What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-04-23 compared with 2023-10-24 · 134 added, 265 removed, 442 unchanged (47% 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,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

In millions, except per-share data March 31,

2024 March 31,

Net sales $ 1,017.2 $ 1,028.6

4 unchanged sentences

Operating income 180.8 183.6

Other (income) expense

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

Other expense

Net interest expense 27.3 32.4

Other (income) expense

( 0.3 ) 0.3 ( 4.4 ) 0.5

Other expense 0.1 0.7

Income from continuing operations before income taxes 153.4 150.5

1 unchanged sentence

Net income from continuing operations 133.5 128.5

Loss from discontinued operations, net of tax — — ( 0.1 ) ( 1.0 )

(Loss) income from discontinued operations, net of tax

Net income $ 133.3 $ 129.7

4 unchanged sentences

Comprehensive income $ 134.3 $ 134.6

Earnings (loss) per ordinary share

Earnings per ordinary share

Continuing operations $ 0.80 $ 0.78

10 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

September 30,

2024 December 31,

25 unchanged sentences

Commitments and contingencies (Note 15)

Ordinary shares $ 0.01 par value, 426.0 authorized, 165.3 and 164.5 issued at September 30, 2023 and December 31, 2022, respectively

Ordinary shares $ 0.01 par value, 426.0 authorized, 166.0 and 165.3 issued at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 1,607.6 1,593.6

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine months ended

In millions September 30,

2023 September 30,

Three months ended

In millions March 31,

2024 March 31,

Operating activities

Net income $ 133.3 $ 129.7

Loss from discontinued operations, net of tax 0.1 1.0

Loss (income) from discontinued operations, net of tax

Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities

3 unchanged sentences

Deferred income taxes 4.8 ( 14.0 )

Gain on sale of businesses — ( 0.2 )

Share-based compensation 7.9 7.2

Asset impairment and write-offs 0.8 4.1

Amortization of bridge financing fees — 9.0

Gain on sale of assets ( 3.4 ) ( 2.3 )

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

6 unchanged sentences

Other non-current assets and liabilities 6.0 1.9

Net cash provided by operating activities of continuing operations 502.3 271.5

Net cash used for operating activities of continuing operations

( 107.4 ) ( 106.6 )

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

Net cash provided by operating activities 500.7 270.5

Net cash used for operating activities

( 107.6 ) ( 106.6 )

Investing activities

1 unchanged sentence

Proceeds from sale of property and equipment — 0.2

Settlement of net investment hedges — 8.8

Acquisitions, net of cash acquired — 0.2

Other 4.1 0.3

Net cash used for investing activities ( 19.3 ) ( 16.2 )

Financing activities

Net (repayments) borrowings of revolving long-term debt

( 320.0 ) 256.1

Proceeds from long-term debt — 1,391.3

Net borrowings of revolving long-term debt

Repayments of long-term debt ( 6.3 ) —

Debt issuance costs — ( 15.7 )

Shares issued to employees, net of shares withheld 6.1 ( 4.1 )

Repurchases of ordinary shares — ( 50.0 )

Dividends paid ( 38.0 ) ( 36.2 )

Receipts upon the maturity of cross currency swaps — 0.2

Net cash (used for) provided by financing activities

( 426.2 ) 1,385.5

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents 2.5 ( 0.2 )

6 unchanged sentences

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

comprehensive loss Total

comprehensive (loss) income

Number Amount

9 unchanged sentences

Balance - March 31, 2024 166.0 $ 1.7 $ 1,607.6 $ 1,961.3 $ ( 243.4 ) $ 3,327.2

Net income — — — 152.9 — 152.9

Other comprehensive loss, net of tax — — — — ( 2.5 ) ( 2.5 )

Dividends declared, $ 0.22 per share

— — — ( 36.4 ) — ( 36.4 )

Exercise of options, net of shares tendered for payment 0.1 — 6.3 — — 6.3

Shares surrendered by employees to pay taxes — — ( 1.4 ) — — ( 1.4 )

Share-based compensation — — 6.9 — — 6.9

Balance - June 30, 2023 165.1 $ 1.7 $ 1,569.8 $ 1,600.4 $ ( 236.6 ) $ 2,935.3

Net income — — — 132.1 — 132.1

Other comprehensive loss, net of tax — — — — ( 5.5 ) ( 5.5 )

Dividends declared, $ 0.22 per share

— — — ( 36.4 ) — ( 36.4 )

Exercise of options, net of shares tendered for payment 0.2 — 8.4 — — 8.4

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

Share-based compensation — — 7.2 — — 7.2

Balance - September 30, 2023 165.3 $ 1.7 $ 1,585.2 $ 1,696.1 $ ( 242.1 ) $ 3,040.9

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

comprehensive loss Total

comprehensive (loss) income

Number Amount

1 unchanged sentence

Net income — — — 129.7 — 129.7

Other comprehensive loss, net of tax — — — — ( 0.8 ) ( 0.8 )

Other comprehensive income, net of tax

— — — — 4.9 4.9

Dividends declared, $ 0.22 per share

5 unchanged sentences

Balance - March 31, 2023 165.0 $ 1.7 $ 1,558.0 $ 1,483.9 $ ( 234.1 ) $ 2,809.5

Net income — — — 152.9 — 152.9

Other comprehensive loss, net of tax — — — — ( 15.4 ) ( 15.4 )

Dividends declared, $ 0.21 per share

— — — ( 34.6 ) — ( 34.6 )

Share repurchases ( 0.9 ) — ( 50.0 ) — — ( 50.0 )

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

Shares surrendered by employees to pay taxes — — ( 0.3 ) — — ( 0.3 )

Share-based compensation — — 6.3 — — 6.3

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

See accompanying notes to condensed consolidated financial statements.

11 unchanged sentences

We report our interim quarterly periods on a calendar quarter basis.

Securities and Exchange Commission (“SEC”) final rules

In March 2024, the SEC issued the final rules under SEC Release No.

33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors.

In April 2024, the SEC voluntarily stayed the new rules as a result of pending legal challenges.

These rules, if adopted, will require registrants to disclose certain climate-related information, including Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics, in registration statements and annual reports, when material.

Disclosure requirements, absent the results of pending legal challenges, will begin phasing in with our annual reporting for the year ending December 31, 2025.

We are currently evaluating the impact the rules will have on our disclosures.

We disaggregate our revenue from contracts with customers by segment, geographic location and vertical market, as we believe these best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

1 unchanged sentence

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

Three months ended Nine months ended

In millions September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

In millions March 31,

2024 March 31,

$ 705.2 $ 715.8

1 unchanged sentence

Developing (1)

142.8 140.3 406.4 378.3

Other Developed (2)

54.7 64.8 181.5 193.8

Consolidated net sales $ 1,017.2 $ 1,028.6

2 unchanged sentences

Vertical market net sales information was as follows:

Three months ended Nine months ended

In millions September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

In millions March 31,

2024 March 31,

Residential $ 543.2 $ 566.4

2 unchanged sentences

Consolidated net sales $ 1,017.2 $ 1,028.6

Performance obligations

On September 30, 2023, we had $ 122.4 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.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Performance obligations

As of March 31, 2024, we had $ 103.8 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.

Contract assets and liabilities

Contract assets and liabilities consisted of the following:

In millions September 30,

In millions March 31,

2024 December 31,

2 unchanged sentences

Contract liabilities 46.8 53.7 ( 6.9 ) ( 12.8 ) %

Net contract assets (liabilities)

Net contract assets

$ 23.1 $ 17.1 $ 6.0 35.1 %

The $ 14.5 million increase in net contract assets from December 31, 2022 to September 30, 2023 was primarily the result of timing of milestone payments.

Approximately 85 % of our contract liabilities at December 31, 2022 were recognized in revenue in the first nine months of 2023.

In July 2022, as part of our Water 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 allocated based on the fair value of assets acquired and liabilities assumed at the date of the Manitowoc Ice acquisition.

The purchase price allocation was completed in the third quarter of 2023.

The following table summarizes the fair values of the assets acquired and liabilities assumed in the Manitowoc Ice acquisition as previously reported as of December 31, 2022 and revised as of September 30, 2023:

In millions As Previously Reported As Revised

Cash $ 33.8 $ 33.8

Accounts receivable 36.7 36.7

Inventories 66.5 66.7

Other current assets 3.9 3.9

Property, plant and equipment 21.6 21.6

Identifiable intangible assets 728.3 728.3

Goodwill 790.5 789.7

Other assets 1.8 0.7

Current liabilities ( 66.5 ) ( 62.7 )

Other liabilities ( 3.3 ) ( 4.8 )

Purchase price $ 1,613.3 $ 1,613.9

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 allocated to goodwill in the amount of $ 789.7 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 a weighted-average estimated useful life of 20 years, $ 47.1 million of definite-lived proprietary technology intangible assets with a weighted-average estimated useful life of 10 years and $ 14.4 million of other definite-lived intangible assets with a weighted-average 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 described in Note 11.

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, 2022

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

Pro forma net income from continuing operations 131.9 417.8

Pro forma earnings per ordinary share - continuing operations

Basic $ 0.80 $ 2.53

Diluted 0.80 2.52

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 $ 25.6 million for the nine months ended September 30, 2022.

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 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.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Total share-based compensation expense for the three and nine months ended September 30, 2023 and 2022 was as follows:

Three months ended Nine months ended

In millions September 30,

2023 September 30,

2022 September 30,

2023 September 30,

The $ 6.0 million increase in net contract assets from December 31, 2023 to March 31, 2024 was primarily the result of timing of milestone payments.

Approximately 60 % of our contract liabilities at December 31, 2023 were recognized in revenue in the first quarter of 2024.

Total share-based compensation expense for the three months ended March 31, 2024 and 2023 was as follows:

Three months ended

In millions March 31,

2024 March 31,

Restricted stock units $ 3.8 $ 3.7

16 unchanged sentences

Treasury Department yield curve in effect at the time of grant.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Restructuring and Transformation Program

1 unchanged sentence

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, 2023, we initiated and continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.

In addition, we have continued to execute certain initiatives associated with the Transformation Program.

These initiatives included a reduction in hourly and salaried headcount of approximately 350 employees during the nine months ended September 30, 2023.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

During the three months ended March 31, 2024, we initiated and continued execution of our Transformation Program as well as certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.

Restructuring and Transformation Program initiatives included a reduction in hourly and salaried headcount of approximately 100 employees during the three months ended March 31, 2024.

Restructuring and transformation-related costs included within Cost of goods sold and 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,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

In millions March 31,

2024 March 31,

Restructuring Initiatives

1 unchanged sentence

Other restructuring costs and related adjustments (1)

1.6 2.4 2.1 2.6

Total restructuring costs 5.0 3.1

2 unchanged sentences

Other transformation costs (2)

11.0 7.0 23.3 17.7

Total transformation costs 17.0 8.5

1 unchanged sentence

(1) Other restructuring costs and related adjustments primarily consist of certain accruals, various contract termination costs, asset impairments and inventory write-offs associated with business and product line exits.

(2) Other transformation costs primarily consist of professional services, project management related costs and asset impairments, partially offset by gain on sale of assets.

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

Restructuring and transformation costs by reportable segment were as follows:

Three months ended Nine months ended

In millions September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Industrial & Flow Technologies $ 1.6 $ 0.3 $ 2.8 $ 1.5

Three months ended

In millions March 31,

2024 March 31,

Flow $ 2.6 $ 0.4

Water Solutions 0.6 1.5

Pool 1.7 3.3 6.9 4.7

Other 15.1 6.4

Consolidated $ 22.0 $ 11.6

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, 2023:

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, 2024:

In millions March 31,

Beginning balance $ 13.4

6 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,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

In millions, except per-share data March 31,

2024 March 31,

Net income $ 133.3 $ 129.7

4 unchanged sentences

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

1.4 0.7 1.2 1.0

Diluted 167.2 165.8

Earnings (loss) per ordinary share

Earnings per ordinary share

Continuing operations $ 0.80 $ 0.78

5 unchanged sentences

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

0.2 1.0 0.3 0.7

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 nine months ended September 30, 2023:

In millions September 30,

Activity related to our allowance for credit losses is summarized as follows for the three months ended March 31, 2024:

In millions March 31,

Beginning balance $ 11.2

Bad debt expense (benefit) ( 0.9 )

Write-offs, net of recoveries ( 0.3 )

Bad debt expense

Ending balance $ 12.0

3 unchanged sentences

Supplemental Balance Sheet Information

In millions September 30,

In millions March 31,

2024 December 31,

48 unchanged sentences

In millions December 31,

2022 Purchase Accounting Adjustments Foreign Currency

Translation September 30,

Industrial & Flow Technologies $ 747.6 $ — $ ( 6.8 ) $ 740.8

2023 Foreign Currency

Translation March 31,

Flow $ 767.1 $ ( 15.2 ) $ 751.9

Water Solutions 1,400.6 ( 3.6 ) 1,397.0

2 unchanged sentences

Identifiable intangible assets consisted of the following:

September 30,

2023 December 31,

March 31, 2024 December 31, 2023

In millions Cost Accumulated

4 unchanged sentences

Proprietary technology and patents 89.3 ( 44.4 ) 44.9 89.7 ( 43.2 ) 46.5

Other — — — 14.4 ( 14.4 ) —

Total definite-life intangibles 1,186.9 ( 383.4 ) 803.5 1,204.6 ( 358.9 ) 845.7

Total finite-life intangibles

1,190.5 ( 413.9 ) 776.6 1,195.9 ( 405.0 ) 790.9

Indefinite-life intangibles

1 unchanged sentence

Total intangibles $ 1,440.1 $ ( 413.9 ) $ 1,026.2 $ 1,447.4 $ ( 405.0 ) $ 1,042.4

Identifiable intangible asset amortization expense was $ 13.8 million and $ 18.5 million for the three months ended September 30, 2023 and 2022 and $ 41.5 million and $ 31.4 million for the nine months ended September 30, 2023 and 2022, respectively.

Identifiable intangible asset amortization expense was $ 13.5 million and $ 13.8 million for the three months ended March 31, 2024 and 2023, respectively.

Estimated future amortization expense for identifiable intangible assets during the remainder of 2024 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 September 30, 2023 Maturity

Year September 30,

In millions Average interest rate as of March 31, 2024 Maturity

Year March 31,

2024 December 31,

13 unchanged sentences

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

as borrowers, which was amended and restated in December 2021 and further amended in December 2022, providing for a $ 900.0 million senior unsecured revolving credit facility and a $ 200.0 million senior unsecured term loan facility.

as borrowers, 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.

1 unchanged sentence

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

As of September 30, 2023, total availability under the Senior Credit Facility was $ 900.0 million.

As of March 31, 2024, total availability under the Senior Credit Facility was $ 798.6 million.

In addition, PFSA has the option to request to increase the revolving credit facility and/or to 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 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 $ 600.0 million senior unsecured term loan facility (the “Term Loan 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.

The Term Loan Facility has a maturity date of July 28, 2027, with required quarterly installment payments of $ 6.3 million that began on the last day of the third quarter of 2023 and increase to $ 12.5 million beginning with the last day of the third quarter of 2024.

In addition, Pentair and PFSA are parties to a senior unsecured term loan facility (the “Term Loan Facility”), with PFSA, as borrower, Pentair, as guarantor, providing for an aggregate principal amount of $ 1.0 billion.

The Term Loan Facility has a maturity date of July 28, 2027, with required quarterly installment payments of $ 6.3 million which began on the last day of the third quarter of 2023 and increase to $ 12.5 million beginning with the last day of the third quarter of 2024.

The Term Loan Facility bears interest at a rate equal to an alternate base rate, adjusted term secured overnight financing rate, or adjusted daily simple secured overnight financing 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.

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.

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 and cash equivalents 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

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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 $ 20.8 million, of which there were no outstanding borrowings at September 30, 2023.

Borrowings under these credit facilities bear interest at variable rates.

We have $ 31.3 million of Term Loan Facility payments due in the next twelve months.

We classified this debt as long-term as of September 30, 2023 as we have the intent and ability to refinance such obligation on a long-term basis under the revolving credit facility under the Senior Credit Facility.

Debt outstanding, excluding unamortized issuance costs and discounts, at September 30, 2023 matures on a calendar year basis as follows:

We have $ 43.8 million of Term Loan Facility payments and $ 200.0 million of payments under the senior unsecured term loan facility, associated with the Senior Credit Facility, due in the next twelve months.

We classified this debt as long-term as of

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

March 31, 2024 as we have the intent and ability to refinance such obligation on a long-term basis under the revolving credit facility under the Senior Credit Facility.

Debt outstanding, excluding unamortized issuance costs and discounts, at March 31, 2024 matures on a calendar year basis as follows:

In millions 2024 2025 2026 2027 2028 2029 Thereafter Total

14 unchanged sentences

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

At September 30, 2023 and December 31, 2022, we had outstanding foreign currency derivative contracts with gross notional U.S.

At March 31, 2024 and December 31, 2023, we had outstanding foreign currency derivative contracts with gross notional U.S.

dollar equivalent amounts of $ 21.3 million and $ 23.9 million, respectively.

1 unchanged sentence

Cross currency swaps

At September 30, 2023 and December 31, 2022, we had outstanding cross currency swap agreements with a combined notional amount of $ 739.6 million and $ 746.3 million, respectively.

At March 31, 2024 and December 31, 2023, we had outstanding cross currency swap agreements with a combined notional amount of $ 917.1 million and $ 940.2 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 $ 38.6 million and $ 40.3 million at September 30, 2023 and December 31, 2022, respectively, recorded in Accumulated other comprehensive loss associated with our cross currency swap activity.

We had deferred foreign currency losses of $ 33.4 million and $ 51.6 million at March 31, 2024 and December 31, 2023, respectively, recorded 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.

1 unchanged sentence

Hedging of variable interest rates

On March 31, 2023, we entered into floating-to-fixed interest rate swap agreements to hedge the interest rate movements related to a portion of our variable rate debt.

The swaps have a combined notional amount of $ 300.0 million and an average fixed one-month U.S.

Dollar secured overnight financing rate (“SOFR”) of 3.795 %.

They have an effective date of April 4, 2023 and settle monthly through April 2026.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

On April 3, 2023, we entered into five-year interest rate collar agreements with a combined notional value of $ 200.0 million to hedge the cash flows related to the interest rate movements on our variable rate debt.

In these collar agreements, the Company and counterparty financial institutions agreed to a one-month U.S.

Dollar SOFR floor of 1.875 % and a cap of 5.000 %.

The collars have an effective date of April 4, 2023 and settle monthly through April 2028.

The interest rate swaps and collars were designated as cash flow hedges.

We manage our exposure to certain interest rate risks related to our variable rate debt through the use of interest rate swaps and collars.

We enter into these agreements to hedge the variability of interest expense and cash flows attributable to changes in interest rates of our variable rate debt.

As of March 31, 2024, we had an aggregate notional amount of $ 300.0 million and $ 200.0 million in interest rate swaps and collars, respectively, that are designated as cash flow hedges.

Unrealized gains and losses related to the fair value of the interest rate swaps are recorded in Accumulated other comprehensive loss on our Condensed Consolidated Balance Sheets.

We had a gain of $ 9.4 million at September 30, 2023 recorded in Accumulated other comprehensive loss associated with our interest rate swap and collar activity.

We had unrealized gains of $ 4.8 million and $ 0.3 million at March 31, 2024 and December 31, 2023, respectively, recorded in Accumulated other comprehensive loss associated with our interest rate swap and collar activity.

The periodic interest settlements related to our interest rate swaps and collars are classified as operating activities.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Fair value measurements

13 unchanged sentences

fair value of common/collective trusts are valued at net asset value (“NAV”), which is based on the fair value of the underlying securities owned by the fund and divided by the number of shares outstanding.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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

September 30,

2024 December 31,

4 unchanged sentences

Total debt $ 2,102.0 $ 2,090.7 $ 2,006.8 $ 2,012.0

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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

September 30, 2023

March 31, 2024

In millions Level 1 Level 2 Level 3 NAV Total

1 unchanged sentence

Interest rate contract assets $ — $ 4.8 $ — $ — $ 4.8

Foreign currency contract assets

— 4.9 — — 4.9

Foreign currency contract liabilities — ( 52.3 ) — — ( 52.3 )

4 unchanged sentences

Recurring fair value measurements

Interest rate contract assets $ — $ 0.3 $ — $ — $ 0.3

Foreign currency contract assets — 0.2 — — 0.2

Foreign currency contract liabilities — ( 70.0 ) — — ( 70.0 )

6 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, 2023 was 14.5 %, compared to 13.9 % for the nine months ended September 30, 2022.

The effective income tax rate for the three months ended March 31, 2024 was 13.0 %, compared to 14.6 % for the three months ended March 31, 2023.

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 $ 37.2 million and $ 39.6 million at September 30, 2023 and December 31, 2022, respectively.

The total gross liability for uncertain tax positions was $ 38.3 million and $ 38.6 million at March 31, 2024 and December 31, 2023, 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.

The Organization for Economic Co-operation and Development Pillar Two Model Rules (“Pillar Two”) for a global 15.0% minimum tax are in the process of being adopted by a number of jurisdictions in which we operate.

In particular, the U.K.

completed passage of legislation to comply with the Pillar Two framework which became effective on January 1, 2024.

For the three months ended March 31, 2024, the impact of Pillar Two on our condensed consolidated financial statements was not material.

Pentair plc and Subsidiaries

1 unchanged sentence

Benefit Plans

Components of net periodic benefit expense for our pension plans for the three and nine months ended September 30, 2023 and 2022 were as follows:

Three months ended Nine months ended

In millions September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Components of net periodic benefit expense for our pension plans for the three months ended March 31, 2024 and 2023 were as follows:

Three months ended

In millions March 31,

2024 March 31,

Service cost $ 0.4 $ 0.4

2 unchanged sentences

Net periodic benefit expense $ 1.3 $ 1.2

Components of net periodic benefit expense for our other post-retirement plans for the three and nine months ended September 30, 2023 and 2022 were not material .

Components of net periodic benefit expense for our other post-retirement plans for the three months ended March 31, 2024 and 2023 were not material .

Shareholders’ Equity

2 unchanged sentences

The authorization expires on December 31, 2025 .

During the three and nine months ended September 30, 2023, no ordinary shares were repurchased.

As of September 30, 2023, we had $ 600.0 million available for share repurchases under this authorization.

During the three months ended March 31, 2024, no ordinary shares were repurchased.

As of March 31, 2024, we had $ 600.0 million available for share repurchases under this authorization.

Dividends payable

On September 18, 2023, the Board of Directors declared a quarterly cash dividend of $ 0.22 per share, payable on November 3, 2023 to shareholders of record at the close of business on October 20, 2023.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $ 36.4 million at September 30, 2023, compared to $ 36.2 million at December 31, 2022.

On February 19, 2024, the Board of Directors declared a quarterly cash dividend of $ 0.23 per share, payable on May 3, 2024 to shareholders of record at the close of business on April 19, 2024.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $ 38.2 million at March 31, 2024, compared to $ 38.0 million at December 31, 2023.

Segment Information

Effective January 1, 2023, we reorganized our reporting segments to reflect how we are managing our business and to help us accelerate our efforts to improve customer experience, differentiate our products and drive profitability for our shareholders.

All prior period amounts related to the segment change have been retrospectively reclassified to conform to the new presentation.

As part of this reorganization, the legacy Consumer Solutions segment was divided into a Pool segment and a Water Solutions segment.

The Industrial & Flow Technologies segment remains the same.

We classify our operations into the following reporting segments:

• Industrial & Flow Technologies — The focus of this segment is to deliver water where it is needed, when it is needed and more efficiently and transforming waste into value.

This segment designs, manufactures and sells a variety of fluid treatment and pump products and systems, including pressure vessels, gas recovery solutions, membrane bioreactors, wastewater reuse systems and advanced membrane filtration, separation systems, water disposal pumps, water supply pumps, fluid transfer pumps, turbine pumps, solid handling pumps, and agricultural spray nozzles, while serving the global residential, commercial and industrial markets.

These products and systems are used in a range of applications, including fluid delivery, ion exchange, desalination, food and beverage, separation technologies for the oil and gas industry, residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, circulation and transfer, fire suppression, flood control, agricultural irrigation and crop spray.

• Water Solutions — The focus of this segment is to provide great tasting, higher-quality water and ice while helping end-users use water more productively.

This segment designs, manufactures and sells commercial and residential water treatment products and systems including pressure tanks, control valves, activated carbon products, commercial ice machines, conventional filtration products, and point-of-entry and point-of-use water treatment systems.

These water treatment products and systems are used in residential whole home water filtration, drinking water filtration and water softening solutions in addition to commercial total water management and filtration in foodservice operations.

In addition, our water solutions business also provides installation and preventative services for water management solutions for commercial operators.

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

• Pool — The focus of this segment is to provide innovative, energy-efficient pool solutions to help end-users more sustainably enjoy water.

This segment designs, manufactures and sells a complete line of energy-efficient residential and commercial pool equipment and accessories including pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment and pool accessories.

Applications for our pool products include residential and commercial pool maintenance, pool repair, renovation, service and construction and aquaculture solutions.

We evaluate performance based on net sales and segment income (loss) and use a variety of ratios to measure performance of our reporting segments.

2 unchanged sentences

Financial information by reportable segment is as follows:

Three months ended Nine months ended

In millions September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Industrial & Flow Technologies $ 400.2 $ 389.5 $ 1,203.6 $ 1,125.0

Three months ended

In millions March 31,

2024 March 31,

Flow $ 384.3 $ 391.8

Water Solutions 273.1 272.0

3 unchanged sentences

Segment income (loss)

Industrial & Flow Technologies $ 77.5 $ 65.7 $ 217.3 $ 177.0

Flow $ 77.3 $ 65.0

Water Solutions 55.6 52.4

2 unchanged sentences

Consolidated $ 217.3 $ 211.0

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,

2023 September 30,

2022 September 30,

2023 September 30,

Three months ended

In millions March 31,

2024 March 31,

Segment income $ 217.3 $ 211.0

Deal-related costs and expenses — ( 13.4 ) — ( 21.4 )

Inventory step-up — ( 5.8 ) — ( 5.8 )

Asset impairment and write-offs ( 0.8 ) ( 3.9 )

2 unchanged sentences

Intangible amortization ( 13.5 ) ( 13.8 )

Gain on sale of businesses — 0.2 — 0.2

Russia business exit impact — 0.8 — ( 5.1 )

Legal accrual adjustments and settlements 0.3 1.9

Interest expense, net ( 27.3 ) ( 32.4 )

Other (expense) income

Other expense

( 1.0 ) ( 0.9 )

Income from continuing operations before income taxes $ 153.4 $ 150.5

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Commitments and Contingencies

2 unchanged sentences

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

The changes in the carrying amount of service and product warranties from continuing operations for the nine months ended September 30, 2023 were as follows:

In millions September 30,

The changes in the carrying amount of service and product warranties from continuing operations for the three months ended March 31, 2024 were as follows:

In millions March 31,

Beginning balance $ 65.0

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 September 30, 2023 and December 31, 2022, the outstanding value of bonds, letters of credit and bank guarantees totaled $ 106.9 million and $ 99.7 million, respectively.

As of March 31, 2024 and December 31, 2023, the outstanding value of bonds, letters of credit and bank guarantees totaled $ 111.1 million and $ 124.3 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