WATTS WATER TECHNOLOGIES INC
For the period ended Sep 29, 2024. Filed Oct 31, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 29, 2024 · Filed Oct 31, 2024
WTS$346.14-0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001558370-24-011496
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-29; filed 2024-10-31.
0001558370-24-014022
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 86 previous paragraphs and 89 current paragraphs.
34 unchanged; 46 reworded; 7 added; 3 removed; 3 previous and 2 current paragraphs rearranged.
Tables are not compared: 17 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
On October 1, 2024, we publicly disclosed our intention for local management to begin consultations with the appropriate works council in regard to a project to close the foundry at our manufacturing facility in Hautvillers-Ouville, France and to relocate the facility’s other production activities primarily to our other facilities in France and other locations in Europe. We expect that the works council consultation process will last approximately three months, after which the local management team will present its proposal to our Board of Directors, who will make a determination whether to approve the restructuring plan. If our Board of Directors approves the restructuring plan, the charges expected to be incurred in connection with such plan are anticipated to be material.
Current report
On October 27, 2024, Shashank Patel, our Chief Financial Officer, provided notice of his intention to retire from the Company effective as of March 15, 2025. We have initiated a search for our next Chief Financial Officer, which will include both internal and external candidates. Mr. Patel will continue in his role as Chief Financial Officer until a successor is named and will assist with the transition of his responsibilities to his successor.
Current report
APMEA net sales increased $3.2 million, or 9.7%, for the third quarter of 2024 compared to the third quarter of 2023. The change in net sales was positively impacted by $0.4 million, or 1.4%, of foreign currency translation. Organic net sales increased $2.8 million, or 8.3%, primarily due to growth in China, New Zealand and the Middle East. China’s sales
Current report
growth was primarily from increased commercial valves within data centers.
Current report
Operating income increased $6.1 million, or 7.0%, for the third quarter of 2024 compared to the third quarter of 2023. Operating income was positively impacted by $11.9 million, or 13.7%, from acquisitions as well as $0.1 million, or 0.1% of foreign currency translation. The decrease in organic operating income of $1.4 million, or 1.6%, was primarily due to inflation, incremental investments and lower volume, partially offset by higher price realization and productivity and lower organic SG&A expenses.
Current report
Other (Income) Expense, Net. Other (income) expense, net, was an income balance of $0.6 million in the third quarter of 2024 primarily due to an immaterial investment gain partially offset by unfavorable foreign currency translation, compared to an expense balance of $0.1 million in the third quarter of 2023.
Current report
Income Taxes. Our effective income tax rate increased to 24.7% in the first nine months of 2024, from 24.2% in the first nine months of 2023, primarily due to 2023 including a reduction of foreign tax liabilities associated with the repatriation of funds and a higher tax benefit from the vesting of stock compensation awards. These impacts were slightly offset by a change in the geographical mix of income in 2024 compared to 2023.
Removed paragraphs (3)
Previous report
APMEA net sales increased $4.8 million, or 15.9%, for the second quarter of 2024 compared to the second quarter of 2023. The change in net sales was negatively impacted by $0.8 million, or 2.6%, of foreign currency translation. Organic net sales increased $5.6 million, or 18.5%, primarily due to growth in all major countries in the segment, partly attributed to project timing.
Previous report
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 report
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.
Reworded paragraphs (46)
Previous wording
The following discussion and analysis are provided to increase the understanding of, and should be read in conjunction with, the accompanying unaudited consolidated financial statements and related notes. In this Quarterly Report on Form 10-Q, references to “the Company,” “Watts,” “we,” “us” or “our” refer to Watts Water Technologies, Inc. and its consolidated subsidiaries.
Current wording
The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, the accompanying unaudited consolidated financial statements and related notes. In this Quarterly Report on Form 10-Q, references to “the Company,” “Watts,” “we,” “us” or “our” refer to Watts Water Technologies, Inc. and its consolidated subsidiaries.
Previous wording
● Residential & commercial flow control and protection—includes products and solutions typically sold into plumbing and hot water applications such as backflow preventers, water pressure regulators, temperature and pressure relief valves, thermostatic mixing valves, leak detection and protection products, commercial washroom solutions and emergency safety products and equipment. Many of our flow control and protection products are now smart and connected enabled, warning of leaks, floods and freeze with alerts to Building Management Systems (“BMS”) and/or personal devices giving our customers greater insight into their water management and the ability to shut off the water supply to avoid waste and mitigate damage.
Current wording
● Residential & commercial flow control and protection—includes products and solutions typically sold into plumbing and hot water applications such as backflow preventers, water pressure regulators, temperature and pressure relief valves, thermostatic mixing valves, leak detection and protection products, commercial washroom solutions and emergency safety products and equipment. Many of our flow control and protection products are now smart and connected enabled, warning of leaks, floods, freezing temperatures and other hazards with alerts to Building Management Systems (“BMS”) and/or personal devices giving our customers greater insight into their water management and the ability to shut off the water supply to avoid waste and mitigate damage.
Previous wording
● HVAC & gas—includes commercial high-efficiency boilers, water heaters and heating solutions, hydronic and electric heating systems for under-floor radiant applications, custom heat and hot water solutions, hydronic pump groups for boiler manufacturers and alternative energy control packages, and flexible stainless steel connectors for natural and liquid propane gas in commercial food service and residential applications. Most of our HVAC products and solutions feature advanced controls enabling customers to easily connect to the BMS for better monitoring, control and operation. HVAC is an acronym for heating, ventilation and air conditioning.
Current wording
● Heating, ventilation and air conditioning (“HVAC”) & gas—includes commercial high-efficiency boilers, water heaters and heating solutions, hydronic and electric heating systems for under-floor radiant applications, custom heat and hot water solutions, hydronic pump groups for boiler manufacturers and alternative energy control packages, and flexible stainless steel connectors for natural and liquid propane gas in commercial food service and residential applications. Most of our HVAC products and solutions feature advanced controls enabling customers to easily connect to the BMS for better monitoring, control and operation.
Previous wording
Over the past several years we have been building our smart and connected products foundation by expanding our internal capabilities and making strategic acquisitions. Our strategy is to deliver superior customer value through smart and connected products and solutions. This strategy focuses on three dimensions: Connect, Control and Conserve. We are focused on introducing products that connect our customers with smart systems, control systems for optimal performance, and conserve critical resources by increasing operability, efficiency and safety.
Current wording
Over the past several years we have been building our smart and connected products foundation by expanding our internal capabilities and making strategic acquisitions. Our strategy is to deliver superior customer value through smart and connected products and intelligent water solutions. This strategy focuses on three dimensions: Connect, Control and Conserve. We are focused on introducing products that connect our customers with smart systems, manage systems for optimal performance, and conserve critical resources by increasing operability, efficiency and safety.
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, 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.
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, is growing and institutional verticals remain steady. 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
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.
Current wording
Third quarter 2024 sales increased 7.8%, or $39.3 million, on a reported basis, and decreased 4.1%, or $20.4 million, on an organic basis, compared to the third quarter of 2023. The reported sales increase included acquired sales of 11.7%, or $58.8 million, all reported within the Americas segment, as well as net favorable impact of foreign exchange of 0.2%, or $0.9 million, compared to the third quarter of 2023. The 4.1% organic decline was driven by organic decline in the Americas of 2.7% and Europe of 11.5%, partially offset by 8.3% organic growth in APMEA compared to the third quarter of 2023 segment net sales. The organic decline was primarily driven by volume declines in the Americas and Europe, partially offset by favorable price realization and favorable volume in APMEA. Operating income of $93.2 million increased by $6.1 million, or 7.0%, in the third quarter of 2024 as compared to the third quarter of 2023. This increase, primarily driven by acquisitions of 13.7%, or $11.9 million, all reported within the Americas segment, as well as favorable price realization and productivity, more than offset inflation, incremental investments and restructuring charges and lower volume.
Previous wording
Second Quarter ended June 30, 2024 Compared to Second Quarter Ended June 25, 2023
Current wording
Third Quarter ended September 29, 2024 Compared to Third Quarter Ended September 24, 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 second 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 third quarters of 2024 and 2023 were as follows:
Previous wording
Americas net sales increased $81.2 million, or 22.1%, for the second quarter of 2024 compared to the second quarter of 2023. The change in net sales was positively impacted by $64.8 million, or 17.6%, 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 $16.8 million, or 4.6%, 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, partly attributed to project timing.
Current wording
Americas net sales increased $49.0 million, or 14.0%, for the third quarter of 2024 compared to the third quarter of 2023. The change in net sales was positively impacted by $58.8 million, or 16.8%, 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 decreased $9.4 million, or 2.7%, primarily in the wholesale channel from decreased sales across our core valve products partially related to safety stock reductions.
Previous wording
Europe net sales decreased $21.5 million, or 15.8%, for the second quarter of 2024 compared to the second quarter of 2023. The change in net sales was negatively impacted by $1.2 million, or 0.8%, of foreign currency translation. Organic net sales decreased $20.3 million, or 15.0%, 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 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.
Current wording
Europe net sales decreased $12.9 million, or 10.7%, for the third quarter of 2024 compared to the third quarter of 2023. The change in net sales was positively impacted by $0.9 million, or 0.8%, of foreign currency translation. Organic net sales decreased $13.8 million, or 11.5%, 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 an increase in sales of our drains products.
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 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.
Current 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 and Chinese yuan, partially offset by appreciation of the U.S. dollar against the Canadian dollar in the third 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 second 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 third quarters of 2024 and 2023 were as follows:
Previous wording
Gross profit and gross margin increased primarily from higher price realization and productivity, partially offset by inflation, volume deleverage in Europe, and the dilutive impact of acquisitions on gross margin, including the amortization of the fair value step-up adjustment for inventory purchased as part of the Josam acquisition.
Current wording
Gross profit and gross margin increased primarily from higher price realization and productivity, partially offset by inflation, lower volume, and the dilutive impact of acquisitions on gross margin. Gross profit includes the impact of the Bradley and Josam acquisitions completed in the fourth quarter of 2023 and first quarter of 2024, respectively.
Previous 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:
Current wording
Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses increased $12.1 million, or 8.2%, in the third quarter of 2024 compared to the third quarter of 2023. The increase in SG&A expenses was attributable to the following:
Previous wording
The decrease in organic SG&A expenses was primarily due to a $3.3 million gain on the sale of a building, decreased Corporate expenses including lower professional fees of $2.4 million, $2.2 million from productivity initiatives and a net decrease in short-term and long-term compensation accruals of $1.4 million, mostly offset by an increase in investments of $5.6 million, including in our smart and connected initiatives and other strategic initiatives and general inflation of $4.1 million compared to the second quarter of 2023. The decrease in foreign exchange was mainly due to the appreciation of the U.S. dollar against the euro and 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. The acquired SG&A costs include $1.2 million of acquisition related costs. Total SG&A expenses, as a percentage of sales, were 29.0% in the second quarter of 2024 compared to 28.3% in the second quarter of 2023.
Current wording
The decrease in organic SG&A expenses was primarily due to $3.4 million from productivity initiatives, a net decrease in short-term and long-term compensation accruals of $1.5 million, decreased product liability and insurance costs of $1.1 million and decreased Corporate expenses of $4.0 million including lower acquisition-related costs, mostly offset by an increase in investments of $6.0 million, including in our smart and connected initiatives and other strategic initiatives and general inflation of $3.9 million compared to the third quarter of 2023. 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 the Bradley and Josam acquisitions in the Americas segment completed in the fourth quarter of 2023 and first quarter of 2024, respectively. The acquired SG&A costs include $0.9 million of acquisition-related costs and a $7.8 million gain on the settlement of Bradley’s frozen pension plan. Total SG&A expenses, as a percentage of net sales, were 29.2% in the third quarter of 2024 compared to 29.1% in the third quarter of 2023.
Previous 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.
Current wording
Restructuring. In the third quarter of 2024, we recorded a net restructuring charge of $4.9 million, which primarily related to immaterial actions in all regions including severance and other cost reductions. In the third quarter of 2023, we recorded a net restructuring charge of $0.4 million, which primarily related to an immaterial program approved in the Americas involving a planned facility exit and the related severance and other costs incurred.
Previous wording
Operating Income. Operating income (loss) by segment for the second quarters of 2024 and 2023 was as follows:
Current wording
Operating Income. Operating income (loss) by segment for the third quarters of 2024 and 2023 was as follows:
Previous 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.
Current wording
Interest Income. Interest income in the third quarter of 2024 decreased $0.2 million compared to the third quarter of 2023, primarily due to lower cash and cash equivalents balances.
Previous 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.
Current wording
Interest Expense. Interest expense in the third quarter of 2024 increased $2.4 million compared to the third 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
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.
Current wording
Income Taxes. Our effective income tax rate decreased slightly to 25.1% in the third quarter of 2024, from 25.3% in the third 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 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 $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.
Current wording
Net Income. Net income was $69.1 million, or $2.06 per common share on a diluted basis, for the third quarter of 2024, compared to $65.8 million, or $1.96 per common share on a diluted basis, for the third quarter of 2023. Results for the third quarter of 2024 included an after-tax benefit of $5.8 million, or $0.17 per common share, for a gain on the settlement of the Bradley pension plan and $0.9 million, or $0.03 per common share, for other investment gains, partially offset by after-tax charges of $3.8 million, or $0.11 per common share, for restructuring and $1.9 million, or $0.06 per common share, for acquisition-related costs. Results for the third quarter of 2023 included after-tax charges of $2.3 million, or $0.07 per common share, for acquisition-related costs and $0.3 million, or $0.01 per common share, for restructuring.
Previous wording
Six Months ended June 30, 2024 Compared to Six Months Ended June 25, 2023
Current wording
Nine Months Ended September 29, 2024 Compared to Nine Months Ended September 24, 2023
Previous wording
Net Sales. Our net sales in each of these segments for each of the first six months of 2024 and 2023 were as follows:
Current wording
Net Sales. Our net sales in each of the three geographic segments for the first nine months of 2024 and 2023 were as follows:
Previous 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.
Current wording
Americas net sales increased $225.8 million, or 21.7%, for the first nine months of 2024 compared to the first nine months of 2023. The change in net sales was positively impacted by $183.7 million, or 17.6%, 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 $42.9 million, or 4.1%, primarily due to increased volume, partially from the benefit of additional shipping days in the first nine months of 2024 compared to the first nine months of 2023, and favorable price realization. The additional shipping days increased net sales by low 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 $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.
Current wording
Europe net sales decreased $39.4 million, or 10.3%, for the first nine months of 2024 compared to the first nine months of 2023. The change in net sales was positively impacted by $1.3 million, or 0.3%, of foreign currency translation. Organic net sales decreased $40.7 million, or 10.6%, 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 single-digits. The decrease was primarily due to volume declines in the OEM channel which was impacted by reduced government energy incentives in 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 $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.
Current wording
APMEA net sales increased $16.6 million, or 19.9%, for the first nine months of 2024 compared to the first nine months of 2023. The change in net sales was negatively impacted by $1.1 million, or 1.3%, of foreign currency translation, which was more than offset by $8.1 million, or 9.7%, of acquired sales related to the Enware acquisition completed in the second quarter of 2023. Organic net sales increased $9.6 million, or 11.5%, primarily due to volume growth from the benefit of additional shipping days in the first nine months of 2024 compared to the first nine 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
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 the first six months of 2024.
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 Chinese yuan and Canadian dollar, partially offset by the favorable impact of the depreciation of the U.S. dollar against the euro in the first nine months of 2024.
Previous wording
Gross Profit. Gross profit and gross profit as a percent of net sales (gross margin) for the first six months 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 first nine months of 2024 and 2023 were as follows:
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, 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.
Current wording
Gross profit and gross margin increased primarily from higher price realization and productivity, partially offset by inflation, lower volume despite the additional shipping days, 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. Gross profit includes the impact of the Bradley and Josam acquisitions completed in the fourth quarter of 2023 and first quarter of 2024, respectively.
Previous wording
Selling, General and Administrative Expenses. SG&A expenses increased $58.1 million, or 20.5%, in the first six months of 2024 compared to the first six months of 2023. The increase in SG&A expenses was attributable to the following:
Current wording
Selling, General and Administrative Expenses. SG&A expenses increased $70.2 million, or 16.3%, in the first nine months of 2024 compared to the first nine months of 2023. The increase in SG&A expenses was attributable to the following:
Previous wording
The increase in organic SG&A expenses was primarily due to an increase in investments of $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.
Current wording
The increase in organic SG&A expenses was primarily due to an increase in investments of $18.0 million, including in our smart and connected initiatives and other strategic initiatives, general inflation of $12.0 million and increased variable costs due to higher sales of $3.4 million. These increases were partially offset by $7.2 million from productivity initiatives, a net decrease in short-term and long-term compensation accruals of $5.9 million, $4.4 million gain on the sale of buildings, decreased acquisition-related expenses of $3.0 million, lower professional fees of $2.4 million and $1.5 million of restructuring savings compared to the first nine months of 2023. 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 $4.1 million of acquisition-related costs and a $7.8 million gain on the settlement of Bradley’s frozen pension plan. Total SG&A expenses, as a percentage of sales, were 29.3% in the first nine months of 2024 compared to 28.6% in the first nine months of 2023.
Previous wording
Restructuring. In the first six months of 2024, we recorded a net restructuring charge of $1.5 million, which primarily related to immaterial severance and other exit costs in all three segments. In the first six months of 2023, we recorded a net restructuring charge of $1.3 million, which primarily related to immaterial actions in Europe and APMEA segments related to severance and other cost reductions.
Current wording
Restructuring. In the first nine months of 2024, we recorded a net restructuring charge of $6.4 million, which primarily related to immaterial actions in all regions including severance, exit costs and other cost reductions. In the first nine months of 2023, we recorded a net restructuring charge of $1.7 million, which primarily related to immaterial actions in all regions related to severance and other cost reductions.
Previous wording
Operating Income. Operating income (loss) by segment for the first six months of 2024 and 2023 was as follows:
Current wording
Operating Income. Operating income (loss) by segment for the first nine months of 2024 and 2023 was as follows:
Previous wording
Operating income increased $11.1 million, or 11.1%, for the second quarter of 2024 compared to the second quarter of 2023. Operating income was positively impacted by $7.6 million, or 7.6%, from acquisitions and negatively impacted by $0.5 million, or 0.5% of foreign currency translation. The increase in organic operating income of $2.5 million, or 2.5%, was primarily due to higher price realization and productivity, partially offset by inflation, incremental investments and lower volume.
Current wording
Operating income increased $29.2 million, or 10.7%, for the first nine months of 2024 compared to the first nine months of 2023. Operating income was positively impacted by $18.1 million, or 6.7%, from acquisitions and negatively impacted by $0.1 million, or 0.2%, of foreign currency translation. The increase in organic operating income of $15.9 million, or 5.9%, was primarily due to higher price realization and productivity, partially offset by inflation, incremental investments and lower volume.
Previous wording
Interest Income. Interest income in the first six months of 2024 increased $2.3 million compared to the first six months of 2023, primarily due to higher interest rates earned on our cash and cash equivalents.
Current wording
Interest Income. Interest income in the first nine months of 2024 increased $2.1 million compared to the first nine months of 2023, primarily due to higher interest rates earned on our cash and cash equivalents.
Previous wording
Interest Expense. Interest expense in the first six months of 2024 increased $5.1 million compared to the first six months 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 first nine months of 2024 increased $7.5 million compared to the first nine months 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, Net. Other income, net, in the first six months of 2024 increased $0.3 million compared to the first six months of 2023, primarily due to favorable foreign currency translation.
Current wording
Other Income, Net. Other income, net, in the first nine months of 2024 increased $1.0 million compared to the first nine months of 2023, primarily due to an immaterial investment gain partially offset by unfavorable foreign currency translation.
Previous wording
Net Income. Net income was $154.5 million, or $4.61 per common share on a diluted basis, for the first six months of 2024, compared to $140.6 million, or $4.19 per common share on a diluted basis, for the first six months of 2023. Results for the first six months of 2024 included after-tax charges of $8.0 million, or $0.24 per common share, for acquisition-related costs, $1.1 million, or $0.03 per common share, for restructuring; partially offset by an after-tax benefit of $3.3 million, or $0.10 per common share, for gain on sale of asset. Results for the first six months of 2023 include an after-tax charges of $1.3 million, or $0.04 per common share, for acquisition-related costs and $1.0 million, or $0.03 per common share, for restructuring.
Current wording
Net Income. Net income was $223.6 million, or $6.67 per common share on a diluted basis, for the first nine months of 2024, compared to $206.4 million, or $6.15 per common share on a diluted basis, for the first nine months of 2023. Results for the first nine months of 2024 included after-tax charges of $9.9 million, or $0.30 per common share, for acquisition-related costs and $4.9 million, or $0.14 per common share, for restructuring, partially offset by an after-tax benefit of $5.8 million, or $0.17 per common share, for a gain on the settlement of the Bradley pension plan, $3.3 million, or $0.10 per common share, for gain on sale of assets and $0.9 million, or $0.03 per common share, for other investment gains. Results for the first nine months of 2023 include after-tax charges of $3.6 million, or $0.11 per common share, for acquisition-related costs and $1.2 million, or $0.04 per common share, for restructuring.
Previous 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.
Current wording
We generated $221.6 million of net cash provided by operating activities in the first nine months of 2024 compared to $200.9 million of net cash provided by operating activities in the first nine months of 2023. The increase in net cash provided by operating activities was primarily related to higher net income including contributions from our acquisitions.
Previous 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.
Current wording
We used $112.7 million of net cash for investing activities in the first nine months of 2024 compared to $31.1 million used in the first nine months of 2023. We used $96.3 million in cash for business acquisitions in our Americas segment in the first nine months of 2024 compared to $12.1 million for the immaterial acquisition in our APMEA segment in the first nine months of 2023, and $1.6 million less cash for net capital expenditures in the first nine months of 2024 compared to the first nine months of 2023. For the remainder of 2024, we expect to invest approximately $12 million in capital expenditures as part of our ongoing commitment to improve our operating capabilities.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
As of September 29, 2024, we held $303.9 million in cash and cash equivalents. Of this amount, $164.0 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.
Current report — wording carried from elsewhere
to evaluate our financial structure. Our computation may not be comparable to other companies that may define their net debt to capitalization ratios differently.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Income Taxes. Our effective income tax rate increased to 24.5% in the first six months of 2024, from 23.6% in the first six months of 2023, primarily due to a reduction of foreign tax liabilities associated with the repatriation of funds in the first six months of 2023 that did not occur in the first six months of 2024 and a lower tax benefit resulting from the vesting of stock compensation awards in the first six months of 2024 compared to the first six months 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 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 report — wording carried elsewhere
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 report — wording carried elsewhere
could be required to accrue and pay taxes to repatriate these funds. Such charges may include potential state income taxes and other tax charges.