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

2011-05-03 13:16 1252
  • First quarter sales increased 12 percent to $790 million
  • EPS increased 46 percent to $0.51; Adjusted EPS of $0.52 excludes acquisition costs
  • Operating margins expanded more than 200 basis points in both Water and Technical Products
  • Full Year EPS outlook raised

MINNESOTA, May 3, 2011 /PRNewswire-Asia/ -- Pentair, Inc. (NYSE: PNR) today announced first quarter 2011sales 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.

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, and 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 ultra filtration and recent winner of the 'Water Technology Company of the Year' award." added Hogan.

Source: Pentair
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