Financial Statements of Subsidiary Guarantors

6 Months Ended

Jun. 30, 2012

Financial Statements of Subsidiary Guarantors

16.   Financial Statements of Subsidiary Guarantors

Certain of the domestic subsidiaries (the “Guarantor Subsidiaries”) of Pentair, Inc. (the “Parent Company”), each of which is directly or indirectly wholly-owned by the Parent Company, jointly and severally, and fully and unconditionally, guarantee the Parent Company’s indebtedness under the Notes and the Credit Facility. The following supplemental financial information sets forth the Condensed Consolidated Statements of Income and Comprehensive Income (Loss), the Condensed Consolidated Balance Sheets, and the Condensed Consolidated Statements of Cash Flows for the Parent Company, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries, and total consolidated Pentair and subsidiaries. 

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income (Loss)

For the three months ended June 30, 2012

	Parent			Guarantor			Non-guarantor
In thousands	company			subsidiaries			subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	628,860		$	392,347		$	(79,682	)	$	941,525
Cost of goods sold		—			421,655			287,437			(79,695	)		629,397
Gross profit		—			207,205			104,910			13			312,128
Selling, general and administrative		11,905			85,781			75,746			13			173,445
Research and development		245			10,958			9,688			—			20,891
Operating income (loss)		(12,150	)		110,466			19,476			—			117,792
Earnings from investment in subsidiaries		(62,199	)		(527	)		600			62,126			—
Other (income) expense:
Equity income of unconsolidated subsidiaries		—			(636	)		—			—			(636)
Net interest (income) expense		(27,676	)		38,301			5,454			—			16,079
Income before income taxes and noncontrolling interest		77,725			73,328			13,422			(62,126	)		102,349
Provision for income taxes		5,895			23,935			(966	)		—			28,864
Net income before noncontrolling interest		71,830			49,393			14,388			(62,126	)		73,485
Noncontrolling interest		—			—			1,655			—			1,655
Net income attributable to Pentair, Inc.	$	71,830		$	49,393		$	12,733		$	(62,126	)	$	71,830
Comprehensive income (loss)	$	(10,207	)	$	22,945		$	(42,332	)	$	19,164		$	(10,430)
Less: Comprehensive income attributable to noncontrolling interest		—			—			(223	)		—			(223)
Comprehensive income (loss) attributable to Pentair, Inc.	$	(10,207	)	$	22,945		$	(42,109	)	$	19,164		$	(10,207)

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income (Loss)

For the six months ended June 30, 2012

	Parent			Guarantor			Non-guarantor
In thousands	company			subsidiaries			subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	1,186,928		$	778,524		$	(165,750	)	$	1,799,702
Cost of goods sold		—			807,713			564,599			(165,457	)		1,206,855
Gross profit		—			379,215			213,925			(293	)		592,847
Selling, general and administrative		28,789			174,144			145,815			(293	)		348,455
Research and development		468			21,568			19,612			—			41,648
Operating income (loss)		(29,257	)		183,503			48,498			—			202,744
Earnings from investment in subsidiaries		(115,592	)		(1,325	)		(364	)		117,281			—
Other (income) expense:
Equity income of unconsolidated subsidiaries		—			(1,544	)		(141	)		—			(1,685)
Net interest (income) expense		(56,710	)		76,484			11,073			—			30,847
Income before income taxes and noncontrolling interest		143,045			109,888			37,930			(117,281	)		173,582
Provision for income taxes		10,401			24,242			3,300			—			37,943
Net income before noncontrolling interest		132,644			85,646			34,630			(117,281	)		135,639
Noncontrolling interest		—			—			2,995			—			2,995
Net income attributable to Pentair, Inc.	$	132,644		$	85,646		$	31,635		$	(117,281	)	$	132,644
Comprehensive income (loss)	$	91,788		$	59,198		$	16,435		$	(73,613	)	$	93,808
Less: Comprehensive income attributable to noncontrolling interest		—			—			2,020			—			2,020
Comprehensive income (loss) attributable to Pentair, Inc.	$	91,788		$	59,198		$	14,415		$	(73,613	)	$	91,788

Pentair, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

June 30, 2012

In thousands	Parent company			Guarantor subsidiaries			Non-guarantor subsidiaries			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	6,135		$	14,339		$	40,124		$	—		$	60,598
Accounts and notes receivable, net		736			348,556			281,087			(58,235	)		572,144
Inventories		—			241,629			218,410			—			460,039
Deferred tax assets		130,151			40,698			12,674			(124,624	)		58,899
Prepaid expenses and other current assets		44,061			12,282			107,023			(39,021	)		124,345
Total current assets		181,083			657,504			659,318			(221,880	)		1,276,025
Property, plant and equipment, net		17,953			132,314			230,796			—			381,063
Other assets
Investments in/advances to subsidiaries		2,911,498			1,414,260			85,952			(4,411,710	)		—
Goodwill		—			1,330,265			924,869			—			2,255,134
Intangibles, net		—			243,431			327,072			—			570,503
Other		65,638			8,931			48,115			(19,140	)		103,544
Total other assets		2,977,136			2,996,887			1,386,008			(4,430,850	)		2,929,181
Total assets	$	3,176,172		$	3,786,705		$	2,276,122		$	(4,652,730	)	$	4,586,269
Liabilities and Shareholders’ Equity
Current liabilities
Short-term borrowings	$	—		$	—		$	222		$	—		$	222
Current maturities of long-term debt		—			—			1,193			—			1,193
Accounts payable		5,334			188,673			152,549			(58,291	)		288,265
Employee compensation and benefits		15,771			19,855			53,888			—			89,514
Current pension and post-retirement benefits		9,052			—			—			—			9,052
Accrued product claims and warranties		165			24,385			20,385			—			44,935
Income taxes		35,498			(1,801	)		(1,469	)		—			32,228
Accrued rebates and sales incentives		—			36,212			9,658			—			45,870
Other current liabilities		30,824			64,436			94,191			(39,014	)		150,437
Total current liabilities		96,644			331,760			330,617			(97,305	)		661,716
Other liabilities
Long-term debt		1,245,055			2,417,922			520,265			(2,949,448	)		1,233,794
Pension and other retirement compensation		185,513			(10,541	)		72,352			—			247,324
Post-retirement medical and other benefits		17,512			31,549			—			(19,140	)		29,921
Long-term income taxes payable		13,294			—			—			—			13,294
Deferred tax liabilities		—			229,962			84,835			(124,624	)		190,173
Due to (from) affiliates		(442,406	)		675,455			601,727			(834,776	)		—
Other non-current liabilities		58,771			1,323			32,081			—			92,175
Total liabilities		1,174,383			3,677,430			1,641,877			(4,025,293	)		2,468,397
Shareholders’ equity attributable to Pentair, Inc.		2,001,789			109,275			518,162			(627,437	)		2,001,789
Noncontrolling interest		—			—			116,083			—			116,083
Total shareholders’ equity		2,001,789			109,275			634,245			(627,437	)		2,117,872
Total liabilities and shareholders’ equity	$	3,176,172		$	3,786,705		$	2,276,122		$	(4,652,730	)	$	4,586,269

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2012

	Parent			Guarantor			Non-guarantor
In thousands	company			subsidiaries			subsidiaries			Eliminations		Consolidated
Net cash provided by (used for) operating activities	$	10,612		$	108,550		$	47,599		$	—	$	166,761
Investing activities
Capital expenditures		(1,980	)		(14,562	)		(14,770	)		—		(31,312)
Proceeds from sale of property and equipment		—			1,538			3,330			—		4,868
Acquisitions, net of cash acquired		—			—			(19,905	)		—		(19,905)
Other		—			—			(3,073	)		—		(3,073)
Net cash provided by (used for) investing activities		(1,980	)		(13,024	)		(34,418	)		—		(49,422)
Financing activities
Net short-term borrowings		(3,472	)		—			—			—		(3,472)
Proceeds from long-term debt		352,463			—			—			—		352,463
Repayment of long-term debt		(420,810	)		—			—			—		(420,810)
Net change in advances to subsidiaries		98,720			(84,519	)		(14,201	)		—		—
Excess tax benefits from stock-based compensation		1,740			—			—			—		1,740
Stock issued to employees, net of shares withheld		16,163			—			—			—		16,163
Dividends paid		(43,628	)		—			(512	)		—		(44,140)
Net cash provided by (used for) financing activities		1,176			(84,519	)		(14,713	)		—		(98,056)
Effect of exchange rate changes on cash and cash equivalents		(6,770	)		—			(1,992	)		—		(8,762)
Change in cash and cash equivalents		3,038			11,007			(3,524	)		—		10,521
Cash and cash equivalents, beginning of period		3,097			3,332			43,648			—		50,077
Cash and cash equivalents, end of period	$	6,135		$	14,339		$	40,124		$	—	$	60,598

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income (Loss)

For the three months ended July 2, 2011

	Parent			Guarantor		Non-guarantor
In thousands	company			subsidiaries		subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	586,395	$	398,634		$	(74,854	)	$	910,175
Cost of goods sold		—			399,270		297,830			(74,661	)		622,439
Gross profit		—			187,125		100,804			(193	)		287,736
Selling, general and administrative		6,664			83,632		68,329			(193	)		158,432
Research and development		435			10,509		8,938			—			19,882
Operating (loss) income		(7,099	)		92,984		23,537			—			109,422
Earnings from investment in subsidiaries		(53,988	)		—		—			53,988			—
Other (income) expense:
Equity income of unconsolidated subsidiaries		(607	)		—		(65	)		—			(672)
Net interest (income) expense		(26,636	)		38,107		3,142			—			14,613
Income before income taxes and noncontrolling interest		74,132			54,877		20,460			(53,988	)		95,481
Provision for income taxes		7,420			18,301		1,623			—			27,344
Net income before noncontrolling interest		66,712			36,576		18,837			(53,988	)		68,137
Noncontrolling interest		—			—		1,425			—			1,425
Net income attributable to Pentair, Inc.	$	66,712		$	36,576	$	17,412		$	(53,988	)	$	66,712
Comprehensive income (loss)	$	90,090		$	41,534	$	29,491		$	(68,809	)	$	92,306
Less: Comprehensive income attributable to noncontrolling interest		—			—		2,216			—			2,216
Comprehensive income (loss) attributable to Pentair, Inc.	$	90,090		$	41,534	$	27,275		$	(68,809	)	$	90,090

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income (Loss)

For the six months ended July 2, 2011

In thousands	Parent company			Guarantor subsidiaries		Non-guarantor subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	1,101,449	$	740,212		$	(141,213	)	$	1,700,448
Cost of goods sold		—			754,831		549,560			(140,738	)		1,163,653
Gross profit		—			346,618		190,652			(475	)		536,795
Selling, general and administrative		13,272			168,751		121,644			(475	)		303,192
Research and development		605			21,355		16,044			—			38,004
Operating (loss) income		(13,877	)		156,512		52,964			—			195,599
Earnings from investment in subsidiaries		(91,295	)		—		—			91,295			—
Other (income) expense:
Equity income of unconsolidated subsidiaries		(783	)		—		(124	)		—			(907)
Net interest (income) expense		(54,016	)		76,593		1,361			—			23,938
Income before income taxes and noncontrolling interest		132,217			79,919		51,727			(91,295	)		172,568
Provision for income taxes		14,964			26,782		10,651			—			52,397
Net income before noncontrolling interest		117,253			53,137		41,076			(91,295	)		120,171
Noncontrolling interest		—			—		2,918			—			2,918
Net income attributable to Pentair, Inc.	$	117,253		$	53,137	$	38,158		$	(91,295	)	$	117,253
Comprehensive income (loss)	$	181,498		$	63,306	$	67,508		$	(125,193	)	$	187,119
Less: Comprehensive income attributable to noncontrolling interest		—			—		5,621			—			5,621
Comprehensive income (loss) attributable to Pentair, Inc.	$	181,498		$	63,306	$	61,887			$        (125,193)		$	181,498

Pentair, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

July 2, 2011

In thousands	Parent company			Guarantor subsidiaries			Non- guarantor subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	4,836		$	4,651		$	59,485	$	—		$	68,972
Accounts and notes receivable, net		796			317,365			375,242		(97,996	)		595,407
Inventories		—			203,998			280,797		—			484,795
Deferred tax assets		113,205			40,363			13,247		(105,982	)		60,833
Prepaid expenses and other current assets		8,958			14,973			118,638		(17,937	)		124,632
Total current assets		127,795			581,350			847,409		(221,915	)		1,334,639
Property, plant and equipment, net		20,172			110,551			279,824		—			410,547
Other assets
Investments in/advances to subsidiaries		2,856,562			599,056			686,070		(4,141,688	)		—
Goodwill		—			1,471,582			1,101,848		—			2,573,430
Intangibles, net		—			217,311			437,597		—			654,908
Other		75,538			4,821			23,477		(25,048	)		78,788
Total other assets		2,932,100			2,292,770			2,248,992		(4,166,736	)		3,307,126
Total assets	$	3,080,067		$	2,984,671		$	3,376,225	$	(4,388,651	)	$	5,052,312
Liabilities and Shareholders’ Equity
Current liabilities
Short-term borrowings	$	—		$	—		$	21,451	$	—		$	21,451
Current maturities of long-term debt		2,905			—			29,220		(30,836	)		1,289
Accounts payable		5,781			160,537			247,182		(98,097	)		315,403
Employee compensation and benefits		32,294			22,791			53,751		—			108,836
Current pension and post-retirement benefits		8,733			—			—		—			8,733
Accrued product claims and warranties		12,248			22,574			12,437		—			47,259
Income taxes		9,106			5,720			6,672		—			21,498
Accrued rebates and sales incentives		—			32,219			10,348		—			42,567
Other current liabilities		14,874			37,558			110,149		(18,215	)		144,366
Total current liabilities		85,941			281,399			491,210		(147,148	)		711,402
Other liabilities
Long-term debt		1,265,400			2,417,890			1,033,600		(3,332,723	)		1,384,167
Pension and other retirement compensation		136,901			38			80,082		—			217,021
Post-retirement medical and other benefits		17,679			35,323			—		(25,048	)		27,954
Long-term income taxes payable		23,832			—			—		—			23,832
Deferred tax liabilities		10			213,201			128,192		(105,981	)		235,422
Due to (from) affiliates		(743,661	)		(261,361	)		1,024,935		(19,913	)		—
Other non-current liabilities		44,611			1,701			39,348		—			85,660
Total liabilities		830,713			2,688,191			2,797,367		(3,630,813	)		2,685,458
Shareholders’ equity attributable to Pentair, Inc.		2,249,354			296,480			461,358		(757,838	)		2,249,354
Noncontrolling interest		—			—			117,500		—			117,500
Total shareholders’ equity		2,249,354			296,480			578,858		(757,838	)		2,366,854
Total liabilities and shareholders’ equity	$	3,080,067		$	2,984,671		$	3,376,225		$      (4,388,651)		$	5,052,312

Pentair, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the six months ended July 2, 2011

In thousands	Parent company			Guarantor subsidiaries			Non- guarantor subsidiaries			Eliminations		Consolidated
Net cash provided by (used for) operating activities	$	(12,254	)	$	190,161		$	(25,296	)	$	—	$	152,611
Investing activities
Capital expenditures		(5,368	)		(13,584	)		(16,269	)		—		(35,221)
Proceeds from sale of property and equipment		—			42			47			—		89
Acquisitions, net of cash acquired		—			—			(733,105	)		—		(733,105)
Other		902			(783	)		—			—		119
Net cash provided by (used for) investing activities		(4,466	)		(14,325	)		(749,327	)		—		(768,118)
Financing activities
Net short-term borrowings		16,518			(29	)		29			—		16,518
Proceeds from long-term debt		1,320,957			—			—			—		1,320,957
Repayment of long-term debt		(661,422	)		—			—			—		(661,422)
Debt issuance costs		(8,721	)		—			—			—		(8,721)
Net change in advances to subsidiaries		(670,522	)		(174,560	)		845,082			—		—
Excess tax benefits from stock-based compensation		1,465			—			—			—		1,465
Stock issued to employees, net of shares withheld		9,551			—			—			—		9,551
Repurchases of common stock		(287	)		—			—			—		(287)
Dividends paid		(39,730	)		—			(9	)		—		(39,739)
Net cash provided by (used for) financing activities		(32,191	)		(174,589	)		845,102			—		638,322
Effect of exchange rate changes on cash and cash equivalents		50,546			—			(50,445	)		—		101
Change in cash and cash equivalents		1,635			1,247			20,034			—		22,916
Cash and cash equivalents, beginning of period		3,201			3,404			39,451			—		46,056
Cash and cash equivalents, end of period	$	4,836		$	4,651		$	59,485		$	—	$	68,972

Pentair, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

December 31, 2011

In thousands	Parent company			Guarantor subsidiaries			Non- guarantor subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	3,097		$	3,332		$	43,648	$	—		$	50,077
Accounts and notes receivable, net		828			360,027			263,201		(54,852	)		569,204
Inventories		—			227,472			222,391		—			449,863
Deferred tax assets		134,240			40,698			13,382		(127,421	)		60,899
Prepaid expenses and other current assets		28,937			(6,886	)		107,121		(21,380	)		107,792
Total current assets		167,102			624,643			649,743		(203,653	)		1,237,835
Property, plant and equipment, net		19,693			136,102			231,730		—			387,525
Other assets
Investments in/advances to subsidiaries		2,910,927			1,447,522			92,396		(4,450,845	)		—
Goodwill		—			1,330,265			943,653		—			2,273,918
Intangibles, net		—			250,792			341,493		—			592,285
Other		63,508			27,337			23,045		(19,140	)		94,750
Total other assets		2,974,435			3,055,916			1,400,587		(4,469,985	)		2,960,953
Total assets	$	3,161,230		$	3,816,661		$	2,282,060	$	(4,673,638	)	$	4,586,313
Liabilities and Shareholders’ Equity
Current liabilities
Short-term borrowings	$	—		$	—		$	3,694	$	—		$	3,694
Current maturities of long-term debt		2,585			—			1,168		(2,585	)		1,168
Accounts payable		5,036			189,355			152,065		(51,598	)		294,858
Employee compensation and benefits		24,466			30,015			54,880		—			109,361
Current pension and post-retirement benefits		9,052			—			—		—			9,052
Accrued product claims and warranties		165			22,037			20,428		—			42,630
Income taxes		40,999			(28,717	)		2,265		—			14,547
Accrued rebates and sales incentives		—			25,612			11,397		—			37,009
Other current liabilities		25,050			53,960			71,890		(21,378	)		129,522
Total current liabilities		107,353			292,262			317,787		(75,561	)		641,841
Other liabilities
Long-term debt		1,312,053			2,417,922			542,411		(2,968,161	)		1,304,225
Pension and other retirement compensation		182,556			(7,701	)		73,760		—			248,615
Post-retirement medical and other benefits		17,024			33,890			—		(19,140	)		31,774
Long-term income taxes payable		26,470			—			—		—			26,470
Deferred tax liabilities		—			229,962			86,416		(127,421	)		188,957
Due to (from) affiliates		(479,943	)		751,145			711,705		(982,907	)		—
Other non-current liabilities		62,388			1,508			33,143		—			97,039
Total liabilities		1,227,901			3,718,988			1,765,222		(4,173,190	)		2,538,921
Shareholders’ equity attributable to Pentair, Inc.		1,933,329			97,673			402,775		(500,448	)		1,933,329
Noncontrolling interest		—			—			114,063		—			114,063
Total shareholders’ equity		1,933,329			97,673			516,838		(500,448	)		2,047,392
Total liabilities and shareholders’ equity	$	3,161,230		$	3,816,661		$	2,282,060		$        (4,673,638)		$	4,586,313