GOLDEN VALLEY, Minn., Oct. 26 /PRNewswire-FirstCall/ -- Pentair
(NYSE: PNR) announced that its third quarter 2004 earnings per share (EPS)
from continuing operations of $0.32 increased 19 percent over third quarter
2003 EPS from continuing operations of $0.27. Pentair's third quarter 2004 net
sales totaled $607.8 million, up 46 percent from $417.0 million in the same
period a year ago. Removing the effects of acquisitions, sales were up 11
percent over the third quarter 2003.
Operating income for the third quarter 2004 totaled $64.1 million, 42
percent greater than the $45.2 million reported in the third quarter of 2003.
Excluding acquisitions, operating income increased 20 percent in the third
quarter. Third quarter 2004 free cash flow was $74.4 million, bringing the
year-to-date total to $169.2 million, a $20.6 million improvement compared to
the first nine months of last year.
"We have completed the strategic repositioning of Pentair, exchanging the
earnings of our Tools business, and the dynamics of the tools market, for the
earnings of WICOR, and the brighter prospects of our water business, for a net
cash outlay of about $100 million," said Randall J. Hogan, Pentair chairman
and chief executive officer. "Now we are turning to the second phase of the
transformation: improving the performance of the newly acquired businesses and
attaining our growth and profit goals."
Hogan said that Pentair's growth initiatives are on-track, that margins in
Pentair's existing businesses continue to improve, and that the integration of
the former WICOR businesses is proceeding well, despite the fact that
integration costs were higher than benefits in the quarter and that WICOR's
starting margins were somewhat lower than expected. Hogan credited Pentair's
productivity improvements, supply management activities, and ability to
achieve price increases in offsetting the impact of higher material costs in
the quarter.
In the Water Group, third quarter 2004 sales of $426.7 million were 58
percent higher than the $270.9 million recorded in the same period last year,
reflecting the impact of the WICOR acquisition effective as of July 31, 2004.
Organic sales increased in the upper single digits reflecting continued
double-digit growth in our pump markets.
Third quarter 2004 operating income of $47.4 million in the Water Group
reflected a 31 percent gain over the same period last year. As expected,
operating income margins were 11.1 percent including the lower initial margins
of the former WICOR businesses. Excluding the WICOR and Everpure businesses
and about $1.0 million of post-acquisition integration expenses, operating
margins were about 13.6 percent, comparable to the 13.4 percent in the same
period in 2003.
Integration of the former WICOR businesses proceeded as expected during
the quarter. The consolidations of three manufacturing facilities and six
distribution or warehousing locations in the U.S. and Europe have been
announced, with some already completed. Costs associated with the integration
efforts, which are expected to total approximately $5 million in the fourth
quarter of 2004, will continue to offset the benefits for the remainder of
this year.
All Enclosures Group businesses had significantly higher sales in key
sectors, resulting in organic sales growth of 24 percent for the quarter.
Additional wins in high growth markets, continued market share gains, and new
customers in European markets helped to boost third quarter 2004 sales to
$181.1 million compared to a year-earlier total of $146.2 million.
Third quarter operating income in the Enclosures Group increased 71
percent from the same period last year, totaling $23.2 million in 2004 versus
$13.6 million in 2003. Margins reached 12.8 percent, expanding by 350 basis
points over the third quarter 2003 and by 70 basis points over the second
quarter 2004, delivering the Enclosures Group's 11th consecutive quarter of
sequential margin improvement. This performance was driven by higher volume
and productivity gains from PIMS and supply management initiatives.
Pentair's third quarter Cost of Goods Sold increased, reducing EPS by
approximately three cents per share, for the expensing of fair market value
inventory adjustments related to inventory acquired in the Everpure and WICOR
transactions. Excluding this adjustment, gross profit increased by 210 basis
points over the same period.
Pentair's year-to-date 2004 effective income tax rate of 35.0 percent is
330 basis points higher than the 31.7 percent rate of the same period last
year. The higher rate is due to the discontinued status of the Tools Group,
the higher tax rate borne by the WICOR businesses, the anticipated higher
level and mix of Pentair's 2004 U.S. and foreign earnings, and the fact that
many of Pentair's tax saving programs are relatively fixed.
Pentair noted that the proceeds from the early fourth quarter sale of its
Tools Group to Black & Decker yielded a total of $796 million. With the
closing of the sale, Pentair immediately paid down the $850 bridge loan
associated with its acquisition of WICOR. Today, Pentair's debt-to-total-
capital ratio is less than 37 percent, equal to what it was in late 2003.
According to Hogan, Pentair is now focused on driving the Water Group's
margins back toward the goal of 15 percent, and capturing growth opportunities
in both water and enclosures.
"In the first half of this year, our Water Group reached its goal of 15
percent Return on Sales. As we combine WICOR's strong customer service
orientation and Pentair's proven operating disciplines over the next two
years, we expect that the expanded Water Group will regain that high level of
performance," Hogan said. "Our fourth quarter will continue to reflect more
integration costs than benefits but, despite this, we still expect to generate
fourth quarter EPS of between $0.30 and $0.34, or full year EPS of between
$1.32 and $1.36. This is in-line with our prior guidance and represents a
year-over-year EPS growth of approximately 35 percent. We still expect 2005
EPS to be in the range of $1.95 to $2.10, an increase of approximately 50
percent over 2004."
A Pentair conference call scheduled for 11:00 a.m. CDT today will be
webcast live via http://www.pentair.com . A link to the conference call is
posted on the site's "Financial Information" page and will be archived at the
same location.
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three months ended Nine months ended
In thousands, except October 2 September 27 October 2 September 27
per-share data 2004 2003 2004 2003
Net sales $607,767 $416,986 $1,626,653 $1,238,310
Cost of goods sold 437,983 306,571 1,155,145 905,573
Gross profit 169,784 110,415 471,508 332,737
% of net sales 27.9 % 26.5 % 29.0 % 26.9 %
Selling, general and
administrative 96,882 59,471 264,795 187,998
% of net sales 15.9 % 14.3 % 16.3 % 15.2 %
Research and development 8,803 5,752 21,521 16,705
% of net sales 1.4 % 1.4 % 1.3 % 1.3 %
Operating income 64,099 45,192 185,192 128,034
% of net sales 10.5 % 10.8 % 11.4 % 10.3 %
Net interest expense 11,172 5,530 26,317 18,571
% of net sales 1.8 % 1.3 % 1.6 % 1.5 %
Income before income taxes 52,927 39,662 158,875 109,463
% of net sales 8.7 % 9.5 % 9.8 % 8.8 %
Provision for income taxes 19,835 12,687 55,549 34,739
Effective tax rate 37.5 % 32.0 % 35.0 % 31.7 %
Income from continuing
operations 33,092 26,975 103,326 74,724
Income from discontinued
operations, net of tax 14,810 11,400 40,247 35,387
Net income $47,902 $38,375 $143,573 $110,111
Earnings per common share
Basic
Continuing operations $0.33 $0.27 $1.04 $0.76
Discontinued operations 0.15 0.12 0.41 0.36
Basic earnings per common
share $0.48 $0.39 $1.45 $1.11
Diluted
Continuing operations $0.32 $0.27 $1.02 $0.75
Discontinued operations 0.15 0.11 0.40 0.36
Diluted earnings per common
share $0.47 $0.38 $1.42 $1.10
Weighted average common
shares outstanding
Basic 99,502 98,868 99,083 98,809
Diluted 102,059 100,086 101,428 99,649
Cash dividends declared per
common share $0.105 $0.105 $0.320 $0.305
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
October 2 December 31 September 27
In thousands 2004 2003 2003
Assets
Current assets
Cash and cash equivalents $78,794 $47,989 $50,381
Accounts and notes receivable,
net 397,098 251,475 232,018
Inventories 315,414 166,862 161,415
Current assets of discontinued
operations 394,937 313,399 360,606
Deferred tax assets 45,304 30,871 38,367
Prepaid expenses and other
current assets 30,967 18,854 17,330
Total current assets 1,262,514 829,450 860,117
Property, plant and equipment, net 335,976 233,106 228,314
Other assets
Assets of discontinued operations 565,071 539,892 540,398
Goodwill 1,619,635 997,183 875,197
Intangibles, net 259,770 98,490 7,545
Other 83,839 82,556 75,918
Total other assets 2,528,315 1,718,121 1,499,058
Total assets $4,126,805 $2,780,677 $2,587,489
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $850,000 $ -- $102
Current maturities of long-term
debt 9,865 73,631 103,308
Accounts payable 184,741 93,043 95,721
Employee compensation and
benefits 88,779 61,213 59,888
Accrued product claims and
warranties 35,200 24,427 24,865
Current liabilities of
discontinued operations 209,339 156,004 167,396
Income taxes 49,697 14,912 12,876
Other current liabilities 136,873 74,221 80,754
Total current liabilities 1,564,494 497,451 544,910
Long-term debt 737,719 732,862 558,610
Pension and other retirement
compensation 129,779 101,704 135,313
Post-retirement medical and other
benefits 58,007 26,227 26,387
Deferred tax liabilities 140,656 60,636 30,446
Other noncurrent liabilities 61,861 62,208 62,863
Liabilities of discontinued
operations 41,598 38,111 32,656
Total liabilities 2,734,114 1,519,199 1,391,185
Minority interest 2,672 -- --
Shareholders' equity 1,390,019 1,261,478 1,196,304
Total liabilities and
shareholders' equity $4,126,805 $2,780,677 $2,587,489
Days sales in accounts receivable
(13 month moving average) 52 54 54
Days inventory on hand
(13 month moving average) 58 59 60
Days in accounts payable
(13 month moving average) 56 54 53
Debt/total capital 53.5 % 39.0 % 35.6 %
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended
October 2 September 27
In thousands 2004 2003
Operating activities
Net income $143,575 $110,111
Adjustments to reconcile net income to
net cash provided by
operation activities:
Net income from discontinued operations (40,247) (35,387)
Depreciation 34,946 32,132
Other amortization 10,310 3,578
Deferred income taxes (449) 10,766
Stock compensation -- 306
Changes in assets and liabilities, net of
effects of business acquisitions and dispositions
Accounts and notes receivable 13,611 (1,601)
Inventories (46,043) 9,016
Prepaid expenses and other current assets (13,835) (4,690)
Accounts payable 14,090 (1,205)
Employee compensation and benefits 6,127 7,724
Accrued product claims and warranties 2,009 (1,073)
Income taxes 24,602 902
Other current liabilities 28,914 4,467
Pension and post-retirement benefits 7,121 7,514
Other assets and liabilities (1,059) 1,878
Net cash provided by continuing
operations 183,672 144,438
Net cash provided by discontinued
operations 14,031 33,891
Net cash provided by operating
activities 197,703 178,329
Investing activities
Capital expenditures (28,553) (29,720)
Acquisitions, net of cash acquired (877,717) (19,409)
Payments from sale of businesses -- (2,400)
Equity investments -- (5,426)
Other -- 48
Net cash used for investing activities (906,270) (56,907)
Financing activities
Net short-term (repayments) borrowings 845,838 (771)
Proceeds from long-term debt 231,516 486,657
Repayment of long-term debt (317,152) (558,816)
Proceeds from exercise of stock options 10,225 510
Dividends paid (32,042) (30,106)
Net cash provided by (used for)
financing activities 738,385 (102,526)
Effect of exchange rate changes on cash 987 (8,163)
Change in cash and cash equivalents 30,805 10,733
Cash and cash equivalents, beginning of period 47,989 39,648
Cash and cash equivalents, end of period $78,794 $50,381
Free cash flow
Net cash provided by operating activities $197,703 $178,329
Less capital expenditures continuing operations (22,793) (18,369)
Less capital expenditures discontinued
operations (5,760) (11,351)
Free cash flow $169,150 $148,609
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment (Unaudited)
First Qtr Second Qtr Third Qtr Nine Months
In thousands 2004 2004 2004 2004
Net sales to
external customers
Water $314,002 $353,345 $426,696 $1,094,043
Enclosures 174,803 178,103 181,100 534,006
Intersegment sales
elimination (352) (1,015) (29) (1,396)
Consolidated $488,453 $530,433 $607,767 $1,626,653
Operating income (loss)
Water $41,547 $59,253 $47,410 $148,210
Enclosures 19,354 21,590 23,211 64,155
Other (10,791) (9,860) (6,522) (27,173)
Consolidated $50,110 $70,983 $64,099 $185,192
Operating income as
a percent of net sales
Water 13.2% 16.8% 11.1% 13.5%
Enclosures 11.1% 12.1% 12.8% 12.0%
Consolidated 10.3% 13.4% 10.5% 11.4%
First Qtr Second Qtr Third Qtr Nine Months
In thousands 2003 2003 2003 2003
Net sales to
external customers
Water $246,440 $290,692 $270,901 $808,033
Enclosures 139,453 145,236 146,232 430,921
Intersegment sales
elimination (142) (355) (147) (644)
Consolidated $385,751 $435,573 $416,986 $1,238,310
Operating income (loss)
Water $29,504 $46,002 $36,197 $111,703
Enclosures 9,865 11,703 13,555 35,123
Other (7,217) (7,015) (4,560) (18,792)
Consolidated $32,152 $50,690 $45,192 $128,034
Operating income as
a percent of net sales
Water 12.0% 15.8% 13.4% 13.8%
Enclosures 7.1% 8.1% 9.3% 8.2%
Consolidated 8.3% 11.6% 10.8% 10.3%
About Pentair, Inc.
Pentair (http://www.pentair.com) is a diversified operating company
headquartered in Minnesota. Its Water Group is a global leader in providing
innovative products and systems used worldwide in the movement, treatment,
storage and enjoyment of water. Pentair's Enclosures Group is a leader in the
global enclosures market, designing and manufacturing standard, modified and
custom enclosures that house and protect sensitive electronics and electrical
components. With 2003 revenues of $2.7 billion, Pentair has approximately
13,000 employees worldwide.
Any statements made about the company's anticipated financial results are
forward-looking statements subject to risks and uncertainties such as
continued economic growth; the ability to integrate the WICOR acquisition
successfully and the risk that expected synergies may not be fully realized or
may take longer to realize than expected; 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:
Pentair: Mark Cain
Tel. (763) 656-5278
E-mail: mark.cain@pentair.com
SOURCE Pentair