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Pentair's Growth and Cost Initiatives Drive 15% Gain in Second Quarter 2002 EPS
07.23.2002

ST. PAUL, Minn., Jul 23, 2002 /PRNewswire-FirstCall via COMTEX/ -- Pentair (NYSE: PNR) today announced that its recent growth and cost productivity actions generated second quarter 2002 earnings per share (EPS) of $0.86, a 15 percent gain over EPS of $0.75 -- without goodwill amortization -- in the same period last year.

Pentair's second quarter net sales totaled $708.1 million, up three percent over sales of $689.4 million in the prior year. Operating income totaled $74.6 million, seven percent greater than the $69.6 million of operating income reported in the second quarter of 2001. Free cash flow in the first half of 2002 totaled $87.2 million -- representing a $33.8 million gain over the same period last year, a 135 percent conversion of first-half net income, and cash EPS of $1.75.

"Our second quarter 2002 performance demonstrates that our supply management, lean enterprise, and cash flow initiatives are generating concrete results, and that growth-oriented actions are contributing to our improved performance," said Randall J. Hogan, Pentair chairman and CEO. "Our Tools and Enclosures groups realized strong margin gains compared to the first quarter of this year, and sales in both our Tools and Water Technologies groups increased by double-digit percentages."

In the Tools Group, record second quarter 2002 sales of $303.8 million were 11 percent higher than in the same period last year, while operating income of $30.8 million improved 50 percent on the same comparison. Second quarter operating income margins were 10.2 percent, representing an increase of 270 basis points over the second quarter 2001. Sell-through in all channels improved over prior-year levels, with particularly strong activity in pressure washer and woodworking equipment lines.

In the Water Technologies Group, second quarter sales of $265.5 million -- an 11 percent gain over the same period last year -- was due to record high seasonal activity in the pool and spa equipment business, robust sales in retail and municipal markets, and strong international sales. Second quarter 2002 operating income of $43.7 million gained eight percent over the same period last year, driven principally by volume increases. Margins in the second quarter were 16.5 percent, down slightly from the prior year due to less favorable product mix.

In the Enclosures segment, sales of $138.8 million and operating income of $7.0 million in the second quarter of 2002 were down significantly against year-ago levels due to continued slow capital spending and weak global technology markets. Enclosures Group sales have been essentially flat during the last three quarters, but margins improved sequentially by 90 basis points in the first quarter of 2002 and gained another 170 basis points in the second quarter of 2002.

"There's uncertainty about the economy and its impact on business in the current environment," Hogan said. "Despite these circumstances, our Tools business has regained double-digit margins and moved from defense to offense; margins in the Water Technologies business are strong, and our core pump and water treatment markets are improving; and, cost productivity actions in our Enclosures business are taking hold while industrial markets appear to be stabilizing.

"Looking forward, assuming our markets continue their current pace of recovery, that we continue to build share in our water markets, and that Enclosures' sales are flat to up slightly in the second half, we expect to remain on track with 2002 EPS expectations of between $2.80 and $2.90," Hogan added.

In a separate filing today to the SEC, Pentair filed an amended first quarter 2002 10-Q to conform its financial statements to EITF #01-9. This EITF reclassifies certain selling expenses from SG&A as a reduction in net sales. This reclassification does not change operating or net income for the quarter or any prior accounting period. Conforming adjustments for prior periods are included in the tables following this news release.

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         Six months ended
                            June 29      June 30      June 29       June 30
    In thousands, except
     per-share data          2002          2001        2002          2001

    Net sales (b)         $708,116      $689,427   $1,311,179    $1,353,596
    Cost of goods sold     532,136       531,294      998,188     1,038,690
    Gross profit           175,980       158,133      312,991       314,906
      % of net sales          24.9%         22.9%        23.9%         23.3%
    Selling, general and
     administrative (a)(b)  92,367        90,534      175,287       186,712
      % of net sales          13.0%         13.1%        13.4%         13.8%
    Research and development 9,021         7,250       17,385        14,989
      % of net sales           1.3%          1.1%         1.3%          1.1%
    Operating income        74,592        60,349      120,319       113,205
      % of net sales          10.5%          8.8%         9.2%          8.4%
    Net interest expense    10,476        16,241       24,206        33,957
      % of net sales           1.5%          2.4%         1.8%          2.5%
    Other expense,
     write-off of
     investment                ---           ---          ---         2,500
      % of net sales           n/a           n/a          n/a           0.2%
    Income before income
     taxes                  64,116        44,108       96,113        76,748
      % of net sales           9.1%          6.4%         7.3%          5.7%
    Provision for income
     taxes                  21,140        15,552       31,699        27,629
      Effective tax rate      33.0%         35.3%        33.0%         36.0%
    Net income             $42,976       $28,556      $64,414       $49,119
      % of net sales           6.1%          4.1%         4.9%          3.6%

    Earnings per common
     share
    Basic                    $0.87         $0.58        $1.31         $1.00
    Diluted                  $0.86         $0.58        $1.29         $1.00

    Weighted average
     common shares
     outstanding
    Basic                   49,228        49,032       49,201        49,019
    Diluted                 50,039        49,274       49,812        49,200

    Cash dividends
     declared per common
     share                   $0.18         $0.17        $0.36         $0.34

    Goodwill amortization
     disclosure
    Reported net income    $42,976       $28,556      $64,414       $49,119
    Add back goodwill
     amortization,
     net of tax                ---         8,200          ---        16,200
    Adjusted net income    $42,976       $36,756      $64,414       $65,319
    Reported earnings per
     share - basic           $0.87         $0.58        $1.31         $1.00
    Goodwill amortization      ---          0.17          ---          0.33
    Adjusted net earnings
     per share - basic       $0.87         $0.75        $1.31         $1.33
    Reported earnings per
     share - diluted         $0.86         $0.58        $1.29         $1.00
    Goodwill amortization      ---          0.17          ---          0.33
    Adjusted net earnings
     per share - diluted     $0.86         $0.75        $1.29         $1.33

(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 six month periods of 2001 includes $9,238 and $18,252 of goodwill amortization, respectively ($8,200 and $16,200 net of tax, or $0.17 and $0.33 per diluted share, respectively). SG&A expense for the three and six month periods of 2001 excluding the impact of goodwill amortization was $81,296 and $168,460, or 11.8% and 12.4% 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)

                                    June 29       December 31     June 30
    In thousands                      2002            2001          2001
                         Assets
    Current assets
    Cash and cash equivalents       $29,289         $39,844       $27,689
    Accounts and notes receivable,
     net                            450,701         398,579       475,813
    Inventories                     305,663         300,923       345,097
    Other current assets             88,276          90,932        96,330
    Net assets of discontinued
     operations                       2,399           5,325       109,060
    Total current assets            876,328         835,603     1,053,989

    Property, plant and equipment,
     net                            314,655         329,500       341,037

    Goodwill, net                 1,098,952       1,088,206     1,114,115
    Other assets                    110,894         118,889        91,275
    Total assets                 $2,400,829      $2,372,198    $2,600,416

        Liabilities and Shareholders' Equity
    Current liabilities
    Short-term borrowings              $---            $---       $98,828
    Current maturities of
     long-term debt                   6,089           8,729         4,463
    Accounts and notes payable      206,159         179,149       230,286
    Accrued expenses and other
     current liabilities            250,235         240,555       244,731
    Total current liabilities       462,483         428,433       578,308

    Long-term debt                  638,554         714,977       780,888
    Other noncurrent liabilities    221,655         213,786       199,343
    Total liabilities             1,322,692       1,357,196     1,558,539

    Shareholders' equity          1,078,137       1,015,002     1,041,877
    Total liabilities and
     shareholders' equity        $2,400,829      $2,372,198    $2,600,416

    Days sales in accounts
     receivable (13 month
     moving average)                     63              65            68
    Days inventory on hand
     (13 month moving average)           68              75            79
    Days in accounts payable
     (13 month moving average)           57              59            60
    Debt/total capital                 37.4%           41.6%         45.9%


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

                                                         Six months ended
                                                     June 29        June 30
    In thousands                                       2002           2001

    Operating activities
    Net income                                       $64,414        $49,119
    Depreciation                                      30,376         32,830
    Amortization of intangibles and unearned
     compensation                                      1,728         20,565
    Deferred income taxes                              3,485            264
    Other expense, write-off of investment               ---          2,500
    Changes in assets and liabilities, net of
     effects of business acquisitions
      Accounts and notes receivable                  (43,527)       (16,233)
      Inventories                                     (1,620)        42,752
      Prepaid expenses and other current assets       (5,092)        (7,464)
      Accounts payable                                25,472        (15,222)
      Employee compensation and benefits               1,099        (16,333)
      Accrued product claims and warranties            1,894           (564)
      Income taxes                                     8,496          7,000
      Other current liabilities                        8,077         (6,017)
      Pension and post-retirement benefits             3,508          2,765
      Other assets and liabilities                     1,222         (5,050)
        Net cash provided by continuing operations    99,532         90,912
        Net cash provided by (used for) discontinued
         operations                                    2,927        (12,387)
          Net cash provided by operating activities  102,459         78,525

    Investing activities
    Capital expenditures                             (15,275)       (25,131)
    Proceeds from sale of businesses                   1,547            ---
    Acquisitions, net of cash acquired                   ---         (1,937)
    Equity investments                                (4,169)       (16,698)
    Other                                               (165)           ---
          Net cash used for investing activities     (18,062)       (43,766)

    Financing activities
    Net short-term borrowings (repayments)               ---         (8,586)
    Proceeds from long-term debt                          89          2,413
    Repayment of long-term debt                      (81,123)       (21,683)
    Proceeds from exercise of stock options            2,107          1,648
    Dividends paid                                   (17,713)       (16,665)
          Net cash used for financing activities     (96,640)       (42,873)

    Effect of exchange rate changes on cash            1,688            859
    Change in cash and cash equivalents              (10,555)        (7,255)
    Cash and cash equivalents, beginning of period    39,844         34,944
    Cash and cash equivalents, end of period         $29,289        $27,689

    Free cash flow
    Net cash provided by operating activities       $102,459        $78,525
    Less capital expenditures                        (15,275)       (25,131)
    Free cash flow                                   $87,184        $53,394

    Weighted average common shares
     outstanding - diluted                            49,812         49,200
    Free cash flow per share                           $1.75          $1.09


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

                      First Qtr  Second Qtr  Third Qtr   Fourth Qtr    Year
    In thousands,
     except per-
     share data         2001        2001       2001        2001        2001

    Net sales (a)     $664,169   $689,427   $636,175    $584,309  $2,574,080
    Cost of goods
     sold              507,396    531,294    487,033     442,222   1,967,945
    Gross profit       156,773    158,133    149,142     142,087     606,135
      % of net
       sales              23.6%      22.9%      23.4%       24.3%       23.5%
    Selling, general
     and
     administrative (a) 96,178     90,534     90,153     100,233     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 Qtr      Second Qtr    Six Months
    In thousands                      2002           2002          2002


    Net sales to external
     customers (a)
    Tools                          $252,092        $303,771      $555,863
    Water                           211,411         265,531       476,942
    Enclosures                      139,560         138,814       278,374
    Consolidated                   $603,063        $708,116    $1,311,179

    Operating income (loss) as
     reported
    Tools                           $16,686         $30,837       $47,523
    Water                            29,747          43,708        73,455
    Enclosures                        4,608           6,995        11,603
    Other                            (5,314)         (6,948)      (12,262)
    Consolidated                    $45,727         $74,592      $120,319

    Restructuring charge
    Tools                              $---            $---          $---
    Water                               ---             ---           ---
    Enclosures                          ---             ---           ---
    Other                               ---             ---           ---
    Consolidated (b)                   $---            $---          $---

    Goodwill amortization
    Tools                              $---            $---          $---
    Water                               ---             ---           ---
    Enclosures                          ---             ---           ---

    Total goodwill amortization         ---             ---           ---
    Amortization of unearned
     compensation                       864             864         1,728
    Total amortization                 $864            $864        $1,728

    Operating income (loss)
     excluding restructuring charge
     and goodwill amortization
    Tools                           $16,686         $30,837       $47,523
    Water                            29,747          43,708        73,455
    Enclosures                        4,608           6,995        11,603
    Other                            (5,314)         (6,948)      (12,262)
    Consolidated                    $45,727         $74,592      $120,319

    Operating income before
     restructuring charge and
     goodwill amortization as a
     percent of net sales
    Tools                               6.6%           10.2%          8.5%
    Water                              14.1%           16.5%         15.4%
    Enclosures                          3.3%            5.0%          4.2%
    Consolidated                        7.6%           10.5%          9.2%


    (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 Supplemental Financial Information by Reportable Business Segment (Unaudited)

                                   First Qtr      Second Qtr     Six Months
    In thousands                     2001            2001           2001

    Net sales to external
     customers (a)
    Tools                          $234,404        $274,419      $508,823
    Water                           219,626         239,854       459,480
    Enclosures                      210,139         175,154       385,293
    Consolidated                   $664,169        $689,427    $1,353,596

    Operating income (loss)
     as reported
    Tools                            $7,863         $18,218       $26,081
    Water                            28,193          35,650        63,843
    Enclosures                       21,237           9,834        31,071
    Other                            (4,437)         (3,353)       (7,790)
    Consolidated                    $52,856         $60,349      $113,205

    Restructuring charge
    Tools                              $---            $---          $---
    Water                               ---             ---           ---
    Enclosures                          ---             ---           ---
    Other                               ---             ---           ---
    Consolidated (b)                   $---            $---          $---

    Goodwill amortization
    Tools                            $2,319          $2,319        $4,638
    Water                             4,549           4,859         9,408
    Enclosures                        2,146           2,060         4,206

    Total goodwill amortization       9,014           9,238        18,252
    Amortization of unearned
     compensation                       870           1,443         2,313
    Total amortization               $9,884         $10,681       $20,565

    Operating income (loss)
     excluding restructuring charge
     and goodwill amortization
    Tools                           $10,182         $20,537       $30,719
    Water                            32,742          40,509        73,251
    Enclosures                       23,383          11,894        35,277
    Other                            (4,437)         (3,353)       (7,790)
    Consolidated                    $61,870         $69,587      $131,457

    Operating income before
     restructuring charge and
     goodwill amortization as a
     percent of net sales
    Tools                               4.3%            7.5%          6.0%
    Water                              14.9%           16.9%         15.9%
    Enclosures                         11.1%            6.8%          9.2%
    Consolidated                        9.3%           10.1%          9.7%


    (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 Supplemental Financial Information by Reportable Business Segment (Unaudited)

                                    Third Qtr     Fourth Qtr       Year
    In thousands                      2001           2001          2001

    Net sales to external
     customers (a)
    Tools                          $241,487        $251,335    $1,001,645
    Water                           230,370         192,765       882,615
    Enclosures                      164,317         140,210       689,820
    Consolidated                   $636,174        $584,310    $2,574,080

    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
    Tools                              $---            $---          $---
    Water                               ---             ---           ---
    Enclosures                          ---          39,382        39,382
    Other                               ---           1,678         1,678
    Consolidated (b)                   $---         $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 before
     restructuring charge and
     goodwill amortization as a
     percent of net sales
    Tools                               8.2%            8.7%          7.2%
    Water                              14.3%           11.5%         14.5%
    Enclosures                          6.6%            2.4%          7.2%
    Consolidated                        9.5%            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
     expense (a)   $396,105     $310,700     $261,302     $241,062    $216,775


    (a) Adjusted to give effect to the adoption of EITF 01-9.

For more information, contact: Mark Cain for Pentair, Inc., +1-651-639-5278.

SOURCE Pentair, Inc.

CONTACT: Mark Cain for Pentair, Inc., +1-651-639-5278

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