Good morning. My name is Sarah and I will be your conference operator today. At this time I would like to welcome everyone to the Pentair 2012 outlook conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions). Thank you. Ms. Zawoyski, you may begin your conference.

Thank you Sarah and welcome to Pentair’s 2012 outlook conference call. We’re glad you could join us. I'm Sara Zawoyski, Head of Investor Relations. With me today is Randy Hogan, our Chairman and Chief Executive Officer; and John Stauch, our Chief Financial Officer. On today’s call, we’ll provide details on our 2012 outlook along with an updated outlook for the fourth quarter and full year 2011 as outlined in this morning’s release. Before we begin, let me remind you that any statements made about the company’s anticipated financial results are forward-looking statements subject to future risks and uncertainties such as the risk outlined in Pentair’s 10-Q for the quarter ended October 1st, 2011 and today’s release. Forward-looking statements included herein are made as of today and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. Today’s webcast is accompanied by a presentation which can be found in the investor section of Pentair’s website at www.pentair.com. We’ll reference these slides throughout our prepared remarks, any references to non-GAAP financials are reconciled to the appendix of the presentation. We’ll be sure to reserve for questions and answers after our prepared remarks this morning. In recognition that there are other calls this morning, we’ll target it to be done in an hour. With that, I kindly request that you limit your question to one and get back in the queue for further questions so that we can try to make it through everyone. With that, Randy?

Thanks Sara and welcome. Before turning to 2012, I’d like to address the fourth quarter of 2011 and what we’re seeing in our businesses. This is shown on slide number 2. As indicated in this morning’s release we lowered our sales and earnings expectations for the fourth quarter. Our updated Q4 guidance reflects sales growth of roughly 14% year-over-year versus the previous estimate of 18%. This revised near-term outlook largely reflects the impact of weaker Western European sales, both volume and some foreign exchange impact. In addition, we’re experiencing a sharp reduction in residential water treatment components sale reflecting adjustments in yearend pro channel inventory levels. Both of these factors are negatively impacting profitability. The remaining businesses and geographies are generally performing in line with expectations. We’re encouraged by a fairly fast start to December along with a better price cost and net productivity performance, but we don’t expect these fully to offset the impact in the lowered sales expectations related to a weaker quarter to date performance. While clearly disappointed in the lower expectations, we still expect top and bottom line growth along with margin expansion in the fourth quarter. Importantly, we included this new market reality into our 2012 operating plans. In addition, we’re ramping up productivity initiatives, further prioritizing our investments and moving forward on repositioning the company after the CPT acquisition as we mentioned before. These should all yield additional savings. Moving to slide three, you’ll see that the majority of our portfolio is still performing well with good execution of our strategic priorities in 2011 to position us positively as we move forward. Full year 2011 sales are expected to grow a strong 14% year-over-year or up 6% organic including a negative 2 percentage point impact from the Gulf Intracoastal Waterway project or GIWW which…

Thanks, Randy. Please turn to my first slide, slide number 9, labeled Full-year 2012 Outlook. Overall for 2012, we expect to grow revenue by seven to 10 points, inclusive of the 5 basis carry over month CPT, which adds about 3.5 points of growth to our 2012 expectations. Organic growth, excluding the impact of CPT is expected to be 3.5 to 6.5 points year-over-year or up mid-single digits, inclusive of about 150 to 200 basis points of price, about 100 basis points of FX headwinds, and therefore about three to five points of core value growth. Our volume growth assumptions assume that the impact of Western Europe will remain at headwind with roughly 14% of our revenue experiencing a 5% year-over-year decline. We expect the US economy to grow at about one to two points of volume, and Best growth markets to be up around 15% year-over-year. This three to five points of volume growth is comparable to the roughly six points of volume growth experienced in 2011, excluding the impact of the year-over-year GIWW project shift in 2010. It’s about one to three points softer in volume. This is reflected in West European headwind as well as continued sluggish demand for water treatment components and a little softer volume within technical products. Turning to slide 10, we have a similar outlook for operating income. In 2012, we expect to grow operating income by roughly 13% at the midpoint or up to approximately $445 million to $470 million. We’re targeting operating margin expansion of 40 to 80 basis points or up roughly 100 basis points excluding the impact of CPT to the five-month comparison period. Solid pricing should help mitigate the impact of material plus labor inflation. We expect to ensure that operating expenses stay relatively flat as a percentage…

(Operator Instructions) Your first question comes from the line of Hamzah Mazari from Credit Suisse.

May be if you could, Randy and John, add some color on the cost actions you’re taking in terms of how much your structural cost takeout versus temporary at this stage with the macro uncertainty you’re facing and as your mix goes to more fast growth markets, how do you adapt your sales channel to that and do you need to shut down facilities in Europe and move them over to some of these regions, how dynamic is your sales channel and manufacturing footprint as fast growth markets become a bigger part of the mix?

Okay, I’ll take the first part and I’ll let Randy talk about the dynamic nature of the global footprint. We’re taking a look at the repositioning actions we’re mentioning and we’re in the process of concluding what those are. We’re looking at high impact ROI and it’s all structural. So right now, we’re not anticipating any factory consolidations in the view, but we are taking a look at making sure that we’ve got the right investment in fast growth regions and looking at, making sure that the channels between CPT and the base water business are aligned properly and there’s a lot of synergy opportunities there as Randy mentioned and there is also the opportunity to get things right for the future state of how we want to go to market with these particular platforms and that’s really where the focus area will be and we expect a pretty good return on these investments.

And consistent with that, as we look at the investments, we both, we have investments and a good foot print in CPT and ones we’ve made, some of them are overlapping, some of them are complimentary. Frequently we have two sales offices in the city, we don’t need to, you know we’ll be collapsing those down and actually we’ll be able to -- it has low overhead and have more people on the street. And selling a broader product line for instance CPT has very strong sales folks who are selling highend applications and we are much stronger on the distribution side and setting up the distribution. So we can give the application side, a bigger set of products to sell and a bigger set of applications to go after. And take some of the lower end component products of CPT mix and put them through our distribution channels. So that, a lot of the focus that’s going on in terms of combining the sales channel. The other thing is to leverage the factories that we built already in India and in China and in Brazil to actually build the systems that CPT is building in Europe today. And you know that really improves the cost structure of those projects. So there is a structural cost improvements that John was talking about. There is a overhead for a reduction we can get in the fast growth markets and importantly, there is opportunities to lower our product cost, both through sourcing of the CPT business, both through sourcing and in terms of localizing the manufacturing of the systems. Those are the big pieces.

Your next question comes from the line of Jim Lucas from Janney Capital Markets.

First CPT equation, any changes to your expectations of what you were thinking in 2012 and if you could also expand a little bit more on what you are seeing on the residential water treatment. It sounded like it was more inventory correction with your dealers in the 4th quarter, but what is the outlook there going forward?

From a business perspective, not expecting any dramatic change or any change in CPT for that matter. I think I can’t tell you where the FX rate is going to be, I mean if it keeps around here at 129, it will go south to 129, there will be a slight translation impact, but for the most part, everything is intact. You know we will see a slight (inaudible) headwind on the CPT side of the business, but we have got substantial opportunities on the industrial side to penetrate and continue the double digit growth rates in the business. So all things intact for CPT, maybe a small translation impact as we head into 2012.

Yeah and water treatment. We think we are seeing, we will know better as the quarter plays up. We think we are seeing some we say inventory adjustment, but as we look at particularly the impact in western Europe, there has been a deceleration over the last two quarters. It’s much sharper, it was much sharper and particularly in November and I don’t know whether that was inventory draw down, pretty sure there was an impact in the US inventory draw down. I think in Western Europe, Western Europe was doing really well, I mean the first quarter actually grew really 10% and in this quarter it is going to be down at least that much in residential; in residential treatment components. So we think that particularly in Europe in Europe which is a very attractive market for us in that space, we think we are seeing more than inventory adjustments particularly there.

And John, just a point of clarification on CPT, the EPS accretion of what you had been expecting in ’12, any changes on there?

No, I mean I was saying Tim that we expected a 10% uplift from 2011 to 2012; $0.10, I am sorry; it will be somewhere between $0.09 to $0.10 depending on the impact of FX.

You next question comes from the line of Robert Barry from UBS.

I was just curious if you could expand a little bit on the weakness you are seeing in Europe. You touched on it vis-à-vis the resi piece in the last question, but more broadly in the other businesses what you are seeing? And then just a quick follow-up, I just wanted to clarify a few things, the US municipal business, it was supposed to be an engineered flow, its actually going to be down in 2012 versus ’11 is that a part of your planning assumption?

Yeah, let me take them in a couple of categories. I think you know for the full year Western Europe volumes, just to give you some context, we think the full year 2011 will be closer to 5% up which is made up of a strong Q1 as Randy mentioned, so double digit volume growth in Q1 and in contrast even with the strong recovery in December that we are seeing, we are expecting volume in Western Europe to be down 15%, which is 10 points higher than the 5% we are predicting in our outlook; that when we gave the Q4 outlook. When we take a look at municipal next year in the United States and globally, we are anticipating it will be down in the single digits globally and that is anticipated in our 2012 guidance. And then in contrast for 2011, that market was down globally as well, so we’re not expecting any recovery and then we’re continuing to see headwinds in that space.

And just to be clear, it sounds like then the European weakness is pretty broad-based, is that fair?

Yes, in water and in tech products it’s okay.

Well, it was generally broad-based and just to be clear a very strong downturn in October and November; so late October and November. We are seeing an uptick in December, the first two weeks of December globally for all of our business is very strong and a recovery in Europe, but it won't be strong enough to recover what the downturn in November was.

Your next question comes from the line of Deane Dray from Citi Investment Research.

I just want to follow-up on Rob’s question regarding the Europe slowdown you’ve seen in the fourth quarter and how might that and it sounds like it has prong upon you a little bit more recently, but how might this have changed your thinking about 2012 and your expectations of what the downside might be across your European businesses and within the context, if I am not mistaken, it’s a big chunk of your business may be it’s 80% goes to your distribution and if you’ve got the destocking phenomena and this can run a couple of quarters, so how did this to run to your thinking and planning for 2012?

Well, Deane, let me break those into two other categories. First in Western Europe; I think we anticipated that Western Europe would be down next year, we didn’t anticipate Q4 for us would be down as much. So I think you know just to kind of set the context at the way we’re looking at 2012, you can think about a nickel being related to pension next year and about a nickel being related to the staring point of where we are finishing 2011;

Which we do I think is going carryover in the first quarter.

Right. The rest of the context is you know if you take the organic growth and the productivity and the price cost actions are generally aligned and probably throughout Q4, we’re going to reach a little deep to repositioning buckets to put ourselves in good position to get the productivity for next year. When we take a look at the water softener components piece and I don’t know -- you know there is a couple of things going on in the industry you know related to where the financing is primarily North America and those product contents and there has been a shift in mix if you will away from the pro-channel into some of the retail at a much lower price point which does not necessarily favor all of our components all that wealth. So when we think that our channel is getting healthier; as we take a look at the outlook for 2012 and it’s really into earlier we still think this is a down market as we look out in the 2012 unless we see some bounce in residential which would give us the pro-channel lift.

And then I just a follow upon CPT; one of the new products that you talked about at Aquatech was this nano-hollow fiber that allows you to screen out [interconnect] inhibitors and this is kind of been the Holy Grail of membrane technology. How soon does this get launched; what sort of ramp do you expect over the next couple of years?

We’re testing that now. I’ll give you more color on that when we actually do the earnings call. I haven’t had an update on it in the last three to four weeks, so I would rather not do that until I get the most recent update. We are excited about it; I think you are right this is kind of Holy Grail and hopefully we’ll find it you know this in the coming.

Your next question comes from the line of Ajay Kejriwal from FBR Capital Markets.

May be give us a better sense of Europe in November; so how much was the business down and then it sounded like things came back a little bit in December. So what changed, I mean and macro still looks to be pretty weak so, but it sounds like you are seeing a rebound in December; any sense what’s driving that and is that sustainable?

I think that – you know we don’t have all the specifics on it, but obviously just to give you some color I mean as we mentioned earlier we expected volume and take the foreign exchange component out for Q4 to be down about 5%. That contrasted with what would have been more like breakeven volume in Q3 and as I mentioned up double digit in Q1. So we are seeing the trend throughout the Europe and the volume piece; November volumes for us were down you know north of 20% and as I mentioned earlier, we have seen this slight snap back in the volumes nearly we call them high single digit levels in December.

Well, it’s the best comment right John about all of Pentair stronger and this particular product line isn’t particularly…..

Right. And I was talking about Europe in whole Randy we have seen an uptick in Europe as well.

But it’s not a specific comment about residential well above (inaudible)

Correct. And so, when you take a look at it Ajay, we’re still thinking that we’re going to be double digit volume down in Q4 and I think if we take a look at our outlook for 2012, we think it will be -- continue to be deeper headwinds in Q1, but overall we’ve got about 5% down outlook in Europe. You know then Euro is more colored, you know, sitting right round of on a $1.30 is going to create some translation risk for everyone. If the Euro continues to weaken more, we do expect that we will see export sales pick up and increase as we saw in the first half of 2010 when we petered around the $1.15, $1.20 levels. So I think there's a lot to play out in Europe. I think for us, our distributors don't have a lot of access to cash and they become very uncertain about their future and adjust their inventory positions in lieu of, you know, what they think is going to happen to the economy and I think that has a steeper impact to us within the distribution community. That's the only color I can provide beyond what the date is. We will obviously know more as we close the quarter and get all the details behind the financials.

And one of the effects we always see at the end of the year is distributors trying to make next rebate level, sales people trying to make their commissions and so we tend not to be equate sort of factor those out, which will have a much better analog as we close.

Thank you. That’s helpful. And then maybe just clarify on that CPT, I talked when acquisition was announced, we are expecting $0.15 to $0.20 accretion in ’12.

That's correct.

It is the delta. It is $0.05 in 2011 and what John was talking about was an additional $0.10. So next year, so that's $0.15 is the total.

Your next question comes from the line of Christopher Glynn from Oppenheimer.

Thanks, good morning. I have a question on the water portfolio in general. With CPT now enhancing the breadth of your growth portfolio, I was wondering where you are in the strategic thought processes segregating parts of the portfolio more as cost driven businesses, how you think about the opportunity there? And what’s the competitive dynamic on some of the more non-growing parts of the water portfolio?

Well, we’re particularly – let me talk about the sort of pieces of CPT. You know, we’re particularly excited about beverage on a large scale, not just on the filtration side or a broader system side, the CO2 recovery side, the energy recovery side. There’s some very, very exciting growth opportunities for us and that’s one of the areas we can use that it and enroll with membrane bio-reactors section, create energy from the waste streams and the beverage arena. So we see, we’re quite excited about and that’s what John was saying earlier about the industrial applications that would include these kinds of beverage in the area of application. Pretty exciting, and we like the position it gives us in the water space. You know, we do expect a little bit of headwinds in the water space going forward. On the pump area, we think there’s opportunities to grow our pump business and improve our cost position in our pump business with the addition and the analysis we think about that product line. So most of the areas, the CPT, they really give us more growth prospects with, if you would back off the cost opportunities, you know like.

And Chris to your point, you know, we clearly have what we say in water, close to 10, 11 growth platforms and Randy mentioned a couple. And yes we will take a look at the growth opportunities of all those entire type and especially has we connect them to the fast-growth regions. Each of them have a different vertical markets driving there particular growth opportunities and as Randy mentioned in his remarks, clearly as we take a look at operating expenses next year in the wake of the economy, we will reprioritize in the higher impact platforms more than we will be prioritizing those that are more in a cash generation position.

And there in CPT is really, you know, rank order than we’ll talk more about that. They’re really kind of in a top three.

Okay. And is there a fundamental opportunity it takes, you know, ex percent of your portfolio and run it differently as a real kind of cost constrained type of model compared to where you’ve been previously?

Well, when we talk about putting more discipline into our prioritization, that is code for us basically, making sure we’re investing in the investible and focusing on productivity in the less attractive segment, exactly right now, maybe product line basis or maybe in region basis or country basis, where we are best exactly what we are working on right now. You know we’re also looking at the business, particularly in water, and thinking more clearly about the catalog distribution business versus the applied value add business and making sure that we are honing our go-to-market strategies as best we can to make the most of both of those, and while that still could be use for distribution, it still can be used to help that application side. We really need, we really need opportunities to get closer to some key customers, drive specifications into a boarder set of product, and so that’s a big focus we have now on our growth side and our rapid growth process has helped us see that more clearly and see these opportunities more quickly.

And can we may be anticipate next Labor Day when you tend to do your deeper dive call, you know more segregation or pie chart them what you look at as kind of cost driven versus more investable?

Sure

Okay, and just last one on the Fish Farm opportunity, how you look at that opportunity going forward? Where is it now and how have you and what’s the history there?

You know, we do probably, you know, somewhere north of $25 million right now without trying. The, you know, there are kinds of fish farms, there is in the ocean, there is not that much of equivalent in that. There is the land based in-ponds, there is opportunity in filtration in farms and that. But there are really exciting opportunities in the, what I would call, the mechanized agriculture, which is going to be more like a factory-type of farm. We think it has got a growth rate that’s going to be north of 10% and we are focused. We have a pretty unique portfolio of products, the pool equipments, particularly the larger pool equipments, is ideal. We have number of programs working with thought leaders in that industry to basically take in our (inaudible) program and applying it to raise the yields, and yields both in terms of raising them fast but keeping the fish and as we talk about before, you know, we can’t seize the world sustainably, unless agriculture is playing a bigger, bigger role. You know we have so many contacts, here in Minnesota, who are sort of in the ag space, that we share.

And is it fair to say that activism or whatever is driving a big mix shift towards agriculture from environmentally mix settings?

Well, I think it’s one of those well aligned things. It’s you know literally the yield of approaching from grain is higher with this. So if you are going to feed all this, it’s part of the new, new world thinking right. I mean if you are going to feed all these people, they move up Maslow’s Hierarchy of Needs. They want protein, they only want to do it such so. And it does help to stop over fishing in the oceans (inaudible) which is good.

The next question comes from the line of Brian Drab from William Blair.

On CPT, is there any way that you could help quantify the growth and performance in CPT before acquisition, post acquisition or understand obviously the economic environment difference post acquisition, but what was that business growing to your mind maybe in the first half of 2011 and what do you expect to grow in the second half of 2011 and what do you, putting the forecast for CPT growth for 2012.

Yeah, I mean a good question Brian. I mean I think just to give some insight, the CPT business topline 2010 and certainly throughout 2011 even for our months of ownership is growing north of 20% of the topline. Our goal is to look at that as a 10% plus topline growth heading into 2012 and repositioning the operating income fees to expand margins more significantly. The operating income in both 2010 in and pre our ownership wasn’t a primary focus and that will be a primary focus under the Pentair ownership and making sure that we’ve got good returns and higher margins for the type of technological advantage that they actually offer into the market space. So I think you can expect a little bit more margin discipline and a may be slightly slower growth rate, but still one more to 10%.

Okay, great and the slightly slower growth rate to expand fiscal comparisons in the economic environment offset and quantify the synergies that what we’re talking about, is that fair enough? Think about it that way?

We always thought we’d have a lower growth rate as we put a stronger focus on profitable growth versus growth. So that means what John just said is consistent with sort of the philosophy that we put into this strategy when we originally bought it. It looks like actually the fact that the water in municipal is down, that is the lower profitable stuff, so, right. It’s kind of consistent with the right thing to do.

But it is inclusive of our double-digit growth outlook forward, so we still think we’re going to grow double-digit inclusive of those market headwinds.

Your next question comes from the line of Scott Graham from Jefferies & Company. Scott Graham - Jefferies & Company: My really only question centers around the margin. A couple of months back at the analyst meeting you indicated that you’re trying to march your way toward a 36% gross margin and I know that these things are not linear, but we’re kind of coming off of a pretty weak 2009 and then a good recovery in 2010 and 2011, but I guess my question here is that at a gross margin guidance of 50 to 80 basis points up, what would kind of be the delta versus let’s say 100% -- 100 basis point annual type of number; what changed since then?

One simple answer Scott, little less volume absorption; little less volume benefit that’s it versus those assumptions. Scott Graham - Jefferies & Company: But Europe is only 15% of sales and it looks to me like the rest of the businesses are performing the same way that they were a couple of months back?

Its fair, but as we talked about in the comments, in my comments and Randy’s comments, our growth expectations for 2012 which include our 50 basis point of gross expansion which is what you just pointed out is going to be a slightly less volume contribution in that outlook. When you take a look at both the gross margin and the operating margin, as we mentioned in the slide and also in the comments, if you take a look at the negative impact of CPT was 40 basis points and look at the headwind, we’re growing a 100 basis points margin expansion excluding the negative headwind of CPT. So we’re still on-track; all of our productivity actions and lean initiatives still yielding what we expect; its 100 basis points without CPT and roughly 60 basis points in the midpoint with CPT. Scott Graham - Jefferies & Company:

You next question comes from the line of David Rose from Wedbush Securities.

I have a couple of follow up questions. On Europe, and trying to get back to some of the previous questions on leveraging operating margin. If Europe does stabilize, what sort of incremental leverage can we expect and where is that relative to the top-end and the bottom end of the guidance; one? And two is, on the initiatives for new product introductions, are you including the launch of saltless water softener, water treatment products or not? And then lastly are you assuming or can we assume any potential acquisitions of distributors as you want to get closer to the customers?

I think just to give you some context; our Western European revenue which is roughly 14% to 15% of revenue generates about 13% to 15% of operating margins, so it is profitable healthy piece of the overall Pentair portfolio. And as I mentioned earlier David, we are anticipating about 5% volume downward draft on that next year, so it kind of gives you the color to be able to do your own view is the markets not down as much or its down more, what’s the incremental impact that we would expect in that piece of the business. I’ll let Randy handle the launch of the.

We called it the Hybrid DI for Deionization which we showed at Aquatech. As we said then, we’re still on track for mid year launch in 2012, so there will be some volume in second half. We don’t expect it to be – its going to be a more technical sale; we got to work with the channel in order to bring it on so we see sort of map as opposed to huge overhead kind of (inaudible) launch mush as I like that and we see it being slower. So not assuming a huge bottom line impact or top line impact in the guidance that’s given here and it is more an impact in 2013. And in terms of distribution, we work closely with distribution. There has been a number of things that have been for say and you know I would say right now our focus is in that direction. We’re focused more on investing in innovation and to footprint outside of Europe and the US.

There are no further questions at this time.

Okay, thank you very much, and thank you all for letting us finish in time for you to all participate in the next call. So, Sarah could you give out the replay information.

Absolutely. Thank you for participating in today's 2012 Outlook Conference Call. This call will be available for replay beginning today approximately two hours from now. The conference ID number for the replay is 312-411-04. Again the conference ID number for the replay is 312-411-04. The number to dial for the replay is 1855-859-2056 or 404-537-3406. Thank you again for your participation. You may now disconnect.