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Pentair Reports First Quarter 2019 Results
04.17.2019
  • First quarter sales of $689 million.
  • First quarter GAAP EPS of $0.30 and adjusted EPS of $0.43.
  • The company reiterates its 2019 GAAP EPS from continuing operations guidance of approximately $2.04 - $2.09 and on an adjusted basis of approximately $2.30 - $2.35.

Reconciliations of GAAP to Non-GAAP measures are in the attached financial tables.

LONDON--(BUSINESS WIRE)-- Pentair plc (NYSE: PNR) today announced first quarter 2019 sales of $689 million. Sales were down 6 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales declined 4 percent in the first quarter. First quarter 2019 earnings per diluted share from continuing operations (“EPS”) were $0.30 compared to $0.32 in the first quarter of 2018. On an adjusted basis, the company reported EPS of $0.43 compared to $0.49 in the first quarter of 2018. Segment income, adjusted net income, free cash flow, and adjusted EPS are described in the attached schedules.

First quarter 2019 operating income was $68 million, down 27 percent compared to operating income for the first quarter of 2018, and return on sales (“ROS”) was 9.8 percent, a decrease of 290 basis points when compared to the first quarter of 2018. On an adjusted basis, the company reported segment income of $99 million for the first quarter, down 16 percent compared to segment income for the first quarter of 2018, and ROS was 14.3 percent, a decrease of 170 basis points when compared to the first quarter of 2018.

Net cash used for operating activities of continuing operations was $257 million and free cash flow usage from continuing operations was $274 million for the quarter.

Pentair paid a regular cash dividend of $0.18 per share in the first quarter of 2019. Pentair previously announced on December 10, 2018 that its Board of Directors approved a 3 percent increase in the company's regular annual cash dividend rate for 2019 to $0.72 from $0.70, adjusted for the spin-off of nVent Electric plc. This marks the 43rd consecutive year that Pentair has increased its dividend.

“Wet and cold weather delayed pool construction activity in several key markets,” said John L. Stauch, Pentair President and Chief Executive Officer. “We have not seen any significant changes in demand trends within the important Aquatics markets. The inclement weather also impacted our higher margin Specialty Ag Spray business within Flow Technologies. As a result of slower sell-through during the first quarter, inventory levels were not reduced to the levels we originally anticipated. We expect inventory levels in the channel to come down as stronger sell-through resumes in the second and third quarters.”

“We believe this is a 2019 event and we expect to be even better positioned for the season next year. We continue to invest in our prioritized growth initiatives around advancing pool growth and accelerating residential and commercial water treatment. We are accelerating our productivity initiatives across operations and material sourcing and optimizing our cost structure. We have a strong capital structure, solid free cash flow generation, and we are continuing to invest in our strategy to be the leading residential and commercial water treatment company.”

OUTLOOK

The company reiterates its estimated 2019 GAAP EPS from continuing operations of approximately $2.04 - $2.09 and on an adjusted EPS basis of approximately $2.30 - $2.35. The company reiterates its full year 2019 sales guidance of up approximately 1 to 2 percent on a reported basis and approximately flat to up 1 percent on a core basis compared to full year 2018. The company expects full year free cash flow to approximate adjusted net income.

In addition, the company introduces second quarter 2019 GAAP EPS from continuing operations guidance of approximately $0.58 - $0.61 and on an adjusted EPS basis of approximately $0.63 - $0.66. The company expects second quarter sales to be up approximately 1 to 2 percent on a reported basis and approximately flat to up 1 percent on a core basis compared to second quarter 2018.

EARNINGS CONFERENCE CALL

Pentair President and Chief Executive Officer John L. Stauch and Chief Financial Officer Mark C. Borin will discuss the company’s first quarter 2019 results on a two-way conference call with investors at 9:00 a.m. Eastern today. A live audio webcast of the call, along with the related presentation, can be accessed in the Investor Relations 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, each 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 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" 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 overall global economic and business conditions impacting our business, including the strength of housing and related markets; demand, competition and pricing pressures in the markets we serve; volatility in currency exchange rates; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; the ability to successfully integrate the Aquion and Pelican Water Systems acquisitions; the ability to achieve the benefits of our restructuring plans and cost reduction initiatives; risks associated with operating foreign businesses; the impact of material cost and other inflation; the impact of seasonality of sales and weather conditions; our ability to comply with laws and regulations; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits or impact trade agreements and tariffs; the outcome of litigation and governmental proceedings; the ability to realize the anticipated benefits from the separation of nVent Electric plc from Pentair; 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 Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2018. All forward-looking statements speak only as of the date of this release. Pentair plc assumes no obligation, and disclaims any obligation, to update the information contained in this release.

ABOUT PENTAIR PLC

At Pentair, we believe the health of our world depends on reliable access to clean water. We deliver a comprehensive range of smart, sustainable water solutions to homes, business and industry around the world. Our industry leading and proven portfolio of solutions enables our customers to access clean, safe water. Whether it’s improving, moving or enjoying water, we help manage the world’s most precious resource. Smart, Sustainable, Water Solutions. For Life.

Pentair had revenue in 2018 of $3 billion, and trades under the ticker symbol PNR. With approximately 130 locations in 34 countries and 10,000 employees, we believe that the future of water depends on us. To learn more, visit www.pentair.com.

 
Pentair plc and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
     
Three months ended
March 31, March 31,
In millions, except per-share data     2019   2018
Net sales $ 688.9 $ 732.6
Cost of goods sold       453.3       479.3  
Gross profit 235.6 253.3
% of net sales 34.2 % 34.6 %
Selling, general and administrative 147.3 141.8
% of net sales 21.4 % 19.4 %
Research and development 20.7 18.8
% of net sales       3.0 %     2.6 %
Operating income 67.6 92.7
% of net sales       9.8 %     12.7 %
Other (income) expense:
(Gain) loss on sale of business (3.5 ) 5.3
Other expense 0.6 0.4
Net interest expense 7.3 13.5
% of net sales       1.1 %     1.8 %
Income from continuing operations before income taxes 63.2 73.5
Provision for income taxes 10.8 15.1
Effective tax rate       17.1 %     20.5 %
Net income from continuing operations 52.4 58.4
(Loss) income from discontinued operations, net of tax       (1.1 )     44.5  
Net income     $ 51.3     $ 102.9  
Earnings (loss) per ordinary share
Basic
Continuing operations $ 0.31 $ 0.33
Discontinued operations       (0.01 )     0.24  
Basic earnings per ordinary share     $ 0.30     $ 0.57  
Diluted
Continuing operations $ 0.30 $ 0.32
Discontinued operations             0.25  
Diluted earnings per ordinary share     $ 0.30     $ 0.57  
Weighted average ordinary shares outstanding
Basic 171.6 179.2
Diluted 172.5 181.5
Cash dividends paid per ordinary share $ 0.18 $ 0.35
 
 
Pentair plc and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
     

March 31,
2019

December 31,
2018
In millions      
Assets
Current assets
Cash and cash equivalents $ 78.9 $ 74.3
Accounts and notes receivable, net 645.7 488.2
Inventories 421.8 387.5
Other current assets       105.2     89.4
Total current assets 1,251.6 1,039.4
Property, plant and equipment, net 279.1 272.6
Other assets
Goodwill 2,283.0 2,072.7
Intangibles, net 361.5 276.3
Other non-current assets       207.0     145.5
Total other assets       2,851.5     2,494.5
Total assets     $ 4,382.2   $ 3,806.5
Liabilities and Equity
Current liabilities
Accounts payable $ 265.3 $ 378.6
Employee compensation and benefits 94.2 111.7
Other current liabilities       345.8     328.4
Total current liabilities 705.3 818.7
Other liabilities
Long-term debt 1,370.7 787.6
Pension and other post-retirement compensation and benefits 89.8 90.0
Deferred tax liabilities 124.6 105.9
Other non-current liabilities       221.4     168.2
Total liabilities       2,511.8     1,970.4
Equity       1,870.4     1,836.1
Total liabilities and equity     $ 4,382.2   $ 3,806.5
 
 
Pentair plc and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
    Three months ended
March 31,     March 31,
In millions     2019     2018
Operating activities
Net income $ 51.3 $ 102.9
Loss (income) from discontinued operations, net of tax 1.1 (44.5 )
Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities of continuing operations
Equity income of unconsolidated subsidiaries (0.6 ) (0.6 )
Depreciation 12.0 12.6
Amortization 8.2 9.3
Deferred income taxes (1.7 ) (9.9 )
(Gain) loss on sale of business (3.5 ) 5.3
Share-based compensation 5.4 6.0
Trade name and other impairment 15.3
Changes in assets and liabilities, net of effects of business acquisitions
Accounts and notes receivable (154.0 ) (146.2 )
Inventories (22.2 ) (8.4 )
Other current assets (22.5 ) 5.6
Accounts payable (118.2 ) (59.7 )
Employee compensation and benefits (18.9 ) (30.1 )
Other current liabilities (8.3 ) (39.6 )
Other non-current assets and liabilities       (0.5 )       3.3  
Net cash used for operating activities of continuing operations (257.1 ) (194.0 )
Net cash provided by operating activities of discontinued operations       0.8         26.4  
Net cash used for operating activities (256.3 ) (167.6 )
Investing activities
Capital expenditures (16.8 ) (11.5 )
Proceeds from sale of property and equipment 0.3
Proceeds from (payments due to) the sale of businesses, net 0.7 (13.8 )
Acquisitions, net of cash acquired (287.2 ) (0.9 )
Other       (1.5 )        
Net cash used for investing activities of continuing operations (304.5 ) (26.2 )
Net cash used for investing activities of discontinued operations               (5.0 )
Net cash used for investing activities (304.5 ) (31.2 )
Financing activities
Net receipts of commercial paper and revolving long-term debt 584.1 417.5
Shares issued to employees, net of shares withheld 5.9 0.9
Repurchases of ordinary shares (150.0 )
Dividends paid       (31.0 )       (63.3 )
Net cash provided by financing activities of continuing operations 559.0 205.1
Net cash provided by financing activities of discontinued operations               792.7  
Net cash provided by financing activities 559.0 997.8
Change in cash held for sale (809.7 )
Effect of exchange rate changes on cash and cash equivalents       6.4         (4.8 )
Change in cash and cash equivalents 4.6 (15.5 )
Cash and cash equivalents, beginning of period       74.3         86.3  
Cash and cash equivalents, end of period     $ 78.9       $ 70.8  
 
 
Pentair plc and Subsidiaries
Reconciliation of the GAAP operating activities cash flow to the non-GAAP free cash flow (Unaudited)
 
    Three months ended
March 31,   March 31,
In millions     2019   2018
Net cash used for operating activities of continuing operations $ (257.1 ) $ (194.0 )
Capital expenditures (16.8 ) (11.5 )
Proceeds from sale of property and equipment       0.3        
Free cash flow from continuing operations     $ (273.6 )   $ (205.5 )
Net cash provided by operating activities of discontinued operations 0.8 26.4
Capital expenditures of discontinued operations (5.3 )
Proceeds from sale of property and equipment of discontinued operations             2.3  
Free cash flow     $ (272.8 )   $ (182.1 )
 
 
Pentair plc and Subsidiaries
Supplemental Financial Information by Reportable Segment (Unaudited)
     
2019   2018
First First
In millions     Quarter   Quarter
Net sales
Aquatic Systems $ 220.5 $ 240.4
Filtration Solutions 239.3 251.6
Flow Technologies 228.7 240.3
Other       0.4       0.3  
Consolidated     $ 688.9     $ 732.6  
Segment income (loss)
Aquatic Systems $ 52.4 $ 60.0
Filtration Solutions 33.7 33.7
Flow Technologies 30.1 38.7
Other       (17.5 )     (15.4 )
Consolidated     $ 98.7     $ 117.0  
Return on sales
Aquatic Systems 23.8 % 25.0 %
Filtration Solutions 14.1 % 13.4 %
Flow Technologies       13.2 %     16.1 %
Consolidated       14.3 %     16.0 %
 
 
Pentair plc and Subsidiaries
Reconciliation of the GAAP year ended December 31, 2019 to the non-GAAP
excluding the effect of 2019 adjustments (Unaudited)
           
Actual Forecast
First

Second

Full

In millions, except per-share data     Quarter

Quarter

Year

Net sales     $ 688.9   approx   Up 1 - 2 %   approx   Up 1 - 2 %
Operating income 67.6 approx Up 16 - 18 % approx Up 9 - 11 %
% of net sales 9.8 %
Adjustments:
Restructuring and other 1.1 approx approx 1
Intangible amortization 8.2 approx 9 approx 35
Asset impairment 15.3 approx approx 15
Inventory step-up 1.7 approx 1 approx 3
Deal-related costs and expenses 4.2 approx approx 4
Equity income of unconsolidated subsidiaries       0.6   approx   1   approx   4
Segment income 98.7 approx Down 5 - 7 % approx Flat - Up 2 %
Return on sales 14.3 %
Net income from continuing operations—as reported 52.4 approx $100 - $105 approx $351 - $360
Gain on sale of business (3.5 ) approx approx (4)
Adjustments to operating income 30.5 approx 10 approx 58
Income tax adjustments       (5.4 ) approx   (2)   approx   (12)
Net income from continuing operations—as adjusted     $ 74.0   approx   $108 - $113   approx   $393 - $402
Continuing earnings per ordinary share—diluted
Diluted earnings per ordinary share—as reported $ 0.30 approx $0.58 - $0.61 approx $2.04 - $2.09
Adjustments       0.13   approx   0.05   approx   0.26
Diluted earnings per ordinary share—as adjusted     $ 0.43   approx   $0.63 - $0.66   approx   $2.30 - $2.35
 
 
Pentair plc and Subsidiaries
Reconciliation of the GAAP year ended December 31, 2018 to the non-GAAP
excluding the effect of 2018 adjustments (Unaudited)
           
First Second Third Fourth

Full

In millions, except per-share data     Quarter   Quarter   Quarter   Quarter  

Year

Net sales     $ 732.6     $ 780.6     $ 711.4     $ 740.5     $ 2,965.1  
Operating income 92.7 122.6 108.4 113.0 436.7
% of net sales 12.7 % 15.7 % 15.2 % 15.3 % 14.7 %
Adjustments:
Restructuring and other 5.6 19.0 3.5 3.7 31.8
Intangible amortization 9.3 9.1 8.6 7.9 34.9
Trade name and other impairment 6.0 6.0 12.0
Corporate allocations 8.8 2.2 11.0
Deal-related costs and expenses 2.0 2.0
Equity income of unconsolidated subsidiaries       0.6       5.2       1.3       1.3       8.4  
Segment income 117.0 164.1 121.8 133.9 536.8
Return on sales 16.0 % 21.0 % 17.1 % 18.1 % 18.1 %
Net income from continuing operations—as reported 58.4 77.9 91.2 94.2 321.7
Loss on sale of business 5.3 0.9 0.2 0.9 7.3
Loss on early extinguishment of debt 17.1 17.1
Interest expense adjustment 6.0 2.4 8.4
Pension and other post-retirement mark-to-market loss 2.2 1.4 3.6
Adjustments to operating income 23.7 36.3 12.1 19.6 91.7
Income tax adjustments       (4.5 )     (7.1 )     (10.3 )     (11.5 )     (33.4 )
Net income from continuing operations—as adjusted     $ 88.9     $ 127.5     $ 95.4     $ 104.6     $ 416.4  
Continuing earnings per ordinary share—diluted
Diluted earnings per ordinary share—as reported $ 0.32 $ 0.44 $ 0.52 $ 0.54 $ 1.81
Adjustments       0.17       0.27       0.02       0.06       0.54  
Diluted earnings per ordinary share—as adjusted     $ 0.49     $ 0.71     $ 0.54     $ 0.60     $ 2.35  
 
 
Pentair plc and Subsidiaries
Reconciliation of Net Sales Growth to Core Net Sales Growth by Segment
For the Quarter Ending March 31, 2019 (Unaudited)
 
  Actual
Q1 Net Sales Growth
    Core   Currency   Acq. / Div.   Total
Total Pentair (4.2 )%   (2.4 )%   0.6 %   (6.0 )%
Aquatic Systems (6.4 )% (0.8 )% (1.1 )% (8.3 )%
Filtration Solutions (6.0 )% (3.7 )% 4.8 % (4.9 )%
Flow Technologies   (0.3 )%   (2.4 )%   (2.1 )%   (4.8 )%
 
 
Pentair plc and Subsidiaries
Reconciliation of Net Sales Growth to Core Net Sales Growth by Segment
For the Quarter Ending June 30, 2019 and Year Ending December 31, 2019 (Unaudited)
       
    Forecast
Q2 Net Sales Growth Full Year Net Sales Growth
    Acq. /   Acq. /
        Core   Currency   Div.   Total Core   Currency   Div.   Total
Total Pentair approx 0 - 1 % (2) % 3 % 1 - 2 % 0 - 1 % (2) % 3 % 1 - 2 %
Aquatic Systems approx (1) - 0 % 0 % 0 % (1) - 0 % (2) - 0 % 0 % 0 % (2) - 0 %
Filtration Solutions approx (2) - 0 % (3) % 10 % 5 - 7 % (1) - 0 % (2) % 10 % 7 - 8 %
Flow Technologies   approx   2 - 4 %   (2) %   (2) %   (2) - 0 % 2 - 4 %   (1) %   (2) %   (1) - 1 %

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

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

Source: Pentair plc

Categories: Press Releases