Pentair Reports Second Quarter 2022 Results

Excluding currency translation, acquisitions and divestitures, core sales grew 12 percent in the second quarter. Second quarter 2022 earnings per diluted share from continuing operations (“EPS”) were $0.92 compared to $0.79 in the second quarter of 2021. On an adjusted basis, the company reported EPS of $1.02 compared to $0.84 in the second quarter of 2021. Segment income, adjusted net income, free cash flow and adjusted EPS are described in the attached schedules.

John L. Stauch, Pentair’s President and Chief Executive Officer, commented: “We reported strong second quarter results with double digit growth in sales, segment income, and adjusted EPS. We were particularly encouraged with our strong margin expansion, both sequentially and year-over-year, as price read out and more than offset continued inflationary headwinds. While ongoing supply chain inefficiencies remain, our teams continue to deliver for our customers and we are seeing improvement in our lead times.”

Second quarter 2022 operating income was $191 million, up 18 percent compared to operating income for the second quarter of 2021, and return on sales (“ROS”) was 17.9 percent, an increase of 70 basis points when compared to the second quarter of 2021. On an adjusted basis, the company reported segment income of $206 million for the second quarter of 2022, up 18 percent compared to segment income for the second quarter of 2021, and ROS was 19.3 percent, an increase of 70 basis points when compared to the second quarter of 2021.

Consumer Solutions sales were up 19 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 15 percent in the second quarter. Segment income of $169 million was up 18 percent compared to the second quarter of 2021, and ROS was 24.7 percent, a decrease of 20 basis points when compared to the second quarter of 2021 and up significantly from the first quarter of 2022.

Industrial & Flow Technologies sales were up 4 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 7 percent in the second quarter. Segment income of $59 million was up 4 percent compared to the second quarter of 2021, and ROS was 15.7 percent, flat when compared to the second quarter of 2021.

Net cash provided by operating activities of continuing operations was $308 million for the quarter compared to $380 million in the second quarter of 2021 and free cash flow provided by continuing operations for the quarter was $288 million compared to $369 million in the second quarter of 2021.

Pentair paid a regular cash dividend of $0.21 per share in the second quarter of 2022. Pentair previously announced on May 16, 2022 that it will pay a regular quarterly cash dividend of $0.21 per share on August 5, 2022 to shareholders of record at the close of business on July 22, 2022. This year marks the 46th consecutive year that Pentair has increased its dividend.

Mr. Stauch continued, “We are also excited to have received all of the necessary regulatory approvals related to our acquisition of Manitowoc Ice, and are expecting to close on or around July 28, subject to closing conditions. With the significant growth of our Pool business since 2019 and our Water Solutions business expected to exceed $1 billion in sales on a pro forma basis including Manitowoc Ice, we will be moving to three reporting segments starting January 1, 2023: Pool, Water Solutions, and Industrial & Flow Technologies.

“We believe this new segment structure will help us accelerate our efforts to improve customer experiences, differentiate our products, and drive profitability for our shareholders. We remain excited about Pentair’s long-term prospects and we look forward to building on our success of the past few years.”

Effective January 1, 2023, Pentair will move to three reporting segments: Pool, Water Solutions, and Industrial & Flow Technologies. The following leadership changes will be effective upon the move to three segments.

• Pool business, currently part of Consumer Solutions, is a leader in North America pool equipment. Our new Pool segment will be led by Jerome Pedretti, who joined Pentair in 2005. Currently Mr. Pedretti is EVP and President of the Industrial & Flow Technologies segment.

• New Water Solutions segment will include Manitowoc Ice, which we expect to acquire on or around July 28, subject to closing conditions. Water Solutions will be led by Adrian Chiu, who joined Pentair in 2011. Currently Mr. Chiu is EVP, Chief Transformation Officer and Chief Human Resources Officer.

• The Industrial & Flow Technologies segment will remain the same. The segment will be led by De’Mon Wiggins, who joined Pentair in 2010 and who is currently the President of the Pool business.

• In connection with these changes, Steve Pilla will assume the role of Chief Transformation Officer, in addition to his current role of EVP, Chief Supply Chain Officer, and the company will begin a search for a new Chief Human Resources Officer.

The company plans to provide historical financials reflecting this realignment when it reports its fourth quarter 2022 earnings in early 2023.

Outlook
The company updates its estimated 2022 GAAP EPS from continuing operations to approximately $3.40 to $3.45 and on an adjusted EPS basis to approximately $3.70 to $3.75. The company updates full year 2022 sales guidance to be up approximately 8 to 10 percent on a reported basis. The updated guidance primarily reflects the negative impacts of foreign exchange and higher interest rates in addition to further margin expansion. The company’s outlook for 2022 does not include the anticipated Manitowoc Ice acquisition.

In addition, the company introduces third quarter 2022 GAAP EPS from continuing operations guidance of approximately $0.90 to $0.92 and on an adjusted EPS basis of approximately $0.93 to $0.95. The company expects third quarter sales to be up approximately 3 to 5 percent on a reported basis compared to the third quarter of 2021.

“I am proud of the resiliency of our manufacturing teams and I am excited about our continued growth prospects across our diverse portfolio despite near term external challenges. We believe the addition of Manitowoc Ice to our commercial platform, combined with our new segmentation and focused transformation efforts, will continue to drive value for our shareholders,” added Mr. Stauch.