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Pentair's Second Quarter 2003 EPS Totals $0.88, First Half 2003 EPS Up 12%
07.17.2003
Enclosures Margins Improve 310 Basis Points, Water Technologies Delivers Record Quarter

GOLDEN VALLEY, Minn., Jul 17, 2003 /PRNewswire-FirstCall via COMTEX/ -- Pentair (NYSE: PNR) today announced that its second quarter 2003 earnings per share (EPS) of $0.88 gained two percent over EPS of $0.86 in the same period last year, resulting in first-half EPS of $1.44, a 12 percent increase over EPS of $1.29 in the first half of 2002.

Pentair's second quarter net sales totaled $719.0 million, up from sales of $708.1 million in the same period a year ago. Operating income for the second quarter 2003 totaled $76.3 million, two percent greater than the $74.6 million reported in the second quarter of 2002. Pentair generated Free Cash Flow (Cash from Operations less Capital Expenditures) of $68.8 million in the second quarter of 2003, resulting in a positive year-to-date Free Cash Flow of $58.7 million.

"Our supply management, lean enterprise, and cash flow initiatives continued to improve our performance in the second quarter, despite the impact of the slow economy, unfavorable weather conditions, and a challenging comparison against what was a very strong performance in the second quarter of 2002," said Randall J. Hogan, Pentair chairman and CEO. "Our Enclosures Group realized its sixth quarter of sequential margin improvement with a 100 basis point gain over the first quarter of 2003. Our Water Technologies Group, which is now at a billion-dollar run rate, delivered a record quarter in terms of sales and operating income as a result of initiatives that are beginning to show promising results, with new growth in pumps, filtration, the European pool business, and Asia."

In the Tools Group, net sales of $283.4 million in the second quarter of 2003 were down seven percent compared to the same period last year. These results were attributed to the effects of an uncertain economy, unfavorable weather conditions that hampered sales of certain product lines into industrial and retail channels, and the lingering impact of the first quarter 2003 loss of compressor SKUs in the home center channel. The continued decline in demand also led to increased pricing pressure and higher promotional costs. Operating income of $23.1 million was 25 percent lower than in the same period last year, and margins of 8.2 percent were 200 basis points below those of the same period last year due to sales declines driven by lower units and price pressure, coupled with increased costs related to capacity reductions.

In the Water Technologies Group, second quarter 2003 sales of $290.7 million increased nearly 10 percent versus the same period last year due to the contributions of the Plymouth Products business and favorable effects of currency translation. The Group's operating income of $46.0 million was up more than five percent for the quarter compared to those of the same period last year, while margins declined by 70 basis points on the same comparison. The lower margins resulted from unfavorable product mix due primarily to the slow start of the pool season, and costs associated with downsizing the Chardon, Ohio operation.

In the Enclosures Group, sales of $145.2 million in the second quarter of 2003 were up five percent compared to the same period in 2002, driven by favorable currency exchange. Second quarter operating income of $11.7 million gained 67 percent over that of the previous year's second quarter, while margins gained 310 basis points to 8.1 percent. The continued margin improvement was attributed to productivity improvements from lean enterprise activities and supply chain initiatives.

"While sales were weak in the Tools Group, growth initiatives in both the Enclosures and Water Technologies Groups are showing promising results," Hogan said. "Given continued gains in our Enclosures and Water Technologies businesses, and our cautious outlook on Tools, we are targeting third quarter 2003 EPS of between $0.70 and $0.80."

Pentair EPS guidance for the full year 2003 of between $2.90 and $3.05 is unchanged from guidance provided on April 17, 2003.

A Pentair conference call scheduled for 11:00 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 Minnesota-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; foreign currency effects; 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)

    In thousands,           Three months ended          Six months ended
     except per-share      June 28       June 29     June 28       June 29
     data                   2003          2002         2003          2002

    Net sales             $718,989      $708,116   $1,356,505    $1,311,179
    Cost of goods sold     535,501       532,136    1,017,726       998,188
    Gross profit           183,488       175,980      338,779       312,991
      % of net sales          25.5%         24.9%        25.0%         23.9%
    Selling, general and
     administrative         95,932        92,367      188,914       175,287
      % of net sales          13.3%         13.0%        13.9%         13.4%
    Research and
     development            11,224         9,021       21,345        17,385
      % of net sales           1.6%          1.3%         1.6%          1.3%
    Operating income        76,332        74,592      128,520       120,319
      % of net sales          10.6%         10.5%         9.5%          9.2%
    Net interest expense     9,837        10,476       19,830        24,206
      % of net sales           1.4%          1.5%         1.5%          1.8%
    Income before income
     taxes                  66,495        64,116      108,690        96,113
      % of net sales           9.2%          9.1%         8.0%          7.3%
    Provision for income
     taxes                  22,608        21,140       36,954        31,699
      Effective tax rate      34.0%         33.0%        34.0%         33.0%
    Net income (loss)      $43,887       $42,976      $71,736       $64,414

    Earnings per common
     share
    Basic                    $0.89         $0.87        $1.45         $1.31
    Diluted                  $0.88         $0.86        $1.44         $1.29

    Weighted average
     common shares
     outstanding
    Basic                   49,381        49,228       49,364        49,201
    Diluted                 49,812        50,039       49,715        49,812

    Cash dividends
     declared per common
     share                   $0.21         $0.18        $0.40         $0.36


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

                                    June 28       December 31     June 29
    In thousands                     2003            2002           2002
                           Assets
    Current assets
    Cash and cash equivalents       $45,465         $39,648       $29,289
    Accounts and notes
     receivable, net                442,366         403,793       450,701
    Inventories                     333,370         293,202       305,663
    Deferred income taxes            57,524          55,234        67,087
    Prepaid expenses and other
     current assets                  20,695          17,132        21,189
    Net assets of discontinued
     operations                       2,166           1,799         2,399
    Total current assets            901,586         810,808       876,328

    Property, plant and
     equipment, net                 342,784         351,316       314,655

    Goodwill                      1,245,812       1,218,341     1,098,952
    Other assets                    137,339         133,985       110,894
    Total assets                 $2,627,521      $2,514,450    $2,400,829

           Liabilities and Shareholders' Equity
    Current liabilities
    Short-term borrowings              $329            $686            $-
    Current maturities of
     long-term debt                  58,516          60,488         6,089
    Accounts and notes payable      214,213         171,709       206,159
    Employee compensation
     and benefits                    76,884          84,965        76,548
    Accrued product claims
     and warranties                  38,920          36,855        39,678
    Income taxes                     17,086          12,071        15,234
    Other current liabilities       109,186         109,426       118,775
    Total current liabilities       515,134         476,200       462,483

    Long-term debt                  669,687         673,911       638,554
    Pension and other retirement
     compensation                   132,622         124,301        80,405
    Post-retirement medical
     and other benefits              42,293          42,815        43,102
    Deferred income taxes            33,745          31,728        35,143
    Other noncurrent liabilities     62,497          59,771        63,005
    Total liabilities             1,455,978       1,408,726     1,322,692

    Shareholders' equity          1,171,543       1,105,724     1,078,137
    Total liabilities and
     shareholders' equity        $2,627,521      $2,514,450    $2,400,829

    Days sales in accounts
     receivable (13 month
     moving average)                     58              59            63
    Days inventory on hand
     (13 month moving average)           65              63            68
    Days in accounts payable
     (13 month moving average)           53              53            56
    Debt/total capital                 38.3%           39.9%         37.4%


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

                                                        Six months ended
                                                     June 28        June 29
    In thousands                                       2003           2002
    Operating activities
    Net income                                       $71,736        $64,414
    Depreciation                                      32,031         30,376
    Other amortization                                 2,566          1,728
    Deferred income taxes                               (614)         3,485
    Stock compensation                                   306              -
    Changes in assets and liabilities,
     net of effects of business acquisitions
      Accounts and notes receivable                  (31,013)       (43,461)
      Inventories                                    (33,148)        (1,620)
      Prepaid expenses and other current assets       (3,899)        (5,087)
      Accounts payable                                38,753         25,407
      Employee compensation and benefits              (8,783)         1,099
      Accrued product claims and warranties            1,125          1,894
      Income taxes                                     3,816          8,496
      Other current liabilities                       (3,515)         8,077
      Pension and post-retirement benefits             4,795          3,508
      Other assets and liabilities                     3,863          1,217
        Net cash provided by continuing operations    78,019         99,533
        Net cash provided by (used for)
         discontinued operations                        (367)         2,926
          Net cash provided by operating activities   77,652        102,459

    Investing activities
    Capital expenditures                             (18,935)       (15,275)
    Proceeds (payments) from sale of businesses       (2,400)         1,547
    Acquisitions, net of cash acquired               (15,150)             -
    Equity investments                                (5,461)        (4,169)
    Other                                                 47           (165)
          Net cash used for investing activities     (41,899)       (18,062)

    Financing activities
    Net short-term borrowings (repayments)              (549)           665
    Proceeds from long-term debt                     291,691        119,689
    Repayment of long-term debt                     (301,300)      (201,388)
    Proceeds from exercise of stock options              699          2,107
    Dividends paid                                   (19,738)       (17,713)
          Net cash used for financing activities     (29,197)       (96,640)

    Effect of exchange rate changes on cash             (739)         1,688
    Change in cash and cash equivalents                5,817        (10,555)
    Cash and cash equivalents, beginning of period    39,648         39,844
    Cash and cash equivalents, end of period         $45,465        $29,289

    Free cash flow
    Net cash provided by operating activities        $77,652      $ 102,459
    Less capital expenditures (including buyout
     of synthetic lease)                             (18,935)       (15,275)
    Free cash flow                                   $58,717        $87,184


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

                   First    Second      Six    First   Second       Six
                    Qtr       Qtr     Months     Qtr     Qtr      Months
    In thousands    2003     2003      2003     2002    2002       2002
    Net sales
     to external
     customers
    Tools         $251,765 $283,416  $535,181 $252,092 303,771   $555,863
    Water          246,440  290,692   537,132  211,411 265,531    476,942
    Enclosures     139,311  144,881   284,192  139,560 138,814    278,374
    Consolidated  $637,516 $718,989 1,356,505 $603,063 708,116 $1,311,179

    Intersegment
     sales
    Tools              $ -      $ -       $ -      $ -     $ -        $ -
    Water                -        -         -        -       -          -
    Enclosures         142      355       497        -       -          -
    Other             (142)    (355)     (497)       -       -          -
    Consolidated       $ -      $ -       $ -      $ -     $ -        $ -

    Operating
     income
     (loss)
    Tools          $17,686  $23,148   $40,834  $16,686 $30,837    $47,523
    Water           29,504   46,002    75,506   29,747  43,708     73,455
    Enclosures       9,865   11,703    21,568    4,608   6,995     11,603
    Other           (4,867)  (4,521)   (9,388)  (5,314) (6,948)   (12,262)
    Consolidated   $52,188  $76,332  $128,520  $45,727 $74,592   $120,319

    Operating
     income as a
     percent of
     net sales
    Tools              7.0%     8.2%      7.6%     6.6%   10.2%       8.5%
    Water             12.0%    15.8%     14.1%    14.1%   16.5%      15.4%
    Enclosures         7.1%     8.1%      7.6%     3.3%    5.0%       4.2%
    Consolidated       8.2%    10.6%      9.5%     7.6%   10.5%       9.2%


    

SOURCE Pentair

Mark Cain of Pentair, +1-763-656-5278
Categories: Press Releases