What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-10-25 compared with 2022-07-26 · 201 added, 127 removed, 534 unchanged (38% 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,

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

In millions, except per-share data September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Net sales $ 1,055.1 $ 969.2 $ 3,118.9 $ 2,776.2

4 unchanged sentences

Operating income 147.1 167.3 483.7 486.2

Other expense:

Other (income) expense:

Gain on sale of businesses ( 0.2 ) ( 1.4 ) ( 0.2 ) ( 1.4 )

Net interest expense 19.3 2.6 34.2 11.5

23 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, 164.5 and 165.1 issued at June 30, 2022 and December 31, 2021, respectively

Ordinary shares $ 0.01 par value, 426.0 authorized, 164.5 and 165.1 issued at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,549.3 1,582.7

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six months ended

In millions June 30,

2022 June 30,

Nine months ended

In millions September 30,

2022 September 30,

Operating activities

6 unchanged sentences

Deferred income taxes ( 37.5 ) ( 4.8 )

Gain on sale of businesses ( 0.2 ) ( 1.4 )

Share-based compensation 20.6 20.8

15 unchanged sentences

Proceeds from sale of property and equipment 3.0 3.7

Proceeds from the sale of businesses, net — 1.4

Acquisitions, net of cash acquired ( 1,592.8 ) ( 83.6 )

Settlement of net investment hedges 8.8 —

Other 0.3 2.7

Net cash used for investing activities ( 1,643.9 ) ( 114.4 )

Financing activities

Net borrowings of revolving long-term debt 19.8 ( 20.0 )

Net borrowings (repayments) of revolving long-term debt 256.1 ( 36.1 )

Proceeds from long-term debt 1,391.3 —

Repayments of long-term debt ( 88.3 ) ( 103.8 )

4 unchanged sentences

Receipts (payments) upon the maturity of cross currency swaps 0.2 ( 14.7 )

Net cash used for financing activities ( 113.8 ) ( 251.2 )

Net cash provided by (used for) financing activities 1,385.5 ( 341.8 )

Effect of exchange rate changes on cash and cash equivalents 12.2 7.2

27 unchanged sentences

Balance - June 30, 2022 164.5 $ 1.7 $ 1,540.5 $ 1,250.9 $ ( 230.1 ) $ 2,563.0

Net income — — — 115.4 — 115.4

Other comprehensive loss, net of tax — — — — ( 13.5 ) ( 13.5 )

Dividends declared, $ 0.21 per share

— — — ( 34.5 ) — ( 34.5 )

Exercise of options, net of shares tendered for payment — — 1.4 — — 1.4

Share-based compensation — — 7.4 — — 7.4

Balance - September 30, 2022 164.5 $ 1.7 $ 1,549.3 $ 1,331.8 $ ( 243.6 ) $ 2,639.2

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

22 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 income, 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

See accompanying notes to condensed consolidated financial statements.

19 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,

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

In millions September 30,

2022 September 30,

2021 September 30,

2022 September 30,

$ 752.1 $ 669.3 $ 2,215.1 $ 1,895.0

8 unchanged sentences

Vertical net sales information was as follows:

Three months ended Six months ended

In millions June 30,

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

In millions September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Residential $ 637.0 $ 628.8 $ 2,050.1 $ 1,800.0

5 unchanged sentences

Performance obligations

On June 30, 2022, we had $ 92.2 million of remaining performance obligations on contracts with an original expected duration of one year or more.

On September 30, 2022, we had $ 111.1 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,

2022 December 31,

3 unchanged sentences

Net contract (liabilities) assets $ ( 5.1 ) $ 9.4 $ ( 14.5 ) ( 154.3 ) %

The $ 13.8 million change in net contract liabilities from December 31, 2021 to June 30, 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 80 % of our contract liabilities at December 31, 2021 were recognized in revenue in the first half 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 borrowings under our term loan facility and net proceeds from the issuance of our 2032 senior notes, together with cash on hand and/or borrowings under our revolving credit facility.

We expect to close our Manitowoc Ice acquisition on or around July 28, 2022, subject to customary closing conditions set forth in the definitive agreement.

The $ 14.5 million change in net contract liabilities from December 31, 2021 to September 30, 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 85 % of our contract liabilities at December 31, 2021 were recognized in revenue in the first nine months of 2022.

On July 28, 2022, as part of our Consumer Solutions reporting segment, we acquired the issued and outstanding equity securities of certain subsidiaries of Welbilt, Inc.

(“Welbilt”) and certain other assets, rights, and properties, and assumed certain liabilities, comprising Welbilt’s Manitowoc Ice business (“Manitowoc Ice”), for approximately $ 1.6 billion in cash.

Manitowoc Ice is a designer, manufacturer, and distributor of commercial ice machines.

The acquisition of Manitowoc Ice allows us to enhance and deliver our total water management offerings to an expanded network of channel partners and customers.

The purchase price has been preliminarily allocated based on the estimated fair value of assets acquired and liabilities assumed at the date of the Manitowoc Ice acquisition.

The preliminary purchase price allocation is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation.

These changes will primarily relate to the fair value of tangible assets and the related income tax impacts.

We expect the final purchase price allocation to be completed by the third quarter of 2023.

There can be no assurance that such finalization will not result in material changes from the preliminary purchase price allocation.

The following table summarizes our preliminary estimates of the fair values of the assets acquired and liabilities assumed in the Manitowoc Ice acquisition:

Accounts receivable 39.7

Inventories 70.8

Other current assets 3.9

Property, plant and equipment 21.6

Identifiable intangible assets 728.3

Goodwill 796.7

Other assets 1.8

Current liabilities ( 68.1 )

Other liabilities ( 3.2 )

Purchase price $ 1,625.3

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

The excess of purchase price over tangible net assets and identified intangible assets acquired has been preliminarily allocated to goodwill in the amount of $ 796.7 million, all of which is expected to be deductible for income tax purposes.

Goodwill recognized from the Manitowoc Ice acquisition primarily reflects the future economic benefit resulting from synergies of our combined operations.

Identifiable intangible assets acquired as part of the Manitowoc Ice acquisition include $ 78.4 million of indefinite-lived trade name intangible assets, $ 588.4 million of definite-lived customer relationships with an estimated useful life of 20 years, $ 47.1 million of definite-lived proprietary technology intangible assets with an estimated useful life of 10 years and $ 14.4 million of other definite-lived intangible assets with an estimated useful life of four months .

The fair values of trade names and proprietary technology acquired in the acquisition were determined using a relief-from-royalty method, and customer relationships and other definite-lived intangible assets acquired were determined using a multi-period excess earnings method.

These methods utilize unobservable inputs that are significant to these fair value measurements and thus classified as Level 3 of the fair value hierarchy.

Manitowoc Ice’s net sales and operating income for the period from the acquisition date to September 30, 2022 were $ 66.5 million and $ 1.3 million, respectively.

Manitowoc’s operating income includes $ 12.9 million of identifiable intangible asset amortization expense and $ 5.8 million of amortization of inventory fair market value step-up.

The following table presents unaudited pro forma financial information as if the Manitowoc Ice acquisition had occurred on January 1, 2021:

Three months ended Nine months ended

In millions, except per-share data September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Pro forma net sales $ 1,084.6 $ 1,058.7 $ 3,325.7 $ 3,009.2

Pro forma net income from continuing operations 131.9 146.5 417.8 377.9

Pro forma earnings per ordinary share - continuing operations

Basic $ 0.80 $ 0.88 $ 2.53 $ 2.28

Diluted 0.80 0.87 2.52 2.25

The unaudited pro forma net income from continuing operations includes Manitowoc Ice’s identifiable intangible asset amortization expense of $ 8.5 million for the three months ended September 30, 2022 and 2021, respectively, and $ 25.6 million and $ 40.0 million for the nine months ended September 30, 2022 and 2021, respectively.

The unaudited pro forma net income from continuing operations for the three and nine months ended September 30, 2022 excludes the impact of $ 18.8 million and $ 34.2 million, respectively, of transaction-related charges, acquisition-related bridge financing costs and non-recurring expense related to the fair value adjustment to acquisition-date inventory.

The nine months ended September 30, 2021 was adjusted to include transaction-related charges and non-recurring expense related to the fair value adjustment to acquisition-date inventory.

The pro forma condensed consolidated financial information has been prepared for comparative purposes only and includes certain adjustments, as noted above.

The adjustments are estimates based on currently available information and actual amounts may differ materially from these estimates.

They do not reflect the effect of costs or synergies that would have been expected to result from the integration of the Manitowoc Ice acquisition.

The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the Manitowoc Ice acquisition occurred on January 1, 2021.

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.

1 unchanged sentence

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

We expect the final purchase price allocation to be completed in the fourth quarter of 2022.

The pro forma impact of this acquisition is not material.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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

2 unchanged sentences

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

The pro forma impact of these acquisitions is not material.

Total share-based compensation expense for the three and six months ended June 30, 2022 and 2021 was as follows:

Three months ended Six months ended

In millions June 30,

2022 June 30,

2021 June 30,

2022 June 30,

The pro forma impact of this acquisition is not material.

Total share-based compensation expense for the three and nine months ended September 30, 2022 and 2021 was as follows:

Three months ended Nine months ended

In millions September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Restricted stock units $ 4.1 $ 2.4 $ 11.0 $ 9.4

2 unchanged sentences

Total share-based compensation expense $ 7.4 $ 4.2 $ 20.6 $ 20.8

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.

14 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, 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.

During the nine months ended September 30, 2022, we initiated and continued execution of restructuring actions aimed at reducing our fixed cost structure and realigning our business as well as certain initiatives associated with the Transformation Program.

These actions included a reduction in hourly and salaried headcount of approximately 400 employees.

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,

2022 June 30,

2021 June 30,

2022 June 30,

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Three months ended Nine months ended

In millions September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Restructuring Initiatives

4 unchanged sentences

Transformation Program

Transformation costs (2)

Severance and related costs 3.1 — 3.1 —

Other transformation costs (2)

7.0 4.0 17.7 5.9

Total transformation costs 10.1 4.0 20.8 5.9

Total restructuring and transformation costs $ 21.0 $ 4.0 $ 34.6 $ 11.2

(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.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

(2) Other transformation costs primarily consist of professional services and project management and related costs.

Restructuring and transformation costs by reportable segment were as follows:

Three months ended Six months ended

In millions June 30,

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

In millions September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Consumer Solutions $ 12.0 $ 0.1 $ 13.8 $ 0.8

2 unchanged sentences

Consolidated $ 21.0 $ 4.0 $ 34.6 $ 11.2

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, 2022:

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, 2022:

In millions September 30,

Beginning balance $ 10.7

2 unchanged sentences

Ending balance $ 18.9

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

Three months ended Six months ended

In millions, except per-share data June 30,

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

In millions, except per-share data September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Net income $ 115.4 $ 143.6 $ 385.9 $ 404.3

15 unchanged sentences

1.0 — 0.7 0.1

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Accounts Receivable

5 unchanged sentences

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

Activity related to our allowance for credit losses is summarized as follows for the six months ended June 30, 2022:

In millions June 30,

Activity related to our allowance for credit losses is summarized as follows for the nine months ended September 30, 2022:

In millions September 30,

Beginning balance $ 9.1

Bad debt expense 2.6

Acquisitions 0.3

Write-offs, net of recoveries ( 1.3 )

Ending balance $ 10.3

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

Pentair plc and Subsidiaries

1 unchanged sentence

Supplemental Balance Sheet Information

In millions June 30,

In millions September 30,

2022 December 31,

49 unchanged sentences

2021 Purchase

Adjustments Foreign

translation June 30,

Adjustments Acquisitions Foreign

translation September 30,

Consumer Solutions $ 1,722.5 $ 1.4 $ 796.7 $ ( 20.0 ) $ 2,500.6

2 unchanged sentences

Identifiable intangible assets consisted of the following:

September 30,

2022 December 31,

5 unchanged sentences

Proprietary technology and patents 91.6 ( 33.7 ) 57.9 46.3 ( 32.1 ) 14.2

Other 14.4 ( 7.2 ) 7.2 — — —

Total definite-life intangibles 1,193.8 ( 326.2 ) 867.6 605.1 ( 352.2 ) 252.9

2 unchanged sentences

Total intangibles $ 1,436.9 $ ( 326.2 ) $ 1,110.7 $ 780.2 $ ( 352.2 ) $ 428.0

Identifiable intangible asset amortization expense was $ 6.3 million for both the three months ended June 30, 2022 and 2021 and $ 12.9 million and $ 13.4 million for the six months ended June 30, 2022 and 2021, respectively.

Identifiable intangible asset amortization expense was $ 18.5 million and $ 6.0 million for the three months ended September 30, 2022 and 2021, respectively, and $ 31.4 million and $ 19.4 million for the nine months ended September 30, 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 $ 20.9 $ 54.6 $ 54.1 $ 54.1 $ 52.8 $ 51.6

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 June 30, 2022 Maturity

Year June 30,

In millions Average interest rate as of September 30, 2022 Maturity

Year September 30,

2022 December 31,

Revolving credit facilities 2.300 % 2026 $ 215.0 $ 195.0

Revolving credit facility 3.940 % 2026 $ 451.6 $ 195.0

Term Loan Facility 4.300 % 2027 1,000.0 —

Term loans 4.358 % 2024 200.0 200.0

5 unchanged sentences

4.500 % 2029 400.0 400.0

Senior notes - fixed rate (1)

5.900 % 2032 400.0 —

Unamortized debt issuance costs and discounts N/A N/A ( 22.8 ) ( 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.

4 unchanged sentences

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

As of June 30, 2022, total availability under the Senior Credit Facility was $ 685.0 million.

As of September 30, 2022, total availability under the Senior Credit Facility was $ 448.4 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.

In March 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”).

On June 30, 2022, the Term Loan Facility was amended to increase the facility by $ 400.0 million to an aggregate principal amount of $ 1.0 billion.

PFSA and Pentair intend to borrow the full $ 1.0 billion 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 $ 600.0 million as of June 30, 2022.

No borrowings or loans were outstanding under the Bridge Facility or the Term Loan Facility as of June 30, 2022.

On July 8, 2022, in contemplation of the acquisition of Manitowoc Ice, Pentair, as guarantor, and PFSA, as issuer, completed a public offering of $ 400.0 million aggregate principal amount of 5.900 % Senior Notes due 2032 (“2032 Senior Notes”).

PFSA and Pentair intend to use the net proceeds from the issuance of the 2032 Senior Notes to finance a portion of the purchase price in the Manitowoc Ice acquisition and to pay related fees and expenses.

The net proceeds from the issuance of the 2032 Senior Notes have replaced a corresponding amount of the commitments in respect of the Bridge Facility in accordance with the terms of the Commitment Letter.

On July 8, 2022, Pentair and PFSA voluntarily eliminated the remaining $ 200.0 million of commitments under the Bridge Facility.

As a result, there are no remaining commitments under the Bridge Facility.

In June 2022, the Term Loan Facility was amended to increase the facility by $ 400.0 million to an aggregate principal amount of $ 1.0 billion.

In July 2022, in contemplation of the acquisition of Manitowoc Ice, Pentair, as guarantor, and PFSA, as issuer, completed a public offering of $ 400.0 million aggregate principal amount of 5.900 % Senior Notes due 2032 (“2032 Senior Notes”).

We used the net proceeds from the Term Loan Facility and the issuance of the 2032 Senior Notes to finance a portion of the Manitowoc Ice acquisition purchase price and to pay related fees and expenses.

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

1 unchanged sentence

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 June 30, 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 June 30, 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 June 30, 2022 matures on a calendar year basis as follows:

In addition to the Senior Credit Facility and the Term Loan Facility, we have various other credit facilities with an aggregate availability of $ 20.9 million, of which there were no outstanding borrowings at September 30, 2022.

Borrowings under these credit facilities bear interest at variable rates.

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

Debt outstanding, excluding unamortized issuance costs and discounts, at September 30, 2022 matures on a calendar year basis as follows:

In millions 2022 2023 2024 2025 2026 2027 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, 2022 and December 31, 2021, we had outstanding foreign currency derivative contracts with gross notional U.S.

At September 30, 2022 and December 31, 2021, we had outstanding foreign currency derivative contracts with gross notional U.S.

dollar equivalent amounts of $ 7.5 million and $ 14.7 million, respectively.

1 unchanged sentence

Cross Currency Swaps

At June 30, 2022 and December 31, 2021, we had outstanding cross currency swap agreements with a combined notional amount of $ 736.3 million and $ 794.4 million, respectively.

At September 30, 2022 and December 31, 2021, we had outstanding cross currency swap agreements with a combined notional amount of $ 681.5 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 gains of $ 36.5 million and $ 7.3 million at June 30, 2022 and December 31, 2021, respectively, in Accumulated other comprehensive loss associated with our cross currency swap activity.

We had deferred foreign currency gains of $ 82.0 million and $ 7.3 million at September 30, 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.

The cash flows that relate to principal balances are classified as financing activities for the cash flow hedges on intercompany debt and investing activities for the net investment hedges.

In October 2022, we entered into transactions to early terminate and cash settle € 700 million of our cross currency swap agreements due to favorable market conditions.

The termination of the cross currency swap agreements resulted in cash proceeds of $ 85.3 million.

Subsequent to the termination, we entered into new cross currency swap agreements with euro notional amounts matching the original swap agreements.

In June 2022, we terminated two of our cross currency swap agreements, resulting in total net cash received of $ 9.0 million, of which $ 8.8 million is included within investing activities and $ 0.2 million is included within financing activities on the Consolidated Statement of Cash Flows.

We entered new cross currency swaps with a combined notional amount of $ 320.0 million to replace the terminated cross currency swap agreements.

We entered into new cross currency swaps with a combined notional amount of $ 320.0 million to replace the terminated cross currency swap agreements.

In January 2021, one of our cross currency swap agreements which was accounted for as a cash flow hedge matured, resulting in a net cash payment of $ 14.7 million.

The net cash payment is included within financing activities on the Condensed Consolidated Statements of Cash Flows.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Fair value measurements

1 unchanged sentence

Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Valuation is based on observable inputs such as quoted market prices (unadjusted) for identical assets or liabilities in active markets.

11 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:

June 30, 2022

September 30, 2022

In millions Level 1 Level 2 Level 3 NAV Total

17 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 six months ended June 30, 2022 was 15.6 %, compared to 14.7 % for the six months ended June 30, 2021.

The effective income tax rate for the nine months ended September 30, 2022 was 13.9 %, compared to 14.2 % for the nine months ended September 30, 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 the mix of global earnings or adjustments that are required to be reported in the specific quarter of resolution.

The total gross liability for uncertain tax positions was $ 36.4 million and $ 37.3 million at June 30, 2022 and December 31, 2021, respectively.

The total gross liability for uncertain tax positions was $ 36.5 million and $ 37.3 million at September 30, 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 six months ended June 30, 2022 and 2021 were as follows:

Three months ended Six months ended

In millions June 30,

2022 June 30,

2021 June 30,

2022 June 30,

Components of net periodic benefit expense for our pension plans for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three months ended Nine months ended

In millions September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Service cost $ 0.6 $ 0.7 $ 1.8 $ 2.1

2 unchanged sentences

Net periodic benefit expense $ 1.1 $ 1.1 $ 3.3 $ 3.3

Components of net periodic benefit expense for our other post-retirement plans for the three and six months ended June 30, 2022 and 2021 were not material .

Components of net periodic benefit expense for our other post-retirement plans for the three and nine months ended September 30, 2022 and 2021 were not material .

Shareholders’ Equity

2 unchanged sentences

The authorization expires on December 31, 2025 .

During the three and six months ended June 30, 2022, we repurchased 0.9 million of our ordinary shares for $ 50.0 million.

As of June 30, 2022, we had $ 600.0 million available for share repurchases under this authorization.

During the nine months ended September 30, 2022, we repurchased 0.9 million of our ordinary shares for $ 50.0 million.

As of September 30, 2022, we had $ 600.0 million available for share repurchases under this authorization.

Dividends payable

On May 16, 2022, the Board of Directors declared a quarterly cash dividend of $ 0.21 , payable on August 5, 2022 to shareholders of record at the close of business on July 22, 2022.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $ 34.5 million at June 30, 2022, compared to $ 33.0 million at December 31, 2021.

On September 19, 2022, the Board of Directors declared a quarterly cash dividend of $ 0.21 , payable on November 4, 2022 to shareholders of record at the close of business on October 21, 2022.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $ 34.5 million at September 30, 2022, compared to $ 33.0 million at December 31, 2021.

Pentair plc and Subsidiaries

5 unchanged sentences

Financial information by reportable segment is as follows:

Three months ended Six months ended

In millions June 30,

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

In millions September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Consumer Solutions $ 665.3 $ 613.6 $ 1,992.7 $ 1,711.9

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,

2022 June 30,

2021 June 30,

2022 June 30,

Three months ended Nine months ended

In millions September 30,

2022 September 30,

2021 September 30,

2022 September 30,

Segment income $ 206.9 $ 179.7 $ 584.9 $ 519.0

Deal-related costs and expenses ( 13.4 ) ( 2.1 ) ( 21.4 ) ( 3.8 )

Inventory step-up ( 5.8 ) — ( 5.8 ) —

Restructuring and other ( 12.5 ) ( 0.2 ) ( 15.7 ) ( 5.9 )

1 unchanged sentence

Intangible amortization ( 18.5 ) ( 6.0 ) ( 31.4 ) ( 19.4 )

Russia business exit costs — — ( 5.9 ) —

Gain on sale of businesses 0.2 1.4 0.2 1.4

Russia business exit impact 0.8 — ( 5.1 ) —

Legal accrual adjustments and settlements — — 0.2 2.4

19 unchanged sentences

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

As of June 30, 2022 and December 31, 2021, our recorded reserves for environmental matters were not material.

As of September 30, 2022 and December 31, 2021, 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, 2022 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, 2022 were as follows:

In millions September 30,

Beginning balance $ 40.5

1 unchanged sentence

Payments ( 51.6 )

Acquisitions 7.9

Foreign currency translation ( 0.7 )

7 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, 2022 and December 31, 2021, the outstanding value of bonds, letters of credit and bank guarantees totaled $ 106.1 million and $ 104.5 million, respectively.

As of September 30, 2022 and December 31, 2021, the outstanding value of bonds, letters of credit and bank guarantees totaled $ 99.2 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