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Pentair Reports 39% Sales Growth and a 36% Gain in EPS From Continuing Operations in 2004
02.02.2005
Company Highlights a 'Tremendous Year Distinguished by Successful Execution'

GOLDEN VALLEY, Minn., Feb 02, 2005 /PRNewswire-FirstCall via COMTEX/ -- Pentair (NYSE: PNR) today announced its full-year 2004 results, saying they reflect a series of achievements including the strategic repositioning of the Company, sales growth of 39 percent or 14 percent on an organic basis, a 36 percent gain in 2004 earnings per share (EPS) from continuing operations over that of the previous year, and a 50 basis point increase in operating margins to 10.9 percent. Fourth quarter 2004 results were also positive with organic sales rising 10 percent over same period last year, and EPS from continuing operations of $0.33, up 38 percent over last year.

"Pentair's 2004 was a tremendous year distinguished by successful execution, not the least of which was the sale of our Tools Group and the acquisition of WICOR Industries," said Randall J. Hogan, Pentair chairman and chief executive officer. "This strategic repositioning, coupled with double digit growth and increased margins driven by good execution of our operating initiatives, has delivered total shareholder return in excess of 90 percent in 2004. As we enter 2005, we believe we are well-positioned to continue our high level of performance with two strong and growing business platforms, the destinies of which are firmly in our grasp."

Pentair's fourth quarter 2004 EPS from continuing operations of $0.33 increased 38 percent over fourth quarter 2003 EPS from continuing operations of $0.24. Pentair's fourth quarter 2004 net sales totaled $651.5 million, up 61 percent from $404.7 million in the same period a year ago. Fourth quarter organic sales -- removing the effects of acquisitions and excluding favorable foreign currency exchange -- grew 10 percent. Further adjusting for the three fewer days in the fourth quarter, organic sales growth was 15 percent. Operating income from continuing operations for the fourth quarter 2004 totaled $62.0 million, 47 percent greater than the $42.2 million reported in the fourth quarter of 2003. Excluding acquisitions, operating income increased approximately eight percent in the fourth quarter. Fourth quarter 2004 free cash flow was $46.1 million, bringing the total for the year to $215.2 million.

For the full year 2004, Pentair's sales from continuing operations increased 39 percent to $2.278 billion from the 2003 total of $1.643 billion. Operating income increased 45 percent to $247.2 million in 2004 from $170.2 million in 2003. EPS from continuing operations of $1.35 in 2004 increased 36 percent over 2003 EPS from continuing operations of $0.99.

Operating Results by Group

In the Water Group, fourth quarter 2004 sales of $469.5 million were 86 percent higher than the $252.3 million recorded in the same period last year, reflecting the impact of the WICOR acquisition and strong organic growth. Organic sales, without acquisitions and foreign exchange, and adjusted for days, increased about 11 percent, reflecting strong domestic pool sales, and growth in US, Asian, and European pump and filtration sales.

Fourth quarter 2004 operating income of $49.1 million in the Water Group reflected a 52 percent gain over the same period last year. Operating income margins in the Water Group were 10.5 percent in the fourth quarter 2004, down 230 basis points reflecting the lower initial margins of the former WICOR businesses and one-time costs related to the consolidation of pump facilities and other integration activities. Adding back these one-time costs of about $5 million, operating income margins in the fourth quarter would have been 11.5 percent.

Pentair said integration of the former WICOR water businesses advanced in the fourth quarter with nine facilities closed or consolidated to date, and another six closings or consolidations in process. Construction of a water products manufacturing facility near the campus of the existing Enclosures operation in Reynosa, Mexico, will be complete in the first quarter of 2005, with product transfers starting immediately thereafter. Product rationalization efforts are well underway, and early results include a 20 percent reduction in storage tank SKUs and a 50 percent reduction in residential filtration SKUs. Sales forces serving certain pump markets were realigned to take advantage of cross-selling opportunities. Consistent with its original plan, Pentair expects integration benefits to begin exceeding costs late in the first quarter of 2005.

Enclosures Group sales in the fourth quarter 2004 totaled $182.2 million compared to a year-earlier total of $152.5 million, a 20 percent increase. This performance was driven by the Group's improved market position with continued success in penetrating new vertical markets, new products, and growth in core markets. Pentair noted that the fourth quarter of 2004 was the Enclosure Group's eighth consecutive quarter of sequential sales growth.

Fourth quarter operating income in the Enclosures Group increased 48 percent from the same period last year, totaling $23.7 million in 2004 versus $16.0 million in 2003. Margins reached 13 percent, expanding by 250 basis points over the fourth quarter 2003 and by 20 basis points over the third quarter 2004, delivering the Enclosures Group's 12th consecutive quarter of sequential margin improvement. This performance was driven by higher volume and productivity gains from lean enterprise and supply management initiatives.

Outlook

"Our efforts to achieve operating excellence have produced solid progress over the last four years and, now, we believe we have transformed Pentair to maximize our growth opportunities and deliver even higher levels of performance," Hogan said. "As we enter 2005, the integration of the former WICOR businesses is proceeding as planned, and we are executing a robust and reliable integration process that we expect will continue to serve us well when applied to future Water and Enclosures acquisitions.

"As for 2005, we expect first quarter EPS of between $0.35 and $0.38, which is at least 25 percent higher than the same period last year," Hogan said. "For the second quarter 2005, we anticipate EPS of $0.61 to $0.65, which is at minimum 45 percent higher than the same period in 2004. This guidance reflects the new seasonality of the transformed Pentair. In addition, we are reaffirming our previous guidance for the full-year 2005 of $1.95 to $2.10, an increase of more than 45 percent from 2004."

In a separate news release issued today, Pentair announced it has appointed Richard J. Cathcart, formerly president and COO of Pentair's Water Group, to vice chairman. In his new role, Cathcart will lead Pentair's intensified growth focus with primary responsibilities for international growth and for business development. He will continue in his leadership role with Pentair Water.

A Pentair conference call scheduled for 11:00 a.m. CST 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         Year ended
                          December 31  December 31  December 31  December 31
    In thousands, except     2004         2003        2004         2003
     per-share data
    Net sales             $651,476     $404,677   $2,278,129   $1,642,987
    Cost of goods sold     468,274      291,184    1,623,419    1,196,757
    Gross profit           183,202      113,493      654,710      446,230
      % of net sales         28.1%        28.0%        28.7%        27.2%

    Selling, general
     and administrative    111,221       65,089      376,015      253,087
      % of net sales         17.1%        16.1%        16.5%        15.4%

    Research and
     development             9,932        6,227       31,453       22,932
      % of net sales          1.5%         1.5%         1.4%         1.4%

    Operating income        62,049       42,177      247,242      170,211
      % of net sales          9.5%        10.4%        10.9%        10.4%

    Net interest expense    10,892        7,824       37,210       26,395
      % of net sales          1.7%         1.9%         1.6%         1.6%

    Income from continuing
     operations before
     income taxes           51,157       34,353      210,032      143,816
      % of net sales          7.9%         8.5%         9.2%         8.8%

    Provision for
     income taxes           17,460       10,927       73,008       45,666
      Effective tax rate     34.1%        31.8%        34.8%        31.8%

    Income from
     continuing operations  33,697       23,426      137,024       98,150
    Income from
     discontinued
     operations,
     net of tax                  -       10,751       40,248       46,138
    Loss on disposal of
     discontinued
     operations,
     net of tax             (6,047)      (2,936)      (6,047)      (2,936)
    Net income             $27,650      $31,241     $171,225     $141,352

    Earnings per
     common share
    Basic
    Continuing operations    $0.34        $0.24        $1.38        $1.00
    Discontinued operations  (0.07)        0.08         0.34         0.44
    Basic earnings per
     common share            $0.27        $0.32        $1.72        $1.44

    Diluted
    Continuing operations    $0.33        $0.24        $1.35        $0.99
    Discontinued operations  (0.07)        0.08         0.33         0.43
    Diluted earnings per
     common share            $0.26        $0.32        $1.68        $1.42

    Weighted average
     common shares
     outstanding
    Basic                  100,014       97,926       99,316       97,876
    Diluted                102,541       99,532      101,706       99,620

    Cash dividends
     declared per
     common share           $0.110       $0.105       $0.430       $0.410



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

                                                    December 31    December 31
    In thousands                                       2004           2003
                         Assets
    Current assets
    Cash and cash equivalents                        $31,495        $47,989
    Accounts and notes receivable, net               396,459        251,475
    Inventories                                      323,676        166,862
    Current assets of discontinued operations              -        313,399
    Deferred tax assets                               52,899         30,871
    Prepaid expenses and other current assets         24,433         18,854
    Total current assets                             828,962        829,450

    Property, plant and equipment, net               336,302        233,106

    Other assets
    Assets of discontinued operations                    393        539,892
    Goodwill                                       1,620,404        997,183
    Intangibles, net                                 258,438         98,490
    Other                                             80,213         82,556
    Total other assets                             1,959,448      1,718,121
    Total assets                                  $3,124,712     $2,780,677

               Liabilities and Shareholders' Equity
    Current liabilities
    Current maturities of long-term debt             $11,957        $73,631
    Accounts payable                                 195,289         93,043
    Employee compensation and benefits               104,821         61,213
    Accrued product claims and warranties             42,524         24,427
    Current liabilities of discontinued operations       192        155,898
    Income taxes                                      27,395         14,912
    Other current liabilities                        144,664         74,327
    Total current liabilities                        526,842        497,451

    Long-term debt                                   724,148        732,862
    Pension and other retirement compensation        135,356        100,234
    Post-retirement medical and other benefits        69,667         26,227
    Deferred tax liabilities                         146,698         60,636
    Other noncurrent liabilities                      71,154         62,208
    Liabilities of discontinued operations             3,054         39,581
    Total liabilities                              1,676,919      1,519,199

    Commitments and contingencies

    Shareholders' equity                           1,447,793      1,261,478
    Total liabilities and shareholders' equity    $3,124,712     $2,780,677

    Days sales in accounts receivable
     (13 month moving average)                            52             54
    Days inventory on hand (13 month moving average)      62             59
    Days in accounts payable (13 month moving average)    57             54
    Debt/total capital                                 33.7%          39.0%



                        Pentair, Inc. and Subsidiaries
         Condensed Consolidated Statements of Cash Flows (Unaudited)
                                                           Year ended
                                                   December 31    December 31
    In thousands                                      2004           2003
    Operating activities
    Net income                                      $171,225       $141,352
    Adjustments to reconcile net income to
     net cash provided by operating activities
    Net income from discontinued operations          (40,248)       (46,138)
    Loss on disposal of discontinued operations        6,047          2,936
    Depreciation                                      47,063         40,809
    Amortization                                      13,534          4,074
    Deferred income taxes                             16,736         31,319
    Stock compensation                                     -            306
    Changes in assets and liabilities, net of
     effects of business acquisitions
     and dispositions
      Accounts and notes receivable                   26,328         (5,080)
      Inventories                                    (51,996)        13,174
      Prepaid expenses and other current assets        2,176         (4,781)
      Accounts payable                                17,864        (12,758)
      Employee compensation and benefits               4,596          4,813
      Accrued product claims and warranties            2,993         (1,756)
      Income taxes                                     6,352          5,437
      Other current liabilities                        9,191         (3,336)
      Pension and post-retirement benefits            11,508         (2,108)
      Other assets and liabilities                     6,794          6,769
        Net cash provided by continuing operations   250,163        175,032
        Net cash provided by discontinued operations  13,928         87,907
          Net cash provided by operating activities  264,091        262,939

    Investing activities
    Capital expenditures                             (48,867)       (43,622)
    Acquisitions, net of cash acquired              (869,155)      (229,094)
    Divestitures                                     773,399         (2,400)
    Equity investments                                    60         (5,294)
    Other                                                  -             48
          Net cash used for investing activities    (144,563)      (280,362)

    Financing activities
    Repayment of short-term borrowings, net           (4,162)          (873)
    Proceeds from long-term debt                     343,316        780,857
    Repayment of long-term debt                     (440,518)      (709,886)
    Proceeds from exercise of stock options           10,862          5,795
    Repurchases of common stock                       (4,200)        (1,589)
    Dividends paid                                   (43,128)       (40,494)
          Net cash provided by (used for)
           financing activities                     (137,830)        33,810

    Effect of exchange rate changes on cash            1,808         (8,046)
    Change in cash and cash equivalents              (16,494)         8,341
    Cash and cash equivalents, beginning of period    47,989         39,648
    Cash and cash equivalents, end of period         $31,495        $47,989

    Free cash flow
    Net cash provided by operating activities       $264,091       $262,939
    Less capital expenditures                        (48,867)       (43,622)
    Free cash flow                                  $215,224       $219,317



                        Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment (Unaudited)
First Qtr    Second Qtr   Third Qtr   Fourth Qtr    Year
    In thousands   2004         2004         2004        2004        2004

    Net sales to
     external
     customers
    Water         $314,002    $353,345     $426,696    $469,469   $1,563,512
    Enclosures     174,803     178,103      181,100     182,189      716,195
    Intersegment
     sales
     elimination      (352)     (1,015)         (29)       (182)      (1,578)
    Consolidated  $488,453    $530,433     $607,767    $651,476   $2,278,129

    Operating
     income
     (loss)
    Water          $41,547     $59,253      $47,410     $49,100     $197,310
    Enclosures      19,354      21,590       23,211      23,689       87,844
    Other          (10,791)     (9,860)      (6,521)    (10,740)     (37,912)
    Consolidated   $50,110     $70,983      $64,100     $62,049     $247,242

    Operating
     income as a
     percent of
     net sales
    Water            13.2%       16.8%        11.1%       10.5%        12.6%
    Enclosures       11.1%       12.1%        12.8%       13.0%        12.3%
    Consolidated     10.3%       13.4%        10.5%        9.5%        10.9%



                  First Qtr  Second Qtr    Third Qtr   Fourth Qtr    Year
    In thousands    2003        2003         2003        2003        2003

    Net sales to
     external
     customers
    Water         $246,440    $290,692     $270,901    $252,332   $1,060,365
    Enclosures     139,453     145,236      146,232     152,494      583,415
    Intersegment
     sales
     elimination      (142)       (355)        (147)       (149)        (793)
    Consolidated  $385,751    $435,573     $416,986    $404,677   $1,642,987

    Operating
     income
     (loss)
    Water          $29,504     $46,002      $36,197     $32,259     $143,962
    Enclosures       9,865      11,703       13,555      15,972       51,095
    Other           (7,217)     (7,015)      (4,560)     (6,054)     (24,846)
    Consolidated   $32,152     $50,690      $45,192     $42,177     $170,211

    Operating
     income as a
     percent of
     net sales
    Water            12.0%       15.8%        13.4%       12.8%        13.6%
    Enclosures        7.1%        8.1%         9.3%       10.5%         8.8%
    Consolidated      8.3%       11.6%        10.8%       10.4%        10.4%

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. 2004 revenues from continuing operations were $2.28 billion, or $2.76 billion on a pro forma basis (as if Pentair's 2004 acquisitions had been completed at the beginning of the year). 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.

SOURCE Pentair

Pentair Contacts:
Rachael Jarosh Communications
763-656-5280
rachael.jarosh@pentair.com

Mark Cain
Investor Relations
+1-763-656-5278
mark.cain@pentair.com

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