<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 1, 2000
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)
<TABLE>
<S> <C>
Minnesota 41-0907434
-------------------------------------- --------------------------------------
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
90 South 7th Street, 36th Floor
Minneapolis, Minnesota 55402
-------------------------------------- --------------------------------------
(Address of principal executive (Zip Code)
offices)
</TABLE>
(612) 338-5100
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
The number of shares outstanding of Registrant's only class of common stock on
July 1, 2000 was 48,529,635.
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<PAGE> 2
PENTAIR, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I -- FINANCIAL INFORMATION
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signature Page
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
Pentair, Inc.
<TABLE>
<CAPTION>
SIX MONTHS ENDED QUARTER ENDED
---------------------- --------------------
(UNAUDITED) JULY 1, JUNE 26, JULY 1, JUNE 26,
($ EXPRESSED IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2000 1999 2000 1999
--------------------------------------------------- ---------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $1,488,891 $977,718 $776,613 $507,224
OPERATING COSTS:
Cost of goods sold 1,043,778 667,874 549,706 347,215
Selling, general and administrative 273,689 199,678 140,321 102,322
Research and development 18,865 12,102 8,869 6,062
Restructuring charge 200 38,000 0 0
---------- -------- -------- --------
Total operating costs 1,336,532 917,654 698,896 455,599
OPERATING INCOME 152,359 60,064 77,717 51,625
INTEREST EXPENSE -- NET 40,410 11,994 20,005 7,082
---------- -------- -------- --------
INCOME BEFORE INCOME TAXES 111,949 48,070 57,712 44,543
PROVISION FOR INCOME TAXES 41,420 17,545 21,082 16,258
---------- -------- -------- --------
NET INCOME $ 70,529 $ 30,525 $ 36,630 $ 28,285
========== ======== ======== ========
EARNINGS PER COMMON SHARE:
BASIC $ 1.45 $ 0.72 $ 0.75 $ 0.67
DILUTED $ 1.45 $ 0.71 $ 0.75 $ 0.66
WEIGHTED AVERAGE COMMON SHARES
Outstanding 48,485 42,433 48,517 42,642
Outstanding assuming dilution 48,658 43,056 48,742 43,038
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
Pentair, Inc.
<TABLE>
<CAPTION>
(UNAUDITED)
JULY 1, DECEMBER 31,
(IN THOUSANDS) 2000 1999
------------------------------------------------------------ ----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 56,126 $ 66,228
Accounts and notes receivable 617,050 587,211
Inventories 484,498 425,935
Deferred income taxes 53,326 55,984
Other current assets 25,271 15,120
---------- ----------
TOTAL CURRENT ASSETS 1,236,271 1,150,478
PROPERTY, PLANT & EQUIPMENT -- NET 385,589 403,807
Goodwill 1,158,510 1,187,525
Other assets 67,522 61,156
---------- ----------
TOTAL ASSETS $2,847,892 $2,802,966
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts and notes payable $ 281,604 $ 262,844
Compensation and other benefits accruals 89,799 103,318
Income taxes 40,000 21,363
Accrued product claims and warranties 48,031 49,819
Accrued rebates 19,606 19,905
Accrued expenses and other liabilities 78,771 125,910
Current maturities of long-term debt 217,310 177,788
---------- ----------
TOTAL CURRENT LIABILITIES 775,121 760,947
LONG-TERM DEBT 839,131 857,296
PENSIONS AND OTHER RETIREMENT COMPENSATION 58,541 67,182
POSTRETIREMENT MEDICAL AND OTHER BENEFITS 45,869 44,043
RESERVES -- INSURANCE SUBSIDIARY 16,978 22,885
DEFERRED INCOME TAXES 9,138 6,845
OTHER LIABILITIES 59,129 50,563
COMMON STOCK -- par value, $.16 2/3 8,089 8,053
ADDITIONAL PAID-IN CAPITAL 462,452 456,516
ACCUMULATED OTHER COMPREHENSIVE INCOME (25,803) (15,599)
RETAINED EARNINGS 599,247 544,235
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 1,043,985 993,205
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,847,892 $2,802,966
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Pentair, Inc.
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
JULY 1, DECEMBER 31,
(IN THOUSANDS) 2000 1999
------------------------------------------------------------ ----------- ------------
<S> <C> <C>
PREFERRED STOCK
Beginning Balance $ 0 $ 53,638
Conversions into common 0 (53,638)
---------- --------
Ending Balance 0 0
COMMON STOCK -- PAR
Beginning Balance $ 8,053 $ 6,417
Repurchase of common stock 0 (19)
Employee stock plans -- net 36 58
Issuance of common stock 0 917
Conversions into common 0 680
---------- --------
Ending Balance 8,089 8,053
ADDITIONAL PAID IN CAPITAL
Beginning Balance $ 456,516 $184,145
Repurchase of common stock 0 (4,011)
Employee stock plans -- net 5,936 9,861
Issuance of common stock 0 213,563
Conversions into common 0 52,958
---------- --------
Ending Balance 462,452 456,516
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Beginning Balance $ (14,614) $ (1,587)
Current period change (10,204) (13,027)
---------- --------
Ending Balance (24,818) (14,614)
MINIMUM LIABILITY PENSION ADJUSTMENT
Beginning Balance $ (985) $ (2,375)
Current period change 0 1,390
---------- --------
Ending Balance (985) (985)
RETAINED EARNINGS
Beginning Balance $ 544,235 $469,127
Net Income 70,529 103,309
Common Dividends (15,517) (28,201)
---------- --------
Ending Balance 599,247 544,235
TOTAL SHAREHOLDERS' EQUITY $1,043,985 $993,205
========== ========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
Pentair, Inc.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JULY 1, JUNE 26,
(UNAUDITED) (IN THOUSANDS) 2000 1999
------------------------------------------------------------ -------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 70,529 $ 30,525
Adjustments to reconcile to cash flow:
Restructuring charge 200 38,000
Depreciation 35,341 28,235
Amortization 19,325 9,323
Deferred income taxes 5,370 2,657
Changes in assets and liabilities, net of effects of
acquisitions/disposition
Accounts receivable (36,229) (30,967)
Inventories (64,534) (10,033)
Accounts payable 22,251 (26,179)
Compensation and benefits (12,382) 385
Income taxes 19,150 (13,499)
Pensions and other retirement compensation (7,024) (393)
Reserves -- insurance subsidiary current and long-term (1,907) (2,311)
Other assets/liabilities -- net (52,913) (15,627)
-------- --------
CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES (2,823) 10,116
INVESTING ACTIVITIES
Capital expenditures (29,486) (18,982)
Payments for acquisition of businesses 0 (61,970)
Other 88 88
-------- --------
CASH USED FOR INVESTING ACTIVITIES (29,398) (80,864)
-------- --------
FINANCING ACTIVITIES
Borrowings 31,301 116,555
Debt payments (4,063) (38,483)
Employee stock plans and other 5,972 4,101
Repurchase of stock 0 (4,030)
Dividends paid (15,517) (13,660)
-------- --------
CASH PROVIDED BY FINANCING ACTIVITIES 17,693 64,483
EFFECTS OF CURRENCY EXCHANGE RATE CHANGES 4,426 15,859
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,102) 9,594
CASH AND CASH EQUIVALENTS
-- BEGINNING OF PERIOD 66,228 32,039
-------- --------
-- END OF PERIOD $ 56,126 $ 41,633
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pentair, Inc.
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with instructions for Form 10-Q and, accordingly, do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring accruals, considered necessary
for a fair presentation have been included.
These statements should be read in conjunction with the financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999, previously filed with the Securities and Exchange
Commission.
The results of operations for the six months ended July 1, 2000 is not
necessarily indicative of the operating results to be expected for the full
year.
Income tax provisions for interim periods are based on the current best estimate
of the effective annual federal, state and foreign income tax rates.
Certain reclassifications have been made to prior years' financial statements to
conform to the current year presentation.
In June, 2000, Pentair, Inc. (the Company) reorganized its management reporting
structure into four segments in place of the three segments it had used since
the fourth quarter of 1997. The Company has recently filed a Form 8-K consisting
of restated annual segment financial information and descriptions of the
segments.
Pentair has chosen to focus its management skills on four segment markets
consisting of Pentair Tools, Pentair Equipment, Pentair Water Technologies and
Pentair Enclosures. Selected financial information for business segments (taking
restructuring charge into account for operating income) for the six months ended
July 1, 2000 and June 26, 1999 is included in the Management's Discussion and
Analysis section.
2. EARNINGS PER COMMON SHARE
Basic earnings per common share is computed by dividing net income by the
weighted average common shares outstanding during the period.
Diluted earnings per common share is computed by dividing net income by the
weighted average common shares outstanding plus the incremental shares that
would have been outstanding upon the assumed exercise of dilutive stock options
and upon the assumed conversion of each series preferred stock.
7
<PAGE> 8
The following table reflects the calculation of basic and diluted earnings per
share.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
JULY 1, JUNE 26,
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2000 1999
------------------------------------------------------ ------- --------
<S> <C> <C>
EARNINGS PER SHARE
Net Income $70,529 $30,525
======= =======
Weighted average shares outstanding 48,485 42,433
======= =======
Basic Earnings per Common Share $ 1.45 $ 0.72
======= =======
EARNINGS PER SHARE -- ASSUMING DILUTION
Net Income $70,529 $30,525
======= =======
Weighted average shares outstanding 48,485 42,433
Dilutive impact of stock options outstanding 173 348
Assumed conversion of preferred stock 0 275
------- -------
Weighted average shares and potentially dilutive
shares outstanding 48,658 43,056
======= =======
Diluted Earnings per Common Share $ 1.45 $ 0.71
======= =======
</TABLE>
3. COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
JULY 1, JUNE 26,
(IN THOUSANDS) 2000 1999
----------------------------------------------------- -------- --------
<S> <C> <C>
Net Income $ 70,529 $30,525
Other Comprehensive Income, net of tax:
Foreign Currency Translation Adjustments (10,204) (1,367)
Minimum Pension Liability Adjustment 0 0
-------- -------
Total Comprehensive Income $ 60,325 $29,158
======== =======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------
JULY 1, JUNE 26,
2000 1999
-------- --------
<S> <C> <C>
Net Income $36,630 $28,285
Other Comprehensive Income, net of tax:
Foreign Currency Translation Adjustments (4,840) (1,267)
Minimum Pension Liability Adjustment 0 0
------- -------
Total Comprehensive Income $31,790 $27,018
======= =======
</TABLE>
4. INVENTORIES
<TABLE>
<CAPTION>
JULY 1, DECEMBER 31,
(IN THOUSANDS) 2000 1999
----------------------------------------------------- -------- ------------
<S> <C> <C>
Finished goods $302,413 $243,757
Work in process 50,684 64,629
Raw materials and supplies 131,401 117,549
-------- --------
Total $484,498 $425,935
======== ========
</TABLE>
8
<PAGE> 9
5. PROPERTY PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
JULY 1, DECEMBER 31,
(IN THOUSANDS) 2000 1999
---------------------------------------------------- --------- ------------
<S> <C> <C>
Land and land improvements $ 18,810 $ 21,768
Buildings 168,221 170,245
Machinery and equipment 500,695 509,419
Construction in progress 50,827 39,025
Accumulated depreciation (352,964) (336,650)
--------- ---------
Net Property Plant and Equipment $ 385,589 $ 403,807
========= =========
</TABLE>
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
JULY 1, DECEMBER 31,
(IN THOUSANDS) 2000 1999
---------------------------------------------------- ---------- ------------
<S> <C> <C>
Revolving credit facilities $ 637,243 $ 590,612
Private placement debt 151,128 174,694
Senior Notes 250,000 250,000
Other 18,070 19,778
---------- ----------
Total 1,056,441 1,035,084
Current maturities 217,310 177,788
---------- ----------
Total long-term debt $ 839,131 $ 857,296
========== ==========
</TABLE>
Debt agreements contain various restrictive covenants, including a limitation on
the payment of dividends and certain other restricted payments. Under the most
restrictive covenants, $315 million of the July 1, 2000 retained earnings were
unrestricted for such purposes.
7. CAPITAL STOCK
<TABLE>
<S> <C>
-- authorized 250,000,000
-- common Outstanding 48,529,635
</TABLE>
Of the 250 million authorized shares, up to 15 million shares may be designated
by the Board of Directors as preferred shares. There were no designated
preferred shares at July 1, 2000.
On December 14, 1998, the Company announced that the Pentair board had
authorized the Company to repurchase on an annual basis up to 400,000 shares of
Pentair common stock. Any purchases would be made periodically in the open
market, by block purchases or private transactions. The share repurchase is
intended to offset the dilution caused by stock issuances under employee stock
compensation plans. As of July 1, 2000, the Company had repurchased no shares
under the current annual authorization.
8. SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION
The following is supplemental information relating to the Statement of Cash
Flows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
JULY 1, JUNE 26,
($ IN THOUSANDS) 2000 1999
------------------------------------------------------ -------- --------
<S> <C> <C>
Interest paid $48,989 $13,699
Income tax payments 30,291 27,747
</TABLE>
9
<PAGE> 10
9. RESTRUCTURING CHARGE
In 1999, the Company recorded an initial restructuring charge of $38.0 million
($24.1 million after-tax) and in the first quarter of 2000 recorded a further
net restructuring charge of $0.2 million ($0.1 million after-tax). The status
and progress of the projects implemented in 1999 were re-evaluated in the first
quarter and a reduction for a change in the original estimate of $6.3 million
was recorded. Three new related projects were determined as restructuring items
and a $6.5 million additional charge was recorded.
As shown below, $30.5 million has been spent or charged through July 1, 2000.
The remaining balance of $7.7 million is classified within Accrued Liabilities
and Other Expenses on the balance sheet.
The restructuring plan comprised consolidation of certain operations, overhead
reductions, and outsourcing of specific product lines in three of the Company's
business segments. The restructuring plan did not contemplate the Company
exiting any of its current lines of business; the projects involved were
designed to make the Company's existing businesses more efficient.
The additional net charge in 2000 is attributable to a delay in a plant closing
in the Equipment segment as a result of a fire in a Taiwanese factory providing
sourced products, the closure of a North American facility and the write-off of
goodwill at the Transrack subsidiary in France, both in the Enclosure segment.
The write-off of goodwill was related to the restructuring of our European
enclosure operations. Upon analysis of future undiscounted cash flows of the
Transrack business, it was determined that the cash flows were not adequate to
ensure recoverability of a portion of the goodwill amount recorded. The goodwill
write-off was $3.0 million (20 million French francs).
The components of the restructuring charge and related reserve balances
remaining at July 1, 2000 were:
<TABLE>
<CAPTION>
PERSONNEL ASSET EXIT
(IN MILLIONS) COSTS DISPOSALS COSTS TOTAL
----------------------------------------- --------- --------- ----- ------
<S> <C> <C> <C> <C>
1999 Restructuring Charge $27.5 $ 7.0 $3.5 $ 38.0
1999 Spending:
Cash spending (9.4) (0.1) (0.1) (9.6)
Non-cash spending (0.0) (2.9) (0.3) (3.2)
Change in Estimate (9.3) 3.7 (0.7) (6.3)
2000 Restructuring Charge 1.3 3.9 1.3 6.5
2000 Spending:
Cash spending (4.9) (0.0) (1.6) (6.5)
Non-cash spending (0.0) (10.7) (0.5) (11.2)
----- ------ ----- ------
Remaining Reserve $ 5.2 $ 0.9 $1.6 $ 7.7
===== ====== ===== ======
</TABLE>
"Personnel Costs" consist of severance, medical plan continuation, pension
cash-outs, and outplacement per business unit policies for employees terminated.
As of July 1, 2000, approximately 850 employees have been terminated (or in
Europe are working under statutory notice periods). The remaining 250 employees
affected by the restructuring are expected to be terminated during the third
quarter of 2000 with the final shutdown of the Jonesboro manufacturing
operation.
"Asset Disposals" consist of the write-down of the carrying value of the
buildings held for resale and the write-off of special-use manufacturing and
support assets which will no longer be needed and which will be scrapped or
abandoned. The real estate held for resale is expected to be disposed of by the
third quarter of 2000. All of these assets are currently classified as property,
plant and equipment. The closure of the North American facility in the Enclosure
segment does not entail significant asset disposals, since the facility was
leased until the end of 2000. Asset disposals do include, however, the write-off
of goodwill at Transrack.
"Exit Costs" consists of maintenance and security costs of surplus buildings
until leases expire or demolition or disposal of certain buildings.
10
<PAGE> 11
"Personnel Costs" and "Exit Costs" are primarily cash costs and the "Asset
Disposals" are primarily non-cash costs. Our currently anticipated schedule
projects cash expenditures of $7.5 million remaining in 2000 and $0.2 million in
2001. These requirements will be funded through cash from operations or
borrowings under our existing credit facilities.
Restructuring benefits (largely personnel cost savings) were realized of
approximately $5.9 million and $6 million in the first six months of 2000 and
full year 1999, respectively. Anticipated benefits are projected to be $12
million in 2000 and $15 million in 2001. The major components of anticipated
benefits are in reductions in labor costs and efficiencies in consolidating
distribution and administrative functions.
The anticipated benefits noted above are net of the costs of adding 200
employees at other Pentair locations. The benefits do not, however, take into
account one-time costs associated with these restructuring plans. The Company
anticipates that the associated one-time costs will total approximately $7
million, of which over half has been incurred to date. These costs are not
included in the restructuring charge, since they relate to asset relocations,
start-up costs and training and recruiting of employees at other locations.
10. ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The FASB subsequently issued FAS No. 137 delaying the
effective date for one year, to fiscal years beginning after June 15, 2000. The
Company will adopt this standard no later than January 1, 2001. Although the
Company expects that this standard will not materially affect its financial
position and results of operations, it has not yet determined the impact of this
standard on its financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition." An amendment in June 2000 delayed the
effective date until the fourth quarter of 2000. The company is reviewing the
requirements of this standard and has not yet determined the impact of this
standard on its consolidated financial statements.
11
<PAGE> 12
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BUSINESS SEGMENT INFORMATION
In June, 2000, Pentair, Inc. (the Company) reorganized its management reporting
structure into four segments in place of the three segments it had used since
the fourth quarter of 1997. The Company has recently filed a Form 8-K consisting
of restated annual segment financial information and descriptions of the
segments.
Pentair has chosen to focus its management skills on four segment markets
consisting of Pentair Tools, Pentair Equipment, Pentair Water Technologies and
Pentair Enclosures. Selected financial information for business segments (taking
restructuring charge into account for operating income) for the six months ended
July 1, 2000 and June 26, 1999 follows:
SEGMENT INFORMATION:
<TABLE>
<CAPTION>
($000S) (UNAUDITED) TOOLS EQUIPMENT WATER ENCLOSURES OTHER TOTAL
--------------------------- -------- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
2000
Net sales from external
customers $500,475 $139,623 $481,607 $367,186 $ 0 $1,488,891
Intersegment net sales 0 0 0 0 0 0
Segment profit (loss):
Operating income* 41,187 (811) 72,196 49,198 (9,411) 152,359
Segment assets 950,371 214,152 978,555 554,111 150,703 2,847,892
1999
Net sales from external
customers $299,489 $153,035 $225,570 $299,624 $ 0 $ 977,718
Intersegment net sales 0 0 0 0 0 0
Segment profit (loss):
Operating income** 28,121 (775) 31,647 10,055 (8,984) 60,064
Segment assets 332,856 211,293 445,358 572,893 107,117 1,669
</TABLE>
Other = Corporate leadership expenses, captive insurance company, intermediate
financial companies, charges that do not relate to current operations,
intercompany eliminations and all cash and cash equivalents
* Including net restructuring charge of $0.2 million taken in 2000. Before
restructuring charge, operating income for the segments and for Pentair as a
whole were: Tools -- $40,016; Equipment -- $1,857; Water -- $72,196;
Enclosures -- $47,901; and Pentair total -- $152,559. Operating margins
before the restructuring charge were: Tools -- 8.0%; Equipment -- 1.3%;
Water -- 15.0%; Enclosures -- 13.0%; and Pentair total -- 10.2%.
** Including net restructuring charge of $38.0 million taken in 1999. Before
restructuring charge, operating income for the segments and for Pentair as a
whole were: Tools -- $34,426; Equipment -- $14,177; Water -- $31,647;
Enclosures -- $26,798; and Pentair total -- $98,064. Operating margins before
the restructuring charge were: Tools -- 11.5%; Equipment -- 9.3%;
Water -- 14.0%; Enclosures -- 8.9%; and Pentair total -- 10.0%.
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
SIX MONTHS ENDED JULY 1, 2000 COMPARED TO SIX MONTHS ENDED JUNE 26, 1999
Consolidated net sales increased to $1.489 billion in the six months of 2000,
representing a 52.3% increase over the corresponding 1999 period. While the
majority of this increase is attributable to the acquisitions
12
<PAGE> 13
the Company made in its Tools and Water Technologies segments in the third
quarter of 1999, organic sales growth (that is, before the impact of business
units acquired less than one year) exceeded 8%.
Operating income in the first six months of 2000, after taking restructuring
charges into account ($.2 million), was $152.4 million, an increase of $92.3
million from the corresponding 1999 period that included a $38.0 million
restructuring charge. Operating income before restructuring charges was $152.6
million for the first six months of 2000, up 55.6% from the corresponding
year-earlier period. As a percent of sales, pre-charge operating income improved
in the six-month period from 10.0% in 1999 to 10.2% in 2000. The increase in
operating income is largely attributable to the significant acquisitions made in
1999, though strong gains in the Water Technologies and Enclosures segments
helped generate an increase in organic operating income for the period.
Gross profit margins decreased in the first six months of 2000 to 29.9% versus
31.7% for the same period a year ago, attributable in large part to the
acquisitions made in 1999, since these businesses have higher costs of goods
sold and lower SG&A costs than other Pentair businesses. Excluding acquisitions,
gross margins improved 50 basis points year-over-year. Selling, general and
administrative expense (SG&A) as a percent of sales was 19.7% in the first six
months of 2000 as compared to 21.7% in the year-earlier period.
Net income for the first six months of 2000 after restructuring charge ($.1
million after-tax) increased to $70.5 million from $30.5 million in 1999 after
restructuring charge ($24.1 million after-tax). Before restructuring charges in
the two periods are taken into account, net income in 2000 was $70.6 million, up
from $54.6 million, or 29.3% over 1999.
Due to higher interest costs as a result of increased indebtedness incurred for
the 1999 acquisitions, interest expense increased for the first six months from
$12.0 million to $40.4 million. In addition, exchange rates, primarily between
the US dollar and the Euro and pound sterling, adversely impacted European
operations in both sales ($13.9 million) and operating income ($1.3 million) for
the six month period in 2000. Pentair's tax rate for the first six months was
37% in 2000, an increase from 36.5% in the year-earlier period. The increase is
primarily due to nondeductible amortization of goodwill attributable to the 1999
acquisitions.
Diluted earnings per share for 2000 year-to-date after the restructuring charge
increased from $.71 to $1.45; before the restructuring charges, diluted earnings
per share increased 14.2% over the comparable period ($1.27) in 1999. Weighted
average common shares outstanding, assuming full dilution, were 48.658 million
for the second quarter of 2000, compared to 43.056 million in the year-earlier
quarter. The increase is primarily attributable to the public offering of 5.5
million shares completed in October 1999.
SECOND QUARTER ENDED JULY 1, 2000 COMPARED TO SECOND QUARTER ENDED JUNE 26, 1999
Consolidated net sales increased to $776.6 million in the second quarter of
2000, an increase of $269.4 million or 53.1% over the same period a year ago.
Acquisitions made in the third quarter of 1999 accounted for a significant
portion of this increase, although organic sales growth in the quarter increased
at nearly a double-digit rate over year-earlier net sales.
Second quarter operating income rose to $77.7 million in 2000, an increase of
$26.1 million or 50.5% over the corresponding 1999 period, attributable to the
1999 acquisitions. Organic operating income, however, decreased from second
quarter 1999 levels as a result of poorly performing operations in the Tools and
Equipment segments. Net income in the quarter increased to $36.6 million in 2000
from $28.3 million in 1999, or 29.5%. Second quarter diluted earnings per share
in 2000 showed a 13.6% increase over the corresponding period in 1999,
attributable to accretive acquisitions and strong performance in the Water
Technologies and Enclosures segments.
SEGMENT INFORMATION
TOOLS SEGMENT
Net sales increased to $500.5 million in 2000 year-to-date, representing a 67.1%
increase over the corresponding six-month period in 1999. Net sales in the
second quarter of 2000 grew 76.5% to
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$263.8 million from $149.4 million in the same period in 1999. Second quarter
sales and operating income for the Tools segment in 2000 have been adjusted from
previously released numbers due to final closing entries. Organic sales in 2000
year-to-date were up only slightly year-over-year, largely as a result of the
continuing impact in its markets of the shipping difficulties caused by the
start-up of the new Tools distribution center in the first quarter, but in the
second quarter increased over 10% as compared to the second quarter of 1999. Net
sales of the acquired business were also below expectations as a result of a
decline in generator sales due to continuing high inventories at distributors
and retailers, as well as increased competition in other product markets.
Operating income in 2000 year-to-date after the restructuring charge was $41.2
million, an increase of $13.1 million over the prior year. Before taking
restructuring charges into account ($6.3 million in 1999 compared to $(1.2)
million in 2000), operating income in 2000 for the six month period increased
from $34.4 million to $40.0 million, or 16.2%. As a percent of sales, pre-charge
operating income decreased from 11.5% to 8.0%, largely attributable to
unfavorable product mix, special pricing and promotional programs and higher
material costs in 2000.
Operating income in the second quarter of 2000 grew 3.4% to $16.1 million from
$15.6 million in the same period in 1999. Operating income as a percent of sales
in the second quarter declined to 6.1% in 2000 from 10.4% in the corresponding
period in 1999, largely as a result of special pricing and promotional programs,
increases in raw material costs and the establishment of a reserve to cover the
deterioration in credit quality of a significant customer.
The outlook for market demand for the Tools segment products remains good. The
Company is optimistic that core growth through product innovation and
cross-selling will continue. Aggressive actions are being implemented to return
the Tools businesses to their traditional high levels of performance.
EQUIPMENT SEGMENT
Net sales in this newly formed segment decreased from $153.0 million to $139.6
million in 2000 year-to-date, representing an 8.8% decrease over the
corresponding six-month period in 1999. Net sales in the second quarter of 2000
decreased 15.3% to $67.4 million from $79.6 million in the same period in 1999.
This poor sales performance is attributable to slow growth and pricing pressures
in the automotive and industrial markets served by these businesses.
The segment reported an operating loss in 2000 year-to-date after restructuring
charge of $0.8 million, similar to that of the prior year. Before taking
restructuring charges into account ($15 million in 1999 compared to $2.7 million
in 2000), operating income in 2000 for the six-month period was $1.9 million
compared to $14.2 million in the prior year. This decrease is largely
attributable to unfavorable manufacturing variances, lower unit volumes and
lower selling prices in 2000.
The Equipment segment reported an operating loss in the second quarter of 2000
($0.8 million) compared to operating income of $8.3 million in the same period
in 1999. This poor performance resulted from delays in a plant closing,
inefficiencies associated with consolidating two automotive service equipment
businesses and Asian product sourcing difficulties.
The Company is in the process of consolidating the automotive service equipment
businesses, combining the industrial and automotive lubrication businesses to
eliminate market overlaps, closing the Jonesboro, Arkansas facility and reducing
working capital. Once these structural changes are completed, the businesses
should be in a position to regain sales momentum and market position.
WATER TECHNOLOGIES SEGMENT
Net sales increased to $481.6 million in 2000 year-to-date, representing a
113.5% increase over the corresponding period in 1999. Net sales in the second
quarter of 2000 more than doubled to $255.6 million from $121.9 million in the
same period in 1999. While the large sales increases for the respective periods
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<PAGE> 15
are largely attributable to the 1999 third-quarter acquisition of the pressure
vessel and pool and spa equipment businesses, organic net sales did experience
mid-to-high single digit year-over-year sales growth.
Operating income in 2000 year-to-date was $72.2 million, an increase of $40.6
million or 128.1% over the first six months of 1999. Operating income as a
percent of sales improved from 14.0% to 15.0%. Operating income in the second
quarter of 2000 grew 135.6% to $41.4 million from $17.6 million in the same
period in 1999, and as a percentage of sales rose to 16.2% from 14.4%. While the
1999 acquisitions are largely responsible for the magnitude of the increase in
operating income, the Water Technologies segment did achieve organic operating
income growth in the mid-teens for both the second quarter and the first six
months.
The outlook for the Water Technologies segment is very good. As a result of the
Essef acquisition, this segment greatly expanded its product and geographic
capabilities. The segment is focusing more resources on its growth in overseas
markets, especially by Pentair Water Treatment, while continuing to implement
its operating improvement initiatives previously adopted and completing the
integration of the acquired businesses into its existing operations.
ENCLOSURES SEGMENT
Net sales increased to $367.2 million in 2000 year-to-date, representing a 22.5%
increase over the corresponding period in 1999. Net sales in the second quarter
of 2000 grew 21.5% to $189.8 million from $156.3 million in the same period in
1999. These sales increases, all organic in the second quarter, occurred across
all of the businesses in this segment, although the increases are strongest in
the telecom and data networking equipment markets.
Operating income in 2000 year-to-date after the restructuring charge was $49.2
million, an increase from $10.1 million in the prior year six-month period.
Operating income before restructuring charges ($16.7 million in 1999 and $(1.3)
million in 2000) increased to $47.9 million, up 78.7% over 1999 year-to-date.
Pre-charge operating income as a percent of sales increased from 8.9% to 13.0%.
Operating income in the second quarter of 2000 grew 71.4% to $24.7 million from
$14.4 million in the same period in 1999. Operating margins for the second
quarter increased from 9.2% in 1999 to 13.0% in 2000.
Strong growth is continued to be foreseen over the balance of the year and in
2001, especially in the telecom and data networking markets. The outlook for
continued growth in the Enclosures segment is excellent. The expansion of the
Enclosure businesses around the world will be critical to the segment's future
success in the rapidly growing datacom and telecom fields, especially in
creating a world-wide capability to serve these markets, whether in the
Americas, Europe or Asia. The Enclosure businesses plan to continue process
improvement actions and coordinated utilization of world-wide manufacturing
capacity to optimize profitability.
RESTRUCTURING CHARGE
In 1999, the Company recorded an initial restructuring charge of $38.0 million
($24.1 million after-tax) and in the first quarter of 2000 recorded a further
net restructuring charge of $0.2 million ($0.1 million after-tax). The status
and progress of the projects implemented in 1999 were re-evaluated in the first
quarter and a reduction for a change in the original estimate of $6.3 million
was recorded. Three new related projects were determined as restructuring items
and a $6.5 million additional charge was recorded.
As shown below, $30.5 million has been spent or charged through July 1, 2000.
The remaining balance of $7.7 million is classified within Accrued Liabilities
and Other Expenses on the balance sheet.
The restructuring plan comprised consolidation of certain operations, overhead
reductions, and outsourcing of specific product lines in three of the Company's
business segments. The restructuring plan did not contemplate the Company
exiting any of its current lines of business; the projects involved were
designed to make the Company's existing businesses more efficient.
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<PAGE> 16
The additional net charge in 2000 is attributable to a delay in a plant closing
in the Equipment segment as a result of a fire in a Taiwanese factory providing
sourced products, the closure of a North American facility and the write-off of
goodwill at the Transrack subsidiary in France, both in the Enclosure segment.
The write-off of goodwill was related to the restructuring of our European
enclosure operations. Upon analysis of future undiscounted cash flows of the
Transrack business, it was determined that the cash flows were not adequate to
ensure recoverability of a portion of the goodwill amount recorded. The goodwill
write-off was $3.0 million (20 million French francs).
The components of the restructuring charge and related reserve balances
remaining at July 1, 2000 were:
<TABLE>
<CAPTION>
PERSONNEL ASSET EXIT
(IN MILLIONS) COSTS DISPOSALS COSTS TOTAL
----------------------------------------- --------- --------- ----- ------
<S> <C> <C> <C> <C>
1999 Restructuring Charge $27.5 $ 7.0 $3.5 $ 38.0
1999 Spending:
Cash spending (9.4) (0.1) (0.1) (9.6)
Non-cash spending (0.0) (2.9) (0.3) (3.2)
Change in Estimate (9.3) 3.7 (0.7) (6.3)
2000 Restructuring Charge 1.3 3.9 1.3 6.5
2000 Spending:
Cash spending (4.9) (0.0) (1.6) (6.5)
Non-cash spending (0.0) (10.7) (0.5) (11.2)
----- ------ ----- ------
Remaining Reserve $ 5.2 $ 0.9 $1.6 $ 7.7
===== ====== ===== ======
</TABLE>
"Personnel Costs" consist of severance, medical plan continuation, pension
cash-outs, and outplacement per business unit policies for employees terminated.
As of July 1, 2000, approximately 850 employees have been terminated (or in
Europe are working under statutory notice periods). The remaining 250 employees
affected by the restructuring are expected to be terminated during the third
quarter of 2000 with the final shutdown of the Jonesboro manufacturing
operation.
"Asset Disposals" consist of the write-down of the carrying value of the
buildings held for resale and the write-off of special-use manufacturing and
support assets which will no longer be needed and which will be scrapped or
abandoned. The real estate held for resale is expected to be disposed of by the
third quarter of 2000. All of these assets are currently classified as property,
plant and equipment. The closure of the North American facility in the Enclosure
segment does not entail significant asset disposals, since the facility was
leased until the end of 2000. Asset disposals do include, however, the write-off
of goodwill at Transrack.
"Exit Costs" consists of maintenance and security costs of surplus buildings
until leases expire or demolition or disposal of certain buildings.
"Personnel Costs" and "Exit Costs" are primarily cash costs and the "Asset
Disposals" are primarily non-cash costs. Our currently anticipated schedule
projects cash expenditures of $7.5 million remaining in 2000 and $0.2 million in
2001. These requirements will be funded through cash from operations or
borrowings under our existing credit facilities.
Restructuring benefits (largely personnel cost savings) were realized of
approximately $5.9 million and $6 million in the first six months of 2000 and
full year 1999, respectively. Anticipated benefits are projected to be $12
million in 2000 and $15 million in 2001. The major components of anticipated
benefits are in reductions in labor costs and efficiencies in consolidating
distribution and administrative functions.
The anticipated benefits noted above are net of the costs of adding 200
employees at other Pentair locations. The benefits do not, however, take into
account one-time costs associated with these restructuring plans. The Company
anticipates that the associated one-time costs will total approximately $7
million, of which over half has been incurred to date. These costs are not
included in the restructuring
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charge, since they relate to asset relocations, start-up costs and training and
recruiting of employees at other locations.
LIQUIDITY AND CAPITAL RESOURCES
The Company seeks to maintain a total debt to capital ratio around 40% as
appropriate for its financing needs and business plans, although Pentair will
exceed this target ratio from time-to-time as needed for operational purposes
and/or acquisitions. The Company's total debt to capital ratio is 50.3% at the
end of the second quarter of 2000, down from 53.5% at the end of the first
quarter and from 51.0% at the end of 1999. The Company's total debt to capital
ratio was 36.6% at the end of the second quarter of 1999. The additional
indebtedness was incurred to finance two substantial acquisitions made in the
third quarter of 1999. The Company's available capital resources are deemed
adequate for its anticipated uses for the remainder of 2000.
The Company has targeted reduction in indebtedness as a key objective in 2000,
in order to increase its financial flexibility and to reduce its interest
expense. This reduction in indebtedness is to be achieved by significantly
increasing the amount of its free cash flow throughout the year. The Company has
adopted a goal in 2000 of reaching free cash flow of 5% of net sales and a
reduction in working capital from the first quarter of at least $100 million.
Of the total indebtedness of the Company at the end of the second quarter of
2000, more than 81% (approximately $860 million, including $21.2 million in
current maturities) is long-term and has an average life to maturity of 6 years.
This long-term indebtedness has interest rates varying from 4.0% to 9.0%, with
an average interest rate of 7.7%. The Company believes that currently
outstanding long-term indebtedness is and will continue to be adequate for its
financing needs for the foreseeable future. The Company also believes that it
will be able to obtain additional long-term indebtedness as its needs may
increase or its current indebtedness matures.
Short-term indebtedness stands at $196.1 million as of July 1, 2000, down from
$285.8 million at the end of the first quarter of 2000. This short-term
indebtedness has an average interest rate of 6.88%. The Company believes that it
will generate substantial cash flow from operations during 2000 which will be
used in large part to reduce current indebtedness. The Company also believes
that it will be able to renew its current short-term credit agreements, at the
time of their expiration in August 2000. In addition, the Company instituted a
commercial paper program in January 2000 for the issuance of short-term notes at
what it believes are favorable interest rates.
The Company expects capital spending in 2000 to be in the $85-90 million range
and will relate to e-business initiatives, computer hardware and software,
manufacturing cost reduction projects, new product development and
reconfiguration of manufacturing facilities.
At the end of the first half of 2000, free cash flow was negative by $32.3
million, as an exceptionally unfavorable net outflow of $164.7 million
experienced in the first quarter of 2000 was followed by a very strong second
quarter, which saw free cash flow of $132.4 million. The Company's focused
effort on collection of receivables, negotiation of better payment terms and
reductions in working capital showed positive results, helped in part by normal
customer payments for seasonal purchases in the Water Technologies segment.
During the second quarter, reductions in working capital were realized at almost
every business, and totaled $90 million for the Company as a whole. The Company
intends to continue to emphasize controlling working capital and maximizing free
cash flow.
In 2000, the Company has paid two quarterly dividends of $.16 per share and
recently announced an increase in its quarterly dividend rate of six percent to
$.17 per share. The increased cash dividend was payable August 11, 2000 to
shareholders of record at the close of business on July 28, 2000.
OUTLOOK
Pentair operates in four segments. This diversification enables the Company to
consistently improve results despite difficult markets in one or more
businesses. Continuing demand for power tools in the DIY
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<PAGE> 18
channel, ever-rising needs for clean water throughout the world, and the
critical importance of protecting sensitive electronics give Pentair's chosen
businesses excellent prospects for strong long-term performance. Markets for
lubrication and automotive equipment continue to remain static. The Company's
basic operating strategies -- ongoing cost containment, new product development,
multi-channel distribution, and the pursuit of value-added acquisitions -- drive
the businesses in both growing and softer economies.
Pentair is consolidating a number of its operations into larger, more effective
units which are better positioned to compete in their respective markets. In the
Tools segment, Porter-Cable and Delta completed the consolidation of their
operations in the first quarter of 2000, following an earlier combination of
their sales organizations.
Also scheduled for completion in 2000 is the consolidation of Equipment segment
operations in the United States into two primary facilities which will result in
the closing of one manufacturing facility. The Lincoln lubrication equipment
businesses will be combined into one operation managed out of the Company's St.
Louis facility. The automotive service equipment businesses of Century
Manufacturing and Lincoln are being combined into the Company's Bloomington,
Minnesota facility. These combinations are designed to minimize market overlaps
and streamline product line responsibilities.
The 1999 acquisition of the pressure vessel and pool and spa equipment
businesses have broadened the scope and opportunities of the Water Technologies
businesses. Since the acquisition, Pentair has closed one of the acquired
facilities and relocated its manufacturing operations; over the next few
quarters, Pentair intends to continue reorganization and consolidation of units
in order to improve manufacturing efficiencies and financial performance.
In 1999, the Company's Enclosures segment combined five separate North American
facilities into one business unit, Pentair Electronic Packaging, in order to
focus on the high-growth custom and modified enclosure market for telecom and
data networking products. In the second quarter the closure of a small operation
in California was undertaken in order to reduce costs and increase productivity
in the remaining facilities.
The Company continues to look for synergistic acquisitions in each of its
business segments, in line with its pattern over the past five years. Of the
fifteen acquisitions made since 1994, most were smaller businesses or product
lines which fit with existing operations, offering new products or expanded
geographic scope. In addition, three transactions over the last three years were
stand-alone acquisitions of large established businesses. Pentair intends to
continue to pursue smaller, bolt-on purchases, but will also carefully review
larger targets that have the capability to significantly expand its current
segments, or in appropriate cases, that establish an additional business
segment.
NOTIFICATION REGARDING FORWARD-LOOKING INFORMATION
It should be noted that certain statements herein which are not historical
facts, including without limitation those regarding 1) the timeliness of product
introductions and deliveries; 2) expectations regarding market growth and
developments; 3) expectations for growth and profitability; 4) implementation of
plans; 5) anticipated savings; 6) results achieved from acquisitions; and 7)
statements preceded by "believe", "anticipate", "expect", "estimate", "will" or
similar expressions are forward-looking statements. Because such statements
involve risks and uncertainties, actual results may differ from the results
currently expected by the Company.
Factors that could cause such differences include, but are not limited to, 1)
general economic conditions, such as the rate of economic growth in the
Company's principal geographic markets or fluctuations in exchange rates or
interest rates; 2) industry conditions, such as the strength of product demand,
the intensity of competition, pricing pressures, the acceptability of new
product introductions, the introduction of new products by competitors, changes
in technology or the ability of the Company to source components from third
parties without interruption and at reasonable prices and the financial
condition of the Company's customers; 3) operating factors, such as continued
improvement in manufacturing activities
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<PAGE> 19
and the achievement of related efficiencies therein, and inventory risks due to
shifts in market demand; and 4) integration of new businesses.
The Company undertakes no obligation to revise any forward-looking statements in
order to reflect events or circumstances that may arise after the date hereof.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this report and in the Company's other filings with the
Securities and Exchange Commission from time to time, especially the Company's
report on Form 10-K for the year ended December 31, 1999, that advise interested
parties of risks and uncertainties that may affect the Company's financial
condition and results of operations.
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS.
Horizon Litigation. Twenty-eight separate lawsuits involving 29 primary
plaintiffs, a class action and claims for indemnity by Celebrity, were brought
against Essef Corporation and certain of its subsidiaries which concern exposure
to Legionnaires bacteria by passengers aboard the cruise ship M/V Horizon, a
ship operated by Celebrity Cruise Lines. The lawsuits included a class action
brought on behalf of all passengers aboard the ship during the relevant time
period, individual "opt-out" passenger suits, and a suit by Celebrity Cruise
Lines, Inc. Celebrity Cruises, Inc. alleges in its suit that it has sustained
economic damages due to loss of usage of the M/V Horizon while it was dry
docked.
The claims against Essef and its involved subsidiaries, are based upon the
allegation that Essef designed, manufactured and marketed two sand swimming pool
filters that were installed as a part of the spa system on the Horizon, and
allegations that the spa, and filters, contained bacteria that infected certain
passengers on cruises from December, 1993 through July, 1994.
Prior to the Company's acquisition of Essef, a settlement was reached in the
class action. Essef and Celebrity have jointly attempted to resolve claims
brought by "opt-out" plaintiffs. To date, a number of these claims have been
settled, for nominal amounts, leaving 13 primary plaintiffs.
The claims of one plaintiff have been tried under a stipulation among all
remaining parties providing that the liability findings would be applicable to
all plaintiffs and defendants. The claims of this plaintiff were unusual because
he alleged that he developed complications that profoundly impaired his mental
functioning. (No other plaintiff asserted similar claims).
This trial resulted in a jury verdict finding liability on the part of the Essef
Defendants (70%) and Celebrity and its sister company Fantasia (together 30%).
Compensatory damages in the total amount of $2,660,000 were awarded, each
defendant being accountable for its proportionate share of liability. Punitive
damages were separately awarded against the Essef Defendants in the total amount
of $7 million, with 60% awarded to all remaining plaintiffs and 40% to
Celebrity. In any subsequent trial of other plaintiffs in this litigation, no
further punitive damages will be available. Essef and its subsidiaries intend to
file post-trial motions challenging the verdict, and if necessary, to file an
appeal.
At the current time, trial counsel is optimistic that all of the pending suits
will be resolved within available insurance coverage. This is a pre-acquisition
liability and the Company has purchase accounting reserves it believes
sufficient to cover the amount of any uninsured awards or settlements.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are included with this Form 10-Q Report as
required by Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
<C> <S>
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the second quarter of 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
/s/ DAVID D. HARRISON
--------------------------------------
David D. Harrison
Executive Vice President and
Chief Financial Officer
August 14, 2000
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