WATTS WATER TECHNOLOGIES INC

Previous wording

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.

Current wording

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 and future acquisitions, expected investments in capital expenditures, 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.

Previous wording

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.

Current wording

Tariffs imposed 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 in 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.

Previous wording

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.

Current wording

The trade policy environment and the ongoing U.S. government shutdown has created uncertainty and may result in further reductions to 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 and the U.S. government shutdown 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.

Previous wording

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.

Current wording

Third quarter 2025 sales increased 12.5%, or $68.1 million, on a reported basis, and 9.4%, or $50.8 million, on an organic basis, compared to the third quarter of 2024. The reported sales increase compared to the third quarter of 2024 was positively impacted by acquired sales of 2.0%, or $11.1 million, all reported within the Americas segment, as well as net favorable impact of foreign exchange of 1.1%, or $6.2 million, primarily due to strengthening of the euro against the U.S. dollar. The 9.4% organic growth was driven by organic growth in the Americas of 13.3% and in APMEA of 0.3%, partially offset by organic decline in Europe of 2.3%. The organic growth was primarily driven by favorable price realization and increased volume in the Americas, including pull-forward demand resulting from tariff-related price increases. Organic growth in the Americas and APMEA was partially offset by lower volumes in Europe. Operating income of $111.4 million increased by $18.2 million, or 19.5%, in the third quarter of 2025 as compared to the third quarter of 2024. This increase was primarily driven by favorable price realization, volume growth and productivity, partially offset by inflation and tariffs.

Previous wording

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.

Current wording

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, gain on sale of assets and pension settlements. The CODM uses segment earnings for insight into underlying trends comparing past financial performance with current performance by reporting segment on a consistent basis.

Previous wording

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.

Current wording

On November 3, 2025, the Company 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 December 15, 2025 to stockholders of record on December 1, 2025.

Previous wording

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

Current wording

Third Quarter Ended September 28, 2025 Compared to Third Quarter Ended September 29, 2024

Previous wording

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:

Current wording

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 third quarters of 2025 and 2024 were as follows:

Previous wording

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.

Current wording

Americas net sales increased $64.1 million, or 16.0%, for the third quarter of 2025 compared to the third quarter of 2024. The change in net sales was positively impacted by $11.1 million, or 2.8%, of acquired sales related to acquisitions completed in the first and second quarters of 2025. The change in net sales was negatively impacted by $0.2 million, or 0.1%, of foreign currency translation. Organic net sales increased $53.2 million, or 13.3%, primarily due to favorable price realization and higher volumes, including pull-forward demand into the third quarter of 2025.

Previous wording

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.

Current wording

APMEA net sales decreased $0.3 million, or 0.8%, for the third quarter of 2025 compared to the third quarter of 2024. The change in net sales was negatively impacted by $0.4 million, or 1.1%, of foreign currency translation. Organic net

Previous wording

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.

Current wording

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 third 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.

Previous wording

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:

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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:

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses increased $26.1 million, or 16.4%, in the third quarter of 2025 compared to the third quarter of 2024. The increase in SG&A expenses was attributable to the following:

Previous wording

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.

Current wording

The increase in organic SG&A expenses was primarily due to a net increase in short-term and long-term compensation accruals of $6.6 million, an increase in strategic investments of $4.8 million, general inflation of $4.2 million and increased variable costs of $3.1 million due to higher net sales, partially offset by a $3.4 million net benefit from the release of a previously reserved contingency matter, $2.9 million from productivity initiatives, and $1.6 million of restructuring savings compared to the third 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 $7.8 million gain on the settlement of Bradley’s frozen pension plan, partially offset by acquisition-related costs of $0.9 million, recognized in the third quarter of 2024. Total SG&A expenses, as a percentage of net sales, were 30.3% in the third quarter of 2025 compared to 29.2% in the third quarter of 2024.

Previous wording

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.

Current wording

Restructuring. In the third quarter of 2025, we recorded a net restructuring charge of $1.9 million, which primarily 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 third quarter of 2024, we recorded a net restructuring charge of $4.9 million, which primarily related to immaterial actions in all regions including severance and other cost reductions. For a more detailed description of our restructuring plans, see Note 6 of the Notes to the Consolidated Financial Statements.

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

Operating income increased $18.2 million, or 19.5%, for the third quarter of 2025 compared to the third quarter of 2024. Operating income was unfavorably impacted by segment special items of $1.9 million relating to restructuring charges incurred in the third quarter of 2025 compared to the third quarter of 2024 which included a $7.8 million gain on the settlement of Bradley’s frozen pension plan, partially offset by $4.9 million of restructuring charges and $2.5 million of acquisition-related costs. The increase in organic operating income of $22.5 million, or 21.3%, was primarily due to higher price realization, increased volume in the Americas, including pull-forward demand into the third quarter of 2025, productivity and savings from prior restructuring actions, partially offset by volume deleverage in Europe, inflation, tariffs and investments.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

Interest Expense. Interest expense in the third quarter of 2025 decreased $0.9 million compared to the third 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.

Previous wording

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.

Current wording

Other Expense (Income), Net. Other expense (income), net, was an expense balance of $0.2 million in the third quarter of 2025, primarily due to unfavorable foreign currency translation, compared to an income balance of $0.6 million in the third quarter of 2024, primarily due to an immaterial investment gain partially offset by unfavorable foreign currency translation.

Previous wording

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 pershare of common stock, for acquisition-related costs, partially offset by an after-tax benefit of $2.5 million, or $0.06 pershare of common stock, for the gain on sale of a building.

Current wording

Net Income. Net income was $82.2 million, or $2.45 per share of common stock on a diluted basis, for the third quarter of 2025, compared to $69.1 million, or $2.06 per share of common stock on a diluted basis, for the third quarter of 2024. Results for the third quarter of 2025 included after-tax charges of $1.5 million, or $0.05 per share of common stock, for restructuring. Results for the third quarter of 2024 included an after-tax benefit of $5.8 million, or $0.17 per share of common stock, for a gain on the settlement of the Bradley pension plan and $0.9 million, or $0.03 per share of common stock, for other investment gains, partially offset by after-tax charges of $3.8 million, or $0.11 per common share, for restructuring and $1.9 million, or $0.06 per share of common stock, for acquisition-related costs.

Previous wording

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

Current wording

Nine Months Ended September 28, 2025 Compared to Nine Months Ended September 29, 2024

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

Americas net sales increased $113.9 million, or 9.0%, for the first nine months of 2025 compared to the first nine months of 2024. The change in net sales was positively impacted by $23.1 million, or 1.8%, 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 $1.7 million, or 0.1%, of foreign currency translation. Organic net sales increased $92.5 million, or 7.3%, primarily due to favorable price realization, and higher volume, including pull-forward demand into the third quarter of 2025, partially offset by fewer shipping days in the first nine months of 2025. The organic net sales growth was primarily in the wholesale channel from increased sales across our core valve and drain products and in the specialty channel from increased sales of our heating and hot water products.

Previous wording

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.

Current wording

Europe net sales decreased $13.7 million, or 4.0%, for the first nine months of 2025 compared to the first nine months of 2024. The change in net sales was positively impacted by $8.8 million, or 2.6%, of favorable foreign currency translation. Organic net sales decreased $22.5 million, or 6.6%, primarily due to volume declines from market weakness in the OEM and wholesale channels and fewer shipping days in the first nine 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 primarily in the first half of 2025, while the wholesale channel was primarily impacted by reduced volume of plumbing product sales into France and Benelux.

Previous wording

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.

Current wording

APMEA net sales increased $1.4 million, or 1.4%, for the first nine months of 2025 compared to the first nine months of 2024. The change in net sales was negatively impacted by $2.1 million, or 2.1%, of unfavorable foreign currency translation. Organic net sales increased $3.5 million, or 3.5%, primarily due to volume growth in China, Australia and the Middle East, partially offset by fewer shipping days in the first nine months of 2025.

Previous wording

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.

Current wording

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 unfavorable impact of the appreciation of the U.S. dollar against the Australian dollar and Canadian dollar in the first nine months of 2025.

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

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 tariffs.

Previous wording

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:

Current wording

Selling, General and Administrative Expenses. SG&A expenses increased $38.1 million, or 7.6%, in the first nine months of 2025 compared to the first nine months of 2024. The increase in SG&A expenses was attributable to the following:

Previous wording

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.

Current wording

The increase in organic SG&A expenses was primarily due to an increase in strategic investments of $12.1 million, general inflation of $11.8 million, increased variable costs of $8.3 million due to higher net sales and a net increase in short-term and long-term compensation accruals of $7.6 million, partially offset by $8.6 million from productivity initiatives, $4.8 million of restructuring savings, $3.4 million net benefit from the release of a previously reserved contingency matter, lower professional fees of $1.8 million and a $0.8 million reduction in travel and marketing spend compared to the first nine months of 2024. The increase in foreign exchange was mainly due to 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. 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 $7.8 million gain on

Previous wording

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.

Current wording

Restructuring. In the first nine months of 2025, we recorded a net restructuring charge of $22.6 million, which included a $20.6 million charge related to the 2025 French restructuring program that was approved in the first quarter of 2025. In the first nine months of 2024, we recorded a net restructuring charge of $6.4 million, which primarily related to immaterial actions in all regions including severance, exit costs and other cost reductions. For a more detailed description of our restructuring plans, see Note 6 of the Notes to the Consolidated Financial Statements.

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

Operating income increased $33.0 million, or 10.9%, for the first nine months of 2025 compared to the first nine months of 2024. Operating income was unfavorably impacted by $20.6 million of restructuring charges related to the 2025 French restructuring program as well as gains of $7.8 million on the settlement of Bradley’s frozen pension plan and $4.4 million gain on the sale of buildings in the first nine months of 2024 that did not repeat in 2025, partially offset by lower acquisition-related costs. The increase in organic operating income of $50.1 million, or 14.4%, was primarily due to higher price realization, higher volume in the Americas, including pull-forward demand into the third quarter of 2025, productivity and savings from prior restructuring actions, partially offset by volume deleverage in Europe, inflation, tariffs and investments.

Previous wording

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.

Current wording

Interest Income. Interest income in the first nine months of 2025 increased $1.0 million compared to the first nine months of 2024, primarily due to higher cash and cash equivalents balances.

Previous wording

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.

Current wording

Interest Expense. Interest expense in the first nine months of 2025 decreased $3.8 million compared to the first nine 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.

Previous wording

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.

Current wording

Other Expense (Income), Net. Other expense (income), net, was an expense balance of $0.8 million in the first nine months of 2025, primarily due to unfavorable foreign currency translation, compared to an income balance of $1.4 million in the first nine months of 2024, primarily due to an immaterial investment gain partially offset by unfavorable foreign currency translation.

Previous wording

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.

Current wording

Income Taxes. Our effective income tax rate decreased to 22.7% in the first nine months of 2025, from 24.7% in the first nine 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. This decrease was slightly offset by an increase related to the changes from the OBBBA.

Previous wording

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.

Current wording

Net Income. Net income was $257.1 million, or $7.67 per share of common stock on a diluted basis, for the first nine months of 2025, compared to $223.6 million, or $6.67 per share of common stock on a diluted basis, for the first nine months of 2024. Results for the first nine months of 2025 included after-tax charges of $17.0 million, or $0.51 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 nine months of 2024 included after-tax charges of $9.9 million, or $0.30 per share of common stock, for acquisition-related costs and $4.9 million, or $0.14 per share of common stock, for restructuring, partially offset by an after-tax benefit of $5.8 million, or $0.17 per share of common stock, for a gain on the settlement of the Bradley pension plan, $3.3 million, or $0.10 per share of common stock, for gain on sale of assets and $0.9 million, or $0.03 per share of common stock, for other investment gains.