- Second quarter sales of $800 million.
- Second quarter GAAP EPS of $0.68 and adjusted EPS of
$0.69.
- The company updates its 2019 GAAP EPS guidance to approximately
$2.13 and on an adjusted basis to approximately $2.35.
Reconciliations of GAAP to Non-GAAP measures are in the attached
financial tables.
Pentair plc (NYSE: PNR) today announced second quarter 2019
sales of $800 million. Sales were up 2 percent compared to sales
for the same period last year. Excluding currency translation,
acquisitions and divestitures, core sales grew 1 percent in the
second quarter. Second quarter 2019 earnings per diluted share from
continuing operations (“EPS”) were $0.68 compared to $0.44 in the
second quarter of 2018. On an adjusted basis, the company reported
EPS of $0.69 compared to $0.71 in the second quarter of 2018.
Segment income, adjusted net income, free cash flow, and adjusted
EPS are described in the attached schedules.
Second quarter 2019 operating income was $134 million, up 9
percent compared to operating income for the second quarter of
2018, and return on sales (“ROS”) was 16.7 percent, an increase of
100 basis points when compared to the second quarter of 2018. On an
adjusted basis, the company reported segment income of $154 million
for the second quarter, down 6 percent compared to segment income
for the second quarter of 2018, and ROS was 19.3 percent, a
decrease of 170 basis points when compared to the second quarter of
2018.
Net cash provided by operating activities of continuing
operations was $356 million and free cash flow provided by
continuing operations was $343 million for the quarter.
Pentair paid a regular cash dividend of $0.18 per share in the
second 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.
John L. Stauch, Pentair’s President and Chief Executive Officer,
commented: “We delivered solid second quarter performance even as
weather issues lingered during the quarter in several of our key
markets. Our recent acquisitions are performing well and are
helping to further our residential and commercial water treatment
strategy. During the quarter, we successfully completed a bond
offering and our balance sheet remains in excellent shape. Looking
ahead, we remain confident that we will exit the year positioned
for more normalized performance in 2020.”
OUTLOOK
The company updates its estimated 2019 GAAP EPS to approximately
$2.13 and on an adjusted EPS basis to approximately $2.35. The
company updates its full year 2019 sales guidance to approximately
flat to up 1 percent on a reported basis and approximately flat to
down 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 third quarter 2019 GAAP EPS
of approximately $0.50 - $0.52 and on an adjusted EPS basis of
approximately $0.54 - $0.56. The company expects third quarter
sales to be approximately flat to up 2 percent on a reported basis
and approximately down 1 to 3 percent on a core basis compared to
third 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
second 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 110 locations in 30 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
Six months ended
June 30,
June 30,
June 30,
June 30,
In millions, except per-share data
2019
2018
2019
2018
Net sales
$
799.5
$
780.6
$
1,488.4
$
1,513.2
Cost of goods sold
512.8
498.0
966.1
977.3
Gross profit
286.7
282.6
522.3
535.9
% of net sales
35.9
%
36.2
%
35.1
%
35.4
%
Selling, general and administrative
132.2
140.9
279.5
282.7
% of net sales
16.5
%
18.1
%
18.8
%
18.7
%
Research and development
20.7
19.1
41.4
37.9
% of net sales
2.6
%
2.4
%
2.8
%
2.5
%
Operating income
133.8
122.6
201.4
215.3
% of net sales
16.7
%
15.7
%
13.5
%
14.2
%
Other (income) expense:
Loss (gain) on sale of business
0.1
0.9
(3.4
)
6.2
Loss on early extinguishment of debt
—
17.1
—
17.1
Other income
(12.9
)
(4.2
)
(12.3
)
(3.8
)
Net interest expense
9.4
10.1
16.7
23.6
% of net sales
1.2
%
1.3
%
1.1
%
1.6
%
Income from continuing operations before
income taxes
137.2
98.7
200.4
172.2
Provision for income taxes
22.1
20.8
32.9
35.9
Effective tax rate
16.1
%
21.1
%
16.4
%
20.8
%
Net income from continuing
operations
115.1
77.9
167.5
136.3
(Loss) income from discontinued
operations, net of tax
(0.8
)
(36.4
)
(1.9
)
8.1
Net income
$
114.3
$
41.5
$
165.6
$
144.4
Earnings (loss) per ordinary
share
Basic
Continuing operations
$
0.68
$
0.44
$
0.98
$
0.77
Discontinued operations
(0.01
)
(0.21
)
(0.01
)
0.04
Basic earnings per ordinary share
$
0.67
$
0.23
$
0.97
$
0.81
Diluted
Continuing operations
$
0.68
$
0.44
$
0.98
$
0.76
Discontinued operations
(0.01
)
(0.21
)
(0.01
)
0.04
Diluted earnings per ordinary share
$
0.67
$
0.23
$
0.97
$
0.80
Weighted average ordinary shares
outstanding
Basic
169.8
176.9
170.6
178.1
Diluted
170.5
178.6
171.4
179.9
Cash dividends paid per ordinary
share
$
0.18
$
0.35
$
0.36
$
0.70
Pentair plc and
Subsidiaries
Condensed Consolidated Balance
Sheets (Unaudited)
June 30,
December 31,
In millions
2019
2018
Assets
Current assets
Cash and cash equivalents
$
80.5
$
74.3
Accounts and notes receivable, net
459.6
488.2
Inventories
396.7
387.5
Other current assets
104.7
89.4
Total current assets
1,041.5
1,039.4
Property, plant and equipment,
net
280.3
272.6
Other assets
Goodwill
2,287.5
2,072.7
Intangibles, net
354.2
276.3
Other non-current assets
206.5
145.5
Total other assets
2,848.2
2,494.5
Total assets
$
4,170.0
$
3,806.5
Liabilities and Equity
Current liabilities
Accounts payable
$
261.7
$
378.6
Employee compensation and benefits
68.7
111.7
Other current liabilities
379.8
328.4
Total current liabilities
710.2
818.7
Other liabilities
Long-term debt
1,215.1
787.6
Pension and other post-retirement
compensation and benefits
89.2
90.0
Deferred tax liabilities
119.8
105.9
Other non-current liabilities
229.1
168.2
Total liabilities
2,363.4
1,970.4
Equity
1,806.6
1,836.1
Total liabilities and equity
$
4,170.0
$
3,806.5
Pentair plc and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Six months ended
June 30,
June 30,
In millions
2019
2018
Operating activities
Net income
$
165.6
$
144.4
Loss (income) from discontinued
operations, net of tax
1.9
(8.1
)
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
(2.5
)
(5.8
)
Depreciation
24.4
24.9
Amortization
16.5
18.4
Deferred income taxes
(9.6
)
10.1
(Gain) loss on sale of business
(3.4
)
6.2
Share-based compensation
10.7
11.3
Trade name and other impairment
18.2
6.0
Loss on early extinguishment of debt
—
17.1
Pension settlement gain
(12.2
)
—
Pension and other post-retirement plan
contribution
(10.7
)
—
Changes in assets and liabilities, net
of effects of business acquisitions
Accounts and notes receivable
32.2
52.7
Inventories
3.1
(15.4
)
Other current assets
(18.8
)
(10.8
)
Accounts payable
(123.1
)
(45.9
)
Employee compensation and benefits
(22.5
)
(32.2
)
Other current liabilities
28.5
3.5
Other non-current assets and
liabilities
0.9
1.4
Net cash provided by operating activities
of continuing operations
99.2
177.8
Net cash used for operating activities of
discontinued operations
(2.5
)
(5.9
)
Net cash provided by operating
activities
96.7
171.9
Investing activities
Capital expenditures
(29.8
)
(20.3
)
Proceeds from sale of property and
equipment
0.4
(0.5
)
Proceeds from (payments due to) the sale
of businesses, net
0.7
(12.8
)
Acquisitions, net of cash acquired
(284.5
)
(0.9
)
Other
(1.5
)
—
Net cash used for investing activities of
continuing operations
(314.7
)
(34.5
)
Net cash used for investing activities of
discontinued operations
—
(7.1
)
Net cash used for investing activities
(314.7
)
(41.6
)
Financing activities
Net receipts of commercial paper and
revolving long-term debt
32.9
30.2
Proceeds from long-term debt
400.0
—
Repayments of long-term debt
—
(675.1
)
Debt issuance costs
(5.7
)
—
Premium paid on early extinguishment of
debt
—
(16.0
)
Transfer of cash to nVent
—
(74.2
)
Distribution of cash from nVent
—
993.6
Shares issued to employees, net of shares
withheld
7.2
6.3
Repurchases of ordinary shares
(150.0
)
(300.0
)
Dividends paid
(62.0
)
(125.9
)
Net cash provided by (used for) financing
activities
222.4
(161.1
)
Change in cash held for sale
—
27.0
Effect of exchange rate changes on cash
and cash equivalents
1.8
(3.8
)
Change in cash and cash
equivalents
6.2
(7.6
)
Cash and cash equivalents, beginning of
period
74.3
86.3
Cash and cash equivalents, end of
period
$
80.5
$
78.7
Pentair plc and
Subsidiaries
Reconciliation of the GAAP
operating activities cash flow to the non-GAAP free cash flow
(Unaudited)
Three months
Three months
Six months
Six months
ended
ended
ended
ended
March 31,
June 30,
June 30,
June 30,
In millions
2019
2019
2019
2018
Net cash provided by operating activities
of continuing operations
$
(257.1
)
$
356.3
$
99.2
$
177.8
Capital expenditures
(16.8
)
(13.0
)
(29.8
)
(20.3
)
Proceeds from sale of property and
equipment
0.3
0.1
0.4
(0.5
)
Free cash flow from continuing
operations
$
(273.6
)
$
343.4
$
69.8
$
157.0
Net cash used for operating activities of
discontinued operations
0.8
(3.3
)
(2.5
)
(5.9
)
Capital expenditures of discontinued
operations
—
—
—
(7.4
)
Proceeds from sale of property and
equipment of discontinued operations
—
—
—
2.3
Free cash flow
$
(272.8
)
$
340.1
$
67.3
$
146.0
Pentair plc and
Subsidiaries
Supplemental Financial
Information by Reportable Segment (Unaudited)
2019
2018
First
Second
Six
First
Second
Six
In millions
Quarter
Quarter
Months
Quarter
Quarter
Months
Net sales
Aquatic Systems
$
220.5
$
270.6
$
491.1
$
240.4
$
276.2
$
516.6
Filtration Solutions
239.3
285.6
524.9
251.6
262.1
513.7
Flow Technologies
228.7
243.0
471.7
240.3
241.9
482.2
Other
0.4
0.3
0.7
0.3
0.4
0.7
Consolidated
$
688.9
$
799.5
$
1,488.4
$
732.6
$
780.6
$
1,513.2
Segment income (loss)
Aquatic Systems
$
52.4
$
76.8
$
129.2
$
60.0
$
79.6
$
139.6
Filtration Solutions
33.7
50.0
83.7
33.7
52.3
86.0
Flow Technologies
30.1
41.9
72.0
38.7
44.4
83.1
Other
(17.5
)
(14.6
)
(32.1
)
(15.4
)
(12.2
)
(27.6
)
Consolidated
$
98.7
$
154.1
$
252.8
$
117.0
$
164.1
$
281.1
Return on sales
Aquatic Systems
23.8
%
28.4
%
26.3
%
25.0
%
28.8
%
27.0
%
Filtration Solutions
14.1
%
17.5
%
15.9
%
13.4
%
20.0
%
16.7
%
Flow Technologies
13.2
%
17.2
%
15.3
%
16.1
%
18.4
%
17.2
%
Consolidated
14.3
%
19.3
%
17.0
%
16.0
%
21.0
%
18.6
%
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
Third
Full
In millions, except per-share data
Quarter
Quarter
Quarter
Year
Net sales
$
688.9
$
799.5
approx
Flat - Up 2 %
approx
Flat - Up 1 %
Operating income
67.6
133.8
approx
Up 4 - 6 %
approx
Up 4 %
% of net sales
9.8
%
16.7
%
Adjustments:
Restructuring and other
1.1
6.7
approx
$
—
approx
$
8
Intangible amortization
8.2
8.3
approx
8
approx
32
Asset impairment
15.3
2.9
approx
—
approx
18
Inventory step-up
1.7
0.5
approx
—
approx
3
Deal-related costs and expenses
4.2
—
approx
—
approx
4
Equity income of unconsolidated
subsidiaries
0.6
1.9
approx
1
approx
5
Segment income
98.7
154.1
approx
Flat - Up 2 %
approx
Down 2 %
Return on sales
14.3
%
19.3
%
Net income from continuing operations—as
reported
52.4
115.1
approx
$84 - $88
approx
$
365
(Gain) loss on sale of business
(3.5
)
0.1
approx
—
approx
(4
)
Pension settlement gain
—
(12.2
)
approx
—
approx
(12
)
Adjustments to operating income
30.5
18.4
approx
8
approx
65
Income tax adjustments
(5.4
)
(3.8
)
approx
(1
)
approx
(12
)
Net income from continuing operations—as
adjusted
$
74.0
$
117.6
approx
$91 - $95
approx
$
402
Continuing earnings per ordinary
share—diluted
Diluted earnings per ordinary share—as
reported
$
0.30
$
0.68
approx
$0.50 - $0.52
approx
$
2.13
Adjustments
0.13
0.01
approx
0.04
approx
0.22
Diluted earnings per ordinary share—as
adjusted
$
0.43
$
0.69
approx
$0.54 - $0.56
approx
$
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 June
30, 2019 (Unaudited)
Actual
Q2 Net Sales Growth
Core
Currency
Acq. / Div.
Total
Total Pentair
1.3
%
(1.6
)%
2.7
%
2.4
%
Aquatic Systems
(1.5
)%
(0.4
)%
(0.1
)%
(2.0
)%
Filtration Solutions
1.4
%
(2.7
)%
10.3
%
9.0
%
Flow Technologies
4.6
%
(1.7
)%
(2.4
)%
0.5
%
Pentair plc and
Subsidiaries
Reconciliation of Net Sales
Growth to Core Net Sales Growth by Segment
For the Quarter Ending
September 30, 2019 and Year Ending December 31, 2019
(Unaudited)
Forecast
Q3 Net Sales Growth
Full Year Net Sales
Growth
Core
Currency
Acq. / Div.
Total
Core
Currency
Acq. / Div.
Total
Total Pentair
approx
(3) - (1) %
— %
3 %
0 - 2 %
(1) - 0 %
(1) %
2 %
0 - 1 %
Aquatic Systems
approx
(10) - (8) %
— %
(1) %
(11) - (9) %
(6) - (4) %
— %
(1) %
(7) - (5) %
Filtration Solutions
approx
1 - 3 %
(1) %
12 %
12 - 14 %
0 - 1 %
(2) %
10 %
8 - 9 %
Flow Technologies
approx
0 - 2 %
(1) %
(1) %
(2) - 0 %
1 - 3 %
(1) %
(2) %
(2) - 0 %
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Jim Lucas Senior Vice President, Investor Relations and
Treasurer Direct: 763-656-5575 Email: jim.lucas@pentair.com
Rebecca Osborn Senior Manager, External Communications Direct:
763-656-5589 Email: rebecca.osborn@pentair.com
Pentair (NYSE:PNR)
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