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Pentair Reports Third Quarter Sales Growth of 17 Percent and Net Income Per Diluted Share From Continuing Operations of $0.55
10.26.2010
-- Reports third quarter sales up 17 percent year-over-year to $774 million, with double digit growth in both Water and Technical Products
-- Operating margins improved year-over-year to 11.7 percent
-- Diluted earnings per share from continuing operations (EPS) of $0.55, up 45 percent year-over-year on GAAP basis; up 31 percent when compared to adjusted third quarter 2009 EPS
-- Updated full-year 2010 EPS guidance to a range of $1.93 to $1.98 from previous guidance of $1.86 to $1.96 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, Oct 26, 2010 /PRNewswire via COMTEX/ --

Pentair, Inc. (NYSE: PNR) today reported third quarter 2010 revenue of $774 million and net income from continuing operations attributable to Pentair, Inc. of $55 million, or $0.55 per share. This compares to $0.38 of EPS in the third quarter last year. Adjusting third quarter 2009 for restructuring items, year-over-year adjusted EPS increased 31 percent.

Total company sales increased 17 percent to $774 million, compared with $663 million in the third quarter of 2009. Both Water and Technical Products grew sales double-digits with broad-based growth across geographies and most key end-markets served. The company delivered third quarter operating income of $91 million, up 36 percent year-over-year or up 23 percent compared to adjusted third quarter 2009 operating income. Overall, operating margins for the third quarter increased 50 basis points to 11.7 percent when compared to adjusted third quarter 2009 operating margins, driven mostly by revenue growth.

The company generated free cash flow of $79 million for the quarter, with year-to-date free cash flow performance of $207 million, which is $5 million greater than the same period of a year ago. The company said it is on track to achieve free cash flow of greater than $225 million for the full year 2010.

"Third quarter results were solid, with broad-based top-line growth across our portfolio of businesses and geographies," said Randall J. Hogan, Pentair chairman and chief executive officer. "Our performance reflects focused execution on our growth and productivity initiatives and underscores the strength of our brands, channels and geographies."

"We are encouraged by the continued strength in the industrial end markets and robust growth in emerging markets, while the U.S. residential end market continues its modest recovery. We continue to generate strong cash flows and invest in product innovation and expanding our presence in key emerging markets to fuel further growth," Hogan continued.

THIRD QUARTER BUSINESS HIGHLIGHTS

Water sales grew 11 percent year-over-year to $513 million, including an unfavorable one-percentage point impact from foreign exchange. Within Water, U.S. sales grew 14 percent led by strong sales in municipal pumps, pool equipment and agriculture. In emerging markets, water grew 13 percent led by 18 percent growth in Latin America and sales almost doubling in India. Within the five Water global business units, the third quarter sales were as follows:

  • Residential Flow sales were up 1 percent versus the year-ago quarter, as robust growth in the agricultural business helped offset a modest decline in U.S. residential pumps.
  • Residential Filtration sales were up 9 percent due to expanded distribution in emerging markets and product innovations across all markets.
  • Pool sales were up 10 percent as the U.S. business continued to grow faster than the market due to dealer expansion and demand for energy-efficient Eco-Select products.
  • Engineered Flow sales were up 35 percent reflecting strong municipal pump sales driven by the Gulf Intracoastal Waterway project in New Orleans. Commercial business declines continued, reflecting a weak commercial market.
  • Filtration Solutions sales were up 10 percent led by strong global sales and expanded distribution in Food Service and the Energy market, which helped offset lower municipal project sales.

Water's third quarter reported operating income totaled $58 million, up 10 percent as compared to $53 million in the same period last year. When compared to third quarter 2009 adjusted operating income of $56 million, third quarter 2010 operating margins decreased by 70 basis points to 11.4 percent. Higher than expected material costs due to inflation and mix, along with lower pricing drove margins lower year-over-year. The benefits from volume growth and productivity continued to offset reinstated employee benefits and growth investments.

Technical Products delivered third quarter 2010 sales of $261 million, an increase of 30 percent versus the year-earlier period. Sales grew 32 percent, excluding the impact of foreign exchange, driven by solid demand across all key markets.

  • Industrial, communications and general electronics all posted strong double digit sales, while the commercial business grew for the second sequential quarter.
  • The U.S. had strong growth, with sales up 35 percent year-over-year, while Western European geographies grew in the low teens. Emerging markets were up 38 percent in total, led by robust growth in China.

Technical Products' third quarter reported operating income totaled $43 million, up 75 percent compared to $24 million in the same quarter last year. When compared to third quarter 2009 adjusted operating income of $29 million, third quarter 2010 operating margins increased 190 basis points to 16.3 percent. Volume growth, productivity, and slightly higher pricing more than offset the negative impact from inflation, reinstated employee benefits and growth investments.

OUTLOOK

The company provided its fourth quarter 2010 EPS guidance of $0.42 to $0.47, which is flat to down 11 percent when compared to adjusted fourth quarter 2009 EPS of $0.47. The fourth quarter 2010 EPS includes a higher tax rate and four less selling days when compared to the same period of a year ago. The company expects fourth quarter 2010 sales to be up mid single digits compared to the same period last year.

The company updated its full year 2010 EPS guidance to a range of $1.93 to $1.98, an increase of 31 to 35 percent versus full year 2009 adjusted EPS. Full year 2010 sales are now expected to be around $3.0 billion and full year free cash flow is expected to be greater than $225 million.

"Our updated full year 2010 guidance reflects sales growth of approximately 12 percent for the year and expected EPS growth in the 31 to 35 percent range, demonstrating the strength of our businesses and positive results from our focused execution on growth and productivity initiatives," said Hogan.

"The fourth quarter EPS guidance reflects continued strength in daily sales. We anticipate higher year-over-year costs in the fourth quarter related to material inflation, the reinstatement of the employee benefits and continued investments in innovation and selling capabilities. Moving beyond the fourth quarter, we expect pricing and higher productivity to offset material inflation and we will continue to drive initiatives to sustain accelerated growth," 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 third 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 third quarter 2010 earnings release and the third 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 CONTACTS:

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


Nine months ended




October 2,


September 26,


October 2,


September 26,

In thousands, except per-share data


2010


2009


2010


2009

Net sales


$

773,735

$

662,665

$

2,276,915

$

1,990,217

Cost of goods sold


537,193


455,698


1,578,503


1,417,539

Gross profit



236,542


206,967


698,412


572,678


% of net sales


30.6%


31.2%


30.7%


28.8%

Selling, general and administrative


128,854


125,578


392,787


361,957


% of net sales


16.7%


18.9%


17.3%


18.2%

Research and development


16,865


14,707


51,075


43,265


% of net sales


2.2%


2.2%


2.2%


2.2%

Operating income


90,823


66,682


254,550


167,456


% of net sales


11.7%


10.1%


11.2%


8.4%











Other (income) expense:



















Equity (income) losses of unconsolidated subsidiaries


(347)


135


(1,806)


691

Loss on early extinguishment of debt


--


--


--


4,804

Net interest expense


8,953


9,711


27,049


31,328


% of net sales


1.2%


1.5%


1.2%


1.6%

Income from continuing operations before income taxes









and noncontrolling interest


82,217


56,836


229,307


130,633

Provision for income taxes



26,488


18,159


75,937


41,808


effective tax rate


32.2%


31.9%


33.1%


32.0%

Income from continuing operations


55,729


38,677


153,370


88,825

Gain (loss) on disposal of discontinued operations, net of tax


549


(85)


1,666


(153)

Net income before noncontrolling interest


56,278


38,592


155,036


88,672

Noncontrolling interest


1,228


1,644


3,584


2,531

Net income attributable to Pentair, Inc.

$

55,050

$

36,948

$

151,452

$

86,141











Net income from continuing operations attributable to Pentair, Inc.

$

54,501

$

37,033

$

149,786

$

86,294











Earnings per common share attributable to Pentair, Inc.









Basic










Continuing operations

$

0.55

$

0.38

$

1.53

$

0.89

Discontinued operations


0.01


--


0.01


--

Basic earnings per common share

$

0.56

$

0.38

$

1.54

$

0.89











Diluted










Continuing operations

$

0.55

$

0.38

$

1.51

$

0.88

Discontinued operations


--


--


0.01


--

Diluted earnings per common share

$

0.55

$

0.38

$

1.52

$

0.88





















Weighted average common shares outstanding









Basic



98,298


97,496


98,105


97,495

Diluted



99,514


98,641


99,326


98,329











Cash dividends declared per common share

$

0.19

$

0.18

$

0.57

$

0.54

Pentair, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)










October 2,


December 31,


September 26,

In thousands


2010


2009


2009

Assets







Current assets







Cash and cash equivalents

$

56,995

$

33,396

$

50,214

Accounts and notes receivable, net


490,221


455,090


423,125

Inventories


410,072


360,627


366,416

Deferred tax assets


50,991


49,609


52,997

Prepaid expenses and other current assets


48,555


47,576


48,446

Total current assets


1,056,834


946,298


941,198








Property, plant and equipment, net


327,602


333,688


339,412








Other assets







Goodwill


2,070,911


2,088,797


2,127,082

Intangibles, net


461,378


486,407


506,837

Other


56,033


56,144


67,723

Total other assets


2,588,322


2,631,348


2,701,642

Total assets

$

3,972,758

$

3,911,334

$

3,982,252








Liabilities and Shareholders' Equity







Current liabilities







Short-term borrowings

$

4,180

$

2,205

$

16

Current maturities of long-term debt


37


81


98

Accounts payable


266,416


207,661


199,002

Employee compensation and benefits


100,626


74,254


78,225

Current pension and post-retirement benefits


8,948


8,948


8,890

Accrued product claims and warranties


40,783


34,288


33,179

Income taxes


22,202


5,659


24,302

Accrued rebates and sales incentives


39,066


27,554


27,989

Other current liabilities


90,286


85,629


95,367

Total current liabilities


572,544


446,279


467,068








Other liabilities







Long-term debt


673,265


803,351


814,857

Pension and other retirement compensation


219,463


234,948


264,472

Post-retirement medical and other benefits


28,506


31,790


32,019

Long-term income taxes payable


23,857


26,936


27,792

Deferred tax liabilities


147,772


146,630


153,984

Other non-current liabilities


93,681


95,060


102,924

Total liabilities


1,759,088


1,784,994


1,863,116








Shareholders' equity


2,213,670


2,126,340


2,119,136

Total liabilities and shareholders' equity

$

3,972,758

$

3,911,334

$

3,982,252








Days sales in accounts receivable (13 month moving average)


59


62


62

Days inventory on hand (13 month moving average)


82


90


92

Days in accounts payable (13 month moving average)


68


66


65

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)



Nine months ended





October 2,



September 26,

In thousands


2010



2009

Operating activities






Net income before noncontrolling interest

$

155,036


$

88,672

Adjustments to reconcile net income to net cash provided by (used for) operating activities






(Gain) loss on disposal of discontinued operations


(1,666)



153

Equity (income) losses of unconsolidated subsidiaries


(1,806)



691

Depreciation


43,141



44,186

Amortization


19,742



22,054

Deferred income taxes


4,866



170

Stock compensation


16,598



13,092

Excess tax benefits from stock-based compensation


(2,193)



(754)

Gain on sale of assets


166



(177)

Changes in assets and liabilities, net of effects of business acquisitions and dispositions







Accounts and notes receivable


(36,216)



46,718


Inventories


(49,822)



56,459


Prepaid expenses and other current assets


(1,476)



16,061


Accounts payable


60,162



(18,659)


Employee compensation and benefits


21,600



(17,883)


Accrued product claims and warranties


6,556



(8,565)


Income taxes


18,013



19,166


Other current liabilities


15,493



(9,699)


Pension and post-retirement benefits


(15,197)



(12,251)


Other assets and liabilities


(3,754)



747


Net cash provided by (used for) continuing operations


249,243



240,181


Net cash provided by (used for) operating activities of discontinued operations


--



(1,531)



Net cash provided by (used for) operating activities


249,243



238,650









Investing activities






Capital expenditures


(42,981)



(39,306)

Proceeds from sale of property and equipment


340



817

Divestitures


--



1,506

Other


(1,232)



(3,272)


Net cash provided by (used for) investing activities


(43,873)



(40,255)









Financing activities






Net short-term borrowings


1,975



(16)

Proceeds from long-term debt


493,821



490,000

Repayment of long-term debt


(624,007)



(628,776)

Debt issuance costs


(50)



(50)

Excess tax benefits from stock-based compensation


2,193



754

Stock issued to employees, net of shares withheld


7,861



1,729

Repurchases of common stock




(2,786)



--

Dividends paid


(56,584)



(53,162)


Net cash provided by (used for) financing activities


(177,577)



(189,521)









Effect of exchange rate changes on cash and cash equivalents


(4,194)



1,996

Change in cash and cash equivalents


23,599



10,870

Cash and cash equivalents, beginning of period


33,396



39,344

Cash and cash equivalents, end of period

$

56,995


$

50,214









Free cash flow






Net cash provided by (used for) continuing operations

$

249,243


$

240,181

Capital expenditures


(42,981)



(39,306)

Proceeds from sale of property and equipment


340



817

Free cash flow

$

206,602


$

201,692

Pentair, Inc. and Subsidiaries

Supplemental Financial Information by Reportable Business Segment (Unaudited)












First Qtr


Second Qtr


Third Qtr


Nine Months

In thousands


2010


2010


2010


2010

Net sales to external customers









Water Group

$

478,038

$

549,318

$

512,587

$

1,539,943

Technical Products Group


228,975


246,849


261,148


736,972

Consolidated

$

707,013

$

796,167

$

773,735

$

2,276,915










Intersegment sales









Water Group

$

517

$

427

$

442

$

1,386

Technical Products Group


703


1,047


1,154


2,904

Intercompany sales eliminations


(1,220)


(1,474)


(1,596)


(4,290)

Consolidated

$

--

$

--

$

--

$

--










Operating income (loss)









Water Group

$

42,138

$

75,954

$

58,457

$

176,549

Technical Products Group


33,098


37,990


42,605


113,693

Unallocated corporate expenses and









intercompany eliminations


(11,635)


(13,818)


(10,239)


(35,692)

Consolidated

$

63,601

$

100,126

$

90,823

$

254,550










Operating income as a percent of net sales









Water


8.8%


13.8%


11.4%


11.5%

Technical Products


14.5%


15.4%


16.3%


15.4%

Consolidated


9.0%


12.6%


11.7%


11.2%





















First Qtr


Second Qtr


Third Qtr


Nine Months

In thousands


2009


2009


2009


2009

Net sales to external customers









Water Group

$

423,932

$

486,990

$

461,570

$

1,372,492

Technical Products Group


209,908


206,722


201,095


617,725

Consolidated

$

633,840

$

693,712

$

662,665

$

1,990,217










Intersegment sales









Water Group

$

289

$

198

$

284

$

771

Technical Products Group


233


600


544


1,377

Intercompany sales eliminations


(522)


(798)


(828)


(2,148)

Consolidated

$

--

$

--

$

--

$

--










Operating income (loss)









Water Group

$

26,976

$

49,781

$

53,085

$

129,842

Technical Products Group


20,462


23,578


24,356


68,396

Unallocated corporate expenses and









intercompany eliminations


(10,224)


(9,799)


(10,759)


(30,782)

Consolidated

$

37,214

$

63,560

$

66,682

$

167,456










Operating income as a percent of net sales









Water


6.4%


10.2%


11.5%


9.5%

Technical Products


9.7%


11.4%


12.1%


11.1%

Consolidated


5.9%


9.2%


10.1%


8.4%

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 Quarter

Second Quarter

Third Quarter

Fourth 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 Quarter

Second Quarter

Third Quarter

Fourth 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