10-Q 1 pnr-20240630.htm 10-Q pnr-20240630
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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, 2024
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-11625
Pentair_Logo_Color_RGB.jpg
Pentair plc
(Exact name of registrant as specified in its charter)
Ireland98-1141328
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
Regal House, 70 London Road, Twickenham,London, TW13QSUnited 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 classTrading Symbol(s)Name of each exchange on which registered
Ordinary Shares, nominal value $0.01 per sharePNRNew 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 (§232.405 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, a 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 filerAccelerated filerNon-accelerated filerSmaller 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, 2024, 165,497,736 shares of registrant’s common stock were outstanding.


Pentair plc and Subsidiaries
 


2

PART I FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS
Pentair plc and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
Three months endedSix months ended
In millions, except per-share dataJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Net sales$1,099.3 $1,082.5 $2,116.5 $2,111.1 
Cost of goods sold661.4 683.0 1,288.5 1,329.8 
Gross profit437.9 399.5 828.0 781.3 
Selling, general and administrative expenses165.1 165.1 350.3 338.4 
Research and development expenses24.8 25.9 48.9 50.8 
Operating income248.0 208.5 428.8 392.1 
Other expense (income)
Net interest expense26.3 31.8 53.6 64.2 
Other expense (income)
0.8 (4.8)0.9 (4.1)
Income from continuing operations before income taxes 220.9 181.5 374.3 332.0 
Provision for income taxes34.8 27.3 54.7 49.3 
Net income from continuing operations 186.1 154.2 319.6 282.7 
Loss from discontinued operations, net of tax
 (1.3)(0.2)(0.1)
Net income$186.1 $152.9 $319.4 $282.6 
Comprehensive income, net of tax
Net income$186.1 $152.9 $319.4 $282.6 
Changes in cumulative translation adjustment(10.1)(2.2)(31.8)9.9 
Changes in market value of derivative financial instruments, net of tax 6.2 (0.3)28.9 (7.5)
Comprehensive income$182.2 $150.4 $316.5 $285.0 
Earnings (loss) per ordinary share
Basic
Continuing operations$1.12 $0.94 $1.93 $1.71 
Discontinued operations (0.01)  
Basic earnings per ordinary share $1.12 $0.93 $1.93 $1.71 
Diluted
Continuing operations$1.11 $0.93 $1.91 $1.70 
Discontinued operations (0.01)  
Diluted earnings per ordinary share $1.11 $0.92 $1.91 $1.70 
Weighted average ordinary shares outstanding
Basic165.9 165.0 165.8 164.9 
Diluted167.3 166.1 167.3 165.9 
See accompanying notes to condensed consolidated financial statements.
3

Pentair plc and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
 June 30,
2024
December 31,
2023
In millions, except per-share data
Assets
Current assets
Cash and cash equivalents$214.3 $170.3 
Accounts receivable, net of allowances of $10.6 and $11.2, respectively
567.8 561.7 
Inventories647.5 677.7 
Other current assets133.9 159.3 
Total current assets1,563.5 1,569.0 
Property, plant and equipment, net361.4 362.0 
Other assets
Goodwill3,250.6 3,274.6 
Intangibles, net1,012.4 1,042.4 
Other non-current assets360.1 315.3 
Total other assets4,623.1 4,632.3 
Total assets$6,548.0 $6,563.3 
Liabilities and Equity
Current liabilities
Current maturities of short-term borrowings
$3.3 $ 
Accounts payable295.0 278.9 
Employee compensation and benefits104.0 125.4 
Other current liabilities548.1 545.3 
Total current liabilities950.4 949.6 
Other liabilities
Long-term debt1,752.6 1,988.3 
Pension and other post-retirement compensation and benefits71.8 73.6 
Deferred tax liabilities38.7 40.0 
Other non-current liabilities301.6 294.7 
Total liabilities3,115.1 3,346.2 
Commitments and contingencies (Note 15)
Equity
Ordinary shares $0.01 par value, 426.0 authorized, 165.5 and 165.3 issued at June 30, 2024 and December 31, 2023, respectively
1.7 1.7 
Additional paid-in capital1,569.2 1,593.6 
Retained earnings2,109.3 1,866.2 
Accumulated other comprehensive loss(247.3)(244.4)
Total equity 3,432.9 3,217.1 
Total liabilities and equity$6,548.0 $6,563.3 
See accompanying notes to condensed consolidated financial statements.
4

Pentair plc and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
 Six months ended
In millionsJune 30,
2024
June 30,
2023
Operating activities
Net income $319.4 $282.6 
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(1.1)(0.8)
Depreciation30.4 29.4 
Amortization26.9 27.7 
Deferred income taxes12.6 (31.9)
Share-based compensation16.3 14.1 
Asset impairment and write-offs0.8 4.4 
Gain on sale of assets (3.4)
Changes in assets and liabilities, net of effects of business acquisitions
Accounts receivable(10.7)7.4 
Inventories23.5 33.6 
Other current assets(4.0)(16.7)
Accounts payable19.4 (25.8)
Employee compensation and benefits(19.4)(1.2)
Other current liabilities6.6 22.1 
Other non-current assets and liabilities10.9 (1.5)
Net cash provided by operating activities of continuing operations
431.8 340.1 
Net cash used for operating activities of discontinued operations(0.2)(1.6)
Net cash provided by operating activities
431.6 338.5 
Investing activities
Capital expenditures(36.3)(35.4)
Proceeds from sale of property and equipment 5.0 
Acquisitions, net of cash acquired 0.2 
Other(0.5)4.1 
Net cash used for investing activities(36.8)(26.1)
Financing activities
Net receipts of short-term borrowings
3.3  
Net repayments of revolving long-term debt
 (204.3)
Repayments of long-term debt(237.5) 
Shares issued to employees, net of shares withheld9.3 0.8 
Repurchases of ordinary shares(50.0) 
Dividends paid(76.2)(72.5)
Net cash used for financing activities
(351.1)(276.0)
Effect of exchange rate changes on cash and cash equivalents0.3 (3.7)
Change in cash and cash equivalents44.0 32.7 
Cash and cash equivalents, beginning of period170.3 108.9 
Cash and cash equivalents, end of period$214.3 $141.6 
See accompanying notes to condensed consolidated financial statements.
5

Pentair plc and Subsidiaries
Condensed Consolidated Statements of Changes in Equity (Unaudited)
In millionsOrdinary sharesAdditional paid-in capitalRetained earnings
Accumulated
other
comprehensive (loss) income
 Total
NumberAmount
Balance - December 31, 2023165.3 $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 payment0.4 — 15.2 — — 15.2 
Issuance of restricted shares, net of cancellations0.4 — (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, 2024166.0 $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 payment0.1 — 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 
In millionsOrdinary sharesAdditional paid-in capitalRetained earnings
Accumulated
other
comprehensive (loss) income
 Total
NumberAmount
Balance - December 31, 2022164.5 $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 payment0.1 — 2.5 — — 2.5 
Issuance of restricted shares, net of cancellations0.5 — (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, 2023165.0 $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 payment0.1 — 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 
See accompanying notes to condensed consolidated financial statements.
6

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 endedSix months ended
In millionsJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
U.S.$773.6 $757.6 $1,478.8 $1,473.4 
Western Europe127.2 119.5 258.8 247.3 
Developing (1)
139.3 142.5 262.0 263.6 
Other Developed (2)
59.2 62.9 116.9 126.8 
Consolidated net sales$1,099.3 $1,082.5 $2,116.5 $2,111.1 
(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 endedSix months ended
In millionsJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Residential$581.4 $536.0 $1,124.6 $1,102.4 
Commercial308.6 344.8 582.2 618.1 
Industrial209.3 201.7 409.7 390.6 
Consolidated net sales$1,099.3 $1,082.5 $2,116.5 $2,111.1 
7

Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Performance obligations
As of June 30, 2024, we had $88.1 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 millionsJune 30,
2024
December 31,
2023
$ Change% Change
Contract assets$61.9 $70.8 $(8.9)(12.6)%
Contract liabilities35.8 53.7 (17.9)(33.3)%
Net contract assets
$26.1 $17.1 $9.0 52.6 %
The $9.0 million increase in net contract assets from December 31, 2023 to June 30, 2024 was primarily the result of timing of milestone payments. Approximately 85% of our contract liabilities at December 31, 2023 were recognized in revenue in the first half of 2024.

3.     Share Plans
Total share-based compensation expense for the three and six months ended June 30, 2024 and 2023 was as follows:
Three months ended    Six months ended
In millionsJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Restricted stock units$4.3 $3.7 $8.1 $7.4 
Stock options1.3 1.0 2.7 2.1 
Performance share units2.8 2.2 5.5 4.6 
Total share-based compensation expense$8.4 $6.9 $16.3 $14.1 
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 rate4.44 %
Expected dividend yield1.43 %
Expected share price volatility30.90 %
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.

8

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 six months ended June 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 200 employees during the six months ended June 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    Six months ended
In millionsJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Restructuring Initiatives
Severance and related costs$5.4 $0.9 $9.4 $3.4 
Other restructuring costs and related adjustments (1)
(0.1)(0.1)0.9 0.5 
Total restructuring costs5.3 0.8 10.3 3.9 
Transformation Program
Severance and related costs0.3 0.3 0.7 2.2 
Other transformation costs (2)
11.5 5.7 28.1 12.3 
Total transformation costs11.8 6.0 28.8 14.5 
Total restructuring and transformation costs$17.1 $6.8 $39.1 $18.4 
(1) Other restructuring costs and related adjustments primarily consist of certain accruals, 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 and project management related costs, 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 endedSix months ended
In millionsJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Flow$2.4 $0.8 $5.0 $1.2 
Water Solutions0.9 (2.6)1.5 (1.1)
Pool1.7 1.9 5.4 5.2 
Corporate and other
12.1 6.7 27.2 13.1 
Total restructuring and transformation costs
$17.1 $6.8 $39.1 $18.4 
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, 2024: 
In millionsJune 30,
2024
Beginning balance$13.4 
Costs incurred10.1 
Cash payments and other(12.1)
Ending balance$11.4 
9

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    Six months ended
In millions, except per-share dataJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Net income$186.1 $152.9 $319.4 $282.6 
Net income from continuing operations
$186.1 $154.2 $319.6 $282.7 
Weighted average ordinary shares outstanding
Basic165.9 165.0 165.8 164.9 
Dilutive impact of stock options, restricted stock units and performance share units
1.4 1.1 1.5 1.0 
Diluted167.3 166.1 167.3 165.9 
Earnings (loss) per ordinary share
Basic
Continuing operations$1.12 $0.94 $1.93 $1.71 
Discontinued operations (0.01)  
Basic earnings per ordinary share$1.12 $0.93 $1.93 $1.71 
Diluted
Continuing operations$1.11 $0.93 $1.91 $1.70 
Discontinued operations (0.01)  
Diluted earnings per ordinary share$1.11 $0.92 $1.91 $1.70 
Anti-dilutive stock options excluded from the calculation of diluted earnings per share
0.2 0.3 0.2 0.6 
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 six months ended June 30, 2024: 
In millionsJune 30,
2024
Beginning balance$11.2 
Write-offs, net of recoveries(1.0)
Other (1)
0.4 
Ending balance$10.6 
(1) Other amounts are primarily the effects of changes in currency translation and the impact of allowance for credits.
10

Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
7.    Supplemental Balance Sheet Information
In millionsJune 30,
2024
December 31,
2023
Inventories
Raw materials and supplies$341.1 $369.1 
Work-in-process94.5 97.1 
Finished goods211.9 211.5 
Total inventories$647.5 $677.7 
Other current assets
Cost in excess of billings$61.9 $70.8 
Prepaid expenses65.6 55.2 
Other current assets6.4 33.3 
Total other current assets$133.9 $159.3 
Property, plant and equipment, net
Land and land improvements$31.8 $32.3 
Buildings and leasehold improvements227.7 225.5 
Machinery and equipment683.7 669.9 
Capitalized software90.7 70.5 
Construction in progress38.2 55.8 
Total property, plant and equipment1,072.1 1,054.0 
Accumulated depreciation and amortization710.7 692.0 
Total property, plant and equipment, net$361.4 $362.0 
Other non-current assets
Right-of-use lease assets$124.8 $102.0 
Deferred income taxes126.7 113.2 
Deferred compensation plan assets28.3 26.1 
Other non-current assets80.3 74.0 
Total other non-current assets$360.1 $315.3 
Other current liabilities
Dividends payable$38.1 $38.0 
Accrued warranty74.2 65.0 
Accrued rebates and incentives197.2 181.8 
Accrued freight22.4 20.4 
Billings in excess of cost28.2 46.9 
Current lease liability25.5 26.2 
Income taxes payable25.8 20.7 
Accrued restructuring11.4 13.4 
Interest payable28.2 29.7 
Other current liabilities97.1 103.2 
Total other current liabilities$548.1 $545.3 
Other non-current liabilities
Long-term lease liability$104.0 $79.1 
Income taxes payable36.2 35.6 
Self-insurance liabilities52.7 51.9 
Deferred compensation plan liabilities28.3 26.1 
Foreign currency contract liabilities48.4 70.0 
Other non-current liabilities32.0 32.0 
Total other non-current liabilities$301.6 $294.7 
11

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 millionsDecember 31,
2023
Foreign Currency
Translation
June 30,
2024
Flow$767.1 $(19.0)$748.1 
Water Solutions1,400.6 (5.0)1,395.6 
Pool1,106.9  1,106.9 
Total goodwill$3,274.6 $(24.0)$3,250.6 
Identifiable intangible assets consisted of the following:
 June 30, 2024December 31, 2023
In millionsCostAccumulated
amortization
NetCostAccumulated
amortization
Net
Definite-life intangibles
Customer relationships$1,100.8 $(381.0)$719.8 $1,106.2 $(361.8)$744.4 
Proprietary technology and patents89.3 (45.8)43.5 89.7 (43.2)46.5 
Total definite-life intangibles
1,190.1 (426.8)763.3 1,195.9 (405.0)790.9 
Indefinite-life intangibles
Trade names249.1 — 249.1 251.5 — 251.5 
Total intangibles$1,439.2 $(426.8)$1,012.4 $1,447.4 $(405.0)$1,042.4 
Identifiable intangible asset amortization expense was $13.4 million and $13.9 million for the three months ended June 30, 2024 and 2023, and $26.9 million and $27.7 million for the six months ended June 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:
 
Q3-Q4
     
202420252026202720282029
Estimated amortization expense$27.0 $54.0 $52.8 $51.5 $49.0 $48.6 


12

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 millionsAverage interest rate as of June 30, 2024Maturity
Year
June 30,
2024
December 31,
2023
Revolving credit facility (Senior Credit Facility)6.637%2026$ $ 
Term Loan Facility6.802%2023 - 2027950.0 987.5 
Term loans (Senior Credit Facility)N/A2024 200.0 
Senior notes - fixed rate (1)
4.650%202519.3 19.3 
Senior notes - fixed rate (1)
4.500%2029400.0 400.0 
Senior notes - fixed rate (1)
5.900%2032400.0 400.0 
Other
N/A
N/A
3.3  
Unamortized debt issuance costs and discountsN/AN/A(16.7)(18.5)
Total debt1,755.9 1,988.3 
Less: Current maturities of short-term borrowings
(3.3) 
Long-term debt$1,752.6 $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 June 30, 2024, total availability under the Senior Credit Facility was $900.0 million. In addition, PFSA has the option to request to increase the revolving credit facility and/or to enter into one or more tranches of term loans in an aggregate amount of up to $300.0 million, subject to customary conditions, including the commitment of the participating lenders.
In addition, Pentair and PFSA are parties to a senior unsecured term loan facility (the “Term Loan Facility”), with PFSA, as borrower, Pentair, as guarantor, providing for an aggregate principal amount of $1.0 billion. The Term Loan Facility has a maturity date of July 28, 2027, with required quarterly installment payments of $6.3 million which began on the last day of the third quarter of 2023 and increase to $12.5 million beginning with the last day of the third quarter of 2024. The Term Loan Facility 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 $20.8 million, of which there were no outstanding borrowings at June 30, 2024. Borrowings under these credit facilities bear interest at variable rates.
13

Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
We have $25.0 million of Term Loan Facility payments due in the next twelve months. We classified this debt as long-term as of June 30, 2024 as we have the intent and ability to refinance such obligation on a long-term basis under the revolving credit facility under the Senior Credit Facility.
Debt outstanding, excluding unamortized issuance costs and discounts, at June 30, 2024 matures on a calendar year basis as follows:
 
Q3 - Q4
       
In millions202420252026202720282029ThereafterTotal
Contractual debt obligation maturities
$3.3 $69.3 $50.0 $850.0 $ $400.0 $400.0 $1,772.6 
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 June 30, 2024 and December 31, 2023, we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of $17.9 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 June 30, 2024 and December 31, 2023, we had outstanding cross currency swap agreements with a combined notional amount of $909.8 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 $27.7 million and $51.6 million at June 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.
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 June 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.
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 unrealized gains of $5.2 million and $0.3 million at June 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.
14

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

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:
June 30,
2024
December 31,
2023
In millionsRecorded
Amount
Fair
Value
Recorded
Amount
Fair
Value
Variable rate debt$953.3 $953.3 $1,187.5 $1,187.5 
Fixed rate debt819.3 796.7 819.3 824.5 
Total debt$1,772.6 $1,750.0 $2,006.8 $2,012.0 

15

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:
 June 30, 2024
In millionsLevel 1Level 2Level 3NAVTotal
Recurring fair value measurements
Interest rate contract assets$ $5.2 $ $ $5.2 
Foreign currency contract assets
 7.5   7.5 
Foreign currency contract liabilities (48.4)  (48.4)
Deferred compensation plan assets13.5   14.8 28.3 
Total recurring fair value measurements$13.5 $(35.7)$ $14.8 $(7.4)
 December 31, 2023
In millionsLevel 1Level 2Level 3NAVTotal
Recurring fair value measurements
Interest rate contract assets$ $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 six months ended June 30, 2024 was 14.6%, compared to 14.8% for the six months ended June 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 $37.3 million and $38.6 million at June 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 six months ended June 30, 2024, the impact of Pillar Two on our condensed consolidated financial statements was not material.

16

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 six months ended June 30, 2024 and 2023 were as follows:
Three months endedSix months ended
In millionsJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Service cost$0.4 $0.4 $0.8 $0.8 
Interest cost1.0 1.0 2.0 2.0 
Expected return on plan assets(0.1)(0.2)(0.2)(0.4)
Net periodic benefit expense$1.3 $1.2 $2.6 $2.4 
Components of net periodic benefit expense for our other post-retirement plans for the three and six months ended June 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 three and six months ended June 30, 2024, we repurchased 0.6 million of our ordinary shares for $50.0 million. As of June 30, 2024, we had $550.0 million available for share repurchases under this authorization.
Dividends payable
On May 6, 2024, the Board of Directors declared a quarterly cash dividend of $0.23 per share, payable on August 2, 2024 to shareholders of record at the close of business on July 19, 2024. As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $38.1 million at June 30, 2024, compared to $38.0 million at December 31, 2023.
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 endedSix months ended
In millionsJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Flow$396.8 $411.6 $781.1 $803.4 
Water Solutions310.5 336.2 583.6 608.2 
Pool391.5 334.3 751.0 698.6 
Reportable segment net sales
1,098.8 1,082.1 2,115.7 2,110.2 
Corporate and other
0.5 0.4 0.8 0.9 
Net sales
$1,099.3 $1,082.5 $2,116.5 $2,111.1 


17

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 endedSix months ended
In millionsJune 30,
2024
June 30,
2023
June 30,
2024
June 30,
2023
Reportable segment income
Flow
$84.4 $74.8 $161.7 $139.8 
Water Solutions
72.9 74.8 128.5 127.2 
Pool
133.6 105.1 244.4 221.3 
Reportable segment income
290.9 254.7 534.6 488.3 
Corporate and other
(19.5)(20.5)(45.9)(43.1)
Asset impairment and write-offs (0.5)(0.8)(4.4)
Restructuring and other(5.9)(0.6)(10.5)(3.5)
Transformation costs(11.8)(6.0)(28.8)(14.5)
Intangible amortization(13.4)(13.9)(26.9)(27.7)
Legal accrual adjustments and settlements7.9 (4.1)8.2 (2.2)
Interest expense, net(26.3)(31.8)(53.6)(64.2)
Other (expense) income
(1.0)4.2 (2.0)3.3 
Income from continuing operations before income taxes$220.9 $181.5 $374.3 $332.0 
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 six months ended June 30, 2024 were as follows:
In millionsJune 30,
2024
Beginning balance$65.0 
Service and product warranty provision49.9 
Payments(40.5)
Foreign currency translation(0.2)
Ending balance$74.2 
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 June 30, 2024 and December 31, 2023, the outstanding value of bonds, letters of credit and bank guarantees totaled $107.2 million and $124.3 million, respectively.
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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking Statements
This report contains statements that we believe to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, are forward-looking statements. Without limitation, any statements preceded or followed by or that include the words “targets,” “plans,” “believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “should,” “would,” “could,” “positioned,” “strategy,” or “future” or words, phrases, or terms of similar substance or the negative thereof are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the overall global economic and business conditions impacting our business, including the strength of housing and related markets and conditions relating to international hostilities; supply, demand, logistics, competition and pricing pressures related to and in the markets we serve; the ability to achieve the benefits of our restructuring plans, cost reduction initiatives and Transformation Program; the impact of raw material, logistics and labor costs and other inflation; volatility in currency exchange rates and interest rates; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; risks associated with operating foreign businesses; the impact of seasonality of sales and weather conditions; our ability to comply with laws and regulations; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits or impact trade agreements and tariffs; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating and environmental, social and governance (“ESG”) goals and targets. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission, including this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023. All forward-looking statements speak only as of the date of this report. Pentair assumes no obligation, and disclaims any obligation, to update the information contained in this report.
Overview
The terms “us,” “we,” “our” or “Pentair” refer to Pentair plc and its consolidated subsidiaries. At Pentair, we believe the health of our world depends on reliable access to clean water. We deliver a comprehensive range of smart, sustainable water solutions to homes, businesses and industries around the world. Our industry-leading and proven portfolio of solutions enables our customers to access clean, safe water; reduce water consumption; and recover and reuse water. Whether it’s moving, improving or helping people enjoy water, we help manage life’s most essential resource. We are composed of three reporting segments: Flow, Water Solutions and Pool. For the first six months of 2024, the Flow, Water Solutions and Pool segments represented approximately 37%, 28% and 35% of total revenues, respectively. We classify our operations into reporting segments based primarily on types of products offered and markets served:
Flow — The focus of this segment is to deliver water where it is needed, when it is needed, more efficiently and to transform waste into value. This segment designs, manufactures and sells a variety of fluid treatment and pump products and systems, including pressure vessels, gas recovery solutions, membrane bioreactors, wastewater reuse systems and advanced membrane filtration, separation systems, water disposal pumps, water supply pumps, fluid transfer pumps, turbine pumps, solid handling pumps and agricultural spray nozzles, while serving the global residential, commercial and industrial markets. These products and systems are used in a range of applications, including fluid delivery, ion exchange, desalination, food and beverage, separation technologies for the oil and gas industry, residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, circulation and transfer, fire suppression, flood control, agricultural irrigation and crop spray.
Water Solutions — The focus of this segment is to provide great-tasting, higher-quality water and ice while helping people use water more productively. This segment designs, manufactures and sells commercial and residential water treatment products and systems including pressure tanks, control valves, activated carbon products, commercial ice machines, conventional filtration products, and point-of-entry and point-of-use water treatment systems. These water treatment products and systems are used in residential whole home water filtration, drinking water filtration and water softening solutions in addition to commercial total water management and filtration in foodservice operations. In addition, our water solutions business also provides installation and preventative services for water management solutions for commercial operators.

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Pool — The focus of this segment is to provide innovative, energy-efficient pool solutions to help people more sustainably enjoy water. This segment designs, manufactures and sells a complete line of energy-efficient residential and commercial pool equipment and accessories including pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment and pool accessories. Applications for our pool products include residential and commercial pool maintenance, pool repair, renovation, service, construction and aquaculture solutions.
Key Trends and Uncertainties Regarding Our Existing Business
The following trends and uncertainties affected our financial performance in the first six months of 2024 and are reasonably likely to impact our results in the future:
In 2021, we created a transformation office and launched and committed resources to the Transformation Program designed to accelerate growth and drive margin expansion by driving operational excellence, reducing complexity and streamlining our processes. During 2023 and the first six months of 2024, we made strategic progress on our Transformation Program initiatives with a focus on our four key themes of pricing excellence, strategic sourcing, operations excellence and organizational effectiveness. We expect to continue to execute on our key Transformation Program initiatives to drive margin expansion and to continue to incur transformation costs throughout the remainder of 2024 and beyond.
In 2024, we began using 80/20 guiding principles to enable our Transformation Program. This 80/20 analysis is expected to create value by focusing on the right customers and products through quadrant based strategies. We expect the analysis to result in actions to improve operating performance by reducing lower margin sales and removing complexity in the future.
During 2023 and the first six months of 2024, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. We expect these actions to continue throughout the remainder of 2024 and to drive margin growth.
During 2023 and the first six months of 2024, we experienced inflationary cost increases for certain raw materials as well as logistics and transportation costs. The current volatile market for commodities has the potential to continue to drive price increases in our supply chain. While we have taken pricing actions and implemented transformation initiatives that we expect to improve productivity and offset cost increases, we anticipate supply chain pressures and inflationary cost increases to continue for the remainder of 2024.
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. Pillar Two has negatively impacted our effective tax rate in 2024. That impact could change in the future as we continue to evaluate the enacted legislative changes and as new guidance becomes available.
We have identified specific product and geographic market opportunities that we find attractive and continue to pursue, both within and outside the U.S. We expect to continue investing in our businesses to drive these opportunities through research and development and additional sales and marketing resources. Unless we successfully penetrate these markets, our core sales growth will likely be limited or may decline.

In 2024, our operating objectives focus on delivering our core and building our future. We expect to execute these objectives by:
Delivering profitable revenue growth and productivity for customers and shareholders;
Continuing to focus on capital allocation through:
Committing to maintain our investment grade rating;
Focusing on reducing our long-term debt;
Returning cash to shareholders through dividends and share repurchases; and
Accelerating our performance with strategically aligned mergers and acquisitions;
Focusing growth initiatives that accelerate our investments in digital, innovation, technology and ESG;
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Continuing to implement our Transformation Program initiatives that will drive operational excellence, reduce complexity and improve our organizational structure, which includes the focus on 80/20 actions to drive profitable growth; and
Building a high performance growth culture and delivering on our commitments while living our Win Right values.

CONSOLIDATED RESULTS OF OPERATIONS
The consolidated results of operations for the three months ended June 30, 2024 and 2023 were as follows:
 Three months ended
In millionsJune 30,
2024
June 30,
2023

Change
% / Point 
Change
Net sales$1,099.3 $1,082.5 $16.8 1.6 %
Cost of goods sold661.4 683.0 (21.6)(3.2)%
Gross profit437.9 399.5 38.4 9.6 %
      % of net sales
39.8 %36.9 %2.9  pts
 
Selling, general and administrative
165.1 165.1 — — %
      % of net sales
15.0 %15.3 %(0.3) pts
Research and development
24.8 25.9 (1.1)(4.2)%
      % of net sales2.3 %2.4 %(0.1) pts
Operating income 248.0 208.5 39.5 18.9 %
      % of net sales22.6 %19.3 %3.3  pts
Other expense (income)
0.8 (4.8)5.6 N.M.
Net interest expense26.3 31.8 (5.5)(17.3)%
Income from continuing operations before income taxes220.9 181.5 39.4 21.7 %
Provision for income taxes</