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Pentair Reports Full Year 2011 Sales Growth of 14 Percent to $3.5 Billion; Reaffirms 2012 Earnings Outlook of $2.60 to $2.75
01.31.2012
Full Year 2011 Highlights
- Full year sales up 14 percent year-over-year to record $3.5 billion
- Reported EPS of $0.34, after non-cash goodwill impairment charge; Adjusted EPS increased 21 percent to record $2.41 reflecting solid operating performance
- Generated strong free cash flow of $248 million, exceeding net income
- Quarterly dividend increased 10 percent to $0.22 per share in 2012
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, Jan. 31, 2012 /PRNewswire/ -- Pentair, Inc. (NYSE: PNR) announced full year 2011 sales of $3.5 billion, an increase of 14 percent from the prior year.  The full year sales increase reflected broad-based growth in both Water and Technical Products, and included 8 percentage points from the acquisition of Clean Process Technologies (CPT) and a point from favorable foreign exchange.  Earnings per diluted share from continuing operations (EPS) were $0.34 for the full year 2011, which included a non-cash goodwill impairment charge of $1.82 per share, restructuring charges totaling $0.10 per share and acquisition related costs of $0.15 per share.  Excluding these items, the company achieved EPS of $2.41 in 2011, up 21 percent from the prior year.

During the year, Pentair generated $248 million in free cash flow, which represented another year of greater than 100 percent conversion of net income.  The company paid approximately $80 million in dividends in 2011, or $0.80 per share.  The new quarterly dividend effective in the first quarter of 2012 equates to an annual cash dividend of $0.88 cents per share, up 10 percent.

"Delivering strong sales and over 20 percent adjusted earnings growth for the year were significant accomplishments given challenging market conditions," said Randall J. Hogan, Pentair chairman and chief executive officer.  "Robust sales in fast growth regions, along with distribution gains and new product introductions drove sales higher.  Pricing and productivity discipline enabled another year of margin expansion, and we continued to invest in the innovation, brands and global capabilities that we believe position us well to deliver long-term, sustainable growth."

FOURTH QUARTER RESULTS

Total company fourth quarter sales increased 15 percent over the prior year quarter to $866 million, and included 12 percentage points from the CPT acquisition and a minimal negative impact from foreign exchange.  Sales in fast growth regions grew 65 percent in the quarter, including a 42 percentage point contribution from the CPT acquisition.  Year-over-year sales growth in the quarter included a negative 2 percentage point impact due to sales in 2010 related to the Gulf Intracoastal Waterway (GIWW) project.

The company reported a fourth quarter operating loss of $120 million compared to operating income of $80 million in the prior year quarter.  Fourth quarter results included a pre-tax non-cash goodwill impairment charge of $201 million in the Residential Filtration business as a result of the company's annual impairment analysis of goodwill.  The company concluded that due to continued softness in the end-markets served by residential water treatment components, the carrying amount of this business exceeded its fair value.  This non-cash charge does not impact the company's normal business operations or debt covenants.

The company also recorded a pre-tax restructuring charge of $11 million in the fourth quarter as a result of repositioning actions taken to reduce the company's cost structure and better align around channels and growth platforms.  Excluding the impairment and restructuring charges and acquisition related costs, operating income increased 18 percent over the prior year quarter to $94 million and operating margins expanded 30 basis points to 10.9 percent.

"We delivered strong sales and cash flow performance in the fourth quarter," added Hogan, "despite softness in western European and residential water treatment component sales.  While the goodwill impairment charge and restructuring initiatives significantly impacted reported profitability in the quarter, adjusted operating performance was solid as pricing and productivity helped offset inflation and continued global investments."

FOURTH QUARTER BUSINESS HIGHLIGHTS

Water sales grew 21 percent year-over-year to $608 million in the fourth quarter, with CPT contributing 18 percentage points.  Year-over-year sales growth was negatively impacted by approximately 3 percentage points due to sales in 2010 related to the GIWW project.  Within the five Water global businesses, the fourth quarter sales performances as compared to the same quarter last year were as follows:

  • Residential Flow sales were up 7 percent, with strong double-digit growth in agricultural products and U.S. residential pumps, partly offset by softness in western Europe.
  • Residential Filtration sales were up 5 percent, reflecting continued strength in fast growth regions, offset by lower residential water treatment component sales in developed regions.
  • Pool sales were up 18 percent, driven by continued dealer expansion, new product introductions and demand for the energy-efficient Eco-Select product line.
  • Engineered Flow sales were down 25 percent, reflecting continued headwinds in the municipal end-market and a negative 17 percentage point impact from GIWW.
  • Filtration Solutions sales were up 136 percent, reflecting a 133 percentage point or $92 million contribution from the CPT acquisition.  The remaining 3 percentage points reflected year-over-year sales growth in foodservice and desalination.

Water reported a fourth quarter operating loss of $142 million, compared to operating income of $55 million in the same period last year. Excluding the non-cash goodwill impairment charge, restructuring charges and acquisition related costs included in the Water segment, fourth quarter operating income increased 24 percent to $68 million while operating margins expanded 20 basis points to 11.2 percent.  The benefits from price and productivity nearly offset the unfavorable impact of inflation and increased investments, while volume growth and the impact of CPT helped drive margins higher.

Technical Products delivered fourth quarter sales of $258 million, an increase of 2 percent versus the fourth quarter of last year.

  • Solid global demand drove double-digit growth across most of the end-markets served, including industrial, energy, infrastructure and commercial that collectively comprise more than 60 percent of Technical Products' sales.  The communications end-market declined double-digits year-over-year, as expected, with general electronics sales roughly flat to prior year.
  • Sales in the U.S. were relatively flat year-over-year, with strong growth in industrial being offset by softness in communications.  Western European sales grew modestly, and fast growth regions were up 25 percent.

Technical Products' fourth quarter reported operating income totaled $40 million, compared to $38 million in the same quarter last year.  Excluding the restructuring charges, fourth quarter operating income was $42 million, up 12 percent, and operating margins expanded 140 basis points to 16.4 percent.  Pricing and productivity gains more than offset the negative impact from inflation and continued growth investments.

OUTLOOK

Pentair continues to expect full year 2012 EPS to be between $2.60 and $2.75, which represents an increase of approximately 8 to 14 percent from 2011 adjusted EPS of $2.41.  The company anticipates full year 2012 sales to be in the range of approximately $3.7 billion to $3.8 billion, or up 7 to 10 percent, which includes an approximate 3 percentage point contribution from the CPT acquisition.  The company expects to generate free cash flow of approximately $270 million in 2012.

"As we exit 2011 and look toward this year, we are well positioned for growth," continued Hogan.  "Greater scale in fast-growth regions, more innovative solutions for an expanding customer base and the added technology and application know-how gained with the CPT acquisition position us well for continued success.  We expect solid price realization, accelerated productivity and the benefit from repositioning actions to drive margin expansion and profitable growth in 2012."

First quarter 2012 EPS is expected to be $0.53 to $0.57.  This compares to first quarter 2011 reported EPS of $0.51, or $0.52 on an adjusted basis.  The company expects first quarter 2012 revenue to be up 13 to 15 percent compared to the same period last year, including the contribution from the CPT acquisition.

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 2011 performance and first quarter and full year 2012 outlook on a two-way conference call with investors at 9 a.m. Eastern today.  A live audio webcast of the call, along with the related presentation, can be accessed in the Investors section of the company's website (www.pentair.com) shortly before the call begins.  Reconciliations of non-GAAP financial measures are set forth in the attachments to this release and in the presentation, both of which can be found on Pentair's web site.  The webcast and presentation will be archived at the same site following the conclusion of the event.

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 company's ability to successfully and timely integrate and realize the benefits of acquisitions; the magnitude, timing and scope of recovery from the global economic downturn, including the current European Union debt crisis, 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 the company's 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 2011 revenues of $3.5 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


Year ended




December 31


December 31


December 31


December 31

In thousands, except per-share data


2011 


2010 


2011 


2010 

Net sales

$

865,692

$

753,858

$

3,456,686

$

3,030,773

Cost of goods sold


600,827


521,630


2,382,964


2,100,133

Gross profit


264,865


232,228


1,073,722


930,640


% of net sales


30.6%


30.8%


31.1%


30.7%

Selling, general and administrative

164,267


136,542


626,527


529,329


% of net sales


19.0%


18.1%


18.1%


17.5%

Research and development


20,063


16,081


78,158


67,156


% of net sales


2.3%


2.1%


2.3%


2.2%

Goodwill impairment

200,520



200,520


Operating income


(119,985)


79,605


168,517


334,155


% of net sales


-13.9%


10.6%


4.9%


11.0%











Other (income) expense:



















Equity income of unconsolidated subsidiaries


(417)


(302)


(1,898)


(2,108)

Net interest expense


17,524


9,067


58,835


36,116


% of net sales


2.0%


1.2%


1.7%


1.2%

Income from continuing operations before income taxes









  and noncontrolling interest

(137,092)


70,840


111,580


300,147

Provision for income taxes


(3,388)


21,263


73,059


97,200


effective tax rate


2.5%


30.0%


65.5%


32.4%

Income from continuing operations


(133,704)


49,577


38,521


202,947

Loss on disposal of discontinued operations, net of tax



(2,292)



(626)

Net income before noncontrolling interest


(133,704)


47,285


38,521


202,321

Noncontrolling interest


419


909


4,299


4,493

Net income attributable to Pentair, Inc.

$

(134,123)

$

46,376

$

34,222

$

197,828











Net income from continuing operations attributable to Pentair, Inc.

$

(134,123)

$

48,668

$

34,222

$

198,454











Earnings per common share attributable to Pentair, Inc.









Basic









Continuing operations

$

(1.36)

$

0.50

$

0.35

$

2.02

Discontinued operations



(0.02)



(0.01)

Basic earnings per common share

$

(1.36)

$

0.48

$

0.35

$

2.01











Diluted









Continuing operations

$

(1.36)

$

0.49

$

0.34

$

2.00

Discontinued operations



(0.02)



(0.01)

Diluted earnings per common share

$

(1.36)

$

0.47

$

0.34

$

1.99





















Weighted average common shares outstanding









Basic


98,395


98,219


98,233


98,037

Diluted


98,395


99,606


99,753


99,294











Cash dividends declared per common share

$

0.20

$

0.19

$

0.80

$

0.76















Pentair, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)








December 31


December 31

In thousands


2011 


2010 

Assets





Current assets





Cash and cash equivalents

$

50,077

$

46,056

Accounts and notes receivable, net


569,204


516,905

Inventories


449,863


405,356

Deferred tax assets


60,899


56,349

Prepaid expenses and other current assets


107,792


44,631

Total current assets


1,237,835


1,069,297






Property, plant and equipment, net


387,525


329,435






Other assets





Goodwill


2,273,918


2,066,044

Intangibles, net


592,285


453,570

Other


94,750


55,187

Total other assets


2,960,953


2,574,801

Total assets

$

4,586,313

$

3,973,533






Liabilities and Shareholders' Equity





Current liabilities





Short-term borrowings

$

3,694

$

4,933

Current maturities of long-term debt


1,168


18

Accounts payable


294,858


262,357

Employee compensation and benefits


109,361


107,995

Current pension and post-retirement benefits


9,052


8,733

Accrued product claims and warranties


42,630


42,295

Income taxes


14,547


5,964

Accrued rebates and sales incentives


37,009


33,559

Other current liabilities


129,522


80,942

Total current liabilities


641,841


546,796






Other liabilities





Long-term debt


1,304,225


702,521

Pension and other retirement compensation


248,615


209,859

Post-retirement medical and other benefits


31,774


30,325

Long-term income taxes payable


26,470


23,507

Deferred tax liabilities


188,957


169,198

Other non-current liabilities


97,039


86,295

Total liabilities


2,538,921


1,768,501






Shareholders' equity


2,047,392


2,205,032

Total liabilities and shareholders' equity

$

4,586,313

$

3,973,533






Days sales in accounts receivable (13 month moving average)


61


60

Days inventory on hand (13 month moving average)


83


83

Days in accounts payable (13 month moving average)


71


71












Pentair, Inc. and Subsidiaries



Condensed Consolidated Statements of Cash Flows (Unaudited)





Year Ended





December 31



December 31

In thousands


2011 



2010 

Operating activities






Net income before noncontrolling interest

$

38,521


$

202,321

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






Loss on disposal of discontinued operations




626

Equity income of unconsolidated subsidiaries


(1,898)



(2,108)

Depreciation


66,235



57,995

Amortization


41,897



26,184

Deferred income taxes


(5,583)



29,453

Stock compensation


19,489



21,468

Goodwill impairment


200,520



Excess tax benefits from stock-based compensation


(3,310)



(2,686)

Loss on sale of assets


933



466

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







Accounts and notes receivable


1,348



(62,344)


Inventories


18,263



(44,495)


Prepaid expenses and other current assets


10,032



2,777


Accounts payable


(24,330)



55,321


Employee compensation and benefits


(20,486)



27,252


Accrued product claims and warranties


(1,984)



8,068


Income taxes


10,084



1,791


Other current liabilities


10,921



561


Pension and post-retirement benefits


(24,596)



(43,024)


Other assets and liabilities


(15,830)



(9,250)



Net cash provided by (used for) operating activities


320,226



270,376









Investing activities






Capital expenditures


(73,348)



(59,523)

Proceeds from sale of property and equipment


1,310



358

Acquisitions, net of cash acquired


(733,105)



Other


(2,943)



(1,148)



Net cash provided by (used for) investing activities


(808,086)



(60,313)









Financing activities






Net short-term borrowings


(1,239)



2,728

Proceeds from long-term debt


1,421,602



703,641

Repayment of long-term debt


(832,147)



(804,713)

Debt issuance costs


(8,973)



(50)

Excess tax benefits from stock-based compensation


3,310



2,686

Stock issued to employees, net of shares withheld


13,322



9,941

Repurchases of common stock


(12,785)



(24,712)

Dividends paid


(79,537)



(75,465)

Distribution to noncontrolling interest




(4,647)



Net cash provided by (used for) financing activities


503,553



(190,591)









Effect of exchange rate changes on cash and cash equivalents


(11,672)



(6,812)

Change in cash and cash equivalents


4,021



12,660

Cash and cash equivalents, beginning of period


46,056



33,396

Cash and cash equivalents, end of period

$

50,077


$

46,056









Free cash flow






Net cash provided by (used for) continuing operations

$

320,226


$

270,376

Capital expenditures


(73,348)



(59,523)

Proceeds from sale of property and equipment


1,310



358

Free cash flow

$

248,188


$

211,211













Pentair, Inc. and Subsidiaries

Supplemental Financial Information by Reportable Business Segment (Unaudited)














First Qtr


Second Qtr


Third Qtr


Fourth Qtr


Year

In thousands


2011 


2011 


2011 


2011 


2011 

Net sales to external customers











Water Group

$

515,368

$

631,994

$

614,557


607,885

$

2,369,804

Technical Products Group


274,905


278,181


275,989


257,807


1,086,882

Consolidated

$

790,273

$

910,175

$

890,546


865,692

$

3,456,686












Intersegment sales











Water Group

$

455

$

316

$

426


390

$

1,587

Technical Products Group


999


1,559


1,755


1,313


5,626

Other


(1,454)


(1,875)


(2,181)


(1,703)


(7,213)

Consolidated

$

$

$


$












Operating income (loss)











Water Group

$

56,528

$

84,521

$

59,608


(142,346)

$

58,311

Technical Products Group


48,087


48,261


48,611


40,281


185,240

Other


(18,438)


(23,360)


(15,316)


(17,920)


(75,034)

Consolidated

$

86,177

$

109,422

$

92,903


(119,985)

$

168,517












Operating income as a percent of net sales











Water


11.0%


13.4%


9.7%


(23.4%)


2.5%

Technical Products


17.5%


17.3%


17.6%


15.6%


17.0%

Consolidated


10.9%


12.0%


10.4%


(13.9%)


4.9%

























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

Other


(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

Other


(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%




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

$          865,692

$ 3,456,686







Operating income - as reported

86,177

109,422

92,903

(119,985)

168,517

  % of net sales

10.9%

12.0%

10.4%

(13.9%)

4.9%

Adjustments:






   CPT deal related costs

1,709

6,136

466

8,311

   Restructuring

2,079

10,851

12,930

   Inventory step-up and customer backlog

197

5,256

5,798

2,173

13,424

   Goodwill impairment

200,520

200,520

Operating income - as adjusted

88,083

120,814

100,780

94,025

403,702

  % of net sales

11.1%

13.3%

11.3%

10.9%

11.7%







Net income from continuing operations attributable






   to Pentair, Inc. - as reported

50,541

66,712

51,092

(134,123)

34,222

   Adjustments net of tax

1,287

8,803

6,561

189,824

206,475

Net income from continuing operations attributable






   to Pentair, Inc. - as adjusted

51,828

75,515

57,653

55,701

240,697







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






Diluted earnings per common share - as reported

$             0.51

$                  0.67

$              0.51

$               (1.36)

$          0.34

Adjustments

0.01

0.08

0.07

1.92

2.07

Diluted earnings per common share - as adjusted

$             0.52

$                  0.75

$              0.58

$                0.56

$          2.41



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

$            631,994

$        614,557

$          607,885

$ 2,369,804







Operating income - as reported

56,528

84,521

59,608

(142,346)

58,311

  % of net sales

11.0%

13.4%

9.7%

(23.4%)

2.5%

Adjustments:






   Restructuring

1,955

7,845

9,800

   Inventory step-up and customer backlog

197

5,256

5,798

2,173

13,424

   Goodwill impairment

200,520

200,520

Operating income - as adjusted

56,725

89,777

67,361

68,192

282,055

  % of net sales

11.0%

14.2%

11.0%

11.2%

11.9%













Technical Products






Net sales

$       274,905

$            278,181

$        275,989

$          257,807

1,086,882





Operating income - as reported

48,087

48,261

48,611

40,281

185,240

  % of net sales

17.5%

17.3%

17.6%

15.6%

17.0%

Adjustments - Restructuring

124

2,010

2,134

Operating income - as adjusted

48,087

48,261

48,735

42,291

187,374

  % of net sales

17.5%

17.3%

17.7%

16.4%

17.2%



SOURCE Pentair, Inc.

Categories: Press Releases