-- Delivers full year net earnings per share from continuing operations
(EPS) on adjusted basis* $2.08, up 21 percent versus 2006 adjusted EPS
of $1.72
-- Generates record free cash flow of $285 million for the full year 2007,
up $104 million versus 2006
-- Reports strong fourth quarter sales of $830 million, up 12 percent year
over year
-- Announces fourth quarter reported EPS of 48 cents or 51 cents on an
adjusted basis*
-- Affirms full year 2008 EPS guidance of between $2.25 and $2.40
* Adjusted 2007 and 2006 EPS exclude the benefit of non-recurring tax
items as well as the negative impact associated with restructuring
costs, legal settlements, and other market related actions in the
respective period. Adjusted 2007 and 2006 Operating Income and
Margins exclude the negative impact associated with restructuring
costs, legal settlements and other market related actions in the
respective period (see reconciliation tables attached to this
release).
GOLDEN VALLEY, Minn., Feb. 21 /Xinhua-PRNewswire/ -- Pentair, Inc. (NYSE: PNR) today announced fourth-quarter earnings per share of 48 cents, up 23 percent from 39 cents per share in the fourth quarter 2006.
(Logo: http://www.prnasia.com/sa/200801081454.jpg )
Fourth quarter 2007 adjusted earnings per share of 51 cents were up 65 percent as compared to fourth quarter 2006 adjusted earnings per share of 31 cents. Fourth quarter 2007 adjusted earnings per share exclude $0.01 per share favorable impact from one-time net tax benefits and $0.04 per share negative impact from restructuring and legal matters. Fourth quarter 2007 earnings per share benefited from curtailments associated with changes to the company’s long-term, defined benefit and retiree medical plans partially offset by certain cost actions. The net impact of these items provided a $0.02 EPS benefit in the fourth quarter of 2007.
Pentair’s sales for fourth quarter 2007 were $830 million, an increase of 11.7 percent from the year-ago quarter or 4 percent excluding acquisitions and foreign exchange. In the quarter, the company delivered operating income of $90 million versus $61 million in the year-earlier quarter. On a reported basis, operating margins expanded 260 basis points to 10.9 percent. The company delivered adjusted operating income of $96 million. On this basis, operating margins expanded 330 basis points to 11.6 percent. Margin expansion was driven by a positive 600 basis point improvement from productivity, price, acquisitions, and volume. These items more than offset a negative 270 basis point impact related to total inflation.
“Pentair’s fourth quarter results demonstrate the value of the diversity in our end markets,” said Randall J. Hogan, Pentair chairman and CEO. “Our investments in key growth regions and vertical market initiatives, such as food service, desalination, commercial pools and industrial water, produced double digit growth. These focused initiatives, coupled with our strong overall growth in China, India and the Middle East, provide momentum as we exit the year,” he added. “Further, the actions we took early in the decline of the North American residential market and our productivity and lean enterprise disciplines enabled the company to expand margins as expected.”
FOURTH QUARTER BUSINESS HIGHLIGHTS
The Water Group delivered $566 million in sales or 13 percent year-over-year sales growth. Acquisitions accounted for 7 points of growth and foreign exchange equaled 2 points of growth.
-- Sales in Asia-Pacific grew 28 percent year-over-year. These results
reflect strong growth in China sales for filtration and pump systems,
and in India led by sales of commercial pump, food service solutions
and rural water systems.
-- Sales in Europe grew 51 percent year-over-year or 12 percent excluding
the Jung Pump acquisition. These results reflect strength in the East
European markets as well as key successes in the flow technologies
market in the Middle East.
-- North American filtration sales rose 11 percent with strong growth in
food service, commercial water treatment and industrial markets muted
by declines in residential water treatment markets. Total North
American filtration sales were down when adjusted to exclude the Porous
Media acquisition.
-- North American flow technologies (previously named North American pump)
sales were flat as growth in commercial and municipal markets, new
products and pricing actions offset declines in residential markets.
-- North American pool and spa sales increased 11 percent as new products,
price actions and a solid early buy program more than offset
residential market softness.
The Water Group’s fourth quarter operating income totaled $64 million, an increase of 70 percent as compared to $38 million in the same period last year. On an adjusted basis, the Group’s operating income was $68 million or 80 percent higher than the $38 million in the year-ago period. Adjusted operating margins of 12 percent expanded 450 basis points as the benefit from productivity actions, acquisitions, curtailment, and positive price more than offset the negative impact from inflation, decreased volumes and cost actions.
Technical Products delivered fourth quarter 2007 sales of $265 million, an increase of 9 percent versus the year-earlier period. Strong sales in Asia and in the North American electrical market set the pace.
-- Total electrical sales grew approximately 10 percent driven by
continued market share gains year-over-year in the industrial,
commercial and networking segments. New products contributed
significantly to this growth, especially in the networking segment.
-- Global electronic sales increased approximately 8 percent. In Asia,
sales grew 44 percent, reflecting continued growth in China. In Europe,
sales increased 8 percent; in North America, sales declined
approximately 3 percent.
Technical Products’ fourth quarter reported operating income totaled $40 million, an increase of 15 percent as compared to $34 million in the same quarter last year. Reported operating margins were 15 percent, up 80 basis points. Adjusting for the restructuring expenses associated with a North America plant closure, operating income totaled $42 million, up 21 percent versus the $34 million in the fourth quarter 2006. Adjusted operating margins were 15.7 percent, an increase of 150 basis points versus the year-ago period. In the quarter, the benefits from volume, price, and productivity more than offset the negative impact from total inflation.
FISCAL YEAR 2007 RESULTS
Record sales of $3.4 billion for fiscal year 2007 increased 7.7 percent from $3.15 billion a year ago. For the year, the company reported EPS of $2.10. This represents an increase of 16 percent as compared to the $1.81 of reported EPS in 2006. Full year 2007 results include the favorable impact of $0.12 per share from one-time net tax benefits and a negative $0.10 per share impact from adjustments. Full year 2006 results included the favorable impact of $0.20 per share from one-time net tax benefits and a negative $0.11 per share impact from similar adjustments. Full year adjusted 2007 EPS was $2.08, up 21 percent as compared to adjusted full year 2006 EPS of $1.72.
For the year, Pentair generated a record $285 million in free cash flow, up 57 percent compared to free cash flow of $181 million in 2006, driven by higher income and working capital reductions. The company paid a $0.60 dividend for each share of common stock and repurchased 1.2 million shares of stock in 2007. The company recently announced it increased its dividend to $0.68 for each share of common stock. Additionally, the board has approved a $50 million share repurchase authorization that the company expects to utilize in 2008.
“Pentair’s 2007 results demonstrate tremendous achievements,” said Hogan. “Despite the uncertain economic environment, we believe we are better positioned to deliver results than we were a year ago. We delivered in 2007 because of several key factors. First, we aggressively reduced general and administrative cost and streamlined our leadership. Second, we aggressively drove Pentair’s Integrated Management System (PIMS) and achieved productivity to offset high material inflation. Moreover, we increased our investments for growth, positioned ourselves in more attractive market segments, and improved customer service levels from 2006.
“Our ability to expand margins 120 basis points on an adjusted basis and deliver free cash flow well in excess of net income reflects lean disciplines taking deeper root throughout the company, and actions taken to improve our cost structure and to lower our corporate tax rate,” Hogan noted. “The $0.04 per share or $6.0 million total pre-tax charge in the fourth quarter was taken to improve our North American electronics footprint and to settle a portion of the Horizon case. The expected benefits associated with our 2007 restructuring actions -- as well as continued productivity improvements driven by lean disciplines -- are included in our 2008 outlook,” he said.
OUTLOOK
The company introduces first quarter 2008 earnings per share guidance in the range of $0.46 to $0.48, an increase of 10 to 14 percent year-over-year. The company affirms full year 2008 EPS guidance range of $2.25 to $2.40, an increase of 8 to 15 percent versus 2007 adjusted EPS.
“Pentair remains focused on delivering operating margin and earnings growth in 2008,” Hogan said. “We expect the return on the investments we made this past year to drive growth and expand international sales in 2008 --and we will further increase investments against our best opportunities. We remain relentless on cost productivity and we expect greater improvements from supply management,” he noted. “These factors, coupled with our lower sustainable tax rate, enable us to remain committed to our EPS range of $2.25 to $2.40 for 2008. We continue to drive working capital performance and expect full year 2008 free cash flow to be at least 100 percent conversion of net income,” Hogan concluded.
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 and full year 2008 guidance on a two-way conference call with investors at 12:00 p.m. Eastern today. Reconciliation of any non-GAAP financial measures are set forth in the attachments to this fourth quarter 2007 earnings release and in the fourth quarter 2007 earning release conference call presentation, both of which can be found at Pentair’s web site ( http://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 web cast 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 anticipated financial results are forward-looking statements subject to risks and uncertainties such as continued economic growth, including: the strength of housing and related markets; the ability to integrate acquisitions successfully and the risk that expected synergies may not be fully realized or may take longer to realize than expected; the ability to successfully limit any judgment arising out of the Horizon litigation; foreign currency effects; retail and industrial demand; product introductions; and pricing and other competitive pressures, 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 ( http://www.pentair.com ) is a diversified operating company headquartered in 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 house and protect sensitive electronics and electrical components. With 2007 revenues of $3.40 billion, Pentair employs approximately 16,000 people worldwide.
