Pentair Annual Report 1999

FY1999 Annual Report · Pentair

Loading PDF…

what’s behind the name?

Pentair, Inc. Summary Annual Report 1999

what’s behind the name?

Acquisition know-how. We acquired
three strategic businesses in 1999
that will boost our revenues by
50 percent, making us a $3 billion
company in the year 2000.

Manufacturing excellence. The mind-
set in our plants is for continuous
improvement. Customer-focused
work teams, with clear productivity
goals and a commitment to quality,
help us deliver superior products
on time and at competitive prices.

Consistent, strong performance.
We have been proﬁtable since
our second year in business.
Our 14,000 employees give us
our competitive edge.

Rapid growth. We’re making it
happen throughout the Company,
in each business segment,
geographically, and ﬁnancially.

Innovation across the board.
From products to processes to
services, we’re ﬁnding new and
better ways of doing business.

Pentair is a diversiﬁed

manufacturer serving

customers worldwide

in three core

businesses:

professional tools

and equipment,

water and

ﬂuid technologies,

and electrical and

electronic enclosures.

Pentair brands are

recognized market

leaders in their

categories. Pentair’s

manufacturing

and marketing

competencies enable

the company to

deliver high-value

products to

customers and

consistent earnings

to investors.

Pentair stock is

traded on the

New York Stock

Exchange under

the symbol PNR.

page 1

operating groups

ﬁnancial highlights

Years ended December 31

Delta

Porter-Cable

DeVilbiss
Air Power

Century

In thousands, except per share data and percentages

1999

1998

Change

Net sales

$2,367,753

$1,937,578

22.2%

Operating income

$ 252,331*

$ 193,192

30.6%

Net income

$ 127,439*

$ 106,840

19.3%

professional tools
and equipment group

Diluted earnings per share

Cash dividends per common share

2.89*

.64

2.46

17.5%

.60

Return on average common

shareholders’ equity

15.2%*

16.6%

Common shares outstanding at year-end

48,317

38,504

Stock price at year-end

Capital expenditures

Total debt to capital ratio

38 1⁄2

60,629

51%

39 13⁄16

53,843

33%

Number of employees

13,900

10,500

*excludes restructuring charge of $38.0 million pre-tax, $24.13 million after-tax, or $0.56 per share.

8
7
6
3
2

6
7
3
9
1

1
9
3
8
1

1
7
6
5
1

9
2
0
4
1

7
1
6
2
1

*
4
7
2
1

8
6
0
1

6
1
9

5
4
7

5
0
6

1
0
5

*
9
8
2

6
4
2

1
1
2

3
7
1

1
4
1

7
1
1

sales

income from
continuing
operations

earnings per
share diluted

4
9

5
9

6
9

7
9

8
9

9
9

$ millions

4
9

5
9

6
9

7
9

8
9

9
9

$ millions

4
9

5
9

6
9

7
9

8
9

9
9

$ per share
from continuing
operations

Pentair Pump
and Pool

Lincoln Industrial

Pentair Water
Treatment

water and ﬂuid
technologies group

Hoffman

Pentair Electronic
Packaging

Pentair
Enclosures
Europe

electrical and electronic
enclosures group

2 page

to our shareholders

Of the many ﬁne qualities behind the Pentair name, the one that has always

been a trademark is consistent, strong ﬁnancial performance. In 1999, for the

eighth consecutive year, we achieved record sales and pre-charge earnings

from continuing businesses. In addition, we continued our growth momentum,

strengthened our senior management team, and engineered increased productivity

at all of our operations.

Winslow H. Buxton
Chairman and CEO

We managed more aggressively in 1999, taking substantial actions to

ensure the vigorous growth and long-term success of Pentair. We built critical

mass in our three business segments through a combination of organic growth

and major acquisitions; enhanced our ﬁnancial structure through new debt

and equity offerings; and took a one-time charge against earnings to accelerate

the restructuring programs necessary to support our rapid growth.

Joseph R. Collins
Vice Chairman

We continued to increase our global reach, penetrate new markets,

introduce new products, win new customers, achieve internal economies

of scale, and hone the core competencies beﬁtting an organization of our size

and potential.

Our sales in 1999 were up 22 percent to $2.37 billion, and our pre-charge

operating income was up 31 percent to $252.3 million. Pre-charge earnings per

Randall J. Hogan
President and COO

share (EPS) for 1999 reached $2.89 – 18 percent ahead of 1998 EPS. Cash EPS,

deﬁned as regular EPS plus the after-tax impact of goodwill amortization, was

$3.38 in 1999 versus $2.75 in 1998, an improvement of 23 percent. Operating

margins for the year improved by 70 basis points, while margins excluding the

impact of acquisitions improved by 160 basis points. The fourth quarter of 1999

was our 25th consecutive quarter of achieving year-to-year earnings growth.

And we are doing all we can to continue this record.

1999 was a great year for Pentair, with one exception. Stock market

ﬂuctuations made headline news regularly throughout the year, and we rode

the roller coaster along with most everyone else. In light of our unwavering

commitment to building shareholder value, we are disappointed that our record

ﬁnancial performance in 1999 was not reﬂected in the price of our stock.

page 3

to our shareholders

However, we are conﬁdent that the downturn was due primarily to the market’s

prevailing interest in technology stocks, and we believe that as our performance

and market position strengthen, investors will ultimately recognize Pentair’s

consistently excellent performance and prospects. We are certain that the bold

steps we took to build the business in 1999 will generate considerable value

for all Pentair stakeholders in the near future and the coming years.

Revenues projected at $3 billion in 2000

We reached a major milestone in 1999 on the road to achieving our long-term

growth goals. The successful completion of our two largest acquisitions ever —

Essef Corporation and DeVilbiss Air Power Company — built critical mass in

two of our chosen market segments and assured us of generating more than

$3 billion in revenues in 2000.

On August 10, 1999, we acquired Essef Corporation of Chardon, Ohio,

for $18.97 per share, or $310 million, and the assumption of approximately

$120 million of debt. Essef manufactures products used in moving, treating,

Pentair’s

and storing water — including pumps, tanks, ﬁltration systems, and pool and spa

manufacturing

equipment. Essef is expected to drive sales in our Water and Fluid Technologies

excellence

Group to nearly $900 million in 2000. Water is a strong growth market that will

was publicly

provide us with inﬁnite opportunities.

recognized in

October 1999

Pentair excels at manufacturing by focusing on the people who do the work. Since the Company

was founded in 1966, Pentair has empowered the people closest to the tasks to get the job done.

when Porter-Cable

Today, plant employees are the “experts on the ﬂoor,” determining work processes, setting goals,

was named one

and even selecting the equipment they use. They run their areas as if they were their own

businesses; and when they exceed their goals, they share in the proﬁts. This way of working gives

of the top 10

employees a heightened sense of responsibility for the success of the products they produce and

manufacturing

the company they represent.

plants in

IndustryWeek magazine selected the Porter-Cable facility in Jackson, Tennessee, as one of the top

Pentair’s manufacturing excellence was publicly recognized in October 1999 when

North America.

10 manufacturing plants in North America. Porter-Cable was chosen from more than 400 plants

nominated for the award.

IndustryWeek credited Porter-Cable’s American Integrated Manufacturing System — or

AIMS program — for the plant’s success. AIMS focuses on employee involvement, a commitment

4 page

In early September, we acquired DeVilbiss Air Power Company of Jackson,

Tennessee, for approximately $460 million. With this acquisition, we gained

new product lines and signiﬁcant market share in product categories new to us.

DeVilbiss Air Power Company is number one in retail air compressors, number

one in cold water pressure washers, and a strong number three in retail generators.

We expect the addition of DeVilbiss Air Power Company will drive sales in our

Professional Tools and Equipment Group to more than $1.5 billion in the year 2000.

This acquisition positions us for future growth in North American markets.

We continue to make smaller strategic acquisitions to support growth in

our three business segments. In April 1999, we increased our penetration of

the fast-growing global electronic packaging market with the acquisition of WEB

Tool and Manufacturing of Chicago, Illinois. WEB, a high-volume manufacturer

of stamped enclosures and assemblies for computer applications, increased

our custom enclosure capabilities and strengthened our ability to serve datacom

and telecom markets.

To fund our unusually high degree of acquisition activity in 1999, we issued

new debt and equity. In early October, we successfully completed

parallel offerings of 5.5 million new shares of common stock

and $250 million of long-term public debt; both offerings were

oversubscribed by investors. The offerings enabled us to bring

to quality, and a virtual war against waste. The program’s slogan is People,

Productivity, Quality.

AIMS was implemented in 1992 after Porter-Cable made a strategic

decision to sell its professional-quality power tools through home centers.

Anticipating considerably higher production volumes, the factory reorganized

into cells, formed work teams, and opened communication lines between the

plant ﬂoor and management. Through these initiatives, the operation was transformed.

The AIMS effort allowed Porter-Cable to successfully compete with and become one of the

giants of the power tool industry, meet the volume and order-ﬁll requirements of home centers,

and take good care of all customers. During the last seven years, Porter-Cable sales have

increased 300 percent, driven by manufacturing and distribution excellence.

Naturally, when the IndustryWeek award was presented in Jackson, the employees of

Porter-Cable, like Darell Wilson, pictured at right, were the guests of honor.

page 5

to our shareholders

our total debt to capital ratio to the 50 percent range by year-end, and to return

Pentair to a strong ﬁnancial structure that supports strategic future growth.

With acquisitions like DeVilbiss Air Power, Essef, and WEB, we continue

to solidify our business interests in tools and equipment, water, and enclosures.

In October 1999, in a move to further tighten this focus, we announced our intent

to explore strategic alternatives for Lincoln Industrial. A Pentair business since

1986, Lincoln Industrial is the global market leader in automated grease lubrication.

At this time, we are exploring options to ensure that Lincoln Industrial is optimally

positioned to grow in the lubrication and pump markets it serves.

Initiatives target customer access and service

In 1999, we undertook many separate initiatives designed to reduce costs

and increase our abilities to access and serve our customers more efﬁciently.

Our global expansion is being accelerated so that we can accommodate the needs

of large, multinational customers. E-business capabilities are being developed

so that we can provide customers with faster, smoother transactions and service.

Motivated,

We also are implementing new enterprise systems to better manage activities

enthusiastic

within our operating units, and to consolidate and improve services.

people working

Much of our success can be attributed to our well-developed core

together to

competencies. Operating expertise, acquisition and integration know-how,

achieve common

goals are the

Pentair looks at its strategies and growth plans in terms of the leadership that will be required

to bring those plans to fruition. In 1999, a new, more aggressive talent management process

driving force

was launched to deliver more consistent talent identiﬁcation and development. Personal

in the top

competencies necessary for successful leadership were deﬁned, with an emphasis on ethics,

problem-solving skills, people skills, business skills, and self-management skills — qualities

performance

that reﬂect the tenets of Pentair’s Code of Business Conduct.

of Pentair

businesses.

Pentair business units determined their talent needs; promising employees within those

business units were identiﬁed; and development-planning discussions were held. As part of the

overall talent management process, a two-year Executive Development Program was established,

with a new class beginning each year.

The ﬁrst class of 22 high-potential middle managers was organized in 1999. Participants

received personal competency-based development guidance, 360-degree feedback, and training

that gave them tools to increase their effectiveness in their jobs. Training included sessions on

6 page

product innovation, excellent channel management, and people-powered

performance keep our businesses and brands in leadership positions in their

markets. We continue to strengthen these core competencies and develop other

skill sets necessary to support Pentair’s projected growth in size and scope.

Meeting the demands of the future

The acquisitions, stock offering, and restructuring activities we undertook in 1999

were necessary phases in our corporate evolution. Pentair’s future business plan

is based on fewer, larger business units and consolidated world-class services.

Our current initiatives will result in a streamlined organization that is better able

to focus on the critical competencies of manufacturing and operating excellence,

product innovation, acquisition and integration, talent management, e-business,

and customer service.

Our corporate evolution has dictated changes in every area of our business.

In a move to ﬁne-tune our senior management team, Enclosures Group President

and Pentair Executive Vice President Randall J. Hogan was promoted to president

and chief operating ofﬁcer of Pentair, effective December 1, 1999.

Randy has 23 years of experience in strategy development and

implementation, operations and ﬁscal management, global market

growth, acquisitions, and marketing. His broad background, strong

personal effectiveness, leadership techniques, ﬁnance, marketing, strategic

planning, and global business practices.

Six members of the ﬁrst Executive Development class are pictured at

Pentair’s corporate headquarters following a training session in Minneapolis.

Front row, left to right: Jochen Enderle, Pentair Enclosures Europe; Roma

Anderson, Pentair Water Treatment; and Lori Stiegmann, Porter-Cable.

Back row, left to right: Scott Kiefer, Porter-Cable; JoEllen Lawler, Pentair Corporate; and

Gene Caston, Hoffman.

An important feature of the talent management process is the assignments that take

employees across business and group lines. Ultimately, this cross-training initiative will result

in a more collaborative and uniﬁed organization. In implementing the ﬁrst phase of the talent

management process, development efforts targeted management-level employees. Pentair

plans to expand this initiative over the next several years to include other employee groups.

page 7

to our shareholders

leadership skills, and depth of talent make him well suited to the tasks

ahead of Pentair.

David D. Harrison rejoined Pentair in February 2000 as executive vice

president and chief ﬁnancial ofﬁcer, succeeding retiring CFO Richard Ingman. Dave

was a strong participant in Pentair’s mid-1990s reengineering strategy, and his

return to the Company gives us considerable depth in ﬁnancial management and

investor relations.

Simpliﬁed and focused

Our leadership team is more focused than ever before. Over the last ﬁve years,

we have acquired and divested to concentrate all our assets in three areas of

enterprise – tools and equipment, water, and enclosures. Each of these three

areas has long legs, meaning each offers opportunities for added value in the

short-term, as well as attractive returns in the long-term. Our tools and equipment

businesses help meet the basic requirements of shelter and transportation.

Our water businesses serve the fundamental human need for safe, clean

Pentair’s

water. Our enclosure businesses play a critical role in advancing industry and

commitment to

technology by housing and protecting sensitive electronic equipment. From

its communities

this perspective, Pentair’s business mix and operating strategies are clear-cut

took on new

and easy to understand.

scope and

meaning in June

Pentair has long been giving back to the communities in which it operates. In 1998, the Company’s

philanthropic activities were formalized with the establishment of The Pentair Foundation.

1999 when the

The Foundation has two major areas of focus: Education and Community. Funding is

Foundation

directed to educational programs and community-based organizations that serve socially and

economically disadvantaged people, with the goal of creating positive change in their lives.

entered into a

The Foundation provided $2.09 million in grants to 163 organizations in 1999.

partnership with

Habitat for

Humanity

International.

Pentair’s commitment to its communities took on new scope and meaning in June 1999

when the Foundation launched its ﬁrst company-wide initiative. The Foundation entered into a

partnership with Habitat for Humanity International to build ten houses in two years. Under the

banner of “Businesses Building Homes,” nearly 400 Pentair employee volunteers in ﬁve locations

participated in the construction projects in 1999.

Pentair’s corporate ofﬁce staff kicked off the national program by helping to build a Habitat

home in Columbia Heights, Minnesota. Then, employee volunteers from Pentair businesses—

8 page

We are uniquely equipped to serve our three growth markets, and as a result,

to meet the expectations of our shareholders. Across the board, Pentair

has top-performing businesses, extraordinary people, broad ﬁnancial strength,

and the know-how to succeed.

Advantage: top-performing businesses

Our businesses are ﬁrst or second in their markets, managing their brands so that

they maintain leadership positions in their distribution channels. They’ve made

product innovation a key strategy across the board and introduced integrated

product offerings that provide complete, ready-to-go solutions and the convenience

of one-stop shopping. They continue to broaden their scope to provide new

products and services to existing customers, and to reﬁne their processes so that

innovation, product performance, and transaction excellence are integral parts of

their offerings. Working to achieve manufacturing excellence, Pentair businesses

are transforming their facilities into operations that rank among the world’s best.

Advantage: extraordinary people

Motivated, enthusiastic people working together to achieve

common goals are the driving force in the top performance of

Pentair businesses. In a work environment where communications

Porter-Cable in Jackson, Tennessee; Lincoln Industrial in St. Louis, Missouri;

Fairbanks Morse in Kansas City, Kansas; and Hoffman Enclosures in Anoka,

Minnesota — followed suit by building Habitat houses in their own communities.

Greg Linder, who coordinated the volunteer effort at Hoffman Enclosures

and acted as the site crew leader, is pictured using a Delta saw to cut temporary

supports for a front porch. At every build, Pentair provided Delta/Porter-Cable

power tool packages to the Habitat for Humanity local afﬁliate.

Five additional Foundation-sponsored Habitat homes are scheduled to be

built in 2000 by Delta International Machinery Corporation in Tupelo, Mississippi;

Pentair Water Treatment in Milwaukee, Wisconsin; Century Manufacturing in Bloomington,

Minnesota; Pentair Pump and Pool in Ashland, Ohio; and Pentair Electronic Packaging in

Warwick, Rhode Island. The Foundation’s total contribution for the two-year Habitat program

will be $464,500.

page 9

to our shareholders

are open and informal, we attempt to use to the fullest the diverse strengths and

abilities of our people by encouraging fresh thinking and new ways of doing things.

We help employees increase their knowledge and skills by offering developmental

opportunities, management experience, and chances to make signiﬁcant

contributions to the organization. Pentair employees also have the opportunity

to contribute to their communities through voluntarism and service on community

councils within Pentair businesses. Through community councils, The Pentair

Foundation donates a portion of Pentair proﬁts to charitable programs in plant

communities. In 1999, The Pentair Foundation invested $2.09 million in education

and community-based programs nationwide.

Advantage: broad ﬁnancial strengths

Pentair’s excellent ﬁnancial results enable us to serve the best interests of our

stakeholders, and still build the business for tomorrow. To continue meeting

expectations, Pentair is striving to achieve benchmark ﬁnancial performance

deﬁned as:

Though our

15%+ revenue growth

one-year jump

20% return on equity

from $2 billion

30-40% total debt to capital

to $3 billion in

We continue to benchmark against other top-performing industrial companies

annualized sales

in categories including return on sales, free cash ﬂow, and earnings per share.

is signiﬁcant,

we have set even

Advantage: the know-how to succeed

more aggressive

We believe we have the leadership, businesses, and resources to double our

growth goals

revenues to $6 billion by the year 2005. We are on track to achieving our

over the next

performance and growth goals by remaining close to our businesses, staying

ﬁve years.

prudent and practical in our outlook, and practicing our proven competencies.

Our future is more assured by our efforts to expand geographically, build new

enterprise systems and services, and extend our reach through new e-business

and e-commerce initiatives.

10 page

We believe that e-commerce and e-business are key to securing strategic

We believe

market position, and we have a number of active projects in the works to develop

we have the

our abilities in these areas. We see our e-commerce and e-business initiatives as

leadership,

opportunities to gain quick access to our markets, improve the speed and accuracy

businesses,

of our transactions, better meet the needs of our customers, and improve

and resources

relationships with our suppliers.

to double our

We are also working to increase the visibility of the Pentair name.

revenues to

While continuing to build our business brands in their own markets, we have

$6 billion by

begun positioning the Pentair name as an enterprise umbrella in appropriate

the year 2005.

new business-to-business markets to build recognition and support for the

Company as a whole.

Pentair is developing into a great company. By designing, manufacturing,

and marketing innovative products on a global basis, we are building recognition

and respect for our performance, market leadership, and values. We continue to

be guided by our Code of Business Conduct, which sets the standard for the way

we do business. Of course, nothing happens without people, and we gratefully

acknowledge the support of all our stakeholders, who collectively make Pentair

the exceptional company it is. We are optimistic that 2000 will be another in a

long string of great years.

On behalf of Pentair,

Winslow H. Buxton
Chairman and CEO

Joseph R. Collins
Vice Chairman

Randall J. Hogan
President and COO

page 11

what’s behind the craftsmanship?

professional tools and equipment group

What do an intricate wood
inlay, a newly shingled roof,
and a jumpstart have in
common? They’re all made
possible by Pentair products.
The pros you trust with your
most important projects
probably use Delta table saws;
the crew that’s building
your new garage may have
Porter-Cable power tools on
site; and the mechanic who
maintains your car most
likely has a shop equipped
with Lincoln lubricating
and lifting equipment,
a Charge Air Pro air
compressor, and more
than one Century battery
charger.You may own a
few Pentair tools yourself.
Pentair tools help
discriminating professionals
and do-it-yourselfers produce
the best in craftsmanship
and service.

page 13

8
3
7
0
1

3
9
4
8

1
7
4
7

7
2
8
4 5
2
9
4

5
9

6
9

7
9

8
9

9
9

$ millions

professional tools and equipment group

The Professional Tools and Equipment Group serves professionals who rely upon tools to make

their living, as well as discriminating do-it-yourselfers who prefer professional-grade products.

Comprising the Group are four businesses operating in two industries. Porter-Cable and Delta

supply products to portable power tool and woodworking machinery markets, respectively.

Century and DeVilbiss Air Power Company provide products to equipment markets.

In 1999, the Group upheld a performance record that included four consecutive years

of double-digit sales growth and six consecutive years of double-digit operating income

growth. Sales for the Group totaled $1.074 billion in 1999, a 26 percent gain over the

sales

previous year. Operating income for the Group before the restructuring charge was

$122.2 million, up 23 percent from 1998.

The acquisition of DeVilbiss Air Power Company for approximately $460 million

strengthened Pentair’s product offerings, provided leading market share in new product

categories, and presented opportunities for increasing the Group’s overall effectiveness

in the areas of manufacturing, sales, distribution, and customer service. The acquisition

is expected to drive Group sales to more than $1.5 billion in 2000.

The Group restructured certain aspects of its tool businesses in 1999 and early 2000.

Delta’s main ofﬁce was relocated from Pittsburgh, Pennsylvania, to Jackson, Tennessee, to

share headquarters with Porter-Cable. A state-of-the-art 675,000-square-

foot Delta/Porter-Cable distribution center was built in Jackson to improve

fulﬁllment capabilities. And the companies’ retail sales forces were

consolidated to provide better coverage and service to customers.

With the acquisition of DeVilbiss Air Power Company on September 3, 1999,

Jackson, Tennessee, became an increasingly important strategic location for

Pentair. At the time of the acquisition, both DeVilbiss Air Power and Pentair’s

Porter-Cable tool business had headquarters, manufacturing, and distribution

centers there. Then, in the ﬁrst quarter of 2000, they were joined by Pentair’s

Delta International Machinery Corp. Delta, formerly based in Pittsburgh,

combined its headquarters with Porter-Cable in Jackson in a move to heighten

the competitiveness of Pentair’s Tools businesses.

DeVilbiss Air Power Company is the

In addition, a state-of-the-art 675,000-square-foot distribution center

North American market leader in cold

was constructed in Jackson to consolidate and streamline order fulﬁllment

water pressure washers.

and customer service for Delta and Porter-Cable. Consequently, the Delta

distribution center in Memphis was closed. Operating these three businesses

from one city increases Pentair’s ability to take advantage of distribution, manufacturing, and

administrative synergies, while better serving customers and managing costs.

14 page

brands
Delta, Biesemeyer,
Porter-Cable, FLEX,
Century, Lincoln,
Blackhawk, Guardian,
Marquette, Pro-Arc,
Solar, Booster Pac,
Truck Pac, Rescue Pac,
Viper, T-Tech,
Electri Pac,
Air America, Ex-Cell,
Power Back, Charge
Air Pro, 2 by 4.

locations
Jackson, Tennessee;
Tupelo, Mississippi;
Mesa, Arizona;
Bloomington,
Minnesota;
Decatur, Arkansas;
Guelph, Ontario,
Canada;
Steinheim, Germany;
Taichung, Taiwan.

Similarly, the Group took steps to streamline its equipment businesses by combining

Lincoln Automotive with Century. Lincoln Automotive’s headquarters in St. Louis, Missouri,

and manufacturing plant in Jonesboro, Arkansas, were folded into the Century operation in

Bloomington, Minnesota. The realignment created one large business unit with a strong

sales force and extensive product lines.

Known for innovation, the Group continues to introduce new products that have wide

consumer appeal. Porter-Cable’s 19.2-Volt cordless tools and Delta’s new “Platinum Edition”

woodworking tools sold particularly well in 1999. Century introduced a new product that has

no equivalent in the marketplace; the Electri Pac provides hours of reliable AC energy that allows

users to power just about anything that requires 110-Volt electricity. Lincoln Automotive received

Motor Magazine’s Tool Innovation Award for the Power-Luber, a cordless, rechargeable

grease gun that provides a continuous ﬂow of grease at uniform pressure. Products developed

in the last ﬁve years account for approximately 50 percent of the Group’s tool sales.

Pentair businesses continue to win customer recognition. In 1999, for the fourth

consecutive year, Porter-Cable received Home Depot’s Vendor of the Year award in

the Hardware category. Porter-Cable also was named Vendor of the Year by Lowe’s.

Holding the ﬁrst or second position in all served tool and equipment markets is the

objective of the Professional Tools and Equipment Group. Leveraging their

position in all channels in 1999, the businesses in this Group strengthened

their reputations and built consumer preference for their brands.

With the acquisition of DeVilbiss Air Power, Pentair gained new product

lines and signiﬁcant market share in product categories new to the Company.

Pentair became the market leader in retail air compressors and cold water

pressure washers, and a strong third in retail generators. DeVilbiss Air Power

products are sold under several brand names including Ex-Cell, Air America,

and Charge Air Pro. The company also private labels its products for customers

such as Sears, W.W. Grainger, and Snap-On. These respected product lines not

only expand the Group’s product offerings, but increase its ability to meet

customer needs and leverage its distribution strengths.

Porter-Cable branded air compressors

Beyond the retail market, Pentair believes DeVilbiss Air Power products

are manufactured by DeVilbiss Air

can produce growth in the Group’s industrial tool and equipment channels.

Power Company in Jackson, Tennessee.

With some focused product development, generators, pressure washers, and

compressors can all be sold into industrial tool channels by Porter-Cable, and into service

channels by the equipment sales force.

page 15

what’s behind the smiles?

water and ﬂuid technologies group

The enjoyment of safe,
clean water—swimming
in a pool, lingering in a
warm shower, or quenching
your thirst with ice-cold
lemonade—is a beneﬁt of
Pentair water products.
So is a quickly extinguished
ofﬁce building ﬁre, and a
dry basement after a rain
storm. Our pumps, valves,
controls, tanks, and ﬁlters
are used in a myriad of
processes including water
pressure boosting, water
softening, water purifying,
and transport. You’ll ﬁnd
our water products in
components and systems
worldwide, ensuring safe,
abundant supplies of water.
Next time you turn on a
faucet, remember the name
that’s behind the ﬂow,
the purity, and the quality
of your water: Pentair.

page 17

6
9
6
6

9
7
3
5

0
4
0
4

3
2
2
3

5
7
3
2

5
9

6
9

7
9

8
9

9
9

$ millions

water and ﬂuid technologies group

Providing the equipment and expertise for moving, treating, storing, and enjoying water

is the focus of the Water and Fluid Technologies Group. The Group consists of three

global businesses: Pentair Pump and Pool, Pentair Water Treatment, and Lincoln Industrial.

These businesses manufacture products and systems sold into residential, commercial,

industrial, municipal, and recreational markets.

Pentair Pump and Pool is one of the top ten pump businesses in the world, and one of

the top ﬁve in North America. It is the second largest water and wastewater pump business

in North America. Its product offerings range from light-duty household utility pumps to

sales

massive, high-ﬂow turbine pumps designed for municipal water applications. In 1999, Pentair

Pump and Pool became a leader among pool and spa equipment providers when it gained

a complete line of pool and spa accessories through the acquisition of Essef.

Pentair Water Treatment holds the number one position in the worldwide water

treatment control valve market. It manufactures a wide range of control valves for

residential, commercial, and industrial water conditioning systems. With the acquisition

of Essef, Pentair Water Treatment added a complete line of composite pressure vessels

and storage tanks to its product offerings. These tanks make it possible to provide

customers with complete water treatment systems.

The Water and Fluid Technologies Group reported 1999 sales of $669.6 million, a

25 percent gain over 1998. The Group’s operating income before the restructuring charge

totaled $85.7 million, up 30 percent from 1998. The Group’s performance

beneﬁted from supply management initiatives, higher labor productivity,

The acquisition of Essef Corporation of Chardon, Ohio, on August 10, 1999,

expanded Pentair’s considerable position in global water markets. The addition

of Essef’s market-leading water storage tank products reinforced Pentair’s

number one position in water conditioning control valves. Similarly, Pentair’s

strong position in pumps and water systems for residential applications was

enhanced by Essef’s residential pressure tanks, which are key components

of household well water systems.

The acquisition also gave Pentair a strong position in the swimming pool

Structural brand water pressure vessels

and spa equipment industry. Swimming pool and spa equipment is a new,

are used in a variety of industrial and

but very attractive, area of focus for Pentair. Studies of this market indicate

commercial applications.

that “Baby Boomer” demographics, combined with trends toward greater use

of hydrotherapy, and a preference for stay-at-home recreation and ﬁtness,

will drive growth in the pool and spa equipment market far into the future.

18 page

and continued good sales in water treatment markets. Steps taken to optimize plant

capacities and rationalize product lines also paid off.

In late 1999, Essef’s Codeline pressure tank operation in Escondido, California, was

closed, and product manufacturing was transferred to an existing facility in Chardon, Ohio.

The transfer makes better use of the capacity at the Chardon facility and streamlines

manufacturing within the water group businesses. The transition was completed in early

2000. Concurrently, a product rationalization project at the Chardon facility resulted in new

efﬁciencies in manufacturing and improved delivery times at this operation.

In August 1999, the Pentair water businesses were structured into global geographic

regions, delineating the Group’s expansion in North American, Asian, European, Middle

Eastern, and Indian markets. The new organizations that support these regions are intended

to streamline and coordinate manufacturing, sales, distribution, customer service, and

technical support worldwide for our pump, pool, and water treatment customers.

Clean, safe water is a basic human need that transcends all cultures and geographic

boundaries. The vision of the Water and Fluid Technologies Group is to be the leading global

supplier of products and systems used in the transportation, treatment, storage, and

enjoyment of water. Pentair continues to pursue aggressive growth strategies to enhance

brands
Myers, Water Ace,
Shur-Dri, Aplex,
Fairbanks Morse,
Layne & Bowler,
Aurora, Hydromatic,
Verti-Line, WellMate,
PacFab, Purex Triton,
National Pool Tile,
Rainbow Lifegard,
Paragon Aquatics,
American Products,
Compool, Kreepy
Krauly, Fleck, SIATA,
Structural, CodeLine,
Lincoln, ORSCO.

locations
Ashland and Chardon,
Ohio; North Aurora,
Illinois; Kansas City,
Kansas; Sanford,
North Carolina;
Moorpark, El Monte,
Mountain View, and
Anaheim, California;
Brookﬁeld, Wisconsin;
St. Louis, Missouri;
Buc, France; Florence
and Milan, Italy;
Herentals, Belgium;
Walldorf, Germany;
New Delhi and Goa, India.

the strong brand names, reputable products, and worldwide distribution

capabilities of its Water and Fluid Technologies businesses.

Once the acquisition was ﬁnalized, Pentair reorganized Essef to take

advantage of synergies with existing Pentair businesses. Essef’s PacFab pool

and spa equipment business was combined with the Pentair Pump Group to

form a new business unit called Pentair Pump and Pool. Essef’s Structural

pressure tank business was combined with Pentair’s Fleck Controls unit to form

Pentair Water Treatment.

In the short term, Essef creates opportunities for the Group to: boost

sales by leveraging existing distribution channels, extract value from economies

of scale and synergies that exist among the water businesses, and offer new

CodeLine pressure vessels serve as

products to water treatment customers. Essef’s broad geographic presence,

the heart of a municipal water ﬁltration

and its unique ﬁltration and resin tank technologies offer considerable potential

facility in Spain.

in domestic and global water markets. Essef provides a platform for growth

in developing markets, while accelerating the Group’s sales to nearly $900 million in 2000.

page 19

what’s behind the technology?

electrical and electronic enclosures group

Advancements in electronic
technology are making voice,
video, and data communi-
cations accessible to an
ever-changing, ever-growing
population. The intricate
components and equipment
that make up the infrastructure
of the fast-growing telecom
and datacom markets are
housed in Pentair enclosures
and systems. So are the
sophisticated electronics
that serve the industrial and
electrical industries. On the
factory ﬂoor or in remote
outdoor environments,
Pentair enclosure products
provide complete protection
against every imaginable
hazard: heat, cold, water, and
earthquakes, to name a few.
Because of Pentair’s standard
and custom packaging
solutions, the electronic
systems that keep our world
humming are safe and reliable.

page 21

electrical and electronic enclosures group

7
3
3
6

4
9
7
5

0
4
6
5

8
8
4
5

5
2
4
5

The Electrical and Electronic Enclosures Group is made up of Hoffman Enclosures, Pentair

Enclosures Europe, and Pentair Electronic Packaging. Its premier brands are Schroff and

Hoffman. Primary products manufactured by the Group are metal and composite enclosures

that house and protect sensitive controls and components.

The Group has a solid leadership position in global enclosure markets. Hoffman,

the leading North American producer of electrical enclosures, sells through a distributor

network to original equipment manufacturers (OEMs) as well as construction, petrochemical,

and general manufacturing industries. Pentair Enclosures, a leader in European and

sales

Asian electronic enclosure markets, sells direct to electronics, datacom, and telecom

5
9

6
9

7
9

8
9

9
9

$ millions

manufacturers. Pentair Electronic Packaging is a North American organization that provides

custom and off-the-shelf enclosure packaging solutions to datacom and telecom OEMs

via sales representatives and direct sales people.

The Group prides itself in having the best design and manufacturing capabilities in the

industry, and a full spectrum of products ranging from standard to modiﬁed to tailor-made

solutions. The enclosure businesses also provide integration services for their customers,

and manage the outsourcing of non-core operations. Pentair has a worldwide presence,

with enclosure facilities in the U.S., in all key European markets, and in Japan.

The Electrical and Electronic Enclosures Group achieved 1999

sales of $633.7 million, a 12 percent gain over 1998 levels. Operating

income before the restructuring charge rose to $63.1 million, a 37 percent

improvement over the previous year, and return on sales for the Group

The Enclosures Group achieved a dramatic performance turnaround in 1999

in part because of a Group-wide initiative targeting high-growth markets

and customers. Hoffman strengthened its leading position in industrial

enclosure markets, aided by the segmentation of its 1,400 stocking distributors.

This process not only helped focus distribution on high-potential segments

of industrial markets, but added more than 200 new distributors to the

base. Meanwhile, Hoffman targeted key high-volume original equipment

manufacturers and further expanded its position in fast-growing

The enclosures group provides precision

Networking markets.

metal stampings and assemblies for tele-

In Europe and Asia, Pentair Enclosures Europe worked to solidify

com, aerospace, and computer customers.

its position in its traditional markets while aggressively pursuing business

opportunities in Information and Communication Technology markets.

Pentair Enclosures supported this thrust by reinforcing its capabilities as a full service

integrator of electronic packaging.

22 page

was 10 percent in 1999. Growth initiatives in industrial, data communications, and

telecommunications markets, and the restructuring of the European enclosure operations

contributed to the Group’s much-improved performance.

Hoffman proﬁted from segmented distribution, diligent cost management, and enhanced

relations with original equipment manufacturers and customers in the networking market.

Pentair Enclosures Europe rebounded strongly in 1999, recording its best performance in

three years. A new leadership structure, a total revamping of the sales and marketing

approach, higher levels of productivity, and improved economic conditions in Europe were

factors in the improved performance of the European enclosure businesses. The formation

of Pentair Electronic Packaging gave new impetus to the Group’s efforts to capture greater

market share in technology markets, and resulted in increased growth momentum.

The Group gained even greater penetration of technology markets in April 1999 when

it acquired WEB Tool and Manufacturing of Chicago, Illinois. WEB increased the Group’s

product offerings and reinforced its design, manufacturing, assembly, and integration

capabilities. WEB is now part of Pentair Electronic Packaging.

Pentair was the ﬁrst consolidator in the global enclosure business and the ﬁrst provider

of a full range of enclosure products in the Americas, Europe, and Japan. The Electrical and

brand names
Hoffman, Schroff,
Transrack, Pentair
Electronic Packaging,
Pentair Enclosures.

locations
Anoka, Brooklyn
Center, and
Plymouth, Minnesota;
Mt. Sterling, Kentucky;
Warwick, Rhode
Island; El Segundo,
California;
Pennsauken,
New Jersey;
Chicago, Illinois;
Houston, Texas;
Reynosa, Mexico;
Scarborough, Ontario,
Canada;
Straubenhardt,
Germany;
Betschdorf and
Bonneuil-sur-Marne,
France; Skarpnäck,
Sweden; Gallarate
(Varese), Italy;
Edinburgh, Scotland;
Hemel Hempstead,
England; Yokohama
and Meiwa-Cho,
Japan; Singapore.

Electronic Enclosures Group continues to capture the business — and the

imagination — of major customers around the world. The Group is building

its position in industrial, electronic, datacom, and telecom markets and

establishing itself as the global leader in enclosure technology and service.

To better capture electronic packaging design, production, and integration

opportunities, Pentair combined ﬁve North American enclosure operations in

July 1999 to form Pentair Electronic Packaging. Working with Pentair Enclosures

Europe and Asia, this new entity provides a wide array of custom and off-the-shelf

enclosure packaging solutions for customers in the fast-growing data communi-

cations and telecommunications markets. Pentair Electronic Packaging products

and services include Schroff-brand subracks, cases and cabinets; high volume,

stamped components and assemblies; custom cabinets and consoles; outdoor

aluminum enclosures; and a complete range of design and integration services.

Integrating electronic components

The goal of the Group is to be the world’s largest enclosures organization

into protective enclosures is a core

offering the broadest selection of enclosure solutions from multiple facilities

competency of Pentair’s enclosures

throughout the world. Customers are already beneﬁting from the Group’s broad

businesses.

strengths in design, manufacturing, and integration; its uniﬁed, customer-

focused sales team; and its extensive range of packaging capabilities.

page 23

ﬁnancial review

Operating Activities. We generated
record levels of cash due to improved
proﬁtability and working capital
management.

Investing Activities. We refocused capital
expenditures to fuel growth and support
company-wide investments in technology,
and successfully completed $1 billion of
acquisitions that strategically advanced
each of our three chosen segments.

Financing Activities. We orchestrated
the expansion of Pentair’s ﬁnancial
structure, including $250 million
of new bonds and an equity offering
of 5.5 million shares.

25 consecutive
quarters of
year-to-year
earnings growth

diluted earnings

per share from

continuing operations

*excludes restructuring

charge of $0.56 per share

*
1
6

4
5

5
4

8
3

2
3

3
2

6
1

6
6

6
5

7
4

0
4

1
3

8
2

6
1

9
6

0
6

0
5

3
4

6
3

2
3

9
1

0
9

6
7

8
6

2
5

2
4

4
3

5
2

2
2

3
9

4
9

5
9

6
9

7
9

8
9

9
9

first quarter

3
9

4
9

5
9

6
9

7
9

8
9

9
9

second quarter

3
9

4
9

5
9

6
9

7
9

8
9

9
9

2
9

3
9

4
9

5
9

6
9

7
9

8
9

9
9

third quarter

fourth quarter

24 page

This summary annual
report contains
abbreviated ﬁnancial
data for the ﬁscal
year 1999. The
complete text of
Management’s
Discussion and
Analysis, and the
consolidated ﬁnancial
statements and
footnotes, are
presented in Pentair’s
Annual Report on
Form 10-K, which also
incorporates the 2000
Proxy Statement.
Copies of Form 10-K
and the 2000 Proxy
Statement are
available from
Pentair’s Investor
Relations Department.

ﬁnancial review

Pentair’s objective is to maintain and enhance its position as an independent, top-performing,

consistently growing, diversiﬁed industrial company. Pentair has adopted a strategic plan

to focus on three business areas and to build, both internally and through acquisition,

those businesses into recognized market leaders.

Pentair’s goals include the following ﬁnancial performance objectives: 15%+ revenue

growth, 20% return on equity, and 30%- 40% total debt to capital.

Pentair achieved excellent ﬁnancial results in 1999. Sales of $2.4 billion were 22.2%

over the previous year. Operating income in 1999 after the restructuring charge ($38.0

million) was $214.3 million, up 10.9% over 1998; operating income as a percent of sales

decreased from 10.0% to 9.1%. Operating income before the restructuring charge was

$252.3 million in 1999, up 30.6% over 1998, and as a percent of sales, improved from

10.0% in 1998 to 10.7% in 1999. Diluted earnings per share for 1999 after the restructuring

charge declined from $2.46 to $2.33, a decrease of 5.3% from 1998; diluted earnings

per share before the restructuring charge was $2.89, an increase of 17.5% over 1998.

The Company’s ROE was 12.5% in 1999; ROE before the restructuring charge was 15.2%.

Free cash ﬂow (cash from operations less capital expenditures) was $85.4 million in 1999

compared to $81.5 million in 1998.

Total Return to Shareholders

The Company continued its strong track record, attaining a 14.0% annual compounded

return to shareholders for the ﬁve-year period ended December 31, 1999. Pentair stock

had a negative 1.7% total return to shareholders for 1999.

page 25

operations review

Pentair has adopted a standard “4-4-5 week” accounting quarter for reporting in 1999.

Pentair’s ﬁscal year will continue to end on December 31. Also, operating proﬁts of the

segments are now reported net of all their administrative and related costs. The prior year

segment data was restated for such reporting change.

Pentair has three segments: Professional Tools and Equipment (PTE), Water and Fluid

Technologies (WFT), and Electrical and Electronic Enclosures (EEE).

(In millions)

Net Sales

1999

1998

1997

Operating Income

1999

1998

1997

Operating Margin %

1999

1998

1997

Professional
Tools and
Equipment

Water and
Fluid
Technologies

Electrical and
Electronic
Enclosures

Other*

Total

$1,073.8

849.3

747.1

$669.6

537.9

404.0

$633.7

564.0

579.4

$ (9.3)

$2,367.8

(13.6)

108.6

1,937.6

1,839.1

$ 105.4

$ 81.3

$ 46.3

$(18.7)

$ 214.3

99.6

76.8

9.8

11.7

10.3

66.0

41.9

12.1

12.3

10.4

46.0

47.3

7.3

8.2

(18.4)

3.8

193.2

169.8

9.1

10.0

9.2

*Other includes corporate leadership expenses, captive insurance company, intermediate ﬁnancial companies,
charges that do not relate to current operations, divested operations (Federal) and intercompany eliminations.

Sales in the Professional Tools and Equipment segment totaled $1,073.8 million in

1999, a 26.4 percent gain over the previous year. Operating income for the segment was

$105.4 million, up 5.8 percent from 1998. Operating income before the restructuring charge

was $122.2 million, up 22.6 percent from 1998, with 1999 return on sales of 11.4 percent.

The Water and Fluid Technologies segment reported 1999 sales of $669.6 million,

a 24.5 percent gain over 1998. Operating income for the segment totaled $81.3 million,

up 23.2 percent from 1998. Operating income before the restructuring charge was

$85.7 million, up 29.9 percent from 1998, with 1999 return on sales of 12.8 percent.

The Electrical and Electronic Enclosures segment’s sales totaled $633.7 million

in 1999, a 12.3 percent gain over 1998, while operating income totaled $46.3 million,

up 0.7 percent from 1998. Operating income before the restructuring charge was

$63.1 million, up 37.1 percent from 1998, with 1999 return on sales of 10.0 percent.

26 page

ﬁnancial reports

Management’s Responsibility for Financial Reporting

The consolidated ﬁnancial statements of Pentair, Inc. have been prepared by Company management who are

responsible for their integrity and objectivity. These statements have been prepared in accordance with generally

accepted accounting principles and, where appropriate, reﬂect estimates based on judgments of management. The

ﬁnancial statements have been audited in accordance with generally accepted auditing standards and reported upon by

our independent auditors, Deloitte & Touche LLP, who were given free access to all ﬁnancial records and related data.

We believe the representations made to the independent auditors were valid and appropriate.

Pentair maintains a system of internal controls. Our systems provide reasonable assurance that assets are

protected, transactions are appropriately reported, and established procedures are followed.

The Audit Committee of the Board of Directors, comprised of outside directors, meets periodically with the

independent auditors, the Company’s internal auditors, and management to monitor activities and to ensure that each

is properly discharging its responsibilities. The independent auditors have free access to the Audit Committee, without

management present, to discuss the results of their audit, the adequacy of internal accounting controls, and the quality

of ﬁnancial reports.

Winslow H. Buxton
Chairman of the Board
and Chief Executive Ofﬁcer

David D. Harrison
Executive Vice President
and Chief Financial Ofﬁcer

Independent Auditors’ Report on Condensed Financial Information

To the Board of Directors and Shareholders of Pentair, Inc.:

We have audited the consolidated balance sheets of Pentair, Inc. and subsidiaries as of December 31, 1999 and 1998,

and the related consolidated statements of income, shareholders’ equity, cash ﬂows and comprehensive income for the

years ended December 31, 1999, 1998 and 1997. Such consolidated ﬁnancial statements and our report thereon dated

February 2, 2000, expressing an unqualiﬁed opinion (which are not included herein), are included in the Annual Report

on Form 10-K of Pentair, Inc. for the year ended December 31, 1999. The accompanying condensed consolidated

ﬁnancial statements are the responsibility of Pentair’s management. Our responsibility is to express an opinion

on such condensed consolidated ﬁnancial statements in relation to the complete consolidated ﬁnancial statements.

In our opinion, the information set forth in the accompanying condensed consolidated ﬁnancial statements of

Pentair, Inc. is fairly stated in all material respects in relation to the basic consolidated ﬁnancial statements from which

it has been derived.

Deloitte & Touche LLP

Minneapolis, Minnesota
February 2, 2000

page 27

condensed consolidated statements of income

(In millions, except share and per share amounts)

Net sales

Operating costs

Cost of goods sold

Selling, general and administrative

Restructuring charge

Research and development

Total operating costs

Operating income

Gain on sale of business

Interest expense

Interest income

Income before income taxes

Provision for income taxes

Net income

Preferred dividend requirements

Years Ended December 31

1998

1997

$1,937.6

$1,839.1

1,330.3

391.1

—

23.0

1,744.4

193.2

—

24.0

1.7

170.9

64.1

106.8

4.2

1,290.8

357.1

—

21.4

1,669.3

169.8

10.3

22.2

158.4

66.8

91.6

4.9

1999

$2,367.8

1,632.7

455.7

38.0

27.1

2,153.5

214.3

—

49.5

1.7

166.5

63.2

103.3

—

Income available to common shareholders

$ 103.3

$ 102.6

86.7

Basic earnings per common share

Diluted earnings per common share

2.36

2.33

2.67

2.46

2.28

2.11

Average common shares (in thousands)

Outstanding

Outstanding assuming dilution

43,803

44,287

38,444

43,149

37,989

43,067

28 page

condensed consolidated balance sheets

(In millions)

Assets

Current assets
Cash and cash equivalents
Accounts and notes receivable
Inventories
Deferred income taxes
Other current assets

Total current assets

Property, plant and equipment
Less accumulated depreciation

Property, plant and equipment, net

Goodwill, net

Other assets

Total assets

Liabilities and Shareholders’ Equity

Current liabilities
Accounts and notes payable
Compensation and other beneﬁts accruals
Income taxes
Accrued product claims and warranties
Accrued rebates
Accrued expenses and other liabilities
Current maturities of long-term debt

Total current liabilities

Long-term debt

Pensions and other retirement compensation

Postretirement medical and other beneﬁts

Reserves – insurance subsidiary

Deferred income taxes

Other liabilities
Preferred stock – at liquidation value

Outstanding: 0 shares in 1999 and

1,534,919 shares in 1998

Unearned ESOP compensation
Common stock – par value, $.16 2⁄3

Outstanding: 48,317,068 in 1999 and

38,503,587 in 1998

Additional paid-in capital

Accumulated other comprehensive income

Retained earnings

Total shareholders’ equity

December 31

1999

1998

66.2
587.2
425.9
56.0
15.2

1,150.5

740.5
336.7

403.8
1,187.5
61.2

32.0
396.1
278.6
30.4
11.5

748.6

593.0
284.7

308.3
474.5
23.3

$2,803.0

$1,554.7

$ 262.8
103.3
21.4
49.8
19.9
125.9
177.8

760.9

857.3
67.2
44.0
22.9
6.9
50.6

—
—

8.1
456.5
(15.6)
544.2

993.2

$ 156.0
69.9
7.1
29.5
19.7
59.7
52.9

394.8

288.0
60.6
41.9
29.4
.4
30.2

53.6
—

6.4
184.2
(4.0)
469.2

709.4

Total liabilities and shareholders’ equity

$2,803.0

$1,554.7

page 29

condensed consolidated statements of cash ﬂows

Years Ended December 31

1999

146.0

1998

$ 135.3

1997

$ 117.9

(In millions)

Cash from operating activities

Investing activities

Capital expenditures

Proceeds from sale of businesses

Payments for acquisition of businesses

Construction funds held in escrow

Purchase of marketable securities

Proceeds from sale of marketable securities

(60.6)

—

(953.2)

1.8

—

(53.8)

13.0

(68.4)

—

Cash provided by (used for) investing activities

(1,012.0)

(108.5)

Financing activities

Long-term borrowings

Payments of long-term debt

Proceeds from issuance of long-term bonds

Debt issuance costs

Bridge loan borrowings

Repayment of bridge loan borrowings

Unearned ESOP compensation decrease

Employee stock plans and other

Proceeds from issuance of common stock, net of expenses

Repurchase of stock

Dividends

Cash provided by (used for) ﬁnancing activities

Effects of currency exchange rate changes

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents – beginning of period

501.9

(60.0)

250.0

(2.4)

450.0

(450.0)

—

9.9

214.5

(4.0)

(28.2)

881.7

18.5

34.2

32.0

Cash and cash equivalents – end of period

66.2

73.0

(65.4)

—

6.3

4.3

—

(12.4)

(27.3)

(21.5)

(7.6)

(2.3)

34.3

32.0

30 page

(77.5)

112.0

(210.6)

7.1

(2.0)

48.7

(122.3)

107.3

(70.3)

—

8.1

5.5

—

(25.4)

25.2

(9.5)

11.3

23.0

34.3

Income From:

Continuing Operations

Net Income (a)

Common Share Data

EPS – Diluted (a) (b)

Cash Dividends

Stock Dividends %

Book Value

Stock Price

selected ﬁnancial data

(In millions, except per share data)

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Income Statement Data

Net Sales

Professional Tools and Equipment

1,073.8

849.3

747.1

582.7

492.4

453.5

408.1

Water and Fluid Technologies

669.6

537.9

404.0

322.3

237.5

210.6

184.4

Electrical and Electronic Enclosures

633.7

564.0

579.4

548.8

542.5

460.5

236.7

Other

Total

Operating Income

Professional Tools and Equipment

Water and Fluid Technologies

Electrical and Electronic Enclosures

Other

Total

(9.3)

(13.6)

108.6

113.3

130.5

137.1

117.4

2,367.8

1,937.6

1,839.1

1,567.1

1,402.9

1,261.7

946.6

864.0

802.9

805.2

105.4

81.3

46.3

99.6

66.0

46.0

(18.7)

(18.4)

76.8

41.9

47.3

3.8

54.7

41.2

53.9

44.2

22.7

50.5

(6.9)

(1.2)

39.5

15.4

39.6

11.1

33.7

8.4

18.3

7.7

214.3

193.2

169.8

142.9

116.2

105.6

68.1

61.9

53.1

47.9

Earnings Before Income Taxes

166.5

170.9

158.4

124.6

101.7

83.5

55.1

47.7

38.4

31.6

103.3

106.8

103.3

106.8

91.6

74.5

60.5

77.2

50.1

53.6

32.7

46.6

27.2

42.8

18.8

41.1

16.9

33.0

2.33

2.46

2.11

.64

—

.60

—

.54

—

1.73

.50

100

1.41

1.17

.40

—

.36

—

20.56

17.03

15.12

13.69

12.37

10.71

38 1⁄2

39 13⁄16

35 15⁄16

32 1⁄4

24 7⁄8

.76

.34

9.29

16 1⁄2

692

.64

.32

—

8.21

13 3⁄16

549

.47

.30

—

8.79

13 7⁄16

558

.42

.29

—

7.97

8 1⁄4

342

213⁄8

899

Market Capitalization

1,860

1,718

1,548

1,378

1,045

Balance Sheet Data

Preferred Equity (net)

Common Equity

ROE %(a)

Capital Expenditures

Total Assets

Long-Term Debt

Total Debt

—

53.6

53.4

47.6

44.6

40.9

33.9

77.4

74.1

68.4

993.2

655.8

577.2

516.2

458.3

391.1

336.9

260.0

275.7

247.8

12.5

60.6

16.6

53.8

15.9

77.5

14.3

71.6

16.9

63.8

13.2

57.8

13.6

28.1

12.8

28.0

13.3

26.5

11.1

28.0

2,803.0

1,554.7

1,472.9

1,289.0

1,252.5

1,161.1

863.1

769.5

698.4

696.5

857.3

288.0

294.5

279.9

219.9

408.5

236.7

209.3

191.2

217.5

1,035.1

340.9

329.3

312.8

238.8

412.1

237.5

214.3

198.2

228.7

Long-Term Debt to Capital %

Total Debt to Capital %

All Share and Per Share Data adjusted for stock dividends.

(a) 1992 – before the cumulative effects of accounting changes.

(b) From continuing operations.

page 31

board of directors and Pentair ofﬁcers and executives

board of directors

corporate ofﬁcers

Winslow H. Buxton (3, 5), 60
Chairman and Chief Executive Ofﬁcer of Pentair, Inc.

Winslow H. Buxton
Chairman and Chief Executive Ofﬁcer

William J. Cadogan (2, 3, 5, 6), 51
Chairman, President, and Chief Executive Ofﬁcer of
ADC Telecommunications.

Joseph R. Collins
Vice Chairman

Joseph R. Collins (3, 8, 7), 58
Vice Chairman of Pentair, Inc.

Randall J. Hogan
President; Chief Operating Ofﬁcer;
President, Electrical and Electronic Enclosures Group

Barbara B. Grogan (2, 7, 8), 52
Chairman and President of Western Industrial
Contractors, Inc.

Richard J. Cathcart
Executive Vice President;
President, Water and Fluid Technologies Group

Charles A. Haggerty (1, 3, 6, 8), 58
Chairman, President, and Chief Executive
Ofﬁcer of Western Digital.

Harold V. Haverty (2, 3, 7), 69
Retired President and Chief Executive
Ofﬁcer of Deluxe Corporation.

Quentin J. Hietpas (2, 5, 7), 69
Senior Vice President of External Affairs
at the University of St. Thomas.

Randall J. Hogan, 44
President and Chief Operating Ofﬁcer of Pentair, Inc.

Stuart Maitland (1, 2), 54
Director of Manufacturing Operations
for Vehicle Operations, Ford Motor Company.

Augusto Meozzi (6, 8), 60
Chief Operating Ofﬁcer of the German Isola Group.

Richard M. Schulze (1, 5, 8), 59
Founder, Chairman, and Chief Executive
Ofﬁcer of Best Buy Company, Inc.

Karen E. Welke (1, 6, 7), 55
Group Vice President of 3M’s Medical
Products Group.

(1) Audit Committee, (2) Compensation/HR Committee,
(3) Executive Committee, (4) Shareholder Affairs Committee,
(5) Nominating and Governance Committee, (6) Share Rights
Committee, (7) Public Policy Committee, (8) Finance/Investment
Policy Committee.

David D. Harrison
Executive Vice President and Chief Financial Ofﬁcer

James A. White
Executive Vice President;
President, Professional Tools and Equipment Group

Louis L. Ainsworth
Senior Vice President and General Counsel

George M. Danko
Senior Vice President, Corporate Development
and Central Operating Services

Karen A. Durant
Vice President and Controller

Deb S. Knutson
Vice President, Human Resources

Roy T. Rueb
Vice President, Treasurer, and Secretary

business executives

John S. Abbott
Pentair Electronic Packaging

Steven R. Bentson
Pentair Equipment Businesses

Jorge Fernandez
Pentair Water Treatment

John H. Garlock
Pentair Tools Businesses

Ken Lewandowski
Pentair Enclosures Europe

Delton D. Nickel
Hoffman Enclosures

Michael V. Schrock
Pentair Pump and Pool

Mark T. Schroepfer
Lincoln Industrial

seated, left to right:
Karen E. Welke and
William J. Cadogan

standing, left to right:
Quentin J. Hietpas,
Stuart Maitland,
Augusto Meozzi,
Barbara B. Grogan,
Harold V. Haverty,
Richard M. Schulze,
Randall J. Hogan,
Charles A. Haggerty,
Winslow H. Buxton,
and Joseph R. Collins.

David D. Harrison
Executive Vice President;
Chief Financial Ofﬁcer

James A. White
Executive Vice President;
President, Professional Tools
and Equipment Group

Richard J. Cathcart
Executive Vice President;
President, Water and Fluid
Technologies Group

32 page

page 33

investor information

common stock data Pentair common stock is listed on the New York Stock Exchange under the symbol PNR.

The price information below represents closing sale prices reported in the Dow Jones Historical Stock Quote Reporter

Service for the calendar year 1999. There were 4,395 shareholder accounts on December 31, 1999.

price range and dividends of common stock

1999

First Quarter

High

41 13/16

Second Quarter 48 7/8

Third Quarter

47 13/16

Fourth Quarter

41 1/8

Low Dividend

Last

1998

31 5/16

30 15/16

40 1/8

32 7/16

0.16

31 5/16

45 5/16

41 7/16

38 1/2

First Quarter

Second Quarter

45 3/4

Third Quarter

Fourth Quarter

High

45 9/16

Low Dividend

34 3/16

37 1/4

27 7/8

30 7/16

0.15

Last

44 3/4

32 1/4

39 13/16

common dividends 1999 Dividends are $.16 per share quarterly for an indicated annual rate of $.64 per share.

Pentair has now paid 96 consecutive quarterly dividends. See Note 6 of Notes to Consolidated Financial Statements

for certain dividend restrictions.

dividend reinvestment Pentair has established a Dividend Reinvestment Plan. This plan enables shareholders

to automatically reinvest Pentair dividends and to invest up to an additional $3,000 per quarter in Pentair common

stock, with any costs of purchasing the shares paid by the Company. The plan brochure and enrollment cards are

available from the Company or Norwest Bank Minnesota, N.A.

direct book entry registration Pentair offers its shareholders the opportunity to participate in the Company’s

Direct Book Entry Registration service. Direct Book Entry is an uncertiﬁcated form of stock ownership that provides

protection against loss, theft, and inadvertent destruction of stock certiﬁcate(s), while reducing administrative costs.

Plan brochures and enrollment forms are available from the Company or Norwest Bank Minnesota, N.A.

annual meeting The annual meeting of shareholders will be held in the Auditorium at the Lutheran Brotherhood

Building, 625 Fourth Ave., Minneapolis, Minnesota, at 10:00 a.m. on April 26, 2000. Management and directors

encourage all shareholders to attend the annual meeting.

form 10-K available A copy of the Company’s annual report on Form 10-K, as ﬁled with the Securities and

Exchange Commission, will be provided on request. Written requests should be directed to Pentair Investor Relations.

takeover defense Pentair is committed to protecting its stakeholders from harm by corporate raiders and

unfriendly takeover actions. Information on our position may be obtained by writing to the Pentair, Inc. corporate

secretary at the corporate ofﬁce.

forward-looking statements This summary annual report contains forward-looking statements which

are based on current expectations, estimates, and projections. These statements are not guarantees of future

performance and involve risks and uncertainties which are difﬁcult to predict. For a discussion of these risks and

uncertainties, please refer to Forms 10-Q and 10-K, which Pentair ﬁles with the Securities and Exchange Commission.

trademarks, copyrights, and trade names Certain trademarks, copyrights, and trade names are owned

or licensed by Pentair, Inc. or its wholly owned subsidiaries. Other trademarks, copyrights, and trade names may also

appear in this report. It is not Pentair’s intent to imply that these are its own.

registrar and transfer agent Norwest Bank Minnesota, N.A., South St. Paul, MN 55075

certiﬁed public accountants Deloitte & Touche LLP, Minneapolis, MN 55402

34 page

code of business conduct

Pentair, Inc. chooses to be
an independent, publicly
owned company, and this
statement is to guide the
development of its organiza-
tion and the conduct of its
business affairs. Our busi-
nesses are to be managed
in keeping with the highest
business, ethical, moral
and patriotic standards
applicable to a publicly
owned corporation.
Our businesses are to be
operated so that we are
respected for our actions
by shareholders, employees,
plant communities,
customers, suppliers,
investors and all other
stakeholders. Our approach
to business is intended
to make Pentair, Inc. a
top-performing company
managed and operated to
provide long-term beneﬁts
to all constituents.

operating guidelines

Balanced consideration will be given

to the interests of shareholders and

employees in managing the corporation.

The corporation staff will be kept to

minimum size, and subsidiary operations

will be as autonomous as practicable.

A strong work ethic is expected of

all constituents. Good performance

will be freely recognized. Poor

performance will not be condoned.

We will strive to: operate with the

highest regard for the environment;

eliminate environmental risks from the

workplace; and minimize emissions

and waste.

The dignity and self-worth of all

persons involved with the Company

will be respected.

Safety in the workplace and in work

practices shall be maximized.

We will encourage, aid and promote

the physical and mental health and

wellness of employees and their families.

Qualiﬁed employees will be given priority

for internal employment opportunities.

Standards of ethics, integrity and

work practices shall apply equally

to all employees.

We will honor agreements, meet

obligations timely, maintain the spirit

and intent of our commitments, and

value good relationships.

Hiring emphasis will recognize ability,

compatibility and integrity, and will

not discriminate on the basis of sex,

religion, race or age.

We will promote open and candid

communications with emphasis on

informality and on conversational

exchanges.

page 35

electrical and electronic
enclosures group

Hoffman Enclosures
900 Ehlen Drive
Anoka, MN 55303
Tel (763) 421-2240
www.hoffmanonline.com

Pentair Electronic Packaging
170 Commerce Drive
Warwick, RI 02886
Tel (401) 732-3770
www.pentair-ep.com

Schroff
Langenalber Str. 96-100
D-75334 Straubenhardt
Germany
Tel 7082-794-0
www.schroff.de
www.schroff.fr
www.schroff.co.uk
www.schroff.se

Pentair Enclosures Europe
48 Melville Street
Edinburgh EH3 7UF
Scotland
Tel 131-623-8000

ofﬁce locations

Pentair
Waters Edge Plaza
1500 County Road B2 West
St. Paul, Minnesota 55113
Telephone (651) 636-7920
www.pentair.com

professional tools
and equipment group

Porter-Cable Corporation
4825 Highway 45 North
Jackson, Tennessee 38305
Tel (901) 668-8600
www.porter-cable.com
www.ﬂex-tools.com

Delta International Machinery Corp.
4825 Highway 45 North
Jackson, Tennessee 38305
Tel (901) 668-8600
www.deltawoodworking.com
www.biesemeyer.com

Century Manufacturing Company
9231 Penn Avenue South
Bloomington, Minnesota 55431
Tel (952) 884-3211
www.centurymfgco.com
www.lincolnautomotive.com
www.solaronline.com
www.t-techonline.com
www.viperonline.com

DeVilbiss Air Power Company
213 Industrial Drive
Jackson, Tennessee 38301
Tel (901) 423-7000
www.devilbissairpower.com
www.devap.com

water and ﬂuid technologies group

Pentair Pump and Pool
1101 Myers Parkway
Ashland, OH 44805
Tel (419) 289-1144
www.pentairpump.com

Pentair Water Treatment
20580 Enterprise Avenue
Brookﬁeld, Wisconsin 53008
Tel (414) 784-4490
www.ﬂeckcontrols.com
www.pentairwater.com
www.pentairwatertreatment.com

Lincoln Industrial
One Lincoln Way
St. Louis, Missouri 63120
Tel (314) 679-4200
www.lincolnindustrial.com