UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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. 001-11625
PENTAIR, INC.
(Exact name of Registrant as specified in its charter)
Minnesota 41-0907434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 County Road B2 West, Suite 400, Saint Paul, Minnesota 55113-3105
(Address of principal executive offices) (Zip Code)
(612) 636-7920
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
1) Common Stock, Par Value $.16 2/3 per share
2) Rights
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of
the Registrant on February 26, 1996 was $932 million. For purposes of
this calculation, all shares held by officers and directors of the
Registrant and by the trustees of employee stock ownership plans (ESOPs)
and pension plans of the Registrant and subsidiaries were deemed to be shares
held by affiliates.
The number of shares outstanding of Registrant's only class of
common stock on February 26, 1996 was 37,394,754.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following portions of the Annual Report to Shareholders for
the year ended December 31, 1995 and Proxy Statement for the 1996 Annual
Meeting of Shareholders are incorporated by reference as the Item of
this Form 10-K indicated.
Part of Form 10-K Portion of Annual Report
Part I, Item 1. Business - Financial Pages 32 and 54: Business
information about industry segments, Segment Information;
foreign operations, research and Page 43: Research and Development;
development and environmental matters. Page 35: Environmental Matters and
Page 47: Commitments and Contingencies
- (Note 9) and Page 56: Disclosure of
Risks and Uncertainties (Note 18)
Part II, Item 5.Market for Registrant's Page 58: Pentair Stock
Common Equity and Related Stockholder Data, Price Range and Dividends of
Matters. Common Stock.
Part II, Item 6. Selected Financial Page 57: Selected Financial
Data. Data - 10 Year Summary.
Part II, Item 7.Management's Discussion Pages 28-35: Management's
and Analysis of Financial Condition Discussion and Analysis.
and Results of Operations.
Part II, Item 8. Financial Statements Pages 36-56: Consolidated
and Supplementary Data. Statement of Income, Balance Sheet
and Statement of Cash Flows, related
Notes, Report of Independent Auditors
and Quarterly Financial Data.
Portion of Proxy Statement
Part III, Item 10. Directors and Pages 2-5: Security Ownership of
Executive Officers of the Registrant. Management and Beneficial
Ownership; Pages 5-8; Directors
Standing for Election.
Part III, Item 11. Pages 14-23: Executive
Executive Compensation. Compensation.
Part III, Item 12. Security Ownership Pages 2-5: Security
of Certain Beneficial Owners and Ownership of Management and
Management. Beneficial Ownership.
<PAGE>
PART I
Item 1. Business
(a) General Development of the Business.
The Registrant was incorporated in 1966 under the laws of Minnesota.
In the past year, the Registrant has not changed its form of organization
or mode of conducting business. The Registrant grows through internal
development and acquisitions. As in the past, periodic dispositions of
assets or business units are possible when they no longer fit with the
long-term strategies of the Registrant.
Effective January 1, 1994, the Registrant acquired the net assets and the
subsidiaries of Schroff GmbH (Schroff) from Fried. Krupp AG Hoesch-Krupp
for a cash purchase price of approximately $140 million net of cash acquired.
Schroff manufactures and sells enclosures, cases, subracks and accessories
for commercial electronic and instrumentation applications.
In September 1994, Pentair announced that it was exploring strategic
alternatives for its paper businesses,including their possible sale.
In the second quarter of 1995, all of the Pentair paper businesses were sold.
On April 1, 1995 the company sold its Cross Pointe Paper Corporation
subsidiary for $203.3 million to Noranda Forest, Inc. 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 $115.6 million
cash to Consolidated Papers, Inc.
The sale transactions have permitted Pentair to focus its commitments
and resources on the industrial products sector, building upon the
strong growth and leading market positions these businesses have achieved.
Effective November 1, 1995, the Company acquired Fleck Controls, Inc.,
a manufacturer of control valves which are major components in
residential water softeners, and commercial and industrial water
conditioning systems for $133.9 million. Pentair considers Fleck
to be its first major step in entering the water treatment business.
This will be continued as Pentair pursues other product offerings and new
channels within the water products market.
(b) Financial Information about Industry Segments.
The Registrant's business is conducted in two industry segments.
The Specialty Products segment manufactures woodworking machinery;
portable power tools; valves for water conditioning equipment; and
pumps and pumping systems. The General Industrial Equipment segment
manufactures electrical and electronic enclosures and wireways;
industrial lubricating systems and material dispensing equipment;
automotive service equipment; and sporting ammunition. Business segment
financial information is found on page 32 and page 54 (Note 16) of the
1995 Annual Report to Shareholders.
Narrative Description of Business.
Description of the Specialty Products Segment:
Products and marketing.
The following table sets forth, for each of the last three years,
the Specialty Products segment product class net sales in
excess of 10 percent of the Registrant's consolidated net sales .
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Stationary and Portable Power Tools 28 % 28 % 33 %
Pumps and Water Treatment Systems 9 9 10
Total Segment 37 % 37 % 43 %
</TABLE>
Woodworking Machinery. The Registrant, through its subsidiary
Delta International Machinery Corp.(Delta), manufactures, markets,
and services a line of general-purpose woodworking machinery, such as
saws, planers, jointers, plate joiners, grinders, drill presses,
shapers, lathes, and other quality machines. Delta sells its products
in the United States, Canada, and other foreign countries under its
"Delta" brand name through a network of independent and mail order
distributors, hardware stores and home centers.
Portable Electric Tools. The Registrant, through its subsidiary
Porter-Cable Corporation (Porter-Cable), manufactures and markets
a variety of portable electric tools, such as saws, sanders, drills
and routers, used in woodworking, industrial maintenance, and
construction trades. Porter-Cable markets its products under the
brand name "Porter-Cable" through a network of independent, specialty
tool, and mail order distributors, hardware stores and home centers.
Pumps and Pumping Systems. The Registrant, through its F.E. Myers
Co. Division of McNeil (Ohio) Corporation (Myers), manufactures and
markets a wide variety of pumps for residential, environmental,
engineering, and industrial use. Products are distributed through
a network of distributors, wholesalers, dealers, and installers.
In addition, Myers distributes products to the do-it-yourself market
for retail sale through home centers and hardware stores under the
names "Water Ace" and "Shur Dri".
Water Conditioning Control Valves. The Registrant, through its
subsidiary Fleck Controls, Inc. (Fleck), manufactures, designs
and markets a broad range of control valves, timers and meters
for residential and commercial water softeners. Products are
sold directly by Fleck's internal sales organization to small,
regional independent original equipment manufacturers (OEMs),
with the remaining sales going to larger, fully integrated manufacturers.
Competitive conditions.
Delta participates in the middle range of the overall market
for general purpose woodworking machinery. The addressed market is
focused on high quality, feature oriented products and value added
services for the home shop, contractor, and small shop markets.
Delta markets the industry's broadest line of products for its addressed
market. Delta's numerous competitors do have individual products
which compete with certain of Delta's products. Competition in this
market focuses on quality, features, service and price.
Porter-Cable competes in the professional portable electric tool
market which is highly competitive. Porter-Cable faces several major
competitors across its addressed market. Product innovation, features,
performance, quality, service, delivery and price are all competitive factors.
Myers addresses the water pump and system market. Myers faces many
competitors across its product lines. Price, delivery, and quality
are competitive factors.
Fleck addresses the water treatment market. Fleck is one of the four
primary manufacturers of control valves in the United States and Europe.
Broad product offerings, product development and customer support and
service are competitive factors. Fleck has a significant market share
in the residential valve market and a leading market share in the
commercial valve market. Fleck sells to both OEMs and independent
distributors for inclusion in water control systems which are sold directly
to the end user.
Description of the General Industrial Equipment Segment:
Products and marketing.
The following table sets forth, for each of the last three years, the
General Industrial Equipment segment product class net sales
in excess of 10 percent of consolidated net sales.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Electrical and Electronic Enclosures 39 % 36 % 25 %
Sporting Ammunition 10 12 14
Total Segment 63 % 63 % 57 %
</TABLE>
Electrical Enclosures. Through the Hoffman Engineering Company
division of Federal-Hoffman, Inc. (Hoffman Engineering), the Registrant
manufactures enclosures and wireways for electrical and industrial
instrumentation applications and markets these products primarily
through independent manufacturer's representatives and electrical
and electronic equipment distributors throughout North America and the
United Kingdom.
Electronic Enclosures. Through Schroff GmbH and its international
subsidiaries (Schroff), the Registrant manufactures enclosures and
wireways for electronic instrumentation applications. Schroff is a large
European manufacturer of cabinets, cases, subracks, microcomputer
packaging systems and accessories. Schroff serves the worldwide
industrial electronics industry including key segments such as computers,
test & measurement, private LANs/data communication, industrial control
and factory automation, medical and telecommunications.
Sporting Ammunition. Through the Federal Cartridge Company division
of Federal-Hoffman, Inc. (Federal Cartridge), the Registrant manufactures
and markets sporting and law enforcement ammunition, and components.
These products are distributed throughout the United States through a
network of distributors; directly to large retail chains; and
directly to law enforcement agencies (governmental).
Industrial Lubricating Systems and Material Dispensing Equipment.
The Registrant, through its Lincoln Industrial division of McNeil
(Ohio) Corporation (Lincoln Industrial), manufactures components and designs
systems for manual and automatic delivery of measured quantities of
lubricants for industrial applications. Lincoln Industrial also manufactures
components and designs, fabricates, and installs high-volume liquid
and semi-solid dispensing systems. Both segments serve original
equipment and retrofit markets. Lubricating and materials dispensing
systems are marketed in the United States by approximately 100
specially qualified systems distributors with design, installation,
and service capability. Basic lubricating equipment and accessories are
marketed through industrial supply and specialty distributors. A special
direct sales group markets a wide variety of Lincoln Industrial products
to original equipment manufacturers in a variety of industries.
Lincoln Industrial also manufactures lubricating components and systems
at its facility in Walldorf, Germany for distribution to European,
Middle East, Far East and African markets, and to a lesser extent to the
United States. The remainder of the world market, including the Pacific Rim,
is served from Lincoln Industrial's St. Louis, Missouri manufacturing
facility.
Automotive Service Equipment. The Registrant, through its Lincoln
Automotive division of McNeil (Ohio) Corporation (Lincoln Automotive),
manufactures and markets lubrication, repair, and service equipment for
a broad range of vehicles. Products are sold through a key group of
approximately 600 aftermarket wholesalers. Certain products are sold
to large auto parts chain stores. Certain lubricating equipment,
tools, and jacks and lifting equipment are sold under private label programs.
Garage, service station, car dealership service department, and fast oil
change lubricating systems are marketed through petroleum equipment and
service distributors with design and installation capability.
Competitive conditions.
Hoffman Engineering is the largest North American manufacturer of
electrical enclosures and wireways, having a market share estimated
to be about 25% of the addressed market. It is currently the only
manufacturer with national distribution and its competitors are
generally smaller, regional manufacturers. Hoffman Engineering also
participates in the North American electronic enclosures market, facing
competition from a large number of firms, with three or four established
firms leading the market. In both markets, the most significant
competitive factors are price, product innovation, service, quality,
breadth of product line, and delivery.
Schroff is a significant manufacturer in Europe's electronic enclosure
market and a technological leader. Schroff, like Hoffman, has a
comprehensive product range. Schroff faces competition from a large number
of firms, some of whom like Rittal manufacture a broad range of enclosures
and some who focus on smaller niche markets. Significant competitive
factors are product innovation and quality.
Federal Cartridge and its two primary competitors, Winchester and Remington,
have a combined market share of approximately 90% in the U.S.
sporting ammunition market, with the balance coming from smaller
domestic competitors and foreign ammunition manufacturers. Quality,
delivery, price and terms are significant competitive factors.
Lincoln Industrial and Lincoln Automotive face three to five major
competitors and several smaller competitors across their product lines.
Competition involving industrial lubricating systems and material
dispensing equipment tends to center around quality, systems capability,
and application knowledge. Price becomes a more significant competitive
factor for vehicle servicing equipment.
Information Regarding Both Segments:
Working capital items.
Federal Cartridge's working capital builds from January through September
as inventories are increased to meet third quarter shipping schedules and
receivables increase due to fall dating for early order programs used in the
sporting ammunition business. Management continues to focus on reducing
working capital requirements through management of receivable and inventory
levels.
Status of new products.
The industries in which the segments participate are essentially mature
and do not experience the introduction of many products that
materially change the nature of the industry. Individual manufacturers
generally make improvements or apply new technologies to existing products.
Raw materials.
The raw materials used in the manufacturing process include steel (bar
and sheet), various metals including brass and lead, gunpowder and plastic.
Selected motors, castings, plastic parts and components are also purchased.
The supply of all raw materials and components is currently adequate.
Delta and Porter-Cable import selected tools in their product offerings.
Design and engineering of these products is performed primarily by Delta.
The manufacturing process is controlled and monitored for most of these
products in factories dedicated to Delta production. Supply of these
products is currently adequate and timely.
Patents, trademarks, licenses, franchises and concessions.
The businesses own a number of U.S. and foreign patents and trademarks.
They were acquired over many years and relate to many products and
improvements. No one patent or trademark is of material importance to
either segment.
Seasonal aspects.
For the either segment, there is no strongly seasonal aspect.
Backlog.
The segments normally do not experience backlogs for substantial periods
of time. The nature of the businesses emphasizes maintaining
inventories sufficient to satisfy customer needs on a timely basis, and
production and sourcing is geared towards providing adequate inventories
in order to minimize customer back orders. Accordingly, backlogs are
not material to understanding the sales trends or manufacturing
fluctuations of the segments.
Dependence on limited number of customers.
The Registrant as a whole is not dependent on a single customer or
on a few customers. The loss of a limited number of customers
would not have a material adverse impact on the Registrant.
Government contracts.
The Registrant has no material portion of sales under government
contracts that may be subject to renegotiation of profits or
termination of contracts at the election of the government.
Employees.
As of December 31, 1995, the Registrant and its subsidiaries employed
approximately 9,150 persons, of which 2,058 were represented by unions
having collective bargaining agreements.
Labor contracts negotiated in 1995 were: International Association of
Machinists Local 59 - Ashland, Ohio (extended to 4/6/98) approximately 310
employees; International Association of Machinists Local 9 -
St. Louis, Missouri (extended to 4/30/98) approximately 230 employees;
United Steel Workers of America Local 8630 - Tupelo, Mississippi (extended
to 5/1/98) 260 approximately employees; Patternworkers League - Ashland, Ohio
(extended to 9/1/97) 2 employees; and Teamsters Local 984 - Memphis,
Tennessee (extended to 12/15/98) approximately 50 employees.
Contracts expiring in 1996: International Union of Electrical Workers -
Jonesboro, Arkansas (expires April, 1996).
The Registrant considers its employee relations to be good and feels
future contracts will be able to be negotiated for the benefit of the
business and the employees.
(d) Financial Information about Foreign Operations.
The Registrant operates primarily in North America and Europe. See
discussion of foreign operations incorporated by reference.
Item 2. Properties
The Registrant's corporate offices, located at 1500 County Road B2 West,
St. Paul, Minnesota 55113-3105, are leased and consist of approximately
22,000 square feet; the lease expires in December 1999. Information about the
Registrant's principal manufacturing facilities and other properties is
presented below by industry segment. These facilities are adequate and
suitable for the purposes they serve. Unless noted all facilities are owned.
Specialty Products Segment
SUBSIDIARY/ APPROXIMATE
DIVISION LOCATION PRIMARY USE SQUARE FEET
Porter-Cable Jackson, Manufacturing, 485,000
Tennessee(1) Distribution,
and Office
Delta Pittsburgh, Office and 34,000
Pennsylvania(2) Product Development
Tupelo, Manufacturing 333,000
Mississippi and Office
Memphis, Distribution 245,000
Tennessee(3) and Office
Guelph, Distribution 57,000
Ontario(4) and Office
Mesa, Manufacturing 49,730
Arizona(5) and Office
Taichung, Office and 1,000
Taiwan Product Development
F.E. Myers Ashland, Manufacturing, 412,000
Ohio Distribution,
and Office
Kitchener, Distribution 26,000
Ontario and Office
Midland, Manufacturing, 20,850
Texas and Office
Fleck Controls, Brookfield, Manufacturing, 77,000
Inc. Wisconsin Distribution,
and Office
Buc, Manufacturing, 23,850
France(6) Distribution,
and Office
NOTES:
(1) Leased for a five-year term expiring in 1998.
(2) Currently leased under a month-to-month lease
while a longer term lease is negotiated.
(3) Leased for a five-year term expiring in 1996.
(4) Leased for a five-year term expiring in 1999.
(5) Lease term expires in 2000.
(6) Lease term expires in 1998.
General Industrial Equipment Segment
SUBSIDIARY/ APPROXIMATE
DIVISION LOCATION PRIMARY USE SQUARE FEET
Hoffman Anoka, Manufacturing 814,000
Engineering Minnesota and Office
Brooklyn Center, Manufacturing 128,000
Minnesota(1) and Office
Reynosa, Mexico Manufacturing 90,000
Hoffman U.K. Hemel Hempstead, Manufacturing 37,000
England(2)
Hoffman U.K. Hemel Hempstead, Manufacturing 22,000
England(2)(3)
Federal Anoka, Manufacturing 679,000
Cartridge Minnesota and Office
Richmond, Manufacturing 41,000
Indiana and Office
Lincoln St. Louis, Manufacturing 565,000
Industrial Missouri and Office
Walldorf, Manufacturing 117,000
Germany and Office
Chodov, Manufacturing 6,500
Czech Republic (4) and Office
Lincoln Jonesboro, Manufacturing 426,000
Automotive Arkansas(5) and Office
Nogales, Sonora Manufacturing 35,000
Mexico(6)
Mississauga, Distribution 30,000
Ontario and Office
Schroff GmbH Straubenhardt, Manufacturing 523,000
Germany(7)
Schroff S.A. Betschdorf, Manufacturing 210,000
France(8) and Warehouse
Schroff U.K. Hemel Hempstead, Manufacturing 37,000
England(2)
Schroff U.K. Hemel Hempstead, Manufacturing 22,000
England(2)(3)
Schroff, Inc. Warwick, Manufacturing 80,000
Rhode Island and Office
Warwick, Office and 18,000
Rhode Island(9) Assembly
Schroff K.K. Meiwa-Cho, Manufacturing 23,500
Japan
NOTES:
(1) Leased for a 25-year term expiring in 1996, with options to renew for
two ten-year terms. Currently leased under the first of the ten-year
options, expiring in 2006.
(2) Facilities are shared by Schroff U.K. & Hoffman U.K. Total area is
59,000 square feet.
(3) Leased for a twenty-year term expiring in 2011.
(4) Leased for a three-year term expiring in 1998, with an option to renew
for a one-year term.
(5) Includes approximately 51,000 sq. ft. warehouse and 3,000 sq. ft.
office leased for a three-year term which expires in 1995.
(6) Leased for a six-year term expiring in 1999.
(7) A small portion of this total facility has been leased for a 30-year
term expiring in 2011.
(8) Leased under two lease agreements expiring in 2002 and 2005. Both
leases include a purchase option.
(9) Leased for a ten-year term expiring in 2000. This lease includes
a purchase option.
Item 3. Legal Proceedings.
The Registrant or its subsidiaries have been made parties to actions filed,
or have been given notice of potential claims, relating to the conduct of its
business, including those pertaining to product liability, environmental and
employment matters. Major matters which may have an impact on the Registrant
are discussed below. The Registrant believes that it is remote that the
outcome of such matters will have a material adverse effect on the
Registrant's financial position or future results of operations, based on
current circumstances known to the Registrant.
Federal-Hoffman, Inc. Federal Cartridge, a division of Federal-Hoffman,
has been named by the EPA as a Potentially Responsible Party (PRP) in
connection with a waste disposal site in Greer, South Carolina.
The EPA issued an administrative order effective April 29, 1992 to
Federal-Hoffman and 96 other entities to compel the cleanup of the Aqua-Tech
Environmental, Inc. site. Federal-Hoffman is working with a group of
other PRPs to negotiate with the EPA regarding the cleanup of the site.
A surface cleanup of the site is complete. Under interim allocations by
the PRP group, Federal Cartridge paid $442,000 toward the cost of the surface
cleanup. Under current final allocation proposals, Federal-Hoffman
anticipates no additional payout for the surface cleanup.
On March 16, 1995, the EPA notified Federal Cartridge that it is a PRP
related to the subsurface of the Aqua-Tech site. The PRP group
anticipates beginning a study of the soil and groundwater to determine the
extent of subsurface contamination. The cost of such study, any necessary
remediation and the size of allocation, if any, to Federal-Hoffman
is unknown to the Registrant at this time. Federal-Hoffman however,
anticipates its allocation in the subsurface action to be positively
impacted by the nature of its waste and the fact that virtually all of its
waste was accounted for and removed during the surface remediation.
In October 1992, Hoffman Engineering, a division of Federal-Hoffman,
was also named as a PRP in connection with the Aqua-Tech site.
Hoffman has settled out of both the surface and subsurface remediation as
a de minimis party.
Federal Cartridge, a division of Federal-Hoffman, and 79 manufacturers,
distributors and retailers of ammunition and/or firearms were sued in
July 1995 by a private environmental group pursuant to California Health and
Safety Code Section 25249 (Proposition 65) and the Business and Professions
Code Section 17200. The lawsuit alleged violations of California law
arising from exposure to lead from the discharge or cleaning of firearms.
Claims were made for injunctive relief, statutory penalties and attorneys
fees. An industry-wide settlement was approved by the court in January 1996.
Federal Cartridge's share will be less than $10,000.
Porter-Cable Corporation. In November 1993, the Tennessee Department
of Environment and Conservation (TDEC) issued to Porter-Cable Corporation
(Porter-Cable) and Rockwell International Corporation (Rockwell) an
administrative order requiring them to investigate, and if necesssary clean up
alleged groundwater contamination at a manufacturing facility located in
Madison County, Tennessee. The facility was acquired by Porter Cable
from Rockwell in 1981. Porter Cable reached an agreement with Rockwell
regarding sharing costs and expenses related to investigation of the site.
The Registrant believes that this matter is unlikely to result in material
liability or material changes in operations. No estimate of the projected
response cost liability can be made based on information currently known to
the Company.
Discontinued Paper Operations. Responsibility for certain environmental
obligations and potential liability of the Registrant's former Cross
Pointe Paper Corporation subsidiary were retained by the Registrant as a
part of the sale of Cross Pointe. At the time of the sale, the Registrant
established reserves for potential liabilities relating to environmental
conditions existing on or before April 1995, based on extensive studies
of the sites involved. Costs for certain of these environmental conditions
are borne entirely by the Registrant; for other conditions, the Registrant
bears only a portion of the costs which may be incurred in connection therewith.
In 1995, the Registrant paid approximately $585,000 in costs covered by those
reserves. The Registrant is closely monitoring the status of all open
environmental conditions and has established procedures with the buyer
dealing with activities at the affected sites.
Few of the retained liabilities involve conditions or sites that are active
at this time. One matter, however, has been previously reported in the
Company's Form 10-K for the year ended December 31, 1994. In February 1994,
the Miami mill (Miami) of Cross Pointe Paper Corporation was named a PRP
in connection with the IWD/Cardington landfill in Moraine, Ohio.
Waste haulers with whom Miami contracted to transport its flyash and paper
and wood waste allegedly took it to this landfill for some time prior to its
closure in 1980. The EPA has identified 22 other PRPs at this time. The
cost of remediation of the site is estimated to be approximately $12 to $15
million. Miami recently settled this matter for $178,000. Based on current
information available to it, the Registrant believes that this matter is
unlikely to result in material future liability.
Responsibility for environmental obligations of the Registrant's former
Niagara of Wisconsin Paper Corporation subsidiary and its two joint ventures,
Lake Superior Paper Industries and Superior Recycled Fiber Industries,
was not retained as part of the sale of these entities. Customary warranties
were given regarding unknown environmental conditions at these sites, but
the Registrant does not anticipate any significant liability therefor.
Product Liability Claims. As of March 4, 1996, the Registrant or its
subsidiaries are defendants in approximately 177 product liability lawsuits
and have been notified of approximately 118 additional claims. The Registrant
has had and currently has in place insurance coverage it deems adequate for
its needs. A substantial number of these lawsuits and claims are insured by
Penwald, a regulated insurance company wholly owned by Registrant. See
discussion in Item 7 (MD&A - Insurance Subsidiary) and Item 8 (Note 1 to the
Financial Statements). Accounting reserves covering the deductible
portion of liability claims not covered by Penwald have been established
and are reviewed on a regular basis. The Registrant has not experienced
unfavorable trends in either the severity or frequency of product
liability claims.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter, no matter was submitted to a vote of security
holders.
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Item 8. Financial Statements and Supplementary Data.
For information required under Items 5 through 8, see the Registrant's
Annual Report to Shareholders for the year ended December 31, 1995,
as referenced on page 2 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
No changes in accountants or disagreements between the Registrant and its
accountants regarding accounting principles or financial statement
disclosures have occurred within the 24 months prior to the date of the
Registrant's most recent financial statements.
PART III
Item 10. Directors and Executive Officers of the Registrant.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the executive officers of the Registrant. Their term
of office extends until the next annual meeting of the Board of Directors,
scheduled for April 24, 1996, or until their successors are elected and
have qualified.
Winslow H. Buxton 56
Chairman since January 15, 1993;
President and Chief Executive Officer
since August 1992; Chief Operating
Officer, August 1990 - August 1992.
Richard J. Cathcart 51
Executive Vice President since February
1996; Executive Vice President,
Corporate Development March 1995-
February 1996; Vice President, Building
Development of Honeywell, Inc. 1994 -
March 1995; Vice President and General
Manager of Honeywell's Worldwide
Building Control Division 1992 - 1994;
Vice President and General Manager
Honeywell's U.S. Operations of Building
Control Division, 1988-1991.
Joseph R. Collins 54
Executive Vice President since March
1995; Senior Vice President - Specialty
Products August 1991 - February 1995;
Acting Chief Financial Officer, June 1993
- March 1994; President, Delta
International Machinery Corporation
(subsidiary of the Registrant), October
1984 - August 1991.
James H. Frank 56
Senior Vice President, Enclosures since
March 1996; Co-President of Schroff
(subsidiary of Registrant) March 1994 -
February 1996; President of Hoffman
Engineering (division of Registrant)
December 1989 - March 1994.
David D. Harrison 48
Executive Vice President since March
1995 and Chief Financial Officer since
March 1994; Senior Vice President
March 1994 - February 1995; Vice-President,
Finance and Information Technology of
the GE Canada Appliance Component
subsidiary of General Electric,
August 1992 - March 1994; and
Vice President, Finance and Deputy
Executive Officer of the GE Europe
Lighting Component subsidiary of
General Electric, January 1990 - July
1992.
Ronald V. Kelly 59
Senior Vice President, Business
Development since February 1996;
Senior Vice President - Long Range
Planning September 1994 - February
1996; Senior Vice President - Paper
Products, August 1991 - September
1994; Vice President - Specialty
Products, March 1989 - August 1991.
Gerald C. Kitch 58
Executive Vice President, President
International Business Development
since February 1996; Executive Vice
President March 1995 - February 1996;
Senior Vice President - General
Industrial Equipment August 1991 -
February 1995; Vice President - General
Industrial Equipment, March 1989 -
August 1991.
Debby S. Knutson 41
Vice President, Human Resources since
September 1994; Assistant Vice
President, Human Resources , August
1993 - September 1994; Vice President
Human Resources of Hoffman
Engineering (division of Registrant) July
1990 - August 1993.
Roy T. Rueb 55
Vice President, Treasurer since October
1986 and Secretary since June 1994.
There is no family relationship between any of the executive officers
or directors.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
For information required under Items 11 and 12, see the Registrant's Proxy
Statement for the 1996 Annual Meeting of Shareholders referenced on page 2
of this report.
Item 13. Certain Relationships and Related Transactions.
No relationships or transactions existed that require disclosure under Item 13.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements and Exhibits.
1. The following consolidated financial statements of Pentair, Inc.
and subsidiaries, together with the Report of Independent Certified
Public Accountants, found on pages 28 to 57 of the Registrant's Annual
Report to Shareholders for the year ended December 31, 1995, are hereby
incorporated by reference in this Form 10-K.
Page of Annual Report
Report of Independent Certified Public Accountants 36
Consolidated Statements of Income
for Years Ended December 31, 1995,
1994 and 1993 37
Consolidated Balance Sheets as of
December 31, 1995 and 1994 38 - 39
Consolidated Statements of Cash Flows
for Years Ended December 31, 1995,
1994 and 1993 41
Notes to Consolidated Financial
Statements 42 - 56
2. The additional financial data listed below is included as exhibits to
this Form 10-K Report and should be read in conjunction with the
consolidated financial statements presented in the 1995 Annual
Report to Shareholders.
Report of Independent Certified Public Accountants
Schedule for the years ended December 31, 1995, 1994 and 1993:
VIII- Valuation and Qualifying Accounts
3. The following exhibits are included with this Report on Form 10-K
(or incorporated by reference) as required by Item 601 of Regulation S-K.
Exhibit
Number Description
(3.1) Restated Articles of Incorporation
as amended through April 19, 1995.
(3.2) Resolution Establishing and Designating
$7.50 Callable Cumulative Convertible Preferred
Stock, Series 1988, as a series of Preferred
Stock of Pentair, Inc.
(3.3) Resolution Establishing and Designating 8%
Callable Cumulative Voting Convertible
Preferred Stock, Series 1990, as a series of
Preferred Stock of Pentair, Inc.
(3.4) Second Amended and Superseding By-Laws as
amended through July 21, 1995.
(4.1) Restated Articles of Incorporation, as amended,
and Second Amended and Superseding
By-Laws, as amended (see Exhibits 3.1 - 3.4 above).
(4.2) Rights Agreement as of July 21, 1995 between
Norwest Bank N.A. and Pentair, Inc.
(4.3) Bid Loan Agreement dated December 14, 1988
between the Company, Continental Bank
N.A. for itself and as Agent, Morgan Guaranty
Trust Company of New York, Morgan Bank
(Delaware), First Bank National Association,
Norwest Bank Minnesota, N.A., and Mellon
Bank, N.A.
(4.4) First Amendment to Bid Loan Agreement dated
January 1, 1991 between the Company,
Continental Bank N.A. for itself and as Agent,
Morgan Guaranty Trust Company of New
York, Morgan Bank (Delaware), First Bank
National Association, Norwest Bank Minnesota,
N.A., and NBD Bank, N.A. (Amending Exhibit 4.3).
(4.5) Second Amendment to Bid Loan Agreement dated as
of February 11, 1994 between
Pentair, Inc., Continental Bank N.A. for itself
and as Agent, Morgan Guaranty Trust
Company of New York, J.P. Morgan Delaware,
First Bank National Association, Norwest
Bank Minnesota, N.A., and NBD Bank, N.A. (Amending Exhibit 4.3).
(4.6) $125,000,000 Facility Agreement dated as of
February 11, 1994 between Pentair, Inc.,
Continental Bank N.A. for itself and as Agent,
Morgan Guaranty Trust Company of New
York for itself and as Agent, NBD Bank, N.A.,
and J. P. Morgan Delaware.
(4.7) Amendment Number One to Facility Agreement
dated as of November 1, 1994 between
Pentair, Inc., Bank of America Illinois (formerly
known as Continental Bank N.A.) for itself
and as Agent, Morgan Guaranty Trust Company of New
York for itself and as Agent, NBD
Bank, N.A., and J. P. Morgan Delaware. (Amending Exhibit 4.6)
(4.8) $45,000,000 Facility Agreement dated as of February
11, 1994 between Pentair, Inc., First
Bank National Association, for itself and as Agent,
and Norwest Bank Minnesota N.A.
(4.9) Amendment Number One to Facility Agreement dated as
of November 1, 1994 between
Pentair, Inc., First Bank National Association, for
itself and as Agent, and Norwest Bank
Minnesota N.A.(Amending Exhibit 4.8)
(4.10) DM 115,000,000 Facility Agreement dated as of February
11, 1994 between EuroPentair,
GmbH as Borrower, Pentair, Inc., as Guarantor, Morgan
Guaranty Trust Company of New
York for itself and as Agent, Continental Bank N.A., for
itself and as Agent, NBD Bank, N.A. and Dresdner Bank.
(4.11) Amendment Number One to Facility Agreement dated as
of November 1, 1994 between
EuroPentair, GmbH as Borrower, Pentair, Inc., as
Guarantor, Morgan Guaranty Trust
Company of New York for itself and as Agent, Bank
of America Illinois(formerly known as
Continental Bank N.A.), for itself and as Agent,
NBD Bank, N.A. and Dresdner Bank.
(Amending Exhibit 4.10)
(4.12) Amendment Number Two to Facility Agreement dated as
of February 15, 1995 between
EuroPentair, GmbH as Borrower, Pentair, Inc.,
as Guarantor, Morgan Guaranty Trust
Company of New York for itself and as Agent,
Bank of America Illinois(formerly known as
Continental Bank N.A.), for itself and as Agent,
NBD Bank, N.A. and Dresdner Bank .
(Amending Exhibit 4.10)
(4.13) Restatement of Credit Agreement dated July 11,
1989 between Federal-Hoffman, Inc. and
First Bank National Association.
(4.14) Second Amendment to Restatement of Credit Agreement
dated as of January 19, 1993
between Federal-Hoffman, Inc., Pentair, Inc., and
First Bank National Association
(Amending Exhibit 4.13) .
(4.15) Third Amendment to Restatement of Credit Agreement
dated as of December 31, 1994
between Federal-Hoffman, Inc., Pentair, Inc., and
First Bank National Association
(Amending Exhibit 4.13)
(4.16) $35,000,000 Note Purchase Agreement dated March 25,
1991 between Pentair, Inc. and
Nationwide Life Insurance Company.
(4.17) $25,000,000 Note Purchase Agreement dated December 13,
1991 between Pentair, Inc.
and Principal Mutual Life Insurance Company.
(4.18) $15,000,000 Note Purchase Agreement dated November 1,
1992 between Pentair, Inc.
and Nationwide Life Insurance Company.
(4.19) $15,000,000 Note Purchase Agreement dated January 15,
1993 between Pentair, Inc. and
Principal Mutual Life Insurance Company.
(4.20) $70,000,000 Senior Notes Purchase Agreement dated
as of April 30, 1993 between
Pentair, Inc. and United of Omaha Life Insurance
Company, Companion Life Insurance
Company, Principal Mutual Life Insurance Company,
Nippon Life Insurance Company of
America, Lutheran Brotherhood, American United
Life Insurance Company, Modern
Woodmen of America, The Franklin Life Insurance
Company and Ameritas Life Insurance Corp.
(10.1) Agreements dated February 8, 1978 and February 9,
1982 between the Company and D. Eugene Nugent.
(10.2) Agreement dated February 8, 1984 (Amending Exhibit 10.1).
(10.3) Agreement dated December 17, 1985 (Amending Exhibit 10.1).
(10.4) Agreement dated May 7, 1990 (Amending Exhibit 10.1).
(10.5) Company's Supplemental Employee Retirement Plan effective June 16, 1988.
(10.6) Company's 1986 Nonqualified Stock Option Plan.
(10.7) Company's 1990 Omnibus Stock Incentive Plan.
(10.8) Company's Management Incentive Plan as amended to January 12, 1990.
(10.9) Employee Stock Purchase and Bonus Plan as amended and
restated effective January 1, 1992.
(10.10)Company's Flexible Perquisite Program as amended to January 1, 1989.
(10.11)Form of 1986 Management Assurance Agreement (Revised 1990)
between the Company and certain key employees.
(10.12)Company's Third Amended and Restated Compensation Plan for
Non-Employee Directors as amended to January 1, 1992.
(10.13)Company's Outside Directors Nonqualified Stock Option Plan
dated January 22, 1988.
(10.14)First Amendment to Outside Directors Nonqualified Stock Option
Plan (Amending Exhibit 10.13).
(10.15)Second Amendment to Outside Directors Nonqualified Stock Option
Plan (Amending Exhibit 10.13).
(10.16)Pentair, Inc. Deferred Compensation Plan effective January 1, 1993.
(10.17)Pentair, Inc. Non-Qualified Deferred Compensation Plan effective
January 1, 1996
(10.18)Trust Agreement for Pentair, Inc. Non-Qualified Deferred Compensation
Plan between Pentair, Inc. And State Street Bank and Trust Company
(10.19)Cash Deficiency Agreement dated December 31, 1987 among Pentair
Duluth Corp., as Joint Venturer, Associated Southern
Investment Company, as Owner Participant, The
Connecticut Bank and Trust Company, National Association,
as Indenture Trustee, and First National Bank of Minneapolis,
as Owner Trustee. Cash Deficiency Agreements also
were entered into with respect to each of the other four Owner
Participants: Dana Lease Finance Corporation, NYNEX Credit Company,
Public Service Resources Corporation, and Southern Indiana Properties,
Inc.
(10.20)Keepwell Agreement and Assignment dated December 31, 1987 among
Pentair, Inc., as Sponsor, Pentair Duluth Corp.,
as Joint Venturer, and First National Bank of Minneapolis,
as Owner Trustee; although First Minneapolis executed this
filed document as Owner Trustee for Associated Southern Investment
Company, additional Keepwell Agreements and Assignments
were entered into by First Minneapolis as Owner Trustee for the other
four Owner Participants listed in the description of Exhibit 10.19 above.
(10.21)Definition of Terms for Financing Agreement dated December 31, 1987
and the Transaction Documents Referred to Therein: Sale and Leaseback
of Undivided Interest in Lake Superior Paper Industries' Supercalendered
Paper Mill; although this filed document supplies the definitions
applicable to the agreements filed as Exhibits 10.19 and 10.20
above, there were four additional sets of definitions that supply
the definitions for the other sets of agreements referred to in the
descriptions of those Exhibits with respect to the various Owner
Participants.
(10.22)Loan and Stock Purchase Agreement dated March 7, 1990 between the
Company and the Pentair, Inc. Employee Stock Ownership Plan
Trust, acting through State Street Bank and Trust Company, as Trustee.
(10.23)$56,499,982 Promissory Note dated March 7, 1990 of the Pentair, Inc.
Employee Stock Ownership Plan Trust, acting through State
Street Bank and Trust Company, as Trustee, to the Company.
(10.24)Agreement for Sale and Purchase of Stock of Cross Pointe Paper
Corporation between Pentair, Inc. and Noranda Forest, Inc.
dated February 21, 1995 (including Exhibits and only Schedule 13).
(11) Statement regarding computation of earnings per share.
(13) Annual Report to Shareholders for period ended December 31, 1995.
(21) Subsidiaries of Registrant.
(23) Consent of Deloitte & Touche.
(27) Financial Data Schedules.
EXHIBIT INDEX
Exhibit
Number Description
(3.1) Restated Articles of Incorporation as amended through
April 19, 1995 (Incorporated by
reference to Exhibit 3.1 to the Company's
Form 10-Q for the quarter ended June 30, 1995).
(3.2) Resolution Establishing and Designating $7.50 Callable
Cumulative Convertible Preferred
Stock, Series 1988, as a series of Preferred Stock
of Pentair, Inc. (Incorporated by
reference to Exhibit 4.1 to Amendment No. 1
to the Company's Current Report on Form 8-K filed December 30, 1988).
(3.3) Resolution Establishing and Designating 8% Callable
Cumulative Voting Convertible
Preferred Stock, Series 1990, as a series of
Preferred Stock of Pentair, Inc. (Incorporated
by reference to Exhibit 4 to the Company's Current
Report on Form 8-K filed March 21, 1990).
(3.4) Second Amended and Superseding By-Laws as amended
through July 21, 1995
(Incorporated by reference to Exhibit 3.2 to the
Company's Form 10-Q for the quarter
ended June 30, 1995).
(4.1) Restated Articles of Incorporation, as amended,
and Second Amended and Superseding
By-Laws, as amended (see Exhibits 3.1 - 3.4 above).
(4.2) Rights Agreement dated as of July 21, 1995 between
Norwest Bank N.A. and Pentair, Inc.
(Incorporated by reference to Exhibit 4.1 to the
Company's Form 10-Q for the quarter
ended June 30, 1995).
(4.3) Bid Loan Agreement dated December 14, 1988 between
the Company, Continental Bank
N.A. for itself and as Agent, Morgan Guaranty
Trust Company of New York, Morgan Bank
(Delaware), First Bank National Association,
Norwest Bank Minnesota, N.A., and Mellon
Bank, N.A. (Incorporated by reference to Exhibit
4.2 to Amendment No. 1 to the Company's
Current Report on Form 8-K filed December 30, 1988).
(4.4) First Amendment to Bid Loan Agreement dated January
1, 1991 between the Company,
Continental Bank N.A. for itself and as Agent,
Morgan Guaranty Trust Company of New
York, Morgan Bank (Delaware), First Bank National
Association, Norwest Bank Minnesota,
N.A., and NBD Bank, N.A. (Amending Exhibit 4.3)
(Incorporated by reference to Exhibit 4.9
to the Company's Annual Report on Form 10K for
the year ended December 31, 1990).
(4.5) Second Amendment to Bid Loan Agreement dated as
of February 11, 1994 between
Pentair, Inc., Continental Bank N.A. for itself
and as Agent, Morgan Guaranty Trust
Company of New York, J.P. Morgan Delaware, First
Bank National Association, Norwest
Bank Minnesota, N.A., and NBD Bank, N.A. (Amending
Exhibit 4.3) (Incorporated by
reference to Exhibit 4.3 to the Company's Current
Report on Form 8-K filed March 14, 1994).
(4.6) $125,000,000 Facility Agreement dated as of February
11, 1994 between Pentair, Inc.,
Continental Bank N.A. for itself and as Agent,
Morgan Guaranty Trust Company of New
York for itself and as Agent, NBD Bank, N.A., and
J. P. Morgan Delaware (Incorporated by
reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K filed March 14, 1994).
(4.7) Amendment Number One to Facility Agreement dated as
of November 1, 1994 between
Pentair, Inc., Bank of America Illinois (formerly
known as Continental Bank N.A.) for itself
and as Agent, Morgan Guaranty Trust Company of
New York for itself and as Agent, NBD
Bank, N.A., and J. P. Morgan Delaware. (Amending
Exhibit 4.6) (Incorporated by reference
to Exhibit 4.9 to the Company's Annual Report on
Form 10K for the year ended December 31, 1994).
(4.8) $45,000,000 Facility Agreement dated as of February
11, 1994 between Pentair, Inc., First
Bank National Association, for itself and as Agent,
and Norwest Bank Minnesota N.A.
(Incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed March 14, 1994).
(4.9) Amendment Number One to Facility Agreement dated as
of November 1, 1994 between
Pentair, Inc., First Bank National Association,
for itself and as Agent, and Norwest Bank
Minnesota N.A.(Amending Exhibit 4.8) (Incorporated
by reference to Exhibit 4.11 to the
Company's Annual Report on Form 10K for the year ended
December 31, 1994).
(4.10) DM 115,000,000 Facility Agreement dated as of February
11, 1994 between EuroPentair,
GmbH as Borrower, Pentair, Inc., as Guarantor,
Morgan Guaranty Trust Company of New
York for itself and as Agent, Continental Bank N.A.,
for itself and as Agent, NBD Bank,
N.A. and Dresdner Bank (Incorporated by reference
to Exhibit 4.4 to the Company's
Current Report on Form 8-K filed March 14, 1994).
(4.11) Amendment Number One to Facility Agreement dated
as of November 1, 1994 between
EuroPentair, GmbH as Borrower, Pentair, Inc.,
as Guarantor, Morgan Guaranty Trust
Company of New York for itself and as Agent, Bank
of America Illinois(formerly known as
Continental Bank N.A.), for itself and as Agent,
NBD Bank, N.A. and Dresdner Bank.
(Amending Exhibit 4.10) (Incorporated by reference to
Exhibit 4.13 to the Company's
Annual Report on Form 10K for the year ended December 31, 1994).
(4.12) Amendment Number Two to Facility Agreement dated
as of February 15, 1995 between
EuroPentair, GmbH as Borrower, Pentair, Inc.,
as Guarantor, Morgan Guaranty Trust
Company of New York for itself and as Agent,
Bank of America Illinois(formerly known as
Continental Bank N.A.), for itself and as Agent,
NBD Bank, N.A. and Dresdner Bank .
(Amending Exhibit 4.10) (Incorporated by
reference to Exhibit 4.14 to the Company's
Annual Report on Form 10K for the year ended December 31, 1994).
(4.13) Restatement of Credit Agreement dated July 11, 1989
between Federal-Hoffman, Inc. and
First Bank National Association (Incorporated by
reference to Exhibit 4.10 to the
Company's Form 10-K for the year ended December 31, 1989).
(4.14) Second Amendment to Restatement of Credit Agreement
dated as of January 19, 1993
between Federal-Hoffman, Inc., Pentair, Inc., and
First Bank National Association
(Amending Exhibit 4.13) (Incorporated by reference
to Exhibit 4.13 to the Company's Form
10-K for the year ended December 31, 1992).
(4.15) Third Amendment to Restatement of Credit Agreement
dated as of December 31, 1994
between Federal-Hoffman, Inc., Pentair, Inc., and
First Bank National Association
(Amending Exhibit 4.13). (Incorporated by reference
to Exhibit 4.17 to the Company's
Annual Report on Form 10K for the year ended December 31, 1994).
(4.16) $35,000,000 Note Purchase Agreement dated March 25,
1991 between Pentair, Inc. and
Nationwide Life Insurance Company. (Incorporated by
reference to Exhibit 4.14 to the
Company's Registration Statement on Form S-8 filed August 6, 1991).
(4.17) $25,000,000 Note Purchase Agreement dated December 13,
1991 between Pentair, Inc.
and Principal Mutual Life Insurance Company. (Incorporated
by reference to Exhibit 4.15
to the Company's Registration Statement on Form S-8 filed
January 13, 1992).
(4.18) $15,000,000 Note Purchase Agreement dated November 1, 1992
between Pentair, Inc.
and Nationwide Life Insurance Company (Incorporated by
reference to Exhibit 4.16 to the
Company's Form 10-K for the year ended December 31, 1992).
(4.19) $15,000,000 Note Purchase Agreement dated January 15, 1993
between Pentair, Inc. and
Principal Mutual Life Insurance Company (Incorporated by
reference to Exhibit 4.17 to the
Company's Form 10-K for the year ended December 31, 1992).
(4.20) $70,000,000 Senior Notes Purchase Agreement dated as of
April 30, 1993 between
Pentair, Inc. and United of Omaha Life Insurance Company,
Companion Life Insurance
Company, Principal Mutual Life Insurance Company,
Nippon Life Insurance Company of
America, Lutheran Brotherhood, American United Life
Insurance Company, Modern
Woodmen of America, The Franklin Life Insurance Company
and Ameritas Life Insurance
Corp (Incorporated by reference to Exhibit 4.17 to the
Company's Form 10-K for the year
ended December 31, 1993).
(10.1) Agreements dated February 8, 1978 and February 9, 1982
between the Company and D.
Eugene Nugent (Incorporated by reference to Exhibit
10.2 to the Company's Registration
Statement on Form S-2 filed June 24, 1983).
(10.2) Agreement dated February 8, 1984 (Amending Exhibit 10.1)
(Incorporated by reference to
Exhibit 10.4 to the Company's Annual Report on Form
10-K for the year ended December 31, 1983).
(10.3) Agreement dated December 17, 1985 (Amending Exhibit 10.1)
(Incorporated by reference
to Exhibit 10.6 to the Company's Annual Report on Form
10-K for the year ended December 31, 1985).
(10.4) Agreement dated May 7, 1990 (Amending Exhibit 10.1).
(Incorporated by reference to
Exhibit 10.4 to the Company's Annual Report on Form
10K for the year ended December 31, 1990).
(10.5) Company's Supplemental Employee Retirement Plan
effective June 16, 1988
(Incorporated by reference to Exhibit 10.10 to
the Company's Annual Report on Form 10-K
for the year ended December 31, 1989).
(10.6) Company's 1986 Nonqualified Stock Option Plan
(Incorporated by reference to Exhibit
10.14 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1986).
(10.7) Company's 1990 Omnibus Stock Incentive Plan
(Incorporated by reference to Exhibit
10.16 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989).
(10.8) Company's Management Incentive Plan as amended
to January 12, 1990 (Incorporated by
reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1989).
(10.9) Employee Stock Purchase and Bonus Plan as amended and
restated effective January 1,
1992 (Incorporated by reference to Exhibit 10.16 to
the Company's Annual Report on Form
10-K for the year ended December 31, 1991).
(10.10)Company's Flexible Perquisite Program as amended
to January 1, 1989 (Incorporated by
reference to Exhibit 10.20 to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1989).
(10.11)Form of 1986 Management Assurance Agreement (Revised
1990) between the Company
and certain executive officers (Incorporated by
reference to Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1989).
(10.12)Company's Third Amended and Restated Compensation
Plan for Non-Employee Directors
as amended to January 1, 1992. (Incorporated by
reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-8 filed January 13, 1992).
(10.13)Company's Outside Directors Nonqualified Stock Option
Plan dated January 22, 1988
(Incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K
for the year ended December 31, 1987).
(10.14)First Amendment to Outside Directors Nonqualified
Stock Option Plan (Amending Exhibit
10.13) (Incorporated by reference to Exhibit 10.22
to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991).
(10.15)Second Amendment to Outside Directors Nonqualified
Stock Option Plan (Amending
Exhibit 10.13) (Incorporated by reference to
Exhibit 10.23 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1991).
(10.16)Pentair, Inc. Deferred Compensation Plan effective
January 1, 1993 (Incorporated by
reference to Exhibit 10.21 to the Company's Form
10-K for the year ended December 31, 1992).
(10.17)Pentair, Inc. Non-Qualified Deferred Compensation
Plan effective January 1, 1996
(10.18)Trust Agreement for Pentair, Inc. Non-Qualified
Deferred Compensation Plan between
Pentair, Inc. And State Street Bank and Trust Company
(10.19)Cash Deficiency Agreement dated December
31, 1987 among Pentair Duluth Corp., as
Joint Venturer, Associated Southern
Investment Company, as Owner Participant, The
Connecticut Bank and Trust Company,
National Association, as Indenture Trustee, and
First National Bank of Minneapolis, as
Owner Trustee. Cash Deficiency Agreements also
were entered into with respect to each of the
other four Owner Participants: Dana Lease
Finance Corporation, NYNEX Credit Company,
Public Service Resources Corporation,
and Southern Indiana Properties, Inc. (Incorporated
by reference to Exhibit 10.1 to
Amendment No. 1 to the Company's Current Report
on Form 8-K filed April 26, 1988).
(10.20)Keepwell Agreement and Assignment dated December
31, 1987 among Pentair, Inc., as
Sponsor, Pentair Duluth Corp., as Joint Venturer,
and First National Bank of Minneapolis,
as Owner Trustee; although First Minneapolis
executed this filed document as Owner
Trustee for Associated Southern Investment
Company, additional Keepwell Agreements
and Assignments were entered into by First
Minneapolis as Owner Trustee for the other
four Owner Participants listed in the description
of Exhibit 10.19 above (Incorporated by
reference to Exhibit 10.2 to Amendment No. 1
to the Company's Current Report on Form
8-K filed April 26, 1988).
(10.21)Definition of Terms for Financing Agreement
dated December 31, 1987 and the
Transaction Documents Referred to Therein:
Sale and Leaseback of Undivided Interest in
Lake Superior Paper Industries' Supercalendered
Paper Mill; although this filed document
supplies the definitions applicable to the
agreements filed as Exhibits 10.19 and 10.20
above, there were four additional sets of
definitions that supply the definitions for the other
sets of agreements referred to in the descriptions
of those Exhibits with respect to the
various Owner Participants (Incorporated by
reference to Exhibit 10.3 to Amendment No. 1
to the Company's Current Report on Form 8-K filed April 26, 1988).
(10.22)Loan and Stock Purchase Agreement dated March 7,
1990 between the Company and the
Pentair, Inc. Employee Stock Ownership Plan
Trust, acting through State Street Bank and
Trust Company, as Trustee (Incorporated by
reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed March 21, 1990).
(10.23)$56,499,982 Promissory Note dated March 7, 1990
of the Pentair, Inc. Employee Stock
Ownership Plan Trust, acting through State Street
Bank and Trust Company, as Trustee, to
the Company (Incorporated by reference to Exhibit
10.2 to the Company's Current Report
on Form 8-K filed March 21, 1990).
(10.24)Agreement for Sale and Purchase of Stock of Cross
Pointe Paper Corporation between
Pentair, Inc. and Noranda Forest, Inc. dated
February 21, 1995 (including Exhibits and only
Schedule 13)(Incorporated by reference to Exhibit
2.1 to the Company's Current Report on
Form 8-K filed April 17, 1995).
(11) Statement regarding computation of earnings per share.
(13) Annual Report to Shareholders for period ended December 31, 1995.
(21) Subsidiaries of Registrant.
(23) Consent of Deloitte & Touche.
(27) Financial Data Schedules.
(b) Reports on Form 8-K.
A report on Form 8-K was filed on November 15, 1995 regarding
the purchase of Fleck Controls, Inc. of Brookfield, Wisconsin.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
PENTAIR, INC.
By /s/ David D. Harrison
David D. Harrison
Executive Vice President and
Chief Financial Officer
Dated: March 22, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has also been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By /s/ Winslow H. Buxton Dated: March 22, 1996
Winslow H. Buxton,
Chairman, President and
Chief Executive Officer, Director
By /s/ George N. Butzow Dated: March 22, 1996
George N. Butzow,
Director
By /s/ Charles A. Haggerty Dated: March 22, 1996
Charles A. Haggerty,
Director
By /s/ Harold V. Haverty Dated: March 22, 1996
Harold V. Haverty,
Director
By /s/ Quentin J. Hietpas Dated: March 22, 1996
Quentin J. Hietpas,
Director
By /s/ Walter Kissling Dated: March 22, 1996
Walter Kissling,
Director
By /s/ D. Eugene Nugent Dated: March 22, 1996
D. Eugene Nugent,
Director
By /s/ Richard M. Schulze Dated: March 22, 1996
Richard M. Schulze,
Director
By /s/ Karen E. Welke Dated: March 22, 1996
Karen E. Welke,
Director
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Pentair, Inc.:
We have audited the consolidated financial statements of Pentair, Inc. and
subsidiaries as of December 31, 1995 and 1994, and for each of the
three years in the period ended December 31, 1995, and have issued
our report thereon dated February 9, 1996; such financial statements
and report are included in your 1995 Annual Report to Shareholders and
are incorporated herein by reference. Our audits also included the
financial statement schedule of Pentair, Inc. and subsidiaries listed
in Item 14. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE
Minneapolis, Minnesota
February 9, 1996
SCHEDULE VIII
PENTAIR, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
BALANCE AT ADDITIONS - BALANCE
BEGINNING CHARGED TO COSTS DEDUCTIONS- AT END OF
($ THOUSANDS) OF PERIOD AND EXPENSES WRITE-OFFS PERIOD
Allowance for
doubtful
accounts and
notes receivables
<C> <C> <C> <C> <C>
1993 4,676 1,389 (613) 5,452
1994 5,452 2,634 (897) 7,189
1995 7,189 782 (131) 7,840
</TABLE>
PENTAIR, INC.
NON-QUALIFIED DEFERRED COMPENSATION
PLAN
As Amended and Restated Effective January 1, 1996
PENTAIR, INC.
NON-QUALIFIED DEFERRED COMPENSATION
PLAN
<PAGE>
ARTICLE I
HISTORY, PURPOSE AND EFFECTIVE DATE OF PLAN
Effective January 1, 1993, Pentair, Inc. ("Pentair")
established a non-qualified deferred compensation plan
(the "Plan") for the benefit of certain management and
highly compensated employees of Pentair and various
companies in the Pentair controlled group. Under the
Plan, participants could elect to defer receipt of base
and bonus compensation in exchange for the unfunded,
unsecured promise of the participant's employing company
to pay the amounts deferred, plus earnings, at the time
and in the manner selected by the participant when making
a deferral election. Until the time of payment, the
amounts deferred under the Plan, adjusted for any earnings
credited with respect to those amounts, remain subject to
the claims of the general creditors of the participant's
employing company.
Pentair now hereby amends and restates the Plan,
effective January 1, 1996. The amended and restated Plan
continues to permit eligible employees of Pentair and
companies in the Pentair controlled group to defer receipt
of base and bonus compensation in exchange for the
unsecured promise of the participant's employing company
to pay these amounts, as adjusted for earnings or losses
by reference to deemed investment options selected by each
participant. The Plan, as amended and restated, also
provides for the replacement of benefits no longer
available to certain participants under the Pentair
Retirement Savings and Stock Incentive Plan due to certain
limitations imposed by the Internal Revenue Code.
The Plan, as amended and restated, is for the
benefit of a select group of management and highly
compensated employees. Benefits under the Plan are
unfunded, unsecured general obligations of Pentair and
participating companies in the Pentair controlled group.
Plan participants have the status of unsecured general
creditors of their employing company. Any assets acquired
or set aside for purposes of providing this deferred
compensation may be held in a grantor trust as the
property of the participant's employing company and
subject to the claims of its general creditors. To the
extent any assets are held in a grantor trust, the terms
and provisions of the trust document will control in all
cases where they are in conflict with the Plan.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
Section 2.1 Definitions. Unless the context
clearly or necessarily indicates the contrary, when
capitalized the following words and phrases shall have the
meanings shown when used in this Article or other parts of
the Plan.
(1) "Accounts" are the accounts under the
Plan to be maintained for each Participant.
(2) "Base Compensation" is all remuneration
items paid to or on behalf of a Participant for services
rendered to the Employer as an Employee as listed or
described in the left-hand column of Schedule 1, and
excluding any such items listed or described in the right-hand
column of Schedule 1. Base salary shall be
determined in accordance with customary and usual payroll
practices of an Employer, and shall include or not include
items of remuneration not listed or described in Schedule
1 as determined by the Committee; provided, however, the
Committee shall exercise its discretion with respect to
similarly situated Participants in a uniform and non-
discriminatory manner. For purposes of the Plan, in no
event shall Base Compensation include any item included in
the definition of Bonus Compensation, regardless of
whether listed or described in Schedule 1.
(3) "Before-tax Deposits" are deposits made
at the direction of a Participant pursuant to Section 3.2.
(4) "Beneficiary" is the person, trust or
other entity designated by a Participant to receive
benefits accumulated hereunder in the event of the
Participant's death. If a Participant is married at the
time of death, the Beneficiary shall be the Participant's
Spouse at such time, unless (i) such Spouse has consented
in writing to the designation of a different Beneficiary,
(ii) such consent is witnessed by a Plan representative
appointed by the Committee or a notary public, and (iii)
the Participant is survived by a Beneficiary designated as
such in the manner described above.
(5) "Bonus Compensation" is compensation
awarded to an Employee pursuant to the Employer's
Management Incentive Plan, and may also include annual
bonuses or other items of extraordinary compensation as
determined by the Committee; provided, however, the
Committee shall exercise its discretion with respect to
similarly situated Participants in a uniform and
nondiscriminatory manner.
(6) "Code" is the Internal Revenue Code of
1986, as amended and in effect from time to time.
(7) "Committee" is the Committee appointed
pursuant to Article IX.
(8) "Company" is Pentair, Inc., a Minnesota
corporation.
(9) "Employee" is, subject to the
provisions of Section 2.2(e), any individual who (i) is
employed by a Participating Employer, (ii) is a highly
compensated or key management employee of a Participating
Employer, (iii) holds a position evaluated by a
Participating Employer in salary grade 27 or higher, and
(iv) is eligible to participate in RSIP Plus.
(10) "Employer" is the Company and each
other corporation or unincorporated business which is a
member of a controlled group of corporations, a group of
trades or businesses under common control or an affiliated
service group (within the meaning of Code section 414(b),
(c) or (m)) which includes the Company.
(11) "Employer Contributions" are amounts
contributed under the Plan by Participating Employers as
provided in Article IV.
(12) "Employer Discretionary Contributions"
are the amounts contributed by Participating Employers
pursuant to Section 4.2.
(13) "Employer Matching Contributions" are
the amounts contributed by Participating Employers
pursuant to Section 4.1.
(14) "ERISA" is the Employee Retirement
Income Security Act of 1974, as from time to time amended.
(15) "Investment Fund" is a deemed
investment which may be selected by the Committee and
designated by a Participant for purposes of crediting
earnings or losses to a Participant's Accounts.
(16) "Participant" is an individual who has
an Account balance under the Plan.
(17) "Participating Employer" is the Company
and any other Employer designated as such by the Company
which adopts the Plan by appropriate corporate action.
(18) "Plan Year" is the calendar year.
(19) "Retirement" is an individual's
termination of employment from the Employer (other than by
reason of death or Total and Permanent Disability) at a
time which then entitles such individual to immediate
commencement of early, normal or late retirement benefits
under a defined benefit plan maintained by the Company or
another Employer (or, for an individual who does not
participate under such a defined benefit plan, such a
termination of employment for which, if such individual
were a participant under the Pentair, Inc. Pension Plan,
he or she would be eligible for immediate commencement of
such benefits thereunder). If an individual who retires
has not completed the minimum number of years of service
necessary to qualify for the immediate commencement of
such benefits then for purposes of the Plan, such
individual shall be deemed to have completed the requisite
years of service to be considered eligible for immediate
commencement of benefits under the Employer's defined
benefit plan.
(20) "RSIP Plus" is the Pentair, Inc.
Retirement Savings and Stock Incentive Plan, as amended.
(21) "Spouse" is an individual, of a sex
opposite to that of a Participant, whose marriage to a
Participant is recognized under the laws of the United
States (or one of the United States) or any other
generally recognized jurisdiction.
(22) "Total and Permanent Disability" is a
bodily injury or disease which, in the judgment of the
Committee, wholly disables a Participant and will
permanently, continuously and wholly prevent such
Participant for life from engaging in his or her
occupation or employment for wage or profit with an
Employer.
(23) "Trust" is the Pentair, Inc. Deferred
Compensation Trust.
(24) "Trustee" is the Deferred Compensation
Trustee appointed by the Company.
(25) "Valuation Date" is the last business
day of each calendar month.
Section 2.2 Provisions Relating to Eligibility to
Participate.
(a) General. This Section 2.2 prescribes
the rules used to determine when an Employee is eligible
to begin participation in the Plan and receive Employer
Contributions, and whether the Employee remains so
eligible in future Plan Years.
(b) Eligibility to Make Before-tax
Deposits. Employees who are eligible to authorize
deposits under RSIP Plus are eligible to elect to make
Before-tax Deposits under the Plan.
(c) Eligibility for Employer
Contributions. (1) Employer Matching Contributions.
Only those Employees who are eligible to receive an
employer matching contribution under RSIP Plus and who
meet the eligibility criteria described in Section 4.1(b)
are eligible to receive an Employer Matching Contribution
under the Plan.
(2) Employer Discretionary Contributions.
Only those Employees who are eligible to receive an
employer discretionary contribution under RSIP Plus and
who meet the eligibility criteria described in Section
4.2(b) are eligible to receive an Employer Discretionary
Contribution under the Plan.
(d) Suspension of Participation. (1)
Failure to Qualify as an Employee. An individual shall
remain an Employee, regardless of the identity of the
Participating Employer, so long as such individual remains
eligible to actively participate in RSIP Plus. In the
event an Employee becomes employed by an Employer which is
not then a Participating Employer under the Plan or under
RSIP Plus, such Employer may, in the sole discretion of
the Committee, be considered a Participating Employer for
the sole purpose of allowing such Employee to remain a
Participant.
If the Committee determines such Employer
shall not become a Participating Employer solely with
respect to such individual, such individual's
participation, and Before-tax Deposits, shall be
suspended. If an individual's participation is suspended,
no make-up of Before-tax Deposits with respect to Base or
Bonus Compensation earned during the period of suspension
will be permitted. Employer Contributions shall be made
for a Plan Year during which such Employee's participation
is suspended only with respect to Before-tax Deposits
made, and Base and Bonus Compensation earned, by the
Participant prior to such suspension, provided the
Participant would otherwise have been entitled to share in
Employer Contributions for that Plan Year. A Participant
on an authorized leave of absence without pay fails to
qualify as an Employee.
(2) Resumption. Upon becoming eligible to
resume participation, an individual whose participation
has been suspended may again elect to make Before-tax
Deposits under the Plan pursuant to the provisions of
Section 3.1(b).
(e) Application of ERISA. If the Plan
should be found to be a "pension plan" within the meaning
of ERISA section 3(2), or if the Committee should
reasonably determine the Plan is or may be such a plan,
Plan participation shall not be allowed by any individual
(i) who is not a member of a "select group of management
or highly compensated employees" within the meaning of
ERISA section 201(2), or (ii) whom the Committee
reasonably determines is not or may not be a member of
such group. In addition, the Committee shall have the
right to (i) limit the class of Employees eligible to
participate under the Plan to those individuals who are
members of such group, (ii) suspend future participation
under the Plan for all individuals who are not members of
such group, and (iii) immediately, and without regard to
any provision of the Plan, pay to such individual the
entire balance in his or her Accounts regardless of
whether such individual is then employed by any Employer.
Section 2.3 Application of Code Limits. As a
tax-qualified plan, RSIP Plus is subject to various Code
provisions limiting the amount of benefits which can be
accrued on behalf of participants. It is the intent of
the Plan to apply the benefit formulas under RSIP Plus to
Participants without reference to the limits contained in
any Code section, such as the limits described in Code
sections 415(c) and (e). Because the Plan is intended to
extend the application of the RSIP Plus formula and is not
intended solely to provide benefits in excess of the
applicable Code section 415 limits, and it is not,
therefore, an excess benefit plan as that term is defined
in ERISA section 3(36).
Section 2.4 Construction.
(a) General. Wherever any words are used
herein in the singular, masculine, feminine or neuter
form, they shall be construed as though they were used in
the plural, feminine, masculine or non-neuter form,
respectively, in all cases where such interpretation is
reasonable. The words "hereof ," "herein," "hereunder,"
and other similar compounds of the word "here" shall mean
and refer to this entire document and not to any
particular Article or Section. Titles of Articles and
Sections are for general information only, and the Plan is
not to be construed by reference thereto. Amendments or
restatements of the Plan shall apply only to those
Participants who are eligible to participate in the Plan
on or after the effective date of the amendment or
restatement, unless the amendment or restatement
specifically provides for retroactive application.
(b) Applicable Law. To the extent not
preempted by ERISA or any other federal statute, the Plan
shall be construed and its validity determined according
to the substantive laws of the State of Minnesota. In
case any provision of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity
shall not affect the remaining provisions of the Plan, and
the Plan shall be construed and enforced as if said
illegal or invalid provisions had never been included.
ARTICLE III
PARTICIPANT'S DEPOSITS
Section 3.1 Election to Participate.
(a) General. An Employee who is eligible
to participate in the Plan may direct that Before-tax
Deposits be made from such Employee's Base or Bonus
Compensation. Generally, with respect to Base
Compensation, any such election shall be made prior to the
beginning of the Plan Year during which the Base
Compensation will be paid. With respect to Bonus
Compensation, any such election shall be made before the
beginning of the Plan Year for which such Bonus
Compensation is earned and, if payable in a later year,
not when the Bonus Compensation is paid (e.g., Before-tax
Deposits from Bonus Compensation to be earned in 1996 must
be authorized before the end of 1995, but Bonus
Compensation earned in 1996 will not be reduced by the
amount of such deposits until paid to the Employee in
1997).
(b) Participation During Plan Year. An
Employee who first becomes eligible to participate in the
Plan during a Plan Year may authorize Before-tax Deposits
from only Base and Bonus Compensation to be earned after
the election to participate is made. Any such election
must be made within thirty (30) days of the date such
Employee is first eligible to make Before-tax Deposits and
will be effective only with respect to Base and Bonus
Compensation paid for services to be performed subsequent
to the election. The same rules with respect to Bonus
Compensation, as described in Section 3.1(a), shall apply.
Section 3.2 Amount of Participant's Before-tax
Deposits. Each Participant shall designate a rate of
Before-tax Deposits at the time of election to participate
in the Plan, which rate shall be in any percentage which,
when combined with the rate of before-tax deposits elected
under RSIP Plus, will permit such Participant to defer up
to 25% of Base Compensation and up to 100% of Bonus
Compensation. Unless otherwise provided herein, an
election designating the rate of Before-tax Deposits shall
be irrevocable with respect to Base and Bonus Compensation
earned during the Plan Year to which such election
applies. Before-tax Deposits shall be made for the
Participant through payroll deductions from payments of
Base and Bonus Compensation.
Section 3.3 Payment of Deposits to Trustee. A
Participating Employer shall remit amounts withheld as
Before-tax Deposits to the Trustee as soon as
administratively feasible after the end of each calendar
month during which such amounts were withheld as Before-
tax Deposits under the Plan.
ARTICLE IV
EMPLOYER CONTRIBUTIONS
Section 4.1 Employer Matching Contribution.
(a) Amount of Contribution. Participating
Employers shall make an Employer Matching Contribution
under the Plan in an amount determined by the rate of the
employer matching contribution applicable to their
eligible Employees for that Plan Year under RSIP Plus.
Said contribution rate shall be applied to each
Participant's Base and Bonus Compensation, up to the
compensation limit described in Section 4.3. The Employer
Matching Contribution so determined shall be reduced by
the amount of the employer matching contributions made on
behalf of such Employees under RSIP Plus. Payment of such
amount to the Trustee shall be completed not later than
sixty (60) days after the end of the Plan Year for which
the Employer Matching Contribution is made.
(b) Eligibility for Employer Matching
Contributions. The Participants eligible to share in
Employer Matching Contributions for a Plan Year shall be
all Participants (i) who are eligible to receive an
allocation of employer matching contributions under RSIP
Plus for that Plan Year; (ii) whose annual covered
compensation under RSIP Plus for that Plan Year exceeds
$150,000, as adjusted for cost-of-living, in the manner
and at the time prescribed by the Secretary of the
Treasury pursuant to Code section 401(a)(17); and (iii)
who, on a combined basis under RSIP Plus and the Plan, are
making before-tax deposits of at least 4% of compensation
up to the compensation cap described in Section 4.3.
Section 4.2 Employer Discretionary Contributions.
(a) Amount of Contribution. Participating
Employers shall make an Employer Discretionary
Contribution under the Plan for their eligible Employees
in an amount equal to the employer discretionary
contribution rate, if any, applicable to that Plan Year
under RSIP Plus. Until further action of the Company's
Board of Directors, this rate shall be equal to 1% of each
eligible Participant's Base and Bonus Compensation, up to
the compensation limit for the Plan Year, as described in
Section 4.3, less the employer discretionary contribution
made on behalf of such Participant under RSIP Plus for
that Plan Year. Payment of such amounts to the Trustee
shall be made no later than sixty (60) days after the end
of the Plan Year for which the Employer Discretionary
Contribution is made.
(b) Participants Eligible for
Contributions. Participants eligible for Employer
Discretionary Contributions shall be those who are
eligible to receive an employer discretionary contribution
under RSIP Plus for that Plan Year and whose annual
covered compensation under RSIP Plus for that Plan Year
exceeds $150,000, as adjusted for cost-of-living, in the
manner and at the time prescribed by the Secretary of the
Treasury pursuant to Code section 401(a)(17).
Section 4.3 Limit on Compensation for Purposes of
Employer Contributions. In general, Code section
401(a)(17) imposes a limit of $150,000, as adjusted for
cost-of-living by the Internal Revenue Service, on annual
covered compensation which may be taken into account under
RSIP Plus for a plan year. Prior to 1994, this limit was
$200,000, as adjusted for cost-of-living. To replace the
employer contributions lost by Participants under RSIP
Plus due to the change in the limit on annual covered
compensation, the Plan will determine Employer
Contributions by assuming the compensation cap under Code
section 401(a)(17), as in effect prior to 1994, continues
to be in effect. This compensation limit (i.e., $254,000
for 1996) shall be adjusted in subsequent years for cost-
of-living by applying the same formula the Internal
Revenue Service applies for purposes of Code section
401(a)(17).
ARTICLE V
TRUSTEE AND TRUST AGREEMENT
Section 5.1 Appointment.
(a) General. The Plan is an unfunded
deferred compensation arrangement and neither the Company
nor any Participating Employer shall be required to
establish a trust or to in any way segregate assets for
purposes of funding or otherwise providing benefits under
the Plan. The Company may, however, in its sole
discretion, establish and maintain an unfunded grantor
trust with one or more persons selected by the Committee
to act as Trustee. If a Trustee is so appointed, such
Trustee shall hold, manage, administer and invest the
assets of the Trust, reinvest any income, and make
distributions in accordance with the directions of the
Committee and the provisions of the Plan and Trust. The
trust agreement shall be in such form and contain such
provisions as the Committee deems necessary and
appropriate to effectuate the purposes of the Plan.
(b) Removal and Resignation. Pursuant to
the notice requirements and other procedures contained in
the trust agreement, and in accordance with the trust
agreement, the Committee may, at any time and from time to
time, remove a Trustee or any successor Trustee and any
such Trustee or any successor Trustee may resign. The
Committee shall, upon removal or resignation of a Trustee,
appoint a successor Trustee.
Section 5.2 Fees and Expenses. The Trustee's fee,
and other fees and expenses, shall be paid by the Company
and Participating Employers. Brokerage fees and other
investment expenses, if applicable, shall be paid out of
the Trust and charged to the fund of the Trust and the
Accounts of the Participant to which such fees and costs
are attributable.
Section 5.3 Use of Trust. Except as provided under
Section 10.2, to the extent any assets are held in the
Trust, such assets shall at all times be the property of
the Company or a Participating Employer and, as such,
shall remain subject to the claims of general creditors of
the Company or the Participating Employer, as the case may
be, in the event of bankruptcy or insolvency. No
Participant or Beneficiary shall have any rights to any
assets of the Trust, the Company or a Participating
Employer, nor to any amounts credited to any Account
maintained under the Plan. Neither the existence of the
Plan nor the establishment of a Trust shall be interpreted
or construed as a guaranty that any funds which may be
held in trust hereunder will be available or sufficient
for the payment of benefits under the Plan.
Section 5.4 Responsibility and Authority for Fund
Management. The Company may, in its sole discretion,
establish and maintain a funding policy, and may delegate
to the Committee the following duties and authority:
(i) to establish Investment Funds for
purposes of crediting earnings and
losses to Accounts, including the
authority to add to or change the
number and nature of the Investment
Funds from time to time;
(ii) to direct the investment and
reinvestment of all or any portion of
the assets, if any, held by the
Trustee under the Trust; and
(iii) to periodically review the performance
of the Investment Funds.
Section 5.5 Trust Assets. Neither the Company, a
Participating Employer nor the Trustee shall be obligated
to purchase any asset or Investment Fund designated by a
Participant pursuant to the provisions of Article VI for
purposes of crediting earnings or losses to such
Participant's Accounts. To the extent the Company and
Participating Employers remit Before-tax Deposits or
Employer Contributions to the Trustee, however, and the
Investment Fund designated by the Participant as a deemed
investment for his or her Accounts consists of an asset
which the Trustee cannot purchase (e.g., phantom shares of
the Company's common stock or an investment which is not
readily available on the open market), the Trustee shall,
subject to the direction of the Committee, return any such
amounts to the Company and Participating Employers in the
form of cash. To the extent a Participant reallocates all
or a portion of the balance in his or her Accounts into an
Investment Fund which consists of an asset the Trustee
cannot purchase, the Trustee shall withdraw from the Trust
cash equal to the fair market value of such investment
designation and return such cash to the Company and
Participating Employers.
ARTICLE VI
INVESTMENT; PARTICIPANT'S ACCOUNTS
Section 6.1 Allocation and Reallocation of Deposits
and Contributions.
(a) Allocation. For purposes of crediting
earnings to his or her Accounts, a Participant shall elect
to allocate all Before-tax Deposits and Employer
Contributions to one or more of the Investment Funds. A
Participant may elect to change the mix of such
allocations in accordance with rules of uniform
application prescribed by the Committee. An election
under this Section 6.1(a) shall remain in effect for the
entire Plan Year for which it is made and for successive
Plan Years unless changed by the Participant; provided,
however, that neither the Company, a Participating
Employer, the Committee nor the Trustee shall be obligated
to purchase any investment designated by a Participant.
Investment Funds are selected by a Participant solely for
purposes of determining the earnings or losses to be
credited to a Participant's Accounts.
(b) Reallocation. In accordance with rules
of uniform application as established by the Committee, a
Participant may reallocate the balance credited to his or
her Accounts among the available Investment Funds no more
frequently than four (4) times each Plan Year. Any such
reallocation shall apply to the entire balance of such
Participant's Accounts attributable to participation in
the Plan, and not just to deposits or Employer
Contributions made subsequent to such Participant's
reallocation. Such reallocation shall not apply to any
amounts deferred by a Participant under the Plan prior to
its amendment and restatement.
Section 6.2 Investment of Deposits and Employer
Contributions. The Participating Employers may, but are
not required to, contribute to the Trust a Participant's
Before-tax Deposits and Employer Contributions for a Plan
Year. The Committee may, in its sole discretion, direct
the Trustee to invest a Participant's Before-tax Deposits
and Employer Contributions in the Investment Funds
designated by the Participant, to the extent such
investment is available on the open market and can be
purchased by the Trustee and owned by the Employer.
Regardless of whether any deposits or Employer
Contributions are actually invested in the Investment
Funds designated by Participants, however, the Committee
shall maintain a bookkeeping account on behalf of each
Participant to which shall be credited the investment
results of each Investment Fund so designated to adjust
the amounts in each Participant's Accounts. Promptly
following each calendar quarter, the Committee shall
prepare or cause to be prepared a report indicating the
increase or decrease in the value of each Participant's
Accounts. Any earnings of an Investment Fund shall be
deemed to be reinvested in the same Investment Fund for
purposes of maintaining a Participant's Accounts.
Section 6.3 Participant's Accounts.
(a) Establishment of Accounts. Separate
Accounts shall be established and maintained for each
Participant, depending upon the Investment Funds selected.
To the extent necessary or appropriate to provide for
proper administration of the Plan, Participant Accounts
shall include separate balances or subaccounts for
interests derived from Before-tax Deposits, and Employer
Contributions and such other separate balances as the
Committee shall determine. The Committee shall also
establish and maintain separate Accounts for Participants
by reference to the identity of each Participant's
Employer.
(b) Crediting of Accounts. The appropriate
Accounts of each Participant shall be credited with the
amounts of Before-tax Deposits and Employer Contributions
made for each Plan Year. The reallocation of a
Participant's Accounts shall be appropriately credited as
of the Valuation Date coincident with or next following
the effective date of the reallocation. The maintenance
of such Accounts does not, however, entitle a Participant
to any ownership, preferred claim or beneficial interest
in any Investment Fund or in any specific asset of the
Trust. Investment Funds are deemed investments and are
used solely for purposes of determining the earnings or
losses to be credited to a Participant's Accounts.
ARTICLE VII
DISTRIBUTION OF ACCOUNTS UPON
TERMINATION OF EMPLOYMENT
Section 7.1 Time of Distribution.
(a) General. At the time of participation
in the Plan, each Participant shall elect the form of
payment and the event or date upon which payment shall
begin. Such election shall apply to all Before-tax
Deposits and Employer Contributions credited under the
Plan on behalf of the Participant and shall, except as
otherwise provided herein, be irrevocable. Distribution
of a Participant's Accounts shall be made or commence to
be made as soon as administratively feasible following the
elected event of distribution, but in no case later than
sixty (60) days after the event of distribution occurs.
(b) Events of Distribution. A Participant
may elect to receive a distribution of benefits under the
Plan on:
(i) the date the Participant voluntarily
terminates employment;
(ii) the date such Participant is granted
benefits on account of Total and
Permanent Disability under the
Employer's long-term disability plan
or, if earlier, the date of a
Participant's Retirement from the
Company or a Participating Employer;
(iii) January 1 of the year following the
year of a Participant's Retirement
from the Company or a Participating
Employer;
(iv) the last day of the Plan Year
coincident with or immediately
following the Participant's attainment
of an age which shall be specified by
the Participant at the time of the
election;
(v) the date specified in (iv) above, if
the Participant's employment is
involuntarily terminated prior to that
date; or
(vi) the date the Participant's employment
ends, regardless of the reason, if the
option otherwise elected by such
Participant cannot be given effect on
that date.
(c) Forms of Distribution. A distribution
shall be paid in one of the following forms as elected by
the Participant:
(i) cash lump-sum;
(ii) equal annual cash installments over a
period of five (5) years; or
(iii) equal annual cash installments over a
period of ten (10) years.
(d) Change in Election. A Participant who
experiences a material change in personal circumstances
may elect to change, but not to postpone, the time or
method for distribution previously elected. Approval of
any such change shall be in the sole discretion of the
Committee, and no such change shall be allowed after the
date payment of benefits under the Plan commences or is
scheduled to commence, or if the Committee determines
allowing such change may have an adverse tax consequence
to the Company, a Participating Employer, the Plan or
other Participants.
Section 7.2 Distribution Due to Death.
(a) Death Benefit. If a Participant dies
before receiving payment of all of the amounts allocated
to his or her Accounts, then all such unpaid benefits
shall be paid to his or her Beneficiary within sixty (60)
days of the date the Committee has verified the identity
of the Beneficiary and the Beneficiary has established the
right to receive payment of a Participant's benefits under
the Plan.
(b) Default Takers. If a Participant fails
to make a valid Beneficiary designation, makes such a
designation but is not survived by any named Beneficiary,
or makes such a designation but the designation does not
effectively dispose of all benefits payable after the
Participant's death, then and to the extent benefits are
payable after the Participant's death, all such benefits
shall be paid in accordance with the laws of intestate
succession of the jurisdiction in which the Participant
was domiciled as of the date of death.
(c) Form of Distribution. Distribution to
a Beneficiary shall be made in a cash lump sum; provided,
however, a Beneficiary may elect to receive equal annual
cash installments over a period of five (5) or ten (10)
years if such election is made within thirty (30) days
after the date of the Participant's death.
(d) Death of Beneficiary. If a Beneficiary
dies before receiving payment of all amounts allocated to
his or her Accounts under the Plan, then all such unpaid
benefits shall be paid as a lump sum in accordance with
the laws of intestate succession of the jurisdiction in
which the Beneficiary was domiciled as of the date of
death.
Section 7.3 Payment of Installments. If a
Participant or Beneficiary elects to receive an
installment distribution, the unpaid balance credited to
such Accounts shall continue to be subject to investment
direction by the Participant or Beneficiary, as the case
may be, and be credited with earnings or losses by
reference to the designated Investment Funds in accordance
with applicable Plan provisions. Any investment election
made by a Participant prior to the date of death shall
continue in effect, however, unless changed by the
Beneficiary pursuant to the provisions of Section 6.1,
until such time as all Plan benefits are paid to the
Beneficiary.
Section 7.4 Payment of Employer Contributions. To
the extent a Participant or Beneficiary, as the case may
be, has received or commenced receiving benefits
hereunder, and such Participant is subsequently determined
to be entitled to an allocation of Employer Contributions
for the Plan Year in which the Participant's participation
in the Plan ceased, then the Company or Participating
Employer shall timely pay any such contribution to the
individual or, if such individual is receiving an
installment form of distribution, the Committee shall
adjust the balance of the installments due to reflect the
amount of such Employer Contribution effective with the
due date of the next installment payment. Any such amount
shall remain subject to all applicable provisions of the
Plan until paid to the individual.
ARTICLE VIII
EMERGENCY WITHDRAWALS
Section 8.1 Restricted Withdrawals.
(a) General. A Participant who has not
experienced his or her designated event of distribution
may, on a showing of an unforeseeable emergency or
extraordinary circumstance, request a withdrawal from the
Plan. For this purpose, an unforeseeable emergency or
extraordinary circumstance is a situation resulting from
events beyond the control of the Participant which has
created a severe financial hardship the Participant has
insufficient liquid assets to meet. The amount of such a
withdrawal which may be approved by the Committee, in its
sole discretion, shall be the amount necessary to
alleviate the Participant's emergency. An emergency
withdrawal cannot be requested more frequently than once
each Plan Year.
(b) Emergency. For purposes of this
Section, the Committee or its delegate, on a uniform and
nondiscriminatory basis, shall determine whether the facts
and circumstances relevant to a Participant's situation
represent an unforeseeable emergency or other similar
extraordinary circumstance. The Committee may require
such proof as it deems appropriate from the Participant to
evidence the existence of the emergency.
(c) Severe Financial Hardship. To
demonstrate the emergency or circumstance has created a
severe financial hardship which cannot be met from other
resources, the Participant shall provide such documents or
information as the Committee may require to certify the
need cannot be relieved (i) through reimbursement from
insurance, (ii) by reasonable liquidation of assets that
would not create a severe financial hardship, or (iii) by
cessation of Before-tax Deposits under the Plan.
(d) Time for Payment. Distributions
pursuant to this Section shall be made as soon as
administratively feasible after the withdrawal is approved
by the Committee. If a Participant should die after
requesting an emergency withdrawal, but prior to the
distribution thereof, the withdrawal election shall be
deemed revoked.
(e) Committee Discretion. Approval of an
emergency withdrawal shall be in the sole discretion of
the Committee, and no such approval shall be given if the
Committee determines allowing such withdrawal may have an
adverse tax consequence to the Company, Participating
Employers, the Plan or other Participants.
ARTICLE IX
PLAN ADMINISTRATION
Section 9.1 Committee.
(a) General. The Company shall appoint a
Committee consisting of not less than three (3) persons
which shall have exclusive responsibility for the
administration and operation of the Plan and the power to
take any action necessary or appropriate to carry out such
responsibilities. In addition, the Committee shall
generally provide for the operation of the Plan and be a
liaison between Employers to assure uniform procedures.
The duties of the Committee shall include, but not be
limited to, the following:
(i) to prescribe, require and use
appropriate forms;
(ii) to formulate, issue and apply rules
and regulations;
(iii) to prepare and file reports, notices
and any other documents relating to
the Plan which may be required by law;
(iv) to interpret and apply the provisions
of the Plan;
(v) to authorize and direct benefit
payments.
In exercising such powers and duties, and other powers and
duties granted under the Plan or Trust to the Committee,
the Committee and each member thereof is granted such
discretion as is appropriate or necessary to carry out the
duties and powers so delegated. This discretion
necessarily follows from the fact that the Plan, the Trust
and related documents do not, and are not intended to,
prescribe all rules necessary to administer the Plan or
anticipate all circumstances or events which may arise in
the course of such administration.
(b) Allocation to Participating Employers.
The Committee shall account for the Trust assets in such
manner as will permit the accurate allocation of earnings
on Participant Accounts to such Participant's Employer.
The Committee shall provide to each Participating Employer
all information necessary to permit each such Employer to
prepare any reports or tax filings which may be required
by reason of its status as a Participating Employer.
Section 9.2 Organization and Procedure. The
Committee may have a chairman, a secretary, and such other
officers as it deems appropriate. Action on any matter
shall be taken on the vote of at least a majority of all
members of the Committee at any meeting or upon unanimous
written consent of all members without a meeting. Minutes
of meetings shall be kept and all major actions of the
Committee shall be recorded in such minutes or other
appropriate written form. The Committee may adopt such
bylaws, procedures and operating rules as it deems
appropriate.
Section 9.3 Delegation of Authority and
Responsibility. The Committee may, in writing, delegate
to any one or more of its members the authority to execute
documents on behalf of the Committee and to represent the
Committee in any matters or dealings involving such
Committee.
The Committee may delegate in writing certain of its
powers to a person employed by an Employer under such
terms and conditions as may be specified by the Committee.
Employees of an Employer who are not members of the
Committee or persons to whom powers are delegated, shall
perform such duties and functions relating to the Plan as
the Committee may direct and supervise. It is expressly
provided, however, that the Committee shall retain full
and exclusive authority and responsibility for and
respecting any such activities by other employees, and
nothing contained in this Section 9.3 shall be construed
to confer upon any such employee any discretionary
authority or control respecting the administration or
operation of the Plan.
Section 9.4 Use of Professional Services. The
Committee may obtain the services of such attorneys,
actuaries, accountants or other persons as it deems
appropriate, any of whom may be the same persons who are
providing services to an Employer. In any case in which
the Committee utilizes such services, it shall retain
exclusive discretionary authority and control over the
administration and operation of the Plan.
Section 9.5 Fees and Expenses. Committee members
who are employees of the Company or a Participating
Employer shall serve without compensation but shall be
reimbursed for all reasonable expenses incurred in their
capacity as Committee members. No employee members of
the Committee or persons performing services pursuant to
Section 9.4 shall receive greater than reasonable
compensation for their services. All compensation for
services and expenses shall be paid from the Trust unless
the Company, in its sole discretion, elects to pay them.
To the extent not paid by the Company, such compensation
and expenses shall be paid out of the principal or income
of the Trust.
Section 9.6 Communications. All requests, claims,
appeals, elections and other communications to the Company
or the Committee shall be in writing and shall be made by
transmitting the same via the U.S. Mail, certified, return
receipt requested, addressed as follows:
Pentair, Inc.
1500 County Road B2 West
St. Paul, Minnesota 55113-3105
Attn: Non-Qualified RSIP Committee
c/o Director of Human Resources
ARTICLE X
AMENDMENTS AND TERMINATION
Section 10.1 Amendments and Termination.
(a) General. While it is intended the
Plan shall continue in effect indefinitely, the Company
may from time to time modify, alter or amend the Plan or
the Trust, provided that no amendment affecting the
rights, duties or responsibilities of the Trustee may be
made without the Trustee's consent. The Company may at
any time order the temporary suspension or complete
discontinuance of Employer Contributions or may terminate
the Plan.
(b) Amendments to Comply with Applicable
Law. Nothing herein shall be construed to prevent any
modification, alteration or amendment of the Plan or Trust
which is required to comply with the provision of any
applicable law or regulation relating to the establishment
or maintenance of this Plan and Trust. Except as
otherwise provided herein, no such amendment shall reduce
the balance in any Participant's Accounts determined as of
the later of the date the amendment is adopted or
effective.
(c) Participating Employers. Any Employer
may become a Participating Employer by adopting a written
resolution of its board of directors and delivering such
resolution to the Committee. An Employer which becomes a
Participating Employer must agree to pay or provide for
the payment of benefits hereunder to those Participants
(and their Beneficiaries) employed by such adopting
Employer.
Any Employer, other than the Company, may
cease to be a Participating Employer by adopting a written
resolution of its board of directors and delivering such
resolution to the Committee. No resolution ending
participation in the Plan shall be effective until thirty
(30) days after it is received by the Committee. Unless
otherwise provided herein, ceasing to be a Participating
Employer shall not relieve such Employer of the obligation
to provide for the payment of benefits credited to
Accounts on behalf of Participants during the time such
Employer was a Participating Employer.
(d) Plan Termination. If the Plan is
terminated, the Committee may elect to either terminate or
retain the Trust. Any decision to terminate the Plan or
the Trust shall not reduce the balance of a Participant's
Accounts under the Plan as of the effective date of such
termination, nor shall it terminate, amend or otherwise
change the liability of the Company or Participating
Employer to pay or provide for the payment of benefits
under the Plan.
Section 10.2 Change in Control.
(a) Definition. For purposes of the Plan,
an unfriendly change in control of the Company shall be
deemed to occur if any person or entity shall acquire
control of the Company either by substantial market
purchases or by a tender offer, or both, which is opposed
by a majority of the Company's board of directors.
(b) Effect on Trust. Notwithstanding any
other provision of the Plan, in the event of an unfriendly
change in control, the Trust created hereunder shall no
longer be considered a grantor trust, and shall be
converted to a fully funded irrevocable trust maintained
for the exclusive benefit of the Participants and their
Beneficiaries. The Company and Participating Employers
shall then immediately pay to the Trustee such assets,
whether in cash or other property, as are necessary to
fully fund the benefits represented by the balance then
credited to each Participant's Accounts. The Company and
Participating Employers shall also be obligated to
immediately pay to the Trust such additional amounts, as
determined by the Committee in its sole discretion, which
may be necessary to pay all applicable federal, state and
local tax liability which may be imposed on each
Participant due to the irrevocable funding of the Trust.
After the Trust becomes funded, neither the Company nor
any Participating Employer shall have any right, title or
interest in the assets of the Trust and none of such
assets shall inure to the benefit of the Company or a
Participating Employer.
(c) Effect on Participants. Upon the
occurrence of an unfriendly change in control, the Plan
shall be deemed to automatically terminate and all
benefits then credited to the Participants' Accounts,
together with earnings on such benefits through the
effective date of the change in control, shall be
immediately payable to the Participants, together with
such additional amounts as have been contributed by the
Company and Participating Employers to offset the
applicable taxes as will be imposed on Participants due to
the funding and payment of benefits hereunder.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Non-Guarantee of Employment.
Nothing contained in this Plan shall be construed as a
contract of employment between an Employer and a
Participant, or as a right of any Participant to be
continued in the employment of an Employer, or as a
limitation on the right of an Employer to discharge any
Participant with or without notice or with or without
cause.
Section 11.2 Rights to Trust Asset.
(a) Rights of Participants. No Participant
or any other person shall have any right to, or interest
in, any part of the Trust assets upon termination of
employment or otherwise, except as otherwise provided
under the Plan. If the assets of the Trust are
insufficient to pay the deposits and Employer
Contributions and earnings thereon credited to a
Participant's Accounts, the Participant's Employer shall
pay any such amounts from its other general assets. If
such Employer does not timely pay such benefits, then,
except as described in Section 11.2(b), the sole recourse
of a claimant Participant or Beneficiary shall be against
such Employer and neither the Company nor any other
Employer shall be responsible to pay or provide for the
payment of such benefits or liable for the nonpayment
thereof.
(b) Company Assumption of Liability. If
the Participant's employment is terminated due to the sale
of the stock (or rights analogous to stock) or assets of
his or her Employer by the Company, the Company shall
assume and be responsible for the payment of benefits to
such Participant as necessary pursuant to this Section
11.2 even though it may not have been such Participant's
Employer. The Company's obligation under this Section
11.2(b) shall cease as of the earlier of the date all such
benefits are paid to the affected Participant or the date
the person who purchased such stock or assets, or a person
who controls such person, agrees in writing to assume the
liability for the benefits credited to the affected
Participants by reason of their participation in the Plan
Section 11.3 Requirement of Proof. In
discharging their duties and responsibilities under the
Plan, the Committee or other individual may require proof
of any matter concerning this Plan, and no person shall
acquire any rights or be entitled to receive any benefits
under this Plan until such proof is furnished.
Section 11.4 Non-Recommendation of Investment.
The availability of any Investment Fund hereunder shall
not be construed as a recommendation to designate a deemed
investment in such Fund for purposes of crediting earnings
to a Participant's Accounts. The decision as to the choice
of a deemed investment for a Participant's Accounts must
be made solely by each Participant, and no officer or
employee of any Employer or the Trustee is authorized to
make any recommendation to any Participant concerning the
designation of Investment Funds hereunder.
Section 11.5 Indemnification. The Company
shall indemnify each member of the Committee and hold each
of them harmless from the consequences of acts or conduct
when done in an official capacity, This provision shall
apply only if the member acted in good faith and in a
manner reasonably believed to be solely in the best
interests of the Participants and their Beneficiaries, and
with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful.
Such indemnification shall cover any and all attorneys'
fees and expenses, judgments, fines and amounts paid in
settlement, but only to the extent such amounts are not
paid to such person(s) under an applicable Company
insurance policy and to the extent such amounts are
actually and reasonably incurred by such person(s).
Section 11.6 Non-Alienation. Except as
otherwise provided herein, no right or interest of any
Participant or Beneficiary in the Plan and the Trust shall
be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge,
attachment, garnishment, execution, levy, bankruptcy, or
any other disposition of any kind, either voluntary or
involuntary, prior to actual receipt of payment by the
person entitled to such right or interest under the
provisions hereof, and any such disposition or attempted
disposition shall be void.
Section 11.7 Facility of Payment. If the
Committee shall determine a Participant or Beneficiary
entitled to a distribution hereunder is incapable of
caring for his or her own affairs because of illness or
otherwise, it may direct any distribution from such
Participant's Accounts be made, in such shares as it shall
determine, to the Spouse, child, parent or other blood
relative of such Participant or Beneficiary, or any of
them, or to such other person or persons as the Committee
may determine, until such date as it shall determine such
incapacity no longer exists. The Committee shall be under
no obligation to see to the proper application of the
distributions so made to such person or persons and any
such distribution shall be a complete discharge of any
liability under the Plan to such Participant or
Beneficiary, to the extent of such distribution.
Section 11.8 Requirement of Releases. If in
the opinion of the Committee, any present or former Spouse
or dependent of a Participant shall by reason of the law
of any jurisdiction appear to have any interest in Plan
benefits that may become payable to such Participant, the
Committee may direct such benefits be withheld pending
receipt of such written releases as it deems necessary to
prevent or avoid any conflict or multiplicity of claims
with respect to the payment of such benefits.
Section 11.9 Unclaimed Benefits. Each
Participant shall provide the Company with a current
address and the current address of any Beneficiary. The
Company shall not be obligated to search for any person
entitled to benefits from the Plan who cannot be located.
If such a person cannot be located at the time benefits
under the Plan are payable, and such person is not located
within three (3) years, the Company may make payments from
the Plan as though the individual to whom payment was due
had died at the end of such three (3) year period.
Section 11.10 Computational Errors. In the
event mathematical, accounting, or similar errors are made
in processing or paying a benefit under the Plan, the
Committee may make such equitable adjustments as it deems
appropriate (which may be retroactive) to correct such
errors.
ARTICLE XII
TRANSITIONAL RULES
Section 12.1 Amounts Deferred Under Prior
Plan. Any compensation deferred by a Participant under
the Plan prior to its amendment and restatement (the
"Prior Plan") shall not be commingled with deposits and
Employer Contributions made under the Plan and shall not
become part of the Trust. All such deferrals shall
continue to be accounted for by the Company and the
Employers and shall remain subject to the provisions of
the Prior Plan, including the irrevocable distribution
elections made by the deferring participants with respect
to such deferrals.
Section 12.2 Bonus Compensation Earned in 1995
and Payable in 1996. A Participant who has earned Bonus
Compensation during 1995 and which is authorized for
payment in 1996 may elect to defer payment of such 1995
Bonus Compensation only under the provisions of the Prior
Plan.
SCHEDULE 1
BASE COMPENSATION
Items Included
Base salary or wages
RSIP Plus pre-tax contributions
Medical Reimbursement Plan pre-tax
contributions
Shift differential pay
Overtime pay
Holiday pay
Sick leave pay
Bereavement pay
Jury duty pay
Military pay
Gain-sharing payments
Profit-sharing payments
Short-term disability benefits to
and all Sales commissions
Perquisites
Items Excluded
Stock Purchase & Bonus Plan bonus
contributions
Severance pay
Management Incentive Plan bonus
Special cash awards
Annual bonuses
Cash payments made and property or rights in
property other than cash granted under or
pursuant to the Pentair Omnibus Stock Incentive Plan
Moving expense reimbursements
Employee business expense reimbursements
Tuition reimbursement
Adoption assistance payments
Amounts contributed to (e.g, deferred salary)
or received under or pursuant to non-qualified
deferred compensation arrangements
Except as expressly included in the column
headed "Items Included", all contributions
(other than after-tax employee contributions)
benefits received under a tax-qualified plan
TRUST AGREEMENT
THIS TRUST AGREEMENT is made this __ day of
__________________, 1996, between Pentair, Inc., a
Minnesota corporation, (the "Company") and State Street
Bank and Trust Company, a Massachusetts trust company,
having its principal office at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Trustee").
WITNESSETH:
WHEREAS, the Company has adopted the amended and
restated Pentair, Inc. Non-Qualified Deferred Compensation
Plan (the "Plan") effective as of January 1, 1996 for the
purpose of providing benefits to a select group of
management and highly compensated employees of the Company
and members of its controlled group (the "Participating
Employers"); and
WHEREAS, the Company and Participating Employers
expect to incur liability for benefits earned under the
Plan by eligible participants; and
WHEREAS, the Company wishes to establish a grantor
trust to provide a source of funds to assist it and the
Participating Employers in meeting their anticipated
liabilities under the Plan; and
WHEREAS, except as otherwise provided in the event
of a change in control, the assets of said trust shall be
held for the benefit of the Company and Participating
Employers and subject to the claims of their respective
general creditors in the event of bankruptcy or
insolvency; and
WHEREAS, the parties intend this trust and the Plan
shall constitute an unfunded arrangement which shall not
affect the status of the Plan as a nonqualified, unfunded
plan maintained for the purpose of providing deferred
compensation for a select group of management or highly
compensated employees of the Company and Participating
Employers; and
WHEREAS, the Trustee is willing to serve as trustee
of the trust herein created pursuant to the terms of this
Trust Agreement;
NOW, THEREFORE, in consideration of the foregoing
premises and of the mutual covenants herein contained, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Incorporation by Reference. Unless the
context requires otherwise, when capitalized terms are
used herein and such terms are defined under the Plan,
then such terms shall have the same meaning hereunder as
given to them under the Plan.
Section 1.2 Other Definitions. Unless the context
requires otherwise, when capitalized the terms listed
below shall have the following meaning when used herein:
(1) "Trust Agreement" is this document as in
effect on the date first above written, and
as amended thereafter.
(2) "Trust Fund" is the assets of the Plan held
under the Trust Agreement.
ARTICLE II
ESTABLISHMENT OF TRUST
Section 2.1 General. The Company, as grantor,
hereby establishes an irrevocable grantor trust, within
the meaning of subpart E, part I, subchapter J, chapter I,
subtitle A of the Code, to be known as the Pentair, Inc.
Deferred Compensation Trust (the "Trust"). The Trust
shall consist solely of such sums of money and other
property as may from time to time be paid or delivered to
the Trustee by the Company and Participating Employers,
together with the earnings or losses from investing such
contributions (the "Trust Fund").
Section 2.2 Unfunded Trust. The Trust does not,
and is not intended to, fund the Plan, but is a depository
arrangement established with the Trustee for purposes of
setting aside assets to meet part or all of the future
obligations of the Company and Participating Employers to
Participants and Beneficiaries under the Plan.
Establishment of this Trust shall not relieve the Company
and Participating Employers of the liability for payment
of benefits to Participants and Beneficiaries, as the
case may be, pursuant to the terms and provisions of the
Plan; provided, however, payments to a Participant or
Beneficiary from the Trust shall, to the extent thereof,
discharge the Company and Participating Employers from
their obligations under the Plan.
The amounts to be contributed to the Trust Fund
shall be determined in the sole discretion of the
Committee. Neither the Trustee nor any Participant or
Beneficiary shall have any right to compel the Company or
Participating Employers to make contributions to the Trust
Fund.
Section 2.3 Management of Assets. The Committee
shall direct the Trustee in the investment of the assets
of the Trust Fund and select the Investment Funds which
shall be made available to Participants for purposes of
selecting deemed investments. The Committee may also
appoint one or more investment managers to manage and
invest any portion of the Trust Fund. The Committee shall
give prompt written notice to the Trustee of the
Investments Funds which shall be used for purposes of
adjusting Participant Accounts, and of the appointment or
the termination of the appointment of any investment
manager and the Trust Fund assets to be allocated to an
investment manager. Prior to a change in control, the
Trustee shall not be responsible for the selection of
Investment Funds or for the acts or omissions of any duly
appointed investment manager and shall have no obligation
to evaluate the performance of any Investment Fund or
investment manager. The Committee shall have the right at
any time, and from time to time in its sole discretion, to
substitute assets of equal fair market value for any asset
held by the Trust.
Section 2.4 Rights of Participants. Except as
other provided in the event of a change in control, the
Trust Fund shall be held for the benefit of the Company
and Participating Employers and used to offset the
unfunded liabilities expected to be incurred by them under
the Plan. Neither Participants nor Beneficiaries shall
have any preferred claim on or any beneficial ownership
interest in the Trust Fund or any specific asset held by
the Trust Fund. Participants and Beneficiaries shall have
only unsecured, contractual rights against their Employer.
The share of the Trust Fund allocable to each Employer
shall remain subject to the claims of general creditors of
such Employer in the event of its bankruptcy or
insolvency.
ARTICLE III
CHANGE IN CONTROL
Section 3.1 Required Deposits. As soon as
administratively feasible, and not later than ten (10)
days after the occurrence of an unfriendly change in
control, as that term is defined in Section 10.2 of the
Plan, the Company and Participating Employers shall be
required to irrevocably fund the Trust and deposit with
the Trustee cash or other property in such amount as the
Committee, in its sole discretion, shall determine is
sufficient to pay to each Participant or Beneficiary, as
the case may be, all benefits they would be entitled to
receive pursuant to the terms of the Plan as of the
effective date of the change in control, together with
such amounts as may be necessary to pay any applicable
federal, state and local payroll and withholding taxes
which will become payable by Participants or Beneficiaries
by reason of the irrevocable funding of the Trust. Except
for the occurrence of an unfriendly change in control, the
Company and Participating Employers shall have no
obligation to deposit funds with the Trustee. The Trustee
may require the Committee to furnish such evidence as will
permit the Trustee to verify a change in control has
occurred. In determining whether a change in control has
occurred, the Trustee shall be entitled to rely on such
evidence as is furnished to it by the Committee.
Section 3.2 Participant Accounts Following Change
in Control. (a) Record Keeping. Upon the occurrence of
a change in control, the Trustee shall maintain all Trust
Fund records, including individual Participant Accounts
and such other records as are necessary. The Trustee
shall, consistent with the terms of the Plan and Trust,
value the Trust Fund and adjust individual Accounts to
reflect earnings or losses and benefit payments since the
preceding Valuation Date. The Trustee shall issue to each
Participant or Beneficiary a statement of Account value
after the end of each calendar quarter.
(b) Investment. Upon the occurrence of an
unfriendly change in control, the Trustee shall have the
power to take all such actions as may be necessary to
terminate and wind up the affairs of the Trust and to pay
benefits to Participants and Beneficiaries consistent with
the provisions of the Plan. Until such time as all
benefits under the Plan are paid, the Trustee shall be
responsible for the management and investment of the Trust
Fund consistent with the terms of this Trust Agreement.
(c) Distributions. Upon the occurrence of an
unfriendly change in control, the Trustee shall assume the
obligation to make distributions from Participant Accounts
in accordance with the provisions of the Plan. The
Trustee shall also provide for the reporting and
withholding of any federal, state or local taxes which
become payable as a result of the irrevocable funding of
the Trust or the distribution of benefits to Participants
or Beneficiaries and the payment of such amounts as are
withheld to the appropriate taxing authority. All
benefits payable to a Participant or Beneficiary shall be
paid only to the extent of the amounts credited to such
individual's Accounts.
Section 3.3 Effect on Trustees. Upon the
occurrence of an unfriendly change in control, the
Committee shall no longer have any authority to remove the
Trustee or appoint a successor trustee. The Trustee may
be removed, and a successor trustee appointed, only with
the written consent of the Participants and Beneficiaries
whose Accounts contain at least a majority of all assets
then held in the Trust Fund. The removal of the Trustee
or appointment of a successor trustee shall, however,
remain subject to the same procedures as are described in
Article VII.
ARTICLE IV
PARTICIPANT ACCOUNTS
Section 4.1 Maintaining Accounts. The Committee
shall maintain and provide to the Trustee a separate
record of the Accounts for each Participant and a separate
record of the Accounts attributable to participation by
Employees of each Participating Employer. Each
Participant shall select the Investment Funds into which
deposits and Employer Contributions shall be deemed
invested for purposes of allocating earnings to said
Accounts; provided, however, neither the Company nor the
Trustee shall be obligated to actually purchase any
Investment Fund designated by a Participant for such
purpose. The Trustee shall, however, purchase and hold
shares in any Investment Fund as the Committee may direct.
To the extent the Investment Fund designated by a
Participant, whether at participation or upon reallocation
of Accounts among available Investment Funds, cannot be
purchased by the Trustee (e.g. shares of the Company's
common stock) the Trustee shall return to the Company and
Participating Employers cash in an amount equal to the
fair market value of such investment designation.
Section 4.2 Valuing Accounts. The Trust Fund shall
be valued by the Trustee as of the last business day of
each calendar month by reference to the value of the
Investment Funds actually held in the Trust, and the
Accounts of each Participant shall, as applicable, be
adjusted by the Committee to reflect contributions,
payments, income, expenses, appreciation and depreciation
since the preceding valuation date. For purposes of
valuing Participant Accounts and activity, Investment
Funds shall be valued using the month end RSIP Plus
valuation date for which Investment Funds are valued.
Each Participant shall receive a statement of total
Account value which reflects the market value of all
Investment Funds designated by the Participant, regardless
of whether held by the Trust, after the end of each
calendar quarter.
Section 4.3 Distributions from Accounts. The Trust
property shall be used to pay benefits credited to
Participants and their Beneficiaries pursuant to the
provisions of the Plan and the irrevocable distribution
elections made by Participants upon their election to
participate in the Plan. The Committee shall direct the
Trustee with respect to the amounts payable to any
Participant or Beneficiary and the time of commencement
and form in which such benefits shall be paid. Except as
otherwise provided in the event of a change in control,
the Trustee shall make payments to the Participants solely
in accordance with the instructions of the Committee.
After all such payments to Participants and Beneficiaries
have been completed, any remaining assets of the Trust
Fund shall be allocated among and distributed to the
Company and the Participating Employers. In the event the
Trust Fund is insufficient to pay benefits as and when due
in accordance with the provisions of the Plan, the Company
and Participating Employers shall make the balance of any
such payments directly to the Participant or Beneficiary.
ARTICLE V
INSOLVENCY
Section 5.1 General. If the Company or a
Participating Employer is insolvent, the Trustee shall
cease payment of benefits to Participants and
Beneficiaries attributable to employment with the affected
Employer and hold the portion of the Trust Fund allocable
to the Accounts of such individuals for the benefit of the
Employer's general creditors. For this purpose, an
Employer shall be considered insolvent if it is unable to
pay its debts as they become due, or if it is subject to
a pending proceeding as a debtor under the United States
Bankruptcy Code. The Committee shall inform the Trustee
in writing of the insolvency of any Employer. Unless the
Trustee has actual knowledge of an Employer's insolvency
or has received notice of such insolvency from the
Committee or a person claiming to be a creditor of the
Employer, the Trustee shall have no duty to inquire as to
an Employer's solvency. The Trustee may rely on such
evidence of insolvency as provides it with a reasonable
basis for making a determination concerning an Employer's
insolvency.
Section 5.2 Resumption of Payments. The Trustee
shall resume payment of benefits to the affected
Participants and Beneficiaries under the Plan only after
it has either determined the Employer is no longer
insolvent, or received permission from a court of
competent jurisdiction to resume such payments. If there
are sufficient assets in the Trust Fund allocable to such
Employer and to the Accounts of the affected Participants
and Beneficiaries at the time the Trustee resumes payment
of benefits, the first such payment shall include the
aggregate amount of all payments due to Participants and
Beneficiaries for the period during which benefit payments
were suspended, less the aggregate amount of any payments
made directly by the Company and Participating Employers
during such suspension of benefits.
Section 5.3 Participants as Creditors. Nothing
contained in the Plan or Trust shall diminish the rights
of Participants and Beneficiaries to pursue their rights
as general creditors of an insolvent Employer with respect
to benefits due under the Plan.
ARTICLE VI
TRUSTEE POWERS AND DUTIES
Section 6.1 General. Absent a change in control,
the Trustee shall hold, manage, invest, distribute and
otherwise administer the Trust Fund in accordance with the
terms of the Plan and Trust Agreement and subject to the
specific direction of the Committee. The Trustee shall be
responsible only for contributions actually received by
it. Except as otherwise provided in the event of a change
in control, the Trustee shall have no duty or
responsibility with respect to the investment of the Trust
Fund, administration of the Trust, maintenance of
Participant Accounts, and distributions from the Trust
Fund, other than to follow the specific direction of the
Committee.
Section 6.2 Trustee Standard of Care. The Trustee
shall act with the care skill, prudence and diligence
under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of like
character and with like aims. The Trustee shall not,
however, incur liability to any person for any action
taken pursuant to a direction, request or approval given
by the Committee which is in conformity with the
provisions of the Plan or Trust.
Section 6.3 Trustee Powers. To the extent
consistent with the specific direction of the Committee,
the Trustee is authorized, in its discretion, with respect
to any property at any time held or acquired by the
Trustee (including accumulated income), and without
authorization by any Court:
(a) to collect, receive and receipt for any
principal or income;
(b) to invest at State Street Bank and Trust
Company (i) in any type of interest bearing
investment (including but not limited to
savings accounts, money market accounts,
certificates of deposit and repurchase
agreements) and (ii) in non-interest bearing
accounts (including but not limited to
checking accounts) and (iii) in common or
collective investment funds managed by the
Trustee;
(c) to vote in person or by proxy, or to refrain
from voting, in respect of any securities held by
the Trust Fund, and to exercise any conversion privileges,
subscription rights or other options; to oppose
or consent to reorganizations, recapitalizations,
consolidations, mergers and similar transactions with
respect to such securities;
(d) to retain any asset for any period or
periods of time, to sell or otherwise dispose
of the same at any time, in any manner, for
cash or credit, and upon any terms and
conditions, and to hold all or any part
uninvested for any period or periods of time;
(e) to consent to the modification, renewal, or
extension of any note, whether or not
secured, or any bond or mortgage, or of any
term, provision or guarantee thereof, or to
the release of such guarantee; to refrain
from instituting suits or actions against
such obligors for deficiencies;
(f) to exercise or dispose of any or all options,
privileges, or rights, whether to vote, by
discretionary proxy or otherwise, or to
assent, subscribe or convert, or of any other
nature; to become a part to, or deposit
securities or other property under, or accept
securities issued under, any voting trust
agreement;
(g) to assent to or participate in any
reorganization, readjustment,
recapitalization, consolidation, merger,
contract or other action or proceeding by any
corporation; to deposit securities or other
property under, or become a party to, any
agreement or plan for any such action or
proceeding or for the protection of holders
of securities; to subscribe to new securities
issued pursuant to any such action or
proceeding; to pay any assessments or other
expenses in connection with any of the
foregoing;
(h) upon advice of independent legal counsel, to
adjust, compromise and settle or refer to
arbitration any claim in favor of or against
the Trust created by this Trust Agreement,
and to institute, prosecute or defend any
legal proceedings;
(i) to employ and to pay the compensation of any
custodians and counsel, legal or investment,
and to delegate discretionary powers to, and
rely upon information or advice furnished by,
such custodians or counsel;
(j) to hold property in its name as Trustee or,
to the extent permitted by law, in its name
without designation of any fiduciary capacity
or in the name of a nominee or unregistered
or in such form as will pass by delivery;
(k) generally, to exercise all such rights and
powers, and to do all such acts, and to enter
into all such agreements, as persons owning
similar property in their own right might
lawfully exercise, do or enter into.
Section 6.4 Trustee Records and Accounts. The
Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other
transactions hereunder, and all accounts, books and
records relating thereto shall be open to inspections and
audit at all reasonable times by the Committee or its
delegate. Within ninety (90) days following the close of
each fiscal year of the Trust (which shall be the calendar
year), and within ninety (90) days after the removal or
resignation of the Trustee pursuant to the provisions of
Article VII, the Trustee shall provide the Committee an
accounting of the investments, receipts, disbursements and
other transactions effected by the Trustee or reported to
it by such investment managers as may be appointed
hereunder during the preceding fiscal year or during the
period from the close of the last such fiscal year to the
date of such removal or resignation. Upon the expiration
date of ninety (90) days from the date of filing such
annual or other accounting, the Trustee shall be forever
released and discharged from all liability and
accountability to anyone with respect to the propriety of
all acts and transactions reflected in such accounting,
except with respect to any such acts or transactions as to
which the Committee shall object within such ninety (90)
day period.
The Trustee shall from time to time make such other
reports and furnish such other information concerning the
Trust Fund as the Committee may reasonably request or as
may be required by the Plan.
Section 6.5 Settlement of Accounts.
Notwithstanding the provisions of Section 6.4, the Trustee
shall have the right to apply to a court of competent
jurisdiction for the settlement of its accounts. Any
judgment or decree which may be entered in such a
proceeding shall be conclusive as to all persons having or
claiming to have an interest in the Trust Fund or under
the Plan.
ARTICLE VII
RESIGNATION OR REMOVAL OF TRUSTEES
Section 7.1 General. The Trustee may resign at any
time by delivering thirty (30) days written notice thereof
to the Committee, unless such notice period is waived in
whole or in part by the Committee. The Trustee may be
removed at any time by the Committee delivering to the
Trustee notice of removal in writing. Such removal shall
be effective on the date specified in the notice.
Section 7.2 Successor Trustee. Upon the
resignation or removal of the Trustee, a successor trustee
shall be appointed by the Committee. The Trustee shall
continue to serve, and receive compensation and
reimbursement of its expenses, until a successor accepts
the Trust and receives delivery of the Trust Fund. Any
successor trustee must be a commercial bank or trust
company which is not affiliated with the Company or a
Participating Employer and is established under the laws
of the United States or a State within the United States.
A successor trustee shall have all the rights, powers and
duties granted the Trustee hereunder. Upon the
resignation or removal of the Trustee, the appointment of
a successor trustee, and after the acceptance and approval
of its final accounting, the Trustee shall transfer the
Trust Fund to such successor.
ARTICLE VIII
TAX MATTERS
Section 8.1 Tax Consequences to Grantor. As this
Trust is a grantor trust, within the meaning of Code
section 671, et. seq., all taxable Trust Fund income,
expense, gain or loss is attributable to the Company and
Participating Employers, as applicable, for income tax
purposes. To the extent required by law, the Trustee
shall furnish the Company and Participating Employers with
such informational returns as may be required for federal
or state tax purposes.
Section 8.2 Withholding. The Trustee shall verify
that the Company and Participating Employers have provided
for the reporting and withholding of any federal, state or
local taxes as may be required to be withheld from
payments to Participants and Beneficiaries, and the
payments of the amounts so withheld to the appropriate
taxing authority and, if it determines such provisions
have not been made, the Trustee shall report and withhold
all such taxes and shall pay the amounts so withheld to
the appropriate taxing authority.
ARTICLE IX
AMENDMENT AND TERMINATION OF TRUST
Section 9.1 Amendment of Trust. This Trust
Agreement may be amended, in whole or in part, at any time
by the Company, pursuant to a resolution of the
Compensation Committee of the Board of Directors; provided
no such amendment shall conflict with the terms of the
Plan or make the Trust revocable after it has become an
irrevocable funded trust. No amendment shall increase the
duties and responsibilities of the Trustee without the
Trustee's written consent. After a change in control no
amendment to the Trust Agreement shall be allowed.
Section 9.2 Termination of Trust. This Trust
Agreement shall terminate upon the earlier of (i) an
unfriendly change in control (as that term is defined in
Plan Section 10.2), (ii) the exhaustion of the Fund, or
(iii) the satisfaction of all liabilities of the Company
and Participating Employers under the Plan, unless such
Plan and Trust are earlier terminated by the Company.
Upon the termination of the Trust, and the Trustee shall
follow the direction of the Committee with respect to the
liquidation of the Trust Fund and the payment of the Trust
Fund to Participants and Beneficiaries. After all benefit
liabilities under the Plan have been satisfied, the
Trustee shall, as soon as reasonably possible, wind-up the
affairs of the Trust and pay any amounts remaining in the
Trust Fund to the Company and Participating Employers. If
the Trust is terminated due to a change in control,
however, the provisions of Section 3.2 shall apply.
Section 9.3 Liquidation of Trust. Upon termination
of the Trust the Trustee shall, after the acceptance and
approval of its final accounting, distribute the remaining
Trust Fund assets, if any, to the Company and
Participating Employers. Upon completing such
distribution, the Trustee shall be relieved and discharged
of all liabilities and obligations hereunder. The powers
of the Trustee shall continue as long as any part of the
Trust Fund remains in its possession.
ARTICLE X
MISCELLANEOUS
Section 10.1 Nonalienability. No disposition,
charge or encumbrance on the income or principal of the
Trust Fund, or any part thereof, by any Participant or
Beneficiary by way of anticipation shall be valid or in
any way binding upon the Trustee, and no Participant or
Beneficiary shall have any right to assign, transfer,
encumber or otherwise dispose of such income or principal,
or any part thereof, until the same shall be paid to such
individual by the Trustee, and no income or principal or
any part thereof shall in any way be liable to any claim
of any creditor of any such person.
Section 10.2 Non-ERISA Plans. The Plan is an
unfunded deferred compensation arrangement for a select
group of highly compensated and management employees and
as such is exempt from the application of ERISA, except
for the applicable limited disclosure requirements. The
Plan and Trust are not, and are not intended to be,
qualified under Code sections 401(a) and 501(a),
respectively, and are not subject to any of the Code
requirements applicable to a tax-qualified plan or trust.
Section 10.3 Trustee Compensation and
Expenses. The Trustee shall be paid compensation by the
Company and Participating Employers in accordance with the
Trustee's usual and customary fees, together with its
out-of-pocket expenses, unless otherwise agreed in writing by
the Committee and the Trustee.
The Company and Participating Employers shall
reimburse the Trustee for reasonable expenses incurred in
the management and administration of the Trust Fund
including reasonable expenses of counsel, custodians and
other agents employed by the Trustee. Such expenses and
compensation shall be a charge on the Trust Fund and shall
constitute a lien on the Trust Fund in favor of the
Trustee unless and until paid by the Company.
Section 10.4 Indemnification. The Company and
Participating Employers agree to indemnify and hold
harmless the Trustee from and against any losses, costs,
damages, claims or expenses, including without limitation
reasonable attorneys' fees, which the Trustee may incur in
connection with, or otherwise arising out of, the
performance by the Trustee of its duties hereunder in
accordance with the direction of the Committee, unless
such loss, cost, damage, claim or expense arises due to
the Trustee's gross negligence or willful misconduct.
Section 10.5 Governing Law. This Agreement
shall be construed and interpreted under, and the Trust
hereby created shall be governed by, the substantive laws
of the Commonwealth of Massachusetts.
Section 10.6 Gender. Neither the gender nor
the number (singular or plural) of any word shall be
construed to exclude another gender or number when a
different gender or number would be appropriate.
Section 10.7 Successors and Assigns. This
Trust Agreement shall be binding upon and inure to the
benefit of any successor to the Company as the result of
merger, consolidation, reorganization, or otherwise, and
any such successor shall promptly notify the Trustee in
writing of its successorship and furnish the Trustee with
such information as it shall require to fulfill its
responsibilities hereunder.
Section 10.8 Counterparts. This Trust
Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all
of which shall together constitute only one agreement.
Section 10.9 Addresses of Parties.
Communications to the Trustee shall be sent to
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attn: Michael Richal, Operations Officer
or to such other address as the Trustee may specify in
writing. Communications to the Company shall be sent to
the Company's principal offices or to such other address
as the Company may specify in writing.
Section 10.10 Severability. If any
provision of this Trust Agreement or the application
thereof to any person or circumstance shall be determined
by a court of proper jurisdiction to be invalid or
unenforceable, the remainder of this Trust Agreement, or
its application to such persons or circumstances other
than those as to which it is held invalid or
unenforceable, shall not be affected, and each provision
of this Trust Agreement shall be valid and enforceable to
the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused
this Trust Agreement to be duly executed this _____ day of
__________, 19___.
STATE STREET BANK AND TRUST COMPANY
Attest:
By
Its
Attest:PENTAIR, INC.
By Roy T. Rueb
Its Vice President
EXHIBIT 11
<TABLE>
<CAPTION>
PENTAIR, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
YEARS ENDED DECEMBER 31
1991 1992 1993 1994 1995
INCOME ($ THOUSANDS)1
<S> <C> <C> <C> <C> <C>
Income before cumulative effects
of accounting changes $41,100 $42,800 $46,600 $53,600 $77,200
Cumulative effects of
accounting changes - (41,625) - - -
Net Income 41,100 1,175 46,600 53,600 77,200
Preferred Dividend Requirements 6,358 8,545 6,114 5,416 5,203
Earnings Available to Common and
Common Equivalent Shares - Primary 34,742 (7,370) 40,486 48,184 71,997
Preferred dividends assuming
conversion of Preferred Stock:
Series 1987 3,000 3,000 620 0 0
Series 1988 658 1,065 1,044 1,016 983
Series 1990 2,700 4,480 4,450 4,400 4,220
Tax benefit on preferred
ESOP dividend eliminated
due to conversion into common - (700) (833) (1,046) (1,243)
Tax benefit on ESOP
dividend assuming con-
version to common -
at common dividend rate 690 215 276 366 481
Earnings available to Common
and Common Equivalent
shares - Diluted $41,790 $690 $46,043 $52,920 $76,438
SHARES (thousands)1
Weighted average number of shares
outstanding during the period 31,302 31,584 35,356 36,408 36,812
Shares issuable on exercise
of stock options less
shares repurchaseable
from the proceeds 256 288 426 436 488
Common and Common Equivalent
Shares - Primary 31,558 31,872 35,782 36,844 37,300
Shares issuable on conversion of:
$1.50 Cumulative Convertible
Preferred Stock Series 1987 4,356 4,356 830 0 0
$7.50 Callable Cumulative
Convertible Preferred Stock
Series 1988 1,320 1,122 1,044 1,016 982
8% Callable Cumulative Voting
Convertible Preferred Stock
Series 1990 4,302 4,284 4,254 4,220 4,098
Common and Common Equivalent
Shares - Diluted 41,536 41,634 41,910 42,080 42,380
EARNINGS PER SHARE1
PRIMARY
Income from:
Continuing Operations $0.47 $0.64 $0.76 $1.21 $1.48
Discontinued Operations 0.63 0.43 $0.37 0.10 0.45
Earnings before cumulative
effects of accounting changes 1.10 1.07 1.13 1.31 1.93
Cumulative effects of
accounting changes 0 (1.30) 0 0 0
Net income (loss) $1.10 $(.23) $1.13 $1.31 $1.93
DILUTED
Income from:
Continuing Operations $0.47 $0.64 $0.76 $1.17 $1.41
Discontinued Operations 0.53 0.37 $0.34 0.09 0.40
Earnings before cumulative
effects of accounting changes $1.00 $1.01 $1.10 $1.26 $1.81
</TABLE>
NOTES:
1 Adjusted for stock dividend of 50% in June 1993 and
stock dividend of 100% in February 1996.
EXHIBIT 13
Pentair 1995
In 1995 We Increased
Our Earnings,
Boosted Our Cash Flow, Acquired Two New Businesses, and Focused
on Growing as a
Diversified Manufacturer.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights 1995
In Thousands, Except per Share Data and Percentages
1995 1994 % Change
<S> <C> <C> <C>
Net Sales $1,402,871 $1,261,705 11%
Income from Continuing
Operations $60,500 $50,103 21%
Net Income $77,200 $53,600 44%
Earnings per Share from
Continuing Operations
Primary $1.48 $1.21 22%
Diluted $1.41 $1.17 20%
Cash Dividends per Common Share $.40 $.36 11%
Common Shareholders'
Equity per Share $12.37 $10.71 15%
Preferred Shareholders'
Equity $44,582 $40,916 _
Common Shareholders' Equity $458,273 $391,058 _
Return on Average Common
Shareholders' Equity 16.9% 13.2% _
Capital Expenditures $63,838 $57,861 10%
Total Assets $1,252,493 $1,161,142 8%
Long-term Debt to
Total Capital 31% 49% _
Common Shares
Outstanding at Year-End 37,035 36,496 _
Average Common and Common
Equivalent Shares 37,300 36,844 _
Number of Employees
9,150 8,525 _
<FN>
Share and per share data have been restated to reflect stock dividend in
February 1996.
</TABLE>
<PAGE>
Pentair 1995
We Continue to Grow
and Add Value
for Our Stakeholders,
Guided by Our
Code of Business Conduct and Driven by the
Strategies Described
in this Report.
#
<PAGE>
Letter to Our Shareholders
Pentair
In 1995, Pentair successfully adjusted its focus and redefined its
business mix. Change and rapid growth characterized this
year in which we took important steps to enhance our position as a
leading diversified manufacturer and establish global presence in our
major industrial product markets. As we deploy our energies and
resources, our new focus and strategy will lend Pentair new stability,
strength, and scope.
STABILITY: In 1994, we set a strategic objective to exit the paper market
and focus on the growth of our industrial businesses. In 1995, we
carried out the plan. Now, as a company fully focused on industrial
manufacturing, our performance will be more consistent, our operations
will be less capital intensive, and our sales and earnings will be
less influenced by economic cycles.
STRENGTH:The sale of our paper businesses allowed us to strengthen our
capital position by reducing debt and eliminating significant lease
commitments. Proceeds from the sale are being used for aggressive
development of our existing businesses and for acquisitions in areas
of strategic focus.
SCOPE: In 1995, we acquired two excellent businesses which met our
strategic growth objectives. Fleck Controls gives us entry and leading
market share in the water conditioning controls industry; and
Biesemeyer supplements Delta's line of woodworking accessories. A
third acquisition in early 1996 of Aplex supplements Myers' industrial
pumps offerings. We continue to seek acquisitions that will allow our
businesses to expand and compete at broader levels.
Net sales from 1995 continuing operations increased 11 percent over 1994
levels, while income from continuing operations grew 21 percent over
the previous year. Earnings per share increased 20 percent, and our
common stock price increased from $213\8 at year-end 1994 to $247\8 at
year-end 1995. In January 1996, the board approved a 25 percent
increase in 1996 quarterly cash dividends, making this the 20th
consecutive year of increased dividends. Dividends and share price
appreciation resulted
in total return to shareholders of 18.3 percent in 1995.
<PAGE>
Two moves in 1996 made Pentair more accessible and valuable to our
shareholders. In February, we split our common stock two-for-one,
increasing the shares outstanding to approximately 37 million; and in
early March, we began trading our stock - under the symbol <PAGE> -
on the New York Stock Exchange to improve our visibility in the
international investment community and broaden our shareholder base.
These moves were in keeping with our objective of encouraging broad
ownership among our stakeholders.
The new Pentair is growth-minded, yet grounded in business fundamentals.
Pentair's values and operating style continue to be based on a
strongly decentralized model that focuses on the ethics, innovation,
leadership, and participation of its people. This management
philosophy has stood the test of time,
and we believe it will continue to be a major factor in Pentair's
growth and prosperity.
As part of the process of change, however, we have adapted our strategies
to the realities of the current business environment. We have expanded
beyond being broadly diversified with a focus on turning around
underperforming companies and developing their niche markets. And,
as Pentair has matured, we have moved our major product lines into
international markets and broadened our channels of distribution to
serve
<PAGE>
all our potential customers. We now have a leading global market
position in some of our major product lines, while in others we
possess strong, growing market share. This requires that we allocate
our resources
to enhance that strategic position and to provide services that are
significantly value-added.
Much of Pentair's development strength is found in its aggressive
approach to innovation, not only in terms of product development, but
in terms of distribution, marketing, customer service, and our
management approach. We expect innovation and performance from our
people, and feel strongly that our decentralized yet participative
work system encourages creative thinking and new approaches to the way
we do business. One of Pentair's chief competitive advantages is the
ability of our people to develop and produce value-added products and
to deliver them with consistency, integrity, and service to the
customer.
Pentair is guided by a Code of Business Conduct established by the early
leaders of the company (see inside back cover). Our standards are
high. We manage our businesses so that we are respected for our
actions by stakeholders _ including employees, plant communities,
customers, suppliers, and shareholders. We honor our agreements, meet
our obligations on time, maintain the spirit and intent of our
commitments, and value good relationships.
Because of our commitment to these high principles, our business
transactions tend to be friendly and mutually beneficial. In the
second quarter of 1995, our paper businesses were sold to companies
that could provide them with broad opportunities and resources, and
would maintain the commitments we had made to mill employees,
customers, suppliers, and communities. In the acquisition transactions
of 1995 and early 1996, corporate culture and management practices
figured significantly in the
Focused on growth and top performance.
Guided by our Code of Business Conduct.
Protecting the interests of all stakeholders.
<PAGE>
owners' decision to sell to us. When we
buy businesses, we buy for
the long term. Some 75 percent of the officers of our subsidiaries were
employees of the businesses prior to Pentair ownership.
Employee satisfaction and high standards of performance continue to be
our hallmarks. At every level of business, we encourage employee
participation, communication, and skills development. We maintain a
lean corporate structure, and strive to keep decision-making as close
as possible to the operations themselves so that subsidiary businesses
can function autonomously. Equally important, we intend to remain an
independent public company, believing that only through independence
can we continue serving the best interests of our stakeholders.
The strategies and tactics of our subsidiaries, and of Pentair as a
whole, are
to continue the growth of our existing businesses through internal
development, supplemented by appropriate acquisitions. We will
continue to look for turnaround situations where feasible and
practical, but first and foremost, we will pursue acquisitions that
enhance the value of our existing businesses.
I would like to thank all of our stakeholders - employees, shareholders,
customers, suppliers, and communities in which we operate - for their
support and contributions in developing Pentair. We are optimistic
that 1996 will prove to be a very successful year, and as a management
team, we remain confident that the best years for Pentair are still
ahead.
Winslow H. Buxton
Chairman, President, and Chief Executive Officer
<PAGE>
Electrical Business Strategies
Pentair
Augmenting each other's strengths in product
design, marketing, and manufacturing through partnering, Hoffman and Schroff
are capturing
an increasingly greater share of the world enclosures market.
Mounting global initiatives with combined resources, Sales Vice Presidents
Ronald Weingartner of Schroff and Del Nickel of Hoffman Engineering are
working together for a bigger piece of the world enclosures market.
Cross-marketing is one tactic providing each
company with access to new market territories.
<PAGE>
Today, electrical and electronic enclosures represent a $5 billion market
worldwide. To be recognized as the unequivocal market leader in this
industry by the year 2000 is the shared goal of Hoffman Engineering
Company and Schroff, the two companies that comprise our enclosures
business. Currently Hoffman has a leading share of the electrical
enclosures market in North America while Schroff leads the electronic
enclosures market in Europe. Together, they hold a major share of the
world market, and they are positioning themselves for further growth.
To leverage their leadership positions and increase market share, Hoffman
and Schroff continue to cultivate the synergistic partnership that
began in 1994 when Schroff became a Pentair company. Through
cooperative efforts in 1995, Hoffman and Schroff penetrated new
markets and expanded product offerings at record rates.
At the 1995 Hannover Fair, for the first time under one banner, Hoffman
and Schroff introduced new product lines. This joint marketing venture
fulfilled two goals: it provided Hoffman a significant channel for
European sales, and it gave Schroff entry into the European electrical
enclosures market. Inclusion of each other's product lines in catalogs
boosted sales for both companies. Cooperative manufacturing
arrangements also have allowed Hoffman to begin manufacturing
electronic enclosures. Schroff, which began manufacturing electrical
en closures in the United Kingdom in 1994, will expand to continental
Europe in 1996.
A joint product development team comprised of staff from Schroff and
Hoffman launched an effort in 1995 to develop an enclosure that would
meet the diverse needs of both companies' customers. Combining
Schroff's expertise in electronics packaging with Hoffman's knowledge
of industrial enclosures resulted in a new enclosure line which will
be introduced to European markets in 1996. Meanwhile, Hoffman and
Schroff
<PAGE>
have already begun additional joint development projects that
will further reinforce their leadership position and reputation for
quality products in the global enclosures market.
Hoffman and Schroff entered the rapidly growing Southeast Asian market in
June, opening a joint sales office in Singapore. This strategic
location provides access to the Pacific Rim and complements our
manufacturing location in Japan. In anticipation of increasing product
demand, electrical enclosures will be stocked in the region by the
second half of 1996.
Expansion into new geographical territories, joint product development,
and shared marketing initiatives are expected to dramatically increase
sales volumes and raise production demands. Anticipating growth, Hoffman and
Schroff have taken steps to construct new facilities and expand
existing capacity in North America, Europe, and Asia. For example, in
late January 1996, Hoffman announced plans to build a new $30 million
large enclosure manufacturing facility in Mount Sterling, Kentucky.
Aggressive cross-marketing and joint product development made 1995 a year
of unprecedented sales growth and territory expansion for our
enclosures business. We will continue to support Schroff/Hoffman
partnership strategies, which amplify the collective strengths of both
companies and contribute significantly to Pentair's overall vision of
global presence and growth.
Layering strength upon strength, Hoffman and Schroff thrive. At our current
rate of growth, we will hold the leading global market share in enclosures by
the year 2000.
<PAGE>
Tool Business Strategies
Pentair
By the turn of the century, Pentair's tool businesses will more than double
in size on the strength of
low-cost manufacturing, multi-channel distribution, savvy marketing, and
innovative new products.
Elevating the art of innovative tool development to new heights, Lou Brickner
of Delta International and Matt Popik of Porter-Cable lead teams of designers
whose products have earned 28 awards in the last four years.
<PAGE>
Tool Business Strategies
Pentair
Pentair businesses compete in markets where survival is dependent on the
ability to generate a steady stream of new products. The companies
that comprise our tool business _ Delta International Machinery Corp.
and Porter-Cable Corp. _ are highly successful competitors in
challenging markets because they continuously invest in innovative
product design and development, bring products to market quickly, and
market them aggressively. Successful pursuit of this strategy is
reflected in the fact that new products introduced since 1990
represent 59 percent of Delta and Porter-Cable 1995 combined sales.
Innovative product development is our hallmark. Porter-Cable's Profile
Sander, which was introduced in 1995, rapidly exceeded our unit sales
projections. Sales rose even higher when the sander was selected by
Popular Mechanics for the magazine's prestigious 1995 Design and Engineering
Award. More recognition followed, including the 1995 National Hardware
Show's Retailer's Choice Award. Our products consistently receive
honors for their innovation and quality.
New product offerings are being created through a balance of internal
development and the acquisition of well-respected, related businesses.
In 1995, Delta purchased Biesemeyer Manufacturing Corporation of Mesa,
Arizona, a maker of premier saw fences and woodworking accessories.
The Biesemeyer acquisition brought 24 new accessories to Delta's
machinery line, and gave Delta customers new options for accessorizing
Delta products.
Staying price-competitive in the home center market requires constant
review of manufacturing and sourcing options. Our tool businesses
supplement U.S. manufacturing by sourcing
<PAGE>
tools and components from
partners based in Australia, Taiwan, and mainland China. Sourcing
allows Delta and Porter-Cable to dramatically increase the number of
new tools brought to market and to complete that process in a fraction
of the time.
Porter-Cable this year broke ground for a 128,000-square-foot
distribution center in Jackson, Tennessee, to make more space
available in the existing facility for manufacturing, and to meet the
growing needs of distribution and customer service. Both Delta and
Porter-Cable improved their warehouse management systems to achieve
shorter lead times, higher fill rates, and just-in-time delivery.
Strong national television exposure lends sustained support to our
marketing initiatives. Delta and Porter-Cable continue to promote
woodworking as a hobby by underwriting the increasingly popular New
Yankee Workshop and American Woodshop on PBS. Each week, these
programs, which reach a targeted audience of 12.5 million
do-it-yourselfers, strengthen our reputation, brand name recognition,
and sales. Our distributors also benefit at the local level through
co-op advertising.
In the future, our goal of growing twice as fast as the rapidly growing
North American tool market will be accomplished through a balance of
internal development and acquisition. As we pursue growth, we will
seek to expand our product accessories offering and ultimately broaden
the definition of what constitutes a tool.
Additional investments in internal development and related acquisitions are
building the market strength of Pentair's tool businesses.
<PAGE>
Tool Business Strategies
Pentair
#
<PAGE>
Water Products Business Strategies
Pentair
A key element of Pentair's strategic plan involves expanding our presence in
the fast-growing global water products market.
Pentair's acquisition of Fleck Controls, Inc. in November 1995 was a major
step in this process.
Fred Lavender, president of Pentair's F.E. Myers pump company, and John
Hosler, Fleck Controls' president, reflect the management
skill and expertise that
are essential in Pentair's effort to capture a significant share of the
global water products market.
#
<PAGE>
Water Products Business Strategies
Pentair
In 1995, we began assessing the $4 billion global water products market
which includes pump, water system, water conditioning, and filtration
markets _ to determine if it would be a suitable focus for Pentair business
development. The market's 10 percent annual growth rate, combined with
increasing demands for potable water in developing countries and more
stringent requirements for water quality in developed nations, were
indicators of excellent opportunity. We subsequently launched an
initiative to expand our presence in the water products market.
Our strategy for achieving growth in this market is two-pronged. We will
enhance our current pump offering by accelerating new product
development at F. E. Myers Co., and we will acquire businesses that
either supplement our existing product lines or provide us entry into
new product categories within the water products market.
On November 1, 1995, we took a major first step in entering the water
treatment business when we purchased privately held Fleck Controls,
Inc. of Brookfield, Wisconsin, and its French subsidiary, Fleck
Europe. Fleck designs, manufactures, and markets control valves which
are major components in residential water softeners and commercial and
industrial water conditioning systems. The former president of our
Lake Superior Paper Industries joint venture, John Hosler, was
appointed president of Fleck, which employs about 260 people in
Brookfield and 50 at its Buc, France location.
Fleck is an ideal fit with Pentair from the standpoints of corporate
culture and
<PAGE>
strategic growth objectives. The acquisition gives us an
enviable position in the global water controls marketplace. Fleck
commands a leading share of the worldwide residential water
conditioning controls market and holds a similar share of the
international commercial/industrial water conditioning controls
market. Its strong brand name, extensive product line, and
well-established distribution channels provide the platform for rapid,
far-reaching market expansion.
F. E. Myers, the 125-year-old pump company upon which we are building our
water products business, produced record earnings in 1995. Cost
reductions and excellence in operations management contributed to the
best year in the history of the company. In addition, Myers'
acquisition of Aplex Industries Inc. of Midland, Texas, in January 1996
supplemented Myers' existing industrial
pump line with specialized reciprocating pumps, parts, and accessories.
The addition of Aplex to Myers gives Pentair a significantly greater
presence in the industrial pump market.
We intend to further develop our water products business by capitalizing
on the strengths of Myers and Fleck: their established customer
relationships and their reputations for product reliability and
qality. Concurrently,
we will continue to pursue acquisition strategies that allow us to expand
existing product offerings and enter new channels within the water
products market.
The acquisitions of Fleck Controls and Aplex, together with the strong
ongoing performance of Myers, give Pentair an excellent base upon which to
build its presence in the water products market.
<PAGE>
Emerging Businesses Strategies
Pentair
Essential to fulfilling our performance objectives is cultivating our
emerging
businesses through a combination of manufacturing refinements, marketing,
investment, product development, and
acquisition strategies.
Determining the next major business segment to take a seat with the existing
electrical, tool, and water products businesses is a responsibility of
Pentair's operations leadership, Gerry Kitch, Rick Cathcart,
and Joe Collins.
<PAGE>
Emerging Businesses Strategies
Pentair
Pentair's vision for business development is broad in scope, and goes
well beyond tools, water products, and electrical. A stated objective of our
strategic plan is to identify and establish other major business
segments
that we can drive and grow. For direction, we look to our Lincoln
Industrial, Lincoln Automotive, and Federal Cartridge Company
businesses and the lubrication, automotive servicing, and ammunition
markets they represent.
These businesses are steadily performing, well-managed companies that
have the potential to become major Pentair business segments. We
nurture these businesses and support efforts to enhance manufacturing,
marketing, and product development approaches that will contribute
to their internal growth. At the same time, we continue to explore
acquisition opportunities that will allow us to achieve greater impact
in targeted markets.
Federal Cartridge, which has clearly established itself as the technology
leader in the ammunition business, continues to broaden its innovative
product line. In 1995, nontoxic lead-free BallistiCleantrademark
bullets were developed to improve shooting range environments, and
high-power TacticalRegistration Mark pistol cartridges for law
enforcement applications were introduced. Today, law enforcement
agencies rely on Federal ammunition and account for a sizeable portion
of Federal's total sales. Federal's competition loads, which helped
the U.S. Shooting Team win two Olympic medals in 1992, continue to win
awards for competitive shooters. In 1995, Federal sustained its
position or gained in all markets; it is one of three major suppliers
of ammunition in the United States.
Lincoln Industrial, our international lubrication business which has
operations in the United States and Germany, turned in an outstanding
financial
<PAGE>
performance in 1995. An innovative new marketing program,
which helped reposition a product line, contributed to a 14 percent
increase in 1995 sales. Moving a portion of its European manufacturing
to plants in the Czech Republic introduced significant cost
efficiencies. This
was reflected in a 17 percent improvement in productivity. Lincoln
Industrial continues to be competitively strong in its market, and is
positioning itself through new product development and new marketing
strategies to capture a greater share of the automated lubrication
market which is expanding as customers convert from manual to automated
lubrication systems.
Lincoln Automotive improved its performance in 1995, despite a flat
market. The company, which sells vehicle service equipment and supplies to
automotive aftermarkets, in 1995 was named the NAPA Tools and
Equipment Supplier of the Year for the second year in a row. The
MarquetteRegistration Mark welding equipment line, acquired in 1992
and reintroduced in late 1994, is Lincoln's fastest growing product line with
1995 sales of approximately $14 million.
We continue to evaluate opportunities to build a major business segment
using one of our emerging businesses as the cornerstone. We also seek
to acquire substantial, established companies with products,
manufacturing, or distribution to blend with and accelerate the growth
of our existing companies. Finally, we seek what we call
"opportunistic" acquisitions _ underperforming businesses that may
operate in industries unrelated to those in which we currently conduct
business and that, once revitalized, will generate above-average
returns for our shareholders.
By nurturing its
emerging businesses
with management expertise, investment, and product development, Pentair
will continue its history of profitable growth.
<PAGE>
Subsidiaries
Pentair
Pentair, Inc. Pentair, with approximately 9,000 employees world wide, is
composed of nine diverse manufacturing businesses which operate under
a common Code of Business Conduct. These businesses provide
construction, woodworking, recreation, electronics, law enforcement,
water conditioning, automotive, and industrial markets with a wide
range of innovative, quality products. Headquartered in St. Paul,
Minnesota, Pentair was incorporated in 1966. Its subsidiaries span the
globe with 32 operations in North America, Europe, and Asia. Pentair
common stock is listed on the New York Stock Exchange under the
symbol: PNR.
Waters Edge Plaza, 1500 County Road B2 West, St. Paul, MN 55113-3105,
612/636-7920
CORPORATE OFFICERS
Winslow H. Buxton, Chairman, President, and Chief Executive Officer
Richard J. Cathcart, Executive Vice President
Joseph R. Collins, Executive Vice President
James H. Frank, Senior Vice President, Enclosures
David D. Harrison, Executive Vice President and Chief Financial
Officer
Ronald V. Kelly, Senior Vice President
Gerald C. Kitch, Executive Vice President, President International
Business Development
Deb S. Knutson, Vice President, Human Resources
Roy T. Rueb, Vice President, Treasurer, and Secretary
DELTA INTERNATIONAL MACHINERY CORP. Products A full line of homeshop
products, select contractor tools, a broad line of general purpose
stationary woodworking machinery, and a complete line of accessories.
<PAGE>
Markets Residential, commercial, and industrial construction;
do-it-yourself/homeshop craftsmen; remodeling; and cabinet
manufacturers, case goods, and furniture makers. President Nevin J.
Craig
Employees 700 Locations Pittsburgh, Pennsylvania; Tupelo,
Mississippi; Memphis, Tennessee; Guelph, Ontario, Canada; Mesa, Arizona;
and Taichung, Taiwan. 246 Alpha Drive, Pittsburgh, PA 15238,
412/963-2400
Federal Cartridge Company Products Shotshell, centerfire, and rimfire
cartridges; ammunition components; and clay targets. Markets Hunting;
trap, skeet, sporting clay, and target shooting; the U.S. government;
and law enforcement agencies. President Ronald V. Mason Employees 1,200
LOCATIONS Anoka, Minnesota; and Richmond, Indiana. 900 Ehlen Drive, Anoka,
MN 55303, 612/421-7100
Fleck Controls, Inc. Products Residential, commercial, and industrial
control valves and accessories for water softening, conditioning, and
filtration. Markets Residential, commercial, and industrial water
conditioning. President John C. Hosler Employees 310
Locations Brookfield, Wisconsin; and Buc, France. 20580 Enterprise Way,
Brookfield, WI 53005-1006, 414/784-4490
Hoffman Engineering Company Products Metallic and composite enclosures
and cabinets for electrical and electronic controls, instruments, and
components. Markets Original equipment manufacturers; plant
maintenance and repair; and construction. President Richard W. Ingman
Employees 2,250 Locations Anoka, Minnesota; Brooklyn Center, Minnesota;
Scarborough, Ontario, Canada; Hemel Hempstead, Hertfordshire, United
Kingdom; and Reynosa, Mexico. 900 Ehlen Drive, Anoka, MN 55303,
612/421-2240
<PAGE>
Lincoln Automotive Products Vehicle service products including
lubricating tools and equipment, battery charging and testing
equipment, welding equipment and supplies, and a complete line of
lifting equipment including hydraulic jacks and specialty tools.
Markets Automotive after-markets
including automotive repair and vehicle
maintenance, farm, and industrial. Products are marketed through a
distributor network to professional mechanics and vehicle maintenance
facilities.
President Barry J. Wetzel Employees 560 Locations St. Louis, Missouri;
Jonesboro, Arkansas; Nogales, Mexico; and Mississauga, Ontario, Canada. One
Lincoln Way, St. Louis, MO 63120-1576, 314/679-4300
Lincoln Industrial Products Automated and manual lubrication systems
and equipment; pumps and pump stations for thick fluids and viscous
materials. Markets Manufacturers, process plants, mining, printers,
and general lubrication. President Mark T. Schroepfer Employees 770
Locations St. Louis, Missouri; Walldorf, Germany; Detroit, Michigan;
and Chodov, Czech Republic. One Lincoln Way, St. Louis, MO 63120-1576,
314/679-4200
F. E. Myers Co. Products Pumps for residential and municipal wells; sump
pumps for residential service; submersible non-clog and grinder pumps
and systems for residential, commercial, and municipal service; and
reciprocating and centrifugal pumps for commercial and industrial
services. Markets Wholesale and retail distribution to residential users,
municipal environmental organizations, and industrial manufacturing
companies. President Fred C. Lavender Employees 600
Locations Ashland, Ohio; Midland, Texas; Kitchener, Ontario,
Canada; Jacksonville, Florida; and Sacramento, California.
1101 Myers Parkway, Ashland, OH 44805-2285, 419/289-1144
<PAGE>
Porter-Cable Corporation Products Portable electric tools including
circular saws, reciprocating saws, band saws, belt sanders, random
orbit sanders, drills, and routers. Markets Woodworking, residential,
and industrial construction; industrial fabrication and maintenance;
and home craftsmen. President James A. White Employees 950
Locations Jackson, Tennessee. 4825 Highway 45 North, Jackson,
TN 38302-2468, 901/668-8600
Schroff Products Cabinets, cases, subracks, microcomputer packaging
systems, and a full line of accessories including backplanes, power
supplies, and technical workstations. Markets Industrial electronics
industry including key segments such as computers, test and measurement,
private LANs/data communication, industrial control and factory
automation, medical, and telecommunications.
Co-Presidents Vince Tomlinson, Benno Gengenbach Employees 1,450 Locations
Straubenhardt, Germany; Betschdorf, France; Hemel Hempstead,
Hertfordshire, United Kingdom; Warwick, Rhode Island; Yokohama and
Meiwa-Cho, Japan; Skarpnack, Sweden; Gallarate (Varese), Italy; and
Singapore. Langenalber Str. 96-100,
D-75334 Straubenhardt, Germany, (7082) 794-0
<PAGE>
Financial Table of Contents
Pentair, Inc. and Subsidiaries
Financial Review 29
Management's Discussion & Analysis 30
Report of Management 36
Report of Independent Certified Public Accountants 36
Financial Statements 37
Notes to Consolidated Financial Statements 42
Selected Financial Data - Ten-Year Summary 57
<PAGE>
Financial Review
Pentair, Inc. and Subsidiaries
Overview The Pentair vision is to be an independent, top-performing,
consistently growing, diversified industrial company composed of
subsidiaries that are recognized as leaders in their markets and whose
combined performance maximizes benefits to shareholders, employees,
customers and other stakeholders. Pentair is guided by its Business
Code of Conduct and respected for and by its people.
Pentair, Inc. has strategic and financial objectives that guide
management decision-making in creating value for its shareholders.
Pentair achieved solid financial results in 1995. Sales of continuing
operations of $1.4 billion represented an increase of 11% over the
previous year's comparable results. Earnings per share of continuing
operations increased 20% to $1.41 per share in 1995. Free cash flow
from continuing operations was $35 million in 1995 compared to $12 million in
1994.
Total Return to Shareholders Pentair seeks to maximize value with
strategic planning for long-term performance. The Company believes
shareholder value is best measured by dividend returns and equity
value growth, which are enhanced when EPS growth and ROE goals are
achieved.
The Company continued its strong track record returning an average of 26%
return to the shareholder in the five year period. Pentair achieved an
18% total return to shareholders for the year ended December 31, 1995.
Financial Goals The financial goals are to achieve: a 10% EPS growth -
annual growth in earnings per share over any ten-year period; and a
15% ROE - average return on common shareholders' equity over any five-year
period. The Company approached its ROE objective for 1995, achieving a
14.0% ROE for the five-year period ending with 1995. The Company
reached its EPS objective achieving a 16.7% EPS growth rate over the
ten-year period. Recently, the Company evaluated its financial results
and has raised its goals to a 15% EPS growth in the near-term coupled
with a 17% ROE.
<PAGE>
Management's Discussion & Analysis
Pentair, Inc. and Subsidiaries
Strategic Transactions In September 1994, Pentair announced that it was
exploring strategic alternatives for its paper businesses, including
their possible sale. In the second quarter of 1995, all of the Pentair
paper businesses were sold. The sale transactions have permitted
Pentair to focus its commitment and resources in the industrial
products sector, continuing the strong growth and leading market
positions these businesses have achieved.
In 30 years of business, Pentair has achieved a reputation as one of the
nation's premier diversified, growth-oriented manufacturing companies.
To maintain this reputation and enhance value for our shareholders, it
is important that we continue to follow the fundamentals that helped
us grow as we pursue a new, more aggressive strategic plan.
Financial Condition The Company's financial condition grew stronger in
1995 with cash from operations being sufficient to fund business growth and
capital expenditures.
In 1995, the sale of the businesses in the Paper Products and Joint
Venture segments substantially increased the financial strength of the
Company. Funds obtained from the sale of these businesses were used to
reduce private placement debt, and revolving credit borrowings.
The Company has managed its financial condition to position itself in
accordance with its strategic plan of focusing on its industrial
businesses. The success of this financial management has led to
efficient use of resources in maximizing cash flow from operations and
minimizing external borrowing.
Cash from operating activities reached $105.7 million in 1995 compared to
$75.2 million in 1994 as restated. Focused management of working
capital levels, in relation to increased sales volume, helped cash
flow. In 1995, cash from operations was sufficient to cover capital
expenditures, investments in marketable securities in the captive
insurance subsidiary and to cover dividend payments. The Company
attained a positive free cash flow from continuing operations of $34.8
million in 1995 compared to $12.2 million in 1994. Free cash flow, a
measure of the internal financing of operational cash needs, is
defined as cash from operations, less net operating investments,
excluding acquisitions or dispositions of major business lines.
Looking ahead to 1996, cash from operating activities generated by the
industrial businesses is anticipated to more than cover investments in
capital, dividends and small synergistic acquisitions. The Company
is in a position to finance additional acquisitions without significantly
effecting its financial condition.
Pentair invests capital to maintain existing businesses, introduce new
products and develop new businesses. In the last five years, $204
million has been reinvested in the businesses. Pentair has invested
$63.8 million, $57.8 million and $28.1 million in the businesses in the
Specialty Products and General Industrial
Equipment segments for the periods
ending December 31, 1995, 1994 and 1993, respectively.
<PAGE>
Capital outlays are expected to be about $90 million in 1996. Future
projects include a new manufacturing plant for Hoffman Engineering in
Mount Sterling, Kentucky; reconfiguration and expansion of
manufacturing facilities; upgrading of information technology systems;
and new product development. Over the past 2 years, environmental
capital expenditures have accounted for significantly less than 5% of
the total capital spending. Amounts in the future are anticipated to
be even less.
In 1995, the Company acquired Fleck Controls Inc. for approximately $134
million, net of cash acquired, of which $13.2 million was financed through
revolving borrowings and the balance by delivery of promissory notes
payable in 1996. These notes were paid in January through the use of
$100 million from a deferred payment received in connection with the sale of
the paper businesses and the balance from revolving borrowings. In
1994, by contrast, the Company acquired Schroff GmbH for approximately $140
million, net of cash acquired, financed entirely through existing domestic
and new foreign revolving credit facility agreements.
As a result of the sale of its Paper businesses, Pentair's financial
condition improved greatly in 1995, permitting the Company to repay
in full, as of the end of the year, all U.S. revolving borrowings and to
reduce its private placement debt. Even taking into account the
acquisition of Fleck Controls, a portion of the purchase price of
which was paid through the use of its revolving loan agreements,
Pentair's long-term debt to total capital ratio as of December 31,
1995 was 31%, down from 49% at the end of 1994.
Based upon current operating plans, the credit available under revolving
credit facilities is considered adequate to cover seasonal working
capital, long-term capital expenditures, and captive insurance company
investments.
In January 1996, the Company raised its quarterly dividend to 12.5 cents
per share (25 cents pre-split), or an annual rate of $.50 per share
($1.00 pre-split). This is a 25% increase over 1995.
Pentair has increased its dividend payment each year since
1976.Since the first cash dividend in 1976, dividends have increased at an
average annualized growth rate of 16%.
<PAGE>
<TABLE>
<CAPTION>
Results of Operations
General
Specialty Industrial
In Thousands Products Equipment Corporate Total
<S> <C> <C> <C> <C>
Sales
1995 $516,841 $886,030 - $1,402,871
1994 465,573 796,132 - 1,261,705
1993 411,570 534,994 - 946,564
Operating Income
1995 $56,655 $82,872 $(23,280) $116,247
1994 49,518 76,003 (19,947) 105,574
1993 41,973 42,181 (16,021) 68,133
</TABLE>
Consolidated
1995 Versus 1994 Consolidated net sales from continuing operations
increased to $1,402.9 million in 1995, representing an 11.1% increase
over 1994. Continued strength in both domestic markets as well as
interna-tional sales helped propel the double digit growth rate. The
acquisition of Fleck Controls at the beginning of November contributed
less than 1% to this increase. With sales growth split evenly between
the Specialty Product and General Industrial segments, we saw
continued strength from new product introductions and further
distribution channel penetration.
Operating income from continuing operations increased to $116.2 million
in 1995, up 10.1% over 1994. Net income increased by 44.0% to $77.2
million versus $53.6 million in 1994. Double digit growth from continuing
industrial operations, lower interest cost and a gain from the sale of
our paper operations drove the substantial increase in net income.
<PAGE>
Gross profit margin was slightly lower at 29.0% versus 29.3% in 1994 due
primarily to additional cost in penetrating new channels
of distribution and a product mix shift in sporting ammunition. As a
result of increased sales and productivity improvement, the industrial
businesses again reduced their selling, general and administration
(SG&A) cost as a percent of sales from 19.9% in 1994 to 19.7% in 1995.
Operating income as a percent of net sales for the continuing operations
was 8.3% compared to 8.4% in 1994. This compares to 7.1% for the total
business, including paper operations, in 1994. Most businesses
increased their operating income margin with the exception of Federal.
Federal's margins were down due to product mix changes created by
external market factors in 1995 and higher raw material cost. Product
mix had created very favorable profits in 1994.
Interest expense declined dramatically in 1995 as long-term debt dropped
from $408.5 million at the end of 1994 to $219.9 million in 1995.
Borrowings were reduced by application of proceeds from the
sale of the paper businesses, partially offset by the purchase of
Fleck Controls.
The effective tax rate was higher in 1995, 40.5% versus 40.0% in 1994.
The higher rate resulted from increased profitability of operations
outside the U.S.
1994 Versus 1993 Net sales from continuing operations increased to
$1,261.7 million in 1994, a 33.3% increase over 1993;
largely attributable to the
full year operating results of the Schroff group of businesses. In
addition, strong worldwide economic conditions coupled with new
products and new distribution channels helped drive the sales and
earnings in the industrial businesses.
Operating income from continuing operations increased by 55.0%, $105.6
million in 1994 versus $68.1 million in 1993. This increase was due to the
addition of the Schroff group as well as continued improvement from
all industrial businesses.
Operating income as a percentage of sales for continuing operations
improved from 7.2% in 1993 to 8.4% in 1994. Improved market
conditions and greater operating efficiencies aided in this improvement.
Interest expense increased due to higher borrowing
as a result of the Schroff acquisition and higher overall interest rates.
The impact of higher rates was somewhat mitigated due to a favorable
mix of borrowing in Europe versus the US.
The effective income tax rate decreased from 40.7% to 40.0%.
Segment Discussion
Specialty Products Businesses in this group manufacture tools and
equipment designed and marketed for commercial, residential and
municipal construction and a variety of professional craftsman and
do-it-yourself applications. The products include woodworking
machinery (Delta); portable power tools (Porter-Cable); and
residential water systems, sump pumps, environmental pumps and
grinders, and industrial pumps (Myers). In November, 1995 Pentair
acquired Fleck Controls, Inc., a manufacturer of residential,
commercial, and industrial control valves and accessories for water
softening, conditioning, and filtration.
1995 Versus 1994 Specialty Products sales increased $51.3 million or
11.0% as a result of new product introductions and expanded
distribution in home center and hardware channels. Acquired in
November, Fleck Controls, Inc. contributed two months of sales and income
to Pentair in 1995.
<PAGE>
Operating income as a percent of sales increased to 11.0% from 10.6%
because of productivity gains and capacity efficiencies.
1994 Versus 1993 Specialty Products sales increased $54.0 million or
13.1% Growth in this segment was driven by expanded distribution in
the home center and hardware channels. All businesses experienced
growth due to new products and strong market demand from positive
housing starts and construction trends.
Operating income as a percent of sales increased to 10.6% from 10.2%
because of productivity gains and capacity efficiencies.
Outlook Ongoing product development and broader distribution through
market expansion should contribute to increased sales and operating
income from the tool businesses in 1996. Completion of a new
Porter-Cable distribution center should provide additional
productivity efficiencies. Specialty Products will benefit from a full
year of Fleck operations in 1996.
General Industrial Equipment The products of this group include
electrical enclosures (Hoffman), electronic enclosures (Schroff) and
lubrication systems and material dispensing equipment (Lincoln
Industrial). These products are designed to facilitate industrial and
commercial expansion and efficiencies. Other businesses in this group
include automotive service equipment (Lincoln Automotive) and sporting
and law enforcement ammunition (Federal).
1995 Versus 1994 General Industrial Equipment sales increased $89.9
million or 11.3% over 1994 driven by new product introductions
and continued strong market demand across product lines. The active
worldwide durable goods
markets which characterized 1994 continued in 1995, increasing orders
at Hoffman and Schroff. In contrast to 1994, orders at Federal were
unusually weak in 1995 as customers and distributors worked down
stock-piled inventories of ammunition that had been built the previous
year in anticipation of new handgun regulations. Lincoln Automotive
markets were essentially flat year to year, though operating
efficiencies and higher sales to key customers helped the Company
improve performance over 1994. Lincoln Industrial performed well as a
result of productivity improvements, reduced working capital and
increased sales.
Volume efficiencies and productivity improvements in most of the General
Industrial Equipment businesses were offset by an unfavorable product
mix at Federal, resulting in a decrease in operating income as a
percent of sales from 9.5% to 9.4%.
1994 Versus 1993 General Industrial Equipment sales increased $261.1
million or 48.8% over 1993. The existing businesses grew 15% with the
acquisition of Schroff contributing the balance.
New products and strong market demand contributed to
the increase in existing businesses. Strong
durable goods markets boosted orders at Hoffman and Schroff. The
positive change in the European economy helped drive sales at the
German subsidiaries. Orders at Federal were unusually strong in 1994
as customers stockpiled inventories of ammunition.
Operating income as a percent of sales increased to 9.5% from 7.9%
improving the segment's overall margins during 1994. Volume efficiencies and
productivity improvements strengthened margins.
<PAGE>
Outlook New products and productivity gains are expected to contribute to
increased sales and operating income for 1996 in this segment.
Although the European economy is not expected to be as strong in 1996
as in 1995, the European operations are forecasting continued good
performance for the year.
Inflation The rate of inflation remains at reasonable levels in the
United States and most of the foreign economies that affect Pentair
results.
Insurance Subsidiary The Company's captive insurance subsidiary provides
a cost effective means of obtaining insurance coverage for general and
product liability, workers' compensation and auto liability. The
insurance subsidiary insures directly and reinsures an admitted
carrier. Loss reserves are established based on actuarial
projections of ultimate loss.
Environmental Matters Pentair believes,
that under current laws and regulations, its environmental matters are
manageable in the ordinary course of the operations of affected
businesses. Some subsidiaries face remediation of soil and groundwater
as a result of predecessors or their own previous disposal practices.
In addition, Pentair subsidiaries have been named as potentially
responsible parties at a small number of Superfund or other sites
being studied or remediated. In all cases to date, the affected
business has been deemed to be a de minimis defendant or the
business's share of remediation costs has not been material to the
Company. With the sale of the paper businesses, the Company has
contractually retained certain obligations pertaining to environmental
issues of some discontinued operations.
For purposes of maintaining appropriate reserves against liabilities
associated with environmental issues, whether involving on- or
off-site locations, Pentair management reviews each individual site,
taking into consideration the number of parties involved with the
site, the joint and several liability imposed by certain environmental
laws, the expected level of contributions of the other parties, the
nature and quantities of wastes involved, the expected method and
extent of remediation, the estimated professional expenses involved
and the time period over which any costs would be incurred. Based on
this evaluation, reserves are established when loss amounts are
probable and reasonably estimable. Insurance recoveries are recorded
only when claims for recovery are settled.
The Company also engages environmental professionals to perform periodic
audits of its facilities to assist Pentair in complying with the
various environmental laws and regulations faced by its businesses.
Capital expenditures necessary for compliance with environmental
regulations were not material during 1995 or 1994, nor are they
anticipated to be material in the foreseeable future.
<PAGE>
Report of Management & Report of Independent Certified Public Accountants
Pentair, Inc. and Subsidiaries
To the Shareholders of Pentair, Inc.:
The consolidated financial statements of Pentair, Inc. have been prepared
by company management who are responsible for their
integrity and objectivity. These statements have been prepared in
accordance with generally accepted accounting principles and, where
appropriate, reflect estimates based on judgments of management.
Pentair maintains a system of internal controls.
Our systems provide reasonable assurance that assets are protected,
transactions are appropriately reported and established procedures are
followed.
The financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, whose report appears on this
page.
The Audit Committee of the Board of Directors, comprised of outside
directors, meets periodically with the independent certified public
accountants and management to monitor activities and to ensure that
each is properly
discharging its responsibilities. The independent certified public
accountants have free access to the Audit Committee, without
management present, to discuss the results of their audit, the
adequacy of internal accounting controls, and the quality of financial
reports.
Winslow H. Buxton
Chairman, President, and Chief Executive Officer
David D. Harrison
Executive Vice President and Chief Financial Officer
To the Directors and Shareholders of Pentair, Inc.:
We have audited the accompanying consolidated balance sheets of Pentair,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December
31,1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Pentair, Inc. and
subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Minneapolis, Minnesota
February 9, 1996
<PAGE>
Consolidated Statements of Income
Pentair, Inc. and Subsidiaries
<TABLE>
<CAPTION>
In Thousands,
except per share amounts Years Ended December Thirty-first
1995 1994 1993
<S> <C> <C> <C>
Net Sales $1,402,871 $1,261,705 $946,564
Operating Costs
Cost of Goods Sold 996,576 892,321 682,662
Selling, General and
Administrative 276,683 251,685 186,447
Research and Development 13,365 12,125 9,322
Total Operating Costs
1,286,624 1,156,131 878,431
Operating Income 116,247 105,574 68,133
Interest Expense (21,861) (23,519) (14,155)
Interest Income 7,308 1,450 1,155
Income from Continuing
Operations before
Income Taxes 101,694 83,505 55,133
Provision for Income Taxes
41,194 33,402 22,450
Income from Continuing
Operations 60,500 50,103 32,683
Discontinued Operations:
Income from Operations
of Discontinued
Paper Products
and Joint Venture Segments
(Net of Applicable Income
Taxes of $2,740, $2,098 and
$8,350,Respectively) 4,566 3,497 13,917
Gain on Sale of Discontinued
Operations
(Less Applicable
Income Taxes of $7,734) 12,134 0 0
Net Income 77,200 53,600 46,600
Preferred Dividend
Requirements 5,203 5,416 6,114
Earnings Applicable
to Common Stock $71,997 $48,184 $40,486
Earnings per Common Share
Primary
Continuing Operations $1.48 $1.21 $.76
Discontinued Operations .45 .10 .37
$1.93 $1.31 $1.13
Fully Diluted
Continuing Operations $1.41 $1.17 $ .76
Discontinued Operations .40 .09 .34
$1.81 $1.26 $1.10
Average Common Shares Outstanding
Primary 37,300 36,844 35,782
Diluted 42,380 42,080 41,910
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Consolidated Balance Sheets
Pentair, Inc. and Subsidiaries
<TABLE>
<CAPTION>
In Thousands December Thirty-first 1995 1994
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $36,648 $32,677
Accounts Receivable _ Trade (Net) 262,503 219,527
Note Receivable 100,000 0
Inventories 212,685 193,087
Deferred Income Taxes 26,017 23,087
Net Assets of Discontinued Operations 0 240,136
Other Current Assets 9,391 8,701
Total Current Assets 647,244 717,215
Property, Plant and Equipment
Land and Land Improvements 18,284 16,708
Buildings 100,355 92,958
Machinery and Equipment 312,250 257,389
Construction in Progress 21,219 11,677
Total 452,108 378,732
Less Accumulated Depreciation 185,381 147,581
Property, Plant and Equipment 266,727 231,151
Marketable Securities _ Insurance Subsidiary 33,036 23,655
Goodwill _ Net 282,376 170,965
Other Assets 23,110 18,156
Total Assets $1,252,493 $1,161,142
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
In Thousands December Thirty-first 1995 1994
<S> <C> <C>
Liabilities
Current Liabilities
Accounts Payable $90,846 $78,065
Notes Payable 120,732 0
Compensation and Other Benefits Accruals 68,414 48,657
Income Taxes 17,812 2,708
Accrued Product Claims and Warranties 21,684 24,324
Accrued Expenses and Other Liabilities 58,363 61,277
Current Maturities of Long-term Debt 18,950 3,566
Total Current Liabilities 396,801 218,597
Long-term Debt 219,896 408,503
Other Liabilities 21,141 13,558
Deferred Income Taxes 68 366
Pensions and Other Retirement Compensation 38,220 26,182
Postretirement Medical and Other Benefits 46,158 40,878
Reserves _ Insurance Subsidiary 27,354 21,084
Commitments and Contingencies (Note 9)
Shareholders' Equity
Preferred Stock _ at Liquidation Value
Outstanding: 1,873,051 Shares in 1995
and 1,953,243 Shares in 1994 65,656 68,444
Unearned ESOP Compensation (21,074) (27,528)
Common Stock _ Par Value, $.16 2\3
Outstanding: 37,035,082 in 1995
and 36,496,310 in 1994 6,172 6,082
Additional Paid-in Capital 169,832 163,273
Currency Translation and Pension Adjustments 11,020 8,033
Retained Earnings 271,249 213,670
Total Shareholders' Equity 502,855 431,974
Total Liabilities and Shareholders' Equity $1,252,493 $1,161,142
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Consolidated Balance Sheets
Pentair, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
Pentair, Inc. and Subsidiaries
In Thousands Years Ended December Thirty-first
1995 1994 199
<S> <C> <C> <C>
Preferred Stock
Beginning Balance $68,444 $69,380 $120,137
Conversions into Common (2,788) (936) (50,757)
Ending Balance 65,656 68,444 69,380
Unearned ESOP Compensation $(21,074) $(27,528) $(35,453)
Beginning Balance $6,082 $6,044 $5,274
Employee Stock Plans _ Net 54 26 35
Conversions into Common 36 12 735
Ending Balance 6,172 6,082 6,044
Additional Paid in Capital
Beginning Balance $163,273 $160,438 $108,565
Employee Stock Plans _ Net 3,828 1,926 1,914
Conversions into Common 2,731 909 49,959
Ending Balance 169,832 163,273 160,438
Currency Translation
and Pension Adjustments
Beginning Balance $8,033 $(7,047) $(1,483)
Currency Translation 927 11,414 (709)
Pension Adjustments 2,060 3,666 (4,855)
Ending Balance 11,020 8,033 (7,047)
Retained Earnings
Beginning Balance $213,670 $177,487 $147,612
Net Income 77,200 53,600 46,600
Dividends
Common (14,718) (13,105) (11,931)
Preferred (5,203) (5,416) (6,114)
Payment for Redemption of Stock Rights
(558) _ _
Tax Benefit of Preferred Dividends
858 1,104 1,320
Ending Balance 271,249 213,670 177,487
Total Shareholders' Equity $502,855 $431,974 $370,849
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Statements of Cash Flows
Pentair, Inc. and Subsidiaries
<TABLE>
In Thousands December Thirty-first
1995 1994 1993
<S> <C> <C> <C>
Operating activities
Net Income $77,200 $53,600 $46,600
Adjustment for Discontinued Operations
(16,700) (3,497) (13,917)
Adjustments to Reconcile to Cash Flow
Depreciation 41,570 34,924 23,988
Amortization of Intangible Assets
7,364 5,895 2,542
Deferred Income Taxes 5,725 2,903 (1,011)
Changes in Assets and Liabilities,
Net of Effects of Acquisition
Receivables (34,103) (24,099) (16,504)
Inventories (9,257) (12,364) (14,723)
Other Assets (10,060) (8,597) (5,647)
Accounts Payable 10,038 2,584 7,724
Accrued Compensation and Benefits
17,735 10,383 6,226
Income Taxes 9,692 (7,000) 1,459
Pensions and Other Retirement Compensation
12,038 (12,251) 7,920
Reserves _ Insurance Subsidiary 6,270 7,219 8,279
Other Liabilities (11,849) 25,462 1,511
Cash from Operations:
Continuing Operations 105,663 75,162 54,447
Payments Related to Discontinued Operations
(34,925) (5,405) (29,606)
Total Cash from Operating Activities
70,738 69,757 24,841
Investing Activities
Capital Expenditures (63,838) (57,861) (28,074)
Proceeds from Sale of Discontinued Operations
216,086 _ _
Acquisition of Businesses _ Net of Cash Acquired
(16,517) (139,750) _
Purchase of Marketable Securities
(13,081) (9,598) (13,513)
Proceeds from Sale of Marketable Securities
6,091 4,537 2,976
Cash Provided by (Used for) Investing Activities
128,741 (202,672) (38,611)
Financing Activities
Long-term Borrowings 30,792 171,528 128,853
Payments of Long-term Debt (210,236) (19,231) (104,741)
Unearned ESOP Compensation Decrease
6,454 7,925 7,302
Employee Stock Plans and Other
4,161 3,041 3,164
Dividends (19,921) (18,521) (18,045)
Cash Provided by (Used for) Financing Activities
(188,750) 144,742 16,533
Effects of Currency Exchange Rate Changes
(6,758) 10,523 (828)
Increase in Cash and Cash Equivalents
3,971 22,350 1,935
Cash and Cash Equivalents
_ Beginning of Period
32,677 10,327 8,392
Cash and Cash Equivalents
_ End of Period
$36,648 $32,677 $10,327
Supplemental Cash Flow Information:
Cash Payments for: Interest $22,571 $22,856 $13,157
Income Taxes 34,754 27,649 23,316
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Notes To Consolidated Financial Statements
Pentair, Inc. and Subsidiaries
1. Summary of Significant Accounting Policies
Principles of consolidation The consoli-dated financial statements
include Pentair, Inc. and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated.
Cash equivalents The Company considers all highly liquid investments
purchased with a maturity of three months or less to be
cash equivalents.
Property, plant and equipment Property,
plant and equipment is stated at cost. Depreciation is computed using the
straight-line method. Estimated useful lives are:
Land Improvements: 5 years
Buildings: 6 to 33 years
Machinery and Equipment: 3 to 16 years.
Insurance Subsidiary The Company's wholly-owned insurance subsidiary,
established in June 1992, insures general and product
liability, workers compensation, and auto liability risks. The
insurance subsidiary invests in marketable securities including debt
and equity securities classified as available-for-sale in accordance
with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." Debt and
equity securities classified as available-for-sale are carried at fair
value on the balance sheet with unrealized gains and losses reported
in a component of shareholders' equity.
These investments are treated as operating assets
of the insurance subsidiary and the related earnings ($1,470,000,
$1,108,000, and $775,000 in 1995, 1994 and 1993, respectively) are
recorded as a reduction of the insurance component of cost of sales.
Reserves for policy claims ($34,192,000
in 1995 and $26,355,000 in 1994) are established based on actuarial
projections of ultimate loss.
<TABLE>
<CAPTION>
The cost and market value of debt and equity securities of the insurance
subsidiary at December 31,
by contractual maturity, are shown below:
In Thousands 1995 1994
Debt Securities: Cost Market Cost Market
<S> <C> <C> <C> <C>
Due During the Next Year $1,504 $1,504 $1,828 $1,839
Due After One Year through Five Years 17,405 17,159 17,458 16,532
Due After Five Years through Ten Years 4,957 5,844 1,625 1,538
23,866 24,507 20,911 19,909
Equity Securities: 7,492 8,529 3,640 3,746
Total $31,358 $33,036 $24,551 $23,655
</TABLE>
Goodwill The excess purchase price paid over net assets of businesses
acquired is amortized on a straight-line basis over periods ranging
from 25 to 40 years. The amortization recorded for 1995, 1994 and 1993
was $7,253,000, $5,895,000 and $2,542,000, respectively. Accumulated
amortization was $25,860,000 and $18,607,000 at December 31, 1995 and
1994, respectively. The Company periodically reviews goodwill to assess
recoverability. The Company evaluates the recoverability by measuring
the unamortized balance of such goodwill against estimated future cash
flows. If events or changes in circumstances indicated that the
carrying amount of such asset may not be recoverable, the asset would
be adjusted to the present value of the estimated future cash flows.
Based on evaluations performed, there was no adjustment to the
carrying value of goodwill in 1995.
Foreign currency translation Translation gains or losses resulting from
translating foreign currency financial statements are reported in a
separate component of shareholders' equity. Foreign currency
transaction gains and losses are included in earnings as incurred.
Revenue recognition Revenue from sales is recognized at the time the
product is shipped.
Product warranty costs Provision for estimated warranty costs is recorded
at the time of sale and periodically adjusted to reflect actual
experience.
Research and development Research and development expenditures are
expensed as incurred. Development activities generally relate to
creating new products, improving or creating variations of existing
products, or modifying existing products to meet new applications.
Earnings per common share 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
pre-ferred dividends paid to ESOPs are: for allo-cated shares credited
to income tax expense; for unallocated shares, credited to retained
earnings and 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.
On January 22, 1996 the board of directors approved a two-for-one stock
split in the form of a 100% stock dividend. The dividend was payable
February 16, 1996 to shareholders of record
at the close of business on February 2, 1996. On April 21, 1993 the board
of directors approved a three-for-two stock split in the form of a 50%
stock dividend. The dividend was payable June 11, 1993 to shareholders
of record at the close of business on May 14, 1993. All references in
the financial statements to shares outstanding and related prices, per
share amounts, and the stock plan data have been restated to reflect
these splits.
Recent Accounting Standards The Company adopted Financial Accounting
Standards Board Opinion No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" on
December 31, 1995. No adjustments were required.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," which requires adoption of the disclosure
provisions no later than fiscal years beginning after December 15,
1995 and adoption of the recognition and measurement provisions for
nonemployee transactions no later than after December 15, 1995. The
new standard defines a fair value method of accounting for stock
options and other equity instruments.
<PAGE>
Companies are encouraged, but are not required, to adopt the fair value
method of accounting for employee stock-based trans-actions, but are
required to disclose in a note to the financial statements pro forma
net income and earnings per share as if the Company had applied the
new method of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of
adoption. The Company has not yet determined if it will elect to
change to the fair value method,
nor has it determined the effect the new standard will
have on net income and earnings per share should it
elect to make such a change. Adoption of
the new standard will have no effect on the Company's cash flows.
Reclassifications Certain reclassifications
have been made to prior years' financial statements to conform to the
current year presentation.
2. Fleck Acquisition Effective November 1, 1995, the Company acquired
Fleck Controls, Inc., a manufacturer of control valves which are major
components in residential water softeners, and commercial and
industrial water conditioning systems for $133.9 million of which
$13.2 million was paid in cash and promissory notes due
January 2, 1996 for $120.7 million were given for the remainder.
The acquisition was accounted for by the purchase method;
accordingly, the purchase price was
allocated to the assets acquired based on their estimated fair values
as follows: working capital, $11.1 million; property, plant and
equipment, $10.5 million; other non-current liabilities, $.2 million;
other intangible assets, $3.5 million; and goodwill, $109.1 million.
Goodwill will be amortized on a straight line basis
over 25 years. The Fleck operating results are
included in the Company's consolidated results from November 1, 1995.
Had the acquisition occurred at January 1, 1994, unaudited proforma results
for 1994 are: net sales $1,322.2 million; income from continuing
operations, $51.2 million and primary and diluted earnings per share
from continuing operations, $1.25 and $1.20, respectively. Unaudited
proforma results for 1995 are: net sales $1,460.0 million;
income from continuing operations, $61.8
million and primary and diluted earnings per share
from continuing operations, $1.52 and $1.44, respectively.
These results have been prepared for comparative purposes only and do not
purport to be indicative of what would have occurred had the
acquisition been made at the beginning of 1994, or of the results
which may occur in the future.
3. Schroff Acquisition Effective January 1, 1994, the Company acquired
Schroff GmbH and its international subsidiaries, manu-facturers of
cabinets, cases, subracks and accessories for the electronics
industry, for $139.8 million. The acquisition was accounted for by the
purchase method, accordingly, the purchase price was allocated 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 will be amortized on a straight line basis
over 25 years.
The Schroff operating results are included in the Company's consolidated
results from January 1, 1994. Had the acquisition occurred at January
1, 1993, unaudited proforma results for 1993 are: net sales $1,098.6
million; income from continuing operations, $32.9 million and primary and
diluted earnings per share from continuing operations, $0.77.
<PAGE>
4. Discontinued operations _ paper products and joint venture segments On
April 1, 1995 the Company sold its Cross Pointe Paper Corporation
subsidiary for $203.3 million, of which $103.3 million was received in
cash and a promissory note due January 2, 1996 was received for the
remainder. On June 30, 1995 the Company sold its Niagara of Wisconsin
Paper Corporations, its 50% share of Lake Superior Paper Industries
(LSPI) joint venture and its 12% share of Superior Recycled Fiber
Industries (SRFI) for approximately $115.6 million cash.
The gain on the sales was $12.1 million after income tax expense of $7.7
million. The transaction added 28 cents to diluted earnings per share in 1995.
The prior years have been restated to include the Company's former paper
businesses (Paper Products and Joint Venture segments) as discontinued
operations.
<TABLE>
<CAPTION>
Summarized results of operations and
financial position data of discontinued
operations were as follows:
Results of Operations
in millions 1995 1994 1993
<S> <C> <C> <C>
Net Sales $145.1 $387.5 $381.6
Operating Income 9.0 13.7 30.0
Earnings, Net of Tax 4.6 3.5 13.9
Gain on Sale,
Net of Tax 12.1 0.0 0.0
</TABLE>
<TABLE>
<CAPTION>
Financial Position
in millions 12/31/94
<S> <C>
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
</TABLE>
5. Balance Sheet Information Accounts receivable are stated net of
allowances for doubtful accounts of $7,840,000 in 1995 and $7,189,000
in 1994.
Inventories are stated at the lower of cost or market. All foreign
companies use the first-in, first-out - FIFO and moving average
methods. The domestic Specialty Products and General Industrial
segments use the last-in, first-out - LIFO method.
<TABLE>
<CAPTION>
In thousands 1995 1994
<S> <C> <C>
Finished Goods $134,456 $114,875
Work in Process 40,801 41,283
Raw Materials
and Supplies 37,428 36,929
Total $212,685 $193,087
</TABLE>
If all LIFO inventories were valued at FIFO, aggregate inventory would
have been $218,095,000 and $199,456,000 at December 31, 1995 and 1994,
respectively.
6. Long-Term Debt and Credit Facilities Revolving credit agreements are
with five banks providing credit facilities of U.S. $200 million and
Deutsche Mark 132.5 million. The Company must pay a commitment fee at
the rate of .150 of 1% per annum on the total amount of the credit
facility. The revolving credit facilities are committed through
January 1, 1999 (term-out date). If not renewed prior to that date,
outstanding loans at the term-out date are payable in 16 quarterly
installments through January 2003. In the past, the Company has
consistently renewed its revolving credit agreements prior to the
term-out date.
<PAGE>
<TABLE>
<CAPTION>
Debt is Summarized as follows:
In thousands 1995 1994
<S> <C> <C>
Revolving Credit Facilities:
U.S. $ Revolver $0 $157,000
DM Revolver 92,574 74,242
Private Placement Debt, Due 1996 to 2003,
Average Interest Rate 7.31% 125,000 160,000
Other, Due Periodically to 2005,
Average Interest Rate 6.4% 21,272 20,827
Total 238,846 412,069
Current Maturities 18,950 3,566
Total Long-term Debt $219,896 $408,503
</TABLE>
At December 31, 1995, the Company had DM132.5 million (US$ 92.6 million)
borrowed under the credit facilities at an average interest
rate of 4.2%. The average credit facilities borrowing rates were 6.0% in
1995 and 5.2% in 1994. See also interest rate swap agree-ments at Note 7.
Various debt agreements require the Company to maintain minimum levels of
earnings, tangible net worth and certain financial ratios. The
agreements also contain various restrictive limitations on the payment
of dividends and certain other restricted payments. Under the most
restrictive covenants, $65,000,000 of the December 31, 1995 retained
earnings were unrestricted for such purposes. The Company has remained
in compliance with these covenants.
Total long-term debt maturities, excluding revolving credit facilities,
are $18,950,000, $17,610,000, $15,923,000, $38,419,000 and $21,460,000
for the years 1996 to 2000, respectively.
If revolving credit facilities are not renewed, the payouts would be
$17,358,000 in 1999, $23,144,000 in 2000 through 2002, and $5,784,000 in 2003.
7. Financial Instruments The Company has entered into interest rate swap
agreements with major financial institutions to exchange variable rate
interest payment obligations to fixed rate obligations without the
exchange of the underlying principal amounts in order to manage
interest rate exposures. Net payments or receipts under the agreements are
recorded as adjustments to interest expense and credit risk is considered
remote.
As of December 31, 1995, the Company had swap agreements outstanding with
an aggregate notional amount of $80,000,000. The swap agreements
mature in 1996. The average interest rate fixed under the swap
agreements is 7.67% Under the interest rate environment existing as of
December 31, 1995, the net fair value of the Company's swap agreements
was a net liability of $1,295,000.
As of December 31, 1995, the Company had in place forward starting swap
agreements with an aggregate notional amount of $74,500,000. The
forward swap agreements, which begin December 1996 through June 1999,
have an interest rate of 6.56% and an ultimate maturity of 8 years. Under the
interest rate environment existing as of December 31, 1995, the net
fair value of the Company's foward swap agreements was a net liability
of $689,000.
Long-term debt, including current maturities, has a carrying value of
$238,846,000 and a fair value of $244,485,000. The estimated fair value
represents the present value of debt service at rates currently
available to the Company for issuance of debt with similar terms.
Except for the above, all financial instruments are carried at amounts
that approximate estimated fair value.
<PAGE>
8. Lease Commitments Rent expense related to operating leases amounted to
$13,117,000, $7,199,000 and $6,729,000 in 1995, 1994 and 1993,
respectively. The majority of the lease expense is for information technology
systems.
Future minimum rental payments under all operating leases are $9,645,000,
$7,184,000, $5,202,000, $3,708,000 and $3,465,000 for the years 1996
to 2000, respectively. Rental payments subsequent to the year 2000 are
$7,848,000.
9.Commitments and Contingencies Various lawsuits, claims and proceedings
have been or may be instituted or asserted against the Company
relating to the conduct of its businesses, including those pertaining
to product liability, environmental, safety and health, and employment
matters. The Company records liabilities when loss amounts are
determined to be probable and reasonably estimable. Insurance
recoveries are recorded only when claims for recovery are settled.
Although the outcome of litigation cannot be predicted with certainty
and some lawsuits, claims or proceedings may be disposed of
unfavorably to the Company, management believes, based on facts
presently known, that the outcome of such legal pro-ceedings and
claims will not have a material adverse effect on the Company's
financial position, liquidity or future results of operations.
Under a $382,000,000 leveraged-lease financing for its former joint
venture LSPI, the Company is committed to provide
up to $95,000,000 additional cash to LSPI if
needed to meet its lease obligation. In connection with the sale of
LSPI, Consolidated Papers, Inc. (the purchaser) has agreed to
indemnify the Company for any required payments.
10. Capital Stock
Preferred Stock The two classes of preferred stock (par value - $.10)
are: $7.50 Callable Cumulative Convertible Preferred Stock, Series
1988; and 8% Callable Cumulative Voting Convertible Preferred Stock,
Series 1990.Both issues are held by ESOPs (see Note 11). The preferred shares
are convertible into common stock and are redeemable, in whole or in part,
at the option of the Company on or after the dates indicated below,
and at redemption prices declining to the original price per share
after ten years.
<TABLE>
<CAPTION>
Preferred Stock
Series 1988 Series 1990
<S> <C> <C>
Shares
Authorized 300,000 2,500,000
Issued and Outstanding 128,975 1,744,076
Liquidation Value $100.00 $30.25
Conversion
Price of Common $10.66 to $13.34 $13.11
Shares of Common 9.375 to 7.5 2.3077
Early Redemption Date January 1991 March 1994
</TABLE>
Upon the retirement or other termination of an ESOP participant, the
shares of preferred stock (Series 1988 and 1990) in which he
or she is vested are automatically converted into common shares and
distributed in that form, with fractional shares paid in cash.
<PAGE>
All outstanding shares of its $1.50 Cumulative Convertible Preferred
Stock, Series 1987 were called for redemption on March 15, 1993. In
lieu of redemption, substantially all of the preferred shares were
converted into 4,352,340 shares of common stock.
Common Stock The authorized stock of the Company also consists of
122,200,000 shares of Common Stock with a par value of $.16 2\3.
On April 21, 1993 the board of directors approved a three-for-two
stock split in the form of a 50% stock dividend.
The dividend was payable June 11, 1993 to shareholders
of record at the close of business on May 14, 1993. On January 22,
1996, the board of directors approved a two-for-one stock split in the
form of a 100% stock dividend. The dividend was payable February 16,
1996 to shareholders of record at the close of business on February 2,
1996.
<TABLE>
<CAPTION>
Changes in outstanding common shares are summarized as follows:
thousands
1995 1994 1993
<S> <C> <C> <C>
Beginning Balance 36,496 36,269 31,645
Employee Stock Plans _ Net 325 157 212
Conversion of Preferred Stock 214 70 4,412
Ending Balance 37,035 36,496 36,269
</TABLE>
11. Employee Stock Ownership Plan (ESOP) The Company has an Employee
Stock Ownership Plan (ESOP) covering non-bargaining and some
bargaining U.S. employees. The employees receive Series 1990 Preferred
Stock in lieu of cash 401(k) matching contributions and other cash
compensation.
To finance the plan, the ESOP borrowed $56,500,000 from the Company and
exchanged it for 1,867,768 shares of Callable Cumulative Voting
Convertible Preferred Stock, Series 1990 at $30.25 per share. The
unpaid balance of the twenty-year, 8.75% loan with interest only for
the first four years is included in the Company's balance sheet as
unearned ESOP compensation.
Gross compensation expense (i.e. the value of shares allocated to
participant accounts) was $5,391,000, $6,894,000, and $6,512,000 in
1995, 1994 and 1993, respectively. The stock held by the ESOP is released for
allocation to the participants accounts as principal and interest is
paid from dividends on unallocated shares ($2,202,000, $2,831,000, and
$3,418,000 in 1995, 1994 and 1993, respectively) and Company
contributions. Through December 31, 1995, the loan has been reduced
$49,750,000; of this, $35,426,000 (1,171,000 shares) has been allocated to
participants accounts as compensation and dividends; and the
difference is included in unearned compensation.
A separate frozen ESOP holds the Series 1988 Preferred Stock.
12. Omnibus Stock Incentive Plan In April 1990, shareholders approved the
1990 Omnibus Stock Incentive Plan (the Plan) which authorizes the
issuance of up to 3,268,352 shares of the Company's common stock. The
Plan extends to January 11, 2000. At December 31, 1995, there were
491, 148 shares available for grant under the Plan.
<PAGE>
The Plan allows for the granting of nonqualified stock options, incentive
stock options, restricted stock and incentive compensation units
(ICUs). Although none have been issued, the Plan also allows for
granting of stock appreciation rights, performance shares and
performance units.
Restricted Shares and ICUs Restrictions on the restricted shares and ICUs
generally expire in the third, fourth and fifth years after issuance.
Beginning with 1993 grants, ICU restrictions will expire at the end of
three years. The value of each ICU is based on the increase in book
value of common stock during the restriction period and is payable
when the restrictions lift. Compensation expense consists of (a)
amortization of the market value of the stock on the date of
award over the period in which the restrictions
lapse, and (b) the annual increase in ICU
value. Compensation expense was $5,040,000 in 1995, $3,050,000 in
1994, and $2,491,000 in 1993. The Company records incremental tax benefits
resulting from the program as additional paid-in capital.
Options Options are granted to purchase shares at not less than fair
market value of shares on date of grant. Options generally expire
after five years but may expire up to ten years from date of grant.
<TABLE>
<CAPTION>
Details of options are as follows:
Number of Shares Option
Price
<S> <C> <C>
1993
Granted 392,998 $13.50
Exercised 317,304 $6.8182 - $14.708
Forfeited 22,268 $8.1667 - $14.708
Outstanding, End of Year 1,255,742 $8.1667 - $14.708
Exercisable, End of Year 491,154 $8.1667 - $14.708
1994
Granted 395,896 $17.75
Exercised 162,302 $8.1667 - $14.708
Forfeited 16,412 $10.6667 - $17.75
Outstanding, End of Year 1,472,924 $8.1667 - $17.75
Exercisable, End of Year 709,570 $8.1667 - $14.708
1995
Granted 451,718 $21.375 -$22.5625
Exercised 427,192 $8.1667 - $21.50
Forfeited 40,392 $9.583 - $21.50
Outstanding, End of Year 1,457,058 $8.1667 -$22.5625
Exercisable, End of Year 690,738 $8.1667 - $17.75
</TABLE>
<PAGE>
13. Provision for Income Taxes
<TABLE>
<CAPTION>
The components of earnings before income taxes were as follows:
In thousands 1995 1994 1993
<S> <C> <C> <C>
Domestic $76,294 $71,236 $56,984
Foreign 25,400 12,269 (1,851)
$101,694 $83,505 $55,133
</TABLE>
<TABLE>
<CAPTION>
The provisions for income taxes, excluding tax benefits credited directly to
shareholders' equity,
were as follows:
In thousands 1995 1994 1993
<S> <C> <C> <C>
Current
Federal (Less Foreign Tax Credits) $23,751 $26,251 $20,762
State 4,127 3,415 2,727
Foreign 7,591 833 (28)
Current Provision 35,469 30,499 23,461
Deferred
Federal 2,421 (2,374) (1,011)
Foreign 3,304 5,27 0
Deferred Provision 5,725 2,903 (1,011)
Total Provision $41,194 $33,402 $22,450
</TABLE>
<TABLE>
<CAPTION>
A reconciliation of the statutory federal tax rate to the effective rate
follows:
1995 1994 1993
<S> <C> <C> <C>
Statutory Federal Income Tax Rate 35.0% 35.0% 35.0%
State and Local Income Taxes,
Net of Federal Income Tax Benefit 3.1 2.6 3.4
ESOP Dividend Benefit (1.1) (1.2) (1.4)
Incremental Foreign Tax Rate 2.0 2.2 1.3
Goodwill 1.2 1.2 1.8
Prior Year Adjustment _ _ (0.8)
Other 0.3 0.2 1.4
Effective Rate 40.5% 40.0% 40.7%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The tax effect of the primary temporary differences giving rise to the
Company's deferred tax assets and liabilities at December
31, 1995 and 1994 are as follows:
Current Long-term
In thousands
December 31, 1995 Asset(Liability) Liability(Asset)
<S> <C> <C>
Accounts Receivable Allowances 3,473 _
Inventory Allowances (8,230) _
Retiree Medical Liability 1,079 (18,002)
Accelerated Depreciation _ 21,637
Warranty/Product Liability Accruals
13,992 (1,278)
Employee Benefit Accruals 6,860 (10,121)
Other 8,843 7,832
Total Deferred Income Taxes $26,01 $68
</TABLE>
<TABLE>
<CAPTION>
Current Long-term
In thousands
December 31, 1994 Asset(Liability) Liability(Asset)
<S> <C> <C>
Accounts Receivable Allowances 3,421 _
Inventory Allowances (7,820) _
Retiree Medical Liability 922 (15,943)
Accelerated Depreciation _ 20,658
Warranty/Product Liability Accruals
11,535 (1,386)
Employee Benefit Accruals 6,070 (8,873)
Other 8,959 5,910
Total Deferred Income Taxes $23,087 $366
</TABLE>
14. Retirement Plans
The Company has several non-contributory defined benefit employee pension
plans covering substantially all employees of its U.S. and certain
non-U.S. subsidiaries. Employees covered under the bargaining plans
are eligible to participate at the time of employment and the benefits
are based on a fixed amount for each year of service. Employees
covered under the non-bargaining pension plans are eligible to
participate upon the attainment of age 21 and the completion
of one year of service; and benefits are based upon final average salary
and years of service. All employees are fully vested in the plans
after 5-7 years of service. The Company's funding policy is to make
quarterly contributions as required by applicable regulations.
<TABLE>
<CAPTION>
Assumptions used to develop pension data were:
1995 1994 1993
<S> <C> <C> <C>
Expense:
Discount Rate 8.5% 7.0% 8.0%
Long-term Rate of
Return on Assets 8.5% 8.5% 9.0%
Rate of Increase in Compensation 6.0% 5.0% 6.0%
PBO Discount Rate Year-End 7.0% 8.5% 7.0%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The components of pension cost are as follows:
In Thousands
1995 1994 1993
<S> <C> <C> <C>
Service Cost $9,020 $9,578 $6,884
Interest Cost on Projected Benefit Obligation 16,772 13,464 11,660
Actual Return on Assets (43,012) (4,564) (18,623)
Net Amortization and Deferral 28,165 (8,960) 5,413
Net Periodic Pension Cost $10,945 $9,518 $5,334
</TABLE>
<TABLE>
<CAPTION>
The funded status and accrued pension cost at December 31 are as follows:
Plans Whose Plans Whose
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
In Thousands 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Plan Assets At Fair Value $219,892 $201,553 $8,658 $1,379
Accumulated Benefit
Obligation (ABO):
Vested Benefits $168,088 $142,928 $23,92 $13,575
Nonvested Benefits 2,229 2,527 10,851 4,703
Total ABO 170,317 145,455 34,773 18,278
Provision for Salary Increases 50,477 49,348 5,410 2,603
Projected Benefit Obligation (PBO)
$220,794 $194,803 $40,183 $20,881
Plan Assets (in Excess of)
Less than PBO $902 $(6,750) $31,525 $19,502
Net Transition (Liability) Asset 671 1,033 (106) (297)
Unrecognized Prior Service Cost (2,836) (3,426) (764) (748)
Unrecognized Net Gains (Losses) 7,089 10,263 (6,707) 439
Minimum Liability Adjustment _ _ 2,685 2,525
Accrued Pension Liability $5,826 $1,120 $26,633 $21,421
</TABLE>
In German practice, it is uncommon to fund pension plans. Approximately $21
million of the $31.5 million underfunding shown above
(Plan assets less than PBO) relates to the German pension plans.
At December 31, 1995, approximately 85% of the plan assets are invested
in listed stocks and bonds or cash and short-term investments. The
rest of the plan assets are invested primarily in fixed-rate
guaranteed investment type contracts purchased from insurance
companies. The Company's own common stock accounted for 12% of plan
assets.
<PAGE>
15. Postretirement Medical and Other Benefits The Company provides
certain health care and life
insurance benefits for retired employees.
Employees become eligible for these
benefits if they meet minimum age and
service requirements and are eligible for retirement benefits.
<TABLE>
<CAPTION>
The accrued postretirement medical and other benefits costs that are not
funded were as follows at December 31:
In Thousands 1995 1994
<S> <C> <C>
Accumulated Postretirement Benefit Obligation (APBO):
Retirees $26,199 $22,064
Fully Eligible Active Plan Participants 8,115 7,556
Other Active Plan Participants 8,879 7,513
Total APBO $43,193 $37,133
Unrecognized Prior Service Cost 6,032 4,464
Unrecognized Net Gains (losses) (300) 1,648
Accrued Postretirement Medical
and Other Benefits Liability $48,925 $43,245
</TABLE>
<TABLE>
<CAPTION>
The components of the net periodic cost are as follows:
In Thousands 1995 1994 1993
<S> <C> <C> <C>
Service Cost $624 $600 $533
Cost on Projected Benefit Obligation 3,870 2,677 2,701
Amortization of Plan Amendment (913) (472) (525)
Net Periodic Postretirement Cost $3,581 $2,805 $2,709
</TABLE>
The discount rate used in determining actuarial present value of the
benefit obligations was 7.0% and 8.5% in 1995 and 1994, respectively.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 9.6 percent in 1995,
declining to 5.5 percent by the year 2021. If the health care cost
trend rate assumptions were increased by 1 percent, the accumulated
postretirement benefit obligation as of December 31, 1995 would be
increased by 3 percent. The effect of this change on the sum of the
service cost and interest cost would be an increase of 5 percent.
<PAGE>
16. Industry Segment and Geographic Information (unaudited) Businesses in
the Specialty Products Segment manufacture products designed and
marketed for commercial, residential and municipal
construction and a variety of professional craftsman and do-it-yourself
woodworking applications. The products include woodworking machinery
(Delta), portable power tools (Porter-Cable), residential water
systems, sump pumps, environmental pumps and grinders, and industrial
pumps (Myers), and control valves which are major components in
residential water softeners, and commercial and industrial water
conditioning systems (Fleck).
Businesses in the General Industrial Equipment Segment manufacture
products designed to facilitate industrial and commercial expansion
and efficiencies. The products include electrical enclosures
(Hoffman), electronic enclosures (Schroff), lubrication systems and
material dispensing equipment (Lincoln Industrial), automotive service
equipment (Lincoln Automotive) and sporting and law enforcement
ammunition (Federal).
Corporate expense includes administrative costs, charges that do not
relate to current operations and captive insurance activities.
Corporate assets include all cash and cash equivalents.
<TABLE>
<CAPTION>
Sales and operating income by business segment
are included in the table on page 32. The following tables provide
additional segment information.
General
Specialty Industrial
In thousands Products Equipment Corporate Total
<S> <C> <C> <C> <C>
Identifiable Assets
1995 $383,983 $686,170 $182,340 $1,252,493
1994 227,764 618,265 315,113 1,161,142
1993 205,737 384,656 272,733 863,126
Depreciation and Amortization
1995 $10,147 $38,625 $162 $48,934
1994 8,036 32,667 116 40,819
1993 7,565 18,870 95 26,530
Capital Expenditures
1995 $16,046 $47,694 $98 $63,838
1994 12,238 45,400 223 57,861
1993 9,860 18,158 56 28,074
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Information by geographic area follows:
In Thousands United States Europe Other Elimin
ations Total
<S> <C> <C> <C> <C> <C>
1995
Sales to Unaffiliated
Customers $1,094,784 $230,344 $77,743 _ $1,402,871
Intergeographic Sales 15,915 90,124 _ (106,039) _
Total Sales $1,110,699 $320,468 $77,743 $(106,039) $1,402,871
Operating Income $83,420 $24,057 $8,770 _ $116,247
Identifiable Assets $810,103 $270,679 $34,748 (45,377) $1,070,153
Corporate Assets 182,340
Total Assets $1,252,493
1994
Sales to Unaffiliated
Customers $1,014,599 $175,931 $71,175 _ $1,261,705
Intergeographic Sales 26,317 69,568 _ (95,885) _
Total Sales $1,040,916 $245,499 $71,175 $(95,885) $1,261,705
Operating Income $87,451 $12,054 $6,069 _ $105,574
Identifiable Assets $597,918 $256,630 $32,152 (40,671) $846,029
Corporate Assets 315,113
Total Assets $1,161,142
1993
Sales to Unaffiliated
Customers $859,473 $34,402 $52,689 _ $946,564
Intergeographic Sales 17,690 _ _ (17,690) _
Total Sales $877,163 $34,402 $52,689 $(17,690) $946,564
Operating Income $68,581 $(4,134) $3,686 _ $68,133
Identifiable Assets $544,947 $23,077 $25,592 (3,223) $590,393
Corporate Assets 272,733
Total Assets $863,126
The components of this table are accumulated based upon the location of the
subsidiary or company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
17. Quarterly Financial Data (unaudited)
In thousands,
except per share amounts 1st 2nd 3rd 4th Total
<S> <C> <C> <C> <C> <C>
1995
Net Sales $333,823 $338,216 $353,338 $377,494 $1,402,871
Gross Profit 101,199 98,941 97,949 108,206 406,295
Operating Income 29,228 26,615 28,199 32,205 116,247
Income - Continuing 13,851 13,349 15,300 18,000 60,500
Net Income 15,350 28,550 15,300 18,000 77,200
Earnings Per Share -
Continuing
Primary .34 .32 .38 .44 1.48
Diluted .32 .31 .36 .42 1.41
1st 2nd 3rd 4th Total
1994
Net Sales $296,935 $300,358 $324,864 $339,548 $1,261,705
Gross Profit 87,351 89,255 93,365 99,413 369,384
Operating Income 22,438 24,932 27,647 30,557 105,574
Income _ Continuing 9,928 11,935 13,638 14,602 50,103
Net Income 11,100 11,825 13,775 16,900 53,600
Earnings per Share -
Continuing
Primary .23 .29 .33 .36 1.21
Diluted .23 .28 .32 .34 1.17
All per share data has been adjusted for the two-for-one stock split in
the form of a 100% stock dividend in February 1996.
</TABLE>
18. Disclosure of Risks and Uncertainties Pentair, Inc. is engaged
principally in the design, engineering and manufacturing of various
industrial products. The nine diversified businesses manufacture
enclosures for electrical and electronic equipment, woodworking
equipment, power tools, pumps, water conditioning control valves,
sporting and law enforcement ammunition, automotive service equipment
and industrial lubrication systems and material dispensing equipment.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Certain obligations of discontinued businesses have been retained by the
Company. Based on evaluations by management and environmental
professionals, amounts for any estimated risks or obligations have
been accrued.
Although the individual subsidiaries deal with major customers throughout
North America and Europe, Pentair as a whole has mitigated any
significant impact or potential risk of concentration of customers,
products, or in certain markets or geographic areas. This is due to
the diversified nature of the Company and its product lines.
<PAGE>
<TABLE>
<CAPTION>
In millions,
except per share data 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net Sales
Specialty Products 516.9 465.6 411.6 377.5 344.6
General Industrial 886.0 796.1 535.0 486.5 458.3
Total 1,402.9 1,261.7 946.6 864.0 802.9
Operating Income
Specialty Products 56.7 49.5 42.0 40.2 33.6
General Industrial 82.9 76.0 42.2 38.6 35.9
Corporate (23.4) (19.9) (16.1) (16.9) (16.4)
Total 116.2 105.6 68.1 61.9 53.1
Income From:
Continuing Operations 60.5 50.1 32.7 27.2 18.8
Net Income(A) 77.2 53.6 46.6 42.8 41.1
Common Share Data
EPS - Diluted (A)(B) 1.41 1.17 .76 .64 .47
Cash Dividend .40 .36 .34 .32 .30
Stock Dividend _ _ 50 _ _
Book Value 12.37 10.71 9.29 8.21 8.79
Stock Price 24 7\8 21 3\8 16 1\2 13 3\16 13 7\16
Market Capitalization 1,045 899 692 549 558
Balance Sheet Data
Preferred Equity (net) 44.6 40.9 33.9 77.4 74.1
Common Equity 458.3 391.1 336.9 260.0 275.7
ROE %(A)(B) 16.9 13.2 13.6 12.8 13.3
Capital Expenditures 63.8 57.8 28.1 28.0 26.5
Total Assets 1,252.5 1,161.1 863.1 769.5 698.4
Long-term Debt 219.9 408.5 236.7 209.3 191.2
Debt to Capital % 31 49 39 38 35
In millions,
except per share data 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net Sales
Specialty Products 344.9 337.5 317.1 289.7 207.7
General Industrial 460.3 460.9 127.9 112.5 38.4
Total 805.2 798.4 445.0 402.2 246.1
Operating Income
Specialty Products 28.1 29.5 30.6 31.2 20.1
General Industrial 34.5 32.6 9.9 11.1 2.7
Corporate (14.7) (10.0) (11.4) (7.7) (6.4)
Total 47.9 52.1 29.1 34.6 16.4
Income From:
Continuing Operations 16.9 19.4 10.7 19.0 7.2
Net Income (A) 33.0 36.4 39.8 21.9 15.2
Common Share Data
EPS - Diluted (A)(B) .42 .50 .32 .56 .26
Cash Dividends .29 .26 .22 .21 .20
Stock Dividends - - 10 - 10
Book Value 7.97 7.42 6.67 5.53 5.09
Stock Price 8 1/4 9 3/16 10 7/16 6 1/4 7 3/4
Market Capitalization 342 352 395 200 247
Balance Sheet Data
Preferred Equity (net) 68.4 65.9 67.6 50.0 -
Common Equity 247.8 241.0 214.2 158.6 145.4
ROE %(A)(B) 11.1 14.1 19.8 12.9 10.9
Capital Expenditures 28.0 28.7 20.2 19.2 18.6
Total Assets 696.5 708.9 675.2 376.9 366.1
Long-term Debt 217.5 243.4 242.9 81.0 132.0
Debt to Capital % 41 44 46 28 48
</TABLE>
All Share and Per Share Data adjusted for stock dividends including a 100
percent stock dividend in February 1996.
(a) 1992 net income and earnings per share are before the cumulative
effects of accounting changes.
(b) From continuing operations.
Pentair Stock Data For the calendar year 1995, Pentair common stock was
quoted on the NASDAQ National Market System.
As of March 4, 1996, Pentair common stock
was listed on The New York Stock Exchange
under the symbol <PAGE>. The price information below
represents closing sale prices reported in the NASDAQ/NMS Monthly
Statistical Report. There were 3,516 shareholder accounts on
December 31, 1995.
<TABLE>
<CAPTION>
Price Range And Dividends Of Common Stock Adjusted for a stock split
effective February 20, 1996
Dividends
1995 High Low Paid Close
<S> <C> <C> <C> <C>
First Quarter $22 1\8 $19 7\8 $.10 $21 1\8
Second Quarter $24 5\16 $21 3\8 $.10 $21 3\4
Third Quarter $23 19\32 $21 13\16 $.10 $22 1\2
Fourth Quarter $26 1\4 $21 7\8 $.10 $24 7\8
</TABLE>
<TABLE>
<CAPTION>
Dividends
1994 High Low Paid Close
<S> <C> <C> <C> <C>
First Quarter $18 3\4 $16 3\8 $.09 $18 1\8
Second Quarter $19 1\8 $16 3\8 $.09 $17 7\8
Third Quarter $21 3\8 $18 1\8 $.09 $19 3\4
Fourth Quarter $22 1\4 $19 1\4 $.09 $21 3\8
</TABLE>
Common Dividends In the first quarter of 1996, the board of directors
increased the cash dividend to $.25 per share quarterly for an
indicated annual rate of $1.00 per share. Pentair has now paid 80
consecutive quarterly dividends. The board also approved a 100 percent stock
dividend, splitting Pentair common stock on a two-for-one basis. The
stock split is payable February 16, 1996, to shareholders of record at
the close of business on February 2, 1996. Dividends paid subsequent
to this date are $.125 per share or $.50 annually. See Note 6 of Notes
to Consolidated Financial Statements for certain dividend
restrictions.
Dividend Reinvestment Pentair has established a Dividend Reinvestment
Plan. This plan enables shareholders to automatically reinvest Pentair
dividends and to invest up to an additional $3,000
per quarter in Pentair common stock, with any costs of purchasing the
shares paid by the company. The plan brochure and enrollment cards are
available from the company or Norwest Bank Minnesota, N.A.
Direct Book Entry Registration Pentair offers its shareholders the
opportunity to participate in the company's Direct Book Entry
Registration service. Direct Book Entry is an uncertificated form of
stock ownership that provides protection against loss, theft, and
inadvertent destruction of stock certificate(s), while reducing
administrative costs. A plan brochure and enrollment forms are
available from the company or Norwest Bank Minnesota, N.A.
Annual Meeting The annual meeting of shareholders will be held at the
Northland Inn, 7101 Northland Circle, Brooklyn Park, Minnesota, at
10:00 a.m. on April 24, 1996. Management and directors encourage all
shareholders to attend the annual meeting.
Form 10-K Available A copy of the company annual report on Form 10-K, as
filed with the Securities and Exchange Commission, will be provided on
request to shareholders. Written requests should be directed to
Investor Relations, Pentair, Inc., Waters Edge Plaza, 1500 County Road
B2 West, Suite 400, St. Paul, Minnesota 55113.
Takeover Defense Pentair is committed to protecting its stakeholders from
harm by corporate raiders and unfriendly takeover actions. Information
on our position may be obtained by writing to the Pentair, Inc.
corporate secretary at the corporate office.
Registrar And Transfer Agent Norwest Bank Minnesota, N.A., South St.
Paul, MN 55075
Certified Public Accountants Deloitte & Touche LLP, Minneapolis, MN 55402
General Counsel Henson & Efron, P.A., Minneapolis, MN 55401
<PAGE>
(Left to right)
Walter Kissling (3,6), 65, President and Chief Executive Officer of H. B.
Fuller Company.
D. Eugene Nugent (3,4,5,8), 69, Retired Chairman and Chief Executive
Officer of Pentair, Inc.
Charles A. Haggerty (1,6,8), 55, Chairman, President, and Chief Executive
Officer of Western Digital.
Karen E. Welke (1,7,8), 51, Group Vice President of 3M's Medical Products
Group.
George N. Butzow (1,2,4,6), 67, Retired Chairman of MTS Systems
Corporation.
Richard M. Schulze (1), 55, Founder, Chairman, and Chief Executive
Officer of Best Buy Company, Inc.
Winslow H. Buxton (3,4,5,7), 57, Chairman, President, and Chief Executive
Officer of Pentair, Inc.
Quentin J. Hietpas (2,5), 65, Senior Vice President of External Affairs
at the University of St. Thomas.
Harold V. Haverty (2,3,7), 66, Chairman of the Board of Deluxe
Corporation.
(1) Audit Committee, (2) Compensation Committee, (3) Executive Committee,
(4) Shareholder Affairs Committee, (5) Nominating Committee,
(6) Share Rights Committee, (7) Public Policy Committee, (8) Investment
Policy Committee.
Pentair 1995
Pentair's 1995 Accomplishments Reflect the Contributions
of Time, Talent, and Energy by over 9,000 Employees around the World
whose Shared Vision is a Prosperous Pentair.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
As of December 31, 1995, the following are wholly-owned
subsidiaries of the Registrant except as noted:
State or Other
Jurisdiction of
Incorporation
Subsidiary or Organization
Specialty Products
Delta International Machinery Corp. Minnesota
Biesmeyer Manufacturing Corporation 1 Arizona
Pentair Canada, Inc. 2 Ontario, Canada
Porter-Cable Corporation Minnesota
McNeil (Ohio) Corporation Minnesota
F. E. Myers Co., Division of
McNeil (Ohio) Corporation -
Pentair Canada, Inc. 2 Ontario, Canada
Aplex Industries, Inc. 3 Texas
Fleck Controls, Inc. Wisconsin
Fleck Europe, S.N.C. 8 France
Fleckenstein Family France
Corporation Wisconsin
General Industrial Equipment
McNeil (Ohio) Corporation Minnesota
Lincoln Industrial, Division of
McNeil (Ohio) Corporation -
Lincoln Automotive, Division of
McNeil (Ohio) Corporation -
Pentair Canada, Inc. 2 Ontario, Canada
APNO, S.A. de C.V. 3 Mexico
Telestack Company 3 Ohio
FC Holdings Inc. Delaware
Federal-Hoffman, Inc. 4 Minnesota
Federal Cartridge Company, Division
of Federal-Hoffman, Inc. -
Hoffman Engineering Company,
Division of Federal-Hoffman, Inc. -
Hoffman Engineering Company
Limited 5 United Kingdom
Hoffman Engineering, S.A. de C.V.5 Mexico
Schroff Inc. 4 Rhode Island
Schroff Co. Ltd. 4 Taiwan
Schroff K.K. 4 Japan
EuroPentair, GmbH Germany
Schroff, GmbH 6 Germany
Schroff U.K. Ltd. 6 United Kingdom
Schroff S.A. 6 France
Schroff S.r.L. 6 Italy
Schroff Scandinavia AB 6 Sweden
Lincoln GmbH 6 Germany
General Corporate
Federal-Hoffman International, Inc. 5 Guam
Pentair FSC Corporation 3 U.S. Virgin Islands
Penwald Insurance Company Vermont
FOOTNOTES:
1 A wholly-owned subsidiary of Delta International Machinery Corp.
2 Wholly-owned by Delta International Machinery Corp. and McNeil
(Ohio) Corporation, having the following divisions: Delta
International Machinery, F. E. Myers Company, and Lincoln
Canada.
3 A wholly-owned subsidiary of McNeil (Ohio) Corporation.
4 A wholly-owned subsidiary of FC Holdings Inc.
5 A wholly-owned subsidiary of Federal-Hoffman, Inc.
6 A wholly-owned subsidiary of EuroPentair, GmbH.
7 Wholly-owned by EuroPentair GmbH and Telestack Company,
a subsidiary of McNeil (Ohio) Corporation.
8 Wholly-owned by Fleck Controls, Inc. and Fleckenstein Family
France Corporation
EXHIBIT 23
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
CONSENT
We consent to the incorporation by reference in Registration
Statements No. 2-83635, No. 2-88670, No. 33-36256, No. 33-38534,
No. 33-42057, No. 33-42268, and No. 33-45012 of
Pentair, Inc. on Form S-8 of our reports dated February 9, 1996,
appearing in and incorporated by reference in this Annual Report
on Form 10-K of Pentair, Inc. for the year ended December 31,
1995.
DELOITTE & TOUCHE
Minneapolis, Minnesota
March 22, 1996
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