What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-20 · 107 added, 145 removed, 391 unchanged (39% of the section changed)

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the outcome of litigation and governmental proceedings;

and the ability to achieve our long-term strategic operating and ESG goals.

and the ability to achieve our long-term strategic operating and sustainability goals and targets.

Additional information concerning these and other factors is contained in our filings with the U.S.

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Pentair assumes no obligation, and disclaims any obligation, to update the information contained in this report.

Pentair plc and its consolidated subsidiaries (“we,” “us,” “our,” “Pentair” or the “Company”) is a pure play water industrial manufacturing company comprised of three reporting segments:

Flow (formerly named the Industrial & Flow Technologies segment), Water Solutions and Pool.

Pentair plc and its consolidated subsidiaries (“we,” “us,” “our,” “Pentair” or the “Company”) is a pure play water industrial manufacturing company comprised of three reportable segments:

Flow, Water Solutions and Pool.

We classify our operations into business segments based primarily on types of products offered and markets served.

For the year ended December 31, 2023, the Flow, Water Solutions and Pool segments represented approximately 38%, 29% and 33% of total revenues, respectively.

For the year ended December 31, 2024, the Flow, Water Solutions and Pool reportable segments represented approximately 37%, 28% and 35% of total consolidated net sales, respectively.

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.

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.

On December 2, 2024, as part of our Pool reportable segment, we completed the acquisition of G & F Manufacturing, LLC (“G & F Manufacturing”) for $116.0 million in cash, net of cash acquired and subject to customary adjustments.

The net purchase price is comprised of an upfront cash payment of $108.0 million, subject to customary adjustments, and the estimated fair value at the acquisition date of a contingent earn-out liability based upon the achievement of certain defined operating results in the two years following the acquisition.

G & F Manufacturing manufactures and services pool heat pumps.

Key trends and uncertainties regarding our existing business

The following trends and uncertainties affected our financial performance in 2024, and are reasonably likely to impact our results in the future:

• In 2021, we created a transformation office and launched and committed resources to the Transformation Program designed to accelerate growth and drive margin expansion by driving operational excellence, reducing complexity and streamlining our processes.

• We have a Transformation Program designed to accelerate growth and drive margin expansion by driving operational excellence, reducing complexity and streamlining our processes.

During 2024, we made strategic progress on our Transformation Program initiatives with a focus on our four key themes of pricing excellence, strategic sourcing, operations excellence and organizational effectiveness.

We expect to continue to execute on our key Transformation Program initiatives to drive margin expansion and to continue to incur transformation costs in 2025 and beyond.

• In 2024, we began using 80/20 guiding principles to enable our Transformation Program.

This 80/20 analysis is expected to create value by focusing on key customers and products through quadrant-based strategies.

We expect the analysis to result in actions to improve operating performance by driving growth with our highest value customers, reducing lower margin sales and removing complexity in the future.

• In 2024, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.

We expect these actions to continue into 2025 and to drive margin growth.

• The current volatile market for commodities has the potential to drive price increases in our supply chain.

While we have taken pricing actions and implemented transformation initiatives that we expect to improve productivity and offset cost increases, we anticipate supply chain pressures and inflationary cost increases to continue into 2024.

• The Organization for Economic Co-operation and Development Pillar Two Model Rules (“Pillar Two”), for a global 15.0% minimum tax, are in the process of being adopted by a number of jurisdictions in which we operate.

In particular, the U.K.

has completed passage of legislation to comply with the Pillar Two framework, which became effective at the start of 2024.

We expect Pillar Two to have a negative 1.0% to 1.5% impact to our effective tax rate in 2024.

That impact could change in the future as we continue to evaluate the enacted legislative changes and as new guidance becomes available.

• During 2024, we experienced inflationary cost increases for certain raw materials as well as logistics and transportation costs.

The ongoing volatile market for commodities has the potential to continue to drive price increases in our supply chain.

In addition, the current U.S.

administration has recently implemented tariffs and has announced the possibility of implementing additional, or increasing current, tariffs;

these actions and any reactionary tariff adjustments by other countries may also contribute to inflationary cost increases.

As a result, we have taken pricing actions, which may continue going forward, and implemented transformation initiatives that we expect to improve productivity and offset cost increases.

We anticipate supply chain pressures and inflationary cost increases due to potential tariffs and pressure on global manufacturing to continue into 2025.

• The Organization for Economic Co-operation and Development Pillar Two Model Rules (“Pillar Two”), for a global 15.0% minimum tax, have been adopted by a number of jurisdictions in which we operate.

Pillar Two has negatively impacted our effective tax rate in 2024 and is likely to continue to impact our effective tax rate in the future.

We continue to evaluate the enacted legislative changes and new guidance as it becomes available.

• We have identified specific product and geographic market opportunities that we find attractive and continue to pursue, both within and outside the U.S.

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◦ Accelerating our performance with strategically-aligned mergers and acquisitions;

• Focusing growth initiatives that accelerate our investments in digital, innovation, technology and ESG;

• Continuing to implement our Transformation Program initiatives that will drive operational excellence, reduce complexity and improve our organizational structure;

• Focusing growth initiatives that accelerate our investments in digital, innovation, technology and sustainability;

• Continuing to implement our Transformation Program initiatives that will drive operational excellence, reduce complexity and improve our organizational structure, which includes the focus on 80/20 actions to drive profitable growth;

• Building a high performance growth culture and delivering on our commitments while living our Win Right values.

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% of net sales 19.7 % 18.0 % 14.4 % 1.7 pts 3.6 pts

Gain on sale of businesses — (0.2) (1.4) N.M.

Net interest expense 118.3 61.8 12.5 N.M.

Other expense (income)

Net interest expense 88.6 118.3 61.8 (25.1) % 91.4 %

Other (income) expense

(3.7) 2.0 (17.1) N.M.

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718.9 618.9 550.6 16.2 % 12.4 %

(Benefit) provision for income taxes

Provision (benefit) for income taxes

93.3 (4.0) 67.4 N.M.

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The 0.5 percent decrease in consolidated net sales in 2024 from 2023 was primarily the result of:

• decreased sales volume in our residential business within our Flow segment compared to the prior year;

• decreased sales volume in our residential business within our Water Solutions segment driven by lower demand compared to the prior year and certain business exits announced in the second half of 2022;

• decreased sales volume in our Pool segment primarily due to higher channel inventory and lower demand compared to the prior year.

• decreased sales volume in our residential flow and industrial solutions businesses within our Flow segment compared to the prior year;

• decreased sales volume in our Water Solutions segment compared to the prior year, in addition to a business exit in our residential business in 2024 and the completion of a large project in 2023 within our commercial business that did not recur in 2024;

• a product line exit in our Pool segment that occurred in 2024.

This decrease was partially offset by:

• increased selling prices to mitigate a rise in inflationary costs as well as lower rebates and incentives in our Pool segment;

• increased sales within our Water Solutions segment from the acquisition of Manitowoc Ice, which was completed in the third quarter of 2022;

• increased sales volume in our commercial business within our Water Solutions segment driven by demand and easing of supply chain pressures, which allowed increased productivity and delivery to market;

• increased sales volume in our commercial and industrial solutions businesses within our Flow segment compared to the prior year.

• increased selling prices across all of our segments to mitigate inflationary cost increases;

• increased sales volume in our commercial flow business within our Flow segment compared to the prior year;

• increased sales volume within our Pool segment due to higher demand compared to the prior year;

• increased sales due to the acquisition of G & F Manufacturing completed in the fourth quarter of 2024.

The 2.2 percentage point increase in gross profit as a percentage of net sales in 2024 from 2023 was primarily the result of:

• increased selling prices to mitigate impacts of inflation as well as lower rebates and incentives in our Pool segment;

• increased productivity within our Water Solutions segment as a result of certain transformation and restructuring initiatives;

• increased productivity in our Flow segment mainly driven by manufacturing leverage and transformation initiatives;

• inventory impairments and write-offs and certain accruals of $19.6 million, recorded in 2022 as part of exiting businesses in our Water Solutions segment;

• amortization of inventory fair market value step-up of $5.8 million in 2022, as a result of the Manitowoc Ice acquisition.

• increases in selling prices to mitigate impacts of inflationary costs;

• increased productivity mainly driven by transformation initiatives.

This increase was partially offset by:

• inflationary cost increases related to labor costs and certain raw materials;

• inventory impairments and write-offs of $7.0 million in 2023.

• asset impairment and write-offs of $11.3 million recorded in 2024, compared to $7.0 million recorded in 2023.

Selling, general and administrative (“SG&A”)

The 0.6 percentage point increase in SG&A expense as a percentage of net sales in 2024 from 2023 was driven by:

• higher employee compensation costs compared to the prior year;

• transformation costs of $52.0 million in 2024, compared to $44.3 million in 2023;

This increase was partially offset by:

• no deal-related costs and expenses in 2023, compared to $22.2 million in 2022;

• restructuring costs of $34.4 million in 2024, compared to $9.1 million in 2023;

• asset impairment charges of $6.3 million in 2024, compared to $0.9 million in 2023.

This increase was partially offset by:

• a reduction in our legal accrual of $7.5 million in 2024, compared to an increase in our legal accrual of $2.2 million in 2023.

Net interest expense

The increase in net interest expense in 2023 from 2022 was the result of:

• increased variable interest rates in 2023 compared to the prior year;

• increased debt due to the acquisition of Manitowoc Ice in the third quarter of 2022.

The 25.1 percent decrease in net interest expense in 2024 from 2023 was the result of:

• lower variable-rate debt compared to the prior year.

Provision for income taxes

The 13.6 percentage point increase in the effective tax rate in 2024 from 2023 was primarily due to:

• favorable impacts in the prior year that did not recur in the current year, including worthless stock deductions related to exiting certain businesses in our Water Solutions segment and increases in tax basis of assets located in foreign jurisdictions;

• withholding taxes primarily related to the repatriation of earnings in 2024 which did not occur in 2023;

• the unfavorable mix of global earnings.

This increase was partially offset by:

• the amortization of debt issuance costs of $9.0 million in 2022 related to financing commitments for a bridge loan facility established in connection with the acquisition of Manitowoc Ice that did not recur in 2023.

(Benefit) provision for income taxes

The 12.8 percentage point decrease in the effective tax rate in 2023 from 2022 was primarily due to:

• the favorable impact of worthless stock deductions related to exiting certain businesses in our Water Solutions segment;

• the favorable impact of discrete items primarily related to increases in tax basis in assets located in foreign jurisdictions;

• the favorable mix of global earnings.

• the favorable impact of discrete items that occurred during 2024 primarily related to changes in uncertain tax positions.

2023 Comparison with 2022

A discussion of changes in our consolidated results of operations, segment results of operations for the Flow (formerly named Industrial & Flow Technologies) segment and liquidity and capital resources from the year ended December 31, 2022 to December 31, 2021 can be found in Part II, ITEM 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 21, 2023.

A discussion of changes in our consolidated results of operations, segment results of operations and liquidity and capital resources from the year ended December 31, 2023 to December 31, 2022 can be found in Part II, ITEM 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 20, 2024.

However, such discussion is not incorporated by reference into, and does not constitute a part of, this Annual Report on Form 10-K.

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The summary that follows provides a discussion of the results of operations of our three reportable segments (Flow, Water Solutions and Pool).

Each of these segments is comprised of various product offerings that serve multiple end users.

We evaluate performance based on net sales and segment income and use a variety of ratios to measure performance of our reporting segments.

Segment income represents equity income of unconsolidated subsidiaries and operating income exclusive of intangible amortization, certain acquisition related expenses, costs of restructuring and transformation activities, impairments and other unusual non-operating items.

Each of these segments comprises various product offerings that serve multiple end users.

We evaluate performance based on net sales and reportable segment income (“segment income”) and use certain ratios, particularly return on sales, to measure performance of our reportable segments.

Segment income represents operating income of each reportable segment inclusive of equity income of unconsolidated subsidiaries and exclusive of intangible amortization, certain acquisition related expenses, costs of restructuring and transformation activities, impairments, legal accrual adjustments and settlements and other unusual non-operating items.

The net sales and segment income for Flow were as follows:

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Total (4.3) % 5.4 %

The 5.4 percent increase in net sales for Flow in 2023 from 2022 was primarily the result of:

The 4.3 percent decrease in net sales for Flow in 2024 from 2023 was primarily the result of:

• decreased sales volume in our residential flow and industrial solutions businesses compared to the prior year.

The decrease was partially offset by:

• increased selling prices to mitigate inflationary cost increases;

• increased sales volume in our commercial and industrial solutions businesses in 2023 compared to the prior year;

• favorable foreign currency effects in 2023 compared to the prior year.

The increase was partially offset by:

• decreased sales volume in our residential business in 2023 compared to the prior year.

• increased sales volume in our commercial flow business compared to the prior year.

Segment income

The components of the change in Flow segment income as a percentage of net sales from the prior period were as follows:

Growth/Price/Acquisition 5.6 pts 9.6 pts

2.5 pts 5.6 pts

Currency — (0.1)

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The 3.2 percentage point increase in segment income for Flow as a percentage of net sales in 2024 from 2023 was primarily the result of:

• increased productivity mainly driven by transformation initiatives;

• increased selling prices to mitigate impacts of inflation.

• increased productivity mainly driven by manufacturing leverage and transformation initiatives.

This increase was partially offset by:

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Total (3.9) % 19.3 %

The 19.3 percent increase in net sales for Water Solutions in 2023 from 2022 was primarily the result of:

• increased sales as a result of the acquisition of Manitowoc Ice, which was completed in the third quarter of 2022;

• higher sales volume in our commercial business driven by higher demand and easing of supply chain pressures, which allowed increased production and delivery to market;

The 3.9 percent decrease in net sales for Water Solutions in 2024 from 2023 was primarily the result of:

• decreased sales volume compared to the prior year, in addition to the completion of a large project in 2023 within our commercial business that did not recur in 2024;

• unfavorable foreign currency effects compared to the prior year;

• a business exit in our residential business that occurred in 2024.

This decrease was partially offset by:

• increased selling prices to mitigate inflationary cost increases.

This increase was partially offset by:

• decreased sales volume in our residential business driven by lower demand in 2023 compared to the prior year and certain business exits announced in the second half of 2022;

• unfavorable foreign currency effects.

The 28.2 percent increase in net sales for Water Solutions in 2022 from 2021 was primarily the result of:

• increased sales due to the acquisitions of Manitowoc Ice and Ken’s Beverage, Inc.

completed in the third quarter of 2022 and the second quarter of 2021, respectively;

• increased selling prices to mitigate impacts of inflation;

• increased sales volume in our commercial business in 2022 compared to the prior year.

This increase was partially offset by:

• decreased sales volume in our residential business in 2022 compared to the prior year;

• unfavorable foreign currency effects.

Segment income

The components of the change in Water Solutions segment income as a percentage of net sales from the prior period were as follows:

Growth/Price/Acquisition 7.8 pts 14.6 pts

Volume/Price/Acquisition/Divestiture

1.3 pts 7.8 pts

Currency 0.1 (0.5)

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The 1.6 percentage point increase in segment income for Water Solutions as a percentage of net sales in 2024 from 2023 was primarily the result of:

• increased sales as a result of the Manitowoc Ice acquisition;

• increased productivity mainly driven by transformation initiatives;

• increased selling prices to mitigate impacts of inflation.

• increased productivity in the residential business as a result of certain transformation and restructuring initiatives.

This increase was partially offset by:

• inflationary cost increases related to labor costs and certain raw materials.

• unfavorable foreign currency effects.

The 1.9 percentage point increase in segment income for Water Solutions as a percentage of net sales in 2022 from 2021 was primarily the result of:

• increased sales as a result of the Manitowoc Ice acquisition in the third quarter of 2022;

• increased selling prices to mitigate impacts of inflation.

This increase was partially offset by:

• inflationary cost increases due to high demand and limited supply of raw materials such as metals, resins and electronics along with increased logistics and labor costs;

• decreased productivity in our residential business due to decreased sales volume;

• unfavorable foreign currency effects.

The net sales and segment income for Pool were as follows:

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Total 6.9 % (17.7) %

The 17.7 percent decrease in net sales for Pool in 2023 from 2022 was primarily the result of:

• sales volume decreases primarily due to higher channel inventory and lower demand compared to the prior year.

This decrease was partially offset by:

• increased selling prices to mitigate a rise in inflationary costs as well as lower rebates and incentives.

The 6.9 percent increase in net sales for Pool in 2024 from 2023 was primarily the result of:

• increased selling prices to mitigate impacts of inflation;

• increased sales due to the acquisition of Pleatco Holdings, LLC completed in the fourth quarter of 2021.

• increased sales volume due to higher demand compared to the prior year;

• increased selling prices to mitigate inflationary cost increases;

• increased sales due to the acquisition of G & F Manufacturing completed in the fourth quarter of 2024.

This increase was partially offset by:

• decreased sales volume in 2022 compared to the prior year;

• unfavorable foreign currency effects.

• a product line exit that occurred in 2024.

Segment income

The components of the change in Pool segment income as a percentage of net sales from the prior period were as follows:

Growth/Price/Acquisition 5.3 pts 10.1 pts

Currency — 0.1

Volume/Price/Acquisition/Divestiture

2.2 pts 5.3 pts

Inflation (1.7) (2.9)

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The 2.2 percentage point increase in segment income for Pool as a percentage of net sales in 2024 from 2023 was primarily the result of:

• increased selling prices to mitigate impacts of inflation as well as lower rebates and incentives;

• increased productivity associated with benefits realized from our transformation initiatives;

• cost management initiatives associated with decreased sales volume.

• increased selling prices to mitigate impacts of inflation;

• increased productivity driven by transformation initiatives.

This increase was partially offset by:

• inflationary cost increases related to labor costs and certain raw materials.

The 0.5 percentage point decrease in segment income for Pool as a percentage of net sales in 2022 from 2021 was primarily the result of:

• inflationary cost increases due to high demand and limited supply of raw materials such as metals, resins and electronics along with increased logistics and labor costs;

• decreased productivity due to decreased sales volume.

This decrease was partially offset by:

• increases in selling prices to mitigate the impacts of inflation;

• increased sales as a result of the Pleatco Holdings, LLC acquisition in the fourth quarter of 2021.

BACKLOG OF ORDERS BY SEGMENT

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Our backlog of orders is dependent upon when customers place orders and is not necessarily an indicator of our expected results for our 2025 net sales.

The decrease in our overall backlog from the prior year was primarily driven by our backlog trending down to more historical levels as a result of increased manufacturing capacity and improved lead times within each of our reportable segments as well as timing of delivery of orders associated with certain advance sale (“early buy”) programs within our Pool segment.

LIQUIDITY AND CAPITAL RESOURCES

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In the second half of 2024, we funded our operations using our strong cash flow and revolving credit facility.

End-user demand for pool equipment in the Pool segment, water solution products in the Water Solutions segment, and residential water supply and agricultural products within the Flow segment follows warm weather trends, with seasonal highs from April to September.

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).

Demand for residential and agricultural water systems is also impacted by weather patterns, particularly by temperature, heavy flooding and droughts.

On December 2, 2024, as part of our Pool reportable segment, we completed the acquisition of G & F Manufacturing for approximately $116.0 million in cash, net of cash acquired, including an upfront cash payment of $108.0 million.

We funded the purchase price for this acquisition with cash on hand.

Summary of Cash Flows

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Operating activities

In 2024, net cash provided by operating activities of continuing operations primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization and asset impairment, of $757.8 million.

In 2023, net cash provided by operating activities of continuing operations primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization, asset impairment and deferred income taxes, of $653.1 million.

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Decreases in inventory and accounts payable were primarily related to supply chain efficiencies and improved lead times.

In 2022, net cash provided by operating activities of continuing operations primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization and asset impairment, of $615.4 million.

Additionally, we had a cash outflow of $218.7 million as a result of changes in net working capital, primarily due to increased inventory balances compared to December 31, 2021.

Inventory was higher due to inflationary impacts, continued supply chain inefficiencies and a rebalancing of inventory levels in the residential channel.

Investing activities

Net cash used for investing activities in 2024 primarily reflects net cash paid of $108.0 million for the acquisition of G & F Manufacturing, capital expenditures of $74.4 million and cash paid upon the settlement of net investment hedges of $5.8 million.

Net cash used for investing activities in 2023 primarily reflects capital expenditures of $76.0 million and cash paid upon the settlement of net investment hedges of $18.5 million, partially offset by proceeds from the sale of property and equipment of $5.6 million.

Net cash used for investing activities in 2022 primarily reflects the net cash paid of $1,579.5 million for the Manitowoc Ice acquisition and capital expenditures of $85.2 million, partially offset by cash received upon the settlement of net investment hedges of $78.9 million.

Financing activities

In 2024, net cash used for financing activities primarily relates to the repayment of $200.0 million of term loans under the Senior Credit Facility (as defined below), $162.5 million of principal payments on the Term Loan Facility (as defined below), dividend payments of $152.3 million and share repurchases of $150.0 million.

In 2023, net cash used for financing activities primarily relates to net repayments of revolving long-term debt of $320.0 million and dividend payments of $145.2 million.

In 2022, net cash provided by financing activities primarily relates to net borrowings of revolving long-term debt of $124.5 million, net proceeds received from the Term Loan Facility and issuance of the 2032 Senior Notes of $1,391.3 million used to finance the Manitowoc Ice acquisition and net cash receipts upon the settlement of cross currency swaps of $12.3 million, partially offset by dividend payments of $138.6 million, repayment of $88.3 million senior fixed notes, share repurchases of $50.0 million and payments of debt issuance costs of $15.8 million.

Free Cash Flow

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are parties to a credit agreement (the “Senior Credit Facility”), with Pentair as guarantor and PFSA and Pentair, Inc.

as borrowers, providing for a $900.0 million senior unsecured revolving credit facility and a $200.0 million senior unsecured term loan facility.

The revolving credit facility has a maturity date of December 16, 2026 and the term loan facility has a maturity date of December 16, 2024.

as borrowers, providing for a $900.0 million senior unsecured revolving credit facility.

During 2024, PFSA repaid $200.0 million of term loans under the Senior Credit Facility.

The revolving credit facility has a maturity date of December 16, 2026.

Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate, adjusted term secured overnight financing rate, adjusted euro interbank offered rate, adjusted daily simple secured overnight financing rate or central bank rate, plus, in each case, an applicable margin.

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In addition, PFSA has the option to request to increase the revolving credit facility and/or to enter into one or more additional tranches of term loans in an aggregate amount of up to $300.0 million, subject to customary conditions, including the commitment of the participating lenders.

In 2022, Pentair and PFSA entered into a senior unsecured term loan facility (the “Term Loan Facility”), with PFSA, as borrower, Pentair, as guarantor, and the lenders and agents party thereto, providing for an aggregate principal amount of $1.0 billion.

The Term Loan Facility has a maturity date of July 28, 2027, with required quarterly installment payments of $6.3 million which began on the last day of the third quarter of 2023 and increases to $12.5 million beginning with the last day of the third quarter of 2024.

In addition, Pentair and PFSA are parties to a senior unsecured term loan facility (the “Term Loan Facility”), with PFSA, as borrower, Pentair, as guarantor, providing for an aggregate principal amount of $1.0 billion.

The Term Loan Facility has a maturity date of July 28, 2027, with required quarterly installment payments of $6.3 million which began on the last day of the third quarter of 2023 and increased to $12.5 million on the last day of the third quarter of 2024.

During 2024, PFSA repaid the remaining $162.5 million of quarterly installments on the Term Loan Facility, such that PFSA is not required to make any further quarterly installment payments.

As of December 31, 2024, the remaining obligation of $825.0 million matures on July 28, 2027.

The Term Loan Facility bears interest at a rate equal to an alternate base rate, adjusted term secured overnight financing rate, or adjusted daily simple secured overnight financing rate, plus, in each case, an applicable margin.

The applicable margin is based on, at PFSA’s election, Pentair’s leverage level or PFSA’s public credit rating.

In addition to the Term Loan Facility, Pentair, as guarantor, and PFSA, as issuer, completed a public offering in 2022 of $400.0 million aggregate principal amount of 5.900% Senior Notes due 2032 (“2032 Senior Notes”).

We used the net proceeds from the Term Loan Facility and the issuance of the 2032 Senior Notes to finance a portion of the Manitowoc Ice acquisition purchase price and to pay related fees and expenses.

Our debt agreements contain various financial covenants, but the most restrictive covenants are contained in the Senior Credit Facility and the Term Loan Facility.

The Senior Credit Facility and the Term Loan Facility contain covenants requiring us not to permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash and cash equivalents in excess of $5.0 million but not to exceed $250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense (“EBITDA”) on the last day of any period of four consecutive fiscal quarters (each, a “testing period”) to exceed 3.75 to 1.00 (or, at PFSA’s election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection with certain material acquisitions) (the “Leverage Ratio”) and (ii) the ratio of our EBITDA to our consolidated interest expense, for the same period to be less than 3.00 to 1.00 as of the end of each fiscal quarter.

For purposes of the Leverage Ratio, the Senior Credit Facility and the Term

Loan Facility provide for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and liquidations during the period to which such calculation relates.

For purposes of the Leverage Ratio, the Senior Credit Facility and the Term Loan Facility provide for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and liquidations during the period to which such calculation relates.

In addition to the Senior Credit Facility and the Term Loan Facility, we have various other credit facilities with an aggregate availability of $20.8 million, of which there were no outstanding borrowings at December 31, 2024.

Borrowings under these credit facilities bear interest at variable rates.

We have $37.5 million of Term Loan Facility payments and $200.0 million of payments under the senior unsecured term loan facility, associated with the Senior Credit Facility, due in the next twelve months.

We have $19.3 million of senior notes maturing in the next twelve months.

We classified this debt as long-term as of December 31, 2024 as we have the intent and ability to refinance such obligations on a long-term basis under the revolving credit facility under the Senior Credit Facility.

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This authorization expires on December 31, 2025.

During the year ended December 31, 2022, we repurchased 1.0 million of our ordinary shares for $50.0 million.

During the year ended December 31, 2023, no ordinary shares were repurchased.

During the year ended December 31, 2024, we repurchased 1.6 million of our ordinary shares for $150.0 million.

As of December 31, 2024, we had $450.0 million available for share repurchases under this authorization.

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The following summarizes our material cash requirements from significant contractual obligations and purchase commitments that impact our liquidity as of December 31, 2024:

In millions Next

Twelve Months Greater Than Twelve Months Total

In millions Next Twelve Months Greater Than Twelve Months Total

Debt obligations (Note 8) $ 28.6 $ 1,634.5 $ 1,663.1

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Operating lease obligations, net of sublease rentals (Note 15) 31.2 110.6 141.8

Pension and other post-retirement plan contributions (Note 11) 9.5 79.9 89.4

Pension and other post-retirement plan benefit payments (Note 11)

9.0 72.7 81.7

Other purchase obligations

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The total gross liability for uncertain tax positions at December 31, 2024 was estimated to be $6.0 million.

We record penalties and interest related to unrecognized tax benefits in (Benefit) p rovision for income taxes and Net interest expense , respectively, which is consistent with our past practices.

As of December 31, 2023, we had recorded $0.3 million for the possible payment of penalties and $6.4 million related to the possible payment of interest.

We record penalties and interest related to unrecognized tax benefits in Provision (benefit) for income taxes and Net interest expense , respectively, which is consistent with our past practices.

As of December 31, 2024, we had recorded $3.9 million related to the possible payment of interest and recorded no liabilities for the possible payment of penalties.

COMMITMENTS AND CONTINGENCIES

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NEW ACCOUNTING STANDARDS

See ITEM 8, Note 1 of the Notes to Consolidated Financial Statements, included in this Form 10-K, for information pertaining to accounting standards to be adopted in the future.

See ITEM 8, Note 1 of the Notes to Consolidated Financial Statements, included in this Form 10-K, for information pertaining to accounting standards recently adopted or to be adopted in the future.

CRITICAL ACCOUNTING POLICIES

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However, we may elect to perform the quantitative goodwill impairment test even if no indications of a potential impairment exist.

During 2023, a quantitative assessment was performed.

The fair value of each reporting unit was determined using a discounted cash flow analysis and market approach.

Projecting discounted future cash flows requires us to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital and the appropriate discount rate.

Use of the market approach consists of comparisons to comparable publicly-traded companies that are similar in size and industry.

The non-recurring fair value measurement is a “Level 3” measurement under the fair value hierarchy.

For the 2023 annual impairment test, the estimated fair value significantly exceeded the carrying value in each of our reporting units, therefore, no impairment charge was required.

During 2024, a qualitative assessment was performed.

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We also consider the extent to which each of the adverse events and circumstances identified affect the comparison of the respective reporting unit’s fair value with its carrying amount.

We place more weight on the events and circumstances that most affect the respective reporting unit’s fair value or the carrying amount of its net assets.

We place more weight on the events and circumstances that most affect the respective reporting unit’s

fair value or the carrying amount of its net assets.

We consider positive and mitigating events and circumstances that may affect its determination of whether it is more likely than not that the fair value exceeds the carrying amount.

During 2023, a quantitative assessment was performed.

The fair value of each reporting unit was determined using a discounted cash flow analysis and market approach.

Use of the market approach consists of comparisons to comparable publicly-traded companies that are similar in size and industry.

For the 2023 annual impairment test, the estimated fair value significantly exceeded the carrying value in each of our reporting units, therefore, no impairment charge was required.

The non-recurring fair value measurement is a “Level 3” measurement under the fair value hierarchy described in ITEM 8, Note 9 of the Notes to Consolidated Financial Statements.

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Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment charge of $2.7 million was recorded in 2022 related to the write-off of a proprietary technology intangible asset as a result of restructuring initiatives implemented in the fourth quarter of 2022.

The impairment charge was recorded in Selling, general and administrative in our Consolidated Statements of Operations and Comprehensive Income.

No impairment charges associated with identifiable intangibles with finite lives were recognized in 2023.

No impairment charges associated with identifiable intangibles with finite lives were recognized in 2024 or 2023.

Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant.

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No impairment charges were recognized in 2024 or 2023 as a result of our annual impairment assessment.

Business combinations

Assets and liabilities acquired in a business combination are recorded at their estimated fair values at the acquisition date.

Goodwill is recorded when the purchase price exceeds the estimated fair value of the net identifiable tangible and intangible assets acquired.

Estimates of intangible asset fair value represent management’s best estimate of assumptions and about future events and uncertainties, including significant judgments related to future cash flows, discount rates, margin and revenue growth assumptions, royalty rates, customer attrition rates, useful lives and others.

Inputs used are generally obtained from historical data supplemented by current and anticipated market conditions and growth rates.

If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could result in a possible impairment of the intangible assets and goodwill or require acceleration of the amortization expense of finite-lived intangible assets.

Allocations of the purchase price for acquisitions are based on estimates of the fair value of the net assets acquired and are subject to adjustment upon finalization of the purchase price allocation.

During this measurement period, we will adjust assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date.

All changes that do not qualify as measurement period adjustments are included in current period earnings.

Pension and other post-retirement plans

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This accounting method also results in the potential for volatile and difficult to forecast mark-to-market adjustments.

Mark-to-market adjustments resulted in a pre-tax loss of $6.1 million in 2023 and pre-tax gains of $17.5 million and $2.4 million in 2022 and 2021, respectively.

Mark-to-market adjustments resulted in pre-tax gains of $5.3 million and $17.5 million in 2024 and 2022, respectively, and a pre-tax loss of $6.1 million in 2023.

The remaining components of pension expense, including service and interest costs and the expected return on plan assets, are recorded on a quarterly basis as ongoing pension expense.

Discount rates

The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year based on our December 31 measurement date.

The discount rate reflects the current rate at which the pension liabilities could be effectively settled.

The discount rate was determined by matching our expected benefit payments to payments from a stream of bonds rated AA or higher available in the marketplace.

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A 100 basis point increase or decrease in the discount rates used to measure our U.S.

defined-benefit pension and other post-retirement plans would result in an approximately $7 million increase or $6 million decrease in our total projected benefit obligation.

defined-benefit pension and other post-retirement plans would result in an approximate decrease of $5 million or increase of $6 million in our total projected benefit obligation.

A 100 basis point increase or decrease in the assumed rate of return on pension assets or discount rates for our U.S.

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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 7. Management’s Discussion and Analysis