UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended June 30, 2022

OR 

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

Commission file number: 001-11625

Pentair plc

(Exact name of Registrant as specified in its charter)

Ireland			98-1141328
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
	Regal House, 70 London Road,	Twickenham,	London,	TW13QS	United Kingdom
(Address of principal executive offices)

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☑ No ☐

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

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

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

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

On June 30, 2022, 164,459,912 shares of Registrant’s common stock were outstanding.

Pentair plc and Subsidiaries

		Page
PART I FINANCIAL INFORMATION
ITEM 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Operations and Comprehensive Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes in Equity	6
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	34
ITEM 4.	Controls and Procedures	35
PART II OTHER INFORMATION
ITEM 1.	Legal Proceedings	35
ITEM 1A.	Risk Factors	35
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
ITEM 6.	Exhibits	38
	Signatures	39

2

PART I FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

Pentair plc and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

	Three months ended				Six months ended
In millions, except per-share data	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net sales	$	1,064.2	$	941.1	$	2,063.8	$	1,807.0
Cost of goods sold	704.7		600.1		1,372.1		1,150.8
Gross profit	359.5		341.0		691.7		656.2
Selling, general and administrative expenses	145.6		158.2		309.7		294.8
Research and development expenses	23.1		21.0		45.4		42.5
Operating income	190.8		161.8		336.6		318.9
Other expense:
Net interest expense	9.2		3.8		14.9		8.9
Other expense	0.1		0.3		0.2		0.7
Income from continuing operations before income taxes	181.5		157.7		321.5		309.3
Provision for income taxes	28.5		25.1		50.0		45.6
Net income from continuing operations	153.0		132.6		271.5		263.7
Loss from discontinued operations, net of tax	(0.1)		(0.5)		(1.0)		(3.0)
Net income	$	152.9	$	132.1	$	270.5	$	260.7
Comprehensive income, net of tax
Net income	$	152.9	$	132.1	$	270.5	$	260.7
Changes in cumulative translation adjustment	(46.8)		8.4		(54.2)		(12.3)
Changes in market value of derivative financial instruments, net of tax	31.4		(4.1)		38.0		12.9
Comprehensive income	$	137.5	$	136.4	$	254.3	$	261.3
Earnings (loss) per ordinary share
Basic
Continuing operations	$	0.93	$	0.80	$	1.65	$	1.59
Discontinued operations	—		—		(0.01)		(0.02)
Basic earnings per ordinary share	$	0.93	$	0.80	$	1.64	$	1.57
Diluted
Continuing operations	$	0.92	$	0.79	$	1.64	$	1.57
Discontinued operations	—		—		(0.01)		(0.02)
Diluted earnings per ordinary share	$	0.92	$	0.79	$	1.63	$	1.55
Weighted average ordinary shares outstanding
Basic	164.8		166.0		165.0		166.1
Diluted	165.5		167.8		166.0		167.7

See accompanying notes to condensed consolidated financial statements.

3

Pentair plc and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

	June 30, 2022		December 31, 2021
In millions, except per-share data
Assets
Current assets
Cash and cash equivalents	$	135.1	$	94.5
Accounts receivable, net of allowances of $12.3 and $9.1, respectively	493.2		534.3
Inventories	695.0		562.9
Other current assets	139.3		112.3
Total current assets	1,462.6		1,304.0
Property, plant and equipment, net	318.4		310.0
Other assets
Goodwill	2,454.8		2,504.5
Intangibles, net	407.8		428.0
Other non-current assets	228.6		207.1
Total other assets	3,091.2		3,139.6
Total assets	$	4,872.2	$	4,753.6
Liabilities and Equity
Current liabilities
Accounts payable	$	372.5	$	385.7
Employee compensation and benefits	101.5		140.1
Other current liabilities	582.1		525.9
Total current liabilities	1,056.1		1,051.7
Other liabilities
Long-term debt	911.5		894.1
Pension and other post-retirement compensation and benefits	90.3		93.2
Deferred tax liabilities	69.9		89.8
Other non-current liabilities	181.4		202.9
Total liabilities	2,309.2		2,331.7
Commitments and contingencies (Note 16)
Equity
Ordinary shares $0.01 par value, 426.0 authorized, 164.5 and 165.1 issued at June 30, 2022 and December 31, 2021, respectively	1.7		1.7
Additional paid-in capital	1,540.5		1,582.7
Retained earnings	1,250.9		1,051.4
Accumulated other comprehensive loss	(230.1)		(213.9)
Total equity	2,563.0		2,421.9
Total liabilities and equity	$	4,872.2	$	4,753.6

See accompanying notes to condensed consolidated financial statements.

4

Pentair plc and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Six months ended
In millions	June 30, 2022		June 30, 2021
Operating activities
Net income	$	270.5	$	260.7
Loss from discontinued operations, net of tax	1.0		3.0
Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities of continuing operations
Equity income of unconsolidated subsidiaries	(0.9)		(0.1)
Depreciation	26.5		25.5
Amortization	12.9		13.4
Deferred income taxes	(16.9)		(4.3)
Share-based compensation	13.2		16.6
Amortization of bridge financing fees	7.7		—
(Gain) loss on sale of assets	(2.3)		0.5
Changes in assets and liabilities, net of effects of business acquisitions
Accounts receivable	31.4		(49.8)
Inventories	(144.1)		(31.9)
Other current assets	(31.7)		(10.5)
Accounts payable	(10.0)		51.3
Employee compensation and benefits	(35.7)		9.4
Other current liabilities	60.4		78.7
Other non-current assets and liabilities	(5.7)		(1.5)
Net cash provided by operating activities of continuing operations	176.3		361.0
Net cash used for operating activities of discontinued operations	(1.0)		(0.2)
Net cash provided by operating activities	175.3		360.8
Investing activities
Capital expenditures	(40.1)		(24.3)
Proceeds from sale of property and equipment	2.9		3.5
Acquisitions, net of cash acquired	(1.4)		(82.8)
Settlement of net investment hedges	8.8		—
Other	—		2.7
Net cash used for investing activities	(29.8)		(100.9)
Financing activities
Net borrowings of revolving long-term debt	19.8		(20.0)
Repayments of long-term debt	—		(103.8)
Debt issuance costs	(8.9)		—
Shares issued to employees, net of shares withheld	(5.4)		4.0
Repurchases of ordinary shares	(50.0)		(50.0)
Dividends paid	(69.5)		(66.7)
Receipts (payments) upon the maturity of cross currency swaps	0.2		(14.7)
Net cash used for financing activities	(113.8)		(251.2)
Effect of exchange rate changes on cash and cash equivalents	8.9		5.1
Change in cash and cash equivalents	40.6		13.8
Cash and cash equivalents, beginning of period	94.5		82.1
Cash and cash equivalents, end of period	$	135.1	$	95.9

See accompanying notes to condensed consolidated financial statements.

5

Pentair plc and Subsidiaries

Condensed Consolidated Statements of Changes in Equity (Unaudited)

In millions	Ordinary shares			Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Total
	Number	Amount
Balance - December 31, 2021	165.1	$	1.7	$	1,582.7	$	1,051.4	$	(213.9)	$	2,421.9
Net income	—	—		—		117.6		—		117.6
Other comprehensive loss, net of tax	—	—		—		—		(0.8)		(0.8)
Dividends declared, $0.21 per share	—	—		—		(36.4)		—		(36.4)
Exercise of options, net of shares tendered for payment	—	—		0.5		—		—		0.5
Issuance of restricted shares, net of cancellations	0.4	—		(2.2)		—		—		(2.2)
Shares surrendered by employees to pay taxes	(0.1)	—		(3.6)		—		—		(3.6)
Share-based compensation	—	—		6.9		—		—		6.9
Balance - March 31, 2022	165.4	$	1.7	$	1,584.3	$	1,132.6	$	(214.7)	$	2,503.9
Net income	—	—		—		152.9		—		152.9
Other comprehensive loss, net of tax	—	—		—		—		(15.4)		(15.4)
Dividends declared, $0.21 per share	—	—		—		(34.6)		—		(34.6)
Share repurchases	(0.9)	—		(50.0)		—		—		(50.0)
Exercise of options, net of shares tendered for payment	—	—		0.2		—		—		0.2
Shares surrendered by employees to pay taxes	—	—		(0.3)		—		—		(0.3)
Share-based compensation	—	—		6.3		—		—		6.3
Balance - June 30, 2022	164.5	$	1.7	$	1,540.5	$	1,250.9	$	(230.1)	$	2,563.0

6

In millions	Ordinary shares			Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Total
	Number	Amount
Balance - December 31, 2020	166.1	$	1.7	$	1,680.7	$	631.2	$	(207.3)	$	2,106.3
Net income	—	—		—		128.6		—		128.6
Other comprehensive loss, net of tax	—	—		—		—		(3.7)		(3.7)
Dividends declared, $0.20 per share	—	—		—		(33.3)		—		(33.3)
Share repurchases	(0.2)	—		(9.6)		—		—		(9.6)
Exercise of options, net of shares tendered for payment	0.1	—		5.2		—		—		5.2
Issuance of restricted shares, net of cancellations	0.2	—		—		—		—		—
Shares surrendered by employees to pay taxes	—	—		(5.3)		—		—		(5.3)
Share-based compensation	—	—		5.6		—		—		5.6
Balance - March 31, 2021	166.2	$	1.7	$	1,676.6	$	726.5	$	(211.0)	$	2,193.8
Net income	—	—		—		132.1		—		132.1
Other comprehensive income, net of tax	—	—		—		—		4.3		4.3
Dividends declared, $0.20 per share	—	—		—		(33.3)		—		(33.3)
Share repurchases	(0.6)	—		(40.4)		—		—		(40.4)
Exercise of options, net of shares tendered for payment	0.3	—		5.6		—		—		5.6
Issuance of restricted shares, net of cancellations	0.1	—		—		—		—		—
Shares surrendered by employees to pay taxes	(0.1)	—		(1.5)		—		—		(1.5)
Share-based compensation	—	—		11.0		—		—		11.0
Balance - June 30, 2021	165.9	$	1.7	$	1,651.3	$	825.3	$	(206.7)	$	2,271.6

See accompanying notes to condensed consolidated financial statements.

7

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

1.Basis of Presentation and Responsibility for Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements of Pentair plc and its subsidiaries (“we,” “us,” “our,” “Pentair,” or the “Company”) have been prepared following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America (“GAAP”) can be condensed or omitted.

We are responsible for the unaudited condensed consolidated financial statements included in this document. The financial statements include all normal recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. As these are condensed financial statements, one should also read our consolidated financial statements and notes thereto, which are included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Revenues, expenses, cash flows, assets and liabilities can and do vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be indicative of those for a full year.

In 2020, the World Health Organization declared the novel coronavirus 2019 (“COVID-19”) a global pandemic. The COVID-19 pandemic has had and may continue to have an unfavorable impact on certain parts of our business. The broader implications of the COVID-19 pandemic on our business, financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, the impact of virus variants, the effectiveness of vaccinations, the COVID-19 pandemic’s impact on our customers and suppliers and the range of governmental and community reactions to the pandemic. We may continue to experience reduced customer demand in certain parts of our business, impacts to our operations, or constrained labor and/or supply that could materially and adversely impact our business, financial condition, results of operations, liquidity and cash flows in future periods.

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

2.Revenue

We disaggregate our revenue from contracts with customers by segment, geographic location and vertical, as we believe these best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Refer to Note 15 for revenue disaggregated by segment.

Geographic net sales information, based on geographic destination of the sale, was as follows:

	Three months ended				Six months ended
In millions	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
U.S.	$	757.0	$	639.1	$	1,463.0	$	1,225.7
Western Europe	115.9		120.7		233.8		236.0
Developing (1)	127.4		120.5		238.0		225.9
Other Developed (2)	63.9		60.8		129.0		119.4
Consolidated net sales	$	1,064.2	$	941.1	$	2,063.8	$	1,807.0
(1) Developing includes China, Eastern Europe, Latin America, the Middle East and Southeast Asia.
(2) Other Developed includes Australia, Canada and Japan.

Vertical net sales information was as follows:

	Three months ended				Six months ended
In millions	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Residential	$	730.3	$	599.5	$	1,413.1	$	1,171.2
Commercial	161.9		173.2		311.6		310.8
Industrial	172.0		168.4		339.1		325.0
Consolidated net sales	$	1,064.2	$	941.1	$	2,063.8	$	1,807.0

8

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Performance obligations

On June 30, 2022, we had $92.2 million of remaining performance obligations on contracts with an original expected duration of one year or more. We expect to recognize the majority of our remaining performance obligations on these contracts within the next 12 to 18 months.

Contract assets and liabilities

Contract assets and liabilities consisted of the following:

In millions	June 30, 2022		December 31, 2021		$ Change		% Change
Contract assets	$	43.0	$	48.8	$	(5.8)	(11.9)	%
Contract liabilities	47.4		39.4		8.0		20.3	%
Net contract (liabilities) assets	$	(4.4)	$	9.4	$	(13.8)	(146.8)	%

The $13.8 million change in net contract liabilities from December 31, 2021 to June 30, 2022 was primarily the result of timing of milestone payments and the recognition of $1.1 million of impairment losses on our contract assets in the first quarter of 2022 related to our exit of business activity in Russia. Approximately 80% of our contract liabilities at December 31, 2021 were recognized in revenue in the first half of 2022.

3.Acquisitions

On March 2, 2022, as part of our Consumer Solutions reporting segment, we entered into a definitive agreement with Welbilt, Inc. (“Welbilt”) to acquire the issued and outstanding equity securities of certain subsidiaries of Welbilt and certain other assets, rights, and properties, and assume certain liabilities, comprising Welbilt’s Manitowoc Ice business (“Manitowoc Ice”), for an aggregate purchase price of $1.6 billion, subject to customary adjustments contemplated by the definitive agreement. We expect to fund the purchase price for the acquisition with borrowings under our term loan facility and net proceeds from the issuance of our 2032 senior notes, together with cash on hand and/or borrowings under our revolving credit facility. We expect to close our Manitowoc Ice acquisition on or around July 28, 2022, subject to customary closing conditions set forth in the definitive agreement.

In October 2021, as part of both of our Consumer Solutions and Industrial & Flow Technologies reporting segments, we completed the acquisition of Pleatco Holdings, LLC and related entities for $256.9 million in cash, net of cash acquired and working capital true-ups. The excess of purchase price over tangible net assets acquired has been preliminarily allocated to goodwill in the amount of $140.1 million, $136.5 million of which is expected to be deductible for income tax purposes. Identifiable intangible assets acquired consisted of $97.9 million of definite-lived customer relationships with an estimated useful life of 17 years.

In May 2021, as part of our Consumer Solutions reporting segment, we completed the acquisition of Ken’s Beverage, Inc. for $82.2 million in cash, net of cash acquired and working capital true-ups. The excess of purchase price over tangible net assets acquired has been allocated to goodwill in the amount of $28.3 million, all of which is expected to be deductible for income tax purposes. Identifiable intangible assets acquired consisted of $38.0 million of definite-lived customer relationships with an estimated useful life of 22 years.

The pro forma impact of these acquisitions is not material.

4.Share Plans

Total share-based compensation expense for the three and six months ended June 30, 2022 and 2021 was as follows:

	Three months ended				Six months ended
In millions	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Restricted stock units	$	3.3	$	3.6	$	6.9	$	7.0
Stock options	0.9		0.9		1.9		1.8
Performance share units	2.1		6.5		4.4		7.8
Total share-based compensation expense	$	6.3	$	11.0	$	13.2	$	16.6

9

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

In the first quarter of 2022, we issued our annual share-based compensation grants under the Pentair plc 2020 Share and Incentive Plan to eligible employees. The total number of awards issued was approximately 0.6 million, of which 0.3 million were restricted stock units (“RSUs”), 0.2 million were stock options and 0.1 million were performance share units (“PSUs”). The weighted-average grant date fair value of the RSUs, stock options and PSUs issued was $60.78, $17.92, and $68.28, respectively.

We estimated the fair value of each stock option award issued in the annual share-based compensation grant using a Black-Scholes option pricing model, modified for dividends and using the following assumptions:

	2022 Annual Grant
Risk-free interest rate	1.18	%
Expected dividend yield	1.14	%
Expected share price volatility	29.60	%
Expected term (years)	6.4

These estimates require us to make assumptions based on historical results, observance of trends in our share price, changes in option exercise behavior, future expectations and other relevant factors. If other assumptions had been used, share-based compensation expense, as calculated and recorded under the accounting guidance, could have been affected. We based the expected life assumption on historical experience as well as the terms and vesting periods of the options granted. For purposes of determining expected share price volatility, we considered a rolling average of historical volatility measured over a period approximately equal to the expected option term. The risk-free interest rate for periods that coincide with the expected life of the options is based on the United States (“U.S.”) Treasury Department yield curve in effect at the time of grant.

5.Restructuring and Transformation Program

In 2021, we launched and committed resources to a program designed to accelerate growth and drive margin expansion through transformation of our business model to drive operational excellence, reduce complexity and streamline our processes (the “Transformation Program”). The Transformation Program is structured in multiple phases and is expected to empower us to work more efficiently and optimize our business to better serve our customers while meeting our financial objectives.

During the six months ended June 30, 2022, we initiated and continued execution of actions aimed at reducing our fixed cost structure and realigning our business associated with restructuring and the Transformation Program.

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

	Three months ended				Six months ended
In millions	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Restructuring Initiatives
Severance and related costs	$	0.8	$	4.2	$	2.7	$	5.1
Other restructuring costs (1)	0.2		—		0.2		0.2
Total restructuring costs	1.0		4.2		2.9		5.3
Transformation Program
Transformation costs (2)	5.2		1.9		10.7		1.9
Total restructuring and transformation costs	$	6.2	$	6.1	$	13.6	$	7.2
(1) Other restructuring costs primarily consist of asset impairment and various contract termination costs.
(2) Transformation costs primarily consist of professional services and project management and related costs.

10

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Restructuring and transformation costs by reportable segment were as follows:

	Three months ended				Six months ended
In millions	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Consumer Solutions	$	0.5	$	0.2	$	1.8	$	0.7
Industrial & Flow Technologies	0.6		—		1.2		0.5
Other	5.1		5.9		10.6		6.0
Consolidated	$	6.2	$	6.1	$	13.6	$	7.2

Activity related to accrued severance and related costs recorded in Other current liabilities in the Condensed Consolidated Balance Sheets is summarized as follows for the six months ended June 30, 2022: 

In millions	June 30, 2022
Beginning balance	$	10.7
Costs incurred	2.7
Cash payments and other	(4.8)
Ending balance	$	8.6

6.Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

	Three months ended				Six months ended
In millions, except per-share data	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net income	$	152.9	$	132.1	$	270.5	$	260.7
Net income from continuing operations	$	153.0	$	132.6	$	271.5	$	263.7
Weighted average ordinary shares outstanding
Basic	164.8		166.0		165.0		166.1
Dilutive impact of stock options, restricted stock units and performance share units	0.7		1.8		1.0		1.6
Diluted	165.5		167.8		166.0		167.7
Earnings (loss) per ordinary share
Basic
Continuing operations	$	0.93	$	0.80	$	1.65	$	1.59
Discontinued operations	—		—		(0.01)		(0.02)
Basic earnings per ordinary share	$	0.93	$	0.80	$	1.64	$	1.57
Diluted
Continuing operations	$	0.92	$	0.79	$	1.64	$	1.57
Discontinued operations	—		—		(0.01)		(0.02)
Diluted earnings per ordinary share	$	0.92	$	0.79	$	1.63	$	1.55
Anti-dilutive stock options excluded from the calculation of diluted earnings per share	0.9		0.1		0.7		0.3

11

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

7.Accounts Receivable

All trade receivables are reported on our Condensed Consolidated Balance Sheets at the outstanding principal amount adjusted for any allowance for credit losses and write-offs, net of recoveries. We record an allowance for credit losses, reducing our receivables balance to an amount we estimate is collectible from our customers. Estimates used in determining the allowance for credit losses are based on current trends, aging of accounts receivable, periodic credit evaluations of our customers’ financial condition, and historical collection experience as well as reasonable and supportable forecasts of future economic conditions. Write-offs are recorded at the time all collection efforts have been exhausted. We generally do not require collateral. We review our allowance for credit losses on a quarterly basis.

Activity related to our allowance for credit losses is summarized as follows for the six months ended June 30, 2022: 

In millions	June 30, 2022
Beginning balance	$	9.1
Bad debt expense	4.2
Write-offs, net of recoveries	(1.0)
Ending balance	$	12.3

12

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

8.Supplemental Balance Sheet Information

In millions	June 30, 2022		December 31, 2021
Inventories
Raw materials and supplies	$	380.6	$	290.3
Work-in-process	93.3		77.4
Finished goods	221.1		195.2
Total inventories	$	695.0	$	562.9
Other current assets
Cost in excess of billings	$	43.0	$	48.8
Prepaid expenses	90.1		57.1
Other current assets	6.2		6.4
Total other current assets	$	139.3	$	112.3
Property, plant and equipment, net
Land and land improvements	$	33.3	$	34.8
Buildings and leasehold improvements	189.4		194.5
Machinery and equipment	610.2		607.3
Capitalized software	68.8		66.5
Construction in progress	78.3		62.8
Total property, plant and equipment	980.0		965.9
Accumulated depreciation and amortization	661.6		655.9
Total property, plant and equipment, net	$	318.4	$	310.0
Other non-current assets
Right-of-use lease assets	$	79.1	$	84.5
Deferred income taxes	22.9		23.1
Deferred compensation plan assets	20.7		25.6
Foreign currency contract assets	39.0		7.2
Other non-current assets	66.9		66.7
Total other non-current assets	$	228.6	$	207.1
Other current liabilities
Dividends payable	$	34.5	$	33.0
Accrued warranty	43.2		40.5
Accrued rebates and incentives	234.3		198.7
Accrued freight	44.0		36.5
Billings in excess of cost	35.4		31.2
Current lease liability	26.7		25.6
Income taxes payable	21.7		32.0
Accrued restructuring	8.6		10.7
Other current liabilities	133.7		117.7
Total other current liabilities	$	582.1	$	525.9
Other non-current liabilities
Long-term lease liability	$	54.2	$	62.6
Income taxes payable	34.1		34.1
Self-insurance liabilities	44.3		42.6
Deferred compensation plan liabilities	20.7		25.6
Foreign currency contract liabilities	—		9.5
Other non-current liabilities	28.1		28.5
Total other non-current liabilities	$	181.4	$	202.9

13

Pentair plc and Subsidiaries

Notes to condensed consolidated financial statements (unaudited)

9.Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill by reportable segment were as follows:

In millions	December 31, 2021		Purchase Accounting Adjustments		Foreign  currency  translation		June 30, 2022
Consumer Solutions	$	1,722.5	$	1.4	$	(10.8)	$	1,713.1
Industrial & Flow Technologies	782.0		0.5		(40.8)		741.7
Total goodwill	$	2,504.5	$	1.9	$	(51.6)	$	2,454.8

Identifiable intangible assets consisted of the following:

	June 30, 2022						December 31, 2021
In millions	Cost		Accumulated amortization		Net		Cost		Accumulated amortization		Net
Definite-life intangibles
Customer relationships	$	546.4	$	(320.8)	$	225.6	$	558.8	$	(320.1)	$	238.7
Proprietary technology and patents	45.4		(32.9)		12.5		46.3		(32.1)		14.2
Total definite-life intangibles	591.8		(353.7)		238.1		605.1		(352.2)		252.9
Indefinite-life intangibles
Trade names	169.7		—		169.7		175.1		—		175.1
Total intangibles	$	761.5	$	(353.7)	$	407.8	$	780.2	$	(352.2)	$	428.0

Identifiable intangible asset amortization expense was $6.3 million for both the three months ended June 30, 2022 and 2021 and $12.9 million and $13.4 million for the six months ended June 30, 2022 and 2021, respectively.

Estimated future amortization expense for identifiable intangible assets during the remainder of 2022 and the next five years is as follows:

	Q3-Q4
	2022		2023		2024		2025		2026		2027
Estimated amortization expense	$	10.5	$	20.7	$	20.3	$	20.3	$	19.0	$	17.7

10.Debt

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

In millions	Average interest rate as of June 30, 2022	Maturity Year	June 30, 2022		December 31, 2021
Revolving credit facilities	2.300%	2026	$	215.0	$	195.0
Term loans	3.030%	2024	200.0		200.0
Senior notes - fixed rate (1)	3.150%	2022	88.3		88.3
Senior notes - fixed rate (1)	4.650%	2025	19.3		19.3
Senior notes - fixed rate (1)	4.500%	2029	400.0		400.0
Unamortized debt issuance costs and discounts	N/A