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, expected financial results, our strategy, benefits from recent acquisitions, improvements in operating and free cashflow throughout and our ability to manage challenging macro-economic and softer market conditions, 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, 2023, filed with the Securities and Exchange Commission. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and, except as required by law, we undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Current wording

This Quarterly Report on Form 10-Q contains statements that are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements contain projections of our future results of operations or our financial position or state other forward-looking information. The forward-looking statements included in this Quarterly Report on Form 10-Q, including without limitation statements regarding our business performance and strategy, including, without limitation, expected financial results, benefits from recent acquisitions, expected investments in capital expenditure, improvements in operating and free cash flow throughout and our ability to manage challenging macro-economic and softer market conditions, 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, 2023, 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 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 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 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:

Previous wording

We believe that 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. We have completed 14 acquisitions since 2014. 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 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. Since March 31, 2023, we completed three 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 that 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 2014, and in the last year and a half, we have completed three 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

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

Current wording

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

Previous wording

Global gross domestic product (“GDP”) remains positive, however global economic indicators are mixed and show some signs of weakening market conditions for the remainder of 2024. Elevated interest rates may impact new construction. We also continue to experience inflation across our labor and overhead costs. The European economy continued to show signs of weakening, China’s economy has decelerated, and geo-political risks have heightened. 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

Global gross domestic product (“GDP”) remains positive and is generally a leading indicator for our repair and replacement business. New construction indicators are mixed, but are showing signs of weakening, particularly in multi-family housing, office, retail and recreation verticals. Light industrial, including data centers, and institutional verticals remain positive. The European economy continued to show signs of weakening and geo-political risks have heightened. Elevated interest rates may impact new construction. 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.

Previous wording

First quarter 2024 sales increased 21.0%, or $99.2 million, on a reported basis, and 6.4%, or $30.1 million, on an organic basis, compared to the first quarter of 2023. The reported sales increase included acquired sales of $68.3 million, or 14.5%, with $60.2 million reported within the Americas segment and $8.1 million reported within the APMEA segment, while the foreign exchange impact was flat compared to the first quarter of 2023. The 6.4% organic growth was driven by organic growth in the Americas of 11.0% and APMEA of 6.4% and offset by 5.1% organic decline in Europe, and included additional shipping days compared to the first quarter of 2023. The positive impact of additional shipping days in the first quarter of 2024 will be offset in the fourth quarter of 2024. The 6.4% organic growth was primarily driven by approximately 7% of growth from additional shipping days and favorable price realization, offset by volume declines in Europe. The growth from additional shipping days was estimated based on average sales per day. Operating income of $96.7 million increased by $12.0 million, or 14.2%, in the first quarter of 2024 as compared to the first quarter of 2023. This increase was primarily driven by favorable price realization, volume leverage from the additional shipping days and productivity, partially offset by inflation and incremental investments.

Current wording

Second quarter 2024 sales increased 12.1%, or $64.5 million, on a reported basis, and 0.4%, or $2.1 million, on an organic basis, compared to the second quarter of 2023. The reported sales increase included acquired sales of 12.2%, or $64.8 million, all reported within the Americas segment, partially offset by a net unfavorable impact of foreign exchange of 0.5%, or $2.4 million, compared to the second quarter of 2023. The 0.4% organic growth was driven by organic growth in the Americas of 4.6% and APMEA of 18.5%, offset by 15.0% organic decline in Europe compared to the second quarter of 2023 segment net sales. The organic growth was primarily driven by growth from favorable volume and price realization in the Americas and APMEA, offset by volume declines in Europe. Operating income of $111.5 million increased by $11.1 million, or 11.1%, in the second quarter of 2024 as compared to the second quarter of 2023. This increase was primarily driven by acquisitions of 7.6%, or $7.6 million, all reported within the Americas segment, as well as favorable price realization and productivity, partially offset by inflation, incremental investments and lower volume.

Previous wording

First Quarter ended March 31, 2024 Compared to First Quarter Ended March 26, 2023

Current wording

Second Quarter ended June 30, 2024 Compared to Second Quarter Ended June 25, 2023

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 2024 and 2023 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 2024 and 2023 were as follows:

Previous wording

The net increase in 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 Chinese yuan in the first quarter of 2024. 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 decrease in sales due to foreign exchange was mostly due to the unfavorable impact of the appreciation of the U.S. dollar against the euro and Chinese yuan in the second quarter of 2024. We cannot predict whether foreign currencies will appreciate or depreciate against the U.S. dollar in future periods or whether future foreign exchange rate fluctuations will have a positive or negative impact on our net sales.

Previous wording

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

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative, or SG&A, expenses increased $35.9 million, or 5.9%, in the first quarter of 2024 compared to the first quarter of 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 $22.3 million, or 3.7%, in the second quarter of 2024 compared to the second quarter of 2023. The increase in SG&A expenses was attributable to the following:

Previous wording

Restructuring. In the first quarter of 2024, we recorded a net restructuring charge of $1.2 million, which primarily related to immaterial severance and other exit costs in the Americas and APMEA segments. In the first quarter of 2023, we recorded a net restructuring benefit of $0.3 million related to immaterial adjustments to reduce previously estimated restructuring charges recognized for the cost saving actions in Europe and related to severance and other costs.

Current wording

Restructuring. In the second quarter of 2024, we recorded a net restructuring charge of $0.2 million, which primarily related to immaterial severance and other exit costs in the Europe and APMEA segments. In the second quarter of 2023, we recorded a net restructuring charge of $1.6 million, which primarily related to immaterial actions in Europe and APMEA related to severance and other cost reductions.

Previous wording

Operating Income. Operating income (loss) by segment for the first quarters of 2024 and 2023 was as follows:

Current wording

Operating Income. Operating income (loss) by segment for the second quarters of 2024 and 2023 was as follows:

Previous wording

Interest Income. Interest income in the first quarter of 2024 increased $1.7 million compared to the first quarter of 2023, primarily due to higher interest rates earned on our cash and cash equivalents.

Current wording

Interest Income. Interest income in the second quarter of 2024 increased $0.6 million compared to the second quarter of 2023, primarily due to higher interest rates earned on our cash and cash equivalents.

Previous wording

Interest Expense. Interest expense in the first quarter of 2024 increased $2.7 million compared to the first quarter of 2023, primarily due to a higher principal balance of debt outstanding due to the acquisition of Bradley during the fourth quarter of 2023 and an increase in interest rates. Refer to Note 10 of the Notes to Consolidated Financial Statements for further details.

Current wording

Interest Expense. Interest expense in the second quarter of 2024 increased $3.4 million compared to the second quarter of 2023, primarily due to a higher principal balance of debt outstanding due to the acquisition of Bradley during the fourth quarter of 2023 and an increase in interest rates. Refer to Note 10 of the Notes to Consolidated Financial Statements for further details.

Previous wording

Other (Income) Expense, Net. Other (income) expense, net, was an income balance of $0.6 million in the first quarter of 2024 primarily due to favorable foreign currency translation, compared to an expense balance of $0.1 in the first quarter of 2023.

Current wording

Other Income, Net. Other income, net, in the second quarter of 2024 decreased $0.4 million compared to the second quarter of 2023, primarily due to favorable foreign currency translation in the second quarter of 2023.

Previous wording

Income Taxes. Our effective income tax rate increased to 23.7% in the first quarter of 2024, from 22.5% in the first quarter of 2023, primarily related to a lower tax benefit resulting from the vesting of stock compensation awards in the first quarter of 2024 compared to the first quarter of 2023. The Organization for Economic Co-operation and Development (“OECD”) has a framework for a 15% global minimum tax, commonly referred to as “Pillar Two” and certain aspects are effective January 1, 2024. We have assessed the 2024 forecasted annual impact of Pillar Two and it is not expected to be material to our consolidated financial statements.

Current wording

Income Taxes. Our effective income tax rate increased to 25.1% in the second quarter of 2024, from 24.6% in the second quarter of 2023, primarily due to a reduction of foreign tax liabilities associated with the repatriation of funds in the second quarter of 2023 that did not occur in the second quarter of 2024. The Organization for Economic Co-operation and Development (“OECD”) has a framework for a 15% global minimum tax, commonly referred to as “Pillar Two” and certain aspects became effective January 1, 2024. We have assessed the 2024 forecasted annual impact of Pillar Two and it is not expected to be material to our consolidated financial statements.

Previous wording

Net Income. Net income was $72.6 million, or $2.17 per common share on a diluted basis, for the first quarter of 2024, compared to $64.7 million, or $1.93 per common share on a diluted basis, for the first quarter of 2023. Results for the first quarter of 2024 included after-tax charges of $5.2 million, or $0.15 per common share, for acquisition-related costs, $0.9 million, or $0.03 per common share, for restructuring; partially offset by an after-tax benefit of $0.8 million, or $0.02 per common share, for gain on sale of asset. Results for the first quarter of 2023 include an after-tax benefit of $0.2 million, or $0.01 per common share, for restructuring.

Current wording

Net Income. Net income was $82.0 million, or $2.44 per common share on a diluted basis, for the second quarter of 2024, compared to $75.9 million, or $2.26 per common share on a diluted basis, for the second quarter of 2023. Results for the second quarter of 2024 included after-tax charges of $2.8 million, or $0.08 per common share, for acquisition-related costs, partially offset by an after-tax benefit of $2.5 million, or $0.06 per common share, for the gain on sale of a building. Results for the second quarter of 2023 include an after-tax charges of $1.3 million, or $0.04 per common share, for acquisition-related costs and $1.2 million, or $0.04 per common share, for restructuring.

Previous wording

Americas net sales increased $95.6 million, or 29.6%, for the first quarter of 2024 compared to the first quarter of 2023. The change in net sales was positively impacted by $60.2 million, or 18.6%, of acquired sales related to the Bradley and Josam acquisitions completed in the fourth quarter of 2023 and first quarter of 2024, respectively. Organic net sales increased $35.4 million, or 11.0%, primarily due to increased volume from the benefit of additional shipping days in the first quarter of 2024 compared to the first quarter of 2023 and favorable price realization. The additional shipping days increased net sales by high-single-digits. The organic net sales growth was primarily in the wholesale channel from increased sales across our core valve products.

Current wording

Americas net sales increased $176.8 million, or 25.6%, for the first six months of 2024 compared to the first six months of 2023. The change in net sales was negatively impacted by $0.4 million, or 0.1%, of foreign currency translation, and positively impacted by $124.9 million, or 18.1%, of acquired sales related to the Bradley and Josam acquisitions completed in the fourth quarter of 2023 and first quarter of 2024, respectively. Organic net sales increased $52.3 million, or 7.6%, primarily due to increased volume, mostly from the benefit of additional shipping days in the first six months of 2024 compared to the first six months of 2023, and favorable price realization. The additional shipping days increased net sales by low to mid-single-digits. 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.

Previous wording

Europe net sales decreased $5.0 million, or 3.9%, for the first quarter of 2024 compared to the first quarter of 2023. The change in net sales was positively impacted by $1.6 million, or 1.2%, of foreign currency translation. Organic net sales decreased $6.6 million, or 5.1%, primarily due to lower volumes despite the benefit of additional shipping days and favorable price realization. The additional shipping days increased net sales by mid-single-digits. The decline was primarily in the OEM channel due to the volume declines impacted by reduced government energy incentives in Germany and Italy, as well as volume declines in wholesale plumbing product into France and Benelux.

Current wording

Europe net sales decreased $26.5 million, or 10.0%, for the first six months of 2024 compared to the first six months of 2023. The change in net sales was positively impacted by $0.4 million, or 0.2%, of foreign currency translation. Organic net sales decreased $26.9 million, or 10.2%, primarily due to lower volumes despite the benefit of additional shipping days and favorable price realization. The additional shipping days increased net sales by low to mid-single-digits. The decrease was primarily due to volume declines in the OEM channel which was impacted by reduced government energy incentives in Germany and Italy and the related heat pump destocking, as well as volume declines in wholesale plumbing product sales into France and Benelux, partially offset by an increase in sales of our drains products.

Previous wording

APMEA net sales increased $8.6 million, or 42.6%, for the first quarter of 2024 compared to the first quarter of 2023. The change in net sales was negatively impacted by $0.8 million, or 3.9%, of foreign currency translation, which was more than offset by $8.1 million, or 40.1%, of acquired sales related to the Enware acquisition completed in the second quarter of 2023. Organic net sales increased $1.3 million, or 6.4%, primarily due to volume growth from the benefit of additional shipping days in the first quarter of 2024 compared to the first quarter of 2023. The additional shipping days increased net sales by mid-single-digits. The organic growth was primarily due to growth in New Zealand, Australia and the Middle East, partially offset by declines in China.

Current wording

APMEA net sales increased $13.4 million, or 26.5%, for the first six months of 2024 compared to the first six months of 2023. The change in net sales was negatively impacted by $1.6 million, or 3.2%, of foreign currency translation, which was more than offset by $8.1 million, or 16.0%, of acquired sales related to the Enware acquisition completed in the second quarter of 2023. Organic net sales increased $6.9 million, or 13.7%, primarily due to volume growth from the benefit of additional shipping days in the first six months of 2024 compared to the first six months of 2023. The additional shipping days increased net sales by low-single-digits. The organic growth was primarily due to growth in all major countries in the segment.

Previous wording

Gross profit and gross margin increased primarily from higher price realization, favorable volume leverage from the additional shipping days and productivity, partially offset by inflation and the amortization of the fair value step-up adjustments for inventory purchased as part of the Bradley and Josam acquisitions.

Current wording

Gross profit and gross margin increased primarily from higher price realization, favorable volume leverage from the additional shipping days and productivity, partially offset by inflation, the dilutive impact of acquisitions on gross margin and the amortization of the fair value step-up adjustments for inventory purchased as part of the Bradley and Josam acquisitions.

Previous wording

The increase in organic SG&A expenses was primarily due to an increase in investments of $6.0 million, including in our smart and connected initiatives and other strategic initiatives, general inflation of $3.8 million, increased variable costs due to higher sales of $2.7 million, higher travel and marketing costs of $1.8 million and acquisition-related costs of $0.7 million compared to the first quarter of 2023. These increases were partially offset by a net decrease in short-term and long-term compensation accruals of $2.9 million, $2.1 million from productivity initiatives and $0.7 million of restructuring savings. The increase in foreign exchange was mainly due to the depreciation of the U.S. dollar against the euro, partially offset by the U.S. dollar appreciation against the Chinese yuan. The acquired SG&A costs 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 acquired SG&A costs include $2.0 million of acquisition-related costs. Total SG&A expenses, as a percentage of sales, were 29.7% in the first quarter of 2024 compared to 28.3% in the first quarter of 2023.

Current wording

The increase in organic SG&A expenses was primarily due to an increase in investments of $11.6 million, including in our smart and connected initiatives and other strategic initiatives, general inflation of $8.0 million and increased variable costs due to higher sales of $3.5 million compared to the first six months of 2023. These increases were partially offset by $4.5 million from productivity initiatives, a net decrease in short-term and long-term compensation accruals of $4.2 million, $4.4 million gain on the sale of buildings and $0.6 million of restructuring savings. The decrease in foreign exchange was mainly due to the appreciation of the U.S. dollar against the Chinese yuan. The acquired SG&A costs 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 acquired SG&A costs include $3.2 million of acquisition-related costs. Total SG&A expenses, as a percentage of sales, were 29.3% in the first six months of 2024 compared to 28.3% in the first six months of 2023.

Previous wording

Operating income increased $12.0 million, or 14.2%, for the first quarter of 2024 compared to the first quarter of 2023. Operating income was positively impacted by $8.5 million, or 10.0%, from acquisitions and positively impacted by $0.1 million, or 0.2% of foreign currency translation. The increase in organic operating income of $4.9 million, or 5.8%, was due to higher price realization, favorable volume leverage from additional shipping days and productivity. These increases were partially offset by inflation and incremental investments.

Current wording

Operating income increased $23.1 million, or 12.5%, for the first six months of 2024 compared to the first six months of 2023. Operating income was positively impacted by $16.1 million, or 8.7%, from acquisitions and $0.5 million, or 0.2% of foreign currency translation. The increase in organic operating income of $6.7 million, or 3.7%, was primarily due to higher price realization, favorable volume leverage from additional shipping days and productivity, partially offset by inflation and incremental investments.

Previous wording

We generated $45.6 million of net cash provided by operating activities in the first quarter of 2024 compared to $33.4 million of net cash provided by operating activities in the first quarter of 2023. The increase in net cash provided by operating activities was primarily related to higher net income and reduced working capital investments.

Current wording

We generated $130.9 million of net cash provided by operating activities in the first six months of 2024 compared to $100.5 million of net cash provided by operating activities in the first six months of 2023. The increase in net cash provided by operating activities was primarily related to higher net income, reduced working capital investments and contributions from our acquisitions.

Previous wording

We used $109.8 million of net cash for investing activities in the first quarter of 2024 compared to $5.1 million used in the first quarter of 2023. We used $100.8 million in cash for business acquisitions in our Americas segment and $3.9 million more cash for net capital expenditures in the first quarter of 2024 compared to the first quarter of 2023. For the remainder of 2024, we expect to invest approximately $35 million to $45 million in capital expenditure as part of our ongoing commitment to improve our operating capabilities.

Current wording

We used $107.5 million of net cash for investing activities in the first six months of 2024 compared to $23.3 million used in the first six months of 2023. We used $96.3 million in cash for business acquisitions in our Americas segment in the first six months of 2024 compared to $11.7 million for the immaterial acquisition in our APMEA segment in first six months of 2023, and $0.4 million less cash for net capital expenditures in the first six months of 2024 compared to the first six months of 2023. For the remainder of 2024, we expect to invest approximately $23 million to $33 million in capital expenditure as part of our ongoing commitment to improve our operating capabilities.

Previous wording

We used $44.6 million of net cash for financing activities during the first quarter of 2024 primarily due to long-term debt repayments of $15.0 million, dividend payments of $12.1 million, tax withholding payments on vested stock awards of $12.8 million and payments of $4.0 million to repurchase approximately 20,000 shares of Class A common stock. In the

Current wording

We used $88.9 million of net cash for financing activities during the first six months of 2024 primarily due to long-term debt repayments of $40.0 million, dividend payments of $26.7 million, tax withholding payments on vested stock awards of $12.8 million and payments of $8.1 million to repurchase approximately 40,000 shares of Class A common stock. In the first six months of 2023, we used $96.9 million of net cash for financing activities primarily due to long-term debt repayments of $80.0 million (offset by proceeds from drawdowns of $30.0 million), tax withholding payments on vested stock awards of $15.6 million, dividend payments of $22.3 million and payments of $7.7 million to repurchase approximately 47,000 shares of Class A common stock.

Previous wording

On March 30, 2021, we and certain of our subsidiaries entered into the Second Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, as amended by Amendment no. 1 dated August 2, 2022, Amendment no. 2 dated December 12, 2023 and as may be further amended, restated, amended and restated, modified or supplemented from time to time (the “Credit Agreement”). The Credit Agreement establishes a senior unsecured revolving credit facility of $800 million (the “Revolving Credit Facility”). The maturity date of the Revolving Credit Facility is March 30, 2026, subject to extension under certain circumstances and subject to the terms of the Credit Agreement. The Credit Agreement provides for a maximum consolidated leverage ratio of 3.50 to 1.00 (or 4.00 to 1.00 during temporary step-ups following certain acquisitions) and the minimum consolidated interest ratio of 3.50 to 1.00.

Current wording

On July 12, 2024, we entered into the Amended Credit Agreement, amending and restating the prior Second Amended and Restated Credit Agreement, dated as of March 30, 2021, that establishes our senior unsecured revolving credit facility of $800 million (the “Revolving Credit Facility”). Pursuant to the Amended Credit Agreement, the maturity date of the Revolving Credit Facility is July 12, 2029, subject to extension under certain circumstances and subject to the terms of the Amended Credit Agreement. The Amended Credit Agreement provides for a maximum consolidated leverage ratio of 3.50 to 1.00 (or 4.00 to 1.00 during temporary step-ups following certain acquisitions) and the minimum consolidated interest ratio of 3.50 to 1.00.

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 March 31, 2024, we had drawn down $285.0 million on this line of credit and had $12.5 million in letters of credit outstanding, which resulted in $502.5 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 March 31, 2024 was 6.50%. The weighted average interest rate on debt outstanding inclusive of the interest rate swap discussed in Note 11 of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of March 31, 2024 was 4.79%. In addition to paying interest under the Credit Agreement, we are also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. We may repay loans outstanding under the Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Credit Agreement. As of March 31, 2024, we were in compliance with all covenants related to the Credit Agreement.

Current wording

The Revolving Credit Facility also includes sublimits of $100 million for letters of credit and $15 million for swing line loans. As of June 30, 2024, we had drawn down $260.0 million on this line of credit and had $12.9 million in letters of credit outstanding, which resulted in $527.1 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 June 30, 2024 was 6.51%. The weighted average interest rate on debt outstanding inclusive of the interest rate swap discussed in Note 11 of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of June 30, 2024 was 4.63%. In addition to paying interest under the Amended 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 Amended Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Amended Credit Agreement. As of June 30, 2024, we were in compliance with all covenants related to the Amended Credit Agreement.

Previous wording

As of March 31, 2024, we held $237.1 million in cash and cash equivalents. Of this amount, $157.6 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.

Current wording

As of June 30, 2024, we held $279.4 million in cash and cash equivalents. Of this amount, $168.3 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

Previous wording

Free cash flow improved in the first quarter of 2024 when compared to the first quarter of 2023 primarily driven by higher net income and reduced working capital investments.

Current wording

Free cash flow improved in the first six months of 2024 when compared to the first six months of 2023 primarily driven by higher net income, reduced working capital investments and contributions from our acquisitions.

Previous wording

Our net debt to capitalization ratio, a non-GAAP financial measure used by management, at March 31, 2024 was 2.9% compared to (3.5%) at December 31, 2023. The change 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 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 June 30, 2024 was (1.3%) compared to (3.5%) at December 31, 2023. The change was driven by an increase in net debt balance primarily due to decreased cash and cash equivalents and an increase in stockholders’ equity at June 30, 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.