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Pentair Provides Financial Outlook for 2014; Reaffirms Full Year 2013 Outlook
12.17.2013


  • Company provides full year 2014 EPS outlook of $3.85 to $4.00 

  • Reaffirms 2013 adjusted EPS outlook of $3.19 to $3.21 

  • Updates 2015 synergies target to $310 million 
       Reconciliations of GAAP to Non-GAAP measures are in the attached financial tables.

SCHAFFHAUSEN, Switzerland - December 17, 2013 - Pentair Ltd. (NYSE: PNR) today provided its outlook for 2014 and reaffirmed its fourth quarter and full year 2013 sales and earnings outlook.

For full year 2014, the company is providing an earnings per diluted share (EPS) outlook of $3.85 to $4.00, which represents an increase of 20 to 25 percent from the mid-point of the 2013 adjusted EPS outlook. The company anticipates full year 2014 sales to be approximately $7.7 billion, or up 3 to 5 percent compared to estimated 2013 sales. The company expects to continue generating free cash flow in excess of net income in 2014.

"2013 has been a successful year from an integration standpoint and our productivity initiatives continue to gain momentum," said Randall J. Hogan, Chairman and Chief Executive Officer. "We have seen a number of top line headwinds moderate throughout 2013 and we expect to benefit in 2014 from stabilization in our five key verticals."

Pentair expects fourth quarter 2013 EPS to be in the range of $0.83 to $0.85, up approximately 60 percent versus the same quarter last year's pro forma adjusted EPS. The company expects full year 2013 adjusted EPS to be in the range of $3.19 to $3.21, which represents an increase of 26 percent over 2012 adjusted pro forma EPS of $2.54.

The company also stated that it remains committed to its long term growth strategies and its 2015 EPS goal of $5.00 while also raising its synergies target for 2015 to $310 million from $230 million.

CONFERENCE CALL
Pentair Chairman and CEO Randall J. Hogan and Chief Financial Officer John L. Stauch will discuss the company's outlook on a two-way conference call with investors at 8:30 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 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 press release contains statements that we believe to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward-looking statements. 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," "positioned," "strategy," "future," "outlook," "opportunity" or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the ability to complete Pentair's change in place of incorporation and realize the expected benefits from such change and change in tax residency; the ability to successfully integrate the Flow Control business and achieve expected benefits from such combination; overall global economic and business conditions; competition and pricing pressures in the markets we serve; the strength of housing and related markets; volatility in currency exchange rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; increased risks associated with operating foreign businesses; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission, including in our Quarterly Report on Form 10-Q for the quarter ended September 28, 2013 and our 2012 Annual Report on Form 10-K. All forward-looking statements speak only as of the date of this communication. Pentair Ltd. assumes no obligation, and disclaims any obligation, to update the information contained in this communication.

ABOUT PENTAIR LTD.
Pentair Ltd. (www.pentair.com) delivers industry-leading products, services and solutions for its customers' diverse needs in water and other fluids, thermal management and equipment protection. With pro forma revenues of approximately $8 billion, Pentair employs more than 30,000 people worldwide.

PENTAIR CONTACTS:
Jim Lucas
Vice President, Investor Relations
Direct: 763-656-5575
Email: jim.lucas@pentair.com

Rebecca Osborn
Senior Manager, External Communications
Direct: 763-656-5589
Email: rebecca.osborn@pentair.com

Pentair Ltd. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ended December 31, 2013 to the "Adjusted" non-GAAP
excluding the effect of 2013 adjustments (Unaudited)
Actual Forecast
In millions, except per-share data First
Quarter
Second
Quarter
Third
Quarter
Full
Year
Total Pentair
Net sales $ 1,774.5 $ 1,963.7 $ 1,824.8 approx $ 7,400
Operating income-as reported 74.3 225.9 240.0 approx 782
% of net sales 4.2 % 11.5 % 13.2 %   approx 10.6 %
Adjustments:
Inventory step-up and customer backlog 76.8 10.1 - approx 88
Restructuring and other 27.4 32.4 8.7 approx 70
Operating income-as adjusted 178.5 268.4 248.7 approx 940
% of net sales 10.1 % 13.7 % 13.6 %   approx 12.7 %
Net income attributable to Pentair Ltd.-as reported 51.7 154.1 172.8 approx 549
Gain on sale of business, net of tax (12.5 ) - - approx (13 )
Interest expense, net of tax - 1.6 - approx 2
Adjustments, net of tax 80.8 33.5 1.1 approx 115
Net income attributable to Pentair Ltd.-as adjusted 120.0 189.2 173.9 approx 653
Earnings per common share attributable to Pentair Ltd.-diluted
Diluted earnings per common share-as reported $ 0.25 $ 0.75 $ 0.85 approx $2.68 - $2.70
Adjustments 0.33 0.17 0.01 approx 0.51
Diluted earnings per common share-as adjusted $ 0.58 $ 0.92 $ 0.86 approx $3.19 - $3.21
Pentair Ltd. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ended December 31, 2013 to the "Adjusted" non-GAAP
excluding the effect of 2013 adjustments (Unaudited)
Actual Forecast
In millions First
Quarter
Second
Quarter
Third
Quarter
Full
Year
Water & Fluid Solutions
Net sales $ 782.0 $ 949.8 $ 814.3 approx $ 3,345
Operating income-as reported 74.8 136.1 105.9 approx 411-416
% of net sales 9.6 % 14.3 % 13.0 %   approx 12.4 %
Adjustments:
Restructuring and other 7.5 6.6 3.5 approx 18
Inventory step-up and customer backlog 0.6 0.2 - approx 1
Operating income-as adjusted 82.9 142.9 109.4 approx 430-435
% of net sales 10.6 % 15.0 % 13.4 %   approx 13.0 %
Valves & Controls
Net sales $ 585.8 $ 619.9 $ 611.5 approx $ 2,400
Operating income (loss)-as reported (18.6 ) 56.9 76.6 approx 187-192
% of net sales (3.2 )% 9.2 % 12.5 %   approx 7.9 %
Adjustments:
Restructuring and other 7.3 17.0 3.7 approx 28
Inventory step-up and customer backlog 70.6 10.0 - approx 81
Operating income-as adjusted 59.3 83.9 80.3 approx 296-301
% of net sales 10.1 % 13.5 % 13.1 %   approx 12.4 %
Technical Solutions
Net sales $ 410.0 $ 397.4 $ 405.9 approx $ 1,655
Operating income-as reported 53.3 65.1 82.2 approx 292-297
% of net sales 13.0 % 16.4 % 20.3 %   approx 17.8 %
Adjustments:
Restructuring and other 10.7 4.9 1.5 approx 17
Inventory step-up and customer backlog 5.7 - - approx 6
Operating income-as adjusted 69.7 70.0 83.7 approx 315-320
% of net sales 17.0 % 17.6 % 20.6 %   approx 19.2 %

Pentair Ltd. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ended December 31, 2012 to the "Adjusted" non-GAAP
excluding the effect of 2012 adjustments (Unaudited)
In millions, except per-share data First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Year
Total Pentair
Net sales $ 858.2 $ 941.5 $ 865.5 $ 1,750.9 $ 4,416.1
Operating income (loss) -as reported 86.5 119.3 55.2 (304.1 ) (43.1 )
% of net sales 10.1 % 12.7 % 6.4 % (17.4 )%   (1.0 )%
Adjustments:
Deal related costs and expenses 11.8 6.3 52.7 12.0 82.8
Inventory step-up and customer backlog - - - 179.6 179.6
Restructuring - 10.4 1.1 55.3 66.8
Trade name impairment - - - 60.7 60.7
Change in accounting method - pension and post-retirement (1.5 ) (1.5 ) (1.5 ) 146.2 141.7
Operating income-as adjusted 96.8 134.5 107.5 149.7 488.5
% of net sales 11.3 % 14.3 % 12.4 % 8.5 %   11.1 %
Net income (loss) attributable to Pentair Ltd.-as reported 61.8 72.8 31.4 (273.1 ) (107.1 )
Bond redemption and interest expense (0.8 ) - 1.8 51.9 52.9
Other adjustments net of tax 3.0 10.9 32.3 320.9 367.1
Net income attributable to Pentair Ltd.-as adjusted 64.0 83.7 65.5 99.7 312.9
Earnings per common share attributable to Pentair Ltd.-diluted
Diluted earnings (loss) per common share-as reported $ 0.62 $ 0.72 $ 0.31 $ (1.31 ) $ (0.84 )
Adjustments 0.02 0.11 0.33 1.78 3.23
Diluted earnings per common share-as adjusted $ 0.64 $ 0.83 $ 0.64 $ 0.47 $ 2.39

Pentair Ltd. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ended December 31, 2012 to the "Adjusted" non-GAAP
excluding the effect of 2012 adjustments (Unaudited)
 
In millions First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Year
Water & Fluid Solutions
Net sales $ 587.1 $ 675.4 $ 605.5 $ 771.2 $ 2,639.2
Operating income-as reported 63.7 92.0 69.2 (56.9 ) 168.0
% of net sales 10.8 % 13.6 % 11.4 % (7.4 )%   6.4 %
Adjustments:
Restructuring - 6.9 1.1 42.5 50.5
Inventory step-up and customer backlog - - - 23.4 23.4
Trade name impairment - - - 49.1 49.1
Operating income-as adjusted 63.7 98.9 70.3 58.1 291.0
% of net sales 10.8 % 14.6 % 11.6 % 7.5 %   11.0 %
Valves & Controls
Net sales $ - $ - $ - $ 548.6 $ 548.6
Operating income-as reported - - - (76.8 ) (76.8 )
% of net sales - % - % - % (14.0 )%   (14.0 )%
Adjustments:
Restructuring - - - 5.1 5.1
Inventory step-up and customer backlog - - - 113.5 113.5
Operating income-as adjusted - - - 41.8 41.8
% of net sales - % - % - % 7.6 %   7.6 %
Technical Solutions
Net sales $ 272.6 $ 267.5 $ 261.5 $ 434.8 $ 1,236.4
Operating income-as reported 50.5 50.6 52.3 11.6 165.0
% of net sales 18.5 % 18.9 % 20.0 % 2.7 %   13.3 %
Adjustments:
Restructuring - 3.1 - 9.7 12.8
Inventory step-up and customer backlog - - - 42.7 42.7
Trade name impairment - - - 11.6 11.6
Operating income-as adjusted 50.5 53.7 52.3 75.6 232.1
% of net sales 18.5 % 20.1 % 20.0 % 17.4 %   18.8 %

Pro Forma Reconciliation
Pro Forma Adjustments
2012 Total Pentair
(in millions, except EPS)
Historical
Adjusted
Results
Historical
Flow Control
Acquisition
Depreciation
&
Amortization
Other
Adjustments
Adjusted
Pro Forma
Results
First Quarter
Sales $ 858.2 $ 995.9 $ - $ (74.0 ) $ 1,780.1
Operating Income 96.8 124.9 (17.1 ) (32.2 ) 172.4
Net Income 64.0 93.7 (12.8 ) (28.1 ) 116.8
Diluted EPS 0.64 0.44 (0.06 ) (0.48 ) 0.54
Second Quarter
Sales 941.5 980.8 - (33.2 ) 1,889.1
Operating Income 134.5 143.5 (17.2 ) (24.0 ) 236.8
Net Income 83.7 107.6 (12.9 ) (14.0 ) 164.4
Diluted EPS 0.83 0.50 (0.06 ) (0.50 ) 0.77
Third Quarter
Sales 865.5 1,019.8 - (16.0 ) 1,869.3
Operating Income 107.5 119.9 (17.3 ) 5.5 215.6
Net Income 65.5 89.9 (13.0 ) 6.4 148.8
Diluted EPS 0.64 0.42 (0.06 ) (0.31 ) 0.69
Fourth Quarter
Sales 1,750.9 - - (7.1 ) 1,743.8
Operating Income 149.7 - - 16.6 166.3
Net Income 99.7 - - 12.7 112.4
Diluted EPS 0.47 - - 0.06 0.53
Full Year
Sales 4,416.1 2,996.5 - (130.3 ) 7,282.3
Operating Income 488.5 388.3 (51.6 ) (34.1 ) 791.1
Net Income 312.9 291.3 (38.7 ) (23.1 ) 542.4
Diluted EPS 2.39 1.36 (0.18 ) (1.03 ) 2.54

Note: "Other" adjustments represent the elimination of certain large projects and sales to sanctioned countries (which were terminated prior to the completion of the Flow Control acquisition), changes in corporate allocation assumptions, income taxes and share count.

Pro Forma Reconciliation
Pro Forma Adjustments
2012 Water & Fluid Solutions Segment
(in millions)
Historical
Adjusted
Results
Historical
Flow Control
Acquisition
Depreciation
&
Amortization
Other
Adjustments
Adjusted
Pro Forma
Results
First Quarter
Sales $ 587.1 $ 163.4 $ - $ (0.1 ) $ 750.4
Operating Income 63.7 11.1 (0.1 ) (1.8 ) 72.9
Second Quarter
Sales 675.4 202.3 - 0.1 877.8
Operating Income 98.9 24.3 (0.1 ) (1.7 ) 121.4
Third Quarter
Sales 605.5 202.1 - (0.1 ) 807.5
Operating Income 70.3 14.9 (0.1 ) 0.6 85.7
Fourth Quarter
Sales 771.2 - - (0.7 ) 770.5
Operating Income 58.1 - - 14.2 72.3
Full Year
Sales 2,639.2 567.8 - (0.8 ) 3,206.2
Operating Income 291.0 50.3 (0.3 ) 11.2 352.2

Note: "Other" adjustments represent changes in corporate allocation assumptions.

Pro Forma Reconciliation
Pro Forma Adjustments
2012 Valves & Controls Segment
(in millions)
Historical
Adjusted
Results
Historical
Flow Control
Acquisition
Depreciation
&
Amortization
Other
Adjustments
Adjusted
Pro Forma
Results
First Quarter
Sales $ - $ 621.3 $ - $ (12.7 ) $ 608.6
Operating Income - 83.7 (12.3 ) (10.6 ) 60.8
Second Quarter
Sales - 602.4 - (5.0 ) 597.4
Operating Income - 93.1 (12.4 ) (9.8 ) 70.9
Third Quarter
Sales - 629.6 - (9.5 ) 620.1
Operating Income - 70.9 (12.5 ) 11.3 69.7
Fourth Quarter
Sales 548.6 - - (1.9 ) 546.7
Operating Income 41.8 - - 0.4 42.2
Full Year
Sales 548.6 1,853.3 - (29.1 ) 2,372.8
Operating Income 41.8 247.7 (37.2 ) (8.7 ) 243.6

Note: "Other" adjustments represent the elimination of sales to sanctioned countries (which were terminated prior to the completion of the Flow Control acquisition) and changes in corporate allocation assumptions.

Pro Forma Reconciliation
Pro Forma Adjustments
2012 Technical Solutions Segment
(in millions)
Historical
Adjusted
Results
Historical
Flow Control
Acquisition
Depreciation
&
Amortization
Other
Adjustments
Adjusted
Pro Forma
Results
First Quarter
Sales $ 272.6 $ 211.2 $ - $ (62.7 ) $ 421.1
Operating Income 50.5 35.8 (4.7 ) (19.7 ) 61.9
Second Quarter
Sales 267.5 176.1 - (29.8 ) 413.8
Operating Income 53.7 27.9 (4.7 ) (12.4 ) 64.5
Third Quarter
Sales 261.5 188.1 - (7.9 ) 441.7
Operating Income 52.3 39.0 (4.7 ) (6.4 ) 80.2
Fourth Quarter
Sales 434.8 - - (8.3 ) 426.5
Operating Income 75.6 - - 2.0 77.6
Full Year
Sales 1,236.4 575.4 - (108.6 ) 1,703.2
Operating Income 232.1 102.7 (14.1 ) (36.6 ) 284.1

Note: "Other" adjustments represent the elimination of certain large projects and changes in corporate allocation assumptions.


HUG#1750337
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