Pentair Reports First Quarter Sales Growth of 12 Percent and EPS of $0.51, Up 46 Percent

MINNEAPOLIS, April 26, 2011 /PRNewswire/ -- Pentair, Inc. (NYSE: PNR) today announced first quarter 2011 sales of $790 million, an increase of 12 percent from the prior year quarter.  Sales growth was broad-based across its two segments, Water and Technical Products, with double-digit increases in the U.S., Europe and fast growth markets.  Earnings per diluted share from continuing operations (EPS) for the first quarter were $0.51, an increase of 46 percent as compared to the $0.35 of EPS in the first quarter last year.  When adjusted to exclude acquisition related costs, first quarter 2011 EPS was $0.52, an increase of 49 percent as compared to the same period in the prior year.

"The first quarter was a great start to the year, with 12 percent organic revenue growth, meaningful margin expansion and excellent earnings growth.  Our investments are yielding positive results, particularly evident in our geographic expansion, strong innovation and productivity gains," said Randall J. Hogan, Pentair chairman and chief executive officer.  "Strong demand in the industrial end markets continued, along with rapid growth in fast growth markets, led by China where sales were up 26 percent.  While the U.S. residential end market continues its modest recovery, demand for our energy-efficient and sustainable product offerings remains solid," added Hogan.

The company delivered first quarter operating income of $86 million, up 35 percent from the prior year quarter, or up 38 percent to $88 million, when adjusted to exclude acquisition related costs.  Overall, operating margins for the first quarter increased 190 basis points to 10.9 percent when compared to first quarter 2010 operating margins.  Adjusted to exclude acquisition related costs, first quarter operating margins increased 210 basis points to 11.1 percent, as the impact from higher sales volume, pricing and productivity gains more than offset cost increases for raw materials and labor.

The company said it expects to achieve free cash flow of greater than $240 million for the full year 2011, driven by improvements in working capital and earnings growth. Total company free cash flow was a usage of $61 million in the first quarter 2011 reflecting normal seasonality.  

First Quarter Business Highlights

Water sales grew 8 percent year-over-year to $515 million, including a one-percentage point favorable impact from foreign currency exchange.  Within Water, U.S. sales grew 5 percent, led by growth in pool equipment and foodservice filtration products and systems, while Western European sales increased double digits.  In fast growth regions, Water sales grew 12 percent led by strength in Southeast Asia and India.  Within the five Water global businesses, the first quarter sales performances were as follows:

• Residential Flow sales were up 6 percent versus the prior year quarter, as continued growth in the agricultural business and strong European pump sales helped offset the impact of a difficult comparison in U.S. de-watering products related to heavier than normal floods in the prior year quarter.  
• Residential Filtration sales were up 3 percent as the growth from continued geographic expansion and new products was partially offset by softness in the U.S. market.    
• Pool sales were up 15 percent driven by continued dealer expansion and solid demand for energy efficient pool products.
• Engineered Flow sales were up 4 percent as growth in commercial and industrial pumps helped offset modestly lower U.S. municipal sales.  
• Filtration Solutions sales were up 10 percent, with broad-based strength across all end markets served, including foodservice, energy, industrial and desalination.  

Water's first quarter reported operating income totaled $57 million, up 34 percent as compared to $42 million in the same period last year.  In the first quarter 2011, operating margins increased by 220 basis points to 11.0 percent when compared to 8.8 percent the prior year quarter.  The benefits from higher volume, pricing and productivity improvements more than offset the negative impact from inflation and continued investments in growth.

Technical Products delivered first quarter 2011 sales of $275 million, an increase of 20 percent versus the prior year quarter.    

• Strong global demand continued, with double-digit growth across the industrial, energy, and general electronics end markets.  
• Sales in the U.S. increased over 15 percent year-over-year.  Fast growth regions were up 40 percent, led by China where sales were up nearly 70 percent.  

Technical Products' first quarter reported operating income totaled $48 million, up 45 percent compared to $33 million in the same quarter last year.  First quarter 2011 operating margins increased to a record 17.5 percent, an increase of 300 basis points when compared to the prior year quarter.  Strong volume leverage, along with pricing and productivity gains, more than offset the negative impact from inflation and continued growth investments.  

Outlook

Excluding any impact related to the Clean Process Technologies (CPT) acquisition, the company raised its full year 2011 adjusted EPS guidance range to $2.30 to $2.42, reflecting the strong first quarter performance.  This represents an increase of 15 to 21 percent compared to 2010 EPS.  The company now expects full year 2011 sales to grow in the 6 to 8 percent range to approximately $3.2 billion. Pentair also introduced second quarter 2011 EPS guidance of $0.68 to $0.72, an increase of 11 to 18 percent compared to second quarter 2010 earnings, on expected high-single-digit revenue growth. Both the full year and second quarter outlook do not include any impact from the recently announced agreement to acquire Norit's CPT business.  

The CPT acquisition is expected to close in the second quarter of 2011, subject to the satisfaction of customary conditions and regulatory approvals.  As previously announced, the transaction is expected to be dilutive to 2011 EPS by approximately $0.15, pending final purchase accounting valuations and analysis.  After adjusting to exclude customer contracts and inventory step-ups of approximately $0.12 and customary transaction costs of approximately $0.06, of which $0.01 was recorded in the first quarter 2011, the acquisition is expected to be about $0.03 accretive to 2011 adjusted EPS, and add roughly $230 million to 2011 sales.

"Our updated guidance reflects our strong first quarter performance.  We believe that we are well positioned for sustained, profitable growth through the year.  We expect positive trends to continue in many of our end markets and margin expansion, as pricing and productivity more than offset inflation," said Hogan.  "Of course, we are excited about our recently announced agreement to acquire Norit's Clean Process Technologies business, a global leader in innovative membrane technology and ultrafiltration and recent winner of the 'Water Technology Company of the Year' award," added 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 2011 results and 2011 outlook on a two-way conference call with investors and a live audio webcast at 11 a.m. Eastern today.  Reconciliation of non-GAAP financial measures are set forth in the attachments to this first quarter 2011 earnings release and the first quarter 2011 earnings conference call presentation, both of which can be found at Pentair's web site (www.pentair.com).  Related financial charts and certain other information to be discussed on the conference call will be available on the company's website shortly before the conference call.  The webcast and presentation will be archived at the same site following the conclusion of the conference call.

Caution concerning forward-looking statements

Any statements made about the company's and CPT's anticipated financial results are forward-looking statements subject to risks and uncertainties such as our ability to close the CPT acquisition on anticipated terms and schedule, including the ability to obtain regulatory approval of the acquisition; our ability to integrate the CPT acquisition successfully; increased risks associated with operating foreign businesses; the magnitude, timing and scope of recovery from the global economic downturn; the strength of housing and related markets; foreign currency effects; material inflation outpacing our productivity and pricing actions; retail, commercial and industrial demand; 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 2010 revenues of $3.0 billion, Pentair employs over 14,000 people worldwide.

Pentair Contacts:
Sara Zawoyski
Vice President, Investor Relations
Tel.: (763) 656-5575
E-mail: [email protected]

SOURCE Pentair, Inc.