WATTS WATER TECHNOLOGIES INC - Quarter Report: 2025 June (Form 10-Q)

WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

INDEX


Part I. Financial Information		3

Item 1.	Financial Statements	3

	Consolidated Balance Sheets at June 29, 2025 and December 31, 2024 (unaudited)	3

	Consolidated Statements of Operations for the Second Quarters and Six Months Ended June 29, 2025 and June 30, 2024 (unaudited)	4

	Consolidated Statements of Comprehensive Income for the Second Quarters and Six Months Ended June 29, 2025 and June 30, 2024 (unaudited)	5

	Consolidated Statements of Stockholders’ Equity for the Second Quarters and Six Months Ended June 29, 2025 and June 30, 2024 (unaudited)	6

	Consolidated Statements of Cash Flows for the Six Months Ended June 29, 2025 and June 30, 2024 (unaudited)	8

	Notes to Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures	41

Part II. Other Information		43

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 5.	Other Information	45

Item 6.	Exhibits	46

Signatures		47

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except share information)

(Unaudited)


	June 29,		December 31,
	2025		2024
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$		$
Trade accounts receivable, less reserve allowances of $ million at June 29, 2025 and $ million at December 31, 2024
Inventories, net:
Raw materials
Work in process
Finished goods
Total Inventories
Prepaid expenses and other current assets
Total Current Assets
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost
Accumulated depreciation		()		()
Property, plant and equipment, net
OTHER ASSETS:
Goodwill
Intangible assets, net
Deferred income taxes
Other, net
TOTAL ASSETS	$		$
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$		$
Accrued expenses and other liabilities
Accrued compensation and benefits
Total Current Liabilities
LONG-TERM DEBT
DEFERRED INCOME TAXES
OTHER NONCURRENT LIABILITIES
STOCKHOLDERS’ EQUITY:
Preferred Stock, $ par value; shares authorized; shares issued or outstanding		—		—
Class A common stock, $ par value; shares authorized; vote per share; issued and outstanding, shares at June 29, 2025 and shares at December 31, 2024
Class B common stock, $ par value; shares authorized; votes per share; issued and outstanding, shares at June 29, 2025 and shares at December 31, 2024
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss		()		()
Total Stockholders’ Equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$		$

See accompanying notes to consolidated financial statements.

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in millions, except per share information)

(Unaudited)

Second Quarter Ended

Six Months Ended

June 29,

June 30,

June 29,

June 30,

2025

2024

2025

2024

Net sales

$

Cost of goods sold

GROSS PROFIT

Selling, general and administrative expenses

Restructuring

OPERATING INCOME

Other (income) expense:

Interest income

()

Interest expense

Other expense (income), net

()

Total other expense

INCOME BEFORE INCOME TAXES

Provision for income taxes

NET INCOME

$

Basic EPS

NET INCOME PER SHARE

$

Weighted average number of shares

Diluted EPS

NET INCOME PER SHARE

$

Weighted average number of shares

Dividends declared per share

$

See accompanying notes to consolidated financial statements.

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in millions)

(Unaudited)

Second Quarter Ended

Six Months Ended

June 29,

June 30,

June 29,

June 30,

2025

2024

2025

2024

Net income

$

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

()

Cash flow hedges

()

Other comprehensive income (loss)

()

Comprehensive income

$

See accompanying notes to consolidated financial statements.

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in millions)

(Unaudited)

Accumulated

Class A

Class B

Additional

Other

Total

(For the six months ended

Common Stock

Paid-In

Retained

Comprehensive

Stockholders’

June 29, 2025)

Shares

Amount

Shares

Amount

Capital

Earnings

Loss

Equity

Balance at December 31, 2024

$

()

$

Net income

—

Other comprehensive income

—

Comprehensive income

Shares of Class B common stock converted to Class A common stock

—

()

—

Stock-based compensation

—

Stock repurchase

()

—

()

—

()

Net change in restricted and performance stock units

—

()

—

()

Common stock dividends

—

()

—

()

Balance at June 29, 2025

$

()

$

Accumulated

Class A

Class B

Additional

Other

Total

(For the second quarter ended

Common Stock

Paid-In

Retained

Comprehensive

Stockholders’

June 29, 2025)

Shares

Amount

Shares

Amount

Capital

Earnings

Loss

Equity

Balance at March 30, 2025

$

()

$

Net income

—

Other comprehensive income

—

Comprehensive income

Shares of Class B common stock converted to Class A common stock

—

()

—

Stock-based compensation

—

Stock repurchase

()

—

()

—

()

Net change in restricted and performance stock units

—

()

—

()

Common stock dividends

—

()

—

()

Balance at June 29, 2025

$

()

$

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Accumulated

Class A

Class B

Additional

Other

Total

(For the six months ended

Common Stock

Paid-In

Retained

Comprehensive

Stockholders’

June 30, 2024)

Shares

Amount

Shares

Amount

Capital

Earnings

Loss

Equity

Balance at December 31, 2023

$

()

$

Net income

—

Other comprehensive loss

—

()

Comprehensive income

Shares of Class B common stock converted to Class A common stock

—

()

—

Shares of Class A common stock issued upon the exercise of stock options

—

Stock-based compensation

—

Stock repurchase

()

—

()

—

()

Net change in restricted and performance stock units

—

()

—

()

Common stock dividends

—

()

—

()

Balance at June 30, 2024

$

()

$

Accumulated

Class A

Class B

Additional

Other

Total

(For the second quarter ended

Common Stock

Paid-In

Retained

Comprehensive

Stockholders’

June 30, 2024)

Shares

Amount

Shares

Amount

Capital

Earnings

Loss

Equity

Balance at March 31, 2024

$

()

$

Net income

—

Other comprehensive loss

—

()

Comprehensive income

Shares of Class B common stock converted to Class A common stock

—

()

—

Shares of Class A common stock issued upon the exercise of stock options

—

Stock-based compensation

—

Stock repurchase

()

—

()

—

()

Net change in restricted and performance stock units

—

()

—

()

Common stock dividends

—

()

—

()

Balance at June 30, 2024

$

()

$

See accompanying notes to consolidated financial statements.

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)



	Six Months Ended
	June 29,		June 30,
	2025		2024
OPERATING ACTIVITIES
Net income	$		$
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
Amortization of intangibles and other
Loss on disposal of long-lived assets and (gain) on sale of assets				()
Stock-based compensation
Deferred income tax		()		()
Changes in operating assets and liabilities, net of effects from business acquisitions:
Accounts receivable		()		()
Inventories		()		()
Prepaid expenses and other assets		()		()
Accounts payable, accrued expenses and other liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES
Additions to property, plant and equipment		()		()
Proceeds from the sale of property, plant and equipment		—
Business acquisitions, net of cash acquired		()		()
Net cash used in investing activities		()		()
FINANCING ACTIVITIES
Payments of long-term debt		—		()
Payments for withholding taxes on vested awards		()		()
Payments for finance leases and other		()		()
Payments to repurchase common stock		()		()
Dividends		()		()
Net cash used in financing activities		()		()
Effect of exchange rate changes on cash and cash equivalents				()
DECREASE IN CASH AND CASH EQUIVALENTS		()		()
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$		$

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Acquisition of businesses:
Fair value of assets acquired	$		$
Cash paid, net of cash acquired
Liabilities assumed	$		$

Issuance of stock under management stock purchase plan	$		$

CASH PAID FOR:
Interest	$		$
Income taxes	$		$

See accompanying notes to consolidated financial statements.

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

million and $ million for the second quarters of 2025 and 2024, respectively, and were $ million and $ million for the first six months of 2025 and 2024, respectively.

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, the Company has designed and produced valve systems that safeguard and regulate water systems, energy efficient heating and hydronic systems, drainage systems and water filtration technology that help purify and conserve water.

The Company distributes products through primary distribution channels: wholesale, original equipment manufacturers (“OEMs”), specialty, and do-it-yourself (“DIY”). The Company operates in geographic segments: Americas, Europe, and Asia-Pacific, Middle East and Africa (“APMEA”). Each of these segments sells similar products, which consist of the following principal product categories:

●

Residential & commercial flow control and protection—includes products and solutions typically sold into plumbing and hot water applications such as backflow preventers, water pressure regulators, temperature and pressure relief valves, thermostatic mixing valves, leak detection and protection products, commercial washroom solutions and emergency safety products and equipment. Many of our flow control and protection products are now smart and connected enabled, warning of leaks, floods, freezing temperatures and other hazards with alerts to Building Management Systems (“BMS”) and/or personal devices giving our customers greater insight into their water management and the ability to shut off the water supply to avoid waste and mitigate damage.

●

Heating, ventilation and air conditioning (“HVAC”) & gas—includes commercial high efficiency boilers, water heaters and heating solutions, hydronic and electric heating systems for under floor radiant applications, custom heat and hot water solutions, hydronic pump groups for boiler manufacturers and alternative energy control packages, and flexible stainless steel connectors for natural and liquid propane gas in commercial food service and residential applications. Most of our HVAC products and solutions feature advanced controls enabling customers to easily connect to the BMS for better monitoring, control and operation.

●

Drainage & water re-use—includes drainage products and engineered rainwater harvesting solutions for commercial, industrial, marine and residential applications, including connected roof drain systems.

●

Water quality—includes point-of-use, point-of-entry, closed loop, cooling tower, and other water applications used for water filtration, monitoring, conditioning and scale prevention systems for commercial, marine, light industrial and residential applications.

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$

OEM

Specialty

—

DIY

—

Total

$

For the Second Quarter Ended June 29, 2025

For the Six Months Ended June 29, 2025

(in millions)

Principal Product Category

Americas

Europe

APMEA

Consolidated

Americas

Europe

APMEA

Consolidated

Residential & Commercial Flow Control

$

HVAC and Gas Products

Drainage and Water Re-use Products

Water Quality Products

Total

$

For the Second Quarter Ended June 30, 2024

For the Six Months Ended June 30, 2024

(in millions)

Distribution Channel

Americas

Europe

APMEA

Consolidated

Americas

Europe

APMEA

Consolidated

Wholesale

$

OEM

Specialty

—

DIY

—

Total

$

For the Second Quarter Ended June 30, 2024

For the Six Months Ended June 30, 2024

(in millions)

Principal Product Category

Americas

Europe

APMEA

Consolidated

Americas

Europe

APMEA

Consolidated

Residential & Commercial Flow Control

$

HVAC and Gas Products

Drainage and Water Re-use Products

Water Quality Products

Total

$

The Company generally considers customer purchase orders, which in some cases are governed by master sales agreements, to represent the contract with a customer. The Company’s contracts with customers are generally for products only and typically do not include other performance obligations such as professional services, extended warranties, or other material rights. In situations where sales are to a distributor, the Company has concluded that its contracts are with the distributor as the Company holds a contract bearing enforceable rights and obligations only with the distributor. As part of its consideration of the contract, the Company evaluates certain factors, including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligation. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. As the Company’s standard payment terms are less than one year, the Company has elected not to assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is

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million, net of cash acquired of $ million. The final post-closing working capital adjustment was immaterial and adjusted in the second quarter of 2025.

I-CON is headquartered in Oviedo, Florida, and is a designer and manufacturer of intelligent plumbing controls, addressing the unique challenges of water management in correctional facilities. I-CON’s operating results since the date of acquisition are included in the Americas segment. The Company has determined that both the pro-forma and actual results, including I-CON’s net sales, net income, and earnings per share, are not material to the Company’s financial results, and therefore has not included these disclosures.

The Company accounted for the transaction as a purchased business combination. During the first quarter of 2025, the Company performed the preliminary purchase price allocation for the I-CON purchase, with immaterial adjustments in the second quarter of 2025 related to the final working capital and valuation adjustments. The purchase price allocation was completed in the second quarter of 2025. The acquisition resulted in the recognition of $ million in goodwill and $ million in intangible assets. The intangible assets acquired consist of customer relationships valued at $ million with estimated lives of and the trade name valued at $ million with an indefinite life. The goodwill is attributable to the workforce of I-CON and the portfolio which will allow the Company to extend its product offerings as a result of the acquisition. For tax purposes, the Company accounted for the transaction as an asset acquisition and therefore the intangibles and goodwill are deductible for tax purposes resulting in future tax benefits.

Trade accounts receivable

Inventories, net

Prepaid expenses and other assets

Property, plant and equipment

Intangible assets

Goodwill

Accounts payable, accrued expenses and other liabilities

()

Purchase price

$

Josam

Effective January 1, 2024, the Company completed the acquisition of Josam Company following its conversion into Josam Industries, LLC (“Josam”) in a share purchase transaction funded with cash on hand. The final net purchase price was $ million, net of cash acquired of $ million. Josam is based in Michigan City, Indiana, and is a leading provider and manufacturer of drainage and plumbing products, serving commercial, industrial, and multi-family end markets for over . Josam’s operating results since the date of acquisition are included in the Americas segment. The Company has determined that both the pro-forma and actual results, including Josam’s net sales, net income, and earnings per share, are not material to the Company’s financial results, and therefore has not included these disclosures.

The Company accounted for the transaction as a purchased business combination. During the first quarter of 2024, the Company performed the preliminary purchase price allocation for the Josam purchase, with immaterial adjustments during the remainder of fiscal year 2024 related to the final working capital and valuation adjustments. The purchase price allocation was completed in the fourth quarter of 2024. The acquisition resulted in the recognition of $ million in goodwill and $ million in intangible assets. The intangible assets acquired consist of customer relationships valued at $ million with estimated lives of and the trade name valued at $ million with an indefinite life. The goodwill is attributable to the workforce of Josam and the portfolio which will allow the Company to extend its product offerings as a result of the acquisition. For tax purposes, the Company accounted for the transaction as an asset acquisition and therefore the intangibles and goodwill are deductible for tax purposes resulting in future tax benefits.

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Trade accounts receivable

Inventories, net

Prepaid expenses and other current assets

Property, plant and equipment

Intangible assets

Goodwill

Accounts payable

()

Accrued expenses and other current liabilities

()

Purchase price

$

geographic segments: Americas, Europe, and APMEA. The changes in the carrying amounts of goodwill by geographic segment are as follows:

$

()

$

—

$

()

$

Europe

—

()

—

()

APMEA

—

()

—

()

Total

$

()

$

—

$

()

$

During the first six months of 2025, the Company completed the acquisitions of EasyWater and I-CON, resulting in an increase in goodwill of $ million within the Americas segment.

Goodwill and indefinite-lived intangible assets are tested for impairment at least annually or more frequently if events or circumstances indicate that it is “more likely than not” that they might be impaired, such as from a change in business conditions. The Company performs its annual goodwill and indefinite-lived intangible assets impairment assessment in the fourth quarter of each year. At the most recent annual impairment test, which occurred during the fourth quarter of 2024, the Company performed qualitative fair value assessments, including an evaluation of certain key assumptions for all of its reporting units with goodwill at the impairment test date. The Company concluded that the fair value of all reporting units tested exceeded their carrying values at that time.

Intangible assets include the following:

$

()

$

—

$

()

$

—

Customer relationships

()

Technology

()

Trade names

()

Other

()

Total amortizable intangibles

()

Indefinite-lived intangible assets

—

$

()

$

()

$

14

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million, consisting of amortizable technology assets valued at $ million with an estimated useful life of , customer relationships valued at $ million with an estimated useful life of to , and an indefinite-lived trade name valued at $ million. During the year ended December 31, 2024, the Company acquired $ million in intangible assets as part of the Josam acquisition, consisting of customer relationships valued at $ million, with an estimated useful life of , and an indefinite-lived trade name of $ million.

Aggregate amortization expense for amortized intangible assets for the second quarters ended June 29, 2025 and June 30, 2024 was $ million and $ million, respectively, and for the first six months of 2025 and 2024 was $ million and $ million, respectively.

$

—

$

—

Other Actions

Total restructuring charges

$

The Company recorded pre-tax restructuring costs in its business segments as follows:

Europe

APMEA

—

Total

$

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million, including costs for severance, relocation, clean-up and certain asset write-downs, and result in the elimination of approximately positions at the Hautvillers, France facility. As a result of the facility consolidations, the net headcount reduction in France is expected to be approximately positions. As of June 29, 2025, the Company increased its total expected pre-tax charges for the program to approximately $ million, primarily related to higher legal and severance costs than were initially estimated. Total net after-tax charges for this restructuring program are expected to be approximately $ million, of which non-cash charges are immaterial, with costs being incurred through the end of 2026, at which time the restructuring program is expected to be completed. The Company expects to spend approximately $ million in capital expenditures to consolidate operations. Annual pre-tax savings are estimated to be approximately $ million, which the Company expects to fully realize by the end of 2026.

The following table summarizes by type, the total expected, incurred and remaining pre-tax restructuring costs for the Company’s restructuring program related to the 2025 France Actions:

$

—

$

Costs incurred — second quarter 2025

Remaining costs to be incurred

Total expected restructuring costs

$

Details of the restructuring reserve activity for the Company’s 2025 France Actions for the six months ended June 29, 2025 are as follows:

—

Utilization and foreign currency impact

()

—

Balance at March 30, 2025

$

—

$

—

$

Net pre-tax restructuring charges

Utilization and foreign currency impact

()

Balance at June 29, 2025

$

—

$

Other Actions

The Company periodically initiates other actions which are not part of a major program. Included in “Other Actions” for the second quarter and six months ended June 29, 2025, were immaterial cost saving actions, primarily severance costs, in the Europe and APMEA segments.

Included in “Other Actions” for the second quarter and six months ended June 30, 2024, were immaterial actions primarily taken in the Americas segment related to the approved closure of facilities and consolidation of the related productions into existing facilities, as well as immaterial cost saving actions in the Europe and APMEA segment. The facility exits were substantially completed in the fourth quarter of 2023, with one facility exit completed in the first half of 2024.

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$

Effect of dilutive securities:

Common stock equivalents

—

Diluted EPS:

Net income

$

For the Six Months Ended June 29, 2025

For the Six Months Ended June 30, 2024

Income

Shares

Per Share

Income

Shares

Per Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

(Amounts in millions, except per share information)

Basic EPS:

Net income

$

Effect of dilutive securities:

Common stock equivalents

—

Diluted EPS:

Net income

$

On July 31, 2023, the Company’s Board of Directors authorized the repurchase of up to $ million of the Company’s Class A common stock, to be purchased from time to time on the open market or in privately negotiated transactions. The Company has entered into a Rule 10b5-1 plan, which permits shares to be repurchased under the Company’s stock repurchase program when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time, subject to the terms of the Rule 10b5-1 plan the Company entered into with respect to the repurchase program. As of June 29, 2025, there was approximately $ million remaining authorized for share repurchases under the repurchase program.

For the second quarters ended June 29, 2025 and June 30, 2024, the Company repurchased shares for $ million and shares for $ million, respectively. For the six months ended June 29, 2025 and June 30, 2024, the Company repurchased shares for $ million and shares for $ million, respectively.

and units of deferred stock awards during the first six months of 2025 and 2024, respectively. The Company grants deferred stock awards to key employees and stock awards to non-employee members of the Company’s Board of Directors under the Third Amended and Restated 2004 Stock Incentive Plan (“2004 Stock Incentive Plan”). Deferred stock awards to employees typically vest annually over a period, and stock awards to non-employee members of the Company’s Board of Directors vest immediately.

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. Upon vesting, the number of shares of the Company’s Class A common stock awarded to each performance stock unit recipient will be determined based on the Company’s performance relative to certain performance goals set at the time the performance stock units were granted. The recipient of a performance stock unit award may earn from shares to twice the number of target shares awarded to such recipient. The performance stock units are amortized to expense over the vesting period and, based on the Company’s performance relative to the performance goals, may be adjusted. Changes to the estimated shares expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the period of change. If the performance goals are not met, no awards are earned and previously recognized compensation expense is reversed. The Company granted and performance stock units during the first six months of 2025 and 2024, respectively. The performance goals for the performance stock units are based on the compound annual growth rate of the Company’s revenue over the performance period and the Company’s return on invested capital for the third year of the performance period.

The Company also has a Management Stock Purchase Plan (“MSPP”) that allows for the granting of restricted stock units (“RSUs”) to key employees. Under the MSPP, the Company granted and RSUs during the first six months of 2025 and 2024, respectively. On an annual basis, key employees may elect to receive a portion of their annual incentive compensation in RSUs instead of cash. Participating key employees may use up to % of their annual incentive bonus to purchase RSUs for a purchase price equal to % of the fair market value of the Company’s Class A common stock as of the date of grant. RSUs vest either annually over a period from the grant date or upon the third anniversary of the grant date. Receipt of the shares underlying RSUs is deferred for a minimum of , or such greater number of years from the date of the grant as is chosen by the key employee.

The fair value of the discount of each purchased RSU is estimated on the date of grant, using the Black-Scholes-Merton Model, based on the following weighted average assumptions:

Expected stock price volatility

%

Expected dividend yield

%

Risk-free interest rate

%

The risk-free interest rate is based upon the U.S. Treasury yield curve at the time of grant for the expected life of the RSUs. The expected life (estimated period of time outstanding) of RSUs and volatility were calculated using historical data. The expected dividend yield of stock is the Company’s best estimate of the expected future dividend yield.

The above assumptions were used to determine the weighted average grant-date fair value of the discount on RSUs granted in 2025 and 2024 of $ and $, respectively.

A more detailed description of each of these plans can be found in Note 14 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

geographic and reportable segments: Americas, Europe, and APMEA. Each of these segments sells similar products and solutions and has separate financial results that are reviewed by the CODM. Each segment earns revenue and income almost exclusively from the sale of the Company’s products. The Company sells its products into various end markets around the world with sales by region based upon location of the entity recording the sale. See Note 3 for further detail on sales by region of the product categories. The accounting policies for each segment are the same as those described in Note 2 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

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$

Intersegment sales

Total segment net sales

$

Reconciliation of net sales

Elimination of intersegment sales

()

Total consolidated net sales

$

Less (a)

Segment cost of goods sold

Segment selling, general and administrative

Segment research and development

Segment earnings

Reconciliation of segment earnings to income before income taxes

Segment special items (b)

()

Corporate operating loss (c)

()

Consolidated operating income

Interest income

()

Interest expense

Other expense, net

Income before income taxes

$

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$

Intersegment sales

Total segment net sales

$

Reconciliation of net sales

Elimination of intersegment sales

()

Total consolidated net sales

$

Less (a)

Segment cost of goods sold

Segment selling, general and administrative

Segment research and development

Segment earnings

Reconciliation of segment earnings to income before income taxes

Segment special items (b)

()

Corporate operating loss (c)

()

Consolidated operating income

Interest income

()

Interest expense

Other income, net

()

Income before income taxes

$

For the Six Months Ended June 29, 2025

Americas

Europe

APMEA

Total

(in millions)

Net sales

Net sales from external customers

$

Intersegment sales

Total segment net sales

$

Reconciliation of net sales

Elimination of intersegment sales

()

Total consolidated net sales

$

Less (a)

Segment cost of goods sold

Segment selling, general and administrative

Segment research and development

Segment earnings

Reconciliation of segment earnings to income before income taxes

Segment special items (b)

()

Corporate operating loss (c)

()

Consolidated operating income

Interest income

()

Interest expense

Other expense, net

Income before income taxes

$

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$

Intersegment sales

Total segment net sales

$

Reconciliation of net sales

Elimination of intersegment sales

()

Total consolidated net sales

$

Less (a)

Segment cost of goods sold

Segment selling, general and administrative

Segment research and development

Segment earnings

Reconciliation of segment earnings to income before income taxes

Segment special items (b)

()

Corporate operating loss (c)

()

Consolidated operating income

Interest income

()

Interest expense

Other income, net

()

Income before income taxes

$

(a)	The significant expense categories and amounts align with segment-level information that is regularly provided to the CODM. Significant segment expenses exclude certain expenses incurred and benefits recognized, see footnote (b) below. Intersegment expenses are included within the amounts shown.

(b)

(c)

Corporate expenses are primarily for administrative compensation expense, compliance costs, professional fees, including corporate-related legal and audit expenses, shareholder services and benefit administration costs. Corporate special items are included within the amounts shown and consist of acquisition-related costs.

Second Quarter Ended

Six Months Ended

June 29,

June 30,

June 29,

June 30,

2025

2024

2025

2024

(in millions)

Capital expenditures

Americas

$

Europe

APMEA

Consolidated capital expenditures

$

Depreciation and amortization

Americas

$

Europe

APMEA

Consolidated depreciation and amortization

$

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$

Europe

APMEA

Consolidated identifiable assets

$

Property, plant and equipment, net (at end of period)

Americas

$

Europe

APMEA

Consolidated property, plant and equipment, net

$

The above summary of the Company’s significant accounts and balances by segment are presented on a basis consistent with the presentation included in Note 18 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The property, plant and equipment, net, in the U.S. of the Company’s Americas segment was $ million and $ million as of June 29, 2025 and December 31, 2024, respectively.

The following includes U.S. net sales of the Company’s Americas segment:

$

)

$

—

$

()

Change in period

—

()

Balance March 30, 2025

$

()

$

—

$

()

Change in period

—

()

Balance June 29, 2025

$

()

$

—

$

()

Balance December 31, 2023

$

()

$

()

Change in period

()

—

()

Balance March 31, 2024

$

()

$

()

Change in period

()

—

()

Balance June 30, 2024

$

()

$

()

(1)	Pension adjustment relates to the acquired Bradley defined benefit retirement plan which was terminated effective December 31, 2023 and subsequently settled in September 2024.

(2)	Cash flow hedges include interest rate swaps and designated foreign currency hedges. See Note 12 for further details.

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million (the “Revolving Credit Facility”). The maturity date of the Revolving Credit Facility is July 12, 2029, subject to extension under certain circumstances and subject to the terms of the Credit Agreement. The Credit Agreement provides for a maximum consolidated leverage ratio of to 1.00 (or to 1.00 during temporary step-ups following certain acquisitions) and a minimum consolidated interest ratio of to 1.00.

The Revolving Credit Facility also includes sub-limits of $ million for letters of credit and $ million for swing line loans. As of June 29, 2025, the Company had drawn down $ million on this line of credit and had $ million in letters of credit outstanding, which resulted in $ million of unused and available credit under the Revolving Credit Facility as of such date. Borrowings outstanding bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Term Benchmark loans, the Term Benchmark rate plus an applicable percentage, ranging from % to %, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than %) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on such day plus % and (c) the Term Benchmark rate plus % for a one-month interest period, in each case, determined by reference to the Company’s consolidated leverage ratio. For the borrowings denominated in dollars, there is a fixed basis point adjustment if the reference rate is Term SOFR. The weighted average interest rate on debt outstanding under the Revolving Credit Facility as of June 29, 2025 was %. The weighted average interest rate on debt outstanding inclusive of the interest rate swaps discussed in Note 12 of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of June 29, 2025 was %. In addition to paying interest under the Credit Agreement, the Company is also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. The Company may repay loans outstanding under the Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Credit Agreement. The Credit Agreement contains an expansion option of $ million.

The Credit Agreement imposes various restrictions on the Company and its subsidiaries, including restrictions pertaining to: (i) the incurrence of additional indebtedness, (ii) limitations on liens, (iii) making distributions, dividends and other payments, (iv) mergers, consolidations and acquisitions, (v) dispositions of assets, (vi) certain consolidated leverage ratios and consolidated interest coverage ratios, (vii) transactions with affiliates, (viii) changes to governing documents, and (ix) changes in control. As of June 29, 2025, the Company was in compliance with these financial covenants.

The Company maintains letters of credit that guarantee its performance or payment to third parties in accordance with specified terms and conditions. The Company’s letters of credit are primarily associated with insurance coverage. The Company’s letters of credit generally expire within of issuance. These instruments may exist or expire without being drawn down. Therefore, they do not necessarily represent future cash flow obligations.

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$

—

$

—

Interest rate swap(2)

$

—

$

—

Total assets

$

—

Liabilities

Plan liability for deferred compensation(3)

$

—

$

—

Interest rate swap(4)

$

—

$

—

Designated foreign currency hedges(5)

$

—

$

—

Total liabilities

$

—

Fair Value Measurements at December 31, 2024 Using:

Quoted Prices in Active

Significant Other

Significant

Markets for Identical

Observable

Unobservable

Assets

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

(in millions)

Assets

Plan asset for deferred compensation(1)

$

—

$

—

Interest rate swap(2)

$

—

$

—

Designated foreign currency hedges(6)

$

—

$

—

Total assets

$

—

Liabilities

Plan liability for deferred compensation(3)

$

—

$

—

Interest rate swap(4)

$

—

$

—

Total liabilities

$

—

(1)	Included on the Company’s consolidated balance sheet in other assets (other, net).

(2)

As of June 29, 2025, $ million classified in prepaid expenses and other current assets on the Company’s consolidated balance sheet. As of December 31, 2024, $ million classified in prepaid expenses and other current assets and $ million classified in other assets (other, net) on the Company’s consolidated balance sheet.

(3)Included on the Company’s consolidated balance sheet in accrued compensation and benefits.

(4)

As of June 29, 2025, $ million classified in accrued expenses and other liabilities on the Company’s consolidated balance sheet. As of December 31, 2024, $ million classified in accrued expenses and other liabilities and $ million classified in other noncurrent liabilities on the Company’s consolidated balance sheet.

(5)	Included on the Company’s consolidated balance sheet in accrued expenses and other liabilities.

(6)	Included on the Company’s consolidated balance sheet in prepaid expenses and other current assets.

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million. Borrowings outstanding under the Revolving Credit Facility bear interest at a fluctuating rate per annum as further detailed in Note 11.

In order to manage the Company’s exposure to changes in cash flows attributable to fluctuations in interest payments related to the Company’s floating rate debt, the Company entered into an interest rate swap on March 30, 2021. Under the interest rate swap agreement, the Company received the one-month USD-LIBOR subject to a % floor and paid a fixed rate of % on a notional amount of $ million. On August 2, 2022, the Company amended the interest rate swap to replace LIBOR as a reference rate for borrowings with Term SOFR. Under the amended interest rate swap agreement, the Company receives the one-month Term SOFR subject to a -% floor and pays a fixed rate of % on a notional amount of $ million. The Company elected the optional expedient in connection with amending its interest rate swap to replace the reference rate from LIBOR to Term SOFR to consider the amendment as a continuation of the existing contract without having to perform an assessment that would otherwise be required under U.S. GAAP. The Company entered into an additional interest rate swap on October 23, 2023, as part of the acquisition of Bradley. Under the interest rate swap agreement, the Company receives the one-month Term SOFR subject to a -% floor and pays a fixed rate of % on a notional amount of $ million. Both swaps mature on March 30, 2026. The Company formally documents the hedge relationships at hedge inception to ensure that its interest rate swaps qualify for hedge accounting. On a quarterly basis, the Company assesses whether the interest rate swap is highly effective in offsetting changes in the cash flow of the hedged item. The Company does not hold or issue interest rate swaps for trading purposes. The swaps are designated as cash flow hedges. For the second quarter and six months ended June 29, 2025, net losses of $ million and $ million, respectively, were recorded in Accumulated Other Comprehensive Loss to recognize the effective portion of the fair value of the interest rate swap that qualifies as a cash flow hedge.

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% of the forecasted intercompany purchase transactions between one of the Company’s Canadian subsidiaries and the Company’s U.S. operating subsidiaries for the next . As of June 29, 2025, all designated foreign exchange hedge contracts were cash flow hedges under ASC 815, Derivatives and Hedging. The Company records the effective portion of the designated foreign currency hedge contracts in other comprehensive income (loss) until inventory turns and is sold to a third-party. Once the third-party transaction associated with the hedged forecasted transaction occurs, the effective portion of any related gain or loss on the designated foreign currency hedge is reclassified into earnings within cost of goods sold. In the event the notional amount of the derivatives exceeds the forecasted intercompany purchases for a given month, the excess hedge position will be attributed to the following month’s forecasted purchases. However, if the following month’s forecasted purchases cannot absorb the excess hedge position from the current month, the effective portion of the hedge recorded in other comprehensive income (loss) will be reclassified to earnings.

The notional amounts outstanding as of June 29, 2025 for the Canadian dollar to U.S. dollar contracts was $ million. The fair value of the Company’s designated foreign hedge contracts outstanding as of June 29, 2025 was a liability of $ million. As of June 29, 2025, the amount expected to be reclassified into cost of goods sold from other comprehensive income (loss) in the next is a gain of $ million.

million. With respect to the estimate of reasonably possible loss, management has estimated the upper end of the range of reasonably possible loss based on (i) the amount of money damages claimed, where applicable, (ii) the allegations and factual development to date, (iii) available defenses based on the allegations, and/or (iv) other potentially liable parties. This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate. In the event of an unfavorable outcome in one or more of the matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to it, management believes that the ultimate outcome of all matters, as they are resolved over time, is not likely to have a material adverse effect on the financial condition of the Company.

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, the Company declared a quarterly dividend of cents ($) per share on each outstanding share of Class A common stock and Class B common stock payable on to stockholders of record on .

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains statements that are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements contain projections of our future results of operations or our financial position or state other forward-looking information. The forward-looking statements included in this Quarterly Report on Form 10-Q, including without limitation statements regarding our business performance and strategy, including, without limitation, expected financial results, benefits from recent acquisitions, expected investments in capital expenditures, improvements in operating and free cash flow, expected impacts from legislation and our ability to manage challenging macro-economic and softer market conditions, including impacts from tariffs, are only predictions and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify these forward-looking statements by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” and “would” or similar words. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to differ materially from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Some of the factors that might cause these differences are described under Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and, except as required by law, we undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Overview

The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, the accompanying unaudited consolidated financial statements and related notes. In this Quarterly Report on Form 10-Q, references to “the Company,” “Watts,” “we,” “us” or “our” refer to Watts Water Technologies, Inc. and its consolidated subsidiaries.

We are a leading supplier of solutions, systems and products that manage and conserve the flow of fluids and energy into, through and out of buildings in the commercial, industrial and residential markets in the Americas, Europe and Asia-Pacific, Middle East and Africa (“APMEA”). For over 150 years, we have designed and produced valve systems that safeguard and regulate water systems, energy efficient heating and hydronic systems, drainage systems and water filtration technology that helps purify and conserve water. We earn revenue and income almost exclusively from the sale of our products. Our principal product and solution categories include:

● Residential & commercial flow control and protection—includes products and solutions typically sold into plumbing and hot water applications such as backflow preventers, water pressure regulators, temperature and pressure relief valves, thermostatic mixing valves, leak detection and protection products, commercial washroom solutions and emergency safety products and equipment. Many of our flow control and protection products are now smart and connected enabled, warning of leaks, floods, freezing temperatures and other hazards with alerts to Building Management Systems (“BMS”) and/or personal devices giving our customers greater insight into their water management and the ability to shut off the water supply to avoid waste and mitigate damage.

● Heating, ventilation and air conditioning (“HVAC”) & gas—includes commercial high-efficiency boilers, water heaters and heating solutions, hydronic and electric heating systems for under-floor radiant applications, custom heat and hot water solutions, hydronic pump groups for boiler manufacturers and alternative energy control packages, and flexible stainless steel connectors for natural and liquid propane gas in commercial food service and residential applications. Most of our HVAC products and solutions feature advanced controls enabling customers to easily connect to the BMS for better monitoring, control and operation.

● Drainage & water re-use—includes drainage products and engineered rainwater harvesting solutions for commercial, industrial, marine and residential applications, including connected roof drain systems.

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● Water quality—includes point-of-use, point-of-entry, closed loop, cooling tower, and other water applications used for water filtration, monitoring, conditioning and scale prevention systems for commercial, marine, light industrial and residential applications.

Our business is reported in three geographic segments: Americas, Europe, and APMEA. We distribute our products through four primary distribution channels: wholesale, original equipment manufacturers (“OEMs”), specialty, and do-it-yourself (“DIY”).

We believe the factors relating to our future growth include continued product innovation that meets the needs of our customers and our end markets; our ability to continue to make selective acquisitions, both in our core markets as well as in complementary markets; regulatory requirements relating to the quality and conservation of water and the safe use of water; increased demand for clean water; and continued enforcement of plumbing and building codes. Our acquisition strategy focuses on businesses that promote our key macro themes around safety and regulation, energy efficiency and water conservation. We target businesses that we believe will provide us with one or more of the following: an entry into new markets and/or new geographies, improved channel access, unique and/or proprietary technologies, including smart and connected technologies, advanced production capabilities or complementary solution offerings. We have completed 15 acquisitions since 2015, and in the last two years, we have completed four strategic and complementary acquisitions that expanded our addressable market and that we believe will enable value creation through greater scale and growth opportunities.

Our innovation strategy is focused on differentiated products and solutions that will provide greater opportunity to distinguish ourselves in the marketplace, while at the same time creating innovative products and smart solutions to protect, control, and conserve critical resources, and help our customers with their sustainability efforts through the use of our products. We continually look for strategic opportunities to invest in new products and markets or divest existing product lines where necessary in order to meet those objectives.

Over the past several years we have been building our smart and connected products foundation by expanding our internal capabilities and making strategic acquisitions. Our strategy is to deliver superior customer value through smart and connected products and intelligent water solutions. This strategy focuses on three dimensions: Connect, Control and Conserve. We are focused on introducing products that connect our customers with smart systems, manage systems for optimal performance, and conserve critical resources by increasing operability, efficiency and safety.

Products representing a majority of our sales are subject to regulatory standards and code enforcement, which typically require that these products meet stringent performance criteria. We have consistently advocated for the development and enforcement of such plumbing codes. We are focused on maintaining stringent quality control and testing procedures at each of our manufacturing facilities in order to manufacture products in compliance with code requirements and take advantage of the resulting demand for compliant products. We believe that product development, product testing capability and investment in plant and equipment needed to manufacture products in compliance with code requirements, represent a competitive advantage for us.

Enacted tariffs on foreign imports into the United States, particularly from Canada, China and Mexico, have increased the cost of our products and could adversely impact the gross margin we earn on our products. We are proactively responding to the dynamic trade environment by leveraging our global sourcing strategy, driving incremental productivity within our operations and implementing pricing actions as appropriate. We expect that our significant degree of vertical integration, with manufacturing close to our customers, will be an advantage for us in the current environment. We have a proven track record of successfully navigating through periods of disruption and are committed to continuing our strong execution. However, there can be no assurance that we will be able to fully mitigate the impact of new or increased tariffs and actions taken by the United States or other countries to impose or increase tariffs which could have a material adverse effect on our business, financial condition or results of operations. We also continue to experience inflation across our labor and overhead costs. Despite these challenges and uncertainties, we continue to invest in our business, including new products, our smart and connected solutions and our growth and productivity initiatives. We remain focused on our customers’ needs and executing on our long-term strategy.

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The trade policy environment has created uncertainty which has resulted in lowered economic forecasts, including a reduction in global gross domestic product (“GDP”) expectations. While GDP is expected to be lower than the prior year, it is expected to remain positive and is generally a leading indicator for our repair and replacement business. New construction indicators are mixed. Multi-family housing, office, retail and recreation verticals are expected to be down, but light industrial, including data centers, is growing and institutional verticals remain steady. The impact of the enacted tariffs on interest rate levels and new construction remains uncertain. The European economy remains weak and geo-political uncertainties continue, all of which may adversely affect our future financial results.

Financial Overview

Second quarter 2025 sales increased 7.8%, or $46.4 million, on a reported basis, and 5.8%, or $34.6 million, on an organic basis, compared to the second quarter of 2024. The reported sales increase compared to the second quarter of 2024 was positively impacted by acquired sales of 1.2%, or $7.0 million, all reported within the Americas segment, as well as net favorable impact of foreign exchange of 0.8%, or $4.8 million, primarily due to strengthening of the euro against the U.S. dollar. The 5.8% organic growth was driven by organic growth in the Americas of 9.8%, offset by organic declines in Europe of 7.6% and in APMEA of 1.1%. The organic growth was primarily driven by favorable price realization in all regions and increased volume in the Americas, including pull-forward demand resulting from tariff-related price increases. Growth in the Americas was partially offset by lower volumes in Europe and APMEA. Operating income of $135.3 million increased by $23.8 million, or 21.3%, in the second quarter of 2025 as compared to the second quarter of 2024. This increase was primarily driven by favorable price realization, volume growth and productivity, partially offset by inflation and restructuring charges.

In discussing our results of operations, segment earnings is the GAAP performance measure used by our chief operating decision-maker (“CODM”) to assess and evaluate segment results. Segment earnings exclude the impacts of special items which are defined as non-recurring, and unusual expenses or benefits such as restructuring costs, acquisition-related costs, and gain on sale of assets. The CODM uses segment earnings for insight into underlying trends comparing past financial performance with current performance by reporting segment on a consistent basis.

In addition, we refer to non-GAAP organic changes in financial measures, including organic net sales, organic net sales growth, organic selling, general and administrative expenses, and organic segment earnings, that exclude the impacts of acquisitions, divestitures and foreign exchange. Management believes reporting these non-GAAP financial measures provides useful information to investors, potential investors and others, because it allows for additional insight into underlying trends by providing growth on a consistent basis. We reconcile the change in these non-GAAP financial measures to our reported results below.

Acquisitions

On June 13, 2025, we completed the acquisition of substantially all of the assets of Freije Treatment Systems, Inc. (“EasyWater”) in an all-cash transaction. EasyWater, a leading provider of water quality solutions, is based in Fishers, Indiana, and has designed and manufactured innovative, chemical-free technologies for treating water in residential and commercial applications. The acquisition of EasyWater aligns with our continued focus on growth, innovation and expanding our portfolio of high-value water quality solutions.

On January 2, 2025, we completed the acquisition of I-CON Systems Holdings LLC (“I-CON”) in a membership unit purchase transaction funded with cash on hand. The final net purchase price was approximately $70.7 million, net of cash acquired. I-CON is headquartered in Oviedo, Florida, and is a leading designer and manufacturer of intelligent plumbing controls, addressing the unique challenges of water management in correctional facilities.

Recent Developments

On August 4, 2025, we declared a quarterly dividend of fifty-two cents ($0.52) per share on each outstanding share of Class A common stock and Class B common stock payable on September 15, 2025 to stockholders of record on August 29, 2025.

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Results of Operations

Second Quarter Ended June 29, 2025 Compared to Second Quarter Ended June 30, 2024

Net Sales. Our business is reported in three geographic segments: Americas, Europe and APMEA. Our net sales in each of these segments for each of the second quarters of 2025 and 2024 were as follows:


	Second Quarter Ended										% Change to
	June 29, 2025				June 30, 2024						Consolidated
	Net Sales		% Sales		Net Sales		% Sales		Change		Net Sales

	(dollars in millions)
Americas	$	498.5	77.4	%	$	448.1	75.0	%	$	50.4	8.4	%
Europe		111.0	17.3			114.1	19.1			(3.1)	(0.5)
APMEA		34.2	5.3			35.1	5.9			(0.9)	(0.1)
Total	$	643.7	100.0	%	$	597.3	100.0	%	$	46.4	7.8	%

The change in net sales was attributable to the following:


									Change As a %								Change As a %
									of Consolidated Net Sales								of Segment Net Sales

	Americas		Europe		APMEA		Total		Americas		Europe		APMEA		Total		Americas		Europe		APMEA

	(dollars in millions)
Organic	$	43.7	$	(8.7)	$	(0.4)	$	34.6	7.3	%	(1.4)	%	(0.1)	%	5.8	%	9.8	%	(7.6)	%	(1.1)	%
Foreign exchange		(0.3)		5.6		(0.5)		4.8	(0.1)		0.9		—		0.8		(0.1)		4.9		(1.5)
Acquired		7.0		—		—		7.0	1.2		—		—		1.2		1.5		—		—
Total	$	50.4	$	(3.1)	$	(0.9)	$	46.4	8.4	%	(0.5)	%	(0.1)	%	7.8	%	11.2	%	(2.7)	%	(2.6)	%

Our products are sold primarily to wholesalers, OEMs, DIY chains, and through various specialty channels. The change in organic net sales by channel was attributable to the following:


											Change As a %
											*of Prior Year Sales ()**
	Wholesale		OEMs		DIY		Specialty		Total		Wholesale		OEMs		DIY		Specialty
	(dollars in millions)
Americas	$	36.1	$	2.2	$	2.2	$	3.2	$	43.7	12.3	%	8.1	%	11.1	%	3.0	%
Europe		(4.8)		(3.9)		—		—		(8.7)	(6.2)		(10.9)		—		—
APMEA		(1.1)		0.8		—		(0.1)		(0.4)	(4.4)		47.1		—		(1.2)
Total	$	30.2	$	(0.9)	$	2.2	$	3.1	$	34.6	7.6	%	(1.4)	%	10.7	%	2.7	%

* Segment change as a % of segment net sales by channel and Total change as a % of consolidated net sales by channel.

Americas net sales increased $50.4 million, or 11.2%, for the second quarter of 2025 compared to the second quarter of 2024. The change in net sales was positively impacted by $7.0 million, or 1.5%, of acquired sales related to acquisitions completed in the first and second quarters of 2025. The change in net sales was negatively impacted by $0.3 million, or 0.1%, of foreign currency translation. Organic net sales increased $43.7 million, or 9.8%, primarily due to higher volumes, including pull-forward demand into the second quarter of 2025, and favorable price realization.

Europe net sales decreased $3.1 million, or 2.7%, for the second quarter of 2025 compared to the second quarter of 2024. The decrease in net sales was partially offset by favorable foreign currency translation of $5.6 million, or 4.9%. Organic net sales decreased $8.7 million, or 7.6%, primarily due to reduced volumes impacted by market weakness in the wholesale and OEM channels, partially offset by favorable price realization.

APMEA net sales decreased $0.9 million, or 2.6%, for the second quarter of 2025 compared to the second quarter of 2024. The change in net sales was negatively impacted by $0.5 million, or 1.5%, of foreign currency translation. Organic net sales decreased $0.4 million, or 1.1%, primarily due to a decline in China, partially offset by growth in Australia, New Zealand and the Middle East. China’s net sales decline was primarily due to data center project timing.

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The net increase in net sales due to foreign exchange was mostly due to the favorable impact of the depreciation of the U.S. dollar against the euro partially offset by the appreciation of the U.S. dollar against the Australian dollar and Canadian dollar in the second quarter of 2025. We cannot predict whether foreign currencies will appreciate or depreciate against the U.S. dollar in future periods or whether future foreign exchange rate fluctuations will have a positive or negative impact on our net sales.

Gross Profit. Gross profit and gross profit as a percent of net sales (gross margin) for the second quarters of 2025 and 2024 were as follows:


	Second Quarter Ended
	June 29, 2025			June 30, 2024

	(dollars in millions)
Gross profit	$	325.9		$	284.8
Gross margin		50.6	%		47.7	%

Gross profit and gross margin increased primarily from higher price realization, higher volume and productivity, partially offset by inflation.

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses increased $14.1 million, or 8.1%, in the second quarter of 2025 compared to the second quarter of 2024. The increase in SG&A expenses was attributable to the following:


	(in millions)		% Change
Organic	$	7.4	4.3	%
Foreign exchange		1.2	0.7
Acquired		3.0	1.7
Special items		2.5	1.4
Total	$	14.1	8.1	%

The increase in organic SG&A expenses was primarily due to increased variable costs of $5.2 million due to higher net sales, an increase in investments of $4.5 million, including in our smart and connected initiatives and other strategic initiatives and general inflation of $3.9 million, partially offset by $2.8 million from productivity initiatives, lower professional fees of $2.5 million and $1.6 million of restructuring savings compared to the second quarter of 2024. The increase in foreign exchange was mainly due to the depreciation of the U.S. dollar against the euro. The acquired SG&A costs related to two acquisitions in the Americas segment completed in the first and second quarters of 2025. The increase in special items SG&A expenses was primarily due to a $3.3 million gain on sale of building in the second quarter of 2024, partially offset by decreased acquisition-related costs of $0.8 million compared to the second quarter of 2024. Total SG&A expenses, as a percentage of net sales, were 29.1% in the second quarter of 2025 compared to 29.0% in the second quarter of 2024.

Restructuring. In the second quarter of 2025, we recorded a net restructuring charge of $3.4 million, which related to the 2025 French restructuring program that was approved in the first quarter of 2025 and immaterial severance costs related to other cost actions in the Europe segment. In the second quarter of 2024, we recorded a net restructuring charge of $0.2 million, which primarily related to immaterial severance and other exit costs in the Europe and APMEA segments. For a more detailed description of our restructuring plans, see Note 6 of the Notes to the Consolidated Financial Statements.

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Operating Income. Operating income, which is made up of segment earnings, Corporate operating loss and special items, for the second quarters of 2025 and 2024 was as follows:


									% Change to
	Second Quarter Ended							Consolidated
	June 29,		June 30,					Operating
	2025		2024		Change			Income
	(dollars in millions)
Americas	$	135.8	$	108.8		$	27.0		24.2	%
Europe		13.0		11.4			1.6		1.4
APMEA		6.5		6.6			(0.1)		(0.1)
Total segment earnings	$	155.3	$	126.8		$	28.5		25.6	%

Corporate operating loss - excluding special items	$	(16.2)	$	(14.7)		$	(1.5)		(1.3)	%
Corporate special items		—		—			—		—
Corporate operating loss - as reported	$	(16.2)	$	(14.7)		$	(1.5)		(1.3)	%

Segment special items		(3.8)		(0.6)			(3.2)		(2.9)
Total operating income	$	135.3	$	111.5		$	23.8		21.3	%

The increase (decrease) in total segment earnings was attributable to the following:


									Change As a % of								Change As a % of
									Total Segment Earnings								Segment Earnings

	Americas		Europe		APMEA		Total		Americas		Europe		APMEA		Total		Americas		Europe		APMEA

	(dollars in millions)
Organic	$	25.4	$	0.9	$	(0.1)	$	26.2	20.0	%	0.7	%	(0.1)	%	20.6	%	23.3	%	7.9	%	(1.5)	%
Foreign exchange		—		0.7		—		0.7	—		0.6		—		0.6		—		6.1		—
Acquired		1.6		—		—		1.6	1.3		—		—		1.3		1.5		—		—
Total	$	27.0	$	1.6	$	(0.1)	$	28.5	21.3	%	1.3	%	(0.1)	%	22.5	%	24.8	%	14.0	%	(1.5)	%

Operating income increased $23.8 million, or 21.3%, for the second quarter of 2025 compared to the second quarter of 2024. Operating income was unfavorably impacted by $3.4 million of restructuring charges primarily related to the 2025 French restructuring program and a $3.3 million gain on sale of building in the second quarter of 2024 that did not repeat in 2025, partially offset by lower acquisition-related costs. The increase in organic operating income of $26.2 million, or 20.6%, was primarily due to higher price realization, higher volume in the Americas, including pull-forward demand into the second quarter of 2025, productivity and savings from prior restructuring actions, partially offset by inflation and investments.

Interest Income. Interest income in the second quarter of 2025 increased $0.4 million compared to the second quarter of 2024, primarily due to higher cash and cash equivalents balances.

Interest Expense. Interest expense in the second quarter of 2025 decreased $1.4 million compared to the second quarter of 2024, primarily due to a lower principal balance of debt outstanding. Refer to Note 11 of the Notes to Consolidated Financial Statements for further details.

Other Expense (Income), Net. Other expense (income), net, was an expense balance of $0.2 million in the second quarter of 2025, primarily due to unfavorable foreign currency translation, compared to an income balance of $0.2 million in the second quarter of 2024, primarily due to favorable foreign currency translation.

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Income Taxes. Our effective income tax rate increased slightly to 25.2% in the second quarter of 2025, from 25.1% in the second quarter of 2024.

Net Income. Net income was $100.9 million, or $3.01 per share of common stock on a diluted basis, for the second quarter of 2025, compared to $82.0 million, or $2.44 per share of common stock on a diluted basis, for the second quarter of 2024. Results for the second quarter of 2025 included after-tax charges of $2.5 million, or $0.08 per share of common stock, for restructuring and $0.3 million, or $0.01 per share of common stock, for acquisition-related costs. Results for the second quarter of 2024 included after-tax charges of $2.8 million, or $0.08 per share of common stock, for acquisition-related costs, partially offset by an after-tax benefit of $2.5 million, or $0.06 per share of common stock, for the gain on sale of a building.

Six Months Ended June 29, 2025 Compared to Six Months Ended June 30, 2024

Net Sales. Our net sales in each of the three geographic segments for the first six months of 2025 and 2024 were as follows:


	Six Months Ended										% Change to
	June 29, 2025				June 30, 2024						Consolidated
	Net Sales		% Sales		Net Sales		% Sales		Change		Net Sales

	(dollars in millions)
Americas	$	916.6	76.3	%	$	866.9	74.2	%	$	49.7	4.3	%
Europe		219.4	18.3			237.4	20.3			(18.0)	(1.5)
APMEA		65.7	5.5			63.9	5.5			1.8	0.1
Total	$	1,201.7	100.0	%	$	1,168.2	100.0	%	$	33.5	2.9	%

The change in net sales was attributable to the following:


									Change as a %								Change as a %
									of Consolidated Net Sales								of Segment Net Sales

	Americas		Europe		APMEA		Total		Americas		Europe		APMEA		Total		Americas		Europe		APMEA

	(dollars in millions)
Organic	$	39.3	$	(20.0)	$	3.4	$	22.7	3.4	%	(1.7)	%	0.3	%	2.0	%	4.5	%	(8.4)	%	5.3	%
Foreign exchange		(1.6)		2.0		(1.6)		(1.2)	(0.1)		0.2		(0.2)		(0.1)		(0.2)		0.8		(2.5)
Acquired		12.0		—		—		12.0	1.0		—		—		1.0		1.4		—		—
Total	$	49.7	$	(18.0)	$	1.8	$	33.5	4.3	%	(1.5)	%	0.1	%	2.9	%	5.7	%	(7.6)	%	2.8	%

The change in organic net sales by channel was attributable to the following:


											Change As a %
											*of Prior Year Sales ()**
	Wholesale		OEMs		DIY		Specialty		Total		Wholesale		OEMs		DIY		Specialty
	(dollars in millions)
Americas	$	31.4	$	0.9	$	0.5	$	6.5	$	39.3	5.5	%	1.7	%	1.2	%	3.2	%
Europe		(10.7)		(9.2)		(0.1)		—		(20.0)	(6.6)		(12.3)		(8.3)		—
APMEA		3.6		0.6		—		(0.8)		3.4	8.2		17.6		—		(4.9)
Total	$	24.3	$	(7.7)	$	0.4	$	5.7	$	22.7	3.1	%	(5.9)	%	0.9	%	2.6	%

* Segment change as a % of segment net sales by channel and Total change as a % of consolidated net sales by channel.

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Americas net sales increased $49.7 million, or 5.7%, for the first six months of 2025 compared to the first six months of 2024. The change in net sales was positively impacted by $12.0 million, or 1.4%, of acquired sales related to two acquisitions completed in the first and second quarters of 2025. The change in net sales was negatively impacted by $1.6 million, or 0.2%, of foreign currency translation. Organic net sales increased $39.3 million, or 4.5%, primarily due to favorable price realization, and higher volume, including pull-forward demand into the second quarter of 2025, partially offset by fewer shipping days in the first six months of 2025. The organic net sales growth was primarily in the wholesale channel from increased sales across our core valve products and in the specialty channel from increased sales of our heating and hot water products.

Europe net sales decreased $18.0 million, or 7.6%, for the first six months of 2025 compared to the first six months of 2024. The change in net sales was positively impacted by $2.0 million, or 0.8%, of favorable foreign currency translation. Organic net sales decreased $20.0 million, or 8.4%, primarily due to volume declines from market weakness in the OEM and wholesale channels and fewer shipping days in the first six months of 2025, partially offset by favorable price realization. The OEM channel was impacted by reduced government energy incentives and the related heat pump destocking while the wholesale channel was primarily impacted by reduced volume of plumbing product sales into France and Benelux.

APMEA net sales increased $1.8 million, or 2.8%, for the first six months of 2025 compared to the first six months of 2024. The change in net sales was negatively impacted by $1.6 million, or 2.5%, of unfavorable foreign currency translation. Organic net sales increased $3.4 million, or 5.3%, primarily due to volume growth in all major countries in the segment, partially offset by fewer shipping days in the first six months of 2025.

The net decrease in net sales due to foreign exchange was mostly due to the unfavorable impact of the appreciation of the U.S. dollar against the Australian dollar and Canadian dollar, partially offset by the favorable impact of the depreciation of the U.S. dollar against the euro in the first six months of 2025.

Gross Profit. Gross profit and gross profit as a percent of net sales (gross margin) for the first six months of 2025 and 2024 were as follows:


	Six Months Ended
	June 29, 2025			June 30, 2024

	(dollars in millions)
Gross profit	$	598.4		$	552.3
Gross margin		49.8	%		47.3	%

Gross profit and gross margin increased primarily from higher price realization, productivity and lower amortization of fair value inventory adjustments from acquisitions, partially offset by inflation and lower volume.

Selling, General and Administrative Expenses. SG&A expenses increased $12.1 million, or 3.5%, in the first six months of 2025 compared to the first six months of 2024. The increase in SG&A expenses was attributable to the following:


	(in millions)		% Change
Organic	$	6.0	1.8	%
Foreign exchange		(0.6)	(0.2)
Acquired		5.8	1.6
Special items		0.9	0.3
Total	$	12.1	3.5	%

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The increase in organic SG&A expenses was primarily due to an increase in investments of $7.6 million, including in our smart and connected initiatives and other strategic initiatives, general inflation of $7.5 million and increased variable costs of $5.3 million due to higher net sales, partially offset by $5.5 million from productivity initiatives, $3.2 million of restructuring savings, lower professional fees of $2.9 million and a $1.0 million reduction in travel and marketing spend compared to the first six months of 2024. The decrease in foreign exchange was mainly due to the appreciation of the U.S. dollar against the Australian dollar and Canadian dollar, partially offset by the depreciation of the U.S. dollar against the euro. The acquired SG&A costs related to two acquisitions in the Americas segment completed in the first and second quarters of 2025. The increase in special items SG&A expenses was primarily due to a $4.4 million gain on sale of buildings in the second quarter of 2024, partially offset by decreased acquisition-related costs of $3.5 million compared to the first six months of 2024. Total SG&A expenses, as a percentage of sales, were 29.5% in the first six months of 2025 compared to 29.3% in the first six months of 2024.

Restructuring. In the first six months of 2025, we recorded a net restructuring charge of $20.7 million, which included a $19.1 million charge related to the 2025 French restructuring program that was approved in the first quarter of 2025. In the first six months of 2024, we recorded a net restructuring charge of $1.5 million, which primarily related to immaterial severance and other exit costs in all three segments. For a more detailed description of our restructuring plans, see Note 6 of the Notes to the Consolidated Financial Statements.

Operating Income. Operating income, which is made up of segment earnings, Corporate operating loss and special items, for the first six months of 2025 and 2024 was as follows:


							% Change to
	Six Months Ended						Consolidated
	June 29,		June 30,				Operating
	2025		2024		Change		Income

	(dollars in millions)
Americas	$	233.6	$	201.5	$	32.1	15.4	%
Europe		28.1		30.8		(2.7)	(1.3)
APMEA		12.0		11.9		0.1	—
Total segment earnings	$	273.7	$	244.2	$	29.5	14.2	%

Corporate operating loss - excluding special items	$	(28.5)	$	(28.3)	$	(0.2)	(0.1)	%
Corporate special items		—		(0.6)		0.6	0.3
Corporate operating loss - as reported	$	(28.5)	$	(28.9)	$	0.4	0.2	%

Segment special items		(22.2)		(7.1)		(15.1)	(7.3)
Total operating income	$	223.0	$	208.2	$	14.8	7.1	%

The increase (decrease) in total segment earnings was attributable to the following:


									Change As a % of								Change As a % of
									Total Segment Earnings								Segment Earnings

	Americas		Europe		APMEA		Total		Americas		Europe		APMEA		Total		Americas		Europe		APMEA

	(dollars in millions)
Organic	$	30.6	$	(2.9)	$	—	$	27.7	12.5	%	(1.2)	%	—	%	11.3	%	15.2	%	(9.4)	%	—	%
Foreign exchange		(0.3)		0.2		0.1		0.0	(0.1)		0.1		—		—		(0.1)		0.6		0.8
Acquired		1.8		—		—		1.8	0.7		—		—		0.7		0.9		—		—
Total	$	32.1	$	(2.7)	$	0.1	$	29.5	13.1	%	(1.1)	%	—	%	12.0	%	16.0	%	(8.8)	%	0.8	%

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Operating income increased $14.8 million, or 7.1%, for the first six months of 2025 compared to the first six months of 2024. Operating income was unfavorably impacted by $19.1 million of restructuring charges related to the 2025 French restructuring program and a $4.4 million gain on sale of buildings in the first six months of 2024 that did not repeat in 2025, partially offset by lower acquisition-related costs. The increase in organic operating income of $27.7 million, or 11.3%, was primarily due to higher price realization, productivity and savings from prior restructuring actions, partially offset by inflation and lower volume.

Interest Income. Interest income in the first six months of 2025 increased $0.6 million compared to the first six months of 2024, primarily due to higher cash and cash equivalents balances.

Interest Expense. Interest expense in the first six months of 2025 decreased $2.9 million compared to the first six months of 2024, primarily due to a lower principal balance of debt outstanding. Refer to Note 11 of the Notes to Consolidated Financial Statements for further details.

Other Expense (Income), Net. Other expense (income), net, was an expense balance of $0.6 million in the first six months of 2025, primarily due to unfavorable foreign currency translation, compared to an income balance of $0.8 million in the second quarter of 2024, primarily due to favorable foreign currency translation.

Income Taxes. Our effective income tax rate decreased to 21.1% in the first six months of 2025, from 24.5% in the first six months of 2024. The decrease is due to a reversal of a tax liability during the first quarter of 2025 relating to a prior tax year for which we determined the statute of limitations had lapsed. The tax liability reversal resulted in a decrease in our foreign tax credit carryforwards and the release of an associated valuation allowance.

Net Income. Net income was $174.9 million, or $5.22 per share of common stock on a diluted basis, for the first six months of 2025, compared to $154.5 million, or $4.61 per share of common stock on a diluted basis, for the first six months of 2024. Results for the first six months of 2025 included after-tax charges of $15.5 million, or $0.46 per share of common stock, for restructuring and $1.0 million, or $0.03 per share of common stock, for acquisition-related costs, partially offset by an after-tax benefit of $8.3 million, or $0.25 per share of common stock, for an income tax adjustment related to a lapsed statute tax year liability, as noted above in ‘Income Taxes’. Results for the first six months of 2024 included after-tax charges of $8.0 million, or $0.24 per share of common stock, for acquisition-related costs, $1.1 million, or $0.03 per share of common stock, for restructuring; partially offset by an after-tax benefit of $3.3 million, or $0.10 per share of common stock, for gain on sale of assets.

Liquidity and Capital Resources

We generated $124.9 million of net cash provided by operating activities in the first six months of 2025 compared to $130.9 million of net cash provided by operating activities in the first six months of 2024. The decrease in net cash provided by operating activities was primarily related to higher working capital investment related to timing of accounts receivable collections and higher inventory primarily related to increased tariff costs, partially offset by higher net income.

We used $105.5 million of net cash for investing activities in the first six months of 2025 compared to $107.5 million used in the first six months of 2024. We used $85.7 million in cash for business acquisitions in our Americas segment in the first six months of 2025 compared to $96.3 million in cash for business acquisitions in our Americas segment in the first six months of 2024, which was partially offset by an increase of $8.6 million cash used for net capital expenditures in the first six months of 2025 compared to the first six months of 2024. For the remainder of 2025, we expect to invest approximately $25 million to $30 million in capital expenditures as part of our ongoing commitment to improve our operating capabilities.

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We used $52.3 million of net cash for financing activities during the first six months of 2025 primarily due to dividend payments of $32.0 million, tax withholding payments on vested stock awards of $11.1 million and payments of $7.9 million to repurchase approximately 37,000 shares of Class A common stock. In the first six months of 2024, we used $88.9 million of net cash for financing activities during the first six months of 2024 primarily due to long-term debt repayments of $40.0 million, dividend payments of $26.7 million, tax withholding payments on vested stock awards of $12.8 million and payments of $8.1 million to repurchase approximately 40,000 shares of Class A common stock.

On July 12, 2024, we entered into the Third Amended and Restated Credit Agreement by and among the Company, certain subsidiaries of the Company, the lenders and other parties from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”). The Credit Agreement amends and restates the prior Second Amended and Restated Credit Agreement, dated as of March 30, 2021 (as amended by that certain Amendment No. 1 date August 2, 2022 and Amendment No. 2 dated December 12, 2023), that establishes our senior unsecured revolving credit facility of $800 million (the “Revolving Credit Facility”). The Credit Agreement also contains an expansion option of $400.0 million. Pursuant to the Credit Agreement, the maturity date of the Revolving Credit Facility is July 12, 2029, subject to extension under certain circumstances and subject to the terms of the Credit Agreement. The Credit Agreement provides for a maximum consolidated leverage ratio of 3.50 to 1.00 (or 4.00 to 1.00 during temporary step-ups following certain permitted acquisitions) and the minimum consolidated interest ratio of 3.50 to 1.00.

The Revolving Credit Facility also includes sub-limits of $100 million for letters of credit and $15 million for swing line loans. As of June 29, 2025, we had drawn down $200.0 million on this line of credit and had $12.2 million in letters of credit outstanding, which resulted in $587.8 million of unused and available credit under the Revolving Credit Facility as of such date. Borrowings outstanding bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Term Benchmark loans, the Term Benchmark rate plus an applicable percentage, ranging from 1.075% to 1.325%, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than 1.00%) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on such day plus 0.50% and (c) the Term Benchmark rate plus 1.00% for a one-month interest period, in each case, determined by reference to our consolidated leverage ratio. For the borrowings denominated in dollars, there is a fixed 10 basis point adjustment if the reference rate is Term SOFR. The weighted average interest rate on debt outstanding under the Revolving Credit Facility as of June 29, 2025 was 5.50%. The weighted average interest rate on debt outstanding inclusive of the interest rate swaps discussed in Note 12 of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of June 29, 2025 was 4.07%. In addition to paying interest under the Credit Agreement, we are also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. We may repay loans outstanding under the Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Credit Agreement.

As of June 29, 2025, we held $369.3 million in cash and cash equivalents. Of this amount, $202.8 million of cash and cash equivalents were held by foreign subsidiaries. Our U.S. operations typically generate sufficient cash flows to meet our domestic obligations. We expect existing cash and cash equivalents and cash flows from operations and financing activities to be sufficient to meet our cash needs for at least the next 12 months and thereafter for the foreseeable future. However, if we did have to borrow to fund some or all of our expected cash outlays, we can do so at reasonable interest rates by utilizing the undrawn borrowings under our Revolving Credit Facility. Subsequent to recording the Toll Tax as part of the Tax Cuts and Jobs Act of 2017, our intent, other than with respect to the one-time repatriation of foreign earnings in 2023, has been to permanently reinvest undistributed earnings of foreign subsidiaries, and we do not have any current plans to repatriate additional post-Toll Tax foreign earnings to fund operations in the United States. However, if amounts held by foreign subsidiaries were needed to fund operations in the United States, we could be required to accrue and pay taxes to repatriate these funds. Such charges may include potential state income taxes and other tax charges.

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On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act was enacted into law in the United States and includes a broad range of tax reform provisions. We are in the process of assessing the impacts of the legislation. We currently do not expect the OBBB Act to have a material impact on our estimated effective income tax rate in 2025, however given the complexity of tax laws, related regulations and developing guidance, our estimates may require revisions as additional information becomes available.

We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Non-GAAP Financial Measures

In accordance with the SEC’s Regulation G and Item 10(e) of Regulation S-K, the following provides definitions of the non-GAAP financial measures used by management. We believe that these measures enhance the overall understanding of underlying business results and trends. These non-GAAP measures are not intended to be considered by the user in place of the related GAAP financial measure, but rather as supplemental information to more fully understand our business results. These non-GAAP financial measures may not be the same as similar measures used by other companies due to possible differences in method and in the items or events being adjusted.

We refer to non-GAAP organic changes in financial measures, including organic net sales, organic net sales growth, organic SG&A expenses and organic segment earnings which are non-GAAP measures that exclude the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. A reconciliation to the most closely related U.S. GAAP measure, net sales, net sales growth, SG&A and segment earnings, have been included in our discussion within “Results of Operations” above. Non-GAAP measures should be considered in addition to, and not as a replacement for or as a superior measure to U.S. GAAP measures. Management believes reporting these non-GAAP measures provide useful information to investors, potential investors and others, by facilitating easier comparisons of our performance with prior and future periods.

Free cash flow is a non-GAAP measure that does not represent cash provided by operating activities in accordance with U.S. GAAP. Therefore, it should not be considered an alternative to net cash provided by or used in operating activities as an indication of our performance. The cash conversion rate of free cash flow to net income is also a measure of our performance in cash flow generation. We believe free cash flow and cash flow conversion rate to be an appropriate supplemental measure of our operating performance because it provides investors with a measure of our ability to generate cash, repay debt, pay dividends, repurchase stock and fund acquisitions.

A reconciliation of net cash provided by operating activities to free cash flow and a calculation of our cash conversion rate is provided below:


	Six Months Ended
	June 29,			June 30,
	2025			2024

	(in millions)
Net cash provided by operating activities	$	124.9		$	130.9
Less: additions to property, plant, and equipment		(19.8)			(16.9)
Plus: proceeds from the sale of property, plant, and equipment		—			5.7
Free cash flow	$	105.1		$	119.7
Net income	$	174.9		$	154.5
Cash conversion rate of free cash flow to net income		60.1	%		77.5	%

Free cash flow decreased in the first six months of 2025 when compared to the first six months of 2024, primarily driven by higher working capital investment related to timing of accounts receivable collections and higher inventory primarily related to increased tariff costs, partially offset by higher net income.

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Our net debt to capitalization ratio, a non-GAAP financial measure used by management, at June 29, 2025 was (10.0%) compared to (12.5%) at December 31, 2024. The increase was driven by a change in net debt balance, primarily due to decreased cash and cash equivalents, and an increase in stockholders’ equity at June 29, 2025 compared to December 31, 2024 due to higher net income. Management believes the net debt to capitalization ratio is an appropriate supplemental measure because it helps investors understand our ability to meet our financing needs and serves as a basis to evaluate our financial structure. Our computation may not be comparable to other companies that may define their net debt to capitalization ratios differently.

A reconciliation of long-term debt (including current portion) to net debt and our net debt to capitalization ratio is provided below:


	June 29,		December 31,
	2025		2024

	(in millions)
Current portion of long‑term debt	$	—	$	—
Plus: long-term debt, net of current portion		197.3		197.0
Less: cash and cash equivalents		(369.3)		(386.9)
Net debt	$	(172.0)	$	(189.9)

A reconciliation of capitalization is provided below:


	June 29,			December 31,
	2025			2024

	(in millions)
Net debt	$	(172.0)		$	(189.9)
Total stockholders’ equity		1,892.4			1,707.9
Capitalization	$	1,720.4		$	1,518.0
Net debt to capitalization ratio		(10.0)	%		(12.5)	%

Application of Critical Accounting Policies and Key Estimates

We believe that our critical accounting policies are those related to revenue recognition, inventory valuation, goodwill and other intangibles, product liability costs, legal contingencies and income taxes. We believe these accounting policies are particularly important to an understanding of our financial position and results of operations and require application of significant judgment by our management. In applying these policies, management uses its judgment in making certain assumptions and estimates. Our accounting policies are more fully described under the heading “Accounting Policies” in Note 2 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K as filed with the SEC on February 18, 2025.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We use derivative financial instruments primarily to reduce exposure to adverse fluctuations in foreign exchange rates, interest rates and costs of certain raw materials used in the manufacturing process. We do not enter into derivative financial instruments for trading purposes. As a matter of policy, all derivative positions are used to reduce risk by hedging underlying economic exposure. The derivatives we use are instruments with liquid markets. See Note 12 of Notes to the Consolidated Financial Statements for further details.

Our consolidated earnings, which are reported in United States dollars, are subject to translation risks due to changes in foreign currency exchange rates. This risk is concentrated in the exchange rate between the U.S. dollar and the euro; the U.S. dollar and the Canadian dollar; and the U.S. dollar and the Chinese yuan.

Our non-U.S. subsidiaries transact most business, including certain intercompany transactions, in foreign currencies. Such transactions are principally purchases or sales of materials and are denominated in European currencies, the Chinese yuan or the U.S., Canadian or Australian dollar. We use foreign currency forward exchange contracts from time to time to manage the risks related to intercompany loans, intercompany purchases and intercompany sales that occur during the course of a year, and certain open foreign currency denominated commitments to sell products to third parties. We have entered into forward exchange contracts which hedge approximately 80% to 85% of the forecasted

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intercompany purchases between one of our Canadian subsidiaries and our U.S. operating subsidiaries for the next twelve months. We record the effective portion of the designated foreign currency hedge contracts in other comprehensive income (loss) until inventory turns and is sold to a third-party. Once the third-party transaction associated with the hedged forecasted transaction occurs, the effective portion of any related gain or loss on the designated foreign currency hedge is reclassified into cost of goods sold within earnings. The fair value of the Company’s designated foreign hedge contracts outstanding as of June 29, 2025 was a liability of $0.2 million.

Under the Credit Agreement, our earnings and cash flows are exposed to fluctuations in interest payments related to our floating rate debt. In order to manage our exposure, we entered into an interest rate swap on March 30, 2021. Under the interest rate swap agreement, we received the one-month USD-LIBOR subject to a 0.00% floor and paid a fixed rate of 1.02975% on a notional amount of $100.0 million. On August 2, 2022, we amended the interest rate swap to replace LIBOR as a reference rate for borrowings with Term SOFR. Under the amended interest rate swap agreement, we receive the one-month Term SOFR subject to a -0.1% floor and pay a fixed rate of 0.942% on a notional amount of $100.0 million. We entered into an additional interest rate swap on October 23, 2023, as part of the acquisition of Bradley. Under the interest rate swap agreement, we receive the one-month Term SOFR subject to a -0.1% floor and pay a fixed rate of 4.844% on a notional amount of $100.0 million. Both swaps mature on March 30, 2026. Information about our long-term debt facility and related interest rates appears in Note 11 of the Consolidated Financial Statements.

We purchase significant amounts of bronze ingot, brass rod, cast iron, stainless steel and plastic, which are utilized in manufacturing our many product lines. Our operating results can be adversely affected by changes in commodity prices, including tariffs, if we are unable to pass on related price increases to our customers. We manage this risk by monitoring related market prices, working with our suppliers to achieve the maximum level of stability in their costs and related pricing, seeking alternative supply sources when necessary and passing increases in commodity costs to our customers, to the maximum extent possible, when they occur.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or Exchange Act, as of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily applies its judgment in evaluating and implementing possible controls and procedures. The effectiveness of our disclosure controls and procedures is also necessarily limited by the staff and other resources available to us and the geographic diversity of our operations. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective, in that they provided reasonable assurance 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 are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

In the second quarter of 2025, we began the implementation of a new global enterprise resource planning (“ERP”) system. The implementation is expected to occur in phases over the next several years and will replace many of our legacy ERP systems. The ERP system is designed to, among other things, streamline and enhance the Company’s operational, financial and accounting processes through a comprehensive, integrated solution. During the second quarter of 2025, we made changes to our internal control over financial reporting to address processes impacted by the ERP system implementation.

As the phased implementation of the new ERP system continues, we will have additional changes to our processes and procedures which, in turn, will result in additional changes to our internal control over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting.

Other than the above-noted changes, there was no change in our internal control over financial reporting that occurred during the second quarter ended June 29, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We will continue to review and document our disclosure controls and procedures, including our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

As disclosed in Part I, Item 1, “Product Liability, Environmental and Other Litigation Matters” and Item 3, “Legal Proceedings” of our Annual Report on Form 10-K for the year ended December 31, 2024, we are party to certain litigation. There have been no material developments with respect to such legal proceedings during the quarter ended June 29, 2025, other than as described in Note 13 of the Notes to Consolidated Financial Statements, which is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2024.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We satisfy the minimum withholding tax obligation due upon the vesting of shares of restricted stock by repurchasing a number of shares with an aggregate fair market value on the date of such vesting that would satisfy the withholding amount due. We did not have any such repurchases in the second quarter ended June 29, 2025.

The following table includes information with respect to repurchases of our Class A common stock during the second quarter ended June 29, 2025 under our stock repurchase program.


	Issuer Purchases of Equity Securities (1)
					(d) Maximum Number (or
	(a) Total			(c) Total Number of	Approximate Dollar
	Number of	(b) Average		Shares (or Units)	Value) of Shares (or
	Shares (or	Price Paid		Purchased as Part of	Units) that May Yet Be
	Units)	per Share		Publicly Announced	Purchased Under the
Period	Purchased(1)	(or Unit)		Plans or Programs	Plans or Programs
March 31, 2025 – April 27, 2025	6,186	$	196.50	6,186	$	139,775,398
April 28, 2025 – May 25, 2025	5,709	$	225.76	5,709	$	138,486,533
May 26, 2025 – June 29, 2025	6,124	$	242.41	6,124	$	137,002,030
Total	18,019	$	221.37	18,019

(1)

On July 31, 2023, we announced that our Board of Directors had authorized a repurchase program of up to $150 million of our Class A common stock, to be purchased from time to time on the open market or in privately negotiated transactions, which has no expiration date. The timing and number of shares repurchased will be determined by the Company’s management based on its evaluation of market conditions and other factors.

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Item 5.Other Information

(a) Disclosure in lieu of reporting on a Current Report on Form 8-K.

None.

(b) Material changes to the procedures by which security holders may recommend nominees to the board of directors.

None.

(c) Insider trading arrangements and policies.

During the second quarter ended June 29, 2025, no director or officer of the Company or a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits


Exhibit No.		Description
3.1		Restated Certificate of Incorporation, as amended. Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 25, 2023 (File No. 001-11499).
3.2		Amended and Restated By-Laws. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 31, 2023 (File No. 001- 11499).
10.1†		Form of Indemnification Agreement between the Registrant and certain directors and officers of the Registrant.
31.1†		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2†		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1††		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350
32.2††		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350
101.INS**		Inline XBRL Instance Document
101.SCH**		Inline XBRL Taxonomy Extension Schema Document
101.CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE**		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

† Filed herewith.

†† Furnished herewith.

** Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at June 29, 2025 and December 31, 2024, (ii) Consolidated Statements of Operations for the Second Quarters and Six Months ended June 29, 2025 and June 30, 2024, (iii) Consolidated Statements of Comprehensive Income for the Second Quarters and Six Months ended June 29, 2025 and June 30, 2024, (iv) Consolidated Statements of Stockholders’ Equity for the Second Quarters and Six Months ended June 29, 2025 and June 30, 2024, (v) Consolidated Statements of Cash Flows for the Six Months ended June 29, 2025 and June 30, 2024, and (vi) Notes to Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	WATTS WATER TECHNOLOGIES, INC.

Date: August 7, 2025	By:	/s/ Robert J. Pagano, Jr.
		Robert J. Pagano, Jr.
		Chief Executive Officer, President and Chairperson of the Board (principal executive officer)

Date: August 7, 2025	By:	/s/ Ryan Lada
		Ryan Lada Chief Financial Officer (principal financial officer)

Date: August 7, 2025

By:

/s/ Virginia A. Halloran

Virginia A. Halloran

Chief Accounting Officer (principal accounting officer)

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WATTS WATER TECHNOLOGIES INC - Quarter Report: 2025 June (Form 10-Q)

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