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Pentair Reports First Quarter 2021 Results

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·15 min read
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  • First quarter sales of $866 million.

  • First quarter GAAP EPS of $0.78 and adjusted EPS of $0.81.

  • The company updates its full year 2021 GAAP EPS guidance to approximately $2.65 to $2.80 and on an adjusted basis to approximately $2.80 to $2.95.

Reconciliations of GAAP to Non-GAAP measures are in the attached financial tables.

Pentair plc (NYSE: PNR) today announced first quarter 2021 sales of $866 million. Sales were up 22 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 19 percent in the first quarter. First quarter 2021 earnings per diluted share from continuing operations ("EPS") were $0.78 compared to $0.43 in the first quarter of 2020. On an adjusted basis, the company reported EPS of $0.81 compared to $0.52 in the first quarter of 2020. Segment income, adjusted net income, free cash flow and adjusted EPS are described in the attached schedules.

First quarter 2021 operating income was $157 million, up 56 percent compared to operating income for the first quarter of 2020, and return on sales ("ROS") was 18.1 percent, an increase of 390 basis points when compared to the first quarter of 2020. On an adjusted basis, the company reported segment income of $164 million for the first quarter of 2020, up 47 percent compared to segment income for the first quarter of 2020, and ROS was 19.0 percent, an increase of 330 basis points when compared to the first quarter of 2020.

Consumer Solutions sales were up 34 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 31 percent in the first quarter. Segment income of $131 million was up 54 percent compared to the first quarter of 2020, and ROS was 25.1 percent, an increase of 330 basis points when compared to the first quarter of 2020.

Industrial & Flow Technologies sales were up 7 percent compared to sales for the same period last year. Excluding currency translation, core sales grew 3 percent in the first quarter. Segment income of $50 million was up 12 percent compared to the first quarter of 2020, and ROS was 14.5 percent, an increase of 60 basis points when compared to the first quarter of 2020.

Net cash used for operating activities of continuing operations was $19 million compared to a use of $162 million in the first quarter of 2020 and free cash flow used for continuing operations for the quarter was $29 million compared to $181 million in the first quarter of 2020.

Pentair paid a regular cash dividend of $0.20 per share in the first quarter of 2021. Pentair previously announced on February 16, 2021 that it will pay a regular quarterly cash dividend of $0.20 per share on May 7, 2021 to shareholders of record at the close of business on April 23, 2021. This year marks the 45th consecutive year that Pentair has increased its dividend.

John L. Stauch, Pentair’s President and Chief Executive Officer commented: "I want to thank the entire Pentair team for their efforts to deliver exceptional first quarter results and allow us to raise our full year expectations. We continued to experience strong residential demand and it took the agility of our operations and sourcing teams to secure key materials, expand capacity, and do our best to meet the expectations of our consumers and channel partners. We experienced greater than 20 percent revenue growth and delivered greater than 50 percent adjusted EPS growth in the quarter while also continuing to invest in our future by making focused growth investments. Also encouraging were the continued signs of recovery in our industrial and commercial businesses, which gives us confidence in their full year recovery."

"We recently completed the acquisition of Rocean and signed an agreement to purchase Ken’s Beverage, which helps us to fill out key strategic growth opportunities within the Water Treatment business of our Consumer Solutions segment. With a very healthy balance sheet and the growth momentum we are building, I believe we are well-positioned to continue to work with our customers to create sustainable solutions that help them make the most out of life’s essential resources while creating value for our shareholders."

Outlook

The company updates its estimated 2021 GAAP EPS from continuing operations to approximately $2.65 to $2.80 and on an adjusted EPS basis of approximately $2.80 to $2.95. The company updates full year 2021 sales guidance to up approximately 6 to 11 percent on a reported basis. The company expects full year free cash flow of greater than or equal to 100 percent of net income.

In addition, the company introduces second quarter 2021 GAAP EPS from continuing operations guidance of $0.65 to $0.70 and on an adjusted EPS basis of $0.69 to $0.74. The company expects second quarter sales to be up approximately 13 to 16 percent on a reported basis compared to the second quarter of 2020.

EARNINGS CONFERENCE CALL

Pentair President and Chief Executive Officer John L. Stauch and Chief Financial Officer Robert P. Fishman will discuss the company’s first quarter 2021 results on a two-way conference call with investors at 9:00 a.m. Eastern Daylight Time today. A live audio webcast of the call, along with the related presentation, can be accessed in the Investor Relations section of the company’s website, www.pentair.com, shortly before the call begins.

Reconciliations of non-GAAP financial measures are set forth in the attachments to this release and in the presentation, each of which can be found on Pentair’s website. The webcast and presentation will be archived at the company’s website following the conclusion of the event.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This release contains statements that we believe to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "targets," "plans," "believes," "expects," "intends," "will," "likely," "may," "anticipates," "estimates," "projects," "should," "would," "could," "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 overall impact of the COVID-19 pandemic on our business; the duration and severity of the COVID-19 pandemic, the impact of virus variants and the rate of vaccinations; actions that may be taken by us, other businesses and governments to address or otherwise mitigate the impact of the COVID-19 pandemic, including those that may impact our ability to operate our facilities, meet production demands, and deliver products to our customers; the negative impacts of the COVID-19 pandemic on the global economy, our customers and suppliers, and customer demand; overall global economic and business conditions impacting our business, including the strength of housing and related markets; demand, competition and pricing pressures in the markets we serve; volatility in currency exchange rates; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; the ability to achieve the benefits of our restructuring plans and cost reduction initiatives; risks associated with operating foreign businesses; the impact of material cost and other inflation; the impact of seasonality of sales and weather conditions; our ability to comply with laws and regulations; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits or impact trade agreements and tariffs; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2020. All forward-looking statements speak only as of the date of this release. Pentair plc assumes no obligation, and disclaims any obligation, to update the information contained in this release.

ABOUT PENTAIR PLC

Pentair makes the most of life’s essential resources. From our residential and business solutions that help people move, improve and enjoy their water, to our sustainable innovations and applications, we deliver smart, sustainable solutions for life.

Pentair had revenue in 2020 of $3 billion, and trades under the ticker symbol PNR. With approximately 9,750 global employees serving customers in more than 150 countries, we work to help improve lives and the environment around the world. To learn more, visit www.pentair.com.

Pentair plc and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

Three months ended

In millions, except per-share data

March 31,
2021

March 31,
2020

Net sales

$

865.9

$

710.0

Cost of goods sold

550.7

458.4

Gross profit

315.2

251.6

% of net sales

36.4

%

35.4

%

Selling, general and administrative

136.6

131.9

% of net sales

15.8

%

18.6

%

Research and development

21.5

19.0

% of net sales

2.5

%

2.7

%

Operating income

157.1

100.7

% of net sales

18.1

%

14.2

%

Other expense:

Other expense

0.4

1.2

Net interest expense

5.1

6.9

% of net sales

0.6

%

1.0

%

Income from continuing operations before income taxes

151.6

92.6

Provision for income taxes

20.5

19.9

Effective tax rate

13.5

%

21.5

%

Net income from continuing operations

131.1

72.7

Loss from discontinued operations, net of tax

(2.5

)

Net income

$

128.6

$

72.7

Earnings (loss) per ordinary share

Basic

Continuing operations

$

0.79

$

0.43

Discontinued operations

(0.02

)

Basic earnings per ordinary share

$

0.77

$

0.43

Diluted

Continuing operations

$

0.78

$

0.43

Discontinued operations

(0.01

)

Diluted earnings per ordinary share

$

0.77

$

0.43

Weighted average ordinary shares outstanding

Basic

166.2

167.8

Diluted

167.7

168.7

Cash dividends paid per ordinary share

$

0.20

$

0.19

Pentair plc and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

March 31,
2021

December 31,
2020

In millions

Assets

Current assets

Cash and cash equivalents

$

95.0

$

82.1

Accounts and notes receivable, net

566.4

367.5

Inventories

429.1

420.0

Other current assets

118.0

105.5

Total current assets

1,208.5

975.1

Property, plant and equipment, net

293.4

301.2

Other assets

Goodwill

2,367.2

2,392.2

Intangibles, net

315.5

325.9

Other non-current assets

199.5

202.8

Total other assets

2,882.2

2,920.9

Total assets

$

4,384.1

$

4,197.2

Liabilities and Equity

Current liabilities

Accounts payable

$

297.1

$

245.1

Employee compensation and benefits

101.0

117.0

Other current liabilities

425.8

410.4

Total current liabilities

823.9

772.5

Other liabilities

Long-term debt

932.4

839.6

Pension and other post-retirement compensation and benefits

101.2

102.0

Deferred tax liabilities

101.4

107.4

Other non-current liabilities

231.4

269.4

Total liabilities

2,190.3

2,090.9

Equity

2,193.8

2,106.3

Total liabilities and equity

$

4,384.1

$

4,197.2

Pentair plc and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three months ended

In millions

March 31,
2021

March 31,
2020

Operating activities

Net income

$

128.6

$

72.7

Loss from discontinued operations, net of tax

2.5

Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities of continuing operations

Equity (income) loss of unconsolidated subsidiaries

(0.2

)

0.5

Depreciation

12.7

11.6

Amortization

7.1

7.6

Deferred income taxes

(2.8

)

14.0

Share-based compensation

5.6

6.2

Changes in assets and liabilities, net of effects of business acquisitions

Accounts receivable

(202.4

)

(167.1

)

Inventories

(12.5

)

(20.1

)

Other current assets

(16.6

)

(13.4

)

Accounts payable

54.8

(49.9

)

Employee compensation and benefits

(14.8

)

(0.8

)

Other current liabilities

17.7

(22.3

)

Other non-current assets and liabilities

1.5

(1.4

)

Net cash used for operating activities of continuing operations

(18.8

)

(162.4

)

Net cash used for operating activities of discontinued operations

(0.2

)

Net cash used for operating activities

(19.0

)

(162.4

)

Investing activities

Capital expenditures

(13.2

)

(18.7

)

Proceeds from sale of property and equipment

3.4

0.1

Acquisitions, net of cash acquired

(7.2

)

Net cash used for investing activities

(9.8

)

(25.8

)

Financing activities

Net borrowings of commercial paper and revolving long-term debt

92.4

420.9

Shares issued to employees, net of shares withheld

(0.2

)

5.2

Repurchases of ordinary shares

(9.6

)

(115.2

)

Dividends paid

(33.3

)

(32.1

)

Payments upon the maturity of cross currency swaps

(14.7

)

Net cash provided by financing activities

34.6

278.8

Effect of exchange rate changes on cash and cash equivalents

7.1

(3.8

)

Change in cash and cash equivalents

12.9

86.8

Cash and cash equivalents, beginning of period

82.1

82.5

Cash and cash equivalents, end of period

$

95.0

$

169.3

Pentair plc and Subsidiaries

Reconciliation of the GAAP operating activities cash flow to the non-GAAP free cash flow (Unaudited)

Three months ended

In millions

March 31,
2021

March 31,
2020

Net cash used for operating activities of continuing operations

$

(18.8

)

$

(162.4

)

Capital expenditures

(13.2

)

(18.7

)

Proceeds from sale of property and equipment

3.4

0.1

Free cash flow from continuing operations

$

(28.6

)

$

(181.0

)

Net cash used for discontinued operations

(0.2

)

Free cash flow

$

(28.8

)

$

(181.0

)

Pentair plc and Subsidiaries

Supplemental Financial Information by Reportable Segment (Unaudited)

2021

2020

In millions

First

Quarter

First

Quarter

Net sales

Consumer Solutions

$

521.4

$

388.8

Industrial & Flow Technologies

344.1

320.9

Other

0.4

0.3

Consolidated

$

865.9

$

710.0

Segment income (loss)

Consumer Solutions

$

131.0

$

84.8

Industrial & Flow Technologies

50.0

44.7

Other

(16.6

)

(18.0

)

Consolidated

$

164.4

$

111.5

Return on sales

Consumer Solutions

25.1

%

21.8

%

Industrial & Flow Technologies

14.5

%

13.9

%

Consolidated

19.0

%

15.7

%

Pentair plc and Subsidiaries

Reconciliation of GAAP to non-GAAP financial measures for the year ending December 31, 2021

excluding the effect of adjustments (Unaudited)

Actual

Forecast

In millions, except per-share data

First

Quarter

Second

Quarter

Full

Year

Net sales

$

865.9

approx

Up 13% - 16%

approx

Up 6% - 11%

Operating income

157.1

% of net sales

18.1

%

Adjustments:

Restructuring and other

1.5

approx

$

approx

$

2

Intangible amortization

7.1

approx

6

approx

24

COVID-19 related costs expenses

0.2

approx

approx

Legal accrual adjustments

(2.4

)

approx

approx

(2

)

Deal-related costs and expenses

0.7

approx

approx

1

Equity income of unconsolidated subsidiaries

0.2

approx

1

approx

3

Segment income

164.4

approx

Up 12% - 20%

approx

Up 10% - 16%

Return on sales

19.0

%

Net income from continuing operations—as reported

131.1

approx

$109 - $117

approx

$443 - $468

Adjustments to operating income

7.1

approx

6

approx

25

Income tax adjustments

(2.4

)

approx

1

approx

1

Net income from continuing operations—as adjusted

$

135.8

approx

$116 - $124

approx

$469 - $494

Continuing earnings per ordinary share—diluted

Diluted earnings per ordinary share—as reported

$

0.78

approx

$0.65 - $0.70

approx

$2.65 - $2.80

Adjustments

0.03

approx

0.04

approx

0.15

Diluted earnings per ordinary share—as adjusted

$

0.81

approx

$0.69 - $0.74

approx

$2.80 - $2.95

Pentair plc and Subsidiaries

Reconciliation of GAAP to non-GAAP financial measures for the year ended December 31, 2020

excluding the effect of 2020 adjustments (Unaudited)

In millions, except per-share data

First

Quarter

Second

Quarter

Third

Quarter

Fourth

Quarter

Full

Year

Net sales

$

710.0

$

713.3

$

798.5

$

796.0

$

3,017.8

Operating income

100.7

111.1

128.1

121.5

461.4

% of net sales

14.2

%

15.6

%

16.0

%

15.3

%

15.3

%

Adjustments:

Restructuring and other

2.4

1.1

2.1

9.8

15.4

Intangible amortization

7.6

7.0

6.9

6.9

28.4

COVID-19 related costs and expenses

0.9

4.8

2.6

2.1

10.4

Deal-related costs and expenses

0.4

0.2

0.6

Equity (loss) income of unconsolidated subsidiaries

(0.5)

0.7

0.8

0.4

1.4

Segment income

111.5

124.7

140.5

140.9

517.6

Return on sales

15.7

%

17.5

%

17.6

%

17.7

%

17.2

%

Net income from continuing operations—as reported

72.7

73.8

110.8

99.8

357.1

Loss on sale of businesses

0.1

0.1

Pension and other post retirement mark-to-market loss

6.7

6.7

Other income

(2.2)

(2.2)

Adjustments to operating income

11.3

12.9

11.6

19.0

54.8

Income tax adjustments

3.3

11.1

(3.6)

(8.1)

2.7

Net income from continuing operations—as adjusted

$

87.3

$

97.9

$

116.6

$

117.4

$

419.2

Continuing earnings per ordinary share—diluted

Diluted earnings per ordinary share—as reported

$

0.43

$

0.44

$

0.66

$

0.60

$

2.13

Adjustments

0.09

0.15

0.04

0.10

0.37

Diluted earnings per ordinary share—as adjusted

$

0.52

$

0.59

$

0.70

$

0.70

$

2.50

Pentair plc and Subsidiaries

Reconciliation of Net Sales Growth to Core Net Sales Growth by Segment

For the Quarter Ended March 31, 2021 (Unaudited)

Q1 Net Sales Growth

Core

Currency

Acq. / Div.

Total

Total Pentair

18.5

%

2.6

%

0.9

%

22.0

%

Consumer Solutions

31.1

%

1.3

%

1.7

%

34.1

%

Industrial & Flow Technologies

3.3

%

3.9

%

%

7.2

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210422005281/en/

Contacts

Jim Lucas
SVP, Treasurer, FP&A and Investor Relations
Direct: 763-656-5575
Email: jim.lucas@pentair.com

Rebecca Osborn
Senior Manager, External Communications
Direct: 763-656-5589
Email: rebecca.osborn@pentair.com