-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OvEwI9K/VPlWbcln9GQuEHUwt4JyZndc8Qaft18HYrwpEf1uqS4ZDuKI4NEM2iJd 1g6qNYC42+2SZ806kdbJKw== 0000077360-96-000037.txt : 19961031 0000077360-96-000037.hdr.sgml : 19961031 ACCESSION NUMBER: 0000077360-96-000037 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961030 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENTAIR INC CENTRAL INDEX KEY: 0000077360 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY (NO METALWORKING MACHINERY) [3550] IRS NUMBER: 410907434 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11625 FILM NUMBER: 96650290 BUSINESS ADDRESS: STREET 1: 1500 COUNTY RD - B2 WEST STREET 2: SUITE 400 CITY: ST PAUL STATE: MN ZIP: 55113-3105 BUSINESS PHONE: 6126367920 FORMER COMPANY: FORMER CONFORMED NAME: PENTAIR INDUSTRIES INC DATE OF NAME CHANGE: 19790327 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _______ Commission File No. 001-11625 PENTAIR, INC. (Exact name of Registrant as specified in its charter) Minnesota 41-0907434 (State or other (IRS Employer jurisdiction of Identification No.) incorporation or organization) 1500 County B2 West, Suite 400 St. Paul, Minnesota 55113-3105 (Address of principal executive offices) (Zip Code) (612) 636-7920 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of Registrant's only class of common stock on September 30, 1996 was 37,603,998. PENTAIR, INC. AND SUBSIDIARIES FORM 10-Q TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements Management's Discussion and Analysis of Results of Operations and Financial Condition PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signature Page Exhibit Index PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS PENTAIR, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited) ($ expressed in thousands except per share amounts)
Nine Months Ended Quarter Ended September 30 September 30 1996 1995 1996 1995 Net sales $1,140,160 $ 1,025,377 $410,970 $353,338 Operating costs: Cost of goods sold 802,950 727,288 294,982 255,389 Selling, general and administrative 236,110 214,047 80,365 69,750 Total costs 1,039,060 941,335 375,347 325,139 Operating income 101,100 84,042 35,623 28,199 Interest expense - net (13,829) (12,530) (4,555) (2,687) Income from continuing operations before income taxes 87,271 71,512 31,068 25,512 Provision for income taxes 35,084 29,012 12,490 10,212 Income from continuing operations 52,187 42,500 18,578 15,300 Discontinued operations: Income from operations of discontinued Paper Products and Joint Venture segments (net of applicable income taxes of $2,740) 0 4,566 0 0 Gain on sale of discontinued operations (less applicable income taxes of $7,734) 0 12,134 0 0 Net income 52,187 59,200 18,578 15,300 Preferred dividend requirements 3,816 3,981 1,268 1,324 Earnings applicable to common stock $48,371 $55,219 $17,310 $13,976 Earnings per share: Primary - Income from: continuing operations $1.28 $1.04 $.46 $.38 discontinued operations .00 .45 .00 .00 Net Income $1.28 $1.49 $.46 $.38 Diluted - Income from: continuing operations $1.21 $.99 $.43 $.36 discontinued operations .00 .40 .00 .00 Net Income $1.21 $1.39 $.43 $.36 Weighted average common and common equivalent shares: Primary 37,915 37,238 38,037 37,378 Diluted 42,745 42,346 42,793 42,398
See Notes to Consolidated Financial Statements. PENTAIR, INC. CONSOLIDATED BALANCE SHEET (Unaudited) ($ expressed in thousands)
September 30, December 31, ASSETS 1996 1995 Current assets Cash and cash equivalents $34,629 $36,648 Accounts receivable - net 305,256 262,503 Note receivable 0 100,000 Inventories Finished goods 172,142 134,456 Work in process 51,750 40,801 Raw materials and supplies 42,846 37,428 Total inventory 266,738 212,685 Deferred income taxes 26,625 26,017 Other current assets 21,198 9,391 Total current assets 654,446 647,244 Property, plant and equipment 492,511 452,108 Accumulated depreciation 218,077 185,381 PP & E - net 274,434 266,727 Marketable securities - insurance subsidiary 38,810 33,036 Goodwill - net 280,226 282,376 Other assets 32,953 23,110 TOTAL ASSETS $1,280,869 $1,252,493 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $96,824 $90,846 Notes payable 0 120,732 Compensation and other benefits accruals 61,804 68,414 Income taxes 20,751 17,812 Accrued product claims and warranties 23,881 21,684 Accrued expenses and other liabilities 71,519 58,363 Current maturities of long-term debt 39,050 18,950 Total current liabilities 313,829 396,801 Long-term debt 276,520 219,896 Deferred income taxes 3,552 68 Pensions and other retirement compensation 42,903 38,220 Postretirement medical and other benefits 46,907 46,158 Reserves - insurance subsidiary 31,099 27,354 Other liabilities 21,723 21,141 Commitments and contingencies Shareholders' equity Preferred stock - at liquidation value Authorized: 2,500,000 shares Outstanding:1996 - 1,778,652 62,466 65,656 1995 - 1,873,051 Unearned compensation relating to ESOP (17,966) (21,074) Common stock - par value, $.16 2/3 Authorized: 72,500,000 shares Outstanding:1996 - 37,603,998 6,269 6,172 1995 - 37,035,082 Additional paid-in capital 177,336 169,832 Currency translation and pension adjustments 9,964 11,020 Retained earnings 306,267 271,249 Total shareholders' equity 544,336 502,855 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,280,869 $1,252,493
See Notes to Consolidated Financial Statements. PENTAIR, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) ($ expressed in thousands)
Nine Months Ended September 30 1996 1995 Cash provided by (used for) Operating activities Net income $52,187 $59,200 Adjustment for discontinued operations 0 (16,700) Adjustments to reconcile net income to cash provided from operating activities Depreciation 35,802 30,895 Amortization 8,566 4,914 Deferred income taxes 3,230 295 Changes in assets and liabilities, net of effects of acquisitions and dispositions Accounts receivable (39,935) (46,976) Inventories (39,453) (32,945) Accounts payable 2,506 (1,743) Accrued compensation and benefits (5,949) 5,288 Income taxes 3,130 (2,798) Pensions and other retirement compensation 5,917 13,276 Reserves - insurance subsidiary 3,745 4,688 Other assets/liabilities - net (2,983) 8,714 Cash from continuing operations 26,763 26,108 Cash from discontinued operations 0 (21,812) Cash from operating activities 26,763 4,296 Cash flows from investing activities Capital expenditures (39,497) (35,853) Purchase of marketable securities - net (5,774) (5,475) Construction funds in escrow (9,748) 0 Proceeds from sale of discontinued operations 0 212,760 Acquisitions - net of cash acquired (48,151) 0 Cash (used for) provided by investing activities (103,170) 171,432 Cash flows from financing activities Borrowings 80,350 24,762 Debt payments (1,227) (198,364) Unearned ESOP compensation decrease 3,105 6,240 Employee stock plans and other 4,410 3,150 Dividends paid (17,844) (15,561) Cash provided by (used for) financing activities 68,794 (179,773) Effect of currency exchange rate changes 5,594 (2,009) Increase (decrease) in cash and cash equivalents (2,019) (6,054) Cash and cash equivalents - beginning of period 36,648 32,677 - end of period $34,629 $26,623
See Notes to Consolidated Financial Statements. PENTAIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with instructions for Form 10-Q and, accordingly, do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation have been included. These statements should be read in conjunction with the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, previously filed with the Commission. 2. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the operating results to be expected for the full year. 3. Income tax provisions for interim periods are based on the current best estimate of the effective federal, state and foreign income tax rates. 4. Earnings per common share are based on the weighted average number of common and common equivalent shares outstanding during each period. The tax benefits applicable to preferred dividends paid to ESOPs are: for allocated shares, credited to income tax expense and, for unallocated shares, credited to retained earnings and not considered earnings applicable to common stock. Fully diluted computations assume full conversion of each series of preferred stock into common stock, the elimination of preferred dividend requirements, and the recognition of the tax benefit on deductible ESOP dividends applicable to allocated shares payable based on the converted common dividend rate. Conversion was assumed during the portion of each period that the securities were outstanding. 5. The long-term debt is summarized as follows ($ millions):
September 30, December 31, 1996 1995 Revolving credit facilities $164 $93 Private placement debt 125 125 Other 27 21 TOTAL 316 239 Current maturities (39) (19) Total long-term debt $277 $220
Debt agreements contain various restrictive covenants, including a limitation on the payment of dividends and certain other restricted payments. Under the most restrictive covenants, $77 million of the September 30, 1996 retained earnings were unrestricted for such purposes. 6.Statement of Cash Flows The following is supplemental information relating to the Statement of Cash Flows ($000's):
Nine Months Ended September 30 1996 1995 Interest paid (net of capitalized interest) $12,374 $21,304 Income tax payments 21,863 50,183
7. Stock Split On January 22, 1996 the board of directors approved a two-for-one stock split in the form of a 100% stock dividend. The dividend was payable February 16, 1996 to shareholders of record at the close of business on February 2, 1996. All references in the financial statements to shares outstanding and per share amounts have been restated to reflect this split. 8. Reclassifications Certain reclassifications have been made to prior years' financial statements to conform to the current year presentation. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION BUSINESS SEGMENT INFORMATION Selected information for business segments for the nine months ended September 30, 1996 and 1995 follows ($ millions):
General Specialty Industrial Products Equipment Corporate Total 1996 Net Sales $476.4 $663.8 $0.0 $1,140.2 Operating Income 55.2 61.5 (15.6) 101.1 Identifiable Assets 468.3 734.8 77.8 1,280.9 Depreciation and Amortization 13.9 30.4 0.1 44.4 Capital Expenditures 12.5 26.9 0.1 39.5 1995 Net Sales $353.4 $671.9 $ 0.0 $1,025.3 Operating Income 35.2 63.2 (14.4) 84.0 Identifiable Assets 241.7 692.1 179.3 1,113.1 Depreciation and Amortization 7.3 28.5 0.0 35.8 Capital Expenditures 8.3 27.5 0.1 35.9
RESULTS OF OPERATIONS Pentair reported net income of $52.2 million, or $1.21 per fully diluted share, on consolidated net sales of $1,140.2 million for the nine month period ended September 30, 1996. This represented a 23% increase in net income from continuing operations and an 11% increase in sales over the comparable period in 1995. The nine month 1995 income from continuing operations was $42.5 million, or 99 cents per fully diluted share, on consolidated net sales of $1,025.3 million. Net sales for the three month period ended September 30, 1996 increased 16% over the same period of the prior year and net income increased 21%. Specialty Products Segment. For the nine month period ended September 30, 1996, net sales increased $123.0 million or 35% and operating income increased $20.0 million or 57%. The increases are attributable to Fleck Controls, an acquisition made in November 1995, and FLEX, a recent Porter Cable acquisition. Double digit growth over last year at Myers and Porter Cable reflected new product sales, contributions from smaller acquisitions, and continued expansion and increased penetration into national distribution channels and home centers. Results from the newly acquired Flex business have been included since July 1, 1996. General Industrial Equipment Segment. For the nine month period ended September 30, 1996, net sales decreased $8.1 million or 1% and operating income decreased $1.7 million or 3%. Combined, Hoffman and Schroff posted moderate sales and earnings increases as compared to very good 1995 results. Both Lincoln Industrial and Lincoln Automotive profits increased due to cost reductions and improved productivity. Sales at Federal Cartridge were up in the third quarter. Federal's sales shortfall in the first half was somewhat made up by the anticipated peak in the third quarter demand which did fully not meet expectations. Sales in the sporting ammunition industry are expected to remain relatively soft in the fourth quarter. FINANCIAL CONDITION In 1996 as in 1995, net income adjusted for non-cash items provided the funds for seasonal working capital increases. Accounts receivable levels increased due to dating programs and strong sales in the latter part of the current quarter. Inventory levels decreased during the current quarter and are expected to decrease in the fourth quarter also due to seasonal sales. Borrowings in the 1996 nine month period financed some operating needs, acquisition payments and capital expenditures. The proceeds from the $100 million note receivable from the sale of Cross Pointe Paper offset much of the $120 million notes payable for the purchase of Fleck Controls. Capital expenditures were $39.5 million in 1996 as compared to $35.9 million in 1995. The percentage of long-term debt to total capital was 34% at September 30, 1996 compared to 31% at December 31, 1995. Based upon current operating expectations, credit available under revolving credit facilities is expected to be adequate to cover seasonal working capital, long-term capital expenditure requirements and acquisitions. OUTLOOK In general, the Company is well-positioned to continue its internal growth. Recent acquisitions are expected to continue to contribute to sales and earnings growth. The strong emphasis on product development and aggressive efforts to expand distribution channels that helped during 1995 and the current year are expected to continue to generate growth in market share, sales and profits. Sales will continue to grow as a result of new products and enhanced customer service. Pentair continues to search for strategic or synergistic industrial acquisitions. The full year 1996 cash flow from operations is expected to increase with additional net income contributions as compared to last year. Working capital needs are somewhat seasonal during the year and tend to grow over time as sales increase. Capital expenditures are expected to be in the range of $80 to $90 million in 1996 as compared to $63.8 million in 1995. This increase is due primarily to the addition of a Hoffman manufacturing facility in Mount Sterling, Kentucky and new product development activities. Except for historical information contained herein, certain statements are forward-looking statements that involve risks and uncertainties, including, but not limited to, product demand and market acceptance risks, the effect of economic conditions, the impact of competitive products and pricing, product development, commercialization and technological difficulties, capacity and supply constraints or difficulties, the results of financing efforts, actual purchases under agreements, the effect of the Company's accounting policies, and other risks detailed in other SEC filings. PART II - OTHER INFORMATION ITEM 6 - Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are included with this Form 10-Q Report as required by Item 601 of Regulation S-K. Exhibit Description Number 11 Calculation of Earnings per Common and Common Equivalent Share 27 Financial Data Schedule (b) Reports on Form 8-K. None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. /s/ Richard W. Ingman Executive Vice President and Chief Financial Officer October 30, 1996 EXHIBIT INDEX Exhibit Number 11 Calculation of Earnings per Common and Common Equivalent Share 27 Financial Data Schedule EX-11 2 EXHIBIT 11 PENTAIR, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Nine Months Quarter Ended September 30 September 30 1996 1995 1996 1995 INCOME ($ thousands) Net income $52,187 $59,200 $18,578 $15,300 Preferred dividend requirements 3,816 3,981 1,268 1,324 Earnings available to common and common equivalent shares - Primary 48,371 55,219 17,310 13,976 Preferred dividends assuming conversion of Preferred Stock: Series 1988 711 741 233 244 Series 1990 3,105 3,240 1,035 1,080 Tax benefit on preferred ESOP dividend eliminated due to conversion into common (1,010) (947) (327) (301) Tax benefit on ESOP dividend assuming con- version to common, at common dividend rate 488 366 158 116 Earnings available for common and common equivalent shares - Diluted $51,665 $58,619 $18,409 $15,115 SHARES (thousands) Weighted average number of shares outstanding during the period 37,433 36,754 37,573 36,902 Shares issuable on exercise of stock options less shares repurchaseable from proceeds 482 484 464 476 Common and Common Equivalent Shares - Primary 37,915 37,238 38,037 37,378 Shares issuable on conversion of: $7.50 Callable Cumulative Convertible Preferred Stock, Series 1988 948 988 931 976 8% Callable Cumulative Voting Convertible Preferred Stock, Series 1990 3,882 4,120 3,825 4,044 Common and Common Equivalent Shares - Diluted 42,745 42,346 42,793 42,398 Earnings per Share: Primary Income from continuing operations $1.28 $1.04 $.46 $.38 Income from discontinued operations .00 .45 .00 .00 Net income $1.28 $1.49 $.46 $.38 Diluted Income from continuing operations $1.21 $.99 $.43 $.36 Income from discontinued operations .00 .40 .00 .00 Net income $1.21 $1.39 $.43 $.36
EX-27 3
5 9-MOS DEC-31-1996 SEP-30-1996 34629000 0 305256000 0 266738000 654446000 492511000 218077000 1280869000 313829000 0 499836000 0 44500000 0 1280869000 1140160000 1140160000 805950000 1039060000 0 0 13829000 87271000 35084000 52187000 0 0 0 52187000 1.28 1.21
-----END PRIVACY-ENHANCED MESSAGE-----