What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-22 compared with 2024-10-22 · 154 added, 205 removed, 223 unchanged (62% of the section changed)

18 unchanged sentences

the outcome of litigation and governmental proceedings;

and the ability to achieve our long-term strategic operating and environmental, social and governance (“ESG”) goals and targets.

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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Whether it’s moving, improving or helping people enjoy water, we help manage life’s most essential resource.

We are composed of three reporting segments:

We are comprised of three reportable segments:

Flow, Water Solutions and Pool.

For the first nine months of 2024, the Flow, Water Solutions and Pool segments represented approximately 37%, 28% and 35% of total revenues, respectively.

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

For the first three months of 2025, the Flow, Water Solutions and Pool reportable segments represented approximately 36%, 26% and 38% of total consolidated net sales, respectively.

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

• Flow — The focus of this segment is to deliver water where it is needed, when it is needed, more efficiently and to transform waste into value.

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

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 the first nine months of 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.

During 2023 and the first nine months of 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.

The following trends and uncertainties affected our financial performance in the first three months of 2025 and are reasonably likely to impact our results in the future:

• 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 and the first three months of 2025, 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 throughout the remainder of 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 the right customers and products through quadrant based strategies.

We expect the analysis to result in actions to improve operating performance by reducing lower margin sales and removing complexity in the future.

• During 2023 and the first nine months of 2024, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.

• During 2024 and the first three months of 2025, we implemented 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.

• During 2024 and the first three months of 2025, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.

We expect these actions to continue throughout the remainder of 2025 and to drive margin growth.

• During 2023 and the first nine months of 2024, we experienced inflationary cost increases for certain raw materials as well as logistics and transportation costs.

The current volatile market for commodities has the potential to continue 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 inflationary cost increases to continue for the remainder of 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.

Pillar Two has negatively impacted 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 and the first three months of 2025, 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.

We expect these actions and reactionary tariff adjustments by other countries to impact our business and contribute to inflationary cost increases.

As a result, we have taken actions to mitigate the impact of tariffs such as pricing increases, inventory pre-buys and capping orders to manage supply chain, inventory and production, which may continue going forward.

In addition, our Transformation Program initiatives are intended to improve productivity and offset cost increases.

We anticipate supply chain pressures as well as inflationary cost increases due to these tariffs and any resulting impact on macroeconomic conditions and our business to continue throughout the remainder of 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 2025 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;

• 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;

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CONSOLIDATED RESULTS OF OPERATIONS

The consolidated results of operations for the three months ended September 30, 2024 and 2023 were as follows:

The consolidated results of operations for the three months ended March 31, 2025 and 2024 were as follows:

Three months ended

In millions September 30,

2024 September 30,

Change % / Point

Net sales $ 993.4 $ 1,008.8 $ (15.4) (1.5) %

Cost of goods sold 600.2 637.0 (36.8) (5.8) %

Gross profit 393.2 371.8 21.4 5.8 %

% of net sales

39.6 % 36.9 % 2.7 pts

Selling, general and administrative

190.4 166.2 24.2 14.6 %

% of net sales

19.2 % 16.5 % 2.7 pts

Research and development

22.9 25.5 (2.6) (10.2) %

% of net sales 2.3 % 2.5 % (0.2) pts

Operating income 179.9 180.1 (0.2) (0.1) %

% of net sales 18.1 % 17.9 % 0.2 pts

(0.1) (0.3) 0.2 N.M.

Net interest expense 19.8 27.5 (7.7) (28.0) %

Income from continuing operations before income taxes 160.2 152.9 7.3 4.8 %

Provision for income taxes

20.6 20.8 (0.2) (1.0) %

Effective tax rate 12.9 % 13.6 % (0.7) pts

Not Meaningful

The consolidated results of operations for the nine months ended September 30, 2024 and 2023 were as follows:

Nine months ended

In millions September 30,

2024 September 30,

In millions March 31,

2025 March 31,

Change % / Point

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% of net sales 20.1 % 17.8 % 2.3 pts

Other expense (income) 0.8 (4.4) 5.2 N.M.

Other expense

0.5 0.1 0.4 N.M.

Net interest expense 19.7 27.3 (7.6) (27.8) %

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The components of the consolidated net sales change from the prior period were as follows:

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

Three months ended March 31, 2025

over the prior year period

Volume (2.8) %

Price 2.2 2.0

Core growth (0.8)

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Total (0.7) %

The 1.5 and 0.3 percent decreases in net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

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

• decreased sales volume within our commercial and residential businesses in our Water Solutions segment 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 the first nine months of 2024;

• a product line exit in our Pool segment that occurred in the first nine months of 2024.

These decreases were partially offset by:

• increased selling prices in our Flow segment, in our commercial business within our Water Solutions segment and in our Pool segment 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;

• favorable foreign currency effects compared to the third quarter of the prior year.

The 2.7 and 2.3 percentage point increases in gross profit as a percentage of net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

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

• increased productivity mainly driven by transformation initiatives across all segments and manufacturing leverage within our Pool segment;

• asset impairment and write-offs of $3.5 million recorded in the first nine months of 2024, compared to $5.3 million in the first nine months of 2023.

These increases were partially offset by:

The 0.7 percent decrease in net sales in the first quarter of 2025 from 2024 was primarily driven by:

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

• decreased sales volume within our Water Solutions segment compared to the same period of the prior year;

• unfavorable foreign currency effects compared to the first quarter of the prior year;

• a business exit in our residential business in our Water Solutions segment that occurred in the fourth quarter of 2024.

This decrease was partially offset by:

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

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

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

• increased sales volume within our Pool segment due to higher demand compared to the same period of the prior year.

The 1.5 percentage point increase in gross profit as a percentage of net sales in the first quarter of 2025 from 2024 was primarily driven by:

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

• increased productivity mainly driven by transformation initiatives across all segments.

This increase was partially offset by:

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

• asset impairment and write-offs of $5.2 million recorded in the first quarter of 2025, compared to $0.8 million in the first quarter of 2024.

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

The 2.7 and 1.2 percentage point increases in SG&A as a percentage of net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

• transformation costs of $41.4 million in the first nine months of 2024, compared to $28.0 million in the first nine months of 2023;

• restructuring and other costs of $23.4 million in the third quarter of 2024, compared to $1.6 million in the third quarter of 2023, and $33.9 million in the first nine months of 2024, compared to $5.1 million in the first nine months of 2023;

• asset impairment charges of $5.7 million in third quarter of 2024, compared to $0.4 million in the third quarter of 2023, and $5.8 million in the first nine months of 2024, compared to $0.9 million in the first nine months of 2023.

These increases were partially offset by:

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

The 0.7 percentage point decrease in SG&A as a percentage of net sales in the first quarter of 2025 from 2024 was primarily driven by:

• transformation costs of $9.1 million in the first quarter of 2025, compared to $17.0 million in the first quarter of 2024;

• decreased employee compensation expense compared to the same period of the prior year.

This decrease was partially offset by:

• restructuring and other costs of $9.7 million in the first quarter of 2025, compared to $4.6 million in the first quarter of 2024;

• increased share-based stock compensation expense driven by the accelerated vesting of retirement eligible employee awards granted in the first quarter of 2025.

Net interest expense

The 28.0 and 20.0 percent decreases in net interest expense in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

• lower variable debt compared to the same period of the prior year.

The 27.8 percent decrease in net interest expense in the first quarter of 2025 from 2024 was primarily driven by:

• lower debt levels compared to the same period of the prior year.

Provision for income taxes

The 0.7 and 0.4 percentage point decreases in the effective tax rate in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

• the favorable impact of discrete items that occurred during the first nine months of 2024 that did not occur in the same period of the prior year.

These decreases were partially offset by:

The 2.3 percentage point increase in the effective tax rate in the first quarter of 2025 from 2024 was primarily driven by:

• the unfavorable mix of global earnings;

• decrease in the amount of favorable discrete items in 2025 compared to 2024.

SEGMENT RESULTS OF OPERATIONS

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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 a variety of ratios to measure performance of our reporting segments.

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, 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:

Three months ended Nine months ended

In millions September 30,

2024 September 30,

2023 % / Point Change September 30,

2024 September 30,

Three months ended

In millions March 31,

2025 March 31,

2024 % / Point Change

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83.6 77.3 8.2%

% of net sales 22.2 % 19.4 % 2.8 pts 21.2 % 18.1 % 3.1 pts

% of net sales 22.7 % 20.1 % 2.6 pts

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

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

Three months ended March 31, 2025

over the prior year period

Volume (4.8) %

Price 1.8 1.7

Core growth (2.9)

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Total (4.3) %

The 7.0 and 4.2 percent decreases in net sales for Flow in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

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

These decreases were partially offset by:

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

The 4.3 percent decrease in net sales for Flow in the first quarter of 2025 from 2024 was primarily driven by:

• decreased sales volume in our residential flow and industrial solutions businesses compared to the same period of the prior year;

• unfavorable foreign currency effects compared to the first quarter of the prior year.

This decrease was partially offset by:

• increased sales volume in our commercial flow business compared to the same period of the prior year;

• increased selling prices to mitigate inflationary cost increases.

• favorable foreign currency effects compared to the third quarter of 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:

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

Growth/Price 3.5 pts 2.5 pts

Three months ended March 31, 2025

over the prior year period

Inflation (2.1)

Productivity 2.0

Total 2.8 pts 3.1 pts

The 2.8 and 3.1 percentage point increases in segment income for Flow as a percentage of net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

Total 2.6 pts

The 2.6 percentage point increase in segment income for Flow as a percentage of net sales in the first quarter of 2025 from 2024 was primarily driven by:

• increased selling prices to mitigate impacts of inflation and favorable mix;

• increased productivity mainly driven by transformation initiatives.

These increases were partially offset by:

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

This increase was partially offset by:

• inflationary cost increases related to certain raw materials.

Water Solutions

The net sales and segment income for Water Solutions were as follows:

Three months ended Nine months ended

In millions September 30,

2024 September 30,

2023 % / Point Change September 30,

2024 September 30,

Three months ended

In millions March 31,

2025 March 31,

2024 % / Point Change

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Segment income 60.7 55.6 9.2%

% of net sales 22.2 % 23.0 % (0.8) pts 22.1 % 21.6 % 0.5 pts

% of net sales 23.5 % 20.4 % 3.1 pts

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

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

Three months ended March 31, 2025

over the prior year period

Volume (5.4) %

Price 1.1 1.3

Core growth (4.3)

Acquisition/Divestiture

Currency (0.6)

Total (5.5) %

The 3.3 and 3.8 percent decreases in net sales for Water Solutions in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

• 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 the first nine months of 2024;

• unfavorable foreign currency effects compared to the first nine months of the prior year.

These decreases were partially offset by:

• increased selling prices in our commercial business to mitigate inflationary cost increases.

The 5.5 percent decrease in net sales for Water Solutions in the first quarter of 2025 from 2024 was primarily driven by:

• decreased sales volume compared to the same period of the prior year;

• a business exit in our residential business that occurred in the fourth quarter of 2024;

• unfavorable foreign currency effects compared to the same period of the prior year.

This decrease was partially offset by:

• increased selling prices to mitigate inflationary cost increases.

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:

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

— pts 1.3 pts

Currency 0.5 —

Three months ended March 31, 2025

over the prior year period

Volume/Price/Acquisition/Divestiture

Inflation (2.5)

Productivity 4.1

Total (0.8) pts 0.5 pts

The 0.8 percentage point decrease in segment income for Water Solutions as a percentage of net sales in the third quarter of 2024 from 2023 was primarily driven by:

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

This decrease was partially offset by:

• increased productivity in our residential business mainly driven by transformation initiatives;

• increased selling prices in our commercial business to mitigate impacts of inflation;

• favorable foreign currency effects compared to the prior year.

The 0.5 percentage point increase in segment income for Water Solutions as a percentage of net sales in the first nine months of 2024 from 2023 was primarily driven b y:

Total 3.1 pts

The 3.1 percentage point increase in segment income for Water Solutions as a percentage of net sales in the first quarter of 2025 from 2024 was primarily driven by:

• increased productivity mainly driven by transformation initiatives;

• increased selling prices in our commercial business to mitigate impacts of inflation and favorable mix.

• favorable foreign currency effects compared to the first quarter of the prior year;

• increased selling prices to mitigate impacts of inflation.

This increase was partially offset by:

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

• inflationary cost increases related to certain raw materials.

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

Three months ended Nine months ended

In millions September 30,

2024 September 30,

2023 % / Point Change September 30,

2024 September 30,

Three months ended

In millions March 31,

2025 March 31,

2024 % / Point Change

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Segment income 126.0 110.8 13.7%

% of net sales 34.0 % 29.3 % 4.7 pts 33.0 % 31.0 % 2.0 pts

% of net sales 32.8 % 30.8 % 2.0 pts

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

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

Volume 4.1 % 4.9 %

Price 3.9 3.0

Three months ended March 31, 2025

over the prior year period

Core growth 4.2

Acquisition/Divestiture 2.7

Total 7.3 % 7.4 %

The 7.3 and 7.4 percent increases in net sales for Pool in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

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

Currency (0.1)

The 6.8 percent increase in net sales for Pool in the first quarter of 2025 from 2024 was primarily driven by:

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

• increased selling prices to mitigate inflationary cost increases;

These increases were partially offset by:

• a product line exit that occurred in the first nine months of 2024.

• increased sales volume due to higher demand compared to the same period of the prior year.

Segment income

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

Three months ended September 30, 2024 Nine months ended September 30, 2024

over the prior year period over the prior year period

Growth/Price/Divestiture

1.0 pts 1.9 pts

Three months ended March 31, 2025

over the prior year period

Volume/Price/Acquisition/Divestiture

Inflation (1.7)

Productivity 1.6

Total 4.7 pts 2.0 pts

The 4.7 and 2.0 percentage point increases in segment income for Pool as a percentage of net sales in the third quarter and first nine months, respectively, of 2024 from 2023 were primarily driven by:

• increased productivity driven by transformation initiatives and manufacturing leverage;

Total 2.0 pts

The 2.0 percentage point increase in segment income for Pool as a percentage of net sales in the first quarter of 2025 from 2024 was primarily driven by:

• increased sales as a result of the acquisition of G & F Manufacturing;

• increased selling prices to mitigate impacts of inflation;

These increases were partially offset by:

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

BACKLOG OF ORDERS BY SEGMENT

In millions September 30,

2024 December 31,

2023 $ Change % Change

Flow $ 344.7 $ 390.1 $ (45.4) (11.6) %

Water Solutions 84.3 108.5 (24.2) (22.3) %

Pool 94.6 239.7 (145.1) (60.5) %

Total backlog

$ 523.6 $ 738.3 $ (214.7) (29.1) %

The majority of our backlog is short cycle in nature with shipments within one year from when a customer places an order and a substantial portion of our revenues has historically resulted from orders received and products delivered in the same month.

A portion of our backlog, particularly from orders for major capital projects, can take more than one year from order to delivery depending on the size and type of order.

We record, as part of our backlog, all orders from external customers, which represent firm commitments, and are supported by a purchase order or other legitimate contract.

Our backlog of orders is dependent upon when customers place orders and is not necessarily an indicator of our expected results for our 2024 net sales.

The decrease in our overall backlog from December 31, 2023 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 delivery of orders associated with certain advance sale (“early buy”) programs within our Pool segment.

• increased productivity driven by transformation initiatives.

This increase was partially offset by:

• inflationary cost increases related to certain raw materials.

LIQUIDITY AND CAPITAL RESOURCES

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Consistent with historical trends, we experienced seasonal cash usage in the first quarter of 2025 and drew on our revolving credit facility to fund our operations.

This cash usage reversed in the second quarter as the seasonality of our businesses peaked and generated significant cash to fund our operations.

We continued to generate significant cash to fund our operations in the third quarter of 2024.

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 is partially mitigated by employing some advance sale “early buy” programs (generally including extended payment terms and/or additional discounts).

This cash usage typically reverses in the second quarter as the seasonality of our businesses peak.

We expect historical seasonal patterns to continue and the second quarter of 2025 to generate significant cash to fund our operations.

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.

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Summary of cash flows

Nine months ended

In millions September 30,

2024 September 30,

Net cash provided by (used for):

Three months ended

In millions March 31,

2025 March 31,

Net cash (used for) provided by:

Operating activities of continuing operations $ (38.9) $ (107.4)

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Operating activities

Net cash provided by operating activities of continuing operations in the first nine months of 2024 primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization, share-based compensation and asset impairment, of $580.5 million.

Additionally, we had a cash inflow of $80.9 million as a result of changes in net working capital, primarily due to lower inventory and accounts receivable balances.

These decreases were primarily related to supply chain efficiencies and improved lead times.

Net cash provided by operating activities of continuing operations in the first nine months of 2023 primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization and asset impairment, of $506.8 million.

Net cash used for operating activities of continuing operations in the first three months of 2025 primarily reflects a cash outflow of $255.5 million as a result of changes in net working capital, primarily due to an increase in accounts receivable largely related to certain advance sale programs in anticipation of our distributors’ peak sales season in the second and third quarters.

The outflow related to net working capital was partially offset by net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization, share-based compensation and asset impairment, of $201.7 million.

Net cash used for operating activities of continuing operations in the first three months of 2024 primarily reflects a cash outflow of $287.9 million as a result of changes in net working capital, primarily due to an increase in accounts receivable largely related to certain advance sale programs in anticipation of our distributors’ peak sales season in the second and third quarters.

Investing activities

Net cash used for investing activities in the first nine months of 2024 primarily reflects capital expenditures of $51.7 million and cash paid upon the settlement of net investment hedges of $16.4 million.

Net cash used for investing activities in the first nine months of 2023 primarily reflects capital expenditures of $54.8 million, partially offset by proceeds from the sale of property and equipment of $5.4 million.

Net cash used for investing activities in the first three months of 2025 reflects capital expenditures of $16.8 million.

Net cash used for investing activities in the first three months of 2024 reflects capital expenditures of $19.3 million.

Financing activities

Net cash used for financing activities in the first nine months of 2024 primarily relates to the repayment of $200.0 million term loans under the Senior Credit Facility, $162.5 million Term Loan Facility principal payments, dividend payments of $114.3 million and share repurchases of $100.0 million.

Net cash used for financing activities in the first nine months of 2023 primarily relates to net repayments of revolving long-term debt of $320.0 million and dividend payments of $108.9 million.

Net cash provided by financing activities in the first three months of 2025 primarily relates to net borrowings of revolving long-term debt of $196.2 million, partially offset by share repurchases of $50.0 million and dividend payments of $41.2 million.

Net cash provided by financing activities in the first three months of 2024 primarily relates to net borrowings of revolving long-term debt of $101.4 million, partially offset by dividend payments of $38.0 million.

Free cash flow

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The following table is a reconciliation of free cash flow:

Nine months ended

In millions September 30,

2024 September 30,

Net cash provided by operating activities of continuing operations

Three months ended

In millions March 31,

2025 March 31,

Net cash used for operating activities of continuing operations

$ (38.9) $ (107.4)

Capital expenditures of continuing operations (16.8) (19.3)

Proceeds from sale of property and equipment of continuing operations 0.4 5.4

Free cash flow from continuing operations (55.7) (126.7)

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

During the second quarter of 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.

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

As of September 30, 2024, total availability under the Senior Credit Facility was $900.0 million.

As of March 31, 2025, total availability under the Senior Credit Facility was $694.3 million.

In addition, PFSA has the option to request to increase the revolving credit facility and/or to enter into one or more 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.

1 unchanged sentence

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 the nine months ended September 30, 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 September 30, 2024, the remaining obligation of $825.0 million matures on July 28, 2027.

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 March 31, 2025, 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.

3 unchanged sentences

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 $21.0 million, of which there were no outstanding borrowings at September 30, 2024.

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 March 31, 2025.

Borrowings under these credit facilities bear interest at variable rates.

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

We classified this debt as long-term as of September 30, 2024 as we have the intent and ability to refinance such obligation on a long-term basis under the revolving credit facility under the Senior Credit Facility.

As of September 30, 2024, we had $94.8 million of cash held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.

We classified this debt as long-term as of March 31, 2025 as we have the intent and ability to refinance such obligation on a long-term basis under the Senior Credit Facility.

As of March 31, 2025, we had $103.8 million of cash held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.

Share repurchases

1 unchanged sentence

This authorization expires on December 31, 2025.

During the nine months ended September 30, 2024, we repurchased 1.2 million of our ordinary shares for $100.0 million.

As of September 30, 2024, we had $500.0 million available for share repurchases under this authorization.

During the three months ended March 31, 2025, we repurchased 0.6 million of our ordinary shares for $50.0 million.

As of March 31, 2025, we had $400.0 million available for share repurchases under this authorization.

Dividends payable

On September 23, 2024, the Board of Directors declared a quarterly cash dividend of $0.23 per share, payable on November 1, 2024 to shareholders of record at the close of business on October 18, 2024.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $38.0 million at both September 30, 2024 and December 31, 2023, respectively.

We paid dividends in the first nine months of 2024 of $114.3 million, or $0.69 per ordinary share compared with $108.9 million, or $0.66 per ordinary share, in the prior year period.

On February 24, 2025, the Board of Directors declared a quarterly cash dividend of $0.25 per share, payable on May 2, 2025 to shareholders of record at the close of business on April 18, 2025.

As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $41.2 million at both March 31, 2025 and December 31, 2024.

We paid dividends in the first three months of 2025 of $41.2 million, or $0.25 per ordinary share compared with $38.0 million, or $0.23 per ordinary share, in the prior year period.

Under Irish law, the payment of future cash dividends and repurchases of shares may be paid only out of Pentair plc’s “distributable reserves” on its statutory balance sheet.

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If such subsidiaries are unable to transfer funds to the Parent Company Guarantor or the Subsidiary Issuer and sufficient cash or liquidity is not otherwise available, the Parent Company Guarantor or the Subsidiary Issuer may not be able to make principal and interest payments on their outstanding debt, including the senior notes or the guarantees.

The following table presents summarized financial information as of September 30, 2024 and December 31, 2023 for the Parent Company Guarantor and Subsidiary Issuer on a combined basis after elimination of (i) intercompany transactions and balances among the guarantors and issuer and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer.

In millions September 30,

The following table presents summarized financial information as of March 31, 2025 and December 31, 2024 for the Parent Company Guarantor and Subsidiary Issuer on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company Guarantor and the Subsidiary Issuer and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or issuer.

In millions March 31,

2025 December 31,

Current assets (1)

$ 102.1 $ 71.7

Noncurrent assets (2)

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2,022.9 1,828.6

(1) No assets due from non-guarantor subsidiaries were included as of September 30, 2024 and December 31, 2023, respectively.

(2) Includes assets due from non-guarantor subsidiaries of $2,562.6 million and $2,673.3 million as of September 30, 2024 and December 31, 2023, respectively.

(3) Includes liabilities due to non-guarantor subsidiaries of $1,858.3 million and $1,583.6 million as of September 30, 2024 and December 31, 2023, respectively.

(4) Includes liabilities due to non-guarantor subsidiaries of $162.7 million and $268.4 million as of September 30, 2024 and December 31, 2023, respectively.

(1) No assets due from non-guarantor subsidiaries were included as of March 31, 2025 and December 31, 2024, respectively.

(2) Includes assets due from non-guarantor subsidiaries of $2,536.9 million and $2,547.3 million as of March 31, 2025 and December 31, 2024, respectively.

(3) Includes liabilities due to non-guarantor subsidiaries of $1,750.8 million and $1,843.0 million as of March 31, 2025 and December 31, 2024, respectively.

(4) Includes liabilities due to non-guarantor subsidiaries of $157.3 million and $151.5 million as of March 31, 2025 and December 31, 2024, respectively.

The Parent Company Guarantor and Subsidiary Issuer do not have material results of operations on a combined basis.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk during the quarter ended September 30, 2024.

There have been no material changes in our market risk during the quarter ended March 31, 2025.

For additional information refer to Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2024.

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-Q

Item 2. Management’s Discussion and Analysis