WATTS WATER TECHNOLOGIES INC

Previous wording

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:

Current wording

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

Previous wording

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.

Current wording

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 17 acquisitions since 2016, and eight acquisitions in the last three years, all of which were strategic and complementary acquisitions that expanded our addressable market and that we believe will enable value creation through greater scale and growth opportunities.

Previous wording

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.

Current wording

The trade policy environment has created uncertainty which may result in reduced economic activity. However, gross domestic product (“GDP”) is expected to remain positive and is generally a leading indicator for our repair and replacement business. New construction indicators are mixed. Multi-family and single-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 geopolitical uncertainties continue, all of which may adversely affect our future financial results.

Previous wording

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.

Current wording

Net sales for 2025 increased 8.3%, or $186.3 million, on a reported basis and 5.3%, or $119.1 million, on an organic basis, compared to 2024. The reported sales increase included acquired sales of 2.3%, or $52.4 million, with $50.4 million reported within the Americas segment and $2.0 million reported within APMEA, and the favorable impact of foreign exchange of $14.8 million, primarily due to the depreciation of the U.S. dollar against the euro. The organic sales increase was primarily driven by incremental price across all of our operating segments, higher volumes in our Americas and APMEA segments, partially offset by lower volumes in our Europe segment. Operating income of $448.1 million increased by $57.7 million, or 14.8%, in 2025 compared to 2024. This increase was primarily driven by favorable price, volume growth, productivity, contributions from our acquisitions and cost savings from prior restructuring actions, partially offset by inflation, tariffs, lower volume in our Europe segment, higher restructuring costs and incremental investments.

Previous wording

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.

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 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.

Current wording

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

Previous wording

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.

Current wording

On February 9, 2026, 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 March 13, 2026, to stockholders of record on February 27, 2026.

Previous wording

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.

Current wording

Americas net sales increased $182.5 million, or 11.0%, in 2025 compared to 2024. The change in net sales was positively impacted by $50.4 million, or 3.0%, of acquired sales related to four acquisitions completed during 2025. The change in net sales was negatively impacted by $1.6 million of foreign currency translation. Organic net sales increased $133.7 million, or 8.0%, primarily due to favorable price realization and increased volume. 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 $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.

Current wording

Europe net sales decreased $2.6 million, or 0.6%, in 2025 compared to 2024. The change in net sales was positively impacted by $18.4 million, or 4.0%, of foreign currency translation. Organic net sales decreased $21.0 million, or 4.6%, primarily due to volume declines from market weakness in the OEM and wholesale channels, 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 and drains product sales.

Previous wording

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.

Current wording

APMEA net sales increased $6.4 million, or 4.8%, in 2025 compared to 2024. The change in net sales was positively impacted by $2.0 million, or 1.5%, of acquired sales related to the Saudi Cast acquisition completed in the fourth quarter of 2025. The change in net sales was negatively impacted by $2.0 million, or 1.5%, of foreign currency translation. Organic net sales increased $6.4 million, or 4.8%, primarily due to increased volume across all major countries in the segment.

Previous wording

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.

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 2025.

Previous wording

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:

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses increased $69.8 million, or 10.5%, in 2025 compared to 2024. The increase in SG&A expenses was attributable to the following:

Previous wording

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.

Current wording

The increase in organic SG&A expenses was primarily due to an increase in strategic investments of $18.0 million, increased costs due to general inflation of $16.2 million, a net increase in short-term and long-term compensation accruals of $11.1 million, increased variable costs of $9.8 million due to higher net sales, $4.9 million increase in donations, increased product liability and insurance claim costs of $3.7 million and $1.4 million in higher travel and marketing spend, partially offset by $11.6 million from productivity initiatives, $6.7 million of restructuring savings, $3.4 million net benefit from the release of a previously reserved contingency matter and lower professional fees of $2.9 million compared to 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 five acquisitions completed in 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 and $4.4 million gain on sale of buildings in 2024 that did not repeat in 2025, partially offset by decreased acquisition-related costs of $3.9 million compared to 2024. Total SG&A expenses, as a percentage of net sales, were 30.1% in 2025 compared to 29.5% in 2024.

Previous wording

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.

Current wording

Restructuring. In 2025, we recorded a net restructuring charge of $23.7 million, which included a $22.0 million charge related to the 2025 French restructuring program that was approved in the first quarter of 2025. 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. For a more detailed description of our restructuring plans, see Note 3 of Notes to Consolidated Financial Statements in this Annual Report Form 10-K.

Previous wording

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.

Current wording

Interest Income. Interest income increased $0.9 million, or 10.1%, in 2025 compared to 2024 primarily due to higher cash and cash equivalents balances.

Previous wording

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-Kfor further details.

Current wording

Interest Expense. Interest expense decreased $3.9 million, or 26.5%, in 2025 as compared to 2024 primarily due to a lower principal balance of debt outstanding. Refer to Note 13 Financing Arrangement of Notes to Consolidated Financial Statements in this Annual Report on Form 10-Kfor further details.

Previous wording

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-Kfor further details.

Current wording

Other Expense (Income), Net. Other expense (income), net, was an expense balance of $1.3 million in 2025, primarily due to unfavorable foreign currency translation, compared to an income balance of $1.4 million in 2024 primarily due to an immaterial investment gain. Refer to Note 18 Financial Instruments of Notes to Consolidated Financial Statements in this Annual Report on Form 10-Kfor further details.

Previous wording

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.

Current wording

Net Income. Net income for 2025 was $340.8 million, or $10.17 per share of common stock on a diluted basis, compared to $291.2 million, or $8.69 per share of common stock on a diluted basis, for 2024. Results for 2025 included after-tax charges of $17.8 million, or $0.53 per share of common stock, for restructuring and $4.5 million, or $0.13 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’.

Previous wording

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.

Current wording

Results for 2024 included after-tax charges of $10.7 million, or $0.32 per share of common stock, for acquisition-related costs and $5.4 million, or $0.16 per share of common stock, for restructuring, partially offset by after-tax benefits of $5.8 million, or $0.17 per share of common stock, for a gain on the settlement of the Bradley pension plan, $3.5 million, or $0.11 per share of common stock, for a gain on sale of assets and $1.0 million, or $0.03 per share of common stock, for other investment gains.

Previous wording

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.

Current wording

We used $302.8 million of net cash for investing activities in 2025 compared to $124.7 million used in 2024. We spent $160.8 million more cash for acquisitions and $16.3 million more cash for net capital expenditures in 2025 compared to 2024.

Previous wording

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.

Current wording

We used $96.9 million of net cash for financing activities during 2025 primarily due to dividend payments of $66.9 million, tax withholding payments on vested stock awards of $11.4 million and payments of $16.0 million to repurchase approximately 67,000 shares of Class A common stock. In 2024, we used $190.5 million of net cash for financing activities 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 approximately 85,000 shares of Class A common stock.

Previous wording

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

Current wording

The Revolving Credit Facility also includes sub-limits of $100 million for letters of credit and $15 million for swing line loans. As of December 31, 2025, we had drawn down $200.0 million on this line of credit and had $12.2 million in letters of credit outstanding, which resulted in $587.8 million of unused and available credit under the Revolving Credit Facility as of such date. Borrowings outstanding bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Term Benchmark loans, the Term Benchmark rate plus an applicable percentage, ranging from 1.075% to 1.325%, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than 1.00%) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in

Previous wording

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.

Current wording

As of December 31, 2025, we held $405.5 million in cash and cash equivalents. Of this amount, $209.4 million of cash and cash equivalents were held by foreign subsidiaries. Our U.S. operations typically generate sufficient cash flows to meet our domestic obligations. We expect existing cash and cash equivalents and cash flows from operations and financing activities to be sufficient to meet our cash needs for at least the next 12 months and thereafter for the foreseeable future. However, if we did have to borrow to fund some or all of our expected cash outlays, we can do so at reasonable interest rates by utilizing the undrawn borrowings under our Revolving Credit Facility. Subsequent to recording the Toll Tax as part of the Tax Cuts and Jobs Act of 2017, our intent, other than with respect to the one-time repatriation of foreign earnings in 2023, has been to permanently reinvest undistributed earnings of foreign subsidiaries, and we do not have any current plans to repatriate additional post-Toll Tax foreign earnings to fund operations in the United States. However, if amounts held by foreign subsidiaries were needed to fund operations in the United States, we could be required to accrue and pay taxes to repatriate these funds. Such charges may include potential state income taxes and other tax charges.

Previous wording

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

Current wording

As of December 31, 2025, we were in compliance with all financial covenants related to the Credit Agreement.

Previous wording

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.

Current wording

Working capital (defined as current assets less current liabilities) as of December 31, 2025 was $773.7 million compared to $665.6 million as of December 31, 2024. The ratio of current assets to current liabilities was 2.5 to 1.0 as of December 31, 2025 and 2.6 to 1 as of December 31, 2024. The increase in working capital is primarily related to higher working capital investment related to timing of accounts receivable collections and higher inventory primarily related to strategic inventory investment and incremental tariffs, partially offset by timing of accounts payable and various accrual expense payments.

Previous wording

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.

Current wording

We anticipate investing between $50 million to $60 million in capital expenditures during 2026 to improve our manufacturing capabilities and invest in technology and other commercial and operational excellence initiatives. We also anticipate investing approximately $25 million to $30 million during 2026 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.

Previous wording

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.

Current wording

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 $12.2 million as of December 31, 2025 and $12.9 million as of December 31, 2024. 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.

Previous wording

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

Current wording

(f) Relates to capital expenditure obligations included in the anticipated capital expenditure investment totals of $50 million to $60 million discussed above.

Previous wording

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

Current wording

(g) Primarily includes $56.7 million of commodity commitments and $12.6 million relates to cost obligations for our SAP ERP system implementation program.

Previous wording

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.

Current wording

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 exclude the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. Reconciliations 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.

Previous wording

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.

Current wording

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, gain 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.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

Our net debt to capitalization ratio, a non GAAP financial measure used by management, at December 31, 2025 was (11.4%) compared to (12.5%) at December 31, 2024. The change was driven by a decrease in net debt balance, primarily due to increased cash and cash equivalents and an increase in stockholders’ equity at December 31, 2025 compared to December 31, 2024 due to higher net income. Management believes the net debt to capitalization ratio is an appropriate supplemental measure because it helps investors understand our ability to meet our financing needs and serves as a basis to evaluate our financial structure. Our computation may not be comparable to other companies that may define their net debt to capitalization ratios differently.

Previous wording

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.

Current wording

Our revenue for product sales is primarily 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. For certain product sales, the Company recognizes revenue on an over-time basis. Performance obligations are satisfied over time if the customer receives the benefits as the Company performs work, if the customer controls the asset as it is being produced (continuous transfer of control), or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment for performance to date. For performance obligations satisfied over time, revenue is recognized on a percentage-of-completion basis generally using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which correspond with and best depict transfer of control to the customer. Contract costs can include labor, materials, subcontractors’ costs, or other direct costs and indirect costs. 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.

Previous wording

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.

Current wording

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. The determination of reporting units requires judgment, and if we changed the definition of our reporting units, it is possible that we would have reached different conclusions when

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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, 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.

Previous wording

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.

Current wording

In 2025, we had eight reporting units. Haws, Superior and Saudi Cast were acquired in the fourth quarter of 2025, after the goodwill testing date (October 26, 2025). We performed a qualitative analysis for seven reporting units, which include Blücher, Front-of-the-Wall, US Drains, Water Quality, Fluid Solutions-Americas, Heating and Hot Water Solutions (“HHWS”) and APMEA. We performed a quantitative analysis for the Fluid Solutions - Europe reporting unit in connection with the annual strategic plan and due to the underperformance to prior year and budget, primarily caused by the challenging European economic environment in 2025.

Previous wording

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.

Current wording

As of October 26, 2025, our testing date, we had $780.0 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. As a result of the quantitative analysis, we determined that the fair value of the Fluid Solutions - Europe reporting unit exceeded the carrying value. In 2025, 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 and quantitative analyses could result in the reporting unit fair value not exceeding the carrying amounts and could lead to impairment.

Previous wording

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.

Current wording

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 2025 impairment assessment, which occurred as of October 26, 2025, 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 2025, with a few expected to potentially have minimal sales decline in 2025 but sales growth in 2026 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 2025, 2024, and 2023, no impairment was recognized on our indefinite-lived intangible assets. Changes in macroeconomics, 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.