EX-99.4 6 dex994.txt PRESS RELEASE DATED FEBRUARY 4, 2004 ANNOUNCING EARNINGS EXHIBIT 99.4 PENTAIR, INC. 5500 Wayzata Blvd., Suite 800 Golden Valley, MN 55416 763 545 1730 Tel 763 656 5204 Fax NEWS RELEASE [LOGO OF PENTAIR, INC.] Pentair's Fourth Quarter 2003 EPS Rises 21 Percent to $0.69 as Sales and Profits Rise in the Water Technologies and Enclosures Groups Pentair Generates Record Free Cash Flow of $219 Million GOLDEN VALLEY, Minn. -- February 4, 2004 -- Pentair (NYSE: PNR) reported earnings per share (EPS) from continuing operations of $0.69 for the fourth quarter 2003, a 21 percent gain over fourth quarter 2002 EPS of $0.57. Sales for the fourth quarter totaled $682.8 million, a seven percent gain over sales of $640.3 million in the same period in 2002. Operating income for the fourth quarter totaled $63.3 million, up 18 percent compared to $53.9 million in the same period last year. Pentair's net sales for 2003 totaled $2,724.4 million, up from the $2,580.8 million recorded in 2002. Operating income for the year totaled $259.6 million, versus $236.0 million in 2002. EPS from continuing operations in 2003 was $2.90, an 11 percent gain over 2002 EPS of $2.61. Full year free cash flow totaled $219.3 million, representing a 155 percent conversion of 2003 net income. "Pentair's fourth quarter 2003 performance reflected continued benefits flowing from our five operating initiatives together with an improving economic environment," said Randall J. Hogan, Pentair chairman and CEO. "The Water Technologies Group turned in a tremendous quarter with solid organic sales growth and a 39 percent profit gain over the fourth quarter of 2002. Our Enclosures Group delivered an outstanding performance with margins of 10.5 percent in the fourth quarter -- the Group's eighth consecutive quarter of margin improvement. Coupled with six percent organic sales growth, the margin gain resulted in the strongest Enclosures Group performance since the first quarter of 2001. Our Tools Group continued to battle through competitive market conditions, and it too realized a fourth quarter sales gain of nearly three percent." (more) -2- In the Water Technologies Group, fourth quarter 2003 sales of $252.3 million increased nine percent versus the same period last year, driven principally by pool equipment, residential and commercial pumps, filtration, and the European water business. Excluding the impact of currency translation, sales were up seven percent. Operating income of $32.3 million increased 39 percent over the same period last year, with pump margins increasing due to productivity improvements and material savings. The European water business also contributed stronger profits resulting from productivity improvements and the effects of currency translation. Margins in the Group were 12.8 percent, up 280 basis points from those of the same period last year. In the Enclosures Group, fourth quarter 2003 sales of $152.5 million were up 11 percent over the same period in 2002, or six percent excluding the impact of currency translation. The improved volume was driven by increased demand broadly spread across all electrical and electronic markets. Fourth quarter operating income of $16.0 million gained 69 percent over that of the previous year's fourth quarter, while margins increased 360 basis points to 10.5 percent. The Group's profit performance was driven by volume-related efficiencies and continued productivity improvements. In the Tools Group, the fourth quarter was the first quarter in 2003 in which sales, excluding the effect of acquisitions, improved year-over-year. Sales of $278.2 million in the quarter were up 3 percent compared to the fourth quarter of last year. Operating income for the Group totaled $19.5 million, 21 percent below that of the same period last year due to competitive marketplace pricing, expenses related to capacity reductions, and other one-time costs. The Group expects to improve sales and margins in 2004 by leveraging its brand strength, introducing innovative products, and improving cost productivity. Pentair reported a loss from discontinued operations of $0.06 per share for the fourth quarter and full year of 2003 due to a reduction in estimated proceeds related to exiting two remaining facilities associated with the fourth quarter 2001 disposal of Pentair's Equipment segment. There was no income or loss from discontinued operations in 2002. (more) -3- In a separate announcement, Pentair said it has entered into an agreement to acquire WICOR Industries, a subsidiary of Wisconsin Energy Corporation (NYSE: WEC) of Milwaukee, Wisconsin. WICOR, which manufactures water system, filtration, and pool equipment products under the Sta-Rite, SHURflo, and Hypro brands, is expected to generate sales of approximately $750 million in 2003 and employs 3,500 people in 24 locations worldwide. Pentair expects the WICOR acquisition to be accretive to earnings in the first 12 months of ownership. Pentair also announced that it is exploring strategic alternatives for its Tools Group businesses. "Our Water Technologies and Enclosures groups are performing well in an economy that seems to be gaining momentum," Hogan said. "Our acquisition of Everpure on December 31, 2003, has already reinforced our water filtration platform, and our planned acquisition of WICOR Industries will take Pentair's Water Technologies Group to an entirely new level of performance and profitability. Enclosures will continue to make the most of the sales gains it is capturing and this is expected to further enhance profitability. Meanwhile, the Tools Group is pursuing cost and productivity steps to strengthen its margins in 2004. "Before any impact from WICOR, we expect to continue driving earnings growth and forecast EPS in the range of $3.15 to $3.30 for 2004," Hogan added. "We expect an increase of about 15 percent in the first quarter 2004." A Pentair conference call scheduled for 9:00 a.m. CST today will be webcast live via http://www.pentair.com. The conference call, which can be found on the site's "Financial Information" page, will be archived at the same location. (more) -4- PENTAIR, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED YEAR ENDED -------------------------- -------------------------- DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 In thousands, except per-share data 2003 2002 2003 2002 --------------------------------------------- ----------- ----------- ----------- ----------- Net sales $ 682,846 $ 640,303 $ 2,724,365 $ 2,580,783 Cost of goods sold 509,594 486,556 2,045,327 1,965,076 ----------- ----------- ----------- ----------- Gross profit 173,252 153,747 679,038 615,707 % of net sales 25.4% 24.0% 24.9% 23.9% Selling, general and administrative 98,405 89,276 375,586 342,806 % of net sales 14.4% 13.9% 13.8% 13.3% Research and development 11,558 10,620 43,898 36,909 % of net sales 1.7% 1.7% 1.6% 1.4% ----------- ----------- ----------- ----------- Operating income 63,289 53,851 259,554 235,992 % of net sales 9.3% 8.4% 9.5% 9.1% Net interest expense 11,506 11,134 40,936 43,545 % of net sales 1.7% 1.7% 1.5% 1.7% ----------- ----------- ----------- ----------- Income from continuing operations before income taxes 51,783 42,717 218,618 192,447 % of net sales 7.6% 6.7% 8.0% 7.5% Provision for income taxes 17,606 14,632 74,330 62,545 Effective tax rate 34.0% 34.3% 34.0% 32.5% ----------- ----------- ----------- ----------- Income from continuing operations 34,177 28,085 144,288 129,902 Loss from discontinued operations, net of tax (2,936) -- (2,936) -- ----------- ----------- ----------- ----------- Net income $ 31,241 $ 28,085 $ 141,352 $ 129,902 =========== =========== =========== =========== EARNINGS PER COMMON SHARE BASIC Continuing operations $ 0.70 $ 0.57 $ 2.95 $ 2.64 Discontinued operations (0.06) -- (0.06) -- ----------- ----------- ----------- ----------- Basic earnings per common share $ 0.64 $ 0.57 $ 2.89 $ 2.64 =========== =========== =========== =========== DILUTED Continuing operations $ 0.69 $ 0.57 $ 2.90 $ 2.61 Discontinued operations (0.06) -- (0.06) -- ----------- ----------- ----------- ----------- Diluted earnings per common share $ 0.63 $ 0.57 $ 2.84 $ 2.61 =========== =========== =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic 48,963 49,305 48,938 49,235 Diluted 49,766 49,552 49,810 49,744 Cash dividends declared per common share $ 0.21 $ 0.19 $ 0.82 $ 0.74
(more) -5- PENTAIR, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
DECEMBER 31 DECEMBER 31 In thousands 2003 2002 ----------------------------------------------------------- ------------- ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 47,989 $ 39,648 Accounts and notes receivable, net 420,403 403,793 Inventories 285,577 293,202 Deferred income taxes 50,989 55,234 Prepaid expenses and other current assets 26,205 18,931 ------------- ------------- Total current assets 831,163 810,808 Property, plant and equipment, net 343,550 351,316 Goodwill 1,373,549 1,218,341 Other assets 235,113 133,985 ------------- ------------- Total assets $ 2,783,375 $ 2,514,450 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ -- $ 686 Current maturities of long-term debt 73,631 60,488 Accounts and notes payable 170,077 171,709 Employee compensation and benefits 84,587 84,965 Accrued product claims and warranties 37,148 36,855 Income taxes 13,198 12,071 Other current liabilities 120,521 109,426 ------------- ------------- Total current liabilities 499,162 476,200 Long-term debt 734,836 673,911 Pension and other retirement compensation 101,704 124,301 Post-retirement medical and other benefits 42,134 42,815 Deferred income taxes 78,532 31,728 Other noncurrent liabilities 65,529 59,771 ------------- ------------- Total liabilities 1,521,897 1,408,726 Shareholders' equity 1,261,478 1,105,724 ------------- ------------- Total liabilities and shareholders' equity $ 2,783,375 $ 2,514,450 ============= ============= Days sales in accounts receivable (13 month moving average) 56 59 Days inventory on hand (13 month moving average) 63 63 Days in accounts payable (13 month moving average) 51 53 Debt/total capital 39.1% 39.9%
(more) -6- PENTAIR, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
YEAR ENDED -------------------------- DECEMBER 31 DECEMBER 31 In thousands 2003 2002 -------------------------------------------------------------------------- ----------- ----------- OPERATING ACTIVITIES Net income $ 141,352 $ 129,902 Depreciation 61,129 58,833 Other amortization 4,514 5,869 Deferred income taxes 33,134 29,677 Stock compensation 306 -- Loss from discontinued operations 2,936 -- CHANGES IN ASSETS AND LIABILITIES, NET OF EFFECTS OF BUSINESS ACQUISITIONS Accounts and notes receivable 9,400 25,535 Inventories 25,782 29,717 Prepaid expenses and other current assets (4,491) 8,147 Accounts payable (15,530) (18,356) Employee compensation and benefits (6,423) 6,289 Accrued product claims and warranties (1,012) (1,704) Income taxes 2,349 5,863 Other current liabilities 4,845 (18,384) Pension and post-retirement benefits 5,621 (4,787) Other assets and liabilities (178) 10,667 ----------- ----------- Net cash provided by continuing operations 263,734 267,268 Net cash provided by (used for) discontinued operations (796) 3,526 ----------- ----------- Net cash provided by operating activities 262,938 270,794 INVESTING ACTIVITIES Capital expenditures (43,622) (33,744) Acquisition of previously leased facility -- (22,952) Proceeds (payments) from sale of businesses (2,400) 1,744 Acquisitions, net of cash acquired (229,094) (170,270) Equity investments (5,294) (9,383) Other 48 (7) ----------- ----------- Net cash used for investing activities (280,362) (234,612) FINANCING ACTIVITIES Net short-term (repayments) borrowings (873) 665 Proceeds from long-term debt 780,857 462,599 Repayment of long-term debt (709,886) (468,161) Proceeds from exercise of stock options 5,795 2,730 Repurchases of common stock (1,589) -- Dividends paid (40,494) (36,420) ----------- ----------- Net cash provided by (used for) financing activities 33,810 (38,587) Effect of exchange rate changes on cash (8,045) 2,209 ----------- ----------- Change in cash and cash equivalents 8,341 (196) Cash and cash equivalents, beginning of period 39,648 39,844 ----------- ----------- Cash and cash equivalents, end of period $ 47,989 $ 39,648 =========== =========== FREE CASH FLOW Net cash provided by operating activities $ 262,938 $ 270,794 Less capital expenditures (including buyout of synthetic lease) (43,622) (56,696) ----------- ----------- Free cash flow $ 219,316 $ 214,098 =========== ===========
(more) -7- PENTAIR, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION BY REPORTABLE BUSINESS SEGMENT (Unaudited)
FIRST QTR SECOND QTR THIRD QTR FOURTH QTR YEAR In thousands 2003 2003 2003 2003 2003 ------------------------------------------- ---------- ---------- --------- ---------- ----------- NET SALES TO EXTERNAL CUSTOMERS Water $ 246,440 $ 290,692 $ 270,901 $ 252,332 $ 1,060,365 Enclosures 139,453 145,236 146,233 152,494 583,416 Tools 251,765 283,416 268,028 278,169 1,081,378 Intersegment sales elimination (142) (355) (148) (149) (794) ---------- ---------- --------- ---------- ----------- Consolidated $ 637,516 $ 718,989 $ 685,014 $ 682,846 $ 2,724,365 ========== ========== ========= ========== =========== OPERATING INCOME (loss) Water $ 29,504 $ 46,002 $ 36,197 $ 32,259 $ 143,962 Enclosures 9,865 11,703 13,555 15,971 51,094 Tools 17,686 23,148 21,440 19,500 81,774 Other (4,867) (4,521) (3,447) (4,441) (17,276) ---------- ---------- --------- ---------- ----------- Consolidated $ 52,188 $ 76,332 $ 67,745 $ 63,289 $ 259,554 ========== ========== ========= ========== =========== OPERATING INCOME AS A PERCENT OF NET SALES Water 12.0% 15.8% 13.4% 12.8% 13.6% Enclosures 7.1% 8.1% 9.3% 10.5% 8.8% Tools 7.0% 8.2% 8.0% 7.0% 7.6% Consolidated 8.2% 10.6% 9.9% 9.3% 9.5%
FIRST QTR SECOND QTR THIRD QTR FOURTH QTR YEAR In thousands 2002 2002 2002 2002 2002 ------------------------------------------- ---------- ---------- --------- ---------- ----------- NET SALES TO EXTERNAL CUSTOMERS Water $ 211,411 $ 265,531 $ 223,637 $ 231,841 $ 932,420 Enclosures 139,560 138,814 139,932 137,726 556,032 Tools 252,092 303,771 265,732 270,736 1,092,331 Intersegment sales elimination -- -- -- -- -- ---------- ---------- --------- ---------- ----------- Consolidated $ 603,063 $ 708,116 $ 629,301 $ 640,303 $ 2,580,783 ========== ========== ========= ========== =========== OPERATING INCOME (loss) Water $ 29,747 $ 43,708 $ 29,969 $ 23,135 $ 126,559 Enclosures 4,608 6,995 8,884 9,455 29,942 Tools 16,686 30,837 25,479 24,596 97,598 Other (5,314) (6,948) (2,510) (3,335) (18,107) ---------- ---------- --------- ---------- ----------- Consolidated $ 45,727 $ 74,592 $ 61,822 $ 53,851 $ 235,992 ========== ========== ========= ========== =========== OPERATING INCOME AS A PERCENT OF NET SALES Water 14.1% 16.5% 13.4% 10.0% 13.6% Enclosures 3.3% 5.0% 6.3% 6.9% 5.4% Tools 6.6% 10.2% 9.6% 9.1% 8.9% Consolidated 7.6% 10.5% 9.8% 8.4% 9.1%
(more) -8- About Pentair, Inc. Pentair is a diversified operating company headquartered in Minnesota. Its Water Technologies Group is a global leader in providing innovative products and systems used worldwide in the movement, treatment, storage and enjoyment of water. Pentair's Enclosures group is a leader in the global enclosures market, serving industrial and electronic customers, and its Tools Group markets innovative products under established brand names to professionals and do-it-yourself users. Pentair's 2003 revenues totaled $2.7 billion. The company employs 12,000 people in more than 50 locations around the world. Any statements made about the company's anticipated financial results are forward-looking statements subject to risks and uncertainties such as continued economic growth; foreign currency effects; retail and industrial demand; product introductions; and pricing and other competitive pressures. Forward-looking statements included herein are made as of the date hereof and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. Contacts: Pentair: Mark Cain Tel. (763) 656-5278 E-mail: mark.cain@pentair.com