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Pentair Reports First Quarter 2010 Net Income Per Share from Continuing Operations of $0.35 on 12 Percent Growth in Sales
04.27.2010

  • Reports first quarter sales of $707 million, up 12 percent year-over-year
  • Operating margins in Water Group and Technical Products increase year over year
  • Earnings per share up 94 percent year-over-year on GAAP basis, or up 75 percent when compared to adjusted first quarter 2009 EPS
  • First quarter free cash flow improved year-over-year and is on track to achieve full year target of over $225 million
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.

MINNEAPOLIS, Apr 27, 2010 (BUSINESS WIRE) --Pentair, Inc. (NYSE:PNR) today announced first quarter 2010 net earnings per diluted share from continuing operations (EPS) of $0.35. This represents an increase of 94 percent as compared to the $0.18 of EPS in the first quarter last year. Adjusting first quarter 2009 for restructuring items, year-over-year adjusted EPS increased 75 percent.

Total company sales increased 12 percent to $707 million, compared with $634 million in the first quarter of 2009. The company delivered first quarter operating income of $64 million, up 71 percent year-over-year or up 59 percent compared to adjusted first quarter 2009 operating income. Overall, operating margins for the first quarter increased 270 basis points to 9 percent when compared to adjusted first quarter 2009 operating margins. The positive impact on operating margins from higher volume and productivity more than offset the negative impact related to modest selling price reductions and inflation.

Total company free cash flow was a usage of $22 million for the quarter versus a usage of $33 million for the year-earlier quarter. The company said it is on track to achieve free cash flow of $225 million for 2010, driven by improvements in working capital and earnings growth.

"We had a great start to the year with double digit sales increases, strong earnings growth and free cash flow already ahead of last year's robust levels," said Randall J. Hogan, Pentair chairman and chief executive officer. "Last year we put the company in position to weather the downturn and prepare for growth. As evidenced in our first quarter sales growth, we believe markets are steadily recovering and emerging markets are once again strong," he added.

FIRST QUARTER BUSINESS HIGHLIGHTS

The Water Group delivered $478 million in sales, a 13 percent increase year-over-year. Sales were up 11 percent excluding foreign exchange.

  • Residential Flow sales were up 12 percent versus the year-ago quarter. Strong growth in residential channels coupled with demand for residential de-watering products to protect homes from heavier than normal flooding helped to drive sales.
  • Residential Filtration sales were up 14 percent as fast growth regions grew in the high teens and the U.S. market continued its steady recovery.
  • Pool sales were up 25 percent as the business continued to expand its dealer base, new energy efficient products were well received in the marketplace and key distributors started to build inventory levels.
  • Engineered Flow sales were up 10 percent as municipal and industrial pump sales remained strong while commercial water systems were down significantly reflecting a weak commercial construction market globally.
  • Filtration Solutions sales were up 8 percent led by strong double-digit sales growth in Food Service, which helped overcome weaker energy and desalination sales.

The Water Group's first quarter reported operating income totaled $42 million, up 56 percent as compared to $27 million in the same period last year. When compared to first quarter 2009 adjusted operating income of $28 million, first quarter 2010 operating margins increased by 210 basis points to 8.8 percent. The benefits from higher volume and productivity more than offset the negative impact from inflation and growth investments. First quarter 2010 margins are inclusive of approximately 100 basis points of pay as you go expenses related to previously announced plant moves incurred in the quarter.

Technical Products delivered first quarter 2010 sales of $229 million, an increase of 9 percent versus the year-earlier period. Sales were up 7 percent excluding the impact of foreign exchange.

  • Strong sales in industrial, infrastructure and general electronics markets offset declines in commercial, security and defense sales.
  • International markets were up nine percent, led by Asia up 13 percent in local currencies.

Technical Products' first quarter reported operating income totaled $33 million, up 62 percent compared to $20 million in the same quarter last year. When compared to first quarter 2009 adjusted operating income of $21 million, first quarter 2010 operating margins increased 440 basis points to 14.5 percent margins. The positive impact of volume, productivity and material savings more than offset the negative impact from investments. First quarter 2010 margins are inclusive of approximately 50 basis points of pay as you go expenses related to previously announced plant moves incurred in the quarter.

"We delivered the growth and financial results we expected - and are seeing solid indicators that trends are favorable for the balance of the year," said Hogan. "In the quarter, we reinstated major employee benefits, incentive accruals, sales volume rebate programs and accelerated the remainder of our major restructuring actions - all of which impacted and are included in our results, which met the high end of our original guidance," he added.

OUTLOOK

The company updates its second quarter 2010 EPS guidance to a range of $0.52 to $0.55, an increase of over 35 percent year-over-year over adjusted second quarter 2009 earnings. The company expects second quarter sales to be up over 10 percent compared to the same period last year.

The company maintains its full year 2010 EPS guidance range of $1.75 to $1.90, an increase of 19 to 29 percent versus 2009 adjusted EPS. The company expects full year 2010 sales to be approximately $2.9 billion and full year free cash flow to be approximately $225 million.

"We are encouraged by our first quarter results and, as we enter the critical second quarter, we have positive order trends, strong backlog and solid execution against our productivity initiatives," said Hogan. "We are maintaining our full year outlook as we validate the sustainability of the trends we are experiencing today," he 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 first quarter 2010 results and 2010 outlook on a two-way conference call with investors and a live audio webcast at 9 a.m. Eastern today. Reconciliation of non-GAAP financial measures are set forth in the attachments to this first quarter 2010 earnings release and the first quarter 2010 earnings 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 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 the magnitude, timing and scope of recovery from the global economic downturn; the strength of housing and related markets; the risk that expected benefits from our recent restructuring and other cost reduction plans may not be fully realized, or may take longer to realize than expected; foreign currency effects; material inflation outpacing our productivity and pricing actions; retail, commercial 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 global diversified industrial company headquartered in Minneapolis, 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 protect sensitive electronics and the people that use them. With 2009 revenues of $2.7 billion, Pentair employs approximately 13,500 people worldwide.

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three months ended
In thousands, except per-share data April 3,
2010
March 28,
2009
Net sales $ 707,013 $ 633,840
Cost of goods sold 493,311 464,608
Gross profit 213,702 169,232
% of net sales 30.2% 26.7%
Selling, general and administrative 132,890 117,275
% of net sales 18.8% 18.5%
Research and development 17,211 14,743
% of net sales 2.4% 2.3%
Operating income 63,601 37,214
% of net sales 9.0% 5.9%
Other (income) expense:
Equity (income) losses of unconsolidated subsidiary (84) 277
Net interest expense 9,527 11,784
% of net sales 1.3% 1.9%
Income from continuing operations before income taxes and noncontrolling interest 54,158 25,153
% of net sales 7.7% 4.0%
Provision for income taxes 18,129 7,432
Effective tax rate 33.5% 29.5%
Income from continuing operations 36,029 17,721
Gain on disposal of discontinued operations, net of tax 524 10
Net income before noncontrolling interest 36,553 17,731
Noncontrolling interest 1,232 466
Net income attributable to Pentair, Inc. $ 35,321 $ 17,265
Net income from continuing operations attributable to Pentair, Inc. $ 34,797 $ 17,255
Earnings per common share attributable to Pentair, Inc.
Basic
Continuing operations $ 0.35 $ 0.18
Discontinued operations 0.01 --
Basic earnings per common share $ 0.36 $ 0.18
Diluted
Continuing operations $ 0.35 $ 0.18
Discontinued operations 0.01 --
Diluted earnings per common share $ 0.36 $ 0.18
Weighted average common shares outstanding
Basic 98,030 97,375
Diluted 99,568 97,966
Cash dividends declared per common share $ 0.19 $ 0.18
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
In thousands April 3,
2010
December 31,
2009
March 28,
2009
Assets
Current assets
Cash and cash equivalents $ 46,783 $ 33,396 $ 34,708
Accounts and notes receivable, net 550,830 455,090 505,196
Inventories 363,667 360,627 393,201
Deferred tax assets 49,665 49,609 51,268
Prepaid expenses and other current assets 43,580 47,576 47,848
Total current assets 1,054,525 946,298 1,032,221
Property, plant and equipment, net 330,201 333,688 337,898
Other assets
Goodwill 2,067,836 2,088,797 2,092,825
Intangibles, net 472,398 486,407 504,921
Other 56,224 56,144 56,964
Total other assets 2,596,458 2,631,348 2,654,710
Total assets $ 3,981,184 $ 3,911,334 $ 4,024,829
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $ 3,731 $ 2,205 $ 7,404
Current maturities of long-term debt 51 81 630
Accounts payable 229,502 207,661 196,767
Employee compensation and benefits 77,496 74,254 75,664
Current pension and post-retirement benefits 8,948 8,948 8,890
Accrued product claims and warranties 37,803 34,288 38,639
Income taxes 8,571 5,659 4,312
Accrued rebates and sales incentives 24,653 27,554 20,754
Other current liabilities 86,763 85,629 98,919
Total current liabilities 477,518 446,279 451,979
Other liabilities
Long-term debt 862,351 803,351 991,807
Pension and other retirement compensation 231,733 234,948 270,443
Post-retirement medical and other benefits 30,630 31,790 34,299
Long-term income taxes payable 25,720 26,936 28,076
Deferred tax liabilities 145,777 146,630 145,565
Other non-current liabilities 95,399 95,060 97,260
Total liabilities 1,869,128 1,784,994 2,019,429
Shareholders' equity 2,112,056 2,126,340 2,005,400
Total liabilities and shareholders' equity $ 3,981,184 $ 3,911,334 $ 4,024,829
Days sales in accounts receivable (13 month moving average) 61 62 60
Days inventory on hand (13 month moving average) 86 90 85
Days in accounts payable (13 month moving average) 66 66 61
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended
In thousands April 3,
2010
March 28,
2009
Operating activities
Net income before noncontrolling interest $ 36,553 $ 17,731
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Gain on disposal of discontinued operations (524 ) (10 )
Equity (income) losses of unconsolidated subsidiary (84 ) 277
Depreciation 14,564 15,170
Amortization 6,746 7,233
Deferred income taxes 1,617 7
Stock compensation 6,802 4,720
Excess tax benefits from stock-based compensation (980 ) (64 )
(Gain) loss on sale of assets (147 ) 19
Changes in assets and liabilities, net of effects of business acquisitions and dispositions
Accounts and notes receivable (99,054 ) (47,021 )
Inventories (5,525 ) 21,069
Prepaid expenses and other current assets 2,826 15,008
Accounts payable 22,479 (18,052 )
Employee compensation and benefits 1,694 (15,470 )
Accrued product claims and warranties 3,647 (2,797 )
Income taxes 3,446 (922 )
Other current liabilities (1,584 ) (13,337 )
Pension and post-retirement benefits (426 ) 1,801
Other assets and liabilities (2,363 ) (2,415 )
Net cash provided by (used for) operating activities (10,313 ) (17,053 )
Investing activities
Capital expenditures (12,059 ) (15,979 )
Proceeds from sale of property and equipment 127 280
Other 292 (40 )
Net cash provided by (used for) investing activities (11,640 ) (15,739 )
Financing activities
Net short-term borrowings 1,526 7,494
Proceeds from long-term debt 200,000 135,000
Repayment of long-term debt (141,025 ) (96,679 )
Excess tax benefits from stock-based compensation 980 64
Stock issued to employees, net of shares withheld (1,938 ) 680
Dividends paid (18,837 ) (17,710 )
Net cash provided by (used for) financing activities 40,706 28,849
Effect of exchange rate changes on cash and cash equivalents (5,366 ) (693 )
Change in cash and cash equivalents 13,387 (4,636 )
Cash and cash equivalents, beginning of period 33,396 39,344
Cash and cash equivalents, end of period $ 46,783 $ 34,708
Free cash flow
Net cash provided by (used for) operating activities $ (10,313 ) $ (17,053 )
Capital expenditures (12,059 ) (15,979 )
Proceeds from sale of property and equipment 127 280
Free cash flow $ (22,245 ) $ (32,752 )
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment (Unaudited)
In thousands First Qtr
2010
First Qtr
2009
Net sales to external customers
Water Group $ 478,038 $ 423,932
Technical Products Group 228,975 209,908
Consolidated $ 707,013 $ 633,840
Intersegment sales
Water Group $ 517 $ 289
Technical Products Group 703 233
Intercompany sales eliminations (1,220 ) (522 )
Consolidated $ -- $ --
Operating income (loss)
Water Group $ 42,138 $ 26,976
Technical Products Group 33,098 20,462
Unallocated corporate expenses and intercompany eliminations (11,635 ) (10,224 )
Consolidated $ 63,601 $ 37,214
Operating income as a percent of net sales
Water 8.8 % 6.4 %
Technical Products 14.5 % 9.7 %
Consolidated 9.0 % 5.9 %
Pentair, Inc. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ending December 31, 2009 to the "Adjusted" non-GAAP
excluding the effect of 2009 adjustments (Unaudited)
In thousands, except per-share data First Quarter
2009
Second Quarter
2009
Third Quarter
2009
Fourth Quarter
2009
Year
2009
Net sales $ 633,840 $ 693,712 $ 662,665 $ 702,251 $ 2,692,468
Operating income - as reported 37,214 63,560 66,682 52,492 219,948
% of net sales 5.9% 9.2% 10.1% 7.5% 8.2%
Adjustments:
Restructuring and asset impairment 2,824 2,944 7,295 24,881 37,944
Operating income - as adjusted 40,038 66,504 73,977 77,373 257,892
% of net sales 6.3% 9.6% 11.2% 11.0% 9.6%

Net income from continuing operations attributable to Pentair, Inc. - as reported

17,255 32,006 37,033 29,218 115,512
Adjustments - tax affected

Restructuring and asset impairment, net of minority interest

1,864 1,943 4,815 17,549 26,171
Bond tender -- 3,171 -- -- 3,171

Net income from continuing operations attributable to Pentair, Inc. - as adjusted

19,119 37,120 41,848 46,767 144,854
Continuing earnings per common share attributable to Pentair, Inc. - diluted
Diluted earnings per common share - as reported $ 0.18 $ 0.33 $ 0.38 $ 0.29 $ 1.17
Adjustments 0.02 0.05 0.04 0.18 0.30
Diluted earnings per common share - as adjusted $ 0.20 $ 0.38 $ 0.42 $ 0.47 $ 1.47
Weighted average common shares outstanding - Diluted 97,966 98,422 98,641 99,226 98,522
Pentair, Inc. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ending December 31, 2009 to the "Adjusted" non-GAAP
excluding the effect of 2009 adjustments (Unaudited)
In thousands First Quarter
2009
Second Quarter
2009
Third Quarter
2009
Fourth Quarter
2009
Year
2009
Water
Net sales $ 423,932 $ 486,990 $ 461,570 $ 475,272 $ 1,847,764
Operating income - as reported 26,976 49,781 53,085 33,903 163,745
% of net sales 6.4% 10.2% 11.5% 7.1% 8.9%
Adjustments - restructuring and asset impairment 1,464 1,460 2,639 21,336 26,899
Operating income - as adjusted 28,440 51,241 55,724 55,239 190,644
% of net sales 6.7% 10.5% 12.1% 11.6% 10.3%
Technical Products
Net sales $ 209,908 $ 206,722 $ 201,095 $ 226,979 $ 844,704
Operating income - as reported 20,462 23,578 24,356 31,959 100,355
% of net sales 9.7% 11.4% 12.1% 14.1% 11.9%
Adjustments - restructuring and asset impairment 792 1,139 4,557 2,729 9,217
Operating income - as adjusted 21,254 24,717 28,913 34,688 109,572
% of net sales 10.1% 12.0% 14.4% 15.3% 13.0%

SOURCE: Pentair, Inc.

Pentair
Todd Gleason, 763-656-5570
Vice President, Strategic Planning & Investor Relations
todd.gleason@pentair.com

Categories: Press Releases