-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ppgtPzNrSm9CXnpuCN+BJj2TJx3ablODiXzEnXsQXsiQQcDw7YH075mcdwXQMnfA FObxQVFKXq3FWibKXVVrEw== 0000077360-95-000016.txt : 19950516 0000077360-95-000016.hdr.sgml : 19950516 ACCESSION NUMBER: 0000077360-95-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENTAIR INC CENTRAL INDEX KEY: 0000077360 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 410907434 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04689 FILM NUMBER: 95539483 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 March 31, 1995 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. 0-4689 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 March 31, 1995 was 18,335,029. 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 4. Results of Votes of Security Holders Item 5. 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)
Three Months Ended March 31 1995 1994 Net sales $459,250 $389,252 Operating costs Cost of goods sold 349,710 290,752 Selling, general and administrative 77,905 72,143 Total operating costs 427,615 362,895 31,635 26,357 Equity in jt vent income 1,689 378 Operating income 33,324 26,735 Interest expense 8,461 8,424 Interest income 997 589 Income before income taxes 25,860 18,900 Provision for income taxes 10,510 7,800 Net income 15,350 11,100 Preferred dividend req 1,330 1,366 Earnings applicable to common stock $14,020 $9,734 Earnings per share: Primary $.76 $.53 Diluted $.72 $.52 Weighted average common and common equivalent shares: Primary 18,551 18,372 Diluted 21,143 21,006
See Notes to Consolidated Financial Statements. PENTAIR, INC. CONSOLIDATED BALANCE SHEET (Unaudited) ($ expressed in thousands)
March 31, December 31, ASSETS 1995 1994 Current Assets Cash and cash equiv $25,192 $32,677 Accts receivable - net 287,336 255,105 Inventories Finished goods 170,073 139,066 Work in process 43,904 42,502 Raw materials and supplies 66,211 62,083 Total inventory 280,188 243,651 Deferred income taxes 28,193 27,749 Other current assets 9,693 10,037 Total current assets 630,602 569,219 Property, plant and equipment 784,882 764,408 Accumulated depreciation 366,840 353,422 PP & E - net 418,042 410,986 Marketable securities - insurance subsidiary 24,641 23,655 Investment in jt ventures 78,023 81,102 Goodwill - net 180,248 170,965 Other assets 28,911 25,569 TOTAL ASSETS $1,360,467 $1,281,496 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $113,790 $115,962 Compensation and other benefits accruals 60,277 58,297 Income taxes 13,126 7,570 Accrued product claims and warranties 25,854 25,484 Accrued expenses and other liabilities 85,551 72,612 Current maturities of long-term debt 3,979 5,766 Total current liabilities 302,577 285,691 Long-term debt 438,851 408,503 Other liabilities 21,246 20,883 Deferred income taxes 22,341 22,706 Pensions and other retirement compensation 35,204 29,521 Postretirement medical and other benefits 61,594 61,134 Reserves - insurance subsidiary 22,839 21,084 Commitments and contingencies Shareholders' equity Preferred stock - at liquidation value Authorized: 2,500,000 shares Outstanding: 1995 - 1,941,292 68,008 68,444 1994 - 1,953,243 Unearned compensation relating to ESOP (25,448) (27,528) Common stock - par value, $.16 2/3 Authorized: 72,500,000 shares Outstanding: 1995 - 18,335,029 3,056 3,041 1994 - 18,248,155 Additional paid-in capital 168,989 166,314 Currency translation and pension adjustments 16,954 8,033 Retained earnings 224,256 213,670 Total shareholders' equity 455,815 431,974 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,360,467 $1,281,496
See Notes to Consolidated Financial Statements. PENTAIR, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) ($ expressed in thousands)
Three Months Ended March 31 March 31 1995 1994 Cash provided by (used for) Operating activities Net income $15,350 $11,100 Adjustments to reconcile to cash flow: Depreciation 16,960 16,335 Amortization 994 1,384 Deferred income taxes (809) (104) Undistributed (earnings) from joint venture (1,689) (378) Changes in assets and liabilities, net of effects of acquisition Accounts receivable (32,231) (22,332) Inventories (36,537) (15,419) Accounts payable (2,172) (1,995) Compensation and benefits 3,980 6,774 Income taxes 5,556 4,258 Pensions and other retirement compensation 5,683 6,395 Reserves - insurance subsidiary 1,755 1,819 Other assets/ liabilities - net 9,181 (2,783) Net cash from (used for) operating activities (13,979) 5,054 Investing activities Capital expenditures (16,266) (14,963) Cash investment in joint venture - net 4,768 (1,993) Purchase of marketable securities - net (986) 729 Acquisition - net of cash acquired 0 (140,116) Net cash (used) for investing activities (12,484) (156,343) Financing activities Borrowings 24,500 175,384 Debt payments (6,770) (5,951) Unearned ESOP compensation decrease 2,080 1,110 Employee stock plans and other 2,479 1,373 Dividends paid (4,989) (4,637) Net cash provided for financing activities 17,300 167,279 Effects of currency exchange rate changes 1,678 1,127 Increase (decrease) in cash and cash equivalents (7,485) 17,117 Cash and cash equivalents - beginning of period 32,677 10,327 - end of period $25,192 $27,444
See Notes to Consolidated Financial Statements. PENTAIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with instructions for Form 10-Q and, accordingly, do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation have been included. These statements should be read in conjunction with the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994, previously filed with the Commission. 2. The results of operations for the three months ended March 31, 1995 are not necessarily indicative of the operating results to be expected for the full year. 3. Income tax provisions for interim periods are based on the current best estimate of the effective federal, state and foreign income tax rates. 4. Earnings per common share are based on the weighted average number of common and common equivalent shares outstanding during each period. The tax benefits applicable to preferred dividends paid to ESOPs are: for allocated shares credited to income tax expense and for unallocated shares, credited to retained earnings and are not considered earnings applicable to common stock. Fully diluted computations assume full conversion of each series of preferred stock into common stock, the elimination of preferred dividend requirements, and the recognition of the tax benefit on deductible ESOP dividends applicable to allocated shares payable based on the converted common dividend rate. Conversion was assumed during the portion of each period that the securities were outstanding. 5. The long-term debt is summarized as follows ($ millions):
March 31,December 31, 1995 1994 Revolving credit facilities $266 $231 Private placement debt 160 160 Other 17 23 TOTAL 443 414 Current maturities (4) (5) Total long-term debt $439 $409
Debt agreements contain various restrictive covenants, including a limitation on the payment of dividends and certain other restricted payments. Under the most restrictive covenants, $148 million of the March 31, 1995 retained earnings were unrestricted for such purposes. 6. The Company uses the equity method of accounting for its Joint Ventures, Lake Superior Paper Industries (LSPI) and LSPI Fiber. First quarter operations are summarized as follows ($ millions):
1995 1994 Net Sales $47.3 39.1 Operating Income 5.0 1.8 Pre-Tax Income 3.4 .8
7. Statement of Cash Flows The following is supplemental information relating to the Statement of Cash Flows ($000's):
Three Months Ended March 31 1995 1994 Interest paid (net of capitalized interest) $8,227 $8,992 Income tax payments 4,158 3,241
8. Acquisition Effective January 1, 1994, the Company acquired Schroff GmbH and its international subsidiaries, a manufacturer of cabinets, cases, subracks and accessories for the electronics industry, for $140 million. The acquisition was accounted for by the purchase method, accordingly, the purchase price was allocated to the assets acquired based on their estimated fair values as follows: working capital, $20.9 million; property, plant and equipment, $57.8 million; other non-current liabilities, $17.9 million; and goodwill, $79.0 million. Goodwill is being amortized on a straight line basis over 25 years. The Schroff operating results are included in the company's consolidated results from January 1, 1994. 9. Subsequent Event The sale of Cross Pointe Paper Corporation was completed on April 3, 1995. The definitive agreements regarding the sale of Niagara of Wisconsin Paper Corporation, our 50% share of Lake Superior Paper Industries (LSPI) joint venture and our 12% share of Superior Recycled Fiber Industries (SRFI) were signed on May 8, 1995. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION BUSINESS SEGMENT INFORMATION Selected information for business segments for the three months ended March 31, 1995 and 1994 follows ($millions):
General Specialty Industrial Paper Joint General Products Equipment Products Ventures Corporate Total 1995 Net Sales $117.6 $219.8 $125.4 $0.0 $(3.5) $459.3 Operating Income 13.4 21.1 2.7 1.7 (5.6) 33.3 Identifiable Assets 240.7 677.0 294.5 78.0 70.3 1,360.5 Depreciation 2.5 7.8 6.7 0.0 0.0 17.0 Capital Expenditures 2.0 7.9 6.4 0.0 0.0 16.3 1994 Net Sales $109.9 $187.1 $ 92.3 $0.0 $0.0 $389.3 Operating Income 11.4 16.7 4.2 0.4 (6.0) 26.7 Identifiable Assets 216.3 597.4 261.1 73.6 61.3 1,209.7 Depreciation 2.2 7.6 6.5 0.0 0.0 16.3 Capital Expenditures 2.4 6.2 6.4 0.0 0.0 15.0
RESULTS OF OPERATIONS Pentair reported net income of $15.4 million, or 72 cents per fully diluted share, on consolidated net sales of $459.3 million for the three months ended March 31, 1995. This represented a 38.3 percent increase in net income and an 18.0 percent increase in sales over the first quarter of 1994. The first quarter 1994 net income was $11.1 million, or 52 cents per fully diluted share, on consolidated net sales of $389.3 million. Specialty Products Segment. Net sales increased $7.7 million or 7.0% and operating income increased $2.0 million or 17.8% with Porter Cable contributing much of the improvement. The increases reflect new product sales and further expansion into major home center distribution channels. General Industrial Equipment Segment. Sales increased $32.8 million or 17.5% and operating income increased $4.4 million or 26.6%. Schroff and Hoffman were the major contributors to the increased sales and operating income for the first three months of 1995. Electronic and electrical enclosure sales continued strong for the first quarter of 1995, assisted by the strength in durable goods spending in the U.S. and Europe. Lubrication and material dispensing sales and profits were up considerably from the prior year. The strengthening of the European economy continues to favorably impact the results of the Lincoln GmbH business. Sporting ammunition sales and operating margins were lower due to unfavorable product mix as compared to 1994. Paper Products Segment. Net sales increased $33.1 million and operating income decreased $1.5 million, reflecting continuous margin pressures in uncoated free sheet products. The turnaround in the domestic paper market helped the businesses greatly. Coated groundwood paper volume was up 10.8% and prices increased by $200 per ton above first quarter 1994 prices. Uncoated paper volume was up 12.7% and prices were up over $115 per ton over the same period in 1994. Net paper segment results were flat. However, within this segment a $6.5 million charge was recorded based on senior management's decision to accelerate closure of a sludge disposal facility in Dickinson County, Michigan. Joint Venture Segment. Tons shipped were flat but prices were up 16.2% or over $100 per ton as compared to the first quarter of 1994. FINANCIAL CONDITION In 1995 as in 1994, net income adjusted for non-cash items provided much of the funds for seasonal working capital increases. Accounts receivable levels increased due to dating programs and increased sales. Some subsidiaries were also re-building inventory levels. Borrowings financed some operating needs along with capital expenditures of $16.3 million in 1995 and $15.0 million in 1994. The percentage of long-term debt to total capital was 49% at March 31, 1995 compared to 49% at December 31, 1994. In 1994, revolving credit facilities were used to fund the acquisition of Schroff. The full year 1995 cash flow from operations is expected to increase with additional net income contributions. Working capital needs will grow as total sales increase. Capital expenditures are expected to be down from 1994 to about $60-70 million in 1995 as compared to $92.7 million in 1994 due to the expected disposition of all of the paper businesses. Based upon current operating expectations, credit available under revolving credit facilities is expected to be adequate to cover seasonal working capital and long-term capital expenditure requirements. OUTLOOK In general, the Company is well-positioned to continue its internal growth. The strong emphasis on product development and aggressive efforts to expand distribution channels that helped during the recent year are expected to continue to grow market share and sales and profit growth. In all businesses, sales are expected to respond to new products and enhanced customer service. The sale of Cross Pointe Paper Corporation was completed on April 3, 1995. The definitive agreements regarding the sale of Niagara of Wisconsin Paper Corporation, our 50% share of Lake Superior Paper Industries (LSPI) joint venture and our 12% share of Superior Recycled Fiber Industries (SRFI) were signed on May 8, 1995. With the expected completion of the disposition of the Paper Products and Joint Venture segments, Pentair will be able to devote full financial and managerial resources to growth and development of its industrial businesses. The proceeds from the sales of the paper businesses will strengthen our capital position and enable the company to pursue industrial acquisitions. These resources also will enable the company to make continued capital expenditures for internal development of the existing industrial businesses. PART II - OTHER INFORMATION ITEM 4 -Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of Pentair, Inc. was held on April 19, 1995, for the purpose of electing certain members to the board of directors, approving the appointment of auditors, and voting on the proposals described below. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934. DIRECTORS All of management's nominees for directors as listed in the proxy statement were elected with the following vote:
Shares Shares Broker Voted "For" "Withheld" Non-Votes Q. Hietpas 17,395,504 165,925 0 R. Schulze 17,385,344 176,085 0 K. Welke 17,371,326 190,103 0
AUDITORS The appointment of Deloitte & Touche LLP as independent auditors of the Company for 1995 was ratified by the following vote:
Shares Shares Voted Shares Broker Voted "For" "Against" "Abstaining" Non-Votes 17,322,488 61,084 177,857 0
PROPOSAL 2 A proposal to amend the Restated Articles of Incorporation increasing the total number of shares authorized to be issued from 75,000,000 to 100,000,000 and increase from 10,000,000 to 15,000,000 the number of authorized shares that the Board of Directors could designate as preferred shares, and modify the power of the Board of Directors to establish voting rights of unissued shares did not receive the required 60% approval. The vote tally was as follows:
Shares Shares Voted Shares Broker Voted "For" "Against" "Abstaining" Non-Votes 10,973,651 5,274,835 166,329 1,146,614
PROPOSAL 3 A proposal to amend the Restated Articles of Incorporation increasing the total number of shares authorized to be issued from 75,000,000 to 125,000,000 and increase from 10,000,000 to 15,000,000 the number of authorized shares that the Board of Directors could designate as preferred shares was passed with the following vote:
Shares Shares Voted Shares Broker Voted "For" "Against" "Abstaining" Non-Votes 13,824,183 2,321,552 269,080 1,146,614
In order for either proposal regarding the amendment to the Articles of Incorporation to pass, the proposal was required to receive greater than 60% vote in favor and not more than 25% vote against. ITEM 5 - Other Information The Registrant announced on May 8, 1995 that is has signed a definitive agreement to sell its remaining paper businesses to Consolidated Papers, Inc. of Wisconsin for approximately $103 million cash, plus assumed debt and lease obligations. The sale includes Niagara of Wisconsin Paper Corporation, our 50% share of Lake Superior Paper Industries (LSPI) joint venture and our 12% share of Superior Recycled Fiber Industries (SRFI). The transaction is expected to close in late June 1995, subject to regulatory clearance and further due diligence. In connection with the completed sale of Cross Pointe and the expected sale of the remaining assets, the Company has decided to report its Paper Products segment and Joint Ventures segment as discontinued operations, effective May 1, 1995. The consolidated financial statements will be reclassified to report separately the net assets and operating results of the discontinued operations. The company's prior year operating results will also be restated to reflect continuing operations. The continuing operations will consist of the Specialty Products, General Industrial Equipment, and General Corporate segment. Comparative sales and operating income figures can be found in Part 1 Item 2 Business Segment Information. The results of 1994 and first quarter of 1995 will be restated on a discontinued operations basis on Form 8-K/A to be filed in early June. 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. A report on Form 8K was filed on April 17, 1995 disclosing the closing of the sale of Cross Pointe Paper Corporation to Noranda Forest, Inc. 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/ David D. Harrison Senior Vice President and Chief Financial Officer May 15, 1995 EXHIBIT INDEX Exhibit Number 11 Calculation of Earnings per Common and Common Equivalent Share 27 Financial Data Schedule EX-27 2
5 3-MOS DEC-31-1994 MAR-31-1995 25192000 0 287336000 0 280188000 630602000 784882000 366840000 1360467000 302577000 0 413255000 0 42560000 0 1360467000 459250000 459250000 349710000 427615000 0 0 8461000 25860000 10510000 15350000 0 0 0 15350000 .76 .72
EX-11 3 EXHIBIT 11 PENTAIR, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Quarter Ended March 31 1995 1994 INCOME ($ thousands) Net income $15,350 $11,100 Preferred dividend requirements 1,330 1,366 Earnings available to common and common equivalent shares - Primary 14,020 9,734 Preferred dividends assuming conversion of Preferred Stock: Series 1988 250 256 Series 1990 1,080 1,110 Tax benefit on preferred ESOP dividend eliminated due to conversion into common (332) (264) Tax benefit on ESOP dividend assuming con- version to common, at common dividend rate 128 92 Earnings available for common and common equivalent shares - Diluted $15,147 $10,928 SHARES (thousands) Weighted average number of shares outstanding during the period 18,302 18,169 Shares issuable on exercise of stock options less shares repurchaseable from proceeds 249 203 Common and Common Equivalent Shares - Primary 18,551 18,372 Shares issuable on conversion of: $7.50 Callable Cumulative Convertible Preferred Stock, Series 1988 499 513 8% Callable Cumulative Voting Convertible Preferred Stock, Series 1990 2,093 2,121 Common and Common Equivalent Shares - Diluted 21,143 21,006 Earnings per Share: Primary $.76 $.53 Diluted .72 .52
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