QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Quarterly Period Ended September 30, 2019 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||
(Address of principal executive offices) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company |
Page | ||
PART I FINANCIAL INFORMATION | ||
ITEM 1. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
PART II OTHER INFORMATION | ||
ITEM 1. | ||
ITEM 1A. | ||
ITEM 2. | ||
ITEM 6. | ||
Three months ended | Nine months ended | ||||||||||||
In millions, except per-share data | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Net sales | $ | $ | $ | $ | |||||||||
Cost of goods sold | |||||||||||||
Gross profit | |||||||||||||
Selling, general and administrative expenses | |||||||||||||
Research and development expenses | |||||||||||||
Operating income | |||||||||||||
Other (income) expense: | |||||||||||||
Loss (gain) on sale of business | ( | ) | |||||||||||
Loss on early extinguishment of debt | |||||||||||||
Net interest expense | |||||||||||||
Other expense (income) | ( | ) | ( | ) | |||||||||
Income from continuing operations before income taxes | |||||||||||||
Provision for income taxes | |||||||||||||
Net income from continuing operations | |||||||||||||
Income (loss) from discontinued operations, net of tax | ( | ) | |||||||||||
Net income | $ | $ | $ | $ | |||||||||
Comprehensive income, net of tax | |||||||||||||
Net income | $ | $ | $ | $ | |||||||||
Changes in cumulative translation adjustment | ( | ) | ( | ) | ( | ) | |||||||
Changes in market value of derivative financial instruments, net of tax | ( | ) | ( | ) | |||||||||
Comprehensive income | $ | $ | $ | $ | |||||||||
Earnings (loss) per ordinary share | |||||||||||||
Basic | |||||||||||||
Continuing operations | $ | $ | $ | $ | |||||||||
Discontinued operations | ( | ) | |||||||||||
Basic earnings per ordinary share | $ | $ | $ | $ | |||||||||
Diluted | |||||||||||||
Continuing operations | $ | $ | $ | $ | |||||||||
Discontinued operations | ( | ) | |||||||||||
Diluted earnings per ordinary share | $ | $ | $ | $ | |||||||||
Weighted average ordinary shares outstanding | |||||||||||||
Basic | |||||||||||||
Diluted |
September 30, 2019 | December 31, 2018 | |||||
In millions, except per-share data | ||||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | $ | ||||
Accounts and notes receivable, net of allowances of $13.4 and $14.0, respectively | ||||||
Inventories | ||||||
Other current assets | ||||||
Total current assets | ||||||
Property, plant and equipment, net | ||||||
Other assets | ||||||
Goodwill | ||||||
Intangibles, net | ||||||
Other non-current assets | ||||||
Total other assets | ||||||
Total assets | $ | $ | ||||
Liabilities and Equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | $ | ||||
Employee compensation and benefits | ||||||
Other current liabilities | ||||||
Total current liabilities | ||||||
Other liabilities | ||||||
Long-term debt | ||||||
Pension and other post-retirement compensation and benefits | ||||||
Deferred tax liabilities | ||||||
Other non-current liabilities | ||||||
Total liabilities | ||||||
Equity | ||||||
Ordinary shares $0.01 par value, 426.0 authorized, 168.1 and 171.4 issued at September 30, 2019 and December 31, 2018, respectively | ||||||
Additional paid-in capital | ||||||
Retained earnings | ||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||
Total equity | ||||||
Total liabilities and equity | $ | $ |
Nine months ended | ||||||
In millions | September 30, 2019 | September 30, 2018 | ||||
Operating activities | ||||||
Net income | $ | $ | ||||
Loss (income) from discontinued operations, net of tax | ( | ) | ||||
Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities of continuing operations | ||||||
Equity income of unconsolidated subsidiaries | ( | ) | ( | ) | ||
Depreciation | ||||||
Amortization | ||||||
Deferred income taxes | ( | ) | ( | ) | ||
(Gain) loss on sale of business | ( | ) | ||||
Share-based compensation | ||||||
Trade name and other impairment | ||||||
Loss on early extinguishment of debt | ||||||
Pension settlement (gain) loss | ( | ) | ||||
Pension and other post-retirement plan contributions | ( | ) | ||||
Changes in assets and liabilities, net of effects of business acquisitions | ||||||
Accounts and notes receivable | ||||||
Inventories | ( | ) | ||||
Other current assets | ( | ) | ( | ) | ||
Accounts payable | ( | ) | ( | ) | ||
Employee compensation and benefits | ( | ) | ( | ) | ||
Other current liabilities | ||||||
Other non-current assets and liabilities | ||||||
Net cash provided by operating activities of continuing operations | ||||||
Net cash used for operating activities of discontinued operations | ( | ) | ( | ) | ||
Net cash provided by operating activities | ||||||
Investing activities | ||||||
Capital expenditures | ( | ) | ( | ) | ||
Proceeds from sale of property and equipment | ( | ) | ||||
Proceeds from (payments due to) the sale of businesses, net | ( | ) | ||||
Acquisitions, net of cash acquired | ( | ) | ( | ) | ||
Other | ( | ) | ||||
Net cash used for investing activities of continuing operations | ( | ) | ( | ) | ||
Net cash used for investing activities of discontinued operations | ( | ) | ||||
Net cash used for investing activities | ( | ) | ( | ) | ||
Financing activities | ||||||
Net receipts of commercial paper and revolving long-term debt | ||||||
Proceeds from long-term debt | ||||||
Repayments of long-term debt | ( | ) | ( | ) | ||
Debt issuance costs | ( | ) | ( | ) | ||
Premium paid on early extinguishment of debt | ( | ) | ||||
Transfer of cash to nVent | ( | ) | ||||
Distribution of cash from nVent | ||||||
Shares issued to employees, net of shares withheld | ||||||
Repurchases of ordinary shares | ( | ) | ( | ) | ||
Dividends paid | ( | ) | ( | ) | ||
Net cash provided by (used for) financing activities | ( | ) | ||||
Change in cash held for sale | ||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | ||||
Change in cash and cash equivalents | ( | ) | ||||
Cash and cash equivalents, beginning of period | ||||||
Cash and cash equivalents, end of period | $ | $ |
In millions | Ordinary shares | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Total | |||||||||||||
Number | Amount | |||||||||||||||||
Balance - December 31, 2018 | $ | $ | $ | $ | ( | ) | $ | |||||||||||
Net income | — | — | — | — | ||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | ||||||||||||||
Dividends declared, $0.18 per share | — | — | — | ( | ) | — | ( | ) | ||||||||||
Exercise of options, net of shares tendered for payment | — | — | — | |||||||||||||||
Issuance of restricted shares, net of cancellations | — | — | — | |||||||||||||||
Shares surrendered by employees to pay taxes | — | ( | ) | — | — | ( | ) | |||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||
Balance - March 31, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||
Net income | — | — | — | — | ||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | ( | ) | ( | ) | ||||||||||
Dividends declared, $0.18 per share | — | — | — | ( | ) | — | ( | ) | ||||||||||
Share repurchase | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||
Exercise of options, net of shares tendered for payment | — | — | — | |||||||||||||||
Issuance of restricted shares, net of cancellations | — | — | — | |||||||||||||||
Shares surrendered by employees to pay taxes | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||
Share-based compensation | — | — | — | — | ||||||||||||||
Balance - June 30, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||
Net income | — | — | — | — | ||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | ( | ) | ( | ) | ||||||||||
Dividends declared, $0.18 per share | — | — | — | ( | ) | — | ( | ) | ||||||||||
Exercise of options, net of shares tendered for payment | — | — | — | |||||||||||||||
Shares surrendered by employees to pay taxes | — | ( | ) | — | — | ( | ) | |||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||
Balance - September 30, 2019 | ( | ) |
In millions | Ordinary shares | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Total | |||||||||||||
Number | Amount | |||||||||||||||||
Balance - December 31, 2017 | $ | $ | $ | $ | ( | ) | $ | |||||||||||
Net income | — | — | — | — | ||||||||||||||
Cumulative effect of accounting changes | — | — | — | ( | ) | — | ( | ) | ||||||||||
Other comprehensive loss, net of tax | — | — | — | — | ( | ) | ( | ) | ||||||||||
Dividends declared, $0.35 per share | — | — | — | ( | ) | — | ( | ) | ||||||||||
Share repurchase | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||
Exercise of options, net of shares tendered for payment | — | — | — | |||||||||||||||
Issuance of restricted shares, net of cancellations | — | — | — | — | ||||||||||||||
Shares surrendered by employees to pay taxes | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||
Share-based compensation | — | — | — | — | ||||||||||||||
Balance - March 31, 2018 | $ | $ | $ | $ | ( | ) | $ | |||||||||||
Net income | — | — | — | — | ||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | ||||||||||||||
Distribution to nVent | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Dividends declared, $0.175 per share | — | — | — | ( | ) | — | ( | ) | ||||||||||
Share repurchase | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||
Exercise of options, net of shares tendered for payment | — | — | — | |||||||||||||||
Issuance of restricted shares, net of cancellations | ( | ) | — | — | — | |||||||||||||
Shares surrendered by employees to pay taxes | — | ( | ) | — | — | ( | ) | |||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||
Balance - June 30, 2018 | $ | $ | $ | $ | ( | ) | $ | |||||||||||
Net income | — | — | — | — | ||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | ( | ) | ( | ) | ||||||||||
Dividends declared, $0.175 per share | — | — | — | ( | ) | — | ( | ) | ||||||||||
Share repurchase | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||
Exercise of options, net of shares tendered for payment | — | — | — | |||||||||||||||
Issuance of restricted shares, net of cancellations | — | — | — | — | ||||||||||||||
Shares surrendered by employees to pay taxes | — | — | ( | ) | — | — | ( | ) | ||||||||||
Share-based compensation | — | — | — | — | ||||||||||||||
Balance - September 30, 2018 | $ | $ | $ | $ | ( | ) | $ |
Three months ended | Nine months ended | ||||||||||||
In millions | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
U.S. | $ | $ | $ | $ | |||||||||
Western Europe | |||||||||||||
Developing (1) | |||||||||||||
Other Developed (2) | |||||||||||||
Consolidated net sales | $ | $ | $ | $ | |||||||||
(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 | Nine months ended | ||||||||||||
In millions | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Residential | $ | $ | $ | $ | |||||||||
Commercial | |||||||||||||
Industrial | |||||||||||||
Consolidated net sales | $ | $ | $ | $ |
In millions | September 30, 2019 | December 31, 2018 | $ Change | % Change | ||||||||
Contract assets | $ | $ | $ | % | ||||||||
Contract liabilities | % | |||||||||||
Net contract assets | $ | $ | $ | ( | ) | ( | )% |
Three months ended | Nine months ended | ||||||||||||
In millions | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Net sales | $ | $ | $ | $ | |||||||||
Cost of goods sold | |||||||||||||
Gross profit | |||||||||||||
Selling, general and administrative expenses | |||||||||||||
Research and development expenses | |||||||||||||
Operating (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||
(Loss) income from discontinued operations before income taxes | $ | ( | ) | $ | $ | ( | ) | $ | |||||
Income tax (benefit) provision | ( | ) | ( | ) | ( | ) | |||||||
Income (loss) from discontinued operations, net of tax | $ | $ | $ | ( | ) | $ |
4. | Share Plans |
Three months ended | Nine months ended | ||||||||||||
In millions | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Restricted stock units | $ | $ | $ | $ | |||||||||
Stock options | |||||||||||||
Performance share units | |||||||||||||
Total share-based compensation expense | $ | $ | $ | $ |
2019 Annual Grant | ||
Risk-free interest rate | % | |
Expected dividend yield | % | |
Expected share price volatility | % | |
Expected term (years) |
5. | Restructuring |
Three months ended | Nine months ended | ||||||||||||
In millions | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Severance and related costs | $ | $ | $ | $ | |||||||||
Other | |||||||||||||
Total restructuring costs | $ | $ | $ | $ |
Three months ended | Nine months ended | ||||||||||||
In millions | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Aquatic Systems | $ | $ | $ | $ | |||||||||
Filtration Solutions | |||||||||||||
Flow Technologies | |||||||||||||
Other | |||||||||||||
Consolidated | $ | $ | $ | $ |
In millions | September 30, 2019 | ||
Beginning balance | $ | ||
Costs incurred | |||
Cash payments and other | ( | ) | |
Ending balance | $ |
6. | Earnings Per Share |
Three months ended | Nine months ended | ||||||||||||
In millions, except per-share data | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Net income | $ | $ | $ | $ | |||||||||
Net income from continuing operations | $ | $ | $ | $ | |||||||||
Weighted average ordinary shares outstanding | |||||||||||||
Basic | |||||||||||||
Dilutive impact of stock options, restricted stock units and performance share units | |||||||||||||
Diluted | |||||||||||||
Earnings (loss) per ordinary share | |||||||||||||
Basic | |||||||||||||
Continuing operations | $ | $ | $ | $ | |||||||||
Discontinued operations | ( | ) | |||||||||||
Basic earnings per ordinary share | $ | $ | $ | $ | |||||||||
Diluted | |||||||||||||
Continuing operations | $ | $ | $ | $ | |||||||||
Discontinued operations | ( | ) | |||||||||||
Diluted earnings per ordinary share | $ | $ | $ | $ | |||||||||
Anti-dilutive stock options excluded from the calculation of diluted earnings per share |
In millions | September 30, 2019 | December 31, 2018 | ||||
Inventories | ||||||
Raw materials and supplies | $ | $ | ||||
Work-in-process | ||||||
Finished goods | ||||||
Total inventories | $ | $ | ||||
Other current assets | ||||||
Cost in excess of billings | $ | $ | ||||
Prepaid expenses | ||||||
Prepaid income taxes | ||||||
Other current assets | ||||||
Total other current assets | $ | $ | ||||
Property, plant and equipment, net | ||||||
Land and land improvements | $ | $ | ||||
Buildings and leasehold improvements | ||||||
Machinery and equipment | ||||||
Construction in progress | ||||||
Total property, plant and equipment | ||||||
Accumulated depreciation and amortization | ||||||
Total property, plant and equipment, net | $ | $ | ||||
Other non-current assets | ||||||
Right-of-use lease assets | $ | $ | ||||
Deferred income taxes | ||||||
Deferred compensation plan assets | ||||||
Other non-current assets | ||||||
Total other non-current assets | $ | $ | ||||
Other current liabilities | ||||||
Dividends payable | $ | $ | ||||
Accrued warranty | ||||||
Accrued rebates and incentives | ||||||
Billings in excess of cost | ||||||
Current lease liability | ||||||
Income taxes payable | ||||||
Accrued restructuring | ||||||
Other current liabilities | ||||||
Total other current liabilities | $ | $ | ||||
Other non-current liabilities | ||||||
Long-term lease liability | $ | $ | ||||
Income taxes payable | ||||||
Self-insurance liabilities | ||||||
Deferred compensation plan liabilities | ||||||
Foreign currency contract liabilities | ||||||
Other non-current liabilities | ||||||
Total other non-current liabilities | $ | $ |
8. | Goodwill and Other Identifiable Intangible Assets |
In millions | December 31, 2018 | Acquisitions | Foreign currency translation/other | September 30, 2019 | ||||||||
Aquatic Systems | $ | $ | $ | ( | ) | $ | ||||||
Filtration Solutions | ( | ) | ||||||||||
Flow Technologies | ( | ) | ||||||||||
Total goodwill | $ | $ | $ | ( | ) | $ |
September 30, 2019 | December 31, 2018 | ||||||||||||||||||
In millions | Cost | Accumulated amortization | Net | Cost | Accumulated amortization | Net | |||||||||||||
Definite-life intangibles | |||||||||||||||||||
Customer relationships | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||
Trade names | ( | ) | |||||||||||||||||
Proprietary technology and patents | ( | ) | ( | ) | |||||||||||||||
Total definite-life intangibles | ( | ) | ( | ) | |||||||||||||||
Indefinite-life intangibles | |||||||||||||||||||
Trade names | — | — | |||||||||||||||||
Total intangibles | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ |
Q4 | ||||||||||||||||||
In millions | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | ||||||||||||
Estimated amortization expense | $ | $ | $ | $ | $ | $ |
9. | Debt |
In millions | Average interest rate as of September 30, 2019 | Maturity Year | September 30, 2019 | December 31, 2018 | ||||
Commercial paper | 2023 | $ | $ | |||||
Revolving credit facilities | 2023 | |||||||
Senior notes - fixed rate (1) | 2019 | |||||||
Senior notes - fixed rate - Euro (1) | 2019 | |||||||
Senior notes - fixed rate (1) | 2020 | |||||||
Senior notes - fixed rate (1) | 2021 | |||||||
Senior notes - fixed rate (1) | 2022 | |||||||
Senior notes - fixed rate (1) | 2025 | |||||||
Senior notes - fixed rate (1) | 2029 | |||||||
Unamortized debt issuance costs and discounts | N/A | N/A | ( | ) | ( | ) | ||
Total debt | $ | $ | ||||||
(1) Senior notes are guaranteed as to payment by Pentair and PISG. |
Q4 | ||||||||||||||||||||||||
In millions | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | ||||||||||||||||
Contractual debt obligation maturities | $ | $ | $ | $ | $ | $ | — | $ | $ |
10. | Derivatives and Financial Instruments |
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. |
• | 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. |
September 30, 2019 | December 31, 2018 | ||||||||||||
In millions | Recorded Amount | Fair Value | Recorded Amount | Fair Value | |||||||||
Variable rate debt | $ | $ | $ | $ | |||||||||
Fixed rate debt | |||||||||||||
Total debt | $ | $ | $ | $ |
September 30, 2019 | |||||||||||||||
In millions | Level 1 | Level 2 | Level 3 | NAV | Total | ||||||||||
Recurring fair value measurements | |||||||||||||||
Foreign currency contract assets | $ | $ | $ | $ | $ | ||||||||||
Foreign currency contract liabilities | ( | ) | ( | ) | |||||||||||
Deferred compensation plan assets | |||||||||||||||
Total recurring fair value measurements | $ | $ | ( | ) | $ | $ | $ |
December 31, 2018 | |||||||||||||||
In millions | Level 1 | Level 2 | Level 3 | NAV | Total | ||||||||||
Recurring fair value measurements | |||||||||||||||
Foreign currency contract liabilities | $ | $ | ( | ) | $ | $ | $ | ( | ) | ||||||
Deferred compensation plan assets | |||||||||||||||
Total recurring fair value measurements | $ | $ | ( | ) | $ | $ | $ | ( | ) |
11. |
12. | Benefit Plans |
Three months ended | Nine months ended | ||||||||||||
In millions | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Service cost | $ | $ | $ | $ | |||||||||
Interest cost | |||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | |||||
Plan settlement loss (gain) | ( | ) | |||||||||||
Net periodic benefit expense (income) | $ | $ | $ | ( | ) | $ |
13. | Shareholders’ Equity |
14. | Segment Information |
Three months ended | Nine months ended | ||||||||||||
In millions | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Net sales | |||||||||||||
Aquatic Systems | $ | $ | $ | $ | |||||||||
Filtration Solutions | |||||||||||||
Flow Technologies | |||||||||||||
Other | |||||||||||||
Consolidated | $ | $ | $ | $ | |||||||||
Segment income (loss) | |||||||||||||
Aquatic Systems | $ | $ | $ | $ | |||||||||
Filtration Solutions | |||||||||||||
Flow Technologies | |||||||||||||
Other | ( | ) | ( | ) | ( | ) | ( | ) | |||||
Consolidated | $ | $ | $ | $ |
Three months ended | Nine months ended | ||||||||||||
In millions | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||
Segment income | $ | $ | $ | $ | |||||||||
Deal-related costs and expenses | ( | ) | |||||||||||
Inventory step-up | ( | ) | |||||||||||
Restructuring and other | ( | ) | ( | ) | ( | ) | ( | ) | |||||
Intangible amortization | ( | ) | ( | ) | ( | ) | ( | ) | |||||
Pension settlement (loss) gain | ( | ) | ( | ) | ( | ) | |||||||
Asset impairment | ( | ) | ( | ) | |||||||||
(Loss) gain on sale of business | ( | ) | ( | ) | ( | ) | |||||||
Loss on early extinguishment of debt | ( | ) | |||||||||||
Corporate allocations | ( | ) | |||||||||||
Net interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||
Other expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||
Income from continuing operations before income taxes | $ | $ | $ | $ |
15. | Commitments and Contingencies |
Three months ended | Nine months ended | |||||
In millions | September 30, 2019 | |||||
Operating lease cost | $ | $ | ||||
Sublease income | ( | ) | ( | ) | ||
Total lease cost | $ | $ |
In millions | September 30, 2019 | ||
Operating cash flows from operating leases | $ | ||
Right-of-use assets obtained in exchange for lease obligations |
September 30, 2019 | ||
Weighted-average remaining lease term of operating leases | ||
Weighted-average discount rate of operating leases | % |
In millions | Operating Leases | ||
Q4 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total lease payments | |||
Less: imputed interest | ( | ) | |
Total | $ |
In millions | Operating Leases | ||
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total | $ |
In millions | September 30, 2019 | ||
Beginning balance | $ | ||
Service and product warranty provision | |||
Payments | ( | ) | |
Foreign currency translation | ( | ) | |
Ending balance | $ |
16. | Supplemental Guarantor Information |
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Net sales | $ | $ | $ | $ | $ | $ | ||||||||||||
Cost of goods sold | ||||||||||||||||||
Gross profit | ||||||||||||||||||
Selling, general and administrative | ( | ) | ||||||||||||||||
Research and development | ||||||||||||||||||
Operating (loss) income | ( | ) | ( | ) | ||||||||||||||
(Earnings) loss from continuing operations of investment in subsidiaries | ( | ) | ( | ) | ( | ) | ||||||||||||
Other (income) expense: | ||||||||||||||||||
Loss on sale of business | ||||||||||||||||||
Net interest expense | ||||||||||||||||||
Other expense | ||||||||||||||||||
Income (loss) from continuing operations before income taxes | ( | ) | ||||||||||||||||
Provision for income taxes | ||||||||||||||||||
Net income (loss) from continuing operations | ( | ) | ||||||||||||||||
Income from discontinued operations, net of tax | ||||||||||||||||||
Earnings (loss) from discontinued operations of investment in subsidiaries | ( | ) | ||||||||||||||||
Net income (loss) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Comprehensive income (loss), net of tax | ||||||||||||||||||
Net income (loss) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Changes in cumulative translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Changes in market value of derivative financial instruments, net of tax | ( | ) | ||||||||||||||||
Comprehensive income (loss) | $ | $ | $ | $ | $ | ( | ) | $ |
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Net sales | $ | $ | $ | $ | $ | $ | ||||||||||||
Cost of goods sold | ||||||||||||||||||
Gross profit | ||||||||||||||||||
Selling, general and administrative expenses | ||||||||||||||||||
Research and development expenses | ||||||||||||||||||
Operating (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||||
(Earnings) loss from continuing operations of investment in subsidiaries | ( | ) | ( | ) | ( | ) | ||||||||||||
Other (income) expense: | ||||||||||||||||||
Gain on sale of business | ( | ) | ( | ) | ||||||||||||||
Net interest expense | ||||||||||||||||||
Other income | ( | ) | ( | ) | ||||||||||||||
Income (loss) from continuing operations before income taxes | ( | ) | ||||||||||||||||
Provision for income taxes | ||||||||||||||||||
Net income (loss) from continuing operations | ( | ) | ||||||||||||||||
Loss from discontinued operations, net of tax | ( | ) | ( | ) | ||||||||||||||
(Loss) earnings from discontinued operations of investment in subsidiaries | ( | ) | ( | ) | ( | ) | ||||||||||||
Net income (loss) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Comprehensive income (loss), net of tax | ||||||||||||||||||
Net income (loss) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Changes in cumulative translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Changes in market value of derivative financial instruments, net of tax | ( | ) | ||||||||||||||||
Comprehensive income (loss) | $ | $ | $ | $ | $ | ( | ) | $ |
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Assets | ||||||||||||||||||
Current assets | ||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | $ | ||||||||||||
Accounts and notes receivable, net | ( | ) | ||||||||||||||||
Inventories | ||||||||||||||||||
Other current assets | ||||||||||||||||||
Total current assets | ( | ) | ||||||||||||||||
Property, plant and equipment, net | ||||||||||||||||||
Other assets | ||||||||||||||||||
Investments in subsidiaries | ( | ) | ||||||||||||||||
Goodwill | ||||||||||||||||||
Intangibles, net | ||||||||||||||||||
Other non-current assets | ( | ) | ||||||||||||||||
Total other assets | ( | ) | ||||||||||||||||
Total assets | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Liabilities and Equity | ||||||||||||||||||
Current liabilities | ||||||||||||||||||
Accounts payable | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Employee compensation and benefits | ||||||||||||||||||
Other current liabilities | ||||||||||||||||||
Total current liabilities | ( | ) | ||||||||||||||||
Other liabilities | ||||||||||||||||||
Long-term debt | ( | ) | ||||||||||||||||
Pension and other post-retirement compensation and benefits | ||||||||||||||||||
Deferred tax liabilities | ||||||||||||||||||
Other non-current liabilities | ||||||||||||||||||
Total liabilities | ( | ) | ||||||||||||||||
Equity | ( | ) | ||||||||||||||||
Total liabilities and equity | $ | $ | $ | $ | $ | ( | ) | $ |
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Operating activities | ||||||||||||||||||
Net cash provided by (used for) operating activities | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Investing activities | ||||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ||||||||||||||
Proceeds from sale of property and equipment | ||||||||||||||||||
Proceeds from the sale of businesses | ||||||||||||||||||
Acquisitions, net of cash acquired | ( | ) | ( | ) | ||||||||||||||
Net intercompany loan activity | ( | ) | ( | ) | ||||||||||||||
Other | ( | ) | ( | ) | ||||||||||||||
Net cash (used for) provided by investing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
Financing activities | ||||||||||||||||||
Net receipts (repayments) of commercial paper and revolving long-term debt | ( | ) | ||||||||||||||||
Proceeds from long-term debt | ||||||||||||||||||
Repayments of long-term debt | ( | ) | ( | ) | ||||||||||||||
Debt issuance costs | ( | ) | ( | ) | ||||||||||||||
Net change in advances to subsidiaries | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
Shares issued to employees, net of shares withheld | ||||||||||||||||||
Repurchases of ordinary shares | ( | ) | ( | ) | ||||||||||||||
Dividends paid | ( | ) | ( | ) | ||||||||||||||
Net cash (used for) provided by financing activities | ( | ) | ( | ) | ( | ) | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | ||||||||||||||||
Change in cash and cash equivalents | ||||||||||||||||||
Cash and cash equivalents, beginning of period | ||||||||||||||||||
Cash and cash equivalents, end of period | $ | $ | $ | $ | $ | $ |
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Net sales | $ | $ | $ | $ | $ | $ | ||||||||||||
Cost of goods sold | ||||||||||||||||||
Gross profit | ||||||||||||||||||
Selling, general and administrative expenses | ||||||||||||||||||
Research and development expenses | ||||||||||||||||||
Operating (loss) income | ( | ) | ( | ) | ||||||||||||||
(Earnings) loss from continuing operations of investment in subsidiaries | ( | ) | ( | ) | ( | ) | ||||||||||||
Other (income) expense: | ||||||||||||||||||
Loss on sale of business | ||||||||||||||||||
Net interest (income) expense | ( | ) | ||||||||||||||||
Other expense | ||||||||||||||||||
Income (loss) from continuing operations before income taxes | ( | ) | ||||||||||||||||
Provision for income taxes | ||||||||||||||||||
Net income (loss) from continuing operations | ( | ) | ||||||||||||||||
Income from discontinued operations, net of tax | ||||||||||||||||||
(Loss) earnings from discontinued operations of investment in subsidiaries | ( | ) | ||||||||||||||||
Net income (loss) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Comprehensive income (loss), net of tax | ||||||||||||||||||
Net income (loss) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Changes in cumulative translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Changes in market value of derivative financial instruments, net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Comprehensive income (loss) | $ | $ | $ | $ | $ | ( | ) | $ |
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Net sales | $ | $ | $ | $ | $ | $ | ||||||||||||
Cost of goods sold | ||||||||||||||||||
Gross profit | ||||||||||||||||||
Selling, general and administrative | ||||||||||||||||||
Research and development | ||||||||||||||||||
Operating (loss) income | ( | ) | ( | ) | ||||||||||||||
(Earnings) loss from continuing operations of investment in subsidiaries | ( | ) | ( | ) | ( | ) | ||||||||||||
Other (income) expense: | ||||||||||||||||||
Loss on sale of business | ||||||||||||||||||
Loss on early extinguishment of debt | ||||||||||||||||||
Net interest (income) expense | ( | ) | ||||||||||||||||
Other income | ( | ) | ( | ) | ||||||||||||||
Income (loss) from continuing operations before income taxes | ( | ) | ||||||||||||||||
Provision for income taxes | ||||||||||||||||||
Net income (loss) from continuing operations | ( | ) | ||||||||||||||||
Income from discontinued operations, net of tax | ||||||||||||||||||
Earnings (loss) from discontinued operations of investment in subsidiaries | ( | ) | ||||||||||||||||
Net income (loss) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Comprehensive income (loss), net of tax | ||||||||||||||||||
Net income (loss) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Changes in cumulative translation adjustment | ( | ) | ||||||||||||||||
Changes in market value of derivative financial instruments, net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Comprehensive income (loss) | $ | $ | $ | $ | $ | ( | ) | $ |
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Assets | ||||||||||||||||||
Current assets | ||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | $ | ||||||||||||
Accounts and notes receivable, net | ||||||||||||||||||
Inventories | ||||||||||||||||||
Other current assets | ( | ) | ||||||||||||||||
Total current assets | ( | ) | ||||||||||||||||
Property, plant and equipment, net | ||||||||||||||||||
Other assets | ||||||||||||||||||
Investments in subsidiaries | ( | ) | ||||||||||||||||
Goodwill | ||||||||||||||||||
Intangibles, net | ||||||||||||||||||
Other non-current assets | ( | ) | ||||||||||||||||
Total other assets | ( | ) | ||||||||||||||||
Total assets | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Liabilities and Equity | ||||||||||||||||||
Current liabilities | ||||||||||||||||||
Accounts payable | $ | $ | $ | $ | $ | $ | ||||||||||||
Employee compensation and benefits | ||||||||||||||||||
Other current liabilities | ( | ) | ||||||||||||||||
Total current liabilities | ( | ) | ||||||||||||||||
Other liabilities | ||||||||||||||||||
Long-term debt | ( | ) | ||||||||||||||||
Pension and other post-retirement compensation and benefits | ||||||||||||||||||
Deferred tax liabilities | ||||||||||||||||||
Other non-current liabilities | ||||||||||||||||||
Total liabilities | ( | ) | ||||||||||||||||
Equity | ( | ) | ||||||||||||||||
Total liabilities and equity | $ | $ | $ | $ | $ | ( | ) | $ |
In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total | ||||||||||||
Operating activities | ||||||||||||||||||
Net cash provided by (used for) operating activities | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||
Investing activities | ||||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ||||||||||||||
Proceeds from sale of property and equipment | ( | ) | ( | ) | ||||||||||||||
Payments due to sale of businesses, net | ( | ) | ( | ) | ||||||||||||||
Acquisitions, net of cash acquired | ( | ) | ( | ) | ||||||||||||||
Net intercompany loan activity | ( | ) | ( | ) | ||||||||||||||
Net cash provided by (used for) investing activities of continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||||
Net cash used for investing activities of discontinued operations | ( | ) | ( | ) | ||||||||||||||
Net cash provided by (used for) investing activities | ( | ) | ( | ) | ( | ) | ||||||||||||
Financing activities | ||||||||||||||||||
Net receipts (repayments) of commercial paper and revolving long-term debt | ( | ) | ||||||||||||||||
Repayments of long-term debt | ( | ) | ( | ) | ||||||||||||||
Premium paid on early extinguishment of debt | ( | ) | ( | ) | ||||||||||||||
Debt issuance costs | ( | ) | ( | ) | ||||||||||||||
Transfer of cash to nVent | ( | ) | ( | ) | ||||||||||||||
Distribution from nVent spin-off | ||||||||||||||||||
Net change in advances to subsidiaries | ( | ) | ( | ) | ( | ) | ||||||||||||
Shares issued to employees, net of shares withheld | ||||||||||||||||||
Repurchases of ordinary shares | ( | ) | ( | ) | ||||||||||||||
Dividends paid | ( | ) | ( | ) | ||||||||||||||
Net cash (used for) provided by financing activities | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Change in cash held for sale | ||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||||||||||||
Change in cash and cash equivalents | ( | ) | ( | ) | ||||||||||||||
Cash and cash equivalents, beginning of period | ||||||||||||||||||
Cash and cash equivalents, end of period | $ | $ | $ | $ | $ | $ |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Aquatic Systems — This segment manufactures and sells a complete line of energy-efficient residential and commercial pool equipment and accessories including pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment and pool accessories. Applications for our Aquatic Systems products include residential and commercial pool maintenance, pool repair, renovation, service and construction and aquaculture solutions. |
• | Filtration Solutions — This segment manufactures and sells water and fluid treatment products and systems, including pressure tanks and vessels, control valves, activated carbon products, conventional filtration products, point-of-entry and point-of-use systems, gas recovery solutions, membrane bioreactors, wastewater reuse systems and advanced membrane filtration and separation systems into the global residential, industrial and commercial markets. These products are used in a range of applications, including use in fluid filtration, ion exchange, desalination, food and beverage, food service and separation technologies for the oil and gas industry. |
• | Flow Technologies — This segment manufactures and sells products ranging from light-duty diaphragm pumps to high-flow turbine pumps and solid handling pumps while serving the global residential, commercial and industrial markets. These pumps are used in a range of applications, including residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, fluid delivery, circulation and transfer, fire suppression, flood control, agricultural irrigation and crop spray. |
• | Wet and cold weather delayed pool construction activity in several key markets during the first half of 2019. As a result of slower sell-through during the first half of 2019, inventory levels were not reduced to the levels we anticipated. We expect the financial results of Aquatic Systems for the remainder of 2019 to be negatively impacted as a result. |
• | 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 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. |
• | Proposed regulations as part of the Tax Cuts and Jobs Act, enacted in the U.S. in December 2017, may place limitations on the deductibility of certain interest expense for U.S. tax purposes. These proposed regulations could materially adversely affect our financial condition, results of operations, cash flows or our effective tax rate in future reporting periods when enacted. |
• | Accelerating the Pentair Integrated Management System (“PIMS”), with specific focus on the area of commercial excellence and acquisition integrations; |
• | Delivering our growth priorities through new products and global and market expansion, specifically in the areas of pool and residential and commercial water treatment especially through acquisitions and focus on China and Southeast Asia; |
• | Optimizing our technological capabilities to increasingly generate innovative new products and advance digital transformation; and |
• | Building a growth culture and delivering on our commitments while living our Win Right values. |
Three months ended | |||||||||||
In millions | September 30, 2019 | September 30, 2018 | $ Change | % / Point Change | |||||||
Net sales | $ | 713.6 | $ | 711.4 | $ | 2.2 | 0.3 | % | |||
Cost of goods sold | 458.6 | 467.6 | (9.0 | ) | (1.9 | )% | |||||
Gross profit | 255.0 | 243.8 | 11.2 | 4.6 | % | ||||||
% of net sales | 35.7 | % | 34.3 | % | 1.4 | pts | |||||
Selling, general and administrative | 126.4 | 116.3 | 10.1 | 8.7 | % | ||||||
% of net sales | 17.7 | % | 16.3 | % | 1.4 | pts | |||||
Research and development | 19.8 | 19.1 | 0.7 | 3.7 | % | ||||||
% of net sales | 2.8 | % | 2.7 | % | 0.1 | pts | |||||
Operating income | 108.8 | 108.4 | 0.4 | 0.4 | % | ||||||
% of net sales | 15.2 | % | 15.2 | % | — | ||||||
Loss on sale of business | 0.1 | 0.2 | (0.1 | ) | N.M. | ||||||
Other expense | 0.6 | 2.1 | (1.5 | ) | N.M. | ||||||
Net interest expense | 6.9 | 4.3 | 2.6 | 60.5 | % | ||||||
Income from continuing operations before income taxes | 101.2 | 101.8 | (0.6 | ) | (0.6 | )% | |||||
Provision for income taxes | 9.9 | 10.6 | (0.7 | ) | (6.6 | )% | |||||
Effective tax rate | 9.8 | % | 10.4 | % | (0.6 | ) pts |
Nine months ended | |||||||||||
In millions | September 30, 2019 | September 30, 2018 | $ Change | % / Point Change | |||||||
Net sales | $ | 2,202.0 | $ | 2,224.6 | $ | (22.6 | ) | (1.0 | )% | ||
Cost of goods sold | 1,424.7 | 1,444.9 | (20.2 | ) | (1.4 | )% | |||||
Gross profit | 777.3 | 779.7 | (2.4 | ) | (0.3 | )% | |||||
% of net sales | 35.3 | % | 35.0 | % | 0.3 | pts | |||||
Selling, general and administrative expenses | 405.9 | 399.0 | 6.9 | 1.7 | % | ||||||
% of net sales | 18.4 | % | 17.9 | % | 0.5 | pts | |||||
Research and development expenses | 61.2 | 57.0 | 4.2 | 7.4 | % | ||||||
% of net sales | 2.8 | % | 2.6 | % | 0.2 | pts | |||||
Operating income | 310.2 | 323.7 | (13.5 | ) | (4.2 | )% | |||||
% of net sales | 14.1 | % | 14.6 | % | (0.5 | ) pts | |||||
(Gain) loss on sale of business | (3.3 | ) | 6.4 | (9.7 | ) | N.M. | |||||
Loss on early extinguishment of debt | — | 17.1 | (17.1 | ) | N.M. | ||||||
Other income | (11.7 | ) | (1.7 | ) | (10.0 | ) | N.M. | ||||
Net interest expense | 23.6 | 27.9 | (4.3 | ) | (15.4 | )% | |||||
Income from continuing operations before income taxes | 301.6 | 274.0 | 27.6 | 10.1 | % | ||||||
Provision for income taxes | 42.8 | 46.5 | (3.7 | ) | (8.0 | )% | |||||
Effective tax rate | 14.2 | % | 17.0 | % | (2.8 | ) pts |
Three months ended September 30, 2019 | Nine months ended September 30, 2019 | |||
over the prior year period | over the prior year period | |||
Volume | (5.0 | )% | (4.3 | )% |
Price | 3.1 | 2.8 | ||
Core growth | (1.9 | ) | (1.5 | ) |
Acquisition (divestiture) | 3.3 | 2.2 | ||
Currency | (1.1 | ) | (1.7 | ) |
Total | 0.3 | % | (1.0 | )% |
• | selective increases in selling prices to mitigate inflationary cost increases; |
• | increased sales volume in the industrial filtration and food and beverage businesses of our Filtration Solutions segment; and |
• | the impact of the Aquion and Pelican acquisitions. |
• | decreased sales volume in our Aquatic Systems segment due to higher than anticipated inventory levels in some of our key distribution channels; |
• | decreased sales volume in the residential, agriculture and commercial businesses of our Flow Technologies segment; and |
• | unfavorable foreign currency effects. |
• | decreased sales volume in our Aquatic Systems segment and agriculture-related business in our Flow Technologies segment due to cold and wet weather in the first half of 2019 and higher than anticipated inventory levels in some of our key distribution channels; and |
• | unfavorable foreign currency effects. |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | the impact of the Aquion and Pelican acquisitions. |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | higher contribution margin as a result of savings generated from our PIMS initiatives, including lean and supply management practices. |
• | unfavorable mix as a result of a core sales growth decrease in the higher margin Aquatic Systems segment; and |
• | inflationary increases related to labor costs and certain raw materials. |
• | asset impairment of $18.2 million in the first nine months of 2019, compared to $6.0 million in the first nine months of 2018; and |
• | increased investment in sales and marketing to drive growth. |
• | restructuring and other costs of $13.7 million in the first nine months of 2019, compared to $28.1 million in the first nine months of 2018; |
• | savings generated from restructuring and other lean initiatives; and |
• | decreased amortization expense from $24.1 million in the first nine months of 2019 compared to $27.0 million in the first nine months of 2018. |
• | the impact of higher average outstanding debt levels during the third quarter of 2019, compared to the same period in 2018. In June 2019, Pentair, Pentair Finance S.à r.l. (“PFSA”) and Pentair Investments Switzerland GmbH (“PISG”) completed a public offering of $400.0 million aggregate principal amount of PFSA’s 4.500% Senior Notes due 2029. |
• | the impact of lower average outstanding debt levels during the first nine months of 2019, compared to the same period in 2018. In June 2018, the proceeds from the Separation were utilized to repay the remaining $255.3 million aggregate principal amount of our 2.9% fixed rate senior notes due 2018 and for the early extinguishment of €363.4 million aggregate principal amount of our 2.45% senior notes due 2019; and |
• | favorable foreign currency impact of interest payments made in Euros. |
Three months ended | Nine months ended | ||||||||||||||||||
In millions | September 30, 2019 | September 30, 2018 | % / Point Change | September 30, 2019 | September 30, 2018 | % / Point Change | |||||||||||||
Net sales | $ | 218.7 | $ | 232.7 | (6.0 | )% | $ | 709.8 | $ | 749.3 | (5.3 | )% | |||||||
Segment income | 54.8 | 59.9 | (8.5 | )% | 184.0 | 199.5 | (7.8 | )% | |||||||||||
% of net sales | 25.1 | % | 25.7 | % | (0.6 | ) pts | 25.9 | % | 26.6 | % | (0.7 | ) pts |
Three months ended September 30, 2019 | Nine months ended September 30, 2019 | |||
over the prior year period | over the prior year period | |||
Volume | (9.4 | )% | (8.8 | )% |
Price | 4.9 | 4.8 | ||
Core growth | (4.5 | ) | (4.0 | ) |
Acquisition (divestiture) | (1.2 | ) | (0.8 | ) |
Currency | (0.3 | ) | (0.5 | ) |
Total | (6.0 | )% | (5.3 | )% |
• | sales volume declines due to cold, wet weather during the first half of 2019 in key markets; |
• | higher than anticipated inventory levels in some of our key distribution channels impacting our residential and commercial businesses during the three and nine months ended September 30, 2019; and |
• | unfavorable foreign currency effects compared to the same periods of the prior year. |
• | selective increases in selling prices to mitigate impacts of inflation. |
Three months ended September 30, 2019 | Nine months ended September 30, 2019 | |||
over the prior year period | over the prior year period | |||
Growth | (2.3 | ) pts | (2.0 | ) pts |
Inflation | (2.9 | ) | (3.0 | ) |
Productivity/Price | 4.6 | 4.3 | ||
Total | (0.6 | ) pts | (0.7 | ) pts |
• | inflationary increases related to labor costs and certain raw materials; |
• | sales declines in our residential and commercial businesses; and |
• | increased investment in both research and development and sales and marketing to drive growth. |
• | selective increases in selling prices to mitigate impacts of inflation; and |
• | increased productivity. |
Three months ended | Nine months ended | ||||||||||||||||||
In millions | September 30, 2019 | September 30, 2018 | % / Point Change | September 30, 2019 | September 30, 2018 | % / Point Change | |||||||||||||
Net sales | $ | 273.5 | $ | 240.4 | 13.8 | % | $ | 798.4 | $ | 754.1 | 5.9 | % | |||||||
Segment income | 45.1 | 38.4 | 17.4 | % | 128.8 | 124.4 | 3.5 | % | |||||||||||
% of net sales | 16.5 | % | 16.0 | % | 0.5 | pts | 16.1 | % | 16.5 | % | (0.4 | ) pts |
Three months ended September 30, 2019 | Nine months ended September 30, 2019 | |||
over the prior year period | over the prior year period | |||
Volume | 2.5 | % | (1.6 | )% |
Price | 1.1 | 1.2 | ||
Core growth | 3.6 | (0.4 | ) | |
Acquisition (divestiture) | 12.0 | 9.0 | ||
Currency | (1.8 | ) | (2.7 | ) |
Total | 13.8 | % | 5.9 | % |
• | increased sales due to the acquisitions of Aquion and Pelican in the first quarter of 2019; |
• | increased volume in our industrial filtration and food and beverage businesses in the third quarter of 2019; and |
• | selective increases in selling prices to mitigate inflationary cost increases. |
• | decreased sales volume in our residential and commercial businesses, partially due to lower component sales as Aquion sales are now considered intercompany; and |
• | unfavorable foreign currency effects compared to the same periods of the prior year. |
Three months ended September 30, 2019 | Nine months ended September 30, 2019 | |||
over the prior year period | over the prior year period | |||
Growth | 2.6 | pts | 0.8 | pts |
Inflation | (2.8 | ) | (2.8 | ) |
Productivity/Price | 0.7 | 1.6 | ||
Total | 0.5 | pts | (0.4 | ) pts |
• | sales growth, primarily as a result of increased volumes in the industrial filtration and food and beverage businesses, which resulted in increased leverage on operating expenses; |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | the impact of the Aquion and Pelican acquisitions. |
• | inflationary increases related to labor costs and certain raw materials. |
• | inflationary increases related to labor costs and certain raw materials. |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | the impact of the Aquion and Pelican acquisitions. |
Three months ended | Nine months ended | ||||||||||||||||||
In millions | September 30, 2019 | September 30, 2018 | % / Point Change | September 30, 2019 | September 30, 2018 | % / Point Change | |||||||||||||
Net sales | $ | 221.0 | $ | 238.0 | (7.1 | )% | $ | 692.7 | $ | 720.2 | (3.8 | )% | |||||||
Segment income | 37.9 | 36.6 | 3.6 | % | 109.9 | 119.7 | (8.2 | )% | |||||||||||
% of net sales | 17.1 | % | 15.4 | % | 1.7 | pts | 15.9 | % | 16.6 | % | (0.7 | ) pts |
Three months ended September 30, 2019 | Nine months ended September 30, 2019 | |||
over the prior year period | over the prior year period | |||
Volume | (8.3 | )% | (2.5 | )% |
Price | 3.2 | 2.3 | ||
Core growth | (5.1 | ) | (0.2 | ) |
Acquisition (divestiture) | (0.9 | ) | (1.8 | ) |
Currency | (1.1 | ) | (1.8 | ) |
Total | (7.1 | )% | (3.8 | )% |
• | decreased sales volume in our agriculture-related business due to cold, wet weather in the first half of 2019; |
• | unfavorable foreign currency effects compared to the same period of the prior year; and |
• | the impact of divestitures. |
• | selective increases in selling prices to mitigate inflationary cost increases. |
Three months ended September 30, 2019 | Nine months ended September 30, 2019 | |||
over the prior year period | over the prior year period | |||
Growth | (1.2 | ) pts | (0.5 | ) pts |
Inflation | (2.2 | ) | (3.0 | ) |
Productivity/Price | 5.1 | 2.8 | ||
Total | 1.7 | pts | (0.7 | ) pts |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | increased productivity. |
• | decreased sales volumes in our residential, commercial and industrial businesses, which resulted in decreased leverage on operating expenses; |
• | inflationary increases related to labor costs and certain raw materials; and |
• | the impact of divestitures. |
• | decreased sales volumes in our residential and industrial businesses, which resulted in decreased leverage on operating expenses; and |
• | inflationary increases related to labor costs and certain raw materials. |
• | selective increases in selling prices to mitigate inflationary cost increases; and |
• | increased productivity. |
Nine months ended | ||||||
In millions | September 30, 2019 | September 30, 2018 | ||||
Net cash provided by operating activities of continuing operations | $ | 266.1 | $ | 299.2 | ||
Capital expenditures of continuing operations | (44.6 | ) | (33.8 | ) | ||
Proceeds from sale of property and equipment of continuing operations | 0.4 | (0.4 | ) | |||
Free cash flow from continuing operations | $ | 221.9 | $ | 265.0 | ||
Net cash used for operating activities of discontinued operations | (1.4 | ) | (14.6 | ) | ||
Capital expenditures of discontinued operations | — | (7.4 | ) | |||
Proceeds from sale of property and equipment of discontinued operations | — | 2.3 | ||||
Free cash flow | $ | 220.5 | $ | 245.3 |
(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 27 | 933 | $ | 37.80 | — | $ | 250,000,187 | ||||
July 28 - August 24 | 12,542 | $ | 39.02 | — | $ | 250,000,187 | ||||
August 25 - September 30 | 8,641 | $ | 37.53 | — | $ | 250,000,187 | ||||
Total | 22,116 | — |
(a) | The purchases in this column include 933 shares for the period July 1 - July 27, 12,542 shares for the period July 28 - August 24 and 8,641 shares for the period August 25 - September 30 deemed surrendered to us by participants in our 2012 Stock and Incentive Plan (the “2012 Plan”) and earlier stock incentive plans that are now outstanding under the 2012 Plan (collectively the “Plans”) to satisfy the exercise price or withholding of tax obligations related to the exercise of stock options and vesting of restricted and performance shares. |
(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. |
(d) | 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 2018 authorization expires on May 31, 2021. As of September 30, 2019, we had $250.0 million available for share repurchases under this authorization. From time to time, we may enter into a Rule 10b5-1 trading plan for the purpose of repurchasing shares under this authorization. |
Certification of Chief Executive Officer. | ||
Certification of Chief Financial Officer. | ||
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. | ||
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 September 30, 2019 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 September 30, 2019 and 2018, (ii) the Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, (iii) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018, (iv) the Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2019 and 2018, 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 | ||
Registrant | ||
By | /s/ Mark C. Borin | |
Mark C. Borin | ||
Executive Vice President, Chief Financial Officer and Chief Accounting Officer | ||
1. | I have reviewed this quarterly report on Form 10-Q of Pentair plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | October 23, 2019 | /s/ John L. Stauch |
John L. Stauch | ||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Pentair plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | October 23, 2019 | /s/ Mark C. Borin |
Mark C. Borin | ||
Executive Vice President, Chief Financial Officer and Chief Accounting Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
Date: | October 23, 2019 | /s/ John L. Stauch |
John L. Stauch | ||
President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
Date: | October 23, 2019 | /s/ Mark C. Borin |
Mark C. Borin | ||
Executive Vice President, Chief Financial Officer and Chief Accounting Officer |
Segment Information - Financial Information by Reportable Segment (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Segment Reporting Information [Line Items] | ||||
Net sales | $ 713.6 | $ 711.4 | $ 2,202.0 | $ 2,224.6 |
Segment income | 108.8 | 108.4 | 310.2 | 323.7 |
Aquatic Systems | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 218.7 | 232.7 | 709.8 | 749.3 |
Segment income | 54.8 | 59.9 | 184.0 | 199.5 |
Filtration Solutions | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 273.5 | 240.4 | 798.4 | 754.1 |
Segment income | 45.1 | 38.4 | 128.8 | 124.4 |
Flow Technologies | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 221.0 | 238.0 | 692.7 | 720.2 |
Segment income | 37.9 | 36.6 | 109.9 | 119.7 |
Other | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 0.4 | 0.3 | 1.1 | 1.0 |
Segment income | (15.0) | (13.1) | (47.1) | (40.7) |
Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Segment income | $ 122.8 | $ 121.8 | $ 375.6 | $ 402.9 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
|
Income Tax Disclosure [Abstract] | |||
Effective income tax rate | 14.20% | 17.00% | |
Total gross liability for unrecognized tax benefits | $ 48.4 | $ 51.4 |
Acquisitions and Discontinued Operations Income Statement (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Discontinued Operations and Disposal Groups [Abstract] | ||||
Net sales | $ 0.0 | $ 0.0 | $ 0.0 | $ 693.9 |
Cost of goods sold | 0.0 | 0.0 | 0.0 | 424.0 |
Gross profit | 0.0 | 0.0 | 0.0 | 269.9 |
Selling, general and administrative expenses | 1.2 | 2.5 | 2.0 | 233.5 |
Research and development expenses | 0.0 | 0.0 | 0.0 | 14.6 |
Operating (loss) income | (1.2) | (2.5) | (2.0) | 21.8 |
(Loss) income from discontinued operations before income taxes | (1.3) | 14.8 | (2.5) | 34.6 |
Income tax (benefit) provision | (2.3) | (4.1) | (1.6) | 7.6 |
Income (loss) from discontinued operations, net of tax | 1.0 | 18.9 | (0.9) | 27.0 |
Discontinued Operation, Income (Loss) from Discontinued Operation During Phase-out Period, Net of Tax | $ 1.0 | $ 18.9 | $ (0.9) | $ 27.0 |
Restructuring - Additional Information (Detail) $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2019
USD ($)
Person
|
Sep. 30, 2018
USD ($)
|
Dec. 31, 2018
Person
|
|
Restructuring Cost and Reserve [Line Items] | |||||
Number of employees | Person | 325 | 300 | |||
Total restructuring costs | $ 2.9 | $ 3.5 | $ 10.7 | $ 34.1 | |
Aquatic Systems | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Total restructuring costs | 0.2 | 0.6 | 3.1 | 3.6 | |
Filtration Solutions | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Total restructuring costs | 1.5 | 0.9 | 3.1 | 14.4 | |
Flow Technologies | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Total restructuring costs | 0.3 | 0.7 | 2.4 | 8.7 | |
Other | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Total restructuring costs | $ 0.9 | $ 1.3 | $ 2.1 | $ 7.4 |
Supplemental Balance Sheet Information (Tables) |
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Disclosure Supplemental Balance Sheet Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Balance Sheet Information |
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Discontinued Operations (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations | Operating results of the discontinued operation is summarized below:
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Segment Information |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information 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. Financial information by reportable segment is as follows:
The following table presents a reconciliation of consolidated segment income to consolidated income from continuing operations before income taxes:
|
Condensed Consolidated Statements of Operations and Comprehensive Income (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Income Statement [Abstract] | ||||
Changes in cumulative translation adjustment inclusive of divestiture of business reclassified to gain from sale | $ 0.0 | $ 0.0 | $ 0.0 | $ 0.0 |
Goodwill and Other Identifiable Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amount of Goodwill by Segment | The changes in the carrying amount of goodwill by reportable segment were as follows:
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Detail of Identifiable Intangible Assets | Identifiable intangible assets consisted of the following:
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Estimated Future Amortization Expense for Identifiable Intangible Assets | Estimated future amortization expense for identifiable intangible assets during the remainder of 2019 and the next five years is as follows:
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Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Information by Reportable Segment | Financial information by reportable segment is as follows:
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Reconciliation of Operating Profit (Loss) from Segments to Consolidated | The following table presents a reconciliation of consolidated segment income to consolidated income from continuing operations before income taxes:
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Revenue - Schedule of Contract Assets and Liabilities (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2019 |
Dec. 31, 2018 |
|
Revenue from Contract with Customer [Abstract] | |||
Contract assets | $ 37,300,000 | $ 37,300,000 | $ 36,500,000 |
Contract liabilities | 34,400,000 | 34,400,000 | 32,800,000 |
Net contract assets | 2,900,000 | 2,900,000 | $ 3,700,000 |
$ Change | |||
Contract assets | 800,000 | ||
Contract liabilities | 1,600,000 | ||
Net contract assets | $ (800,000) | ||
% Change | |||
Contract assets | 2.20% | ||
Contract liabilities | 4.90% | ||
Net contract assets | (21.60%) | ||
Percent of contract liabilities | 80.00% | ||
Impairment losses on contract assets | $ 0 | $ 0 |
Derivatives and Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives and Financial Instruments | 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 September 30, 2019 and December 31, 2018, we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of $41.5 million and $47.6 million, respectively. The impact of these contracts on the Condensed Consolidated Statements of Operations and Comprehensive Income was not material for any period presented. Cross Currency Swaps At September 30, 2019 and December 31, 2018, we had outstanding cross currency swap agreements with a combined notional amount of $601.9 million and $283.8 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 of $3.8 million at September 30, 2019 and deferred foreign currency losses of $14.5 million at December 31, 2018, 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:
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:
The recorded amounts and estimated fair values of total debt, excluding unamortized issuance costs and discounts, were as follows:
Financial assets and liabilities measured at fair value on a recurring basis were as follows:
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Label | Element | Value |
---|---|---|
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (214,000,000.0) |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (214,000,000.0) |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share Basic and diluted earnings per share were calculated as follows:
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Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Letters of credit outstanding | $ 105.0 | $ 123.6 |
Debt - Debt Outstanding Matures on Calendar Year Basis (Detail) $ in Millions |
Sep. 30, 2019
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
Q3 - Q4 2019 | $ 250.0 |
2020 | 74.0 |
2021 | 103.8 |
2022 | 88.3 |
2023 | 193.3 |
Thereafter | 419.3 |
Total debt | $ 1,128.7 |
Goodwill and Other Identifiable Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Intangible asset amortization expense | $ 7.6 | $ 8.6 | $ 24.1 | $ 27.0 |
Revenue - Additional Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2019 |
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Disaggregation of Revenue [Line Items] | ||
Percent of contract liabilities | 80.00% | |
Change in net contract assets | $ (800,000) | |
Impairment losses on contract assets | $ 0 | $ 0 |
Debt (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt and Average Interest Rates on Debt Outstanding | Debt and the average interest rates on debt outstanding were as follows:
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Debt Outstanding Matures on Calendar Year Basis | Debt outstanding, excluding unamortized issuance costs and discounts, at September 30, 2019 matures on a calendar year basis as follows:
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Commitments and Contingencies (Tables) |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Lease Cost and Other Information Related to Leases | Other information related to leases was as follows:
The components of lease cost for the three and nine months ended September 30, 2019 were as follows:
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Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases for the nine months ended September 30, 2019 was as follows:
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Future Minimum Lease Commitments Under Non-cancelable Operating Leases | Future minimum lease commitments under non-cancelable operating leases as of September 30, 2019 were as follows: Future minimum lease commitments under non-cancelable operating leases based on accounting standards
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Changes in Carrying Amount of Service and Product Warranties | The changes in the carrying amount of service and product warranties of continuing operations for the nine months ended September 30, 2019 were as follows:
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Debt and the average interest rates on debt outstanding were as follows:
In June 2019, Pentair, Pentair Finance S.à r.l. (“PFSA”) and Pentair Investments Switzerland GmbH (“PISG”) completed a public offering of $400.0 million aggregate principal amount of PFSA’s 4.500% Senior Notes due 2029 (the “2029 Notes”). The 2029 Notes are fully and unconditionally guaranteed as to payment of principal and interest by Pentair and PISG. We used the net proceeds of the 2029 Notes to partially repay outstanding commercial paper. 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. The Senior Credit Facility replaced PFSA’s existing credit facility under that certain Amended and Restated Credit Agreement, dated as of October 3, 2014. 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. PFSA has the option to request an increase to the Senior Credit Facility up to $1,100.0 million in the aggregate, subject to customary conditions, including the commitment of participating lenders. 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. As of September 30, 2019, total availability under the Senior Credit Facility was $706.7 million. 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 $189.7 million of commercial paper outstanding as of September 30, 2019 and $76.0 million as of December 31, 2018, 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. 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. In addition to the Senior Credit Facility, we have various other credit facilities with an aggregate availability of $20.9 million, of which there were no outstanding borrowings at September 30, 2019. Borrowings under these credit facilities bear interest at variable rates. We have $324.0 million aggregate principal amount of fixed rate senior notes maturing in the next twelve months. We classified this debt as long-term as of September 30, 2019 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 September 30, 2019 matures on a calendar year basis as follows:
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Restructuring |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring | Restructuring During the nine months ended September 30, 2019 and the year ended December 31, 2018, we initiated and continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. Initiatives during the nine months ended September 30, 2019 and the year ended December 31, 2018 included the reduction in hourly and salaried headcount of approximately 325 employees and 300 employees, respectively. Restructuring-related costs included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income included costs for severance and other restructuring costs as follows:
Other restructuring costs primarily consist of asset impairment and various contract termination costs. Restructuring costs by reportable segment were as follows:
Activity related to accrued severance and related costs recorded in Other current liabilities in the Condensed Consolidated Balance Sheets is summarized as follows for the nine months ended September 30, 2019:
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Commitments and Contingencies - Changes in Carrying Amount of Service and Product Warranties (Detail) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2019
USD ($)
| |
Movement in Standard Product Warranty Accrual [Roll Forward] | |
Beginning balance | $ 33.9 |
Service and product warranty provision | 37.9 |
Payments | (41.0) |
Foreign currency translation | (0.2) |
Ending balance | $ 30.6 |
Supplemental Guarantor Information - Additional Information (Detail) |
9 Months Ended |
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Sep. 30, 2019 | |
Subsidiary Issuer | |
Condensed Financial Statements, Captions [Line Items] | |
Ownership percentage | 100.00% |
Goodwill and Other Identifiable Intangible Assets - Detail of Identifiable Intangible Assets (Detail) - USD ($) $ in Millions |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Acquired Intangible Assets By Major Class [Line Items] | ||
Cost | $ 458.7 | $ 433.7 |
Accumulated amortization | (289.6) | (316.7) |
Net | 169.1 | 117.0 |
Net, indefinite-life intangibles | 172.3 | 159.3 |
Cost | 631.0 | 593.0 |
Net | 341.4 | 276.3 |
Customer relationships | ||
Acquired Intangible Assets By Major Class [Line Items] | ||
Cost | 415.9 | 347.1 |
Accumulated amortization | (260.8) | (247.9) |
Net | 155.1 | 99.2 |
Trade names intangibles | ||
Acquired Intangible Assets By Major Class [Line Items] | ||
Cost | 0.0 | 0.4 |
Accumulated amortization | 0.0 | (0.4) |
Net | 0.0 | 0.0 |
Patented Technology [Member] | ||
Acquired Intangible Assets By Major Class [Line Items] | ||
Cost | 42.8 | 86.2 |
Accumulated amortization | (28.8) | (68.4) |
Net | $ 14.0 | $ 17.8 |
Restructuring - Accrual Activity (Detail) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2019
USD ($)
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Restructuring Reserve [Roll Forward] | |
Beginning balance | $ 27.1 |
Costs incurred | 9.6 |
Cash payments and other | (19.7) |
Ending balance | $ 17.0 |
Shareholders' Equity - Additional Information (Detail) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
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Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2014 |
Dec. 31, 2018 |
May 08, 2018 |
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Stockholders Equity Note Disclosure [Line Items] | |||||||||||
Payments for Repurchase of Common Stock | $ 150,000,000.0 | $ 400,000,000.0 | |||||||||
Cash dividends declared per ordinary share | $ 0.18 | $ 0.18 | $ 0.18 | $ 0.175 | $ 0.175 | $ 0.35 | |||||
Dividends payable | $ 30,300,000 | 30,300,000 | $ 30,800,000 | ||||||||
May 2018 Share Repurchase Program [Member] | |||||||||||
Stockholders Equity Note Disclosure [Line Items] | |||||||||||
Repurchase of shares of our common stock up to a maximum aggregate value | $ 750,000,000.0 | ||||||||||
Common stock authorized for repurchase, expiration date | May 31, 2021 | ||||||||||
December 2014 Share Repurchase Program | |||||||||||
Stockholders Equity Note Disclosure [Line Items] | |||||||||||
Share repurchase program remaining available amount | $ 250,000,000.0 | $ 250,000,000.0 |
Restructuring - Costs Included in Selling, General & Administrative Expenses (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Restructuring Cost and Reserve [Line Items] | ||||
Restructuring costs | $ 2.9 | $ 3.5 | $ 10.7 | $ 34.1 |
Severance and related costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring costs | 2.1 | 2.8 | 9.6 | 12.8 |
Other | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring costs | $ 0.8 | $ 0.7 | $ 1.1 | $ 21.3 |
Revenue - Geographic Net Sales Information by Segment (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Disaggregation of Revenue [Line Items] | ||||
Net sales | $ 713.6 | $ 711.4 | $ 2,202.0 | $ 2,224.6 |
Residential | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 395.5 | 397.6 | 1,230.1 | 1,247.3 |
Commercial | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 154.3 | 155.8 | 475.7 | 475.4 |
Industrial | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 163.8 | 158.0 | 496.2 | 501.9 |
U.S. | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 445.0 | 438.5 | 1,382.1 | 1,395.1 |
Western Europe | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 97.8 | 97.1 | 309.0 | 311.2 |
Developing | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 119.9 | 117.6 | 357.8 | 346.0 |
Other Developed | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | $ 50.9 | $ 58.2 | $ 153.1 | $ 172.3 |
Share Plans - Schedule of Share-based Compensation Expense (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation associated with discontinued operations | $ 3.4 | |||
Total share-based compensation expense | $ 4.6 | $ 5.1 | $ 15.3 | 16.4 |
Restricted stock units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total share-based compensation expense | 2.5 | 2.4 | 8.2 | 6.7 |
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total share-based compensation expense | 0.9 | 1.3 | 3.4 | 3.5 |
Performance share units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total share-based compensation expense | $ 1.2 | $ 1.4 | $ 3.7 | $ 6.2 |
Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract with Customer, Asset and Liability | Contract assets and liabilities Contract assets and liabilities consisted of the following:
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Disaggregation of Revenue | Geographic net sales information, based on geographic destination of the sale, was as follows:
Vertical net sales information was as follows:
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Shareholders' Equity |
9 Months Ended |
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Sep. 30, 2019 | |
Shareholders' Equity | 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. During the nine months ended September 30, 2019, we repurchased 4.0 million of our shares for $150.0 million. As of September 30, 2019, we had $250.0 million available for share repurchases under this authorization. Dividends payable On September 24, 2019, the Board of Directors declared a quarterly cash dividend of $0.18, payable on November 1, 2019 to shareholders of record at the close of business on October 18, 2019. As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $30.3 million at September 30, 2019, compared to $30.8 million at December 31, 2018.
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Earnings Per Share (Tables) |
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Basic and Diluted Earnings Per Share | Basic and diluted earnings per share were calculated as follows:
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Income Taxes |
9 Months Ended |
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Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We manage our affairs so that we are centrally managed and controlled in the United Kingdom (“U.K.”) and therefore have our tax residency in the U.K. The provision for income taxes consists of provisions for the U.K. and international income taxes. We operate in an international environment with operations in various locations outside the U.K. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates. The effective income tax rate for the nine months ended September 30, 2019 was 14.2%, compared to 17.0% for the nine months ended September 30, 2018. 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. The liability for uncertain tax positions was $48.4 million and $51.4 million at September 30, 2019 and December 31, 2018, 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.
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Supplemental Balance Sheet Information |
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Disclosure Supplemental Balance Sheet Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Balance Sheet Information | Supplemental Balance Sheet Information
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Acquisitions and Discontinued Operations |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions and Discontinued Operations | Acquisitions and Discontinued Operations Acquisitions In February 2019, as part of Filtration Solutions, we completed the acquisitions of Aquion, Inc. (“Aquion”) and Pelican Water Systems (“Pelican”) for $163.4 million and $121.1 million, respectively, in cash, net of cash acquired. For Aquion, the excess of purchase price over tangible net assets and identified intangible assets acquired has been preliminarily allocated to goodwill in the amount of $94.5 million, $4.6 million of which is expected to be deductible for income tax purposes. Identifiable intangible assets acquired as part of the Aquion acquisition include $15.7 million of indefinite-lived trade name intangible assets and $78.8 million of definite-lived customer relationships with an estimated useful life of 15 years. For Pelican, the excess purchase price over tangible net assets acquired has been preliminarily allocated to goodwill in the amount of $121.0 million, $7.6 million of which is expected to be deductible for income tax purposes. The preliminary purchase price allocation for these acquisitions is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. These changes will primarily relate to impacts associated with income taxes and other accruals. The proforma impact of these acquisitions is not material. Discontinued Operation — Electrical Separation On April 30, 2018, we completed the separation of our Electrical business from the rest of Pentair (the “Separation”) by means of a dividend in specie of the Electrical business, which was effected by the transfer of the Electrical business from Pentair to nVent Electric plc (“nVent”) and the issuance by nVent of ordinary shares directly to Pentair shareholders (the “Distribution”). The results of the Electrical business have been presented as discontinued operations. The Electrical business had been previously disclosed as a stand-alone reporting segment. Separation costs related to the Separation and Distribution were $2.5 million and $82.4 million for the three and nine months ended September 30, 2018, respectively. These costs are reported in discontinued operations as they represent a cost directly related to the Separation and Distribution and are included within Income (loss) from discontinued operations, net of tax presented below. Operating results of the discontinued operation is summarized below:
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Benefit Plans (Tables) |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Benefit Costs | Components of net periodic benefit cost for our pension plans for the three and nine months ended September 30, 2019 and 2018 were as follows:
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Basis of Presentation and Responsibility for Interim Financial Statements - Adoption of New Accounting Standards (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
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New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Operating Lease, Liability, Current | $ 19.8 | $ 19.8 | $ 0.0 | ||
Operating Lease, Liability, Noncurrent | 63.0 | 63.0 | 0.0 | ||
Net periodic benefit cost | 1.8 | $ 4.0 | (7.3) | $ 7.6 | |
Operating Lease, Right-of-Use Asset | $ 80.0 | $ 80.0 | $ 0.0 |
Goodwill and Other Identifiable Intangible Assets - Estimated Future Amortization Expense for Identifiable Intangible Assets (Detail) $ in Millions |
Sep. 30, 2019
USD ($)
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Goodwill and Intangible Assets Disclosure [Abstract] | |
Q3 - Q4 2019 | $ 7.4 |
2020 | 27.1 |
2021 | 22.1 |
2022 | 15.2 |
2023 | 12.8 |
2024 | $ 12.3 |
Commitments and Contingencies - Future Minimum Lease Commitments Under Non-cancelable Operating Leases (Details) - USD ($) $ in Millions |
Sep. 30, 2019 |
Dec. 31, 2018 |
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Commitments and Contingencies Disclosure [Abstract] | ||
Q4 2019 | $ 6.4 | $ 23.2 |
2020 | 22.4 | 17.6 |
2021 | 18.1 | 13.3 |
2022 | 15.6 | 11.1 |
2023 | 13.2 | 9.5 |
Thereafter | 22.4 | 13.8 |
Total lease payments | 98.1 | $ 88.5 |
Less: imputed interest | (15.3) | |
Total | $ 82.8 |
Acquisitions and Discontinued Operations Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended |
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Sep. 30, 2018 |
Sep. 30, 2018 |
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Discontinued Operations [Member] | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Separation costs | $ 2.5 | $ 82.4 |
Benefit Plans - Components of Net Periodic Benefit Cost (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Retirement Benefits [Abstract] | ||||
Service cost | $ 0.7 | $ 1.0 | $ 1.8 | $ 3.1 |
Interest cost | 0.9 | 3.0 | 6.3 | 9.0 |
Expected return on plan assets | (0.2) | (2.2) | (3.6) | (6.7) |
Actuarial gain | 0.4 | 2.2 | (11.8) | 2.2 |
Net periodic benefit cost | $ 1.8 | $ 4.0 | $ (7.3) | $ 7.6 |
Derivatives and Financial Instruments - Additional Information (Detail) - USD ($) $ in Millions |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2019 |
Dec. 31, 2018 |
|
Foreign Exchange Contract [Member] | ||
Derivative [Line Items] | ||
Notional amount | $ 41.5 | $ 47.6 |
Currency Swap [Member] | ||
Derivative [Line Items] | ||
Notional amount | 601.9 | 283.8 |
Deferred foreign currency gain (loss) | $ 3.8 | $ (14.5) |
Basis of Presentation and Responsibility for Interim Financial Statements |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Responsibility for Interim Financial Statements | Basis of Presentation and Responsibility for Interim Financial Statements The accompanying unaudited condensed consolidated financial statements of Pentair plc and its subsidiaries (“we,” “us,” “our,” “Pentair,” or the “Company”) have been prepared following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (“GAAP”) can be condensed or omitted. We are responsible for the unaudited condensed consolidated financial statements included in this document. The financial statements include all normal recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. As these are condensed financial statements, one should also read our consolidated financial statements and notes thereto, which are included in our Annual Report on Form 10-K for the year ended December 31, 2018. Revenues, expenses, cash flows, assets and liabilities can and do vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be indicative of those for a full year. Our fiscal year ends on December 31. We report our interim quarterly periods on a calendar quarter basis. Adoption of new accounting standards On January 1, 2019, we adopted ASU No. 2016-02, “Leases” (“the new lease standard” or “ASC 842”) using the transition method of adoption. Under the transition method of adoption, comparative information has not been restated and continues to be reported under the standards in effect for those periods. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. We also elected the practical expedient to not separate non-lease components from the lease components to which they relate, and instead account for each separate lease and non-lease component associated with that lease component as a single lease component for all underlying asset classes. Accordingly, all costs associated with a lease contract are accounted for as one lease cost. The impact of adopting the new standard primarily relates to the recognition of a lease right-of-use (“ROU”) asset and current and non-current lease liability on the consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As we cannot readily determine the rate implicit in the lease, we use our incremental borrowing rate determined by country of lease origin based on the anticipated lease term as determined at commencement date in determining the present value of lease payments. The ROU asset also excludes any accrued lease payments and unamortized lease incentives. As of September 30, 2019, $80.0 million was included in Other non-current assets, $19.8 million in Other current liabilities and $63.0 million in Other non-current liabilities, on the Condensed Consolidated Balance Sheets as a result of the new lease standard. There was no impact on our Condensed Consolidated Statements of Operations and Comprehensive Income or Condensed Consolidated Statements of Cash Flows. Refer to Note 15 for further discussion.
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Share Plans (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Expense | Total share-based compensation expense for the three and nine months ended September 30, 2019 and 2018 was as follows:
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | We estimated the fair value of each stock option award issued in the annual share-based compensation grant using a Black-Scholes option pricing model, modified for dividends and using the following assumptions:
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Commitments and Contingencies |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Leases We determine if an arrangement is a lease at inception. Our lease portfolio principally consists of operating leases related to facilities, machinery, equipment and vehicles. Our lease terms do not include options to extend or terminate the lease until we are reasonably certain that we will exercise that option. Operating lease cost for lease payments is recognized on a straight-line basis over the lease term and principally consists of fixed payments for base rent. The components of lease cost for the three and nine months ended September 30, 2019 were as follows:
Supplemental cash flow information related to leases for the nine months ended September 30, 2019 was as follows:
Other information related to leases was as follows:
Future minimum lease commitments under non-cancelable operating leases as of September 30, 2019 were as follows:
Future minimum lease commitments under non-cancelable operating leases based on accounting standards applicable as of December 31, 2018 were as follows:
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. In connection with the disposition of the Valves & Controls business in 2017, we agreed to indemnify Emerson Electric Co. for certain pre-closing tax liabilities. We have recorded a liability representing the fair value of our expected future obligation for this matter. We provide service and warranty policies on our products. Liability under service and warranty policies is based upon a review of historical warranty and service claim experience. Adjustments are made to accruals as claim data and historical experience warrant. The changes in the carrying amount of service and product warranties of continuing operations for the nine months ended September 30, 2019 were as follows:
Stand-by letters of credit, bank guarantees and bonds In certain situations, Tyco International Ltd., Pentair Ltd.’s former parent company (“Tyco”), guaranteed performance by the flow control business of Pentair Ltd. (“Flow Control”) to third parties or provided financial guarantees for financial commitments of Flow Control. In situations where Flow Control and Tyco were unable to obtain a release from these guarantees in connection with the spin-off of Flow Control from Tyco, we will indemnify Tyco for any losses it suffers as a result of such guarantees. In the ordinary course of business, we are required to commit to bonds, letters of credit and bank guarantees that require payments to our customers for any non-performance. The outstanding face value of these instruments fluctuates with the value of our projects in process and in our backlog. In addition, we issue financial stand-by letters of credit primarily to secure our performance to third parties under self-insurance programs. As of September 30, 2019 and December 31, 2018, the outstanding value of bonds, letters of credit and bank guarantees totaled $105.0 million and $123.6 million, respectively.
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Acquisitions and Discontinued Operations Acquisitions (Details) - USD ($) $ in Millions |
1 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Feb. 28, 2019 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
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Business Acquisition [Line Items] | ||||
Acquisitions, net of cash acquired | $ 284.5 | $ 0.9 | ||
Goodwill | $ 2,261.0 | $ 2,072.7 | ||
Aquion | ||||
Business Acquisition [Line Items] | ||||
Acquisitions, net of cash acquired | $ 163.4 | |||
Goodwill | 94.5 | |||
Business Acquisition, Goodwill, Expected Tax Deductible Amount | 4.6 | |||
Indefinite-lived trade name intangible assets | 15.7 | |||
Definite-lived customer relationships | $ 78.8 | |||
Estimated useful life | 15 years | |||
Pelican | ||||
Business Acquisition [Line Items] | ||||
Acquisitions, net of cash acquired | $ 121.1 | |||
Goodwill | 121.0 | |||
Business Acquisition, Goodwill, Expected Tax Deductible Amount | $ 7.6 |
Share Plans - Schedule of Valuation Assumptions (Details) |
3 Months Ended |
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Mar. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Risk-free interest rate | 2.89% |
Expected dividend yield | 1.78% |
Expected share price volatility | 23.30% |
Expected term (years) | 6 years 1 month 6 days |
Benefit Plans - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Defined Benefit Plan Disclosure [Line Items] | ||||
Benefits paid | $ 171.9 | |||
Pension and other post-retirement plan contribution | $ 11.1 | $ 0.0 | ||
Actuarial gain | $ (0.4) | $ (2.2) | $ 11.8 | $ (2.2) |
Derivatives and Financial Instruments - Recorded Amounts and Estimated Fair Values (Detail) - USD ($) $ in Millions |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative [Line Items] | ||
Total debt | $ 1,128.7 | |
Recorded Amount | ||
Derivative [Line Items] | ||
Variable rate debt | 193.3 | $ 102.2 |
Fixed rate debt | 935.4 | 690.5 |
Total debt | 1,128.7 | 792.7 |
Fair Value | ||
Derivative [Line Items] | ||
Variable rate debt | 193.3 | 102.2 |
Fixed rate debt | 981.8 | 691.8 |
Total debt | $ 1,175.1 | $ 794.0 |
Commitments and Contingencies - Components of Lease Cost and Other Information Related to Leases (Details) $ in Millions |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2019
USD ($)
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Lease, Cost [Abstract] | ||
Operating lease cost | $ 8.0 | $ 24.7 |
Sublease income | (0.2) | (0.7) |
Total lease cost | $ 7.8 | $ 24.0 |
Weighted-average remaining lease term of operating leases | 5 years | 5 years |
Weighted-average discount rate of operating leases | 6.30% | 6.30% |
Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 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:
Vertical net sales information was as follows:
Performance obligations On September 30, 2019, we had $62.8 million of remaining performance obligations on contracts with an original expected duration of one year or more. We expect to recognize the majority of our remaining performance obligations on these contracts within the next 12 to 18 months. Contract assets and liabilities Contract assets and liabilities consisted of the following:
The $0.8 million decrease in net contract assets from December 31, 2018 to September 30, 2019 was primarily the result of timing of milestone payments. Approximately 80% of our contract liabilities at December 31, 2018 were recognized in revenue in the first nine months of 2019. There were no impairment losses recognized on our contract assets for the three months or nine months ended September 30, 2019.
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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts and notes receivable, allowances | $ 13.4 | $ 14.0 |
Ordinary shares, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock authorized (in shares) | 426,000,000 | 426,000,000 |
Common shares issued (in shares) | 168,100,000 | 171,400,000 |
Restructuring (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Related Costs | Restructuring-related costs included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income included costs for severance and other restructuring costs as follows:
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Restructuring Costs By Segment [Table Text Block] | Restructuring costs by reportable segment were as follows:
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Restructuring Accrual Activity Recorded on Consolidated Balance Sheets | Activity related to accrued severance and related costs recorded in Other current liabilities in the Condensed Consolidated Balance Sheets is summarized as follows for the nine months ended September 30, 2019:
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