- Reports record second quarter sales of $923 million, up 7
percent versus the second quarter 2006
- Delivers second quarter earnings per share of $0.62
- Generates strong free cash flow of $145 million in the second
quarter and $69 million for the first half of 2007, up $42
million year-to-date versus the first half of 2006
- Announces full year earnings per diluted share guidance range
of $2.00 to $2.05
GOLDEN VALLEY, Minn.--(BUSINESS WIRE)--July 24, 2007--Pentair,
Inc. (NYSE:PNR) today announced second quarter 2007 earnings per share
(EPS) from continuing operations of $0.62, down 7 percent on a
reported basis as compared with the year-earlier period. Last year's
second quarter earnings per share of $0.67 included $0.08 of one-time
tax benefits.
Total sales increased 7 percent to a record $923 million as
compared with $862 million in the second quarter of 2006. The company
delivered record operating income for the second quarter of $115
million versus $108 million in the year-earlier quarter. Overall,
operating margins declined 10 basis points as a 260 net basis point
improvement from productivity, volume, mix and pricing actions could
not offset the impact of key commodity inflation. Pentair generated
free cash flow of $145 million for the quarter, driven primarily by
higher cash provided from working capital. For the first half of the
year, the company generated $69 million, reflecting a $42 million
improvement as compared with the first half of 2006.
"We delivered a strong second quarter. Organic sales were up 3
percent, and 2 percent excluding the impact of foreign exchange. While
some of our end markets were turbulent, as expected, we exceeded our
earnings per share guidance by capitalizing on several opportunities
for growth," Hogan said. "The strength of our diversity in end markets
was evidenced in the quarter as we countered the softness of the North
American residential markets with sales growth in our municipal and
commercials markets," Hogan said.
SECOND QUARTER BUSINESS HIGHLIGHTS
The Water Group delivered $665 million in sales or 10 percent
year-over-year sales growth. Organic sales were up 5 percent, and up 4
percent excluding foreign exchange. Acquisitions contributed 5 points
of growth. Organic sales in the North American Pool and Filtration
markets were relatively flat, reflecting the continuing softness of
the North American residential housing market. Europe and Asia
operations drove double-digit sales growth.
- Sales in Asia-Pacific grew 34 percent, driven in part by a
strong rebound in the Australian market and continued
penetration in China.
- Sales in Europe grew 42 percent or 13 percent excluding the
Jung Pump acquisition. Sales growth outpaced the economy with
strength in the industrial and food service markets offset
somewhat by softness in residential water treatment.
- Overall, North American pump sales were up 9 percent as
compared with the second quarter of 2006. The company drove
sales growth in the commercial, industrial and municipal pump
markets and saw continued weakness in residential pump
markets. The overall sales improvement reflects
higher-than-expected municipal sales, as some project-based
product shipments moved from the third quarter into the second
to meet a customer request. Excluding this order, overall Pump
sales would have declined about 1 percent.
- Sales in North American Filtration markets were up 7 percent,
driven by the Porous Media acquisition. Organic sales were
down 1 percent as increases in our commercial and industrial
markets and continued momentum in food service did not offset
declines in residential tanks.
- Sales in North American Pool and Spa markets were essentially
flat in a down market. New products, new customers and price
increases helped offset the market declines.
The Water Group's second quarter operating income totaled $91
million, up 8 percent as compared to $84 million in the same period in
2006. Operating margins of 13.7 percent were 20 basis points below the
year-earlier period, even with 10 basis points of productivity
improvement net of key strategic investments. These improvements did
not offset the decline in volume in the North American residential
markets and some material cost inflation.
Technical Products delivered second quarter 2007 sales of $257
million, flat as compared to the year-earlier period. Sales were down
approximately 1 percent organically and 2 percent excluding the
positive impact of foreign exchange. Solid sales in the electrical
markets and strong sales in international regions did not offset the
declines associated with the consolidation and contraction of the
telecommunications and the global electronics markets.
- In North America, second quarter sales growth in the
electrical markets was up approximately 6 percent driven by
market share gains year-over-year in the industrial,
commercial and networking market segments. New products
contributed significantly to this growth, especially in the
networking and data-communications segments.
- Technical Products global electronic sales were down
approximately 6 percent. In North America, electronic sales
declines of approximately 27% masked significant progress in
Asia, which delivered 60 percent year-over-year electronic
sales growth.
Second quarter operating income for Technical Products totaled $36
million as compared to $40 million in the same quarter last year.
Operating margins of 14.1 percent were 140 basis points lower
year-over-year, driven by the strong performance of Hoffman Enclosures
and planned price increases but offset by the declines in Electronics
volume.
OUTLOOK
"Based on our solid first half of 2007, we are announcing third
quarter EPS guidance in the range of $0.48 to $0.51, and a full-year
EPS guidance range of $2.00 to $2.05," Hogan said. "Looking ahead, we
anticipate ongoing uncertainty in the North American residential
market, which impacts our Water business, and we anticipate a modest
recovery in the telecommunications markets we serve.
"We continue to drive sales growth in the commercial, industrial
and municipal markets, the electrical technical products markets, and
internationally. We expect this growth, coupled with lean disciplines
driven through Pentair's Integrated Management System, to offset the
market challenges we face. We remain on track to achieve our 2007
margin targets, and to achieving free cash flow greater than 100
percent conversion of net income," Hogan added.
EARNINGS CONFERENCE CALL
Pentair Chairman and CEO Randall J. Hogan and Chief Financial
Officer John L. Stauch will discuss the Company's performance and
guidance on a two-way conference call with investors at 12:00 p.m.
Eastern today. Reconciliation of any non-GAAP financial measures are
set forth in the attachments of this second quarter 2007 earnings
release and in the second quarter 2007 earning release conference call
presentation, both of which can be found at Pentair's web site
(www.pentair.com). Related financial charts and certain other
information to be discussed on the conference call will be available
on the company's website shortly before the conference call. The web
cast 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 Six months ended
--------------------- ---------------------
June 30 July 1 June 30 July 1
In thousands, except per-
share data 2007 2006 2007 2006
----------------------------------------------------------------------
Net sales $ 922,645 $ 862,022 $1,730,640 $1,633,411
Cost of goods sold 639,200 599,333 1,209,792 1,148,214
----------------------------------------------------------------------
Gross profit 283,445 262,689 520,848 485,197
% of net sales 30.7% 30.4% 30.1% 29.7%
Selling, general and
administrative 153,792 139,831 296,092 268,920
% of net sales 16.7% 16.2% 17.1% 16.5%
Research and development 14,808 14,883 29,758 29,746
% of net sales 1.6% 1.7% 1.7% 1.8%
----------------------------------------------------------------------
Operating income 114,845 107,975 194,998 186,531
% of net sales 12.4% 12.5% 11.3% 11.4%
Net interest expense 18,885 12,553 34,005 25,837
% of net sales 2.0% 1.4% 2.0% 1.6%
----------------------------------------------------------------------
Income from continuing
operations before income
taxes 95,960 95,422 160,993 160,694
% of net sales 10.4% 11.1% 9.3% 9.8%
Provision for income taxes 33,959 26,789 56,862 48,990
Effective tax rate 35.4% 28.1% 35.3% 30.5%
----------------------------------------------------------------------
Income from continuing
operations 62,001 68,633 104,131 111,704
Gain (loss) on disposal of
discontinued operations,
net of tax 64 -- 207 (1,451)
----------------------------------------------------------------------
Net income $ 62,065 $ 68,633 $ 104,338 $ 110,253
======================================================================
Earnings (loss) per common
share
Basic
Continuing operations $ 0.63 $ 0.68 $ 1.05 $ 1.11
Discontinued operations -- -- -- (0.01)
----------------------------------------------------------------------
Basic earnings per common
share $ 0.63 $ 0.68 $ 1.05 $ 1.10
======================================================================
Diluted
Continuing operations $ 0.62 $ 0.67 $ 1.04 $ 1.09
Discontinued operations -- -- -- (0.01)
----------------------------------------------------------------------
Diluted earnings per
common share $ 0.62 $ 0.67 $ 1.04 $ 1.08
======================================================================
Weighted average common
shares outstanding
Basic 98,874 100,509 98,915 100,498
Diluted 100,371 102,429 100,294 102,457
Cash dividends declared
per common share $ 0.15 $ 0.14 $ 0.30 $ 0.28
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
June 30 December 31 July 1
In thousands 2007 2006 2006
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 52,016 $ 54,820 $ 48,331
Accounts and notes receivable, net 533,144 422,134 502,982
Inventories 416,008 398,857 380,219
Deferred tax assets 52,642 50,578 45,922
Prepaid expenses and other current
assets 42,453 31,239 27,659
----------------------------------------------------------------------
Total current assets 1,096,263 957,628 1,005,113
Property, plant and equipment, net 354,322 330,372 312,146
Other assets
Goodwill 1,941,014 1,718,771 1,729,179
Intangibles, net 503,823 287,011 263,600
Other 77,822 71,197 80,167
----------------------------------------------------------------------
Total other assets 2,522,659 2,076,979 2,072,946
----------------------------------------------------------------------
Total assets $ 3,973,244 $ 3,364,979 $ 3,390,205
======================================================================
Liabilities and Shareholders'
Equity
Current liabilities
Short-term borrowings $ 10,202 $ 14,563 $ 4,869
Current maturities of long-term
debt 4,622 7,625 6,970
Accounts payable 219,151 206,286 224,237
Employee compensation and benefits 96,651 88,882 83,071
Current pension and post-
retirement benefits 7,918 7,918 --
Accrued product claims and
warranties 48,867 44,093 41,346
Income taxes 20,459 22,493 22,533
Accrued rebates and sales
incentives 42,185 39,419 35,723
Other current liabilities 94,873 90,003 83,937
----------------------------------------------------------------------
Total current liabilities 544,928 521,282 502,686
Other liabilities
Long-term debt 1,173,527 721,873 801,898
Pension and other retirement
compensation 218,420 207,676 164,480
Post-retirement medical and other
benefits 46,806 47,842 73,723
Long-term income taxes payable 14,705 -- --
Deferred tax liabilities 112,615 109,781 125,418
Other non-current liabilities 87,949 86,526 79,838
----------------------------------------------------------------------
Total liabilities 2,198,950 1,694,980 1,748,043
Shareholders' equity 1,774,294 1,669,999 1,642,162
----------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 3,973,244 $ 3,364,979 $ 3,390,205
======================================================================
Days sales in accounts receivable
(13 month moving average) 54 54 54
Days inventory on hand (13 month
moving average) 78 76 71
Days in accounts payable (13 month
moving average) 55 56 56
Debt/total capital 40.1% 30.8% 33.1%
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
in the first quarter of 2007. 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)
Six months ended
---------------------
June 30 July 1
In thousands 2007 2006
----------------------------------------------------------------------
Operating activities
Net income $ 104,338 $ 110,253
Adjustments to reconcile net income to net cash
provided by operating activities
(Gain) loss on disposal of discontinued
operations (207) 1,451
Depreciation 30,185 30,386
Amortization 12,972 9,476
Deferred income taxes (6,476) 181
Stock compensation 12,626 12,484
Excess tax benefits from stock-based
compensation (2,213) (2,605)
Changes in assets and liabilities, net of
effects of business acquisitions and
dispositions
Accounts and notes receivable (86,949) (74,193)
Inventories 2,673 (28,032)
Prepaid expenses and other current assets (3,542) (2,809)
Accounts payable 15,065 12,382
Employee compensation and benefits (4,982) (16,832)
Accrued product claims and warranties 4,561 (1,793)
Income taxes 5,477 6,443
Other current liabilities 3,192 (19,933)
Pension and post-retirement benefits 7,730 8,722
Other assets and liabilities 3,466 1,565
----------------------------------------------------------------------
Net cash provided by continuing operations 97,916 47,146
Net cash provided by operating activities
of discontinued operations -- 48
----------------------------------------------------------------------
Net cash provided by operating activities 97,916 47,194
Investing activities
Capital expenditures (30,068) (20,217)
Proceeds from sale of property and equipment 1,536 221
Acquisitions, net of cash acquired (482,885) (19,694)
Divestitures -- (24,007)
Other (779) (4,273)
----------------------------------------------------------------------
Net cash used for investing activities (512,196) (67,970)
Financing activities
Net short-term borrowings (4,708) 4,763
Proceeds from long-term debt 1,121,402 414,233
Repayment of long-term debt (673,341) (358,141)
Debt issuance costs (1,782) --
Excess tax benefits from stock-based
compensation 2,213 2,605
Proceeds from exercise of stock options 4,922 2,939
Repurchases of common stock (9,280) (18,330)
Dividends paid (29,991) (28,458)
----------------------------------------------------------------------
Net cash provided by financing activities 409,435 19,611
Effect of exchange rate changes on cash and cash
equivalents 2,041 996
----------------------------------------------------------------------
Change in cash and cash equivalents (2,804) (169)
Cash and cash equivalents, beginning of period 54,820 48,500
----------------------------------------------------------------------
Cash and cash equivalents, end of period $ 52,016 $ 48,331
======================================================================
Free cash flow
Net cash provided by operating activities $ 97,916 $ 47,194
Less capital expenditures (30,068) (20,217)
Proceeds from sale of property and equipment 1,536 221
----------------------------------------------------------------------
Free cash flow $ 69,384 $ 27,198
======================================================================
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment
(Unaudited)
First Second First Second
Qtr Qtr Six Months Qtr Qtr Six Months
In thousands 2007 2007 2007 2006 2006 2006
----------------------------------------------------------------------
Net sales to
external
customers
Water $555,412 $665,495 $1,220,907 $517,169 $605,516 $1,122,685
Technical
Products 252,583 257,150 509,733 254,220 256,506 510,726
----------------------------------------------------------------------
Consolidated $807,995 $922,645 $1,730,640 $771,389 $862,022 $1,633,411
======================================================================
Intersegment
sales
Water $214 $46 $260 $50 $55 $105
Technical
Products 896 1,689 2,585 889 1,312 2,201
Other (1,110) (1,735) (2,845) (939) (1,367) (2,306)
----------------------------------------------------------------------
Consolidated $-- $-- $-- $-- $-- $--
======================================================================
Operating
income
(loss)
Water $60,879 $90,978 $151,857 $55,587 $84,191 $139,778
Technical
Products 31,631 36,140 67,771 37,704 39,678 77,382
Other (12,357) (12,273) (24,630) (14,735) (15,894) (30,629)
----------------------------------------------------------------------
Consolidated $80,153 $114,845 $194,998 $78,556 $107,975 $186,531
======================================================================
Operating
income as a
percent of
net sales
Water 11.0% 13.7% 12.4% 10.8% 13.9% 12.5%
Technical
Products 12.5% 14.1% 13.3% 14.8% 15.5% 15.2%
Consolidated 9.9% 12.4% 11.3% 10.2% 12.5% 11.4%
CONTACT: Pentair, Inc.
Todd Gleason, (763) 656-5570
Vice President, Investor Relations
E-mail: todd.gleason@pentair.com
Rachael Jarosh, (763) 656-5280
Director, Communications
E-mail: rachael.jarosh@pentair.com
SOURCE: Pentair, Inc.