What changed in this filing

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Item 1. Business

2024-02-20 compared with 2023-02-21 · 66 added, 75 removed, 115 unchanged (55% of the section changed)

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At Pentair, we help the world sustainably move, improve and enjoy water, life’s most essential resource.

From our residential and commercial water solutions to industrial water management and everything in between, Pentair is focused on creating a better world for people and our planet through smart, sustainable water solutions.

From our residential and commercial water solutions to industrial water managemen t and everything in between, Pentair is focused on smart, sustainable water solutions that help people and the planet thrive.

Pentair strategy

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Although our jurisdiction of organization is Ireland, we manage our affairs so that we are centrally managed and controlled in the United Kingdom (the “U.K.”) and therefore have our tax residency in the U.K.

On July 28, 2022, as part of our Consumer Solutions reporting segment, we acquired the issued and outstanding equity securities of certain subsidiaries of Welbilt, Inc.

In July 2022, as part of our Water Solutions reporting segment, we acquired the issued and outstanding equity securities of certain subsidiaries of Welbilt, Inc.

(“Welbilt”) and certain other assets, rights, and properties, and assumed certain liabilities, comprising Welbilt’s Manitowoc Ice business (“Manitowoc Ice”), for approximately $1.6 billion in cash.

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BUSINESS AND PRODUCTS

Pentair is comprised of three reportable business segments:

Flow, Water Solutions and Pool.

The following is a brief description of each of the Company’s reportable segments and business activities.

Effective January 1, 2023, we reorganized our segments, going from two segments to three with the three segments being Pool, Water Solutions and Industrial & Flow Technologies.

The discussions below that speak to historical periods refer to the prior segments, while statements about present and future periods refer to the businesses underlying those segments and carry forward with those businesses (including our customers, seasonality and competition) in their re-segmented form.

Additional information regarding this re-segmentation is found below under the section titled “New Segmentation.”

Consumer Solutions

The Consumer Solutions 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, commercial ice machines, 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 food service operations.

The Flow segment (formerly named the Industrial & Flow Technologies segment) delivers water where it is needed, when it is needed, more efficiently and transforms waste into value.

This segment designs, 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, 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.

For the fiscal year ended December 31, 2023, our residential and irrigation flow businesses, which sell pumps focused on residential and agriculture, comprised approximately 39% of Flow sales.

Another approximately 27% of Flow sales were from the commercial & infrastructure flow businesses, which sell larger pumps focused on fire suppression, wastewater and flood control.

The remaining approximately 34% of Flow sales were from the industrial solutions business, comprised of applications focused on industrial process filtration and sustainable gas.

Flow brand names include Pentair Flow, Aurora, Berkeley, Codeline, Fairbanks-Nijhuis, Haffmans, Hydromatic, Hypro, Jung Pumpen, Myers, Sta-Rite, Shurflo, Südmo and X-Flow.

Flow customers include businesses engaged with end users, and wholesale and retail distribution in the residential, commercial, food and beverage, and industrial vertical markets.

We have historically experienced increased demand following warm weather trends for residential water supply and agricultural products.

Such demand historically has been at seasonal highs from April to August.

Seasonal effects may vary from year to year and are impacted by weather patterns, particularly by temperatures, heavy flooding and droughts.

Flow faces numerous domestic and international competitors, some of which have substantially greater resources directed to the vertical markets in which we compete.

Competition focuses on brand names, product performance (including energy-efficient offerings and required specifications), quality, service and price.

We compete by offering a wide variety of innovative and high-quality products, which are competitively priced.

Water Solutions

The Water Solutions segment provides great tasting, higher-quality water and ice while helping people use water more productively.

This segment designs, manufactures and sells commercial and residential water treatment products and systems including pressure tanks, control valves, activated carbon products, commercial ice machines, conventional filtration products, and point-of-entry and point-of-use water treatment systems.

These water treatment products and systems are used in residential whole home water filtration, drinking water filtration and water softening solutions in addition to commercial water management and filtration in foodservice operations.

In addition, our water solutions business also provides installation and preventative services for water management solutions for commercial operators.

The primary focus of this segment is business-to-consumer.

For the fiscal year ended December 31, 2022, our pool business comprised approximately 60% of the Consumer Solutions sales.

The pool business is a leader in North American pool equipment, serving an end market that is primarily replacement.

The other approximately 40% of sales were from the water treatment and water solutions businesses, which sell residential and commercial components, residential systems, commercial systems and commercial ice machines.

Consumer Solutions brand names include Everpure, KBI, Kreepy Krauly, Manitowoc Ice, Pleatco, RainSoft and Sta-Rite.

Consumer Solutions customers include businesses engaged in wholesale and retail distribution in the residential and commercial vertical markets.

For the fiscal year ended December 31, 2023, our commercial business, which products include pressure tanks, control valves, activated carbon products, commercial ice machines, conventional filtration products, and commercial point-of-entry and point-of-use water treatment systems, comprised approximately 67% of Water Solutions sales.

In addition, our commercial business also provides installation and preventative services for water management solutions for commercial operators.

The other approximately 33% of Water Solutions sales were associated with our residential business, which primarily focuses on products associated with residential point of entry and point of use filtration and softening systems.

Water Solutions brand names include Pentair Water Solutions, Everpure, Fleck, KBI, Manitowoc Ice, Pentek and RainSoft.

Water Solutions customers include businesses engaged in wholesale and retail distribution in the residential, commercial and food and beverage vertical markets.

Customers also include end users, consumers, commercial operators and original equipment manufacturers.

One customer in the Consumer Solutions’ pool business represented approximately 20% of our consolidated net sales in 2022 and 2021.

We have historically experienced seasonal demand with several end-customers and end-users within Consumer Solutions.

We experience seasonal demand with several end customers and end users within Water Solutions.

End-user demand for water solution products generally follows warm weather trends and is at seasonal highs from April to September.

Water Solutions faces numerous domestic and international competitors, some of which have substantially greater resources directed to the vertical markets in which we compete.

Competition focuses on brand names, product performance (including required specifications), quality and price.

We compete by offering a wide variety of innovative and high-quality products, which are competitively priced.

We believe our distribution channels and reputation for quality also provide us a competitive advantage.

The Pool segment provides innovative, energy-efficient pool solutions to help people more sustainably enjoy water.

This segment designs, manufactures and sells a complete line of energy-efficient residential and commercial pool equipment and accessories including pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment and pool accessories.

Applications for our pool products include residential and commercial pool maintenance, pool repair, renovation, service and construction and aquaculture solutions.

The primary brand names associated with the Pool segment are Pentair Pool, Kreepy Krauly, Pleatco and Sta-Rite.

Pool customers include businesses engaged in wholesale and retail distribution in the residential and commercial vertical markets.

Customers in the residential and commercial verticals also include end users and consumers.

One customer in the Pool business represented approximately 15% and 20% of our consolidated net sales in 2023 and 2022, respectively.

We have historically experienced seasonal demand with several end customers and end users.

End-user demand for pool equipment follows warm weather trends and historically has been at seasonal highs from April to August.

The magnitude of the sales spike has historically been partially mitigated by employing some advance sale “early buy” programs (generally including extended payment terms and/or additional discounts).

Consumer Solutions faces numerous domestic and international competitors, some of which have substantially greater resources directed to the vertical markets in which we compete.

Pool faces numerous domestic and international competitors, some of which have substantially greater resources directed to the vertical markets in which we compete.

Competition focuses on brand names, product performance (including energy-efficient offerings and required specifications), quality, service and price.

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We believe our distribution channels and reputation for quality also provide us a competitive advantage.

Industrial & Flow Technologies

The Industrial & Flow Technologies segment manufactures and sells a variety of fluid treatment products (advanced membrane filtration, separation systems, membrane bioreactors), pumps (water supply pumps, water disposal pumps, solid handling pumps, fluid transfer pumps, turbine pumps), valves, and spray nozzles as well as systems combining these products (process filtration systems, gas recovery solutions).

These products and systems serve the global residential, commercial, industrial, agricultural and infrastructure vertical markets.

They are used in a range of applications, food and beverage, fluid separation technologies (oil and gas and other industries), water and wastewater treatment, water wells, pressure boosting, fire suppression, flood control, agricultural irrigation, crop spray and fluid circulation and transfer.

The primary focus of this segment is business-to-business.

For the fiscal year ended December 31, 2022, our residential and irrigation flow businesses comprised approximately 45% of the Industrial & Flow Technologies sales.

The residential and irrigation flow businesses sell pumps focused on residential and agriculture.

Another approximately 25% of sales were from the commercial & infrastructure flow businesses, which sell larger pumps focused on fire suppression, waste water and flood control.

The remaining approximately 30% of sales were from the industrial solutions business, comprised of applications focused on industrial process filtration and sustainable gas.

Industrial & Flow Technologies brand names include Pentair, Aurora, Berkeley, Codeline, Fairbanks-Nijhuis, Haffmans, Hydromatic, Hypro, Jung Pumpen, Myers, Sta-Rite, Shurflo, Südmo and X-Flow.

Industrial & Flow Technologies customers include businesses engaged with end users, and wholesale and retail distribution in the residential, commercial, food & beverage and industrial vertical markets.

We have historically experienced increased demand for residential water supply and irrigation pumps following weather trends, which historically has been at seasonal highs from April to August.

Seasonal effects may vary from year to year and are impacted by weather patterns, particularly by temperatures, heavy flooding and droughts.

Industrial & Flow Technologies faces numerous domestic and international competitors, some of which have substantially greater resources directed to the vertical markets in which we compete.

Competition focuses on brand names, product performance (including energy-efficient offerings and required specifications), quality, service and price.

We compete by offering a wide variety of innovative and high-quality products, which are competitively priced.

NEW SEGMENTATION

Effective January 1, 2023, we reorganized our reporting segments to reflect how we are managing our business beginning in 2023.

We believe the new alignment into three segments, Pool, Water Solutions and Industrial & Flow Technologies, will help us accelerate our efforts to improve customer experiences, differentiate our products and drive profitability for our shareholders.

As part of this reorganization, the legacy Consumer Solutions segment was divided into a Pool segment and a Water Solutions segment.

The Industrial & Flow Technologies segment remains the same.

All segment information presented throughout this Annual Report on Form 10-K, with the exception of the table below, was prepared based on the reporting segments in place during 2022.

The below table presents net sales and segment income under the revised reporting segments (Pool, Water Solutions, and Industrial & Flow Technologies) for the years ended December 31, 2022, 2021 and 2020.

In millions 2022 2021 2020

Pool $ 1,632.7 $ 1,572.0 $ 1,123.5

Water Solutions 986.8 769.9 619.4

Industrial & Flow Technologies 1,500.8 1,421.4 1,273.6

Other 1.5 1.5 1.3

Consolidated $ 4,121.8 $ 3,764.8 $ 3,017.8

Segment income (loss)

Pool $ 462.1 $ 452.7 $ 321.4

Water Solutions 149.0 101.7 97.7

Industrial & Flow Technologies 242.3 213.3 164.6

Other (85.7) (81.8) (66.1)

Consolidated $ 767.7 $ 685.9 $ 517.6

INFORMATION REGARDING ALL REPORTABLE SEGMENTS

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Raw materials

The principal materials we use in manufacturing our products are mild steel, stainless steel, electronic components (including drives and motors), plastics (resins, fiberglass, epoxies), copper and paint (powder and liquid).

In addition to the purchase of raw materials, we purchase some finished goods for distribution for resale.

We purchase the materials we use in various manufacturing processes on the open market, and the majority are available through multiple sources.

Supplier capabilities were stressed in 2022 and 2021 compared to previous years as a result of various degrees of supply chain challenges, including reduced labor availability and increased lead times for electronic components and other raw materials due to availability constraints and high demand.

We purchase the materials we use in various manufacturing processes on the open market.

We believe the majority of such materials are available through multiple sources and in adequate supply.

We have certain long-term commitments, principally price commitments, for the purchase of various component parts and raw materials and continue to work with our suppliers to maintain delivery continuity.

Alternate sources of supply are available for most materials and we believe that the termination of any of these commitments would not have a material adverse effect on our financial position, results of operations or cash flows.

Global container transportation delays may also affect raw material availability and lead times.

Certain commodities, such as metals and resins, are subject to commodity market and duty-driven price fluctuations.

We manage these fluctuations through several mechanisms, including long-term agreements with price adjustment clauses for significant commodity market movements in certain circumstances.

Prices for raw materials, such as metals, resins and electronics, may trend higher in the near future due to the existing inflationary market trends.

Prices for raw materials, such as metals, may trend higher in the near future due to the volatile market trends.

Intellectual property

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Engaging our employees and developing their careers is important to our long-term success and ties directly to our Win Right culture and values.

We engage with our employees and gather feedback about our employee programs, practices and policies through various approaches that include:

town hall meetings where Pentair leaders share strategies and perspectives;

quarterly leadership webcasts to help ensure our results and expectations are clearly communicated;

an annual global leadership meeting to help drive growth and productivity initiatives and share best practices;

and a feedback feature on our employee intranet.

In addition, we periodically conduct employee engagement and culture surveys to gauge the level of engagement and actions needed on culture, engagement and retention.

We support our Win Right culture by providing dedicated culture training to all our employees globally.

We engage with our employees and gather feedback about our employee programs, practices and policies through various approaches that include town hall meetings where Pentair leaders share strategies and perspectives;

quarterly leadership meetings to help ensure our results and expectations are clearly communicated;

and an annual senior leadership meeting to help drive growth and productivity initiatives, share best practices, and invest in our leaders.

In addition, we conduct employee engagement and pulse surveys multiple times a year to gauge the level of engagement and actions needed on culture, the business, employee experience and retention.

We provide those insights transparently down to the manager level to drive quick insights, development and action planning to drive change.

Training and development

To support employees in their career journey, we have developed and shared through our employee intranet a number of tools and resources.

These resources include:

live training sessions;

To support employees in their career journey, we have developed and shared, through our dedicated development site, a number of tools and resources.

We recently rolled out career pathing and development resources for all functions throughout Pentair.

We support development annually with a dedicated career week, individual development planning and targeted development experiences supported through live training sessions;

on-demand eLearning and virtual classrooms;

and downloadable materials.

Additionally, our annual talent management process allows employees to build development plans with their leaders to advance their careers.

Our talent development efforts span across all levels of our organization, including our campus Leadership Development Program, a 36-month program in which future leaders participate in rotations intended to develop their capabilities through organization-wide exposure, and our Growth Manager development programs that prepare our new and experienced managers to be more effective and inclusive leaders at Pentair.

Additionally, our annual talent management process supports employees to set objectives, receive feedback and development, and build development plans with their leaders.

Our talent development efforts span across all levels of our organization, including our early career Leadership Development Program, a 36-month program in which future leaders participate in rotations intended to develop their capabilities through organization-wide exposure, and our Growth Manager development programs that prepare our new and experienced managers to be more effective and inclusive leaders at Pentair.

Inclusion and diversity

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Additionally, each site maintains a confidential reporting process, and we encourage the use of the Ethics Hotline for employees to report anonymously potential safety concerns.

All locations, enterprise wide, must meet and/or exceed regulatory agency standards as applicable to each plant’s location.

All locations, enterprise wide, must meet and/or exceed regulatory agency standards as applicable to each site’s location.

Compensation and benefits

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ESG (Environmental, Social and Governance) Activities

As a leading provider of water treatment and sustainable solutions and with a foundation of Win Right values, we recognize that the work we do and the products and services we provide help to improve lives and the environment around the world.

As a leading provider of smart, sustainable water solutions and with a foundation of Win Right values, we recognize that the work we do and the products and services we provide help to improve lives and the environment around the world.

Pentair strives to be a positive influence on the social and environmental issues of today.

As we progress, we are focused on building on our Win Right values and culture by further contributing to the development of a sustainable and responsible society that we believe will also drive our future growth.

We are also focused on further integrating our ESG goals throughout our business by creating broad accountability for our social responsibility strategy and creating shared commitments and targets.

We are focused on building on our Win Right values and culture by further contributing to the development of a sustainable and responsible society that we believe will also drive our future growth.

We are also focused on further integrating our sustainability goals throughout our business by creating accountability for our social responsibility strategy and shared commitments and targets.

We have established a formal social responsibility program to further advance our social responsibility goals.

In 2020, Pentair completed a formal ESG assessment to identify ESG topics of importance to our shareholders, customers, suppliers, employees and communities.

Through engagement with these stakeholders, internal business leaders and subject matter experts, we identified ESG goals, which ultimately culminated into Pentair’s Social Responsibility Targets, which we announced in 2021.

Through engagement with these stakeholders, internal business leaders and subject matter experts, we identified key ESG topic areas, which ultimately culminated in Pentair’s Social Responsibility Strategic Targets (“Strategic Targets”), which we announced in 2021.

In 2023, Pentair completed a refreshed ESG assessment in alignment with the European Union’s Corporate Sustainability Reporting Directive (“CSRD”).

This assessment supported the topics focused on for our Strategic Targets and they remain in effect.

We expect to use the results of our updated ESG assessment for continued sustainability strategic planning and risk management, as well as to determine future disclosure requirements under CSRD.

Annually, we publish a corporate responsibility report on our ESG and social responsibility activities and accomplishments, which can be found on our corporate website, and which is not incorporated by reference into this Annual Report on Form 10-K.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business