10-Q 1 pnr-201633110q.htm 10-Q
Table of Contents

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 March 31, 2016

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 March 31, 2016, 180,716,339 shares of Registrant’s common stock were outstanding.

Table of Contents
Pentair plc and Subsidiaries

| Page
PART I FINANCIAL INFORMATION |
ITEM 1. | Financial Statements (unaudited) |
| Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2016 and March 28, 2015 | 3
| Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 | 4
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and March 28, 2015 | 5
| Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2016 and March 28, 2015 | 6
| Notes to Condensed Consolidated Financial Statements | 7
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 40
ITEM 4. | Controls and Procedures | 40
PART II OTHER INFORMATION |
ITEM 1. | Legal Proceedings | 41
ITEM 1A. | Risk Factors | 41
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 41
ITEM 6. | Exhibits | 41
| Signatures | 42

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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
In millions, except per-share data | March 31, 2016 | March 28, 2015
Net sales | $ | 1,575.5 |  | $ | 1,475.0 |
Cost of goods sold | 1,040.1 |  | 964.8 |
Gross profit | 535.4 |  | 510.2 |
Selling, general and administrative | 331.6 |  | 309.2 |
Research and development | 33.2 |  | 29.8 |
Operating income | 170.6 |  | 171.2 |
Other (income) expense: |  |
Equity income of unconsolidated subsidiaries | (0.9 | ) | (0.5 | )
Net interest expense | 36.4 |  | 18.2 |
Income from continuing operations before income taxes | 135.1 |  | 153.5 |
Provision for income taxes | 27.7 |  | 35.3 |
Net income from continuing operations | 107.4 |  | 118.2 |
Loss from discontinued operations, net of tax | — |  | (4.3 | )
Net income | $ | 107.4 |  | $ | 113.9 |
Comprehensive income (loss), net of tax |  |
Net income | $ | 107.4 |  | $ | 113.9 |
Changes in cumulative translation adjustment | 28.0 |  | (174.2 | )
Changes in market value of derivative financial instruments, net of ($0.5) and $0.2 tax, respectively | (14.7 | ) | (0.1 | )
Comprehensive income (loss) | $ | 120.7 |  | $ | (60.4 | )
Earnings (loss) per ordinary share |  |
Basic |  |
Continuing operations | $ | 0.59 |  | $ | 0.66 |
Discontinued operations | — |  | (0.03 | )
Basic earnings per ordinary share | $ | 0.59 |  | $ | 0.63 |
Diluted |  |
Continuing operations | $ | 0.59 |  | $ | 0.65 |
Discontinued operations | — |  | (0.03 | )
Diluted earnings per ordinary share | $ | 0.59 |  | $ | 0.62 |
Weighted average ordinary shares outstanding |  |
Basic | 180.7 |  | 180.1 |
Diluted | 182.4 |  | 182.7 |
Cash dividends paid per ordinary share | $ | 0.33 |  | $ | 0.32 |

See accompanying notes to condensed consolidated financial statements.
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Pentair plc and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)

| March 31, 2016 | December 31, 2015
In millions, except per-share data
Assets
Current assets |  |
Cash and cash equivalents | $ | 158.1 |  | $ | 126.3 |
Accounts and notes receivable, net of allowances of $99.6 and $103.7, respectively | 1,268.7 |  | 1,167.7 |
Inventories | 1,197.7 |  | 1,174.3 |
Other current assets | 381.4 |  | 309.3 |
Total current assets | 3,005.9 |  | 2,777.6 |
Property, plant and equipment, net | 951.8 |  | 942.8 |
Other assets |  |
Goodwill | 5,250.0 |  | 5,255.4 |
Intangibles, net | 2,461.0 |  | 2,490.1 |
Other non-current assets | 361.5 |  | 367.6 |
Total other assets | 8,072.5 |  | 8,113.1 |
Total assets | $ | 12,030.2 |  | $ | 11,833.5 |
Liabilities and Equity
Current liabilities |  |
Current maturities of long-term debt and short-term borrowings | $ | 0.7 |  | $ | 0.7 |
Accounts payable | 579.0 |  | 578.8 |
Employee compensation and benefits | 222.6 |  | 262.9 |
Other current liabilities | 665.3 |  | 644.1 |
Total current liabilities | 1,467.6 |  | 1,486.5 |
Other liabilities |  |
Long-term debt | 4,837.1 |  | 4,685.8 |
Pension and other post-retirement compensation and benefits | 285.9 |  | 287.2 |
Deferred tax liabilities | 828.7 |  | 844.2 |
Other non-current liabilities | 526.7 |  | 521.0 |
Total liabilities | 7,946.0 |  | 7,824.7 |
Equity |  |
Ordinary shares $0.01 par value, 426.0 authorized, 180.7 and 180.5 issued at March 31, 2016 and December 31, 2015, respectively | 1.8 |  | 1.8 |
Additional paid-in capital | 2,874.8 |  | 2,860.3 |
Retained earnings | 1,839.3 |  | 1,791.7 |
Accumulated other comprehensive loss | (631.7 | ) | (645.0 | )
Total equity | 4,084.2 |  | 4,008.8 |
Total liabilities and equity | $ | 12,030.2 |  | $ | 11,833.5 |

See accompanying notes to condensed consolidated financial statements.
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Pentair plc and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)

| Three months ended
In millions | March 31, 2016 | March 28, 2015
Operating activities |  |
Net income | $ | 107.4 |  | $ | 113.9 |
Loss from discontinued operations, net of tax | — |  | 4.3 |
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 | (0.9 | ) | (0.5 | )
Depreciation | 33.5 |  | 32.4 |
Amortization | 37.6 |  | 27.6 |
Deferred income taxes | (13.6 | ) | 5.7 |
Share-based compensation | 16.1 |  | 9.7 |
Excess tax benefits from share-based compensation | (0.5 | ) | (2.8 | )
Gain on sale of assets | (2.3 | ) | (1.2 | )
Changes in assets and liabilities, net of effects of business acquisitions |  |
Accounts and notes receivable | (90.7 | ) | (85.8 | )
Inventories | (11.7 | ) | (88.2 | )
Other current assets | (51.2 | ) | (71.0 | )
Accounts payable | (4.2 | ) | (60.2 | )
Employee compensation and benefits | (43.7 | ) | (33.7 | )
Other current liabilities | 22.3 |  | 38.8 |
Other non-current assets and liabilities | (13.1 | ) | (15.2 | )
Net cash provided by (used for) operating activities of continuing operations | (15.0 | ) | (126.2 | )
Net cash provided by (used for) operating activities of discontinued operations | — |  | (7.0 | )
Net cash provided by (used for) operating activities | (15.0 | ) | (133.2 | )
Investing activities |  |
Capital expenditures | (38.2 | ) | (34.8 | )
Proceeds from sale of property and equipment | 6.3 |  | 2.3 |
Acquisitions, net of cash acquired | (0.1 | ) | (3.0 | )
Net cash provided by (used for) investing activities of continuing operations | (32.0 | ) | (35.5 | )
Net cash provided by (used for) investing activities of discontinued operations | — |  | 54.9 |
Net cash provided by (used for) investing activities | (32.0 | ) | 19.4 |
Financing activities |  |
Net receipts of short-term borrowings | 0.7 |  | — |
Net receipts of commercial paper and revolving long-term debt | 138.4 |  | 406.0 |
Repayments of long-term debt | (0.7 | ) | (0.4 | )
Excess tax benefits from share-based compensation | 0.5 |  | 2.8 |
Shares issued to employees, net of shares withheld | (1.6 | ) | 8.7 |
Repurchases of ordinary shares | — |  | (200.0 | )
Dividends paid | (60.1 | ) | (57.5 | )
Net cash provided by (used for) financing activities | 77.2 |  | 159.6 |
Effect of exchange rate changes on cash and cash equivalents | 1.6 |  | (25.1 | )
Change in cash and cash equivalents | 31.8 |  | 20.7 |
Cash and cash equivalents, beginning of period | 126.3 |  | 110.4 |
Cash and cash equivalents, end of period | $ | 158.1 |  | $ | 131.1 |

See accompanying notes to condensed consolidated financial statements.
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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 loss | Total
Number | Amount |  | Number | Amount
Balance - December 31, 2015 | 180.5 |  | $ | 1.8 |  |  | — |  | $ | — |  | $ | 2,860.3 |  | $ | 1,791.7 |  | $ | (645.0 | ) | $ | 4,008.8 |
Net income | — |  | — |  |  | — |  | — |  | — |  | 107.4 |  | — |  | 107.4 |
Other comprehensive income, net of tax | — |  | — |  |  | — |  | — |  | — |  | — |  | 13.3 |  | 13.3 |
Dividends declared | — |  | — |  |  | — |  | — |  | — |  | (59.8 | ) | — |  | (59.8 | )
Exercise of options, net of shares tendered for payment | 0.1 |  | — |  |  | — |  | — |  | 3.2 |  | — |  | — |  | 3.2 |
Issuance of restricted shares, net of cancellations | 0.2 |  | — |  |  | — |  | — |  | — |  | — |  | — |  | — |
Shares surrendered by employees to pay taxes | (0.1 | ) | — |  |  | — |  | — |  | (4.8 | ) | — |  | — |  | (4.8 | )
Share-based compensation | — |  | — |  |  | — |  | — |  | 16.1 |  | — |  | — |  | 16.1 |
Balance - March 31, 2016 | 180.7 |  | $ | 1.8 |  |  | — |  | $ | — |  | $ | 2,874.8 |  | $ | 1,839.3 |  | $ | (631.7 | ) | $ | 4,084.2 |

In millions | Ordinary shares |  | Treasury shares | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | 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 |
Net income | — |  | — |  |  | — |  | — |  | — |  | 113.9 |  | — |  | 113.9 |
Other comprehensive loss, net of tax | — |  | — |  |  | — |  | — |  | — |  | — |  | (174.3 | ) | (174.3 | )
Dividends declared | — |  | — |  |  | — |  | — |  | 1.5 |  | — |  | — |  | 1.5 |
Share repurchase | (3.1 | ) | — |  |  | — |  | — |  | (200.0 | ) | — |  | — |  | (200.0 | )
Exercise of options, net of shares tendered for payment | — |  | — |  |  | 0.3 |  | 16.0 |  | (3.8 | ) | — |  | — |  | 12.2 |
Issuance of restricted shares, net of cancellations | — |  | — |  |  | 0.2 |  | 7.7 |  | (7.7 | ) | — |  | — |  | — |
Shares surrendered by employees to pay taxes | — |  | — |  |  | (0.1 | ) | (2.6 | ) | (0.9 | ) | — |  | — |  | (3.5 | )
Share-based compensation | — |  | — |  |  | — |  | — |  | 9.7 |  | — |  | — |  | 9.7 |
Balance - March 28, 2015 | 199.3 |  | $ | 2.0 |  |  | (19.5 | ) | $ | (1,230.8 | ) | $ | 4,048.8 |  | $ | 2,157.9 |  | $ | (554.6 | ) | $ | 4,423.3 |

See accompanying notes to condensed consolidated financial statements.
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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.
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, 2015.
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. Beginning in the first quarter of 2016, we report our interim quarterly periods on a calendar quarter basis. Prior to the first quarter of 2016, we reported our interim quarterly periods on a 13-week basis ending on a Saturday.
New accounting standards
In March 2016, the Financial Accounting Standards Board ("FASB") issued a new accounting standard that will change certain aspects of accounting for share-based payments to employees, including the accounting for income taxes, forfeitures and statutory withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for annual and interim periods beginning after December 15, 2016. We have not yet determined the impact this standard will have on our financial condition or results of operations.
In February 2016, the FASB issued new accounting requirements regarding accounting for leases, which requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period, and early adoption is permitted. We have not yet determined the potential effects on our financial condition or results of operations.
In November 2015, the FASB issued a new accounting standard which clarifies and simplifies the balance sheet classification of deferred tax assets and liabilities. Under the new standard, all deferred tax assets and liabilities are required to be classified as non-current in a classified balance sheet. The new standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period, and early adoption is permitted. We have not yet determined the impact this standard will have on our financial condition.
In April 2015, the FASB issued a new accounting standard which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The new standard was effective for annual and interim periods beginning after December 15, 2015. We adopted the new standard during the first quarter of 2016 and, as a result, reclassified unamortized debt issuance costs of $23.5 million from Other current assets and Other non-current assets to Long-term debt on the Condensed Consolidated Balance Sheet as of December 31, 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 and Divestitures

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.
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Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
ERICO has employees in 30 countries across the world with recognized brands including CADDY fixing, fastening and support products; ERICO electrical grounding, bonding and connectivity products and LENTON engineered systems.
The purchase price has been preliminarily allocated based on the estimated fair value of assets acquired and liabilities assumed at the date of the ERICO Acquisition. The preliminary purchase price allocation is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. These changes will primarily relate to income tax-related items. We expect the purchase price allocation to be completed in the second 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 as previously reported at December 31, 2015 and as revised at March 31, 2016:

In millions | As Previously Reported | As Revised
Cash | $ | 11.8 |  | $ | 11.8 |
Accounts receivable | 75.9 |  | 75.9 |
Inventories | 102.4 |  | 102.1 |
Other current assets | 2.9 |  | 2.8 |
Property, plant and equipment | 53.4 |  | 53.4 |
Identifiable intangible assets | 1,033.8 |  | 1,033.8 |
Goodwill | 1,061.9 |  | 1,037.4 |
Current liabilities | (97.2 | ) | (94.3 | )
Deferred income taxes, including current | (418.8 | ) | (396.8 | )
Other liabilities | (8.0 | ) | (8.0 | )
Purchase price | $ | 1,818.1 |  | $ | 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 $1,037.4 million, none of which is expected to be deductible for income tax purposes. Identifiable intangible assets acquired as part of the ERICO Acquisition include $228.4 million of indefinite-lived trade name intangible assets and $805.4 million of definite-lived customer relationships with an estimated useful life of 21 years.
The following unaudited pro forma consolidated condensed financial results of operations are presented as if the ERICO Acquisition was consummated on January 1, 2014:

| Three months ended
In millions, except per-share data | March 28, 2015
Pro forma net sales | $ | 1,599.1 |
Pro forma net income from continuing operations | 121.0 |
Pro forma earnings per ordinary share - continuing operations |
Basic | $ | 0.67 |
Diluted | 0.66 |

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
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Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
of cash acquired. In November 2015, cash of $0.9 million (1.2 million Canadian dollars translated at the average monthly exchange rate) was paid to Nuheat in settlement of a working capital adjustment. Based in Canada, Nuheat is a leading manufacturer of electric floor heating systems that are distributed across North America. Total goodwill recorded as part of the purchase allocation was $43.2 million, none of which is tax deductible. Identified intangible assets acquired consisted of customer relationships of $53.3 million, with an estimated useful life of 17 years. The pro forma impact of this acquisition was deemed to not be material.
Discontinued operations
During the first and second quarters of 2015, we sold the remaining portions of the Water Transport business in Australia and received cash proceeds of $59.0 million. The results of the Water Transport business have been presented as discontinued operations.
Operating results of discontinued operations are summarized below:

| Three months ended
In millions | March 31, 2016 | March 28, 2015
Net sales | $ | — |  | $ | 18.6 |
Cost of goods sold | — |  | 18.1 |
Gross profit | $ | — |  | $ | 0.5 |
Loss from discontinued operations before income taxes | $ | — |  | $ | (5.6 | )
Income tax benefit | — |  | 1.3 |
Loss from discontinued operations, net of tax | $ | — |  | $ | (4.3 | )

3. | Share Plans

Total share-based compensation expense for the three months ended March 31, 2016 and March 28, 2015 was as follows:

| Three months ended
In millions | March 31, 2016 | March 28, 2015
Restricted stock units | $ | 7.0 |  | $ | 6.2 |
Stock options | 5.4 |  | 3.5 |
Performance share units | 3.7 |  | — |
Total share-based compensation expense | $ | 16.1 |  | $ | 9.7 |

In the first quarter of 2016, 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 1.7 million, of which 1.1 million were stock options, 0.3 million were restricted stock units and 0.3 million were performance share units. The weighted-average grant date fair value of the stock options, restricted stock units and performance share units issued was $10.23, $49.21 and $49.21, 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:

| 2016 Annual Grant
Risk-free interest rate | 1.57 | %
Expected dividend yield | 2.47 | %
Expected share price volatility | 27.3 | %
Expected term (years) | 5.9 |

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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.

4. | Restructuring

During the three months ended March 31, 2016 and the year ended December 31, 2015, we continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. Initiatives during the three months ended March 31, 2016 included the reduction in hourly and salaried headcount of approximately 50 employees, consisting of approximately 10 in Water Quality Systems, 20 in Flow & Filtration Solutions and 20 in Technical Solutions. Initiatives during the year ended December 31, 2015 included the reduction in hourly and salaried headcount of approximately 3,000 employees, consisting of approximately 100 in Water Quality Systems, 200 in Flow & Filtration Solutions, 200 in Technical Solutions and 2,500 in Valves & Controls.
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
In millions | March 31, 2016 | March 28, 2015
Severance and related costs | $ | 0.8 |  | $ | — |
Other | (0.1 | ) | — |
Total restructuring costs | $ | 0.7 |  | $ | — |

Other restructuring costs primarily consist of asset impairment and various contract termination costs.
Restructuring costs (benefits) by reportable segment for the three months ended March 31, 2016 and March 28, 2015 were as follows:

| Three months ended
In millions | March 31, 2016 | March 28, 2015
Water Quality Systems | $ | 0.5 |  | $ | — |
Flow & Filtration Solutions | (1.1 | ) | — |
Technical Solutions | 0.2 |  | — |
Valves & Controls | 0.2 |  | — |
Other | 0.9 |  | — |
Consolidated | $ | 0.7 |  | $ | — |

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 three months ended March 31, 2016:

In millions | March 31, 2016
Beginning balance | $ | 91.2 |
Costs incurred | 0.8 |
Cash payments and other | (20.7 | )
Ending balance | $ | 71.3 |

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Notes to condensed consolidated financial statements (unaudited)

5. | Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

| Three months ended
In millions, except per-share data | March 31, 2016 | March 28, 2015
Net income | $ | 107.4 |  | $ | 113.9 |
Net income from continuing operations | $ | 107.4 |  | $ | 118.2 |
Weighted average ordinary shares outstanding |  |
Basic | 180.7 |  | 180.1 |
Dilutive impact of stock options, restricted stock units and performance share units | 1.7 |  | 2.6 |
Diluted | 182.4 |  | 182.7 |
Earnings (loss) per ordinary share |  |
Basic |  |
Continuing operations | $ | 0.59 |  | $ | 0.66 |
Discontinued operations | — |  | (0.03 | )
Basic earnings per ordinary share | $ | 0.59 |  | $ | 0.63 |
Diluted |  |
Continuing operations | $ | 0.59 |  | $ | 0.65 |
Discontinued operations | — |  | (0.03 | )
Diluted earnings per ordinary share | $ | 0.59 |  | $ | 0.62 |
Anti-dilutive stock options excluded from the calculation of diluted earnings per share | 3.1 |  | 1.2 |

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Notes to condensed consolidated financial statements (unaudited)

6. | Supplemental Balance Sheet Information

In millions | March 31, 2016 | December 31, 2015
Inventories |  |
Raw materials and supplies | $ | 461.9 |  | $ | 433.0 |
Work-in-process | 244.5 |  | 249.2 |
Finished goods | 491.3 |  | 492.1 |
Total inventories | $ | 1,197.7 |  | $ | 1,174.3 |
Other current assets |  |
Cost in excess of billings | $ | 122.2 |  | $ | 114.4 |
Prepaid expenses | 128.1 |  | 84.6 |
Deferred income taxes | 114.6 |  | 96.7 |
Other current assets | 16.5 |  | 13.6 |
Total other current assets | $ | 381.4 |  | $ | 309.3 |
Property, plant and equipment, net |  |
Land and land improvements | $ | 160.7 |  | $ | 161.9 |
Buildings and leasehold improvements | 511.3 |  | 518.8 |
Machinery and equipment | 1,235.0 |  | 1,287.6 |
Construction in progress | 88.6 |  | 79.3 |
Total property, plant and equipment | 1,995.6 |  | 2,047.6 |
Accumulated depreciation and amortization | 1,043.8 |  | 1,104.8 |
Total property, plant and equipment, net | $ | 951.8 |  | $ | 942.8 |
Other non-current assets |  |
Asbestos-related insurance receivable | $ | 110.3 |  | $ | 111.0 |
Deferred income taxes | 63.8 |  | 62.8 |
Other non-current assets | 187.4 |  | 193.8 |
Total other non-current assets | $ | 361.5 |  | $ | 367.6 |
Other current liabilities |  |
Deferred revenue and customer deposits | $ | 90.6 |  | $ | 94.6 |
Dividends payable | 59.6 |  | 59.6 |
Billings in excess of cost | 30.7 |  | 32.0 |
Accrued warranty | 59.5 |  | 59.8 |
Other current liabilities | 424.9 |  | 398.1 |
Total other current liabilities | $ | 665.3 |  | $ | 644.1 |
Other non-current liabilities |  |
Asbestos-related liabilities | $ | 235.4 |  | $ | 237.9 |
Taxes payable | 67.1 |  | 71.1 |
Other non-current liabilities | 224.2 |  | 212.0 |
Total other non-current liabilities | $ | 526.7 |  | $ | 521.0 |

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Notes to condensed consolidated financial statements (unaudited)

7. | Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill by segment were as follows:

In millions | December 31, 2015 | Purchase accounting adjustments | Foreign currency translation/other | March 31, 2016
Water Quality Systems | $ | 1,121.1 |  | $ | — |  | $ | 3.5 |  | $ | 1,124.6 |
Flow & Filtration Solutions | 882.7 |  | — |  | 12.1 |  | 894.8 |
Technical Solutions | 2,255.2 |  | (24.5 | ) | 3.5 |  | 2,234.2 |
Valves & Controls | 996.4 |  | — |  | — |  | 996.4 |
Total goodwill | $ | 5,255.4 |  | $ | (24.5 | ) | $ | 19.1 |  | $ | 5,250.0 |

Identifiable intangible assets consisted of the following:

| March 31, 2016 |  | December 31, 2015
In millions | Cost | Accumulated amortization | Net |  | Cost | Accumulated amortization | Net
Finite-life intangibles |  |  |  |  |  |  |
Customer relationships | $ | 2,085.5 |  | $ | (450.4 | ) | $ | 1,635.1 |  |  | $ | 2,078.7 |  | $ | (415.8 | ) | $ | 1,662.9 |
Trade names | 1.8 |  | (1.2 | ) | 0.6 |  |  | 1.8 |  | (1.2 | ) | 0.6 |
Proprietary technology and patents | 250.6 |  | (120.1 | ) | 130.5 |  |  | 249.3 |  | (114.2 | ) | 135.1 |
Total finite-life intangibles | 2,337.9 |  | (571.7 | ) | 1,766.2 |  |  | 2,329.8 |  | (531.2 | ) | 1,798.6 |
Indefinite-life intangibles |  |  |  |  |  |  |
Trade names | 694.8 |  | — |  | 694.8 |  |  | 691.5 |  | — |  | 691.5 |
Total intangibles, net | $ | 3,032.7 |  | $ | (571.7 | ) | $ | 2,461.0 |  |  | $ | 3,021.3 |  | $ | (531.2 | ) | $ | 2,490.1 |

Intangible asset amortization expense was $37.6 million and $27.6 million for the three months ended March 31, 2016 and March 28, 2015, respectively.
Estimated future amortization expense for identifiable intangible assets during the remainder of 2016 and the next five years is as follows:

| Q2-Q4 |  |  |  |  |
In millions | 2016 | 2017 | 2018 | 2019 | 2020 | 2021
Estimated amortization expense | $ | 113.2 |  | $ | 150.1 |  | $ | 148.6 |  | $ | 146.1 |  | $ | 139.3 |  | $ | 134.2 |

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Notes to condensed consolidated financial statements (unaudited)

8. | Debt

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

In millions | Average interest rate at March 31, 2016 | Maturity Year | March 31, 2016 | December 31, 2015
Commercial paper | 1.628% | 2019 | $ | 169.4 |  | $ | 179.5 |
Revolving credit facilities | 1.936% | 2019 | 1,330.0 |  | 1,181.4 |
Senior notes - fixed rate | 1.875% | 2017 | 350.0 |  | 350.0 |
Senior notes - fixed rate | 2.900% | 2018 | 500.0 |  | 500.0 |
Senior notes - fixed rate | 2.650% | 2019 | 250.0 |  | 250.0 |
Senior notes - fixed rate - Euro | 2.450% | 2019 | 559.8 |  | 548.4 |
Senior notes - fixed rate | 3.625% | 2020 | 400.0 |  | 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 |  | 250.0 |
Capital lease obligations and other | 1.734% | 2016 | 0.7 |  | 0.7 |
Unamortized debt issuance costs and discounts | N/A | N/A | (22.1 | ) | (23.5 | )
Total debt |  |  | 4,837.8 |  | 4,686.5 |
Less: Current maturities and short-term borrowings |  |  | (0.7 | ) | (0.7 | )
Long-term debt |  |  | $ | 4,837.1 |  | $ | 4,685.8 |

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 million aggregate principal amount of PFSA's 2.90% Senior Notes due 2018, $400 million aggregate principal amount of PFSA's 3.625% Senior Notes due 2020, $250 million aggregate principal amount of PFSA's 4.65% Senior Notes due 2025 and €500 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, 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.
In October 2014, Pentair plc, PISG, PFSA and Pentair, Inc. entered into an amended and restated credit agreement (the "Credit Facility"), with Pentair plc and PISG as guarantors and PFSA and Pentair, Inc. as borrowers. The Credit Facility had a maximum aggregate availability of $2,100.0 million and a maturity date of October 3, 2019. Borrowings under the 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 Credit Facility.
In August 2015, Pentair plc, PISG and PFSA entered into a First Amendment to the 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 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 Credit Facility. PFSA uses the Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. As of March 31, 2016 and December 31, 2015, PFSA had $169.4 million and $179.5 million, respectively, of commercial paper outstanding, all of which
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Notes to condensed consolidated financial statements (unaudited)
was classified as long-term debt as we have the intent and the ability to refinance such obligations on a long-term basis under the Credit Facility.
Our debt agreements contain certain financial covenants, the most restrictive of which are in the 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 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 March 31, 2016, we were in compliance with all financial covenants in our debt agreements.
Total availability under the Credit Facility was $1,000.6 million as of March 31, 2016, which was limited to $429.7 million by the Leverage Ratio in the Credit Facility’s credit agreement.
In addition to the Credit Facility, we have various other credit facilities with an aggregate availability of $51.3 million, of which none was outstanding at March 31, 2016. Borrowings under these credit facilities bear interest at variable rates.
Debt outstanding, excluding unamortized issuance costs and discounts, at March 31, 2016 matures on a calendar year basis as follows:

| Q2-Q4 |  |  |  |  |  |  |
In millions | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | Total
Contractual debt obligation maturities | $ | 0.7 |  | $ | 350.0 |  | $ | 500.0 |  | $ | 2,309.2 |  | $ | 400.0 |  | $ | 500.0 |  | $ | 800.0 |  | $ | 4,859.9 |

9. | 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.
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. To hedge currency exposure related to certain non-functional currency intercompany debt, we have entered into cross-currency swap contracts for periods consistent with the underlying debt.
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Notes to condensed consolidated financial statements (unaudited)
At March 31, 2016 and December 31, 2015, we had outstanding foreign currency derivative contracts with gross notional U.S. dollar equivalent amounts of $576.4 million and $331.5 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 Accumulated Other Comprehensive Loss ("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 months ended March 31, 2016 and March 28, 2015 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 March 31, 2016, we had deferred foreign currency gains of $5.0 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.
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, excluding unamortized issuance costs and discounts, were as follows:

| March 31, 2016 |  | December 31, 2015
In millions | Recorded Amount | Fair Value |  | Recorded Amount | Fair Value
Variable rate debt | $ | 1,500.1 |  | $ | 1,500.1 |  |  | $ | 1,360.9 |  | $ | 1,360.9 |
Fixed rate debt | 3,359.8 |  | 3,399.0 |  |  | 3,349.1 |  | 3,395.4 |
Total debt | $ | 4,859.9 |  | $ | 4,899.1 |  |  | $ | 4,710.0 |  | $ | 4,756.3 |

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Notes to condensed consolidated financial statements (unaudited)
Financial assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows:

| March 31, 2016
In millions | Level 1 | Level 2 | Level 3 | Total
Recurring fair value measurements |  |  |  |
Foreign currency contract liabilities | $ | — |  | $ | (32.7 | ) | $ | — |  | $ | (32.7 | )
Deferred compensation plan assets (1) | 39.6 |  | 6.2 |  | — |  | 45.8 |
Total recurring fair value measurements | $ | 39.6 |  | $ | (26.5 | ) | $ | — |  | $ | 13.1 |

| December 31, 2015
In millions | Level 1 | Level 2 | Level 3 | Total
Recurring fair value measurements |  |  |  |
Foreign currency contract assets | $ | — |  | $ | 0.1 |  | $ | — |  | $ | 0.1 |
Foreign currency contract liabilities | — |  | (7.6 | ) | — |  | (7.6 | )
Deferred compensation plan assets (1) | 43.8 |  | 7.0 |  | — |  | 50.8 |
Total recurring fair value measurements | $ | 43.8 |  | $ | (0.5 | ) | $ | — |  | $ | 43.3 |
Nonrecurring fair value measurements |  |  |  |
Goodwill (2) | $ | — |  | $ | — |  | $ | 996.4 |  | $ | 996.4 |
Trade name intangibles (3) | — |  | — |  | 138.1 |  | 138.1 |
Total nonrecurring fair value measurements | $ | — |  | $ | — |  | $ | 1,134.5 |  | $ | 1,134.5 |

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

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

The fair value of the reporting unit was determined using a discounted cash flow analysis and market approach. Projecting discounted future cash flows requires us to make significant estimates regarding future revenues and expenses, projected capital expenditures, changes in working capital and the appropriate discount rate. Use of the market approach consists of comparisons to comparable publicly-traded companies that are similar in size and industry. Actual results may differ from those used in our valuations.
Step two compares the implied fair value of the goodwill with the carrying value of that goodwill. If the carrying value of the goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of its assets and liabilities as if the reporting unit had been acquired in a business combination and its fair value was the purchase price paid to acquire the reporting unit.
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(3) | During the fourth quarter of 2015, we performed an impairment test for our Valves & Controls trade names. As a result, we recorded a pre-tax, non-cash trade name impairment charge of $39.5 million. The fair value of trade names is measured using the relief-from-royalty method. This method assumes the trade name has value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.

10. | Income Taxes

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. 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 three months ended March 31, 2016 was 20.5%, compared to 23.0% for the three months ended March 28, 2015. 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 $66.5 million and $69.9 million at March 31, 2016 and December 31, 2015, 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.

11. | Benefit Plans

Components of net periodic benefit cost for our pension plans for the three months ended March 31, 2016 and March 28, 2015 were as follows:

| U.S. pension plans
| Three months ended
In millions | March 31, 2016 | March 28, 2015
Service cost | $ | 2.8 |  | $ | 3.5 |
Interest cost | 4.1 |  | 3.7 |
Expected return on plan assets | (2.9 | ) | (2.5 | )
Net periodic benefit cost | $ | 4.0 |  | $ | 4.7 |

| Non-U.S. pension plans
| Three months ended
In millions | March 31, 2016 | March 28, 2015
Service cost | $ | 2.5 |  | $ | 2.6 |
Interest cost | 3.7 |  | 3.8 |
Expected return on plan assets | (3.8 | ) | (4.1 | )
Net periodic benefit cost | $ | 2.4 |  | $ | 2.3 |

Components of net periodic benefit cost for our other post-retirement plans for the three months ended March 31, 2016 and March 28, 2015 were not material.

12. | Shareholders’ Equity

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.
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Notes to condensed consolidated financial statements (unaudited)
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 three months ended March 28, 2015, we repurchased 3.1 million of our shares for $200.0 million pursuant to this authorization. There were no share repurchases during the three months ended March 31, 2016 pursuant to this authorization. As of March 31, 2016, we had $800.0 million remaining available for share repurchases under this authorization.
Dividends payable
On February 23, 2016, the Board of Directors declared a quarterly cash dividend of $0.33 payable on May 6, 2016 to shareholders of record at the close of business on April 22, 2016. Additionally, on December 8, 2015, the Board of Directors declared a quarterly cash dividend of $0.33 which was paid on February 12, 2016 to shareholders of record at the close of business on January 29, 2016 and approved a plan to increase the 2016 annual cash dividend to $1.34, which is intended to be paid in four quarterly installments of $0.33 in each of the first and second quarters of 2016 and $0.34 in each of the third and fourth quarters of 2016. As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $59.6 million at March 31, 2016 and December 31, 2015.

13. | Segment Information

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 equity income of unconsolidated subsidiaries and 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
In millions | March 31, 2016 | March 28, 2015
Net sales |  |
Water Quality Systems | $ | 331.5 |  | $ | 306.9 |
Flow & Filtration Solutions | 337.7 |  | 350.1 |
Technical Solutions | 524.6 |  | 395.8 |
Valves & Controls | 387.0 |  | 429.2 |
Other | (5.3 | ) | (7.0 | )
Consolidated | $ | 1,575.5 |  | $ | 1,475.0 |
Segment income (loss) |  |
Water Quality Systems | $ | 61.7 |  | $ | 51.8 |
Flow & Filtration Solutions | 39.5 |  | 36.4 |
Technical Solutions | 112.8 |  | 77.6 |
Valves & Controls | 25.3 |  | 55.4 |
Other | (29.5 | ) | (21.9 | )
Consolidated | $ | 209.8 |  | $ | 199.3 |

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Notes to condensed consolidated financial statements (unaudited)
The following table presents a reconciliation of consolidated segment income to consolidated operating income:

| Three months ended
In millions | March 31, 2016 | March 28, 2015
Segment income | $ | 209.8 |  | $ | 199.3 |
Restructuring and other | (0.7 | ) | — |
Intangible amortization | (37.6 | ) | (27.6 | )
Equity income of unconsolidated subsidiaries | (0.9 | ) | (0.5 | )
Operating income | $ | 170.6 |  | $ | 171.2 |

14. | 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 March 31, 2016, there were approximately 4,000 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 $235.4 million and $237.9 million as of March 31, 2016 and December 31, 2015, 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 $110.3 million and $111.0 million as of March 31, 2016 and December 31, 2015, 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.
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Notes to condensed consolidated financial statements (unaudited)
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 $19.7 million and $22.8 million as of March 31, 2016 and December 31, 2015, respectively. We do not anticipate these environmental conditions will have a material adverse effect on our financial position, results of operations or cash flows.
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 three months ended March 31, 2016 were as follows:

In millions | March 31, 2016
Beginning balance | $ | 59.8 |
Service and product warranty provision | 12.9 |
Payments | (13.5 | )
Foreign currency translation | 0.3 |
Ending balance | $ | 59.5 |

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 March 31, 2016 and December 31, 2015, the outstanding value of bonds, letters of credit and bank guarantees totaled $382.8 million and $402.2 million, respectively.
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Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)

15. | Supplemental Guarantor Information

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 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.
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.
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Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three months ended March 31, 2016

In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total
Net sales | $ | — |  | $ | — |  | $ | — |  | $ | 1,575.5 |  | $ | — |  | $ | 1,575.5 |
Cost of goods sold | — |  | — |  | — |  | 1,040.1 |  | — |  | 1,040.1 |
Gross profit | — |  | — |  | — |  | 535.4 |  | — |  | 535.4 |
Selling, general and administrative | 8.4 |  | — |  | 0.9 |  | 322.3 |  | — |  | 331.6 |
Research and development | — |  | — |  | — |  | 33.2 |  | — |  | 33.2 |
Operating income (loss) | (8.4 | ) | — |  | (0.9 | ) | 179.9 |  | — |  | 170.6 |
Loss (earnings) from investment in subsidiaries | (115.8 | ) | (115.8 | ) | (144.1 | ) | — |  | 375.7 |  | — |
Other (income) expense: |  |  |  |  |  |
Equity income of unconsolidated subsidiaries | — |  | — |  | — |  | (0.9 | ) | — |  | (0.9 | )
Net interest expense | — |  | — |  | 27.4 |  | 9.0 |  | — |  | 36.4 |
Income (loss) before income taxes | 107.4 |  | 115.8 |  | 115.8 |  | 171.8 |  | (375.7 | ) | 135.1 |
Provision for income taxes | — |  | — |  | — |  | 27.7 |  | — |  | 27.7 |
Net income (loss) | $ | 107.4 |  | $ | 115.8 |  | $ | 115.8 |  | $ | 144.1 |  | $ | (375.7 | ) | $ | 107.4 |
Comprehensive income (loss), net of tax |  |  |  |  |  |
Net income (loss) | $ | 107.4 |  | $ | 115.8 |  | $ | 109.4 |  | $ | 137.7 |  | $ | (362.9 | ) | $ | 107.4 |
Changes in cumulative translation adjustment | 28.0 |  | 28.0 |  | 28.0 |  | 28.0 |  | (84.0 | ) | 28.0 |
Changes in market value of derivative financial instruments | (14.7 | ) | (14.7 | ) | (14.7 | ) | (14.7 | ) | 44.1 |  | (14.7 | )
Comprehensive income (loss) | $ | 120.7 |  | $ | 129.1 |  | $ | 122.7 |  | $ | 151.0 |  | $ | (402.8 | ) | $ | 120.7 |

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Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Condensed Consolidating Balance Sheet
March 31, 2016

In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total
Assets
Current assets |  |  |  |  |  |
Cash and cash equivalents | $ | — |  | $ | — |  | $ | — |  | $ | 158.1 |  | $ | — |  | $ | 158.1 |
Accounts and notes receivable, net | — |  | — |  | — |  | 1,268.7 |  | — |  | 1,268.7 |
Inventories | — |  | — |  | — |  | 1,197.7 |  | — |  | 1,197.7 |
Other current assets | 10.0 |  | 6.8 |  | 3.4 |  | 387.2 |  | (26.0 | ) | 381.4 |
Total current assets | 10.0 |  | 6.8 |  | 3.4 |  | 3,011.7 |  | (26.0 | ) | 3,005.9 |
Property, plant and equipment, net | — |  | — |  | — |  | 951.8 |  | — |  | 951.8 |
Other assets |  |  |  |  |  |
Investments in subsidiaries | 4,624.9 |  | 4,609.0 |  | 9,019.4 |  | — |  | (18,253.3 | ) | — |
Goodwill | — |  | — |  | — |  | 5,250.0 |  | — |  | 5,250.0 |
Intangibles, net | — |  | — |  | — |  | 2,461.0 |  | — |  | 2,461.0 |
Other non-current assets | 12.6 |  | 10.5 |  | 1,119.8 |  | 1,132.1 |  | (1,913.5 | ) | 361.5 |
Total other assets | 4,637.5 |  | 4,619.5 |  | 10,139.2 |  | 8,843.1 |  | (20,166.8 | ) | 8,072.5 |
Total assets | $ | 4,647.5 |  | $ | 4,626.3 |  | $ | 10,142.6 |  | $ | 12,806.6 |  | $ | (20,192.8 | ) | $ | 12,030.2 |
Liabilities and Equity
Current liabilities |  |  |  |  |  |
Current maturities of long-term debt and short-term borrowings | $ | — |  | $ | — |  | $ | — |  | $ | 0.7 |  | $ | — |  | $ | 0.7 |
Accounts payable | 0.8 |  | — |  | — |  | 578.2 |  | — |  | 579.0 |
Employee compensation and benefits | 0.7 |  | 0.1 |  | — |  | 221.8 |  | — |  | 222.6 |
Other current liabilities | 71.9 |  | 1.3 |  | 20.4 |  | 597.7 |  | (26.0 | ) | 665.3 |
Total current liabilities | 73.4 |  | 1.4 |  | 20.4 |  | 1,398.4 |  | (26.0 | ) | 1,467.6 |
Other liabilities |  |  |  |  |  |
Long-term debt | 487.6 |  | — |  | 5,509.9 |  | 753.1 |  | (1,913.5 | ) | 4,837.1 |
Pension and other post-retirement compensation and benefits | — |  | — |  | — |  | 285.9 |  | — |  | 285.9 |
Deferred tax liabilities | — |  | — |  | 3.0 |  | 825.7 |  | — |  | 828.7 |
Other non-current liabilities | 2.3 |  | — |  | — |  | 524.4 |  | — |  | 526.7 |
Total liabilities | 563.3 |  | 1.4 |  | 5,533.3 |  | 3,787.5 |  | (1,939.5 | ) | 7,946.0 |
Equity | 4,084.2 |  | 4,624.9 |  | 4,609.3 |  | 9,019.1 |  | (18,253.3 | ) | 4,084.2 |
Total liabilities and equity | $ | 4,647.5 |  | $ | 4,626.3 |  | $ | 10,142.6 |  | $ | 12,806.6 |  | $ | (20,192.8 | ) | $ | 12,030.2 |

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Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Condensed Consolidating Statement of Cash Flows
Three months ended March 31, 2016

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 | $ | 126.6 |  | $ | 99.9 |  | $ | 106.6 |  | $ | 27.6 |  | $ | (375.7 | ) | $ | (15.0 | )
Investing activities |  |  |  |  |  |
Capital expenditures | — |  | — |  | — |  | (38.2 | ) | — |  | (38.2 | )
Proceeds from sale of property and equipment | — |  | — |  | — |  | 6.3 |  | — |  | 6.3 |
Acquisitions, net of cash acquired | — |  | — |  | — |  | (0.1 | ) | — |  | (0.1 | )
Net intercompany loan activity | — |  | — |  | (6.5 | ) | 126.0 |  | (119.5 | ) | — |
Net cash provided by (used for) investing activities | — |  | — |  | (6.5 | ) | 94.0 |  | (119.5 | ) | (32.0 | )
Financing activities |  |  |  |  |  |
Net receipts of short-term borrowings | — |  | — |  | — |  | 0.7 |  | — |  | 0.7 |
Net receipts (repayments) of commercial paper and revolving long-term debt | — |  | — |  | 164.8 |  | (26.4 | ) | — |  | 138.4 |
Repayments of long-term debt | — |  | — |  | — |  | (0.7 | ) | — |  | (0.7 | )
Net change in advances to subsidiaries | (64.9 | ) | (99.9 | ) | (276.4 | ) | (54.0 | ) | 495.2 |  | — |
Excess tax benefits from share-based compensation | — |  | — |  | — |  | 0.5 |  | — |  | 0.5 |
Shares issued to employees, net of shares withheld | (1.6 | ) | — |  | — |  | — |  | — |  | (1.6 | )
Dividends paid | (60.1 | ) | — |  | — |  | — |  | — |  | (60.1 | )
Net cash provided by (used for) financing activities | (126.6 | ) | (99.9 | ) | (111.6 | ) | (79.9 | ) | 495.2 |  | 77.2 |
Effect of exchange rate changes on cash and cash equivalents | — |  | — |  | 11.4 |  | (9.8 | ) | — |  | 1.6 |
Change in cash and cash equivalents | — |  | — |  | (0.1 | ) | 31.9 |  | — |  | 31.8 |
Cash and cash equivalents, beginning of period | — |  | — |  | 0.1 |  | 126.2 |  | — |  | 126.3 |
Cash and cash equivalents, end of period | $ | — |  | $ | — |  | $ | — |  | $ | 158.1 |  | $ | — |  | $ | 158.1 |

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Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three months ended March 28, 2015

In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total
Net sales | $ | — |  | $ | — |  | $ | — |  | $ | 1,475.0 |  | $ | — |  | $ | 1,475.0 |
Cost of goods sold | — |  | — |  | — |  | 964.8 |  | — |  | 964.8 |
Gross profit | — |  | — |  | — |  | 510.2 |  | — |  | 510.2 |
Selling, general and administrative | 3.1 |  | 0.1 |  | 1.1 |  | 304.9 |  | — |  | 309.2 |
Research and development | — |  | — |  | — |  | 29.8 |  | — |  | 29.8 |
Operating income (loss) | (3.1 | ) | (0.1 | ) | (1.1 | ) | 175.5 |  | — |  | 171.2 |
Loss (earnings) from continuing operations of investment in subsidiaries | (120.7 | ) | (121.7 | ) | (118.5 | ) | — |  | 360.9 |  | — |
Other (income) expense: |  |  |  |  |  |
Equity income of unconsolidated subsidiaries | — |  | — |  | — |  | (0.5 | ) | — |  | (0.5 | )
Net interest expense | — |  | 0.9 |  | 3.5 |  | 13.8 |  | — |  | 18.2 |
Income (loss) from continuing operations before income taxes | 117.6 |  | 120.7 |  | 113.9 |  | 162.2 |  | (360.9 | ) | 153.5 |
Provision (benefit) for income taxes | (0.6 | ) | — |  | — |  | 35.9 |  | — |  | 35.3 |
Net income (loss) from continuing operations | 118.2 |  | 120.7 |  | 113.9 |  | 126.3 |  | (360.9 | ) | 118.2 |
Loss from discontinued operations, net of tax | — |  | — |  | — |  | (4.3 | ) | — |  | (4.3 | )
Earnings (loss) from discontinued operations of investment in subsidiaries | (4.3 | ) | (4.3 | ) | (4.3 | ) | — |  | 12.9 |  | — |
Net income (loss) | $ | 113.9 |  | $ | 116.4 |  | $ | 109.6 |  | $ | 122.0 |  | $ | (348.0 | ) | $ | 113.9 |
Comprehensive income (loss), net of tax |  |  |  |  |  |
Net income (loss) | $ | 113.9 |  | $ | 116.4 |  | $ | 109.6 |  | $ | 122.0 |  | $ | (348.0 | ) | $ | 113.9 |
Changes in cumulative translation adjustment | (174.2 | ) | (174.2 | ) | (174.2 | ) | (174.2 | ) | 522.6 |  | (174.2 | )
Changes in market value of derivative financial instruments | (0.1 | ) | (0.1 | ) | (0.1 | ) | (0.1 | ) | 0.3 |  | (0.1 | )
Comprehensive income (loss) | $ | (60.4 | ) | $ | (57.9 | ) | $ | (64.7 | ) | $ | (52.3 | ) | $ | 174.9 |  | $ | (60.4 | )

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Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Condensed Consolidating Balance Sheet
December 31, 2015

In millions | Parent Company Guarantor | Subsidiary Guarantor | Subsidiary Issuer | Non-guarantor Subsidiaries | Eliminations | Consolidated Total
Assets
Current assets |  |  |  |  |  |
Cash and cash equivalents | $ | — |  | $ | — |  | $ | 0.1 |  | $ | 126.2 |  | $ | — |  | $ | 126.3 |
Accounts and notes receivable, net | 0.1 |  | — |  | — |  | 1,167.6 |  | — |  | 1,167.7 |
Inventories | — |  | — |  | — |  | 1,174.3 |  | — |  | 1,174.3 |
Other current assets | 25.2 |  | 12.8 |  | — |  | 309.2 |  | (37.9 | ) | 309.3 |
Total current assets | 25.3 |  | 12.8 |  | 0.1 |  | 2,777.3 |  | (37.9 | ) | 2,777.6 |
Property, plant and equipment, net | — |  | — |  | — |  | 942.8 |  | — |  | 942.8 |
Other assets |  |  |  |  |  |
Investments in subsidiaries | 4,495.6 |  | 4,486.1 |  | 10,151.1 |  | — |  | (19,132.8 | ) | — |
Goodwill | — |  | — |  | — |  | 5,255.4 |  | — |  | 5,255.4 |
Intangibles, net | — |  | — |  | — |  | 2,490.1 |  | — |  | 2,490.1 |
Other non-current assets | 12.6 |  | — |  | 190.1 |  | 352.1 |  | (187.2 | ) | 367.6 |
Total other assets | 4,508.2 |  | 4,486.1 |  | 10,341.2 |  | 8,097.6 |  | (19,320.0 | ) | 8,113.1 |
Total assets | $ | 4,533.5 |  | $ | 4,498.9 |  | $ | 10,341.3 |  | $ | 11,817.7 |  | $ | (19,357.9 | ) | $ | 11,833.5 |
Liabilities and Equity
Current liabilities |  |  |  |  |  |
Current maturities of long-term debt and short-term borrowings | $ | — |  | $ | — |  | $ | — |  | $ | 0.7 |  | $ | — |  | $ | 0.7 |
Accounts payable | 0.6 |  | — |  | 0.3 |  | 577.9 |  | — |  | 578.8 |
Employee compensation and benefits | 0.4 |  | 0.1 |  | — |  | 262.4 |  | — |  | 262.9 |
Other current liabilities | 61.7 |  | 1.5 |  | 27.1 |  | 591.7 |  | (37.9 | ) | 644.1 |
Total current liabilities | 62.7 |  | 1.6 |  | 27.4 |  | 1,432.7 |  | (37.9 | ) | 1,486.5 |
Other liabilities |  |  |  |  |  |
Long-term debt | 453.3 |  | 1.7 |  | 4,535.5 |  | (117.5 | ) | (187.2 | ) | 4,685.8 |
Pension and other post-retirement compensation and benefits | — |  | — |  | — |  | 287.2 |  | — |  | 287.2 |
Deferred tax liabilities | — |  | — |  | 3.1 |  | 841.1 |  | — |  | 844.2 |
Other non-current liabilities | 8.7 |  | — |  | — |  | 512.3 |  | — |  | 521.0 |
Total liabilities | 524.7 |  | 3.3 |  | 4,566.0 |  | 2,955.8 |  | (225.1 | ) | 7,824.7 |
Equity | 4,008.8 |  | 4,495.6 |  | 5,775.3 |  | 8,861.9 |  | (19,132.8 | ) | 4,008.8 |
Total liabilities and equity | $ | 4,533.5 |  | $ | 4,498.9 |  | $ | 10,341.3 |  | $ | 11,817.7 |  | $ | (19,357.9 | ) | $ | 11,833.5 |

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Pentair plc and Subsidiaries
Notes to condensed consolidated financial statements (unaudited)
Condensed Consolidating Statement of Cash Flows
March 28, 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 | $ | 79.5 |  | $ | 102.4 |  | $ | 107.9 |  | $ | (75.0 | ) | $ | (348.0 | ) | $ | (133.2 | )
Investing activities |  |  |  |  |  |
Capital expenditures | — |  | — |  | — |  | (34.8 | ) | — |  | (34.8 | )
Proceeds from sale of property and equipment | — |  | — |  | — |  | 2.3 |  | — |  | 2.3 |
Acquisitions, net of cash acquired | — |  | — |  | — |  | (3.0 | ) | — |  | (3.0 | )
Intercompany loan activity | — |  | — |  | (468.5 | ) | 163.4 |  | 305.1 |  | — |
Net cash provided by (used for) investing activities of continuing operations | — |  | — |  | (468.5 | ) | 127.9 |  | 305.1 |  | (35.5 | )
Net cash provided by (used for) investing activities of discontinued operations | — |  | — |  | — |  | 54.9 |  | — |  | 54.9 |
Net cash provided by (used for) investing activities | — |  | — |  | (468.5 | ) | 182.8 |  | 305.1 |  | 19.4 |
Financing activities |  |  |  |  |  |
Net receipts (repayments) of commercial paper and revolving long-term debt | — |  | — |  | 406.5 |  | (0.5 | ) | — |  | 406.0 |
Repayments of long-term debt | — |  | — |  | — |  | (0.4 | ) | — |  | (0.4 | )
Net change in advances to subsidiaries | 178.0 |  | (102.4 | ) | (45.8 | ) | (72.7 | ) | 42.9 |  | — |
Excess tax benefits from share-based compensation | — |  | — |  | — |  | 2.8 |  | — |  | 2.8 |
Shares issued to employees, net of shares withheld | — |  | — |  | — |  | 8.7 |  | — |  | 8.7 |
Repurchases of ordinary shares | (200.0 | ) | — |  | — |  | — |  | — |  | (200.0 | )
Dividends paid | (57.5 | ) | — |  | — |  | — |  | — |  | (57.5 | )
Net cash provided by (used for) financing activities | (79.5 | ) | (102.4 | ) | 360.7 |  | (62.1 | ) | 42.9 |  | 159.6 |
Effect of exchange rate changes on cash and cash equivalents | — |  | — |  | — |  | (25.1 | ) | — |  | (25.1 | )
Change in cash and cash equivalents | — |  | — |  | 0.1 |  | 20.6 |  | — |  | 20.7 |
Cash and cash equivalents, beginning of period | — |  | — |  | 0.1 |  | 110.3 |  | — |  | 110.4 |
Cash and cash equivalents, end of period | $ | — |  | $ | — |  | $ | 0.2 |  | $ | 130.9 |  | $ | — |  | $ | 131.1 |

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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 overall global economic and business conditions, including worldwide demand for oil and gas; the ability to achieve the benefits of our restructuring plans; the ability to successfully identify, finance, complete and integrate acquisitions, including the ability to successfully integrate and achieve the expected benefits of the acquisition of ERICO Global Company; competition and pricing pressures in the markets we serve; the strength of housing and related markets; volatility in currency exchange rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; increased risks associated with operating foreign businesses; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission, including our 2015 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: Water Quality Systems, Flow & Filtration Solutions, Technical Solutions and Valves & Controls. For the first three months of 2016, Water Quality Systems, Flow & Filtration Solutions, Technical Solutions and Valves & Controls, represented approximately 21 percent, 21 percent, 33 percent and 25 percent of total revenues, respectively. We classify our operations into business segments based primarily on types of products offered and markets served:

• | 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.

• | 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.

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

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

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.
Beginning in the first quarter of 2016, we report our interim quarterly periods on a calendar quarter basis. Prior to the first quarter of 2016, we reported our interim quarterly periods on a 13-week basis ending on a Saturday.
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Key Trends and Uncertainties Regarding Our Existing Business
The following trends and uncertainties affected our financial performance in 2015 and the first three months of 2016 and will likely impact our results in the future:

• | 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 throughout 2016.

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

• | We initiated restructuring actions to offset the negative earnings impact of foreign exchange and core revenue decline. We expect to continue these actions throughout 2016 and that these actions will contribute to margin growth in 2016.

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

• | Despite the favorable long-term outlook for our end-markets, we experience differing levels of volatility depending on the end-market and may continue to do so over the medium and longer term. While we believe the general trends are favorable, factors specific to each of our major end-markets may negatively affect the capital spending plans of our customers and lead to lower sales volumes for us.

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

In 2016, our operating objectives include the following:

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

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

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

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

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

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CONSOLIDATED RESULTS OF OPERATIONS
The consolidated results of operations for the three months ended March 31, 2016 and March 28, 2015 were as follows:

| Three months ended
In millions | March 31, 2016 | March 28, 2015 | $ change | % / point change
Net sales | $ | 1,575.5 |  | $ | 1,475.0 |  | $ | 100.5 |  | 6.8 | %
Cost of goods sold | 1,040.1 |  | 964.8 |  | 75.3 |  | 7.8 | %
Gross profit | 535.4 |  | 510.2 |  | 25.2 |  | 4.9 | %
% of net sales | 34.0 | % | 34.6 | % |  | (0.6 | ) pts
Selling, general and administrative | 331.6 |  | 309.2 |  | 22.4 |  | 7.2 | %
% of net sales | 21.1 | % | 21.0 | % |  | 0.1 | pts
Research and development | 33.2 |  | 29.8 |  | 3.4 |  | 11.4 | %
% of net sales | 2.1 | % | 2.0 | % |  | 0.1 | pts
Operating income | 170.6 |  | 171.2 |  | (0.6 | ) | (0.4 | )%
% of net sales | 10.8 | % | 11.6 | % |  | (0.8 | ) pts
Net interest expense | 36.4 |  | 18.2 |  | 18.2 |  | 100.0 | %
Income from continuing operations before income taxes | 135.1 |  | 153.5 |  | (18.4 | ) | (12.0 | )%
Provision for income taxes | 27.7 |  | 35.3 |  | (7.6 | ) | (21.5 | )%
Effective tax rate | 20.5 | % | 23.0 | % |  | (2.5 | ) pts

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

| Three months ended March 31, 2016
| over the prior year period
Volume | 1.0 | %
Price | 0.2 |
Core growth | 1.2 |
Acquisition | 8.0 |
Currency | (2.4 | )
Total | 6.8 | %

The 6.8 percent increase in consolidated net sales in the first quarter of 2016 from 2015 was primarily driven by:

• | net sales of $120.1 million for the three months ended March 31, 2016 as a result of the ERICO Acquisition; and

• | core sales growth in Water Quality Systems and Technical Solutions, primarily as the result of increased volume in the United States and Canada.

These increase s were partially offset by:

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

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

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

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Gross profit
The 0.6 percentage point decrease in gross profit as a percentage of sales in the first quarter of 2016 from 2015 was primarily driven by:

• | inflationary increases related to raw materials and labor costs.

This decrease was 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 0.1 percentage point increase in SG&A expense as a percentage of sales in the first quarter of 2016 from 2015 was primarily driven by:

• | amortization expense of $37.6 million in the first quarter of 2016, compared to $27.6 million in the first quarter of 2015 as a result of the ERICO Acquisition; and

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

These increase s were partially offset by:

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

Net interest expense
The 100.0 percent increase in net interest expense in the first quarter of 2016 from 2015 was primarily driven by:

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

• | increased overall interest rates in effect on our outstanding debt.

Provision for income taxes
The 2.5 percentage point decrease in the effective tax rate in the first quarter of 2016 from 2015 was primarily driven by:
•the mix of global earnings toward lower tax jurisdictions; and
•increased non-recurring benefits related to resolution of tax disputes and expiration of statutes of limitations.
SEGMENT RESULTS OF OPERATIONS
The summary that follows provides a discussion of the results of operations of each of our four reportable segments (Water Quality Systems, Flow & Filtration Solutions, Technical Solutions and Valves & Controls). Each of these segments is comprised of various product offerings that serve multiple end users.
Water Quality Systems
The net sales and segment income for Water Quality Systems for the three months ended March 31, 2016 and March 28, 2015 were as follows:

| Three months ended |  |
In millions | March 31, 2016 | March 28, 2015 |  | % / point change
Net sales | $ | 331.5 |  | $ | 306.9 |  |  | 8.0 | %
Segment income | 61.7 |  | 51.8 |  |  | 19.1 | %
% of net sales | 18.6 | % | 16.9 | % |  | 1.7 | pts

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

| Three months ended March 31, 2016
| over the prior year period
Volume | 8.9 | %
Price | 0.3 |
Core growth | 9.2 |
Currency | (1.2 | )
Total | 8.0 | %

The 8.0 percent increase in net sales for Water Quality Systems in the first quarter of 2016 from 2015 was primarily driven by:

• | core sales growth related to higher sales of certain pool products primarily serving the North American residential housing market for the first three months of 2016;

• | core sales growth in the United States; and

• | selective increases in selling prices to mitigate inflationary cost increases.

These increase s 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 March 31, 2016
| over the prior year period
Growth | 1.5 | pts
Inflation | (0.9 | )
Productivity/Price | 1.1 |
Total | 1.7 | pts

The 1.7 percentage point increase in segment income for Water Quality Systems as a percentage of net sales in the first quarter of 2016 from 2015 was primarily driven by:

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

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

These increase s were partially offset by:

• | inflationary increases related to labor costs and certain raw materials.

Flow & Filtration Solutions
The net sales and segment income for Flow & Filtration Solutions for the three months ended March 31, 2016 and March 28, 2015 were as follows:

| Three months ended |  |
In millions | March 31, 2016 | March 28, 2015 |  | % / point change
Net sales | $ | 337.7 |  | $ | 350.1 |  |  | (3.5 | )%
Segment income | 39.5 |  | 36.4 |  |  | 8.5 | %
% of net sales | 11.7 | % | 10.4 | % |  | 1.3 | pts

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

| Three months ended March 31, 2016
| over the prior year period
Volume | (1.9 | )%
Price | 0.4 |
Core growth | (1.5 | )
Currency | (2.0 | )
Total | (3.5 | )%

The 3.5 percent decrease in net sales for Flow & Filtration Solutions in the first quarter of 2016 from 2015 was primarily driven by:

• | core sales declines in the food & beverage business due mainly to weak irrigation sales and lower project sales;

• | core sales declines in our industrial businesses and in China; and

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

These decrease s were partially offset by:

• | core sales growth related to higher sales of pump and filtration solutions serving the residential & commercial and infrastructure businesses; and

• | core growth in certain developing regions, including Middle East, Southeast Asia 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 March 31, 2016
| over the prior year period
Growth | (1.1 | ) pts
Inflation | (1.3 | )
Productivity/Price | 3.7 |
Total | 1.3 | pts

The 1.3 percentage point increase in segment income for Flow & Filtration Solutions as a percentage of net sales in the first quarter of 2016 from 2015 was primarily driven by:

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

• | savings generated from our cost-out actions and PIMS initiatives, including lean and supply management practices.

These increase s were partially offset by:

• | inflationary increases related to labor costs and certain raw materials; and

• | lower core sales volumes, which resulted in decreased leverage on operating expenses.

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Technical Solutions
The net sales and segment income for Technical Solutions for the three months ended March 31, 2016 and March 28, 2015 were as follows:

| Three months ended |  |
In millions | March 31, 2016 | March 28, 2015 |  | % / point change
Net sales | $ | 524.6 |  | $ | 395.8 |  |  | 32.5 | %
Segment income | 112.8 |  | 77.6 |  |  | 45.4 | %
% of net sales | 21.5 | % | 19.6 | % |  | 1.9 | pts

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

| Three months ended March 31, 2016
| over the prior year period
Volume | 5.1 | %
Price | (0.1 | )
Core growth | 5.0 |
Acquisition | 29.9 |
Currency | (2.4 | )
Total | 32.5 | %

The 32.5 percent increase in net sales for Technical Solutions in the first quarter of 2016 from 2015 was primarily driven by:

• | net sales of $120.1 million for the three months ended March 31, 2016 as a result of the ERICO Acquisition; and

• | higher project core sales volume in the Unites States and Canada.

These increase s were partially offset by:

• | lower North American industrial business core sales as a result of decline in short cycle and standard product sales; and

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

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

| Three months ended March 31, 2016
| over the prior year period
Growth/Acquisition | — |
Inflation | (1.1 | )
Productivity/Price | 3.0 |
Total | 1.9 | pts

The 1.9 percentage point increase in segment income for Technical Solutions as a percentage of net sales in the first quarter of 2016 from 2015 was primarily driven by:

• | higher core sales volumes in our infrastructure and residential & commercial businesses, which resulted in increased leverage on operating expenses; and

• | strong margin contribution and integration synergies as a result of the ERICO Acquisition.

These increase s were partially offset by:

• | high margin project sales in the first quarter of 2015 that did not recur in the first quarter of 2016; and

• | inflationary increases related to labor costs and certain raw materials.

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Valves & Controls
The net sales and segment income for Valves & Controls for the three months ended March 31, 2016 and March 28, 2015 were as follows:

| Three months ended |  |
In millions | March 31, 2016 | March 28, 2015 |  | % / point change
Net sales | $ | 387.0 |  | $ | 429.2 |  |  | (9.8 | )%
Segment income | 25.3 |  | 55.4 |  |  | (54.3 | )%
% of net sales | 6.5 | % | 12.9 | % |  | (6.4 | ) pts

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

| Three months ended March 31, 2016
| over the prior year period
Volume | (6.0 | )%
Price | (0.5 | )
Core growth | (6.5 | )
Currency | (3.3 | )
Total | (9.8 | )%

The 9.8 percent decrease in net sales for Valves & Controls in the first quarter of 2016 from 2015 was primarily driven by:

• | lower shipments and orders within the oil & gas business and broad-based slowing of global capital spending;

• | continued sales decline in the power and mining industry; and

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

These decrease s were partially offset by:

• | sales growth in developing regions, including Southeast Asia, Latin America and India.

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

| Three months ended March 31, 2016
| over the prior year period
Growth | (13.2 | ) pts
Inflation | (0.7 | )
Productivity/Price | 7.5 |
Total | (6.4 | ) pts

The 6.4 percentage point decrease in segment income for Valves & Controls as a percentage of net sales in the first quarter of 2016 from 2015 was primarily driven by:

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

• | negative mix and pricing pressure in aftermarket business; and

• | inflationary cost increases.

These decrease s were partially offset by:

• | savings generated from cost-out actions and our PIMS initiatives, including lean and supply management practices.

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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, Flow & Filtration Solutions and Technical 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. Additionally, Technical Solutions generally experiences increased demand for thermal protection products and services during the fall and winter months in the Northern Hemisphere and increased demand for electrical fastening products during the spring and summer months in the Northern Hemisphere.
Operating activities
Cash used for operating activities of continuing operations was $15.0 million in the first three months of 2016, compared to $126.2 million in the same period of 2015.
The $15.0 million in net cash used for operating activities of continuing operations in the first three months of 2016 primarily reflects an increase in net working capital. Operating cash flows in the first three months of 2016 were negatively impacted by $179.2 million due to the increase in net working capital, primarily the result of increases in accounts receivable and inventories in anticipation of our peak sales season in the second and third quarters. The increase in net working capital was offset by $178.5 million of net income from continuing operations, net of non-cash depreciation and amortization.
The $126.2 million in net cash used for operating activities of continuing operations in the first three months of 2015 primarily reflects an increase in net working capital. Operating cash flows in the first three months of 2015 were negatively impacted by $300.1 million due to the increase in net working capital, primarily the result of increases in accounts receivable and inventories in anticipation of our peak sales season in the second and third quarter. The increase in net working capital was partially offset by $178.2 million of net income from continuing operations, net of non-cash depreciation and amortization.
Investing activities
Cash used for investing activities of continuing operations was $32.0 million in the first three months of 2016, compared to $35.5 million in the same period of 2015. Net cash used for investing activities of continuing operations in the first three months of 2016 primarily relates to capital expenditures of $38.2 million partially offset by $6.3 million of proceeds from the sale of property and equipment. Net cash used for investing activities of continuing operations in the first three months of 2015 relates primarily relates to capital expenditures of $34.8 million partially offset by $2.3 million of proceeds from the sale of property and equipment.
We anticipate capital expenditures for fiscal 2016 to be approximately $150 million, primarily for capacity expansions of manufacturing facilities, developing new products and general maintenance.
Financing activities
Net cash provided by financing activities was $77.2 million in the first three months of 2016, compared with $159.6 million in the prior year period. Net cash provided by financing activities in the first three months of 2016 primarily included net receipts of commercial paper and revolving long-term debt, partially offset by payment of dividends. Net cash provided by financing activities in the first three months of 2015 primarily included net receipts of commercial paper and revolving long-term debt, partially offset by share repurchases and payment of dividends.
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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 million aggregate principal amount of PFSA's 2.90% Senior Notes due 2018, $400 million aggregate principal amount of PFSA's 3.625% Senior Notes due 2020, $250 million aggregate principal amount of PFSA's 4.65% Senior Notes due 2025 and €500 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.
The Senior Notes issued in the September 2015 Offerings, 1.875% Senior Notes due 2017, 2.65% Senior Notes due 2019, $373.0 million of the 5.00% Senior Notes due 2021 and 3.15% Senior Notes due 2022 issued by PFSA and $127.0 million of the 5.00% Senior Notes due 2021 issued by Pentair, Inc. (collectively, the "Notes") are guaranteed as to payment by Pentair plc and PISG.
In October 2014, Pentair plc, PISG, PFSA and Pentair, Inc. entered into an amended and restated credit agreement (the "Credit Facility"), with Pentair plc and PISG as guarantors and PFSA and Pentair, Inc. as borrowers. The Credit Facility had a maximum aggregate availability of $2,100.0 million and a maturity date of October 3, 2019. Borrowings under the 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 Credit Facility.
In August 2015, Pentair plc, PISG and PFSA entered into a First Amendment to the 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 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 Credit Facility. PFSA uses the Credit Facility as back-up liquidity to support 100% of commercial paper outstanding. As of March 31, 2016 and December 31, 2015, PFSA had $169.4 million and $179.5 million, respectively, of commercial paper outstanding, all of which was classified as long-term debt as we have the intent and the ability to refinance such obligations on a long-term basis under the Credit Facility.
Our debt agreements contain certain financial covenants, the most restrictive of which are in the 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 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 March 31, 2016, we were in compliance with all financial covenants in our debt agreements.
Total availability under the Credit Facility was $1,000.6 million as of March 31, 2016, which was limited to $429.7 million by the Leverage Ratio in the Credit Facility’s credit agreement.
In addition to the Credit Facility, we have various other credit facilities with an aggregate availability of $51.3 million, of which none was outstanding at March 31, 2016. Borrowings under these credit facilities bear interest at variable rates.
As of March 31, 2016, we have $89.8 million of cash held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.
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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.
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 three months ended March 28, 2015, we repurchased 3.1 million of our shares for $200.0 million pursuant to this authorization. There were no share repurchases during the three months ended March 31, 2016. As of March 31, 2016, we had $800.0 million remaining available for share repurchases under this authorization.
Dividends
On February 23, 2016, the Board of Directors declared a quarterly cash dividend of $0.33 payable on May 6, 2016 to shareholders of record at the close of business on April 22, 2016. Additionally, on December 8, 2015, the Board of Directors declared a quarterly cash dividend of $0.33 which was paid on February 12, 2016 to shareholders of record at the close of business on January 29, 2016 and approved a plan to increase the 2016 annual cash dividend to $1.34, which is intended to be paid in four quarterly installments of $0.33 in each of the first and second quarters of 2016 and $0.34 in each of the third and fourth quarters of 2016. As a result, the balance of dividends payable included in Other current liabilities on our Condensed Consolidated Balance Sheets was $59.6 million at March 31, 2016 and December 31, 2015.
We paid dividends in the first three months of 2016 of $60.1 million, or $0.33 per ordinary share, compared with $57.5 million, or $0.32 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, 2015, our distributable reserve balance was $9.6 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 adjusted 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:

| Three months ended
In millions | March 31, 2016 | March 28, 2015
Net cash provided by (used for) operating activities of continuing operations | $ | (15.0 | ) | $ | (126.2 | )
Capital expenditures | (38.2 | ) | (34.8 | )
Proceeds from sale of property and equipment | 6.3 |  | 2.3 |
Free cash flow | $ | (46.9 | ) | $ | (158.7 | )

NEW ACCOUNTING STANDARDS
In March 2016, the Financial Accounting Standards Board ("FASB") issued a new accounting standard that will change certain aspects of accounting for share-based payments to employees, including the accounting for income taxes, forfeitures and statutory withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for annual and interim periods beginning after December 15, 2016. We have not yet determined the impact this standard will have on our financial condition or results of operations.
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In February 2016, the FASB issued new accounting requirements regarding accounting for leases, which requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period, and early adoption is permitted. We have not yet determined the potential effects on our financial condition or results of operations.
In November 2015, the FASB issued a new accounting standard which clarifies and simplifies the balance sheet classification of deferred tax assets and liabilities. Under the new standard, all deferred tax assets and liabilities are required to be classified as non-current in a classified balance sheet. The new standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period, and early adoption is permitted. We have not yet determined the impact this standard will have on our financial condition.
In April 2015, the FASB issued a new accounting standard which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The new standard was effective for annual and interim periods beginning after December 15, 2015. We adopted the new standard during the first quarter of 2016 and, as a result, reclassified unamortized debt issuance costs of $23.5 million from Other current assets and Other non-current assets to Long-term debt on the Condensed Consolidated Balance Sheet as of December 31, 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.
CRITICAL ACCOUNTING POLICIES
In our 2015 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 March 31, 2016. For additional information, refer to Item 7A of our 2015 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 March 31, 2016 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the quarter ended March 31, 2016 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange 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
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 to augment our company-wide controls. There was no other change in our internal control over financial reporting that occurred during the quarter ended March 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments from the disclosures contained in our 2015 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 2015 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 first quarter of 2016:

| (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
January 1 - January 30 | 74,710 |  | $ | 49.26 |  | — |  | $ | 800,000,049 |
January 31 - February 27 | 1,165 |  | $ | 46.23 |  | — |  | $ | 800,000,049 |
February 28 - March 31 | 21,788 |  | $ | 50.71 |  | — |  | $ | 800,000,049 |
Total | 97,663 |  |  | — |  |

(a) | The purchases in this column include 74,710 shares for the period January 1 - January 30, 1,165 shares for the period January 31 - February 27 and 21,788 shares for the period February 28 - March 31 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 April 26, 2016.

| 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 March 31, 2016

10.1 |  | Form of Key Executive Employment and Severance Agreement for Dennis J. Cassidy Jr. (Incorporated by reference to Exhibit 10.16 in the Annual Report on Form 10-K of Pentair plc for the year ended December 31, 2015 (File No. 001-11625)).
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 March 31, 2016 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2016 and March 28, 2015, (ii) the Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015, (iii) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and March 28, 2015, (iv) the Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2016 and March 28, 2015, and (v) Notes to Condensed Consolidated Financial Statements.

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