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. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the overall impact of the COVID-19 pandemic on our business; the duration and severity of the COVID-19 pandemic, the impact of virus variants and the rate of vaccinations; actions that may be taken by us, other businesses and governments to address or otherwise mitigate the impact of the COVID-19 pandemic, including those that may impact our ability to operate our facilities, meet production demands, and deliver products to our customers; the negative impacts of the COVID-19 pandemic on the global economy, our customers and suppliers, and customer demand; overall global economic and business conditions impacting our business, including the strength of housing and related markets; demand, competition and pricing pressures in the markets we serve; volatility in currency exchange rates; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; the ability to achieve the benefits of our restructuring plans and cost reduction initiatives; risks associated with operating foreign businesses; the impact of material cost and other inflation; the impact of seasonality of sales and weather conditions; our ability to comply with laws and regulations; the impact of changes in laws, regulations and administrative policy, including those that limitU.S. tax benefits or impact trade agreements and tariffs; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with theU.S. Securities and Exchange Commission (the "SEC"), including this Form 10-Q and our Form 10-K for the year endedDecember 31, 2020 . All forward-looking statements speak only as of the date of this report.Pentair assumes no obligation, and disclaims any obligation, to update the information contained in this report. Overview The terms "us," "we," "our" or "Pentair" refer toPentair plc and its consolidated subsidiaries. AtPentair , we believe the health of our world depends on reliable access to clean water. We deliver a comprehensive range of smart, sustainable water solutions to homes, business and industry around the world. Our industry leading and proven portfolio of solutions enables our customers to access clean, safe water, reduce water consumption, and recover and reuse it. Whether it's improving, moving or helping people enjoy water, we help manage the world's most precious resource. We are comprised of two reporting segments: Consumer Solutions and Industrial & Flow Technologies. For the first three months of 2021, the Consumer Solutions and Industrial & Flow Technologies segments represented approximately 60% and 40% of total revenues, respectively. We classify our operations into business segments based primarily on types of products offered and markets served: •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. 20
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Table of Contents •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 residential, commercial and industrial markets. These products and systems are used in a range of applications, 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. COVID-19 Pandemic Update InMarch 2020 , theWorld Health Organization declared the COVID-19 outbreak a pandemic. The COVID-19 pandemic continues to persist throughoutthe United States ("U.S.") and the world, with the continued potential for significant impact. The COVID-19 pandemic has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, "shelter-in-place" and "stay-at-home" orders, travel restrictions, business curtailments, limits on gatherings, and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the economic impacts of the COVID-19 pandemic.
Our businesses generally have been and continue to be considered essential under applicable government-mandated orders which has allowed us to maintain business continuity at substantially all of our manufacturing facilities throughout the COVID-19 pandemic. While our facilities have remained operational during the first quarter of 2021, we continue to experience various degrees of manufacturing cost pressures and inefficiencies as a result of supply chain issues and, in certain businesses, increased demand. Although we regularly monitor the financial health and operations of companies in our supply chain, and use alternative suppliers when necessary and available, financial hardship or government restrictions on our suppliers or sub-suppliers caused by the COVID-19 pandemic could cause a disruption in our ability to obtain raw materials or components required to manufacture our products and adversely affect our operations.
Our Consumer Solutions segment delivered significant growth in the first quarter
of 2021 led by continued strength in our pool and residential water treatment
businesses. The high level of demand in these businesses continued as consumers
invested in their homes and backyards. Demand in our commercial filtration
business continued to be negatively impacted as the restaurant and hospitality
industries remain slow to recover in
Our Industrial & Flow Technologies segment also showed signs of strong growth in the first quarter of 2021 mainly driven by increased volume within our residential and irrigation flow businesses due to high demand in the residential vertical. Demand in our commercial and infrastructure flow businesses remained soft in the first quarter of 2021; however, results improved year over year. In our industrial filtration business, demand is mostly driven by customer capital spending, which continued to be slow to resume across most industries served. While we are preparing for this business to remain under pressure in 2021, we expect long-term demand drivers for this business not to be significantly changed.
We maintain our commitment to protect the health and safety of our employees,
customers, and suppliers by continuing our enhanced safety protocols for those
on-site at our manufacturing facilities and for those
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Table of Contents Key Trends and Uncertainties Regarding Our Existing Business The following trends and uncertainties affected our financial performance in the first three months of 2021 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 increasing numbers of virus variants, the extent of worldwide social, political and economic disruption it may continue to cause and the development and distribution of vaccines to address the COVID-19 virus. The broader implications of the COVID-19 pandemic on 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 rate 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. •During 2020 and the first quarter of 2021, we executed certain business restructuring initiatives unrelated to the COVID-19 pandemic aimed at reducing our fixed cost structure and realigning our business. We expect these actions to continue throughout the remainder of 2021 and to drive margin growth. •In the first quarter of 2021, we created a transformation office in an effort to accelerate growth and drive margin expansion by leveraging our internal capabilities and reducing complexity. We expect transformation initiatives to occur throughout the remainder of 2021 and beyond and to drive future margin growth. •We have identified specific product and geographic market opportunities that we find attractive and continue to pursue, both within and outside theU.S. We are reinforcing that our businesses 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. •During the first quarter of 2021, we experienced inflationary increases due to high demand and tight supply of raw materials such as metals, resins and electronics, along with increased logistics costs. While we have taken pricing actions and we strive for productivity improvements that could help offset these increases, supply chain pressures and inflationary increases are expected to continue in the second quarter of 2021 and may continue thereafter and could negatively impact our results of operations. In 2021, 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, prioritization of growth investments and addressing the cost structures as necessary; •Continued focus on capital allocation through: •Commitment to maintain our investment grade rating; •Return cash to shareholders through dividends and buybacks; and •Supplement our business with strategically-aligned mergers and acquisitions. •Focused growth initiatives that accelerate our investments in digital, technology and services expansion; and •Building a high performance growth culture and delivering on our commitments while living ourWin Right values. 22
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