EX-99.2 3 c12074exv99w2.htm RECONCILIATION OF "GAAP" exv99w2
 

 

EXHIBIT 99.2
Pentair, Inc. and Subsidiaries
Reconciliation of the GAAP “As Reported” year ended December 31, 2006 to the “Adjusted” non-GAAP
excluding the effect of third quarter 2006 one-times charges (Unaudited)
In our quarterly conference call on February 6, 2007 for the fourth quarter ended December 31, 2006, we referred to a $17 million charge we took against earnings in the third quarter of 2006 in recognition of the weaker markets for our Pool and Spa businesses. We also compared the impact of that charge on the following accounting measures for the year ended December 31, 2006:
Pentair earnings per share (from continuing operations)
Pentair gross margin (gross profit percent)
Pentair S, G & A (selling, general and administrative)
Pentair operating margin (operating income as a percent of net sales)
Pentair Water segment operating margin (operating income as a percent of net sales)
The following tables reconcile the measures listed above, as adjusted to exclude this charge, to the as-reported GAAP measures for the year ended December 31, 2006. We believe these measures provide investors with a clearer understanding both of the impact of this charge and the underlying performance of Pentair or its Water segment before taking this charge into account.

 

 

Pentair, Inc. and Subsidiaries
Reconciliation of the GAAP “As Reported” year ended December 31, 2006 to the “Adjusted” non-GAAP
excluding the effect of third quarter 2006 one-time charges (Unaudited)
                                 
    Year Ended  
    As Reported     Third Quarter     Adjusted     As Reported  
    December 31     One-Time     December 31     December 31  
In thousands, except per-share data   2006     Adjustments     2006     2005  
       
Net sales
   $ 3,154,469     $ —     $ 3,154,469     $ 2,946,579  
Cost of goods sold
     2,248,219       (9,211 )     2,239,008       2,098,558  
       
Gross profit
     906,250       9,211       915,461       848,021  
% of net sales
     28.7 %     n/a       29.0 %     28.8 %
Selling, general and administrative
     541,209       (7,738 )     533,471       478,907  
% of net sales
     17.2 %     n/a       16.9 %     16.2 %
Research and development
     58,055       —       58,055       46,042  
% of net sales
     1.8 %     n/a       1.8 %     1.6 %
       
Operating income
     306,986       16,949       323,935       323,072  
% of net sales
     9.7 %     n/a       10.3 %     11.0 %
Gain on sale of investment
     364       —       364       5,435  
Net interest expense
     51,881       —       51,881       44,989  
% of net sales
     1.6 %     n/a       1.6 %     1.5 %
       
Income from continuing operations before income taxes
     255,469       16,949       272,418       283,518  
% of net sales
     8.1 %     n/a       8.6 %     9.6 %
Provision for income taxes
     71,702       6,102       77,804       98,469  
Effective tax rate
     28.1 %     36.0 %     28.6 %     34.7 %
       
Income from continuing operations
     183,767       10,847       194,614       185,049  
Gain on disposal of discontinued operations, net of tax
     (36 )     —       (36 )     —  
       
Net income
   $ 183,731     $ 10,847     $ 194,578     $ 185,049  
       
 
                                
Earnings per common share
                                
Basic
                                
Continuing operations
   $ 1.84     $ 0.11     $ 1.95     $ 1.84  
Discontinued operations
     —       —       —       —  
       
Basic earnings per common share
   $ 1.84     $ 0.11     $ 1.95     $ 1.84  
       
 
                                
Diluted
                                
Continuing operations
   $ 1.81     $ 0.11     $ 1.92     $ 1.80  
Discontinued operations
     —       —       —       —  
       
Diluted earnings per common share
   $ 1.81     $ 0.11     $ 1.92     $ 1.80  
       
 
                                
Weighted average common shares outstanding
                                
Basic
     99,784       99,784       99,784       100,665  
Diluted
     101,371       101,371       101,371       102,618  
 
                                
Cash dividends declared per common share
   $ 0.56             $ 0.56     $ 0.52  

 

 

Pentair, Inc. and Subsidiaries
Reconciliation of the GAAP “As Reported” year ended December 31, 2006 to the “Adjusted” non-GAAP
excluding the effect of third quarter 2006 one-time charges (Unaudited)
                                 
    Year Ended  
    As Reported     Third Quarter     Adjusted     As Reported  
    Year     One-Time     Year     Year  
In thousands   2006     Adjustments     2006     2005  
       
 
                                
Net sales to external customers
                                
Water
   $ 2,155,225     $ —     $ 2,155,225     $ 2,131,505  
 
                                
Operating income
                                
Water
   $ 212,498     $ 14,906     $ 227,404     $ 267,140  
 
                                
Operating income as a percent of net sales
                                
Water
     9.9 %             10.6 %     12.5 %