Pentair (PNR) 10-K risk factor changes: FY2016 vs FY2015

Sales outside of the U.S. for the year ended December 31, [removed: 2015] [added: 2016] accounted for [removed: 52] [added: 41] percent of our net sales.

During [removed: 2015,] [added: 2016,] foreign currency translations had a [removed: 6.6] [added: 0.8] percent negative impact on our [removed: results of operations.][added: net sales.]

During [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013,] [added: 2014,] we initiated and continued execution of certain business initiatives aimed at reducing our fixed cost structure and realigning our business.

As of December 31, [removed: 2015] [added: 2016] our goodwill and intangible assets were [removed: $7,745.5] [added: $5,849.2] million and represented [removed: 65%] [added: 51%] of our total assets.

As of December 31, [removed: 2015,] [added: 2016,] approximately [removed: 10,200] [added: 9,000] of our employees were covered by collective bargaining agreements or works councils.

[removed: We cannot predict with certainty the extent to which we will be successful in litigating or] otherwise resolving lawsuits in the future and we continue to evaluate different strategies related to asbestos claims filed against us including entity restructuring and judicial relief.

We have disposed of a number of businesses in recent years and in certain [added: cases, we have retained responsibility and potential liability for certain environmental obligations.]

In addition, new laws and regulations that might favor the increased use of non-fossil fuels, including nuclear, wind, solar and bio-fuels or that are designed to increase energy efficiency, could dampen demand for oil and gas production or power generation [removed: resulting in lower spending by customers for our products and services.]

These actions could also increase costs associated with [added: our operations, including costs for raw materials and transportation.]

In connection with the Distribution, we entered into a tax sharing agreement (the "2012 Tax Sharing Agreement") with Tyco [added: (now known as Johnson Controls International plc, "Johnson Controls")] and The ADT Corporation ("ADT"), which governs the rights and obligations of ADT, [removed: Tyco] [added: Johnson Controls] and us for certain pre-Distribution tax liabilities, including [removed: Tyco’s] [added: Johnson Controls'] obligations under a separate tax sharing agreement (the "2007 Tax Sharing Agreement") entered into by [removed: Tyco,] [added: Johnson Controls,] Covidien Ltd. (now known as Medtronic plc, "Medtronic") and TE Connectivity Ltd. ("TE Connectivity") in connection with the 2007 distributions of Medtronic and TE Connectivity by [removed: Tyco (the "2007 Separation").][added: Johnson Controls.]

In addition, [added: under the terms of the 2012 Tax Sharing Agreement,] in the event [removed: that] the [removed: 2007 Separation or certain related] [added: Distribution, the ADT distribution, the internal] transactions [removed: are] [added: or the Merger were] determined to be taxable as a result of actions taken after the [removed: 2007 Separation] [added: Distribution] by [removed: Tyco, Medtronic] [added: us, ADT] or [removed: TE Connectivity,] [added: Johnson Controls,] the party responsible for such failure would be responsible for all taxes imposed [removed: on Tyco, Medtronic or TE Connectivity] as a result thereof.

Costs and expenses associated with the management of [removed: these shared tax liabilities are] [added: Shared Tax Liabilities will] generally [added: be] shared [removed: equally among the parties.][added: 20% by us, 27.5% by ADT and 52.5% by Johnson Controls.]

The 2012 Tax Sharing Agreement provides that we, [removed: Tyco] [added: Johnson Controls] and ADT will share (i) certain pre-Distribution income tax liabilities that arise from adjustments made by tax authorities to our, [removed: Tyco’s] [added: Johnson Controls'] and [removed: ADT’s] [added: ADT's] U.S. income tax returns, [added: including withholding tax, income tax, or other tax liabilities that could arise if the Merger, Distribution or certain internal transactions undertaken in anticipation of the Distribution are determined to be taxable for U.S. federal or Swiss tax purposes,] and (ii) payments required to be made by [removed: Tyco] [added: Johnson Controls] with respect to the 2007 Tax Sharing Agreement (the liabilities in clauses (i) and (ii) collectively, "Shared Tax Liabilities").

[removed: Tyco] [added: Johnson Controls] is responsible for the first $500 million of Shared Tax Liabilities.

As of December 31, [removed: 2015, Tyco] [added: 2016, Johnson Controls] has paid [removed: $63.0] [added: $210.0] million of Shared Tax Liabilities.

We, ADT and [removed: Tyco] [added: Johnson Controls] will share 20%, 27.5% and 52.5%, respectively, of Shared Tax Liabilities above $725 million.

To the extent we are responsible for any liability under the 2012 Tax Sharing Agreement, and indirectly the 2007 Tax Sharing Agreement, [added: in excess of the recorded liability,] there could be a material adverse impact on our financial condition, results of operations, cash flows or our effective tax rate in future reporting periods.

[removed: If such] failure is not the result of actions taken after the Distribution by us, ADT or [removed: Tyco,] [added: Johnson Controls,] then we, ADT and [removed: Tyco] [added: Johnson Controls] would be responsible for any taxes imposed as a result of such determination in the same manner and in the same proportions as we, ADT and [removed: Tyco] [added: Johnson Controls] are responsible for Shared Tax Liabilities.

As of December 31, [removed: 2015,] [added: 2016,] we had [removed: $4.7] [added: $4.3] billion of total debt outstanding.

In particular, legislative action could be taken by the U.S., the U.K., Ireland or the European Union which could override tax treaties or modify tax statutes or regulations upon which we expect to rely and adversely affect our effective tax [added: rate.]

Our articles of association provide that, in the event of any such payment, we (i) may seek reimbursement from the buyer, (ii) will have a lien against the shares acquired by such buyer and any dividends paid on such shares and (iii) may set-off the amount of the stamp duty against [removed: future dividends on such shares.]

Children have a tax-free threshold of [removed: €280,000] [added: €310,000] per lifetime in respect of taxable gifts or inheritances received from their parents for periods on or after October [removed: 14, 2015.][added: 12, 2016.]

We may not complete the sale of our Valves & controls business in the time frame or on the terms we anticipate.

On August 18, 2016, we entered into an agreement to sell our Valves & Controls business to Emerson Electric Co. for a purchase price of $3.15 billion in cash, subject to certain customary adjustments.

We believe the sale will be completed by the end of the first quarter of 2017, subject to customary regulatory approvals and closing conditions.

The completion of the sale is subject to a number of risks and uncertainties, including the satisfaction of the conditions to the completion of the sale, the parties to the transactions obtaining the necessary regulatory approvals, the occurrence of any event, change or other circumstance that could give rise to the termination of the sale agreement and our ability to obtain the expected proceeds from the sale.

These and other factors could impair our ability to complete the sale in the time frame and on the terms we anticipate, and this could have a material adverse effect on our financial position, results of operations or cash flows.

Sales outside of the U.S. for the year ended December 31, 2016 accounted for 41 percent of our net sales.

As of December 31, 2016, there were approximately 3,800 claims pending against our subsidiaries, of which approximately 3,300 relate to the Valves & Controls business classified as held for sale.

We cannot predict with certainty the extent to which we will be successful in litigating or

resulting in lower spending by customers for our products and services.

As of December 31, 2016, we have a liability of $13.3 million recorded for this matter in Other non-current liabilities in the Consolidated Balance Sheets.

However, the ultimate resolution of these matters, and the impact of that resolution, are uncertain.

If such

future dividends on such shares.

In particular, products sold by Valves & Controls to energy-related businesses are cyclical in nature as the worldwide demand for oil and gas fluctuates.

Lower worldwide demand for oil and gas impacts the economics of oil and gas capital project investments, reducing the demand for our products.

Therefore, results of operations for any particular period are not necessarily indicative of the results of operations for any future period.

Prices for oil and gas are subject to fluctuations in response to changes in the supply of, and demand for, oil and gas, market uncertainty and a variety of other economic factors that are beyond our control.

Since the latter half of 2014, the price of oil has dropped dramatically.

A sustained depression of oil prices may result in the reduction or deferral of major capital projects, including significant maintenance projects and upgrades.

Lower levels of oil and gas maintenance spend and major capital project activity may result in a corresponding decline in the demand for our products and services that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may not realize the anticipated benefits of the acquisition of ERICO Global Company and any benefit may take longer to realize than we expect.

On September 18, 2015, we acquired all of the outstanding shares of capital stock of ERICO for approximately $1.8 billion.

The ERICO Acquisition involves the integration of ERICO’s operations with our existing operations, and there are uncertainties inherent in such an integration.

We will be required to devote significant management attention and resources to integrating ERICO’s operations.

Delays or unexpected difficulties in the integration process could adversely affect our business, financial results and financial condition.

Even if we are able to integrate ERICO’s operations successfully, this integration may not result in the realization of the full benefits of revenue synergies, cost savings and operational efficiencies that we expect or the achievement of these benefits within a reasonable period of time.

In addition, we may not have identified all liabilities and other factors regarding ERICO that could produce unintended and unexpected consequences for us.

Undiscovered factors could result in us incurring financial liabilities, which could be material, and in us not achieving the expected benefits from the ERICO Acquisition within our desired time frames, if at all.

Our future revenue depends in part on the existence of and our ability to win new contracts for major capital projects.

A significant portion of our revenue in Technical Solutions is derived from major capital projects.

The number of such projects we may win in any year fluctuates, and is dependent upon the general availability of such projects and our ability to bid successfully for them.

If negative market conditions arise, fewer such projects may be available, and if we fail to secure adequate financial arrangements or required governmental approvals we may not be able to pursue particular projects.

Either condition could materially and adversely affect our business, financial condition, results of operations and cash flows.

We maintain a sizable backlog and the timing of our conversion of revenue out of backlog is uncertain.

Our inability to convert backlog into revenue, whether due to factors that are within or outside of our control, could adversely affect our revenue and profitability.

The timing of our conversion of revenue out of backlog is subject to a variety of factors that may cause delays, many of which, including fluctuations in our customers’ delivery schedules, are beyond our control.

This is especially true with respect to major global capital projects, where the extended timeline for project completion and invoice satisfaction increases the likelihood for delays in the conversion of backlog related to modifications and order cancellations.

Such delays may lead to significant fluctuations in results of operations and cash flows from quarter to quarter, making it difficult to predict our financial performance on a quarterly basis.

Further, while we believe that historical order cancellations have not been significant, if we were to experience a significant amount of cancellations of or reductions in orders, it would reduce our backlog and, consequently, our future sales and results of operations.

We are exposed to liquidated damages in many of our customer contracts.

Many of our customer contracts contain liquidated damages provisions in the event that we fail to perform our obligations thereunder in a timely manner or in accordance with agreed terms, conditions and standards.

Liquidated damages provisions typically provide for a payment to be made by us to the customer if we fail to deliver a product or service on time.

We generally try to limit our exposure to a maximum penalty within a contract.

However, because our products are often components of large and complex systems or capital projects, if we incur liquidated damages they may materially and adversely affect our business, financial condition, results of operations and cash flows.

Certain of our products require certifications by regulators or standards organizations, and our failure to obtain or maintain such certifications could negatively impact our business.

In certain industries and for certain applications, in particular with respect to our pressure relief valves and valves used in the nuclear power generation industry, we must obtain certifications for our products or installations by regulators or standards organizations.

As we expand our products offering into emerging markets, we will need to comply with additional and potentially different certification requirements.

If we fail to obtain required certifications for our products, or if we fail to maintain such certifications on our products after they have been certified, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

For example, we recognized a pre-tax, non-cash impairment charge of $554.7 million for the year ended December 31, 2015 related to goodwill and trade name intangible assets in Valves & Controls.

Because of the significance of our goodwill and intangible assets, any future impairment of these assets could have a material adverse effect on our financial results.

As of December 31, 2015, there were approximately 4,100 claims pending against our subsidiaries.

We currently record an estimated liability related to pending claims and future claims, including related defense costs, based on a number of key assumptions and estimation methodologies.

These assumptions are derived from historical claims experience and reflect our expectations about future claim activities.

These factors include [added: the ability to successfully complete the sale of the Valves & Controls business on anticipated terms and timetable:] overall global economic and business conditions, including worldwide demand for oil and gas; the ability to achieve the benefits of our restructuring plans; the ability to successfully identify, finance, complete and integrate [removed: acquisitions, including the ability to successfully integrate and achieve the expected benefits of the acquisition of ERICO Global Company;] [added: acquisitions;] competition and pricing pressures in the markets we serve; the strength of housing and related markets; volatility in currency exchange rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; increased risks associated with operating foreign businesses; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals.

Pentair plc is a focused diversified industrial manufacturing company comprising [removed: four] [added: three] reporting segments: [removed: Valves & Controls,] [added: Water Quality Systems,] Flow & Filtration [removed: Solutions, Water Quality Systems] [added: Solutions] and Technical Solutions.

For the year ended December 31, [removed: 2015, Valves & Controls,] [added: 2016, Water Quality Systems,] Flow & Filtration [removed: Solutions, Water Quality Systems] [added: Solutions] and Technical Solutions accounted for 29 percent, [removed: 22 percent, 21] [added: 28] percent and [removed: 28] [added: 43] percent of total revenues, respectively.

On September 18, 2015, we acquired, as part of Technical Solutions, all of the outstanding shares of capital stock of ERICO Global Company ("ERICO") for approximately [removed: $1.8] [added: 1.8] billion (the "ERICO Acquisition").

The following trends and uncertainties affected our financial performance in [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and will likely impact our results in the future:

| • | In late [removed: 2014] [added: 2015] and continuing through [removed: 2015,] [added: 2016,] our results were negatively impacted due to the strengthening of the U.S. dollar against most key global currencies. We expect this trend to continue into [removed: 2016.] [added: 2017.] |

| • | [removed: In 2015, we] [added: We] experienced declines [removed: in project orders, particularly] within [removed: the energy and] [added: our] industrial [added: and energy] businesses. We expect headwinds in the [removed: energy and] industrial [removed: business] [added: and energy businesses] to continue and oil prices to remain depressed [removed: throughout 2016.] [added: into 2017.] |

| • | [removed: In the last three quarters of 2015, we] [added: We] initiated [removed: further] restructuring actions to offset the negative earnings impact of [removed: foreign exchange and] core revenue [removed: decline.] [added: decline and foreign exchange.] We expect to continue these actions into [removed: 2016] [added: 2017] and these actions will contribute to margin growth in [removed: 2016.] [added: 2017.] |

| • | Despite the favorable long-term outlook for our end-markets, we experience differing levels of volatility depending on the end-market and may continue to do so over the medium and longer term. [removed: While we believe the general trends are favorable, factors specific to each of] [added: During 2015 and 2016,] our [removed: major end-markets may negatively affect the] [added: core sales have been challenged by broad-based industrial] capital [removed: spending plans of our customers] [added: expenditure] and [removed: lead] [added: maintenance deferrals. We expect this trend] to [removed: lower sales volumes for us.] [added: continue into 2017.] |

| • | [removed: Through 2014 and into 2015, we] [added: We have] experienced material and other cost inflation. We strive for productivity improvements, and we implement increases in selling prices to help mitigate this inflation. We expect the current economic environment will result in continuing price volatility for many of our raw [removed: materials. Commodity prices have declined, but] [added: materials, and] we are uncertain as to the timing and impact of these market changes. |

In [removed: 2016,] [added: 2017,] our operating objectives include the following:

| • | Reducing long-term debt and overall leverage through improved cash flow [removed: performance;] [added: performance and the pending sale of the Valves & Controls business;] |

| • | Focusing on developing global talent in light of our [removed: increased] global presence. |

| In millions | [removed: 2015] [added: 2016] | | | [removed: 2014] [added: 2015] | | | [removed: 2013] [added: 2014] | | | | [added: 2016 vs] 2015 [removed: vs. 2014] | | [added: 2015 vs] 2014 [removed: vs. 2013] | |

| % of net sales | [removed: 8.6] [added: 2.3] | | % | [removed: —] [added: 2.1] | | % | [removed: 0.2] [added: 2.1] | | % | | [removed: 8.6] [added: 0.2 pts] | | [removed: (0.2] [added: —] | [removed: )] |

| Loss [removed: (gain)] on sale of businesses, net | [removed: 3.2] [added: 3.9] | | | [removed: 0.2] [added: 3.2] | | | [removed: (20.8] [added: 0.2] | | [removed: )] | | [removed: N.M.] [added: 21.9] | [added: %] | [removed: (101.0] [added: N.M.] | [removed: )%] |

| | [added: 2016 vs] 2015 [removed: vs. 2014] | | | [added: 2015 vs] 2014 [removed: vs. 2013] | |

| Price | [removed: 0.4] [added: 0.9] | | | [removed: 0.9] [added: 0.8] | |

| Currency | [removed: (6.6] [added: (1.1] | ) | | [removed: (1.1] [added: (6.1] | ) |

The [removed: 8.4] [added: 1.1] percent decrease in consolidated net sales in 2015 from 2014 was primarily the result of:

| • | [removed: a] [added: continued] slowdown in [removed: industrial] capital spending, particularly in the [removed: oil & gas] [added: energy] and [removed: energy-related] [added: infrastructure] businesses, driving core sales [removed: declines in Valves & Controls;] [added: declines; and] |

| • | slowing economic activity in China, Brazil and other developing [removed: markets; and] [added: markets.] |

These [removed: decreases] [added: increase] were partially offset by:

| • | core sales growth in Water Quality Systems and Technical Solutions, primarily as the result of increased volume in the United States and Canada; [added: and] |

| • | sales of $147.0 million [removed: in 2015] as a result of the ERICO Acquisition; |

| • | core sales growth in our food & beverage and residential & commercial [removed: businesses; and] [added: businesses.] |

| • | selective increases in selling prices to mitigate inflationary cost [removed: increases.] [added: increases;] |

The [removed: 0.6] [added: 5.9] percent increase in consolidated net sales in [removed: 2014] [added: 2016] from [removed: 2013] [added: 2015] was primarily the result of:

| • | core sales growth in [removed: Technical Solutions,] [added: Water Quality Systems,] primarily as the result of increased volume in the United [removed: States, China] [added: States] and [removed: Canada;] [added: Canada.] |

| • | core sales growth [removed: in Water Quality Systems due] [added: related] to higher sales of certain pool products [added: primarily] serving North American residential housing [removed: and increased demand for global food & beverage solutions;] [added: in 2016;] and |

| • | [added: a strong U.S. dollar causing] unfavorable foreign currency effects; |

The [removed: 1.1] [added: 0.1] percentage point decrease in gross profit as a percentage of sales in 2015 from 2014 was primarily the result of:

| • | [removed: lower core] [added: higher] sales volumes, which resulted in [removed: decreased] [added: increased] leverage on fixed expenses included in cost of goods sold; |

| • | an increase in cost of goods sold of $35.7 million in 2015 compared to 2014 as a result of inventory fair value step-up recorded as part of the Technical Solutions acquisitions in [removed: 2015, which did not occur in 2014;] [added: 2015;] and |

The [removed: 1.1] [added: 2.1] percentage point increase in gross profit as a percentage of sales in [removed: 2014] [added: 2016] from [removed: 2013] [added: 2015] was primarily the result of:

| • | a decrease in cost of goods sold of [removed: $86.6] [added: $35.7] million in [removed: 2014] [added: 2016] compared to [removed: 2013] [added: 2015] as a result of inventory fair value step-up [removed: and customer backlog] recorded as part of the [removed: Merger purchase accounting in 2013, which did not recur] [added: Technical Solutions acquisitions] in [removed: 2014;] [added: 2015.] |

| • | higher contribution margin as a result of savings generated from our PIMS initiatives including lean and supply management [removed: practices; and] [added: practices.] |

The [removed: 0.5] [added: 2.0] percentage point decrease in SG&A expense as a percentage of sales in 2015 from 2014 and was driven [removed: by:][added: by the following:]

| • | "mark-to-market" actuarial gains related to pension and other post-retirement benefit plans of $23.0 million in 2015, compared to "mark-to-market" actuarial losses of [removed: $49.9] [added: $31.5] million in 2014; [removed: and] |

| • | [removed: cost] savings generated from back-office consolidation, reduction in personnel and other lean initiatives. |

On August 18, 2016, we entered into a share purchase agreement to sell our Valves & Controls business to Emerson Electric Co. for a purchase price of $3.15 billion in cash, subject to customary adjustments.

We believe the sale will be completed by the end of the first quarter of 2017, subject to customary regulatory approvals and closing conditions.

The results of the Valves and Controls business have been presented as discontinued operations and the related assets and liabilities have been reclassified as held for sale for all periods presented.

The Valves & Controls business was previously disclosed as a stand-alone reporting segment.

| Net sales | $ | 4,890.0 | | $ | 4,616.4 | | $ | 4,666.8 | | | 5.9 | % | (1.1 | )% |

| Cost of goods sold | 3,095.9 | | | 3,017.6 | | | 3,046.3 | | | | 2.6 | % | (0.9 | )% |

| Gross profit | 1,794.1 | | | 1,598.8 | | | 1,620.5 | | | | 12.2 | % | (1.3 | )% |

| % of net sales | 36.7 | | % | 34.6 | | % | 34.7 | | % | | 2.1 pts | | (0.1) pts | |

| Selling, general and administrative | 979.3 | | | 884.0 | | | 985.6 | | | | 10.8 | % | (10.3 | )% |

| % of net sales | 20.0 | | % | 19.1 | | % | 21.1 | | % | | 0.9 pts | | (2.0) pts | |

| Research and development | 114.1 | | | 98.7 | | | 96.4 | | | | 15.6 | % | 2.4 | % |

| Operating income | 700.7 | | | 616.1 | | | 538.5 | | | | 13.7 | % | 14.4 | % |

| % of net sales | 14.3 | | % | 13.3 | | % | 11.5 | | % | | 1.0 pts | | 1.8 pts | |

| Net interest expense | 140.1 | | | 101.9 | | | 68.6 | | | | 37.5 | % | 48.5 | % |

| Income from continuing operations before income taxes | 561.0 | | | 512.5 | | | 470.9 | | | | 9.5 | % | 8.8 | % |

| Provision for income taxes | 109.4 | | | 115.4 | | | 114.3 | | | | (5.2 | )% | 1.0 | % |

| Effective tax rate | 19.5 | | % | 22.5 | | % | 24.3 | | % | | (3.0) pts | | (1.8) pts | |

| Volume | (1.7 | )% | | 0.5 | % |

| Price | 0.3 | | | 0.6 | |

| Acquisition | 8.1 | | | 3.1 | |

| Currency | (0.8 | ) | | (5.3 | ) |

| Total | 5.9 | % | | (1.1 | )% |

| • | sales of $516.1 million in 2016 as a result of the ERICO Acquisition, compared to sales of $147.0 million in 2015; and |

| • | continued slowdown in capital spending, particularly in our industrial and energy businesses, driving core sales declines in Flow & Filtration Solutions and Technical Solutions; |

| • | slowing economic activity in certain developing regions, including China and Brazil; and |

The 0.9 percentage point increase in SG&A expense as a percentage of sales in 2016 from 2015 and was driven by:

| • | an increase in intangible asset amortization as a result of the ERICO Acquisition that occurred at the end of the third quarter in 2015; |

| • | a non-cash impairment charge of $13.3 million related to a trade name intangible asset in Technical Solutions; and |

| • | increased investment in sales and marketing to drive growth. |

| • | deal related costs and expenses of $14.3 million in 2015, which did not occur in 2016; and |

| • | the impact of higher debt levels during 2016, compared to 2015, primarily as the result of the September 2015 issuance of senior notes used to finance the ERICO Acquisition; and |

| • | the unfavorable tax impact of transaction costs in 2015 related to the ERICO Acquisition. |

| • | core sales declines in Western Europe, Asia and in certain developing regions. |

| | 2016 | | 2015 | |

| • | favorable material savings and product mix offsetting inflation; |

| • | cost savings generated from PIMS initiatives including lean and supply management practices. |

| • | continued growth investments in research & development and sales & marketing. |

| In millions | 2016 | | | 2015 | | | 2014 | | | | 2016 vs 2015 | | 2015 vs 2014 | |

| Segment income | 180.7 | | | 187.2 | | | 201.3 | | | | (3.5 | )% | (7.0 | )% |

| % of net sales | 13.3 | | % | 13.0 | | % | 12.6 | | % | | 0.3 pts | | 0.4 pts | |

During the latter part of the fourth quarter of 2015, the oil and gas industry continued to deteriorate, leading management to reconsider its estimates for future profitability of Valves & Controls.

As a result, for the year ended December 31, 2015, we recognized a pre-tax, non-cash impairment charge of $554.7 million related to goodwill and trade name intangible assets in Valves & Controls.

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| | Years ended December 31 | | | | | | | | | | % / point change | | | |

| Net sales | $ | 6,449.0 | | $ | 7,039.0 | | $ | 6,999.7 | | | (8.4 | )% | 0.6 | % |

| Cost of goods sold | 4,263.2 | | | 4,576.0 | | | 4,629.6 | | | | (6.8 | )% | (1.2 | )% |

| Gross profit | 2,185.8 | | | 2,463.0 | | | 2,370.1 | | | | (11.3 | )% | 3.9 | % |

| % of net sales | 33.9 | | % | 35.0 | | % | 33.9 | | % | | (1.1 | ) | 1.1 | |

| Selling, general and administrative | 1,334.3 | | | 1,493.8 | | | 1,493.7 | | | | (10.7 | )% | — | % |

| % of net sales | 20.8 | | % | 21.3 | | % | 21.3 | | % | | (0.5 | ) | — | |

| Research and development | 119.6 | | | 117.3 | | | 122.8 | | | | 2.0 | % | (4.5 | )% |

| % of net sales | 1.9 | | % | 1.7 | | % | 1.8 | | % | | 0.2 | | (0.1 | ) |

| Impairment of goodwill and trade names | 554.7 | | | — | | | 11.0 | | | | N.M. | | (100.0 | )% |

| Operating income | 177.2 | | | 851.9 | | | 742.6 | | | | (79.2 | )% | 14.7 | % |

| % of net sales | 2.7 | | % | 12.1 | | % | 10.6 | | % | | (9.4 | ) | 1.5 | |

| Net interest expense | 102.7 | | | 68.6 | | | 70.9 | | | | 49.7 | % | (3.2 | )% |

| Income from continuing operations before income taxes and noncontrolling interest | 74.1 | | | 784.3 | | | 694.5 | | | | (90.6 | )% | 12.9 | % |

| Provision for income taxes | 139.1 | | | 177.3 | | | 177.0 | | | | (21.5 | )% | 0.2 | % |

| Effective tax rate | 187.7 | | % | 22.6 | | % | 25.5 | | % | | 165.1 | | (2.9 | ) |

Net sales

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| Volume | (4.3 | )% | | 1.0 | % |

| Core growth (decline) | (3.9 | ) | | 1.9 | |

| Acquisition (divestiture) | 2.1 | | | (0.2 | ) |

| Total | (8.4 | )% | | 0.6 | % |

These increases were partially offset by:

| • | decreases in sales of energy products in Valves & Controls and sales declines in residential retail product sales and infrastructure businesses in Flow & Filtration Solutions; and |

| • | loss of revenue related to the 2013 divestitures of businesses in Technical Solutions and Flow & Filtration Solutions. |

| • | selective increases in selling prices across all business segments to mitigate inflationary cost increases. |

SG&A expense as a percentage of sales remained consistent in 2014 from 2013 and was favorably impacted by the following:

| • | restructuring costs of $88.3 million in 2014, compared to $103.2 million in 2013; |

| • | savings generated from back-office consolidation, reduction in personnel and other lean initiatives; and |

| • | higher sales volume and the resultant gain of leverage on fixed operating expenses. |

These favorable fluctuations were offset by the following:

Impairment of goodwill and trade names

During the fourth quarter of 2015, we recognized a pre-tax, non-cash impairment charge of $554.7 million related to goodwill and trade name intangible assets in Valves & Controls.

Our debt portfolio as of December 31, [removed: 2015,] [added: 2016,] was comprised of debt predominantly denominated in U.S. dollars.

This debt portfolio is comprised of [removed: 71%] [added: 77%] fixed-rate debt and [removed: 29%] [added: 23%] variable-rate debt.

Based on the fixed-rate debt included in our debt portfolio, as of December 31, [removed: 2015,] [added: 2016,] a 100 basis point increase or decrease in interest rates would result in a [removed: $144.3] [added: $118.5] million decrease or a [removed: $152.1] [added: $124.3] million increase in fair value, respectively.

Based on the variable-rate debt included in our debt portfolio as of December 31, [removed: 2015,] [added: 2016,] a 100 basis point increase or decrease in interest rates would result in a [removed: $13.6] [added: $9.8] million increase or decrease in interest incurred.

At December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of [removed: $331.5] [added: $475.6] million and [removed: $250.8] [added: $331.5] million, respectively.

The rates used to perform this analysis were based on the market exchange rates in effect on December 31, [removed: 2015.][added: 2016.]

A 10% appreciation of the U.S. dollar relative to the Euro would result in a [removed: $49.9] [added: $47.3] million net increase in Other comprehensive income.

Conversely, a 10% depreciation of the U.S. dollar relative to the Euro would result in a [removed: $60.9] [added: $57.9] million net decrease in Other comprehensive income.

Pentair plc is a focused diversified industrial manufacturing company comprising [removed: four] [added: three] reporting segments: [removed: Valves & Controls,] [added: Water Quality Systems,] Flow & Filtration [removed: Solutions, Water Quality Systems] [added: Solutions] and Technical Solutions.

We are an Irish [removed: corporation] [added: public] limited [removed: by shares] [added: company] that was formed in 2014.

Customers [added: also] include end-users as well as [removed: engineering,] [added: engineering] procurement [removed: and construction companies,] contractors, [added: and] original equipment [removed: manufacturers and distributors.][added: manufacturers.]

Flow & Filtration Solutions is involved in the entire [removed: fluid management system,] [added: water, water treatment and wastewater system] from advanced filtration, [removed: desalination and] [added: desalination,] water supply to water disposal, process and control.

From [removed: product selection] [added: engineered solutions] to [removed: installation, maintenance] [added: installation] and [removed: servicing, Flow & Filtration Solutions supports] [added: maintenance, we support] a broad range of [removed: products] [added: solutions] and services specifically tailored to address [added: our] customers' needs for [removed: reliable and efficient movement] [added: water reuse, water availability] and [removed: control of fluids.][added: water stewardship.]

Applications for Flow and Filtration [removed: Solutions’] [added: Solutions'] products include precision agriculture, [added: biogas upgrading,] water supply and disposal, fire applications and food and beverage processing.

Brand names for Flow & Filtration Solutions products include Aurora, Berkeley, [added: Codeline,] Fairbanks-Nijhuis, Haffmans, [removed: Hydromatic,] Hypro, Sta-Rite, Südmo and X-Flow.

Flow & Filtration Solutions customers include businesses engaged in wholesale distribution and retail across the residential, commercial, [removed: industrial, infrastructure, energy and] food and [removed: beverage] [added: beverage, infrastructure, industrial, and energy] verticals.

Brand names for Water Quality Systems include [removed: Everpure,] [added: Pentair,] Pentair [added: Aquatic Eco-Systems, Everpure, Kreepy Krauly, Sta-Rite] and [removed: Sta-Rite.][added: Shurflo.]

The portfolio of products serves a range of industries, including use in [removed: industrial,] [added: the commercial, communications,] energy, [removed: residential & commercial] [added: electronics, industrial, infrastructure, medical,] and [removed: infrastructure] [added: security & defense] verticals.

| In millions | [removed: 2015 | |] [added: 2016] | [removed: 2014] | | [added: 2015] | [removed: $ change] | | [added: 2014] | [removed: % change] | |

| Water Quality Systems | [removed: 141.4] [added: $] | [added: 134.8] | | [removed: 121.0] [added: $] | [added: 141.4] | | [removed: 20.4] [added: $] | [added: (6.6] | [added: )] | [removed: 16.9] [added: (4.7] | [added: )%] |

[removed: Generally,] [added: Our] backlog [removed: from Valves & Controls] [added: typically] has a [removed: longer] [added: short] manufacturing cycle and products [removed: typically] [added: generally] ship within [removed: six to twelve months] [added: 90 days] of the date on which a customer places an order.

A substantial portion of our [removed: revenues, however,] [added: revenues] result from orders received and product delivered in the same month.

We expect the majority of our backlog [removed: from all segments] at December 31, [removed: 2015] [added: 2016] will be [removed: filled] [added: shipped] in [removed: 2016.][added: 2017.]

Research and development expenditures during [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] were [removed: $119.6] [added: $114.1] million, [removed: $117.3] [added: $98.7] million and [removed: $122.8] [added: $96.4] million, respectively.

As of December 31, [removed: 2015,] [added: 2016,] we employed [removed: 27,600] [added: 26,000] people worldwide, of which [removed: 9,600] [added: 9,500] were in the U.S. and [removed: 10,200] [added: 9,000] were covered by collective bargaining agreements or works councils.

On August 18, 2016, we entered into a share purchase agreement to sell our Valves & Controls business to Emerson Electric Co. for a purchase price of $3.15 billion in cash, subject to customary adjustments.

We believe the sale will be completed by the end of the first quarter of 2017, subject to customary regulatory approvals and closing conditions.

The results of the Valves and Controls business have been presented as discontinued operations and the related assets and liabilities have been reclassified as held for sale for all periods presented.

The Valves & Controls business was previously disclosed as a stand-alone reporting segment.

Our registered principal office is located at 43 London Wall, London, EC2M 5TF, United Kingdom.

Our solutions also help in critical municipal challenges around flood control, storm water management, de-watering, dredging and fish friendly solutions.

The industries and verticals served by the engineered fastening solutions

business is relatively fragmented, with about a dozen major competitors and a large number of smaller suppliers.

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

NEW SEGMENTATION

During the first quarter of 2017, we reorganized our business segments to reflect a new operating structure, resulting in a change to our reporting segments in 2017.

As part of this reorganization, the legacy Water Quality Systems business segment was combined with the legacy Flow & Filtration Solutions business segment to form the Water reporting segment and now operates as a stand-alone business segment.

In addition, the legacy Technical Solutions business segment will be renamed the Electrical reporting segment.

All segment information presented throughout this Annual Report on Form 10-K, with exception of the table below, was prepared based on the reporting segments in place during 2016.

The below table presents sales and segment income under the revised reporting segments (Water and Electrical) for the years ended December 31, 2016, 2015, and 2014.

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | |

| | December 31 | | | | | | | | |

| Net Sales | | | | | | | | | |

| Water | $ | 2,777.7 | | $ | 2,808.3 | | $ | 2,941.3 | |

| Electrical | 2,116.0 | | | 1,809.3 | | | 1,728.1 | | |

| Other | (3.7 | | ) | (1.2 | | ) | (2.6 | | ) |

| Consolidated | $ | 4,890.0 | | $ | 4,616.4 | | $ | 4,666.8 | |

| Segment income (loss) | | | | | | | | | |

| Water | $ | 494.0 | | $ | 469.0 | | $ | 454.6 | |

| Electrical | 447.2 | | | 395.0 | | | 378.1 | | |

| Other | (101.7 | | ) | (108.8 | | ) | (127.5 | | ) |

| Consolidated | $ | 839.5 | | $ | 755.2 | | $ | 705.2 | |

| In millions | 2016 | | | 2015 | | | $ change | | | % change | |

| Flow and Filtration Solutions | 241.0 | | | 289.6 | | | (48.6 | | ) | (16.8 | ) |

| Technical Solutions | 266.3 | | | 319.0 | | | (52.7 | | ) | (16.5 | ) |

| Total | $ | 642.1 | | $ | 750.0 | | $ | (107.9 | ) | (14.4 | )% |

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

Of the 26,000 people employed worldwide as of December 31, 2016, 7,500 relate to our Valves & Controls business classified as held for sale, of which 1,500 were in the U.S. and 2,200 were covered by collective bargaining agreements or works councils.

Valves & Controls designs, manufactures, markets and services valves, fittings, automation and controls and actuators.

Our registered principal office is located at P.O. Box 471, Sharp Street, Walkden, Manchester, M28 8BU United Kingdom.

VALVES & CONTROLS

The Valves & Controls segment designs, manufactures, markets and services valves, fittings, automation and controls and actuators for the energy and industrial verticals.

Valve products include a broad range of industrial valves, including on-off valves, safety relief valves and other specialty valves.

Actuation products include pneumatic, hydraulic and electric actuators.

Control products include limit switches, valve positioners, network systems and accessories.

Valves & Controls products are used in many applications including oil and gas, power, chemical and pharmaceutical, mining, marine and food and beverage.

Valves & Controls also provides engineering, design, inspection, maintenance and repair services for its valves and related products.

The product line is sold under many trade names, including Anderson Greenwood, Biffi, Crosby, Keystone and Vanessa, globally via its internal sales force and in some cases through independent distributors.

Customers

Valves & Controls customers include businesses engaged in a wide range of applications within the energy and industrial verticals.

Seasonality

Valves & Controls is not significantly affected by seasonal demand fluctuations.

Competition

The flow control industry is highly fragmented, consisting of many local and regional companies and a few global competitors.

We compete against a number of international, national and local manufacturers of industrial valves, as well as against specialized manufacturers on the basis of product capability, product quality, breadth of product line, delivery, service capability and price.

Our major competitors vary by region and by industry.

Customers also include end-users as well as engineering procurement contractors, original equipment manufacturers and residential retail consumers.

Technical Solutions products are highly engineered and are sold largely through independent distributors and on a project basis, via a network of sales and service professionals.

| Valves & Controls | $ | 1,127.6 | | $ | 1,233.7 | | $ | (106.1 | ) | (8.6 | )% |

| Flow & Filtration Solutions | 289.6 | | | 361.2 | | | (71.6 | | ) | (19.8 | ) |

| Technical Solutions | 319.0 | | | 281.0 | | | 38.0 | | | 13.5 | |

| Total | $ | 1,877.6 | | $ | 1,996.9 | | $ | (119.3 | ) | (6.0 | )% |

Backlog from Valves & Controls consists of business in the energy and industrial verticals.

Backlog from Flow & Filtration Solutions, Water Quality Systems and Technical Solutions typically has a shorter manufacturing cycle and products generally ship within 90 days of the date on which a customer places an order.

Our estimated liability for asbestos-related claims was [removed: $237.9] [added: $228.3] million and [removed: $249.1] [added: $237.9] million as of December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] respectively, and was recorded in [removed: Other non-current] [added: Non-current] liabilities [added: held for sale] in the Consolidated Balance Sheets for pending and future claims and related defense costs.

Our estimated receivable for insurance recoveries was [removed: $111.0] [added: $108.5] million and [removed: $115.8 million] [added: $111.0 million, respectively,] at December 31, [removed: 2015] [added: 2016] and [removed: 2014, all of which was acquired in the Merger,] [added: 2015,] and was recorded in [removed: Other non-current] [added: Non-current] assets [added: held for sale] in the Consolidated Balance Sheets.

Based upon our experience, current information regarding known contingencies and applicable laws, we have recorded reserves for these environmental matters of [removed: $22.8] [added: $18.3] million and [removed: $31.4] [added: $22.8] million as of December 31, [removed: 2015] [added: 2016] and [removed: 2014, respectively.][added: 2015, respectively, which relate primarily to the Valves & Controls business classified as held for sale.]

As of December 31, 2016, there were approximately 3,800 claims outstanding against our subsidiaries, of which approximately 3,300 relate to the Valves & Controls business classified as held for sale.

As of December 31, 2015, there were approximately 4,100 claims outstanding against our subsidiaries.

In 2004, we disposed of the Tools Group and we retained responsibility for certain product claims.

For the Fiscal Year Ended December 31, [removed: 2015][added: 2016]

[removed: Registrant’s] [added: Registrant's] telephone number, including area code: [removed: 44-161-703-1885][added: 44-207-347-8925]

Aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of [removed: $63.75] [added: $58.29] per share as reported on the New York Stock Exchange on June [removed: 26, 2015] [added: 30, 2016] (the last business day of [removed: Registrant’s] [added: Registrant's] most recently completed second quarter): [removed: $11,256,593,708][added: $9,520,686,063.]

The number of shares outstanding of [removed: Registrant’s] [added: Registrant's] only class of common stock on December 31, [removed: 2015] [added: 2016] was [removed: 180,455,693.][added: 181,765,451.]

Parts of the [removed: Registrant’s] [added: Registrant's] definitive proxy statement for its annual meeting to be held on May [removed: 10, 2016,] [added: 9, 2017,] are incorporated by reference in this Form 10-K in response to Part III, ITEM 10, 11, 12, 13 and 14.

For the Year Ended December 31, [removed: 2015][added: 2016]

| ITEM 1. | | [removed: [Business](#s55885F7D4A965B819E5C964BDDCA44DC)] [added: [Business](#s9B77E1D2B4615A19BA26EFA783570505)] | | [removed: [1](#s55885F7D4A965B819E5C964BDDCA44DC)] [added: [1](#s9B77E1D2B4615A19BA26EFA783570505)] |

| ITEM 1A. | | [Risk [removed: Factors](#sF9F6E662660B5614B3D8A966DFB90506)] [added: Factors](#s1A7C7A035EE155F990B9E0E297A5F048)] | | [removed: [5](#sF9F6E662660B5614B3D8A966DFB90506)] [added: [5](#s1A7C7A035EE155F990B9E0E297A5F048)] |

| ITEM 1B. | | [Unresolved Staff [removed: Comments](#s1ABB26996F065D86BF1F10102CAE971A)] [added: Comments](#sB73DA6EFC1125C74A3EA252A1BBE8005)] | | [removed: [18](#s1ABB26996F065D86BF1F10102CAE971A)] [added: [15](#sB73DA6EFC1125C74A3EA252A1BBE8005)] |

| ITEM 2. | | [removed: [Properties](#s289F0F05407E5CC4B5B3C078E07374D3)] [added: [Properties](#s49B28ADD4B305292B828B367503F0BCB)] | | [removed: [18](#s289F0F05407E5CC4B5B3C078E07374D3)] [added: [15](#s49B28ADD4B305292B828B367503F0BCB)] |

| ITEM 3. | | [Legal [removed: Proceedings](#s03A7597A64E3584D9EAA0E09ADD10E79)] [added: Proceedings](#s2BF131EB6B265EB4ADDBD4DCFDCD7DF5)] | | [removed: [18](#s03A7597A64E3584D9EAA0E09ADD10E79)] [added: [15](#s2BF131EB6B265EB4ADDBD4DCFDCD7DF5)] |

| ITEM 4. | | [Mine Safety [removed: Disclosures](#s5B1B768FD7B553FBAA0B20BE37590CBB)] [added: Disclosures](#sFBCCF40A3839505D85B7BD3CB7961678)] | | [removed: [19](#s8CA30833220A5B4AB4585B5CD4009AE1)] [added: [16](#sB8FBD9CF2D5D5481A5A38ED6AEC24242)] |

| ITEM 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s9A9F1D35DF7B554787164C7593FEB371)] [added: Securities](#s7C835BA54C48546CBC70CB3D9F722648)] | | [removed: [21](#s9A9F1D35DF7B554787164C7593FEB371)] [added: [18](#s7C835BA54C48546CBC70CB3D9F722648)] |

| ITEM 6. | | [Selected Financial [removed: Data](#s2A2E225B85635A0388726BCCD72981C1)] [added: Data](#s8DB47E6207035DCABBA4CAB2E72BE86E)] | | [removed: [24](#s2A2E225B85635A0388726BCCD72981C1)] [added: [21](#s8DB47E6207035DCABBA4CAB2E72BE86E)] |

| ITEM 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s02F607295BCC502D94A3BF87F338630D)] [added: Operations](#sD8945E0635765D6DB9CC9D360B42E983)] | | [removed: [25](#s02F607295BCC502D94A3BF87F338630D)] [added: [22](#sD8945E0635765D6DB9CC9D360B42E983)] |

| ITEM 7A. | | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#sEFA6A0E31BEC586ABA1C44C167852AC1)] [added: Risk](#sB6B3A762D8E55FE7B9660A5F1381AA64)] | | [removed: [45](#sEFA6A0E31BEC586ABA1C44C167852AC1)] [added: [40](#sB6B3A762D8E55FE7B9660A5F1381AA64)] |

| ITEM 8. | | [Financial Statements and Supplementary [removed: Data](#s2C3F0385C333537C88D1D22CCC61B39A)] [added: Data](#s7941F1A8C54352E894E9043271F3E60B)] | | [removed: [47](#s2C3F0385C333537C88D1D22CCC61B39A)] [added: [41](#s7941F1A8C54352E894E9043271F3E60B)] |

| ITEM 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sF1B9B5CC86525EDFA5C6698327794205)] [added: Disclosure](#s605BC9DC5777581EBC3F3C022BEBD03F)] | | [removed: [98](#sF1B9B5CC86525EDFA5C6698327794205)] [added: [91](#s605BC9DC5777581EBC3F3C022BEBD03F)] |

| ITEM 9A. | | [Controls and [removed: Procedures](#s427E92357DDE5621A59D8B9203E9D0A4)] [added: Procedures](#s66E9A4D0A0005A53AE1328BDDE0D2BD9)] | | [removed: [98](#s427E92357DDE5621A59D8B9203E9D0A4)] [added: [91](#s66E9A4D0A0005A53AE1328BDDE0D2BD9)] |

| ITEM 9B. | | [Other [removed: Information](#s85DC47728BFA549693A250CB62567B46)] [added: Information](#sDF685AC78E05539AA4B1EFC15A9CA3FC)] | | [removed: [98](#s85DC47728BFA549693A250CB62567B46)] [added: [91](#sDF685AC78E05539AA4B1EFC15A9CA3FC)] |

| ITEM 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#s7002FEFDC7AC5D079F40BAE7FD1C3699)] [added: Governance](#s646FC72F39C75103BF56494DAA0B1B04)] | | [removed: [99](#s7002FEFDC7AC5D079F40BAE7FD1C3699)] [added: [92](#s646FC72F39C75103BF56494DAA0B1B04)] |

| ITEM 11. | | [Executive [removed: Compensation](#sF8A18EDB2C1A55AD877DD5ADDBED9F58)] [added: Compensation](#s94D5F70753215F96ADC0752E8F6B2433)] | | [removed: [99](#sF8A18EDB2C1A55AD877DD5ADDBED9F58)] [added: [92](#s94D5F70753215F96ADC0752E8F6B2433)] |

| ITEM 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s06999584F99A503C9C3990272828A5D5)] [added: Matters](#s75B9DD1510F251CC891CE667D352B61C)] | | [removed: [100](#s06999584F99A503C9C3990272828A5D5)] [added: [93](#s75B9DD1510F251CC891CE667D352B61C)] |

| ITEM 13. | | [Certain Relationships and Related Transactions and Director [removed: Independence](#s2A96AC8648DF5547951156FD1779F9ED)] [added: Independence](#s69BD6B87EA2D5B02A9DAD153A9F869EF)] | | [removed: [100](#s2A96AC8648DF5547951156FD1779F9ED)] [added: [93](#s69BD6B87EA2D5B02A9DAD153A9F869EF)] |

| ITEM 14. | | [Principal Accounting Fees and [removed: Services](#sCE3CB1797ED15EF9884133E8033CBF33)] [added: Services](#sD1F8D44071555840ADDA67F2DDD4E4DD)] | | [removed: [100](#sCE3CB1797ED15EF9884133E8033CBF33)] [added: [93](#sD1F8D44071555840ADDA67F2DDD4E4DD)] |

| ITEM 15. | | [Exhibits, Financial Statement [removed: Schedules](#sCF093644FB225097AEB32AB0871699B8)] [added: Schedules](#s4315612088B85C318279249CFCCB8200)] | | [removed: [101](#sCF093644FB225097AEB32AB0871699B8)] [added: [94](#s4315612088B85C318279249CFCCB8200)] |

10-K 1 a2016pnr-10k.htm FORM 10-K

| 43 London Wall, London, EC2M 5TF, United Kingdom | | |

| ITEM 16. | | [Form 10-K Summary](#s4315612088B85C318279249CFCCB8200) | | [94](#s4315612088B85C318279249CFCCB8200) |

| | | | | |

| | | [Signatures](#sE4CC8E4FDC265A75A5BE616161AB8A35) | | [95](#sE4CC8E4FDC265A75A5BE616161AB8A35) |

10-K 1 pnr-20151231x10k.htm FORM 10-K

| P.O. Box 471, Sharp Street, Walkden, Manchester, M28 8BU United Kingdom | | |

| | | [Signatures](#sCB5110C65C4F5174B18F33DE64CFCD50) | | [102](#sCB5110C65C4F5174B18F33DE64CFCD50) |

Our principal office is located in leased premises in [removed: Manchester,] [added: London,] United Kingdom, and our management office in the United States is located in leased premises in Minneapolis, Minnesota.

We carry out our [removed: Valves & Controls] [added: Technical Solutions] manufacturing operations at [removed: 8] [added: 9] plants located throughout the United States and at [removed: 32] [added: 11] plants located in [removed: 16] [added: 9] other countries.

In addition, [removed: Valves & Controls] [added: Technical Solutions] has [removed: 23] [added: 16] distribution facilities, [removed: 56] [added: 52] sales offices and [removed: 51] [added: 3] service centers located in numerous countries throughout the world.

We carry out our Flow & Filtration Solutions manufacturing operations at [removed: 7] [added: 8] plants located throughout the United States and at 12 plants located in 8 other countries.

In addition, Flow & Filtration Solutions has [removed: 22] [added: 14] distribution facilities, [removed: 18] [added: 14] sales offices and 10 service centers located in numerous countries throughout the world.

We carry out our Water Quality Systems manufacturing operations at [removed: 13] [added: 12] plants located throughout the United States and at [removed: 10] [added: 7] plants located in 6 other countries.

In addition, Water Quality Systems has 15 distribution facilities, [removed: 11] [added: 14] sales offices and [removed: 2] [added: 1] service [removed: centers] [added: center] located in numerous countries throughout the world.

We carry out our Technical Solutions manufacturing operations at 10 plants located throughout the United States and at 15 plants located in 11 other countries.

In addition, Technical Solutions has 11 distribution facilities, 52 sales offices and 3 service centers located in numerous countries throughout the world.

| Randall J. Hogan | | [removed: 60] [added: 61] | | | Chief Executive Officer since 2001 and Chairman of the Board since 2002; President and Chief Operating Officer, 1999 — 2000; Executive Vice President and President of [removed: Pentair’s] [added: Pentair's] Electrical and Electronic Enclosures Group, 1998 — 1999; United Technologies Carrier Transicold President, 1995 — 1997; Pratt & Whitney Industrial Turbines Vice President and General Manager, 1994 — 1995; General Electric various executive positions, 1988 — 1994; McKinsey & Company consultant, 1981 — 1987. |

| John L. Stauch | | [removed: 51] [added: 52] | | | Executive Vice President and Chief Financial Officer since 2007; 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; Various executive, investor relations and managerial finance positions with Honeywell International Inc. and its predecessor AlliedSignal Inc., 1994 — 2000. |

| Angela D. Jilek | | [removed: 47] [added: 48] | | | Senior Vice President, General Counsel and Secretary since 2010; Assistant General Counsel, 2002 — 2010; Shareholder and Officer of the law firm of Henson & Efron, P.A., 2000 — 2002; Associate Attorney in the law firm of Henson & Efron, P.A. 1996 — 2000 and in the law firm of Felhaber Larson Fenlon & Vogt, P.A., 1992 — 1996. |

| Mark C. Borin | | [removed: 48] [added: 49] | | | [added: Senior Vice President and] Chief Accounting Officer since 2008 and Treasurer since 2015; Partner in the audit practice of the public accounting firm KPMG LLP, 2000 — 2008; Various positions in the audit practice of KPMG LLP, 1989 — 2000. |

| Karl R. Frykman | | [removed: 55] [added: 56] | | | President, Water [added: segment since 2017; President, Water] Quality Systems Global Business [removed: Unit since 2007;] [added: Unit, 2007 — 2016;] President of Aquatic Systems' National Pool Tile group, 1998— 2007; Vice President of Operations for American Products, [removed: 1995—] [added: 1995 —] 1998; Vice President of Anthony Pools, 1990 — 1995; Vice President of Poolsaver, 1988 — 1990. |

| Beth A. Wozniak | | [removed: 51] [added: 52] | | | President, [added: Electrical segment since 2017; President,] Flow & Filtration Solutions Global Business [removed: Unit since 2015;] [added: Unit, 2015 — 2016;] President of Environmental and Combustion Controls unit of Honeywell International Inc., 2011 — 2015; President of Sensing and Controls unit of Honeywell International Inc., 2006 — 2011; Various leadership positions at Honeywell International Inc. and its predecessor AlliedSignal Inc., 1990 — 2006. |

| Karen L. Keegans | | 51 | | | Senior Vice President and Chief Human Resources Officer since 2016; Vice President and Chief Human Resources Officer of Praxair Inc., 2014 — 2016; Vice President North America Human Resources of Praxair Inc., 2012 — 2014; Vice President of Human Resources and Global Manufacturing of Monsanto, 2011 — 2012; Various executive human resources positions of Monsanto, 2007 — 2011. |

| John H. Jacko | | 59 | | | Senior Vice President and Chief Marketing Officer since 2017; Vice President and Chief Marketing Officer of Kennametal Corporation, 2007 — 2016; Senior Vice President and Chief Marketing Officer of Flowserve Corporation, 2002 — 2007; Vice President of Marketing and Customer Management of Flowserve Corporation, 2001 — 2002; Various business leadership positions of Honeywell Aerospace, 1995 — 2001. |

| Dennis J. Cassidy, Jr. | | 48 | | | President, Valves & Controls global business unit since 2016; Managing Director - Oil, Gas and Chemicals Strategy and Operations Expert, AlixPartners, 2012 — 2016; Vice President, Booz & Company, 2009 — 2012; Principal, Booz Allen Hamilton, 2004 — 2009. |

| Alok Maskara | | 44 | | | President, Technical Solutions Global Business Unit since 2014; President, Thermal Management business, 2012 — 2014; President, Water Purification business, 2011 — 2012; President, Residential Filtration business, 2008 — 2011; General Manager of the Residential & Commercial water business at General Electric Corporation, 2006 — 2008; Manager Corporate Initiatives, General Electric Corporation, 2004 — 2006; Various executive positions with McKinsey & Company, 2000 — 2004. |

Our ordinary shares are listed for trading on the New York Stock Exchange and trade under the symbol "PNR." As of December 31, [removed: 2015,] [added: 2016,] there were [removed: 19,990] [added: 18,840] shareholders of record.

The high, low and closing sales price for our ordinary shares and the dividends paid for each of the quarterly periods for [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] were as follows:

| Dividends paid | [removed: 0.32] [added: 0.33] | | | [removed: 0.32] [added: 0.33] | | | [removed: 0.32] [added: 0.34] | | | [removed: 0.32] [added: 0.34] | | | | [removed: 0.25] [added: 0.32] | | | [removed: 0.25] [added: 0.32] | | | [removed: 0.30] [added: 0.32] | | | [removed: 0.30] [added: 0.32] | | |

Pentair has paid [removed: 160] [added: 164] consecutive quarterly dividends.

The Board of Directors has approved a plan to increase the dividend for [removed: 2016,] [added: 2017,] which will mark the [removed: 40th] [added: 41st] consecutive year we have increased dividends.

On July 29, 2014, following the approval of the Irish High Court, we made the required filing of Pentair plc's initial accounts with the Irish Companies Registration Office, which completed the process to allow us to pay future cash dividends and redeem and repurchase shares out of Pentair plc's "distributable reserves." Our distributable reserve balance was [removed: $9.6] [added: $9.4] billion and [removed: $12.1] [added: $9.6] billion as of December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] respectively.

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, [removed: 2010] [added: 2011] and the reinvestment of all dividends since that date to December 31, [removed: 2015.][added: 2016.]

[removed: ][added: ]

| | Base Period December [removed: 2010] [added: 2011] | | INDEXED RETURNS Years ended December 31 | | | | | | | | | |

| Company / Index | [removed: 2011 | |] 2012 | | 2013 | | 2014 | | 2015 | | [added: 2016] | | [added: | |]

The following table provides information with respect to purchases we made of our ordinary shares during the fourth quarter of [removed: 2015:][added: 2016:]

| October [removed: 25] [added: 30] – November [removed: 21, 2015] [added: 26, 2016] | [removed: 388] [added: 1,181] | | [removed: 55.11] [added: 56.44] | | | — | | 800,000,049 | | |

| November [removed: 22] [added: 27] – December 31, [removed: 2015] [added: 2016] | [removed: 1,523] [added: 1,596] | | [removed: 54.67] [added: 58.34] | | | — | | 800,000,049 | | |

| (a) | The purchases in this column include [removed: 85,640] [added: 1,633] shares for the period [removed: September 27] [added: October 1] – October [removed: 24, 2015, 388] [added: 29, 2016, 1,181] shares for the period October [removed: 25] [added: 30] – November [removed: 21, 2015,] [added: 26, 2016,] and [removed: 1,523] [added: 1,596] shares for the period November [removed: 22] [added: 27] – December 31, [removed: 2015] [added: 2016] deemed surrendered to us by participants in our 2012 Stock and Incentive Plan (the "2012 Plan") and earlier stock incentive plans that are now outstanding under the 2012 Plan (collectively the "Plans") to satisfy the exercise price or withholding of tax obligations related to the exercise of stock options and vesting of restricted shares. |

| (c) | The number of shares in this column represents the number of shares repurchased as part of our publicly announced plans to repurchase our ordinary shares up to a maximum dollar limit of [removed: $3.2] [added: $1.0] billion. |

| (d) | In December 2014, our Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $1.0 billion. This authorization expires on December 31, 2019. [added: We have $800.0 million remaining availability for repurchases under the 2014 authorization.] |

| | 2016 | | | | | | | | | | | | | 2015 | | | | | | | | | | | |

| High | $ | 54.54 | | $ | 63.39 | | $ | 66.99 | | $ | 64.39 | | | $ | 68.24 | | $ | 66.52 | | $ | 69.65 | | $ | 59.69 | |

| Low | 41.57 | | | 50.37 | | | 57.20 | | | 53.80 | | | | 60.73 | | | 59.92 | | | 49.44 | | | 48.14 | | |

| Close | 54.26 | | | 58.29 | | | 64.24 | | | 56.07 | | | | 62.39 | | | 63.75 | | | 51.98 | | | 49.53 | | |

| Pentair plc | 100 | | 150.88 | | 242.46 | | 210.55 | | 160.41 | | 186.07 | |

| S&P 500 Index | 100 | | 116.00 | | 153.57 | | 174.60 | | 177.01 | | 198.18 | |

| S&P 500 Industrials Index | 100 | | 115.35 | | 162.67 | | 178.21 | | 173.70 | | 206.46 | |

| October 1 – October 29, 2016 | 1,633 | | $ | 59.95 | | — | | $ | 800,000,049 | |

| Total | 4,410 | | | | | — | | | | |

| | 2015 | | | | | | | | | | | | | 2014 | | | | | | | | | | | |

| High | $ | 68.24 | | $ | 66.52 | | $ | 69.65 | | $ | 59.69 | | | $ | 83.37 | | $ | 81.04 | | $ | 73.36 | | $ | 69.37 | |

| Low | 60.73 | | | 59.92 | | | 49.44 | | | 48.14 | | | | 71.29 | | | 71.96 | | | 62.91 | | | 59.09 | | |

| Close | 62.39 | | | 63.75 | | | 51.98 | | | 49.53 | | | | 77.66 | | | 72.76 | | | 67.41 | | | 66.42 | | |

| Pentair plc | 100 | | 93.13 | | 140.52 | | 225.80 | | 196.08 | | 149.39 | |

| S&P 500 Index | 100 | | 102.11 | | 118.45 | | 156.82 | | 178.28 | | 180.75 | |

| S&P 500 Industrials Index | 100 | | 99.41 | | 114.67 | | 161.31 | | 177.16 | | 172.67 | |

| September 27 – October 24, 2015 | 85,640 | | $ | 51.80 | | — | | $ | 800,000,049 | |

| Total | 87,551 | | | | | — | | | | |

The following table sets forth our selected historical financial data for the five years ended December 31, [removed: 2015.][added: 2016.]

| In millions, except per-share data | [added: 2016 | | |] 2015 | | | 2014 | | | 2013 | | | 2012 | | | [removed: 2011 | | |]

| Net income (loss) from continuing operations attributable to Pentair plc | [removed: (65.0] [added: 451.6] | | [removed: )] | [removed: 607.0] [added: 397.1] | | | [removed: 511.7] [added: 356.6] | | | [removed: (81.5] [added: 354.8] | | [removed: )] | [removed: (7.5] [added: (21.3] | | ) |

| Earnings (loss) per ordinary share from continuing operations attributable to Pentair plc | $ | [removed: (0.36] [added: 2.49] | [removed: )] | $ | [removed: 3.19] [added: 2.20] | | $ | [removed: 2.54] [added: 1.87] | | $ | [removed: (0.64] [added: 1.76] | [removed: )] | $ | [removed: (0.08] [added: (0.17] | ) |

| Weighted average shares | [added: 181.3 | | |] 180.3 | | | 190.6 | | | 201.1 | | | 127.4 | | | [removed: 98.2 | | |]

| Earnings (loss) per ordinary share from continuing operations attributable to Pentair plc | $ | [removed: (0.36] [added: 2.47] | [removed: )] | $ | [removed: 3.14] [added: 2.17] | | $ | [removed: 2.50] [added: 1.84] | | $ | [removed: (0.64] [added: 1.73] | [removed: )] | $ | [removed: (0.08] [added: (0.17] | ) |

| Weighted average shares | [added: 183.1 | | |] 182.6 | | | 193.7 | | | 204.6 | | | 127.4 | | | [removed: 98.2 | | |]

| Cash dividends declared and paid per ordinary share | $ | [removed: 1.28] [added: 1.34] | | $ | [removed: 1.10] [added: 1.28] | | $ | [removed: 0.96] [added: 1.10] | | $ | [removed: 0.88] [added: 0.96] | | $ | [removed: 0.80] [added: 0.88] | |

| Cash dividends declared and unpaid per ordinary share | [added: 0.345 | | |] 0.33 | | | 0.64 | | | 0.50 | | | 0.46 | | | [removed: — | | |]

| Total equity | [added: 4,254.4 | | |] 4,008.8 | | | 4,663.8 | | | 6,217.7 | | | 6,487.5 | | | [removed: 2,047.4 | | |]

[removed: For periods prior] [added: Prior] to [removed: 2012,] the [added: Merger, the] Consolidated Statements of Operations and Comprehensive Income (Loss) include the historical results of Pentair, Inc. [removed: Following the consummation of the Merger on September 28, 2012, the consolidated financial statements include the results of Flow Control.]

All periods presented have been revised, as applicable, to present the results of the Valves & Controls business as discontinued operations and to reclassify the assets and liabilities of the Valves & Controls business as held for sale.

See ITEM 8, Note 3 of the Notes to Consolidated Financial Statements for additional information.

| Net sales | $ | 4,890.0 | | $ | 4,616.4 | | $ | 4,666.8 | | $ | 4,553.7 | | $ | 3,767.4 | |

| Operating income | 700.7 | | | 616.1 | | | 538.5 | | | 529.2 | | | 76.4 | | |

| Total assets | $ | 11,534.8 | | $ | 11,833.5 | | $ | 10,643.8 | | $ | 11,732.5 | | $ | 11,870.6 | |

| Total debt | 4,279.2 | | | 4,685.8 | | | 2,988.4 | | | 2,532.6 | | | 2,430.9 | | |

The consummation of the Merger with Tyco's Flow Control business occurred on September 28, 2012.

| Net sales | $ | 6,449.0 | | $ | 7,039.0 | | $ | 6,999.7 | | $ | 4,306.8 | | $ | 3,456.7 | |

| Operating income (loss) | 177.2 | | | 851.9 | | | 742.6 | | | (4.8 | | ) | 100.2 | | |

| Total assets | $ | 11,857.0 | | $ | 10,655.2 | | $ | 11,743.3 | | $ | 11,882.7 | | $ | 4,586.3 | |

| Total debt | 4,710.0 | | | 3,004.1 | | | 2,550.4 | | | 2,451.6 | | | 1,309.1 | | |

In the fourth quarter of 2015, we recorded a pre-tax, non-cash goodwill and trade name impairment charge of $554.7 million.

In May 2011, we acquired as part of Flow & Filtration Solutions, the Clean Process Technologies division of privately held Norit Holding B.V. In the fourth quarter of 2011, we recorded a pre-tax non-cash goodwill impairment charge of $200.5 million.

Management assessed the effectiveness of the [removed: Company’s] [added: Company's] internal control over financial reporting as of December 31, [removed: 2015.][added: 2016.]

Based on this assessment, management believes that, as of December 31, [removed: 2015,] [added: 2016,] the [removed: Company’s] [added: Company's] internal control over financial reporting was effective based on those criteria.

Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the [removed: Company’s] [added: Company's] internal control over financial reporting as of December 31, [removed: 2015.][added: 2016.]

[removed: Manchester,] [added: London,] United Kingdom

We have audited the internal control over financial reporting of Pentair plc and subsidiaries (the "Company") as of December 31, [removed: 2015,] [added: 2016,] based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2015,] [added: 2016,] based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule listed in the Index at Item 15 as of and for the year ended December 31, [removed: 2015] [added: 2016] of the Company and our report dated February [removed: 26, 2016] [added: 21, 2017] expressed an unqualified opinion on those financial statements and financial statement schedule.

We have audited the accompanying consolidated balance sheets of Pentair plc and subsidiaries (the "Company") as of December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and the related consolidated statements of operations and comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, [removed: 2015.][added: 2016.]

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Pentair plc and subsidiaries as of December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] and the results of their operations and their cash flows for each of the three years in the period ended December 31, [removed: 2015,] [added: 2016,] in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the [removed: Company’s] [added: Company's] internal control over financial reporting as of December 31, [removed: 2015,] [added: 2016,] based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February [removed: 26, 2016] [added: 21, 2017] expressed an unqualified opinion on the [removed: Company’s] [added: Company's] internal control over financial reporting.

| In millions, except per-share data | [removed: 2015] [added: 2016] | | | [removed: 2014] [added: 2015] | | | [removed: 2013] [added: 2014] | | |

| Cost of goods sold | [removed: 4,263.2] [added: —] | | | [removed: 4,576.0] [added: —] | | | [removed: 4,629.6] [added: —] | | | [added: 3,095.9 | | | — | | | 3,095.9 | | |]

| Selling, general and administrative | [removed: 1,334.3] [added: 979.3] | | | [removed: 1,493.8] [added: 884.0] | | | [removed: 1,493.7] [added: 985.6] | | |

| Research and development | [removed: 119.6] [added: —] | | | [removed: 117.3] [added: —] | | | [removed: 122.8] [added: —] | | | [added: 114.1 | | | — | | | 114.1 | | |]

| Impairment of goodwill and trade names | [removed: 554.7] [added: —] | | | [removed: —] [added: 554.7] | | | [removed: 11.0] [added: —] | | |

| Loss [removed: (gain)] on sale of businesses, net | [removed: 3.2] [added: 3.9] | | | [removed: 0.2] [added: 3.2] | | | [removed: (20.8] [added: 0.2] | | [removed: )] |

| Equity income of unconsolidated subsidiaries | [removed: (2.8] [added: (4.3] | | ) | [removed: (1.2] [added: (1.5] | | ) | [removed: (2.0] [added: (1.2] | | ) |

| Income from continuing operations before income taxes [removed: and noncontrolling interest] | [removed: 74.1] [added: 561.0] | | | [removed: 784.3] [added: 512.5] | | | [removed: 694.5] [added: 470.9] | | |

| Provision for income taxes | [removed: 139.1] [added: 109.4] | | | [removed: 177.3] [added: 115.4] | | | [removed: 177.0] [added: 114.3] | | |

| Income [removed: (loss)] from discontinued operations, net of tax | [removed: (4.7] [added: —] | | [removed: )] | [removed: (6.4] [added: —] | | [removed: )] | [removed: 25.9] [added: —] | | | [added: 70.0 | | | — | | | 70.0 | | |]

| Loss from sale / impairment of discontinued operations, net of tax | [removed: (6.7] [added: —] | | [removed: )] | [added: — | | | — | | |] (385.7 | | ) | [removed: (0.8] [added: —] | | [added: | (385.7 | |] ) |

| Net income (loss) [removed: before noncontrolling interest] | [removed: (76.4] [added: $] | [added: 522.2] | [removed: )] | [removed: 214.9] [added: $] | [added: (76.4] | [added: )] | [removed: 542.6] [added: $] | [added: 214.9] | |

| [removed: Noncontrolling] [added: Purchase of noncontrolling] interest | — | | | — | | | [removed: 5.8] [added: (134.7] | | [added: )] |

| Net income (loss) [removed: attributable to Pentair plc] | $ | [removed: (76.4] [added: 522.2] | [removed: )] | $ | [removed: 214.9] [added: (76.4] | [added: )] | $ | [removed: 536.8] [added: 214.9] | |

| Net income (loss) [removed: before noncontrolling interest] | $ | [removed: (76.4] [added: 522.2] | [removed: )] | $ | [removed: 214.9] [added: (76.4] | [added: )] | $ | [removed: 542.6] [added: 214.9] | |

| Changes in cumulative translation adjustment | [removed: (264.9] [added: (83.0] | | ) | [removed: (336.3] [added: (264.9] | | ) | [removed: (29.1] [added: (336.3] | | ) |

| Changes in market value of derivative financial instruments, net of [removed: $0.5, $1.1] [added: $1.9, $0.5] and [removed: $0.7] [added: $1.1] tax, respectively | [removed: 0.2] [added: (8.3] | | [added: )] | [removed: (0.4] [added: 0.2] | | [removed: )] | [removed: (0.3] [added: (0.4] | | ) |

| [removed: Total comprehensive] [added: Comprehensive] income (loss) | [removed: (341.1] [added: $] | [added: 430.9] | [removed: )] | [removed: (121.8] [added: $] | [added: (341.1] | ) | [removed: 512.8] [added: $] | [added: (121.8] | [added: )] |

| Earnings (loss) per ordinary share [removed: attributable to Pentair plc] | | | | | | | | | |

| Discontinued operations | [removed: (0.06] [added: 0.09] | | [removed: )] | [removed: (2.06] [added: 0.06] | | [removed: )] | 0.13 | | | [added: 0.12 | | | 0.39 | | |]

| Basic earnings (loss) per ordinary share [removed: attributable to Pentair plc] | $ | [removed: (0.42] [added: 2.88] | [removed: )] | $ | [removed: 1.13] [added: (0.42] | [added: )] | $ | [removed: 2.67] [added: 1.13] | |

| [removed: Discontinued operations | (0.06 | | ) | (2.03 | | ) | 0.12 |] [added: 3.] | [added: Discontinued Operations] |

| Diluted earnings (loss) per ordinary share [removed: attributable to Pentair plc] | $ | [removed: (0.42] [added: 2.85] | [removed: )] | $ | [removed: 1.11] [added: (0.42] | [added: )] | $ | [removed: 2.62] [added: 1.11] | |

| Basic | [removed: 180.3] [added: 181.3] | | | [removed: 190.6] [added: 180.3] | | | [removed: 201.1] [added: 190.6] | | |

| Diluted | [removed: 182.6] [added: 183.1] | | | [removed: 193.7] [added: 182.6] | | | [removed: 204.6] [added: 193.7] | | |

| In millions, except [removed: per-share] [added: per share] data | [added: 2016 | | |] 2015 | | | 2014 | | |

| Cash and cash equivalents | $ | [removed: 126.3] [added: 238.5] | | $ | [removed: 110.4] [added: 126.3] | |

| Accounts and notes receivable, net of allowances of [removed: $103.7] [added: $25.6] and [removed: $96.5,] [added: $46.1,] respectively | [removed: 1,167.7] [added: 764.0] | | | [removed: 1,205.9] [added: 773.2] | | |

| Other current assets | [removed: 312.3] [added: $] | [added: —] | | [removed: 366.8] [added: $] | [added: 34.4] | |

| Current assets held for sale | — | | | [removed: 80.6] [added: —] | | | [added: — | | | 891.9 | | | — | | | 891.9 | | |]

February 21, 2017

London, United Kingdom

February 21, 2017

| Net sales | $ | 4,890.0 | | $ | 4,616.4 | | $ | 4,666.8 | |

| Gross profit | 1,794.1 | | | 1,598.8 | | | 1,620.5 | | |

| Operating income | 700.7 | | | 616.1 | | | 538.5 | | |

| Interest income | (8.3 | | ) | (4.7 | | ) | (2.3 | | ) |

| Interest expense | 148.4 | | | 106.6 | | | 70.9 | | |

| Net income from continuing operations | 451.6 | | | 397.1 | | | 356.6 | | |

| Continuing operations | $ | 2.49 | | $ | 2.20 | | $ | 1.87 | |

| Continuing operations | $ | 2.47 | | $ | 2.17 | | $ | 1.84 | |

| Discontinued operations | 0.38 | | | (2.59 | | ) | (0.73 | | ) |

| Inventories | 524.2 | | | 564.7 | | |

| Goodwill | 4,217.4 | | | 4,259.0 | | |

| Total assets | $ | 11,534.8 | | $ | 11,833.5 | |

| Deferred tax liabilities | 609.5 | | | 670.2 | | |

| Total liabilities | 7,280.4 | | | 7,824.7 | | |

| Equity income of unconsolidated subsidiaries | (4.3 | | ) | (1.5 | | ) | (1.2 | | ) |

| Depreciation | 84.6 | | | 81.2 | | | 79.7 | | |

| Amortization | 96.4 | | | 68.1 | | | 60.6 | | |

| Loss on sale of businesses, net | 3.9 | | | 3.2 | | | 0.2 | | |

| Deferred income taxes | (16.1 | | ) | (2.3 | | ) | (23.0 | | ) |

| Inventories | 34.3 | | | 54.7 | | | 30.8 | | |

| Other current assets | (15.8 | | ) | (27.3 | | ) | (25.8 | | ) |

| Accounts payable | 38.0 | | | 10.6 | | | 5.3 | | |

| Employee compensation and benefits | 7.0 | | | (15.6 | | ) | (1.7 | | ) |

| Other current liabilities | 51.6 | | | (16.6 | | ) | 60.4 | | |

| Capital expenditures | (117.8 | | ) | (91.3 | | ) | (83.7 | | ) |

| Other | (5.2 | | ) | (3.0 | | ) | 0.2 | | |

| Net cash provided by (used for) investing activities of discontinued operations | 1.5 | | | 38.1 | | | (34.4 | | ) |

| Net income | — | | — | | | | — | | — | | | — | | | 522.2 | | | — | | | 522.2 | | | — | | | 522.2 | | |

| Balance - December 31, 2016 | 181.8 | | $ | 1.8 | | | — | | $ | — | | $ | 2,920.8 | | $ | 2,068.1 | | $ | (736.3 | ) | $ | 4,254.4 | | $ | — | | $ | 4,254.4 | |

We recorded no impairment charges in 2016 in conjunction with restructuring activities.

Consistent with our annual test, the fair value was estimated using both a discounted cash flow analysis and market approach.

We complete our annual impairment test during the fourth quarter each year for those identifiable assets not subject to amortization.

enacted.

These modified grants are accounted for as a new award and measured

Performance share units ("PSU") are stock awards where the ultimate number of shares issued will be contingent on the Company's performance against certain financial performance targets.

The fair value of each PSU is based on the market value on the date of grant.

We recognize expense related to the estimated vesting of our PSUs granted.

Management has excluded from its assessment the internal control over financial reporting at ERICO Global Company, which was acquired on September 18, 2015 and whose financial statements constitute approximately 19 percent of total assets and 2 percent of total revenues in the consolidated financial statements as of and for the year ended December 31, 2015.

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at ERICO Global Company ("ERICO"), which was acquired on September 18, 2015 and whose financial statements constitute approximately 19 percent of total assets and 2 percent of total revenues in the consolidated financial statements as of and for the year ended December 31, 2015.

Accordingly, our audit did not include the internal control over financial reporting at ERICO.

February 26, 2016

Pentair plc and Subsidiaries

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Net sales | $ | 6,449.0 | | $ | 7,039.0 | | $ | 6,999.7 | |

| Gross profit | 2,185.8 | | | 2,463.0 | | | 2,370.1 | | |

| Operating income | 177.2 | | | 851.9 | | | 742.6 | | |

| Interest income | (6.0 | | ) | (3.7 | | ) | (4.4 | | ) |

| Interest expense | 108.7 | | | 72.3 | | | 75.3 | | |

| Net income (loss) from continuing operations before noncontrolling interest | (65.0 | | ) | 607.0 | | | 517.5 | | |

| Net income (loss) from continuing operations attributable to Pentair plc | $ | (65.0 | ) | $ | 607.0 | | $ | 511.7 | |

| Amortization of pension and other post-retirement prior service cost, net of $0, $0 and $0.2 tax, respectively | — | | | — | | | (0.4 | | ) |

| Less: Comprehensive income attributable to noncontrolling interest | — | | | — | | | 8.0 | | |

| Comprehensive income (loss) attributable to Pentair plc | $ | (341.1 | ) | $ | (121.8 | ) | $ | 504.8 | |

| Continuing operations | $ | (0.36 | ) | $ | 3.19 | | $ | 2.54 | |

| Continuing operations | $ | (0.36 | ) | $ | 3.14 | | $ | 2.50 | |

| Inventories | 1,174.3 | | | 1,130.4 | | |

| Goodwill | 5,255.4 | | | 4,741.9 | | |

| Total assets | $ | 11,857.0 | | $ | 10,655.2 | |

| Accounts payable | 578.8 | | | 583.1 | | |

| Total liabilities | 7,848.2 | | | 5,991.4 | | |

| Ordinary shares held in treasury, 19.9 shares at December 31, 2014 | — | | | (1,251.9 | | ) |

| Depreciation | 139.5 | | | 138.7 | | | 141.3 | | |

| Amortization | 121.4 | | | 114.0 | | | 134.1 | | |

| Deferred income taxes | 3.0 | | | 2.0 | | | 54.0 | | |

| Inventories | 1.4 | | | (3.7 | | ) | 58.1 | | |

| Other current assets | (21.7 | | ) | (22.0 | | ) | (5.7 | | ) |

| Accounts payable | (8.1 | | ) | 34.5 | | | 41.1 | | |

| Other current liabilities | (31.2 | | ) | 58.5 | | | 41.2 | | |

| Capital expenditures | (134.3 | | ) | (129.6 | | ) | (170.0 | | ) |

| Proceeds from sale of businesses, net | — | | | 0.3 | | | 43.5 | | |

| Other | (3.6 | | ) | 0.2 | | | 1.7 | | |

| Balance - December 31, 2012 | 213.0 | | $ | 113.5 | | | (6.9 | ) | $ | (315.5 | ) | $ | 5,292.4 | | $ | 1,292.3 | | $ | (11.6 | ) | $ | 6,371.1 | | $ | 116.4 | | $ | 6,487.5 | |

| Net income | — | | — | | | | — | | — | | | — | | | 536.8 | | | — | | | 536.8 | | | 5.8 | | | 542.6 | | |

| Distribution to noncontrolling interest | — | | — | | | | — | | — | | | — | | | — | | | — | | | — | | | (2.0 | | ) | (2.0 | | ) |

| Share repurchase | — | | — | | | | (12.3 | ) | (715.8 | | ) | — | | | — | | | — | | | (715.8 | | ) | — | | | (715.8 | | ) |

The non-recurring fair value measurement is a "Level 3" measurement under the fair value hierarchy described below.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the year ended December 31, [removed: 2015,] [added: 2016,] pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 ("the Exchange Act").

Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the year ended December 31, [removed: 2015] [added: 2016] to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange [removed: Commission’s] [added: Commission's] rules and forms and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.

There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, [removed: 2015] [added: 2016] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Information required under this item with respect to directors is contained in our Proxy Statement for our [removed: 2016] [added: 2017] annual general meeting of shareholders under the captions "Corporate Governance Matters," "Proposal 1 Re-elect [removed: Eleven] Director Nominees" and "Section 16(a) Beneficial Ownership Reporting Compliance" and is incorporated herein by reference.

Information required under this item is contained in our Proxy Statement for our [removed: 2016] [added: 2017] annual general meeting of shareholders under the captions [removed: "Corporate Governance Matters — Committees of the Board — Compensation Committee," "Corporate Governance Matters — Compensation Committee Interlocks and Insider Participation,"] "Compensation Discussion and Analysis," "Compensation Committee Report," "Executive [removed: Compensation"] [added: Compensation Tables"] and [removed: "Director] [added: "Corporate Governance Matters - Director] Compensation" and is incorporated herein by reference.

Information required under this item with respect to security ownership is contained in our Proxy Statement for our [removed: 2016] [added: 2017] annual general meeting of shareholders under the caption "Security Ownership" and is incorporated herein by reference.

The following table summarizes, as of December 31, [removed: 2015,] [added: 2016,] information about compensation plans under which our equity securities are authorized for issuance:

| 2008 Omnibus Stock Incentive Plan | [removed: 2,341,053] [added: 2,199,075] | | (4) | [removed: 32.78] [added: 32.73] | | | (2) | — | | (5) |

| 2004 Omnibus Stock Incentive Plan | [removed: 994,661] [added: 382,897] | | | [removed: 32.74] [added: 33.93] | | | | — | | (5) |

| Outside Directors Non-qualified Stock Option Plan | [removed: 140,000] [added: 80,000] | | | [removed: 33.63] [added: 34.05] | | | | — | | (5) |

| (2) | Represents the weighted average exercise price of outstanding stock options and does not take into account outstanding restricted stock [added: units or performance share] units. |

| 2012 Stock and Incentive Plan | 4,110,233 | | (1) | $ | 56.54 | | (2) | 5,228,708 | | (3) |

| Total | 6,772,205 | | | $ | 45.65 | | (2) | 5,228,708 | | |

| (1) | Consists of 3,107,651 shares subject to stock options, 706,214 shares subject to restricted stock units, and 296,368 shares subject to performance share awards. |

| (4) | Consists of 2,199,075 shares subject to stock options. |

| 2012 Stock and Incentive Plan | 3,005,781 | | (1) | $ | 58.47 | | (2) | 6,493,423 | | (3) |

| Total | 6,481,495 | | | $ | 42.79 | | (2) | 6,493,423 | | |

| (1) | Consists of 2,186,653 shares subject to stock options and 819,128 shares subject to restricted stock units. |

| (4) | Consists of 2,297,754 shares subject to stock options and 43,299 shares subject to restricted stock units. |

Information required under this item is contained in our Proxy Statement for our [removed: 2016] [added: 2017] annual general meeting of shareholders under the captions [removed: "Corporate Governance Matters — Board Governance," "Corporate Governance Matters — Independent Directors,"] [added: "Proposal 1 Re-elect Director Nominees - Director Independence"] and "Corporate Governance Matters [removed: —] [added: - The Board's Role and Responsibilities -] Policies and Procedures Regarding Related Person Transactions" and is incorporated herein by reference.

Information required under this item is contained in our Proxy Statement for our [removed: 2016] [added: 2017] annual general meeting of shareholders under the caption "Proposal [removed: 3] [added: 4] Ratify, by Non-Binding Advisory Vote, the Appointment of Deloitte & Touche LLP as the Independent Auditors of Pentair plc and [added: to] Authorize, by Binding Vote, the Audit and Finance Committee [added: of the Board of Directors] to Set the [removed: Auditors] [added: Auditors'] Remuneration" and is incorporated herein by reference.

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013][added: 2014]

Consolidated Balance Sheets as of December 31, [removed: 2015] [added: 2016] and [removed: 2014][added: 2015]

Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013][added: 2014]

Consolidated Statements of Changes in Equity for the years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013][added: 2014]

Schedule II — Valuation and Qualifying Accounts

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 26, 2016.

| | | |

| --- | --- | --- |

| | PENTAIR PLC | |

| | By | /s/ John L. Stauch |

| | | John L. Stauch |

| | | Executive Vice President and Chief Financial Officer |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on February 26, 2016.

| Signature | | Title |

| /s/ Randall J. Hogan | | Chairman and Chief Executive Officer |

| Randall J. Hogan | | |

| /s/ John L. Stauch | | Executive Vice President and Chief Financial Officer |

| John L. Stauch | | |

| /s/ Mark C. Borin | | Chief Accounting Officer and Treasurer |

| Mark C. Borin | | |

| * | | Director |

| Glynis A. Bryan | | |

| Jerry W. Burris | | |

| Carol Anthony (John) Davidson | | |

| Jacques Esculier | | |

| T. Michael Glenn | | |

| David H. Y. Ho | | |

| David A. Jones | | |

| Ronald L. Merriman | | |

| William T. Monahan | | |

| Billie I. Williamson | | |

| | |

| --- | --- |

| *By | /s/ Angela D. Jilek |

| | Angela D. Jilek |

| | Attorney-in-fact |

Pentair plc and Subsidiaries

| | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| In millions | Beginning balance | | | Additions charged (reductions credited) to costs and expenses | | | Deductions (1) | | | Other changes (2) | | | Ending balance | | |

| Allowances for doubtful accounts | | | | | | | | | | | | | | | |

| Year ended December 31, 2015 | $ | 42.5 | | $ | 21.0 | | $ | 7.1 | | $ | (4.6 | ) | $ | 51.8 | |

| Year ended December 31, 2014 | $ | 58.7 | | $ | (1.2 | ) | $ | 11.5 | | $ | (3.5 | ) | $ | 42.5 | |

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 21, 2017.

| | | |

| --- | --- | --- |

| | | |

| | PENTAIR PLC | |

| | | |

| | By | /s/ John L. Stauch |

| | | John L. Stauch |

| | | Executive Vice President and Chief Financial Officer |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on February 21, 2017.

| | | |

| --- | --- | --- |

| | | |

| Signature | | Title |

| /s/ Randall J. Hogan | | Chairman and Chief Executive Officer |

| Randall J. Hogan | | |

| | | |

| /s/ John L. Stauch | | Executive Vice President and Chief Financial Officer |

| John L. Stauch | | |

| | | |

| /s/ Mark C. Borin | | Senior Vice President, Chief Accounting Officer and Treasurer |

| Mark C. Borin | | |

| | | |

| * | | Director |

| Glynis A. Bryan | | |

| | | |

| * | | Director |

| Jerry W. Burris | | |

| | | |

| * | | Director |

| Carol Anthony (John) Davidson | | |

| | | |

| * | | Director |

| Jacques Esculier | | |

| | | |

| * | | Director |

| Edward P. Garden | | |

| | | |