Pentair
Annual Report 2011

Plain-text annual report

The front portion of this report was printed on paper made from 100% post-consumer recycled fiber. Because we believe in being part of the solution. Seeing the big picture. 5500 Wayzata Blvd, Suite 800 Minneapolis, MN 55416–1261 763.545.1730 www.pentair.com Annual Report 2 011 Our vision To be a diversified industrial growth company, a global enterprise and a responsible citizen known for operational excellence, innovation, top talent and growing by serving customers well while delivering superior long-term shareholder value. Pentair Leadership Team 2011 Sales BY s e g m e n t 2011 Sales BY r e g i o n | 69% Board Members Leslie Abi-Karam Executive Vice President and President 31% of Mailing Solutions Management of Pitney Bowes Inc.; Director since 2008 Water & Fluid Solutions 28% 26% 15% Technical Products Flow Treatment/Process Aquatic | | | | Glynis A. Bryan Water & Fluid Solutions Chair of the Governance Committee; Chief Financial Officer of Insight Enterprises, Inc.; Director since 2003 Pentair is a leading provider of innovative water and Jerry W. Burris President and Chief Executive Officer fluid processing products and solutions used in a of Associated Materials, LLC; Director since 2007 wide range of applications. Pentair’s comprehensive product suite addresses all areas of fluid handling, T. Michael Glenn Executive Vice President of Market Development with products ranging from energy-efficient pumps and Corporate Communications of FedEx Corporation; and point-of-use filtration to highly engineered Director since 2007 pumps and fluid processing systems. Charles A. Haggerty Chief Executive Officer of LeConte Associates, LLC; 2011 Sales Director since 1994 BY e n d -m a r k e t s e r v e d David H. Y. Ho W i tH i n Wat e r & F lu i d Chairman, Kiina Investment Limited; Director since 2007 BY r e g i o n W i tH i n Wat e r & F lu i d 2011 Sales Randall J. Hogan Chairman and Chief Executive Officer; Director since 1999 David A. Jones Chair of the Compensation Committee; Chair of the International Committee; Senior Advisor to Oak Hill Capital Partners; Director since 2003 | | | | | 52% Residential Ronald L. Merriman Chair of the Audit Committee; Retired Vice Chair of KPMG; 18% Industrial Director since 2004 13% Commercial 11% Municipal William T. Monahan 6% Agriculture Lead Director; Retired Chairman and CEO of Imation Corporation; Director since 2001 US Developed Non-US Fast Growth Regions* 59% 21% 20% | | | Management Randall J. Hogan Chairman and Chief Executive Officer 61% 21% 18% | | | US Developed Non-US Fast Growth Regions* Michael V. Schrock President and Chief Operating Officer Technical Products John L. Stauch Executive Vice President and Chief Financial Officer Pentair is a leading provider of products that enclose Frederick S. Koury and protect some of the world’s most sensitive Senior Vice President, Human Resources electronics and electronic equipment, ensuring their Angela D. Lageson safe, secure and reliable performance. Technical Senior Vice President, General Counsel and Secretary Products provides a broad array of standard and Mark C. Borin customized enclosures and thermal management Corporate Controller and Chief Accounting Officer solutions to customers all around the world. Michael G. Meyer Vice President, Treasury and Tax 2011 Sales Karl R. Frykman BY e n d -m a r k e t s e r v e d President, Aquatic Systems W i tH i n t eC H n iC a l P r o d uC t s BY r egio n WitH in teCH n iC a l Pro duC ts 2011 Sales Netha N. Johnson, Jr. President, Process Technologies Alok Maskara President, Water Purification Philip Pejovich President, Technical Products Gary S. Witt | 37% President, Flow Technologies | 20% | 11% | 11% | 7% | 6% | 8% Industrial Communications Energy General Electronics Commercial Infrastructure Other 64% 24% 12% | | | US Developed Non-US Fast Growth Regions* * Fast Growth Regions include China, India, Latin America, Southeast Asia, Eastern Europe, the Middle East and Africa Annual Meeting The Annual Meeting of Pentair shareholders Investor Information The world is changing. An expanding population and a growing middle class are driving demand for new and creative solutions to the world’s challenges. Registrar, Stock Transfer and Paying Agent Wells Fargo Bank, N.A. (625 Fourth Avenue South, Minneapolis, Minnesota). Wednesday, April 25, 2012 at 10:00 a.m. Central www.wellsfargo.com/com/investments/ in the auditorium of Thrivent Financial St. Paul, Minnesota 55164-0854 shareowner-services will take place on: Tel. 877-536-3554 P.O. Box 64854 Investor Information Shareholders seeking more information about the Company can access news releases describing Independent Registered Public Accounting Firm Deloitte & Touche LLP, Minneapolis, Minnesota significant Company events and earnings results Commission filings at www.pentair.com. Information may also be obtained by request for each quarter and the fiscal year as well as Form 10-K and other Securities and Exchange anticipated financial results are forward-looking from the Pentair Investor Relations Department, 5500 Wayzata Boulevard, Suite 800, Minneapolis, By weaving an innovative spirit together Caution Concerning Forward-Looking Statements Any statements made about the Company’s with a mindset of continuous improvement, Pentair strives to always be at the forefront of our industry, creating value across the globe and generating sustainable returns for our shareholders. Stock Exchange Listing New York Stock Exchange (symbol: PNR) Dividends Dividends are $0.22 per share and are paid quarterly from restructuring and other cost reduction plans integrate and realize the benefits of acquisitions; from the global economic downturn, including the current European Union debt crisis, or any the magnitude, timing and scope of recovery statements subject to risks and uncertainties such potential future downturn; the strength of housing may not be fully realized, or may take longer to as the Company’s ability to successfully and timely and related markets; the risk that expected benefits Minnesota 55416. in February, May, August and November. Pentair has realize than expected; foreign currency effects; paid 144 consecutive quarterly dividends. material inflation outpacing our productivity and Dividend Reinvestment Pentair offers a Dividend Reinvestment Plan which At Pentair, we have a clear vision of the opportunities ahead and the discipline to deliver results. enables shareholders of record the opportunity to automatically reinvest Pentair dividends and to invest up to an additional $3,000 per calendar foreign businesses; product introductions; pricing and other competitive pressures; and strategic operating goals, as well as other risk the Company’s ability to achieve its long-term pricing actions; retail, commercial and industrial demand; increased risks associated with operating quarter in Pentair common stock, with any costs factors set forth in our SEC filings. Forward-looking of purchasing the shares paid by the Company. statements included herein are made as of the date Plan and enrollment information are available from hereof, and the Company undertakes no obligation the Company or Wells Fargo Bank, N.A. to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. 12 Pentair Annual Report 2011 3 Pentair Annual Report 2011 3 Pentair Annual Report 2011 The growing population and wealth of the developing economies create a tremendous opportunity for Pentair. 3.5 3.0 2.7 2.41* 2.00 0.34 1.47* 1.17 248 207 211 0.80 0.76 0.72 ’09 ’10 ’11 ’09 ’10 ’11 ’09 ’10 ’11 ’09 ’10 ’11 Net sales ($ in billions) Diluted EPS from continuing operations ($) reported adjusted Free cash flow ($ in millions) Annual dividend ($ per share) * 2011 adjusted EPS excluded a restructuring charge of $0.10, acquisition related costs of $0.15 and a goodwill impairment charge of $1.82; 2009 adjusted EPS excluded a restructuring and bond redemption charge of $0.16, and an asset impairment charge of $0.14. • We returned approximately $80 million to reliability and performance. 2011 marked another year generating strong cash flow, consistently converting shareholders through dividends and raised our quarterly dividend for the 36th consecutive year for 2012, up 10 percent. • Adjusted diluted earnings per share from continuing of robust product launches, from broadening our greater than 100 percent of net income to free cash Eco-Select pool offerings to entering waste-to-energy flow while investing for future growth — a testament to with the anaerobic membrane bioreactor. our lean disciplines. operations (EPS) increased 21 percent to $2.41, while We continue to grow beyond current markets by The foundation of everything we do is our “Win Right” reported EPS was $0.34 after a non-cash goodwill identifying new, adjacent opportunities. In Technical culture. A bold projection of “Win Right” is Project impairment charge and restructuring and acquisition Products, for example, our global thermal platform was Safewater-Colón. This multi-year initiative, funded by related costs totaling $2.07 per share. up 40 percent outside the U.S. in 2011 as we designed, the Pentair Foundation, demonstrated that it’s possible Sustained Growth The investments we have made are paying off, and we developed and manufactured new products in China, to provide people in developing countries with affordable for China. In Water & Fluid Solutions, we extended our and sustainable sources of safe drinking water, and we separation technology know-how beyond oil refineries are focused on sharing these protocols to provide safe continue to strengthen Pentair at the core every day. to natural gas production and transport and continue water to those in need all around the world. We are increasingly global. Fast growth regions now total approximately 18 percent of our annual sales, roughly double that of five years ago. We’ve invested over $60 million over the past three years with localized manufacturing, engineering and Lean Enterprise capabilities supporting our in-region, for-region strategy. In 2011, we doubled our product launches in fast growth regions from two years ago and have more than 30 percent of our engineering resources now located in these regions. China, to find new ways to grow. Realigning for Growth In a step towards advancing our global growth Opportunities Ahead Excellent execution of our strategic priorities in 2011 provides a solid position for us as we move forward. strategies and execution, we introduced our new Water Our presence in fast growth regions has never & Fluid Solutions alignment that focuses on three key been stronger, and we will continue to leverage the platforms: Flow, Treatment and Process, and Aquatic. investments in new product development and selling Within this framework, we will prioritize technology and marketing that we have seeded over the past platforms, leverage scale and implement cross-business, several years. Amid the continuing challenges of the fast growth region strategies. This will help ensure that global economy, we are ramping up productivity we are working as one Pentair on opportunities in key initiatives, further prioritizing investments and Latin America, the Middle East and India all provide growth markets. tremendous growth opportunities for Pentair. In 2011, we meaningfully advanced our global water and fluid process capabilities through acquisitions, most notably, Clean Process Technologies (CPT). The Right Way We believe the Pentair Integrated Management System (PIMS) is the right way to create value for customers, shareholder value. grow our business and improve performance. From repositioning the company to best serve the growing, global needs of our customers. As we gain increasing control of our own destiny, our portfolio provides tremendous opportunity to create strong, sustaining With over 90 percent of revenues outside of the U.S., Lean Enterprise to the Rapid Growth Process — we CPT provides advanced separation technologies, systems and application know-how, deepening our global water filtration platform and expanding our are continuously improving everything we do. In 2011, we drove meaningful improvements in product quality, on-time delivery, and workplace safety. position in the attractive food and beverage markets. One year into our Rapid Growth Process, we have Randall J. Hogan Chairman & Chief Executive Officer We continue to invest more in research and development (R&D) initiatives to ensure that we deliver to customers what they need around efficiency, trained over 800 global leaders in this new, disciplined growth process and deepened our market-back view of the opportunities. We also have over a decade of Randall J. Hogan Chairman & Chief Executive Officer Dear fellow shareholders 2011 was a good year for Pentair. I’m pleased with our strong operating performance, with record sales, margin improvement and good cash flow yield. Amid market uncertainties and challenges, we sustained a clear growth agenda through disciplined investments, focused resource allocation and prioritized initiatives. We continued to make good progress on strategic priorities — setting the stage for future success and sustainable growth. Seeing the Big Picture The increasing wealth of populations in fast growing markets is putting incredible pressure and demands on food, water, energy and industrial infrastructure today. These global mega trends present opportunities for Pentair. We continue to evolve into a more global, technology-driven company to better serve these growing needs, and to create long-term shareholder value. A year ago, I reported to you on the progress we’ve made in expanding our presence in key growth markets, strengthening our innovation capabilities and driving operational excellence. In 2011, we continued to make great strides on these strategic imperatives and it was evident in our results. 2011 Financial Highlights • We delivered record revenues of $3.5 billion, with revenue growth of 14 percent. • We generated free cash flow of $248 million, representing another year of greater than 100 percent net income conversion. 4 Pentair Annual Report 2011 5 Pentair Annual Report 2011 Expanding our global opportunities The growing population and wealth of developing economies creates a tremendous opportunity for Pentair. We are adding scale in fast growth regions through focused investments in global manufacturing, product development and distribution — accelerating Pentair’s growth. With manufacturing capabilities across the globe, including China, Brazil, India and Mexico, we are where the growth is. To support our in-region, for-region strategy, we continued to localize product development to best serve local demands and needs with faster launches and unique designs. We are applying the Pentair Integrated Management System and Lean Enterprise capabilities we have already established in our more developed markets. This creates more value for our customers and an advantage compared to our competitors. In 2011, we meaningfully expanded our global reach through acquisitions in Water & Fluid Solutions — adding new capabilities, technology and market reach. Fast Growth Region sales grew 52 percent in 2011 compared to the prior year, reflecting expanded distribution and more relevant innovation along with added sales from acquisitions. We expanded distribution across all businesses, with 40 percent more distributors today than just two year ago, and we’re continuing to invest in global sales and marketing. Greater scale in fast growth regions, more innovative solutions for an expanded customer base and added technology and application know-how position us well to serve the growing, global demands and needs of our customers. In-Region, For-Region With the completion of Technical Products Qingdao Design Center, we brought a new level of development capabilities to the China region in 2011. The Center includes a full-function testing lab, enabling a quick launch of a new line of thermal management products designed specifically for China’s fast growing markets. Expanding Our Reach We advanced our global water and fluid process capabilities through the acquisition of Clean Process Technologies (CPT). With over 90 percent of revenues outside of the US, CPT deepens our global water filtration platform, provides advanced fluid separation technologies and expands our position in the attractive food and beverage markets. First-Hand Experience We opened our first Customer Experience Center in Shanghai, China where visitors can gain a deeper understanding of our latest water treatment technologies and experience first-hand our innovative product offerings. Bringing Safe Water to Kureb We installed a reverse osmosis filtration system in the remote village of Kureb, India, to establish a model that would provide access to safe water for the 5,000 villagers. By hiring and training a local manager to operate the system, it ensures a viable and self-sustaining enterprise for years to come. Discover, Develop, Deploy Design centers in India and China help support global product development efforts. We are developing expertise in controls, engineering analytics and systems design in India, and the China center is now almost entirely focused on in-region, for-region product development — increasing both our global capabilities and local relevance. e g a m I e t i l l e t a S e y E o e G Strengthening Fast Growth The acquisition of Hidro Filtros in Brazil strengthened our position in the fast growing water filtration market in Latin America, while the acquisition of Wuxi Pioneer Pumps added local pump manufacturing capabilities in China. 6 Pentair Annual Report 2011 7 Pentair Annual Report 2011 Membrane bioreactors are not new to the food industry. But the concept of combining an anaerobic process with our Pentair X-Flow ® membranes is transformational. Innovating for sustainable growth We made great strides in innovation this year, bringing new products to the marketplace faster than before and deepening our global technology capabilities. strengthening our leading position in ultrafiltration and breaking new ground in nanofiltration. We’re continuing to leverage our leading brands and technology expertise to expand into new applications and markets. In Water & Fluid Solutions, we are extending our offerings into the dairy New product launches have increased 50 percent market with waste-to-energy solutions and into in the last 3 years. We’re improving how we the oil and gas market with natural gas liquid innovate by sharing best practices, closely tracking separation systems. In Technical Products, we key metrics and keeping the customer firmly at the are capitalizing on our strong channel presence center of our innovation strategy. We’re bringing and reliable brand reputation to grow our thermal greater value to our customers by providing management solutions — providing customers more efficient, customized and cost-effective protective, efficient cooling solutions for sensitive products and solutions. We continued to grow our electronics and electrical equipment. engineering presence in key fast growth regions and maintained our focus on shifting from sustaining We’re continuing to invest in innovation to drive engineering to new product development. We’re sustainable growth. Waste-to-Energy Efficiently treating waste streams can be a costly and cumbersome process for plants in the dairy, food and beverage industries. By adding our Pentair X-Flow® membranes and biogas recovery systems to anaerobic membrane bioreactors, our customers can enjoy the benefits of easy maintenance, increased biogas output and lower operating costs. High-Flow, High-Efficiency Our new line of Pentair BERKELEY® agricultural irrigation pumps combines a high flow rate with industry-leading efficiency, significantly reducing the carbon footprint and cost of ownership compared to standard models. A Simpler Solution With the announcement of our new Hybrid Deionization system, customers will experience the first system giving the benefits of reverse osmosis filtration and water softening while conserving more water and requiring no salt. Award Winning Innovation Our Pentair Nijhuis™ fish-friendly pump won the 2011 Overall Innovation Award at Aquatech in Amsterdam, a top global trade show for process, drinking and waste water. Eco-Friendly Innovations Eco-Select is our most advanced and environmentally friendly suite of pool pumps, heaters, filters and cleaners. These products, led by the top-selling IntelliFlo pump, can reduce energy consumption and save pool owners hundreds of dollars per year in operating costs. Precision Brewing In the production of beer and other carbonated beverages, minimizing the level of oxygen is critical to ensuring a quality finished product. The newly launched O2 Gehaltemeter OGM uses optical technology that is not susceptible to interference from organic substances and humidity, greatly improving response times and reducing the need for frequent re-calibration. 8 Pentair Annual Report 2011 9 Pentair Annual Report 2011 Driving to a new level of capabilities and focus The Pentair Integrated Management System (PIMS) is core to everything we do. From Lean Enterprise to Talent Management, we apply the same set of principles across our global businesses to drive growth, greater efficiencies and increased productivity — all while delivering superior value to our customers. A core tenet of Lean Enterprise is “Improving Every Day,” and we continue to make meaningful advancements toward our operational goals. Already better than the industry average, our safety performance improved from last year, and we meaningfully exceeded our quality and delivery goals. We increased capacity and production while holding operating expenses and capital investments constant as a percentage of annual sales. With our acquisitions, we began building a Lean culture on day one, improving on-time-delivery and safety rates and significantly reducing machine set-up and idle times. With the addition of the Rapid Growth Process to the PIMS toolkit, we’re able to more quickly recognize which opportunities hold potential and will provide the sustainable, profitable growth we demand from our investments. In the first year alone, we’ve conducted over 40 Alpha Tests, which identified approximately $500 million in potential future opportunities through the Rapid Growth Process. With PIMS, we keep our focus on the customer, and they’re taking note. We’ve been recognized with vendor of the year distinctions by multiple customers for our ability to efficiently and proactively deliver our products where and when they’re needed most. Customer Alignment In early 2012, we realigned Water & Fluid Solutions to focus on three growth platforms: Flow (Flow Technologies business), Treatment/Process (Water Purification and Process Technologies businesses) and Aquatic (Aquatic Systems business), enhancing our ability to address market opportunities, better serve our global customers and leverage scale. Sustainability at Work Last year, we made the conscious decision to replace our Pisa, Italy plant’s aging roof completely with solar panels. Today the panels generate over 50 percent more energy than the plant uses, allowing the excess electricity to be sold back into the power grid, providing clean, renewable energy for the city. Moving Beyond the Oil Refinery We are breaking into new gas separation applications as we apply existing technology and systems know-how to a broader set of customer needs. Our Pentair POLAREX® system allows proven, cost-effective contaminant removal from natural gas liquids for shale gas developments. One-Year Anniversary In its first year, the Rapid Growth Process has provided the framework, tools and methodology that allow us to confidently identify new market opportunities and increase the speed of new product development, bringing innovative products to our customers more quickly. Proving the World’s Water Crisis is Solvable With more than one billion people around the world lacking access to safe drinking water, Project Safewater-Colón proved that for just pennies a day, this crisis is solvable. Visit www.projectsafewater.com to learn more. A Record Year Driven by crisp execution and rooted Lean disciplines, Technical Products achieved record full-year operating margins in 2011, proving that our “Customer First” strategy can drive significant margin expansion through better customer satisfaction, greater efficiencies and meaningful cost reductions. 10 Pentair Annual Report 2011 11 Pentair Annual Report 2011 Our vision To be a diversified industrial growth company, a global enterprise and a responsible citizen known for operational excellence, innovation, top talent and growing by serving customers well while delivering superior long-term shareholder value. Pentair Leadership Team 2011 Sales BY s e g m e n t 2011 Sales BY r e g i o n | 69% Board Members Leslie Abi-Karam Executive Vice President and President of Mailing Solutions Management of Pitney Bowes Inc.; Director since 2008 Water & Fluid Solutions 28% 26% 15% Technical Products Flow Treatment/Process Aquatic | | | 31% | Management Randall J. Hogan Chairman and Chief Executive Officer 61% 21% 18% US Developed Non-US Fast Growth Regions* | | | Michael V. Schrock President and Chief Operating Officer Water & Fluid Solutions Glynis A. Bryan Chair of the Governance Committee; Chief Financial Officer of Insight Enterprises, Inc.; Director since 2003 Technical Products John L. Stauch Executive Vice President and Chief Financial Officer Pentair is a leading provider of innovative water and fluid processing products and solutions used in a Jerry W. Burris President and Chief Executive Officer of Associated Materials, LLC; Director since 2007 wide range of applications. Pentair’s comprehensive product suite addresses all areas of fluid handling, T. Michael Glenn Executive Vice President of Market Development with products ranging from energy-efficient pumps and Corporate Communications of FedEx Corporation; Director since 2007 and point-of-use filtration to highly engineered Pentair is a leading provider of products that enclose Frederick S. Koury Senior Vice President, Human Resources and protect some of the world’s most sensitive electronics and electronic equipment, ensuring their Angela D. Lageson Senior Vice President, General Counsel and Secretary safe, secure and reliable performance. Technical Products provides a broad array of standard and customized enclosures and thermal management Mark C. Borin Corporate Controller and Chief Accounting Officer pumps and fluid processing systems. solutions to customers all around the world. Charles A. Haggerty Chief Executive Officer of LeConte Associates, LLC; Director since 1994 2011 Sales 2011 Sales BY e n d -m a r k e t s e r v e d David H. Y. Ho W i tH i n Wat e r & F lu i d Chairman, Kiina Investment Limited; Director since 2007 BY r e g i o n W i tH i n Wat e r & F lu i d Randall J. Hogan Chairman and Chief Executive Officer; Director since 1999 David A. Jones Chair of the Compensation Committee; Chair of the International Committee; Senior Advisor to Oak Hill Capital Partners; Director since 2003 52% 18% 13% 11% 6% | | | | | Residential Ronald L. Merriman Chair of the Audit Committee; Retired Vice Chair of KPMG; Industrial Director since 2004 Commercial Municipal Agriculture US Developed Non-US Fast Growth Regions* William T. Monahan Lead Director; Retired Chairman and CEO of Imation Corporation; Director since 2001 59% 21% 20% | | | Michael G. Meyer Vice President, Treasury and Tax 2011 Sales Karl R. Frykman BY e n d -m a r k e t s e r v e d President, Aquatic Systems W i tH i n t eC H n iC a l P r o d uC t s 2011 Sales BY r egio n WitH in teCH n iC a l Pro duC ts Netha N. Johnson, Jr. President, Process Technologies Alok Maskara President, Water Purification Philip Pejovich President, Technical Products 64% 24% 12% | | | US Developed Non-US Fast Growth Regions* Gary S. Witt Industrial President, Flow Technologies Communications Energy General Electronics Commercial Infrastructure Other | | | | | | | 37% 20% 11% 11% 7% 6% 8% * Fast Growth Regions include China, India, Latin America, Southeast Asia, Eastern Europe, the Middle East and Africa will take place on: Investor Information The world is changing. An expanding Annual Meeting The Annual Meeting of Pentair shareholders population and a growing middle class are driving demand for new and creative solutions to the world’s challenges. Investor Information Shareholders seeking more information about Registrar, Stock Transfer and Paying Agent Wells Fargo Bank, N.A. (625 Fourth Avenue South, Minneapolis, Minnesota). Wednesday, April 25, 2012 at 10:00 a.m. Central www.wellsfargo.com/com/investments/ in the auditorium of Thrivent Financial St. Paul, Minnesota 55164-0854 shareowner-services Tel. 877-536-3554 P.O. Box 64854 Independent Registered Public Accounting Firm Deloitte & Touche LLP, Minneapolis, Minnesota the Company can access news releases describing significant Company events and earnings results Commission filings at www.pentair.com. Information may also be obtained by request for each quarter and the fiscal year as well as Form 10-K and other Securities and Exchange anticipated financial results are forward-looking from the Pentair Investor Relations Department, 5500 Wayzata Boulevard, Suite 800, Minneapolis, By weaving an innovative spirit together Caution Concerning Forward-Looking Statements Any statements made about the Company’s with a mindset of continuous improvement, Pentair strives to always be at the forefront of our industry, creating value across the Stock Exchange Listing globe and generating sustainable returns New York Stock Exchange (symbol: PNR) for our shareholders. Dividends Dividends are $0.22 per share and are paid quarterly and related markets; the risk that expected benefits as the Company’s ability to successfully and timely potential future downturn; the strength of housing statements subject to risks and uncertainties such from restructuring and other cost reduction plans integrate and realize the benefits of acquisitions; from the global economic downturn, including the current European Union debt crisis, or any the magnitude, timing and scope of recovery may not be fully realized, or may take longer to Minnesota 55416. in February, May, August and November. Pentair has realize than expected; foreign currency effects; paid 144 consecutive quarterly dividends. material inflation outpacing our productivity and pricing actions; retail, commercial and industrial At Pentair, we have a clear vision of the Dividend Reinvestment Pentair offers a Dividend Reinvestment Plan which opportunities ahead and the discipline to deliver results. enables shareholders of record the opportunity to automatically reinvest Pentair dividends and to invest up to an additional $3,000 per calendar the Company’s ability to achieve its long-term strategic operating goals, as well as other risk pricing and other competitive pressures; and foreign businesses; product introductions; demand; increased risks associated with operating quarter in Pentair common stock, with any costs factors set forth in our SEC filings. Forward-looking of purchasing the shares paid by the Company. statements included herein are made as of the date Plan and enrollment information are available from hereof, and the Company undertakes no obligation the Company or Wells Fargo Bank, N.A. to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. 12 Pentair Annual Report 2011 3 Pentair Annual Report 2011 3 Pentair Annual Report 2011 The front portion of this report was printed on paper made from 100% post-consumer recycled fiber. Because we believe in being part of the solution. Seeing the big picture. 5500 Wayzata Blvd, Suite 800 Minneapolis, MN 55416–1261 763.545.1730 www.pentair.com Annual Report 2 011 

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