GOLDEN VALLEY, Minn., Jul 25, 2006 (BUSINESS WIRE) -- Pentair (NYSE:PNR):
Second Quarter 2006 Highlights
-- Earnings per share of $0.67 from continuing operations was up
12%.
-- Net sales of $862.0 million increased 9%, of which 4% was
organic and the remainder was from the impact of acquisitions.
-- Technical Products Group surpassed its 15 percent operating
margin goal and achieved its 18th consecutive quarter of
sequential margin improvement, excluding the impact of stock
option expensing.
-- Sales in Asia grew approximately 30% in local currencies.
-- The FARADYNE pump motor joint venture is on-schedule to begin
production of four-inch submersible pump motors in the third
quarter of 2006.
-- Cash flow of $128.5 million brings YTD Free Cash Flow to $27.2
million.
Pentair (NYSE:PNR) today announced its second quarter 2006
results, highlighting earnings per share (EPS) from continuing
operations of $0.67, an increase of 12 percent over the same period
last year, on sales of $862.0 million, a gain of nine percent.
Excluding the impact of acquisitions and negligible currency exchange,
second quarter sales increased approximately four percent. Pentair
realized a net EPS benefit of approximately five cents per share from
the net impact of one-time tax-related items that were partially
offset by one-time reorganization costs in the quarter.
Pentair Chairman and Chief Executive Officer, Randall J. Hogan,
said: "We realized good growth in our residential, commercial and
municipal pump markets; in Asian markets; and in the industrial and
commercial markets of our Technical Products Group. Our Thermal
Management acquisition has exceeded its sales, operating income and
margin targets for the first six months of 2006, and the Technical
Products Group, as a whole, has surpassed our 15 percent return on
sales goal.
"Although our residential Water markets remained relatively
strong, we did see some weakness in the Spa & Bath area due to softer
housing markets, and sales of pool equipment were adversely affected
by inventory adjustments at several large distributors. Growth in our
European Water business slowed in the second quarter with good growth
in pump sales being somewhat offset by lower pool equipment sales due
to an unseasonably cool, wet European spring."
Hogan added: "We continue to build toward the promise of higher
growth and higher performance in our two attractive business segments.
Based upon our second quarter performance and not withstanding the
mixed economic outlook, we are reiterating our previous EPS guidance
of between $2.08 and $2.18 for the year and are initiating third
quarter EPS guidance in a range between $0.46 and $0.50."
Pentair's full year 2005 EPS from continuing operations was $1.80
with EPS from continuing operations in the third quarter 2005 of
$0.43, both reflecting the impact of stock option expensing per SFAS
123R.
Second Quarter 2006 Financial Comments
Earnings:
EPS from continuing operations of $0.67 was 12 percent higher than
second quarter 2005 EPS from continuing operations of $0.60. Operating
income totaled $108.0 million, approximately one percent higher than
the $107.2 million reported in the same period last year. Return on
sales of 12.5 percent in the second quarter was lower by 110 basis
points than that of a year ago as higher Technical Products Group
margins were offset by Water Group investments and higher corporate
costs. Pentair realized a net EPS benefit of approximately five cents
per share from the net impact of one-time tax-related items that were
partially offset by one-time reorganization costs in the quarter.
Revenue:
Net sales totaled $862.0 million, up nine percent from $788.5
million in the same period a year ago. Sales growth, excluding the
impact of acquisitions and negligible currency exchange, was
approximately four percent.
Cash:
Cash flow totaled $128.5 million, bringing free cash flow for the
first half of 2006 to $27.2 million. This compares favorably to the
second quarter of 2005, when cash flow totaled $112.8 million,
bringing free cash flow for the first half of 2005 to $11.4 million.
Water Group Second Quarter Comments
-- Water Group sales of $605.5 million increased 3.4 percent over
the same period last year.
-- Pump growth included record sales of Aurora and Sta-Rite pumps
and strong sales of water systems in commercial, municipal,
and residential pump markets. Wet weather in the northeastern
U.S. contributed to the strong quarter, as did new customers
in several vertical markets including wastewater and fire
protection systems, and new products, including control boxes,
variable speed drive pumps, and end-suction pumps.
-- Pool sales were up from year-ago levels driven by new products
including electronic control packages and high-efficiency
variable speed pumps. This performance came despite a decline
in Spa & Bath sales, and slower pool building markets in
Florida and California.
-- Filtration growth reflected improved industrial sales that
more than offset weaker sales in residential and original
equipment manufacturer (OEM) markets. Filtration also saw
stronger activity in its Ecolab partnership and in
point-of-use residential filtration.
-- Efforts to capture additional share in global desalination
projects produced another record quarter for our CodeLine
pressure vessel business.
-- New products contributed to sales gains, particularly in Pool
and in Europe. Pool benefited from previously launched
products including variable speed pumps, control systems, and
robotic cleaners, while product launches in Europe included an
energy-efficient variable speed pump for residential markets,
a new in-ground fire suppression system, and a complete
cabinet-sized water softener for point-of-use applications.
-- Operating income for the Group totaled $84.2 million, down
nine percent over the same period last year. Return on sales
was 13.9 percent, down 180 basis points compared to last year.
-- Margin gains in Pump operations - driven by sourcing
activities, pricing, and volume - were offset by mix, material
cost inflation, and plant consolidation-related inefficiencies
in Pool and Filtration operations.
-- Planned investments for growth continued with approximately $7
million incurred in the quarter.
-- Operating income from international businesses was down from
year-ago levels due primarily to reorganization costs and
continuing investments in Asia and in Europe.
-- The FARADYNE joint venture is progressing well as
field-testing is complete. Production of submersible motors is
expected to begin shortly, and motors should be available in
the third quarter, as anticipated.
Technical Products Group Second Quarter Comments
-- Sales of $256.5 million for the quarter increased $54 million
or 26 percent over the same quarter last year. Excluding the
impact of the newly acquired Thermal Management businesses and
negligible foreign currency exchange, organic growth was
approximately seven percent.
-- Excluding acquisitions, sales in North American markets grew
in the mid-single digits, resulting from share gains in
targeted petrochemical, food & beverage, and commercial
construction markets driven by new products and focused
vertical marketing efforts.
-- In Europe, growth in test & measurement and automation &
control markets, and in ATCA was offset by several end-of-life
telecom programs and transition of OEM business to our China
operations. New products and an expanded customer base
bolstered sales.
-- Strong growth in Asia benefited from continued market
penetration in China, strong growth in Japan as those markets
continued their recovery, and OEM program transitions from our
North American and European operations.
-- Volume growth, supply management savings, cost reductions, and
improved productivity combined to set new earnings records.
Operating income of $39.7 million set a new record, breaking
the previous $37.7 million record set in the first quarter of
2006.
-- Margins totaled 15.5 percent, up 70 basis points on a
sequential quarter basis. The second quarter was the Group's
18th consecutive quarter of sequential margin improvement,
excluding the impact of stock option expensing.
-- Increased sales together with the rapid implementation of lean
and supply management practices drove significant profit
improvements in the newly acquired Thermal Management
business. The business exceeded its sales, operating income
and margin targets for the first six months.
As announced in a June 29, 2006 news release, a jury verdict was
rendered against Pentair for $193 million, exclusive of pre-judgment
interest and attorney's fees, in the commercial damages portion of the
previously disclosed Horizon litigation. Based on the information
available to the Company at this time, no adjustment to previously
established reserves was deemed necessary in the second quarter.
Pentair's EPS guidance does not reflect any potential impact of this
litigation.
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
successfully appeal and limit damages payable arising out of the
Horizon litigation; 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 Six months ended
------------------- -----------------------
July 1 July 2 July 1 July 2
In thousands, except per-
share data 2006 2005 2006 2005
----------------------------------------------------------------------
Net sales $862,022 $788,523 $1,633,411 $1,498,158
Cost of goods sold 599,333 553,290 1,148,214 1,058,787
----------------------------------------------------------------------
Gross profit 262,689 235,233 485,197 439,371
% of net sales 30.4% 29.8% 29.7% 29.3%
Selling, general and
administrative 139,831 117,467 268,920 238,092
% of net sales 16.2% 14.9% 16.5% 15.9%
Research and development 14,883 10,532 29,746 21,959
% of net sales 1.7% 1.3% 1.8% 1.4%
----------------------------------------------------------------------
Operating income 107,975 107,234 186,531 179,320
% of net sales 12.5% 13.6% 11.4% 12.0%
Gain on sale of investment -- 5,199 -- 5,199
Net interest expense 12,553 11,696 25,837 22,972
% of net sales 1.4% 1.5% 1.6% 1.5%
----------------------------------------------------------------------
Income from continuing
operations before income
taxes 95,422 100,737 160,694 161,547
% of net sales 11.1% 12.8% 9.8% 10.8%
Provision for income taxes 26,789 39,358 48,990 59,987
Effective tax rate 28.1% 39.1% 30.5% 37.1%
----------------------------------------------------------------------
Income from continuing
operations 68,633 61,379 111,704 101,560
Loss on disposal of
discontinued operations,
net of tax -- -- (1,451) --
----------------------------------------------------------------------
Net income $68,633 $61,379 $110,253 $101,560
======================================================================
Earnings (loss) per common
share
Basic
Continuing operations $0.68 $0.61 $1.11 $1.01
Discontinued operations -- -- (0.01) --
----------------------------------------------------------------------
Basic earnings per common
share $0.68 $0.61 $1.10 $1.01
======================================================================
Diluted
Continuing operations $0.67 $0.60 $1.09 $0.99
Discontinued operations -- -- (0.01) --
----------------------------------------------------------------------
Diluted earnings per
common share $0.67 $0.60 $1.08 $0.99
======================================================================
Weighted average common
shares outstanding
Basic 100,509 100,769 100,498 100,566
Diluted 102,429 102,967 102,457 102,645
Cash dividends declared
per common share $0.14 $0.13 $0.28 $0.26
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
July 1 December 31 July 2
In thousands 2006 2005 2005
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $48,331 $48,500 $41,853
Accounts and notes receivable, net 502,982 423,847 457,878
Inventories 380,219 349,312 339,460
Deferred tax assets 45,922 48,971 49,077
Prepaid expenses and other current
assets 27,659 24,394 27,734
----------------------------------------------------------------------
Total current assets 1,005,113 895,024 916,002
Property, plant and equipment, net 312,146 311,839 324,477
Other assets
Goodwill 1,729,179 1,718,207 1,614,248
Intangibles, net 263,600 266,533 254,233
Other 80,167 62,152 60,538
----------------------------------------------------------------------
Total other assets 2,072,946 2,046,892 1,929,019
----------------------------------------------------------------------
Total assets $3,390,205 $3,253,755 $3,169,498
======================================================================
Liabilities and Shareholders'
Equity
Current liabilities
Short-term borrowings $4,869 $-- $--
Current maturities of long-term
debt 6,970 4,137 6,469
Accounts payable 224,237 207,320 195,702
Employee compensation and benefits 83,071 95,552 80,584
Accrued product claims and
warranties 41,346 43,551 43,940
Current liabilities of
discontinued operations -- 192 192
Income taxes 22,533 17,518 45,123
Accrued rebates and sales
incentives 35,723 45,374 38,177
Other current liabilities 83,937 111,026 97,367
----------------------------------------------------------------------
Total current liabilities 502,686 524,670 507,554
Long-term debt 801,898 748,477 727,631
Pension and other retirement
compensation 164,480 152,780 138,830
Post-retirement medical and other
benefits 73,723 73,949 70,309
Deferred tax liabilities 125,418 125,785 143,377
Other non-current liabilities 79,838 70,455 67,576
Non-current liabilities of
discontinued operations -- 2,029 2,031
----------------------------------------------------------------------
Total liabilities 1,748,043 1,698,145 1,657,308
Shareholders' equity 1,642,162 1,555,610 1,512,190
----------------------------------------------------------------------
Total liabilities and
shareholders' equity $3,390,205 $3,253,755 $3,169,498
======================================================================
Days sales in accounts receivable
(13 month moving average) 54 54 53
Days inventory on hand (13 month
moving average) 71 70 68
Days in accounts payable (13 month
moving average) 56 56 56
Debt/total capital 33.1% 32.6% 32.7%
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended
-------------------
July 1 July 2
In thousands 2006 2005
----------------------------------------------------------------------
Operating activities
Net income $110,253 $101,560
Adjustments to reconcile net income to net cash
used for operating activities
Loss on disposal of discontinued operations 1,451 --
Depreciation 30,386 28,962
Amortization 9,476 8,074
Deferred income taxes 181 2,572
Stock compensation 12,484 13,306
Excess tax benefits from stock-based compensation (2,605) (7,809)
Gain on sale of investment -- (5,199)
Changes in assets and liabilities, net of effects
of business acquisitions and dispositions
Accounts and notes receivable (74,193) (72,729)
Inventories (28,032) (22,340)
Prepaid expenses and other current assets (2,809) (4,036)
Accounts payable 12,382 4,590
Employee compensation and benefits (16,832) (29,912)
Accrued product claims and warranties (1,793) 1,228
Income taxes 6,443 18,285
Other current liabilities (19,933) 787
Pension and post-retirement benefits 8,722 7,370
Other assets and liabilities 1,565 (5,144)
----------------------------------------------------------------------
Net cash provided by continuing operations 47,146 39,565
Net cash provided by (used for) operating
activities of discontinued operations 48 (630)
----------------------------------------------------------------------
Net cash provided by operating activities 47,194 38,935
Investing activities
Capital expenditures (20,217) (39,077)
Proceeds from sale of property and equipment 221 11,553
Acquisitions, net of cash acquired (19,694) (10,513)
Divestitures (24,007) (190)
Other (4,273) 23,596
----------------------------------------------------------------------
Net cash used for investing activities (67,970) (14,631)
Financing activities
Net short-term borrowings 4,763 --
Proceeds from long-term debt 414,233 186,610
Repayment of long-term debt (358,141) (186,993)
Proceeds from exercise of stock options 2,939 6,355
Repurchases of common stock (18,330) --
Excess tax benefits from stock-based compensation 2,605 7,809
Dividends paid (28,458) (26,648)
----------------------------------------------------------------------
Net cash provided by (used for) financing
activities 19,611 (12,867)
Effect of exchange rate changes on cash and cash
equivalents 996 (1,079)
----------------------------------------------------------------------
Change in cash and cash equivalents (169) 10,358
Cash and cash equivalents, beginning of period 48,500 31,495
----------------------------------------------------------------------
Cash and cash equivalents, end of period $48,331 $41,853
======================================================================
Free cash flow
Net cash provided by operating activities $47,194 $38,935
Less capital expenditures (20,217) (39,077)
Proceeds from sale of property and equipment 221 11,553
----------------------------------------------------------------------
Free cash flow $27,198 $11,411
======================================================================
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment
(Unaudited)
First Qtr Second Qtr Six Months
In thousands 2006 2006 2006
----------------------------------------------------------------------
Net sales to external customers
Water $517,169 $605,516 $1,122,685
Technical Products 254,220 256,506 510,726
----------------------------------------------------------------------
Consolidated $771,389 $862,022 $1,633,411
======================================================================
Intersegment sales
Water $50 $55 $105
Technical Products 889 1,312 2,201
Other (939) (1,367) (2,306)
----------------------------------------------------------------------
Consolidated $-- $-- $--
======================================================================
Operating income (loss)
Water $55,587 $84,191 $139,778
Technical Products 37,704 39,678 77,382
Other (14,735) (15,894) (30,629)
----------------------------------------------------------------------
Consolidated $78,556 $107,975 $186,531
======================================================================
Operating income as a percent of net
sales
Water 10.8% 13.9% 12.5%
Technical Products 14.8% 15.5% 15.2%
Consolidated 10.2% 12.5% 11.4%
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment
(Unaudited)
First Qtr Second Qtr Six Months
In thousands 2005 2005 2005
----------------------------------------------------------------------
Net sales to external customers
Water $512,088 $585,657 $1,097,745
Technical Products 197,547 202,866 400,413
----------------------------------------------------------------------
Consolidated $709,635 $788,523 $1,498,158
======================================================================
Intersegment sales
Water $22 $187 209
Technical Products 402 630 1,032
Other (424) (817) (1,241)
----------------------------------------------------------------------
Consolidated $-- $-- $--
======================================================================
Operating income (loss)
Water $60,489 $92,167 $152,656
Technical Products 25,172 26,325 51,497
Other (13,575) (11,258) (24,833)
----------------------------------------------------------------------
Consolidated $72,086 $107,234 $179,320
======================================================================
Operating income as a percent of net
sales
Water 11.8% 15.7% 13.9%
Technical Products 12.7% 13.0% 12.9%
Consolidated 10.2% 13.6% 12.0%
SOURCE: Pentair, Inc.
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