PENTAIR plc

Previous wording

The terms “us,” “we,” “our” or “Pentair” refer to Pentair plc and its consolidated subsidiaries. At Pentair, we believe the health of our world depends on reliable access to clean water. We deliver a comprehensive range of smart, sustainable water solutions to homes, businesses and industries around the world. Our industry-leading and proven portfolio of solutions enables our customers to access clean, safe water; reduce water consumption; and recover and reuse water. Whether it’s moving, improving or helping people enjoy water, we help manage life’s most essential resource. We are composed of three reporting segments: 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. We classify our operations into reporting segments based primarily on types of products offered and markets served:

Current wording

The terms “us,” “we,” “our” or “Pentair” refer to Pentair plc and its consolidated subsidiaries. At Pentair, we believe the health of our world depends on reliable access to clean water. We deliver a comprehensive range of smart, sustainable water solutions to homes, businesses and industries around the world. Our industry-leading and proven portfolio of solutions enables our customers to access clean, safe water; reduce water consumption; and recover and reuse water. Whether it’s moving, improving or helping people enjoy water, we help manage life’s most essential resource. We are composed of three reporting segments: Flow, Water Solutions and Pool. 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:

Previous wording

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:

Current wording

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:

Previous wording

•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. 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.

Current wording

•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 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.

Previous wording

•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.

Current wording

•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.

Previous wording

•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. 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.

Current wording

•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 inflationary cost increases to continue for the remainder of 2024.

Previous wording

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

Current wording

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

Previous wording

•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;

Current wording

•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 nine months of 2024; and

Previous wording

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

Current wording

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

Previous wording

•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.

Current wording

•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;

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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:

Current wording

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:

Previous wording

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

Current wording

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

Previous wording

•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.

Current wording

•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.

Previous wording

•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.

Current wording

•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.

Previous wording

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:

Current wording

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:

Previous wording

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

Current wording

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:

Previous wording

•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.

Current wording

•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.

Previous wording

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:

Current wording

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:

Previous wording

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

Current wording

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

Previous wording

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:

Current wording

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:

Previous wording

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:

Current wording

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:

Previous wording

•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; and

Current wording

•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; and

Previous wording

•unfavorable foreign currency effects compared to the prior year; and

Current wording

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

Previous wording

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:

Current wording

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:

Previous wording

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:

Current wording

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 by:

Previous wording

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:

Current wording

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:

Previous wording

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

Current wording

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

Previous wording

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:

Current wording

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:

Previous wording

•increased productivity driven by manufacturing leverage and transformation initiatives; and

Current wording

•increased productivity driven by transformation initiatives and manufacturing leverage; and

Previous wording

We experience seasonal cash flows primarily due to seasonal demand in a number of markets. 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 reversed in the second quarter as the seasonality of our businesses peaked and generated significant cash to fund our operations.

Current wording

We experience seasonal cash flows primarily due to seasonal demand in a number of markets. 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 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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

Previous wording

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. Borrowings under these credit facilities bear interest at variable rates.

Current wording

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.

Previous wording

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.

Current wording

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.