What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-22 compared with 2024-07-23 · 114 added, 116 removed, 314 unchanged (42% of the section changed)

32 unchanged sentences

Flow, Water Solutions and Pool.

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

For the first nine 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 six 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 nine 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 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.

During 2023 and the first nine 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.

2 unchanged sentences

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.

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

• During 2023 and the first nine 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.

While we have taken pricing actions and implemented transformation initiatives that we expect to improve productivity and offset cost increases, we anticipate supply chain pressures and inflationary cost increases to continue for the remainder of 2024.

While we have taken pricing actions and implemented transformation initiatives that we expect to improve productivity and offset cost increases, we anticipate inflationary cost increases to continue for the remainder of 2024.

• 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.

16 unchanged sentences

CONSOLIDATED RESULTS OF OPERATIONS

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

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

Three months ended

In millions June 30,

2024 June 30,

In millions September 30,

2024 September 30,

Change % / Point

13 unchanged sentences

% of net sales 18.1 % 17.9 % 0.2 pts

Other expense (income)

(0.1) (0.3) 0.2 N.M.

5 unchanged sentences

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,

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

Nine months ended

In millions September 30,

2024 September 30,

Change % / Point

13 unchanged sentences

% of net sales 19.6 % 18.3 % 1.3 pts

Other expense (income)

0.9 (4.1) 5.0 N.M.

Other expense (income) 0.8 (4.4) 5.2 N.M.

Net interest expense 73.4 91.7 (18.3) (20.0) %

5 unchanged sentences

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

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

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

5 unchanged sentences

Total (1.5) % (0.3) %

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:

The 1.5 and 0.3 percent decreases in net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven 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:

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

These decreases were partially offset by:

• increased selling prices in our Flow segment, in our commercial business within our Water Solutions segment and in our Pool segment to mitigate inflationary cost increases;

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

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

• favorable foreign currency effects compared to the third quarter of the prior year.

The 2.7 and 2.3 percentage point increases in gross profit as a percentage of net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

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

• 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.

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

• asset impairment and write-offs of $3.5 million recorded in the first nine months of 2024, compared to $5.3 million in the first nine months of 2023.

These increases were partially offset by:

1 unchanged sentence

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

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.

The 2.7 and 1.2 percentage point increases in SG&A as a percentage of net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

• transformation costs of $41.4 million in the first nine months of 2024, compared to $28.0 million in the first nine months of 2023;

• restructuring and other costs of $23.4 million in the third quarter of 2024, compared to $1.6 million in the third quarter of 2023, and $33.9 million in the first nine months of 2024, compared to $5.1 million in the first nine months of 2023;

• asset impairment charges of $5.7 million in third quarter of 2024, compared to $0.4 million in the third quarter of 2023, and $5.8 million in the first nine months of 2024, compared to $0.9 million in the first nine months of 2023.

These increases were partially offset by:

• a reduction in our legal accrual of $7.5 million in the first nine months of 2024, compared to an increase in our legal accrual of $2.2 million in the first nine months of 2023.

Net interest expense

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:

The 28.0 and 20.0 percent decreases in net interest expense in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

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

Provision for income taxes

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:

The 0.7 and 0.4 percentage point decreases in the effective tax rate in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

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

These decreases were partially offset by:

• the unfavorable mix of global earnings.

5 unchanged sentences

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

Three months ended Six months ended

In millions June 30,

2024 June 30,

2023 % / Point Change June 30,

2024 June 30,

Three months ended Nine months ended

In millions September 30,

2024 September 30,

2023 % / Point Change September 30,

2024 September 30,

2023 % / Point Change

4 unchanged sentences

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

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

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

4 unchanged sentences

Total (7.0) % (4.2) %

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:

The 7.0 and 4.2 percent decreases in net sales for Flow in the third quarter and first nine months, 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.

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

• increased selling prices to mitigate inflationary cost increases;

• favorable foreign currency effects compared to the third quarter of the prior year.

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 June 30, 2024 Six months ended June 30, 2024

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

3 unchanged sentences

Total 2.8 pts 3.1 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;

The 2.8 and 3.1 percentage point increases in segment income for Flow as a percentage of net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

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

• increased productivity mainly driven by transformation initiatives.

3 unchanged sentences

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

Three months ended Six months ended

In millions June 30,

2024 June 30,

2023 % / Point Change June 30,

2024 June 30,

Three months ended Nine months ended

In millions September 30,

2024 September 30,

2023 % / Point Change September 30,

2024 September 30,

2023 % / Point Change

3 unchanged sentences

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

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

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

4 unchanged sentences

Total (3.3) % (3.8) %

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.

The 3.3 and 3.8 percent decreases in net sales for Water Solutions in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

• decreased sales volume 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 nine months of 2024;

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

These decreases were partially offset by:

2 unchanged sentences

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 June 30, 2024 Six months ended June 30, 2024

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

4 unchanged sentences

Total (0.8) pts 0.5 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:

The 0.8 percentage point decrease in segment income for Water Solutions as a percentage of net sales in the third quarter of 2024 from 2023 was primarily driven by:

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

This decrease was partially offset by:

• increased productivity in our residential business mainly driven by transformation initiatives;

• increased selling prices in our commercial business to mitigate impacts of inflation;

• favorable foreign currency effects compared to the prior year.

The 0.5 percentage point increase in segment income for Water Solutions as a percentage of net sales in the first nine months of 2024 from 2023 was primarily driven b y:

• increased productivity mainly driven by transformation initiatives;

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

These increases were partially offset by:

This increase was partially offset by:

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

• unfavorable foreign currency effects compared to the prior year.

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

Three months ended Six months ended

In millions June 30,

2024 June 30,

2023 % / Point Change June 30,

2024 June 30,

Three months ended Nine months ended

In millions September 30,

2024 September 30,

2023 % / Point Change September 30,

2024 September 30,

2023 % / Point Change

3 unchanged sentences

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

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

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

3 unchanged sentences

Acquisition/Divestiture

Currency (0.1) (0.1)

Total 7.3 % 7.4 %

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:

The 7.3 and 7.4 percent increases in net sales for Pool in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

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

1 unchanged sentence

These increases were partially offset by:

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

• a product line exit that occurred in the first nine months 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 June 30, 2024 Six months ended June 30, 2024

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

4 unchanged sentences

Total 4.7 pts 2.0 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;

The 4.7 and 2.0 percentage point increases in segment income for Pool as a percentage of net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

• increased productivity driven by transformation initiatives and manufacturing leverage;

• increased selling prices to mitigate impacts of inflation.

2 unchanged sentences

BACKLOG OF ORDERS BY SEGMENT

In millions June 30,

In millions September 30,

2024 December 31,

16 unchanged sentences

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

We continued to generate significant cash to fund our operations in the third quarter of 2024.

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

Six months ended

In millions June 30,

2024 June 30,

Nine months ended

In millions September 30,

2024 September 30,

Net cash provided by (used for):

3 unchanged sentences

Operating activities

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.

Net cash provided by operating activities of continuing operations in the first nine 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 $580.5 million.

Additionally, we had a cash inflow of $80.9 million as a result of changes in net working capital, primarily due to lower inventory and accounts receivable balances.

These decreases were primarily related to supply chain efficiencies and improved lead times.

Net cash provided by operating activities of continuing operations in the first nine months of 2023 primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization and asset impairment, of $506.8 million.

Investing activities

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.

Net cash used for investing activities in the first nine months of 2024 primarily reflects capital expenditures of $51.7 million and cash paid upon the settlement of net investment hedges of $16.4 million.

Net cash used for investing activities in the first nine months of 2023 primarily reflects capital expenditures of $54.8 million, partially offset by proceeds from the sale of property and equipment of $5.4 million.

Financing activities

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.

Net cash used for financing activities in the first nine months of 2024 primarily relates to the repayment of $200.0 million term loans under the Senior Credit Facility, $162.5 million Term Loan Facility principal payments, dividend payments of $114.3 million and share repurchases of $100.0 million.

Net cash used for financing activities in the first nine months of 2023 primarily relates to net repayments of revolving long-term debt of $320.0 million and dividend payments of $108.9 million.

Free cash flow

7 unchanged sentences

The following table is a reconciliation of free cash flow:

Six months ended

In millions June 30,

2024 June 30,

Nine months ended

In millions September 30,

2024 September 30,

Net cash provided by operating activities of continuing operations

13 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, 2024, total availability under the Senior Credit Facility was $900.0 million.

As of September 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.

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 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 increased to $12.5 million on the last day of the third quarter of 2024.

During the nine months ended September 30, 2024, PFSA repaid the remaining $162.5 million of quarterly installments on the Term Loan Facility, such that PFSA is not required to make any further quarterly installment payments.

As of September 30, 2024, the remaining obligation of $825.0 million matures on July 28, 2027.

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.

3 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 June 30, 2024.

In addition to the Senior Credit Facility and the Term Loan Facility, we have various other credit facilities with an aggregate availability of $21.0 million, of which there were no outstanding borrowings at September 30, 2024.

Borrowings under these credit facilities bear interest at variable rates.

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.

We have $19.3 million of senior notes maturing in the next twelve months.

We classified this debt as long-term as of September 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 September 30, 2024, we had $94.8 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 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.

During the nine months ended September 30, 2024, we repurchased 1.2 million of our ordinary shares for $100.0 million.

As of September 30, 2024, we had $500.0 million available for share repurchases under this authorization.

Dividends payable

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.

On September 23, 2024, the Board of Directors declared a quarterly cash dividend of $0.23 per share, payable on November 1, 2024 to shareholders of record at the close of business on October 18, 2024.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $38.0 million at both September 30, 2024 and December 31, 2023, respectively.

We paid dividends in the first nine months of 2024 of $114.3 million, or $0.69 per ordinary share compared with $108.9 million, or $0.66 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 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,

The following table presents summarized financial information as of September 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 September 30,

2024 December 31,

7 unchanged sentences

1,861.3 2,331.4

(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.

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

(2) Includes assets due from non-guarantor subsidiaries of $2,562.6 million and $2,673.3 million as of September 30, 2024 and December 31, 2023, respectively.

(3) Includes liabilities due to non-guarantor subsidiaries of $1,858.3 million and $1,583.6 million as of September 30, 2024 and December 31, 2023, respectively.

(4) Includes liabilities due to non-guarantor subsidiaries of $162.7 million and $268.4 million as of September 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 June 30, 2024.

There have been no material changes in our market risk during the quarter ended September 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