Pentair’s Growth and Cost Initiatives Drive 15% Gain in Second Quarter 2002 EPS

Pentair's second quarter net sales totaled $708.1 million, up three percent over sales of $689.4 million in the prior year. Operating income totaled $74.6 million, seven percent greater than the $69.6 million of operating income reported in the second quarter of 2001. Free cash flow in the first half of 2002 totaled $87.2 million -- representing a $33.8 million gain over the same period last year, a 135 percent conversion of first-half net income, and cash EPS of $1.75.

"Our second quarter 2002 performance demonstrates that our supply management, lean enterprise, and cash flow initiatives are generating concrete results, and that growth-oriented actions are contributing to our improved performance," said Randall J. Hogan, Pentair chairman and CEO. "Our Tools and Enclosures groups realized strong margin gains compared to the first quarter of this year, and sales in both our Tools and Water Technologies groups increased by double-digit percentages."

In the Tools Group, record second quarter 2002 sales of $303.8 million were 11 percent higher than in the same period last year, while operating income of $30.8 million improved 50 percent on the same comparison. Second quarter operating income margins were 10.2 percent, representing an increase of 270 basis points over the second quarter 2001. Sell-through in all channels improved over prior-year levels, with particularly strong activity in pressure washer and woodworking equipment lines.

In the Water Technologies Group, second quarter sales of $265.5 million -- an 11 percent gain over the same period last year -- was due to record high seasonal activity in the pool and spa equipment business, robust sales in retail and municipal markets, and strong international sales. Second quarter 2002 operating income of $43.7 million gained eight percent over the same period last year, driven principally by volume increases. Margins in the second quarter were 16.5 percent, down slightly from the prior year due to less favorable product mix.

In the Enclosures segment, sales of $138.8 million and operating income of $7.0 million in the second quarter of 2002 were down significantly against year-ago levels due to continued slow capital spending and weak global technology markets. Enclosures Group sales have been essentially flat during the last three quarters, but margins improved sequentially by 90 basis points in the first quarter of 2002 and gained another 170 basis points in the second quarter of 2002.

"There's uncertainty about the economy and its impact on business in the current environment," Hogan said. "Despite these circumstances, our Tools business has regained double-digit margins and moved from defense to offense; margins in the Water Technologies business are strong, and our core pump and water treatment markets are improving; and, cost productivity actions in our Enclosures business are taking hold while industrial markets appear to be stabilizing.

"Looking forward, assuming our markets continue their current pace of recovery, that we continue to build share in our water markets, and that Enclosures' sales are flat to up slightly in the second half, we expect to remain on track with 2002 EPS expectations of between $2.80 and $2.90," Hogan added.