EX-99.1 2 c52454exv99w1.htm EX-99.1 EX-99.1
Exhibit 99.1
Pentair, Inc.
5500 Wayzata Blvd., Suite 800
MInneapolis, MN 55416
763 545 1730 Tel
763 656 5400 Fax
(PENTAIR LOGO)
News Release
Pentair Reports Second Quarter Net Income Per Share from Continuing Operations of $0.33; Adjusted EPS of $0.38

  •   Reports second quarter sales of $694 million, down 23 percent year-over-year.
 
  •   Delivers $131 million of free cash flow; on track to deliver over $225 million for full year
 
  •   Effectively executing against restructuring actions as all events are on schedule or completed.
 
  •   Introduces third quarter adjusted EPS guidance of $0.35 to $0.45 and maintains full year sales, earnings and free cash flow guidance.
All financial information and period-to-period references are on a continuing operations basis unless otherwise noted. Reconciliations to discontinued operations as well as GAAP and Non-GAAP reconciliations are in the attached financial tables.
MINNEAPOLIS, Minn. — July 21, 2009 — Pentair, Inc. (NYSE: PNR) today announced second quarter 2009 net earnings per diluted share from continuing operations (EPS) of $0.33. This represents a decrease of 77 percent as compared to the $1.41 of EPS in the second quarter last year. Current period results include a negative $0.02 per share impact from restructuring charges and a negative $0.03 per share charge from the early redemption of bonds. Adjusting for these items, second quarter 2009 EPS was $0.38, compared to adjusted second quarter 2008 EPS of $0.70, a decrease of 46 percent.
Total company sales decreased 23 percent to $694 million, compared with $898 million in the second quarter of 2008. The company delivered second quarter operating income of $64 million. On an adjusted basis, the company delivered operating income of $67 million versus $120 million in the year-ago quarter. The company’s adjusted operating income in the current quarter excludes the impact of additional severance charges associated with the second quarter elimination of 100 positions not included in prior restructuring. Overall, adjusted operating margins for the second quarter contracted 370 basis points to 9.6 percent. The positive impact from productivity and price did not offset the significant negative impact related to lower volumes.
Total company free cash flow was positive $131 million for the quarter. Year-to-date the company has generated $98 million of free cash flow, which is $39 million more than was generated in the first half of 2008. The company said it remains on track to achieve free cash flow greater than $225 million for 2009, driven by improvements in working capital.
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“Overall we continue to make tremendous progress against our cost actions as well as to drive strong free cash flow generation. While a few of our markets are showing signs of improvement, most continue to remain soft, as expected,” said Randall J. Hogan, Pentair chairman and chief executive officer.
Second Quarter Business Highlights
The Water Group delivered $487 million in sales, an 18 percent decline year-over-year. Sales were down 17 percent excluding the formation of the Pentair Residential Filtration (PRF) business with General Electric’s (GE) Water and Process Technologies unit, which added two points of growth, and foreign exchange, which reduced sales by three points.
  •   Global Flow Technologies sales were down 17 percent versus the year-ago quarter, as sales increases of pump equipment for North American municipal markets did not outpace declines in residential, commercial and agricultural markets.
 
  •   Global Filtration sales were down 14 percent, or down 17 percent in local currencies and excluding the increased sales associated with the formation of PRF. Sales increases in desalination markets did not offset declines in residential, industrial and foodservice markets.
 
  •   Global Pool and Spa sales were down 16 percent as a sequential uptick in second quarter sales associated with the summer pool season was not enough to overcome the prolonged decline in North American residential pool markets.
The Water Group’s second quarter reported operating income totaled $50 million, down 16 percent as compared to $59 million in the same period last year. In the quarter, the Water Group had $1 million in pre-tax restructuring charges associated with severance from recently announced additional headcount reductions. Excluding these items, second quarter 2009 adjusted operating income was $51 million, down 38 percent versus second quarter 2008 adjusted operating income of $82 million. Adjusted operating margins of 10.5 percent were down 330 basis points as benefits from productivity and price did not offset the negative impact from volume declines, inflation, pay-as-you-go restructuring costs, and integration expenses associated with the formation of PRF.
Technical Products delivered second quarter 2009 sales of $207 million, a decrease of 32 percent versus the year-earlier period. Sales were down 30 percent excluding the impact of foreign exchange.
  •   Global Electrical sales were down 28 percent as industrial customers dramatically slowed their capital projects and distributors aggressively reduced inventory levels.
 
  •   Global Electronic sales were down 32 percent as each major vertical market contracted led by Datacom, which was down over 50 percent.
Technical Products’ second quarter reported operating income totaled $24 million, down 53 percent compared to $50 million in the same quarter last year. Adjusting for a restructuring charge, operating income was $25 million. Adjusted operating margins were 12.0 percent, down 440 basis points versus the second quarter 2008. In the quarter, the benefits from productivity and price did not offset the negative impact from volume declines and foreign exchange.
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“Second quarter results were generally in line with our expectations and guidance. Sales came in at the low end, as our Technical Products and Water European businesses could not overcome extremely soft April and May months. North America residential markets are beginning to improve or at least stabilize while commercial and industrial markets remain uncertain,” Hogan said. “Also as expected, the solid progress we are making to reduce fixed and variable cost enabled margins in Water to rise back up above ten percent while Technical Products achieved twelve percent adjusted margins. So, our actions are yielding solid results and we continue to position our businesses for significant upside when markets recover.”
Outlook
The company introduces its third quarter reported 2009 EPS guidance range of $0.32 to $0.42. Adjusting for charges associated with new restructuring actions, third quarter EPS is expected to be $0.35 to $0.45, down approximately 29 percent year-over-year when using the midpoint of the guidance range. Third quarter sales are expected to be down over 20 percent.
The company maintains its full year 2009 EPS guidance to equal or exceed $1.40, which would be down 46 percent when compared to reported full year 2008 EPS or down 36 percent when 2008 EPS is adjusted for non-recurring items (see attached 2008 reconciliation table). The company expects full year 2009 EPS on both a reported and adjusted basis will be comparable as restructuring and other charges in 2009 are expected to be similar in size to anticipated gains from other nonrecurring items.
“We anticipate that the benefits we have achieved and expect to realize from our productivity actions will continue to accelerate in the second half of 2009,” said Hogan. “We remain excited about our new product introductions, global growth prospects in many markets and our ability to support infrastructure projects included in the government stimulus package. A good example is last week’s announcement that our Engineered Flow business won a $65 million municipal water contract, which highlights our strength in this key North American market.”
“We expect the second half of 2009 will show continued earnings improvement as we realize more benefits from our productivity and cost actions and our year over year sales comparisons become less difficult,” Hogan added.
Earnings Conference Call
Pentair Chairman and CEO Randall J. Hogan and Chief Financial Officer John L. Stauch will discuss the company’s performance and third quarter and full year 2009 guidance on a two-way conference call with investors and a live audio webcast at 12:00 p.m. Eastern today. Reconciliation of non-GAAP financial measures are set forth in the attachments to this second quarter 2009 earnings release and in the second quarter 2009 earning release conference call presentation, both of which can be found at Pentair’s web site (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.
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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 the breadth and severity of the global economic downturn; the strength of housing and related markets; the ability to implement our restructuring and other cost reduction plans successfully and the risk that expected benefits may not be fully realized or may take longer to realize than expected; 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 (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 2008 revenues of $3.35 billion, Pentair employs approximately 13,100 people worldwide.
Pentair Contacts:
Todd Gleason
Vice President, Strategic Planning & Investor Relations
Tel.: (763) 656-5570
E-mail: todd.gleason@pentair.com

 

 

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
                                 
    Three months ended   Six months ended
    June 27   June 28   June 27   June 28
In thousands, except per-share data   2009   2008   2009   2008
 
Net sales
   $ 693,712     $ 898,378     $ 1,327,552     $ 1,728,524  
Cost of goods sold
     497,233       619,968       961,841       1,199,420  
 
 
                                
Gross profit
     196,479       278,410       365,711       529,104  
% of net sales
     28.3 %     31.0 %     27.6 %     30.6 %
Selling, general and administrative
     119,104       145,610       236,379       283,713  
% of net sales
     17.1 %     16.2 %     17.8 %     16.4 %
Research and development
     13,815       15,818       28,558       31,082  
% of net sales
     2.0 %     1.8 %     2.2 %     1.8 %
Legal settlement
     —       20,435       —       20,435  
 
 
                                
Operating income
     63,560       96,547       100,774       193,874  
% of net sales
     9.2 %     10.7 %     7.6 %     11.2 %
 
                                
Other (income) expense:
                                
 
                                
Gain on sale of interest in subsidiaries
     —       (109,648 )     —       (109,648 )
Equity losses of unconsolidated subsidiary
     279       847       556       1,764  
Loss on early extinguishment of debt
     4,804       —       4,804       —  
Net interest expense
     9,833       15,862       21,617       31,951  
% of net sales
     1.4 %     1.8 %     1.6 %     1.9 %
 
 
                                
Income from continuing operations before income taxes and noncontrolling interest
     48,644       189,486       73,797       269,807  
Provision for income taxes
     16,217       49,649       23,649       77,507  
 
Income from continuing operations
     32,427       139,837       50,148       192,300  
 
                                
Loss from discontinued operations, net of tax
     —       (1,102 )     —       (2,138 )
 
                                
Loss on disposal of discontinued operations, net of tax
     (78 )     —       (68 )     (7,137 )
 
Net income before noncontrolling interest
     32,349       138,735       50,080       183,025  
Noncontrolling interest
     421       —       887       —  
 
Net income attributable to Pentair, Inc.
   $ 31,928     $ 138,735     $ 49,193     $ 183,025  
 
 
                                
Net income from continuing operations attributable to Pentair, Inc.
   $ 32,006     $ 139,837     $ 49,261     $ 192,300  
 
 
                                
Earnings (loss) per common share attributable to Pentair, Inc.
                                
Basic
                                
Continuing operations
   $ 0.33     $ 1.43     $ 0.51     $ 1.96  
Discontinued operations
     —       (0.01 )     —       (0.09 )
 
Basic earnings per common share
   $ 0.33     $ 1.42     $ 0.51     $ 1.87  
 
 
                                
Diluted
                                
Continuing operations
   $ 0.33     $ 1.41     $ 0.50     $ 1.93  
Discontinued operations
     —       (0.01 )     —       (0.09 )
 
Diluted earnings per common share
   $ 0.33     $ 1.40     $ 0.50     $ 1.84  
 
 
                                
Weighted average common shares outstanding
                                
Basic
     97,507       98,062       97,445       98,172  
Diluted
     98,422       99,509       98,145       99,462  
 
                                
Cash dividends declared per common share
   $ 0.18     $ 0.17     $ 0.36     $ 0.34  

 

Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
                         
    June 27   December 31   June 28
In thousands   2009   2008   2008
 
Assets
                        
Current assets
                        
Cash and cash equivalents
   $ 38,118     $ 39,344     $ 74,616  
Accounts and notes receivable, net
     462,106       461,081       551,653  
Inventories
     362,743       417,287       424,277  
Deferred tax assets
     51,465       51,354       51,961  
Prepaid expenses and other current assets
     50,111       63,113       46,104  
Current assets of discontinued operations
     —       —       20,527  
 
Total current assets
     964,543       1,032,179       1,169,138  
 
                        
Property, plant and equipment, net
     340,884       343,881       375,453  
 
                        
Other assets
                        
Goodwill
     2,106,026       2,101,851       2,152,628  
Intangibles, net
     504,674       515,508       554,216  
Other
     61,118       59,794       78,734  
Non-current assets of discontinued operations
     —       —       13,853  
 
Total other assets
     2,671,818       2,677,153       2,799,431  
 
Total assets
   $ 3,977,245     $ 4,053,213     $ 4,344,022  
 
 
                        
Liabilities and Shareholders’ Equity
                        
Current liabilities
                        
Short-term borrowings
   $ 6,143     $ —     $ 217  
Current maturities of long-term debt
     122       624       4,442  
Accounts payable
     212,973       217,898       237,302  
Employee compensation and benefits
     71,674       90,210       98,640  
Current pension and post-retirement benefits
     8,890       8,890       8,557  
Accrued product claims and warranties
     36,780       41,559       47,155  
Income taxes
     14,668       5,451       19,246  
Accrued rebates and sales incentives
     26,286       28,897       36,578  
Other current liabilities
     84,491       104,975       129,775  
Current liabilities of discontinued operations
     —       —       771  
 
Total current liabilities
     462,027       498,504       582,683  
 
                        
Other liabilities
                        
Long-term debt
     883,281       953,468       1,024,160  
Pension and other retirement compensation
     270,588       270,139       171,923  
Post-retirement medical and other benefits
     32,847       34,723       35,094  
Long-term income taxes payable
     26,906       28,139       24,442  
Deferred tax liabilities
     150,167       146,559       188,498  
Other non-current liabilities
     96,016       101,612       95,544  
Non-current liabilities of discontinued operations
     —       —       1,483  
 
Total liabilities
     1,921,832       2,033,144       2,123,827  
 
                        
Shareholders’ equity
     2,055,413       2,020,069       2,220,195  
 
Total liabilities and shareholders’ equity
   $ 3,977,245     $ 4,053,213     $ 4,344,022  
 
 
                        
Days sales in accounts receivable (13 month moving average)
     61       57       56  
Days inventory on hand (13 month moving average)
     89       79       75  
Days in accounts payable (13 month moving average)
     62       59       58  

 

Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
                 
    Six months ended
    June 27   June 28
In thousands   2009   2008
 
Operating activities
                
Net income before noncontrolling interest
   $ 50,080     $ 183,025  
Adjustments to reconcile net income to net cash provided by (used for) operating activities
                
Loss from discontinued operations
     —       2,138  
Loss on disposal of discontinued operations
     68       7,137  
Equity losses of unconsolidated subsidiary
     556       1,764  
Depreciation
     29,634       30,335  
Amortization
     14,601       13,101  
Deferred income taxes
     464       21,037  
Stock compensation
     9,087       11,932  
Excess tax benefits from stock-based compensation
     (582 )     (776 )
Gain on sale of assets
     (286 )     (443 )
Gain on sale of interest in subsidiaries
     —       (109,648 )
Changes in assets and liabilities, net of effects of business acquisitions and dispositions
                
Accounts and notes receivable
     1,556       (83,345 )
Inventories
     55,703       (20,776 )
Prepaid expenses and other current assets
     13,532       (7,854 )
Accounts payable
     (3,436 )     11,869  
Employee compensation and benefits
     (21,821 )     (18,265 )
Accrued product claims and warranties
     (4,792 )     (2,366 )
Income taxes
     9,066       3,182  
Other current liabilities
     (23,234 )     31,084  
Pension and post-retirement benefits
     (1,433 )     3,320  
Other assets and liabilities
     (2,205 )     4,986  
 
Net cash provided by (used for) continuing operations
     126,558       81,437  
Net cash provided by (used for) operating activities of discontinued operations
     (1,408 )     (5,963 )
 
Net cash provided by (used for) operating activities
     125,150       75,474  
 
                
Investing activities
                
Capital expenditures
     (28,850 )     (26,191 )
Proceeds from sale of property and equipment
     563       3,802  
Acquisitions, net of cash acquired or received
     —       6,237  
Divestitures
     920       29,959  
Other
     (10 )     —  
 
Net cash provided by (used for) investing activities
     (27,377 )     13,807  
 
                
Financing activities
                
Net short-term borrowings (repayments)
     6,024       (13,965 )
Proceeds from long-term debt
     400,000       279,405  
Repayment of long-term debt
     (470,187 )     (297,740 )
Debt issuance costs
     (50 )     (50 )
Excess tax benefits from stock-based compensation
     582       776  
Proceeds from exercise of stock options
     996       2,175  
Repurchases of common stock
     —       (21,721 )
Dividends paid
     (35,433 )     (33,747 )
 
Net cash provided by (used for) financing activities
     (98,068 )     (84,867 )
 
                
Effect of exchange rate changes on cash and cash equivalents
     (931 )     (593 )
 
Change in cash and cash equivalents
     (1,226 )     3,821  
Cash and cash equivalents, beginning of period
     39,344       70,795  
 
Cash and cash equivalents, end of period
   $ 38,118     $ 74,616  
 
 
                
Free cash flow
                
 
Net cash provided by (used for) continuing operations
   $ 126,558     $ 81,437  
Capital expenditures
     (28,850 )     (26,191 )
Proceeds from sale of property and equipment
     563       3,802  
 
Free cash flow
   $ 98,271     $ 59,048  
 

 

 

Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment (Unaudited)
                                                 
    First Qtr   Second Qtr   Six Months   First Qtr   Second Qtr   Six Months
In thousands   2009   2009   2009   2008   2008   2008
 
Net sales to external customers
                                                
Water
   $ 423,932     $ 486,990     $ 910,922     $ 544,686     $ 594,118     $ 1,138,804  
Technical Products
     209,908       206,722       416,630       285,460       304,260       589,720  
 
Consolidated
   $ 633,840     $ 693,712     $ 1,327,552     $ 830,146     $ 898,378     $ 1,728,524  
             
 
                                                
Intersegment sales
                                                
Water
   $ 289     $ 198     $ 487     $ 372     $ 139     $ 511  
Technical Products
     233       600       833       1,138       1,034       2,172  
Other
     (522 )     (798 )     (1,320 )     (1,510 )     (1,173 )     (2,683 )
 
Consolidated
   $ —     $ —     $ —     $ —     $ —     $ —  
 
 
                                                
Operating income (loss)
                                                
Water
   $ 26,976     $ 49,781     $ 76,757     $ 65,035     $ 59,475     $ 124,510  
Technical Products
     20,462       23,578       44,040       45,337       49,732       95,069  
Other
     (10,224 )     (9,799 )     (20,023 )     (13,045 )     (12,660 )     (25,705 )
 
Consolidated
   $ 37,214     $ 63,560     $ 100,774     $ 97,327     $ 96,547     $ 193,874  
             
 
                                                
Operating income as a percent of net sales                                        
Water
     6.4 %     10.2 %     8.4 %     11.9 %     10.0 %     10.9 %
Technical Products
     9.7 %     11.4 %     10.6 %     15.9 %     16.3 %     16.1 %
Consolidated
     5.9 %     9.2 %     7.6 %     11.7 %     10.8 %     11.2 %

 

 

Pentair, Inc. and Subsidiaries
Reconciliation of the GAAP “As Reported” year ending December 31, 2009 to the “Adjusted” non-GAAP
excluding the effect of 2009 adjustments (Unaudited)
                                         
    First Quarter   Second Quarter   Third Quarter   Fourth Quarter   Year
In thousands, except per-share data   2009   2009   2009   2009   2009
 
Net sales
   $ 633,840     $ 693,712     $ 675,000-$705,000     $ 670,000-$700,000     approx $2,700M  
           
 
                                        
Operating income — as reported
     37,214       63,560       65,000 — 75,000       69,000 — 79,000     approx 244,000  
% of net sales
     5.9 %     9.2 %   approx 10 %   approx 11 %   approx 9.0 %
Adjustments:
                                        
Restructuring & other
     2,824       2,944       5,000       —     approx 11,000  
 
Operating income — as adjusted
     40,038       66,504       70,000 — 80,000       69,000 — 79,000     approx 255,000  
% of net sales
     6.3 %     9.6 %   approx 11 %   approx 11 %   approx 9.5 %
 
Net income from continuing operations attributable to Pentair, Inc. — as reported
     17,255       32,006       31,200 — 41,200       44,400 — 55,200     approx 137,000  
Adjustments — tax affected
                                        
Restructuring & other
     1,864       5,114       3,300     approx (10,000)       —  
 
Net income from continuing operations attributable to Pentair, Inc. — as adjusted
     19,119       37,120       34,500 — 44,500       34,400 — 45,200     approx 137,000  
 
 
                                        
Continuing earnings per common share attributable to Pentair, Inc. — diluted
                                
Diluted earnings per common share — as reported
   $ 0.18     $ 0.33     $ 0.32 — $0.42     $ 0.45 — $0.56     $1.40 or above  
Adjustments
     0.02       0.05       0.03       (0.10 )     —  
 
Diluted earnings per common share — as adjusted
   $ 0.20     $ 0.38     $ 0.35 — $0.45     $ 0.35 — $0.46     $1.40 or above  
 
 
                                        
Weighted average common shares outstanding — Diluted
     97,966       98,422       98,500       98,500     approx 98,500  
Pentair, Inc. and Subsidiaries
Reconciliation of the GAAP “As Reported” year ending December 31, 2008 to the “Adjusted” non-GAAP
excluding the effect of 2008 adjustments (Unaudited)
                                         
    First Quarter   Second Quarter   Third Quarter   Fourth Quarter   Year
In thousands, except per-share data   2008   2008   2008   2008   2008
 
Net sales
   $ 830,146     $ 898,378     $ 855,815     $ 767,637     $ 3,351,976  
 
 
                                        
Operating income — as reported
     97,327       96,547       85,614       45,197       324,685  
% of net sales
     11.7 %     10.7 %     10.0 %     5.9 %     9.7 %
Adjustments:
                                        
Restructuring and asset impairment
     —       2,586       15,207       28,377       46,170  
Horizon settlement
     —       20,435       —       —       20,435  
 
Operating income — as adjusted
     97,327       119,568       100,821       73,574       391,290  
% of net sales
     11.7 %     13.3 %     11.8 %     9.6 %     11.7 %
 
                                        
Net income from continuing operations attributable to Pentair, Inc. — as reported
     52,463       139,837       42,902       21,161       256,363  
Adjustments — tax affected
                                        
Restructuring and asset impairment
     —       1,707       10,037       18,729       30,473  
Horizon settlement
     —       13,487       —       —       13,487  
Gain on PRF transaction
     —       (85,832 )     —       —       (85,832 )
Bond tender
     —       —       3,043       —       3,043  
 
Net income from continuing operations attributable to Pentair, Inc. — as adjusted
     52,463       69,199       55,982       39,890       217,534  
 
 
                                        
Continuing earnings per common share attributable to Pentair, Inc. — diluted
                                        
Diluted earnings per common share — as reported
   $ 0.53     $ 1.41     $ 0.43     $ 0.22     $ 2.59  
Adjustments
     —       (0.71 )     0.13       0.19       (0.39 )
 
Diluted earnings per common share — as adjusted
   $ 0.53     $ 0.70     $ 0.56     $ 0.41     $ 2.20  
 
 
                                        
Weighted average common shares outstanding — Diluted
     99,558       99,509       99,319       98,299       99,068  

 

 

Pentair, Inc. and Subsidiaries
Reconciliation of the GAAP “As Reported” year ending December 31, 2009 to the “Adjusted” non-GAAP
excluding the effect of 2009 adjustments (Unaudited)
                                         
    First Quarter   Second Quarter   Third Quarter   Fourth Quarter   Year
In thousands   2009   2009   2009   2009   2009
 
Water
                                        
Net sales
   $ 423,932     $ 486,990     $ 455,000 — $475,000     $ 450,000 — $470,000     approx $1,840M  
           
 
                                        
Operating income — as reported
     26,976       49,781       48,500 — 53,500       51,500 — 56,500       180,000 — 185,000  
% of net sales
     6.4 %     10.2 %     10.2% — 11.8 %     11.0% — 12.6 %   approx 10.0 %
Adjustments — restructuring
     1,464       1,460       —       —     approx 3,000  
 
Operating income — as adjusted
     28,440       51,241       48,500 — 53,500       51,500 — 56,500       183,000 — 188,000  
% of net sales
     6.7 %     10.5 %     10.2% — 11.8 %     11.0% — 12.6 %   approx 10.0 %
 
                                        
Technical Products
                                        
Net sales
   $ 209,908     $ 206,722     $ 215,000 — $220,000     $ 220,000 — $225,000     approx $860M  
 
 
                                        
Operating income — as reported
     20,462       23,578       24,000 — 29,000       30,000 — 35,000       101,500 — 106,500  
% of net sales
     9.7 %     11.4 %     10.9% — 13.5 %     13.3% — 15.9 %   approx 12.0 %
Adjustments — restructuring
     792       1,139       5,000       —     approx 7,000  
 
Operating income — as adjusted
     21,254       24,717       29,000 — 34,000       30,000 — 35,000       108,500 — 113,500  
% of net sales
     10.1 %     12.0 %     13.2% — 15.8 %     13.3% — 15.9 %   approx 13.0 %
Pentair, Inc. and Subsidiaries
Reconciliation of the GAAP “As Reported” year ending December 31, 2008 to the “Adjusted” non-GAAP
excluding the effect of 2008 adjustments (Unaudited)
                                         
    First Quarter   Second Quarter   Third Quarter   Fourth Quarter   Year
In thousands   2008   2008   2008   2008   2008
 
Water
                                        
Net sales
   $ 544,686     $ 594,118     $ 557,976     $ 509,362     $ 2,206,142  
 
 
                                        
Operating income — as reported
     65,035       59,475       49,684       32,163       206,357  
% of net sales
     11.9 %     10.0 %     8.9 %     6.3 %     9.4 %
Adjustments
                                        
Restructuring and asset impairment
     —       2,157       13,438       19,628       35,223  
Horizon settlement
     —       20,435       —       —       20,435  
 
Operating income — as adjusted
     65,035       82,067       63,122       51,791       262,015  
% of net sales
     11.9 %     13.8 %     11.3 %     10.2 %     11.9 %
 
                                        
Technical Products
                                        
Net sales
   $ 285,460     $ 304,260     $ 297,839     $ 258,275     $ 1,145,834  
 
 
                                        
Operating income — as reported
     45,337       49,732       47,585       26,661       169,315  
% of net sales
     15.9 %     16.3 %     16.0 %     10.3 %     14.8 %
Adjustments — restructuring and asset impairment
     —       429       633       7,209       8,271  
 
Operating income — as adjusted
     45,337       50,161       48,218       33,870       177,586  
% of net sales
     15.9 %     16.4 %     16.2 %     13.1 %     15.5 %