What changed in this filing

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Item 1. Financial Statements

2022-04-21 compared with 2021-10-26 · 141 added, 210 removed, 462 unchanged (43% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

Three months ended Nine months ended

In millions, except per-share data September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Three months ended

In millions, except per-share data March 31,

2022 March 31,

Net sales $ 999.6 $ 865.9

4 unchanged sentences

Operating income 145.8 157.1

Other (income) expense:

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

Other expense:

Net interest expense 5.7 5.1

Other expense (income) 0.3 ( 2.5 ) 1.0 ( 1.6 )

Other expense 0.1 0.4

Income from continuing operations before income taxes 140.0 151.6

21 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

September 30,

2022 December 31,

25 unchanged sentences

Commitments and contingencies (Note 16)

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

Ordinary shares $ 0.01 par value, 426.0 authorized, 165.4 and 165.1 issued at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,584.3 1,582.7

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine months ended

In millions September 30,

2021 September 30,

Three months ended

In millions March 31,

2022 March 31,

Operating activities

6 unchanged sentences

Deferred income taxes ( 3.7 ) ( 2.8 )

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

Share-based compensation 6.9 5.6

Amortization of bridge financing fees 2.6 —

Changes in assets and liabilities, net of effects of business acquisitions

6 unchanged sentences

Other non-current assets and liabilities ( 0.7 ) 1.5

Net cash provided by operating activities of continuing operations 540.4 500.8

Net cash used for operating activities of continuing operations ( 131.5 ) ( 18.8 )

Net cash used for operating activities of discontinued operations — ( 0.2 )

Net cash provided by operating activities 540.1 500.3

Net cash used for operating activities ( 131.5 ) ( 19.0 )

Investing activities

1 unchanged sentence

Proceeds from sale of property and equipment — 3.4

Proceeds from the sale of businesses, net 1.4 —

Acquisitions, net of cash acquired ( 1.4 ) —

Other 2.7 2.2

Net cash used for investing activities ( 19.1 ) ( 9.8 )

Financing activities

Net borrowings of commercial paper and revolving long-term debt ( 36.1 ) ( 151.3 )

Repayments of long-term debt ( 103.8 ) ( 74.0 )

Net borrowings of revolving long-term debt 199.6 92.4

Debt issuance costs ( 5.8 ) —

Shares issued to employees, net of shares withheld ( 5.3 ) ( 0.2 )

2 unchanged sentences

Payments upon the maturity of cross currency swaps — ( 14.7 )

Net cash used for financing activities ( 341.8 ) ( 414.8 )

Net cash provided by financing activities 153.8 34.6

Effect of exchange rate changes on cash and cash equivalents 4.6 7.1

13 unchanged sentences

— — — ( 36.4 ) — ( 36.4 )

Share repurchases ( 0.2 ) — ( 9.6 ) — — ( 9.6 )

Exercise of options, net of shares tendered for payment — — 0.5 — — 0.5

3 unchanged sentences

Balance - March 31, 2022 165.4 $ 1.7 $ 1,584.3 $ 1,132.6 $ ( 214.7 ) $ 2,503.9

Net income — — — 132.1 — 132.1

Other comprehensive income, net of tax — — — — 4.3 4.3

Dividends declared, $ 0.20 per share

— — — ( 33.3 ) — ( 33.3 )

Share repurchases ( 0.6 ) — ( 40.4 ) — — ( 40.4 )

Exercise of options, net of shares tendered for payment 0.3 — 5.6 — — 5.6

Issuance of restricted shares, net of cancellations 0.1 — — — — —

Shares surrendered by employees to pay taxes ( 0.1 ) — ( 1.5 ) — — ( 1.5 )

Share-based compensation — — 11.0 — — 11.0

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

3 unchanged sentences

Net income — — — 128.6 — 128.6

Other comprehensive income, net of tax — — — — 1.3 1.3

Other comprehensive loss, net of tax — — — — ( 3.7 ) ( 3.7 )

Dividends declared, $ 0.20 per share

6 unchanged sentences

Balance - March 31, 2021 166.2 $ 1.7 $ 1,676.6 $ 726.5 $ ( 211.0 ) $ 2,193.8

Net income — — — 72.1 — 72.1

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

Dividends declared, $ 0.19 per share

— — — ( 31.7 ) — ( 31.7 )

Exercise of options, net of shares tendered for payment 0.1 — 2.8 — — 2.8

Issuance of restricted shares, net of cancellations 0.1 — — — — —

Shares surrendered by employees to pay taxes — — ( 0.6 ) — — ( 0.6 )

Share-based compensation — — 4.2 — — 4.2

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.

10 unchanged sentences

Therefore, the results and trends in these interim financial statements may not be indicative of those for a full year.

In March 2020, the World Health Organization declared the novel coronavirus 2019 (“COVID-19”) a global pandemic.

In 2020, the World Health Organization declared the novel coronavirus 2019 (“COVID-19”) a global pandemic.

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 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.

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 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, impacts to our operations, 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 Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Three months ended

In millions March 31,

2022 March 31,

$ 706.0 $ 586.6

1 unchanged sentence

Developing (1)

123.7 108.3 349.6 303.2

Other Developed (2)

61.1 56.4 180.5 149.4

Consolidated net sales $ 999.6 $ 865.9

2 unchanged sentences

Vertical net sales information was as follows:

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Three months ended

In millions March 31,

2022 March 31,

Residential $ 682.8 $ 571.7

5 unchanged sentences

Performance obligations

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.

On March 31, 2022, we had $ 73.9 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 September 30,

In millions March 31,

2022 December 31,

3 unchanged sentences

Net contract assets $ 10.1 $ 9.4 $ 0.7 7.4 %

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.

for $ 82.8 million in cash, net of cash acquired.

The $ 0.7 million increase in net contract assets from December 31, 2021 to March 31, 2022 was primarily the result of timing of milestone payments and the recognition of $ 1.1 million of impairment losses on our contract assets in the first quarter of 2022 related to our exit of business activity in Russia.

Approximately 50 % of our contract liabilities at December 31, 2021 were recognized in revenue in the first quarter of 2022.

On March 2, 2022, as part of our Consumer Solutions reporting segment, we entered into a definitive agreement with Welbilt, Inc.

(“Welbilt”) to acquire the issued and outstanding equity securities of certain subsidiaries of Welbilt and certain other assets, rights, and properties, and assume certain liabilities, comprising Welbilt’s Manitowoc Ice business (“Manitowoc Ice”), for an aggregate purchase price of $ 1.6 billion, subject to customary adjustments contemplated by the definitive agreement.

We expect to fund the purchase price for the acquisition with new debt that we anticipate to be investment grade, including the Term Loan Facility (as defined below).

We expect to close our Manitowoc Ice acquisition in the second or third quarter of 2022, subject to customary closing conditions and necessary regulatory approvals.

In October 2021, as part of both of our Consumer Solutions and Industrial & Flow Technologies reporting segments, we completed the acquisition of Pleatco Holdings, LLC and related entities for $ 256.9 million in cash, net of cash acquired and working capital true-ups.

The excess of purchase price over tangible net assets acquired has been preliminarily allocated to goodwill in the amount of $ 139.5 million, $ 137.5 million of which is expected to be deductible for income tax purposes.

Identifiable intangible assets acquired consisted of $ 97.9 million of definite-lived customer relationships with an estimated useful life of 17 years.

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

for $ 82.2 million in cash, net of cash acquired and working capital true-ups.

The excess of purchase price over tangible net assets acquired has been preliminarily allocated to goodwill in the amount of $ 28.3 million, all of which is expected to be deductible for income tax purposes.

Identifiable intangible assets acquired consisted of $ 38.0 million of definite-lived customer relationships with an estimated useful life of 22 years.

In 2020, our Consumer Solutions reporting segment completed acquisitions with purchase prices totaling $ 58.0 million in cash, net of cash acquired.

The pro forma impact of these acquisitions is not material.

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,

Total share-based compensation expense for the three months ended March 31, 2022 and 2021 was as follows:

Three months ended

In millions March 31,

2022 March 31,

Restricted stock units $ 3.6 $ 3.4

2 unchanged sentences

Total share-based compensation expense $ 6.9 $ 5.6

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

In the first quarter of 2022, we issued our annual share-based compensation grants under the Pentair plc 2020 Share and Incentive Plan to eligible employees.

1 unchanged sentence

The weighted-average grant date fair value of the RSUs, stock options and PSUs issued was $ 60.78 , $ 17.92 , and $ 68.28 , respectively.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

We estimated the fair value of each stock option award issued in the annual share-based compensation grant using a Black-Scholes option pricing model, modified for dividends and using the following assumptions:

9 unchanged sentences

Restructuring and Transformation Program

During the second quarter of 2021, we launched and committed resources to a program designed to accelerate growth and drive margin expansion through transformation of our business model to drive operational excellence, reduce complexity and streamline our processes (the “Transformation Program”).

In 2021, we launched and committed resources to a program designed to accelerate growth and drive margin expansion through transformation of our business model to drive operational excellence, reduce complexity and streamline our processes (the “Transformation Program”).

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 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.

During the three months ended March 31, 2022, 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.

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 Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Three months ended

In millions March 31,

2022 March 31,

Restructuring Initiatives

Severance and related costs $ 1.9 $ 0.9

Other restructuring costs (1)

Total restructuring costs 1.9 1.1

Transformation Program

Transformation costs (2)

Other costs (2)

— 0.6 0.2 0.6

Total restructuring and transformation costs $ 7.4 $ 1.1

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

(2) 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.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Restructuring and transformation costs by reportable segment were as follows:

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Three months ended

In millions March 31,

2022 March 31,

Consumer Solutions $ 1.3 $ 0.5

2 unchanged sentences

Consolidated $ 7.4 $ 1.1

Pentair plc and Subsidiaries

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 nine months ended September 30, 2021:

In millions September 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 three months ended March 31, 2022:

In millions March 31,

Beginning balance $ 10.7

4 unchanged sentences

Basic and diluted earnings per share were calculated as follows:

Three months ended Nine months ended

In millions, except per-share data September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Three months ended

In millions, except per-share data March 31,

2022 March 31,

Net income $ 117.6 $ 128.6

4 unchanged sentences

Dilutive impact of stock options, restricted stock units and performance share units

1.9 1.0 1.7 0.8

Diluted 166.5 167.7

7 unchanged sentences

Anti-dilutive stock options excluded from the calculation of diluted earnings per share

— 1.6 0.1 2.2

Pentair plc and Subsidiaries

7 unchanged sentences

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

In millions September 30,

2021 December 31,

Activity related to our allowance for credit losses is summarized as follows for the three months ended March 31, 2022:

In millions March 31,

Beginning balance $ 9.1

Bad debt expense (benefit) (1)

Acquisitions 0.6 0.1

Bad debt expense 2.5

Write-offs, net of recoveries ( 0.2 )

Ending balance $ 12.0

(1) The bad debt benefit for the year-ended December 31, 2020 includes the positive impact related to the adoption of ASU No.

“Financial Instruments-Credit Losses.”

(1) Other amounts are primarily the effects of changes in currency translation and the impact of allowance for credits.

2 unchanged sentences

Supplemental Balance Sheet Information

In millions September 30,

In millions March 31,

2022 December 31,

6 unchanged sentences

Prepaid expenses 79.7 57.1

Prepaid income taxes 1.7 3.8

Other current assets 6.3 6.4

13 unchanged sentences

Deferred compensation plan assets 23.7 25.6

Foreign currency contract assets 9.7 7.2

Other non-current assets 67.7 66.7

4 unchanged sentences

Accrued rebates and incentives 169.7 198.7

Accrued freight 46.2 36.5

Billings in excess of cost 30.0 31.2

17 unchanged sentences

In millions December 31,

2020 Purchase Accounting Adjustments Acquisitions Foreign currency

translation/other September 30,

2021 Purchase Accounting Adjustments Foreign

translation March 31,

Consumer Solutions $ 1,722.5 $ 1.0 $ ( 3.4 ) $ 1,720.1

2 unchanged sentences

Identifiable intangible assets consisted of the following:

September 30,

2022 December 31,

9 unchanged sentences

Total intangibles $ 776.4 $ ( 356.4 ) $ 420.0 $ 780.2 $ ( 352.2 ) $ 428.0

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.

Identifiable intangible asset amortization expense was $ 6.6 million and $ 7.1 million for the three months ended March 31, 2022 and 2021, respectively.

Estimated future amortization expense for identifiable intangible assets during the remainder of 2022 and the next five years is as follows:

1 unchanged sentence

Estimated amortization expense $ 16.8 $ 21.0 $ 20.5 $ 20.5 $ 19.2 $ 17.9

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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

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

Year September 30,

In millions Average interest rate as of March 31, 2022 Maturity

Year March 31,

2022 December 31,

7 unchanged sentences

4.500 % 2029 400.0 400.0

Senior notes - fixed rate (1)

4.500 % 2029 400.0 400.0

Unamortized debt issuance costs and discounts N/A N/A ( 11.5 ) ( 8.5 )

1 unchanged sentence

(1) Senior notes are guaranteed as to payment by Pentair plc.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Pentair, Pentair Finance S.à r.l (“PFSA“) and Pentair, Inc.

are parties to a credit agreement (the “Senior Credit Facility”), with Pentair as guarantor and PFSA and Pentair, Inc.

as borrowers, providing for a $ 900.0 million senior unsecured revolving credit facility.

The Senior Credit Facility has a maturity date of April 25, 2023.

Borrowings under the Senior Credit Facility bear interest at a rate equal to an adjusted base rate or the London Interbank Offered Rate, plus, in each case, an applicable margin.

as borrowers, which was amended and restated in December 2021, providing for a $ 900.0 million senior unsecured revolving credit facility and a $ 200.0 million senior unsecured term loan facility.

The revolving credit facility has a maturity date of December 16, 2026 and the term loan facility has a maturity date of December 16, 2024.

Borrowings under the Senior Credit Facility bear interest at a rate equal to an adjusted base rate, the London interbank offered rate, the euro interbank offered rate or the central bank rate, plus, in each case, an applicable margin.

The applicable margin is based on, at PFSA’s election, Pentair’s leverage level or PFSA’s public credit rating.

The Senior Credit Facility provides for the extension of term loans in an aggregate amount of $ 200.0 million (the “Term Loans”).

We have utilized the term loan extension since December 2019.

The Term Loans are in addition to the revolving credit facility commitment.

In addition, PFSA has the option to further increase the Senior Credit Facility in an aggregate amount of up to $ 300.0 million, through a combination of increases to the total commitment amount of the revolving credit facility and/or one or more tranches of term loans in addition to the Term Loans, subject to customary conditions, including the commitment of the participating lenders.

PFSA is authorized to sell short-term commercial paper notes to the extent availability exists under the Senior Credit Facility.

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 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.

The volatility impacted both market access to and pricing of commercial paper.

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 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.

The Senior Credit Facility contains covenants requiring us not to permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash in excess of $ 5.0 million but not to exceed $ 250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense (“EBITDA”) on the last day of any period of four consecutive fiscal quarters to exceed 3.75 to 1.00 (the “Leverage Ratio”) and (ii) the ratio of our EBITDA to our consolidated interest expense, for the same period to be less than 3.00 to 1.00 as of the end of each fiscal quarter.

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 September 30, 2021.

As of March 31, 2022, total availability under the Senior Credit Facility was $ 505.0 million.

In addition, PFSA has the option to request to increase the revolving credit facility and/or enter into one or more additional tranches of term loans in an aggregate amount of up to $ 300.0 million, subject to customary conditions, including the commitment of the participating lenders.

In connection with entering into the definitive agreement to acquire Manitowoc Ice, Pentair and PFSA entered into a commitment letter, dated March 2, 2022 (the “Commitment Letter”), pursuant to which, among other things, the lenders have committed to provide debt financing for the acquisition of Manitowoc Ice, consisting of a senior unsecured bridge facility of $ 1.6 billion (the “Bridge Facility”), on the terms and subject to the conditions set forth in the Commitment Letter.

The Bridge Facility will be subject to mandatory reduction and prepayment for 100% of the net cash proceeds from the issuance of any debt and other of our securities, other specified events and the Term Loan Facility (as defined below), subject to certain exceptions.

On March 24, 2022, in contemplation of the acquisition of Manitowoc Ice, Pentair and PFSA entered into a Loan Agreement among PFSA, as borrower, Pentair, as guarantor, and the lenders and agents party thereto, providing for a five-year $ 600.0 million senior unsecured term loan facility (the “Term Loan Facility”).

PFSA and Pentair intend to borrow the full $ 600.0 million aggregate principal amount available under the Term Loan Facility to finance a portion of the purchase price in the Manitowoc Ice acquisition and to pay related fees and expenses.

The aggregate principal amount of the commitments under the Term Loan Facility have replaced a corresponding amount of the commitments in respect of the Bridge Facility in accordance with the terms of the Commitment Letter.

As a result, the remaining commitment under the Bridge Facility was $ 1.0 billion as of March 31, 2022.

No borrowings or loans were outstanding under the Bridge Facility or the Term Loan Facility as of March 31, 2022.

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

The Senior Credit Facility and the Term Loan Facility contain covenants requiring us not to permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash in excess of $ 5.0 million but not to exceed $ 250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense (“EBITDA”) on the last day of any period of four consecutive fiscal quarters (each, a “testing period”) to exceed 3.75 to 1.00 (or, at PFSA’s election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection with certain material acquisitions) (the “Leverage Ratio”) and (ii) the ratio of our EBITDA to our consolidated interest expense, for the same period to be less than 3.00 to 1.00 as of the end of each fiscal quarter.

For purposes of the Leverage Ratio, the Senior Credit Facility and the Term Loan Facility provide 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 and the Term Loan Facility, we have various other credit facilities with an aggregate availability of $ 21.5 million, of which there were no outstanding borrowings at March 31, 2022.

Borrowings under these credit facilities bear interest at variable rates.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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:

We classified this debt as long-term as of March 31, 2022 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 March 31, 2022 matures on a calendar year basis as follows:

In millions 2022 2023 2024 2025 2026 2027 Thereafter Total

1 unchanged sentence

$ 88.3 $ — $ 200.0 $ 19.3 $ 395.0 $ — $ 400.0 $ 1,102.6

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Derivatives and Financial Instruments

11 unchanged sentences

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

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

At March 31, 2022 and December 31, 2021, we had outstanding foreign currency derivative contracts with gross notional U.S.

dollar equivalent amounts of $ 10.3 million and $ 14.7 million, respectively.

1 unchanged sentence

Cross Currency Swaps

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.

At March 31, 2022 and December 31, 2021, we had outstanding cross currency swap agreements with a combined notional amount of $ 776.0 million and $ 794.4 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 $ 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.

We had deferred foreign currency gains of $ 13.9 million and $ 7.3 million at March 31, 2022 and December 31, 2021, 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.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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

3 unchanged sentences

• short-term financial instruments (cash and cash equivalents, accounts and notes receivable, accounts and notes payable and variable-rate debt) — recorded amount approximates fair value because of the short maturity period;

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

• long-term fixed-rate debt, including current maturities — fair value is based on market quotes available for issuance of debt with similar terms, which are inputs that are classified as Level 2 in the valuation hierarchy defined by the accounting guidance;

3 unchanged sentences

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

September 30,

2022 December 31,

5 unchanged sentences

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

September 30, 2021

March 31, 2022

In millions Level 1 Level 2 Level 3 NAV Total

7 unchanged sentences

Recurring fair value measurements

Foreign currency contract assets $ — $ 7.2 $ — $ — $ 7.2

Foreign currency contract liabilities — ( 9.5 ) — — ( 9.5 )

1 unchanged sentence

Total recurring fair value measurements $ 13.6 $ ( 2.3 ) $ — $ 12.0 $ 23.3

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.

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.

The effective income tax rate for the three months ended March 31, 2022 was 15.4 %, compared to 13.5 % for the three months ended March 31, 2021.

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 $ 46.7 million and $ 46.3 million at September 30, 2021 and December 31, 2020, respectively.

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

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

The total gross liability for uncertain tax positions was $ 36.7 million and $ 37.3 million at March 31, 2022 and December 31, 2021, 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 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,

Components of net periodic benefit expense for our pension plans for the three months ended March 31, 2022 and 2021 were as follows:

Three months ended

In millions March 31,

2022 March 31,

Service cost $ 0.6 $ 0.7

2 unchanged sentences

Net periodic benefit expense $ 1.1 $ 1.1

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 .

Components of net periodic benefit expense for our other post-retirement plans for the three months ended March 31, 2022 and 2021 were not material .

Shareholders’ Equity

Share repurchases

In May 2018, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $ 750.0 million (the “2018 Authorization”).

The 2018 authorization expired on May 31, 2021 .

In December 2020, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $ 750.0 million (the “2020 Authorization”).

In December 2020, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $ 750.0 million.

The authorization expires on December 31, 2025 .

The 2020 Authorization supplemented the 2018 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.

During the three months ended March 31, 2022, no ordinary shares were repurchased.

As of March 31, 2022, we had $ 650.0 million available for share repurchases under this authorization.

Dividends payable

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.

On February 21, 2022, the Board of Directors declared a quarterly cash dividend of $ 0.21 , payable on May 6, 2022 to shareholders of record at the close of business on April 22, 2022.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $ 34.7 million at March 31, 2022, compared to $ 33.0 million at December 31, 2021.

Segment Information

2 unchanged sentences

Segment income (loss) represents equity income of unconsolidated subsidiaries and operating income exclusive of intangible amortization, certain acquisition related expenses, costs of restructuring and transformation activities, impairments and other unusual non-operating items.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Financial information by reportable segment is as follows:

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Three months ended

In millions March 31,

2022 March 31,

Consumer Solutions $ 641.2 $ 521.4

7 unchanged sentences

Consolidated $ 172.1 $ 164.4

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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

Three months ended Nine months ended

In millions September 30,

2021 September 30,

2020 September 30,

2021 September 30,

Three months ended

In millions March 31,

2022 March 31,

Segment income $ 172.1 $ 164.4

Deal-related costs and expenses ( 6.4 ) ( 0.7 )

Restructuring, transformation and other costs ( 4.1 ) ( 2.1 ) ( 11.4 ) ( 5.6 )

Restructuring and other ( 2.1 ) ( 1.7 )

Transformation costs ( 5.5 ) —

Intangible amortization ( 6.6 ) ( 7.1 )

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 )

Russia business exit costs ( 5.9 ) —

Legal accrual adjustments 0.7 2.4

2 unchanged sentences

Income from continuing operations before income taxes $ 140.0 $ 151.6

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Commitments and Contingencies

Legal proceedings

We have been, and in the future may be, made parties to a number of actions filed or have been, and in the future may be, given notice of potential claims relating to the conduct of our business, including those relating to commercial, regulatory or contractual disputes with suppliers, authorities, customers or parties to acquisitions and divestitures, intellectual property matters, environmental, asbestos, safety and health matters, product liability, the use or installation of our products, consumer matters, and employment and labor matters.

intellectual property matters;

environmental, asbestos, safety and health matters;

product liability matters, including those relating to the use or installation of our products;

consumer matters’ and employment and labor matters.

While we believe that a material impact on our consolidated financial position, results of operations or cash flows from any such future claims or potential claims is unlikely, given the inherent uncertainty of litigation, a remote possibility exists that a future adverse ruling or unfavorable development could result in future charges that could have a material adverse impact.

6 unchanged sentences

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

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

As of March 31, 2022 and December 31, 2021, our recorded reserves for environmental matters were not material.

Product liability claims

5 unchanged sentences

We have not experienced significant unfavorable trends in either the severity or frequency of product liability lawsuits or personal injury claims.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Warranties and guarantees

11 unchanged sentences

Adjustments are made to accruals as claim data and historical experience warrant.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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,

The changes in the carrying amount of service and product warranties of continuing operations for the three months ended March 31, 2022 were as follows:

In millions March 31,

Beginning balance $ 40.5

1 unchanged sentence

Payments ( 12.5 )

Foreign currency translation ( 0.3 )

Ending balance $ 41.3

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 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.

As of March 31, 2022 and December 31, 2021, the outstanding value of bonds, letters of credit and bank guarantees totaled $ 101.7 million and $ 104.5 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