UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission File No. 0-4689
PENTAIR, INC.
(Exact name of Registrant as specified in its charter)
Minnesota 41-0907434
(State or other (IRS Employer
jurisdiction of Identification No.)(I.R.S. Employer
incorporation or organization) Identification No.)
1500 County B2 West,
Suite 400 St. Paul, Minnesota 55113-3105
(Address of principal executive offices) (Zip Code)
(612) 636-7920
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of Registrant's only class of
common stock on March 31,June 30, 1995 was 18,335,029.18,429,913.
PENTAIR, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Results of Operations and Financial Condition
PART II - OTHER INFORMATION
Item 4. Results of Votes of
Security Holders1. Legal Proceedings
Item 5. Other Information2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signature Page
Exhibit Index
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PENTAIR, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
($ expressed in thousands except per share amounts)
ThreeSix Months Ended March 31Quarter Ended
June 30 June 30
1995 1994 1995 1994
Net sales $459,250 $389,252$672,039 $597,293 $338,216 $300,358
Operating costscosts:
Cost of goods sold 349,710 290,752471,899 420,687 239,275 211,103
Selling, general
and administrative 77,905 72,143144,297 129,236 72,326 64,323
Total operating costs 427,615 362,895
31,635 26,357
Equity in jt vent income 1,689 378616,196 549,923 311,601 275,426
Operating income 33,324 26,73555,843 47,370 26,615 24,932
Interest expense 8,461 8,424
Interest income 997 589- net (9,843) (10,844) (4,077) (5,431)
Income from continuing
operations before
income taxes 25,860 18,90046,000 36,526 22,538 19,501
Provision for
income taxes 10,510 7,80018,800 14,663 9,189 7,566
Income from
continuing operations 27,200 21,863 13,349 11,935
Discontinued operations:
Income from operations
of discontinued Paper
Products and Joint Venture
segments (net of applicable
income taxes of $2,740 and
$637, and $1,841 and
($67), respectively) 4,566 1,062 3,067 (110)
Gain on sale of
discontinued operations
(less applicable
income taxes of
$7,734) 12,134 0 12,134 0
Net income 15,350 11,10043,900 22,925 28,550 11,825
Preferred dividend
req 1,330 1,366requirements 2,657 2,731 1,327 1,365
Earnings applicable
to common stock $14,020 $9,734$41,243 $20,194 $27,223 $10,460
Earnings per share:
Primary $.76 $.53-
Income from:
continuing operations $1.32 $1.04 $.64 $.57
discontinued operations .90 .06 .82 .00
Net Income $2.22 $1.10 $1.46 $.57
Diluted $.72 $.52-
Income from:
continuing operations $1.27 $1.03 $.62 $.56
discontinued operations .79 .05 .72 .00
Net Income $2.06 $1.08 $1.34 $.56
Weighted average
common and common
equivalent shares:
Primary 18,551 18,37218,584 18,376 18,616 18,380
Diluted 21,143 21,00621,160 21,004 21,176 21,003
See Notes to Consolidated Financial Statements.
PENTAIR, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
($ expressed in thousands)
March 31,June 30, December 31,
ASSETS 1995 1994
ASSETS
Current assets
Current Assets
Cash and cash equiv $25,192equivalents $32,271 $32,677
AcctsAccounts receivable - net 287,336 255,105253,043 219,527
Notes receivable 99,426 0
Inventories
Finished goods 170,073 139,066160,680 114,875
Work in process 43,904 42,50242,050 41,283
Raw materials and supplies 66,211 62,08342,011 36,929
Total inventory 280,188 243,651244,741 193,087
Deferred income taxes 28,193 27,74928,366 23,087
Other current assets 9,693 10,03710,444 8,701
Net assets of
discontinued operations 0 240,136
Total current assets 630,602 569,219668,291 717,215
Property, plant
and equipment 784,882 764,408
Accumulated407,456 378,732
Less accumulated
depreciation 366,840 353,422
PP & E167,457 147,581
Property, plant and
equipment - net 418,042 410,986239,999 231,151
Marketable securities -
insurance subsidiary 24,64124,366 23,655
Investment in jt ventures 78,023 81,102
Goodwill - net 180,248177,583 170,965
Other assets 28,911 25,56918,374 18,156
TOTAL ASSETS $1,360,467 $1,281,496$1,128,613 $1,161,142
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $113,790 $115,962$76,129 $78,065
Compensation and other
benefits accruals 60,277 58,29753,476 48,657
Income taxes 13,126 7,57011,837 2,708
Accrued product claims
and warranties 25,854 25,48424,729 24,324
Accrued expenses and
other liabilities 85,551 72,61284,557 61,277
Current maturities of long-term debt 3,979 5,7664,529 3,566
Total current liabilities 302,577 285,691255,257 218,597
Long-term debt 438,851246,430 408,503
Other liabilities 21,246 20,88317,461 17,944
Deferred income taxes 22,341 22,70622,917 366
Pensions and other
retirement compensation 35,204 29,52132,566 21,796
Postretirement medical and
other benefits 61,594 61,13446,128 40,878
Reserves -
insurance subsidiary 22,83924,444 21,084
Commitments and contingencies
Shareholders' equity
Preferred stock -
at liquidation value
Authorized: 2,500,000 shares
Outstanding:
1995 - 1,941,292 68,0081,901,836 66,720 68,444
1994 - 1,953,243
Unearned compensation
relating to ESOP (25,448)(23,368) (27,528)
Common stock -
par value, $.16 2/3
Authorized: 72,500,000 shares
Outstanding:
1995 - 18,335,029 3,05618,429,913 3,072 3,041
1994 - 18,248,155
Additional paid-in capital 168,989170,374 166,314
CurrencyCumulative translation
and pension adjustments 16,95418,581 8,033
Retained earnings 224,256248,031 213,670
Total shareholders'
equity 455,815483,410 431,974
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $1,360,467 $1,281,496$1,128,613 $1,161,142
See Notes to Consolidated Financial Statements.
PENTAIR, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
($ expressed in thousands)
ThreeSix Months Ended
March 31 March 31June 30 June 30
1995 1994
Cash flows from operating activities
Cash provided by (used for)
Operating activities
Net income $15,350 $11,100$43,900 $22,925
Adjustment for
discontinued operations (16,700) (1,062)
Adjustments to reconcile net
income to cash flow:provided
from operating activities
Depreciation 16,960 16,33520,508 17,544
Amortization 994 1,3843,166 2,852
Deferred income taxes (809) (104)
Undistributed (earnings)
from joint venture (1,689) (378)(619) 1,786
Changes in assets and liabilities,
net of effects of acquisitionacquisitions
and dispositions
Accounts receivable (32,231) (22,332)(33,516) (14,788)
Inventories (36,537) (15,419)(51,654) (24,138)
Accounts payable (2,172) (1,995)
Compensation(1,936) (6,235)
Accrued compensation
and benefits 3,980 6,7744,819 12,203
Income taxes 5,556 4,258(1,619) 697
Pensions and other
retirement compensation 5,683 6,39510,770 10,354
Reserves - insurance
subsidiary 1,755 1,8193,360 3,634
Other assets/
liabilities - net 9,181 (2,783)
Net cash9,139 1,848
Cash from
(used for)continuing operations (10,382) 27,620
Cash from
discontinued operations (525) 2,198
Cash from
operating activities (13,979) 5,054
Investing(10,907) 29,818
Cash flows from investing activities
Capital expenditures (16,266) (14,963)
Cash investment in joint
venture - net 4,768 (1,993)(22,571) (21,655)
Purchase of marketable
securities - net (986) 729(711) (236)
Proceeds from sale of
discontinued
operations 206,459 0
Acquisition - net of
cash acquired 0 (140,116)
Net cash (used)Cash provided by
(used for) investing
activities -
continuing operations 183,177 (162,007)
Cash used for investing
activities (12,484) (156,343)
Financing-
discontinued operations 0 (11,566)
Cash provided by (used for)
investing activities 183,177 (173,573)
Cash flows from financing activities
Borrowings 24,500 175,38424,621 158,235
Debt payments (6,770) (5,951)(196,863) (6,193)
Unearned ESOP
compensation decrease 2,080 1,1104,160 2,220
Employee stock
plans and other 2,479 1,3732,817 1,731
Dividends paid (4,989) (4,637)
Net cash(9,989) (9,276)
Cash provided by
(used for) financing
activities -
continuing operations (175,254) 146,717
Cash used for financing
activities 17,300 167,279
Effects-
discontinued operations 0 0
Cash (used for) provided by
financing activities (175,254) 146,717
Effect of currency
exchange rate changes 1,678 1,1272,578 4,298
Increase (decrease)
in cash and cash equivalents (7,485) 17,117(406) 7,260
Cash and cash equivalents
- beginning of period 32,677 10,327
- end of period $25,192 $27,444$32,271 $17,587
See Notes to Consolidated Financial Statements.
PENTAIR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Accounting Policies.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions forto Form 10-Q and accordingly,Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments consisting only(consisting of normal recurring accruals,accruals) considered
necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the
year ended December 31, 1995.
These statements should be read in conjunction with the financial
statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994,
previously filed with the Commission.
Certain reclassifications have been made to prior year's financial
statements to conform to the current year presentation.
Note 2. Discontinued Operations.
On April 1, 1995 the company sold its Cross Pointe Paper
Corporation subsidiary for $203.3 million, of which $100 million
was received in cash and a promissory note due January 2, 1996
was given for the remainder. Effective May 1, 1995 the company
decided to report its Paper Products and Joint Venture segments
as discontinued operations. On June 30, 1995 the company sold
its Niagara of Wisconsin Paper Corporation, its 50% share of
Lake Superior Paper Industries (LSPI) joint venture and its 12%
share of Superior Recycled Fiber Industries (SRFI) for
approximately $103 million cash.
The gain on the sale was $12.1 million after income tax expense
of $7.7 million. The transaction added 57 cents to earnings per
share in 1995.
The prior year has been restated to include the company's former
paper businesses (Paper Products and Joint Venture segments)
as discontinued operations.
Summarized results of operations for the three months ended
March 31, 1995 are not necessarily indicativeand financial position data of
the
operating results to be expected for the full year.discontinued operations were as follows:
Results of Operations
Period Ended June 30
1995 1994
Net Sales $187.1 $183.9
Operating Income 27.2 4.4
Net Earnings 4.6 1.1
Gain on Sale 12.1 0.0
Financial Position
December 31, 1994
Current assets $92.1
Net property, plant and equipment 179.8
Other assets 88.5
Current liabilities (67.1)
Other liabilities (53.2)
Net assets of
discontinued operations $240.1
Note 3. Income tax provisions for interim periods are based on
the current best estimate of the effective federal, state
and foreign income tax rates.
4. Earnings per common share are based on the weighted
average number of common and common equivalent shares
outstanding during each period. The tax benefits applicable
to preferred dividends paid to ESOPs are: for allocated
shares credited to income tax expense and for unallocated
shares, credited to retained earnings and are not
considered earnings applicable to common stock.
Fully diluted computations assume full conversion of each
series of preferred stock into common stock, the
elimination of preferred dividend requirements, and the
recognition of the tax benefit on deductible ESOP dividends
applicable to allocated shares payable based on the
converted common dividend rate. Conversion was assumed
during the portion of each period that the securities were
outstanding.
5.Long-Term Debt.
The long-term debt is summarized as follows ($ millions):
March 31,December 31,
1995 19946/30/95 12/31/94
Revolving credit facilities $266 $231facilities:
US $ revolvers $14 $157
DM revolvers 96 74
Private placement debt 160125 160
Other 1716 23
TOTAL 443251 414
Current maturities (4) (5) (6)
Total long-term debt $439 $409$246 $408
Debt agreements contain various restrictive covenants, including
a limitation on the payment of dividends and certain other
restricted payments. Under the most restrictive covenants, $148$151
million of the March 31,June 30, 1995 retained earnings were unrestricted
for such purposes.
6. The Company uses the equity method of accounting for
its Joint Ventures, Lake Superior Paper Industries (LSPI)
and LSPI Fiber. First quarter operations are summarized as
follows ($ millions):
1995 1994
Net Sales $47.3 39.1
Operating Income 5.0 1.8
Pre-Tax Income 3.4 .8
7.Note 4. Statement of Cash Flows - supplemental information.
The following is supplemental information relating to the
Statement of Cash Flows ($000's):
ThreeSix Months
Ended March 31June 30
1995 1994
Interest paid (net of
capitalized interest) $8,227 $8,992$16,615 $15,294
Income tax payments 4,158 3,24124,382 15,281
8. Acquisition
Effective January 1, 1994, the Company acquired Schroff
GmbH and its international subsidiaries, a manufacturer of
cabinets, cases, subracks and accessories for the
electronics industry, for $140 million. The acquisition
was accounted for by the purchase method, accordingly, the
purchase price was allocatedNon-cash Items:
Gross amounts to the assets acquired based
on their estimated fair values as follows: working
capital, $20.9 million; property, plant and equipment,
$57.8 million; other non-current liabilities, $17.9
million; and goodwill, $79.0 million. Goodwill is being
amortized on a straight line basis over 25 years.
The Schroff operating results are included in the company's
consolidated resultsbe realized from January 1, 1994.
9. Subsequent Event
The sale of Cross Pointe Paper Corporation was completed on
April 3, 1995. The definitive agreements regarding the sale of Niagara of Wisconsinthe Paper Corporation, our 50%
share of Lake Superior Paper Industries (LSPI) joint
ventureProducts
and our 12% share of Superior Recycled Fiber
Industries (SRFI) were signed on May 8, 1995.Joint Venture segments are approximately $316 million. Of
this amount $206 million was received in cash, a promissory note
was received for $100 million which is due January 2, 1996 and
the remainder is recorded as a miscellaneous account receivable.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
BUSINESS SEGMENT INFORMATION
Selected information for business segments for the six months ended
June 30, 1995 and 1994 follows ($ millions):
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
BUSINESS SEGMENT INFORMATION
Selected information for business segments for the three months
ended March 31, 1995 and 1994 follows ($millions):
General
Specialty Industrial Paper Joint General
Products Equipment Products Ventures Corporate Total
1995
1995
Net Sales $117.6 $219.8 $125.4$228.3 $443.7 $0.0 $(3.5) $459.3$672.0
Operating Income 13.4 21.1 2.7 1.7 (5.6) 33.322.5 43.2 (9.9) 55.2
Identifiable Assets 240.7 677.0 294.5 78.0 70.3 1,360.5237.0 703.4 188.2 1,128.6
Depreciation 2.5 7.8 6.76.2 14.3 0.0 0.0 17.020.5
Capital Expenditures 2.0 7.9 6.4 0.0 0.0 16.36.5 16.0 0.1 22.6
1994
Net Sales $109.9 $187.1 $ 92.3$216.3 $381.0 $0.0 $0.0 $389.3$597.3
Operating Income 11.4 16.7 4.2 0.4 (6.0) 26.721.4 35.4 (9.4) 47.4
Identifiable Assets 216.3 597.4 261.1 73.6 61.3 1,209.7209.0 621.2 288.4 1,118.6
Depreciation 2.2 7.6 6.54.5 13.0 0.0 0.0 16.317.5
Capital Expenditures 2.4 6.2 6.4 0.0 0.0 15.04.6 17.0 0.1 21.7
RESULTS OF OPERATIONS
Consolidated Continuing Operations. Pentair reported net income
from continuing operations of $15.4$27.2 million, or 72 cents$1.27 per fully
diluted share, on consolidated net sales from continuing
operations of $459.3$672.0 million for the threesix months ended March 31,June 30,
1995. This represented a 38.324.4 percent increase in net income from
continuing operations and an 18.0a 12.5 percent increase in sales from
continuing operations over the first quarterhalf of 1994. The first quarterhalf
1994 net income from continuing operations was $11.1$21.9 million, or
52 cents$1.03 per fully diluted share, on consolidated net sales from
continuing operations of $389.3$597.3 million.
Specialty Products Segment. Net sales increased $7.7$12.0 million
or 7.0%5.6% and operating income increased $2.0$1.2 million or 17.8% with Porter Cable contributing much of the
improvement.5.5%.
The increases reflect new product sales and further expansion into major home center
distribution channels.channels, tempered somewhat by a general economic
slowing of retail sales activity in the second quarter. Order rates,
supported by new product introductions, remain strong in this
segment.
General Industrial Equipment Segment. Sales increased $32.8$62.7
million or 17.5%16.5% and operating income increased $4.4$7.7 million or
26.6%21.8%. Hoffman and Schroff and Hoffman were the major contributors to the
increased sales and operating income for the first three monthshalf of 1995.
ElectronicElectrical and electricalelectronic enclosure sales continued strong for the first
quarter ofinto
1995, assisted by the strength in durable goods spending in both
the U.S.United States and Europe. Lubrication and material
dispensingWestern European markets. Sporting
ammunition sales and profitsmargins were down due to a less favorable
product mix, competitive pricing pressures, and higher raw
material costs. The Lincoln group of companies continued their
strong recovery with year to year sales up considerably13% and operating
income up 121%. Reported sales in this segment were increased
by $18-20 million due to the year to year strengthening of the
Deutsche mark relative to the US dollar. However, foreign
exchange rates had no material effect on the operating income of
this segment.
Discontinued Operations. Results from the Paper Products and
Joint Venture segments have been restated as discontinued
operations. See Note 2 to the financial statements for details of
these discontinued operations.
Interest Expense. Interest expense for continuing operations was
$1.0 million lower than the same period in the prior year. The
strengtheningreduction in interest expense was primarily the result of reduced
allocations of interest costs in connection with a reduction of debt
via the European economy
continues to favorably impactproceeds received from the resultssale of Cross Pointe Paper
Corporation in early April 1995.
FINANCIAL CONDITION
Through the Lincoln
GmbH business. Sporting ammunition sales and operating
margins were lowerfirst half of 1995, increases in accounts receivable
due to unfavorable product mix asincreased sales volume, combined with seasonal and
temporary build-ups of finished goods inventories resulted in
negative cash from continuing operations of $10.4 million,
compared to 1994.
Paper Products Segment. Net sales increased $33.1a positive cash from continuing operations of $27.6
million and operating income decreased $1.5 million, reflecting continuous margin
pressures in uncoated free sheet products. The
turnaround in the domestic paper market helped the
businesses greatly. Coated groundwood paper volume was up
10.8% and prices increased by $200 per ton above first
quarter 1994 prices. Uncoated paper volume was up 12.7%
and prices were up over $115 per ton over the same period in 1994. Net paper segment results were flat. However,
within this segment a $6.5 million charge was recorded
based on senior management's decision to accelerate closure
of a sludge disposal facility in Dickinson County,
Michigan.
Joint Venture Segment. Tons shipped were flat but prices
were up 16.2% or over $100 per ton as compared tothe prior year.
Capital expenditures of continuing operations for the first quarter of 1994.
FINANCIAL CONDITION
In 1995 as in 1994, net income adjusted for non-cash items
provided much of the funds for seasonal working capital
increases. Accounts receivable levels increased due to
dating programs and increased sales. Some subsidiariessix
months were also re-building inventory levels. Borrowings
financed some operating needs along with capital
expenditures of $16.3$22.6 million in 1995 and $15.0$21.7 million in 1994.
The percentage of long-term debt to total capital was 49%reduced to
34% at March 31,June 30, 1995 compared to 49% at December 31, 1994. In 1994,
largely due to the use of proceeds from the disposition of the
paper businesses to pay down outstanding debt. As a result,
substantially all of the US$ revolving credit facilities were usedand the $35
million portion of the private placement debt that was to fundmature
in June 1996 was paid down. The average interest rate on the
acquisitionredeemed debt was 8.81%. A make-whole premium of
Schroff.approximately $950,000 was required to be paid to redeem the
private placement debt. The full year 1995average interest rate on the
remaining private placement debt of $125 million is 7.31%.
Management believes that cash flowflows from continuing operations
will be positive by the end of 1995. The company's continuing
operations should generate sufficient cash from operations is expected to
increase with additional net income contributions. Workingprovide for their recurring capital needs will grow as total sales increase.needs. Capital expenditures of
continuing operations are expected to be down from 1994 to about $60-70$70 million in
1995 as compared to $92.7$57.8 million in 1994
due to the expected disposition of all of the paper
businesses.
Based upon current operating expectations, credit1994.
Credit available under revolving credit facilities is expected to be
adequate to
cover seasonalprovide for working capital, and long-term
capital expenditure, and acquisition
requirements.
OUTLOOK
In general, the Company is strong and well-positioned to continue
its internal growth. The strong emphasis on product developmentGiven a continued steady GNP growth in the United
States and aggressive efforts to expand distribution channels that
helped duringEurope, the recent year are expectedcompany expects to continue to grow
market share and sales and profit growth. In allearnings of its continuing businesses sales are expected to respond to new products
and enhanced customer service.
The sale of Cross Pointe Paper Corporation was completed on
April 3, 1995. The definitive agreements regarding the
sale of Niagara of Wisconsin Paper Corporation, our 50%
share of Lake Superior Paper Industries (LSPI) joint
venture and our 12% share of Superior Recycled Fiber
Industries (SRFI) were signed on May 8,in 1995.
With the expected completion of the dispositionpaper business sales on June 30, the
company became entirely a diversified manufacturer of industrial
products. The performance of the Paper Products and Joint Venture segments, Pentaircompany will be able to devote full financialless
influenced by economic cycles, and managerialcapable of returning
consistent value in both the near and long term.
With its strengthened capital structure, the company has
sufficient resources to growthpursue both internal and development of itsexternal
expansion into profitable industrial businesses. The
proceeds from the sales of the paper businesses will
strengthen our capital position and enable the company to
pursue industrial acquisitions. These resources also will
enable the company to make continued capital expenditures
for internal development of the existing industrial
businesses.business segment
opportunities.
PART II - OTHER INFORMATION
ITEM 4 -Submission1 - Legal Proceedings
Federal-Hoffman, Inc. Federal Cartridge, a division of MattersFederal-Hoffman, Inc.,
and 79 manufacturers, distributors and retailers of
ammunition and/or firearms were sued in July 1995 by a private
environmental group pursuant to a Vote of Security Holders
The Annual Meeting of Shareholders of Pentair, Inc.California Health and Safety
Code Section 25249 (Proposition 65) and the Business and
Professions Code Section 17200. Basic information concerning
this matter was held on April 19, 1995,previously reported in the Company's Form 10-K
for the purposeyear ending December 31, 1994. The lawsuit alleges
violations of electing certain
membersCalifornia law arising from exposure to lead from the
boarddischarge or cleaning of directors, approving the
appointment of auditors,firearms. Claims have been made for
injunctive relief, statutory penalties and votingattorneys fees. Based on
the proposals
described below. Proxies forinformation currently known, the meeting were solicited
pursuantRegistrant believes that this
matter is unlikely to Section 14(a) of theresult in material liability.
ITEM 2 - Changes in Securities
Exchange Act of
1934.
DIRECTORS
All of management's nominees for directors as listed in the
proxy statement were elected with the following vote:
Shares Shares Broker
Voted "For" "Withheld" Non-Votes
Q. Hietpas 17,395,504 165,925 0
R. Schulze 17,385,344 176,085 0
K. Welke 17,371,326 190,103 0
AUDITORS
The appointment of Deloitte & Touche LLP as independent
auditors of the Company forOn July 21, 1995, was ratified by the
following vote:
Shares
Shares Voted Shares Broker
Voted "For" "Against" "Abstaining" Non-Votes
17,322,488 61,084 177,857 0
PROPOSAL 2
A proposal to amend the Restated Articles of Incorporation
increasing the total number of shares authorized to be
issued from 75,000,000 to 100,000,000 and increase from
10,000,000 to 15,000,000 the number of authorized shares
that the Board of Directors could designateof Pentair, Inc. (the
"Company") declared a dividend of one common share purchase
right (a "Right") for each outstanding share of common stock, par
value $.16-2/3 per share (the "Common Shares"), of the
Company. The dividend is effective July 31, 1995 for
shareholders of record on such date (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company
one Common Share at a price of $160.00 per Common Share,
subject to adjustment (the "Purchase Price"). The description
and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and Norwest Bank
Minnesota, National Association, as preferredRights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated
persons (other than the Company, a subsidiary of the Company
or an employee benefit plan of the Company or a subsidiary) (an
"Acquiring Person") has acquired beneficial ownership of 15% or
more of the outstanding Common Shares (the "Shares Acquisition
Date") or (ii) 10 business days (or such later date as may be
determined by action of the Company's Board of Directors prior
to such time as any person becomes an Acquiring Person)
following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or
group (other than the Company, a subsidiary of the Company or
an employee benefit plan of the Company or a subsidiary) of 15%
or more of such outstanding Common Shares (the earlier of such
dates being called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share
certificate.
The Rights Agreement provides that, until the Distribution Date,
the Rights will be transferred with and only with the Common
Shares. Until the Distribution Date (or earlier redemption or
expiration of the Rights), new Common Share certificates issued
after the Record Date, upon transfer or new issuance of Common
Shares, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer
of any certificates for Common Shares, outstanding as of the
Record Date, even without such notation, will also constitute the
transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution
Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on July 31, 2005 (the "Final Expiration Date"),
unless the Rights are earlier redeemed or exchanged by the
Company, in each case, as described below.
The Purchase Price payable, and the number of Common Shares
or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Common Shares, (ii) upon
the grant to holders of the Common Shares of certain rights or
warrants to subscribe for or purchase Common Shares at a price,
or securities convertible into Common Shares with a conversion
price, less than the then current market price of the Common
Shares or (iii) upon the distribution to holders of the Common
Shares of evidences of indebtedness or assets (excluding regular
quarterly cash dividends or dividends payable in Common
Shares) or of subscription rights or warrants (other than those
referred to above).
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment
of at least 1% in such Purchase Price. No fractional shares will
be issued. In lieu thereof, an adjustment in cash will be made
based on the market price of the Common Shares on the last
trading day prior to the date of exercise.
The Purchase Price is payable by certified check, cashier's check,
bank draft or money order or, if so provided by the Company, the
Purchase Price following the occurrence of a Flip-In Event (as
defined below) and modifyuntil the first occurrence of a Flip-Over Event
(as defined below) may be paid in Common Shares having an
equivalent value.
In the event that any person becomes an Acquiring Person (a
"Flip-In Event"), the holders of Rights will thereafter have the right
to receive upon exercise that number of Common Shares (or, in
certain circumstances cash, property or other securities of the
Company or a reduction in the Purchase Price) having a market
value of two times the then current Purchase Price.
Notwithstanding any of the foregoing, following the occurrence of
a Flip-In Event all Rights will be null and void to the extent they
are, or (under certain circumstances specified in the Rights
Agreement) were, or subsequently become beneficially owned by
an Acquiring Person, related persons and transferees.
In the event that, at any time following the Shares Acquisition
Date, (i) the Company is acquired in a merger or other business
combination transaction or (ii) 50% or more of its consolidated
assets or earning power are sold (the events described in clauses
(i) and (ii) are herein referred to as "Flip-Over Events"), proper
provision will be made so that the holders of Rights will thereafter
have the right to receive, upon the exercise thereof at the then
current Purchase Price, that number of shares of common stock
of the acquiring company which at the time of such transaction
will have a market value of two times the then current Purchase
Price.
At any time after a person becomes an Acquiring Person and
prior to the acquisition by such Acquiring Person of 50% or more
of the outstanding Common Shares, the Board of Directors of the
Company may exchange the Rights (other than Rights owned by
such Acquiring Person which have become void), in whole or in
part, at an exchange ratio of one Common Share (or of a share
of a class or series of the Company's preferred stock having
equivalent rights, preferences and privileges) per Right (subject
to establish voting rightsadjustment).
At any time prior to the close of unissued shares did not receivebusiness on the required
60% approval. The vote tally was as follows:
Shares
Shares Voted Shares Broker
Voted "For" "Against" "Abstaining" Non-Votes
10,973,651 5,274,835 166,329 1,146,614
PROPOSAL 3
A proposal to amendtenth day
following the Restated Articles of Incorporation
increasing the total number of shares authorized to be
issued from 75,000,000 to 125,000,000 and increase from
10,000,000 to 15,000,000 the number of authorized shares
thatShares Acquisition Date, the Board of Directors could designateof
the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on
such basis and with such conditions as preferred
shares was passedthe Board of Directors in
its sole discretion may establish. Immediately upon any
redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Other than the Redemption Price, the Purchase Price and the
Final Expiration Date, the terms of the Rights may be amended
by the Board of Directors of the Company without the consent of
the holders of the Rights, including an amendment to lower the
threshold for exercisability of the Rights from 15% to 10%, with
appropriate exceptions for any person then beneficially owning a
percentage of the number of Common Shares then outstanding
equal to or in excess of the new threshold, except that from and
after the Distribution Date no such amendment may adversely
affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of the Company, including, without
limitation, the right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the following vote:
Shares
Shares Voted Shares Broker
Voted "For" "Against" "Abstaining" Non-Votes
13,824,183 2,321,552 269,080 1,146,614
In order for either proposal regarding the amendmentSecurities
and Exchange Commission as an Exhibit to a Registration
Statement on Form 8-A12G filed with respect to the Articles of Incorporation to pass, the proposal was
required to receive greater than 60% vote in favor and not
more than 25% vote against.
ITEM 5 - Other Information
The Registrant announced on May 8, 1995 that is has signed
a definitive agreement to sell its remaining paper
businesses to Consolidated Papers, Inc. of Wisconsin for
approximately $103 million cash, plus assumed debt and
lease obligations. The sale includes Niagara of Wisconsin
Paper Corporation, our 50% share of Lake Superior Paper
Industries (LSPI) joint venture and our 12% share of
Superior Recycled Fiber Industries (SRFI). The transaction
is expected to close in late June 1995, subject to
regulatory clearance and further due diligence.
In connection with the completed sale of Cross Pointe and
the expected saleRights. A
copy of the remaining assets,Rights Agreement is available free of charge from the
Company has
decided to report its Paper Products segment and Joint
Ventures segment as discontinued operations, effective May
1, 1995. The consolidated financial statements will be
reclassified to report separately the net assets and
operating resultsCompany. This summary description of the discontinued operations. The
company's prior year operating results will also be
restated to reflect continuing operations.
The continuing operations will consist of the Specialty
Products, General Industrial Equipment, and General
Corporate segment. Comparative sales and operating income
figures can be found in Part 1 Item 2 Business Segment
Information. The results of 1994 and first quarter of 1995
will be restated on a discontinued operations basis on Form
8-K/ARights does not
purport to be filedcomplete and is qualified in early June.its entirety by reference
to the Rights Agreement, which is hereby incorporated herein by
reference.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are included with this Form
10-Q Report as required by Item 601 of Regulation S-K.
Exhibit Description
Number
3.1 Restated Articles of Incorporation of Pentair, Inc.
as amended through April 19, 1995
3.2 Second Amended and Superseding Bylaws of Pentair, Inc.
as amended through July 21, 1995
4.1 Rights Agreement dated as of July 21, 1995 between
Norwest Bank Minnesota, N.A. and Pentair, Inc.
11 Calculation of Earnings per Common and Common
Equivalent Share
27 Financial Data Schedule
(b) Reports on Form 8-K.
A report on Form 8K was filed on April 17, 1995 disclosing the
closingcompletion of the sale of Cross Pointe Paper Corporation to
Noranda Forest, Inc.
A report on Form 8K/A (Amendment to form 8K which was filed
on April 17, 1995) was filed on May 30, 1995 disclosing the
proforma financial information of the Pentair, Inc. excluding the
Paper Products and Joint Venture segments which were
classified as discontinued operations as of May 1, 1995. The
filing also announced the proposed disposition on June 30, 1995
of the company's Niagara of Wisconsin Paper subsidiary and the
disposition of the company's shares in its paper-related joint
ventures Lake Superior Paper Industries and Superior Recycled
Fiber Industries.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
/s/ David D. Harrison
Senior Vice President and
Chief Financial Officer
May 15,August 11, 1995
EXHIBIT INDEX
Exhibit Number
3.1 Restated Articles of Incorporation of Pentair, Inc.
as amended through April 19, 1995
3.2 Second Amended and Superseding Bylaws of Pentair, Inc.
as amended through July 21, 1995
4.1 Rights Agreement dated as of July 21, 1995 between
Norwest Bank Minnesota, N.A. and Pentair, Inc.
11 Calculation of Earnings per Common and
Common Equivalent Share
27 Financial Data Schedule