ST. PAUL, Minn., Feb 7, 2002 /PRNewswire-FirstCall via COMTEX/ --
$41 Million Enclosures Group Restructuring Expected to Deliver First-Year Benefit of $15 Million, $21 Million Annually Thereafter
Pentair, Inc.
(NYSE: PNR) today reported fourth quarter 2001 pre-charge continuing EPS of
$0.27, at the high end of the range provided in the Company's revised guidance
issued December 11, 2001. This compares to ($0.02) in the fourth quarter 2000,
which included a $25 million one-time charge. Pentair said fourth quarter net
sales of $595.9 million declined 12 percent versus the same period in 2000.
A year-over-year working capital reduction of more than 18 percent drove
Pentair's full-year free cash flow past its goal of $150 million to a record
$179 million, up 50 percent from $117 million in 2000. This cash flow
performance represents cash earnings per share (EPS) of $3.62.
"Pentair recorded concrete accomplishments in several important areas during
2001 -- among them strong cash flow, reduced debt, innovative product
development, and the adoption of lean enterprise practices across the company.
But our disappointing 2001 sales and earnings clearly illustrate the impact of
the weak global economy and the fact that we have more work to do to return the
Company to its previous levels of performance," said Randall J. Hogan, president
and chief executive officer.
Pentair's full year 2001 sales and pre-restructuring charge operating income
from continuing businesses totaled $2.6 billion and $198.8 million,
respectively, representing a five percent decline in sales and a 12 percent
decrease in pre-restructuring charge operating income. The declines were
predominately in the Enclosure Group due to adverse market conditions throughout
2001. A pre-tax restructuring charge of $41.1 million was taken in the fourth
quarter of 2001 to reduce capacity in the Enclosures Group and gain operational
efficiencies. Pre-restructuring charge net income from continuing businesses in
2001 was $87.3 million, or $1.77 diluted EPS as compared to $97.2 million, or
$1.99 diluted EPS in 2000, which included one-time charges of $30 million.
Sales in the Tools Group totaled $1.039 billion in 2001, a three percent decline
from the previous year. Operating income for the segment was $63.2 million, up
117 percent from 2000. Fourth quarter 2001 sales in the Group totaled $261.6
million, a six percent decline from sales in the same period last year, due to
soft retail and industrial sales late in the year. Operating income in the same
period was $19.6 million, up 194 percent over the 2000 levels, driven
principally by cost savings from supply chain management and lean enterprise
initiatives. Excluding one-time charges taken in 2000, fourth quarter 2001
margins improved 600 basis points over year-ago levels, and margins in the Group
improved for the fourth consecutive quarter.
Enclosure Group sales totaled $689.8 million in 2001, an 11 percent decline over
2000 levels, and pre-restructuring operating income totaled $41.2 million, a 56
percent decrease over the previous year. Full-year margins dropped from 12.2
percent in 2000 to 6.0 percent in 2001. Group sales totaled $140.2 million in
the fourth quarter of 2001, a 30 percent decrease over 2000 levels, while
pre-restructuring operating income dropped 94 percent from the previous year to
$1.4 million. Fourth quarter margins dropped from 11.1 percent in 2000 to one
percent in 2001 as further reductions in volume affected the Group's ability to
absorb fixed costs despite significant cost cutting throughout the year. The
decrease in volume is attributed to sharp declines in all Enclosures markets,
with the industrial market at its lowest point in the last decade.
The $41.1 million pre-tax restructuring charge in the fourth quarter is to
reduce manufacturing capacity in the Enclosures Group by approximately 20
percent, and reduce headcount by approximately 25 percent. Plant closures have
been announced at locations in Pennsauken, New Jersey; Brooklyn Center,
Minnesota; and Bonneuil-sur-Marne, France. In addition, several support
facilities also will be closed. Pentair said that the Enclosures restructuring,
which will be completed in the first half of 2002, will yield an estimated $15
million in cost savings during 2002, and $21 million of savings annually
thereafter.
The Water Technologies Group reported 2001 sales of $887.5 million, a two
percent decline from 2000. Operating income for the segment totaled $109.8
million, down nine percent from 2000. The weak economic environment, coupled
with unfavorable sales mix within the pump business and investments in foreign
manufacturing capacity, dampened the Water Technologies Group's fourth quarter
results. The Group reported fourth quarter 2001 sales of $194.1 million, flat
with 2000 levels. Operating income for the segment totaled $17.5 million, down
12.5 percent from the previous year. Return on sales for the segment was 9.0
percent for 2001 versus 10.2 percent for 2000.
In the fourth quarter, Pentair completed the sales of both Lincoln Industrial
and the Service Equipment businesses. Estimated proceeds from the sale totaled
$94 million and included cash of $75.5 million, of which the $70 million
received to date was used to pay down debt. Included in the estimated proceeds
is a $37.5 million equity position, recorded at $18.4 million current fair
market value, in the new Lincoln Industrial, an indirect wholly-owned subsidiary
of LN Holdings Corporation which is owned by management, various institutional
investors, Pentair and affiliates of The Jordan Company. The $25 million
recorded as loss from discontinued operations in the fourth quarter includes
three items stated net of taxes: the $13 million adjustment to record the equity
position at its current fair market value; changes in the value of retained
pensions and retiree medical totaling $6 million; and an operating shortfall in
the discontinued operations amounting to $6 million resulting from the economic
downturn in the capital goods market and its effect on the equipment businesses'
volumes and earnings.
"In 2002, we will work to reduce our overall cost structure by some $38 million
by further simplifying and rationalizing our infrastructure, capturing supply
management opportunities, and implementing lean enterprise practices throughout
the organization," Hogan said, "Our efforts to strengthen our processes and
systems capabilities, reinvigorate product development efforts, and develop
stronger talent throughout the company will continue. Finally, we will maintain
our momentum on cash flow and improving return on investment."
Pentair adopted accounting standard SFAS No. 142 "Goodwill and Other Intangible
Assets" effective January 1, 2002. Accordingly, the Company will no longer
amortize goodwill to earnings, resulting in an estimated increment of $0.65 to
full-year 2002 EPS.
"Looking forward," Hogan added, "we expect to achieve full-year 2002 EPS between
$2.70 and $2.80, including the effect of the change in goodwill accounting, and
first quarter 2002 EPS in the range of $0.30 to $0.35. This assumes there will
be no significant changes in prevailing economic conditions in our markets."
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 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 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)
Quarter ended Year ended
December 31 December 31 December 31 December 31
In thousands, except 2001 2000 2001 2000
per-share data
Net sales $595,926 $674,777 $2,615,944 $2,748,013
Cost of goods sold 442,223 523,187 1,967,945 2,051,515
Gross profit 153,703 151,590 647,999 696,498
% of net sales 25.8% 22.5% 24.8% 25.3%
Selling, general and
administrative 111,850 128,011 418,963 438,488
% of net sales 18.8% 19.0% 16.0% 16.0%
Research and
development 8,377 7,831 31,171 31,191
% of net sales 1.4% 1.2% 1.2% 1.1%
Restructuring charge 40,105 27,257 40,105 24,789
% of net sales 6.7% 4.0% 1.5% 0.9%
Operating income
(loss) (6,629) (11,509) 157,760 202,030
% of net sales (1.1%) (1.7%) 6.0% 7.4%
Net interest expense 13,120 18,619 61,488 74,899
% of net sales 2.2% 2.8% 2.4% 2.7%
Other expense,
write-off of
investment 485 -- 2,985 --
% of net sales 0.1% nm 0.1% nm
Income (loss)
from continuing
operations before
income taxes (20,234) (30,128) 93,287 127,131
% of net sales (3.4%) (4.5%) 3.6% 4.6%
Provision for
income taxes (3,961) (11,661) 35,771 45,263
Effective tax rate 19.6% 38.7% 38.3% 35.6%
Income (loss) from
continuing
operations (16,273) (18,467) 57,516 81,868
% of net sales (2.7%) (2.7%) 2.2% 3.0%
Loss from
discontinued
operations,
net of tax -- (7,962) -- (24,759)
Loss on sale of
discontinued
operations,
net of tax (24,647) -- (24,647) --
Cumulative effect
of accounting
change, net of tax -- -- -- (1,222)
Net income (loss) $(40,920) $(26,429) $32,869 $55,887
Earnings per common
share
Basic
Continuing
operations $(0.33) $(0.38) $1.17 $1.68
Discontinued
operations (0.50) (0.16) (0.50) (0.51)
Cumulative effect
of accounting
change -- -- -- (0.02)
Basic earnings
per common share $(0.83) $(0.54) $0.67 $1.15
Diluted
Continuing
operations $(0.33) $(0.38) $1.17 $1.68
Discontinued
operations (0.50) (0.16) (0.50) (0.51)
Cumulative effect
of accounting
change -- -- -- (0.02)
Diluted earnings
per common share $(0.83) $(0.54) $0.67 $1.15
Weighted average
common shares
outstanding
Basic 49,070 48,682 49,047 48,544
Diluted 49,376 48,696 49,297 48,645
Cash dividends
declared per
common share $0.18 $0.17 $0.70 $0.66
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
December 31 December 31
In thousands 2001 2000
Assets
Current assets
Cash and cash equivalents $39,844 $34,944
Accounts and notes receivable, net 398,579 468,081
Inventories 300,923 392,495
Other current assets 90,932 95,019
Net assets of discontinued operations 5,325 101,263
Total current assets 835,603 1,091,802
Property, plant and equipment, net 329,500 352,984
Goodwill, net 1,088,206 1,141,102
Other assets 118,889 58,137
Total assets $2,372,198 $2,644,025
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $-- $108,141
Current maturities of long-term debt 8,729 23,999
Accounts and notes payable 179,149 250,088
Accrued expenses and other
current liabilities 240,555 266,564
Total current liabilities 428,433 648,792
Long-term debt 714,977 781,834
Other noncurrent liabilities 213,786 202,808
Total liabilities 1,357,196 1,633,434
Shareholders' equity 1,015,002 1,010,591
Total liabilities and shareholders' equity $2,372,198 $2,644,025
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Year ended
December 31 December 31
In thousands 2001 2000
Operating activities
Net income $32,869 $55,887
Depreciation 62,674 59,897
Amortization 41,675 39,131
Deferred income taxes (5,315) 9,735
Restructuring charge 41,060 24,789
Other expense, write-off of investment 2,985 --
Loss on sale of discontinued operations 24,647 --
Cumulative effect of accounting change -- 1,222
Changes in assets and liabilities,
net of effects of business acquisitions
Accounts and notes receivable 70,890 17,908
Inventories 87,840 (45,893)
Prepaid expenses and other current assets 653 (9,588)
Accounts payable (69,321) 32,973
Employee compensation and benefits (13,185) (10,810)
Accrued product claims and warranties (4,468) (6,318)
Income taxes 9,942 (8,467)
Other current liabilities (50,758) (17,715)
Pension and post-retirement benefits 17,199 5,353
Other assets and liabilities (7,205) (7,296)
Net cash provided by
continuing operations 242,182 140,808
Net cash provided by (used for)
discontinued operations (9,848) 44,139
Net cash provided by
operating activities 232,334 184,947
Investing activities
Capital expenditures (53,668) (68,041)
Proceeds from sale of businesses 70,100 --
Acquisitions, net of cash acquired (1,937) --
Equity investments (25,438) --
Other (186) (32)
Net cash used for
investing activities (11,129) (68,073)
Financing activities
Net short-term borrowings (repayments) (108,336) (42,471)
Proceeds from long-term debt 2,811 8,108
Repayment of long-term debt (84,525) (82,271)
Proceeds from exercise of stock options 2,913 3,100
Proceeds from issuance of common stock, net -- 774
Repurchases of common stock (1,458) (410)
Dividends paid (34,327) (32,038)
Net cash used for
financing activities (222,922) (145,208)
Effect of exchange rate changes on cash 6,617 263
Change in cash and cash equivalents 4,900 (28,071)
Cash and cash equivalents, beginning of period 34,944 63,015
Cash and cash equivalents, end of period $39,844 $34,944
Free cash flow
Net cash provided by operating activities $232,334 $184,947
Less capital expenditures (53,668) (68,041)
Free cash flow $178,666 $116,906
Weighted average common shares
outstanding - Diluted 49,297 48,645
Free cash flow per share $3.62 $2.40
Pentair, Inc. and Subsidiaries
Financial Information by Reportable Business Segment (Unaudited)
Quarter ended Year ended
December 31 December 31 December 31 December 31
In thousands 2001 2000 2001 2000
Net sales to
external customers
Tools $261,632 $279,428 $1,038,606 $1,066,616
Water 194,084 195,859 887,518 903,672
Enclosures 140,210 199,490 689,820 777,725
Consolidated $595,926 $674,777 $2,615,944 $2,748,013
Operating income
(loss) before
restructuring charge
Tools (2) $19,627 $(20,865) $63,232 $29,147
Water 17,522 20,023 109,792 120,732
Enclosures 1,429 22,166 41,240 94,643
Other (4,147) (5,576) (15,444) (17,703)
Consolidated $34,431 $15,748 $198,820 $226,819
Operating income (loss)
before restructuring
charge as a percent
of net sales
Tools (2) 7.5% (7.5%) 6.1% 2.7%
Water 9.0% 10.2% 12.4% 13.4%
Enclosures 1.0% 11.1% 6.0% 12.2%
Consolidated 5.8% 2.3% 7.6% 8.3%
Restructuring charge
(income)
Tools $-- $6,567 $-- $5,396
Water -- -- -- --
Enclosures 39,383 (328) 39,383 (1,625)
Other 1,677 21,018 1,677 21,018
Consolidated (1) $41,060 $27,257 $41,060 $24,789
Operating Income (Loss)
After Restructuring
Charge
Tools (2) $19,627 $(27,432) $63,232 $23,751
Water 17,522 20,023 109,792 120,732
Enclosures (37,954) 22,494 1,857 96,268
Other (5,824) (26,594) (17,121) (38,721)
Consolidated $(6,629) $(11,509) $157,760 $202,030
(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.
(2) Tools segment operating income reflects one-time pre-tax costs to
establish an additional $30.0 million in accounts receivable
($5.0 million in the second quarter of 2000 and $17.0 million in the
fourth quarter of 2000) and inventory ($8.0 million in the fourth
quarter of 2000) reserves.
For further information, please contact Mark Cain of Pentair, Inc.,
+1-651-639-5278.
SOURCE Pentair, Inc.