Pentair Reports Full Year Sales Growth of 13 Percent and Net Income Per Diluted Share from Continuing Operations of $2.00

Full Year 2010 Highlights

• Reports full year sales up 13 percent year-over-year to $3.0 billion, with double digit growth in both Water and Technical Products
• Operating margins improved year-over-year to 11 percent, up 140 basis points compared to 2009 adjusted operating margins of 9.6 percent
• Diluted earnings per share from continuing operations (EPS) of $2.00, up 71 percent year-over-year on GAAP basis; up 36 percent compared to adjusted 2009 EPS
• Quarterly dividend increased for the 35th consecutive year to $0.20 per share in 2011

MINNESOTA and SHANGHAI, Feb. 11, 2011 /PRNewswire-Asia/ -- Pentair, Inc. (NYSE: PNR) reported organic revenue growth of 13 percent for full year 2010, as revenues reached $3.0 billion compared to $2.7 billion in 2009. The company delivered EPS of $2.00 for the full year 2010, representing an increase of 71 percent as compared to $1.17 per share in the prior year. Adjusting 2009 EPS to exclude restructuring and impairment items and the impact from the early redemption of bonds, full year 2010 EPS increased 36 percent.

During 2010, Pentair generated $211 million in free cash flow, which represents a greater than 100 percent conversion of net income. Excluding the $25 million accelerated pension contribution at the end of the year, free cash flow was $236 million for the full year 2010, representing an approximate 120 percent conversion of net income.

"2010 was a year of tremendous progress. Organic sales grew 13 percent for the full year, reflecting broad-based growth across businesses and geographies," said Randall J. Hogan, chairman and chief executive officer. "Fast growth regions grew at an even faster pace, led by China sales up 26 percent and Latin America up 18 percent for the full year 2010, as we strengthened our presence through more localized capabilities. Expanded distribution and stepped up new product development helped fuel top-line growth, along with solid recovery in many end markets. For the full year 2010, volume growth along with productivity offset material inflation and the impact of reinstated employee benefits, driving more than 140 basis points of margin expansion."

Total company fourth quarter sales increased 7 percent to $754 million, compared with $702 million in the fourth quarter of 2009, despite four fewer selling days. The company delivered fourth quarter operating income of $80 million, up 52 percent year-over-year or up 3 percent compared to adjusted operating income in the same period last year. Overall, operating margins of 10.6 percent for the fourth quarter 2010 decreased 40 basis points when compared to adjusted operating margins of a year ago, due mainly to higher material inflation and lower cost absorption from fewer selling days. The company delivered net income from continuing operations of $49 million, or $0.49 per share. This compares to EPS of $0.29 in the fourth quarter last year. Adjusting fourth quarter 2009 EPS to exclude restructuring and impairment items, year-over-year adjusted EPS increased 4 percent.

"We exit 2010 with confidence, as top-line strength continued in the fourth quarter with average daily sales accelerating from the third quarter," continued Hogan. "Fourth quarter operating margins came in as expected, negatively impacted by material inflation with only a modest benefit from pricing. Pricing actions were announced in the fourth quarter with realization beginning during the first quarter, helping to mitigate expected 2011 commodity inflation. We expect operating margins in both segments as well as Pentair to expand at least 100 basis points year over year for the first quarter and full year of 2011.”

FOURTH QUARTER BUSINESS HIGHLIGHTS

Water sales grew 5 percent year-over-year to $501 million, including an unfavorable one percentage point impact from foreign exchange. Within Water, U.S. sales grew 7 percent led by growth in municipal pumps and agricultural products. In fast growth regions, Water grew 16 percent led by 42 percent growth in China and double-digit increases in India and Southeast Asia.

Within the five Water global business units, the fourth quarter sales were as follows:

• Residential Flow sales were up 1 percent versus the year-ago quarter, as robust growth in the agricultural business and a stable U.S. residential pump business helped mitigate the impact of declines in specialty pumps.
• Residential Filtration sales were up 1 percent as expanded distribution and new products in fast growth regions were partially offset by softness in Europe.
• Pool sales were up 4 percent driven by continued dealer expansion and demand for energy-efficient Eco-Select products.
• Engineered Flow sales were up 20 percent reflecting municipal pump sales from the final shipment for the Gulf Intracoastal Waterway project in New Orleans.
• Filtration Solutions sales were up 9 percent led by growth in desalination and energy markets, along with increased system sales.

Water's fourth quarter reported operating income totaled $55 million, up 62 percent as compared to $34 million in the same period last year. When compared to fourth quarter 2009 adjusted operating income of $55 million, operating income remained flat in 2010. The benefits from volume growth and productivity continued to offset reinstated employee benefits and growth investments, while higher material inflation unfavorably impacted margins.

OUTLOOK

The company anticipates full year 2011 sales growing in the mid-single digit range to approximately $3.2 billion. This reflects expected recurring organic revenue growth in the high-single digits, partially offset by the negative year-over-year impact of the Gulf Intracoastal Waterway project, which contributed $56 million in full year 2010. Pentair continues to expect full year 2011 EPS to be between $2.20 and $2.35, which represents an increase of approximately 10 to 18 percent from 2010 EPS of $2.00. The company expects to generate free cash flow in excess of $240 million for 2011.

"The tremendous progress we made in 2010 positions us for another strong year. We expect to leverage our increased presence in fast growth regions, expanded innovation capabilities and continued application of lean disciplines to deliver continued, strong top-line growth and margin expansion," said Hogan. "We anticipate operating margins to expand over 100 basis points in 2011, reflecting volume leverage, price increases and productivity more than offsetting expected material inflation. Our growth investments are yielding positive results and position us well for sustainable, profitable growth in 2011 and beyond."

First quarter 2011 EPS is expected to be $0.42 to $0.45, which represents an increase of approximately 20 to 29 percent when compared to first quarter 2010 EPS of $0.35. The company expects first quarter 2011 revenue to be up high-single digits compared to the same period last year.

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.