Pentair, Inc. announced third quarter 2011 sales of $891 million, an increase of 15 percent from the same quarter last year.
These results reflected growth across both segments, Water and Technical Products, including 11 percentage points from the acquisition of Norit s Clean Process Technologies (CPT) and 2 percentage points from favorable foreign currency. Earnings per diluted share from continuing operations (EPS) were $0.51 in the third quarter 2011. Third quarter 2011 results included restructuring charges of $2 million, or approximately $0.02 of EPS, related to repositioning actions in its Water business. Adjusting to exclude acquisition related costs and restructuring charges, third quarter 2011 EPS was $0.58, an increase of 5 percent over the same quarter last year.
"We had another solid quarter with balanced top-line growth and good margin performance across our businesses," said Randall J. Hogan, Pentair chairman and chief executive officer. "Growth investments continued to yield positive results with fast growth regions up 22 percent in the quarter, before including the CPT acquisition. Innovation, expanded distribution and improved operating performance helped to drive solid global demand across our end markets. The CPT results reflected strong double digit sales growth from a year ago, demonstrating the strength of its membrane technology and systems expertise in water and beverage solutions."
"Solid price realization of 2 percent in the quarter combined with productivity more than offset inflation. The year-over-year margin decline reflected the negative impact of the CPT acquisition and related intangible amortization and acquisition related costs, as we anticipated. We expect to drive sequential CPT margin improvement through a combination of volume leverage, lean-driven efficiencies, as well as repositioning efforts that are already underway," added Hogan.
The company reported third quarter operating income of $93 million compared to $91 million in the prior year quarter. Adjusting to exclude acquisition related costs and restructuring charges, operating income increased 11 percent to $101 million and the company achieved operating margins of 11.3 percent compared to 11.7 percent of a year ago, reflecting the impact of the CPT acquisition. Pricing combined with productivity gains more than offset inflation across both Water and Technical Products. Third quarter 2011 results included the benefit of a lower effective tax rate, largely resulting from the CPT acquisition and a favorable geographic mix.
Free cash flow was $70 million in the third quarter, resulting in $188 million through the first three quarters of 2011. The company said it expects to achieve free cash flow of approximately $250 million for the full year 2011.
Third Quarter Business Highlights
Water sales grew 20 percent year-over-year to $615 million, including 17 percentage points from the CPT acquisition and a two-percentage point favorable impact from foreign currency. Year-over-year sales growth was negatively impacted by approximately 6 percentage points due to sales in 2010 related to the Gulf Intracoastal Waterway (GIWW) project. Within the five Water global businesses, the third quarter sales performances were as follows:
Water s third quarter reported operating income totaled $60 million. Excluding the acquisition related costs and restructuring charges included in the Water segment, third quarter operating income increased 15 percent to $67 million while operating margins decreased 40 basis points to 11 percent, reflecting the negative 100 basis point impact from the CPT acquisition. Pricing and productivity improvements more than offset the negative impact from inflation and continued growth investments.
- Residential Flow sales were up 15 percent versus the prior year quarter, led by double-digit growth in U.S. residential de-watering products and the agricultural business.
- Residential Filtration sales were up 5 percent, as the benefit from new products and increased penetration in fast growth regions offset softness in the U.S. market.
- Pool sales were up 14 percent driven by strong demand for energy efficient pool products and expanded distribution.
- Engineered Flow sales were down 32 percent due to lower U.S. municipal sales largely related to the prior year benefit from GIWW, while commercial and industrial pumps sales increased year-over-year. The year-over-year impact of GIWW resulted in 28 percentage points of the decline.
- Filtration Solutions sales increased 141 percent year-over-year, reflecting a 133-percentage point or $89 million benefit from the CPT acquisition. The remaining 8 percentage points of growth mainly reflected increased sales in foodservice and desalination.
Technical Products delivered third quarter 2011 sales of $276 million, an increase of 6 percent versus the prior year quarter, including a three-percentage point favorable impact from foreign currency.
Technical Products third quarter reported operating income totaled $49 million, up 14 percent compared to $43 million in the same quarter last year. Third quarter 2011 operating margins increased to 17.6 percent, an increase of 130 basis points when compared to the prior year quarter. Strong pricing and productivity gains, more than offset the negative impact from inflation and continued growth investments.
- Solid global demand drove double-digit growth across many of the end markets served, including industrial, commercial, general electronics and energy, partially offset by an expected decline in communications.
- Sales in the U.S were relatively flat year-over-year, reflecting the softness in communications. Fast growth regions were up 29 percent, led by China and Latin America, due to distribution gains and expanded product offerings.
The company provided its fourth quarter 2011 EPS guidance of $0.57 to $0.60. Excluding the acquisition related costs and restructuring charges, the company expects an adjusted fourth quarter 2011 EPS in the range of $0.59 to $0.62, an increase of 20 to 27 percent from the prior year quarter, on an estimated sales growth of 17 to 19 percent.
The company expects full year 2011 reported EPS to be in the $2.26 to $2.29 range, including approximately $0.18 of acquisition related costs and restructuring charges. Excluding these costs, the company expects full year 2011 adjusted EPS in the range of $2.44 to $2.47. This represents an increase of 22 to 24 percent compared to 2010 EPS on expected full year 2011 sales of approximately $3.5 billion, up approximately 15 percent compared to the prior year.
"I m pleased with the performance and progress we ve made in 2011," added Hogan. "We enter the fourth quarter with solid price realization, fast growth region momentum and accelerated productivity efforts. Despite challenges in a few end markets, we continue to grow the top-line, expand margins and position Pentair for continued success in 2012 and beyond."