What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-23 compared with 2024-04-23 · 191 added, 127 removed, 239 unchanged (57% of the section changed)

32 unchanged sentences

Flow, Water Solutions and Pool.

For the first three months of 2024, the Flow, Water Solutions and Pool segments represented approximately 38%, 27% and 35% of total revenues, respectively.

For the first six months of 2024, the Flow, Water Solutions and Pool segments represented approximately 37%, 28% and 35% of total revenues, respectively.

We classify our operations into reporting segments based primarily on types of products offered and markets served:

10 unchanged sentences

Key Trends and Uncertainties Regarding Our Existing Business

The following trends and uncertainties affected our financial performance in the first three months of 2024 and are reasonably likely to impact our results in the future:

The following trends and uncertainties affected our financial performance in the first six months of 2024 and are reasonably likely to impact our results in the future:

• In 2021, we created a transformation office and launched and committed resources to the Transformation Program designed to accelerate growth and drive margin expansion by driving operational excellence, reducing complexity and streamlining our processes.

During 2023 and the first three months of 2024, we made strategic progress on our Transformation Program initiatives with a focus on our four key themes of pricing excellence, strategic sourcing, operations excellence and organizational effectiveness.

During 2023 and the first six months of 2024, we made strategic progress on our Transformation Program initiatives with a focus on our four key themes of pricing excellence, strategic sourcing, operations excellence and organizational effectiveness.

We expect to continue to execute on our key Transformation Program initiatives to drive margin expansion and to continue to incur transformation costs throughout the remainder of 2024 and beyond.

• During 2023 and the first three months of 2024, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.

• In 2024, we began using 80/20 guiding principles to enable our Transformation Program.

This 80/20 analysis is expected to create value by focusing on the right customers and products through quadrant based strategies.

We expect the analysis to result in actions to improve operating performance by reducing lower margin sales and removing complexity in the future.

• During 2023 and the first six months of 2024, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.

We expect these actions to continue throughout the remainder of 2024 and to drive margin growth.

• During 2023 and the first three months of 2024, we experienced inflationary cost increases for certain raw materials.

• During 2023 and the first six months of 2024, we experienced inflationary cost increases for certain raw materials as well as logistics and transportation costs.

The current volatile market for commodities has the potential to continue to drive price increases in our supply chain.

15 unchanged sentences

• Focusing growth initiatives that accelerate our investments in digital, innovation, technology and ESG;

• Continuing to implement our Transformation Program initiatives that will drive operational excellence, reduce complexity and improve our organizational structure;

• Continuing to implement our Transformation Program initiatives that will drive operational excellence, reduce complexity and improve our organizational structure, which includes the focus on 80/20 actions to drive profitable growth;

• Building a high performance growth culture and delivering on our commitments while living our Win Right values.

CONSOLIDATED RESULTS OF OPERATIONS

The consolidated results of operations for the three months ended March 31, 2024 and March 31, 2023 were as follows:

The consolidated results of operations for the three months ended June 30, 2024 and 2023 were as follows:

Three months ended

In millions March 31,

2024 March 31,

In millions June 30,

2024 June 30,

Change % / Point

4 unchanged sentences

39.8 % 36.9 % 2.9 pts

Selling, general and administrative

165.1 165.1 — — %

% of net sales

15.0 % 15.3 % (0.3) pts

Research and development

24.8 25.9 (1.1) (4.2) %

% of net sales 2.3 % 2.4 % (0.1) pts

Operating income 248.0 208.5 39.5 18.9 %

% of net sales 22.6 % 19.3 % 3.3 pts

Other expense (income)

0.8 (4.8) 5.6 N.M.

Net interest expense 26.3 31.8 (5.5) (17.3) %

Income from continuing operations before income taxes 220.9 181.5 39.4 21.7 %

Provision for income taxes

34.8 27.3 7.5 27.5 %

Effective tax rate 15.8 % 15.0 % 0.8 pts

Not Meaningful

The consolidated results of operations for the six months ended June 30, 2024 and 2023 were as follows:

Six months ended

In millions June 30,

2024 June 30,

Change % / Point

Net sales $ 2,116.5 $ 2,111.1 $ 5.4 0.3 %

Cost of goods sold 1,288.5 1,329.8 (41.3) (3.1) %

Gross profit 828.0 781.3 46.7 6.0 %

% of net sales

39.1 % 37.0 % 2.1 pts

Selling, general and administrative expenses

7 unchanged sentences

% of net sales 20.3 % 18.6 % 1.7 pts

Other expense

Other expense (income)

0.9 (4.1) 5.0 N.M.

6 unchanged sentences

The components of the consolidated net sales change from the prior period were as follows:

Three months ended March 31, 2024

over the prior year period

Three months ended June 30, 2024 Six months ended June 30, 2024

over the prior year period over the prior year period

Volume 1.1 % (1.3) %

Price 1.1 1.9

Core growth 2.2 0.6

Acquisition/Divestitures (0.2) (0.1)

Currency (0.4) (0.2)

Total 1.6 % 0.3 %

The 1.1 percent decrease in net sales in the first quarter of 2024 from 2023 was primarily driven by:

• decreased sales volume in our residential flow business within our Flow segment and our residential business within our Water Solutions segment compared to the same period of the prior year;

• decreased sales volume in our commercial business within our Water Solutions segment driven by the completion of a large project in 2023 that did not recur in the first three months of 2024;

• decreased sales volume in our Pool segment primarily due to lower demand compared to the prior year.

This decrease was partially offset by:

• increased selling prices to mitigate inflationary cost increases;

• increased sales volume in our commercial flow business within our Flow segment compared to the same period of the prior year.

The 1.3 percentage point increase in gross profit as a percentage of net sales in the first quarter of 2024 from 2023 was primarily driven by:

The 1.6 and 0.3 percent increases in net sales in the second quarter and first half, respectively, of 2024 from 2023 were primarily driven by:

• increased sales volume within our Pool segment due to higher demand compared to the prior year;

• increased sales volume in our commercial flow business within our Flow segment in the first half of 2024 compared to the prior year;

• increased selling prices in our commercial flow and industrial solutions businesses within our Flow segment, in our commercial business within our Water Solutions segment and in our Pool segment to mitigate inflationary cost increases.

These increases were partially offset by:

• decreased sales volume in our residential flow and industrial solutions businesses within our Flow segment compared to the prior year;

• decreased sales volume within our commercial and residential businesses in our Water Solutions segment compared to the prior year, in addition to the completion of a large project in 2023 within our commercial business that did not recur in the first half of 2024;

• unfavorable foreign currency effects compared to the prior year;

• a product line exit in our Pool segment that occurred in the first half of 2024.

The 2.9 and 2.1 percentage point increases in gross profit as a percentage of net sales in the second quarter and first half, respectively, of 2024 from 2023 were primarily driven by:

• increases in selling prices to mitigate impacts of inflationary costs;

• increased productivity in our Flow and Water Solutions segments mainly driven by manufacturing leverage and transformation initiatives;

• asset impairment and write-offs of $0.8 million recorded in the first quarter of 2024, compared to $3.9 million in the first quarter of 2023.

This increase was partially offset by:

• increased productivity mainly driven by manufacturing leverage within our Pool segment and transformation initiatives;

• asset impairment and write-offs of $0.8 million recorded in the first half of 2024, compared to $3.9 million in the first half of 2023.

These increases were partially offset by:

• inflationary cost increases related to labor costs and certain raw materials.

Selling, general and administrative expenses (“SG&A”)

The 1.4 percentage point increase in SG&A as a percentage of net sales in the first quarter of 2024 from 2023 was primarily driven by:

• transformation costs of $17.0 million in the first quarter of 2024, compared to $8.5 million in the first quarter of 2023;

• restructuring and other costs of $4.6 million in the first quarter of 2024, compared to $2.9 million in the first quarter of 2023.

The 0.3 percentage point decrease in SG&A as a percentage of net sales in the second quarter of 2024 from 2023 was primarily driven by:

• a reduction in our legal accrual of $7.9 million in the second quarter of 2024, compared to an increase in our legal accrual of $4.1 million in the second quarter of 2023.

This decrease was partially offset by:

• transformation costs of $11.8 million in the second quarter of 2024, compared to $6.0 million in the second quarter of 2023;

• restructuring and other costs of $5.9 million in the second quarter of 2024, compared to $0.6 million in the second quarter of 2023.

The 0.6 percentage point increase in SG&A as a percentage of net sales in the first half of 2024 from 2023 was primarily driven by:

• transformation costs of $28.8 million in the first half of 2024, compared to $14.5 million in the first half of 2023;

• restructuring and other costs of $10.5 million in the first half of 2024, compared to $3.5 million in the first half of 2023.

This increase was partially offset by:

• a reduction in our legal accrual of $8.2 million in the first half of 2024, compared to an increase in our legal accrual of $2.2 million in the first half of 2023.

Net interest expense

The 15.7 percent decrease in net interest expense in the first quarter of 2024 from 2023 was primarily driven by:

The 17.3 and 16.5 percent decreases in net interest expense in the second quarter and first half, respectively, of 2024 from 2023 were primarily driven by:

• lower variable debt compared to the same period of the prior year.

This decrease was partially offset by:

• increased variable interest rates compared to the same period of the prior year.

Provision for income taxes

The 1.6 percentage point decrease in the effective tax rate in the first quarter of 2024 from 2023 was primarily driven b y:

• the favorable impact of discrete items that occurred during the first quarter of 2024 that did not occur in the same period of the prior year.

The 0.8 percentage point increase in the effective tax rate in the second quarter of 2024 from 2023 was primarily driven by:

• the unfavorable mix of global earnings.

The 0.2 percentage point decrease in the effective tax rate in the first half of 2024 from 2023 was primarily driven b y:

• the favorable impact of discrete items that occurred during the first half of 2024 that did not occur in the same period of the prior year.

This decrease was partially offset by:

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Each of these segments comprises various product offerings that serve multiple end users.

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

Segment income represents equity income of unconsolidated subsidiaries and operating income exclusive of intangible amortization, costs of restructuring and transformation activities, impairments, legal accrual adjustments and settlements and other unusual non-operating items.

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

Segment income represents operating income of each reportable segment inclusive of equity income of unconsolidated subsidiaries and exclusive of intangible amortization, costs of restructuring and transformation activities, impairments, legal accrual adjustments and settlements and other unusual non-operating items.

The net sales and segment income for Flow were as follows:

Three months ended

In millions March 31,

2024 March 31,

Three months ended Six months ended

In millions June 30,

2024 June 30,

2023 % / Point Change June 30,

2024 June 30,

2023 % / Point Change

1 unchanged sentence

Segment income

% of net sales 20.1 % 16.6 % 3.5 pts

84.4 74.8 12.8% 161.7 139.8 15.7%

% of net sales 21.3 % 18.2 % 3.1 pts 20.7 % 17.4 % 3.3 pts

The components of the change in Flow net sales from the prior period were as follows:

Three months ended March 31, 2024

over the prior year period

Three months ended June 30, 2024 Six months ended June 30, 2024

over the prior year period over the prior year period

Volume (4.3) % (4.3) %

Price 1.2 1.7

Core growth (3.1) (2.6)

Currency (0.5) (0.2)

Total (3.6) % (2.8) %

The 1.9 percent decrease in net sales for Flow in the first quarter of 2024 from 2023 was primarily driven by:

• decreased sales volume in our residential flow business compared to the same period of the prior year.

This decrease was partially offset by:

• increased sales volume in our commercial flow business compared to the same period of the prior year;

• increased selling prices to mitigate inflationary cost increases.

The 3.6 and 2.8 percent decreases in net sales for Flow in the second quarter and first half, respectively, of 2024 from 2023 were primarily driven by:

• decreased sales volume in our residential flow and industrial solutions businesses compared to the prior year;

• unfavorable foreign currency effects compared to the prior year.

These decreases were partially offset by:

• increased sales volume in our commercial flow business in the first half of 2024 compared to the prior year;

• increased selling prices in our commercial flow and industrial solutions businesses to mitigate inflationary cost increases.

Segment income

The components of the change in Flow segment income as a percentage of net sales from the prior period were as follows:

Three months ended March 31, 2024

over the prior year period

Growth/Price 3.2 pts

Three months ended June 30, 2024 Six months ended June 30, 2024

over the prior year period over the prior year period

Growth/Price 1.0 pts 2.1 pts

Inflation (2.3) (2.3)

Productivity 4.4 3.5

Total 3.5 pts

The 3.5 percentage point increase in segment income for Flow as a percentage of net sales in the first quarter of 2024 from 2023 was primarily driven by:

• increased selling prices to mitigate impacts of inflation and favorable mix;

• increased productivity mainly driven by manufacturing leverage and transformation initiatives.

This increase was partially offset by:

Total 3.1 pts 3.3 pts

The 3.1 and 3.3 percentage point increases in segment income for Flow as a percentage of net sales in the second quarter and first half, respectively, of 2024 from 2023 were primarily driven by:

• increased selling prices in our commercial flow and industrial solutions businesses to mitigate impacts of inflation;

• increased productivity mainly driven by transformation initiatives.

These increases were partially offset by:

• inflationary cost increases related to labor costs and certain raw materials.

1 unchanged sentence

The net sales and segment income for Water Solutions were as follows:

Three months ended

In millions March 31,

2024 March 31,

Three months ended Six months ended

In millions June 30,

2024 June 30,

2023 % / Point Change June 30,

2024 June 30,

2023 % / Point Change

1 unchanged sentence

Segment income 72.9 74.8 (2.5)% 128.5 127.2 1.0%

% of net sales 20.4 % 19.3 % 1.1 pts

% of net sales 23.5 % 22.2 % 1.3 pts 22.0 % 20.9 % 1.1 pts

The components of the change in Water Solutions net sales from the prior period were as follows:

Three months ended March 31, 2024

over the prior year period

Three months ended June 30, 2024 Six months ended June 30, 2024

over the prior year period over the prior year period

Volume (8.1) % (4.8) %

Price 1.1 1.3

Core growth (7.0) (3.5)

Currency (0.6) (0.5)

The 0.4 percent increase in net sales for Water Solutions in the first quarter of 2024 from 2023 was primarily driven by:

Total (7.6) % (4.0) %

The 7.6 and 4.0 percent decreases in net sales for Water Solutions in the second quarter and first half, respectively, of 2024 from 2023 were primarily driven by:

• decreased sales volume in our commercial and residential businesses compared to the prior year, in addition to the completion of a large project in 2023 within our commercial business that did not recur in the first half of 2024;

• unfavorable foreign currency effects compared to the prior year.

These decreases were partially offset by:

• increased selling prices in our commercial business to mitigate inflationary cost increases.

This increase was partially offset by:

• decreased sales volume in our commercial business driven by the completion of a large project in 2023 that did not recur in the first three months of 2024;

• decreased sales volume in our residential business as a result of lower demand;

• unfavorable foreign currency effects compared to the same period of the prior year.

Segment income

The components of the change in Water Solutions segment income as a percentage of net sales from the prior period were as follows:

Three months ended March 31, 2024

over the prior year period

Three months ended June 30, 2024 Six months ended June 30, 2024

over the prior year period over the prior year period

1.4 pts 1.9 pts

Currency (0.1) (0.3)

1 unchanged sentence

Productivity 2.0 1.8

Total 1.1 pts

The 1.1 percentage point increase in segment income for Water Solutions as a percentage of net sales in the first quarter of 2024 from 2023 was primarily driven by:

Total 1.3 pts 1.1 pts

The 1.3 and 1.1 percentage point increases in segment income for Water Solutions as a percentage of net sales in the second quarter and first half, respectively, of 2024 from 2023 were primarily driven by:

• increased productivity mainly driven by transformation initiatives;

• increased selling prices in our commercial business to mitigate impacts of inflation and favorable mix.

• increased productivity mainly driven by manufacturing leverage and transformation initiatives.

This increase was partially offset by:

These increases were partially offset by:

• inflationary cost increases related to labor costs and certain raw materials;

• unfavorable foreign currency effects compared to the first quarter of the prior year.

• unfavorable foreign currency effects compared to the prior year.

The net sales and segment income for Pool were as follows:

Three months ended

In millions March 31,

2024 March 31,

Three months ended Six months ended

In millions June 30,

2024 June 30,

2023 % / Point Change June 30,

2024 June 30,

2023 % / Point Change

1 unchanged sentence

Segment income 133.6 105.1 27.1% 244.4 221.3 10.4%

% of net sales 30.8 % 31.9 % (1.1) pts

% of net sales 34.1 % 31.4 % 2.7 pts 32.5 % 31.7 % 0.8 pts

The components of the change in Pool net sales from the prior period were as follows:

Three months ended March 31, 2024

over the prior year period

Three months ended June 30, 2024 Six months ended June 30, 2024

over the prior year period over the prior year period

Volume 17.1 % 5.2 %

Price 0.8 2.7

Core growth 17.9 7.9

Acquisition/Divestiture

Currency (0.1) (0.1)

Total 17.1 % 7.5 %

The 1.3 percent decrease in net sales for Pool in the first quarter of 2024 from 2023 was primarily driven by:

• decreased sales volume primarily due to lower demand compared to the prior year.

This decrease was partially offset by:

The 17.1 and 7.5 percent increases in net sales for Pool in the second quarter and first half, respectively, of 2024 from 2023 were primarily driven by:

• increased sales volume due to higher demand compared to the prior year;

• increased selling prices to mitigate inflationary cost increases.

These increases were partially offset by:

• a product line exit that occurred in the first half of 2024.

Segment income

The components of the change in Pool segment income as a percentage of net sales from the prior period were as follows:

Three months ended March 31, 2024

over the prior year period

Growth/Price 2.7 pts

Three months ended June 30, 2024 Six months ended June 30, 2024

over the prior year period over the prior year period

Growth/Price/Divestiture

1.6 pts 2.3 pts

Inflation (2.1) (1.9)

Productivity 3.2 0.4

Total (1.1) pts

The 1.1 percentage point decrease in segment income for Pool as a percentage of net sales in the first quarter of 2024 from 2023 was primarily driven by:

• decreased productivity due to decreased sales volume and investments to drive future growth;

• inflationary cost increases related to labor costs and certain raw materials.

This decrease was partially offset by:

Total 2.7 pts 0.8 pts

The 2.7 and 0.8 percentage point increases in segment income for Pool as a percentage of net sales in the second quarter and first half, respectively, of 2024 from 2023 were primarily driven by:

• increased productivity driven by manufacturing leverage and transformation initiatives;

• increased selling prices to mitigate impacts of inflation.

These increases were partially offset by:

• inflationary cost increases related to labor costs and certain raw materials.

BACKLOG OF ORDERS BY SEGMENT

In millions March 31,

In millions June 30,

2024 December 31,

3 unchanged sentences

Pool 68.2 239.7 (171.5) (71.5) %

Total $ 575.7 $ 738.3 $ (162.6) (22.0) %

Total backlog

$ 490.9 $ 738.3 $ (247.4) (33.5) %

The majority of our backlog is short cycle in nature with shipments within one year from when a customer places an order and a substantial portion of our revenues has historically resulted from orders received and products delivered in the same month.

2 unchanged sentences

Our backlog of orders is dependent upon when customers place orders and is not necessarily an indicator of our expected results for our 2024 net sales.

The decrease in our overall backlog from December 31, 2023 was primarily driven by backlog in our Flow and Pool segments trending down to more historical levels as a result of increased manufacturing capacity and improved lead times.

The decrease in our overall backlog from December 31, 2023 was primarily driven by our backlog trending down to more historical levels as a result of increased manufacturing capacity and improved lead times within each of our reportable segments as well as delivery of orders associated with certain advance sale (“early buy”) programs within our Pool segment.

LIQUIDITY AND CAPITAL RESOURCES

3 unchanged sentences

Consistent with historical trends, we experienced seasonal cash usage in the first quarter of 2024 and drew on our revolving credit facility to fund our operations.

This cash usage typically reverses in the second quarter as the seasonality of our businesses peak.

We expect historical seasonal patterns to continue and the second quarter of 2024 to generate significant cash to fund our operations.

This cash usage reversed in the second quarter as the seasonality of our businesses peaked and generated significant cash to fund our operations.

End-user demand for pool equipment in the Pool segment, water solution products in the Water Solutions segment, and residential water supply and agricultural products within the Flow segment follows warm weather trends, with seasonal highs from April to September.

4 unchanged sentences

Summary of cash flows

Three months ended

In millions March 31,

2024 March 31,

Six months ended

In millions June 30,

2024 June 30,

Net cash provided by (used for):

3 unchanged sentences

Operating activities

Net cash used for operating activities of continuing operations in the first three months of 2024 primarily reflects a cash outflow of $287.9 million as a result of changes in net working capital, primarily due to an increase in accounts receivable largely related to certain advance sale programs in anticipation of our distributors’ peak sales season in the second and third quarters.

The outflow related to net working capital was partially offset by net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization and asset impairment, of $162.7 million.

Net cash used for operating activities of continuing operations in the first three months of 2023 primarily reflects a cash outflow of $262.6 million as a result of changes in net working capital, primarily due to an increase in accounts receivable largely related to certain advance sale programs in anticipation of our distributors’ peak sales season in the second and third quarters.

Net cash provided by operating activities of continuing operations in the first six months of 2024 primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization, share-based compensation and asset impairment, of $394.0 million.

Additionally, we had a cash inflow of $15.4 million as a result of changes in net working capital, primarily due to lower inventory and increased accounts payable balances.

The decrease in inventory was primarily related to supply chain efficiencies and improved lead times.

The higher accounts payable balance was attributable to inventory purchases for our peak sales season.

Net cash provided by operating activities of continuing operations in the first six months of 2023 primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization and asset impairment, of $344.2 million.

Investing activities

Net cash used for investing activities in the first three months of 2024 reflects capital expenditures of $19.3 million.

Net cash used for investing activities in the first three months of 2023 primarily reflects capital expenditures of $16.6 million.

Net cash used for investing activities in the first six months of 2024 primarily reflects capital expenditures of $36.3 million.

Net cash used for investing activities in the first six months of 2023 primarily reflects capital expenditures of $35.4 million, partially offset by proceeds from the sale of property and equipment of $5.0 million.

Financing activities

Net cash provided by financing activities in the first three months of 2024 primarily relates to net borrowings of revolving long-term debt of $101.4 million, partially offset by dividend payments of $38.0 million.

Net cash provided by financing activities in the first three months of 2023 primarily relates to net borrowings of revolving long-term debt of $173.6 million, partially offset by dividend payments of $36.2 million.

Net cash used for financing activities in the first six months of 2024 primarily relates to the repayment of $200.0 million term loans under the Senior Credit Facility, $37.5 million Term Loan Facility principal payments, dividend payments of $76.2 million and share repurchases of $50.0 million.

Net cash used for financing activities in the first six months of 2023 primarily relates to net repayments of revolving long-term debt of $204.3 million and dividend payments of $72.5 million.

Free cash flow

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The following table is a reconciliation of free cash flow:

Three months ended

In millions March 31,

2024 March 31,

Net cash used for operating activities of continuing operations

Six months ended

In millions June 30,

2024 June 30,

Net cash provided by operating activities of continuing operations

$ 431.8 $ 340.1

7 unchanged sentences

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 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.

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

During the second quarter of 2024, PFSA repaid $200.0 million of term loans under the Senior Credit Facility.

The revolving credit facility has a maturity date of December 16, 2026.

Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate, adjusted term secured overnight financing rate, adjusted euro interbank offered rate, adjusted daily simple secured overnight financing rate or 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.

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.

As of June 30, 2024, total availability under the Senior Credit Facility was $900.0 million.

In addition, PFSA has the option to request to increase the revolving credit facility and/or to enter into one or more 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 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.

5 unchanged sentences

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 March 31, 2024.

Borrowings under these credit facilities bear interest at variable rates.

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 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.

As of March 31, 2024, we had $89.1 million of cash held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.

We have $25.0 million of Term Loan Facility payments due in the next twelve months.

We classified this debt as long-term as of June 30, 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.

As of June 30, 2024, we had $105.5 million of cash held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.

Share repurchases

1 unchanged sentence

This authorization expires on December 31, 2025.

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.

During the three and six months ended June 30, 2024, we repurchased 0.6 million of our ordinary shares for $50.0 million.

As of June 30, 2024, we had $550.0 million available for share repurchases under this authorization.

Dividends payable

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.

We paid dividends in the first three months of 2024 of $38.0 million, or $0.23 per ordinary share compared with $36.2 million, or $0.22 per ordinary share, in the prior year period.

On May 6, 2024, the Board of Directors declared a quarterly cash dividend of $0.23 per share, payable on August 2, 2024 to shareholders of record at the close of business on July 19, 2024.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $38.1 million at June 30, 2024, compared to $38.0 million at December 31, 2023.

We paid dividends in the first six months of 2024 of $76.2 million, or $0.46 per ordinary share compared with $72.5 million, or $0.44 per ordinary share, in the prior year period.

Under Irish law, the payment of future cash dividends and repurchases of shares may be paid only out of Pentair plc’s “distributable reserves” on its statutory balance sheet.

14 unchanged sentences

If such subsidiaries are unable to transfer funds to the Parent Company Guarantor or the Subsidiary Issuer and sufficient cash or liquidity is not otherwise available, the Parent Company Guarantor or the Subsidiary Issuer may not be able to make principal and interest payments on their outstanding debt, including the senior notes or the guarantees.

The following table presents summarized financial information as of March 31, 2024 and December 31, 2023 for the Parent Company Guarantor and Subsidiary Issuer on a combined basis after elimination of (i) intercompany transactions and balances among the guarantors and issuer and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer.

In millions March 31,

The following table presents summarized financial information as of June 30, 2024 and December 31, 2023 for the Parent Company Guarantor and Subsidiary Issuer on a combined basis after elimination of (i) intercompany transactions and balances among the guarantors and issuer and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer.

In millions June 30,

2024 December 31,

Current assets (1)

$ 93.9 $ 71.7

Noncurrent assets (2)

4 unchanged sentences

1,966.5 2,331.4

(1) No assets due from non-guarantor subsidiaries were included as of March 31, 2024 and December 31, 2023, respectively.

(2) Includes assets due from non-guarantor subsidiaries of $2,554.6 million and $2,673.3 million as of March 31, 2024 and December 31, 2023, respectively.

(3) Includes liabilities due to non-guarantor subsidiaries of $1,115.7 million and $1,583.6 million as of March 31, 2024 and December 31, 2023, respectively.

(4) Includes liabilities due to non-guarantor subsidiaries of $157.1 million and $268.4 million as of March 31, 2024 and December 31, 2023, respectively.

(1) No assets due from non-guarantor subsidiaries were included as of June 30, 2024 and December 31, 2023, respectively.

(2) Includes assets due from non-guarantor subsidiaries of $2,554.2 million and $2,673.3 million as of June 30, 2024 and December 31, 2023, respectively.

(3) Includes liabilities due to non-guarantor subsidiaries of $1,606.3 million and $1,583.6 million as of June 30, 2024 and December 31, 2023, respectively.

(4) Includes liabilities due to non-guarantor subsidiaries of $155.8 million and $268.4 million as of June 30, 2024 and December 31, 2023, respectively.

The Parent Company Guarantor and Subsidiary Issuer do not have material results of operations on a combined basis.

5 unchanged sentences

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk during the quarter ended March 31, 2024.

There have been no material changes in our market risk during the quarter ended June 30, 2024.

For additional information refer to Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2023.

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 2. Management’s Discussion and Analysis