Minnesota
|
41-0907434 | |
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification number) | |
5500 Wayzata Blvd, Suite 800, Golden Valley, Minnesota
|
55416 | |
(Address of principal executive offices)
|
(Zip code) |
2
Three months ended | |||||||||
April 1 | April 2 | ||||||||
In thousands, except per-share data | 2006 | 2005 | |||||||
Net sales |
$ | 771,389 | $ | 709,635 | |||||
Cost of goods sold |
548,881 | 505,497 | |||||||
Gross profit |
222,508 | 204,138 | |||||||
Selling, general and administrative |
129,089 | 120,625 | |||||||
Research and development |
14,863 | 11,427 | |||||||
Operating income |
78,556 | 72,086 | |||||||
Net interest expense |
13,284 | 11,276 | |||||||
Income from continuing operations before income taxes |
65,272 | 60,810 | |||||||
Provision for income taxes |
22,201 | 20,629 | |||||||
Income from continuing operations |
43,071 | 40,181 | |||||||
Loss on disposal of discontinued operations, net of tax |
(1,451 | ) | | ||||||
Net income |
$ | 41,620 | $ | 40,181 | |||||
Earnings (loss) per common share |
|||||||||
Basic |
|||||||||
Continuing operations |
$ | 0.43 | $ | 0.40 | |||||
Discontinued operations |
(0.01 | ) | | ||||||
Basic earnings per common share |
$ | 0.42 | $ | 0.40 | |||||
Diluted |
|||||||||
Continuing operations |
$ | 0.42 | $ | 0.39 | |||||
Discontinued operations |
(0.01 | ) | | ||||||
Diluted earnings per common share |
$ | 0.41 | $ | 0.39 | |||||
Weighted average common shares outstanding |
|||||||||
Basic |
100,493 | 100,363 | |||||||
Diluted |
102,492 | 102,463 | |||||||
Cash dividends declared per common share |
$ | 0.14 | $ | 0.13 |
3
April 1 | December 31 | April 2 | ||||||||||
In thousands, except share and per-share data | 2006 | 2005 | 2005 | |||||||||
Assets |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ | 50,237 | $ | 48,500 | $ | 43,839 | ||||||
Accounts and notes receivable, net |
520,968 | 423,847 | 475,603 | |||||||||
Inventories |
375,619 | 349,312 | 339,910 | |||||||||
Deferred tax assets |
44,432 | 48,971 | 49,913 | |||||||||
Prepaid expenses and other current assets |
28,921 | 24,394 | 27,838 | |||||||||
Total current assets |
1,020,177 | 895,024 | 937,103 | |||||||||
Property, plant and equipment, net |
314,164 | 311,839 | 335,063 | |||||||||
Other assets |
||||||||||||
Goodwill |
1,723,952 | 1,718,207 | 1,620,719 | |||||||||
Intangibles, net |
262,829 | 266,533 | 255,028 | |||||||||
Other |
67,561 | 62,152 | 81,009 | |||||||||
Total other assets |
2,054,342 | 2,046,892 | 1,956,756 | |||||||||
Total assets |
$ | 3,388,683 | $ | 3,253,755 | $ | 3,228,922 | ||||||
Liabilities and Shareholders Equity |
||||||||||||
Current liabilities |
||||||||||||
Current maturities of long-term debt |
$ | 4,246 | $ | 4,137 | $ | 17,423 | ||||||
Accounts payable |
206,528 | 207,320 | 185,138 | |||||||||
Employee compensation and benefits |
75,536 | 95,552 | 76,873 | |||||||||
Accrued product claims and warranties |
42,238 | 43,551 | 44,297 | |||||||||
Current liabilities of discontinued operations |
| 192 | 192 | |||||||||
Income taxes |
27,195 | 17,518 | 24,285 | |||||||||
Accrued rebates and sales incentives |
23,353 | 45,374 | 26,352 | |||||||||
Other current liabilities |
94,418 | 111,026 | 104,588 | |||||||||
Total current liabilities |
473,514 | 524,670 | 479,148 | |||||||||
Long-term debt |
888,015 | 748,477 | 848,006 | |||||||||
Pension and other retirement compensation |
158,535 | 152,780 | 138,524 | |||||||||
Post-retirement medical and other benefits |
73,812 | 73,949 | 70,013 | |||||||||
Deferred tax liabilities |
123,663 | 125,785 | 145,294 | |||||||||
Other non-current liabilities |
76,452 | 70,455 | 72,431 | |||||||||
Non-current liabilities of discontinued operations |
| 2,029 | 2,866 | |||||||||
Total liabilities |
1,793,991 | 1,698,145 | 1,756,282 | |||||||||
Commitments and contingencies |
||||||||||||
Shareholders equity |
||||||||||||
Common shares par value $0.16 2/3 ; 101,642,814, 101,202,237
and 101,601,836 shares issued and outstanding, respectively |
16,940 | 16,867 | 16,934 | |||||||||
Additional paid-in capital |
524,904 | 518,751 | 517,344 | |||||||||
Retained earnings |
1,048,374 | 1,020,978 | 915,816 | |||||||||
Accumulated other comprehensive income (loss) |
4,474 | (986 | ) | 22,546 | ||||||||
Total shareholders equity |
1,594,692 | 1,555,610 | 1,472,640 | |||||||||
Total liabilities and shareholders equity |
$ | 3,388,683 | $ | 3,253,755 | $ | 3,228,922 | ||||||
4
Three months ended | ||||||||
April 1 | April 2 | |||||||
In thousands | 2006 | 2005 | ||||||
Operating activities |
||||||||
Net income |
$ | 41,620 | $ | 40,181 | ||||
Adjustments to reconcile net income to net cash used for operating activities |
||||||||
Loss on disposal of discontinued operations |
1,451 | | ||||||
Depreciation |
15,230 | 14,463 | ||||||
Amortization |
4,258 | 3,993 | ||||||
Deferred income taxes |
2,483 | 2,391 | ||||||
Stock compensation |
6,646 | 6,160 | ||||||
Excess tax benefits from stock-based compensation |
(2,532 | ) | (3,731 | ) | ||||
Changes in assets and liabilities, net of effects of business acquisitions and
dispositions |
||||||||
Accounts and notes receivable |
(95,541 | ) | (85,608 | ) | ||||
Inventories |
(25,379 | ) | (19,489 | ) | ||||
Prepaid expenses and other current assets |
(4,258 | ) | (4,331 | ) | ||||
Accounts payable |
(4,041 | ) | (7,382 | ) | ||||
Employee compensation and benefits |
(23,528 | ) | (27,416 | ) | ||||
Accrued product claims and warranties |
(1,363 | ) | 1,544 | |||||
Income taxes |
10,717 | (2,842 | ) | |||||
Other current liabilities |
(26,140 | ) | (605 | ) | ||||
Pension and post-retirement benefits |
4,477 | 3,646 | ||||||
Other assets and liabilities |
3,550 | (1,250 | ) | |||||
Net cash used for continuing operations |
(92,350 | ) | (80,276 | ) | ||||
Net cash provided by operating activities of discontinued
operations |
48 | 205 | ||||||
Net cash used for operating activities |
(92,302 | ) | (80,071 | ) | ||||
Investing activities |
||||||||
Capital expenditures |
(9,054 | ) | (21,289 | ) | ||||
Proceeds from sale of property and equipment |
79 | | ||||||
Acquisitions, net of cash acquired |
(2,158 | ) | (10,301 | ) | ||||
Divestitures |
(24,007 | ) | (1,190 | ) | ||||
Other |
(2,150 | ) | 17 | |||||
Net cash used for investing activities |
(37,290 | ) | (32,763 | ) | ||||
Financing activities |
||||||||
Proceeds from long-term debt |
272,906 | 146,610 | ||||||
Repayment of long-term debt |
(133,051 | ) | (14,120 | ) | ||||
Proceeds from exercise of stock options |
2,577 | 2,599 | ||||||
Excess tax benefits from stock-based compensation |
2,532 | 3,731 | ||||||
Dividends paid |
(14,224 | ) | (13,428 | ) | ||||
Net cash provided by financing activities |
130,740 | 125,392 | ||||||
Effect of exchange rate changes on cash and cash equivalents |
589 | (214 | ) | |||||
Change in cash and cash equivalents |
1,737 | 12,344 | ||||||
Cash and cash equivalents, beginning of period |
48,500 | 31,495 | ||||||
Cash and cash equivalents, end of period |
$ | 50,237 | $ | 43,839 | ||||
5
6
April 1 | April 2 | |||||||
2006 | 2005 | |||||||
Expected stock price volatility |
31.5 | % | 34.5 | % | ||||
Expected life |
4.5 yrs. | 3.6 yrs. | ||||||
Risk-free interest rate |
4.56 | % | 4.00 | % | ||||
Dividend yield |
1.44 | % | 1.30 | % |
7
Three months ended | ||||||||
April 1 | April 2 | |||||||
In thousands, except per-share data | 2006 | 2005 | ||||||
Earnings (loss) per common share basic |
||||||||
Continuing operations |
$ | 43,071 | $ | 40,181 | ||||
Discontinued operations |
(1,451 | ) | | |||||
Net income |
$ | 41,620 | $ | 40,181 | ||||
Continuing operations |
$ | 0.43 | $ | 0.40 | ||||
Discontinued operations |
(0.01 | ) | | |||||
Basic earnings per common share |
$ | 0.42 | $ | 0.40 | ||||
Earnings (loss) per common share diluted |
||||||||
Continuing operations |
$ | 43,071 | $ | 40,181 | ||||
Discontinued operations |
(1,451 | ) | | |||||
Net income |
$ | 41,620 | $ | 40,181 | ||||
Continuing operations |
$ | 0.42 | $ | 0.39 | ||||
Discontinued operations |
(0.01 | ) | | |||||
Diluted earnings per common share |
$ | 0.41 | $ | 0.39 | ||||
Weighted average common shares outstanding basic |
100,493 | 100,363 | ||||||
Dilutive impact of stock options and restricted stock |
1,999 | 2,100 | ||||||
Weighted average common shares outstanding diluted |
102,492 | 102,463 | ||||||
Stock options excluded from the calculation of diluted earnings
per share because the exercise price was greater than the average market price of the common shares |
2,079 | 539 |
8
Three months ended | ||||||||
April 1 | April 2 | |||||||
In thousands, except per-share data | 2006 | 2005 | ||||||
Pro forma net sales from continuing operations |
$ | 771,389 | $ | 740,924 | ||||
Pro forma net income from continuing operations |
43,071 | 40,152 | ||||||
Pro forma
earnings per common share - continuing operations |
||||||||
Basic |
$ | 0.43 | $ | 0.40 | ||||
Diluted |
$ | 0.42 | $ | 0.39 | ||||
Weighted average common shares outstanding |
||||||||
Basic |
100,493 | 100,363 | ||||||
Diluted |
102,492 | 102,463 |
Three months ended | ||||||||
April 1 | April 2 | |||||||
In thousands | 2006 | 2005 | ||||||
Loss on disposal of discontinued operations |
$ | (3,254 | ) | $ | | |||
Income tax benefit |
1,803 | | ||||||
Loss on disposal of discontinued operations, net of tax |
$ | (1,451 | ) | $ | | |||
April 1 | December 31 | April 2 | ||||||||||
In thousands | 2006 | 2005 | 2005 | |||||||||
Raw materials and supplies |
$ | 162,274 | $ | 146,389 | $ | 133,734 | ||||||
Work-in-process |
49,590 | 49,418 | 43,668 | |||||||||
Finished goods |
163,755 | 153,505 | 162,508 | |||||||||
Total inventories |
$ | 375,619 | $ | 349,312 | $ | 339,910 | ||||||
9
Three months ended | |||||||||
April 1 | April 2 | ||||||||
In thousands | 2006 | 2005 | |||||||
Net income |
$ | 41,620 | $ | 40,181 | |||||
Changes in cumulative foreign currency translation adjustment |
3,897 | (9,970 | ) | ||||||
Changes in
market value of derivative financial instruments classified as cash flow hedges |
1,563 | 110 | |||||||
Comprehensive income |
$ | 47,080 | $ | 30,321 | |||||
Technical | ||||||||||||
In thousands | Water | Products | Consolidated | |||||||||
Balance at December 31, 2005 |
$ | 1,433,280 | $ | 284,927 | $ | 1,718,207 | ||||||
Acquired |
| | | |||||||||
Purchase accounting adjustments |
363 | 2,163 | 2,526 | |||||||||
Foreign currency translation |
1,626 | 1,593 | 3,219 | |||||||||
Balance at April 1, 2006 |
$ | 1,435,269 | $ | 288,683 | $ | 1,723,952 | ||||||
April 1, 2006 | December 31, 2005 | April 2, 2005 | ||||||||||||||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||
carrying | Accum. | carrying | Accum. | carrying | Accum. | |||||||||||||||||||||||||||||||
In thousands | amount | amort | Net | amount | amort | Net | amount | amort | Net | |||||||||||||||||||||||||||
Finite-life intangibles |
||||||||||||||||||||||||||||||||||||
Patents |
$ | 15,455 | $ | (4,589 | ) | $ | 10,866 | $ | 15,685 | $ | (4,135 | ) | $ | 11,550 | $ | 14,657 | $ | (2,691 | ) | $ | 11,966 | |||||||||||||||
Non-compete agreements |
3,940 | (2,276 | ) | 1,664 | 3,937 | (2,021 | ) | 1,916 | 7,461 | (4,577 | ) | 2,884 | ||||||||||||||||||||||||
Proprietary technology |
51,378 | (6,195 | ) | 45,183 | 51,386 | (5,107 | ) | 46,279 | 45,121 | (2,686 | ) | 42,435 | ||||||||||||||||||||||||
Customer relationships |
87,525 | (10,077 | ) | 77,448 | 87,707 | (8,647 | ) | 79,060 | 83,938 | (4,764 | ) | 79,174 | ||||||||||||||||||||||||
Total finite-life intangibles |
$ | 158,298 | $ | (23,137 | ) | $ | 135,161 | $ | 158,715 | $ | (19,910 | ) | $ | 138,805 | $ | 151,177 | $ | (14,718 | ) | $ | 136,459 | |||||||||||||||
Indefinite-life intangibles |
||||||||||||||||||||||||||||||||||||
Brand names |
$ | 127,668 | $ | | $ | 127,668 | $ | 127,728 | $ | | $ | 127,728 | $ | 118,569 | $ | | $ | 118,569 | ||||||||||||||||||
Total intangibles, net |
$ | 262,829 | $ | 266,533 | $ | 255,028 | ||||||||||||||||||||||||||||||
In thousands | 2006 Q2 - Q4 | 2007 | 2008 | 2009 | 2010 | 2011 | ||||||||||||||||||
Estimated amortization expense |
$ | 8,931 | $ | 11,923 | $ | 11,008 | $ | 10,826 | $ | 10,322 | $ | 10,117 |
10
Average | ||||||||||||||||||||
interest rate | Maturity | April 1 | December 31 | April 2 | ||||||||||||||||
In thousands | April 1, 2006 | (Year) | 2006 | 2005 | 2005 | |||||||||||||||
Commercial paper, maturing within 51 days |
5.16 | % | $ | 166,261 | $ | 144,656 | $ | 219,518 | ||||||||||||
Revolving credit facilities |
5.34 | % | 2010 | 230,600 | 112,300 | 138,800 | ||||||||||||||
Private
placement - fixed rate |
5.50 | % | 2007-2013 | 135,000 | 135,000 | 135,000 | ||||||||||||||
Private
placement - floating rate |
5.22 | % | 2013 | 100,000 | 100,000 | 100,000 | ||||||||||||||
Senior notes |
7.85 | % | 2009 | 250,000 | 250,000 | 250,000 | ||||||||||||||
Other |
2.30 | % | 2006-2009 | 6,318 | 6,285 | 19,642 | ||||||||||||||
Total contractual debt obligations |
888,179 | 748,241 | 862,960 | |||||||||||||||||
Interest rate swap monetization deferred income |
4,082 | 4,373 | 5,247 | |||||||||||||||||
Fair value adjustment of hedged debt |
| | (2,778 | ) | ||||||||||||||||
Total long-term debt, including current
portion per balance sheet |
892,261 | 752,614 | 865,429 | |||||||||||||||||
Less current maturities |
(4,246 | ) | (4,137 | ) | (17,423 | ) | ||||||||||||||
Long-term debt |
$ | 888,015 | $ | 748,477 | $ | 848,006 | ||||||||||||||
In thousands | 2006 Q2-Q4 | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | Total | ||||||||||||||||||||||||
Contractual long-term debt
obligation maturities |
$ | 2,492 | $ | 38,432 | $ | 152 | $ | 250,139 | $ | 396,923 | $ | 6 | $ | 200,035 | $ | 888,179 | ||||||||||||||||
Other maturities |
875 | 1,166 | 1,166 | 875 | | | | 4,082 | ||||||||||||||||||||||||
Total maturities |
$ | 3,367 | $ | 39,598 | $ | 1,318 | $ | 251,014 | $ | 396,923 | $ | 6 | $ | 200,035 | $ | 892,261 | ||||||||||||||||
11
Three months ended | ||||||||||||||||
Pension benefits | Post-retirement | |||||||||||||||
April 1 | April 2 | April 1 | April 2 | |||||||||||||
In thousands | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Service cost |
$ | 4,512 | $ | 4,118 | $ | 184 | $ | 213 | ||||||||
Interest cost |
7,343 | 7,456 | 799 | 947 | ||||||||||||
Expected return on plan assets |
(6,974 | ) | (7,373 | ) | | | ||||||||||
Amortization of transition obligation |
31 | 30 | | | ||||||||||||
Amortization of prior year service cost (benefit) |
77 | 74 | (59 | ) | (50 | ) | ||||||||||
Recognized net actuarial loss |
1,009 | 698 | (212 | ) | | |||||||||||
Net periodic benefit cost |
$ | 5,998 | $ | 5,003 | $ | 712 | $ | 1,110 | ||||||||
Three months ended | ||||||||
April 1 | April 2 | |||||||
In thousands | 2006 | 2005 | ||||||
Net sales to external customers |
||||||||
Water |
$ | 517,169 | $ | 512,088 | ||||
Technical Products |
254,220 | 197,547 | ||||||
Consolidated |
$ | 771,389 | $ | 709,635 | ||||
Intersegment sales |
||||||||
Water |
$ | 50 | $ | 22 | ||||
Technical Products |
889 | 402 | ||||||
Other |
(939 | ) | (424 | ) | ||||
Consolidated |
$ | | $ | | ||||
Operating income (loss) |
||||||||
Water |
$ | 55,587 | $ | 60,489 | ||||
Technical Products |
37,704 | 25,172 | ||||||
Other |
(14,735 | ) | (13,575 | ) | ||||
Consolidated |
$ | 78,556 | $ | 72,086 | ||||
12
April 1 | April 2 | |||||||
In thousands | 2006 | 2005 | ||||||
Balance at beginning of the year |
$ | 33,551 | $ | 32,524 | ||||
Service and product warranty provision |
9,415 | 10,474 | ||||||
Payments |
(10,777 | ) | (9,066 | ) | ||||
Acquired |
| 240 | ||||||
Translation |
49 | 125 | ||||||
Balance at end of the period |
$ | 32,238 | $ | 34,297 | ||||
13
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
In thousands | Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net sales |
$ | | $ | 633,060 | $ | 181,285 | $ | (42,956 | ) | $ | 771,389 | |||||||||
Cost of goods sold |
125 | 459,223 | 132,073 | (42,540 | ) | 548,881 | ||||||||||||||
Gross profit |
(125 | ) | 173,837 | 49,212 | (416 | ) | 222,508 | |||||||||||||
Selling, general and administrative |
6,221 | 93,541 | 29,743 | (416 | ) | 129,089 | ||||||||||||||
Research and development |
| 11,784 | 3,079 | | 14,863 | |||||||||||||||
Operating (loss) income |
(6,346 | ) | 68,512 | 16,390 | | 78,556 | ||||||||||||||
Net interest (income) expense |
(15,532 | ) | 29,786 | (970 | ) | | 13,284 | |||||||||||||
Income from continuing operations before income taxes |
9,186 | 38,726 | 17,360 | | 65,272 | |||||||||||||||
Provision for income taxes |
3,192 | 13,036 | 5,973 | | 22,201 | |||||||||||||||
Income from continuing operations |
5,994 | 25,690 | 11,387 | | 43,071 | |||||||||||||||
Loss on disposal of discontinued operations, net of tax |
(1,451 | ) | | | | (1,451 | ) | |||||||||||||
Net income |
$ | 4,543 | $ | 25,690 | $ | 11,387 | $ | | $ | 41,620 | ||||||||||
14
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
In thousands | Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets |
||||||||||||||||||||
Current assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 5,070 | $ | 5,276 | $ | 39,891 | $ | | $ | 50,237 | ||||||||||
Accounts and notes receivable, net |
444 | 431,959 | 137,145 | (48,580 | ) | 520,968 | ||||||||||||||
Inventories |
| 284,297 | 91,322 | | 375,619 | |||||||||||||||
Deferred tax assets |
71,648 | 33,455 | 4,592 | (65,263 | ) | 44,432 | ||||||||||||||
Prepaid expenses and other current assets |
7,679 | 10,381 | 15,647 | (4,786 | ) | 28,921 | ||||||||||||||
Total current assets |
84,841 | 765,368 | 288,597 | (118,629 | ) | 1,020,177 | ||||||||||||||
Property, plant and equipment, net |
5,281 | 224,224 | 84,659 | | 314,164 | |||||||||||||||
Other assets |
||||||||||||||||||||
Investments in subsidiaries |
1,982,627 | 43,937 | 90,489 | (2,117,053 | ) | | ||||||||||||||
Goodwill |
| 1,490,950 | 233,002 | | 1,723,952 | |||||||||||||||
Intangibles, net |
| 240,062 | 22,767 | | 262,829 | |||||||||||||||
Other |
55,077 | 6,517 | 5,967 | | 67,561 | |||||||||||||||
Total other assets |
2,037,704 | 1,781,466 | 352,225 | (2,117,053 | ) | 2,054,342 | ||||||||||||||
Total assets |
$ | 2,127,826 | $ | 2,771,058 | $ | 725,481 | $ | (2,235,682 | ) | $ | 3,388,683 | |||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||||
Current liabilities |
||||||||||||||||||||
Current maturities of long-term debt |
$ | 1,166 | $ | 231 | $ | 22,783 | $ | (19,934 | ) | $ | 4,246 | |||||||||
Accounts payable |
1,289 | 163,160 | 89,954 | (47,875 | ) | 206,528 | ||||||||||||||
Employee compensation and benefits |
9,203 | 39,137 | 27,196 | | 75,536 | |||||||||||||||
Accrued product claims and warranties |
| 27,398 | 14,840 | | 42,238 | |||||||||||||||
Income taxes |
8,594 | 7,496 | 11,105 | | 27,195 | |||||||||||||||
Accrued rebates and sales incentives |
| 21,558 | 1,795 | | 23,353 | |||||||||||||||
Other current liabilities |
21,902 | 54,829 | 22,450 | (4,763 | ) | 94,418 | ||||||||||||||
Total current liabilities |
42,154 | 313,809 | 190,123 | (72,572 | ) | 473,514 | ||||||||||||||
Long-term debt |
884,777 | 1,786,622 | 13,146 | (1,796,530 | ) | 888,015 | ||||||||||||||
Pension and other retirement compensation |
78,471 | 29,390 | 50,674 | | 158,535 | |||||||||||||||
Post-retirement medical and other benefits |
23,807 | 50,005 | | | 73,812 | |||||||||||||||
Deferred tax liabilities |
| 162,860 | 26,066 | (65,263 | ) | 123,663 | ||||||||||||||
Due to / (from) affiliates |
(527,961 | ) | 205,621 | 242,104 | 80,236 | | ||||||||||||||
Other non-current liabilities |
31,886 | 2,682 | 41,884 | | 76,452 | |||||||||||||||
Total liabilities |
533,134 | 2,550,989 | 563,997 | (1,854,129 | ) | 1,793,991 | ||||||||||||||
Shareholders equity |
1,594,692 | 220,069 | 161,484 | (381,553 | ) | 1,594,692 | ||||||||||||||
Total liabilities and shareholders equity |
$ | 2,127,826 | $ | 2,771,058 | $ | 725,481 | $ | (2,235,682 | ) | $ | 3,388,683 | |||||||||
15
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
In thousands | Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Operating activities |
||||||||||||||||||||
Net income |
$ | 4,543 | $ | 25,690 | $ | 11,387 | $ | | $ | 41,620 | ||||||||||
Adjustments to reconcile net income to net
cash provided by (used for) operating activities: |
||||||||||||||||||||
Loss on disposal of discontinued operations |
1,451 | | | | 1,451 | |||||||||||||||
Depreciation |
400 | 11,299 | 3,531 | | 15,230 | |||||||||||||||
Amortization |
1,025 | 2,989 | 244 | | 4,258 | |||||||||||||||
Deferred income taxes |
3,024 | (4,100 | ) | 3,559 | | 2,483 | ||||||||||||||
Stock compensation |
3,124 | 2,990 | 532 | | 6,646 | |||||||||||||||
Excess tax benefit from stock-based compensation |
(1,190 | ) | (1,139 | ) | (203 | ) | | (2,532 | ) | |||||||||||
Changes in assets and liabilities, net of effects of
business acquisitions and dispositions |
||||||||||||||||||||
Accounts and notes receivable |
(370 | ) | (93,520 | ) | (16,198 | ) | 14,547 | (95,541 | ) | |||||||||||
Inventories |
| (17,290 | ) | (8,089 | ) | | (25,379 | ) | ||||||||||||
Prepaid expenses and other current assets |
10,546 | (1,583 | ) | (12,946 | ) | (275 | ) | (4,258 | ) | |||||||||||
Accounts payable |
744 | (6,669 | ) | 16,455 | (14,571 | ) | (4,041 | ) | ||||||||||||
Employee compensation and benefits |
(7,662 | ) | (17,869 | ) | 2,003 | | (23,528 | ) | ||||||||||||
Accrued product claims and warranties |
| (1,266 | ) | (97 | ) | | (1,363 | ) | ||||||||||||
Income taxes |
(3,625 | ) | 15,934 | (1,592 | ) | | 10,717 | |||||||||||||
Other current liabilities |
(7,354 | ) | (27,192 | ) | 8,107 | 299 | (26,140 | ) | ||||||||||||
Pension and post-retirement benefits |
2,342 | 1,354 | 781 | | 4,477 | |||||||||||||||
Other assets and liabilities |
(3,407 | ) | (676 | ) | 7,633 | | 3,550 | |||||||||||||
Net cash provided by (used for) continuing operations |
3,591 | (111,048 | ) | 15,107 | | (92,350 | ) | |||||||||||||
Net cash provided by (used for) operating activities of
discontinued operations |
1,451 | | (1,403 | ) | | 48 | ||||||||||||||
Net cash provided by (used for) operating activities |
5,042 | (111,048 | ) | 13,704 | | (92,302 | ) | |||||||||||||
Investing activities |
||||||||||||||||||||
Capital expenditures |
| (4,679 | ) | (4,375 | ) | | (9,054 | ) | ||||||||||||
Proceeds from sale of property and equipment |
| 31 | 48 | | 79 | |||||||||||||||
Acquisitions, net of cash acquired |
(1,941 | ) | (217 | ) | | | (2,158 | ) | ||||||||||||
Investment in subsidiaries |
(109,439 | ) | 115,768 | (6,329 | ) | | | |||||||||||||
Divestitures |
(18,246 | ) | | (5,761 | ) | | (24,007 | ) | ||||||||||||
Other |
(1,750 | ) | (400 | ) | | | (2,150 | ) | ||||||||||||
Net cash (used for) provided by investing activities |
(131,376 | ) | 110,503 | (16,417 | ) | | (37,290 | ) | ||||||||||||
Financing activities |
||||||||||||||||||||
Proceeds from long-term debt |
272,906 | | | | 272,906 | |||||||||||||||
Repayment of long-term debt |
(133,051 | ) | | | | (133,051 | ) | |||||||||||||
Proceeds from exercise of stock options |
2,577 | | | | 2,577 | |||||||||||||||
Excess tax benefits from stock-based compensation |
1,190 | 1,139 | 203 | | 2,532 | |||||||||||||||
Dividends paid |
(14,224 | ) | | | | (14,224 | ) | |||||||||||||
Net cash provided by financing activities |
129,398 | 1,139 | 203 | | 130,740 | |||||||||||||||
Effect of exchange rate changes on cash |
(998 | ) | 320 | 1,267 | | 589 | ||||||||||||||
Change in cash and cash equivalents |
2,066 | 914 | (1,243 | ) | | 1,737 | ||||||||||||||
Cash and cash equivalents, beginning of period |
3,004 | 4,362 | 41,134 | | 48,500 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 5,070 | $ | 5,276 | $ | 39,891 | $ | | $ | 50,237 | ||||||||||
16
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
In thousands | Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net sales |
$ | | $ | 577,879 | $ | 164,308 | $ | (32,552 | ) | $ | 709,635 | |||||||||
Cost of goods sold |
60 | 419,929 | 117,937 | (32,429 | ) | 505,497 | ||||||||||||||
Gross profit |
(60 | ) | 157,950 | 46,371 | (123 | ) | 204,138 | |||||||||||||
Selling, general and administrative |
9,378 | 85,098 | 26,272 | (123 | ) | 120,625 | ||||||||||||||
Research and development |
| 8,876 | 2,551 | | 11,427 | |||||||||||||||
Operating (loss) income |
(9,438 | ) | 63,976 | 17,548 | | 72,086 | ||||||||||||||
Net interest (income) expense |
(27,877 | ) | 40,415 | (1,262 | ) | | 11,276 | |||||||||||||
Income before income taxes |
18,439 | 23,561 | 18,810 | | 60,810 | |||||||||||||||
Provision for income taxes |
5,513 | 8,409 | 6,707 | | 20,629 | |||||||||||||||
Net income |
$ | 12,926 | $ | 15,152 | $ | 12,103 | $ | | $ | 40,181 | ||||||||||
17
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
In thousands | Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets |
||||||||||||||||||||
Current assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 3,004 | $ | 4,362 | $ | 41,134 | $ | | $ | 48,500 | ||||||||||
Accounts and notes receivable, net |
543 | 338,439 | 118,896 | (34,031 | ) | 423,847 | ||||||||||||||
Inventories |
| 267,007 | 82,305 | | 349,312 | |||||||||||||||
Deferred tax assets |
74,116 | 34,039 | 8,154 | (67,338 | ) | 48,971 | ||||||||||||||
Prepaid expenses and other current assets |
7,658 | 8,798 | 12,999 | (5,061 | ) | 24,394 | ||||||||||||||
Total current assets |
85,321 | 652,645 | 263,488 | (106,430 | ) | 895,024 | ||||||||||||||
Property, plant and equipment, net |
5,681 | 228,858 | 77,300 | | 311,839 | |||||||||||||||
Other assets |
||||||||||||||||||||
Investments in subsidiaries |
1,983,857 | 42,174 | 84,804 | (2,110,835 | ) | | ||||||||||||||
Goodwill |
| 1,488,425 | 229,782 | | 1,718,207 | |||||||||||||||
Intangibles, net |
| 240,084 | 26,449 | | 266,533 | |||||||||||||||
Other |
49,100 | 7,157 | 5,895 | | 62,152 | |||||||||||||||
Total other assets |
2,032,957 | 1,777,840 | 346,930 | (2,110,835 | ) | 2,046,892 | ||||||||||||||
Total assets |
$ | 2,123,959 | $ | 2,659,343 | $ | 687,718 | $ | (2,217,265 | ) | $ | 3,253,755 | |||||||||
Liabilities and Shareholders Equity |
||||||||||||||||||||
Current liabilities |
||||||||||||||||||||
Current maturities of long-term debt |
$ | 1,166 | $ | 76,269 | $ | 19,862 | $ | (93,160 | ) | $ | 4,137 | |||||||||
Accounts payable |
836 | 167,256 | 72,531 | (33,303 | ) | 207,320 | ||||||||||||||
Employee compensation and benefits |
13,869 | 57,006 | 24,677 | | 95,552 | |||||||||||||||
Accrued product claims and warranties |
| 28,664 | 14,887 | | 43,551 | |||||||||||||||
Current liabilities of discontinued operations |
| | 192 | | 192 | |||||||||||||||
Income taxes |
886 | 7,195 | 9,437 | | 17,518 | |||||||||||||||
Accrued rebates and sales incentives |
| 42,262 | 3,112 | | 45,374 | |||||||||||||||
Other current liabilities |
31,547 | 61,318 | 23,223 | (5,062 | ) | 111,026 | ||||||||||||||
Total current liabilities |
48,304 | 439,970 | 167,921 | (131,525 | ) | 524,670 | ||||||||||||||
Long-term debt |
745,162 | 1,710,648 | 12,344 | (1,719,677 | ) | 748,477 | ||||||||||||||
Pension and other retirement compensation |
75,743 | 28,386 | 48,651 | | 152,780 | |||||||||||||||
Post-retirement medical and other benefits |
24,155 | 49,794 | | | 73,949 | |||||||||||||||
Deferred tax liabilities |
| 167,544 | 25,579 | (67,338 | ) | 125,785 | ||||||||||||||
Due to / (from) affiliates |
(356,365 | ) | 64,324 | 246,212 | 45,829 | | ||||||||||||||
Other non-current liabilities |
31,350 | 881 | 38,224 | | 70,455 | |||||||||||||||
Non-current liabilities of discontinued operations |
| | 2,029 | | 2,029 | |||||||||||||||
Total liabilities |
568,349 | 2,461,547 | 540,960 | (1,872,711 | ) | 1,698,145 | ||||||||||||||
Shareholders equity |
1,555,610 | 197,796 | 146,758 | (344,554 | ) | 1,555,610 | ||||||||||||||
Total liabilities and shareholders equity |
$ | 2,123,959 | $ | 2,659,343 | $ | 687,718 | $ | (2,217,265 | ) | $ | 3,253,755 | |||||||||
18
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
In thousands | Company | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Operating activities |
||||||||||||||||||||
Net income |
$ | 12,926 | $ | 15,152 | $ | 12,103 | $ | | $ | 40,181 | ||||||||||
Adjustments to reconcile net income to net
cash provided by (used for) operating activities: |
||||||||||||||||||||
Depreciation |
375 | 11,078 | 3,010 | | 14,463 | |||||||||||||||
Amortization |
1,081 | 2,590 | 322 | | 3,993 | |||||||||||||||
Deferred income taxes |
70 | (3,376 | ) | 5,697 | | 2,391 | ||||||||||||||
Stock compensation |
2,891 | 2,772 | 497 | | 6,160 | |||||||||||||||
Excess tax benefit from stock-based compensation |
(1,754 | ) | (1,679 | ) | (298 | ) | | (3,731 | ) | |||||||||||
Changes in assets and liabilities, net of effects of
business acquisitions and dispositions |
||||||||||||||||||||
Accounts and notes receivable |
353 | (77,119 | ) | (19,283 | ) | 10,441 | (85,608 | ) | ||||||||||||
Inventories |
| (16,756 | ) | (2,733 | ) | | (19,489 | ) | ||||||||||||
Prepaid expenses and other current assets |
10,821 | (2,193 | ) | (13,306 | ) | 347 | (4,331 | ) | ||||||||||||
Accounts payable |
(3,163 | ) | (2,806 | ) | 9,052 | (10,465 | ) | (7,382 | ) | |||||||||||
Employee compensation and benefits |
(5,680 | ) | (22,073 | ) | 337 | | (27,416 | ) | ||||||||||||
Accrued product claims and warranties |
| 1,565 | (21 | ) | | 1,544 | ||||||||||||||
Income taxes |
(8,136 | ) | 13,012 | (7,718 | ) | | (2,842 | ) | ||||||||||||
Other current liabilities |
(119 | ) | (9,908 | ) | 9,741 | (319 | ) | (605 | ) | |||||||||||
Pension and post-retirement benefits |
1,555 | 1,293 | 798 | | 3,646 | |||||||||||||||
Other assets and liabilities |
(4,094 | ) | 875 | 1,969 | | (1,250 | ) | |||||||||||||
Net cash provided by (used for) continuing operations |
7,126 | (87,573 | ) | 167 | 4 | (80,276 | ) | |||||||||||||
Net cash provided by operating activities of
discontinued operations |
| | 205 | | 205 | |||||||||||||||
Net cash provided by (used for) operating activities |
7,126 | (87,573 | ) | 372 | 4 | (80,071 | ) | |||||||||||||
Investing activities |
||||||||||||||||||||
Capital expenditures |
(1,566 | ) | (15,787 | ) | (3,936 | ) | | (21,289 | ) | |||||||||||
Acquisitions, net of cash acquired |
(10,301 | ) | | | | (10,301 | ) | |||||||||||||
Investment in subsidiaries |
(119,212 | ) | 111,047 | 8,165 | | | ||||||||||||||
Divestitures |
(998 | ) | 289 | (481 | ) | | (1,190 | ) | ||||||||||||
Other |
| | 17 | | 17 | |||||||||||||||
Net cash (used for) provided by investing activities |
(132,077 | ) | 95,549 | 3,765 | | (32,763 | ) | |||||||||||||
Financing activities |
||||||||||||||||||||
Proceeds from long-term debt |
146,610 | | | | 146,610 | |||||||||||||||
Repayment of long-term debt |
(14,120 | ) | | | | (14,120 | ) | |||||||||||||
Proceeds from exercise of stock options |
2,599 | | | | 2,599 | |||||||||||||||
Excess tax benefit from stock-based compensation |
1,754 | 1,679 | 298 | | 3,731 | |||||||||||||||
Dividends paid |
(13,428 | ) | | | | (13,428 | ) | |||||||||||||
Net cash provided by financing activities |
123,415 | 1,679 | 298 | | 125,392 | |||||||||||||||
Effect of exchange rate changes on cash |
3,707 | 74 | (3,991 | ) | (4 | ) | (214 | ) | ||||||||||||
Change in cash and cash equivalents |
2,171 | 9,729 | 444 | | 12,344 | |||||||||||||||
Cash and cash equivalents, beginning of period |
2,295 | 5,570 | 23,630 | | 31,495 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 4,466 | $ | 15,299 | $ | 24,074 | $ | | $ | 43,839 | ||||||||||
19
20
| changes in general economic and industry conditions, such as: |
▪ | the strength of product demand; | ||
▪ | the intensity of competition, including that from foreign competitors; | ||
▪ | pricing pressures; | ||
▪ | market acceptance of new product introductions and enhancements; | ||
▪ | the introduction of new products and enhancements by competitors; | ||
▪ | our ability to maintain and expand relationships with large customers; | ||
▪ | our ability to source raw material commodities from our suppliers without interruption and at reasonable prices; | ||
▪ | our ability to source components from third parties, in particular from foreign manufacturers, without interruption and at reasonable prices; and | ||
▪ | the financial condition of our customers; |
| our ability to identify, complete, and integrate acquisitions successfully and to realize expected synergies on our anticipated timetable; | |
| changes in our business strategies, including acquisition, divestiture, and restructuring activities; | |
| domestic and foreign governmental and regulatory policies; | |
| general economic and political conditions, such as political instability, the rate of economic growth in our principal geographic or product markets, or fluctuations in exchange rates; | |
| changes in operating factors, such as continued improvement in manufacturing activities and the achievement of related efficiencies, cost reductions, and inventory risks due to shifts in market demand and costs associated with moving production overseas; | |
| unanticipated developments that could occur with respect to contingencies such as litigation, intellectual property matters, product liability exposures and environmental matters; | |
| our ability to continue to successfully generate savings from our excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; | |
| our ability to accurately evaluate the effects of contingent liabilities such as taxes, product liability, environmental, and other claims; and | |
| our ability to access capital markets and obtain anticipated financing under favorable terms. |
21
| We experience seasonal demand in a number of markets within our Water Group. End-user demand for pool/spa equipment follows warm weather trends and is at seasonal highs from March to July. The magnitude of the sales spike is partially mitigated by effective use of the distribution channel by employing some advance sales programs (generally including extended payment terms and/or additional discounts). Demand for residential and agricultural water systems is also affected by weather patterns particularly related to heavy flooding and droughts. | |
| We expect our operations to continue to benefit from our PIMS initiatives which include: strategy deployment; lean enterprise with special focus on sourcing and supply management, cash flow management, and lean operations; and IGNITE, our process to drive organic growth. | |
| We are experiencing material cost inflation in a number of our businesses. We are striving for greater productivity improvements and implementing selective increases in selling prices to help mitigate cost increases in base materials such as steel and resins, freight, fuel, health care, and insurance. | |
| Free cash flow, which we define as cash flow from operating activities less capital expenditures, including both continuing and discontinued operations, plus proceeds from sale of property and equipment, exceeded $200 million for the fourth consecutive year in 2005 and is expected to be approximately $200 million in 2006. See our discussion of Other financial measures under the caption Liquidity and Capital Resources of this report. | |
| In the first three months of 2006, the U.S. dollar was stronger against the Euro when compared to the same period in 2005. This resulted in year-over-year unfavorable foreign currency effects, which may or may not continue to trend unfavorably in the future. | |
| The effective tax rate for the first three months of 2006 was 34.0%. We estimate our effective income tax rate for the remainder of 2006 to be 35.5%, resulting in a full year effective income tax rate of 35.2%. We continue to actively pursue initiatives to reduce our effective tax rate. The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. |
| Continue to drive for operating excellence through PIMS: lean enterprise initiatives, supply management practices, and cash flow management; | |
| Continue the integration of acquisitions and realize identified synergistic opportunities; | |
| Continue proactive talent management process building competencies in international management and other key functional areas; | |
| Achieve organic sales growth (in excess of market growth), particularly in international markets; and | |
| Continue to make strategic acquisitions to grow and expand our existing platforms in our Water and Technical Products Groups. |
22
Three months ended | |||||||||||||||||
April 1 | April 2 | ||||||||||||||||
In thousands | 2006 | 2005 | $ change | % change | |||||||||||||
Net sales |
$ | 771,389 | $ | 709,635 | $ | 61,754 | 8.7 | % | |||||||||
% Change from 2005 | ||||
Percentages | First quarter | |||
Volume |
7.3 | |||
Price |
2.6 | |||
Currency |
(1.2 | ) | ||
Total |
8.7 | |||
| organic sales growth of approximately 5 percent (excluding the effects of acquisitions and foreign currency exchange), which includes selective increases in selling prices to mitigate inflationary cost increases; and | |
| an increase in sales volume due to our December 1, 2005 acquisition of the Thermal businesses. |
| unfavorable foreign currency effects as the stronger U.S. dollar decreased the U.S. dollar value of sales denominated in foreign currencies. |
Three months ended | |||||||||||||||||
April 1 | April 2 | ||||||||||||||||
In thousands | 2006 | 2005 | $ change | % change | |||||||||||||
Water |
$ | 517,169 | $ | 512,088 | $ | 5,081 | 1.0 | % | |||||||||
Technical Products |
254,220 | 197,547 | 56,673 | 28.7 | % | ||||||||||||
Total |
$ | 771,389 | $ | 709,635 | $ | 61,754 | 8.7 | % | |||||||||
| organic sales growth of approximately 2 percent (excluding foreign currency exchange) which includes selective increases in selling prices to mitigate inflationary cost increases: |
▪ | an increase in sales of water systems, wastewater, and commercial pumps and Everpure foodservice filtration; and | ||
▪ | a strong international sales performance. |
| unfavorable foreign currency effects; | |
| lower sales of retail pumps and filtration; and | |
| timing of municipal pump shipments. |
23
| organic sales growth of approximately 13 percent (excluding acquisitions and foreign currency exchange) which includes selective increases in selling prices to mitigate inflationary cost increases: |
▪ | continued strong North American sales in petrochemical, commercial, construction, data, medical, and food and beverage markets; | ||
▪ | a strong performance in Europe due to sales of several new products and a large telecom project for outdoor cabinets; | ||
▪ | higher sales in Asia driven by continued penetration in China, and a general market recovery in Japan; and |
| an increase in sales volume driven by our December 1, 2005 acquisition of the Thermal businesses. |
| unfavorable foreign currency effects. |
Three months ended | |||||||||||||||||
April 1 | % of | April 2 | % of | ||||||||||||||
In thousands | 2006 | sales | 2005 | sales | |||||||||||||
Gross profit |
$ | 222,508 | 28.8% | $ | 204,138 | 28.8% | |||||||||||
Percentage point change |
0.0 | pts |
| selective increases in selling prices in our Water and Technical Products Groups to mitigate inflationary cost increases; | |
| savings generated from our PIMS initiatives including lean and supply management practices; and | |
| cost leverage from our increase in sales volume in the Technical Products Group. |
| inflationary increases related to material, labor and freight costs; | |
| anticipated inefficiencies resulting from plant and product line moves in the Water Group; and | |
| lower margins due to unfavorable product mix (primarily in the Water Group). |
Three months ended | |||||||||||||||||
April 1 | % of | April 2 | % of | ||||||||||||||
In thousands | 2006 | sales | 2005 | sales | |||||||||||||
SG&A |
$ | 129,089 | 16.7% | $ | 120,625 | 17.0% | |||||||||||
Percentage point change |
(0.3 | ) pts |
| cost leverage from our increase in sales volume in the Technical Products Group; and | |
| proportionately lower spending in the acquired Thermal businesses. |
24
| higher selling and general expense to fund investments in future growth in all markets with emphasis on growth in the international markets, including personnel and business infrastructure investments; | ||
| an increase in amortization expense related to the intangible assets from the Thermal acquisition; and | ||
| higher costs related to stock-based compensation. |
Three months ended | |||||||||||||||||
April 1 | % of | April 2 | % of | ||||||||||||||
In thousands | 2006 | sales | 2005 | sales | |||||||||||||
R&D |
$ | 14,863 | 1.9% | $ | 11,427 | 1.6% | |||||||||||
Percentage point change |
0.3 | pts |
| additional investments related to new product development initiatives in our Water and Technical Products Groups; and | |
| proportionately higher spending in the newly acquired Thermal businesses. |
Three months ended | |||||||||||||||||
April 1 | % of | April 2 | % of | ||||||||||||||
In thousands | 2006 | sales | 2005 | sales | |||||||||||||
Operating income |
$ | 55,587 | 10.8% | $ | 60,489 | 11.8% | |||||||||||
Percentage point change |
(1.0 | ) pts |
| inflationary increases related to material, labor, and freight costs; | |
| expected inefficiencies resulting from plant and product line moves; | |
| planned investments in new products and new customers, reinforcing international talent, and implementing a unified business infrastructure in Europe; and | |
| unfavorable product mix. |
| selective increases in selling prices to mitigate inflationary cost increases; and | |
| savings realized from supply management activities. |
Three months ended | ||||||||||||||||
April 1 | % of | April 2 | % of | |||||||||||||
In thousands | 2006 | sales | 2005 | sales | ||||||||||||
Operating income |
$ | 37,704 | 14.8% | $ | 25,172 | 12.7% | ||||||||||
Percentage point change |
2.1 | pts |
| leverage gained on volume expansion through market share growth; |
25
| savings realized from the continued success of PIMS, including lean and supply management activities; and | |
| selective increases in selling prices to mitigate inflationary cost increases. |
| inflationary increases related to labor and freight costs. |
Three months ended | |||||||||||||||||
April 1 | April 2 | ||||||||||||||||
In thousands | 2006 | 2005 | Difference | % change | |||||||||||||
Net interest expense |
$ | 13,284 | $ | 11,276 | $ | 2,008 | 17.8% | ||||||||||
| increases in interest rates in 2006; and | ||
| incremental interest expense related to the payments made in connection with the final resolution of the net asset value dispute with BDK. |
Three months ended | |||||||||
April 1 | April 2 | ||||||||
In thousands | 2006 | 2005 | |||||||
Income before income taxes |
$ | 65,272 | $ | 60,810 | |||||
Provision for income taxes |
22,201 | 20,629 | |||||||
Effective tax rate |
34.0% | 33.9% |
| a favorable settlement in the first quarter of 2005 of an IRS exam for the periods 1998-2001 resulting in a release of tax contingency reserves in the amount of $1.3 million. |
| a favorable adjustment of $0.9 million in the first quarter of 2006 related to a prior year tax return. |
26
April 1 | December 31 | April 2 | ||||||||||
Days | 2006 | 2005 | 2005 | |||||||||
Days of sales in accounts receivable |
55 | 54 | 54 | |||||||||
Days inventory on hand |
71 | 70 | 65 | |||||||||
Days in accounts payable |
56 | 56 | 57 |
Rating Agency | Long-Term Debt Rating | Current Rating Outlook | ||
Standard & Poors
|
BBB | Stable | ||
Moodys
|
Baa3 | Stable |
27
Three months ended | |||||||||
April 1 | April 2 | ||||||||
In thousands | 2006 | 2005 | |||||||
Net cash used for operating activities |
$ | (92,302 | ) | $ | (80,071 | ) | |||
Capital expenditures |
(9,054 | ) | (21,289 | ) | |||||
Proceeds from sale of property and equipment |
79 | | |||||||
Free cash flow |
(101,277 | ) | (101,360 | ) | |||||
Net income |
41,620 | 40,181 | |||||||
Conversion of net income |
(243.3% | ) | (252.3% | ) | |||||
28
(a) | Evaluation of Disclosure Controls and Procedures We maintain a system of disclosure controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter ended April 1, 2006 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act). Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the quarter ended April 1, 2006 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures. |
|
(b) | Changes in Internal Controls There was no change in our internal control over financial reporting that occurred during the quarter ended April 1, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. |
29
30
ITEM 1A. | There have been no material changes from the risk factors previously disclosed in Item 1A. of our 2005 Annual Report on Form 10-K. |
31
ITEM 2. | Unregistered Sales of Equity Securities and Use of
Proceeds
The following table provides information with respect to purchases we made of our common stock during the first
quarter of 2006: |
(c) Total Number of | (d) | |||||||||||||
(a) Total | (b) | Shares Purchased as | Dollar value of Shares | |||||||||||
Number of | Average | Part of Publicly | that May Yet Be | |||||||||||
Shares | Price Paid | Announced Plans or | Purchased Under the | |||||||||||
Period | Purchased | per Share | Programs | Plans or Programs | ||||||||||
January 1 January 28, 2006
|
55,946 | 34.31 | | $25,000,000 | ||||||||||
January 29 February 25, 2006
|
112,986 | 38.17 | | $25,000,000 | ||||||||||
February 26
April 1, 2006
|
32,012 | 41.15 | | $25,000,000 | ||||||||||
Total
|
200,944 | | ||||||||||||
(a)
|
The purchases in this column include only those shares deemed surrendered to us by plan participants to satisfy the exercise price or withholding tax obligations related to the exercise of stock options and non-vested shares. | |
(b)
|
The average price paid in this column includes only those shares deemed surrendered to us by plan participants to satisfy the exercise price or withholding of tax obligations related to the exercise price of stock options and non-vested shares. | |
(c)
|
The number of shares in this column represents the number of shares repurchased as part of our publicly announced plan to repurchase up to $25 million of our common stock annually. | |
(d)
|
In December 2004, our Board of Directors authorized a program to annually repurchase shares of our common stock up to a maximum of $25 million per year. There is no expiration associated with the authorization granted. From January 1, 2006 to April 1, 2006, no shares had been repurchased pursuant to this program and accordingly we have the authority to repurchase up to a maximum dollar limit of $25 million during the remainder of 2006. |
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10.1
|
Letter Agreement, dated March 31, 2006, between Pentair, Inc. and Karen Durant (incorporated by reference to Exhibit 10.1 contained in Pentairs Current Report on Form 8-K dated April 5, 2006). | |
10.2
|
Confidentiality and Non-Competition Agreement, dated April 1, 2006, between Pentair, Inc. and Karen Durant (incorporated by reference to Exhibit 10.2 contained in Pentairs Current Report on Form 8-K dated April 5, 2006). | |
15
|
Letter Regarding Unaudited Interim Financial Information. | |
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1
|
Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2
|
Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
33
PENTAIR, INC. | ||||||
Registrant | ||||||
By | /s/ | David D. Harrison | ||||
David D. Harrison | ||||||
Executive Vice President and Chief Financial Officer | ||||||
(Chief Accounting Officer) |
34
10.1
|
Letter Agreement, dated March 31, 2006, between Pentair, Inc. and Karen Durant (incorporated by reference to Exhibit 10.1 contained in Pentairs Current Report on Form 8-K dated April 5, 2006). | |
10.2
|
Confidentiality and Non-Competition Agreement, dated April 1, 2006, between Pentair, Inc. and Karen Durant (incorporated by reference to Exhibit 10.2 contained in Pentairs Current Report on Form 8-K dated April 5, 2006). | |
15
|
Letter Regarding Unaudited Interim Financial Information | |
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1
|
Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2
|
Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
35