The City of Houston has selected planning, engineering and program management firm Lockwood, Andrews & Newnam Inc. (LAN) to develop...
Pentair announced its second quarter 2005 results, highlighting a 50% year-over-year increase in earnings per share (EPS) from continuing operations driven by stronger margins in Pentair's enclosures and water businesses, coupled with share gains in robust enclosures markets and the contributions of the new water businesses acquired in the WICOR purchase in August 2004.
Pentair's second quarter 2005 net sales totaled $788.5 million, up 49% from $530.4 million in the same period a year ago. Organic sales—removing the effects of acquisitions and excluding favorable foreign currency exchange—grew approximately 7%. Operating income for the second quarter totaled $111.5 million, 57% greater than the $71 million reported in the same period last year. A 14.1% margin in the second quarter reflected a gain of 70 basis points over the year-earlier level of 13.4%. Cash flow for the second quarter of 2005 totaled $117 million, bringing free cash flow for the first half of 2005 to $19 million. Pentair has targeted $200 million of free cash flow in 2005.
"The integration of our new water businesses and our water margin enhancement efforts both showed concrete progress in this our seasonally high quarter. The Enclosures Group continued its long streak of sales and margin improvements with several performance records established in the second quarter," said Randall J. Hogan, chairman and chief executive officer for Pentair. "These results demonstrate that we are executing very well in all of our businesses, and that we are getting solid bottom line results from our newly acquired water businesses."
In the Water Group, second quarter 2005 sales of $585.7 million were 66% higher than the $353.3 million recorded in the same period last year. Removing the effects of acquisitions and excluding favorable foreign currency exchange, sales were up approximately 4% over the second quarter of 2004 when the group's organic growth rate was 15%. Sales gains in specialty pumps, water treatment, foodservice, pool equipment and Asia more than offset lower sales in water systems pumps, Europe, and spa and bath equipment.
Second quarter 2005 operating income in the Water Group totaled $93.5 million, up 58% from $59.3 million for the same period last year. The group showed significant progress in margin expansion with operating income margin of 16% in the second quarter—only 80 basis points below the same period last year, prior to the WICOR acquisition. Pentair said the integration of its new water businesses is on schedule, with 17 of the facility closings or consolidations identified in its integration plan now completed or announced, up from 15 in the first quarter. Water margins are up 180 basis points over where they would have been had WICOR been included in the second quarter of last year.
Pentair's Enclosures Group delivered 15% sales growth with second quarter 2005 sales totaling $202.9 million compared to a year-earlier total of $177.1 million. Second quarter growth was driven by gains in all North American end markets, with sales in the rest of the world down slightly.
Second quarter operating income in the Enclosures Group increased 25% from the same period last year, totaling $27.1 million in 2005 versus $21.6 million in 2004. Margins reached 13.3%, expanding by 110 basis points over the second quarter 2004, and delivering the Enclosures Group's 14th consecutive quarter of sequential margin improvement. The group benefited from higher volume in North America and productivity gains from the Pentair Integrated Management System and supply management initiatives, as well as more stable raw material pricing.
Second quarter 2005 EPS included a $5.2 million pre-tax gain, or a net gain of $3.3 million after tax, from the sale of our investment in the stock of LN Holdings Corp. This gain was offset by a $3.2 million charge to tax expense related to an anticipated settlement of a routine German tax exam for prior years that is likely to be unfavorable. The overall effective tax rate of 38.5% in the second quarter of 2005 was higher than our normal 2005 tax run rate of 35.5% due to this additional $3.2 million of tax expense.
"Our performance during the first half of 2005 has proven the value of the steps we are taking to grow our company and build shareholder value," Hogan said. "We are clearly executing well in enclosures and most of our water businesses, and we continue to work to improve organic sales growth in water and to minimize costs from redundant operations during integration-related product line moves."
Hogan added, "Looking ahead to our third quarter expectations, we are initiating third quarter EPS guidance of between $0.43 and $0.47—at least 34% higher than third quarter 2004 continuing EPS. We are further tightening our full year 2005 EPS guidance to a range of between $2 and $2.05, which is, at minimum, 48% higher than 2004 continuing EPS."