GOLDEN VALLEY, Minn., July 21 /PRNewswire-FirstCall/ -- Pentair
(NYSE: PNR) announced that its second quarter 2004 earnings per share (EPS) of
$0.55 increased 25 percent over second quarter 2003 EPS of $0.44 (adjusted to
reflect the impact of a two-for-one stock split effective June 8, 2004).
Pentair's second quarter 2004 net sales totaled $813.9 million, up 13 percent
from $719.0 million in the same period a year ago. Removing the effects of an
acquisition and favorable currency translation, sales were up 10 percent over
the second quarter 2003. Operating income for the second quarter 2004 totaled
$96.5 million, 26 percent greater than the $76.3 million reported in the
second quarter of 2003. Pentair's operating income margin in the second
quarter improved 130 basis points to 11.9 percent. Second quarter 2004 free
cash flow was $98.8 million, bringing the first half total to $94.7 million, a
$36 million improvement compared to the first half of last year.
"We continued to deliver on our performance commitments, with the water
and enclosures businesses generating double digit sales growth and expanded
margins," said Randall J. Hogan, Pentair chairman and chief executive officer.
"In addition, the strategic repositioning of Pentair made another leap forward
with our recent announcements concerning the FTC clearance of the WICOR
acquisition and the pending sale of the Tools business."
In the Water Technologies Group, second quarter 2004 sales of
$353.3 million were 22 percent higher than the $290.7 million recorded in the
same period last year, reflecting broad-based growth in all of the water
businesses. Sales of residential sump pump and effluent pump lines, pool and
spa equipment, and residential water conditioning valves were particularly
strong in the quarter. After excluding sales from the Everpure acquisition and
the impact of favorable currency translation, the Group's second quarter
growth rate was 15 percent.
Second quarter 2004 operating income totaled $59.3 million in Water
Technologies, a 29 percent gain over the same period last year. Increased
volume and continued progress on the Pentair Integrated Management System
(PIMS) and supply management initiatives contributed to a 100 basis point
margin improvement, boosting second quarter margins to 16.8 percent. The
second quarter 2004 was the third consecutive quarter in which margins grew by
at least 100 basis points on a quarter-over-quarter basis.
Pentair's Enclosures Group delivered 23 percent sales growth with second
quarter 2004 sales totaling $178.1 million compared to a year-earlier total of
$145.2 million. Pentair attributed the increase to market share gains, the
recovery of the telecom market, and stronger demand in test and measurement,
as well as automation and control markets. Significant wins in targeted growth
markets - safety, security and defense, and medical - together with the impact
of new product introductions helped boost Enclosures Group organic sales to
the highest levels in three years.
Second quarter operating income in the Enclosures Group increased 85
percent from the same period last year, totaling $21.6 million in 2004 versus
$11.7 million in 2003. Margins improved 400 basis points to 12.1 percent on
the same comparison, and 100 basis points from the first quarter 2004 as the
Group generated its tenth consecutive quarter of margin improvement. This
performance was driven by higher volume and productivity gains from PIMS and
supply management initiatives.
In the Tools Group, sales of $283.4 million equaled those of the same
period last year. The Group benefited from stronger sales of portable power
tools and stationary/bench-top tools in industrial channels, new pressure
washer sales at a major home center, stronger international sales, and sales
of new private label power tools. This improvement was offset by price
declines in some lines, the change-out of accessories at a major home center
in advance of a re-launch, our removal of a couple of pressure washer SKUs in
the club channel and the bankruptcy of a major woodworking customer.
Operating income of $23.2 million was equal to that of the same period
last year, as the effects of competitive market place pricing, higher raw
material costs, and one-time costs, combined to offset higher productivity.
Margins of 8.2 percent were comparable to those in the year-earlier period.
In an announcement issued Monday, July 19, Pentair said that it has
concluded its exploration of strategic alternatives for its Tools Group, and
that it has signed a definitive agreement to sell the Tools Group to The Black
& Decker Corporation of Towson, Maryland, for approximately
$775 million. The transaction is expected to close in 2004, following the
completion of customary regulatory clearances. The Tools Group will be treated
as a discontinued operation under Statement of Financial Accounting Standards
("SFAS") No. 144 for reporting purposes beginning in the third quarter of
2004. A preliminary analysis of continuing and discontinued operations for the
last six quarters of reportable business segments results is included with
this announcement.
On July 6, 2004, Pentair announced it has received clearance from the
Federal Trade Commission for its acquisition of WICOR Industries, a unit of
Wisconsin Energy Corporation, Milwaukee. In addition, the Public Service
Commission of Wisconsin approved the corporate restructuring of WICOR required
to facilitate this transaction. Pentair said it expects to complete the
transaction at the end of July.
"The third transformation of Pentair is nearing completion," Hogan said.
"Looking to the future on a continuing operation basis, we expect third
quarter EPS of between $0.29 and $0.34 and full year EPS of between $1.28 and
$1.38. This is in line with our prior guidance. Further, we expect 2005 EPS of
$1.95 to $2.10, which reflects 50 percent EPS growth from continuing
operations. By then, we expect to have swapped the earnings of our Tools
business, and the dynamics of the tools market, for the earnings of WICOR, and
the prospects of our water business, for a net cash outlay of roughly
$100 million -- with no dilution from prior expectations of $1.99."
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 Six months ended
In thousands, except July 3 June 28 July 3 June 28
per-share data 2004 2003 2004 2003
Net sales $813,873 $718,989 $1,581,014 $1,356,505
Cost of goods sold 590,412 535,501 1,155,895 1,017,726
Gross profit 223,461 183,488 425,119 338,779
% of net sales 27.5% 25.5% 26.9% 25.0%
Selling, general and
administrative 115,086 95,932 231,781 188,914
% of net sales 14.1% 13.3% 14.7% 13.9%
Research and
development 11,829 11,224 23,756 21,345
% of net sales 1.5% 1.6% 1.5% 1.6%
Operating income 96,546 76,332 169,582 128,520
% of net sales 11.9% 10.6% 10.7% 9.5%
Net interest expense 11,233 9,837 22,407 19,830
% of net sales 1.4% 1.4% 1.4% 1.5%
Income before income
taxes 85,313 66,495 147,175 108,690
% of net sales 10.5% 9.2% 9.3% 8.0%
Provision for income
taxes 29,853 22,608 51,504 36,954
Effective tax rate 35.0% 34.0% 35.0% 34.0%
Net income $55,460 $43,887 $95,671 $71,736
Earnings per
common share
Basic $0.56 $0.44 $0.97 $0.73
Diluted $0.55 $0.44 $0.95 $0.72
Weighted average common
shares outstanding
Basic 99,320 98,762 98,874 98,729
Diluted 101,694 99,624 101,112 99,430
Cash dividends declared
per common share $0.105 $0.105 $0.21 $0.20
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
July 3 December 31 June 28
In thousands 2004 2003 2003
Assets
Current assets
Cash and cash equivalents $58,247 $47,989 $45,465
Accounts and notes receivable,
net 459,710 420,403 442,366
Inventories 373,350 285,577 333,370
Deferred tax assets 50,126 50,989 57,524
Prepaid expenses and other
current assets 33,266 24,493 22,861
Total current assets 974,699 829,451 901,586
Property, plant and equipment,
net 345,912 343,550 342,784
Other assets
Goodwill 1,404,264 1,373,549 1,245,812
Intangibles, net 105,997 108,118 18,065
Other 99,148 126,009 119,274
Total other assets 1,609,409 1,607,676 1,383,151
Total assets $2,930,020 $2,780,677 $2,627,521
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $1,587 $- $329
Current maturities of long-term
debt 5,333 73,631 58,516
Accounts payable 253,447 170,077 214,213
Employee compensation and
benefits 89,077 84,587 76,884
Accrued product claims and
warranties 41,278 37,148 38,920
Income taxes 27,781 13,198 17,086
Other current liabilities 123,303 118,810 109,186
Total current liabilities 541,806 497,451 515,134
Long-term debt 747,319 732,862 669,687
Pension and other retirement
compensation 102,351 101,704 132,622
Post-retirement medical and
other benefits 41,970 42,134 42,293
Deferred tax liabilities 78,573 78,532 33,745
Other noncurrent liabilities 73,233 66,516 62,497
Total liabilities 1,585,252 1,519,199 1,455,978
Shareholders' equity 1,344,768 1,261,478 1,171,543
Total liabilities and
shareholders' equity $2,930,020 $2,780,677 $2,627,521
Days sales in accounts
receivable (13 month
moving average) 54 56 58
Days inventory on hand
(13 month moving average) 61 63 65
Days in accounts payable
(13 month moving average) 53 51 53
Debt/total capital 35.9% 39.0% 38.3%
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended
July 3 June 28
In thousands 2004 2003
Operating activities
Net income $95,672 $71,736
Depreciation 31,655 32,031
Other amortization 6,629 2,566
Deferred income taxes 1,977 (614)
Stock compensation - 306
Changes in assets and liabilities, net of
effects of business acquisitions and
dispositions
Accounts and notes receivable (28,957) (31,013)
Inventories (72,237) (33,148)
Prepaid expenses and other current assets (20,526) (3,899)
Accounts payable 53,996 38,753
Employee compensation and benefits 3,025 (8,783)
Accrued product claims and warranties 4,215 1,125
Income taxes 14,450 3,816
Other current liabilities 12,646 (3,515)
Pension and post-retirement benefits 1,257 4,795
Other assets and liabilities 2,732 3,863
Net cash provided by continuing operations 106,534 78,019
Net cash provided by (used for)
discontinued operations 1,533 (367)
Net cash provided by operating activities 108,067 77,652
Investing activities
Capital expenditures (13,340) (18,935)
Payments from sale of businesses - (2,400)
Acquisitions, net of cash acquired (15,288) (15,150)
Equity investments (200) (5,461)
Other - 47
Net cash used for investing activities (28,828) (41,899)
Financing activities
Net short-term borrowings (2,603) (549)
Proceeds from long-term debt 164,816 291,691
Repayment of long-term debt (220,526) (301,300)
Proceeds from exercise of stock options 10,178 699
Dividends paid (20,997) (19,738)
Net cash used for financing activities (69,132) (29,197)
Effect of exchange rate changes on cash 151 (739)
Change in cash and cash equivalents 10,258 5,817
Cash and cash equivalents, beginning of period 47,989 39,648
Cash and cash equivalents, end of period $58,247 $45,465
Free cash flow
Net cash provided by operating activities $108,067 $77,652
Less capital expenditures (13,340) (18,935)
Free cash flow $94,727 $58,717
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 2004 2004 2004 2003 2003 2003
Net sales to
external
customers
Water $314,002 $353,345 $667,347 $246,440 $290,734 $537,174
Enclosures 174,803 178,103 352,906 139,453 145,194 284,647
Tools 278,688 283,441 562,129 251,765 283,416 535,181
Intersegment
sales
elimination (352) (1,016) (1,368) (142) (355) (497)
Consolidated $767,141 $813,873 $1,581,014 $637,516 $718,989 $1,356,505
Operating income
(loss)
Water $41,547 $59,253 $100,800 $29,504 $46,002 $75,506
Enclosures 19,354 21,590 40,944 9,865 11,703 21,568
Tools 20,763 23,165 43,928 17,686 23,148 40,834
Other (8,628) (7,462) (16,090) (4,867) (4,521) (9,388)
Consolidated $73,036 $96,546 $169,582 $52,188 $76,332 $128,520
Operating income
as a percent of
net sales
Water 13.2% 16.8% 15.1% 12.0% 15.8% 14.1%
Enclosures 11.1% 12.1% 11.6% 7.1% 8.1% 7.6%
Tools 7.5% 8.2% 7.8% 7.0% 8.2% 7.6%
Consolidated 9.5% 11.9% 10.7% 8.2% 10.6% 9.5%
Pentair, Inc. and Subsidiaries
Reconciliation of Continuing and Discontinued Operations* (Unaudited)
In millions,
except
per-share First Second Six Third Fourth
data Quarter Quarter Months Quarter Quarter Year
Net Sales
2003 total $637.5 $719.0 $1,356.5 $685.0 $682.9 $2,724.4
Tools Group
discontinued
operations 251.8 283.4 535.2 268.0 278.2 1,081.4
2003
continuing
operations $385.7 $435.6 $821.3 $417.0 $404.7 $1,643.0
2004 total $767.1 $813.9 $1,581.0
Tools Group
discontinued
operations 278.7 283.4 562.1
2004
continuing
operations $488.4 $530.5 $1,018.9
% change from
continuing
operations 27% 22% 24%
Operating Income
2003 total $52.2 $76.3 $128.5 $67.8 $63.3 $259.6
Tools Group
discontinued
operations 20.1 25.6 45.7 22.6 21.1 89.4
2003
continuing
operations $32.1 $50.7 $82.8 $45.2 $42.2 $170.2
2004 total $73.0 $96.6 $169.6
Tools Group
discontinued
operations 22.9 25.6 48.5
2004
continuing
operations $50.1 $71.0 $121.1
% change from
continuing
operations 56% 40% 46%
Diluted Earnings
Per Share
2003 continuing
operations $0.18 $0.30 $0.48 $0.27 $0.24 $0.99
Equipment
discontinued
operations - - - - (0.03) (0.03)
Tools Group
discontinued
operations 0.10 0.14 0.24 0.11 0.11 0.46
2003 total
reported $0.28 $0.44 $0.72 $0.38 $0.32 $1.42
Diluted Earnings
Per Share
2004 continuing
operations $0.28 $0.42 $0.70
Tools Group
discontinued
operations 0.12 0.13 0.25
2004 total
reported $0.40 $0.55 $0.95
* On July 15, 2004, Pentair, Inc. met the recognition criteria to
classify its Tools Group as a discontinued operation. Beginning in the
2004 third quarter Form 10-Q, the Pentair, Inc. historical financials
will be restated to reflect the Tools Group as a discontinued
operation.
About Pentair, Inc.
Pentair ( http://www.pentair.com ) is a diversified operating company
headquartered in Minnesota. Its Water Technologies 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, serving industrial and electronic
customers, and its Tools Group markets innovative products under established
brand names to professionals and do-it-yourself users. Pentair's 2003 revenues
totaled $2.7 billion. The company employs 13,500 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 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
Pentair: Mark Cain
Tel.: (763) 656-5278
E-mail: mark.cain@pentair.com
SOURCE Pentair