Forward-looking Statements
This report contains statements that we believe to be "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements, other than statements of historical fact, are
forward-looking statements. Without limitation, any statements preceded or
followed by or that include the words "targets," "plans," "believes," "expects,"
"intends," "will," "likely," "may," "anticipates," "estimates," "projects,"
"should," "would," "could," "positioned," "strategy," "future" or words, phrases
or terms of similar substance or the negative thereof, are forward-looking
statements. All statements made about the
Overview
The terms "us," "we," "our" or "Pentair" refer to
•Consumer Solutions - This segment designs, manufactures and sells energy-efficient residential and commercial pool equipment and accessories, and commercial and residential water treatment products and systems. Residential and commercial pool equipment and accessories include pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment and pool accessories. Water treatment products and systems include pressure tanks, control valves, activated carbon products, conventional filtration products, and point-of-entry and point-of-use systems. Applications for our pool business's products include residential and commercial pool maintenance, repair, renovation, service and construction. Our water treatment products and systems are used in residential whole home water filtration, drinking water filtration and water softening solutions in addition to commercial total water management and filtration in foodservice operations. The primary focus of this segment is business-to-consumer.
•Industrial & Flow Technologies - This segment manufactures and sells a variety of fluid treatment and pump products and systems, including pressure vessels, gas recovery solutions, membrane bioreactors, wastewater reuse systems and advanced membrane filtration, separation systems, water disposal pumps, water supply pumps, fluid transfer pumps, turbine pumps, solid handling pumps, and agricultural spray nozzles, while serving the global
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Table of Contents residential, commercial and industrial markets. These products and systems are used in a range of applications, including fluid delivery, ion exchange, desalination, food and beverage, separation technologies for the oil and gas industry, residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, circulation and transfer, fire suppression, flood control, agricultural irrigation and crop spray. The primary focus of this segment is business-to-business.
On
Effective
COVID-19 Pandemic Update
In 2020, the
In connection with the supply chain disruptions described above, we have experienced inflationary increases of certain raw materials, such as metals, resins and electronics (including drives and motors), as well as logistics, transportation and labor costs. While we have taken pricing actions and we strive for productivity improvements that could help offset these inflationary cost increases, we expect inflationary cost increases to continue throughout 2022.
The extent of the COVID-19 pandemic's effect on our operational and financial
performance in the future will depend on future developments, including the
duration, geographic location and intensity of the pandemic, the impact of virus
variants, the effectiveness of vaccinations, our continued ability to
manufacture and distribute our products, as well as any future actions that may
be taken by governmental authorities or by us relating to the pandemic. For more
information regarding factors and events that may impact our business, results
of operations and financial condition as a result of the COVID-19 pandemic, see
"Risk Factors - Risks Relating to our Business: The COVID-19 pandemic may have a
material negative impact on our business, financial condition, results of
operations and cash flows" included in Item 1A. "Risk Factors" in our Annual
Report on Form 10-K for the year ended
Key Trends and Uncertainties Regarding Our Existing Business The following trends and uncertainties affected our financial performance in the first six months of 2022 and/or may impact our results in the future:
•There are many uncertainties regarding the COVID-19 pandemic, including the anticipated duration and severity of the pandemic, the spread of an increasing number of virus variants, the extent of worldwide social, political and economic disruption it may continue to cause and the distribution and effectiveness of vaccines to address the COVID-19 virus. The broader implications of the COVID-19 pandemic that are reasonably likely to impact our business, financial condition, results of operations and cash flows cannot be determined at this time, and ultimately will be affected by a number of evolving factors including the length of time that the pandemic continues and the impact of vaccines on it, the impact of virus variants, the effectiveness of vaccinations, the pandemic's effect on the demand for our products and services, our supply chain, and our manufacturing capacity, as well as the impact of governmental regulations imposed in response to the pandemic. See further discussion above under "COVID-19 Pandemic Update" for key trends and uncertainties with regard to the COVID-19 pandemic.
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•During 2021 and the first six months of 2022, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. We expect these actions to continue throughout the remainder of 2022 and to drive margin growth.
•In 2021, we created a transformation office and launched and committed resources to the Transformation Program designed to accelerate growth and drive margin expansion by driving operational excellence, reducing complexity and streamlining our processes. We expect to implement Transformation Program initiatives and incur transformation costs throughout the remainder of 2022 and beyond.
•During the first six months of 2022, we continued to experience supply chain challenges, including increased lead times for raw materials due to availability constraints and high demand. While we have elevated our engagement with our suppliers and used secondary suppliers and new methods of procurement where available to mitigate the supply chain pressures, we expect supply chain challenges to continue throughout the remainder of 2022, which may continue thereafter and could negatively impact our results of operations.
•During the first six months of 2022, we continued to experience inflationary increases in costs of raw materials such as metals, resins and electronics (including drives and motors), as well as increases in logistics, transportation and labor costs. While we have taken pricing actions and we strive for productivity improvements that could help offset these inflationary cost increases, we expect inflationary cost increases to continue throughout the remainder of 2022, which may continue thereafter and could negatively impact our results of operations.
•At the end of the second quarter of 2022, our backlog, primarily in our Consumer Solutions segment, decreased compared to the backlog at the end of 2021 as shipments outpaced new orders during the period as customers balanced the need to place new orders with market demand and channel inventory levels. This downward trend may continue throughout the remainder of 2022 as we expect backlog to return to more historical levels.
•We have identified specific product and geographic market opportunities that we
find attractive and continue to pursue, both within and outside the
In 2022, our operating objectives remain to focus on delivering our core while continuing to build out our future. We expect to execute these objectives by:
•Delivering revenue growth in our core businesses;
•Delivering income and cash by managing price/cost inflation, prioritizing growth investments and addressing the cost structures as necessary;
•Continued focus on capital allocation through:
•Commitment to maintain our investment grade rating;
•Return of cash to shareholders through dividends and share repurchases; and
•Supplement our business with strategically-aligned mergers and acquisitions;
•Focused growth initiatives that accelerate our investments in digital, technology and services expansion;
•Implementation of Transformation Program initiatives that will drive operational excellence, reduce complexity and improve our organizational structure;
•Integration of
•Building a high performance growth culture and delivering on our commitments
while living our
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