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Quarterly report [Sections 13 or 15(d)]

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Ireland 98-1141328
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification number)
P.O. Box 471, Sharp Street, Walkden, Manchester, M28 8BU United Kingdom
(Address of principal executive offices)
Page
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2016 and March 28, 2015 3
Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 4
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and March 28, 2015 5
Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2016 and March 28, 2015 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 40
ITEM 4. Controls and Procedures 40
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings 41
ITEM 1A. Risk Factors 41
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 41
ITEM 6. Exhibits 41
Signatures 42
Three months ended
In millions, except per-share data March 31,
2016
March 28,
2015
Net sales $ 1,575.5
$ 1,475.0
Cost of goods sold 1,040.1
964.8
Gross profit 535.4
510.2
Selling, general and administrative 331.6
309.2
Research and development 33.2
29.8
Operating income 170.6
171.2
Other (income) expense:
Equity income of unconsolidated subsidiaries (0.9 ) (0.5 )
Net interest expense 36.4
18.2
Income from continuing operations before income taxes 135.1
153.5
Provision for income taxes 27.7
35.3
Net income from continuing operations 107.4
118.2
Loss from discontinued operations, net of tax
(4.3 )
Net income $ 107.4
$ 113.9
Comprehensive income (loss), net of tax
Net income $ 107.4
$ 113.9
Changes in cumulative translation adjustment 28.0
(174.2 )
Changes in market value of derivative financial instruments, net of ($0.5) and $0.2 tax, respectively (14.7 ) (0.1 )
Comprehensive income (loss) $ 120.7
$ (60.4 )
Earnings (loss) per ordinary share
Basic
Continuing operations $ 0.59
$ 0.66
Discontinued operations
(0.03 )
Basic earnings per ordinary share $ 0.59
$ 0.63
Diluted
Continuing operations $ 0.59
$ 0.65
Discontinued operations
(0.03 )
Diluted earnings per ordinary share $ 0.59
$ 0.62
Weighted average ordinary shares outstanding
Basic 180.7
180.1
Diluted 182.4
182.7
Cash dividends paid per ordinary share $ 0.33
$ 0.32
March 31,
2016
December 31,
2015
In millions, except per-share data
Assets
Current assets
Cash and cash equivalents $ 158.1
$ 126.3
Accounts and notes receivable, net of allowances of $99.6 and $103.7, respectively 1,268.7
1,167.7
Inventories 1,197.7
1,174.3
Other current assets 381.4
309.3
Total current assets 3,005.9
2,777.6
Property, plant and equipment, net 951.8
942.8
Other assets
Goodwill 5,250.0
5,255.4
Intangibles, net 2,461.0
2,490.1
Other non-current assets 361.5
367.6
Total other assets 8,072.5
8,113.1
Total assets $ 12,030.2
$ 11,833.5
Liabilities and Equity
Current liabilities
Current maturities of long-term debt and short-term borrowings $ 0.7
$ 0.7
Accounts payable 579.0
578.8
Employee compensation and benefits 222.6
262.9
Other current liabilities 665.3
644.1
Total current liabilities 1,467.6
1,486.5
Other liabilities
Long-term debt 4,837.1
4,685.8
Pension and other post-retirement compensation and benefits 285.9
287.2
Deferred tax liabilities 828.7
844.2
Other non-current liabilities 526.7
521.0
Total liabilities 7,946.0
7,824.7
Equity
Ordinary shares $0.01 par value, 426.0 authorized, 180.7 and 180.5 issued at March 31, 2016 and December 31, 2015, respectively 1.8
1.8
Additional paid-in capital 2,874.8
2,860.3
Retained earnings 1,839.3
1,791.7
Accumulated other comprehensive loss (631.7 ) (645.0 )
Total equity 4,084.2
4,008.8
Total liabilities and equity $ 12,030.2
$ 11,833.5
Three months ended
In millions March 31,
2016
March 28,
2015
Operating activities
Net income $ 107.4
$ 113.9
Loss from discontinued operations, net of tax
4.3
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 ) (0.5 )
Depreciation 33.5
32.4
Amortization 37.6
27.6
Deferred income taxes (13.6 ) 5.7
Share-based compensation 16.1
9.7
Excess tax benefits from share-based compensation (0.5 ) (2.8 )
Gain on sale of assets (2.3 ) (1.2 )
Changes in assets and liabilities, net of effects of business acquisitions
Accounts and notes receivable (90.7 ) (85.8 )
Inventories (11.7 ) (88.2 )
Other current assets (51.2 ) (71.0 )
Accounts payable (4.2 ) (60.2 )
Employee compensation and benefits (43.7 ) (33.7 )
Other current liabilities 22.3
38.8
Other non-current assets and liabilities (13.1 ) (15.2 )
Net cash provided by (used for) operating activities of continuing operations (15.0 ) (126.2 )
Net cash provided by (used for) operating activities of discontinued operations
(7.0 )
Net cash provided by (used for) operating activities (15.0 ) (133.2 )
Investing activities
Capital expenditures (38.2 ) (34.8 )
Proceeds from sale of property and equipment 6.3
2.3
Acquisitions, net of cash acquired (0.1 ) (3.0 )
Net cash provided by (used for) investing activities of continuing operations (32.0 ) (35.5 )
Net cash provided by (used for) investing activities of discontinued operations
54.9
Net cash provided by (used for) investing activities (32.0 ) 19.4
Financing activities
Net receipts of short-term borrowings 0.7

Net receipts of commercial paper and revolving long-term debt 138.4
406.0
Repayments of long-term debt (0.7 ) (0.4 )
Excess tax benefits from share-based compensation 0.5
2.8
Shares issued to employees, net of shares withheld (1.6 ) 8.7
Repurchases of ordinary shares
(200.0 )
Dividends paid (60.1 ) (57.5 )
Net cash provided by (used for) financing activities 77.2
159.6
Effect of exchange rate changes on cash and cash equivalents 1.6
(25.1 )
Change in cash and cash equivalents 31.8
20.7
Cash and cash equivalents, beginning of period 126.3
110.4
Cash and cash equivalents, end of period $ 158.1
$ 131.1
In millions Ordinary shares Treasury shares Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total
Number Amount Number Amount
Balance - December 31, 2015 180.5
$ 1.8

$
$ 2,860.3
$ 1,791.7
$ (645.0 ) $ 4,008.8
Net income




107.4

107.4
Other comprehensive income, net of tax





13.3
13.3
Dividends declared




(59.8 )
(59.8 )
Exercise of options, net of shares tendered for payment 0.1



3.2


3.2
Issuance of restricted shares, net of cancellations 0.2







Shares surrendered by employees to pay taxes (0.1 )


(4.8 )

(4.8 )
Share-based compensation



16.1


16.1
Balance - March 31, 2016 180.7
$ 1.8

$
$ 2,874.8
$ 1,839.3
$ (631.7 ) $ 4,084.2
In millions Ordinary shares Treasury shares Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total
Number Amount Number Amount
Balance - December 31, 2014 202.4
$ 2.0
(19.9 ) $ (1,251.9 ) $ 4,250.0
$ 2,044.0
$ (380.3 ) $ 4,663.8
Net income




113.9

113.9
Other comprehensive loss, net of tax





(174.3 ) (174.3 )
Dividends declared



1.5


1.5
Share repurchase (3.1 )


(200.0 )

(200.0 )
Exercise of options, net of shares tendered for payment

0.3
16.0
(3.8 )

12.2
Issuance of restricted shares, net of cancellations

0.2
7.7
(7.7 )


Shares surrendered by employees to pay taxes

(0.1 ) (2.6 ) (0.9 )

(3.5 )
Share-based compensation



9.7


9.7
Balance - March 28, 2015 199.3
$ 2.0
(19.5 ) $ (1,230.8 ) $ 4,048.8
$ 2,157.9
$ (554.6 ) $ 4,423.3
In millions As Previously Reported As Revised
Cash $ 11.8
$ 11.8
Accounts receivable 75.9
75.9
Inventories 102.4
102.1
Other current assets 2.9
2.8
Property, plant and equipment 53.4
53.4
Identifiable intangible assets 1,033.8
1,033.8
Goodwill 1,061.9
1,037.4
Current liabilities (97.2 ) (94.3 )
Deferred income taxes, including current (418.8 ) (396.8 )
Other liabilities (8.0 ) (8.0 )
Purchase price $ 1,818.1
$ 1,818.1
Three months ended
In millions, except per-share data March 28,
2015
Pro forma net sales $ 1,599.1
Pro forma net income from continuing operations 121.0
Pro forma earnings per ordinary share - continuing operations
Basic $ 0.67
Diluted 0.66
Three months ended
In millions March 31,
2016
March 28,
2015
Net sales $
$ 18.6
Cost of goods sold
18.1
Gross profit $
$ 0.5
Loss from discontinued operations before income taxes $
$ (5.6 )
Income tax benefit
1.3
Loss from discontinued operations, net of tax $
$ (4.3 )
Three months ended
In millions March 31,
2016
March 28,
2015
Restricted stock units $ 7.0
$ 6.2
Stock options 5.4
3.5
Performance share units 3.7

Total share-based compensation expense $ 16.1
$ 9.7
2016 Annual Grant
Risk-free interest rate 1.57 %
Expected dividend yield 2.47 %
Expected share price volatility 27.3 %
Expected term (years) 5.9
Three months ended
In millions March 31,
2016
March 28,
2015
Severance and related costs $ 0.8
$
Other (0.1 )
Total restructuring costs $ 0.7
$
Three months ended
In millions March 31,
2016
March 28,
2015
Water Quality Systems $ 0.5
$
Flow & Filtration Solutions (1.1 )
Technical Solutions 0.2

Valves & Controls 0.2

Other 0.9

Consolidated $ 0.7
$
In millions March 31,
2016
Beginning balance $ 91.2
Costs incurred 0.8
Cash payments and other (20.7 )
Ending balance $ 71.3
Three months ended
In millions, except per-share data March 31,
2016
March 28,
2015
Net income $ 107.4
$ 113.9
Net income from continuing operations $ 107.4
$ 118.2
Weighted average ordinary shares outstanding
Basic 180.7
180.1
Dilutive impact of stock options, restricted stock units and performance share units 1.7
2.6
Diluted 182.4
182.7
Earnings (loss) per ordinary share
Basic
Continuing operations $ 0.59
$ 0.66
Discontinued operations
(0.03 )
Basic earnings per ordinary share $ 0.59
$ 0.63
Diluted
Continuing operations $ 0.59
$ 0.65
Discontinued operations
(0.03 )
Diluted earnings per ordinary share $ 0.59
$ 0.62
Anti-dilutive stock options excluded from the calculation of diluted earnings per share 3.1
1.2
In millions March 31,
2016
December 31,
2015
Inventories
Raw materials and supplies $ 461.9
$ 433.0
Work-in-process 244.5
249.2
Finished goods 491.3
492.1
Total inventories $ 1,197.7
$ 1,174.3
Other current assets
Cost in excess of billings $ 122.2
$ 114.4
Prepaid expenses 128.1
84.6
Deferred income taxes 114.6
96.7
Other current assets 16.5
13.6
Total other current assets $ 381.4
$ 309.3
Property, plant and equipment, net
Land and land improvements $ 160.7
$ 161.9
Buildings and leasehold improvements 511.3
518.8
Machinery and equipment 1,235.0
1,287.6
Construction in progress 88.6
79.3
Total property, plant and equipment 1,995.6
2,047.6
Accumulated depreciation and amortization 1,043.8
1,104.8
Total property, plant and equipment, net $ 951.8
$ 942.8
Other non-current assets
Asbestos-related insurance receivable $ 110.3
$ 111.0
Deferred income taxes 63.8
62.8
Other non-current assets 187.4
193.8
Total other non-current assets $ 361.5
$ 367.6
Other current liabilities
Deferred revenue and customer deposits $ 90.6
$ 94.6
Dividends payable 59.6
59.6
Billings in excess of cost 30.7
32.0
Accrued warranty 59.5
59.8
Other current liabilities 424.9
398.1
Total other current liabilities $ 665.3
$ 644.1
Other non-current liabilities
Asbestos-related liabilities $ 235.4
$ 237.9
Taxes payable 67.1
71.1
Other non-current liabilities 224.2
212.0
Total other non-current liabilities $ 526.7
$ 521.0
In millions December 31,
2015
Purchase accounting adjustments Foreign currency translation/other March 31,
2016
Water Quality Systems $ 1,121.1
$
$ 3.5
$ 1,124.6
Flow & Filtration Solutions 882.7

12.1
894.8
Technical Solutions 2,255.2
(24.5 ) 3.5
2,234.2
Valves & Controls 996.4


996.4
Total goodwill $ 5,255.4
$ (24.5 ) $ 19.1
$ 5,250.0
March 31,
2016
December 31,
2015
In millions Cost Accumulated amortization Net Cost Accumulated amortization Net
Finite-life intangibles
Customer relationships $ 2,085.5
$ (450.4 ) $ 1,635.1
$ 2,078.7
$ (415.8 ) $ 1,662.9
Trade names 1.8
(1.2 ) 0.6
1.8
(1.2 ) 0.6
Proprietary technology and patents 250.6
(120.1 ) 130.5
249.3
(114.2 ) 135.1
Total finite-life intangibles 2,337.9
(571.7 ) 1,766.2
2,329.8
(531.2 ) 1,798.6
Indefinite-life intangibles
Trade names 694.8

694.8
691.5

691.5
Total intangibles, net $ 3,032.7
$ (571.7 ) $ 2,461.0
$ 3,021.3
$ (531.2 ) $ 2,490.1
In millions Average interest rate at March 31, 2016 Maturity Year March 31,
2016
December 31,
2015
Commercial paper 1.628% 2019 $ 169.4
$ 179.5
Revolving credit facilities 1.936% 2019 1,330.0
1,181.4
Senior notes - fixed rate 1.875% 2017 350.0
350.0
Senior notes - fixed rate 2.900% 2018 500.0
500.0
Senior notes - fixed rate 2.650% 2019 250.0
250.0
Senior notes - fixed rate - Euro 2.450% 2019 559.8
548.4
Senior notes - fixed rate 3.625% 2020 400.0
400.0
Senior notes - fixed rate 5.000% 2021 500.0
500.0
Senior notes - fixed rate 3.150% 2022 550.0
550.0
Senior notes - fixed rate 4.650% 2025 250.0
250.0
Capital lease obligations and other 1.734% 2016 0.7
0.7
Unamortized debt issuance costs and discounts N/A N/A (22.1 ) (23.5 )
Total debt

4,837.8
4,686.5
Less: Current maturities and short-term borrowings

(0.7 ) (0.7 )
Long-term debt

$ 4,837.1
$ 4,685.8
Q2-Q4
In millions 2016 2017 2018 2019 2020 2021 Thereafter Total
Contractual debt obligation maturities $ 0.7
$ 350.0
$ 500.0
$ 2,309.2
$ 400.0
$ 500.0
$ 800.0
$ 4,859.9
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.
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; and
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.
March 31,
2016
December 31,
2015
In millions Recorded Amount Fair Value Recorded Amount Fair Value
Variable rate debt $ 1,500.1
$ 1,500.1
$ 1,360.9
$ 1,360.9
Fixed rate debt 3,359.8
3,399.0
3,349.1
3,395.4
Total debt $ 4,859.9
$ 4,899.1
$ 4,710.0
$ 4,756.3
March 31, 2016
In millions Level 1 Level 2 Level 3 Total
Recurring fair value measurements
Foreign currency contract liabilities $
$ (32.7 ) $
$ (32.7 )
Deferred compensation plan assets (1) 39.6
6.2

45.8
Total recurring fair value measurements $ 39.6
$ (26.5 ) $
$ 13.1
December 31, 2015
In millions Level 1 Level 2 Level 3 Total
Recurring fair value measurements
Foreign currency contract assets $
$ 0.1
$
$ 0.1
Foreign currency contract liabilities
(7.6 )
(7.6 )
Deferred compensation plan assets (1) 43.8
7.0

50.8
Total recurring fair value measurements $ 43.8
$ (0.5 ) $
$ 43.3
Nonrecurring fair value measurements
Goodwill (2) $
$
$ 996.4
$ 996.4
Trade name intangibles (3)

138.1
138.1
Total nonrecurring fair value measurements $
$
$ 1,134.5
$ 1,134.5
(1) Deferred compensation plan assets include mutual funds, common/collective trusts and cash equivalents for payment of certain non-qualified benefits for retired, terminated and active employees. The fair value of mutual funds and cash equivalents were based on quoted market prices in active markets. The underlying investments in the common/collective trusts primarily include intermediate and long-term debt securities, corporate debt securities, equity securities and fixed income securities. The overall fair value of the common/collective trusts are based on observable inputs.
(2) During the fourth quarter of 2015, we performed a goodwill impairment test for our Valves & Controls reporting unit using the required two-step process as of December 31, 2015. As a result, we recorded a non-cash goodwill impairment charge of $515.2 million . The first step of this process includes comparing the fair value to the carrying value of the reporting unit to which the goodwill is allocated to identify potential impairment. If the fair value of the reporting unit exceeds its carrying value, goodwill allocated to that reporting unit is considered not impaired. If the inverse result is observed, the reporting unit is considered to be impaired and step two of the test to measure the amount of impairment must be completed.
(3) During the fourth quarter of 2015, we performed an impairment test for our Valves & Controls trade names. As a result, we recorded a pre-tax, non-cash trade name impairment charge of $39.5 million . The fair value of trade names is measured using the relief-from-royalty method. This method assumes the trade name has value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.
U.S. pension plans
Three months ended
In millions March 31,
2016
March 28,
2015
Service cost $ 2.8
$ 3.5
Interest cost 4.1
3.7
Expected return on plan assets (2.9 ) (2.5 )
Net periodic benefit cost $ 4.0
$ 4.7
Non-U.S. pension plans
Three months ended
In millions March 31,
2016
March 28,
2015
Service cost $ 2.5
$ 2.6
Interest cost 3.7
3.8
Expected return on plan assets (3.8 ) (4.1 )
Net periodic benefit cost $ 2.4
$ 2.3
Three months ended
In millions March 31,
2016
March 28,
2015
Net sales
Water Quality Systems $ 331.5
$ 306.9
Flow & Filtration Solutions 337.7
350.1
Technical Solutions 524.6
395.8
Valves & Controls 387.0
429.2
Other (5.3 ) (7.0 )
Consolidated $ 1,575.5
$ 1,475.0
Segment income (loss)
Water Quality Systems $ 61.7
$ 51.8
Flow & Filtration Solutions 39.5
36.4
Technical Solutions 112.8
77.6
Valves & Controls 25.3
55.4
Other (29.5 ) (21.9 )
Consolidated $ 209.8
$ 199.3
Three months ended
In millions March 31,
2016
March 28,
2015
Segment income $ 209.8
$ 199.3
Restructuring and other (0.7 )
Intangible amortization (37.6 ) (27.6 )
Equity income of unconsolidated subsidiaries (0.9 ) (0.5 )
Operating income $ 170.6
$ 171.2
In millions March 31,
2016
Beginning balance $ 59.8
Service and product warranty provision 12.9
Payments (13.5 )
Foreign currency translation 0.3
Ending balance $ 59.5
In millions Parent Company Guarantor Subsidiary
Guarantor
Subsidiary Issuer Non-guarantor Subsidiaries Eliminations Consolidated
Total
Net sales $
$
$
$ 1,575.5
$
$ 1,575.5
Cost of goods sold


1,040.1

1,040.1
Gross profit


535.4

535.4
Selling, general and administrative 8.4

0.9
322.3

331.6
Research and development


33.2

33.2
Operating income (loss) (8.4 )
(0.9 ) 179.9

170.6
Loss (earnings) from investment in subsidiaries (115.8 ) (115.8 ) (144.1 )
375.7

Other (income) expense:
Equity income of unconsolidated subsidiaries


(0.9 )
(0.9 )
Net interest expense

27.4
9.0

36.4
Income (loss) before income taxes 107.4
115.8
115.8
171.8
(375.7 ) 135.1
Provision for income taxes


27.7

27.7
Net income (loss) $ 107.4
$ 115.8
$ 115.8
$ 144.1
$ (375.7 ) $ 107.4
Comprehensive income (loss), net of tax
Net income (loss) $ 107.4
$ 115.8
$ 109.4
$ 137.7
$ (362.9 ) $ 107.4
Changes in cumulative translation adjustment 28.0
28.0
28.0
28.0
(84.0 ) 28.0
Changes in market value of derivative financial instruments (14.7 ) (14.7 ) (14.7 ) (14.7 ) 44.1
(14.7 )
Comprehensive income (loss) $ 120.7
$ 129.1
$ 122.7
$ 151.0
$ (402.8 ) $ 120.7
In millions Parent Company Guarantor Subsidiary
Guarantor
Subsidiary Issuer Non-guarantor Subsidiaries Eliminations Consolidated
Total
Assets
Current assets
Cash and cash equivalents $
$
$
$ 158.1
$
$ 158.1
Accounts and notes receivable, net


1,268.7

1,268.7
Inventories


1,197.7

1,197.7
Other current assets 10.0
6.8
3.4
387.2
(26.0 ) 381.4
Total current assets 10.0
6.8
3.4
3,011.7
(26.0 ) 3,005.9
Property, plant and equipment, net


951.8

951.8
Other assets
Investments in subsidiaries 4,624.9
4,609.0
9,019.4

(18,253.3 )
Goodwill


5,250.0

5,250.0
Intangibles, net


2,461.0

2,461.0
Other non-current assets 12.6
10.5
1,119.8
1,132.1
(1,913.5 ) 361.5
Total other assets 4,637.5
4,619.5
10,139.2
8,843.1
(20,166.8 ) 8,072.5
Total assets $ 4,647.5
$ 4,626.3
$ 10,142.6
$ 12,806.6
$ (20,192.8 ) $ 12,030.2
Liabilities and Equity
Current liabilities
Current maturities of long-term debt and short-term borrowings $
$
$
$ 0.7
$
$ 0.7
Accounts payable 0.8


578.2

579.0
Employee compensation and benefits 0.7
0.1

221.8

222.6
Other current liabilities 71.9
1.3
20.4
597.7
(26.0 ) 665.3
Total current liabilities 73.4
1.4
20.4
1,398.4
(26.0 ) 1,467.6
Other liabilities
Long-term debt 487.6

5,509.9
753.1
(1,913.5 ) 4,837.1
Pension and other post-retirement compensation and benefits


285.9

285.9
Deferred tax liabilities

3.0
825.7

828.7
Other non-current liabilities 2.3


524.4

526.7
Total liabilities 563.3
1.4
5,533.3
3,787.5
(1,939.5 ) 7,946.0
Equity 4,084.2
4,624.9
4,609.3
9,019.1
(18,253.3 ) 4,084.2
Total liabilities and equity $ 4,647.5
$ 4,626.3
$ 10,142.6
$ 12,806.6
$ (20,192.8 ) $ 12,030.2
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 $ 126.6
$ 99.9
$ 106.6
$ 27.6
$ (375.7 ) $ (15.0 )
Investing activities
Capital expenditures


(38.2 )
(38.2 )
Proceeds from sale of property and equipment


6.3

6.3
Acquisitions, net of cash acquired


(0.1 )
(0.1 )
Net intercompany loan activity

(6.5 ) 126.0
(119.5 )
Net cash provided by (used for) investing activities

(6.5 ) 94.0
(119.5 ) (32.0 )
Financing activities
Net receipts of short-term borrowings


0.7

0.7
Net receipts (repayments) of commercial paper and revolving long-term debt

164.8
(26.4 )
138.4
Repayments of long-term debt


(0.7 )
(0.7 )
Net change in advances to subsidiaries (64.9 ) (99.9 ) (276.4 ) (54.0 ) 495.2

Excess tax benefits from share-based compensation


0.5

0.5
Shares issued to employees, net of shares withheld (1.6 )



(1.6 )
Dividends paid (60.1 )



(60.1 )
Net cash provided by (used for) financing activities (126.6 ) (99.9 ) (111.6 ) (79.9 ) 495.2
77.2
Effect of exchange rate changes on cash and cash equivalents

11.4
(9.8 )
1.6
Change in cash and cash equivalents

(0.1 ) 31.9

31.8
Cash and cash equivalents, beginning of period

0.1
126.2

126.3
Cash and cash equivalents, end of period $
$
$
$ 158.1
$
$ 158.1
In millions Parent
Company
Guarantor
Subsidiary
Guarantor
Subsidiary
Issuer
Non-guarantor
Subsidiaries
Eliminations Consolidated
Total
Net sales $
$
$
$ 1,475.0
$
$ 1,475.0
Cost of goods sold


964.8

964.8
Gross profit


510.2

510.2
Selling, general and administrative 3.1
0.1
1.1
304.9

309.2
Research and development


29.8

29.8
Operating income (loss) (3.1 ) (0.1 ) (1.1 ) 175.5

171.2
Loss (earnings) from continuing operations of investment in subsidiaries (120.7 ) (121.7 ) (118.5 )
360.9

Other (income) expense:
Equity income of unconsolidated subsidiaries


(0.5 )
(0.5 )
Net interest expense
0.9
3.5
13.8

18.2
Income (loss) from continuing operations before income taxes 117.6
120.7
113.9
162.2
(360.9 ) 153.5
Provision (benefit) for income taxes (0.6 )

35.9

35.3
Net income (loss) from continuing operations 118.2
120.7
113.9
126.3
(360.9 ) 118.2
Loss from discontinued operations, net of tax


(4.3 )
(4.3 )
Earnings (loss) from discontinued operations of investment in subsidiaries (4.3 ) (4.3 ) (4.3 )
12.9

Net income (loss) $ 113.9
$ 116.4
$ 109.6
$ 122.0
$ (348.0 ) $ 113.9
Comprehensive income (loss), net of tax
Net income (loss) $ 113.9
$ 116.4
$ 109.6
$ 122.0
$ (348.0 ) $ 113.9
Changes in cumulative translation adjustment (174.2 ) (174.2 ) (174.2 ) (174.2 ) 522.6
(174.2 )
Changes in market value of derivative financial instruments (0.1 ) (0.1 ) (0.1 ) (0.1 ) 0.3
(0.1 )
Comprehensive income (loss) $ (60.4 ) $ (57.9 ) $ (64.7 ) $ (52.3 ) $ 174.9
$ (60.4 )
In millions Parent Company Guarantor Subsidiary
Guarantor
Subsidiary Issuer Non-guarantor Subsidiaries Eliminations Consolidated
Total
Assets
Current assets
Cash and cash equivalents $
$
$ 0.1
$ 126.2
$
$ 126.3
Accounts and notes receivable, net 0.1


1,167.6

1,167.7
Inventories


1,174.3

1,174.3
Other current assets 25.2
12.8

309.2
(37.9 ) 309.3
Total current assets 25.3
12.8
0.1
2,777.3
(37.9 ) 2,777.6
Property, plant and equipment, net


942.8

942.8
Other assets
Investments in subsidiaries 4,495.6
4,486.1
10,151.1

(19,132.8 )
Goodwill


5,255.4

5,255.4
Intangibles, net


2,490.1

2,490.1
Other non-current assets 12.6

190.1
352.1
(187.2 ) 367.6
Total other assets 4,508.2
4,486.1
10,341.2
8,097.6
(19,320.0 ) 8,113.1
Total assets $ 4,533.5
$ 4,498.9
$ 10,341.3
$ 11,817.7
$ (19,357.9 ) $ 11,833.5
Liabilities and Equity
Current liabilities
Current maturities of long-term debt and short-term borrowings $
$
$
$ 0.7
$
$ 0.7
Accounts payable 0.6

0.3
577.9

578.8
Employee compensation and benefits 0.4
0.1

262.4

262.9
Other current liabilities 61.7
1.5
27.1
591.7
(37.9 ) 644.1
Total current liabilities 62.7
1.6
27.4
1,432.7
(37.9 ) 1,486.5
Other liabilities
Long-term debt 453.3
1.7
4,535.5
(117.5 ) (187.2 ) 4,685.8
Pension and other post-retirement compensation and benefits


287.2

287.2
Deferred tax liabilities

3.1
841.1

844.2
Other non-current liabilities 8.7


512.3

521.0
Total liabilities 524.7
3.3
4,566.0
2,955.8
(225.1 ) 7,824.7
Equity 4,008.8
4,495.6
5,775.3
8,861.9
(19,132.8 ) 4,008.8
Total liabilities and equity $ 4,533.5
$ 4,498.9
$ 10,341.3
$ 11,817.7
$ (19,357.9 ) $ 11,833.5
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 $ 79.5
$ 102.4
$ 107.9
$ (75.0 ) $ (348.0 ) $ (133.2 )
Investing activities
Capital expenditures


(34.8 )
(34.8 )
Proceeds from sale of property and equipment


2.3

2.3
Acquisitions, net of cash acquired


(3.0 )
(3.0 )
Intercompany loan activity

(468.5 ) 163.4
305.1

Net cash provided by (used for) investing activities of continuing operations

(468.5 ) 127.9
305.1
(35.5 )
Net cash provided by (used for) investing activities of discontinued operations


54.9

54.9
Net cash provided by (used for) investing activities

(468.5 ) 182.8
305.1
19.4
Financing activities
Net receipts (repayments) of commercial paper and revolving long-term debt

406.5
(0.5 )
406.0
Repayments of long-term debt


(0.4 )
(0.4 )
Net change in advances to subsidiaries 178.0
(102.4 ) (45.8 ) (72.7 ) 42.9

Excess tax benefits from share-based compensation


2.8

2.8
Shares issued to employees, net of shares withheld


8.7

8.7
Repurchases of ordinary shares (200.0 )



(200.0 )
Dividends paid (57.5 )



(57.5 )
Net cash provided by (used for) financing activities (79.5 ) (102.4 ) 360.7
(62.1 ) 42.9
159.6
Effect of exchange rate changes on cash and cash equivalents


(25.1 )
(25.1 )
Change in cash and cash equivalents

0.1
20.6

20.7
Cash and cash equivalents, beginning of period

0.1
110.3

110.4
Cash and cash equivalents, end of period $
$
$ 0.2
$ 130.9
$
$ 131.1
Technical Solutions — The Technical Solutions segment designs, manufactures, markets and services products that guard and protect some of the world’s most sensitive electrical and electronic equipment, as well as heat management solutions designed to provide thermal protection to temperature sensitive fluid applications and engineered electrical and fastening products for electrical, mechanical and civil applications.
Our results were negatively impacted due to the strengthening of the U.S. dollar against most key global currencies. We expect this trend to continue throughout 2016.
We have identified specific product and geographic market opportunities that we find attractive and continue to pursue, both within and outside the United States. 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.
Despite the favorable long-term outlook for our end-markets, we experience differing levels of volatility depending on the end-market and may continue to do so over the medium and longer term. While we believe the general trends are favorable, factors specific to each of our major end-markets may negatively affect the capital spending plans of our customers and lead to lower sales volumes for us.
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. Commodity prices have declined, but we are uncertain as to the timing and impact of these market changes.
Three months ended
In millions March 31,
2016
March 28,
2015
$ change % / point change
Net sales $ 1,575.5
$ 1,475.0
$ 100.5
6.8 %
Cost of goods sold 1,040.1
964.8
75.3
7.8 %
Gross profit 535.4
510.2
25.2
4.9 %
% of net sales 34.0 % 34.6 % (0.6 ) pts

Selling, general and administrative 331.6
309.2
22.4
7.2 %
% of net sales 21.1 % 21.0 % 0.1 pts
Research and development 33.2
29.8
3.4
11.4 %
% of net sales 2.1 % 2.0 % 0.1 pts
Operating income 170.6
171.2
(0.6 ) (0.4 )%
% of net sales 10.8 % 11.6 % (0.8 ) pts
Net interest expense 36.4
18.2
18.2
100.0 %
Income from continuing operations before income taxes 135.1
153.5
(18.4 ) (12.0 )%
Provision for income taxes 27.7
35.3
(7.6 ) (21.5 )%
Effective tax rate 20.5 % 23.0 % (2.5 ) pts
Three months ended March 31, 2016
over the prior year period
Volume 1.0 %
Price 0.2
Core growth 1.2
Acquisition 8.0
Currency (2.4 )
Total 6.8 %
amortization expense of $37.6 million in the first quarter of 2016 , compared to $27.6 million in the first quarter of 2015 as a result of the ERICO Acquisition; and
Three months ended
In millions March 31,
2016
March 28,
2015
% / point change
Net sales $ 331.5
$ 306.9
8.0 %
Segment income 61.7
51.8
19.1 %
% of net sales 18.6 % 16.9 % 1.7 pts
Three months ended March 31, 2016
over the prior year period
Volume 8.9 %
Price 0.3
Core growth 9.2
Currency (1.2 )
Total 8.0 %
core sales growth related to higher sales of certain pool products primarily serving the North American residential housing market for the first three months of 2016 ;
Three months ended March 31, 2016
over the prior year period
Growth 1.5 pts
Inflation (0.9 )
Productivity/Price 1.1
Total 1.7 pts
Three months ended
In millions March 31,
2016
March 28,
2015
% / point change
Net sales $ 337.7
$ 350.1
(3.5 )%
Segment income 39.5
36.4
8.5 %
% of net sales 11.7 % 10.4 % 1.3 pts
Three months ended March 31, 2016
over the prior year period
Volume (1.9 )%
Price 0.4
Core growth (1.5 )
Currency (2.0 )
Total (3.5 )%
Three months ended March 31, 2016
over the prior year period
Growth (1.1 ) pts
Inflation (1.3 )
Productivity/Price 3.7
Total 1.3 pts
Three months ended
In millions March 31,
2016
March 28,
2015
% / point change
Net sales $ 524.6
$ 395.8
32.5 %
Segment income 112.8
77.6
45.4 %
% of net sales 21.5 % 19.6 % 1.9 pts
Three months ended March 31, 2016
over the prior year period
Volume 5.1 %
Price (0.1 )
Core growth 5.0
Acquisition 29.9
Currency (2.4 )
Total 32.5 %
Three months ended March 31, 2016
over the prior year period
Growth/Acquisition
Inflation (1.1 )
Productivity/Price 3.0
Total 1.9 pts
Three months ended
In millions March 31,
2016
March 28,
2015
% / point change
Net sales $ 387.0
$ 429.2
(9.8 )%
Segment income 25.3
55.4
(54.3 )%
% of net sales 6.5 % 12.9 % (6.4 ) pts
Three months ended March 31, 2016
over the prior year period
Volume (6.0 )%
Price (0.5 )
Core growth (6.5 )
Currency (3.3 )
Total (9.8 )%
Three months ended March 31, 2016
over the prior year period
Growth (13.2 ) pts
Inflation (0.7 )
Productivity/Price 7.5
Total (6.4 ) pts
Three months ended
In millions March 31,
2016
March 28,
2015
Net cash provided by (used for) operating activities of continuing operations $ (15.0 ) $ (126.2 )
Capital expenditures (38.2 ) (34.8 )
Proceeds from sale of property and equipment 6.3
2.3
Free cash flow $ (46.9 ) $ (158.7 )
(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
January 1 - January 30 74,710
$ 49.26

$ 800,000,049
January 31 - February 27 1,165
$ 46.23

$ 800,000,049
February 28 - March 31 21,788
$ 50.71

$ 800,000,049
Total 97,663

(a) The purchases in this column include 74,710 shares for the period January 1 - January 30 , 1,165 shares for the period January 31 - February 27 and 21,788 shares for the period February 28 - March 31 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 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 shares.
Pentair plc
Registrant
By /s/ John L. Stauch
John L. Stauch
Executive Vice President and Chief Financial Officer
By /s/ Mark C. Borin
Mark C. Borin
Chief Accounting Officer and Treasurer
10.1 Form of Key Executive Employment and Severance Agreement for Dennis J. Cassidy Jr. (Incorporated by reference to Exhibit 10.16 in the Annual Report on Form 10-K of Pentair plc for the year ended December 31, 2015 (File No. 001-11625)).
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 The following materials from Pentair plc’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2016 and March 28, 2015, (ii) the Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015, (iii) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and March 28, 2015, (iv) the Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2016 and March 28, 2015, and (v) Notes to Condensed Consolidated Financial Statements.

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