Pentair Reports Third Quarter Results; Merger with Tyco's Flow Control Business Completed

- Third quarter adjusted EPS of $0.64 per share, up 10 percent over the same quarter last year. Sales up 1% in local currencies to $866 million.

- Legacy Pentair on track to previously communicated EPS expectations.

- Company reiterates expectations of EPS accretion of $0.40 in 2013 related to merger with Tyco's Flow Control business and $5.00 EPS in 2015.

- Further updates to be given at Investor and Analyst Day on November 27.

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

Nov 01, 2012, 07:00 ET from Pentair Ltd.

SCHAFFHAUSEN, Switzerland, Nov. 1, 2012 /PRNewswire/ -- Pentair Ltd. (NYSE: PNR) today announced third quarter 2012 sales of $866 million, an increase of 1 percent from the prior year quarter excluding 3 points of foreign exchange translation.  When adjusted to exclude acquisition-related and repositioning costs, third quarter 2012 earnings per diluted share ("EPS") were $0.64, up 10 percent from adjusted EPS of $0.58 in the third quarter of last year.  EPS on a GAAP basis, including acquisition-related and repositioning costs for the third quarter, were $0.30 compared to $0.51 of EPS in the third quarter last year. 

(Logo:  http://photos.prnewswire.com/prnh/20120307/CG65728LOGO)

Adjusted operating income was $108 million, up 7 percent, and operating margins expanded 110 basis points to 12.4 percent.  Pricing and productivity gains more than offset material inflation and higher labor costs.  On a GAAP basis, the company delivered operating income of $54 million.

Free cash flow in the quarter was $62 million, inclusive of $11 million of deal-related costs resulting in $203 million for the first nine months of 2012, inclusive of $26 million of deal-related costs.  The company expects to deliver full year free cash flow greater than 100% of net income.

As previously communicated, Pentair completed its merger with Tyco's Flow Control business on September 28, 2012, more than doubling the revenue for Pentair.  The combination of the two companies better positions Pentair to fully participate in fast growth regions where rising GDP and urbanization are driving infrastructure, energy, and water demands. The company's fourth quarter earnings will include the results related to Tyco's Flow Control business.

"Although the global economic environment remains cloudy and foreign exchange continues to negatively impact the top line, we continue to drive strong margin expansion led by price and productivity," said Randall J. Hogan, Pentair chairman and chief executive officer.  "Great execution allowed us to deliver record third quarter adjusted earnings per share while also closing the transformational merger with Tyco's Flow Control business."  

"The integration of the new Pentair, while in the early stages, is well underway and the leadership team is even more excited after visiting more than 30 flow control facilities around the world and meeting with more than a quarter of our new employees in the first four weeks," continued Hogan.  "The enthusiasm around the growth opportunities and the ability to accelerate operational performance with the Pentair Integrated Management System gives me even more confidence in our ability to deliver the expected $5.00 of earnings per share by 2015."

THIRD QUARTER BUSINESS HIGHLIGHTS

Water & Fluid Solutions sales were down 1 percent year-over-year to $605 million, but increased 2 percent when excluding the impact of foreign exchange.  In fast growth regions, Water & Fluid Solutions sales grew 11 percent driven by strength in Latin America and the Middle East.  Within Water & Fluid Solutions, the third quarter sales performances were as follows:

  • Flow Technologies, which accounted for approximately 40 percent of Water & Fluid Solutions sales, was down 5 percent versus the prior year quarter, as strength in agriculture and infrastructure was offset by continued weakness in Western Europe and flood related products in the U.S. impacted by the unusually dry weather.
  • Treatment/Process, which accounted for approximately 40 percent of Water & Fluid Solutions sales, was flat.  Foreign exchange was a major headwind, which negated a 5 percent volume and price gain on strength in energy and residential markets.
  • Aquatic Systems, which accounted for approximately 20 percent of Water & Fluid Solutions sales, was up 6 percent year-over-year driven by pool dealer expansion and continued strong demand for Pentair's energy efficient products and solutions.

Water & Fluid Solutions' third quarter adjusted operating income of $70 million was up 4 percent as compared to $67 million in the same period last year.  Adjusted operating margins increased by 60 basis points to 11.6 percent.  Pricing and productivity initiatives more than offset inflation during the quarter.  Including repositioning charges Water & Fluid Solutions' third quarter reported operating income was $69 million.

Technical Solutions delivered third quarter 2012 sales of $260 million, down 6 percent versus the prior year quarter, including a three-percentage point unfavorable impact from foreign exchange.

  • Enclosures & Cabinets, which made up approximately 58% of Technical Solutions sales, was up 2% excluding the impact of foreign exchange, primarily on the continued strength of global Industrial, which was offset slightly by military markets.
  • Systems & Solutions and Accessories, which made up approximately 32% of Technical Solutions sales, was down 10% in the quarter related to significant project delays and OEM orders primarily related to global data communications applications.
  • Cooling, which made up approximately 10% of Technical Solutions sales, was flat excluding the impact of foreign exchange, with strong industrial growth offset by significant declines in the datacom and telecom markets.

Technical Solutions reported third quarter operating income of $52 million, up 7 percent compared to $49 million in the same quarter last year.  Third quarter 2012 operating margins increased to a third quarter record of 20.1 percent, an increase of 240 basis points when compared to the prior year quarter.  Pricing and productivity gains related to a richer mix of standard products more than offset material and labor inflation.

OUTLOOK

The legacy Pentair business remains on track to deliver adjusted EPS approximating $2.73 per share, which represents the mid-point of its prior guidance of $2.70 to $2.76 on $3.6 billion in revenue. 

Pentair Ltd. is introducing adjusted fourth quarter 2012 EPS guidance of $0.40 to $0.45.  These numbers are inclusive of a substantial increase in its share count following the merger with Tyco's Flow Control business, incremental corporate and integration team expenses, estimated deal amortization costs in line with previous estimates, approximately $25 million of branding/transition costs to be incurred during the fourth quarter, and a tax rate of approximately 30%, which does not yet reflect the tax strategy savings that the company expects to realize in 2013 and beyond.

In addition, the company is updating its full year 2012 adjusted EPS outlook to a range of $2.30 to $2.35, which includes the items mentioned above.  GAAP EPS guidance for the fourth quarter and full year is ($0.22) to ($0.17) and $0.92 to $0.97, respectively, which include repositioning and deal-related expenses, inventory step-up and backlog amortization, specific tax benefits, and the make-whole provision relating to an early bond redemption.

"We are excited about the expanded opportunities across the combined company to accelerate both revenue growth and earnings," said Hogan.  "The teams are building robust plans to ensure that we achieve expected $0.40 of EPS accretion against legacy Pentair's 2013 expectation and ultimately $5.00 per share of EPS in 2015.  We will share these plans in detail during our investor conference scheduled for November 27th in New York City."

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 2012 results on a two-way conference call with investors at 10:00 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 press release contains statements that Pentair believes to be "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including, without limitation, statements regarding the anticipated benefits of the merger or Pentair's anticipated financial results, 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", "expect", "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 Pentair's 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 successfully integrate Pentair and the flow control business and achieve expected benefits from the merger; overall global economic and business conditions; competition and pricing pressures in the markets Pentair serves; 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 market 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 Pentair's long-term strategic operating goals. Additional information concerning these and other factors is contained in Pentair's filings with the U.S. Securities and Exchange Commission ("SEC"), including in Pentair's Quarterly Report on Form 10-Q for the quarter ended September 29, 2012. All forward-looking statements speak only as of the date of this press release. Pentair assumes no obligation, and disclaims any obligation, to update the information contained in this press release.

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:

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

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

Pentair Ltd. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

Three months ended

Nine months ended

 

In thousands, except per-share data

September 29,

2012

October 1,

2011

September 29,

2012

October 1,

2011

Net sales

$

865,512

$

890,546

$

2,665,214

$

2,590,994

Cost of goods sold

587,435

618,484

1,794,290

1,782,137

Gross profit

278,077

272,062

870,924

808,857

% of net sales

32.1%

30.6%

32.7%

31.2%

Selling, general and administrative

204,665

159,068

553,120

462,260

% of net sales

23.6%

17.9%

20.8%

17.8%

Research and development

19,735

20,091

61,383

58,095

% of net sales

2.3%

2.3%

2.3%

2.3%

Operating income

53,677

92,903

256,421

288,502

% of net sales

6.2%

10.4%

9.6%

11.1%

Other (income) expense:

Equity income of unconsolidated subsidiaries

(616)

(574)

(2,301)

(1,481)

Net interest expense

18,620

17,373

49,467

41,311

% of net sales

2.2%

2.0%

1.9%

1.6%

Income before income taxes and noncontrolling interest

35,673

76,104

209,255

248,672

Provision for income taxes

4,023

24,050

41,966

76,447

effective tax rate

11.3%

31.6%

20.1%

30.7%

Net income before noncontrolling interest

31,650

52,054

167,289

172,225

Noncontrolling interest 

1,232

962

4,227

3,880

Net income attributable to Pentair Ltd.

$

30,418

$

51,092

$

163,062

$

168,345

Earnings per common share attributable to Pentair Ltd.

Basic

$

0.30

$

0.52

$

1.64

$

1.71

Diluted

$

0.30

$

0.51

$

1.60

$

1.69

Weighted average common shares outstanding

Basic

100,445

98,472

99,484

98,228

Diluted

102,910

99,802

101,708

99,759

Cash dividends paid per common share

$

0.22

$

0.20

$

0.66

$

0.60

 

Pentair Ltd. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

September 29,

December 31,

October 1,

In thousands

2012

2011

2011

Assets

Current assets

Cash and cash equivalents

$

642,570

$

50,077

$

52,665

Accounts and notes receivable, net

1,319,561

569,204

556,688

Inventories

1,379,971

449,863

459,916

Deferred taxes

131,531

60,899

61,411

Prepaid expenses and other current assets

266,813

107,792

147,568

Total current assets

3,740,446

1,237,835

1,278,248

Property, plant and equipment, net

1,156,327

387,525

394,922

Other assets

Goodwill

4,766,519

2,273,918

2,516,692

Intangibles, net

1,954,512

592,285

619,262

Other

354,531

94,750

73,319

Total other assets

7,075,562

2,960,953

3,209,274

Total assets

$

11,972,335

$

4,586,313

$

4,882,443

Liabilities and Shareholders' Equity

Current liabilities

Short-term borrowings

$

17

$

3,694

$

29,705

Current maturities of long-term debt

501,375

1,168

1,194

Accounts payable

602,707

294,858

281,448

Dividends payable

142,999

Employee compensation and benefits

304,029

109,361

117,538

Current pension and post-retirement benefits

14,790

9,052

8,733

Accrued product claims and warranties

64,498

42,630

43,920

Income taxes

14,547

26,283

Accrued rebates and sales incentives

153,645

37,009

45,231

Other current liabilities

347,889

129,522

163,550

Total current liabilities

2,131,949

641,841

717,602

Other liabilities

Long-term debt

1,495,369

1,304,225

1,317,454

Pension and other retirement compensation

382,181

248,615

190,221

Post-retirement medical and other benefits

28,963

31,774

26,933

Long-term income taxes

49,041

26,470

23,891

Deferred taxes

539,451

188,957

228,737

Other non-current liabilities

279,140

97,039

79,489

Total liabilities

4,906,094

2,538,921

2,584,327

Redeemable noncontrolling interest

100,000

Shareholders' equity

6,966,241

2,047,392

2,298,116

Total liabilities and shareholders' equity

$

11,972,335

$

4,586,313

$

4,882,443

Days sales in accounts receivable (13 month moving average)(1)

60

61

61

Days inventory on hand (13 month moving average) (1)

86

83

83

Days in accounts payable (13 month moving average) (1)

70

71

71

(1) Calculations exclude balance sheet accounts related to amounts acquired or assumed in the Merger.

 

Pentair Ltd. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine months ended

 

In thousands

September 29,

2012

October 1,

2011

Operating activities

Net income before noncontrolling interest

$

167,289

$

172,225

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

Equity income of unconsolidated subsidiaries

(2,301)

(1,481)

Depreciation

48,590

49,079

Amortization

29,394

29,807

Deferred income taxes

4,039

4,445

Stock compensation

28,527

14,695

Excess tax benefits from stock-based compensation

(2,145)

(3,137)

Loss (gain) on sale of assets

(3,271)

702

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

Accounts and notes receivable

27,301

22,657

Inventories

(600)

15,633

Prepaid expenses and other current assets

(4,478)

(26,380)

Accounts payable

(30,673)

(45,759)

Employee compensation and benefits

(14,944)

(12,334)

Accrued product claims and warranties

2,220

115

Income taxes

(12,686)

18,045

Other current liabilities

47,414

46,924

Pension and post-retirement benefits

(20,062)

(23,636)

Other assets and liabilities

(16,263)

(21,041)

Net cash provided by (used for) operating activities

247,351

240,559

Investing activities

Capital expenditures

(49,942)

(53,063)

Proceeds from sale of property and equipment

5,130

139

Acquisitions, net of cash acquired

671,797

(733,105)

Other

(3,074)

(441)

Net cash provided by (used for) investing activities

623,911

(786,470)

Financing activities

Net short-term borrowings 

(3,683)

24,772

Proceeds from long-term debt

500,860

1,370,423

Repayment of long-term debt

(723,443)

(771,793)

Debt issuance costs

(3,122)

(8,973)

Excess tax benefits from stock-based compensation

2,145

3,137

Stock issued to employees, net of shares withheld

21,972

11,788

Repurchases of common stock

(12,785)

Dividends paid

(66,153)

(59,669)

Net cash provided by (used for) financing activities

(271,424)

556,900

Effect of exchange rate changes on cash and cash equivalents

(7,345)

(4,380)

Change in cash and cash equivalents

592,493

6,609

Cash and cash equivalents, beginning of period

50,077

46,056

Cash and cash equivalents, end of period

$

642,570

$

52,665

Free cash flow

Net cash provided by (used for) operating activities

$

247,351

$

240,559

Capital expenditures

(49,942)

(53,063)

Proceeds from sale of property and equipment

5,130

139

Free cash flow

$

202,539

$

187,635

Pentair Ltd. and Subsidiaries

Supplemental Financial Information by Reportable Segment (Unaudited)

First Qtr

Second Qtr

Third Qtr

Nine Months

In thousands

2012

2012

2012

2012

Net sales to external customers

Water & Fluid Solutions

$

586,978

$

675,522

$

605,390

$

1,867,890

Technical Solutions

271,199

266,003

260,122

797,324

Consolidated

$

858,177

$

941,525

$

865,512

$

2,665,214

Intersegment sales

Water & Fluid Solutions

$

73

$

(116)

$

60

$

17

Technical Solutions

1,359

1,535

1,400

4,294

Other

(1,432)

(1,419)

(1,460)

(4,311)

Consolidated

$

$

$

$

Operating income (loss)

Water & Fluid Solutions

$

63,677

$

91,989

$

69,228

$

224,894

Technical Solutions

50,459

50,624

52,320

153,403

Other

(29,184)

(24,821)

(67,871)

(121,876)

Consolidated

$

84,952

$

117,792

$

53,677

$

256,421

Operating income as a percent of net sales

Water & Fluid Solutions

10.8%

13.6%

11.4%

12.0%

Technical Solutions

18.6%

19.0%

20.1%

19.2%

Consolidated

9.9%

12.5%

6.2%

9.6%

First Qtr

Second Qtr

Third Qtr

Nine Months

In thousands

2011

2011

2011

2011

Net sales to external customers

Water & Fluid Solutions

$

515,368

$

631,994

$

614,557

$

1,761,919

Technical Solutions

274,905

278,181

275,989

829,075

Consolidated

$

790,273

$

910,175

$

890,546

$

2,590,994

Intersegment sales

Water & Fluid Solutions

$

455

$

316

$

426

$

1,197

Technical Solutions

999

1,559

1,755

4,313

Other

(1,454)

(1,875)

(2,181)

(5,510)

Consolidated

$

$

$

$

Operating income (loss)

Water & Fluid Solutions

$

56,528

$

84,521

$

59,608

$

200,657

Technical Solutions

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 & Fluid Solutions

11.0%

13.4%

9.7%

11.4%

Technical Solutions

17.5%

17.3%

17.6%

17.5%

Consolidated

10.9%

12.0%

10.4%

11.1%

Pentair Ltd. 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)

Forecast

Total Pentair

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

In millions, except per-share data

2012

2012

2012

2012

Net sales

$        858.2

$      941.5

$        865.5

 approx $1,800 

Operating income - as reported

85.0

117.8

53.7

       approx 30 - 35

   % of net sales

9.9%

12.5%

6.2%

approx. 11.5%

Adjustments:

    Deal related costs and expenses

11.8

6.3

52.7

5

    Inventory step-up and customer backlog

80

    Restructuring

10.4

1.1

35

Operating income - as adjusted

96.8

134.5

107.5

 approx 150 - 155 

   % of net sales

11.3%

14.3%

12.4%

approx. 8.5%

Net income attributable to Pentair Ltd. - as reported

60.8

71.8

30.4

 approx (47) - (37) 

    Bond redemption and interest expense

(1.2)

2.5

51

    Other adjustments net of tax

4.4

11.9

32.6

83

Net income from continuing operations attributable 

    to Pentair Ltd. - as adjusted

64.0

83.7

65.5

 approx 87 - 97 

Continuing earnings per common share attributable to Pentair Ltd. - diluted

Diluted earnings per common share - as reported

$          0.61

$        0.71

$          0.30

 ($0.22) - ($0.17) 

Adjustments

0.03

0.12

0.34

0.62

Diluted earnings per common share - as adjusted

$          0.64

$        0.83

$          0.64

 $0.40 - $0.45 

Pentair Ltd. 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 Ltd. - 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 Ltd. - as adjusted

51.8

75.5

57.7

55.7

240.7

Continuing earnings per common share attributable to Pentair Ltd. - 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 Ltd. 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)

Water & Fluid Solutions

First Quarter

Second Quarter

Third Quarter

In millions

2012

2012

2012

Net sales

$            587.0

$                 675.5

$              605.4

Operating income - as reported

63.7

$                   92.0

$                69.2

   % of net sales

10.9%

13.6%

11.4%

Adjustments - restructuring

6.9

1.1

Operating income - as adjusted

63.7

98.9

70.3

   % of net sales

10.9%

14.7%

11.6%

Technical Solutions

Net sales

$            271.2

$                 266.0

$              260.1

Operating income - as reported

50.5

50.6

52.3

   % of net sales

18.6%

19.0%

20.1%

Adjustments - restructuring

3.1

Operating income - as adjusted

50.5

53.7

52.3

   % of net sales

18.6%

20.2%

20.1%

Pentair Ltd. 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 & Fluid Solutions

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 Solutions

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%

Pentair Ltd. and Subsidiaries

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

excluding the effect of 2012 adjustments (Unaudited)

Forecast

Pre-Merger

Merger

Consolidated

In millions, except per-share data

Pentair, Inc.

Impact

Pentair Ltd.

Reported GAAP:

Operating income

$             106

$     (73)

$                33

Net income

63

(103)

(40)

Weighted average common shares outstanding - diluted

215

215

215

Diluted earnings per common share 

 N/A 

 N/A 

$           (0.19)

Adjustments:

Deal related costs and expenses

$              —

$        5

$                  5

Restructuring

35

35

Inventory step-up and backlog amortization

80

80

Bond redemption

73

73

Income taxes

(59)

(59)

    Total adjustments to net income

$              —

$    134

$              134

Merger impact on weighted average shares outstanding

113

 N/A 

Adjusted non-GAAP:

Adjusted operating income

$             106

$      47

$              153

Adjusted net income

63

31

94

Adjusted weighted average shares outstanding - diluted

102

 N/A 

215

Adjusted diluted earnings per common share

$            0.62

 N/A 

$             0.44

Reconciliation provided to illustrate "Legacy Pentair" results excluding the impact of the merger with Tyco's Flow Control business

Pentair Ltd. 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)

Forecast

Pre-Merger

Merger

Consolidated

In millions, except per-share data

Pentair, Inc.

Impact

Pentair Ltd.

Reported GAAP:

Operating income

$             362

$     (73)

$              289

Net income

216

(93)

123

Weighted average common shares outstanding - diluted

129

129

129

Diluted earnings per common share 

 N/A 

 N/A 

$             0.95

Adjustments:

Deal related costs and expenses

$               71

$        5

$                76

Restructuring

11

35

46

Inventory step-up and backlog amortization

1

80

81

Bond redemption and interest

1

73

74

Income taxes

(24)

(69)

(93)

    Total adjustments to net income

$               60

$    124

$              184

Merger impact on weighted average shares outstanding

28

 N/A 

Adjusted non-GAAP:

Adjusted operating income

$             445

$      47

$              492

Adjusted net income

276

31

307

Adjusted weighted average shares outstanding - diluted

101

 N/A 

129

Adjusted diluted earnings per common share

$            2.73

 N/A 

$             2.38

Reconciliation provided to illustrate "Legacy Pentair" results excluding the impact of the merger with Tyco's Flow Control business

SOURCE Pentair Ltd.



RELATED LINKS

http://www.pentair.com