Company Raises Low end of Full Year Guidance Range to $2.30 to
$2.40, an increase of 10 to 14 Percent
MINNEAPOLIS--(BUSINESS WIRE)--April 22, 2008--Pentair, Inc. (NYSE:
PNR):
- Reports first quarter sales of $840 million, up 6 percent
versus the first quarter 2007
- Delivers earnings per share from continuing operations (EPS)
of $0.53, up 26 percent; income from continuing operations of
$53 million, up 23 percent
- Introduces second quarter 2008 EPS guidance range of $0.64 to
$0.67, up 5 to 10 percent versus the second quarter 2007
- Updates full-year 2008 EPS guidance to $2.30 to $2.40
All financial information and period-to-period references are on a
continuing operations basis unless otherwise noted. Reconciliations to
discontinued operations as well as GAAP and Non-GAAP reconciliations
are in the attached financial tables.
Pentair, Inc. (NYSE: PNR) today announced first quarter 2008
earnings per share from continuing operations (EPS) of $0.53. This
represents an increase of 26 percent as compared to the $0.42 of EPS
in the first quarter last year.
Total sales increased 6 percent to $840 million as compared with
$793 million in the first quarter of 2007. The company delivered
operating income for the first quarter of $97 million versus $81
million in the year-earlier quarter. Overall, operating margins
expanded 120 basis points to 11.5 percent driven by a positive 360
basis point improvement from volume, price, mix, acquisitions and
productivity. The positive impact from these items more than offset a
negative 240 basis point impact related to total inflation.
Company free cash flow was a usage of $78 million for the quarter
versus a usage of $75 million for the year-earlier quarter. The
company said it remains on track to achieve free cash flow greater
than 100 percent conversion of income from continuing operations for
2008.
"We had a strong start to the year and are very pleased with our
operating performance in the first quarter of 2008. We continue to
leverage the strength of our business diversity and our growing
international presence, which has enabled us to navigate the
challenging North American residential markets. Strong sales growth
and earnings increases in our Technical Products business enabled us
to exceed our first quarter earnings guidance. In our Water
businesses, we continue to drive solid growth in our industrial,
commercial and municipal Water markets globally," said Randall J.
Hogan, chairman and chief executive officer.
FIRST QUARTER BUSINESS HIGHLIGHTS
The Water Group delivered $555 million in sales or 3 percent
year-over-year sales growth. Organic sales were flat excluding
acquisitions and down 4 percent excluding foreign exchange. The
decline in organic growth was driven by continuing softness in the
North American residential markets. Internationally, Water sales
increased at a double-digit rate.
- Global Flow Technologies grew 8 percent or up 5 percent
excluding the 2007 acquisition of Jung Pump. Sales of pump
equipment for global commercial, municipal and agricultural
markets continue to outpace declines in North American
residential markets.
- Global Filtration grew 8 percent as the 2007 acquisition of
Porous Media boosted sales higher than the year-ago period.
Excluding this acquisition, Filtration sales were down 2
percent. Steady gains in industrial filtration, food service
and desalination products did not offset declines in the North
American residential markets.
- Global Pool and Spa sales were down 10 percent as the
prolonged decline in North American residential pool and spa
markets more than offset continued gains in commercial and
international pool equipment sales.
- Internationally, Water grew 17 percent in Europe because of
the 2007 acquisition of Jung Pump. Sales in Asia-Pacific grew
23 percent driven by strong double-digit growth in China and
India.
The Water Group's first quarter operating income totaled $64
million, up 3 percent as compared to $62 million in the same period
last year. Operating margins were flat as benefits from productivity,
acquisitions and price offset the negative impact from inflation and
decreased volumes.
In the quarter, the company sold its National Pool Tile business
(NPT) to Pool Corporation for $30 million in cash. The transaction
yielded a negative 8 cent EPS impact from discontinued operations in
the first quarter 2008. Of this amount, 7 cents was attributable to a
loss on the sale and 1 cent was from operational results in January
and February 2008.
Technical Products delivered first quarter 2008 sales of $285
million, an increase of 13 percent versus the year-earlier period.
Sales were up approximately 11 percent excluding acquisitions and up 7
percent excluding foreign exchange.
- Global Electrical sales were up 10 percent, led by strong
double-digit increases in its Thermal applications product
line and natural resource markets (e.g., Oil & Gas, Mining).
The business also benefited from solid growth in the
networking and commercial markets.
- Global Electronic sales were up 18 percent or up 7 percent
when adjusted for acquisitions. In Asia, electronic sales were
up 46 percent while sales in North America were up
approximately 7 percent. In Europe, sales were essentially
flat in local currencies.
Technical Products' first quarter operating income totaled $45
million, up 43 percent as compared to $32 million in the same quarter
last year. Operating margins were 15.9 percent, up 340 basis points.
In the quarter, the benefits from volume, price, productivity and
acquisitions more than offset the negative impact from total
inflation.
"Our businesses are performing well in their respective markets.
Technical Products is firing on all cylinders. Water continues to
invest in global expansion, especially in emerging markets, and in
high-growth vertical markets while effectively managing the impact of
the continued weakness in the North American residential market,"
Hogan said. "We continue to hone our portfolio of businesses with the
sale of National Pool Tile. We also made tremendous progress advancing
our new Global Business Unit structure, which will enable greater
growth and productivity in the future," he added.
OUTLOOK
The company introduces its second quarter 2008 EPS guidance range
of $0.64 to $0.67, an increase of 5 to 10 percent versus the second
quarter 2007. Additionally, the company raised its full year 2008 EPS
guidance range to $2.30 to $2.40, up 10 to 14 percent versus full year
2007. The company's previous full year guidance was $2.25 to $2.40.
"We expect our positive performance momentum to continue in our
international Water and global Technical Products' businesses, which
enables us to update our full year guidance by increasing the low end
of the range 5 cents," Hogan said. "Our second quarter 2008 guidance
reflects our expectations for continued difficult residential and pool
market environments. Our guidance also takes into account the
difficult year-over-year comparison within the Flow Technologies
Global Business Unit which, in the second quarter 2007, delivered $21
million in municipal pumps to New Orleans, adding 4 cents of EPS in
that period."
"For the full year, we continue to focus on delivering
productivity by reducing our manufacturing cost structure, executing
on previously announced restructuring actions, more aggressively
managing our sourcing and reducing our general and administrative
structure globally," said Hogan. "Further, we are evaluating pricing
actions to offset the stubborn rise in some key commodities such as
steel, resin, copper and aluminum. We believe these actions, coupled
with our ongoing investment in key growth initiatives, will enable us
to deliver on our earnings guidance."
EARNINGS CONFERENCE CALL
Pentair Chairman and CEO Randall J. Hogan and Chief Financial
Officer John L. Stauch will discuss the Company's performance and Q2
and full year 2008 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 to this first
quarter 2008 earnings release and in the first quarter 2008 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, as
well as other risk factors set forth in our SEC filings.
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 2007 revenues of $3.30 billion, Pentair employs approximately
16,000 people worldwide.
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three months ended
-------------------------
March 29 March 31
In thousands, except per-share data 2008 2007
----------------------------------------------------------------------
Net sales $840,404 $792,845
Cost of goods sold 589,073 556,914
----------------------------------------------------------------------
Gross profit 251,331 235,931
% of net sales 29.9% 29.8%
Selling, general and administrative 138,646 139,482
% of net sales 16.5% 17.6%
Research and development 15,866 14,950
% of net sales 1.9% 1.9%
----------------------------------------------------------------------
Operating income 96,819 81,499
% of net sales 11.5% 10.3%
Equity losses of unconsolidated subsidiary (917) (957)
Net interest expense 16,088 14,711
% of net sales 1.9% 1.9%
----------------------------------------------------------------------
Income from continuing operations before
income taxes 79,814 65,831
% of net sales 9.5% 8.3%
Provision for income taxes 27,170 23,202
Effective tax rate 34.0% 35.2%
----------------------------------------------------------------------
Income from continuing operations 52,644 42,629
Loss from discontinued operations, net of
tax (1,217) (499)
Gain (loss) on disposal of discontinued
operations, net of tax (7,137) 143
----------------------------------------------------------------------
Net income $ 44,290 $ 42,273
======================================================================
Earnings (loss) per common share
Basic
Continuing operations $ 0.54 $ 0.43
Discontinued operations (0.09) -
----------------------------------------------------------------------
Basic earnings per common share $ 0.45 $ 0.43
======================================================================
Diluted
Continuing operations $ 0.53 $ 0.42
Discontinued operations (0.08) -
----------------------------------------------------------------------
Diluted earnings per common share $ 0.45 $ 0.42
======================================================================
Weighted average common shares outstanding
Basic 98,280 98,966
Diluted 99,558 100,271
Cash dividends declared per common share $ 0.17 $ 0.15
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
March 29 December 31 March 31
In thousands 2008 2007 2007
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 62,284 $ 70,795 $ 64,230
Accounts and notes receivable, net 616,705 466,675 525,213
Inventories 416,059 392,416 393,495
Deferred tax assets 54,275 50,511 51,178
Prepaid expenses and other current
assets 43,245 35,908 40,990
Current assets of discontinued
operations -- 21,716 29,199
----------------------------------------------------------------------
Total current assets 1,192,568 1,038,021 1,104,305
Property, plant and equipment, net 368,293 365,990 349,768
Other assets
Goodwill 2,030,281 2,004,720 1,813,552
Intangibles, net 497,799 491,263 384,763
Other 81,447 82,237 69,505
Non-current assets of discontinued
operations -- 18,383 18,420
----------------------------------------------------------------------
Total other assets 2,609,527 2,596,603 2,286,240
----------------------------------------------------------------------
Total assets $4,170,388 $4,000,614 $3,740,313
======================================================================
Liabilities and Shareholders'
Equity
Current liabilities
Short-term borrowings $ 7,005 $ 13,586 $ 16,003
Current maturities of long-term
debt 5,209 5,075 8,153
Accounts payable 235,798 229,937 200,649
Employee compensation and benefits 99,582 111,475 85,219
Current pension and post-
retirement benefits 8,557 8,557 7,918
Accrued product claims and
warranties 46,318 49,382 42,766
Income taxes 34,135 12,919 13,458
Accrued rebates and sales
incentives 28,864 36,663 31,130
Other current liabilities 109,759 90,377 91,102
Current liabilities of
discontinued operations -- 2,935 9,220
----------------------------------------------------------------------
Total current liabilities 575,227 560,906 505,618
Other liabilities
Long-term debt 1,119,105 1,041,925 1,056,116
Pension and other retirement
compensation 169,790 161,042 213,512
Post-retirement medical and other
benefits 36,179 37,147 47,401
Long-term income taxes payable 24,268 21,306 14,412
Deferred tax liabilities 166,558 167,633 108,903
Other non-current liabilities 105,041 97,086 85,912
Non-current liabilities of
discontinued operations -- 2,698 2,582
----------------------------------------------------------------------
Total liabilities 2,196,168 2,089,743 2,034,456
Shareholders' equity 1,974,220 1,910,871 1,705,857
----------------------------------------------------------------------
Total liabilities and
shareholders' equity $4,170,388 $4,000,614 $3,740,313
======================================================================
Days sales in accounts receivable
(13 month moving average) 55 53 55
Days inventory on hand (13 month
moving average) 75 75 76
Days in accounts payable (13 month
moving average) 55 54 56
Debt/total capital 36.4% 35.7% 38.8%
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended
-------------------------
March 29 March 31
In thousands 2008 2007
----------------------------------------------------------------------
Operating activities
Net income $ 44,290 $ 42,273
Adjustments to reconcile net income to net
cash used for operating activities
Loss from discontinued operations 1,217 499
(Gain) loss on disposal of discontinued
operations 7,137 (143)
Equity losses of unconsolidated subsidiary 917 957
Depreciation 15,081 15,436
Amortization 6,535 4,890
Deferred income taxes (5,836) (355)
Stock compensation 6,465 6,218
Excess tax benefits from stock-based
compensation (378) (1,063)
Gain on sale of investment (552) --
Changes in assets and liabilities, net of
effects of business acquisitions and
dispositions
Accounts and notes receivable (139,045) (98,527)
Inventories (16,096) (2,010)
Prepaid expenses and other current assets (5,657) (8,625)
Accounts payable 5,542 2,711
Employee compensation and benefits (17,038) (12,845)
Accrued product claims and warranties (3,336) (1,403)
Income taxes 19,410 (1,699)
Other current liabilities 9,470 (7,734)
Pension and post-retirement benefits 1,885 4,033
Other assets and liabilities 2,588 289
----------------------------------------------------------------------
Net cash used for continuing operations (67,401) (57,098)
Net cash used for operating activities
of discontinued operations (2,948) (571)
----------------------------------------------------------------------
Net cash used for operating activities (70,349) (57,669)
Investing activities
Capital expenditures (14,225) (18,865)
Proceeds from sale of property and equipment 3,845 1,329
Acquisitions, net of cash acquired 165 (230,581)
Divestitures 29,959 --
----------------------------------------------------------------------
Net cash provided by (used for)
investing activities 19,744 (248,117)
Financing activities
Net short-term borrowings (7,272) 1,234
Proceeds from long-term debt 159,405 345,190
Repayment of long-term debt (82,766) (10,250)
Excess tax benefits from stock-based
compensation 378 1,063
Proceeds from exercise of stock options 851 1,762
Repurchases of common stock (12,500) (9,280)
Dividends paid (16,908) (15,022)
----------------------------------------------------------------------
Net cash provided by financing
activities 41,188 314,697
Effect of exchange rate changes on cash and
cash equivalents 906 499
----------------------------------------------------------------------
Change in cash and cash equivalents (8,511) 9,410
Cash and cash equivalents, beginning of
period 70,795 54,820
----------------------------------------------------------------------
Cash and cash equivalents, end of period $ 62,284 $ 64,230
======================================================================
Free cash flow
Net cash used for continuing operations $ (67,401) $ (57,098)
Less capital expenditures (14,225) (18,865)
Proceeds from sale of property and equipment 3,845 1,329
----------------------------------------------------------------------
Free cash flow $ (77,781) $ (74,634)
======================================================================
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment
(Unaudited)
First Qtr First Qtr
In thousands 2008 2007
----------------------------------------------------------------------
Net sales to external customers
Water $554,944 $540,262
Technical Products 285,460 252,583
----------------------------------------------------------------------
Consolidated $840,404 $792,845
======================================================================
Intersegment sales
Water $ 372 $ 214
Technical Products 1,138 896
Other (1,510) (1,110)
----------------------------------------------------------------------
Consolidated $ -- $ --
======================================================================
Operating income (loss)
Water $ 64,419 $ 62,426
Technical Products 45,337 31,631
Other (12,937) (12,558)
----------------------------------------------------------------------
Consolidated $ 96,819 $ 81,499
======================================================================
Operating income as a percent of net sales
Water 11.6% 11.6%
Technical Products 15.9% 12.5%
Consolidated 11.5% 10.3%
CONTACT: Pentair, Inc.
Todd Gleason, 763-656-5570
Vice President, Investor Relations
[email protected]
or
Rachael Jarosh, 763-656-5280
Vice President, Communications
[email protected]
SOURCE: Pentair, Inc.