- First quarter sales of $689
million.
- First quarter GAAP EPS of $0.30 and
adjusted EPS of $0.43.
- The company reiterates its 2019 GAAP
EPS from continuing operations guidance of approximately $2.04 -
$2.09 and on an adjusted basis of approximately $2.30 - $2.35.
Reconciliations of GAAP to Non-GAAP measures are in the attached
financial tables.
Pentair plc (NYSE: PNR) today announced first quarter 2019 sales
of $689 million. Sales were down 6 percent compared to sales for
the same period last year. Excluding currency translation,
acquisitions and divestitures, core sales declined 4 percent in the
first quarter. First quarter 2019 earnings per diluted share from
continuing operations (“EPS”) were $0.30 compared to $0.32 in the
first quarter of 2018. On an adjusted basis, the company reported
EPS of $0.43 compared to $0.49 in the first quarter of 2018.
Segment income, adjusted net income, free cash flow, and adjusted
EPS are described in the attached schedules.
First quarter 2019 operating income was $68 million, down 27
percent compared to operating income for the first quarter of 2018,
and return on sales (“ROS”) was 9.8 percent, a decrease of 290
basis points when compared to the first quarter of 2018. On an
adjusted basis, the company reported segment income of $99 million
for the first quarter, down 16 percent compared to segment income
for the first quarter of 2018, and ROS was 14.3 percent, a decrease
of 170 basis points when compared to the first quarter of 2018.
Net cash used for operating activities of continuing operations
was $257 million and free cash flow usage from continuing
operations was $274 million for the quarter.
Pentair paid a regular cash dividend of $0.18 per share in the
first quarter of 2019. Pentair previously announced on December 10,
2018 that its Board of Directors approved a 3 percent increase in
the company's regular annual cash dividend rate for 2019 to $0.72
from $0.70, adjusted for the spin-off of nVent Electric plc. This
marks the 43rd consecutive year that Pentair has increased its
dividend.
“Wet and cold weather delayed pool construction activity in
several key markets,” said John L. Stauch, Pentair President and
Chief Executive Officer. “We have not seen any significant changes
in demand trends within the important Aquatics markets. The
inclement weather also impacted our higher margin Specialty Ag
Spray business within Flow Technologies. As a result of slower
sell-through during the first quarter, inventory levels were not
reduced to the levels we originally anticipated. We expect
inventory levels in the channel to come down as stronger
sell-through resumes in the second and third quarters.”
“We believe this is a 2019 event and we expect to be even better
positioned for the season next year. We continue to invest in our
prioritized growth initiatives around advancing pool growth and
accelerating residential and commercial water treatment. We are
accelerating our productivity initiatives across operations and
material sourcing and optimizing our cost structure. We have a
strong capital structure, solid free cash flow generation, and we
are continuing to invest in our strategy to be the leading
residential and commercial water treatment company.”
OUTLOOK
The company reiterates its estimated 2019 GAAP EPS from
continuing operations of approximately $2.04 - $2.09 and on an
adjusted EPS basis of approximately $2.30 - $2.35. The company
reiterates its full year 2019 sales guidance of up approximately 1
to 2 percent on a reported basis and approximately flat to up 1
percent on a core basis compared to full year 2018. The company
expects full year free cash flow to approximate adjusted net
income.
In addition, the company introduces second quarter 2019 GAAP EPS
from continuing operations guidance of approximately $0.58 - $0.61
and on an adjusted EPS basis of approximately $0.63 - $0.66. The
company expects second quarter sales to be up approximately 1 to 2
percent on a reported basis and approximately flat to up 1 percent
on a core basis compared to second quarter 2018.
EARNINGS CONFERENCE CALL
Pentair President and Chief Executive Officer John L. Stauch and
Chief Financial Officer Mark C. Borin will discuss the company’s
first quarter 2019 results on a two-way conference call with
investors at 9:00 a.m. Eastern today. A live audio webcast of the
call, along with the related presentation, can be accessed in the
Investor Relations section of the company’s website,
www.pentair.com, shortly before the call begins.
Reconciliations of non-GAAP financial measures are set forth in
the attachments to this release and in the presentation, each of
which can be found on Pentair’s website. The webcast and
presentation will be archived at the company’s website following
the conclusion of the event.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release contains statements that we believe to be
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical fact are forward-looking statements.
Without limitation, any statements preceded or followed by or that
include the words "targets," "plans," "believes," "expects,"
"intends," "will," "likely," "may," "anticipates," "estimates,"
"projects," "should," "would," "positioned," "strategy," "future"
or words, phrases or terms of similar substance or the negative
thereof, are forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject
to risks, uncertainties, assumptions and other factors, some of
which are beyond our control, which could cause actual results to
differ materially from those expressed or implied by such
forward-looking statements. These factors include overall global
economic and business conditions impacting our business, including
the strength of housing and related markets; demand, competition
and pricing pressures in the markets we serve; volatility in
currency exchange rates; failure of markets to accept new product
introductions and enhancements; the ability to successfully
identify, finance, complete and integrate acquisitions; the ability
to successfully integrate the Aquion and Pelican Water
Systems acquisitions; the ability to achieve the benefits of our
restructuring plans and cost reduction initiatives; risks
associated with operating foreign businesses; the impact of
material cost and other inflation; the impact of seasonality
of sales and weather conditions; our ability to comply with
laws and regulations; the impact of changes in laws, regulations
and administrative policy, including those that limit U.S. tax
benefits or impact trade agreements and tariffs; the outcome of
litigation and governmental proceedings; the ability to
realize the anticipated benefits from the separation
of nVent Electric plc from Pentair; and the ability to
achieve our long-term strategic operating goals. Additional
information concerning these and other factors is contained in our
filings with the Securities and Exchange Commission, including our
Annual Report on Form 10-K for the year ended December 31, 2018.
All forward-looking statements speak only as of the date of this
release. Pentair plc assumes no obligation, and disclaims any
obligation, to update the information contained in this
release.
ABOUT PENTAIR PLC
At Pentair, we believe the health of our world depends on
reliable access to clean water. We deliver a comprehensive range of
smart, sustainable water solutions to homes, business and industry
around the world. Our industry leading and proven portfolio of
solutions enables our customers to access clean, safe water.
Whether it’s improving, moving or enjoying water, we help manage
the world’s most precious resource. Smart, Sustainable, Water
Solutions. For Life.
Pentair had revenue in 2018 of $3 billion, and trades under the
ticker symbol PNR. With approximately 130 locations in 34 countries
and 10,000 employees, we believe that the future of water depends
on us. To learn more, visit www.pentair.com.
Pentair plc and Subsidiaries Condensed
Consolidated Statements of Operations (Unaudited)
Three months ended March 31, March 31,
In millions, except per-share data
2019
2018 Net sales $ 688.9 $ 732.6 Cost of goods sold
453.3 479.3 Gross profit
235.6 253.3 % of net sales 34.2 % 34.6 % Selling, general and
administrative 147.3 141.8 % of net sales 21.4 % 19.4 % Research
and development 20.7 18.8 % of net sales 3.0 %
2.6 % Operating income 67.6 92.7 % of net sales
9.8 % 12.7 %
Other (income)
expense: (Gain) loss on sale of business (3.5 ) 5.3 Other
expense 0.6 0.4 Net interest expense 7.3 13.5 % of net sales
1.1 % 1.8 % Income from continuing
operations before income taxes 63.2 73.5 Provision for income taxes
10.8 15.1 Effective tax rate 17.1 %
20.5 %
Net income from continuing operations 52.4
58.4 (Loss) income from discontinued operations, net of tax
(1.1 ) 44.5
Net income
$ 51.3 $ 102.9
Earnings
(loss) per ordinary share Basic Continuing operations $
0.31 $ 0.33 Discontinued operations (0.01 )
0.24 Basic earnings per ordinary share
$ 0.30 $ 0.57
Diluted Continuing
operations $ 0.30 $ 0.32 Discontinued operations
— 0.25 Diluted earnings per
ordinary share $ 0.30 $ 0.57
Weighted average ordinary shares outstanding Basic 171.6
179.2 Diluted 172.5 181.5
Cash dividends paid per ordinary
share $ 0.18 $ 0.35
Pentair plc and
Subsidiaries Condensed Consolidated Balance Sheets
(Unaudited)
March 31,2019
December 31,2018 In millions
Assets Current assets Cash and cash equivalents $
78.9 $ 74.3 Accounts and notes receivable, net 645.7 488.2
Inventories 421.8 387.5 Other current assets
105.2 89.4 Total current assets 1,251.6 1,039.4
Property, plant and equipment, net 279.1 272.6
Other
assets Goodwill 2,283.0 2,072.7 Intangibles, net 361.5 276.3
Other non-current assets 207.0
145.5 Total other assets 2,851.5
2,494.5
Total assets $ 4,382.2 $
3,806.5
Liabilities and Equity Current liabilities
Accounts payable $ 265.3 $ 378.6 Employee compensation and benefits
94.2 111.7 Other current liabilities 345.8
328.4 Total current liabilities 705.3 818.7
Other
liabilities Long-term debt 1,370.7 787.6 Pension and other
post-retirement compensation and benefits 89.8 90.0 Deferred tax
liabilities 124.6 105.9 Other non-current liabilities
221.4 168.2 Total liabilities
2,511.8 1,970.4
Equity
1,870.4 1,836.1
Total liabilities and
equity $ 4,382.2 $ 3,806.5
Pentair plc and Subsidiaries Condensed Consolidated
Statements of Cash Flows (Unaudited)
Three months ended March 31, March
31, In millions
2019
2018 Operating activities Net income $ 51.3 $ 102.9
Loss (income) from discontinued operations, net of tax 1.1 (44.5 )
Adjustments to reconcile net income from continuing operations
to net cash provided by (used for) operating activities of
continuing operations Equity income of unconsolidated
subsidiaries (0.6 ) (0.6 ) Depreciation 12.0 12.6 Amortization 8.2
9.3 Deferred income taxes (1.7 ) (9.9 ) (Gain) loss on sale of
business (3.5 ) 5.3 Share-based compensation 5.4 6.0 Trade name and
other impairment 15.3 —
Changes in assets and liabilities, net
of effects of business acquisitions Accounts and notes
receivable (154.0 ) (146.2 ) Inventories (22.2 ) (8.4 ) Other
current assets (22.5 ) 5.6 Accounts payable (118.2 ) (59.7 )
Employee compensation and benefits (18.9 ) (30.1 ) Other current
liabilities (8.3 ) (39.6 ) Other non-current assets and liabilities
(0.5 ) 3.3 Net
cash used for operating activities of continuing operations (257.1
) (194.0 ) Net cash provided by operating activities of
discontinued operations 0.8
26.4 Net cash used for operating activities
(256.3 ) (167.6 )
Investing activities Capital expenditures
(16.8 ) (11.5 ) Proceeds from sale of property and equipment 0.3 —
Proceeds from (payments due to) the sale of businesses, net 0.7
(13.8 ) Acquisitions, net of cash acquired (287.2 ) (0.9 ) Other
(1.5 ) — Net cash
used for investing activities of continuing operations (304.5 )
(26.2 ) Net cash used for investing activities of discontinued
operations — (5.0
) Net cash used for investing activities (304.5 ) (31.2 )
Financing activities Net receipts of commercial paper and
revolving long-term debt 584.1 417.5 Shares issued to employees,
net of shares withheld 5.9 0.9 Repurchases of ordinary shares —
(150.0 ) Dividends paid (31.0 )
(63.3 ) Net cash provided by financing activities of
continuing operations 559.0 205.1 Net cash provided by financing
activities of discontinued operations —
792.7 Net cash provided by financing
activities 559.0 997.8
Change in cash held for sale — (809.7
)
Effect of exchange rate changes on cash and cash
equivalents 6.4
(4.8 )
Change in cash and cash equivalents 4.6 (15.5
) Cash and cash equivalents, beginning of period
74.3 86.3
Cash and
cash equivalents, end of period $ 78.9
$ 70.8
Pentair plc and
Subsidiaries Reconciliation of the GAAP operating activities
cash flow to the non-GAAP free cash flow (Unaudited)
Three months ended March 31,
March 31, In millions
2019
2018 Net cash used for operating activities of continuing
operations $ (257.1 ) $ (194.0 ) Capital expenditures (16.8 ) (11.5
) Proceeds from sale of property and equipment
0.3 —
Free cash flow from continuing
operations $ (273.6 ) $ (205.5 ) Net cash
provided by operating activities of discontinued operations 0.8
26.4 Capital expenditures of discontinued operations — (5.3 )
Proceeds from sale of property and equipment of discontinued
operations — 2.3
Free cash flow $ (272.8 ) $ (182.1 )
Pentair plc and Subsidiaries Supplemental
Financial Information by Reportable Segment (Unaudited)
2019 2018 First
First In millions
Quarter
Quarter Net sales Aquatic Systems $ 220.5 $ 240.4
Filtration Solutions 239.3 251.6 Flow Technologies 228.7 240.3
Other 0.4 0.3
Consolidated $ 688.9 $ 732.6
Segment income (loss) Aquatic Systems $ 52.4 $ 60.0
Filtration Solutions 33.7 33.7 Flow Technologies 30.1 38.7 Other
(17.5 ) (15.4 ) Consolidated
$ 98.7 $ 117.0
Return on
sales Aquatic Systems 23.8 % 25.0 % Filtration Solutions 14.1 %
13.4 % Flow Technologies 13.2 %
16.1 % Consolidated 14.3 % 16.0
%
Pentair plc and Subsidiaries
Reconciliation of the GAAP year ended December 31, 2019 to the
non-GAAP excluding the effect of 2019 adjustments
(Unaudited)
Actual Forecast First
Second
Full
In millions, except per-share data
Quarter
Quarter
Year
Net sales $ 688.9 approx Up 1 - 2 %
approx Up 1 - 2 % Operating income 67.6 approx Up 16
- 18 % approx Up 9 - 11 % % of net sales 9.8 % Adjustments:
Restructuring and other 1.1 approx — approx 1 Intangible
amortization 8.2 approx 9 approx 35 Asset impairment 15.3 approx —
approx 15 Inventory step-up 1.7 approx 1 approx 3 Deal-related
costs and expenses 4.2 approx — approx 4 Equity income of
unconsolidated subsidiaries 0.6 approx
1 approx 4 Segment income 98.7 approx Down 5 -
7 % approx Flat - Up 2 % Return on sales 14.3 % Net income from
continuing operations—as reported 52.4 approx $100 - $105 approx
$351 - $360 Gain on sale of business (3.5 ) approx — approx (4)
Adjustments to operating income 30.5 approx 10 approx 58 Income tax
adjustments (5.4 ) approx (2)
approx (12) Net income from continuing operations—as
adjusted $ 74.0 approx $108 - $113
approx $393 - $402
Continuing earnings per
ordinary share—diluted Diluted earnings per ordinary share—as
reported $ 0.30 approx $0.58 - $0.61 approx $2.04 - $2.09
Adjustments 0.13 approx 0.05
approx 0.26 Diluted earnings per ordinary share—as
adjusted $ 0.43 approx $0.63 - $0.66
approx $2.30 - $2.35
Pentair plc and
Subsidiaries Reconciliation of the GAAP year ended December
31, 2018 to the non-GAAP excluding the effect of 2018
adjustments (Unaudited)
First Second Third Fourth
Full
In millions, except per-share data
Quarter
Quarter Quarter Quarter
Year
Net sales $ 732.6 $ 780.6
$ 711.4 $ 740.5 $ 2,965.1
Operating income 92.7 122.6 108.4 113.0 436.7 % of net sales 12.7 %
15.7 % 15.2 % 15.3 % 14.7 % Adjustments: Restructuring and other
5.6 19.0 3.5 3.7 31.8 Intangible amortization 9.3 9.1 8.6 7.9 34.9
Trade name and other impairment — 6.0 — 6.0 12.0 Corporate
allocations 8.8 2.2 — — 11.0 Deal-related costs and expenses — — —
2.0 2.0 Equity income of unconsolidated subsidiaries
0.6 5.2 1.3
1.3 8.4 Segment income
117.0 164.1 121.8 133.9 536.8 Return on sales 16.0 % 21.0 % 17.1 %
18.1 % 18.1 % Net income from continuing operations—as reported
58.4 77.9 91.2 94.2 321.7 Loss on sale of business 5.3 0.9 0.2 0.9
7.3 Loss on early extinguishment of debt — 17.1 — — 17.1 Interest
expense adjustment 6.0 2.4 — — 8.4 Pension and other
post-retirement mark-to-market loss — — 2.2 1.4 3.6 Adjustments to
operating income 23.7 36.3 12.1 19.6 91.7 Income tax adjustments
(4.5 ) (7.1 )
(10.3 ) (11.5 ) (33.4 ) Net income from
continuing operations—as adjusted $ 88.9
$ 127.5 $ 95.4 $ 104.6
$ 416.4
Continuing earnings per ordinary
share—diluted Diluted earnings per ordinary share—as reported $
0.32 $ 0.44 $ 0.52 $ 0.54 $ 1.81 Adjustments
0.17 0.27 0.02
0.06 0.54 Diluted
earnings per ordinary share—as adjusted $ 0.49
$ 0.71 $ 0.54 $ 0.60
$ 2.35
Pentair plc and
Subsidiaries Reconciliation of Net Sales Growth to Core Net
Sales Growth by Segment For the Quarter Ending March 31,
2019 (Unaudited) Actual Q1 Net Sales
Growth Core Currency
Acq. / Div. Total Total Pentair
(4.2 )% (2.4 )%
0.6 % (6.0 )% Aquatic Systems
(6.4 )% (0.8 )% (1.1 )% (8.3 )% Filtration Solutions (6.0 )% (3.7
)% 4.8 % (4.9 )% Flow Technologies (0.3 )% (2.4 )%
(2.1 )% (4.8 )%
Pentair plc and
Subsidiaries Reconciliation of Net Sales Growth to Core Net
Sales Growth by Segment For the Quarter Ending June 30, 2019
and Year Ending December 31, 2019 (Unaudited)
Forecast Q2 Net Sales
Growth Full Year Net Sales Growth Acq.
/ Acq. / Core
Currency Div. Total
Core Currency Div.
Total Total Pentair approx 0 - 1 %
(2) % 3 % 1 - 2 % 0 - 1 % (2) %
3 % 1 - 2 % Aquatic Systems approx (1) - 0 % 0 % 0 %
(1) - 0 % (2) - 0 % 0 % 0 % (2) - 0 % Filtration Solutions approx
(2) - 0 % (3) % 10 % 5 - 7 % (1) - 0 % (2) % 10 % 7 - 8 % Flow
Technologies approx 2 - 4 % (2) % (2) %
(2) - 0 % 2 - 4 % (1) % (2) % (1) - 1 %
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PENTAIR CONTACTSJim LucasSenior Vice President, Investor
Relations and TreasurerDirect: 763-656-5575Email:
jim.lucas@pentair.com
Rebecca OsbornSenior Manager, External CommunicationsDirect:
763-656-5589Email: rebecca.osborn@pentair.com
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