PENTAIR plc

Pentair plc is an S&P 500 company focused on smart, sustainable water solutions, operating as a pure play water industrial manufacturing company comprised of three reportable segments: Flow, Water Solutions and Pool. The company helps the world sustainably move, improve and enjoy water, serving residential, commercial and industrial markets globally. For the year ended December 31, 2025, the Flow, Water Solutions and Pool reportable segments represented approximately 37%, 25% and 38% of total consolidated net sales, respectively. The company faces numerous domestic and international competitors across its segments, with competition focusing on brand names, product performance, quality, service and price. Pentair competes by offering a wide variety of innovative and high-quality products, which it believes are competitively priced, and believes its distribution channels and reputation for quality provide a competitive advantage.

Pentair competes in geographically diverse and highly competitive markets against large and well-established national and global companies, regional and local companies, diversified and pure-play companies, and lower-cost manufacturers. One customer in the Pool business represented approximately 18% and 15% of consolidated net sales in 2025 and 2024, respectively. The company competes based on technical expertise, intellectual property, reputation for quality and reliability, timeliness of delivery, previous installation history, contractual terms, service offerings, customer experience and service and price. Pentair believes its distribution channels and reputation for quality provide a competitive advantage, particularly in the Water Solutions and Pool segments.

Pentair generates revenue through the design, manufacture and sale of fluid treatment and pump products and systems, water treatment products and systems, and pool equipment and accessories. The company serves customers including businesses engaged with end users, wholesale and retail distribution in residential, agricultural, commercial, food and beverage, and industrial vertical markets, as well as end users, consumers and original equipment manufacturers. Revenue is primarily transactional in nature, with no significant recurring revenue streams described in the filing. The company experiences seasonal demand, with warm weather trends driving higher sales from April to September for Water Solutions and Pool, and April to August for Flow's residential and agricultural products.

The Flow segment designs, manufactures and sells a variety of fluid treatment and pump products and systems, including pressure vessels, gas recovery solutions, membrane bioreactors, wastewater reuse systems and advanced membrane filtration, separation systems, specialty insertion valves, line stop fittings and installation equipment, water disposal pumps, water supply pumps, fluid transfer pumps, turbine pumps, solid handling pumps, and agricultural spray nozzles. For the fiscal year ended December 31, 2025, residential and irrigation flow businesses comprised approximately 36% of Flow sales, commercial and infrastructure flow businesses comprised approximately 30% of Flow sales, and industrial solutions business comprised approximately 34% of Flow sales. Flow brand names include Pentair Flow, Aurora, Berkeley, Codeline, Fairbanks-Nijhuis, Haffmans, Hydromatic, Hypro, Jung Pumpen, Myers, Sta-Rite, Shurflo, Südmo and X-Flow.

The Water Solutions segment designs, manufactures and sells commercial and residential water treatment products and systems including pressure tanks, control valves, activated carbon products, commercial ice machines, conventional filtration products, and point-of-entry and point-of-use water treatment systems. For the fiscal year ended December 31, 2025, the commercial business comprised approximately 66% of Water Solutions sales, and the residential business comprised approximately 34% of Water Solutions sales. Water Solutions brand names include Pentair Water Solutions, Everpure, Fleck, Manitowoc Ice, Pentek and RainSoft. The Pool segment designs, manufactures and sells a complete line of energy-efficient residential and commercial pool equipment and accessories including pumps, filters, heaters, lights, automatic controls, chlorinators, automatic cleaners, maintenance equipment and pool accessories, with primary brand names including Pentair Pool, Kreepy Krauly, Pleatco and Sta-Rite.

On September 17, 2025, as part of the Flow reportable segment, Pentair completed the acquisition of Hydra-Stop, LLC for $292.1 million in cash, net of cash acquired, and subject to customary adjustments. Hydra-Stop manufactures specialty insertion valves, line stop fittings and installation equipment. In December 2024, as part of the Pool reportable segment, Pentair completed the acquisition of G & F Manufacturing, LLC for $116.0 million in cash, net of cash acquired, comprised of an upfront cash payment of $108.0 million and the estimated fair value of a contingent earn-out liability. In December 2025, the Board of Directors authorized the repurchase of ordinary shares up to a maximum dollar limit of $1.0 billion, which expires on December 31, 2028. As of December 31, 2025, Pentair had $1.0 billion available for share repurchases under the 2025 Authorization. The company also paid a regular quarterly cash dividend of $0.25 per share in the fourth quarter of 2025, and on December 15, 2025, the Board approved a regular quarterly cash dividend of $0.27 per share, reflecting an 8 percent increase and marking the 50th consecutive year that Pentair has increased its dividend.

For the fiscal year ended December 31, 2025, Pentair reported net sales of $4,176.0 million, compared to $4,082.8 million in 2024 and $4,104.5 million in 2023, representing a 2.3% increase year-over-year. Gross profit was $1,690.3 million in 2025, compared to $1,598.8 million in 2024, with gross margin expanding 1.3 percentage points to 40.5% of net sales. Operating income was $857.5 million in 2025, compared to $803.8 million in 2024, representing 20.5% of net sales versus 19.7% in the prior year. Net income from continuing operations before income taxes was $756.5 million in 2025, compared to $718.9 million in 2024. The provision for income taxes was $107.0 million in 2025, resulting in an effective tax rate of 14.1%, compared to 13.0% in 2024.

The company states that it expects to continue executing on its key Transformation Program initiatives to drive margin expansion and to incur transformation costs in 2026 and beyond. Additionally, the company anticipates that supply chain pressures and inflationary cost increases resulting from tariffs, as well as any related impacts on macroeconomic conditions and its business, will likely continue into 2026.

Pentair has identified specific product and geographic market opportunities that it finds attractive and continues to pursue, both within and outside the U.S. The company expects to continue investing in its businesses to drive these opportunities through research and development and additional sales and marketing resources. The company's growth initiatives focus on accelerating investments in digital, innovation, technology and sustainability. Effective January 1, 2026, Pentair reorganized the composition of its Flow and Water Solutions reportable segments, moving the residential and irrigation flow business from Flow to Water Solutions, which management believes will help accelerate efforts to improve customer experiences, enhance operational efficiencies and deliver more comprehensive solutions.

The company's Transformation Program is designed to accelerate growth and drive margin expansion by driving operational excellence, reducing complexity and streamlining processes. In 2025, Pentair implemented 80/20 guiding principles to enable the Transformation Program, focusing on key customers and products through quadrant-based strategies, which management expects to result in improved operating performance by driving margin growth with highest value customers, reducing lower margin sales and removing complexity in the future. The company expects to continue focusing on 80/20 principles in 2026 to create value. Additionally, in 2025, Pentair executed certain business restructuring initiatives aimed at reducing its fixed cost structure and realigning its business, with these actions expected to continue into 2026 and to drive margin expansion.

Pentair anticipates that supply chain pressures and inflationary cost increases resulting from tariffs, as well as any related impacts on macroeconomic conditions and its business, will likely continue into 2026. The company has taken actions to mitigate the impact of tariffs such as pricing increases, inventory pre-buys and supply chain optimization actions, which may continue going forward. The company's Transformation Program initiatives are intended to improve productivity and offset cost increases. On February 20, 2026, the U.S. Supreme Court struck down certain tariffs imposed under the International Emergency Powers Act, and it is unclear at this time what impact this decision will have on future financial results, including whether the company will be able to obtain refunds of amounts previously collected for such tariffs or the level of replacement tariffs imposed through other means.

The filing does not provide specific quantitative targets for R&D spending levels, capital expenditure plans, or share repurchase authorization amounts beyond the $1.0 billion authorization approved in December 2025. The company states that its capital allocation priorities include committing to maintain its investment grade rating, focusing on reducing long-term debt, returning cash to shareholders through dividends and share repurchases, and accelerating performance with strategically aligned mergers and acquisitions. The Board of Directors approved a regular quarterly cash dividend of $0.27 per share paid on February 6, 2026, reflecting an 8 percent increase and marking the 50th consecutive year that Pentair has increased its dividend.

The company faces structural headwinds from inflationary cost increases for raw materials such as metals and resins, as well as increases in logistics, transportation, energy, insurance and labor costs. The ongoing volatile market for commodities has the potential to continue to drive price increases in the supply chain. The current U.S. administration has implemented tariffs with an ongoing possibility of implementing additional, or increasing current, tariffs, which have also triggered reactionary tariff adjustments by other countries that may continue to contribute to inflationary cost increases. The Organization for Economic Co-operation and Development Pillar Two Model Rules for a global 15.0% minimum tax have been adopted by a number of jurisdictions in which Pentair operates, which has negatively impacted the effective tax rate in 2025 and is likely to continue to impact the effective tax rate in the future.

The company faces execution risks related to its Transformation Program and restructuring initiatives, noting that it may not be able to achieve accelerated growth or ongoing margin expansion and operating efficiencies to reduce costs or realize benefits that it anticipates. As a result of implementing 80/20 guiding principles, it is possible that revenues could be reduced by exiting certain customers and products. Additionally, the company may not be able to successfully implement its updated global enterprise resource planning system without experiencing delays, increased costs and other difficulties, and if the system does not operate as intended, the effectiveness of internal control over financial reporting could be adversely affected.

Pentair faces material risks from its concentration of sales to a relatively small number of larger customers, with net sales to its largest customer representing approximately 18% ¹ of consolidated net sales in 2025, and the loss of such customers could materially harm the business. The company is exposed to significant goodwill and intangible asset impairment risk, as goodwill and intangible assets were $4,611.4 million ² as of December 31, 2025, representing approximately 67% ³ of total assets, and a decline in fair market value could result in future impairment charges. Asbestos-related litigation poses a quantifiable risk, with approximately 795 ⁴ asbestos-related claims pending against subsidiaries as of December 31, 2025, substantially all relating to discontinued operations, and while most claims are covered by historical insurance policies, the uninsured portion may increase over time as coverage erodes. The company's effective tax rate is subject to material adverse impacts from the Organization for Economic Co-operation and Development Pillar Two Model Rules for a global 15.0% ⁵ minimum tax, which has negatively impacted the effective tax rate in 2025 and is likely to continue to do so. Additionally, the company faces risks from the imposition of tariffs and trade restrictions, with the current U.S. administration having implemented tariffs with an ongoing possibility of additional or increased tariffs, which have contributed to inflationary cost increases and may continue to impact the business.

Management's message emphasizes Pentair's vision to be the world's most valued sustainable water solutions company for employees, customers and shareholders. The strategic priorities emphasized for the period ahead include delivering profitable revenue growth and productivity for customers and shareholders; continuing to focus on capital allocation through maintaining the investment grade rating, reducing long-term debt, returning cash to shareholders through dividends and share repurchases, and accelerating performance with strategically aligned mergers and acquisitions; focusing growth initiatives that accelerate investments in digital, innovation, technology and sustainability; continuing to implement Transformation Program initiatives to drive operational excellence, reduce complexity and improve organizational structure, including a continued focus on 80/20 guiding principles to drive profitable growth; and building a high-performance growth culture and delivering on commitments while living the Win Right values.