GOLDEN VALLEY, Minn.--(BUSINESS WIRE)--April 24, 2007--Pentair,
Inc. (NYSE:PNR) today announced that first quarter 2007 sales
increased 5 percent to $808 million from $771 million in the first
quarter of 2006. Earnings per share (EPS) from continuing operations
of $0.42 were flat with the year-earlier period. Free cash flow for
the quarter improved to a usage of $75 million versus a usage of $101
million in the first quarter of 2006, an improvement of $26 million
driven by lower cash use of working capital. The Company said it
remains committed to achieving free cash flow greater than 100 percent
conversion of net income in 2007.
"Pentair delivered solid performance in the first quarter, and we
are on track to achieve our 2007 goals," said Randall J. Hogan,
Pentair chairman and chief executive officer. "Overall, sales were
good despite the challenges we faced in water markets affected by slow
North American residential housing starts and headwinds in our
electronic markets from consolidation in the telecommunication
industry," he added.
"As expected, the Water Group began to deliver margin improvements
in the quarter," Hogan continued. "This progress reflects actions we
took in the third and fourth quarters of 2006 to address market
softness as well as effective deployment of our lean disciplines
across our businesses and our continued emphasis on supply management.
"Looking ahead, we continue to view our markets as challenging.
However, based on our solid first quarter and our progress on cost
actions, we remain committed to exceeding two dollars in earnings per
share for 2007," Hogan said.
Water Group Highlights
The Water Group delivered strong year-over-year sales performance
with sales of $555 million, up 7 percent over the same period last
year. Organic sales growth, excluding the Jung Pump acquisition, was 5
percent. Excluding favorable foreign currency exchange, organic growth
for the Water Group was about 4 percent.
- Continued growth in China and in emerging markets in
Asia-Pacific as well as continued success in penetrating
markets in Europe and the Middle East contributed to Water's
overall growth. Sales in Asia-Pacific grew 27 percent, or 23
percent excluding currency exchange. Sales in Europe grew 36
percent, or 14 percent excluding the Jung Pump acquisition and
approximately 6 percent also excluding currency exchange.
- Strong sales in the commercial and industrial pump markets
continued; however, this growth was offset by continued
weakness in residential pump sales. Overall, North American
pump sales were down 1 percent.
- Sales in North American Filtration markets were flat, with
growth in industrial and food service filtration markets
offset by slowing residential markets.
- Pool and Spa sales were approximately 11 percent higher than
the same period in 2006, due to shipments of fourth quarter
2006 early-buy program orders and successful new product
introductions. Combining the pool and spa sales of fourth
quarter 2006 and first quarter 2007 to reflect the first half
of the pool season, sales were down approximately 4 percent as
compared to the year-earlier period.
The Water Group's first quarter operating income totaled $61
million, up 10 percent as compared to $56 million in the same period
in 2006, as higher volume, price realization and improved productivity
more than offset inflation. Water's first quarter operating margins
expanded 20 basis points to 11.0 percent reflecting core operational
improvements. Excluding the fair market value inventory step-up for
Jung Pump, Water's first quarter operating margins expanded 50 basis
points.
Technical Products Highlights
For the quarter, Technical Products' sales of $253 million were
essentially flat as compared to $254 million in the same period last
year. Consolidation in the telecommunication (telecom) market and
datacommunication (datacom) projects that reached end-of-life continue
to depress growth. Excluding the impact of favorable foreign currency
exchange, sales decreased approximately 3 percent.
- Technical Products global electronic sales were down
approximately 8 percent. Strong first quarter sales in Asia
advanced 32 percent as compared to the first quarter of 2006
with the majority of the growth reflecting successful
penetration into China. This growth was offset by declines in
North American and European sales, reflecting the telecom
market contraction and datacom programs that, as expected,
reached end-of-life.
- In North America, first quarter growth in the electrical
markets was up approximately 5 percent. The industrial,
commercial and networking market segments all grew, driven by
the Company's distribution penetration strategy.
First quarter operating income for Technical Products totaled $32
million as compared to $38 million in the same quarter last year.
Operating margins of 12.5 percent were 230 basis points lower compared
to 14.8 percent in the same period in 2006. This decline reflects
softness in the telecom and datacom markets; raw material inflation;
and, exit costs related to a previously announced 2001 French facility
closure. These exit costs negatively affected operating margins by
approximately 70 basis points.
Earnings Conference Call
As previously announced, Pentair will discuss the Company's
results, strategy and outlook on a conference call with investors at
12:00 p.m. Eastern today. The Company will host a live webcast and
presentation on the Financial Information page of the Company's
website (www.pentair.com); the webcast and presentation will be
archived at the same site following the conclusion of the conference
call.
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, including the
strength of housing and related markets; 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; the
ability to successfully limit any judgment 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 (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
Technical Products Group is a leader in the 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 2006 revenues of $3.15 billion, Pentair employs approximately
15,000 people worldwide.
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three months ended
-------------------
March 31 April 1
In thousands, except per-share data 2007 2006
----------------------------------------------------------------------
Net sales $807,995 $771,389
Cost of goods sold 570,592 548,881
----------------------------------------------------------------------
Gross profit 237,403 222,508
% of net sales 29.4% 28.8%
Selling, general and administrative 142,300 129,089
% of net sales 17.6% 16.7%
Research and development 14,950 14,863
% of net sales 1.9% 1.9%
----------------------------------------------------------------------
Operating income 80,153 78,556
% of net sales 9.9% 10.2%
Net interest expense 15,120 13,284
% of net sales 1.9% 1.7%
----------------------------------------------------------------------
Income from continuing operations before income
taxes 65,033 65,272
% of net sales 8.0% 8.5%
Provision for income taxes 22,903 22,201
Effective tax rate 35.2% 34.0%
----------------------------------------------------------------------
Income from continuing operations 42,130 43,071
Gain (loss) on disposal of discontinued
operations, net of tax 143 (1,451)
----------------------------------------------------------------------
Net income $42,273 $41,620
======================================================================
Earnings (loss) per common share
Basic
Continuing operations $0.43 $0.43
Discontinued operations -- (0.01)
----------------------------------------------------------------------
Basic earnings per common share $0.43 $0.42
======================================================================
Diluted
Continuing operations $0.42 $0.42
Discontinued operations -- (0.01)
----------------------------------------------------------------------
Diluted earnings per common share $0.42 $0.41
======================================================================
Weighted average common shares outstanding
Basic 98,966 100,493
Diluted 100,271 102,492
Cash dividends declared per common share $0.15 $0.14
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
March 31 December 31 April 1
In thousands 2007 2006 2006
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $64,230 $54,820 $50,237
Accounts and notes receivable, net 532,792 422,134 520,968
Inventories 413,178 398,857 375,619
Deferred tax assets 52,198 50,578 44,432
Prepaid expenses and other current
assets 41,907 31,239 28,921
----------------------------------------------------------------------
Total current assets 1,104,305 957,628 1,020,177
Property, plant and equipment, net 351,211 330,372 314,164
Other assets
Goodwill 1,830,359 1,718,771 1,723,952
Intangibles, net 384,933 287,011 262,829
Other 69,505 71,197 67,561
----------------------------------------------------------------------
Total other assets 2,284,797 2,076,979 2,054,342
----------------------------------------------------------------------
Total assets $3,740,313 $3,364,979 $3,388,683
======================================================================
Liabilities and Shareholders'
Equity
Current liabilities
Short-term borrowings $16,003 $14,563 $--
Current maturities of long-term
debt 8,257 7,625 4,246
Accounts payable 208,713 206,286 206,528
Employee compensation and benefits 85,741 88,882 75,536
Current pension and post-
retirement benefits 7,918 7,918 --
Accrued product claims and
warranties 42,766 44,093 42,238
Income taxes 13,525 22,493 27,195
Accrued rebates and sales
incentives 31,293 39,419 23,353
Other current liabilities 91,402 90,003 94,418
----------------------------------------------------------------------
Total current liabilities 505,618 521,282 473,514
Other liabilities
Long-term debt 1,056,495 721,873 888,015
Pension and other retirement
compensation 213,512 207,676 158,535
Post-retirement medical and other
benefits 47,401 47,842 73,812
Long-term income taxes payable 14,412 -- --
Deferred tax liabilities 111,106 109,781 123,663
Other non-current liabilities 85,912 86,526 76,452
----------------------------------------------------------------------
Total liabilities 2,034,456 1,694,980 1,793,991
Shareholders' equity 1,705,857 1,669,999 1,594,692
----------------------------------------------------------------------
Total liabilities and
shareholders' equity $3,740,313 $3,364,979 $3,388,683
======================================================================
Days sales in accounts receivable
(13 month moving average) 54 54 55
Days inventory on hand (13 month
moving average) 77 76 71
Days in accounts payable (13 month
moving average) 56 56 56
Debt/total capital 38.8% 30.8% 35.9%
NOTE: The Company adopted the provisions of Financial Accounting
Standards Board (FASB) Interpretation No. 48, Accounting for
Uncertainty in Income Taxes - an interpretation of FASB No. 109 ("FIN
48") on January 1, 2007. As a result of adoption of FIN 48, the
Company recorded an adjustment to retained earnings of $2.9 million.
Additionally, the Company has added the line "Long-term income taxes
payable" to the Company's Condensed Consolidated Balance Sheets to
report its total long-term liability for unrecognized tax benefits.
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended
--------------------
March 31 April 1
In thousands 2007 2006
----------------------------------------------------------------------
Operating activities
Net income $42,273 $41,620
Adjustments to reconcile net income to net cash
used for operating activities
(Gain) loss on disposal of discontinued
operations (143) 1,451
Depreciation 15,523 15,230
Amortization 4,900 4,258
Deferred income taxes (355) 2,483
Stock compensation 6,218 6,646
Excess tax benefits from stock-based compensation (1,063) (2,532)
Changes in assets and liabilities, net of effects
of business acquisitions and dispositions
Accounts and notes receivable (99,387) (95,541)
Inventories (6,381) (25,379)
Prepaid expenses and other current assets (8,770) (4,258)
Accounts payable 7,886 (4,041)
Employee compensation and benefits (13,081) (23,528)
Accrued product claims and warranties (1,403) (1,363)
Income taxes (1,448) 10,717
Other current liabilities (7,638) (26,140)
Pension and post-retirement benefits 4,033 4,477
Other assets and liabilities 1,167 3,550
----------------------------------------------------------------------
Net cash used for continuing operations (57,669) (92,350)
Net cash provided by operating activities of
discontinued operations -- 48
----------------------------------------------------------------------
Net cash used for operating activities (57,669) (92,302)
Investing activities
Capital expenditures (18,865) (9,054)
Proceeds from sale of property and equipment 1,329 79
Acquisitions, net of cash acquired (230,581) (2,158)
Divestitures -- (24,007)
Other -- (2,150)
----------------------------------------------------------------------
Net cash used for investing activities (248,117) (37,290)
Financing activities
Net short-term borrowings 1,234 --
Proceeds from long-term debt 345,190 272,906
Repayment of long-term debt (10,250) (133,051)
Excess tax benefits from stock-based compensation 1,063 2,532
Proceeds from exercise of stock options 1,762 2,577
Repurchases of common stock (9,280) --
Dividends paid (15,022) (14,224)
----------------------------------------------------------------------
Net cash provided by financing activities 314,697 130,740
Effect of exchange rate changes on cash and cash
equivalents 499 589
----------------------------------------------------------------------
Change in cash and cash equivalents 9,410 1,737
Cash and cash equivalents, beginning of period 54,820 48,500
----------------------------------------------------------------------
Cash and cash equivalents, end of period $64,230 $50,237
======================================================================
Free cash flow
Net cash used for operating activities $(57,669) $(92,302)
Less capital expenditures (18,865) (9,054)
Proceeds from sale of property and equipment 1,329 79
----------------------------------------------------------------------
Free cash flow $(75,205) $(101,277)
======================================================================
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment
(Unaudited)
First Qtr First Qtr
In thousands 2007 2006
----------------------------------------------------------------------
Net sales to external customers
Water $555,412 $517,169
Technical Products 252,583 254,220
----------------------------------------------------------------------
Consolidated $807,995 $771,389
======================================================================
Intersegment sales
Water $214 $50
Technical Products 896 889
Other (1,110) (939)
----------------------------------------------------------------------
Consolidated $-- $--
======================================================================
Operating income (loss)
Water $60,879 $55,587
Technical Products 31,631 37,704
Other (12,357) (14,735)
----------------------------------------------------------------------
Consolidated $80,153 $78,556
======================================================================
Operating income as a percent of net sales
Water 11.0% 10.8%
Technical Products 12.5% 14.8%
Consolidated 9.9% 10.2%
CONTACT: Pentair, Inc.
Rachael Jarosh, 763-656-5280
E-mail: rachael.jarosh@pentair.com
SOURCE: Pentair, Inc.