GOLDEN VALLEY, Minn.--(BUSINESS WIRE)--Sept. 26, 2006--Pentair
(NYSE:PNR) today said that it has revised its earnings per share (EPS)
guidance from Continuing Operations for the third quarter 2006 and
full year 2006. The revision reflects the impacts of the soft pool
equipment market and resulting distributor inventory adjustments, as
pool equipment customers draw down existing inventories, on the
performance of the Company's Pool & Spa business. The revised guidance
takes into consideration the performance of Pentair's other Water
businesses and the Technical Products Group, which is consistent with
previous expectations.
"Third quarter 2006 Pool & Spa business sales are projected to be
flat with 2005 levels and approximately $20 million lower than
mid-year expectations. This adjustment reflects the effect of the
housing slow-down on spa and bath markets and on new pool starts, and
the resulting channel inventory adjustments due to reduced pool
equipment demands," said Randall J. Hogan, Pentair chairman and chief
executive officer. "Fourth quarter 2006 pool equipment sales are
projected to be lower than previous expectations and below 2005
levels," Hogan added. The Company said that fourth quarter 2005 pool
equipment sales were especially strong due to the success of its early
buy program, an incentive program to level-load production during the
traditionally slowest time of the year.
"Given the inventory draw-down we are now experiencing, as well as
continued softness in key pool equipment markets, particularly Florida
and Southern California, sales from the fourth quarter 2006 early buy
program are now projected to be below our previous expectations and
$30 to $60 million lower than the fourth quarter 2005," Hogan said.
"While we continue to monitor conditions closely, we believe this
inventory draw-down will be essentially complete by the end of the
fourth quarter and, thereafter, we should track more closely to the
market," he added.
Pentair also said it does not currently expect economic conditions
during the fourth quarter will worsen to the point that the Company's
commercial, industrial and municipal markets will be affected. Hogan
stated: "We believe the expected inventory draw-downs are short-term,
and that the pool equipment business remains attractive long-term.
However, given current conditions, we are repositioning the pool
business for improved performance in this uncertain environment and
redoubling our efforts to reduce costs and accelerate growth in all of
our Water businesses."
Actions to Address Current Conditions
The Company announced several actions being implemented in
response to current market conditions. "First, we are streamlining the
leadership structure at the corporate and business segment levels.
This new structure will more effectively deploy leadership, create
greater efficiencies and generate savings," Hogan said. "Second, we
are driving for margin improvements in the Water businesses through
the aggressive deployment of lean enterprise disciplines, and by
sourcing and manufacturing in low cost countries.
"We are also incurring a one-time charge of approximately $17
million for severance costs in the Water Group and Corporate, and to
increase reserves for accounts receivable, inventory and warranty in
the Pool & Spa business," Hogan said.
In a separate news release issued today, Pentair announced the
appointment of Michael V. Schrock as president and chief operating
officer for the company, and the departure of Charles M. Brown, former
president and chief operating officer for the Pump and Pool & Spa
businesses.
Hogan said, "Based on these actions and our ongoing initiatives to
increase productivity while delivering high quality products and
customer service, we expect to generate $35 million of profit
improvements in 2007. Our global Water and Technical Products
businesses serve a broad range of markets, and I believe the long-term
prospects of Pentair remain positive."
Revised 2006 Earning Guidance
The Company said it is revising third quarter 2006 EPS guidance to
a range of $0.30 to $0.32 including the charge of approximately $17
million (approximately ($0.11) of EPS), and the impact of lower volume
in the Pool & Spa business. The Company's previously issued guidance
for the third quarter 2006 EPS was $0.46 to $0.50.
In addition, the Company said that it is also revising fourth
quarter 2006 EPS guidance to a range of $0.33 to $0.35, as compared to
the Company's previous fourth quarter 2006 EPS guidance of $0.53 to
$0.59. This results in revised full-year EPS guidance from Continuing
Operations of between $1.72 and $1.76.
According to Pentair, reduced income from operations, together
with fewer receivable pre-payments from lower participation in the
Pool early buy program, has also prompted the Company to reduce its
2006 free cash flow estimate to a range of between $170 and $180
million from its previous estimate of $200 million. Hogan said the
company remains committed to its long term goal of achieving free cash
flow equal to 100 percent conversion of net income.
The Company also announced it will provide 2007 EPS guidance when
it announces third quarter 2006 financial results on Tuesday, October
24, 2006.
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.
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.
CONTACT: Pentair
Rachael Jarosh, 763-656-5280
rachael.jarosh@pentair.com
or
Mark Cain, 763-656-5278 (Investor Relations)
mark.cain@pentair.com
SOURCE: Pentair