Item 1. BUSINESS

Unless the context otherwise indicates, references herein to “Pentair,” the “Company,” and such words as “we,” “us,” and “our” include Pentair plc and its consolidated subsidiaries.

GENERAL

At Pentair, we help the world sustainably move, improve and enjoy water, life’s most essential resource. From our residential and commercial water solutions to industrial water management and everything in between, Pentair is focused on smart, sustainable water solutions that help people and the planet thrive.

Pentair strategy

Our vision is to be the world’s most valued sustainable water solutions company for our employees, customers and shareholders. As a company, we:

• Focus on growth in our core businesses and strategic initiatives;

• Accelerate digital, innovation, technology and environmental, social and governance (“ESG”) investments;

• Expedite growth and drive margin expansion through our Transformation Program; and

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

HISTORY AND DEVELOPMENT

We are an Irish public limited company that was formed in 2014. We are the successor to Pentair Ltd., a Swiss corporation formed in 2012, and Pentair, Inc., a Minnesota corporation formed in 1966 and our wholly-owned subsidiary, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although our jurisdiction of organization is Ireland, we manage our affairs so that we are centrally managed and controlled in the United Kingdom (the “U.K.”) and therefore have our tax residency in the U.K.

In July 2022, as part of our Water Solutions reporting segment, we acquired the issued and outstanding equity securities of certain subsidiaries of Welbilt, Inc. (“Welbilt”) and certain other assets, rights, and properties, and assumed certain liabilities, comprising Welbilt’s Manitowoc Ice business (“Manitowoc Ice”), for approximately $1.6 billion in cash.

Our registered principal office is located at Regal House, 70 London Road, Twickenham, London, TW13QS United Kingdom. Our management office in the United States (“U.S.”) is located at 5500 Wayzata Boulevard, Suite 900, Golden Valley, Minnesota.

BUSINESS AND PRODUCTS

Pentair is comprised of three reportable business segments: Flow, Water Solutions and Pool. The following is a brief description of each of the Company’s reportable segments and business activities.

Flow

The Flow segment (formerly named the Industrial & Flow Technologies segment) delivers water where it is needed, when it is needed, more efficiently and transforms waste into value. This segment designs, manufactures and sells a variety of fluid treatment and pump products and systems, including pressure vessels, gas recovery solutions, membrane bioreactors, wastewater reuse systems and advanced membrane filtration, separation systems, water disposal pumps, water supply pumps, fluid transfer pumps, turbine pumps, solid handling pumps, and agricultural spray nozzles, while serving the global residential, commercial and industrial markets. These products and systems are used in a range of applications, including fluid delivery, ion exchange, desalination, food and beverage, separation technologies for the oil and gas industry, residential and municipal wells, water treatment, wastewater solids handling, pressure boosting, circulation and transfer, fire suppression, flood control, agricultural irrigation and crop spray.

For the fiscal year ended December 31, 2023, our residential and irrigation flow businesses, which sell pumps focused on residential and agriculture, comprised approximately 39% of Flow sales. Another approximately 27% of Flow sales were from the commercial & infrastructure flow businesses, which sell larger pumps focused on fire suppression, wastewater and flood control. The remaining approximately 34% of Flow sales were from the industrial solutions business, comprised of applications focused on industrial process filtration and sustainable gas.

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

Customers

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

Seasonality

We have historically experienced increased demand following warm weather trends for residential water supply and agricultural products. Such demand historically has been at seasonal highs from April to August. Seasonal effects may vary from year to year and are impacted by weather patterns, particularly by temperatures, heavy flooding and droughts.

Competition

Flow faces numerous domestic and international competitors, some of which have substantially greater resources directed to the vertical markets in which we compete. Competition focuses on brand names, product performance (including energy-efficient offerings and required specifications), quality, service and price. We compete by offering a wide variety of innovative and high-quality products, which are competitively priced.

Water Solutions

The Water Solutions segment provides great tasting, higher-quality water and ice while helping people use water more productively. This segment designs, manufactures and sells commercial and residential water treatment products and systems including pressure tanks, control valves, activated carbon products, commercial ice machines, conventional filtration products, and point-of-entry and point-of-use water treatment systems. These water treatment products and systems are used in residential whole home water filtration, drinking water filtration and water softening solutions in addition to commercial water management and filtration in foodservice operations. In addition, our water solutions business also provides installation and preventative services for water management solutions for commercial operators.

For the fiscal year ended December 31, 2023, our commercial business, which products include pressure tanks, control valves, activated carbon products, commercial ice machines, conventional filtration products, and commercial point-of-entry and point-of-use water treatment systems, comprised approximately 67% of Water Solutions sales. In addition, our commercial business also provides installation and preventative services for water management solutions for commercial operators. The other approximately 33% of Water Solutions sales were associated with our residential business, which primarily focuses on products associated with residential point of entry and point of use filtration and softening systems.

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

Customers

Water Solutions customers include businesses engaged in wholesale and retail distribution in the residential, commercial and food and beverage vertical markets. Customers also include end users, consumers, commercial operators and original equipment manufacturers.

Seasonality

We experience seasonal demand with several end customers and end users within Water Solutions. End-user demand for water solution products generally follows warm weather trends and is at seasonal highs from April to September.

Competition

Water Solutions faces numerous domestic and international competitors, some of which have substantially greater resources directed to the vertical markets in which we compete. Competition focuses on brand names, product performance (including required specifications), quality and price. We compete by offering a wide variety of innovative and high-quality products, which are competitively priced. We believe our distribution channels and reputation for quality also provide us a competitive advantage.

Pool

The Pool segment provides innovative, energy-efficient pool solutions to help people more sustainably enjoy water. This segment designs, manufactures and sells a complete line of energy-efficient residential and commercial pool equipment and accessories including pumps, filters, heaters, lights, automatic controls, automatic cleaners, maintenance equipment and pool accessories. Applications for our pool products include residential and commercial pool maintenance, pool repair, renovation, service and construction and aquaculture solutions.

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

Customers

Pool customers include businesses engaged in wholesale and retail distribution in the residential and commercial vertical markets. Customers in the residential and commercial verticals also include end users and consumers.

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

Seasonality

We have historically experienced seasonal demand with several end customers and end users. End-user demand for pool equipment follows warm weather trends and historically has been at seasonal highs from April to August. The magnitude of the sales spike has historically been partially mitigated by employing some advance sale “early buy” programs (generally including extended payment terms and/or additional discounts).

Competition

Pool faces numerous domestic and international competitors, some of which have substantially greater resources directed to the vertical markets in which we compete. Competition focuses on brand names, product performance (including energy-efficient offerings and required specifications), quality, service and price. We compete by offering a wide variety of innovative and high-quality products, which are competitively priced. We believe our distribution channels and reputation for quality also provide us a competitive advantage.

INFORMATION REGARDING ALL REPORTABLE SEGMENTS

Research and development

We conduct research and development activities primarily in our own facilities. These efforts consist mostly of the development of new products, product applications and manufacturing processes.

Raw materials

The principal materials we use in manufacturing our products are mild steel, stainless steel, electronic components (including drives and motors), plastics (resins, fiberglass, epoxies), metals and paint (powder and liquid). In addition to the purchase of raw materials, we purchase some finished goods for distribution for resale.

We purchase the materials we use in various manufacturing processes on the open market. We believe the majority of such materials are available through multiple sources and in adequate supply. We have certain long-term commitments, principally price commitments, for the purchase of various component parts and raw materials and continue to work with our suppliers to maintain delivery continuity. Alternate sources of supply are available for most materials and we believe that the termination of any of these commitments would not have a material adverse effect on our financial position, results of operations or cash flows. Global container transportation delays may also affect raw material availability and lead times.

Certain commodities, such as metals and resins, are subject to commodity market and duty-driven price fluctuations. We manage these fluctuations through several mechanisms, including long-term agreements with price adjustment clauses for significant commodity market movements in certain circumstances. Prices for raw materials, such as metals, may trend higher in the near future due to the volatile market trends.

Intellectual property

Patents, non-compete agreements, proprietary technologies, customer relationships, trademarks, trade names and brand names are important to our business. However, we do not regard our business as being materially dependent upon any single patent, non-compete agreement, proprietary technology, customer relationship, trademark, trade name or brand name.

Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise. We do not expect the termination of patents, patent applications or license agreements to have a material adverse effect on our financial position, results of operations or cash flows.

Human capital resources

We believe our success depends on our ability to attract, develop and retain strong employees. We believe a deep-rooted culture energizes our employees to make a difference within and beyond the workplace. We strive to be the destination for top talent, and work hard to develop and retain high performers throughout their career. We also believe our Win Right values, positive culture and commitment to inclusion and diversity foster innovation and curiosity, which, in turn, contribute to us being an industry leader.

As of December 31, 2023, we had approximately 10,500 employees worldwide, of which approximately 49% are located in the U.S. A small portion of our U.S. employees are unionized, while outside the U.S., we have employees in certain countries, particularly in Europe, that are represented by an employee representative organization, such as a union, works council or employee association.

Employee engagement and development

Engaging our employees and developing their careers is important to our long-term success and ties directly to our Win Right culture and values. We support our Win Right culture by providing dedicated culture training to all our employees globally. We engage with our employees and gather feedback about our employee programs, practices and policies through various approaches that include town hall meetings where Pentair leaders share strategies and perspectives; quarterly leadership meetings to help ensure our results and expectations are clearly communicated; and an annual senior leadership meeting to help drive growth and productivity initiatives, share best practices, and invest in our leaders. In addition, we conduct employee engagement and pulse surveys multiple times a year to gauge the level of engagement and actions needed on culture, the business, employee experience and retention. We provide those insights transparently down to the manager level to drive quick insights, development and action planning to drive change.

Training and development

To support employees in their career journey, we have developed and shared, through our dedicated development site, a number of tools and resources. We recently rolled out career pathing and development resources for all functions throughout Pentair. We support development annually with a dedicated career week, individual development planning and targeted development experiences supported through live training sessions; on-demand eLearning and virtual classrooms; and downloadable materials. Additionally, our annual talent management process supports employees to set objectives, receive feedback and development, and build development plans with their leaders.

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

Inclusion and diversity

Our commitment to inclusion and diversity is part of living our Win Right values. Our success also depends on our ability to attract, engage and retain a diverse group of employees. We believe an inclusive and diverse workforce contributes different perspectives and innovative ideas that enable us to improve every day. We believe that every employee should be provided the same opportunity to be heard, respected, have a sense of belonging and contribute to our mission. Race, gender, ethnicity, country of origin, age, personal style, sexual orientation, physical ability, religion, life experiences and many more factors contribute to this diversity. Our Business Resource Groups have been put into place to help promote a culture of inclusion through employees providing feedback and sponsoring awareness, education and engagement.

Our statistics are a measure of our performance, and we are committed to advancing a diverse workplace. The following sets forth information regarding the diversity of our workforce as of December 31, 2023:

			Percent of workforce			Percent of leadership roles (3)
Minorities (1)			38%			24%
Women (2)			31%			31%
(1) Inclusive of the following racial minority groups: Black/African American, Hispanic/Latino, American Indian/Alaskan Native, Asian, Native Hawaiian/Other Pacific Islander. Data for U.S. employee population only.
(2) Global data.
(3) Leadership roles are those of employees who are director level and above.

We take an integrated approach to supporting and promoting workplace inclusion and diversity including: ensuring leadership involvement and ownership; attracting and retaining diverse talent at all levels; fostering a globally aware, inclusive culture; and ensuring our practices are fair and nondiscriminatory. In addition, we promote an inclusive and diverse workplace through: a training called the “The Power of Inclusion”; Business Resource Groups led by employees; Pentair’s Code of Business Conduct and Ethics; and an Inclusion and Diversity Hub on our company’s intranet.

Health, safety and wellness

We are committed to providing a safe workplace for all of our employees. We encourage employees to “Stop Work” anytime there is a potential concern regarding worker safety, and promote an open door policy so that all of our employees feel free to speak to their manager if there are any potential health, safety, compliance or sustainability concerns. Additionally, each site maintains a confidential reporting process, and we encourage the use of the Ethics Hotline for employees to report anonymously potential safety concerns. All locations, enterprise wide, must meet and/or exceed regulatory agency standards as applicable to each site’s location.

Compensation and benefits

In the U.S., all non-union full-time employees are eligible to receive the following benefits: short-term and long-term disability insurance; flexible and health savings accounts and wellness programs; health insurance (medical, pharmacy, dental); eight weeks paid parental leave for birth, adoptive and foster parents; two weeks paid caregiver leave; legal services; retirement benefits; stock ownership; tuition reimbursement; holidays; vacation and sick time. Union employee benefits vary by contract.

ESG (Environmental, Social and Governance) Activities

As a leading provider of smart, sustainable water solutions and with a foundation of Win Right values, we recognize that the work we do and the products and services we provide help to improve lives and the environment around the world. Pentair strives to be a positive influence on the social and environmental issues of today. We are focused on building on our Win Right values and culture by further contributing to the development of a sustainable and responsible society that we believe will also drive our future growth. We are also focused on further integrating our sustainability goals throughout our business by creating accountability for our social responsibility strategy and shared commitments and targets. We have established a formal social responsibility program to further advance our social responsibility goals.

In 2020, Pentair completed a formal ESG assessment to identify ESG topics of importance to our shareholders, customers, suppliers, employees and communities. Through engagement with these stakeholders, internal business leaders and subject matter experts, we identified key ESG topic areas, which ultimately culminated in Pentair’s Social Responsibility Strategic Targets (“Strategic Targets”), which we announced in 2021. In 2023, Pentair completed a refreshed ESG assessment in alignment with the European Union’s Corporate Sustainability Reporting Directive (“CSRD”). This assessment supported the topics focused on for our Strategic Targets and they remain in effect. We expect to use the results of our updated ESG assessment for continued sustainability strategic planning and risk management, as well as to determine future disclosure requirements under CSRD.

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

Environmental Matters

See ITEM 1A “Risk Factors – We are exposed to potential environmental laws, liabilities and litigation.”

Captive insurance subsidiary

A portion of our property and casualty insurance program is insured through our regulated wholly-owned captive insurance subsidiary, Penwald Insurance Company (“Penwald”). Reserves for policy claims are established based on actuarial projections of ultimate losses. Accruals with respect to liabilities insured by third parties, such as liabilities arising from acquired businesses, pre-Penwald liabilities and those of certain non-U.S. operations, are established.

Matters pertaining to Penwald are discussed in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements – Insurance subsidiary, included in this Form 10-K.

Available information

We make available free of charge (other than an investor’s own Internet access charges) through our Internet website (https://www.pentair.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). Reports of beneficial ownership filed by our directors and executive officers pursuant to Section 16(a) of the Exchange Act are also available on our website. We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K.

In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, and you may access any materials we file with the SEC through their website at www.sec.gov.