GOLDEN VALLEY, Minn., July 26 /PRNewswire-FirstCall/ -- Pentair
(NYSE: PNR) today announced its second quarter 2005 results, highlighting a
50 percent year-over-year increase in earnings per share (EPS) from continuing
operations driven by stronger margins in Pentair's Enclosures and Water
businesses, coupled with share gains in robust Enclosures markets and the
contributions of the new water businesses acquired in the WICOR purchase in
August 2004.
Pentair's second quarter 2005 net sales totaled $788.5 million, up 49
percent from $530.4 million in the same period a year ago. Organic sales -
removing the effects of acquisitions and excluding favorable foreign currency
exchange - grew approximately seven percent. Operating income for the second
quarter totaled $111.5 million, 57 percent greater than the $71.0 million
reported in the same period last year. A 14.1 percent margin in the second
quarter reflected a gain of 70 basis points over the year-earlier level of
13.4 percent. Second quarter 2005 EPS of $0.63 compared to second quarter 2004
EPS from continuing operations of $0.42. Cash flow for the second quarter of
2005 totaled $117 million, bringing free cash flow for the first half of 2005
to $19 million. Pentair has targeted $200 million of free cash flow in 2005.
"The integration of our new water businesses and our water margin
enhancement efforts both showed concrete progress in this our seasonally high
quarter. The Enclosures Group continued its long streak of sales and margin
improvements with several performance records established in the second
quarter," said Randall J. Hogan, Pentair chairman and chief executive officer.
"These results demonstrate that we are executing very well in all of our
businesses, and that we are getting solid bottom line results from our newly
acquired water businesses."
In the Water Group, second quarter 2005 sales of $585.7 million were 66
percent higher than the $353.3 million recorded in the same period last year.
Removing the effects of acquisitions and excluding favorable foreign currency
exchange, sales were up approximately four percent over the second quarter of
2004 when the Group's organic growth rate was 15 percent. Sales gains in
specialty pumps, water treatment, foodservice, pool equipment, and Asia more
than offset lower sales in water systems pumps, Europe, and spa and bath
equipment.
Second quarter 2005 operating income in the Water Group totaled
$93.5 million, up 58 percent from $59.3 million for the same period last year.
The Group showed significant progress in margin expansion with operating
income margin of 16.0 percent in the second quarter -- only 80 basis points
below the same period last year, prior to the WICOR acquisition. Pentair said
the integration of its new water businesses is on schedule, with 17 of the
facility closings or consolidations identified in its integration plan now
completed or announced, up from 15 in the first quarter. Water margins are up
180 basis points over where they would have been had WICOR been included in
the second quarter of last year.
Pentair's Enclosures Group delivered 15 percent sales growth with second
quarter 2005 sales totaling $202.9 million compared to a year-earlier total of
$177.1 million. Second quarter growth was driven by gains in all North
American end markets, with sales in the rest of the world down slightly.
Second quarter operating income in the Enclosures Group increased 25
percent from the same period last year, totaling $27.1 million in 2005 versus
$21.6 million in 2004. Margins reached 13.3 percent, expanding by 110 basis
points over the second quarter 2004, and delivering the Enclosures Group's
14th consecutive quarter of sequential margin improvement. The Group benefited
from higher volume in North America and productivity gains from the Pentair
Integrated Management System and supply management initiatives, as well as
more stable raw material pricing.
Second quarter 2005 EPS included a $5.2 million pre-tax gain, or a net
gain of $3.3 million after tax, from the sale of our investment in the stock
of LN Holdings Corporation. This gain was offset by a $3.2 million charge to
tax expense related to an anticipated settlement of a routine German tax exam
for prior years that is likely to be unfavorable. The overall effective tax
rate of 38.5 percent in the second quarter of 2005 was higher than our normal
2005 tax run rate of 35.5 percent due to this additional $3.2 million of tax
expense.
"Our performance during the first half of 2005 has proven the value of the
steps we are taking to grow our company and build shareholder value," Hogan
said. "We are clearly executing well in Enclosures and most of our Water
businesses, and we continue to work to improve organic sales growth in Water
and to minimize costs from redundant operations during integration-related
product line moves."
Hogan added: "Looking ahead to our third quarter expectations, we are
initiating third quarter EPS guidance of between $0.43 and $0.47 -- at least
34 percent higher than third quarter 2004 continuing EPS. We are further
tightening our full year 2005 EPS guidance to a range of between $2.00 and
$2.05, which is, at minimum, 48 percent higher than 2004 continuing EPS."
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
July 2 July 3 July 2 July 3
In thousands, except 2005 2004 2005 2004
per-share data
Net sales $788,523 $530,433 $1,498,158 $1,018,886
Cost of goods sold 553,290 368,782 1,058,787 717,162
Gross profit 235,233 161,651 439,371 301,724
% of net sales 29.8% 30.5% 29.3% 29.6%
Selling, general and
administrative 113,224 84,260 229,562 167,912
% of net sales 14.4% 15.9% 15.3% 16.5%
Research and development 10,532 6,407 21,959 12,718
% of net sales 1.3% 1.2% 1.5% 1.2%
Operating income 111,477 70,984 187,850 121,094
% of net sales 14.1% 13.4% 12.5% 11.9%
Gain on sale of investment 5,199 - 5,199 -
Net interest expense 11,698 7,500 22,974 15,145
% of net sales 1.5% 1.4% 1.5% 1.5%
Income from continuing
operations before income
taxes 104,978 63,484 170,075 105,949
% of net sales 13.3% 12.0% 11.4% 10.4%
Provision for income taxes 40,456 21,491 62,248 35,714
Effective tax rate 38.5% 33.9% 36.6% 33.7%
Income from continuing
operations 64,522 41,993 107,827 70,235
Income from discontinued
operations, net of tax - 13,470 - 25,438
Net income $64,522 $55,463 $ 107,827 $95,673
Earnings per common share
Basic
Continuing operations $0.64 $0.42 $1.07 $0.71
Discontinued operations - 0.14 - 0.26
Basic earnings per
common share $0.64 $0.56 $1.07 $0.97
Diluted
Continuing operations $0.63 $0.42 $1.05 $0.70
Discontinued operations - $0.13 - 0.25
Diluted earnings per
common share $0.63 $0.55 $1.05 $0.95
Weighted average common
shares outstanding
Basic 100,769 99,320 100,566 98,874
Diluted 102,967 101,694 102,855 101,112
Cash dividends declared
per common share $0.130 $0.105 $0.260 $0.210
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
July 2 December 31 July 3
In thousands 2005 2004 2004
Assets
Current assets
Cash and cash equivalents $41,853 $31,495 $58,247
Accounts and notes receivable, net 457,878 396,459 285,348
Inventories 339,460 323,676 193,220
Current assets of discontinued
operations - - 380,387
Deferred tax assets 49,077 49,074 30,630
Prepaid expenses and other
current assets 27,734 24,433 26,868
Total current assets 916,002 825,137 974,700
Property, plant and equipment, net 324,477 336,302 219,343
Other assets
Non-current assets of discontinued
operations - 393 561,769
Goodwill 1,614,248 1,620,404 997,441
Intangibles, net 254,233 258,126 96,156
Other 60,538 80,213 81,871
Total other assets 1,929,019 1,959,136 1,737,237
Total assets $3,169,498 $3,120,575 $2,931,280
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $- $- $1,587
Current maturities of long-term debt 6,469 11,957 5,333
Accounts payable 195,702 195,289 130,852
Employee compensation and benefits 80,584 104,821 64,868
Accrued product claims and warranties 43,940 42,524 27,013
Current liabilities of discontinued
operations 192 192 206,779
Income taxes 47,384 27,395 26,680
Accrued rebates and sales incentives 38,177 41,618 22,809
Other current liabilities 97,367 103,083 57,640
Total current liabilities 509,815 526,879 543,561
Long-term debt 727,631 724,148 747,319
Pension and other retirement
compensation 138,830 135,356 100,383
Post-retirement medical and
other benefits 70,309 69,667 25,790
Deferred tax liabilities 143,377 142,873 60,201
Other non-current liabilities 67,576 70,804 62,525
Non-current liabilities of
discontinued operations 2,031 3,054 46,733
Total liabilities 1,659,569 1,672,781 1,586,512
Shareholders' equity 1,509,929 1,447,794 1,344,768
Total liabilities and shareholders'
equity $3,169,498 $3,120,575 $2,931,280
Days sales in accounts receivable
(13 month moving average) 53 52 52
Days inventory on hand
(13 month moving average) 68 62 55
Days in accounts payable
(13 month moving average) 56 57 55
Debt/total capital 32.7% 33.7% 35.9%
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended
July 2 July 3
In thousands 2005 2004
Operating activities
Net income $107,827 $95,673
Adjustments to reconcile net income to
net cash provided by operating activities
Net income from discontinued operations - (25,438)
Depreciation 28,962 20,928
Amortization 12,075 6,277
Deferred income taxes 2,572 301
Stock compensation 777 -
Gain on sale of investment (5,199) -
Changes in assets and liabilities, net of
effects of business acquisitions and
dispositions
Accounts and notes receivable (72,729) (35,903)
Inventories (22,340) (28,179)
Prepaid expenses and other current assets (4,036) (7,797)
Accounts payable 4,590 38,994
Employee compensation and benefits (29,912) 2,971
Accrued product claims and warranties 1,228 2,660
Income taxes 20,546 11,934
Other current liabilities 787 7,979
Pension and post-retirement benefits 7,370 3,990
Other assets and liabilities (5,144) (1,182)
Net cash provided by continuing operations 47,374 93,208
Net cash provided by (used for)
discontinued operations (630) 14,863
Net cash provided by operating
activities 46,744 108,071
Investing activities
Capital expenditures (39,077) (13,340)
Proceeds from sale of property and equipment 11,553 -
Acquisitions, net of cash acquired (10,513) (15,288)
Divestitures (190) -
Proceeds from sale of investment 23,596 -
Equity investments - (200)
Net cash used for investing
activities (14,631) (28,828)
Financing activities
Net short-term borrowings (repayments) - (2,603)
Proceeds from long-term debt 160,000 164,816
Repayment of long-term debt (160,383) (220,526)
Proceeds from exercise of stock options 6,355 10,178
Dividends paid (26,648) (21,001)
Net cash used for financing
activities (20,676) (69,136)
Effect of exchange rate changes on cash (1,079) 151
Change in cash and cash equivalents 10,358 10,258
Cash and cash equivalents, beginning of period 31,495 47,989
Cash and cash equivalents, end of period $41,853 $58,247
Free cash flow
Net cash provided by operating activities $46,744 $108,071
Less capital expenditures continuing
operations (39,077) (10,412)
Less capital expenditures discontinued
operations - (2,928)
Proceeds from sale of property and equipment 11,553 -
Free cash flow $19,220 $94,731
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 2005 2005 2005 2004 2004 2004
Net sales to
external
customers
Water $512,088 $585,657 $1,097,745 $313,981 $353,316 $667,297
Enclosures 197,547 202,866 400,413 174,472 177,117 351,589
Consolidated $709,635 $788,523 $1,498,158 $488,453 $530,433 $1,018,886
Intersegment sales
Water $22 $187 $209 $21 $29 $50
Enclosures 402 630 1,032 332 986 1,318
Other (424) (817) (1,241) (353) (1,015) (1,368)
Consolidated $ - $ - $ - $ - $ - $ -
Operating income
(loss)
Water $61,803 $93,481 $155,284 $41,547 $59,253 $100,800
Enclosures 25,926 27,078 53,004 19,354 21,590 40,944
Other (11,356) (9,082) (20,438) (10,791) (9,859) (20,650)
Consolidated $ 76,373 $111,477 $187,850 $50,110 $70,984 $121,094
Operating income
as a percent
of net sales
Water 12.1% 16.0% 14.1% 13.2% 16.8% 15.1%
Enclosures 13.1% 13.3% 13.2% 11.1% 12.2% 11.6%
Consolidated 10.8% 14.1% 12.5% 10.3% 13.4% 11.9%
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.
Pentair Contacts:
Rachael Jarosh
Communications
Tel.: (763) 656-5280
E-mail: rachael.jarosh@pentair.com
Mark Cain
Investor Relations
Tel.: (763) 656-5278
E-mail: mark.cain@pentair.com
SOURCE Pentair, Inc.