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Pentair's Third Quarter 2003 EPS Totals $0.77 as Sales and Profits Improve; Year-to-Date Free Cash Flow Tops $148 Million
10.16.2003

GOLDEN VALLEY, Minn., Oct 16, 2003 /PRNewswire-FirstCall via COMTEX/ -- Pentair (NYSE: PNR) reported earnings per share (EPS) of $0.77 for the third quarter 2003, noting that third quarter margins in the Company's Water Technologies Group improved to the same level as in last year's third quarter, and that the Enclosures Group recorded its seventh consecutive quarter of sequential margin improvement. Pentair's three operating groups, all of which realized sales gains in the third quarter over year-ago levels, contributed positively to Free Cash Flow (Cash from Operations less Capital Expenditures) of $89.9 million during the third quarter, resulting in year-to-date Free Cash Flow of $148.6 million, or 135 percent of net income.

Pentair's third quarter net sales totaled $685.0 million, up nine percent from sales of $629.3 million in the same period a year ago, while operating income totaled $67.7 million, ten percent greater than the $61.8 million reported in the third quarter of 2002. Third quarter 2003 EPS of $0.77 reflects a three percent increase over EPS of $0.75 in the same period last year. The third quarter marked Pentair's sixth consecutive quarter of favorable quarter-over-quarter EPS comparisons.

Randall J. Hogan, Pentair chairman and CEO, said: "We've seen continued progress on margins and some encouraging sales trends in both our Water Technologies and Enclosures Groups. Our Tools business also realized a slight improvement in sales, but severe price competition in the marketplace continues to affect the Tools margins. Overall, our businesses are performing well in markets that appear to be stable, if not improving."

In the Water Technologies Group, third quarter 2003 sales of $270.9 million increased 21 percent versus the same period last year, driven by acquisitions, pool equipment, residential and commercial pumps and the European water business. Operating income of $36.2 million gained 21 percent over the same period last year, with pump margins increasing due to productivity improvements and material savings. The European water business also contributed stronger profits resulting from increased volume and the effects of currency translation. Margins in the Group were 13.4 percent, matching those of the same period last year. Pentair noted that, on a year-to- date basis, the Water Technologies Group is its largest business and it has been the largest contributor to the Company's operating income each year since 2000.

In the Tools Group, net sales of $268.0 million in the third quarter of 2003 were up one percent compared to the same period last year. The sales gain was primarily attributed to the Oldham Saw acquisition. Lower volume in higher margin products, competitive pricing, some inflationary cost increases, and expenses related to capacity reductions continued to affect operating income, which totaled $21.4 million in the third quarter of 2003, 16 percent lower than in the same period last year. Margins of 8.0 percent were 160 basis points below those of the same period last year.

In the Enclosures Group, third quarter 2003 sales of $146.2 million were up almost five percent over the same period in 2002. The improved volume was driven by increased sales in electronics markets combined with share gains in U.S. commercial and networking markets. Third quarter operating income of $13.6 million gained 53 percent over that of the previous year's third quarter, while margins increased 300 basis points to 9.3 percent. Higher profits in the Group were driven primarily by volume-related efficiencies and continued productivity improvements.

"We made solid gains in working capital, supply chain management, our lean enterprise initiative, and organic growth, and we're redoubling efforts to offset competitive market price pressures in the Tools Group through additional materials savings and improved productivity," Hogan said. "Looking forward, we expect fourth quarter 2003 EPS of between $0.62 and $0.70, compared to EPS of $0.56 in the same period last year."

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.

Contact: Mark Cain of Pentair, (763) 656-5278

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

                               Three months ended       Nine months ended
    In thousands, except      Sept. 27     Sept. 28    Sept. 27    Sept. 28
     per-share data             2003         2002       2003         2002

    Net sales                 $685,014    $629,301  $2,041,519   $1,940,480
    Cost of goods sold         518,007     480,332   1,535,733    1,478,520
    Gross profit               167,007     148,969     505,786      461,960
      % of net sales             24.4%       23.7%       24.8%        23.8%
    Selling, general and
     administrative             88,267      78,243     277,181      253,530
      % of net sales             12.9%       12.4%       13.6%        13.1%
    Research and development    10,995       8,904      32,340       26,289
      % of net sales              1.6%        1.4%        1.6%         1.4%
    Operating income            67,745      61,822     196,265      182,141
      % of net sales              9.9%        9.8%        9.6%         9.4%
    Net interest expense         9,600       8,205      29,430       32,411
      % of net sales              1.4%        1.3%        1.4%         1.7%
    Income before income taxes  58,145      53,617     166,835      149,730
      % of net sales              8.5%        8.5%        8.2%         7.7%
    Provision for income taxes  19,770      16,214      56,724       47,913
      Effective tax rate         34.0%       30.2%       34.0%        32.0%
    Net income                 $38,375     $37,403    $110,111     $101,817

    Earnings per common share
    Basic                        $0.78       $0.76       $2.23        $2.07
    Diluted                      $0.77       $0.75       $2.21        $2.04

    Weighted average common
     shares outstanding
    Basic                       49,484      49,235      49,404       49,212
    Diluted                     50,043      49,804      49,824       49,809

    Cash dividends declared per
     common share                $0.21       $0.19       $0.61        $0.55


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

                                    September 27   December 31  September 28
    In thousands                        2003           2002         2002
             Assets
    Current assets
    Cash and cash equivalents         $50,381       $ 39,648      $39,591
    Accounts and notes receivable,
     net                              420,267        403,793      415,019
    Inventories                       308,150        293,202      291,308
    Deferred income taxes              57,416         55,234       66,527
    Prepaid expenses and other current
     assets                            21,523         17,132       20,735
    Net assets of discontinued
     operations                         2,379          1,799        1,771
    Total current assets              860,116        810,808      834,951

    Property, plant and equipment,
     net                              340,131        351,316      306,102

    Goodwill                        1,250,621      1,218,341    1,098,141
    Other assets                      136,620        133,985      115,704
    Total assets                   $2,587,488     $2,514,450   $2,354,898


        Liabilities and Shareholders' Equity
    Current liabilities
    Short-term borrowings                $102           $686           $-
    Current maturities of long-term
     debt                              57,499         60,488        7,284
    Accounts and notes payable        180,147        171,709      188,872
    Employee compensation and benefits 80,952         84,965       81,530
    Accrued product claims and
     warranties                        36,704         36,855       37,632
    Income taxes                       30,938         12,071       30,790
    Other current liabilities         124,046        109,426      124,039
    Total current liabilities         510,388        476,200      470,147

    Long-term debt                    605,131        673,911      559,218
    Pension and other retirement
     compensation                     135,607        124,301       82,683
    Post-retirement medical and
     other benefits                    42,162         42,815       42,762
    Deferred income taxes              34,110         31,728       35,390
    Other noncurrent liabilities       63,786         59,771       64,423
    Total liabilities               1,391,184      1,408,726    1,254,623

    Shareholders' equity            1,196,304      1,105,724    1,100,275
    Total liabilities and
     shareholders' equity          $2,587,488     $2,514,450   $2,354,898


    Days sales in accounts receivable
     (13 month moving average)             57             59           62
    Days inventory on hand (13 month
     moving average)                       64             63           66
    Days in accounts payable (13 month
     moving average)                       52             53           55
    Debt/total capital                  35.6%          39.9%        34.0%


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

                                                      Nine months ended
                                                  September 27  September 28
    In thousands                                      2003           2002
    Operating activities
    Net income                                      $110,111       $101,817
    Depreciation                                      47,366         44,499
    Other amortization                                 3,905          2,592
    Deferred income taxes                               (272)         4,263
    Stock compensation                                   306              -
    Changes in assets and liabilities, net of
     effects of business acquisitions
      Accounts and notes receivable                   (7,458)        (9,236)
      Inventories                                     (7,640)        11,777
      Prepaid expenses and other current assets       (3,608)         2,103
      Accounts payable                                 3,925          8,813
      Employee compensation and benefits              (5,356)         6,230
      Accrued product claims and warranties           (1,109)          (601)
      Income taxes                                    17,640         24,104
      Other current liabilities                       10,624          4,187
      Pension and post-retirement benefits             7,445          5,664
      Other assets and liabilities                     3,031         11,141
        Net cash provided by continuing operations   178,910        217,353
        Net cash (used for) provided by discontinued
         operations                                     (581)         3,555
          Net cash provided by operating
           activities                                178,329        220,908

    Investing activities
    Capital expenditures                             (29,720)       (23,674)
    Proceeds from sale of businesses                       -          1,744
    Acquisitions, net of cash acquired               (19,409)             -
    Divestitures                                      (2,400)             -
    Equity investments                                (5,426)        (9,448)
    Other                                                 48           (165)

          Net cash used for investing activities     (56,907)       (31,543)

    Financing activities
    Net short-term (repayments) borrowings              (771)           665
    Proceeds from long-term debt                     486,657        194,987
    Repayment of long-term debt                     (558,816)      (363,960)
    Proceeds from exercise of stock options              510          2,683
    Dividends paid                                   (30,106)       (27,067)
          Net cash used for financing activities    (102,526)      (192,692)

    Effect of exchange rate changes on cash           (8,163)        3,074
    Change in cash and cash equivalents               10,733           (253)
    Cash and cash equivalents, beginning of period    39,648         39,844
    Cash and cash equivalents, end of period         $50,381        $39,591

    Free cash flow
    Net cash provided by operating activities       $178,329       $220,908
    Less capital expenditures (including buyout
     of synthetic lease)                             (29,720)       (23,674)
    Free cash flow                                  $148,609       $197,234

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

                                 First Qtr  Second Qtr  Third Qtr Nine Months
    In thousands                   2003       2003       2003        2003

    Net sales to external customers
    Tools                        $251,765   $283,416   $268,028   $803,209
    Water                         246,440    290,692    270,901    808,033
    Enclosures                    139,453    145,236    146,233    430,922
    Intersegment sales
     elimination                     (142)      (355)      (148)      (645)
    Consolidated                 $637,516   $718,989   $685,014 $2,041,519

    Operating income (loss)
    Tools                         $17,686    $23,148    $21,440    $62,274
    Water                          29,504     46,002     36,197    111,703
    Enclosures                      9,865     11,703     13,555     35,123
    Other                          (4,867)    (4,521)    (3,447)   (12,835)
    Consolidated                  $52,188    $76,332    $67,745   $196,265

    Operating income as a percent
     of net sales
    Tools                            7.0%       8.2%       8.0%       7.8%
    Water                           12.0%      15.8%      13.4%      13.8%
    Enclosures                       7.1%       8.1%       9.3%       8.2%
    Consolidated                     8.2%      10.6%       9.9%       9.6%


                                First Qtr  Second Qtr  Third Qtr Nine Months
    In thousands                  2002        2002       2002       2002

    Net sales to external customers
    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
    Intersegment sales
     elimination                        -          -          -          -
    Consolidated                 $603,063   $708,116   $629,301 $1,940,480

    Operating income (loss)
    Tools                         $16,686    $30,837    $25,479    $73,002
    Water                          29,747     43,708     29,969    103,424
    Enclosures                      4,608      6,995      8,884     20,487
    Other                          (5,314)    (6,948)    (2,510)   (14,772)
    Consolidated                  $45,727    $74,592    $61,822   $182,141

    Operating income as a percent
     of net sales
    Tools                            6.6%      10.2%       9.6%       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%

SOURCE Pentair

Mark Cain of Pentair +1-763-656-5278

Categories: Press Releases