Investor Relations

News Release Details

Home Investor Relations News Releases News Release Details
//
Pentair Reports Solid Third Quarter 2011 Results
10.26.2011

- Third quarter sales increased 15 percent to $891 million
- Reported EPS of $0.51; Adjusted EPS of $0.58, up 5 percent
- Generated free cash flow of $70 million in the quarter
- Updated full year reported EPS outlook to a range of $2.26 to $2.29; adjusted EPS outlook of $2.44 to 2.47, up 22 to 24 percent
All financial information and period-to-period references are on a continuing operations basis unless otherwise noted. Reconciliations of GAAP to Non-GAAP measures are in the attached financial tables.

MINNEAPOLIS, Oct. 26, 2011 /PRNewswire via COMTEX/ --

Pentair, Inc. (NYSE: PNR) announced third quarter 2011 sales of $891 million, an increase of 15 percent from the same quarter last year. These results reflected growth across both segments, Water and Technical Products, including 11 percentage points from the acquisition of Norit's Clean Process Technologies (CPT) and 2 percentage points from favorable foreign currency. Earnings per diluted share from continuing operations (EPS) were $0.51 in the third quarter 2011. Third quarter 2011 results included restructuring charges of $2 million, or approximately $0.02 of EPS, related to repositioning actions in its Water business. Adjusting to exclude acquisition related costs and restructuring charges, third quarter 2011 EPS was $0.58, an increase of 5 percent over the same quarter last year.

"We had another solid quarter with balanced top-line growth and good margin performance across our businesses," said Randall J. Hogan, Pentair chairman and chief executive officer. "Growth investments continued to yield positive results with fast growth regions up 22 percent in the quarter, before including the CPT acquisition. Innovation, expanded distribution and improved operating performance helped to drive solid global demand across our end markets. The CPT results reflected strong double digit sales growth from a year ago, demonstrating the strength of its membrane technology and systems expertise in water and beverage solutions."

"Solid price realization of 2 percent in the quarter combined with productivity more than offset inflation. The year-over-year margin decline reflected the negative impact of the CPT acquisition and related intangible amortization and acquisition related costs, as we anticipated. We expect to drive sequential CPT margin improvement through a combination of volume leverage, lean-driven efficiencies, as well as repositioning efforts that are already underway," added Hogan.

The company reported third quarter operating income of $93 million compared to $91 million in the prior year quarter. Adjusting to exclude acquisition related costs and restructuring charges, operating income increased 11 percent to $101 million and the company achieved operating margins of 11.3 percent compared to 11.7 percent of a year ago, reflecting the impact of the CPT acquisition. Pricing combined with productivity gains more than offset inflation across both Water and Technical Products. Third quarter 2011 results included the benefit of a lower effective tax rate, largely resulting from the CPT acquisition and a favorable geographic mix.

Free cash flow was $70 million in the third quarter, resulting in $188 million through the first three quarters of 2011. The company said it expects to achieve free cash flow of approximately $250 million for the full year 2011.

THIRD QUARTER BUSINESS HIGHLIGHTS

Water sales grew 20 percent year-over-year to $615 million, including 17 percentage points from the CPT acquisition and a two-percentage point favorable impact from foreign currency. Year-over-year sales growth was negatively impacted by approximately 6 percentage points due to sales in 2010 related to the Gulf Intracoastal Waterway (GIWW) project. Within the five Water global businesses, the third quarter sales performances were as follows:

  • Residential Flow sales were up 15 percent versus the prior year quarter, led by double-digit growth in U.S. residential de-watering products and the agricultural business.
  • Residential Filtration sales were up 5 percent, as the benefit from new products and increased penetration in fast growth regions offset softness in the U.S. market.
  • Pool sales were up 14 percent driven by strong demand for energy efficient pool products and expanded distribution.
  • Engineered Flow sales were down 32 percent due to lower U.S. municipal sales largely related to the prior year benefit from GIWW, while commercial and industrial pumps sales increased year-over-year. The year-over-year impact of GIWW resulted in 28 percentage points of the decline.
  • Filtration Solutions sales increased 141 percent year-over-year, reflecting a 133-percentage point or $89 million benefit from the CPT acquisition. The remaining 8 percentage points of growth mainly reflected increased sales in foodservice and desalination.

Water's third quarter reported operating income totaled $60 million. Excluding the acquisition related costs and restructuring charges included in the Water segment, third quarter operating income increased 15 percent to $67 million while operating margins decreased 40 basis points to 11 percent, reflecting the negative 100 basis point impact from the CPT acquisition. Pricing and productivity improvements more than offset the negative impact from inflation and continued growth investments.

Technical Products delivered third quarter 2011 sales of $276 million, an increase of 6 percent versus the prior year quarter, including a three-percentage point favorable impact from foreign currency.

  • Solid global demand drove double-digit growth across many of the end markets served, including industrial, commercial, general electronics and energy, partially offset by an expected decline in communications.
  • Sales in the U.S were relatively flat year-over-year, reflecting the softness in communications. Fast growth regions were up 29 percent, led by China and Latin America, due to distribution gains and expanded product offerings.

Technical Products' third quarter reported operating income totaled $49 million, up 14 percent compared to $43 million in the same quarter last year. Third quarter 2011 operating margins increased to 17.6 percent, an increase of 130 basis points when compared to the prior year quarter. Strong pricing and productivity gains, more than offset the negative impact from inflation and continued growth investments.

OUTLOOK

The company provided its fourth quarter 2011 EPS guidance of $0.57 to $0.60. Excluding the acquisition related costs and restructuring charges, the company expects an adjusted fourth quarter 2011 EPS in the range of $0.59 to $0.62, an increase of 20 to 27 percent from the prior year quarter, on an estimated sales growth of 17 to 19 percent.

The company expects full year 2011 reported EPS to be in the $2.26 to $2.29 range, including approximately $0.18 of acquisition related costs and restructuring charges. Excluding these costs, the company expects full year 2011 adjusted EPS in the range of $2.44 to $2.47. This represents an increase of 22 to 24 percent compared to 2010 EPS on expected full year 2011 sales of approximately $3.5 billion, up approximately 15 percent compared to the prior year.

"I'm pleased with the performance and progress we've made in 2011," added Hogan. "We enter the fourth quarter with solid price realization, fast growth region momentum and accelerated productivity efforts. Despite challenges in a few end markets, we continue to grow the top-line, expand margins and position Pentair for continued success in 2012 and beyond."

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 2011 results and 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 third quarter 2011 earnings release and the third quarter 2011 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 our ability to integrate the CPT acquisition successfully; the magnitude, timing and scope of recovery from the global economic downturn or any potential future downturn; the strength of housing and related markets; the risk that expected benefits from 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; increased risks associated with operating foreign businesses; 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 15,000 people worldwide.

Pentair Contacts:

Sara Zawoyski

Vice President, Investor Relations

Tel.: (763) 656-5575

E-mail: sara.zawoyski@pentair.com


Betsy Day

Corporate Communications Manager

Tel.: (763) 656-5537

E-mail: betsy.day@pentair.com

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)














Three months ended


Nine months ended




October 1,


October 2,


October 1,


October 2,

In thousands, except per-share data


2011


2010


2011


2010

Net sales

$

890,546

$

773,735

$

2,590,994

$

2,276,915

Cost of goods sold


618,484


537,193


1,782,137


1,578,503

Gross profit


272,062


236,542


808,857


698,412


% of net sales


30.6%


30.6%


31.2%


30.7%

Selling, general and administrative

159,068


128,854


462,260


392,787


% of net sales


17.9%


16.7%


17.8%


17.3%

Research and development


20,091


16,865


58,095


51,075


% of net sales


2.3%


2.2%


2.3%


2.2%

Operating income


92,903


90,823


288,502


254,550


% of net sales


10.4%


11.7%


11.1%


11.2%











Other (income) expense:



















Equity income of unconsolidated subsidiaries


(574)


(347)


(1,481)


(1,806)

Net interest expense


17,373


8,953


41,311


27,049


% of net sales


2.0%


1.2%


1.6%


1.2%

Income from continuing operations before income taxes









and noncontrolling interest

76,104


82,217


248,672


229,307

Provision for income taxes


24,050


26,488


76,447


75,937


effective tax rate


31.6%


32.2%


30.7%


33.1%

Income from continuing operations


52,054


55,729


172,225


153,370

Gain on disposal of discontinued operations, net of tax


--


549


--


1,666

Net income before noncontrolling interest


52,054


56,278


172,225


155,036

Noncontrolling interest


962


1,228


3,880


3,584

Net income attributable to Pentair, Inc.

$

51,092

$

55,050

$

168,345

$

151,452











Net income from continuing operations attributable to Pentair, Inc.

$

51,092

$

54,501

$

168,345

$

149,786











Earnings per common share attributable to Pentair, Inc.









Basic









Continuing operations

$

0.52

$

0.55

$

1.71

$

1.53

Discontinued operations


--


0.01


--


0.01

Basic earnings per common share

$

0.52

$

0.56

$

1.71

$

1.54











Diluted









Continuing operations

$

0.51

$

0.55

$

1.69

$

1.51

Discontinued operations


--


--


--


0.01

Diluted earnings per common share

$

0.51

$

0.55

$

1.69

$

1.52





















Weighted average common shares outstanding









Basic


98,472


98,298


98,228


98,105

Diluted


99,802


99,514


99,759


99,326











Cash dividends declared per common share

$

0.20

$

0.19

$

0.60

$

0.57











Pentair, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)










October 1,


December 31,


October 2,

In thousands


2011


2010


2010

Assets







Current assets







Cash and cash equivalents

$

52,665

$

46,056

$

56,995

Accounts and notes receivable, net


556,688


516,905


490,221

Inventories


459,916


405,356


410,072

Deferred tax assets


61,411


56,349


50,991

Prepaid expenses and other current assets


147,568


44,631


48,555

Total current assets


1,278,248


1,069,297


1,056,834








Property, plant and equipment, net


394,922


329,435


327,602








Other assets







Goodwill


2,516,692


2,066,044


2,070,911

Intangibles, net


619,262


453,570


461,378

Other


73,319


55,187


56,033

Total other assets


3,209,273


2,574,801


2,588,322

Total assets

$

4,882,443

$

3,973,533

$

3,972,758








Liabilities and Shareholders' Equity







Current liabilities







Short-term borrowings

$

29,705

$

4,933

$

4,180

Current maturities of long-term debt


1,194


18


37

Accounts payable


281,448


262,357


266,416

Employee compensation and benefits


117,538


107,995


100,626

Current pension and post-retirement benefits


8,733


8,733


8,948

Accrued product claims and warranties


43,920


42,295


40,783

Income taxes


26,283


5,964


22,202

Accrued rebates and sales incentives


45,231


33,559


39,066

Other current liabilities


163,550


80,942


90,286

Total current liabilities


717,602


546,796


572,544








Other liabilities







Long-term debt


1,317,454


702,521


673,265

Pension and other retirement compensation


190,221


209,859


219,463

Post-retirement medical and other benefits


26,933


30,325


28,506

Long-term income taxes payable


23,891


23,507


23,857

Deferred tax liabilities


228,737


169,198


147,772

Other non-current liabilities


79,489


86,295


93,681

Total liabilities


2,584,327


1,768,501


1,759,088








Shareholders' equity


2,298,116


2,205,032


2,213,670

Total liabilities and shareholders' equity

$

4,882,443

$

3,973,533

$

3,972,758








Days sales in accounts receivable (13 month moving average)


61


60


59

Days inventory on hand (13 month moving average)


83


82


82

Days in accounts payable (13 month moving average)


72


71


68










Pentair, Inc. and Subsidiaries



Condensed Consolidated Statements of Cash Flows (Unaudited)





Nine months ended





October 1,



October 2,

In thousands


2011



2010

Operating activities






Net income before noncontrolling interest

$

172,225


$

155,036

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






Gain on disposal of discontinued operations


--



(1,666)

Equity income of unconsolidated subsidiaries


(1,481)



(1,806)

Depreciation


49,079



43,141

Amortization


29,807



19,742

Deferred income taxes


4,445



4,866

Stock compensation


14,695



16,598

Excess tax benefits from stock-based compensation


(3,137)



(2,193)

Loss on sale of assets


702



166

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







Accounts and notes receivable


22,657



(36,216)


Inventories


15,633



(49,822)


Prepaid expenses and other current assets


(26,380)



(1,476)


Accounts payable


(45,759)



60,162


Employee compensation and benefits


(12,334)



21,600


Accrued product claims and warranties


115



6,556


Income taxes


18,045



18,013


Other current liabilities


46,924



15,493


Pension and post-retirement benefits


(23,636)



(15,197)


Other assets and liabilities


(21,041)



(3,754)



Net cash provided by (used for) operating activities


240,559



249,243









Investing activities






Capital expenditures


(53,063)



(42,981)

Proceeds from sale of property and equipment


139



340

Acquisitions, net of cash acquired


(733,105)



--

Other


(441)



(1,232)



Net cash provided by (used for) investing activities


(786,470)



(43,873)









Financing activities






Net short-term borrowings


24,772



1,975

Proceeds from long-term debt


1,370,423



493,821

Repayment of long-term debt


(771,793)



(624,007)

Debt issuance costs


(8,973)



(50)

Excess tax benefits from stock-based compensation


3,137



2,193

Stock issued to employees, net of shares withheld


11,788



7,861

Repurchases of common stock


(12,785)



(2,786)

Dividends paid


(59,669)



(56,584)



Net cash provided by (used for) financing activities


556,900



(177,577)









Effect of exchange rate changes on cash and cash equivalents


(4,380)



(4,194)

Change in cash and cash equivalents


6,609



23,599

Cash and cash equivalents, beginning of period


46,056



33,396

Cash and cash equivalents, end of period

$

52,665


$

56,995









Free cash flow






Net cash provided by (used for) operating activities

$

240,559


$

249,243

Capital expenditures


(53,063)



(42,981)

Proceeds from sale of property and equipment


139



340

Free cash flow

$

187,635


$

206,602









Pentair, Inc. and Subsidiaries

Supplemental Financial Information by Reportable Business Segment (Unaudited)












First Qtr


Second Qtr


Third Qtr


Nine Months

In thousands


2011


2011


2011


2011

Net sales to external customers









Water Group

$

515,368

$

631,994

$

614,557

$

1,761,919

Technical Products Group


274,905


278,181


275,989


829,075

Consolidated

$

790,273

$

910,175

$

890,546

$

2,590,994










Intersegment sales









Water Group

$

455

$

316

$

426

$

1,197

Technical Products Group


999


1,559


1,755


4,313

Other


(1,454)


(1,875)


(2,181)


(5,510)

Consolidated

$

--

$

--

$

--

$

--










Operating income (loss)









Water Group

$

56,528

$

84,521

$

59,608

$

200,657

Technical Products Group


48,087


48,261


48,611


144,959

Other


(18,438)


(23,360)


(15,316)


(57,114)

Consolidated

$

86,177

$

109,422

$

92,903

$

288,502










Operating income as a percent of net sales









Water Group


11.0%


13.4%


9.7%


11.4%

Technical Products Group


17.5%


17.3%


17.6%


17.5%

Consolidated


10.9%


12.0%


10.4%


11.1%





















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

Other


(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

Other


(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 Group


8.8%


13.8%


11.4%


11.5%

Technical Products Group


14.5%


15.4%


16.3%


15.4%

Consolidated


9.0%


12.6%


11.7%


11.2%

Pentair, Inc. and Subsidiaries

Reconciliation of the GAAP "As Reported" year ending December 31, 2011 to the "Adjusted" non-GAAP

excluding the effect of 2011 adjustments (Unaudited)









Total Pentair



First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Year

In thousands, except per-share data

2011

2011

2011

2011

2011

Net sales



$ 790,273

$ 910,175

$ 890,546

$880,000 - $900,000

approx $ 3.5B









Operating income - as reported



86,177

109,422

92,903

98,000 - 102,000

approx 386 - 390M

% of net sales



10.9%

12.0%

10.4%

11% - 11.5%

approx 11%+

Adjustments:








CPT deal related costs



1,709

6,136

--



Restructuring



--

--

2,079



Inventory step-up and customer backlog

197

5,256

5,798

approx 2,000

approx 23M

Operating income - as adjusted



88,083

120,814

100,780

100,000 - 104,000

approx 409 - 413M

% of net sales



11.1%

13.3%

11.3%

11% - 11.5%

approx 12%









Net income from continuing operations attributable






to Pentair, Inc. - as reported



50,541

66,712

51,092

56,000 - 60,000

approx 225 - 229M

Adjusments net of tax



1,287

8,803

6,561

approx 2,000

approx 18M

Net income from continuing operations attributable






to Pentair, Inc. - as adjusted



51,828

75,515

57,653

58,000 - 62,000

approx 243 - 247M









Continuing earnings per common share attributable to Pentair, Inc. - diluted




Diluted earnings per common share - as reported

$ 0.51

$ 0.67

$ 0.51

$0.57 - $0.60

$2.26 - $2.29

Adjustments



0.01

0.08

0.07

0.02

0.18

Diluted earnings per common share - as adjusted

$ 0.52

$ 0.75

$ 0.58

$0.59 - $0.62

$2.44 - $2.47

Pentair, Inc. and Subsidiaries

Reconciliation of the GAAP "As Reported" year ending December 31, 2011 to the "Adjusted" non-GAAP

excluding the effect of 2011 adjustments (Unaudited)













Water

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Year

In thousands

2011

2011

2011

2011

2011

Net sales

$ 515,368

$ 631,944

$ 614,557

$620,000 - $635,000

approx $2.4B







Operating income - as reported

56,528

84,521

59,608

68,000 - 73,000

269 - 274M

% of net sales

11.0%

13.4%

9.7%

approx 11-11.5%

approx 11-11.5%

Adjustments:






Restructuring

--

--

1,955



Inventory step-up and customer backlog

197

5,256

5,798

approx 2,000

approx 15M

Operating income - as adjusted

56,725

89,777

67,361

70,000 - 75,000

284 - 289M

% of net sales

11.0%

14.2%

11.0%

approx 11.5%

approx 11.5-12%

SOURCE Pentair, Inc.

Categories: Press Releases