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What changed in Pentair's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Pentair's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+293 added−278 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-21)

Top changes in Pentair's 2023 10-K

293 paragraphs added · 278 removed · 225 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn 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.
Biggest changeFor 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.
Our Business Resource Groups have been put into place to help promote a culture of inclusion through employees providing feedback and sponsoring awareness, education and engagement. 4 Our statistics are a measure of our performance, and we are committed to advancing a diverse workplace.
Our Business Resource Groups have been put into place to help promote a culture of inclusion through employees providing feedback and sponsoring awareness, education and engagement. Our statistics are a measure of our performance, and we are committed to advancing a diverse workplace.
In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, and you may access any materials we file with the SEC through their website at www.sec.gov.
In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, and you may access any materials we file with the SEC through their website at www.sec.gov . 5
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. Customers 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.
Flow brand names include Pentair Flow, Aurora, Berkeley, Codeline, Fairbanks-Nijhuis, Haffmans, Hydromatic, Hypro, Jung Pumpen, Myers, Sta-Rite, Shurflo, Südmo and X-Flow. 1 Customers Flow customers include businesses engaged with end users, and wholesale and retail distribution in the residential, commercial, food and beverage, and industrial vertical markets.
Union employee benefits vary by contract. 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.
Union employee benefits vary by contract. ESG (Environmental, Social and Governance) Activities 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.
Pentair strives to be a positive influence on the social and environmental issues of today. 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.
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.
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.
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.
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.
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 have established a formal social responsibility program to further advance our social responsibility goals.
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.
The following sets forth information regarding the diversity of our workforce as of December 31, 2022: Percent of workforce Percent of leadership roles (3) Minorities (1) 40% 25% Women (2) 32% 32% (1) Inclusive of the following racial minority groups: Black/African American, Hispanic/Latino, American Indian/Alaskan Native, Asian, Native Hawaiian/Other Pacific Islander. Data for U.S. employee population only. (2) Global data.
The following sets forth information regarding the diversity of our workforce as of December 31, 2023: Percent of workforce Percent of leadership roles (3) Minorities (1) 38% 24% Women (2) 31% 31% (1) Inclusive of the following racial minority groups: Black/African American, Hispanic/Latino, American Indian/Alaskan Native, Asian, Native Hawaiian/Other Pacific Islander. Data for U.S. employee population only. (2) Global data.
Seasonality 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.
Seasonality 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.
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.
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 key ESG topic areas, which ultimately culminated in Pentair’s Social Responsibility Strategic Targets (“Strategic Targets”), which we announced in 2021.
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.
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.
We also believe our Win Right values, positive culture and commitment to inclusion and diversity foster innovation and curiosity, which, in turn, contribute to us being an industry leader. As of December 31, 2022, we had approximately 11,250 employees worldwide, of which approximately 53% are located in the U.S.
We also believe our Win Right values, positive culture and commitment to inclusion and diversity foster innovation and curiosity, which, in turn, contribute to us being an industry leader. As of December 31, 2023, we had approximately 10,500 employees worldwide, of which approximately 49% are located in the U.S.
Our management office in the United States (“U.S.”) is located at 5500 Wayzata Boulevard, Suite 900, Golden Valley, Minnesota. BUSINESS AND PRODUCTS The following is a brief description of each of the Company’s 2022 reportable segments and business activities.
Our management office in the United States (“U.S.”) is located at 5500 Wayzata Boulevard, Suite 900, Golden Valley, Minnesota. 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.
Matters pertaining to Penwald are discussed in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements – Insurance subsidiary, included in this Form 10-K. 5 Available information We make available free of charge (other than an investor’s own Internet access charges) through our Internet website ( https://www.pentair.com ) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”).
Available information We make available free of charge (other than an investor’s own Internet access charges) through our Internet website ( https://www.pentair.com ) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”).
We believe a deep-rooted culture energizes our employees to make a difference within and beyond the workplace. We strive to be the destination for top talent, and work hard to develop and retain high performers throughout their career.
Human capital resources We believe our success depends on our ability to attract, develop and retain strong employees. We believe a deep-rooted culture energizes our employees to make a difference within and beyond the workplace. We strive to be the destination for top talent, and work hard to develop and retain high performers throughout their career.
Compensation and benefits In the U.S., all non-union full-time employees are eligible to receive the following benefits: short-term and long-term disability insurance; flexible and health savings accounts and wellness programs; health insurance (medical, pharmacy, dental); eight weeks paid parental leave for birth, adoptive and foster parents; two weeks paid caregiver leave; legal services; retirement benefits; stock ownership; tuition reimbursement; holidays; vacation and sick time.
All locations, enterprise wide, must meet and/or exceed regulatory agency standards as applicable to each site’s location. 4 Compensation and benefits In the U.S., all non-union full-time employees are eligible to receive the following benefits: short-term and long-term disability insurance; flexible and health savings accounts and wellness programs; health insurance (medical, pharmacy, dental); eight weeks paid parental leave for birth, adoptive and foster parents; two weeks paid caregiver leave; legal services; retirement benefits; stock ownership; tuition reimbursement; holidays; vacation and sick time.
Competition 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.
Competition 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.
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. Pentair strategy Our vision is to be the world’s most valued sustainable water solutions company for our employees, customers and shareholders.
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 Our vision is to be the world’s most valued sustainable water solutions company for our employees, customers and shareholders.
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.
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.
A small portion of our U.S. employees are unionized, while outside the U.S., we have employees in certain countries, particularly in Europe, that are represented by an employee representative organization, such as a union, works council or employee association.
A small portion of our U.S. employees are unionized, while outside the U.S., we have employees in certain countries, particularly in Europe, that are represented by an employee representative organization, such as a union, works council or employee association. 3 Employee engagement and development Engaging our employees and developing their careers is important to our long-term success and ties directly to our Win Right culture and values.
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.
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.
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.
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.
These efforts consist mostly of the development of new products, product applications and manufacturing processes. 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).
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), metals and paint (powder and liquid). In addition to the purchase of raw materials, we purchase some finished goods for distribution for resale.
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. Certain commodities, such as metals and resins, are subject to commodity market and duty-driven price fluctuations.
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.
Accruals with respect to liabilities insured by third parties, such as liabilities arising from acquired businesses, pre-Penwald liabilities and those of certain non-U.S. operations, are established.
Accruals with respect to liabilities insured by third parties, such as liabilities arising from acquired businesses, pre-Penwald liabilities and those of certain non-U.S. operations, are established. Matters pertaining to Penwald are discussed in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements – Insurance subsidiary, included in this Form 10-K.
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).
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.
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. We believe our distribution channels and reputation for quality also provide us a competitive advantage.
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. Pool The Pool segment provides innovative, energy-efficient pool solutions to help people more sustainably enjoy water.
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.
The remaining approximately 34% of Flow sales were from the industrial solutions business, comprised of applications focused on industrial process filtration and sustainable gas.
However, we do not regard our business as being materially dependent upon any single patent, non-compete agreement, proprietary technology, customer relationship, trademark, trade name or brand name. Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise.
Intellectual property Patents, non-compete agreements, proprietary technologies, customer relationships, trademarks, trade names and brand names are important to our business. However, we do not regard our business as being materially dependent upon any single patent, non-compete agreement, proprietary technology, customer relationship, trademark, trade name or brand name.
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.
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.
We do not expect the termination of patents, patent applications or license agreements to have a material adverse effect on our financial position, results of operations or cash flows. Human capital resources We believe our success depends on our ability to attract, develop and retain strong employees.
Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise. We do not expect the termination of patents, patent applications or license agreements to have a material adverse effect on our financial position, results of operations or cash flows.
These resources include: 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.
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 supports employees to set objectives, receive feedback and development, and build development plans with their leaders.
We manage these fluctuations through several mechanisms, including long-term agreements with price adjustment clauses for significant commodity market movements in certain circumstances.
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, may trend higher in the near future due to the volatile market trends.
Consumer Solutions brand names include Everpure, KBI, Kreepy Krauly, Manitowoc Ice, Pleatco, RainSoft and Sta-Rite. Customers Consumer Solutions customers include businesses engaged in wholesale and retail distribution in the residential and commercial vertical markets. Customers also include end-users, consumers, commercial operators and original equipment manufacturers.
Customers 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. Seasonality We experience seasonal demand with several end customers and end users within Water Solutions.
One customer in the Consumer Solutions’ pool business represented approximately 20% of our consolidated net sales in 2022 and 2021. Seasonality We have historically experienced seasonal demand with several end-customers and end-users within Consumer Solutions. End-user demand for pool equipment follows warm weather trends and historically has been at seasonal highs from April to August.
Customers in the residential and commercial verticals also include end users and consumers. 2 One customer in the Pool business represented approximately 15% and 20% of our consolidated net sales in 2023 and 2022, respectively. Seasonality We have historically experienced seasonal demand with several end customers and end users.
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.
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.
In addition, we periodically conduct employee engagement and culture surveys to gauge the level of engagement and actions needed on culture, engagement and retention. 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.
Training and development 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.
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). Competition Consumer Solutions faces numerous domestic and international competitors, some of which have substantially greater resources directed to the vertical markets in which we compete.
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).
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.
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.
Removed
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.
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Flow 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.
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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.
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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.
Removed
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.
Added
End-user demand for water solution products generally follows warm weather trends and is at seasonal highs from April to September. Competition 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.
Removed
The pool business is a leader in North American pool equipment, serving an end market that is primarily replacement. 1 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.
Added
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.
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We compete by offering a wide variety of innovative and high-quality products, which are competitively priced. 2 NEW SEGMENTATION Effective January 1, 2023, we reorganized our reporting segments to reflect how we are managing our business beginning in 2023.
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The primary brand names associated with the Pool segment are Pentair Pool, Kreepy Krauly, Pleatco and Sta-Rite. Customers Pool customers include businesses engaged in wholesale and retail distribution in the residential and commercial vertical markets.
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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.
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Competition 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. We compete by offering a wide variety of innovative and high-quality products, which are competitively priced.
Removed
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.
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We believe our distribution channels and reputation for quality also provide us a competitive advantage. INFORMATION REGARDING ALL REPORTABLE SEGMENTS Research and development We conduct research and development activities primarily in our own facilities. These efforts consist mostly of the development of new products, product applications and manufacturing processes.
Removed
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.
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We support our Win Right culture by providing dedicated culture training to all our employees globally.
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December 31 In millions 2022 2021 2020 Net Sales 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 Research and development We conduct research and development activities primarily in our own facilities.
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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.
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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.
Added
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.
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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.
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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.
Removed
Prices for raw materials, such as metals, resins and electronics, may trend higher in the near future due to the existing inflationary market trends. 3 Intellectual property Patents, non-compete agreements, proprietary technologies, customer relationships, trademarks, trade names and brand names are important to our business.
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Employee engagement and development Engaging our employees and developing their careers is important to our long-term success and ties directly to our Win Right culture and values.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs an Irish company, we are governed by the Irish Companies Act, which differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer transactions and shareholder lawsuits. Further, the duties of directors and officers of an Irish company generally are owed to the company only.
Biggest changeTherefore, a final judgment for the payment of money rendered by any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not automatically be enforceable in Ireland. 16 As an Irish company, we are governed by the Irish Companies Act 2014, which differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer transactions and shareholder lawsuits.
Unfavorable rulings, judgments or settlement terms could have a material adverse impact on our business and financial condition, results of operations and cash flows. In addition, while most of 13 the asbestos claims against us are covered by liability insurance policies from many years ago, not all claims are insured.
Unfavorable rulings, judgments or settlement terms could have a material adverse impact on our business and financial condition, results of operations and cash flows. In addition, while most of the asbestos claims against us are covered 13 by liability insurance policies from many years ago, not all claims are insured.
The market price of our shares may fluctuate widely, depending on many factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our results of operations due to factors related to our business; • success or failure of our business strategy; • our quarterly or annual earnings, or those of other companies in our industry; • our ability to obtain third-party financing as needed; • announcements by us or our competitors of significant acquisitions or dispositions; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in earnings estimates or guidance by us or securities analysts or our ability to meet those estimates or guidance; • the operating and share price performance of other comparable companies; • investor perception of us; • effect of certain events or occurrences on our reputation; • overall market fluctuations; • results from any material litigation or governmental investigation or environmental liabilities; 17 • natural or other environmental disasters; • changes in laws and regulations affecting our business; and • general economic conditions and other external factors.
The market price of our shares may fluctuate widely, depending on many factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our results of operations due to factors related to our business; • success or failure of our business strategy; • our quarterly or annual earnings, or those of other companies in our industry; • our ability to obtain third-party financing as needed; • announcements by us or our competitors of significant acquisitions or dispositions; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in earnings estimates or guidance by us or securities analysts or our ability to meet those estimates or guidance; • the operating and share price performance of other comparable companies; 17 • investor perception of us; • effect of certain events or occurrences on our reputation; • overall market fluctuations; • results from any material litigation or governmental investigation or environmental liabilities; • natural or other environmental disasters; • changes in laws and regulations affecting our business; and • general economic conditions and other external factors.
A trade war; other governmental action related to tariffs or international trade agreements; changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently purchase, have operations 9 or manufacture and sell products; and any resulting negative sentiments towards the U.S. as a result of such changes, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
A trade war; other governmental action related to tariffs or international trade agreements; changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently purchase, have operations or manufacture and sell products; and any resulting negative sentiments towards the U.S. as a result of such changes, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If we are unable to meet our targets or successfully implement our strategy or our ESG reporting is inaccurate or incomplete, then we could suffer from reputational damage and incur adverse reaction from investors and other stakeholders, which could adversely impact the perception of our brand and our 14 products and services by current and potential investors and customers, which could in turn adversely impact our business, results of operations, or financial condition.
If we are unable to meet our targets or successfully implement our strategy or our ESG reporting is inaccurate or incomplete, then we could suffer from reputational damage and incur adverse reaction from investors and other stakeholders, which could adversely impact the perception of our brand and our products and services by current and potential investors and customers, which could in turn adversely impact our business, results of operations, or financial condition.
Also, in several emerging markets, potential customers prefer local suppliers, in some cases because of existing relationships and in other cases because of local legal restrictions or incentives that favor local businesses. In addition, we need to be flexible to adapt our products to ever changing customer preferences, including those relating to regulatory, climate change and social responsibility matters.
Also, in several emerging markets, potential customers prefer local suppliers, in some cases because of existing relationships and in other cases because of local legal restrictions or incentives that favor local businesses. In addition, we need to be flexible to adapt our products to ever changing customer preferences, including those relating to regulatory, climate change and social 6 responsibility matters.
It is uncertain whether, when and in what form a federal mandatory carbon dioxide emissions reduction program, or other state programs, may be adopted. Similarly, certain countries have adopted the Kyoto Protocol and in February 2021, the U.S. rejoined the Paris Accord. These and other existing or potential international initiatives and regulations could affect our international operations.
It is uncertain whether, when and in what form a federal mandatory carbon dioxide emissions reduction program, or other state programs, may be adopted. Similarly, certain countries have adopted the Kyoto Protocol and, in 2021, the U.S. rejoined the Paris Accord. These and other existing or potential international initiatives and regulations could affect our international operations.
Accordingly, holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the U.S. 16 Irish law differs from the laws in effect in the United States, which may negatively impact our ability to issue ordinary shares.
Accordingly, holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the U.S. Irish law differs from the laws in effect in the United States, which may negatively impact our ability to issue ordinary shares.
Our ability to 11 meet the financial covenants may be affected by events beyond our control, and we cannot provide assurance that we will meet those tests. A breach of any of these covenants could result in a default under our credit agreements or indentures.
Our ability to meet the financial covenants may be affected by events beyond our control, and we cannot provide assurance that we will meet those tests. A breach of any of these covenants could result in a default under our credit agreements or indentures.
Upon the occurrence of an event of default under any of our credit facilities or indentures, the lenders or trustees could elect to declare all amounts outstanding thereunder to be immediately due and payable and, in the case of credit facility lenders, terminate all commitments to extend further credit.
Upon the occurrence of an event of default under any of our credit facilities or indentures, the lenders or trustees could elect to declare all amounts outstanding thereunder to be immediately due and payable and, in the case of credit facility lenders, terminate all 11 commitments to extend further credit.
It is uncertain what laws will be enacted and therefore we cannot predict the potential impact of such laws on our future financial condition, results of operations and cash flows.
It is uncertain what new laws will be enacted and therefore we cannot predict the potential impact of such laws on our future financial condition, results of operations and cash flows.
During 2022 and 2021, we experienced supply chain challenges, including increased lead times for raw materials due to availability constraints and high demand for these materials.
During 2023, 2022 and 2021, we experienced supply chain challenges, including increased lead times for raw materials due to availability constraints and high demand for these materials.
The MLI has now entered into force for a number of countries, including Ireland and the U.K. Under the Double Tax Convention between Ireland and the U.K., as amended by the MLI, the residence tie-breaker provides that a company will remain dual resident unless there is a determination otherwise by the tax authorities of the two contracting states.
The MLI has now entered into force for a number of countries, including Ireland and the U.K. Under the Double Tax Convention between Ireland and the U.K., as amended by the MLI, the residency tie-breaker provides that a company will remain dual resident unless there is a determination otherwise by the tax authorities of the two contracting states.
These risks include: • changes in general economic and political conditions in countries where we operate, particularly in emerging markets; • relatively more severe economic conditions in some international markets than in the U.S.; • the imposition of sanctions, tariffs, duties, exchange controls, currency restrictions or other trade restrictions; • changes in tax treaties, laws or rulings that could have a material adverse impact on our effective tax rate; • the difficulty of enforcing agreements and collecting receivables through non-U.S. legal systems; • the difficulty of communicating and monitoring evolving standards and directives across our product lines, services, and global facilities; • the difficulty of ensuring that our products, services and supply chains meet ever-changing regional regulations and requirements; • trade protection measures and import or export licensing requirements and restrictions; • the possibility of military conflicts or terrorist action affecting us, our operations, supply chains or our end-markets; • the threat of nationalization and expropriation; • changes due to nationalist consumer sentiment; • the difficulty in staffing and managing widespread operations in non-U.S. labor markets; • limitations on repatriation of earnings or other regionally-imposed capital requirements; • the difficulty of protecting intellectual property in non-U.S. countries; and • changes in and required compliance with a variety of non-U.S. laws and regulations, some of which may be incompatible.
These risks include: • changes in general economic and political conditions in countries where we operate or purchase from, particularly in emerging markets; • relatively more severe economic conditions in some international markets than in the U.S.; • the imposition of sanctions, tariffs, duties, exchange controls, currency restrictions or other trade restrictions; • changes in tax treaties, laws or rulings that could have a material adverse impact on our effective tax rate; • the difficulty of enforcing agreements and collecting receivables through non-U.S. legal systems; • the difficulty of communicating and monitoring evolving standards and directives across our product lines, services, and global facilities; • the difficulty of ensuring that our products, services and supply chains meet ever-changing regional regulations and requirements; 8 • trade protection measures and import or export licensing requirements and restrictions; • the possibility of military conflicts or terrorist action affecting us, our operations, supply chains, our end-markets or economies generally; • the threat of nationalization and expropriation; • changes due to nationalist consumer sentiment; • the difficulty in staffing and managing widespread operations in non-U.S. labor markets; • limitations on repatriation of earnings or other regionally-imposed capital requirements; • the difficulty of protecting intellectual property in non-U.S. countries; and • changes in and required compliance with a variety of non-U.S. laws and regulations, some of which may be incompatible with each other or U.S. laws and regulations.
Intellectual property challenges may hinder our ability to develop, engineer and market our products. Patents, non-compete agreements, proprietary technologies, customer relationships, trademarks, trade names, and brand names are important to our business. Intellectual property protections, however, may not preclude competitors from developing products similar to ours, or from challenging our names or products.
Intellectual property challenges may hinder our ability to develop, engineer and market our products. Patents, non-compete agreements, proprietary technologies, customer relationships, trademarks, trade names and brand names are important to our business. Intellectual property protections, however, may not preclude competitors from developing products like ours, or from challenging our names or products.
We have experienced cybersecurity incidents, and, although we have determined such cybersecurity incidents to be immaterial and such incidents have not had a material adverse effect on our financial condition, results of operations or cash flows, there can be no assurance of similar results in the future.
We have experienced cybersecurity incidents, and, although we have determined such cybersecurity incidents to be immaterial and such incidents have not had a material adverse effect on our business strategy, financial condition, results of operations or cash flows, there can be no assurance of similar results in the future.
In addition, unless otherwise authorized by its shareholders, when an Irish company issues shares for cash to new shareholders, it is required first to offer those shares on the same or more favorable terms to existing shareholders on a pro-rata basis.
In addition, unless otherwise authorized by its shareholders or constitutional document, when an Irish company issues shares for cash to new shareholders, it is required first to offer those shares on the same or more favorable terms to existing shareholders on a pro-rata basis.
While we currently maintain what we believe to be suitable product liability insurance, we may not be able to maintain this insurance on our preferred terms or at an acceptable cost, and this insurance may not provide adequate protection against potential or previously existing liabilities.
While we currently maintain what we believe to be suitable product liability insurance, we may not be able to maintain this insurance on our preferred terms or at an acceptable cost. Further, this insurance may not provide adequate protection against potential or previously existing liabilities.
Furthermore, our business strategy also includes expanding our smart products and Internet of Things offerings and there are many other companies that hold patents in this space. Over the past few years, we have noticed an increasing tendency for participants in our markets, including competitors, to use challenges to intellectual property as a means to compete.
Furthermore, our business strategy also includes expanding our smart products and Internet of Things offerings and there are many other companies that hold patents in this space. Over the past few years, we have noticed an increasing tendency for participants in our markets, including competitors, to use challenges to intellectual property to compete.
We may not achieve some or all of the expected benefits of our business initiatives. During 2022 and 2021, we initiated and continued execution of certain business initiatives aimed at reducing our fixed cost structure and realigning our business.
We may not achieve some or all of the expected benefits of our business initiatives. During 2023 and 2022, we initiated and continued execution of certain business initiatives aimed at reducing our fixed cost structure and realigning our business.
In particular, our pool business operations in North Carolina and California are in areas that are more susceptible to natural disasters such as hurricanes, wildfires, and earthquakes. These types of events may negatively impact residential, commercial and industrial spending in impacted regions or, depending on the severity, global spending.
Some of our operations, including our pool business operations in North Carolina and California, are in areas that are more susceptible to natural disasters such as hurricanes, wildfires and earthquakes. These types of events may negatively impact residential, commercial and industrial spending in impacted regions or, depending on the severity, global spending.
While we do not have any other customers that accounted for more than 10% of our consolidated net sales in 2022, we have other customers that are key to the success of our business. Our concentration of sales to a relatively small number of larger customers makes our relationship with each of these customers important to our business.
While we do not have any other customers that accounted for more than 10% of our consolidated net sales in 2023, we have other customers that are key to the success of our business. Our concentration of sales to a relatively small number of larger customers makes our 9 relationship with each of these customers important to our business.
If operations at any of our manufacturing facilities or those of our suppliers were to be disrupted as a result of significant equipment failures, natural disasters, earthquakes, power outages, fires, explosions, terrorism, military conflicts, cybersecurity attacks, adverse weather conditions, labor disputes, public health epidemics (including the COVID-19 pandemic) or other catastrophic events or disruptions outside of our control, we may be unable to fill customer orders and otherwise meet customer demand for our products.
If operations at any of our manufacturing facilities or those of our suppliers were to be disrupted as a result of significant equipment failures, natural disasters, earthquakes, power outages, fires, explosions, terrorism, political disputes, international hostilities, military conflicts, cybersecurity incidents, adverse weather conditions, labor disputes, public health epidemics (including the COVID-19 pandemic) or other catastrophic events or disruptions outside of our control, we may be unable to fill customer orders and otherwise meet customer demand for our products.
If proposals were enacted that had the effect of disregarding our incorporation in Ireland or limiting our ability as an Irish company to maintain tax residency in the U.K., we could be subject to increased taxation, which could materially adversely affect our financial condition, results of operations, cash flows or our effective tax rate in future reporting periods.
If proposals were enacted that had the effect of disregarding our incorporation in Ireland or limiting our ability as an Irish company to maintain tax residency in the U.K., we could be subject to increased taxation and/or be required to take action to maintain our effective tax rate, which could materially adversely affect our financial condition, results of operations, cash flows or our effective tax rate in future reporting periods.
Patent and trademark challenges increase our costs to develop, engineer and market our products. We may need to spend significant resources monitoring, enforcing and defending our intellectual property rights, and we may or may not be able to detect infringement by third parties.
Patent and trademark challenges increase our costs to develop, engineer and market our products. We may need to spend significant resources monitoring, enforcing and defending, including through litigation, our intellectual property rights, and we may or may not be able to detect infringement by third parties.
Volatility in currency exchange rates could have a material adverse effect on our financial condition, results of operations and cash flows. Sales outside of the U.S. for the year ended December 31, 2022 accounted for 29% of our net sales. Our financial statements reflect translation of items denominated in non-U.S. currencies to U.S. dollars.
Volatility in currency exchange rates could have a material adverse effect on our financial condition, results of operations and cash flows. Sales outside of the U.S. for the year ended December 31, 2023 accounted for approximately 31% of our net sales. Our financial statements reflect translation of items denominated in non-U.S. currencies to U.S. dollars.
In addition, some of our businesses, customers, and dealers are subject to various laws and regulations regarding consumer protection and advertising and sales practices, and we have been named, and may be named in the future, as a defendant in litigation, some of which are or may be class action complaints, arising from alleged violation of these laws and regulations.
In addition, some of our businesses, customers, and dealers are subject to various laws and regulations regarding consumer 15 protection and advertising and sales practices, and we have been named, and may be named in the future, as a defendant in litigation, including class action complaints, arising from alleged violation of these laws and regulations.
These laws and regulations impose on us increasingly complex, stringent and costly compliance activities, including but not limited to environmental, health, and safety protection standards and permitting, labeling and other requirements regarding (among other things) product efficiency and performance, material makeup, air quality and emissions, and wastewater discharges; the use, handling, and disposal of hazardous or toxic materials; remediation of environmental contamination; and working conditions for and compensation of our employees.
These laws and regulations impose on us increasingly complex, stringent and costly monitoring and compliance activities, including but not limited to environmental, health, and safety protection standards and permitting, labeling and other requirements regarding (among other things) product efficiency and performance, material makeup, air quality and emissions, and wastewater discharges; the use, handling, and disposal of hazardous or toxic materials and substances, including perfluoroalkyl and polyfluoroalkyl substances (“PFAS”) and other substances of concern; remediation of environmental contamination; and working conditions for and compensation of our employees.
Although we expect to have sufficient liquidity to meet our foreseeable needs, our access to and the cost of capital could be negatively impacted by disruptions in the credit markets, which have occurred in the past and made financing terms for borrowers unattractive or unavailable.
Although we expect to have sufficient liquidity to meet our foreseeable needs, our access to and the cost of capital could be negatively impacted by disruptions in the credit markets, including due to failures of financial institutions, which have occurred in the past and made financing terms for borrowers unattractive or unavailable.
A loss of, or material cancellation, reduction, or delay in purchases by or delivery of products to, one or more of our largest customers could harm our business. Our net sales to our largest customer represented approximately 20% of our consolidated net sales in 2022.
A loss of, or material cancellation, reduction, or delay in purchases by or delivery of products to, one or more of our largest customers could harm our business. Our net sales to our largest customer represented approximately 15% of our consolidated net sales in 2023.
We may increase our debt or raise additional capital, our credit ratings may be downgraded in the future, or our interest rates may increase, each of which could affect our financial condition, and may decrease our profitability. As of December 31, 2022, we had $2,339.3 million of total debt outstanding on a consolidated basis.
We may increase our debt or raise additional capital, our credit ratings may be downgraded in the future, or our interest rates may increase, each of which could affect our financial condition, and may decrease our profitability. As of December 31, 2023, we had $2,006.8 million of total debt outstanding on a consolidated basis.
Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances.
Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances and require court permission to do so.
While historically we have attempted to mitigate the magnitude of the sales spikes in 10 the pool business and in the businesses within the Industrial & Flow Technologies segment by employing some advance sale “early buy” programs (generally including extended payment terms and/or additional discounts), we cannot provide any assurance that should we use such programs in the future they will be successful.
While historically we have attempted to mitigate the magnitude of the sales spikes in the Pool segment by employing some advance sale “early buy” programs (generally including extended payment terms and/or additional discounts), we cannot provide assurance that should we use such programs in the future they will be successful.
Any material interruption in our supply chain, such as material interruption of the supply of raw materials and components due to the casualty loss of any of our manufacturing plants; interruptions in service by our third-party logistic service providers or common carriers that ship goods within our distribution channels; unexpected delays in shipping or processing through customs of goods; trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions; or other unexpected or uncontrollable events that cause a material interruption in our supply chain such as pandemics (including COVID-19); social or labor unrest; natural disasters or political disputes and military conflicts; could negatively affect our ability to produce or deliver our products and have a negative material impact on our business and our profitability.
Any material interruption in our supply chain, such as material interruption of the supply of raw materials and components due to the casualty loss of any of our manufacturing plants; interruptions in service by our third-party logistic service providers or common carriers that ship goods within our distribution channels; unexpected delays in shipping or processing through customs of goods; increased logistics costs, including air freight; lack of availability of marine cargo insurance for shipments in certain geographies due to hostilities; trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions or inspections; or other unexpected or uncontrollable events that cause a material interruption in our supply chain such as pandemics (including COVID-19); social or labor unrest; natural disasters; or political disputes, international hostilities and military conflicts; could negatively affect our ability to produce or deliver our products and have a negative material impact on our business and our profitability.
We have projects underway at several current and former manufacturing facilities to investigate and remediate environmental contamination resulting from our past operations or by the operations of divested or acquired businesses or other businesses that previously owned or used the properties. The cost of remediation and other environmental liabilities can be difficult to accurately predict.
We have projects underway at several current and former manufacturing facilities to investigate and remediate environmental contamination resulting from our past operations or by the operations of divested or acquired businesses or other businesses that previously owned or used the properties.
However, any recovery under our insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Seasonality of sales and weather conditions could have a material adverse effect on our financial results.
However, any recovery under our insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations and may also affect the price and availability of insurance in the future, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We have obtained a determination from the Competent Authorities of the Irish Revenue Commissioners and the U.K. HM Revenue & Customs which states that we are resident for tax purposes only in the U.K.
In January 2021, we obtained a determination from the tax authorities in Ireland, the Irish Revenue Commissioners, and in the U.K., HM Revenue & Customs, which states that we are resident for tax purposes only in the U.K.
In particular, during 2021, we had higher than anticipated demand in our pool business and certain parts of our residential and commercial businesses. However, such demand in our pool and other residential businesses declined during 2022 and may not be repeated in future periods.
In particular, during 2021, we had higher than anticipated demand in our pool business and certain parts of our residential and commercial businesses. However, such demand in our pool and other residential businesses declined during 2022 and 2023 as we saw inventory correcting within our residential distribution channels and may not be repeated in future periods.
Our policy mandates strict compliance with U.S. and non-U.S. trade laws applicable to our products. However, even when we are in strict compliance with law and our policies, we may suffer reputational damage if certain of our products are sold through various intermediaries to sanctioned entities or to entities operating in sanctioned countries.
However, even when we are in strict compliance with law and our policies, we may suffer reputational damage if certain of our products are sold through various intermediaries to sanctioned entities or to entities operating in sanctioned countries.
However, these actions may not be successful in managing our costs or increasing our productivity and we anticipate inflation to continue with respect to materials (especially resins, copper, steel, stainless steel and electronics) as well as labor and logistics.
However, these actions may not be successful in managing our costs or increasing our productivity and we anticipate inflation to continue with respect to raw materials as well as labor and logistics.
Failure to comply with the broad range of standards, laws and regulations in the jurisdictions in which we operate may result in exposure to substantial disruptions, costs and liabilities. Our products, manufacturing facilities and business operations are subject to certain statutory and regulatory requirements.
Failure to comply with the broad range of standards, laws and regulations in the jurisdictions in which we operate may result in exposure to substantial disruptions, costs and liabilities. Our products, manufacturing facilities and business operations are subject to numerous federal, state and local statutory and regulatory requirements, both within and outside the U.S.
As of December 31, 2022, our goodwill and intangible assets were $4,347.2 million and represented 67% of our total assets. Declines in fair market value could result in future goodwill and intangible asset impairment charges.
As of December 31, 2023, our goodwill and intangible assets were $4,317.0 million and represented approximately 66% of our total assets. Declines in fair market value could result in future goodwill and intangible asset impairment charges.
Violations of these laws may require self-disclosure to government agencies and result in criminal or civil sanctions, which could disrupt our 12 business and result in a material adverse effect on our reputation, business, financial condition, results of operations and cash flows.
Violations of these laws may require self-disclosure to government agencies and result in criminal or civil sanctions, which could disrupt our business and result in a material adverse effect on our reputation, business, financial condition, results of operations and cash flows. 12 Our failure to satisfy international trade compliance regulations, and changes in U.S. government and other applicable sanctions, could have a material adverse effect on us.
We are subject to changes in law and other factors that may not allow us to maintain a worldwide effective corporate tax rate that is competitive in our industry.
Risks Relating to Our Jurisdiction of Incorporation in Ireland and Tax Residency in the U.K. We are subject to changes in law and other factors that may not allow us to maintain a worldwide effective corporate tax rate that is competitive in our industry.
During 2022, we experienced a reduction in revenue and profits as a result of the significant strengthening of the U.S. dollar against foreign currencies. Fluctuations in foreign currency exchange rates, most notably the strengthening of the U.S. dollar against the euro, could have a material adverse effect on our reported revenue in future periods.
Fluctuations in foreign currency exchange rates, most notably the strengthening of the U.S. dollar against the euro, could have a material adverse effect on our reported revenue in future periods.
Our subsidiaries, along with numerous other companies, are named as defendants in a substantial number of lawsuits based on alleged exposure to asbestos-containing materials, substantially all of which relate to our discontinued operations.
Our subsidiaries are party to asbestos-related litigation that could adversely affect our financial condition, results of operations and cash flows. Our subsidiaries, along with numerous other companies, are named as defendants in a substantial number of lawsuits based on alleged exposure to asbestos-containing materials, substantially all of which relate to our discontinued operations.
Sales outside of the U.S. for the year ended December 31, 2022 accounted for 29% of our net sales. Further, most of our businesses obtain some products, components and raw materials from non-U.S. suppliers. Accordingly, our business is subject to the political, regulatory, economic, trade, and other risks that are inherent in operating in, and purchasing from, numerous countries.
We are exposed to political, regulatory, economic, trade, and other risks that arise from operating a multinational business. Sales outside of the U.S. for the year ended December 31, 2023 accounted for 31% of our net sales. Further, most of our businesses obtain some products, components and raw materials from non-U.S. suppliers.
In addition, investors and other stakeholders are increasingly focused on ESG matters, and as stakeholder ESG expectations and standards are evolving, we may not be able to sufficiently respond to these evolving standards and expectations. Furthermore, we could be criticized for the accuracy or completeness of the disclosure of our ESG initiatives.
In addition, investors and other stakeholders are increasingly focused on ESG matters, and as stakeholder ESG expectations and standards are evolving, we may not be able to sufficiently respond to these evolving standards and expectations or investors may not view our products and services as sustainable solutions.
These cases typically involve product liability claims based primarily on allegations of manufacture, sale or distribution of industrial products that either contained asbestos or were attached to or used with asbestos-containing components manufactured by third parties. In addition, some cases brought against us involve the presence of asbestos at facilities that we own or used to own.
These cases typically involve product liability claims based primarily on allegations of manufacture, sale or distribution of industrial products that either contained asbestos or were attached to or used with asbestos-containing components manufactured by third parties or to which asbestos insulation was applied after installation.
Successful claims or litigation against us for significant amounts could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows. 15 Risks Relating to Our Jurisdiction of Incorporation in Ireland and Tax Residency in the U.K.
In addition, our indemnification obligations relating to the purchase or sale of businesses could result in litigation or claims of unknown amounts. Successful claims or litigation against us for significant amounts could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows.
During 2022 and 2021, we experienced inflationary cost increases of raw materials, such as metals, resins and electronics (including drives and motors), as well as increases in logistics, energy, insurance and labor costs (including wages, pension and health care), and we expect inflationary cost increases to continue in 2023.
In prior years, we experienced inflationary cost increases of raw materials, such as metals, resins, drives and motors, as well as increases in logistics, energy, insurance and labor costs (including wages, pensions and health care benefits), and due to the current volatile nature of the market, we expect inflationary cost increases to continue in 2024.
While we have elevated our engagement with our suppliers and used secondary suppliers and new methods of procurement where available to mitigate the supply chain pressures, we expect supply chain challenges to continue in 2023.
While we have elevated our engagement with our suppliers and used secondary suppliers and new methods of procurement where available to mitigate the supply chain pressures, supply chain challenges may continue in the future. In addition, as we execute on our ongoing Transformation Program, we may experience costs as a result of changing to new suppliers.
If we are unable to continue to differentiate our products, services and solutions or adapt to changes in customer purchasing behavior or shifts in distribution channels, or if we are unable to maintain our desired pricing or forced to incur additional costs to remain competitive, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. 6 Our future growth is dependent upon our ability to transform and adapt our products, services, solutions, and organization to meet the demands of local markets in both developed and emerging economies and by developing or acquiring new technologies that achieve market acceptance with acceptable margins.
If we are unable to continue to differentiate our products, services and solutions or adapt to changes in customer purchasing behavior or shifts in distribution channels, or if we are unable to maintain our desired pricing or forced to incur additional costs to remain competitive, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Gifts and inheritances passing between spouses are exempt from CAT. Children have a tax-free threshold of €335,000 per lifetime in respect of taxable gifts or inheritances received from their parents for periods on or after October 9, 2019. General Risk Factors Our share price may fluctuate significantly. We cannot predict the prices at which our shares may trade.
Gifts and inheritances passing between spouses are exempt from CAT. Children have a tax-free threshold of €335,000 per lifetime in respect of taxable gifts or inheritances received from their parents for periods on or after October 9, 2019. The standard rate of CAT for gifts and inheritances received above this threshold is 33%.
In addition, currency variations could have a material adverse effect on margins on sales of our products in countries outside of the U.S. and margins on sales of products that include components obtained from suppliers located outside of the U.S. Risks Relating to Our Debt and Financial Markets Increased leverage may harm our business, financial condition and results of operations.
In addition, currency variations could have a material adverse effect on margins on sales of our products in countries outside of the U.S. and margins on sales of products that include components obtained from suppliers located outside of the U.S. Our business may be adversely affected by matters associated with our labor force.
In addition to clean-up actions brought by governmental authorities, private parties could bring individual or class-action claims due to the presence of, or exposure to, hazardous substances.
In addition to clean-up actions brought by governmental authorities, private parties could bring individual or class-action claims due to the presence of, or exposure to, hazardous substances, including at sites where we did not have operations but may have acquired liability through an acquisition of a business.
The occurrence of any of these events could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows. We may be negatively impacted by litigation and other claims. We are currently, and may in the future, become subject to litigation and other claims.
In addition, if there is a breach of privacy, we may be required to make notifications under data privacy laws or regulations, or could become subject to litigation. The occurrence of any of these events could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows.
We experience seasonal demand with end-customers and end-users within each of our business segments. Demand for pool equipment in the pool business within the Consumer Solutions segment and residential water supply, infrastructure and agricultural products in the businesses within the Industrial & Flow Technologies segment follows warm weather trends and is at seasonal highs from April to August.
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.
For example, current macroeconomic and political instability caused by global supply chain disruptions, inflation, the strengthening of the U.S. dollar and the conflict between Russia and Ukraine, have and could continue to adversely impact our results of operations. The businesses of many of our industrial customers are to varying degrees cyclical and have experienced periodic downturns.
For example, current macroeconomic and political instability caused by global supply chain disruptions, inflation and the strengthening of the U.S. dollar have and could continue to adversely impact our results of operations. In addition, military conflicts, such as those between Russia and Ukraine and Hamas and Israel, and their impact on economies may adversely impact our results of operations.
Certain of the products we sell are “dual use” products, which are products that may have both civil and military applications, or may otherwise be involved in weapons proliferation, and are often subject to more stringent export controls. From time to time, we obtain or receive information alleging improper activity in connection with imports or exports.
Our global operations require importing and exporting goods and technology across international borders on a regular basis. Certain of the products we sell are “dual use” products, which are products that may have both civil and military applications, or may otherwise be involved in weapons proliferation, and are often subject to more stringent export controls.
As of December 31, 2022, we had $2,339.3 million of total debt outstanding on a consolidated basis. Our indebtedness increased materially in connection with our acquisition of Manitowoc Ice, which we funded with approximately $1.6 billion of new indebtedness. We and our subsidiaries may incur additional indebtedness in the future, subject to restrictions in our debt agreements.
Risks Relating to Our Debt and Financial Markets Increased leverage may harm our business, financial condition and results of operations. As of December 31, 2023, we had $2,006.8 million of total debt outstanding on a consolidated basis. We and our subsidiaries may incur additional indebtedness in the future, including in connection with acquisitions, subject to restrictions in our debt agreements.
Companies’ obligations and requirements under these laws and regulations are subject to uncertainty in how they may be interpreted by courts and governmental authorities. The costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may increase our operational costs, and/or result in interruptions or delays in the availability of systems.
The costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may increase our operational costs, and/or result in interruptions or delays in the availability of systems. In the case of non-compliance with these laws, including the GDPR, regulators have the authority to levy significant fines.
The occurrence of any of these events could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows. In addition, such cybersecurity incidents could result in litigation, regulatory action and potential liability and the costs and operational consequences of implementing further data protection measures.
In addition, such cybersecurity incidents could result in litigation, regulatory action and potential liability and the costs and operational consequences of implementing further data protection measures. For information on our cybersecurity risk management, strategy and governance, see ITEM 1C.- Cybersecurity. Changes in data privacy laws and our ability to comply with them could have a material adverse effect on us.
Our business strategy includes acquiring businesses and making investments that complement our existing businesses. We continue to analyze and evaluate the acquisition of strategic businesses or product lines with the potential to strengthen our industry position or enhance our existing set of product, service, and solution offerings.
We continue to analyze and evaluate the acquisition of strategic businesses or product lines with the potential to strengthen our industry position or enhance our existing set of product, service, and solution offerings. We may not be able to identify suitable acquisition candidates, obtain financing or have sufficient cash necessary for acquisitions or successfully complete acquisitions in the future.
In addition, environmental requirements change and tend to become more stringent over time. Our eventual environmental remediation costs and liabilities could exceed the amount of our current reserves. Our subsidiaries are party to asbestos-related litigation that could adversely affect our financial condition, results of operations and cash flows.
The cost of remediation and other environmental liabilities can be difficult to accurately predict and is typically excluded by insurance. In addition, environmental requirements change and tend to become more stringent over time. Our eventual environmental remediation costs and liabilities could exceed the amount of our current reserves.
Each case typically names a large number of product manufacturers, service providers and premises owners. Historically, our subsidiaries have been identified as defendants in asbestos-related claims. Our strategy has been, and continues to be, to mount a vigorous defense aimed at having unsubstantiated suits dismissed, and settling claims before trial only where appropriate.
In addition, some cases brought against us involve the presence of asbestos at facilities that we own or used to own. Each case typically names a large number of product manufacturers, service providers and premises owners. Historically, our subsidiaries have been identified as defendants in asbestos-related claims.
A variety of state, national, foreign and international laws and regulations apply to the collection, use, retention, protection, security, disclosure, transfer and other processing of personal and other data. Many foreign data privacy regulations, including the General Data Protection Regulation (the “GDPR”) in the European Union, are more stringent than federal regulations in the United States.
We collect and store data that is sensitive to us and our employees, customers, dealers and suppliers. A variety of state, national, foreign and international laws and regulations apply to the collection, use, retention, protection, security, disclosure, transfer and other processing of personal and other data.
In addition, seasonal effects in the pool business and in the businesses within the Industrial & Flow Technologies segment may vary from year to year and be impacted by weather patterns, particularly by temperature, heavy flooding and droughts.
In addition, seasonal effects associated with products within our Flow, Water Solutions and Pool segments may vary from year to year and be impacted by weather patterns, such as temperature, heavy flooding and droughts. Moreover, adverse weather conditions, such as cold or wet weather, may negatively impact demand for, and sales of products within our business segments.
Within the United States, many states are considering adopting, or have already adopted privacy regulations, including, for example, the California Consumer Privacy Act. These laws and regulations are rapidly evolving and changing, and could have an adverse effect on our operations.
Many foreign data privacy regulations, including the General Data Protection Regulation (the “GDPR”) in the European Union, are more stringent than federal regulations in the United States. Within the United States, many states are considering adopting, or have already adopted privacy regulations, including, for example, the California Consumer Privacy Act.
The failure to effectively adapt our products, services, or solutions could have a material adverse effect on our business, financial condition, results of operations and cash flows. We may not be able to identify, finance and complete suitable acquisitions and investments, and any completed acquisitions and investments may be unsuccessful or consume significant resources.
We may not be able to identify, finance and complete suitable acquisitions and investments, and any completed acquisitions and investments may be unsuccessful or consume significant resources. Our business strategy includes acquiring businesses and making investments that complement our existing businesses.
As of December 31, 2022, there were approximately 689 claims pending against our subsidiaries, substantially all of which relate to our discontinued operations.
Our strategy has been, and continues to be, to mount a vigorous defense aimed at having unsubstantiated suits dismissed, and settling claims before trial only where appropriate. As of December 31, 2023, there were approximately 590 claims pending against our subsidiaries, substantially all of which relate to our discontinued operations.
We may not be able to identify suitable acquisition candidates, obtain financing or have sufficient cash necessary for acquisitions or successfully complete acquisitions in the future. Acquisitions and investments may involve significant cash expenditures, debt incurrences, equity issuances, operating losses and expenses.
Acquisitions and investments may involve significant cash expenditures, debt incurrences, equity issuances, operating losses and expenses.
Removed
The COVID-19 pandemic may have a material negative impact on our business, financial condition, results of operations and cash flows. Our business and financial results have been and may continue to be negatively impacted by the COVID-19 pandemic and its repercussions. The severity, magnitude and duration of the current COVID-19 pandemic remains uncertain, rapidly changing and hard to predict.
Added
The businesses of many of our industrial customers are to varying degrees cyclical and have experienced periodic downturns.
Removed
In 2022, 2021 and 2020, the COVID-19 pandemic significantly impacted economic activity and markets around the world and our business, and it may negatively impact our business in numerous ways, including but not limited to those outlined below: • Due to the impacts of the COVID-19 pandemic, we have experienced and may continue to experience reductions in customer demand for certain products and in certain end-markets. • Our workforce may be unable or unwilling to work on-site or travel as a result of the continuing pandemic and related vaccine requirements, event cancellations, facility closures, shelter-in-place, travel and other restrictions and changes in industry practice, or if they, their co-workers or their family members become ill or otherwise require care arrangements.
Added
Our future growth is dependent upon our ability to transform and adapt our products, services, solutions, and organization to meet the demands of local markets in both developed and emerging economies and by developing or acquiring new technologies that achieve market acceptance with acceptable margins.
Removed
In addition, we have experienced disruptions at some of our facilities with higher absenteeism due to the COVID-19 pandemic. • Government or regulatory responses to the COVID-19 pandemic have and may continue to negatively impact our business.
Added
We have identified specific product and geographic market opportunities that we find attractive and continue to pursue, both within and outside the U.S. We expect to continue investing in our businesses to drive these opportunities through research and development and additional sales and marketing resources.
Removed
Mandatory lockdowns or other restrictions on operations in some countries have previously temporarily disrupted our ability to manufacture in or distribute our products to or from some of these markets. A reoccurrence of these disruptions could materially adversely impact our operations and results.
Added
Unless we successfully penetrate these markets, our core sales growth will likely be limited or may decline.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeThe following is a summary of our principal properties as of December 31, 2022, including manufacturing, distribution, sales offices and service centers: No. of Facilities Location Manufacturing Distribution Sales and Corporate Offices Service Centers Consumer Solutions U.S. and 9 foreign countries 22 27 10 31 Industrial & Flow Technologies U.S. and 14 foreign countries 20 10 4 10 Corporate U.S. and 3 foreign countries — — 5 — Total 42 37 19 41 We believe that our production facilities, as well as the related machinery and equipment, are well maintained and suitable for their purpose and are adequate to support our businesses.
Biggest changeThe following is a summary of our principal properties as of December 31, 2023, including manufacturing, distribution, sales offices and service centers: No. of Sites Location Manufacturing Distribution Sales and Corporate Offices Service Centers Flow U.S. and 15 foreign countries 21 10 5 9 Water Solutions U.S. and 6 foreign countries 13 6 7 30 Pool U.S. and 2 foreign countries 7 11 2 1 Corporate U.S. and 3 foreign countries — — 6 — Total 41 27 20 40 We believe that our production sites, as well as the related machinery and equipment, are well maintained and suitable for their purpose and are adequate to support our businesses.
ITEM 2. PROPERTIES Our principal office is located in leased premises in London, U.K., and our management office in the U.S. is located in leased premises in Golden Valley, Minnesota. Our operations are conducted in facilities throughout the world. These facilities house manufacturing and distribution operations, as well as sales and marketing, engineering and administrative offices.
ITEM 2. PROPERTIES Our principal office is located in leased premises in London, U.K., and our management office in the U.S. is located in leased premises in Golden Valley, Minnesota. Our operations are conducted in sites throughout the world. These sites house manufacturing and distribution operations, as well as sales and marketing, engineering and administrative offices.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

10 edited+0 added−4 removed2 unchanged
Biggest changeExecutive Vice President and President, Industrial & Flow Technologies 2020 – 2022; Senior Vice President of Pentair’s former Aquatic Systems reporting segment 2016 – 2019; Vice President of Pentair’s former Valves & Controls business 2014 – 2016; Vice President Growth Strategy 2010 – 2014; Various business leadership positions of Pentair 2005 – 2014; Consultant at Bain & Co 2002 – 2005.
Biggest changePedretti 53 Executive Vice President and Chief Executive Officer of the Pool reporting segment since January 1, 2023; Executive Vice President and President of the Flow reporting segment 2020 – 2022; Senior Vice President of Pentair’s former Aquatic Systems reporting segment 2016 – 2019; Vice President of Pentair’s former Valves & Controls business 2014 – 2016; Vice President Growth Strategy 2010 – 2014; Various business leadership positions of Pentair 2005 – 2014; Consultant at Bain & Co 2002 – 2005.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 18 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Current executive officers of Pentair plc, their ages, current position and their business experience during at least the past five years are as follows: Name Age Current Position and Business Experience John L.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 20 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Current executive officers of Pentair plc, their ages, current position and their business experience during at least the past five years are as follows: Name Age Current Position and Business Experience John L.
Stauch 58 President and Chief Executive Officer since 2018; Executive Vice President and Chief Financial Officer 2007 – 2018; Chief Financial Officer of the Automation and Control Systems unit of Honeywell International Inc. 2005 – 2007; Vice President, Finance and Chief Financial Officer of the Sensing and Controls unit of Honeywell International Inc. 2004 – 2005; Vice President, Finance and Chief Financial Officer of the Automation & Control Products unit of Honeywell International Inc. 2002 – 2004; Chief Financial Officer and IT Director of PerkinElmer Optoelectronics, a unit of PerkinElmer, Inc., 2000 – 2002.
Stauch 59 President and Chief Executive Officer since 2018; Executive Vice President and Chief Financial Officer 2007 – 2018; Chief Financial Officer of the Automation and Control Systems unit of Honeywell International Inc. 2005 – 2007; Vice President, Finance and Chief Financial Officer of the Sensing and Controls unit of Honeywell International Inc. 2004 – 2005; Vice President, Finance and Chief Financial Officer of the Automation & Control Products unit of Honeywell International Inc. 2002 – 2004; Chief Financial Officer and IT Director of PerkinElmer Optoelectronics, a unit of PerkinElmer, Inc., 2000 – 2002.
Rolchigo 61 Executive Vice President and Chief Technology Officer since 2018; Chief Technology Officer 2017 – 2018; Vice President of Technology 2015 – 2017; Vice President of Engineering 2007 – 2015; Business Development Director of Water Technologies business of GE Global Research Center 2006 – 2007; Director of Technology of GE Water & Process Technologies 2003 – 2006; Chief Technology Officer of Osmonics 2000 – 2003; Vice President of Research & Development of Osmonics 1998 – 2000.
Rolchigo 62 Executive Vice President and Chief Technology Officer since 2018; Chief Technology Officer 2017 – 2018; Vice President of Technology 2015 – 2017; Vice President of Engineering 2007 – 2015; Business Development Director of Water Technologies business of GE Global Research Center 2006 – 2007; Director of Technology of GE Water & Process Technologies 2003 – 2006; Chief Technology Officer of Osmonics 2000 – 2003; Vice President of Research & Development of Osmonics 1998 – 2000.
Robertson 52 Executive Vice President, General Counsel, Secretary and Chief Social Responsibility Officer since 2020; Executive Vice President, General Counsel and Secretary 2018 – 2020; General Counsel, Water segment 2017 – 2018; Executive Vice President, General Counsel and Corporate Secretary of SUPERVALU Inc.
Robertson 53 Executive Vice President, General Counsel, Secretary and Chief Social Responsibility Officer since 2020; Executive Vice President, General Counsel and Secretary 2018 – 2020; General Counsel, Water segment 2017 – 2018; Executive Vice President, General Counsel and Corporate Secretary of SUPERVALU Inc.
Executive Vice President, Chief Human Resources Officer and Chief Transformation Officer 2021 – 2022; Vice President of Total Rewards and Human Resources Information Systems 2018 – 2021; Vice President and Project Management Office Leader for the separation of nVent plc (Pentair’s former electrical business) 2017 – 2018; Vice President of Human Resources Technology, Operations, and Equity Compensation 2016 – 2018; Senior Director of Human Resources Technology and Services 2011 – 2016; Various consulting positions of increasing responsibility at IBM Global Business Services 2000 – 2011.
Chiu 45 Executive Vice President and President of the Water Solutions reporting segment since January 1, 2023; Executive Vice President, Chief Human Resources Officer and Chief Transformation Officer 2021 – 2022; Vice President of Total Rewards and Human Resources Information Systems 2018 – 2021; Vice President and Project Management Office Leader for the separation of nVent plc (Pentair’s former electrical business) 2017 – 2018; Vice President of Human Resources Technology, Operations, and Equity Compensation 2016 – 2018; Senior Director of Human Resources Technology and Services 2011 – 2016; Various consulting positions of increasing responsibility at IBM Global Business Services 2000 – 2011.
Vice President of Global Talent and Corporate Human Resources of Honeywell International Inc. 2021 – 2022; Vice President and Chief Human Resources Officer of Collins Aerospace 2019 – 2021; Vice President of Talent of Collins Aerospace 2018 – 2019; Vice President of Human Resources of Collins Aerospace 2016 – 2018; Various positions of increasing responsibility at Shell 2000 – 2016.
Hooper 51 Executive Vice President and Chief Human Resources Officer since January 1, 2023; Vice President of Global Talent and Corporate Human Resources of Honeywell International Inc. 2021 – 2022; Vice President and Chief Human Resources Officer of Collins Aerospace 2019 – 2021; Vice President of Talent of Collins Aerospace 2018 – 2019; Vice President of Human Resources of Collins Aerospace 2016 – 2018; Various positions of increasing responsibility at Shell 2000 – 2016.
Fishman 59 Executive Vice President, Chief Financial Officer and Chief Accounting Officer since 2020; also Interim President, Consumer Solutions during 2022; Executive Vice President and Chief Financial Officer of NCR Corporation (a global provider of omni-channel technology solutions) 2016 – 2018; Senior Vice President and Chief Financial Officer of NCR Corporation 2010 – 2016; Vice President and Corporate Controller of NCR Corporation 2007 – 2009.
Robert P. Fishman 60 Executive Vice President, Chief Financial Officer and Chief Accounting Officer since 2020; Executive Vice President and Chief Financial Officer of NCR Corporation (a global provider of omni-channel technology solutions) 2016 – 2018; Senior Vice President and Chief Financial Officer of NCR Corporation 2010 – 2016; Vice President and Corporate Controller of NCR Corporation 2007 – 2009.
Stephen J. Pilla 59 Effective January 1, 2023, Mr. Pilla is the Executive Vice President, Chief Supply Chain Officer and Chief Transformation Officer. Executive Vice President and Chief Supply Chain Officer since 2020; Vice President and Chief Supply Chain Officer of Red Wing Shoe Co.
Stephen J. Pilla 60 Executive Vice President, Chief Supply Chain Officer and Chief Transformation Officer since January 1, 2023; Executive Vice President and Chief Supply Chain Officer 2020 – 2022; Vice President and Chief Supply Chain Officer of Red Wing Shoe Co.
Group President of Pentair’s Pool business 2021 – 2022; Vice President of Pentair’s Pool business 2017 – 2021; Vice President and Strategic Business Unit leader for Pentair’s Fluid Motion platform 2016 – 2017; Various other business leadership positions of Pentair 2010 – 2016. 19 PART II
Wiggins 49 Executive Vice President and President of the Flow reporting segment since January 1, 2023; Group President of Pentair’s Pool business 2021 – 2022; Vice President of Pentair’s Pool business 2017 – 2021; Vice President and Strategic Business Unit leader for Pentair’s Fluid Motion platform 2016 – 2017; Various other business leadership positions of Pentair 2010 – 2016. 21 PART II
Removed
Adrian C. Chiu 44 Effective January 1, 2023, Mr. Chiu is Executive Vice President and President of the new Water Solutions reporting segment.
Removed
Tanya L. Hooper 50 Effective January 1, 2023, Ms. Hooper is the Executive Vice President and Chief Human Resources Officer.
Removed
Jerome O. Pedretti 52 Effective January 1, 2023, Mr. Pedretti is Executive Vice President and Chief Executive Officer of the new Pool reporting segment.
Removed
De’Mon L. Wiggins 48 Effective January 1, 2023, Mr. Wiggins is Executive Vice President and President of the Industrial & Flow Technologies segment.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+1 added−0 removed4 unchanged
Biggest changeOn the basis of our size and diversity of businesses, we believe the S&P 500 Industrials Index is an appropriate published industry index for comparison purposes. 20 Base Period December INDEXED RETURNS Years ended December 31 Company / Index 2017 2018 2019 2020 2021 2022 Pentair plc $ 100 $ 81.14 $ 100.35 $ 118.30 $ 164.73 $ 103.16 S&P 500 Index 100 95.62 125.72 148.85 191.58 156.88 S&P 500 Industrials Index 100 96.95 127.95 157.60 201.56 162.45 Purchases of Equity Securities The following table provides information with respect to purchases we made of our ordinary shares during the fourth quarter of 2022: (a) (b) (c) (d) Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Dollar value of shares that may yet be purchased under the plans or programs October 1 – October 29 86 $ 41.81 — $ 600,002,203 October 30 – November 26 1,014 42.50 — 600,002,203 November 27 – December 31 1,432 46.20 — 600,002,203 Total 2,532 — (a) The purchases in this column include 86 shares for the period October 1 – October 29, 1,014 shares for the period October 30 – November 26, and 1,432 shares for the period November 27 – December 31 deemed surrendered to us by participants in our equity incentive plans to satisfy the exercise price or withholding of tax obligations related to the exercise of stock options and vesting of restricted and performance shares.
Biggest changeOn the basis of our size and diversity of businesses, we believe the S&P 500 Industrials Index and the S&P Mid Cap 400 Index are appropriate published industry indexes for comparison purposes. 22 Base Period December INDEXED RETURNS Years ended December 31 Company / Index 2018 2019 2020 2021 2022 2023 Pentair plc $ 100 $ 123.68 $ 145.80 $ 203.02 $ 127.14 $ 208.71 S&P 500 Index 100 131.49 155.68 200.37 164.08 207.21 S&P 500 Industrials Index 100 131.97 162.55 207.89 167.55 218.55 S&P Mid Cap 400 Index 100 124.05 138.70 170.89 146.14 167.26 Purchases of Equity Securities The following table provides information with respect to purchases we made of our ordinary shares during the fourth quarter of 2023: (a) (b) (c) (d) Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Dollar value of shares that may yet be purchased under the plans or programs October 1 – October 28 4,679 $ 63.56 — $ 600,002,203 October 29 – November 25 594 60.99 — 600,002,203 November 26 – December 31 1,283 65.23 — 600,002,203 Total 6,556 — (a) The purchases in this column include 4,679 shares for the period October 1 – October 28, 594 shares for the period October 29 – November 25, and 1,283 shares for the period November 26 – December 31 deemed surrendered to us by participants in our equity incentive plans to satisfy the exercise price or withholding of tax obligations related to the exercise of stock options and vesting of restricted and performance shares.
From time to time, we may enter into a Rule 10b5-1 trading plan for the purpose of repurchasing shares under this authorization. ITEM 6. [RESERVED] 21
From time to time, we may enter into a Rule 10b5-1 trading plan for the purpose of repurchasing shares under this authorization. ITEM 6. [RESERVED] 23
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our ordinary shares are listed for trading on the New York Stock Exchange (“NYSE”) under the symbol “PNR.” As of December 31, 2022, there were 12,940 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our ordinary shares are listed for trading on the New York Stock Exchange (“NYSE”) under the symbol “PNR.” As of December 31, 2023, there were 12,363 shareholders of record.
The graph also contains for comparison purposes the S&P 500 Index and the S&P 500 Industrials Index, assuming the same investment level and reinvestment of dividends. By virtue of our market capitalization, we are a component of the S&P 500 Index.
The graph also contains for comparison purposes the S&P 500 Index, the S&P 500 Industrials Index and the S&P Mid Cap 400 Index assuming the same investment level and reinvestment of dividends. By virtue of our market capitalization, we are a component of the S&P 500 Index.
The following graph sets forth the cumulative total shareholder return on our ordinary shares for the last five years, assuming the investment of $100 on December 31, 2017 and the reinvestment of all dividends since that date to December 31, 2022.
The following graph sets forth the cumulative total shareholder return on our ordinary shares for the last five years, assuming the investment of $100 on December 31, 2018 and the reinvestment of all dividends since that date to December 31, 2023.
(d) In December 2020, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $750.0 million (the “2020 Authorization”). The 2020 Authorization expires on December 31, 2025. We have $600.0 million remaining availability for repurchases under the 2020 Authorization.
(d) In December 2020, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $750.0 million. This authorization expires on December 31, 2025. As of December 31, 2023, we had $600.0 million remaining availability for repurchases under this authorization.
Pentair has paid 188 consecutive quarterly cash dividends, including most recently a dividend of $0.21 per share in the fourth quarter of 2022.
Pentair has paid 192 consecutive quarterly cash dividends, including most recently a dividend of $0.22 per share in the fourth quarter of 2023.
On December 12, 2022, Pentair’s Board of Directors approved a 5 percent increase in the Company’s regular quarterly cash dividend rate (from $0.21 per share to $0.22 per share) that was paid on February 3, 2023 to shareholders of record at the close of business on January 20, 2023. 2023 marks the 47 th consecutive year that Pentair has increased its dividend.
On December 11, 2023, Pentair’s Board of Directors approved a regular quarterly cash dividend of $0.23 per share that was paid on February 2, 2024 to shareholders of record at the close of business on January 19, 2024.
Added
This dividend reflects a 5 percent increase in the Company’s regular cash dividend rate and marks the 48 th consecutive year that Pentair has increased its dividend.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+26 added−22 removed51 unchanged
Biggest changeNot Meaningful Net sales The components of the consolidated net sales change were as follows: 2022 vs 2021 2021 vs 2020 Volume (7.1) % 16.3 % Price 13.3 4.6 Core growth 6.2 20.9 Acquisition/Divestiture 5.5 2.6 Currency (2.2) 1.3 Total 9.5 % 24.8 % The 9.5 percent increase in consolidated net sales in 2022 from 2021 was primarily the result of: • increases in selling prices to mitigate a rise in inflationary costs; • increased sales from the acquisitions of Manitowoc Ice, Pleatco Holdings, LLC (“Pleatco”), and Ken’s Beverage, Inc (“KBI”) completed in the third quarter of 2022, fourth quarter of 2021 and second quarter of 2021, respectively; • sales volume increase in our industrial solutions business within our Industrial & Flow Technologies segment; and • sales volume increase in our commercial water solutions business within our Consumer Solutions segment. 24 This increase was partially offset by: • sales volume decrease in our Consumer Solutions segment mainly driven by our pool and residential water treatment businesses; • sales volume decrease in our residential and irrigation flow businesses within our Industrial & Flow Technologies segment; and • unfavorable foreign currency effects in 2022 compared to the prior year.
Biggest changeNot Meaningful Net sales The components of the consolidated net sales change were as follows: 2023 vs 2022 2022 vs 2021 Volume (11.3) % (7.1) % Price 6.4 13.3 Core growth (4.9) 6.2 Acquisition/Divestiture 4.4 5.5 Currency 0.1 (2.2) Total (0.4) % 9.5 % The 0.4 percent decrease in consolidated net sales in 2023 from 2022 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; and • decreased sales volume in our Pool segment primarily due to higher channel inventory and lower demand compared to the prior year.
Without limitation, any statements preceded or followed by or that include the words “targets,” “plans,” “believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “should,” “would,” “could,” “positioned,” “strategy,” “future” or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements.
Without limitation, any statements preceded or followed by or that include the words “targets,” “plans,” “believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “should,” “would,” “could,” “positioned,” “strategy,” or “future” or words, phrases, or terms of similar substance or the negative thereof are forward-looking statements.
Investing activities 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.
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.
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. 30 Our debt agreements contain various financial covenants, but the most restrictive covenants are contained in the Senior Credit Facility and the Term Loan Facility.
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.
If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary.
If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary. 40
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 34 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.
This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital. The non-recurring fair value measurement is a “Level 3” measurement under the fair value hierarchy. No impairment charges were recognized in 2022 or 2021 as a result of our annual impairment assessment.
This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital. The non-recurring fair value measurement is a “Level 3” measurement under the fair value hierarchy. No impairment charges were recognized in 2023 or 2022 as a result of our annual impairment assessment.
A 100 basis point increase or decrease in the assumed rate of return on pension assets or discount rates for our pension and other post-retirement benefit plans would result in an immaterial change in our ongoing pension expense. These estimates exclude any potential mark-to-market adjustments.
A 100 basis point increase or decrease in the assumed rate of return on pension assets or discount rates for our U.S. pension and other post-retirement benefit plans would result in an immaterial change in our ongoing pension expense. These estimates exclude any potential mark-to-market adjustments.
Consistent with historical trends, we experienced seasonal cash usage in the first quarter of 2022 and drew on our revolving credit facility to fund our operations. This cash usage reversed in the second quarter of 2022 as the seasonality of our businesses peaked and generated significant cash to fund our operations.
Consistent with historical trends, we experienced seasonal cash usage in the first quarter of 2023 and drew on our revolving credit facility to fund our operations. This cash usage reversed in the second quarter of 2023 as the seasonality of our businesses peaked and generated significant cash to fund our operations.
These factors include the overall global economic and business conditions impacting our business, including the strength of housing and related markets and conditions relating to the conflict between Russia and Ukraine and related sanctions; supply, demand, logistics, competition and pricing pressures related to and in the markets we serve; the ability to achieve the benefits of our restructuring plans, cost reduction initiatives and transformation program; the impact of raw material, logistics and labor costs and other inflation; volatility in currency exchange rates; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; risks associated with operating foreign businesses; the impact of seasonality of sales and weather conditions; our ability to comply with laws and regulations; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits or impact trade agreements and tariffs; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating and ESG goals.
These factors include the overall global economic and business conditions impacting our business, including the strength of housing and related markets and conditions relating to international hostilities; supply, demand, logistics, competition and pricing pressures related to and in the markets we serve; the ability to achieve the benefits of our restructuring plans, cost reduction initiatives and Transformation Program; the impact of raw material, logistics and labor costs and other inflation; volatility in currency exchange rates and interest rates; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; risks associated with operating foreign businesses; the impact of seasonality of sales and weather conditions; our ability to comply with laws and regulations; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits or impact trade agreements and tariffs; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating and ESG goals.
(4) Includes liabilities due to non-guarantor subsidiaries of $259.8 million. The Parent Company Guarantor and Subsidiary Issuer do not have material results of operations on a combined basis.
(4) Includes liabilities due to non-guarantor subsidiaries of $268.4 million. The Parent Company Guarantor and Subsidiary Issuer do not have material results of operations on a combined basis.
This accounting method also results in the potential for volatile and difficult to forecast mark-to-market adjustments. Mark-to-market adjustments resulted in pre-tax gains of $17.5 million and $2.4 million in 2022 and 2021, respectively, and a pre-tax loss of $6.7 million in 2020.
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.
The Term Loan Facility has a maturity date of July 28, 2027, with required quarterly installment payments of $6.3 million beginning on the last day of the third quarter of 2023 and increasing to $12.5 million beginning with the last day of the third quarter of 2024.
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.
Distributable reserves may be created through the earnings of the Irish parent company and through a reduction in share capital approved by the Irish High Court. Distributable reserves are not linked to a U.S. GAAP reported amount (e.g., retained earnings). Our distributable reserve balance was $7.1 billion and $8.4 billion as of December 31, 2022 and 2021, respectively.
Distributable reserves may be created through the earnings of the Irish parent company and through a reduction in share capital approved by the Irish High Court. Distributable reserves are not linked to a U.S. GAAP reported amount (e.g., retained earnings). Our distributable reserve balance was $6.9 billion and $7.1 billion as of December 31, 2023 and 2022, respectively.
The applicable margin is based on, at PFSA’s election, Pentair’s leverage level or PFSA’s public credit rating. As of December 31, 2022, total availability under the Senior Credit Facility was $580.0 million.
The applicable margin is based on, at PFSA’s election, Pentair’s leverage level or PFSA’s public credit rating. As of December 31, 2023, total availability under the Senior Credit Facility was $900.0 million.
As of December 31, 2022, we had $89.6 million of cash held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences. Authorized shares Our authorized share capital consists of 426.0 million ordinary shares with a par value of $0.01 per share.
As of December 31, 2023, we had $87.5 million of cash held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences. Authorized shares Our authorized share capital consists of 426.0 million ordinary shares with a par value of $0.01 per share.
These tax liabilities are reflected net of related tax loss carryforwards. As events change or resolution occurs, these liabilities are adjusted, such as in the case of audit settlements with taxing authorities. The ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities.
As events change or resolution occurs, these liabilities are adjusted, such as in the case of audit settlements with taxing authorities. The ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities.
In addition, we issue financial stand-by letters of credit primarily to secure our performance to third parties under self-insurance programs. As of December 31, 2022 and 2021, the outstanding value of bonds, letters of credit and bank guarantees totaled $99.7 million and $104.5 million, respectively.
In addition, we issue financial stand-by letters of credit primarily to secure our performance to third parties under self-insurance programs. As of December 31, 2023 and 2022, the outstanding value of bonds, letters of credit and bank guarantees totaled $124.3 million and $99.7 million, respectively.
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 December 31, 2022. Borrowings under these credit facilities bear interest at variable rates.
In addition to the Senior Credit Facility and the Term Loan Facility, we have various other credit facilities with an aggregate availability of $20.9 million, of which there were no outstanding borrowings at December 31, 2023. Borrowings under these credit facilities bear interest at variable rates.
Sensitivity to changes in key assumptions A 100 basis point increase or decrease in the discount rates used to measure our pension and other post-retirement benefit plans would result in a $7.1 million increase or $6.1 million decrease in our total projected benefit obligation.
Sensitivity to changes in key assumptions 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.
We expect to execute these objectives by: • Delivering profitable revenue growth and productivity for customers and shareholders; • Continuing to focus on capital allocation through: ◦ Committing to maintain our investment grade rating; ◦ Focusing on reducing our long-term debt; ◦ Returning cash to shareholders through dividends and share repurchases; and ◦ Accelerating our performance with strategically-aligned mergers and acquisitions; • Focusing growth initiatives that accelerate our investments in digital, technology and services expansion; • Continuing to implement our Transformation Program initiatives that will drive operational excellence, reduce complexity and improve our organizational structure; and • Building a high performance growth culture and delivering on our commitments while living our Win Right values. 23 CONSOLIDATED RESULTS OF OPERATIONS The consolidated results of operations were as follows: Years ended December 31 % / point change In millions 2022 2021 2020 2022 vs 2021 2021 vs 2020 Net sales $ 4,121.8 $ 3,764.8 $ 3,017.8 9.5 % 24.8 % Cost of goods sold 2,757.2 2,445.6 1,960.2 12.7 % 24.8 % Gross profit 1,364.6 1,319.2 1,057.6 3.4 % 24.7 % % of net sales 33.1 % 35.0 % 35.0 % (1.9) pts — pts Selling, general and administrative 677.1 596.4 520.5 13.5 % 14.6 % % of net sales 16.4 % 15.8 % 17.2 % 0.6 pts (1.4) pts Research and development 92.2 85.9 75.7 7.3 % 13.5 % % of net sales 2.2 % 2.3 % 2.5 % (0.1) pts (0.2) pts Operating income 595.3 636.9 461.4 (6.5) % 38.0 % % of net sales 14.4 % 16.9 % 15.3 % (2.5) pts 1.6 pts (Gain) loss on sale of businesses (0.2) (1.4) 0.1 N.M.
We expect to execute these objectives by: • Delivering profitable revenue growth and productivity for customers and shareholders; • Continuing to focus on capital allocation through: ◦ Committing to maintain our investment grade rating; ◦ Focusing on reducing our long-term debt; ◦ Returning cash to shareholders through dividends and share repurchases; and ◦ 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; and • Building a high performance growth culture and delivering on our commitments while living our Win Right values. 25 CONSOLIDATED RESULTS OF OPERATIONS The consolidated results of operations were as follows: Years ended December 31 % / point change In millions 2023 2022 2021 2023 vs 2022 2022 vs 2021 Net sales $ 4,104.5 $ 4,121.8 $ 3,764.8 (0.4) % 9.5 % Cost of goods sold 2,585.3 2,757.2 2,445.6 (6.2) % 12.7 % Gross profit 1,519.2 1,364.6 1,319.2 11.3 % 3.4 % % of net sales 37.0 % 33.1 % 35.0 % 3.9 pts (1.9) pts Selling, general and administrative 680.2 677.1 596.4 0.5 % 13.5 % % of net sales 16.6 % 16.4 % 15.8 % 0.2 pts 0.6 pts Research and development 99.8 92.2 85.9 8.2 % 7.3 % % of net sales 2.4 % 2.2 % 2.3 % 0.2 pts (0.1) pts Operating income 739.2 595.3 636.9 24.2 % (6.5) % % of net sales 18.0 % 14.4 % 16.9 % 3.6 pts (2.5) pts Gain on sale of businesses — (0.2) (1.4) N.M.
The following table is a reconciliation of free cash flow: Years ended December 31 In millions 2022 2021 2020 Net cash provided by operating activities of continuing operations $ 364.3 $ 613.6 $ 574.2 Capital expenditures of continuing operations (85.2) (60.2) (62.2) Proceeds from sale of property and equipment of continuing operations 4.1 3.9 0.1 Free cash flow from continuing operations $ 283.2 $ 557.3 $ 512.1 Net cash used for operating activities of discontinued operations (1.0) (0.4) (0.6) Free cash flow $ 282.2 $ 556.9 $ 511.5 Debt and Capital Pentair, Pentair Finance S.à r.l (“PFSA“) and Pentair, Inc. are parties to a credit agreement (the “Senior Credit Facility”), with Pentair as guarantor and PFSA and Pentair, Inc. as borrowers, which was amended and restated in December 2021 and further amended in December 2022, providing for a $900.0 million senior unsecured revolving credit facility and a $200.0 million senior unsecured term loan facility.
The following table is a reconciliation of free cash flow: Years ended December 31 In millions 2023 2022 2021 Net cash provided by operating activities of continuing operations $ 620.8 $ 364.3 $ 613.6 Capital expenditures of continuing operations (76.0) (85.2) (60.2) Proceeds from sale of property and equipment of continuing operations 5.6 4.1 3.9 Free cash flow from continuing operations $ 550.4 $ 283.2 $ 557.3 Net cash used for operating activities of discontinued operations (1.6) (1.0) (0.4) Free cash flow $ 548.8 $ 282.2 $ 556.9 Debt and Capital Pentair, Pentair Finance S.à r.l (“PFSA“) and Pentair, Inc. 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 balance of dividends payable included in Other current liabilities on our Consolidated Balance Sheets was $36.2 million at December 31, 2022. Dividends paid per ordinary share were $0.84, $0.80 and $0.76 for the years ended December 31, 2022, 2021 and 2020, respectively.
The balance of dividends payable included in Other current liabilities on our Consolidated Balance Sheets was $38.0 million at December 31, 2023. Dividends paid per ordinary share were $0.88, $0.84 and $0.80 for the years ended December 31, 2023, 2022 and 2021, respectively.
Overview Pentair plc and its consolidated subsidiaries (“we,” “us,” “our,” “Pentair” or the “Company”) is a pure play water industrial manufacturing company and in 2022 we were comprised of two reporting segments: Consumer Solutions and Industrial & Flow Technologies. We classify our operations into business segments based primarily on types of products offered and markets served.
Overview 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. We classify our operations into business segments based primarily on types of products offered and markets served.
However, such discussion is not incorporated by reference into, and does not constitute a part of, this Annual Report on Form 10-K. SEGMENT RESULTS OF OPERATIONS The summary that follows provides a discussion of the results of operations of each of our 2022 reportable segments (Consumer Solutions and Industrial & Flow Technologies).
However, such discussion is not incorporated by reference into, and does not constitute a part of, this Annual Report on Form 10-K. SEGMENT RESULTS OF OPERATIONS The summary that follows provides a discussion of the results of operations of our three reportable segments (Flow, Water Solutions and Pool).
The Subsidiary Issuer’s principal source of cash flow is interest income from its subsidiaries. None of the subsidiaries of the Parent Company Guarantor or the Subsidiary Issuer is under any direct obligation to pay or otherwise fund amounts due on the senior notes or the guarantees, whether in the form of dividends, distributions, loans or other payments.
None of the subsidiaries of the Parent Company Guarantor or the Subsidiary Issuer is under any direct obligation to pay or otherwise fund amounts due on the senior notes or the guarantees, whether in the form of dividends, distributions, loans or other payments.
N.M. Net interest expense 61.8 12.5 23.9 N.M. (47.7) % Other (income) expense (16.9) (1.0) 5.3 N.M. N.M. Income from continuing operations before income taxes 550.6 626.8 432.1 (12.2) % 45.1 % Provision for income taxes 67.4 70.8 75.0 (4.8) % (5.6) % Effective tax rate 12.2 % 11.3 % 17.4 % 0.9 pts (6.1) pts N.M.
N.M. Net interest expense 118.3 61.8 12.5 N.M. N.M. Other expense (income) 2.0 (16.9) (1.0) N.M. N.M. Income from continuing operations before income taxes 618.9 550.6 626.8 12.4 % (12.2) % (Benefit) provision for income taxes (4.0) 67.4 70.8 N.M. (4.8) % Effective tax rate (0.6) % 12.2 % 11.3 % (12.8) pts 0.9 pts N.M.
Financing activities 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.
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. 33 Free Cash Flow In addition to measuring our cash flow generation or usage based upon operating, investing and financing classifications included in the Consolidated Statements of Cash Flows, we also measure our free cash flow.
COMMITMENTS AND CONTINGENCIES We have been, and in the future may be, made parties to a number of actions filed or have been, and in the future may be, given notice of potential claims relating to the conduct of our business, including those relating to commercial, regulatory or contractual disputes with suppliers, authorities, customers or parties to acquisitions and divestitures, intellectual property matters, environmental, asbestos, safety and health matters, product liability, the use or installation of our products, consumer matters, and employment and labor matters.
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. 36 COMMITMENTS AND CONTINGENCIES We have been, and in the future may be, made parties to a number of actions filed or have been, and in the future may be, given notice of potential claims relating to the conduct of our business, including those relating to commercial, regulatory or contractual disputes with suppliers, authorities, customers or parties to acquisitions and divestitures, intellectual property matters, environmental, asbestos, safety and health matters, product liability, the use or installation of our products, consumer matters, and employment and labor matters.
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, 34 would have resulted in the recognition of those assets and liabilities as of that date.
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.
Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. We complete our annual impairment test the first day of the fourth quarter each year for those identifiable assets not subject to amortization.
No impairment charges associated with identifiable intangibles with finite lives were recognized in 2023. Identifiable intangible assets not subject to amortization are tested for impairment annually or more frequently if events warrant. We complete our annual impairment test the first day of the fourth quarter each year for those identifiable assets not subject to amortization.
By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, our observance of trends in the industry and information available from other outside sources, as appropriate.
These judgments are based on our historical experience, terms of existing contracts, our observance of trends in the industry and information available from other outside sources, as appropriate.
In July 2022, in contemplation of the acquisition of Manitowoc Ice, Pentair, as guarantor, and PFSA, as issuer, completed a public offering of $400.0 million aggregate principal amount of 5.900% Senior Notes due 2032 (“2032 Senior Notes”).
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”).
The increase was partially offset by: • decreased sales volume in our pool and residential water treatment businesses in 2022 compared to the prior year; and 26 • unfavorable foreign currency effects compared to 2021.
This increase was partially offset by: • decreased sales volume in our residential business in 2022 compared to the prior year; and • unfavorable foreign currency effects.
Expected rate of return The expected rate of return is designed to be a long-term assumption that may be subject to considerable year-to-year variance from actual returns. In developing the expected long-term rate of return, we considered our historical returns, with consideration given to forecasted economic conditions, our asset allocations, input from external consultants and broader long-term market indices.
In developing the expected long-term rate of return, we considered our historical returns, with consideration given to forecasted economic conditions, our asset allocations, input from external consultants and broader long-term market indices.
Industrial & Flow Technologies The net sales and segment income for Industrial & Flow Technologies were as follows: Years ended December 31 % / point change In millions 2022 2021 2020 2022 vs 2021 2021 vs 2020 Net sales $ 1,500.8 $ 1,421.4 $ 1,273.6 5.6 % 11.6 % Segment income 242.3 213.3 164.6 13.6 % 29.6 % % of net sales 16.1 % 15.0 % 12.9 % 1.1 pts 2.1 pts Net sales The components of the change in Industrial & Flow Technologies net sales were as follows: 2022 vs 2021 2021 vs 2020 Volume (0.7) % 5.9 % Price 10.4 3.2 Core growth 9.7 9.1 Acquisition/Divestiture — 0.4 Currency (4.1) 2.1 Total 5.6 % 11.6 % ` The 5.6 percent increase in net sales for Industrial & Flow Technologies in 2022 from 2021 was primarily the result of: • increases in selling prices to mitigate inflationary cost increases; and • increased sales volume in our industrial solutions business in 2022 due to continued recovery in our project sales.
Flow The net sales and segment income for Flow were as follows: Years ended December 31 % / point change In millions 2023 2022 2021 2023 vs 2022 2022 vs 2021 Net sales $ 1,582.1 $ 1,500.8 $ 1,421.4 5.4 % 5.6 % Segment income 282.3 242.3 213.3 16.5 % 13.6 % % of net sales 17.8 % 16.1 % 15.0 % 1.7 pts 1.1 pts Net sales The components of the change in Flow net sales were as follows: 2023 vs 2022 2022 vs 2021 Volume (2.0) % (0.7) % Price 7.1 10.4 Core growth 5.1 9.7 Currency 0.3 (4.1) Total 5.4 % 5.6 % The 5.4 percent increase in net sales for Flow in 2023 from 2022 was primarily the result of: • 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; and • favorable foreign currency effects in 2023 compared to the prior year.
During the year ended December 31, 2022, we repurchased 1.0 million of our ordinary shares for $50.0 million under the 2020 Authorization. As of December 31, 2022, we had $600.0 million available for share repurchases under the 2020 Authorization.
During the year ended December 31, 2023, no ordinary shares were repurchased. As of December 31, 2023, we had $600.0 million available for share repurchases under this authorization.
Dividends On December 12, 2022, the Board of Directors approved a 5 percent increase in the Company’s regular quarterly dividend rate (from $0.21 per share to $0.22 per share) that was paid on February 3, 2023 to shareholders of record at the close of business on January 20, 2023.
Dividends On December 11, 2023, the Board of Directors approved a regular quarterly cash dividend of $0.23 per share that was paid on February 2, 2024 to shareholders of record at the close of business on January 19, 2024. This dividend reflects a 5 percent increase in the Company’s regular cash dividend rate.
During 2022, we made strategic progress on our Transformation Program initiatives with a primary focus on two of our four key themes of pricing excellence and strategic sourcing and built capabilities across all themes, including the other two of operations excellence and organizational effectiveness.
During 2023, 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.
All changes that do not qualify as measurement period adjustments are included in current period earnings. Pension and other post-retirement plans We sponsor U.S. and non-U.S. defined-benefit pension and other post-retirement plans. The amounts recognized in our consolidated financial statements related to our defined-benefit pension and other post-retirement plans are determined from actuarial valuations.
Pension and other post-retirement plans We sponsor U.S. and non-U.S. defined-benefit pension and other post-retirement plans. The amounts recognized in our consolidated financial statements related to our defined-benefit pension and other post-retirement plans are determined from actuarial valuations.
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. Identifiable intangible assets Our primary identifiable intangible assets include: customer relationships, trade names, proprietary technology and patents.
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.
The Subsidiary Issuer is a holding company formed to own directly and indirectly substantially all of its operating and other subsidiaries and to issue debt securities, including the senior notes. The Parent Company Guarantor’s principal source of cash flow, including cash flow to make payments on the senior notes pursuant to the guarantees, is dividends from its subsidiaries.
The Parent Company Guarantor is a holding company established to own directly and indirectly substantially all of its operating and other subsidiaries. The Subsidiary Issuer is a holding company formed to own directly and indirectly substantially all of its operating and other subsidiaries and to issue debt securities, including the senior notes.
This increase was partially offset by: • decreased sales volume in our residential and irrigation flow businesses in 2022 compared to the prior year; and • unfavorable foreign currency effects in 2022 compared to 2021. 27 Segment income The components of the change in Industrial & Flow Technologies segment income as a percentage of net sales from the prior period were as follows: 2022 2021 Growth/Price/Acquisition 9.6 pts 3.6 pts Currency (0.1) 0.1 Inflation (7.4) (3.9) Productivity (1.0) 2.3 Total 1.1 pts 2.1 pts The 1.1 percentage point increase in segment income for Industrial & Flow Technologies as a percentage of net sales in 2022 from 2021 was primarily the result of: • increases in selling prices to mitigate inflationary cost increases.
The increase was partially offset by: • decreased sales volume in our residential business in 2023 compared to the prior year. 28 Segment income The components of the change in Flow segment income as a percentage of net sales from the prior period were as follows: 2023 2022 Growth/Price/Acquisition 5.6 pts 9.6 pts Currency (0.1) (0.1) Inflation (5.6) (7.4) Productivity 1.8 (1.0) Total 1.7 pts 1.1 pts The 1.7 percentage point increase in segment income for Flow as a percentage of net sales in 2023 from 2022 was primarily the result of: • increased selling prices to mitigate impacts of inflation; and • increased productivity mainly driven by manufacturing leverage and transformation initiatives.
We have $12.5 million of Term Loan Facility payments due in the next twelve months. We classified this debt as long-term as of December 31, 2022 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.
We classified this debt as long-term as of December 31, 2023 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.
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. There are no known or anticipated changes in our discount rate assumptions that will impact our pension expense in 2023.
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.
We perform reviews of our income tax positions on a quarterly basis and accrue for uncertain tax positions. We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the tax jurisdictions in which we operate based on our estimate of whether, and the extent to which, additional taxes will be due.
We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the tax jurisdictions in which we operate based on our estimate of whether, and the extent to which, additional taxes will be due. These tax liabilities are reflected net of related tax loss carryforwards.
Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management records the effect of a tax rate or law change on the Company’s deferred tax assets and liabilities in the period of enactment.
Management records the effect of a tax rate or law change on the Company’s deferred tax assets and liabilities in the period of enactment. Future tax rate or law changes could have a material effect on the Company’s financial condition, results of operations or cash flows.
We consider an accounting estimate to be critical if: • it requires us to make assumptions about matters that were uncertain at the time we were making the estimate; and • changes in the estimate or different estimates that we could have selected would have had a material impact on our financial condition or results of operations. 33 Our critical accounting estimates include the following: Impairment of goodwill and indefinite-lived intangibles Goodwill Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable tangible net assets and identifiable intangible assets purchased and liabilities assumed.
We consider an accounting estimate to be critical if: • it requires us to make assumptions about matters that were uncertain at the time we were making the estimate; and • changes in the estimate or different estimates that we could have selected which would have had a material impact on our financial condition or results of operations.
BACKLOG OF ORDERS BY SEGMENT December 31 In millions 2022 2021 $ change % change Consumer Solutions $ 483.1 $ 1,073.7 $ (590.6) (55.0) % Industrial & Flow Technologies 512.1 446.3 65.8 14.7 % Total $ 995.2 $ 1,520.0 $ (524.8) (34.5) % 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.
BACKLOG OF ORDERS BY SEGMENT December 31 In millions 2023 2022 $ change % change Flow $ 390.1 $ 512.1 $ (122.0) (23.8) % Water Solutions 108.5 193.5 (85.0) (43.9) % Pool 239.7 289.6 (49.9) (17.2) % Total $ 738.3 $ 995.2 $ (256.9) (25.8) % 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.
In March 2022, in contemplation of the acquisition of Manitowoc Ice, Pentair and PFSA entered into a Loan Agreement among PFSA, as borrower, Pentair, as guarantor, and the lenders and agents party thereto, providing for a $600.0 million senior unsecured term loan facility (the “Term Loan Facility”).
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.
Segment income The components of the change in Consumer Solutions segment income as a percentage of net sales from the prior period were as follows: 2022 2021 Growth/Price/Acquisition 10.8 pts 5.0 pts Currency — (0.1) Inflation (9.2) (7.7) Productivity (2.0) 2.5 Total (0.4) pts (0.3) pts The 0.4 percentage point decrease in segment income for Consumer Solutions 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; and • decreased productivity in our pool and residential water treatment businesses due to decreased sales volume.
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; and • decreased productivity due to decreased sales volume.
The following summarizes our material cash requirements from significant contractual obligations and purchase commitments that impact our liquidity as of December 31, 2022: In millions Next Twelve Months Greater Than Twelve Months Total Debt obligations (Note 8) $ 12.5 $ 2,326.8 $ 2,339.3 Interest obligations on fixed-rate debt 42.5 322.2 364.7 Operating lease obligations, net of sublease rentals (Note 15) 32.2 55.8 88.0 Purchase and marketing obligations 19.8 14.8 34.6 Pension and other post-retirement plan contributions (Note 11) 9.3 75.3 84.6 Total contractual obligations, net $ 116.3 $ 2,794.9 $ 2,911.2 The majority of the purchase obligations represent commitments for raw materials to be utilized in the normal course of business.
The following summarizes our material cash requirements from significant contractual obligations and purchase commitments that impact our liquidity as of December 31, 2023: In millions Next Twelve Months Greater Than Twelve Months Total Debt obligations (Note 8) $ 237.5 $ 1,769.3 $ 2,006.8 Interest obligations on fixed-rate debt 42.5 279.7 322.2 Operating lease obligations, net of sublease rentals (Note 15) 31.4 97.8 129.2 Pension and other post-retirement plan contributions (Note 11) 9.5 79.9 89.4 Other purchase obligations 42.4 24.2 66.6 Total contractual obligations, net $ 363.3 $ 2,250.9 $ 2,614.2 Other purchase obligations primarily include service and marketing contracts as well as commitments for raw materials to be utilized in the normal course of business.
In December 2020, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $750.0 million (the “2020 Authorization”). The 2020 Authorization expires on December 31, 2025. The 2020 Authorization supplemented the 2018 Authorization.
Share repurchases In December 2020, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $750.0 million. 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.
In millions December 31, 2022 Current assets (1) $ 2.4 Noncurrent assets (2) 2,677.4 Current liabilities (3) 1,068.6 Noncurrent liabilities (4) 2,640.3 (1) No assets due from non-guarantor subsidiaries were included. (2) Includes assets due from non-guarantor subsidiaries of $2,664.7 million. (3) Includes liabilities due to non-guarantor subsidiaries of $989.8 million.
In millions December 31, 2023 Current assets (1) $ 71.7 Noncurrent assets (2) 2,686.9 Current liabilities (3) 1,659.0 Noncurrent liabilities (4) 2,331.4 (1) No assets due from non-guarantor subsidiaries were included. (2) Includes assets due from non-guarantor subsidiaries of $2,673.3 million. (3) Includes liabilities due to non-guarantor subsidiaries of $1,583.6 million.
In the second half of 2022, we funded our operations using our strong cash flow and revolving credit facility. End-user demand for pool and certain pumping equipment follows warm weather trends and historically has been at seasonal highs from April to August.
In the second half of 2023, 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.
CRITICAL ACCOUNTING POLICIES We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are more fully described in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements. Certain accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates.
Our significant accounting policies are more fully described in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements. Certain accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty.
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 28 residential and agricultural water systems is also impacted by weather patterns, particularly by temperature, heavy flooding and droughts.
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).
Supplemental guarantor information Pentair plc (the “Parent Company Guarantor”), fully and unconditionally, guarantees the senior notes of PFSA (the “Subsidiary Issuer”).
Supplemental guarantor information Pentair plc (the “Parent Company Guarantor”), fully and unconditionally, guarantees the senior notes of PFSA (the “Subsidiary Issuer”). The Subsidiary Issuer is a Luxembourg private limited liability company and 100 percent-owned subsidiary of the Parent Company Guarantor.
In estimating future taxable income, we develop assumptions including the amount of future pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.
In estimating future taxable income, we develop assumptions including the amount of future pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying businesses.
Summary of Cash Flows Years ended December 31 In millions 2022 2021 2020 Cash provided by (used for): Operating activities of continuing operations $ 364.3 $ 613.6 $ 574.2 Investing activities (1,582.8) (390.7) (117.9) Financing activities 1,232.7 (222.2) (435.9) Operating activities In 2022, net cash provided by operating activities of continuing operations primarily reflects net income from continuing operations of $615.4 million, net of non-cash depreciation, amortization and asset impairment.
Demand for residential and agricultural water systems is also impacted by weather patterns, particularly by temperature, heavy flooding and droughts. 32 Summary of Cash Flows Years ended December 31 In millions 2023 2022 2021 Cash provided by (used for): Operating activities of continuing operations $ 620.8 $ 364.3 $ 613.6 Investing activities (85.4) (1,582.8) (390.7) Financing activities (468.1) 1,232.7 (222.2) Operating activities 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.
Any reduction in future taxable income including but not limited to any future restructuring activities may require that we record an additional valuation allowance against our deferred tax assets. An increase in the valuation allowance could result in additional income tax expense in such period and could have a significant impact on our future earnings.
The realization of our remaining deferred tax assets is primarily dependent on future taxable income in the appropriate jurisdiction. Any reduction in future taxable income including but not limited to any future restructuring activities may require that we record an additional valuation allowance against our deferred tax assets.
We expect these actions to continue into 2023 and to drive margin growth. • 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.
Key trends and uncertainties regarding our existing business The following trends and uncertainties affected our financial performance in 2023, 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.
These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying businesses. 35 We currently have recorded valuation allowances that we will maintain until when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.
We currently have recorded valuation allowances that we will maintain until when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Our income tax expense recorded in the future may be reduced to the extent of decreases in our valuation allowances.
The following table presents summarized financial information as of December 31, 2022 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.
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. 35 The following table presents summarized financial information as of 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.
We record penalties and interest related to unrecognized tax benefits in Provision for income taxes and Net interest expense , respectively, which is consistent with our past practices. As of December 31, 2022, we had recorded $0.6 million for the possible payment of penalties and $4.9 million related to the possible payment of interest.
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.
(“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.
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.
Additionally, we had a cash outflow of $20.8 million as a result of changes in net working capital, primarily due to increased sales demand and inflationary impacts leading to higher accounts receivable, inventory, accounts payable and other current liabilities balances.
Additionally, we had a cash outflow of $61.3 million as a result of changes in net working capital, primarily due to an increase in accounts receivable and decreases in accounts payable and other current liability balances, partially offset by lower inventory compared to December 31, 2022.
This decrease was partially offset by: • increases in selling prices to mitigate impacts of inflation.
This decrease was partially offset by: • increases in selling prices to mitigate the impacts of inflation; and • increased sales as a result of the Pleatco Holdings, LLC acquisition in the fourth quarter of 2021.
Consumer Solutions The net sales and segment income for Consumer Solutions were as follows: Years ended December 31 % / point change In millions 2022 2021 2020 2022 vs 2021 2021 vs 2020 Net sales $ 2,619.5 $ 2,341.9 $ 1,742.9 11.9 % 34.4 % Segment income 611.1 554.4 419.1 10.2 % 32.3 % % of net sales 23.3 % 23.7 % 24.0 % (0.4) pts (0.3) pts Net sales The components of the change in Consumer Solutions net sales were as follows: 2022 vs 2021 2021 vs 2020 Volume (10.9) % 23.8 % Price 15.0 5.7 Core growth 4.1 29.5 Acquisition 8.8 4.3 Currency (1.0) 0.6 Total 11.9 % 34.4 % The 11.9 percent increase in net sales for Consumer Solutions in 2022 from 2021 was primarily the result of: • increases in selling prices to mitigate impacts of inflation; • increased sales due to the acquisitions of Manitowoc Ice, Pleatco and KBI completed in the third quarter of 2022, the fourth quarter of 2021 and the second quarter of 2021, respectively; and • increased sales volume in our commercial water solutions business in 2022 compared to the prior year.
Water Solutions The net sales and segment income for Water Solutions were as follows: Years ended December 31 % / point change In millions 2023 2022 2021 2023 vs 2022 2022 vs 2021 Net sales $ 1,177.2 $ 986.8 $ 769.9 19.3 % 28.2 % Segment income 247.6 149.0 101.7 66.2 % 46.5 % % of net sales 21.0 % 15.1 % 13.2 % 5.9 pts 1.9 pts Net sales The components of the change in Water Solutions net sales were as follows: 2023 vs 2022 2022 vs 2021 Volume (2.0) % (6.2) % Price 3.1 15.1 Core growth 1.1 8.9 Acquisition/Divestiture 18.5 21.9 Currency (0.3) (2.6) Total 19.3 % 28.2 % 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; and • increased selling prices to mitigate inflationary cost increases.
However, we may elect to perform the quantitative goodwill impairment test even if no indications of a potential impairment exist. During 2022 and 2021, a qualitative assessment was performed. As a result, it was determined that it was more likely than not that the fair value of the reporting units exceeded their respective carrying values.
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.
Selling, general and administrative (“SG&A”) The 0.6 percentage point increase in SG&A expense as a percentage of net sales in 2022 from 2021 was driven by: • identifiable intangible asset amortization expense of $28.6 million related to the addition of Manitowoc Ice’s definite-lived intangible assets in 2022; • deal-related costs and expenses of $22.2 million in 2022, compared to $7.9 million in 2021; • restructuring costs of $36.7 million in 2022, compared to $7.4 million in 2021; and • transformation costs of $27.2 million in 2022, compared to $11.7 million in 2021.
Selling, general and administrative (“SG&A”) The 0.2 percentage point increase in SG&A expense as a percentage of net sales in 2023 from 2022 was driven by: • higher employee compensation costs compared to the prior year; and • transformation costs of $44.3 million in 2023, compared to $27.2 million in 2022.
We are reinforcing that our businesses more effectively address these opportunities through research and development and additional sales and marketing resources. Unless we successfully penetrate these markets, our core sales growth will likely be limited or may decline. • The ongoing effects of the COVID-19 pandemic continue to impact global economic conditions.
We expect to continue investing in our businesses to drive these opportunities through research and development and additional sales and marketing resources. Unless we successfully penetrate these markets, our core sales growth will likely be limited or may decline. In 2024, our operating objectives focus on delivering our core and building our future.
This increase was partially offset by: • the favorable mix of global earnings. 2021 Comparison with 2020 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, 2021 to December 31, 2020 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, 2021, which was filed with the SEC on February 22, 2022.
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. 27 (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; and • the favorable mix of global earnings. 2022 Comparison with 2021 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.
This downward trend may continue in 2023 as we expect backlog to return to more historical levels and lead times to improve. • We have identified specific product and geographic market opportunities that we find attractive and continue to pursue, both within and outside the U.S.
That impact could change in the future as we continue to evaluate the enacted legislative changes and as new guidance 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.
The decrease in our backlog in our Consumer Solutions segment from the prior year was primarily driven by pool backlog trending down to more historical levels due to increased manufacturing capacity, improved lead times and customers balancing the need to place new orders with market demand and channel inventory levels.
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 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.
Future tax rate or law changes could have a material effect on the Company’s financial condition, results of operations or cash flows. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. We perform reviews of our income tax positions on a quarterly basis and accrue for uncertain tax positions.
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.
For the year ended December 31, 2023, the Flow, Water Solutions and Pool segments represented approximately 38%, 29% and 33% of total revenues, 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 2021, net cash provided by operating activities of continuing operations primarily reflects net income from continuing operations of $633.5 million, net of non-cash depreciation and amortization.
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.
Gross profit The 1.9 percentage point decrease in gross profit as a percentage of net sales in 2022 from 2021 was primarily the result of: • inflationary cost increases due to tight supply of raw materials such as metals, resins and electronics; • higher logistics and labor costs due to increased demand, additional headcount and factory labor wage increases; • decreased productivity in our Consumer Solutions pool and residential water treatment businesses due to decreased sales volumes; • decreased productivity in our Industrial & Flow Technologies segment as a result of supply chain and plant inefficiencies; • inventory impairments and write-offs and certain accruals of $19.6 million recorded as part of exiting businesses in our Consumer Solutions segment; • amortization of inventory fair market value step-up of $5.8 million as a result of the Manitowoc Ice acquisition; and • charges of $4.7 million recorded in 2022 for the write-off of inventory and costs related to contracts and orders that we will no longer fulfill in light of our exit of business activity and sales in Russia.
Gross profit The 3.9 percentage point increase in gross profit as a percentage of net sales in 2023 from 2022 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; and • amortization of inventory fair market value step-up of $5.8 million in 2022, as a result of the Manitowoc Ice acquisition.
We expect to continue to execute on our key Transformation Program initiatives to drive margin expansion and expect to continue to incur transformation costs in 2023 and beyond. 22 • We experienced supply chain challenges, including increased lead times for raw materials due to availability constraints and high demand for these materials.
We expect to continue to execute on our key Transformation Program initiatives to drive margin expansion and to continue to incur transformation costs in 2024 and beyond. • In 2023, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on the variable-rate debt included in our debt portfolio as of December 31, 2022, a 100 basis point increase or decrease in interest rates would result in a $15.2 million increase or decrease in interest incurred.
Biggest changeA 100 basis point fluctuation in interest rates associated with our variable-rate debt as of December 31, 2023, inclusive of our interest rate swaps and collars, would result in an increase of approximately $7 million or decrease of approximately $8 million in interest incurred.
However, our results of operations and assets and liabilities are reported in U.S. dollars and thus will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar. 36 From time to time, we may enter into short duration foreign currency contracts to hedge foreign currency risks.
However, our results of operations and assets and liabilities are reported in U.S. dollars and thus will fluctuate with changes in exchange rates between such local currencies and the U.S. dollar. From time to time, we may enter into short duration foreign currency contracts to hedge foreign currency risks.
As the majority of our foreign currency contracts have an original maturity date of less than one year, there is no material foreign currency risk. At December 31, 2022, we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of $9.4 million.
As the majority of our foreign currency contracts have an original maturity date of less than one year, there is no material foreign currency risk. At December 31, 2023, we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of $23.9 million.
A 10% appreciation or a 10% depreciation of the U.S. dollar relative to the Euro would result in a change in accumulated other comprehensive income of approximately $55 million. However, the change in other comprehensive income would be offset by decreases or increases in the hedged items on our balance sheet. 37
A 10% appreciation or a 10% depreciation of the U.S. dollar relative to the Euro would result in a change in accumulated other comprehensive income of approximately $73 million. However, the change in other comprehensive income would be offset by decreases or increases in the hedged items on our balance sheet. 41
At December 31, 2022, we had outstanding cross currency swap agreements with a combined notional amount of $746.3 million. The cross currency swap agreements are accounted for as either cash flow hedges to hedge foreign currency fluctuations on certain intercompany debt, or as net investment hedges to manage our exposure to fluctuations in the Euro-U.S. Dollar exchange rate.
At December 31, 2023, we had outstanding cross currency swap agreements with a combined notional amount of $940.2 million. The cross currency swap agreements are accounted for as either cash flow hedges to hedge foreign currency fluctuations on certain intercompany debt, or as net investment hedges to manage our exposure to fluctuations in the Euro-U.S. Dollar exchange rate.
The major accounting policies and utilization of these instruments is described more fully in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements. Interest rate risk Our debt portfolio as of December 31, 2022, was comprised of debt predominantly denominated in U.S. dollars. This debt portfolio is comprised of 35% fixed-rate debt and 65% variable-rate debt.
The major accounting policies and utilization of these instruments is described more fully in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements. Interest rate risk Our debt portfolio as of December 31, 2023, was comprised of debt denominated in U.S. dollars. This debt portfolio is comprised of 41% fixed-rate debt and 59% variable-rate debt.
Based on the fixed-rate debt included in our debt portfolio, as of December 31, 2022, a 100 basis point increase or decrease in interest rates would result in a $50.1 million decrease or $54.3 million increase in fair value, respectively.
Based on the fixed-rate debt included in our debt portfolio, as of December 31, 2023, a 100 basis point increase or decrease in interest rates would result in approximately a $48 million decrease or a $52 million increase in fair value of total fixed rate debt outstanding, respectively.
Added
We manage our exposure to certain interest rate risks related to our variable rate debt through the use of interest rate swaps and collars. We enter into these agreements to hedge the variability of interest expense and cash flows attributable to changes in interest rates of our variable rate debt.
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As of December 31, 2023, we had an aggregate notional amount of $300.0 million and $200.0 million in interest rate swaps and collars, respectively, that are designated as cash flow hedges. Refer to ITEM 8, Note 9 of the Notes to Consolidated Financial Statements for additional information regarding our interest rate swaps and collars.

Other PNR 10-K year-over-year comparisons