More annual reports from Pentair:
2023 ReportPeers and competitors of Pentair:
Enerpac Tool GroupS u m m a r y A n n u a l R e p o r t 2 0 0 1 100 $200 s n o i l l i P e n t a i r P e n t a i r [ ] M n i $ w o l F h s a C e e r F e v i t a l u m u C i n P r i c e o f P e n t a i r 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter $ (53.0) $ 178.7 $ 109.6 C h a n g e S t o c k ( $ 53.4 100% (100) 50% 0% % 0 ) P e n t a i r F r e e C a s h F l o w a n d S t o c k P r i c e P e r f o r m a n c e f o r 2 0 0 1 f i n a n c i a l h i g h l i g h t s 2 0 0 1 F i n a n c i a l H i g h l i g h t s 2 0 0 1 Pentair, Inc. and Subsidiaries Years ended December 31 (Dollars in thousands, except per-share data) 2001 2000 1999 Net sales Operating income (1) Net income — continuing operations (1) (2) (3) Diluted EPS — continuing operations (1) (2) (3) Cash dividends declared per common share Total debt Shareholders’ equity Debt/total capital Return on average common shareholders’ equity (1) Net cash provided by operating activities Capital expenditures Free cash flow (4) Closing stock price Employees of continuing operations $ 2,615,944 $ 2,748,013 $ 2,116,070 $ $ $ $ $ 198,821 $ 226,819 87,285 1.77 0.70 $ $ $ 97,770 2.01 0.66 $ $ $ $ 224,774 112,723 2.55 0.64 723,706 $ 913,974 $ 1,035,084 $ 1,015,002 $ 1,010,591 $ 990,771 41.6% 6.1% 47.5% 7.1% 51.1% 13.8% 232,334 $ 184,947 $ 144,296 53,668 $ 68,041 178,666 $ 116,906 36.52 11,700 $ 24.19 13,100 $ $ $ 53,671 90,625 38.50 12,400 $ $ $ $ (1) (2) (3) (4) Excludes pre-tax restructuring charge of $41.1 million ($29.8 million after tax, or $0.60 per share), $24.8 million ($15.9 million after tax, or $0.33 per share) and $23.0 million ($14.6 million after tax, or $0.34 per share) in 2001, 2000, and 1999, respectively. Excludes loss on sale of discontinued operations of $(24.6) million, or $(0.50) per share, and income (loss) from discontinued operations of $(24.8) million, or $(0.51) per share, and $5.2 million, or $0.12 per share in 2001, 2000, and 1999, respectively. Excludes non-cash pre-tax cumulative effect of accounting change of $1.9 million ($1.2 million after tax, or $0.02 per share). Net cash provided by operating activities less capital expenditures $2.6 billion, Pentair comprises three core business groups: tools, water technologies, acquiring, renewing, and developing manufacturing companies. With 2001 sales of Pentair is a diversified operating company that builds value for stakeholders by [ ] people in more than 50 locations around the world. Pentair common stock is and enclosures. Headquartered in St. Paul, Minnesota, the company employs 11,700 PNR traded on the New York Stock Exchange under the symbol: t o o u r s h a r e h o l d e r s Pentair made solid progress L e t t e r To O u r S h a r e h o l d e r s [ ]R a n d a l l J . H o g a n in 2001, but there’s much more toward improved performance to be accomplished in 2002. Pentair recorded concrete accomplishments in several important areas during 2001 — among them strong cash flow, reduced debt, innovative product development, and the adoption of lean enterprise practices. But our disappointing sales and earnings clearly illustrate another important fact: We have more work to do. Last year, we said we would: Establish a culture that emphasizes the value of cash flow; Refocus our corporate capabilities to drive high performance; [ page 1 ] Reinvigorate the Tools business to return it to superior performance; and, Position the Water Technologies and Enclosures businesses to perform in a weak economic environment. We met — and exceeded — the first two goals, we made progress on the third, and the fourth is underway. t o o u r s h a r e h o l d e r s L e t t e r To O u r S h a r e h o l d e r s ( c o n t i n u e d ) Pentair exceeded its $150 million free cash flow 12 percent of Pentair’s total employment — as we goal by $29 million in 2001, generating a total of worked to size our businesses appropriately for the $179 million or free cash flow earnings per share of economic conditions we faced in 2001. $3.62, up 50 percent over the prior year. Cost saving was far from the only strategy we Working capital continued to improve dramati- employed in 2001. We also reinforced the delivery of cally. Overall, our 2001 average working capital results, narrowed our focus on our core businesses by decreased to 15.3 percent of sales versus 17.2 percent divesting Lincoln Industrial and Service Equipment, in the prior year, reflecting the results of our cash flow and increased investment in new product development. discipline. We still have productivity opportunities in working capital, which will help in achieving our Tools Group making good progress $200 million free cash flow goal for 2002. In the Tools business, we continue to gain Our strong cash flow allowed us to pay down ground. Our plans to return the Tools Group to its debt $190 million in 2001, resulting in a debt-to-total- traditional performance levels consisted of five key capital ratio of 42 percent, versus 47 percent in the elements that combined to deliver a dramatic same period last year and 51 percent in 1999. Pentair performance improvement: has paid down debt of $480 million since April, 2000. Cost reduction — We trimmed headcount, Our performance in 2001 was supported by the restricted discretionary spending, reduced inventories, continuation of a cost reduction program we intro- launched our lean enterprise initiative, reinforced our duced late in 2000. Pentair’s supply chain management supply chain management effort, and focused on cost initiatives were able to generate approximately productivity as a measure of performance. These $44 million incremental savings during 2001 despite actions saved $30 million in Tools Group material lower purchase volumes. Headcount reductions totaled costs during 2001. more than 1,600 employees during 2001 — more than [ page 2 ] $140 $200 $160 $180 $90.6 $116.9 $178.7 $200.0 PENTAIR GENERATED FREE CASH FLOW OF $179 MILLION g e n e r a t e d c a s h w e g e n e r a t e d c a s h [ ] in 2001, $29 million more than the Company’s $150 million goal for the year. Pentair has set a target of $200 million in free cash flow for 2002. U p w a r d t r e n d i n f r e e c a s h f l o w $ i n m i l l i o n s 1999 2000 2001 2002 (forecast) $120 $100 $80 $20 $40 $60 0 6.0% 7.0% 8.0% 5.0% 3.3% 6.4% 7.0% 7.5% PENTAIR’S TOOLS GROUP CONTINUED ITS RECOVERY w e r e c o v e r e d r e c o v e r e d[ ] management, and leadership. Margins in the Group improved via cost reductions, pricing, new products, channel each quarter throughout 2001. 2 0 0 1 T o o l s G r o u p M a r g i n s b y Q u a r t e r R O S % 1Q 2Q 3Q 4Q 4.0% 1.0% 2.0% 3.0% 0.0 Pricing discipline — We overhauled our pricing on new channels including plumbing and heating, practices in 2001 to give us greater flexibility in serving ventilation and air conditioning (HVAC); agriculture multiple distribution channels and protecting margins. dealers; and electrical distributors. We also have As a result, our realized price was about two percent enhanced our customer service capabilities through higher in the fourth quarter of 2001 than in the same technology and organizational realignment by channel. period the prior year. Leadership — We began 2001 with top-level New products — Innovation is the key to management changes and fine-tuned the team with a the tools market, and we increased our spending to rich mix of DeVilbiss Air Power Company, Porter- drive sales and market share gains by offering a Cable, and outside talent. Today, we have a top-notch broader-than-ever range of innovative new tools team in place, a fact that will continue to become including the first cordless router, a cordless jigsaw, a apparent as the results they drive read out in 2002. cordless twin power source brad nailer, a two-speed In summary, we have streamlined our Tools 13" planer, three direct-drive oil lube air compressors, operations, cut overall operating and material costs, a new range of pneumatic tools, and accessories to go invigorated innovation, and redoubled efforts to with them. In fact, at the National Hardware Show in return the business to high performance levels. These August 2001, we introduced 75 new products that actions are delivering results and we’re confident yielded some $48 million in sales in 2001. Those same that 2002 will find the Group returning to strong 75 new products are expected to generate an estimated revenue and profit performance. $110 million in sales during 2002. Channel management — We’re doing a much Restructuring Enclosures better job of attending to the needs of all tools In Enclosures, our performance has been hit hard channels. We corrected our under-representation in by the recessionary economy. The decrease in volume some channels, and launched plans to enter new during 2001 was attributed to sharp declines in all channels in which we didn’t previously participate. For enclosures markets, and an industrial market that was example, in 2001 we launched a major sales focus at its lowest point in the last decade. [ page 3 ] $5.9 $14.0 $18.0 $12.0 $16.0 $17.7 $10.0 $10.4 PENTAIR’S SUPPLY CHAIN MANAGEMENT INITIATIVES d e l i v e r e d s a v i n g s w e d e l i v e r e d s a v i n g s [ ] DELIVERED $44 MILLION of incremental savings during 2001. estimated $20 million of incremental savings in 2002. Cost saving activities are expected to contribute an 2 0 0 1 i n c r e m e n t a l s a v i n g s $ i n m i l l i o n s 1Q 2Q 3Q 4Q $10.0 $4.0 $8.0 $6.0 $2.0 0 Our response has been focused on reducing our Although cost control and cash management overall cost structure, redefining our business mix, and have been at the forefront of our initiatives in the strengthening our core capabilities. These actions soft economy that characterized 2001, we have also allowed Enclosures to remain profitable throughout been aggressively developing our engine for growth 2001, and we took further action by restructuring the through innovation. business beginning in the Fourth Quarter 2001. The In our Water Treatment business, we are bringing majority of a $41 million pre-tax restructuring charge next generation technologies to market in each of the was applied to support our objectives of reducing key product families, including pressure vessels, valves, capacity by approximately 20 percent and headcount and reverse osmosis membrane housings. For example, by some 25 percent. We expect this restructuring to a new proprietary materials technology for pressure return approximately a $15 million savings in 2002, tanks will lower the unit cost of our tank products and and an annualized savings of $21 million thereafter. allow us to further penetrate the global pressure vessel The weakness that characterized enclosures market with products that last longer, perform better, markets in 2001 validates our strategy of maintaining and cost no more than steel. [ page 4 ] broad product offerings that serve the full spectrum Our Pump business continues to expand into of enclosure markets and customers worldwide. value-added systems to gain incremental sales. For example, our new pre-packaged fire control systems Pools buoyed Water Technologies’ results have been very successful and have been specified for Performance in our Pool and Water Treatment installation at newly constructed Target® stores. businesses was on par with last year, while the Pump Our Pool and Spa Equipment business has built business experienced the effects of a softer economy upon the success of its Spectrum Amerlite (SAm) and a decline in the industrial business. Despite lower lights for swimming pools and is now introducing earnings, the Water Technologies Group was a major a similar system for spa applications. In addition, contributor to Pentair’s strong cash flow performance. we have recently introduced a new low-NOx pool t o o u r s h a r e h o l d e r s L e t t e r To O u r S h a r e h o l d e r s ( c o n t i n u e d ) heater to the California market, where it is one of The Enclosures team can still taste the success they only a few such products capable of meeting new enjoyed as recently as the first quarter of 2001, and environmental requirements. they are committed to get back to that level. In 2002, we are working to reduce our overall Pentair in 2002: A practical, powerful business cost structure by $38 million by further simplifying We believe that companies that make decisions in and rationalizing our infrastructure, capturing supply the best interests of shareholders, employees, and management opportunities, and implementing lean customers are the companies that will survive and enterprise practices throughout the organization. Our excel. We intend to do just that — excel. What remains efforts to strengthen our processes and systems is for us to build on our momentum and focus our capabilities, reinvigorate product development, and efforts in 2002 on three key actions: develop stronger talent throughout the company will 1. Drive operating excellence — We are excited continue. Finally, we will maintain our momentum on about the supply management and lean enterprise cash flow and improving return on investment. initiatives that have taken root in all our operating These actions, which are elaborated upon in the units. These two initiatives will assist us in achieving operating group discussions that follow this letter, our goal of five-percent total cost productivity every should substantially improve Pentair’s performance year. This measure of productivity is a simple one — it through the remainder of 2002 — regardless of the means that we need to make our products five percent prevailing economic conditions. less expensively every year in order to meet competitive Pentair is in good shape and getting better. What pressures and improve the performance we deliver to remains is for us to move forward, and deliver strong our shareholders and customers. results in 2002. I’m confident we can do just that. 2. Commit to growth — Many of our businesses Pentair will maintain its focus on improving cash have exciting action plans to drive growth. These include flow, sales, and earnings. Our shareholders and our new products, like the Tiger ClawTM variable angle saw employees have every reason to be optimistic about by Porter-Cable; new channels to market, such as the where we’re going and what the future holds for us. security distributor channel that Hoffman Enclosures I look forward to that future and invite you to has added to its distribution network; and new territory join the entire Pentair organization in our enthusiasm. [ page 5 ] developments, like Water Technologies’ expansion into the Chinese market. We have many opportunities for growth in all three groups and we are committed to pursuing them aggressively. R a n d a l l J . H o g a n 3. Complete the performance turnarounds — President and Chief Executive Officer The Tools business is on the mend, and our team is committed to regain its former status as a world leader. [ page 6 ] W a t e r T e c h n o l o g i e s g r o u p How can a simple thing like a glass of water bring a smile to a child’s face? While safe, clean water may be abundant in developed nations, it remains a luxury for the majority of the world’s people. Pentair is playing a key role in making safe, clean water available to an ever-growing portion of the world’s population. In 2001, Pentair Water Treatment led the market in supplying pressure vessels for reverse osmosis systems in (continues next page) [ page 7 ] Residents of Port Lisas, Trinidad, will enjoy the benefits of safe, f o r s a f e , c l e a n w a t e r [ ] clean water when the largest desalination operation in the Western features state-of-the-art CodeLine MultiPort vessels that provide membrane housings — designed specifically for reverse osmosis, filtration plant. A smaller operation in Menifee, California [left] desalination, microfiltration, ultrafiltration and nanofiltration Hemisphere is completed. CodeLine’sTM fiberglass-reinforced processes — form the core of the 28.8 million-gallon-per-day potable water to a rapidly growing retirement community. w a t e r t e c h n o l o g i e s g r o u p W a t e r T e c h n o l o g i e s g r o u p numerous water filtration projects under construction The Pentair Pump Group is one of the top ten the world over. CodeLineTM-brand reverse osmosis pump businesses in the world, and is the second largest pressure vessels — fiberglass-reinforced membrane water and wastewater pump business in North housings designed to withstand the high pressures America. Its product offerings range from light-duty required to filter microscopic material from water — household utility pumps to massive, high-flow turbine are at the core of a 28.8 million-gallon-per-day reverse pumps designed for municipal water applications. osmosis plant being constructed at Point Lisas, Brand names within the Pump Group include Myers®, Trinidad. Rapid growth in the last decade has Fairbanks Morse®, Hydromatic®, Aurora®, Water Ace®, outstripped the supply of potable water in this region and Shur-Dri®. of Trinidad, and this $120 million facility — the Pentair Water Treatment holds the number one largest in the western hemisphere — will treat position in the worldwide water treatment control seawater for industry, making more potable water valve and fiberglass pressure vessel market. It manu- available for consumption. factures a wide range of control valves for residential, Pentair Water Treatment also is supplying pressure commercial, and industrial water conditioning systems. vessels for Florida’s Tampa Bay project — the largest The business also offers an industry leading range of desalination plant of its kind in the United States. fiberglass/composite pressure vessels and storage tanks. Brand names within Pentair Water Treatment include Ensuring safe, abundant supplies of water Fleck®, SIATA, CodeLine, Structural, and WellMateTM. CodeLine is one of several leading brands aligned The Water Technologies Group launched the under Pentair’s Water Technologies Group, which Pentair Pool Products name in early 2001, integrating [ page 8 ] collectively provide the equipment and expertise for ten pool and spa equipment brand names under a moving, treating, storing, and enjoying water. The common identity. This decision, together with other Group consists of three global businesses: The Pentair strategies aimed at building the pool business’ top line, Pump Group, Pentair Water Treatment, and Pentair resulted in Pentair Pool Products displacing its chief Pool Products. These businesses manufacture products competitor to become the world’s largest pool and spa and systems sold into residential, commercial, equipment manufacturer. industrial, municipal, and recreational markets. The Water Technologies Group reported 2001 sales of $887.5 million, a two percent decline from 2000. Operating income for the segment totaled $109.8 million, down nine percent from 2000. The The Water Technologies Group is committed to weak economic environment, coupled with unfavorable growing at twice the industry average. This higher sales mix within the Pump business, dampened the standard of performance will be achieved as a Water Technologies Group’s five-year annualized result of accelerated product development cycles. growth rate of 50 percent. The Water Technologies The Group also will continue to pursue system and Group was a major contributor to Pentair’s profit and service opportunities in most areas of its business. strong cash flow performance during 2001. With additional strategic acquisitions to expand Strategy emphasizes cost productivity, segment has bright prospects for further growth and new product technology improved performance. its expertise in these areas, the Water Technologies Efforts to reduce the Group’s overall cost structure in 2002 are placing priority on implementation of lean enterprise practices throughout the organization. Coupled with benefits of on-going supply management opportunities and reduction in inventories, these activities will support margin growth in the Water Technologies Group. [ page 9 ] w a t e r t e c h n o l o g i e s g r o u p w a t e r t e c h n o l o g i e s [ ] P e n t a i r P u m p G r o u p , P e n t a i r W a t e r T r e a t m e n t a n d P e n t a i r P o o l P r o d u c t s [ page 10 ] E n c l o s u r e s g r o u p For many people, accessing today’s technology is a simple matter of plugging in a computer and establishing an account with an Internet service provider. This customer convenience is made possible by a large and complex technical infrastructure representing multi-billion dollar investments. The immense task of managing and maintaining this infrastructure is accomplished with the help of a host of technology savvy companies, including Pentair. (continues next page) [ page 11 ] A Manitoba Telecom Services technician installs components in an f o r c o m m u n i c a t i o n [ ] outdoor digital subscriber line (DSL) enclosure that houses and protects hubs [left]. Designed and built by Pentair’s Hoffman Enclosures unit, high-speed Internet access to business and residential customers via the critical connection between local customer lines and MTS’ DSL these enclosures are a critical element in MTS’ ability to provide its growing DSL network. e n c l o s u r e s g r o u p E n c l o s u r e s g r o u p In 2001, for example, Pentair’s Hoffman and Pentair Electronic Packaging®. Products manu- Enclosures played an important role in the expansion factured by the Group include metal and composite of telecommunications services provided by Manitoba’s enclosures that protect sensitive controls, components, preeminent, full-service telecommunications company, and instrumentation. Manitoba Telecom Services, Inc. (MTS). The decision The Group has a solid leadership position in to expand MTS’ digital subscriber line (DSL) network global enclosure markets. Hoffman, the leading North required 450 outdoor DSL multiplexers — enclosures American producer of electrical enclosures, sells through that house and protect the critical connection between distributors to original equipment manufacturers the DSL hub and the customer’s household or place of (OEMs) as well as construction, petrochemical, auto- business. Hoffman Enclosures delivered a successful motive, pharmaceutical, and general manufacturing proposal for a fully integrated, custom enclosure industries. Schroff, a leader in European and Asian within a very condensed timeframe; a prototype was electronic enclosure markets, sells direct to electronics, designed, built, and components integrated in just 12 datacom, and telecom manufacturers. Pentair Electronic business days, and the first dozen units were delivered Packaging is a North American organization with a within a month of earning the contract. worldwide focus that provides custom and off-the-shelf The MTS project reflects the technology expertise enclosure packaging solutions to datacom and telecom and rapid response capabilities of Pentair’s Enclosures OEMs via sales representatives and direct sales people. businesses. Using its core industrial and electronic The Group offers some of the best design and enclosures technologies as a foundation, the Group manufacturing capabilities in the industry with a full has leveraged existing assets to broaden its customer spectrum of products. The Enclosure businesses also [ page 12 ] base and add new distributors, helping mitigate the provide integration services for their customers, and impact of the economic downturn. can manage the outsourcing of third party, non-core Safeguarding today’s new technology enclosure facilities in the U.S. and key European Many of the intricate components and equipment markets, as well as Japan, China, and Brazil. operations. Pentair has a worldwide presence, with that make up the infrastructure of today’s industrial, electrical, and technology markets are housed in Profitable in a precarious market enclosures and systems manufactured by Pentair’s The year 2001 was a difficult period for most Enclosures Group. The Group goes to market under capital goods manufacturers. With the curtailment of three primary brands: Hoffman Enclosures®, Schroff®, capital spending in industrial and commercial markets, and the precipitous decline in telecom markets, the in all enclosures markets, with the industrial market Group faced a need to reduce costs. The majority of a at its lowest point in the last decade. Full-year margins $41.1 million pre-tax restructuring charge taken in the dropped from 12.2 percent in 2000 to 6.0 percent fourth quarter of 2001 reduced the Group’s operating in 2001 as revenues declined faster than fixed costs capacity by approximately 20 percent and trimmed were reduced. headcount by some 25 percent. In the fourth quarter of 2001, plant closures were announced at locations in Strategy focuses on cost structure Pennsauken, New Jersey; Brooklyn Center, Minnesota; The goal of the Group in 2002 will be to reduce and in Europe. In addition, several support facilities operating costs by simplifying and rationalizing its are being closed. The restructuring, which will be infrastructure and by capturing savings through supply completed in the first half of 2002, will yield an management activities, as well as continuing to estimated $15 million in cost savings during 2002, and implement lean enterprise programs throughout the $21 million of savings annually thereafter. While the worldwide organization. The Group will also work to restructuring was comprehensive, it will not interfere take full advantage of opportunities that arise. We will with the Group’s ability to serve our customers. exploit our strengths in a competitive environment. Enclosure Group sales totaled $689.8 million in The restructured Enclosures organization has 2001, an 11 percent decline over 2000 levels, and excellent long-term prospects, and Pentair is taking the pre-restructuring operating income totaled $41.2 right steps to build on its position in global markets. million, a 56 percent decrease over the previous year. The decrease in volume is attributed to sharp declines [ page 13 ] e n c l o s u r e s e n c l o s u r e s g r o u p [ ] H o f f m a n E n c l o s u r e s , S c h r o f f a n d P e n t a i r E l e c t r o n i c P a c k a g i n g [ page 14 ] T o o l s g r o u p Carpenters and craftsmen alike appreciate innovative, well-designed tools. That’s why the brands of Pentair’s Tools Group — Porter-Cable, Delta®, Biesemeyer®, Ex-CellTM, DAPCTM, Air America®, Charge Air Pro®, and Water DriverTM — are among those preferred by savvy professionals and discriminating do-it-yourselfers. Innovation in new product development is a hallmark of Pentair’s Tools Group, a fact supported by the hundreds of awards and honors bestowed upon its products in 2001 alone. (continues next page) [ page 15 ] f o r c r a f t s m a n s h i p Woodworker, journalist, and educator, George Vondriska puts Porter-Cable’s cordless twin power source brad nailer to the test [ ] the one-of-a-kind Tiger ClawTM [left], a variable angle construction same engineering group that developed the radical concept behind development function within the Pentair Tools Group. This is the in his workshop. The cordless nailer, which can be operated by a traditional compressor or its own battery powered on-board saw featuring a cutting head that rotates in two dimensions. mini-compressor, is the creation of a reinvigorated product t o o l s g r o u p T o o l s g r o u p As a contributing editor at one of the nation’s Cost reduction was another facet of the recovery leading woodworking magazines, and a woodworking strategy. The Group trimmed headcount, restricted educator, George Vondriska has used hundreds of discretionary spending, reduced inventories, launched tools from virtually every tool manufacturer in North its lean enterprise initiative, reinforced its supply chain America. It’s no coincidence, therefore, that Pentair management, and focused on cost productivity as a tools play a large role in the projects that George measure of performance. undertakes for his personal pleasure. The much-heralded Implementing lean enterprise practices, which Delta® two-speed 13" planer and Porter-Cable’s new reduce the waste of space, time, and effort throughout cordless twin power source brad nailer and cordless the business, delivered tangible benefits. For example, router have all been put to good use in George’s the Tiger SawTM assembly line at Porter-Cable improved shop, just as they have in thousands of workshops its labor productivity 24 percent, reduced its use of throughout North America. factory space 56 percent, and cut walking distance for While product innovation has long been a core plant associates by 16 percent. The net result of competency of Pentair’s Tools Group, the development the supply management program, lean enterprise process was accelerated in 2001 to provide a constant activity, and integrated product cost reduction was stream of innovative new products, to improve product a quarter-by-quarter improvement in margins and a launch speed by 50 percent, and to achieve lower costs $43 million improvement in costs during the year. while maintaining high quality levels. The innovation In addition, the Tools Group revised its pricing process combines the most advanced technology in 2001 to allow more flexibility in serving its many available with a deep understanding of end-users’ distribution channels, and to protect margins. The [ page 16 ] needs, especially those needs that are in the early stages result was a two percent improvement in realized prices of development and are not served by any products in the fourth quarter of 2001 over those of the same on the market. period last year. The Group also entered new channels, including plumbing and HVAC, agriculture dealers, and electrical distributors. Strong organic growth programs driving The Group will continue to reduce its overall cost margin improvement structure in 2002, principally through lean enterprise Sales in the Tools Group totaled $1.039 billion in practices and supply management opportunities. These 2001, a three percent decline from the previous year. efforts will deliver improved productivity, which in Operating income for the segment was $63.2 million, turn will increase margins in 2002 and 2003. up 117 percent from 2000. Excluding one-time charges Capitalizing on its manufacturing, product taken in 2000, fourth quarter 2001 margins improved innovation, marketing, and brand awareness strategies, 600 basis points over previous year levels, and margins the Tools Group succeeds by offering broad product in the Group improved in each quarter of 2001. lines to an ever-widening range of customers through In 2002, the Tools Group will drive growth multiple channels of distribution. through faster innovation and new product develop- ment, coupled with expanded accessory product offerings and further penetration of new and existing channels. Growth objectives will be supported by efforts aimed at expanding the service business and pursuing international markets. [ page 17 ] t o o l s t o o l s g r o u p[ ] P o r t e r - C a b l e , D e l t a a n d D e V i l b i s s A i r P o w e r C o m p a n y 900 1,000 1,100 1,035 914 724 (51%) (47%) (42%) PENTAIR PAID DOWN APPROXIMATELY $190 MILLION w e r e d u c e d d e b t r e d u c e d d e b t[ ] at the end of the year was 42 percent, versus 47 percent of debt during 2001, making use of free cash flow and proceeds from divestitures. Debt-to-total capital T o t a l D e b t $ i n M i l l i o n s ( D e b t / C a p i t a l ) at the end of 2000. 1999 2000 2001 700 600 800 [ page 18 ] f i n a n c i a l r e v i e w f i n a n c i a l r e v i e w Net sales Sales by segment and the year-over-year changes were as follows: (Dollars in thousands) Tools Water Enclosures Total 2001 $ 1,038,606 887,518 689,820 $ 2,615,944 2000 $ 1,066,616 903,672 777,725 $ 2,748,013 1999 $ 875,643 582,927 657,500 $ 2,116,070 2001 vs. 2000 $ change % change (2.6%) (1.8%) (11.3%) (4.8%) $ (28,010) (16,154) (87,905) $ (132,069) 2000 vs. 1999 $ change % change 21.8% $ 190,973 55.0% 320,745 18.3% 120,225 29.9% $ 631,943 Net sales in 2001 decreased by 4.8%, consisting of 4.4% volume decline and 0.5% unfavorable foreign currency effect, offset by 0.1% price increase. Net sales in 2000 increased 29.9%, consisting of 32.5% volume increase (up about 8% adjusted for acquisitions), offset by 1.0% decline in price and 1.6% unfavorable foreign currency effect. Tools The 2.6 percent decline in Tools segment sales in 2001 was primarily due to: • lower sales volume due to the weak economy; and • lower average selling prices in the first nine months of the year, stemming from the mid-2000 price discounting activi- ties, somewhat offset by an increase in realized selling prices in the fourth quarter of 2001. The 21.8 percent increase in Tools segment sales in 2000 was primarily due to: • the September 1999 acquisition of DeVilbiss Air Power Company (DAPC); and • higher sales volume in our Porter-Cable/Delta business. These increases in 2000 were partially offset by: • lower sales volume in 2000 for generators due to high inventories at distributors and retailers at the end of 1999 and lower storm sales in 2000; and • lower average selling prices, primarily in our Porter-Cable/Delta business, due to price discounting in some markets on some products in 2000 to recover market share. Water The 1.8 percent decline in Water segment sales in 2001 was primarily due to: • lower sales volume for our industrial pumps and components for large water filtration systems as a weaker economy slowed demand; and • unfavorable foreign currency translation resulting from the stronger U.S. dollar. These decreases in 2001 were partially offset by: • higher sales volume in our pool and spa equipment business as we increased our market share. The 55.0 percent increase in Water segment sales in 2000 was primarily due to: • the August 1999 acquisition of the pressure vessel and pool and spa equipment businesses of Essef Corporation; and • higher sales volume in our pump and valve businesses due to increased demand. These increases in 2000 were somewhat offset by: • unfavorable impacts of foreign currency translation. Enclosures The 11.3 percent decline in Enclosures segment sales in 2001 was primarily due to: • lower sales volume attributable to sharp declines in all enclosures markets, somewhat offset by increased sales due to the expansion in the number of Hoffman distributors; and • unfavorable impacts of foreign currency translation. The 18.3 percent increase in Enclosures segment sales in 2000 was primarily due to: • higher sales volume due to strong demand for our products in the telecom and datacom markets and with industrial original equipment manufacturers. The increase in 2000 was somewhat offset by: • unfavorable impacts of foreign currency translation. Excluding the impacts of foreign currency translation, 2000 Enclosures segment sales increased by 22 percent over 1999. [ page 19 ] f i n a n c i a l r e v i e w ( c o n t i n u e d ) f i n a n c i a l r e v i e w Operating income The following table provides a comparison of operating income by segment excluding special items noted below: (Dollars in thousands) Tools (1) Water Enclosures (2) Corporate/other (3) Total 2001 $ 63,232 109,792 41,239 (15,442) $ 198,821 2000 $ 59,147 120,732 94,643 (17,703) $ 256,819 1999 $ 106,985 73,362 63,089 (18,662) $ 224,774 2001 6.1% 12.4% 6.0% % of net sales 2000 5.5% 13.4% 12.2% 1999 12.2% 12.6% 9.6% 7.6% 9.3% 10.6% (1) Tools segment operating income excludes restructuring charge expense of $5.4 million in 2000 and $6.3 million in 1999. Operating income also excludes one-time pre-tax costs to establish an additional $30.0 million in accounts receivable ($5.0 million in the second quarter of 2000 and $17.0 million in the fourth quarter of 2000) and inventory ($8.0 million in the fourth quarter of 2000) reserves. (2) Enclosures segment operating income excludes restructuring charge expense (income) of $39.4 million in 2001, $(1.6) million in 2000 (due to a change in estimate of the 1999 restructuring liability), and $16.7 million in 1999. (3) Excludes restructuring charge expense of $1.7 million in 2001 and $21.0 million in 2000. Tools The 0.6 percentage point increase in Tools segment 2001 operating income margin excluding special items was primarily due to: • cost savings from our supply chain management and lean enterprise initiatives. This increase in 2001 was partially offset by: • lower sales volume due to the weak economy; • lower average selling prices in the first nine months of the year, stemming from the mid-2000 price discounting activities, somewhat offset by an increase in realized selling prices in the fourth quarter of 2001; • higher warranty costs. The 6.7 percentage point decline in Tools segment 2000 operating income margin excluding special items was primarily due to: • lower sales volume for generators and a change in product mix in our Porter-Cable/Delta business; and • lower average selling prices due to price discounting to recover market share. Water The 1.0 percentage point decline in Water segment operating income margin in 2001 was primarily due to: • lower sales volume in our higher margin pump and water treatment businesses which have been more directly affected by the economic slowdown. The decline in 2001 was partially offset by: • higher sales volume in our pool and spa equipment business as we increased our market share. The 0.8 percentage point increase in Water segment operating income margin in 2000 was primarily due to: • improved margins in the pool and spa equipment businesses acquired in August 1999; • increased volume for pumps and valves; and • material cost savings as a result of supply management initiatives coupled with increased labor productivity. These increases in 2000 were partially offset by: • unfavorable impacts of foreign currency translation. [ page 20 ] Enclosures The 6.2 percentage point decline in Enclosures 2001 operating income margin excluding special items was primarily due to: • lower sales volume, attributable to sharp declines in all enclosures markets; • unfavorable product mix; and • higher benefit costs. These decreases in 2001 were partially offset by: • lower costs, primarily due to headcount reductions. The 2.6 percentage point increase in Enclosures 2000 operating income margin excluding special items was primarily due to: • higher sales volume due to strong demand for our products in the telecom and datacom markets and with industrial original equipment manufacturers. This increase in 2000 was somewhat offset by: • unfavorable product mix; and • unfavorable impacts of foreign currency translation in 2000. f i n a n c i a l r e p o r t s f i n a n c i a l r e p o r t s Report of management We are responsible for the integrity and objectivity of the financial information presented in this report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include certain amounts based on our best estimates and judgment. We are also responsible for establishing and maintaining our accounting systems and related internal controls, which are designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded. These systems and controls are reviewed by the internal auditors. In addition, our code of conduct states that our affairs are to be conducted under the highest ethical standards. The independent auditors provide an independent review of the financial statements and the fairness of the information presented therein. The Audit and Finance Committee of the Board of Directors, composed solely of outside directors, meets regularly with us, our internal auditors and our independent auditors to review audit activities, internal controls, and other accounting, reporting, and financial matters. Both the independent auditors and internal auditors have unrestricted access to the Audit and Finance Committee. R a n d a l l J . H o g a n President and Chief Executive Officer St. Paul, Minnesota February 8, 2002 Da v i d D . H a r r i s o n 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 (the Company) as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders’ equity and cash flow for each of the three years in the period ended December 31, 2001. Such consolidated financial statements and our report thereon dated February 8, 2002, expressing an unqualified opinion (which are not included herein), are included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2001. The accompanying condensed consolidated financial statements are the responsibility of the Company’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 the Company is fairly stated in all material respects in relation to the basic consolidated financial statements from which it has been derived. [ page 21 ] Minneapolis, Minnesota February 8, 2002 i n c o m e c o n d e n s e d c o n s o l i d a t e d s t a t e m e n t s o f i n c o m e Pentair, Inc. and Subsidiaries (Dollars in thousands, except per-share data) Net sales Cost of goods sold Gross profit Selling, general and administrative Research and development Restructuring charge Operating income Interest income Interest expense Other expense, write-off of investment Income from continuing operations before income taxes Provision for income taxes Income from continuing operations Income (loss) from discontinued operations, net of tax Loss on disposal of discontinued operations, net of tax Cumulative effect of accounting change, net of tax Net income Earnings per common share Basic Continuing operations Discontinued operations Cumulative effect of accounting change Basic earnings per common share Diluted Continuing operations Discontinued operations Cumulative effect of accounting change Diluted earnings per common share Years ended December 31 2001200` $ 2,615,944 1,967,945 647,999 418,962 31,171 40,105 157,761 960 62,448 2,985 93,288 35,772 57,516 — (24,647) — 32,869 $ $ $ $ $ 1.17 (0.50) — 0.67 1.17 (0.50) — 0.67 2000 $ 2,748,013 2,051,515 696,498 438,488 31,191 24,789 202,030 1,488 76,387 — 127,131 45,263 81,868 (24,759) — (1,222) 55,887 $ $ $ $ $ 1.68 (0.51) (0.02) 1.15 1.68 (0.51) (0.02) 1.15 1999 $ 2,116,070 1,529,419 586,651 339,707 22,170 23,048 201,726 1,472 45,054 — 158,144 60,056 98,088 5,221 — — $ 103,309 $ $ $ $ 2.24 0.12 — 2.36 2.21 0.12 — 2.33 Pro forma amounts assuming the accounting change is applied retroactively $ $ [ page 22 ] Continuing operations Discontinued operations Net income Pro forma earnings per common share Basic Continuing operations Discontinued operations Basic earnings per common share Diluted Continuing operations Discontinued operations Diluted earnings per common share Weighted average common shares outstanding Basic Diluted 57,516 (24,647) 32,869 1.17 (0.50) 0.67 1.17 (0.50) 0.67 $ $ $ $ $ 81,868 (24,759) 57,109 $ 97,514 5,221 $ 102,735 1.68 (0.51) 1.17 1.68 (0.51) 1.17 $ $ $ 2.23 0.12 2.35 2.20 0.12 $2.32 $ $ $ $ $ 49,047 49,297 48,544 48,645 43,803 44,287 b a l a n c e s h e e t s c o n d e n s e d c o n s o l i d a t e d b a l a n c e s h e e t s Pentair, Inc. and Subsidiaries (Dollars in thousands, except per-share data) Assets Current assets Cash and cash equivalents Accounts and notes receivable, net of allowance of $14,142 and $18,636, respectively Inventories Deferred income taxes Prepaid expenses and other current assets Net assets of discontinued operations Total current assets Years ended December 31 2001 200` 2000 $ 39,844 $ 34,944 398,579 300,923 69,953 20,979 5,325 835,603 468,081 392,495 72,577 22,442 101,263 1,091,802 Property, plant and equipment, net 329,500 352,984 Other assets Goodwill, net Other Total other assets Total assets Liabilities and shareholders’ equity Current liabilities Short-term borrowings Current maturities of long-term debt Accounts and notes payable Employee compensation and benefits Accrued product claims and warranties Income taxes Other current liabilities Total current liabilities Long-term debt Pension and other retirement compensation Postretirement medical and other benefits Deferred income taxes Other noncurrent liabilities Total liabilities Commitments and contingencies Shareholders’ equity Common shares par value $0.162⁄3; 49,110,859 and 48,711,955 shares issued and outstanding, respectively Additional paid-in capital Retained earnings Unearned restricted stock compensation Accumulated other comprehensive loss Total shareholders’ equity Total liabilities and shareholders’ equity 1,088,206 118,889 1,207,095 $ 2,372,198 1,141,102 58,137 1,199,239 $ 2,644,025 $ — 8,729 179,149 74,888 37,590 6,252 121,825 428,433 714,977 74,263 43,583 34,128 61,812 1,357,196 $ 108,141 23,999 250,088 84,197 42,189 5,487 134,691 648,792 781,834 59,313 34,213 37,133 72,149 1,633,434 8,193 478,541 566,626 (9,440) (28,918) 1,015,002 $ 2,372,198 8,119 468,425 568,084 (7,285) (26,752) 1,010,591 $ 2,644,025 [ page 23 ] c a s h f l o w c o n d e n s e d c o n s o l i d a t e d s t a t e m e n t s o f c a s h f l o w Pentair, Inc. and Subsidiaries (Dollars in thousands) Operating activities Net income Depreciation Amortization of intangibles and unearned compensation Deferred income taxes Restructuring charge Other expense, write-off of investment Loss on disposal of discontinued operations Cumulative effect of accounting change Changes in assets and liabilities, net of effects of business acquisitions and dispositions Accounts and notes receivable Inventories Prepaid expenses and other current assets Accounts payable Employee compensation and benefits Accrued product claims and warranties Income taxes Other current liabilities Pension and post-retirement benefits Other assets and liabilities Net cash provided by continuing operations Net cash provided by (used for) discontinued operations Net cash provided by operating activities [ page 24 ] Investing activities Capital expenditures Proceeds from sale of businesses Acquisitions, net of cash acquired Equity investments Other Net cash used for investing activities Financing activities Net short-term borrowings (repayments) Proceeds from long-term debt Repayment of long-term debt Proceeds from long-term bonds Debt issuance costs Proceeds from bridge loans Repayment of bridge loans Proceeds from exercise of stock options Proceeds from issuance of common stock, net Repurchases of common stock Dividends paid Net cash provided by (used for) financing activities Years ended December 31 2001200` 2000 1999 $ 32,869 62,674 41,675 (5,315) 41,060 2,985 24,647 — $ 55,887 59,897 39,131 9,735 24,789 — — 1,222 70,890 87,840 653 (69,321) (13,185) (4,468) 9,942 (50,758) 17,199 (7,205) 242,182 (9,848) 232,334 (53,668) 70,100 (1,937) (25,438) (186) (11,129) (108,336) 2,811 (84,525) — — — — 2,913 — (1,458) (34,327) (222,922) 17,908 (45,893) (9,588) 32,973 (10,810) (6,318) (8,467) (17,715) 5,353 (7,296) 140,808 44,139 184,947 (68,041) — — — (32) (68,073) (42,471) 8,108 (82,271) — — — — 3,100 774 (410) (32,038) (145,208) $ 103,309 56,081 25,987 (1,954) 23,048 — — — (28,282) (26,449) 7,779 26,423 32,660 8,344 (4,462) (48,076) 953 (18,791) 156,570 (12,274) 144,296 (53,671) — (953,124) — 1,664 (1,005,131) 150,612 351,297 (59,814) 250,000 (2,430) 450,000 (450,000) 4,454 214,480 (4,030) (28,201) 876,368 Effect of exchange rate changes on cash Change in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period 6,617 4,900 34,944 $ 39,844 263 (28,071) 63,015 $ 34,944 18,344 33,877 29,138 $ 63,015 s e l e c t e d f i n a n c i a l d a t a s e l e c t e d f i n a n c i a l d a t a Pentair, Inc. and Subsidiaries Years ended December 31 (Dollars in thousands, except per-share data) Statement of operations Net sales: Tools Water Enclosures Other Total 2001 200` 2000 1999 1998 1997 1996 $ 1,038,606 887,518 689,820 — 2,615,944 $ 1,066,616 903,672 777,725 — 2,748,013 $ 875,643 582,927 657,500 — 2,116,070 $ 661,782 $ 573,787 $ 478,107 218,344 306,047 566,919 600,491 133,360 128,136 1,396,730 1,689,641 1,608,461 441,030 586,829 — Cost of goods sold Other costs and expenses Restructuring charge 1,967,945 450,133 40,105 2,051,515 469,679 24,789 1,529,419 361,877 23,048 1,227,427 1,189,777 272,578 — 297,972 — 1,032,343 240,982 — Operating income: Tools Water Enclosures Other Total 63,232 109,792 1,857 (17,120) 157,761 Gain on sale of business Net interest expense Other expense, write-off of investment Provision for income taxes Income from continuing operations Income (loss) from discontinued — 61,488 2,985 35,772 57,516 23,751 120,732 96,268 (38,721) 202,030 — 74,899 — 45,263 81,868 100,680 73,362 46,346 (18,662) 201,726 — 43,582 — 60,056 98,088 80,383 56,264 46,026 (18,431) 164,242 — 19,855 — 53,667 90,720 62,669 32,366 47,282 3,789 146,106 10,313 19,729 — 58,089 78,601 45,800 30,562 53,856 (6,813) 123,405 — 16,849 — 42,860 63,696 operations, net of tax Loss on disposal of discontinued operations, net of tax Cumulative effect of accounting change, net of tax Net income Preferred dividends Income available to — (24,759) 5,221 16,120 12,999 10,813 (24,647) — — — — — — 32,869 — (1,222) 55,887 — — 103,309 — — 106,840 (4,267) — 91,600 (4,867) — 74,509 (4,928) common shareholders 32,869 55,887 103,309 102,573 86,733 69,581 Common share data Diluted EPS — continuing operations Diluted EPS — discontinued operations Diluted EPS — cumulative effect of accounting change Diluted EPS — net income Cash dividends declared per common share Balance sheet data Property and equipment, net Total assets Total debt Shareholders’ equity Debt/total capital Return on average common shareholders’ equity Other data Depreciation Amortization of intangibles and unearned compensation $ 1.17 (0.50) — 0.67 $ 1.68 (0.51) (0.02) 1.15 $ 2.21 0.12 — 2.33 $ 2.09 0.37 — 2.46 $ 1.81 0.30 — 2.11 $ 1.47 0.26 — 1.73 0.70 0.66 0.64 0.60 0.54 0.50 [ page 25 ] $ 329,500 2,372,198 723,706 1,015,002 $ 352,984 2,644,025 913,974 1,010,591 $ 367,783 2,706,516 1,035,084 990,771 $ 271,389 $ 261,486 $ 270,071 1,236,694 1,484,207 1,413,494 312,817 328,538 560,751 627,653 340,721 707,628 41.6% 47.5% 51.1% 32.5% 34.4% 35.8% 3.2% 5.6% 12.6% 16.7% 16.0% 14.4% $ 62,674 $ 59,897 $ 56,081 $ 46,571 $ 47,577 $ 42,620 Capital expenditures Employees of continuing operations 41,675 53,668 11,700 39,131 68,041 13,100 25,987 53,671 12,400 15,483 43,335 8,800 15,240 69,364 8,800 12,795 67,216 8,000 All financial information reflects our Equipment segment (Century Mfg Co./Lincoln Automotive and Lincoln Industrial businesses) as discontinued operations. The 2001 results reflect a pre-tax loss on the sale of these businesses of $36.3 million ($24.6 million after tax, or $0.50 per share). The 2000 results reflect a non-cash pre-tax cumulative effect of accounting change related to revenue recognition that reduced income by $1.9 million ($1.2 million after tax, or $0.02 per share). The 1997 results include a pre-tax gain on the sale of Federal Cartridge of $10.3 million ($1.2 million after tax, or $0.03 per share). d i r e c t o r s & o f f i c e r s B o a r d o f d i r e c t o r s a n d P e n t a i r o f f i c e r s Board of directors Corporate officers Winslow H. Buxton (3, 4, 5), 62 Chairman of the Board of Pentair, Inc. William J. Cadogan (3, 4), 53 Former Chairman and Chief Executive Officer of ADC Telecommunications. Barbara B. Grogan (2, 4, 5), 54 Chairman and President of Western Industrial Contractors, Inc. Charles A. Haggerty (2, 3, 4, 5), 60 Chief Executive Officer of LeConte Associates, LLC. William H. Hernandez (1), 53 Senior Vice President, Finance, of PPG Industries. Randall J. Hogan (3, 4, 5), 46 President and Chief Executive Officer of Pentair, Inc. Stuart Maitland (1, 2), 56 Former Director of Manufacturing Operations for Vehicle Operations, Ford Motor Company. Winslow H. Buxton Chairman of the Board Randall J. Hogan President and Chief Executive Officer David D. Harrison Executive Vice President and Chief Financial Officer Richard J. Cathcart President and Chief Operating Officer, Water Technologies Frank J. Feraco President and Chief Operating Officer, Tools Michael V. Schrock President and Chief Operating Officer, Enclosures Louis L. Ainsworth Senior Vice President and General Counsel Karen A. Durant Vice President and Controller Deb S. Knutson Vice President, Human Resources Augusto Meozzi (1, 5), 62 Chief Operating Officer of the Isola Group. William T. Monahan (2), 54 Chairman of the Board and Chief Executive Officer of Imation. Karen E. Welke (1, 5), 57 Former Group Vice President for Medical Markets, 3M Company. [ page 26 ] (1) Audit and Finance Committee, (2) Compensation/HR Committee, (3) Executive Committee, (4) Nominating/ Governance, Public Policy and Share Rights Committee, (5) European Policy Subcommittee. b o a r d o f d i r e c t o r s b o a r d o f d i r e c t o r s [ ] s e a t e d : KAREN E. WELKE and AUGUSTO MEOZZI f r o m l e f t t o r i g h t [ page 27 ] s t a n d i n g : WILLIAM T. MONAHAN, CHARLES A. HAGGERTY, STUART MAITLAND, BARBARA B. GROGAN, RANDALL J. HOGAN, WILLIAM J. CADOGAN, WINSLOW H. BUXTON, and WILLIAM H. HERNANDEZ i n v e s t o r i n f o r m a t i o n I n v e s t o r I n f o r m a t i o n 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 2001. There were 4,229 shareholder accounts on December 31, 2001. Price range and dividends of common stock ($) 2001 High 1Q 30 9⁄16 2Q 36 13⁄32 3Q 38 3⁄64 4Q 39 9⁄32 Low 22 1⁄2 24 1⁄2 28 57⁄64 29 47⁄64 Div. 0.17 0.17 0.18 0.18 Last 2000 High 25 31⁄64 33 51⁄64 30 49⁄64 36 33⁄64 1Q 39 7⁄16 2Q 44 3Q 36 3⁄8 4Q 30 1⁄2 Low 31 13⁄16 35 5⁄16 23 15⁄16 21 Div. 0.16 0.16 0.17 0.17 Last 37 1⁄16 35 1⁄2 26 3⁄4 24 3⁄16 Common dividends Dividends are $0.18 per share quarterly for an indicated annual rate of $0.72 per share. Pentair has now paid 104 consecutive quarterly dividends. 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 calendar 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 Wells Fargo 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 Wells Fargo Bank Minnesota, N.A. Annual meeting The annual meeting of shareholders will be held in the Auditorium at the Lutheran Brotherhood Building, 625 Fourth Avenue, Minneapolis, Minnesota, at 10:00 a.m. on May 1, 2002. 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. [ page 28 ] 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 that 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 Wells Fargo Bank Minnesota, N.A., St. Paul, MN 55164 Certified public accountants Deloitte & Touche LLP, Minneapolis, MN 55402 c o d e o f b u s i n e s s c o n d u c t C o d e o f B u s i n e s s C o n d u c t Pentair, Inc. chooses to be an independent, publicly owned company, and this statement is to guide the development of its organization and the conduct of its business affairs. Our businesses 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. o p e r a t i n g g u i d e l i n e s O p e r a t i n g G u i d e l i n e s 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. P e n t a i r m a d e s o l i d p r o g r e s s d e l i v e r w e d e l i v e r [ ] t o w a r d i m p r o v e d p e r f o r m a n c e i n 2 0 0 1 , t o b e a c c o m p l i s h e d i n 2 0 0 2 . b u t t h e r e ’ s m u c h m o r e Waters Edge Plaza 1500 County Road B2 West St. Paul, Minnesota 55113 651.636.7920 tel www.pentair.com
Continue reading text version or see original annual report in PDF format above