GOLDEN VALLEY, Minn.--(BUSINESS WIRE)--April 27, 2006--Pentair
(NYSE:PNR):
First Quarter 2006 Highlights
-- Earnings per share of $0.42 from continuing operations, up 8%.
-- Operating income of $78.6 million, up 9%.
-- Net sales of $771.4 million increased 9%, or 5% excluding
acquisitions and foreign exchange.
-- International sales grew approximately 13 percent in local
currencies.
Pentair (NYSE:PNR) today announced its first quarter 2006 results,
highlighting earnings per share (EPS) from continuing operations of
$0.42, an increase of eight percent over the same period last year, on
sales of $771.4 million, a gain of nine percent. Excluding the impact
of acquisitions and currency exchange, first quarter sales increased
approximately five percent.
Pentair Chairman and Chief Executive Officer, Randall J. Hogan,
said: "We had a number of successes in the first quarter: Our
Technical Products Group continued to grow far faster than the markets
it serves and, even including the impact of acquisitions, achieved a
record operating income margin of 14.8 percent. Pentair sales in
European and Asian markets continued to trend upward, with solid gains
in local currencies. Despite continued inflationary pressures in the
first quarter, we widened the gap between price and inflation from the
fourth quarter of 2005. The initial plant closings and consolidations
that were put into action following the acquisition of the WICOR
businesses are now complete, and the moves that had been delayed in
the second half of 2005 were wrapped up in the first quarter. Our
recent Thermal Management acquisition in Technical Products is
performing well and the integration is progressing smoothly.
"Organic sales growth in Water was lower in the first quarter due
to lower growth in pool and pump versus the fourth quarter," Hogan
added. "As expected, Water profit margins were affected by planned
investments in international growth, infrastructure build in Europe,
and expected inefficiencies resulting from plant and product line
moves. Unfavorable product mix and unfavorable foreign exchange
resulting from the decline of the Euro were also factors in our Water
Group's profit performance.
"We are reaffirming our previous EPS guidance for the full year
2006 of between $2.08 and $2.18. In addition, assuming some rebound in
Water growth rates, we are initiating second quarter EPS guidance in a
range between $0.61 and $0.63."
First Quarter 2006 Financial Comments
Earnings:
Operating income totaled $78.6 million, nine percent greater than
the $72.1 million reported in the same period last year. Operating
margins of 10.2 percent in the first quarter were even with those of a
year ago as higher Technical Products Group margins were offset by
Water Group performance and higher corporate costs. EPS from
continuing operations of $0.42 was eight percent higher than first
quarter 2005 EPS from continuing operations of $0.39. In the first
quarter of 2006, Pentair finalized the purchase price adjustment from
the sale of its former Tools Group, which was the primary reason for
the after-tax expense of approximately $1.5 million and the resulting
loss from discontinued operations of approximately one cent per share.
Revenue:
Net sales totaled $771.4 million, up nine percent from $709.6
million in the same period a year ago. Sales growth, excluding the
impact of acquisitions and currency exchange, was approximately five
percent.
Cash:
Due to the seasonality of Pentair's businesses, free cash flow was
negative $101.3 million, which is comparable to negative $101.4
million in the same period last year. We are still committed to
achieving 2006 free cash flow in excess of $200 million, which is
comparable to our full year 2005 free cash flow of $202.5 million.
Water Group First Quarter Comments
-- Sales of $517.2 million were up one percent over the same
period last year, or approximately two percent excluding
unfavorable foreign exchange.
-- Water systems, wastewater, commercial pumps, and Everpure
foodservice filtration sales increased in the quarter,
while retail pump and filtration sales softened.
Unfavorable timing of municipal pump deliveries also
affected sales volume. Pool sales gained in the mid-single
digits in the first quarter of 2006 following strong
growth in the fourth quarter of 2005 resulting from a
successful early buy program.
-- Sales in European markets were up in local currencies;
however, these increases were more than offset by
unfavorable currency exchange. Sales of CodeLine pressure
vessels made in the Goa, India operation continued to
benefit from strong growth in desalination projects.
-- Operating income for the segment totaled $55.6 million, down
eight percent over the same period last year. Return on sales
was 10.8 percent, down 100 basis points compared to last year.
-- Water profit margins were affected by planned investments
in new products and new customers; in international
management, sales, engineering, sourcing and manufacturing
talent; in a unified business system infrastructure in
Europe; and in the Faradyne Motors joint venture, together
with expected inefficiencies resulting from plant and
product moves.
-- Water margins were also affected by unfavorable product
mix caused by higher sales of large filtration projects
and pool finishes, versus sales of residential water
treatment and pool equipment products.
-- Margins in European businesses were adversely affected by
unfavorable currency exchange due to U.S. dollar sourcing
arrangements for raw materials.
Technical Products Group First Quarter Comments
-- Sales of $254.2 million for the quarter increased $57 million
or 29 percent over the same quarter last year. Excluding the
impact of the newly acquired Thermal Management businesses and
foreign currency exchange, organic growth was approximately 13
percent.
-- Excluding acquisitions, sales in North American markets
grew in the high single digits, driven by strong sales in
petrochemical, commercial, data, medical, and food and
beverage markets.
-- The European business recorded its highest sales quarter
in the past five years in local currencies. This is
attributed to stronger markets, success with several new
products, and a large telecom project for outdoor cabinets
that had heavy shipments in the first quarter.
-- Sales in Asian markets increased strongly in the quarter,
helped by planned OEM program transitions from North
American Technical Products businesses, continued market
penetration in China and southeast Asia, and general
market recovery in Japan.
-- Sales in the Thermal Management businesses were strong in
the served telecom markets.
-- Operating income of $37.7 million set a new record for the
Group, breaking the previous $30.0 million record set in the
fourth quarter of 2005.
-- Margins totaled 14.8 percent, up 80 basis points on a
sequential quarterly basis.
-- In North America, profits benefited from material cost
savings, productivity improvements, and price.
-- In Europe, improved results were driven principally by
increased volumes and supply management savings.
-- In Asia, volume increases in China and Japan strengthened
margins.
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.
About Pentair, Inc.
Pentair, Inc. (NYSE:PNR) 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
Technical Products Group is a leader in global enclosures and thermal
management markets, designing and manufacturing thermal management
products and standard, modified, and custom enclosures that house and
protect sensitive electronics and electrical components. With 2005
revenues of $2.95 billion, Pentair employs approximately 15,000 people
worldwide.
Caution concerning forward-looking statements
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 acquisitions 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, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three months ended
------------------
April 1 April 2
In thousands, except per-share data 2006 2005
----------------------------------------------------------------------
Net sales $771,389 $709,635
Cost of goods sold 548,881 505,497
----------------------------------------------------------------------
Gross profit 222,508 204,138
% of net sales 28.8% 28.8%
Selling, general and administrative 129,089 120,625
% of net sales 16.7% 17.0%
Research and development 14,863 11,427
% of net sales 1.9% 1.6%
----------------------------------------------------------------------
Operating income 78,556 72,086
% of net sales 10.2% 10.2%
Net interest expense 13,284 11,276
% of net sales 1.7% 1.6%
----------------------------------------------------------------------
Income from continuing operations before income
taxes 65,272 60,810
% of net sales 8.5% 8.6%
Provision for income taxes 22,201 20,629
Effective tax rate 34.0% 33.9%
----------------------------------------------------------------------
Income from continuing operations 43,071 40,181
Loss on disposal of discontinued operations, net of
tax (1,451) --
----------------------------------------------------------------------
Net income $41,620 $40,181
======================================================================
Earnings per common share
Basic
Continuing operations $0.43 $0.40
Discontinued operations (0.01) --
----------------------------------------------------------------------
Basic earnings per common share $0.42 $0.40
======================================================================
Diluted
Continuing operations $0.42 $0.39
Discontinued operations (0.01) --
----------------------------------------------------------------------
Diluted earnings per common share $0.41 $0.39
======================================================================
Weighted average common shares outstanding
Basic 100,493 100,363
Diluted 102,492 102,463
Cash dividends declared per common share $0.14 $0.13
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
April 1 December 31 April 2
In thousands 2006 2005 2005
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $50,237 $48,500 $43,839
Accounts and notes receivable, net 520,968 423,847 475,603
Inventories 375,619 349,312 339,910
Deferred tax assets 44,432 48,971 49,913
Prepaid expenses and other current
assets 28,921 24,394 27,838
----------------------------------------------------------------------
Total current assets 1,020,177 895,024 937,103
Property, plant and equipment, net 314,164 311,839 335,063
Other assets
Goodwill 1,723,952 1,718,207 1,620,719
Intangibles, net 262,829 266,533 255,028
Other 67,561 62,152 81,009
----------------------------------------------------------------------
Total other assets 2,054,342 2,046,892 1,956,756
----------------------------------------------------------------------
Total assets $3,388,683 $3,253,755 $3,228,922
======================================================================
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $4,246 $4,137 $17,423
Accounts payable 206,528 207,320 185,138
Employee compensation and benefits 75,536 95,552 76,873
Accrued product claims and warranties 42,238 43,551 44,297
Current liabilities of discontinued
operations -- 192 192
Income taxes 27,195 17,518 24,285
Accrued rebates and sales incentives 23,353 45,374 26,352
Other current liabilities 94,418 111,026 104,588
----------------------------------------------------------------------
Total current liabilities 473,514 524,670 479,148
Long-term debt 888,015 748,477 848,006
Pension and other retirement
compensation 158,535 152,780 138,524
Post-retirement medical and other
benefits 73,812 73,949 70,013
Deferred tax liabilities 123,663 125,785 145,294
Other non-current liabilities 76,452 70,455 72,431
Non-current liabilities of
discontinued operations -- 2,029 2,866
----------------------------------------------------------------------
Total liabilities 1,793,991 1,698,145 1,756,282
Shareholders' equity 1,594,692 1,555,610 1,472,640
----------------------------------------------------------------------
Total liabilities and shareholders'
equity $3,388,683 $3,253,755 $3,228,922
======================================================================
Days sales in accounts receivable (13
month moving average) 55 54 54
Days inventory on hand (13 month
moving average) 71 70 65
Days in accounts payable (13 month
moving average) 56 56 57
Debt/total capital 35.9% 32.6% 37.0%
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended
--------------------
April 1 April 2
In thousands 2006 2005
----------------------------------------------------------------------
Operating activities
Net income $41,620 $40,181
Adjustments to reconcile net income to net cash
used for operating activities
Loss on disposal of discontinued operations 1,451 --
Depreciation 15,230 14,463
Amortization 4,258 3,993
Deferred income taxes 2,483 2,391
Stock compensation 6,646 6,160
Excess tax benefits from stock-based compensation (2,532) (3,731)
Changes in assets and liabilities, net of effects
of business acquisitions and dispositions
Accounts and notes receivable (95,541) (85,608)
Inventories (25,379) (19,489)
Prepaid expenses and other current assets (4,258) (4,331)
Accounts payable (4,041) (7,382)
Employee compensation and benefits (23,528) (27,416)
Accrued product claims and warranties (1,363) 1,544
Income taxes 10,717 (2,842)
Other current liabilities (26,140) (605)
Pension and post-retirement benefits 4,477 3,646
Other assets and liabilities 3,550 (1,250)
----------------------------------------------------------------------
Net cash used for continuing operations (92,350) (80,276)
Net cash provided by operating activities of
discontinued operations 48 205
----------------------------------------------------------------------
Net cash used for operating activities (92,302) (80,071)
Investing activities
Capital expenditures (9,054) (21,289)
Proceeds from sale of property and equipment 79 --
Acquisitions, net of cash acquired (2,158) (10,301)
Divestitures (24,007) (1,190)
Other (2,150) 17
----------------------------------------------------------------------
Net cash used for investing activities (37,290) (32,763)
Financing activities
Proceeds from long-term debt 272,906 146,610
Repayment of long-term debt (133,051) (14,120)
Proceeds from exercise of stock options 2,577 2,599
Excess tax benefits from stock-based compensation 2,532 3,731
Dividends paid (14,224) (13,428)
----------------------------------------------------------------------
Net cash provided by financing activities 130,740 125,392
Effect of exchange rate changes on cash 589 (214)
----------------------------------------------------------------------
Change in cash and cash equivalents 1,737 12,344
Cash and cash equivalents, beginning of period 48,500 31,495
----------------------------------------------------------------------
Cash and cash equivalents, end of period $50,237 $43,839
======================================================================
Free cash flow
Net cash used for operating activities $(92,302) $(80,071)
Less capital expenditures (9,054) (21,289)
Proceeds from sale of property and equipment 79 --
----------------------------------------------------------------------
Free cash flow $(101,277)$(101,360)
======================================================================
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment
(Unaudited)
First Qtr First Qtr
In thousands 2006 2005
----------------------------------------------------------------------
Net sales to external customers
Water $517,169 $512,088
Technical Products 254,220 197,547
----------------------------------------------------------------------
Consolidated $771,389 $709,635
======================================================================
Intersegment sales
Water $50 $22
Technical Products 889 402
Other (939) (424)
----------------------------------------------------------------------
Consolidated $-- $--
======================================================================
Operating income (loss)
Water $55,587 $60,489
Technical Products 37,704 25,172
Other (14,735) (13,575)
----------------------------------------------------------------------
Consolidated $78,556 $72,086
======================================================================
Operating income as a percent of net sales
Water 10.8% 11.8%
Technical Products 14.8% 12.7%
Consolidated 10.2% 10.2%
CONTACT: Pentair, Inc., Golden Valley
Communications:
Rachael Jarosh, 763-656-5280
E-mail: [email protected]
or
Investor Relations:
Mark Cain, 763-656-5278
E-mail: [email protected]
SOURCE: Pentair, Inc.