filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
Pentair plc and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
| Three months ended | Nine months ended | ||||||||||||||||
| In millions, except per-share data | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Net sales | $ | 993.4 | $ | 1,008.8 | $ | 3,109.9 | $ | 3,119.9 | |||||||||
| Cost of goods sold | 600.2 | 637.0 | 1,888.7 | 1,966.8 | |||||||||||||
| Gross profit | 393.2 | 371.8 | 1,221.2 | 1,153.1 | |||||||||||||
| Selling, general and administrative expenses | 190.4 | 166.2 | 540.7 | 504.6 | |||||||||||||
| Research and development expenses | 22.9 | 25.5 | 71.8 | 76.3 | |||||||||||||
| Operating income | 179.9 | 180.1 | 608.7 | 572.2 | |||||||||||||
| Other expense (income) | |||||||||||||||||
| Net interest expense | 19.8 | 27.5 | 73.4 | 91.7 | |||||||||||||
| Other (income) expense | (0.1) | (0.3) | 0.8 | (4.4) | |||||||||||||
| Income from continuing operations before income taxes | 160.2 | 152.9 | 534.5 | 484.9 | |||||||||||||
| Provision for income taxes | 20.6 | 20.8 | 75.3 | 70.1 | |||||||||||||
| Net income from continuing operations | 139.6 | 132.1 | 459.2 | 414.8 | |||||||||||||
| Loss from discontinued operations, net of tax | — | — | (0.2) | (0.1) | |||||||||||||
| Net income | $ | 139.6 | $ | 132.1 | $ | 459.0 | $ | 414.7 | |||||||||
| Comprehensive income, net of tax | |||||||||||||||||
| Net income | $ | 139.6 | $ | 132.1 | $ | 459.0 | $ | 414.7 | |||||||||
| Changes in cumulative translation adjustment | 32.3 | (24.0) | 0.5 | (14.1) | |||||||||||||
| Changes in market value of derivative financial instruments, net of tax | (35.5) | 18.5 | (6.6) | 11.0 | |||||||||||||
| Comprehensive income | $ | 136.4 | $ | 126.6 | $ | 452.9 | $ | 411.6 | |||||||||
| Earnings per ordinary share | |||||||||||||||||
| Basic | |||||||||||||||||
| Continuing operations | $ | 0.84 | $ | 0.80 | $ | 2.77 | $ | 2.51 | |||||||||
| Discontinued operations | — | — | — | — | |||||||||||||
| Basic earnings per ordinary share | $ | 0.84 | $ | 0.80 | $ | 2.77 | $ | 2.51 | |||||||||
| Diluted | |||||||||||||||||
| Continuing operations | $ | 0.84 | $ | 0.79 | $ | 2.75 | $ | 2.50 | |||||||||
| Discontinued operations | — | — | — | — | |||||||||||||
| Diluted earnings per ordinary share | $ | 0.84 | $ | 0.79 | $ | 2.75 | $ | 2.50 | |||||||||
| Weighted average ordinary shares outstanding | |||||||||||||||||
| Basic | 165.6 | 165.2 | 165.7 | 165.0 | |||||||||||||
| Diluted | 167.0 | 166.6 | 167.2 | 166.2 | |||||||||||||
See accompanying notes to condensed consolidated financial statements.
Pentair plc and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
| September 30, 2024 | December 31, 2023 | |||||||
| In millions, except per-share data | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 218.1 | $ | 170.3 | ||||
| Accounts receivable, net of allowances of $9.9 and $11.2, respectively | 497.1 | 561.7 | ||||||
| Inventories | 645.9 | 677.7 | ||||||
| Other current assets | 128.0 | 159.3 | ||||||
| Total current assets | 1,489.1 | 1,569.0 | ||||||
| Property, plant and equipment, net | 358.5 | 362.0 | ||||||
| Other assets | ||||||||
| Goodwill | 3,280.8 | 3,274.6 | ||||||
| Intangibles, net | 1,002.8 | 1,042.4 | ||||||
| Other non-current assets | 341.4 | 315.3 | ||||||
| Total other assets | 4,625.0 | 4,632.3 | ||||||
| Total assets | $ | 6,472.6 | $ | 6,563.3 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 286.4 | $ | 278.9 | ||||
| Employee compensation and benefits | 116.7 | 125.4 | ||||||
| Other current liabilities | 525.7 | 545.3 | ||||||
| Total current liabilities | 928.8 | 949.6 | ||||||
| Other liabilities | ||||||||
| Long-term debt | 1,628.4 | 1,988.3 | ||||||
| Pension and other post-retirement compensation and benefits | 70.9 | 73.6 | ||||||
| Deferred tax liabilities | 40.3 | 40.0 | ||||||
| Other non-current liabilities | 305.4 | 294.7 | ||||||
| Total liabilities | 2,973.8 | 3,346.2 | ||||||
| Commitments and contingencies (Note 15) | ||||||||
| Equity | ||||||||
| Ordinary shares $0.01 par value, 426.0 authorized, 165.2 and 165.3 issued at September 30, 2024 and December 31, 2023, respectively | 1.7 | 1.7 | ||||||
| Additional paid-in capital | 1,536.7 | 1,593.6 | ||||||
| Retained earnings | 2,210.9 | 1,866.2 | ||||||
| Accumulated other comprehensive loss | (250.5) | (244.4) | ||||||
| Total equity | 3,498.8 | 3,217.1 | ||||||
| Total liabilities and equity | $ | 6,472.6 | $ | 6,563.3 |
See accompanying notes to condensed consolidated financial statements.
Pentair plc and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Nine months ended | ||||||||
| In millions | September 30, 2024 | September 30, 2023 | ||||||
| Operating activities | ||||||||
| Net income | $ | 459.0 | $ | 414.7 | ||||
| Loss from discontinued operations, net of tax | 0.2 | 0.1 | ||||||
| Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities | ||||||||
| Equity income of unconsolidated subsidiaries | (1.7) | (2.1) | ||||||
| Depreciation | 45.3 | 44.3 | ||||||
| Amortization | 40.4 | 41.5 | ||||||
| Deferred income taxes | 3.6 | (45.0) | ||||||
| Share-based compensation | 26.3 | 21.3 | ||||||
| Asset impairment and write-offs | 9.3 | 6.2 | ||||||
| Gain on sale of assets | — | (3.4) | ||||||
| Changes in assets and liabilities, net of effects of business acquisitions | ||||||||
| Accounts receivable | 66.2 | 23.9 | ||||||
| Inventories | 30.1 | 67.8 | ||||||
| Other current assets | 5.0 | (14.7) | ||||||
| Accounts payable | 7.3 | (63.8) | ||||||
| Employee compensation and benefits | (8.0) | 11.7 | ||||||
| Other current liabilities | (19.7) | (0.2) | ||||||
| Other non-current assets and liabilities | 17.1 | — | ||||||
| Net cash provided by operating activities of continuing operations | 680.4 | 502.3 | ||||||
| Net cash used for operating activities of discontinued operations | (0.2) | (1.6) | ||||||
| Net cash provided by operating activities | 680.2 | 500.7 | ||||||
| Investing activities | ||||||||
| Capital expenditures | (51.7) | (54.8) | ||||||
| Proceeds from sale of property and equipment | 0.4 | 5.4 | ||||||
| Payments upon the settlement of net investment hedges | (16.4) | — | ||||||
| Acquisitions, net of cash acquired | — | (0.6) | ||||||
| Other | (0.5) | 4.1 | ||||||
| Net cash used for investing activities | (68.2) | (45.9) | ||||||
| Financing activities | ||||||||
| Net repayments of revolving long-term debt | — | (320.0) | ||||||
| Repayments of long-term debt | (362.5) | (6.3) | ||||||
| Shares issued to employees, net of shares withheld | 16.8 | 9.0 | ||||||
| Repurchases of ordinary shares | (100.0) | — | ||||||
| Dividends paid | (114.3) | (108.9) | ||||||
| Net cash used for financing activities | (560.0) | (426.2) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (4.2) | (0.5) | ||||||
| Change in cash and cash equivalents | 47.8 | 28.1 | ||||||
| Cash and cash equivalents, beginning of period | 170.3 | 108.9 | ||||||
| Cash and cash equivalents, end of period | $ | 218.1 | $ | 137.0 |
See accompanying notes to condensed consolidated financial statements.
Pentair plc and Subsidiaries
Condensed Consolidated Statements of Changes in Equity (Unaudited)
| In millions | Ordinary shares | Additional paid-in capital | Retained earnings | Accumulated other comprehensive (loss) income | Total | ||||||||||||||||||||||||||||||
| Number | Amount | ||||||||||||||||||||||||||||||||||
| Balance - December 31, 2023 | 165.3 | $ | 1.7 | $ | 1,593.6 | $ | 1,866.2 | $ | (244.4) | $ | 3,217.1 | ||||||||||||||||||||||||
| Net income | — | — | — | 133.3 | — | 133.3 | |||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | 1.0 | 1.0 | |||||||||||||||||||||||||||||
| Dividends declared, $0.23 per share | — | — | — | (38.2) | — | (38.2) | |||||||||||||||||||||||||||||
| Exercise of options, net of shares tendered for payment | 0.4 | — | 15.2 | — | — | 15.2 | |||||||||||||||||||||||||||||
| Issuance of restricted shares, net of cancellations | 0.4 | — | (4.0) | — | — | (4.0) | |||||||||||||||||||||||||||||
| Shares surrendered by employees to pay taxes | (0.1) | — | (5.1) | — | — | (5.1) | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | 7.9 | — | — | 7.9 | |||||||||||||||||||||||||||||
| Balance - March 31, 2024 | 166.0 | $ | 1.7 | $ | 1,607.6 | $ | 1,961.3 | $ | (243.4) | $ | 3,327.2 | ||||||||||||||||||||||||
| Net income | — | — | — | 186.1 | — | 186.1 | |||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | (3.9) | (3.9) | |||||||||||||||||||||||||||||
| Dividends declared, $0.23 per share | — | — | — | (38.1) | — | (38.1) | |||||||||||||||||||||||||||||
| Share repurchases | (0.6) | — | (50.0) | — | — | (50.0) | |||||||||||||||||||||||||||||
| Exercise of options, net of shares tendered for payment | 0.1 | — | 3.7 | — | — | 3.7 | |||||||||||||||||||||||||||||
| Shares surrendered by employees to pay taxes | — | — | (0.5) | — | — | (0.5) | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | 8.4 | — | — | 8.4 | |||||||||||||||||||||||||||||
| Balance - June 30, 2024 | 165.5 | $ | 1.7 | $ | 1,569.2 | $ | 2,109.3 | $ | (247.3) | $ | 3,432.9 | ||||||||||||||||||||||||
| Net income | — | — | — | 139.6 | — | 139.6 | |||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | (3.2) | (3.2) | |||||||||||||||||||||||||||||
| Dividends declared, $0.23 per share | — | — | — | (38.0) | — | (38.0) | |||||||||||||||||||||||||||||
| Share repurchase | (0.6) | — | (50.0) | — | — | (50.0) | |||||||||||||||||||||||||||||
| Exercise of options, net of shares tendered for payment | 0.3 | — | 8.0 | — | — | 8.0 | |||||||||||||||||||||||||||||
| Shares surrendered by employees to pay taxes | — | — | (0.5) | — | — | (0.5) | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | 10.0 | — | — | 10.0 | |||||||||||||||||||||||||||||
| Balance - September 30, 2024 | 165.2 | $ | 1.7 | $ | 1,536.7 | $ | 2,210.9 | $ | (250.5) | $ | 3,498.8 |
| In millions | Ordinary shares | Additional paid-in capital | Retained earnings | Accumulated other comprehensive (loss) income | Total | ||||||||||||||||||
| Number | Amount | ||||||||||||||||||||||
| Balance - December 31, 2022 | 164.5 | $ | 1.7 | $ | 1,554.9 | $ | 1,390.5 | $ | (239.0) | $ | 2,708.1 | ||||||||||||
| Net income | — | — | — | 129.7 | — | 129.7 | |||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | 4.9 | 4.9 | |||||||||||||||||
| Dividends declared, $0.22 per share | — | — | — | (36.3) | — | (36.3) | |||||||||||||||||
| Exercise of options, net of shares tendered for payment | 0.1 | — | 2.5 | — | — | 2.5 | |||||||||||||||||
| Issuance of restricted shares, net of cancellations | 0.5 | — | (2.3) | — | — | (2.3) | |||||||||||||||||
| Shares surrendered by employees to pay taxes | (0.1) | — | (4.3) | — | — | (4.3) | |||||||||||||||||
| Share-based compensation | — | — | 7.2 | — | — | 7.2 | |||||||||||||||||
| Balance - March 31, 2023 | 165.0 | $ | 1.7 | $ | 1,558.0 | $ | 1,483.9 | $ | (234.1) | $ | 2,809.5 | ||||||||||||
| Net income | — | — | — | 152.9 | — | 152.9 | |||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | (2.5) | (2.5) | |||||||||||||||||
| Dividends declared, $0.22 per share | — | — | — | (36.4) | — | (36.4) | |||||||||||||||||
| Exercise of options, net of shares tendered for payment | 0.1 | — | 6.3 | — | — | 6.3 | |||||||||||||||||
| Shares surrendered by employees to pay taxes | — | — | (1.4) | — | — | (1.4) | |||||||||||||||||
| Share-based compensation | — | — | 6.9 | — | — | 6.9 | |||||||||||||||||
| Balance - June 30, 2023 | 165.1 | $ | 1.7 | $ | 1,569.8 | $ | 1,600.4 | $ | (236.6) | $ | 2,935.3 | ||||||||||||
| Net income | — | — | — | 132.1 | — | 132.1 | |||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | (5.5) | (5.5) | |||||||||||||||||
| Dividends declared, $0.22 per share | — | — | — | (36.4) | — | (36.4) | |||||||||||||||||
| Exercise of options, net of shares tendered for payment | 0.2 | — | 8.4 | — | — | 8.4 | |||||||||||||||||
| Shares surrendered by employees to pay taxes | — | — | (0.2) | — | — | (0.2) | |||||||||||||||||
| Share-based compensation | — | — | 7.2 | — | — | 7.2 | |||||||||||||||||
| Balance - September 30, 2023 | 165.3 | $ | 1.7 | $ | 1,585.2 | $ | 1,696.1 | $ | (242.1) | $ | 3,040.9 |
See accompanying notes to condensed consolidated financial statements.
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
**1.**Basis of Presentation and Responsibility for Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements of Pentair plc and its subsidiaries (“we,” “us,” “our,” “Pentair,” or the “Company”) have been prepared following the requirements of the United States (“U.S.”) Securities and Exchange Commission for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (“GAAP”) can be condensed or omitted.
We are responsible for the unaudited condensed consolidated financial statements included in this document. The financial statements include all normal recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. As these are condensed financial statements, one should also read our consolidated financial statements and notes thereto, which are included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Revenues, expenses, cash flows, assets and liabilities can and do vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be indicative of those for a full year.
Our fiscal year ends on December 31. We report our interim quarterly periods on a calendar quarter basis.
Recent U.S. Securities and Exchange Commission (“SEC”) final rules
In March 2024, the SEC issued the final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. In April 2024, the SEC voluntarily stayed the new rules as a result of pending legal challenges. These rules, if adopted, will require registrants to disclose certain climate-related information, including Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics, in registration statements and annual reports, when material. Disclosure requirements, absent the results of pending legal challenges, may begin phasing in with our annual reporting for the year ending December 31, 2025. We are currently evaluating the impact the rules will have on our disclosures.
**2.**Revenue
We disaggregate our revenue from contracts with customers by segment, geographic location and vertical market, as we believe these best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Refer to Note 14 for revenue disaggregated by segment.
Geographic net sales information, based on geographic destination of the sale, was as follows:
| Three months ended | Nine months ended | ||||||||||||||||
| In millions | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| U.S. | $ | 687.6 | $ | 696.6 | $ | 2,166.4 | $ | 2,170.0 | |||||||||
| Western Europe | 117.0 | 114.7 | 375.8 | 362.0 | |||||||||||||
| Developing (1) | 129.9 | 142.8 | 391.9 | 406.4 | |||||||||||||
| Other Developed (2) | 58.9 | 54.7 | 175.8 | 181.5 | |||||||||||||
| Consolidated net sales | $ | 993.4 | $ | 1,008.8 | $ | 3,109.9 | $ | 3,119.9 | |||||||||
| (1) Developing includes China, Eastern Europe, Latin America, the Middle East and Southeast Asia. | |||||||||||||||||
| (2) Other Developed includes Australia, Canada and Japan. |
Vertical market net sales information was as follows:
| Three months ended | Nine months ended | ||||||||||||||||
| In millions | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Residential | $ | 519.5 | $ | 513.1 | $ | 1,644.1 | $ | 1,615.5 | |||||||||
| Commercial | 282.7 | 295.2 | 864.9 | 913.3 | |||||||||||||
| Industrial | 191.2 | 200.5 | 600.9 | 591.1 | |||||||||||||
| Consolidated net sales | $ | 993.4 | $ | 1,008.8 | $ | 3,109.9 | $ | 3,119.9 | |||||||||
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Performance obligations
As of September 30, 2024, we had $91.4 million of remaining performance obligations on contracts with an original expected duration of one year or more. We expect to recognize the majority of our remaining performance obligations on these contracts within the next 12 to 18 months.
Contract assets and liabilities
Contract assets and liabilities consisted of the following:
| In millions | September 30, 2024 | December 31, 2023 | $ Change | % Change | |||||||||||||
| Contract assets | $ | 53.5 | $ | 70.8 | $ | (17.3) | (24.4) | % | |||||||||
| Contract liabilities | 40.4 | 53.7 | (13.3) | (24.8) | % | ||||||||||||
| Net contract assets | $ | 13.1 | $ | 17.1 | $ | (4.0) | (23.4) | % |
The $4.0 million decrease in net contract assets from December 31, 2023 to September 30, 2024 was primarily the result of timing of milestone payments. Approximately 95% of our contract liabilities at December 31, 2023 were recognized in revenue in the first nine months of 2024.
3. Share Plans
Total share-based compensation expense for the three and nine months ended September 30, 2024 and 2023 was as follows:
| Three months ended | Nine months ended | ||||||||||||||||
| In millions | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Restricted stock units | $ | 4.4 | $ | 3.9 | $ | 12.5 | $ | 11.3 | |||||||||
| Stock options | 1.3 | 1.1 | 4.0 | 3.2 | |||||||||||||
| Performance share units | 4.3 | 2.2 | 9.8 | 6.8 | |||||||||||||
| Total share-based compensation expense | $ | 10.0 | $ | 7.2 | $ | 26.3 | $ | 21.3 |
In the first quarter of 2024, we issued our annual share-based compensation grants under the Pentair plc 2020 Share and Incentive Plan to eligible employees. The total number of awards issued was approximately 0.5 million, of which 0.2 million were restricted stock units (“RSUs”), 0.2 million were stock options and 0.1 million were performance share units (“PSUs”). The weighted-average grant date fair value of the RSUs, stock options and PSUs issued was $75.70, $25.10 and $71.83, respectively.
We estimated the fair value of each stock option award issued in the annual share-based compensation grant using a Black-Scholes option pricing model, modified for dividends and using the following assumptions:
| 2024 Annual Grant | |||||
| Risk-free interest rate | 4.44 | % | |||
| Expected dividend yield | 1.43 | % | |||
| Expected share price volatility | 30.90 | % | |||
| Expected term (years) | 6.5 |
These estimates require us to make assumptions based on historical results, observance of trends in our share price, changes in option exercise behavior, future expectations and other relevant factors. If other assumptions had been used, share-based compensation expense, as calculated and recorded under the accounting guidance, could have been affected. We based the expected life assumption on historical experience as well as the terms and vesting periods of the options granted. For purposes of determining expected share price volatility, we considered a rolling average of historical volatility measured over a period approximately equal to the expected option term. The risk-free interest rate for periods that coincide with the expected life of the options is based on the U.S. Treasury Department yield curve in effect at the time of grant.
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
4. Restructuring and Transformation Program
In 2021, we launched and committed resources to a program designed to accelerate growth and drive margin expansion through transformation of our business model to drive operational excellence, reduce complexity and streamline our processes (the “Transformation Program”). The Transformation Program is structured in multiple phases and is expected to empower us to work more efficiently and optimize our business to better serve our customers while meeting our financial objectives.
During the nine months ended September 30, 2024, we initiated and continued execution of activities associated with our Transformation Program as well as initiated and continued certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. Restructuring and Transformation Program initiatives included a reduction in hourly and salaried headcount of approximately 475 employees during the nine months ended September 30, 2024.
Restructuring and transformation-related costs included within Cost of goods sold and Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income included the following:
| Three months ended | Nine months ended | ||||||||||||||||
| In millions | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Restructuring Initiatives | |||||||||||||||||
| Severance and related costs | $ | 17.4 | $ | 1.1 | $ | 26.8 | $ | 4.5 | |||||||||
| Other restructuring costs and related adjustments (1) | 10.9 | 1.6 | 11.8 | 2.1 | |||||||||||||
| Total restructuring costs | 28.3 | 2.7 | 38.6 | 6.6 | |||||||||||||
| Transformation Program | |||||||||||||||||
| Severance and related costs | — | 2.9 | 0.7 | 5.1 | |||||||||||||
| Other transformation costs (2) | 15.4 | 11.0 | 43.5 | 23.3 | |||||||||||||
| Total transformation costs | 15.4 | 13.9 | 44.2 | 28.4 | |||||||||||||
| Total restructuring and transformation costs | $ | 43.7 | $ | 16.6 | $ | 82.8 | $ | 35.0 | |||||||||
| (1) Other restructuring costs and related adjustments primarily consist of certain accruals and related refinements as well as various contract termination costs, asset impairments and inventory write-offs associated with business and product line exits. | |||||||||||||||||
| (2) Other transformation costs primarily consist of professional services, project management related costs, asset impairments and inventory write-offs, partially offset by gain on sale of assets. |
Restructuring and transformation costs by reportable segment as well as Corporate and other were as follows:
| Three months ended | Nine months ended | ||||||||||||||||
| In millions | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Flow | $ | 6.0 | $ | 1.6 | $ | 11.0 | $ | 2.8 | |||||||||
| Water Solutions | 16.2 | 2.7 | 17.7 | 1.6 | |||||||||||||
| Pool | 4.7 | 1.7 | 10.1 | 6.9 | |||||||||||||
| Corporate and other | 16.8 | 10.6 | 44.0 | 23.7 | |||||||||||||
| Total restructuring and transformation costs | $ | 43.7 | $ | 16.6 | $ | 82.8 | $ | 35.0 |
Activity related to accrued severance and related costs recorded in Other current liabilities in the Condensed Consolidated Balance Sheets is summarized as follows for the nine months ended September 30, 2024:
| In millions | September 30, 2024 | ||||
| Beginning balance | $ | 13.4 | |||
| Costs incurred | 27.5 | ||||
| Cash payments and other | (19.8) | ||||
| Ending balance | $ | 21.1 |
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
5. Earnings Per Share
Basic and diluted earnings per share were calculated as follows:
| Three months ended | Nine months ended | ||||||||||||||||
| In millions, except per-share data | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Net income | $ | 139.6 | $ | 132.1 | $ | 459.0 | $ | 414.7 | |||||||||
| Net income from continuing operations | $ | 139.6 | $ | 132.1 | $ | 459.2 | $ | 414.8 | |||||||||
| Weighted average ordinary shares outstanding | |||||||||||||||||
| Basic | 165.6 | 165.2 | 165.7 | 165.0 | |||||||||||||
| Dilutive impact of stock options, restricted stock units and performance share units | 1.4 | 1.4 | 1.5 | 1.2 | |||||||||||||
| Diluted | 167.0 | 166.6 | 167.2 | 166.2 | |||||||||||||
| Earnings per ordinary share | |||||||||||||||||
| Basic | |||||||||||||||||
| Continuing operations | $ | 0.84 | $ | 0.80 | $ | 2.77 | $ | 2.51 | |||||||||
| Discontinued operations | — | — | — | — | |||||||||||||
| Basic earnings per ordinary share | $ | 0.84 | $ | 0.80 | $ | 2.77 | $ | 2.51 | |||||||||
| Diluted | |||||||||||||||||
| Continuing operations | $ | 0.84 | $ | 0.79 | $ | 2.75 | $ | 2.50 | |||||||||
| Discontinued operations | — | — | — | — | |||||||||||||
| Diluted earnings per ordinary share | $ | 0.84 | $ | 0.79 | $ | 2.75 | $ | 2.50 | |||||||||
| Anti-dilutive stock options excluded from the calculation of diluted earnings per share | 0.1 | 0.2 | 0.2 | 0.3 |
6. Accounts Receivable
All trade receivables are reported on our Condensed Consolidated Balance Sheets at the outstanding principal amount adjusted for any allowance for credit losses and write-offs, net of recoveries. We record an allowance for credit losses, reducing our receivables balance to an amount we estimate is collectible from our customers. Estimates used in determining the allowance for credit losses are based on current trends, aging of accounts receivable, periodic credit evaluations of our customers’ financial condition, and historical collection experience as well as reasonable and supportable forecasts of future economic conditions. Write-offs are recorded at the time all collection efforts have been exhausted. We generally do not require collateral. We review our allowance for credit losses on a quarterly basis.
Activity related to our allowance for credit losses is summarized as follows for the nine months ended September 30, 2024:
| In millions | September 30, 2024 | |||||||
| Beginning balance | $ | 11.2 | ||||||
| Bad debt expense | (0.6) | |||||||
| Write-offs, net of recoveries | (1.2) | |||||||
| Other (1) | 0.5 | |||||||
| Ending balance | $ | 9.9 | ||||||
| (1) Other amounts are primarily the effects of changes in currency translation and the impact of allowance for credits. |
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
7. Supplemental Balance Sheet Information
| In millions | September 30, 2024 | December 31, 2023 | ||||||
| Inventories | ||||||||
| Raw materials and supplies | $ | 337.7 | $ | 369.1 | ||||
| Work-in-process | 93.0 | 97.1 | ||||||
| Finished goods | 215.2 | 211.5 | ||||||
| Total inventories | $ | 645.9 | $ | 677.7 | ||||
| Other current assets | ||||||||
| Cost in excess of billings | $ | 53.5 | $ | 70.8 | ||||
| Prepaid expenses | 67.8 | 55.2 | ||||||
| Other current assets | 6.7 | 33.3 | ||||||
| Total other current assets | $ | 128.0 | $ | 159.3 | ||||
| Property, plant and equipment, net | ||||||||
| Land and land improvements | $ | 32.5 | $ | 32.3 | ||||
| Buildings and leasehold improvements | 226.5 | 225.5 | ||||||
| Machinery and equipment | 697.0 | 669.9 | ||||||
| Capitalized software | 92.4 | 70.5 | ||||||
| Construction in progress | 40.5 | 55.8 | ||||||
| Total property, plant and equipment | 1,088.9 | 1,054.0 | ||||||
| Accumulated depreciation and amortization | 730.4 | 692.0 | ||||||
| Total property, plant and equipment, net | $ | 358.5 | $ | 362.0 | ||||
| Other non-current assets | ||||||||
| Right-of-use lease assets | $ | 108.0 | $ | 102.0 | ||||
| Deferred income taxes | 135.4 | 113.2 | ||||||
| Deferred compensation plan assets | 29.2 | 26.1 | ||||||
| Other non-current assets | 68.8 | 74.0 | ||||||
| Total other non-current assets | $ | 341.4 | $ | 315.3 | ||||
| Other current liabilities | ||||||||
| Dividends payable | $ | 38.0 | $ | 38.0 | ||||
| Accrued warranty | 68.2 | 65.0 | ||||||
| Accrued rebates and incentives | 196.7 | 181.8 | ||||||
| Accrued freight | 20.0 | 20.4 | ||||||
| Billings in excess of cost | 33.9 | 46.9 | ||||||
| Current lease liability | 25.9 | 26.2 | ||||||
| Income taxes payable | 20.3 | 20.7 | ||||||
| Accrued restructuring | 21.1 | 13.4 | ||||||
| Interest payable | 12.4 | 29.7 | ||||||
| Other current liabilities | 89.2 | 103.2 | ||||||
| Total other current liabilities | $ | 525.7 | $ | 545.3 | ||||
| Other non-current liabilities | ||||||||
| Long-term lease liability | $ | 87.2 | $ | 79.1 | ||||
| Income taxes payable | 35.6 | 35.6 | ||||||
| Self-insurance liabilities | 53.3 | 51.9 | ||||||
| Deferred compensation plan liabilities | 29.2 | 26.1 | ||||||
| Foreign currency contract liabilities | 60.7 | 70.0 | ||||||
| Other non-current liabilities | 39.4 | 32.0 | ||||||
| Total other non-current liabilities | $ | 305.4 | $ | 294.7 |
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
8. Goodwill and Other Identifiable Intangible Assets
The changes in the carrying amount of goodwill by reportable segment were as follows:
| In millions | December 31, 2023 | Foreign Currency Translation | September 30, 2024 | ||||||||||||||
| Flow | $ | 767.1 | $ | 5.1 | $ | 772.2 | |||||||||||
| Water Solutions | 1,400.6 | 1.1 | 1,401.7 | ||||||||||||||
| Pool | 1,106.9 | — | 1,106.9 | ||||||||||||||
| Total goodwill | $ | 3,274.6 | $ | 6.2 | $ | 3,280.8 |
Identifiable intangible assets consisted of the following:
| September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| In millions | Cost | Accumulated amortization | Net | Cost | Accumulated amortization | Net | |||||||||||||||||
| Definite-life intangibles | |||||||||||||||||||||||
| Customer relationships | $ | 1,108.1 | $ | (399.6) | $ | 708.5 | $ | 1,106.2 | $ | (361.8) | $ | 744.4 | |||||||||||
| Proprietary technology and patents | 89.8 | (47.7) | 42.1 | 89.7 | (43.2) | 46.5 | |||||||||||||||||
| Total definite-life intangibles | 1,197.9 | (447.3) | 750.6 | 1,195.9 | (405.0) | 790.9 | |||||||||||||||||
| Indefinite-life intangibles | |||||||||||||||||||||||
| Trade names | 252.2 | — | 252.2 | 251.5 | — | 251.5 | |||||||||||||||||
| Total intangibles | $ | 1,450.1 | $ | (447.3) | $ | 1,002.8 | $ | 1,447.4 | $ | (405.0) | $ | 1,042.4 |
Identifiable intangible asset amortization expense was $13.5 million and $13.8 million for the three months ended September 30, 2024 and 2023, and $40.4 million and $41.5 million for the nine months ended September 30, 2024 and 2023, respectively.
Estimated future amortization expense for identifiable intangible assets during the remainder of 2024 and the next five years is as follows:
| Q4 | ||||||||||||||||||||
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | |||||||||||||||
| Estimated amortization expense | $ | 13.6 | $ | 54.2 | $ | 52.9 | $ | 51.6 | $ | 49.0 | $ | 48.6 |
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
9. Debt
Debt and the average interest rates on debt outstanding were as follows:
| In millions | Average interest rate as of September 30, 2024 | Maturity Year | September 30, 2024 | December 31, 2023 | ||||||||||
| Revolving credit facility (Senior Credit Facility) | 6.046% | 2026 | $ | — | $ | — | ||||||||
| Term Loan Facility | 6.446% | 2023 - 2027 | 825.0 | 987.5 | ||||||||||
| Term loans (Senior Credit Facility) | N/A | 2024 | — | 200.0 | ||||||||||
| Senior notes - fixed rate (1) | 4.650% | 2025 | 19.3 | 19.3 | ||||||||||
| Senior notes - fixed rate (1) | 4.500% | 2029 | 400.0 | 400.0 | ||||||||||
| Senior notes - fixed rate (1) | 5.900% | 2032 | 400.0 | 400.0 | ||||||||||
| Unamortized debt issuance costs and discounts | N/A | N/A | (15.9) | (18.5) | ||||||||||
| Total debt | $ | 1,628.4 | $ | 1,988.3 | ||||||||||
| (1) Senior notes are guaranteed as to payment by Pentair plc. |
Pentair, Pentair Finance S.à r.l (“PFSA”) and Pentair, Inc. 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. 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 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 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.
Our debt agreements contain various financial covenants, but the most restrictive covenants are contained in the Senior Credit Facility and the Term Loan Facility. The Senior Credit Facility and the Term Loan Facility contain covenants requiring us not to permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash and cash equivalents in excess of $5.0 million but not to exceed $250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense (“EBITDA”) on the last day of any period of four consecutive fiscal quarters (each, a “testing period”) to exceed 3.75 to 1.00 (or, at PFSA’s election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection with certain material acquisitions) (the “Leverage Ratio”) and (ii) the ratio of our EBITDA to our consolidated interest expense, for the same period to be less than 3.00 to 1.00 as of the end of each fiscal quarter. For purposes of the Leverage Ratio, the Senior Credit Facility and the Term Loan Facility provide for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and liquidations during the period to which such calculation relates.
In addition to the Senior Credit Facility and the Term Loan Facility, we have various other credit facilities with an aggregate availability of $21.0 million, of which there were no outstanding borrowings at September 30, 2024. Borrowings under these credit facilities bear interest at variable rates.
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
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.
Debt outstanding, excluding unamortized issuance costs and discounts, at September 30, 2024 matures on a calendar year basis as follows:
| Q4 | |||||||||||||||||||||||||||||
| In millions | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | |||||||||||||||||||||
| Contractual debt obligation maturities | $ | — | $ | 19.3 | $ | — | $ | 825.0 | $ | — | $ | 400.0 | $ | 400.0 | $ | 1,644.3 | |||||||||||||
10. Derivatives and Financial Instruments
Derivative financial instruments
We are exposed to market risk related to changes in foreign currency exchange rates and interest rates on our variable rate indebtedness. To manage the volatility related to these exposures, we periodically enter into a variety of derivative financial instruments. Our objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates or variable interest rates. The derivative contracts contain credit risk to the extent that our bank counterparties may be unable to meet the terms of the agreements. The amount of such credit risk is generally limited to the unrealized gains, if any, in such contracts. Such risk is minimized by limiting those counterparties to major financial institutions of high credit quality.
Foreign currency contracts
We conduct business in various locations throughout the world and are subject to market risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar. We manage our economic and transaction exposure to certain market-based risks through the use of foreign currency derivative financial instruments. Our objective in holding these derivatives is to reduce the volatility of net earnings and cash flows associated with changes in foreign currency exchange rates. The majority of our foreign currency contracts have an original maturity date of less than one year.
At September 30, 2024 and December 31, 2023, we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of $15.7 million and $23.9 million, respectively. The impact of these contracts on the Condensed Consolidated Statements of Operations and Comprehensive Income was not material for any period presented.
Cross currency swaps
At September 30, 2024 and December 31, 2023, we had outstanding cross currency swap agreements with a combined notional amount of $950.0 million and $940.2 million, respectively. The agreements are accounted for as either cash flow hedges, to hedge foreign currency fluctuations on certain intercompany debt, or as net investment hedges to manage our exposure to fluctuations in the Euro-U.S. Dollar exchange rate. We had deferred foreign currency losses of $39.9 million and $51.6 million at September 30, 2024 and December 31, 2023, respectively, recorded in Accumulated other comprehensive loss associated with our cross currency swap activity. The periodic interest settlements related to our cross currency swap agreements are classified as operating activities. The cash flows that relate to principal balances are classified as financing activities for the cash flow hedges on intercompany debt and investing activities for the net investment hedges.
In August 2024, we entered into a transaction to early terminate and cash settle a €150 million cross currency swap agreement, resulting in a net cash payment of $16.1 million, of which $16.4 million is included in investing activities and $0.3 million of interest income is included within operating activities on the Consolidated Statements of Cash Flows. Subsequent to the termination, we entered into new cross currency swap agreements with euro notional amounts matching the original swap agreement.
Hedging of variable interest rates
We manage our exposure to certain interest rate risks related to our variable rate debt through the use of interest rate swaps and collars. We enter into these agreements to hedge the variability of interest expense and cash flows attributable to changes in interest rates of our variable rate debt. As of September 30, 2024, we had an aggregate notional amount of $300.0 million and $200.0 million in interest rate swaps and collars, respectively, that are designated as cash flow hedges.
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Unrealized gains and losses related to the fair value of the interest rate swaps are recorded in Accumulated other comprehensive loss on our Condensed Consolidated Balance Sheets. We had an unrealized loss of $1.7 million and an unrealized gain of $0.3 million at September 30, 2024 and December 31, 2023, respectively, recorded in Accumulated other comprehensive loss associated with our interest rate swap and collar activity. The periodic interest settlements related to our interest rate swaps and collars are classified as operating activities.
Fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:
| Level 1: | Valuation is based on observable inputs such as quoted market prices (unadjusted) for identical assets or liabilities in active markets. | |||||||
| Level 2: | Valuation is based on inputs such as quoted market prices for similar assets or liabilities in active markets or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |||||||
| Level 3: | Valuation is based upon other unobservable inputs that are significant to the fair value measurement. |
In making fair value measurements, observable market data must be used when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
Fair value of financial instruments
The following methods were used to estimate the fair values of each class of financial instrument:
-
short-term financial instruments (cash and cash equivalents, accounts and notes receivable, accounts payable and variable-rate debt) — recorded amount approximates fair value because of the short maturity period;
-
long-term fixed-rate debt, including current maturities — fair value is based on market quotes available for issuance of debt with similar terms, which are inputs that are classified as Level 2 in the valuation hierarchy defined above;
-
foreign currency contracts, interest rate swap and collar agreements — fair values are determined through the use of models that consider various assumptions, including time value, yield curves, as well as other relevant economic measures, which are inputs that are classified as Level 2 in the valuation hierarchy defined above; and
-
deferred compensation plan assets (mutual funds, common/collective trusts and cash equivalents for payment of certain non-qualified benefits for retired, terminated and active employees) — fair value of mutual funds and cash equivalents are based on quoted market prices in active markets that are classified as Level 1 in the valuation hierarchy defined above; fair value of common/collective trusts are valued at net asset value (“NAV”), which is based on the fair value of the underlying securities owned by the fund and divided by the number of shares outstanding.
The recorded amounts and estimated fair values of total debt, excluding unamortized issuance costs and discounts, were as follows:
| September 30, 2024 | December 31, 2023 | ||||||||||||||||
| In millions | Recorded Amount | Fair Value | Recorded Amount | Fair Value | |||||||||||||
| Variable rate debt | $ | 825.0 | $ | 825.0 | $ | 1,187.5 | $ | 1,187.5 | |||||||||
| Fixed rate debt | 819.3 | 834.9 | 819.3 | 824.5 | |||||||||||||
| Total debt | $ | 1,644.3 | $ | 1,659.9 | $ | 2,006.8 | $ | 2,012.0 |
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Financial assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows:
| September 30, 2024 | |||||||||||||||||
| In millions | Level 1 | Level 2 | Level 3 | NAV | Total | ||||||||||||
| Recurring fair value measurements | |||||||||||||||||
| Interest rate contract liabilities | $ | — | $ | (1.7) | $ | — | $ | — | $ | (1.7) | |||||||
| Foreign currency contract liabilities | — | (60.7) | — | — | (60.7) | ||||||||||||
| Deferred compensation plan assets | 14.9 | — | — | 14.3 | 29.2 | ||||||||||||
| Total recurring fair value measurements | $ | 14.9 | $ | (62.4) | $ | — | $ | 14.3 | $ | (33.2) | |||||||
| December 31, 2023 | |||||||||||||||||
| In millions | Level 1 | Level 2 | Level 3 | NAV | Total | ||||||||||||
| Recurring fair value measurements | |||||||||||||||||
| Interest rate contract assets | $ | — | $ | 0.3 | $ | — | $ | — | $ | 0.3 | |||||||
| Foreign currency contract assets | — | 0.2 | — | — | 0.2 | ||||||||||||
| Foreign currency contract liabilities | — | (70.0) | — | — | (70.0) | ||||||||||||
| Deferred compensation plan assets | 12.1 | — | — | 14.0 | 26.1 | ||||||||||||
| Total recurring fair value measurements | $ | 12.1 | $ | (69.5) | $ | — | $ | 14.0 | $ | (43.4) | |||||||
11. Income Taxes
We manage our affairs so that we are centrally managed and controlled in the United Kingdom (“U.K.”) and therefore have our tax residency in the U.K. The provision for income taxes consists of provisions for the U.K. and international income taxes. We operate in an international environment with operations in various locations outside the U.K. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates.
The effective income tax rate for the nine months ended September 30, 2024 was 14.1%, compared to 14.5% for the nine months ended September 30, 2023. We continue to actively pursue initiatives to reduce our effective tax rate. The tax rate in any quarter can be affected positively or negatively by the mix of global earnings or adjustments that are required to be reported in the specific quarter of resolution.
The total gross liability for uncertain tax positions was $36.8 million and $38.6 million at September 30, 2024 and December 31, 2023, respectively. We record penalties and interest related to unrecognized tax benefits in Provision for income taxes and Net interest expense, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income, which is consistent with our past practices.
The Organization for Economic Co-operation and Development Pillar Two Model Rules (“Pillar Two”) for a global 15.0% minimum tax are in the process of being adopted by a number of jurisdictions in which we operate. In particular, the U.K. completed passage of legislation to comply with the Pillar Two framework which became effective on January 1, 2024. For the nine months ended September 30, 2024, the impact of Pillar Two on our condensed consolidated financial statements was not material.
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
12. Benefit Plans
Components of net periodic benefit expense for our pension plans for the three and nine months ended September 30, 2024 and 2023 were as follows:
| Three months ended | Nine months ended | ||||||||||||||||
| In millions | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Service cost | $ | 0.4 | $ | 0.4 | $ | 1.2 | $ | 1.2 | |||||||||
| Interest cost | 1.0 | 1.0 | 3.0 | 3.0 | |||||||||||||
| Expected return on plan assets | (0.1) | (0.2) | (0.3) | (0.6) | |||||||||||||
| Net periodic benefit expense | $ | 1.3 | $ | 1.2 | $ | 3.9 | $ | 3.6 |
Components of net periodic benefit expense for our other post-retirement plans for the three and nine months ended September 30, 2024 and 2023 were not material.
13. Shareholders’ Equity
Share repurchases
In December 2020, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $750.0 million. The authorization expires on December 31, 2025. 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 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.
14. Segment Information
We are composed of three reporting segments: Flow, Water Solutions and Pool. We evaluate performance based on net sales and reportable segment income and use a variety of ratios to measure performance of our reporting segments. These results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Reportable 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. “Corporate and other” activity primarily consists of corporate expenses not allocated to the segments, including executive office, board of directors, and centrally-managed corporate functional or shared service costs related to finance, human resources, communications and corporate development. These activities do not meet the criteria for a stand-alone reporting segment under accounting standards codification (“ASC”) 280.
Net sales of the Company’s reportable segments as well as Corporate and other were as follows:
| Three months ended | Nine months ended | ||||||||||||||||
| In millions | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Flow | $ | 372.2 | $ | 400.2 | $ | 1,153.3 | $ | 1,203.6 | |||||||||
| Water Solutions | 289.5 | 299.4 | 873.1 | 907.6 | |||||||||||||
| Pool | 331.4 | 308.8 | 1,082.4 | 1,007.4 | |||||||||||||
| Reportable segment net sales | 993.1 | 1,008.4 | 3,108.8 | 3,118.6 | |||||||||||||
| Corporate and other | 0.3 | 0.4 | 1.1 | 1.3 | |||||||||||||
| Net sales | $ | 993.4 | $ | 1,008.8 | $ | 3,109.9 | $ | 3,119.9 | |||||||||
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
The following table presents a reconciliation of reportable segment income to consolidated income from continuing operations before income taxes:
| Three months ended | Nine months ended | ||||||||||||||||
| In millions | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Reportable segment income | |||||||||||||||||
| Flow | $ | 82.8 | $ | 77.5 | $ | 244.5 | $ | 217.3 | |||||||||
| Water Solutions | 64.4 | 68.8 | 192.9 | 196.0 | |||||||||||||
| Pool | 112.7 | 90.6 | 357.1 | 311.9 | |||||||||||||
| Reportable segment income | 259.9 | 236.9 | 794.5 | 725.2 | |||||||||||||
| Corporate and other | (20.7) | (24.8) | (66.6) | (67.9) | |||||||||||||
| Asset impairment and write-offs | (8.5) | (1.8) | (9.3) | (6.2) | |||||||||||||
| Restructuring and other | (23.4) | (1.6) | (33.9) | (5.1) | |||||||||||||
| Transformation costs | (12.6) | (13.5) | (41.4) | (28.0) | |||||||||||||
| Intangible amortization | (13.5) | (13.8) | (40.4) | (41.5) | |||||||||||||
| Legal accrual adjustments and settlements | (0.7) | — | 7.5 | (2.2) | |||||||||||||
| Interest expense, net | (19.8) | (27.5) | (73.4) | (91.7) | |||||||||||||
| Other (expense) income | (0.5) | (1.0) | (2.5) | 2.3 | |||||||||||||
| Income from continuing operations before income taxes | $ | 160.2 | $ | 152.9 | $ | 534.5 | $ | 484.9 |
15. Commitments and Contingencies
Warranties
We provide service and warranty policies on our products. Liability under service and warranty policies is based upon a review of historical warranty and service claim experience. Adjustments are made to accruals as claim data and historical experience warrant.
The changes in the carrying amount of service and product warranties from continuing operations for the nine months ended September 30, 2024 were as follows:
| In millions | September 30, 2024 | ||||
| Beginning balance | $ | 65.0 | |||
| Service and product warranty provision | 68.7 | ||||
| Payments | (65.6) | ||||
| Foreign currency translation | 0.1 | ||||
| Ending balance | $ | 68.2 |
Stand-by letters of credit, bank guarantees and bonds
In the ordinary course of business, we are required to commit to bonds, letters of credit and bank guarantees that require payments to our customers for any non-performance. The outstanding face value of these instruments fluctuates with the value of our projects in process and in our backlog. In addition, we issue financial stand-by letters of credit primarily to secure our performance to third parties under self-insurance programs.
As of September 30, 2024 and December 31, 2023, the outstanding value of bonds, letters of credit and bank guarantees totaled $105.1 million and $124.3 million, respectively.
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