FOOL CONFERENCE CALL SYNOPSIS*
By Greg Markus (TMF Boring)

Pentair, Inc.
(NYSE: PNR)
Waters Edge Plaza
1500 County Road B2 West
St. Paul, MN 55113 (651) 636-7920

http://www.pentair.com

ANN ARBOR, Mich. (July 16, 1998) /FOOLWIRE/ -- Pentair is a diversified manufacturing company operating in three principal markets: professional tools and equipment; water and fluid technologies; and electrical and electronic enclosures. The company operates from 50 manufacturing and distribution locations in North America, Europe, and Asia.

Pentair today reported net income of $24.4 million, or $0.56 cents per diluted share, on net sales of $471.8 million for the three months ended June 30, 1998. That compares with net income of $20.5 million, or $0.47 cents per diluted share, on net sales of $422.3 million in the year-ago period and represents a 12% sales gain and a 19% EPS increase over the second quarter of 1997.

Pentair has now recorded 19 consecutive quarters in which EPS improved by a double-digit percentage amount over the same period in prior years; in 16 of those 19 quarters, the EPS increase exceeded 15%.

Income Statement Highlights. Pentair achieved a 19% EPS increase despite an unusual amount of expense related to acquisition activities. On a "same-store" basis, without acquisitions or divestitures, overall margins improved by 130 basis points [1.3 percentage points] relative to last year's second quarter, with each of the company's three groups recording same-store margin improvements.

Balance Sheet Highlights. On the assets side, and on an unaudited basis, cash and short-term investments totaled $35 million at the end of the quarter. Net receivables were $373 million; net inventories, $283 million; net property, plant and equipment, $282 million; goodwill net of amortization, $426 million. On the liabilities side, current maturity of long-term debt was $40 million, and long-term debt was $323 million. Equity was $666 million.

Cash Flow. Depreciation and amortization was $18.5 million. Cash flow from operating activities in the quarter was $49 million. After capital expense of $11 million, net free cash flow was $38 million.

Pentair's Professional Tools and Equipment Group. The PTE Group achieved second quarter sales of $198.0 million, an 18% gain over second quarter 1997 levels. Operating income for the group was $22.2 million, up 49%. New products, near-record domestic housing starts, and high demand from Do-It-Yourself markets drove sales in the tools businesses. Sales of the Bammer air-powered hammer continue very strong; this product line could eventually be a $30 million per year business. Home Depot (NYSE: HD) is Pentair's #1 customer for that product and for tools, generally. The professional equipment businesses benefited from strong sales, new product introductions, and distribution expansion. Margins benefited from steps taken last year to rationalize facilities and outsource products.

Water and Fluid Technologies Group. Group sales totaled $138.2 million and operating income was $17.6 million, increases of 63% and 41%, respectively, over second quarter 1997. These results reflect the contributions of the pump businesses acquired in the third quarter of 1997 as well as solid growth from the Group's continuing businesses. The latter was driven by higher operating efficiencies at the water conditioning control valve business and improving European markets. In addition, flooding in the central U.S. increased demand for residential sump pumps. The company continues to make progress in bringing recently-acquired pump businesses up to Pentair's standards by rationalizing facilities and products, and the company's aggressive targets are being met. The lubrication business in Europe has recently improved, although the markets in the U.S. were relatively flat during the quarter.

Electrical and Electronic Enclosures. Second-quarter production at the new Mt. Sterling, KY plant increased 12% sequentially. On the other hand, sales of electronic enclosures were affected by weakness in Asian markets, while reduced capital spending in the semiconductor and automotive markets dampened demand for enclosures in North America. European enclosure business profits continued to improve, with gains in the double digits. Altogether, Group sales dropped 4.7% from year-ago levels to $138.1 million; operating income of $14.1 million was 2.3% below second quarter 1997 levels. Management said they are working to accelerate the Enclosure Group's performance by focusing on the fast-growing information and communications technology segments of the market while also reinforcing the Group's position in core industrial and electronics enclosure markets.

Cost Reductions. As previously noted, the company has undertaken a project to reduce costs by $60 million over the next two years. This effort is on track and making excellent progress.

Guidance. Given the strength of the company's tools and equipment businesses, the rapid expansion of its position in the growing water business, and the potential to capture significant savings through cost reductions, Pentair's management believes they "can sustain, and possibly improve upon," the company's "excellent performance record through 1998 and into 1999."

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.

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