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Pentair Reports Full Year Sales Growth of 13 Percent and Net Income Per Diluted Share from Continuing Operations of $2.00
02.01.2011

Full Year 2010 Highlights
- Reports full year sales up 13 percent year-over-year to $3.0 billion, with double digit growth in both Water and Technical Products
- Operating margins improved year-over-year to 11 percent, up 140 basis points compared to 2009 adjusted operating margins of 9.6 percent
- Diluted earnings per share from continuing operations (EPS) of $2.00, up 71 percent year-over-year on GAAP basis; up 36 percent compared to adjusted 2009 EPS
- Quarterly dividend increased for the 35th consecutive year to $0.20 per share in 2011
All financial information and period-to-period references are on a continuing operations basis unless otherwise noted. Reconciliations of GAAP to Non-GAAP are in the attached financial tables.

MINNEAPOLIS, Feb. 1, 2011 /PRNewswire via COMTEX/ --

Pentair, Inc. (NYSE: PNR) reported organic revenue growth of 13 percent for full year 2010, as revenues reached $3.0 billion compared to $2.7 billion in 2009. The company delivered EPS of $2.00 for the full year 2010, representing an increase of 71 percent as compared to $1.17 per share in the prior year. Adjusting 2009 EPS to exclude restructuring and impairment items and the impact from the early redemption of bonds, full year 2010 EPS increased 36 percent.

During 2010, Pentair generated $211 million in free cash flow, which represents a greater than 100 percent conversion of net income. Excluding the $25 million accelerated pension contribution at the end of the year, free cash flow was $236 million for the full year 2010, representing an approximate 120 percent conversion of net income.

"2010 was a year of tremendous progress. Organic sales grew 13 percent for the full year, reflecting broad-based growth across businesses and geographies," said Randall J. Hogan, chairman and chief executive officer. "Fast growth regions grew at an even faster pace, led by China sales up 26 percent and Latin America up 18 percent for the full year 2010, as we strengthened our presence through more localized capabilities. Expanded distribution and stepped up new product development helped fuel top-line growth, along with solid recovery in many end-markets. For the full year 2010, volume growth along with productivity offset material inflation and the impact of reinstated employee benefits, driving more than 140 basis points of margin expansion."

Total company fourth quarter sales increased 7 percent to $754 million, compared with $702 million in the fourth quarter of 2009, despite four fewer selling days. The company delivered fourth quarter operating income of $80 million, up 52 percent year-over-year or up 3 percent compared to adjusted operating income in the same period last year. Overall, operating margins of 10.6 percent for the fourth quarter 2010 decreased 40 basis points when compared to adjusted operating margins of a year ago, due mainly to higher material inflation and lower cost absorption from fewer selling days. The company delivered net income from continuing operations of $49 million, or $0.49 per share. This compares to EPS of $0.29 in the fourth quarter last year. Adjusting fourth quarter 2009 EPS to exclude restructuring and impairment items, year-over-year adjusted EPS increased 4 percent.

"We exit 2010 with confidence, as top-line strength continued in the fourth quarter with average daily sales accelerating from the third quarter," continued Hogan. "Fourth quarter operating margins came in as expected, negatively impacted by material inflation with only a modest benefit from pricing. Pricing actions were announced in the fourth quarter with realization beginning during the first quarter, helping to mitigate expected 2011 commodity inflation. We expect operating margins in both segments as well as Pentair to expand at least 100 basis points year over year for the first quarter and full year of 2011."

Fourth Quarter Business Highlights

Water sales grew 5 percent year-over-year to $501 million, including an unfavorable one-percentage point impact from foreign exchange. Within Water, U.S. sales grew 7 percent led by growth in municipal pumps and agricultural products. In fast growth regions, Water grew 16 percent led by 42 percent growth in China and double-digit increases in India and Southeast Asia. Within the five Water global business units, the fourth quarter sales were as follows:

  • Residential Flow sales were up 1 percent versus the year-ago quarter, as robust growth in the agricultural business and a stable U.S. residential pump business helped mitigate the impact of declines in specialty pumps.
  • Residential Filtration sales were up 1 percent as expanded distribution and new products in fast growth regions were partially offset by softness in Europe.
  • Pool sales were up 4 percent driven by continued dealer expansion and demand for energy-efficient Eco-Select products.
  • Engineered Flow sales were up 20 percent reflecting municipal pump sales from the final shipment for the Gulf Intracoastal Waterway project in New Orleans.
  • Filtration Solutions sales were up 9 percent led by growth in desalination and energy markets, along with increased system sales.

Water's fourth quarter reported operating income totaled $55 million, up 62 percent as compared to $34 million in the same period last year. When compared to fourth quarter 2009 adjusted operating income of $55 million, operating income remained flat in 2010. The benefits from volume growth and productivity continued to offset reinstated employee benefits and growth investments, while higher material inflation unfavorably impacted margins.

Technical Products delivered fourth quarter 2010 sales of $253 million, an increase of 11 percent versus the year-earlier period. Sales grew 13 percent, excluding the impact of foreign exchange, driven by solid demand across most key end-markets and one percentage point of pricing.

  • Industrial, general electronics and energy markets all posted strong double digit sales growth.
  • Sales in the U.S. increased 11 percent year-over-year. Fast growth regions were up 32 percent, led by robust growth of greater than 50 percent in China and India.

Technical Products' fourth quarter reported operating income totaled $38 million, up 18 percent compared to $32 million in the same quarter last year. When compared to fourth quarter 2009 adjusted operating income of $35 million, fourth quarter 2010 operating income increased 9 percent. Volume growth, productivity, and higher pricing offset the negative impact from material inflation and reinstated employee benefits.

Outlook

The company anticipates full year 2011 sales growing in the mid-single digit range to approximately $3.2 billion. This reflects expected recurring organic revenue growth in the high-single digits, partially offset by the negative year-over-year impact of the Gulf Intracoastal Waterway project, which contributed $56 million in full year 2010. Pentair continues to expect full year 2011 EPS to be between $2.20 and $2.35, which represents an increase of approximately 10 to 18 percent from 2010 EPS of $2.00. The company expects to generate free cash flow in excess of $240 million for 2011.

"The tremendous progress we made in 2010 positions us for another strong year. We expect to leverage our increased presence in fast growth regions, expanded innovation capabilities and continued application of lean disciplines to deliver continued, strong top-line growth and margin expansion," said Hogan. "We anticipate operating margins to expand over 100 basis points in 2011, reflecting volume leverage, price increases and productivity more than offsetting expected material inflation. Our growth investments are yielding positive results and position us well for sustainable, profitable growth in 2011 and beyond."

First quarter 2011 EPS is expected to be $0.42 to $0.45, which represents an increase of approximately 20 to 29 percent when compared to first quarter 2010 EPS of $0.35. The company expects first quarter 2011 revenue to be up high-single digits compared to the same period last year.

Earnings Conference Call

Pentair Chairman and CEO Randall J. Hogan and Chief Financial Officer John L. Stauch will discuss the company's fourth quarter and full year 2010 performance and first quarter 2011 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 earnings release and the fourth quarter and full year 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; pricing and other competitive pressures; and the company's ability to achieve its long-term strategic operating goals, 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 2010 revenues of $3.0 billion, Pentair employs over 14,000 people worldwide.

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


Year ended




December 31


December 31


December 31


December 31

In thousands, except per-share data


2010


2009


2010


2009

Net sales

$

753,858

$

702,251

$

3,030,773

$

2,692,468

Cost of goods sold


521,630


489,794


2,100,133


1,907,333

Gross profit


232,228


212,457


930,640


785,135


% of net sales


30.8%


30.3%


30.7%


29.2%

Selling, general and administrative

136,542


145,346


529,329


507,303


% of net sales


18.1%


20.7%


17.5%


18.8%

Research and development


16,081


14,619


67,156


57,884


% of net sales


2.1%


2.1%


2.2%


2.2%

Operating income


79,605


52,492


334,155


219,948


% of net sales


10.6%


7.5%


11.0%


8.2%











Other (income) expense:



















Equity (income) losses of unconsolidated subsidiaries


(302)


688


(2,108)


1,379

Loss on early extinguishment of debt

--


--


--


4,804

Net interest expense


9,067


9,790


36,116


41,118


% of net sales


1.2%


1.4%


1.2%


1.5%

Income from continuing operations before income taxes









and noncontrolling interest

70,840


42,014


300,147


172,647

Provision for income taxes


21,263


14,620


97,200


56,428


effective tax rate


30.0%


34.8%


32.4%


32.7%

Income from continuing operations


49,577


27,394


202,947


116,219

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


(2,292)


134


(626)


(19)

Net income before noncontrolling interest


47,285


27,528


202,321


116,200

Noncontrolling interest


909


(1,824)


4,493


707

Net income attributable to Pentair, Inc.

$

46,376

$

29,352

$

197,828

$

115,493











Net income from continuing operations attributable to Pentair, Inc.

$

48,668

$

29,218

$

198,454

$

115,512











Earnings per common share attributable to Pentair, Inc.









Basic









Continuing operations

$

0.50

$

0.30

$

2.02

$

1.19

Discontinued operations


(0.02)


--


(0.01)


--

Basic earnings per common share

$

0.48

$

0.30

$

2.01

$

1.19











Diluted









Continuing operations

$

0.49

$

0.29

$

2.00

$

1.17

Discontinued operations


(0.02)


--


(0.01)


--

Diluted earnings per common share

$

0.47

$

0.29

$

1.99

$

1.17





















Weighted average common shares outstanding









Basic


98,219


97,667


98,037


97,415

Diluted


99,606


99,226


99,294


98,522











Cash dividends declared per common share

$

0.19

$

0.18

$

0.76

$

0.72











Pentair, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)








December 31


December 31

In thousands


2010


2009

Assets





Current assets





Cash and cash equivalents

$

46,056

$

33,396

Accounts and notes receivable, net


516,905


455,090

Inventories


405,356


360,627

Deferred tax assets


55,086


49,609

Prepaid expenses and other current assets


45,894


47,576

Total current assets


1,069,297


946,298






Property, plant and equipment, net


329,435


333,688






Other assets





Goodwill


2,066,044


2,088,797

Intangibles, net


453,570


486,407

Other


55,187


56,144

Total other assets


2,574,801


2,631,348

Total assets

$

3,973,533

$

3,911,334






Liabilities and Shareholders' Equity





Current liabilities





Short-term borrowings

$

4,933

$

2,205

Current maturities of long-term debt


18


81

Accounts payable


262,357


207,661

Employee compensation and benefits


107,995


74,254

Current pension and post-retirement benefits


8,733


8,948

Accrued product claims and warranties


42,295


34,288

Income taxes


5,964


5,659

Accrued rebates and sales incentives


33,559


27,554

Other current liabilities


80,942


85,629

Total current liabilities


546,796


446,279






Other liabilities





Long-term debt


702,521


803,351

Pension and other retirement compensation


215,482


234,948

Post-retirement medical and other benefits


30,325


31,790

Long-term income taxes payable


23,507


26,936

Deferred tax liabilities


167,005


146,630

Other non-current liabilities


86,295


95,060

Total liabilities


1,771,931


1,784,994






Shareholders' equity


2,201,602


2,126,340

Total liabilities and shareholders' equity

$

3,973,533

$

3,911,334






Days sales in accounts receivable (13 month moving average)


60


62

Days inventory on hand (13 month moving average)


82


90

Days in accounts payable (13 month moving average)


71


66








Pentair, Inc. and Subsidiaries



Condensed Consolidated Statements of Cash Flows (Unaudited)





Year Ended





December 31



December 31

In thousands


2010



2009

Operating activities






Net income before noncontrolling interest

$

202,321


$

116,200

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






Loss on disposal of discontinued operations


626



19

Equity (income) losses of unconsolidated subsidiaries


(2,108)



1,379

Depreciation


57,995



64,823

Amortization


26,184



40,657

Deferred income taxes


30,716



30,616

Stock compensation


21,468



17,324

Excess tax benefits from stock-based compensation


(2,686)



(1,746)

Loss on sale of assets


466



985

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







Accounts and notes receivable


(62,344)



11,307


Inventories


(44,495)



66,684


Prepaid expenses and other current assets


1,514



16,202


Accounts payable


55,321



(13,822)


Employee compensation and benefits


27,252



(22,431)


Accrued product claims and warranties


8,068



(7,440)


Income taxes


1,791



1,972


Other current liabilities


561



(21,081)


Pension and post-retirement benefits


(43,024)



(39,607)


Other assets and liabilities


(9,250)



(2,141)


Net cash provided by (used for) continuing operations


270,376



259,900


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


--



(1,531)



Net cash provided by (used for) operating activities


270,376



258,369









Investing activities






Capital expenditures


(59,523)



(54,137)

Proceeds from sale of property and equipment


358



1,208

Divestitures


--



1,567

Other


(1,148)



(3,224)



Net cash provided by (used for) investing activities


(60,313)



(54,586)









Financing activities






Net short-term borrowings


2,728



2,205

Proceeds from long-term debt


703,641



580,000

Repayment of long-term debt


(804,713)



(730,304)

Debt issuance costs


(50)



(50)

Excess tax benefits from stock-based compensation


2,686



1,746

Stock issued to employees, net of shares withheld


9,941



8,247

Repurchases of common stock


(24,712)



--

Dividends paid


(75,465)



(70,927)

Distribution to noncontrolling interest


(4,647)



--



Net cash provided by (used for) financing activities


(190,591)



(209,083)









Effect of exchange rate changes on cash and cash equivalents


(6,812)



(648)

Change in cash and cash equivalents


12,660



(5,948)

Cash and cash equivalents, beginning of period


33,396



39,344

Cash and cash equivalents, end of period

$

46,056


$

33,396









Free cash flow






Net cash provided by (used for) continuing operations

$

270,376


$

259,900

Capital expenditures


(59,523)



(54,137)

Proceeds from sale of property and equipment


358



1,208

Free cash flow

$

211,211


$

206,971









Pentair, Inc. and Subsidiaries

Supplemental Financial Information by Reportable Business Segment (Unaudited)














First Qtr


Second Qtr


Third Qtr


Fourth Qtr


Year

In thousands


2010


2010


2010


2010


2010

Net sales to external customers











Water Group

$

478,038

$

549,318

$

512,587

$

501,338

$

2,041,281

Technical Products Group


228,975


246,849


261,148


252,520


989,492

Consolidated

$

707,013

$

796,167

$

773,735

$

753,858

$

3,030,773












Intersegment sales











Water Group

$

517

$

427

$

442

$

444

$

1,830

Technical Products Group


703


1,047


1,154


913


3,817

Intercompany sales eliminations


(1,220)


(1,474)


(1,596)


(1,357)


(5,647)

Consolidated

$

--

$

--

$

--

$

--

$

--












Operating income (loss)











Water Group

$

42,138

$

75,954

$

58,457

$

55,039

$

231,588

Technical Products Group


33,098


37,990


42,605


37,840


151,533

Unallocated corporate expenses and











intercompany eliminations


(11,635)


(13,818)


(10,239)


(13,274)


(48,966)

Consolidated

$

63,601

$

100,126

$

90,823

$

79,605

$

334,155












Operating income as a percent of net sales











Water


8.8%


13.8%


11.4%


11.0%


11.3%

Technical Products


14.5%


15.4%


16.3%


15.0%


15.3%

Consolidated


9.0%


12.6%


11.7%


10.6%


11.0%

























First Qtr


Second Qtr


Third Qtr


Fourth Qtr


Year

In thousands


2009


2009


2009


2009


2009

Net sales to external customers











Water Group

$

423,932

$

486,990

$

461,570

$

475,272

$

1,847,764

Technical Products Group


209,908


206,722


201,095


226,979


844,704

Consolidated

$

633,840

$

693,712

$

662,665

$

702,251

$

2,692,468












Intersegment sales











Water Group

$

289

$

198

$

284

$

510

$

1,281

Technical Products Group


233


600


544


834


2,211

Intercompany sales eliminations


(522)


(798)


(828)


(1,344)


(3,492)

Consolidated

$

--

$

--

$

--

$

--

$

--












Operating income (loss)











Water Group

$

26,976

$

49,781

$

53,085

$

33,903

$

163,745

Technical Products Group


20,462


23,578


24,356


31,959


100,355

Unallocated corporate expenses and











intercompany eliminations


(10,224)


(9,799)


(10,759)


(13,370)


(44,152)

Consolidated

$

37,214

$

63,560

$

66,682

$

52,492

$

219,948












Operating income as a percent of net sales











Water


6.4%


10.2%


11.5%


7.1%


8.9%

Technical Products


9.7%


11.4%


12.1%


14.1%


11.9%

Consolidated


5.9%


9.2%


10.1%


7.5%


8.2%

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

Categories: Press Releases