Pentair Annual Report 2015

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FY2015 Annual Report · Pentair

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2015 ANNUAL REPORT

1966–2016: 50 YEARS OF WINNING RIGHT

We’ve been witness to many changes in a half-century of

consistent growth and profitability. Throughout, one truth

has remained the same: we are a company grounded in

values. As we’ve evolved from a five-man startup to a global

industrial company 30,000 people strong, our call to

Win Right has guided our actions—from the way we

approach business to the way we treat people. With these

values as our constant, we’re confident the next 50 years

will only bring more success.

1968
Acquired Peavey
Paper Mills

1966
Pentair
founded

1981
Tools entry

1981
Founder Murray
Harpole
retires

1981
Gene Nugent
named
CEO

1988
Enclosures
entry

1986
Water
entry

1990
Winslow Buxton
named 3rd
CEO

INFLATABLES

PAPER-LED YEARS

DIVERSIFICATION INTO INDUSTRIAL PRODUCTS

67 68 69 70 71 72 73 74 75 76 77 78 79 80 81

84 85

89 90 91 92 93 94

REVENUE

$1B

WIN
CUSTOMER FIRST
We make it easy for customers to do business
with Pentair and are tenacious about meeting
customer commitments.

A CCO U N TA B I L I T Y FOR
P ERFORM ANC E
We commit to high standards of performance
and demonstrate personal ownership for
getting the job done.

RIGHT
POSITIVE ENERGY
We display a positive outlook and take
responsibility for our impact on others.

RESPE CT AND
TEAMW O RK
We treat others with respect and openness;
we collaborate and align with others
for team success.

I N N O VAT I O N A N D
ADAPTABILIT Y
We actively pursue continuous improvement,
adapting to changing circumstances and
applying new ideas.

ABSOLUTE
INTE GRIT Y
We are committed to honest and ethical business
practices in our dealings with customers, business
partners, investors, communities, and each other.

2001
Randall J. Hogan
named 4th
CEO

1998
Pentair Foundation
created

2004
Exited tools,
acquired Wicor
Industries

EXPANSION OF WATER BUSINESS

2012
Tyco Flow Control
merger

2015
ERICO
acquisition

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

13 14

$2B

$3B

$7B

PE NTAIR ANNUAL REPORT 2015 01

DEAR FELLOW SHAREHOLDER,
Throughout the course of Pentair’s fifty year history, we have seen a lot
of change, have faced many challenges, and each time, we have
emerged a stronger company. Looking back on 2015, we experienced
the impact of a significant contraction of capital spending by customers
across multiple industries, primarily energy and industrial. While we
were not alone in facing the challenges of a global economic slowdown,
at the end of the year, we were encouraged with the progress made to
respond to those challenges. We believe we are now in a better position
to move forward and once again emerge stronger than ever before.
Overall, 2015 was a year in which we saw two segments of our business
deliver strong performance, one segment stabilize, and we continue to
address the economic realities faced by the other segment.

The Water Quality Systems segment was again a consistently
high performer, delivering organic growth through our sustainable
“EcoSelect” offerings in the pool business, as well as success in
expanding the commercial filtration food service business in fast
growth regions. Both are important growth initiatives for Pentair.

Flow & Filtration Solutions focused on stabilizing the business in
2015, delivering positive results in the form of margin expansion.
The focus for the business now is to move from being a product
supplier to a solutions provider, capitalizing on expanding industrial
water solutions as well as furthering adoption of our unique
membrane technologies.

This past year, Technical Solutions demonstrated its ability to
grow globally, particularly with its enclosures business. It also
demonstrated leadership in thermal building solutions by penetrat-
ing more applications with its heat tracing solutions. In September,
the acquisition of ERICO was finalized which expanded our presence
in both the commercial and infrastructure sectors creating a
broader and stronger offering for customers.

Valves & Controls clearly faced challenges in 2015 and is
adjusting the business to counter the current economic
environment we continue to face today. In addition to the aggressive
actions taken to right size the business and continuing to drive
productivity, Valves & Controls’ broad portfolio allows us to focus on
capturing growth opportunities. Valves & Controls is an industry
leader that we believe is well positioned to emerge even stronger.

2016 marks the 40th
consecutive year Pentair
will have paid an increasing
dividend to shareholders.

02 PENTAIR ANNUAL REP OR T 2015

OUR STRATEGY HAS DRIVEN LONG TERM VALUE
Over the course of 50 years, Pentair has transformed many times,
venturing into new opportunities to drive growth and control its
own destiny. One of the more recent transformative highlights was
the merger with Tyco International’s Flow Control business, which
has created many opportunities for the company and our
shareholders. The advantaged structure from the merger has
allowed Pentair to continue to invest in other businesses as cash
generating capabilities were greatly enhanced. ERICO is a good
example of finding complementary businesses that help
strengthen the portfolio.

Pentair’s Integrated Management System (PIMS) has long
provided the tools to deliver shareholder value around both organic
growth and margin expansion. PIMS growth processes provide a
set of approaches to ensure we serve customers well and are used
across the company globally. Lean Enterprise helps to improve
delivery and drive margin expansion by increasing productivity at
manufacturing sites and reducing complexity throughout all parts
of the business. Another important part of PIMS is the ability to
place the right people to create the best opportunities to solve
customer challenges. PIMS also has proven to be a powerful
acquisition integration toolset as demonstrated by both the Flow
Control and ERICO acquisitions.

Pentair has staying power, primarily because of our approach to
business, our Win Right values, and our people. While good
businesses, good products and a broad vision have contributed to
our company’s success, Pentair’s greatest competitive advantage
is our people. This creates a strong position for the company,
and tremendous opportunity to continue creating sustained
shareholder value for the next 50 years.

Thank you for all your support,

RANDALL J. HOGAN

CHAIRMAN & CHIEF
EXECUTIVE OFFICER

NET SALES
($ IN MILLIONS)

2013 7,000
2014 7,039
2015 6,449

DILUTED EPS
($ PER SHARE)

REPORTED

ADJUSTED

FINANCIAL
HIGHLIGHTS
2015

Delivered sales of $6.4 billion, with
core sales decline of 4 percent1.

4.233

3.14

3.463

2.50

‘13

‘14

FREE CASH FLOW
($ IN MILLIONS)

889

767

3.943

‘15

(0.36)

643

‘13

‘14

‘15

ANNUAL DIVIDENDS
($ PER SHARE)

1.28

1.10

0.96

‘13

‘14

‘15

Segment income declined
12 percent to $1.0 billion2.

Generated free cash flow of
$643 million, representing
approximately 90 percent
of adjusted net income.

Returned $432 million of cash to
shareholders through dividends and
share repurchases. 2015 marked
the 39th consecutive year in which
Pentair increased its dividend.

1“Core sales” refers to GAAP revenue from existing operations excluding (1) the impact of currency
translation and (2) the impact of revenue from acquired businesses recorded prior to the first anniversary
of the acquisition less the amount of sales attributable to divested product lines not considered
discontinued operations.

22015 segment income excludes a goodwill and trade name impairment charge of approximately
$555 million, intangible amortization of approximately $121 million, restructuring and other costs of
approximately $121 million, an inventory step-up charge of approximately $36 million, a pension “mark to
market” gain of approximately $23 million, and deal related costs and expenses of approximately
$14 million; 2014 segment income excludes intangible amortization of approximately $114 million,
restructuring and other costs of approximately $110 million, a pension “mark to market” charge of
approximately $50 million, and redomicile related costs of approximately $10 million.

32015 adjusted EPS excludes a goodwill and trade name impairment charge of $3.00, intangible
amortization of $0.53, restructuring and other charges of $0.53, deal related costs and expenses of $0.27,
pension “mark to market” gain of $0.11, loss on sale of businesses and tax adjustments of $0.08;
2014 adjusted EPS excludes intangible amortization of $0.45, restructuring and other charges of $0.41,
pension “mark to market” charge of $0.19, and redomicile related expenses of $0.04; 2013 adjusted EPS
excludes intangible amortization of $0.41, restructuring and other charges of $0.42, deal related costs of
$0.35, pension “mark to market” gain of $0.23, gain on sale of businesses and tax adjustments of $0.05,
a trade name impairment charge of $0.04, and redomicile related expenses of $0.02.

PE N TAIR ANNUAL REPORT 2015 03

2015 FINANCIAL PERFORMANCE

Pentair is a global water, fluid, thermal management,

and equipment protection partner with industry-leading

products, services, and solutions. Pentair reports the

performance of its business within four segments that

focus on five primary verticals.

BY SEGMENT 2015 SALES

29%

VALVES &
CONTROLS

22%

FLOW &
FILTRATION
SOLUTIONS

21%

WATER QUALITY
SYSTEMS

28%

TECHNICAL
SOLUTIONS

BY VERTICAL 2015 SALES

30%

RESIDENTIAL &
COMMERCIAL

27%

INDUSTRIAL

25%

ENERGY

10%

FOOD &
BEVERAGE

INFRA-
STRUCTURE

BY REGION 2015 SALES

54%

U.S. & CANADA

22%

DEVELOPING

18%

WESTERN
EUROPE

OTHER
DEVELOP-
ED

04 PENTAIR ANNU AL REP ORT 2015

VALVES & CONTROLS Designs, manufactures, markets, and services valves, fittings, automation and controls,
and actuators for the energy and industrial verticals.

2015 SALES BY VERTICAL

2015 SALES BY REGION

29% | U.S. & Canada
38% | Developing
23% | Western Europe
10% | Other Developed

$1.8B 2015 SALES

FLOW & FILTRATION SOLUTIONS Designs, manufactures, markets, and services solutions for the toughest
filtration, separation, flow and fluid management challenges in agriculture, food and beverage processing, water
supply and disposal, and a variety of industrial applications.

2015 SALES BY VERTICAL

2015 SALES BY REGION

52% | U.S. & Canada
23% | Developing
19% | Western Europe
6% | Other Developed

$1.4B 2015 SALES

WATER QUALITY SYSTEMS Designs, manufactures, markets, and services innovative water system products
and solutions to meet filtration and fluid management challenges in food and beverage, water, swimming pools, and
aquaculture applications.

2015 SALES BY VERTICAL

2015 SALES BY REGION

73% | U.S. & Canada
15% | Developing
9% | Western Europe
3% | Other Developed

$1.4B 2015 SALES

TECHNICAL SOLUTIONS Designs, manufactures, markets, and services products that guard and protect some of the
world’s most sensitive electrical and electronic equipment, as well as heat management solutions designed to provide
thermal protection to temperature sensitive fluid applications and engineered electrical and fastening products for electrical,
mechanical and civil applications.

2015 SALES BY VERTICAL

$1.8B 2015 SALES

2015 SALES BY REGION

68% | U.S. & Canada
11% | Developing
19% | Western Europe
2% | Other Developed

PE NTAIR ANNUAL REPORT 2015 05

The world’s population is
growing, with a middle class
soon to surpass four billion
people. This demographic
shift puts tremendous stress
on water, energy, and food.
Pentair has the solutions,
values, and employees to
make a positive impact on
these challenges.

06 PENTAIR ANNU AL REP ORT 2015

Our purpose is to
improve the quality
of life of people
around the world.

We are one global team
with a shared purpose,
coming together in
pursuit of a common
goal. We’re inspired by
our role in the world,
our customers, our
communities, and
each other.

WE PARTNER WITH OUR CUSTOMERS

To reduce, recover and reuse water.
We help some of the world’s largest consumers of fresh water, from manufacturing to agriculture,
better manage this most precious resource. Our products reduce, recover and reuse water, and
ensure the water is clean when returned to the environment as well as clean and safe to drink.

To maximize the productivity of energy processes.
From recovering waste from refinery and natural gas streams, to maintaining the consistent flow
of oil and gas in harsh conditions, our solutions help our customers maximize energy efficiency
and deliver safe and sustainable energy in an environmentally responsible way.

To provide reliable and efficient solutions for the global food and beverage industry.
The most advanced, efficient, and sustainable food and beverage producers in the world partner
with Pentair. Our innovative solutions and technologies help them increase yield and decrease
costs, waste, energy use, and water consumption—all while maintaining taste and quality.

To safeguard people, processes, equipment and the environment.
From enclosures that protect sensitive equipment, to fire and leak detection technologies and
flood control systems, our products support, maintain, and protect our customers’ critical
processes and equipment, keeping people, communities, and the environment safe.

WE ENGAGE IN OUR COMMUNITIES

Through The Pentair Foundation’s philanthropic activities.
We believe safe water is a fundamental human right, and one of the foundations of freedom and
economic development. Pentair collaborates with a range of partners, combining our technology,
micro-enterprise business models and scientific research to provide sustainable access to safe
water, as well as water conservation and reuse efforts.

By employing environmentally sustainable manufacturing practices.
We are continually evaluating ways to employ sustainable environmental practices to reduce our
manufacturing impact by improving our use of energy, water and waste.

With the time and talent of Team Pentair.
As “Team Pentair,” our employees give time and talent to unite around important issues with
their colleagues, providing leadership to help improve the communities where we live and work
around the world.

PE NTAIR ANNUAL REPORT 2015 07

LEADERSHIP TEAM

BOARD MEMBERS (LEFT TO RIGHT)

CAROL ANTHONY (JOHN) DAVIDSON
Former Senior Vice President, Controller and Chief
Accounting Officer of Tyco International Ltd.;
Director since 2012

WILLIAM T. MONAHAN
Lead Director; Retired Chairman and Chief Executive
Officer of Imation Corp.; Director since 2001

JACQUES ESCULIER
Chief Executive Officer, Director and Chairman,
WABCO Holdings, Inc.; Director since 2014

T. MICHAEL GLENN
Chair of the Governance Committee; Executive Vice
President - Market Development and Corporate
Communications of FedEx Corporation; Director since 2007

DAVID H. Y. HO
Chairman, Kiina Investment Limited; Director since 2007

RONALD L. MERRIMAN
Chair of the Audit and Finance Committee;
Retired Vice Chair of KPMG; Director since 2004

GLYNIS A. BRYAN
Chief Financial Officer of Insight Enterprises, Inc.;
Director since 2003

DAVID A. JONES
Chair of the Compensation Committee; Senior Advisor
to Oak Hill Capital Partners; Director since 2003

RANDALL J. HOGAN
Board Chairman and Chief Executive Officer; Director
since 1999

BILLIE I. WILLIAMSON
Former Senior Assurance Partner at Ernst & Young;
Board Member since 2014

JERRY W. BURRIS
Former President and Chief Executive Officer of
Associated Materials Group, Inc.; Director since 2007

MANAGEMENT

RANDALL J. HOGAN
Chairman and Chief Executive Officer

KARL R. FRYKMAN
President, Water Quality Systems

JOHN L. STAUCH
Executive Vice President and Chief Financial Officer

ALOK MASKARA
President, Technical Solutions

ANGELA D. JILEK
Senior Vice President, General Counsel and Secretary

BETH A. WOZNIAK
President, Flow & Filtration Solutions

MARK C. BORIN
Chief Accounting Officer and Treasurer

08 PENTAIR ANNUA L REPORT 2015

INVESTOR INFORMATION
ANNUAL GENERAL MEETING
Our Annual General Meeting of Shareholders will be held at the
Four Seasons Hotel, Hamilton Place, Park Lane, London,
England, W1J7DR, Tuesday, May 10, 2016 at 8:00 a.m. local time.
Shareholders in Ireland may participate in the Annual General
Meeting of Shareholders by audio link at the offices of Arthur Cox,
Earlsfort Centre, Earlsfort Terrace, Dublin 2, Ireland, at 8:00 a.m.
local time.

INVESTOR INFORMATION
Shareholders seeking more information about the Company can
access news releases describing significant company events and
earnings results for each quarter and the fiscal year as well as
Form 10-K and other Securities and Exchange Commission filings
at www.pentair.com.

Information may also be obtained by request from the Pentair
Investor Relations Department, 5500 Wayzata Boulevard,
Suite 600, Minneapolis, Minnesota 55416.

STOCK EXCHANGE LISTING
New York Stock Exchange (symbol: PNR)

REGISTRAR, STOCK TRANSFER AND PAYING AGENT
Computershare, Inc.
P.O. Box 43001
Providence, RI 02940
Telephone inquiries: 1-866-241-7684 (U.S.)
1-732-491-0587 (non U.S.)
Email inquiries: web.queries@computershare.com

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This communication contains statements that we believe to be “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward looking state-
ments. Without limitation, any statements preceded or followed by or that include the words “targets,” “plans,” “believes,”
“expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “should,” “would,” “positioned,” “strategy,”
“future” or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These
forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions
and other factors, some of which are beyond our control, which could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. These factors include overall global economic and business
conditions, including worldwide demand for oil and gas; the ability to achieve the benefits of our business initiatives; the ability
to successfully identify, finance, complete and integrate acquisitions, including the ability to successfully integrate and achieve
the expected benefits of the acquisition of ERICO Global Company; 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. Additional information concerning these and other factors is contained in our filings with
the U.S. Securities and Exchange Commission, including in our 2015 Annual Report on Form 10-K. All forward looking
statements speak only as of the date of this report. We assume no obligation, and disclaim any obligation, to update the
information contained in this report.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For the Fiscal Year Ended December 31, 2015

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

‘

Commission file number 001-11625

Pentair plc

(Exact name of Registrant as specified in its charter)

Ireland

(State or other jurisdiction of
incorporation or organization)

98-1141328

(I.R.S. Employer
Identification number)

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

(Address of principal executive offices)

Registrant’s telephone number, including area code: 44-161-703-1885

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Ordinary Shares, nominal value $0.01 per share

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No Í

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days. Yes Í No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the Registrant was required to submit and post such files). Yes Í No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in PART III of
this Form 10-K or any amendment to this Form 10-K. Í

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer Í

Smaller reporting company ‘

Non-accelerated filer ‘

Accelerated filer ‘

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No Í

Aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of
$63.75 per share as reported on the New York Stock Exchange on June 26, 2015 (the last business day of Registrant’s most recently
completed second quarter): $11,256,593,708

The number of shares outstanding of Registrant’s only class of common stock on December 31, 2015 was 180,455,693.

DOCUMENTS INCORPORATED BY REFERENCE

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

Pentair plc

Annual Report on Form 10-K
For the Year Ended December 31, 2015

PART I

ITEM 1.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 1A.

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 1B.

Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 2.

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 3.

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 4.

Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

ITEM 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 6.

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . .

ITEM 7A.

Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 8.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . .

ITEM 9A.

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 9B.

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

ITEM 10.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 11.

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . .

ITEM 13.

Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 14.

Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

ITEM 15.

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

116

117

118

119

120

PART I

ITEM 1. BUSINESS

GENERAL
Pentair plc is a focused diversified industrial manufacturing company comprising four reporting segments:
Valves & Controls, Flow & Filtration Solutions, Water Quality Systems and Technical Solutions. Valves &
Controls designs, manufactures, markets and services valves, fittings, automation and controls and actuators.
Flow & Filtration Solutions designs, manufactures, markets and services solutions for the toughest filtration,
separation, flow and fluid management challenges in agriculture, food and beverage processing, water supply and
disposal and a variety of industrial applications. Water Quality Systems designs, manufactures, markets and
services innovative water system products and solutions to meet filtration and fluid management challenges in
food and beverage, water, swimming pools and aquaculture applications. Technical Solutions designs,
manufactures, markets and services products that guard and protect some of the world’s most sensitive electrical
and electronic equipment, as well as heat management solutions designed to provide thermal protection to
temperature sensitive fluid applications and engineered electrical and fastening products for electrical,
mechanical and civil applications.

Pentair strategy
Our strategy is to drive sustainable, profitable growth and return on invested capital improvements through:

•

•
•
•
•

building operational excellence through the Pentair Integrated Management System (“PIMS”) consisting
of lean enterprise, growth and talent management;
driving long-term growth in sales, operating income and cash flows, through growth and productivity
initiatives along with acquisitions;
developing new products and enhancing existing products;
penetrating attractive growth markets, particularly outside of the United States;
expanding multi-channel distribution; and
proactively managing our business portfolio for optimal value creation, including consideration of new
business platforms.

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. We are an Irish corporation limited by
shares 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”).

HISTORY AND DEVELOPMENT
In December 2013, the Company’s Board of Directors approved changing the Company’s jurisdiction of
organization from Switzerland to Ireland. At an extraordinary meeting of shareholders on May 20, 2014, Pentair
Ltd. shareholders voted in favor of a reorganization proposal pursuant to which Pentair Ltd. would merge into
Pentair plc and all Pentair Ltd. common shares would be cancelled and all holders of such shares would receive
ordinary shares of Pentair plc on a one-to-one basis. The reorganization transaction was completed on June 3,
2014, at which time Pentair plc replaced Pentair Ltd. as the ultimate parent company (the “Redomicile”). Shares
of Pentair plc began trading on the New York Stock Exchange (“NYSE”) on June 3, 2014 under the symbol
“PNR,” the same symbol under which Pentair Ltd. shares were previously traded.

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.

below), with Pentair, Inc. surviving as an indirect, wholly-owned subsidiary of ours. “Flow Control” refers to
Pentair Ltd. prior to the Merger. Prior to the Merger, Tyco International Ltd. (“Tyco”) engaged in an internal
restructuring whereby it transferred to Flow Control certain assets related to the flow control business of Tyco,
and Flow Control assumed from Tyco certain liabilities related to the flow control business of Tyco. On
September 28, 2012 prior to the Merger, Tyco effected a spin-off of Flow Control through the pro-rata
distribution of 100% of the outstanding ordinary shares of Flow Control
to Tyco’s shareholders (the
“Distribution”), resulting in the distribution of approximately 110.9 million of our ordinary shares to Tyco’s
shareholders. The Merger was accounted for as a reverse acquisition under the purchase method of accounting
with Pentair, Inc. treated as the acquirer.

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 $1.8 billion (the “ERICO Acquisition”). ERICO is a
leading global manufacturer and marketer of engineered electrical and fastening products for electrical,
mechanical and civil applications. ERICO has employees in 30 countries across the world with recognized
brands including CADDY fixing, fastening and support products; ERICO electrical grounding, bonding and
connectivity products and LENTON engineered systems.

Our registered principal office is located at P.O. Box 471, Sharp Street, Walkden, Manchester, M28 8BU United
Kingdom. Our management office in the United States (“U.S.”) is located at 5500 Wayzata Boulevard, Suite 600,
Minneapolis, Minnesota.

BUSINESS AND PRODUCTS
Reporting segment and geographical financial information is contained in ITEM 8, Note 16 of the Notes to
Consolidated Financial Statements, included in this Form 10-K. The following is a brief description of each of
the Company’s reportable segments and business activities.

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. Customers include end-users as well as engineering, procurement and construction
companies, contractors, original equipment manufacturers and distributors.

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.

FLOW & FILTRATION SOLUTIONS
The Flow & Filtration Solutions segment designs, manufactures, markets and services solutions for the toughest
filtration, separation, flow and fluid management challenges in agriculture, food and beverage processing, water
supply and disposal and a variety of industrial applications.

Flow & Filtration Solutions is involved in the entire fluid management system, from advanced filtration,
desalination and water supply to water disposal, process and control. From product selection to installation,
maintenance and servicing, Flow & Filtration Solutions supports a broad range of products and services
specifically tailored to address customers’ needs for reliable and efficient movement and control of fluids.
Solutions include light duty diaphragm pumps and pressure boosters, high-flow turbine pumps and solid handling
pumps, as well as advanced filtration, oil & gas separation, membrane technology, energy recovery and quality
control and instrumentation.

Applications for Flow and Filtration Solutions’ products include precision agriculture, water supply and disposal,
fire applications and food and beverage processing. Brand names for Flow & Filtration Solutions products
include Aurora, Berkeley, Fairbanks-Nijhuis, Haffmans, Hydromatic, Hypro, Sta-Rite, Südmo and X-Flow.

Customers
Flow & Filtration Solutions customers include businesses engaged in wholesale distribution and retail across the
residential, commercial, industrial, infrastructure, energy and food and beverage verticals. Customers also
include end-users as well as engineering procurement contractors, original equipment manufacturers and
residential retail consumers.

Seasonality
We experience demand for residential water supply products, infrastructure and agricultural products following
warm weather trends, which are at seasonal highs from April to August. The magnitude of the sales increase is
partially mitigated by employing some advance sale “early buy” programs (generally including extended
payment terms and/or additional discounts). Seasonal effects may vary from year to year and are impacted by
weather patterns, particularly by temperatures, heavy flooding and droughts.

Competition
Flow & Filtration Solutions faces numerous domestic and international competitors, some of which have
substantially greater resources directed to the verticals in which we compete. Competition in Flow & Filtration
Solutions 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 QUALITY SYSTEMS
The Water Quality Systems segment designs, manufactures, markets and services innovative water system
products and solutions to meet filtration and fluid management challenges in food and beverage, water,
swimming pools and aquaculture applications.

Water Quality Systems offers a comprehensive product suite that includes a full range of recreational water
treatment equipment including energy-efficient pumps, point-of-entry / point-of-use filtration for residential and
commercial applications including foodservice, valves, UV sanitization and automation controls. We offer design
and consulting services and our advanced water technologies are used across a wide number of industries
including industrial, residential, commercial, municipal, foodservice, aquaculture, aquaponics, aquatic life
support systems, irrigation and flood control, wastewater and more. Our equipment and solutions are found in
swimming pools and spas, aquaculture farms, laboratories, water purification and sanitation systems, foodservice
operations, and in other applications across the globe.

Brand names for Water Quality Systems include Everpure, Pentair and Sta-Rite.

Customers
Water Quality Systems customers include businesses engaged in wholesale and retail distribution in the
residential & commercial, food & beverage and infrastructure verticals. Customers in the residential &
commercial vertical also include end-users and consumers.

Seasonality
We experience seasonal demand with several end customers and end-users within Water Quality Systems. End-
user demand for pool equipment follows warm weather trends and is at seasonal highs from April to August. The
magnitude of the sales increase is partially mitigated by employing some advance sale “early buy” programs
(generally including extended payment terms and/or additional discounts).

Competition
Water Quality Systems faces numerous domestic and international competitors, some of which have substantially
greater resources directed to the verticals in which we compete. Competition focuses on brand names, product
performance (including energy-efficient offerings), 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.

TECHNICAL SOLUTIONS
The Technical Solutions segment designs, manufactures, markets and services products that guard and protect
some of the world’s most sensitive electrical and electronic equipment, as well as heat management solutions
designed to provide thermal protection to temperature sensitive fluid applications and engineered electrical and
fastening products for electrical, mechanical and civil applications.

Technical Solutions products include mild steel, stainless steel, aluminum and non-metallic enclosures, cabinets,
cases, subracks, backplanes, engineered fastening solutions across a wide range of industries and verticals and
thermal management systems including heat tracing, floor heating, fire-rated and specialty wiring, sensing, and
snow melting and de-icing solutions for industrial, commercial and residential use.

including use in industrial, energy, residential &
The portfolio of products serves a range of industries,
commercial and infrastructure verticals. Brand names for Technical Solutions offerings include CADDY,
ERICO, Hoffman, LENTON, Raychem, Schroff and Tracer. 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.

Customers
Technical Solutions customers include electrical distributors, data center contractors, original equipment
manufacturers, contractors mainly of greenfield developments and maintenance contractors. Technical Solutions
has a global installed base of customers.

Seasonality
Technical Solutions generally experiences increased demand for thermal protection products and services during
the fall and winter months in the Northern Hemisphere and increased demand for electrical fastening products
during the spring and summer months in the Northern Hemisphere.

Competition
Within Technical Solutions, the equipment protection business faces significant competition in the verticals it
serves, particularly within the communications industry, where product design, prototyping, global supply, price
competition and customer service are significant factors. The industries and verticals served by the thermal
management business are highly fragmented, comprising local markets and niches.

INFORMATION REGARDING ALL REPORTABLE SEGMENTS

Backlog of orders by segment

In millions

Valves & Controls
Flow & Filtration Solutions
Water Quality Systems
Technical Solutions

Total

2015

1,127.6
289.6
141.4
319.0

December 31
2014

$ change % change

$1,233.7
361.2
121.0
281.0

$ (106.1)
(71.6)
20.4
38.0

(8.6)%
(19.8)
16.9
13.5

1,877.6

$1,996.9

$ (119.3)

(6.0)%

Backlog from Valves & Controls consists of business in the energy and industrial verticals. Generally, backlog
from Valves & Controls has a longer manufacturing cycle and products typically ship within six to twelve
months of the date on which a customer places an order. 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. A substantial portion of our revenues, however,
result from orders received and product delivered in the same month. We record as part of our backlog all orders
from external customers, which represent firm commitments, and are supported by a purchase order or other
legitimate contract. We expect the majority of our backlog from all segments at December 31, 2015 will be filled
in 2016.

Research and development
We conduct research and development activities primarily in our own facilities. These efforts consist primarily of
the development of new products, product applications and manufacturing processes. Research and development
expenditures during 2015, 2014 and 2013 were $119.6 million, $117.3 million and $122.8 million, respectively.

Environmental
Environmental matters are discussed in ITEM 3, ITEM 7 and ITEM 8, Note 17 of the Notes to Consolidated
Financial Statements, included in this Form 10-K.

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

We purchase the materials we use in various manufacturing processes on the open market and the majority is
available through multiple sources which are in adequate supply. We have not experienced any significant work
stoppages to date due to shortages of materials. We have certain long-term commitments, principally price
commitments, for the purchase of various component parts and raw materials and believe that it is unlikely that
any of these agreements would be terminated prematurely. Alternate sources of supply at competitive prices are
available for most materials for which long-term commitments exist and we believe that the termination of any of
these commitments would not have a material adverse effect on our financial position, results of operations or
cash flows.

Certain commodities, such as metals and resin, are subject to 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 and resins, may trend higher in the future.

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.

Employees
As of December 31, 2015, we employed 27,600 people worldwide, of which 9,600 were in the U.S. and 10,200
were covered by collective bargaining agreements or works councils. We believe that our relations with the labor
unions have generally been good.

Captive insurance subsidiary
We insure certain general and product liability, property, workers’ compensation and automobile liability risks
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 3 and 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 (http://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 U.S. Securities and Exchange Commission (“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.

ITEM 1A. RISK FACTORS

You should carefully consider all of the information in this document and the following risk factors before
making an investment decision regarding our securities. Any of the following risks could materially and
adversely affect our business, financial condition, results of operations, cash flows and the actual outcome of
matters as to which forward-looking statements are made in this document.

Risks Relating to Our Business

General global economic and business conditions affect demand for our products.
We compete in various geographic regions and product markets around the world. Among these, the most
significant are global industrial markets and residential markets. We have experienced, and expect to continue to
experience, fluctuations in revenues and operating results due to economic and business cycles. Important factors
for our businesses and the businesses of our customers include the overall strength of the economy and our
customers’ confidence in the economy, industrial and governmental capital spending, the strength of the residential
and commercial real estate markets, unemployment rates, availability of consumer and commercial financing,
interest rates, and energy and commodity prices. The businesses of many of our industrial customers, particularly oil

and gas companies, chemical and petrochemical companies, mining and general industrial companies, are to
varying degrees cyclical and have experienced periodic downturns. While we attempt to minimize our exposure to
economic or market fluctuations by serving a balanced mix of end markets and geographic regions, any of the above
factors, individually or in the aggregate, or a significant or sustained downturn in a specific end market or
geographic region could reduce demand for our products and services.

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 compete in attractive markets with a high level of competition, which may result in pressure on our profit
margins and limit our ability to maintain or increase the market share of our products.
The markets for our products and services are geographically diverse and highly competitive. We compete
against large and well-established national and global companies, as well as regional and local companies and
lower cost manufacturers. We compete based on technical expertise, reputation for quality and reliability,
timeliness of delivery, previous installation history, contractual terms and price. Some of our competitors, in
particular smaller companies, attempt
localized expertise and local
relationships, especially with respect to products and applications that do not require a great deal of engineering
or technical expertise. In addition, during economic downturns average selling prices tend to decrease as market
participants compete more aggressively on price. If we are unable to continue to differentiate our products,
services and solutions, or if we are forced to cut prices or to incur additional costs to remain competitive, our
business, financial condition, results of operations and cash flows could be materially and adversely affected.

to compete based primarily on price,

Volatility in currency exchange rates may adversely affect our financial condition, results of operations and
cash flows.
Sales outside of the U.S. for the year ended December 31, 2015 accounted for 52 percent of our net sales. Our
financial statements reflect translation of items denominated in non-U.S. currencies to U.S. dollars. Therefore, if
the U.S. dollar strengthens in relation to the principle non-U.S. currencies from which we derive revenue as
compared to a prior period, our U.S. dollar reported revenue and income will effectively be decreased to the
extent of the change in currency valuations, and vice-versa. During 2015, foreign currency translations had a 6.6
percent negative impact on our results of operations. Fluctuations in foreign currency exchange rates, most
notably the strengthening of the U.S. dollar against the Euro, could continue to adversely affect our reported
revenue in future periods. In addition, currency variations can adversely affect margins on sales of our products
in countries outside of the U.S. and margins on sales of products that include components obtained from
suppliers located outside of the U.S.

Our future growth is dependent upon our ability to continue to adapt our products, services and organization
to meet the demands of local markets in both developed and emerging economies and by developing or
acquiring new technologies that achieve market acceptance with acceptable margins.
We operate in global markets that are characterized by customer demand that is often global in scope but
localized in delivery. We compete with thousands of smaller regional and local companies that may be
positioned to offer products produced at lower cost than ours, or to capitalize on highly localized relationships
and knowledge that are difficult for us to replicate. Also, in several emerging markets potential customers prefer
local suppliers, in some cases because of existing relationships and in other cases because of local legal

restrictions or incentives that favor local businesses. Accordingly, our future success depends upon a number of
factors, including our ability to adapt our products, services, organization, workforce and sales strategies to fit
localities throughout the world, particularly in high growth emerging markets; identify emerging technological
and other trends in our target end-markets; and develop or acquire competitive products and services and bring
them to market quickly and cost-effectively. We have chosen to focus our growth initiatives in specific end
markets and geographies, but we cannot provide assurance that these growth initiatives will be sufficient to offset
revenue declines in other markets. The failure to effectively adapt our products or services could materially and
adversely affect our business, financial condition, results of operations and cash flows.

Our business strategy includes acquiring businesses and making investments that complement our existing
businesses. We may not be able to identify, finance and complete suitable acquisitions and investments, and
any completed acquisitions and investments could be unsuccessful or consume significant resources, which
could adversely affect our operating results.
We continue to analyze and evaluate the acquisition of strategic businesses or product lines with the potential to
strengthen our industry position or enhance our existing set of product and service offerings. We cannot provide
any assurance that we will be able to identify suitable acquisition candidates, obtain financing or have sufficient
cash necessary for acquisitions or successfully complete acquisitions in the future or that completed acquisitions
will be successful. Acquisitions and investments may involve significant cash expenditures, debt incurrences,
equity issuances, operating losses and expenses that could have a material adverse effect on our business,
financial condition, results of operations and cash flows. Acquisitions involve numerous other risks, including:

•

diversion of management time and attention from daily operations;

difficulties integrating acquired businesses, technologies and personnel into our business;

difficulties in obtaining and verifying the financial statements and other business information of
acquired businesses;

inability to obtain required regulatory approvals;

potential loss of key employees, key contractual relationships or key customers of acquired companies
or of ours;

assumption of the liabilities and exposure to unforeseen liabilities of acquired companies, including
risks related to the U.S. Foreign Corrupt Practices Act (the “FCPA”); and

dilution of interests of holders of our shares through the issuance of equity securities or equity-linked
securities.

It may be difficult for us to complete transactions quickly and to integrate acquired operations efficiently into our
business operations. Any acquisitions or investments may ultimately harm our business, financial condition,
results of operations and cash flows, as such acquisitions may not be successful and may ultimately result in
impairment charges.

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.

We may not achieve some or all of the expected benefits of our business initiatives.
During 2015, 2014 and 2013, we initiated and continued execution of certain business initiatives aimed at
reducing our fixed cost structure and realigning our business. As a result, we have incurred substantial expense,
including restructuring charges. We may not be able to achieve the operating efficiencies to reduce costs or
realize benefits that were initially anticipated in connection with these initiatives. If we are unable to execute
these initiatives as planned, we may not realize all or any of the anticipated benefits, which could adversely affect
our business and results of operations.

We are exposed to political, regulatory, economic and other risks that arise from operating a multinational
business.
Sales outside of the U.S. for the year ended December 31, 2015 accounted for 52 percent of our net sales.
Further, most of our businesses obtain some products, components and raw materials from non-U.S. suppliers.
Accordingly, our business is subject to the political, regulatory, economic and other risks that are inherent in
operating in numerous countries. These risks include:

•

changes in general economic and political conditions in countries where we operate, particularly in
emerging markets;

relatively more severe economic conditions in some international markets than in the United States;

the difficulty of enforcing agreements and collecting receivables through foreign legal systems;

the difficulty of communicating and monitoring standards and directives across our global network of
after-market service centers and manufacturing facilities;

trade protection measures and import or export licensing requirements and restrictions;

the possibility of terrorist action affecting us or our operations;

the threat of nationalization and expropriation;

the imposition of tariffs, exchange controls or other trade restrictions;

difficulty in staffing and managing widespread operations in non-U.S. labor markets;

changes in tax treaties, laws or rulings that could have an adverse impact on our effective tax rate;

limitations on repatriation of earnings;

the difficulty of protecting intellectual property in non-U.S. countries; and

changes in and required compliance with a variety of non-U.S. laws and regulations.

Our success depends in part on our ability to anticipate and effectively manage these and other risks. We cannot
assure you that these and other factors will not have a material adverse effect on our international operations or
on our business as a whole.

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.

Material cost and other inflation have adversely affected and could continue to affect our results of
operations.
In the past, we have experienced material cost and other inflation in a number of our businesses. We strive for
productivity improvements and implement increases in selling prices to help mitigate cost increases in raw
materials (especially metals and resins), energy and other costs such as pension, health care and insurance. We
continue to implement operational initiatives in order to mitigate the impacts of this inflation and continuously
reduce our costs. We cannot provide assurance, however, that these actions will be successful in managing our
costs or increasing our productivity. Continued cost inflation or failure of our initiatives to generate cost savings
or improve productivity would likely negatively impact our 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.

Intellectual property challenges may hinder our ability to develop, engineer and market our products.
Patents, non-compete agreements, proprietary technologies, customer relationships, trademarks, trade names and
brand names are important
to our business. Intellectual property protection, however, may not preclude
competitors from developing products similar to ours or from challenging our names or products. Our pending
patent applications, and our pending copyright and trademark registration applications, may not be allowed or
competitors may challenge the validity or scope of our patents, copyrights or trademarks. In addition, our patents,
copyrights, trademarks and other intellectual property rights may not provide us a significant competitive
advantage. Over the past few years, we have noticed an increasing tendency for participants in our markets to use
conflicts over and challenges to intellectual property as a means to compete. Patent and trademark challenges
increase our costs to develop, engineer and market our products. We may need to spend significant resources

monitoring our intellectual property rights and we may or may not be able to detect infringement by third parties.
If we fail to successfully enforce our intellectual property rights or register new patents, our competitive position
could suffer, which could harm our business, financial condition, results of operations and cash flows.

We have significant goodwill and intangible assets and future impairment of our goodwill and intangible
assets could have a material negative impact on our financial results.
We test goodwill and indefinite-lived intangible assets for impairment on at least an annual basis, and more
frequently if circumstances warrant, by comparing the estimated fair value of each of our reporting units to their
respective carrying values on their balance sheets. As of December 31, 2015 our goodwill and intangible assets
were $7,745.5 million and represented 65% of our total assets. Long-term declines in projected future cash flows
could result in future goodwill and intangible asset impairments. 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.

We may be adversely affected by work stoppages, union negotiations, labor disputes and other matters
associated with our labor force.
As of December 31, 2015, approximately 10,200 of our employees were covered by collective bargaining
agreements or works councils. Although we believe that our relations with the labor unions and work councils
that represent our employees are generally good and we have experienced no material strikes and only minor
work stoppages recently, no assurances can be made that we will not experience in the future these and other
types of conflicts with labor unions, works councils, other groups representing employees or our employees
generally, or that any future negotiations with our labor unions will not result in significant increases in our cost
of labor.

Seasonality of sales and weather conditions may adversely affect our financial results.
We experience seasonal demand in a number of markets within Flow & Filtration Solutions, Water Quality
Systems and Technical Solutions. In Flow & Filtration Solutions, demand for residential water supply products,
infrastructure and agricultural products follows warm weather trends and is at seasonal highs from April to
August. In Water Quality Systems, end-user demand for pool equipment in our primary markets follows warm
weather trends and is at seasonal highs from April to August. The magnitude of the sales increase in both Flow &
Filtration Solutions and Water Quality Systems is partially mitigated by employing some advance sale or “early
buy” programs (generally including extended payment terms and/or additional discounts). Seasonal effects may
vary from year to year and are impacted by weather patterns, particularly by temperatures, heavy flooding and
droughts. Technical Solutions generally experiences increased demand for thermal protection products and
services during the fall and winter months in the Northern Hemisphere and increased demand for electrical
fastening products during the spring and summer months in the Northern Hemisphere. We cannot provide
assurance that seasonality and weather conditions will not have a material adverse effect on our results of
operations.

Our share price may fluctuate significantly.
We cannot predict the prices at which our shares may trade. The market price of our shares may fluctuate widely,
depending on many factors, some of which may be beyond our control, including:

•

actual or anticipated fluctuations in our operating results due to factors related to our business;

success or failure of our business strategy;

our quarterly or annual earnings, or those of other companies in our industry;

our ability to obtain third-party financing as needed;

announcements by us or our competitors of significant acquisitions or dispositions;

changes in accounting standards, policies, guidance, interpretations or principles;

•

changes in earnings estimates by us or securities analysts or our ability to meet those estimates;

the operating and share price performance of other comparable companies;

investor perception of us;

natural or other environmental disasters that investors believe may affect us;

overall market fluctuations;

results from any material
environmental liabilities;

litigation,

including asbestos claims, government

investigations or

changes in laws and regulations affecting our business; and

general economic conditions and other external factors.

Stock markets in general have experienced volatility that has often been unrelated to the operating performance
of a particular company. These broad market fluctuations could adversely affect the trading price of our shares.

Risks Relating to Legal, Regulatory and Compliance Matters

Our subsidiaries are party to asbestos-related product litigation that could adversely affect our financial
condition, results of operations and cash flows.
Our subsidiaries, along with numerous other companies, are named as defendants in a substantial number of
lawsuits based on alleged exposure to asbestos-containing materials. These cases typically involve product
liability claims based primarily on allegations of manufacture, sale or distribution of industrial products that
either contained asbestos or were attached to or used with asbestos-containing components manufactured by third
parties. Each case typically names between dozens to hundreds of corporate defendants. Historically, our
subsidiaries have been identified as defendants in asbestos-related claims. We have experienced an increase in
the number of asbestos-related lawsuits over the past several years, including lawsuits by plaintiffs with
mesothelioma-related claims. A large percentage of these suits have not presented viable legal claims and, as a
result, have been dismissed or withdrawn. Our strategy has been, and continues to be, to mount a vigorous
defense aimed at having unsubstantiated suits dismissed, and, only where appropriate, settling claims before trial.
As of December 31, 2015, there were approximately 4,100 claims pending against our subsidiaries. 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. Unfavorable rulings, judgments or settlement terms could have a material
adverse impact on our business and financial condition, results of operations and cash flows.

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 assumptions about
the future may or may not prove accurate, and accordingly, we may incur additional liabilities in the future. A
change in one or more of the inputs or the methodology that we use to estimate the asbestos liability could
materially change the estimated liability and associated cash flows for pending and future claims. Although it is
possible that we will incur additional costs for asbestos claims filed beyond what we have currently recorded, we
do not believe there is a reasonable basis for estimating those costs at this time. On an annual basis, we review,
and update as appropriate, such estimated asbestos liabilities and assets and the underlying assumptions. Such an
update could result in a material change in such estimated assets and liabilities.

We also record an asset
that represents our best estimate of probable recoveries from insurers or other
responsible parties for the estimated asbestos liabilities. There are significant assumptions made in developing
estimates of asbestos-related recoveries, such as policy triggers, policy or contract interpretation, success in
litigation in certain cases, the methodology for allocating claims to policies and the continued solvency of the
insurers or other responsible parties. The assumptions underlying the recorded asset may not prove accurate, and

as a result, actual performance by our insurers and other responsible parties could result in lower receivables and
cash flows expected to reduce our asbestos costs. We believe it is possible that the cost of asbestos claims filed
beyond our estimation period, net of expected recoveries, could have a material adverse effect on our financial
condition, results of operations and cash flows.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar anti-
corruption laws outside the United States.
The FCPA and similar anti-corruption laws in other jurisdictions generally prohibit companies and their
intermediaries from making improper payments to government officials or other persons for the purpose of
obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement
activity, with more frequent and aggressive investigations and enforcement proceedings by both the U.S.
Department of Justice (“DOJ”) and the SEC, increased enforcement activity by non-U.S. regulators and increases
in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance
with these anti-bribery laws. We operate in many parts of the world that are recognized as having governmental
and commercial corruption and in certain circumstances, strict compliance with anti-bribery laws may conflict
with local customs and practices. Because many of our customers and end users are involved in infrastructure
construction and energy production, they are often subject to increased scrutiny by regulators. We cannot assure
you that our internal control policies and procedures will always protect us from reckless or criminal acts
committed by our employees or third-party intermediaries. In the event that we believe or have reason to believe
that our employees or agents have or may have violated applicable anti-corruption laws, including the FCPA we
may be required to investigate or have outside counsel investigate the relevant facts and circumstances, which
can be expensive and require significant time and attention from senior management. Violations of these laws
may result in criminal or civil sanctions, which could disrupt our business and result in a material adverse effect
on our reputation, business, financial condition, results of operations and cash flows.

Prior to the Merger, the Flow Control business was subject to investigations by the DOJ and the SEC related to
allegations that improper payments were made by the Flow Control business and other Tyco subsidiaries and
third-party intermediaries in recent years in violation of the FCPA. Tyco reported to the DOJ and the SEC the
remedial measures that it had taken in response to the allegations and Tyco’s own internal investigations. As a
result of discussions with the DOJ and SEC aimed at resolving these matters, on September 24, 2012, Tyco
entered into a settlement with the SEC and a non-prosecution agreement with the DOJ. As a result, the Flow
Control business may be subject to investigations in other jurisdictions or suffer other criminal or civil penalties
or adverse impacts, including being subject to lawsuits brought by private litigants, each of which could have a
material adverse effect on our business, financial condition, results of operations and cash flows.

Our failure to satisfy international trade compliance regulations may adversely affect us.
Our global operations require importing and exporting goods and technology across international borders on a
regular basis. Certain of the products we manufacture are “dual use” products, which are products that may have
both civil and military applications, or may otherwise be involved in weapons proliferation, and are often subject
to more stringent export controls. From time to time, we obtain or receive information alleging improper activity
in connection with imports or exports. Our policy mandates strict compliance with U.S. and non-U.S. trade laws
applicable to our products. However, even when we are in strict compliance with law and our policies, we may
suffer reputational damage if certain of our products are sold through various intermediaries to entities operating
in sanctioned countries. When we receive information alleging improper activity, our policy is to investigate that
information and respond appropriately, including, if warranted, reporting our findings to relevant governmental
authorities. Nonetheless, we cannot provide assurance that our policies and procedures will always protect us
from actions that would violate U.S. and/or non-U.S. laws. Any improper actions could subject us to civil or
criminal penalties, including material monetary fines, or other adverse actions including denial of import or
export privileges, and could damage our reputation and business prospects.

We are exposed to potential environmental and other laws, liabilities and litigation.
We are subject to U.S. federal, state, local and non-U.S. laws and regulations governing our environmental
practices, public and worker health and safety, and the indoor and outdoor environment. Compliance with these
environmental, health and safety regulations could require us to satisfy environmental liabilities, increase the cost
of manufacturing our products or otherwise adversely affect our business, financial condition and results of
operations. Any violations of these laws by us could cause us to incur unanticipated liabilities that could harm
our operating results and cause our business to suffer. We are also required to comply with various
environmental laws and maintain permits, some of which are subject to discretionary renewal from time to time,
for many of our businesses and we could suffer if we are unable to renew existing permits or to obtain any
additional permits that we may require. Compliance with environmental requirements also could require
significant operating or capital expenditures or result in significant operational restrictions. We cannot assure you
that we have been or will be at all times in compliance with environmental and health and safety laws. If we
violate these laws, we could be fined, criminally charged or otherwise sanctioned by regulators.

We have been named as defendant,
target or a potentially responsible party (“PRP”) in a number of
environmental clean-ups relating to our current or former business units. We have disposed of a number of
businesses in recent years and in certain cases, we have retained responsibility and potential liability for certain
environmental obligations. We have received claims for indemnification from certain purchasers. We may be
named as a PRP at other sites in the future for existing business units, as well as both divested and acquired
businesses. In addition to cleanup actions brought by governmental authorities, private parties could bring
personal injury or other claims due to the presence of, or exposure to, hazardous substances.

Certain environmental laws impose liability on current or previous owners or operators of real property for the
cost of removal or remediation of hazardous substances at their properties or at properties at which they have
disposed of hazardous substances. We have projects underway at several current and former manufacturing
facilities to investigate and remediate environmental contamination resulting from our past operations or by other
businesses that previously owned or used the properties. The cost of cleanup and other environmental liabilities
can be difficult to accurately predict. In addition, environmental requirements change and tend to become more
stringent over time. Thus, we cannot provide assurance that our eventual environmental clean-up costs and
liabilities will not exceed the amount of our current reserves.

We are exposed to potential regulatory, financial and reputational risks related to certain “conflict minerals.”
In 2012, the SEC adopted disclosure requirements related to certain minerals sourced from the Democratic
Republic of Congo or adjoining countries, as required by Section 1502 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act. The final rules impose inquiry, diligence and disclosure obligations with respect to
“conflict minerals,” defined as tin, tantalum, tungsten and gold, that are necessary to the functionality of a
product manufactured, or contracted to be manufactured, by an SEC reporting company. Certain of these
minerals are used extensively in components manufactured by our suppliers (or in components incorporated by
our suppliers into components supplied to us) for use in our products. Under the final rules, an SEC reporting
company must conduct a country of origin inquiry that is reasonably designed to determine whether any of the
“conflict minerals” that are necessary to the functionality of a product manufactured, or contracted to be
manufactured, by the company originated in the Democratic Republic of the Congo or an adjoining country. If
any such “conflict minerals” originated in the Democratic Republic of Congo or an adjoining country, the final
rules require the issuer to exercise due diligence on the source of such “conflict minerals” and their chain of
custody with the ultimate objective of determining whether the “conflict minerals” directly or indirectly financed
or benefited armed groups in the Democratic Republic of the Congo or an adjoining country. The issuer must
then prepare and file with the SEC annually a report regarding its diligence efforts, which we have done since the
SEC’s reporting requirements became effective. We have incurred, and expect to continue to incur, significant
costs to conduct country of origin inquiries and to exercise such due diligence.

We have a very large number of suppliers and our supply chain is very complex and multifaceted. While we have
no intention to use minerals sourced from the Democratic Republic of Congo or adjoining countries that are not

“conflict free” (meaning that they do not contain “conflict minerals” that directly or indirectly finance or benefit
armed groups in the Democratic Republic of the Congo or an adjoining country), a significant number of our
suppliers are small businesses, and those small businesses have limited or no resources to track their sources of
minerals. As a result, we have experienced, and expect to continue to experience, ongoing significant difficulty in
determining the country of origin or the source and chain of custody for all “conflict minerals” used in our
products and disclosing that our products are “conflict free.” We may face reputational challenges if we are
unable to verify the country of origin or the source and chain of custody for all “conflict minerals” used in our
products or if we continue to be unable to disclose that our products are “conflict free.” The ongoing
implementation of these rules may also affect the sourcing and availability of some minerals necessary to the
manufacture of our products and may affect the availability and price of “conflict minerals” capable of
certification as “conflict free.” Accordingly, we have incurred, and expect to continue to incur, significant costs
as a consequence of these rules, which may adversely affect our business, financial condition or results of
operations.

We are exposed to certain regulatory and financial risks related to climate change.
Climate change is receiving ever increasing attention worldwide. Many scientists, legislators and others attribute
global warming to increased levels of greenhouse gases, including carbon dioxide, which has led to significant
legislative and regulatory efforts to limit greenhouse gas emissions. The U.S. Congress and federal and state
regulatory agencies have been considering legislation and regulatory proposals that would regulate and limit
greenhouse gas emissions. It is uncertain whether, when and in what form a federal mandatory carbon dioxide
emissions reduction program may be adopted. Similarly, certain countries have adopted the Kyoto Protocol and
this and other existing international initiatives or those under consideration could affect our international
operations. To the extent our customers, particularly those involved in the oil and gas, power generation,
petrochemical processing or petroleum refining industries, are subject to any of these or other similar proposed or
newly enacted laws and regulations, we are exposed to risks that the additional costs by customers to comply
with such laws and regulations could impact their ability or desire to continue to operate at similar levels in
certain jurisdictions as historically seen or as currently anticipated, which could negatively impact their demand
for our products and services. 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 resulting in lower spending by customers for our
products and services. These actions could also increase costs associated with our operations, including costs for
raw materials and transportation. Because it is uncertain what laws will be enacted, we cannot predict the
potential impact of such laws on our future financial condition, results of operations and cash flows.

Increased information technology security threats and more sophisticated computer crime pose a risk to our
systems, networks, products and services. We are exposed to potential regulatory, financial and reputational
risks relating to the protection of our data.
We rely upon information technology systems and networks in connection with a variety of business activities,
some of which are managed by third parties. Additionally, we collect and store data that is sensitive to Pentair
and its employees, customers, dealers and suppliers. The secure operation of these information technology
systems and networks, and the processing and maintenance of this data is critical to our business operations and
strategy. Information technology security threats — from user error to attacks designed to gain unauthorized
access to our systems, networks and data — are increasing in frequency and sophistication. Attacks may range
from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced
persistent threats. These threats pose a risk to the security of our systems and networks and the confidentiality,
availability and integrity of the data we process and maintain. Establishing systems and processes to address
these threats and changes in legal requirements relating to data collection and storage may increase our costs. We
have identified attempts to gain unauthorized access to our information technology systems and networks. To our
knowledge, no such attack was ultimately successful in exporting sensitive data or controlling sensitive systems
or networks. Should such an attack succeed it could expose us and our employees, customers, dealers and
suppliers to misuse of information or systems, the compromising of confidential information, theft of assets,
manipulation and destruction of data, defective products, production downtimes and operations disruptions, and

breach of privacy, which may require notification under data privacy and other applicable laws. The occurrence
of any of these events could adversely affect our reputation, competitive position, business and results of
operations. In addition, such breaches in security could result in litigation, regulatory action and potential liability
and the costs and operational consequences of implementing further data protection measures.

Our results of operations may be negatively impacted by litigation.
Our businesses expose us to potential litigation, such as product liability claims relating to the design, manufacture
and sale of our products. While we currently maintain what we believe to be suitable product liability insurance, we
cannot provide assurance that we will be able to maintain this insurance on acceptable terms or that this insurance
will provide adequate protection against potential or previously existing liabilities. In addition, we self-insure a
portion of product liability claims. Successful claims against us for significant amounts could materially and
adversely affect our product reputation, financial condition, results of operations and cash flows.

Risks Relating to the Distribution and the Merger

We share responsibility for certain income tax liabilities for tax periods prior to and including the date of the
Distribution.
In connection with the Distribution, we entered into a tax sharing agreement (the “2012 Tax Sharing
Agreement”) with Tyco and The ADT Corporation (“ADT”), which governs the rights and obligations of ADT,
Tyco and us for certain pre-Distribution tax liabilities, including Tyco’s obligations under a separate tax sharing
agreement (the “2007 Tax Sharing Agreement”) entered into by Tyco, 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 Tyco (the “2007 Separation”).

The 2007 Tax Sharing Agreement governs the rights and obligations of Tyco, Medtronic and TE Connectivity
with respect to certain pre-2007 Separation tax liabilities and certain tax liabilities arising in connection with the
2007 Separation. More specifically, Tyco, Medtronic and TE Connectivity share 27%, 42% and 31%,
respectively, of income tax liabilities that arise from adjustments made by tax authorities to Tyco’s, Medtronic’s
and TE Connectivity’s U.S. and certain non-U.S. 2007 and prior income tax returns. In addition, in the event that
the 2007 Separation or certain related transactions are determined to be taxable as a result of actions taken after
the 2007 Separation by Tyco, Medtronic or TE Connectivity, the party responsible for such failure would be
responsible for all taxes imposed on Tyco, Medtronic or TE Connectivity as a result thereof. If none of the
companies is responsible for such failure, then Tyco, Medtronic and TE Connectivity would be responsible for
such taxes, in the same manner and in the same proportions as other shared tax liabilities under the 2007 Tax
Sharing Agreement. Costs and expenses associated with the management of these shared tax liabilities are
generally shared equally among the parties.

The 2012 Tax Sharing Agreement provides that we, Tyco and ADT will share (i) certain pre-Distribution income
tax liabilities that arise from adjustments made by tax authorities to our, Tyco’s and ADT’s U.S. income tax
returns, and (ii) payments required to be made by Tyco with respect to the 2007 Tax Sharing Agreement (the
liabilities in clauses (i) and (ii) collectively, “Shared Tax Liabilities”). Tyco is responsible for the first $500
million of Shared Tax Liabilities. As of December 31, 2015, Tyco has paid $63.0 million of Shared Tax
Liabilities. We and ADT will share 42% and 58%, respectively, of the next $225 million of Shared Tax
Liabilities. We, ADT and Tyco will share 20%, 27.5% and 52.5%, respectively, of Shared Tax Liabilities above
$725 million. Costs and expenses associated with the management of Shared Tax Liabilities will generally be
shared 20% by us, 27.5% by ADT and 52.5% by Tyco.

all of the issues and adjustments proposed by the IRS for tax years through 2007, it has not been able to resolve
matters related to the treatment of certain intercompany debt transactions during the period. As described below,
Tyco has entered into a settlement with the IRS intended to resolve the intercompany debt issues for Tyco’s
1997 — 2000 audit cycle; however, the ultimate resolution of these matters is uncertain and could result in Tyco
being responsible for a greater amount than it expects under the 2007 Tax Sharing Agreement.

On July 1, 2013, Tyco announced that the IRS issued Notices of Deficiency (“Tyco IRS Notices”) to Tyco
asserting that several of Tyco’s former U.S. subsidiaries collectively owe additional taxes of $883.3 million plus
penalties of $154 million based on audits of the 1997 through 2000 tax years of Tyco and its subsidiaries as they
existed at that time. These amounts exclude interest and do not reflect the impact on subsequent periods if the
IRS position described below is ultimately successful.

The IRS asserted in the Tyco IRS Notices that substantially all of Tyco’s intercompany debt originated during the
1997 — 2000 period should not be treated as debt for U.S. federal income tax purposes, and has disallowed
interest and related deductions recognized on U.S. income tax returns for those periods totaling approximately
$2.9 billion. If the IRS is successful in asserting its claim, it would have an adverse impact on interest deductions
related to the same Tyco intercompany debt in subsequent time periods, totaling approximately $6.6 billion,
which Tyco has advised us that it expects the IRS to disallow. Under the 2012 Tax Sharing Agreement, Tyco has
the right to administer, control, and settle all U.S. income tax audits for periods prior to and including the
Distribution. Tyco has filed petitions with the U.S. Tax Court contesting the IRS proposed adjustments and a trial
date has been set for October 2016.

On January 19, 2016, Tyco announced that it had entered into Stipulations of Settled Issues with the IRS
intended to resolve all disputes related to the intercompany debt issues for Tyco’s 1997 — 2000 audit cycle
currently before the U.S. Tax Court. The Stipulations of Settled Issues are contingent upon the IRS Appeals
Division applying the same settlement to all intercompany debt issues on appeal for subsequent audit cycles
(2001 — 2007) and, if applicable, review by the U.S. Congress Joint Committee on Taxation. Tyco further
disclosed that if finalized, the tentative resolution would cover all aspects of the controversy described above and
before the Appeals Division of the IRS, and would result in a total cash payment to the IRS in the range of $475
million to $525 million, which includes all interest and penalties, and that this payment would be subject to the
sharing formulas described above in the 2007 and 2012 Tax Sharing Agreements with Pentair not being
responsible for any payment related to this amount. However, we cannot provide any assurance that the
conditions precedent to this settlement will be met, that the intercompany debt dispute is settled with the IRS or
that the IRS will consistently apply the terms of the settlement to all of Tyco’s U.S. income tax returns filed
subsequent to 2000.

If the IRS should successfully assert its position, our share of the collective liability, if any, would be determined
pursuant to the 2007 Tax Sharing Agreement and the 2012 Tax Sharing Agreement. Any payment that Tyco is
required to make under the 2007 Tax Sharing Agreement, including if the IRS were to prevail with respect to the
matter set forth above, could result in a material liability for us under the 2012 Tax Sharing Agreement. To the
extent we are responsible for any liability under the 2012 Tax Sharing Agreement, and indirectly the 2007 Tax
Sharing Agreement, 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.

If the Merger, Distribution or certain internal transactions undertaken in anticipation of the Distribution are
determined to be taxable for U.S. federal income tax purposes, we, our shareholders or Tyco could incur
significant U.S. federal income tax liabilities.
Pentair, Inc. and Tyco received private letter rulings from the IRS in connection with the Distribution and the
Merger regarding the U.S. federal income tax consequences of the Distribution and the Merger to the effect that,
for U.S. federal income tax purposes: the Distribution will qualify as tax-free under Sections 355 and 361 of the
Internal Revenue Code of 1986, as amended (the “Code”), except for cash received in lieu of fractional shares;
certain internal transactions undertaken in anticipation of the Distribution will qualify for favorable treatment
under the Code; the Merger will qualify as a reorganization under Section 368(a) of the Code; certain anticipated

the tax-free treatment of the Distribution or the Merger; and
post-closing transactions will not prevent
Section 367(a)(1) of the Code will not cause the Merger to be taxable to Pentair, Inc. shareholders (except for a
U.S. shareholder who is or will be a “five-percent transferee shareholder” within the meaning of applicable
Treasury Regulations but who does not enter into a “gain recognition agreement” with the IRS). In addition,
Tyco received a legal opinion confirming the tax-free status of the Distribution for U.S. federal income tax
purposes and Tyco and Pentair, Inc. received legal opinions to the effect that the Merger will qualify as a
reorganization under section 368(a) of the Code and that Section 367(a)(1) of the Code will not cause the Merger
to be taxable to Pentair, Inc. shareholders (except for a U.S. shareholder who is or will be a “five-percent
transferee shareholder” within the meaning of applicable Treasury Regulations but who does not enter into a
“gain recognition agreement” with the IRS).

The private letter rulings and opinions relied on certain facts and assumptions, and certain representations and
undertakings, from us, Tyco and Pentair, Inc. Notwithstanding the private letter rulings and the opinions, the IRS
could determine on audit that the Distribution, the internal transactions or the Merger should be treated as taxable
transactions if it determines that any of these facts, assumptions, representations or undertakings is not correct or
has been violated, or that the Distribution, the internal transactions or the Merger should be taxable for other
reasons, including as a result of significant changes in share or asset ownership after the Merger.

If the Distribution ultimately is determined to be taxable, the Distribution could be treated as a taxable dividend
or capital gain to Tyco shareholders for U.S. federal income tax purposes, and Tyco shareholders could incur
significant U.S. federal income tax liabilities. In addition, Tyco would recognize a gain in an amount equal to the
excess of the fair market value of Pentair Ltd.’s ordinary shares distributed to Tyco shareholders on the
Distribution date over Tyco’s tax basis in such ordinary shares, but such gain, if recognized, generally would not
be subject to U.S. federal income tax. However, Tyco could incur significant U.S. federal income tax liabilities if
it is ultimately determined that certain internal transactions undertaken in anticipation of the Distribution are
taxable. If the Merger ultimately is determined to be taxable, Pentair, Inc. shareholders would recognize taxable
gain or loss on their disposition of Pentair, Inc. ordinary shares in the Merger.

Under the terms of the 2012 Tax Sharing Agreement, in the event the Distribution, the ADT distribution, the
internal transactions or the Merger were determined to be taxable as a result of actions taken after the
Distribution by us, ADT or Tyco, the party responsible for such failure would be responsible for all taxes
imposed as a result thereof. If such failure is not the result of actions taken after the Distribution by us, ADT or
Tyco, then we, ADT and Tyco 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 Tyco are responsible for Shared Tax Liabilities.
Such tax amounts could be significant. In the event that any party to the 2012 Tax Sharing Agreement defaults in
its obligation to pay certain taxes to another party that arise as a result of no party’s fault, each non-defaulting
party would be responsible for an equal amount of the defaulting party’s obligation to make a payment to another
party in respect of such other party’s taxes. In addition, if another party to the 2012 Tax Sharing Agreement that
is responsible for all or a portion of an income tax liability were to default in its payment of such liability to a
taxing authority, we could be legally liable under applicable tax law for such liabilities and required to make
additional tax payments. Accordingly, under certain circumstances, we may be obligated to pay amounts in
excess of our agreed-upon share of our, Tyco’s and ADT’s tax liabilities.

If the Distribution or the Merger is determined to be taxable for Swiss withholding or other tax purposes, we
could incur significant Swiss withholding tax or other tax liabilities.
Generally, Swiss withholding tax of 35% is due on dividends and similar distributions to Tyco’s shareholders,
regardless of the place of residency of the shareholder. As of January 1, 2011, distributions to shareholders out of
qualifying contributed surplus (Kapitaleinlage) accumulated on or after January 1, 1997 are exempt from Swiss
withholding tax if certain conditions are met (Kapitaleinlageprinzip). Tyco has obtained a ruling from the Swiss
Federal Tax Administration confirming that the Distribution qualifies as payment out of such qualifying
contributed surplus and no amount will be withheld by Tyco when making the Distribution.

As a condition to closing of the Merger, Tyco obtained rulings from the Swiss Federal Tax Administration
confirming: (i) that the Merger will be a transaction that is generally tax-free for Swiss federal, cantonal, and
communal tax purposes (including with respect to Swiss stamp tax and Swiss withholding tax); (ii) the relevant
Swiss tax base of an acquisition subsidiary of ours for Swiss tax (including federal and cantonal and communal)
purposes; (iii) the relevant amount of capital contribution reserves (Kapitaleinlageprinzip) which will be exempt
from Swiss withholding tax in the event of a distribution to our shareholders after the Merger; and (iv) that no
Swiss stamp tax will be levied on certain post-Merger restructuring transactions.

These tax rulings rely on certain facts and assumptions, and certain representations and undertakings, from Tyco.
Notwithstanding these tax rulings, the Swiss Federal Tax Administration could determine on audit that the
Distribution or the Merger or certain internal transactions undertaken in anticipation of the Distribution should be
treated as a taxable transaction for withholding tax or other tax purposes if it determines that any of these facts,
assumptions, representations or undertakings is not correct or has been violated. If the Distribution or the Merger
or certain internal transactions undertaken in anticipation of the Distribution ultimately are determined to be
taxable for withholding tax or other tax purposes, we and Tyco could incur material Swiss withholding tax or
other tax liabilities that could significantly detract from, or eliminate, the benefits of the Distribution and the
Merger. In addition, we could become liable to indemnify Tyco for part of any Swiss withholding tax liabilities
to the extent provided under the 2012 Tax Sharing Agreement.

Risks Relating to Our Liquidity

Disruptions in the financial markets could adversely affect us, our customers and our suppliers by increasing
funding costs or reducing availability of credit.
In the normal course of our business, we may access credit markets for general corporate purposes, which may
include repayment of indebtedness, acquisitions, additions to working capital, repurchase of shares, capital
expenditures and investments in our subsidiaries. Although we expect to have sufficient liquidity to meet our
foreseeable needs, our access to and the cost of capital could be negatively impacted by disruptions in the credit
markets, which have occurred in the past and made financing terms for borrowers unattractive or unavailable.
These factors may make it more difficult or expensive for us to access credit markets if the need arises. In
addition, these factors may make it more difficult for our suppliers to meet demand for their products or for
prospective customers to commence new projects, as customers and suppliers may experience increased costs of
debt financing or difficulties in obtaining debt financing. Disruptions in the financial markets have had adverse
effects on other areas of the economy and have led to a slowdown in general economic activity that may continue
to adversely affect our businesses. These disruptions may have other unknown adverse effects. One or more of
these factors could adversely affect our business, financial condition, results of operations or cash flows.

Covenants in our debt instruments may adversely affect us.
Our credit agreements and indentures contain customary financial covenants, including those that limit the amount of
our debt, which may restrict the operations of our business and our ability to incur additional debt to finance
acquisitions. Our ability to meet the financial covenants can be affected by events beyond our control, and we cannot
provide assurance that we will meet those tests. A breach of any of these covenants could result in a default under our
credit agreements or indentures. Upon the occurrence of an event of default under any of our credit facilities or
indentures, the lenders or trustees could elect to declare all amounts outstanding thereunder to be immediately due and
payable and, in the case of credit facility lenders, terminate all commitments to extend further credit. If the lenders or
trustees accelerate the repayment of borrowings, we cannot provide assurance that we will have sufficient assets to
repay our credit facilities and our other indebtedness. Furthermore, acceleration of any obligation under any of our
material debt instruments will permit the holders of our other material debt to accelerate their obligations, which could
have a material adverse effect on our financial condition.

We may increase our debt or raise additional capital in the future, which could affect our financial condition,
and may decrease our profitability.
As of December 31, 2015, we had $4.7 billion of total debt outstanding. We may increase our debt or raise
additional capital in the future, subject to restrictions in our debt agreements. If our cash flow from operations is
less than we anticipate, if our cash requirements are more than we expect, or if we intend to finance acquisitions,
we may require more financing. However, debt or equity financing may not be available to us on acceptable
terms, if at all. If we incur additional debt or raise equity through the issuance of additional capital shares, the
terms of the debt or capital shares issued may give the holders rights, preferences and privileges senior to those
of holders of our ordinary shares, particularly in the event of liquidation. The terms of the debt may also impose
additional and more stringent restrictions on our operations than we currently have. If we raise funds through the
issuance of additional equity, the percentage ownership of existing shareholders in our company would decline.
If we are unable to raise additional capital when needed, our financial condition could be adversely affected.

Our leverage could have a material adverse effect on our business, financial condition or results of
operations.
Our ability to make payments on and to refinance our indebtedness, including our existing debt as well as any
future debt that we may incur, will depend on our ability to generate cash in the future from operations,
financings or asset sales. Our ability to generate cash is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. If we are not able to repay or refinance our
debt as it becomes due, we may be forced to sell assets or take other disadvantageous actions, including
(i) reducing financing in the future for working capital, capital expenditures and general corporate purposes or
(ii) dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on
our indebtedness. The lenders who hold such debt could also accelerate amounts due, which could potentially
trigger a default or acceleration of any of our other debt.

Risks Relating to Our Jurisdiction of Incorporation in Ireland and Tax Residency in the United Kingdom

We are subject to changes in law and other factors that may not allow us to maintain a worldwide effective
corporate tax rate that is competitive in our industry.
While we believe that we should be able to maintain a worldwide effective corporate tax rate that is competitive
in our industry, we cannot give any assurance as to what our effective tax rate will be in the future because of,
among other things, uncertainty regarding tax policies of the jurisdictions where we operate. Also, the tax laws of
the U.S., the U.K., Ireland and other jurisdictions could change in the future, and such changes could cause a
material change in our worldwide effective corporate tax rate. 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 rate. We cannot predict the
outcome of any specific legislative proposals. If proposals were enacted that had the effect of disregarding our
incorporation in Ireland or limiting our ability as an Irish company to maintain tax residency in the U.K. and take
advantage of the tax treaties among the U.S., the U.K. and Ireland, we could be subject to increased taxation,
which could materially adversely affect our financial condition, results of operations, cash flows or our effective
tax rate in future reporting periods.

A change in our tax residency could have a negative effect on our future profitability and taxes on dividends.
Under current Irish legislation, a company is regarded as resident for tax purposes in Ireland if it is centrally
managed and controlled in Ireland, or, in certain circumstances, if it is incorporated in Ireland. Under current
U.K. legislation, a company that is centrally managed and controlled in the U.K. is regarded as resident in the
U.K. for taxation purposes. Where a company is treated as tax resident under the domestic laws of both the U.K.
and Ireland then the provisions of article 4(3) of the Double Tax Convention between Ireland and the U.K.
provide that such enterprise shall be treated as resident only in the jurisdiction in which its place of effective
management is situated. We have managed, and we intend to continue to manage, our affairs so that we are
centrally managed and controlled in the U.K. and therefore have our tax residency only in the U.K. However, we
cannot provide assurance that we will continue to be resident only in the U.K. for tax purposes. It is possible that
in the future, whether as a result of a change in law or the practice of any relevant tax authority or as a result of

any change in the conduct of its affairs, we could become, or be regarded as having become resident in a
jurisdiction other than the U.K. If we were considered to be a tax resident of Ireland, we could become liable for
Irish corporation tax and any dividends paid by us could be subject to Irish dividend withholding tax.

Irish law differs from the laws in effect in the United States and may afford less protection to holders of our
securities.
It may not be possible to enforce court judgments obtained in the U.S. against us in Ireland based on the civil
liability provisions of the U.S. federal or state securities laws. In addition, there is some uncertainty as to whether
the courts of Ireland would recognize or enforce judgments of U.S. courts obtained against us or our directors or
officers based on the civil liabilities provisions of the U.S. federal or state securities laws or hear actions against
us or those persons based on those laws. We have been advised that the United States currently does not have a
treaty with Ireland providing for the reciprocal recognition and enforcement of judgments in civil and
commercial matters. Therefore, a final judgment for the payment of money rendered by any U.S. federal or state
court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not
automatically be enforceable in Ireland.

As an Irish company, we are governed by the Irish Companies Act, which differs in some material respects from
laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to
interested director and officer transactions and shareholder lawsuits. Likewise, the duties of directors and officers
of an Irish company generally are owed to the company only. Shareholders of Irish companies generally do not
have a personal right of action against directors or officers of the company and may exercise such rights of action
on behalf of the company only in limited circumstances. Accordingly, holders of our securities may have more
difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction
of the U.S.

Transfers of our ordinary shares may be subject to Irish stamp duty.
Transfers of our ordinary shares effected by means of the transfer of book entry interests in the Depository Trust
Company (“DTC”) will not be subject to Irish stamp duty. However, if you hold your ordinary shares directly
rather than beneficially through DTC, any transfer of your ordinary shares could be subject to Irish stamp duty
(currently at the rate of 1% of the higher of the price paid or the market value of the shares acquired). Payment of
Irish stamp duty is generally a legal obligation of the transferee.

We currently intend to pay, or cause one of our affiliates to pay, stamp duty in connection with share transfers
made in the ordinary course of trading by a seller who holds shares directly to a buyer who holds the acquired
shares beneficially. In other cases we may, in our absolute discretion, pay or cause one of our affiliates to pay
any stamp duty. 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 future dividends on such shares.
Parties to a share transfer may assume that any stamp duty arising in respect of a transaction in our shares has
been paid unless one or both of such parties is otherwise notified by us.

Our ordinary shares, received by means of a gift or inheritance could be subject to Irish capital acquisitions
tax.
Irish capital acquisitions tax (“CAT”) could apply to a gift or inheritance of our ordinary shares irrespective of
the place of residence, ordinary residence or domicile of the parties. This is because our shares will be regarded
as property situated in Ireland. The person who receives the gift or inheritance has primary liability for CAT.
Gifts and inheritances passing between spouses are exempt from CAT. Children have a tax-free threshold of
€280,000 per lifetime in respect of taxable gifts or inheritances received from their parents for periods on or after
October 14, 2015.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal office is located in leased premises in Manchester, United Kingdom, and our management office in
the United States is located in leased premises in Minneapolis, Minnesota. Our operations are conducted in
facilities throughout the world. These facilities house manufacturing and distribution operations, as well as sales
and marketing, engineering and administrative offices.

We carry out our Valves & Controls manufacturing operations at 8 plants located throughout the United States
and at 32 plants located in 16 other countries. In addition, Valves & Controls has 23 distribution facilities, 56
sales offices and 51 service centers located in numerous countries throughout the world.

We carry out our Flow & Filtration Solutions manufacturing operations at 7 plants located throughout the United
States and at 12 plants located in 8 other countries. In addition, Flow & Filtration Solutions has 22 distribution
facilities, 18 sales offices and 10 service centers located in numerous countries throughout the world.

We carry out our Water Quality Systems manufacturing operations at 13 plants located throughout the United
States and at 10 plants located in 6 other countries. In addition, Water Quality Systems has 15 distribution
facilities, 11 sales offices and 2 service centers 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.

We believe that our production facilities are suitable for their purpose and are adequate to support our businesses.

ITEM 3. LEGAL PROCEEDINGS

We have been made parties to a number of actions filed or have been given notice of potential claims relating to
the conduct of our business, including those pertaining to commercial disputes, product liability, asbestos,
environmental, safety and health, patent infringement and employment matters.

While we believe that a material impact on our consolidated financial position, results of operations or cash flows
from any such future claims or potential claims is unlikely, given the inherent uncertainty of litigation, a remote
possibility exists that a future adverse ruling or unfavorable development could result in future charges that could
have a material adverse impact. We do and will continue to periodically reexamine our estimates of probable
liabilities and any associated expenses and receivables and make appropriate adjustments to such estimates based
on experience and developments in litigation. As a result, the current estimates of the potential impact on our
consolidated financial position, results of operations and cash flows for the proceedings and claims described in
the notes to our consolidated financial statements could change in the future.

dismissed by the courts. Our historical strategy has been to mount a vigorous defense aimed at having
unsubstantiated suits dismissed, and, where appropriate, settling suits before trial. Although a large percentage of
litigated suits have been dismissed, we cannot predict the extent to which we will be successful in resolving
lawsuits in the future.

As of December 31, 2015, there were approximately 4,100 claims outstanding against our subsidiaries. This
amount is not adjusted for claims that are not actively being prosecuted, identified incorrect defendants, or
duplicated other actions, which would ultimately reflect our current estimate of the number of viable claims
made against us, our affiliates, or entities for which we assumed responsibility in connection with acquisitions or
divestitures. In addition, the amount does not include certain claims pending against third parties for which we
have been provided an indemnification.

Our estimated liability for asbestos-related claims was $237.9 million and $249.1 million as of December 31,
2015 and 2014, respectively, and was recorded in Other non-current liabilities in the Consolidated Balance
Sheets for pending and future claims and related defense costs. Our estimated receivable for insurance recoveries
was $111.0 million and $115.8 million at December 31, 2015 and 2014, all of which was acquired in the Merger,
and was recorded in Other non-current assets in the Consolidated Balance Sheets.

Environmental matters
We are involved in or have retained responsibility and potential liability for environmental obligations and legal
proceedings related to our current business and, including pursuant to certain indemnification obligations, related
for ongoing
to certain formerly owned businesses. We are responsible, or alleged to be responsible,
environmental investigation and/or remediation of sites in several countries. These sites are in various stages of
investigation and/or remediation and at some of these sites our liability is considered de minimis. We received
notification from the U.S. Environmental Protection Agency and from similar state and non-U.S. environmental
agencies that several sites formerly or currently owned and/or operated by us, and other properties or water
supplies that may be or may have been impacted from those operations, contain disposed or recycled materials or
waste and require environmental investigation and/or remediation. Those sites include instances where we have
been identified as a potentially responsible party under U.S. federal, state and/or non-U.S. environmental laws
and regulations. For several formerly owned businesses, we have also received claims for indemnification from
purchasers of these businesses.

Our accruals for environmental matters are recorded on a site-by-site basis when it is probable that a liability has
been incurred and the amount of the liability can be reasonably estimated, based on current law and existing
technologies. It can be difficult to estimate reliably the final costs of investigation and remediation due to various
factors. In our opinion, the amounts accrued are appropriate based on facts and circumstances as currently
known. Based upon our experience, current information regarding known contingencies and applicable laws, we
have recorded reserves for these environmental matters of $22.8 million and $31.4 million as of December 31,
2015 and 2014, respectively. We do not anticipate these environmental conditions will have a material adverse
effect on our financial position, results of operations or cash flows. However, unknown conditions, new details
about existing conditions or changes in environmental requirements may give rise to environmental liabilities
that will exceed the amount of our current reserves and could have a material adverse effect in the future.

Product liability claims
We are subject to various product liability lawsuits and personal injury claims. A substantial number of these
lawsuits and claims are insured and accrued for by Penwald, our captive insurance subsidiary. See discussion in
ITEM 1 and ITEM 8, Note 1 of the Notes to Consolidated Financial Statements — Insurance subsidiary. Penwald
records a liability for these claims based on actuarial projections of ultimate losses. For all other claims, accruals
covering the claims are recorded, on an undiscounted basis, when it is probable that a liability has been incurred
and the amount of the liability can be reasonably estimated based on existing information. The accruals are
adjusted periodically as additional information becomes available. In 2004, we disposed of the Tools Group and
we retained responsibility for certain product claims. We have not experienced significant unfavorable trends in
either the severity or frequency of product liability lawsuits or personal injury claims.

Compliance matters
Prior to the Merger, the Flow Control business was subject to investigations by the DOJ and the SEC related to
allegations that improper payments were made by the Flow Control business and other Tyco subsidiaries and
third-party intermediaries in recent years in violation of the Foreign Corrupt Practices Act. Tyco reported to the
DOJ and the SEC the remedial measures that it had taken in response to the allegations and Tyco’s own internal
investigations. As a result of discussions with the DOJ and SEC aimed at resolving these matters, on
September 24, 2012, Tyco entered into a settlement with the SEC and a non-prosecution agreement with the
DOJ.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Current executive officers of Pentair plc, their ages, current position and their business experience during at
least the past five years are as follows:

Name

Age Current Position and Business Experience

Randall J. Hogan

John L. Stauch

60 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 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.

51 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
investor relations and managerial finance positions with Honeywell
executive,
International Inc. and its predecessor AlliedSignal Inc., 1994 — 2000.

Angela D. Jilek

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

48 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

Alok Maskara

Beth A. Wozniak

President, Water Quality Systems Global Business Unit since 2007; President of
Aquatic Systems’ National Pool Tile group, 1998— 2007; Vice President of
Operations for American Products, 1995— 1998; Vice President of Anthony Pools,
1990 — 1995; Vice President of Poolsaver, 1988 — 1990.

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.

President, Flow & Filtration Solutions Global Business Unit since 2015; 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.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our ordinary shares are listed for trading on the New York Stock Exchange and trade under the symbol “PNR.”
As of December 31, 2015, there were 19,990 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 2015 and 2014 were as follows:

2015

2014

High
Low
Close
Dividends paid

First

68.24
60.73
62.39
0.32

Second

Third

Fourth

66.52
59.92
63.75
0.32

69.65
49.44
51.98
0.32

59.69
48.14
49.53
0.32

First

83.37
71.29
77.66
0.25

Second

Third

Fourth

81.04
71.96
72.76
0.25

73.36
62.91
67.41
0.30

69.37
59.09
66.42
0.30

Pentair has paid 160 consecutive quarterly dividends. The Board of Directors has approved a plan to increase the
dividend for 2016, which will mark the 40th consecutive year we have increased dividends.

Future dividends on our ordinary shares or reductions of share capital for distribution to shareholders, if any,
must be approved by our Board of Directors for payment out of distributable reserves on our statutory balance
sheet. We are not permitted to pay dividends out of share capital, which includes share premiums. Distributable
reserves may be created through the earnings of the Irish parent company and through a reduction in share capital
approved by the Irish High Court. Distributable reserves are not linked to a U.S. generally accepted accounting
principles (“GAAP”) reported amount (e.g., retained earnings). On July 22, 2014, the Irish High Court approved
Pentair plc’s conversion of approximately $14.4 billion of share premium to distributable reserves. 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 $9.6 billion and $12.1 billion as of December 31, 2015 and 2014, respectively.

The timing, declaration and payment of future dividends to holders of our ordinary shares will depend upon
many factors, including our financial condition and results of operations, the capital requirements of our
businesses, industry practice and any other relevant factors.

United Kingdom tax considerations
Although our jurisdiction of organization is Ireland, we manage our affairs so that we are centrally managed and
controlled in the U.K. and therefore have our tax residency in the U.K.

As a result of its U.K. tax status, dividend distributions by Pentair plc to its shareholders are not subject to
withholding tax, as the U.K. currently does not levy a withholding tax on dividend distributions.

See the discussion of “Dividends” under “Liquidity and Capital Resources—Financing Activities” in ITEM 7 of
this annual report on Form 10-K for additional information required by this item.

Share Performance Graph
The following information under the caption “Share Performance Graph” in this ITEM 5 of this Annual Report
on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject
to
Regulation 14A or 14C under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or to the
liabilities of Section 18 of the Exchange Act and will not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically
incorporate it by reference into such a filing.

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, 2010 and the reinvestment of all dividends since that
date to December 31, 2015. The graph also contains for comparison purposes the S&P 500 Index and the S&P
500 Industrials Index, assuming the same investment level and reinvestment of dividends.

By virtue of our market capitalization, we are a component of the S&P 500 Index. On the basis of our size and
diversity of businesses, we believe the S&P 500 Industrials Index is an appropriate published industry index for
comparison purposes.

Comparison of Cumulative Five Year Total Return

$250

$200

$150

$100

$50

2010

2011

2012

2013

2014

2015

Pentair plc

S&P 500 Index

S&P 500 Sector Indices - Industrials Sector Index

Company / Index

Pentair plc
S&P 500 Index
S&P 500 Industrials Index

INDEXED RETURNS
Years ended December 31
2014
2013

2012

140.52
118.45
114.67

225.80
156.82
161.31

196.08
178.28
177.16

2011

93.13
102.11
99.41

2015

149.39
180.75
172.67

Base Period
December
2010

100
100
100

Purchases of Equity Securities
The following table provides information with respect to purchases we made of our ordinary shares during the
fourth quarter of 2015:

(a)

(b)

Total number of
shares
purchased

Average price
paid per share

(d)

Dollar value
of
shares that may
yet be purchased
under the plans or
programs

September 27 – October 24, 2015
October 25 – November 21, 2015
November 22 – December 31, 2015

Total

85,640
388
1,523

87,551

51.80
55.11
54.67

— $ 800,000,049
800,000,049
—
800,000,049
—

—

(a) The purchases in this column include 85,640 shares for the period September 27 — October 24, 2015,
388 shares for the period October 25 — November 21, 2015, and 1,523 shares for the period
November 22 — December 31, 2015 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.

(b) The average price paid in this column includes shares repurchased as part of our publicly announced
plans and shares deemed surrendered to us by participants in the Plans to satisfy the exercise price of
stock options and withholding tax obligations due upon stock option exercises and vesting of restricted
shares.

announced plans to repurchase our ordinary shares up to a maximum dollar limit of $3.2 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.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth our selected historical financial data for the five years ended December 31, 2015.

In millions, except per-share data

2015

Years ended December 31
2013

2014

2012

2011

Consolidated statements of

operations and comprehensive
income (loss) data

Net sales
Operating income (loss)
Net income (loss) from continuing

6,449.0
177.2

7,039.0
851.9

6,999.7
742.6

4,306.8
(4.8)

3,456.7
100.2

operations attributable to Pentair plc

(65.0)

607.0

511.7

(81.5)

(7.5)

Per-share data
Basic:

Earnings (loss) per ordinary share
from continuing operations
attributable to Pentair plc

Weighted average shares

Diluted:

Earnings (loss) per ordinary share
from continuing operations
attributable to Pentair plc

Weighted average shares
Cash dividends declared and paid per

ordinary share

Cash dividends declared and unpaid per

ordinary share

Consolidated balance sheets data
Total assets
Total debt
Total equity

(0.36) $
180.3

3.19
190.6

(0.36) $
182.6

3.14
193.7

2.54 $
201.1

(0.64) $
127.4

(0.08)
98.2

2.50 $
204.6

(0.64) $
127.4

(0.08)
98.2

1.28

1.10

0.96

0.88

0.80

0.33

0.64

0.50

0.46

—

11,857.0
4,710.0
4,008.8

10,655.2
3,004.1
4,663.8

11,743.3
2,550.4
6,217.7

11,882.7
2,451.6
6,487.5

4,586.3
1,309.1
2,047.4

Factors affecting comparability of our Selected Financial Data
In the fourth quarter of 2015, we recorded a pre-tax, non-cash goodwill and trade name impairment charge of
$554.7 million.

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

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.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Forward-looking statements
This report contains statements that we believe to be “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are
forward-looking statements. Without limitation, any statements preceded or followed by or that include the
words “targets,” “plans,” “believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,”
“projects,” “should,” “would,” “positioned,” “strategy,” “future” or words, phrases or terms of similar substance
or the negative thereof, are forward-looking statements. These forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are
beyond our control, which could cause actual results to differ materially from those expressed or implied by such
forward-looking statements. These factors include 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 acquisitions, including the ability to successfully integrate
and achieve the expected benefits of the acquisition of ERICO Global Company; 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. Additional information concerning these and other factors is contained in our filings
with the U.S. Securities and Exchange Commission, including in Item 1A of this Annual Report on Form 10-K.
All forward-looking statements speak only as of the date of this report. Pentair plc assumes no obligation, and
disclaims any obligation, to update the information contained in this report.

Overview
Pentair plc is a focused diversified industrial manufacturing company comprising four reporting segments:
Valves & Controls, Flow & Filtration Solutions, Water Quality Systems and Technical Solutions. We classify
our operations into business segments based primarily on types of products offered and markets served. For the
year ended December 31, 2015, Valves & Controls, Flow & Filtration Solutions, Water Quality Systems and
Technical Solutions accounted for 29 percent, 22 percent, 21 percent and 28 percent of total revenues,
respectively.

In December 2013, the Company’s Board of Directors approved changing the Company’s jurisdiction of
organization from Switzerland to Ireland. At an extraordinary meeting of shareholders on May 20, 2014, Pentair
Ltd. shareholders voted in favor of a reorganization proposal pursuant to which Pentair Ltd. would merge into
Pentair plc and all Pentair Ltd. common shares would be cancelled and all holders of such shares would receive
ordinary shares of Pentair plc on a one-to-one basis. The reorganization transaction was completed on June 3,
2014, at which time Pentair plc replaced Pentair Ltd. as the ultimate parent company (the “Redomicile”). Shares
of Pentair plc began trading on the New York Stock Exchange (“NYSE”) on June 3, 2014 under the symbol
“PNR”, the same symbol under which Pentair Ltd. shares were previously traded.

and Flow Control assumed from Tyco certain liabilities related to the flow control business of Tyco. On
September 28, 2012 prior to the Merger, Tyco effected a spin-off of Flow Control through the pro-rata
distribution of 100% of the outstanding ordinary shares of Flow Control
to Tyco’s shareholders (the
“Distribution”), resulting in the distribution of approximately 110.9 million of our ordinary shares to Tyco’s
shareholders. The Merger was accounted for as a reverse acquisition under the purchase method of accounting
with Pentair, Inc. treated as the acquirer.

On January 30, 2014, we acquired, as part of Water Quality Systems, the remaining 19.9 percent ownership
interest in two entities, a U.S. entity and an international entity (collectively, Pentair Residential Filtration or
“PRF”), from GE Water & Process Technologies (a unit of General Electric Company) (“GE”) for $134.3
million in cash. Prior to the acquisition, we held a 80.1 percent ownership equity interest in PRF, representing
our and GE’s respective global water softener and residential water filtration businesses.

On July 28, 2014, our Board of Directors approved a decision to exit our Water Transport business in Australia.
The results of the Water Transport business have been presented as discontinued operations and the assets and
liabilities of the Water Transport business have been reclassified as held for sale for all periods presented. During
2014, we recognized an impairment charge related to allocated amounts of goodwill, intangible assets, property,
plant & equipment and other non-current assets totaling $380.1 million, net of tax, representing our estimated
loss on disposal of the Water Transport business. The sale of the Water Transport business was completed in
2015.

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.

Key trends and uncertainties regarding our existing business
The following trends and uncertainties affected our financial performance in 2015 and 2014, and will likely
impact our results in the future:

•

In late 2014 and continuing through 2015, 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 2016.

In 2015, we experienced declines in project orders, particularly within the energy and industrial
businesses. We expect headwinds in the energy and industrial business to continue and oil prices to
remain depressed throughout 2016.

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

• We have identified specific product and geographic market opportunities that we find attractive and
continue to pursue, both within and outside the United States. We are reinforcing our businesses to more
effectively address these opportunities through research and development and additional sales and
marketing resources. Unless we successfully penetrate these markets, our core sales growth will likely
be limited or may decline.

•

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. While we
believe the general trends are favorable, factors specific to each of our major end-markets may
negatively affect the capital spending plans of our customers and lead to lower sales volumes for us.

Through 2014 and into 2015, we 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 materials. Commodity prices have declined, but we are uncertain as to the timing and impact of
these market changes.

In 2016, our operating objectives include the following:

•

Reducing long-term debt and overall leverage through improved cash flow performance;

Driving operating excellence through lean enterprise initiatives, with specific focus on sourcing and
supply management, cash flow management and lean operations;

Achieving differentiated revenue growth through new products and global and market expansion;

Optimizing our technological capabilities to increasingly generate innovative new products; and

Focusing on developing global talent in light of our increased global presence.

CONSOLIDATED RESULTS OF OPERATIONS

The consolidated results of operations were as follows:

In millions

Net sales
Cost of goods sold

Gross profit

% of net sales

Years ended December 31

% / point change

2015

2014

2013

2015 vs. 2014

2014 vs. 2013

$6,449.0
4,263.2

$7,039.0
4,576.0

$6,999.7
4,629.6

2,185.8

2,463.0

2,370.1

33.9%

35.0%

33.9%

Selling, general and administrative

1,334.3

1,493.8

1,493.7

% of net sales

Research and development

% of net sales

Impairment of goodwill and trade names

% of net sales

Operating income
% of net sales

20.8%
119.6

1.9%

554.7

8.6%

21.3%
117.3

1.7%
—
—%

21.3%
122.8

1.8%
11.0
0.2%

177.2

2.7%

851.9
12.1%

742.6
10.6%

Loss (gain) on sale of businesses, net
Net interest expense

3.2
102.7

0.2
68.6

(20.8)
70.9

(8.4)%
(6.8)%

(11.3)%
(1.1)

(10.7)%
(0.5)
2.0%
0.2
N.M.
8.6

(79.2)%
(9.4)

N.M.
49.7%

0.6%
(1.2)%

3.9%
1.1

—%
—
(4.5)%
(0.1)
(100.0)%
(0.2)

14.7%
1.5

(101.0)%
(3.2)%

Income from continuing operations

before income taxes and
noncontrolling interest
Provision for income taxes
Effective tax rate

N.M. Not Meaningful

Net sales

74.1
139.1
187.7%

784.3
177.3
22.6%

694.5
177.0
25.5%

(90.6)%
(21.5)%
165.1

12.9%
0.2%
(2.9)

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

Volume
Price

Core growth (decline)

Acquisition (divestiture)
Currency

Total

2015 vs. 2014

2014 vs. 2013

(4.3)%
0.4

(3.9)
2.1
(6.6)

(8.4)%

1.0%
0.9

1.9
(0.2)
(1.1)

0.6%

The 8.4 percent decrease in consolidated net sales in 2015 from 2014 was primarily the result of:

•

a slowdown in industrial capital spending, particularly in the oil & gas and energy-related businesses,
driving core sales declines in Valves & Controls;

slowing economic activity in China, Brazil and other developing markets; and

a strong U.S. dollar causing unfavorable foreign currency effects.

These decreases 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;

sales of $147.0 million in 2015 as a result of the ERICO Acquisition;

core sales growth in our food & beverage and residential & commercial businesses; and

selective increases in selling prices to mitigate inflationary cost increases.

The 0.6 percent increase in consolidated net sales in 2014 from 2013 was primarily the result of:

•

core sales growth in Technical Solutions, primarily as the result of increased volume in the United
States, China and Canada;

core sales growth in Water Quality Systems due to higher sales of certain pool products serving North
American residential housing and increased demand for global food & beverage solutions; and

selective increases in selling prices to mitigate inflationary cost increases.

These increases were partially offset by:

•

unfavorable foreign currency effects;

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.

Gross profit
The 1.1 percentage point decrease in gross profit as a percentage of sales in 2015 from 2014 was primarily the
result of:

•

lower core sales volumes, which resulted in decreased 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 2015, which did not occur in
2014; and

inflationary increases related to raw materials and labor costs.

These decreases were partially offset by:

•

higher contribution margin as a result of savings generated from our Pentair Integrated Management
System (“PIMS”) initiatives including lean and supply management practices; and

selective increases in selling prices to mitigate inflationary cost increases.

The 1.1 percentage point increase in gross profit as a percentage of sales in 2014 from 2013 was primarily the
result of:

•

a decrease in cost of goods sold of $86.6 million in 2014 compared to 2013 as a result of inventory fair
value step-up and customer backlog recorded as part of the Merger purchase accounting in 2013, which
did not recur in 2014;

higher contribution margin as a result of savings generated from our PIMS initiatives including lean and
supply management practices; and

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

These increases were partially offset by:

•

inflationary increases related to raw materials and labor costs.

Selling, general and administrative (“SG&A”)
The 0.5 percentage point decrease in SG&A expense as a percentage of sales in 2015 from 2014 and was driven
by:

•

“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 $49.9 million in 2014; and

cost savings generated from back-office consolidation, reduction in personnel and other lean initiatives.

These decreases were partially offset by:

•

restructuring costs of $117.8 million in 2015, compared to $88.3 million in 2014;

deal related costs and expenses of $14.3 million for 2015; and

lower sales volume and the resulting loss of leverage on fixed operating expenses.

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:

•

“mark-to-market” actuarial losses related to pension and other post-retirement benefit plans of $49.9
million in 2014, compared to “mark-to-market” actuarial gains of $63.2 million in 2013; and

costs of $10.3 million incurred in 2014, compared to $5.4 million in 2013, as a result of the Redomicile
of the Company from Switzerland to Ireland.

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. An impairment charge of $11.0
million was recorded in the fourth quarter of 2013 related to a trade name in Technical Solutions.

Gain on sale of businesses, net
During 2013, we sold businesses that were part of Technical Solutions and Flow & Filtration Solutions for a cash
purchase price of $30.1 million and $13.4 million, respectively, net of transaction costs, resulting in a gain of
$16.8 million and $4.0 million, respectively.

Net interest expense
The 49.7 percent increase in net interest expense in 2015 from 2014 was primarily the result of:

•

the amortization of $10.8 million of debt issuance costs during 2015 related to financing commitments
for a senior unsecured bridge loan facility established (and subsequently terminated upon issuance of the
September 2015 issuance of senior notes discussed in Liquidity and Capital Resources below) in
connection with the ERICO Acquisition;

the impact of higher debt levels during 2015, compared to 2014, primarily as the result of the September
2015 issuance of senior notes; and

higher interest rates on commercial paper.

The 3.2 percent decrease in net interest expense in 2014 from 2013 was primarily the result of:

•

reduced overall interest rates in effect on our outstanding debt; and

additional interest expense of $2.1 million in the second quarter of 2013 for a working capital and net
indebtedness adjustment related to the Merger that did not recur in 2014.

These decreases were partially offset by:

•

the impact of higher debt levels during 2014 compared to 2013.

Provision for income taxes
The 165.1 percentage point increase in the effective tax rate in 2015 from 2014 was primarily due to:

•

a goodwill impairment charge of $515.2 million, which was not tax deductible;

restructuring costs in jurisdictions with low tax benefits;

an increase in valuation allowances during 2015; and

the unfavorable tax impact of transaction costs related to the ERICO Acquisition.

These increases were partially offset by:

•

the mix of global earnings toward lower tax jurisdictions; and

non-recurring withholding taxes during 2014 which did not recur in 2015.

The 2.9 percentage point decrease in the effective tax rate in 2014 from 2013 was primarily due to:

•

the mix of global earnings toward lower tax jurisdictions.

The decrease was partially offset by:

•

increase in withholding taxes that are non-recurring.

SEGMENT RESULTS OF OPERATIONS

This summary that follows provides a discussion of the results of operations of each of our four reportable
segments (Valves & Controls, Flow & Filtration Solutions, Water Quality Systems and Technical Solutions).
Each of these segments comprises various product offerings that serve multiple end markets.

We evaluate performance based on sales and segment income and use a variety of ratios to measure performance
of our reporting segments. During the third quarter of 2015, we revised our definition of segment income to
exclude intangible amortization to better reflect how management assesses performance of the business. Segment
income represents operating income (loss) from continuing operations exclusive of intangible amortization,
certain acquisition related expenses, costs of restructuring activities,
impairments and other unusual non-
operating items.

Valves & Controls

The net sales and segment income for Valves & Controls were as follows:

In millions

Net sales
Segment income
% of net sales

Years ended December 31
2013
2014
2015

% / point change

2015 vs. 2014

2014 vs. 2013

$1,840.1
223.0
12.1%

$2,377.3
398.5
16.8%

$2,451.7
349.3
14.2%

(22.6)%
(44.0)%
(4.7)

(3.0)%
14.1%
2.6

Net sales
The components of the change in Valves & Controls net sales were as follows:

Volume
Price

Core growth

Currency

Total

2015 vs. 2014

2014 vs. 2013

(13.6)%
(0.1)

(13.7)
(8.9)

(22.6)%

(2.2)%
0.5

(1.7)
(1.3)

(3.0)%

The 22.6 percent decrease in Valves & Controls net sales in 2015 from 2014 was primarily the result of:

•

lower shipments and orders within the oil & gas and industrial businesses and broad-based slowing of
global capital spending;

continued sales decline in the mining industry; and

a strong U.S. dollar causing unfavorable foreign currency effects.

These decreases were partially offset by:

•

sales growth in developing regions, including Southeast Asia, India and Eastern Europe.

The 3.0 percent decrease in Valves & Controls net sales in 2014 from 2013 was primarily the result of:

•

decreased sales volume related to lower shipments for our energy products, particularly in the mining
industry; and

unfavorable foreign currency effects.

These decreases were partially offset by:

•

increased sales volume for our industrial products; and

selective increases in selling prices to mitigate inflationary cost increases.

Segment income
The components of the change in Valves & Controls segment income from the prior period were as follows:

Growth
Inflation
Productivity/Price

Total

2015

2014

(6.5) pts
(1.0)
2.8

— pts

(1.4)
4.0

(4.7) pts

2.6 pts

The 4.7 percentage point decrease in segment income for Valves & Controls as a percentage of net sales in 2015
from 2014 was primarily the result of:

•

lower core sales volumes, which resulted in decreased leverage on operating expenses; and

inflationary cost increases.

These decreases were partially offset by:

•

cost savings generated from back-office consolidation, reduction in personnel and other lean initiatives.

The 2.6 percentage point increase in segment income for Valves & Controls as a percentage of net sales in 2014
from 2013 was primarily the result of:

•

selective increases in selling price to mitigate inflationary cost increases related to raw materials and
labor costs;

favorable project mix due to higher margin projects in 2014; and

savings generated from our PIMS initiatives, including lean and supply management practices.

These increases were partially offset by:

•

costs related to the operating model transformation investment in 2014.

Flow & Filtration Solutions

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

In millions

Net sales
Segment income
% of net sales

Years ended December 31
2014

2013

2015

% / point change

2015 vs. 2014

2014 vs. 2013

1,441.6
185.1
12.8%

1,603.1
199.5
12.3%

1,651.8
202.4
12.3%

(10.1)%
(7.2)%
0.5

(2.9)%
(1.4)%
—

Net sales
The components of the change in Flow & Filtration Solutions net sales were as follows:

Volume
Price

Core growth
Acquisition (divestiture)
Currency

Total

2015 vs. 2014

2014 vs. 2013

(4.6)%
1.0

(3.6)
—
(6.5)

(10.1)%

(2.1)%
0.7

(1.4)
(0.6)
(0.9)

(2.9)%

The 10.1 percent decrease in Flow & Filtration Solutions sales in 2015 from 2014 was primarily the result of:

•

decrease in core sales due to significant declines in the global agricultural industry, broad-based slowing
of global capital spending and customer inventory de-stocking;

decreased sales volume related to the loss of a customer in the residential retail business during the
second half of 2014; and

a strong U.S. dollar causing unfavorable foreign currency effects.

These decreases were partially offset by:

•

selective increases in selling prices to mitigate inflationary cost increases;

core sales growth in our food & beverage business; and

core growth in developing regions, including Eastern Europe and Southeast Asia.

The 2.9 percent decrease in Flow & Filtration Solutions sales in 2014 from 2013 was primarily the result of:

•

decreased sales volume related to the loss of a customer in the residential retail business and sales
declines in the infrastructure business;

loss of revenue related to the divestiture of a business at the end of the fourth quarter of 2013; and

unfavorable foreign currency effects.

These decreases were partially offset by:

•

selective increases in selling prices to mitigate inflationary cost increases.

Segment income
The components of the change in Flow & Filtration Solutions segment income from the prior period were as
follows:

Growth
Acquisition (divestiture)
Inflation
Productivity/Price

Total

2015

2014

(2.5)pts
—
(1.4)
4.4

— pts

(0.1)
(1.5)
1.6

0.5pts

— pts

The 0.5 percentage point increase in segment income for Flow & Filtration Solutions as a percentage of net sales
in 2015 from 2014 was primarily the result of:

•

price increases more than offsetting inflationary cost increases;

savings driven by restructuring actions; and

savings generated from our PIMS initiatives including lean and supply management practices.

These increases were partially offset by:

•

inflationary increases related to labor and certain raw materials;

lower core sales volumes, which resulted in decreased leverage on operating expenses; and

decreased sales volume related to the loss of a customer in the residential retail business during the
second half of 2014.

Segment income for Flow & Filtration Solutions as a percentage of net sales remained consistent in 2014 from
2013 and was positively impacted by the following:

•

selective increases in selling prices to mitigate inflationary cost increases; and

savings generated from our PIMS initiatives including lean and supply management practices.

These were partially offset by:

•

inflationary increases related to labor and certain raw materials.

Water Quality Systems

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

In millions

Net sales
Segment income
% of net sales

Years ended
December 31
2014

2015

% / point change

2013

2015 vs. 2014

2014 vs. 2013

$1,381.5
281.8
20.4%

$1,356.4
253.3
18.7%

$1,269.3
227.9
18.0%

1.9%
11.3%
1.7

6.9%
11.1%
0.7

Net sales
The components of the change in Water Quality Systems net sales were as follows:

Volume
Price

Core growth

Currency

Total

2015 vs. 2014

2014 vs. 2013

4.2%
0.8

5.0
(3.1)

1.9%

6.2%
1.3

7.5
(0.6)

6.9%

The 1.9 percent increase in Water Quality Systems sales in 2015 from 2014 was primarily the result of:

•

core sales growth related to higher sales of certain pool products primarily serving the North American
residential housing market in 2015;

core sales growth within our residential & commercial and food & beverage businesses; and

selective increases in selling prices to mitigate inflationary cost increases.

These increases were partially offset by:

•

a strong U.S. dollar causing unfavorable foreign currency effects; and

decreased sales in Western Europe and in the developing regions of Brazil and Latin America.

The 6.9 percent increase in Water Quality Systems sales in 2014 from 2013 was primarily the result of:

•

core sales growth related to higher sales of certain pool products primarily serving North American
residential housing;

increased demand for global food & beverage solutions in 2014;

growth in developed regions led by strength in the U.S. and Western Europe; and

selective increases in selling prices to mitigate inflationary cost increases.

These increases were partially offset by:

•

sales declines in our industrial and infrastructure businesses;

unfavorable foreign currency effects; and

decreased sales in Brazil and Western Europe.

Segment income
The components of the change in Water Quality Systems segment income from the prior period were as follows:

Growth
Inflation
Productivity/Price

Total

2015

2014

0.3 pts
(1.0)
2.4

— pts

(1.5)
2.2

1.7 pts

0.7 pts

The 1.7 percentage point increase in segment income for Water Quality Systems as a percentage of net sales in
2015 from 2014 was primarily the result of:

•

price increases more than offsetting inflationary cost increases; and

cost savings generated from back-office consolidation, reduction in personnel and other lean initiatives.

These increases were partially offset by:

•

inflationary increases related to labor costs and certain raw materials.

The 0.7 percentage point increase in segment income for Water Quality Systems as a percentage of net sales in
2014 from 2013 was primarily the result of:

•

selective increases in selling prices to mitigate inflationary cost increases; and

core sales growth in our residential & commercial and food & beverage businesses, which resulted in
increased leverage on operating expenses.

These increases were partially offset by:

•

inflationary increases related to certain raw materials; and

lower sales volumes in our industrial and infrastructure businesses, which resulted in decreased leverage
on operating expenses.

Technical Solutions

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

In millions

Net sales
Segment income
% of net sales

Years ended December 31
2014

2013

2015

% / point change

2015 vs. 2014

2014 vs. 2013

$1,809.3
395.0
21.8%

$1,728.1
378.1
21.9%

$1,663.4
342.0
20.6%

4.7%
4.5%
(0.1)

3.9%
10.6%
1.3

Net sales
The components of the change in Technical Solutions net sales were as follows:

Volume
Price

Core growth
Acquisition (divestiture)
Currency

Total

2015 vs. 2014

2014 vs. 2013

2.2%
0.1

2.3
8.5
(6.1)

4.7%

4.2%
1.3

5.5
(0.4)
(1.2)

3.9%

The 4.7 percent increase in Technical Solutions sales in 2015 from 2014 was primarily the result of:

•

sales of $147.0 million in 2015 as a result of the ERICO Acquisition;

core growth in our residential & commercial and energy businesses; and

higher project core sales volume in the United States and Canada.

These increases were partially offset by:

•

a strong U.S. dollar causing unfavorable foreign currency effects;

lower core sales volumes in our infrastructure business, primarily due to broad-based slowing of global
capital spending; and

a decrease in demand for products in developing regions.

The 3.9 percent increase in Technical Solutions sales in 2014 from 2013 was primarily the result of:

•

higher sales volume in the U.S., China and Canada;

increased sales in our industrial, infrastructure and residential & commercial businesses; and

selective increases in selling prices to mitigate inflationary cost increases.

These increases were partially offset by:

•

unfavorable foreign currency effects; and

loss of revenue related to the divestiture of a business at the end of the first quarter of 2013.

Segment income
The components of the change in Technical Solutions segment income from the prior period were as follows:

Growth
Acquisition/Divestiture
Inflation
Productivity/Price

Total

2015

2014

(1.3)pts
0.4
(1.1)
1.9

(0.1)pts

— pts
0.1
(1.7)
2.9

1.3 pts

The 0.1 percentage point decrease in segment income for Technical Solutions as a percentage of net sales in
2015 from 2014 and was primarily the result of:

•

high margin project sales in 2014 that did not recur in 2015;

lower core sales volumes in our infrastructure business, which resulted in decreased leverage on
operating expenses; and

inflationary increases related to labor costs and certain raw materials.

These decreases were partially offset by:

•

higher core sales volumes in our energy and commercial businesses, which resulted in increased
leverage on operating expenses; and

selective increases in selling prices to mitigate inflationary cost increases.

The 1.3 percentage point increase in segment income for Technical Solutions as a percentage of sales in 2014
from 2013 was primarily the result of:

•

higher sales volume in our industrial, infrastructure and residential & commercial businesses, which
resulted in increased leverage on operating expenses; and

selective increases in selling prices to mitigate inflationary cost increases.

These increases were partially offset by:

•

inflationary increases related to labor costs and certain raw materials.

LIQUIDITY AND CAPITAL RESOURCES

We generally fund cash requirements for working capital, capital expenditures, equity investments, acquisitions,
debt repayments, dividend payments and share repurchases from cash generated from operations, availability
under existing committed revolving credit facilities and in certain instances, public and private debt and equity
offerings. We have grown our businesses in significant part in the past through acquisitions financed by credit
provided under our revolving credit facilities and from time to time, by private or public debt issuance. Our
primary revolving credit facilities have generally been adequate for these purposes, although we have negotiated
additional credit facilities as needed to allow us to complete acquisitions. We intend to issue commercial paper to
fund our financing needs on a short-term basis and to use our revolving credit facility as back-up liquidity to
support commercial paper.

We are focusing on increasing our cash flow and repaying existing debt, while continuing to fund our research
and development, marketing and capital investment initiatives. Our intent is to maintain investment grade ratings
and a solid liquidity position.

We experience seasonal cash flows primarily due to seasonal demand in a number of markets within Flow &
Filtration Solutions and Water Quality Systems. We generally borrow in the first quarter of our fiscal year for
operational purposes, which usage reverses in the second quarter as the seasonality of our businesses peaks. End-
user demand for pool and certain pumping equipment follows warm weather trends and is at seasonal highs from
April to August. The magnitude of the sales spike is partially mitigated by employing some advance sale “early
buy” programs (generally including extended payment terms and/or additional discounts). Demand for residential
and agricultural water systems is also impacted by weather patterns, particularly by heavy flooding and droughts.
Additionally, Technical Solutions generally experiences increased demand for thermal protection products and
services during the fall and winter months in the Northern Hemisphere.

Operating activities
Cash provided by operating activities of continuing operations was $750.0 million in 2015, or $255.0 million
lower than in 2014. The decrease in cash provided by operating activities from continuing operations was due
primarily to a $173.2 million decrease in Net income (loss) from continuing operations before noncontrolling
interest, net of the following non-cash items: depreciation and amortization, loss (gain) on sale of businesses,
goodwill and trade name impairment and pension and other post-retirement expense (income).

Cash provided by operating activities from continuing operations was $1,005.0 million in 2014, or $73.7
million higher than in 2013. The increase in cash provided by operating activities from continuing operations was
due primarily to a $184.3 million increase in Net income (loss) before noncontrolling interest, net of the
following non-cash items: depreciation and amortization,
trade name
impairment and pension and other post-retirement expense (income).

loss (gain) on sale of businesses,

Investing activities
Net cash used for investing activities of continuing operations was $2,024.5 million in 2015, compared to $128.3
million in 2014 and $211.2 million in 2013. The following investing activities impacted our cash flow:

Acquisitions
In 2015, we paid cash of $1,806.3 million, net of cash acquired, to acquire ERICO Global Company during the
third quarter and cash of $96.0 million, net of cash acquired, to acquire Nuheat Industries Limited (“Nuheat”)
during the second quarter, both as part of Technical Solutions. During the fourth quarter, we paid an additional
$0.9 million related to the Nuheat acquisition in settlement of a working capital adjustment.

In December 2014, we paid cash of $7.5 million and $4.8 million to acquire businesses as part of Water Quality
Systems and Technical Solutions, respectively.

In June 2013, $84.4 million of cash was paid to Tyco in settlement of a working capital and net indebtedness
adjustment related to the Merger. In addition, in December 2013 we acquired a business as part of Water Quality
Systems for cash consideration of $8.0 million, net of cash acquired.

Capital expenditures
Capital expenditures in 2015, 2014 and 2013 were $134.3 million, $129.6 million and $170.0 million,
respectively. We anticipate capital expenditures for fiscal 2016 to be approximately $140 million, primarily for
capacity expansions of manufacturing facilities located in our low-cost countries, developing new products and
general maintenance.

Financing activities
Net cash provided by financing activities was $1,286.3 million in 2015. Cash provided by financing activities in
2015 was primarily due to cash proceeds received from the September 2015 issuance of senior notes (discussed
below), partially offset by share repurchases, repayment of $350.0 million of senior notes due 2015 and payment
of dividends.

Net cash used for financing activities was $995.1 million in 2014. Cash used for financing activities in 2014
included share repurchases, payments of dividends and the purchase of the remaining noncontrolling interest in a
business, partially offset by net receipts of commercial paper and revolving long-term debt to fund our operations
in the normal course of business.

Net cash used for financing activities was $719.1 million in 2013. Cash used for financing activities in 2013
included share repurchases and payments of dividends, partially offset by net receipts of commercial paper and
revolving long-term debt to fund our operations in the normal course of business and cash received from shares
issued to employees.

In September 2015, Pentair plc, Pentair Finance S.A. (“PFSA”) and Pentair Investments Switzerland GmbH
(“PISG”), a 100-percent owned subsidiary of Pentair plc and the 100-percent owner of PFSA, completed public
offerings (the “September 2015 Offerings”) of $500.0 million aggregate principal amount of PFSA’s 2.90%
Senior Notes due 2018, $400.0 million aggregate principal amount of PFSA’s 3.625% Senior Notes due 2020,
$250.0 million aggregate principal amount of PFSA’s 4.65% Senior Notes due 2025 and €500.0 million
aggregate principal amount of PFSA’s 2.45% Senior Notes due 2019, all of which are guaranteed as to payment
by Pentair plc and PISG. Pentair plc used the net proceeds from the September 2015 Offerings to finance the
ERICO Acquisition.

Additionally, PFSA has outstanding $350.0 million of 1.875% Senior Notes due 2017, $250.0 million of 2.65%
Senior Notes due 2019, $373.0 million of the 5.00% Senior Notes due 2021 and $550.0 million of 3.15% Senior
Notes due 2022 and Pentair, Inc. has outstanding $127.0 million of 5.00% Senior Notes due 2021, all of which
are guaranteed as to payment by Pentair plc and PISG.

Interbank Offered Rate (“LIBOR”) plus a specified margin based upon PFSA’s credit ratings. PFSA must pay a
facility fee ranging from 9.0 to 25.0 basis points per annum (based upon PFSA’s credit ratings) on the amount of
each lender’s commitment and letter of credit fee for each letter of credit issued and outstanding under the
Amended Credit Facility.

In August 2015, Pentair plc, PISG and PFSA entered into a First Amendment to the Amended Credit Facility (the
“First Amendment”), which, among other things, increased the Leverage Ratio (as defined below) following the
ERICO Acquisition from 3.50 to 1.00 on the last day of each fiscal quarter to the amounts specified below.
Additionally, in September 2015, Pentair plc, PISG and PFSA entered into a Second Amendment to the
Amended Credit Facility (the “Second Amendment,” and together with the First Amendment,
the
“Amendments”), which, among other things, increased the maximum aggregate availability to $2,500.0 million.

PFSA is authorized to sell short-term commercial paper notes to the extent availability exists under the Amended
Credit Facility. PFSA uses the Amended Credit Facility as back-up liquidity to support 100% of commercial
paper outstanding. As of December 31, 2015 and 2014, we had $179.5 million and $987.6 million, respectively,
of commercial paper outstanding, all of which was classified as long-term as we have the intent and the ability to
refinance such obligations on a long-term basis under the Amended Credit Facility.

Our debt agreements contain certain financial covenants, the most restrictive of which are in the Amended Credit
Facility (as updated for the Amendments), including that we may not permit (i) the ratio of our consolidated debt
plus synthetic lease obligations to our consolidated net income (excluding, among other things, non-cash gains
and losses) before interest, taxes, depreciation, amortization, non-cash share-based compensation expense, and
up to a lifetime maximum $25.0 million of costs, fees and expenses incurred in connect with certain acquisitions,
investments, dispositions and the issuance, repayment or refinancing debt, and in addition (but without
duplication of) the fees, cost and expenses referred above, any fees costs and expenses, in an aggregate amount
not to exceed $50.0 million, incurred in connection with the ERICO Acquisition and any related incurrance,
issuance, repayment or refinancing of debt (“EBITDA”) for the four consecutive fiscal quarters then ended (the
“Leverage Ratio”) to exceed (a) 4.50 to 1.00 as of the last day of any period of four consecutive fiscal quarters
ending on or prior to June 30, 2016; (b) 4.25 to 1.00 as of the last day of the period of four consecutive fiscal
quarters ending on September 30, 2016; (c) 4.00 to 1.00 as of the last day of the period of four consecutive fiscal
quarters ending on December 31, 2016; (d) 3.75 to 1.00 as of the last day of the period of four consecutive fiscal
quarters ending after December 31, 2016 but before June 30, 2017; and (e) 3.50 to 1.00 as of the last day of the
period of four consecutive fiscal quarters ending after June 30, 2017, and (ii) the ratio of our EBITDA for the
four consecutive fiscal quarters then ended to our consolidated interest expense, including consolidated yield or
discount accrued as to outstanding securitization obligations (if any), for the same period to be less than 3.00 to
1.00 as of the end of each fiscal quarter. For purposes of the Leverage Ratio, the Amended Credit Facility
provides for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and
liquidations during the period to which such calculation relates. As of December 31, 2015, we were in
compliance with all financial covenants in our debt agreements.

Total availability under the Amended Credit Facility was $1,139.1 million as of December 31, 2015, which was
limited to $640.6 million by the Leverage Ratio in the Amended Credit Facility’s credit agreement.

In addition to the Amended Credit Facility, we have various other credit facilities with an aggregate availability
of $50.6 million, of which none was outstanding at December 31, 2015. Borrowings under these credit facilities
bear interest at variable rates.

As of December 31, 2015, we had $64.2 million of cash held in certain countries in which the ability to repatriate
is limited due to local regulations or significant potential tax consequences.

We expect to continue to have cash requirements to support working capital needs and capital expenditures, to
pay interest and service debt and to pay dividends to shareholders quarterly. We believe we have the ability and

sufficient capacity to meet these cash requirements by using available cash and internally generated funds and to
borrow under our committed and uncommitted credit facilities.

Dividends
We paid dividends in 2015 of $231.7 million, or $1.28 per ordinary share, compared with $211.4 million, or
$1.10 per ordinary share, in 2014 and $194.2 million, or $0.96 per ordinary share, in 2013. On December 8,
2015, the Board of Directors declared a dividend of $0.33 that was paid on February 12, 2016 to shareholders of
record at the close of business on January 29, 2016. Additionally, the Board of Directors approved a plan to
increase the 2016 annual cash dividend to $1.34, which is intended to be paid in four quarterly installments of
$0.33 in each of the first and second quarters of 2016 and $0.34 in each of the third and fourth quarters of 2016.
The 2016 increase will mark the 40th consecutive year we have increased dividends.

Under Irish law, the payment of future cash dividends after those approved at our 2014 annual meeting of
shareholders and redemptions and repurchases of shares following the Redomicile may be paid only out of
Pentair plc’s “distributable reserves” on its statutory balance sheet. Pentair plc is not permitted to pay dividends
out of share capital, which includes share premiums. Distributable reserves may be created through the earnings
of the Irish parent company and through a reduction in share capital approved by the Irish High Court.
Distributable reserves are not linked to a U.S. generally accepted accounting principles (“GAAP”) reported
amount (e.g., retained earnings). On July 22, 2014, the Irish High Court approved Pentair plc’s conversion of
approximately $14.4 billion of share premium to distributable reserves. 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 $9.6 billion
and $12.1 billion as of December 31, 2015 and 2014, respectively.

Authorized shares
Our authorized share capital consists of 426.0 million ordinary shares with a par value of $0.01 per share.

Ordinary shares held in treasury
In August 2015, we canceled all of our ordinary shares held in treasury. At the time of the cancellation, we held
19.1 million ordinary shares in treasury at a cost of $1.2 billion.

Share repurchases
Prior to the closing of the Merger, our Board of Directors, and Tyco as our sole shareholder, authorized the
repurchase of our ordinary shares with a maximum aggregate value of $400.0 million following the closing of the
Merger. This authorization did not have an expiration date. In October 2012, our Board of Directors authorized
the repurchase of our ordinary shares with a maximum aggregate value of $800.0 million. This authorization
expired on December 31, 2015 and was in addition to the $400.0 million share repurchase authorization. There is
no remaining availability under the 2012 authorizations.

In December 2013, the Board of Directors authorized the repurchase of shares of our ordinary shares up to a
maximum dollar limit of $1.0 billion. This authorization expires on December 31, 2016 and is in addition to the
combined $1.2 billion 2012 share repurchase authorizations. There is no remaining availability under the 2013
authorization.

In December 2014, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum
dollar limit of $1.0 billion. This authorization is in addition to the 2012 and 2013 share repurchase authorizations.
The authorization expires on December 31, 2019.

During the year ended December 31, 2015, we repurchased 3.1 million of our ordinary shares for $200.0 million
under the 2014 authorization and had $800.0 million remaining availability for repurchases under the 2014
authorization.

Contractual obligations
The following summarizes our significant contractual obligations that impact our liquidity:

In millions

2016

2017

2018

2019

2020

Thereafter

Total

Years ended December 31

Debt obligations
Capital lease obligations
Interest obligations on fixed-

rate debt

Operating lease obligations, net

of sublease rentals
Purchase obligations
Pension and other post-

retirement plan contributions

Marketing obligations

Total contractual obligations,

$ — $ 350.0
—

0.7

$ 500.0
—

$ 2,159.3
—

$ 400.0
—

1,300.0
—

$ 4,709.3
0.7

109.6

107.9

44.3
43.1

24.4
6.6

32.6
1.7

20.4
4.2

99.4

24.8
0.2

22.5
3.5

85.2

19.8
0.1

23.2
3.0

64.8

14.9
0.1

19.8
2.4

98.0

23.3
0.1

87.1
11.9

564.9

159.7
45.3

197.4
31.6

net

$ 228.7

$ 516.8

$ 650.4

$ 2,290.6

$ 502.0

1,520.4

$ 5,708.9

The majority of the purchase obligations represent commitments for raw materials to be utilized in the normal
course of business. For purposes of the above table, arrangements are considered purchase obligations if a
contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure
and approximate timing of the transaction.

In addition to the summary of significant contractual obligations, we will incur annual interest expense on
outstanding variable rate debt. As of December 31, 2015, variable interest rate debt was $1,360.9 million at a
weighted average interest rate of 1.54%.

The total gross liability for uncertain tax positions at December 31, 2015 was estimated to be $69.9 million. We
record penalties and interest related to unrecognized tax benefits in Provision for income taxes and Interest
expense, respectively, which is consistent with our past practices. As of December 31, 2015, we had recorded
$2.6 million for the possible payment of penalties and $10.8 million related to the possible payment of interest.

Other financial measures
In addition to measuring our cash flow generation or usage based upon operating, investing and financing
classifications included in the Consolidated Statements of Cash Flows, we also measure our free cash flow. We
have a long-term goal to consistently generate free cash flow that equals or exceeds 100 percent conversion of
net income. Free cash flow is a non-GAAP financial measure that we use to assess our cash flow performance.
We believe free cash flow is an important measure of operating performance because it provides us and our
investors a measurement of cash generated from operations that is available to pay dividends, make acquisitions,
repay debt and repurchase shares. In addition, free cash flow is used as a criterion to measure and pay
compensation-based incentives. Our measure of free cash flow may not be comparable to similarly titled
measures reported by other companies. The following table is a reconciliation of free cash flow:

In millions

Years ended December 31
2014

2015

2013

Net cash provided by operating activities of continuing operations
Capital expenditures
Proceeds from sale of property and equipment

Free cash flow

$ 750.0
(134.3)
27.3

$ 1,005.0
(129.6)
13.1

$ 931.3
(170.0)
6.0

$ 643.0

$ 888.5

$ 767.3

Off-balance sheet arrangements
At December 31, 2015, we had no off-balance sheet financing arrangements.

COMMITMENTS AND CONTINGENCIES

While we believe that a material impact on our consolidated financial position, results of operations or cash flows
from any such future claims or potential claims is unlikely, given the inherent uncertainty of litigation, a remote
possibility exists that a future adverse ruling or unfavorable development could result in future charges that could
have a material impact. We do and will continue to periodically reexamine our estimates of probable liabilities
and any associated expenses and receivables and make appropriate adjustments to such estimates based on
experience and developments in litigation. As a result, the current estimates of the potential impact on our
consolidated financial position, results of operations and cash flows for the proceedings and claims described in
ITEM 8, Note 17 of the Notes to Consolidated Financial Statements could change in the future.

Asbestos matters
Our subsidiaries and numerous other companies are named as defendants in personal injury lawsuits based on
alleged exposure to asbestos-containing materials. These cases typically involve product liability claims based
primarily on allegations of manufacture, sale or distribution of industrial products that either contained asbestos
or were attached to or used with asbestos-containing components manufactured by third-parties. Each case
typically names between dozens to hundreds of corporate defendants. While we have observed an increase in the
number of these lawsuits over the past several years, including lawsuits by plaintiffs with mesothelioma-related
claims, a large percentage of these suits have not presented viable legal claims and, as a result, have been
dismissed by the courts. Our historical strategy has been to mount a vigorous defense aimed at having
unsubstantiated suits dismissed, and, where appropriate, settling suits before trial. Although a large percentage of
litigated suits have been dismissed, we cannot predict the extent to which we will be successful in resolving
lawsuits in the future.

Our estimated liability for asbestos-related claims was $237.9 million and $249.1 million as of December 31,
2015 and 2014, respectively, and was recorded in Other non-current liabilities in the Consolidated Balance
Sheets for pending and future claims and related defense costs. Our estimated receivable for insurance recoveries
was $111.0 million and $115.8 million at December 31, 2015 and 2014, respectively, and was recorded in Other
non-current assets in the Consolidated Balance Sheets.

supplies that may be or may have been impacted from those operations, contain disposed or recycled materials or
waste and require environmental investigation and/or remediation. Those sites include instances where we have
been identified as a potentially responsible party under U.S. federal, state and/or non-U.S. environmental laws
and regulations. For several formerly owned businesses, we have also received claims for indemnification from
purchasers of these businesses.

Stand-by letters of credit, bank guarantees and bonds
In certain situations, Tyco guaranteed Flow Control’s performance to third parties or provided financial
guarantees for financial commitments of Flow Control. In situations where Flow Control and Tyco were unable
to obtain a release from these guarantees in connection with the spin-off, we will indemnify Tyco for any losses
it suffers as a result of such guarantees.

In disposing of assets or businesses, we often provide representations, warranties and indemnities to cover
various risks including unknown damage to the assets, environmental risks involved in the sale of real estate,
liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing
facilities and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not have the
ability to reasonably estimate the potential liability due to the inchoate and unknown nature of these potential
liabilities. However, we have no reason to believe that these uncertainties would have a material adverse effect
on our financial position, results of operations or cash flows.

In the ordinary course of business, we are required to commit to bonds, letters of credit and bank guarantees that
require payments to our customers for any non-performance. The outstanding face value of these instruments
fluctuates with the value of our projects in process and in our backlog. In addition, we issue financial stand-by
letters of credit primarily to secure our performance to third parties under self-insurance programs.

As of December 31, 2015 and 2014, the outstanding value of bonds, letters of credit and bank guarantees totaled
$402.2 million and $370.1 million, respectively.

NEW ACCOUNTING STANDARDS

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

CRITICAL ACCOUNTING POLICIES

We have adopted various accounting policies to prepare the consolidated financial statements in accordance with
GAAP. Our significant accounting policies are more fully described in ITEM 8, Note 1 of the Notes to
Consolidated Financial Statements. Certain of our accounting policies require the application of significant
judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their
nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our
historical experience, terms of existing contracts, our observance of trends in the industry and information
available from other outside sources, as appropriate. We consider an accounting estimate to be critical if:

•

it requires us to make assumptions about matters that were uncertain at the time we were making the
estimate; and

changes in the estimate or different estimates that we could have selected would have had a material
impact on our financial condition or results of operations.

Our critical accounting estimates include the following:

Impairment of goodwill and indefinite-lived intangibles
Goodwill
Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable
tangible net assets and identifiable intangible assets purchased and liabilities assumed.

Goodwill is tested at least annually for impairment and is tested for impairment more frequently if events or
changes in circumstances indicate that the asset might be impaired. The impairment test is performed using a
two-step process. In the first step, the fair value of each reporting unit is compared with the carrying amount of
the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting
unit there is an indication that goodwill impairment exists and a second step must be completed in order to
determine the amount of the goodwill impairment, if any that should be recorded. In the second step, an
impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the
implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value
of the reporting unit in a manner similar to a purchase price allocation.

The fair value of each reporting unit is determined using a discounted cash flow analysis and market approach.
Projecting discounted future cash flows requires us to make significant estimates regarding future revenues and
expenses, projected capital expenditures, changes in working capital and the appropriate discount rate. Use of the
market approach consists of comparisons to comparable publicly-traded companies that are similar in size and
industry. Actual results may differ from those used in our valuations.

In developing our discounted cash flow analysis, assumptions about future revenues and expenses, capital
expenditures and changes in working capital are based on our annual operating plan and long-term business plan
for each of our reporting units. These plans take into consideration numerous factors including historical
experience, anticipated future economic conditions, changes in raw material prices and growth expectations for
the industries and end markets we participate in. These assumptions are determined over a six year long-term
planning period. The six year growth rates for revenues and operating profits vary for each reporting unit being
evaluated. Revenues and operating profit beyond 2021 are projected to grow at a perpetual growth rate of 3.0%.

Discount rate assumptions for each reporting unit take into consideration our assessment of risks inherent in the
future cash flows of the respective reporting unit and our weighted-average cost of capital. We utilized discount
rates ranging from 9.5% to 12.5% in determining the discounted cash flows in our fair value analysis.

In estimating fair value using the market approach, we identify a group of comparable publicly-traded companies
for each reporting unit that are similar in terms of size and product offering. These groups of comparable
companies are used to develop multiples based on total market-based invested capital as a multiple of earnings
before interest, taxes, depreciation and amortization (“EBITDA”). We determine our estimated values by
applying these comparable EBITDA multiples to the operating results of our reporting units. The ultimate fair
value of each reporting unit is determined considering the results of both valuation methods.

We completed step one of our annual goodwill impairment evaluation as of the first day of the fourth quarter of
2015, 2014 and 2013 with all but one of our reporting units’ fair value substantially in excess of its carrying
value. In connection with our 2015 annual impairment test, we determined that the fair value of our Valves &
Controls reporting unit did not exceed its carrying value by a significant amount. The percentage of excess fair
value over carrying value of this reporting unit was approximately 9% as of the annual impairment testing date.
If cash flow projections decreased by 10.5%, or if the discount rate increased by 100 basis points, this reporting
unit would have failed the annual step one test.

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 the reporting unit and thereby increasing the
likelihood that the associated goodwill could be impaired. As such, we concluded that a triggering event occurred
during the fourth quarter of 2015 requiring that we test Valves & Controls goodwill for impairment. As a result,
we reperformed our step one analysis as of December 31, 2015. Consistent with our annual test, the fair value
was estimated using both a discounted cash flow analysis and market approach.

The results of our step one goodwill impairment testing as of December 31, 2015 indicated that the fair value of
Valves & Controls was below its carrying value. Accordingly, we performed the step two test and concluded the
goodwill of Valves & Controls was impaired. As a result, we recorded a non-cash goodwill impairment charge of
$515.2 million for the year ended December 31, 2015. The impairment is included in Impairment of goodwill and
trade names in our Consolidated Statements of Operations and Comprehensive Income (Loss).

Identifiable intangible assets
Our primary identifiable intangible assets include: customer relationships,
trade names and trademarks,
proprietary technology, backlog and patents. Identifiable intangibles with finite lives are amortized and those
identifiable intangibles with indefinite lives are not amortized. Identifiable intangible assets that are subject to
amortization are evaluated for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Identifiable intangible assets not subject to amortization are tested for
impairment annually or more frequently if events warrant. We complete our annual impairment test during the
fourth quarter each year for those identifiable assets not subject to amortization.

The impairment test consists of a comparison of the fair value of the trade name with its carrying value. Fair
value is measured using the relief-from-royalty method. This method assumes the trade name has value to the
extent that the owner is relieved of the obligation to pay royalties for the benefits received from them. This
method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the
weighted average cost of capital.

As noted above, 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 the Valves & Controls and
thereby increasing the likelihood that the associated intangible assets could be impaired. As such, we concluded
that a triggering event occurred during the fourth quarter of 2015 requiring that we test Valves & Controls trade
names for impairment. As a result of this test, an impairment charge of $39.5 million was recorded in 2015
related to trade names in Valves & Controls.

There was no impairment charge recorded in 2014 for identifiable intangible assets. An impairment charge of
$11.0 million was recorded in 2013 related to a trade name in Technical Solutions as the result of a rebranding
strategy implemented in the fourth quarter of 2013. These trade name impairment charges were recorded in
Impairment of goodwill and trade names in our Consolidated Statements of Operations and Comprehensive
Income (Loss).

Impairment of long-lived assets
We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment,
when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may
not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value
of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest
charges) of the related operations. If these cash flows are less than the carrying value of such asset, an
impairment loss is recognized for the difference between estimated fair value and carrying value. Impairment
losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced
for the cost to dispose of the assets. The measurement of impairment requires us to estimate future cash flows
and the fair value of long-lived assets. During 2015, 2014, and 2013, we recorded impairment charges of $17.7
million, $20.9 million and $16.6 million, respectively, in conjunction with restructuring activities.

Percentage of completion revenue recognition
Revenue from certain long-term contracts is recognized over the contractual period under the percentage of
completion method of accounting. Under this method, sales and gross profit are recognized as work is performed
either based on the relationship between the actual costs incurred and the total estimated costs at completion
(“the cost-to-cost method”) or based on efforts expended for measuring progress towards completion in situations
in which this approach is more representative of the progress on the contract than the cost-to-cost method.
Changes to the original estimates may be required during the life of the contract and such estimates are reviewed
on a regular basis. Sales and gross profit are adjusted using the cumulative catch-up method for revisions in
estimated total contract costs and contract values. These reviews have not resulted in adjustments that were
significant to our results of operations. Estimated losses are recorded when identified. Claims against customers
are recognized as revenue upon settlement.

Pension and other post-retirement plans
We sponsor U.S. and Non-U.S. defined-benefit pension and other post-retirement plans. The amounts recognized
in our consolidated financial statements related to our defined-benefit pension and other post-retirement plans are
determined from actuarial valuations. Inherent in these valuations are assumptions, including: expected return on
plan assets, discount rates, rate of increase in future compensation levels and health care cost trend rates. These
assumptions are updated annually and are disclosed in ITEM 8, Note 13 to the Notes to Consolidated Financial
Statements. Differences in actual experience or changes in assumptions may affect our pension and other post-
retirement obligations and future expense.

We recognize changes in the fair value of plan assets and net actuarial gains or losses for pension and other post-
retirement benefits annually in the fourth quarter each year (“mark-to-market adjustment”) and, if applicable, in
any quarter in which an interim remeasurement is triggered. Net actuarial gains and losses occur when the actual
experience differs from any of the various assumptions used to value our pension and other post-retirement plans
or when assumptions change as they may each year. The primary factors contributing to actuarial gains and
losses each year are (1) changes in the discount rate used to value pension and other post-retirement benefit
obligations as of the measurement date and (2) differences between the expected and the actual return on plan
assets. This accounting method also results in the potential for volatile and difficult to forecast mark-to-market
adjustments. Mark-to-market adjustments resulted in pre-tax income of $23.0 million in 2015, a pre-tax charge of
$49.9 million in 2014 and pre-tax income of $63.2 million in 2013. The remaining components of pension
expense, including service and interest costs and the expected return on plan assets, are recorded on a quarterly
basis as ongoing pension expense.

Discount rate
The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of
the year based on our December 31 measurement date. The discount rate was determined by matching our
expected benefit payments to payments from a stream of bonds available in the marketplace rated AA or higher,
adjusted to eliminate the effects of call provisions. This produced a weighted-average discount rate for our
U.S. plans of 4.21% in 2015, 3.63% in 2014 and 4.51% in 2013. The discount rates on our Non-U.S. plans
ranged from 0.50% to 4.25% in 2015, 0.50% to 4.25% in 2014 and 0.50% to 5.00% in 2013. There are no known
or anticipated changes in our discount rate assumption that will impact our pension expense in 2016.

Expected rate of return
Our expected rate of return on plan assets for our U.S. plans was 3.65% for 2015, 4.56% in 2014 and 3.75% in
2013. The expected rate of return on our Non-U.S. plans ranged from 1.00% to 6.00% in 2015, 1.00% to 6.40%
in 2014 and 1.00% to 6.50% in 2013. The expected rate of return is designed to be a long-term assumption that
may be subject to considerable year-to-year variance from actual returns. In developing the expected long-term
rate of return, we considered our historical returns, with consideration given to forecasted economic conditions,
our asset allocations, input from external consultants and broader longer-term market indices.

During 2012, we adopted an investment strategy for our U.S. pension plans with a primary objective of
preserving the funded status of the U.S. plans. This was achieved through investments in fixed interest
instruments with interest rate sensitivity characteristics closely reflecting the interest rate sensitivity of our
benefit obligations. The shifting of allocations away from equities to liability hedging fixed income investments,
by reinvesting in fixed income instruments as equity investments were redeemed, was completed during 2013. As
of December 31, 2015, the U.S. pension plans have an approximately 98 percent allocation to fixed income
investments. As a result of the adoption of this investment strategy, we anticipate the expected rate of return on
our U.S. funded pension plans will continue to be consistent with the discount rate.

See ITEM 8, Note 13 of the Notes to Consolidated Financial Statements for further information regarding
pension and other post-retirement plans.

Loss contingencies
Accruals are recorded for various contingencies including legal proceedings, self-insurance and other claims that
arise in the normal course of business. The accruals are based on judgment, the probability of losses and, where
applicable, the consideration of opinions of internal and/or external legal counsel and actuarially determined
estimates. Additionally, we record receivables from third party insurers when recovery has been determined to be
probable.

We recognize asbestos-related liabilities on an undiscounted basis when a loss is probable and can be reasonably
estimated. Certain of these liabilities are subject to insurance coverage. Our subsidiaries and numerous other
companies are named as defendants in personal injury lawsuits based on alleged exposure to asbestos-containing
materials. These cases typically involve product liability claims based primarily on allegations of manufacture,
sale or distribution of industrial products that either contained asbestos or were attached to or used with asbestos-
containing components manufactured by third-parties. The process of estimating asbestos-related liabilities and
the corresponding insurance recoveries receivable is complex and dependent primarily on our historical claim
experience, estimates of potential future claims, our legal strategy for resolving these claims, the availability of
insurance coverage, and the solvency and creditworthiness of insurers.

See ITEM 8, Note 17 of the Notes to Consolidated Financial Statements for further information regarding loss
contingencies.

Income taxes
In determining taxable income for financial statement purposes, we must make certain estimates and judgments.
These estimates and judgments affect the calculation of certain tax liabilities and the determination of the

recoverability of certain of the deferred tax assets, which arise from temporary differences between the tax and
financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax
assets we consider all available positive and negative evidence including our past operating results, the existence
of cumulative losses in the most recent years and our forecast of future taxable income. In estimating future
taxable income, we develop assumptions including the amount of future pre-tax operating income, the reversal of
temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions
require significant judgment about the forecasts of future taxable income and are consistent with the plans and
estimates we are using to manage the underlying businesses.

We currently have recorded valuation allowances that we will maintain until when,
in the opinion of
management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Our
income tax expense recorded in the future may be reduced to the extent of decreases in our valuation allowances.
The realization of our remaining deferred tax assets is primarily dependent on future taxable income in the
appropriate jurisdiction. Any reduction in future taxable income including but not
limited to any future
restructuring activities may require that we record an additional valuation allowance against our deferred tax
assets. An increase in the valuation allowance could result in additional income tax expense in such period and
could have a significant impact on our future earnings.

Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future.
Management records the effect of a tax rate or law change on the Company’s deferred tax assets and liabilities in
the period of enactment. Future tax rate or law changes could have a material effect on the Company’s financial
condition, results of operations or cash flows.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex
tax regulations in a multitude of jurisdictions across our global operations. We perform reviews of our income
tax positions on a quarterly basis and accrue for uncertain tax positions. We recognize potential liabilities and
record tax liabilities for anticipated tax audit issues in the tax jurisdictions in which we operate based on our
estimate of whether, and the extent to which, additional taxes will be due. These tax liabilities are reflected net of
related tax loss carryforwards. As events change or resolution occurs, these liabilities are adjusted, such as in the
case of audit settlements with taxing authorities. The ultimate resolution may result in a payment that is
materially different from our current estimate of the tax liabilities. If our estimate of tax liabilities proves to be
less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts
ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits
being recognized in the period when we determine the liabilities are no longer necessary.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential economic loss that may result from adverse changes in the fair value of financial
instruments. We are exposed to various market risks, including changes in interest rates and foreign currency
rates. Periodically, we use derivative financial instruments to manage or reduce the impact of changes in interest
rates. Counterparties to all derivative contracts are major financial institutions. All instruments are entered into
for other than trading purposes. The major accounting policies and utilization of these instruments is described
more fully in ITEM 8, Note 1 of the Notes to Consolidated Financial Statements.

Interest rate risk
Our debt portfolio as of December 31, 2015, was comprised of debt predominantly denominated in U.S. dollars.
This debt portfolio is comprised of 71% fixed-rate debt and 29% variable-rate debt. Changes in interest rates
have different impacts on the fixed and variable-rate portions of our debt portfolio. A change in interest rates on
the fixed portion of the debt portfolio impacts the fair value but has no impact on interest incurred or cash flows.
A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash
flows but does not impact the net financial instrument position.

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

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

Foreign currency risk
We conduct business in various locations throughout the world and are subject to market risk due to changes in
the value of foreign currencies in relation to our reporting currency, the U.S. dollar. Periodically, we use
derivative financial instruments to manage these risks. The functional currencies of our foreign operating
locations are generally the local currency in the country of domicile. We manage these operating activities at the
local level and revenues, costs, assets and liabilities are generally denominated in local currencies, thereby
mitigating the risk associated with changes in foreign exchange. However, our results of operations and assets
and liabilities are reported in U.S. dollars and thus will fluctuate with changes in exchange rates between such
local currencies and the U.S. dollar.

From time to time, we may enter into short duration foreign currency contracts to hedge foreign currency risks.
As the majority of our foreign currency contracts have an original maturity date of less than one year, there is no
material foreign currency risk. At December 31, 2015 and 2014, we had outstanding foreign currency derivative
contracts with gross notional U.S. dollar equivalent amounts of $331.5 million and $250.8 million, respectively.
Changes in the fair value of all derivatives are recognized immediately in income unless the derivative qualifies
as a hedge of future cash flows. Gains and losses related to a hedge are deferred and recorded in the Consolidated
Balance Sheets as a component of AOCI and subsequently recognized in the Consolidated Statements of
Operations and Comprehensive Income (Loss) when the hedged item affects earnings.

In September 2015, we designated the €500.0 million 2.45% Senior Notes due 2019 (the “2019 Euro Notes”) as a
net investment hedge of our investments in certain international subsidiaries that use the Euro as their functional
currency. The hedge is intended to reduce, but will not eliminate, the impact on our financial results of changes
in the exchange rate between the Euro and the U.S. dollar. The currency risk related to the net investment hedge
is measured by estimating the potential impact of a 10% change in the value of the U.S. dollar relative to the
Euro. The rates used to perform this analysis were based on the market exchange rates in effect on December 31,
2015. A 10% appreciation of the U.S. dollar relative to the Euro would result in a $49.9 million net increase in
Other comprehensive income. Conversely, a 10% depreciation of the U.S. dollar relative to the Euro would result
in a $60.9 million net decrease in Other comprehensive income. However, these increases and decreases in Other
comprehensive income would be offset by decreases or increases in the hedged net investments on our balance
sheet due to currency translation.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Pentair plc and its subsidiaries (the “Company”) is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the
Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. The Company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
the financial statements in accordance with generally accepted accounting principles and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the
financial statements.

Because of its inherent
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial reporting
to future periods are subject to the risk that the controls may become inadequate because of changes in conditions
or that the degree of compliance with the policies or procedures may deteriorate.

limitations,

Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2015. In making this assessment, management used the criteria for effective internal control over
financial reporting described in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as
of December 31, 2015, the Company’s internal control over financial reporting was effective based on those
criteria.

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.

Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on
the Company’s internal control over financial reporting as of December 31, 2015. That attestation report is set
forth immediately following this management report.

Randall J. Hogan
Chairman and Chief Executive Officer

John L. Stauch
Executive Vice President and Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Pentair plc
Manchester, United Kingdom

We have audited the internal control over financial reporting of Pentair plc and subsidiaries (the “Company”) as of
December 31, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. 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.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers, or persons performing similar functions, and
effected by the company’s board of directors, management, and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion
or improper management override of controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2015, 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, 2015 of the Company and our report dated February 26, 2016
expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ Deloitte & Touche LLP

Minneapolis, Minnesota
February 26, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Pentair plc
Manchester, United Kingdom

We have audited the accompanying consolidated balance sheets of Pentair plc and subsidiaries (the “Company”)
as of December 31, 2015 and 2014, 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,
2015. Our audits also included the consolidated financial statement schedule listed in the Index at Item 15. These
financial statements and financial statement schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the financial statements and financial statement schedule based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

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, 2015 and 2014, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2015, in conformity with
accounting principles generally accepted in the United States of America. Also, in our opinion, such consolidated
financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of December 31, 2015, 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 26, 2016 expressed an unqualified
opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Minneapolis, Minnesota
February 26, 2016

Pentair plc and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income (Loss)

In millions, except per-share data

Net sales
Cost of goods sold

Gross profit
Selling, general and administrative
Research and development
Impairment of goodwill and trade names

Operating income
Other (income) expense
Loss (gain) on sale of businesses, net
Equity income of unconsolidated subsidiaries
Interest income
Interest expense

Income from continuing operations before income taxes and noncontrolling interest
Provision for income taxes

Net income (loss) from continuing operations before noncontrolling interest
Income (loss) from discontinued operations, net of tax
Loss from sale / impairment of discontinued operations, net of tax

Net income (loss) before noncontrolling interest
Noncontrolling interest

Net income (loss) attributable to Pentair plc

Net income (loss) from continuing operations attributable to Pentair plc

Comprehensive income (loss), net of tax
Net income (loss) before noncontrolling interest
Changes in cumulative translation adjustment
Amortization of pension and other post-retirement prior service cost, net of $0, $0 and

$0.2 tax, respectively

Changes in market value of derivative financial instruments, net of $0.5, $1.1 and $0.7

tax, respectively

Total comprehensive income (loss)
Less: Comprehensive income attributable to noncontrolling interest

Years ended December 31
2014

2015

2013

$ 6,449.0
4,263.2

$ 7,039.0
4,576.0

$ 6,999.7
4,629.6

2,185.8
1,334.3
119.6
554.7

177.2

3.2
(2.8)
(6.0)
108.7

74.1
139.1

(65.0)
(4.7)
(6.7)

(76.4)
—

2,463.0
1,493.8
117.3
—

851.9

0.2
(1.2)
(3.7)
72.3

784.3
177.3

607.0
(6.4)
(385.7)

214.9
—

(76.4) $

214.9

(65.0) $

607.0

(76.4) $
(264.9)

214.9
(336.3)

—

0.2

(341.1)
—

—

(0.4)

(121.8)
—

2,370.1
1,493.7
122.8
11.0

742.6

(20.8)
(2.0)
(4.4)
75.3

694.5
177.0

517.5
25.9
(0.8)

542.6
5.8

536.8

511.7

542.6
(29.1)

(0.4)

(0.3)

512.8
8.0

Comprehensive income (loss) attributable to Pentair plc

$ (341.1) $ (121.8) $

504.8

Earnings (loss) per ordinary share attributable to Pentair plc
Basic
Continuing operations
Discontinued operations

Basic earnings (loss) per ordinary share attributable to Pentair plc

Diluted
Continuing operations
Discontinued operations

Diluted earnings (loss) per ordinary share attributable to Pentair plc

Weighted average ordinary shares outstanding
Basic
Diluted

(0.36) $
(0.06)

3.19
(2.06)

(0.42) $

1.13

(0.36) $
(0.06)

3.14
(2.03)

(0.42) $

1.11

2.54
0.13

2.67

2.50
0.12

2.62

180.3
182.6

190.6
193.7

201.1
204.6

See accompanying notes to consolidated financial statements.

Pentair plc and Subsidiaries
Consolidated Balance Sheets

In millions, except per-share data

Current assets
Cash and cash equivalents
Accounts and notes receivable, net of allowances of $103.7 and $96.5, respectively
Inventories
Other current assets
Current assets held for sale

Assets

Total current assets
Property, plant and equipment, net
Other assets
Goodwill
Intangibles, net
Other non-current assets
Non-current assets held for sale

Total other assets

Total assets

Liabilities and Equity

Current liabilities
Current maturities of long-term debt and short-term borrowings
Accounts payable
Employee compensation and benefits
Other current liabilities
Current liabilities held for sale

Total current liabilities
Other liabilities
Long-term debt
Pension and other post-retirement compensation and benefits
Deferred tax liabilities
Other non-current liabilities
Non-current liabilities held for sale

Total liabilities
Equity

Ordinary shares $0.01 par value, 426.0 authorized, 180.5 and 202.4 issued at December 31, 2015

and December 31, 2014, respectively

Ordinary shares held in treasury, 19.9 shares at December 31, 2014
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss

Total equity

Total liabilities and equity

See accompanying notes to consolidated financial statements.

December 31

2015

2014

126.3
1,167.7
1,174.3
312.3
—

2,780.6
942.8

5,255.4
2,490.1
388.1
—

8,133.6

110.4
1,205.9
1,130.4
366.8
80.6

2,894.1
950.0

4,741.9
1,608.1
436.2
24.9

6,811.1

$ 11,857.0

$ 10,655.2

0.7
578.8
262.9
644.1
—

6.7
583.1
305.5
709.1
35.1

1,486.5

1,639.5

4,709.3
287.2
844.2
521.0
—

7,848.2

1.8

—
2,860.3
1,791.7
(645.0)

4,008.8

2,997.4
322.0
528.3
497.7
6.5

5,991.4

2.0

(1,251.9)
4,250.0
2,044.0
(380.3)

4,663.8

$ 11,857.0

$ 10,655.2

Pentair plc and Subsidiaries
Consolidated Statements of Cash Flows

In millions

Operating activities
Net income (loss) before noncontrolling interest
Loss (income) from discontinued operations, net of tax
Loss from sale / impairment of discontinued operations, net of tax
Adjustments to reconcile net income (loss) from continuing operations before
noncontrolling interest to net cash provided by (used for) operating activities of
continuing operations
Equity income of unconsolidated subsidiaries
Depreciation
Amortization
Loss (gain) on sale of businesses, net
Deferred income taxes
Share-based compensation
Impairment of goodwill and trade names
Excess tax benefits from share-based compensation
Amortization of bridge financing debt issuance costs
Pension and other post-retirement expense (income)
Pension and other post-retirement contributions
Changes in assets and liabilities, net of effects of business acquisitions

Accounts and notes receivable
Inventories
Other current assets
Accounts payable
Employee compensation and benefits
Other current liabilities
Other non-current assets and liabilities

Net cash provided by (used for) operating activities of continuing operations
Net cash provided by (used for) operating activities of discontinued operations
Net cash provided by (used for) operating activities

Investing activities
Capital expenditures
Proceeds from sale of property and equipment
Proceeds from sale of businesses, net
Acquisitions, net of cash acquired
Other

Net cash provided by (used for) investing activities of continuing operations
Net cash provided by (used for) investing activities of discontinued operations
Net cash provided by (used for) investing activities

Financing activities
Net receipts (repayments) of short-term borrowings
Net receipts of commercial paper and revolving long-term debt
Proceeds from long-term debt
Repayment of long-term debt
Debt issuance costs
Excess tax benefits from share-based compensation
Shares issued to employees, net of shares withheld
Repurchases of ordinary shares
Dividends paid
Purchase of / distribution to noncontrolling interest

Net cash provided by (used for) financing activities

Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

Years ended December 31
2013
2014
2015

(76.4) $
4.7
6.7

214.9
6.4
385.7

$ 542.6
(25.9)
0.8

(2.8)
139.5
121.4
3.2
3.0
33.0
554.7
(6.0)
10.8
9.1
(24.7)

48.8
1.4
(21.7)
(8.1)
(41.1)
(31.2)
25.7
750.0
(10.7)
739.3

(134.3)
27.3
—
(1,913.9)
(3.6)
(2,024.5)
59.0
(1,965.5)

(1.2)
138.7
114.0
0.2
2.0
33.6
—
(12.6)
—
76.2
(27.7)

9.0
(3.7)
(22.0)
34.5
13.2
58.5
(14.7)
1,005.0
3.4
1,008.4

(129.6)
13.1
0.3
(12.3)
0.2
(128.3)
—
(128.3)

(2.3)
363.5
1,714.8
(356.6)
(26.8)
6.0
19.4
(200.0)
(231.7)
—
1,286.3
(44.2)
15.9
110.4
126.3

0.5
468.6
2.2
(16.8)
(3.1)
12.6
37.0
(1,150.0)
(211.4)
(134.7)
(995.1)
(30.6)
(145.6)
256.0
110.4

(2.0)
141.3
134.1
(20.8)
54.0
31.1
11.0
(16.8)
—
(31.3)
(34.0)

(106.3)
58.1
(5.7)
41.1
66.3
41.2
52.5
931.3
(3.4)
927.9

(170.0)
6.0
43.5
(92.4)
1.7
(211.2)
—
(211.2)

—
104.2
0.7
(7.4)
(1.4)
16.8
80.0
(715.8)
(194.2)
(2.0)
(719.1)
21.0
18.6
237.4
256.0

See accompanying notes to consolidated financial statements.

Pentair plc and Subsidiaries
Consolidated Statements of Changes in Equity

In millions

Ordinary shares

Treasury shares

Number Amount Number Amount

Additional
paid-in
capital

Retained
earnings

Balance - December 31, 2012
Net income
Other comprehensive income (loss), net

213.0 $ 113.5
—

—

(6.9) $ (315.5) $ 5,292.4 $1,292.3
— 536.8

—

Accumulated
other
comprehensive
income (loss)

Total
Pentair plc

Non-
controlling
interest

Total

$(11.6)
—

$6,371.1 $
536.8

116.4 $ 6,487.5
542.6

5.8

of tax

Tax benefit of share-based compensation
Dividends declared
Distribution to noncontrolling interest
Share repurchase
Exercise of options, net of shares

tendered for payment

Issuance of restricted shares, net of

cancellations

Shares surrendered by employees to pay

taxes

Share-based compensation

—
—
—
—
—

—

—
—

—
—
—
—
—
—
—
—
— (12.3)

—
—
22.6
—
— (198.5)
—
—
—
(715.8)

—

—
—

3.0

0.9

131.8

(35.6)

37.0

(37.0)

(0.3)
—

(12.6)
—

(3.6)
31.1

—
—
—
—
—

—

—
—

(32.0)
—
—
—
—

—

—
—

(32.0)
22.6
(198.5)
—
(715.8)

96.2

—

(16.2)
31.1

2.2
(29.8)
22.6
—
— (198.5)
(2.0)
— (715.8)

(2.0)

—

—
—

96.2

—

(16.2)
31.1

Balance - December 31, 2013

213.0 $ 113.5

(15.6) $ (875.1) $ 5,071.4 $1,829.1 $

(43.6) $ 6,095.3 $

122.4 $ 6,217.7

Net income
Other comprehensive income (loss), net

of tax

Tax benefit of share-based compensation
Conversion of Pentair Ltd. common

shares to Pentair plc ordinary shares

Dividends declared
Purchase of noncontrolling interest
Share repurchase
Exercise of options, net of shares

tendered for payment

Issuance of restricted shares, net of

cancellations

Shares surrendered by employees to pay

taxes

Share-based compensation

—

—
—

—

—
—

— (111.4)
—
—
—
—
(0.1)
(10.6)

—

—
—

Balance - December 31, 2014

202.4 $

Net income (loss)
Other comprehensive income (loss), net

of tax

Tax benefit of share-based compensation
Dividends declared
Share repurchase
Cancellation of treasury shares
Exercise of options, net of shares

tendered for payment

Issuance of restricted shares, net of

cancellations

Shares surrendered by employees to pay

taxes

Share-based compensation

—

—
—
—
(3.1)
(19.1)

0.1

0.3

(0.1)
—

—

—
—

2.0

—

—
—
—
—
(0.2)

—

—
—

—

—
—

—
—
—
(5.8)

1.3

0.3

(0.1)
—

—

—
—

—
—
—
(450.7)

60.9

19.3

(6.3)
—

— 214.9

—

214.9

—

214.9

—
11.4

111.4
(229.5)
(12.3)
(699.2)

(14.4)

(19.3)

(3.1)
33.6

—
—

—
—
—
—

—

—
—

(336.7)
—

(336.7)
11.4

— (336.7)
11.4
—

—
—
(229.5)
—
—
(12.3)
— (1,150.0)

—
—
— (229.5)
(134.7)
— (1,150.0)

(122.4)

—

—
—

46.5

—

(9.4)
33.6

—

—
—

46.5

—

(9.4)
33.6

(19.9) $(1,251.9) $ 4,250.0 $2,044.0 $

(380.3) $ 4,663.8 $

— $ 4,663.8

—

—
—
—
—
19.1

0.7

0.2

(0.1)
—

—

(76.4)

—

(76.4)

—

(76.4)

—
—
—
—
1,210.9

—
5.7
1.5
(200.0)
(1,210.7)

—
—
(175.9)
—
—

34.6

9.4

(3.0)
—

(3.5)

(9.4)

(6.3)
33.0

—

—
—

(264.7)
—
—
—
—

—

—
—

(264.7)
5.7
(174.4)
(200.0)
—

31.1

—

(9.3)
33.0

— (264.7)
—
5.7
— (174.4)
— (200.0)
—
—

—

—
—

31.1

—

(9.3)
33.0

Balance - December 31, 2015

180.5 $

1.8

— $

— $ 2,860.3 $1,791.7 $

(645.0) $ 4,008.8 $

— $ 4,008.8

See accompanying notes to consolidated financial statements.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Basis of Presentation and Summary of Significant Accounting Policies

1.
Business
Pentair plc and its consolidated subsidiaries (the “Company” or “Pentair”) is a focused diversified industrial
manufacturing company comprising four reporting segments: Valves & Controls, Flow & Filtration Solutions,
Water Quality Systems and Technical Solutions.

In December 2013, the Company’s Board of Directors approved changing the Company’s jurisdiction of
organization from Switzerland to Ireland. At an extraordinary meeting of shareholders on May 20, 2014, Pentair
Ltd. shareholders voted in favor of a reorganization proposal pursuant to which Pentair Ltd. would merge into
Pentair plc, an Irish company, and all Pentair Ltd. CHF 0.50 par value common shares would be canceled and all
holders of such shares would receive $0.01 par value ordinary shares of Pentair plc on a one-for-one basis. The
reorganization transaction was completed on June 3, 2014, at which time Pentair plc replaced Pentair Ltd. as our
ultimate parent company (the “Redomicile”). Shares of Pentair plc began trading on the New York Stock
Exchange on June 3, 2014 under the symbol “PNR,” the same symbol under which Pentair Ltd. shares were
previously traded. 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.

Our former parent company, Pentair Ltd., took its form on September 28, 2012 as a result of a reverse acquisition
(the “Merger”) involving Pentair, Inc. and an indirect, wholly-owned subsidiary of Flow Control (defined
below), with Pentair, Inc. surviving as an indirect, wholly-owned subsidiary of ours. “Flow Control” refers to
Pentair Ltd. prior to the Merger. Prior to the Merger, Tyco International Ltd. (“Tyco”) engaged in an internal
restructuring whereby it transferred to Flow Control certain assets related to the flow control business of Tyco,
and Flow Control assumed from Tyco certain liabilities related to the flow control business of Tyco. On
September 28, 2012 prior to the Merger, Tyco effected a spin-off of Flow Control through the pro-rata
distribution of 100% of the outstanding ordinary shares of Flow Control
to Tyco’s shareholders (the
“Distribution”), resulting in the distribution of approximately 110.9 million of our ordinary shares to Tyco’s
shareholders.

Basis of presentation
The accompanying consolidated financial statements include the accounts of Pentair and all subsidiaries, both the
United States (“U.S.”) and non-U.S., which we control. Intercompany accounts and transactions have been
eliminated. Investments in companies of which we own 20% to 50% of the voting stock or have the ability to
exercise significant influence over operating and financial policies of the investee are accounted for using the
equity method of accounting and as a result, our share of the earnings or losses of such equity affiliates is
included in the Consolidated Statements of Operations and Comprehensive Income (Loss).

The consolidated financial statements have been prepared in U.S. dollars (“USD”) and in accordance with
accounting principles generally accepted in the United States of America (“GAAP”).

Fiscal year
Our fiscal year ends on December 31. We reported our interim quarterly periods on a 13-week basis ending on a
Saturday during 2015, 2014 and 2013. Beginning in 2016, we will report our interim quarterly periods on a
calendar quarter basis.

Use of estimates

The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates
and assumptions that affect the amounts reported in these consolidated financial statements and accompanying
notes, disclosures of contingent assets and liabilities at the date of the financial statements and the reported

Pentair plc and Subsidiaries
Notes to consolidated financial statements

amounts of revenues and expenses during the reporting period. These estimates include our accounting for
valuation of goodwill and indefinite lived intangible assets, estimated losses on accounts receivable, estimated
realizable value on excess and obsolete inventory, percentage of completion revenue recognition, assets acquired
and liabilities assumed in acquisitions, estimated selling proceeds from assets held for sale, contingent liabilities,
income taxes and pension and other post-retirement benefits. Actual results could differ from our estimates.

Revenue recognition
We recognize revenue when it is realized or realizable and has been earned. Revenue is recognized when
persuasive evidence of an arrangement exists, shipment or delivery has occurred (depending on the terms of the
sale), our price to the buyer is fixed or determinable, and collectability is reasonably assured.

Generally, there is no post-shipment obligation on product sold other than warranty obligations in the normal and
ordinary course of business. In the event significant post-shipment obligations were to exist, revenue recognition
would be deferred until substantially all obligations were satisfied.

Percentage of completion
Revenue from certain long-term contracts is recognized over the contractual period under the percentage of
completion method of accounting. Under this method, sales and gross profit are recognized as work is performed
either based on the relationship between the actual costs incurred and the total estimated costs at completion (“the
cost-to-cost method”) or based on efforts for measuring progress towards completion in situations in which this
approach is more representative of the progress on the contract than the cost-to-cost method. Changes to the original
estimates may be required during the life of the contract and such estimates are reviewed on a regular basis. Sales
and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs.
These reviews have not resulted in adjustments that were significant to our results of operations. Estimated losses
are recorded when identified. Claims against customers are recognized as revenue upon settlement.

We record costs and earnings in excess of billings on uncompleted contracts within Other current assets and
billings in excess of costs and earnings on uncompleted contracts within Other current liabilities in the
Consolidated Balance Sheets.

Sales returns
The right of return may exist explicitly or implicitly with our customers. Generally, our return policy allows for
customer returns only upon our authorization. Goods returned must be product we continue to market and must
be in salable condition. Returns of custom or modified goods are normally not allowed. At the time of sale, we
reduce revenue for the estimated effect of returns. Estimated sales returns include consideration of historical sales
levels, the timing and magnitude of historical sales return levels as a percent of sales, type of product, type of
customer and a projection of this experience into the future.

Pricing and sales incentives
We record estimated reductions to revenue for customer programs and incentive offerings including pricing
arrangements, promotions and other volume-based incentives at the later of the date revenue is recognized or the
incentive is offered. Sales incentives given to our customers are recorded as a reduction of revenue unless we
(1) receive an identifiable benefit for the goods or services in exchange for the consideration and (2) we can
reasonably estimate the fair value of the benefit received.

Pricing is established at or prior to the time of sale with our customers and we record sales at the agreed-upon net
selling price. However, one of our businesses allows customers to apply for a refund of a percentage of the
original purchase price if they can demonstrate sales to a qualifying end customer. At the time of sale, we
estimate the anticipated refund to be paid based on historical experience and reduce sales for the probable cost of
the discount. The cost of these refunds is recorded as a reduction in gross sales.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Volume-based incentives involve rebates that are negotiated at or prior to the time of sale with the customer and
are redeemable only if the customer achieves a specified cumulative level of sales or sales increase. Under these
incentive programs, at the time of sale, we reforecast the anticipated rebate to be paid based on forecasted sales
levels. These forecasts are updated at least quarterly for each customer and sales are reduced for the anticipated
cost of the rebate. If the forecasted sales for a customer changes, the accrual for rebates is adjusted to reflect the
new amount of rebates expected to be earned by the customer.

Shipping and handling costs
Amounts billed to customers for shipping and handling are recorded in Net sales in the accompanying
Consolidated Statements of Operations and Comprehensive Income (Loss). Shipping and handling costs incurred
by Pentair for the delivery of goods to customers are included in Cost of goods sold in the accompanying
Consolidated Statements of Operations and Comprehensive Income (Loss).

Research and development
We conduct research and development (“R&D”) activities in our own facilities, which consist primarily of the
development of new products, product applications and manufacturing processes. We expense R&D costs as
incurred. R&D expenditures during 2015, 2014 and 2013 were $119.6 million, $117.3 million and $122.8
million, respectively.

Cash equivalents
We consider highly liquid investments with original maturities of three months or less to be cash equivalents.

Trade receivables and concentration of credit risk
We record an allowance for doubtful accounts, reducing our receivables balance to an amount we estimate is
collectible from our customers. Estimates used in determining the allowance for doubtful accounts are based on
current trends, aging of accounts receivable, periodic credit evaluations of our customers’ financial condition,
and historical collection experience. We generally do not require collateral. No customer receivable balances
exceeded 10% of total net receivable balances as of December 31, 2015 or December 31, 2014.

Inventories
Inventories are stated at the lower of cost or market with substantially all inventories recorded using the first-in,
first-out (“FIFO”) cost method and with an insignificant amount of inventories located outside the U.S. recorded
using a moving average cost method which approximates FIFO.

Property, plant and equipment, net
Property, plant and equipment is stated at historical cost. We compute depreciation by the straight-line method
based on the following estimated useful lives:

Land improvements
Buildings and leasehold improvements
Machinery and equipment

Years

5 to 20
5 to 50
3 to 15

Significant improvements that add to productive capacity or extend the lives of properties are capitalized. Costs
for repairs and maintenance are charged to expense as incurred. When property is retired or otherwise disposed
of, the recorded cost of the assets and their related accumulated depreciation are removed from the Consolidated
Balance Sheets and any related gains or losses are included in income.

We review the recoverability of long-lived assets to be held and used, such as property, plant and equipment,
when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may

Pentair plc and Subsidiaries
Notes to consolidated financial statements

not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value
of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest
charges) of the related operations. If these cash flows are less than the carrying value of such asset or asset group,
an impairment loss is recognized for the difference between estimated fair value and carrying value. Impairment
losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced
for the cost to dispose of the assets. The measurement of impairment requires us to estimate future cash flows
and the fair value of long-lived assets. During 2015, 2014 and 2013, we recorded impairment charges of $17.7
million, $20.9 million and $16.6 million, respectively, in conjunction with restructuring activities.

Goodwill and identifiable intangible assets
Goodwill
Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable
tangible net assets and identifiable intangible assets purchased and liabilities assumed.

Goodwill is tested annually for impairment and is tested for impairment more frequently if events or changes in
circumstances indicate that the asset might be impaired. The impairment test is performed using a two-step
process. In the first step, the fair value of each reporting unit is compared with the carrying amount of the
reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting
unit there is an indication that goodwill impairment exists and a second step must be completed in order to
determine the amount of the goodwill impairment, if any, that should be recorded. In the second step, an
impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the
implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value
of the reporting unit in a manner similar to a purchase price allocation.

In developing our discounted cash flow analysis, assumptions about future revenues and expenses, capital
expenditures and changes in working capital, are based on our annual operating plan and long-term business plan
for each of our reporting units. These plans take into consideration numerous factors including historical
experience, anticipated future economic conditions, changes in raw material prices and growth expectations for
the industries and end markets we participate in. These assumptions are determined over a six year long-term
planning period. The six year growth rates for revenues and operating profits vary for each reporting unit being
evaluated. Revenues and operating profit beyond 2021 are projected to grow at a perpetual growth rate of 3.0%.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

We completed step one of our annual goodwill impairment evaluation as of the first day of the fourth quarter of
2015, 2014 and 2013 with each reporting unit’s fair value in excess of its carrying value. 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 the Valves & Controls reporting unit and thereby increasing the likelihood
that the associated goodwill could be impaired. As such, we concluded that a triggering event occurred during the
fourth quarter of 2015 requiring that we test Valves & Controls goodwill for impairment. As a result, we
reperformed our step one analysis as of December 31, 2015.

Identifiable intangible assets
Our primary identifiable intangible assets include: customer relationships, trade names, proprietary technology
and patents. Identifiable intangibles with finite lives are amortized and those identifiable intangibles with
indefinite lives are not amortized. Identifiable intangible assets that are subject to amortization are evaluated for
impairment whenever events or changes in circumstances indicate that
the carrying amount may not be
recoverable. Identifiable intangible assets not subject to amortization are tested for impairment annually or more
frequently if events warrant.

The impairment test for trade names consists of a comparison of the fair value of the trade name with its carrying
value. Fair value is measured using the relief-from-royalty method. This method assumes the trade name has
value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from
them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate
and the weighted average cost of capital. The non-recurring fair value measurement is a “Level 3” measurement
under the fair value hierarchy described below.

Equity and cost method investments
We have investments that are accounted for using the equity method. Our proportionate share of income or losses
from investments accounted for under the equity method is recorded in the Consolidated Statements of
Operations and Comprehensive Income (Loss). We write down or write off an investment and recognize a loss
when events or circumstances indicate there is impairment in the investment that is other-than-temporary. This
requires significant judgment, including assessment of the investees’ financial condition and in certain cases the

Pentair plc and Subsidiaries
Notes to consolidated financial statements

possibility of subsequent rounds of financing, as well as the investees’ historical and projected results of
operations and cash flows. If the actual outcomes for the investees are significantly different from projections, we
may incur future charges for the impairment of these investments. Our investment in and loans to equity method
investees was $36.0 million and $12.9 million at December 31, 2015 and December 31, 2014, respectively, net of
our proportionate share of the results of their operations.

Investments for which we do not have significant influence are accounted for under the cost method. The
aggregate balance of these investments was $9.3 million and $8.6 million at December 31, 2015 and
December 31, 2014, respectively.

Income taxes
We use the asset and liability approach to account for income taxes. Under this method, deferred tax assets and
liabilities are recognized for the expected future tax consequences of differences between the carrying amounts
of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Changes in valuation allowances from period to period are included in our tax
provision in the period of change. We recognize the effect of income tax positions only if those positions are
more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that
is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in
which the change in judgment occurs.

Pension and other post-retirement plans
We sponsor U.S. and Non-U.S. defined-benefit pension and other post-retirement plans. The pension and other
post-retirement benefit costs for company-sponsored benefit plans are determined from actuarial assumptions and
methodologies, including discount rates, expected returns on plan assets and health care cost trend rates. These
assumptions are updated annually and are disclosed in Note 13.

Environmental
We recognize environmental clean-up liabilities on an undiscounted basis when a loss is probable and can be
reasonably estimated. Such liabilities generally are not subject
to insurance coverage. The cost of each
environmental clean-up is estimated by engineering, financial and legal specialists based on current law. Such
estimates are based primarily upon the estimated cost of investigation and remediation required and the
likelihood that, where applicable, other potentially responsible parties (“PRPs”) will be able to fulfill their
commitments at
the sites where Pentair may be jointly and severally liable. The process of estimating
environmental clean-up liabilities is complex and dependent primarily on the nature and extent of historical
information and physical data relating to a contaminated site, the complexity of the site, the uncertainty as to
what remedy and technology will be required and the outcome of discussions with regulatory agencies and other
PRPs at multi-party sites. In future periods, new laws or regulations, advances in clean-up technologies and
additional information about the ultimate clean-up remedy that is used could significantly change our estimates.
Accruals for environmental liabilities are included in Other current liabilities and Other non-current liabilities in
the Consolidated Balance Sheets.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Asbestos matters
We recognize asbestos-related liabilities on an undiscounted basis when a loss is probable and can be reasonably
estimated. Certain of these liabilities are subject to insurance coverage and we recognize receivables for asbestos-
related insurance recoveries only when realization of the claim is deemed probable. Our subsidiaries and
numerous other companies are named as defendants in personal injury lawsuits based on alleged exposure to
liability claims based primarily on
asbestos-containing materials. These cases typically involve product
allegations of manufacture, sale or distribution of industrial products that either contained asbestos or were
attached to or used with asbestos-containing components manufactured by third-parties. The process of
estimating asbestos-related liabilities and the corresponding insurance recoveries receivable is complex and
dependent primarily on our historical claim experience, estimates of potential future claims, our legal strategy for
resolving these claims, the availability of insurance coverage, and the solvency and creditworthiness of insurers.
On an annual basis, we review, and update as appropriate, such estimated asbestos liabilities and assets and the
underlying assumptions. Accruals for asbestos-related liabilities are included in Other non-current liabilities and
the estimated receivable for insurance recoveries are recorded in Other non-current assets in the Consolidated
Balance Sheets.

Insurance subsidiary
We insure certain general and product liability, property, workers’ compensation and automobile liability risks
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. As of December 31,
2015 and 2014, reserves for policy claims were $62.2 million ($13.2 million included in Other current liabilities
and $49.0 million included in Other non-current liabilities) and $58.1 million ($13.2 million included in Other
current liabilities and $44.9 million included in Other non-current liabilities), respectively.

Share-based compensation
We account for share-based compensation awards on a fair value basis. The estimated grant date fair value of
each option award is recognized in income on an accelerated basis over the requisite service period (generally the
vesting period). The estimated fair value of each option award is calculated using the Black-Scholes option-
pricing model. From time to time, we have elected to modify the terms of the original grant. These modified
grants are accounted for as a new award and measured using the fair value method, resulting in the inclusion of
additional compensation expense in our Consolidated Statements of Operations and Comprehensive Income
(Loss). Restricted share awards and units are recorded as compensation cost on an accelerated basis over the
requisite service periods based on the market value on the date of grant.

Earnings (loss) per ordinary share
Basic earnings (loss) per share are computed by dividing net income (loss) attributable to Pentair plc by the
weighted-average number of ordinary shares outstanding. Diluted earnings (loss) per share are computed by
dividing net income (loss) attributable to Pentair plc by the weighted-average number of ordinary shares
outstanding including the dilutive effects of ordinary share equivalents.

Derivative financial instruments
We recognize all derivatives, including those embedded in other contracts, as either assets or liabilities at fair value
in our Consolidated Balance Sheets. If the derivative is designated and is effective as a cash-flow hedge, changes in
the fair value of the derivative are recorded in Accumulated other comprehensive income (loss) (“AOCI”) as a
separate component of equity in the Consolidated Balance Sheets and is recognized in the Consolidated Statements
of Operations and Comprehensive Income (Loss) when the hedged item affects earnings. If the underlying hedged
transaction ceases to exist or if the hedge becomes ineffective, all changes in fair value of the related derivatives that
have not been settled are recognized in current earnings. For a derivative that is not designated as or does not qualify
as a hedge, changes in fair value are reported in earnings immediately.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Gains and losses on net investment hedges are included in AOCI as a separate component of equity in the
Consolidated Balance Sheets.

We use derivative instruments for the purpose of hedging interest rate and currency exposures, which exist as
part of ongoing business operations. We do not hold or issue derivative financial instruments for trading or
speculative purposes. All other contracts that contain provisions meeting the definition of a derivative also meet
the requirements of and have been designated as, normal purchases or sales. Our policy is not to enter into
contracts with terms that cannot be designated as normal purchases or sales. From time to time, we may enter
into short duration foreign currency contracts to hedge foreign currency risks.

Fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Assets and liabilities measured at fair value are
classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the
measurement date:

Level 1: Valuation is based on observable inputs such as quoted market prices (unadjusted) for identical
assets or liabilities in active markets.

Level 2: Valuation is based on inputs such as quoted market prices for similar assets or liabilities in active
markets or other inputs that are observable for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument.

Level 3: Valuation is based upon other unobservable inputs that are significant
measurement.

to the fair value

In making fair value measurements, observable market data must be used when available. When inputs used to
measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement
is categorized is based on the lowest level input that is significant to the fair value measurement.

Foreign currency translation
The financial statements of subsidiaries located outside of the U.S. are generally measured using the local
currency as the functional currency, except for certain corporate entities outside of the U.S. which are measured
using USD. Assets and liabilities of these subsidiaries are translated at the rates of exchange at the balance sheet
date. Income and expense items are translated at average monthly rates of exchange. The resultant translation
adjustments are included in AOCI, a separate component of equity.

New accounting standards
In November 2015, the Financial Accounting Standards Board (the “FASB”) issued a new accounting standard
which clarifies and simplifies the balance sheet classification of deferred tax assets and liabilities. Under the new
standard, all deferred tax assets and liabilities are required to be classified as non-current in a classified balance
sheet. The new standard is effective for fiscal years beginning after December 15, 2016, including interim
periods within that reporting period, and early adoption is permitted. We have not yet determined the impact this
standard will have on our financial condition.

In September 2015, the FASB issued a new accounting standard related to the accounting for measurement period
adjustments recognized in a business combination. Under the previous standard, when adjustments were made to
amounts previously reported as part of a business combination during the measurement period, entities were
required to revise comparative information for prior periods. Under the new standard, entities must recognize these
adjustments in the reporting period in which the amounts are determined rather than retrospectively. The new

Pentair plc and Subsidiaries
Notes to consolidated financial statements

standard is effective for fiscal years beginning after December 15, 2015, including interim periods within that
reporting period, and early adoption is permitted. We adopted the new standard during the fourth quarter of 2015.

In May 2014, the FASB issued new accounting requirements for the recognition of revenue from contracts with
customers. The new requirements also include additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and
changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The requirements
are effective for annual reporting periods beginning after December 15, 2017, including interim periods within
that reporting period. Early adoption is permitted for reporting periods beginning after December 15, 2016. We
have not yet determined the potential effects on our financial condition or results of operations.

2.
Acquisitions
Material acquisitions
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 $1.8 billion (the “ERICO Acquisition”). ERICO is a
leading global manufacturer and marketer of engineered electrical and fastening products for electrical,
mechanical and civil applications. ERICO has employees in 30 countries across the world with recognized
brands including CADDY fixing, fastening and support products; ERICO electrical grounding, bonding and
connectivity products and LENTON engineered systems.

The purchase price has been preliminarily allocated based on the estimated fair value of assets acquired and
liabilities assumed at the date of the ERICO Acquisition. The preliminary purchase price allocation is subject to
further refinement and may require significant adjustments to arrive at the final purchase price allocation. These
changes will primarily relate to income tax-related items. We expect the purchase price allocation to be
completed in the first half of 2016. There can be no assurance that such finalization will not result in material
changes from the preliminary purchase price allocations.

The following table summarizes our preliminary estimates of the fair values of the assets acquired and liabilities
assumed in the ERICO Acquisition:

In millions

Cash
Accounts receivable
Inventories
Other current assets
Property, plant and equipment
Identifiable intangible assets
Goodwill
Current liabilities
Deferred income taxes, including current
Other liabilities

Purchase price

As Originally
Reported

As
Revised

11.6
76.7
99.0
9.5
27.0
964.6
1,102.8
(96.0)
(373.0)
(4.1)

11.8
75.9
102.4
2.9
53.4
1,033.8
1,061.9
(97.2)
(418.8)
(8.0)

1,818.1

The excess of purchase price over tangible net assets and identified intangible assets acquired has been
preliminarily allocated to goodwill in the amount of $1,061.9 million, none of which is expected to be deductible
for income tax purposes. Identifiable intangible assets acquired as part of the ERICO Acquisition include $228.4
indefinite-lived trade name intangible assets and $805.4 million of definite-lived customer
million of
relationships with an estimated useful life of 21 years.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

ERICO’s net sales and net income for the period from the acquisition date to December 31, 2015 were $147.0
million and $12.7 million, respectively.

The following unaudited pro forma consolidated condensed financial results of operations are presented as if the
ERICO Acquisition was consummated on January 1, 2014, the beginning of the comparable prior annual
reporting period:

In millions, except share and per-share data

Pro forma net sales
Pro forma net income (loss) from continuing operations
Pro forma earnings (loss) per ordinary share - continuing operations
Basic
Diluted

Years ended December 31

2015

2014

6,835.2
(1.6)

7,596.0
609.2

(0.01) $
(0.01)

3.20
3.15

The unaudited pro forma net income (loss) from continuing operations for the year ended December 31, 2014
was adjusted to include the impact of $32.8 million in non-recurring items related to acquisition date fair value
adjustments to inventory. The unaudited pro forma net income (loss) for the year ended December 31, 2015
excludes the impact of $24.6 million of non-recurring transaction related and bridge financing costs.

The pro forma condensed consolidated financial information has been prepared for comparative purposes only
and includes certain adjustments, as noted above. The adjustments are estimates based on currently available
information and actual amounts may differ materially from these estimates. They do not reflect the effect of costs
or synergies that would have been expected to result from the integration of the ERICO Acquisition. The pro
forma information does not purport to be indicative of the results of operations that actually would have resulted
had the ERICO Acquisition occurred on January 1, 2014.

Other acquisitions
In April 2015, we acquired, as part of Technical Solutions, all of the outstanding shares of capital stock of
Nuheat Industries Limited (“Nuheat”) for $96.0 million in cash (120.5 million Canadian dollars translated at the
April 2, 2015 exchange rate), net of cash acquired. In November 2015, cash of $0.9 million (1.2 million
Canadian dollars translated at the average monthly exchange rate) was paid to Nuheat in settlement of a working
capital adjustment. Based in Canada, Nuheat is a leading manufacturer of electric floor heating systems that are
distributed across North America. Total goodwill recorded as part of the purchase allocation was $43.2 million,
none of which is tax deductible. Identified intangible assets acquired consisted of customer relationships of $53.3
million, with an estimated useful life of 17 years. The pro forma impact of this acquisition was deemed to not be
material.

Discontinued Operations and Divestitures

3.
Discontinued operations
On July 28, 2014, our Board of Directors approved a decision to exit our Water Transport business in Australia.
During the third quarter of 2014, we recognized an impairment charge related to allocated amounts of goodwill,
intangible assets, property, plant & equipment and other non-current assets totaling $380.1 million, net of a $12.3
million tax benefit, representing our estimated loss on disposal of the Water Transport business. The impairment
charge was determined using significant unobservable inputs (“Level 3” fair value measurements). In addition,
during the first quarter of 2014 and fourth quarter of 2013, we sold portions of our Water Transport business in
Australia and New Zealand, respectively, resulting in losses of $5.6 million, net of a $2.4 million tax benefit, and
$0.8 million, net of a $0.3 million tax benefit, respectively.

During 2015, we sold the remainder of our Water Transport business and received cash proceeds of $59.0 million.
The results of the Water Transport business have been presented as discontinued operations and the assets and
liabilities of the Water Transport business have been reclassified as held for sale for all periods presented.

Operating results of discontinued operations are summarized below:

In millions
Net sales
Cost of goods sold
Gross profit

Income (loss) from discontinued operations before income taxes
Income tax benefit (provision)
Income (loss) from discontinued operations, net of tax

Loss from sale / impairment of discontinued operations before income

taxes

Income tax benefit
Loss from sale / impairment of discontinued operations, net of tax

Years ended December 31
2014

2013

2015

18.6
18.1
0.5

(7.1) $
2.4
(4.7) $

295.8
250.2
45.6

1.5
(7.9)
(6.4) $

(6.7) $
—
(6.7) $

(400.4) $
14.7
(385.7) $

490.1
387.4
102.7

33.0
(7.1)
25.9

(1.1)
0.3
(0.8)

The carrying amounts of major classes of assets and liabilities that were classified as held for sale on the
Consolidated Balance Sheets were as follows:

In millions
Cash and cash equivalents
Accounts and notes receivable, net
Inventories
Other current assets
Current assets held for sale

Property, plant and equipment, net
Other non-current assets
Non-current assets held for sale

Accounts payable
Employee compensation and benefits
Other current liabilities
Current liabilities held for sale

Long-term debt
Pension and other post-retirement compensation and benefits
Non-current liabilities held for sale

December 31

2015

2014

— $
—
—
—
— $

— $
—
— $

— $
—
—
— $

— $
—
— $

7.0
28.8
30.1
14.7
80.6

18.5
6.4
24.9

12.2
11.3
11.6
35.1

4.0
2.5
6.5

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Divestitures
During 2013, we sold businesses that were part of Technical Solutions and Flow & Filtration Solutions for a cash
purchase price of $30.1 million and $13.4 million, respectively, net of transaction costs, resulting in a gain of
$16.8 million and $4.0 million, respectively. Goodwill of $5.3 million and $5.7 million was included in the assets
of the business sold for Technical Solutions and Flow & Filtration Solutions, respectively.

Earnings (Loss) Per Share

4.
Basic and diluted earnings (loss) per share were calculated as follows:

In millions, except per share data

Net income (loss) attributable to Pentair plc

Net income (loss) from continuing operations attributable to Pentair plc

Weighted average ordinary shares outstanding
Basic
Dilutive impact of stock options and restricted stock awards

Diluted

Earnings (loss) per ordinary share attributable to Pentair plc
Basic
Continuing operations
Discontinued operations

Basic earnings (loss) per ordinary share attributable to Pentair plc

Diluted
Continuing operations
Discontinued operations

Diluted earnings (loss) per ordinary share attributable to Pentair plc

Anti-dilutive stock options excluded from the calculation of diluted

earnings per share

Years ended December 31
2013
2014
2015

(76.4) $

214.9

(65.0) $

607.0

536.8

511.7

180.3
2.3

182.6

190.6
3.1

193.7

201.1
3.5

204.6

(0.36) $
(0.06)

3.19
(2.06)

(0.42) $

1.13

(0.36) $
(0.06)

3.14
(2.03)

2.54
0.13

2.67

2.50
0.12

(0.42) $

1.11

2.62

1.3

0.5

0.2

Restructuring

5.
During 2015, 2014 and 2013, we initiated and continued execution of certain business restructuring initiatives
aimed at reducing our fixed cost structure and realigning our business. The 2015 initiatives included a reduction
in hourly and salaried headcount of approximately 3,000 employees, which included 2,500 in Valves & Controls,
200 in Flow & Filtration Solutions, 100 in Water Quality Systems and 200 in Technical Solutions. The 2014
initiatives included the reduction in hourly and salaried headcount of approximately 1,150 employees, which
included 600 in Valves & Controls, 350 in Flow & Filtration Solutions, 50 in Water Quality Systems and 150 in
Technical Solutions. The 2013 initiatives included the reduction in hourly and salaried headcount of
approximately 1,100 employees, which included 500 in Valves & Controls, 250 in Flow & Filtration Solutions,
50 in Water Quality Systems and 300 in Technical Solutions.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Restructuring related costs included in Selling, general and administrative expenses in the Consolidated
Statements of Operations and Comprehensive Income (Loss) included costs for severance and other restructuring
costs as follows:

In millions

Severance and related costs
Other

Total restructuring costs

Years ended December 31
2013
2014
2015

96.7
21.1

117.8

58.9
29.4

88.3

81.5
21.7

103.2

Other restructuring costs primarily consist of asset impairment and various contract termination costs.

Restructuring costs by reportable segment were as follows:

In millions

Valves & Controls
Flow & Filtration Solutions
Water Quality Systems
Technical Solutions
Other

Consolidated

Years ended December 31
2013
2014
2015

76.5
11.2
6.2
15.7
8.2

48.8
14.0
15.2
4.3
6.0

51.0
17.8
5.0
19.4
10.0

117.8

88.3

103.2

Activity in the restructuring accrual recorded in Other current liabilities and Employee compensation and
benefits in the Consolidated Balance Sheets is summarized as follows:

In millions

Beginning balance
Costs incurred
Cash payments and other

Ending balance

Years ended December 31

2015

2014

73.4
96.7
(78.9)

91.2

68.6
58.9
(54.1)

73.4

Goodwill and Other Identifiable Intangible Assets

6.
The changes in the carrying amount of goodwill for the years ended December 31, 2015 and 2014 by reportable
segment were as follows:

In millions

Valves & Controls
Flow & Filtration Solutions
Water Quality Systems
Technical Solutions

December 31,
2014

Acquisitions/
divestitures Impairment

Foreign currency
translation/other

December 31,
2015

$ 1,511.6
942.4
1,137.6
1,150.3

—
—
—
1,116.4

$ (515.2)
—
—
—

—
(59.7)
(16.5)
(11.5)

996.4
882.7
1,121.1
2,255.2

Total goodwill

$ 4,741.9

$ 1,116.4

$ (515.2)

$ (87.7)

$ 5,255.4

Pentair plc and Subsidiaries
Notes to consolidated financial statements

In millions

Valves & Controls
Flow & Filtration Solutions
Water Quality Systems
Technical Solutions

Total goodwill

December 31,
2013

Acquisitions/
divestitures

Foreign currency
translation/other

December 31,
2014

$ 1,511.6
1,036.4
1,154.7
1,158.0

$ 4,860.7

—
—
6.8
—

6.8

—
(94.0)
(23.9)
(7.7)

$ (125.6)

$1,511.6
942.4
1,137.6
1,150.3

$4,741.9

Accumulated goodwill impairment losses were $715.7 million and $200.5 million as of December 31, 2015 and
2014, respectively.

Identifiable intangible assets consisted of the following at December 31:

In millions

Cost

2015
Accumulated
amortization

Net

Cost

2014
Accumulated
amortization

Net

Finite-life intangibles
Customer relationships
Trade names
Proprietary technology

and patents

Total finite-life
intangibles
Indefinite-life
intangibles

Trade names

2,078.7
1.8

(415.8) $
(1.2)

1,662.9
0.6

1,247.8
2.0

(325.2) $
(1.1)

922.6
0.9

249.3

(114.2)

135.1

255.7

(96.7)

159.0

2,329.8

(531.2)

1,798.6

1,505.5

(423.0)

1,082.5

691.5

—

691.5

525.6

—

525.6

Total intangibles

3,021.3

(531.2) $

2,490.1

2,031.1

(423.0) $

1,608.1

Identifiable intangible asset amortization expense in 2015, 2014 and 2013 was $121.4 million, $114.0 million
and $134.1 million, respectively.

In 2015, we recorded an impairment charge for trade name intangible assets of $39.5 million in Valves &
Controls. There were no impairment charges recorded in 2014. In 2013, we recorded an impairment charge for
trade name intangible assets of $11.0 million in Technical Solutions.

Estimated future amortization expense for identifiable intangible assets during the next five years is as follows:

In millions

Estimated amortization expense

2016

2017

2018

2019

2020

$149.5

$148.0

$145.6

$138.8

$133.7

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Supplemental Balance Sheet Information

In millions

Inventories
Raw materials and supplies
Work-in-process
Finished goods

Total inventories

Other current assets
Cost in excess of billings
Prepaid expenses
Deferred income taxes
Other current assets

Total other current assets

Property, plant and equipment, net
Land and land improvements
Buildings and leasehold improvements
Machinery and equipment
Construction in progress

Total property, plant and equipment
Accumulated depreciation and amortization

Total property, plant and equipment, net

Other non-current assets
Asbestos-related insurance receivable
Deferred income taxes
Other non-current assets

Total other non-current assets

Other current liabilities
Deferred revenue and customer deposits
Dividends payable
Billings in excess of cost
Accrued warranty
Other current liabilities

Total other current liabilities

Other non-current liabilities
Asbestos-related liabilities
Taxes payable
Other non-current liabilities

Total other non-current liabilities

December 31

2015

2014

433.0
249.2
492.1

460.1
229.0
441.3

$ 1,174.3

$ 1,130.4

114.4
87.6
96.7
13.6

312.3

161.9
518.8
1,287.6
79.3

2,047.6
1,104.8

942.8

111.0
62.8
214.3

388.1

94.6
59.6
32.0
59.8
398.1

644.1

237.9
71.1
212.0

521.0

103.5
109.6
139.4
14.3

366.8

165.1
493.5
1,169.1
71.0

1,898.7
948.7

950.0

115.8
87.9
232.5

436.2

112.7
116.8
41.4
66.4
371.8

709.1

249.1
61.6
187.0

497.7

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Supplemental Cash Flow Information

In millions

Cash paid for interest, net
Cash paid for income taxes, net

Accumulated Other Comprehensive Income (Loss)

9.
Components of AOCI consist of the following:

In millions

Cumulative translation adjustments
Market value of derivative financial instruments, net of tax

Accumulated other comprehensive loss

Debt

10.
Debt and the average interest rates on debt outstanding were as follows:

Years ended December 31
2014

2013

2015

76.9
182.8

67.5
134.2

69.4
91.2

December 31

2015

2014

$ (635.9) $ (371.0)
(9.3)

(9.1)

$ (645.0) $ (380.3)

In millions

Commercial paper
Revolving credit facilities
Senior notes - fixed rate
Senior notes - fixed rate
Senior notes - fixed rate
Senior notes - fixed rate
Senior notes - fixed rate - Euro
Senior notes - fixed rate
Senior notes - fixed rate
Senior notes - fixed rate
Senior notes - fixed rate
Capital lease obligations

Total debt
Less: Current maturities and short-term

borrowings

Long-term debt

Average
interest rate at
December 31, 2015

Maturity
year

December 31

2015

2014

1.308%
1.581%
1.350%
1.875%
2.900%
2.650%
2.450%
3.625%
5.000%
3.150%
4.650%
4.670%

2019
2019
2015
2017
2018
2019
2019
2020
2021
2022
2025
2016

179.5
1,181.4
—
350.0
500.0
250.0
548.4
400.0
500.0
550.0
250.0
0.7

4,710.0

987.6
9.8
350.0
350.0
—
250.0
—
—
500.0
550.0
—
6.7

3,004.1

(0.7)

(6.7)

4,709.3

2,997.4

In September 2015, Pentair plc, Pentair Finance S.A. (“PFSA”) and Pentair Investments Switzerland GmbH
(“PISG”), a 100-percent owned subsidiary of Pentair plc and the 100-percent owner of PFSA, completed public
offerings (the “September 2015 Offerings”) of $500.0 million aggregate principal amount of PFSA’s 2.90%
Senior Notes due 2018, $400.0 million aggregate principal amount of PFSA’s 3.625% Senior Notes due 2020,
$250.0 million aggregate principal amount of PFSA’s 4.65% Senior Notes due 2025 and €500.0 million
aggregate principal amount of PFSA’s 2.45% Senior Notes due 2019. Pentair plc used the net proceeds from the
September 2015 Offerings to finance the ERICO Acquisition.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

The Senior Notes issued in the September 2015 Offerings, 1.875% Senior Notes due 2017, 2.65% Senior Notes
due 2019, $373.0 million of the 5.00% Senior Notes due 2021 and 3.15% Senior Notes due 2022 issued by PFSA
and $127.0 million of the 5.00% Senior Notes due 2021 issued by Pentair, Inc. (collectively, the “Notes”) are
guaranteed as to payment by Pentair plc and PISG. Prior to its maturity and repayment in the fourth quarter of
2015, the 1.35% Senior Notes due 2015 were also guaranteed as to payment by Pentair plc and PISG.

Pentair, Inc. had a credit agreement providing for an unsecured, committed revolving credit facility (the “Prior
Credit Facility”) pursuant to which Pentair Ltd. was the guarantor and PFSA and certain other of our subsidiaries
were affiliate borrowers. In October 2014, Pentair plc, PISG, PFSA and Pentair, Inc. entered into an amended
and restated credit agreement related to the Prior Credit Facility (the “Amended Credit Facility”), with Pentair
plc and PISG as guarantors and PFSA and Pentair, Inc. as borrowers. The Amended Credit Facility increased the
maximum aggregate availability to $2,100.0 million and extended the maturity date to October 3, 2019.
Borrowings under the Amended Credit Facility generally bear interest at a variable rate equal to the London
Interbank Offered Rate (“LIBOR”) plus a specified margin based upon PFSA’s credit ratings. PFSA must pay a
facility fee ranging from 9.0 to 25.0 basis points per annum (based upon PFSA’s credit ratings) on the amount of
each lender’s commitment and letter of credit fee for each letter of credit issued and outstanding under the
Amended Credit Facility.

In August 2015, Pentair plc, PISG and PFSA entered into a First Amendment to the Amended Credit Facility (the
“First Amendment”), which, among other things, increased the Leverage Ratio (as defined below) following the
ERICO Acquisition from 3.50 to 1.00 on the last day of each fiscal quarter to the amounts specified below.
Additionally, in September 2015, Pentair plc, PISG and PFSA entered into a Second Amendment to the
the
Amended Credit Facility (the “Second Amendment”, and together with the First Amendment,
“Amendments”), which, among other things, increased the maximum aggregate availability to $2,500.0 million.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

provides for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and
liquidations during the period to which such calculation relates. As of December 31, 2015, we were in
compliance with all financial covenants in our debt agreements.

Debt outstanding at December 31, 2015 matures on a calendar year basis as follows:

In millions

Contractual debt

2016

2017

2018

2019

2020

Thereafter

Total

obligation maturities
Capital lease obligations

$ — $
0.7

350.0
—

Total maturities

0.7

350.0

500.0
—

500.0

2,159.3
—

2,159.3

400.0
—

400.0

1,300.0
—

1,300.0

4,709.3
0.7

4,710.0

Capital lease obligations relate primarily to land and buildings and consist of total future minimum lease
payments of $0.8 million, less the imputed interest of $0.1 million, as of December 31, 2015.

As of December 31, 2015 and 2014, the recorded values of the assets acquired under capital lease were $14.7
million and $19.5 million, respectively,
less accumulated amortization of $2.9 million and $2.4 million,
respectively, all of which were included in Property, plant and equipment, net on the Consolidated Balance
Sheets.

Derivatives and Financial Instruments

11.
Derivative financial instruments
We are exposed to market risk related to changes in foreign currency exchange rates. To manage the volatility
related to this exposure, we periodically enter into a variety of derivative financial instruments. Our objective is
to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with
changes in foreign currency rates. The derivative contracts contain credit risk to the extent that our bank
counterparties may be unable to meet the terms of the agreements. The amount of such credit risk is generally
limited to the unrealized gains, if any, in such contracts. Such risk is minimized by limiting those counterparties
to major financial institutions of high credit quality.

Foreign currency contracts
We conduct business in various locations throughout the world and are subject to market risk due to changes in
the value of foreign currencies in relation to our reporting currency, the U.S. dollar. We manage our economic
and transaction exposure to certain market-based risks through the use of foreign currency derivative financial
instruments. Our objective in holding these derivatives is to reduce the volatility of net earnings and cash flows
associated with changes in foreign currency exchange rates. The majority of our foreign currency contracts have
an original maturity date of less than one year. At December 31, 2015 and 2014, we had outstanding foreign
currency derivative contracts with gross notional U.S. dollar equivalent amounts of $331.5 million and $250.8
million, respectively. The impact of these contracts on the Consolidated Statements of Operations and
Comprehensive Income (Loss) was not material for any period presented.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Gains or losses on foreign currency contracts designated as hedges are reclassified out of AOCI and into Selling,
general and administrative expense in the Consolidated Statements of Operations and Comprehensive Income
(Loss) upon settlement. Such reclassifications during 2015, 2014 and 2013 were not material.

Net investment hedge
We have net investments in foreign subsidiaries that are subject to changes in the foreign currency exchange rate.
In September 2015, we designated the €500 million 2.45% Senior Notes due 2019 (the “2019 Euro Notes”) as a
net investment hedge for a portion of our net investment in our Euro denominated subsidiaries. The gains/losses
on the 2019 Euro Notes have been included as a component of the cumulative translation adjustment account
within AOCI. As of December 31, 2015, we had deferred foreign currency gains of $16.4 million in AOCI
associated with the net investment hedge activity.

Fair value of financial instruments
The following methods were used to estimate the fair values of each class of financial instrument:

•

short-term financial instruments (cash and cash equivalents, accounts and notes receivable, accounts and
notes payable and variable-rate debt) — recorded amount approximates fair value because of the short
maturity period;

long-term fixed-rate debt, including current maturities — fair value is based on market quotes available
for issuance of debt with similar terms, which are inputs that are classified as Level 2 in the valuation
hierarchy defined by the accounting guidance; and

foreign currency contract agreements — fair values are determined through the use of models that
consider various assumptions, including time value, yield curves, as well as other relevant economic
measures, which are inputs that are classified as Level 2 in the valuation hierarchy defined by the
accounting guidance.

The recorded amounts and estimated fair values of total debt at December 31 were as follows:

In millions

Variable rate debt
Fixed rate debt

Total debt

2015

2014

Recorded
Amount

Fair
Value

Recorded
Amount

Fair
Value

1,360.9
3,349.1

4,710.0

1,360.9
3,395.4

997.4
2,006.7

997.4
2,070.4

4,756.3

$ 3,004.1

$ 3,067.8

Financial assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows:

Recurring fair value measurements
In millions

Foreign currency contract assets
Foreign currency contract liabilities
Deferred compensation plans assets (1)

Total recurring fair value measurements

Nonrecurring fair value measurements
Goodwill (2)
Trade name intangibles (3)

December 31, 2015

Level 1 Level 2 Level 3

Total

$ — $
—
43.8

0.1
(7.6)
7.0

— $
—
—

0.1
(7.6)
50.8

$ 43.8

(0.5) $

— $

43.3

$ — $ — $ 996.4
138.1

—

$ 996.4
138.1

Total nonrecurring fair value measurements

$ — $ — $1,134.5

$1,134.5

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Recurring fair value measurements
In millions

Foreign currency contract assets
Foreign currency contract liabilities
Deferred compensation plan assets (1)

Total recurring fair value measurements

Nonrecurring fair value measurements (4)

December 31, 2014
Level 1 Level 2 Level 3 Total

$ — $
—
47.9

0.9
(6.6)
7.4

$ — $ 0.9
— (6.6)
— 55.3

$ 47.9

1.7

$ — $49.6

(1) Deferred compensation plan assets include mutual funds, common/collective trusts and cash equivalents
for payment of certain non-qualified benefits for retired, terminated and active employees. The fair
value of mutual funds and cash equivalents were based on quoted market prices in active markets. The
underlying investments in the common/collective trusts primarily include intermediate and long-term
debt securities, corporate debt securities, equity securities and fixed income securities. The overall fair
value of the common/collective trusts are based on observable inputs.

(2) During the fourth quarter of 2015, we performed a goodwill impairment test for our Valves & Controls
reporting unit using the required two-step process as of December 31, 2015. As a result, we recorded a
impairment charge of $515.2 million. The first step of this process includes
non-cash goodwill
comparing the fair value to the carrying value of the reporting unit to which the goodwill is allocated to
identify potential impairment. If the fair value of the reporting unit exceeds its carrying value, goodwill
allocated to that reporting unit is considered not impaired. If the inverse result is observed, the reporting
unit is considered to be impaired and step two of the test to measure the amount of impairment must be
completed.

The fair value of the reporting unit was determined using a discounted cash flow analysis and market
approach. Projecting discounted future cash flows requires us to make significant estimates regarding
future revenues and expenses, projected capital expenditures, changes in working capital and the
appropriate discount rate. Use of the market approach consists of comparisons to comparable publicly-
traded companies that are similar in size and industry. Actual results may differ from those used in our
valuations.

Step two compares the implied fair value of the goodwill with the carrying value of that goodwill. If the
carrying value of the goodwill exceeds its implied fair value, an impairment loss is recognized in an
amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the
amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is
allocated to all of its assets and liabilities as if the reporting unit had been acquired in a business
combination and its fair value was the purchase price paid to acquire the reporting unit.

(3) During the fourth quarter of 2015, we performed an impairment test for our Valves & Controls trade
names. As a result, we recorded a pre-tax, non-cash trade name impairment charge of $39.5 million. The
fair value of trade names is measured using the relief-from-royalty method. This method assumes the
trade name has value to the extent that the owner is relieved of the obligation to pay royalties for the
benefits received from them. This method requires us to estimate the future revenue for the related
brands, the appropriate royalty rate and the weighted average cost of capital.

(4) During the third quarter of 2014, we recognized an impairment charge related to allocated amounts of
goodwill, intangible assets, property, plant & equipment and other non-current assets totaling $380.1
million, net of a $12.3 million tax benefit, representing our estimated loss on disposal of the Water
Transport business. The impairment charge was determined using significant unobservable inputs
(“Level 3” fair value measurements). See Note 3 for additional information about the impairment.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Income Taxes

12.
Income from continuing operations before income taxes and noncontrolling interest consisted of the following:

In millions

Federal (1)
International

Income from continuing operations before income taxes and noncontrolling

interest

Years ended December 31
2014

2013

2015

$ (23.7) $ 13.3
771.0

97.8

$ 328.7
365.8

$ 74.1

$ 784.3

$ 694.5

(1) As a result of the Redomicile, “Federal” reflects income from continuing operations before income taxes
and noncontrolling interest for the U.K. in 2015 and 2014 and for Switzerland in 2013.

The provision for income taxes consisted of the following:

In millions

Currently payable
Federal (1)
International (2)

Total current taxes
Deferred
Federal (1)
International (2)

Total deferred taxes

Years ended December 31
2014

2013

2015

— $

(0.4) $

136.1

0.9
2.1

3.0

175.7

175.3

2.2
(0.2)

2.0

17.4
105.6

123.0

18.9
35.1

54.0

Total provision for income taxes

139.1

177.3

177.0

(1) As a result of the Redomicile, “Federal” represents U.K. taxes for 2015 and 2014 and Swiss taxes for

2013.

(2) As a result of the Redomicile, “International” represents non-U.K. taxes for 2015 and 2014 and non-

Swiss taxes for 2013.

Reconciliations of the federal statutory income tax rate to our effective tax rate were as follows:

Percentages

Federal statutory income tax rate (1)
Tax effect of international operations (2)
Change in valuation allowances
Withholding taxes
Interest limitations
Non-deductible transaction costs
Non-deductible goodwill impairment

Effective tax rate

Years ended December 31
2013
2014
2015

20.3
(74.5)
81.6
7.3
8.8
3.4
140.8

187.7

21.0
(4.9)
3.4
2.3
0.8
—
—

22.6

7.8
10.4
5.7
1.1
0.5
—
—

25.5

(1) The statutory rate for 2015 and 2014 reflects the U.K. statutory rate of 20.25 percent and 21 percent,

respectively. For 2013, the statutory rate reflects the Swiss statutory rate of 7.8 percent.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

(2) The tax effect of international operations for 2015 and 2014 consists of non-U.K. jurisdictions. For

2013, the tax effect of international operations consists of non-Swiss jurisdictions.

Reconciliations of the beginning and ending gross unrecognized tax benefits were as follows:

In millions

Beginning balance
Gross increases for tax positions in prior periods
Gross decreases for tax positions in prior periods
Gross increases based on tax positions related to the current year
Gross decreases related to settlements with taxing authorities
Reductions due to statute expiration
Gross decreases due to currency fluctuations
Gross increases due to acquisitions

Ending balance

Years ended December 31
2013
2014
2015

62.1
5.2
(3.4)
6.2
(1.9)
(1.5)
(3.4)
6.6

60.8
2.3
(0.5)
1.8
(0.1)
(1.2)
(1.0)
—

53.4
12.2
(0.6)
2.7
(5.1)
(1.8)
—
—

69.9

62.1

60.8

Included in the $69.9 million of total gross unrecognized tax benefits as of December 31, 2015 was $66.2 million
of tax benefits that, if recognized, would impact the effective tax rate. It is reasonably possible that the gross
unrecognized tax benefits as of December 31, 2015 may decrease by a range of $0 to $32.6 million during 2016,
primarily as a result of the resolution of non-U.K. examinations, including U.S. federal and state examinations,
and the expiration of various statutes of limitations.

The determination of annual income tax expense takes into consideration amounts which may be needed to cover
exposures for open tax years. The Internal Revenue Service (“IRS”) is currently examining the Pentair, Inc. U.S.
federal income tax return for the tax year ending September 28, 2012, and the Panthro Acquisition Co. U.S.
federal income tax returns for tax years ending December 31, 2012 and December 31, 2013. A number of tax
periods from 2002 to present are under audit by tax authorities in various jurisdictions, including Canada,
Germany, India and Italy. We anticipate that several of these audits may be concluded in the foreseeable future.
We are also subject to the 2012 Tax Sharing Agreement, discussed below, which generally applies to pre-
Distribution Tyco tax periods beginning in 1997 which remain subject to audit by the IRS.

We record penalties and interest related to unrecognized tax benefits in Provision for income taxes and Interest
expense, respectively. As of December 31, 2015 and 2014, we have liabilities of $2.6 million and $1.2 million,
respectively, for the possible payment of penalties and $10.8 million and $9.8 million, respectively, for the
possible payment of interest expense, which are recorded in Other current liabilities in the Consolidated Balance
Sheets.

Deferred taxes in the amount of $11.1 million have been provided on undistributed earnings of certain
subsidiaries. Taxes have not been provided on undistributed earnings of subsidiaries where it is our intention to
reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so. It is not
practicable to estimate the amount of tax that might be payable if such earnings were to be remitted.

Deferred taxes arise because of different treatment between financial statement accounting and tax accounting,
known as “temporary differences.” We record the tax effect of these temporary differences as “deferred tax
assets” (generally items that can be used as a tax deduction or credit in future periods) and “deferred tax
liabilities” (generally items for which we received a tax deduction but the tax impact has not yet been recorded in
the Consolidated Statements of Operations and Comprehensive Income (Loss)).

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Deferred taxes were recorded in the Consolidated Balance Sheets as follows:

In millions

Other current assets
Other non-current assets
Deferred tax liabilities

Net deferred tax liabilities

December 31

2015

2014

96.7
62.8
844.2

684.7

139.4
87.9
528.3

301.0

The tax effects of the major items recorded as deferred tax assets and liabilities were as follows:

In millions

Deferred tax assets
Accrued liabilities and reserves
Pension and other post-retirement benefits
Employee compensation & benefits
Tax loss and credit carryforwards

Total deferred tax assets
Valuation allowance

Deferred tax assets, net of valuation allowance
Deferred tax liabilities
Property, plant and equipment
Goodwill and other intangibles
Other liabilities

Total deferred tax liabilities

Net deferred tax liabilities

December 31

2015

2014

168.7
53.2
102.7
392.8

717.4
362.5

354.9

58.1
942.4
39.1

1,039.6

684.7

200.3
68.4
100.0
291.9

660.6
235.8

424.8

51.6
645.6
28.6

725.8

301.0

As of December 31, 2015, tax loss carryforwards of $1,419.6 million were available to offset future income. A
valuation allowance of $326.0 million exists for deferred income tax benefits related to the tax loss carryforwards
which may not be realized. The increase in tax loss carryforwards and valuation allowance from 2014 to 2015
were primarily related to restructuring costs and impairments. We believe sufficient taxable income will be
generated in the respective jurisdictions to allow us to fully recover the remainder of the tax losses. The tax
losses relate to Non-U.S. carryforwards of $1,339.6 million which are subject to varying expiration periods. Non-
U.S. carryforwards of $1,045.4 million are located in jurisdictions with unlimited tax loss carryforward periods,
while the remainder will begin to expire in 2016. In addition, there were no U.S. federal tax loss carryforwards
and $80.0 million of state tax loss carryforwards as of December 31, 2015, which will expire in future years
through 2035.

Tax sharing agreement
In connection with the Distribution, we entered into a tax sharing agreement (the “2012 Tax Sharing
Agreement”) with Tyco and The ADT Corporation (“ADT”), which governs the rights and obligations of ADT,
Tyco, and us for certain pre-Distribution tax liabilities, including Tyco’s obligations under a separate tax sharing
agreement (the “2007 Tax Sharing Agreement”) entered into by Tyco, 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 Tyco (the “2007 Separation”).

Pentair plc and Subsidiaries
Notes to consolidated financial statements

The 2012 Tax Sharing Agreement provides that we, Tyco and ADT will share (i) certain pre-Distribution income
tax liabilities that arise from adjustments made by tax authorities to our, Tyco’s and ADT’s U.S. income tax returns,
and (ii) payments required to be made by Tyco with respect to the 2007 Tax Sharing Agreement (the liabilities in
clauses (i) and (ii) collectively, “Shared Tax Liabilities”). Tyco is responsible for the first $500 million of Shared
Tax Liabilities. As of December 31, 2015, Tyco has paid $63.0 million of Shared Tax Liabilities. We and ADT will
share 42% and 58%, respectively, of the next $225 million of Shared Tax Liabilities. We, ADT and Tyco will share
20%, 27.5% and 52.5%, respectively, of Shared Tax Liabilities above $725 million. Costs and expenses associated
with the management of Shared Tax Liabilities will generally be shared 20% by us, 27.5% by ADT and 52.5% by
Tyco. Under these tax sharing agreements, the amount ultimately assessed would have to be in excess of $1.85
billion before we would be required to pay any of the amounts assessed.

In the event the Distribution, the spin-off of ADT, or certain internal transactions undertaken in connection
therewith were determined to be taxable as a result of actions taken after the Distribution by us, ADT or Tyco,
the party responsible for such failure would be responsible for all taxes imposed on us, ADT or Tyco as a result
thereof. Taxes resulting from the determination that the Distribution, the spin-off of ADT, or any internal
transaction is taxable are referred to herein as “Distribution Taxes.” If such failure is not the result of actions
taken after the Distribution by us, ADT or Tyco, then we, ADT and Tyco would be responsible for any
Distribution Taxes imposed on us, ADT or Tyco as a result of such determination in the same manner and in the
same proportions as the Shared Tax Liabilities. ADT will have sole responsibility for any income tax liability
arising as a result of Tyco’s acquisition of Brink’s Home Security Holdings, Inc. (“BHS”) in May 2010,
including any liability of BHS under the tax sharing agreement between BHS and The Brink’s Company dated
October 31, 2008 (collectively, the “BHS Tax Liabilities”). Costs and expenses associated with the management
of Shared Tax Liabilities, Distribution Taxes and BHS Tax Liabilities will generally be shared 20% by us, 27.5%
by ADT and 52.5% by Tyco. We are responsible for all of our own taxes that are not shared pursuant to the 2012
Tax Sharing Agreement’s sharing formulae. In addition, Tyco and ADT are responsible for their tax liabilities
that are not subject to the 2012 Tax Sharing Agreement’s sharing formula.

The 2012 Tax Sharing Agreement also provides that, if any party were to default in its obligation to another party
to pay its share of the distribution taxes that arise as a result of no party’s fault, each non-defaulting party would
be required to pay, equally with any other non-defaulting party, the amounts in default. In addition, if another
party to the 2012 Tax Sharing Agreement that is responsible for all or a portion of an income tax liability were to
default in its payment of such liability to a taxing authority, we could be legally liable under applicable tax law
for such liabilities and required to make additional tax payments. Accordingly, under certain circumstances, we
may be obligated to pay amounts in excess of our agreed-upon share of our, Tyco’s and ADT’s tax liabilities.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Tax authorities, including the Internal Revenue Service (“IRS”), have raised issues and proposed tax adjustments,
in particular with respect to tax years preceding the 2007 Separation, in connection with examinations of Tyco’s
and its subsidiaries’ income tax returns. The issues and proposed adjustments are generally subject to the sharing
provisions of the 2007 Tax Sharing Agreement which may require Tyco to make a payment to a taxing authority,
Medtronic or TE Connectivity. In connection with U.S. federal tax audits, the IRS has raised a number of issues
and proposed adjustments for periods beginning with the 1997 tax year. Although Tyco has resolve substantially
all of the issues and adjustments proposed by the IRS for tax years through 2007, it has not been able to resolve
matters related to the treatment of certain intercompany debt transactions during the period. As described below,
Tyco has entered into a settlement with the IRS intended to resolve the intercompany debt issues for Tyco’s
1997 — 2000 audit cycle; however, the ultimate resolution of these matters is uncertain and could result in Tyco
being responsible for a greater amount than it expects under the 2007 Tax Sharing Agreement.

On July 1, 2013, Tyco announced that the IRS issued Notices of Deficiency (“Tyco IRS Notices”) to Tyco
asserting that several of Tyco’s former U.S. subsidiaries collectively owe additional taxes of $883.3 million plus
penalties of $154.0 million based on audits of the 1997 through 2000 tax years of Tyco and its subsidiaries as
they existed at that time. These amounts exclude interest and do not reflect the impact on subsequent periods if
the IRS’s position described below is ultimately successful.

The IRS asserted in the Tyco IRS Notices that substantially all of Tyco’s intercompany debt originated during the
1997 — 2000 period should not be treated as debt for U.S. federal income tax purposes, and has disallowed interest
and related deductions recognized on U.S. income tax returns for those periods totaling approximately $2.9 billion. If
the IRS is successful in asserting its claim, it would have an adverse impact on interest deductions related to the same
Tyco intercompany debt in subsequent time periods, totaling approximately $6.6 billion, which Tyco has advised us
that it expects the IRS to disallow. Under the 2012 Tax Sharing Agreement, Tyco has the right to administer, control,
and settle all U.S. income tax audits for periods prior to and including the Distribution. Tyco has filed petitions with the
U.S. Tax Court contesting the IRS proposed adjustments and a trial date has been set for October 2016.

On January 19, 2016, Tyco announced that it had entered into Stipulations of Settled Issues with the IRS intended to
resolve all disputes related to the intercompany debt issues for Tyco’s 1997 — 2000 audit cycle currently before the
U.S. Tax Court. The Stipulations of Settled Issues are contingent upon the IRS Appeals Division applying the same
settlement to all intercompany debt issues on appeal for subsequent audit cycles (2001 — 2007) and, if applicable,
review by the U.S. Congress Joint Committee on Taxation. Tyco further disclosed that if finalized, the tentative
resolution would cover all aspects of the controversy described above and before the Appeals Division of the IRS,
and would result in a total cash payment to the IRS in the range of $475 million to $525 million, which includes all
interest and penalties, and that this payment would be subject to the sharing formulas described above in the 2007
and 2012 Tax Sharing Agreements with Pentair not being responsible for any payment related to this amount.
However, we cannot provide any assurance that the conditions precedent to this settlement will be met, that the
intercompany debt dispute is settled with the IRS or that the IRS will consistently apply the terms of the settlement
to all of Tyco’s U.S. income tax returns filed subsequent to 2000.

Pentair plc and Subsidiaries
Notes to consolidated financial statements

Benefit Plans

13.
Pension and other post-retirement plans
We sponsor U.S. and Non-U.S. defined-benefit pension and other post-retirement plans. Pension benefits are
based principally on an employee’s years of service and/or compensation levels near retirement. In addition, we
provide certain post-retirement health care and life insurance benefits. Generally, the post-retirement health care
and life insurance plans require contributions from retirees. In December 2007, we announced that we will be
freezing certain U.S. pension plans as of December 31, 2017.

Obligations and funded status
The following tables present reconciliations of plan benefit obligations, fair value of plan assets and the funded
status of pension plans and other post-retirement plans as of and for the years ended December 31, 2015 and
2014:

U.S. pension plans
2014
2015

Non-U.S. pension plans