WATTS WATER TECHNOLOGIES INC

Previous wording

This Quarterly Report on Form 10-Q contains statements that are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements contain projections of our future results of operations or our financial position or state other forward-looking information. The forward-looking statements included in this Quarterly Report on Form 10-Q, including without limitation statements regarding our business performance and strategy, including, without limitation, expected financial results, benefits from recent acquisitions, expected investments in capital expenditure, improvements in operating and free cash flow and our ability to manage challenging macro-economic and softer market conditions, including impacts from tariffs, are only predictions and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify these forward-looking statements by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” and “would” or similar words. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to differ materially from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Some of the factors that might cause these differences are described under Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and, except as required by law, we undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Current wording

This Quarterly Report on Form 10-Q contains statements that are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements contain projections of our future results of operations or our financial position or state other forward-looking information. The forward-looking statements included in this Quarterly Report on Form 10-Q, including without limitation statements regarding our business performance and strategy, including, without limitation, expected financial results, benefits from recent acquisitions, expected investments in capital expenditures, improvements in operating and free cash flow, expected impacts from legislation and our ability to manage challenging macro-economic and softer market conditions, including impacts from tariffs, are only predictions and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify these forward-looking statements by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” and “would” or similar words. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to differ materially from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Some of the factors that might cause these differences are described under Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and, except as required by law, we undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Previous wording

● Water quality—includes point-of-use and point-of-entry water filtration, monitoring, conditioning and scale prevention systems for commercial, marine and residential applications.

Current wording

● Water quality—includes point-of-use, point-of-entry, closed loop, cooling tower, and other water applications used for water filtration, monitoring, conditioning and scale prevention systems for commercial, marine, light industrial and residential applications.

Previous wording

We believe the factors relating to our future growth include continued product innovation that meets the needs of our customers and our end markets; our ability to continue to make selective acquisitions, both in our core markets as well as in complementary markets; regulatory requirements relating to the quality and conservation of water and the safe use of water; increased demand for clean water; and continued enforcement of plumbing and building codes. Our acquisition strategy focuses on businesses that promote our key macro themes around safety and regulation, energy efficiency and water conservation. We target businesses that we believe will provide us with one or more of the following: an entry into new markets and/or new geographies, improved channel access, unique and/or proprietary technologies, including smart and connected technologies, advanced production capabilities or complementary solution offerings. We have completed 14 acquisitions since 2015, and in the last two years, we have completed 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 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 15 acquisitions since 2015, and in the last two years, we have completed four strategic and complementary acquisitions that expanded our addressable market and that we believe will enable value creation through greater scale and growth opportunities.

Previous wording

Enacted tariffs on foreign imports into the United States, particularly from Canada, China and Mexico, have increased the cost of our products and could adversely impact the gross margin we earn on our products. We are proactively responding to the dynamic trade environment by leveraging our global sourcing strategy, driving incremental productivity within our operations and implementing pricing actions as appropriate. We expect that our significant degree of vertical integration, with manufacturing close to our customers, will be an advantage for us in this fluid environment. We have a proven track record of successfully navigating inflation and supply chain challenges, and remain focused on continuing to deliver our products and provide value to our customers. However, there can be no assurance that we will be able to fully mitigate the impact of new or increased tariffs and actions taken by the United States or other countries to impose or increase tariffs could have a material adverse effect on our business, financial condition or results of operations. We also continue to experience inflation across our labor and overhead costs. Despite these 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

Enacted tariffs on foreign imports into the United States, particularly from Canada, China and Mexico, have increased the cost of our products and could adversely impact the gross margin we earn on our products. We are proactively responding to the dynamic trade environment by leveraging our global sourcing strategy, driving incremental productivity within our operations and implementing pricing actions as appropriate. We expect that our significant degree of vertical integration, with manufacturing close to our customers, will be an advantage for us in the current environment. We have a proven track record of successfully navigating through periods of disruption and are committed to continuing our strong execution. However, there can be no assurance that we will be able to fully mitigate the impact of new or increased tariffs and actions taken by the United States or other countries to impose or increase tariffs which could have a material adverse effect on our business, financial condition or results of operations. We also continue to experience inflation across our labor and overhead costs. Despite these challenges and uncertainties, we continue to invest in our business, including new products, our smart and connected solutions and our growth and productivity initiatives. We remain focused on our customers’ needs and executing on our long-term strategy.

Previous wording

First quarter 2025 sales decreased 2.3%, or $12.9 million, on a reported basis, and 2.1%, or $12.0 million, on an organic basis, compared to the first quarter of 2024. The reported sales decrease was positively impacted by acquired sales of 0.9%, or $5.0 million, all reported within the Americas segment, as well as net unfavorable impact of foreign exchange of 1.1%, or $5.9 million, compared to the first quarter of 2024. The 2.1% organic decline was driven by organic decline in the Americas of 1.1% and Europe of 9.2%, partially offset by 13.2% organic growth in APMEA. The organic decline was primarily driven by the unfavorable impact of approximately 3% from fewer shipping days compared to the first quarter of 2024, resulting in volume declines in the Americas and Europe, partially offset by favorable price realization and favorable volume in APMEA. The decline from fewer shipping days was estimated based on average sales per day. Operating income of $87.7 million decreased by $9.0 million, or 9.3%, in the first quarter of 2025 as compared to the first quarter of 2024. This decrease was primarily driven by volume declines from fewer shipping days, inflation and $17.4 million of restructuring charges in our Europe segment related to the 2025 French restructuring program, partially offset by favorable price realization and productivity.

Current wording

Second quarter 2025 sales increased 7.8%, or $46.4 million, on a reported basis, and 5.8%, or $34.6 million, on an organic basis, compared to the second quarter of 2024. The reported sales increase compared to the second quarter of 2024 was positively impacted by acquired sales of 1.2%, or $7.0 million, all reported within the Americas segment, as well as net favorable impact of foreign exchange of 0.8%, or $4.8 million, primarily due to strengthening of the euro against the U.S. dollar. The 5.8% organic growth was driven by organic growth in the Americas of 9.8%, offset by organic declines in Europe of 7.6% and in APMEA of 1.1%. The organic growth was primarily driven by favorable price realization in all regions and increased volume in the Americas, including pull-forward demand resulting from tariff-related price increases. Growth in the Americas was partially offset by lower volumes in Europe and APMEA. Operating income of $135.3 million increased by $23.8 million, or 21.3%, in the second quarter of 2025 as compared to the second quarter of 2024. This increase was primarily driven by favorable price realization, volume growth and productivity, partially offset by inflation and restructuring charges.

Previous wording

On January 2, 2025, we completed the acquisition of I-CON Systems Holdings LLC (“I-CON”) in a membership unit purchase transaction funded with cash on hand. The aggregate net purchase price was approximately $70.3 million, net of cash acquired of $2.8 million, and is subject to a final post-closing working capital adjustment. I-CON is headquartered in Oviedo, Florida, and is a leading designer and manufacturer of intelligent plumbing controls, addressing the unique challenges of water management in correctional facilities.

Current wording

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

Previous wording

On May 5, 2025, the Company declared a quarterly dividend of fifty-two cents ($0.52) per share on each outstanding share of Class A common stock and Class B common stock payable on June 13, 2025 to stockholders of record on May 30, 2025.

Current wording

On August 4, 2025, we declared a quarterly dividend of fifty-two cents ($0.52) per share on each outstanding share of Class A common stock and Class B common stock payable on September 15, 2025 to stockholders of record on August 29, 2025.

Previous wording

First Quarter ended March 30, 2025 Compared to First Quarter Ended March 31, 2024

Current wording

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

Previous wording

Net Sales. Our business is reported in three geographic segments: Americas, Europe and APMEA. Our net sales in each of these segments for each of the first quarters of 2025 and 2024 were as follows:

Current wording

Net Sales. Our business is reported in three geographic segments: Americas, Europe and APMEA. Our net sales in each of these segments for each of the second quarters of 2025 and 2024 were as follows:

Previous wording

Europe net sales decreased $14.9 million, or 12.1%, for the first quarter of 2025 compared to the first quarter of 2024. The change in net sales was negatively impacted by $3.6 million, or 2.9%, of foreign currency translation. Organic net sales decreased $11.3 million, or 9.2%, primarily due to fewer shipping days leading to reduced volumes and destocking in the wholesale and OEM channels which were impacted by heat pump destocking and market weakness, partially offset by favorable price realization.

Current wording

Europe net sales decreased $3.1 million, or 2.7%, for the second quarter of 2025 compared to the second quarter of 2024. The decrease in net sales was partially offset by favorable foreign currency translation of $5.6 million, or 4.9%. Organic net sales decreased $8.7 million, or 7.6%, primarily due to reduced volumes impacted by market weakness in the wholesale and OEM channels, partially offset by favorable price realization.

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, Chinese yuan and Canadian dollar in the first quarter of 2025. We cannot predict whether foreign currencies will appreciate or depreciate against the U.S. dollar in future periods or whether future foreign exchange rate fluctuations will have a positive or negative impact on our net sales.

Current wording

The net increase in net sales due to foreign exchange was mostly due to the favorable impact of the depreciation of the U.S. dollar against the euro partially offset by the appreciation of the U.S. dollar against the Australian dollar and Canadian dollar in the second quarter of 2025. We cannot predict whether foreign currencies will appreciate or depreciate against the U.S. dollar in future periods or whether future foreign exchange rate fluctuations will have a positive or negative impact on our net sales.

Previous wording

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

Current wording

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

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses decreased $2.1 million, or 1.2%, in the first quarter of 2025 compared to the first quarter of 2024. The decrease in SG&A expenses was attributable to the following:

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses increased $14.1 million, or 8.1%, in the second quarter of 2025 compared to the second quarter of 2024. The increase in SG&A expenses was attributable to the following:

Previous wording

The decrease in organic SG&A expenses was primarily due to $1.9 million from productivity initiatives, $1.8 million of restructuring savings, a net decrease in short-term and long-term compensation accruals of $1.3 million and a $1.0 million reduction in travel and marketing spend, partially offset by general inflation of $3.5 million compared to the first quarter of 2024. The decrease in foreign exchange was mainly due to the appreciation of the U.S. dollar against the euro. The acquired SG&A costs related to the I-CON acquisition in the Americas segment completed in the first quarter of 2025. The decrease in special items SG&A costs was primarily due to lower acquisition related costs in the first quarter of 2025. Total SG&A expenses, as a percentage of net sales, were 30.0% in the first quarter of 2025 compared to 29.7% in the first quarter of 2024.

Current wording

The increase in organic SG&A expenses was primarily due to increased variable costs of $5.2 million due to higher net sales, an increase in investments of $4.5 million, including in our smart and connected initiatives and other strategic initiatives and general inflation of $3.9 million, partially offset by $2.8 million from productivity initiatives, lower professional fees of $2.5 million and $1.6 million of restructuring savings compared to the second quarter of 2024. The increase in foreign exchange was mainly due to the depreciation of the U.S. dollar against the euro. The acquired SG&A costs related to two acquisitions in the Americas segment completed in the first and second quarters of 2025. The increase in special items SG&A expenses was primarily due to a $3.3 million gain on sale of building in the second quarter of 2024, partially offset by decreased acquisition-related costs of $0.8 million compared to the second quarter of 2024. Total SG&A expenses, as a percentage of net sales, were 29.1% in the second quarter of 2025 compared to 29.0% in the second quarter of 2024.

Previous wording

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

Current wording

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

Previous wording

Interest Income. Interest income in the first quarter of 2025 increased $0.2 million compared to the first quarter of 2024, primarily due to higher cash and cash equivalents balances.

Current wording

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

Previous wording

Interest Expense. Interest expense in the first quarter of 2025 decreased $1.5 million compared to the first quarter of 2024, primarily due to a lower principal balance of debt outstanding. Refer to Note 11 of the Notes to Consolidated Financial Statements for further details.

Current wording

Interest Expense. Interest expense in the second quarter of 2025 decreased $1.4 million compared to the second quarter of 2024, primarily due to a lower principal balance of debt outstanding. Refer to Note 11 of the Notes to Consolidated Financial Statements for further details.

Previous wording

Restructuring. In the first quarter of 2025, we recorded a net restructuring charge of $17.3 million, which included a $17.4 million charge related to a 2025 French restructuring program that was approved in the first quarter of 2025. 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. For more detailed description of our restructuring plans, see Note 6 of the Notes to the Consolidated Financial Statements.

Current wording

Restructuring. In the first six months of 2025, we recorded a net restructuring charge of $20.7 million, which included a $19.1 million charge related to the 2025 French restructuring program that was approved in the first quarter of 2025. In the first six months of 2024, we recorded a net restructuring charge of $1.5 million, which primarily related to immaterial severance and other exit costs in all three segments. For a more detailed description of our restructuring plans, see Note 6 of the Notes to the Consolidated Financial Statements.

Previous wording

Operating income decreased $9.0 million, or 9.3%, for the first quarter of 2025 compared to the first quarter of 2024. Operating income was unfavorably impacted by $17.4 million of restructuring charges related to the 2025 French restructuring program, partially offset by lower acquisition related costs, in the first quarter of 2025 compared to the first quarter of 2024. The increase in organic operating income of $1.8 million, or 1.5%, was primarily due to higher price realization, productivity and lower organic SG&A expenses, partially offset by inflation and lower volume.

Current wording

Operating income increased $14.8 million, or 7.1%, for the first six months of 2025 compared to the first six months of 2024. Operating income was unfavorably impacted by $19.1 million of restructuring charges related to the 2025 French restructuring program and a $4.4 million gain on sale of buildings in the first six months of 2024 that did not repeat in 2025, partially offset by lower acquisition-related costs. The increase in organic operating income of $27.7 million, or 11.3%, was primarily due to higher price realization, productivity and savings from prior restructuring actions, partially offset by inflation and lower volume.

Previous wording

Other Expense (Income), Net. Other expense (income), net, was an expense balance of $0.4 million in the first quarter of 2025, primarily due to unfavorable foreign currency translation, compared to an income balance of $0.6 million in the first quarter of 2024, primarily dure to favorable foreign currency translation.

Current wording

Other Expense (Income), Net. Other expense (income), net, was an expense balance of $0.6 million in the first six months of 2025, primarily due to unfavorable foreign currency translation, compared to an income balance of $0.8 million in the second quarter of 2024, primarily due to favorable foreign currency translation.

Previous wording

Income Taxes. Our effective income tax rate decreased to 14.8% in the first quarter of 2025, from 23.7% in the first quarter of 2024. The decrease is due to a reversal of a tax liability relating to a prior tax year for which we determined the statute of limitations had lapsed. The tax liability reversal resulted in a decrease in our foreign tax credit carryforwards and the release of an associated valuation allowance.

Current wording

Income Taxes. Our effective income tax rate decreased to 21.1% in the first six months of 2025, from 24.5% in the first six months of 2024. The decrease is due to a reversal of a tax liability during the first quarter of 2025 relating to a prior tax year for which we determined the statute of limitations had lapsed. The tax liability reversal resulted in a decrease in our foreign tax credit carryforwards and the release of an associated valuation allowance.

Previous wording

Net Income. Net income was $74.0 million, or $2.21 per share of common stock on a diluted basis, for the first quarter of 2025, compared to $72.6 million, or $2.17 per share of common stock on a diluted basis, for the first quarter of 2024. Results for the first quarter of 2025 included after-tax charges of $13.0 million, or $0.39 per share of common stock, for restructuring and $0.8 million, or $0.02 per share of common stock, for acquisition-related costs; offset by an after-tax benefit of $8.3 million, or $0.25 per share of common stock, for an income tax adjustment related to a lapsed statute tax year liability, as noted above in ‘Income Taxes’. Results for the first quarter of 2024 included after-tax charges of $5.2 million, or $0.15 per share of common stock, for acquisition-related costs, $0.9 million, or $0.03 per share of common stock, for restructuring; partially offset by an after-tax benefit of $0.8 million, or $0.02 per share of common stock, for a gain on sale of asset.

Current wording

Net Income. Net income was $174.9 million, or $5.22 per share of common stock on a diluted basis, for the first six months of 2025, compared to $154.5 million, or $4.61 per share of common stock on a diluted basis, for the first six months of 2024. Results for the first six months of 2025 included after-tax charges of $15.5 million, or $0.46 per share of common stock, for restructuring and $1.0 million, or $0.03 per share of common stock, for acquisition-related costs, partially offset by an after-tax benefit of $8.3 million, or $0.25 per share of common stock, for an income tax adjustment related to a lapsed statute tax year liability, as noted above in ‘Income Taxes’. Results for the first six months of 2024 included after-tax charges of $8.0 million, or $0.24 per share of common stock, for acquisition-related costs, $1.1 million, or $0.03 per share of common stock, for restructuring; partially offset by an after-tax benefit of $3.3 million, or $0.10 per share of common stock, for gain on sale of assets.

Previous wording

We generated $55.2 million of net cash provided by operating activities in the first quarter of 2025 compared to $45.6 million of net cash provided by operating activities in the first quarter of 2024. The increase in net cash provided by operating activities was primarily related to lower income tax payments.

Current wording

We generated $124.9 million of net cash provided by operating activities in the first six months of 2025 compared to $130.9 million of net cash provided by operating activities in the first six months of 2024. The decrease in net cash provided by operating activities was primarily related to higher working capital investment related to timing of accounts receivable collections and higher inventory primarily related to increased tariff costs, partially offset by higher net income.

Previous wording

We used $79.9 million of net cash for investing activities in the first quarter of 2025 compared to $109.8 million used in the first quarter of 2024. We used $70.3 million in cash for a business acquisition in our Americas segment in the first quarter of 2025 compared to $100.8 million in cash for business acquisitions in our Americas segment in the first quarter of 2024, which was partially offset by an increase of $0.6 million cash used for net capital expenditures in the first quarter of 2025 compared to the first quarter of 2024. For the remainder of 2025, we expect to invest approximately $35 million to $40 million in capital expenditures as part of our ongoing commitment to improve our operating capabilities.

Current wording

We used $105.5 million of net cash for investing activities in the first six months of 2025 compared to $107.5 million used in the first six months of 2024. We used $85.7 million in cash for business acquisitions in our Americas segment in the first six months of 2025 compared to $96.3 million in cash for business acquisitions in our Americas segment in the first six months of 2024, which was partially offset by an increase of $8.6 million cash used for net capital expenditures in the first six months of 2025 compared to the first six months of 2024. For the remainder of 2025, we expect to invest approximately $25 million to $30 million in capital expenditures as part of our ongoing commitment to improve our operating capabilities.

Previous wording

We used $29.9 million of net cash for financing activities during the first quarter of 2025 primarily due to dividend payments of $14.4 million, tax withholding payments on vested stock awards of $10.9 million and payments of $3.9 million to repurchase approximately 19,000 shares of Class A common stock. In the first quarter of 2024, we used $44.6 million of net cash for financing activities, which primarily consisted of 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.

Current wording

We used $52.3 million of net cash for financing activities during the first six months of 2025 primarily due to dividend payments of $32.0 million, tax withholding payments on vested stock awards of $11.1 million and payments of $7.9 million to repurchase approximately 37,000 shares of Class A common stock. In the first six months of 2024, 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.

Previous wording

The Revolving Credit Facility also includes sub-limits of $100 million for letters of credit and $15 million for swing line loans. As of March 30, 2025, we had drawn down $200.0 million on this line of credit and had $13.2 million in letters of credit outstanding, which resulted in $586.8 million of unused and available credit under the Revolving Credit Facility as of such date. Borrowings outstanding bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Term Benchmark loans, the Term Benchmark rate plus an applicable percentage, ranging from 1.075% to 1.325%, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than 1.00%) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on such day plus 0.50% and (c) the Term Benchmark rate plus 1.00% for a one-month interest period, in each case, determined by reference to our consolidated leverage ratio. For the borrowings denominated in dollars, there is a fixed 10 basis point adjustment if the reference rate is Term SOFR. The weighted average interest rate on debt outstanding under the Revolving Credit Facility as of March 30, 2025 was 5.50%. The weighted average interest rate on debt outstanding inclusive of the interest rate swaps discussed in Note 12 of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of March 30, 2025 was 4.07%. In addition to paying interest under the Credit Agreement, we are also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. We may repay loans outstanding under the Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Credit Agreement.

Current wording

The Revolving Credit Facility also includes sub-limits of $100 million for letters of credit and $15 million for swing line loans. As of June 29, 2025, we had drawn down $200.0 million on this line of credit and had $12.2 million in letters of credit outstanding, which resulted in $587.8 million of unused and available credit under the Revolving Credit Facility as of such date. Borrowings outstanding bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Term Benchmark loans, the Term Benchmark rate plus an applicable percentage, ranging from 1.075% to 1.325%, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than 1.00%) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in 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 29, 2025 was 5.50%. The weighted average interest rate on debt outstanding inclusive of the interest rate swaps discussed in Note 12 of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of June 29, 2025 was 4.07%. In addition to paying interest under the Credit Agreement, we are also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. We may repay loans outstanding under the Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Credit Agreement.

Previous wording

As of March 30, 2025, we held $336.8 million in cash and cash equivalents. Of this amount, $173.1 million of cash and cash equivalents were held by foreign subsidiaries. Our U.S. operations typically generate sufficient cash flows to meet our domestic obligations. We expect existing cash and cash equivalents and cash flows from operations and financing activities to be sufficient to meet our cash needs for at least the next 12 months and thereafter for the foreseeable future. However, if we did have to borrow to fund some or all of our expected cash outlays, we can do so at reasonable interest rates by utilizing the undrawn borrowings under our Revolving Credit Facility. Subsequent to recording the Toll Tax as part of the Tax Cuts and Jobs Act of 2017, our intent, other than with respect to the one-time repatriation of foreign earnings in 2023, has been to permanently reinvest undistributed earnings of foreign subsidiaries, and we do not have any current plans to repatriate additional post-Toll Tax foreign earnings to fund operations in the United States. However, if amounts held by foreign subsidiaries were needed to fund operations in the United States, we could be required to accrue and pay taxes to repatriate these funds. Such charges may include potential state income taxes and other tax charges.

Current wording

As of June 29, 2025, we held $369.3 million in cash and cash equivalents. Of this amount, $202.8 million of cash and cash equivalents were held by foreign subsidiaries. Our U.S. operations typically generate sufficient cash flows to meet our domestic obligations. We expect existing cash and cash equivalents and cash flows from operations and financing activities to be sufficient to meet our cash needs for at least the next 12 months and thereafter for the foreseeable future. However, if we did have to borrow to fund some or all of our expected cash outlays, we can do so at reasonable interest rates by utilizing the undrawn borrowings under our Revolving Credit Facility. Subsequent to recording the Toll Tax as part of the Tax Cuts and Jobs Act of 2017, our intent, other than with respect to the one-time repatriation of foreign earnings in 2023, has been to permanently reinvest undistributed earnings of foreign subsidiaries, and we do not have any current plans to repatriate additional post-Toll Tax foreign earnings to fund operations in the United States. However, if amounts held by foreign subsidiaries were needed to fund operations in the United States, we could be required to accrue and pay taxes to repatriate these funds. Such charges may include potential state income taxes and other tax charges.

Previous wording

Free cash flow improved in the first quarter of 2025 when compared to the first quarter of 2024, primarily driven by lower income tax payments.

Current wording

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

Previous wording

Our net debt to capitalization ratio, a non-GAAP financial measure used by management, at March 30, 2025 was (8.6%) compared to (12.5%) at December 31, 2024. The increase was driven by a change in net debt balance, primarily due to decreased cash and cash equivalents, and an increase in stockholders’ equity at March 30, 2025 compared to December 31, 2024 due to higher net income. Management believes the net debt to capitalization ratio is an appropriate supplemental measure because it helps investors understand our ability to meet our financing needs and serves as a basis to evaluate our financial structure. Our computation may not be comparable to other companies that may define their net debt to capitalization ratios differently.

Current wording

Our net debt to capitalization ratio, a non-GAAP financial measure used by management, at June 29, 2025 was (10.0%) compared to (12.5%) at December 31, 2024. The increase was driven by a change in net debt balance, primarily due to decreased cash and cash equivalents, and an increase in stockholders’ equity at June 29, 2025 compared to December 31, 2024 due to higher net income. Management believes the net debt to capitalization ratio is an appropriate supplemental measure because it helps investors understand our ability to meet our financing needs and serves as a basis to evaluate our financial structure. Our computation may not be comparable to other companies that may define their net debt to capitalization ratios differently.