Financial Statements of Parent Company Guarantor

9 Months Ended

Sep. 28, 2013

Financial Statements of Parent Company Guarantor

Pentair Ltd. (the “Parent Company Guarantor”), fully and unconditionally, guarantees the Notes of Pentair Finance S.A. (the “Subsidiary Issuer”). The Subsidiary Issuer is a Luxembourg public limited liability company formed in January 2012 and 100 percent-owned subsidiary of the Parent Company Guarantor.

The following supplemental financial information sets forth the financial information of:


•	Parent Company Guarantor;


•	Subsidiary Issuer;


•	Non-guarantor subsidiaries of Pentair Ltd. on a combined basis;


•	Consolidating entries and eliminations representing adjustments to:


a.	eliminate intercompany transactions between or among the Parent Company Guarantor, the Subsidiary Issuer and the non-guarantor subsidiaries;


b.	eliminate the investments in subsidiaries; and


c.	record consolidating entries.


•	Pentair Ltd. and subsidiaries on a consolidated basis.

The following present the Company’s Condensed Consolidating Statement of Operations and Comprehensive Income (Loss), Condensed Consolidating Balance Sheets and Condensed Consolidating Statement of Cash Flows. The historical consolidated financial statements of Pentair Ltd. for the three and nine months ended September 29, 2012 include all non-guarantor subsidiaries. Consequently, no consolidating financial information for the three and nine months ended September 29, 2012 is presented.

Pentair Ltd. and Subsidiaries

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

Three months ended September 28, 2013



In millions	Parent Company Guarantor			Subsidiary Issuer			Non-guarantor Subsidiaries			Eliminations			Pentair Ltd. and Subsidiaries Consolidated
Net sales	$	—		$	—		$	1,824.8		$	—		$	1,824.8
Cost of goods sold	—			—			1,187.2			—			1,187.2
Gross profit	—			—			637.6			—			637.6
Selling, general and administrative	(0.7		)	3.1			363.7			—			366.1
Research and development	—			—			31.5			—			31.5
Operating (loss) income	0.7			(3.1		)	242.4			—			240.0
Loss (earnings) from investment in subsidiaries	(173.3		)	(177.3		)	—			350.6			—
Other (income) expense:
Equity income of unconsolidated subsidiaries	—			—			(0.5		)	—			(0.5		)
Gain on sale of business	—			—			(0.1		)	—			(0.1		)
Net interest expense	1.3			0.6			15.3			—			17.2
Income (loss) before income taxes and noncontrolling interest	172.7			173.6			227.7			(350.6		)	223.4
Provision for income taxes	(0.1		)	1.3			48.0			—			49.2
Net income (loss) before noncontrolling interest	172.8			172.3			179.7			(350.6		)	174.2
Noncontrolling interest	—			—			1.4			—			1.4
Net income (loss) attributable to Pentair Ltd.	$	172.8		$	172.3		$	178.3		$	(350.6	)	$	172.8
Comprehensive income (loss), net of tax
Net income (loss) before noncontrolling interest	$	172.8		$	172.3		$	179.7		$	(350.6	)	$	174.2
Changes in cumulative translation adjustment	87.9			87.9			89.1			(175.8		)	89.1
Changes in market value of derivative financial instruments	(0.6		)	(0.6		)	(0.6		)	1.2			(0.6		)
Total comprehensive income (loss)	260.1			259.6			268.2			(525.2		)	262.7
Less: Comprehensive income attributable to noncontrolling interest	—			—			2.6			—			2.6
Comprehensive income (loss) attributable to Pentair Ltd.	$	260.1		$	259.6		$	265.6		$	(525.2	)	$	260.1

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

Nine months ended September 28, 2013



In millions	Parent Company Guarantor			Subsidiary Issuer			Non-guarantor Subsidiaries			Eliminations			Pentair Ltd. and Subsidiaries Consolidated
Net sales	$	—		$	—		$	5,563.0		$	—		$	5,563.0
Cost of goods sold	—			—			3,734.2			—			3,734.2
Gross profit	—			—			1,828.8			—			1,828.8
Selling, general and administrative	(1.5		)	10.1			1,182.9			—			1,191.5
Research and development	—			—			97.1			—			97.1
Operating (loss) income	1.5			(10.1		)	548.8			—			540.2
Loss (earnings) from investment in subsidiaries	(381.1		)	(396.4		)	—			777.5			—
Other (income) expense:
Equity income of unconsolidated subsidiaries	—			—			(1.6		)	—			(1.6		)
Gain on sale of business	—			—			(16.8		)	—			(16.8		)
Net interest expense	4.4			6.7			41.5			—			52.6
Income (loss) before income taxes and noncontrolling interest	378.2			379.6			525.7			(777.5		)	506.0
Provision for income taxes	(0.4		)	1.3			122.2			—			123.1
Net income (loss) before noncontrolling interest	378.6			378.3			403.5			(777.5		)	382.9
Noncontrolling interest	—			—			4.3			—			4.3
Net income (loss) attributable to Pentair Ltd.	$	378.6		$	378.3		$	399.2		$	(777.5	)	$	378.6
Comprehensive income (loss), net of tax
Net income (loss) before noncontrolling interest	$	378.6		$	378.3		$	403.5		$	(777.5	)	$	382.9
Changes in cumulative translation adjustment	(29.8		)	(29.8		)	(29.1		)	59.6			(29.1		)
Changes in market value of derivative financial instruments	(0.3		)	(0.3		)	(0.3		)	0.6			(0.3		)
Total comprehensive income (loss)	348.5			348.2			374.1			(717.3		)	353.5
Less: Comprehensive income attributable to noncontrolling interest	—			—			5.0			—			5.0
Comprehensive income (loss) attributable to Pentair Ltd.	$	348.5		$	348.2		$	369.1		$	(717.3	)	$	348.5

Pentair Ltd. and Subsidiaries

Condensed Consolidating Balance Sheet

September 28, 2013



In millions	Parent Company Guarantor		Subsidiary Issuer		Non-guarantor Subsidiaries		Eliminations			Pentair Ltd. and Subsidiaries Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	0.2	$	237.5	$	—		$	237.7
Accounts and notes receivable, net	5.7		20.7		1,305.7		(32.9		)	1,299.2
Inventories	—		—		1,296.1		—			1,296.1
Other current assets	10.8		—		378.3		(10.8		)	378.3
Total current assets	16.5		20.9		3,217.6		(43.7		)	3,211.3
Property, plant and equipment, net	—		—		1,171.9		—			1,171.9
Other assets
Investments in subsidiaries	6,488.9		7,953.9		—		(14,442.8		)	—
Goodwill	—		—		5,122.0		—			5,122.0
Intangibles, net	—		—		1,817.2		—			1,817.2
Other non-current assets	31.6		1,544.9		443.1		(1,537.8		)	481.8
Total other assets	6,520.5		9,498.8		7,382.3		(15,980.6		)	7,421.0
Total assets	$	6,537.0	$	9,519.7	$	11,771.8	$	(16,024.3	)	$	11,804.2
Liabilities and Equity
Current liabilities
Current maturities of long-term debt and short-term borrowings	$	—	$	—	$	3.0	$	—		$	3.0
Accounts payable	0.5		6.0		605.8		(32.9		)	579.4
Employee compensation and benefits	—		—		317.5		—			317.5
Other current liabilities	150.4		15.8		623.1		(10.8		)	778.5
Total current liabilities	150.9		21.8		1,549.4		(43.7		)	1,678.4
Other liabilities
Long-term debt	286.2		2,412.1		1,410.2		(1,537.8		)	2,570.7
Pension and other post-retirement compensation and benefits	—		—		388.2		—			388.2
Deferred tax liabilities	—		—		497.8		—			497.8
Other non-current liabilities	17.7		—		449.7		—			467.4
Total liabilities	454.8		2,433.9		4,295.3		(1,581.5		)	5,602.5
Equity
Shareholders’ equity attributable to Pentair Ltd. and subsidiaries	6,082.2		7,085.8		7,357.0		(14,442.8		)	6,082.2
Noncontrolling interest	—		—		119.5		—			119.5
Total equity	6,082.2		7,085.8		7,476.5		(14,442.8		)	6,201.7
Total liabilities and equity	$	6,537.0	$	9,519.7	$	11,771.8	$	(16,024.3	)	$	11,804.2

Pentair Ltd. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

Nine months ended September 28, 2013



In millions	Parent Company Guarantor			Subsidiary Issuer			Non-guarantor Subsidiaries			Eliminations			Pentair Ltd. and Subsidiaries Consolidated
Operating activities
Net cash provided by (used for) operating activities	$	369.0		$	383.4		$	654.9		$	(777.5	)	629.8
Investing activities
Capital expenditures	—			—			(126.3		)	—			(126.3		)
Proceeds from sale of property and equipment	—			—			3.7			—			3.7
Proceeds from sale of businesses, net	—			—			30.9			—			30.9
Acquisitions, net of cash acquired	(84.4		)	—			—			—			(84.4		)
Other	—			—			(0.8		)	—			(0.8		)
Net cash provided by (used for) investing activities	(84.4		)	—			(92.5		)	—			(176.9		)
Financing activities
Net receipts (repayments) of commercial paper and revolving long-term debt	—			114.9			7.6			—			122.5
Repayment of long-term debt	—			—			(6.2		)	—			(6.2		)
Debt issuance costs	—			(1.4		)	—			—			(1.4		)
Excess tax benefits from share-based compensation	—			—			7.4						7.4
Net change in advances to subsidiaries	(140.7		)	(496.7		)	(140.1		)	777.5			—
Shares issued to employees, net of shares withheld	—			—			70.8			—			70.8
Repurchases of common shares	—			—			(540.3		)	—			(540.3		)
Dividends paid	(143.9		)	—			—			—			(143.9		)
Distributions to noncontrolling interest	—			—			(2.0		)	—			(2.0		)
Net cash provided by (used for) financing activities	(284.6		)	(383.2		)	(602.8		)	777.5			(493.1		)
Effect of exchange rate changes on cash and cash equivalents	—			—			16.6			—			16.6
Change in cash and cash equivalents	—			0.2			(23.8		)	—			(23.6		)
Cash and cash equivalents, beginning of period	—			—			261.3			—			261.3
Cash and cash equivalents, end of period	$	—		$	0.2		$	237.5		$	—		$	237.7

Pentair Ltd. and Subsidiaries

Condensed Consolidating Balance Sheet

December 31, 2012



In millions	Parent Company Guarantor		Subsidiary Issuer		Non-guarantor Subsidiaries		Eliminations			Pentair Ltd. and Subsidiaries Consolidated
Assets
Current assets
Cash and cash equivalents	$	—	$	—	$	261.3	$	—		$	261.3
Accounts and notes receivable, net	20.2		1,458.3		1,330.7		(1,534.6		)	1,274.6
Inventories	—		—		1,333.9		—			1,333.9
Other current assets	85.8		—		339.7		(84.4		)	341.1
Total current assets	106.0		1,458.3		3,265.6		(1,619.0		)	3,210.9
Property, plant and equipment, net	—		—		1,188.2		—			1,188.2
Other assets
Investments in subsidiaries	6,486.6		7,464.9		—		(13,951.5		)	—
Goodwill	—		—		5,111.0		—			5,111.0
Intangibles, net	—		—		1,926.9		—			1,926.9
Other non-current assets	31.6		6.9		466.3		—			504.8
Total other assets	6,518.2		7,471.8		7,504.2		(13,951.5		)	7,542.7
Total assets	$	6,624.2	$	8,930.1	$	11,958.0	$	(15,570.5	)	$	11,941.8
Liabilities and Equity
Current liabilities
Current maturities of long-term debt and short-term borrowings	$	—	$	—	$	3.1	$	—		$	3.1
Accounts payable	54.3		1.7		587.3		(76.3		)	567.0
Employee compensation and benefits	—		—		296.7		—			296.7
Other current liabilities	180.9		11.5		670.1		(84.4		)	778.1
Total current liabilities	235.2		13.2		1,557.2		(160.7		)	1,644.9
Other liabilities
Long-term debt	—		2,297.7		1,614.9		(1,458.3		)	2,454.3
Pension and other post-retirement compensation and benefits	—		—		378.8		—			378.8
Deferred tax liabilities	—		—		480.9		—			480.9
Other non-current liabilities	17.7		—		477.4		—			495.1
Total liabilities	252.9		2,310.9		4,509.2		(1,619.0		)	5,454.0
Equity
Shareholders’ equity attributable to Pentair Ltd. and subsidiaries	6,371.3		6,619.2		7,332.3		(13,951.5		)	6,371.3
Noncontrolling interest	—		—		116.5		—			116.5
Total equity	6,371.3		6,619.2		7,448.8		(13,951.5		)	6,487.8
Total liabilities and equity	$	6,624.2	$	8,930.1	$	11,958.0	$	(15,570.5	)	$	11,941.8