Company Quick10K Filing
Pentair
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 171 $6,254
10-Q 2019-10-23 Quarter: 2019-09-30
10-Q 2019-07-23 Quarter: 2019-06-30
10-Q 2019-04-23 Quarter: 2019-03-31
10-K 2019-02-19 Annual: 2018-12-31
10-Q 2018-10-23 Quarter: 2018-09-30
10-Q 2018-07-25 Quarter: 2018-06-30
10-Q 2018-04-20 Quarter: 2018-03-31
10-K 2018-02-27 Annual: 2017-12-31
10-Q 2017-10-24 Quarter: 2017-09-30
10-Q 2017-07-25 Quarter: 2017-06-30
10-Q 2017-04-25 Quarter: 2017-03-31
10-K 2017-02-21 Annual: 2016-12-31
10-Q 2016-10-25 Quarter: 2016-09-30
10-Q 2016-07-28 Quarter: 2016-06-30
10-Q 2016-04-26 Quarter: 2016-03-31
10-K 2016-02-26 Annual: 2015-12-31
10-Q 2015-10-20 Quarter: 2015-09-26
10-Q 2015-07-21 Quarter: 2015-06-27
10-Q 2015-04-21 Quarter: 2015-03-28
10-K 2015-02-24 Annual: 2014-12-31
10-Q 2014-10-21 Quarter: 2014-09-27
10-Q 2014-07-31 Quarter: 2014-06-28
10-Q 2014-04-22 Quarter: 2014-03-29
10-K 2014-02-25 Annual: 2013-12-31
10-Q 2013-10-22 Quarter: 2013-09-28
10-Q 2013-07-23 Quarter: 2013-06-29
10-Q 2013-04-23 Quarter: 2013-03-30
10-K 2013-02-26 Annual: 2012-12-31
10-Q 2012-11-01 Quarter: 2012-09-29
10-Q 2012-07-24 Quarter: 2012-06-30
10-Q 2012-04-24 Quarter: 2012-03-31
10-K 2012-02-21 Annual: 2011-12-31
10-Q 2011-10-26 Quarter: 2011-10-01
10-Q 2011-07-26 Quarter: 2011-07-02
10-Q 2011-04-26 Quarter: 2011-04-02
10-K 2011-02-23 Annual: 2010-12-31
10-Q 2010-10-26 Quarter: 2010-10-02
10-Q 2010-07-29 Quarter: 2010-07-03
10-Q 2010-04-27 Quarter: 2010-04-03
10-K 2010-02-23 Annual: 2009-12-31
8-K 2019-12-02 Off-BS Arrangement, Exhibits
8-K 2019-10-24 Officers
8-K 2019-09-23 Officers
8-K 2019-08-05 Officers, Exhibits
8-K 2019-07-23 Earnings, Exhibits
8-K 2019-06-21 Off-BS Arrangement, Other Events, Exhibits
8-K 2019-06-12 Other Events, Exhibits
8-K 2019-05-07 Shareholder Vote
8-K 2019-04-17 Earnings, Exhibits
8-K 2019-04-09 Earnings, Exhibits
8-K 2019-01-29 Earnings, Exhibits
8-K 2018-10-23 Earnings, Exhibits
8-K 2018-09-10 Officers
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-05-08 Shareholder Vote
8-K 2018-04-30 Enter Agreement, M&A, Off-BS Arrangement, Exhibits
8-K 2018-04-19 Earnings, Exhibits
8-K 2018-04-11 Other Events
8-K 2018-04-03 Officers, Other Events
8-K 2018-03-23 Off-BS Arrangement, Exhibits
8-K 2018-03-14 Officers, Exhibits
8-K 2018-03-12 Other Events, Exhibits
8-K 2018-02-27 Officers
8-K 2018-01-30 Earnings, Exhibits
8-K 2018-01-05 Officers, Exhibits
PNR 2019-09-30
Part I Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex311ceocertification2.htm
EX-31.2 ex312cfocertification2.htm
EX-32.1 ex321ceocertification2.htm
EX-32.2 ex322cfocertification2.htm

Pentair Earnings 2019-09-30

PNR 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
MIDD 7,407 4,887 3,088 2,918 1,086 329 619 9,321 37% 15.0 7%
WWD 7,266 4,016 2,311 2,883 542 267 562 8,216 19% 14.6 7%
GDI 7,082 4,594 2,809 2,651 996 259 418 8,396 38% 20.1 6%
PNR 6,254 4,170 2,363 2,940 1,034 369 485 7,400 35% 15.3 9%
OC 6,254 10,183 5,778 7,127 1,624 515 1,275 9,564 23% 7.5 5%
AGCO 6,018 8,415 5,286 9,225 2,033 376 789 7,116 22% 9.0 4%
WSO 5,567 2,632 1,277 4,590 1,130 288 381 5,863 25% 15.4 11%
CW 5,278 3,427 1,774 2,461 890 293 507 5,853 36% 11.5 9%
LECO 5,159 2,394 2,119 3,017 1,030 315 488 5,680 34% 11.6 13%
BWXT 4,877 1,756 1,462 1,793 501 208 351 5,691 28% 16.2 12%

Document
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Table of Contents

 
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 September 30, 2019
OR 
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 September 30, 2019, 168,092,998 shares of Registrant’s common stock were outstanding.



Table of Contents

Pentair plc and Subsidiaries
 
 
Page
 
 
PART I FINANCIAL INFORMATION
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
PART II OTHER INFORMATION
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 2.
 
 
 
ITEM 6.
 
 
 
 



2

Table of Contents

PART I FINANCIAL INFORMATION

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,
2019
September 30,
2018
 
September 30,
2019
September 30,
2018
Net sales
$
713.6

$
711.4

 
$
2,202.0

$
2,224.6

Cost of goods sold
458.6

467.6

 
1,424.7

1,444.9

Gross profit
255.0

243.8

 
777.3

779.7

Selling, general and administrative expenses
126.4

116.3

 
405.9

399.0

Research and development expenses
19.8

19.1

 
61.2

57.0

Operating income
108.8

108.4

 
310.2

323.7

Other (income) expense:
 
 
 
 
 
Loss (gain) on sale of business
0.1

0.2

 
(3.3
)
6.4

Loss on early extinguishment of debt


 

17.1

Net interest expense
6.9

4.3

 
23.6

27.9

Other expense (income)
0.6

2.1

 
(11.7
)
(1.7
)
Income from continuing operations before income taxes
101.2

101.8

 
301.6

274.0

Provision for income taxes
9.9

10.6

 
42.8

46.5

Net income from continuing operations
91.3

91.2

 
258.8

227.5

Income (loss) from discontinued operations, net of tax
1.0

18.9

 
(0.9
)
27.0

Net income
$
92.3

$
110.1

 
$
257.9

$
254.5

Comprehensive income, net of tax
 
 
 
 
 
Net income
$
92.3

$
110.1

 
$
257.9

$
254.5

Changes in cumulative translation adjustment
(25.8
)
(2.1
)
 
(28.3
)
23.1

Changes in market value of derivative financial instruments, net of tax
21.9

(1.0
)
 
22.8

(0.7
)
Comprehensive income
$
88.4

$
107.0

 
$
252.4

$
276.9

Earnings (loss) per ordinary share
 
 
 
 
 
Basic
 
 
 
 
 
Continuing operations
$
0.54

$
0.52

 
$
1.53

$
1.29

Discontinued operations
0.01

0.11

 
(0.01
)
0.15

Basic earnings per ordinary share
$
0.55

$
0.63

 
$
1.52

$
1.44

Diluted
 
 
 
 
 
Continuing operations
$
0.54

$
0.52

 
$
1.52

$
1.28

Discontinued operations
0.01

0.11

 
(0.01
)
0.15

Diluted earnings per ordinary share
$
0.55

$
0.63

 
$
1.51

$
1.43

Weighted average ordinary shares outstanding
 
 
 
 
 
Basic
168.1

174.3

 
169.7

176.8

Diluted
168.6

175.7

 
170.3

178.5

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

Pentair plc and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
 
September 30,
2019
December 31,
2018
In millions, except per-share data
Assets
Current assets
 
 
Cash and cash equivalents
$
113.2

$
74.3

Accounts and notes receivable, net of allowances of $13.4 and $14.0, respectively
404.0

488.2

Inventories
390.3

387.5

Other current assets
95.1

89.4

Total current assets
1,002.6

1,039.4

Property, plant and equipment, net
277.9

272.6

Other assets
 
 
Goodwill
2,261.0

2,072.7

Intangibles, net
341.4

276.3

Other non-current assets
197.5

145.5

Total other assets
2,799.9

2,494.5

Total assets
$
4,080.4

$
3,806.5

Liabilities and Equity
Current liabilities
 
 
Accounts payable
$
253.4

$
378.6

Employee compensation and benefits
70.7

111.7

Other current liabilities
370.1

328.4

Total current liabilities
694.2

818.7

Other liabilities
 
 
Long-term debt
1,118.7

787.6

Pension and other post-retirement compensation and benefits
88.1

90.0

Deferred tax liabilities
111.4

105.9

Other non-current liabilities
199.2

168.2

Total liabilities
2,211.6

1,970.4

Equity
 
 
Ordinary shares $0.01 par value, 426.0 authorized, 168.1 and 171.4 issued at September 30, 2019 and December 31, 2018, respectively
1.7

1.7

Additional paid-in capital
1,765.9

1,893.8

Retained earnings
335.3

169.2

Accumulated other comprehensive loss
(234.1
)
(228.6
)
Total equity
1,868.8

1,836.1

Total liabilities and equity
$
4,080.4

$
3,806.5

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents


Pentair plc and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Nine months ended
In millions
September 30,
2019
September 30,
2018
Operating activities
 
 
Net income
$
257.9

$
254.5

Loss (income) from discontinued operations, net of tax
0.9

(27.0
)
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
(3.0
)
(7.1
)
Depreciation
36.4

36.9

Amortization
24.1

27.0

Deferred income taxes
(17.7
)
(4.1
)
(Gain) loss on sale of business
(3.3
)
6.4

Share-based compensation
15.3

16.4

Trade name and other impairment
18.2

6.0

Loss on early extinguishment of debt

17.1

Pension settlement (gain) loss
(11.8
)
2.2

Pension and other post-retirement plan contributions
(11.1
)

Changes in assets and liabilities, net of effects of business acquisitions
 
 
Accounts and notes receivable
82.8

73.5

Inventories
4.0

(36.3
)
Other current assets
(10.5
)
(11.0
)
Accounts payable
(128.8
)
(60.1
)
Employee compensation and benefits
(19.1
)
(25.4
)
Other current liabilities
21.3

27.7

Other non-current assets and liabilities
10.5

2.5

Net cash provided by operating activities of continuing operations
266.1

299.2

Net cash used for operating activities of discontinued operations
(1.4
)
(14.6
)
Net cash provided by operating activities
264.7

284.6

Investing activities
 
 
Capital expenditures
(44.6
)
(33.8
)
Proceeds from sale of property and equipment
0.4

(0.4
)
Proceeds from (payments due to) the sale of businesses, net
0.7

(12.8
)
Acquisitions, net of cash acquired
(284.5
)
(0.9
)
Other
(1.5
)

Net cash used for investing activities of continuing operations
(329.5
)
(47.9
)
Net cash used for investing activities of discontinued operations

(7.1
)
Net cash used for investing activities
(329.5
)
(55.0
)
Financing activities
 
 
Net receipts of commercial paper and revolving long-term debt
91.2

46.0

Proceeds from long-term debt
400.0


Repayments of long-term debt
(151.5
)
(675.1
)
Debt issuance costs
(6.3
)
(2.0
)
Premium paid on early extinguishment of debt

(16.0
)
Transfer of cash to nVent

(74.2
)
Distribution of cash from nVent

993.6

Shares issued to employees, net of shares withheld
6.8

16.0

Repurchases of ordinary shares
(150.0
)
(400.0
)
Dividends paid
(92.4
)
(156.7
)
Net cash provided by (used for) financing activities
97.8

(268.4
)
Change in cash held for sale

27.0

Effect of exchange rate changes on cash and cash equivalents
5.9

(9.8
)
Change in cash and cash equivalents
38.9

(21.6
)
Cash and cash equivalents, beginning of period
74.3

86.3

Cash and cash equivalents, end of period
$
113.2

$
64.7

See accompanying notes to condensed consolidated financial statements.

5

Table of Contents

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
Number
Amount
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 loss, net of tax


 


(4.3
)
(4.3
)
Dividends declared, $0.18 per share


 

(30.4
)

(30.4
)
Share repurchase
(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

Net income


 

92.3


92.3

Other comprehensive loss, net of tax


 


(3.9
)
(3.9
)
Dividends declared, $0.18 per share


 

(30.4
)

(30.4
)
Exercise of options, net of shares tendered for payment
0.1


 




Shares surrendered by employees to pay taxes


 
(0.4
)


(0.4
)
Share-based compensation


 
4.6



4.6

Balance - September 30, 2019
168.1

1.7

 
1,765.9

335.3

(234.1
)
1,868.8

 





6

Table of Contents

Pentair plc and Subsidiaries
Condensed Consolidated Statements of Changes in Equity (Unaudited), continued

In millions
Ordinary shares
 
Additional paid-in capital
Retained earnings
Accumulated
other
comprehensive loss
 Total
Number
Amount
Balance - December 31, 2017
180.3

$
1.8

 
$
2,797.7

$
2,481.7

$
(243.4
)
$
5,037.8

Net income


 

102.9


102.9

Cumulative effect of accounting changes


 

(214.0
)

(214.0
)
Other comprehensive loss, net of tax


 


(1.4
)
(1.4
)
Dividends declared, $0.35 per share


 

(62.6
)

(62.6
)
Share repurchase
(2.2
)

 
(150.0
)


(150.0
)
Exercise of options, net of shares tendered for payment
0.1


 
5.8



5.8

Issuance of restricted shares, net of cancellations
0.3


 




Shares surrendered by employees to pay taxes
(0.1
)

 
(4.8
)


(4.8
)
Share-based compensation


 
6.0



6.0

Balance - March 31, 2018
178.4

$
1.8

 
$
2,654.7

$
2,308.0

$
(244.8
)
$
4,719.7

Net income


 

41.5


41.5

Other comprehensive income, net of tax


 


74.8

74.8

Distribution to nVent


 
(438.2
)
(2,290.7
)
(47.9
)
(2,776.8
)
Dividends declared, $0.175 per share


 

(30.9
)

(30.9
)
Share repurchase
(3.3
)

 
(150.0
)


(150.0
)
Exercise of options, net of shares tendered for payment
0.3


 
6.3



6.3

Issuance of restricted shares, net of cancellations
(0.1
)

 




Shares surrendered by employees to pay taxes
0.1


 
(1.0
)


(1.0
)
Share-based compensation


 
5.3



5.3

Balance - June 30, 2018
175.4

$
1.8

 
$
2,077.1

$
27.9

$
(217.9
)
$
1,888.9

Net income


 

110.1


110.1

Other comprehensive loss, net of tax


 


(3.1
)
(3.1
)
Dividends declared, $0.175 per share


 

(30.5
)

(30.5
)
Share repurchase
(2.3
)

 
(100.0
)


(100.0
)
Exercise of options, net of shares tendered for payment
0.4


 
10.7



10.7

Issuance of restricted shares, net of cancellations
0.1


 




Shares surrendered by employees to pay taxes


 
(1.0
)


(1.0
)
Share-based compensation


 
5.1



5.1

Balance - September 30, 2018
173.6

$
1.8

 
$
1,991.9

$
107.5

$
(221.0
)
$
1,880.2

See accompanying notes to condensed consolidated financial statements.

7

Table of Contents
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, 2018.
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.
Adoption of new accounting standards
On January 1, 2019, we adopted ASU No. 2016-02, “Leases” (“the new lease standard” or “ASC 842”) using the transition method of adoption. Under the transition method of adoption, comparative information has not been restated and continues to be reported under the standards in effect for those periods. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. We also elected the practical expedient to not separate non-lease components from the lease components to which they relate, and instead account for each separate lease and non-lease component associated with that lease component as a single lease component for all underlying asset classes. Accordingly, all costs associated with a lease contract are accounted for as one lease cost.
The impact of adopting the new standard primarily relates to the recognition of a lease right-of-use (“ROU”) asset and current and non-current lease liability on the consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As we cannot readily determine the rate implicit in the lease, we use our incremental borrowing rate determined by country of lease origin based on the anticipated lease term as determined at commencement date in determining the present value of lease payments. The ROU asset also excludes any accrued lease payments and unamortized lease incentives.
As of September 30, 2019, $80.0 million was included in Other non-current assets, $19.8 million in Other current liabilities and $63.0 million in Other non-current liabilities, on the Condensed Consolidated Balance Sheets as a result of the new lease standard. There was no impact on our Condensed Consolidated Statements of Operations and Comprehensive Income or Condensed Consolidated Statements of Cash Flows.
Refer to Note 15 for further discussion.


8

Table of Contents
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
 
Nine months ended
In millions
September 30,
2019
September 30,
2018
 
September 30,
2019
September 30,
2018
U.S.
$
445.0

$
438.5

 
$
1,382.1

$
1,395.1

Western Europe
97.8

97.1

 
309.0

311.2

Developing (1)
119.9

117.6

 
357.8

346.0

Other Developed (2)
50.9

58.2

 
153.1

172.3

Consolidated net sales
$
713.6

$
711.4

 
$
2,202.0

$
2,224.6

(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
 
Nine months ended
In millions
September 30,
2019
September 30,
2018
 
September 30,
2019
September 30,
2018
Residential
$
395.5

$
397.6

 
$
1,230.1

$
1,247.3

Commercial
154.3

155.8

 
475.7

475.4

Industrial
163.8

158.0

 
496.2

501.9

Consolidated net sales
$
713.6

$
711.4

 
$
2,202.0

$
2,224.6



Performance obligations
On September 30, 2019, we had $62.8 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,
2019
December 31,
2018
 
$ Change
% Change
Contract assets
$
37.3

$
36.5

 
$
0.8

2.2
 %
Contract liabilities
34.4

32.8

 
1.6

4.9
 %
Net contract assets
$
2.9

$
3.7

 
$
(0.8
)
(21.6
)%

The $0.8 million decrease in net contract assets from December 31, 2018 to September 30, 2019 was primarily the result of timing of milestone payments. Approximately 80% of our contract liabilities at December 31, 2018 were recognized in revenue in the first nine months of 2019. There were no impairment losses recognized on our contract assets for the three months or nine months ended September 30, 2019.


9

Table of Contents
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

3.Acquisitions and Discontinued Operations
Acquisitions
In February 2019, as part of Filtration 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.

For Aquion, the excess of purchase price over tangible net assets and identified intangible assets acquired has been preliminarily allocated to goodwill in the amount of $94.5 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 preliminarily allocated to goodwill in the amount of $121.0 million, $7.6 million of which is expected to be deductible for income tax purposes.

The preliminary purchase price allocation for these acquisitions is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. These changes will primarily relate to impacts associated with income taxes and other accruals.

The proforma impact of these acquisitions is not material.

Discontinued Operation Electrical Separation
On April 30, 2018, we completed the separation of our Electrical business from the rest of Pentair (the “Separation”) by means of a dividend in specie of the Electrical business, which was effected by the transfer of the Electrical business from Pentair to nVent Electric plc (“nVent”) and the issuance by nVent of ordinary shares directly to Pentair shareholders (the “Distribution”). The results of the Electrical business have been presented as discontinued operations. The Electrical business had been previously disclosed as a stand-alone reporting segment. Separation costs related to the Separation and Distribution were $2.5 million and $82.4 million for the three and nine months ended September 30, 2018, respectively. These costs are reported in discontinued operations as they represent a cost directly related to the Separation and Distribution and are included within Income (loss) from discontinued operations, net of tax presented below.

Operating results of the discontinued operation is summarized below:
 
Three months ended
 
Nine months ended
In millions
September 30,
2019
September 30,
2018
 
September 30,
2019
September 30,
2018
Net sales
$

$

 
$

$
693.9

Cost of goods sold


 

424.0

Gross profit


 

269.9

Selling, general and administrative expenses
1.2

2.5

 
2.0

233.5

Research and development expenses


 

14.6

Operating (loss) income
$
(1.2
)
$
(2.5
)
 
$
(2.0
)
$
21.8

(Loss) income from discontinued operations before income taxes
$
(1.3
)
$
14.8

 
$
(2.5
)
$
34.6

Income tax (benefit) provision
(2.3
)
(4.1
)
 
(1.6
)
7.6

Income (loss) from discontinued operations, net of tax
$
1.0

$
18.9

 
$
(0.9
)
$
27.0




10

Table of Contents
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

4.
Share Plans
Total share-based compensation expense for the three and nine months ended September 30, 2019 and 2018 was as follows:
 
Three months ended    
 
Nine months ended
In millions
September 30,
2019
September 30,
2018
 
September 30,
2019
September 30,
2018
Restricted stock units
$
2.5

$
2.4

 
$
8.2

$
6.7

Stock options
0.9

1.3

 
3.4

3.5

Performance share units
1.2

1.4

 
3.7

6.2

Total share-based compensation expense
$
4.6

$
5.1

 
$
15.3

$
16.4



Of the total share-based compensation expense noted above, $3.4 million was reported as part of Income (loss) from discontinued operations, net of tax for the nine months ended September 30, 2018.

In the first quarter of 2019, we issued our annual share-based compensation grants under the Pentair plc 2012 Stock and Incentive 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 $40.84, $8.84, and $38.47, 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:
 
2019
Annual Grant
Risk-free interest rate
2.89
%
Expected dividend yield
1.78
%
Expected share price volatility
23.3
%
Expected term (years)
6.1



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 nine months ended September 30, 2019 and the year ended December 31, 2018, we initiated and continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. Initiatives during the nine months ended September 30, 2019 and the year ended December 31, 2018 included the reduction in hourly and salaried headcount of approximately 325 employees and 300 employees, respectively.
Restructuring-related costs included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income included costs for severance and other restructuring costs as follows: 
 
Three months ended    
 
Nine months ended
In millions
September 30,
2019
September 30,
2018
 
September 30,
2019
September 30,
2018
Severance and related costs
$
2.1

$
2.8

 
$
9.6

$
12.8

Other
0.8

0.7

 
1.1

21.3

Total restructuring costs
$
2.9

$
3.5

 
$
10.7

$
34.1



11

Table of Contents
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Other restructuring costs primarily consist of asset impairment and various contract termination costs.
Restructuring costs by reportable segment were as follows:
 
Three months ended
 
Nine months ended
In millions
September 30,
2019
September 30,
2018
 
September 30,
2019
September 30,
2018
Aquatic Systems
$
0.2

$
0.6

 
$
3.1

$
3.6

Filtration Solutions
1.5

0.9

 
3.1

14.4

Flow Technologies
0.3

0.7

 
2.4

8.7

Other
0.9

1.3

 
2.1

7.4

Consolidated
$
2.9

$
3.5

 
$
10.7

$
34.1


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, 2019: 
In millions
September 30,
2019
Beginning balance
$
27.1

Costs incurred
9.6

Cash payments and other
(19.7
)
Ending balance
$
17.0


6.
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,
2019
September 30,
2018
 
September 30,
2019
September 30,
2018
Net income
$
92.3

$
110.1

 
$
257.9

$
254.5

Net income from continuing operations
$
91.3

$
91.2

 
$
258.8

$
227.5

Weighted average ordinary shares outstanding
 
 
 
 
 
Basic
168.1

174.3

 
169.7

176.8

Dilutive impact of stock options, restricted stock units and performance share units
0.5

1.4

 
0.6

1.7

Diluted
168.6

175.7

 
170.3

178.5

Earnings (loss) per ordinary share
 
 
 
 
 
Basic
 
 
 
 
 
Continuing operations
$
0.54

$
0.52

 
$
1.53

$
1.29

Discontinued operations
0.01

0.11

 
(0.01
)
0.15

Basic earnings per ordinary share
$
0.55

$
0.63

 
$
1.52

$
1.44

Diluted
 
 
 
 
 
Continuing operations
$
0.54

$
0.52

 
$
1.52

$
1.28

Discontinued operations
0.01

0.11

 
(0.01
)
0.15

Diluted earnings per ordinary share
$
0.55

$
0.63

 
$
1.51

$
1.43

Anti-dilutive stock options excluded from the calculation of diluted earnings per share
2.2

1.3

 
2.0

0.6



12

Table of Contents
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

7.    Supplemental Balance Sheet Information
In millions
September 30,
2019
December 31,
2018
Inventories
 
 
Raw materials and supplies
$
198.0

$
191.3

Work-in-process
63.4

64.0