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, 1996 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 24, 1997 was $1.06 billion. 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 24, 1997 was 37,863,963.
DOCUMENTS INCORPORATED BY REFERENCE The following portions of the Annual Report to Shareholders for the year ended December 31, 1996 and Proxy Statement for the 1997 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 30 and 53: information about Business Segment industry segments, Information; Page 43: foreign operations, Research and Develop- research and ment; Page 35: Environ- development and mental Matters and Page environmental matters. 46: Committments and Contingencies (Note 9) and Page 55: Disclosure of Risks and Uncertain- ties (Note 19). Part II, Item 5. Market for Registrant's Page 57: Pentair Stock Common Equity and Data, Price Range and Related Stockholder Dividends of Common Matters. Stock. Part II, Item 6. Selected Financial Data. Page 56: Selected Financial Data - 10 Year Summary. Part II, Item 7. Management's Discussion Pages 28-35: and Analysis of Financial Management's Condition and Results of Discussion and Analysis. Operations. Part II, Item 8. Financial Statements Pages 36-56: and Supplementary Data. Consolidated 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 Executive Pages 2-5: Security Officers of the Registrant. Ownership of Management and Beneficial Ownership; Pages 5-8: Directors Standing for Election. Part III, Item 11. Executive Compensation. Pages 11-20: Executive Compensation. Part III, Item 12. Security Ownership of Pages 2-5: Security Certain Beneficial Owners Ownership of and Management. Management and Certain Beneficial Ownership.
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 Corporations, 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. During 1996, the Company completed four strategic acquisitions that strengthened market positions throughout the world. In January, Myers acquired Aplex to broaden its industrial pump line. In June, Porter-Cable acquired FLEX, a German power tool company. In November, the Company acquired Century Manufacturing a manufacturer which serves the vehicle service equipment markets, complementing its Lincoln Automotive subsidiary. In December, Fleck Controls purchased SIATA, an Italian manufacturer of water conditioning control equipment. (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; vehicle service equipment; and sporting ammunition. Business segment financial information is found on page 30 and page 53 (Note 17) of the 1996 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> 1996 1995 1994 <S> <C> <C> <C> Stationary and Portable Power Tools 30% 28% 28% Pumps and Water Treatment Systems 13 9 9 Total Segment 43% 37% 37% </TABLE> Woodworking Machinery. The Registrant, through its subsidiary Delta International Machinery Corp. (Delta), manufactures, markets, and services a line of general-purpose woodworking machinery including table saws, band saws, planers, jointers, grinders, drill presses, shapers, lathes, and other tools and accessories. Delta sells its products in the United States, Canada, and other foreign countries under its "Delta" and "Biesemeyer" brand names through a network of independent and mail order distributors, hardware stores and home centers. Markets include do-it-yourself/homeshop craftsmen; commercial, residential, and industrial construction; remodeling; and cabinet manufacturers, case goods, and furniture makers. Portable Electric Tools. The Registrant, through its subsidiary Porter-Cable Corporation (Porter-Cable), manufactures and markets a variety of portable electric tools and air-powered nailing products including circular saws, reciprocating saws, band saws, sanders, grinders, cordless tools, drills, pneumatic fastening products and routers. Porter-Cable markets its products under the brand names "Porter-Cable" and "FLEX" through a network of independent, specialty tool, and mail order distributors, hardware stores and home centers. Markets include woodworking; residential and industrial construction; industrial fabrication and maintenance; and home craftsmen. 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 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 include wholesale, retail, and national catalog distribution to residential, commercial, and industrial users; pump specialty distribution for municipal, government, and OEM products. Myers markets its products under the brand names " Myers" and "Aplex". 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 used in the manufacture of water softeners, filtration, deionization, and desalination systems. Products are sold directly by Fleck's internal sales organization. Fleck markets its products under the brand names "Fleck" and "SIATA". Markets include residential, commercial, industrial, and municipal water treatment; and manufacturers who supply residential and commercial markets with standard and custom designed products. 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 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> 1996 1995 1994 <S> <C> <C> <C> Electrical and Electronic Enclosures 35% 39% 36% Sporting Ammunition 8 10 12 Total Segment 57% 63% 63% </TABLE> Electrical and Electronic Enclosures. Through the Hoffman Engineering Company division of Federal-Hoffman, Inc. (Hoffman) and through Schroff GmbH and its international subsidiaries (Schroff), the Registrant manufactures metallic and composite enclosures and cabinets that house electrical and electronic controls, instruments, and components; and cabinets, cases, subracks, microcomputer packaging systems, and a full line of accessories including backplanes, power supplies, and technical workstations. Hoffman markets its products primarily through independent manufacturer's representatives and electrical and electronic equipment distributors. Hoffman markets its products under the brand name "Hoffman". Markets include automotive, petroleum and petrochemical, food, machine tool, and other industrial manufacturing customers along with original equipment manufacturers; plant maintenance and repair; and construction. Schroff markets its products under the brand name "Schroff". 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), the Registrant manufactures and markets shotshell, centerfire, and rimfire cartridges, ammunition components, and clay targets. These products are distributed throughout the United States through a network of distributors, directly to large retail chains, and directly to the U.S. government and law enforcement agencies. Federal markets its products under the brand names of "Premium", "Gold Medal", "Classic", BallistiClean", and "Tactical". Federal markets include hunters; trap, skeet, sporting clay, and target shooters; the U.S. government; and law enforcement. Vehicle Service Equipment. The Registrant, through its Lincoln Automotive division of McNeil (Ohio) Corporation (Lincoln Automotive) and its subsidiary Century Manufacturing (Century), manufactures and markets lubrication, repair, and service equipment for a broad range of vehicles. Products include 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; portable power supplies, automotive refrigerant and coolant recyclers, arc and MIG welders, plasma cutters, and welding accessories. Products are marketed under the brand names of "Lincoln", "Blackhawk Automotive", "Marquette", "Porto-Power", "Banner", "Winner", "Pro-Arc", "Century", "Solar", and "Booster Pac". Products are marketed to national retailers and through a distributor network to professional mechanics and general maintenance facilities. Certain lubricating equipment, tools, and jacks and lifting equipment are sold under private label programs. Markets include automotive aftermarket and retail channels for professional and do-it-yourself automotive and body repair; wholesale, retail, and commercial distribution for industrial maintenance, farm, and home metalworking. Industrial Lubricating Systems and Material Dispensing Equipment. The Registrant, through its Lincoln Industrial division of McNeil (Ohio) Corporation (Lincoln Industrial), manufactures components and designs automated and manual lubrication systems and equipment; pumps and pumping stations for thick fluid transfer applications. 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 markets its products under the brand names "Air Brake", "BearingSaver", "Centro-Matic", "Cobra", "Dispense Pak", "Ecolub", "Helios", "Lincoln", "Magna-Ram", "Modular Lube", "Multi-Luber", "PowerMaster", "PileDriver", "PL2000", "Quicklink", "Quicklub", "System Sentry", and "Zerk-lock". Markets include heavy industry (steel mills, cement plants, pulp and paper, power plants), automobile manufacturers, commercial vehicles, agriculture, construction equipment, food and beverage, mining, printing, and general lubrication markets. Competitive conditions. Hoffman is the largest North American manufacturer of electrical enclosures and wireways, having a market share estimated to be about 25% of our addressed market. It is currently the only manufacturer with national distribution and its competitors are generally smaller, regional manufacturers. Hoffman 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 manufacture a broad range of enclosures and some who focus on smaller niche markets. Significant competitive factors are product innovation and quality. Federal 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 , Lincoln Automotive and Century 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's working capital builds from January through September as inventories are increased to meet third quarter shipping schedules. 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 either segment, there is no strong 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, 1996, the Registrant and its subsidiaries employed approximately 9,770 persons, of which 2,050 were represented by unions having collective bargaining agreements. Labor contracts negotiated in 1996 were: International Union of Electrical Workers - Jonesboro, Arkansas (extended to April 4, 1999 ) 215 employees. Contracts expiring in 1997: Molders and Allied Workers Local 45 - Ashland, Ohio (expires 5/1/97) 49 employees; United Auto Workers - St. Louis, Missouri (expires 6/6/97) 144 employees; Molders and Allied Workers Local 19 - Guelph, Ontario, Canada (expires 7/1/97) 7 employees; and Patternworkers League - Ashland, Ohio (expires 9/1/97) 1 employee. 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 November 1998, with an option to renew for a term of five years. 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 Steinheim, Manufacturing, 90,000 Germany Distribution, and Office Delta Pittsburgh, Office and 41,000 Pennsylvania Product Development Tupelo, Manufacturing 333,000 Mississippi and Office Memphis, Distribution 400,000 Tennessee(2) and Office Guelph, Distribution 57,000 Ontario(3) and Office Mesa, Manufacturing 50,000 Arizona(4) 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, 21,000 Texas and Office Fleck Controls, Brookfield, Manufacturing, 77,000 Inc. Wisconsin Distribution, and Office Buc, Manufacturing, 24,000 France(5) Distribution, and Office Montespertoly, Manufacturing, 24,000 Italy Distribution, and Office Maurapas, Manufacturing, 20,000 France(6) Distribution, and Office Singapore(7) Manufacturing, 4,000 Distribution, and Office NOTES: (1) Lease term expires in 1998. (2) Lease term expires in 1999. (3) Lease term expires in 1999. (4) Lease term expires in 2000. (5) Lease term expires in 1998. (6) Lease term expires in 1999. (7) Leased under a short-term lease. 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 Plymouth, Office and 20,000 Minnesota (12) Training Center Federal Anoka, Manufacturing 875,000 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 18,000 Czech Republic (2) and Office Lincoln Jonesboro, Manufacturing 378,000 Automotive Arkansas and Office Nogales, Sonora Manufacturing 35,000 Mexico(3) Mississauga, Distribution 30,000 Ontario and Office Schroff GmbH Straubenhardt, Manufacturing 523,000 Germany(4) Schroff S.A. Betschdorf, Manufacturing 210,000 France(5) and Warehouse Schroff U.K. Hemel Hempstead, Manufacturing 37,000 England(6) Schroff U.K. Hemel Hempstead, Manufacturing 22,000 England(6)(7) Schroff, Inc. Warwick, Manufacturing 80,000 Rhode Island and Office Warwick, Office and 18,000 Rhode Island(8) Assembly Warwick, Distribution 15,000 Rhode Island(11) Schroff K.K. Meiwa-Cho, Manufacturing 23,500 Japan Century Bloomington, Manufacturing, 216,000 Manufacturing Minnesota(9) Distribution, and Office Pierre, Manufacturing 70,000 South Dakota(10) and Office St.-Jean-sur- Richelieu, Manufacturing 13,000 Quebec(11) and Office NOTES: (1) Lease term expires in 2006. The lease has an option to renew for an additional ten-year term. (2) Lease term expires in 1998, with an option to renew for one-year. (3) Lease term expires in 1999. (4) A small portion of this facility is leased until 2011. (5) Leased under two lease agreements expiring in 2002 and 2005. Both leases include a purchase option. (6) Facilities are shared by Schroff U.K. & Hoffman U.K. Total area is 59,000 square feet. (7) Lease term expires in 2011. (8) Lease term expires in 2000. This lease includes a purchase option. (9) Lease term expires in 2020. (10) Lease term expires in 1999 with a bargain purchase option of $1. (11) Lease term expires in 2001. (12) Lease term expires in 2000. 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. Federal Cartridge paid $442,000 toward the cost of 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. Pending EPA approval, the PRP group anticipates beginning in 1997 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. Delta International Machinery. In January 1993, Beaver-Delta Machinery Corp. (Beaver-Delta), a former subsidiary of Delta International Machinery Corp., and three other parties were sued by a commercial developer and current owner of real estate in Guelph, Ontario that Rockwell International (Rockwell) previously owned and that was acquired by Beaver-Delta in 1984. Trichlorethylene (TCE) and other contamination of soil and groundwater was alleged. Preliminary investigation indicated that Beaver-Delta did not use TCE during the short period that it owned the property at issue. Beaver-Delta served notice on Rockwell of its intent to seek indemnification from Rockwell for all costs related to that matter. The lawsuit was dismissed with prejudice in August 1995 after two years of inactivity. In July 1996, the Registrant received notice of a potential claim from Rockwell regarding the alleged contamination of the same property. In June 1996, the Ontario Ministry of Environment and Energy (MOEE) requested Rockwell to investigate the site and develop a cleanup program. The extent and cost of such a cleanup program is unknown at this time. The Registrant continues to believe that the Asset Purchase Agreement with Rockwell calls for Rockwell to be responsible for this matter. The Registrant believes that this matter is unlikely to result in material liability. 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 necessary, 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 accruals for potential liabilities relating to environmental conditions existing on or before April 1995, based on extensive studies of the sites involved. Cost 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 1996, the Registrant paid approximately $445,000 in costs covered by those accruals. 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. 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 1, 1997, the Registrant or its subsidiaries are defendants in approximately 143 product liability lawsuits and have been notified of approximately 160 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 the Registrant. See discussion in Item 7 (MD&A - Insurance Subsidiary) and Item 8 (Note 1 to the Financial Statements). Accounting accruals 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, 1996, 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 23, 1997, or until their successors are elected and have qualified. Winslow H. Buxton 57 Chairman since January 15, 1993; President and Chief Executive Officer since August 1992; Chief Operating Officer, August 1990 - August 1992. Richard J. Cathcart 52 Executive Vice President since February 1996; Executive Vice President, Corporate Development March 1995 - February 1996; Vice President, Business Development of Honeywell, Inc. 1994 - March 1995; Vice President and General Manager of Honeywell's Worldwide Building Control Division 1992 - 1994. Joseph R. Collins 55 Executive Vice President since March 1995; Acting Chief Financial Officer, June 1993 - March 1994; Senior Vice President - Specialty Products August 1991 - February 1995. James H. Frank 57 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. Richard W. Ingman 52 Executive Vice President and Chief Financial Officer since August 1996; President of Hoffman Engineering (division of Registrant) March 1994 - July 1996; Vice President of Corporate Development August 1989 - February 1994. Gerald C. Kitch 59 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. Debby S. Knutson 42 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 56 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 1997 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, 1996, 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, 1996, 1995 and 1994 (37) Consolidated Balance Sheets as of December 31, 1996 and 1995 (38 - 39) Consolidated Statements of Cash Flows for Years Ended December 31, 1996, 1995 and 1994 (41) Notes to Consolidated Financial Statements (42 - 55) 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 1996 Annual Report to Shareholders. Independent Auditors Report Schedule for the years ended December 31, 1996,1995 and 1994: II- 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) Multi-Facility Credit Agreement among Pentair, Inc., for itself as Borrower as agent for all Borrowers and as Guarantor, EuroPentair GmbH, Pentair Canada, Inc., Borrowers and Bank of America National Trust and Savings Association, for itself and as U.S. Dollar Administrative Agent, First Bank National Association for itself and as Overnight Administrative Agent, Morgan Guaranty Trust Company of New York, for itself and as G-7 Currency Administrative Agent, NBD Bank, Dresdner Bank AG, ABN Amro Bank N.V. and the Bank of Tokyo - Mitsubishi, Ltd., Banks and various affiliates of the Banks which are parties to the Canadian Facility, Dated as of November 15, 1996. (4.4) Credit Agreement Dated as of November 15, 1996 Between Pentair, Inc. and First Bank National Association. (4.5) $25,000,000 Note Purchase Agreement dated December 13, 1991 between Pentair, Inc. and Principal Mutual Life Insurance Company. (4.6) $15,000,000 Note Purchase Agreement dated November 1, 1992 between Pentair, Inc. and Nationwide Life Insurance Company. (4.7) $15,000,000 Note Purchase Agreement dated January 15, 1993 between Pentair, Inc. and Principal Mutual Life Insurance Company. (4.8) $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. (4.9) Pentair, Inc. Note Purchase Agreement Dated as of January 24, 1997 6.99% Senior Notes, Series A, Due 2007, 6.79% Senior Notes, Series B, Due 2004 and 6.74% Senior Notes, Series C, Due 2004. (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 Omnibus Stock Incentive Plan as Amended and Restated. (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) Fourth Amended and Restated Compensation Plan for Non-Employee Directors. (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 each of the three years in the period ended December 31, 1996. (21) Subsidiaries of Registrant. (23) Consent of Deloitte & Touche, LLP. (27) Financial Data Schedule. 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) Multi-Facility Credit Agreement among Pentair, Inc., for itself as Borrower as agent for all Borrowers and as Guarantor, EuroPentair GmbH, Pentair Canada, Inc., Borrowers and Bank of America National Trust and Savings Association, for itself and as U.S. Dollar Administrative Agent, First Bank National Association for itself and as Overnight Administrative Agent, Morgan Guaranty Trust Company of New York, for itself and as G-7 Currency Administrative Agent, NBD Bank, Dresdner Bank AG, ABN Amro Bank N.V. and the Bank of Tokyo - Mitsubishi, Ltd., Banks and various affiliates of the Banks which are parties to the Canadian Facility, Dated as of November 15, 1996. (4.4) Credit Agreement Dated as of November 15, 1996 Between Pentair, Inc. and First Bank National Association. (4.5) $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). (4.6) $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). (4.7) $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). (4.8) $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). (4.9) Pentair, Inc. Note Purchase Agreement Dated as of January 24, 1997 6.99% Senior Notes, Series A, Due 2007, 6.79% Senior Notes, Series B, Due 2004 and 6.74% Senior Notes, Series C, Due 2004. (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 Omnibus Stock Incentive Plan as Amended and Restated. (Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q for the quarter ended March 31, 1996). (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 Form10-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) Fourth Amended and Restated Compensation Plan for Non-Employee Directors. (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 (Incorporated by reference to Exhibit 10.17 to the Company's Form 10-K for the year ended December 31, 1995). (10.18) Trust Agreement for Pentair, Inc. Non-Qualified Deferred Compensation Plan between Pentair, Inc. And State Street Bank and Trust Company (Incorporated by reference to Exhibit 10.18 to the Company's Form 10-K for the year ended December 31, 1995). (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 theTransaction 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 each of the three years in the period ended December 31, 1996. (21) Subsidiaries of Registrant. (23) Consent of Deloitte & Touche,LLP. (27) Financial Data Schedule. (b) Reports on Form 8-K. None. 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/ Richard W. Ingman Richard W. Ingman Executive Vice President and Chief Financial Officer Dated: March 27, 1997
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 27, 1997 Winslow H. Buxton, Chairman, President and Chief Executive Officer, Director By /s/ George N. Butzow Dated: March 27,1997 George N. Butzow, Director By /s/ William J. Cadogan Dated: March 27, 1997 William J. Cadogan Director By /s/ Barbara B. Grogan Dated: March 27, 1997 Barbara B. Grogan Director By /s/ Charles A. Haggerty Dated: March 27, 1997 Charles A. Haggerty, Director By /s/ Harold V. Haverty Dated: March 27, 1997 Harold V. Haverty, Director By /s/ Quentin J. Hietpas Dated: March 27,1997 Quentin J. Hietpas, Director By /s/ Walter Kissling Dated: March 27,1997 Walter Kissling, Director By /s/ D. Eugene Nugent Dated: March 27,1997 D. Eugene Nugent, Director By /s/ Richard M. Schulze Dated: March 27,1997 Richard M. Schulze, Director By /s/ Karen E. Welke Dated: March 27,1997 Karen E. Welke, Director
INDEPENDENT AUDITORS REPORT Pentair, Inc.: We have audited the consolidated financial statements of Pentair, Inc. and subsidiaries as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996, and have issued our report thereon dated February 7, 1997; such financial statements and report are included in your 1996 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, LLP Minneapolis, Minnesota February 7, 1997
<TABLE> <CAPTION> SCHEDULE II PENTAIR, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS - BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND DEDUCTIONS- AT END OF ($ THOUSANDS) OF PERIOD EXPENSES WRITE-OFFS PERIOD Allowance for doubtful accounts and notes receivables <S> <C> <C> <C> <C> 1994 $5,452 2,634 (897) $7,189 1995 7,189 782 (131) 7,840 1996 7,840 498 (990) 7,348 </TABLE>