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Pentair Reports Second Quarter Sales Growth of 15 Percent and Net Income Per Share From Continuing Operations of $0.61
07.29.2010

- Reports second quarter sales up 15 percent year-over-year to $796 million, with double digit growth in both Water and Technical Products
- Operating margins improved year-over-year to 12.6 percent
- Diluted earnings per share from continuing operations (EPS) of $0.61 up 85 percent year-over-year on GAAP basis; up 61 percent when compared to adjusted second quarter 2009 EPS
- Delivered strong free cash flow of $150 million in the second quarter
- Updated full-year 2010 EPS guidance to a range of $1.86 to $1.96 from previous guidance of $1.75 to $1.90 per share
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, July 29, 2010 /PRNewswire via COMTEX/ --

Pentair, Inc. (NYSE: PNR) today reported second quarter 2010 revenue of $796 million and net income from continuing operations attributable to Pentair, Inc. of $60 million, or $0.61 per share. This represents an increase of 85 percent as compared to the $0.33 of EPS in the second quarter last year. Adjusting second quarter 2009 for restructuring items, year-over-year adjusted EPS increased 61 percent.

Total company sales increased 15 percent to $796 million, compared with $694 million in the second quarter of 2009. Both Water and Technical Products posted double-digit sales gains, and growth was broad-based across end-markets served. The company delivered second quarter operating income of $100 million, up 58 percent year-over-year or up 51 percent compared to adjusted second quarter 2009 operating income. Overall, operating margins for the second quarter increased 300 basis points to 12.6 percent when compared to adjusted second quarter 2009 operating margins, driven by revenue growth and operational productivity.

The company generated strong free cash flow of $150 million for the quarter, with year-to-date free cash flow performance of $128 million, which is $29 million greater than the first half of 2009. The company said it is on track to achieve free cash flow of greater than $225 million for full year 2010.

"I am pleased with our second quarter performance, as strong execution of growth and productivity initiatives, along with improvement in market trends, enabled us to deliver double digit revenue gains and robust earnings growth. Pentair's strong market execution, innovation and growth in the U.S., Europe and China led the way in both Water and Technical Products," said Randall J. Hogan, Pentair chairman and chief executive officer.

"Our lean cost structure and continued productivity efforts enabled us to significantly expand operating margins, while making continued incremental growth investments in product and market innovation," Hogan continued. "Our strong second quarter performance underscores the strength of our brands, channels and geographies, as well as our focused execution."

SECOND QUARTER BUSINESS HIGHLIGHTS

Water delivered $549 million in sales, a 13 percent increase year-over-year. Foreign exchange was neutral to revenue in the quarter.

  • Residential Flow sales were up 4 percent versus the year-ago quarter, reflecting share gains in the professional pump channel and strength in the agricultural business.
  • Residential Filtration sales were up 7 percent as fast growth regions increased double digits, while the U.S. market continued its modest recovery.
  • Pool sales were up 31 percent as the business continued to gain share with an expanded dealer base and healthy demand for energy-efficient Eco-Select products.
  • Engineered Flow sales were up 14 percent driven by strong municipal sales, while North American commercial water systems remained down, reflecting a weak commercial construction market.
  • Filtration Solutions sales were up 8 percent led by strong sales in Food Service along with growth in global systems in China and India, which helped offset timing delays of larger municipal project sales.

Water's second quarter reported operating income totaled $76 million, up 53 percent as compared to $50 million in the same period last year. When compared to second quarter 2009 adjusted operating income of $51 million, second quarter 2010 operating margins increased by 330 basis points to 13.8 percent. The benefits from higher volumes, modest pricing and strong productivity more than offset increased costs related to material inflation, reinstated employee benefits and growth investments.

Technical Products delivered second quarter 2010 sales of $247 million, an increase of 19 percent versus the year-earlier period. Sales grew 20 percent, excluding the impact of foreign exchange, driven by solid demand across all key markets and increased pricing of approximately 1 percentage point.

  • Industrial, general electronics, energy and infrastructure all posted strong double digit sales, with modest growth in communications and commercial markets.
  • The U.S. and Western European geographies grew in the mid-teens, while emerging markets were up over 36 percent in total, led by robust growth in China.

Technical Products' second quarter reported operating income totaled $38 million, up 61 percent compared to $24 million in the same quarter last year. When compared to second quarter 2009 adjusted operating income of $25 million, second quarter 2010 operating margins increased 340 basis points to 15.4 percent. Higher volumes, increased pricing and continued productivity more than offset the negative impact from inflation, reinstated employee benefits, costs related to the completion of all previously announced plant closures, and growth investments.

OUTLOOK

The company provided its third quarter 2010 EPS guidance of $0.49 to $0.52, an increase of 17 to 24 percent year-over-year when compared to adjusted third quarter 2009 earnings. The company expects third quarter sales to be up over 10 percent compared to the same period last year.

The company updated its full year 2010 EPS guidance to a range of $1.86 to $1.96, an increase of 27 to 33 percent versus full year 2009 adjusted EPS. Full year 2010 sales are expected to be around $2.95 billion and full year free cash flow is expected to be greater than $225 million.

"Our raised full year 2010 guidance reflects our strong first half performance and a balanced market view for the remainder of the year," said Hogan. "We have a strong portfolio of products and systems today, along with an aligned global business structure with prioritized growth and productivity initiatives that we believe are yielding positive results and positioning us for accelerating performance in our served markets," 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 second 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 second quarter 2010 earnings release and the second 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.

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    PENTAIR CONTACT:
    Sara Zawoyski
    Vice President, Investor Relations
    Tel.: (763) 656-5575
    E-mail: sara.zawoyski@pentair.com


                        Pentair, Inc. and Subsidiaries
           Condensed Consolidated Statements of Income (Unaudited)

                                 Three months ended          Six months ended
                                 ------------------          ----------------
                              July 3,       June 27,   July 3,      June 27,
    In thousands,
     except per-share
     data                         2010          2009       2010           2009
    -----------------
    Net sales               $796,167      $693,712  $1,503,180     $1,327,552
    Cost of goods sold         547,999       497,233  1,041,310        961,841
    ------------------         -------                ---------
    Gross profit               248,168       196,479    461,870        365,711
      % of net sales            31.2%         28.3%      30.7%          27.6%
    Selling, general
     and administrative      131,043       119,104    263,933        236,379
      % of net sales            16.5%         17.1%      17.6%          17.8%
    Research and
     development              16,999        13,815     34,210         28,558
      % of net sales             2.1%          2.0%       2.2%           2.2%
                                 ---           ---        ---            ---
    Operating income         100,126        63,560    163,727        100,774
      % of net sales            12.6%          9.2%      10.9%           7.6%

    Other (income)
     expense:

    Equity (income)
     losses of
     unconsolidated
     subsidiaries             (1,375)          279     (1,459)           556
    Loss on early
     extinguishment of
     debt                          -         4,804          -          4,804
    Net interest
     expense                   8,569         9,833     18,096         21,617
      % of net sales             1.1%          1.4%       1.2%           1.6%
                                 ---           ---        ---            ---
    Income from
     continuing
     operations before
     income taxes
       and noncontrolling
        interest              92,932        48,644    147,090         73,797
      % of net sales             0.0%          0.0%       0.0%           0.0%
    Provision for
     income taxes             31,320        16,217     49,449         23,649
      effective tax rate        33.7%         33.3%      33.6%          32.0%
                                ----          ----       ----           ----
    Income from
     continuing
     operations               61,612        32,427     97,641         50,148
    Gain (loss) on
     disposal of
     discontinued
     operations, net of
     tax                         593        (78)     1,117          (68)
    -------------------          ---           ---      -----            ---
    Net income before
     noncontrolling
     interest                 62,205        32,349     98,758         50,080
    Noncontrolling
     interest                  1,124           421      2,356            887
    --------------             -----           ---      -----            ---
    Net income
     attributable to
     Pentair, Inc.           $61,081       $31,928     $96,402        $49,193
    ================         =======       =======     ======        =======

    Net income from
     continuing
     operations
     attributable to
     Pentair, Inc.           $60,488       $32,006     $95,285        $49,261
    ================         =======       =======     ======        =======

    Earnings per common
     share attributable
     to Pentair, Inc.
    Basic
    Continuing
     operations                $0.61         $0.33       $0.96          $0.51
    Discontinued
     operations                 0.01             -       0.01              -
    ------------
    Basic earnings
     per common
     share                     $0.62         $0.33       $0.97          $0.51
    ==============             =====         =====       ====          =====

    Diluted
    Continuing
     operations                $0.61         $0.33       $0.96          $0.50
    Discontinued
     operations                    -             -       0.01              -
    ------------
    Diluted earnings
     per common
     share                     $0.61         $0.33       $0.97          $0.50
    ================           =====         =====       ====          =====


    Weighted average
     common shares
     outstanding
    Basic                     98,208        97,507     98,081         97,445
    Diluted                   99,638        98,422     99,435         98,145

    Cash dividends
     declared per
     common share              $0.19         $0.18       $0.38          $0.36


                           Pentair, Inc. and Subsidiaries
                 Condensed Consolidated Balance Sheets (Unaudited)


                                                        December
                                             July 3,       31,     June 27,
    In thousands                                  2010       2009       2009
                     Assets
    Current assets
    Cash and cash equivalents                  $38,580    $33,396    $38,118
    Accounts and notes receivable, net         475,679    455,090    462,106
    Inventories                                389,428    360,627    362,743
    Deferred tax assets                         49,058     49,609     51,465
    Prepaid expenses and other current
     assets                                     42,878     47,576     50,111
    Total current assets                       995,623    946,298    964,543

    Property, plant and equipment, net         318,124    333,688    340,884

    Other assets
    Goodwill                                 2,033,064  2,088,797  2,106,026
    Intangibles, net                           451,806    486,407    504,674
    Other                                       54,083     56,144     61,118
    Total other assets                       2,538,953  2,631,348  2,671,818
    ------------------                       ---------  ---------  ---------
    Total assets                            $3,852,700 $3,911,334 $3,977,245
                                            ========== ========== ==========

      Liabilities and Shareholders' Equity
    Current liabilities
    Short-term borrowings                       $2,320     $2,205     $6,143
    Current maturities of long-term debt           163         81        122
    Accounts payable                           248,679    207,661    212,973
    Employee compensation and benefits          86,471     74,254     71,674
    Current pension and post-retirement
     benefits                                    8,948      8,948      8,890
    Accrued product claims and warranties       42,981     34,288     36,780
    Income taxes                                23,252      5,659     14,668
    Accrued rebates and sales incentives        34,418     27,554     26,286
    Other current liabilities                   78,496     85,629     84,491
    Total current liabilities                  525,728    446,279    462,027

    Other liabilities
    Long-term debt                             734,472    803,351    883,281
    Pension and other retirement
     compensation                              213,142    234,948    270,588
    Post-retirement medical and other
     benefits                                   29,819     31,790     32,847
    Long-term income taxes payable              24,821     26,936     26,906
    Deferred tax liabilities                   139,977    146,630    150,167
    Other non-current liabilities               92,926     95,060     96,016
    -----------------------------
    Total liabilities                        1,760,885  1,784,994  1,921,832

    Shareholders' equity                     2,091,815  2,126,340  2,055,413
    Total liabilities and shareholders'
     equity                                 $3,852,700 $3,911,334 $3,977,245
                                            ========== ========== ==========

    Days sales in accounts receivable (13
     month moving average)                          60         62         61
    Days inventory on hand (13 month moving
     average)                                       83         90         89
    Days in accounts payable (13 month
     moving average)                                69         66         62


                               Pentair, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows (Unaudited)

                                                  Six months ended
                                                  ----------------
                                                  July 3,        June 27,
    In thousands                                       2010           2009
    ------------
    Operating activities
    Net income before noncontrolling interest       $98,758        $50,080
    Adjustments to reconcile net income to net
     cash provided by (used for) operating
     activities
    (Gain) loss on disposal of discontinued
     operations                                      (1,117)            68
    Equity (income) losses of unconsolidated
     subsidiaries                                    (1,459)           556
    Depreciation                                     28,876         29,634
    Amortization                                     13,357         14,601
    Deferred income taxes                             2,396            464
    Stock compensation                               12,365          9,087
    Excess tax benefits from stock-based
     compensation                                    (1,322)          (582)
    Gain on sale of assets                              (57)          (286)
    Changes in assets and liabilities, net of
     effects of business acquisitions and
     dispositions
      Accounts and notes receivable                 (33,438)         1,556
      Inventories                                   (38,651)        55,703
      Prepaid expenses and other current assets       1,877         13,532
      Accounts payable                               46,938         (3,436)
      Employee compensation and benefits             11,275        (21,821)
      Accrued product claims and warranties           9,196         (4,792)
      Income taxes                                   18,872          9,066
      Other current liabilities                       1,043        (23,234)
      Pension and post-retirement benefits          (12,943)        (1,433)
      Other assets and liabilities                      448         (2,205)
      ----------------------------                      ---         ------
      Net cash provided by (used for) continuing
       operations                                   156,414        126,558
      Net cash provided by (used for) operating
       activities of discontinued operations              -         (1,408)
      -----------------------------------------         ---         ------
        Net cash provided by (used for) operating
         activities                                 156,414        125,150

    Investing activities
    Capital expenditures                            (28,937)       (28,850)
    Proceeds from sale of property and
     equipment                                          243            563
    Divestitures                                          -            920
    Other                                            (1,286)           (10)
    -----                                            ------            ---
        Net cash provided by (used for) investing
         activities                                 (29,980)       (27,377)

    Financing activities
    Net short-term borrowings                           115          6,024
    Proceeds from long-term debt                    335,021        400,000
    Repayment of long-term debt                    (403,742)      (470,187)
    Debt issuance costs                                 (50)           (50)
    Excess tax benefits from stock-based
     compensation                                     1,322            582
    Stock issued to employees, net of shares
     withheld                                          (817)           996
    Dividends paid                                  (37,700)       (35,433)
    --------------                                  -------        -------
        Net cash provided by (used for) financing
         activities                                (105,851)       (98,068)

    Effect of exchange rate changes on cash and
     cash equivalents                               (15,399)          (931)
    -------------------------------------------
    Change in cash and cash equivalents               5,184         (1,226)
    Cash and cash equivalents, beginning of
     period                                          33,396         39,344
    ---------------------------------------          ------         ------
    Cash and cash equivalents, end of period        $38,580        $38,118
    ========================================        =======        =======

    Free cash flow
    --------------
    Net cash provided by (used for) continuing
     operations                                    $156,414       $126,558
    Capital expenditures                            (28,937)       (28,850)
    Proceeds from sale of property and
     equipment                                          243            563
    ----------------------------------
    Free cash flow                                 $127,720        $98,271
    ==============                                 ========        =======


                       Pentair, Inc. and Subsidiaries
     Supplemental Financial Information by Reportable Business Segment
                                (Unaudited)

                                       First         Second           Six
                                         Qtr           Qtr          Months
    In thousands                          2010          2010            2010
    ------------                          ----          ----            ----
    Net sales to external
     customers
    Water Group                       $478,038      $549,318      $1,027,356
    Technical Products Group           228,975       246,849         475,824
    Consolidated                      $707,013      $796,167      $1,503,180
    ============                      ========      ========      ==========

    Intersegment sales
    Water Group                           $517          $427            $944
    Technical Products Group               703         1,047           1,750
    Intercompany sales
     eliminations                       (1,220)       (1,474)         (2,694)
    Consolidated                    $        -    $        -    $          -
    ============                  ===      ===  ===      ===  ===        ===

    Operating income (loss)
    Water Group                        $42,138       $75,954        $118,092
    Technical Products Group            33,098        37,990          71,088
    Unallocated corporate
     expenses and
       intercompany eliminations       (11,635)      (13,818)        (25,453)
    Consolidated                       $63,601      $100,126        $163,727
    ============                       =======      ========        ========

    Operating income as a percent
     of net sales
    Water                                  8.8%         13.8%           11.5%
    Technical Products                    14.5%         15.4%           14.9%
    Consolidated                           9.0%         12.6%           10.9%


                                       First         Second           Six
                                         Qtr           Qtr          Months
    In thousands                          2009          2009            2009
    ------------                          ----          ----            ----
    Net sales to external
     customers
    Water Group                       $423,932      $486,990        $910,922
    Technical Products Group           209,908       206,722         416,630
    Consolidated                      $633,840      $693,712      $1,327,552
    ============                      ========      ========      ==========

    Intersegment sales
    Water Group                           $289          $198            $487
    Technical Products Group               233           600             833
    Intercompany sales
     eliminations                         (522)         (798)         (1,320)
    Consolidated                    $        -    $        -    $          -
    ============                  ===      ===  ===      ===  ===        ===

    Operating income (loss)
    Water Group                        $26,976       $49,781         $76,757
    Technical Products Group            20,462        23,578          44,040
    Unallocated corporate
     expenses and
       intercompany eliminations       (10,224)       (9,799)        (20,023)
    Consolidated                       $37,214       $63,560        $100,774
    ============                       =======       =======        ========

    Operating income as a percent
     of net sales
    Water                                  6.4%         10.2%            8.4%
    Technical Products                     9.7%         11.4%           10.6%
    Consolidated                           5.9%          9.2%            7.6%


                       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)



                        First    Second     Third    Fourth
                      Quarter   Quarter    Quarter  Quarter      Year
    In thousands,
     except per-
     share data           2009      2009      2009      2009        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)



                        First     Second     Third    Fourth
                       Quarter   Quarter    Quarter   Quarter      Year
    In thousands           2009       2009      2009      2009        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.

Categories: Press Releases