WTS US Equity☆

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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Overview

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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 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:

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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”).

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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 14 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.

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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.

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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.

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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.

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Global gross domestic product (“GDP”) remains 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 European economy remains weak and geo-political uncertainties continue. Elevated interest rates may impact new construction. Tariffs on foreign imports into the United States, particularly from Canada, China and Mexico, should they be implemented, will increase the cost of our products and could adversely impact the gross margin we earn on our products. We believe we are prepared to proactively work with our supply chain to mitigate the cost impact, seek alternative supply sources when necessary and pass increases in costs to our customers, to the extent possible, when they occur. We also continue to experience inflation across our labor and overhead costs. Despite these anticipated 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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Due to the above circumstances and as described generally in this Form 10-K, our results of operations for the year ended December 31, 2024 are not necessarily indicative of future results. Management cannot predict the full impact of the uncertainties discussed above. For further information regarding the impact on the Company, see Item 1A. “Risk Factors.”

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Financial Overview

Net sales for 2024 increased 9.5%, or $195.9 million, on a reported basis and decreased 0.9%, or $18.0 million, on an organic basis, compared to 2023. The reported sales increase included acquired sales of 10.4%, or $214.7 million, with $206.6 million reported within the Americas segment and $8.1 million reported within APMEA, and the unfavorable impact of foreign exchange of $0.8 million. The organic sales decrease was primarily driven by lower volumes in our Europe segment, partially offset by incremental price across all of our operating segments. Operating income of $390.4 million increased by $39.5 million, or 11.3%, in 2024 compared to 2023. This increase was primarily driven by contribution from our acquisitions, favorable price, product mix, productivity, and cost savings from restructuring actions, partially offset by inflation, lower volume in our Europe segment and incremental investments.

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In discussing our results of operations, segment earnings is our 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, gain or loss on sale of assets, pension settlements and contingent consideration adjustments. The CODM uses segment earnings for insight into underlying trends comparing past financial performance with current performance by reporting segment on a consistent basis.

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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.

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Management’s discussion and analysis of our financial condition, results of operations and cash flows as of and for the year ended December 31, 2022 can be found in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Acquisitions

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Effective January 1, 2024, we 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 aggregate net purchase price was approximately $98.9 million, net of cash acquired of $4.6 million. The final post-closing working capital adjustment was immaterial and adjusted in the second quarter of 2024, resulting in a final purchase price of $99.0 million, net of cash acquired. 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 100 years. We accounted for the transaction as a business combination in 2024.

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Recent Developments

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On February 3, 2025, our Board of Directors authorized a restructuring program with respect to our operating facility in Hautvillers, France (the “2025 French restructuring”). The restructuring program includes the shutdown of the foundry at our manufacturing facility in Hautvillers, France and the relocation of the facility’s other production activities primarily to our other facilities in France and other locations in Europe. The program is expected to include pre-tax charges totaling approximately $22 million, including costs for severance, relocation, facility exit and clean-up and certain asset write-downs, and result in the elimination of approximately 96 positions at the Hautvillers, France facility. Severance costs make up the majority of the program costs and are estimated to approximate $18 million. As a result of the facility consolidations, the net headcount reduction in France is expected to be approximately 68 positions. Total net after-tax charges for this restructuring program are expected to be approximately $16 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. We expect to spend approximately $1 million in capital expenditures to consolidate operations. Annual pre-tax savings are estimated to be approximately $3 million, which we expect to fully realize by the end of 2026.

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On February 3, 2025, we declared a quarterly dividend of forty-three cents ($0.43) per share on each outstanding share of Class A common stock and Class B common stock payable on March 14, 2025, to stockholders of record on February 28, 2025.

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On January 2, 2025, we completed the acquisition of I-CON Systems (“I-CON”) in a share purchase transaction funded with cash on hand. The aggregate net purchase price was approximately $70.6 million, net of cash acquired of $2.5 million, and is subject to a final post-closing working capital adjustment. 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. We will account for the transaction as a business combination in the first quarter of 2025.

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Results of Operations

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Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

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Net Sales. Our business is reported in three geographic segments: Americas, Europe and APMEA. Our net sales in each of these segments for the years ended December 31, 2024 and December 31, 2023 were as follows:

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended ​ Year Ended ​ ​ ​ ​ % Change to

​ ​ December 31, 2024 ​ December 31, 2023 ​ ​ ​ ​ Consolidated

​ Net Sales % Sales Net Sales % Sales Change Net Sales

​ ​ (dollars in millions)

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The change in net sales was attributable to the following:

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As a % ​ Change As a %

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Consolidated Net Sales ​ of Segment Net Sales

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​ ​ (dollars in millions)

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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:

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As a %

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Prior Year Sales (*)

​ Wholesale OEMs DIY Specialty Total Wholesale OEMs DIY ​ Specialty

​ (dollars in millions) ​

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* 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 $236.8 million, or 16.6%, in 2024 compared to 2023. The change in net sales was positively impacted by $206.6 million, or 14.5%, of acquired sales related to the Bradley and Josam acquisitions completed in the fourth quarter of 2023 and first quarter of 2024, respectively. The change in net sales was negatively impacted by $1.4 million, or 0.1%, of foreign currency translation. Organic net sales increased $31.6 million, or 2.2%, primarily due to increased volume and favorable price realization. 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.

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Europe net sales decreased $58.8 million, or 11.5%, in 2024 compared to 2023. The change in net sales was positively impacted by $1.5 million, or 0.3%, of foreign currency translation. Organic net sales decreased $60.3 million, or 11.8%, primarily due to lower volumes, partially offset by favorable price realization. The decrease was primarily due to volume declines in the OEM channel which was impacted by reduced government energy incentives and the related heat pump destocking, as well as volume declines in wholesale plumbing product sales into France and Benelux, partially offset by increased sales of our drains products.

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APMEA net sales increased $17.9 million, or 15.4%, in 2024 compared to 2023. The change in net sales was negatively impacted by $0.9 million, or 0.8%, of foreign currency translation, which was more than offset by $8.1 million, or 7.0%, of acquired sales related to the Enware acquisition completed in the second quarter of 2023. Organic net sales increased $10.7 million, or 9.2%, primarily due to increased volume across all major countries in the segment.

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The net decrease in sales due to foreign exchange was mostly due to the unfavorable impact of the appreciation of the U.S. dollar against the Chinese yuan and Canadian dollar, partially offset by the favorable impact of the depreciation of the U.S. dollar against the euro in 2024.

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Gross Profit. Gross profit and gross profit as a percent of net sales (gross margin) for 2024 and 2023 were as follows:

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​ ​ Year Ended

​ ​ (dollars in millions)

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Gross profit increased primarily due to contribution from our acquisitions, higher price realization and productivity, partially offset by inflation, lower volume in our Europe segment, and the amortization of the fair value step-up adjustments for inventory purchased as part of the Bradley and Josam acquisitions. Gross profit includes the impact of the Bradley and Josam acquisitions completed in the fourth quarter of 2023 and first quarter of 2024, respectively. Gross margin was also impacted by the overall dilutive impact of the Bradley acquisition.

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Selling, General and Administrative Expenses. Selling, general and administrative, or SG&A, expenses increased $59.9 million, or 9.9%, in 2024 compared to 2023. The increase in SG&A expenses was attributable to the following:

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​ (in millions) % Change

Organic ​ $ (2.7) (0.4) %

Foreign exchange ​ (0.3) (0.1) ​

Special items ​ ​ (11.0) ​ (1.8) ​

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The organic decrease in SG&A expenses was primarily due to $10.3 million from productivity initiatives, a net decrease in short-term and long-term compensation accruals of $6.7 million, $3.3 million of restructuring saving, and decreases of $4.0 million in professional fees, $2.9 million in engineering project spend, $2.0 million in donations, $1.4 million in depreciation and amortization, $1.1 million in travel and marketing spend, and $1.1 million in insurance and product liability claim costs. These decreases were partially offset by general inflation of $16.7 million and an increase in investments of $16.3 million, including in our smart and connected initiatives and other strategic initiatives, compared to 2023. The decrease in foreign exchange was primarily driven by the appreciation of the U.S. dollar against the Canadian dollar and Chinese yuan, partially offset by the depreciation of the U.S. dollar against the euro. The acquired increase in SG&A related to the Bradley and Josam acquisitions in the Americas segment completed in the fourth quarter of 2023 and first quarter of 2024, respectively, as well as the Enware acquisition in the APMEA segment completed in the second quarter of 2023. The decrease in special items SG&A costs was primarily due to a $7.8 million gain on the settlement of Bradley’s frozen pension plan and $4.4 million gain on sale of buildings. Total SG&A expenses, as a percentage of net sales, were 29.5% in 2024 compared to 29.4% in 2023.

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Restructuring.In 2024, we recorded a net restructuring charge of $7.2 million, which related to immaterial actions in all regions including severance, exit costs and other cost reductions. In 2023, we recorded a net restructuring charge of $5.5 million, which related to immaterial cost reduction actions in all regions primarily related to severance and other exit costs. For a more detailed description of our current and future restructuring plans, see “Recent Developments” above and Note 3 of Notes to Consolidated Financial Statements in this Annual Report Form 10-K.

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Operating Income. Operating income, which is made up of segment earnings, Corporate operating loss and special items, for 2024 and 2023 was as follows:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change to

​ Year Ended ​ ​ Consolidated

​ December 31, ​ December 31, ​ ​ Operating ​

​ (dollars in millions) ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Corporate operating loss - excluding special items ​ (54.1) ​ (55.0) ​ 0.9 0.2 ​

Corporate special items ​ (1.7) ​ (5.8) ​ 4.1 1.2 ​

Corporate operating loss - as reported ​ $ (55.8) ​ $ (60.8) ​ 5.0 1.4 ​

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Segment special items ​ (7.5) ​ (8.5) ​ 1.0 0.3 ​

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

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As a % of ​ Change As a % of

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Segment Earnings ​ Segment Earnings

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​ ​ (dollars in millions)

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Operating income increased $39.5 million, or 11.3%, in 2024 compared to 2023. Operating income increased due to higher segment earnings in the Americas of $47.5 million, or 13.6%, and in APMEA of $5.2 million, or 1.5%, partially offset by lower segment earnings in Europe of $19.2 million, or 5.5%. The increase in organic segment earnings of $7.8 million, or 2.2%, was due to higher price, favorable product mix, productivity, and savings from restructuring actions, partially offset by inflation, lower volume in Europe and incremental investments. Total segment earnings were positively impacted by $25.5 million, or 7.3%, from acquisitions and positively impacted by $0.2 million, or 0.1%, of foreign currency translation compared to 2023.

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Operating income was positively impacted by $5.0 million, or 1.4%, of decreased Corporate costs, primarily due to the $4.1 million, or 1.2%, decrease in Corporate special items in 2024 compared to 2023, due to decreased acquisition-related expenses within Corporate.

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Interest Income.Interest income increased $1.7 million, or 23.6%, in 2024 as compared to 2023 primarily due to higher interest rates earned on our cash and cash equivalents.

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Interest Expense.Interest expense increased $6.5 million, or 79.3%, in 2024 as compared to 2023 primarily due to a higher principal balance of debt outstanding due to the acquisition of Bradley in the fourth quarter of 2023 and an increase in interest rates. Refer to Note 12 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further details.

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Other (Income) expense, Net. Other (income) expense, net, was an income balance of $1.4 million in 2024 primarily due to an immaterial investment gain. In 2023, other (income) expense, net was an expense balance primarily due to unfavorable foreign currency translation. Refer to Note 17 Financial Instruments of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further details.

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Income Taxes.Our effective income tax rate decreased to 24.6% in 2024 from 24.9% in 2023. The decrease is primarily due to 2023 having additional foreign withholding taxes associated with the repatriation of funds and was partially offset by a lower tax benefit from the vesting of stock compensation awards and incremental foreign taxes related to the final settlement of a foreign tax audit in 2024.

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Net Income.Net income for 2024 was $291.2 million, or $8.69 per common share on a diluted basis, compared to $262.1 million, or $7.82 per common share on a diluted basis, for 2023. Results for 2024 included after-tax charges of $10.7 million, or $0.32 per common share, for acquisition-related costs and $5.4 million, or $0.16 per common share, for restructuring, partially offset by after-tax benefits of $5.8 million, or $0.17 per common share, for a gain on the settlement of the Bradley pension plan, $3.5 million, or $0.11 per common share, for a gain on sale of assets and $1.0 million, or $0.03 per common share, for other investment gains.

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Results for 2023 include after-tax charges of $8.3 million, or $0.25 per common share, for acquisition-related costs, $5.3 million, or $0.16 per common share, primarily for an income tax adjustment related to repatriation of foreign funds and $4.1 million, or $0.12 per common share, for restructuring; partially offset by an after-tax benefit of $2.5 million, or $0.08 per common share, for an adjustment to contingent consideration.

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Liquidity and Capital Resources

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2024 and 2023 Cash Flows

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We generated $361.1 million of net cash from operating activities in 2024 as compared to $310.8 million in 2023. The increase in cash generated was primarily due to higher net income, improved working capital and cash flows generated from acquisitions.

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We used $124.7 million of net cash for investing activities in 2024 compared to $343.1 million used in 2023. We spent $217.1 million less cash for acquisitions and $0.3 million less cash for net capital expenditures in 2024 compared to 2023.

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We used $190.5 million of net cash for financing activities during 2024 primarily due to long-term debt repayments of $100.0 million, dividend payments of $55.5 million, tax withholding payments on vested stock awards of $13.0 million and payments of $17.0 million to repurchase 85,435 shares of Class A common stock. In 2023, we generated $69.0 million of net cash from financing activities in 2023 primarily due to proceeds from borrowings of $240.0 million offset by long-term debt repayments on our line of credit totaling $90.0 million, tax withholding payments on vested stock awards of $15.8 million, dividend payments of $46.5 million and payments of $16.0 million to repurchase 91,622 shares of Class A common stock.

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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.

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The Revolving Credit Facility also includes sublimits of $100 million for letters of credit and $15 million for swing line loans. As of December 31, 2024, we had drawn down $200.0 million on this line of credit and had $12.9 million in letters of credit outstanding, which resulted in $587.1 million of unused and available credit under the Revolving Credit Facility as of such date. Borrowings outstanding under the Revolving Credit Facility 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 December 31, 2024 was 5.64%. The weighted average interest rate on debt outstanding inclusive of the interest rate swap discussed in Note 17 of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of December 31, 2024 was 4.07%. In addition to paying interest under the Credit Agreement, we are also required to pay certain fees in connection with the

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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.

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As of December 31, 2024, we held $386.9 million in cash and cash equivalents. Of this amount, $161.0 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. 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. In 2024, we repatriated approximately $75.4 million of previously taxed foreign earnings, using the majority of that cash to reduce our outstanding debt and to fund acquisitions.

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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.

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Covenant Compliance

Under the Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial condition tests as of December 31, 2024. The financial ratios include a consolidated interest coverage ratio based on consolidated earnings before income taxes, interest expense, depreciation, and amortization (Consolidated EBITDA) to consolidated interest expense, as defined in the Credit Agreement. The Credit Agreement defines Consolidated EBITDA to exclude unusual or non-recurring charges and gains. We are also required to maintain a consolidated leverage ratio of consolidated funded debt to Consolidated EBITDA. Consolidated funded debt, as defined in the Credit Agreement, includes all long and short-term debt, finance lease obligations and any trade letters of credit that are outstanding, less cash and cash equivalents on the balance sheet.

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As of December 31, 2024, our actual financial ratios calculated in accordance with the Credit Agreement compared to the required levels under the Credit Agreement were as follows:

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​ ​ ​ ​ ​

​ Actual Ratio Required Level

​ ​ ​ Minimum level

​ ​ ​ Maximum level

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As of December 31, 2024, we were in compliance with all covenants related to the Credit Agreement.

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In addition to financial ratios, the Credit Agreement contains affirmative and negative covenants that include limitations on disposition or sale of assets, prohibitions on assuming or incurring any liens on assets with limited exceptions and limitations on making investments other than those permitted by the agreement.

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Working capital (defined as current assets less current liabilities) as of December 31, 2024 was $665.6 million compared to $655.2 million as of December 31, 2023. The ratio of current assets to current liabilities was 2.6 to 1 as of December 31, 2024 and December 31, 2023. The increase in working capital is primarily related to the increase in cash and cash equivalents as a result of increased cash from operating activities.

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Material Cash Requirements

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We expect existing cash and cash equivalents and cash flows from operations and financing activities to be sufficient to meet our cash needs during 2025 and thereafter for the foreseeable future.

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We anticipate investing between $45 million to $50 million in capital expenditures during 2025 to improve our manufacturing capabilities and invest in technology and other commercial and operational excellence initiatives. We also anticipate investing approximately $20 million to $25 million during 2025 related to our multi-year cloud-based SAP ERP system implementation for our Americas and APMEA regions. The SAP ERP system implementation will be a phased rollout approach over a number of years. We expect the new ERP investment will result in more efficient and scalable operational processes, provide enhanced analytics to drive improved business performance, and offer an improved customer experience.

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We completed the acquisition of I-CON in a share purchase transaction funded with cash on hand on January 2, 2025. The aggregate net purchase price was approximately $70.6 million, net of cash acquired of $2.5 million, and is subject to a final post-closing working capital adjustment.

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We anticipate spending approximately $20 million in the next 12 months related to the 2025 French restructuring program that was approved on February 3, 2025. For a more detailed description of our current restructuring plans, see Note 3 of Notes to Consolidated Financial Statements in this Annual Report Form 10-K. For a more detailed description of this restructuring plan, see Note 20 of Notes to Consolidated Financial Statements in this Annual Report Form 10-K

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We intend to continue to repurchase shares of Class A common stock consistent with prior years. The repurchases are executed from time to time on the open market or in privately negotiated transactions. The timing and number of shares repurchased will be determined based on our evaluation of market conditions and other factors, see Note 13 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.

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While we presently intend to continue to pay comparable quarterly cash dividends on both Class A and B common stock, the payment of future cash dividends depends upon our Board of Directors’ assessment of our earnings, financial condition, capital requirements and other factors.

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We maintain letters of credit that guarantee our performance or payment to third parties in accordance with specified terms and conditions. Amounts outstanding were approximately $12.9 million as of December 31, 2024 and $12.5 million as of December 31, 2023. Our letters of credit are primarily associated with insurance coverage and, to a lesser extent, foreign purchases and generally expire within one year 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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Our contractual obligations as of December 31, 2024 are presented in the following table:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Next Beyond

Contractual Obligations ​ Total ​ 12 Months ​ 12 Months

​ ​ (in millions)

Operating lease obligations(b) ​ 57.8 ​ 12.9 ​ 44.9

Finance lease obligations(c) ​ 4.6 ​ 2.7 ​ 1.9

Pension contributions(d) ​ 9.0 ​ 0.4 ​ 8.6

2017 Tax Act Toll Tax payable(f) ​ ​ 8.4 ​ ​ 8.4 ​ ​ —

Capital expenditures(g) ​ ​ 4.4 ​ ​ 4.4 ​ ​ —

Purchase obligations(h) ​ 52.0 ​ 49.8 ​ 2.2

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(a) Relates to drawdowns on the line of credit under the Credit Agreement as recognized in the consolidated balance sheet. See Note 12 of Notes to the Consolidated Financial Statements in this Annual Report for further disclosures.

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(b) Relates to the lease liabilities recognized for right-of-use assets of operating leases with a lease term longer than twelve months. See Note 9 of Notes to the Consolidated Financial Statements in this Annual Report for further disclosures.

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(c) Relates to the lease liabilities recognized for right-of-use assets of financing leases with a lease term longer than twelve months. See Note 9 of Notes to the Consolidated Financial Statements in this Annual Report for further disclosures.

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(d) Relates to estimated future obligations for the Europe pension plans. See Note 15 of Notes to the Consolidated Financial Statements in this Annual Report for further disclosures.

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(e) Represents the current estimate of future interest payments due on the current and estimated future drawdown requirements on the line of credit under the Credit Agreement referenced above at (a).

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(f) Relates to the 2017 Tax Act one time transition tax on accumulated foreign subsidiary earnings not previously subject to U.S. income tax which was payable over a number of years.

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(g) Relates to capital expenditure obligations included in the anticipated capital expenditure investment totals of $45 million to $50 million discussed above.

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(h) Primarily includes $45.2 million of commodity commitments and $6.2 million relates to cost obligations for our SAP ERP system implementation program.

​

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.

​

Adjusted operating income, adjusted operating margins, adjusted net income, and adjusted diluted earnings per share are non-GAAP measures that exclude the impact of special items which are defined as non-recurring, and unusual expenses incurred or benefits recognized in the periods presented that relate primarily to our global restructuring programs, acquisition-related costs, contingent consideration adjustment, gain or loss on sale of assets, pension settlements, other investment gains and the related income tax impacts on these items and other tax adjustments. Management believes reporting these financial measures provides useful information to investors, potential investors and others, by facilitating easier comparisons of our performance with prior and future periods.

​

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A reconciliation of U.S. GAAP results to these adjusted non-GAAP measures is provided below (dollars in millions, except per share amounts):

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ Year Ended

​ ​ December 31, ​ December 31,

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Operating margin % ​ ​ 17.3% ​ ​ 17.1%

​ ​ ​ ​ ​ ​ ​

Adjustments for special items: ​ ​ ​ ​

Restructuring ​ ​ 7.2 ​ ​ 5.5

Acquisition-related costs ​ ​ 14.2 ​ ​ 11.3

Contingent consideration adjustment ​ ​ — ​ ​ (2.5)

Gain on sale of asset ​ ​ (4.4) ​ ​ —

Pension settlement ​ ​ (7.8) ​ ​ —

​ ​ ​ ​ ​ ​ ​

Total adjustments for special items ​ $ 9.2 ​ $ 14.3

​ ​ ​ ​ ​ ​ ​

Adjusted operating income ​ $ 399.6 ​ $ 365.2

Adjusted operating margin % ​ ​ 17.7% ​ ​ 17.8%

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Adjustments for special items - tax effected: ​ ​ ​ ​ ​ ​

Restructuring ​ ​ 5.4 ​ ​ 4.1

Acquisition-related costs ​ ​ 10.7 ​ ​ 8.3

Contingent consideration adjustment ​ ​ — ​ ​ (2.5)

Gain on sale of asset ​ ​ (3.5) ​ ​ —

Pension settlement ​ ​ (5.8) ​ ​ —

Other investment gain ​ ​ (1.0) ​ ​ —

Discrete tax items ​ ​ — ​ ​ 5.3

​ ​ ​ ​ ​ ​ ​

Total adjustments for special items - tax effected: ​ $ 5.8 ​ $ 15.2

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Diluted earnings per share ​ $ 8.69 ​ $ 7.82

Acquisition-related costs ​ 0.32 ​ 0.25

Contingent consideration adjustment ​ — ​ (0.08)

Gain on sale of asset ​ (0.11) ​ —

Pension settlement ​ (0.17) ​ —

Other investment gain ​ (0.03) ​ —

Discrete tax items ​ — ​ 0.16

Adjusted diluted earnings per share ​ $ 8.86 ​ $ 8.27

​

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.

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

​

​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended

​ ​ December 31, ​ December 31, ​

​ ​ (in millions)

Net cash provided by operating activities ​ $ 361.1 ​ $ 310.8 ​

Less: additions to property, plant, and equipment ​ (35.3) ​ (29.7) ​

Plus: proceeds from the sale of property, plant, and equipment ​ 5.9 ​ — ​

Cash conversion rate of free cash flow to net income ​ 113.9 % 107.2 %

​

Free cash flow improved in 2024 when compared to 2023 primarily driven by higher net income including contributions from our acquisitions.

​

Our net debt to capitalization ratio, a non-GAAP financial measure used by management, at December 31, 2024 was (12.5)% for 2024 compared to (3.5)% in 2023. The change was driven by a decrease in net debt balance primarily due to decreased long-term debt and increased cash and cash equivalents and an increase in stockholders’ equity at December 31, 2024 compared to December 31, 2023 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:

​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ December 31,

​ ​ (in millions)

Current portion of long‐term debt $ — ​ $ —

Plus: long-term debt, net of current portion ​ 197.0 ​ 298.3

Less: cash and cash equivalents ​ (386.9) ​ (350.1)

​

A reconciliation of capitalization is provided below:

​

​ ​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ December 31, ​

​ ​ (in millions)

Net debt to capitalization ratio ​ (12.5) % (3.5) %

​

Application of Critical Accounting Policies and Key Estimates

​

The preparation of our consolidated financial statements in accordance with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported. A critical accounting estimate is an assumption about highly uncertain matters and could have a material effect on the consolidated financial statements if another, also reasonable, amount were used, or a change in the estimate is reasonably likely from period to period. We base our assumptions on historical experience and on other estimates that we believe are reasonable under the circumstances. Actual results could differ significantly from these estimates. There were no significant changes in our accounting policies or significant changes in our accounting estimates during 2024.

​

We periodically discuss the development, selection and disclosure of the estimates with our Audit Committee. Management believes the following critical accounting policies reflect our more significant estimates and assumptions.

​

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Revenue recognition

​

We recognize revenue under the core principle to recognize revenue in a manner that depicts the transfer of control to our customers in an amount reflecting the consideration to which we expect to be entitled. In order to achieve that core principle, we apply the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. When determining the transaction price of each contract, we consider contractual consideration payable by the customer and assess variable consideration that may affect the total transaction price. Variable consideration, consisting of early payment discounts, rebates and other sources of price variability, are included in the estimated transaction price based on both customer-specific information as well as historical experience. We regularly review our estimates of variable consideration on the transaction price and recognize changes in estimates on a cumulative catch-up basis as if the most current estimate of the transaction price adjusted for variable consideration had been known as of the inception of the contract.

​

Our revenue for product sales is recognized on a point in time model, at the point control transfers to the customer, which is generally when products are shipped from the Company’s manufacturing or distribution facilities or when delivered to the customer’s named location. Sales tax, value-added tax, or other taxes collected concurrent with revenue producing activities are excluded from revenue. Freight costs billed to customers for shipping and handling activities are included in revenue with the related cost included in selling, general and administrative expenses. See Note 4 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further disclosures and detail regarding revenue recognition.

​

Inventory valuation

​

Inventories are stated at the lower of cost or net realizable value with costs determined primarily on a first-in, first-out basis. We evaluate the need to record adjustments for excess or obsolete inventory at least quarterly.We utilize both specific product identification and historical product demand as the basis for estimating our excess or obsolete inventory reserve. We identify all inventories that exceed a range of one to three years in sales to calculate inventory on hand that exceeds estimated demand. This is determined by comparing the current inventory balance against unit sales for the trailing twelve months. New products added to inventory within the past twelve months are excluded from this analysis. A portion of our products contain recoverable materials, therefore the excess and obsolete reserve is established net of any estimated recoverable amounts based on historical experience. Changes in market conditions, lower-than-expected customer demand or changes in technology or features could result in additional excess or obsolete inventory that is not saleable and could require additional inventory reserve provisions.

​

In certain countries, additional inventory reserves are maintained for potential shrinkage experienced in the manufacturing process. The reserve is established based on the prior year’s inventory losses adjusted for any change in the gross inventory balance.

​

Goodwill and other intangibles

​

We have made numerous acquisitions over the years and have recognized a significant amount of goodwill. Goodwill is tested for impairment annually or more frequently if an event or circumstance indicates that an impairment loss may have been incurred. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, and determination of the fair value of each reporting unit when a quantitative analysis is performed. We estimate the fair value of our reporting units using an income approach based on the present value of estimated future cash flows, and when appropriate, guideline public company and guideline transaction market approaches.

​

Accounting guidance allows us to assess goodwill for impairment utilizing either qualitative or quantitative analyses. We have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, we determine it is more likely than not the fair value of a reporting unit is greater than its carrying amount, then performing the quantitative impairment test is unnecessary.

​

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We first identify those reporting units that we believe could pass a qualitative assessment to determine whether further impairment testing is necessary. For each reporting unit identified, our qualitative analysis includes:

​

​

​

We then compile this information and make our assessment of whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we determine it is not more likely than not, then no further quantitative analysis is required.

​

In 2024, we had eight reporting units. One of the eight reporting units, Water Quality, had no goodwill. We performed a qualitative analysis for each of the remaining seven reporting units, which include Blücher, Bradley, US Drains, Fluid Solutions-Europe, Fluid Solutions-Americas, Heating and Hot Water Solutions (“HHWS”) and APMEA.

​

As of October 27, 2024, our testing date, we had $721.0 million of goodwill on our balance sheet. As a result of our qualitative analyses, we determined that the fair values of the seven reporting units noted above were more likely than not greater than the carrying amounts. In 2024, we did not need to proceed beyond the qualitative analysis, and no goodwill impairments were recorded. Changes in macroeconomic, industry or market conditions, or our inability to achieve projected results that were used to complete the qualitative analyses could result in the reporting unit fair value not exceeding the carrying amounts and could lead to impairment.

​

Intangible assets such as trademarks and trade names are generally recorded in connection with a business acquisition and we have recorded certain trademarks and trade names as indefinite-lived intangible assets. Values assigned to intangible assets are typically determined by an independent valuation firm based on our estimates and judgments regarding expectations of the success and life cycle of products and technology acquired. Accounting guidance allows us to perform a qualitative impairment assessment of indefinite-lived intangible assets consistent with the goodwill guidance noted previously. For our 2024 impairment assessment, which occurred as of October 27, 2024, we performed a qualitative assessment for all trademarks and tradenames where the fair value significantly exceeded the carrying value in the previous quantitative assessment performed. As of the assessment, the majority of the trademarks and tradenames were expected to have annual sales growth in 2024, with a few expected to potentially have minimal sales decline in 2024 but sales growth in 2025 or future years. As a result of our qualitative analyses, we determined that the fair values of the indefinite-lived intangibles assets were more likely than not greater than the carrying amounts. If we were to perform a quantitative assessment, the methodology we employ is the relief from royalty method, a subset of the income approach. During 2024, 2023, and 2022, no impairment was recognized on our indefinite-lived intangible assets. Changes in macroeconomic, industry or market conditions, or our inability to achieve projected results that were used to complete the qualitative and quantitative analyses could result in the trademark’s or trade name’s fair value not exceeding its carrying amount and could lead to impairment.

​

Product liability

​

Because of retention requirements associated with our insurance policies, we are generally self-insured for potential product liability claims. We are subject to a variety of potential liabilities in connection with product liability cases, and for our most significant volume of liability matters, we maintain a high self-insured retention limit within our product liability and general liability coverage, which we believe to be generally in accordance with industry practices. We maintain excess liability insurance to minimize our risks related to claims in excess of our primary insurance policies. The product liability accrual is established after considering any applicable insurance coverage.

​

For our product liability cases in the U.S., we establish a product liability accrual, which includes estimated legal costs associated with accrued claims. For our most significant volume of liability matters, we utilize third-party actuarial valuations which incorporate historical trend factors including, but not limited to, claim frequency and loss severity, and our specific claims experience derived from loss reports provided by third-party claims administrators to establish our product liability accrual. The product liability accrual represents the estimated ultimate losses for all reported and

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incurred but not reported claims. For the remainder of our product liability accrual, where we do not utilize third-party actuarial valuations, we maintain insurance and calculate potential product liability accruals which includes legal costs associated with the accrued claims on a case-by-case basis. Changes in the nature and volume of product liability claims, legal costs, or the actual settlement amounts could affect the adequacy of the estimates and require changes to the accrual. Because the liability is an estimate, the ultimate liability may be more or less than reported. Any material change in the aforementioned factors could have an adverse impact on our operating results for any particular period depending, in part, upon the operating results for such period.

​

Legal contingencies

​

We are a defendant in numerous legal matters including legal matters involving environmental issues and product liability as discussed in more detail in Part I, Item 1. “Business—Product Liability, Environmental and Other Litigation Matters” and Note 16 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. As required by GAAP, we determine whether an estimated loss from a loss contingency should be accrued by assessing whether a loss is deemed probable and the loss amount can be reasonably estimated. When it is possible to estimate reasonably possible loss or range of loss above the amount accrued, that estimate is aggregated and disclosed. Estimates of potential outcomes of these contingencies are often developed in consultation with outside counsel. While this assessment is based upon all available information, litigation is inherently uncertain and the actual liability to fully resolve litigation cannot be predicted with any assurance of accuracy. In the event of an unfavorable outcome in one or more legal matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to our operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to us, management believes that the ultimate outcome of all legal contingencies, as they are resolved over time, is not likely to have a material adverse effect on our financial condition.

​

Income taxes

​

We are subject to income taxes in the U.S. (federal and state) and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.

​

We estimate and use our expected annual effective income tax rates to accrue income taxes throughout the interim periods. Effective tax rates are determined based on budgeted earnings before taxes, including our best estimate of permanent items that will affect the effective rate for the year. Management periodically reviews these rates with outside tax advisors and changes are made if material variances from expectations are identified.

​

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

​

A valuation allowance is provided to offset any net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We consider estimated future taxable income, future reversals of the deferred tax liabilities, and tax planning strategies, in assessing the need for a valuation allowance. Changes in the relevant facts, including the accuracy of our estimated future taxable income, can significantly impact the judgment or need for valuation allowances. In the event we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

​

As of December 31, 2024, we decreased our valuation allowance on foreign tax credits by $4.0 million due to the reduction in related foreign tax credits. See Note 10 of Notes to the Consolidated Financial Statements in this Annual Report for further disclosures.

​

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Item 7A. 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 17 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. or Canadian dollar. We use foreign currency forward exchange contracts from time to time to manage the risk 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 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 our designated foreign hedge contracts outstanding as of December 31, 2024 was an asset of $0.5 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 17 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

​

The financial statements listed in section (a) (1) of “Part IV, Item 15. Exhibits, Financial Statement Schedules” of this Annual Report are incorporated herein by reference.

​

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

​

None.

​

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Item 9A. 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.

​

Management’s Annual Report on Internal Control Over Financial Reporting

​

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

​

Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).

​

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2024.

​

The independent registered public accounting firm that audited the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K has also audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, as stated in this Annual Report on Form 10-K under the heading, “Report of Independent Registered Public Accounting Firm.”

​

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Changes in Internal Control Over Financial Reporting

​

There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2024, 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.

​

Item 9B. OTHER INFORMATION.

(b) During the three months ended December 31, 2024, no director or officer of the Company adopted or terminated 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 .

​

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

​

PART III

​

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

​

Information with respect to the executive officers of the Company is set forth in Part I, Item 1 of this Report under the caption “Information about Our Executive Officers and Directors” and is incorporated herein by reference. The information provided under the captions “Information as to Nominees for Director,” “Corporate Governance” and “Delinquent Section 16(a) Reports” in our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders to be held on May 21, 2025 is incorporated herein by reference.

​

We have adopted a Code of Business Conduct applicable to all officers, employees and Board members. The Code of Business Conduct is posted in the Investors section of our website, www.wattswater.com. We will provide you with a print copy of our Code of Business Conduct free of charge on written request to our Corporate Secretary, Watts Water Technologies, Inc., 815 Chestnut Street, North Andover, MA 01845. Any amendments to, or waivers of, the Code of Business Conduct that are required to be disclosed by SEC or New York Stock Exchange rules will be disclosed on our website promptly following the date of such amendment or waiver.

​

Item 11. EXECUTIVE COMPENSATION.

​

The information provided under the captions “Director Compensation,” “Corporate Governance,” “Compensation Discussion and Analysis,” “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders to be held on May 21, 2025 is incorporated herein by reference.

​

The “Compensation Committee Report” contained in our Proxy Statement shall not be deemed “soliciting material” or “filed” with the Securities and Exchange Commission or otherwise subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Exchange Act, except to the extent we specifically request that such information be treated as soliciting material or specifically incorporate such information by reference into a document filed under the Securities Act or Exchange Act.

​

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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

​

The information appearing under the caption “Principal Stockholders” in our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders to be held on May 21, 2025 is incorporated herein by reference.

​

Securities Authorized for Issuance Under Equity Compensation Plans

​

The following table provides information as of December 31, 2024, about the shares of Class A common stock that may be issued upon the exercise of stock options, settlement of performance stock awards and vesting of deferred stock awards issued under the Company’s Third Amended and Restated 2004 Stock Incentive Plan, and the settlement of restricted stock units granted under our Management Stock Purchase Plan as well as the number of shares remaining for future issuance under our Third Amended and Restated 2004 Stock Incentive Plan and Management Stock Purchase Plan.

​

​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Equity Compensation Plan Information

​ ​ ​ ​ Number of securities remaining

​ ​ Number of securities to be ​ ​ ​ ​ available for future issuance

​ ​ warrants and rights ​ warrants and rights ​ reflected in column (a))

Plan Category ​ (a) ​ (b) ​ (c)

Equity compensation plans not approved by security holders None ​ None ​ None ​

​

​

​

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

​

The information provided under the captions “Corporate Governance” in our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders to be held on May 21, 2025 is incorporated herein by reference.

​

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

​

The information provided under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm” in our definitive Proxy Statement for our 2025 Annual Meeting of Stockholders to be held on May 21, 2025 is incorporated herein by reference.

​

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PART IV

​

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

​

(a)(1) Financial Statements

​

The following financial statements are included in a separate section of this Report commencing on the page numbers specified below:

​

Consolidated Balance Sheets as of December 31, 2024 and 2023 57

Notes to Consolidated Financial Statements 60

​

(a)(2) Schedules

​

​

All other required schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are included in the Notes to the Consolidated Financial Statements.

​

(a)(3) Exhibits

​

The exhibits listed in the Exhibit Index immediately preceding the signature page hereto are filed as part of this Annual Report on Form 10-K.

​

Item 16. FORM 10-K SUMMARY.

​

None.

​

​

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Report of Independent Registered Public Accounting Firm

​

To the Stockholders and Board of Directors

Watts Water Technologies, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Watts Water Technologies, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes and financial statement schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the

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transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Excess and obsolete inventory reserve

As discussed in Note 7 to the consolidated financial statements, the Company reported inventories of $392.1 million as of December 31, 2024, including a valuation reserve of $58.1 million, which primarily relates to reserves for excess and obsolete inventory. As discussed in Note 2, the Company’s inventories are stated at the lower of cost or net realizable value using standard costs determined primarily on a first-in, first-out method which approximates actual costs. The Company uses both specific product identification and historical product demand as the basis for estimating its excess or obsolete inventory reserve. The Company identifies all inventories that exceed a range of one to three years in sales to calculate inventory on hand that exceeds estimated demand. This is determined by comparing the current inventory balance against unit sales for the trailing twelve months. New products added to inventory within the past twelve months are excluded from this analysis. Changes in market conditions, lower-than-expected customer demand, or changes in technology or features could result in additional excess or obsolete inventory that is not saleable and could require additional inventory reserve provisions.

We identified the assessment of certain excess and obsolete inventory reserves based on historical product demand as a critical audit matter. Subjective auditor judgment was required in evaluating whether historical sales experience is indicative of future product demand, as future product demand is based on the outcome of uncertain future events.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of internal controls related to the Company’s excess and obsolete inventory reserve estimation process, including controls related to the development of the product demand assumption. For a selection of inventory items, we compared the Company’s prior year estimate of product demand, which was primarily developed based on historical sales experience, to current year sales and other inventory movements to evaluate the assumption that historical sales experience was indicative of future product demand. We also inspected and evaluated the reasonableness of the Company’s analysis of current facts and circumstances that could impact the Company’s future product demand, based on our inquiries of management and knowledge of the Company’s business and understanding of inventory movements obtained throughout the audit.

​

​

/s/ KPMG LLP

We have served as the Company’s auditor since 1997.

Boston, Massachusetts

February 18, 2025

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Watts Water Technologies, Inc. and Subsidiaries

​

Consolidated Statements of Operations

​

(Amounts in millions, except per share information)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Years Ended December 31,

Selling, general and administrative expenses ​ ​ 664.4 ​ ​ 604.5 ​ ​ 548.7

Restructuring ​ ​ 7.2 ​ ​ 5.5 ​ ​ 10.6

Other (income) expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest income ​ ​ (8.9) ​ ​ (7.2) ​ ​ (0.6)

Interest expense ​ ​ 14.7 ​ ​ 8.2 ​ ​ 7.0

Other (income) expense, net ​ ​ (1.4) ​ ​ 0.4 ​ ​ 1.0

Total other expense ​ ​ 4.4 ​ 1.4 ​ 7.4

Provision for income taxes ​ ​ 94.8 ​ ​ 87.4 ​ ​ 56.1

Basic EPS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

NET INCOME PER SHARE ​ ​ $ 8.70 ​ $ 7.85 ​ $ 7.51

Weighted average number of shares ​ ​ 33.5 ​ 33.4 ​ 33.5

Diluted EPS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

NET INCOME PER SHARE ​ ​ $ 8.69 ​ $ 7.82 ​ $ 7.48

Weighted average number of shares ​ ​ 33.5 ​ 33.5 ​ 33.6

Dividends declared per share ​ ​ $ 1.65 ​ $ 1.38 ​ $ 1.16

​

The accompanying notes are an integral part of these consolidated financial statements.

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Watts Water Technologies, Inc. and Subsidiaries

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Consolidated Statements of Comprehensive Income

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(Amounts in millions)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Years Ended December 31,

Other comprehensive (loss) income net of tax: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Foreign currency translation adjustments ​ ​ (31.6) ​ 9.7 ​ (29.1)

Cash flow hedges ​ ​ ​ (0.7) ​ ​ (3.9) ​ ​ 6.5

Defined benefit pension plan, net of tax: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Pension settlement, net of tax benefit of $0.2 million ​ ​ ​ (0.7) ​ ​ — ​ ​ —

Actuarial gain, net of tax provision of $0.2 million ​ ​ ​ — ​ ​ 0.7 ​ ​ —

Other comprehensive (loss) income ​ ​ (33.0) ​ 6.5 ​ (22.6)

​

The accompanying notes are an integral part of these consolidated financial statements.

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Watts Water Technologies, Inc. and Subsidiaries

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Consolidated Balance Sheets

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(Amounts in millions, except share information)

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​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

ASSETS ​ ​ ​ ​ ​

CURRENT ASSETS: ​ ​ ​ ​ ​ ​