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Pentair Reports Strong First Quarter Results; EPS of $0.61, Sales Up 9 Percent
04.24.2012

- First quarter sales increased to $858 million, up 9 percent from last year
- Adjusted EPS of $0.64, up 23 percent over the same quarter last year; Reported EPS of $0.61
- Updates full-year adjusted EPS guidance to $2.65 to $2.80, up 10 to 16 percent; Reported EPS to $2.62 to $2.77
- Planning underway for pending merger with Tyco International's Flow Control business and on-track for end of September closing; Integration leader named
Reconciliations of GAAP to Non-GAAP are in the attached financial tables.

MINNEAPOLIS, April 24, 2012 /PRNewswire via COMTEX/ --Pentair, Inc. (NYSE: PNR) today announced first quarter 2012 sales of $858 million, an increase of 9 percent from the prior year quarter. Earnings per diluted share ("EPS") for the first quarter were $0.61 compared to $0.51 of EPS in the first quarter last year. When adjusted to exclude acquisition related costs and specific tax benefits, first quarter 2012 EPS were $0.64, up 23 percent from adjusted EPS of $0.52 in the first quarter of last year.

"The first quarter was a solid start to the year. Despite continued softness in Western Europe and lower flood-related residential pump sales, we delivered another quarter of strong operating performance," said Randall J. Hogan, Pentair chairman and chief executive officer. "Excellent execution of pricing and productivity initiatives, coupled with the benefits from our repositioning efforts, drove adjusted operating margins higher as we continue to invest in the innovation, brands and global capabilities that we believe position us well to deliver long-term sustainable growth."

The company delivered operating income of $85 million in the quarter, down 1 percent from $86 million in the same quarter last year. After excluding $12 million of acquisition related costs in the first quarter 2012, operating income was $97 million, up 10 percent, and operating margins expanded 20 basis points to 11.3 percent. Pricing and productivity gains more than offset material inflation and higher labor costs. The company reported an effective tax rate of approximately 13 percent. After adjusting to exclude specific tax benefits, the effective tax rate was approximately 20 percent in the quarter.

Free cash flow in the quarter was a usage of $82 million, reflecting normal seasonality and timing of cash flows. The company expects to deliver full year free cash flow greater than 100 percent of net income.

FIRST QUARTER BUSINESS HIGHLIGHTS

Water & Fluid Solutions sales grew 14 percent year-over-year to $587 million, with the Clean Process Technologies ("CPT") acquisition adding 13 percentage points and a negative one-percentage point impact from foreign exchange. In fast growth regions, Water sales grew 41 percent, largely driven by the CPT acquisition. Within Water & Fluid Solutions, the first quarter sales performances were as follows:

  • Flow sales, which accounted for approximately 40 percent of Water & Fluid Solutions sales, were down 3 percent versus the prior year quarter, as lower flood-related and municipal pump sales offset the benefit from the CPT acquisition.
  • Treatment/Process sales, which accounted for approximately 40 percent of Water & Fluid Solutions sales, were up 34 percent from last year, benefiting from the CPT acquisition. Sales in industrial, energy, and foodservice grew double digits in the quarter, more than offsetting lower sales in Western Europe.
  • Aquatic (previously named Pool) sales, which accounted for approximately 20 percent of Water & Fluid Solutions sales, were up 18 percent year-over-year, driven by pool dealer expansion and continued strong demand for Pentair's energy efficient pool products and solutions.

Water & Fluid Solutions' first quarter operating income totaled $64 million, up 13 percent as compared to $57 million in the same period last year. Operating margins decreased by 20 basis points to 10.8 percent, as CPT seasonality negatively impacted margins. Pricing and productivity initiatives more than offset inflation during the quarter.

Technical Products delivered first quarter 2012 sales of $271 million, down 1 percent versus the prior year quarter, including a one-percentage point unfavorable impact from foreign exchange.

  • While strong demand continued in many of the end-markets served, including double-digit growth in industrial and energy, softness in Western Europe and an end-of-life communications program drove sales lower. Sales in commercial and infrastructure grew mid-single digits in the first quarter compared to the prior year quarter.

Technical Products' first quarter operating income totaled $50 million, up 5 percent compared to $48 million in the same quarter last year. First quarter 2012 operating margins increased to a quarterly record of 18.6 percent, an increase of 110 basis points when compared to the prior year quarter. Pricing and productivity gains more than offset material inflation and higher labor costs.

OUTLOOK

The company is updating its full year 2012 EPS outlook to a range of $2.62 to $2.77. Excluding the first quarter acquisition related costs and specific tax benefits, the company's full year 2012 adjusted EPS outlook is now $2.65 to $2.80 to reflect first quarter results and modestly higher estimated number of diluted shares. This represents an increase of 10 to 16 percent from 2011 adjusted EPS of $2.41. The company anticipates full year 2012 sales of approximately $3.7 billion and adjusted operating profits to be consistent with previously provided outlook.

In addition, the company introduced second quarter 2012 EPS guidance of $0.79 to $0.82, up 5 to 9 percent versus the same quarter last year. Second quarter 2012 sales are expected to be up 6 to 8 percent over last year's quarter to a range of $965 million to $980 million.

Both the full year and second quarter outlook do not include any future impact from the pending merger with Tyco International's Flow Control business, as announced and detailed in the press release on March 28.

"The start of the year showed great PIMS execution and nice growth in our core business. Growth initiatives are yielding results, with increasing contributions from agriculture, energy and industrial process, all areas where we have been investing in innovation and global capabilities," continued Hogan. "We will continue to drive margin expansion through greater productivity and operational efficiencies, and we believe we're well positioned to continue to deliver sustainable, profitable growth in 2012."

OTHER ITEMS

On March 28, 2012, Pentair and Tyco International Ltd. ("Tyco") announced a definitive agreement to combine Tyco's Flow Control business with Pentair in a tax-free, all-stock merger. Upon completion of the transaction, Pentair shareholders will own approximately 47.5 percent of the combined company and Tyco shareholders will own approximately 52.5 percent.

"We are very excited about the pending merger with Tyco's Flow Control business. We believe this transaction is a great strategic fit, as it increases our global presence and exposure to high growth, attractive sectors. Planning is underway and we remain on-track for end of September closing. I am also pleased to announce our new integration leader, Todd Gleason, reporting directly to me. As a proven Pentair executive, Todd will lead a team of functional and business leaders, including those from Tyco Flow once the transaction closes," said Hogan.

EARNINGS CONFERENCE CALL

Pentair Chairman and CEO Randall J. Hogan and Chief Financial Officer John L. Stauch will discuss the company's performance and first quarter 2012 results on a two-way conference call with investors at 11 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 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 website. The webcast and presentation will be archived at the company's website following the conclusion of the event.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This communication may contain certain statements about Pentair, Inc. ("Pentair"), Tyco Flow Control International Ltd. ("Tyco Flow") and Tyco International Ltd. ("Tyco") that are "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this press release may include statements about the expected effects on Pentair, Tyco Flow and Tyco of the proposed merger of Pentair and Tyco Flow (the "Merger"), the anticipated timing and benefits of the Merger, Pentair's and Tyco Flow's anticipated standalone or combined financial results and all other statements in this document other than historical facts. Without limitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "intends", "will", "likely", "may", "anticipates", "estimates", "projects", "should", "would", "expect", "positioned", "strategy", "future" or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These statements are based on the current expectations of the management of Pentair, Tyco Flow and Tyco (as the case may be) and are subject to uncertainty and changes in circumstances and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such forward-looking statements. In addition, these statements are based on a number of assumptions that are subject to change. Such risks, uncertainties and assumptions include: the satisfaction of the conditions to the Merger and other risks related to the completion of the Merger and actions related thereto; Pentair's and Tyco's ability to complete the Merger on anticipated terms and schedule, including the ability to obtain shareholder or regulatory approvals of the Merger and related transactions; risks relating to any unforeseen liabilities of Pentair or Tyco Flow; future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, losses and future prospects; business and management strategies and the expansion and growth of Pentair's or Tyco Flow's operations; Pentair's and Tyco Flow's ability to integrate successfully after the Merger and achieve anticipated synergies; the effects of government regulation on Pentair's or Tyco Flow's businesses; the risk that disruptions from the transaction will harm Pentair's or Tyco Flow's business; Pentair's, Tyco Flow's and Tyco's plans, objectives, expectations and intentions generally; and other factors detailed in Pentair's and Tyco's reports filed with the U.S. Securities and Exchange Commission ("the SEC"), including their Annual Reports on Form 10-K under the caption "Risk Factors". Forward-looking statements included herein are made as of the date hereof, and none of Pentair, Tyco Flow or Tyco undertakes any obligation to update publicly such statements to reflect subsequent events or circumstances.

ADDITIONAL INFORMATION

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of a vote or proxy. The Merger will be submitted to a vote of Pentair shareholders and the proposed distribution of Tyco Flow to Tyco shareholders will be submitted to a vote of Tyco shareholders. In connection with the Merger, Tyco Flow will file a registration statement on Form S-4 with the SEC. Such registration statement will include a proxy statement of Pentair that also constitutes a prospectus of Tyco Flow, and will be sent to Pentair shareholders. In addition, Tyco Flow will file with the SEC a Form 10 and Tyco will file a proxy statement with the SEC related to the proposed distribution of the Tyco Flow shares that will be sent to Tyco shareholders. Shareholders of Pentair and Tyco are urged to read the proxy statements and other documents filed with the SEC when they become available because they will contain important information about Pentair, Tyco Flow, Tyco and the proposed transactions. Shareholders will be able to obtain copies of these documents (when they are available) and other documents filed with the SEC with respect to Pentair, Tyco Flow and Tyco free of charge from the SEC's website at www.sec.gov. These documents (when they are available) can also be obtained free of charge from Pentair upon written request to Investor Relations Department, Pentair, Inc., 5500 Wayzata Blvd., Suite 800, Minneapolis, MN, 55416, or by calling (763) 545-1730,or from Tyco or Tyco Flow upon written request to Investor Relations Department, Tyco International Ltd., 9 Roszel Road, Princeton, NJ, 08540, or by calling (609) 720-4200.

PARTICIPANTS IN THE SOLICITATION

Pentair and Tyco and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from shareholders in connection with the proposed transaction under the rules of the SEC. Information about the directors and executive officers of Pentair may be found in its Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 21, 2012 and definitive proxy statement relating to its 2012 annual meeting of shareholders filed with the SEC on March 9, 2012. Information about the directors and executive officers of Tyco may be found in its Annual Report on Form 10-K for the year ended September 30, 2011 filed with the SEC on November 16, 2011 and definitive proxy statement relating to its 2012 annual general meeting of shareholders filed with the SEC on January 13, 2012. These documents can be obtained free of charge from the sources indicated above. Additional information regarding the interests of these participants will also be included in the proxy statements when it becomes available.

ABOUT PENTAIR, INC.

Pentair (www.pentair.com) is a global diversified industrial company headquartered in Minneapolis, Minnesota. Pentair Water and Fluid Solutions is a leading provider of innovative water and fluid processing products and solutions used in a wide range of applications. Pentair Technical Products is a leading provider of products that enclose and protect some of the world's most sensitive electronics and electrical equipment, ensuring their safe, secure and reliable performance. 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 Email: sara.zawoyski@pentair.com

Betsy Day Manager, Corporate Communications Tel.: 763-656-5537 Email: betsy.day@pentair.com

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)










Three months ended




March 31,


April 2,

In thousands, except per-share data


2012


2011

Net sales

$

858,177

$

790,273

Cost of goods sold


577,458


541,214

Gross profit


280,719


249,059


% of net sales


32.7%


31.5%

Selling, general and administrative

175,010


144,760


% of net sales


20.4%


18.3%

Research and development


20,757


18,122


% of net sales


2.4%


2.3%

Operating income


84,952


86,177


% of net sales


9.9%


10.9%







Other (income) expense:











Equity income of unconsolidated subsidiaries


(1,049)


(235)

Net interest expense


14,768


9,325


% of net sales


1.7%


1.2%

Income before income taxes and noncontrolling interest


71,233


77,087

Provision for income taxes


9,079


25,053


effective tax rate


12.7%


32.5%

Net income before noncontrolling interest


62,154


52,034

Noncontrolling interest


1,340


1,493

Net income attributable to Pentair, Inc.

$

60,814

$

50,541







Earnings per common share attributable to Pentair, Inc.





Basic

$

0.62

$

0.52

Diluted

$

0.61

$

0.51







Weighted average common shares outstanding





Basic


98,633


98,098

Diluted


100,407


99,670







Cash dividends declared per common share

$

0.22

$

0.20







Pentair, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)










March 31,


December 31,


April 2,

In thousands


2012


2011


2011

Assets







Current assets







Cash and cash equivalents

$

55,438

$

50,077

$

57,134

Accounts and notes receivable, net


680,260


569,204


625,856

Inventories


475,403


449,863


411,767

Deferred tax assets


62,405


60,899


56,370

Prepaid expenses and other current assets


115,701


107,792


57,950

Total current assets


1,389,207


1,237,835


1,209,077








Property, plant and equipment, net


393,335


387,525


338,610








Other assets







Goodwill


2,297,175


2,273,918


2,097,428

Intangibles, net


594,929


592,285


461,244

Other


103,560


94,750


56,328

Total other assets


2,995,664


2,960,953


2,615,000

Total assets

$

4,778,206

$

4,586,313

$

4,162,687








Liabilities and Shareholders' Equity







Current liabilities







Short-term borrowings

$

19,190

$

3,694

$

6,093

Current maturities of long-term debt


1,207


1,168


13

Accounts payable


293,398


294,858


256,492

Employee compensation and benefits


86,774


109,361


84,043

Current pension and post-retirement benefits


9,052


9,052


8,733

Accrued product claims and warranties


42,684


42,630


43,418

Income taxes


25,153


14,547


20,492

Accrued rebates and sales incentives


31,730


37,009


29,546

Other current liabilities


150,135


129,522


97,531

Total current liabilities


659,323


641,841


546,361








Other liabilities







Long-term debt


1,395,093


1,304,225


802,321

Pension and other retirement compensation


251,551


248,615


216,592

Post-retirement medical and other benefits


30,918


31,774


29,459

Long-term income taxes payable


13,382


26,470


23,548

Deferred tax liabilities


194,469


188,957


175,877

Other non-current liabilities


89,863


97,039


86,085

Total liabilities


2,634,599


2,538,921


1,880,243








Shareholders' equity


2,143,607


2,047,392


2,282,444

Total liabilities and shareholders' equity

$

4,778,206

$

4,586,313

$

4,162,687








Days sales in accounts receivable (13 month moving average)


62


61


61

Days inventory on hand (13 month moving average)


85


83


82

Days in accounts payable (13 month moving average)


71


71


71










Pentair, Inc. and Subsidiaries



Condensed Consolidated Statements of Cash Flows (Unaudited)





Three months ended





March 31,



April 2,

In thousands


2012



2011

Operating activities






Net income before noncontrolling interest

$

62,154


$

52,034

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






Equity income of unconsolidated subsidiaries


(1,049)



(235)

Depreciation


16,076



15,224

Amortization


9,842



6,401

Deferred income taxes


(167)



3,845

Stock compensation


5,249



5,725

Excess tax benefits from stock-based compensation


(1,384)



(557)

(Gain) loss on sale of assets


(506)



7

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







Accounts and notes receivable


(100,353)



(101,505)


Inventories


(20,028)



(708)


Prepaid expenses and other current assets


2,798



(8,946)


Accounts payable


(4,077)



(11,992)


Employee compensation and benefits


(24,400)



(28,759)


Accrued product claims and warranties


(117)



883


Income taxes


10,495



14,506


Other current liabilities


4,402



8,248


Pension and post-retirement benefits


(48)



1,619


Other assets and liabilities


(26,396)



(3,970)



Net cash provided by (used for) operating activities


(67,509)



(48,180)









Investing activities






Capital expenditures


(15,621)



(13,268)

Proceeds from sale of property and equipment


1,528



42

Acquisitions, net of cash acquired


--



(14,856)

Other


(3,076)



58



Net cash provided by (used for) investing activities


(17,169)



(28,024)









Financing activities






Net short-term borrowings


15,165



1,160

Proceeds from long-term debt


182,976



249,366

Repayments of long-term debt


(94,572)



(150,000)

Excess tax benefits from stock-based compensation


1,384



557

Stock issued to employees, net of shares withheld


7,200



(37)

Repurchases of common stock


--



(287)

Dividends paid


(22,105)



(19,844)



Net cash provided by (used for) financing activities


90,048



80,915









Effect of exchange rate changes on cash and cash equivalents


(9)



6,367

Change in cash and cash equivalents


5,361



11,078

Cash and cash equivalents, beginning of period


50,077



46,056

Cash and cash equivalents, end of period

$

55,438


$

57,134









Free cash flow






Net cash provided by (used for) operating activities

$

(67,509)


$

(48,180)

Capital expenditures


(15,621)



(13,268)

Proceeds from sale of property and equipment


1,528



42

Free cash flow

$

(81,602)


$

(61,406)









Pentair, Inc. and Subsidiaries

Supplemental Financial Information by Reportable Business Segment (Unaudited)








First Qtr


First Qtr

In thousands


2012


2011

Net sales to external customers





Water & Fluid Solutions

$

586,978

$

515,368

Technical Products


271,199


274,905

Consolidated

$

858,177

$

790,273






Intersegment sales





Water & Fluid Solutions

$

73

$

455

Technical Products


1,359


999

Other


(1,432)


(1,454)

Consolidated

$

--

$

--






Operating income (loss)





Water & Fluid Solutions

$

63,677

$

56,528

Technical Products


50,459


48,087

Other


(29,184)


(18,438)

Consolidated

$

84,952

$

86,177






Operating income as a percent of net sales





Water & Fluid Solutions


10.8%


11.0%

Technical Products


18.6%


17.5%

Consolidated


9.9%


10.9%

Pentair, Inc. and Subsidiaries




Reconciliation of the GAAP "As Reported" year ending December 31, 2012 to the "Adjusted" non-GAAP




excluding the effect of 2012 adjustments (Unaudited)




















Total Pentair



First Quarter

Year




In millions, except per-share data


2012

2012




Net sales



$ 858.2

approx $3,700












Operating income - as reported


85.0

approx 433 - 458




% of net sales



9.9%

approx. 12%




Adjustments:








Deal related costs



11.8

11.8




Operating income - as adjusted


96.8

approx 445 - 470




% of net sales



11.3%

approx. 12%+












Net income attributable to Pentair, Inc. - as reported

60.8

approx 265 - 281




Interest expense



(1.2)

(1.2)




Adjustments net of tax



4.4

4.4




Net income from continuing operations attributable






to Pentair, Inc. - as adjusted



64.0

approx 268 - 284












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





Diluted earnings per common share - as reported

$ 0.61

$2.62 - $2.77




Adjustments



0.03

0.03




Diluted earnings per common share - as adjusted

$ 0.64

$2.65 - $2.80




























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 millions, except per-share data


2011

2011

2011

2011

2011

Net sales



$ 790.3

$ 910.2

$ 890.5

$ 865.7

$ 3,456.7









Operating income - as reported


86.2

109.4

92.9

(120.0)

168.5

% of net sales



10.9%

12.0%

10.4%

(13.9%)

4.9%

Adjustments:








CPT deal related costs



1.7

6.1

--

0.5

8.3

Restructuring



--

--

2.1

10.8

12.9

Inventory step-up and customer backlog

0.2

5.3

5.8

2.2

13.5

Goodwill impairment



--

--

--

200.5

200.5

Operating income - as adjusted


88.1

120.8

100.8

94.0

403.7

% of net sales



11.1%

13.3%

11.3%

10.9%

11.7%









Net income attributable to Pentair, Inc. - as reported

50.5

66.7

51.1

(134.1)

34.2

Adjustments net of tax



1.3

8.8

6.6

189.8

206.5

Net income from continuing operations attributable






to Pentair, Inc. - as adjusted



51.8

75.5

57.7

55.7

240.7









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 millions

2011

2011

2011

2011

2011

Net sales

$ 515.4

$ 632.0

$ 614.6

$ 607.9

$ 2,369.8







Operating income - as reported

$ 56.5

$ 84.5

$ 59.6

$ (142.3)

$ 58.3

% of net sales

11.0%

13.4%

9.7%

(23.4%)

2.5%

Adjustments:






Restructuring

--

--

2.0

7.8

9.8

Inventory step-up and customer backlog

0.2

5.3

5.8

2.2

13.5

Goodwill impairment

--

--

--

200.5

200.5

Operating income - as adjusted

56.7

89.8

67.4

68.2

282.1

% of net sales

11.0%

14.2%

11.0%

11.2%

11.9%













Technical Products






Net sales

$ 274.9

$ 278.2

$ 276.0

$ 257.8

$ 1,086.9







Operating income - as reported

$ 48.1

$ 48.3

$ 48.6

$ 40.3

$ 185.3

% of net sales

17.5%

17.3%

17.6%

15.6%

17.0%

Adjustments - Restructuring

--

--

0.1

2.0

2.1

Operating income - as adjusted

48.1

48.3

48.7

42.3

187.4

% of net sales

17.5%

17.3%

17.7%

16.4%

17.2%







SOURCE Pentair, Inc.

Categories: Press Releases