Pentair Reports Third Quarter 2020 Results

Excluding currency translation, acquisitions and divestitures, core sales grew 10 percent in the third quarter. Third quarter 2020 earnings per diluted share from continuing operations (“EPS”) were $0.66 compared to $0.54 in the third quarter of 2019. On an adjusted basis, the company reported EPS of $0.70 compared to $0.58 in the third quarter of 2019. Segment income, adjusted net income, free cash flow and adjusted EPS are described in the attached schedules.

Third quarter 2020 operating income was $128 million, up 18 percent compared to operating income for the third quarter of 2019, and return on sales (“ROS”) was 16.0 percent, an increase of 80 basis points when compared to the third quarter of 2019. On an adjusted basis, the company reported segment income of $141 million for the third quarter of 2020, up 14 percent compared to segment income for the third quarter of 2019, and ROS was 17.6 percent, an increase of 40 basis points when compared to the third quarter of 2019.

Consumer Solutions sales were up 25 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 23 percent in the third quarter. Segment income of $114 million was up 39 percent compared to the third quarter of 2019, and ROS was 24.2 percent, an increase of 250 basis points when compared to the third quarter of 2019.

Industrial & Flow Technologies sales were down 3 percent compared to sales for the same period last year. Excluding currency translation, core sales declined 4 percent in the third quarter. Segment income of $43 million was down 24 percent compared to the third quarter of 2019, and ROS was 13.0 percent, a decrease of 360 basis points when compared to the third quarter of 2019.

Net cash provided by operating activities of continuing operations for the quarter was $234 million compared to $167 million in the third quarter of 2019 and free cash flow from continuing operations for the quarter was $220 million compared to $152 million in the third quarter of 2019.

Net cash provided by operating activities of continuing operations in the nine months ended September 30, 2020 was $501 million compared to $266 million in the first nine months of the previous year and free cash flow from continuing operations in the nine months ended September 30, 2020 was $457 million compared to $222 million in the first nine months of the previous year.

Pentair paid a regular cash dividend of $0.19 per share in the third quarter of 2020. Pentair previously announced on September 22, 2020 that its Board of Directors approved a regular quarterly cash dividend of $0.19 that it will pay on November 6, 2020 to shareholders of record at the close of business on October 23, 2020. Pentair has increased its dividend for 44 consecutive years.

CEO’s Remarks
John L. Stauch, President and CEO, stated, “Our ability to deliver double digit sales and earnings growth in the quarter is a reflection of our diverse portfolio that includes a large mix of residential focused businesses that are currently experiencing strong demand.”

“Our Consumer Solutions segment delivered strong growth in the quarter led by strength in residential markets, particularly our Pool business. Our Industrial & Flow Technologies segment continues to be negatively impacted by delayed capital spending globally across its commercial and industrial markets, however, the business has shown stabilization as the year has progressed. We generated strong cash flow during the quarter and our balance sheet ended the quarter in excellent shape.”

“We believe we remain well positioned to navigate our way through these uncertain times. Furthermore, we continue to invest in our digital infrastructure and innovation throughout the company and specifically in our Consumer Solutions segment to position ourselves for an eventually strengthened economy. We believe there are ample organic and inorganic opportunities to build on our already strong foundation and we are in a great financial position to support our longer-term aspirations.”

“I would especially like to express my gratitude to our front-line employees for their personal commitment to our customers and shareholders during these times.”

2020 Guidance Update
The company updates its estimated 2020 GAAP EPS of approximately $2.05 to $2.10 and on an adjusted EPS basis of approximately $2.35 to $2.40. The company updates full year 2020 sales guidance of approximately $2.95 billion. The company expects full year free cash flow of greater than 100 percent of net income.