Pentair Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Quarterly Period Ended June 30, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-11625

Pentair plc

(Exact name of Registrant as specified in its charter)



Ireland			98-1141328
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

	Regal House, 70 London Road,	Twickenham,	London,	TW13QS	United Kingdom
(Address of principal executive offices)

Registrant’s telephone number, including area code: 44-74-9421-6154

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, nominal value $0.01 per share	PNR	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§223.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

On June 30, 2020, 165,908,770 shares of Registrant’s common stock were outstanding.

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Pentair plc and Subsidiaries



		Page

PART I FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)

	Condensed Consolidated Statements of Operations and Comprehensive Income	3

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Cash Flows	5

	Condensed Consolidated Statements of Changes in Equity	6

	Notes to Condensed Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	33

ITEM 4.	Controls and Procedures	33

PART II OTHER INFORMATION

ITEM 1.	Legal Proceedings	34

ITEM 1A.	Risk Factors	35

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

ITEM 6.	Exhibits	37

	Signatures	38

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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Pentair plc and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)



	Three months ended						Six months ended
In millions, except per-share data	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net sales	$	713.3		$	799.5		$	1,423.3		$	1,488.4
Cost of goods sold	468.2			512.8			926.6			966.1
Gross profit	245.1			286.7			496.7			522.3
Selling, general and administrative expenses	116.7			132.2			248.6			279.5
Research and development expenses	17.3			20.7			36.3			41.4
Operating income	111.1			133.8			211.8			201.4
Other (income) expense:
Loss (gain) on sale of businesses	0.1			0.1			0.1			(3.4		)
Net interest expense	7.7			9.4			14.6			16.7
Other (income) expense	(0.3		)	(12.9		)	0.9			(12.3		)
Income from continuing operations before income taxes	103.6			137.2			196.2			200.4
Provision for income taxes	29.8			22.1			49.7			32.9
Net income from continuing operations	73.8			115.1			146.5			167.5
Loss from discontinued operations, net of tax	(1.7		)	(0.8		)	(1.7		)	(1.9		)
Net income	$	72.1		$	114.3		$	144.8		$	165.6
Comprehensive income, net of tax
Net income	$	72.1		$	114.3		$	144.8		$	165.6
Changes in cumulative translation adjustment	28.2			(0.9		)	(9.6		)	(2.5		)
Changes in market value of derivative financial instruments, net of tax	(17.8		)	(3.4		)	21.3			0.9
Comprehensive income	$	82.5		$	110.0		$	156.5		$	164.0
Earnings (loss) per ordinary share
Basic
Continuing operations	$	0.44		$	0.68		$	0.88		$	0.98
Discontinued operations	(0.01		)	(0.01		)	(0.01		)	(0.01		)
Basic earnings per ordinary share	$	0.43		$	0.67		$	0.87		$	0.97
Diluted
Continuing operations	$	0.44		$	0.68		$	0.87		$	0.98
Discontinued operations	(0.01		)	(0.01		)	(0.01		)	(0.01		)
Diluted earnings per ordinary share	$	0.43		$	0.67		$	0.86		$	0.97
Weighted average ordinary shares outstanding
Basic	165.8			169.8			166.8			170.6
Diluted	166.4			170.5			167.5			171.4

See accompanying notes to condensed consolidated financial statements.

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Pentair plc and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)



	June 30, 2020			December 31, 2019
In millions, except per-share data
Assets
Current assets
Cash and cash equivalents	$	90.6		$	82.5
Accounts receivable, net of allowances of $8.8 and $10.3, respectively	401.8			502.9
Inventories	396.5			377.4
Other current assets	112.8			99.1
Total current assets	1,001.7			1,061.9
Property, plant and equipment, net	284.7			283.2
Other assets
Goodwill	2,302.1			2,258.3
Intangibles, net	325.4			339.2
Other non-current assets	202.2			196.9
Total other assets	2,829.7			2,794.4
Total assets	$	4,116.1		$	4,139.5
Liabilities and Equity
Current liabilities
Accounts payable	$	256.0		$	325.1
Employee compensation and benefits	77.9			71.0
Other current liabilities	416.7			352.9
Total current liabilities	750.6			749.0
Other liabilities
Long-term debt	1,013.0			1,029.1
Pension and other post-retirement compensation and benefits	95.1			96.4
Deferred tax liabilities	112.1			104.4
Other non-current liabilities	195.6			206.7
Total liabilities	2,166.4			2,185.6
Equity
Ordinary shares $0.01 par value, 426.0 authorized, 165.9 and 168.3 issued at June 30, 2020 and December 31, 2019, respectively	1.7			1.7
Additional paid-in capital	1,680.3			1,777.7
Retained earnings	482.5			401.0
Accumulated other comprehensive loss	(214.8		)	(226.5		)
Total equity	1,949.7			1,953.9
Total liabilities and equity	$	4,116.1		$	4,139.5

See accompanying notes to condensed consolidated financial statements.

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Pentair plc and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)



	Six months ended
In millions	June 30, 2020			June 30, 2019
Operating activities
Net income	$	144.8		$	165.6
Loss from discontinued operations, net of tax	1.7			1.9
Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities of continuing operations
Equity income of unconsolidated subsidiaries	(0.3		)	(2.5		)
Depreciation	22.8			24.4
Amortization	14.6			16.5
Deferred income taxes	13.4			(9.6		)
Loss (gain) on sale of businesses	0.1			(3.4		)
Share-based compensation	10.4			10.7
Asset impairment	—			18.2
Pension settlement gain	—			(12.2		)
Pension and other post-retirement plan contribution	—			(10.7		)
Changes in assets and liabilities, net of effects of business acquisitions
Accounts receivable	103.1			32.2
Inventories	(17.7		)	3.1
Other current assets	(14.5		)	(18.8		)
Accounts payable	(64.2		)	(123.1		)
Employee compensation and benefits	7.5			(22.5		)
Other current liabilities	44.9			28.5
Other non-current assets and liabilities	(0.1		)	0.9
Net cash provided by operating activities of continuing operations	266.5			99.2
Net cash used for operating activities of discontinued operations	(0.5		)	(2.5		)
Net cash provided by operating activities	266.0			96.7
Investing activities
Capital expenditures	(30.5		)	(29.8		)
Proceeds from sale of property and equipment	0.1			0.4
Proceeds from the sale of businesses, net	—			0.7
Acquisitions, net of cash acquired	(28.5		)	(284.5		)
Other	—			(1.5		)
Net cash used for investing activities	(58.9		)	(314.7		)
Financing activities
Net (repayments) receipts of commercial paper and revolving long-term debt	(17.1		)	32.9
Proceeds from long-term debt	—			400.0
Debt issuance costs	—			(5.7		)
Shares issued to employees, net of shares withheld	7.3			7.2
Repurchases of ordinary shares	(115.2		)	(150.0		)
Dividends paid	(63.7		)	(62.0		)
Net cash (used for) provided by financing activities	(188.7		)	222.4
Effect of exchange rate changes on cash and cash equivalents	(10.3		)	1.8
Change in cash and cash equivalents	8.1			6.2
Cash and cash equivalents, beginning of period	82.5			74.3
Cash and cash equivalents, end of period	$	90.6		$	80.5

See accompanying notes to condensed consolidated financial statements.

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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			Total
In millions	Number		Amount		Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total
Balance - December 31, 2019	168.3		$	1.7	$	1,777.7		$	401.0		$	(226.5	)	$	1,953.9
Net income	—		—		—			72.7			—			72.7
Other comprehensive income, net of tax	—		—		—			—			1.3			1.3
Dividends declared, $0.19 per share	—		—		—			(31.6		)	—			(31.6		)
Share repurchases	(3.0	)	—		(115.2		)	—			—			(115.2		)
Exercise of options, net of shares tendered for payment	0.3		—		8.8			—			—			8.8
Issuance of restricted shares, net of cancellations	0.2		—		—			—			—			—
Shares surrendered by employees to pay taxes	(0.1	)	—		(3.6		)	—			—			(3.6		)
Share-based compensation	—		—		6.2			—			—			6.2
Balance - March 31, 2020	165.7		$	1.7	$	1,673.9		$	442.1		$	(225.2	)	$	1,892.5
Net income	—		—		—			72.1			—			72.1
Other comprehensive loss, net of tax	—		—		—			—			10.4			10.4
Dividends declared, $0.19 per share	—		—		—			(31.7		)	—			(31.7		)
Exercise of options, net of shares tendered for payment	0.1		—		2.8			—			—			2.8
Issuance of restricted shares, net of cancellations	0.1		—		—			—			—			—
Shares surrendered by employees to pay taxes	—		—		(0.6		)	—			—			(0.6		)
Share-based compensation	—		—		4.2			—			—			4.2
Balance - June 30, 2020	165.9		$	1.7	$	1,680.3		$	482.5		$	(214.8	)	$	1,949.7



In millions	Ordinary shares				Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total
In millions	Number		Amount		Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total
Balance - December 31, 2018	171.4		$	1.7	$	1,893.8		$	169.2		$	(228.6	)	$	1,836.1
Net income	—		—		—			51.3			—			51.3
Other comprehensive income, net of tax	—		—		—			—			2.7			2.7
Dividends declared, $0.18 per share	—		—		—			(31.0		)	—			(31.0		)
Exercise of options, net of shares tendered for payment	0.3		—		9.1			—			—			9.1
Issuance of restricted shares, net of cancellations	0.2		—		—			—			—			—
Shares surrendered by employees to pay taxes	—		—		(3.2		)	—			—			(3.2		)
Share-based compensation	—		—		5.4			—			—			5.4
Balance - March 31, 2019	171.9		$	1.7	$	1,905.1		$	189.5		$	(225.9	)	$	1,870.4
Net income	—		—		—			114.3			—			114.3
Other comprehensive income, net of tax	—		—		—			—			(4.3		)	(4.3		)
Dividends declared, $0.18 per share	—		—		—			(30.4		)	—			(30.4		)
Share repurchases	(4.0	)	—		(150.0		)	—			—			(150.0		)
Exercise of options, net of shares tendered for payment	0.1		—		2.2			—			—			2.2
Issuance of restricted shares, net of cancellations	0.1		—		—			—			—			—
Shares surrendered by employees to pay taxes	(0.1	)	—		(0.9		)	—			—			(0.9		)
Share-based compensation	—		—		5.3			—			—			5.3
Balance - June 30, 2019	168.0		$	1.7	$	1,761.7		$	273.4		$	(230.2	)	$	1,806.6

See accompanying notes to condensed consolidated financial statements.

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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 U.S. Securities and Exchange Commission (“SEC”) 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, 2019.

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.

In March 2020, the World Health Organization declared the novel coronavirus 2019 (“COVID-19”) a global pandemic. The COVID-19 pandemic continues to spread throughout the United States (“U.S.”) and the world, with the continued potential for significant impact. The COVID-19 pandemic has had and may continue to have an unfavorable impact on certain parts of our business. The broader implications of the COVID-19 pandemic on our business, financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, its impact on our customers and suppliers and the range of governmental and community reactions to the pandemic. We may continue to experience reduced customer demand or constrained supply that could materially adversely impact our business, financial condition, results of operations, liquidity and cash flows in future periods.

Our fiscal year ends on December 31. We report our interim quarterly periods on a calendar quarter basis.

Adoption of new accounting standards

On January 1, 2020, we adopted Accounting Standards Update No. 2016-13 “Financial Instruments-Credit Losses” and the related amendments (the “new standard”). The new standard changes the methodology used to measure credit losses for certain financial instruments and financial assets, including trade receivables. The approach utilizes an expected credit loss model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of an asset, which may result in earlier recognition of credit losses than under the previous accounting standards.

Under the new standard, we record an allowance for credit losses, reducing our trade receivables balance to an amount we estimate is collectible from our customers. The estimates used in determining the allowance for credit losses are based on historical collection experience, including write-offs and recoveries, periodic credit evaluations of our customers’ financial situation, and current circumstances as well as reasonable and supportable forecasts of future economic conditions. The adoption of this new standard did not have a material impact on our consolidated financial statements.

The following table summarizes the activity in the allowance for credit losses for the six months ended June 30, 2020:



In millions	June 30, 2020
Beginning balance	$	10.3
Bad debt expense	(0.3		)
Write-offs, net of recoveries	(1.0		)
Other ⁽¹⁾	(0.2		)
Ending balance	$	8.8
⁽¹⁾ Other amounts are primarily the effects of changes in currency translations and the impact of allowance for credits.

On March 2, 2020, we early adopted the SEC’s rule titled “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities,” which simplifies the disclosure requirements related to our guaranteed registered securities under Rule 3-10 of Regulation S-X.

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

2. Revenue

We disaggregate our revenue from contracts with customers by segment, geographic location and vertical, 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				Six months ended
In millions	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
U.S.	$	482.7	$	511.1	$	946.7	$	937.1
Western Europe	84.9		106.9		188.7		211.2
Developing ⁽¹⁾	100.4		129.0		194.9		237.9
Other Developed ⁽²⁾	45.3		52.5		93.0		102.2
Consolidated net sales	$	713.3	$	799.5	$	1,423.3	$	1,488.4
⁽¹⁾Developing includes China, Eastern Europe, Latin America, the Middle East and Southeast Asia.
⁽²⁾Other Developed includes Australia, Canada and Japan.

Vertical net sales information was as follows:



	Three months ended				Six months ended
In millions	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Residential	$	439.7	$	451.0	$	855.5	$	834.6
Commercial	124.4		170.7		265.8		321.4
Industrial	149.2		177.8		302.0		332.4
Consolidated net sales	$	713.3	$	799.5	$	1423.3	$	1488.4

Performance obligations

On June 30, 2020, we had $55.6 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	June 30, 2020		December 31, 2019		$ Change			% Change
Contract assets	$	49.5	$	41.0	$	8.5		20.7	%
Contract liabilities	29.1		32.6		(3.5		)	(10.7	)%
Net contract assets	$	20.4	$	8.4	$	12.0		142.9	%

The $12.0 million increase in net contract assets from December 31, 2019 to June 30, 2020 was primarily the result of timing of milestone payments and impact of foreign currency fluctuations. Approximately 60% of our contract liabilities at December 31, 2019 were recognized in revenue in the first half of 2020. There were no impairment losses recognized on our contract assets for the three or six months ended June 30, 2020.

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

3.Acquisitions

In February 2019, as part of Consumer Solutions, we completed the acquisitions of Aquion, Inc. (“Aquion”) and Pelican Water Systems (“Pelican”) for $163.4 million and $121.1 million, respectively, in cash, net of cash acquired and final working capital true-ups.

For Aquion, the excess of purchase price over tangible net assets and identified intangible assets acquired has been allocated to goodwill in the amount of $101.9 million, $4.6 million of which is expected to be deductible for income tax purposes. Identifiable intangible assets acquired as part of the Aquion acquisition include $15.7 million of indefinite-lived trade name intangible assets and $78.8 million of definite-lived customer relationships with an estimated useful life of 15 years.

For Pelican, the excess purchase price over tangible net assets acquired has been allocated to goodwill in the amount of $118.0 million, $7.6 million of which is expected to be deductible for income tax purposes.

During the first half of 2020, our Consumer Solutions reporting segment completed acquisitions with purchase prices totaling $28.5 million in cash, net of cash acquired.

The pro forma impact of these acquisitions is not material.


4.	Share Plans

In May 2020, the Pentair plc 2020 Share and Incentive Plan (“2020 Share Plan”) was approved during the Annual General Meeting of Shareholders. The Pentair plc 2012 Stock and Incentive Plan (“2012 Stock Plan”) terminated upon the approval of the 2020 Share Plan, although awards outstanding under the 2012 Stock Plan continue in effect. Beginning May 5, 2020, all share-based compensation grants were made under the 2020 Share Plan.

The 2020 Share Plan authorizes the issuance of 3.3 million of our ordinary shares, plus the number of shares reserved under the 2012 Stock Plan that were not the subject of outstanding awards as of the date the 2020 Share Plan became effective, which was 2.5 million shares, plus certain shares that would become available under the 2012 Stock Plan if it had remained in effect. The shares may be issued as new shares or from shares held in treasury. Our practice is to settle equity-based awards by issuing new shares. The 2020 Share Plan terminates on the date all shares reserved for issuance have been issued. The 2020 Share Plan allows for the granting to our employees, consultants and directors of stock options, stock appreciation rights, performance share units, restricted shares, restricted stock units, deferred stock rights, incentive awards, dividend equivalent units and other equity-based awards.

The 2020 Share Plan is administered by our compensation committee (the “Committee”), which is made up of independent members of our Board of Directors. Employees eligible to receive awards under the 2020 Share Plan are managerial, administrative or professional employees. The Committee has the authority to select the recipients of awards, determine the type and size of awards, establish certain terms and conditions of award grants and take certain other actions as permitted under the 2020 Share Plan. The 2020 Share Plan prohibits the Committee from re-pricing awards or canceling and reissuing awards at lower prices.

Total share-based compensation expense for the three and six months ended June 30, 2020 and 2019 was as follows:



	Three months ended				Six months ended
In millions	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Restricted stock units	$	3.1	$	2.9	$	6.3	$	5.7
Stock options	0.6		1.1		1.6		2.5
Performance share units	0.5		1.3		2.5		2.5
Total share-based compensation expense	$	4.2	$	5.3	$	10.4	$	10.7

In the first quarter of 2020, we issued our annual share-based compensation grants under the 2012 Stock Plan to eligible employees. The total number of awards issued was approximately 0.8 million, of which 0.3 million were restricted stock units (“RSUs”), 0.4 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 $42.77, $9.58, and $45.40, respectively.

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

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:



	2020 Annual Grant
Risk-free interest rate	1.61	%
Expected dividend yield	1.80	%
Expected share price volatility	24.1	%
Expected term (years)	6.8

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.


5.	Restructuring

During the six months ended June 30, 2020 and the year ended December 31, 2019, we initiated and continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business, including the reduction in headcount of approximately 100 employees and 375 employees, respectively.

Restructuring-related costs within Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income included the following:



	Three months ended				Six months ended
In millions	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Severance and related costs	$	1.1	$	6.4	$	3.8	$	7.5
Other	—		0.3		—		0.3
Total restructuring costs	$	1.1	$	6.7	$	3.8	$	7.8

Restructuring costs by reportable segment were as follows:



	Three months ended					Six months ended
In millions	June 30, 2020			June 30, 2019		June 30, 2020		June 30, 2019
Consumer Solutions	$	1.4		$	2.3	$	2.0	$	3.4
Industrial & Flow Technologies	(0.3		)	3.3		0.6		3.2
Other	—			1.1		1.2		1.2
Consolidated	$	1.1		$	6.7	$	3.8	$	7.8

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 six months ended June 30, 2020:



In millions	June 30, 2020
Beginning balance	$	16.2
Costs incurred	3.8
Cash payments and other	(7.3		)
Ending balance	$	12.7

Table of Contents

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)


6.	Earnings Per Share

Basic and diluted earnings per share were calculated as follows:



	Three months ended						Six months ended
In millions, except per-share data	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net income	$	72.1		$	114.3		$	144.8		$	165.6
Net income from continuing operations	$	73.8		$	115.1		$	146.5		$	167.5
Weighted average ordinary shares outstanding
Basic	165.8			169.8			166.8			170.6
Dilutive impact of stock options, restricted stock units and performance share units	0.6			0.7			0.7			0.8
Diluted	166.4			170.5			167.5			171.4
Earnings (loss) per ordinary share
Basic
Continuing operations	$	0.44		$	0.68		$	0.88		$	0.98
Discontinued operations	(0.01		)	(0.01		)	(0.01		)	(0.01		)
Basic earnings per ordinary share	$	0.43		$	0.67		$	0.87		$	0.97
Diluted
Continuing operations	$	0.44		$	0.68		$	0.87		$	0.98
Discontinued operations	(0.01		)	(0.01		)	(0.01		)	(0.01		)
Diluted earnings per ordinary share	$	0.43		$	0.67		$	0.86		$	0.97
Anti-dilutive stock options excluded from the calculation of diluted earnings per share	3.1			2.3			2.8			1.9

Table of Contents

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

7. Supplemental Balance Sheet Information



In millions	June 30, 2020		December 31, 2019
Inventories
Raw materials and supplies	$	209.6	$	196.2
Work-in-process	66.0		65.2
Finished goods	120.9		116.0
Total inventories	$	396.5	$	377.4
Other current assets
Cost in excess of billings	$	49.5	$	41.0
Prepaid expenses	55.0		48.3
Prepaid income taxes	4.5		5.2
Other current assets	3.8		4.6
Total other current assets	$	112.8	$	99.1
Property, plant and equipment, net
Land and land improvements	$	33.9	$	33.7
Buildings and leasehold improvements	186.6		188.1
Machinery and equipment	553.2		537.2
Capitalized software	74.7		73.5
Construction in progress	50.3		48.1
Total property, plant and equipment	898.7		880.6
Accumulated depreciation and amortization	614.0		597.4
Total property, plant and equipment, net	$	284.7	$	283.2
Other non-current assets
Right-of-use lease assets	$	81.1	$	77.2
Deferred income taxes	29.2		29.6
Deferred compensation plan assets	18.3		21.3
Foreign currency contract assets	7.0		0.1
Other non-current assets	66.6		68.7
Total other non-current assets	$	202.2	$	196.9
Other current liabilities
Dividends payable	$	31.5	$	32.0
Accrued warranty	36.6		32.1
Accrued rebates and incentives	110.6		83.5
Billings in excess of cost	21.0		22.5
Current lease liability	20.2		19.0
Income taxes payable	32.0		11.1
Accrued restructuring	12.7		16.2
Other current liabilities	152.1		136.5
Total other current liabilities	$	416.7	$	352.9
Other non-current liabilities
Long-term lease liability	$	64.8	$	61.1
Income taxes payable	45.5		45.4
Self-insurance liabilities	39.7		41.6
Deferred compensation plan liabilities	18.3		21.3
Foreign currency contract liabilities	—		11.6
Other non-current liabilities	27.3		25.7
Total other non-current liabilities	$	195.6	$	206.7

Table of Contents

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, 2019		Purchase Accounting Adjustments		Acquisitions		Foreign currency translation/other		June 30, 2020
Consumer Solutions	$	1,501.4	$	14.4	$	25.8	$	1.2	$	1,542.8
Industrial & Flow Technologies	756.9		—		—		2.4		759.3
Total goodwill	$	2,258.3	$	14.4	$	25.8	$	3.6	$	2,302.1

Identifiable intangible assets consisted of the following:



	June 30, 2020							December 31, 2019
In millions	Cost		Accumulated amortization			Net		Cost		Accumulated amortization			Net
Definite-life intangibles
Customer relationships	$	419.3	$	(283.3	)	$	136.0	$	418.1	$	(269.1	)	$	149.0
Proprietary technology and patents	42.4		(27.1		)	15.3

Price	37.66	EPS	2
Shares	170	P/E	18
MCap	6,413	P/FCF	24
Net Debt	1,016	EBIT	394
TEV	7,429	TEV/EBIT	19
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-23
10-Q	2020-03-31	Filed 2020-04-30
10-K	2019-12-31	Filed 2020-02-25
10-Q	2019-09-30	Filed 2019-10-23
10-Q	2019-06-30	Filed 2019-07-23
10-Q	2019-03-31	Filed 2019-04-23
10-K	2018-12-31	Filed 2019-02-19
10-Q	2018-09-30	Filed 2018-10-23
10-Q	2018-06-30	Filed 2018-07-25
10-Q	2018-03-31	Filed 2018-04-20
10-K	2017-12-31	Filed 2018-02-27
10-Q	2017-09-30	Filed 2017-10-24
10-Q	2017-06-30	Filed 2017-07-25
10-Q	2017-03-31	Filed 2017-04-25
10-K	2016-12-31	Filed 2017-02-21
10-Q	2016-09-30	Filed 2016-10-25
10-Q	2016-06-30	Filed 2016-07-28
10-Q	2016-03-31	Filed 2016-04-26
10-K	2015-12-31	Filed 2016-02-26
10-Q	2015-09-26	Filed 2015-10-20
10-Q	2015-06-27	Filed 2015-07-21
10-Q	2015-03-28	Filed 2015-04-21
10-K	2014-12-31	Filed 2015-02-24
10-Q	2014-09-27	Filed 2014-10-21
10-Q	2014-06-28	Filed 2014-07-31
10-Q	2014-03-29	Filed 2014-04-22
10-K	2013-12-31	Filed 2014-02-25
10-Q	2013-09-28	Filed 2013-10-22
10-Q	2013-06-29	Filed 2013-07-23
10-Q	2013-03-30	Filed 2013-04-23
10-K	2012-12-31	Filed 2013-02-26
10-Q	2012-09-29	Filed 2012-11-01
10-Q	2012-06-30	Filed 2012-07-24
10-Q	2012-03-31	Filed 2012-04-24
10-K	2011-12-31	Filed 2012-02-21
10-Q	2011-10-01	Filed 2011-10-26
10-Q	2011-07-02	Filed 2011-07-26
10-Q	2011-04-02	Filed 2011-04-26
10-K	2010-12-31	Filed 2011-02-23
10-Q	2010-10-02	Filed 2010-10-26
10-Q	2010-07-03	Filed 2010-07-29
10-Q	2010-04-03	Filed 2010-04-27
10-K	2009-12-31	Filed 2010-02-23

8-K	2020-07-23	Earnings, Exhibits
8-K	2020-05-05
8-K	2020-04-30
8-K	2020-04-15
8-K	2020-03-25
8-K	2020-02-18
8-K	2020-01-22
8-K	2019-12-02
8-K	2019-10-24
8-K	2019-10-23
8-K	2019-09-23
8-K	2019-08-05
8-K	2019-07-23
8-K	2019-06-21
8-K	2019-06-12
8-K	2019-05-07
8-K	2019-04-17
8-K	2019-04-09
8-K	2019-01-29
8-K	2018-10-23
8-K	2018-09-10
8-K	2018-07-25
8-K	2018-05-08
8-K	2018-04-30
8-K	2018-04-19
8-K	2018-04-11
8-K	2018-04-03
8-K	2018-03-23
8-K	2018-03-14
8-K	2018-03-12
8-K	2018-02-27
8-K	2018-01-30
8-K	2018-01-05

EX-4.1	exhibit41eighthsupplem.htm
EX-4.2	exhibit42seventhsupple.htm
EX-22	ex22guarantorsubsidiar.htm
EX-31.1	ex311ceocertificationq.htm
EX-31.2	ex312cfocertificationq.htm
EX-32.1	ex321ceocertificationq.htm
EX-32.2	ex322cfocertificationq.htm

PNR 10Q Quarterly Report

Pentair Earnings 2020-06-30