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Company watch
September
2002
Pump Industry Analyst
Pentair Inc, USA
Wisconsin Energy Corp, USA
Key Figures (US$ million) Three months ended 29.6.2002 Net Sales Of Which: Water
Key Figures (US$ million) Three months ended 30.6 30.6.2001
708.1
689.4
265.5
239.9
9.0
7.3
Operating Income Of Which: Water
74.6
60.3
43.7
35.7
Net Income
43.0
28.6
Research and Development
2002
2001
ODeratina Revenues
870.9
862.2
Total Operating
758.6
758.5
112.3
103.7
45.4
46.1
Operating
29.6.2002 Net Sales Of Which: Water Research and Development Operating Income Of Which: Water Net Income
Income
Net Income
Six months ended 30.6
Ooeratina Six months ended
Revenues
Total Operating 30.6.2001
1311.2
1353.6
476.9
459.5
17.4
15.0
120.3
113.2
73.5
63.8
64.4
49.1
mating concrete results, and In the we cr TeehnoIogits &at growth-or&n&d actions Group, second quarter s&s are contributing to our ofUS$265.5 millk~n, an 11% improved performance,” said gain ever the same period Rand&l Hogan, Pentair last year, wete due to reeurd chairman and CEO. Tools high seasonal activity in the and Enclosures groups realpool and spa equipment busid ized strong margin gains ness, robmt salea in retail compared with the fiit quarand immieipal markets, and ter of this year, and sales in strong inte~tiomti sales. both Tools and Water TechSecond quarter 2002 nologies groups increased by operating income of double-digit percentages. US$43.7 miltion gained 8% over the same period last DespitP uncertainty about the economy and its year, drivers principa& by volumeincreases. Marginsin impact on business in the current environment, Penthe second quarter were l&5%, down slightly from tair’s Tools business has regained double-digit marthe prior year due to less gins and moved from defense favourable product mix. to offense; margins in the “Our second quarter Water Techn&gies business 2002 performance demonstrates that our supply manare strong, and core pnmp and water treatme-nt markets agement, lean enterprise, and are improving. n cash flow initiatives are gen-
Expenses
Operating
Expenses
Income
Net Income
Wisconsin Energy’s pump manufacturing business &owed significant revenue andeamin@gainsiRthesecond quar&r. WEC’s mamxfMuring segment posted record revenues of USS193 million for the seumd quarter of B&Z, up 21% tim the US%160 millionrecordedfcrrtbesame period a year earlier. Matmf&?tur@ eamhlgs of uS$13 million were up 26% &ml the year-ago quarter. The mamIfacturillg business henefited from cost savings achieved through GonsGlidationof operations, grew& in major markets, stmngth In &emational and additional revenues from acquisiti~. Manufacturing revenues totaled US$343 miiiion for the first baff of 2002, up US%38 million, or 12%, from year-eariier levels. “We are pleased with our results for the second quarter as they
2002
2001
1856.9
2219.4
1710.3
1931.9
146.6
287.5
41.2
133.9
represent contkmed Grengtb ~o~~ore~t~~ grow&
continuillg
f@x$ on cost
20fJz~ asset USN_79 par !&&I@taken in the first quarter and costs associated with the City of West ~~~~~~~~s and Lewis litigation. Excluding those two itema and given normal weather for the rem&&r of this year, WEC says it is reasonabh to assume that 200;? earnings will fall into the middle oftbe US$2.2O-US%2.40 per share range. m
September 2002
Pump Industry Analyst
The Gorman-Rupp USA
Co,
ITT Industries Inc, USA
Key Figures (US$ million) Three months ended 30.6
Key Figures (US$ million) Three months ended 30.6
2002
2001
Net Sales
52.6
54.6
Revenues
Cost of Products Sold
40.3
41.4
Segment Operating
Gross Profit
12.2
13.4
Net Income
4.7
6.5
3.3
4.0
Operating
Profit
Net income
Six months ended 30.6
Revenues 2001
Segment Operating
Net Sales
97.9
104.5
Net Income
Cost of Products Sold
76.1
78.7
Gross Profit
21.8
25.8
8.1
12.1
5.4
7.6
Operating
Profit
The. doin GormsulRupp’s business mainly refleots sknvness in capitaI goods spending affecting the commercial pump business, and the cancellation of orders for components to the power generation business. Patterson Although Pomp will continue to be a major supplier of fabricated components to GE Power Systems, this portion of Pattersank business will be affected during the remainder of2602 and into 2003. White indications of US economic recovery are being reported, German-Kupp says the industrial sector has been slow to respond and any measurable improvement may not occlu until 2003. AU of the company”s divisions
remained profitable during the reporting period and some improvement in international business is occurring, The company expects to complete integnition of the operations of its two recent acquisitions during the second half of 2OQ2.As refiected on 30 June 2602 balance sheet, the company has repaid all bank loan obligations related to its acquisitions. Ahhougb 2002 is expected to be another profitable year, it is not Iikely to match last year’s performance. However German-Rupp says that it remains .confident of its business positioning for the future and of the value and strength in ite balmce sheet. m
2001
1320.1
1184.3
161.1
155.6
92.9
76.1
Six months ended 30.6
2002
Net Income
Income
2002
Income
TIT Industries’ FIuid Techndogy segment reported setond quarter revenues of US$So4.7 million, up US$34,0 million or 7% tiom the second quarter 2661. The i&ease is attributable to contnmed strong paformance in the North Amerioan water market and %%%S.bwateE businesses in Furope and Asia, a sb$ht improvement in the indus&iaI businesses, and the favourable impact of fore@ eurrency tra&a$ion. Exehtding the impact of foreign currency translations and acquisitions, secoml quarter 2062 revemzes for the segment rose 4% organica&. Operating income far the quarter rose 4% to US$64.4 milhon, reflecting higher volume and process improvements Segment operating margin declined aligbtly due to acquisition integration costs. For the f&H year, the eomvy expects revenues to grow modestly* reflecting moderate growth in the water and wastewater marke& aud continued diffiit CCmditiOnsin the industrizd markets.
2002
2001
2505.9
2370.3
291.3
290.7
164.4
135.2
“This was art outstanding quarter for Ifl> with organic growth, earnings and cash flow all stronger than expected,” said Lou Giuhano, CEO of ITT Industries. The company is clearly benefitting from its muhi-industry portfolio: the Fluid Technology segment bad a good quarter, with strong results in wastewater and water markets; the Refense business had higher international sales and its backlog continues to experience growth, while the Electrunic Components segment, which continues to face difficult market conditions, performed in line with expectations and the Motion and Flow Control segment rebounded to achieve a 14% operating margin. Based on this second quarter’s rest&s and ongoing management actions, ITT Industries says it is raising its full-year earnings per share forecast to US$3.58US$3.68. The company has also raised its forecast for full-year free cash flow to approximately US%300 million. q
Pump Industry Analyst
September 2002
Tecumseh Products USA
co:
Gardner Denver Inc, USA
Key Figures (US$ million) Three months ended 30.6
Key Figures (US$ million) Three months ended 30.6
2002
2001
395.3
382.0
40.7
36.7
Revenues Of Which: Puma Products
Operating Income Of Which: Pump Products
34.5
26.5
Cost of Sales
6.2
5.0
Net Income
23.4
17.5
Net Sales Of Which: Pump Products
Net Income
Net Sales Of Which: Pump Products
2001
728.7
786.7
69.0
68.0
Operating Income Of Which: Pump Products
43.7 9.1
8.0
Net Income
27.5
31.5
Despite the improved year over year sales in the second quarter, sales far the first half of the year #iI1 lagged the prior year in the Compressor and Engine L Power Train Groups. Sales and operating profits in the Pump business both reflected increases over 2001 levels. Sales in the second quarter of 2002 amounted to US$40.7 million compared with US$36.7 million in 2002. Year-to-date sales amounted to US$69.0 million in 2002 compared with UStig.0 million the previous year. Pump Products’ operating income amounted to US$S2 million in the quarter ended 30 June 2002 compared with US$5.0 million in the same period of 2001.
45.3
Operating ineome in the first half of 2002 increased to US%9.1 million from US$8.0 million in 2001. The improvements in sales and operating income for the quarter are attributable to the residential pump sector, particularly water garden products, which benefited from the introduction of a new line of products, partially offset by weakness in the general market for industrial products. Operating results were improved for the fiit half, despite flat sales, through effective cost control. On a consolidated basis, the second half of 2002 is expected to improve over the comparable 2001 period with the expected improvement attributable to the Compressor and Pump segments. n
2001
104.9
104.6
15.6
30.6
5.5
6.4
Six months ended 30.6 2002
2001
Revenues Of Which: Pump Products
211.5
205.5
33.7
57.2
Cost of Sales
145.9
144.8
10.1
11.2
Six months ended 30.6 2002
2002
Net Income
Pump Products revenues for the second quarter were US$lS.O million, 49% down onthesameperiodof2001. This decrease wflects the reduced demand for petroleum pumps due to lower natnral gas prices and rig counts, which began negatively impacting the company in the second half of 2001. Given the relatively high fried-cost nature of this business, the operating margin for Pump Products. declined on last year’s second qua&r due to decreased leverage on lower revenues. Pump Products revenues for the six-month period decreased US$23.5 million (41%), compared with the same period of 2001, primarily as a result of reduced demand for petroleum pumps.
Looking forward, CEO RO8ScentanniSaySthataSrig oolmt§ increase, the Gmnpany ~etsmellhlal~mvernent in d&and for pump repIaoement parts ai& if sustained drilIing pumps. Althongh rig countincreasedinbothMay and June, it mmains at its lowest level since mid 2000. Therefore they currently anticipate that revenues for pump products will be driven by backlog consumption, at least through the third quarter of this year. If higher natural gas and oil prices are sustainea supported by an economic recovery, demand for oil well servicing and drilling could return to higher levels, stimulating demand for petroleum pumps in late 2002 or early 2003. II
2002
Pump Industry Analyst
Pentair Inc, USA
Wisconsin Energy Corp, USA
Key Figures (US$ million) Three months ended 29.6.2002 Net Sales Of Which: Water
Key Figures (US$ million) Three months ended 30.6 30.6.2001
708.1
689.4
265.5
239.9
9.0
7.3
Operating Income Of Which: Water
74.6
60.3
43.7
35.7
Net Income
43.0
28.6
Research and Development
2002
2001
ODeratina Revenues
870.9
862.2
Total Operating
758.6
758.5
112.3
103.7
45.4
46.1
Operating
29.6.2002 Net Sales Of Which: Water Research and Development Operating Income Of Which: Water Net Income
Income
Net Income
Six months ended 30.6
Ooeratina Six months ended
Revenues
Total Operating 30.6.2001
1311.2
1353.6
476.9
459.5
17.4
15.0
120.3
113.2
73.5
63.8
64.4
49.1
mating concrete results, and In the we cr TeehnoIogits &at growth-or&n&d actions Group, second quarter s&s are contributing to our ofUS$265.5 millk~n, an 11% improved performance,” said gain ever the same period Rand&l Hogan, Pentair last year, wete due to reeurd chairman and CEO. Tools high seasonal activity in the and Enclosures groups realpool and spa equipment busid ized strong margin gains ness, robmt salea in retail compared with the fiit quarand immieipal markets, and ter of this year, and sales in strong inte~tiomti sales. both Tools and Water TechSecond quarter 2002 nologies groups increased by operating income of double-digit percentages. US$43.7 miltion gained 8% over the same period last DespitP uncertainty about the economy and its year, drivers principa& by volumeincreases. Marginsin impact on business in the current environment, Penthe second quarter were l&5%, down slightly from tair’s Tools business has regained double-digit marthe prior year due to less gins and moved from defense favourable product mix. to offense; margins in the “Our second quarter Water Techn&gies business 2002 performance demonstrates that our supply manare strong, and core pnmp and water treatme-nt markets agement, lean enterprise, and are improving. n cash flow initiatives are gen-
Expenses
Operating
Expenses
Income
Net Income
Wisconsin Energy’s pump manufacturing business &owed significant revenue andeamin@gainsiRthesecond quar&r. WEC’s mamxfMuring segment posted record revenues of USS193 million for the seumd quarter of B&Z, up 21% tim the US%160 millionrecordedfcrrtbesame period a year earlier. Matmf&?tur@ eamhlgs of uS$13 million were up 26% &ml the year-ago quarter. The mamIfacturillg business henefited from cost savings achieved through GonsGlidationof operations, grew& in major markets, stmngth In &emational and additional revenues from acquisiti~. Manufacturing revenues totaled US$343 miiiion for the first baff of 2002, up US%38 million, or 12%, from year-eariier levels. “We are pleased with our results for the second quarter as they
2002
2001
1856.9
2219.4
1710.3
1931.9
146.6
287.5
41.2
133.9
represent contkmed Grengtb ~o~~ore~t~~ grow&
continuillg
f@x$ on cost
20fJz~ asset USN_79 par !&&I@taken in the first quarter and costs associated with the City of West ~~~~~~~~s and Lewis litigation. Excluding those two itema and given normal weather for the rem&&r of this year, WEC says it is reasonabh to assume that 200;? earnings will fall into the middle oftbe US$2.2O-US%2.40 per share range. m
September 2002
Pump Industry Analyst
The Gorman-Rupp USA
Co,
ITT Industries Inc, USA
Key Figures (US$ million) Three months ended 30.6
Key Figures (US$ million) Three months ended 30.6
2002
2001
Net Sales
52.6
54.6
Revenues
Cost of Products Sold
40.3
41.4
Segment Operating
Gross Profit
12.2
13.4
Net Income
4.7
6.5
3.3
4.0
Operating
Profit
Net income
Six months ended 30.6
Revenues 2001
Segment Operating
Net Sales
97.9
104.5
Net Income
Cost of Products Sold
76.1
78.7
Gross Profit
21.8
25.8
8.1
12.1
5.4
7.6
Operating
Profit
The. doin GormsulRupp’s business mainly refleots sknvness in capitaI goods spending affecting the commercial pump business, and the cancellation of orders for components to the power generation business. Patterson Although Pomp will continue to be a major supplier of fabricated components to GE Power Systems, this portion of Pattersank business will be affected during the remainder of2602 and into 2003. White indications of US economic recovery are being reported, German-Kupp says the industrial sector has been slow to respond and any measurable improvement may not occlu until 2003. AU of the company”s divisions
remained profitable during the reporting period and some improvement in international business is occurring, The company expects to complete integnition of the operations of its two recent acquisitions during the second half of 2OQ2.As refiected on 30 June 2602 balance sheet, the company has repaid all bank loan obligations related to its acquisitions. Ahhougb 2002 is expected to be another profitable year, it is not Iikely to match last year’s performance. However German-Rupp says that it remains .confident of its business positioning for the future and of the value and strength in ite balmce sheet. m
2001
1320.1
1184.3
161.1
155.6
92.9
76.1
Six months ended 30.6
2002
Net Income
Income
2002
Income
TIT Industries’ FIuid Techndogy segment reported setond quarter revenues of US$So4.7 million, up US$34,0 million or 7% tiom the second quarter 2661. The i&ease is attributable to contnmed strong paformance in the North Amerioan water market and %%%S.bwateE businesses in Furope and Asia, a sb$ht improvement in the indus&iaI businesses, and the favourable impact of fore@ eurrency tra&a$ion. Exehtding the impact of foreign currency translations and acquisitions, secoml quarter 2062 revemzes for the segment rose 4% organica&. Operating income far the quarter rose 4% to US$64.4 milhon, reflecting higher volume and process improvements Segment operating margin declined aligbtly due to acquisition integration costs. For the f&H year, the eomvy expects revenues to grow modestly* reflecting moderate growth in the water and wastewater marke& aud continued diffiit CCmditiOnsin the industrizd markets.
2002
2001
2505.9
2370.3
291.3
290.7
164.4
135.2
“This was art outstanding quarter for Ifl> with organic growth, earnings and cash flow all stronger than expected,” said Lou Giuhano, CEO of ITT Industries. The company is clearly benefitting from its muhi-industry portfolio: the Fluid Technology segment bad a good quarter, with strong results in wastewater and water markets; the Refense business had higher international sales and its backlog continues to experience growth, while the Electrunic Components segment, which continues to face difficult market conditions, performed in line with expectations and the Motion and Flow Control segment rebounded to achieve a 14% operating margin. Based on this second quarter’s rest&s and ongoing management actions, ITT Industries says it is raising its full-year earnings per share forecast to US$3.58US$3.68. The company has also raised its forecast for full-year free cash flow to approximately US%300 million. q
Pump Industry Analyst
September 2002
Tecumseh Products USA
co:
Gardner Denver Inc, USA
Key Figures (US$ million) Three months ended 30.6
Key Figures (US$ million) Three months ended 30.6
2002
2001
395.3
382.0
40.7
36.7
Revenues Of Which: Puma Products
Operating Income Of Which: Pump Products
34.5
26.5
Cost of Sales
6.2
5.0
Net Income
23.4
17.5
Net Sales Of Which: Pump Products
Net Income
Net Sales Of Which: Pump Products
2001
728.7
786.7
69.0
68.0
Operating Income Of Which: Pump Products
43.7 9.1
8.0
Net Income
27.5
31.5
Despite the improved year over year sales in the second quarter, sales far the first half of the year #iI1 lagged the prior year in the Compressor and Engine L Power Train Groups. Sales and operating profits in the Pump business both reflected increases over 2001 levels. Sales in the second quarter of 2002 amounted to US$40.7 million compared with US$36.7 million in 2002. Year-to-date sales amounted to US$69.0 million in 2002 compared with UStig.0 million the previous year. Pump Products’ operating income amounted to US$S2 million in the quarter ended 30 June 2002 compared with US$5.0 million in the same period of 2001.
45.3
Operating ineome in the first half of 2002 increased to US%9.1 million from US$8.0 million in 2001. The improvements in sales and operating income for the quarter are attributable to the residential pump sector, particularly water garden products, which benefited from the introduction of a new line of products, partially offset by weakness in the general market for industrial products. Operating results were improved for the fiit half, despite flat sales, through effective cost control. On a consolidated basis, the second half of 2002 is expected to improve over the comparable 2001 period with the expected improvement attributable to the Compressor and Pump segments. n
2001
104.9
104.6
15.6
30.6
5.5
6.4
Six months ended 30.6 2002
2001
Revenues Of Which: Pump Products
211.5
205.5
33.7
57.2
Cost of Sales
145.9
144.8
10.1
11.2
Six months ended 30.6 2002
2002
Net Income
Pump Products revenues for the second quarter were US$lS.O million, 49% down onthesameperiodof2001. This decrease wflects the reduced demand for petroleum pumps due to lower natnral gas prices and rig counts, which began negatively impacting the company in the second half of 2001. Given the relatively high fried-cost nature of this business, the operating margin for Pump Products. declined on last year’s second qua&r due to decreased leverage on lower revenues. Pump Products revenues for the six-month period decreased US$23.5 million (41%), compared with the same period of 2001, primarily as a result of reduced demand for petroleum pumps.
Looking forward, CEO RO8ScentanniSaySthataSrig oolmt§ increase, the Gmnpany ~etsmellhlal~mvernent in d&and for pump repIaoement parts ai& if sustained drilIing pumps. Althongh rig countincreasedinbothMay and June, it mmains at its lowest level since mid 2000. Therefore they currently anticipate that revenues for pump products will be driven by backlog consumption, at least through the third quarter of this year. If higher natural gas and oil prices are sustainea supported by an economic recovery, demand for oil well servicing and drilling could return to higher levels, stimulating demand for petroleum pumps in late 2002 or early 2003. II