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 and future acquisitions, expected investments in capital expenditures, expected impacts from legislation, impacts of the invalidation of tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"), and our ability to manage challenging macro-economic and softer market conditions, including impacts from tariffs and the conflict in the Middle East, 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, 2025, 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 and liquidity, benefits from acquisitions, expected investments in capital expenditures, expected costs and benefits from restructuring programs, expected impacts from legislation, impacts of the invalidation of tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"), our ability to manage challenging macro-economic and softer market conditions, including impacts from tariffs and the conflict in the Middle East, market and economic outlook, and the expected timing and benefits of our enterprise resource planning system implementation, 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, 2025, 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

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.

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 are enabling value creation through greater scale and growth opportunities.

Previous wording

Tariffs imposed on foreign imports into the United States have increased the cost of our products and could adversely impact the gross profit we earn on our products. We are proactively managing changes in tariffs and supply disruptions 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 we 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 could have a material adverse effect on our business, financial condition or results of operations. On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under IEEPA were not authorized by the statute. We are the importer of record for certain raw materials, components and products that were previously subject to such tariffs under IEEPA. Significant uncertainty remains regarding how and when any amounts may be recovered. We are evaluating the ruling and potential actions available to us. Because the process, timing, and amount of any recovery are uncertain, we have not recorded any potential benefit from a refund at this time. We will continue to monitor developments and evaluate potential impacts on our future financial results and business. Further, following the

Current wording

Tariffs imposed on foreign imports into the United States have increased the cost of our products and could adversely impact the gross profit we earn on our products. We are proactively managing changes in tariffs and supply disruptions 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 we 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 could have a material adverse effect on our business, financial condition or results of operations. On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under IEEPA were not authorized by the statute. Following this ruling, we have submitted, and expect to continue to submit, tariff recovery claims through the U.S. Customs and Border Protection (CBP) seeking a refund of certain eligible IEEPA tariffs. We will continue to monitor recent developments on tariff policy and evaluate any changes to the applicability of tariffs to our business as they occur. Further, following the Supreme Court’s ruling invalidating IEEPA tariffs, the U.S. government imposed new

Previous wording

We continue to closely monitor impacts to our business, customers, suppliers, employees, and operations in the Middle East due to the conflict in Iran and increased regional instability and tensions. Our operations and our suppliers’ operations in the region have not been materially impacted, although we could experience future impacts as the conflict continues. We also continue to monitor uncertainties related to energy costs and availability. Given the volatile nature of the situation, the potential impacts to our business are subject to change. We also continue to experience inflation in our material, 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 our long-term strategy.

Current wording

We continue to closely monitor impacts to our business, customers, suppliers, employees, and operations in the Middle East due to the conflict in and around Iran and increased regional instability and tensions. Our operations and our suppliers’ operations in the region have not been materially impacted, although we could experience future impacts as the conflict continues. We also continue to monitor uncertainties related to energy costs and availability. Given the volatile nature of the situation, the potential impacts to our business are subject to change.

Previous wording

The trade policy environment and recent geopolitical events have 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.

Current wording

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. We also continue to experience inflation in our material, labor and overhead costs. The European economy is showing signs of improvement, however, the global geopolitical uncertainties continue. Despite the challenges and uncertainties discussed above, we continue to invest in our growth and productivity initiatives, and we remain focused on our customers’ needs and executing our long-term strategy.

Previous wording

First quarter 2026 sales increased 21.4%, or $119.3 million, on a reported basis, and 11.9%, or $66.6 million, on an organic basis, compared to the first quarter of 2025. The reported sales increase included acquired sales of 6.6%, or $36.6 million, with $30.7 million reported within the Americas segment and $5.9 million reported within APMEA. The reported sales increase also included the favorable impact of foreign exchange of $16.1 million, primarily due to the depreciation of the U.S. dollar against the euro. The 11.9% organic growth was driven by organic growth in the Americas of 15.5%, Europe of 0.5% and APMEA of 3.4%. The organic growth was primarily driven by favorable price realization and incremental volume, primarily in the Americas driven by data center growth. Operating income of $133.0 million increased by $45.3 million, or 51.7%, in the first quarter of 2026 as compared to the first quarter of 2025. This increase was primarily driven by favorable price realization, productivity and volume leverage partially offset by inflation, investments and tariffs.

Current wording

Second quarter 2026 sales increased 18.6%, or $119.5 million, on a reported basis, and 12.2%, or $78.7 million, on an organic basis, compared to the second quarter of 2025. The reported sales increase included acquired sales of 5.3%, or $34.3 million, with $28.4 million reported within the Americas segment and $5.9 million reported within APMEA. The reported sales increase also included the favorable impact of foreign exchange of $6.5 million, or 1.1%, primarily due to the depreciation of the U.S. dollar against the euro, Australian dollar and Chinese yuan. The 12.2% organic growth was driven by organic growth in the Americas of 11.6%, Europe of 9.2% and APMEA of 30.7%. The organic growth was primarily driven by favorable price realization and incremental volume, primarily in the Americas driven by data center growth. Operating income of $154.0 million increased by $18.7 million, or 13.8%, in the second quarter of 2026 as compared to the second quarter of 2025. This increase was primarily driven by favorable price realization, productivity and volume leverage partially offset by inflation and tariffs.

Previous wording

First Quarter Ended March 29, 2026 Compared to First Quarter Ended March 30, 2025

Current wording

Second Quarter Ended June 28, 2026 Compared to Second Quarter Ended June 29, 2025

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 first quarters of 2026 and 2025 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 second quarters of 2026 and 2025 were as follows:

Previous wording

Gross Profit. Gross profit and gross profit as a percent of net sales (gross margin) for the first quarters of 2026 and 2025 were as follows:

Current wording

Gross Profit. Gross profit and gross profit as a percent of net sales (gross margin) for the second quarters of 2026 and 2025 were as follows:

Previous wording

Gross profit increased primarily due to higher price realization, productivity, volume leverage and acquisitions which more than offset inflation and tariffs. Gross margin declined primarily due to acquisition dilution.

Current wording

Gross profit increased primarily due to higher price realization, productivity, volume leverage and acquisitions which more than offset inflation and tariffs. Gross margin declined primarily due to the dilutive impact of acquisitions and the prior year benefit of tariff-related price increases ahead of related cost recognition.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses increased $25.4 million, or 15.2%, in the first quarter of 2026 compared to the first quarter of 2025. 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 $27.3 million, or 14.6%, in the second quarter of 2026 compared to the second quarter of 2025. The increase in SG&A expenses was attributable to the following:

Previous wording

Restructuring. In the first quarter of 2026, we recorded a net restructuring charge of $0.2 million, which primarily related to the 2025 French restructuring program that was approved in the first quarter of 2025. In the first quarter of 2025, we recorded a net restructuring charge of $17.3 million, which included a $17.4 million charge related to the 2025 French restructuring program. 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 second quarter of 2026, a net restructuring charge of $5.6 million was recorded, which primarily related to severance costs for immaterial cost saving actions in the Americas and Europe segments. 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 quarters of 2026 and 2025 was as follows:

Current wording

Operating Income. Operating income, which is made up of segment earnings, Corporate operating loss and special items, for the second quarters of 2026 and 2025 was as follows:

Previous wording

Interest Income. Interest income in the first quarter of 2026 decreased $0.6 million compared to the first quarter of 2025, primarily due to lower interest rates.

Current wording

Interest Income. Interest income in the second quarter of 2026 decreased $0.6 million compared to the second quarter of 2025, primarily due to lower interest rates and lower cash and cash equivalent balances.

Previous wording

Interest Expense. Interest expense in the first quarter of 2026 decreased $0.1 million compared to the first quarter of 2025 due to a decrease inletters of credit outstanding. Refer to Note 11 of the Notes to Consolidated Financial Statements for further details.

Current wording

Interest Expense. Interest expense in the second quarter of 2026 decreased $0.5 million compared to the second quarter of 2025, primarily due to a lower principal balance of debt outstanding during the second quarter of 2026. Refer to Note 11 of the Notes to Consolidated Financial Statements for further details.

Previous wording

Americas net sales increased $97.0 million, or 23.2%, for the first quarter of 2026 compared to the first quarter of 2025. The change in net sales was positively impacted by $30.7 million, or 7.4%, of acquired sales related to acquisitions completed during 2025, and was positively impacted by $1.3 million, or 0.3%, of foreign currency translation. Organic net sales increased $65.0 million, or 15.5%, primarily due to favorable price realization and incremental volume driven by data center growth.

Current wording

Americas net sales increased $183.5 million, or 20.0%, for the first six months of 2026 compared to the first six months of 2025. The change in net sales was positively impacted by $59.6 million, or 6.5%, of acquired sales related to acquisitions completed during 2025, and was positively impacted by $1.0 million, or 0.1%, of foreign currency translation. Organic net sales increased $122.9 million, or 13.4%, primarily due to favorable price realization and incremental volume driven by data center growth partially offset by product rationalization within our OEM and DIY channels.

Previous wording

APMEA net sales increased $9.3 million, or 29.5%, for the first quarter of 2026 compared to the first quarter of 2025. The change in net sales was positively impacted by $5.9 million, or 18.7%, of acquired sales related to an acquisition completed in the fourth quarter of 2025, and was positively impacted by $2.3 million, or 7.4%, of foreign currency translation. Organic net sales increased $1.1 million, or 3.4%, primarily due to growth in China, Australia and New Zealand partially offset by a decline in the Middle East.

Current wording

APMEA net sales increased $28.6 million, or 43.5%, for the first six months of 2026 compared to the first six months of 2025. The change in net sales was positively impacted by $11.8 million, or 17.9%, of acquired sales related to an acquisition completed in the fourth quarter of 2025, and was positively impacted by $5.2 million, or 8.0%, of foreign currency translation. Organic net sales increased $11.6 million, or 17.6%, primarily due to growth in China, Australia and New Zealand partially offset by a decline in the Middle East. The increase in China was driven by data center growth.

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, Australian dollar and Canadian dollar in the first quarter of 2026. 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, Australian dollar, Chinese yuan and Canadian dollar in the first six months of 2026. 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

The increase in organic SG&A expenses was primarily due to general inflation of $4.1 million, an increase in strategic investments of $3.4 million, increased variable costs of $2.1 million due to higher net sales, a net increase in short-term and long-term compensation accruals of $1.2 million and $1.2 million in higher travel and marketing spend, partially offset by $2.4 million from productivity initiatives and restructuring savings compared to the first quarter of 2025. 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 acquisitions completed in 2025. Total SG&A expenses, as a percentage of net sales, were 28.5% in the first quarter of 2026 compared to 30.0% in the first quarter of 2025.

Current wording

The increase in organic SG&A expenses was primarily due to an increase in strategic investments of $9.0 million, general inflation of $8.3 million, a net increase in short-term and long-term compensation accruals of $6.8 million, $3.0 million in higher travel and marketing spend and increased variable costs of $1.6 million due to higher net sales, partially offset by $6.7 million from productivity initiatives and restructuring savings compared to the first six months of 2025. The increase in foreign exchange was mainly due to the depreciation of the U.S. dollar against the euro, Australian dollar and Chinese yuan. The acquired SG&A costs related to acquisitions completed in 2025. Total SG&A expenses, as a percentage of net sales, were 28.3% in the first six months of 2026 compared to 29.5% in the first six months of 2025.

Previous wording

Operating income increased $45.3 million, or 51.7%, for the first quarter of 2026 compared to the first quarter of 2025. Operating income was favorably impacted by a decrease in segment special items of $15.5 million, primarily relating to a decrease in restructuring charges, partially offset by an increase in acquisition-related costs in the first quarter of 2026 compared to the first quarter of 2025. The increase in organic operating income of $29.3 million, or 24.7%, was primarily due to higher price realization, incremental volume in the Americas mostly driven by data center growth and productivity savings, partially offset by inflation, tariffs and investments.

Current wording

Operating income increased $64.0 million, or 28.7%, for the first six months of 2026 compared to the first six months of 2025. Operating income was favorably impacted by a decrease in segment special items of $13.3 million, primarily relating to a decrease in restructuring charges, partially offset by an increase in acquisition-related costs in the first six months of 2026 compared to the first six months of 2025. The increase in organic operating income of $44.8 million, or 16.4%, was primarily due to higher price realization, incremental volume, primarily in the Americas from data center growth, and productivity savings, partially offset by inflation and tariffs.

Previous wording

Other Expense, Net. Other expense, net, was an expense balance of $0.7 million in the first quarter of 2026 and increased $0.3 million compared to the first quarter of 2025, primarily due to unfavorable foreign currency translation.

Current wording

Other Expense, Net. Other expense, net, in the first six months of 2026 decreased $0.1 million compared to the first six months of 2025, primarily due to favorable foreign currency translation.

Previous wording

Income Taxes. Our effective income tax rate increased to 24.2% in the first quarter of 2026, from 14.8% in the first quarter of 2025 primarily due to a reversal of a tax liability in the first quarter of 2025 relating to a prior tax year for which we determined the statute of limitations had lapsed.

Current wording

Income Taxes. Our effective income tax rate increased to 23.6% in the first six months of 2026, from 21.1% in the first six months of 2025 primarily due to a reversal of a tax liability in 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.

Previous wording

Net Income. Net income was $99.6 million, or $2.97 per share of common stock on a diluted basis, for the first quarter of 2026, compared to $74.0 million, or $2.21 per share of common stock on a diluted basis, for the first quarter of 2025. Results for the first quarter of 2026 included after-tax charges of$2.1 million, or $0.06 per share of common stock, for acquisition-related costs and $0.1 million, or $0.01 per share of common stock, for restructuring. Results for the first quarter of 2025 included after-tax charges of $13.0 million, or $0.39 per share of common stock, for restructuring and $0.8 million, or $0.02 per share of common stock, for acquisition-related costs; 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 liability.

Current wording

Net Income. Net income was $217.9 million, or $6.50 per share of common stock on a diluted basis, for the first six months of 2026, compared to $174.9 million, or $5.22 per share of common stock on a diluted basis, for the first six months of 2025. Results for the first six months of 2026 included after-tax charges of$4.3 million, or $0.13 per share of common stock, for restructuring and $2.4 million, or $0.07 per share of common stock, for acquisition-related costs. 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”.

Previous wording

We generated $17.9 million of net cash provided by operating activities in the first quarter of 2026 compared to $55.2 million of net cash provided by operating activities in the first quarter of 2025. The decrease in net cash provided by operating activities was primarily related to elevated working capital levels which more than offset higher net income. Working capital increases were due to higher accounts receivable attributable to higher net sales, higher inventory due to incremental tariffs and strategic inventory investments to support expected end-market demand, and higher annual customer rebates due to higher net sales and timing of payments.

Current wording

We generated $120.8 million of net cash provided by operating activities in the first six months of 2026 compared to $124.9 million in the first six months of 2025. The decrease in net cash provided by operating activities was primarily related to elevated working capital levels which more than offset higher net income. Working capital increases were due to higher accounts receivable attributable to higher net sales, higher inventory due to incremental tariffs and strategic inventory investments to support expected end-market demand.

Previous wording

We used $13.2 million of net cash for investing activities in the first quarter of 2026 compared to $79.9 million used in the first quarter of 2025. In the first quarter of 2026, we used $1.9 million in cash for business acquisitions related to immaterial purchase price adjustments for acquisitions completed in the fourth quarter of 2025, compared to $70.3 million in cash for business acquisitions in our Americas segment in the first quarter 2025. Cash used for net capital expenditures in the first quarter of 2026 compared to the first quarter of 2025 increased $1.7 million. For the remainder of 2026, we expect to invest approximately $40 million to $50 million in capital expenditures as part of our ongoing commitment to improve our operating capabilities.

Current wording

We used $24.3 million of net cash for investing activities in the first six months of 2026 compared to $105.5 million used in the first six months of 2025. In the first six months of 2026, we used $1.7 million in cash for business acquisitions related to immaterial purchase price adjustments for acquisitions completed in the fourth quarter of 2025, compared to $85.7 million in cash for business acquisitions in our Americas segment in the first six months 2025. Cash used for net capital expenditures in the first six months of 2026 compared to the first six months of 2025 increased $2.8 million. For the remainder of 2026, we expect to invest approximately $40 million to $45 million in capital expenditures as part of our ongoing commitment to improve our operating capabilities.

Previous wording

We used $34.8 million of net cash for financing activities during the first quarter of 2026 primarily due to dividend payments of $17.5 million, tax withholding payments on vested stock awards of $12.8 million and payments of $3.8 million to repurchase approximately 13,000 shares of Class A common stock. In the first quarter of 2025, we used $29.9

Current wording

We used $151.2 million of net cash for financing activities during the first six months of 2026 primarily due to payments of long-term debt of $90.0 million, dividend payments of $38.8 million, tax withholding payments on vested stock awards of $13.1 million and payments of $7.9 million to repurchase approximately 26,000 shares of Class A common stock. In the first six months of 2025, we used $52.3 million of net cash for financing activities primarily due to dividend payments of $32.0 million, tax withholding payments on vested stock awards of $11.1 million and payments of $7.9 million to repurchase approximately 37,000 shares of Class A common stock.

Previous 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 March 29, 2026, we had drawn down $200.0 million on this line of credit and had $12.2 million in letters of credit outstanding, which resulted in $587.8 million of unused and available credit under the Revolving Credit Facility as of such date. Borrowings outstanding bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Term Benchmark loans, the Term Benchmark rate plus an applicable percentage, ranging from 1.075% to 1.325%, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than 1.00%) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on such day plus 0.50% and (c) the Term Benchmark rate plus 1.00% for a one-month interest period, in each case, determined by reference to our consolidated leverage ratio. For the borrowings denominated in dollars, there is a fixed 10 basis point adjustment if the reference rate is Term SOFR. The weighted average interest rate on debt outstanding under the Revolving Credit Facility as of March 29, 2026 was 4.85%. The weighted average interest rate on debt outstanding inclusive of the interest rate swaps discussed in Note 12 of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of March 29, 2026 was 4.07%. In addition to paying interest under the Credit Agreement, we are also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. We may repay loans outstanding under the Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Credit Agreement.

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 June 28, 2026, we had drawn down $110.0 million on this line of credit and had $12.2 million in letters of credit outstanding, which resulted in $677.8 million of unused and available credit under the Revolving Credit Facility as of such date. Borrowings outstanding bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Term Benchmark loans, the Term Benchmark rate plus an applicable percentage, ranging from 1.075% to 1.325%, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than 1.00%) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on such day plus 0.50% and (c) the Term Benchmark rate plus 1.00% for a one-month interest period, in each case, determined by reference to our consolidated leverage ratio. For the borrowings denominated in dollars, there is a fixed 10 basis point adjustment if the reference rate is Term SOFR. The weighted average interest rate on debt outstanding under the Revolving Credit Facility as of June 28, 2026 was 4.81%. In addition to paying interest under the Credit Agreement, we are also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. We may repay loans outstanding under the Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Credit Agreement.

Previous wording

As of March 29, 2026, we held $374.7 million in cash and cash equivalents. Of this amount, $202.8 million of cash and cash equivalents were held by foreign subsidiaries. Our U.S. operations typically generate sufficient cash flows to meet our domestic obligations. We expect existing cash and cash equivalents and cash flows from operations and financing activities to be sufficient to meet our cash needs for at least the next 12 months and thereafter for the foreseeable future. However, if we did have to borrow to fund some or all of our expected cash outlays, we can do so at reasonable interest rates by utilizing the undrawn borrowings under our Revolving Credit Facility. Subsequent to recording the Toll Tax as part of the Tax Cuts and Jobs Act of 2017, our intent, other than with respect to the one-time repatriation of foreign earnings in 2023, has been to permanently reinvest undistributed earnings of foreign subsidiaries, and we do not have any current plans to repatriate additional post-Toll Tax foreign earnings to fund operations in the United States. However, if amounts held by foreign subsidiaries were needed to fund operations in the United States, we could be required to accrue and pay taxes to repatriate these funds. Such charges may include potential state income taxes and other tax charges.

Current wording

As of June 28, 2026, we held $347.9 million in cash and cash equivalents. Of this amount, $220.2 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

Free cash flow decreased in the first quarter of 2026 when compared to the first quarter of 2025, primarily due to increased capital investments and elevated working capital levels which more than offset higher net income. Working capital increases were due to higher accounts receivable attributable to higher net sales, higher inventory due to incremental tariffs and strategic inventory investments to support expected end-market demand, and higher annual customer rebates due to higher net sales and timing of payments.

Current wording

Free cash flow decreased in the first six months of 2026 when compared to the first six months of 2025, primarily due to increased capital investments and elevated working capital levels which more than offset higher net income. Working capital increases were due to higher accounts receivable attributable to higher net sales, higher inventory due to incremental tariffs and strategic inventory investments to support expected end-market demand.

Previous wording

Our net debt to capitalization ratio, a non-GAAP financial measure used by management, at March 29, 2026 was (9.2%) compared to (11.4%) at December 31, 2025. The increase was driven by an increase in net debt balance, primarily due to decreased cash and cash equivalents and an increase in stockholders’ equity at March 29, 2026 compared to December 31, 2025 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 June 28, 2026 was (12.3%) compared to (11.4%) at December 31, 2025. The decrease was driven by a decrease in net debt balance, primarily due to decreased long-term debt and an increase in stockholders’ equity at June 28, 2026 compared to December 31, 2025 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.