10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-11625

Pentair, Inc.

(Exact name of Registrant as specified in its charter)

Minnesota	41-0907434
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification number)
5500 Wayzata Blvd, Suite 800, Golden Valley, Minnesota	55416
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (763) 545-1730

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act). Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

On April 27, 2007, 99,789,104 shares of the Registrant’s common stock were outstanding.

Pentair, Inc. and Subsidiaries

		Page(s)
PART I FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Condensed Consolidated Statements of Income for the three months ended March 31, 2007 and April 1, 2006		3
	Condensed Consolidated Balance Sheets as of March 31, 2007, December 31, 2006 and April 1, 2006		4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and April 1, 2006		5
	Notes to Condensed Consolidated Financial Statements		6 – 21
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22 – 29
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk		29
ITEM 4.	Controls and Procedures		30
	Report of Independent Registered Public Accounting Firm		31
PART II OTHER INFORMATION
ITEM 1.	Legal Proceedings		32
ITEM 1A.	Risk Factors		32
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		33
ITEM 6.	Exhibits		34
	Signature		35
Third Restated Articles of Incorporation
Fourth Amended and Superseding By-Laws
Letter Regarding Unaudited Interim Financial Information
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

2

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

	Three months ended
	March 31		April 1
In thousands, except per-share data	2007		2006
Net sales	$	807,995	$	771,389
Cost of goods sold		570,592		548,881
Gross profit		237,403		222,508
Selling, general and administrative		142,300		129,089
Research and development		14,950		14,863
Operating income		80,153		78,556
Net interest expense		15,120		13,284
Income from continuing operations before income taxes		65,033		65,272
Provision for income taxes		22,903		22,201
Income from continuing operations		42,130		43,071
Gain (loss) on disposal of discontinued operations, net of tax		143		(1,451	)
Net income	$	42,273	$	41,620
Earnings (loss) per common share
Basic
Continuing operations	$	0.43	$	0.43
Discontinued operations		—		(0.01	)
Basic earnings per common share	$	0.43	$	0.42
Diluted
Continuing operations	$	0.42	$	0.42
Discontinued operations		—		(0.01	)
Diluted earnings per common share	$	0.42	$	0.41
Weighted average common shares outstanding
Basic		98,966		100,493
Diluted		100,271		102,492
Cash dividends declared per common share	$	0.15	$	0.14

See accompanying notes to condensed consolidated financial statements.

3

Pentair, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

	March 31		December 31		April 1
In thousands, except share and per-share data	2007		2006		2006
Assets
Current assets
Cash and cash equivalents	$	64,230	$	54,820	$	50,237
Accounts and notes receivable, net		532,792		422,134		520,968
Inventories		413,178		398,857		375,619
Deferred tax assets		52,198		50,578		44,432
Prepaid expenses and other current assets		41,907		31,239		28,921
Total current assets		1,104,305		957,628		1,020,177
Property, plant and equipment, net		351,211		330,372		314,164
Other assets
Goodwill		1,830,359		1,718,771		1,723,952
Intangibles, net		384,933		287,011		262,829
Other		69,505		71,197		67,561
Total other assets		2,284,797		2,076,979		2,054,342
Total assets	$	3,740,313	$	3,364,979	$	3,388,683
Liabilities and Shareholders’ Equity
Current liabilities
Short-term borrowings	$	16,003	$	14,563	$	—
Current maturities of long-term debt		8,257		7,625		4,246
Accounts payable		208,713		206,286		206,528
Employee compensation and benefits		85,741		88,882		75,536
Current pension and post-retirement benefits		7,918		7,918		—
Accrued product claims and warranties		42,766		44,093		42,238
Income taxes		13,525		22,493		27,195
Accrued rebates and sales incentives		31,293		39,419		23,353
Other current liabilities		91,402		90,003		94,418
Total current liabilities		505,618		521,282		473,514
Other liabilities
Long-term debt		1,056,495		721,873		888,015
Pension and other retirement compensation		213,512		207,676		158,535
Post-retirement medical and other benefits		47,401		47,842		73,812
Long-term income taxes payable		14,412		—		—
Deferred tax liabilities		111,106		109,781		123,663
Other non-current liabilities		85,912		86,526		76,452
Total liabilities		2,034,456		1,694,980		1,793,991
Commitments and contingencies
Shareholders’ equity
Common shares par value $0.16 2/3; 99,777,660, 99,777,165 and 101,642,814 shares issued and outstanding, respectively		16,629		16,629		16,940
Additional paid-in capital		484,376		488,540		524,904
Retained earnings		1,172,459		1,148,126		1,048,374
Accumulated other comprehensive income		32,393		16,704		4,474
Total shareholders’ equity		1,705,857		1,669,999		1,594,692
Total liabilities and shareholders’ equity	$	3,740,313	$	3,364,979	$	3,388,683

See accompanying notes to condensed consolidated financial statements.

4

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Three months ended
	March 31			April 1
In thousands	2007			2006
Operating activities
Net income	$	42,273		$	41,620
Adjustments to reconcile net income to net cash used for operating activities
(Gain) loss on disposal of discontinued operations		(143	)		1,451
Depreciation		15,523			15,230
Amortization		4,900			4,258
Deferred income taxes		(355	)		2,483
Stock compensation		6,218			6,646
Excess tax benefits from stock-based compensation		(1,063	)		(2,532	)
Changes in assets and liabilities, net of effects of business acquisitions and dispositions
Accounts and notes receivable		(99,387	)		(95,541	)
Inventories		(6,381	)		(25,379	)
Prepaid expenses and other current assets		(8,770	)		(4,258	)
Accounts payable		7,886			(4,041	)
Employee compensation and benefits		(13,081	)		(23,528	)
Accrued product claims and warranties		(1,403	)		(1,363	)
Income taxes		(1,448	)		10,717
Other current liabilities		(7,638	)		(26,140	)
Pension and post-retirement benefits		4,033			4,477
Other assets and liabilities		1,167			3,550
Net cash used for continuing operations		(57,669	)		(92,350	)
Net cash provided by operating activities of discontinued operations		—			48
Net cash used for operating activities		(57,669	)		(92,302	)
Investing activities
Capital expenditures		(18,865	)		(9,054	)
Proceeds from sale of property and equipment		1,329			79
Acquisitions, net of cash acquired		(230,581	)		(2,158	)
Divestitures		—			(24,007	)
Other		—			(2,150	)
Net cash used for investing activities		(248,117	)		(37,290	)
Financing activities
Net short-term borrowings		1,234			—
Proceeds from long-term debt		345,190			272,906
Repayment of long-term debt		(10,250	)		(133,051	)
Proceeds from exercise of stock options		1,762			2,577
Repurchases of common stock		(9,280	)		—
Excess tax benefits from stock-based compensation		1,063			2,532
Dividends paid		(15,022	)		(14,224	)
Net cash provided by financing activities		314,697			130,740
Effect of exchange rate changes on cash and cash equivalents		499			589
Change in cash and cash equivalents		9,410			1,737
Cash and cash equivalents, beginning of period		54,820			48,500
Cash and cash equivalents, end of period	$	64,230		$	50,237

See accompanying notes to condensed consolidated financial statements.

5

Pentair, Inc. and subsidiaries

Notes to condensed consolidated financial statements (unaudited)

1. Basis of Presentation and Responsibility for Interim Financial Statements

We prepared the unaudited condensed consolidated financial statements following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States can be condensed or omitted.

We are responsible for the unaudited financial statements included in this document. The financial statements include all normal recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. As these are condensed financial statements, one should also read our consolidated financial statements and notes thereto, which are included in our 2006 Annual Report on Form 10-K for the year ended December 31, 2006.

Revenues, expenses, cash flows, assets and liabilities can and do vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be indicative of those for a full year.

Our fiscal year ends on December 31. We report our interim quarterly periods on a 13-week basis ending on a Saturday.

2. New Accounting Standards

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (“FIN 48”). FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file a tax return in a particular jurisdiction. FIN 48 is effective for fiscal years beginning after December 15, 2006 and we adopted it on January 1, 2007. The adoption of FIN 48 increased total liabilities by $2.9 million and decreased total shareholders’ equity by $2.9 million. The adoption of FIN 48 had no impact on our consolidated results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of adopting SFAS 157 on our consolidated results of operations and financial condition.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of adopting SFAS 159 on our consolidated results of operations and financial condition.

In March 2007, the FASB ratified the Emerging Issues Task Force (“EITF”) Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share Based Payment Awards (“EITF 06-11”). EITF 06-11 requires companies to recognize the income tax benefit realized from dividends or dividend equivalents that are charged to retained earnings and paid to employees for nonvested equity-classified employee share-based awards as an increase to additional paid-in capital. EITF 06-11 is effective for fiscal years beginning after September 15, 2007. We are currently evaluating the impact of adopting EITF 06-11 on our consolidated results of operations and financial condition.

3. Stock-based Compensation

Total stock-based compensation expense for the first quarter of 2007 and 2006 was $6.2 million and $6.6 million, respectively.

Non-vested shares of our common stock were granted during the first quarter of 2007 and 2006 to eligible employees with a vesting period of two to five years after issuance. Non-vested share awards are valued at market value on the date of grant and are typically expensed over the vesting period. Total compensation expense for non-vested share awards during the first quarter of 2007 and 2006 was $2.8 million and $2.3 million, respectively.

During the first quarter of 2007, option awards were granted under the Omnibus Stock Incentive Plan and the Outside Directors Nonqualified Stock Option Plan (together the “Plans”), each with an exercise price equal to the market price of our common stock on the date of grant. Prior to 2006, option grants under the Plans typically had a reload feature when shares were retired to pay the exercise price, allowing individuals to receive additional options upon exercise equal to the number of shares retired. Option awards granted after 2005 under the Plans do not have a reload feature attached to the option. The options vest one-third each year over a three-year period and have a ten-year contractual term. Compensation expense equal to the grant date fair value is recognized for these awards typically over the vesting period. No option grants were reloaded during the quarter for individuals retiring shares to pay the exercise price of options granted prior to 2006. Reload options are vested and expensed immediately. Total compensation expense for stock option awards was $3.4 and $4.3 million for the first quarter of 2007 and 2006, respectively.

6

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

We estimated the fair value of each stock option award on the date of grant using a Black-Scholes option pricing model, modified for dividends and using the following assumptions:

	March 31			April 1
	2007			2006
Expected stock price volatility		28.5	%		31.5	%
Expected life	4.8 yrs.			4.5 yrs.
Risk-free interest rate		4.66	%		4.56	%
Dividend yield		1.95	%		1.44	%

The weighted-average fair value of options granted during the first quarter of 2007 and 2006 was $8.29 and $11.49 per share, respectively.

These estimates require us to make assumptions based on historical results, observance of trends in our stock price, changes in option exercise behavior, future expectations, and other relevant factors. If other assumptions had been used, stock-based compensation expense, as calculated and recorded under SFAS No. 123R, could have been affected.

We based the expected life assumption on historical experience as well as the terms and vesting periods of the options granted. For purposes of determining expected volatility, we considered a rolling-average of historical volatility measured over a period approximately equal to the expected option term. The risk-free rate for periods that coincide with the expected life of the options is based on the U.S. Treasury Department yield curve in effect at the time of grant.

4. Earnings Per Common Share

Basic and diluted earnings per share were calculated using the following:

	Three months ended
	March 31		April 1
In thousands, except per-share data	2007		2006
Earnings (loss) per common share — basic
Continuing operations	$	42,130	$	43,071
Discontinued operations		143		(1,451	)
Net income	$	42,273	$	41,620
Continuing operations	$	0.43	$	0.43
Discontinued operations		—		(0.01	)
Basic earnings per common share	$	0.43	$	0.42
Earnings (loss) per common share — diluted
Continuing operations	$	42,130	$	43,071
Discontinued operations		143		(1,451	)
Net income	$	42,273	$	41,620
Continuing operations	$	0.42	$	0.42
Discontinued operations		—		(0.01	)
Diluted earnings per common share	$	0.42	$	0.41
Weighted average common shares outstanding — basic		98,966		100,493
Dilutive impact of stock options and restricted stock		1,305		1,999
Weighted average common shares outstanding — diluted		100,271		102,492
Stock options excluded from the calculation of diluted earnings per share because the exercise price was greater than the average market price of the common shares		3,675		2,079

7

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

5. Acquisitions

On April 30, 2007, we acquired as part of our Water Group all of the capital interests in Porous Media, a privately held filtration and separation technologies business, for $225.0 million, excluding transaction costs and subject to a post-closing net asset value adjustment. Porous Media’s product portfolio includes high-performance filter media, membranes and related filtration products and purification systems for liquids, gases and solids for general industrial, petrochemical, refining and healthcare market segments among others. We announced the Porous Media acquisition on March 6, 2007.

On February 2, 2007, we acquired as part of our Water Group all the outstanding shares of capital stock of Jung Pumpen GmbH (“Jung”) for $230.2 million, including a cash payment of $239.9 million and transaction costs of $0.7 million, less cash acquired of $10.4 million. The purchase price is subject to a post-closing net asset value adjustment. Jung is a leading German manufacturer of wastewater products for municipal and residential markets. Jung brings us its strong application engineering expertise and a complementary product offering, including a new line of water re-use products, submersible wastewater and drainage pumps, wastewater disposal units and tanks. Jung also brings to Pentair its well-established European presence, a state-of-the-art training facility in Germany, and sales offices in Germany, Austria, France, Hungary, Poland and Slovakia. Goodwill recorded as part of the initial purchase price allocation was $103.2 million, of which approximately $53 million is tax deductible. We continue to evaluate the purchase price allocation for the Jung acquisition, including intangible assets, contingent liabilities, and property, plant and equipment. We expect to revise the purchase price allocation as better information becomes available.

On April 12, 2006, we acquired as part of our Water Group the assets of Geyer’s Manufacturing & Design Inc. and FTA Filtration, Inc. (together “Krystil Klear”), two privately-held companies, for $15.5 million in cash. Krystil Klear expands our industrial filtration product offering to include a full range of steel and stainless steel tanks which house filtration solutions. Goodwill recorded as part of the purchase price allocation was $9.5 million, all of which is tax deductible.

During 2006, we completed several other small acquisitions totaling $14.2 million in cash and notes payable, adding to both our Water and Technical Products Groups. Total goodwill recorded as part of the initial purchase price allocations was $7.9 million, of which $2.9 million is tax deductible. We continue to evaluate the purchase price allocations for these acquisitions and expect to revise the purchase price allocations as better information becomes available.

The following pro forma condensed financial results of operations are presented as if the acquisitions described above (with the exception of Porous Media) had been completed at the beginning of each period.

	Three months ended
	March 31		April 1
In thousands, except per-share data	2007		2006
Pro forma net sales from continuing operations	$	814,171	$	795,334
Pro forma net income from continuing operations		42,403		43,933
Pro forma earnings per common share — continuing operations
Basic	$	0.43	$	0.44
Diluted	$	0.42	$	0.43
Weighted average common shares outstanding
Basic		98,966		100,493
Diluted		100,271		102,492

These pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments, such as increased interest expense on acquisition debt. They do not reflect the effect of costs or synergies that would have been expected to result from the integration of these acquisitions. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of each period presented, or of future results of the consolidated entities.

6. Discontinued Operations

Effective after the close of business on October 2, 2004, we completed the sale of our former Tools Group to The Black & Decker Corporation (“BDK”). In January 2006, pursuant to the purchase agreement for the sale of our former Tools Group, we completed the repurchase of a manufacturing facility in Suzhou, China from BDK for approximately $5.7 million. We recorded no gain or loss on the repurchase. In March 2006, we completed an outstanding net asset value arbitration with BDK relating to the purchase price for the sale of our former Tools Group. The decision by the arbitrator constituted a final resolution of all disputes between BDK and us regarding the net asset value. We paid the final net asset value purchase price adjustment pursuant to the purchase agreement of $16.1 million plus interest of $1.1 million in March 2006, resulting in an incremental pre-tax loss on disposal of discontinued operations of $3.4 million or $1.6 million net of tax.

8

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

In 2001, we completed the sale of our former Service Equipment businesses (Century Mfg. Co./Lincoln Automotive Company) to Clore Automotive, LLC. In the fourth quarter of 2003, we reported an additional loss from discontinued operations of $2.9 million related to exiting the remaining two facilities. In March 2006, we exited a leased facility from our former Service Equipment business resulting in a net cash outflow of $2.2 million and an immaterial gain from disposition.

Operating results of the discontinued operations for the first quarter of 2007 and 2006 are summarized below:

	Three months ended
	March 31			April 1
In thousands	2007			2006
Gain (loss) on disposal of discontinued operations	$	225		$	(3,254	)
Income tax (expense) benefit		(82	)		1,803
Gain (loss) on disposal of discontinued operations, net of tax	$	143		$	(1,451	)

7. Inventories

Inventories were comprised of:

	March 31		December 31		April 1
In thousands	2007		2006		2006
Raw materials and supplies	$	193,049	$	186,508	$	162,274
Work-in-process		56,978		55,141		49,590
Finished goods		163,151		157,208		163,755
Total inventories	$	413,178	$	398,857	$	375,619

8. Comprehensive Income

Comprehensive income and its components, net of tax, were as follows:

	Three months ended
	March 31			April 1
In thousands	2007			2006
Net income	$	42,273		$	41,620
Changes in cumulative foreign currency translation adjustment		15,926			3,897
Changes in market value of derivative financial instruments classified as cash flow hedges		(237	)		1,563
Comprehensive income	$	57,962		$	47,080

9. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the three months ended March 31, 2007 by segment were as follows:

			Technical
In thousands	Water		Products			Consolidated
Balance at December 31, 2006	$	1,449,460	$	269,311		$	1,718,771
Acquired		100,841		—			100,841
Purchase accounting adjustments		748		(198	)		550
Foreign currency translation		5,584		4,613			10,197
Balance at March 31, 2007	$	1,556,633	$	273,726		$	1,830,359

The acquired goodwill relates to the Jung acquisition. The purchase accounting adjustments recorded during the first quarter of 2007 related to the Krystil Klear acquisition and other small acquisitions. We finalized our purchase price allocation for the Krystil Klear acquisition during the first quarter of 2007.

9

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Intangible assets, other than goodwill, were comprised of:

	March 31, 2007							December 31, 2006							April 1, 2006
	Gross							Gross							Gross
	carrying		Accum.					carrying		Accum.					carrying		Accum.
In thousands	amount		amort			Net		amount		amort			Net		amount		amort			Net
Finite-life intangibles
Patents	$	15,437	$	(6,475	)	$	8,962	$	15,433	$	(6,001	)	$	9,432	$	15,455	$	(4,589	)	$	10,866
Non-compete agreements		4,022		(3,031	)		991		4,343		(3,091	)		1,252		3,940		(2,276	)		1,664
Proprietary technology		45,834		(9,056	)		36,778		45,755		(8,240	)		37,515		51,378		(6,195	)		45,183
Customer relationships		157,992		(18,403	)		139,589		110,616		(15,924	)		94,692		87,525		(10,077	)		77,448
Total finite-life intangibles	$	223,285	$	(36,965	)	$	186,320	$	176,147	$	(33,256	)	$	142,891	$	158,298	$	(23,137	)	$	135,161
Indefinite-life intangibles
Brand names	$	198,613	$	—		$	198,613	$	144,120	$	—		$	144,120	$	127,668	$	—		$	127,668
Total intangibles, net						$	384,933						$	287,011						$	262,829

Intangible asset amortization expense for the three months ended March 31, 2007 and April 1, 2006 was approximately $3.7 million and $3.2 million, respectively. The estimated future amortization expense for identifiable intangible assets during the remainder of 2007 and the next five years is as follows:

In thousands	2007 Q2 - Q4		2008		2009		2010		2011		2012
Estimated amortization expense	$	12,301	$	15,417	$	15,172	$	14,660	$	14,451	$	13,538

10. Debt

Debt and the average interest rate on debt outstanding are summarized as follows:

	Average
	interest rate			Maturity		March 31			December 31			April 1
In thousands	March 31, 2007			(Year)		2007			2006			2006
Commercial paper, maturing within 54 days		5.75	%			$	243,267		$	208,882		$	166,261
Revolving credit facilities		5.78	%		2010		325,673			25,000			230,600
Private placement — fixed rate		5.50	%		2007 - 2013		135,000			135,000			135,000
Private placement — floating rate		5.96	%		2013		100,000			100,000			100,000
Senior notes		7.85	%		2009		250,000			250,000			250,000
Other		4.17	%		2007 - 2016		23,900			21,972			6,318
Total contractual debt obligations							1,077,840			740,854			888,179
Interest rate swap monetization deferred income							2,915			3,207			4,082
Total debt, including current portion per balance sheet							1,080,755			744,061			892,261
Less: Current maturities							(8,257	)		(7,625	)		(4,246	)
Short-term borrowings							(16,003	)		(14,563	)		—
Long-term debt						$	1,056,495		$	721,873		$	888,015

We have a multi-currency revolving Credit Facility (the “Credit Facility”) of $800 million expiring on March 4, 2010. The interest rate on the loans under the Credit Facility is LIBOR plus 0.625%. Interest rates and fees on the Credit Facility vary based on our credit ratings.

We are authorized to sell short-term commercial paper notes to the extent availability exists under the Credit Facility. We use the Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. As of March 31, 2007, we had $243.3 million of commercial paper outstanding that matures within 54 days. All of the commercial paper was classified as long-term as we have the intent and the ability to refinance such obligations on a long-term basis under the Credit Facility.

10

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

We were in compliance with all debt covenants as of March 31, 2007.

We have $35 million of outstanding private placement debt maturing in May 2007. We classified this debt as long-term as of March 31, 2007 as we have the intent and ability to refinance such obligation on a long-term basis under the Credit Facility.

In addition to the Credit Facility, we have $25 million of uncommitted credit facilities, under which we had $16.0 million outstanding as of March 31, 2007.

Debt outstanding at March 31, 2007 matures on a calendar year basis as follows:

In thousands	2007 Q2-Q4		2008		2009		2010		2011		2012		Thereafter		Total
Contractual debt obligation maturities	$	22,050	$	1,290	$	250,255	$	604,135	$	75	$	6	$	200,029	$	1,077,840
Other maturities		874		1,166		875		—		—		—		—		2,915
Total maturities	$	22,924	$	2,456	$	251,130	$	604,135	$	75	$	6	$	200,029	$	1,080,755

11. Derivatives and Financial Instruments

Cash-flow hedges

In September 2005, we entered into a $100 million interest rate swap agreement with several major financial institutions to exchange variable rate interest payment obligations for fixed rate obligations without the exchange of the underlying principle amounts in order to manage interest rate exposures. The effective date of the fixed rate swap was April 25, 2006. The swap agreement has a fixed interest rate of 4.68% and expires in July 2013. The fixed interest rate of 4.68% plus the .60% interest rate spread over LIBOR, results in an effective fixed interest rate of 5.28%. The fair value of the swap was an asset of $1.4 million at March 31, 2007 and is recorded in Other assets.

The variable to fixed interest rate swap is designated as and is effective as a cash-flow hedge. The fair value of this swap is recorded on the Condensed Consolidated Balance Sheets, with changes in fair value included in other comprehensive income (OCI). Derivative gains and losses included in OCI are reclassified into earnings at the time the related interest expense is recognized or the settlement of the related commitment occurs.

In anticipation of issuing new debt in the second quarter of 2007 and to partially hedge the risk of future increases to the treasury rate, we entered into an agreement on March 30, 2007 to lock in existing ten-year rates on $200 million. The treasury rate was fixed at 4.64% and the agreement was settled on May 3, 2007.

The treasury rate lock agreement was designated as and was effective as a cash-flow hedge. The treasury rate lock agreement was settled at an interest rate of 4.67% and the corresponding settlement benefit of $0.5 million will be included in OCI in our Condensed Consolidated Balance Sheets, and will be recognized in earnings over the life of the debt after issuance. The agreement had no value at March 31, 2007.

12. Income Taxes

The provision for income taxes consists of provisions for federal, state and foreign income taxes. We operate in an international environment with operations in various locations outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates.

The effective income tax rate for the three months ended March 31, 2007 was 35.2% compared to 34.0% for the three months ended April 1, 2006. The first quarter 2006 effective tax included a $0.9 million favorable adjustment related to a prior year tax return. We expect the effective tax rate for the remainder of 2007 to be between 35.0% and 35.5%, resulting in a full year effective income tax rate of between 35.0% and 35.5%. However, we continue to actively pursue initiatives to reduce our effective tax rate. The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

We adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, we recorded an adjustment to decrease retained earnings by $2.9 million.

Subsequent to the adjustment to retained earnings of $2.9 million, our total liability for unrecognized tax benefits as of January 1, 2007, the date of adoption, was $15.0 million, which if recognized, would affect our effective tax rate. Included in the total liability for unrecognized tax benefits of $15.0 million at the date of adoption was $1.8 million related to discontinued operations, which, if recognized, would affect the effective tax rate for discontinued operations.

We record penalties and interest related to unrecognized tax benefits in Provision for income taxes and Net interest expense, respectively, which is consistent with our past practices. As of January 1, 2007, we had recorded approximately $.3 million for the possible payment of penalties and $1.5 million related to the possible payment of interest.

11

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

We or one of our subsidiaries files income tax returns in the United States (“U.S.”) federal jurisdiction, various U.S. state jurisdictions and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years prior to 2002. The Internal Revenue Service (IRS) has audited us through 2003, and has completed a tax return survey of our 2004 federal income tax return.

During the first quarter of 2007, our total liability for unrecognized tax benefits did not materially increase or decrease. It is reasonably possible that this gross liability for unrecognized tax benefits will decrease by $2.0 million during the next twelve months as a result of audits and the expiration of statutes of limitations in various jurisdictions.

13. Benefit Plans

Components of net periodic benefit cost for the three months ended March 31, 2007 and April 1, 2006 were as follows:

	Three months ended
	Pension benefits						Post-retirement
	March 31			April 1			March 31			April 1
In thousands	2007			2006			2007			2006
Service cost	$	4,331		$	4,512		$	146		$	184
Interest cost		7,891			7,343			746			799
Expected return on plan assets		(7,133	)		(6,974	)		—			—
Amortization of transition obligation		35			31			—			—
Amortization of prior year service cost (benefit)		40			77			(62	)		(59	)
Recognized net actuarial loss		799			1,009			(355	)		(212	)
Net periodic benefit cost	$	5,963		$	5,998		$	475		$	712

14. Business Segments

Financial information by reportable segment for the three months ended March 31, 2007 and April 1, 2006 is shown below:

	Three months ended
	March 31			April 1
In thousands	2007			2006
Net sales to external customers
Water	$	555,412		$	517,169
Technical Products		252,583			254,220
Consolidated	$	807,995		$	771,389
Intersegment sales
Water	$	214		$	50
Technical Products		896			889
Other		(1,110	)		(939	)
Consolidated	$	—		$	—
Operating income (loss)
Water	$	60,879		$	55,587
Technical Products		31,631			37,704
Other		(12,357	)		(14,735	)
Consolidated	$	80,153		$	78,556

Other operating loss is primarily composed of unallocated corporate expenses, costs related to our captive insurance subsidiary and our intermediate finance companies, and intercompany eliminations.

12

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

15. Warranty

The changes in the carrying amount of service and product warranties for the three months ended March 31, 2007 and April 1, 2006 were as follows:

	March 31			April 1
In thousands	2007			2006
Balance at beginning of the year	$	34,093		$	33,551
Service and product warranty provision		12,233			9,415
Payments		(14,752	)		(10,777	)
Acquired		1,116			—
Translation		76			49
Balance at end of the period	$	32,766		$	32,238

16. Commitments and Contingencies

Environmental and Litigation

There have been no further material developments from the disclosures contained in our 2006 Annual Report on Form 10-K.

Horizon Litigation

Twenty-eight separate lawsuits involving 29 primary plaintiffs, a class action, and claims for indemnity by Celebrity Cruise Lines, Inc. (“Celebrity”) were brought against Essef Corporation (“Essef”) and certain of its subsidiaries prior to our acquisition of Essef in August 1999. The claims against Essef and its involved subsidiaries were based upon the allegation that Essef designed, manufactured, and marketed two sand swimming pool filters that were installed as a part of the spa system on the Horizon cruise ship, and allegations that the spa and filters contained Legionnaire’s disease bacteria that infected certain passengers on cruises from April 1994 through July 1994.

The individual and class claims by passengers were tried and resulted in an adverse jury verdict finding liability on the part of the Essef defendants (70%) and Celebrity and its sister company, Fantasia (together 30%). After expiration of post-trial appeals, we paid all outstanding punitive damage awards of $7.0 million in the Horizon cases, plus interest of approximately $1.6 million, in January 2004. All of the personal injury cases have now been resolved through either settlement or judgment.

The only remaining unresolved claims in this case were those brought by Celebrity for damages resulting from the outbreak. Celebrity filed an amended complaint seeking attorney fees and costs for prior litigation as well as out-of-pocket losses, lost profits, and loss of business enterprise value. On June 28, 2006, a jury returned a verdict against the Essef defendants in the total amount of $193.0 million for its claims for out-of-pocket expenses ($10.4 million), lost profits ($47.6 million) and lost enterprise value ($135.0 million). The verdict was exclusive of pre-judgment interest and attorneys’ fees.

On January 17, 2007, the Court ruled on our post-trial motions, granting judgment in our favor as a matter of law with respect to Celebrity’s claim for lost enterprise value ($135.0 million). The Court also granted a new trial with respect to lost profits ($47.6 million). In addition, the Court denied without prejudice our claim for contribution to reduce Celebrity’s recovery by 30% to account for its contributory negligence, with leave to renew the motion following retrial. The trial of this matter has been scheduled for June 2007.

Celebrity’s claim for lost profits at trial amounted to approximately $60 million. We believe that actual lost profits suffered, if any, are substantially less. In a new trial, there remain questions of causation, contribution and proof of damages to be determined. We intend to vigorously defend against Celebrity’s claims. We cannot predict whether Celebrity will appeal the ruling on lost enterprise value, nor whether and to what extent Essef may eventually be found liable on Celebrity’s claims.

Several issues have not been decided by the Court, including whether Celebrity is entitled to recovery of its attorneys’ fees and related costs in the passenger claims phase of the case ($4.1 million), and, with respect to pre-judgment interest, the length of the interest period and the rate of interest on any eventual judgment. We have assessed the impact of the ruling on our previously established reserves for this matter and, based on information available at this time, have not changed our reserves following this ruling, except to take into account quarterly interest accruals.

We believe that any judgment we pay in this matter would be tax-deductible in the year paid or in subsequent years. In addition to the impact of any loss on this matter on our earnings per share when recognized, we may need to borrow funds from our banks or other sources to pay any judgment finally determined after exhaustion of all appeals. We expect that we would have available adequate funds to allow us to do so, based on discussions with our lending sources and our estimates of the results of our business operations over the foreseeable future.

13

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

17. Financial Statements of Subsidiary Guarantors

The $250 million Senior Notes due 2009 are jointly and severally guaranteed by domestic subsidiaries (the “Guarantor Subsidiaries”), each of which is directly or indirectly wholly-owned by Pentair (the “Parent Company”). The following supplemental financial information sets forth the condensed consolidated balance sheets as of March 31, 2007, December 31, 2006 and April 1, 2006, the related condensed consolidated statements of income for the three-months ended March 31, 2007 and April 1, 2006, and statements of cash flows for the three-months ended March 31, 2007 and April 1, 2006, for the Parent Company, the Guarantor Subsidiaries, the non-guarantor subsidiaries and total consolidated Pentair and subsidiaries.

Pentair, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
For the three months ended March 31, 2007

	Parent			Guarantor		Non-Guarantor
In thousands	Company			Subsidiaries		Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	639,591	$	212,432		$	(44,028	)	$	807,995
Cost of goods sold		—			457,197		157,015			(43,620	)		570,592
Gross profit		—			182,394		55,417			(408	)		237,403
Selling, general and administrative		4,204			99,249		39,255			(408	)		142,300
Research and development		—			11,507		3,443			—			14,950
Operating (loss) income		(4,204	)		71,638		12,719			—			80,153
Net interest (income) expense		(14,044	)		29,715		(551	)		—			15,120
Income from continuing operations before income taxes		9,840			41,923		13,270			—			65,033
Provision for income taxes		3,416			15,009		4,478			—			22,903
Income from continuing operations		6,424			26,914		8,792			—			42,130
Gain on disposal of discontinued operations, net of tax		143			—		—			—			143
Net income	$	6,567		$	26,914	$	8,792		$	—		$	42,273

14

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Pentair, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
March 31, 2007

	Parent			Guarantor		Non-Guarantor
In thousands	Company			Subsidiaries		Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	6,980		$	4,830	$	52,420	$	—		$	64,230
Accounts and notes receivable, net		174			405,288		173,584		(46,254	)		532,792
Inventories		—			290,739		122,439		—			413,178
Deferred tax assets		97,313			34,212		6,232		(85,559	)		52,198
Prepaid expenses and other current assets		16,047			12,571		28,845		(15,556	)		41,907
Total current assets		120,514			747,640		383,520		(147,369	)		1,104,305
Property, plant and equipment, net		4,500			208,644		138,067		—			351,211
Other assets
Investments in subsidiaries		2,224,447			61,357		386,539		(2,672,343	)		—
Goodwill		—			1,469,309		361,050		—			1,830,359
Intangibles, net		—			258,108		126,825		—			384,933
Other		74,651			13,631		6,603		(25,380	)		69,505
Total other assets		2,299,098			1,802,405		881,017		(2,697,723	)		2,284,797
Total assets	$	2,424,112		$	2,758,689	$	1,402,604	$	(2,845,092	)	$	3,740,313
Liabilities and Shareholders’ Equity
Current liabilities
Short-term borrowings	$	—		$	—	$	16,003	$	—		$	16,003
Current maturities of long-term debt		1,167			257		284,178		(277,345	)		8,257
Accounts payable		4,956			153,312		102,185		(51,740	)		208,713
Employee compensation and benefits		9,942			39,559		36,240		—			85,741
Current pension and retirement medical benefits		7,918			—		—		—			7,918
Accrued product claims and warranties		—			27,225		15,541		—			42,766
Income taxes		327			8,628		4,570		—			13,525
Accrued rebates and sales incentives		—			25,898		5,395		—			31,293
Other current liabilities		22,516			48,764		29,456		(9,334	)		91,402
Total current liabilities		46,826			303,643		493,568		(338,419	)		505,618
Other liabilities
Long-term debt		1,017,017			1,786,863		57,081		(1,804,466	)		1,056,495
Pension and other retirement compensation		124,496			28,245		60,771		—			213,512
Post-retirement medical and other benefits		22,795			49,986		—		(25,380	)		47,401
Long-term income taxes payable		14,412			—		—		—			14,412
Deferred tax liabilities		3,123			161,359		32,183		(85,559	)		111,106
Due to / (from) affiliates		(540,814	)		102,947		525,319		(87,452	)		—
Other non-current liabilities		30,400			7,157		48,355		—			85,912
Total liabilities		718,255			2,440,200		1,217,277		(2,341,276	)		2,034,456
Shareholders’ equity		1,705,857			318,489		185,327		(503,816	)		1,705,857
Total liabilities and shareholders’ equity	$	2,424,112		$	2,758,689	$	1,402,604	$	(2,845,092	)	$	3,740,313

15

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Pentair, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2007

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating activities
Net income	$	6,567		$	26,914		$	8,792		$	—		$	42,273
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Gain on disposal of discontinued operations		(143	)		—			—			—			(143	)
Depreciation		300			10,234			4,989			—			15,523
Amortization		931			2,942			1,027			—			4,900
Deferred income taxes		(498	)		—			143			—			(355	)
Stock compensation		6,218			—			—			—			6,218
Excess tax benefit from stock-based compensation		(1,063	)		—			—			—			(1,063	)
Intercompany dividends		(24	)		24			—			—			—
Changes in assets and liabilities, net of effects of business acquisitions and dispositions
Accounts and notes receivable		11,062			(88,833	)		(23,553	)		1,937			(99,387	)
Inventories		—			(7,051	)		670			—			(6,381	)
Prepaid expenses and other current assets		16,481			7,984			(26,213	)		(7,022	)		(8,770	)
Accounts payable		(9,300	)		(2,133	)		21,290			(1,971	)		7,886
Employee compensation and benefits		(5,312	)		(8,943	)		1,174			—			(13,081	)
Accrued product claims and warranties		—			(1,729	)		326			—			(1,403	)
Income taxes		(1,806	)		6,942			(6,584	)		—			(1,448	)
Other current liabilities		(10,134	)		(12,625	)		8,060			7,061			(7,638	)
Pension and post-retirement benefits		2,468			681			884			—			4,033
Other assets and liabilities		(1,348	)		1,412			1,103			—			1,167
Net cash provided by (used for) continuing operations		14,399			(64,181	)		(7,892	)		5			(57,669	)
Net cash provided by (used for) operating activities of discontinued operations		(143	)		—			143			—			—
Net cash provided by (used for) operating activities		14,256			(64,181	)		(7,749	)		5			(57,669	)
Investing activities
Capital expenditures		(46	)		(8,411	)		(10,408	)		—			(18,865	)
Proceeds from sale of property and equipment		—			747			582			—			1,329
Acquisitions, net of cash acquired		(229,903	)		—			(678	)		—			(230,581	)
Investment in subsidiaries		(98,247	)		70,464			27,788			(5	)		—
Net cash (used for) provided by investing activities		(328,196	)		62,800			17,284			(5	)		(248,117	)
Financing activities
Net short-term borrowings (repayments)		—			(51	)		1,285			—			1,234
Proceeds from long-term debt		345,190			—			—			—			345,190
Repayment of long-term debt		(10,250	)		—			—			—			(10,250	)
Proceeds from exercise of stock options		1,762			—			—			—			1,762
Repurchases of common stock		(9,280	)		—			—			—			(9,280	)
Excess tax benefits from stock-based compensation		1,063			—			—			—			1,063
Dividends paid		(15,022	)		—			—			—			(15,022	)
Net cash provided by financing activities		313,463			(51	)		1,285			—			314,697
Effect of exchange rate changes on cash		(1,353	)		(288	)		2,140			—			499
Change in cash and cash equivalents		(1,830	)		(1,720	)		12,960			—			9,410
Cash and cash equivalents, beginning of period		8,810			6,550			39,460			—			54,820
Cash and cash equivalents, end of period	$	6,980		$	4,830		$	52,420		$	—		$	64,230

16

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Pentair, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
For the three months ended April 1, 2006

	Parent			Guarantor		Non-Guarantor
In thousands	Company			Subsidiaries		Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	633,060	$	181,285		$	(42,956	)	$	771,389
Cost of goods sold		125			459,223		132,073			(42,540	)		548,881
Gross profit		(125	)		173,837		49,212			(416	)		222,508
Selling, general and administrative		6,221			93,541		29,743			(416	)		129,089
Research and development		—			11,784		3,079			—			14,863
Operating (loss) income		(6,346	)		68,512		16,390			—			78,556
Net interest (income) expense		(15,532	)		29,786		(970	)		—			13,284
Income from continuing operations before income taxes		9,186			38,726		17,360			—			65,272
Provision for income taxes		3,192			13,036		5,973			—			22,201
Income from continuing operations		5,994			25,690		11,387			—			43,071
Loss on disposal of discontinued operations, net of tax		(1,451	)		—		—			—			(1,451	)
Net income	$	4,543		$	25,690	$	11,387		$	—		$	41,620

17

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Pentair, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
April 1, 2006

	Parent			Guarantor		Non-Guarantor
In thousands	Company			Subsidiaries		Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	5,070		$	5,276	$	39,891	$	—		$	50,237
Accounts and notes receivable, net		444			431,959		137,145		(48,580	)		520,968
Inventories		—			284,297		91,322		—			375,619
Deferred tax assets		71,648			33,455		4,592		(65,263	)		44,432
Prepaid expenses and other current assets		7,679			10,381		15,647		(4,786	)		28,921
Total current assets		84,841			765,368		288,597		(118,629	)		1,020,177
Property, plant and equipment, net		5,281			224,224		84,659		—			314,164
Other assets
Investments in subsidiaries		1,982,627			43,937		90,489		(2,117,053	)		—
Goodwill		—			1,490,950		233,002		—			1,723,952
Intangibles, net		—			240,062		22,767		—			262,829
Other		55,077			6,517		5,967		—			67,561
Total other assets		2,037,704			1,781,466		352,225		(2,117,053	)		2,054,342
Total assets	$	2,127,826		$	2,771,058	$	725,481	$	(2,235,682	)	$	3,388,683
Liabilities and Shareholders’ Equity
Current liabilities
Current maturities of long-term debt	$	1,166		$	231	$	22,783	$	(19,934	)	$	4,246
Accounts payable		1,289			163,160		89,954		(47,875	)		206,528
Employee compensation and benefits		9,203			39,137		27,196		—			75,536
Accrued product claims and warranties		—			27,398		14,840		—			42,238
Income taxes		8,594			7,496		11,105		—			27,195
Accrued rebates and sales incentives		—			21,558		1,795		—			23,353
Other current liabilities		21,902			54,829		22,450		(4,763	)		94,418
Total current liabilities		42,154			313,809		190,123		(72,572	)		473,514
Other liabilities
Long-term debt		884,777			1,786,622		13,146		(1,796,530	)		888,015
Pension and other retirement compensation		78,471			29,390		50,674		—			158,535
Post-retirement medical and other benefits		23,807			50,005		—		—			73,812
Deferred tax liabilities		—			162,860		26,066		(65,263	)		123,663
Due to / (from) affiliates		(527,961	)		205,621		242,104		80,236			—
Other non-current liabilities		31,886			2,682		41,884		—			76,452
Total liabilities		533,134			2,550,989		563,997		(1,854,129	)		1,793,991
Shareholders’ equity		1,594,692			220,069		161,484		(381,553	)		1,594,692
Total liabilities and shareholders’ equity	$	2,127,826		$	2,771,058	$	725,481	$	(2,235,682	)	$	3,388,683

18

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Pentair, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended April 1, 2006

	Parent			Guarantor			Non-Guarantor
In thousands	Company			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating activities
Net income	$	4,543		$	25,690		$	11,387		$	—		$	41,620
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Loss on disposal of discontinued operations		1,451			—			—			—			1,451
Depreciation		400			11,299			3,531			—			15,230
Amortization		1,025			2,989			244			—			4,258
Deferred income taxes		3,024			(4,100	)		3,559			—			2,483
Stock compensation		3,124			2,990			532			—			6,646
Excess tax benefit from stock-based compensation		(1,190	)		(1,139	)		(203	)		—			(2,532	)
Changes in assets and liabilities, net of effects of business acquisitions and dispositions
Accounts and notes receivable		(370	)		(93,520	)		(16,198	)		14,547			(95,541	)
Inventories		—			(17,290	)		(8,089	)		—			(25,379	)
Prepaid expenses and other current assets		10,546			(1,583	)		(12,946	)		(275	)		(4,258	)
Accounts payable		744			(6,669	)		16,455			(14,571	)		(4,041	)
Employee compensation and benefits		(7,662	)		(17,869	)		2,003			—			(23,528	)
Accrued product claims and warranties		—			(1,266	)		(97	)		—			(1,363	)
Income taxes		(3,625	)		15,934			(1,592	)		—			10,717
Other current liabilities		(7,354	)		(27,192	)		8,107			299			(26,140	)
Pension and post-retirement benefits		2,342			1,354			781			—			4,477
Other assets and liabilities		(3,407	)		(676	)		7,633			—			3,550
Net cash provided by (used for) continuing operations		3,591			(111,048	)		15,107			—			(92,350	)
Net cash provided by (used for) operating activities of discontinued operations		1,451			—			(1,403	)		—			48
Net cash provided by (used for) operating activities		5,042			(111,048	)		13,704			—			(92,302	)
Investing activities
Capital expenditures		—			(4,679	)		(4,375	)		—			(9,054	)
Proceeds from sale of property and equipment		—			31			48			—			79
Acquisitions, net of cash acquired		(1,941	)		(217	)		—			—			(2,158	)
Investment in subsidiaries		(109,439	)		115,768			(6,329	)		—			—
Divestitures		(18,246	)		—			(5,761	)		—			(24,007	)
Other		(1,750	)		(400	)		—			—			(2,150	)
Net cash (used for) provided by investing activities		(131,376	)		110,503			(16,417	)		—			(37,290	)
Financing activities
Proceeds from long-term debt		272,906			—			—			—			272,906
Repayment of long-term debt		(133,051	)		—			—			—			(133,051	)
Proceeds from exercise of stock options		2,577			—			—			—			2,577
Excess tax benefits from stock-based compensation		1,190			1,139			203			—			2,532
Dividends paid		(14,224	)		—			—			—			(14,224	)
Net cash provided by financing activities		129,398			1,139			203			—			130,740
Effect of exchange rate changes on cash		(998	)		320			1,267			—			589
Change in cash and cash equivalents		2,066			914			(1,243	)		—			1,737
Cash and cash equivalents, beginning of period		3,004			4,362			41,134			—			48,500
Cash and cash equivalents, end of period	$	5,070		$	5,276		$	39,891		$	—		$	50,237

19

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Pentair, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
December 31, 2006

	Parent			Guarantor		Non-Guarantor
In thousands	Company			Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	8,810		$	6,550	$	39,460	$	—		$	54,820
Accounts and notes receivable, net		190			316,157		150,103		(44,316	)		422,134
Inventories		—			283,687		115,170		—			398,857
Deferred tax assets		96,566			66,255		5,359		(117,602	)		50,578
Prepaid expenses and other current assets		16,766			20,555		16,496		(22,578	)		31,239
Total current assets		122,332			693,204		326,588		(184,496	)		957,628
Property, plant and equipment, net		4,753			214,709		110,910		—			330,372
Other assets
Investments in subsidiaries		1,978,466			61,351		134,204		(2,174,021	)		—
Goodwill		—			1,466,536		252,235		—			1,718,771
Intangibles, net		—			261,050		25,961		—			287,011
Other		76,076			15,078		5,423		(25,380	)		71,197
Total other assets		2,054,542			1,804,015		417,823		(2,199,401	)		2,076,979
Total assets	$	2,181,627		$	2,711,928	$	855,321	$	(2,383,897	)	$	3,364,979
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	—		$	—	$	14,563	$	—		$	14,563
Current maturities of long-term debt		1,167			258		34,649		(28,449	)		7,625
Accounts payable		3,053			158,294		94,709		(49,770	)		206,286
Employee compensation and benefits		12,388			48,447		28,047		—			88,882
Current pension and post-retirement benefits		7,918			—		—		—			7,918
Accrued product claims and warranties		—			28,955		15,138		—			44,093
Income taxes		48,462			1,685		4,389		(32,043	)		22,493
Accrued rebates and sales incentives		—			35,185		4,234		—			39,419
Other current liabilities		16,408			51,858		38,132		(16,395	)		90,003
Total current liabilities		89,396			324,682		233,861		(126,657	)		521,282
Other liabilities
Long-term debt		695,924			1,786,914		40,987		(1,801,952	)		721,873
Pension and other retirement compensation		121,680			27,470		58,526		—			207,676
Post-retirement medical and other benefits		23,143			50,079		—		(25,380	)		47,842
Deferred tax liabilities		3,200			161,360		30,780		(85,559	)		109,781
Due to / (from) affiliates		(453,623	)		65,884		270,531		117,208			—
Other non-current liabilities		31,908			7,322		47,296		—			86,526
Total liabilities		511,628			2,423,711		681,981		(1,922,340	)		1,694,980
Shareholders’ equity		1,669,999			288,217		173,340		(461,557	)		1,669,999
Total liabilities and shareholders’ equity	$	2,181,627		$	2,711,928	$	855,321	$	(2,383,897	)	$	3,364,979

20

Pentair, Inc. and subsidiaries
Notes to condensed consolidated financial statements (unaudited)

18. Subsequent Event

On April 9, 2007, we entered into a $250 million 364-day Term Loan Agreement (the “Facility”) with Bank of America, N.A., and JPMorgan Chase Bank, N.A. Each lender has made $125 million available to us under the Facility. On April 30, 2007, we used $225.0 million of borrowings under the Facility to pay the cash purchase price of the Porous Media acquisition and the balance of the funds under the Facility were drawn for other corporate purposes. We announced the Porous Media acquisition on March 6, 2007.

On April 30, 2007, we acquired as part of our Water Group all of the capital interests in Porous Media, a privately held filtration and separation technologies business, for $225.0 million, excluding transaction costs and subject to a post-closing net asset value adjustment. Porous Media’s product portfolio includes high-performance filter media, membranes and related filtration products and purification systems for liquids, gases and solids for general industrial, petrochemical, refining and healthcare market segments among others.

On May 3, 2007, we settled a treasury rate lock agreement that we entered into on March 30, 2007 to lock in existing ten-year rates on $200 million of anticipated new debt. Under this agreement, the treasury rate on such debt was fixed at 4.64%. The agreement was settled at an interest rate of 4.67% and the corresponding settlement benefit of $0.5 million will be included in OCI in our Condensed Consolidated Balance Sheets, and will be recognized in earnings over the life of the debt after issuance.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This report contains statements that we believe to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project,” or “continue,” or the negative thereof or similar words. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this report and in any public statements we make could be materially different from actual results. They can be affected by assumptions we might make or by known or unknown risks or uncertainties. Consequently, we cannot guarantee any forward-looking statements. Investors are cautioned not to place undue reliance on any forward-looking statements. Investors should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties.

The following factors and those discussed in ITEM 1A, Risk Factors, included in our 2006 Annual Report on Form 10-K may impact the achievement of forward-looking statements:

• changes in general economic and industry conditions, such as:

§	the strength of product demand and the markets we serve;
§	the intensity of competition, including that from foreign competitors;
§	pricing pressures;
§	market acceptance of new product introductions and enhancements;
§	the introduction of new products and enhancements by competitors;
§	our ability to maintain and expand relationships with large customers;
§	our ability to source raw material commodities from our suppliers without interruption and at reasonable prices;
§	our ability to source components from third parties, in particular from foreign manufacturers, without interruption and at reasonable prices; and
§	the financial condition of our customers;

• our ability to successfully limit damages arising out of the Horizon litigation;

• our ability to identify, complete, and integrate acquisitions successfully and to realize expected synergies on our anticipated timetable;

• changes in our business strategies, including acquisition, divestiture, and restructuring activities;

• domestic and foreign governmental and regulatory policies;

• general economic and political conditions, such as political instability, the rate of economic growth in our principal geographic or product markets, or fluctuations in exchange rates;

• changes in operating factors, such as continued improvement in manufacturing activities and the achievement of related efficiencies, cost reductions, and inventory risks due to shifts in market demand and costs associated with moving production overseas;

• our ability to generate savings from our excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices;

• unanticipated developments that could occur with respect to contingencies such as litigation, intellectual property matters, product liability exposures and environmental matters;

• our ability to accurately evaluate the effects of contingent liabilities such as tax, product liability, environmental, and other claims; and

• our ability to access capital markets and obtain anticipated financing under favorable terms.

The foregoing factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. We assume no obligation, and disclaim any duty, to update the forward-looking statements in this report.

Overview

We are a focused diversified industrial manufacturing company comprised of two operating segments: Water and Technical Products. Our Water Group is a global leader in providing innovative products and systems used worldwide in the movement, storage, treatment, and enjoyment of water. Our Technical Products Group is a leader in the global enclosures and thermal management markets, designing and manufacturing standard, modified, and custom enclosures that house and protect sensitive electronics and electrical components; thermal management products; and accessories. In 2007, we expect our Water Group and Technical Products Group to generate approximately 70% and 30% of total revenues, respectively.

Our Water Group has progressively become a more important part of our business portfolio with sales increasing from approximately $125 million in 1995 to approximately $2.2 billion in 2006. We believe the water industry is structurally attractive as a result of a growing demand for clean water and the large global market size (of which we have identified a target market totaling $60 billion). Our vision is to be a leading global provider of innovative products and systems used in the movement, storage, treatment, and enjoyment of water.

Our Technical Products Group operates in a large global market with significant potential for growth in industry segments such as defense, security, medical, and networking. We believe we have the largest enclosures industrial and commercial distribution network in North America and the highest enclosures brand recognition in the industry in North America. From mid-2001 through 2003, the Technical Products Group experienced significantly lower sales volumes as a result of severely reduced capital spending in the industrial and

22

commercial markets and over-capacity and weak demand in the datacommunication and telecommunication markets. From 2004 through 2006, sales volumes increased due to the addition of new distributors, new products, and higher demand in targeted markets.

Key Trends and Uncertainties

The following trends and uncertainties affected our financial performance in the first three months of 2007 and will likely impact our results in the future:

• The housing market and new pool starts slowed dramatically in the first quarter of 2007 and also shrank in the last three quarters of 2006. We believe that construction of new homes and new pools starts in North America affects approximately 25% of the sales of our Water Group, especially for our pool and spa businesses. This downturn will likely have an adverse impact on our revenues for the remainder of 2007.

• The telecommunication equipment market, particularly in North America, has slowed over the past three quarters and impacted our North American electronics sales within our Technical Products Group. In the first quarter of 2007, North American electronics sales declined approximately 25% from the year earlier period. The revenue decrease is attributable to telecommunication industry consolidation (which has delayed enclosure product sales) and some datacommunication OEM programs reaching end-of-life. This weakness is anticipated to continue into our second quarter.

• We experience seasonal demand in a number of markets within our Water Group. End-user demand for pool equipment follows warm weather trends and is at seasonal highs from April to August. The magnitude of the sales spike is partially mitigated by employing some advance sales “early buy” programs (generally including extended payment terms and/or additional discounts). Demand for residential and agricultural water systems is also impacted by economic conditions and weather patterns, particularly by heavy flooding and droughts.

• We expect our operations to continue to benefit from our PIMS initiatives, which include strategy deployment; lean enterprise with special focus on sourcing and supply management, cash flow management, and lean operations; and IGNITE, our process to drive organic growth.

• We are experiencing material cost and other inflation in a number of our businesses. We are striving for greater productivity improvements and implementing selective increases in selling prices to help mitigate cost increases in base materials such as stainless steel and carbon steel and other costs such as health care and other employee benefit costs.

• We have a long-term goal to consistently generate free cash flow that equals or exceeds 100% conversion of our net income. Free cash flow, which we define as cash flow from operating activities less capital expenditures plus proceeds from sale of property and equipment, exceeded $200 million for the fourth consecutive year in 2005 and was $181 million in 2006. See our discussion of Other financial measures under the caption “Liquidity and Capital Resources” of this report.

• We experienced favorable foreign currency effects on net sales in the first three months of 2007. Our currency effect is primarily for the U.S. dollar against the euro, which may or may not trend favorably in the future.

• The effective tax rate for the first three months of 2007 was 35.2%. We estimate our effective income tax rate for the remainder of 2007 to be between 35.0% and 35.5%, resulting in a full year effective income tax rate of between 35.0% and 35.5%. We continue to actively pursue initiatives to reduce our effective tax rate. The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

Outlook

In 2007, our operating objective is to increase our return on invested capital by:

• Continuing to drive operating excellence through lean enterprise initiatives, with special focus on sourcing and supply management, cash flow management, and lean operations;

• Continuing the integration of acquisitions and realizing identified synergistic opportunities;

• Continuing proactive talent development, particularly in international management and other key functional areas;

• Achieving organic sales growth (in excess of market growth rates), particularly in international markets; and

• Continuing to make strategic acquisitions to grow and expand our existing platforms in our Water and Technical Products Groups.

The ability to achieve our operating objectives will depend, to a certain extent, on factors outside our control. See “Forward-looking statements” in this report and “Risk Factors” under ITEM 1A in our 2006 Annual Report on Form 10-K.

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RESULTS OF OPERATIONS

Net sales

Consolidated net sales and the change from the prior year period were as follows:

	Three months ended
	March 31		April 1
In thousands	2007		2006		$ change		% change
Net sales	$	807,995	$	771,389	$	36,606		4.7	%

The components of the net sales change in 2007 from 2006 were as follows:

	% Change from 2006
Percentages	First quarter
Volume		0.9
Price		2.3
Currency		1.5
Total		4.7

Consolidated net sales

The 4.7 percent increase in consolidated net sales in the first quarter of 2007 from 2006 was primarily driven by:

• an increase in sales volume due to our February 2, 2007 acquisition of Jung Pumpen GmbH (“Jung”); and

• organic sales growth of approximately 2 percent (excluding acquisitions and foreign currency exchange), which included selective increases in selling prices to mitigate inflationary cost increases:

§ higher sales of North American pool equipment due to shipments of fourth quarter 2006 early-buy program orders;

       This increase was partially offset by:

§	lower Technical Products sales into electronics markets driven by mergers in the telecommunication equipment industry which have delayed buying activity and by datacommunication projects reaching end-of-life; and
§	lower sales of pump and filtration products related to the downturn in the North American residential housing market; and

• favorable foreign currency effects.

Net sales by segment and the change from the prior year period were as follows:

	Three months ended
	March 31		April 1
In thousands	2007		2006		$ change			% change
Water	$	555,412	$	517,169	$	38,243			7.4	%
Technical Products		252,583		254,220		(1,637	)		(0.6	%)
Total	$	807,995	$	771,389	$	36,606			4.7	%

Water

The 7.4 percent increase in Water Group net sales in the first quarter of 2007 from 2006 was primarily driven by:

• organic sales growth of approximately 4 percent (excluding acquisitions and foreign currency exchange), which included selective increases in selling prices to mitigate inflationary cost increases:

§	an increase in sales of North American pool equipment driven by new products and a carryover of fourth quarter 2006 early-buy program orders into the first quarter;
§	continued growth in China and in other emerging markets in Asia-Pacific as well as continued success in penetrating markets in Europe and the Middle East;

24

             These increases were partially offset by:

§ lower sales of pump and filtration products related to the downturn in the North American residential housing market;

• an increase in sales volume driven by our February 2, 2007 acquisition of Jung; and

• favorable foreign currency effects.

Technical Products

The 0.6 percent decrease in Technical Product Group net sales in the first quarter 2007 from 2006 was primarily driven by:

• lower sales into electronics markets driven by mergers in the telecommunication equipment industry which have delayed buying activity and by datacommunication projects reaching end-of-life.

These decreases were partially offset by:

• an increase in sales into electrical markets, which includes selective increases in selling prices to mitigate inflationary cost increases;

• a strong sales performance in Asia driven by continued penetration in China; and

• favorable foreign currency effects.

Gross profit

	Three months ended
	March 31		% of			April 1		% of
In thousands	2007		sales			2006		sales
Gross profit	$	237,403		29.4	%	$	222,508		28.8	%
Percentage Point Change				0.6pts

The 0.6 percent increase in gross profit as a percentage of sales in the first quarter of 2007 from 2006 was primarily the result of:

• selective increases in selling prices in our Water and Technical Products Groups to mitigate inflationary cost increases; and

• savings generated from our PIMS initiatives including lean and supply management practices.

These increases were partially offset by:

• inflationary increases related to raw materials and labor; and

• higher cost as a result of a fair market value inventory step-up related to the Jung acquisition.

Selling, general and administrative (SG&A)

	Three months ended
	March 31		% of			April 1		% of
In thousands	2007		sales			2006		sales
SG&A	$	142,300		17.6	%	$	129,089		16.7	%
Percentage Point Change				0.9pts

The 0.9 percentage point increase in SG&A expense as a percentage of sales in the first quarter of 2007 from 2006 was primarily due to:

• proportionately higher SG&A spending in the acquired Jung business;

• exit costs related to a previously announced 2001 French facility closure;

• higher selling and general expense to fund investments in future growth with emphasis on growth in the international markets, including personnel and business infrastructure investments; and

25

• an increase in amortization expense related to the intangible assets from the Jung acquisition.

Research and development (R&D)

	Three months ended
	March 31		% of			April 1		% of
In thousands	2007		sales			2006		sales
R&D	$	14,950		1.9	%	$	14,863		1.9	%
Percentage Point Change				0.0pts

R&D expense as a percentage of sales in the first quarter of 2007 was consistent with the first quarter of 2006.

Operating income

Water

	Three months ended
	March 31		% of			April 1		% of
In thousands	2007		sales			2006		sales
Operating income	$	60,879		11.0	%	$	55,587		10.8	%
Percentage Point Change				0.2pts

The 0.2 percentage point increase in Water Group operating income as a percentage of sales in the first quarter of 2007 from 2006 was primarily the result of:

• selective increases in selling prices to mitigate inflationary cost increases; and

• savings generated from our PIMS initiatives including lean and supply management practices.

These increases were partially offset by:

• inflationary increases related to raw materials and labor; and

• higher cost as a result of a fair market value inventory step-up related to the Jung acquisition.

Technical Products

	Three months ended
	March 31		% of			April 1		% of
In thousands	2007		sales			2006		sales
Operating income	$	31,631		12.5	%	$	37,704		14.8	%
Percentage Point Change			(2.3) pts

The 2.3 percentage point decrease in Technical Products Group operating income as a percentage of sales in the first quarter of 2007 from 2006 was primarily the result of:

• inflationary increases related to raw materials such as stainless steel and labor costs;

• lower sales into electronics markets driven by mergers in the telecommunication equipment industry which have delayed buying activity and by datacommunication projects reaching end-of-life; and

• exit costs related to a previously announced 2001 French facility closure.

These decreases were partially offset by:

• selective increases in selling prices to mitigate inflationary cost increases; and

• savings realized from the continued success of PIMS, including lean and supply management activities.

26

Net interest expense

	Three months ended
	March 31		April 1
In thousands	2007		2006		Difference		% change
Net interest expense	$	15,120	$	13,284	$	1,836		13.8	%

The 13.8 percentage point increase in interest expense in the first quarter of 2007 from 2006 was primarily the result of:

• an increase in outstanding debt primarily related to the Jung acquisition; and

• an increase in interest rates in the first quarter of 2007 compared to the same period in 2006.

Provision for income taxes from continuing operations

	Three months ended
	March 31			April 1
In thousands	2007			2006
Income before income taxes	$	65,033		$	65,272
Provision for income taxes		22,903			22,201
Effective tax rate		35.2	%		34.0	%

The 1.2 percentage point increase in the effective tax rate in the first quarter of 2007 from 2006 was primarily the result of:

• a favorable adjustment in the first quarter of 2006 related to a prior year tax return.

We estimate our effective income tax rate for the remaining quarters of this year will be between 35.0% and 35.5% resulting in a full year effective income tax rate of between 35.0% and 35.5%.

LIQUIDITY AND CAPITAL RESOURCES

Cash requirements for working capital, capital expenditures, equity investments, acquisitions, debt repayments, share repurchases, and dividend payments are generally funded from cash generated from operations, availability under existing committed revolving credit facilities, and in certain instances, public and private debt and equity offerings.

We experience seasonal cash flows primarily due to seasonal demand in a number of markets within our Water Group. End-user demand for pool equipment follows warm weather trends and is at seasonal highs from April to August. The magnitude of the sales spike is partially mitigated by employing some advance sales “early buy” programs (generally including extended payment terms and/or additional discounts). Demand for residential and agricultural water systems is also impacted by weather patterns, particularly by heavy flooding and droughts.

The following table presents selected working capital measurements calculated from our monthly operating results based on a 13-month moving average:

	March 31		December 31		April 1
Days	2007		2006		2006
Days of sales in accounts receivable		54		54		55
Days inventory on hand		77		76		71
Days in accounts payable		56		56		56

Operating activities

Cash used for operating activities was $57.7 million in the first three months of 2007 compared with cash used for operating activities of $92.3 million in the prior year comparable period. The decrease in cash used for operating activities was due primarily to lower cash used for working capital in the first quarter of 2007 versus the same period of last year. In the future, we expect our working capital ratios to improve as we are able to capitalize on our PIMS initiatives.

Investing activities

Capital expenditures in the first three months of 2007 were $18.9 million compared with $9.1 million in the prior year period. We currently anticipate capital expenditures for fiscal 2007 will be approximately $70 to $80 million, primarily for capacity expansions in our low cost country manufacturing facilities, implementation of a unified business systems infrastructure in Europe, new product development, and general maintenance capital.

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On February 2, 2007, we acquired as part of our Water Group all the outstanding shares of capital stock of Jung Pumpen GmbH (“Jung”) for $230.2 million, including a cash payment of $239.9 million and transaction costs of $0.7 million, less cash acquired of $10.4 million. The purchase price is subject to a post-closing net asset value adjustment. Jung is a leading German manufacturer of wastewater products for municipal and residential markets. Jung brings us its strong application engineering expertise and a complementary product offering, including a new line of water re-use products, submersible wastewater and drainage pumps, wastewater disposal units and tanks. Jung also brings to Pentair its well-established European presence, a state-of-the-art training facility in Germany, and sales offices in Germany, Austria, France, Hungary, Poland and Slovakia. Goodwill recorded as part of the initial purchase price allocation was $103.2 million, of which approximately $53 million is tax deductible. We continue to evaluate the purchase price allocation for the Jung acquisition, including intangible assets, contingent liabilities, and property, plant and equipment. We expect to revise the purchase price allocation as better information becomes available.

Divestiture activities during 2006 relate to the following: In January 2006, pursuant to the purchase agreement for the sale of our former Tools Group, we completed the repurchase of a manufacturing facility in Suzhou, China from The Black and Decker Corporation (“BDK”) for approximately $5.7 million. We recorded no gain or loss on the repurchase. In March 2006, we completed an outstanding net asset value arbitration with BDK relating to the purchase price for the sale of our former Tools Group. The decision by the arbitrator constituted a final resolution of all disputes between BDK and us regarding the net asset value. We paid the final net asset value purchase price adjustment pursuant to the purchase agreement of $16.1 million plus interest of $1.1 million in March 2006, resulting in an incremental pre-tax loss on disposal of discontinued operations of $3.4 million or $1.6 million net of tax. Also in March 2006, we exited a leased facility from our former Service Equipment business resulting in a net cash outflow of $2.2 million and an immaterial gain from disposition.

Financing activities

Net cash provided by financing activities was $314.7 million in the first three months of 2007 compared with $130.7 million provided by financing activities in the prior year period. The increase primarily relates to the additional borrowings to fund the Jung acquisition. Financing activities included draw downs and repayments on our revolving credit facilities to fund our operations in the normal course of business, payments of dividends, cash used to repurchase Company stock, cash received from stock option exercises, and tax benefits related to stock-based compensation.

We have a multi-currency revolving Credit Facility (the “Credit Facility”) of $800 million expiring on March 4, 2010. We are authorized to sell short-term commercial paper notes to the extent availability exists under the Credit Facility. We use the Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. As of March 31, 2007, we had $243.3 million of commercial paper outstanding that matures within 54 days. All of the commercial paper was classified as long-term as we have the intent and the ability to refinance such obligations on a long-term basis under the Credit Facility.

We were in compliance with all debt covenants as of March 31, 2007.

In addition to the Credit Facility, we have $25 million of uncommitted credit facilities, under which we had $16.0 million outstanding as of March 31, 2007.

On April 9, 2007, we entered into a $250 million 364-day Term Loan Agreement (the “Facility”) with Bank of America, N.A., and JPMorgan Chase Bank, N.A. Each lender has made $125 million available to us under the Facility. On April 30, 2007, we used $225.0 million of borrowings under the Facility to pay the cash purchase price of the Porous Media acquisition and the balance of the funds under the Facility were drawn for other corporate purposes. We announced the Porous Media acquisition on March 6, 2007.

Our current credit ratings are as follows:

Rating Agency	Long-Term Debt Rating	Current Rating Outlook
Standard & Poor’s Moody’s	BBB Baa3	Negative Stable

On March 7, 2007, Standard & Poor’s Ratings Services revised its current rating outlook on us from stable to negative. At the same time, Standard & Poor’s affirmed its long-term debt rating of ‘BBB’. Standard & Poor’s stated that the outlook revision reflects the additional leverage and stress on credit metrics that will result from the announced acquisition of Porous Media. The negative outlook indicates the rating could be lowered if financial policies become more aggressive or if operating results are weaker than expected.

As of March 31, 2007, our capital structure consisted of $1,080.8 million in total indebtedness and $1,705.9 million in shareholders’ equity. The ratio of debt-to-total capital at March 31, 2007 was 38.8 percent, compared with 30.8 percent at December 31, 2006 and 35.9 percent at April 1, 2006. Our targeted debt-to-total capital ratio is approximately 40 percent. We will exceed this target ratio from time to time as needed for operational purposes and/or acquisitions.

In anticipation of issuing new debt in the second quarter of 2007 and to partially hedge the risk of future increases to the treasury rate, we entered into an agreement on March 30, 2007 to lock in existing ten-year rates on $200 million. The treasury rate was fixed at 4.64% and the agreement was settled on May 3, 2007.

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The treasury rate lock agreement was designated as and was effective as a cash-flow hedge. The treasury rate lock agreement was settled at an interest rate of 4.67% and the corresponding settlement benefit of $0.5 million will be included in OCI in our Condensed Consolidated Balance Sheets, and will be recognized in earnings over the life of the debt after issuance.

We expect to continue to have cash requirements to support working capital needs and capital expenditures, to pay interest and service debt, to pay dividends to shareholders, and to repurchase Company stock. In order to meet these cash requirements, we intend to use available cash and internally generated funds, and to borrow under our committed and uncommitted credit facilities.

Dividends paid in the first three months of 2007 were $15.0 million, or $0.15 per common share, compared with $14.2 million, or $0.14 per common share, in the prior year period. We have increased dividends every year for the last 31 years and expect to continue paying dividends on a quarterly basis.

During 2006, the Board of Directors authorized the repurchase of shares of our common stock up to a maximum dollar limit of $100 million. As of December 31, 2006, we had purchased 1,986,026 shares for $59.4 million pursuant to this authorization during 2006. In December 2006, the Board of Directors authorized the continuation of the repurchase program in 2007 with a maximum dollar limit of $40.6 million. This authorization expires on December 31, 2007. As of March 31, 2007, we had repurchased an additional 312,400 shares for $9.3 million pursuant to this plan and, accordingly, we have the authority to repurchase additional shares up to a maximum dollar limit of $31.4 million for the remainder of 2007.

There have been no material changes with respect to the contractual obligations, other than noted above, or off-balance sheet arrangements described in our 2006 Annual Report on Form 10-K.

Other financial measures

In addition to measuring our cash flow generation or usage based upon operating, investing, and financing classifications included in the Consolidated Statements of Cash Flows, we also measure our free cash flow and our conversion of net income. We have a long-term goal to consistently generate free cash flow that equals or exceeds 100% conversion of net income. Free cash flow and conversion of net income are non-GAAP financial measures that we use to assess our cash flow performance. We believe free cash flow and conversion of net income are important measures of operating performance because they provide us and our investors a measurement of cash generated from operations that is available to pay dividends and repay debt. In addition, free cash flow and conversion of net income are used as a criterion to measure and pay compensation-based incentives. Our measure of free cash flow and conversion of net income may not be comparable to similarly titled measures reported by other companies. The following table is a reconciliation of free cash flow and a calculation of the conversion of net income with cash flows from continuing and discontinued operating activities:

	Three months ended
	March 31			April 1
In thousands	2007			2006
Net cash used for operating activities	$	(57,669	)	$	(92,302	)
Capital expenditures		(18,865	)		(9,054	)
Proceeds from sale of property and equipment		1,329			79
Free cash flow		(75,205	)		(101,277	)
Net income		42,273			41,620
Conversion of net income		(177.9	%)		(243.3	%)

In 2007, our objective is to generate free cash flow that equals or exceeds 100% conversion of net income.

NEW ACCOUNTING STANDARDS

See Note 1 (New Accounting Standards) of ITEM 1.

CRITICAL ACCOUNTING POLICIES

In our 2006 Annual Report on Form 10-K, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements. We have not changed these policies from those previously disclosed in our Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material changes in our market risk during the quarter ended March 31, 2007. For additional information, refer to Item 7A of our 2006 Annual Report on Form 10-K.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

	We maintain a system of disclosure controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter ended March 31, 2007 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the quarter ended March 31, 2007 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.
(b)	Changes in Internal Controls
	There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders of Pentair, Inc.

We have reviewed the accompanying condensed consolidated balance sheets of Pentair, Inc. and Subsidiaries (the “Company”) as of March 31, 2007 and April 1, 2006, and the related condensed consolidated statements of income and cash flows for the three month periods ended March 31, 2007 and April 1, 2006. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2006, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 26, 2007, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2006 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP

Minneapolis, Minnesota
May 4, 2007

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PART II OTHER INFORMATION

ITEM 1. Legal Proceedings

Environmental and Litigation

There have been no further material developments from the disclosures contained in our 2006 Annual Report on Form 10-K, other than those matters identified below.

Horizon Litigation

Twenty-eight separate lawsuits involving 29 primary plaintiffs, a class action, and claims for indemnity by Celebrity Cruise Lines, Inc. (“Celebrity”) were brought against Essef Corporation (“Essef”) and certain of its subsidiaries prior to our acquisition of Essef in August 1999. The claims against Essef and its involved subsidiaries were based upon the allegation that Essef designed, manufactured, and marketed two sand swimming pool filters that were installed as a part of the spa system on the Horizon cruise ship, and allegations that the spa and filters contained Legionnaire’s disease bacteria that infected certain passengers on cruises from April 1994 through July 1994.

The individual and class claims by passengers were tried and resulted in an adverse jury verdict finding liability on the part of the Essef defendants (70%) and Celebrity and its sister company, Fantasia (together 30%). After expiration of post-trial appeals, we paid all outstanding punitive damage awards of $7.0 million in the Horizon cases, plus interest of approximately $1.6 million, in January 2004. All of the personal injury cases have now been resolved through either settlement or judgment.

The only remaining unresolved claims in this case were those brought by Celebrity for damages resulting from the outbreak. Celebrity filed an amended complaint seeking attorney fees and costs for prior litigation as well as out-of-pocket losses, lost profits, and loss of business enterprise value. On June 28, 2006, a jury returned a verdict against the Essef defendants in the total amount of $193.0 million for its claims for out-of-pocket expenses ($10.4 million), lost profits ($47.6 million) and lost enterprise value ($135.0 million). The verdict was exclusive of pre-judgment interest and attorneys’ fees.

On January 17, 2007, the Court ruled on our post-trial motions, granting judgment in our favor as a matter of law with respect to Celebrity’s claim for lost enterprise value ($135.0 million). The Court also granted a new trial with respect to lost profits ($47.6 million). In addition, the Court denied without prejudice our claim for contribution to reduce Celebrity’s recovery by 30% to account for its contributory negligence, with leave to renew the motion following retrial. The trial of this matter has been scheduled for June 2007.

Celebrity’s claim for lost profits at trial amounted to approximately $60 million. We believe that actual lost profits suffered, if any, are substantially less. In a new trial, there remain questions of causation, contribution and proof of damages to be determined. We intend to vigorously defend against Celebrity’s claims. We cannot predict whether Celebrity will appeal the ruling on lost enterprise value, nor whether and to what extent Essef may eventually be found liable on Celebrity’s claims.

Several issues have not been decided by the Court, including whether Celebrity is entitled to recovery of its attorneys’ fees and related costs in the passenger claims phase of the case ($4.1 million), and, with respect to pre-judgment interest, the length of the interest period and the rate of interest on any eventual judgment. We have assessed the impact of the ruling on our previously established reserves for this matter and, based on information available at this time, have not changed our reserves following this ruling, except to take into account quarterly interest accruals.

We believe that any judgment we pay in this matter would be tax-deductible in the year paid or in subsequent years. In addition to the impact of any loss on this matter on our earnings per share when recognized, we may need to borrow funds from our banks or other sources to pay any judgment finally determined after exhaustion of all appeals. We expect that we would have available adequate funds to allow us to do so, based on discussions with our lending sources and our estimates of the results of our business operations over the foreseeable future.

ITEM 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in ITEM 1A. of our 2006 Annual Report on Form 10-K.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to purchases we made of our common stock during the first quarter of 2007:

	(a)		(b)		(c)		(d)
					Total Number of Shares		Dollar Value of Shares
	Total Number		Average Price		Purchased as Part of		that May Yet Be
	of Shares		Paid per		Publicly Announced Plans		Purchased Under the
Period	Purchased		Share		or Programs		Plans or Programs
January 1 - January 27, 2007		87,740	$	30.08		—	$	40,640,979
January 28 - February 24, 2007		18,170	$	30.78		—	$	40,640,979
February 25 - March 31, 2007		335,898	$	29.82		312,400	$	31,361,482
Total		441,808				312,400

(a)	The purchases in this column include shares repurchased as part of our publicly announced programs and in addition, 87,740 shares for the period January 1 — January 27, 2007, 18,170 shares for the period January 28 — February 24, 2007, and 23,498 shares for the period February 25 — March 31, 2007 deemed surrendered to us by participants in our Omnibus Stock Incentive Plan and the Outside Directors Nonqualified Stock Option Plan (the “Plans”) to satisfy the exercise price or withholding of tax obligations related to the exercise of stock options and non-vested shares.
(b)	The average price paid in this column includes shares repurchased as part of our publicly announced programs and shares deemed surrendered to us by participants in the Plans to satisfy the exercise price or withholding of tax obligations related to the exercise price of stock options and non-vested shares.
(c)	The number of shares in this column represents the number of shares repurchased as part of publicly announced programs to repurchase up to $100 million of our common stock.
(d)	During 2006, the Board of Directors authorized the repurchase of shares of our common stock up to a maximum dollar limit of $100 million. As of December 31, 2006, we had purchased 1,986,026 shares for $59.4 million pursuant to this authorization during 2006. In December 2006, the Board of Directors authorized the continuation of the repurchase program in 2007 with a maximum dollar limit of $40.6 million. This authorization expires on December 31, 2007. As of March 31, 2007, we had repurchased an additional 312,400 shares for $9.3 million pursuant to this plan. As of April 27, 2007, we had not repurchased any additional shares under this plan and, accordingly, we have the authority to repurchase additional shares up to a maximum dollar limit of $31.4 million for the remainder of 2007.

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ITEM 6. Exhibits

(a) Exhibits

3.1	Third Restated Articles of Incorporation as amended through May 3, 2007.
3.2	Fourth Amended and Superseding By-Laws as amended through May 3, 2007.
4.1	Form of Term Loan Agreement for $250 million among Pentair, Inc., Bank of America, N.A. and JPMorgan Chase Bank, N.A. dated April 9, 2007 (incorporated by reference to Exhibit 99.1 to Pentair’s Current Report on Form 8-K dated April 9, 2007).
15	Letter Regarding Unaudited Interim Financial Information.
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURE

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, thereunto duly authorized, on May 4, 2007.

PENTAIR, INC. Registrant
By	/s/ John L. Stauch
	John L. Stauch
	Executive Vice President and Chief Financial Officer (Chief Accounting Officer)

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Exhibit Index to Form 10-Q for the Period Ended March 31, 2007

3.1	Third Restated Articles of Incorporation as amended through May 3, 2007.
3.2	Fourth Amended and Superseding By-Laws as amended through May 3, 2007.
4.1	Form of Term Loan Agreement for $250 million among Pentair, Inc., Bank of America, N.A. and JPMorgan Chase Bank, N.A. dated April 9, 2007 (incorporated by reference to Exhibit 99.1 to Pentair’s Current Report on Form 8-K dated April 9, 2007).
15	Letter Regarding Unaudited Interim Financial Information
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-3.1

THIRD RESTATED ARTICLES OF INCORPORATION
OF PENTAIR, INC.

Compiled Version As Amended Through May 3, 2007.

ARTICLE I.

     The name of this Corporation shall be PENTAIR, INC.

ARTICLE II.

     The duration of this Corporation shall be perpetual.

ARTICLE III.

     Section 1. This Corporation has general business purposes.

     Section 2. In amplification but not in limitation of the provisions and legal effect of Section 1 hereof or of any other provision in these Articles, and in amplification but not in limitation of the purposes, powers and authority this Corporation would have in the absence from these Articles of this Section 2 hereof, the nature of the business, or objects or purposes to be transacted, promoted or carried on are: to manufacture, purchase or otherwise dispose of, and to deal generally in and with paper and paper products and related products, of every type and description; to manufacture, purchase or otherwise acquire, invest in, own, mortgage, sell, assign and transfer, or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description; to carry on any other business in connection with any one or more of the foregoing purposes; and to do any and all acts and things necessary or convenient to accomplish or implement any one or more of the foregoing purposes.

ARTICLE IV.

     This Corporation shall have all the powers granted to private corporations organized for profit by said Minnesota Business Corporation Act and, in furtherance, and not in limitation, of the

powers conferred by the laws of the State of Minnesota upon corporations organized for the foregoing purposes, the Corporation shall have the power:

(a)	To issue bonds, debentures or other obligations of the Corporation, and to contract indebtedness without limit as to amount for any of the objects and purposes of the Corporation, and to secure the same by mortgage or mortgages, deed or deeds of trust, or pledge, or lien, or any or all of the real or personal property, or both, of the Corporation.
(b)	To acquire, hold, mortgage, pledge or dispose of the shares, bonds, securities or other evidences of indebtedness of the United States of America or of any domestic or foreign corporation, and while the holder of such shares, to exercise all the privileges of ownership, including the right to vote thereon, to the same extend as a natural person might or could do, by the president of this Corporation or by proxy appointed by him, unless some other person, by resolution of the Board of Directors, shall be appointed to vote such shares.
(c)	To purchase or otherwise acquire on such terms and in such manner as the By-Laws of this Corporation from time to time provide, and to own and hold, shares of the capital stock of this Corporation, and to reissue the same from time to time.
(d)	When and as authorized by the vote of the holders of not less than a majority of the shares entitled to vote, at a shareholders’ meeting called for that purpose or when authorized upon the written consent of the holders of a majority of such shares, to sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property and assets, including its good will, upon such terms and for such considerations, which may be money, shares, bonds, or other instruments for the payment of money or other property, as the Board of Directors deems expedient or advisable.
(e)	To acquire, hold, lease, encumber, convey or otherwise dispose of, either alone or in conjunction with others, real and personal property within or without the state; and to take real and personal property by will or gift.
(f)	To acquire, hold, take over as a going concern and thereafter to carry on, mortgage, sell or otherwise dispose of, either alone or in conjunction with others, the rights, property and business of any person, entity, partnership, association, or corporation heretofore or hereafter engaged in any business, the purpose of which is similar to the purposes set forth in Article III of these Articles of Incorporation.
(g)	To enter into any lawful arrangement for sharing of profits, union of interest, reciprocal association, or cooperative association with any corporation, association, partnership, individual, or other legal entity, for the carrying on of any business, the purpose of which is similar to the purposes set forth in Article III of these Articles of Incorporation, and, insofar as it is lawful, to enter into any general or limited partnership, the purpose of which is similar to such purposes.

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ARTICLE V.

     An agreement for consolidation or merger with one or more foreign or domestic corporations may be authorized by vote of the shareholders entitled to exercise at least two-thirds of the shares entitled to vote unless the necessary affirmative vote to authorize any particular merger or consolidation is reduced by the Board of Directors, which reduction shall be to not less than a majority of the shares entitled to vote.

ARTICLE VI.

     The location and post office address of the registered office of this Corporation shall be 1500 County Road B2 West, St. Paul, Minnesota.

ARTICLE VII.

     The aggregate number of shares which this Corporation shall have authority to issue is 250,000,000 shares, of which not more than 15,000,000 shares shall be “Preferred Shares.”

a.	All classes of Preferred and Common shares may be issued as and when and for such consideration as the Board of Directors shall determine, and, to the full extent permitted by the Minnesota Business Corporation Act, the Board of Directors shall have the power to establish any classes or series of Preferred Shares or Common Shares, with such par value, rights and priorities it deems appropriate, and to fix or alter, from time to time, in respect of any Preferred Shares then unissued, the rights and preferences of such shares, including without limitation, any or all of the following: dividend rate and dividend cumulation rights; voting rights; redemption rights and price; liquidation rights and price; conversion rights and sinking or purchase fund rights; or the number of shares constituting any class or series. The Board of Directors shall also have the power to fix the terms and provisions of options, rights and warrants to purchase or subscribe for shares of any class or classes and to authorize the issuance thereof. Dividends payable in shares of any class may be paid to shareholders of any other class as and when determined by the Board of Directors.
b.	The voting rights of the shares of this Corporation shall be vested in the holders of all shares presently outstanding, with one vote per share. The voting rights of unissued shares shall be fixed by the Board of Directors, but no such share shall be entitled to more than one vote. No holder of any shares shall be entitled to any cumulative voting rights.
c.	No shareholder of this Corporation shall have any pre-emptive right to subscribe for

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or purchase any shares of any class or series of the Corporation, whether now or hereafter established or authorized, or any securities or obligations convertible into any such shares, or any options or warrants or rights to purchase any such shares.

ARTICLE VIII.

     Section 1. If any person has become an Acquiring Person as defined in Section 2, each holder of Voting Shares, other than the Acquiring Person or a transferee of the Acquiring Person, until and including the ninetieth day following the date the notice to holders of Voting Shares referred to in Section 3 herein is mailed, shall have the right to have the Voting Shares held by such holder redeemed by the Corporation at the Redemption Price determined as provided in Section 4 herein, and each holder of securities convertible into Common Shares or of options, warrants, or rights exercisable to acquire Common Shares prior to such ninetieth day, other than the Acquiring Person or a transferee of the Acquiring Person, shall have the right simultaneously with the conversion of such securities or exercise of such options, warrants, or rights to have the Common Shares to be received thereupon by such holder redeemed by the Corporation at the Redemption Price; provided that no holder of Voting Shares shall have any right to have Voting Shares redeemed by the Corporation pursuant to this Article if the Corporation acting through a majority of its Board of Directors shall either (a) recommend to the holders of Voting Shares that a pending tender offer be accepted by the holders of Voting Shares or (b) if no tender offer is pending it announces that it does not oppose any accumulation of shares by an Acquiring Person; provided, however, that such recommendation or announcement is made within ten days following either (i) the announcement or publication of such tender offer made by an Acquiring Person, (ii) any amendment to such tender offer, (iii) a vote by shareholders of the Corporation for approval of the acquisition of shares by the Acquiring Person (iv) receipt by the Board of Directors of credible notice that an Acquiring Person exists, or (v) receipt by the Board of Directors of credible notice that an Acquiring Person has increased ownership of Voting Shares by more than three percent (3%) of the Voting Shares outstanding.

-4-

     Section 2. For purposes of this Article:

     (a) The term “person” shall include an individual, a corporation, partnership, trust or other entity.

     (b) An “Acquiring Person” shall be any person who becomes the beneficial owner, directly or indirectly, of more than twenty percent (20%) of the voting shares outstanding and becomes the beneficial owner, directly or indirectly, of any additional Voting Shares pursuant to a tender offer or otherwise or (ii) becomes the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the Voting Shares outstanding whether such shares were acquired by market purchases, a tender offer or otherwise.

     (c) For the purpose of determining whether a person is an Acquiring Person, such person shall be deemed to beneficially own (i) all Voting Shares with respect to which such person has the capability to control or influence the voting power in respect thereof and (ii) all Voting Shares which such person has the immediate or future right to acquire, directly or indirectly, pursuant to agreements, through the exercise of options, warrants or rights or through the conversion of convertible securities or otherwise; and all Voting Shares which such person has the right to acquire in such manner shall be deemed to be outstanding shares, but Voting Shares which any other person has the right to acquire in such manner shall not be deemed to be outstanding shares.

     (d) The term “Voting Shares” shall mean such of the Common Shares and the Preferred Shares of the Corporation as shall have been granted voting rights.

     (e) The acquisition of Voting Shares by the Corporation or by any person controlling, controlled by or under common control with the Corporation shall not affect the right to have Voting Shares redeemed pursuant to this Article.

     (f) The right to have Voting Shares redeemed pursuant to this Article shall attach to such shares and shall not be personal to the holder thereof.

     (g) The term “tender offer” shall mean an offer to acquire or an acquisition of Voting Shares pursuant to a request or invitation for tenders or an offer to purchase such shares for cash, securities or any other consideration.

     (h) The term “market purchases” shall mean the acquisition of Voting Shares from holders of such shares in privately negotiated transactions or in transactions effected through a broker or dealer.

     (i) Subject to the provisions of Section 2(c) herein, “outstanding shares” shall mean Voting Shares which at the time in question have been issued by the Corporation and not reacquired and held or retired by it or held by any subsidiary of the Corporation.

     Section 3. If Voting Shares are subject to redemption in accordance with Section 1:

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     (a) Not later than sixty (60) days following the date on which the Corporation receives credible notice that any person has become an Acquiring Person, the Corporation shall give written notice, by first class mail, postage prepaid, at the addresses shown on the records of the Corporation, to each holder of record of Voting Shares (and to any other person known by the Corporation to have rights to demand redemption pursuant to Section 2 of this Article) as of a date not more than seven (7) days prior to the date of the mailing pursuant to this Section 3 and shall advise each such holder of the right to have shares redeemed and the procedure for such redemption.

     (b) If the Corporation fails to give notice as required by this Section 3, any holder entitled to receive such notice may within twenty (20) days thereafter serve written demand upon the Corporation to give such notice. If within twenty (20) days after the receipt of the written demand the Corporation fails to give the required notice, such holder may at the expense and on behalf of the Corporation take such reasonable action as may be appropriate to give notice or to cause notice to be given pursuant to this Section 3.

     (c) The Directors of the Corporation shall designate a Redemption Agent, which shall be a corporation or association (i) organized and doing business under the laws of the United States or any State, (ii) subject to supervision or examination by Federal or State authority, (iii) having combined capital and surplus of at least $20 million, and (iv) having the power to exercise corporate trust powers.

     (d) For a period of ninety (90) days from the date of the mailing of the notice to the holders of Voting Shares referred to in this Section 3, holders of Voting Shares and other persons entitled to have Voting Shares redeemed pursuant to this Article may, at their option, deposit certificates representing all or less than all Voting Shares held of record by them with the Redemption Agent together with written notice that the holder elects to have such shares redeemed pursuant to this Article. Redemption shall be deemed to have been effected at the close of business

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on the day such certificates are deposited in proper form with the Redemption Agent.

     (e) The Corporation shall promptly deposit in trust with the Redemption Agent cash in an amount equal to the aggregate Redemption Price of all of the Voting Shares deposited with the Redemption Agent for purposes of redemption.

     (f) As soon as practicable after receipt by the Redemption Agent of the cash deposit by the Corporation referred to in this Section 3, the Redemption Agent shall issue its checks payable to the order of the persons entitled to receive the Redemption Price of the Voting Shares in respect of which such cash deposit was made.

     Section 4. (a) The Redemption Price shall be the amount payable by the Corporation in respect of each Voting Share with respect to which redemption has been demanded pursuant to this Article and shall be the greater amount determined on either of the following bases, but in no event shall the Redemption Price be less than the amount of shareholders’ equity in respect of each outstanding Voting Share as determined in accordance with generally accepted accounting principles and as reflected in any published report by the Corporation as at the fiscal year quarter ending immediately preceding the notice to shareholders referred to in Section 3 herein:

     (i) The highest price per Voting Share, including any commission paid to brokers or dealers for solicitation or whatever, at which Voting Shares held by the Acquiring Person were acquired pursuant to a tender offer regardless of when such tender offer was made or were acquired pursuant to any market purchase or otherwise within eighteen months prior to the notice to holders of Voting Shares referred to in Section 3 herein. For purposes of this subsection (i) if the consideration paid in any such acquisition of Voting Shares consisted, in whole or in part, of consideration other than cash, the Board of Directors of the Corporation shall take such action, as in its judgment it deems appropriate, to establish the cash value of such consideration, but such valuation shall not be less than the cash value, if any, ascribed to such consideration by the Acquiring Person.

     (ii) The highest sale price per Voting Share for any trading day during the eighteen months prior to the notice to holders of Voting Shares referred to in Section 3 herein. For purposes of this subsection (ii), the sale price for any trading day shall be the last sale price per Voting Share traded on the New York Stock Exchange, any or other national securities exchange or the National Market System or, if Voting Shares are not then traded on the foregoing, the mean of the closing bid and asked price per Voting Share.

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     (b) The determination to be made pursuant to this Section 4 shall be made by the Board of Directors not later than the date of the notice to holders of Voting Shares referred to in Section 3 herein. In making such determination the Board of Directors may engage such persons, including investment banking firms and the independent accountants who have reported on the most recent financial statements of the Corporation, and utilize employees and agents of the Corporation, who will, in the judgment of the Board of Directors, be of assistance to the Board of Directors.

     (c) The determinations to be made pursuant to this Section 4, when made by the Board of Directors acting in good faith on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its shareholders, including any person referred to in Section 2 herein.

     (d) Notwithstanding the foregoing provisions of this Section 4, each such holder of Voting Shares shall have the right to have the Redemption Price to be paid determined under and pursuant to the appraisal provisions of the Minnesota Statutes then in effect.

     Section 5. This Article may be amended or repealed only by the affirmative vote of the holders of 85% of each class of shares of the Corporation entitled to exercise the voting power of the Corporation; provided, however, that if no person holds more than twenty percent (20%) of the Voting Shares and there is no tender offer pending or threatened of which the Board of Directors has credible notice, the necessary vote for amendment or repeal may be reduced by the Board of Directors to not less than the requirements of Article XII of these Articles of Incorporation; provided, further that no amendment or repeal adopted after the notice to holders of Voting Shares referred to in Section 3 herein shall affect any Voting Shares theretofore or thereafter deposited with the Redemption Agent for redemption under this Article pursuant to such notice.

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ARTICLE IX.

     The amount of stated capital with which this Corporation shall commence business will be at least $1,000.

ARTICLE X.

     Meetings of the shareholders, whether annual or special, shall be held at the principal place of business of the Corporation at such time and date as may be fixed in the By-Laws, or at any other place designated by the Board of Directors pursuant to the By-Laws or consented to in writing by all of the shareholders entitled to vote thereat.

ARTICLE XI.

     Section 1. The business of this Corporation shall be managed by a Board of Directors who shall be elected by a majority vote of all votes cast at any meeting of the shareholders. The number of directors is hereby fixed at eleven (11). The directors are hereby divided into three classes, each class to consist as nearly as may be of one-third of the number of directors then constituting the whole Board. The term of office of those of the first class shall expire at the annual meeting in 1977. The term of office of the second class shall expire in 1978. The term of office of the third class shall expire in 1979. At each annual election commencing in 1977, the directors elected shall be chosen for a full term of three years to succeed those whose terms then expire. Vacancies on the Board of Directors may be filled by the remaining directors and each person so elected shall be a director until his successor is elected at an annual meeting of shareholders or at a special meeting duly called therefor.

     Section 2. The Board of Directors shall have all of the powers of the Corporation, subject to such action restricting said powers as may legally be taken from time to time by the shareholders either at an annual meeting or at a special meeting duly called therefor.

     Section 3. The Board of Directors shall have authority to make and alter By-Laws, subject to the power of the shareholders to change or repeal such By-Laws, provided, however, that the

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Board shall not make or alter any By-Law fixing the number, qualifications, or term of office of Directors.

     Section 4. Any contract or other transaction between the Corporation and one or more of its directors, or between the Corporation and any corporation, association or firm of which one or more of its directors are shareholders, members, directors, officers or employees, or in which they are interested, shall be valid for all purposes, notwithstanding the presence and participation of such director or directors at the meeting of the Board of Directors of the Corporation which acts upon or in reference to such contract or transaction, if the fact of such interest shall be disclosed or known to the Board of Directors, and the Board of Directors shall, nevertheless, authorize, approve and ratify such contract or transaction by a vote of a majority of the directors present, such interested director or directors to be counted in determining whether a quorum is present, but not to be counted in calculating the majority necessary to carry such vote. This section shall not be construed to invalidate any contract or transaction which would otherwise be valid under the laws applicable thereto.

     Section 5. The annual meeting of the Board of Directors shall be held immediately following the annual meeting of the shareholders, and at the same place.

     Section 6. The names and post office addresses of the directors at the time of adoption of these Restated Articles of Incorporation are as follows:

Winslow H. Buxton	Joseph R. Collins
Pentair, Inc.	Pentair, Inc.
1500 West County Road B2	1500 West County Road B2
St. Paul, MN 55113-3105	St. Paul, MN 55113-3105
Stuart “Chuck” Maitland	Augusto Meozzi
Ford Motor Company	Via delle Lame, 34
Vehicle Operations General Office, Rm A—212	50126 Florence, Italy
17000 Oakwood Boulevard
Allen Park, MI 48101

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William J. Cadogan	Barbara Grogan
ADC Telecommunications, Inc.	Western Industrial Contractors
P.O. Box 1101	5301 Joliet Street
Minneapolis, MN 55440-1101	Denver, CO 80239-2112
Charles Haggerty	Harold V. Haverty
Chairman, President and CEO	1 Wood Duck Lane
Western Digital Corporation	North Oaks, MN 55127
8105 Irvine Center Drive
Irvine, CA 92718
Karen E. Welke	Quentin J. Hietpas
3M Center, Building 220-14E-16	University of St. Thomas
St. Paul, MN 55144	2115 Summit Avenue, AQU104
	St. Paul, Minnesota 55105
Richard M. Schulze
Best Buy Co., Inc.
7075 Flying Cloud Drive
Eden Prairie, MN 55344

     Section 7. A Director of this Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under Section 302A.251 of the Minnesota Statutes.

     If Chapter 302A of the Minnesota Statutes hereafter is amended to authorize the further elimination or limitation of the liability of directors, then, in addition to the limitation on personal liability provided herein, the liability of a Director of the Corporation shall be limited to the fullest extent permitted by the amended Chapter 302A of the Minnesota Statutes.

     Any repeal or modification of this Section 7 by the shareholders of the Corporation shall be prospective only and shall not adversely affect any limitation of the personal liability of a Director of the Corporation existing at the time of such repeal or modification.

ARTICLE XII.

     These articles may be amended by resolution setting forth such amendment or amendments adopted at any meeting of the shareholders by the affirmative vote of the holders of 60% of the voting power of all shareholders entitled to vote, provided such amendment or amendments shall not

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receive the negative vote of the holders of more than 25% of the voting power of all shareholders entitled to vote. Each share of stock shall entitle the holder thereof to one vote.

     IN WITNESS WHEREOF, the undersigned corporation has caused these Third Restated Articles of Incorporation to be executed by its Chief Executive Officer and attested by its Secretary this 3^rd day of May, 2007.

PENTAIR, INC.

Randall J. Hogan, Chief Executive Officer
 

ATTEST:

Louis L. Ainsworth, Secretary
 

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EX-3.2

FOURTH AMENDED AND SUPERSEDING
BY-LAWS
OF
PENTAIR, INC.
ADOPTED ON AUGUST 23, 2000
Compiled Version As Amended May 3, 2007

ARTICLE I
Meetings of Shareholders

     Section 1. Place and Time of Meetings. Except as otherwise provided by Minnesota Statutes Chapter 302A, meetings of the shareholders may be held at any place, within or without the State of Minnesota, as may from time to time be designated by the Board of Directors and, in the absence of such designation, shall be held at the registered office of the Corporation in the State of Minnesota. The Board of Directors shall designate the time of day for each meeting and, in the absence of such designation and except as otherwise provided in these By-Laws, every meeting of shareholders shall be held at 10:00 a.m. local time.

     Section 2. Annual Meeting. The annual meeting of shareholders (the “Annual Meeting”) shall be held on such date after March 1 and prior to June 1 as the Board of Directors shall select by appropriate resolution. In fixing a meeting date for any Annual Meeting, the Board of Directors may consider such factors as it deems relevant within the good faith exercise of its business judgment. The Annual Meeting shall be the only regular meeting of the shareholders in any one calendar year. At each Annual Meeting, the shareholders shall elect that number of directors equal to the number of directors in the class whose term expires at the time of such Annual Meeting. At any such Annual Meeting, only other business properly brought before the Annual Meeting in accordance with Section 10 of this Article I may be transacted.

     Section 3. Special Meetings.

     (a) A special meeting of the shareholders (a “Special Meeting”) may be called only by (i) the Chief Executive Officer, (ii) the Chief Financial Officer, (iii) two or more members of the Board of Directors, (iv) the Chairman of the Board or (v) a shareholder or shareholders holding ten percent (10%) or more of the voting power of all shares entitled to vote on the matters to be presented to the Special Meeting, except that a Special Meeting for the purpose of considering any action to directly or indirectly facilitate or effect a business combination, including any action to change or otherwise effect the composition of the Board of Directors for that purpose, must be called by twenty five percent (25%) or more of the voting power of all shares entitled to vote.

     (b) In order for a shareholder or shareholders to demand a Special Meeting, a written demand or demands for a Special Meeting by a shareholder or shareholders holding the voting power specified in Section 3(a)(v) of this Article I (the “Requisite Voting Power”) must be delivered to the Corporation. To be valid, each written demand by a shareholder for a Special Meeting shall set forth the specific purpose or purposes for which the Special Meeting is to be held, shall be signed by one or more persons who as of the date of such written demand are shareholders of record (or

their duly authorized proxies or other representatives), shall bear the date of signature of each such shareholder (or proxy or other representative), shall set forth all information about each such shareholder and beneficial owner or owners, if any, on whose behalf the demand is made that would be required to be set forth in a shareholder’s notice described in paragraph (a)(ii) of Section 10 of this Article I, and shall be sent to the Chief Executive Officer or Chief Financial Officer of the Corporation by hand or by certified or registered mail, return receipt requested. Within 30 days after the date that valid written demands for such meeting by the shareholder or shareholders holding the Requisite Voting Power are received by the Chief Executive Officer or Chief Financial Officer of the Corporation (the “Delivery Date”), the Board of Directors shall cause a Special Meeting to be called in accordance with this Section 3.

     (c) Except as provided in the following sentence, any Special Meeting shall be held at such hour and day as may be designated by whichever of the Chief Executive Officer, the Chief Financial Officer, two or more members of the Board of Directors or the Chairman of the Board shall have called such Special Meeting. In the case of any Special Meeting called by the Board of Directors upon the demand of a shareholder or shareholders in accordance with this Section 3 (a “Demand Special Meeting”), such Special Meeting shall be held at such hour and day as may be designated by the Board of Directors; provided, however, that the date of any Demand Special Meeting shall be not more than 90 days after the Delivery Date; and provided further that in the event that the directors then in office fail to designate an hour and date for a Demand Special Meeting within 30 days after the Delivery Date, then such meeting shall be held at 2:00 p.m. local time on the 90^th day after the Delivery Date or, if such 90^th day is not a Business Day (as defined below), on the first preceding Business Day. In fixing a meeting date for any Special Meeting, the Chief Executive Officer, the Chief Financial Officer, two or more members of the Board of Directors, the Chairman of the Board or the Board of Directors may consider such factors as it or he deems relevant within the good faith exercise of its or his business judgment, including, without limitation, the nature of the action proposed to be taken, the facts and circumstances surrounding any demand for such meeting, and any plan of the Board of Directors to call an Annual Meeting or a Special Meeting for the conduct of related business.

     (d) The Corporation may engage regionally or nationally recognized independent inspectors of elections to act as an agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported written demand or demands for a Special Meeting received by the Chief Executive Officer or Chief Financial Officer of the Corporation. For the purpose of permitting the inspectors to perform such review, no purported demand shall be deemed to have been delivered to the Corporation until the earlier of (i) five Business Days following receipt by the Chief Executive Officer or Chief Financial Officer of such purported demand and (ii) such date as the independent inspectors certify to the Corporation that the valid demands received by the Chief Executive Officer or Chief Financial Officer represent the Requisite Voting Power. Nothing contained in this Section 3(d) shall in any way be construed to suggest or imply that the Board of Directors or any shareholder shall not be entitled to contest the validity of any demand, whether during or after such five Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto).

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     (e) For purposes of these By-Laws, “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of Minnesota are authorized or obligated by law or executive order to close.

     Section 4. Notice of Meetings. There shall be mailed to each shareholder, shown by the books of the Corporation to be a holder of record of voting shares, at his or her address as shown by the books of the Corporation, a notice setting out the time and place of each Annual Meeting and each Special Meeting, except where the meeting is an adjourned meeting and the date, time and place of the meeting were announced at the time of adjournment, which notice shall be mailed not less than 10 days nor more than 60 days prior thereto, except that notice of a meeting at which an agreement of merger or exchange is to be considered shall be mailed to all shareholders of record, whether entitled to vote or not, at least fourteen days prior thereto. In the event of any Demand Special Meeting, such notice shall be sent not more than 45 days after the Delivery Date. In the case of any Special Meeting, (a) the notice of meeting shall describe any business that the Board of Directors shall have theretofore determined to bring before the Special Meeting and (b) in the case of a Demand Special Meeting, the notice of meeting (i) shall describe any business set forth in the statement of purpose of the demands received by the corporation in accordance with Section 3 of this Article I and (ii) shall contain all of the information required in the notice received by the Corporation in accordance with Section 10(b) of this Article I. The business transacted at all Special Meetings shall be confined to the purpose or purposes stated in the notice. The written notice of any meeting at which a plan of merger or exchange is to be considered shall so state such as a purpose of the meeting. A copy or short description of the plan of merger or exchange shall be included in or enclosed with such notice.

     Section 5. Waiver of Notice. Notice of any Annual Meeting or Special Meeting may be waived by any shareholder either before, at or after such meeting orally or in a writing signed by such shareholder or a representative entitled to vote the shares of such shareholder. A shareholder, by his or her attendance at any meeting of shareholders, shall be deemed to have waived notice of such meeting, except where the shareholder objects at the beginning of the meeting to the transaction of business because the item may not lawfully be considered at that meeting and does not participate in the consideration of the item at that meeting.

     Section 6. Voting. At each meeting of the shareholders every shareholder having the right to vote shall be entitled to vote either in person or by proxy. Each shareholder, unless the Articles of Incorporation or statute provide otherwise, shall have one vote for each share having voting power registered in such shareholder’s name on the books of the Corporation. Jointly owned shares may be voted by any joint owner unless the Corporation receives written notice from any one of them denying the authority of that person to vote those shares. Upon the demand of any shareholder, the vote upon any question before the meeting shall be by ballot. All questions shall be decided by a majority vote of the number of shares entitled to vote and represented at the meeting at the time of the vote except if otherwise required by statute, the Articles of Incorporation, or these By-Laws.

     Section 7. Record Date. The Board of Directors may fix a time, not exceeding 60 days preceding the date of any meeting of shareholders, as a record date for the determination of the shareholders entitled to notice of, and to vote at, such meeting (“Meeting Record Date”),

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notwithstanding any transfer of shares on the books of the Corporation after any record date so fixed. If the Board of Directors fails to fix a Meeting Record Date, then the Meeting Record Date shall be the 20^th day preceding the date of such meeting. Notwithstanding the foregoing, in the case of any Demand Special Meeting, (a) the Meeting Record Date shall not be later than the 30^th day after the Delivery Date and (b) if the Board of Directors fails to fix the Meeting Record Date within 30 days after the Delivery Date, then the close of business on such 30^th day shall be the Meeting Record Date.

     Section 8. Quorum, Adjourned Meetings. The presence, in person or by proxy, of the holders of a majority of the shares entitled to vote at the meeting shall constitute a quorum for the transaction of business. In case a quorum shall not be present at a meeting, those present may adjourn to such day as they shall, by majority vote, agree upon, and a notice of such adjournment shall be mailed to each shareholder entitled to vote at least five days before such adjourned meeting. If a quorum is present, a meeting may be adjourned without notice other than announcement at the meeting (a) at any time upon a resolution of shareholders by majority vote or (b) at any time prior the transaction of any business at such meeting, by the Chairman of the Board of Directors or pursuant to a resolution of the Board of Directors. At adjourned meetings at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. If a quorum is present, the shareholders may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum.

     Section 9. Written Action. Any action which might be taken at a meeting of the shareholders may be taken without a meeting if done in writing and signed by all of the shareholders entitled to vote on that action.

     Section 10. Notice of Shareholder Business and Nomination of Directors.

     (a) Annual Meetings.

     (i) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an Annual Meeting (A) pursuant to the Corporation’s notice of meeting, (B) by or at the direction of the Board of Directors or (C) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this By-Law and who is entitled to vote at the meeting and complies with the notice procedures set forth in this Section 10.

     (ii) For nominations or other business to be properly brought before an Annual Meeting by a shareholder pursuant to clause (C) of paragraph (a)(i) of this Section 10, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice shall be received by the Secretary of the Corporation at the principal offices of the Corporation not less than 45 days nor more than 70 days prior to the first annual anniversary of the date set forth in the Corporation’s proxy statement for the immediately preceding Annual Meeting as the date on which the Corporation first mailed definitive proxy materials for the immediately preceding Annual Meeting (the “Anniversary Date”); provided, however, that in the event that the date for which the Annual Meeting is called is advanced by more than 30 days or delayed by more

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than 30 days from the first annual anniversary of the immediately preceding Annual Meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 100^th day prior to the date of such Annual Meeting and not later than the later of (A) the 75^th day prior to the date of such Annual Meeting or (B) the 10^th day following the day on which public announcement of the date of such Annual Meeting is first made. In no event shall the announcement of an adjournment of an Annual Meeting commence a new time period for the giving of a shareholder notice as described above. Such shareholder’s notice shall be signed by the shareholder of record who intends to make the nomination or introduce the other business (or his duly authorized proxy or other representative), shall bear the date of signature of such shareholder (or proxy or other representative) and shall set forth: (A) the name and address, as they appear on the Corporation’s books, of such shareholder and the beneficial owner or owners, if any, on whose behalf the nomination or proposal is made; (B) the class and number of shares of the Corporation which are beneficially owned by such shareholder or beneficial owner or owners; (C) a representation that such shareholder is a holder of record of shares of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to make the nomination or introduce the other business specified in the notice; (D) in the case of any proposed nomination for election or re-election as a director, (I) the name and residence address of the person or persons to be nominated, (II) a description of all arrangements or understandings between such shareholder or beneficial owner or owners and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by such shareholder, (III) such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations of proxies for elections of directors, or would be otherwise required to be disclosed, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including any information that would be required to be included in a proxy statement filed pursuant to Regulation 14A had the nominee been nominated by the Board of Directors and (IV) the written consent of each nominee to be named in a proxy statement and to serve as a director of the Corporation if so elected; and (E) in the case of any other business that such shareholder proposes to bring before the meeting, (I) a brief description of the business desired to be brought before the meeting and, if such business includes a proposal to amend these By-Laws, the language of the proposed amendment, (II) such shareholder’s and beneficial owner’s or owners’ reasons for conducting such business at the meeting and (III) any material interest in such business of such shareholder and beneficial owner or owners.

     (iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 10 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 45 days prior to the Anniversary Date, a shareholder’s notice required by this Section 10 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary at the principal offices of the Corporation not later than the close of business on the 10^th day following the day on which such public announcement is first made by the Corporation.

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     (b) Special Meetings. The business transacted at a Special Meeting shall be limited to the purposes stated in the notice of the Special Meeting sent to shareholders pursuant to Section 4 of this Article I. Nominations of persons for election to the Board of Directors may be made at a Special Meeting at which directors are to be elected pursuant to such notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Corporation who (A) is a shareholder of record at the time of giving of such notice of meeting, (B) is entitled to vote at the meeting and (C) complies with the notice procedures set forth in this Section 10. Any shareholder desiring to nominate persons for election to the Board of Directors at such a Special Meeting shall cause a written notice to be received by the Secretary of the Corporation at the principal offices of the Corporation not earlier than 90 days prior to such Special Meeting and not later than the close of business on the later of (x) the 60^th day prior to such Special Meeting and (y) the 10^th day following the day on which public announcement is first made of the date of such Special Meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. Such written notice shall be signed by the shareholder of record who intends to make the nomination (or his duly authorized proxy or other representative), shall bear the date of signature of such shareholder (or proxy or other representative) and shall set forth: (A) the name and address, as they appear on the Corporation’s books, of such shareholder and the beneficial owner or owners, if any, on whose behalf the nomination is made; (B) the class and number of shares of the Corporation which are beneficially owned by such shareholder or beneficial owner or owners; (C) a representation that such shareholder is a holder of record of shares of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to make the nomination specified in the notice; (D) the name and residence address of the person or persons to be nominated; (E) a description of all arrangements or understandings between such shareholder or beneficial owner or owners and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by such shareholder; (F) such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations of proxies for elections of directors, or would be otherwise required to be disclosed, in each case pursuant to Regulation 14A under the Exchange Act, including any information that would be required to be included in a proxy statement filed pursuant to Regulation 14A had the nominee been nominated by the Board of Directors; and (G) the written consent of each nominee to be named in a proxy statement and to serve as a director of the Corporation if so elected.

     (c) General.

     (i) Only persons who are nominated in accordance with the procedures set forth in this Section 10 shall be eligible to serve as directors. The Board of Directors, or a nominating committee duly appointed by the Board of Directors, shall have the sole authority to designate candidates to be nominated by management for election as directors of the Corporation. Only such business shall be conducted at an Annual Meeting or Special Meeting as shall have been brought before such meeting in accordance with the procedures set forth in this Section 10. The chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 10 and, if any proposed nomination or business is not in compliance with this Section 10, to declare that such defective proposal shall be disregarded.

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     (ii) For purposes of this Section 10, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

     (iii) Notwithstanding the foregoing provisions of this Section 10, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 10. Nothing in this Section 10 shall be deemed to limit the Corporation’s obligation to include shareholder proposals in its proxy statement if such inclusion is required by Rule 14a-8 under the Exchange Act.

ARTICLE II
Directors

     Section 1. General Powers; Number of Directors; Classification. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, except as otherwise permitted by statute. The Board of Directors has been divided into three classes, as nearly equal in number as may be, with the terms of office for each class staggered so that the term for only one class expires each year.

     Section 2. Tenure. At each Annual Meeting, the shareholders shall elect directors to fill the vacancies of such directors whose terms have expired. Each newly elected director shall hold office for a term expiring at the third succeeding Annual Meeting or until his successor is elected and qualifies.

     Section 3. Vacancies. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors or by election at a meeting of shareholders. Any director who is elected to fill a vacancy by the remaining directors shall be required to stand for election at the next Annual Meeting or Special Meeting, regardless of whether the class of directors into which such director has been placed will otherwise be elected at such meeting.

     Section 4. Board Meetings. Meetings of the Board of Directors may be held from time to time at such time and place within or without the State of Minnesota as may be designated in the notice of such meeting.

     Section 5. Notice. The Board of Directors shall meet each year immediately after the Annual Meeting, at the same place as the Annual Meeting. No notice of any kind to either old or new members shall be necessary for such annual meeting or for any regular meeting of the directors fixed from time to time by resolution of a majority of the Board of Directors. Other meetings of the Board of Directors may be held upon 48 hours’ written notice of the date, time and place of the meeting upon the call of the Chairman of the Board, Chief Executive Officer, President or any director. Neither the business to be transacted at, nor the purpose of, any meeting need be specified in the notice of such meeting. Notice of an adjourned meeting of the Board of Directors need not be given other than by announcement at the meeting at which adjournment is taken.

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     Section 6. Waiver of Notice. Notice of any meeting of the Board of Directors may be waived by any director either before, at, or after such meeting orally or in a writing signed by such director. A director, by his or her attendance at any meeting of the Board of Directors, shall be deemed to have waived notice of such meeting, except where the director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting.

     Section 7. Quorum; Act of the Board. A majority of the directors holding office immediately prior to a meeting of the Board of Directors shall constitute a quorum for the transaction of business at such meeting; provided, however, that if any vacancies exist for any reason, the remaining directors shall constitute a quorum for the filling of such vacancies. Except as otherwise provided in these By-Laws, the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors.

     Section 8. Absent Directors. A director may give advance written consent or opposition to a proposal to be acted on at a meeting of the Board of Directors. If such director is not present at the meeting, consent or opposition to a proposal does not constitute presence for purposes of determining the existence of a quorum, but consent or opposition shall be counted as a vote in favor of or against the proposal and shall be entered in the minutes or other record of action at the meeting, if the proposal acted on at the meeting is substantially the same or has substantially the same effect as the proposal to which the director has consented or objected.

     Section 9. Electronic Communications. Any or all directors may participate in any meeting of the Board of Directors, or of any duly constituted committee thereof, by any means of communication through which the directors may simultaneously hear each other during such meeting. For the purposes of establishing a quorum and taking any action at the meeting, such directors participating pursuant to this Section 9 shall be deemed present in person at the meeting, and the place of the meeting shall be the place of origination of the conference communication.

     Section 10. Removal of Directors.

     (a) A director may be removed by the Board of Directors at any time, but only with good cause shown therefor, if (i) the director was appointed by the Board of Directors to fill a vacancy and shareholders have not since such appointment elected directors in such director’s class; and (ii) a majority of the other directors present affirmatively vote to remove the director.

     (b) Any one or all of the directors may be removed with good cause shown therefor, at any meeting of the shareholders called for that purpose, by the affirmative vote of 60% of the voting power of the shares entitled to vote provided that removal is not opposed by more than 25% of the voting power of the shares entitled to vote.

     (c) “Good cause” for the purpose of this Section 10 shall mean (i) conviction of a crime involving moral turpitude, (ii) dishonesty in dealings with the Corporation or with respect to its assets or (iii) engaging in competition, directly or indirectly, with the Corporation, usurping any corporate opportunity or advantage or knowingly violating Section 302A.255 of Minnesota Statutes, as amended, with respect to director conflicts of interest, without the prior consent of the Board of Directors after complete disclosure of all material facts with respect thereto.

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     (d) This Section 10 may be amended or repealed at any Annual Meeting or Special Meeting by the affirmative vote of the holders of 60% of the voting power of all shareholders entitled to vote, provided such amendment or repeal shall not receive the negative vote of the holders of more than 25% of the voting power of all shareholders entitled to vote.

     Section 11. Committees.

     (a) A resolution approved by the affirmative vote of a majority of the Board of Directors may establish committees having the authority of the Board in the management of the business of the Corporation to the extent provided in the resolution. Except as otherwise provided in these By-Laws, a committee shall consist of one or more persons, who need not be directors, appointed by affirmative vote of a majority of the directors present. Except as otherwise provided in these By-Laws, committees are subject to the direction and control of, and vacancies in the membership thereof shall be filled by, the Board of Directors.

     (b) Except as otherwise provided in these By-Laws, a majority of the members of the committee present at a meeting is a quorum for the transaction of business, unless a larger or smaller proportion or number is provided in a resolution approved by the affirmative vote of a majority of the directors present.

     Section 12. Committee of Disinterested Persons.

     (a) The Board of Directors may establish a committee composed of two or more disinterested directors or other disinterested persons to determine whether it is in the best interests of the Corporation to pursue a particular legal right or remedy of the Corporation and whether to cause the dismissal or discontinuance of a particular proceeding that seeks to assert a right or remedy on behalf of the Corporation.

     (b) For purposes of this Section 12, a director or other person is “disinterested” if the director is not the owner of more than one percent of the outstanding shares of, or a present or former officer, employee or agent of, the Corporation or of a related corporation and has not been made or threatened to be made a party to the proceeding in question.

     (c) The committee, once established, is not subject to direction, control, or termination by the Board of Directors. A vacancy on the committee may be filled by a majority vote of the remaining members. The good faith determinations of the committee are binding upon the Corporation and its directors, officers and shareholders. The committee’s existence shall terminate upon issuance of the final written report of its determinations.

     (d) A disinterested person appointed to a committee so established is deemed to be a director for the period of existence of the committee but has no power to act as a director except in conjunction with the activities of the committee.

     Section 13. Executive Committee. The Board of Directors may by resolution or resolutions, passed by a majority of the total number of directors, designate an Executive Committee of three or more directors, one of whom shall be the Chief Executive Officer of the Corporation and at least one of whom shall be independent of management. In the event of an emergency, if one or

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more of the members is absent, any of the remaining independent directors shall be an alternative member for each member so absent, chosen by the length of service on the Board of Directors. The Board of Directors shall designate one member of the Executive Committee as Chairman. The Executive Committee shall exercise all other powers of the Board of Directors between the meetings of the Board of Directors; provided, however, that the Executive Committee shall not have the power to fill vacancies in the Board of Directors and in its own membership; provided further, that the Executive Committee shall not have authority to alter or amend these By-Laws. The Board of Directors shall have the power at any time to change the membership of or to dissolve the Executive Committee. The Executive Committee shall take no action except by unanimous approval of all its members. The Executive Committee shall meet at the request of the Chairman or any member with proper notice. In an emergency, any member of the Board of Directors or any officer of the Corporation may call a meeting of the Executive Committee. Regular minutes will be kept of Executive Committee proceedings and shall be reported at the next following meeting of the Board of Directors; such report shall become a part of the record to which such report is presented.

     Section 14. Written Action. Any action which might be taken at a meeting of the Board of Directors, or any duly constituted committee thereof, may be taken without a meeting if done in writing and signed by a majority of the directors or committee members, unless the Articles of Incorporation provide otherwise and the action need not be approved by the shareholders.

     Section 15. Compensation. The Board of Directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members shall have authority to establish reasonable compensation of all directors for service to the Corporation as directors, officers or otherwise.

ARTICLE III
Officers

     Section 1. Number of Officers. The officers of the Corporation shall consist of a Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Secretary, Treasurer, and such other officers and assistant officers and agents as may be elected or appointed by the Board of Directors from time to time. Any number of offices may be held by the same person.

     Section 2. Election and Term of Office. At the first meeting of the Board of Directors held after each Annual Meeting, the Board of Directors shall elect or appoint, by resolution approved by the affirmative vote of a majority of the directors present, from within or without their number, the Chairman of the Board, Chief Executive Officer, President and Chief Financial Officer and such other officers as may be deemed advisable, each of whom shall have the powers, rights, duties and responsibilities provided for in these By-Laws or a resolutions of the Board of Directors not inconsistent therewith. In the absence of an election or appointment of a Chief Executive Officer or Chief Financial Officer by the Board of Directors, the person or persons exercising the principal functions of those offices are respectively deemed to have been elected to those offices. Each officer shall hold office until his successor shall have been duly elected or appointed or until his prior death, resignation or removal.

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     Section 3. Removal and Vacancies. Any officer may be removed from his or her office by the Board of Directors at any time, with or without cause. Such removal, however, shall be without prejudice to the contract rights of the officer so removed. If there be a vacancy among the officers of the Corporation by reason of death, resignation or otherwise, such vacancy shall be filled for the unexpired term by the Board of Directors.

     Section 4. Chairman of the Board. The Chairman of the Board of Directors shall preside at all meetings of shareholders and directors and shall perform such other duties as may be prescribed from time to time by the Board of Directors.

     Section 5. Chief Executive Officer. The Chief Executive Officer shall:

     (a) Have general active management of the business of the Corporation;

     (b) In the absence of the Chairman of the Board, preside at all meetings of the Board of Directors and the shareholders;

     (c) See that all orders and resolutions of the Board of Directors are carried into effect;

     (d) Perform such duties as may be prescribed, from time to time, by the Board of Directors; and

     (e) Render to the Board of Directors, whenever requested, an account of all transactions by the Chief Executive Officer.

     Section 6. President. The President shall:

     (a) Perform such duties as may be prescribed, from time to time, by the Board of Directors or by the Chief Executive Officer; and

     (b) Render to the Chief Executive Officer or the Board of Directors, whenever requested, an account of all transactions by the President.

     Section 7. Chief Financial Officer. The Chief Financial Officer shall:

     (a) Keep accurate financial records for the Corporation;

     (b) Deposit all money, drafts, and checks in the name of and to the credit of the Corporation in the banks and depositories designated by the Board of Directors;

     (c) Endorse for deposit all notes, checks, and drafts received by the Corporation as ordered by the Board of Directors, making proper vouchers therefor;

     (d) Disburse corporate funds and issue checks and drafts in the name of the Corporation, as ordered by the Board of Directors;

     (e) Perform such duties as may be prescribed, from time to time, by the Board of Directors or by the Chief Executive Officer; and

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     (f) Render to the Chief Executive Officer or the Board of Directors, whenever requested, an account of all transactions by the Chief Financial Officer and of the financial condition of the Corporation.

     Section 8. Treasurer. The Treasurer shall:

     (a) Perform such duties as may be prescribed, from time to time, by the Board of Directors, the Chief Executive Officer or the Chief Financial Officer; and

     (b) Render to the Chief Financial Officer, the Chief Executive Officer or the Board of Directors, whenever requested, an account of all transactions by the Treasurer.

     Section 9. Vice President. Each Vice President shall perform such duties as may be prescribed, from time to time, by the Board of Directors or the Chief Executive Officer.

     Section 10. Secretary. The Secretary shall give proper notice of meetings of shareholders and Board of Directors and other notices required by law or by these By-Laws. He shall attend all meetings of the shareholders and Board of Directors and shall maintain records of, and, whenever necessary, certify all proceedings of the shareholders and Board of Directors. He shall also perform such duties as may be prescribed, from time to time, by the Board of Directors or the Chief Executive Officer.

     Section 11. Contracts. All contracts, deeds, mortgages, bonds, notes, checks, conveyances and other instruments shall be executed on behalf of the Corporation by the Chairman of the Board, any Vice Chairman of the Board, the Chief Executive Officer, the President, any Chief Operating Officer, the Chief Financial Officer or any Vice President, or by such other persons as may be designated or authorized, from time to time, by the Board of Directors or the Chief Executive Officer.

     Section 12. Compensation. The officers of this Corporation shall receive such compensation for their services as may be determined, from time to time, by a resolution of the Board of Directors.

ARTICLE IV
Capital Stock

     Section 1. Certificates for Shares. All shares of the Corporation shall be certificated shares. Every owner of shares of the Corporation shall be entitled to a certificate, to be in such form as shall be prescribed by the Board of Directors, certifying the number of shares of the Corporation owned by such shareholder. The certificates for such shares shall be numbered in the order in which they shall be issued and shall be signed, in the name of the Corporation, by the Chairman, Chief Executive Officer or President and by the Chief Financial Officer, Treasurer or Secretary of the Corporation or by such officers as the Board of Directors may designate. If the certificate is signed by a transfer agent or registrar, such signatures of the corporate officers may be by facsimile if authorized by the Board of Directors. Every certificate surrendered to the Corporation for exchange or transfer shall be canceled, and no new certificate or certificates shall be issued in exchange for

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any existing certificate until such existing certificate shall have been so canceled, except in cases provided for in Section 4 of this Article IV.

     Section 2. Issuance of Shares. The Board of Directors is authorized to cause to be issued shares of the Corporation up to the full amount authorized by the Articles of Incorporation in such amounts as may be determined by the Board of Directors and as may be permitted by law. No shares shall be allotted except in consideration of cash or other property, tangible or intangible, received or to be received by the Corporation under a written agreement, of services rendered or to be rendered to the Corporation under a written agreement, or of an amount transferred from surplus to stated capital upon a share dividend. At the time of such allotment of shares, the Board of Directors making such allotments shall state, by resolution, their determination of the fair value to the Corporation in monetary terms of any consideration other than cash for which shares are allotted.

     Section 3. Transfer of Shares. Transfer of shares on the books of the Corporation may be authorized only by the shareholder named in the certificate, or the shareholder’s legal representative, or the shareholder s duly authorized attorney-in-fact, and upon surrender of the certificate or the certificates for such shares. The Corporation may treat as the absolute owner of shares of the Corporation, the person or persons in whose name shares are registered on the books of the Corporation.

     Section 4. Loss of Certificates. Except as otherwise provided by Minnesota Statutes Section 302A.419, any shareholder claiming a certificate for shares to be lost, stolen or destroyed shall make an affidavit or that fact in such form as the Board of Directors shall require and shall, if the Board of Directors so requires, give the Corporation a bond of indemnity in form, in an amount, and with one or more sureties satisfactory to the Board of Directors, to indemnify the Corporation against any claim which may be made against it on account of the reissue of such certificate, whereupon a new certificate may be issued in the same tenor and for the same number of shares as the one alleged to have been lost, stolen or destroyed.

     Section 5. Stock Regulations. The Board of Directors shall have the power and authority to make all such further rules and regulations not inconsistent with the Minnesota Statutes as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation.

     Section 6. [Intentionally omitted.]

     Section 7. Definitions. (Adopted on October 18, 1985.) The following definitions shall apply herein:

     (a) “Acquiring person” means a person, corporation or other entity proposing to make a control share acquisition, but does not include a licensed broker/dealer or underwriter who (i) purchases shares of the Corporation solely for purposes of resale to the public, and (ii) is not acting in concert with an acquiring person.

     (b) “Beneficial owner” includes, but is not limited to, any person who directly or indirectly through any contract, arrangement, understanding, relationship, or otherwise has or shares the power to vote or direct the voting of any shares of the Corporation and the power to dispose of,

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or direct the disposition of, such shares. “Beneficial ownership” includes, but is not limited to, the right, exercisable within 60 days, to acquire securities through the exercise of options, warrants, or rights or the conversion of convertible securities, or otherwise. The shares subject to these options, warrants, rights, or conversion privileges held by a person shall be deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by this person, but shall not be deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person. A person is the beneficial owner of securities beneficially owned by any relative or spouse or relative of the spouse residing in the home of this person, any trust or estate in which this person owns ten percent or more of the total beneficial interest or serves as trustee or executor, any corporation or entity in which this person owns ten percent or more of the equity, and any affiliate or associate of this person.

     (c) “Control share acquisition” means an acquisition of shares of the Corporation resulting in beneficial ownership by an acquiring person of a new range of voting power specified in Section 8(d), but does not include any of the following:

(1)	an acquisition before, or pursuant to an agreement entered into before, the date of adoption of this section of Article IV of the By-Laws;
(2)	an acquisition by a donee pursuant to an inter vivos gift not made to avoid the provisions of Sections 7 through 14 of Article IV or by a distributee as defined in Minn. Stat. Section 524.2-201, clause (10);
(3)	an acquisition pursuant to a security agreement not created to avoid the provisions of Sections 7 through 14 of Article IV;
(4)	an acquisition of shares of the Corporation pursuant to a merger or exchange of shares, if the Corporation is a party to the transaction; or
(5)	an acquisition of shares from the Corporation.

     Section 8. Information Statement. (Adopted on October 18, 1985.) An acquiring person shall deliver to the Corporation at its principal executive office an information statement containing all of the following:

     (a) The identity of the acquiring person;

     (b) a reference that the statement is made under this section of the By-Laws;

     (c) the number of shares of the Corporation beneficially owned by the acquiring person;

     (d) a specification of which of the following ranges of voting power in the election of directors would result from consummation of the control share acquisition:

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(1)	at least 20 percent but less than 33-1/3 percent;
(2)	at least 33-1/3 percent but not more than 50 percent; and
(3)	over 50 percent.

     (e) the terms of the proposed control share acquisition, including, but not limited to, the source of funds or other consideration and the material terms of the financial arrangements for the control share acquisition, plans or proposals of the acquiring person to liquidate the Corporation, to sell all or substantially all of its assets, or merge it or exchange its shares with any other person, to change the location of its principal executive office or of a material portion of its business activities, to change materially its management or policies of employment, to alter materially its relationship with suppliers or customers or the communities in which it operates, or make any other material change in its business, corporate structure, management or personnel, and such other objective facts as would be substantially likely to affect the decision of a shareholder with respect to voting on the proposed control share acquisition.

     Section 9. Special Meeting. (Adopted on October 18, 1985.) Within 5 days after receipt of an information statement pursuant to Section 8, the Corporation shall call a special meeting of the shareholders to vote on the proposed control share acquisition. The meeting shall be held no later than 55 days after receipt by the Corporation of the information statement, unless the acquiring person agrees to a later date, and no sooner than 30 days after receipt of the information statement, if the acquiring person so requests in writing when delivering the information statement. The notice of the meeting shall be, at a minimum, accompanied by a copy of the information statement and a statement disclosing that the Board of Directors of the Corporation (i) recommends acceptance of, (ii) expresses no opinion and is remaining neutral toward, (iii) recommends rejection of, or (iv) is unable to take a position with respect to, the proposed control share acquisition. The notice of meeting shall be given within 20 days after receipt of the information statement.

     Section 10. Consummation of Acquisition. (Adopted on October 18, 1985.) The acquiring person may consummate the proposed control share acquisition if and only if both of the following occur:

     (a) the proposed control share acquisition is approved by the affirmative vote of the holders of a majority of the voting power of all shares entitled to vote under applicable Minnesota law; and

     (b) the proposed control share acquisition is consummated within 180 days after shareholder approval.

     Section 11. Failure to Comply. (Adopted on October 18, 1985.) All shares of the Corporation acquired by an acquiring person in violation of Section 10 shall be: (a) denied voting rights for one year after acquisition; (b) nontransferable on the books of the Corporation for one year after acquisition; and (c) subject to the Corporation’s option, during such one-year period, to call the shares for redemption at the price at which the shares were acquired. Such redemption shall occur on the date set in the call notice, which shall not be later than 60 days after the call notice is given.

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     Section 12. Proxy Solicitation. (Adopted on October 18, 1985.) Notwithstanding any contrary provision of these By-Laws, a proxy relating to a meeting of shareholders required under Section 9 of this Article IV must be solicited separately from the offer to purchase or solicitation of an offer to sell shares of the Corporation. Except for irrevocable proxies appointed in the regular course of business and not in connection with a control share acquisition, all proxies appointed for or in connection with the shareholder authorization of a control share acquisition pursuant Sections 7 through 14 of Article IV shall be at all times terminable at will prior to the obtaining of the shareholder authorization, whether or not the proxy is coupled with an interest. Without affecting any vote previously taken, the proxy may be terminated in any manner permitted by Minnesota statutes or by giving oral notice of the termination in the open meeting of shareholders held pursuant to Section 9 hereof. The presence at a meeting of the person appointing a proxy does not revoke the appointment.

     Section 13. Amendments or Repeal. (Adopted on October 18, 1985.) Notwithstanding any contrary provision of these By-Laws, the provisions of Sections 7 through 14 of this Article may be amended or repealed by the shareholders only by the affirmative vote of the holders of 85% of each class of shares of the Corporation entitled to exercise the voting power of the Corporation; provided, however, that if no person holds more than twenty percent (20%) of the Voting Shares and there is no control share acquisition of which the Board of Directors has credible notice, the necessary vote for amendment or repeal may be reduced by the Board of Directors to not less than a majority of the outstanding shares in each class; and provided further that no amendment or repeal of Sections 7 through 14 of this Article adopted after the notice to shareholders referred to in Section 9 herein is given shall affect the rights of any shareholder under said Sections 7 through 14.

     Section 14. Dissenting Shareholders. (Adopted on October 18, 1985.) Shareholders dissenting from a control share acquisition for which approval of shareholders is sought shall have the right to obtain fair value of their shares, pursuant to the provisions of Minnesota Statutes 302A.473 (1985), as amended.

ARTICLE V
Dividends

     Section 1. Dividends. Subject to the provisions of the Articles of Incorporation, of these By-Laws, and of law, the Board of Directors may declare dividends whenever, and in such amounts as, in its opinion, are deemed advisable.

     Section 2. Record Date. Subject to any provisions of the Articles of Incorporation, the Board of Directors may fix a date not exceeding 120 days preceding the date fixed for the payment of any dividend as the record date for the determination of the shareholders entitled to receive payment of the dividend and, in such case, only shareholders of record on the date so fixed shall be entitled to receive payment of such dividend notwithstanding any transfer of shares on the books of the Corporation after the record date. The Board of Directors may close the books of the Corporation against the transfer of shares during the whole or any part of such period.

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ARTICLE VI
Miscellaneous

     Section 1. Seal. The corporate seal, if any, shall be circular in form and have inscribed thereon the name of the Corporation, the State in which it is incorporated and the words “corporate seal.”

     Section 2. Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors.

ARTICLE VII
Indemnification of Certain Persons

     Section 1. General. The Corporation shall indemnify such persons, for such expenses and liabilities, in such manner, under such circumstances, and to such extent as permitted by Minnesota Statutes Section 302A.521, as now enacted or hereafter amended.

     Section 2. Insurance. The Corporation may purchase and maintain insurance on behalf of any person in such person’s official capacity against any liability asserted against and incurred by such person in or arising from that capacity, whether or not the Corporation would otherwise be required to indemnify the person against the liability.

ARTICLE VIII
Amendments

     These By-Laws may be altered, amended or repealed by a vote of the majority of the whole Board of Directors at any meeting. Such authority of the Board of Directors is subject to the power of the shareholders to change or repeal such By-Laws by a majority vote of the shareholders present or represented at any Annual Meeting or Special Meeting called for such purpose. The Board of Directors shall not adopt, amend or repeal any By-Law fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the Board of Directors, or fixing the number of directors or their classifications, qualifications, or terms of office, except that the Board of Directors may adopt or amend by unanimous action any By-Law to increase the number of directors.

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EX-15

Exhibit 15

Pentair, Inc.
5500 Wayzata Boulevard
Suite 800
Golden Valley, Minnesota

We have performed a review, in accordance with the standards of the Public Company Accounting Oversight Board (United States), of the unaudited interim financial information of Pentair, Inc. and Subsidiaries (the “Company”) for the periods ended March 31, 2007 and April 1, 2006, as indicated in our report dated May 4, 2007; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, is incorporated by reference in Registration Statement Nos. 33-38534, 33-45012, 333-12561, 333-62475, 333-75166, 333-115429, 333-115430, 333-115432 and 333-126693.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statements prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

DELOITTE & TOUCHE LLP

Minneapolis, Minnesota
May 4, 2007

EX-31.1

Exhibit 31.1

Certification

I, Randall J. Hogan, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Pentair, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2007	/s/ Randall J. Hogan
	Randall J. Hogan
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, John L. Stauch, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Pentair, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2007	/s/ John L. Stauch
	John L. Stauch
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of CEO Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report of Pentair, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Randall J. Hogan, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 4, 2007	/s/ Randall J. Hogan
	Randall J. Hogan
	Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of CFO Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report of Pentair, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John L. Stauch, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 4, 2007	/s/ John L. Stauch
	John L. Stauch
	Executive Vice President and Chief Financial Officer