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Tuesday, October 20, 2009

Water Stocks News - Pentair (NYSE:PNR) Reports Third Quarter Net Income Per Share from Continuing Operations of $0.38; Adjusted EPS of $0.42

Water Stocks News - Pentair (NYSE:PNR) Reports Third Quarter Net Income Per Share from Continuing Operations of $0.38; Adjusted EPS of $0.42

•Reports third quarter sales of $663 million, down 23 percent year-over-year. •Delivers $103 million of free cash flow; Year to date free cash flow at $202 million •Operating margins in Water Group increase year over year; Technical Products adjusted operating margins over 14 percent •Introduces fourth quarter adjusted EPS guidance of $0.40 to $0.44 and updates full year adjusted EPS guidance of $1.40 to $1.44. All financial information and period-to-period references are on a continuing operations basis unless otherwise noted. Reconciliations to discontinued operations as well as GAAP and Non-GAAP reconciliations are in the attached financial tables.

MINNEAPOLIS-- October 20 2009 -Pentair, Inc. (NYSE:PNR) today announced third quarter 2009 net earnings per diluted share from continuing operations (EPS) of $0.38. This represents a decrease of 12 percent as compared to the $0.43 of EPS in the third quarter last year. Current period results included a negative $0.04 per share impact from restructuring charges. Adjusting for these items, third quarter 2009 EPS was $0.42, compared to adjusted third quarter 2008 EPS of $0.56, a decrease of 25 percent.

Total company sales decreased 23 percent to $663 million, compared with $856 million in the third quarter of 2008. The company delivered third quarter operating income of $67 million. On an adjusted basis, the company delivered operating income of $74 million versus $101 million in the year-ago quarter. The company’s adjusted operating income in the current quarter excluded the impact of additional severance charges associated with the third quarter elimination of 275 positions not included in prior restructuring. Overall, adjusted operating margins for the third quarter contracted 60 basis points to 11.2 percent. The positive impact from productivity and price did not offset the significant negative impact related to lower volumes.

Total company free cash flow was positive $103 million for the quarter. Year-to-date the company has generated $202 million of free cash flow, which is $95 million more than was generated in the first three quarters of 2008. The company said it remains on track to achieve free cash flow greater than $225 million for 2009.

“We continue to benefit from our cost actions and remain committed to our full year outlook. Additionally, with our strong free cash flow generation and the investments we have maintained in product innovation and sales and marketing we believe the company remains in an excellent position to benefit as markets recover,” said Randall J. Hogan, Pentair chairman and chief executive officer.

THIRD QUARTER BUSINESS HIGHLIGHTS

The Water Group delivered $462 million in sales, a 17 percent decline year-over-year. Sales were down 16 percent excluding foreign exchange.

•Flow Technologies sales were down 14 percent versus the year-ago quarter, as growth in the company’s global municipal market did not offset declines in commercial, industrial and residential markets. •Filtration sales were down 21 percent as sales to global residential, commercial and industrial markets continue to reflect inventory destocking and overall market softness. •Global Pool sales were down 16 percent as the prolonged decline in North American residential pool markets persists. The Water Group’s third quarter reported operating income totaled $53 million, up 7 percent as compared to $50 million in the same period last year. In the quarter, the Water Group had $3 million in pre-tax restructuring charges associated with severance from recently announced additional headcount reductions. Excluding these items, third quarter 2009 adjusted operating income was $56 million, down 12 percent versus third quarter 2008 adjusted operating income of $63 million. Adjusted operating margins of 12.1 percent were up 80 basis points as benefits from productivity more than offset the negative impact from volume declines, inflation, and pay-as-you-go restructuring costs.

Technical Products delivered third quarter 2009 sales of $201 million, a decrease of 32 percent versus the year-earlier period. Sales were down 31 percent excluding the impact of foreign exchange.

•Global Electrical sales were down 29 percent as industrial customers continue to reduce capital projects and distributors aggressively reduced inventory levels. •Global Electronic sales were down 34 percent as each of our major vertical markets contracted. Technical Products’ third quarter reported operating income totaled $24 million, down 49 percent compared to $48 million in the same quarter last year. Adjusting for a restructuring charge, operating income was $29 million. Adjusted operating margins were 14.4 percent, down 180 basis points versus the third quarter 2008. In the quarter, the benefits from productivity did not offset the negative impact from volume declines and foreign exchange.

“Overall, our third quarter results were solid given the recessionary environment. The results of our productivity actions were reflected in our Water business adjusted margins which expanded 80 basis points year over year despite a 17 percent sales decline,” said Randall J. Hogan, Pentair chairman and chief executive officer. “Additionally, our Technical Products business produced adjusted margins of over 14 percent despite sales declines of 32 percent, which were worse than anticipated and reflected declines in most major end markets.”

OUTLOOK

The company introduces its fourth quarter reported 2009 EPS guidance range of $0.37 to $0.41 which would be up when compared to fourth quarter 2008 reported EPS of $0.22. Adjusting for non-recurring items in both years (see attached reconciliation table) fourth quarter adjusted EPS is expected to be $0.40 to $0.44 or essentially flat with the year ago quarter. Fourth quarter sales are expected to be down approximately 14 percent.

The company updates its full year reported 2009 EPS guidance to $1.25 to $1.29, which would be down approximately 50 percent when compared to reported full year 2008 EPS. Adjusting for non-recurring items in both years full year adjusted 2009 EPS is expected to be $1.40 to $1.44 or down approximately 35 percent year over year. The company continues to anticipate future non-recurring gains from certain tax items but the timing is uncertain so these items are not included in the current full year reported EPS guidance.

“As anticipated, the benefits of our cost actions are rapidly improving our operating margins and earnings,” said Hogan. “Our fourth quarter EPS guidance demonstrates the results of our structural cost savings as we expect earnings to be flat year over year with higher operating margins despite anticipated sales declines.”

“We continue to position the company for market recovery, which we are seeing in some select markets and regions, and expect our operating margins and earnings growth will demonstrate that much of what we’ve accomplished in 2009 is sustainable,” Hogan added.

EARNINGS CONFERENCE CALL

Pentair Chairman and CEO Randall J. Hogan and Chief Financial Officer John L. Stauch will discuss the company’s performance and fourth quarter and full year 2009 guidance on a two-way conference call with investors and a live audio webcast at 9 a.m. Eastern today. Reconciliation of non-GAAP financial measures are set forth in the attachments to this third quarter 2009 earnings release and in the third quarter 2009 earning release conference call presentation, both of which can be found at Pentair’s web site (www.pentair.com). Related financial charts and certain other information to be discussed on the conference call will be available on the company’s website shortly before the conference call. The web cast and presentation will be archived at the same site following the conclusion of the conference call.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

Any statements made about the company’s anticipated financial results are forward-looking statements subject to risks and uncertainties such as the breadth and severity of the global economic downturn; the strength of housing and related markets; the ability to implement our restructuring and other cost reduction plans successfully and the risk that expected benefits may not be fully realized or may take longer to realize than expected; foreign currency effects; retail, commercial and industrial demand; product introductions; and pricing and other competitive pressures, as well as other risk factors set forth in our SEC filings. Forward-looking statements included herein are made as of the date hereof, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results.

ABOUT PENTAIR, INC.

Pentair (www.pentair.com) is a diversified operating company headquartered in Minnesota. Its Water Group is a global leader in providing innovative products and systems used worldwide in the movement, treatment, storage and enjoyment of water. Pentair’s Technical Products Group is a leader in the global enclosures and thermal management markets, designing and manufacturing thermal management products and standard, modified, and custom enclosures that house and protect sensitive electronics and electrical components. With 2008 revenues of $3.35 billion, Pentair employs approximately 13,100 people worldwide.

For financial tables see company news at www.pentair.com


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