News Column

Pentair Reports Second Quarter 2014 Results

July 31, 2014

* Second quarter sales of $1.9 billion. * Adjusted EPS grew 13 percent to $1.04 and adjusted operating margins expanded 110 basis points to 14.8 percent. * Free cash flow exceeded $380 million in the quarter and the company expects to deliver full year free cash flow greater than 110 percent of net income. * The company updates 2014 adjusted EPS guidance to a range of $3.65 - $3.70 from a range of $3.85 - $4.00 in part reflecting today's announcement that the Board of Directors has approved a decision to exit our Water Transport business in Australia. * The company also updates its 2015 EPS target to $4.50 from $5.00 reflecting the exclusion of the Water Transport business, ongoing Energy CapEx deferrals, and lingering economic headwinds. Reconciliations of GAAP to Non-GAAP measures are in the attached financial tables. MANCHESTER, United Kingdom - July 31, 2014 - Pentair plc (NYSE: PNR) today announced second quarter 2014 sales of $1.9 billion. Sales were down 3 percent compared to sales for the same period last year. Adjusted second quarter 2014 earnings per diluted share ("EPS") were $1.04, up 13 percent from adjusted EPS of $0.92 in the second quarter of last year. On a GAAP basis, the company reported EPS of $0.82 compared to EPS of $0.75 in the second quarter of 2013. Adjusted EPS and operating income exclude repositioning costs, acquisition and redomicile-related expenses, gain/loss on sale of a business and certain tax items. Second quarter 2014 adjusted operating income was $283 million, up 5 percent compared to adjusted operating income for second quarter 2013, and adjusted operating margins were 14.8 percent, an expansion of 110 basis points when compared to adjusted 2013 operating margins. On a GAAP basis, the company reported operating income of $228 million. Free cash flow in the quarter was $384 million and $358 million for the first half of 2014.  The company expects to deliver full year free cash flow greater than 110 percent of net income. Pentair paid dividends of $0.25 per share in each of the first and second quarters of 2014.  Pentair had previously announced on May 20, 2014 the approval by its shareholders of an ordinary cash dividend of $1.20 per share in four equal quarterly installments of $0.30 in each of the third and fourth quarter of 2014 and the first and second quarter of 2015.  Pentair has increased its dividend for 38 consecutive years. On July 28, 2014, Pentair's Board of Directors approved a decision to exit its Water Transport business. Excluding Water Transport, second quarter sales were $1.8 billion, up 2 percent compared to the same period last year, second quarter 2014 adjusted operating income was $279 million, up 13 percent compared to adjusted operating income for second quarter 2013, and adjusted operating margins were 15.2 percent, an expansion of 150 basis points when compared to adjusted 2013 operating margins. "Our second quarter met our expectations with many of our end markets recovering, albeit at a more moderate rate than anticipated," said Randall J. Hogan, Pentair Chairman and Chief Executive Officer. SECOND QUARTER BUSINESS HIGHLIGHTS Unless otherwise indicated, all comparisons are year-over-year against 2013 adjusted results.  See attached reconciliations of these Non-GAAP measures. Valves & Controls delivered second quarter 2014 sales of $634 million, up 2 percent versus the prior year quarter. Backlog increased 2 percent to $1.4 billion compared to first quarter 2014. * Sales in the Energy vertical, which accounted for roughly 60 percent of Valves & Controls revenue in the quarter, were flat. Sales to the oil & gas industry were up 2 percent while sales to the power industry increased 1 percent.  Sales to the mining industry decreased 8 percent. * Sales in the Industrial vertical, which accounted for approximately 40 percent of Valves & Controls revenue in the quarter, increased 6 percent. Valves & Controls delivered second quarter adjusted operating income of $89 million, up 7 percent compared to $84 million in the same quarter last year. Second quarter adjusted operating margins increased 60 basis points to 14.1 percent. Price and productivity more than offset inflation during the quarter. Including repositioning and other charges, Valves & Controls reported a GAAP operating income of $72 million in the second quarter. Process Technologies second quarter sales were $497 million, up 4 percent versus the prior year quarter. * Sales in the Residential & Commercial vertical, which accounted for roughly 65 percent of Process Technologies  revenue in the quarter, grew 10 percent. * Sales in the Food & Beverage vertical, which accounted for approximately 25 percent of Process Technologies revenue in the quarter, decreased 1 percent. Process Technologies second quarter adjusted operating income of $93 million represented a 17 percent increase as compared to $79 million in the same period last year. Adjusted operating margins increased by 200 basis points to 18.6 percent. Price and productivity more than offset inflation in the quarter. Including repositioning and other charges, Process Technologies reported a GAAP operating income of $82 million in the second quarter. Flow Technologies, excluding its Water Transport business, delivered second quarter 2014 sales of $300 million, down 2 percent versus the prior year quarter. * Sales in the Residential & Commercial vertical, which accounted for roughly 50 percent of Flow Technologies revenue in the quarter, decreased 1 percent. * Sales in the Food & Beverage vertical, which accounted for nearly 20 percent of Flow Technologies revenue in the quarter, increased 2 percent. * Sales in the Industrial vertical, which accounted for approximately 15 percent of Flow Technologies revenue in the quarter, grew 6 percent. * Sales in the Infrastructure vertical, which accounted for nearly 15 percent of Flow Technologies revenue in the quarter, decreased 11 percent. Flow Technologies delivered second quarter adjusted operating income of $42 million, up 1 percent compared to $41 million in the same quarter last year. Second quarter 2014 adjusted operating margins increased 40 basis points to 13.9 percent. Price and productivity more than offset inflation during the quarter. Including Water Transport, repositioning and other charges, Flow Technologies reported a GAAP operating income of $35 million in the second quarter. Technical Solutions delivered second quarter 2014 sales of $409 million, up 3 percent versus the prior year quarter. * Sales in the Industrial vertical, which accounted for roughly 45 percent of Technical Solutions revenue in the quarter, decreased 1 percent. * Sales in the Energy vertical, which accounted for approximately 20 percent of Technical Solutions revenue in the quarter, declined 11 percent. * Sales in the Infrastructure vertical, which accounted for nearly 20 percent of Technical Solutions revenue in the quarter, increased 33 percent. * Sales in the Residential & Commercial vertical, which accounted for approximately 15 percent of Technical Solutions revenue in the quarter, grew 15 percent. Technical Solutions delivered second quarter adjusted operating income of $77 million, up 10 percent compared to $70 million in the same quarter last year. Second quarter 2014 adjusted operating margins increased 120 basis points to 18.8 percent. Price and productivity gains more than offset material and labor inflation. Including repositioning and other charges, Technical Solutions reported a GAAP operating income of $74 million in the second quarter. OUTLOOK Unless otherwise indicated, the company's 2014 outlook, 2015 EPS target, and comparisons to prior years are on an adjusted basis and exclude the Water Transport business. The company is updating its full year 2014 adjusted EPS to a range of $3.65 - $3.70, which represents an increase of approximately 20 percent from 2013 adjusted EPS of $3.05.  The company anticipates full year 2014 sales of $7.15 billion, or up approximately 2 percent over 2013 sales.  The company expects to generate free cash flow in excess of 110 percent of net income in 2014. The company is also updating its 2015 target to $4.50 from $5.00 reflecting the exclusion of its Water Transport business, ongoing Energy CapEx deferrals, and lingering economic headwinds. "Our 2014 expectations have been adjusted to reflect the exit of our Water Transport business, a more muted market outlook, and continued strong delivery of synergies and productivity," said Hogan.  "Our 2015 target continues to demonstrate strong earnings growth and our portfolio remains well positioned to deliver more consistent, predictable growth." In addition, the company introduced third quarter 2014 adjusted EPS guidance of $0.93 - $0.95, up approximately 15 percent versus the same quarter last year's adjusted EPS.  The company expects third quarter revenue to be approximately $1.76 billion, which would be up approximately 3 percent compared to third quarter 2013 revenue. EARNINGS CONFERENCE CALL Pentair Chairman and CEO Randall J. Hogan and Chief Financial Officer John L. Stauch will discuss the company's performance and second quarter 2014 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 Investors 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, both 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 press 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 the ability to successfully integrate the Flow Control business and achieve expected benefits from such combination; the ability to successfully complete the disposition of our Water Transport business on anticipated terms and timetable; overall global economic and business conditions; competition and pricing pressures in the markets we serve; the strength of housing and related markets; volatility in currency exchange rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; increased risks associated with operating foreign businesses; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, complete and integrate acquisitions; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; the ability to achieve our long-term strategic operating goals; and the ability to achieve the expected benefits from the Redomicile. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission ("SEC"), including in our 2013 Annual Report on Form 10-K. All forward-looking statements speak only as of the date of this report. Pentair plc assumes no obligation, and disclaims any obligation, to update the information contained in this report. ABOUT PENTAIR PLC Pentair plc (www.pentair.com) delivers industry-leading products, services and solutions for its customers' diverse needs in water and other fluids, thermal management and equipment protection. With 2013 revenues of $7.5 billion, Pentair employs  approximately 30,000 people worldwide. PENTAIR CONTACTS: Jim Lucas Vice President, Investor Relations Direct: 763-656-5575 Email: jim.lucas@pentair.comRebecca Osborn Senior Manager, External Communications Direct: 763-656-5589 Email: rebecca.osborn@pentair.com Pentair plc and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)   Three months ended   Six months ended ------------------------- ------------------------ In millions, except per- June 28, June 29, June 28, June 29, share data  2014  2013    2014  2013 ------------------------------------------------------------------------------- Net sales $ 1,910.8   $ 1,963.7     $ 3,636.0   $ 3,738.2 Cost of goods sold 1,251.9   1,296.3     2,398.8   2,547.0 ------------------------------------------------------------------------------- Gross profit 658.9   667.4     1,237.2   1,191.2 % of net sales 34.5 % 34.0 %   34.0 % 31.9 % Selling, general and administrative 400.3 409.4   768.7 825.4 % of net sales 20.9 % 20.9 %   21.2 % 22.1 % Research and development 30.9   32.1     60.9   65.6 % of net sales 1.6 % 1.6 %   1.7 % 1.8 % ------------------------------------------------------------------------------- Operating income 227.7   225.9     407.6   300.2 % of net sales 11.9 % 11.5 %   11.2 % 8.0 % ------------------------------------------------------------------------------- Other (income) expense: Equity income of unconsolidated subsidiaries (0.4 ) (0.9 )   (0.8 ) (1.1 ) Loss (gain) on sale of businesses 0.2 -   8.2 (16.7 ) Net interest expense 17.5   18.4     33.2   35.4 % of net sales 0.9 % 0.9 %   0.9 % 0.9 % ------------------------------------------------------------------------------- Income before income taxes and noncontrolling interest 210.4 208.4   367.0 282.6 Provision for income taxes 48.9   53.0     86.9   73.9 Effective tax rate 23.2 % 25.4 %   23.7 % 26.2 % ------------------------------------------------------------------------------- Net income before noncontrolling interest 161.5 155.4   280.1 208.7 Noncontrolling interest -   1.3     -   2.9 ------------------------------------------------------------------------------- Net income attributable to Pentair plc $ 161.5$ 154.1   $ 280.1$ 205.8 ------------------------------------------------------------------------------- Earnings per common share attributable to Pentair plc Basic $ 0.84   $ 0.76     $ 1.44   $ 1.01 Diluted $ 0.82   $ 0.75     $ 1.41   $ 0.99 Weighted average common shares outstanding Basic 193.1   202.1     194.7   203.5 Diluted 196.4   205.5     198.0   206.9 Cash dividends paid per common share $ 0.25$ 0.23   $ 0.50$ 0.46 Pentair plc and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) June 28, December 31, In millions  2014  2013 ------------------------------------------------------------------------------ Assets Current assets Cash and cash equivalents $ 174.4   $ 265.1 Accounts and notes receivable, net 1,302.2   1,334.3 Inventories 1,264.3   1,243.3 Other current assets 425.0   389.4 ------------------------------------------------------------------------------ Total current assets 3,165.9   3,232.1 Property, plant and equipment, net 1,151.6   1,170.0 Other assets Goodwill 5,097.1   5,134.2 Intangibles, net 1,718.3   1,776.1 Other non-current assets 483.9   430.9 ------------------------------------------------------------------------------ Total other assets 7,299.3   7,341.2 ------------------------------------------------------------------------------ Total assets $ 11,616.8   $ 11,743.3 ------------------------------------------------------------------------------ Liabilities and Equity Current liabilities Current maturities of long-term debt and short- term borrowings $ 6.1$ 2.5 Accounts payable 587.0   596.6 Employee compensation and benefits 298.5   347.1 Other current liabilities 885.5   664.0 ------------------------------------------------------------------------------ Total current liabilities 1,777.1   1,610.2 Other liabilities Long-term debt 2,739.0   2,552.6 Pension and other post-retirement compensation and benefits 291.4 324.8 Deferred tax liabilities 608.6   580.6 Other non-current liabilities 481.9   457.4 ------------------------------------------------------------------------------ Total liabilities 5,898.0   5,525.6 ------------------------------------------------------------------------------ Equity 5,718.8   6,217.7 ------------------------------------------------------------------------------ Total liabilities and equity $ 11,616.8   $ 11,743.3 ------------------------------------------------------------------------------ Pentair plc and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)   Six months ended -------------------- June 28, June 29, In millions  2014  2013 ------------------------------------------------------------------------------- Operating activities Net income before noncontrolling interest $ 280.1   $ 208.7 Adjustments to reconcile net income before noncontrolling interest to net cash provided by (used for) operating activities Equity income of unconsolidated subsidiaries (0.8 ) (1.1 ) Depreciation 73.6   73.7 Amortization 58.7   80.7 Deferred income taxes 10.9   17.3 Loss (gain) on sale of businesses 8.2   (16.7 ) Share-based compensation 16.5   18.1 Excess tax benefits from share-based compensation (7.8 ) (6.2 ) Loss on sale of assets 0.3   1.2 Changes in assets and liabilities, net of effects of business acquisitions Accounts and notes receivable 34.6   (55.0 ) Inventories (20.3 ) 22.4 Other current assets (44.3 ) (1.3 ) Accounts payable (6.9 ) 35.1 Employee compensation and benefits (49.6 ) 6.6 Other current liabilities 91.2   2.8 Other non-current assets and liabilities (29.4 ) (0.2 ) ------------------------------------------------------------------------------- Net cash provided by (used for) operating activities 415.0   386.1 Investing activities Capital expenditures (59.6 ) (88.0 ) Proceeds from sale of property and equipment 2.7   3.6 Proceeds from sale of businesses, net -   30.0 Acquisitions, net of cash acquired -   (84.4 ) Other 0.3   (0.6 ) ------------------------------------------------------------------------------- Net cash provided by (used for) investing activities (56.6 ) (139.4 ) Financing activities Net receipts (repayments) of short-term borrowings 3.9   - Net receipts (repayments) of commercial paper and revolving long-term debt 198.8 289.6 Repayments of long-term debt (12.9 ) (5.8 ) Debt issuance costs -   (1.4 ) Excess tax benefits from share-based compensation 7.8   6.2 Shares issued to employees, net of shares withheld 31.5   40.1 Repurchases of common shares (450.7 ) (483.6 ) Dividends paid (99.1 ) (94.0 ) Purchase of noncontrolling interest (134.7 ) - Distribution to noncontrolling interest -   (2.0 ) ------------------------------------------------------------------------------- Net cash provided by (used for) financing activities (455.4 ) (250.9 ) Effect of exchange rate changes on cash and cash equivalents 6.3 (4.0 ) ------------------------------------------------------------------------------- Change in cash and cash equivalents (90.7 ) (8.2 ) Cash and cash equivalents, beginning of period 265.1   261.3 ------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 174.4   $ 253.1 ------------------------------------------------------------------------------- Free cash flow Net cash provided by (used for) operating activities $ 415.0   $ 386.1 Capital expenditures (59.6 ) (88.0 ) Proceeds from sale of property and equipment 2.7   3.6 ------------------------------------------------------------------------------- Free cash flow $ 358.1   $ 301.7 ------------------------------------------------------------------------------- Pentair plc and Subsidiaries Supplemental Financial Information by Reportable Segment (Unaudited)       2014         2013 ------------------------------------- ------------------------------------- First Second First Second In millions Quarter Quarter Six Months   Quarter Quarter Six Months ---------------------------------------------------------------------------------------- Net sales Valves & Controls $ 534.8$ 633.9$ 1,168.7   $ 585.8$ 619.9$ 1,205.7 Process Technologies 418.3 496.8 915.1   396.6 477.6 874.2 Flow Technologies 364.1 378.1 742.2   390.6 478.2 868.8 Technical Solutions 415.3 408.6 823.9   410.0 397.4 807.4 Other (7.3 ) (6.6 ) (13.9 )   (8.5 ) (9.4 ) (17.9 ) ---------------------------------------------------------------------------------------- Consolidated $ 1,725.2   $ 1,910.8   $ 3,636.0     $ 1,774.5   $ 1,963.7   $ 3,738.2 ---------------------------------------------------------------------------------------- Operating income (loss) Valves & Controls $ 52.2$ 71.5$ 123.7   $ (18.6 )$ 56.9$ 38.3 Process Technologies 46.3 82.4 128.7   43.4 76.8 120.2 Flow Technologies 27.5 35.4 62.9   31.4 59.3 90.7 Technical Solutions 76.2 73.6 149.8   53.3 65.1 118.4 Other (22.3 ) (35.2 ) (57.5 )   (35.2 ) (32.2 ) (67.4 ) ---------------------------------------------------------------------------------------- Consolidated $ 179.9   $ 227.7   $ 407.6     $ 74.3   $ 225.9   $ 300.2 ---------------------------------------------------------------------------------------- Operating income (loss) as a percent of net sales Valves & Controls 9.8 % 11.3 % 10.6 %   (3.2 )% 9.2 % 3.2 % Process Technologies 11.1 % 16.6 % 14.1 %   10.9 % 16.1 % 13.7 % Flow Technologies 7.5 % 9.4 % 8.5 %   8.0 % 12.4 % 10.4 % Technical Solutions 18.4 % 18.0 % 18.2 %   13.0 % 16.4 % 14.7 % ---------------------------------------------------------------------------------------- Consolidated 10.4 % 11.9 % 11.2 %   4.2 % 11.5 % 8.0 % ---------------------------------------------------------------------------------------- Pentair plc and Subsidiaries Reconciliation of the GAAP "As Reported" year ended December 31, 2014 to the "Adjusted" non-GAAP excluding the effect of 2014 adjustments (Unaudited)   Actual   Forecast --------------- ----------------- Second Full In millions, except per-share data   Quarter   Year ------------------------------------------------------------------------------- Total Pentair Net sales   $ 1,910.8     approx $ 7,150 ------------------------------------------------------------------------------- Operating income-as reported   227.7     approx 931 % of net sales   11.9 %   approx 13.0 % Adjustments: Restructuring and other   46.0     approx 69 Redomicile related expenses   8.8     approx 10 ------------------------------------------------------------------------------- Operating income-as adjusted   282.5     approx 1,010 % of net sales   14.8 %   approx 14.1 % Net income attributable to Pentair plc-as reported   161.5   approx 652 Loss on sale of business, net of tax   -     approx 6 Adjustments, net of tax   42.0     approx 62 ------------------------------------------------------------------------------- Net income attributable to Pentair plc-as adjusted   $ 203.5   approx $ 720 ------------------------------------------------------------------------------- Earnings per common share attributable to Pentair plc-diluted   $3.29 - Diluted earnings per common share-as reported   $ 0.82   approx $3.34 Adjustments   0.22     approx 0.36 -------------------------------------------------------------------------------   $3.65 - Diluted earnings per common share-as adjusted   $ 1.04   approx $3.70 ------------------------------------------------------------------------------- Pentair plc and Subsidiaries Reconciliation of the GAAP "As Reported" year ended December 31, 2014 and 2013 to the "Adjusted" non-GAAP excluding the effect of adjustments and Water Transport (Unaudited)   2014   2013 ------------------------- -------------------------------------------------- In millions, except per- First Second First Second Third Full share data Quarter Quarter   Quarter Quarter Quarter   Year ------------------------------------------------------------------------------------------ Total Pentair Net sales-as reported $ 1,725.2$ 1,910.8   $ 1,774.5$ 1,963.7$ 1,824.8   $ 7,479.7 Less: Net sales-Water Transport   (81.2 ) (76.7 )   (110.8 ) (172.0 ) (111.5 )   (480.0 ) ------------------------------------------------------------------------------------------ Net sales- excluding Water Transport   $ 1,644.0$ 1,834.1   $ 1,663.7$ 1,791.7$ 1,713.3   $ 6,999.7 ------------------------------------------------------------------------------------------ Operating income-as reported 179.9 227.7   74.3 225.9 240.0   774.0 % of net sales 10.4 % 11.9 %   4.2 % 11.5 % 13.2 %   10.3 % Adjustments: Operating (income) loss-Water Transport   2.1 (1.3 )   (8.0 ) (20.9 ) (10.1 )   (31.5 ) Inventory step-up and customer backlog - -   76.6 10.1 -   86.7 Restructuring and other 17.1 44.1   26.7 31.1 8.0   119.9 Pension and other post- retirement mark-to- market gain - -   - - -   (63.2 ) Trade name impairment - -   - - -   11.0 Redomicile related expenses 1.5 8.8   - - -   5.4 ------------------------------------------------------------------------------------------ Operating income-as adjusted, excluding Water Transport 200.6 279.3   169.6 246.2 237.9   902.3 % of net sales 12.2 % 15.2 %   10.2 % 13.7 % 13.9 %   12.9 % Net income attributable to Pentair plc-as reported 118.6 161.5   51.7 154.1 172.8   536.8 Loss (gain) on sale of business, net of tax 6.1 -   (12.5 ) - -   (14.7 ) Interest expense, net of tax - -   - 1.6 -   1.6 Adjustments, net of tax 16.8 39.1   73.5 15.9 (7.5 )   99.5 ------------------------------------------------------------------------------------------ Net income attributable to Pentair plc-as adjusted, excluding Water Transport $ 141.5$ 200.6   $ 112.7$ 171.6$ 165.3   $ 623.2 ------------------------------------------------------------------------------------------ Earnings per common share attributable to Pentair plc-diluted Diluted earnings per common share- as reported $ 0.59$ 0.82   $ 0.25$ 0.75$ 0.85   $ 2.62 Adjustments 0.12   0.20     0.29   0.09   (0.03 )   0.43 ------------------------------------------------------------------------------------------ Diluted earnings per common share- as adjusted, excluding Water Transport $ 0.71$ 1.02   $ 0.54$ 0.84$ 0.82   $ 3.05 ------------------------------------------------------------------------------------------ Pentair plc and Subsidiaries Reconciliation of the GAAP "As Reported" year ended December 31, 2014 to the "Adjusted" non-GAAP excluding the effect of 2014 adjustments and Water Transport (Unaudited)   Actual   Forecast ----------- ----------------- Second Full In millions Quarter   Year ------------------------------------------------------------------------------- Valves & Controls Net sales $ 633.9     approx $ 2,460 ------------------------------------------------------------------------------- Operating income-as reported 71.5     approx 302 % of net sales 11.3 %   approx 12.3 % Adjustments: Restructuring and other 17.9     approx 27 ------------------------------------------------------------------------------- Operating income-as adjusted 89.4     approx 329 % of net sales 14.1 %   approx 13.5 % Process Technologies Net sales $ 496.8     approx $ 1,870 ------------------------------------------------------------------------------- Operating income -as reported 82.4     approx 266 % of net sales 16.6 %   approx 14.2 % Adjustments: Restructuring and other 10.2     approx 13 ------------------------------------------------------------------------------- Operating income-as adjusted 92.6     approx 279 % of net sales 18.6 %   approx 15.0 % Flow Technologies Net sales-as reported $ 378.1     approx $ 1,465 Less: Net sales-Water Transport   (77.8 )   approx (330 ) ------------------------------------------------------------------------------- Net sales-excluding Water Transport   $ 300.3   approx $ 1,135 ------------------------------------------------------------------------------- Operating income-as reported 35.4     approx 145 % of net sales 9.4 %   approx 9.9 % Adjustments: Operating (income) loss-Water Transport (1.3 )   approx (16 ) Restructuring and other 7.5     approx 10 ------------------------------------------------------------------------------- Operating income-as adjusted, excluding Water Transport 41.6   approx 139 % of net sales 13.9 %   approx 12.5 % Technical Solutions Net sales $ 408.6     approx $ 1,710 ------------------------------------------------------------------------------- Operating income-as reported 73.6     approx 341 % of net sales 18.0 %   approx 19.9 % Adjustments: Restructuring and other 3.2     approx 6 ------------------------------------------------------------------------------- Operating income-as adjusted 76.8     approx 347 % of net sales 18.8 %   approx 20.5 % Pentair plc and Subsidiaries Reconciliation of the GAAP "As Reported" year ended December 31, 2013 to the "Adjusted" non-GAAP excluding the effect of 2013 adjustments (Unaudited) In millions, except per-share First Second Third Fourth Full data Quarter Quarter Quarter Quarter   Year ------------------------------------------------------------------------------- Total Pentair Net sales $ 1,774.5   $ 1,963.7   $ 1,824.8   $ 1,916.7     $ 7,479.7 ------------------------------------------------------------------------------- Operating income-as reported 74.3 225.9 240.0 233.8   774.0 % of net sales 4.2 % 11.5 % 13.2 % 12.2 %   10.3 % Adjustments:     Inventory step-up and customer backlog 76.8 10.1 - -   86.9 Restructuring and other 27.4 32.4 8.7 61.6   130.1 Pension and other post- retirement mark- to-market gain - - - (63.2 )   (63.2 )     Trade name impairment - - - 11.0   11.0 Redomicile related expenses - - - 5.4   5.4 ------------------------------------------------------------------------------- Operating income-as adjusted 178.5 268.4 248.7 248.6   944.2 % of net sales 10.1 % 13.7 % 13.6 % 13.0 %   12.6 % Net income attributable to Pentair plc-as reported 51.7 154.1 172.8 158.2   536.8     Gain on sale of businesses, net of tax (12.5 ) - - (2.2 )   (14.7 )     Interest expense, net of tax - 1.6 - -   1.6     Adjustments, net of tax 80.8 33.5 1.1 18.0   133.4 ------------------------------------------------------------------------------- Net income attributable to Pentair plc-as adjusted $ 120.0$ 189.2$ 173.9$ 174.0   $ 657.1 ------------------------------------------------------------------------------- Earnings per common share attributable to Pentair plc- diluted Diluted earnings per common share-as reported $ 0.25$ 0.75$ 0.85$ 0.78   $ 2.62 Adjustments 0.33   0.17   0.01   0.08     0.59 ------------------------------------------------------------------------------- Diluted earnings per common share-as adjusted $ 0.58$ 0.92$ 0.86$ 0.86   $ 3.21 ------------------------------------------------------------------------------- Pentair plc and Subsidiaries Reconciliation of the GAAP "As Reported" year ended December 31, 2013 to the "Adjusted" non-GAAP excluding the effect of 2013 adjustments and Water Transport (Unaudited) Second Third Full In millions Quarter   Quarter    Year ------------------------------------------------------------------------------- Valves & Controls Net sales $ 619.9     $ 611.5     $ 2,469.2 ------------------------------------------------------------------------------- Operating income (loss)-as reported 56.9     76.6     161.4 % of net sales 9.2 %   12.5 %   6.5 % Adjustments: Restructuring and other 17.0     3.7     60.8 Inventory step-up and customer backlog 10.0     -     80.6 ------------------------------------------------------------------------------- Operating income-as adjusted 83.9     80.3     302.8 % of net sales 13.5 %   13.1 %   12.3 % Process Technologies Net sales $ 477.6     $ 421.2     $ 1,765.9 ------------------------------------------------------------------------------- Operating income-as reported 76.8     57.1     243.2 % of net sales 16.1 %   13.6 %   13.7 % Adjustments: Restructuring and other 2.7     2.8     9.6 Inventory step-up and customer backlog -     -     0.4 ------------------------------------------------------------------------------- Operating income-as adjusted 79.5     59.9     253.2 % of net sales 16.6 %   14.2 %   14.2 % Flow Technologies Net sales-as reported $ 478.2     $ 397.2     $ 1,618.5 Less: Net sales-Water Transport   (173.2 )   (115.7 )   (486.8 ) ------------------------------------------------------------------------------- Net sales-excluding Water Transport   $ 305.0   $ 281.5   $ 1,131.7 ------------------------------------------------------------------------------- Operating income-as reported 59.3     48.8     149.7 % of net sales 12.4 %   12.3 %   9.2 % Adjustments: Operating (income) loss-Water Transport (20.9 )   (10.1 )   (31.5 ) Restructuring and other 2.9     -     14.1 ------------------------------------------------------------------------------- Operating income-as adjusted, excluding Water Transport 41.3   38.7   132.3 % of net sales 13.5 %   13.8 %   11.7 % Technical Solutions Net sales $ 397.4     $ 405.9     $ 1,663.4 ------------------------------------------------------------------------------- Operating income-as reported 65.1     82.2     285.0 % of net sales 16.4 %   20.3 %   17.1 % Adjustments: Restructuring and other 4.9     1.5     20.7 Tradename impairment -     -     11.0 Inventory step-up and customer backlog -     -     5.7 ------------------------------------------------------------------------------- Operating income-as adjusted 70.0     83.7     322.4 % of net sales 17.6 %   20.6 %   19.4 % This announcement is distributed by GlobeNewswire on behalf of GlobeNewswire clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Pentair plc via GlobeNewswire [HUG#1844226]


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