PENTAIR plc

Previous wording

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,” “could,” “positioned,” “strategy,” or “future” or words, phrases, or terms of similar substance or the negative thereof are forward-looking statements. All statements made about the Taco acquisition, including the anticipated time for completing the acquisition, and the anticipated benefits of the acquisition 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 our ability to close and fund the Taco acquisition on the expected terms and time schedule, including obtaining regulatory approvals and satisfying other closing conditions; our ability to integrate the Taco acquisition successfully; our ability to retain customers and employees of Taco; the overall global economic and business conditions impacting our business, including the strength of housing and related markets and conditions relating to international hostilities; supply, demand, logistics, competition and pricing pressures related to and in the markets we serve; the ability to achieve the benefits of our restructuring plans, cost reduction initiatives and Transformation Program; the impact of raw material, logistics and labor costs and other inflation; volatility in currency exchange rates and interest rates; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions; risks associated with operating foreign businesses; the impact of seasonality of sales and weather conditions; our ability to comply with laws and regulations; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. tax benefits or impact trade agreements and tariffs; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating and sustainability goals and targets. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission, including this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2025. All forward-looking statements speak only as of the date of this report. Pentair assumes no obligation, and disclaims any obligation, to update the information contained …

Excerpt shortened here; the source contains the full paragraph.

Current wording

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,” “could,” “positioned,” “strategy,” or “future” or words, phrases, or terms of similar substance or the negative thereof are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the overall global economic and business conditions impacting our business, including the strength of housing and related markets and conditions relating to international hostilities; supply, demand, logistics, competition and pricing pressures related to and in the markets we serve; the ability to achieve the benefits of our restructuring plans, cost reduction initiatives and Transformation Program; the impact of raw material, logistics and labor costs and other inflation; volatility in currency exchange rates and interest rates; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, finance, complete and integrate acquisitions, including the Taco acquisition; risks associated with operating foreign businesses; the impact of seasonality of sales and weather conditions; our ability to comply with laws and regulations; the impact of changes in laws, regulations and administrative policy, including those that limit U.S. or foreign tax benefits or impact trade agreements and tariffs; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating and sustainability goals and targets. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission, including this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2025. All forward-looking statements speak only as of the date of this report. Pentair assumes no obligation, and disclaims any obligation, to update the information contained in this report.

Previous wording

For the first six months of 2026, the Flow, Water Solutions and Pool reportable segments represented approximately 27%, 41% and 32% of total consolidated net sales, respectively. We classify our operations into reportable segments based primarily on types of products offered and markets served:

Current wording

For the first nine months of 2026, the Flow, Water Solutions and Pool reportable segments represented approximately 27%, 42% and 31% of total consolidated net sales, respectively. We classify our operations into reportable segments based primarily on types of products offered and markets served:

Previous wording

On July 27, 2026, as part of our Water Solutions reportable segment, we entered into a definitive agreement to acquire the issued and outstanding equity securities of Taco Group Holdings (“Taco”), for a purchase price of $1.425 billion, subject to customary adjustments contemplated by the definitive agreement. We expect to finance the acquisition with a combination of cash on hand and committed bridge financing, which we intend to refinance through a permanent debt issuance that we anticipate to be investment grade. We expect to close the acquisition of Taco in the fourth quarter of 2026, subject to customary closing conditions and necessary regulatory approvals.

Current wording

On October 1, 2026, as part of our Water Solutions reportable segment, we acquired the issued and outstanding equity securities of Taco Group Holdings (“Taco”) for a purchase price of $1.425 billion, subject to customary adjustments. Taco manufactures hydronic and water-driven solutions, providing innovative, sustainable, and high-performance products for the HVAC, plumbing, and industrial sectors. We funded this acquisition through a combination of cash on hand and debt financing.

Previous wording

The following trends and uncertainties affected our financial performance in the first six months of 2026 and are reasonably likely to impact our results in the future:

Current wording

The following trends and uncertainties affected our financial performance in the first nine months of 2026 and are reasonably likely to impact our results in the future:

Previous wording

•We have a Transformation Program designed to accelerate growth and drive margin expansion through transformation of our business model to drive operational excellence, reduce complexity and streamline our processes. During 2025 and the first six months of 2026, we made strategic progress on our Transformation Program initiatives with a focus on our four key themes of pricing excellence, sourcing excellence, operational excellence and organizational effectiveness. We expect to continue to execute on our key Transformation Program initiatives to drive margin expansion and to incur transformation costs throughout the remainder of 2026 and beyond.

Current wording

•We have a Transformation Program designed to accelerate growth and drive margin expansion through transformation of our business model to drive operational excellence, reduce complexity and streamline our processes. During 2025 and the first nine months of 2026, we made strategic progress on our Transformation Program initiatives with a focus on our four key themes of pricing excellence, sourcing excellence, operational excellence and organizational effectiveness. We expect to continue to execute on our key Transformation Program initiatives to drive margin expansion and to incur transformation costs throughout the remainder of 2026 and beyond.

Previous wording

•During 2025 and the first six months of 2026, we implemented 80/20 guiding principles to enable our Transformation Program. As we continue to focus on 80/20 guiding principles in 2026, we expect to create value by increasing focus on key customers and products through quadrant-based strategies. We expect this approach to enable improved operating performance by driving margin growth with our highest value customers, reducing lower margin sales and removing complexity in the future.

Current wording

•During 2025 and the first nine months of 2026, we implemented 80/20 guiding principles to enable our Transformation Program. As we continue to focus on 80/20 guiding principles in 2026, we expect to create value by increasing focus on key customers and products through quadrant-based strategies. We expect this approach to enable improved operating performance by driving margin growth with our highest value customers, reducing lower margin sales and removing complexity in the future.

Previous wording

•During 2025 and the first six months of 2026, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. We expect these actions to continue throughout the remainder of 2026 and to drive margin expansion.

Current wording

•During 2025 and the first nine months of 2026, we executed certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. We expect these actions to continue throughout the remainder of 2026 and to drive margin expansion.

Previous wording

•During the second quarter of 2026, performance was negatively impacted by a decline in Pool sales largely attributed to a more pronounced inventory realignment with major channel partners than previously estimated and worsening business conditions, including higher interest rates and inflation. Destocking of inventory in the Pool channel is expected to negatively impact net sales for the twelve months ended 2026 by approximately $250 million. While we expect channel inventory levels to improve over time, the timing and pace of normalization remain uncertain and could negatively impact our results of operations.

Current wording

•During the second and third quarters of 2026, performance was negatively impacted by a decline in Pool sales largely attributed to a more pronounced inventory realignment with major channel partners than previously estimated and worsening business conditions, including higher interest rates and inflation. As of September 30, 2026, the inventory destocking with our major channel partners is complete, and we believe the Pool business is positioned for sales and margin growth in 2027.

Previous wording

•During 2025 and the first six months of 2026, we experienced inflationary cost increases, including tariffs, for certain raw materials as well as logistics and transportation costs. Tariffs, along with potential retaliatory measures by other countries, have contributed to higher input costs and supply chain complexity. The ongoing volatility in the commodities market also has the potential to continue to drive price increases in our supply chain. To address these inflationary pressures, we have implemented pricing increases and taken other actions including inventory pre-buys and supply chain optimization. In addition, our Transformation Program initiatives are intended to improve productivity and offset cost increases. We anticipate that inflationary cost increases and supply chain pressures, including additional or increased tariffs in the future, as well as any related impacts on macroeconomic conditions and our business, will likely persist throughout the remainder of 2026.

Current wording

•During 2025 and the first nine months of 2026, we experienced inflationary cost increases, including tariffs, for certain raw materials as well as logistics and transportation costs. Tariffs, along with potential retaliatory measures by other countries, have contributed to higher input costs and supply chain complexity. The ongoing volatility in the commodities market also has the potential to continue to drive price increases in our supply chain. To address these inflationary pressures, we have implemented pricing increases and taken other actions including inventory pre-buys and supply chain optimization. In addition, our Transformation Program initiatives are intended to improve productivity and offset cost increases. We anticipate that inflationary cost increases and supply chain pressures, including additional or increased tariffs in the future, as well as any related impacts on macroeconomic conditions and our business, will likely persist throughout the remainder of 2026.

Previous wording

•During 2025, the current U.S. administration implemented tariffs under the International Emergency Economic Powers Act (“IEEPA”). In February 2026, the U.S. Supreme Court invalidated certain tariffs imposed under the IEEPA. While we have received refunds in the second quarter of 2026 of certain previously paid IEEPA tariffs, uncertainty remains regarding the timing and ultimate amount of any additional potential refunds, as well as the scope and impact of replacement tariffs or other trade policy actions. We will continue to monitor these developments and evaluate their potential impact on our business, results of operations, cash flows and future tariff exposure.

Current wording

•During 2025, the current U.S. administration implemented tariffs under the International Emergency Economic Powers Act (“IEEPA”). In February 2026, the U.S. Supreme Court invalidated certain tariffs imposed under the IEEPA. While we have received refunds in the first nine months of 2026 of certain previously paid IEEPA tariffs, uncertainty remains regarding the timing and ultimate amount of any additional potential refunds, as well as the scope and impact of replacement tariffs or other trade policy actions. We will continue to monitor these developments and evaluate their potential impact on our business, results of operations, cash flows and future tariff exposure.

Previous wording

•The Organisation for Economic Co-operation and Development Pillar Two Model Rules (“Pillar Two”) for a global 15.0% minimum tax have been adopted by a number of jurisdictions in which we operate. Pillar Two has negatively impacted our effective tax rate during the first six months of 2026 and is likely to continue to impact our effective tax rate in the future. We continue to evaluate the enacted legislative changes and new guidance as it becomes available.

Current wording

•The Organisation for Economic Co-operation and Development Pillar Two Model Rules (“Pillar Two”) for a global 15.0% minimum tax have been adopted by a number of jurisdictions in which we operate. Pillar Two has negatively impacted our effective tax rate during the first nine months of 2026 and may impact our effective tax rate in the future. We continue to evaluate the enacted legislative changes and new guidance as it becomes available.

Previous wording

•Evolving the Pentair Business System which includes executing our Transformation Program initiatives and using the Pentair leadership tools to drive operational excellence, reduce complexity and improve our organizational structure, with a continued focus on 80/20 guiding principles for profitable growth; and

Current wording

•Evolving the Pentair Business System which includes executing our Transformation Program initiatives and using the Pentair leadership tools to drive operational excellence, reduce complexity and improve our organizational structure, with a continued focus on 80/20 guiding principles for profitable growth;

Previous wording

The consolidated results of operations for the six months ended June 30, 2026 and 2025 were as follows:

Current wording

The consolidated results of operations for the nine months ended September 30, 2026 and 2025 were as follows:

Previous wording

The 1.7 and 1.8 percentage point increases in gross profit as a percentage of net sales in the second quarter and first half, respectively, of 2026 from 2025 were primarily driven by:

Current wording

The 0.5 percentage point decrease in gross profit as a percentage of net sales in the third quarter of 2026 from 2025 was primarily driven by:

Previous wording

•no asset impairment and write-offs in the second quarter or first half of 2026, compared to $10.3 million and $15.5 million in the second quarter and first half, respectively, of 2025; and

Current wording

•no asset impairment and write-offs in the first nine months of 2026, compared to $16.6 million in the first nine months of 2025; and

Previous wording

The 3.0 and 2.2 percentage point increases in SG&A as a percentage of net sales in the second quarter and first half, respectively, of 2026 from 2025 were primarily driven by:

Current wording

The 2.1 and 2.2 percentage point increases in SG&A as a percentage of net sales in the third quarter and first nine months, respectively, of 2026 from 2025 were primarily driven by:

Previous wording

•an impairment charge of $30.9 million related to the write-off of a definite-lived customer relationship intangible asset as a result of a business exit within our Water Solutions segment during the second quarter of 2025 that did not reoccur in the second quarter of 2026.

Current wording

•an impairment charge of $30.9 million related to the write-off of a definite-lived customer relationship intangible asset as a result of a business exit within our Water Solutions segment during the second quarter of 2025 that did not reoccur in the first nine months of 2026.

Previous wording

The 8.4 and 5.1 percent increases in net interest expense in the second quarter and first half, respectively, of 2026 from 2025 were primarily driven by:

Current wording

The 50.7 and 17.7 percent increases in net interest expense in the third quarter and first nine months, respectively, of 2026 from 2025 were primarily driven by:

Previous wording

The 1.4 and 0.7 percentage point decreases in the effective tax rate in the second quarter and first half, respectively, of 2026 from 2025 were primarily driven by:

Current wording

The 1.3 percentage point increase in the effective tax rate in the third quarter of 2026 from 2025 was primarily driven by:

Previous wording

•a decrease in the amount of favorable discrete items in 2026 compared to 2025.

Current wording

•an increase in the amount of unfavorable discrete items in 2026 compared to 2025.

Previous wording

The 5.1 and 7.9 percent increases in net sales for Flow in the second quarter and first half, respectively, of 2026 from 2025 were primarily driven by:

Current wording

The 4.4 and 6.7 percent increases in net sales for Flow in the third quarter and first nine months, respectively, of 2026 from 2025 were primarily driven by:

Previous wording

The 4.7 and 3.4 percentage point increases in segment income for Flow as a percentage of net sales in the second quarter and first half, respectively, of 2026 from 2025 were primarily driven by:

Current wording

The 2.5 and 3.1 percentage point increases in segment income for Flow as a percentage of net sales in the third quarter and first nine months, respectively, of 2026 from 2025 were primarily driven by:

Previous wording

The 5.1 and 3.0 percent decreases in net sales for Water Solutions in the second quarter and first half, respectively, of 2026 from 2025 were primarily driven by:

Current wording

The 1.4 percent increase in net sales for Water Solutions in the third quarter of 2026 from 2025 was primarily driven by:

Previous wording

The 5.6 and 3.6 percentage point increases in segment income for Water Solutions as a percentage of net sales in the second quarter and first half, respectively, of 2026 from 2025 were primarily driven by:

Current wording

The 3.7 percentage point increases in segment income for Water Solutions as a percentage of net sales in both the third quarter and first nine months of 2026 from 2025 were primarily driven by:

Previous wording

•the positive impact of $18.3 million in refunds in the second quarter of 2026 associated with tariffs previously collected under IEEPA which more than offset inflationary costs increases compared to second quarter of 2025.

Current wording

•the positive impact of $6.2 million in refunds in the third quarter of 2026 associated with tariffs previously collected under IEEPA, which more than offset inflationary cost increases compared to the third quarter of 2025, while $24.6 million in refunds in the first nine months of 2026 partially mitigated inflationary cost increases compared to the first nine months of 2025.

Previous wording

The 42.3 and 21.9 percent decreases in net sales for Pool in the second quarter and first half, respectively, of 2026 from 2025 were primarily driven by:

Current wording

The 17.7 and 20.6 percent decreases in net sales for Pool in the third quarter and first nine months, respectively, of 2026 from 2025 were primarily driven by:

Previous wording

•increased selling prices across all of our segments to mitigate inflationary cost increases;

Current wording

•increased selling prices to mitigate inflationary cost increases.

Previous wording

The 12.3 and 5.1 percentage point decreases in segment income for Pool as a percentage of net sales in the second quarter of 2026 from 2025 were primarily driven by:

Current wording

The 8.2 and 6.1 percentage point decreases in segment income for Pool as a percentage of net sales in the third quarter and first nine months, respectively, of 2026 from 2025 were primarily driven by:

Previous wording

We experience seasonal cash flows primarily due to seasonal demand in a number of markets. Consistent with historical trends, we experienced seasonal cash usage in the first quarter of 2026 and drew on our revolving credit facility to fund our operations. This cash usage reversed in the second quarter of 2026 as the seasonality of our businesses peaked and generated significant cash to fund our operations.

Current wording

We experience seasonal cash flows primarily due to seasonal demand in a number of markets. Consistent with historical trends, we experienced seasonal cash usage in the first quarter of 2026 and drew on our revolving credit facility to fund our operations. This cash usage reversed in the second quarter of 2026 as the seasonality of our businesses peaked and generated significant cash to fund our operations. We continued to generate significant cash to fund our operations in the third quarter of 2026.

Previous wording

Net cash provided by operating activities in the first six months of 2026 primarily reflects net income from continuing operations, inclusive of $34.9 million of tariff refunds previously collected under IEEPA and net of non-cash depreciation, definite-lived intangible amortization and share-based compensation, of $369.7 million. Additionally, we had a cash inflow of $138.0 million as a result of changes in net working capital, primarily due to decreased accounts receivable and increased inventory balances primarily driven by lower sales volume within our Pool segment attributed to higher channel inventory and lower demand as well as an increase in cash collections during the period.

Current wording

Net cash provided by operating activities in the first nine months of 2026 primarily reflects net income from continuing operations, inclusive of $42.7 million of tariff refunds previously collected under IEEPA and net of non-cash depreciation, definite-lived intangible amortization and share-based compensation, of $549.3 million. Additionally, we had a cash inflow of $116.9 million as a result of changes in net working capital, primarily due to decreased accounts receivable, partially offset by increased inventory balances, both of which were primarily driven by lower sales volume within our Pool segment attributed to higher channel inventory and lower demand.

Previous wording

Net cash provided by operating activities in the first six months of 2025 primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization, share-based compensation, loss on sale of business and asset impairment, of $455.8 million. Additionally, we had a cash inflow of $83.3 million as a result of changes in net working capital, primarily due to decreased accounts receivable and increased accounts payable balances. The decrease in accounts receivable was attributed to an increase in cash collections during the period. The increased accounts payable balance was primarily due to an increase in purchases for our peak sales season in the second quarter of 2025.

Current wording

Net cash provided by operating activities in the first nine months of 2025 primarily reflects net income from continuing operations, net of non-cash depreciation, definite-lived intangible amortization, share-based compensation, loss on sale of business, deferred income taxes and asset impairment, of $697.7 million. Additionally, we had a cash inflow of $57.8 million as a result of changes in net working capital, primarily due to decreased accounts receivable and increased accounts payable balances. The decrease in accounts receivable was attributed to an increase in cash collections during the period. The increased accounts payable balance was primarily due to the general timing of vendor payments during the first nine months of 2025.

Previous wording

Net cash used for investing activities in the first six months of 2026 primarily reflects capital expenditures of $37.4 million.

Current wording

Net cash used for investing activities in the first nine months of 2026 primarily reflects capital expenditures of $54.2 million.

Previous wording

Net cash used for investing activities in the first six months of 2025 primarily reflects capital expenditures of $27.7 million and the purchase of investments of $18.0 million.

Current wording

Net cash used for investing activities in the first nine months of 2025 primarily reflects net cash paid of $292.2 million for the Hydra-Stop acquisition, capital expenditures of $45.1 million and the purchase of investments of $18.0 million.

Previous wording

Net cash used for financing activities in the first six months of 2026 primarily relates to the repayment $575.0 million of the remaining principal under the Prior Term Loan Facility, share repurchases of $348.2 million and dividend payments of $87.5 million, partially offset by proceeds received from the term loan facility under the Senior Credit Facility of $500.0 million and net borrowings of revolving long-term debt of $42.3 million.

Current wording

Net cash used for financing activities in the first nine months of 2026 primarily relates to the repayment of $575.0 million of the remaining principal under the Prior Term Loan Facility, share repurchases of $350.0 million, dividend payments of $130.8 million and net repayments of revolving long-term debt of $77.0 million, partially offset by proceeds received from the term loan facility under the Senior Credit Facility of $500.0 million.

Previous wording

Net cash used for financing activities in the first six months of 2025 primarily relates to the repayment of $250.0 million of the principal balance under the Prior Term Loan Facility, share repurchases of $125.0 million and dividend payments of $82.4 million.

Current wording

Net cash used for financing activities in the first nine months of 2025 primarily relates to the repayment of $250.0 million of the remaining principal under the Prior Term Loan Facility, a $19.3 million repayment of senior notes, share repurchases of $175.0 million and dividend payments of $123.3 million, partially offset by net borrowings of revolving long-term debt of $210.5 million.

Previous wording

As of June 30, 2026, total availability under the Senior Credit Facility was $580.0 million. Additionally, PFSA has the option to request to increase the revolving credit facility and/or to enter into one or more additional tranches of term loans in an aggregate amount of up to $450.0 million, subject to customary conditions, including the commitment of the participating lenders.

Current wording

As of September 30, 2026, total availability under the Senior Credit Facility, including the impact of a financial stand-by letter of credit associated with the Taco acquisition, was $698.3 million. Additionally, PFSA has the option to request to increase the revolving credit facility and/or to enter into one or more additional tranches of term loans in an aggregate amount of up to $450.0 million, subject to customary conditions, including the commitment of the participating lenders.

Previous wording

In connection with entering into the definitive agreement to acquire Taco, PFSA entered into a commitment letter, dated July 27, 2026 (the “Commitment Letter”), pursuant to which, among other things, the lender has committed to provide debt financing for the acquisition of Taco, consisting of a senior unsecured bridge facility of $1.4 billion (the “Bridge Facility”), on the terms and subject to the conditions set forth in the Commitment Letter. The Bridge Facility will be subject to mandatory reduction and prepayment for 100% of the net cash proceeds from the issuance of any debt and other of our securities and other specified events, subject to certain exceptions.

Current wording

In connection with entering into the definitive agreement to acquire Taco, PFSA entered into a commitment letter, dated July 27, 2026 (the “Commitment Letter”), pursuant to which, among other things, the lender committed to provide debt financing for the acquisition of Taco, consisting of a senior unsecured bridge facility of $1.4 billion (the “Bridge Facility”), on the terms and subject to the conditions set forth in the Commitment Letter. The Bridge Facility was subject to mandatory reduction and prepayment for 100% of the net cash proceeds from the issuance of any debt and other of our securities and other specified events, subject to certain exceptions.

Previous wording

Our debt agreements contain various financial covenants, but the most restrictive covenants are contained in the Senior Credit Facility. The Senior Credit Facility contains covenants requiring us not to permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash and cash equivalents in excess of $5.0 million but not to exceed $250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense (“EBITDA”) on the last day of any period of four consecutive fiscal quarters (each, a “testing period”) to exceed 3.75 to 1.00 (or, at PFSA’s election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection with certain material acquisitions) (the “Leverage Ratio”) and (ii) the ratio of our EBITDA to our consolidated cash interest expense, 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 Senior 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.

Current wording

Our debt agreements contain various financial covenants, but the most restrictive covenants are contained in the Credit Facilities. Each of the Credit Facilities contains covenants requiring us not to permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash and cash equivalents in excess of $5.0 million but not to exceed $250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense (“EBITDA”) on the last day of any period of four consecutive fiscal quarters (each, a “testing period”) to exceed 3.75 to 1.00 (or, at PFSA’s election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection with certain material acquisitions) (the “Leverage Ratio”) and (ii) the ratio of our EBITDA to our consolidated cash interest expense, 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, each of the Credit Facilities provides for the calculation of EBITDA giving pro forma effect to certain acquisitions, divestitures and liquidations during the period to which such calculation relates.

Previous wording

In addition to the Senior Credit Facility, we have various other credit facilities with an aggregate availability of $21.1 million, of which there were no outstanding borrowings at June 30, 2026. Borrowings under these credit facilities bear interest at variable rates.

Current wording

In addition to the Credit Facilities, we have various other credit facilities with an aggregate availability of $21.2 million, of which there were no outstanding borrowings at September 30, 2026. Borrowings under these credit facilities bear interest at variable rates.

Previous wording

We have $3.1 million of payments due in the next twelve months under the term loan facility of the Senior Credit Facility. We classified this debt as long-term as of June 30, 2026, as we have the intent and ability to refinance such obligation on a long-term basis utilizing the Senior Credit Facility’s revolving credit facility.

Current wording

We have $6.3 million of payments due in the next twelve months under the term loan facility of the Senior Credit Facility. We classified this debt as long-term as of September 30, 2026, as we have the intent and ability to refinance such obligation on a long-term basis utilizing the Senior Credit Facility’s revolving credit facility.