ST. PAUL, Minn., Jan. 30 /PRNewswire-FirstCall/ -- Pentair (NYSE: PNR)
today announced fourth quarter 2002 earnings per share (EPS) of $0.57, a 33
percent gain over fourth quarter 2001 EPS of $0.43 (without goodwill
amortization and restructuring charge). This performance exceeds analysts'
consensus EPS estimate of $0.55 by $0.02. Sales for the fourth quarter
totaled $640.3 million, a 10 percent gain over sales in the same period in
2001. Full year free cash flow totaled $214.1 million, representing a 165
percent conversion of 2002 net income, and cash EPS of $4.30.
"The fourth quarter played out largely as expected, with slower sell-
through at our major retail and industrial accounts, and continued constrained
spending in machine tool, capital goods and technology markets," said
Randall J. Hogan, Pentair chairman and CEO. "These factors were mitigated by
our supply management, lean enterprise, cash flow, and growth initiatives, as
well as contributions from our newly acquired businesses."
Pentair's net sales for 2002 totaled $2,580.8 million, up slightly from
the $2,574.1 million recorded in 2001. Operating income for the year totaled
$236.0 million, versus $234.9 million, before goodwill amortization and
restructuring charge, in 2001. EPS in 2002 totaled $2.61, an eight percent
gain over 2001 EPS of $2.42 without goodwill amortization and restructuring
charge. (On a reported basis, 2002 EPS was up 123 percent versus reported 2001
EPS of $1.17.) Pentair's $214 million of free cash flow is net of
approximately $23 million that was paid to bring a synthetic lease from a 1999
capital project onto the balance sheet.
In the Tools Group, fourth quarter 2002 sales of $270.7 million were eight
percent higher than in the same period last year, while operating income of
$24.6 million improved 12 percent on the same comparison. Fourth quarter
operating income margins in the Group were 9.1 percent, representing an
increase of 40 basis points over the fourth quarter 2001.
Fourth quarter sales for the Tools Group were stronger than in 2001,
benefiting from the Oldham Saw business, which was acquired in October 2002
and was accretive to earnings in the fourth quarter. Gains in operating income
were due primarily to benefits generated by supply chain, lean enterprise, and
cost reduction initiatives, somewhat offset by costs of promotional pricing
programs and a mix shift to lower priced products.
The Tools Group continues to address margin expansion through cost
productivity and working capital improvements, supplemented by accelerated new
product development. Patent applications within the Group increased in 2002
from the prior year, and the time required to move new tools to market has
been cut dramatically.
In the Water Technologies Group, fourth quarter sales of $231.8 million
increased 20 percent versus the same period last year, benefiting from sales
in the Pool business that had been delayed by the customer from the third
quarter to the fourth quarter, as well as contributions from the Plymouth
Products business, acquired in October of 2002. The Group's operating income
of $23.1 million was five percent higher than in the same period last year.
CodeLine pressure vessels for international projects are now being sourced
from Pentair's facilities in India, which is expected to improve margins on
large international water treatment projects. Headcount reductions within the
Ashland, Ohio pump operations, coupled with accelerated lean enterprise and
supply chain management activities, will build margins in the pump business
during the first quarter of 2003.
In the Enclosures Group, sales of $137.7 million in the fourth quarter of
2002 were down two percent, reflecting continued weakness in capital spending
and technology markets. Fourth quarter operating income of $9.5 million - up
176 percent, or 450 basis points, from the same period in 2001 - reflects the
benefits of ongoing restructuring, Lean Enterprise practices, and working
capital management. The fourth quarter was the Enclosure Group's fourth
consecutive quarter of margin improvement, gaining 60 basis points over the
third quarter margins. Pentair said its Enclosures Group continues to pursue a
goal of reaching double-digit margins.
Hogan said Pentair's key operating initiatives - cash flow, lean
enterprise practices, and supply management - have taken root and the Company
is now executing plans designed to drive organic growth. These plans include
exploring new business platforms within existing operations, expanding product
lines, adding new channels, and entering new geographic markets.
"We expect this emphasis on internal growth, coupled with revenues from
potential future acquisitions, to return our growth rates to the high levels
we recorded in the '90s," Hogan said. "Considering how lean and efficient our
operations are becoming, even a modest improvement in sales volume would
improve our earnings significantly."
Hogan said that assuming there is no change in the business environment in
2003, Pentair expects to deliver EPS of between $.50 and $.60 in the first
quarter of 2003, compared to EPS of $0.43 in the first quarter of 2002, and
between $2.90 and $3.05 in 2003. Free cash flow for the year is targeted at
$200 million.
"We think that Pentair's prospects for improving shareholder value in 2003
are excellent, and we're anxious to prove what this leaner, more dynamic
business can do for its shareholders, customers, and employees," Hogan added.
A Pentair conference call scheduled for 11:00 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 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 such as
continued economic growth; retail and industrial demand; product
introductions; and pricing and other competitive pressures. 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)
Fourth quarter Year ended
In thousands, Dec. 31 Dec. 31 Dec. 31 Dec. 31
except per-share data 2002 2001 2002 2001
Net sales (B) $640,303 $584,310 $2,580,783 $2,574,080
Cost of goods sold 486,556 442,222 1,965,076 1,967,945
Gross profit 153,747 142,088 615,707 606,135
% of net sales 24.0% 24.3% 23.9% 23.5%
Selling, general
and administrative
(A)(B) 89,276 100,234 342,806 377,098
% of net sales 13.9% 17.2% 13.3% 14.6%
Research and
development 10,620 8,377 36,909 31,171
% of net sales 1.7% 1.4% 1.4% 1.2%
Restructuring charge - 40,105 - 40,105
% of net sales n/a 6.9% n/a 1.6%
Operating income (loss) 53,851 (6,628) 235,992 157,761
% of net sales 8.4% (1.1%) 9.1% 6.1%
Net interest expense 11,134 13,122 43,545 61,488
% of net sales 1.7% 2.2% 1.7% 2.4%
Other expense, write-off
of investment - 485 - 2,985
% of net sales n/a 0.1% n/a 0.1%
Income (loss) from
continuing operations
before income taxes 42,717 (20,235) 192,447 93,288
% of net sales 6.7% (3.5%) 7.5% 3.6%
Provision for income
taxes 14,632 (3,961) 62,545 35,772
Effective tax rate 34.3% 19.6% 32.5% 38.3%
Income (loss) from
continuing operations 28,085 (16,274) 129,902 57,516
% of net sales 4.4% (2.8%) 5.0% 2.2%
Loss on disposal of
discontinued operations,
net of tax - (24,647) - (24,647)
Net income (loss) $28,085 $(40,921) $129,902 $32,869
Earnings per common share
Basic
Continuing operations $0.57 $(0.33) $2.64 $1.17
Discontinued operations - (0.50) - (0.50)
Basic earnings per
common share $0.57 $(0.83) $2.64 $0.67
Diluted
Continuing operations $0.57 $(0.33) $2.61 $1.17
Discontinued operations - (0.50) - (0.50)
Diluted earnings per
common share $0.57 $(0.83) $2.61 $0.67
Weighted average common
shares outstanding
Basic 49,305 49,070 49,235 49,047
Diluted 49,552 49,376 49,744 49,297
Cash dividends declared
per common share $0.19 $0.18 $0.74 $0.70
Goodwill amortization
disclosure (continuing
operations)
Reported net income
(loss) $28,085 $(16,274) $129,902 $57,516
Add back goodwill
amortization, net
of tax - 7,890 - 32,043
Adjusted net income
(loss) $28,085 $(8,384) $129,902 $89,559
Reported earnings
per share - basic $0.57 $(0.33) $2.64 $1.17
Goodwill amortization - 0.16 - 0.65
Adjusted net earnings
per share - basic $0.57 $(0.17) $2.64 $1.82
Reported earnings per
share - diluted $0.57 $(0.33) $2.61 $1.17
Goodwill amortization - 0.16 - 0.65
Adjusted net earnings
per share - diluted $0.57 $(0.17) $2.61 $1.82
(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 fourth quarter and full year
2001 include $8,896 and $36,107 of goodwill amortization, respectively
($7,890 and $32,043 net of tax, or $0.16 and $0.65 per diluted share,
respectively). SG&A expense for the fourth quarter and full year 2001
excluding the impact of goodwill amortization was $91,338 and
$340,991, or 15.6% and 13.2% 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)
December 31 December 31
In thousands 2002 2001
Assets
Current assets
Cash and cash equivalents $39,648 $39,844
Accounts and notes receivable, net 403,793 398,579
Inventories 293,202 300,923
Deferred income taxes 55,234 69,953
Prepaid expenses and other current assets 17,132 20,979
Net assets of discontinued operations 1,799 5,325
Total current assets 810,808 835,603
Property, plant and equipment, net 351,316 329,500
Goodwill 1,218,341 1,088,206
Other assets 133,985 118,889
Total assets $2,514,450 $2,372,198
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $686 $-
Current maturities of long-term debt 8,340 8,729
Accounts and notes payable 171,709 179,149
Employee compensation and benefits 84,965 74,888
Accrued product claims and warranties 36,855 37,590
Income taxes 12,071 6,252
Other current liabilities 109,426 121,825
Total current liabilities 424,052 428,433
Long-term debt 726,059 714,977
Pension and other retirement compensation 124,301 74,263
Post-retirement medical and other benefits 42,815 43,583
Deferred income taxes 31,728 34,128
Other noncurrent liabilities 59,771 61,812
Total liabilities 1,408,726 1,357,196
Shareholders' equity 1,105,724 1,015,002
Total liabilities and shareholders' equity $2,514,450 $2,372,198
Days sales in accounts receivable
(13 month moving average) 59 65
Days inventory on hand (13 month moving average) 63 75
Days in accounts payable (13 month moving average) 53 59
Debt/total capital 39.9% 41.6%
We recorded a charge to shareholders' equity of $29.2 million in the
fourth quarter of 2002 as required under SFAS No. 87, "Employers'
Accounting for Pensions", as the fair market value of the pension assets
were less than the related accumulated benefit obligation.
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Year ended
December 31 December 31
In thousands 2002 2001
Operating activities
Net income $129,902 $32,869
Depreciation 58,833 62,674
Other amortization 4,089 5,568
Amortization of goodwill - 36,107
Deferred income taxes 11,007 (5,315)
Restructuring charge - 41,060
Other expense, write-off of investment - 2,985
Loss on disposal of discontinued operations - 24,647
Changes in assets and liabilities, net of
effects of business acquisitions
Accounts and notes receivable 25,535 70,890
Inventories 29,717 87,840
Prepaid expenses and other current assets 20,197 653
Accounts payable (18,356) (69,321)
Employee compensation and benefits 8,070 (13,185)
Accrued product claims and warranties (1,704) (4,468)
Income taxes 5,863 9,942
Other current liabilities (30,434) (50,758)
Pension and post-retirement benefits(A) 15,030 17,199
Other assets and liabilities(B) 9,521 (7,205)
Net cash provided by continuing operations 267,270 242,182
Net cash provided by (used for)
discontinued operations 3,524 (9,848)
Net cash provided by operating
activities 270,794 232,334
Investing activities
Capital expenditures (33,744) (53,668)
Acquisition of previously leased facility (22,952) -
Proceeds from sale of businesses 1,744 70,100
Acquisitions, net of cash acquired (170,270) (1,937)
Equity investments (9,383) (25,438)
Other (7) (186)
Net cash used for investing activities (234,612) (11,129)
Financing activities
Net repayments of debt (4,897) (190,050)
Proceeds from exercise of stock options 2,730 2,913
Repurchases of common stock - (1,458)
Dividends paid (36,420) (34,327)
Net cash used for financing activities (38,587) (222,922)
Effect of exchange rate changes on cash 2,209 6,617
Change in cash and cash equivalents (196) 4,900
Cash and cash equivalents, beginning of period 39,844 34,944
Cash and cash equivalents, end of period $39,648 $39,844
Free cash flow
Net cash provided by operating activities $270,794 $232,334
Less capital expenditures (including buyout
of synthetic lease) (56,696) (53,668)
Free cash flow $214,098 $178,666
Weighted average common shares
outstanding - diluted 49,744 49,297
Free cash flow per share $4.30 $3.62
(A) Includes $15.3 million pension contribution in December 2002.
(B) 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 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 $636,174 $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 Qtr Second Qtr Third Qtr Fourth Qtr Year
In thousands 2002 2002 2002 2002 2002
Net sales to
external customers (A)
Tools $252,092 $303,771 $265,732 $270,736 $1,092,331
Water 211,411 265,531 223,637 231,841 932,420
Enclosures 139,560 138,814 139,932 137,726 556,032
Corporate/other - - - - -
Consolidated $603,063 $708,116 $629,301 $640,303 $2,580,783
Operating income
(loss) as reported
Tools $16,686 $30,837 $25,479 $24,596 $97,598
Water 29,747 43,708 29,969 23,135 126,559
Enclosures 4,608 6,995 8,884 9,455 29,942
Other (5,314) (6,948) (2,510) (3,335) (18,107)
Consolidated $45,727 $74,592 $61,822 $53,851 $235,992
Restructuring charge
Tools $- $- $- $- $-
Water - - - - -
Enclosures - - - - -
Other - - - - -
Consolidated $- $- $- $- $-
Goodwill amortization
Tools $- $- $- $- $-
Water - - - - -
Enclosures - - - - -
Total goodwill
amortization - - - - -
Other amortization 864 864 864 1,497 4,089
Total amortization $864 $864 $864 $1,497 $4,089
Operating income (loss)
excluding restructuring
charge and goodwill
amortization
Tools $16,686 $30,837 $25,479 $24,596 $97,598
Water 29,747 43,708 29,969 23,135 126,559
Enclosures 4,608 6,995 8,884 9,455 29,942
Other (5,314) (6,948) (2,510) (3,335) (18,107)
Consolidated $45,727 $74,592 $61,822 $53,851 $235,992
Operating income (loss)
before restructuring
charge and goodwill
amortization as a
percent of net sales
Tools 6.6% 10.2% 9.6% 9.1% 8.9%
Water 14.1% 16.5% 13.4% 10.0% 13.6%
Enclosures 3.3% 5.0% 6.3% 6.9% 5.4%
Consolidated 7.6% 10.5% 9.8% 8.4% 9.1%
(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 Third Qtr Fourth Qtr Year
In thousands 2001 2001 2001 2001 2001
Net sales to
external customers (A)
Tools $234,404 $274,419 $241,487 $251,335 $1,001,645
Water 219,626 239,854 230,370 192,765 882,615
Enclosures 210,139 175,154 164,317 140,210 689,820
Corporate/other - - - - -
Consolidated $664,169 $689,427 $636,174 $584,310 $2,574,080
Operating income
(loss) as reported
Tools $7,863 $18,218 $17,524 $19,627 $63,232
Water 28,193 35,650 28,427 17,522 109,792
Enclosures 21,237 9,834 8,740 (37,954) 1,857
Other (4,437) (3,353) (3,507) (5,823) (17,120)
Consolidated $52,856 $60,349 $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 $2,319 $2,319 $2,318 $2,318 $9,274
Water 4,549 4,859 4,575 4,577 18,560
Enclosures 2,146 2,060 2,066 2,001 8,273
Total goodwill
amortization 9,014 9,238 8,959 8,896 36,107
Other amortization 870 1,443 1,442 1,813 5,568
Total amortization $9,884 $10,681 $10,401 $10,709 $41,675
Operating income
(loss) excluding
restructuring charge
and goodwill
amortization
Tools $10,182 $20,537 $19,842 $21,945 $72,506
Water 32,742 40,509 33,002 22,099 128,352
Enclosures 23,383 11,894 10,806 3,429 49,512
Other (4,437) (3,353) (3,507) (4,145) (15,442)
Consolidated $61,870 $69,587 $60,143 $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% 8.7% 7.2%
Water 14.9% 16.9% 14.3% 11.5% 14.5%
Enclosures 11.1% 6.8% 6.6% 2.4% 7.2%
Consolidated 9.3% 10.1% 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
Other amortization 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.
Contact: Mark Cain of Pentair, +1-651-639-5278
SOURCE Pentair