Pentair Reports Fourth Quarter and Full Year 2012 Results
Pentair Reports Fourth Quarter and Full Year 2012 Results
-- Fourth quarter adjusted EPS of $0.47 per share and sales of $1.8 billion
-- Integration, standardization, and repositioning continue to gain momentum
and company is on track for $90 million in targeted synergies in 2013
-- Adjusted free cash flow exceeded 100 percent of adjusted net income
-- The company affirms 2013 adjusted EPS guidance of $3.10-$3.30
Reconciliations of GAAP to Non-GAAP are in the attached financial tables
PR Newswire
SCHAFFHAUSEN, Switzerland, Jan. 29, 2013
SCHAFFHAUSEN, Switzerland, Jan. 29, 2013 /PRNewswire/ -- Pentair Ltd. (NYSE:
PNR) today announced fourth quarter 2012 sales of $1.8 billion, an increase of
103 percent from the prior year quarter excluding 1 point of foreign exchange
impact, reflecting the Flow Control acquisition. Adjusted fourth quarter 2012
earnings per diluted share ("EPS") were $0.47, down 16 percent from adjusted
EPS of $0.56 in the fourth quarter of last year. On a GAAP basis, the company
reported a loss per share of $1.31 compared to a loss per share of $1.77 in
the fourth quarter last year. Adjusted EPS and operating income exclude
certain costs related to transformational activities in 2012, including the
Flow Control merger. These costs include acquisition-related expenses,
repositioning costs, "mark-to-market" pension expense, impairments, debt
extinguishment expense, and certain tax items.
(Logo: http://photos.prnewswire.com/prnh/20120307/CG65728LOGO)
Fourth quarter 2012 adjusted operating income was $150 million, up 59 percent,
and operating margins contracted 240 basis points to 8.5 percent. Excluding
transition costs, pricing and productivity gains offset material inflation and
higher labor costs. On a GAAP basis, the company reported an operating loss
of $304 million.
For the full year, the company reported sales of $4.4 billion, adjusted
operating income of $489 million, and adjusted EPS of $2.39. On a GAAP basis,
the company reported an operating loss of $43 million and a loss per share of
$0.84.
During the fourth quarter the company elected to change to a more preferable
method of accounting for pension and postretirement benefits. Historically,
the company recognized actuarial gains and losses annually as a component of
Stockholders' Equity, amortizing them into operating results over future
periods. The company has now elected to immediately recognize these gains
and losses in its operating results in the year in which they occur. These
gains and losses will be measured annually as of December 31 and will be
recorded in the fourth quarter of each year. For the fourth quarter of 2012,
the Company recorded a charge of $146 million for actuarial losses. This
change in accounting principle will be applied retrospectively. The impact to
prior periods is summarized in a schedule attached to this press release.
During the year, Pentair generated $318 million in adjusted free cash flow;
this represented 100 percent conversion of adjusted net income. Adjusted free
cash flow excludes the impact of acquisition-related payments, accelerated
pension funding, and repositioning costs.
The company paid approximately $112 million in dividends in 2012, or $0.88 per
share. The new quarterly dividend effective for the first and second quarters
of 2013 is $0.23 per share per quarter. The company intends to seek
authorization from its shareholders at its 2013 annual general meeting of
shareholders to increase the dividend further for the remainder of 2013. If
approved by the shareholders, the 2013 dividend increase will mark the 37th
consecutive year in which Pentair has increased its dividend.
"The fourth quarter results were in line with expectations and marked the end
of a historic transformational year for Pentair," said Randall J. Hogan,
Pentair chairman and chief executive officer. "The integration of the Flow
Control businesses continues to gain momentum as the teams have come together
and are building upon each other's strengths. While many of our end markets
faced some softness in the latter half of 2012, our businesses continued to
deliver on the elements within our control, notably price and productivity,
capabilities that have become hallmarks of Pentair."
Fourth Quarter Business Highlights
All year over year comparisons against 2011 adjusted results on a pro forma
basis for the Flow Control acquisition. See attached reconciliations of these
Non-GAAP measures.
Water & Fluid Solutions sales grew 1 percent year-over-year to $771 million as
the impact of foreign exchange was minimal in the quarter. In fast growth
regions, Water & Fluid Solutions sales grew 4 percent driven by strength in
Latin America and the Middle East.
o Residential & Commercial sales, which accounted for roughly 45 percent of
Water & Fluid Solution sales, grew 2 percent. While there was continued
weakness in western Europe and distributors guarded inventory levels
closely, an improving North American residential market gained momentum.
o Infrastructure sales, which includes the former Flow Control WES business,
and which accounted for nearly 25 percent of Water & Fluid Solutions
sales, were down 3 percent percent as the European infrastructure markets
remained weak. However, the backlog in North American infrastructure
projects continued to grow.
o Food & Beverage sales, which accounted for nearly 15 percent of Water &
Fluid Solutions sales, grew 2 percent led by continued gains with food
service customers. Global agriculture sales were down in the quarter due
to the timing of orders, but the company believes the 2013 outlook for
global agriculture remains sound. There were several project delays from
beverage customers in the quarter with most of this work moved to 2013.
Water & Fluid Solutions' fourth quarter adjusted operating income of $58
million represented a 24 percent decline as compared to $77 million in the
same period last year. Adjusted operating margins decreased by 250 basis
points to 7.5 percent. While price and productivity largely offset inflation
in the quarter, the segment incurred substantial transition costs. Including
repositioning, impairment, and acquisition related charges, Water & Fluid
Solutions reported a fourth quarter GAAP operating loss of $57 million.
Valves & Controls delivered fourth quarter 2012 sales of $547 million, up 3
percent versus the prior year quarter, excluding a 1 percent unfavorable
impact from foreign exchange. Backlog increased 2 percent to $1.4 billion
compared to third quarter 2012.
o Energy sales, which accounted for roughly 60 percent of Valves & Controls
sales, grew 2 percent. Oil & gas industry sales had strong double-digit
growth in the quarter, but some project delays impacted orders in the
quarter. Power industry sales remained weak and mining industry sales had
continued growth.
o Industrial sales, which accounted for roughly 30 percent of Valves &
Controls sales, grew 2 percent. Process sales in Asia were weak, but
orders and backlog grew in the quarter.
Valves & Controls delivered fourth quarter adjusted operating income of $42
million down 3 percent compared to $43 million in the same quarter last year.
Fourth quarter 2012 adjusted operating margins decreased 40 basis points to
7.6 percent. Price and productivity generally offset inflation, but mix and
transition costs contributed to margin contraction in the quarter. Including
repositioning and acquisition related charges, Valves & Controls reported a
GAAP operating loss of $77 million in the fourth quarter.
Technical Solutions delivered fourth quarter 2012 sales of $434 million, up 1
percent versus the prior year quarter including modest unfavorable impact from
foreign exchange.
o Industrial sales, which accounted for roughly 50 percent of Technical
Solutions sales, declined 2 percent.
o Energy sales, which accounted for roughly 30 percent of Technical
Solutions sales, grew 6 percent.
o Residential & Commercial sales, which accounted for roughly 15 percent of
Technical Solutions sales, grew 1 percent percent.
Technical Solutions delivered adjusted fourth quarter operating income of $76
million, up 1 percent compared to $75 million in the same quarter last year.
Fourth quarter 2012 adjusted operating margins were flat at 17.4 percent
compared to the prior year quarter. Pricing and productivity gains driven by
a better mix of standard products more than offset material and labor
inflation. Transition costs impacted the year-over-year comparison
negatively. Including repositioning, impairment, and acquisition related
charges, Technical Solutions' fourth quarter reported GAAP operating income
was $12 million.
Outlook
Pentair continues to expect full year 2013 adjusted EPS to be between $3.10
and $3.30, which represents an increase of approximately 22 to 30 percent from
2012 adjusted pro forma EPS of $2.54. The company anticipates full year 2013
sales to be approximately $7.6 billion, or up approximately 3 to 5 percent
over 2012 adjusted pro forma sales. The company expects to generate free cash
flow in excess of 100 percent of net income once again.
Pentair is initiating first quarter 2013 adjusted EPS guidance of $0.54 to
$0.56. This compares to first quarter 2012 adjusted pro-forma EPS of $0.54
and historical adjusted EPS of $0.64. The company expects first quarter 2013
revenue to be about $1.8 billion, which is up slightly compared to first
quarter 2012 adjusted pro-forma revenue and up significantly versus historical
first quarter 2012 revenue of $858 million. These results include around $10
million of costs associated to drive synergy benefits and only around $5
million of expected realized synergies. Synergies driven by fourth quarter
2012 repositioning actions and functional standardization efforts are on track
to deliver $90 million for the full year of 2013 and are expected to ramp to
$35 million by fourth quarter 2013.
"Despite much of the global economic uncertainty that persists, we are seeing
signs of momentum building in several end markets, such as global energy and
North American residential, which combined are just under half of Pentair's
revenue," said Hogan. "Our focus remains on driving PIMS and improving our
cost structure while continuing to invest in our businesses for growth. We
remain committed to delivering $90 million in synergies in 2013 and $230
million cumulatively by the end of 2015, in addition to our goal of $5.00 of
EPS in 2015."
Earnings Conference Call
Pentair Chairman and CEO Randall J. Hogan and Chief Financial Officer John L.
Stauch will discuss the company's performance and fourth quarter 2012 results
on a two-way conference call with investors at 9:00 a.m. Eastern today. A live
audio webcast of the call, along with the related presentation, can be
accessed in the Investors section of the company's website shortly before the
call begins. Reconciliations of non-GAAP financial measures are set forth in
the attachments to this release and in the presentation, both of which can be
found on Pentair's website. The webcast and presentation will be archived at
the company's website following the conclusion of the event.
Caution Concerning Forward-Looking Statements
This press release contains statements that Pentair believes to be
"forward-looking statements" within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. All statements other than statements of
historical fact, including, without limitation, statements regarding the
anticipated benefits of the merger or Pentair's anticipated financial results,
are forward-looking statements. Without limitation, any statements preceded or
followed by or that include the words "targets", "plans", "believes",
"expects", "intends", "will", "likely", "may", "anticipates", "estimates",
"projects", "should", "would", "expect", "positioned", "strategy", "future",
"outlook", guidance" or words, phrases or terms of similar substance or the
negative thereof, are forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to risks,
uncertainties, assumptions and other factors, some of which are beyond
Pentair's control, which could cause actual results to differ materially from
those expressed or implied by such forward-looking statements. These factors
include the ability to successfully integrate Pentair and the flow control
business and achieve expected benefits from the merger; overall global
economic and business conditions; competition and pricing pressures in the
markets Pentair serves; the strength of housing and related markets;
volatility in currency exchange rates and commodity prices; inability to
generate savings from excellence in operations initiatives consisting of lean
enterprise, supply management and cash flow practices; increased risks
associated with operating foreign businesses; the ability to deliver backlog
and win future project work; failure of market to accept new product
introductions and enhancements; the impact of changes in laws and regulations,
including those that limit U.S. tax benefits; the outcome of litigation and
governmental proceedings; and the ability to achieve Pentair's long-term
strategic operating goals. Additional information concerning these and other
factors is contained in Pentair's filings with the U.S. Securities and
Exchange Commission ("SEC"), including in Pentair's Quarterly Report on Form
10-Q for the quarter ended September 29, 2012. All forward-looking statements
speak only as of the date of this press release. Pentair assumes no
obligation, and disclaims any obligation, to update the information contained
in this press release.
About Pentair Ltd.
Pentair Ltd. (www.pentair.com) delivers industry-leading products, services
and solutions for its customers' diverse needs in water and other fluids,
thermal management and equipment protection. With pro forma revenues of $7.3
billion, Pentair employs more than 30,000 people worldwide.
Pentair Contacts:
Investors:
Jim Lucas, Vice President of Investor Relations
Direct: 763-656-5575
Email: jim.lucas@pentair.com
Media:
Betsy Day, Corporate Communications Manager
Direct: 763-656-5537
Email: betsy.day@pentair.com
Pentair Ltd. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
Three months ended Twelve months ended
December 31, December 31, December 31, December 31,
In thousands, except 2012 2011 2012 2011
per-share data
Net sales $ 1,750,932 $ 865,692 $ 4,416,146 $ 3,456,686
Cost of goods sold 1,352,264 600,827 3,146,554 2,382,964
Gross profit 398,668 264,865 1,269,592 1,073,722
% of net sales 22.8% 30.6% 28.7% 31.1%
Selling, general and 609,882 230,457 1,158,436 694,841
administrative
% of net sales 34.8% 26.6% 26.2% 20.1%
Research and development 32,174 20,063 93,557 78,158
% of net sales 1.8% 2.3% 2.1% 2.3%
Impairment of tradenames 60,718 200,520 60,718 200,520
and goodwill
% of net sales 3.5% 23.2% 1.4% 5.8%
Operating income (loss) (304,106) (186,175) (43,119) 100,203
% of net sales -17.4% -21.5% -1.0% 2.9%
Other (income) expense:
Loss on early 75,367 — 75,367 —
extinguishment of debt
Equity (income) losses of
unconsolidated 145 (417) (2,156) (1,898)
subsidiaries
Net interest expense 18,168 17,524 67,635 58,835
% of net sales 1.0% 2.0% 1.5% 1.7%
Income (loss) before income
taxes and noncontrolling (397,786) (203,282) (183,965) 43,266
interest
Provision (benefit) for (123,050) (29,214) (79,353) 46,417
income taxes
effective tax rate 30.9% 14.4% 43.1% 107.3%
Net loss before (274,736) (174,068) (104,612) (3,151)
noncontrolling interest
Noncontrolling interest (1,653) 419 2,574 4,299
Net loss attributable to $ (273,083) $ (174,487) $ (107,186) $ (7,450)
Pentair Ltd.
Loss per common share
attributable to Pentair
Ltd.
Basic $ (1.31) $ (1.77) $ (0.84) $ (0.08)
Diluted $ (1.31) $ (1.77) $ (0.84) $ (0.08)
Weighted average common
shares outstanding
Basic 208,402 98,395 127,368 98,233
Diluted 208,402 98,395 127,368 98,233
Cash dividends paid per $ 0.22 $ 0.20 $ 0.88 $ 0.80
common share
Pentair Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
December 31
In thousands 2012 2011
Assets
Current assets
Cash and cash equivalents $ 261,341 $ 50,077
Accounts and notes receivable, net 1,292,648 569,204
Inventories 1,380,271 449,863
Deferred taxes 77,661 60,899
Prepaid expenses and other current assets 248,447 107,792
Total current assets 3,260,368 1,237,835
Property, plant and equipment, net 1,224,488 387,525
Other assets
Goodwill 4,894,512 2,273,918
Intangibles, net 1,909,656 592,285
Other non-current assets 506,287 94,750
Total other assets 7,310,455 2,960,953
Total assets $ 11,795,311 $ 4,586,313
Liabilities and Equity
Current liabilities
Current maturities of long-term debt $ 3,096 $ 4,862
Accounts payable 569,596 294,858
Dividends payable 94,966 —
Employee compensation and benefits 295,067 118,413
Accrued product claims and warranties 67,046 42,630
Accrued rebates and sales incentives 36,522 37,009
Other current liabilities 471,628 144,069
Total current liabilities 1,537,921 641,841
Other liabilities
Long-term debt 2,454,278 1,304,225
Pension and other post-retirement compensation and 378,066 280,389
benefits
Deferred tax liabilities 488,102 188,957
Other non-current liabilities 453,587 123,509
Total liabilities 5,311,954 2,538,921
Equity 6,483,357 2,047,392
Total liabilities and equity $ 11,795,311 $ 4,586,313
Pentair Ltd. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Years ended December 31
In thousands 2012 2011
Operating activities
Net loss before noncontrolling interest $ (104,612) $ (3,151)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities
Equity income of unconsolidated subsidiaries (2,156) (1,898)
Depreciation 87,835 66,235
Amortization 75,957 41,897
Deferred income taxes (175,816) (5,583)
Share-based compensation 35,847 19,489
Impairment of trade names and goodwill 60,718 200,520
Loss on early extinguishment of debt 75,367 —
Excess tax benefits from share-based compensation (4,976) (3,310)
Pension and other post-retirement expense 167,237 84,549
Pension and post-retirement contributions, net (237,532) (67,473)
Loss (gain) on sale of assets (2,276) 933
Changes in assets and liabilities, net of effects of
business acquisitions
Accounts and notes receivable 55,720 1,348
Inventories 125,099 18,263
Prepaid expenses and other current assets (6,696) 10,032
Accounts payable (61,990) (24,330)
Employee compensation and benefits (81,313) (20,486)
Accrued product claims and warranties (11,594) (1,984)
Income taxes 8,060 10,084
Other current liabilities 59,449 10,921
Other assets and liabilities 5,632 (15,830)
Net cash provided by(used for) operating 67,960 320,226
activities
Investing activities
Capital expenditures (94,532) (73,348)
Proceeds from sale of property and equipment 5,508 1,310
Acquisitions, net of cash acquired 470,459 (733,105)
Other (5,858) (2,943)
Net cash provided by (used for) investing 375,577 (808,086)
activities
Financing activities
Net short-term borrowings (3,700) (1,239)
Proceeds from long-term debt 1,536,146 1,421,602
Repayment of long-term debt (1,305,339) (832,147)
Debt issuance costs (9,704) (8,973)
Debt termination costs (74,752) —
Excess tax benefits from share-based compensation 4,976 3,310
Shares issued to employees, net of shares withheld 68,177 13,322
Repurchases of common shares (334,159) (12,785)
Dividends paid (112,397) (79,537)
Distributions to noncontrolling interest (1,554) —
Net cash provided by (used for) financing (232,306) 503,553
activities
Effect of exchange rate changes on cash and cash 33 (11,672)
equivalents
Change in cash and cash equivalents 211,264 4,021
Cash and cash equivalents, beginning of year 50,077 46,056
Cash and cash equivalents, end of year $ 261,341 $ 50,077
Pentair Ltd. and Subsidiaries
Supplemental Financial Information by Reportable Segment (Unaudited)
First Second Third Fourth Twelve
Quarter Quarter Quarter Quarter Months
In thousands 2012 2012 2012 2012 2012
Net sales to external
customers
Water & Fluid $ 586,978 $ 675,522 $ 605,390 $ 770,513 $ 2,638,403
Solutions
Valves & Controls — — — 546,707 546,707
Technical Solutions 271,199 266,003 260,122 433,712 1,231,036
Consolidated $ 858,177 $ 941,525 $ 865,512 $ 1,750,932 $ 4,416,146
Intersegment sales
Water & Fluid $ 73 $ (116) $ 60 $ 773 $ 790
Solutions
Valves & Controls — — — 1,919 1,919
Technical Solutions 1,359 1,535 1,400 1,094 5,388
Other (1,432) (1,419) (1,460) (3,786) (8,097)
Consolidated $ — $ — $ — $ — $ —
Operating income
(loss)
Water & Fluid $ 63,677 $ 91,989 $ 69,228 $ (56,851) $ 168,043
Solutions
Valves & Controls — — — (76,843) (76,843)
Technical Solutions 50,459 50,624 52,320 11,614 165,017
Other (27,662) (23,299) (66,349) (182,026) (299,336)
Consolidated $ 86,474 $ 119,314 $ 55,199 $ (304,106) $ (43,119)
Operating income as a
percent of net sales
Water & Fluid 10.8% 13.6% 11.4% -7.4% 6.4%
Solutions
Valves & Controls 0.0% 0.0% 0.0% -14.1% -14.1%
Technical Solutions 18.6% 19.0% 20.1% 2.7% 13.4%
Consolidated 9.9% 12.5% 6.2% -17.4% -1.0%
First Second Third Fourth Twelve
Quarter Quarter Quarter Quarter Months
In thousands 2011 2011 2011 2011 2011
Net sales to external
customers
Water & Fluid $ 515,368 $ 631,994 $ 614,557 $ 607,885 $ 2,369,804
Solutions
Valves & Controls — — — — —
Technical Solutions 274,905 278,181 275,989 257,807 1,086,882
Consolidated $ 790,273 $ 910,175 $ 890,546 $ 865,692 $ 3,456,686
Intersegment sales
Water & Fluid $ 455 $ 316 $ 426 $ 390 $ 1,587
Solutions
Valves & Controls — — — — —
Technical Solutions 999 1,559 1,755 1,313 5,626
Other (1,454) (1,875) (2,181) (1,703) (7,213)
Consolidated $ — $ — $ — $ — $ —
Operating income
(loss)
Water & Fluid $ 56,528 $ 84,521 $ 59,608 $ (142,346) $ 58,311
Solutions
Valves & Controls — — — — —
Technical Solutions 48,087 48,261 48,611 40,281 185,240
Other (19,146) (24,068) (16,024) (84,110) (143,348)
Consolidated $ 85,469 $ 108,714 $ 92,195 $ (186,175) $ 100,203
Operating income as a
percent of net sales
Water & Fluid 11.0% 13.4% 9.7% -23.4% 2.5%
Solutions
Valves & Controls 0.0% 0.0% 0.0% 0.0% 0.0%
Technical Solutions 17.5% 17.3% 17.6% 15.6% 17.0%
Consolidated 10.9% 12.0% 10.4% -21.5% 2.9%
Pentair Ltd. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ended December 31, 2012 to the
"Adjusted" non-GAAP
excluding the effect of 2012 adjustments (Unaudited)
In millions, except First Second Third Fourth Year
per-share data Quarter Quarter Quarter Quarter
2012 2012 2012 2012 2012
Total Pentair
Net sales $ 858.2 $ 941.5 $ 865.5 $ 1,750.9 $ 4,416.1
Operating income (loss) - 86.5 119.3 55.2 (304.1) (43.1)
as reported
% of net sales 10.1% 12.7% 6.4% (17.4%) (1.0%)
Adjustments:
Deal related costs and 11.8 6.3 52.7 12.0 82.8
expenses
Inventory step-up and — — — 179.6 179.6
customer backlog
Restructuring — 10.4 1.1 55.3 66.8
Trade name impairment — — — 60.7 60.7
Change in accounting
method - pension and (1.5) (1.5) (1.5) 146.2 141.7
post-retirement
Operating income - as 96.8 134.5 107.5 149.7 488.5
adjusted
% of net sales 11.3% 14.3% 12.4% 8.5% 11.1%
Net income (loss)
attributable to Pentair 61.8 72.8 31.4 (273.1) (107.1)
Ltd. - as reported
Bond redemption and (0.8) — 1.8 51.9 52.9
interest expense
Other adjustments net 3.0 10.9 32.3 320.9 367.1
of tax
Net income from continuing
operations attributable to 64.0 83.7 65.5 99.7 312.9
Pentair Ltd. - as adjusted
Continuing earnings per common share attributable to Pentair Ltd. -
diluted
Diluted earnings (loss) per $ 0.62 $ 0.72 $ 0.31 $ (1.31) $ (0.84)
common share - as reported
Adjustments 0.02 0.11 0.33 1.78 3.23
Diluted earnings per common $ 0.64 $ 0.83 $ 0.64 $ 0.47 $ 2.39
share - as adjusted
Pentair Ltd. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ended December 31, 2011 to the
"Adjusted" non-GAAP
excluding the effect of 2011 adjustments (Unaudited)
In millions, except First Second Third Fourth Year
per-share data Quarter Quarter Quarter Quarter
2011 2011 2011 2011 2011
Total Pentair
Net sales $ 790.3 $ 910.2 $ 890.5 $ 865.7 $ 3,456.7
Operating income (loss) - 85.5 108.7 92.2 (186.2) 100.2
as reported
% of net sales 10.8% 11.9% 10.4% (21.5%) 2.9%
Adjustments:
Deal related costs and 1.7 6.1 — 0.5 8.3
expenses
Inventory step-up and 0.2 5.3 5.8 2.2 13.5
customer backlog
Restructuring — — 2.1 10.8 12.9
Goodwill impairment — — — 200.5 200.5
Change in accounting
method - pension and 0.7 0.7 0.7 66.2 68.3
post-retirement
Operating income - as 88.1 120.8 100.8 94.0 403.7
adjusted
% of net sales 11.1% 13.3% 11.3% 10.9% 11.7%
Net income (loss)
attributable to Pentair 50.1 66.3 50.6 (174.5) (7.5)
Ltd. - as reported
Adjustments net of tax 1.7 9.2 7.1 230.2 248.2
Net income from continuing
operations attributable
to Pentair Ltd. - as 51.8 75.5 57.7 55.7 240.7
adjusted
Continuing earnings per common share attributable to Pentair Ltd. -
diluted
Diluted earnings (loss) per $ 0.50 $ 0.66 $ 0.50 $ (1.77) $ (0.08)
common share - as reported
Adjustments 0.02 0.09 0.08 2.33 2.49
Diluted earnings per common $ 0.52 $ 0.75 $ 0.58 $ 0.56 $ 2.41
share - as adjusted
Pentair Ltd. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ended December 31, 2012 to the
"Adjusted" non-GAAP
excluding the effect of 2012 adjustments (Unaudited)
First Second Third Fourth Year
Quarter Quarter Quarter Quarter
In millions 2012 2012 2012 2012 2012
Water & Fluid Solutions
Net sales $587.0 $675.5 $605.4 $770.5 $2,638.4
Operating income (loss) - 63.7 $92.0 $69.2 $(56.9) $168.0
as reported
% of net sales 10.9% 13.6% 11.4% (7.4%) 6.4%
Adjustments:
Restructuring — 6.9 1.1 42.5 50.5
Inventory step-up and — — — 23.4 23.4
customer backlog
Trade name impairment — — — 49.1 49.1
Operating income - as 63.7 98.9 70.3 58.1 291.0
adjusted
% of net sales 10.9% 14.7% 11.6% 7.5% 11.0%
Valves & Controls
Net sales $ - $ - $ - $546.7 $546.7
Operating income - as — — — (76.8) (76.8)
reported
% of net sales 0.0% 0.0% 0.0% (14.0%) (14.0%)
Adjustments:
Restructuring — — — 5.1 5.1
Inventory step-up and — — — 113.5 113.5
customer backlog
Operating income - as — — — 41.8 41.8
adjusted
% of net sales 0.0% 0.0% 0.0% 7.6% 7.6%
Technical Solutions
Net sales $271.2 $266.0 $260.1 $433.7 $1,231.0
Operating income - as 50.5 50.6 52.3 11.6 165.0
reported
% of net sales 18.6% 19.0% 20.1% 2.7% 13.4%
Adjustments:
Restructuring — 3.1 — 9.7 12.8
Inventory step-up and — — — 42.7 42.7
customer backlog
Trade name impairment — — — 11.6 11.6
Operating income - as 50.5 53.7 52.3 75.6 232.1
adjusted
% of net sales 18.6% 20.3% 20.1% 17.4% 18.9%
Pentair Ltd. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ended December 31, 2011 to the
"Adjusted" non-GAAP
excluding the effect of 2011 adjustments (Unaudited)
First Second Third Fourth Year
Quarter Quarter Quarter Quarter
In millions 2011 2011 2011 2011 2011
Water & Fluid Solutions
Net sales $ 515.4 $ 632.0 $ 614.6 $ 607.9 $ 2,369.8
Operating income (loss) - $ 56.5 $ 84.5 $ 59.6 $ (142.3) $ 58.3
as reported
% of net sales 11.0% 13.4% 9.7% (23.4%) 2.5%
Adjustments:
Restructuring — — 2.0 7.8 9.8
Inventory step-up and 0.2 5.3 5.8 2.2 13.5
customer backlog
Goodwill impairment — — — 200.5 200.5
Operating income - as 56.7 89.8 67.4 68.2 282.1
adjusted
% of net sales 11.0% 14.2% 11.0% 11.2% 11.9%
Technical Solutions
Net sales $ 274.9 $ 278.2 $ 276.0 $ 257.8 $ 1,086.9
Operating income - as $ 48.1 $ 48.3 $ 48.6 $ 40.3 $ 185.3
reported
% of net sales 17.5% 17.3% 17.6% 15.6% 17.0%
Adjustments - — — 0.1 2.0 2.1
restructuring
Operating income - as 48.1 48.3 48.7 42.3 187.4
adjusted
% of net sales 17.5% 17.3% 17.7% 16.4% 17.2%
Pentair Ltd. and Subsidiaries
Reconciliation of the GAAP "As Reported" year ended December 31, 2013 to the
"Adjusted" non-GAAP
excluding the effect of 2013 adjustments (Unaudited)
Forecast Forecast
First Quarter Year
In millions,
except per-share 2013 2013
data
Total Pentair
Net sales approx
$1,800 approx $7,600
Operating income - approx
as reported 97 approx 865
% of net sales approx
5.4% approx 11.4%
Adjustments:
Inventory step-up approx
and customer backlog 78 approx
85
Operating income - approx 175 approx
as adjusted 950
% of net sales approx
9.7% approx 12.5%
Net income
attributable to approx 58 approx
Pentair Ltd. - as 591
reported
Adjustments
net of tax approx 59 approx
64
Net income from
continuing operations
attributable
to Pentair approx 117 approx
Ltd. - as adjusted 655
Continuing earnings per common share attributable to Pentair Ltd. - diluted
Diluted earnings per
common share - as $0.26-$0.28 $2.79-$2.99
reported
Adjustments 0.28 0.31
Diluted earnings per
common share - as $0.54-$0.56 $3.10-$3.30
adjusted
Pentair Ltd. and Subsidiaries
Reconciliation of Net Cash Provided By (Used For) Operating Activities
to Adjusted Free Cash Flow
For the Year Ended December 31, 2012
(in millions)
Net cash provided by (used for) operating activities $ 68.0
Capital expenditures (94.5)
Proceeds from sale of property and equipment 5.5
Free cash flow (21.0)
Adjustments:
Accelerated pension funding 193.0
Acquisition related payments 126.0
Repositioning 20.0
Adjusted Free Cash Flow $ 318.0
Pentair Ltd. and Subsidiaries
Schedule of "As Reported" to "As Restated"
for the Change in Accounting for Pension and Post-retirement Benefits
First Second Third Fourth Year
Quarter Quarter Quarter Quarter
In millions, except per-share data 2012 2012 2012 2012 2012
Operating income (loss) - as 85.0 117.8 53.7 (157.9) 98.6
reported
Change in accounting principle 1.5 1.5 1.5 (146.2) (141.7)
Operating income (loss) - as 86.5 119.3 55.2 (304.1) (43.1)
restated
Net income (loss) attributable to 60.8 71.8 30.4 (183.9) (20.9)
Pentair Ltd. - as reported
Change in accounting principle 1.0 1.0 1.0 (89.2) (86.2)
Net income (loss) attributable to 61.8 72.8 31.4 (273.1) (107.1)
Pentair Ltd. - as restated
Earnings per common share attributable to
Pentair Ltd. - diluted
Diluted earnings per common share - $0.61 $0.71 $0.30 $(0.88) $(0.16)
as reported
Change in accounting principle 0.01 0.01 0.01 (0.43) (0.68)
Diluted earnings per common share - $0.62 $0.72 $0.31 $(1.31) $(0.84)
as restated
First Second Third Fourth Year
Quarter Quarter Quarter Quarter
In millions, except per-share data 2011 2011 2011 2011 2011
Operating income (loss) - as 86.2 109.4 92.9 (120.0) 168.5
reported
Change in accounting principle (0.7) (0.7) (0.7) (66.2) (68.3)
Operating income (loss) - as 85.5 108.7 92.2 (186.2) 100.2
restated
Net income (loss) attributable to 50.5 66.7 51.1 (134.1) 34.2
Pentair Ltd. - as reported
Change in accounting principle (0.4) (0.4) (0.4) (40.5) (41.7)
Net income (loss) attributable to 50.1 66.3 50.7 (174.6) (7.5)
Pentair Ltd. - as restated
Earnings per common share attributable to
Pentair Ltd. - diluted
Diluted earnings per common share - $0.51 $0.67 $0.51 $(1.36) $0.34
as reported
Change in accounting principle (0.01) (0.01) (0.01) (0.41) (0.42)
Diluted earnings per common share - $0.50 $0.66 $0.50 $(1.77) $(0.08)
as restated
In millions, except per-share data 2010 2009 2008
Operating income - as reported 334.2 219.9 324.7
Change in accounting principle (21.2) (0.9) (109.9)
Operating income - as restated 313.0 219.0 214.8
Net income from continuing
operations attributable to Pentair 198.5 115.5 256.4
Ltd. - as reported
Change in accounting principle (12.9) (0.5) (67.0)
Net income from continuing
operations attributable to Pentair 185.6 115.0 189.4
Ltd. - as restated
Continuing earnings per common share
attributable to Pentair Ltd. - diluted
Diluted earnings per common share - $2.00 $1.17 $2.59
as reported
Change in accounting principle (0.13) (0.01) (0.68)
Diluted earnings per common share - $1.87 $1.16 $1.91
as restated
Pro Forma Reconciliation
Pro Forma Adjustments
2011 Total
Pentair Historical Historical Flow Adjusted
Adjusted Control Depreciation & Other Pro Forma
(in Results Acquisition Amortization Adjustments Results
millions,
except EPS)
First
Quarter
Sales $ 790.3 $ $ $ $
798.1 - (21.2) 1,567.2
Operating $ 88.1 $ $ $ $
Income 99.2 (19.7) (21.2) 146.4
Net Income $ 51.8 $ $ $ $
74.4 (14.8) (9.9) 101.5
Diluted EPS $ 0.52 $ $ $ $
0.35 (0.07) (0.33) 0.47
Second
Quarter
Sales $ 910.2 $ $ $ $
922.6 - (30.8) 1,802.0
Operating $ 120.8 $ $ $ $
Income 119.9 (19.7) (19.6) 201.4
Net Income $ 75.5 $ $ $ $
89.9 (14.8) (11.5) 139.2
Diluted EPS $ 0.75 $ $ $ $
0.42 (0.07) (0.45) 0.65
Third
Quarter
Sales $ 890.5 $ $ $ $
1,079.1 - (42.4) 1,927.2
Operating $ 100.8 $ $ $ $
Income 136.8 (17.2) (20.4) 200.0
Net Income $ 57.7 $ $ $ $
102.6 (12.9) (11.0) 136.4
Diluted EPS $ 0.58 $ $ $ $
0.48 (0.06) (0.36) 0.64
Fourth
Quarter
Sales $ 865.7 $ $ $ $
923.0 - (55.1) 1,733.6
Operating $ 94.0 $ $ $ $
Income 125.6 (17.3) (28.8) 173.5
Net Income $ 55.7 $ $ $ $
94.2 (13.0) (20.0) 116.9
Diluted EPS $ 0.56 $ $ $ $
0.44 (0.06) (0.39) 0.55
Full Year
Sales $ 3,456.7 $ $ $ $
3,722.8 - (149.5) 7,030.0
Operating $ 403.7 $ $ $ $
Income 481.5 (73.9) (90.0) 721.3
Net Income $ 240.7 $ $ $ $
361.1 (55.4) (52.4) 494.0
Diluted EPS $ 2.41 $ $ $ $
1.68 (0.26) (1.53) 2.30
Note: "Other" adjustments represent the elimination of certain large projects
and sales to sanctioned countries (which were terminated prior to the
completion of the Flow Control acquisition), changes in corporate allocation
assumptions, income taxes and share count.
Pro Forma Reconciliation
Pro Forma Adjustments
2012 Total
Pentai Historical Historical Adjusted
Adjusted Flow Control Depreciation & Other Pro Forma
(in Results Acquisition Amortization Adjustments Results
millions,
except EPS)
First
Quarter
Sales $ 858.2 $ $ $ $
995.9 - (74.0) 1,780.1
Operating $ 96.8 $ $ $ $
Income 124.9 (17.1) (32.2) 172.4
Net Income $ 64.0 $ $ $ $
93.7 (12.8) (28.1) 116.8
Diluted EPS $ 0.64 $ $ $ $
0.44 (0.06) (0.48) 0.54
Second
Quarter
Sales $ 941.5 $ $ $ $
980.8 - (33.2) 1,889.1
Operating $ 134.5 $ $ $ $
Income 143.5 (17.2) (24.0) 236.8
Net Income $ 83.7 $ $ $ $
107.6 (12.9) (14.0) 164.4
Diluted EPS $ 0.83 $ $ $ $
0.50 (0.06) (0.50) 0.77
Third
Quarter
Sales $ 865.5 $ $ $ $
1,019.8 - (16.0) 1,869.3
Operating $ 107.5 $ $ $ $
Income 119.9 (17.3) 5.5 215.6
Net Income $ 65.5 $ $ $ $
89.9 (13.0) 6.3 148.8
Diluted EPS $ 0.64 $ $ $ $
0.42 (0.06) (0.31) 0.69
Fourth
Quarter
Sales $ 1,750.9 $ $ $ $
- - (7.1) 1,743.8
Operating $ 149.7 $ $ $ $
Income - - 16.6 166.3
Net Income $ 99.7 $ $ $ $
- - 12.7 112.4
Diluted EPS $ 0.47 $ $ $ $
- - 0.06 0.53
Full Year
Sales $ 4,416.1 $ $ $ $
2,996.5 - (130.3) 7,282.3
Operating $ 488.5 $ $ $ $
Income 388.3 (51.6) (34.1) 791.1
Net Income $ 312.9 $ $ $ $
291.3 (38.7) (23.1) 542.4
Diluted EPS $ 2.39 $ $ $ $
1.36 (0.18) (1.03) 2.54
Note: "Other" adjustments represent the elimination of certain large projects
and sales to sanctioned countries (which were terminated prior to the
completion of the Flow Control acquisition), changes in corporate allocation
assumptions, income taxes and share count.
Pro Forma Reconciliation
Pro Forma Adjustments
2011 Water &
Fluid Historical Historical Depreciation & Other Adjusted
Solutions Adjusted Flow Control Amortization Adjustments Pro Forma
Segment (in Results Acquisition Results
millions)
First Quarter
Sales $ 515.4 $ $ $ $
129.7 - - 645.1
Operating $ 56.7 $ $ $ $
Income 9.7 (0.1) (1.8) 64.5
Second Quarter
Sales $ 632.0 $ $ $ $
168.7 - - 800.7
Operating $ 89.8 $ $ $ $
Income 14.5 (0.1) (1.7) 102.5
Third Quarter
Sales $ 614.6 $ $ $ $
201.0 - - 815.6
Operating $ 67.4 $ $ $ $
Income 5.8 (0.1) (1.7) 71.4
Fourth Quarter
Sales $ 607.9 $ $ $ $
158.5 - - 766.4
Operating $ 68.2 $ $ $ $
Income 10.1 (0.1) (1.7) 76.5
Full Year
Sales $ 2,369.8 $ $ $ $
658.0 - - 3,027.8
Operating $ 282.1 $ $ $ $
Income 40.0 (0.3) (6.8) 315.0
Pro Forma Adjustments
2012 Water &
Fluid Historical Historical Depreciation & Other Adjusted
Solutions Adjusted Flow Control Amortization Adjustments Pro Forma
Segment (in Results Acquisition Results
millions)
First Quarter
Sales $ 587.0 $ $ $ $
163.4 - - 750.4
Operating $ 63.7 $ $ $ $
Income 11.1 (0.1) (1.8) 72.9
Second Quarter
Sales $ 675.5 $ $ $ $
202.3 - - 877.8
Operating $ 98.9 $ $ $ $
Income 24.3 (0.1) (1.7) 121.4
Third Quarter
Sales $ 605.4 $ $ $ $
202.1 - - 807.5
Operating $ 70.3 $ $ $ $
Income 14.9 (0.1) 0.6 85.7
Fourth Quarter
Sales $ 770.5 $ $ $ $
- - - 770.5
Operating $ 58.1 $ $ $ $
Income - - 14.2 72.3
Full Year
Sales $ 2,638.4 $ $ $ $
567.8 - - 3,206.2
Operating $ 291.0 $ $ $ $
Income 50.3 (0.3) 11.2 352.2
Note: "Other" adjustments represent changes in corporate allocation
assumptions
Pro Forma Reconciliation
Pro Forma Adjustments
2011 Valves & Historical Historical Adjusted
Controls Adjusted Flow Control Depreciation & Other Pro Forma
Segment (in Results Acquisition Amortization Adjustments Results
millions)
First Quarter
Sales $ - $ $ $ $
506.2 - (0.2) 506.0
Operating $ - $ $ $ $
Income 66.4 (14.9) (9.3) 42.2
Second Quarter
Sales $ - $ $ $ $
575.4 - (0.9) 574.5
Operating $ - $ $ $ $
Income 87.9 (14.9) (9.4) 63.6
Third Quarter
Sales $ - $ $ $ $
661.1 - (0.1) 661.0
Operating $ - $ $ $ $
Income 101.9 (12.4) (6.2) 83.3
Fourth Quarter
Sales $ - $ $ $ $
539.7 - (3.0) 536.7
Operating $ - $ $ $ $
Income 68.9 (12.5) (13.3) 43.1
Full Year
Sales $ - $ $ $ $
2,282.4 - (4.2) 2,278.2
Operating $ - $ $ $ $
Income 328.2 (54.4) (41.6) 232.2
Pro Forma Adjustments
2012 Valves & Historical Historical Adjusted
Controls Adjusted Flow Control Depreciation & Other Pro Forma
Segment (in Results Acquisition Amortization Adjustments Results
millions)
First Quarter
Sales $ - $ $ $ $
621.3 - (12.7) 608.6
Operating $ - $ $ $ $
Income 83.7 (12.3) (10.6) 60.8
Second Quarter
Sales $ - $ $ $ $
602.4 - (5.0) 597.4
Operating $ - $ $ $ $
Income 93.1 (12.4) (9.8) 70.9
Third Quarter
Sales $ - $ $ $ $
629.6 - (9.5) 620.1
Operating $ - $ $ $ $
Income 70.9 (12.5) 11.3 69.7
Fourth Quarter
Sales $ 546.7 $ $ $ $
- - - 546.7
Operating $ 41.8 $ $ $ $
Income - - 0.4 42.2
Full Year
Sales $ 546.7 $ $ $ $
1,853.3 - (27.2) 2,372.8
Operating $ 41.8 $ $ $ $
Income 247.7 (37.2) (8.7) 243.6
Note: "Other" adjustments represent the elimination of sales to sanctioned
countries (which were terminated prior to the completion of the Flow Control
acquisition), and changes in corporate allocation assumptions.
Pro Forma Reconciliation
Pro Forma Adjustments
2011 Technical Historical Historical Adjusted
Solutions Adjusted Flow Control Depreciation & Other Pro Forma
Segment (in Results Acquisition Amortization Adjustments Results
millions)
First Quarter
Sales $ 274.9 $ $ $ $
162.2 - (21.0) 416.1
Operating $ 48.1 $ $ $ $
Income 29.4 (4.7) (10.1) 62.7
Second Quarter
Sales $ 278.2 $ $ $ $
178.5 - (29.9) 426.8
Operating $ 48.3 $ $ $ $
Income 20.2 (4.7) (8.5) 55.3
Third Quarter
Sales $ 276.0 $ $ $ $
217.0 - (42.3) 450.7
Operating $ 48.7 $ $ $ $
Income 33.6 (4.7) (12.3) 65.3
Fourth Quarter
Sales $ 257.8 $ $ $ $
224.8 - (52.2) 430.4
Operating $ 42.3 $ $ $ $
Income 51.0 (4.7) (13.8) 74.8
Full Year
Sales $ 1,086.9 $ $ $ $
782.5 - (145.4) 1,724.0
Operating $ 187.4 $ $ $ $
Income 134.1 (18.8) (44.7) 258.0
Pro Forma Adjustments
2012 Technical Historical Historical Adjusted
Solutions Adjusted Flow Control Depreciation & Other Pro Forma
Segment (in Results Acquisition Amortization Adjustments Results
millions)
First Quarter
Sales $ 271.2 $ $ $ $
211.2 - (61.3) 421.1
Operating $ 50.5 $ $ $ $
Income 35.8 (4.7) (19.7) 61.9
Second Quarter
Sales $ 266.0 $ $ $ $
176.1 - (28.3) 413.8
Operating $ 53.7 $ $ $ $
Income 27.9 (4.7) (12.4) 64.5
Third Quarter
Sales $ 260.1 $ $ $ $
188.1 - (6.5) 441.7
Operating $ 52.3 $ $ $ $
Income 39.0 (4.7) (6.4) 80.2
Fourth Quarter
Sales $ 433.7 $ $ $ $
- - (7.2) 426.5
Operating $ 75.6 $ $ $ $
Income - - 2.0 77.6
Full Year
Sales $ 1,231.0 $ $ $ $
575.4 - (103.2) 1,703.2
Operating $ 232.1 $ $ $ $
Income 102.7 (14.1) (36.6) 284.1
Note: "Other" adjustments represent the elimination of certain large projects
and changes in corporate allocation assumptions.
SOURCE Pentair Ltd.
Website: http://www.pentair.com
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