PART I FINANCIAL INFORMATION This section presents unaudited condensed consolidated financial statements and management's analysis of financial performance ITEM 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements, including statements of income, balance sheets, cash flows, and changes in equity, along with detailed notes explaining the basis of presentation, revenue disaggregation, restructuring activities, earnings per share, acquisitions, goodwill, derivatives, debt, income taxes, shareholders' equity, segment information, and commitments and contingencies Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) The company reported significant improvements in net sales and net income for both the three and nine months ended September 30, 2021, compared to the prior year, primarily driven by increased sales volume and the absence of goodwill impairment charges seen in 2020 Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (in millions, except per-share data) | Metric (in millions, except per-share data) | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net sales | $642.8 | $509.3 | $1,793.0 | $1,477.4 | | Gross profit | $250.5 | $196.8 | $694.7 | $552.4 | | Operating income (loss) | $97.7 | $(141.6) | $266.4 | $(36.0) | | Net income (loss) | $74.3 | $(138.7) | $205.9 | $(94.3) | | Basic EPS | $0.44 | $(0.82) | $1.23 | $(0.56) | | Diluted EPS | $0.44 | $(0.82) | $1.21 | $(0.56) | | Cash dividends paid per ordinary share | $0.175 | $0.175 | $0.525 | $0.525 | - Operating income significantly improved from a loss of $(141.6) million in Q3 2020 to a profit of $97.7 million in Q3 2021, and from a loss of $(36.0) million in the first nine months of 2020 to a profit of $266.4 million in the same period of 2021, largely due to the absence of a $220.5 million goodwill and trade names impairment in 202110 Condensed Consolidated Balance Sheets The balance sheet shows an increase in total assets, primarily driven by higher accounts receivable, inventories, goodwill, and intangibles, while cash and cash equivalents decreased. Total liabilities also increased, mainly due to higher accounts payable and long-term debt Consolidated Balance Sheets (in millions) | Metric (in millions) | September 30, 2021 | December 31, 2020 | | :------------------- | :----------------- | :---------------- | | Cash and cash equivalents | $46.0 | $122.5 | | Total current assets | $889.7 | $764.4 | | Goodwill | $2,187.2 | $2,098.2 | | Intangibles, net | $1,162.6 | $1,105.5 | | Total assets | $4,678.9 | $4,366.1 | | Total current liabilities | $571.2 | $450.0 | | Long-term debt | $971.5 | $928.0 | | Total liabilities | $2,137.3 | $1,956.3 | | Total equity | $2,541.6 | $2,409.8 | - Cash and cash equivalents decreased by $76.5 million from $122.5 million at December 31, 2020, to $46.0 million at September 30, 202115 - Goodwill increased by $89.0 million, from $2,098.2 million to $2,187.2 million, primarily due to acquisitions1547 Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities increased, while net cash used for investing activities significantly rose due to acquisitions. Net cash used for financing activities decreased, reflecting changes in debt and share repurchases Consolidated Statements of Cash Flows (in millions) | Metric (in millions) | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $205.9 | $(94.3) | | Net cash provided by (used for) operating activities | $258.1 | $203.7 | | Net cash provided by (used for) investing activities | $(260.2) | $(50.9) | | Net cash provided by (used for) financing activities | $(70.7) | $(100.2) | | Cash and cash equivalents, end of period | $46.0 | $159.8 | - Net cash used for investing activities increased substantially from $(50.9) million in 2020 to $(260.2) million in 2021, primarily driven by $235.1 million in acquisitions (net of cash acquired) in 202118 - Net cash provided by operating activities increased by $54.4 million, from $203.7 million in 2020 to $258.1 million in 202118 Condensed Consolidated Statements of Changes in Equity Total equity increased from December 31, 2020, to September 30, 2021, primarily due to net income, partially offset by dividends declared and share repurchases. The company also saw changes in accumulated other comprehensive loss Consolidated Statements of Changes in Equity (in millions) | Metric (in millions) | December 31, 2020 | September 30, 2021 | | :------------------- | :---------------- | :----------------- | | Total equity | $2,409.8 | $2,541.6 | | Net income | $20.7 (Retained Earnings) | $136.9 (Retained Earnings) | | Dividends declared | N/A | $(29.7) | | Share repurchases | N/A | $(20.0) | - Total equity increased by $131.8 million from $2,409.8 million at December 31, 2020, to $2,541.6 million at September 30, 202121 - Retained earnings increased significantly from $20.7 million at December 31, 2020, to $136.9 million at September 30, 2021, reflecting net income generation21 Notes to Condensed Consolidated Financial Statements These notes provide essential details supporting the condensed financial statements, covering the company's business, accounting policies, revenue disaggregation by geography and vertical, restructuring costs, EPS calculations, recent acquisitions, changes in goodwill and intangibles, supplemental balance sheet details, derivative financial instruments, debt structure, income tax impacts, and shareholder equity activities including share repurchases and dividends 1. Basis of Presentation and Responsibility for Interim Financial Statements nVent Electric plc is a global provider of electrical connection and protection solutions, operating in three segments: Enclosures, Electrical & Fastening Solutions, and Thermal Management. The unaudited interim financial statements are prepared in accordance with SEC requirements, with certain GAAP footnotes condensed or omitted. The company acknowledges the ongoing uncertainty and potential unfavorable impact of the COVID-19 pandemic on its business - nVent Electric plc is a leading global provider of electrical connection and protection solutions, with three reporting segments: Enclosures, Electrical & Fastening Solutions, and Thermal Management24 - The company is incorporated in Ireland but centrally managed and tax resident in the United Kingdom25 - The COVID-19 pandemic has had and may continue to have an unfavorable impact on the business, with potential for reduced customer demand or constrained supply28 2. Revenue Revenue is disaggregated by geographic location and vertical, showing strong growth across all segments and regions for the three and nine months ended September 30, 2021, compared to 2020. Contract liabilities increased significantly, indicating more upfront payments or deferred revenue Geographic Net Sales (in millions) | Region | Q3 2021 Total | Q3 2020 Total | 9M 2021 Total | 9M 2020 Total | | :--------------- | :------------ | :------------ | :------------ | :------------ | | U.S. and Canada | $412.2 | $338.5 | $1,134.3 | $978.3 | | Developed Europe | $143.5 | $118.7 | $419.9 | $338.3 | | Developing | $74.1 | $41.3 | $202.4 | $128.6 | | Other Developed | $13.0 | $10.8 | $36.4 | $32.2 | | Total | $642.8 | $509.3 | $1,793.0 | $1,477.4 | Vertical Net Sales (in millions) | Vertical | Q3 2021 Total | Q3 2020 Total | 9M 2021 Total | 9M 2020 Total | | :------------------- | :------------ | :------------ | :------------ | :------------ | | Industrial | $275.0 | $215.5 | $776.1 | $629.8 | | Commercial & Residential | $173.2 | $148.2 | $491.0 | $415.7 | | Infrastructure | $142.9 | $104.5 | $370.4 | $303.1 | | Energy | $51.7 | $41.1 | $155.5 | $128.8 | | Total | $642.8 | $509.3 | $1,793.0 | $1,477.4 | Contract Balances (in millions) | Metric | September 30, 2021 | December 31, 2020 | $ Change | % Change | | :------------------ | :----------------- | :---------------- | :------- | :------- | | Contract assets | $45.2 | $45.6 | $(0.4) | (0.9%) | | Contract liabilities | $18.4 | $11.3 | $7.1 | 62.8% | | Net contract assets | $26.8 | $34.3 | $(7.5) | (21.9%) | - The $7.5 million decrease in net contract assets was primarily due to the timing of milestone payments, with most December 31, 2020 contract liabilities recognized as revenue in the first nine months of 202133 3. Restructuring The company continued its restructuring initiatives to reduce fixed costs and realign its business. Total restructuring costs decreased for both the three and nine months ended September 30, 2021, compared to the prior year, with a notable reduction in severance and related costs Total Restructuring Costs (in millions) | Cost Type | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :------------------------ | :------ | :------ | :------ | :------ | | Severance and related costs | $1.3 | $3.5 | $4.0 | $9.7 | | Other | $0.6 | $0.8 | $3.0 | $1.9 | | Total | $1.9| $4.3| $7.0| $11.6| Restructuring Costs by Segment (in millions) | Segment | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :-------------------------- | :------ | :------ | :------ | :------ | | Enclosures | $1.3 | $0.9 | $4.5 | $5.1 | | Electrical & Fastening Solutions | — | $0.3 | $0.6 | $0.4 | | Thermal Management | — | $1.7 | $1.3 | $4.3 | | Other | $0.6 | $1.4 | $0.6 | $1.8 | | Total | $1.9| $4.3| $7.0| $11.6| Accrued Severance and Related Costs (in millions) | Metric | 9M 2021 | 9M 2020 | | :---------------- | :------ | :------ | | Beginning balance | $6.6 | $9.5 | | Costs incurred | $4.0 | $9.7 | | Cash payments | $(7.4) | $(11.6) | | Ending balance | $3.2 | $7.6 | 4. Earnings (Loss) Per Share Basic and diluted earnings per share significantly improved for both the three and nine months ended September 30, 2021, compared to the prior year, which had reported losses. The dilutive impact of stock options and restricted stock units was positive in 2021, unlike 2020 when they were anti-dilutive due to net losses Earnings (Loss) Per Ordinary Share (in millions, except per-share data) | Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :---------------------------------------- | :------ | :------ | :------ | :------ | | Net income (loss) | $74.3 | $(138.7)| $205.9 | $(94.3) | | Basic EPS | $0.44 | $(0.82) | $1.23 | $(0.56) | | Diluted EPS | $0.44 | $(0.82) | $1.21 | $(0.56) | | Weighted average ordinary shares outstanding (Basic) | 168.2 | 170.0 | 168.0 | 169.9 | | Dilutive impact of stock options, etc. | 1.9 | — | 1.5 | — | | Weighted average ordinary shares outstanding (Diluted) | 170.1 | 170.0 | 169.5 | 169.9 | - In 2020, 0.5 million (Q3) and 0.7 million (9M) outstanding stock options, restricted stock units, and performance share units were excluded from diluted EPS calculation due to their anti-dilutive effect resulting from net losses39 5. Acquisitions nVent completed two acquisitions in 2021: Vynckier Enclosure Systems, Inc. for $27.0 million and CIS Global LLC for $202.4 million, both strengthening the Enclosures segment. These acquisitions resulted in significant goodwill and identifiable intangible assets, with preliminary allocations subject to refinement - On April 1, 2021, nVent acquired Vynckier Enclosure Systems, Inc. for approximately $27.0 million in cash, adding non-metallic enclosures to its Enclosures segment42 - The Vynckier acquisition resulted in a preliminary goodwill allocation of $13.5 million and $6.1 million in definite-lived customer relationships43 - On June 30, 2021, nVent acquired CIS Global LLC for approximately $202.4 million in cash, enhancing its Enclosures segment with intelligent rack power distribution and server slides products44 - The CIS Global acquisition resulted in a preliminary goodwill allocation of $80.5 million, $78.0 million in customer relationships, and $24.5 million in developed technology45 6. Goodwill and Other Identifiable Intangible Assets Goodwill increased due to acquisitions in 2021, primarily within the Enclosures segment. Identifiable intangible assets also grew, mainly in customer relationships and proprietary technology. No goodwill impairment was recorded in 2021, contrasting with a significant impairment in 2020 related to Thermal Management Goodwill Carrying Amount by Segment (in millions) | Segment | December 31, 2020 | Acquisitions/Divestitures | Foreign Currency Translation/Other | September 30, 2021 | | :-------------------------- | :---------------- | :------------------------ | :--------------------------------- | :----------------- | | Enclosures | $332.1 | $93.9 | $(5.4) | $420.6 | | Electrical & Fastening Solutions | $1,051.9 | $0.1 | — | $1,052.0 | | Thermal Management | $714.2 | — | $0.4 | $714.6 | | Total goodwill | $2,098.2 | $94.0 | $(5.0) | $2,187.2 | Identifiable Intangible Assets (in millions) | Asset Type | September 30, 2021 Net | December 31, 2020 Net | | :------------------------------ | :--------------------- | :-------------------- | | Customer relationships | $859.3 | $824.9 | | Proprietary technology and patents | $30.2 | $7.5 | | Trade names (indefinite-life) | $273.1 | $273.1 | | Total intangibles | $1,162.6 | $1,105.5 | - Goodwill increased by $89.0 million from December 31, 2020, to September 30, 2021, primarily due to $94.0 million in acquisitions47 - No goodwill impairment expense was recorded in the three and nine months ended September 30, 2021, a significant improvement from the $212.3 million impairment in the Thermal Management unit in 202047 7. Supplemental Balance Sheet Information This note provides a detailed breakdown of inventories, other current assets, property, plant and equipment, other non-current assets, other current liabilities, and other non-current liabilities, highlighting changes between September 30, 2021, and December 31, 2020 Inventories (in millions) | Category | Sep 30, 2021 | Dec 31, 2020 | | :------------------ | :----------- | :----------- | | Raw materials and supplies | $98.3 | $67.3 | | Work-in-process | $32.9 | $24.4 | | Finished goods | $170.2 | $143.5 | | Total inventories | $301.4 | $235.2 | Other Current Assets (in millions) | Category | Sep 30, 2021 | Dec 31, 2020 | | :------------------ | :----------- | :----------- | | Prepaid expenses | $49.0 | $29.8 | | Prepaid income taxes | $17.2 | $13.4 | | Total other current assets | $113.8 | $92.9 | Other Current Liabilities (in millions) | Category | Sep 30, 2021 | Dec 31, 2020 | | :------------------ | :----------- | :----------- | | Dividends payable | $30.6 | $29.4 | | Accrued rebates | $69.5 | $40.5 | | Contract liabilities | $18.4 | $11.3 | | Accrued taxes payable | $22.4 | $32.8 | | Total other current liabilities | $228.4 | $188.5 | - Total inventories increased by $66.2 million, from $235.2 million at December 31, 2020, to $301.4 million at September 30, 202149 - Accrued rebates increased by $29.0 million, from $40.5 million at December 31, 2020, to $69.5 million at September 30, 202149 8. Derivatives and Financial Instruments The company uses derivative financial instruments, primarily foreign currency contracts, cross currency swaps, and interest rate swaps, to manage exposure to foreign currency exchange rates and interest rate fluctuations. These instruments are not designated as hedging instruments, except for certain cross currency and interest rate swaps accounted for as cash flow or net investment hedges - Outstanding foreign currency derivative contracts increased significantly from $41.8 million (gross notional) at December 31, 2020, to $154.4 million at September 30, 202153 - Cross currency swap agreements increased from $329.0 million to $380.0 million (combined notional amount) and are used as cash flow or net investment hedges54 - Deferred gains from interest rate swap activity increased from $2.1 million at December 31, 2020, to $12.3 million at September 30, 2021, recorded in Accumulated other comprehensive loss55 Fair Value of Financial Instruments (in millions) | Metric | Sep 30, 2021 Total | Dec 31, 2020 Total | | :-------------------------------- | :----------------- | :----------------- | | Foreign currency contract liabilities | $(6.8) | $(14.3) | | Foreign currency contract assets | $3.8 | $0.9 | | Interest rate swap assets | $12.3 | $2.1 | | Deferred compensation plan assets | $20.4 | $20.0 | | Total recurring fair value measurements | $29.7 | $8.7 | 9. Debt The company's total debt increased slightly, with an amended and restated credit agreement in September 2021 providing for a $300.0 million term loan facility and a $600.0 million revolving credit facility. The company remains in compliance with all financial covenants Debt Outstanding (in millions) | Debt Type | Sep 30, 2021 | Dec 31, 2020 | | :---------------------------- | :----------- | :----------- | | Revolving credit facility | $79.9 | $34.6 | | Senior notes - fixed rate (2023) | $300.0 | $300.0 | | Senior notes - fixed rate (2028) | $500.0 | $500.0 | | Term loan facility | $100.0 | $117.5 | | Total debt | $976.5 | $948.0 | | Less: Current maturities | $(5.0) | $(20.0) | | Long-term debt | $971.5 | $928.0 | - In September 2021, the company entered into an amended and restated credit agreement, establishing a five-year $300.0 million senior unsecured term loan facility and a five-year $600.0 million senior unsecured revolving credit facility6566 - As of September 30, 2021, $200.0 million borrowing capacity under the Term Loan Facility and $520.1 million under the Revolving Credit Facility remained available68 - The company was in compliance with all financial covenants in its debt agreements as of September 30, 202169 10. Income Taxes The effective income tax rate for the nine months ended September 30, 2021, was 14.3%, a significant change from the negative 42.9% in the prior year, primarily due to a one-time tax benefit and the absence of a valuation allowance on deferred tax assets recorded in 2020 Effective Income Tax Rate | Period | 9M 2021 | 9M 2020 | | :---------------- | :------ | :------ | | Effective tax rate | 14.3% | (42.9%) | - The 14.3% effective income tax rate in 2021 reflects a one-time tax benefit of $5.2 million related to a worthless stock deduction72 - In 2020, the negative effective tax rate was influenced by a $21.6 million income tax benefit from tax-deductible goodwill impairment and a $19.4 million valuation allowance on certain foreign deferred tax assets7273 11. Shareholders' Equity The Board of Directors authorized a new $300.0 million share repurchase program in May 2021, replacing prior authorizations. The company repurchased $20.0 million of ordinary shares in the first nine months of 2021 and continued to pay quarterly cash dividends - On May 14, 2021, the Board of Directors authorized a new $300.0 million share repurchase program (the "2021 Authorization"), which commenced on July 23, 2021, and expires on July 22, 202475 - During the nine months ended September 30, 2021, the company repurchased 0.9 million ordinary shares for $20.0 million under the expired 2018 Authorization76 - As of September 30, 2021, $300.0 million remained available for share repurchases under the 2021 Authorization76 - A quarterly cash dividend of $0.175 per ordinary share was declared on September 27, 2021, payable on November 5, 202177 12. Segment Information All three reportable segments—Enclosures, Electrical & Fastening Solutions, and Thermal Management—showed significant increases in net sales and segment income for both the three and nine months ended September 30, 2021, compared to the prior year. This growth was driven by higher sales volume and improved operational performance, with the absence of goodwill impairment charges Net Sales by Segment (in millions) | Segment | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :-------------------------- | :------ | :------ | :------ | :------ | | Enclosures | $335.2 | $244.7 | $912.6 | $722.5 | | Electrical & Fastening Solutions | $169.3 | $147.7 | $486.4 | $421.7 | | Thermal Management | $138.3 | $116.9 | $394.0 | $333.2 | | Total | $642.8| $509.3| $1,793.0| $1,477.4| Segment Income (Loss) by Segment (in millions) | Segment | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :-------------------------- | :------ | :------ | :------ | :------ | | Enclosures | $56.4 | $44.0 | $158.9 | $113.1 | | Electrical & Fastening Solutions | $48.4 | $40.7 | $136.5 | $108.9 | | Thermal Management | $31.6 | $25.5 | $77.5 | $60.2 | | Other | $(18.2) | $(9.3) | $(47.4) | $(31.5) | | Total | $118.2| $100.9| $325.5| $250.7| Reconciliation of Segment Income to Income (Loss) before Income Taxes (in millions) | Item | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :-------------------------- | :------ | :------ | :------ | :------ | | Segment income | $118.2 | $100.9 | $325.5 | $250.7 | | Impairment of goodwill | — | $(212.3)| — | $(212.3)| | Impairment of trade names | — | $(8.2) | — | $(8.2) | | Intangible amortization | $(17.8) | $(16.1) | $(49.7) | $(48.1) | | Restructuring and other | $(1.9) | $(5.4) | $(7.0) | $(15.9) | | Acquisition transaction and integration costs | $(0.8) | $(0.5) | $(2.4) | $(2.2) | | Net interest expense | $(8.2) | $(8.5) | $(24.4) | $(27.8) | | Other expense | $(0.6) | $(0.7) | $(1.8) | $(2.2) | | Income (loss) before income taxes | $88.9 | $(150.8)| $240.2| $(66.0)| - Segment income for Enclosures increased by 28.2% in Q3 2021 and 40.5% in 9M 202180 - The absence of goodwill and trade name impairment charges in 2021 significantly contributed to the improved income before income taxes compared to 202080 13. Commitments and Contingencies The company provides indemnifications for disposed businesses and product warranties, with maximum obligations generally not explicitly stated but historically not resulting in material payments. Outstanding bonds, letters of credit, and bank guarantees totaled $37.0 million as of September 30, 2021 - The company indemnifies purchasers for various potential liabilities related to sold businesses, with the overall amount of these obligations not reasonably estimable, but historically not resulting in significant payments8182 - Liability for service and product warranties was not material as of September 30, 2021, and December 31, 202084 - Outstanding bonds, letters of credit, and bank guarantees totaled $37.0 million at September 30, 2021, down from $43.8 million at December 31, 202085 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and future outlook. It details the impact of COVID-19, key trends, operating objectives, and a comprehensive analysis of consolidated and segment-specific results, as well as liquidity and capital resources Overview nVent Electric plc is a global provider of electrical connection and protection solutions across three segments: Enclosures, Electrical & Fastening Solutions, and Thermal Management. The company experienced significant economic recovery in 2021 following the COVID-19 pandemic, with organic sales increasing by 16% in the first nine months. Key operating objectives include differentiated revenue growth, technological innovation, operational excellence, and strategic capital deployment, while managing ongoing supply chain challenges and inflationary pressures - nVent is a leading global provider of electrical connection and protection solutions, with segments including Enclosures (51% of 9M 2021 revenue), Electrical & Fastening Solutions (27%), and Thermal Management (22%)8889 - Organic sales increased by 16% in the first nine months of 2021 compared to the same period in 2020, reflecting economic recovery from the COVID-19 pandemic94 - The company's 2021 operating objectives include achieving differentiated revenue growth through new products and expansion, optimizing technological capabilities, driving operating excellence, optimizing working capital, and deploying capital strategically100 - Ongoing challenges include supply chain issues, increased lead times, and inflationary increases in raw materials, logistics, and labor costs, which are expected to continue into 202296100 CONSOLIDATED RESULTS OF OPERATIONS Consolidated net sales increased significantly for both the three and nine months ended September 30, 2021, driven by strong organic growth (volume and price) and acquisitions. Gross profit margins improved, and operating income saw a substantial turnaround from a loss in 2020, primarily due to higher sales volume, pricing actions, and the absence of goodwill impairment Consolidated Financial Performance (in millions) | Metric (in millions) | Q3 2021 | Q3 2020 | $ Change (Q3) | % Change (Q3) | 9M 2021 | 9M 2020 | $ Change (9M) | % Change (9M) | | :------------------- | :------ | :------ | :------------ | :------------ | :------ | :------ | :------------ | :------------ | | Net sales | $642.8 | $509.3 | $133.5 | 26.2% | $1,793.0| $1,477.4| $315.6 | 21.4% | | Gross profit | $250.5 | $196.8 | $53.7 | 27.3% | $694.7 | $552.4 | $142.3 | 25.8% | | Gross profit % of net sales | 39.0% | 38.6% | N/A | 0.4 pts | 38.7% | 37.4% | N/A | 1.3 pts | | Operating income (loss) | $97.7 | $(141.6)| $239.3 | 169.0% | $266.4 | $(36.0) | $302.4 | 840.0% | | Net income (loss) | $74.3 | $(138.7)| $213.0 | 153.6% | $205.9 | $(94.3) | $300.2 | 318.3% | Components of Net Sales Change | Component | Q3 2021 vs Prior Year | 9M 2021 vs Prior Year | | :------------- | :-------------------- | :-------------------- | | Volume | 10.7% | 10.9% | | Price | 9.3% | 5.4% | | Organic growth | 20.0% | 16.3% | | Acquisition | 5.1% | 2.1% | | Currency | 1.1% | 3.0% | | Total | 26.2% | 21.4% | - The 26.2% and 21.4% increases in net sales for Q3 and 9M 2021, respectively, were primarily driven by organic sales growth (volume and price increases across industrial, commercial & residential, and infrastructure businesses) and contributions from the Vynckier and CIS Global acquisitions103104 - Gross profit as a percentage of net sales increased by 0.4 percentage points in Q3 2021 and 1.3 percentage points in 9M 2021, due to increased sales volume leverage, selective selling price increases, and savings from lean and supply management practices, partially offset by inflationary cost increases106108 - Operating income saw a significant turnaround, increasing by $239.3 million in Q3 2021 and $302.4 million in 9M 2021, largely due to the absence of the $220.5 million goodwill and trade names impairment expense recognized in Q3 2020101102107 SEGMENT RESULTS OF OPERATIONS All three segments—Enclosures, Electrical & Fastening Solutions, and Thermal Management—demonstrated strong net sales and segment income growth in 2021, driven by organic growth (volume and price) and acquisitions. While all segments faced inflationary cost pressures, strategic pricing and operational efficiencies helped improve segment income margins Enclosures The Enclosures segment experienced substantial growth in net sales and segment income, driven by strong organic growth across industrial, commercial & residential, energy, and infrastructure verticals, complemented by the Vynckier and CIS Global acquisitions. Despite inflationary pressures and increased incentive compensation, strategic pricing and sales volume leverage contributed to improved profitability over the nine-month period Enclosures Segment Performance (in millions) | Metric | Q3 2021 | Q3 2020 | % Change (Q3) | 9M 2021 | 9M 2020 | % Change (9M) | | :------------------ | :------ | :------ | :------------ | :------ | :------ | :------------ | | Net sales | $335.2 | $244.7 | 37.0% | $912.6 | $722.5 | 26.3% | | Segment income | $56.4 | $44.0 | 28.2% | $158.9 | $113.1 | 40.5% | | Segment income % of net sales | 16.8% | 18.0% | (1.2 pts) | 17.4% | 15.7% | 1.7 pts | Components of Enclosures Net Sales Change | Component | Q3 2021 vs Prior Year | 9M 2021 vs Prior Year | | :------------- | :-------------------- | :-------------------- | | Volume | 16.1% | 14.0% | | Price | 9.3% | 5.7% | | Organic growth | 25.4% | 19.7% | | Acquisition | 10.7% | 4.1% | | Currency | 0.9% | 2.5% | | Total | 37.0% | 26.3% | - Enclosures net sales increased by 37.0% in Q3 2021 and 26.3% in 9M 2021, driven by strong organic growth (25.4% in Q3, 19.7% in 9M) and acquisitions (10.7% in Q3, 4.1% in 9M)114 - Segment income as a percentage of net sales decreased by 1.2 percentage points in Q3 2021 due to supply chain challenges, inflationary costs, and higher incentive compensation, but increased by 1.7 percentage points in 9M 2021 due to selective pricing and sales volume leverage117118119 Electrical & Fastening Solutions The Electrical & Fastening Solutions segment reported solid increases in net sales and segment income, primarily from organic growth driven by volume and price increases across commercial & residential, infrastructure, and industrial businesses. Improved segment income margins were achieved through strategic pricing, sales volume leverage, and lean initiatives, despite ongoing supply chain and inflationary cost pressures Electrical & Fastening Solutions Segment Performance (in millions) | Metric | Q3 2021 | Q3 2020 | % Change (Q3) | 9M 2021 | 9M 2020 | % Change (9M) | | :------------------ | :------ | :------ | :------------ | :------ | :------ | :------------ | | Net sales | $169.3 | $147.7 | 14.6% | $486.4 | $421.7 | 15.3% | | Segment income | $48.4 | $40.7 | 19.0% | $136.5 | $108.9 | 25.3% | | Segment income % of net sales | 28.6% | 27.6% | 1.0 pts | 28.1% | 25.8% | 2.3 pts | Components of Electrical & Fastening Solutions Net Sales Change | Component | Q3 2021 vs Prior Year | 9M 2021 vs Prior Year | | :------------- | :-------------------- | :-------------------- | | Volume | 0.4% | 5.1% | | Price | 13.4% | 7.6% | | Organic growth | 13.8% | 12.7% | | Acquisition | — | 0.4% | | Currency | 0.8% | 2.2% | | Total | 14.6% | 15.3% | - Net sales increased by 14.6% in Q3 2021 and 15.3% in 9M 2021, primarily due to organic sales growth (13.8% in Q3, 12.7% in 9M) driven by volume and price increases120 - Segment income as a percentage of net sales increased by 1.0 percentage point in Q3 2021 and 2.3 percentage points in 9M 2021, attributed to selective pricing, higher sales volume leverage, and savings from restructuring and lean initiatives, despite supply chain and labor cost inflation121122124 Thermal Management The Thermal Management segment achieved strong net sales and segment income growth, driven by organic growth from increased volume and strategic pricing across industrial, commercial & residential, and energy verticals. Segment income margins improved due to sales volume leverage and lean initiatives, despite facing supply chain challenges and inflationary cost increases Thermal Management Segment Performance (in millions) | Metric | Q3 2021 | Q3 2020 | % Change (Q3) | 9M 2021 | 9M 2020 | % Change (9M) | | :------------------ | :------ | :------ | :------------ | :------ | :------ | :------------ | | Net sales | $138.3 | $116.9 | 18.3% | $394.0 | $333.2 | 18.2% | | Segment income | $31.6 | $25.5 | 23.9% | $77.5 | $60.2 | 28.7% | | Segment income % of net sales | 22.8% | 21.8% | 1.0 pts | 19.7% | 18.1% | 1.6 pts | Components of Thermal Management Net Sales Change | Component | Q3 2021 vs Prior Year | 9M 2021 vs Prior Year | | :------------- | :-------------------- | :-------------------- | | Volume | 12.3% | 11.6% | | Price | 4.1% | 2.3% | | Organic growth | 16.4% | 13.9% | | Currency | 1.9% | 4.3% | | Total | 18.3% | 18.2% | - Net sales increased by 18.3% in Q3 2021 and 18.2% in 9M 2021, driven by organic growth (16.4% in Q3, 13.9% in 9M) from increased volume and selective pricing126 - Segment income as a percentage of net sales increased by 1.0 percentage point in Q3 2021 and 1.6 percentage points in 9M 2021, primarily due to higher sales volume leverage, selective pricing, and savings from restructuring and lean initiatives, despite supply chain and labor cost inflation127128129 LIQUIDITY AND CAPITAL RESOURCES The company's liquidity is primarily supported by cash flows from operations, which increased in the first nine months of 2021. Investing activities saw a significant increase in cash usage due to acquisitions, while financing activities used less cash compared to the prior year, reflecting changes in debt and share repurchases. The company maintains investment-grade metrics and a solid liquidity position, with a new share repurchase authorization and consistent dividend payments - Net cash provided by operating activities increased to $258.1 million in the first nine months of 2021, up from $203.7 million in the prior year132 - Net cash used for investing activities significantly increased to $260.2 million in the first nine months of 2021, primarily due to $228.0 million in cash paid for the Vynckier and CIS Global acquisitions133 - Net cash used by financing activities decreased to $70.7 million in the first nine months of 2021, compared to $100.2 million in 2020, reflecting debt repayments, dividends, and share repurchases, partially offset by new debt proceeds134135 - The company paid $88.3 million in dividends ($0.525 per share) and repurchased $20.0 million of ordinary shares in the first nine months of 2021134149 Free Cash Flow (in millions) | Metric | 9M 2021 | 9M 2020 | | :-------------------------------------- | :------ | :------ | | Net cash provided by (used for) operating activities | $258.1 | $203.7 | | Capital expenditures | $(25.2) | $(25.4) | | Proceeds from sale of property and equipment | $0.1 | $1.5 | | Free cash flow | $233.0| $179.8| CRITICAL ACCOUNTING POLICIES There have been no material changes to the company's critical accounting policies and estimates from those disclosed in its 2020 Annual Report on Form 10-K - No material changes to critical accounting policies and estimates were reported for the quarter ended September 30, 2021, compared to the 2020 Annual Report on Form 10-K153 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in the company's market risk during the quarter ended September 30, 2021 - No material changes in market risk occurred during the quarter ended September 30, 2021154 ITEM 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2021, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred during the quarter Evaluation of Disclosure Controls and Procedures The company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2021, providing reasonable assurance for the reliability and timely reporting of financial information - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2021156 Changes in Internal Control over Financial Reporting There were no material changes in the company's internal control over financial reporting during the quarter ended September 30, 2021 - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2021157 PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and required exhibits ITEM 1. Legal Proceedings There have been no material developments regarding legal proceedings previously disclosed in the 2020 Annual Report on Form 10-K - No material developments in legal proceedings were reported for the quarter ended September 30, 2021160 ITEM 1A. Risk Factors No additional material changes to the risk factors previously disclosed in the 2020 Annual Report on Form 10-K were identified - No additional material changes to risk factors were reported for the quarter ended September 30, 2021161 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,930 ordinary shares during the third quarter of 2021, with $300.0 million remaining available under the 2021 Authorization for share repurchases Ordinary Share Purchases (Q3 2021) | Period | Total number of shares purchased | Average price paid per share | Dollar value of shares that may yet be purchased under the plans or programs | | :---------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------- | | July 1 - July 31, 2021 | 80 | $30.29 | $300,000,000 | | August 1 - August 28, 2021 | 245 | $33.04 | $300,000,000 | | August 29 - September 30, 2021 | 1,605 | $33.08 | $300,000,000 | | Total | 1,930 | — | — | - As of September 30, 2021, $300.0 million was available for share repurchases under the 2021 Authorization163 ITEM 6. Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including the Amended and Restated Credit Agreement, certifications from the CEO and CFO, and iXBRL financial data - Exhibits include the Amended and Restated Credit Agreement (Exhibit 4.1), Guarantors and Subsidiary Issuers (Exhibit 22), Certifications of Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2), and iXBRL formatted financial statements (Exhibit 101, 104)166 Signatures The report is duly signed on behalf of nVent Electric plc by its Executive Vice President and Chief Financial Officer, Sara E. Zawoyski, and Senior Vice President, Chief Accounting Officer and Treasurer, Randolph A. Wacker, on October 28, 2021 - The report was signed by Sara E. Zawoyski, Executive Vice President and Chief Financial Officer, and Randolph A. Wacker, Senior Vice President, Chief Accounting Officer and Treasurer, on October 28, 2021168169
nVent(NVT) - 2021 Q3 - Quarterly Report