UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the Quarterly Period Ended September 26, 2015
OR
 
¨
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
  
98-1141328
(State or other jurisdiction of incorporation or organization)
  
(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
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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§223.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No ¨
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 definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ
  
Accelerated filer o
  
Non-accelerated filer o
  
Smaller reporting company o
 
  
 
  
(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 Exchange Act). Yes ¨ No þ
On September 26, 2015, 180,253,587 shares of Registrant’s common stock were outstanding.



Pentair plc and Subsidiaries
 
 
Page
 
 
PART I FINANCIAL INFORMATION
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
PART II OTHER INFORMATION
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 2.
 
 
 
ITEM 6.
 
 
 
 



2

PART I FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS
Pentair plc and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
 
Three months ended
 
Nine months ended
In millions, except per-share data
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Net sales
$
1,552.1

$
1,758.4

 
$
4,688.3

$
5,236.5

Cost of goods sold
1,012.0

1,133.7

 
3,071.8

3,401.4

Gross profit
540.1

624.7

 
1,616.5

1,835.1

Selling, general and administrative
330.2

328.8

 
958.7

1,071.0

Research and development
29.9

28.5

 
88.7

88.2

Operating income
180.0

267.4

 
569.1

675.9

Other (income) expense:
 
 
 
 
 
Equity income of unconsolidated subsidiaries
(0.9
)
(0.3
)
 
(2.0
)
(0.9
)
Loss on sale of business
—

—

 
—

0.2

Net interest expense
31.3

17.1

 
68.1

51.1

Income from continuing operations before income taxes
149.6

250.6

 
503.0

625.5

Provision for income taxes
34.4

58.1

 
115.7

148.3

Net income from continuing operations
115.2

192.5

 
387.3

477.2

Income (loss) from discontinued operations, net of tax
—

1.6

 
(5.6
)
2.6

Loss from sale / impairment of discontinued operations, net of tax
—

(380.1
)
 
(4.8
)
(385.7
)
Net income (loss)
$
115.2

$
(186.0
)
 
$
376.9

$
94.1

Comprehensive income (loss), net of tax
 
 
 
 
 
Net income (loss)
$
115.2

$
(186.0
)
 
$
376.9

$
94.1

Changes in cumulative translation adjustment
(85.8
)
(178.8
)
 
(238.4
)
(190.3
)
Changes in market value of derivative financial instruments, net of $0.9, ($0.2), $1.3 and ($0.1) tax, respectively
(0.7
)
0.8

 
(1.6
)
1.2

Comprehensive income (loss)
$
28.7

$
(364.0
)
 
$
136.9

$
(95.0
)
Earnings (loss) per ordinary share
 
 
 
 
 
Basic
 
 
 
 
 
Continuing operations
$
0.64

$
1.01

 
$
2.15

$
2.47

Discontinued operations
—

(1.99
)
 
(0.06
)
(1.98
)
Basic earnings (loss) per ordinary share
$
0.64

$
(0.98
)
 
$
2.09

$
0.49

Diluted
 
 
 
 
 
Continuing operations
$
0.63

$
1.00

 
2.12

2.43

Discontinued operations
—

(1.95
)
 
(0.06
)
(1.95
)
Diluted earnings (loss) per ordinary share
$
0.63

$
(0.95
)
 
$
2.06

$
0.48

Weighted average ordinary shares outstanding
 
 
 
 
 
Basic
180.2

190.2

 
180.1

193.2

Diluted
182.6

193.1

 
182.6

196.4

Cash dividends paid per ordinary share
$
0.32

$
0.30

 
$
0.96

$
0.80

See accompanying notes to condensed consolidated financial statements.

3

Pentair plc and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
 
September 26,
2015
December 31,
2014
In millions, except per-share data
Assets
Current assets
 
 
Cash and cash equivalents
$
144.9

$
110.4

Accounts and notes receivable, net of allowances of $98.4 and $96.5, respectively
1,136.5

1,205.9

Inventories
1,296.2

1,130.4

Other current assets
385.7

366.8

Current assets held for sale
0.9

80.6

Total current assets
2,964.2

2,894.1

Property, plant and equipment, net
921.4

950.0

Other assets
 
 
Goodwill
5,827.4

4,741.9

Intangibles, net
2,515.6

1,608.1

Other non-current assets
426.7

436.2

Non-current assets held for sale
15.6

24.9

Total other assets
8,785.3

6,811.1

Total assets
$
12,670.9

$
10,655.2

Liabilities and Equity
Current liabilities
 
 
Current maturities of long-term debt and short-term borrowings
$
3.2

$
6.7

Accounts payable
531.0

583.1

Employee compensation and benefits
264.6

305.5

Other current liabilities
693.9

709.1

Current liabilities held for sale
3.5

35.1

Total current liabilities
1,496.2

1,639.5

Other liabilities
 
 
Long-term debt
4,983.2

2,997.4

Pension and other post-retirement compensation and benefits
301.6

322.0

Deferred tax liabilities
827.9

528.3

Other non-current liabilities
525.6

497.7

Non-current liabilities held for sale
0.5

6.5

Total liabilities
8,135.0

5,991.4

Equity
 
 
Ordinary shares $0.01 par value, 426.0 authorized, 180.3 and 202.4 issued at September 26, 2015 and December 31, 2014, respectively
1.8

2.0

Ordinary shares held in treasury, 19.9 shares at December 31, 2014
—

(1,251.9
)
Additional paid-in capital
2,849.2

4,250.0

Retained earnings
2,305.2

2,044.0

Accumulated other comprehensive income (loss)
(620.3
)
(380.3
)
Total equity
4,535.9

4,663.8

Total liabilities and equity
$
12,670.9

$
10,655.2

See accompanying notes to condensed consolidated financial statements.

4

Pentair plc and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
Operating activities
 
 
Net income
$
376.9

$
94.1

Loss (income) from discontinued operations, net of tax
5.6

(2.6
)
Loss from sale / impairment of discontinued operations, net of tax
4.8

385.7

Adjustments to reconcile net income from continuing operations to net cash provided by (used for) operating activities of continuing operations
 
 
Equity income of unconsolidated subsidiaries
(2.0
)
(0.9
)
Depreciation
101.4

103.9

Amortization
83.8

85.9

Deferred income taxes
1.9

6.7

Share-based compensation
27.5

24.8

Excess tax benefits from share-based compensation
(6.0
)
(10.0
)
Amortization of bridge financing fees
10.8

—

Loss (gain) on sales of assets and businesses
(7.7
)
1.2

Changes in assets and liabilities, net of effects of business acquisitions
 
 
Accounts and notes receivable
85.8

71.5

Inventories
(115.3
)
(38.5
)
Other current assets
(45.1
)
(36.8
)
Accounts payable
(82.3
)
(34.4
)
Employee compensation and benefits
(42.0
)
(11.9
)
Other current liabilities
30.5

95.4

Other non-current assets and liabilities
(25.5
)
(45.9
)
Net cash provided by (used for) operating activities of continuing operations
403.1

688.2

Net cash provided by (used for) operating activities of discontinued operations
(7.2
)
(4.8
)
Net cash provided by (used for) operating activities
395.9

683.4

Investing activities
 
 
Capital expenditures
(100.6
)
(92.5
)
Proceeds from sale of property and equipment
24.8

4.1

Acquisitions, net of cash acquired
(1,913.0
)
—

Other
(0.8
)
0.9

Net cash provided by (used for) investing activities of continuing operations
(1,989.6
)
(87.5
)
Net cash provided by (used for) investing activities of discontinued operations
59.0

—

Net cash provided by (used for) investing activities
(1,930.6
)
(87.5
)
Financing activities
 
 
Net receipts (repayments) of short-term borrowings
(2.0
)
0.3

Net receipts of commercial paper and revolving long-term debt
276.5

426.2

Proceeds from long-term debt
1,714.8

—

Repayments of long-term debt
(4.6
)
(13.2
)
Debt issuance costs
(26.8
)
—

Excess tax benefits from share-based compensation
6.0

10.0

Shares issued to employees, net of shares withheld
21.9

30.3

Repurchases of ordinary shares
(200.0
)
(850.0
)
Dividends paid
(173.3
)
(156.2
)
Purchase of noncontrolling interest
—

(134.7
)
Net cash provided by (used for) financing activities
1,612.5

(687.3
)
Effect of exchange rate changes on cash and cash equivalents
(43.3
)
(8.0
)
Change in cash and cash equivalents
34.5

(99.4
)
Cash and cash equivalents, beginning of period
110.4

256.0

Cash and cash equivalents, end of period
$
144.9

$
156.6

See accompanying notes to condensed consolidated financial statements.

5

Pentair plc and Subsidiaries
Condensed Consolidated Statements of Changes in Equity (Unaudited)

In millions
Ordinary shares
 
Treasury shares
Additional paid-in capital
Retained earnings
Accumulated
other
comprehensive income (loss)
Total Pentair plc
Noncontrolling interest
 Total
Number
Amount
 
Number
Amount
Balance - December 31, 2014
202.4

$
2.0

 
(19.9
)
$
(1,251.9
)
$
4,250.0

$
2,044.0

$
(380.3
)
$
4,663.8

$
—

$
4,663.8

Net income
—

—

 
—

—

—

376.9

—

376.9

—

376.9

Other comprehensive loss, net of tax
—

—

 
—

—

—

—

(240.0
)
(240.0
)
—

(240.0
)
Dividends declared
—

—

 
—

—

1.5

(115.7
)
—

(114.2
)
—

(114.2
)
Share repurchase
(3.1
)
—

 
—

—

(200.0
)
—

—

(200.0
)
—

(200.0
)
Cancellation of treasury shares
(19.1
)
(0.2
)
 
19.1

1,210.9

(1,210.7
)
—

—

—

—

—

Exercise of options, net of shares tendered for payment
0.1

—

 
0.7

34.6

(7.9
)
—

—

26.7

—

26.7

Issuance of restricted shares, net of cancellations
—

—

 
0.2

9.5

(9.5
)
—

—

—

—

—

Shares surrendered by employees to pay taxes
—

—

 
(0.1
)
(3.1
)
(1.7
)
—

—

(4.8
)
—

(4.8
)
Share-based compensation
—

—

 
—

—

27.5

—

—

27.5

—

27.5

Balance - September 26, 2015
180.3

$
1.8

 
—

$
—

$
2,849.2

$
2,305.2

$
(620.3
)
$
4,535.9

$
—

$
4,535.9

 
In millions
Ordinary shares
 
Treasury shares
Additional paid-in capital
Retained earnings
Accumulated
other
comprehensive income (loss)
Total Pentair plc
Noncontrolling interest
 Total
Number
Amount
Number
Amount
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
—

—

 
—

—

—

94.1

—

94.1

—

94.1

Other comprehensive loss, net of tax
—

—

 
—

—

—

—

(189.1
)
(189.1
)
—

(189.1
)
Conversion of Pentair Ltd. common shares to Pentair plc ordinary shares
—

(111.4
)
 
—

—

111.4

—

—

—

—

—

Dividends declared
—

—

 
—

—

(225.7
)
—

—

(225.7
)
—

(225.7
)
Purchase of noncontrolling interest
—

—

 
—

—

(12.3
)
—

—

(12.3
)
(122.4
)
(134.7
)
Share repurchase
(5.9
)
—

 
(5.8
)
(450.7
)
(399.3
)
—

—

(850.0
)
—

(850.0
)
Exercise of options, net of shares tendered for payment
—

—

 
0.9

48.7

(11.0
)
—

—

37.7

—

37.7

Issuance of restricted shares, net of cancellations
—

—

 
0.3

14.4

(14.4
)
—

—

—

—

—

Shares surrendered by employees to pay taxes
—

—

 
(0.1
)
(4.8
)
(2.6
)
—

—

(7.4
)
—

(7.4
)
Share-based compensation
—

—

 
—

—

24.8

—

—

24.8

—

24.8

Balance - September 27, 2014
207.1

$
2.1

 
(20.3
)
$
(1,267.5
)
$
4,542.3

$
1,923.2

$
(232.7
)
$
4,967.4

$
—

$
4,967.4

See accompanying notes to condensed consolidated financial statements.


6
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)


1.Basis of Presentation and Responsibility for Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements of Pentair plc (formerly Pentair Ltd.) and its subsidiaries ("we," "us," "our," "Pentair," or "the Company") have been prepared following the requirements of the U.S. Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America can be condensed or omitted.
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.
During the first quarter of 2015, we reorganized our business segments to reflect a new operating structure and management of our Global Business Units, Valves & Controls, Flow & Filtration Solutions, Water Quality Systems and Technical Solutions. All prior period amounts related to the segment change have been retrospectively reclassified throughout this Quarterly Report on Form 10-Q to conform to the new presentation.
We are responsible for the unaudited financial statements included in this document. The financial statements include all normal recurring adjustments that are considered necessary for the fair presentation of our financial position and operating results. As these are condensed financial statements, one should also read our consolidated financial statements and notes thereto, which are included in our Annual Report on Form 10-K for the year ended December 31, 2014.
Revenues, expenses, cash flows, assets and liabilities can and do vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be indicative of those for a full year.
Our fiscal year ends on December 31. We report our interim quarterly periods on a 13-week basis ending on a Saturday.
New Accounting Standards
In September 2015, the Financial Accounting Standards Board (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 standard is effective for fiscal years beginning after December 15, 2015, including interim periods within that reporting period and early adoption is permitted. The potential impact on our financial condition or results of operations will be dependent upon the nature of final purchase price allocations. We plan to adopt 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 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
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.

7
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

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 the fair value of tangible and intangible assets acquired and liabilities assumed and the related income tax impacts. We expect the purchase price allocation to be completed in the first quarter 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
$
11.6

Accounts receivable
76.7

Inventories
99.0

Other current assets
9.5

Property, plant and equipment
27.0

Identifiable intangible assets
964.6

Goodwill
1,102.8

Current liabilities
(96.0
)
Deferred income taxes, including current
(373.0
)
Other liabilities
(4.1
)
Purchase price
$
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 $1,102.8 million, none of which is expected to be deductible for income tax purposes. Identifiable intangible assets acquired as part of the acquisition have been preliminarily valued at $964.6 million, including definite-lived customer relationship and indefinite-lived trade name intangible assets.

ERICO's net sales and net income for the period from the acquisition date to September 26, 2015 were $13.0 million and $2.2 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 annual reporting period from the date of the ERICO Acquisition:
 
Three months ended    
 
Nine months ended
In millions, except per-share data
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Pro forma net sales
$
1,670.9

$
1,906.4

 
$
5,074.5

$
5,659.8

Pro forma net income from continuing operations
152.2

200.3

 
433.5

481.3

Pro forma earnings per ordinary share - continuing operations
 
 
 
 
 
Basic
$
0.84

$
1.05

 
$
2.41

$
2.48

Diluted
0.83

1.03

 
2.38

2.44

The unaudited pro forma net income from continuing operations for the nine months ended September 27, 2014 was adjusted to include the impact of $29.0 million in non-recurring items related to acquisition date fair value adjustments to inventory. The unaudited pro forma net income for the three and nine months ended September 26, 2015 excludes the impact of $24.6 million of non-recurring transaction related and bridge financing costs.

8
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

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.
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. 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 $46.5 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.
On January 30, 2014, we acquired, as part of Water Quality Systems, the remaining 19.9 percent ownership interest in 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 an 80.1 percent ownership equity interest in PRF, representing our and GE's respective global water softener and residential water filtration businesses. There was no material pro forma impact from this acquisition as the results of PRF were consolidated into our financial statements prior to acquiring the remaining interest.
3.Discontinued Operations
On July 28, 2014, our Board of Directors approved a decision to exit our Water Transport business in Australia. During the first and second quarters of 2015, we sold portions of the Water Transport business and received cash proceeds of $59.0 million. In addition, during the first quarter of 2014 we sold a portion of our Water Transport business resulting in a loss of $5.6 million, net of a $2.4 million tax benefit. We expect to dispose of the remainder of the Water Transport business by the end of 2015. 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:
 
Three months ended
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Net sales
$
—

$
74.8

 
$
18.6

$
235.4

Cost of goods sold
—

65.1

 
18.1

198.9

Gross profit
$
—

$
9.7

 
$
0.5

$
36.5

 
 
 
 
 
 
Income (loss) from discontinued operations before income taxes
$
—

$
0.2

 
$
(7.1
)
$
0.3

Income tax benefit
—

1.4

 
1.5

2.3

Income (loss) from discontinued operations, net of tax
$
—

$
1.6

 
$
(5.6
)
$
2.6

 
 
 
 
 
 
Loss from sale / impairment of discontinued operations before income taxes
$
—

$
(392.4
)
 
$
(4.8
)
$
(400.4
)
Income tax benefit
—

12.3

 
—

14.7

Loss from sale / impairment of discontinued operations, net of tax
$
—

$
(380.1
)
 
$
(4.8
)
$
(385.7
)


9
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

The carrying amounts of major classes of assets and liabilities that were classified as held for sale on the Condensed Consolidated Balance Sheets were as follows:
In millions
September 26,
2015
December 31,
2014
Cash and cash equivalents
$
—

$
7.0

Accounts and notes receivable, net
—

28.8

Inventories
—

30.1

Other current assets
0.9

14.7

Current assets held for sale
$
0.9

$
80.6

Property, plant and equipment, net
$
15.6

$
18.5

Other non-current assets
—

6.4

Non-current assets held for sale
$
15.6

$
24.9

Accounts payable
—

12.2

Employee compensation and benefits
—

11.3

Other current liabilities
3.5

11.6

Current liabilities held for sale
$
3.5

$
35.1

Long-term debt
$
—

$
4.0

Pension and other post-retirement compensation and benefits
—

2.5

Deferred tax liabilities
0.5

—

Non-current liabilities held for sale
$
0.5

$
6.5

4.
Share Plans
Total share-based compensation expense for the three and nine months ended September 26, 2015 and September 27, 2014 was as follows:
 
Three months ended    
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Restricted stock units
$
5.4

$
5.6

 
$
17.9

$
16.7

Stock options
2.7

2.7

 
9.6

8.1

Total share-based compensation expense
$
8.1

$
8.3

 
$
27.5

$
24.8


In the first quarter of 2015, we issued our annual share-based compensation grants under the Pentair plc 2012 Stock and Incentive Plan to eligible employees. The total number of awards issued was approximately 0.8 million, of which 0.6 million were stock options and 0.2 million were restricted stock units. The weighted-average grant date fair value of the stock options and restricted stock units issued was $16.73 and $66.44, respectively.

We estimated the fair value of each stock option award issued in the annual share-based compensation grant using a Black-Scholes option pricing model, modified for dividends and using the following assumptions:
 
2015
Annual Grant
Risk-free interest rate
1.61
%
Expected dividend yield
1.96
%
Expected share price volatility
30.4
%
Expected term (years)
6.0


10
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

These estimates require us to make assumptions based on historical results, observance of trends in our share price, changes in option exercise behavior, future expectations and other relevant factors. If other assumptions had been used, share-based compensation expense, as calculated and recorded under the accounting guidance, could have been affected.
We based the expected life assumption on historical experience as well as the terms and vesting periods of the options granted. For purposes of determining expected share price volatility, we considered a rolling average of historical volatility measured over a period approximately equal to the expected option term. The risk-free interest rate for periods that coincide with the expected life of the options is based on the U.S. Treasury Department yield curve in effect at the time of grant.
5.
Restructuring
During the nine months ended September 26, 2015 and the year ended December 31, 2014, we continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. Initiatives during the nine months ended September 26, 2015 included the reduction in hourly and salaried headcount of approximately 1,500 employees, consisting of approximately 1,150 in Valves & Controls, 150 in Flow & Filtration Solutions, 100 in Water Quality Systems and 100 in Technical Solutions. Initiatives during the year ended December 31, 2014 included the reduction in hourly and salaried headcount of approximately 1,150 employees, consisting of approximately 600 in Valves & Controls, 350 in Flow & Filtration Solutions, 50 in Water Quality Systems and 150 in Technical Solutions.
Restructuring related costs included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) included costs for severance and other restructuring costs as follows: 
 
Three months ended    
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Severance and related costs
$
14.6

$
—

 
$
35.2

$
34.6

Other
10.6

—

 
14.0

18.3

Total restructuring costs
$
25.2

$
—

 
$
49.2

$
52.9

Other restructuring costs primarily consist of asset impairment and various contract termination costs.
Restructuring costs by reportable segment for the three and nine months ended September 26, 2015 and September 27, 2014 were as follows:
 
Three months ended
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Valves & Controls
$
18.0

$
—

 
$
31.6

$
27.7

Flow & Filtration Solutions
3.5

—

 
7.2

12.3

Water Quality Systems
1.5

—

 
4.8

7.1

Technical Solutions
2.2

—

 
5.6

5.8

Consolidated
$
25.2

$
—

 
$
49.2

$
52.9

Activity in the restructuring accrual recorded in Other current liabilities and Employee compensation and benefits in the Condensed Consolidated Balance Sheets is summarized as follows for the nine months ended September 26, 2015: 
In millions
September 26,
2015
Beginning balance
$
73.4

Costs incurred
35.2

Cash payments and other
(37.4
)
Ending balance
$
71.2


11
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

6.
Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share were calculated as follows:
 
Three months ended    
 
Nine months ended
In millions, except per-share data
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Net income (loss)
$
115.2

$
(186.0
)
 
$
376.9

$
94.1

Net income from continuing operations
$
115.2

$
192.5

 
$
387.3

$
477.2

Weighted average ordinary shares outstanding
 
 
 
 
 
Basic
180.2

190.2

 
180.1

193.2

Dilutive impact of stock options and restricted stock units
2.4

2.9

 
2.5

3.2

Diluted
182.6

193.1

 
182.6

196.4

Earnings (loss) per ordinary share
 
 
 
 
 
Basic
 
 
 
 
 
Continuing operations
$
0.64

$
1.01

 
$
2.15

$
2.47

Discontinued operations
—

(1.99
)
 
(0.06
)
(1.98
)
Basic earnings (loss) per ordinary share
$
0.64

$
(0.98
)
 
$
2.09

$
0.49

Diluted
 
 
 
 
 
Continuing operations
$
0.63

$
1.00

 
$
2.12

$
2.43

Discontinued operations
—

(1.95
)
 
(0.06
)
(1.95
)
Diluted earnings (loss) per ordinary share
$
0.63

$
(0.95
)
 
$
2.06

$
0.48

Anti-dilutive stock options excluded from the calculation of diluted earnings per share
1.2

0.5

 
1.2

0.5


12
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

7.
Supplemental Balance Sheet Information
In millions
September 26,
2015
December 31,
2014
Inventories


Raw materials and supplies
$
445.9

$
460.1

Work-in-process
277.3

229.0

Finished goods
573.0

441.3

Total inventories
$
1,296.2

$
1,130.4

Other current assets


Cost in excess of billings
$
125.6

$
103.5

Prepaid expenses
111.2

109.6

Deferred income taxes
126.3

139.4

Other current assets
22.6

14.3

Total other current assets
$
385.7

$
366.8

Property, plant and equipment, net


Land and land improvements
$
145.1

$
165.1

Buildings and leasehold improvements
507.1

493.5

Machinery and equipment
1,282.6

1,169.1

Construction in progress
75.0

71.0

Total property, plant and equipment
2,009.8

1,898.7

Accumulated depreciation and amortization
1,088.4

948.7

Total property, plant and equipment, net
$
921.4

$
950.0

Other non-current assets


Asbestos-related insurance receivable
$
111.3

$
115.8

Deferred income taxes
92.1

87.9

Other non-current assets
223.3

232.5

Total other non-current assets
$
426.7

$
436.2

Other current liabilities


Deferred revenue and customer deposits
$
99.6

$
112.7

Dividends payable
57.7

116.8

Billings in excess of cost
38.1

41.4

Accrued warranty
61.1

66.4

Other current liabilities
437.4

371.8

Total other current liabilities
$
693.9

$
709.1

Other non-current liabilities


Asbestos-related liabilities
$
240.1

$
249.1

Taxes payable
63.9

61.6

Other non-current liabilities
221.6

187.0

Total other non-current liabilities
$
525.6

$
497.7


13
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

8.
Goodwill and Other Identifiable Intangible Assets
The changes in the carrying amount of goodwill by segment were as follows:
In millions
December 31,
2014
Acquisitions/
divestitures 
Foreign currency 
translation/other 
September 26,
2015
Valves & Controls
$
1,511.6

$
—

$
—

$
1,511.6

Flow & Filtration Solutions
942.4

—

(51.8
)
890.6

Water Quality Systems
1,137.6

—

(14.7
)
1,122.9

Technical Solutions
1,150.3

1,160.9

(8.9
)
2,302.3

Total goodwill
$
4,741.9

$
1,160.9

$
(75.4
)
$
5,827.4

Identifiable intangible assets consisted of the following:
 
September 26,
2015
 
December 31,
2014
In millions
Cost
Accumulated
amortization
Net
 
Cost
Accumulated
amortization
Net
Finite-life intangibles



 



Customer relationships
$
1,976.4

$
(384.3
)
$
1,592.1

 
$
1,247.8

$
(325.2
)
$
922.6

Trade names
1.8

(1.2
)
0.6

 
2.0

(1.1
)
0.9

Proprietary technology and patents
250.3

(109.5
)
140.8

 
255.7

(96.7
)
159.0

Total finite-life intangibles
$
2,228.5

$
(495.0
)
$
1,733.5

 
$
1,505.5

$
(423.0
)
$
1,082.5

Indefinite-life intangibles



 



Trade names
782.1

—

782.1

 
525.6

—

525.6

Total intangibles, net
$
3,010.6

$
(495.0
)
$
2,515.6

 
$
2,031.1

$
(423.0
)
$
1,608.1

Intangible asset amortization expense was $28.2 million and $28.4 million for the three months ended September 26, 2015 and September 27, 2014, respectively, and $83.8 million and $85.9 million for the nine months ended September 26, 2015 and September 26, 2014.
Estimated future amortization expense for identifiable intangible assets during the remainder of 2015 and the next five years is as follows:
 
Q4
 
 
 
 
 
In millions
2015
2016
2017
2018
2019
2020
Estimated amortization expense
$
39.4

$
157.4

$
155.9

$
153.5

$
146.7

$
141.6


14
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

9.
Debt
Debt and the average interest rates on debt outstanding were as follows: 
In millions
Average
interest rate at
September 26, 2015
Maturity
Year
September 26,
2015
December 31,
2014
Commercial paper
0.885%
2019
$
1,082.4

$
987.6

Revolving credit facilities
1.451%
2019
191.5

9.8

Senior notes - fixed rate
1.350%
2015
350.0

350.0

Senior notes - fixed rate
1.875%
2017
350.0

350.0

Senior notes - fixed rate
2.900%
2018
500.0

—

Senior notes - fixed rate
2.650%
2019
250.0

250.0

Senior notes - fixed rate - Euro
2.450%
2019
559.3

—

Senior notes - fixed rate
3.625%
2020
400.0

—

Senior notes - fixed rate
5.000%
2021
500.0

500.0

Senior notes - fixed rate
3.150%
2022
550.0

550.0

Senior notes - fixed rate
4.650%
2025
250.0

—

Capital lease obligations and other
8.284%
2016
3.2

6.7

Total debt


4,986.4

3,004.1

Less: Current maturities and short-term borrowings


(3.2
)
(6.7
)
Long-term debt


$
4,983.2

$
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.
The Senior Notes issued in the September 2015 Offerings, the 1.35% Senior Notes due 2015, 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.
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 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.

15
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

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 September 26, 2015 and December 31, 2014, PFSA had $1,082.4 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.
Total availability under the Amended Credit Facility was $1,226.1 million as of September 26, 2015, which was not limited by any covenants contained in the Amended Credit Facility’s credit agreement.
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, up to a lifetime maximum $25.0 million of costs, fees and expenses incurred in connection with certain acquisitions, investments, dispositions and the issuance, repayment or refinancing of debt, and in addition to (but without duplication of) the fees, costs 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 incurrence, 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 September 26, 2015, we were in compliance with all financial covenants in our debt agreements.
In addition to the Amended Credit Facility, we have various other credit facilities with an aggregate availability of $51.0 million, of which $0.3 million was outstanding at September 26, 2015. Borrowings under these credit facilities bear interest at variable rates.
We have $350.0 million of fixed rate senior notes maturing in December 2015. We classified this debt as long-term as of September 26, 2015 as we have the intent and ability to refinance such obligation on a long-term basis under the Amended Credit Facility.
Debt outstanding at September 26, 2015 matures on a calendar year basis as follows:
 
Q4
 
 
 
 
 
 
 
In millions
2015
2016
2017
2018
2019
2020
Thereafter
Total
Contractual debt obligation maturities
$
350.3

$
—

$
350.0

$
500.0

$
2,083.2

$
400.0

$
1,300.0

$
4,983.5

Capital lease obligations
1.7

1.2

—

—

—

—

—

2.9

Total maturities
$
352.0

$
1.2

$
350.0

$
500.0

$
2,083.2

$
400.0

$
1,300.0

$
4,986.4

Capital lease obligations relate primarily to land and buildings and consist of total future minimum lease payments of $3.0 million, less the imputed interest of $0.1 million as of September 26, 2015.
As of September 26, 2015 and December 31, 2014, assets under capital lease were $5.0 million and $19.5 million, respectively, less accumulated amortization of $1.8 million and $2.4 million, respectively, all of which were included in Property, plant and equipment, net on the Condensed Consolidated Balance Sheets.

16
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

10.
Derivatives and Financial Instruments
Derivative financial instruments
We are exposed to market risk related to changes in foreign currency exchange rates and interest rates on our floating rate indebtedness. To manage the volatility related to these exposures, 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 and interest 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.
Interest rate swaps
In April 2011, we entered into interest rate swap contracts to hedge movement in interest rates through the expected date of a fixed rate debt offering. The swaps had a notional amount of $400.0 million with an average interest rate of 3.65%. In May 2011, upon the sale of the fixed rate debt, the swaps were terminated at a cost of $11.0 million. Because we used the contracts to hedge future interest payments, this was recorded in Accumulated other comprehensive income (loss) ("AOCI") in the Condensed Consolidated Balance Sheets and will be amortized as interest expense over the 10 year life of the underlying fixed rate debt. The ending unrealized net loss in AOCI was $6.1 million and $7.0 million at September 26, 2015 and December 31, 2014, respectively.
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 September 26, 2015 and December 31, 2014, we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of $235.1 million and $250.8 million, respectively. The impact of these contracts on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) is not material for any period presented.
Gains or losses on foreign currency contracts designated as hedges are reclassified out of AOCI and into Selling, general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) upon settlement. Such reclassifications during the three and nine months ended September 26, 2015 and September 27, 2014 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 €500.0 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 September 26, 2015, we had deferred foreign currency gains of $5.5 million in AOCI associated with the net investment hedge activity.
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 to the fair value measurement.
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.

17
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Fair value of financial instruments
The following methods were used to estimate the fair values of each class of financial instruments: 
•
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 were as follows:
 
September 26,
2015
 
December 31,
2014
In millions
Recorded
Amount
Fair
Value
 
Recorded
Amount
Fair
Value
Variable rate debt
$
1,274.2

$
1,274.2

 
$
997.4

$
997.4

Fixed rate debt
3,712.2

3,782.1

 
2,006.7

2,070.4

Total debt
$
4,986.4

$
5,056.3

 
$
3,004.1

$
3,067.8

Financial assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows:
 
September 26,
2015
In millions
Level 1
Level 2
Level 3
Total
Recurring fair value measurements




Foreign currency contract liabilities
$
—

$
(13.5
)
$
—

$
(13.5
)
Deferred compensation plan assets (1)
42.2

8.0

—

50.2

Total recurring fair value measurements
$
42.2

$
(5.5
)
$
—

$
36.7


18
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

 
December 31,
2014
In millions
Level 1
Level 2
Level 3
Total
Recurring fair value measurements




Foreign currency contract assets
$
—

$
0.9

$
—

$
0.9

Foreign currency contract liabilities
—

(6.6
)
—

(6.6
)
Deferred compensation plan assets (1)
47.9

7.4

—

55.3

Total recurring fair value measurements
$
47.9

$
1.7

$
—

$
49.6

Nonrecurring fair value measurements (2)




(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 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).
11.
Income Taxes
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. The provision for income taxes consists of provisions for U.K. and international income taxes. We operate in an international environment with operations in various locations outside the U.K. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates.
The effective income tax rate for the nine months ended September 26, 2015 was 23.0%, compared to 23.7% for the nine months ended September 27, 2014. We continue to actively pursue initiatives to reduce our effective tax rate. The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.
The liability for uncertain tax positions was $63.9 million and $62.1 million at September 26, 2015 and December 31, 2014, respectively. We record penalties and interest related to unrecognized tax benefits in Provision for income taxes and Net interest expense, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), which is consistent with our past practices.

19
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

12.
Benefit Plans
Components of net periodic benefit cost for our pension plans for the three and nine months ended September 26, 2015 and September 27, 2014 were as follows:
 
U.S. pension plans
 
Three months ended
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Service cost
$
3.5

$
3.3

 
$
10.5

$
9.9

Interest cost
3.7

3.8

 
11.1

11.4

Expected return on plan assets
(2.5
)
(2.6
)
 
(7.5
)
(7.8
)
Net periodic benefit cost
$
4.7

$
4.5

 
$
14.1

$
13.5

 
Non-U.S. pension plans
 
Three months ended
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Service cost
$
2.6

$
2.0

 
$
7.8

$
6.0

Interest cost
3.8

4.7

 
11.4

14.1

Expected return on plan assets
(4.1
)
(4.2
)
 
(12.3
)
(12.6
)
Net periodic benefit cost
$
2.3

$
2.5

 
$
6.9

$
7.5

Components of net periodic benefit cost for our other post-retirement plans for the three and nine months ended September 26, 2015 and September 27, 2014 were not material.
13.
Shareholders’ Equity
Share repurchases
In December 2014, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $1.0 billion. The authorization expires on December 31, 2019. During the nine months ended September 26, 2015, we repurchased 3.1 million of our shares for $200.0 million pursuant to this authorization. As of September 26, 2015, we had $800.0 million remaining available for share repurchases under this authorization.
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.
Dividends payable
On September 21, 2015, our Board of Directors declared a quarterly cash dividend of $0.32 per share payable on November 6, 2015 to shareholders of record at the close of business on October 23, 2015. On May 5, 2015, our Board of Directors declared a quarterly cash dividend of $0.32 per share which was paid on August 7, 2015 to shareholders of record at the close of business on July 24, 2015.
At our 2014 annual meeting of shareholders held on May 20, 2014, our shareholders approved a proposal to pay quarterly cash dividends through the second quarter of 2015. The authorization provided that dividends of $1.20 per share be paid to our shareholders in quarterly installments of $0.30 for each of the third and fourth quarters of 2014 and the first and second quarters of 2015. In December 2014, the Board of Directors approved an increase of $0.02 per share for the 2015 first and second quarter dividends, bringing the total quarterly dividend for those quarters to $0.32 per share.
As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $57.7 million and $116.8 million at September 26, 2015 and December 31, 2014, respectively.

20
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

14.
Segment information
During the first quarter of 2015, we reorganized our business segments to reflect a new operating structure and management of our Global Business Units, resulting in a change to our reporting segments in 2015.
We evaluate performance based on net sales and segment income (loss) and use a variety of ratios to measure performance of our reporting segments. During the third quarter of 2015, we updated our segment income (loss) measure to exclude intangible amortization in order to better reflect the performance of our reporting segments. Segment income (loss) represents operating income (loss) exclusive of intangible amortization, certain acquisition related expenses, costs of restructuring activities, "mark-to-market" gain/loss for pension and other post-retirement plans, impairments and other unusual non-operating items.
Financial information by reportable segment is as follows:
 
Three months ended
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Net sales
 
 
 
 
 
Valves & Controls
$
440.9

$
607.9

 
$
1,366.5

$
1,767.5

Flow & Filtration Solutions
362.7

394.1

 
1,087.4

1,219.7

Water Quality Systems
322.0

324.1

 
1,016.6

1,006.0

Technical Solutions
432.3

438.8

 
1,235.2

1,262.7

Other
(5.8
)
(6.5
)
 
(17.4
)
(19.4
)
Consolidated
$
1,552.1

$
1,758.4

 
$
4,688.3

$
5,236.5

Segment income (loss)
 
 
 
 
 
Valves & Controls
$
55.7

$
107.6

 
$
175.5

$
282.8

Flow & Filtration Solutions
52.8

53.5

 
145.0

157.6

Water Quality Systems
60.5

56.0

 
200.5

191.0

Technical Solutions
101.0

101.1

 
265.0

266.9

Other
(20.8
)
(22.4
)
 
(65.1
)
(65.1
)
Consolidated
$
249.2

$
295.8

 
$
720.9

$
833.2

The following table presents a reconciliation of consolidated segment income to consolidated operating income:
 
Three months ended
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
 
September 26,
2015
September 27,
2014
Segment income
$
249.2

$
295.8

 
$
720.9

$
833.2

Restructuring and other
(25.3
)
—

 
(50.8
)
(61.1
)
Intangible amortization
(28.2
)
(28.4
)
 
(83.8
)
(85.9
)
Inventory step-up
(1.4
)
—

 
(2.9
)
—

Deal related costs and expenses
(14.3
)
—

 
(14.3
)
—

Redomicile related expenses
—

—

 
—

(10.3
)
Operating income
$
180.0

$
267.4

 
$
569.1

$
675.9


21
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

15.
Commitments and Contingencies
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.
As of September 26, 2015, there were approximately 4,200 claims outstanding against our subsidiaries. This amount includes adjustments for claims that are not actively being prosecuted. This amount is not adjusted for claims that identify incorrect defendants or duplicate other actions. In addition, the amount does not include certain claims pending against third parties for which we have been provided an indemnification.
Periodically, we perform an analysis with the assistance of outside counsel and other experts to update our estimated asbestos-related assets and liabilities. Our estimate of the liability and corresponding insurance recovery for pending and future claims and defense costs is based on our historical claim experience and estimates of the number and resolution cost of potential future claims that may be filed. Our legal strategy for resolving claims also impacts these estimates.
Our estimate of asbestos-related insurance recoveries represents estimated amounts due to us for previously paid and settled claims and the probable reimbursements relating to our estimated liability for pending and future claims. In determining the amount of insurance recoverable, we consider a number of factors, including available insurance, allocation methodologies and the solvency and creditworthiness of insurers.
Our estimated liability for asbestos-related claims was $240.1 million and $249.1 million as of September 26, 2015 and December 31, 2014, respectively, and was recorded in Other non-current liabilities in the Condensed Consolidated Balance Sheets for pending and future claims and related defense costs. Our estimated receivable for insurance recoveries was $111.3 million and $115.8 million as of September 26, 2015 and December 31, 2014, respectively, and was recorded in Other non-current assets in the Condensed Consolidated Balance Sheets.
The amounts recorded by us for asbestos-related liabilities and insurance-related assets are based on our strategies for resolving our asbestos claims and currently available information as well as estimates and assumptions. Key variables and assumptions include the number and type of new claims filed each year, the average cost of resolution of claims, the resolution of coverage issues with insurance carriers, the amounts of insurance and the related solvency risk with respect to our insurance carriers, and the indemnifications we have provided to and received from third parties. Furthermore, predictions with respect to these variables are subject to greater uncertainty in the latter portion of the projection period. Other factors that may affect our liability and cash payments for asbestos-related matters include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms of state or federal tort legislation and the applicability of insurance policies among subsidiaries. As a result, actual liabilities or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in our calculations vary significantly from actual results.
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 to certain formerly owned 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. Based upon our experience, current information regarding known contingencies and applicable laws, we have recorded reserves for these environmental matters of $22.5 million and $31.4 million as of September 26, 2015 and December 31, 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.

22
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Warranties and guarantees
In connection with the disposition of our businesses or product lines, we may agree to indemnify purchasers for various potential liabilities relating to the sold business, such as pre-closing tax, product liability, warranty, environmental, or other obligations. The subject matter, amounts and duration of any such indemnification obligations vary for each type of liability indemnified and may vary widely from transaction to transaction. Generally, the maximum obligation under such indemnifications is not explicitly stated and as a result, the overall amount of these obligations cannot be reasonably estimated. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial condition or results of operations.
We recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.
We provide service and warranty policies on our products. Liability under service and warranty policies is based upon a review of historical warranty and service claim experience. Adjustments are made to accruals as claim data and historical experience warrant.
The changes in the carrying amount of service and product warranties for the nine months ended September 26, 2015 were as follows: 
In millions
September 26,
2015
Beginning balance
$
66.4

Service and product warranty provision
45.4

Payments
(48.9
)
Foreign currency translation
(1.8
)
Ending balance
$
61.1

Stand-by Letters of Credit, Bank Guarantees and Bonds
In certain situations, Tyco International Ltd., Pentair Ltd,'s former parent company ("Tyco"), guaranteed performance by the flow control business of Pentair Ltd. ("Flow Control") to third parties or provided financial guarantees for financial commitments of Pentair Ltd. In situations where Flow Control and Tyco were unable to obtain a release from these guarantees in connection with the spin-off of Pentair Ltd., 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 September 26, 2015 and December 31, 2014, the outstanding value of bonds, letters of credit and bank guarantees totaled $421.2 million and $370.1 million, respectively.
16.
Supplemental Guarantor Information
Effective upon the Redomicile, Pentair plc (the "Parent Company Guarantor") and Pentair Investments Switzerland GmbH (the "Subsidiary Guarantor"), fully and unconditionally, guarantee the Notes of Pentair Finance S.A. (the "Subsidiary Issuer"). The Subsidiary Guarantor is a Switzerland limited liability company formed in April 2014 and 100 percent-owned subsidiary of the Parent Company Guarantor. The Subsidiary Issuer is a Luxembourg public limited liability company and 100 percent-owned subsidiary of the Subsidiary Guarantor. The guarantees provided by the Parent Company Guarantor and Subsidiary Guarantor are joint and several.

23
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

The following supplemental financial information sets forth the Company’s Condensed Consolidating Statement of Operations and Comprehensive Income (Loss), Condensed Consolidating Balance Sheets and Condensed Consolidating Statement of Cash Flows by relevant group within the Company: Pentair plc and Pentair Investments Switzerland GmbH as the guarantors, Pentair Finance S.A. as issuer of the debt and all other non-guarantor subsidiaries. Condensed consolidating financial information for Pentair plc, Pentair Investments Switzerland GmbH and Pentair Finance S.A. on a stand-alone basis is presented using the equity method of accounting for subsidiaries.

24
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three months ended September 26, 2015
In millions
Parent
Company
Guarantor
Subsidiary
Guarantor
Subsidiary
Issuer
Non-guarantor
Subsidiaries
Eliminations
Consolidated
Total
Net sales
$
—

$
—

$
—

$
1,552.1

$
—

$
1,552.1

Cost of goods sold
—

—

—

1,012.0

—

1,012.0

Gross profit
—

—

—

540.1

—

540.1

Selling, general and administrative
17.7

0.1

1.7

310.7

—

330.2

Research and development
—

—

—

29.9

—

29.9

Operating income (loss)
(17.7
)
(0.1
)
(1.7
)
199.5

—

180.0

Loss (earnings) from continuing operations of investment in subsidiaries
(132.9
)
(133.0
)
(148.3
)
—

414.2

—

Other (income) expense:

 




Equity income of unconsolidated subsidiaries
—

—

—

(0.9
)
—

(0.9
)
Net interest expense
—

—

18.0

13.3

—

31.3

Income (loss) from continuing operations before income taxes
115.2

132.9

128.6

187.1

(414.2
)
149.6

Provision for income taxes
—

—

—

34.4

—

34.4

Net income (loss) from continuing operations
115.2

132.9

128.6

152.7

(414.2
)
115.2

Net income (loss)
$
115.2

$
132.9

$
128.6

$
152.7

$
(414.2
)
$
115.2

Comprehensive income (loss), net of tax

 




Net income (loss)
$
115.2

$
132.9

$
128.6

$
152.7

$
(414.2
)
$
115.2

Changes in cumulative translation adjustment
(85.8
)
(85.8
)
(85.8
)
(85.8
)
257.4

(85.8
)
Changes in market value of derivative financial instruments
(0.7
)
(0.7
)
(0.7
)
(0.7
)
2.1

(0.7
)
Comprehensive income (loss)
$
28.7

$
46.4

$
42.1

$
66.2

$
(154.7
)
$
28.7




25
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine months ended September 26, 2015
In millions
Parent
Company
Guarantor
Subsidiary
Guarantor
Subsidiary
Issuer
Non-guarantor
Subsidiaries
Eliminations
Consolidated
Total
Net sales
$
—

$
—

$
—

$
4,688.3

$
—

$
4,688.3

Cost of goods sold
—

—

—

3,071.8

—

3,071.8

Gross profit
—

—

—

1,616.5

—

1,616.5

Selling, general and administrative
30.4

0.2

3.8

924.3

—

958.7

Research and development
—

—

—

88.7

—

88.7

Operating income (loss)
(30.4
)
(0.2
)
(3.8
)
603.5

—

569.1

Loss (earnings) from continuing operations of investment in subsidiaries
(417.0
)
(418.5
)
(428.6
)
—

1,264.1

—

Other (income) expense:
 
 
 
 
 
 
Equity income of unconsolidated subsidiaries
—

—

—

(2.0
)
—

(2.0
)
Net interest expense
—

1.3

21.8

45.0

—

68.1

Income (loss) from continuing operations before income taxes
386.6

417.0

403.0

560.5

(1,264.1
)
503.0

Provision (benefit) for income taxes
(0.7
)
—

—

116.4

—

115.7

Net income (loss) from continuing operations
387.3

417.0

403.0

444.1

(1,264.1
)
387.3

Loss from discontinued operations, net of tax
—

—

—

(5.6
)
—

(5.6
)
Loss from sale / impairment of discontinued operations, net of tax
—

—

—

(4.8
)
—

(4.8
)
Earnings (loss) from discontinued operations of investment in subsidiaries
(10.4
)
(10.4
)
(10.4
)
—

31.2

—

Net income (loss)
$
376.9

$
406.6

$
392.6

$
433.7

$
(1,232.9
)
$
376.9

Comprehensive income (loss), net of tax
 
 
 
 
 
 
Net income (loss)
$
376.9

$
406.6

$
392.6

$
433.7

$
(1,232.9
)
$
376.9

Changes in cumulative translation adjustment
(238.4
)
(238.4
)
(238.4
)
(238.4
)
715.2

(238.4
)
Changes in market value of derivative financial instruments
(1.6
)
(1.6
)
(1.6
)
(1.6
)
4.8

(1.6
)
Comprehensive income (loss)
$
136.9

$
166.6

$
152.6

$
193.7

$
(512.9
)
$
136.9


26
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Condensed Consolidating Balance Sheet
September 26, 2015
In millions
Parent
Company
Guarantor
Subsidiary
Guarantor
Subsidiary
Issuer
Non-guarantor
Subsidiaries
Eliminations
Consolidated
Total
Assets
Current assets

 




Cash and cash equivalents
$
—

$
—

$
0.2

$
144.7

$
—

$
144.9

Accounts and notes receivable, net
—

—

—

1,136.5

—

1,136.5

Inventories
—

—

—

1,296.2

—

1,296.2

Other current assets
1.1

14.8

19.7

391.7

(41.6
)
385.7

Current assets held for sale
—

—

—

0.9

—

0.9

Total current assets
1.1

14.8

19.9

2,970.0

(41.6
)
2,964.2

Property, plant and equipment, net
—

—

—

921.4

—

921.4

Other assets

 




Investments in subsidiaries
4,981.6

4,969.9

9,873.3

—

(19,824.8
)
—

Goodwill
—

—

—

5,827.4

—

5,827.4

Intangibles, net
—

—

—

2,515.6

—

2,515.6

Other non-current assets
36.9

—

1,232.6

367.5

(1,210.3
)
426.7

Non-current assets held for sale
—

—

—

15.6

—

15.6

Total other assets
5,018.5

4,969.9

11,105.9

8,726.1

(21,035.1
)
8,785.3

Total assets
$
5,019.6

$
4,984.7

$
11,125.8

$
12,617.5

$
(21,076.7
)
$
12,670.9

Liabilities and Equity
Current liabilities

 




Current maturities of long-term debt and short-term borrowings
$
—

$
—

$
—

$
3.2

$
—

$
3.2

Accounts payable
1.3

—

0.8

528.9

—

531.0

Employee compensation and benefits
0.3

0.1

—

264.2

—

264.6

Other current liabilities
66.1

1.4

15.8

652.2

(41.6
)
693.9

Current liabilities held for sale
—

—

—

3.5

—

3.5

Total current liabilities
67.7

1.5

16.6

1,452.0

(41.6
)
1,496.2

Other liabilities

 




Long-term debt
402.2

1.6

4,844.8

944.9

(1,210.3
)
4,983.2

Pension and other post-retirement compensation and benefits
—

—

—

301.6

—

301.6

Deferred tax liabilities
—

—

2.9

825.0

—

827.9

Other non-current liabilities
13.8

—

—

511.8

—

525.6

Non-current liabilities held for sale
—

—

—

0.5

—

0.5

Total liabilities
483.7

3.1

4,864.3

4,035.8

(1,251.9
)
8,135.0

Equity
4,535.9

4,981.6

6,261.5

8,581.7

(19,824.8
)
4,535.9

Total liabilities and equity
$
5,019.6

$
4,984.7

$
11,125.8

$
12,617.5

$
(21,076.7
)
$
12,670.9




27
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Condensed Consolidating Statement of Cash Flows
Nine months ended September 26, 2015
In millions
Parent
Company
Guarantor
Subsidiary
Guarantor
Subsidiary
Issuer
Non-guarantor
Subsidiaries
Eliminations
Consolidated
Total
Operating activities

 




Net cash provided by (used for) operating activities
$
421.3

$
393.3

$
406.1

$
408.1

$
(1,232.9
)
$
395.9

Investing activities

 




Capital expenditures
—

—

—

(100.6
)
—

(100.6
)
Proceeds from sale of property and equipment
—

—

—

24.8

—

24.8

Acquisitions, net of cash acquired
—

—

—

(1,913.0
)
—

(1,913.0
)
Net intercompany loan activity
—

—

1,657.8

(149.8
)
(1,508.0
)
—

Other
—

—

—

(0.8
)
—

(0.8
)
Net cash provided by (used for) investing activities of continuing operations
—

—

1,657.8

(2,139.4
)
(1,508.0
)
(1,989.6
)
Net cash provided by (used for) investing activities of discontinued operations
—

—

—

59.0

—

59.0

Net cash provided by (used for) investing activities
—

—

1,657.8

(2,080.4
)
(1,508.0
)
(1,930.6
)
Financing activities

 




Net repayments of short-term borrowings
—

—

—

(2.0
)
—

(2.0
)
Net receipts of commercial paper and revolving long-term debt
—

—

274.9

1.6

—

276.5

Proceeds from long-term debt
—

—

1,714.8

—

—

1,714.8

Repayments of long-term debt
—

—

—

(4.6
)
—

(4.6
)
Debt issuance costs
—

—

(26.8
)
—

—

(26.8
)
Net change in advances to subsidiaries
(48.0
)
(393.3
)
(4,021.2
)
1,721.6

2,740.9

—

Excess tax benefits from share-based compensation
—

—

—

6.0

—

6.0

Shares issued to employees, net of shares withheld
—

—

—

21.9

—

21.9

Repurchases of ordinary shares
(200.0
)
—

—

—

—

(200.0
)
Dividends paid
(173.3
)
—

—

—

—

(173.3
)
Net cash provided by (used for) financing activities
(421.3
)
(393.3
)
(2,058.3
)
1,744.5

2,740.9

1,612.5

Effect of exchange rate changes on cash and cash equivalents
—

—

(5.5
)
(37.8
)
—

(43.3
)
Change in cash and cash equivalents
—

—

0.1

34.4

—

34.5

Cash and cash equivalents, beginning of period
—

—

0.1

110.3

—

110.4

Cash and cash equivalents, end of period
$
—

$
—

$
0.2

$
144.7

$
—

$
144.9



28
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)


Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three months ended September 27, 2014
In millions
Parent
Company
Guarantor
Subsidiary
Guarantor
Subsidiary
Issuer
Non-guarantor
Subsidiaries
Eliminations
Consolidated
Total
Net sales
$
—

$
—

$
—

$
1,758.4

$
—

$
1,758.4

Cost of goods sold
—

—

—

1,133.7

—

1,133.7

Gross profit
—

—

—

624.7

—

624.7

Selling, general and administrative
3.2

1.5

0.8

323.3

—

328.8

Research and development
—

—

—

28.5

—

28.5

Operating income (loss)
(3.2
)
(1.5
)
(0.8
)
272.9

—

267.4

Loss (earnings) from continuing operations of investment in subsidiaries
(195.7
)
(198.1
)
(206.3
)
—

600.1

—

Other (income) expense:

 




Equity income of unconsolidated subsidiaries
—

—

—

(0.3
)
—

(0.3
)
Loss on sale of business
—

—

—

—

—

—

Net interest expense
—

0.9

1.0

15.2

—

17.1

Income (loss) from continuing operations before income taxes
192.5

195.7

204.5

258.0

(600.1
)
250.6

Provision for income taxes
—

 
—

58.1

—

58.1

Net income (loss) from continuing operations
192.5

195.7

204.5

199.9

(600.1
)
192.5

Income from discontinued operations, net of tax
—

—

—

1.6

—

1.6

Loss from sale of discontinued operations, net of tax
—

—

—

(380.1
)
—

(380.1
)
Earnings (loss) from discontinued operations of investment in subsidiaries
(378.5
)
(378.5
)
(378.5
)
—

1,135.5

—

Net income (loss)
$
(186.0
)
$
(182.8
)
$
(174.0
)
$
(178.6
)
$
535.4

$
(186.0
)
Comprehensive income (loss), net of tax
 
 
 
 
 
 
Net income (loss)
$
(186.0
)
$
(182.8
)
$
(174.0
)
$
(178.6
)
$
535.4

$
(186.0
)
Changes in cumulative translation adjustment
(178.8
)
(178.8
)
(178.8
)
(178.8
)
536.4

(178.8
)
Changes in market value of derivative financial instruments
0.8

0.8

0.8

0.8

(2.4
)
0.8

Comprehensive income (loss)
$
(364.0
)
$
(360.8
)
$
(352.0
)
$
(356.6
)
$
1,069.4

$
(364.0
)



29
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine months ended September 27, 2014
 
 
 
 
 
 
 
In millions
Parent
Company
Guarantor
Subsidiary
Guarantor
Subsidiary
Issuer
Non-guarantor
Subsidiaries
Eliminations
Consolidated
Total
Net sales
$
—

$
—

$
—

$
5,236.5

$
—

$
5,236.5

Cost of goods sold
—

—

—

3,401.4

—

3,401.4

Gross profit
—

—

—

1,835.1

—

1,835.1

Selling, general and administrative
10.6

4.2

6.8

1,049.4

—

1,071.0

Research and development
—

—

—

88.2

—

88.2

Operating income (loss)
(10.6
)
(4.2
)
(6.8
)
697.5

—

675.9

Loss (earnings) from continuing operations of investment in subsidiaries
(488.5
)
(493.9
)
(484.0
)
—

1,466.4

—

Other (income) expense:
 
 
 
 
 
 
Equity income of unconsolidated subsidiaries
—

—

—

(0.9
)
—

(0.9
)
Loss on sale of business
—

—

—

0.2

—

0.2

Net interest expense
0.7

1.2

2.0

47.2

—

51.1

Income (loss) from continuing operations before income taxes
477.2

488.5

475.2

651.0

(1,466.4
)
625.5

Provision for income taxes
—

—

1.0

147.3

—

148.3

Net income (loss) from continuing operations
477.2

488.5

474.2

503.7

(1,466.4
)
477.2

Income from discontinued operations, net of tax
—

—

—

2.6

—

2.6

Loss from sale/impairment of discontinued operations, net of tax
—

—

—

(385.7
)
—

(385.7
)
Earnings (loss) from discontinued operations of investment in subsidiaries
(383.1
)
(383.1
)
(383.1
)
—

1,149.3

—

Net income (loss)
$
94.1

$
105.4

$
91.1

$
120.6

$
(317.1
)
$
94.1

Comprehensive income (loss), net of tax
 
 
 
 
 
 
Net income (loss) before noncontrolling interest
$
94.1

$
105.4

$
91.1

$
120.6

$
(317.1
)
$
94.1

Changes in cumulative translation adjustment
(190.3
)
(190.3
)
(190.3
)
(190.3
)
570.9

(190.3
)
Changes in market value of derivative financial instruments
1.2

1.2

1.2

1.2

(3.6
)
1.2

Comprehensive income (loss)
$
(95.0
)
$
(83.7
)
$
(98.0
)
$
(68.5
)
$
250.2

$
(95.0
)

30
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Condensed Consolidating Balance Sheet
December 31, 2014
In millions
Parent
Company
Guarantor
Subsidiary
Guarantor
Subsidiary
Issuer
Non-guarantor
Subsidiaries
Eliminations
Consolidated
Total
Assets
Current assets

 




Cash and cash equivalents
$
—

$
—

$
0.1

$
110.3

$
—

$
110.4

Accounts and notes receivable, net
—

—

—

1,206.8

(0.9
)
1,205.9

Inventories
—

—

—

1,130.4

—

1,130.4

Other current assets
—

17.6

2.0

367.6

(20.4
)
366.8

Current assets held for sale
—

—

—

80.6

—

80.6

Total current assets
—

17.6

2.1

2,895.7

(21.3
)
2,894.1

Property, plant and equipment, net
—

—

—

950.0

—

950.0

Other assets

 




Investments in subsidiaries
4,733.0

4,893.8

7,612.2

—

(17,239.0
)
—

Goodwill
—

—

—

4,741.9

—

4,741.9

Intangibles, net
—

—

—

1,608.1

—

1,608.1

Other non-current assets
80.2

—

1,381.8

345.0

(1,370.8
)
436.2

Non-current assets held for sale
—

—

—

24.9

—

24.9

Total other assets
4,813.2

4,893.8

8,994.0

6,719.9

(18,609.8
)
6,811.1

Total assets
$
4,813.2

$
4,911.4

$
8,996.1

$
10,565.6

$
(18,631.1
)
$
10,655.2

Liabilities and Equity
Current liabilities

 




Current maturities of long-term debt and short-term borrowings
$
—

$
—

$
—

$
6.7

$
—

$
6.7

Accounts payable
0.9

—

—

583.1

(0.9
)
583.1

Employee compensation and benefits
0.2

0.6

—

304.7

—

305.5

Other current liabilities
120.6

2.2

10.9

595.8

(20.4
)
709.1

Current liabilities held for sale
—

—

—

35.1

—

35.1

Total current liabilities
121.7

2.8

10.9

1,525.4

(21.3
)
1,639.5

Other liabilities

 




Long-term debt
11.4

175.6

2,860.6

1,320.6

(1,370.8
)
2,997.4

Pension and other post-retirement compensation and benefits
—

—

—

322.0

—

322.0

Deferred tax liabilities
—

—

2.9

525.4

—

528.3

Other non-current liabilities
16.3

—

—

481.4

—

497.7

Non-current liabilities held for sale
—

—

—

6.5

—

6.5

Total liabilities
149.4

178.4

2,874.4

4,181.3

(1,392.1
)
5,991.4

Equity
4,663.8

4,733.0

6,121.7

6,384.3

(17,239.0
)
4,663.8

Total liabilities and equity
$
4,813.2

$
4,911.4

$
8,996.1

$
10,565.6

$
(18,631.1
)
$
10,655.2


31
Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

Condensed Consolidating Statement of Cash Flows
Nine months ended September 27, 2014
In millions
Parent
Company
Guarantor
Subsidiary
Guarantor
Subsidiary
Issuer
Non-guarantor
Subsidiaries
Eliminations
Consolidated
Total
Operating activities
 
 
 
 
 
 
Net cash provided by (used for) operating activities
$
99.4

$
94.2

$
88.1

$
718.8

$
(317.1
)
$
683.4

Investing activities

 




Capital expenditures
—

—

—

(92.5
)
—

(92.5
)
Proceeds from sale of property and equipment
—

—

—

4.1

—

4.1

Other
—

—

—

0.9

—

0.9

Net cash provided by (used for) investing activities
—

—

—

(87.5
)
—

(87.5
)
Financing activities

 




Net receipts of short-term borrowings
—

—

—

0.3

—

0.3

Net receipts of commercial paper and revolving long-term debt
—

—

416.7

9.5

—

426.2

Repayments of long-term debt
—

—

—

(13.2
)
—

(13.2
)
Excess tax benefits from share-based compensation
—

—

—

10.0

—

10.0

Net change in advances to subsidiaries
455.6

(94.2
)
(551.6
)
(126.9
)
317.1

—

Shares issued to employees, net of shares withheld
—

—

—

30.3

—

30.3

Repurchases of ordinary shares
(399.3
)
—

—

(450.7
)
—

(850.0
)
Dividends paid
(156.2
)
—

—

—

—

(156.2
)
Purchase of noncontrolling interest
—

—

—

(134.7
)
—

(134.7
)
Net cash provided by (used for) financing activities
(99.9
)
(94.2
)
(134.9
)
(675.4
)
317.1

(687.3
)
Effect of exchange rate changes on cash and cash equivalents
—

—

—

(8.0
)
—

(8.0
)
Change in cash and cash equivalents
(0.5
)
—

(46.8
)
(52.1
)
—

(99.4
)
Cash and cash equivalents, beginning of period
0.5

—

47.0

208.5

—

256.0

Cash and cash equivalents, end of period
$
—

$
—

$
0.2

$
156.4

$
—

$
156.6



32

ITEM 2.
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 the ability to achieve the benefits of planned cost take-out actions; the ability to successfully identify, complete and integrate acquisitions, including the ability to successfully integrate and achieve the expected benefits of the ERICO Acquisition; overall global economic and business conditions; 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 ability to successfully complete the disposition of the remaining portion of the Water Transport business on anticipated terms and timetable; 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 ("SEC"), including in our 2014 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
The terms "us," "we" or "our" refer to Pentair plc (formerly Pentair Ltd.) and its consolidated subsidiaries. We are a focused diversified industrial manufacturing company comprising four reporting segments: Valves & Controls, Flow & Filtration Solutions, Water Quality Systems and Technical Solutions. During the first quarter of 2015, we reorganized our business segments to reflect a new operating structure and management of our Global Business Units. Each of our business segments operate as a stand-alone Global Business Unit. All prior period amounts related to the segment change have been retrospectively reclassified throughout this Quarterly Report on Form 10-Q to conform to the new presentation. For the first nine months of 2015, Valves & Controls, Flow & Filtration Solutions, Water Quality Systems and Technical Solutions represented approximately 29 percent, 23 percent, 22 percent and 26 percent of total revenues, respectively. We classify our operations into business segments based primarily on types of products offered and markets served:
•
Valves & Controls — The Valves & Controls segment designs, manufactures, markets and services valves, fittings, automation and controls and actuators for the energy and industrial verticals.
•
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.
•
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.
•
Technical Solutions — The Technical Solutions segment designs, manufactures, markets and services products that guard and protect some of the world’s most sensitive electronics and electronic equipment, as well as heat management solutions designed to provide thermal protection to temperature sensitive fluid applications.



33

Key Trends and Uncertainties Regarding Our Existing Business
The following trends and uncertainties affected our financial performance in 2014 and the first nine months of 2015 and will likely impact our results in the future:
•
In late 2014 and continuing in the first nine months of 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 for the remainder of 2015 and into 2016.
•
In the first nine months of 2015, we experienced softness in project orders, particularly within the energy and industrial businesses. We expect market uncertainty to continue and oil prices to remain volatile throughout 2015.
•
In the second and third quarters of 2015, we initiated further cost take-out actions to offset the negative earnings impact of foreign exchange and core revenue decline. We expect to continue these actions for the remainder of 2015.
•
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 organic growth will likely be limited.
•
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 the first nine months of 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 begun to moderate, but we are uncertain as to the timing and impact of these market changes.
In 2015, our operating objectives include the following:
•
Increasing our presence, organically and through acquisitions, in both fast growth and developed regions and vertical focus to grow in those markets in which we have competitive advantages;
•
Optimizing our technological capabilities to increasingly generate innovative new products;
•
Focusing on developing global talent in light of our increased global presence; and
•
Driving operating excellence through lean enterprise initiatives, with specific focus on sourcing and supply management, cash flow management and lean operations.
We may seek to meet our objectives of expanding our geographic reach internationally and expanding our presence in our various channels to market by acquiring technologies and products to broaden our businesses’ capabilities to serve additional markets and through acquisitions. We may also consider the divestiture of discrete business units to further focus our businesses on our most attractive markets.

34

CONSOLIDATED RESULTS OF OPERATIONS
The consolidated results of operations for the three months ended September 26, 2015 and September 27, 2014 were as follows:
 
Three months ended
In millions
September 26,
2015
September 27,
2014
$ 
change
% / point 
change
Net sales
$
1,552.1

$
1,758.4

$
(206.3
)
(11.7
)%
Cost of goods sold
1,012.0

1,133.7

(121.7
)
(10.7
)%
Gross profit
540.1

624.7

(84.6
)
(13.5
)%
      % of net sales
34.8
%
35.5
%
 
(0.7
) pts
 
 
 
 
 

Selling, general and administrative
330.2

328.8

1.4

0.4
 %
      % of net sales
21.4
%
18.8
%
 
2.6
 pts
Research and development
29.9

28.5

1.4

4.9
 %
      % of net sales
1.9
%
1.6
%
 
0.3
 pts
 
 
 
 
 
Operating income
180.0

267.4

(87.4
)
(32.7
)%
      % of net sales
11.6
%
15.2
%
 
(3.6
) pts
 
 
 
 
 
Net interest expense
31.3

17.1

14.2

83.0
 %
 
 
 
 
 
Net income from continuing operations before income taxes
149.6

250.6

(101.0
)
(40.3
)%
Provision for income taxes
34.4

58.1

(23.7
)
(40.8
)%
      Effective tax rate
23.0
%
23.2
%
 
(0.2
) pts
The consolidated results of operations for the nine months ended September 26, 2015 and September 27, 2014 were as follows:
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
$ 
change
% / point 
change
Net sales
$
4,688.3

$
5,236.5

$
(548.2
)
(10.5
)%
Cost of goods sold
3,071.8

3,401.4

(329.6
)
(9.7
)%
Gross profit
1,616.5

1,835.1

(218.6
)
(11.9
)%
      % of net sales
34.5
%
35.0
%
 
(0.5
) pts
 
 
 
 
 
Selling, general and administrative
958.7

1,071.0

(112.3
)
(10.5
)%
      % of net sales
20.5
%
20.6
%
 
(0.1
) pts
Research and development
88.7

88.2

0.5

0.6
 %
      % of net sales
1.9
%
1.7
%
 
0.2
 pts
 
 
 
 
 
Operating income
569.1

675.9

(106.8
)
(15.8
)%
      % of net sales
12.1
%
12.9
%
 
(0.8
) pts
 
 
 
 
 
Net interest expense
68.1

51.1

17.0

33.3
 %
 
 
 
 
 
Net income from continuing operations before income taxes
503.0

625.5

(122.5
)
(19.6
)%
Provision for income taxes
115.7

148.3

(32.6
)
(22.0
)%
      Effective tax rate
23.0
%
23.7
%
 
(0.7
) pts


Net sales

35

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

Three months ended September 26, 2015
Nine months ended September 26, 2015

over the prior year period
over the prior year period
Volume
(5.5
)%
(4.4
)%
Price
0.2

0.5

Core Growth
(5.3
)
(3.9
)
Acquisition
0.7

0.2

Currency
(7.1
)
(6.8
)
Total
(11.7
)%
(10.5
)%
The 11.7 and 10.5 percent decreases in consolidated net sales in the third quarter and first nine months, respectively, of 2015 from 2014 were primarily driven by:
•
slower than expected oil and gas industry shipments and orders, broad-based slowing of global capital spending and customer inventory de-stocking; 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 $13.0 million in the third quarter and first nine months of 2015 as a result of the ERICO Acquisition;
•
cores sales growth in our food & beverage and residential & commercial businesses; and
•
selective increases in selling prices to mitigate inflationary cost increases.

Gross profit
The 0.7 and 0.5 percentage point decreases in gross profit as a percentage of sales in the third quarter and first nine months, respectively, of 2015 from 2014 were primarily driven by:
•
lower core sales volumes, which resulted in decreased leverage on fixed expenses included in cost of goods sold; 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.
Selling, general and administrative ("SG&A")
The 2.6 percentage point increase in SG&A expense as a percentage of sales in the third quarter of 2015 from 2014 was primarily driven by:
•
restructuring costs of $25.2 million in the third quarter of 2015, compared to no restructuring costs in the third quarter of 2014;
•
deal related costs and expenses of $14.3 million in the third quarter of 2015; and
•
lower sales volume and the resulting loss of leverage on fixed operating expenses.
These increases were partially offset by:
•
cost savings generated from back-office consolidation, reduction in personnel and other lean initiatives.

36

The 0.1 percentage point decrease in SG&A expense as a percentage of sales in the first nine months of 2015 from 2014 was primarily driven by:
•
restructuring costs of $49.2 million in the first nine months of 2015, compared to restructuring costs of $52.9 million in the first nine months of 2014; and
•
cost savings generated from back-office consolidation, reduction in personnel and other lean initiatives.
These decreases were partially offset by:
•
deal related cost and expenses of $14.3 million in the first nine months of 2015
Net interest expense
The 83.0 and 33.3 percent increases in net interest expense in the third quarter and first nine months, respectively, of 2015 from 2014 were primarily driven by:
•
the amortization of $10.8 million of debt issuance costs during the third quarter and first nine months of 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 the first nine months of 2015, compared to the first nine months of 2014, primarily as the result of the September 2015 issuance of senior notes; and
•
higher interest rates on commercial paper.
Provision for income taxes
The 0.2 and 0.7 percentage point decreases in the effective tax rate in the third quarter and first nine months, respectively, of 2015 from 2014 were primarily driven by:
•the mix of global earnings toward lower tax jurisdictions.
This decrease was partially offset by:
•the unfavorable tax impact of transaction costs related to the ERICO Acquisition.

37


SEGMENT RESULTS OF OPERATIONS
The 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 is comprised of various product offerings that serve multiple end users.
Valves & Controls
The net sales and segment income for Valves & Controls for the three and nine months ended September 26, 2015 and September 27, 2014 were as follows:

Three months ended


 
Nine months ended
 
 
In millions
September 26,
2015
September 27,
2014

% / point change
 
September 26,
2015
September 27,
2014
 
% / point change
Net sales
$
440.9

$
607.9


(27.5
)%
 
$
1,366.5

$
1,767.5

 
(22.7
)%
Segment income
55.7

107.6


(48.2
)%
 
175.5

282.8

 
(37.9
)%
      % of net sales
12.6
%
17.7
%

(5.1
) pts
 
12.8
%
16.0
%
 
(3.2
) pts
Net sales
The components of the change in Valves & Controls net sales from the prior period were as follows:

Three months ended September 26, 2015
Nine months ended September 26, 2015

over the prior year period
over the prior year period
Volume
(17.6
)%
(13.4
)%
Price
—

—

Core Growth
(17.6
)
(13.4
)
Currency
(9.9
)
(9.3
)
Total
(27.5
)%
(22.7
)%
The 27.5 and 22.7 percent decreases in net sales for Valves & Controls in the third quarter and first nine months, respectively, of 2015 from 2014 were primarily driven by:
•
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 fast growth regions, including Southeast Asia and India.

38

Segment income
The components of the change in Valves & Controls segment income from the prior period were as follows:
 
Three months ended September 26, 2015
Nine months ended September 26, 2015
 
over the prior year period
over the prior year period
Growth
(7.2
) pts
(5.3
) pts
Inflation
(1.0
)
(1.1
)
Productivity/Price
3.1

3.2

Total
(5.1
) pts
(3.2
) pts
The 5.1 and 3.2 percentage point decreases in segment income for Valves & Controls as a percentage of net sales in the third quarter and first nine months, respectively, of 2015 from 2014 was primarily driven by:
•
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.
Flow & Filtration Solutions
The net sales and segment income for Flow & Filtration Solutions for the three and nine months ended September 26, 2015 and September 27, 2014 were as follows:

Three months ended


 
Nine months ended
 
 
In millions
September 26,
2015
September 27,
2014

% / point change
 
September 26,
2015
September 27,
2014
 
% / point change
Net sales
$
362.7

$
394.1


(8.0
)%
 
$
1,087.4

$
1,219.7

 
(10.8
)%
Segment income
52.8

53.5


(1.3
)%
 
145.0

157.6

 
(8.0
)%
      % of net sales
14.6
%
13.6
%

1.0
 pts
 
13.3
%
12.9
%
 
0.4
 pts
Net sales
The components of the change in Flow & Filtration Solutions net sales from the prior period were as follows:

Three months ended September 26, 2015
Nine months ended September 26, 2015

over the prior year period
over the prior year period
Volume
(1.9
)%
(5.3
)%
Price
0.9

1.2

Core Growth
(1.0
)
(4.1
)
Currency
(7.0
)
(6.7
)
Total
(8.0
)%
(10.8
)%
The 8.0 and 10.8 percent decreases in net sales for Flow & Filtration Solutions in the third quarter and first nine months, respectively, of 2015 from 2014 was primarily driven by:
•
core sales declines due to depression of 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.

39

These decreases were partially offset by:
•
selective increases in selling prices to mitigate inflationary cost increases;
•
core sales growth in our food & beverage businesses; and
•
core growth in fast growth regions, including the Middle East and Eastern Europe.
Segment income
The components of the change in Flow & Filtration Solutions segment income from the prior period were as follows:
 
Three months ended September 26, 2015
Nine months ended September 26, 2015
 
over the prior year period
over the prior year period
Growth
(3.1
) pts
(2.8
) pts
Inflation
(1.3
)
(1.2
)
Productivity/Price
5.4

4.4

Total
1.0
  pts
0.4
  pts
The 1.0 and 0.4 percentage point increases in segment income for Flow & Filtration Solutions as a percentage of net sales in the third quarter and first nine months, respectively, of 2015 from 2014 were primarily driven by:
•
price increases more than offsetting inflationary cost increases; and
•
cost savings driven by previous restructuring actions.
These increases were partially offset by:
•
inflationary increases related to 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.
Water Quality Systems
The net sales and segment income for Water Quality Systems for the three and nine months ended September 26, 2015 and September 27, 2014 were as follows:

Three months ended


 
Nine months ended
 
 
In millions
September 26,
2015
September 27,
2014

% / point change
 
September 26,
2015
September 27,
2014
 
% / point change
Net sales
$
322.0

$
324.1


(0.7
)%
 
$
1,016.6

$
1,006.0

 
1.1
%
Segment income
60.5

56.0


8.0
 %
 
200.5

191.0

 
5.0
%
      % of net sales
18.8
%
17.3
%

1.5
 pts
 
19.7
%
19.0
%
 
0.7
 pts
Net sales
The components of the change in Water Quality Systems net sales from the prior period were as follows:

Three months ended September 26, 2015
Nine months ended September 26, 2015

over the prior year period
over the prior year period
Volume
2.0
 %
3.4
 %
Price
0.8

0.9

Core Growth
2.8

4.3

Currency
(3.5
)
(3.2
)
Total
(0.7
)%
1.1
 %
The 0.7 percent decrease in net sales for Water Quality Systems in the third quarter of 2015 from 2014 was primarily driven by:
•
a strong U.S. dollar causing unfavorable foreign currency effects; and

40

•
core sales declines in our food & beverage businesses.
These decreases were partially offset by:
•
core sales growth related to higher sales of certain pool products primarily serving the North American residential housing market for the third quarter of 2015;
•
core sales growth in the United States; and
•
selective increases in selling prices to mitigate inflationary cost increases.
The 1.1 percent increase in net sales for Water Quality Systems in the first nine months of 2015 from 2014 was primarily driven by:
•
core sales growth related to higher sales of certain pool products primarily serving the North American residential housing market and increased demand for global food & beverage solutions for the first nine months of 2015;
•
core sales growth in the United States, Canada and China; 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.
Segment income
The components of the change in Water Quality Systems segment income from the prior period were as follows:
 
Three months ended September 26, 2015
Nine months ended September 26, 2015
 
over the prior year period
over the prior year period
Growth
0.5
 pts
0.2
 pts
Inflation
(1.0
)
(1.3
)
Productivity/Price
2.0

1.8

Total
1.5
  pts
0.7
  pts

The 1.5 and 0.7 percentage point increases in segment income for Water Quality Systems as a percentage of net sales in the third quarter and first nine months, respectively, of 2015 from 2014 were primarily driven by:
•
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.
Technical Solutions
The net sales and segment income for Technical Solutions for the three and nine months ended September 26, 2015 and September 27, 2014 were as follows:
 
Three months ended
 
 
 
Nine months ended
 
 
In millions
September 26,
2015
September 27,
2014
 
% / point change
 
September 26,
2015
September 27,
2014
 
% / point change
Net sales
$
432.3

$
438.8

 
(1.5
)%
 
$
1,235.2

$
1,262.7

 
(2.2
)%
Segment income
101.0

101.1

 
(0.1
)%
 
265.0

266.9

 
(0.7
)%
      % of net sales
23.4
%
23.1
%
 
0.3
 pts
 
21.5
%
21.1
%
 
0.4
 pts

41

Net sales
The components of the change in Technical Solutions net sales from the prior period were as follows:
 
Three months ended September 26, 2015
Nine months ended September 26, 2015
 
over the prior year period
over the prior year period
Volume
2.3
 %
3.0
 %
Price
(0.3
)
0.2

Core Growth
2.0

3.2

Acquisition
3.0

1.0

Currency
(6.5
)
(6.4
)
Total
(1.5
)%
(2.2
)%
The 1.5 and 2.2 percent decreases in net sales for Technical Solutions in the third quarter and first nine months, respectively, of 2015 from 2014 were primarily driven by:
•
a strong U.S. dollar causing unfavorable foreign currency effects;
•
lower core sales volumes in our infrastructure and industrial business, primarily due to broad-based slowing of global capital spending; and
•
a decrease in demand for products in fast growth regions.
These decreases were partially offset by:
•
sales of $13.0 million in the third quarter and first nine months of 2015 as a result of the ERICO Acquisition;
•
core growth in our residential & commercial and energy businesses; and
•
higher project core sales volume in Canada and Western Europe.
Segment income
The components of the change in Technical Solutions segment income from the prior period were as follows:
 
Three months ended September 26, 2015
Nine months ended September 26, 2015
 
over the prior year period
over the prior year period
Growth
(1.1
) pts
(0.7
) pts
Inflation
(1.0
)
(1.2
)
Productivity/Price
2.4

2.3

Total
0.3
  pts
0.4
  pts

The 0.3 and 0.4 percentage point increases in segment income for Technical Solutions as a percentage of net sales in the third quarter and first nine months, respectively, of 2015 from 2014 were primarily driven 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.
These increases were partially offset by:
•
high margin project sales in the third quarter and first nine months of 2014 that did not recur in the third quarter and first nine months of 2015;
•
lower core sales volumes in our infrastructure and industrial business, which resulted in decreased leverage on operating expenses; and
•
inflationary increases related to labor costs and certain raw materials.

42

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. Our primary revolving credit facilities have generally been adequate for these purposes, although we have negotiated additional credit facilities or completed debt and equity offerings 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 credit ratings and a solid liquidity position.
We experience seasonal cash flows primarily due to seasonal demand in a number of markets within Water Quality Systems and Flow & Filtration Solutions. 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.
Operating activities
Cash provided by operating activities of continuing operations was $403.1 million in the first nine months of 2015, compared to $688.2 million in the same period of 2014.
The $403.1 million in net cash provided by operating activities of continuing operations in the first nine months of 2015 primarily reflects an increase in net working capital. Operating cash flows in the first nine months of 2015 were negatively impacted by $168.4 million due to the increase in net working capital. The increase in net working capital was offset by $572.5 million of net income from continuing operations, net of non-cash depreciation and amortization.

The $688.2 million in net cash provided by operating activities of continuing operations in the first nine months of 2014 is primarily the result of $667.0 million of net income from continuing operations, net of non-cash depreciation and amortization. Additionally, operating cash flows in the first nine months of 2014 were positively impacted by $45.3 million due to a decrease in net working capital.
Investing activities
Cash used for investing activities of continuing operations was $1,989.6 million in the first nine months of 2015, compared to cash used for investing activities of $87.5 million in the same period of 2014. Net cash used for investing activities of continuing operations in the first nine months of 2015 primarily relates to cash of $1,806.3 million (net of cash acquired) used to acquired ERICO Global Company during the third quarter of 2015 and $96.0 million (net of cash acquired) used to acquire Nuheat Industries Limited during the second quarter of 2015, both as part of Technical Solutions. Net cash used for investing activities of continuing operations in the first nine months of 2014 relates primarily to $92.5 million of capital expenditures, partially offset by $4.1 million of proceeds from the sale of property and equipment.
Capital expenditures in the first nine months of 2015 were $100.6 million compared with $92.5 million in the prior year period. We anticipate capital expenditures for fiscal 2015 to be approximately $140 million, primarily for capacity expansions of manufacturing facilities, developing new products and general maintenance.
Financing activities
Net cash provided by financing activities was $1,612.5 million in the first nine months of 2015, compared with net cash used for financing activities of $687.3 million in the prior year period. Net cash provided by financing activities in the first nine months of 2015 was primarily due to cash proceeds received from the September 2015 issuance of senior notes (discussed below), partially offset by share repurchases and payment of dividends. Net cash used for financing activities in the first nine months of 2014 included share repurchases, the acquisition of the remaining 19.9 percent ownership interest in Pentair Residential Filtration as part of Water Quality Systems and payment of dividends, partially offset by net receipts of commercial paper and revolving long-term debt.
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

43

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 1.35% Senior Notes due 2015, $350.0 million of 1.875% Senior Notes due 2017, $250.0 million of 2.65% Senior Notes due 2019, $373.0 million of 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 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, Pentair Investments Switzerland GmbH ("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 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 September 26, 2015 and December 31, 2014, PFSA had $1,082.4 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.
Total availability under the Amended Credit Facility was $1,226.1 million as of September 26, 2015, which was not limited by any covenants contained in the Amended Credit Facility’s credit agreement.
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, up to a lifetime maximum $25.0 million of costs, fees and expenses incurred in connection with certain acquisitions, investments, dispositions and the issuance, repayment or refinancing of debt, and in addition to (but without duplication of) the fees, costs 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 incurrence, 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 September 26, 2015, we were in compliance with all financial covenants in our debt agreements.
In addition to the Amended Credit Facility, we have various other credit facilities with an aggregate availability of $51.0 million, of which $0.3 million was outstanding at September 26, 2015. Borrowings under these credit facilities bear interest at variable rates.

44

As of September 26, 2015, we have $64.0 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.
In December 2014, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $1.0 billion. The authorization expires on December 31, 2019. During the nine months ended September 26, 2015, we repurchased 3.1 million of our ordinary shares for $200.0 million pursuant to these authorizations. As of September 26, 2015, we had $800.0 million remaining available for share repurchases under this authorization. No incremental share repurchase is planned for the remainder of 2015.
At our 2014 annual meeting of shareholders held on May 20, 2014, our shareholders approved a proposal to pay quarterly cash dividends through the second quarter of 2015. The authorization provided that dividends of $1.20 per share be paid to our shareholders in quarterly installments of $0.30 for each of the third and fourth quarters of 2014 and the first and second quarters of 2015 and we expect to continue paying dividends on a quarterly basis. In December 2014, the Board of Directors approved an increase of $0.02 per share for the 2015 first and second quarter dividends, bringing the total quarterly dividend for those quarters to $0.32 per share. The Board of Directors also approved a plan to increase the dividend for the remainder of 2015, which will mark the 39th consecutive year we have increased dividends.

On September 21, 2015, our Board of Directors declared a quarterly cash dividend of $0.32 per share payable on November 6, 2015 to shareholders of record at the close of business on October 23, 2015.
We paid dividends in the first nine months of 2015 of $173.3 million, or $0.96 per ordinary share, compared with $156.2 million, or $0.80 per ordinary share, in the prior year period.
Under Irish law, the payment of future cash dividends and redemptions and repurchases of shares 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. GAAP reported amount (e.g., retained earnings). As of December 31, 2014, our distributable reserve balance was $12.1 billion.
Other financial measures
In addition to measuring our cash flow generation or usage based upon operating, investing and financing classifications included in the Condensed 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-Generally Accepted Accounting Principles 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:
 
Nine months ended
In millions
September 26,
2015
September 27,
2014
Net cash provided by (used for) operating activities of continuing operations
$
403.1

$
688.2

Capital expenditures
(100.6
)
(92.5
)
Proceeds from sale of property and equipment
24.8

4.1

Free cash flow
$
327.3

$
599.8

NEW ACCOUNTING STANDARDS
In September 2015, the Financial Accounting Standards Board (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

45

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 standard is effective for fiscal years beginning after December 15, 2015, including interim periods within that reporting period and early adoption is permitted. The potential impact on our financial condition or results of operations will be dependent upon the nature of final purchase price allocations. We plan to adopt the new standard during the fourth quarter of 2015.
In May 2014, the Financial Accounting Standards Board issued new accounting requirements for the recognition of revenue from contracts with customers. The new requirements 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.
CRITICAL ACCOUNTING POLICIES
In our 2014 Annual Report on Form 10-K, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements. We have not changed these policies from those previously disclosed in our Annual Report.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk during the quarter ended September 26, 2015. For additional information, refer to Item 7A of our 2014 Annual Report on Form 10-K.
ITEM 4.    CONTROLS AND PROCEDURES
(a)    Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter ended September 26, 2015 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the quarter ended September 26, 2015 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.
(b)    Changes in Internal Controls
During the quarter ended September 26, 2015, we completed the ERICO Acquisition. As part of our ongoing integration activities after the ERICO Acquisition, we are continuing to incorporate our controls and procedures into the ERICO business and augment our company-wide controls to reflect the risks inherent in the ERICO Acquisition. There were no other changes in our internal control over financial reporting that occurred during the quarter ended September 26, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


46

PART II OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
There have been no material developments from the disclosures contained in our 2014 Annual Report on Form 10-K.
ITEM 1A.    RISK FACTORS
There have been no material changes from the risk factors previously disclosed in ITEM 1A. of our 2014 Annual Report on Form 10-K.
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information with respect to purchases we made of our ordinary shares during the third quarter of 2015:
 
(a)
(b)
(c)
(d)
Period
Total number
of shares
purchased
Average price
paid per share
Total number of shares
purchased as part of
publicly announced
plans or programs
Dollar value of shares
that may yet be
purchased under the
plans or programs
June 28 - July 25
63

$
65.38

—

$
800,000,049

July 26 - August 22
13,799

60.69

—

800,000,049

August 23 - September 26
5,153

53.85

—

800,000,049

Total
19,015

 
—

 
 
(a)
The purchases in this column include 63 shares for the period June 28 - July 25, 13,799 shares for the period July 26 - August 22 and 5,153 shares for the period August 23 - September 26 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 deemed surrendered to us by participants in the Plans to satisfy the exercise price for the exercise price of stock options and withholding tax obligations due upon stock option exercises and vesting of restricted shares.
(c)
The number of shares in this column represents the number of shares repurchased as part of our publicly announced plans to repurchase our ordinary shares up to a maximum dollar limit of $1.0 billion.
(d)
In December 2014, our Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $1.0 billion. This authorization expires on December 31, 2019.
ITEM 6.     EXHIBITS
The exhibits listed in the accompanying Exhibit Index are filed as part of this Quarterly Report on Form 10-Q.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on October 20, 2015.
 
 
 
 
 
Pentair plc
 
Registrant
 
 
 
 
By
/s/ John L. Stauch
 
 
John L. Stauch
 
 
Executive Vice President and Chief Financial Officer
 
 
 
 
By
/s/ Mark C. Borin
 
 
Mark C. Borin
 
 
Chief Accounting Officer and Treasurer



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Exhibit Index to Form 10-Q for the Period Ended September 26, 2015
 
2.1
 
Agreement and Plan of Merger, dated August 15, 2015, among Pentair plc, Pentair Lionel Acquisition Co., Pentair Lionel Merger Sub, Inc. and ERICO Global Company (Incorporated by reference to Exhibit 2.1 in the Current Report on Form 8-K of Pentair plc filed with the SEC on August 18, 2015 (File No. 001-11625)).
 
 
 
4.1
 
First Amendment, dated as of August 28, 2015, among Pentair, Pentair Investments Switzerland GmbH, Pentair Finance S.A. and the lenders and agents party thereto (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Pentair plc filed with the SEC on September 3, 2015 (File No. 001-11625)).
 
 
 
4.2
 
Second Amendment, dated as of September 2, 2015, among Pentair, Pentair Investments Switzerland GmbH, Pentair Finance S.A. and the lenders and agents party thereto (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Pentair plc filed with the SEC on September 3, 2015 (File No. 001-11625)).
 
 
 
4.3
 
Indenture, dated as of September 16, 2015, among Pentair Finance S.A. (as Issuer), Pentair plc (as Parent and Guarantor), Pentair Investments Switzerland GmbH (as Guarantor) and U.S. Bank National Association (as Trustee) (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Pentair plc filed with the SEC on September 16, 2015 (File No. 001-11625)).
 
 
 
4.4
 
First Supplemental Indenture, dated as of September 16, 2015, among Pentair Finance S.A. (as Issuer), Pentair plc (as Parent and Guarantor), Pentair Investments Switzerland GmbH (as Guarantor) and U.S. Bank National Association (as Trustee) (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Pentair plc filed with the SEC on September 16, 2015 (File No. 001-11625)).
 
 
 
4.5
 
Second Supplemental Indenture, dated as of September 16, 2015, among Pentair Finance S.A. (as Issuer), Pentair plc (as Parent and Guarantor), Pentair Investments Switzerland GmbH (as Guarantor) and U.S. Bank National Association (as Trustee) (Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of Pentair plc filed with the SEC on September 16, 2015 (File No. 001-11625)).
 
 
 
4.6
 
Third Supplemental Indenture, dated as of September 16, 2015, among Pentair Finance S.A. (as Issuer), Pentair plc (as Parent and Guarantor), Pentair Investments Switzerland GmbH (as Guarantor) and U.S. Bank National Association (as Trustee) (Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K of Pentair plc filed with the SEC on September 16, 2015 (File No. 001-11625)).
 
 
 
4.7
 
Fourth Supplemental Indenture, dated as of September 17, 2015, among Pentair Finance S.A. (as Issuer), Pentair plc (as Parent and Guarantor), Pentair Investments Switzerland GmbH (as Guarantor) and U.S. Bank National Association (as Trustee) (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Pentair plc filed with the SEC on September 17, 2015 (File No. 001-11625)).
 
 
 
10.1
 
Letter agreement, dated September 7, 2015, among Pentair plc, Edward P. Garden, Matthew Peltz, Brian Baldwin and Trian Fund Management, L.P. (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Pentair plc filed with the SEC on September 8, 2015 (File No. 001-11625)).
 
 
 
10.2
 
Separation Agreement, dated September 18, 2015, between Philip Pejovich and Pentair Management Company.
 
 
 
10.3
 
Separation Agreement, dated September 3, 2015, between Christopher Stevens and Pentair Management Company.
 
 
 
31.1
  
Certification of Chief Executive Officer.
 
 
31.2
  
Certification of Chief Financial Officer.
 
 
32.1
  
Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
32.2
  
Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
101
  
The following materials from Pentair plc’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2015 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 26, 2015 and September 27, 2014, (ii) the Condensed Consolidated Balance Sheets as of September 26, 2015 and December 31, 2014, (iii) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 26, 2015 and September 27, 2014, (iv) the Condensed Consolidated Statements of Changes in Equity for the nine months ended September 26, 2015 and September 27, 2014, and (v) Notes to Condensed Consolidated Financial Statements.


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Exhibit 10.2

CONFIDENTIAL SEPARATION AGREEMENT

This CONFIDENTIAL SEPARATION AGREEMENT (“Agreement”) is made and entered into by and between Philip Pejovich (“Employee”) and Pentair Management Company on behalf of itself, its predecessors, subsidiaries and affiliated entities (collectively “Company”).

WHERE, the parties wish to memorialize their understanding regarding the separation of Employee's employment with the Company under the terms and conditions of this Agreement.

WHEREAS, Employee’s employment with the Company is ending on October 2, 2015 (“Separation Date”), and the parties now wish to set forth their mutual understanding and agreement with respect to: (i) their respective obligations between the date of this Agreement and the Separation Date (which such period shall be known as the “Transition Period”); (ii) Employee’s separation from the Company; and (iii) Employee’s post-employment obligations in consideration for the significant financial benefits set forth in this Agreement.

WHEREFORE, for good and valuable consideration, the parties agree as follows:

1.    Separation Payment and Other Benefits. The parties have agreed that Employee’s employment will end on the Separation Date. Employee shall continue to receive his base salary and other benefits until the Separation Date. Further, provided Employee has strictly complied with his obligations under Section 5 below during the Transition Period and further provided that Employee signs and delivers to the Company the Post-Employment Release of Claims (“Release”) in the form attached hereto as Exhibit A no later than twenty-one (21) days following the Separation Date, then the Company shall pay Employee the sum of $1,820,870, less applicable withholdings (the “Separation Payment”). The Separation Payment shall be paid in two installments as follows: (a) the first installment of $153,956, less withholdings, within twenty (20) days following Employee’s signature and delivery of the Release to the Company following the Separation Date, and (b) the second installment of $1,666,914, less withholdings, on February 15, 2016. The parties acknowledge that the first installment of the Separation Payment shall be inclusive of Employee’s accrued and unused vacation. Employee expressly understands and agrees that he is not entitled to any other payments for any accrued and/or unused vacation.

Provided Employee signs and delivers the Release to the Company no later than twenty-one (21) days following the Separation Date, then the Company will pay to Employee an additional lump sum of $34,316, less applicable withholdings (the “COBRA Subsidy”), which Employee may use toward the cost of future health insurance premiums or for other purposes. The COBRA Subsidy will be paid to Employee with the first installment of the Separation Payment.

As a participant in the Pentair Management Incentive Plan (“MIP”), Employee will receive a prorated MIP bonus award for the 2015 year on the regular payout date in 2016 subject to the terms and conditions of the MIP. Such bonus amount will be calculated using Employee’s base salary in effect as of the Separation Date in accordance with the terms and conditions of the MIP.

Employee understands and agrees that the amounts described in this Section 1 and the awards described in Section 9 below provide all the rights and benefits available to Employee under bonus or incentive compensation plans of any type maintained by the Company, including, but not limited to, the Pentair Management Incentive Plan, the Omnibus Stock Incentive Plan, the 2008 Omnibus Stock Incentive Plan, the 2012 Stock and Incentive Plan, the Flexible Perquisite Plan, the Pentair Ltd. Employee Stock Purchase and Bonus Plan, the Supplemental Executive Retirement Plan, the Pentair, Inc. Restoration Plan, the Pentair, Inc. Non-Qualified Deferred Compensation Plan (referred to as the Sidekick Plan), the Pentair, Inc. Retirement Savings and Stock Incentive Plan, or any successor plans thereto, or any plans of employers acquired by the Company under which Employee holds vested or unvested options, restricted stock, restricted stock units or performance units; and that he holds no other stock options or rights to grants of future stock options. The Pentair Management Incentive Plan, the Omnibus Stock Incentive Plan, the 2008 Omnibus Stock Incentive Plan, the 2012 Stock and Incentive Plan, the Supplemental Executive Retirement Plan, the Pentair, Inc. Restoration Plan, the Pentair, Inc. Non-Qualified Deferred Compensation Plan (referred to as the Sidekick Plan), the Pentair, Inc. Retirement Savings and Stock Incentive Plan, or any successor plans thereto, and any other plans of employers acquired by the Company under which Employee holds vested or unvested options, restricted stock, restricted stock units or performance units are in the aggregate called the “Pentair Equity Plans” and the documents establishing the terms and conditions of the grants under the Pentair Equity Plans are called the “Terms & Conditions” in this Agreement. Provided Employee does not exercise his right of rescission under Section 7, the Company agrees that Employee’s options, restricted stock, restricted stock units or performance units under the Pentair Equity Plans, if any, will be treated in accordance with Section 9 of this Agreement.





2.    Discharge of Claims. Employee, on behalf of himself, his agents, representatives, attorneys, assignees, heirs, executors, and administrators, hereby covenants that he will not sue and hereby releases and forever discharges the Company, and its past and present employees, agents, insurers, officials, officers, directors, divisions, parents (including Pentair plc), subsidiaries, predecessors and successors, and all affiliated entities and persons, and all of their respective past and present employees, agents, insurers, officials, officers, and directors from any and all claims and causes of action of any type arising, or which may have arisen, out of or in connection with his employment or the separation of his employment with the Company, including but not limited to claims, demands or actions arising under demands or actions arising under the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Age Discrimination in Employment Act of 1967 as amended by the Older Workers Benefit Protection Act, the Equal Pay Act, 42 U.S.C. § 1981, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, the Vocational Rehabilitation Act, the Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act, the Fair Labor Standards Act, the Lily Ledbetter Fair Pay Act of 2009, the Americans with Disabilities Act, the Rehabilitation Act of 1973, the Genetic Information Nondiscrimination Act, the Immigration Reform and Control Act of 1986, the Civil Rights Act of 1991, the Occupational Safety and Health Act, the Consumer Credit Protection Act, the American Recovery and Reinvestment Act of 2009, the Asbestos Hazard Emergency Response Act, Employee Polygraph Protection Act, the Uniformed Services Employment and Reemployment Rights Act, the Minnesota Human Rights Act, the Minnesota Equal Pay for Equal Work Law, the Minnesota Fair Labor Standards Act, the Minnesota Labor Relations Act, the Minnesota Occupational Safety and Health Act, the Minnesota Criminal Background Check Act, the Minnesota Lawful Consumable Products Law, the Minnesota Smokers’ Rights Law, the Minnesota Parental Leave Act, the Minnesota Adoptive Parent Leave Law, the Minnesota Whistleblower Act, the Minnesota Drug and Alcohol Testing in the Workplace Act, the Minnesota Consumer Reports Law, the Minnesota Victim of Violent Crime Leave Law, the Minnesota Domestic Abuse Leave Law, the Minnesota Bone Marrow Donation Leave Law, the Minnesota Military and Service Leave Law, the Minnesota Minimum Wage Law, the Minnesota Drug and Alcohol Testing in the Workplace Act, Minn. Stat. 176.82, Minnesota Statutes Chapter 181, the Minnesota Constitution, Minnesota common law, and all other applicable state, county and local ordinances, statutes and regulations. Employee further understands that this discharge of claims extends to, but is not limited to, all claims which he may have as of the date of this Agreement based upon statutory or common law claims for defamation, libel, slander, assault, battery, negligent or intentional infliction of emotional distress, negligent hiring or retention, breach of contract), retaliation, whistleblowing, promissory estoppel, fraud, wrongful discharge, or any other theory, whether legal or equitable, and any and all claims for wages, salary, bonuses, commissions, damages, attorney’s fees or costs. Employee acknowledges that this release includes all claims that he is legally permitted to release, but does not apply to any vested rights under the Company’s retirement plans. Further, nothing in this Agreement precludes him from filing an administrative charge with a government agency, though he cannot recover any damages if he does file such a charge.

3.    Confidential Information Acquired During Employment. Employee agrees that he will continue to treat, as private and privileged, any information, data, figures, projections, estimates, marketing plans, customer lists, lists of contract workers, tax records, personnel records, accounting procedures, formulas, contracts, business partners, alliances, ventures and all other confidential information which Employee acquired while working for the Company. Employee agrees that he will not release any such information to any person or entity at any time, except as may be required by law, or as agreed to in writing by the Company or as otherwise required for Employee to enforce or defend his rights hereunder. Employee acknowledges that any violation of this non-disclosure provision shall entitle the Company to appropriate injunctive relief and to any damages which it may sustain due to the improper disclosure.

4.    Confidentiality, No Disparaging Remarks. Employee represents and agrees that he will keep the terms and facts of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to anyone, except for his counsel, tax accountant, spouse or except as may be required by law or agreed to in writing by the Company or as otherwise required for Employee to enforce or defend his rights hereunder. Further, during and after the Transition Period, Employee shall not make any disparaging remarks of any sort or otherwise communicate any disparaging comments about the Company, its managers, officers or directors, or about any of the other released persons or entities identified in Section 2 to any other person or entity. Employee acknowledges that any violation of this non-disparagement provision shall entitle the Company to appropriate injunctive relief and to any damages which it may sustain due to the Employee’s violation hereof, including, but not limited to, the Company's attorney’s fees and costs relating to such an action to obtain appropriate injunctive relief and/or damages.

5.    Cooperation and Certification. Employee will fully cooperate with the Company in carrying out all duties and responsibilities assigned during the Transition Period. Further, after the expiration of the Transition Period and at the request of the Company, Employee will cooperate with the Company and with any affiliate of the Company in any claims or lawsuits where Employee has knowledge of the facts. Employee further agrees that he will not voluntarily aid, assist, or cooperate with anyone who has claims against the Company or any affiliate of the Company or with their attorneys or agents in




any claims or lawsuits which such person may bring. However, nothing in this Agreement prevents Employee from testifying at an administrative hearing, arbitration, deposition or in court in response to a lawful and properly served subpoena (provided Employee promptly gives the Company written notice of the service of any subpoena), nor does it preclude Employee from filing an administrative charge with a government agency or cooperating with government agencies in connection with a charge (though he cannot recover damages if he does file such a charge as noted in Section 2 above). Employee certifies, warrants and represents that he has faithfully discharged his role with the Company at all times during his employment. Employee further certifies, warrants and represents that he is unaware of any actual or potential violations of law by the Company, Pentair plc or any affiliate of Pentair plc.

6.    No Wrongdoing. Employee and the Company agree and acknowledge that the consideration exchanged herein does not constitute, and shall not be construed as, an admission of liability or wrongdoing on the part of Employee, the Company or any entity or person, and shall not be admissible in any proceeding as evidence of liability or wrongdoing by anyone.

7.    Notification of Release and Right to Rescind. This Agreement contains a release of certain legal rights which Employee may have, including rights under the Age Discrimination in Employment Act and Minnesota Human Rights Act. Employee should consult with an attorney regarding such release and other aspects of this Agreement before signing this Agreement. Employee understands that he may nullify and rescind this entire Agreement at any time within the next fifteen (15) days from the date of signature below by indicating his desire to do so in writing and delivering that writing to Pentair, c/o Frederick S. Koury, Senior Vice President of Human Resources, Pentair plc, Suite 600, 5500 Wayzata Boulevard, Golden Valley, MN 55416, by hand or by certified mail. Employee further understands that if he rescinds this Agreement on a timely basis, the Company will not be bound by the terms of this Agreement, and, in such event, Employee will have no right to receive or right to retain the financial benefits conferred under this Agreement.

8.    Minnesota Law, Forum and Merger. The terms of this Agreement shall be governed by the laws of the State of Minnesota, the location of Pentair’s U.S. headquarters, and shall be construed and enforced thereunder. Any dispute arising under this Agreement shall be determined exclusively by a Minnesota court of appropriate jurisdiction, and the parties acknowledge the existence of sufficient contacts to the State of Minnesota to confer exclusive jurisdiction upon courts in that state. This Agreement supersedes and replaces all prior oral and written agreements, understandings, and representations between Employee and the Company. Further, the parties acknowledge and agree that Employee does not have any rights or remedies under the Supplemental Executive Retirement Plan, nor does he have rights under any pre-existing key executive employment and severance agreement of any type. Employee understands and agrees that, except as provided in this Agreement, all claims which he has or may have against the Company and the other released parties are fully released and discharged by this Agreement. The only claim which Employee may hereafter assert against the Company or any of the other released parties is limited to an alleged breach of this Agreement.

9.    Restricted Stock Units, Performance Units and Stock Options under Pentair Equity Plans.  Provided Employee does not exercise his right of rescission under Section 7, if Employee has unvested awards under the Pentair Equity Plans, the Company agrees to treat Employee’s unearned restricted stock units, performance units, and nonqualified stock options and incentive stock options, or other accrued benefits under the Pentair Equity Plans as follows:

i.    Restricted Stock Units.  Employee’s unvested restricted stock units under the Pentair Equity Plans that were granted prior to 2015, if any, shall be treated by the Company as fully and immediately vested, effective as of the Separation Date.  Employee’s unvested restricted stock units under the Pentair Equity Plans that were granted during 2015 shall vest only if the performance goal(s) established for such units are satisfied, with the vesting date occurring on the date the Compensation Committee of the Board of Directors of Pentair plc certifies the achievement of such goal(s), which certification is expected to occur in February of 2016. The value of Employee’s restricted stock units (settled in stock) shall be deposited into Employee’s UBS account (reduced by applicable withholdings) within one month following the vesting date, or if later, within fourteen (14) days of the expiration of the rescission period under Section 7; provided, however, that if Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) and if the Restricted Stock Units would be considered deferred compensation under Section 409A, then the shares (reduced by applicable withholdings) will be deposited no earlier than six months following the Separation Date.

ii.    Performance Units. Employee shall be entitled to the performance units and the value of such performance units (settled in cash), based upon the Company actual performance and actual achievement of the performance goals established under the applicable Pentair Equity Plans for the performance units.  The units shall vest, if at all, on the date the Compensation Committee of the Board of Directors of Pentair plc certifies the achievement of such goals following the end of the original three year performance period of the award, and the cash value of the vested performance units shall be paid to Employee (reduced by applicable withholdings) by the Company within one month following such vesting date, or if later,




within fourteen (14) days of the expiration of the rescission period under Section 7; provided, however, that if Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) and if the Performance Units would be considered deferred compensation under Section 409A, then the value (reduced by applicable withholdings) will be paid the later of the time set forth in the previous sentence or six months following the Separation Date.

iii.    Options.  Employee’s options under the Pentair Equity Plans, if any, shall remain outstanding (the “Outstanding Options”) and vest (to the extent not already vested) in accordance with the terms of the particular grant or award under the Pentair Equity Plans or applicable Terms & Conditions until the earlier of the expiration date of the award or the fifth anniversary of the Separation Date (with respect to each option, the “Option Termination Date”). These Outstanding Options may be exercised by Employee until their respective Option Termination Dates, at the time and in the manner permitted under the terms of the applicable Pentair Equity Plan and the applicable Terms & Conditions.  Any Outstanding Options unexercised by Employee as of the close of business on its Option Termination Date shall be forfeited.  If Employee chooses not to sign this Agreement or if Employee exercises his rights of rescission under Section 7, then Employee’s options under the Pentair Equity Plans that had vested prior the Separation Date (the “Previously Vested Options”) may be exercised by Employee in accordance with the time and in the manner permitted under the terms of the applicable Pentair Equity Plan. 

As for all of Employee's incentive stock options, they are eligible for preferential tax treatment if exercised within a period of ninety (90) days following the Separation Date, and if exercised more than ninety (90) days following the Separation Date, they will be taxed as ordinary income.

iv.    Retirement Plans.  Employee shall be entitled to receive payments under the Pentair, Inc. Non-Qualified Deferred Compensation Plan (referred to as the Sidekick Plan) and The Pentair, Inc. Retirement Savings and Stock Incentive Plan(collectively, the “Retirement Plans”), without regard to whether Employee signs this Agreement.   Payment or distributions from Employee’s Retirement Plans accounts will be made in accordance with the terms of the applicable Retirement Plan documents, deferral elections, Internal Revenue Code regulations, or the Employee Retirement Income Security Act of 1974, including the requirement that if Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) and if payments under the Retirement Plans would be considered deferred compensation under Section 409A, then the value (reduced by applicable withholdings) will be paid no sooner than six months following the Separation Date. 

10.    Outplacement. In lieu of outplacement services and provided Employee does not exercise his right of rescission under Section 7 of this Agreement, the Company will pay to Employee the sum of Forty thousand dollars ($40,000.00), less withholdings required by law (the “Outplacement Subsidy”). The Outplacement Subsidy will be paid with the Initial Separation Payment.

11.    Narrow Post-Employment Restrictions. 

(a)    Definitions. For the purpose of Section 11 of this Agreement, the following definitions shall apply:

The Business. The “Business” means each of the business segments, business units, and subsidiary operations of Pentair plc and its subsidiary entities and affiliates on a global basis (including, but not limited to, Pentair’s Flow & Filtration Solutions Business Unit involving the design, manufacturing, marketing and service solutions for filtration, separation, flow and fluid management challenges in agriculture, food and beverage processing, water supply and disposal, and industrial applications on an international scale). The parties acknowledge that due to Employee’s executive position and global duties and responsibilities on behalf of Pentair plc and the Company: (i) he is familiar with all business segments and business units of Pentair plc; (ii) he has been materially involved in all business segments and business units of Pentair plc on a global basis; and (iii) he has received lucrative financial benefits as a result of his exposure to and involvement in all business segments and business units of Pentair plc on a global basis.

Competitor. “Competitor” means any economic concern, whether an entity or a person, that competes against the Business in any geographic market where the Company, Pentair plc or any of its affiliates does business.

Throughout his employment in the Business, Employee became intimately familiar with trade secrets, know-how, business strategies, marketing strategies, product development, proprietary information and confidential information concerning the Business and concerning the operations of the Company, Pentair plc and its affiliates (collectively, the “Pentair Entities”).  As a result of Employee’s intimate familiarity with the proprietary and confidential information regarding the Business, Employee acknowledges and agrees that he would be able to engage in unfair competition vis-à-vis the Pentair Entities in the event he were to: (i) become employed by or otherwise involved in any way with a Competitor; (ii) solicit or accept competitive business from customers of the Pentair Entities; or (iii) solicit employees of the Pentair Entities. Accordingly, Employee agrees to the narrow post-employment restrictions set forth in Sections 11(b) and 11(c) below.





(b)    Non-Competition.  Employee agrees that for a twenty-four (24) month period following the Separation Date, he will not (whether in his individual capacity or as an agent of a third party) become employed by, consult with, obtain an ownership interest in, render services to, or have any competitive involvement with a Competitor in any market in the world where Pentair plc or its affiliates are conducting the Business. 

(c)    Non-Solicitation.  Employee agrees that for a twenty-four (24) month period following the Separation Date, he will not, for himself or for any third party, directly or indirectly, (i) solicit or accept business from any customer of the Pentair Entities, or (ii) solicit any employee of the Pentair Entities the purpose of hiring such person or otherwise entice, induce or encourage, directly or indirectly, any such employee to leave his or her employment. 

The parties acknowledge and agree that the requirement in Section 11(c)(ii) which prohibits Employee from directly or indirectly soliciting or otherwise enticing, inducing or encouraging any employee of the Pentair Entities to leave his or her employment is intended to prohibit and shall prohibit, without limitation, Employee from doing any of the following:  (a) solicit for hire or solicit for retainer as an independent consultant or as contingent worker any employee of any of the Pentair Entities; (b) participate in the recruitment of any employee of any of the Pentair Entities, such as through interviewing; (c) serve as a reference for an employee of the Pentair Entities; (d) offer an opinion regarding the candidacy as a potential employee, independent consultant or contingent worker of an individual employed by the Pentair Entities; (e) assist or encourage any third party to pursue an employee of the Pentair Entities for potential employment, independent consulting or contingent worker opportunities; or  (f) assist or encourage any employee of the Pentair Entities to leave the Pentair Entities in order to be an employee, independent consultant or contingent worker for a third party.

(d)    Reasonableness and Notice. Employee agrees that in light of the money and benefits conferred to him under this Agreement, the narrow nature of the restrictive covenants imposed under Sections 11(b) and 11(c) are reasonable and will not result in any hardship to him.  Further, Employee acknowledges and agrees that his breach of any obligation under this Section 11 would cause irreparable harm to the Company, Pentair plc and/or to its affiliates and that such harm may not be compensable entirely with monetary damages.  If Employee violates his obligations under this section, the Company, Pentair plc and its affiliates may, but shall not be required to, seek injunctive relief and/or any other remedy allowed at law, in equity, or under this Agreement.  Any injunctive relief sought shall be in addition to and not in limitation of any monetary relief or other remedies or rights at law, in equity, or under this Agreement. In connection with any suit at law or in equity under this Agreement, the Company, Pentair plc and its affiliates shall be entitled to an accounting, and to the repayment of all profits, compensation, commissions, fees, or other remuneration which Employee or any other entity or person has either directly or indirectly realized on its behalf or on behalf of another and/or may realize, as a result of, growing out of, or in connection with the violation which is the subject of the suit.  Further, in the event of Employee’s breach of this section, Employee shall disgorge the value of all payments and benefits conferred to him by virtue of this Agreement, including the Separation Payment.  In addition to the foregoing, the Company, Pentair plc and its affiliates shall be entitled to collect from Employee any reasonable attorney’s fees and costs incurred in bringing any action against Employee or otherwise to enforce the terms of this Agreement.  The parties agree that it is their intent that the restrictions in this Section 11 be enforced to the maximum allowable extent or modified to permit enforcement to the maximum allowable extent under the laws of Minnesota as determined by a court of appropriate jurisdiction in Minnesota, and the parties further agree to and acknowledge the sufficiency of the parties’ contacts with the State of Minnesota in order to confer exclusive jurisdiction of Minnesota courts applying Minnesota law.

Employee agrees that while the restrictive covenants imposed under this Section 11 are in effect, Employee shall give written notice to the Company within ten days after accepting any other employment, position, or ownership interest with any entity that has operations which compete with the operations of any of the Pentair Entities. Such written notice shall be delivered to the Company c/o Frederick S. Koury, Senior Vice President of Human Resources, Pentair plc, Suite 600, 5500 Wayzata Boulevard, Golden Valley, MN 55416, by hand or by certified mail.  Employee agrees that the Company may notify such new employer, company or corporate entity that Employee is bound by this Agreement and, at the Company's election, furnish such employer, company or corporate entity with a copy of Section 11 of this Agreement.

12.    Administrative Charges, Investigations, and Proceedings. As stated above, nothing in this Agreement shall be construed to prohibit Employee from filing a charge with or participating in any investigation or proceeding conducted by the EEOC or a comparable state or local agency. As a result, the restriction in Section 3 regarding non-disparagement does not apply in connection with an administrative charge filed with a government agency or an investigation by an administrative agency. As stated above in Section 2 regarding Employee’s waiver of claims, notwithstanding the provisions of this Section 12, Employee waives his right to recover monetary damages or receive any relief in any charge, complaint, or lawsuit filed by Employee or anyone else on his behalf, including in connection with any administrative agency charge, investigation, or proceeding. Employee affirms that he has not filed, has not caused to be filed, and is not presently a party to any claim,




complaint, charge, or action against the Company, against Pentair plc or against any affiliate of Pentair plc in any form or forum.

13.    Construction of this Agreement and Severability. Should this Agreement require judicial interpretation, the court shall not construe the Agreement more strictly against any party, including the party who prepared it. With the exception of Section 2, if one or more of the provisions of this Agreement shall be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained in this Agreement will not in any way be affected or impaired. If Section 2 shall in part or in whole be invalid, illegal or unenforceable in any respect based on a claim brought by Employee challenging the validity of his release in Section 2, the Company may at its option void the remainder of this Agreement, including the obligation to pay Employee the Separation Payment. Any portions of this Agreement found by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect shall be revised to the minimum amount necessary in order to be valid and enforceable.

14.    Employee Understands the Terms of this Agreement. Other than stated herein, Employee warrants that (a) no promise or inducement has been offered for this Agreement; (b) this Agreement is executed without reliance upon any statement or representation of the Company or its representatives concerning the nature and extent of any claims or liability therefor, if any; (c) Employee is legally competent to execute this Agreement and accepts full responsibility therefor; (d) the Company has advised Employee to consult with an attorney regarding the purpose and effect of this Agreement; (e) the Company allowed Employee twenty-one (21) days within which to consider this proposed Agreement, and (f) Employee fully understands this Agreement and has had a sufficient opportunity to be advised by counsel of the consequences of signing this Agreement. The parties acknowledge and agree that if Employee has not signed this proposed Agreement within the twenty-one (21) day period following the Company’s presentation of the offer of this Agreement to Employee, then the offer of this Agreement shall expire by its own terms and be of no further force or effect without any further action required on the part of the Company.

Philip Pejovich

Dated:    September 18, 2015        /s/ Philip Pejovich


Dated:    September 18, 2015        PENTAIR MANAGEMENT COMPANY

By /s/ Frederick S. Koury
Frederick S. Koury

Its    Senior Vice President, Human Resources

Dated:    September 18, 2015        By /s/ Angela D. Lageson
Angela D. Lageson

Its    Senior Vice President, General Cousnel & Secretary

























EXHIBIT A

POST-EMPLOYMENT RELEASE OF CLAIMS

WHEREAS, Employee’s employment with Pentair Management Company (the “Company”) ended on October 2, 2015, and Employee now wishes to sign and deliver this two-page Post-Employment Release of Claims (“Release”) as condition of receiving those certain benefits set forth in the parties’ _________ 2015 Confidential Separation Agreement to which this Release was attached as Exhibit A.

WHEREFORE, Philip Pejovich (“Former Employee”), on behalf of himself, his agents, representatives, attorneys, assignees, heirs, executors, and administrators, hereby covenants not to sue and releases and forever discharges the Company and its past and present employees, agents, insurers, officials, officers, directors, divisions, parents (including Pentair plc), subsidiaries and successors, and all affiliated entities and persons, and all of their respective past and present employees, agents, insurers, officials, officers, and directors from any and all claims and causes of action of any type arising, or which may have arisen, out of or in connection with his employment or the separation of his employment, including but not limited to claims, demands or actions arising under the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Age Discrimination in Employment Act of 1967 as amended by the Older Workers Benefit Protection Act, the Equal Pay Act, 42 U.S.C. § 1981, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, the Vocational Rehabilitation Act, the Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act, the Fair Labor Standards Act, the Lily Ledbetter Fair Pay Act of 2009, the Americans With Disabilities Act, the Rehabilitation Act of 1973, the Genetic Information Nondiscrimination Act, the Immigration Reform and Control Act of 1986, the Civil Rights Act of 1991, the Occupational Safety and Health Act, the Consumer Credit Protection Act, the American Recovery and Reinvestment Act of 2009, the Asbestos Hazard Emergency Response Act, Employee Polygraph Protection Act, the Uniformed Services Employment and Reemployment Rights Act, and any applicable regulations, the Minnesota Human Rights Act, the Minnesota Equal Pay for Equal Work Law, the Minnesota Fair Labor Standards Act, the Minnesota Labor Relations Act, the Minnesota Occupational Safety and Health Act, the Minnesota Criminal Background Check Act, the Minnesota Lawful Consumable Products Law, the Minnesota Smokers’ Rights Law, the Minnesota Parental Leave Act, the Minnesota Adoptive Parent Leave Law, the Minnesota Whistleblower Act, the Minnesota Drug and Alcohol Testing in the Workplace Act, the Minnesota Consumer Reports Law, the Minnesota Victim of Violent Crime Leave Law, the Minnesota Domestic Abuse Leave Law, the Minnesota Bone Marrow Donation Leave Law, the Minnesota Military and Service Leave Law, the Minnesota Minimum Wage Law, the Minnesota Drug and Alcohol Testing in the Workplace Act, Minn. Stat. 176.82, Minnesota Statutes Chapter 181, the Minnesota Constitution, Minnesota common law, and all other applicable state, county and local ordinances, statutes and regulations. Former Employee further understands that this discharge of claims extends to, but is not limited to, all claims which he may have as of the date of this Release based upon statutory or common law claims for defamation, libel, slander, assault, battery, negligent or intentional infliction of emotional distress, negligent hiring or retention, breach of contract, retaliation, whistleblowing, promissory estoppel, fraud, wrongful discharge, or any other theory, whether legal or equitable, and any and all claims for wages, salary, bonuses, commissions, damages, attorney’s fees or costs. Former Employee acknowledges that this Release includes all claims that he is legally permitted to release, but does not apply to any vested rights under the Company’s retirement plans. Further, nothing in this Release precludes him from filing an administrative charge of discrimination, though he cannot recover any damages if he does file such a charge or if he has filed such a charge.

Rescission. Former Employee understands he may not sign this Release prior to the Separation Date as defined in the Confidential Separation Agreement to which this Release was attached as Exhibit A. Former Employee further understands that he may nullify and rescind this Release at any time within fifteen (15) days from the date of signature below by indicating his desire to do so in writing and delivering that writing to Pentair, c/o Frederick S. Koury, Senior Vice President of Human Resources, Pentair plc, 5500 Wayzata Boulevard, Suite 600, Golden Valley, MN 55416, by hand or by certified mail. Former Employee further understands that if he rescinds this Release on a timely basis, then the Company will have no obligation to pay him those particular monies and benefits under the Confidential Separation Agreement to which this Release was attached as Exhibit A which were expressly conditioned upon Former Employee signing and not rescinding this Release after the Separation Date. Former Employee warrants that (a) no promise or inducement has been offered for this Release except as provided in the Confidential Separation Agreement; (b) this Release is executed without reliance upon any statement or representation of the Company or its representatives concerning the nature and extent of any claims or liability therefor, if any; (c) Former Employee is legally competent to execute this Release and accepts full responsibility therefor; (d) the Company has advised Former Employee to consult with an attorney; (e) the Company has allowed Former Employee at least twenty-one (21)




days within which to consider this Release; and (f) Former Employee fully understands this Release and has had a sufficient opportunity to be advised by counsel of the consequences of signing this Release.

FORMER EMPLOYEE


Dated: ________________            _________________________________________







Exhibit 10.3

CONFIDENTIAL SEPARATION AGREEMENT

This CONFIDENTIAL SEPARATION AGREEMENT (“Agreement”) is made and entered into by and between Christopher Stevens (“Employee”) and Pentair Management Company on behalf of itself, its predecessors, subsidiaries and affiliated entities (collectively “Company”).

WHEREAS, Employee has been on an expatriate assignment in Schaffhausen, Switzerland, most recently as President, Pentair Valves & Controls, with the terms and conditions of his at-will employment governed by the October 8, 2012 Tyco Valves & Controls Inc. Letter of Assignment, December 18, 2013 Pentair, Inc. Offer Letter, and October 6, 2014 Assignment Memo Addendum (which such documents are collectively described herein as
the “Assignment Letters”).

WHEREAS, the parties wish to confirm their mutual understanding regarding Employee's repatriation to the United States and the conclusion of his employment with the Company subject to the terms and conditions of this Agreement.

WHEREAS, Employee’s employment with the Company is ending on October 15, 2015 (“Separation Date”), and the parties now wish to set forth their mutual understanding and agreement with respect to: (i) the process for and conditions of Employee’s repatriation to the United States, (ii) their respective obligations between the date of this Agreement and the Separation Date (which such period shall be known as the “Transition Period”), (iii) Employee’s separation from the Company, and (iv) Employee’s post-employment obligations in consideration for the significant financial benefits set forth in this Agreement.

WHEREFORE, for good and valuable consideration, the parties agree as follows:

1.    Separation Payment and Other Benefits. The parties have agreed that Employee’s employment will end on the Separation Date. Employee shall continue to receive his base salary through August 15, 2015 as set forth in Section 5 below. Further, provided Employee has strictly complied with his obligations under Section 5 (including Exhibit A referenced therein) during the Transition Period and further provided that Employee signs and delivers to the Company the Post-Employment Release of Claims (“Release”) in the form attached hereto as Exhibit B no later than twenty-one (21) days following the Separation Date, then the Company shall pay Employee the sum of (USD) $1,425,538.00, less applicable withholdings (the “Separation Payment”). The Separation Payment shall be paid in two installments as follows: (a) the first installment of $236,538.00, less withholdings, within twenty (20) days following Employee’s signature and delivery of the Release to the Company following the Separation Date, and (b) the second installment of $1,189,000.00, less withholdings, on February 15, 2016. The parties acknowledge that the first installment of the Separation Payment shall be inclusive of Employee’s accrued and unused vacation. Employee expressly understands and agrees that he is not entitled to any other payments for any accrued and/or unused vacation.

The parties acknowledge and agree that the purpose and intent of the Separation Payment is for such amount to be inclusive of any end of service gratuity or pay in lieu of notice to which Employee might otherwise be entitled under the laws of any jurisdiction, including the laws of Switzerland. In other words, by amicably entering into this Agreement and accepting the offered benefit of the Separation Payment and the other lucrative financial benefits set forth in this Agreement, Employee agrees that any rights he might otherwise have under laws of Switzerland, including any potential right to receive an end of service gratuity or pay in lieu of notice, are being fully satisfied.

Provided Employee does not exercise his right of rescission under Section 7, then the Company will pay to Employee an additional lump sum of (USD) $30,898.00, less applicable withholdings (the “COBRA Subsidy”), which Employee may use toward the cost of future health insurance premiums or for other purposes. The COBRA Subsidy will be paid to Employee on the date that the rescission period under Section 7 has expired following Employee's signature of this Agreement.

As a participant in the Pentair Management Incentive Plan (“MIP”), Employee will receive a prorated MIP bonus award for the 2015 year on the regular payout date in 2016 subject to the terms and conditions of the MIP. Such bonus amount will be calculated using Employee’s base salary in effect as of the Separation Date in accordance with the terms and conditions of the MIP.

Employee understands and agrees that the amounts described in this Section 1 and the awards described in Section 9 below provide all the rights and benefits available to Employee under bonus or incentive compensation plans of any type maintained by the Company, including, but not limited to, the Pentair Management Incentive Plan, the Omnibus Stock Incentive Plan, the




2008 Omnibus Stock Incentive Plan, the 2012 Stock and Incentive Plan, the Flexible Perquisite Plan, the Pentair Ltd. Employee Stock Purchase and Bonus Plan, the Supplemental Executive Retirement Plan, the Pentair, Inc. Restoration Plan, the Flow Control Supplemental Savings and Retirement Plan, the Pentair, Inc. Non-Qualified Deferred Compensation Plan (referred to as the Sidekick Plan), the Pentair, Inc. Retirement Savings and Stock Incentive Plan, the 2004 TN Tyco International Options Plan, the 2004 Tyco International Options Plan, or any successor plans thereto, or any plans of employers acquired by the Company under which Employee holds vested or unvested options, restricted stock, restricted stock units or performance units; and that he holds no other stock options or rights to grants of future stock options. The Pentair Management Incentive Plan, the Omnibus Stock Incentive Plan, the 2008 Omnibus Stock Incentive Plan, the 2012 Stock and Incentive Plan, the Supplemental Executive Retirement Plan, the Pentair, Inc. Restoration Plan, the Flow Control Supplemental Savings and Retirement Plan, the Pentair, Inc. Non-Qualified Deferred Compensation Plan (referred to as the Sidekick Plan), the Pentair, Inc. Retirement Savings and Stock Incentive Plan, or any successor plans thereto, and any other plans of employers acquired by the Company under which Employee holds vested or unvested options, restricted stock, restricted stock units or performance units are in the aggregate called the “Pentair Equity Plans” and the documents establishing the terms and conditions of the grants under the Pentair Equity Plans are called the “Terms & Conditions” in this Agreement. Provided Employee does not exercise his right of rescission under Section 7, the Company agrees that Employee’s options, restricted stock, restricted stock units or performance units under the Pentair Equity Plans, if any, will be treated in accordance with Section 9 of this Agreement.

2.    Discharge of Claims. Employee, on behalf of himself, his agents, representatives, attorneys, assignees, heirs, executors, and administrators, hereby covenants that he will not sue and hereby releases and forever discharges the Company, and its past and present employees, agents, insurers, officials, officers, directors, divisions, parents (including Pentair plc), subsidiaries, predecessors and successors, and all affiliated entities and persons, and all of their respective past and present employees, agents, insurers, officials, officers, and directors from any and all claims and causes of action of any type arising, or which may have arisen, out of or in connection with his employment or the separation of his employment with the Company, including but not limited to claims, demands or actions arising under demands or actions arising under the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Age Discrimination in Employment Act of 1967 as amended by the Older Workers Benefit Protection Act, the Equal Pay Act, 42 U.S.C. § 1981, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, the Vocational Rehabilitation Act, the Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act, the Fair Labor Standards Act, the Lily Ledbetter Fair Pay Act of 2009, the Americans with Disabilities Act, the Rehabilitation Act of 1973, the Genetic Information Nondiscrimination Act, the Immigration Reform and Control Act of 1986, the Civil Rights Act of 1991, the Occupational Safety and Health Act, the Consumer Credit Protection Act, the American Recovery and Reinvestment Act of 2009, the Asbestos Hazard Emergency Response Act, Employee Polygraph Protection Act, the Uniformed Services Employment and Reemployment Rights Act, the Minnesota Human Rights Act, the Minnesota Equal Pay for Equal Work Law, the Minnesota Fair Labor Standards Act, the Minnesota Labor Relations Act, the Minnesota Occupational Safety and Health Act, the Minnesota Criminal Background Check Act, the Minnesota Lawful Consumable Products Law, the Minnesota Smokers’ Rights Law, the Minnesota Parental Leave Act, the Minnesota Adoptive Parent Leave Law, the Minnesota Whistleblower Act, the Minnesota Drug and Alcohol Testing in the Workplace Act, the Minnesota Consumer Reports Law, the Minnesota Victim of Violent Crime Leave Law, the Minnesota Domestic Abuse Leave Law, the Minnesota Bone Marrow Donation Leave Law, the Minnesota Military and Service Leave Law, the Minnesota Minimum Wage Law, the Minnesota Drug and Alcohol Testing in the Workplace Act, Minn. Stat. 176.82, Minnesota Statutes Chapter 181, the Minnesota Constitution, Minnesota common law, and all other applicable state, county and local ordinances, statutes and regulations, and labor laws of Switzerland. Employee further understands that this discharge of claims extends to, but is not limited to, all claims which he may have as of the date of this Agreement based upon statutory or common law claims for defamation, libel, slander, assault, battery, negligent or intentional infliction of emotional distress, negligent hiring or retention, breach of contract (including, but not limited to, any past, present or alleged future claims arising under the Assignment Letters or under any other contracts aside from any future claims arising under this Agreement), retaliation, whistleblowing, promissory estoppel, fraud, wrongful discharge, or any other theory, whether legal or equitable, and any and all claims for wages, salary, bonuses, commissions, damages, attorney’s fees or costs. Employee acknowledges that this release includes all claims that he is legally permitted to release, but does not apply to any vested rights under the Company’s retirement plans. Further, nothing in this Agreement precludes him from filing an administrative charge with a government agency, though he cannot recover any damages if he does file such a charge. Finally, the parties agree that Employee is not releasing any claims arising from the Company's or its agents' failure to submit or timely submit tax documentation on his behalf.

3.    Confidential Information Acquired During Employment. Employee agrees that he will continue to treat, as private and privileged, any information, data, figures, projections, estimates, marketing plans, customer lists, lists of contract workers, tax records, personnel records, accounting procedures, formulas, contracts, business partners, alliances, ventures and all other confidential information which Employee acquired while working for the Company and which is not a matter of public record. Employee agrees that he will not release any such information to any person or entity at any time, except as may be required by law, or as agreed to in writing by the Company or as otherwise required for Employee to enforce or defend his




rights hereunder. Employee acknowledges that any violation of this non-disclosure provision shall entitle the Company to appropriate injunctive relief and to any damages which it may sustain due to the improper disclosure.

4.    Confidentiality, No Disparaging Remarks. Employee represents and agrees that he will keep the terms and facts of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to anyone, except for his counsel, tax accountant, spouse or except as may be required by law or agreed to in writing by the Company or as otherwise required for Employee to enforce or defend his rights hereunder. Further, during and after the Transition Period, Employee shall not make any disparaging remarks of any sort or otherwise communicate any disparaging comments about the Company, its managers, officers or directors, or about any of the other released persons or entities identified in Section 2 to any other person or entity. Employee acknowledges that any violation of this non-disparagement provision shall entitle the Company to appropriate injunctive relief and to any damages which it may sustain due to the Employee’s violation hereof, including, but not limited to, the Company's attorney’s fees and costs relating to such an action to obtain appropriate injunctive relief and/or damages.

5.    Cooperation, Certification and Details of Repatriation. The parties agree that Employee will cease receiving salary after August 15, 2015 and that between August 15, 2015 and the Separation Date, Employee will not actively perform services on a full-time basis, but instead will be available for consultation and assistance on Company business matters on an as-requested basis. Employee will fully cooperate with the Company in carrying out all duties and responsibilities assigned during the Transition Period in accordance with the foregoing sentence. Further, after the expiration of the Transition Period and at the request of the Company, Employee will cooperate with the Company and with any affiliate of the Company in any claims or lawsuits where Employee has knowledge of the facts, and the Company will reimburse Employee for any out-of-pocket costs actually incurred by Employee in fulfilling his duty of cooperation provided such expenses are approved in writing in advance. Employee further agrees that he will not voluntarily aid, assist, or cooperate with anyone who has claims against the Company or any affiliate of the Company or with their attorneys or agents in any claims or lawsuits which such person may bring. However, nothing in this Agreement prevents Employee from testifying at an administrative hearing, arbitration, deposition or in court in response to a lawful and properly served subpoena (provided Employee gives the Company twenty-four (24) hours' written notice of the service of any subpoena), nor does it preclude Employee from filing an administrative charge with a government agency or cooperating with government agencies in connection with a charge (though he cannot recover damages if he does file such a charge as noted in Section 2 above). Employee certifies, warrants and represents that he has faithfully discharged his role with the Company at all times during his employment. Employee further certifies, warrants and represents that he is unaware of any actual or potential violations of law by the Company, Pentair plc or any affiliate of Pentair plc.

The Company acknowledges and agrees that it is obligated to take all necessary steps to ensure that Employee's taxes are filed in a timely fashion and that the Company is obligated to provide Employee with tax equalization benefits for all Pentair assignment related income he earned while working overseas for the Company (whether in Australia or Switzerland) pursuant to Pentair's Tax Equalization Policy. The Company also affirms for tax years 2015-2018 its obligations to assist Employee with tax equalization will continue so long as Employee has fully cooperated in the income tax equalization process in the same manner that the Company has required his cooperation in past years.

Employee acknowledges and agrees that for tax years 2015, 2016, 2017 and 2018 (and future years, if necessary, as determined by the Company), he is obligated to cooperate with the Company in connection with the income tax equalization process in the same manner that the Company required his cooperation in past years.  Should it be determined by the Company in the income tax equalization process that an amount is due from Employee, then Employee is required to submit such amounts due within sixty (60) days of completion and receipt of the calculation provided by the Company’s designated tax provider. Employee further agrees, authorizes and instructs the Company at its discretion to withhold any such amount from the Separation Payment and/or from any additional amount that might otherwise be owed to Employee. To the extent that Employee fails to submit information, submits his information late or omits information, and penalties and/or interest are assessed by the taxing authorities, Employee agrees that he will be held personally responsible and agrees to indemnify against and reimburse the Company for any and all penalties or interests imposed under Section 409A of the Internal Revenue Code of 1986, as amended, and its implementing regulations and guidance (“Section 409A”) related to Employee’s breach of Section 5 of this Agreement. Likewise, the Company agrees that if it or its designated tax provider or other agents fail to submit necessary information or submit it late such that penalties and/or interest are assessed by the taxing authorities, the Company agrees that it will indemnify Employee and reimburse him for any and all penalties or interest assessed against him.
The parties acknowledge and agree that the information set forth in attached Exhibit A regarding the subject matter contained therein accurately reflects their entire understanding and agreement regarding the manner in which all post-employment issues associated with the end of Employee’s international assignment will be brought to a conclusion and that Employee will fully cooperate with the requirements and timelines set forth in Exhibit A as a condition of becoming eligible to sign the Release




within the twenty-one (21) day period following the Separation Date. Employee specifically acknowledges and agrees that he has no rights or claims with respect to allowances or repatriation except as set forth in Exhibit A, and the parties agree that this Agreement supersedes all prior agreements, representations and understandings of the parties, written or oral, with respect to repatriation.

6.    No Wrongdoing. Employee and the Company agree and acknowledge that the consideration exchanged herein does not constitute, and shall not be construed as, an admission of liability or wrongdoing on the part of Employee, the Company or any entity or person, and shall not be admissible in any proceeding as evidence of liability or wrongdoing by anyone.

7.    Notification of Release and Right to Rescind. This Agreement contains a release of certain legal rights which Employee may have, including rights under the Age Discrimination in Employment Act and Minnesota Human Rights Act. Employee should consult with an attorney regarding such release and other aspects of this Agreement before signing this Agreement. Employee understands that he may nullify and rescind this entire Agreement at any time within the next fifteen (15) days from the date of signature below by indicating his desire to do so in writing and delivering that writing to Pentair, c/o Frederick S. Koury, Senior Vice President of Human Resources, Pentair plc, Suite 600, 5500 Wayzata Boulevard, Golden Valley, MN 55416, by hand or by certified mail. Employee further understands that if he rescinds this Agreement on a timely basis, the Company will not be bound by the terms of this Agreement, and, in such event, Employee will have no right to receive or right to retain the financial benefits conferred under this Agreement.

8.    Minnesota Law, Forum and Merger. The terms of this Agreement shall be governed by the laws of the State of Minnesota, the location of Pentair’s U.S. headquarters, and shall be construed and enforced thereunder. Any dispute arising under this Agreement shall be determined exclusively by a Minnesota court of appropriate jurisdiction, and the parties acknowledge the existence of sufficient contacts to the State of Minnesota to confer exclusive jurisdiction upon courts in that state. This Agreement supersedes and replaces all prior oral and written agreements, understandings, and representations between Employee and the Company. Further, the parties acknowledge and agree that Employee does not have any rights or remedies under the Supplemental Executive Retirement Plan, nor does he have rights under any pre-existing key executive employment and severance agreement of any type. Employee understands and agrees that, except as provided in this Agreement, all claims which he has or may have against the Company and the other released parties are fully released and discharged by this Agreement. The only claim which Employee may hereafter assert against the Company or any of the other released parties is limited to an alleged breach of this Agreement.

9.    Restricted Stock Units, Performance Units and Stock Options under Pentair Equity Plans.  Provided Employee does not exercise his right of rescission under Section 7, if Employee has unvested awards under the Pentair Equity Plans, the Company agrees to treat Employee’s unearned restricted stock units, performance units, and nonqualified stock options and incentive stock options, or other accrued benefits under the Pentair Equity Plans as follows:

i.    Restricted Stock Units.  Employee’s unvested restricted stock units under the Pentair Equity Plans that were granted prior to 2015, if any, shall be treated by the Company as fully and immediately vested, effective as of the Separation Date.  Employee’s unvested restricted stock units under the Pentair Equity Plans that were granted during 2015 shall vest only if the performance goal(s) established for such units are satisfied, with the vesting date occurring on the date the Compensation Committee of the Board of Directors of Pentair plc certifies the achievement of such goal(s), which certification is expected to occur in February of 2016. The value of Employee’s restricted stock units (settled in stock) shall be deposited into Employee’s UBS account (reduced by applicable withholdings) within one month following the vesting date, or if later, within fourteen (14) days of the expiration of the rescission period under Section 7; provided, however, that if Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) and if the Restricted Stock Units would be considered deferred compensation under Section 409A, then the shares (reduced by applicable withholdings) will be deposited no earlier than six months following the Separation Date.

ii.    Performance Units. Employee shall be entitled to the performance units and the value of such performance units (settled in cash), based upon the Company actual performance and actual achievement of the performance goals established under the applicable Pentair Equity Plans for the performance units.  The units shall vest, if at all, on the date the Compensation Committee of the Board of Directors of Pentair plc certifies the achievement of such goals following the end of the original three year performance period of the award, and the cash value of the vested performance units shall be paid to Employee (reduced by applicable withholdings) by the Company within one month following such vesting date, or if later, within fourteen (14) days of the expiration of the rescission period under Section 7; provided, however, that if Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) and if the Performance Units would be considered deferred compensation under Section 409A, then the value (reduced by applicable withholdings) will be paid the later of the time set forth in the previous sentence or six months following the Separation Date.





iii.    Options.  With the exception of the October 12, 2010 and October 12, 2011 Tyco Options (the “Tyco Options”) described in the following paragraph, Employee’s options under the Pentair Equity Plans, if any, shall remain outstanding (the “Outstanding Options”) and vest (to the extent not already vested) in accordance with the terms of the particular grant or award under the Pentair Equity Plans or applicable Terms & Conditions until the earlier of the expiration date of the award or the fifth anniversary of the Separation Date (with respect to each option, the “Option Termination Date”). These Outstanding Options may be exercised by Employee until their respective Option Termination Dates, at the time and in the manner permitted under the terms of the applicable Pentair Equity Plan and the applicable Terms & Conditions.  An Outstanding Options unexercised by Employee as of the close of business on its Option Termination Date shall be forfeited.  If Employee chooses not to sign this Agreement or if Employee exercises his rights of rescission under Section 7, then Employee’s options under the Pentair Equity Plans that had vested prior the Separation Date (the “Previously Vested Options”) may be exercised by Employee in accordance with the time and in the manner permitted under the terms of the applicable Pentair Equity Plan. 

As for the Tyco Options granted on October 12, 2010 and October 12, 2011, respectively, such options, now denominated as PNR grants, shall be fully vested on the Separation Date and may be exercised by Employee no later than one (1) year following the Separation Date. After that time, any unexercised Tyco Options shall be forfeited.     

iv.    Retirement Plans.  Employee shall be entitled to receive payments under the Pentair, Inc. Non-Qualified Deferred Compensation Plan (referred to as the Sidekick Plan) and The Pentair, Inc. Retirement Savings and Stock Incentive Plan(collectively, the “Retirement Plans”), without regard to whether Employee signs this Agreement.   Payment or distributions from Employee’s Retirement Plans accounts will be made in accordance with the terms of the applicable Retirement Plan documents, deferral elections, Internal Revenue Code regulations, or the Employee Retirement Income Security Act of 1974, including the requirement that if Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) and if payments under the Retirement Plans would be considered deferred compensation under Section 409A, then the value (reduced by applicable withholdings) will be paid no sooner than six months following the Separation Date. 

10.    Outplacement. Provided Employee does not exercise his right of rescission under Section 7 of this Agreement, then the Company shall pay for executive outplacement services provided by the executive outplacement services company designated by the Company for Employee’s benefit to the extent such services are actually utilized by Employee within one (1) year following the Separation Date and to the extent the cost does not exceed $40,000.00.

11.    Narrow Post-Employment Restrictions. 

(a)    Definitions. For the purpose of Section 11 of this Agreement, the following definitions shall apply:

The Business. The “Business” means each of the business segments, business units, and subsidiary operations of Pentair plc and its subsidiary entities and affiliates on a global basis (including, but not limited to, Pentair’s Valves & Controls Business Unit which the parties recognize is one of the world’s leading manufacturers and marketers of valves, actuators and controls, providing market-leading products, services and solutions, for the most challenging applications throughout oil and gas, power, mining, chemical, food and beverage and building and construction industries on an international scale). The parties acknowledge that due to Employee’s executive position and global duties and responsibilities on behalf of Pentair plc and the Company: (i) he is familiar with all business segments and business units of Pentair plc; (ii) he has been materially involved in all business segments and business units of Pentair plc on a global basis; and (iii) he has received lucrative financial benefits as a result of his exposure to and involvement in all business segments and business units of Pentair plc on a global basis.

Competitor. “Competitor” means any economic concern, whether an entity or a person, that competes against the Business in any geographic market where the Company, Pentair plc or any of its affiliates does business.

Throughout his employment in the Business, both with the Company as a Pentair affiliate and with any predecessor owner of any part of the Business, Employee became intimately familiar with trade secrets, know-how, business strategies, marketing strategies, product development, proprietary information and confidential information concerning the Business and concerning the operations of the Company, Pentair plc and its affiliates (collectively, the “Pentair Entities”).  As a result of Employee’s intimate familiarity with the proprietary and confidential information regarding the Business, Employee acknowledges and agrees that he would be able to engage in unfair competition vis-à-vis the Pentair Entities in the event he were to: (i) become employed by or otherwise involved in any way with a Competitor; (ii) solicit or accept competitive business from customers of the Pentair Entities; or (iii) solicit employees of the Pentair Entities.  Accordingly, Employee agrees to the narrow post-employment restrictions set forth in Sections 11(b) and 11(c) below.





(b)    Non-Competition.  Employee agrees that for a twenty-four (24) month period following the Separation Date, he will not (whether in his individual capacity or as an agent of a third party) become employed by, consult with, obtain an ownership interest in, render services to, or have any competitive involvement with a Competitor in any market in the world where Pentair plc or its affiliates are conducting the Business. 

(c)    Non-Solicitation.  Employee agrees that for a twenty-four (24) month period following the Separation Date, he will not, for himself or for any third party, directly or indirectly, (i) solicit or accept business from any customer of the Pentair Entities, or (ii) solicit any employee of the Pentair Entities the purpose of hiring such person or otherwise entice, induce or encourage, directly or indirectly, any such employee to leave his or her employment. 

The parties acknowledge and agree that the requirement in Section 11(c)(ii) which prohibits Employee from directly or indirectly soliciting or otherwise enticing, inducing or encouraging any employee of the Pentair Entities to leave his or her employment is intended to prohibit and shall prohibit, without limitation, Employee from doing any of the following:  (a) solicit for hire or solicit for retainer as an independent consultant or as contingent worker any employee of any of the Pentair Entities; (b) participate in the recruitment of any employee of any of the Pentair Entities, such as through interviewing; (c) serve as a reference for an employee of the Pentair Entities; (d) offer an opinion regarding the candidacy as a potential employee, independent consultant or contingent worker of an individual employed by the Pentair Entities; (e) assist or encourage any third party to pursue an employee of the Pentair Entities for potential employment, independent consulting or contingent worker opportunities; or  (f) assist or encourage any employee of the Pentair Entities to leave the Pentair Entities in order to be an employee, independent consultant or contingent worker for a third party.

(d)    Reasonableness and Notice. Employee agrees that in light of the money and benefits conferred to him under this Agreement, the narrow nature of the restrictive covenants imposed under Sections 11(b) and 11(c) are reasonable and will not result in any hardship to him.  Further, Employee acknowledges and agrees that his breach of any obligation under this Section 11 would cause irreparable harm to the Company, Pentair plc and/or to its affiliates and that such harm may not be compensable entirely with monetary damages.  If Employee violates his obligations under this section, the Company, Pentair plc and its affiliates may, but shall not be required to, seek injunctive relief and/or any other remedy allowed at law, in equity, or under this Agreement.  Any injunctive relief sought shall be in addition to and not in limitation of any monetary relief or other remedies or rights at law, in equity, or under this Agreement. In connection with any suit at law or in equity under this Agreement, the Company, Pentair plc and its affiliates shall be entitled to an accounting, and to the repayment of all profits, compensation, commissions, fees, or other remuneration which Employee or any other entity or person has either directly or indirectly realized on its behalf or on behalf of another and/or may realize, as a result of, growing out of, or in connection with the violation which is the subject of the suit.  Further, in the event of Employee’s breach of this section, Employee shall disgorge the value of all payments and benefits conferred to him by virtue of this Agreement, including the Separation Payment.  In addition to the foregoing, the Company, Pentair plc and its affiliates shall be entitled to collect from Employee any reasonable attorney’s fees and costs incurred in bringing any action against Employee or otherwise to enforce the terms of this Agreement.  The parties agree that it is their intent that the restrictions in this Section 11 be enforced to the maximum allowable extent or modified to permit enforcement to the maximum allowable extent under the laws of Minnesota as determined by a court of appropriate jurisdiction in Minnesota, and the parties further agree to and acknowledge the sufficiency of the parties’ contacts with the State of Minnesota in order to confer exclusive jurisdiction of Minnesota courts applying Minnesota law. The parties are aware of the potential jurisdiction of a Swiss court in this regard and herewith exclude such Swiss jurisdiction by mutual agreement.

Employee agrees that while the restrictive covenants imposed under this Section 11 are in effect, Employee shall give written notice to the Company within ten days after accepting any other employment, position, or ownership interest with any entity that has operations which compete with the operations of any of the Pentair Entities. Such written notice shall be delivered to the Company c/o Frederick S. Koury, Senior Vice President of Human Resources, Pentair plc, Suite 600, 5500 Wayzata Boulevard, Golden Valley, MN 55416, by hand or by certified mail.  Employee agrees that the Company may notify such new employer, company or corporate entity that Employee is bound by this Agreement and, at the Company's election, furnish such employer, company or corporate entity with a copy of Section 11 of this Agreement.

12.    Administrative Charges, Investigations, and Proceedings. As stated above, nothing in this Agreement shall be construed to prohibit Employee from filing a charge with or participating in any investigation or proceeding conducted by the EEOC or a comparable state or local agency. As a result, the restriction in Section 3 regarding non-disparagement does not apply in connection with an administrative charge filed with a government agency or an investigation by an administrative agency. As stated above in Section 2 regarding Employee’s waiver of claims, notwithstanding the provisions of this Section 12, Employee waives his right to recover monetary damages or receive any relief in any charge, complaint, or lawsuit filed by Employee or anyone else on his behalf, including in connection with any administrative agency charge, investigation, or




proceeding. Employee affirms that he has not filed, has not caused to be filed, and is not presently a party to any claim, complaint, charge, or action against the Company, against Pentair plc or against any affiliate of Pentair plc in any form or forum.

13.    Construction of this Agreement and Severability. Should this Agreement require judicial interpretation, the court shall not construe the Agreement more strictly against any party, including the party who prepared it. With the exception of Section 2, if one or more of the provisions of this Agreement shall be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained in this Agreement will not in any way be affected or impaired. If Section 2 shall in part or in whole be invalid, illegal or unenforceable in any respect based on a claim brought by Employee challenging the validity of his release in Section 2, the Company may at its option void the remainder of this Agreement, including the obligation to pay Employee the Separation Payment. Any portions of this Agreement found by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect shall be revised to the minimum amount necessary in order to be valid and enforceable.

14.    Employee Understands the Terms of this Agreement. Other than stated herein, Employee warrants that (a) no promise or inducement has been offered for this Agreement; (b) this Agreement is executed without reliance upon any statement or representation of the Company or its representatives concerning the nature and extent of any claims or liability therefor, if any; (c) Employee is legally competent to execute this Agreement and accepts full responsibility therefor; (d) the Company has advised Employee to consult with an attorney regarding the purpose and effect of this Agreement; (e) the Company allowed Employee twenty-one (21) days within which to consider this proposed Agreement, and (f) Employee fully understands this Agreement and has had a sufficient opportunity to be advised by counsel of the consequences of signing this Agreement. The parties acknowledge and agree that if Employee has not signed this proposed Agreement within the twenty-one (21) day period following the Company’s presentation of the offer of this Agreement to Employee, then the offer of this Agreement shall expire by its own terms and be of no further force or effect without any further action required on the part of the Company.

EMPLOYEE

Dated:    August 31, 2015                /s/ Christopher Stevens    
                        

Dated:    September 3, 2015            PENTAIR MANAGEMENT COMPANY

By /s/ Frederick S. Koury                    
Frederick S. Koury

Its     Senior Vice President, Human Resources    

Dated:    September 3, 2015            By /s/ Angela D. Lageson                    
Angela D. Lageson

Its     Senior Vice President, General Counsel & Secretary















EXHIBIT A

Christopher Stevens - Repatriation
TAXATION
Income related to your assignment will remain tax equalized through August 15, 2015, the date your international assignment ends. However, you will continue to be held to Pentair’s tax equalization policy until all tax matters related to your assignment are closed. As of August 16, 2015, you will be personally responsible for global tax liabilities (including home and/or host income, state/local, and social taxes) on all of your employment income as well as any outside personal income you may receive in both your home and host locations. However, should any assignment allowances or employment income be paid by Pentair on your behalf, after your separation date from the Company (i.e., host location tax payments or other Pentair income related to your assignment), these payments will be covered by the tax equalization policy. Please note that tax equalization policy will only cover the Switzerland and Australia income and taxes related to your assignment, and you will remain responsible for any applicable U.S. hypothetical or actual tax (i.e., federal, state, local and social security, etc.) withholdings accordingly. Equalization will not cover taxes related or impose by another country in which you chose to relocate to should these income items be taxable in that country.
During your assignment, foreign tax credit carryovers may have been generated by foreign taxes paid by Pentair. As such, any benefit you receive as a credit against foreign source income, as a result of these credit carryovers, belongs to Pentair. In order for Pentair to capture the benefit from these credits, it may be necessary for you to continue to use Pentair’s designated tax provider, for a period of time, as determined by Pentair.

Pentair will cover the cost for the tax preparation services provided by its designated tax provider who will be responsible for preparing both your U.S. and Switzerland (and Australia as needed) location tax returns, as well as any tax equalization calculations necessary.  It is expected that the services provided will include the 2015, 2016, 2017 and 2018 tax years. Any Pentair settlements or other payments made in the 2019 tax year or future years, which are related to your Pentair assignment, will be evaluated by Pentair for the need for tax assistance, and as to Pentair assignment employment-related income earned by you personally, such assistance will not be denied as long as it falls under Pentair tax equalization policy guidelines. Tax assistance may be provided in the format of either Pentair’s designated tax provider or appropriate tax gross-ups, without the need for tax provider assistance.

It is expected that both parties will fully abide by the tax data submission deadlines without any delay set by the designated tax provider, to help ensure timely tax return filings. To the extent that information is submitted late or omitted, and penalties and/or interest are assessed by the taxing authorities, the party who caused the late submission will be held personally responsible. This includes any penalties or interest imposed under IRC §409A, if applicable. In order to avoid these penalties and/or interest, we strongly urge you to comply with the data submission deadlines.

Any tax equalization payments due to or from Pentair are expected to be settled within 60 calendar days of completion and receipt of the calculation provided by our designated tax provider. Separately, you also agree and instruct the Company, at its discretion, to withhold any tax amounts due to the Company by offsetting other benefits that may be due to you (e.g., separation payments, bonus, etc.).

Please note that tax services do not include financial consulting or planning. These are out of scope of Pentair’s tax services.
  
ASSIGNMENT ALLOWANCES AND BENEFITS
All of your assignment allowances paid through payroll and/or any benefits-in-kind, as outlined (but not limited) to the items below, will cease being paid or provided as of August 15, 2015:
•
G&S Allowance
•
Host Housing Payments to Landlord (except for lease cancellation fees, as described below)
•
Host Housing Utilities Payments/Reimbursements
•
Home Leave Airfare
•
Host Company Car
•
Children Education Costs/Expenses
•
New Jersey Storage Costs (except for what is authorized in storage section below)




•
Any unused language training for you or your spouse
•
Any unused spouse assistance reimbursement allowance
•
CIGNA Int’l Health Coverage will terminate on your employment separation date and you will be provide option for CIGNA Int’l COBRA.

RELOCATION
Pentair will assist with your repatriation back to Houston, Texas or another U.S. location of your choice. However, only one U.S. location will be authorized and confirmed for your relocation benefits back to the U.S. You must confirm to the Manager of Global Mobility the U.S. location you elect for your U.S. repatriation location no later than July 15, 2015. If applying for reimbursements, receipts must be submitted through the Expatriate Expentia system. No expenses for repatriation should be put on your corporate card or submitted through Concur OR local business expenses systems. This includes the arrangements of the relocation air tickets. Global Mobility will help you book these tickets as described further below.
Transportation Costs
Pentair will pay the cost of you and your family’s upgradeable economy class airfare between Switzerland and your U.S. home location via the most direct route. In addition, reasonable ground transportation to/from airports will be reimbursable. Excess baggage charges for personal effects are not covered expenses since an air shipment provision is included for the shipment of your personal household good effects. You can coordinate your relocation tickets through the Manager of Global Mobility so that Carlson Wagonlit can bill the relocation tickets for you and your family to the special expatriate card number. Carlson Wagonlit Travel should copy the Manager of Global Mobility on all flight itineraries for your repatriation airfare.

Temporary Living Expenses
You may have to vacate your host country residence before you leave the host country. Pentair will reimburse the cost of temporary accommodations in Switzerland for up to five (5) days as needed to allow for cleaning, etc., for the turnover of your assignment property. Reimbursements include the cost of accommodations, such as hotel/extended stay, and will include the cost of reasonable meals, if kitchen facilities are not available. Separately, Pentair will cover sixty (60) days temporary living in your U.S. home location coordinated through your SIRVA consultant. Reimbursements include the cost of accommodations, such as corporate apartment, hotel/extended stay, and will include the cost of reasonable meals, only if kitchen facilities are not available. Pentair’s providers will invoice you separately for any costs beyond the sixty (60) days allowable, and you will be expected to settle those temporary housing invoices timely with the vendor.
The temporary accommodations must be approved upfront and coordinated in advance through your SIRVA consultant and the Manager of Global Mobility.
Furniture Rental (In lieu of temporary living)
In lieu of the sixty (60) days temporary noted above, Pentair will allow sixty (60) days for a reasonable rental furniture package, as determined by the Manager of Global Mobility. Your SIRVA consultant will help coordinate the rental furniture rental through its designated furniture rental provider. The furniture package will include the basics for a family of 4 and include items for the Living Room and Dining Room Areas, Electronics (e.g., 32” LCD TV, DVD player), Master Bedroom, 2 Children Rooms, Office (e.g. desk/chair only) and the basic housewares (e.g. kitchen package, bathroom package, bed linens, vacuum, iron/board, etc.). You will be provided further information on package provisions if you elect this option from your SIRVA consultant. Pentair’s provider will invoice you separately for any furniture rental costs beyond the sixty (60) days allowable, and you will be expected to settle those invoices timely with the vendor.

Car Rental
If needed, Pentair will reimburse the fees for a rental car for up to 30 days, in the U.S. Gas receipts are your personal responsibility. Any car rental should be put on your personal credit card, and receipts can be submitted through the Expatriate Expentia System.
Host Company or Personal Cars
For your assignment company car, you will need to work with local Switzerland Human Resources for the disposal/turnover of your company car by August 15, 2015, as per local policy for company car turnovers. Separately, should you have purchased or leased a personal car in the Switzerland, you will be personally responsible for turning over the leased car and/or the disposing of your personal purchased car. No financial assistance will be provided for the disposal of a personal car.




Shipment of Household Goods
The company will cover the packing, transporting, insuring, delivering and unpacking of your household goods and personal effects from Switzerland to your U.S. home location. You will receive an air shipment of 1 LDN container for yourself and 1 D container for the spouse/domestic partner, and 1 H container for each accompanying dependent. In addition, you will receive a sea/surface shipment of 1 40ft. high container, and 1 regular 40 ft. container (if needed). Both shipments will be insured up to the same insurance values that was figured for your most recent move from Schaffhausen to Zurich. These shipments must be facilitated by Pentair’s designated international shipping vendor assigned to you. You are expected to use good judgment in assuring that household goods and personal belongings that are intended for shipment are legally allowed. You should contact Pentair’s designated international shipping vendor to obtain a list of items that will not qualify for company-paid shipping, or is restricted for shipment into the destination location. Should your shipment be in excess of the allowable weights, you will assume responsibility for the excess shipment costs and will be billed separately by the designated shipping vendor. Therefore, it is recommend that you discard, donate, or sell items to ensure you are under your allowable shipment weights.
U.S. Storage (Goods from Switzerland)
Any storage needed upon arrival of your Switzerland sea shipment in the U.S. will be covered for up to 60 days from the date the designated shipper puts your sea shipment into storage. Additional storage time beyond the 60 days allowable or other storage fees (e.g. insurance etc.) will be your personal responsibility and the designated shipper will invoice you directly. Swiss storage is not authorized.
Movement/Shipment And Storage of Goods (Switzerland Sea Shipment in U.S. Storage)
Pentair will pay the cost of moving your personal effects out of the Pentair vendor storage into the new home you secure in your new U.S. home location. The movement of the goods will be limited to a city within the U.S. state authorized for your U.S. home storage. No movements will be authorized to another U.S. state cross-country. This shipment must be facilitated by your SIVRA counselor through the designated shipping company. Insurance coverage will be applicable to Pentair’s shipment policy coverage. All movements out of storage have to be completed no later than the 60 days from the date that your Switzerland sea shipment of goods were put into the U.S. storage facility. Any movements and delivery fees after this 60 day storage time has expired, will also be your personal responsibility. You are allowed to keep your household goods in the storage facility, if you elect to do so. However, Pentair will not pay any additional storage, insurance, or movements after the 60 day expiration. You will be responsible for all related fees and the designated shipping vendor will invoice you directly. Should you secure housing in your new location such that your Switzerland shipment can be moved directly into your new U.S. home housing, this will be considered final delivery with no future movements and no future storage of the above mentioned goods to be authorized.
Storage (New Jersey)
With respect to the goods you currently have in Pentair’s vendor storage in New Jersey, Pentair will continue to pay storage and insurance costs up to 60 days from the date that your Switzerland sea shipment arrives to the U.S. port and goes into the U.S. storage facility authorized.
Further, Pentair will pay the actual cost of moving your personal goods out of Pentair's vendor storage in New Jersey to your new Cincinnati, OH address, including delivering and unpacking of your household goods and personal effects presently in storage in New Jersey provided the move takes place in 2015 and does not exceed a maximum of $20,000.00. Additional storage or the movement of the goods out of the storage facility beyond these terms will be your responsibility.
Turnover of Pentair Company Housing/Lease Cancellation
The earliest Pentair can provide its first cancellation notice on the lease terms is September 2017. Therefore Pentair will cover rental and utility fees as per the lease terms. Since the rental lease terms are in the Company name, Pentair will either try to cancel the lease terms early and find a new tenant with same current lease terms as required, or provide housing to another Pentair assignee to fulfill the remaining lease terms.
You must vacate Pentair’s Company rental property prior to August 15, 2015, and complete the necessary walk through for Pentair and the landlord’s release. All damages, wear and tear, painting, cleaning, etc. should be taken care of prior to move out of the premises, and these costs are your sole financial responsibility but for which you can use your departure assistance reimbursement (outlined below) towards these potential expenses incurred in the turnover of your Switzerland assignment property. However, should the landlord not allow some of the cleaning, damage repair, painting, etc., at the time of move-out, Pentair will obtain the cleaning, damage repair, and painting bids necessary to secure payments from you upfront so that these charges can be settled when the landlord authorizes Pentair to do so.




Departure Assistance Reimbursement
Where necessary, Pentair may reimburse up to USD 2,500 or local equivalent at the time of payment to cover any costs for required repairs and maintenance related to normal wear and tear (i.e., painting, cleaning) to your leased housing prior to departure. Reimbursement will be handled through Expentia and proper documentation/receipts will be required. Any housing movement expenses above this allowable reimbursement amount will be your responsibility to settle to either the landlord or Pentair.
Host Departure Services & Return Of Pentair Housing Deposit
1-2 days departure services through our local contact will be provided to help you satisfy your obligation to vacate the premises prior to August 15, 2015 and accomplish any necessary cleaning, painting and damage repair required to restore the condition of the property to the state it was in at the time you began your tenancy in order to cause the full release of Pentair’s upfront security deposit. Your departure assistance reimbursement benefit described above can be used to assist you in causing any necessary cleaning, painting or repair work to be done to ensure that the property is restored to the state it was in at the time you began your tenancy. Finally, you assign any rights or interest in the security deposit to Pentair, and should the security deposit be remitted to you, you must return the security deposit to Pentair within 30 days of your receipt of the funds.
Repatriation Allowance
Pentair will pay a relocation allowance of USD 5,000 NET.
This allowance is intended to offset any out-of-pocket expenses associated with relocation, and not specifically covered in any other policy element for your repatriation. Relocation expenses would include, but are not limited to, purchase and installation of appliances and furnishing, hook-up charges, automobile registration/license and driver’s license, additional temporary living or car rental, and excess baggage or storage costs, etc.
You can request your relocation allowance through the Expatriate Expentia system.
Immigration (Work & Residence Permit Cancellations)
As required, Pentair will notify the authorities of your termination date for the cancellation of your work and residence permits. Pentair will authorize Pro-Link Global to assist you and your family with your Switzerland de-registrations through our designated immigration vendor. This will help notify the authorities of your official Switzerland departure. This de-registration is also important since it notifies the tax authorities of your departure, which helps to close off your Switzerland tax matters. Should you or your family wish to re-enter Switzerland for personal reasons, e.g., visit/vacation etc., you will need to seek proper legal entry through a visitor visa.
Relocation Administration/Expense Management
Your SIRVA counselor, along with the Manager, Global Mobility will help initiate and facilitate your repatriation/relocation to your U.S. home location. Any authorized repatriation relocation expenses should be coordinated through your SIRVA contact and any reimbursements will be handled through the Polaris/Expentia system.
Repatriation Benefits Deadline
You must fully utilize all repatriation benefits, and also make any appropriate expense submissions no later than December 31, 2015 or forfeit unused benefits. The sole exception is related to the above taxation section which indicates the need to cover multiple tax years for tax preparation and related tax equalization settlements.









Exhibit B

POST-EMPLOYMENT RELEASE OF CLAIMS

WHEREAS, Employee’s employment with Pentair Management Company (the “Company”) ended on October 15, 2015, and Employee now wishes to sign and deliver this two-page Post-Employment Release of Claims (“Release”) as a condition of receiving those certain benefits set forth in the parties’ _________ 2015 Confidential Separation Agreement to which this Release was attached as Exhibit B.

WHEREAS, “the Assignment Letters” means, collectively: the October 8, 2012 Tyco Valves & Controls Inc. Letter of Assignment; the December 18, 2013 Pentair, Inc. Offer Letter; and the October 6, 2014 Assignment Memo Addendum.

WHEREFORE, Christopher Stevens (“Former Employee”), on behalf of himself, his agents, representatives, attorneys, assignees, heirs, executors, and administrators, hereby covenants not to sue and releases and forever discharges the Company and its past and present employees, agents, insurers, officials, officers, directors, divisions, parents (including Pentair plc), subsidiaries and successors, and all affiliated entities and persons, and all of their respective past and present employees, agents, insurers, officials, officers, and directors from any and all claims and causes of action of any type arising, or which may have arisen, out of or in connection with his employment or the separation of his employment, including but not limited to claims, demands or actions arising under the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the Age Discrimination in Employment Act of 1967 as amended by the Older Workers Benefit Protection Act, the Equal Pay Act, 42 U.S.C. § 1981, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, the Vocational Rehabilitation Act, the Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act, the Fair Labor Standards Act, the Lily Ledbetter Fair Pay Act of 2009, the Americans With Disabilities Act, the Rehabilitation Act of 1973, the Genetic Information Nondiscrimination Act, the Immigration Reform and Control Act of 1986, the Civil Rights Act of 1991, the Occupational Safety and Health Act, the Consumer Credit Protection Act, the American Recovery and Reinvestment Act of 2009, the Asbestos Hazard Emergency Response Act, Employee Polygraph Protection Act, the Uniformed Services Employment and Reemployment Rights Act, and any applicable regulations, the Minnesota Human Rights Act, the Minnesota Equal Pay for Equal Work Law, the Minnesota Fair Labor Standards Act, the Minnesota Labor Relations Act, the Minnesota Occupational Safety and Health Act, the Minnesota Criminal Background Check Act, the Minnesota Lawful Consumable Products Law, the Minnesota Smokers’ Rights Law, the Minnesota Parental Leave Act, the Minnesota Adoptive Parent Leave Law, the Minnesota Whistleblower Act, the Minnesota Drug and Alcohol Testing in the Workplace Act, the Minnesota Consumer Reports Law, the Minnesota Victim of Violent Crime Leave Law, the Minnesota Domestic Abuse Leave Law, the Minnesota Bone Marrow Donation Leave Law, the Minnesota Military and Service Leave Law, the Minnesota Minimum Wage Law, the Minnesota Drug and Alcohol Testing in the Workplace Act, Minn. Stat. 176.82, Minnesota Statutes Chapter 181, the Minnesota Constitution, Minnesota common law, and all other applicable state, county and local ordinances, statutes and regulations, and all labor laws of Switzerland. Former Employee further understands that this discharge of claims extends to, but is not limited to, all claims which he may have as of the date of this Release based upon statutory or common law claims for defamation, libel, slander, assault, battery, negligent or intentional infliction of emotional distress, negligent hiring or retention, breach of contract (including, but not limited to, any past, present or future claims arising under the Assignment Letters or under any other contracts aside from any future claims arising under the Confidential Separation Agreement to which this Release is attached as Exhibit B), retaliation, whistleblowing, promissory estoppel, fraud, wrongful discharge, or any other theory, whether legal or equitable, and any and all claims for wages, salary, bonuses, commissions, damages, attorney’s fees or costs. Former Employee acknowledges that this Release includes all claims that he is legally permitted to release, but does not apply to any vested rights under the Company’s retirement plans. Further, nothing in this Release precludes him from filing an administrative charge of discrimination, though he cannot recover any damages if he does file such a charge or if he has filed such a charge.

Rescission. Former Employee understands he may not sign this Release prior to the Separation Date as defined in the Confidential Separation Agreement to which this Release was attached as Exhibit B. Former Employee further understands that he may nullify and rescind this Release at any time within fifteen (15) days from the date of signature below by indicating his desire to do so in writing and delivering that writing to Pentair, c/o Frederick S. Koury, Senior Vice President of Human Resources, Pentair plc, 5500 Wayzata Boulevard, Suite 600, Golden Valley, MN 55416, by hand or by certified mail. Former Employee further understands that if he rescinds this Release on a timely basis, then the Company will have no obligation to pay him those particular monies and benefits under the Confidential Separation Agreement to which this Release was attached as Exhibit B which were expressly conditioned upon Former Employee signing and not rescinding this Release after the Separation Date. Former Employee warrants that (a) no promise or inducement has been offered for this Release except as provided in the Confidential Separation Agreement; (b) this Release is executed without reliance upon any statement or representation of the Company or its representatives concerning the nature and extent of any claims or liability therefor, if any; (c) Former Employee is legally competent to execute this Release and accepts full responsibility therefor; (d) the Company has




advised Former Employee to consult with an attorney; (e) the Company has allowed Former Employee at least twenty-one (21) days within which to consider this Release; and (f) Former Employee fully understands this Release and has had a sufficient opportunity to be advised by counsel of the consequences of signing this Release.

FORMER EMPLOYEE


Dated: ________________            _________________________________________








Exhibit 31.1

Certification

I, Randall J. Hogan, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Pentair plc;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
October 20, 2015
/s/ Randall J. Hogan
 
 
Randall J. Hogan
 
 
Chairman and Chief Executive Officer








Exhibit 31.2

Certification

I, John L. Stauch, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Pentair plc;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
October 20, 2015
/s/ John L. Stauch
 
 
John L. Stauch
 
 
Executive Vice President and Chief Financial Officer







Exhibit 32.1

Certification of CEO Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report of Pentair plc (the “Company”) on Form 10-Q for the period ended September 26, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Randall J. Hogan, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:
October 20, 2015
/s/ Randall J. Hogan
 
 
Randall J. Hogan
 
 
Chairman and Chief Executive Officer









Exhibit 32.2

Certification of CFO Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report of Pentair plc (the “Company”) on Form 10-Q for the period ended September 26, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John L. Stauch, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge:

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:
October 20, 2015
/s/ John L. Stauch
 
 
John L. Stauch
 
 
Executive Vice President and Chief Financial Officer




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