What changed in this filing

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Item 1. Financial Statements

2021-10-26 compared with 2021-07-27 · 131 added, 102 removed, 541 unchanged (30% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

Three months ended Six months ended

In millions, except per-share data June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Three months ended Nine months ended

In millions, except per-share data September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Net sales $ 969.2 $ 798.5 $ 2,776.2 $ 2,221.8

5 unchanged sentences

Other (income) expense:

Loss on sale of businesses — 0.1 — 0.1

(Gain) loss on sale of businesses ( 1.4 ) — ( 1.4 ) 0.1

Net interest expense 2.6 5.4 11.5 20.0

23 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

September 30,

2021 December 31,

25 unchanged sentences

Commitments and contingencies (Note 16)

Ordinary shares $ 0.01 par value, 426.0 authorized, 165.9 and 166.1 issued at June 30, 2021 and December 31, 2020, respectively

Ordinary shares $ 0.01 par value, 426.0 authorized, 165.5 and 166.1 issued at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 1,614.2 1,680.7

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six months ended

In millions June 30,

2021 June 30,

Nine months ended

In millions September 30,

2021 September 30,

Operating activities

6 unchanged sentences

Deferred income taxes ( 4.8 ) 8.5

Loss on sale of businesses — 0.1

(Gain) loss on sale of businesses ( 1.4 ) 0.1

Share-based compensation 20.8 15.2

13 unchanged sentences

Proceeds from sale of property and equipment 3.7 0.1

Proceeds from the sale of businesses, net 1.4 —

Acquisitions, net of cash acquired ( 83.6 ) ( 28.5 )

Other 2.7 2.2

Net cash used for investing activities ( 114.4 ) ( 70.6 )

38 unchanged sentences

Balance - June 30, 2021 165.9 $ 1.7 $ 1,651.3 $ 825.3 $ ( 206.7 ) $ 2,271.6

Net income — — — 143.6 — 143.6

Other comprehensive loss, net of tax — — — — ( 6.9 ) ( 6.9 )

Dividends declared, $ 0.20 per share

— — — ( 33.1 ) — ( 33.1 )

Share repurchase ( 0.6 ) — ( 50.0 ) — — ( 50.0 )

Exercise of options, net of shares tendered for payment 0.2 — 8.9 — — 8.9

Shares surrendered by employees to pay taxes — — ( 0.2 ) — — ( 0.2 )

Share-based compensation — — 4.2 — — 4.2

Balance - September 30, 2021 165.5 $ 1.7 $ 1,614.2 $ 935.8 $ ( 213.6 ) $ 2,338.1

In millions Ordinary shares Additional paid-in capital Retained earnings Accumulated

13 unchanged sentences

Net income — — — 72.1 — 72.1

Other comprehensive loss, net of tax — — — — 10.4 10.4

Other comprehensive income, net of tax — — — — 10.4 10.4

Dividends declared, $ 0.19 per share

5 unchanged sentences

Balance - June 30, 2020 165.9 $ 1.7 $ 1,680.3 $ 482.5 $ ( 214.8 ) $ 1,949.7

Net income — — — 110.8 — 110.8

Other comprehensive income, net of tax — — — — 2.5 2.5

Dividends declared, $ 0.19 per share

— — — ( 31.7 ) — ( 31.7 )

Exercise of options, net of shares tendered for payment 0.4 — 14.1 — — 14.1

Shares surrendered by employees to pay taxes — — ( 0.4 ) — — ( 0.4 )

Share-based compensation — — 4.8 — — 4.8

Balance - September 30, 2020 166.3 $ 1.7 $ 1,698.8 $ 561.6 $ ( 212.3 ) $ 2,049.8

See accompanying notes to condensed consolidated financial statements.

12 unchanged sentences

The COVID-19 pandemic has had and may continue to have an unfavorable impact on certain parts of our business.

The broader implications of the COVID-19 pandemic on our business, financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, the impact of virus variants, the rate of vaccinations, the COVID-19 pandemic’s impact on our customers and suppliers and the range of governmental and community reactions to the pandemic.

We may continue to experience reduced customer demand in certain parts of our business or constrained supply that could materially and adversely impact our business, financial condition, results of operations, liquidity and cash flows in future periods.

The broader implications of the COVID-19 pandemic on our business, financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, the impact of virus variants, the rate and effectiveness of vaccinations, the COVID-19 pandemic’s impact on our customers and suppliers and the range of governmental and community reactions to the pandemic.

We may continue to experience reduced customer demand in certain parts of our business or constrained labor and/or supply that could materially and adversely impact our business, financial condition, results of operations, liquidity and cash flows in future periods.

Our fiscal year ends on December 31.

3 unchanged sentences

Geographic net sales information, based on geographic destination of the sale, was as follows:

Three months ended Six months ended

In millions June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

$ 669.3 $ 541.2 $ 1,895.0 $ 1,487.9

8 unchanged sentences

Vertical net sales information was as follows:

Three months ended Six months ended

In millions June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Residential $ 628.8 $ 520.3 $ 1,800.0 $ 1,375.8

5 unchanged sentences

Performance obligations

On June 30, 2021, we had $ 83.3 million of remaining performance obligations on contracts with an original expected duration of one year or more.

On September 30, 2021, we had $ 72.0 million of remaining performance obligations on contracts with an original expected duration of one year or more.

We expect to recognize the majority of our remaining performance obligations on these contracts within the next 12 to 18 months.

1 unchanged sentence

Contract assets and liabilities consisted of the following:

In millions June 30,

In millions September 30,

2021 December 31,

3 unchanged sentences

Net contract assets $ 16.9 $ 22.6 $ ( 5.7 ) ( 25.2 ) %

The $ 6.0 million decrease in net contract assets from December 31, 2020 to June 30, 2021 was primarily the result of timing of milestone payments and impact of foreign currency fluctuations.

Approximately 65 % of our contract liabilities at December 31, 2020 were recognized in revenue in the first half of 2021.

There were no impairment losses recognized on our contract assets for the three months ended June 30, 2021.

The $ 5.7 million decrease in net contract assets from December 31, 2020 to September 30, 2021 was primarily the result of timing of milestone payments.

Approximately 75 % of our contract liabilities at December 31, 2020 were recognized in revenue in the first nine months of 2021.

There were no impairment losses recognized on our contract assets for the three months ended September 30, 2021.

On September 15, 2021, as part of both of our Consumer Solutions and Industrial & Flow Technologies reporting segments, we entered into a definitive agreement to acquire Pleatco Holdings, LLC and related entities (“Pleatco”) for total consideration of approximately $ 255.0 million in cash, subject to customary adjustments.

We completed the Pleatco acquisition on October 18, 2021.

On May 19, 2021, as part of our Consumer Solutions reporting segment, we completed the acquisition of Ken’s Beverage, Inc.

4 unchanged sentences

The pro forma impact of these acquisitions is not material.

Total share-based compensation expense for the three and six months ended June 30, 2021 and 2020 was as follows:

Three months ended Six months ended

In millions June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Total share-based compensation expense for the three and nine months ended September 30, 2021 and 2020 was as follows:

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Restricted stock units $ 2.4 $ 3.0 $ 9.4 $ 9.3

20 unchanged sentences

The Transformation Program is structured in multiple phases and is expected to empower us to work more efficiently and optimize our business to better serve our customers while meeting our financial objectives.

During the six months ended June 30, 2021 and the year ended December 31, 2020, we initiated and continued execution of actions aimed at reducing our fixed cost structure and realigning our business associated with restructuring and the Transformation Program, including the reduction in headcount of approximately 50 and 175 employees, respectively.

During the nine months ended September 30, 2021 and the year ended December 31, 2020, we initiated and continued execution of actions aimed at reducing our fixed cost structure and realigning our business associated with restructuring and the Transformation Program, including the reduction in headcount of approximately 50 and 175 employees, respectively.

Restructuring and transformation-related costs within Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income included the following:

Three months ended Six months ended

In millions June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Severance and related costs $ — $ 1.2 $ 5.1 $ 5.0

Transformation and other costs 1.9 — 2.1 —

Transformation costs (1)

Other costs (2)

— 0.6 0.2 0.6

Total restructuring and transformation costs $ 4.0 $ 1.8 $ 11.2 $ 5.6

Transformation and other costs primarily consist of professional services, project management and related costs, infrastructure charges to vacate facilities and consolidate operations, and asset impairment and various contract termination costs.

(1) Transformation costs primarily consist of professional services and project management and related costs.

(2) Other costs primarily consist of asset impairment and various contract termination costs.

Restructuring and transformation costs by reportable segment were as follows:

Three months ended Six months ended

In millions June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Consumer Solutions $ 0.1 $ 0.4 $ 0.8 $ 2.4

4 unchanged sentences

Notes to condensed consolidated financial statements (unaudited)

Activity related to accrued severance and related costs recorded in Other current liabilities in the Condensed Consolidated Balance Sheets is summarized as follows for the six months ended June 30, 2021:

In millions June 30,

Activity related to accrued severance and related costs recorded in Other current liabilities in the Condensed Consolidated Balance Sheets is summarized as follows for the nine months ended September 30, 2021:

In millions September 30,

Beginning balance $ 15.2

4 unchanged sentences

Basic and diluted earnings per share were calculated as follows:

Three months ended Six months ended

In millions, except per-share data June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Three months ended Nine months ended

In millions, except per-share data September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Net income $ 143.6 $ 110.8 $ 404.3 $ 255.6

24 unchanged sentences

We review our allowance for credit losses on a quarterly basis.

In millions June 30,

In millions September 30,

2021 December 31,

10 unchanged sentences

Supplemental Balance Sheet Information

In millions June 30,

In millions September 30,

2021 December 31,

48 unchanged sentences

2020 Purchase Accounting Adjustments Acquisitions Foreign currency

translation/other June 30,

translation/other September 30,

Consumer Solutions $ 1,580.5 $ ( 1.2 ) $ 29.0 $ ( 6.0 ) $ 1,602.3

2 unchanged sentences

Identifiable intangible assets consisted of the following:

September 30,

2021 December 31,

9 unchanged sentences

Total intangibles $ 689.0 $ ( 349.4 ) $ 339.6 $ 663.4 $ ( 337.5 ) $ 325.9

Identifiable intangible asset amortization expense was $ 6.3 million and $ 7.0 million for the three months ended June 30, 2021 and 2020, respectively, and $ 13.4 million and $ 14.6 million for the six months ended June 30, 2021 and 2020, respectively.

Identifiable intangible asset amortization expense was $ 6.0 million and $ 6.9 million for the three months ended September 30, 2021 and 2020, respectively, and $ 19.4 million and $ 21.5 million for the nine months ended September 30, 2021 and 2020, respectively.

Estimated future amortization expense for identifiable intangible assets during the remainder of 2021 and the next five years is as follows:

4 unchanged sentences

Debt and the average interest rates on debt outstanding were as follows:

In millions Average interest rate as of June 30, 2021 Maturity

Year June 30,

In millions Average interest rate as of September 30, 2021 Maturity

Year September 30,

2021 December 31,

24 unchanged sentences

PFSA uses the Senior Credit Facility as back-up liquidity to support 100% of commercial paper outstanding.

PFSA had no commercial paper outstanding as of June 30, 2021 and December 31, 2020.

PFSA had no commercial paper outstanding as of September 30, 2021 and December 31, 2020.

In 2020, the commercial paper market began to experience high levels of volatility due to uncertainty related to the COVID-19 pandemic.

1 unchanged sentence

As a cost mitigation action, we withdrew our credit ratings to access the commercial paper market and continued to use the revolving credit facility, along with cash generated from operations, to fund our general operations.

As of June 30, 2021, total availability under the Senior Credit Facility was $ 883.9 million.

As of September 30, 2021, total availability under the Senior Credit Facility was $ 900.0 million.

Our debt agreements contain various financial covenants, but the most restrictive covenants are contained in the Senior Credit Facility.

1 unchanged sentence

For purposes of the Leverage Ratio, the Senior Credit Facility provides for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and liquidations during the period to which such calculation relates.

In addition to the Senior Credit Facility, we have various other credit facilities with an aggregate availability of $ 21.4 million, of which there were no outstanding borrowings at June 30, 2021.

In addition to the Senior Credit Facility, we have various other credit facilities with an aggregate availability of $ 21.4 million, of which there were no outstanding borrowings at September 30, 2021.

Borrowings under these credit facilities bear interest at variable rates.

We have no fixed rate senior notes maturing in the next twelve months.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Debt outstanding, excluding unamortized issuance costs and discounts, at June 30, 2021 matures on a calendar year basis as follows:

We have $ 88.3 million of fixed rate senior notes maturing in the next twelve months.

We classified this debt as long-term as of September 30, 2021 as we have the intent and ability to refinance such obligation on a long-term basis under the Senior Credit Facility.

Debt outstanding, excluding unamortized issuance costs and discounts, at September 30, 2021 matures on a calendar year basis as follows:

In millions 2021 2022 2023 2024 2025 2026 Thereafter Total

14 unchanged sentences

The majority of our foreign currency contracts have an original maturity date of less than one year.

At June 30, 2021 and December 31, 2020, we had outstanding foreign currency derivative contracts with gross notional U.S.

At September 30, 2021 and December 31, 2020, we had outstanding foreign currency derivative contracts with gross notional U.S.

dollar equivalent amounts of $ 10.6 million and $ 12.4 million, respectively.

1 unchanged sentence

Cross Currency Swaps

At June 30, 2021 and December 31, 2020, we had outstanding cross currency swap agreements with a combined notional amount of $ 834.8 million and $ 855.1 million, respectively.

At September 30, 2021 and December 31, 2020, we had outstanding cross currency swap agreements with a combined notional amount of $ 817.8 million and $ 855.1 million, respectively.

The agreements are accounted for as either cash flow hedges, to hedge foreign currency fluctuations on certain intercompany debt, or as net investment hedges to manage our exposure to fluctuations in the Euro-U.S.

Dollar exchange rate.

We had deferred foreign currency losses of $ 20.3 million and $ 32.8 million at June 30, 2021 and December 31, 2020, respectively, in Accumulated other comprehensive loss associated with our cross currency swap activity.

We had deferred foreign currency losses of $ 8.3 million and $ 32.8 million at September 30, 2021 and December 31, 2020, respectively, in Accumulated other comprehensive loss associated with our cross currency swap activity.

The periodic interest settlements related to our cross currency swap agreements are classified as operating activities.

8 unchanged sentences

Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

In making fair value measurements, observable market data must be used when available.

When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

In making fair value measurements, observable market data must be used when available.

Fair value of financial instruments

6 unchanged sentences

The recorded amounts and estimated fair values of total debt, excluding unamortized issuance costs and discounts, were as follows:

September 30,

2021 December 31,

5 unchanged sentences

Financial assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows:

June 30, 2021

September 30, 2021

In millions Level 1 Level 2 Level 3 NAV Total

10 unchanged sentences

Total recurring fair value measurements $ 12.2 $ ( 69.6 ) $ — $ 10.4 $ ( 47.0 )

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

We manage our affairs so that we are centrally managed and controlled in the United Kingdom (“U.K.”) and therefore have our tax residency in the U.K.

3 unchanged sentences

Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

The effective income tax rate for the six months ended June 30, 2021 was 14.7 %, compared to 25.3 % for the six months ended June 30, 2020.

The effective income tax rate for the nine months ended September 30, 2021 was 14.2 %, compared to 19.9 % for the nine months ended September 30, 2020.

We continue to actively pursue initiatives to reduce our effective tax rate.

The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.

The liability for uncertain tax positions was $ 46.6 million and $ 46.3 million at June 30, 2021 and December 31, 2020, respectively.

The liability for uncertain tax positions was $ 46.7 million and $ 46.3 million at September 30, 2021 and December 31, 2020, respectively.

We record penalties and interest related to unrecognized tax benefits in Provision for income taxes and Net interest expense , respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income, which is consistent with our past practices.

Benefit Plans

Components of net periodic benefit expense for our pension plans for the three and six months ended June 30, 2021 and 2020 were as follows:

Three months ended Six months ended

In millions June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Components of net periodic benefit expense for our pension plans for the three and nine months ended September 30, 2021 and 2020 were as follows:

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Service cost $ 0.7 $ 0.8 $ 2.1 $ 2.4

2 unchanged sentences

Net periodic benefit expense $ 1.1 $ 1.3 $ 3.3 $ 3.9

Components of net periodic benefit expense for our other post-retirement plans for the three and six months ended June 30, 2021 and 2020 were not material .

Components of net periodic benefit expense for our other post-retirement plans for the three and nine months ended September 30, 2021 and 2020 were not material .

Shareholders’ Equity

5 unchanged sentences

The 2020 Authorization supplemented the 2018 Authorization.

During the six months ended June 30, 2021, we repurchased 0.8 million of our ordinary shares for $ 50.0 million under the 2018 Authorization.

As of June 30, 2021, we had $ 750.0 million available for share repurchases under the 2020 Authorization.

During the nine months ended September 30, 2021, we repurchased 1.4 million of our ordinary shares for $ 100.0 million, of which 0.8 million shares, or $ 50.0 million, and 0.6 million shares, or $ 50.0 million, were repurchased pursuant to the 2018 Authorization and the 2020 Authorization, respectively.

As of September 30, 2021, we had $ 700.0 million available for share repurchases under the 2020 Authorization.

Dividends payable

On May 4, 2021, the Board of Directors declared a quarterly cash dividend of $ 0.20 , payable on August 6, 2021 to shareholders of record at the close of business on July 23, 2021.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $ 33.2 million at both June 30, 2021 and December 31, 2020, respectively.

On September 21, 2021, the Board of Directors declared a quarterly cash dividend of $ 0.20 , payable on November 5, 2021 to shareholders of record at the close of business on October 22, 2021.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $ 33.1 million at September 30, 2021, compared to $ 33.2 million at December 31, 2020.

Segment Information

5 unchanged sentences

Financial information by reportable segment is as follows:

Three months ended Six months ended

In millions June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Consumer Solutions $ 613.6 $ 470.8 $ 1,711.9 $ 1,260.8

8 unchanged sentences

The following table presents a reconciliation of consolidated segment income to consolidated income from continuing operations before income taxes:

Three months ended Six months ended

In millions June 30,

2021 June 30,

2020 June 30,

2021 June 30,

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Segment income $ 179.7 $ 140.5 $ 519.0 $ 376.7

2 unchanged sentences

Intangible amortization ( 6.0 ) ( 6.9 ) ( 19.4 ) ( 21.5 )

Loss on sale of businesses — ( 0.1 ) — ( 0.1 )

Gain (loss) on sale of businesses 1.4 — 1.4 ( 0.1 )

COVID-19 related costs and expenses ( 0.1 ) ( 2.6 ) ( 0.4 ) ( 8.3 )

16 unchanged sentences

In our opinion, the amounts accrued are appropriate based on facts and circumstances as currently known.

As of June 30, 2021 and December 31, 2020, our recorded reserves for environmental matters were not material.

As of September 30, 2021 and December 31, 2020, our recorded reserves for environmental matters were not material.

Product liability claims

20 unchanged sentences

Notes to condensed consolidated financial statements (unaudited)

The changes in the carrying amount of service and product warranties of continuing operations for the six months ended June 30, 2021 were as follows:

In millions June 30,

The changes in the carrying amount of service and product warranties of continuing operations for the nine months ended September 30, 2021 were as follows:

In millions September 30,

Beginning balance $ 37.0

1 unchanged sentence

Payments ( 38.3 )

Foreign currency translation ( 0.3 )

Ending balance $ 43.0

6 unchanged sentences

In addition, we issue financial stand-by letters of credit primarily to secure our performance to third parties under self-insurance programs.

As of June 30, 2021 and December 31, 2020, the outstanding value of bonds, letters of credit and bank guarantees totaled $ 98.9 million and $ 99.1 million, respectively.

As of September 30, 2021 and December 31, 2020, the outstanding value of bonds, letters of credit and bank guarantees totaled $ 98.5 million and $ 99.1 million, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements