UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~FORM~~ ~~10-Q~~

FORM 10-Q



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

			For the Quarterly Period Ended ~~March 31,~~September 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.)

~~Ireland~~

~~98-1141328~~

~~(State or other jurisdiction of incorporation or organization)~~

~~(I.R.S. Employer Identification No.)~~

Regal House, 70 London Road,

~~Twickenham,~~

~~London,~~Twickenham,

~~TW13QS~~London,

TW13QS

United Kingdom

(Address of principal executive offices)

Registrant’s telephone number, including area code: 44-74-~~9421-6154~~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 ~~March 31,~~September 30, 2020, ~~165,725,188~~166,346,297 shares of Registrant’s common stock were outstanding.

Table of Contents

Pentair plc and Subsidiaries


				Page

PART I FINANCIAL INFORMATION

		~~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	78

ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	2122

ITEM 3.		Quantitative and Qualitative Disclosures about Market Risk	3335

ITEM 4.		Controls and Procedures	3436

PART II OTHER INFORMATION

ITEM 1.		Legal Proceedings	3536

ITEM 1A.		Risk Factors	3637

ITEM 2.		Unregistered Sales of Equity Securities and Use of Proceeds	3738

ITEM 6.		Exhibits	3840

		Signatures	3941

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							Three months ended						Nine months ended
In millions, except per-share data	March 31, 2020			March 31, 2019			In millions, except per-share data	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net sales	$	710.0		$	688.9		Net sales	$	798.5	$	713.6	$	2,221.8	$	2,202.0
Cost of goods sold	458.4			453.3			Cost of goods sold	521.1		458.6		1,447.7		1,424.7
Gross profit	251.6			235.6			Gross profit	277.4		255.0		774.1		777.3
Selling, general and administrative expenses	131.9			147.3			Selling, general and administrative expenses	130.0		126.4		378.6		405.9
Research and development expenses	19.0			20.7			Research and development expenses	19.3		19.8		55.6		61.2

Operating income	100.7			67.6			Operating income	128.1		108.8		339.9		310.2
Other (income) expense:							Other (income) expense:
Gain on sale of businesses	—			(3.5		)

Loss (gain) on sale of businesses							Loss (gain) on sale of businesses	0		0.1		0.1		(3.3)

Net interest expense	6.9			7.3			Net interest expense	5.4		6.9		20.0		23.6
Other expense	1.2			0.6
Other (income) expense							Other (income) expense	(2.5)		0.6		(1.6)		(11.7)
Income from continuing operations before income taxes	92.6			63.2			Income from continuing operations before income taxes	125.2		101.2		321.4		301.6
Provision for income taxes	19.9			10.8			Provision for income taxes	14.4		9.9		64.1		42.8
Net income from continuing operations	72.7			52.4			Net income from continuing operations	110.8		91.3		257.3		258.8
Loss from discontinued operations, net of tax	—			(1.1		)
Income (loss) from discontinued operations, net of tax							Income (loss) from discontinued operations, net of tax	0		1.0		(1.7)		(0.9)

Net income	$	72.7		$	51.3		Net income	$	110.8	$	92.3	$	255.6	$	257.9

Comprehensive income, net of tax							Comprehensive income, net of tax
Net income	$	72.7		$	51.3		Net income	$	110.8	$	92.3	$	255.6	$	257.9
Changes in cumulative translation adjustment	(37.8		)	(1.6		)	Changes in cumulative translation adjustment	25.1		(25.8)		15.5		(28.3)

Changes in market value of derivative financial instruments, net of tax	39.1			4.3			Changes in market value of derivative financial instruments, net of tax	(22.6)		21.9		(1.3)		22.8
Comprehensive income	$	74.0		$	54.0		Comprehensive income	$	113.3	$	88.4	$	269.8	$	252.4
Earnings (loss) per ordinary share							Earnings (loss) per ordinary share
Basic							Basic
Continuing operations	$	0.43		$	0.31		Continuing operations	$	0.67	$	0.54	$	1.54	$	1.53
Discontinued operations	—			(0.01		)	Discontinued operations	0		0.01		(0.01)		(0.01)
Basic earnings per ordinary share	$	0.43		$	0.30		Basic earnings per ordinary share	$	0.67	$	0.55	$	1.53	$	1.52
Diluted							Diluted
Continuing operations	$	0.43		$	0.30		Continuing operations	$	0.66	$	0.54	$	1.54	$	1.52
Discontinued operations	—			—			Discontinued operations	0		0.01		(0.01)		(0.01)
Diluted earnings per ordinary share	$	0.43		$	0.30		Diluted earnings per ordinary share	$	0.66	$	0.55	$	1.53	$	1.51
Weighted average ordinary shares outstanding							Weighted average ordinary shares outstanding
Basic	167.8			171.6			Basic	166.1		168.1		166.6		169.7
Diluted	168.7			172.5			Diluted	167.1		168.6		167.4		170.3

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows (Unaudited)

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~~.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 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:~~losses for the nine months ended September 30, 2020:


In millions	September 30, 2020
Beginning balance	$	10.3
Bad debt expense	(0.7)
Write-offs, net of recoveries	(0.8)
Other ⁽¹⁾	(0.1)
Ending balance	$	8.7
⁽¹⁾Other amounts are primarily the effects of changes in currency translations and the impact of allowance for credits.

In millions March 31,
2020
Beginning balance $ 10.3
Bad debt expense (1.1 )
Write-offs, net of recoveries (0.3 )
Other ⁽¹⁾
(0.3 )
Ending balance $ 8.6
⁽¹⁾ Other amounts are primarily the effects of changes in currency translations and the impact of allowance for credits.

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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						Nine months ended
In millions	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
U.S.	$	541.2	$	445.0	$	1,487.9	$	1,382.1
Western Europe	92.6		97.8		281.3		309.0
Developing ⁽¹⁾	108.3		119.9		303.2		357.8
Other Developed ⁽²⁾	56.4		50.9		149.4		153.1
Consolidated net sales	$	798.5	$	713.6	$	2,221.8	$	2,202.0


⁽¹⁾Developing includes China, Eastern Europe, Latin America, the Middle East and Southeast Asia.
⁽²⁾Other Developed includes Australia, Canada and Japan.

Three months ended
In millions March 31,
2020 March 31,
2019
U.S. $ 464.0
$ 426.0
Western Europe 103.8
104.3
Developing ⁽¹⁾
94.5
108.9
Other Developed ⁽²⁾
47.7
49.7
Consolidated net sales $ 710.0
$ 688.9
⁽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, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Residential	$	520.3	$	395.5	$	1,375.8	$	1,230.1
Commercial	126.0		154.3		391.8		475.7
Industrial	152.2		163.8		454.2		496.2
Consolidated net sales	$	798.5	$	713.6	$	2,221.8	$	2,202.0

Three months ended
In millions March 31,
2020 March 31,
2019
Residential $ 415.8
$ 383.6
Commercial 141.4
150.7
Industrial 152.8
154.6
Consolidated net sales $ 710.0
$ 688.9

Performance obligations

Contract assets and liabilities


In millions	September 30, 2020		December 31, 2019		$ Change		% Change
Contract assets	$	55.6	$	41.0	$	14.6	35.6	%
Contract liabilities	29.1		32.6		(3.5)		(10.7)	%
Net contract assets	$	26.5	$	8.4	$	18.1	215.5	%

In millions March 31,
2020 December 31,
2019 $ Change % Change
Contract assets $ 45.5
$ 41.0
$ 4.5
11.0 %
Contract liabilities 30.4
32.6
(2.2 ) (6.7 )%
Net contract assets $ 15.1
$ 8.4
$ 6.7
79.8 %

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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 nine months of 2020, our Consumer Solutions reporting segment completed acquisitions with purchase prices totaling $28.5 million in cash, net of cash acquired.

The ~~proforma~~pro forma impact of these acquisitions is not material.


4.	~~Share Plans~~

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 nine months ended ~~March 31,~~September 30, 2020 and 2019 was as follows:


	Three months ended					Three months ended						Nine months ended
In millions	March 31, 2020		March 31, 2019		In millions	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Restricted stock units	$	3.2	$	2.8	Restricted stock units	$	3.0	$	2.5	$	9.3	$	8.2
Stock options	1.0		1.4		Stock options	0.6		0.9		2.2		3.4
Performance share units	2.0		1.2		Performance share units	1.2		1.2		3.7		3.7
Total share-based compensation expense	$	6.2	$	5.4	Total share-based compensation expense	$	4.8	$	4.6	$	15.2	$	15.3

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

~~Pentair plc and Subsidiaries~~

~~Notes to condensed consolidated financial statements (unaudited)~~

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
In millions March 31,
2020 March 31,
2019
Severance and related costs $ 2.7
$ 1.1
Total restructuring costs $ 2.7
$ 1.1

Restructuring costs by reportable segment were as follows:

Three months ended
In millions March 31,
2020 March 31,
2019
Consumer Solutions $ 0.6
$ 1.1
Industrial & Flow Technologies 0.9
(0.1 )
Other 1.2
0.1
Consolidated $ 2.7
$ 1.1

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 ~~three~~nine months ended ~~March 31, 2020~~:September 30, 2020:

In millions March 31,
2020
Beginning balance $ 16.2
Costs incurred 2.7
Cash payments and other (4.7 )
Ending balance $ 14.2


In millions	September 30, 2020
Beginning balance	$	16.2

Costs incurred	5.0
Cash payments and other	(8.8)
Ending balance	$	12.4

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

6.Earnings Per Share


6.	~~Earnings Per Share~~

Basic and diluted earnings per share were calculated as follows:

Three months ended
In millions, except per-share data March 31,
2020 March 31,
2019
Net income $ 72.7
$ 51.3
Net income from continuing operations $ 72.7
$ 52.4
Weighted average ordinary shares outstanding
Basic 167.8
171.6
Dilutive impact of stock options, restricted stock units and performance share units 0.9
0.9
Diluted 168.7
172.5
Earnings (loss) per ordinary share
Basic
Continuing operations $ 0.43
$ 0.31
Discontinued operations —
(0.01 )
Basic earnings per ordinary share $ 0.43
$ 0.30
Diluted
Continuing operations $ 0.43
$ 0.30
Discontinued operations —
—
Diluted earnings per ordinary share $ 0.43
$ 0.30
Anti-dilutive stock options excluded from the calculation of diluted earnings per share 2.0
1.7


	Three months ended						Nine months ended
In millions, except per-share data	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net income	$	110.8	$	92.3	$	255.6	$	257.9
Net income from continuing operations	$	110.8	$	91.3	$	257.3	$	258.8
Weighted average ordinary shares outstanding
Basic	166.1		168.1		166.6		169.7
Dilutive impact of stock options, restricted stock units and performance share units	1.0		0.5		0.8		0.6
Diluted	167.1		168.6		167.4		170.3
Earnings (loss) per ordinary share
Basic
Continuing operations	$	0.67	$	0.54	$	1.54	$	1.53
Discontinued operations	0		0.01		(0.01)		(0.01)
Basic earnings per ordinary share	$	0.67	$	0.55	$	1.53	$	1.52
Diluted
Continuing operations	$	0.66	$	0.54	$	1.54	$	1.52
Discontinued operations	0		0.01		(0.01)		(0.01)
Diluted earnings per ordinary share	$	0.66	$	0.55	$	1.53	$	1.51
Anti-dilutive stock options excluded from the calculation of diluted earnings per share	1.6		2.2		2.2		2.0

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

7. Supplemental Balance Sheet Information

In millions March 31,
2020 December 31,
2019
Inventories
Raw materials and supplies $ 201.0
$ 196.2
Work-in-process 66.3
65.2
Finished goods 125.1
116.0
Total inventories $ 392.4
$ 377.4
Other current assets
Cost in excess of billings $ 45.5
$ 41.0
Prepaid expenses 55.8
48.3
Prepaid income taxes 7.8
5.2
Other current assets 3.8
4.6
Total other current assets $ 112.9
$ 99.1
Property, plant and equipment, net
Land and land improvements $ 32.7
$ 33.7
Buildings and leasehold improvements 184.3
188.1
Machinery and equipment 537.9
537.2
Capitalized software 73.1
73.5
Construction in progress 53.4
48.1
Total property, plant and equipment 881.4
880.6
Accumulated depreciation and amortization 600.7
597.4
Total property, plant and equipment, net $ 280.7
$ 283.2
Other non-current assets
Right-of-use lease assets $ 81.1
$ 77.2
Deferred income taxes 28.5
29.6
Deferred compensation plan assets 15.7
21.3
Foreign currency contract assets 32.8
0.1
Other non-current assets 65.0
68.7
Total other non-current assets $ 223.1
$ 196.9
Other current liabilities
Dividends payable $ 31.5
$ 32.0
Accrued warranty 36.5
32.1
Accrued rebates and incentives 76.5
83.5
Billings in excess of cost 19.5
22.5
Current lease liability 18.8
19.0
Income taxes payable 4.3
11.1
Accrued restructuring 14.2
16.2
Other current liabilities 145.3
136.5
Total other current liabilities $ 346.6
$ 352.9
Other non-current liabilities
Long-term lease liability $ 64.2
$ 61.1
Income taxes payable 45.5
45.4
Self-insurance liabilities 39.7
41.6
Deferred compensation plan liabilities 15.7
21.3
Foreign currency contract liabilities —
11.6
Other non-current liabilities 25.6
25.7
Total other non-current liabilities $ 190.7
$ 206.7


In millions	September 30, 2020		December 31, 2019
Inventories
Raw materials and supplies	$	213.0	$	196.2
Work-in-process	65.7		65.2
Finished goods	123.0		116.0
Total inventories	$	401.7	$	377.4
Other current assets
Cost in excess of billings	$	55.6	$	41.0
Prepaid expenses	51.0		48.3
Prepaid income taxes	7.3		5.2
Other current assets	3.2		4.6
Total other current assets	$	117.1	$	99.1
Property, plant and equipment, net
Land and land improvements	$	34.7	$	33.7
Buildings and leasehold improvements	190.7		188.1
Machinery and equipment	566.2		537.2
Capitalized software	74.5		73.5
Construction in progress	54.2		48.1
Total property, plant and equipment	920.3		880.6
Accumulated depreciation and amortization	629.2		597.4
Total property, plant and equipment, net	$	291.1	$	283.2
Other non-current assets
Right-of-use lease assets	$	78.0	$	77.2

Deferred income taxes	29.6		29.6
Deferred compensation plan assets	19.8		21.3

Other non-current assets	68.6		68.8
Total other non-current assets	$	196.0	$	196.9
Other current liabilities

Dividends payable	$	31.7	$	32.0
Accrued warranty	36.2		32.1
Accrued rebates and incentives	148.7		83.5
Billings in excess of cost	21.7		22.5
Current lease liability	20.2		19.0
Income taxes payable	22.8		11.1
Accrued restructuring	12.4		16.2
Other current liabilities	141.6		136.5
Total other current liabilities	$	435.3	$	352.9
Other non-current liabilities
Long-term lease liability	$	62.4	$	61.1
Income taxes payable	45.6		45.4
Self-insurance liabilities	39.8		41.6
Deferred compensation plan liabilities	19.8		21.3
Foreign currency contract liabilities	27.8		11.6
Other non-current liabilities	27.7		25.7
Total other non-current liabilities	$	223.1	$	206.7

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

8.Goodwill and Other Identifiable Intangible Assets


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
March 31,
2020
Consumer Solutions $ 1,501.4
$ 14.4
$ 6.3
$ (2.9 ) $ 1,519.2
Industrial & Flow Technologies 756.9
—
—
(19.3 ) 737.6
Total goodwill $ 2,258.3
$ 14.4
$ 6.3
$ (22.2 ) $ 2,256.8


In millions	December 31, 2019		Purchase Accounting Adjustments		Acquisitions		Foreign currency translation/other		September 30, 2020
Consumer Solutions	$	1,501.4	$	14.4	$	25.8	$	6.4	$	1,548.0
Industrial & Flow Technologies	756.9		0		0		24.7		781.6
Total goodwill	$	2,258.3	$	14.4	$	25.8	$	31.1	$	2,329.6

Identifiable intangible assets consisted of the following:

March 31,
2020 December 31,
2019
In millions Cost
Accumulated
amortization
Net Cost
Accumulated
amortization
Net
Definite-life intangibles
Customer relationships $ 410.3
$ (271.4 ) $ 138.9
$ 418.1
$ (269.1 ) $ 149.0
Proprietary technology and patents 41.7
(25.7 ) 16.0
42.3
(25.5 ) 16.8
Total definite-life intangibles 452.0
(297.1 ) 154.9
460.4
(294.6 ) 165.8
Indefinite-life intangibles
Trade names 171.6
—
171.6
173.4
—
173.4
Total intangibles $ 623.6
$ (297.1 ) $ 326.5
$ 633.8
$ (294.6 ) $ 339.2


	September 30, 2020										December 31, 2019
In millions	Cost		Accumulated amortization		Net		Cost		Accumulated amortization		Net
Definite-life intangibles
Customer relationships	$	426.1	$	(294.6)	$	131.5	$	418.1	$	(269.1)	$	149.0

Proprietary technology and patents	42.9		(28.1)		14.8		42.3		(25.5)		16.8

Total definite-life intangibles	469.0		(322.7)		146.3		460.4		(294.6)		165.8
Indefinite-life intangibles
Trade names	177.0		—		177.0		173.4		—		173.4
Total intangibles	$	646.0	$	(322.7)	$	323.3	$	633.8	$	(294.6)	$	339.2

Identifiable intangible asset amortization expense was ~~$7.6~~$6.9 million and ~~$8.2~~$7.6 million for the three months ended ~~March 31,~~September 30, 2020 and 2019, respectively, and $21.5 million and $24.1 million for the nine months ended September 30, 2020 and 2019, respectively.

Estimated future amortization expense for identifiable intangible assets during the remainder of 2020 and the next five years is as follows:

Q2-Q4
In millions 2020 2021 2022 2023 2024 2025
Estimated amortization expense $ 19.6
$ 22.0
$ 15.4
$ 12.8
$ 12.3
$ 12.3


	Q4
In millions	2020		2021		2022		2023		2024		2025
Estimated amortization expense	$	6.7	$	23.0	$	15.9	$	13.3	$	12.7	$	12.7

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

9.Debt


9.	~~Debt~~

Debt and the average interest rates on debt outstanding were as follows:

In millions Average interest rate as of March 31, 2020
Maturity
Year
March 31,
2020 December 31,
2019
Commercial paper 2.097% 2023 $ —
$ 117.8
Revolving credit facilities 2.069% 2023 574.5
35.8
Term loans⁽¹⁾
2.696% 2023 200.0
200.0
Senior notes - fixed rate⁽¹⁾
3.625% 2020 74.0
74.0
Senior notes - fixed rate⁽¹⁾
5.000% 2021 103.8
103.8
Senior notes - fixed rate⁽¹⁾
3.150% 2022 88.3
88.3
Senior notes - fixed rate⁽¹⁾
4.650% 2025 19.3
19.3
Senior notes - fixed rate⁽¹⁾
4.500% 2029 400.0
400.0
Unamortized debt issuance costs and discounts N/A N/A (9.4 ) (9.9 )
Total debt $ 1,450.5
$ 1,029.1
⁽¹⁾Senior notes (“the Notes”) and the term loans are guaranteed as to payment by Pentair plc and PISG


In millions	Average interest rate as of September 30, 2020	Maturity Year	September 30, 2020		December 31, 2019
Commercial paper	N/A	2023	$	0	$	117.8
Revolving credit facilities	1.248%	2023	2.2		35.8
Term loans	1.244%	2023	200.0		200.0


Senior notes - fixed rate⁽¹⁾	3.625%	2020	0		74.0
Senior notes - fixed rate⁽¹⁾	5.000%	2021	103.8		103.8
Senior notes - fixed rate⁽¹⁾	3.150%	2022	88.3		88.3
Senior notes - fixed rate⁽¹⁾	4.650%	2025	19.3		19.3
Senior notes - fixed rate⁽¹⁾	4.500%	2029	400.0		400.0

Unamortized debt issuance costs and discounts	N/A	N/A	(8.4)		(9.9)
Total debt			$	805.2	$	1,029.1


⁽¹⁾Senior notes are guaranteed as to payment by Pentair plc.

In April 2018, Pentair, Pentair Investments Switzerland GmbH (“PISG”), Pentair Finance S.à r.l (“PFSA“) and Pentair, Inc. entered into a credit agreement, providing for an $800.0 million senior unsecured revolving credit facility with a term of five years (the “Senior Credit Facility”), with Pentair and PISG as guarantors and PFSA and Pentair, Inc. as borrowers. In June 2020, Pentair assumed the PISG guarantee. The Senior Credit Facility has a maturity date of April 25, 2023. Borrowings under the Senior Credit Facility bear interest at a rate equal to an adjusted base rate or the London Interbank Offered 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. In May 2019, PFSA executed an increase of the Senior Credit Facility by $100.0 million for a total commitment up to $900.0 million in the aggregate.

In December 2019, the Senior Credit Facility was amended to provide for the extension of term loans in an aggregate amount of $200.0 million (the “Term Loans”). The Term Loans are in addition to the Senior Credit Facility commitment. In addition, PFSA has the option to further increase the Senior Credit Facility in an aggregate amount of up to $300.0 million, through a combination of increases to the total commitment amount of the Senior Credit Facility and/or one or more tranches of term loans in addition to the Term Loans, subject to customary conditions, including the commitment of the participating lenders.

PFSA is authorized to sell short-term commercial paper notes to the extent availability exists under the Senior Credit Facility. PFSA uses the Senior Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. PFSA had 0 commercial paper outstanding as of ~~March 31,~~September 30, 2020 and $117.8 million as of December 31, 2019, all of which was classified as long-term debt as we have the intent and the ability to refinance such obligations on a long-term basis under the Senior Credit Facility.

In March 2020, the commercial paper market began to experience high levels of volatility due to uncertainty related to the COVID-19 ~~related uncertainty.~~pandemic. The volatility impacted both market access to and pricing of commercial paper. As a ~~result,~~cost mitigation action, we ~~borrowed under~~withdrew our credit ratings to access the ~~Senior Credit Facility and used the proceeds to pay off the remaining~~ commercial paper market in the second quarter of 2020 and continued to use the revolving credit facility, along with cash generated from operations, to fund our general ~~operational needs.~~operations. As of ~~March 31,~~September 30, 2020, total availability under the Senior Credit Facility was ~~$325.5~~$897.8 million.

Our debt agreements contain various financial covenants, but the most restrictive covenants are contained in the Senior Credit Facility. The Senior Credit Facility contains covenants requiring us not to permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash 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 to exceed 3.75 to 1.00 (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 provides for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and liquidations during the period to which such calculation relates.

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Notes to condensed consolidated financial statements (unaudited)

In addition to the Senior Credit Facility, we have various other credit facilities with an aggregate availability of ~~$20.9~~$21.1 million, of which there were 0 outstanding borrowings at ~~March 31, 2020~~.September 30, 2020. Borrowings under these credit facilities bear interest at variable rates.

We have ~~$74.0~~$103.8 million aggregate principal amount of fixed rate senior notes maturing in the next twelve months. We classified this debt as long-term as of ~~March 31,~~September 30, 2020 as we have the intent and ability to refinance such obligation on a long-term basis under the Senior Credit Facility.

Debt outstanding, excluding unamortized issuance costs and discounts, at ~~March 31,~~September 30, 2020 matures on a calendar year basis as follows:


	Q4
In millions	2020		2021		2022		2023		2024		2025		Thereafter		Total
Contractual debt obligation maturities	$	0	$	103.8	$	88.3	$	202.2	$	0	$	19.3	$	400.0	$	813.6

Q2-Q4
In millions 2020 2021 2022 2023 2024 2025 Thereafter Total
Contractual debt obligation maturities $ 74.0
$ 103.8
$ 88.3
$ 774.5
$ —
$ 19.3
$ 400.0
$ 1,459.9

10.Derivatives and Financial Instruments


~~10.~~	~~Derivatives and Financial Instruments~~

Derivative financial instruments

We are exposed to market risk related to changes in foreign currency exchange rates. To manage the volatility related to this exposure, 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. 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 ~~March 31,~~September 30, 2020 and December 31, 2019,, we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of ~~$5.8~~$19.5 million and $17.0 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 ~~March 31,~~September 30, 2020 and December 31, 2019, we had outstanding cross currency swap agreements with a combined notional amount of ~~$761.7~~$816.6 million and $770.0 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 ~~gains~~losses of ~~$37.0~~$4.0 million and ~~deferred currency losses of~~ $1.8 million at ~~March 31,~~September 30, 2020 and December 31, 2019, respectively, in Accumulated other comprehensive loss associated with our cross currency swap activity.

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.

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Notes to condensed consolidated financial statements (unaudited)

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 instruments:


•	~~short-term financial instruments (cash and cash equivalents, accounts and notes receivable, accounts and notes 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 by the accounting guidance;


•	~~foreign currency contract 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 by the accounting guidance; 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 by the accounting guidance; 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.

•short-term financial instruments (cash and cash equivalents, accounts and notes receivable, accounts and notes 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 by the accounting guidance;

•foreign currency contract 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 by the accounting guidance; 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 by the accounting guidance; 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:

March 31,
2020 December 31,
2019
In millions
Recorded
Amount
Fair
Value

Recorded
Amount
Fair
Value
Variable rate debt $ 774.5
$ 774.5
$ 353.6
$ 353.6
Fixed rate debt 685.4
714.0
685.4
732.2
Total debt $ 1,459.9
$ 1,488.5
$ 1,039.0
$ 1,085.8


	September 30, 2020						December 31, 2019
In millions	Recorded Amount		Fair Value		Recorded Amount		Fair Value
Variable rate debt	$	202.2	$	202.2	$	353.6	$	353.6
Fixed rate debt	611.4		674.5		685.4		732.2
Total debt	$	813.6	$	876.7	$	1,039.0	$	1,085.8

Financial assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows:

March 31, 2020
In millions Level 1 Level 2 Level 3 NAV Total
Recurring fair value measurements
Foreign currency contract assets $ —
$ 32.8
$ —
$ —
$ 32.8
Deferred compensation plan assets 8.7
—
—
7.0
15.7
Total recurring fair value measurements $ 8.7
$ 32.8
$ —
$ 7.0
$ 48.5


	September 30, 2020
In millions	Level 1		Level 2		Level 3		NAV		Total
Recurring fair value measurements
Foreign currency contract assets	$	0	$	0.1	$	0	$	0	$	0.1
Foreign currency contract liabilities	0		(27.8)		0		0		(27.8)
Deferred compensation plan assets	10.0		0		0		9.8		19.8
Total recurring fair value measurements	$	10.0	$	(27.7)	$	0	$	9.8	$	(7.9)

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)


	December 31, 2019
In millions	Level 1		Level 2		Level 3		NAV		Total
Recurring fair value measurements
Foreign currency contract assets	$	0	$	0.1	$	0	$	0	$	0.1
Foreign currency contract liabilities	0		(11.6)		0		0		(11.6)
Deferred compensation plan assets	12.5		0		0		8.8		21.3
Total recurring fair value measurements	$	12.5	$	(11.5)	$	0	$	8.8	$	9.8
Nonrecurring fair value measurements ⁽¹⁾

December 31, 2019
In millions Level 1 Level 2 Level 3 NAV Total
Recurring fair value measurements
Foreign currency contract assets $ —
$ 0.1
$ —
$ —
$ 0.1
Foreign currency contract liabilities —
(11.6 ) —
—
(11.6 )
Deferred compensation plan assets 12.5
—
—
8.8
21.3
Total recurring fair value measurements $ 12.5
$ (11.5 ) $ —
$ 8.8
$ 9.8
Nonrecurring fair value measurements ⁽¹⁾

⁽¹⁾
During the year ended December 31, 2019, we recorded impairment charges for cost method investments in the amount of $21.2 million, of which $18.2 million was recorded in the nine months ended September 30, 2019. A valuation method using unobservable inputs was utilized to determine the fair value. We wrote the balance of the cost method investments to zero.


⁽¹⁾	During the year ended December 31, 2019, we recorded impairment charges for cost method investments in the amount of $21.2 million, of which $15.3 million was recorded in the first quarter of 2019. A valuation method using unobservable inputs was utilized to determine the fair value. We wrote the balance of the cost method investments to zero.


~~11.~~	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 ~~three~~nine months ended ~~March 31,~~September 30, 2020 was ~~21.5%~~19.9%, compared to ~~17.1%~~14.2% for the ~~three~~nine months ended ~~March 31,~~September 30, 2019. 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 adjustments that are required to be reported in the specific quarter of resolution.

On March 27, 2020, the ~~United States~~U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the ability to carryback net operating losses arising in taxable years from 2018 through 2020. The CARES Act ~~provisions provided a~~provides positive cash ~~benefit~~benefits of ~~$16.2~~approximately $28.7 million, offset by an increase to our 2020 annual effective tax rate of approximately 1.0% and $5.1 million in discrete tax items recorded in the first nine months of 2020 mainly attributable to base erosion and anti-abuse tax ~~of $6.8 million~~ related to ~~2019~~2019.

In April 2020, the Internal Revenue Service released final regulations as part of the Tax Cuts and Jobs Act of 2017 that ~~was recorded as a~~place limitations on the deductibility of certain interest expense for U.S. tax purposes. These regulations resulted in discrete tax ~~item~~expense of approximately $14.1 million in the ~~first~~second quarter of ~~2020.~~2020, as well as an increase to our 2020 annual effective tax rate of approximately 0.5%.

The liability for uncertain tax positions was ~~$47.5~~$46.8 million and $47.4 million at ~~March 31,~~September 30, 2020 and December 31, 2019, 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.

In April 2020, the Internal Revenue Service released final regulations as part of the Tax Cuts and Jobs Act of 2017 that place limitations on the deductibility of certain interest expense for U.S. tax purposes. These regulations are expected to create a discrete tax expense of approximately $14.1 million in the second quarter of 2020, as well as an increase to our 2020 annual effective tax rate of approximately 1%.


~~12.~~	~~Benefit Plans~~

~~Components of net periodic benefit cost for our pension plans for the three months ended~~ ~~March 31, 2020~~ ~~and 2019 were as follows:~~

Three months ended
In millions March 31,
2020 March 31,
2019
Service cost $ 0.8
$ 0.7
Interest cost 0.7
2.7
Expected return on plan assets (0.2 ) (1.7 )
Net periodic benefit cost $ 1.3
$ 1.7

~~Components of net periodic benefit cost for our other post-retirement plans for the three months ended March 31, 2020 and 2019 were not material.~~

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

12.Benefit Plans


~~13.~~	~~Shareholders’ Equity~~

Components of net periodic benefit expense (income) for our pension plans for the three and nine months ended September 30, 2020 and 2019 were as follows:


	Three months ended						Nine months ended
In millions	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Service cost	$	0.8	$	0.7	$	2.4	$	1.8
Interest cost	0.7		0.9		2.1		6.3
Expected return on plan assets	(0.2)		(0.2)		(0.6)		(3.6)
Plan settlement loss (gain) ⁽¹⁾	0		0.4		0		(11.8)
Net periodic benefit expense (income)	$	1.3	$	1.8	$	3.9	$	(7.3)
⁽¹⁾ In 2019, we received all required government approvals to terminate the Pentair Salaried Plan (the “Salaried Plan”) and entered into an agreement with an insurance company to purchase from us, through an annuity contract, our remaining obligations under the Salaried Plan. For the nine months ended September 30, 2019, we contributed $11.1 million to the Salaried Plan as part of the process to settle our obligations. As a result of these actions, a non-cash pre-tax settlement gain of $11.8 million was recorded for the nine months ended September 30, 2019.

Components of net periodic benefit expense (income) for our other post-retirement plans for the three and nine months ended September 30, 2020 and 2019 were not material.

13.Shareholders’ Equity

Share repurchases

In May 2018, 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 May 31, ~~2021~~.2021. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, we repurchased 3.0 million of our shares for $115.2 million. As of ~~March 31,~~September 30, 2020, we had $134.7 million available for share repurchases under this authorization.

In March 2020, to enhance our liquidity position in response to the COVID-19 pandemic, we elected to temporarily suspend share repurchases under our existing share repurchase program. The temporary suspension of share repurchases has been lifted. The existing program remains authorized by the Board of Directors, and we may resume share repurchases in the future at any time, depending upon market conditions, our capital needs and other factors.

Dividends payable

On ~~February 25,~~September 22, 2020, the Board of Directors declared a quarterly cash dividend of $0.19, payable on ~~May 1,~~November 6, 2020 to shareholders of record at the close of business on ~~April 17,~~October 23, 2020. As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was ~~$31.5~~$31.7 million at ~~March 31,~~September 30, 2020, compared to $32.0 million at December 31, 2019.


~~14.~~	~~Segment Information~~

14.Segment Information

Effective January 1, 2020, we reorganized our business segments to better support our organization with our strategies and to better align with our customer base, resulting in a change to our reporting segments. All prior period amounts related to the segment change have been retrospectively reclassified to conform to the new presentation. As part of this reorganization, the legacy Aquatic Systems, Flow Technologies, and Filtration Solutions segments were realigned into two reportable business segments:

•

•Consumer Solutions — This segment designs, manufactures and sells energy-efficient residential and commercial pool equipment and accessories, and commercial and residential water treatment products and systems. Residential and commercial pool equipment and accessories include pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment and pool accessories. Water treatment products and systems include pressure tanks, control valves, activated carbon products, conventional filtration products, and point-of-entry and point-of-use systems. Applications for our pool business’s products include residential and commercial pool maintenance, repair, renovation, service and construction. Our 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. The primary focus of this segment is business-to-consumer.

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Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

• — This segment designs, manufactures and sells energy-efficient residential and commercial pool equipment and accessories, and commercial and residential water treatment products and systems. Residential and commercial pool equipment and accessories include pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment and pool accessories. Water treatment products and systems include pressure tanks, control valves, activated carbon products, conventional filtration products, and point-of-entry and point-of-use systems. Applications for our pool business include residential and commercial pool maintenance, repair, renovation, service and construction. Our 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 food service operations. The primary focus of this segment is business-to-consumer.

•

Industrial & Flow Technologies — This segment 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, 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. The primary focus of this segment is business-to-business.

We evaluate performance based on net sales and segment income (loss) 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. Segment income (loss) represents equity income of unconsolidated subsidiaries and operating income exclusive of intangible amortization, certain acquisition related expenses, costs of restructuring activities, impairments and other unusual non-operating items.

~~Table of Contents~~

~~Pentair plc and Subsidiaries~~

~~Notes to condensed consolidated financial statements (unaudited)~~

Financial information by reportable segment is as follows:

Three months ended
In millions March 31,
2020 March 31,
2019
Net sales
Consumer Solutions $ 388.8
$ 358.2
Industrial & Flow Technologies 320.9
330.3
Other 0.3
0.4
Consolidated $ 710.0
$ 688.9
Segment income (loss)
Consumer Solutions $ 84.8
$ 75.2
Industrial & Flow Technologies 44.7
41.0
Other (18.0 ) (17.5 )
Consolidated $ 111.5
$ 98.7


	Three months ended						Nine months ended
In millions	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net sales
Consumer Solutions	$	470.8	$	377.0	$	1,260.8	$	1,172.3
Industrial & Flow Technologies	327.4		336.2		960.1		1,028.6
Other	0.3		0.4		0.9		1.1
Consolidated	$	798.5	$	713.6	$	2,221.8	$	2,202.0
Segment income (loss)
Consumer Solutions	$	113.8	$	81.9	$	295.3	$	266.1
Industrial & Flow Technologies	42.7		55.9		131.5		156.6
Other	(16.0)		(15.0)		(50.1)		(47.1)
Consolidated	$	140.5	$	122.8	$	376.7	$	375.6

The following table presents a reconciliation of consolidated segment income to consolidated income from continuing operations before income taxes:


	Three months ended						Nine months ended
In millions	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Segment income	$	140.5	$	122.8	$	376.7	$	375.6
Deal-related costs and expenses	0		0		(0.4)		(4.2)
Inventory step-up	0		0		0		(2.2)
Restructuring and other	(2.1)		(5.9)		(5.6)		(13.7)
Intangible amortization	(6.9)		(7.6)		(21.5)		(24.1)
Pension settlement (loss) gain	0		(0.4)		0		11.8
Asset impairment	0		0		0		(18.2)
(Loss) gain on sale of businesses	0		(0.1)		(0.1)		3.3

COVID-19 related costs and expenses	(2.6)		0		(8.3)		0


Net interest expense	(5.4)		(6.9)		(20.0)		(23.6)
Other income (expense)	1.7		(0.7)		0.6		(3.1)
Income from continuing operations before income taxes	$	125.2	$	101.2	$	321.4	$	301.6

Three months ended
In millions March 31,
2020 March 31,
2019
Segment income $ 111.5
$ 98.7
Deal-related costs and expenses (0.4 ) (4.2 )
Inventory step-up —
(1.7 )
Restructuring and other (2.4 ) (1.1 )
Intangible amortization (7.6 ) (8.2 )
Asset impairment —
(15.3 )
Gain on sale of businesses —
3.5
COVID-19 related costs and expenses (0.9 ) —
Net interest expense (6.9 ) (7.3 )
Other expense (0.7 ) (1.2 )
Income from continuing operations before income taxes $ 92.6
$ 63.2

Table of Contents

Pentair plc and Subsidiaries


~~15.~~	~~Commitments and Contingencies~~

Notes to condensed consolidated financial statements (unaudited)

15.Commitments and Contingencies

Warranties and guarantees

In connection with our disposition of businesses, product lines and assets, we often provide representations, warranties and indemnities to cover purchasers for various potential liabilities relating to the sold businesses, product lines and assets, such as unknown damages or liabilities relating to the assets and pre-closing tax, product liability, warranty, environmental, or other obligations. The subject matter, amounts and duration of any such indemnification obligations vary for each type of liability indemnified and may vary widely from transaction to transaction.

Generally, the maximum obligations under such indemnifications are not explicitly stated and as a result, the overall amount of these obligations cannot be reasonably estimated due to their inchoate and unknown nature. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material adverse effect on our financial position, results of operations or cash flows.

We recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.

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.

~~Table of Contents~~

~~Pentair plc and Subsidiaries~~

~~Notes to condensed consolidated financial statements (unaudited)~~

The changes in the carrying amount of service and product warranties of continuing operations for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 were as follows:

In millions March 31,
2020
Beginning balance $ 32.1
Service and product warranty provision 16.3
Payments (11.5 )
Foreign currency translation (0.4 )
Ending balance $ 36.5


In millions	September 30, 2020
Beginning balance	$	32.1
Service and product warranty provision	42.2
Payments	(38.3)

Foreign currency translation	0.2
Ending balance	$	36.2

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 ~~March 31,~~September 30, 2020 and December 31, 2019, the outstanding value of bonds, letters of credit and bank guarantees totaled ~~$89.3~~$97.3 million and $91.3 million, respectively.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

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, business and industry 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 it. Whether it’s improving, moving or helping people enjoy water, we help manage the world’s most precious resource. We are comprised of two reporting segments: Consumer Solutions and Industrial & Flow Technologies. For the first ~~three~~nine months of 2020, the Consumer Solutions and Industrial & Flow Technologies segments represented approximately ~~55%~~57% and ~~45%~~43% of total revenues, respectively. We classify our operations into business segments based primarily on types of products offered and markets served:

•Industrial & Flow Technologies — This segment 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, 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 sells energy-efficient residential and commercial pool equipment and accessories, and commercial and residential water treatment products and systems. Residential and commercial pool equipment and accessories include pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment and pool accessories. Water treatment products and systems include pressure tanks, control valves, activated carbon products, conventional filtration products, and point-of-entry and point-of-use systems. Applications for our pool business include residential and commercial pool maintenance, repair, renovation, service and construction. Our 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 food service operations. The primary focus of this segment is business-to-consumer.

transfer, fire suppression, flood control, agricultural irrigation and crop spray. The primary focus of this segment is business-to-business.

The COVID-19 pandemic has significantly increased economic and demand uncertainty. We have experienced and expect to continue to experience reductions in customer demand in several of our end-markets.

Within our Consumer Solutions segment, while ~~we believe~~ water quality ~~will remain~~has remained important to consumers, we ~~expect short-term~~have seen demand ~~disruptions to occur. For example, we expect the approximately 5.5 million installed pools~~disruptions. Our Consumer Solutions segment delivered strong growth in the ~~U.S. will still need service~~third quarter of 2020 led by strength in residential markets, particularly our pool business. Our pool business has experienced high demand as consumers sheltered-in-place and ~~repairs~~have spent more time at home. This contributed to an increase in backlog as ~~people are sheltered~~we exited both the second and third quarters of 2020. While shelter-in-place orders impacted our ability to reach our customers in ~~place. However,~~our residential water treatment business at the beginning of the second quarter of 2020, we ~~believe new pool construction~~started to see stabilization in demand in this business towards the end of the second quarter and ~~remodeling could be negatively impacted~~then saw demand rebound in the ~~short term, which~~third quarter as consumers became more comfortable allowing dealers back into their homes to test their water and install new systems. Our commercial filtration business was significantly impacted by restaurant and hospitality industry closures or operations at limited capacity across North America and Europe in the second quarter and to a lesser extent in the third quarter. New or extended government-mandated shutdowns could impact ~~future~~ demand for our ~~pool products. While we have not yet seen a change in demand from wholesalers for~~

~~our commercial filtration~~Consumer Solutions products ~~residential filtration systems demand may decrease due to less retail traffic. Further, commercial food service demand may be impacted by temporary shut downs~~ in the ~~hospitality and restaurant industries.~~future.

Cost mitigation actions

Key Trends and Uncertainties Regarding Our Existing Business

There are many uncertainties regarding the COVID-19 pandemic, including the anticipated duration and severity of the pandemic and the extent of worldwide social, political and economic disruption it may cause. The impact

•There are many uncertainties regarding the COVID-19 pandemic, including the anticipated duration and severity of the pandemic and the extent of worldwide social, political and economic disruption it may continue to cause. The broader implications of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows cannot be determined at this time, and ultimately will be affected by a number of evolving factors including the length of time that the pandemic continues, its effect on the demand for our products and services, ~~and~~ the supply chain, and our manufacturing capacity, as well as the impact of governmental regulations imposed in response to the pandemic. See further discussion above under “COVID-19 Pandemic” for key trends and uncertainties with regard to the COVID-19 pandemic.

•~~COVID-19 Pandemic”~~ ~~for key trends and uncertainties with regard to the COVID-19 pandemic.~~

•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 are reinforcing that our businesses to more effectively address 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.

•We have experienced material and other cost inflation. We strive for productivity improvements, and we implement increases in selling prices to help mitigate this inflation. We expect the current economic environment will result in continuing price volatility for many of our raw materials, and we are uncertain as to the timing and impact of these market changes.

In ~~April~~ 2020, our operating objectives include the ~~Internal Revenue Service released~~following:

•Managing our business through the COVID-19 pandemic, with a focus on:

◦Protecting our employees, customers and our businesses;

◦Optimizing our free cash flow and liquidity; and

◦Delivering the best financial results possible in the near-term while staying focused on longer-term strategies.

•Continued focus on accelerating Pentair Integrated Management System (“PIMS”);

•Delivering our growth priorities through new products and global and market expansion, specifically in the areas of pool and residential and commercial filtration solutions;

•Optimizing our technological capabilities to increasingly generate innovative new products and advance digital transformation; and

•Building a high performance growth culture and delivering on our commitments while living our Win Right values.

The consolidated results of operations for the three months ended September 30, 2020 and 2019 were as follows:


	Three months ended
In millions	September 30, 2020			September 30, 2019			$ Change		% / Point Change
Net sales	$	798.5		$	713.6		$	84.9	11.9	%
Cost of goods sold	521.1			458.6			62.5		13.6	%
Gross profit	277.4			255.0			22.4		8.8	%
% of net sales	34.7		%	35.7		%			(1.0)	pts

Selling, general and administrative	130.0			126.4			3.6		2.8	%
% of net sales	16.3		%	17.7		%			(1.4)	pts
Research and development	19.3			19.8			(0.5)		(2.5)	%
% of net sales	2.4		%	2.8		%			(0.4)	pts



Operating income	128.1			108.8			19.3		17.7	%
% of net sales	16.0		%	15.2		%			0.8	pts

Loss on sale of businesses	—			0.1			(0.1)		N.M.

Other (income) expense	(2.5)			0.6			(3.1)		N.M.
Net interest expense	5.4			6.9			(1.5)		(21.7)	%


Income from continuing operations before income taxes	125.2			101.2			24.0		23.7	%
Provision for income taxes	14.4			9.9			4.5		45.5	%
Effective tax rate	11.5		%	9.8		%			1.7	pts


	Nine months ended
In millions	September 30, 2020			September 30, 2019			$ Change		% / Point Change
Net sales	$	2,221.8		$	2,202.0		$	19.8	0.9	%
Cost of goods sold	1,447.7			1,424.7			23.0		1.6	%
Gross profit	774.1			777.3			(3.2)		(0.4)	%
% of net sales	34.8		%	35.3		%			(0.5)	pts

Selling, general and administrative expenses	378.6			405.9			(27.3)		(6.7)	%
% of net sales	17.0		%	18.4		%			(1.4)	pts
Research and development expenses	55.6			61.2			(5.6)		(9.2)	%
% of net sales	2.5		%	2.8		%			(0.3)	pts



Operating income	339.9			310.2			29.7		9.6	%
% of net sales	15.3		%	14.1		%			1.2	pts

Loss (gain) on sale of businesses	0.1			(3.3)			3.4		N.M.

Other income	(1.6)			(11.7)			10.1		N.M.
Net interest expense	20.0			23.6			(3.6)		(15.3)	%

Income from continuing operations before income taxes	321.4			301.6			19.8		6.6	%
Provision for income taxes	64.1			42.8			21.3		49.8	%
Effective tax rate	19.9		%	14.2		%			5.7	pts


	Three months ended September 30, 2020		Nine months ended September 30, 2020
	over the prior year period		over the prior year period
Volume	10.1	%	(0.4)	%
Price	0.3		1.0
Core growth	10.4		0.6
Acquisition	0.5		0.6
Currency	1.0		(0.3)
Total	11.9	%	0.9	%

The 11.9 and 0.9 percentage point increases in net sales in the third quarter and first nine months, respectively, of 2020 from 2019 were primarily driven by:

•volume increase in our Consumer Solutions segment mainly driven by our pool business;

•volume increase in our residential and irrigation flow businesses in our Industrial & Flow Technologies segment;

•selective increases in selling prices to mitigate inflationary cost increases;

•increased sales due to the Aquion and Pelican acquisitions in February 2019 and other small acquisitions in our Consumer Solutions segment in the fourth quarter of 2019 and first half of 2020; and

•favorable foreign currency effects in the third quarter of 2020 compared to the third quarter of the prior year.

These increases were partially offset by:

•sales volume declines in certain businesses within our Industrial & Flow Technologies segment due to the impacts of the COVID-19 pandemic; and

•unfavorable foreign currency effects in the first nine months of 2020 compared to the prior year.

The 1.0 and 0.5 percentage point decreases in gross profit as a percentage of net sales in the third quarter and first nine months, respectively, of 2020 from 2019 were primarily driven by:

•unfavorable mix within the commercial and infrastructure flow and residential, commercial, and industrial filtration businesses;

•higher transportation and labor costs due to increased demand in our pool business;

•costs related to providing for the health and safety of our employees specific to the COVID-19 pandemic of $2.6 million and $6.6 million for the three and nine months ended September 30, 2020, respectively; and

•inflationary increases related to certain raw materials.

These decreases were partially offset by:

•selective increases in selling prices to mitigate impacts of inflation; and

•increased productivity due to cost actions such as temporary furloughs and hiring freezes in response to the COVID-19 pandemic driving manufacturing efficiencies and lower operating expenses.

Selling, general and administrative expenses (“SG&A”)

The 1.4 percentage point decrease in SG&A as a percentage of net sales in both the third quarter and first nine months of 2020 from 2019 was primarily driven by:

•asset impairment of $18.2 million in the first nine months of 2019 that did not occur in 2020;

•reduction in travel and entertainment, trade show and advertising expenses due to the COVID-19 pandemic; and

•restructuring and other costs of $5.6 million in the first nine months of 2020, compared to $13.7 million in the first nine months of 2019.

Net interest expense

The 21.7 and 15.3 percent decreases in net interest expense in the third quarter and first nine months, respectively, of 2020 from 2019 were primarily driven by:

•cross currency swaps entered into in June 2019 and December 2019 resulting in more interest income in the third quarter and first nine months of 2020 than in the comparative 2019 periods;

•lower interest rate revolving credit facilities replacing higher interest rate fixed rate debt that matured during the second half of 2019; and

•strong cash flows in 2020 leading to lower overall debt levels.

Provision for income taxes

The 1.7 and 5.7 percentage point increases in the effective tax rate in the third quarter and first nine months, respectively, of 2020 from 2019 were primarily driven by:

•the unfavorable impact of discrete items, including items related to the CARES Act, and items related to final regulations as part of the Tax Cuts and Jobs Act of 2017 that place limitations on the deductibility of certain interest expense for U.S. tax purposes.

These regulations are expected to create a discrete tax expense of approximately $14.1 million in the second quarter of 2020, as well as an increase to our 2020 annual effective tax rate of approximately 1%.

~~In 2020, our operating objectives include the following:~~

~~CONSOLIDATED RESULTS OF OPERATIONS~~

Three months ended
In millions March 31,
2020 March 31,
2019
$
Change
% / Point
Change
Net sales $ 710.0
$ 688.9
$ 21.1
3.1 %
Cost of goods sold 458.4
453.3
5.1
1.1 %
Gross profit 251.6
235.6
16.0
6.8 %
      % of net sales
35.4 % 34.2 % 1.2 pts

Selling, general and administrative expenses 131.9
147.3
(15.4 ) (10.5 )%
      % of net sales
18.6 % 21.4 % (2.8 ) pts
Research and development expenses 19.0
20.7
(1.7 ) (8.2 )%
      % of net sales 2.7 % 3.0 % (0.3 ) pts

Operating income 100.7
67.6
33.1
49.0 %
      % of net sales 14.2 % 9.8 % 4.4 pts

Gain on sale of businesses —
(3.5 ) 3.5
N.M.
Other expense 1.2
0.6
0.6
N.M.
Net interest expense 6.9
7.3
(0.4 ) (5.5 )%

Income from continuing operations before income taxes 92.6
63.2
29.4
46.5 %
Provision for income taxes 19.9
10.8
9.1
84.3 %
      Effective tax rate 21.5 % 17.1 % 4.4   pts

~~N.M. Not Meaningful~~



	~~Three months ended March 31, 2020~~
	~~over the prior year period~~
~~Volume~~	~~1.1~~	%
~~Price~~	~~1.6~~
~~Core growth~~	~~2.7~~
~~Acquisition (divestiture)~~	~~1.4~~
~~Currency~~	~~(1.0~~	)
~~Total~~	~~3.1~~	%

~~The 3.1 percentage point increase in net sales in the first quarter of 2020 from 2019 was primarily driven by:~~

~~This increase was~~ partially offset by:

sales volume declines as a result of reduced orders over the past twelve months and shipping delays driven by certain COVID-19 constraints and site closures in our Industrial & Flow Technologies segment; and

~~The 1.2 percentage point increase in gross profit as a percentage of sales in the first quarter of 2020 from 2019 was primarily driven by:~~

~~This increase was partially offset by:~~

~~Selling, general and administrative expenses (“SG&A”)~~

~~The 2.8 percentage point decrease in SG&A as a percentage of sales in the first quarter of 2020 from 2019 was primarily driven by:~~

~~This decrease was partially offset by:~~

~~restructuring and other costs of~~ ~~$2.4 million~~ ~~in the first quarter of 2020, compared to $1.1 million in the first quarter of 2019.~~

~~Net interest expense~~

~~The 5.5 percent decrease in net interest expense in the first quarter of 2020 from 2019 was primarily driven by:~~

~~Provision for income taxes~~

~~The 4.4 percentage point increase in the effective tax rate in the first quarter of 2020 from 2019 was primarily driven by:~~

SEGMENT RESULTS OF OPERATIONS

We evaluate performance based on net sales and segment income and use a variety of ratios to measure performance of our reporting segments. Segment income represents equity income of unconsolidated subsidiaries and operating income exclusive of intangible amortization, certain acquisition related expenses, costs of restructuring activities, impairments and other unusual non-operating items.

The net sales and segment income for Consumer Solutions were as follows:

The components of the change in Consumer Solutions net sales from the prior period were as follows:


	Three months ended September 30, 2020		Nine months ended September 30, 2020
	over the prior year period		over the prior year period
Volume	23.1	%	5.6	%
Price	0.3		1.0
Core growth	23.4		6.6
Acquisition	1.0		1.1
Currency	0.5		(0.2)
Total	24.9	%	7.5	%



	~~Three months ended March 31, 2020~~
	~~over the prior year period~~
~~Volume~~	~~4.8~~	%
~~Price~~	~~1.8~~
~~Core growth~~	~~6.6~~
~~Acquisition~~	~~2.6~~
~~Currency~~	~~(0.7~~	)
~~Total~~	~~8.5~~	%

The ~~8.5~~24.9 and 7.5 percent ~~increase~~increases in net sales for Consumer Solutions in the third quarter and first ~~quarter~~nine months, respectively, of 2020 from 2019 ~~was~~were primarily driven by:

•increased sales volume across all product lines in our pool business in the first quarter of 2020 due to more normal weather patterns and reduced inventory levels in the channel compared to 2019;

•increased sales volume across several of the product lines in our pool business in the second and third quarters of 2020 due to consumers increasing their pool use while sheltering-in-place due to the COVID-19 pandemic;

•increased sales volumes in our residential filtration product lines in North America in the third quarter of 2020;

•selective increases in selling prices to mitigate impacts of inflation; and

•increased sales due to the Aquion and Pelican acquisitions that occurred in February 2019 and other small acquisitions in the fourth quarter of 2019 and first ~~quarter~~nine months of 2020.

~~This increase was~~These increases were partially offset by:

~~unfavorable foreign currency effects compared~~•sales decreases for the first nine months of 2020 due to ~~the same period of the prior year; and~~

The components of the change in Consumer Solutions segment income as a percentage of net sales from the prior period were as follows:



	~~Three months ended March 31, 2020~~
	~~over the prior year period~~
~~Growth~~	~~1.6~~	~~pts~~
~~Acquisition~~	~~0.3~~
~~Inflation~~	~~(1.4~~	)
~~Productivity/Price~~	~~0.3~~
~~Total~~	~~0.8~~	~~pts~~

The ~~0.8~~2.5 and 0.7 percentage point ~~increase~~increases in segment income for Consumer Solutions as a percentage of net sales in the third quarter and first ~~quarter~~nine months, respectively, of 2020 from 2019 ~~was~~were primarily driven by:

•increase in sales volume in our pool business in the third quarter and first nine months of 2020 resulting in favorable sales mix;

•reduction in travel and entertainment, trade show and advertising expenses due to the COVID-19 pandemic and other cost reduction initiatives;

•impact of Aquion and Pelican acquisitions; and

~~This increase was~~These increases were partially offset by:

•lower sales volume in the higher margin commercial filtration business;

•higher sales rebates and employee incentive compensation expense in line with increased sales in our pool business;

•higher transportation and labor costs due to increased demand in our pool business; and

•inflationary increases related to ~~labor costs and~~ certain raw ~~materials; and~~

Industrial & Flow Technologies

The net sales and segment income for Industrial & Flow Technologies were as follows:


	Three months ended											Nine months ended
In millions	September 30, 2020			September 30, 2019			% / Point Change		September 30, 2020			September 30, 2019			% / Point Change
Net sales	$	327.4		$	336.2		(2.6)	%	$	960.1		$	1,028.6		(6.7)	%
Segment income	42.7			55.9			(23.6)	%	131.5			156.6			(16.0)	%
% of net sales	13.0		%	16.6		%	(3.6)	pts	13.7		%	15.2		%	(1.5)	pts

Three months ended
In millions March 31,
2020 March 31,
2019 % / Point Change
Net sales $ 320.9
$ 330.3
(2.8 )%
Segment income 44.7
41.0
9.0 %
% of net sales 13.9 % 12.4 % 1.5 pts

Table of Contents

The components of the change inIndustrial & Flow Technologiesnet sales from the prior period were as follows:

The ~~2.8~~2.6 and 6.7 percent ~~decrease~~decreases in net sales for Industrial & Flow Technologies in the third quarter and first ~~quarter~~nine months, respectively, of 2020 from 2019 ~~was~~were primarily driven by:

•decreased sales volume in our commercial water supply and water disposal, industrial filtration and food and beverage businesses due to less project sales as a result of customers deferring their capital spending and less service and aftermarket revenue driven by reduced consumption and travel restrictions from government-mandated shutdowns and “shelter-in-place” orders due to the COVID-19 pandemic;

•decreased sales volume in our residential and irrigation flow businesses in the first half of 2020 due to market conditions resulting from the COVID-19 pandemic; and

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

These decreases were partially offset by:

•increased sales volume in our residential and irrigation flow businesses in the third quarter of 2020 due to strong demand in the residential water supply, water disposal and specialty spray product lines;

•sales growth in our infrastructure business as a result of ~~reduced orders over the past twelve months;~~strong backlog entering 2020; and

~~delays in shipments driven by certain COVID-19 related constraints and site closures; and~~

~~This decrease was partially offset by:~~

The components of the change in Industrial & Flow Technologies segment income as a percentage of net sales from the prior period were as follows:

The 3.6 and 1.5 percentage point ~~increase~~decreases in segment income for Industrial & Flow Technologies as a percentage of net sales in the third quarter and first ~~quarter~~nine months, respectively, of 2020 from 2019 ~~was~~were primarily driven by:

•decreased sales volumes in our residential and irrigation flow businesses in the first half of 2020 due to the COVID-19 pandemic, which resulted in decreased leverage on fixed operating expenses;

•decreased sales volume in our commercial water supply and water disposal, industrial filtration and food and beverage businesses due to the COVID-19 pandemic along with unfavorable mix within our industrial filtration business; and

•inflationary increases related to raw material and labor costs.

These decreases were partially offset by:

•selective increases in selling prices to mitigate inflationary cost increases;

•lower sales incentive expense in line with decreased sales; and

•increased productivity due to cost actions driving manufacturing efficiencies and lower operating expenses.

~~This increase was partially offset by:~~

We generally fund cash requirements for working capital, capital expenditures, equity investments, acquisitions, debt repayments, dividend payments and share repurchases from cash generated from operations, availability under existing committed revolving credit facilities and in certain instances, public and private debt and equity offerings. Our primary revolving credit facilities have generally been adequate for these purposes, although we have negotiated additional credit facilities or completed debt and equity offerings as needed to allow us to complete acquisitions. While we historically have issued commercial paper to fund our financing needs on a short-term basis, due to disruptions in the short-term financial markets in the first quarter of 2020, we no longer had access to commercial paper and instead drew on our revolving credit facility as a back-up liquidity measure.

We experience seasonal cash flows primarily due to seasonal demand in a number of markets. Consistent with historical trends, we experienced seasonal cash usage in the first quarter of 2020 and drew on our revolving credit facility to repay commercial paper and to fund our operations. This cash usage ~~reverses~~reversed in the second quarter of 2020 as the seasonality of our businesses ~~peaks. We expect~~peaked. Consistent with historical seasonal patterns, ~~to continue and~~ the second quarter of 2020 ~~to generate~~generated significant cash to fund our ~~operations.~~ operations and we used this cash to significantly reduce the draw on our revolving credit facility. We continued to experience strong cash flow in the third quarter of 2020, which we used to further reduce the draw on our revolving credit facility.

End-user demand for pool and certain pumping equipment follows warm weather trends and is at seasonal highs from April to August. The magnitude of the sales spike is partially mitigated by employing some advance sale “early buy” programs (generally including extended payment terms and/or additional discounts). Demand for residential and agricultural water systems is also impacted by weather patterns, particularly by heavy flooding and droughts.

We expect to continue to have cash requirements to support working capital needs and capital expenditures, to pay interest and service debt and to pay dividends to shareholders quarterly. We believe our existing liquidity position, coupled with our currently anticipated operating cash flows will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months. Although there is uncertainty of the impact of the COVID-19 pandemic on our future results, we believe we are well-positioned to manage our business and have the ability and sufficient capacity to meet these cash requirements by using available cash, internally generated funds and borrowing under our committed and uncommitted credit facilities. We are committed to maintaining investment grade credit ratings and a solid liquidity position.

Operating activities

Cash ~~used for~~provided by operating activities of continuing operations was ~~$162.4~~$500.8 million in the first ~~three~~nine months of 2020, compared to ~~$257.1~~$266.1 million in the same period of 2019.

Investing activities

Cash used for investing activities was ~~$25.8~~$70.6 million in the first ~~three~~nine months of 2020, compared to ~~$304.5~~$329.5 million in the same period of 2019. Net cash used for investing activities in the first ~~three~~nine months of 2020 primarily reflects capital expenditures of ~~$18.7 million.~~$44.4 million and cash paid for acquisitions of $28.5 million, net of cash acquired.

Financing activities

In April 2018, Pentair, PISG, PFSA and Pentair, Inc. entered into a credit agreement, providing for an $800.0 million senior unsecured revolving credit facility with a term of five years (the “Senior Credit Facility”), with Pentair and PISG as guarantors and PFSA and Pentair, Inc. as borrowers. In June 2020, Pentair assumed the PISG guarantee. The Senior Credit Facility has a maturity date of April 25, 2023. Borrowings under the Senior Credit Facility bear interest at a rate equal to an adjusted base rate or the London Interbank Offered 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. In May 2019, PFSA executed an increase of the Senior Credit Facility by $100.0 million for a total commitment up to $900.0 million in the aggregate.

In June 2019, PFSA completed a public offering of $400.0 million aggregate principal amount of PFSA’s 4.500% Senior Notes due 2029 (the “2029 Notes”). We used the net proceeds of the 2029 Notes to partially repay outstanding commercial paper.

PFSA is authorized to sell short-term commercial paper notes to the extent availability exists under the Senior Credit Facility. PFSA uses the Senior Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. PFSA had no commercial paper outstanding as of ~~March 31,~~September 30, 2020 and $117.8 million as of December 31, 2019, all of which was classified as long-term debt as we have the intent and the ability to refinance such obligations on a long-term basis under the Senior Credit Facility.

share-based compensation expense (“EBITDA”) on the last day of any period of four consecutive fiscal quarters to exceed 3.75 to 1.00 (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 provides for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and liquidations during the period to which such calculation relates. As of ~~March 31,~~September 30, 2020, we were in compliance with all financial covenants in our debt agreements, and there was no material uncertainty about our ongoing ability to meet these covenants.

In addition to the Senior Credit Facility, we have various other credit facilities with an aggregate availability of ~~$20.9~~$21.1 million, of which there were no outstanding borrowings at ~~March 31,~~September 30, 2020. Borrowings under these credit facilities bear interest at variable rates.

As of ~~March 31,~~September 30, 2020, we have ~~$60.3~~$56.0 million of cash held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.

Supplemental guarantor information

Current assets ⁽¹⁾

Noncurrent assets ⁽²⁾

Current liabilities ⁽³⁾

Noncurrent liabilities ⁽⁴⁾

⁽¹⁾Includes assets due from non-guarantor subsidiaries of $7.1 million and $2.4 million as of September 30, 2020 and December 31, 2019, respectively.

⁽²⁾Includes assets due from non-guarantor subsidiaries of $1,006.2 million and $1,278.7 million as of September 30, 2020 and December 31, 2019, respectively.

⁽³⁾Includes liabilities due to non-guarantor subsidiaries of $504.6 million and $648.8 million as of September 30, 2020 and December 31, 2019, respectively.

⁽⁴⁾Includes liabilities due to non-guarantor subsidiaries of $472.9 million and $449.9 million as of September 30, 2020 and December 31, 2019, respectively.



	~~Three months ended~~
~~In millions~~	March 31, 2020
~~In millions~~	March 31, 2020
~~Net sales~~	$	—
~~Gross profit~~	—
~~Loss from continuing operations before taxes~~	~~(4.1~~		)
~~Net loss of continuing operations~~	~~(4.1~~		)

⁽¹⁾Includes assets due from non-guarantor subsidiaries of $7.2 million and $2.4 million as of March 31, 2020 and December 31, 2019, respectively.

Under Irish law, the payment of future cash dividends and repurchases of shares may be paid only out of Pentair plc’s “distributable reserves” on its statutory balance sheet. Pentair plc is not permitted to pay dividends out of share capital, which includes share premiums. Distributable reserves may be created through the earnings of the Irish parent company and through a reduction in share capital approved by the Irish High Court. Distributable reserves are not linked to a U.S. generally accepted accounting principles (“GAAP”) reported amount (e.g., retained earnings). Our distributable reserve balance was $6.6 billion as of December 31, 2019.

Other financial measures

The following table is a reconciliation of free cash flow:

See Note 1 of the Notes to Condensed Consolidated Financial Statements for information pertaining to recently adopted accounting standards.

We have adopted various accounting policies to prepare the consolidated financial statements in accordance with GAAP. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. In our 2019 Annual Report on Form 10-K, we identified the critical accounting policies that affect our more significant estimates and assumptions used in preparing our consolidated financial statements. There have been no material changes to our critical accounting policies and estimates from those disclosed in our 2019 Annual Report on Form 10-K for the year ended December 31, 2019.

Except for the broad effects of the COVID-19 pandemic as a result of its negative impact on the global economy and major financial markets, there have been no material changes in our market risk during the ~~quarter~~nine months ended ~~March 31,~~September 30, 2020. For additional information refer to Item 7A of our 2019 Annual Report on Form 10-K.

(a) Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter ended ~~March 31,~~September 30, 2020 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the quarter ended ~~March 31,~~September 30, 2020 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.

(b) Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended ~~March 31,~~September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 1. LEGAL PROCEEDINGS

We have been, and in the future may be, made parties to a number of actions filed or have been, and in the future may be, given notice of potential claims relating to the conduct of our business, including those relating to commercial or contractual disputes with suppliers, customers or parties to acquisitions and divestitures, intellectual property matters, environmental, safety and health matters, product liability, the use or installation of our products, consumer matters, and employment and labor matters.

As of ~~March 31,~~September 30, 2020, there were approximately ~~770~~610 claims outstanding against our subsidiaries. This amount is not adjusted for claims that are not actively being prosecuted, identified incorrect defendants, or duplicated other actions, which would ultimately reflect our current estimate of the number of viable claims made against us, our affiliates, or entities for which we assumed responsibility in connection with acquisitions or divestitures. In addition, the amount does not include certain claims pending against third parties for which we have been provided an indemnification.

Environmental matters

Product liability claims

There have been no material changes from the risk factors previously disclosed in our 2019 Annual Report on Form 10-K for the year ended December 31, 2019, except for the addition of the risk factor set forth below.

•The COVID-19 pandemic has caused a global economic slowdown that may last for a potentially extended duration, and it is possible that it could cause a global recession. Deteriorating economic and political conditions caused by the COVID-19 pandemic, such as increased unemployment, decreases in capital spending, declines in consumer confidence, or economic slowdowns or recessions, could cause a decrease in demand for our products.

•Due to the impacts of the COVID-19 pandemic, we have experienced and expect to continue to experience reductions in customer demand for certain of our products and in several of our end-markets, including ~~new pool construction and remodeling,~~ residential and commercial filtration, residential and irrigation flow, commercial flow, industrial filtration ~~commercial~~and food ~~service,~~ and ~~residential flow.~~beverage.


	March 31, 2020			December 31, 2019				September 30, 2020		December 31, 2019
In millions, except per-share data							In millions, except per-share data
Assets	Assets						Assets
Current assets							Current assets
Cash and cash equivalents	$	169.3		$	82.5		Cash and cash equivalents	$	82.6	$	82.5
Accounts and notes receivable, net of allowances of $8.6 and $10.3, respectively	665.0			502.9
Accounts receivable, net of allowances of $8.7 and $10.3, respectively							Accounts receivable, net of allowances of $8.7 and $10.3, respectively	362.1		502.9
Inventories	392.4			377.4			Inventories	401.7		377.4
Other current assets	112.9			99.1			Other current assets	117.1		99.1

Total current assets	1,339.6			1,061.9			Total current assets	963.5		1,061.9
Property, plant and equipment, net	280.7			283.2			Property, plant and equipment, net	291.1		283.2
Other assets							Other assets
Goodwill	2,256.8			2,258.3			Goodwill	2,329.6		2,258.3
Intangibles, net	326.5			339.2			Intangibles, net	323.3		339.2
Other non-current assets	223.1			196.9			Other non-current assets	196.0		196.9

Total other assets	2,806.4			2,794.4			Total other assets	2,848.9		2,794.4
Total assets	$	4,426.7		$	4,139.5		Total assets	$	4,103.5	$	4,139.5
Liabilities and Equity	Liabilities and Equity						Liabilities and Equity
Current liabilities							Current liabilities

Accounts payable	$	268.2		$	325.1		Accounts payable	$	276.6	$	325.1
Employee compensation and benefits	68.0			71.0			Employee compensation and benefits	107.0		71.0
Other current liabilities	346.6			352.9			Other current liabilities	435.3		352.9

Total current liabilities	682.8			749.0			Total current liabilities	818.9		749.0
Other liabilities							Other liabilities
Long-term debt	1,450.5			1,029.1			Long-term debt	805.2		1,029.1
Pension and other post-retirement compensation and benefits	95.7			96.4			Pension and other post-retirement compensation and benefits	94.5		96.4
Deferred tax liabilities	114.5			104.4			Deferred tax liabilities	112.0		104.4
Other non-current liabilities	190.7			206.7			Other non-current liabilities	223.1		206.7

Total liabilities	2,534.2			2,185.6			Total liabilities	2,053.7		2,185.6
Equity							Equity
Ordinary shares $0.01 par value, 426.0 authorized, 165.7 and 168.3 issued at March 31, 2020 and December 31, 2019, respectively	1.7			1.7
Ordinary shares $0.01 par value, 426.0 authorized, 166.3 and 168.3 issued at September 30, 2020 and December 31, 2019, respectively							Ordinary shares $0.01 par value, 426.0 authorized, 166.3 and 168.3 issued at September 30, 2020 and December 31, 2019, respectively	1.7		1.7

Additional paid-in capital	1,673.9			1,777.7			Additional paid-in capital	1,698.8		1,777.7
Retained earnings	442.1			401.0			Retained earnings	561.6		401.0
Accumulated other comprehensive loss	(225.2		)	(226.5		)	Accumulated other comprehensive loss	(212.3)		(226.5)
Total equity	1,892.5			1,953.9			Total equity	2,049.8		1,953.9
Total liabilities and equity	$	4,426.7		$	4,139.5		Total liabilities and equity	$	4,103.5	$	4,139.5


	Three months ended							Nine months ended
In millions	March 31, 2020			March 31, 2019			In millions	September 30, 2020		September 30, 2019
Operating activities							Operating activities
Net income	$	72.7		$	51.3		Net income	$	255.6	$	257.9
Loss from discontinued operations, net of tax	—			1.1			Loss from discontinued operations, net of tax	1.7		0.9

Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities of continuing operations							Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities of continuing operations
Equity loss (income) of unconsolidated subsidiaries	0.5			(0.6		)
Equity income of unconsolidated subsidiaries							Equity income of unconsolidated subsidiaries	(1.0)		(3.0)
Depreciation	11.6			12.0			Depreciation	34.4		36.4
Amortization	7.6			8.2			Amortization	21.5		24.1
Deferred income taxes	14.0			(1.7		)	Deferred income taxes	8.5		(17.7)
Gain on sale of businesses	—			(3.5		)
Loss (gain) on sale of businesses							Loss (gain) on sale of businesses	0.1		(3.3)
Share-based compensation	6.2			5.4			Share-based compensation	15.2		15.3
Asset impairment	—			15.3			Asset impairment	0		18.2

Pension settlement gain							Pension settlement gain	0		(11.8)
Pension and other post-retirement plan contribution							Pension and other post-retirement plan contribution	0		(11.1)

Changes in assets and liabilities, net of effects of business acquisitions							Changes in assets and liabilities, net of effects of business acquisitions
Accounts receivable	(167.1		)	(154.0		)	Accounts receivable	147.3		82.8
Inventories	(20.1		)	(22.2		)	Inventories	(17.7)		4.0
Other current assets	(13.4		)	(22.5		)	Other current assets	(13.4)		(10.5)
Accounts payable	(49.9		)	(118.2		)	Accounts payable	(46.7)		(128.8)
Employee compensation and benefits	(0.8		)	(18.9		)	Employee compensation and benefits	35.0		(19.1)
Other current liabilities	(22.3		)	(8.3		)	Other current liabilities	61.1		21.3
Other non-current assets and liabilities	(1.4		)	(0.5		)	Other non-current assets and liabilities	(0.8)		10.5
Net cash used for operating activities of continuing operations	(162.4		)	(257.1		)
Net cash provided by operating activities of discontinued operations	—			0.8
Net cash used for operating activities	(162.4		)	(256.3		)
Net cash provided by operating activities of continuing operations							Net cash provided by operating activities of continuing operations	500.8		266.1
Net cash used for operating activities of discontinued operations							Net cash used for operating activities of discontinued operations	(0.5)		(1.4)
Net cash provided by operating activities							Net cash provided by operating activities	500.3		264.7
Investing activities							Investing activities
Capital expenditures	(18.7		)	(16.8		)	Capital expenditures	(44.4)		(44.6)
Proceeds from sale of property and equipment	0.1			0.3			Proceeds from sale of property and equipment	0.1		0.4
Proceeds from the sale of businesses, net	—			0.7			Proceeds from the sale of businesses, net	0		0.7
Acquisitions, net of cash acquired	(7.2		)	(287.2		)	Acquisitions, net of cash acquired	(28.5)		(284.5)
Other	—			(1.5		)	Other	2.2		(1.5)

Net cash used for investing activities	(25.8		)	(304.5		)	Net cash used for investing activities	(70.6)		(329.5)
Financing activities							Financing activities
Net receipts of commercial paper and revolving long-term debt	420.9			584.1

Net (repayments) receipts of commercial paper and revolving long-term debt							Net (repayments) receipts of commercial paper and revolving long-term debt	(151.3)		91.2
Proceeds from long-term debt							Proceeds from long-term debt	0		400.0
Repayments of long-term debt							Repayments of long-term debt	(74.0)		(151.5)
Debt issuance costs							Debt issuance costs	0		(6.3)

Shares issued to employees, net of shares withheld	5.2			5.9			Shares issued to employees, net of shares withheld	21.1		6.8
Repurchases of ordinary shares	(115.2		)	—			Repurchases of ordinary shares	(115.2)		(150.0)
Dividends paid	(32.1		)	(31.0		)	Dividends paid	(95.4)		(92.4)
Net cash provided by financing activities	278.8			559.0

Net cash (used for) provided by financing activities							Net cash (used for) provided by financing activities	(414.8)		97.8

Effect of exchange rate changes on cash and cash equivalents	(3.8		)	6.4			Effect of exchange rate changes on cash and cash equivalents	(14.8)		5.9
Change in cash and cash equivalents	86.8			4.6			Change in cash and cash equivalents	0.1		38.9
Cash and cash equivalents, beginning of period	82.5			74.3			Cash and cash equivalents, beginning of period	82.5		74.3
Cash and cash equivalents, end of period	$	169.3		$	78.9		Cash and cash equivalents, end of period	$	82.6	$	113.2



	2020 Annual Grant
Risk-free interest rate	1.61	%
Expected dividend yield	1.80	%
Expected share price volatility	~~24.1~~24.10	%
Expected term (years)	6.8


In millions	Ordinary shares						Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss			Total
		Number		Amount
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	—			—		—		—			0
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 income, 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	—			—		—		—			0
Shares surrendered by employees to pay taxes	0	—			(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
Net income	—	—			—		110.8		—			110.8
Other comprehensive income, net of tax	—	—			—		—		2.5			2.5
Dividends declared, $0.19 per share	—	—			—		(31.7)		—			(31.7)

Exercise of options, net of shares tendered for payment	0.4	—			14.1		—		—			14.1

Shares surrendered by employees to pay taxes	0	—			(0.4)		—		—			(0.4)
Share-based compensation	—	—			4.8		—		—			4.8
Balance - September 30, 2020	166.3	$	1.7		$	1,698.8	$	561.6	$	(212.3)		$	2,049.8



	Q2-Q4
In millions	2020		2021		2022		2023		2024		2025
Estimated amortization expense	$	19.6	$	22.0	$	15.4	$	12.8	$	12.3	$	12.3



In millions	Average interest rate as of March 31, 2020	Maturity Year	March 31, 2020			December 31, 2019
Commercial paper	2.097%	2023	$	—		$	117.8
Revolving credit facilities	2.069%	2023	574.5			35.8
Term loans⁽¹⁾	2.696%	2023	200.0			200.0
Senior notes - fixed rate⁽¹⁾	3.625%	2020	74.0			74.0
Senior notes - fixed rate⁽¹⁾	5.000%	2021	103.8			103.8
Senior notes - fixed rate⁽¹⁾	3.150%	2022	88.3			88.3
Senior notes - fixed rate⁽¹⁾	4.650%	2025	19.3			19.3
Senior notes - fixed rate⁽¹⁾	4.500%	2029	400.0			400.0
Unamortized debt issuance costs and discounts	N/A	N/A	(9.4		)	(9.9		)
Total debt			$	1,450.5		$	1,029.1
⁽¹⁾Senior notes (“the Notes”) and the term loans are guaranteed as to payment by Pentair plc and PISG



	March 31, 2020
In millions	Level 1		Level 2		Level 3		NAV		Total
Recurring fair value measurements
Foreign currency contract assets	$	—	$	32.8	$	—	$	—	$	32.8
Deferred compensation plan assets	8.7		—		—		7.0		15.7
Total recurring fair value measurements	$	8.7	$	32.8	$	—	$	7.0	$	48.5


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~


◦	~~Protecting our employees, customers and our businesses;~~


◦	~~Delivering the best financial results possible in the near-term while staying focused on longer-term strategies.~~


	(a)	(b)		(c)	(d)
Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Dollar value of shares that may yet be purchased under the plans or programs
July 1 - July 25	5,110	$	37.04	—	$	134,718,028
July 26 - August 22	1,008	43.08		—	134,718,028
August 23 - September 30	3,181	45.65		—	134,718,028
Total	9,299			—


~~(b)~~	The average price paid in this column includes shares deemed surrendered to us by participants in the Plans to satisfy the exercise price for the exercise price of stock options and withholding tax obligations due upon stock option exercises and vesting of restricted and performance shares.


~~(c)~~	The number of shares in this column represents the number of shares repurchased as part of our publicly announced plans to repurchase our ordinary shares up to the maximum dollar limit authorized by the Board of Directors, discussed below.


5.	~~Restructuring~~





2210.1						Form of Key Executive Employment and Severance Agreement for Stephen J. Pilla (Incorporated by reference to Exhibit 10.3 in the Quarterly Report on Form 10-Q of Pentair plc for the quarter ended June 30, 2018 (File No. 001-11625)).
22						List of Guarantors and Subsidiary Issuers of Guaranteed ~~Securities~~Securities.
31.1						Certification of Chief Executive Officer.
31.2						Certification of Chief Financial Officer.
32.1						Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2						Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101						The following materials from Pentair plc’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2020 are filed herewith, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019, (ii) the Condensed Consolidated Balance Sheets as of ~~March 31,~~September 30, 2020 and December 31, 2019, (iii) the Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019, (iv) the Condensed Consolidated Statements of Changes in Equity for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019, and (v) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).



	Pentair plc
	~~Pentair plc~~Registrant
	~~Registrant~~
	By	/s/ Robert P. Fishman
	By	~~/s/ Mark C. Borin~~Robert P. Fishman
		~~Mark C. Borin~~
Executive Vice President, Chief Financial Officer and Chief Accounting Officer