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Pentair First Quarter 2002 EPS Exceeds Analysts' Consensus Estimates, Free Cash Flow Reaches Record First Quarter Levels, Second Quarter Guidance Revised Upward
04.16.2002

ST. PAUL, Minn., Apr 16, 2002 /PRNewswire-FirstCall via COMTEX/ -- Pentair (NYSE: PNR) today announced that its first quarter 2002 earnings per share (EPS) of $0.43 exceeded analysts' consensus earnings estimates by $0.05 or 13 percent, while free cash flow in the first quarter of 2002 reached $15 million -- a $68 million gain over year-ago levels. In addition, Pentair said it has raised its expectations for second quarter 2002 EPS to a range of between $0.75 and $0.80, while FY2002 EPS is anticipated in the range of between $2.75 and $2.90.

"Our Tools business performed well in the first quarter, our Water Technologies businesses realized improvements in some key markets, and the restructuring of our Enclosures business is proceeding as expected," said Randall J. Hogan, president and CEO, who will succeed Winslow H. Buxton as Pentair chairman effective May 1, 2002. "The first quarter provided ample evidence that our supply management and lean enterprise initiatives have taken root, and that our action plans are beginning to drive growth as evidenced by higher backlogs in the Tools and Water businesses. Our businesses are committed to return to -- and exceed -- their previously high levels of performance."

Pentair's continuing EPS for the first quarter of 2002 was $0.43, compared to continuing EPS of $0.42 in the previous year, or $0.58 excluding 2001 goodwill amortization. [Due to the cessation of goodwill amortization on January 1, 2002, all references to 2001 operating results in this narrative exclude the impact of 2001 goodwill amortization.] First quarter operating income margins were 7.5 percent, as compared to 7.3 percent in the fourth quarter of 2001. First quarter 2002 operating income was $45.7 million, compared to $61.9 million in the first quarter of 2001. First quarter net sales totaled $613.4 million, versus $671.4 million in the year earlier period. At $15 million, free cash flow was the highest first-quarter free cash flow that Pentair has generated in the last decade.

In the Tools Group, first quarter 2002 sales were nine percent higher than in the same period last year, while operating income improved 64 percent on the same comparison. First quarter operating income margins gained 220 basis points over the first quarter 2001. Sell-through in most channels improved during the first quarter, and higher order rates resulted in increased backlogs. Higher profits were driven by higher volume, improved cost productivity, and results generated by the Group's supply chain and lean enterprise practices.

In the Water Technologies Group, the strongest pump sales in more than a year partially offset the impact of flat-water treatment markets and seasonal weakness in pool and spa equipment markets, netting a four percent decline in first quarter 2002 sales. First quarter 2002 operating income declined nine percent from the same period last year. First quarter operating income margins were 14 percent, a 260 basis point gain over the fourth quarter of last year.

In the Enclosures segment, sales in the first quarter of 2002 declined 34 percent from the record levels of a year ago. North American industrial orders and sales have stabilized from the fourth quarter, while European and Asian markets remain weak. Operating income for the Group was down compared to the first quarter of 2001 due to significant industry-wide sales declines, but operating income margins rose 90 basis points over the fourth quarter 2001 levels as the benefits of cost productivity and restructuring initiatives began to read out in the Group's results. Pentair said it had closed four of five enclosures manufacturing facilities scheduled for shut-down. Four support facilities also were closed. The group's workforce was reduced by another 400 employees during the first quarter.

"We've made progress in restoring the tools business and in reducing costs across the board, but we're also pursuing new growth opportunities," Hogan said. "Certainly, we are in a very good position to take advantage of further strengthening in our markets. Our progress on growth actions, coupled with the increasing impact of our cost productivity activities, makes us confident that Pentair's performance should continue to trend upward through 2002. Just how steep that upward trend runs will be largely determined by the pace of economic recovery."

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 11,500 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. 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
                                                    March 30       March 31
    In thousands, except per-share data                 2002           2001

    Net sales                                       $613,435       $671,383
    Cost of goods sold                               466,052        507,396
    Gross profit                                     147,383        163,987
      % of net sales                                   24.0%          24.4%
    Selling, general and administrative (1)           93,292        103,392
      % of net sales                                   15.2%          15.4%
    Research and development                           8,364          7,739
      % of net sales                                    1.4%           1.2%
    Operating income                                  45,727         52,856
      % of net sales                                    7.5%           7.9%
    Net interest expense                              13,730         17,716
      % of net sales                                    2.2%           2.6%
    Other expense, write-off of investment                --          2,500
      % of net sales                                     n/a           0.4%
    Income before income taxes                        31,997         32,640
      % of net sales                                    5.2%           4.9%
    Provision for income taxes                        10,559         12,077
      Effective tax rate                               33.0%          37.0%
    Net income                                       $21,438        $20,563
      % of net sales                                    3.5%           3.1%

    Earnings per common share
      Basic                                            $0.44          $0.42
      Diluted                                          $0.43          $0.42

    Weighted average common shares outstanding
      Basic                                           49,173         49,006
      Diluted                                         49,584         49,127

    Cash dividends declared per common share           $0.18          $0.17

    Goodwill amortization disclosure
    Reported net income                              $21,438        $20,563
    Add back goodwill amortization, net of tax            --          8,000
    Adjusted net income                              $21,438        $28,563

    Reported earnings per share -- basic               $0.44          $0.42
    Goodwill amortization                                 --           0.16
    Adjusted net earnings per share -- basic           $0.44          $0.58

    Reported earnings per share -- diluted             $0.43          $0.42
    Goodwill amortization                                 --           0.16
    Adjusted net earnings per share -- diluted         $0.43          $0.58

    (1) During the first quarter of 2002, we adopted SFAS 142 which requires
        that goodwill no longer be amortized.  First quarter 2001 selling,
        general and administrative (SG&A) expense includes $9,014 of goodwill
        amortization ($8,000 net of tax, or $0.16 per diluted share).  SG&A
        expense in 2001 excluding the impact of goodwill amortization was
        $94,378, or 14.1% of sales.


                        Pentair, Inc. and Subsidiaries
              Condensed Consolidated Balance Sheets (Unaudited)

                                   March 30     December 31      March 31
    In thousands                       2002            2001          2001
    Assets
    Current assets
    Cash and cash equivalents       $20,946         $39,844       $33,003
    Accounts and notes receivable,
      net                           447,483         398,579       508,344
    Inventories                     295,391         300,923       383,194
    Other current assets             87,211          90,932        94,547
    Net assets of discontinued
      operations                      3,613           5,325       106,633
    Total current assets            854,644         835,603     1,125,721

    Property, plant and equipment,
      net                           318,758         329,500       346,820

    Goodwill, net                 1,085,463       1,088,206     1,132,070
    Other assets                    116,833         118,889        66,373
    Total assets                 $2,375,698      $2,372,198    $2,670,984

    Liabilities and Shareholders' Equity
    Current liabilities
    Short-term borrowings               $--             $--      $170,111
    Current maturities of
      long-term debt                  5,972           8,729        24,569
    Accounts and notes payable      197,407         179,149       224,293
    Accrued expenses and other
      current liabilities           240,767         240,555       243,982
    Total current liabilities       444,146         428,433       662,955

    Long-term debt                  689,136         714,977       782,173
    Other noncurrent liabilities    214,929         213,786       202,421
    Total liabilities             1,348,211       1,357,196     1,647,549

    Shareholders' equity          1,027,487       1,015,002     1,023,435
    Total liabilities and
      shareholders' equity       $2,375,698      $2,372,198    $2,670,984

    Days sales in accounts receivable
      (13 month moving average)          64              64            68
    Days inventory on hand
      (13 month moving average)          72              75            80
    Days in accounts payable
      (13 month moving average)          58              59            61
    Debt/total capital                40.4%           41.6%         48.8%


                        Pentair, Inc. and Subsidiaries
         Condensed Consolidated Statements of Cash Flows (Unaudited)

                                                      Three months ended
                                                    March 30       March 31
    In thousands                                        2002           2001

    Operating activities
    Net income                                       $21,438        $20,563
    Depreciation                                      15,035         16,854
    Amortization of intangibles and unearned
      compensation                                       864          9,884
    Deferred income taxes                              2,089          (880)
    Other expense, write-off of investment                --          2,500
    Changes in assets and liabilities, net of
      effects of business acquisitions
        Accounts and notes receivable               (48,583)       (45,438)
        Inventories                                    3,255          6,615
        Prepaid expenses and other current assets      1,146        (3,969)
        Accounts payable                              21,318       (22,866)
        Employee compensation and benefits          (13,768)       (16,832)
        Accrued product claims and warranties            287          (552)
        Income taxes                                   9,295          6,791
        Other current liabilities                      8,051        (3,425)
        Pension and post-retirement benefits           2,506          2,930
        Other assets and liabilities                 (2,879)        (2,378)
          Net cash provided by (used for)
            continuing operations                     20,054       (30,203)
          Net cash provided by (used for)
            discontinued operations                    1,712        (9,894)
            Net cash provided by (used for)
              operating activities                    21,766       (40,097)

    Investing activities
    Capital expenditures                             (6,980)       (12,859)
    Proceeds from sale of businesses                   1,138             --
    Acquisitions, net of cash acquired                    --        (6,937)
    Equity investments                               (2,081)             --
    Other                                              (165)             --
        Net cash used for investing activities       (8,088)       (19,796)

    Financing activities
    Net short-term borrowings (repayments)                --         62,016
    Proceeds from long-term debt                          45          2,413
    Repayment of long-term debt                     (27,736)        (1,189)
    Proceeds from exercise of stock options            1,490            251
    Dividends paid                                   (8,851)        (8,331)
        Net cash provided by (used for)
          financing activities                      (35,052)         55,160

    Effect of exchange rate changes on cash            2,476          2,792
    Change in cash and cash equivalents             (18,898)        (1,941)
    Cash and cash equivalents, beginning of period    39,844         34,944
    Cash and cash equivalents, end of period         $20,946        $33,003

    Free cash flow
    Net cash provided by (used for)
      operating activities                           $21,766      $(40,097)
    Less capital expenditures                        (6,980)       (12,859)
    Free cash flow                                   $14,786      $(52,956)

    Weighted average common shares outstanding --
      diluted                                         49,584         49,127
    Free cash flow per share                           $0.30        $(1.08)

                        Pentair, Inc. and Subsidiaries
     Supplemental Condensed Consolidated Statements of Income (Unaudited)

    In thousands,                             Three months ended
    except per-share data          March 31         June 30  September 29
                                       2001            2001          2001

    Net sales                      $671,383        $702,076      $646,559
    Cost of goods sold              507,396         531,294       487,033
    Gross profit                    163,987         170,782       159,526
      % of net sales                  24.4%           24.3%         24.7%
    Selling, general  and
      administrative                103,392         103,183       100,537
      % of net sales                  15.4%           14.7%         15.5%
    Research and development          7,739           7,250         7,805
      % of net sales                   1.2%            1.0%          1.2%
    Restructuring charge                 --              --            --
      % of net sales                    n/a             n/a           n/a
    Operating income (loss)          52,856          60,349        51,184
      % of net sales                   7.9%            8.6%          7.9%
    Net interest expense             17,716          16,241        14,409
      % of net sales                   2.6%            2.3%          2.2%
    Other expense, write-off of
      investment                      2,500              --            --
      % of net sales                   0.4%             n/a           n/a
    Income (loss) from continuing
       operations before
      income taxes                   32,640          44,108        36,775
      % of net sales                   4.9%            6.3%          5.7%
    Provision for income taxes       12,077          15,552        12,104
      Effective tax rate              37.0%           35.3%         32.9%
    Income (loss) from continuing
      operations                     20,563          28,556        24,671
      % of net sales                   3.1%            4.1%          3.8%
    Loss on disposal of discontinued
      operations, net of tax             --              --            --
    Net income (loss)               $20,563         $28,556       $24,671

    Earnings per common share
    Basic
    Continuing operations             $0.42           $0.58         $0.50
    Discontinued operations              --              --            --
    Basic earnings per common share   $0.42           $0.58         $0.50

    Diluted
    Continuing operations             $0.42           $0.58         $0.50
    Discontinued operations              --              --            --
    Diluted earnings per common
      share                           $0.42           $0.58         $0.50

    Weighted average common shares outstanding
    Basic                            49,006          49,032        49,082
    Diluted                          49,127          49,274        49,410

    Cash dividends declared per
      common share                    $0.17           $0.17         $0.18

    Goodwill amortization disclosure
      (continuing operations)
    Reported net income             $20,563         $28,556       $24,671
    Add back goodwill amortization,
      net of tax                      8,000           8,200         7,953
    Adjusted net income             $28,563         $36,756       $32,624

    Reported earnings per share --
      basic                           $0.42           $0.58         $0.50
    Goodwill amortization              0.16            0.17          0.16
    Adjusted net earnings per share --
      basic                           $0.58           $0.75         $0.66

    Reported earnings per share --
      diluted                         $0.42           $0.58         $0.50
    Goodwill amortization              0.16            0.17          0.16
    Adjusted net earnings per share --
      diluted                         $0.58           $0.75         $0.66


    In thousands, except per-share data              Three months ended
                                                 December 31           Year
                                                        2001           2001

    Net sales                                       $595,926     $2,615,944
    Cost of goods sold                               442,222      1,967,945
    Gross profit                                     153,704        647,999
      % of net sales                                   25.8%          24.8%
    Selling, general and administrative              111,850        418,962
      % of net sales                                   18.8%          16.0%
    Research and development                           8,377         31,171
      % of net sales                                    1.4%           1.2%
    Restructuring charge                              40,105         40,105
      % of net sales                                    6.7%           1.5%
    Operating income (loss)                          (6,628)        157,761
      % of net sales                                  (1.1%)           6.0%
    Net interest expense                              13,122         61,488
      % of net sales                                    2.2%           2.4%
    Other expense, write-off of investment               485          2,985
      % of net sales                                    0.1%           0.1%
    Income (loss) from continuing operations
      before income taxes                           (20,235)         93,288
      % of net sales                                  (3.4%)           3.6%
    Provision for income taxes                       (3,961)         35,772
      Effective tax rate                               19.6%          38.3%
    Income (loss) from continuing operations        (16,274)         57,516
      % of net sales                                  (2.7%)           2.2%
    Loss on disposal of discontinued operations,
      net of tax                                    (24,647)       (24,647)
    Net income (loss)                              $(40,921)        $32,869

    Earnings per common share
    Basic
    Continuing operations                            $(0.33)          $1.17
    Discontinued operations                           (0.50)         (0.50)
    Basic earnings per common share                  $(0.83)          $0.67

    Diluted
    Continuing operations                            $(0.33)          $1.17
    Discontinued operations                           (0.50)         (0.50)
    Diluted earnings per common share                $(0.83)          $0.67

    Weighted average common shares outstanding
    Basic                                             49,070         49,047
    Diluted                                           49,376         49,297

    Cash dividends declared per common share           $0.18          $0.70

    Goodwill amortization disclosure
      (continuing operations)
    Reported net income                            $(16,274)        $57,516
    Add back goodwill amortization, net of tax         7,890         32,043
    Adjusted net income                             $(8,384)        $89,559

    Reported earnings per share -- basic             $(0.33)          $1.17
    Goodwill amortization                               0.16           0.65
    Adjusted net earnings per share -- basic         $(0.17)          $1.82

    Reported earnings per share -- diluted           $(0.33)          $1.17
    Goodwill amortization                               0.16           0.65
    Adjusted net earnings per share -- diluted       $(0.17)          $1.82

Pentair, Inc. and Subsidiaries Supplemental Financial Information by Reportable Business Segment (Unaudited)

                                                      2002
    In thousands                      First           First        Second

    Net sales to external customers
    Tools                          $261,069        $240,392      $285,905
    Water                           212,806         220,852       241,017
    Enclosures                      139,560         210,139       175,154
    Consolidated                   $613,435        $671,383      $702,076

    Operating income (loss) as reported
    Tools                           $16,686          $7,863       $18,218
    Water                            29,747          28,193        35,650
    Enclosures                        4,608          21,237         9,834
    Other                           (5,314)         (4,437)       (3,353)
    Consolidated                    $45,727         $52,856       $60,349

    Restructuring charge (income)
    Tools                               $--             $--           $--
    Water                                --              --            --
    Enclosures                           --              --            --
    Other                                --              --            --
    Consolidated (1)                    $--             $--           $--

    Goodwill amortization
    Tools                               $--          $2,319        $2,319
    Water                                --           4,549         4,859
    Enclosures                           --           2,146         2,060
    Total goodwill amortization          --           9,014         9,238
    Amortization of unearned
      compensation                      864             870         1,443
    Total amortization                 $864          $9,884       $10,681

    Operating income (loss) excluding restructuring
    charge and goodwill amortization
    Tools                           $16,686         $10,182       $20,537
    Water                            29,747          32,742        40,509
    Enclosures                        4,608          23,383        11,894
    Other                           (5,314)         (4,437)       (3,353)
    Consolidated                    $45,727         $61,870       $69,587

    Operating income (loss) before restructuring charge
    and goodwill amortization as a percent of net sales
    Tools                              6.4%            4.2%          7.2%
    Water                             14.0%           14.8%         16.8%
    Enclosures                         3.3%           11.1%          6.8%
    Consolidated                       7.5%            9.2%          9.9%


                                                      2001
    In thousands                      Third          Fourth          Year

    Net sales to external customers
    Tools                          $250,677        $261,632    $1,038,606
    Water                           231,565         194,084       887,518
    Enclosures                      164,317         140,210       689,820
    Consolidated                   $646,559        $595,926    $2,615,944

    Operating income (loss) as reported
    Tools                           $17,524         $19,627       $63,232
    Water                            28,427          17,522       109,792
    Enclosures                        8,740        (37,954)         1,857
    Other                           (3,507)         (5,823)      (17,120)
    Consolidated                    $51,184        $(6,628)      $157,761

    Restructuring charge (income)
    Tools                               $--             $--           $--
    Water                                --              --            --
    Enclosures                           --          39,382        39,382
    Other                                --           1,678         1,678
    Consolidated (1)                    $--         $41,060       $41,060

    Goodwill amortization
    Tools                            $2,318          $2,318        $9,274
    Water                             4,575           4,577        18,560
    Enclosures                        2,066           2,001         8,273
    Total goodwill amortization       8,959           8,896        36,107
    Amortization of unearned
      compensation                    1,442           1,813         5,568
    Total amortization              $10,401         $10,709       $41,675

    Operating income (loss) excluding restructuring
    charge and goodwill amortization
    Tools                           $19,842         $21,945       $72,506
     Water                           33,002          22,099       128,352
    Enclosures                       10,806           3,429        49,512
    Other                           (3,507)         (4,145)      (15,442)
    Consolidated                    $60,143         $43,328      $234,928

    Operating income (loss) before restructuring charge
    and goodwill amortization as a percent of net sales
    Tools                              7.9%            8.4%          7.0%
    Water                             14.3%           11.4%         14.5%
    Enclosures                         6.6%            2.4%          7.2%
    Consolidated                       9.3%            7.3%          9.0%

    (1) $955 thousand of the fourth quarter 2001 restructuring charge is
        included in cost of goods sold on the consolidated income statements
        for the write-down of inventory on certain product lines that were
        discontinued as a result of plant closures.


SOURCE Pentair

CONTACT: Mark Cain of Pentair, +1-651-639-5278

Categories: Press Releases