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Pentair's First Quarter 2006 Continuing Operations EPS of $0.42 Gains 8%
04.27.2006

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: rachael.jarosh@pentair.com
             or
             Investor Relations:
             Mark Cain, 763-656-5278
             E-mail: mark.cain@pentair.com

    SOURCE: Pentair, Inc.
Categories: Press Releases