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Pentair Reports a 45% Sales Increase, a 50% EPS Improvement, and a 50 Basis Point Margin Gain in First Quarter of 2005
04.26.2005

GOLDEN VALLEY, Minn., April 26 /PRNewswire-FirstCall/ -- Pentair (NYSE: PNR) today announced its first quarter 2005 results, highlighting a 50 percent year-over-year increase in earnings per share (EPS) from continuing operations driven chiefly by share gains in robust Enclosures markets, stronger margins in Enclosures and in Pentair's heritage water businesses, and the contributions of the new water businesses.

Pentair's first quarter 2005 net sales totaled $709.6 million, up 45 percent from $488.5 million in the same period a year ago. Organic sales -- removing the effects of acquisitions and excluding favorable foreign currency exchange -- grew approximately five percent. Operating income for the first quarter totaled $76.4 million, 52 percent greater than the $50.1 million reported in the same period last year. First quarter 2005 EPS of $0.42 compares to first quarter 2004 EPS from continuing operations of $0.28. The $0.42 EPS includes a benefit of approximately one cent from a favorable settlement of a routine IRS exam for prior years resulting in a release of tax contingency reserves.

"We rate the first quarter of 2005 a solid success on the basis of a 45 percent gain in sales, a 52 percent improvement in operating income, a 50 percent increase in EPS, and a 50 basis point expansion in margins," said Randall J. Hogan, Pentair chairman and chief executive officer. "Organic growth of five percent was driven principally by nearly seven percent growth in North America and strong growth in China, offset somewhat by lower sales in Europe."

During the first quarter, Pentair used a net $98 million of cash to support the combined seasonality of the Sta-Rite and Pentair Pool operations as well as working capital requirements to facilitate the rationalization of Water operations and cash payments for various customer rebates and employee bonus plans. Capital expenditures were also higher due to construction of facilities in Mexico and China that will improve Pentair's cost structure and accommodate future growth. Pentair anticipates that cash flow for the first half of 2005 will be positive due to reductions in working capital projected in the second quarter. Pentair expects to exceed $200 million of free cash flow in 2005.

In the Water Group, first quarter 2005 sales of $512.1 million were 63 percent higher than the $314.0 million recorded in the same period last year. Strong Asian sales and improved North American sales of pumps, and foodservice, marine and recreational vehicle filtration sales drove organic growth. This growth was somewhat offset by the contraction of sales in Europe, resulting in organic growth for the Water Group in the low single digits.

First quarter 2005 operating income in the Water Group totaled $61.8 million, up from $41.5 million for the same period last year. Operating income margins of 12.1 percent in the first quarter reflect the lower initial margins of the former WICOR businesses. Pentair said the Water Group showed significant progress in closing the gap on the margin differential between the new Water Group and Pentair's heritage Water Group, from a gap of 230 basis points in the fourth quarter of 2004 to a gap of only 110 basis points in the first quarter of 2005.

Integration of the former WICOR businesses proceeded as expected during the quarter with 10 facilities closed or consolidated to date, and another five closings or consolidations in progress. In February, Pentair completed construction of a water products manufacturing facility near the campus of Pentair's existing operations in Reynosa, Mexico, and production began in March. Operations at the new facility will continue to ramp-up throughout 2005.

Pentair's Enclosures Group delivered 13 percent sales growth with first quarter 2005 sales totaling $197.9 million compared to a year-earlier total of $174.8 million. Sales in North America were very strong, offset by a small reduction in European sales. Pentair attributed the overall increase to market share gains driven by continued wins in targeted growth markets, the impact of new product introductions, and improved service and delivery, coupled with strong demand from North American industrial, commercial and technology markets.

First quarter operating income in the Enclosures Group increased 34 percent from the same period last year, totaling $25.9 million in 2005 versus $19.4 million in 2004. Margins reached 13.1 percent, expanding by 200 basis points over the first quarter 2004, and delivering the Enclosures Group's 13th consecutive quarter of sequential margin improvement. This performance was driven by higher volume in North America and productivity gains from the Pentair Integrated Management System and supply management initiatives.

"In both our Water and Enclosures businesses, we are capturing solid organic growth in those markets where we have executed our growth initiatives; now we need to replicate those successes, particularly in Europe. In operations, we continue to more than offset material cost inflation with pricing and productivity, the integration of the former WICOR businesses is progressing smoothly, and we continue to pursue acquisition opportunities in both Water and Enclosures," Hogan said. "Looking ahead to our second quarter results, we reiterate our expectation of EPS between $0.61 and $0.65, which is at minimum 45 percent higher than the same period in 2004. In addition, we are raising the low end of our previous 2005 EPS guidance from $1.95 to $2.00, while maintaining the high end of the range at $2.10."

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
                                                     April 2        April 3
    In thousands, except per-share data                2005           2004

    Net sales                                       $709,635       $488,453
    Cost of goods sold                               505,497        348,380
    Gross profit                                     204,138        140,073
      % of net sales                                   28.8%          28.7%

    Selling, general and administrative              116,338         83,652
      % of net sales                                   16.4%          17.1%

    Research and development                          11,427          6,311
      % of net sales                                    1.6%           1.3%

    Operating income                                  76,373         50,110
      % of net sales                                   10.8%          10.3%

    Net interest expense                              11,276          7,645
      % of net sales                                    1.6%           1.6%
    Income from continuing operations
     before income taxes                              65,097         42,465
      % of net sales                                    9.2%           8.7%

    Provision for income taxes                        21,792         14,223
      Effective tax rate                               33.5%          33.5%

    Income from continuing operations                 43,305         28,242

    Income from discontinued operations, net of tax        -         11,968

    Net income                                       $43,305        $40,210

    Earnings per common share
    Basic
    Continuing operations                              $0.43          $0.29
    Discontinued operations                                -           0.12
    Basic earnings per common share                    $0.43          $0.41

    Diluted
    Continuing operations                              $0.42          $0.28
    Discontinued operations                                -           0.12
    Diluted earnings per common share                  $0.42          $0.40

    Weighted average common shares outstanding
    Basic                                            100,363         98,428
    Diluted                                          102,742        100,531

    Cash dividends declared per common share         $ 0.130        $ 0.105



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

                                     April 2      December 31      April 3
    In thousands                      2005            2004          2004
                      Assets
    Current assets
    Cash and cash equivalents       $43,839         $31,495       $63,246
    Accounts and notes receivable,
     net                            475,603         396,459       313,016
    Inventories                     339,910         323,676       175,511
    Current assets of
     discontinued operations              -               -       343,343
    Deferred tax assets              49,913          49,074        30,242
    Prepaid expenses and other
     current assets                  27,838          24,433        24,863
    Total current assets            937,103         825,137       950,221

    Property, plant and
     equipment, net                 335,063         336,302       226,523

    Other assets
    Non-current assets of
     discontinued operations              -             393       534,830
    Goodwill                      1,620,719       1,620,404       997,283
    Intangibles, net                255,028         258,126        97,487
    Other                            81,009          80,213        83,173
    Total other assets            1,956,756       1,959,136     1,712,773
    Total assets                 $3,228,922      $3,120,575    $2,889,517

              Liabilities and
            Shareholders' Equity
    Current liabilities
    Current maturities of
     long-term debt                 $17,423         $11,957        $4,884
    Accounts payable                185,138         195,289       122,861
    Employee compensation
     and benefits                    76,873         104,821        54,405
    Accrued product claims
     and warranties                  44,297          42,524        25,670
    Current liabilities of
     discontinued operations            192             192       167,253
    Income taxes                     25,446          27,395        24,842
    Accrued rebates and sales
     incentives                      26,352          41,618        14,076
    Other current liabilities       104,588         103,083        64,646
    Total current liabilities       480,309         526,879       478,637

    Long-term debt                  848,006         724,148       829,135
    Pension and other
     retirement compensation        138,524         135,356        99,804
    Post-retirement medical
     and other benefits              70,013          69,667        25,888
    Deferred tax liabilities        145,294         142,873        60,664
    Other non-current liabilities    72,431          70,804        55,639
    Non-current liabilities of
     discontinued operations          2,866           3,054        39,801
    Total liabilities             1,757,443       1,672,781     1,589,568

    Shareholders' equity          1,471,479       1,447,794     1,299,949
    Total liabilities and
     shareholders' equity        $3,228,922      $3,120,575    $2,889,517

    Days sales in accounts
     receivable (13 month
     moving average)                     54              52            53
    Days inventory on hand
     (13 month moving average)           65              62            57
    Days in accounts payable
     (13 month moving average)           57              57            54
    Debt/total capital                37.0%           33.7%         39.1%



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

                                                       Three months ended
                                                     April 2        April 3
    In thousands                                       2005           2004
    Operating activities
    Net income                                       $43,305        $40,210
    Adjustments to reconcile net income to net
     cash provided by operating activities
    Net income from discontinued operations                -        (11,968)
    Depreciation                                      14,463         10,441
    Amortization                                       5,868          3,144
    Deferred income taxes                              2,391            643
    Changes in assets and liabilities, net
     of effects of business acquisitions and
     dispositions
      Accounts and notes receivable                  (85,608)        61,765)
      Inventories                                    (19,489)        (9,959)
      Prepaid expenses and other current assets       (4,331)        (5,792)
      Accounts payable                                (7,382)        30,013
      Employee compensation and benefits             (27,416)        (7,526)
      Accrued product claims and warranties            1,544          1,265
      Income taxes                                    (1,681)         9,975
      Other current liabilities                         (605)         4,660
      Pension and post-retirement benefits             3,646          1,955
      Other assets and liabilities                    (1,250)        (2,242)
        Net cash (used for) provided by
         continuing operations                       (76,545)         3,054
        Net cash provided by (used for)
         discontinued operations                         205           (130)
          Net cash (used for) provided by
           operating activities                      (76,340)         2,924

    Investing activities
    Capital expenditures                             (21,289)        (6,955)
    Acquisitions, net of cash acquired               (10,301)        (2,296)
    Divestitures                                      (1,190)             -
    Other                                                 17              -
          Net cash used for investing activities     (32,763)        (9,251)

    Financing activities
    Proceeds from long-term debt                     120,000         85,816
    Repayment of long-term debt                       12,490        (62,485)
    Proceeds from exercise of stock options            2,599          9,344
    Dividends paid                                   (13,428)       (10,457)
          Net cash provided by financing activities  121,661         22,218

    Effect of exchange rate changes on cash             (214)          (634)
    Change in cash and cash equivalents               12,344         15,257
    Cash and cash equivalents, beginning of period    31,495         47,989
    Cash and cash equivalents, end of period         $43,839        $63,246

    Free cash flow
    Net cash (used for) provided by
     operating activities                           $(76,340)        $2,924
    Less capital expenditures continuing operations  (21,289)        (5,480)
    Less capital expenditures discontinued
     operations                                            -         (1,475)
    Free cash flow                                  $(97,629)       $(4,031)



                        Pentair, Inc. and Subsidiaries

Supplemental Financial Information by Reportable Business Segment (Unaudited)

                                                    First Qtr      First Qtr
    In thousands                                       2005           2004

    Net sales to external customers
    Water                                           $512,110       $314,002
    Enclosures                                       197,949        174,803
    Intersegment sales elimination                      (424)          (352)
    Consolidated                                    $709,635       $488,453

    Operating income (loss)
    Water                                            $61,803        $41,547
    Enclosures                                        25,926         19,354
    Other                                            (11,356)       (10,791)
    Consolidated                                     $76,373        $50,110

    Operating income as a percent of net sales
    Water                                              12.1%          13.2%
    Enclosures                                         13.1%          11.1%
    Consolidated                                       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 2004 revenues of $2.28 billion, or $2.76 billion on a pro forma basis, 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
+1-763-656-5280
rachael.jarosh@pentair.com
or
Mark Cain
Investor Relations
+1-763-656-5278
mark.cain@pentair.com

both of Pentair

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