Q2 2013 EARNINGS RELEASE - s22.q4cdn.com · Q2 2013 EARNINGS RELEASE July 23, 2013. PENTAIR 2...

PENTAIR

Q2 2013 EARNINGS RELEASEJuly 23, 2013

PENTAIR 2

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This communication contains statements that we believe to be “forward-looking statements” within the meaning of the

Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward-looking

statements. Without limitation, any statements preceded or followed by or that include the words "targets,” "plans,”

"believes,” "expects,” "intends,” "will,” "likely,” "may,” "anticipates,” "estimates,” "projects,” "should,” "would,”

"positioned,” "strategy,” "future" or words, phrases or terms of similar substance or the negative thereof, are forward-

looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks,

uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to

differ materially from those expressed or implied by such forward-looking statements. These factors include the ability to

successfully integrate Pentair, Inc. and the Flow Control business and achieve expected benefits from the Merger; overall

global economic and business conditions; competition and pricing pressures in the markets we serve; the strength of

housing and related markets; volatility in currency exchange rates and commodity prices; inability to generate savings from

excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; increased

risks associated with operating foreign businesses; the ability to deliver backlog and win future project work; failure of

markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including

those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our

long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings

with the U.S. Securities and Exchange Commission, including in our Quarterly Report on Form 10-Q for the quarter ended

June 29, 2013 and our 2012 Annual Report on Form 10-K. All forward-looking statements speak only as of the date of this

communication. Pentair Ltd. assumes no obligation, and disclaims any obligation, to update the information contained in

this communication.

FORWARD-LOOKING STATEMENTS

PENTAIR 3

Adj. Op Income Up 13%

Adj. Op Margins 13.7% … Up 120 bps• Volume (incl. Acq. and FX) +20 pts.

• Price/Productivity/Mix +260 pts.

• Inflation -160 pts.

Adj. EPS Up 19%• Adj. Effective Tax Rate of 24.6% … In Line

• Adj. Net Interest of $16.3M; Share Count 205.5M

Q2 Free Cash Flow of $331M• Expect to Deliver ~$650M of FCF for 2013

FINANCIAL HIGHLIGHTS

SUMMARY

Sales Up 4% YOY• Volume/Price +4%

• FX 0%

• Water & Fluid Solutions +8%

• Valves & Controls +4%

• Technical Solutions -4%

Strong Operating Performance Drives Better EPS Performance

Q2'13 PENTAIR RESULTS*Q2'13 Q2'12

Sales $1.96B $1.89B

Op Income (Rpt.) $226M $119M

Op Income (Adj.) $268M $237M

ROS (Adj.) 13.7% 12.5%

EPS (Rpt.) $0.75 $0.72

EPS (Adj.) $0.92 $0.77

* All year-over-year comparisons against 2012 adjusted results on a pro forma basis for the Flow Control acquisition. See Appendix for reconciliation of non GAAP measures.

• Top Line Growth Led by NA Residential Recoveryand Strong Food & Beverage Sales

• Operating Margin Expansion Further Evidence ofProductivity and Synergies

• Adj. Tax Rate of 24.6% in Line with Forecast

• Share Buyback on Track for Full Year

• YTD Free Cash Flow Exceeded 125% of Net Income

PENTAIR 4

Operating Margins / Productivity HighlightsSales Highlights (by Vertical)

Revenue and Margin Expansion Led by Residential, Food & Beverage, and PIMS

SALES OPERATING INCOME

Q2'13 WATER & FLUID SOLUTIONS PERFORMANCE*


Q2'12Adjusted

Prod./Price

Infl.GrowthQ2'13

Adjusted

$10M$27M

$121M($15M)

+18%YoY

ROS(1.7%)0.2% 2.7%13.8%

$143M

15.0%ROS

$878M

$950M($2M)

Q2'12 Price FX Q2'13

$13M

+8%YoY

1 pts (0 pts) 8pts

Volume

7 pts

$61M

FlowControl

Adjusted Operating Margins 15.0%• Price and Productivity Contribute to

Margin Expansion

• Cost-Out and Standardization Savings

• Price Remains Positive

• Strong Operating Leverage

Sales Up 8%• Residential/Commercial Up 8% on Continued

NA Residential Recovery• Infrastructure Up 2% Led by North American

Backlog and Stabilization in Europe• Food & Beverage Up 25% Led by Strength in

Agriculture, Beverage, and Food Service

Fast Growth Regions Up 5%

PENTAIR 5


Robust Margin Expansion Highlights Execution Capabilities


Q2'13 VALVES & CONTROLS PERFORMANCE*

$597M

$620M($2M)

Q2'12 Price FX Q2'13

$1M

+4%YoY

0 pts (0 pts) 4 pts

Volume

4 pts

$24M


Q2'12Adjusted

Prod./Price

Infl.GrowthQ2'13

Adjusted

$3M$84M$19M

$71M ($9M)

ROS(1.5%)0.0% 3.1%11.9%

ROS

13.5%ROS

+18%YoY

Backlog Flat Sequentially at $1.4B … Ordersup 1% Y-o-Y Driven by Oil & Gas

Sales Up 4%• Energy - Oil & Gas Up 12%• Energy - Mining Up 12%• Energy - Power Down 1%• Industrial - Process Down 3%

Adjusted Operating Margins 13.5%• Integration/Standardization Savings Helped

Drive Productivity in Excess of Inflation

• Streamlined Service Organization SeeingEarly Benefits

• PIMS Adoption Ahead of Expectations

PENTAIR 66

VALVES & CONTROLS BACKLOG*

Total Backlog Remains Healthy and Near Record Levels

INDUSTRIAL - Process ENERGY - Oil & Gas

ENERGY - Power ENERGY - Mining

• 2012: Revenue ~40%

• Second Quarter Orders Up 1% Y-o-Y

• 2012: Revenue ~17%

• Second Quarter Orders Down 24% Y-o-Y

• 2012: Revenue ~34%


• 2012: Revenue ~9%


* All year-over-year comparisons against 2012 adjusted results on a pro forma basis for the Flow Control acquisition.

Backlog ($ Millions)

Backlog ($ Millions)Backlog ($ Millions)

Backlog ($ Millions)

354 354 355 366 359 360 369 359 391 376

0100200300400500600

Q1'11 Q2'11 Q3 11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13

299 340

447493 518 517 540

583 552 559

0100200300400500600

Q1'11 Q2'11 Q3 11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13

423 426 393 397 390 409 379 374 394 387

0100200300400500600

Q1'11 Q2'11 Q3 11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13

72 58 46 53 76 72 82 83 89 101

0100200300400500600

Q1'11 Q2'11 Q3 11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13

PENTAIR 7

Fast Growth Regions Down ~10%

Q2'13 TECHNICAL SOLUTIONS PERFORMANCE*

Margins Remain the Near-Term Focus as Growth is Subdued



Q2'12Adjusted

Prod./Price

Infl.GrowthQ2'13

Adjusted

($3M)$70M$14M

$65M ($6M)

+9%YoY

ROS(1.5%)(0.0%) 3.5%15.6% 17.6%

ROS


$414M

$397M$0M

Q2'12 Volume Price FX Q2'13

$2M

($19M)

(5 pts) 1 pts (0 pts) (4 pts)

FlowControl

(4%)YoY

Sales Down (4%)• Industrial Down (2%)

• Energy Down (9%)

• Residential/Commercial Up 9%

• Infrastructure Down (13%)

Adjusted Operating Margins 17.6%• Price Actions and Productivity Offset

Moderate Inflation

• PIMS Adoption in Legacy FC and StrongExecution in Legacy PNR

• Standardization and Cost-Out EffortsGaining Momentum

PENTAIR

Food & Bev~9% of Sales • Agriculture Still Strong

• Beverage and Food Service Doing Well

Q1: +15% Q2: +23% FY: >+15%

8

TOTAL PENTAIR 1st HALF GROWTH PROFILE*

Growth Continues in Residential/Commercial and Food & Beverage

KEY VERTICALSKEY GEOGRAPHIES

• US/CANADA ~42% of Sales

– NA Residential RecoveryLeading the Way

– Canada Slower with DelayedEnergy Projects

• WESTERN EUROPE ~18% of Sales

– Mixed Signals, but Stabilizing Overall

– FX Neutral in 1H13

– FX Headwind in 2H13

• FAST GROWTH ~25% of Sales

– Overall Up 2% YTD

– China

– Middle East

– Latin America

– SE Asia


Vertical Commentary / Growth Rates (Y-o-Y)

Energy~28% of Sales • Oil & Gas Project Strength

• Power Backlog Building

Q1: -2% Q2: +4% FY: ~+2-4%

Industrial~26% of Sales • 2H13 Recovery Not Materializing

• Process Market Quoting Activity Solid

Q1: -5% Q2: -2% FY: ~-1%

Residential/Commercial~24% of Sales

• NA Recovery Continues• European Weakness Persists

Q1: +9% Q2: +8% FY: ~+6-8%

Infrastructure~13% of Sales • NA Backlog Building

• Middle East Quoting Resumed

Q1: -12% Q2: -2% FY: ~-2%

PENTAIR 9

GUIDANCE UPDATE – FULL YEAR 2013 ADJUSTED EPS

Remain on Track to Deliver Strong Double-Digit Adj. EPS Growth

PREVIOUS GUIDANCE


$3.10 - $3.30

CURRENT VIEW

$3.15 - $3.25

• Market Uncertainty

• Uncertainty in EMEA

• Integration/Cultural Assimilation

• Needed NA Residential Market to Improve

• Upside Reflected 2nd Half Acceleration

• Downside Reflected Execution Risk

• FY Revenue of $7.6B

• Assumed Synergies of $100M

• Still Unclear Except for NA Residential

• Uncertainty in EMEA Remains

• On Track/Performing Well

• NA Residential Recovery Underway

• Industrial Acceleration Unlikely

• Performing Ahead of Expectations

• FY Revenue of $7.5B (Aspen Div. and FX )

• Assumed Synergies of $105M

PENTAIR 10

Q2 YTD

1st HALF ASSESSMENT AND FULL YEAR OUTLOOK*

FY 2013Outlook

Adj. Op Margin

Bps Chg from PY

Revenue

% Chg from PY

2H Assumptions EMEA Stabilizes, but FX

Becomes Headwind

Price Continues to Offset Inflation

NA Residential and Food &Beverage Remain Strong

Energy Benefits from 2H ProjectShipments; Industrial AccelerationDoes Not Occur

$3.7B

+2%

12.0%

+80 bps

$1.50

+15%

~$7.5B

~+3%

~12.5%

~+160 bps

$3.15 to $3.25

+24 to 28%

Adj. EPS

% Chg from PY

To

pL

ine

Price Plus Productivity More ThanOffsetting Inflation

On Track for $105M in Synergies

Valves & Controls and TechnicalSolutions Seasonal Strength

A Very Strong Aquatics Year

$825M of $1.2B of ShareRepurchases Completed

Top Line Still Growing and Margin Expansion Accelerating* All year-over-year comparisons against 2012 adjusted results on a pro forma basis for the Flow Control acquisition. See Appendix for reconciliation of non GAAP measures.

Op

.M

arg

ins

PENTAIR 11

Adj. Op Income Up ~14%

Adj. Op Margins ~12.9% … Up ~140 bps YoY

• Water & Fluid Solutions Margins, ~13.1%

• Valves & Controls Margins, ~13.0%

• Technical Solutions Margins, ~19.2%

Adj. EPS Up ~23%

• Tax Rate ~25%

• Net Interest ~$16.0M; Shares ~202M

Q3’13 FINANCIAL OUTLOOK

KEY HIGHLIGHTS

Sales Up ~1-2%

• Water & Fluid Solutions Up ~3-4%

• Valves & Controls Up ~0-1%

• Technical Solutions Down ~0-1%

Q3’13 Q3'12

Sales ~$1.9B $1.87B

Op Income (Rpt.) ~$245M $55M

Op Income (Adj.) ~$245M $216M

ROS (Adj.) ~12.9% 11.5%

EPS (Rpt.) $0.83-$0.87 $0.31

EPS (Adj.) $0.83-$0.87 $0.69

Strong EPS Growth Expected as Top Line Challenges Persist

Q3’13 PENTAIR OUTLOOK*


• Project Timing and FX Impacting Top Line

• Productivity and Synergies Driving RobustMargin Expansion

• Tax Rate and Share Buyback Help Below the Line

• Free Cash Flow Continues to Build Momentum Q3 Free Cash Flow Likely to Be Strong

PENTAIR 12

Q2 Still Likely to Be Peak Quarter … Shifting Fiscal YE Impacts Q3/Q4

QUARTERLY LINEARITY OF EARNINGS**

** Adjusted results on a pro forma basis for the Flow Control acquisition. See Appendix for reconciliation of non GAAP measures.

2011 pro-forma 2012 pro-forma 2013 Forecast

• Q2 Still Expected to be “Peak” Quarter for PNR

• 2013 Fairly Consistent with Pattern of 2012

• Timing of Legacy Flow Control Fiscal Year Ends(December vs. September) Expected to Impact Q3/Q4

• Synergy Ramp Helps Offset Some Seasonality

• All Others In Line with Previous Years

Seasonality Most Seasonal BusinessesBest Quarter to Worst Quarter (Typical)

$201 $200

Q2, 2011 Q3, 2011

Op Income ($M)

$237 $216

Q2, 2012 Q3, 2012

Op Income ($M)

$268 $245

Q2, 2013 Q3, 2013

Op Income ($M)

• Aquatic Systems (Q2,Q4,Q3,Q1)

• WES (Q2,Q3,Q4,Q1)

• Thermal Management (Q4,Q3,Q1,Q2)

• Valves & Controls (Q2,Q3,Q4,Q1)

PENTAIR 13

Identified Funnel, History In Delivering Sourcing/Lean Savings

SYNERGY FUNNEL AND REALIZATION UPDATE


$10$20

2013 2015

Synergy/StandardizationExpectations

Sourcing Savings Funnel/Comments

Internal Funnel: >$50M (Both Base/Synergies)

• Realized/Forecasted Savings of $10M for 2013

• Key Funnel Actions (through 2015): Plate & Tubing

Castings

Electronics

Fasteners

Plastics

Freight

PC Standardization

IT Support RenegotiationLean/Operations Savings

$10

$45

2013 2015




• Key Funnel Actions (through 2015): PNR Experience has Been >$2M per Factory over 3 Year Horizon

~115 Total Factories in PNR Expect to Read Out Through:

o Warranty/Quality/E&O

o Premium OT and Leverage

o Freight

o OTD/Growth

($M)

($M)

PENTAIR 14

Over $230M of Combined Synergies Targeted … Expanding Funnel

SYNERGY FUNNEL AND REALIZATION UPDATE


$85$130

2013 2015


Back Office/Repositioning Funnel/Comments



• Key Funnel Actions (through 2015):

Current G&A is Greater than 8% of Sales … 2015 Target of 6%/Sales

Legacy PNR Businesses are <4% of Sales

Legacy Flow Control Businesses are >7.5%/Sales

Elimination of ERP’s, Data Centers, Legal Entities, Applications, andStandardization of Accounting/Payroll Centers

Op Inc. From Revenue

$35

2013 2015


Internal Funnel: >$50M (Synergies Only)


• Key Funnel Actions (through 2015): Addition/Expansion of Service Cross-Business Pull Through

o Energy: V&C, W&FS, and Technical Solutions

o Food & Beverage: V&C and W&FS

o Middle East: V&C Pulling & Localizing W&FS

o Brazil: Technical Solutions Leveraging Footprint

o China: Utilization/Expansion of Legacy PNR Capacity

($M)

($M)

PENTAIR

$-

$10

$20

$30

$40

Q1 Q2 Q3 Q4

15

TIMING & SEGMENTATION OF 2013 IST BENEFIT STATUS

INTEGRATION & STANDARDIZATION UPDATE

Expecting $105M of Synergies …Slightly Better than Previous Expectations

$M

• $85M of Full Year Repositioning Benefit Expected• Lean Savings Expected at $10M+• Sourcing Benefit Expected to be $10M+

Sourcing

Lean/Ops

Repositioning

• Repositioning ActionsCompleted in Q2 … >$85MExpected

• Lean & Sourcing BenefitAccelerating as TeamsIdentify More Opportunities(Momentum, Enthusiasm and MoreImportantly … Funnel Building)

• Still IdentifyingMore Opportunities

• Accelerating Actions andPipeline to Help Ensure 2014and 2015 Performance

~$105M of Expected 2013 Benefit … On Track for >$230M by 2015

$10M

$29M$31M

$35M

PENTAIR 16

BALANCE SHEET AND CASH FLOW

Full Year Free Cash Flow on Track

DEBT ROLLFORWARD

CASH FLOW DEBT SUMMARY

*Does Not Include $253M of Cash on Hand

Maturity Avg. Rate

Variable

$2.7B*

Q2'13 Avg. Rate ~2.5%~74% Fixed …

$2.0B

$0.7B 0.6%‘17

3.2%Fixed ’14 – ‘30

Other FY Key Financial Metrics:

• Cap Ex ~$200M or ~125% of Depreciation

• Total D&A ~$320M + ~$30M of Non-CashStock Compensation

• Share Buyback $350M in Q2 (~$825M of$1.2B Cumulative by YE, 2013);~204M Share Count for FY and ~202M by Q4

($M) Q2 '13 Q2 '12 YOY Chg

Net Income attributable toPentair Ltd. $ 154 $ 73 $ 81

Non-Cash Items $ 83 $ 32 $ 51

Subtotal $ 237 $ 105 $ 132

Working Capital $ 82 $ 102 $ (20)

Capital Expenditures $ (38) $ (16) $ (22)

Asset Sales $ 3 $ 3 $ -

Other Accruals/Other $ 47 $ 28 $ 19

Free Cash Flow $ 331 $ 222 $ 109

Use of Cash: ($M) Q2 '13 Q2 '12 YOY Chg

Beginning Debt $ 2,598 $ 1,415 $ (1,183)

Generated Cash $ (331) $ (222) $ 109

Share Repurchase $ 343 $ - $ (343)

Dividends $ 47 $ 22 $ (25)

Other $ 83 $ 20 $ (63)

Ending Debt $ 2,740 $ 1,235 $ (1,505)

PENTAIR 17

Adj. Op Income Up ~19%

Adj. Op Margins ~12.5% ... Up ~160 bps YoY

• Water & Fluid Solutions Margins, ~13.1%

• Valves & Controls Margins, ~12.2%

• Technical Solutions Margins, ~19.0%

FY Adj. EPS Up ~26%

• Tax Rate ~25%

• Net Interest ~($65-$67M); Shares ~204M

FY’13 FINANCIAL OUTLOOK

KEY HIGHLIGHTS

Sales Up ~2-3%

• Water & Fluid Solutions Up ~5-6%

• Valves & Controls Up ~1-2%

• Technical Solutions Down ~0-1%

FY’13 FY'12

Sales ~$7.5B $7.3B

Op Income/(Loss) (Rpt.) ~$793M ($43M)Op Income (Adj.) ~$940M $791M

ROS (Adj.) ~12.5% 10.9%

EPS/(Loss) (Rpt.) $2.65-$2.75 ($0.84)EPS (Adj.) $3.15-$3.25 $2.54

• Expecting 2-3% Organic Revenue Growth

• PIMS Acceleration Across all GBU’s

• Margins Expected to Increase by >160 bpsto ~12.5% … All Segments Increasing

• $105M of IST Benefits in 2013 Forecast

• Efficient Capital Allocation Deployment

Growing in a Mixed Environment and Delivering Strong EPS Growth

FY’13 Free Cash Flow >100% Net IncomeConversion


FULL YEAR 2013 PENTAIR OUTLOOK*

PENTAIR

SUMMARY

18

Remain Well Positioned to Control our Destiny in 2013

• On Track to Deliver $105M in Synergies

• Building Funnels to Drive Additional Synergies in 2014-15

• One Pentair Culture is Progressing; PIMS is Key

• NA Residential Tailwind and Strength in Food & Beverageand Energy Offsetting Weak Infrastructure and Industrial

• Capital Allocation Remains Disciplined

PENTAIR 19

APPENDIXGAAP to Non-GAAP Measurements & Reconciliations

PENTAIR 20

REPORTED TO ADJUSTED 2013 RECONCILIATION

Pentair Ltd. and Subsidiaries

Reconciliation of the GAAP "As Reported" year ended December 31, 2013 to the "Adjusted" non-GAAPexcluding the effect of 2013 adjustments (Unaudited)

Forecast Forecast

First Quarter Second Quarter Third Quarter YearIn millions, except per-share data 2013 2013 2013 2013

Total Pentair

Net sales 1,774.5$ 1,963.7$ approx $1,900 approx $7,500

Operating income - as reported 74.3 225.9 approx 245 approx 793% of net sales 4.2% 11.5% approx 12.9% approx 10.6%

Adjustments:

Inventory step-up and customer backlog 76.8 10.1 — approx 87

Restructuring and other 27.4 32.4 — approx 60

Operating income - as adjusted 178.5 268.4 approx 245 approx 940% of net sales 10.1% 13.7% approx 12.9% approx 12.5%

Net income attributable to Pentair Ltd. - as reported 51.7 154.1 approx 171 approx 550

Gain on sale of business, net of tax (12.5) — — approx (13)

Interest expense, net of tax — 1.6 — approx 2

Adjustments, net of tax 80.8 33.5 — approx 114

Net income from attributable

to Pentair Ltd. - as adjusted 120.0 189.2 approx 171 approx 653

Earnings per common share attributable to Pentair Ltd. - diluted

Diluted earnings per common share - as reported 0.25$ 0.75$ $0.83-$0.87 $2.65-$2.75

Adjustments 0.33 0.17 — 0.50

Diluted earnings per common share - as adjusted 0.58$ 0.92$ $0.83-$0.87 $3.15-$3.25

PENTAIR 21

REPORTED TO ADJUSTED 2013 RECONCILIATIONPentair Ltd. and Subsidiaries

Reconciliation of the GAAP "As Reported" year ended December 31, 2013 to the "Adjusted" non-GAAP

excluding the effect of 2013 adjustments (Unaudited)

Forecast Forecast

First Quarter Second Quarter Third Quarter YearIn millions 2013 2013 2013 2013

Water & Fluid Solutions

Net sales 782.0$ 949.8$ approx $840 approx $3,400

Operating income - as reported 74.8 136.1 approx 105-110 approx 425-430% of net sales 9.6% 14.3% approx 13.1% approx 12.6%

Adjustments:

Restructuring 7.5 6.6 — approx 14

Inventory step-up and customer backlog 0.6 0.2 — approx 1

Operating income - as adjusted 82.9 142.9 approx 105-110 approx 440-445% of net sales 10.6% 15.0% approx 13.1% approx 13.1%

Valves & Controls


Operating income (loss) - as reported (18.6) 56.9 approx 76-81 approx 182-187% of net sales (3.2%) 9.2% approx 13.0% approx 7.8%

Adjustments:


Inventory step-up and customer backlog 70.6 10.0 —$ approx 81


Technical Solutions


Operating income - as reported 53.3 65.1 approx 79-84 approx 296-301% of net sales 13.0% 16.4% approx 19.2% approx 17.7%

Adjustments:


Inventory step-up and customer backlog 5.7 — — approx 6


PENTAIR 22


Reconciliation of the GAAP "As Reported" year ended December 31, 2012 to the "Adjusted" non-GAAPexcluding the effect of 2012 adjustments (Unaudited)

First Quarter Second Quarter Third Quarter Fourth Quarter YearIn millions, except per-share data 2012 2012 2012 2012 2012

Total Pentair

Net sales 858.2$ 941.5$ 865.5$ 1,750.9$ 4,416.1$

Operating income (loss) - as reported 86.5 119.3 55.2 (304.1) (43.1)

% of net sales 10.1% 12.7% 6.4% (17.4%) (1.0%)

Adjustments:

Deal related costs and expenses 11.8 6.3 52.7 12.0 82.8

Inventory step-up and customer backlog — — — 179.6 179.6

Restructuring — 10.4 1.1 55.3 66.8

Trade name impairment — — — 60.7 60.7

Change in accounting method - pension and post-retirement (1.5) (1.5) (1.5) 146.2 141.7

Operating income - as adjusted 96.8 134.5 107.5 149.7 488.5

% of net sales 11.3% 14.3% 12.4% 8.5% 11.1%

Net income (loss) attributable to Pentair Ltd. - as reported 61.8 72.8 31.4 (273.1) (107.1)

Bond redemption and interest expense (0.8) — 1.8 51.9 52.9

Other adjustments net of tax 3.0 10.9 32.3 320.9 367.1

Net income from continuing operations attributable

to Pentair Ltd. - as adjusted 64.0 83.7 65.5 99.7 312.9

Continuing earnings per common share attributable to Pentair Ltd. - diluted

Diluted earnings (loss) per common share - as reported 0.62$ 0.72$ 0.31$ (1.31)$ (0.84)$

Adjustments 0.02 0.11 0.33 1.78 3.23

Diluted earnings per common share - as adjusted 0.64$ 0.83$ 0.64$ 0.47$ 2.39$

PENTAIR 23Note: Inventory step-up and customer backlog reflect amortization of fair market value step-up associated with inventory and in process customer contracts.


Reconciliation of the GAAP "As Reported" year ended December 31, 2012 to the "Adjusted" non-GAAP

excluding the effect of 2012 adjustments (Unaudited)

First Quarter Second Quarter Third Quarter Fourth Quarter YearIn millions 2012 2012 2012 2012 2012

Water & Fluid Solutions

Net sales 587.1$ 675.4$ 605.5$ 771.2$ 2,639.2$

Operating income (loss) - as reported 63.7 92.0 69.2 (56.9) 168.0% of net sales 10.8% 13.6% 11.4% (7.4%) 6.4%

Adjustments:

Restructuring — 6.9 1.1 42.5 50.5



Operating income - as adjusted 63.7 98.9 70.3 58.1 291.0% of net sales 10.8% 14.6% 11.6% 7.5% 11.0%

Valves & Controls

Net sales —$ —$ —$ 548.6$ 548.6$

Operating income (loss) - as reported — — — (76.8) (76.8)% of net sales 0.0% 0.0% 0.0% (14.0%) (14.0%)

Adjustments:

Restructuring — — — 5.1 5.1


Operating income - as adjusted — — — 41.8 41.8% of net sales 0.0% 0.0% 0.0% 7.6% 7.6%

Technical Solutions

Net sales 272.6$ 267.5$ 261.5$ 434.8$ 1,236.4$

Operating income - as reported 50.5 50.6 52.3 11.6 165.0% of net sales 18.5% 18.9% 20.0% 2.7% 13.3%

Adjustments:

Restructuring — 3.1 — 9.7 12.8



Operating income - as adjusted 50.5 53.7 52.3 75.6 232.1% of net sales 18.5% 20.1% 20.0% 17.4% 18.8%

PENTAIR 24

2012 PRO FORMA ADJUSTMENTS – TOTAL PENTAIR

Note: “Other” adjustments represent the elimination of certain large projects and sales to sanctioned countries (which were terminated prior to the completion of the Flow Control acquisition),changes in corporate allocation assumptions, income taxes and share count.

Pro Forma Adjustments

2012 Total Pentair(in millions, except

EPS )

Historical

Adjusted

Results

Historical Flow

Control

Acquisition

Depreciation &

Amortization

Other

Adjustments

Adjusted Pro

Forma Results

First Quarter

Sales 858.2$ 995.9$ -$ (74.0)$ 1,780.1$

Operating Income 96.8$ 124.9$ (17.1)$ (32.2)$ 172.4$

Net Income 64.0$ 93.7$ (12.8)$ (28.1)$ 116.8$

Diluted EPS 0.64$ 0.44$ (0.06)$ (0.48)$ 0.54$

Second Quarter

Sales 941.5$ 980.8$ -$ (33.2)$ 1,889.1$


Net Income 83.7$ 107.6$ (12.9)$ (14.0)$ 164.4$

Diluted EPS 0.83$ 0.50$ (0.06)$ (0.50)$ 0.77$

Third Quarter

Sales 865.5$ 1,019.8$ -$ (16.0)$ 1,869.3$

Operating Income 107.5$ 119.9$ (17.3)$ 5.5$ 215.6$

Net Income 65.5$ 89.9$ (13.0)$ 6.3$ 148.8$

Diluted EPS 0.64$ 0.42$ (0.06)$ (0.31)$ 0.69$

Fourth Quarter

Sales 1,750.9$ -$ -$ (7.1)$ 1,743.8$

Operating Income 149.7$ -$ -$ 16.6$ 166.3$

Net Income 99.7$ -$ -$ 12.7$ 112.4$

Diluted EPS 0.47$ -$ -$ 0.06$ 0.53$

Full Year

Sales 4,416.1$ 2,996.5$ -$ (130.3)$ 7,282.3$


Net Income 312.9$ 291.3$ (38.7)$ (23.1)$ 542.4$

Diluted EPS 2.39$ 1.36$ (0.18)$ (1.03)$ 2.54$

PENTAIR 25

2011 PRO FORMA ADJUSTMENTS – TOTAL PENTAIR

Note: “Other” adjustments represent the elimination of certain large projects and sales to sanctioned countries (which were terminated prior to the completion of the Flow Control acquisition),changes in corporate allocation assumptions, income taxes and share count.

Pro Forma Reconciliation

Pro Forma Adjustments

2011 Total Pentair(in millions, except

EPS)

Historical

Adjusted

Results

Historical Flow

Control

Acquisition

Depreciation &

Amortization

Other

Adjustments

Adjusted Pro

Forma Results

First Quarter

Sales 790.3$ 798.1$ -$ (21.2)$ 1,567.2$


Net Income 51.8$ 74.4$ (14.8)$ (9.9)$ 101.5$

Diluted EPS 0.52$ 0.35$ (0.07)$ (0.33)$ 0.47$

Second Quarter

Sales 910.2$ 922.6$ -$ (30.8)$ 1,802.0$


Net Income 75.5$ 89.9$ (14.8)$ (11.5)$ 139.2$

Diluted EPS 0.75$ 0.42$ (0.07)$ (0.45)$ 0.65$

Third Quarter

Sales 890.5$ 1,079.1$ -$ (42.4)$ 1,927.2$


Net Income 57.7$ 102.6$ (12.9)$ (11.0)$ 136.4$

Diluted EPS 0.58$ 0.48$ (0.06)$ (0.36)$ 0.64$

Fourth Quarter

Sales 865.7$ 923.0$ -$ (55.1)$ 1,733.6$


Net Income 55.7$ 94.2$ (13.0)$ (20.0)$ 116.9$

Diluted EPS 0.56$ 0.44$ (0.06)$ (0.39)$ 0.55$

Full Year

Sales 3,456.7$ 3,722.8$ -$ (149.5)$ 7,030.0$


Net Income 240.7$ 361.1$ (55.4)$ (52.4)$ 494.0$

Diluted EPS 2.41$ 1.68$ (0.26)$ (1.53)$ 2.30$

PENTAIR 26

2012 PRO FORMA ADJUSTMENTS – WATER & FLUID SOLUTIONS

Note: “Other” adjustments represent changes in corporate allocation assumptions

PENTAIR 27

2012 PRO FORMA ADJUSTMENTS – VALVES & CONTROLS

Note: “Other” adjustments represent the elimination of sales to sanctioned countries (which were terminated prior to the completion of the Flow Control acquisition),and changes in corporate allocation assumptions

PENTAIR 28

2012 PRO FORMA ADJUSTMENTS – TECHNICAL SOLUTIONS

Note: “Other” adjustments represent the elimination of certain large projects and changes in corporate allocation assumptions.

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