ST. PAUL, Minn., Oct. 15 /PRNewswire-FirstCall/ -- Pentair (NYSE: PNR)
today announced that it generated third quarter 2002 earnings per share (EPS)
of $0.75, a 13.6 percent gain over EPS of $0.66 -- without goodwill
amortization -- in the same period last year. The Company's third quarter
free cash flow totaled $110.1 million or $197.2 million on a year-to-date
basis. This represents an 80 percent increase over 2001 year-to-date cash
flow, or 194 percent conversion of 2002 net income, and year-to-date cash EPS
of $3.96.
"Supply management, lean enterprise, cash flow, and growth initiatives in
our businesses offset the effects of a tough global economy in the third
quarter," said Randall J. Hogan, Pentair chairman and CEO. "We're making good
progress in gaining new customers, improving profits, and maintaining our cash
flow discipline. We are particularly pleased with the latter, which has more
than paid for the two complementary acquisitions we made in the fourth
quarter."
Pentair's third quarter net sales totaled $629.3 million, down slightly
compared to $636.2 million in the same period a year ago. Operating income
for the third quarter 2002 totaled $61.6 million, 2.4 percent greater than the
$60.1 million, before goodwill amortization, reported in the third quarter
2001. Despite slightly lower sales, operating income margins improved
30 basis points.
In the Tools Group, third quarter 2002 sales of $265.7 million were
10 percent higher than in the same period last year, while operating income of
$26.0 million improved 31 percent on the same comparison. Third quarter
operating income margins in the Group were 9.8 percent, representing an
increase of 160 basis points over the third quarter 2001. Pentair attributed
the improved sales results to significantly higher shipments of Delta products
and pressure washers. Gains in operating income were due primarily to
benefits generated by supply chain, lean enterprise, and cost reduction
initiatives, offset by product mix and costs related to promotional
activities.
In the Water Technologies Group, third quarter sales of $223.6 million
declined three percent versus the same period last year, operating income of
$30.0 million was nine percent lower, and margins declined 90 basis points to
13.4 percent. The Group's sales performance was adversely affected by
fluctuations in the seasonality of pool and spa equipment sales. This was due
primarily to timing of orders and was partially offset by strong pump sales
during the quarter. The decline in operating income was due to lower pool
product sales and unfavorable product mix, specifically significantly higher
sales of retail pumps, which carry a lower margin, and lower productivity in
the pump and tank businesses.
In the Enclosures segment, sales of $139.9 million and operating income of
$8.9 million in the third quarter of 2002 were 15 and 18 percent lower,
respectively, than year-ago levels due to continued slow capital spending and
weak global technology markets. Enclosures Group sales have been essentially
flat during this year, but margins improved sequentially by 90 basis points in
the first quarter of 2002, 170 basis points in the second quarter, and another
130 basis points in the third quarter. Pentair expects its Enclosures Group
to generate continued margin improvement in the fourth quarter.
"We are pleased that margins in Enclosures have continued to improve, that
our Tools sales are growing, and that our ongoing cash flow discipline
delivered excellent results in the quarter," Hogan said. "Despite these
accomplishments, we face a constrained growth environment overall, more
aggressive pricing pressures, and promotional activities in Tools, as well as
slower cost productivity improvements in our Water Technologies Group.
"Given these conditions, and particularly the economic concerns that exist
in many of our businesses, we are expecting to deliver 2002 EPS of between
$2.60 and $2.65, versus previous guidance of between $2.80 and $2.90 per
share," Hogan added. "Even if the current economic conditions continue and
allow only modest sales growth in 2003, our initiatives will still drive EPS
growth in the mid-teens."
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 12,000
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.
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 Nine months ended
September 28 September 29 September 28 September 29
2002 2001 2002 2001
In thousands,
except per-share
data
Net sales (B) $ 629,301 $ 636,174 $ 1,940,480 $ 1,989,770
Cost of goods sold 478,708 487,033 1,476,896 1,525,723
Gross profit 150,593 149,141 463,584 464,047
% of net sales 23.9% 23.4% 23.9% 23.3%
Selling, general and
administrative (A)(B) 80,074 90,152 255,361 276,864
% of net sales 12.7% 14.2% 13.2% 13.9%
Research and
development 8,904 7,805 26,289 22,794
% of net sales 1.4% 1.2% 1.4% 1.1%
Operating income 61,615 51,184 181,934 164,389
% of net sales 9.8% 8.0% 9.4% 8.3%
Net interest expense 8,205 14,409 32,411 48,366
% of net sales 1.3% 2.3% 1.7% 2.4%
Other expense,
write-off of
investment -- -- -- 2,500
% of net sales n/a n/a n/a 0.1%
Income before income
taxes 53,410 36,775 149,523 113,523
% of net sales 8.5% 5.8% 7.7% 5.7%
Provision for income
taxes 16,148 12,104 47,847 39,733
Effective tax rate 30.2% 32.9% 32.0% 35.0%
Net income $ 37,262 $ 24,671 $ 101,676 $ 73,790
% of net sales 5.9% 3.9% 5.2% 3.7%
Earnings per common
share
Basic $ 0.76 $ 0.50 $ 2.07 $ 1.50
Diluted $ 0.75 $ 0.50 $ 2.04 $ 1.50
Weighted average
common shares
outstanding
Basic 49,235 49,082 49,212 49,040
Diluted 49,804 49,410 49,809 49,270
Cash dividends
declared per common
share $ 0.19 $ 0.18 $ 0.55 $ 0.52
Goodwill
amortization
disclosure
Reported net income $ 37,262 $ 24,671 $ 101,676 $ 73,790
Add back goodwill
amortization, net
of tax -- 7,953 -- 24,153
Adjusted net income $ 37,262 $ 32,624 $ 101,676 $ 97,943
Reported earnings per
share - basic $ 0.76 $ 0.50 $ 2.07 $ 1.50
Goodwill amortization -- 0.16 -- 0.49
Adjusted net earnings
per share - basic $ 0.76 $ 0.66 $ 2.07 $ 1.99
Reported earnings
per share - diluted $ 0.75 $ 0.50 $ 2.04 $ 1.50
Goodwill amortization -- 0.16 -- 0.49
Adjusted net earnings
per share - diluted $ 0.75 $ 0.66 $ 2.04 $ 1.99
(A) During the first quarter of 2002, we adopted SFAS 142, which requires
that goodwill no longer be amortized. Selling, general and
administrative (SG&A) expense for the three and nine month periods of
2001 include $8,959 and $27,211 of goodwill amortization, respectively
($7,953 and $24,153 net of tax, or $0.16 and $0.49 per diluted share,
respectively). SG&A expense for the three and nine month periods of
2001 excluding the impact of goodwill amortization was $81,193 and
$249,653, or 12.8% and 12.5% of sales, respectively.
(B) We adopted Emerging Issues Task Force (EITF) Issue No. 01-9,
Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products. This new guidance was effective
for Pentair beginning January 1, 2002. EITF 01-9 requires that
certain payments to our customers for cooperative advertising and
certain sales incentive offers that were historically classified in
selling, general and administrative expense be reclassified and shown
as a reduction in net sales. EITF 01-9 also requires the
reclassification of previously reported results of operations for
periods prior to the adoption to conform to the current presentation.
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
September 28 December 31 September 29
In thousands 2002 2001 2001
Assets
Current assets
Cash and cash equivalents $ 39,591 $ 39,844 $ 32,816
Accounts and notes receivable, net 417,021 398,579 460,732
Inventories 291,308 300,923 343,127
Deferred income taxes 66,527 69,953 73,675
Prepaid expenses and other current
assets 20,735 20,979 28,551
Net assets of discontinued
operations 1,771 5,325 106,683
Total current assets 836,953 835,603 1,045,584
Property, plant and equipment, net 306,102 329,500 340,187
Goodwill, net 1,098,141 1,088,206 1,111,992
Other assets 115,704 118,889 93,814
Total assets $ 2,356,900 $ 2,372,198 $ 2,591,577
Liabilities and
Shareholders' Equity
Current liabilities
Short-term borrowings $ -- $ -- $ 61,890
Current maturities of long-term debt 7,284 8,729 4,371
Accounts and notes payable 188,872 179,149 207,721
Employee compensation and benefits 83,361 74,888 75,645
Accrued product claims and warranties 37,632 37,590 40,221
Income taxes 30,724 6,252 16,066
Other current liabilities 124,417 121,825 125,333
Total current liabilities 472,290 428,433 531,247
Long-term debt 559,218 714,977 781,885
Pension and other retirement
compensation 82,683 74,263 69,733
Post-retirement medical and other
benefits 42,762 43,583 33,317
Deferred income taxes 35,390 34,128 41,956
Other noncurrent liabilities 64,423 61,812 66,643
Total liabilities 1,256,766 1,357,196 1,524,781
Shareholders' equity 1,100,134 1,015,002 1,066,796
Total liabilities and shareholders'
equity $ 2,356,900 $ 2,372,198 $ 2,591,577
Days sales in accounts receivable
(13 month moving average) 62 65 66
Days inventory on hand
(13 month moving average) 66 75 77
Days in accounts payable
(13 month moving average) 55 59 60
Debt/total capital 34.0% 41.6% 44.3%
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended
September 28 September 29
In thousands 2002 2001
Operating activities
Net income $ 101,676 $ 73,790
Depreciation 44,499 48,662
Amortization of intangibles and unearned
compensation 2,592 30,966
Deferred income taxes 4,263 3,843
Other expense, write-off of investment -- 2,500
Changes in assets and liabilities, net of
effects of business acquisitions
Accounts and notes receivable (11,238) 4,723
Inventories 11,777 47,976
Prepaid expenses and other current assets 2,103 (11,273)
Accounts payable 8,813 (40,417)
Employee compensation and benefits 8,061 (8,086)
Accrued product claims and warranties (601) (1,887)
Income taxes 24,038 10,922
Other current liabilities 4,565 (8,281)
Pension and post-retirement benefits 5,664 7,561
Other assets and liabilities (A) 11,141 (4,798)
Net cash provided by continuing operations 217,353 156,201
Net cash provided by (used for)
discontinued operations 3,555 (8,944)
Net cash provided by operating
activities 220,908 147,257
Investing activities
Capital expenditures (23,674) (37,639)
Proceeds from sale of businesses 1,744 --
Acquisitions, net of cash acquired -- (1,937)
Equity investments (9,448) (20,564)
Other (165) --
Net cash used for investing activities (31,543) (60,140)
Financing activities
Net short-term borrowings (repayments) -- (46,937)
Proceeds from long-term debt 387 2,676
Repayment of long-term debt (168,695) (22,582)
Proceeds from exercise of stock options 2,683 1,492
Repurchases of common stock -- (1,458)
Dividends paid (27,067) (25,499)
Net cash used for financing activities (192,692) (92,308)
Effect of exchange rate changes on cash 3,074 3,063
Change in cash and cash equivalents (253) (2,128)
Cash and cash equivalents, beginning of period 39,844 34,944
Cash and cash equivalents, end of period $ 39,591 $ 32,816
Free cash flow
Net cash provided by operating activities $ 220,908 $ 147,257
Less capital expenditures (23,674) (37,639)
Free cash flow $ 197,234 $ 109,618
Weighted average common shares outstanding
- diluted 49,809 49,270
Free cash flow per share $ 3.96 $ 2.22
(A) Includes $8.2 million cash received in September 2002 for the
monetization of an interest rate swap agreement.
Pentair, Inc. and Subsidiaries
Supplemental Condensed Consolidated Statements of Income
(Unaudited)
First Second Third Fourth Year
Qtr Qtr Qtr Qtr 2001
In thousands, except 2001 2001 2001 2001
per-share data
Net sales (A) $ 664,169 $ 689,427 $ 636,174 $ 584,310 $ 2,574,080
Cost of goods sold 507,396 531,294 487,033 442,222 1,967,945
Gross profit 156,773 158,133 149,141 142,088 606,135
% of net sales 23.6% 22.9% 23.4% 24.3% 23.5%
Selling, general and
administrative (A) 96,178 90,534 90,152 100,234 377,098
% of net sales 14.5% 13.1% 14.2% 17.2% 14.6%
Research and development 7,739 7,250 7,805 8,377 31,171
% of net sales 1.2% 1.1% 1.2% 1.4% 1.2%
Restructuring charge -- -- -- 40,105 40,105
% of net sales n/a n/a n/a 6.9% 1.6%
Operating income (loss) 52,856 60,349 51,184 (6,628) 157,761
% of net sales 8.0% 8.8% 8.0% (1.1%) 6.1%
Net interest expense 17,716 16,241 14,409 13,122 61,488
% of net sales 2.7% 2.4% 2.3% 2.2% 2.4%
Other expense, write-off
of investment 2,500 -- -- 485 2,985
% of net sales 0.4% n/a n/a 0.1% 0.1%
Income (loss) from
continuing operations
before income taxes 32,640 44,108 36,775 (20,235) 93,288
% of net sales 4.9% 6.4% 5.8% (3.5%) 3.6%
Provision for income
taxes 12,077 15,552 12,104 (3,961) 35,772
Effective tax rate 37.0% 35.3% 32.9% 19.6% 38.3%
Income (loss) from
continuing operations 20,563 28,556 24,671 (16,274) 57,516
% of net sales 3.1% 4.1% 3.9% (2.8%) 2.2%
Loss on disposal of
discontinued
operations, net of tax -- -- -- (24,647) (24,647)
Net income (loss) $ 20,563 $ 28,556 $ 24,671 $ (40,921)$ 32,869
Earnings per common share
Basic
Continuing operations $ 0.42 $ 0.58 $ 0.50 $ (0.33)$ 1.17
Discontinued
operations -- -- -- (0.50)$ (0.50)
Basic earnings per
common share $ 0.42 $ 0.58 $ 0.50 $ (0.83)$ 0.67
Diluted
Continuing operations $ 0.42 $ 0.58 $ 0.50 $ (0.33)$ 1.17
Discontinued
operations -- -- -- (0.50)$ (0.50)
Diluted earnings per
common share $ 0.42 $ 0.58 $ 0.50 $ (0.83)$ 0.67
Weighted average
common shares
outstanding
Basic 49,006 49,032 49,082 49,070 49,047
Diluted 49,127 49,274 49,410 49,376 49,297
Cash dividends
declared per
common share $ 0.17 $ 0.17 $ 0.18 $ 0.18 $ 0.70
Goodwill amortization
disclosure (continuing
operations)
Reported net income $ 20,563 $ 28,556 $ 24,671 $ (16,274)$ 57,516
Add back goodwill
amortization,
net of tax 8,000 8,200 7,953 7,890 32,043
Adjusted net income $ 28,563 $ 36,756 $ 32,624 $ (8,384)$ 89,559
Reported earnings per
share - basic $ 0.42 $ 0.58 $ 0.50 $ (0.33)$ 1.17
Goodwill amortization 0.16 0.17 0.16 0.16 0.65
Adjusted net earnings
per share - basic $ 0.58 $ 0.75 $ 0.66 $ (0.17)$ 1.82
Reported earnings per
share - diluted $ 0.42 $ 0.58 $ 0.50 $ (0.33)$ 1.17
Goodwill amortization 0.16 0.17 0.16 0.16 0.65
Adjusted net earnings
per share - diluted $ 0.58 $ 0.75 $ 0.66 $ (0.17)$ 1.82
(A) Adjusted to give effect to the adoption of EITF 01-9.
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable
Business Segment (Unaudited)
First Second Third Nine
Qtr Qtr Qtr Months
In thousands 2002 2002 2002 2002
Net sales to external
customers (A)
Tools $ 252,092 $ 303,771 $ 265,732 $ 821,595
Water 211,411 265,531 223,637 700,579
Enclosures 139,560 138,814 139,932 418,306
Consolidated $ 603,063 $ 708,116 $ 629,301 $ 1,940,480
Operating income
(loss) as reported
Tools $ 16,686 $ 30,837 $ 25,972 $ 73,495
Water 29,747 43,708 29,969 103,424
Enclosures 4,608 6,995 8,884 20,487
Other (5,314) (6,948) (3,210) (15,472)
Consolidated $ 45,727 $ 74,592 $ 61,615 $ 181,934
Restructuring charge
(income)
Tools $ -- $ -- $ -- $ --
Water -- -- -- --
Enclosures -- -- -- --
Other -- -- -- --
Consolidated (B) $ -- $ -- $ -- $ --
Goodwill amortization
Tools $ -- $ -- $ -- $ --
Water -- -- -- --
Enclosures -- -- -- --
Total goodwill
amortization -- -- -- --
Amortization of
unearned 864 864 864 2,592
compensation
Total amortization $ 864 $ 864 $ 864 $ 2,592
Operating income (loss)
excluding
restructuring charge
and goodwill
amortization
Tools $ 16,686 $ 30,837 $ 25,972 $ 73,495
Water 29,747 43,708 29,969 103,424
Enclosures 4,608 6,995 8,884 20,487
Other (5,314) (6,948) (3,210) (15,472)
Consolidated $ 45,727 $ 74,592 $ 61,615 $ 181,934
Operating income
(loss) before
restructuring charge
and goodwill
amortization as a
percent of net sales
Tools 6.6% 10.2% 9.8% 8.9%
Water 14.1% 16.5% 13.4% 14.8%
Enclosures 3.3% 5.0% 6.3% 4.9%
Consolidated 7.6% 10.5% 9.8% 9.4%
(A) Adjusted to give effect to the adoption of EITF 01-9.
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment
(Unaudited)
First Second Third Nine Fourth Year
Qtr Qtr Qtr Months Qtr 2001
In thousands 2001 2001 2001 2001 2001
Net sales to
external
customers (A)
Tools $ 234,404 $ 274,419 $ 241,487 $ 750,310 $ 251,335 $ 1,001,645
Water 219,626 239,854 230,370 689,850 192,765 882,615
Enclosures 210,139 175,154 164,317 549,610 140,210 689,820
Corporate/
other -- -- -- -- -- --
Consol-
idated $ 664,169 $ 689,427 $ 636,174 1,989,770 $ 584,310 $ 2,574,080
Operating
income
(loss) as
reported
Tools $ 7,863 $ 18,218 $ 17,524 $ 43,605 $ 19,627 $ 63,232
Water 28,193 35,650 28,427 92,270 17,522 109,792
Enclosures 21,237 9,834 8,740 39,811 (37,954) 1,857
Other (4,437) (3,353) (3,507) (11,297) (5,823) (17,120)
Consol-
idated $ 52,856 $ 60,349 $ 51,184 $ 164,389 $ (6,628)$ 157,761
Restructuring
charge (income)
Tools $ -- $ -- $ -- $ -- $ -- $ --
Water -- -- -- -- -- --
Enclosures -- -- -- -- 39,382 39,382
Other -- -- -- -- 1,678 1,678
Consol-
idated(B) $ -- $ -- $ -- $ -- $ 41,060 $ 41,060
Goodwill
amortiz-
ation
Tools $ 2,319 $ 2,319 $ 2,318 $ 6,956 $ 2,318 $ 9,274
Water 4,549 4,859 4,575 13,983 4,577 18,560
Enclosures 2,146 2,060 2,066 6,272 2,001 8,273
Total
goodwill
amortization 9,014 9,238 8,959 27,211 8,896 36,107
Amortization
of unearned 870 1,443 1,442 3,755 1,813 5,568
compensation
Total
amortiz-
ation $ 9,884 $ 10,681 $ 10,401 $ 30,966 $ 10,709 $ 41,675
Operating
income
(loss)
excluding
restructuring
charge and
goodwill
amortiz-
ation
Tools $ 10,182 $ 20,537 $ 19,842 $ 50,561 $ 21,945 $ 72,506
Water 32,742 40,509 33,002 106,253 22,099 128,352
Enclosures 23,383 11,894 10,806 46,083 3,429 49,512
Other (4,437) (3,353) (3,507) (11,297) (4,145) (15,442)
Consol-
idated $ 61,870 $ 69,587 $ 60,143 $ 191,600 $ 43,328 $ 234,928
Operating
income
(loss)
before
restructuring
charge and
goodwill
amortization
as a percent
of net sales
Tools 4.3% 7.5% 8.2% 6.7% 8.7% 7.2%
Water 14.9% 16.9% 14.3% 15.4% 11.5% 14.5%
Enclosures 11.1% 6.8% 6.6% 8.4% 2.4% 7.2%
Consolidated 9.3% 10.1% 9.5% 9.6% 7.4% 9.1%
(A) Adjusted to give effect to the adoption of EITF 01-9.
(B) $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.
Pentair, Inc. and Subsidiaries
Additional Supplemental Financial Information (Unaudited)
In thousands 2000 1999 1998 1997 1996
Net sales to
external
customers (A)
Tools $ 1,029,658 $ 850,327 $ 644,226 $ 559,907 $ 467,464
Water 898,247 579,236 438,810 304,647 216,769
Enclosures 777,725 657,500 586,829 600,491 566,919
Other -- -- -- 128,136 133,360
Consolidated $ 2,705,630 $ 2,087,063 $ 1,669,865 $ 1,593,181 $ 1,384,512
Goodwill
amortization
Tools $ 9,285 $ 3,282 $ 287 $ 214 $ 306
Water 18,074 12,714 7,793 7,363 4,920
Enclosures 9,097 8,413 5,832 5,576 5,667
Other -- -- -- 418 502
Total
goodwill
amortization 36,456 24,409 13,912 13,571 11,395
Amortization
of unearned
compensation 2,675 1,578 1,571 1,669 1,400
Total
amortization $ 39,131 25,987 15,483 15,240 12,795
SG&A (A) $ 396,105 $ 310,700 $ 261,302 $ 241,062 $ 216,775
(A) Adjusted to give effect to the adoption of EITF 01-9.
SOURCE Pentair
CONTACT: Mark Cain, +1-651-639-5278, for Pentair/