Pentair Reports 39% Sales Growth in 2004
Pentair today announced its full-year 2004 results, saying they reflect a series of achievements including the strategic repositioning of the Company, sales growth of 39 percent or 14 percent on an organic basis, a 36 percent gain in 2004 earnings per share (EPS) from continuing operations over that of the previous year, and a 50 basis point increase in operating margins to 10.9 percent.
Fourth quarter 2004 results were also positive with organic sales rising 10 percent over same period last year, and EPS from continuing operations of $0.33, up 38 percent over last year.
"Pentair's 2004 was a tremendous year distinguished by successful execution, not the least of which was the sale of our Tools Group and the acquisition of WICOR Industries," said Randall J. Hogan, Pentair chairman and chief executive officer. "This strategic repositioning, coupled with double digit growth and increased margins driven by good execution of our operating initiatives, has delivered total shareholder return in excess of 90 percent in 2004. As we enter 2005, we believe we are well-positioned to continue our high level of performance with two strong and growing business platforms, the destinies of which are firmly in our grasp."
Pentair's fourth quarter 2004 EPS from continuing operations of $0.33 increased 38 percent over fourth quarter 2003 EPS from continuing operations of $0.24. Pentair's fourth quarter 2004 net sales totaled $651.5 million, up 61 percent from $404.7 million in the same period a year ago. Fourth quarter organic sales -- removing the effects of acquisitions and excluding favorable foreign currency exchange -- grew 10 percent. Further adjusting for the three fewer days in the fourth quarter, organic sales growth was 15 percent. Operating income from continuing operations for the fourth quarter 2004 totaled $62.0 million, 47 percent greater than the $42.2 million reported in the fourth quarter of 2003. Excluding acquisitions, operating income increased approximately eight percent in the fourth quarter. Fourth quarter 2004 free cash flow was $46.1 million, bringing the total for the year to $215.2 million.
For the full year 2004, Pentair's sales from continuing operations increased 39 percent to $2.278 billion from the 2003 total of $1.643 billion. Operating income increased 45 percent to $247.2 million in 2004 from $170.2 million in 2003. EPS from continuing operations of $1.35 in 2004 increased 36 percent over 2003 EPS from continuing operations of $0.99.
Operating Results by Group
In the Water Group, fourth quarter 2004 sales of $469.5 million were 86 percent higher than the $252.3 million recorded in the same period last year, reflecting the impact of the WICOR acquisition and strong organic growth. Organic sales, without acquisitions and foreign exchange, and adjusted for days, increased about 11 percent, reflecting strong domestic pool sales, and growth in US, Asian, and European pump and filtration sales.
Fourth quarter 2004 operating income of $49.1 million in the Water Group reflected a 52 percent gain over the same period last year. Operating income margins in the Water Group were 10.5 percent in the fourth quarter 2004, down 230 basis points reflecting the lower initial margins of the former WICOR businesses and one-time costs related to the consolidation of pump facilities and other integration activities. Adding back these one-time costs of about $5 million, operating income margins in the fourth quarter would have been 11.5 percent.
Pentair said integration of the former WICOR water businesses advanced in the fourth quarter with nine facilities closed or consolidated to date, and another six closings or consolidations in process. Construction of a water products manufacturing facility near the campus of the existing Enclosures operation in Reynosa, Mexico, will be complete in the first quarter of 2005, with product transfers starting immediately thereafter. Product rationalization efforts are well underway, and early results include a 20 percent reduction in storage tank SKUs and a 50 percent reduction in residential filtration SKUs. Sales forces serving certain pump markets were realigned to take advantage of cross-selling opportunities. Consistent with its original plan, Pentair expects integration benefits to begin exceeding costs late in the first quarter of 2005.
Enclosures Group sales in the fourth quarter 2004 totaled $182.2 million compared to a year-earlier total of $152.5 million, a 20 percent increase. This performance was driven by the Group's improved market position with continued success in penetrating new vertical markets, new products, and growth in core markets. Pentair noted that the fourth quarter of 2004 was the Enclosure Group's eighth consecutive quarter of sequential sales growth.
Fourth quarter operating income in the Enclosures Group increased 48 percent from the same period last year, totaling $23.7 million in 2004 versus $16.0 million in 2003. Margins reached 13 percent, expanding by 250 basis points over the fourth quarter 2003 and by 20 basis points over the third quarter 2004, delivering the Enclosures Group's 12th consecutive quarter of sequential margin improvement. This performance was driven by higher volume and productivity gains from lean enterprise and supply management initiatives.
"Our efforts to achieve operating excellence have produced solid progress over the last four years and, now, we believe we have transformed Pentair to maximize our growth opportunities and deliver even higher levels of performance," Hogan said. "As we enter 2005, the integration of the former WICOR businesses is proceeding as planned, and we are executing a robust and reliable integration process that we expect will continue to serve us well when applied to future Water and Enclosures acquisitions.
"As for 2005, we expect first quarter EPS of between $0.35 and $0.38, which is at least 25 percent higher than the same period last year," Hogan said. "For the second quarter 2005, we anticipate EPS of $0.61 to $0.65, which is at minimum 45 percent higher than the same period in 2004. This guidance reflects the new seasonality of the transformed Pentair. In addition, we are reaffirming our previous guidance for the full-year 2005 of $1.95 to $2.10, an increase of more than 45 percent from 2004."
In a separate news release issued today, Pentair announced it has appointed Richard J. Cathcart, formerly president and COO of Pentair's Water Group, to vice chairman. In his new role, Cathcart will lead Pentair's intensified growth focus with primary responsibilities for international growth and for business development. He will continue in his leadership role with Pentair Water.
Pentair (NYSE: PNR) is a diversified operating company headquartered in Minnesota. Its Water Group is a global leader in providing innovative products and systems used worldwide in the movement, treatment, storage and enjoyment of water. Pentair's Enclosures Group is a leader in the global enclosures market, designing and manufacturing standard, modified and custom enclosures that house and protect sensitive electronics and electrical components. 2004 revenues from continuing operations were $2.28 billion, or $2.76 billion on a pro forma basis (as if Pentair's 2004 acquisitions had been completed at the beginning of the year). Pentair has approximately 13,000 employees worldwide.
Source: Pentair plc.