Pentair Reports Fourth Quarter and Full Year 2019 Results

Excluding currency translation, acquisitions and divestitures, core sales declined 1 percent in the fourth quarter. Fourth quarter 2019 earnings per diluted share from continuing operations (“EPS”) were $0.61 compared to $0.54 in the fourth quarter of 2018. On an adjusted basis, the company reported EPS of $0.68 compared to $0.60 in the fourth quarter of 2018. Segment income, adjusted net income, free cash flow, and adjusted EPS are described in the attached schedules.

Fourth quarter 2019 operating income was $122 million, up 8 percent compared to operating income for the fourth quarter of 2018, and return on sales (“ROS”) was 16.2 percent, an increase of 90 basis points when compared to the fourth quarter of 2018. On an adjusted basis, the company reported segment income of $141 million for the fourth quarter, up 5 percent compared to segment income for the fourth quarter of 2018, and ROS was 18.6 percent, an increase of 50 basis points when compared to the fourth quarter of 2018.

Full year net cash provided by operating activities of continuing operations was $345 million and free cash flow from continuing operations was $287 million.

Pentair paid dividends of $0.18 per share in the fourth quarter of 2019. Pentair previously announced on December 9, 2019 that its Board of Directors approved a 6 percent increase in the company’s regular quarterly cash dividend rate (from $0.18 per share to $0.19 per share) that it will pay on February 7, 2020 to shareholders of record at the close of business on January 24, 2020. 2020 will mark the 44th consecutive year that Pentair has increased its dividend.

John L. Stauch, Pentair’s President and Chief Executive Officer commented: “We are very pleased to deliver fourth quarter and full year results in line with our expectations. During 2019, we completed two strategic acquisitions that allowed us to move closer to the consumer. We made great strides in accelerating our growth investments around marketing, brand building and innovation.”

“In addition, we finalized a detailed North America segmentation analysis that has provided us information on how consumers make purchase decisions, in essence, codifying the customer journeys with Pentair and our products. This segmentation data helped inform us to re-organize into two reporting segments, Consumer Solutions, which are business-to-consumer related businesses, and Industrial & Flow Technologies, which are primarily business-to-business oriented. This new segment structure is focused on better alignment around our product and service offerings by customer type to maximize the customer experience and drive profitable growth.”

“Despite macro challenges in 2019, we made great progress with respect to our vision to build a high-performance growth culture. Our outlook for 2020 reflects us returning to growth and we continue to have a strong balance sheet to fund our most attractive growth opportunities, both organically and inorganically, while also returning capital to our shareholders. We continue to invest in our top priorities and have made solid progress in further positioning Pentair as a leading water treatment company.”

Outlook

The company introduces its 2020 GAAP EPS guidance of $2.36 to $2.41 and on an adjusted basis of $2.50 to $2.55. The company anticipates full year 2020 sales up approximately 1 to 3 percent on a reported basis and up approximately 2 to 4 percent on a core basis. The company expects to deliver full year free cash flow greater than 100 percent of net income.

In addition, the company introduces first quarter 2020 GAAP EPS from continuing operations guidance of $0.44 to $0.47 and on an adjusted EPS basis of $0.48 to $0.51. The company expects first quarter sales to be up approximately 3 to 5 percent on a reported basis and up approximately 4 to 6 percent on a core basis compared to first quarter 2019.