ITEM 2.02 Results of Operations and Financial Condition
On October 20, 2020, Pentair plc (the "Company") issued a press release
announcing its earnings for the third quarter of 2020 and a conference call in
connection therewith. A copy of the release is attached hereto as Exhibit 99.1
and incorporated herein by reference.
This press release refers to certain non-generally accepted accounting
principles ("GAAP") financial measures (core sales, segment income, return on
sales, adjusted net income from continuing operations, adjusted diluted earnings
per share from continuing operations and free cash flow) and a reconciliation of
those non-GAAP financial measures to the corresponding financial measures
contained in the Company's financial statements prepared in accordance with
GAAP.
The 2020 segment income, return on sales, adjusted net income from continuing
operations and adjusted diluted earnings per share from continuing operations
("EPS") include equity income (loss) from unconsolidated subsidiaries and
eliminate intangible amortization, certain targeted restructuring and other
activities, novel coronavirus 2019 ("COVID-19") related costs and expenses,
deal-related costs and expenses, loss on sale of business, other income and
certain tax items. The 2019 segment income, return on sales, adjusted net income
from continuing operations and adjusted EPS include equity income from
unconsolidated subsidiaries and eliminate intangible amortization, certain
targeted restructuring and other activities, deal-related costs and expenses,
impairments, inventory step-up, gain/loss on sale of businesses, pension and
other post-retirement mark-to-market gain/loss and certain tax items.
We use the term "core sales" to refer to GAAP net sales from continuing
operations excluding (1) the impact of currency translation and (2) the impact
of revenue from acquired businesses recorded prior to the first anniversary of
the acquisition less the amount of sales attributable to divested product lines
not considered discontinued operations ("acquisition sales"). The portion of
GAAP net sales attributable to currency translation is calculated as the
difference between (a) the period-to-period change in net sales (excluding
acquisition sales) and (b) the period-to-period change in net sales (excluding
acquisition sales) after applying current period foreign exchange rates to the
prior year period. We use the term "core sales growth" to refer to the measure
of comparing current period core net sales with the corresponding period of the
prior year.
Management utilizes these adjusted financial measures to assess the run-rate of
its continuing operations against those of prior periods without the distortion
of these factors. The Company believes that these non-GAAP financial measures
will be useful to investors as well to assess the continuing strength of the
Company's underlying operations. In addition, adjusted EPS is used as a
criterion to measure and pay long-term incentive compensation and segment income
is used as a criterion to measure and pay annual incentive compensation. These
non-GAAP measures may not be comparable to similarly titled measures reported by
other companies.
The Company uses free cash flow to assess its cash flow performance. The Company
believes free cash flow is an important measure of liquidity because it provides
the Company and its investors a measurement of cash generated from operations
that is available to pay dividends and repay debt. In addition, free cash flow
is used as a criterion to measure and pay annual incentive compensation. The
Company's measure of free cash flow may not be comparable to similarly titled
measures reported by other companies.
ITEM 9.01 Financial Statements and Exhibits
(a)Financial Statements of Businesses Acquired
Not applicable.
(b)Pro Forma Financial Information
Not applicable.
(c)Shell Company Transactions
Not applicable.
(d)Exhibits
                                 EXHIBIT INDEX
   Exhibit          Description
                    Pentair plc press release dated October 20, 2020 announcing earnings for the
    99.1            third quarter of 2020
     104            Cover Page Interactive Data File (embedded within the Inline XBRL document)

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