Watts Water Annual Report 2023

FY2023 Annual Report · Watts Water

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Watts Water Technologies, Inc.

2023 ANNUAL REPORT

Our Mission

To improve comfort, safety, and quality of life for people
around the world through our expertise in a wide range
of water technologies. To be the best in the eyes of our
employees, customers, and shareholders.

At-a-Glance

We are a leading supplier of products and solutions that
conserve water, and manage the flow of fluids and energy into,
through, and out of buildings in the commercial and residential
markets of the Americas, Europe, and Asia-Pacific, Middle East,
and Africa (APMEA).

For 150 years, Watts has designed and produced valve systems
that safeguard and regulate water systems, energy efficient
heating and hydronic systems, drainage systems, and water
filtration technology that help purify and conserve water.

Our 5,100 employees are incredibly proud because our products
and solutions directly improve the comfort, safety, and quality of
life for people around the world.

Founded
Our company was founded in 1874
by Joseph Watts in Lawrence,
Massachusetts, U.S. as a pressure
relief valve machine shop.

Headquarters
Americas & Corporate HQ:
North Andover, Massachusetts, U.S.

Asia-Pacific, Middle East
& Africa (APMEA) HQ:
Shanghai, China

Regions
We have approximately 5,100
employees on 5 continents,
located in 21 countries, and they
collectively speak more than 18
languages.

Solutions
-
-
-
-
-

Plumbing & Flow Control
HVAC & Gas
Drainage & Water Re-use
Water Quality & Conditioning
Commercial Washroom &
Emergency Safety Products

- Municipal Waterworks

Focus Areas
Our solutions offer customers
benefits in 3 key areas:
1. Safety & Regulation
2. Energy Efficiency
3. Water Conservation

Patents
Watts has a portfolio of over
1,000 listed patents worldwide.

Corporate Strategy
Our strategy focuses on
5 key pillars:
1. Growth
2. Operational Excellence
3. Commercial Excellence
4. One Watts
5. Diversified Talent &
Performance Culture

Contractors/Installers

Customers
-
- Wholesalers
-
-
-
-
-

Engineers/Designers/Architects
OEMs
Consumers
Facility Managers/Owners
Government/Municipal

“ Every effort,
like every drop
of water, has a
ripple effect”

— Robert J. Pagano, Jr.
CEO, President, and Chairperson of the Board

Our Brands

To Our Shareholders

Watts Water Technologies achieved record results in
2023 through continued focus on our customers, driving
lean process improvement across the organization, and
our commitment to advancing our strategic initiatives,
including our digital strategy. Reported sales increased
4% to a record $2.1 billion in 2023, and organic sales
increased 1% compared to the prior year. Adjusted
operating margin improved to a record 17.8%, an
expansion of 140 basis points compared to 2022.
Adjusted earnings per share rose 16% to a record
$8.27. Free cash flow increased to $281 million with a
107% free cash flow conversion rate.

Total Net Sales
($ Billions)

Adjusted Operating
Margin*

Adjusted Earnings
per Share*

Over the past year, we successfully navigated a
challenging macro environment and continued to
execute our long-term strategy, including protecting
our core business and investing for future growth
through balanced capital deployment. We expanded
our global addressable market and cross-selling
opportunities through strategic acquisitions, while at
the same time, we continued to focus on improving
our customer service levels globally. We are proud
to provide our customers with solutions that ensure
and promote water safety, energy efficiency, and
conservation. We excel at identifying customer needs
and developing innovative products and solutions to
uniquely meet those needs.

For further discussion of “organic sales,” “adjusted operating margin,” “adjusted
earnings per share,” and “free cash flow,” which are non-GAAP financial measures,
and the comparable GAAP measures, see the section titled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in our Form
10-K included in this Annual Report to Shareholders. See last page for a reconciliation
of GAAP to non-GAAP items, including adjusted operating margin and adjusted
earnings per share.

Operational Enhancements

Our One Watts Performance System (OWPS) drives
continuous improvement by aligning our culture,
strategy, and processes through a standardized
global system of tools, plans, and behaviors. Through
OWPS, we have adopted streamlined, consistent
processes that are deployed to all Watts offices in the
21 different countries in which we operate. OWPS
also allows us to examine, simplify, and automate
our processes more effectively over time. This
has resulted in improvements that directly benefit
our customers, shareholders, and employees. We

continue to find opportunities to enhance efficiency
in our operations, which also improves safety and
sustainability. In 2023, our OWPS accomplishments
included the deployment of automation in dozens
the
of key projects, delivering hard savings;
development of a robust 2024 automation pipeline;
and the creation of automation roadmaps for our
key locations. OWPS is also guiding the integration
of our new acquisitions, bringing the power of One
Watts and the use of standard best practices to
these businesses.

Investments in Strategic Growth & Innovation

Organic Growth

We continue to generate organic growth through
our smart and connected strategy with ongoing
investment in Internet of Things (IoT) architecture
development to enhance the functionality and
security of our smart and connected-enabled
products. These investments helped us achieve
our goal to have 25% of our revenue come from
smart and connected-enabled products in the
fourth quarter of 2023.

Two examples of our newest smart and connected
offerings:

• Freeze Alerts – freeze detection option for outdoor

backflow units

• Smart Steam Boiler Control – allows for remote
monitoring and control of standard steam boilers

We are also driving profitable growth through
innovation and our robust new product development
process. Our customer intimacy enables us to
advance solutions that directly address their needs.
One example is the updated Under Sink Guardian,
which helps building owners reduce the risk of
waterborne bacteria by allowing them to sanitize
their hot water systems at the point of use.

In addition, we continue to strive for a best-in-
class customer experience
through ongoing
enhancements
to our external website and
ecommerce sites, as well as by conducting
extensive training of product development and
other customer-facing employees. In 2023, we
were particularly focused on sustainability and
updated our website to highlight how our products
help customers in their sustainability efforts, i.e., our
Handprint. We also added numerous sustainability-
focused eLearning segments to our Watts Works
Learning Management System, as well as our first
Continuing Education Unit (CEU) on sustainability.

Acquisitions

Over the past few years, we have focused on optimizing
our core business through organic growth, innovation, and
operational excellence. During 2023, we expanded our focus
to include several acquisitions. Watts has a long history of
growing the business through the successful integration of
strategic acquisitions, with 14 in the past decade.

The following acquisitions made in the past year are
expected to drive growth through end market diversification
and increased cross-selling opportunities:

• Enware Australia Pty Limited – In March 2023, we
acquired the primary assets of Enware, located near
Sydney, Australia. Enware is a leading supplier of specialty
plumbing and safety equipment used in Australian
institutional and commercial end markets. This acquisition
aligns with our strategy to expand geographically into
countries with mature and enforced plumbing codes.

• Bradley Corporation – Acquired in October 2023, Bradley
is based in Menomonee Falls, Wisconsin, and is a trusted
provider and manufacturer of commercial washroom
and emergency safety products serving institutional,
other commercial, and industrial end markets. Bradley’s
comprehensive product portfolio includes plumbing
fixtures, washroom accessories, and emergency safety
products marketed to a diverse customer base. This
acquisition expands our addressable market to include
front-of-the-wall products and increases our exposure
to attractive institutional and industrial end markets. The
acquisition also enhances value creation potential through
greater scale, growth opportunities, and cost synergies.

• Josam Company – On January 1, 2024, we acquired
Josam, based in Michigan City, Indiana, and a leading
provider and manufacturer of drainage and plumbing
products. Josam offers a comprehensive portfolio of
high-quality customized products to a diverse customer
base serving commercial, industrial, and multi-family
end markets.

Our Sustainability Journey

Our mission is to provide high-quality products, systems, and solutions for the conveyance, conservation,
control, and safe use of water. As a result, sustainability is an integral part of our business mission, practices,
and operations.

Our 2023 ESG actions and achievements included:

• The Watts Americas leadership team participated
in a joint training session on Water Stewardship
conducted by the Boston College Center for
in
Corporate Citizenship. Leaders engaged
determining how our products and services could
not only meet the needs of our customers, but also
of our communities and stakeholders.

• Our ongoing partnership with the Planet Water
Foundation provided clean drinking water to nearly
in
15,000 children and community members
Cambodia, Indonesia, Vietnam, and the Philippines
in 2023. Our sponsorship of an emergency water
system following a devastating earthquake in Turkey
provided clean drinking water to an additional
10,000 people in critical need.

• Our corporate headquarters was named a Top Place
to Work by The Boston Globe, which identifies the
most admired workplaces in Massachusetts voted
on by the people that know
them best – their employees.
This award is a testament to
who we are as seen through
the lens of our team members and recognizes
Watts as an engaged and people-first organization.

• Our annual Sustainability Report illustrates our
commitment to consistent, transparent sustainability
disclosures. For more information, view our report
at https://investors.wattswater.com/sustainability/
sustainability-overview/default.aspx.

• We were recognized by Newsweek as one of America’s Greenest Companies, which
names the top 300 companies in the U.S. based on their greenhouse gas emissions,
water usage, water generation, waste generation, and sustainability data disclosure
and commitments. For a fifth consecutive year, Newsweek also listed us as one of
America’s Most Responsible Companies (2024). USA Today named our company to
its inaugural list of America’s Climate Leaders – comprised of U.S. organizations that
achieved the greatest reduction in their core emissions intensity between 2019 and
2021, specifically, Scope 1 and 2 greenhouse gas emissions in relation to revenue.

• An integral part of our goal to build a high performance, values-driven culture is
creating an inclusive environment that welcomes and celebrates employees from
all backgrounds. To support this objective, we have incorporated inclusivity into the
Watts strategic pillars, cultural behaviors, and global performance management.
We have established partnerships with and conducted recruitment activities at
universities to drive female and under-represented minority outreach and rolled
out leadership and inclusivity training throughout the global organization. In
2023, we established a diverse candidate slate policy to assist in our outreach
efforts and expand the pool of qualified candidates for positions.

Looking Ahead

We are continuing to monitor the macroeconomic and geopolitical trends
that may impact our operations in 2024. Watts has proven its resiliency over
many decades under a variety of conditions – and I have great confidence
in our team members, our ability to execute across economic cycles, and
our capacity to adapt to meet our customers’ needs in any environment. We
remain a recognized leader with global reach and leading market positions.
Our balance sheet remains strong after our acquisitions of Enware, Bradley,
and Josam and provides ample flexibility to support our capital allocation
priorities as we create value for our customers and shareholders.

Embarking On Our 150th Year

As we head into 2024, I’m thrilled to officially kick off our company’s 150th anniversary celebration, which will
include a host of exciting events around the globe. Since 1874, Watts has been delivering innovative water
technologies that make the world’s most precious resource safe and accessible. This is a proud heritage that
is well worth celebrating, and one that we continue to build upon. Every effort, like every drop of water, has a
ripple effect, and no company reaches 150 years without the tireless efforts of its employees and support of its
customers. Together, we have achieved so much, and we continue to see tremendous opportunities ahead as
we look toward our next 150 years. Thank you for your support in the past and in the years to come. We look
forward to updating you on our continued progress.

Sincerely,

Robert J. Pagano, Jr.
Chief Executive Officer, President, and Chairperson of the Board

Gallery

Photos: (1 & 2) North Andover employees volunteered to clean up the banks of the Spicket River in Lawrence, MA.; (3 – 5) To commemorate the anniversary of 9/11, employees
welcomed local first responders to our global headquarters and treated them to pizza and cupcakes; (6 & 7) Virey le Grand and Rosières, France participated in “Movember,” a
movement where employees donned moustaches and wore blue to focus attention on men’s health; (8 – 13) Employees across the globe celebrated Watts Pink for a Day event,
which raised $25,000 for breast cancer research; (14 – 16) North Andover employees assembled bicycles and donated them to members of the Lawrence Boys & Girls Club
during a luncheon held at corporate headquarters.

Gallery

Photos: (17 & 18) Several global locations created and maintained community gardens to provide fresh produce to employees; (19) Employees in Franklin, NH honored members
of the military each Friday by wearing R.E.D. to Remember Everyone Deployed; (20) Our Latin Americans at Watts Employee Resource Group hosted a Hispanic Heritage Month
event with traditional Latin American food and music; (21- 27) Watts provided clean drinking water to nearly 15,000 children and community members in Cambodia, Indonesia,
Vietnam, and the Philippines.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the fiscal year ended December 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

Commission file number 001-11499
WATTS WATER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

815 Chestnut Street, North Andover, MA
(Address of Principal Executive Offices)

04-2916536
(I.R.S. Employer
Identification No.)

01845
(Zip Code)

Registrant’s telephone number, including area code: (978) 688-1811

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Class A common stock, par value $0.10 per share

Trading Symbol(s)
WTS

Name of each exchange on which registered
New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  No 

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934

during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes 
No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an

emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or

revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the

filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received

by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 25, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $4,757,799,205

based on the closing sale price as reported on the New York Stock Exchange.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class
Class A common stock, $0.10 par value per share
Class B common stock, $0.10 par value per share

Outstanding at January 28, 2024
27,346,822 shares
5,958,290 shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 22, 2024 are incorporated by reference into

Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

Page

PART I.
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.

PART II
Item 5.

Item 6.
Item 7.

BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
CYBERSECURITY
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
[RESERVED]
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

CONTROLS AND PROCEDURES
OTHER INFORMATION
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT

INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND

DIRECTOR INDEPENDENCE

PRINCIPAL ACCOUNTANT FEES AND SERVICES

EXHIBITS, FINANCIAL STATEMENT SCHEDULES
FORM 10-K SUMMARY.

Item 8.
Item 9.

Item 9A.
Item 9B.
Item 9C.

PART III
Item 10.
Item 11.
Item 12.

Item 13.

Item 14.

PART IV
Item 15.
Item 16.

EXHIBIT INDEX
SIGNATURES

3
17
26
27
28
29
29

30
31

46
46

47
47
48

48
48

49
49

50
50

94
97

This Annual Report on Form 10-K 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. 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.” 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.

Item 1. BUSINESS.

PART I

In this Annual Report on Form 10-K, references to “the Company,” “Watts Water,” “Watts,” “we,” “us” or “our” refer to
Watts Water Technologies, Inc. and its consolidated subsidiaries.

Overview

Watts Regulator Co. was founded by Joseph E. Watts in 1874 in Lawrence, Massachusetts. Watts Regulator Co. started
as a small machine shop supplying parts to the New England textile mills of the 19th century. Since then, Watts has
grown into a global manufacturer and become one of the world’s leading providers of water technologies and solutions
that are designed to promote safety, energy efficiency, and water conservation for commercial and residential buildings.
Watts Water Technologies, Inc. was incorporated in Delaware in 1985 and is the parent company of Watts Regulator Co.

Our strategy is to be the preferred supplier of differentiated solutions, systems and products that manage and conserve
the flow of fluids and energy into, through and out of buildings in the commercial and residential markets of the
Americas, Europe, and Asia-Pacific, Middle East and Africa (“APMEA”), our three geographic segments. Within this
framework, we focus upon three themes: safety and regulation, energy efficiency and water conservation. This strategy
provides us with a platform to increase our earnings through sales growth, both organic and inorganic, and the
systematic reduction of manufacturing costs and operational expenses.

Our strategy is to expand organically by introducing new, complementary products and solutions in existing markets, by
enhancing our preferred brands, by promoting plumbing code development to drive the need for safety and quality
products and by continually improving merchandising in our wholesale and retail distribution channels. We focus on
selling solutions to our customers that integrate a variety of our product offerings. We target selected new products and
geographic markets based on growth potential, including our ability to leverage our existing distribution channels.
Additionally, we leverage our distribution channels through the introduction of new products and solutions, as well as
the integration of products of our acquired companies.

The Internet of Things (“IoT”) has allowed companies to transform components and products into smart and connected
solutions. We are committed to enhancing our smart and connected capabilities by expanding our internal competencies
and making strategic acquisitions. We continue to invest in these capabilities by expanding our architecture
development, enhancing digital tools used by our customers, including Watts’ website, and investing in new smart and
connected product development projects. Our strategy focuses on three dimensions: Connect, Control and Conserve. We
have introduced and plan to continue offering new products that will connect our customers with smart systems, control
systems for optimal performance, and conserve critical resources by increasing operability, efficiency and safety. For the
fourth quarter of 2023, 25% of our revenue was from smart and connected enabled products, in line with our goal set
back in 2018.

We continue to focus on sustainability by taking steps to reduce the negative impact our operations have on the
environment while generating economic value by manufacturing and selling solutions, products and technologies that
enable our customers to reduce the negative impact they have on the environment. As a leading global water technology
company, we address some of the world’s most important sustainability priorities – the conservation, control and safe
use of water. In 2023, we initiated a project to conduct Life Cycle Assessments (LCAs) for all of our products produced
in our largest production plant and foundry located in Franklin New Hampshire, representing many of our largest and
most impactful product lines. Our smart and connected strategy is anchored by a commitment to connect our customers
to smart systems, control those systems for optimal performance, and conserve critical water and other resources by
increasing operability, efficiency, and safety. In 2023, we enabled our core product lines with an option for smart and
connected capabilities to provide flood and freeze detection in backflow preventors and flood detection in relief valves,
helping avoid water waste and mitigate damage. Operationally, we have reduced our global water consumption and
greenhouse gas emissions, improved our safety performance, continued to foster a diverse, equitable and inclusive work
environment, and maintained robust ethics and compliance programs so that we do business with integrity and in
accordance with high ethical standards.

We intend to generate incremental growth by targeting select acquisitions both in our core markets and in new
complementary markets. We have completed 14 acquisitions since 2013. Our acquisition strategy focuses on businesses
that manufacture preferred brand name products that address our themes of 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, improved channel access, unique and/or proprietary technologies, advanced production capabilities or
complementary solution offerings. In the last 12 months, we completed three strategic and complementary acquisitions
that expanded our addressable market and are intended to enable value creation through greater scale and growth
opportunities.

We are committed to reducing our manufacturing and operating costs using Lean methodologies to drive improvement
across all key processes. We have a number of manufacturing facilities in lower-cost regions. In recent years, we have
announced global restructuring plans which reduced our manufacturing and distribution footprint in order to reduce our
costs and to realize incremental operating efficiencies.

Additionally, a majority of our manufacturing facilities are ISO 9000, 9001 or 9002 certified by the International
Organization for Standardization. The ISO 9000 standards series is a set of internationally recognized standards for
quality assurance and management.

The majority of our sales are for products that have been approved under regulatory standards incorporated into state and
municipal plumbing, heating, building and fire protection codes in the Americas, Europe, and certain countries within
APMEA. We have consistently advocated for the development and enforcement of plumbing codes and are committed to
providing products to meet these standards.

Products and Solutions

We have a broad range of products and solutions in terms of design distinction, size and configuration. We classify our
many products and solutions into four global categories. These categories are:

• 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 and solutions are now smart and connected enabled, warning of leaks, floods and freeze
with alerts to Building Management System (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. Residential & commercial flow control and protection products accounted for approximately 56%,
52% and 53% of our total net sales in 2023, 2022 and 2021, respectively.

• 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 & gas products and
solutions accounted for approximately 29% of our total net sales in 2023, and 31% of our total net sales in
2022 and 2021. HVAC is an acronym for heating, ventilation and air conditioning.

• Drainage & water re-use—includes drainage products and engineered rain water harvesting solutions for
commercial, industrial, marine and residential applications, including connected roof drain systems.
Drainage & water re-use products and solutions accounted for approximately 10% of our total net sales in
2023, 2022 and 2021.

• Water quality—includes point-of-use and point-of-entry water filtration, monitoring, conditioning and

scale prevention systems for commercial, marine and residential applications. Water quality products and
solutions accounted for approximately 5%, 7% and 6% of our total net sales in 2023, 2022 and 2021,
respectively.

Commercial and Operational Excellence

We strive to invest in product innovation that meets the wants and needs of our customers. Our focus is on differentiated
products and solutions that will provide greater opportunity to distinguish ourselves in the marketplace. Our goal is to be
a solutions provider, not merely a components supplier. We refer to this customer-facing mindset as commercial
excellence, and we are continually looking for strategic opportunities to invest or divest, where necessary, in order to
meet those objectives. In conjunction with this customer-centric focus, we continually review our operations to ensure
we can efficiently and effectively produce and deliver products to customers. We are also striving to simplify our
administrative operations to drive further efficiencies. We call this aspect of our business operational excellence.

Customers and Markets

We sell our products and solutions to plumbing, heating and mechanical wholesale distributors and dealers, original
equipment manufacturers (“OEMs”), specialty product distributors, and major do-it-yourself (“DIY”) and retail chains.

Wholesalers. Approximately 62%, 60% and 61% of our net sales in 2023, 2022 and 2021, respectively, were to
wholesale distributors for commercial and residential applications.

OEMs. Approximately 15% of our net sales in 2023, 2022 and 2021 were to OEMs. In the Americas, our typical OEM
customers are water heater manufacturers and equipment and water systems manufacturers needing flow control devices
and other products. Our sales to OEMs in Europe are primarily to boiler manufacturers and radiant system
manufacturers. Our sales to OEMs in APMEA are primarily to water heater, air conditioning, and appliance
manufacturers.

Specialty. Approximately 19%, 21% and 19% of our net sales in 2023, 2022 and 2021, respectively, were through our
specialty channel. The specialty channel primarily includes sales related to high-efficiency boilers and water heaters,
water filtration and conditioning products and solutions, specialty floor and tile products, food service products and leak
detection products.

DIY Chains. Approximately 4%, 4% and 5% of our net sales in 2023, 2022 and 2021, respectively, were to DIY chains.
The DIY channel primarily includes sales related to valves and a portion of our water quality products.

In 2023, 2022 and 2021, no customer accounted for more than 10% of our total net sales. Our top ten customers
accounted for $440.4 million, or 21.4%, of our total net sales in 2023; $431.7 million, or 21.8%, of our total net sales in
2022; and $371.5 million, or 20.5%, of our total net sales in 2021. Thousands of other customers constituted the balance
of our net sales in each of those years.

Marketing and Sales

For product sales in the Americas, we rely primarily on commissioned manufacturers’ representatives to market our
product lines, some of which maintain a consigned inventory of our products. These representatives sell primarily to
plumbing and heating wholesalers and contractors or supply DIY stores. Our specialty channel products in the Americas
are sold through independent representatives, dealers and distributors. We also sell products directly to wholesalers,
OEMs and private label accounts primarily in Europe and APMEA, and, to a lesser extent, in the Americas.

We aim to inform and educate our channel partners, installers and end-use customers on how to maximize our product
solutions. We do so through a variety of traditional and digital marketing avenues, including social media, trade shows,
and advertising. We pride ourselves in providing industry leading product education through four distinct training
vehicles: Online Courses, on-location Lunch and Learns, Live and Virtual Instructor Led Training, and Continuing
Education Units (CEUs) for designers.

Manufacturing

We have integrated and automated manufacturing capabilities, including a state-of-the-art foundry dedicated exclusively
to the production of products that qualify as “lead-free” under the U.S. Safe Drinking Water Act; and machining
capabilities, plastic extrusion, and injection molding and assembly operations. Our foundry operations include metal
pouring systems, automatic core making, and brass and bronze die-castings. Our machining operations feature
computer-controlled machine tools, high-speed chucking machines with robotics, robotic assembly capability, laser-
cutting technology, and automatic screw machines for machining bronze, brass and steel components. Our heating and
hot water product manufacturing capabilities include all phases of light and heavy gauge metal fabrication, incorporating
the latest technology for welding and brazing, as well as laser cutting; automated and robotic applications; and metal
finishing, which includes chemical passivation of stainless steel. We have invested in recent years to expand our
manufacturing capabilities and to adopt the most efficient and productive equipment. We are committed to maintaining
our manufacturing equipment at a level consistent with current technology in order to maintain high levels of quality and
manufacturing efficiencies. In 2023, we continued to invest in our systems, our manufacturing facilities and our
commercial and operational excellence initiatives.

Capital expenditures and depreciation for each of the last three years were as follows:

Years Ended December 31,
2021

2023

2022
(in millions)

Capital expenditures
Depreciation

$ 29.7
$ 30.1

$ 28.1 $ 26.7
$ 27.6 $ 31.4

Purchased Raw Materials and Components

Our products are made using various purchased components and raw materials, including primarily bronze, brass, cast
iron, stainless steel, steel, and plastic. Substantially all of the raw materials we require to manufacture our products are
purchased from outside sources. The commodity markets have experienced tremendous volatility over the past several
years, particularly with respect to copper and stainless steel, and we have experienced high inflationary pressures in
these markets. Tariffs impact the total cost of our products and the components and raw materials that go into
manufacturing them. Increased tariff costs could adversely impact the gross margin we earn on our products. Because we
internationally source a significant amount of raw materials and components, several months of raw materials and work
in process are moving through our supply chain at any point in time. We are not able to predict whether component costs
or commodity costs, including copper and stainless steel, will significantly increase or decrease in the future. If
component costs or commodity costs increase in the future and we are not able to reduce or eliminate the effect of the
cost increases by reducing production costs or implementing price increases, our profit margins could decrease. If
component costs or commodity costs were to decline, we may experience pressure from customers to reduce our selling
prices. The timing of any price reductions and decreases in commodity costs may not align. As a result, our margins
could be affected.

With limited exceptions, we have multiple suppliers for our components and raw materials. We believe our relationships
with our key suppliers are good and that an interruption in supply from any one supplier would not materially affect our
ability to meet our immediate demands while another supplier is qualified. We regularly review our suppliers to evaluate
their capabilities. If a supplier is unable to meet our demands, we believe that in most cases our inventory of components
and raw materials will allow for sufficient time to identify and obtain the necessary commodities and other raw materials
from an alternate source. We believe that the nature of the components and raw materials used in our business are such
that multiple sources are generally available in the market. However, our current and alternative suppliers are largely
concentrated in China. The occurrence of natural disasters, public health crises such as pandemics or epidemics, political
crises such as war, terrorism or political instability, or other events that result in widespread business or supply chain
disruptions in China could have a material adverse effect on our ability to obtain necessary components and raw
materials, and our business and operating results could suffer.

Refer to Item. 1A “Risk Factors” for risks related to the impact of supply chain and logistic disruptions and Item. 7
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional disclosure.

Code Compliance

Products representing a majority of our sales are subject to regulatory standards and code enforcement, which typically
require that these products meet stringent performance criteria. Codes and standards in the Americas are established by
industry and government organizations such as the American Society of Mechanical Engineers (ASME), the Canadian
Standards Association (CSA), the American Society of Sanitary Engineering (ASSE), NSF International (NSF),
Underwriters Laboratories (UL), the Environmental Protection Agency (EPA), the Californian Energy Commission
(CEC), the International Code Council (ICC) and the International Association of Plumbing and Mechanical Officials
(IAPMO). Many of the codes and standards are incorporated into state and municipal plumbing and heating, building
and fire protection codes.

National regulatory standards in Europe vary by country. The major standards and/or guidelines that our products must
meet are AFNOR (France), DVGW (Germany), UNI/ICIM (Italy), SVGW (Switzerland), SITAC (Sweden), WRAS
(United Kingdom) and CEN (Denmark). Further, there are local regulatory standards requiring compliance as well.

We consistently advocate for the development and enforcement of plumbing codes and standards. Our product-testing
capabilities and quality control processes are core competencies for us. Our manufacturing operations consistently
maintain stringent quality control and testing procedures, thus ensuring products remain in continuous compliance with
all requirements. Investment in product-testing capability and in plant and equipment also ensures ongoing continuous
product compliance. Additionally, a majority of our manufacturing facilities are ISO 9000, 9001 or 9002 certified by the
International Organization for Standardization.

Watts also proactively monitors and participates in regulatory, codes and standards development activities with the
various aforementioned entities and others. We are a primary participating member of the U.S.-based voluntary industry
association American Supply Association (“ASA”), which provides its members with industry information and
coordinates resources for addressing regulatory issues and developing and maintaining codes and standards. Watts is
also a member of the Canadian Institute of Plumbing and Heating (CIPH), which provides a similar function and benefit
as ASA by monitoring and advocating on behalf of its members on various legislative and regulatory issues.

New Product Development and Engineering

We retain our own product development staff, design teams, and testing laboratories in the Americas, Europe and
APMEA that work to enhance our existing products and develop new products and solutions with a focus on sustainable,
customer-centric technological innovation and smart and connected solutions. We maintain sophisticated product
development and testing laboratories and continue to invest in our smart and connected product pipeline. We employ a
global new-product development process that is used to prioritize, guide and support new projects. Over the years, we
have continued to bring innovation to our markets, with smart and connected advancement in our backflow product line
to provide sensors for flood and freeze detection, notification, and tampering security, providing potential to avoid water
loss and mitigate damage from undetected floods. Leak detection has also become an important product group helping
avoid costly water-based damage and loss, providing the ability to shut off water supply remotely at the first detection of
a leak with our Leak Defense system. We continue to invest in leak detection and have solutions that service both the
residential market and commercial properties and multifamily units, together making water safer and cutting off water

loss. We launched a new product, Lync’s Aegis commercial heat pump, which is a water heater powered by electricity
and using R744, a refrigerant that is non-toxic and has less global warming potential than traditional refrigerants such as
R134a or R410a. Aegis produces hot water with no need for supplemental heat. By simply absorbing and moving heat
from the surrounding area instead of needing to generate heat, this heat pump is considered to be extremely efficient
providing the opportunity to save energy and lower operating costs.

In 2023, we launched 12 new smart and connected product offerings, adding to our portfolio and expansion of our smart
and connected strategy. We will continue to focus on and invest in our global new product development program to
leverage new technologies, inhouse expertise and our electronics capabilities to expand our smart and connected
strategy.

Competition

The domestic and international markets for energy efficient products, water conservation devices, and products that
address the safety and regulation for the flow of fluids, are intensely competitive and require us to compete against some
companies possessing greater financial, marketing and other resources than ours. Due to the breadth of our product
offerings, the number and identities of our competitors vary by product line and market. We consider quality, brand
preference, delivery times, engineering specifications, plumbing code requirements, price, technological expertise,
breadth of product offerings, products that help customers’ sustainability efforts, and smart and connected products and
solutions to be the primary competitive factors. We believe that new product development and product engineering are
also important to success in the water industry and that our position in the industry is attributable in part to our ability to
develop new and innovative products quickly and to adapt and enhance existing products. We continue to develop new
and innovative products to expand our market position and are implementing manufacturing and design programs to
reduce costs. We cannot be certain that our efforts to develop new products will be successful or that our customers will
accept our new products. Although we own certain patents and trademarks that we consider to be of importance, we do
not believe that our business and competitiveness as a whole are dependent on any one of our patents or trademarks or
on patent or trademark protection generally.

Human Capital Management

We believe that our employees are our greatest asset, and we aim to provide a safe, inclusive and high-performance
culture where our employees can thrive. As of December 31, 2023, we had approximately 5,100 employees globally,
including 2,600 in the Americas, 2,100 in Europe and 400 in APMEA. At Watts, we strive to attract, develop, retain and
engage high performing talent and we reward employee performance. By developing and promoting our talented people,
we are creating value for our customers and shareholders. As the economy and our business grow, so does the need for
highly qualified talent; hence we are always competing for the best people in an environment of increasingly challenged
supply. To that end, we have developed, and continue to enhance and refine, a robust and comprehensive talent
management strategy that spans from talent attraction to performance management, career development and retention of
our top talent to succession planning across our organization. We continually strive to cultivate and support a highly
engaged and productive workforce with employees from all backgrounds.

Talent Acquisition

• Recruitment efforts follow a defined Talent Acquisition process to attract and hire top talent.
• We provide a robust college internship program to identify and cultivate an early-in-career pipeline of talent.
• We are actively engaging with a select group of historically Black colleges and universities, minority serving

institutions, and professional organizations to help attract and recruit underrepresented professionals.

• We engage with external professional recruiting firms to supplement our internal recruiting efforts as needed.
• We employ varying sourcing strategies and technology platforms to increase the diversity of our candidate

pools.

• We have a global employee referral bonus program to attract qualified candidates and reward employees.
• We provide training to Human Resources Business Partners and hiring managers on the Watts Talent

Acquisition Process Interviewing.

Professional Development

• Leadership & Inclusivity. In 2023, we continued our global roll-out of a multi-phased leadership and inclusivity

training program for all employees that is designed to build leadership capability through a set of clear
frameworks that are simple to use and easily recalled, thus encouraging our employees to practice new habits
and build inclusive behaviors. This training includes three modules focused on identifying bias to make better
decisions, creating teams where all people feel valued and empowering people to use their voice and contribute
ideas.

• Watts Training & Development Offerings Catalog. We partner with external vendors to offer a variety of
leadership and professional development opportunities such as coaching for improved performance, time
management and new manager skills.

• Performance Management Training. We offer a targeted training series addressing the components of

performance management to help all employees to accomplish their individual goals and strategic objectives of
the organization. Specific modules have been developed for all employees on goal setting, performance
conversations, assessing performance, and career development.

• One Watts Performance System (“OWPS”) Training Program. We want to make sure all employees are aligned
with our operating philosophies and principles. Alignment helps us identify and eliminate waste and simplify
and standardize our work. We have a global training program educating all employees on our philosophies and
principles, empowering them to use OWPS tools in their daily work.

• LinkedIn Learning Curriculum. We provide a comprehensive suite of online LinkedIn Learning courses to

supplement live, instructor-led training. Learning collections on relevant topics are provided monthly which
employees can access on-demand.

• Coaching. We provide global, broad-based coaching opportunities through several external partnerships that are

targeted to the individual’s coaching and development needs.

Engagement and Performance Management

•

Senior Leader Communication and Transparency. We actively seek opportunities for regular engagement and
communication by our CEO and other senior executive leaders with our broader employee population. For
example, the Quarterly Connect Meetings and the quarterly CEO videos that follow the release of our quarterly
earnings are accessible to thousands of employees across the Company.

• Employee Engagement Surveys. We annually conduct confidential company-wide employee engagement

surveys. Feedback from these surveys provides our management team with valuable information about our
workplace culture. Survey results are also reviewed with our Board and used to develop and refine other aspects
of our overall human capital management strategies. In 2023, 90% of our Europe employee population and 87%
of our Asia Pacific Middle East & Africa (APMEA) employees participated in a pulse survey to gain feedback
on a core set of engagement items and performance drivers aligned to our business priorities. Additionally, 84%
of our US Headquarters employees also participated in a Massachusetts Top Places to Work survey in 2023.
• Performance Management Framework. We maintain a robust annual performance management process across
the organization. Together with their managers, employees start the process by setting goals; year-end activities
begin with employee self-assessments and conclude with a conversation led by the manager on goal
accomplishment and defined cultural behaviors.
Safety. Employee safety is one of our highest priorities and we strive for zero hazards and zero injuries by
educating and training employees on safety best practices through awareness campaigns and related
engagement initiatives.

•

Diversity, Equity & Inclusion (“DEI”)

An integral part of our mission to build a high performance, values-driven culture is creating an inclusive culture that
welcomes and celebrates employees from all backgrounds. Our path to innovation starts and ends with our employees,
who are fundamental to the vibrancy and success of Watts. Everything we accomplish depends on creating an
environment that is engaging and supportive and enables employees to perform to their potential.

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Climate Change Impact

Climate change and the increasing focus on sustainability have also created opportunities for our business. The growing
interest in energy efficient products has increased demand for our high-efficiency boilers and water heaters, our Aegis
heat pumps, under floor heating systems, smart thermostats, and our Microflex insulated pipes. Concern around water
conservation has led to increased interest in products that are designed to reduce water consumption, such as our ACV
Assure monitoring system, Intelliflow water shut off device, ZeroWaste reverse osmosis filters, OneFlow anti-scale
system, Hygienic Pro drains and our Trident™ and Leak Defense leak detection and water shutoff systems. We have
also seen increased interest in our products and services that are designed to protect our customers from contaminated
water and safeguard biodiversity, such as backflow preventers, HF Scientific ballast water testing systems,
Intellistation® digital water mixing systems, and Lync® brand solutions. Severe weather events that cause damage to, or
destruction of, water systems and plumbing devices have also resulted in increased demand for replacement products and
repair kits.

Environmental Stewardship

We believe we have made substantial progress in reducing the environmental impact of our operations. Recent initiatives
have resulted in a reduction on our global water consumption and our greenhouse gas emissions, including through the
implementation of smart monitoring systems in many of our high water use facilities to promote early leak and surge
detection and investments in various energy reduction projects. With respect to our product handprint, we provide a
portfolio of products, components and systems that conserve water, save energy, reduce waste and preserve water quality
and safety. In addition, our goal is to embed sustainability throughout the lifecycle of our products to create safe,
efficient, long-lasting products made with high-recycling-value materials wherever possible.

Social Responsibility

We are focused on creating both economic and social value and strive to have a positive impact on our global
community. During 2023, we supported those in need through donations of money and products to several non-profit
charitable organizations and through the volunteer efforts of our employees. One example was our ongoing partnership
with the Planet Water Foundation. During 2023, we worked with Planet Water to fund the construction of four
AquaTowers and AquaSan systems during their World Water Day campaign in order to provide clean, safe drinking
water for people in Cambodia, Indonesia and Vietnam.

Governance, Business Ethics, and Compliance

We believe that good corporate governance and an environment of high ethical standards are important for us to achieve
business success and to create value for our stockholders. Our Board is committed to high governance standards and
continually works to improve them. We periodically review our corporate governance policies and practices and
compare them to those suggested by various authorities on corporate governance and employed by other public
companies and consider changes to our corporate governance policies and practices in light of such guidance and
interpretations. We have adopted a Code of Business Conduct applicable to all officers, employees and Board members
worldwide that serves as the foundation for our ethics and compliance program, and drives policy development, training
initiatives, and reinforcement of our values throughout the global organization.

Recognition

In 2023, we were recognized for the fifth year in a row as one of Newsweek’s Most Responsible Companies and we
were also selected by Newsweek as one of America’s Greenest Companies. We were also named one of America’s
Climate Leaders by USA Today.

More information about our sustainability efforts is included in our latest Sustainability Report, available at
https://investors.wattswater.com/sustainability. The material on our website, including in our Sustainability Report is for
informational purposes only and is not included as part of, or incorporated by reference into, this Annual Report on
Form 10-K.

Product Liability, Environmental and Other Litigation Matters

We are subject to a variety of potential liabilities connected with our business operations, including potential liabilities
and expenses associated with possible product defects or failures and compliance with environmental laws. We maintain
product liability and other insurance coverage, which we believe to be generally in accordance with industry practices.
Nonetheless, such insurance coverage may not be adequate to protect us fully against substantial damage claims. See
“Item 1A. Risk Factors” and Note 16 of the Notes to the Consolidated Financial Statements, both of which are
incorporated herein by reference.

Environmental Remediation

We have been named as a potentially responsible party with respect to a limited number of identified contaminated sites.
The levels of contamination vary significantly from site to site as do the related levels of remediation efforts.
Environmental liabilities are recorded based on the most probable cost, if known, or on the estimated minimum cost of
remediation. Accruals are not discounted to their present value, unless the amount and timing of expenditures are fixed
and reliably determinable. We accrue estimated environmental liabilities based on assumptions, which are subject to a
number of factors and uncertainties. Circumstances that can affect the reliability and precision of these estimates include
identification of additional sites, environmental regulations, level of clean-up required, technologies available, number
and financial condition of other contributors to remediation and the time period over which remediation may occur. We
recognize changes in estimates as new remediation requirements are defined or as new information becomes available.
See “Item 1A. Risk Factors” and Note 16 of the Notes to the Consolidated Financial Statements, both of which are
incorporated herein by reference.

Asbestos Litigation

We are defending lawsuits in different jurisdictions, alleging injury or death as a result of exposure to asbestos. The
complaints in these cases typically name a large number of defendants and do not identify any of our particular products
as a source of asbestos exposure. To date, discovery has failed to yield evidence of substantial exposure to any of our
products and no judgments have been entered against us.

Other Litigation

Other lawsuits and proceedings or claims, arising from the ordinary course of operations, are also pending or threatened
against us.

Available Information

We maintain a website with the address www.wattswater.com. The information contained on our website is not included
as a part of, or incorporated by reference into, this Annual Report on Form 10-K. Other than an investor’s own internet
access charges, we make available free of charge through our website our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably
practicable after we have electronically filed such material with, or furnished such material to, the Securities and
Exchange Commission (“SEC”).

Information about Our Executive Officers and Directors

Set forth below are the names of our executive officers and directors, their respective ages and positions with our
Company and a brief summary of their business experience for at least the past five years:

Executive Officers

Robert J. Pagano, Jr.

Shashank Patel
Monica Barry
Andre Dhawan

Kenneth R. Lepage

Elie A. Melhem
Non-Employee Directors
Rebecca J. Boll(1)(3)
Christopher L. Conway(2)(3)
Michael J. Dubose(2)(3)
David A. Dunbar(1)(3)
Louise K. Goeser(2)(3)
W. Craig Kissel(2)(3)
Joseph T. Noonan
Merilee Raines(1)(3)
Joseph W. Reitmeier(1)(3)

Age

Position
Chief Executive Officer, President, Chairperson of
the Board and Director
63 Chief Financial Officer
53 Chief Human Resources Officer
60 Chief Operating Officer

52
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68
62
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68
59

General Counsel, Chief Sustainability Officer &
Secretary
President, Asia-Pacific, the Middle East & Africa

Director
Director
Director
Lead Independent Director
Director
Director
Director
Director
Director

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

(3) Member of the Governance and Sustainability Committee

Robert J. Pagano, Jr. has served as Chief Executive Officer, President and a director of the Company since May 2014
and as Chairperson of the Board of Directors since February 2022. He also served as interim Chief Financial Officer
from October 2014 to April 2015 and from April 2018 to July 2018. Mr. Pagano previously served as Senior Vice
President of ITT Corporation and President, ITT Industrial Process from April 2009 to May 2014. Mr. Pagano originally
joined ITT in 1997 and served in several additional management roles during his career at ITT, including as Vice
President Finance, Corporate Controller, and President of Industrial Products. ITT Corporation is a diversified
manufacturer of highly engineered critical components and customized technology solutions for the energy,
transportation and industrial markets. Prior to joining ITT, Mr. Pagano worked at KPMG LLP. Mr. Pagano is a Certified
Public Accountant. Mr. Pagano has also served as a member of the Board of Directors of Applied Industrial
Technologies, Inc. since August 2017. Applied Industrial Technologies is a distributor of bearings, power transmission
products, fluid power components and other industrial supplies and provides engineering, design and systems integration
for industrial and fluid power applications, as well as customized mechanical, fabricated rubber and fluid power shop
services. Mr. Pagano has also served on the Board of Directors of The Water Council since October 2021. The Water
Council is a non-profit organization focused on water research, education and economic development to solve critical
water challenges by driving innovation in freshwater technology and advancing water stewardship.

Shashank Patel has served as Chief Financial Officer of the Company since July 2018. Mr. Patel previously worked at
Xylem Inc. from the time of its spin-off from ITT Corporation in 2011 until June 2018. While at Xylem, Mr. Patel
served as Vice President, Finance for Xylem Applied Water Systems, Dewatering and the America’s Commercial Team
from July 2017 to June 2018, Integration Leader for the Sensus business from August 2016 to June 2017, Vice President,
Finance for Global Operations from April 2016 to July 2016, Interim Chief Financial Officer of Xylem from July 2015
to March 2016, and Vice President, Finance for the Applied Water Systems division from 2011 to July 2015. Mr. Patel
also served in several leadership roles in finance, operations and engineering at ITT from 1996 until the spin-off of
Xylem in 2011. Xylem is a global designer, manufacturer and equipment and service provider for water and wastewater
applications. Mr. Patel has served as a member of the Board of Directors of Federal Signal Corporation since
October 2021. Federal Signal Corporation designs, manufactures and supplies a suite of products and integrated
solutions for municipal, governmental, industrial and commercial customers.

Monica Barry has served as Chief Human Resources Officer of the Company since October 2021. Ms. Barry previously
served as Vice President, Talent Management, Organizational Development and Corporate Human Resources Business
Partner with Colfax Corporation from February 2020 to September 2021. Colfax is a global diversified technology
company that provides specialty medical technologies and fabrication technology products and services. Ms. Barry
served as Vice President, Global Talent, Learning & Development and Inclusion from July 2015 to January 2020 and as
Vice President, Human Resources, Health Sector from August 2012 to October 2015 for Johnson Matthey, PLC.
Johnson Matthey is a provider of catalyst systems for emission control within vehicles, products and processing services
for the efficient use and transformation of natural resources, active pharmaceutical ingredients for a variety of treatments
and drugs, and emerging opportunities in battery materials and fuel cells. From 2010 to 2012, Ms. Barry served as
Director Human Resources, North America Supply Chain & Labor Relations for The Campbell Soup Company. Prior to
2010, Ms. Barry held several human resources and operations management positions with FMC Corporation.

Andre Dhawan has served as Chief Operating Officer of the Company since August 2022. Mr. Dhawan previously
worked at Gilbarco Veeder-Root, a subsidiary of Vontier Corporation and formerly a subsidiary of Danaher Corporation
and Fortive Corporation. While at Gilbarco Veeder-Root, Mr. Dhawan served as President, Americas from July 2020 to
July 2022 and President, EMEA & APAC from July 2015 to July 2020. Gilbarco Veeder-Root is a global manufacturer
of fueling and convenience store equipment and technology. Mr. Dhawan also served as President, EMEA for Xylem
Inc. from 2013 to 2014 following its spin-off from ITT Corporation. From 1998 to 2012, Mr. Dhawan served in a
number of progressively more senior leadership positions within ITT Corporation.

Kenneth R. Lepage has served as General Counsel and Secretary of the Company since August 2008 and as Chief
Sustainability Officer since May 2021. Mr. Lepage also previously served as Chief Human Resources Officer of the
Company from April 2020 to October 2021 and from December 2009 to October 2015. Mr. Lepage originally joined the
Company in September 2003 as Assistant General Counsel and Assistant Secretary. Prior to joining the Company,
Mr. Lepage was a Junior Partner at the law firm of Hale and Dorr LLP (now Wilmer Cutler Pickering Hale and Dorr
LLP).

Elie A. Melhem has served as President, Asia Pacific, Middle East & Africa since February 2016. Mr. Melhem originally
joined the Company in July 2011 as President, Asia Pacific. Mr. Melhem was previously the Managing Director of
China for Ariston Thermo Group, a global manufacturer of heating and hot water products, from 2008 to July 2011.
Prior to joining Ariston, Mr. Melhem spent eleven years with ITT Industries in China where he held several management
positions, including serving as President of ITT’s Residential and Commercial Water Group in China and President of
ITT’s Water Technology Group in Asia.

Rebecca J. Boll has served as a director of the Company since February 2024. Ms. Boll has served as Senior Vice
President and Chief Product Officer at Fluence Energy, Inc. since 2020. Fluence is a leading provider of energy storage
products and services and cloud-based software for the renewable energy and energy storage markets, and its service
offerings include delivery services and recurring operational services, as well as financing structuring services. Ms. Boll
previously served as Chief Technology Officer and Vice President of Strategy for the Building Management business
unit at Schneider Electric from 2018 to 2020. Prior to this position, Ms. Boll held several management positions at
General Electric from 2005 to 2018, including Chief Technology Officer of GE Licensing and Technology Ventures;
Executive General Manager, Edge Computing and Software Solutions, Automation & Controls; and Commercial
Leader, GE2GE, Automation & Controls. Prior to joining General Electric, Ms. Boll held management positions at
Northrop Grumman, Allied Domecq and Leo Burnett Advertising, and she served as an electronic combat officer,
AWACS, in the United States Air Force.

Christopher L. Conway has served as a director of the Company since June 2015. Mr. Conway was President, Chief
Executive Officer and Chairman of the Board of CLARCOR Inc. from December 2011 until it was acquired in
February 2017. Mr. Conway is now retired. Mr. Conway originally joined CLARCOR in 2006 and served in several
senior management roles prior to becoming President and Chief Executive Officer, including Chief Operating Officer,
President of CLARCOR’s PECOFacet division, President of Facet USA, Inc., an affiliate of CLARCOR, and Vice
President of Manufacturing of Baldwin Filters, Inc., another affiliate of CLARCOR. CLARCOR was a diversified
marketer and manufacturer of mobile, industrial and environmental filtration products sold in domestic and international
markets. Prior to joining CLARCOR, Mr. Conway served for two years as the Chief Operating Officer of Cortron
Corporation, Inc., a manufacturing start-up based in Minneapolis, Minnesota. Mr. Conway also served for seven years in
various management positions at Pentair, Inc., an international provider of products, services, and solutions for its
customers' diverse needs in water and other fluids, thermal management, and equipment protection.

Michael J. Dubose has served as a director of the Company since December 2020. Mr. Dubose served as President of the
Fisher Healthcare Division of Thermo Fisher Scientific Inc. from March 2019 until his retirement in August 2023.
Thermo Fisher Scientific engages in the provision of analytical instruments, equipment, reagents and consumables,
software and services for research, analysis, discovery, and diagnostics. Mr. Dubose previously served as Vice President
of National Accounts and Cross Border Business Globally for W.W. Grainger, Inc. from 2010 to March 2019. W.W.
Grainger is a leading broad line supplier of maintenance, repair and operating (MRO) products, with operations
primarily in North America, Japan and Europe. Prior to this position, he served as a Regional Vice President of Staples,
Inc. from 2008 to 2010. Prior to 2008, Mr. Dubose held senior management positions with Corporate Express Inc.,
Alliant Foodservice Inc. and Baxter International Inc.

David A. Dunbar has served as a director of the Company since February 2017 and as Lead Independent Director of our
Board of Directors since July 2023. Mr. Dunbar has served as President and Chief Executive Officer and a member of
the Board of Directors of Standex International Corporation since January 2014, and as Chairman since October 2016.
Standex is a global, multi-industry manufacturer comprised of five broad business segments: Electronics, Engraving,
Scientific, Engineering Technologies and Specialty Solutions. Mr. Dunbar previously served as President of the valves
and controls global business unit of Pentair Ltd. from October 2009 to December 2013. The unit was initially owned by
Tyco Flow Control and Tyco Flow Control and Pentair merged in 2012. Pentair is a global provider of products and
services relating to energy, water, thermal management and equipment protection. Prior to his tenure at Pentair,
Mr. Dunbar held a number of senior positions at Emerson Electric Co., including President of each of the following:
Emerson Process Management Europe; Machinery Health Management; and Emerson Climate Technologies
Refrigeration.

Louise K. Goeser has served as a director of the Company since March 2018. Ms. Goeser served as President and Chief
Executive Officer of Grupo Siemens S.A. de C.V. from March 2009 until her retirement in May 2018. In this position,
Ms. Goeser was responsible for Siemens Mesoamérica, which is the Mexican, Central American and Caribbean unit of
multinational Siemens AG, a global engineering company operating in the industrial, energy and healthcare sectors.
Ms. Goeser previously served as President and Chief Executive Officer of Ford of Mexico from January 2005 to
November 2008. Prior to this position, she served as Vice President, Global Quality for Ford Motor Company from 1999
to 2005. Prior to 1999, Ms. Goeser served as General Manager, Refrigeration and Vice President, Corporate Quality at
Whirlpool Corporation and held various leadership positions with Westinghouse Electric Corporation. Ms. Goeser has
served as a member of the Board of Directors of MSC Industrial Direct Co., Inc. since December 2009. MSC is a North
American distributor of metal working and maintenance, repair, and operations products and services. Ms. Goeser
previously served as a member of the boards of directors of Talen Energy from June 2015 to December 2016, PPL
Corporation from March 2003 to June 2015, and Witco Corporation from 1997 to 1999.

W. Craig Kissel has served as a director of the Company since October 2011. Mr. Kissel served as Lead Independent
Director of our Board of Directors from February 2022 to July 2023 and served as the Chairperson of our Board of
Directors from October 2014 to February 2022. Mr. Kissel previously was employed by American Standard Companies
Inc. from 1980 until his retirement in September 2008. American Standard was a leading worldwide supplier of air
conditioning and heating systems, vehicle control systems, and bathroom china and faucet ware. During his time at
American Standard, Mr. Kissel served as President of Trane Commercial Systems from 2004 to June 2008, President of
WABCO Vehicle Control Systems from 1998 to 2003, President of the Trane North American Unitary Products Group
from 1994 to 1997, Vice President of Trane Marketing of the North American Unitary Products Group from 1992 to
1994 and held various other management positions at Trane from 1980 to 1991. From 2001 to 2008, Mr. Kissel served as
Chairman of American Standard’s Corporate Ethics and Integrity Council, which was responsible for developing the
company’s ethical business standards. Mr. Kissel also served in the U.S. Navy from 1973 to 1978. Mr. Kissel served as a
director of Chicago Bridge & Iron Company from May 2009 until its merger with McDermott International, Inc. in
May 2018 and then Mr. Kissel served as a member of the board of directors of McDermott International until June 2020.
McDermott International is a global provider of technology, engineering and construction solutions for the energy
industry.

Joseph T. Noonan has served as a director of the Company since May 2013. Mr. Noonan is currently an angel investor
and advisor to consumer, software and technology-enabled companies. Mr. Noonan served as Founder and Chief
Executive Officer of Linger Home, Inc., a direct-to-consumer home textile brand, from August 2018 to January 2020.
From November 2013 to January 2018, Mr. Noonan served as Chief Executive Officer of Homespun Design, Inc., an
online marketplace for American-made furniture and home accents. Mr. Noonan previously worked as an independent
digital strategy consultant from November 2012 to November 2013. Mr. Noonan was employed by Wayfair LLC from
April 2008 to November 2012. During his time at Wayfair, Mr. Noonan served as Senior Director of Wayfair
International from June 2011 to November 2012, Director of Category Management and Merchandising from
February 2009 to June 2011 and Manager of Wayfair’s Business-to-Business Division from April 2008 to
February 2009. Wayfair is an online retailer of home furnishings, décor and home improvement products. Prior to
joining Wayfair, Mr. Noonan worked as a venture capitalist at Polaris Partners and as an investment banker at Cowen &
Company.

Merilee Raines has served as a director of the Company since February 2011. Ms. Raines served as Chief Financial
Officer of IDEXX Laboratories, Inc. from October 2003 until her retirement in May 2013. Prior to becoming Chief
Financial Officer, Ms. Raines held several management positions with IDEXX Laboratories, including Corporate Vice
President of Finance, Vice President of Finance and Treasurer, Director of Finance, and Controller. IDEXX Laboratories
develops, manufactures and distributes products and provides services primarily for the companion animal veterinary,
livestock and poultry, dairy and water testing industries. Ms. Raines served as a member of the Board of Directors of
Affymetrix, Inc., a provider of life science and molecular diagnostic products that enable analysis of biological systems
at the gene, protein and cell level, from January 2015 until it was acquired in March 2016. Ms. Raines also served as a
member of the Board of Directors of Aratana Therapeutics, Inc., a pet therapeutics company focused on licensing,
developing and commercializing biopharmaceutical products for companion animals, from February 2014 until it was
acquired in July 2019. Ms. Raines served as a member of the Board of Directors of Benchmark Electronics, Inc., a
worldwide provider of engineering services, integrated technology solutions and electronic manufacturing services from
May 2018 to June 2021. Ms. Raines has served as a member of the Board of Directors of TransMedics Group, Inc., a
medical technology company providing novel systems for the preservation and transport of organs to be used for
transplant, since January 2021, and as a member of the Board of Directors of Ocular Therapeutix, Inc., a
biopharmaceutical company focused on the formulation, development and commercialization of innovative therapies for
diseases and conditions of the eye, since September 2021.

Joseph W. Reitmeier has served as a director of the Company since February 2016. Mr. Reitmeier has served as
Executive Vice President and Advisor of Lennox International Inc. since January 2024. Mr. Reitmeier previously served
as Executive Vice President and Chief Financial Officer of Lennox International from July 2012 until December 2023,
as Vice President of Finance for the Commercial business segment of Lennox International from 2007 to July 2012, and
as Director of Internal Audit of Lennox International from 2005 to 2007. Lennox International is a leading global
provider of climate control solutions and it designs, manufactures and markets a broad range of products for the heating,
ventilation, air conditioning and refrigeration markets. Before joining Lennox International, Mr. Reitmeier held financial
leadership roles at Cummins Inc. and PolyOne Corporation.

Item 1A. RISK FACTORS.

Industry Risk Factors

Economic cycles, particularly those involving reduced levels of commercial and residential starts and remodeling,
may have adverse effects on our revenues and operating results.

We have experienced and expect to continue to experience fluctuations in revenues and operating results due to
economic and business cycles. The businesses of most of our customers, particularly plumbing and heating wholesalers
and OEM manufacturers, are cyclical. Therefore, the level of our business activity has been cyclical, fluctuating with
economic cycles. An economic downturn may also affect the financial stability of our customers, which could affect
their ability to pay amounts owed to their vendors, including us. We also believe our level of business activity is
influenced by commercial and residential starts and renovation and remodeling, which are, in turn, heavily influenced by
interest rates, consumer debt levels, changes in disposable income, employment growth and consumer confidence. Credit
market conditions may prevent commercial and residential builders or developers from obtaining the necessary capital to
continue existing projects or to start new projects. Increases in prevailing interest rates or disruptions in financial
markets and banking systems could make credit and capital markets difficult for us or our customers to access and could
significantly raise the cost of new debt for us or our customers. This may result in the delay or cancellation of orders
from our customers or potential customers and may adversely affect our revenues and our ability to manage inventory
levels, collect customer receivables and maintain profitability. Economic conditions and financial markets in the United
States and globally have experienced significant volatility in recent periods. If these market conditions persist, we may
see diminished liquidity and credit availability, inability to access capital markets, and the bankruptcy, failure, collapse,
or sale of various entities that could directly or indirectly impact our business, including certain of our customers and
suppliers. If economic conditions worsen in the future, our revenues and profits could decrease or trigger goodwill,
indefinite-lived intangible assets, or long-lived asset impairments and could have a material adverse effect
on our financial condition and results of operations.

Changes in the costs of raw materials and purchased components, including imposition of or changes in tariff rates,
as well as supply chain and logistics disruptions, could reduce our profit margins and adversely affect our ability to
meet our customer delivery commitments.

Our products are made using various purchased components and raw materials, including primarily bronze, brass, cast
iron, stainless steel, steel and plastic. Substantially all of the raw materials we require to manufacture our products are
purchased from outside sources. The costs and availability of raw materials and components may be subject to change
due to, among other things, interruptions in production by suppliers, changes in worldwide prices, demand levels,
exchange rates and imposition of or changes in tariff rates. We typically do not enter into long-term supply agreements.
Our inability to obtain supplies of raw materials and purchased components for our products at favorable costs could
have a material adverse effect on our business, financial condition or results of operations by decreasing our profit
margins. Commodity prices, particularly copper and stainless-steel prices, have experienced tremendous volatility over
the past several years, mainly due to global macroeconomic trends, including global price inflation, supply chain
disruption and international conflicts. Should commodity costs or purchased component costs increase substantially, we
may not be able to recover such costs, through selling price increases to our customers or other product cost reductions,
which would have a negative effect on our financial results. If commodity costs or purchased component costs decline,
we may experience pressure from customers to reduce our selling prices. Additionally, we continue to purchase
components and finished goods from international sources. In limited cases, these components or finished goods are
single-sourced. The availability of components and finished goods from international sources could be adversely
impacted by a range of factors such as a public health crisis, extreme weather events, suppliers’ allocations to other
purchasers, threats of wars and global geo-political instability, and new laws, tariffs or regulations that might cause short
term / long term supply chain disruptions.

As a global manufacturer and distributor, we are facing additional risks related to ongoing disruptions and increased
costs in our supply chain and logistics. Although recent global supply chain disruptions have normalized, labor shortages
have affected our manufacturing and distribution processes, as well as those of our suppliers. The ongoing wars in
Ukraine and Gaza have added strain to the European markets and the global economy, as well as exacerbated inflation,
particularly energy inflation.

We face intense competition and, if we are not able to respond to competition in our markets, our revenues and
profits may decrease.

Competitive pressures in our markets could adversely affect our competitive position, leading to a possible loss of
market share or a decrease in prices, either of which could result in decreased revenues and profits. We encounter intense
competition in all areas of our business. To remain competitive, we will need to invest continually in manufacturing,
product development, marketing, customer service and support and our distribution networks. We may not have
sufficient resources to continue to make such investments and we may be unable to maintain our competitive position. In
addition, we may have to reduce the prices of some of our products to stay competitive, potentially resulting in a
reduction in the profit margin for, and inventory valuation of, these products. Some of our competitors are based in
foreign countries and have cost structures and prices in foreign currencies. Accordingly, currency fluctuations could
cause our U.S. dollar costed products to be less competitive than our competitors’ products costed in other currencies.

We are subject to risks associated with changing technology, product innovation, manufacturing techniques,
operational flexibility and business continuity, which could place us at a competitive disadvantage.

The successful implementation of our business strategy requires us to continually evolve our existing products and
introduce new products to meet customers’ needs in the industries we serve, as evidenced by our investments in our
smart and connected strategy. Many of our products are characterized by stringent performance and specification
requirements that mandate a high degree of manufacturing, engineering, and technological expertise. If we fail to meet
these requirements, or if our product offerings, including our smart and connected products, are not accepted by the
market, our business could be at risk. We believe that our customers rigorously evaluate their suppliers on the basis of a
number of factors, including product quality, price competitiveness, technical and manufacturing expertise, development
and product design capability, new product innovation, reliability and timeliness of delivery, operational flexibility,
impact on the environment, customer service and overall management. Our success will depend on our ability to
continue to meet customers’ changing specifications with respect to these criteria. Further, we must continue to
effectively adapt our products and services to a changing technological and regulatory environment to drive growth and
defend against disruption caused by competitors, regulators or other external forces impacting our business and
operations. If we are unable to be agile and responsive to disruption in the development of new products, services and
technologies, including technologies such as artificial intelligence and machine learning, our business, financial
condition, results of operations and cash flows could be adversely affected. We cannot ensure that we will be able to
address technological advances or introduce new products that may be necessary to remain competitive within our
business. We cannot ensure that we can adequately protect any of our technological developments to produce a
sustainable competitive advantage. Furthermore, we may be subject to business continuity risk in the event of an
unexpected loss of a material facility or operation. We cannot ensure that we adequately protect against such loss.

Economic and other risks associated with international sales and operations could adversely affect our business and
future operating results.

Since we sell and manufacture our products worldwide, our business is subject to risks associated with doing business
internationally. Our business and future operating results could be harmed by a variety of factors, including:

•

unexpected geo-political events in foreign countries in which we operate, which could adversely affect
manufacturing and our ability to fulfill customer orders; and threats or outbreaks of war, terrorism,
governmental instability, or international tensions and conflicts, including the wars in Ukraine and Gaza,
which could cause supply chain disruptions impacting our ability to manufacture products, service our
customers or negatively impact our profit margins;

our failure to comply with anti-corruption laws and regulations of the U.S. government and various
international jurisdictions, such as the U.S. Foreign Corrupt Practices Act and the United Kingdom’s
Bribery Act of 2010;

trade protection measures and import or export duties or licensing requirements, which could increase our
costs of doing business internationally;

expropriation, nationalization or other protectionist activities;

•

potentially negative consequences from changes in tax laws, which could have an adverse impact on our
profits;

difficulty in staffing and managing widespread operations, which could reduce our productivity;

costs of compliance with differing labor regulations, especially in connection with restructuring our
overseas operations;

laws of some foreign countries, which may not protect our intellectual property rights to the same extent as
the laws of the U.S.;

unexpected changes in regulatory requirements, which may be costly and require time to implement;

difficulty of enforcing agreements, collecting receivables and protecting intellectual property and other
assets through non-U.S. legal systems;

foreign exchange rate fluctuations, which could also materially affect our reported results. A portion of our
net sales and certain portions of our costs, assets and liabilities are denominated in currencies other than
U.S. dollars. Approximately 36%, 34% and 38% of our net sales in 2023, 2022 and 2021, respectively,
were from sales outside of the U.S. We cannot predict whether currencies such as the euro, Canadian
dollar, Chinese yuan, or other currencies in which we transact 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 reported results; and

• The occurrence or reoccurrence of regional epidemics, a global pandemic or other public health crises, such
as COVID-19, which may adversely affect our operations, financial condition, and results of operations.
The extent to which a public health crisis impacts our business going forward will depend on factors such
as the duration and scope; governmental, business, and individuals' actions in response to the public health
crisis; and the impact on economic activity, including the possibility of recession or financial market
instability. Measures to contain a public health crisis may intensify other risks described in these Risk
Factors.

Company Risk Factors

Our business, reputation and financial performance may be adversely affected by cyber-security attacks, information
technology failures and other business disruptions.

Our business may be impacted by disruptions, including cyber-security attacks or information technology failures,
threats to physical security, as well as damaging weather, fire or other acts of nature. We depend heavily on the
confidentiality, integrity and availability of our information technology infrastructure and systems, including third-party
data centers and third-party cloud services to manage our business objectives and operations, support our customers’
requirements and protect proprietary and other sensitive information, including personal information. Any damage to, or
failure of, our systems or a third-party hosting facility or other service that we use, could severely impact our ability to
conduct our business operations, attract new customers, maintain existing customers, or result in a material weakness in
our internal control over financial reporting, any of which could materially adversely affect our future operating results.
While we have taken steps designed to reduce interruptions by implementing internal controls, a cybersecurity risk
management program, network and data center resiliency, and redundancy and recovery processes, these measures may
be inadequate.

Cyber-security attacks, in particular, are evolving as threat actors become increasingly sophisticated in using techniques
and tools (including artificial intelligence) to circumvent security controls. Such attacks include, but are not limited to,
malicious software, misconfigurations, bugs, attempts to gain unauthorized access to data (including through social
engineering/phishing or the use of malware/ransomware), and other electronic security breaches that could lead to
disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data.
Cybersecurity may also be breached due to employee error, malfeasance, system errors or vulnerabilities, including
vulnerabilities of our customers, distributors, vendors, suppliers, and their products. We have been impacted by certain
cyber-security attacks, either directly or indirectly via our supply chain or third-party vendors, and may continue to
experience them going forward, potentially with more frequency. While to date no attacks have had a material impact on
our operations or financial results, we cannot guarantee that material attacks will not occur in the future. We also have a

portion of our workforce working remotely, which may heighten these risks. In addition, we have designed products and
services that connect to and are part of the “Internet of Things” which may also be vulnerable to cyber-security breaches.
As we continue to design and develop smart and connected products, services and solutions that leverage our hosted or
cloud-based resources, the Internet-of-Things and other wireless/remote technologies, and include networks of
distributed and interconnected devices that contain sensors, data transfers and other computing capabilities, our
customers' data and systems may be subjected to harmful or illegal content or attacks, including potential cybersecurity
threats. Additionally, we may not have adequately anticipated or precluded such cybersecurity threats through our
product design or development. Consequently, these products, services and solutions also may be subjected to harmful or
illegal content or attacks that develop vulnerabilities or critical security issues that cannot be disclosed without
compromising security. If we need to address multiple vulnerabilities simultaneously, we may also need to make
prioritization decisions in determining which vulnerabilities or security defects to fix first, and the timing of these fixes,
which could result in compromised security. These vulnerabilities and security defects could expose us or our customers
to a risk of loss, disclosure, or misuse of data; adversely affect our operating results; result in litigation (including class
actions), liability, or regulatory action (including under laws related to privacy, data protection, data security, network
security, and consumer protection); deter customers or sellers from using our products, services and solutions; result in
significant incident response, system restoration or remediation costs; and otherwise harm our business and reputation.
We maintain a cybersecurity risk management program and have adopted measures and incurred cost with the intention
of mitigating potential risks associated with information technology disruptions and cybersecurity threats; however,
there is no assurance that these measures will be fully implemented, complied with or effective at preventing or detecting
cyber-attacks or security breaches, or other vulnerabilities, which may allow them to persist in the environment over
long periods of time. In addition, cybersecurity and data privacy and protection laws and regulations are evolving and
present increasing compliance challenges, which may increase our costs, affect our competitiveness and expose us to
substantial fines or other penalties. Further, customers and third-party providers increasingly demand rigorous
contractual provisions regarding privacy, cybersecurity, data protection, confidentiality, and intellectual property, which
may also increase our overall compliance burden and related costs. Finally, we cannot guarantee that any costs and
liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable
insurance will be available to us in the future on economically reasonable terms or at all.

We also may experience unplanned system interruptions or outages of our primary ERP system as it continues to age,
which may affect our ability to support and maintain the system in an effective manner. Any disruptions, delays or
deficiencies related to our primary ERP system could lead to substantial business interruption, including our ability to
perform routine business transactions, which could have a material adverse effect on our financial results.

Given the unpredictability of the timing, nature and scope of such disruptions, we could potentially be subject to
production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products to
our customers, the compromising of confidential or otherwise protected information, misappropriation, destruction or
corruption of data, security breaches, other manipulation or improper use of our systems, networks or our products,
financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of
which could have a material adverse effect on our competitive position, results of operations, cash flows or financial
condition.

We are in the process of replacing our current primary ERP system with a new ERP system, and this system
implementation is expected to occur in phases over the next several years. Any software implementation requires
significant investment of human and financial resources and we may experience significant delays, increased costs and
other difficulties. Any significant disruption or deficiency in the design and implementation of our software systems,
including our new ERP, could adversely affect our ability to process orders, ship product, send invoices and track
payments, fulfill contractual obligations or otherwise operate our business. While we invest significant resources in
planning and project management, significant issues may arise, which could have a material adverse effect on our
competitive position, results of operations, cash flows or financial condition. In addition, our current primary ERP
system will continue to be used over the course of the phased implementation and we may experience system
interruptions or deficiencies as described in the paragraph above.

Implementation of our strategic initiatives, including acquisition and dispositions, and integration of acquired
businesses may not be successful, which could affect our ability to increase our revenues or our profitability.

One of our strategies is to increase our revenues and profitability and expand our business through acquisitions that will
provide us with complementary products and solutions and enhance our existing product offerings. In addition, from
time to time, we may divest assets or businesses based on an evaluation of our business portfolio. We cannot be certain
that we will be able to identify, acquire or profitably manage additional companies or successfully integrate such
additional companies without substantial costs, delays or other problems. The identification, evaluation, and negotiation
of potential acquisitions and other strategic transactions such as divestitures may divert the attention of management and
entail various expenses, whether or not such transactions are ultimately completed. We have faced increasing
competition for acquisition candidates, which has resulted in significant increases in the purchase prices of many
acquisition candidates. This competition, and the resulting purchase price increases, may limit the number of acquisition
opportunities available to us, possibly leading to a decrease in the rate of growth of our revenues and profitability. Also,
companies acquired recently and in the future may not achieve anticipated revenues, cost synergies, profitability or cash
flows that justify our investment, or divestitures may not realize the expected benefits or synergies of such transactions.
In addition, acquisitions may involve a number of risks, including, but not limited to:

•

difficulties in integrating operations, business processes, systems and company culture;

challenges in conforming standards, controls, procedures and accounting and other policies, business
cultures and compensation structures;

adverse effects on existing business relationships with suppliers or customers;

inadequate internal control over financial reporting and our ability to bring such controls into compliance
with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner;

adverse short-term effects on our reported operating results, as a result of incurring acquisition-related debt,
pre-acquisition potential tax liabilities, acquisition expenses, and the amortization of acquisition-acquired
assets;

inability to effectively transfer liabilities, contracts, facilities and employees to the purchaser, identify and
separate the intellectual property to be divested from the intellectual property that we wish to keep and
reduce fixed costs previously associated with the divested assets or business; we may still retain liabilities
associated with the divested businesses and other indemnification obligations;

diversion of management’s attention;

investigations of, or challenges to, acquisitions by competition authorities;

loss of key personnel at acquired companies;

unanticipated management or operational problems or legal liabilities; and

potential goodwill, indefinite-lived intangible assets, or long-lived asset impairment charges.

We are subject to risks related to product defects, which could result in product recalls and could subject us to
warranty claims in excess of our warranty provisions or which are greater than anticipated due to the
unenforceability of liability limitations.

We cannot be certain that our quality controls and procedures, including the testing of raw materials and safety testing of
selected finished products, will reveal latent defects in our products or the materials from which they are made, which
may not become apparent until after the products have been sold into the market. We also cannot be certain that our
suppliers will always eliminate latent defects in products we purchase from them. Accordingly, there is a risk that
product defects will occur, which could require a product recall. Product recalls can be expensive to implement and, if a
product recall occurs during the product’s warranty period, we may be required to replace the defective product. In
addition, a product recall may damage our relationship with our customers and we may lose market share with our
customers. Our insurance policies may not cover the costs of a product recall.

Our standard warranties contain limits on damages and exclusions of liability for consequential damages and for misuse,
improper installation, alteration, accident or mishandling while in the possession of someone other than us. We may
incur additional operating expenses if our warranty provision does not reflect the actual cost of resolving issues related
to defects in our products. If these additional expenses are significant, it could adversely affect our business, financial
condition and results of operations.

We use important intellectual property in our business. If we are unable to protect our intellectual property or if a
third party makes assertions against us or our customers relating to intellectual property rights, our business could be
adversely affected.

We own important intellectual property, including patents, trademarks, copyrights and trade secrets. We cannot
guarantee, however, that we will be able to secure all desired protection, nor that the steps we have taken to protect our
intellectual property will be adequate, to prevent infringement of our rights or misappropriation or theft of our
technology, trade secrets or know-how. For example, effective patent, trademark, copyright and trade secret protection
may be unavailable or limited in some of the countries in which we operate. In addition, while we generally enter into
confidentiality agreements with our employees and third parties to protect our trade secrets, know-how, business strategy
and other proprietary information, such confidentiality agreements could be breached or otherwise may not provide
meaningful protection for our trade secrets and know-how related to the design, manufacture or operation of our
products. If it became necessary for us to resort to litigation to protect our intellectual property rights, any proceedings
could be burdensome and costly, and we may not prevail. Further, adequate remedies may not be available in the event
of an unauthorized use or disclosure of our trade secrets and manufacturing expertise. Finally, for those products in our
portfolio that rely on patent protection, once a patent has expired, the product is generally open to competition. Products
under patent protection usually generate higher revenues and profitability than those not protected by patents. If we fail
to successfully enforce our intellectual property rights, our competitive position could suffer, which could harm our
business, financial condition, results of operations and cash flows.

In addition, our competitors may develop technologies that are similar or superior to our proprietary technologies or
design around the patents we own or license. Further, as we expand our operations in jurisdictions where the protection
of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies increases, despite
efforts we undertake to protect them. Foreign governments may adopt regulations, and foreign governments or courts
may render decisions, requiring compulsory licensing of intellectual property rights, or foreign governments may require
products to meet standards that serve to favor local companies or provide reduced protection relative to other countries.

We face risks from product liability and other lawsuits, which may adversely affect our business.

We have been and expect to continue to be subject to various product liability claims or other lawsuits, including, among
others, alleging that our products include inadequate or improper instructions for use or installation, inadequate warnings
concerning the effects of the failure of our products, alleged manufacturing or design defects, or allegations that our
products contain asbestos. If we do not have adequate insurance or contractual indemnification, damages from these
claims would have to be paid from our assets and could have a material adverse effect on our results of operations,
liquidity and financial condition. Like other manufacturers and distributors of products designed to control and regulate
fluids and gases, we face an inherent risk of exposure to product liability claims and other lawsuits in the event that the
use of our products results in personal injury, property damage or business interruption to our customers. We cannot be
certain that our products will be completely free from defect. In addition, in certain cases, we rely on third-party
manufacturers for our products or components of our products. We cannot be certain that our insurance coverage will
continue to be available to us at a reasonable cost, or, if available, will be adequate to cover any such liabilities. For
more information, see Item 1. “Business—Product Liability, Environmental and Other Litigation Matters” and Note 16
of the Notes to the Consolidated Financial Statements, both of which are incorporated herein by reference.

We face risks from costs for environmental compliance and/or to address potential liabilities under environmental
laws and regulations.

Our operations and facilities in all jurisdictions in which we operate are subject to federal, state, local and foreign laws
and regulations related to pollution and the protection of the environment, health and safety, including, but not limited to
those governing air emissions, discharges to water, water usage, the generation, handling, storage, treatment and disposal
of hazardous wastes and other materials, and the remediation of contaminated sites. A failure by us to comply with
applicable requirements or maintain the permits required for our operations could result in civil or criminal fines,

penalties, enforcement actions, third-party claims for property damage and personal injury, requirements to clean up
property or to pay for the costs of cleanup or regulatory or judicial orders enjoining or curtailing operations or requiring
corrective measures, including the installation of pollution control equipment or remedial actions.

Certain environmental laws and regulations impose on present and former owners and operators of facilities and sites,
and on potentially responsible parties (“PRPs”) for sites to which parties may have sent waste for disposal, requirements
to investigate and remediate contamination. PRP designation typically requires the funding of site investigations and
subsequent remedial activities. Such liability can be imposed without regard to fault and, under certain circumstances,
may be joint and several, which may result in one PRP being held responsible for the entire obligation. Liability may
also include damages to natural resources. On occasion, we are involved in the investigation and/or remedial activities at
sites that we currently own or operate or formerly owned or operated, or sites to which we sent waste for disposal, and
we have been and could continue to be named as a PRP at such other sites.

The discovery of additional contamination, including at acquired facilities, the imposition of more stringent
environmental, health and safety laws and regulations, including cleanup requirements, or the insolvency, or other
grounds for refusing to participate, of other responsible parties could require us to incur capital expenditures or operating
costs materially in excess of our accruals, increase costs of compliance, decrease demand for our products, create
reputational harm or require us to manufacture with alternative technologies and materials. Future investigations we
undertake may lead to discoveries of contamination that must be remediated, and decisions to close facilities may trigger
remediation requirements that are not currently applicable. We may also face liability for alleged personal injury or
property damage due to exposure to hazardous substances used or disposed of by us, contained within our current or
former products, or present in the soil or groundwater at our current or former facilities. We could incur significant costs
in connection with such liabilities. See Item 1. “Business—Product Liability, Environmental and Other Litigation
Matters” and Note 16 of the Notes to the Consolidated Financial Statements, both of which are incorporated herein by
reference.

Climate change, and legislation or regulations addressing climate change, may have an adverse impact on our
business and results of operations.

The impacts of climate change are highly unpredictable and vary depending on geographical location, but could include
changing temperatures, droughts, water shortages, wildfires, changes in weather and rainfall patterns, changes in sea
levels, and changing storm patterns and intensities. These impacts present several potential challenges to water and
energy related products, such as potential degradation of water quality and changes in water conservation or energy
efficiency requirements, particularly during periods of increased precipitation, flooding, or water shortages. Inclement
weather and extreme weather events may have varying impacts on our business. Certain events may disrupt the
operations of our customers, creating customer shutdowns that prevent or defer sales of our product, while other events
may drive increased demand for our products, which may create volatility in our financial results. Additionally, these
events may disrupt our own operations and the operations of our suppliers, including the operation of manufacturing
plants, the transportation of raw materials from our suppliers, and the transportation of products to our customers, any of
which may increase our costs, reduce our productivity and adversely affect our business, financial condition, results of
operations and prospects. Additionally, concern over climate change has and may continue to result in new or increased
legal and regulatory requirements to reduce or mitigate the effects of climate change, including limitations on
greenhouse gas emissions, or to disclose our efforts regarding such matters, which could increase our costs or require
additional investments in our facilities and equipment, and require us to make significant new disclosures regarding the
climate-related impacts of our business. New legislation and regulatory requirements may also impact our customers and
suppliers, which could affect demand for our products or our ability to source key materials. In addition, our customers
and suppliers may impose their own requirements with respect to climate change and greenhouse gas emissions, that
may require us to incur additional costs to comply with such requirements. Any failure to comply with those
requirements may also affect demand for our products or our ability to source key materials. We also establish our own
goals with respect to reducing our impact on the environment. Any failure to achieve our own goals, or any perception of
a failure to act responsibly with respect to the environment or to effectively respond to regulatory requirements
concerning climate change, or failure to accurately report on our progress toward achieving our goal or in environmental
and sustainability programs can lead to adverse publicity or litigation, resulting in an adverse effect on our business or
damage to our reputation.

Increased scrutiny of, and evolving expectations regarding, sustainability and environmental, social, and governance
(“ESG”) matters could increase our costs, harm our reputation and adversely impact our financial results.

Companies are facing increasing and evolving scrutiny related to ESG practices and disclosures from certain investors,
government entities, customers, employees, and other stakeholders or third parties. With this increased focus, public
reporting regarding ESG practices is becoming more broadly expected, which could lead to increased scrutiny of our
ESG practices or lack thereof. Such increased scrutiny may result in increased costs, increased risk of litigation or
reputational damage relating to our ESG practices or performance, enhanced compliance, or disclosure obligations, or
other adverse impacts on our business, financial condition, or results of operations. While we may at times engage in
voluntary initiatives (such as voluntary disclosures or goals), such initiatives may be costly and may not have the desired
effect. For example, we may commit to certain initiatives and we may not ultimately be able to achieve such initiatives
due to cost, technological constraints or other factors that are within or outside of our control. Even if we achieve our
initiatives, our actions may subsequently be determined to be insufficient by various stakeholders or other third parties.
If our ESG practices and reporting do not meet investor, regulator, customer, employee, or other stakeholder or third
party expectations, which continue to evolve, our brand, reputation and/or business relationships may be negatively
impacted, and we may be subject to investor or regulator engagement regarding such matters. Certain market
participants, including major institutional investors, use third-party benchmarks, ratings, or scores to measure our ESG
practices in making investment and voting decisions. Unfavorable ratings or scores of us or our industry may lead to
negative investor sentiment and the diversion of investment to other companies or industries, which could have a
negative impact on our stock price and our access to and cost of capital. As ESG best practices, reporting standards, and
disclosure requirements continue to develop, we may incur increasing costs related to ESG monitoring and reporting. In
addition, new ESG rules and regulations have been adopted and may continue to be introduced in various states and
other jurisdictions. Our failure to comply with any applicable rules or regulations could lead to penalties and adversely
impact our reputation, customer attraction and retention, access to capital, and employee retention. Such ESG matters
may also impact our suppliers, customers, and business partners, which may augment or cause additional impacts on our
business, financial condition or results of operations.

Our ability to achieve savings through our restructuring and business transformation activities may be adversely
affected by management’s ability to fully execute such plans as a result of local regulations, geo-political risk or other
factors within or beyond the control of management.

We have implemented a number of restructuring and business transformation activities, which include steps that we
believe are necessary to enhance the value and performance of the Company, including reducing operating costs and
increasing efficiencies throughout our manufacturing, sales and distribution footprint. Factors within the control of
management, or factors beyond management’s control such as local labor regulations or legal or political intervention,
may change the total estimated costs or the timing of when the savings will be achieved under the plans. Further, if we
are not successful in completing the restructuring or business transformation activities timely or if additional or
unanticipated issues such as labor disruptions, inability to retain key personnel during and after the transformation or
higher exit costs arise, our expected cost savings may not be met and our operating results could be negatively affected.
In addition, our restructuring and transformation activities may place substantial demands on our management, which
could lead to diversion of management’s attention from other business priorities and result in a reduced customer focus.

The requirements to evaluate goodwill, indefinite-lived intangible assets and long-lived assets for impairment may
result in a write-off of all or a portion of our recorded amounts, which would negatively affect our operating results
and financial condition.

As of December 31, 2023, our balance sheet included goodwill, indefinite-lived intangible assets, amortizable intangible
assets and property, plant and equipment of $693.0 million, $65.5 million, $150.6 million and $248.2 million,
respectively. In lieu of amortization, we are required to perform an annual impairment review of both goodwill and
indefinite-lived intangible assets. In 2023, 2022 and 2021, none of our goodwill reporting units or our indefinite lived
tradenames were impaired. We are also required to perform an impairment review of our long-lived assets if indicators
of impairment exist. In 2022, we recognized a pre-tax non-cash impairment charge of $1.3 million related to a
technology intangible asset. This impairment was due to market value expectations indicating the carrying amounts of
these assets were in excess of the fair value. In 2023 and 2021 none of our long-lived assets were impaired.

There can be no assurances that future goodwill, indefinite-lived intangible assets or other long-lived asset impairments
will not occur. We perform our annual test for indications of goodwill and indefinite-lived intangible assets impairment
in the fourth quarter of our fiscal year or sooner if indicators of impairment exist.

The loss or financial instability of major customers could have an adverse effect on our results of operations.

In 2023, our top ten customers accounted for approximately 21% of our total net sales with no one customer accounting
for more than 10% of our total net sales. Our customers generally are not obligated to purchase any minimum volume of
products from us and are able to terminate their relationships with us at any time. In addition, increases in the prices of
our products could result in a reduction in orders from our customers. A significant reduction in orders from, or change
in terms of contracts with, any significant customers could have a material adverse effect on our future results of
operations.

Our credit facility may limit our ability to pay dividends, incur additional debt and make acquisitions and other
investments.

Our revolving credit facility contains operational and financial covenants that restrict our ability to make distributions to
stockholders, incur additional debt and make acquisitions and other investments unless we satisfy certain financial tests
and comply with various financial ratios. If we do not maintain compliance with these covenants, our creditors could
declare a default under our revolving credit facility, and our indebtedness could be declared immediately due and
payable. Our ability to comply with the provisions of our indebtedness may be affected by changes in economic or
business conditions beyond our control. Further, one of our strategies is to increase our revenues and profitability and
expand our business through acquisitions. We may require capital in excess of our available cash and the unused portion
of our revolving credit facility to make large acquisitions, which we would generally obtain from access to the credit
markets. There can be no assurance that if a large acquisition is identified that we would have access to sufficient capital
to complete such acquisition. Should we require additional debt financing above our existing credit limit, we cannot be
assured such financing would be available to us or available to us on reasonable economic terms.

Our inability to attract and retain key personnel may adversely affect our business.

Our success depends on our ability to recruit, retain and develop highly-skilled management and key personnel.
Competition for these individuals in our industry is intense and we may not be able to successfully recruit, train or retain
qualified personnel, or to effectively implement successions to existing personnel. If we fail to retain and recruit the
necessary personnel or arrange for successors to key personnel, our business could materially suffer.

Investment Risk Factors

One of our stockholders can exercise substantial influence over our Company.

As of December 31, 2023, Timothy P. Horne beneficially owned 5,938,290 shares of Class B common stock. Our
Class B common stock entitles its holders to ten votes for each share, and our Class A common stock entitles its holders
to one vote per share. As of December 31, 2023, Timothy P. Horne beneficially owned approximately 17.9% of our
outstanding shares of Class A common stock (assuming conversion of all shares of Class B common stock beneficially
owned by Mr. Horne into Class A common stock) and approximately 99.7% of our outstanding shares of Class B
common stock, which represents approximately 68.3% of the total outstanding voting power. As long as Mr. Horne
controls shares representing at least a majority of the total voting power of our outstanding stock, Mr. Horne will be able
to unilaterally determine the outcome of most stockholder votes, and other stockholders will not be able to affect the
outcome of any such votes.

Conversion and subsequent sale of a significant number of shares of our Class B common stock could adversely
affect the market price of our Class A common stock.

As of December 31, 2023, there were outstanding 27,352,701 shares of our Class A common stock and 5,958,290 shares
of our Class B common stock. Shares of our Class B common stock may be converted into Class A common stock at any
time on a one for one basis. Under the terms of a registration rights agreement with respect to outstanding shares of our
Class B common stock, the holders of our Class B common stock have rights with respect to the registration of the
underlying Class A common stock. Under these registration rights, the holders of Class B common stock may require, on

up to two occasions that we register their shares for public resale. If we are eligible to use Form S-3 or a similar
short-form registration statement, the holders of Class B common stock may require that we register their shares for
public resale up to two times per year. If we elect to register any shares of Class A common stock for any public
offering, the holders of Class B common stock are entitled to include shares of Class A common stock into which such
shares of Class B common stock may be converted in such registration. However, we may reduce the number of shares
proposed to be registered in view of market conditions. We will pay all expenses in connection with any registration,
other than underwriting discounts and commissions. If all of the available registered shares are sold into the public
market the trading price of our Class A common stock could decline.

General Risk Factors

Changes in regulations or standards could adversely affect our business.

Our products and business are subject to a wide variety of statutory, regulatory and industry standards and requirements.
A significant change to regulatory requirements, whether federal, foreign, state or local, or to industry standards, could
substantially increase manufacturing costs, impact the size and timing of demand for our products, require us to
manufacture with alternative technologies or materials, or put us at a competitive disadvantage, any of which could harm
our business and have a material adverse effect on our financial condition, results of operations and cash flow.

Our operating results could be negatively affected by changes in tax rates, the adoption of new tax legislation, or
exposure to additional tax liabilities.

As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. As a result, our
effective rate is derived from a combination of applicable tax rates in the various places that we operate. Our future taxes
could be affected by numerous factors, including changes in the mix of our profitability from country to country, the
results of examinations and audits of our tax filings, adjustments to our uncertain tax positions, changes in accounting
for income taxes and changes in tax laws.

In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination
is uncertain. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or
liabilities, and in evaluating our tax positions. Our tax filings are regularly under audit by tax authorities and the ultimate
tax outcome may differ from the amounts recorded and may materially affect our financial results in the period or
periods for which such determination is made.

In October 2021, the Organization for Economic Co-operation and Development (“OECD”) issued model rules for a
new global minimum tax framework, commonly referred to as “Pillar Two,” which includes the introduction of a 15%
global minimum tax to become effective beginning after January 1, 2024. To date, approximately 140 countries have
tentatively signed a framework agreeing in principle to this initiative and several countries are in various stages of
implementing Pillar Two proposals in local tax legislation. The OECD continues to refine the technical guidance. Our
effective tax rate and cash tax payments could increase in future years as a result of these changes.

The U.S. enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022, which, among other provisions, creates a
new corporate alternative minimum tax (CAMT) of at least 15% for certain large corporations that have at least an
average of $1 billion in adjusted financial statement income over a consecutive three-year period effective in tax years
beginning after December 31, 2022. The IRA also includes a 1% excise tax on new corporate stock repurchases
beginning in 2023. We do not expect to meet the CAMT threshold in the near term nor expect the IRA to have a material
impact on our financial statements. However, it is possible that the U.S. Congress could advance other tax legislation
proposals in the future that could have a material impact on our financial statements.

Item 1B. UNRESOLVED STAFF COMMENTS.

None.

Item 1C. CYBERSECURITY

Cybersecurity Risk Management and Strategy

We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality,
integrity, and availability of our critical systems and information.

We design and assess our program based on the National Institute of Standards and Technology Cybersecurity
Framework (“NIST CSF”). This does not imply that we meet any particular technical standards, specifications, or
requirements. We use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our
business.

Our cybersecurity risk management program is integrated into our overall enterprise risk management program and
shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk
management program to other legal, compliance, strategic, operational, and financial risk areas.

Our cybersecurity risk management program includes the following:

•

risk assessments designed to help identify material cybersecurity risks to our critical systems, information,
products, services, and our broader enterprise IT environment;

a security team principally responsible for managing (1) our cybersecurity risk assessment processes,
(2) our security controls, and (3) our response to cybersecurity incidents;

the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of
our security controls;

risk review of certain third-party service providers, including software vendors, third-party cloud services,
and third-party hosting services, with ongoing risk monitoring for critical vendors through an external
cybersecurity intelligence service;

cybersecurity awareness training of our employees, incident response personnel, and senior management;
and

a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents.

There can be no assurance that our cybersecurity risk management program and processes, including our policies,
controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.

Ongoing Risks

We have not experienced any material cybersecurity incidents. We have not identified risks from known cybersecurity
threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our
operations, business strategy, results of operations, or financial condition. We face risks from cybersecurity threats that,
if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations,
or financial condition. For a full discussion of cybersecurity risks, please see our Risk Factors in Item 1A.

Management Oversight of Cybersecurity

Our Chief Information Officer (“CIO”) and the Vice President (“VP”) of Information Security have primary
responsibility for our overall cybersecurity risk management program and supervise both our internal cybersecurity
personnel and our retained external cybersecurity consultants. Our CIO’s and VP of Information Security’s collectively
have over 25 years of experience in leading information technology and security functions across strategy, architecture,
engineering, and operations.

The CIO and VP of Information Security supervise efforts to prevent, detect, mitigate, and remediate cybersecurity risks
and incidents through various means, which may include but are not limited to risk assessments, including with the
support of external advisors, briefings from internal security personnel; threat intelligence and other information
obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and
reports produced by security tools deployed in the IT environment.

Our Cybersecurity Council, comprised of cross-functional senior leaders from operations, finance, internal audit, product
management, and information technology teams, also reviews and assesses security risks and issues from a business and
technology perspective across all organizations within Watts on a quarterly basis, with the guidance and input of the CIO
and VP of Information Security. Our executive management team is primarily responsible for assessing and managing
our material or reasonably likely to be material risks from cybersecurity threats with the advice and input of the CIO and
VP of Information Security, including based on the above and from external advisors as necessary.

Board Oversight of Cybersecurity

Our Board considers cybersecurity risks as part of its risk oversight function and has delegated to the Audit Committee
oversight of cybersecurity and other information technology risks.

The Audit Committee oversees management’s implementation of our cybersecurity risk management program and
receives updates on the cybersecurity risk management program from the CIO and the VP of Information Security at
least twice yearly. In addition, management updates the Audit Committee regarding any material or significant
cybersecurity incidents, as well as incidents with lesser impact potential as necessary.

The Audit Committee reports to the full Board annually regarding cybersecurity. The full Board also receives annual
briefings from the CIO and the VP of Information Security on cybersecurity, or from external experts on cybersecurity
as part of the Board’s continuing education on topics that impact public companies.

Item 2. PROPERTIES.

We maintain 35 principal manufacturing, warehouse and distribution centers worldwide, including our corporate
headquarters located in North Andover, Massachusetts. Additionally, we maintain numerous sales offices and other
smaller manufacturing facilities and warehouses. The principal properties in each of our three geographic segments and
their location, principal use and ownership status are set forth below:

Americas:

Location
North Andover, MA
Burlington, ON, Canada
Export, PA
Franklin, NH
St. Pauls, NC
Menomonee Falls, WI
Germantown, WI
Michigan City, IN
Spindale, NC
Fort Worth, TX
Fort Myers, FL
Blauvelt, NY
Sparks, NV
Vernon, BC, Canada
Woodland, CA
Groveport, OH

Principal Use

Owned/Leased

Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased

Corporate Headquarters
Distribution Center
Manufacturing
Manufacturing/Distribution
Manufacturing
Manufacturing/Distribution
Manufacturing/Distribution
Manufacturing/Distribution
Distribution Center
Manufacturing/Distribution
Manufacturing/Distribution
Manufacturing/Distribution
Distribution Center
Manufacturing/Distribution
Manufacturing
Distribution Center

Principal Use

Owned/Leased

Europe:

Location
Biassono, Italy
Hautvillers, France
Landau, Germany
Plovdiv, Bulgaria
Sorgues, France
Vildbjerg, Denmark
Virey-le-Grand, France
Rosières, France
Gardolo, Italy
Monastir, Tunisia
St. Neots, United Kingdom

Asia-Pacific, Middle East, and Africa:

Manufacturing/Distribution
Manufacturing
Manufacturing/Distribution
Manufacturing
Distribution Center
Manufacturing/Distribution
Manufacturing/Distribution
Manufacturing/Distribution
Manufacturing
Manufacturing
Distribution

Principal Use

Location
Ningbo, Beilun, China
Shanghai, China
Ningbo, Beilun District, China
Auckland, New Zealand
Dubai, United Arab Emirates
Caringbah, New South Wales, Australia Manufacturing/Distribution
Kewdale, Western Australia, Australia Distribution
Campbellfield, Victoria, Australia
Distribution

Manufacturing
APMEA Headquarters
Distribution Center
Manufacturing/Distribution
Sales Office/Distribution

Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Leased

Owned/Leased

Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased

We believe that our properties, including machinery, tools and equipment, are in good condition, well maintained and
adequate and suitable for their intended uses.

Item 3. LEGAL PROCEEDINGS.

We are from time to time involved in various legal and administrative proceedings. See Item 1. “Business—Product
Liability, Environmental and Other Litigation Matters,” and Note 16 of the Notes to Consolidated Financial Statements,
both of which are incorporated herein by reference.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND

ISSUER PURCHASES OF EQUITY SECURITIES.

Our Class A common stock is traded on the New York Stock Exchange under the trading symbol “WTS.”

There is no established public trading market for our Class B common stock, which is held by members of the Horne
family. The principal holders of such stock are subject to restrictions on transfer with respect to their shares. Each share
of our Class B common stock (10 votes per share) is convertible into one share of Class A common stock (1 vote per
share).

The number of record holders of our Class A common stock as of January 28, 2024 was 58. The number of record
holders of our Class B common stock as of January 28, 2024 was 10.

Aggregate common stock dividend payments in 2023 were $46.5 million, which consisted of $38.3 million and
$8.2 million for Class A shares and Class B shares, respectively. Aggregate common stock dividend payments in 2022
were $39.5 million, which consisted of $32.5 million and $7.0 million for Class A shares and Class B shares,
respectively. While we presently intend to continue to pay comparable cash dividends, the payment of future cash
dividends depends upon the Board of Directors’ assessment of our earnings, financial condition, capital requirements
and other factors.

We satisfy the minimum withholding tax obligation due upon the vesting of shares of restricted stock by repurchasing a
number of shares with an aggregate fair market value on the date of such vesting that would satisfy the withholding
amount due. We did not have any such repurchases in the three-month period ended December 31, 2023.

The following table includes information with respect to repurchases of our Class A common stock during the
three-month period ended December 31, 2023 under our stock repurchase programs.

Issuer Purchases of Equity Securities (1)

(d) Maximum Number (or

Period
September 25, 2023 – October 22, 2023
October 23, 2023 – November 19, 2023
November 20, 2023 – December 31, 2023
Total

(a) Total

Number of

(b) Average

Units)

Shares (or Price Paid Purchased as Part of
per Share Publicly Announced
(or Unit)
Plans or Programs
$ 175.08
$ 180.37
$ 199.75
$ 186.31

Purchased(1)
7,069
6,956
9,028
23,053

7,069 $
6,956 $
9,028 $
23,053

Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs

165,026,242
163,771,607
161,968,227

(1) On February 6, 2019, we announced that our Board of Directors had approved a repurchase program of up to $150

million of our Class A common stock, to be purchased from time to time on the open market or in privately
negotiated transactions, which does not have an expiration date. On July 31, 2023, the Board of Directors authorized
an additional stock repurchase program of up to $150 million of our Class A common stock to be purchased from
time to time on the open market or in privately negotiated transactions, which also has no expiration date. The
additional $150 million has been reflected in the maximum dollar value of shares that may yet be purchased in
column (d) above. The timing and number of shares repurchased will be determined by the Company’s management
based on its evaluation of market conditions and other factors.

Performance Graph

Set forth below is a line graph comparing the cumulative total shareholder return on our Class A common stock for the
last five years with the cumulative return of companies on the Standard & Poor’s 500 Stock Index and the Russell 2000
Index. We chose the Russell 2000 Index because it represents companies with a market capitalization similar to that of
Watts Water. The graph assumes that the value of the investment in our Class A common stock and each index was $100
at December 31, 2018 and that all dividends were reinvested.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Watts Water Technologies, Inc., the S&P 500 Index
and the Russell 2000 Index

$400

$350

$300

$250

$200

$150

$100

$50

12/18

12/19

12/20

12/21

12/22

12/23

Watts Water Technologies, Inc.

S&P 500

Russell 2000

*$100 invested on 12/31/18 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

Cumulative Total Return

Watts Water Technologies, Inc.
S & P 500
Russell 2000

12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23
336.88
207.21
160.85

234.63
164.08
137.56

100.00
100.00
100.00

156.19
131.49
125.52

192.37
155.68
150.58

309.02
200.37
172.90

The above Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with
the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing
under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we
specifically incorporate it by reference into such filing.

Item 6. [Reserved]

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

Overview

We are a leading supplier of products and solutions that manage and conserve the flow of fluids and energy into, through
and out of buildings in the commercial, industrial and residential markets in the Americas, Europe and Asia-Pacific,
Middle East and Africa (“APMEA”). For 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 solutions categories include:

• 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 System (“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.

• 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.

• Water quality—includes point-of-use and point-of-entry water filtration, monitoring, conditioning and

scale prevention systems for commercial, marine and residential applications.

Our business is reported in three geographic segments: Americas, Europe, and APMEA. We distribute our products
through four primary distribution channels: wholesale, original equipment manufacturers (OEMs), specialty, and do-it-
yourself (DIY).

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 2013, including three in the last twelve months. 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.

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.

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.

Products representing a majority of our sales are subject to regulatory standards and code enforcement, which typically
require that these products meet stringent performance criteria. We have consistently advocated for the development and
enforcement of such plumbing codes. We are focused on maintaining stringent quality control and testing procedures at
each of our manufacturing facilities in order to manufacture products in compliance with code requirements and take
advantage of the resulting demand for compliant products. We believe that product development, product testing
capability and investment in plant and equipment needed to manufacture products in compliance with code
requirements, represent a competitive advantage for us.

Global economic indicators are mixed and show some signs of softer market conditions in 2024. Elevated interest rates
may impact new construction. The European economy continues to show signs of weakening, China’s economy has
decelerated, and geo-political risks have heightened. Despite these anticipated challenges, 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.

Due to the above circumstances and as described generally in this Form 10-K, our results of operations for the year
ended December 31, 2023 are not necessarily indicative of future results. Management cannot predict the full impact of
the uncertainties discussed above. For further information regarding the impact on the Company, see Item 1A, “Risk
Factors.”

Financial Overview

Net sales for 2023 increased 3.9%, or $76.8 million, on a reported basis and 0.8%, or $16.3 million, on an organic basis,
compared to 2022, primarily driven by incremental price across all of our operating segments, partially offset by lower
volumes. The reported sales increase included acquired sales of 3.0%, or $58.6 million, with $33.4 million reported
within the Americas segment and $25.2 million reported with APMEA, and the favorable impact of foreign exchange of
0.1%, or $1.9 million. The foreign exchange impact was primarily driven by 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 Canadian dollar and
Chinese yuan. Operating income of $350.9 million increased by $35.9 million, or 11.4%, in 2023 compared to 2022.
This increase was primarily driven by favorable price, product mix, productivity, and cost savings from prior
restructuring actions, partially offset by inflation, lower volume and incremental investments.

In discussing our results of operations, we refer to non-GAAP financial measures, including organic sales, organic
selling, general and administrative expenses, and organic operating income, that excludes the impacts of acquisitions,
divestitures and foreign exchange from year-over-year comparisons. Management believes reporting these non-GAAP
financial measures provides useful information to investors, potential investors and others, because it allows for
additional insight into underlying trends by providing growth on a consistent basis. We reconcile the change in these
non-GAAP financial measures to our reported results below.

Management’s discussion and analysis of our financial condition, results of operations and cash flows as of and for the
year ended December 31, 2021 can be found in Item 7 of Part II, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Acquisitions

On March 31, 2023, we completed the acquisition of the primary business assets of Enware Australia Pty Ltd
(“Enware”) in an all-cash transaction. Enware is based near Sydney, Australia, and has been a leading supplier for
specialty plumbing and safety equipment used in the Australian institutional and commercial end markets since 1937.
The acquisition of Enware aligns with our strategy to expand geographically into countries with mature and enforced
plumbing codes. Enware is expected to enhance our product offering and channel access into the Australian marketplace.
The acquisition of Enware was deemed not to be material.

On October 23, 2023, we completed the acquisition of Bradley Corporation following its conversion into Bradley
Company, LLC (“Bradley”) in a share purchase transaction. The aggregate net purchase price, including an estimated
working capital adjustment, was approximately $301.2 million and is subject to a final post-closing working capital
adjustment. We funded the transaction with $210 million of borrowings under our Credit Agreement with the remainder
being funded by cash on hand. The net transaction value was approximately $266 million after deducting the estimated
net present value of expected tax benefits of approximately $35 million. We accounted for the transaction as a business
combination in the fourth quarter of 2023. Bradley’s annual revenues for 2023 were approximately $200 million, of
which $33.4 million was included in our 2023 Consolidated Financial Statements. Please see Note 5 of the Notes to the
Consolidated Financial Statements for additional information regarding operating results of Bradley.

Bradley is based in Menomonee Falls, WI, and has been a trusted provider and manufacturer of commercial washroom
and emergency safety products serving commercial (primarily institutional) and industrial end markets for over 100
years. Bradley offers a comprehensive product portfolio that includes plumbing fixtures, washroom accessories and
emergency safety products to a diverse customer base. Bradley’s complementary portfolio will enable us to provide our
customers with innovative water solutions, as it adds front-of-the-wall applications to our differentiated back-of-the-wall
portfolio and we intend to leverage the combined strengths of our sales networks and channel relationships to facilitate
cross selling and accelerate growth. The acquisition of Bradley aligns with our strategy to enhance our product offerings,
drive growth and serve our customers.

Recent Developments

Effective January 1, 2024, we completed the acquisition of Josam Company following its conversion into Josam
Industries, LLC (“Josam”) in a share purchase transaction funded with cash on hand. The aggregate net purchase price
was approximately $98.7 million and is subject to a final post-closing working capital adjustment. The net transaction
value was approximately $88.7 million after adjusting for the estimated net present value of expected tax benefits of
approximately $10 million. Josam is based in Michigan City, Indiana, and is a leading provider and manufacturer of
drainage and plumbing products, serving commercial, industrial, and multi-family end markets for over 100 years.
Josam’s annualized sales are approximately $35 million. We will account for the transaction as a business combination
in the first quarter of 2024.

On February 7, 2024, the Board of Directors elected Rebecca J. Boll to serve as a member of the Board of Directors.
Ms. Boll was appointed as a member of the Governance and Sustainability Committee and the Audit Committee.

On February 7, 2024, we declared a quarterly dividend of thirty-six cents ($0.36) per share on each outstanding share of
Class A common stock and Class B common stock payable on March 15, 2024 to stockholders of record on March 1,
2024.

Results of Operations

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Net Sales. Our business is reported in three geographic segments: Americas, Europe and APMEA. Our net sales in each
of these segments for the years ended December 31, 2023 and December 31, 2022 were as follows:

Year Ended
December 31, 2023

Year Ended
December 31, 2022

% Change to
Consolidated

Net Sales % Sales Net Sales % Sales Change Net Sales

(dollars in millions)

$ 1,428.1
512.1
116.1

69.5 % $ 1,390.0
499.1
24.9
90.4
5.6
$ 2,056.3 100.0 % $ 1,979.5

70.2 % $ 38.1
13.0
25.2
25.7
4.6
100.0 % $ 76.8

1.9 %
0.7
1.3
3.9 %

Americas
Europe
APMEA
Total

The change in net sales was attributable to the following:

Change As a %
of Consolidated Net Sales

Change As a %
of Segment Net Sales

Americas Europe APMEA Total Americas

APMEA Total Americas

Europe APMEA

Europe
(dollars in millions)

Organic
Foreign
exchange
Acquired
Total

8.0 $

3.8 $

4.5 $ 16.3

0.4 %

0.2 %

0.2 % 0.8 %

0.5 %

0.8 %

5.0 %

(3.3)
33.4
38.1 $ 13.0 $

9.2
—

1.9
(4.0)
25.2
58.6
25.7 $ 76.8

(0.2)
1.7
1.9 %

0.5
—
0.7 %

(0.2)
1.3
1.3 % 3.9 %

0.1
3.0

(0.2)
2.4
2.7 %

1.8
—
2.6 %

(4.5)
27.9
28.4 %

Our products are sold to wholesalers, OEMs, DIY chains, and through various specialty channels. The change in organic
net sales by channel was attributable to the following:

Wholesale OEMs DIY

Specialty Total Wholesale OEMs DIY Specialty

(dollars in millions)

Change As a %
of Prior Year Sales

Americas
Europe
APMEA
Total

$ 47.0 $ (3.2) $ (1.9) $ (33.9) $ 8.0
3.8
4.5
$ (1.9) $ (33.9) $ 16.3

5.2
(1.4)
4.8
(0.3)
$ 50.4 $ 1.7

—
—

5.9 % (3.1)% (2.3)% (8.2)%
(0.4)
5.8

2.9
(3.8)

—
—

Americas net sales increased $38.1 million, or 2.7%, in 2023 compared to 2022. The change in net sales was negatively
impacted by $3.3 million, or 0.2%, of foreign currency translation, which was more than offset by $33.4 million, or
2.4%, of acquired sales related to the Bradley acquisition completed in the fourth quarter of 2023. Organic net sales
increased $8.0 million, or 0.5%, primarily due to incremental price realization partially offset by lower volumes. The
organic net sales increase was primarily in the wholesale channel due to growth across our core valve products, mostly
offset by decreases in the specialty channel primarily due to volume declines in our gas connectors and marine
instrumentation and decreases in products sold through the OEM channel into the residential end markets.

Europe net sales increased $13.0 million, or 2.6%, in 2023 compared to 2022. The change in net sales was positively
impacted by $9.2 million, or 1.8%, of foreign currency translation. Organic net sales increased $3.8 million, or 0.8%,
primarily due to higher price realization, partially offset by lower volumes. The growth was driven from sales in our
fluid solution products, including sales of our HVAC products within the OEM markets in Germany, offset partly by a
decline in our drains products.

APMEA net sales increased $25.7 million, or 28.4%, in 2023 compared to 2022. The change in net sales was negatively
impacted by $4.0 million, or 4.5%, of foreign currency translation, which was more than offset by $25.2 million, or
27.9%, of acquired sales related to the Enware acquisition completed in the second quarter of 2023. Organic net sales
increased $4.5 million, or 5.0%, due to higher prices realization and volumes, primarily from growth in the Middle East
and Australia, partially offset by declines in China.

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
Canadian dollar and Chinese yuan in 2023. 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.

Gross Profit. Gross profit and gross profit as a percent of net sales (gross margin) for 2023 and 2022 were as follows:

Gross profit
Gross margin

December 31, 2023

December 31, 2022

Year Ended

(dollars in millions)
960.9

$
46.7 %

874.3

44.2 %

Gross profit and gross margin increased primarily from higher prices, favorable product mix and productivity, partially
offset by inflation and lower volume.

Selling, General and Administrative Expenses. Selling, general and administrative, or SG&A, expenses increased
$55.8 million, or 10.2%, in 2023 compared to 2022. The increase in SG&A expenses was attributable to the following:

Organic
Foreign exchange
Acquired
Total

(in millions) % Change
6.0 %
0.1
4.0
10.1 %

33.1
0.6
22.1
55.8

The organic increase was primarily due to an increase in net investments of $17.9 million, including in our smart and
connected and other strategic initiatives, general inflation of $13.7 million, acquisition-related costs of $7.1 million,
higher travel and marketing costs of $5.2 million and a net increase in short-term and long-term compensation accruals
of $6.0 million, compared to 2022. These increases were partially offset by $6.6 million from productivity initiatives,
$4.8 million of restructuring savings and $4.1 million reduction in freight costs. The increase in foreign exchange was
mainly due to the depreciation of the U.S. dollar against the euro, partially offset by the appreciation of the U.S. dollar
against the Canadian dollar and Chinese yuan. The acquired SG&A costs related to the Bradley acquisition in the
Americas segment in the fourth quarter of 2023 and the Enware acquisition in the APMEA segment in the second
quarter of 2023. Total SG&A expenses, as a percentage of sales, were 29.4% in 2023 compared to 27.8% in 2022.

Restructuring. In 2023, we recorded a net restructuring charge of $5.5 million, which primarily related to immaterial
cost reduction actions in all regions primarily related to severance and other exit costs. In 2022, we recorded a net
restructuring charge of $10.6 million, which related to a 2021 French restructuring program as well as other actions
related to the decommissioning of machinery at one of our facilities in the Americas and cost reduction actions in Europe
and the Americas. For a more detailed description of our current restructuring plans, see Note 3 of Notes to Consolidated
Financial Statements in this Annual Report Form 10-K.

Operating Income (Loss). Operating income (loss) by geographic segment for 2023 and 2022 was as follows:

Americas
Europe
APMEA
Corporate
Total

Year Ended

December 31, December 31,

% Change to
Consolidated
Operating

2023

2022

Change

Income

(dollars in millions)

325.2 $
70.4
16.1
(60.8)
350.9

283.9 $ 41.3
3.7
2.1
(11.2)
$ 35.9

66.7
14.0
(49.6)
315.0

13.1 %
1.2
0.7
(3.6)
11.4 %

The increase (decrease) in operating income (loss) is attributable to the following:

Americas Europe APMEA Corporate Total Americas Europe APMEA Corporate Total Americas Europe APMEA Corporate

Change As a % of
Consolidated Operating Income

Change As a % of
Segment Operating Income

Organic
Foreign
exchange
Acquired
Restructuring,
impairment
charges
Total

41.6 $ (4.0) $

2.3 $

(11.2) $ 28.7

(dollars in millions)
0.7 %

13.2 % (1.3)%

(3.6)% 9.0 %

14.7 %

(6.0)%

16.4 %

22.6 %

(1.1)
1.2

1.2
—

(0.1)
1.0

—
—

—
2.2

(0.4)
0.4

0.4
—

—
0.3

—
—

—
0.7

(0.4)
0.4

1.8
—

(0.7)
7.1

—
—

(0.4)
41.3 $

6.5
3.7 $

(1.1)
2.1 $

—

5.0
(11.2) $ 35.9

(0.1)
13.1 %

2.1
1.2 %

(0.3)
0.7 %

—

1.7

(3.6)% 11.4 %

(0.1)
14.6 %

9.8
5.6 %

(7.8)
15.0 %

—
22.6 %

Operating income increased $35.9 million, or 11.4%, in 2023 compared to 2022. Operating income was positively
impacted by $2.2 million, or 0.7%, of acquired sales and the foreign currency translation impact was flat compared to
2022. The increase in organic operating income of $28.7 million, or 9.0%, was due to higher price, favorable product
mix, productivity, and savings from prior restructuring actions. These increases were partially offset by inflation, lower
volume, incremental investments and acquisition-related costs.

Interest Income. Interest income increased $6.6 million in 2023 as compared to 2022 primarily due to higher interest
rates earned on our cash and cash equivalents.

Interest Expense. Interest expense increased $1.2 million, or 17.1%, in 2023 as compared to 2022 primarily due to
higher principal balance of debt outstanding due to the acquisition of Bradley during 2023 and an increase in interest
rates. Refer to Note 12 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further
details.

Other Expense (Income), Net. Other expense (income) decreased $0.6 million compared to 2022. The decrease was
primarily due to $1.0 million of reduced expense as a result of the increase in deferred compensation plan assets. Refer
to Note 17 Financial Instruments of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for
further details.

Income Taxes. Our effective income tax rate increased to 24.9% in 2023, from 18.2% in 2022. The increase is primarily
due to the $16.1 million tax benefit in 2022 related to the modification of the structure of our Mexican supply chain
operations and the additional foreign withholding taxes associated with the repatriation of funds in 2023.

Net Income. Net income for 2023 was $262.1 million, or $7.82 per common share on a diluted basis, compared to
$251.5 million, or $7.48 per common share on a diluted basis, for 2022. Results for 2023 include after-tax charges of
$8.3 million, or $0.25 per common share, for acquisition-related costs, $5.3 million, or $0.16 per common share,
primarily for an income tax adjustment related to repatriation of foreign funds and $4.1 million, or $0.12 per common
share, for restructuring; partially offset by an after-tax benefit of $2.5 million, or $0.08 per common share, for an
adjustment to contingent consideration.

Results for 2022 include an after-tax benefit of $18.2 million, or $0.54 per common share, primarily for an income tax
benefit related to the modification of the structure of our Mexican supply chain operations and $1.4 million, or $0.04 per
common share, for an after-tax gain on sale of asset; partially offset by an after-tax charge of $7.9 million, or $0.23 per
common share, for restructuring.

Liquidity and Capital Resources

2023 and 2022 Cash Flows

We generated $310.8 million of net cash from operating activities in 2023 as compared to $224.0 million in 2022. The
increase in cash generated was primarily due to higher net income and reduced working capital investments, partially
offset by increased payments related to income taxes and customer incentives.

We used $343.1 million of net cash for investing activities in 2023 compared to $22.9 million used in 2022. We spent
$313.4 million more cash for the acquisitions in our Americas and APMEA segments and $1.6 million more cash for net
capital expenditures in 2023 compared to 2022.

We generated $69.0 million of net cash from financing activities in 2023 primarily due to proceeds from drawdowns of
$240.0 million offset by long-term debt repayments on our line of credit totaling $90.0 million, and partially offset by
tax withholding payments on vested stock awards of $15.8 million, dividend payments of $46.5 million and payments of
$16.0 million to repurchase 91,622 shares of Class A common stock. In 2022, we used $121.7 million of net cash from
financing activities primarily due to long-term debt repayments of $80.0 million, dividend payments of $39.5 million,
tax withholding payments on vested stock awards of $13.3 million and payments of $69.4 million to repurchase 493,733
shares of Class A common stock. These payments were partially offset by proceeds from drawdowns on our line of
credit totaling $85.0 million.

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 senior unsecured revolving
credit facility of $800 million from February 12, 2022 to March 30, 2026 (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 our 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.

The Revolving Credit Facility also includes sub-limits of $100 million for letters of credit and $15 million for swing line
loans. As of December 31, 2023, we had drawn down $300.0 million on this line of credit and had $12.5 million in
letters of credit outstanding, which resulted in $487.5 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 fixed 10 basis point adjustment if the reference rate is Term SOFR. The weighted average interest rate
on debt outstanding under the Revolving Credit Facility as of December 31, 2023 was 6.53%. 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 December 31, 2023 was 4.89%. 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 December 31, 2023, we were in
compliance with all covenants related to the Credit Agreement.

As of December 31, 2023, we held $350.1 million in cash and cash equivalents. Of this amount, $171.7 million was held
by foreign subsidiaries. In the fourth quarter of 2023, we determined we would make a one-time repatriation of foreign
earnings to assist in funding recent acquisitions. In 2023 we repatriated approximately $117.9 million of both previously
taxed foreign earnings and the fourth quarter one-time repatriation of foreign earnings, using the majority of that cash to
reduce our outstanding debt and to fund acquisitions. 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.

Covenant Compliance

Under the Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial
condition tests as of December 31, 2023. The financial ratios include a consolidated interest coverage ratio based on

consolidated earnings before income taxes, interest expense, depreciation, and amortization (Consolidated EBITDA) to
consolidated interest expense, as defined in the Credit Agreement. The Credit Agreement defines Consolidated EBITDA
to exclude unusual or non-recurring charges and gains. We are also required to maintain a consolidated leverage ratio of
consolidated funded debt to Consolidated EBITDA. Consolidated funded debt, as defined in the Credit Agreement,
includes all long and short-term debt, finance lease obligations and any trade letters of credit that are outstanding, less
cash and cash equivalents on the balance sheet.

As of December 31, 2023, our actual financial ratios calculated in accordance with the Credit Agreement compared to
the required levels under the Credit Agreement were as follows:

Interest Charge Coverage Ratio

Actual Ratio

45.5 to 1.00

Leverage Ratio

0.00 to 1.00

Required Level
Minimum level
3.50 to 1.00
Maximum level
3.50 to 1.00 (or 4.00 to
1.00 during temporary
step-ups following
certain acquisitions)

As of December 31, 2023, we were in compliance with all covenants related to the Credit Agreement.

In addition to financial ratios, the Credit Agreement contains affirmative and negative covenants that include limitations
on disposition or sale of assets, prohibitions on assuming or incurring any liens on assets with limited exceptions and
limitations on making investments other than those permitted by the agreement.

Working capital (defined as current assets less current liabilities) as of December 31, 2023 was $655.2 million compared
to $571.9 million as of December 31, 2022. The ratio of current assets to current liabilities was 2.6 to 1 as of
December 31, 2023 compared to 2.5 to 1 as of December 31, 2022. The increase in working capital is primarily related
to the increase in cash and cash equivalents as a result of increased cash from operating activities.

Material Cash Requirements

We expect existing cash and cash equivalents and cash flows from operations and financing activities to be sufficient to
meet our cash needs during 2024 and thereafter for the foreseeable future.

We anticipate investing between $55 million to $65 million in capital expenditures during 2024 to improve our
manufacturing capabilities and invest in technology and other commercial and operational excellence initiatives.

We intend to continue to repurchase shares of Class A common stock consistent with prior years. The repurchases are
executed from time to time on the open market or in privately negotiated transactions. The timing and number of shares
repurchased will be determined based on our evaluation of market conditions and other factors, see Note 13 of Notes to
Consolidated Financial Statements in this Annual Report on Form 10-K.

While we presently intend to continue to pay comparable quarterly cash dividends on both Class A and B common
stock, the payment of future cash dividends depends upon our Board of Directors’ assessment of our earnings, financial
condition, capital requirements and other factors.

We maintain letters of credit that guarantee our performance or payment to third parties in accordance with specified
terms and conditions. Amounts outstanding were approximately $12.5 million as of December 31, 2023 and $12.1
million as of December 31, 2022. Our letters of credit are primarily associated with insurance coverage and, to a lesser
extent, foreign purchases and generally expire within one year of issuance. These instruments may exist or expire
without being drawn down; therefore, they do not necessarily represent future cash flow obligations.

Our contractual obligations as of December 31, 2023 are presented in the following table:

Contractual Obligations

Beyond
Next
12 Months 12 Months

Total

Long-term debt obligations, including current maturities(a)
Operating lease obligations(b)
Finance lease obligations(c)
Pension contributions(d)
Interest(e)
2017 Tax Act Toll Tax payable(f)
Capital expenditures(g)
Purchase obligations(h)
Total

$ 300.0
64.1
2.6
9.2
25.6
15.3
6.1
171.9
$ 594.8

(in millions)
$

— $ 300.0
52.3
1.3
8.7
12.1
8.5
—
6.5
$ 205.4 $ 389.4

11.8
1.3
0.5
13.5
6.8
6.1
165.4

(a) Relates to drawdowns on the line of credit under the Credit Agreement as recognized in the consolidated balance
sheet. See Note 12 of Notes to the Consolidated Financial Statements in this Annual Report for further disclosures.

(b) Relates to the lease liabilities recognized for right-of-use assets of operating leases with a lease term longer than
twelve months. See Note 9 of Notes to the Consolidated Financial Statements in this Annual Report for further
disclosures.

(c) Relates to the lease liabilities recognized for right-of-use assets of financing leases with a lease term longer than
twelve months. See Note 9 of Notes to the Consolidated Financial Statements in this Annual Report for further
disclosures.

(d) Relates to estimated future obligations for the Europe pension plans. See Note 15 of Notes to the Consolidated
Financial Statements in this Annual Report for further disclosures.

(e) Represents the current estimate of future interest payments due on the current drawdown on the line of credit under
the Credit Agreement referenced above at (a).

(f) Relates to the 2017 Tax Act one time transition tax on accumulated foreign subsidiary earnings not previously subject
to U.S. income tax which was payable over a number of years.

(g) Relates to capital expenditure obligations included in the anticipated capital expenditure investment totals of $55
million to $65 million discussed above.

(h) Primarily includes the $98.7 million of a preliminary net purchase price related to the definitive agreement we
entered into on December 11, 2023 to acquire Josam, $49.7 million of commodity commitments and $19.4 million
relates to cost obligations for an Information Technology investment program.

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.

Non-GAAP Financial Measures

In accordance with the SEC's Regulation G and Item 10(e) of Regulation S-K, the following provides definitions of the
non-GAAP measures used by management. We believe that these measures enhance the overall understanding of
underlying business results and trends. These non-GAAP measures are not intended to be considered by the user in place
of the related GAAP measure, but rather as supplemental information to more fully understand our business results.
These non-GAAP measures may not be the same as similar measures used by other companies due to possible
differences in method and in the items or events being adjusted.

Organic net sales growth is a non-GAAP measure of net sales growth that excludes the impacts of acquisitions,
divestitures and foreign exchange from period-over-period comparisons. A reconciliation to the most closely related U.S.

GAAP measure, net sales, has been included in our discussion within “Results of Operations” above. Organic net sales
should be considered in addition to, and not as a replacement for or as a superior measure to net sales. Management
believes reporting organic sales growth provides useful information to investors, potential investors and others, by
facilitating easier comparisons of our revenue performance with prior and future periods.

Adjusted operating income, adjusted operating margins, adjusted net income, and adjusted earnings per share are non-
GAAP measures that exclude certain expenses incurred and benefits recognized in the periods presented that relate
primarily to our global restructuring programs, acquisition-related costs, contingent consideration adjustment, gain on
sale of asset, and the related income tax impacts on these items and other tax adjustments. Management believes
reporting these financial measures provides useful information to investors, potential investors and others, by facilitating
easier comparisons of our performance with prior and future periods.

A reconciliation of U.S. GAAP results to these adjusted non-GAAP measures is provided below (dollars in millions,
except per share amounts):

Year Ended

December 31,
2023

December 31,
2022

2,056.3

1,979.5

350.9
17.1%

5.5
11.3
(2.5)
—

14.3

365.2 $
17.8%

262.1 $

4.1
8.3
(2.5)
—
5.3

15.2

315.0
15.9%

10.6
—
—
(1.8)

8.8

323.8
16.4%

251.5

7.9
—
—
(1.4)
(18.2)

(11.7)

277.3 $

239.8

7.82
0.12
0.25
(0.08)
—
0.16
8.27

7.48
0.23
—
—
(0.04)
(0.54)
7.13

Net sales

Operating income - as reported
Operating margin %

Adjustments for special items:
Restructuring
Acquisition-related costs
Contingent consideration adjustment
Gain on sale of asset

Total adjustments for special items

Operating income - as adjusted
Adjusted operating margin %

Net income - as reported

Adjustments for special items - tax effected:
Restructuring
Acquisition-related costs
Contingent consideration adjustment
Gain on sale of asset
Discrete tax items

Total adjustments for special items - tax effected:

Net income as adjusted

Diluted earnings per share - as reported
Restructuring
Acquisition-related costs
Contingent consideration adjustment
Gain on sale of asset
Discrete tax items
Diluted earnings per share - as adjusted

Free cash flow is a non-GAAP measure that does not represent cash generated from operating activities in accordance
with U.S. GAAP. Therefore, it should not be considered an alternative to net cash provided by operating activities as an
indication of our performance. The cash conversion rate of free cash flow to net income is also a measure of our
performance in cash flow generation. We believe free cash flow and cash flow conversion rate to be an appropriate
supplemental measure of our operating performance because it provides investors with a measure of our ability to
generate cash, repay debt, pay dividends, repurchase stock and fund acquisitions.

A reconciliation of net cash provided by operating activities to free cash flow and calculation of our cash conversion rate
is provided below:

Net cash provided by operating activities
Less: additions to property, plant, and equipment
Plus: proceeds from the sale of property, plant, and equipment
Free cash flow
Net income —as reported
Cash conversion rate of free cash flow to net income

Year Ended

December 31,
2023

December 31,
2022

(in millions)

$
$

310.8
(29.7)
—
$
281.1
$
262.1
107.2 %

224.0
(28.1)
5.2
201.1
251.5

80.0 %

Our free cash flow increased in 2023 when compared to 2022 primarily driven by higher net income and reduced
working capital investment, partially offset by increased payments related to income taxes and customer incentives.

Our net debt to capitalization ratio, a non-GAAP financial measure used by management, at December 31, 2023 was
(3.5)% for 2023 compared to (14.3)% in 2022. The change was driven by an increase in net debt balance due to increase
in debt outstanding of $150.7 million, partially offset by an increase in cash and cash equivalents of $39.3, and higher
net income contributing to an increase in stockholders’ equity at December 31, 2023 compared to December 31, 2022.
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.

A reconciliation of long-term debt (including current portion) to net debt and our net debt to capitalization ratio is
provided below:

December 31, December 31,

2023

2022

Current portion of long‑term debt
Plus: long-term debt, net of current portion
Less: cash and cash equivalents
Net debt

A reconciliation of capitalization is provided below:

(in millions)
— $

298.3
(350.1)
(51.8) $

—
147.6
(310.8)
(163.2)

Net debt
Total stockholders’ equity
Capitalization
Net debt to capitalization ratio

December 31, December 31,

2023

2022

(in millions)

(51.8)
1,513.3
$ 1,461.5

(163.2)
1,300.6
$ 1,137.4

(3.5)%

(14.3)%

Application of Critical Accounting Policies and Key Estimates

The preparation of our consolidated financial statements in accordance with U.S. GAAP requires management to make
judgments, assumptions and estimates that affect the amounts reported. A critical accounting estimate is an assumption
about highly uncertain matters and could have a material effect on the consolidated financial statements if another, also

reasonable, amount were used, or, a change in the estimate is reasonably likely from period to period. We base our
assumptions on historical experience and on other estimates that we believe are reasonable under the circumstances.
Actual results could differ significantly from these estimates. There were no significant changes in our accounting
policies or significant changes in our accounting estimates during 2023.

We periodically discuss the development, selection and disclosure of the estimates with our Audit Committee.
Management believes the following critical accounting policies reflect our more significant estimates and assumptions.

Revenue recognition

We recognize revenue under the core principle to recognize revenue in a manner that depicts the transfer of control to
our customers in an amount reflecting the consideration to which we expect to be entitled. In order to achieve that core
principle, we apply the following five-step approach: (1) identify the contract with a customer, (2) identify the
performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the
performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. When
determining the transaction price of each contract, we consider contractual consideration payable by the customer and
assess variable consideration that may affect the total transaction price. Variable consideration, consisting of early
payment discounts, rebates and other sources of price variability, are included in the estimated transaction price based on
both customer-specific information as well as historical experience. We regularly review our estimates of variable
consideration on the transaction price and recognize changes in estimates on a cumulative catch-up basis as if the most
current estimate of the transaction price adjusted for variable consideration had been known as of the inception of the
contract.

Our revenue for product sales is recognized on a point in time model, at the point control transfers to the customer,
which is generally when products are shipped from the Company’s manufacturing or distribution facilities or when
delivered to the customer’s named location. Sales tax, value-added tax, or other taxes collected concurrent with revenue
producing activities are excluded from revenue. Freight costs billed to customers for shipping and handling activities are
included in revenue with the related cost included in selling, general and administrative expenses. See Note 4 of Notes to
Consolidated Financial Statements in this Annual Report on Form 10-K for further disclosures and detail regarding
revenue recognition.

Inventory valuation

Inventories are stated at the lower of cost or net realizable value with costs determined primarily on a first-in first-out
basis. We evaluate the need to record adjustments for excess or obsolete inventory at least quarterly. We utilize both
specific product identification and historical product demand as the basis for estimating our excess or obsolete inventory
reserve. We identify all inventories that exceed a range of one to three years in sales to calculate inventory on hand that
exceeds estimated demand. This is determined by comparing the current inventory balance against unit sales for the
trailing twelve months. New products added to inventory within the past twelve months are excluded from this analysis.
A portion of our products contain recoverable materials, therefore the excess and obsolete reserve is established net of
any estimated recoverable amounts based on historical experience. Changes in market conditions, lower-than- expected
customer demand or changes in technology or features could result in additional excess or obsolete inventory that is not
saleable and could require additional inventory reserve provisions.

In certain countries, additional inventory reserves are maintained for potential shrinkage experienced in the
manufacturing process. The reserve is established based on the prior year’s inventory losses adjusted for any change in
the gross inventory balance.

Goodwill and other intangibles

We have made numerous acquisitions over the years and have recognized a significant amount of goodwill. Goodwill is
tested for impairment annually or more frequently if an event or circumstance indicates that an impairment loss may
have been incurred. Application of the goodwill impairment test requires judgment, including the identification of
reporting units, assignment of assets and liabilities to reporting units, and determination of the fair value of each
reporting unit when a quantitative analysis is performed. We estimate the fair value of our reporting units using an
income approach based on the present value of estimated future cash flows, and when appropriate, guideline public
company and guideline transaction market approaches.

Accounting guidance allows us to assess goodwill for impairment utilizing either qualitative or quantitative analyses. We
have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a
determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after
assessing the totality of events and circumstances, we determine it is more likely than not that the fair value of a
reporting unit is greater than its carrying amount, then performing the quantitative impairment test is unnecessary.

We first identify those reporting units that we believe could pass a qualitative assessment to determine whether further
impairment testing is necessary. For each reporting unit identified, our qualitative analysis includes:

1) A review of the most recent fair value calculation to identify the extent of the cushion between fair value

and carrying amount, to determine if a substantial cushion existed.

2) A review of events and circumstances that have occurred since the most recent fair value calculation to

determine if those events or circumstances would have affected our previous fair value assessment. Items
identified and reviewed include macroeconomic conditions, industry and market changes, cost factor
changes, events that affect the reporting unit, and financial performance against expectations.

We then compile this information and make our assessment of whether it is more likely than not that the fair value of the
reporting unit is less than its carrying amount. If we determine it is not more likely than not, then no further quantitative
analysis is required.

In 2023, we had eight reporting units. Bradley was acquired in the fourth quarter of 2023, after the goodwill testing date
(October 22, 2023), however it was considered a separate reporting unit for the year end 2023. One of the eight reporting
units, Water Quality, had no goodwill. We performed a qualitative analysis for each of the six reporting units, which
include Blücher, US Drains, Fluid Solutions-Europe, Fluid Solutions-Americas, Heating and Hot Water Solutions
(“HHWS”) and APMEA.

As of our October 22, 2023 testing date, we had $589.6 million of goodwill on our balance sheet. As a result of our
qualitative analyses, we determined that the fair values of the six reporting units noted above were more likely than not
greater than the carrying amounts. In 2023, we did not need to proceed beyond the qualitative analysis, and no goodwill
impairments were recorded. Changes in macroeconomic, industry or market conditions, or our inability to achieve
projected results that were used to complete the qualitative analyses could result in the reporting unit fair value not
exceeding the carrying amounts and could lead to impairment.

Intangible assets such as trademarks and trade names are generally recorded in connection with a business acquisition
and we have recorded certain trademarks and trade names as indefinite-lived intangible assets. Values assigned to
intangible assets are typically determined by an independent valuation firm based on our estimates and judgments
regarding expectations of the success and life cycle of products and technology acquired. Accounting guidance allows us
to perform a qualitative impairment assessment of indefinite-lived intangible assets consistent with the goodwill
guidance noted previously. For our 2023 impairment assessment, which occurred as of October 22, 2023, we performed
a qualitative assessment for certain trademarks and tradenames where the fair value significantly exceeded the carrying
value in the previous quantitative assessment performed. Each had sales growth in 2023, sales growth is expected in
2024, and no other indicators of impairment were present. For the remaining tradenames in 2023, we performed a
quantitative assessment. The methodology we employed for the quantitative assessments was the relief from royalty
method, a subset of the income approach. As a result of our qualitative and quantitative analyses, we determined that the
fair values of the indefinite-lived intangibles assets were more likely than not greater than the carrying amounts. As a
result of the quantitative analyses, we determined that fair value exceeded carrying value for each indefinite-lived
intangible asset. During 2023, 2022, and 2021, no impairment was recognized on our indefinite-lived intangible assets.
Changes in macroeconomic, industry or market conditions, or our inability to achieve projected results that were used to
complete the qualitative and quantitative analyses could result in the trademark’s or trade name’s fair value not
exceeding its carrying amount and could lead to impairment.

Product liability

Because of retention requirements associated with our insurance policies, we are generally self-insured for potential
product liability claims. We are subject to a variety of potential liabilities in connection with product liability cases, and
for our most significant volume of liability matters, we maintain a high self-insured retention limit within our product

liability and general liability coverage, which we believe to be generally in accordance with industry practices. We
maintain excess liability insurance to minimize our risks related to claims in excess of our primary insurance policies.
The product liability accrual is established after considering any applicable insurance coverage.

For our product liability cases in the U.S., we establish a product liability accrual, which includes estimated legal costs
associated with accrued claims. For our most significant volume of liability matters, we utilize third-party actuarial
valuations which incorporate historical trend factors including, but not limited to, claim frequency and loss severity, and
our specific claims experience derived from loss reports provided by third-party claims administrators to establish our
product liability accrual. The product liability accrual represents the estimated ultimate losses for all reported and
incurred but not reported claims. For the remainder of our product liability accrual, where we do not utilize third-party
actuarial valuations, we maintain insurance and calculate potential product liability accruals which includes legal costs
associated with the accrued claims on a case-by-case basis. Changes in the nature and volume of product liability claims,
legal costs, or the actual settlement amounts could affect the adequacy of the estimates and require changes to the
accrual. Because the liability is an estimate, the ultimate liability may be more or less than reported. Any material
change in the aforementioned factors could have an adverse impact on our operating results for any particular period
depending, in part, upon the operating results for such period.

Legal contingencies

We are a defendant in numerous legal matters including legal matters involving environmental issues and product
liability as discussed in more detail in Part I, Item 1. “Business—Product Liability, Environmental and Other Litigation
Matters” and Note 16 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. As required
by GAAP, we determine whether an estimated loss from a loss contingency should be accrued by assessing whether a
loss is deemed probable and the loss amount can be reasonably estimated. When it is possible to estimate reasonably
possible loss or range of loss above the amount accrued, that estimate is aggregated and disclosed. Estimates of potential
outcomes of these contingencies are often developed in consultation with outside counsel. While this assessment is based
upon all available information, litigation is inherently uncertain and the actual liability to fully resolve litigation cannot
be predicted with any assurance of accuracy. In the event of an unfavorable outcome in one or more legal matters, the
ultimate liability may be in excess of amounts currently accrued, if any, and may be material to our operating results or
cash flows for a particular quarterly or annual period. However, based on information currently known to us,
management believes that the ultimate outcome of all legal contingencies, as they are resolved over time, is not likely to
have a material adverse effect on our financial condition.

Income taxes

We are subject to income taxes in the U.S. (federal and state) and foreign jurisdictions. Significant judgment is required
in evaluating our uncertain tax positions and determining our provision for income taxes.

We estimate and use our expected annual effective income tax rates to accrue income taxes throughout the interim
periods. Effective tax rates are determined based on budgeted earnings before taxes, including our best estimate of
permanent items that will affect the effective rate for the year. Management periodically reviews these rates with outside
tax advisors and changes are made if material variances from expectations are identified.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is provided to offset any net deferred tax assets if, based upon the available evidence, it is more
likely than not that some or all of the deferred tax assets will not be realized. We consider estimated future taxable
income, future reversals of the deferred tax liabilities, and tax planning strategies, in assessing the need for a valuation
allowance. Changes in the relevant facts, including the accuracy of our estimated future taxable income, can significantly
impact the judgment or need for valuation allowances. In the event we change our determination as to the amount of
deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the
provision for income taxes in the period in which such determination is made.

As of December 31, 2021, we released $22.1 million of our valuation allowance on foreign tax credits related to the
additional foreign source income resulting from our restructured Mexican manufacturing supply chain operations. As of
December 31, 2023 we increased our valuation allowance on foreign tax credits by $4.0 million related to the additional
foreign tax credits generated by our fourth quarter one-time repatriation of foreign earnings. See Note 10 of Notes to the
Consolidated Financial Statements in this Annual Report for further disclosures.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We use derivative financial instruments primarily to reduce exposure to adverse fluctuations in foreign exchange rates,
interest rates and costs of certain raw materials used in the manufacturing process. We do not enter into derivative
financial instruments for trading purposes. As a matter of policy, all derivative positions are used to reduce risk by
hedging underlying economic exposure. The derivatives we use are instruments with liquid markets. See Note 17 of
Notes to the Consolidated Financial Statements for further details.

Our consolidated earnings, which are reported in United States dollars, are subject to translation risks due to changes in
foreign currency exchange rates. This risk is concentrated in the exchange rate between the U.S. dollar and the euro; the
U.S. dollar and the Canadian dollar; and the U.S. dollar and the Chinese yuan.

Our non-U.S. subsidiaries transact most business, including certain intercompany transactions, in foreign currencies.
Such transactions are principally purchases or sales of materials and are denominated in European currencies, the
Chinese yuan or the U.S. or Canadian dollar. We use foreign currency forward exchange contracts from time to time to
manage the risk related to intercompany loans, intercompany purchases and intercompany sales that occur during the
course of a year, and certain open foreign currency denominated commitments to sell products to third parties. We have
entered into forward exchange contracts which hedge approximately 80% to 85% of the forecasted intercompany
purchases between one of our Canadian subsidiaries and our U.S. operating subsidiaries for the next twelve months. We
also entered into forward exchange contracts which hedge up to 60% of the forecasted intercompany sales transactions
between one of our Chinese subsidiaries and one of our U.S. operating subsidiaries for the next twelve months. We
record the effective portion of the designated foreign currency hedge contracts in other comprehensive income until
inventory turns and is sold to a third-party. Once the third-party transaction associated with the hedged forecasted
transaction occurs, the effective portion of any related gain or loss on the designated foreign currency hedge is
reclassified into cost of goods sold within earnings. The fair value of our designated foreign hedge contracts outstanding
as of December 31, 2023 was a liability of $0.2 million.

Under the Credit Agreement, our earnings and cash flows are exposed to fluctuations in interest payments related to our
floating rate debt. In order to manage our exposure, we entered into an interest rate swap on March 30, 2021. Under the
interest rate swap agreement, we received the one-month USD-LIBOR subject to a 0.00% floor and paid a fixed rate of
1.02975% on a notional amount of $100.0 million. On August 2, 2022, we amended the interest rate swap to replace
LIBOR as a reference rate for borrowings with Term SOFR. Under the amended interest rate swap agreement, we
receive the one-month Term SOFR subject to a -0.1% floor and pay a fixed rate of 0.942% on a notional amount of
$100.0 million. We entered into an additional interest rate swap on October 23, 2023, as part of the acquisition of
Bradley. Under the interest rate swap agreement, we receive the one-month Term SOFR subject to a -0.1% floor and pay
a fixed rate of 4.844% on a notional amount of $100.0 million. Both swaps mature on March 30, 2026. Information
about our long-term debt facility and related interest rates appears in Note 17 of the Consolidated Financial Statements.

We purchase significant amounts of bronze ingot, brass rod, cast iron, stainless steel and plastic, which are utilized in
manufacturing our many product lines. Our operating results can be adversely affected by changes in commodity prices
if we are unable to pass on related price increases to our customers. We manage this risk by monitoring related market
prices, working with our suppliers to achieve the maximum level of stability in their costs and related pricing, seeking
alternative supply sources when necessary and passing increases in commodity costs to our customers, to the maximum
extent possible, when they occur.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements listed in section (a) (1) of “Part IV, Item 15. Exhibits, Financial Statement Schedules” of this
Annual Report are incorporated herein by reference.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

DISCLOSURE.

None.

Item 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, or Exchange Act, as of the end
of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures. In designing and evaluating our disclosure controls and procedures, we recognize that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
the desired control objectives, and our management necessarily applies its judgment in evaluating and implementing
possible controls and procedures. The effectiveness of our disclosure controls and procedures is also necessarily limited
by the staff and other resources available to us and the geographic diversity of our operations. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered
by this report, our disclosure controls and procedures were effective, in that they provided reasonable assurance that
information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms and in that such controls are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. The Company’s internal control over financial reporting includes those policies and procedures
that:

(i)

(ii)

(iii)

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the Company are being made only in accordance with authorizations of management and directors of the
Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control—Integrated Framework (2013).

Based on this assessment, management has concluded that our internal control over financial reporting was effective as
of December 31, 2023.

On October 23, 2023, the Company completed the acquisition of Bradley, in a share purchase transaction. The
consolidated financial statements of the Company include the results of Bradley, including total assets of $333.8 million
and total revenues of $33.4 million, but management’s assessment of internal control over financial reporting as of
December 31, 2023 does not include an assessment of the internal control over financial reporting of Bradley.

The independent registered public accounting firm that audited the Company’s consolidated financial statements
included elsewhere in this Annual Report on Form 10-K has also audited the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2023, as stated in this Annual Report on Form 10-K under the
heading, “Report of Independent Registered Public Accounting Firm.”

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended
December 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting. We are currently in the process of integrating the Bradley operations, control processes and
information systems into our systems and control environment. We believe that we have taken the necessary steps to
monitor and maintain appropriate internal controls over financial reporting during this integration. We will continue to
review and document our disclosure controls and procedures, including our internal control over financial reporting, and
may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with
our business.

Item 9B. OTHER INFORMATION.

(b) During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a
“Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of
Regulation S-K .

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Information with respect to the executive officers of the Company is set forth in Part I, Item 1 of this Report under the
caption “Information about Our Executive Officers and Directors” and is incorporated herein by reference. The
information provided under the captions “Information as to Nominees for Director,” “Corporate Governance” and
“Delinquent Section 16(a) Reports” in our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders to
be held on May 22, 2024 is incorporated herein by reference.

We have adopted a Code of Business Conduct applicable to all officers, employees and Board members. The Code of
Business Conduct is posted in the Investors section of our website, www.wattswater.com. We will provide you with a
print copy of our Code of Business Conduct free of charge on written request to our Corporate Secretary, Watts Water
Technologies, Inc., 815 Chestnut Street, North Andover, MA 01845. Any amendments to, or waivers of, the Code of
Business Conduct that are required to be disclosed by SEC or New York Stock Exchange rules will be disclosed on our
website promptly following the date of such amendment or waiver.

Item 11. EXECUTIVE COMPENSATION.

The information provided under the captions “Director Compensation,” “Corporate Governance,” “Compensation
Discussion and Analysis,” “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,”
and “Compensation Committee Report” in our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders
to be held on May 22, 2024 is incorporated herein by reference.

The “Compensation Committee Report” contained in our Proxy Statement shall not be deemed “soliciting material” or
“filed” with the Securities and Exchange Commission or otherwise subject to the liabilities of Section 18 of the

Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filings under the Securities Act
of 1933 or the Exchange Act, except to the extent we specifically request that such information be treated as soliciting
material or specifically incorporate such information by reference into a document filed under the Securities Act or
Exchange Act.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

RELATED STOCKHOLDER MATTERS.

The information appearing under the caption “Principal Stockholders” in our definitive Proxy Statement for our 2024
Annual Meeting of Stockholders to be held on May 22, 2024 is incorporated herein by reference.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of December 31, 2023, about the shares of Class A common stock that may
be issued upon the exercise of stock options, settlement of performance stock awards and vesting of deferred stock
awards issued under the Company’s Third Amended and Restated 2004 Stock Incentive Plan, and the settlement of
restricted stock units granted under our Management Stock Purchase Plan as well as the number of shares remaining for
future issuance under our Third Amended and Restated 2004 Stock Incentive Plan and Management Stock Purchase
Plan.

Equity Compensation Plan Information

Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)

Weighted‑average exercise
price of outstanding options,
warrants and rights
(b)

Number of securities remaining
available for future issuance
under equity compensation
plan (excluding securities
reflected in column (a))
(c)

283,047 (1) $

None

283,047 (1) $

57.47 (2)

None
57.47 (2)

1,684,605 (3)

None
1,684,605 (3)

Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total

(1) Represents 364 outstanding options, 112,610 performance stock awards and 92,716 deferred stock awards under the
Third Amended and Restated 2004 Stock Incentive Plan, and 77,357 outstanding restricted stock units under the
Management Stock Purchase Plan.

(2) Represents the weighted-average exercise price of the 364 outstanding options. Deferred stock awards, performance

stock awards and restricted stock units do not have an exercise price.

(3) Includes 979,835 shares available for future issuance under the Third Amended and Restated 2004 Stock Incentive

Plan, and 704,770 shares available for future issuance under the Management Stock Purchase Plan.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information provided under the captions “Corporate Governance” in our definitive Proxy Statement for our 2024
Annual Meeting of Stockholders to be held on May 22, 2024 is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information provided under the caption “Ratification of Appointment of Independent Registered Public Accounting
Firm” in our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders to be held on May 22, 2024 is
incorporated herein by reference.

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)(1) Financial Statements

PART IV

The following financial statements are included in a separate section of this Report commencing on the page numbers
specified below:

Report of Independent Registered Public Accounting Firm (KPMG LLP, Boston, MA, PCAOB

ID: 185)

Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Comprehensive Income for the years ended December 31, 2023,

2022 and 2021

Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022

and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and

2021

Notes to Consolidated Financial Statements

(a)(2) Schedules

Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2023, 2022

and 2021

51
54

55
56

58
59

All other required schedules for which provision is made in the applicable accounting regulations of the Securities and
Exchange Commission are included in the Notes to the Consolidated Financial Statements.

(a)(3) Exhibits

The exhibits listed in the Exhibit Index immediately preceding the signature page hereto are filed as part of this Annual
Report on Form 10-K.

Item 16. FORM 10-K SUMMARY.

None.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Watts Water Technologies, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Watts Water Technologies, Inc. and subsidiaries (the
Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income,
stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the
related notes and financial statement Schedule II - Valuation and Qualifying Accounts (collectively, the consolidated
financial statements). We also have audited the Company’s internal control over financial reporting as of
December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company acquired Bradley Corporation during 2023, and management excluded from its assessment of the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, Bradley Corporation’s
internal control over financial reporting associated with total assets of $333.8 million and total revenues of $33.4 million
included in the consolidated financial statements of the Company as of and for the year ended December 31, 2023. Our
audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over
financial reporting of Bradley Corporation.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.

Product liability accrual

As discussed in Notes 11 and 16 to the consolidated financial statements, the Company’s product liability accrual as of
December 31, 2023 was $21.7 million. The Company is generally self-insured for potential product liability claims. For
its most significant volume of liability matters, the Company uses third-party actuarial valuations, which incorporate
historical trend factors and its specific claims experience derived from loss reports provided by third-party claims
administrators, to establish its product liability accrual.

We identified the evaluation of the product liability accrual as a critical audit matter. A high degree of auditor judgment
and actuarial professionals with specialized skills and knowledge were required to (1) assess the actuarial methods used,
and (2) evaluate the estimated ultimate losses on claims that are based on application of loss development factors to
historical claims experience.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
and tested the operating effectiveness of internal controls related to the product liability accrual, which included controls
over the review of the actuarial valuations and selection of estimated ultimate losses, as well as completeness and
accuracy of claims data used in the actuarial valuations. We tested current year claims data used to estimate the product
liability accrual by selecting certain claims and comparing them to relevant underlying claim information, including
documentation of claim payments. We involved an actuarial professional with specialized skills and knowledge, who
assisted in:



assessing the actuarial methods used to calculate the product liability accrual for consistency with generally
accepted actuarial standards;

assessing the loss development factors by comparing them to historical loss development factors and
industry loss development trends; and

evaluating the weighting of actuarial methods used to derive ultimate losses.

/s/ KPMG LLP

We have served as the Company’s auditor since 1997.

Boston, Massachusetts

February 21, 2024

Watts Water Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(Amounts in millions, except per share information)

Year Ended December 31,
2022

2023

2021
$ 1,809.2
1,042.1
767.1
508.2
19.3
—
239.6

—
6.3
(0.8)
5.5
234.1
68.4
165.7

4.90
33.8

4.88
33.9
1.01

Net sales
Cost of goods sold

GROSS PROFIT

Selling, general and administrative expenses
Restructuring
Gain on sale of asset

OPERATING INCOME

Other (income) expense:

Interest income
Interest expense
Other expense (income), net

Total other expense
INCOME BEFORE INCOME TAXES
Provision for income taxes
NET INCOME
Basic EPS

NET INCOME PER SHARE
Weighted average number of shares
Diluted EPS

NET INCOME PER SHARE
Weighted average number of shares
Dividends declared per share

$ 2,056.3 $ 1,979.5
1,105.2
874.3
550.5
10.6
(1.8)
315.0

1,095.4
960.9
604.5
5.5
—
350.9

(7.2)
8.2
0.4
1.4
349.5
87.4

$ 262.1 $

(0.6)
7.0
1.0
7.4
307.6
56.1
251.5

7.85 $
33.4

7.51
33.5

7.82 $
33.5
1.38 $

7.48
33.6
1.16

The accompanying notes are an integral part of these consolidated financial statements.

Watts Water Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Amounts in millions)

Year Ended December 31,
2022

2023

2021

262.1

251.5 $

165.7

9.7
(3.9)

(29.1)
6.5

(28.0)
0.7

—
(27.3)
138.4

Net income
Other comprehensive income (loss) net of tax:
Foreign currency translation adjustments
Cash flow hedges
Defined benefit pension plan, net of tax:

Actuarial gain, net of tax provision of $0.2 million in 2023

Other comprehensive income (loss)
Comprehensive income

0.7
6.5
268.6

—
(22.6)
228.9 $

The accompanying notes are an integral part of these consolidated financial statements.

Watts Water Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(Amounts in millions, except share information)

ASSETS
CURRENT ASSETS:

Cash and cash equivalents
Trade accounts receivable, less reserve allowances of $11.9 million at
December 31, 2023 and $10.7 million at December 31, 2022
Inventories, net:
Raw materials
Work in process
Finished goods
Total Inventories
Prepaid expenses and other current assets

Total Current Assets

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost
Accumulated depreciation
Property, plant and equipment, net

OTHER ASSETS:

Goodwill
Intangible assets, net
Deferred income taxes
Other, net
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:

Accounts payable
Accrued expenses and other liabilities
Accrued compensation and benefits

Total Current Liabilities

LONG-TERM DEBT
DEFERRED INCOME TAXES
OTHER NONCURRENT LIABILITIES
STOCKHOLDERS’ EQUITY:

Preferred Stock, $0.10 par value; 5,000,000 shares authorized; no shares issued or
outstanding
Class A common stock, $0.10 par value; 120,000,000 shares authorized; 1 vote per
share; issued and outstanding, 27,352,701 shares at December 31, 2023 and 27,314,679
shares at December 31, 2022
Class B common stock, $0.10 par value; 25,000,000 shares authorized; 10 votes per
share; issued and outstanding, 5,958,290 shares at December 31, 2023 and at
December 31, 2022
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss

Total Stockholders’ Equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of these consolidated financial statements.

December 31,

2023

2022

350.1 $

310.8

259.8

150.6
20.2
228.5
399.3
51.8
1,061.0

677.2
(429.0)
248.2

233.8

138.0
21.0
216.6
375.6
30.4
950.6

595.6
(398.8)
196.8

693.0
216.1
23.6
67.5
2,309.4 $

592.4
113.7
17.8
59.6
1,930.9

131.8 $
190.3
83.7
405.8
298.3
13.5
78.5

—

2.7

134.3
174.6
69.8
378.7
147.6
26.2
77.8

—

2.7

0.6
674.3
979.1
(143.4)
1,513.3
2,309.4 $

0.6
651.9
795.3
(149.9)
1,300.6
1,930.9

Watts Water Technologies, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(Amounts in millions, except share information)

Accumulated

Class B
Common Stock

Additional
Paid-In
Amount Capital Earnings

Retained Comprehensive Stockholders’

Other

Total

Balance at December 31, 2020

Net income
Other comprehensive loss
Comprehensive income
Shares of Class B common stock
converted to Class A common
stock
Shares of Class A common stock
issued upon the exercise of stock
options
Stock-based compensation
Stock repurchase
Net change in restricted stock
units
Common stock dividends
Balance at December 31, 2021

Net income
Other comprehensive income
Comprehensive income
Shares of Class A
common stock issued upon the
exercise of stock options
Stock-based compensation
Stock repurchase
Net change in restricted stock
units
Common stock dividends
Balance at December 31, 2023

Class A
Common Stock
Shares

27,478,512 $

Amount Shares
6,144,290
—
—

2.8
—
—

—
—

120,000

—

(120,000)

1,440
—
(109,998)

—
—
—

94,571
—

27,584,525 $

—
—
2.8
—
—

—
—

—
—
—

—
—
6,024,290
—
—

606.3
—
—

$ 560.1 $
165.7
—

—

0.1
22.9
—

1.9
—
631.2
—
—

—
—
(16.0)

(9.6)
(34.3)
$ 665.9 $
251.5
—

0.6
—
—

—

—
—
—

—
—
0.6
—
—

—

—
—
—

66,000

—

(66,000)

2,325
—
(493,733)

—
—
(0.1)

155,562
—

—
—

27,314,679 $

—
—

598
—
(91,622)

129,046
—

27,352,701 $

2.7
—
—

—
—
—

—
—
2.7

—
—
—

—
—

5,958,290 $

—
—

—
—
—

—
—

5,958,290 $

—
—
0.6 $
—
—

—
—
—

—
—
0.6 $

—

0.2
18.4
—

2.1
—

—
—
(69.3)

(13.3)
(39.5)

651.9 $ 795.3 $

—
—

262.1
—

0.1
20.2
—

2.1
—

—
—
(16.0)

(15.8)
(46.5)

674.3 $ 979.1 $

Loss

Equity

(100.0) $
—
(27.3)
—

1,069.8
165.7
(27.3)
138.4

—

—
—
—

—
—
(127.3)
—
(22.6)
—

—

—
—
—

—
—
(149.9)
—
6.5
—

—
—
—

—
—
(143.4)

—

0.1
22.9
(16.0)

(7.7)
(34.3)
1,173.2
251.5
(22.6)
228.9

—

0.2
18.4
(69.4)

(11.2)
(39.5)
1,300.6
262.1
6.5
268.6

0.1
20.2
(16.0)

(13.7)
(46.5)
1,513.3

The accompanying notes are an integral part of these consolidated financial statements.

Watts Water Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Amounts in millions)

OPERATING ACTIVITIES

Net income
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation
Amortization of intangibles
Loss (gain) on disposal and impairment of long-lived asset
Stock-based compensation
Deferred income tax
Changes in operating assets and liabilities, net of effects from business acquisitions:

Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities

Net cash provided by operating activities

INVESTING ACTIVITIES

Additions to property, plant and equipment
Proceeds from the sale of property, plant and equipment
Business acquisitions, net of cash acquired

Net cash used in investing activities

FINANCING ACTIVITIES

Proceeds from long-term borrowings
Payments of long-term debt
Payments for withholding taxes on vested awards
Payments for finance leases and other
Proceeds from share transactions under employee stock plans
Debt issuance costs
Payments to repurchase common stock
Dividends

Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Acquisition of businesses:
Fair value of assets acquired
Cash paid, net of cash acquired
Liabilities assumed

Issuance of stock under management stock purchase plan

CASH PAID FOR:

Interest
Income taxes

Year Ended December 31,
2022

2021

2023

262.1 $

251.5

165.7

30.1
13.2
0.2
20.2
(18.8)

6.2
27.0
(20.6)
(8.8)
310.8

(29.7)
—
(313.4)
(343.1)

27.6
12.1
(0.2)
18.4
(29.6)

(20.0)
(16.4)
1.9
(21.3)
224.0

(28.1)
5.2
—
(22.9)

240.0
(90.0)
(15.8)
(2.8)
0.1
—
(16.0)
(46.5)
69.0
2.6
39.3
310.8
350.1 $

85.0
(80.0)
(13.3)
(4.7)
0.2
—
(69.4)
(39.5)
(121.7)
(10.6)
68.8
242.0
310.8

344.0 $
313.4
30.6 $

— $
—
— $

0.4 $

0.4

$
$

7.7 $
115.7 $

5.7
85.8

$
$

31.4
13.7
1.4
22.9
(8.2)

(30.2)
(113.7)
(0.8)
98.6
180.8

(26.7)
5.1
(9.1)
(30.7)

40.0
(95.0)
(9.6)
(1.4)
0.1
(2.4)
(16.0)
(34.3)
(118.6)
(8.4)
23.1
218.9
242.0

12.1
9.1
3.1

0.6

6.9
73.0

The accompanying notes are an integral part of these consolidated financial statements.

Watts Water Technologies, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(1) Description of Business

Watts Water Technologies, Inc. (the Company) is a leading supplier of products and solutions that manage and conserve
the flow of fluids and energy into, through and out of buildings in the commercial, industrial and residential markets in
the Americas, Europe, and Asia-Pacific, Middle East, and Africa (APMEA). For 150 years, the Company has 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.

(2) Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority and wholly-owned
subsidiaries. Upon consolidation, all intercompany accounts and transactions are eliminated.

Cash Equivalents

Cash equivalents consist of instruments with original maturities of three months or less and consist primarily of money
market funds, for which the carrying amount is a reasonable estimate of fair value.

Allowance for Credit Losses

The allowance for credit losses is established to represent the Company’s best estimate of the net realizable value of the
outstanding amount of receivables that it will be unable to collect. The Company developed financial asset pools that
consist of business or legal entities with similar risk and economic characteristics, including types of products and
customers, trade receivable characteristics, and history of credit losses on trade receivables. The development of the
Company’s allowance for credit losses varies by asset pool but in general is based on a review of past due amounts,
historical write-off experience, aging trends affecting specific accounts, changes in customer payment terms, general
operational factors affecting all accounts and as applicable current economic conditions and reasonable and supportable
forecasted economic conditions that affect collectability. In addition, factors are developed in certain regions utilizing
historical trends of sales and returns and allowances and cash discount activities to derive a reserve for returns and
allowances and cash discounts. The Company also monitors the creditworthiness of the Company’s largest customers
and periodically reviews customer credit limits to reduce risk. If circumstances relating to specific customers change or
unanticipated changes occur in the general business environment, the Company’s estimates of the recoverability of
receivables could be further adjusted.

Concentration of Credit

The Company sells products to a diversified customer base and, therefore, has no significant concentrations of credit
risk. In 2023, 2022 and 2021, no customer accounted for 10% or more of the Company’s total sales or accounts
receivable.

Inventories

Inventories are stated at the lower of cost or net realizable value using standard costs determined primarily on the
first-in, first-out method which approximates actual costs. The Company utilizes both specific product identification and
historical product demand as the basis for estimating its excess or obsolete inventory reserve, which is evaluated at least
quarterly. The Company identifies all inventories that exceed a range of one to three years in sales to calculate inventory
on hand that exceeds estimated demand. This is determined by comparing the current inventory balance against unit
sales for the trailing twelve months. New products added to inventory within the past twelve months are excluded from
this analysis. A portion of the Company’s products contain recoverable materials, therefore the excess and obsolete
reserve is established net of any estimated recoverable amounts based on historical experience. Changes in market
conditions, lower-than-expected customer demand or changes in technology or features could result in additional excess
or obsolete inventory that is not saleable and could require additional inventory reserve provisions.

Goodwill and Other Intangible Assets

Goodwill is recorded when the consideration paid for acquisitions exceeds the fair value of net tangible and intangible
assets acquired. Goodwill and other intangible assets with indefinite useful lives are not amortized, but rather are tested
for impairment at least annually or more frequently if events or circumstances indicate that it is “more likely than not”
that they might be impaired, such as from a change in business conditions. The Company performs its annual goodwill
and indefinite-lived intangible assets impairment assessment in the fourth quarter of each year.

Long-Lived Assets

Intangible assets with estimable lives and other long-lived assets are reviewed for indicators of impairment at least
quarterly or more frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset
group may not be recoverable.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Depreciation is provided on a straight-line basis over the estimated
useful lives of the assets, which range from 10 to 40 years for buildings and improvements and 2 to 15 years for
machinery and equipment. Leasehold improvements are depreciated over the lesser of the economic useful life of the
asset or the remaining lease term.

Acquisitions

The Company utilizes the acquisition method of accounting under ASC 805, Business Combinations, (“ASC 805”), for
all transactions and events in which it obtains control over one or more other businesses, to recognize the fair value of all
assets and liabilities acquired, and in establishing the acquisition date fair value as of the measurement date for all assets
and liabilities assumed. The Company also utilizes ASC 805 for the initial recognition and measurement, subsequent
measurement and accounting, and disclosure of assets and liabilities arising from contingencies in business
combinations. Other estimates include:

•
•
•

estimated step-ups for fixed assets and inventory;
estimated fair values of intangible assets; and
estimated income tax assets and liabilities assumed from the acquiree.

While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately
value assets acquired and liabilities assumed at the business acquisition date, the estimates and assumptions are
inherently uncertain and subject to refinement. As a result, during the purchase price allocation period, which is
generally one year from the business acquisition date, the Company records adjustments to the assets acquired and
liabilities assumed, with the corresponding offset to goodwill. For changes in the valuation of intangible assets between
the preliminary and final purchase price allocation, the related amortization is adjusted in the period it occurs.
Subsequent to the purchase price allocation period, any adjustment to assets acquired or liabilities assumed is included in
operating results in the period in which the adjustment is determined.

Leases

The Company has leases for the following classes of underlying assets: real estate, automobiles, manufacturing
equipment, facility equipment, office equipment and certain service arrangements that are dependent on an identified
asset. The Company, as the lessee, recognizes in the consolidated balance sheets a liability to make lease payments and a
right-of-use asset (“ROU”) representing the right to use the underlying asset for both finance and operating leases with a
lease term longer than twelve months. The Company elected the short-term lease recognition exemption for all leases
that qualify and does not recognize ROU assets or lease liabilities for short-term leases. The Company recognizes short-
term lease payments on a straight-line basis over the lease term in the consolidated statements of operations.

Measuring the lease liability requires certain estimates and judgments. These estimates and judgments include how the
Company determines 1) the discount rate it uses to discount the unpaid lease payments to present value; 2) lease term;
and 3) lease payments.

• The present value of lease payments is determined using the interest rate implicit in the lease, if that rate is
readily determinable; otherwise, the Company uses its incremental borrowing rate. Generally, the Company
cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated
residual value or the amount of the lessor’s deferred initial direct costs. Therefore, the Company uses the
incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate for a
lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease
payments under a similar term. The Company’s incremental borrowing rate is determined by using a portfolio
approach by geographic region, considering many factors, such as the Company’s specific credit risk, the
amount of the lease payments, collateralized nature of the lease, both borrowing term and the lease term, and
geographical economic considerations.

• The lease term for all of the Company’s leases includes the fixed, noncancelable term of the lease plus (a) all
periods, if any, covered by options to extend the lease if the Company is reasonably certain to exercise that
option, (b) all periods, if any, covered by an option to terminate the lease if the Company is reasonably certain
not to exercise that option, and (c) all periods, if any, covered by an option to extend (or not to terminate) the
lease in which exercise of the option is controlled by the lessor. When determining if a renewal option is
reasonably certain of being exercised, the Company considers several economic factors, including but not
limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to
replace, underlying contractual obligations, or specific characteristics unique to that particular lease that would
make it reasonably certain to exercise such option.

• Lease payments included in the measurement of the lease liability include the following:

o Fixed payments, including in-substance fixed payments, owed over the lease term (which includes
termination penalties the Company would owe if the lease term assumes Company exercise of a
termination option), less any lease incentives paid or payable to the Company;

o Variable lease payments that depend on an index or rate initially measured using the index or rate at

the commencement date;

o Amounts expected to be payable under a Company-provided residual value guarantee; and
o The exercise price of a Company option to purchase the underlying asset if the Company is reasonably

certain to exercise that option.

Variable lease payments associated with the Company’s leases are recognized in the period when the event, activity, or
circumstance in the lease agreement on which those payments are assessed occurs and are included in cost of goods sold
or within selling, general and administrative expenses in the consolidated statements of operations, based on the primary
use of the ROU asset.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes tax benefits when the item in question meets the more–likely–than-not (greater than 50%
likelihood of being sustained upon examination by the taxing authorities) threshold.

Foreign Currency Translation

The functional currency for most of the Company’s foreign subsidiaries is their local currency. For non-U.S. subsidiaries
that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of
exchange at the balance sheet date. Income and expense items are translated at the average foreign currency exchange
rates for the period. Adjustments resulting from the translation of the financial statements of foreign operations into
U.S. dollars are excluded from the determination of net income and are recorded in accumulated other comprehensive
income, a separate component of equity. Transaction gains and losses are included in other (income) expense, net in the
consolidated statements of operations. For subsidiaries where the functional currency of the assets and liabilities differs
from the local currency, non-monetary assets and liabilities are translated at the rate of exchange in effect on the date
assets were acquired while monetary assets and liabilities are translated at current rates of exchange as of the balance
sheet date. Income and expense items are translated at the average foreign currency rates for the period. Translation
adjustments for these subsidiaries are included in other (income) expense, net in the consolidated statements of
operations.

Stock-Based Compensation

The Company records compensation expense in the financial statements for share-based awards based on the grant date
fair value of those awards for restricted stock awards and deferred stock awards. Stock-based compensation expense for
restricted stock awards and deferred stock awards is recognized over the requisite service periods of the awards on a
straight-line basis, which is generally commensurate with the vesting term. The performance stock units offered by the
Company to employees are amortized to expense over the vesting period, if deemed probable of achievement, and based
on the Company’s performance relative to the performance goals, may be adjusted. Changes to the estimated shares
expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the
period of change. The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures over the
vesting period of the respective grant.

Financial Instruments

In the normal course of business, the Company manages risks associated with commodity prices, foreign exchange rates
and interest rates through a variety of strategies, including the use of hedging transactions, executed in accordance with
the Company’s policies. The Company’s hedging transactions include, but are not limited to, the use of various
derivative financial and commodity instruments. As a matter of policy, the Company does not use derivative instruments
unless there is an underlying exposure. Any change in value of the derivative instruments would be substantially offset
by an opposite change in the value of the underlying hedged items. The Company does not use derivative instruments for
trading or speculative purposes.

Derivative instruments may be designated and accounted for as either a hedge of a recognized asset or liability (fair
value hedge) or a hedge of a forecasted transaction (cash flow hedge). For a fair value hedge, both the effective and
ineffective portions of the change in fair value of the derivative instrument, along with an adjustment to the carrying
amount of the hedged item for fair value changes attributable to the hedged risk, are recognized in earnings. For a cash
flow hedge, changes in the fair value of the derivative instrument that are highly effective are deferred in accumulated
other comprehensive income or loss until the underlying hedged item is recognized in earnings. The Company had
interest rate swaps and foreign exchange hedges designated as cash flow hedges as of December 31, 2023. Refer to Note
17 for further details.

If a fair value or cash flow hedge were to cease to qualify for hedge accounting or be terminated, it would continue to be
carried on the balance sheet at fair value until settled, but hedge accounting would be discontinued prospectively. If a
forecasted transaction were no longer probable of occurring, amounts previously deferred in accumulated other
comprehensive income would be recognized immediately in earnings. On occasion, the Company may enter into a
derivative instrument that does not qualify for hedge accounting because it is entered into to offset changes in the fair
value of an underlying transaction which is required to be recognized in earnings (natural hedge). These instruments are
reflected in the consolidated balance sheets at fair value with changes in fair value recognized in earnings.

Portions of the Company’s outstanding debt are exposed to interest rate risks. The Company monitors its interest rate
exposures on an ongoing basis to maximize the overall effectiveness of its interest rates.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. An entity is required to maximize the use of observable inputs, where available,
and minimize the use of unobservable inputs when measuring fair value.

The Company has certain financial assets and liabilities that are measured at fair value on a recurring basis and certain
nonfinancial assets and liabilities that may be measured at fair value on a nonrecurring basis. The fair value disclosures
of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities that the entity has the

ability to access at the measurement date.

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active or other inputs that are
observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are

significant to the fair value of the assets or liabilities.

Assets and liabilities subject to this hierarchy are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair
value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Refer to Note
17 for further details.

Shipping and Handling

Shipping and handling costs included in selling, general and administrative expense amounted to $71.5 million, $73.4
million and $69.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Research and Development

Research and development costs included in selling, general, and administrative expense amounted to $67.1 million,
$59.4 million and $45.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Revenue Recognition

The Company recognizes revenue under the core principle to depict the transfer of control to the Company’s customers
in an amount reflecting the consideration to which the Company expects to be entitled. In order to achieve that core
principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify
the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the
performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. When
determining the transaction price of each contract, we consider contractual consideration payable by the customer and
assess variable consideration that may affect the total transaction price. Variable consideration, consisting of early

payment discounts, rebates and other sources of price variability, are included in the estimated transaction price based on
both customer-specific information as well as historical experience. The Company regularly reviews its estimates of
variable consideration on the transaction price and recognizes changes in estimates on a cumulative catch-up basis as if
the most current estimate of the transaction price adjusted for variable consideration had been known as of the inception
of the contract.

The Company’s revenue for product sales is recognized on a point in time model, at the point control transfers to the
customer, which is generally when products are shipped from the Company’s manufacturing or distribution facilities or
when delivered to the customer’s named location. Sales tax, value-added tax, or other taxes collected concurrent with
revenue producing activities are excluded from revenue. Freight costs billed to customers for shipping and handling
activities are included in revenue with the related cost included in selling, general and administrative expenses. See Note
4 for further disclosures and detail regarding revenue recognition.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. The use of estimates in specific accounting policies is described further below
as appropriate. Actual results could differ from those estimates.

Accounting Standard Updates

In November 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update (“ASU”)
2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" which expands annual
and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant
segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods
beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that
the updated standard will have on the Company’s financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax
Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and
income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption
permitted. The Company is currently evaluating the potential effect that the updated standard will have on the
Company’s financial statement disclosures.

(3) Restructuring and Other Charges, Net

The Company’s Board of Directors approves all major restructuring programs that may involve the discontinuance of
significant product lines or the shutdown of significant facilities. From time to time, the Company takes additional
restructuring actions, including involuntary terminations that are not part of a major program. The Company accounts for
these costs in the period that the liability is incurred. These costs are included in restructuring charges in the Company’s
consolidated statements of operations.

A summary of the pre-tax cost by restructuring program is as follows:

2023

Year Ended December 31,
2022
(in millions)

2021

Restructuring costs:

2021 France Actions
Other Actions
Total restructuring charges

0.4
5.1
5.5

5.1 $ 19.7
(0.4)
5.5
$ 10.6 $ 19.3

The Company recorded pre-tax restructuring in its business segments as follows:

Americas
Europe
APMEA
Total

2021 France Restructuring Actions

2023

Year Ended December 31,
2022
(in millions)
$

2021

2.5
2.0
1.0
5.5

2.2 $ (0.3)
19.5
8.5
0.1
(0.1)
$ 10.6 $ 19.3

On June 25, 2021, the Board of Directors approved a restructuring program with respect to the Company’s operating
facilities in France, within its Europe operating segment. The restructuring program included the shutdown of the
Company’s manufacturing facility in Méry, France and the consolidation of that facility’s operations primarily into the
Company’s facilities in Virey-le-Grand and Hautvillers, France. As of December 31, 2023, the Company had incurred
all pre-tax restructuring charges related to the program, resulting in total program charges of $25.2 million. Total net
after-tax charges for this restructuring program were approximately $18.6 million. In the fourth quarter of 2022, the
Company received cash proceeds from the sale of the manufacturing facility of approximately $4.3 million and
recognized a pre-tax gain on sale of approximately $1.8 million. Annual cash savings, net of tax, approximated $3.0
million, and were fully realized in 2023.

The following table summarizes by type, the total incurred pre-tax restructuring costs for the Company’s restructuring
program related to the 2021 France Actions:

Legal and

Asset

Facility
exit

Severance consultancy write-downs and other Total

(in millions)

Costs incurred — 2021
Costs incurred — 2022
Costs incurred — 2023
Total restructuring costs

$ 16.9
3.5
0.4
$ 20.8 $

0.9
0.2
—

1.1 $

0.9 $
0.8
—
1.7 $

1.0
0.6
—

$ 19.7
5.1
0.4
1.6 $ 25.2

Details of the restructuring reserve activity for the Company’s 2021 France Actions for the year ended December 31,
2023 are as follows:

Balance at December 31, 2020
Net pre-tax restructuring charges
Utilization and foreign currency impact
Balance at December 31, 2021
Net pre-tax restructuring charges
Utilization and foreign currency impact
Balance at December 31, 2022
Net pre-tax restructuring charges
Utilization and foreign currency impact
Balance at December 31, 2023

Legal and

Asset

Facility
exit

Severance consultancy write-downs and other Total

(in millions)

$ — $
16.9
(7.0)
9.9 $
3.5
(11.5)

1.9 $
0.4
(2.1)
0.2 $

— $
0.9
(0.7)
0.2 $
0.2
(0.4)
— $
—
—
— $

— $
0.9
(0.9)

— $
0.8
(0.8)
— $
—
—
— $

— $ —
19.7
1.0
(0.5)
(9.1)
0.5 $ 10.6
5.1
0.6
(13.8)
(1.1)
1.9
0.4
(2.1)
0.2

— $
—
—
— $

Other Actions

The Company periodically initiates other actions which are not part of a major program. Included in “Other Actions” for
the year ended December 31, 2023, were immaterial actions primarily taken in the Americas segment related to the
approved closure of two facilities and consolidation of the related productions into existing facilities. The facility exits
were substantially completed in the fourth quarter of 2023 and total costs approximated $2.0 million. One of the
programs includes the sale of the facility which is expected to be completed in the first half of 2024 and will generate
cash proceeds and an expected gain on sale. Also included in “Other Actions” for the Americas segment was $0.6
million of severance related to head count and cost reductions actions which is expected to take place in the first half of
2024.

Included in “Other Actions” for the year ended December 31, 2023, was $1.6 million of restructuring charges recognized
in the Europe segment related to cost saving actions and primarily include severance costs.

Included in “Other Actions” for the year ended December 31, 2023, was $1.1 million of restructuring charges recognized
in the APMEA segment related to Enware Australia Pty Ltd (“Enware”) acquisition primarily for severance costs within
the Enware restructuring program. The total program costs are estimated to be $2.0 million in restructuring charges and
the remaining $0.9 million in other exit costs are expected to be incurred through the first half of 2024.

Included in “Other Actions” for the year ended December 31, 2022, was $3.2 million and $0.9 million of restructuring
charges associated with cost saving actions in the Europe and Americas segments, respectively, and related to severance
and other costs; and $1.4 million of facility exit charges were recognized associated with the decommissioning of
machinery at one of the Company’s facilities in the Americas.

(4) Revenue Recognition

The Company is a leading supplier of products and solutions that manage and conserve the flow of fluids and energy
into, through and out of buildings in the commercial, industrial and residential markets. For 150 years, the Company has
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.

The Company distributes products through four primary distribution channels: wholesale, original equipment
manufacturers (“OEMs”), specialty, and do-it-yourself (“DIY”). The Company operates in three geographic segments:
Americas, Europe, and APMEA. Each of these segments sells similar products, which are comprised of the following
principal product categories:

• 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 System (“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.

• HVAC & gas—includes commercial high-efficiency boilers, water heaters and custom heat and hot water

solutions, hydronic and electric heating systems for under-floor radiant applications, 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.

• Water quality—includes point-of-use and point-of-entry water filtration, monitoring, conditioning and scale

prevention systems for commercial, marine and residential applications.

The following table disaggregates revenue, which is presented as net sales in the financial statements, for each reportable
segment, by distribution channel and principal product category:

Distribution Channel
Wholesale
OEM
Specialty
DIY

Total

Principal Product Category
Residential & Commercial Flow Control
HVAC and Gas Products
Drainage and Water Re-use Products
Water Quality Products

Total

Distribution Channel
Wholesale
OEM
Specialty
DIY

Total

Principal Product Category
Residential & Commercial Flow Control
HVAC and Gas Products
Drainage and Water Re-use Products
Water Quality Products

Total

For the year ended December 31, 2023
(in millions)

Americas

Europe

APMEA

868.1 $
101.0
377.0
82.0
1,428.1 $

318.8 $
190.7
—
2.6
512.1 $

For the year ended December 31, 2023
(in millions)

Americas

Europe

APMEA

885.0 $
332.4
105.3
105.4
1,428.1 $

173.9 $
248.1
86.2
3.9
512.1 $

For the year ended December 31, 2022
(in millions)

Americas

Europe

APMEA

790.6
104.3
411.1
84.0
1,390.0

314.8
181.7
—
2.6
499.1

For the year ended December 31, 2022
(in millions)

Americas

Europe

APMEA

792.3
366.2
107.7
123.8
1,390.0

171.1
234.2
89.4
4.4
499.1

Consolidated
1,270.5
299.0
402.2
84.6
2,056.3

83.6 $
7.3
25.2
—
116.1 $

Consolidated
1,156.0
595.8
194.2
110.3
2,056.3

97.1 $
15.3
2.7
1.0
116.1 $

Consolidated
1,187.9
293.9
411.1
86.6
1,979.5

82.5 $
7.9
—
—
90.4 $

Consolidated
1,034.8
615.2
200.0
129.5
1,979.5

71.4 $
14.8
2.9
1.3
90.4 $

The Company generally considers customer purchase orders, which in some cases are governed by master sales
agreements, to represent the contract with a customer. The Company’s contracts with customers are generally for
products only and typically do not include other performance obligations such as professional services, extended
warranties, or other material rights. In situations where sales are to a distributor, the Company has concluded that its
contracts are with the distributor as the Company holds a contract bearing enforceable rights and obligations only with
the distributor. As part of its consideration of the contract, the Company evaluates certain factors including the
customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products,
each of which is distinct, to be the identified performance obligation. In determining the transaction price, the Company
evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company
expects to be entitled. As the Company’s standard payment terms are less than one year, the Company has elected not to
assess whether a contract has a significant financing component. The Company allocates the transaction price to each
distinct product based on its relative standalone selling price. The product price as specified on the purchase order is
considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer
in similar circumstances. Revenue is recognized when control of the product is transferred to the customer (i.e., when the
Company’s performance obligation is satisfied), which typically occurs at shipment from the Company’s manufacturing
site or distribution center, or delivery to the customer’s named location. In determining whether control has transferred,
the Company considers if there is a present right to payment, physical possession and legal title, along with risks and
rewards of ownership having transferred to the customer. In certain circumstances, the Company manufactures

customized products without alternative use for its customers. However, as these arrangements do not entitle the
Company to a right to payment of cost plus a profit for work completed, the Company has concluded that control
transfers at the point in time and not over time.

At times, the Company receives orders for products to be delivered over multiple dates that may extend across reporting
periods. The Company invoices for each delivery upon shipment and recognizes revenue for each distinct product
delivered, assuming transfer of control has occurred. As scheduled delivery dates are within one year, under the optional
exemption as provided for under ASC 606 (Revenue from Contracts with Customers), revenues allocated to future
shipments of partially completed contracts are not disclosed.

The Company generally provides an assurance warranty that its products will substantially conform to the published
specification. The Company’s liability is limited to either a credit equal to the purchase price or replacement of the
defective part. Returns under warranty have historically been immaterial. The Company does not consider activities
related to such warranty, if any, to be a separate performance obligation. For certain of its products, the Company will
separately sell extended warranty and service policies to its customers. The Company considers the sale of these as
separate performance obligations. These policies typically are for periods ranging from one to three years. Payments
received are deferred and recognized over the policy period. For all periods presented, the revenue recognized and the
revenue deferred under these policies is not material to the consolidated financial statements.

The timing of revenue recognition, billings and cash collections from the Company’s contracts with customers can vary
based on the payment terms and conditions in the customer contracts. In limited cases, customers will partially prepay
for their goods. In addition, there are constraints which cause variability in the ultimate consideration to be recognized.
These constraints typically include early payment discounts, volume rebates, rights of return, cooperative advertising,
and market development funds. The Company includes these constraints in the estimated transaction price when there is
a basis to reasonably estimate the amount of variable consideration. These estimates are based on historical experience,
anticipated future performance and the Company’s best judgment at the time. The Company did not recognize any
material revenue from obligations satisfied in prior periods. When the timing of the Company’s recognition of revenue is
different from the timing of payments made by the customer, the Company recognizes a contract liability (customer
payment precedes performance). For all periods presented, the recognized contract liabilities and the associated revenue
deferred are not material to the consolidated financial statements.

The Company incurs costs to obtain and fulfill a contract; however, the Company has elected to recognize all
incremental costs to obtain a contract as an expense when incurred if the amortization period is one year or less. The
Company has elected to treat shipping and handling activities performed after the customer has obtained control of the
related goods as a fulfillment cost and the related cost is accrued for in conjunction with the recording of revenue for the
goods.

(5) Acquisitions

Enware

On March 31, 2023, the Company completed the acquisition of the primary business assets of Enware Australia Pty Ltd
(“Enware”) in an all-cash transaction. Enware is based near Sydney, Australia, and has been a leading supplier for
specialty plumbing and safety equipment used in the Australian institutional and commercial end markets since 1937.
The acquisition of Enware aligns with the Company’s strategy to expand geographically into countries with mature and
enforced plumbing codes. Enware is expected to enhance the Company’s product offering and channel access into the
Australian marketplace. The acquisition of Enware was deemed not to be material.

Bradley

On October 23, 2023, the Company completed the acquisition of Bradley Corporation following its conversion into
Bradley Company, LLC (“Bradley”) in a share purchase transaction. The aggregate net purchase price was
approximately $301.2 million, net of cash of $9.2 million, and was financed by $210 million of borrowings under the
Company’s Second Amended and Restated Credit Agreement with the remainder being funded by cash on hand. The
purchase price includes an estimated working capital adjustment of $3.1 million and is subject to a final post-closing
working capital adjustment.

Bradley is based in Menomonee Falls, WI, and is a provider and manufacturer of commercial washroom and
emergency safety products serving commercial (primarily institutional) and industrial end markets for over 100 years.
Bradley offers a comprehensive product portfolio that includes plumbing fixtures, washroom accessories and emergency
safety products to a diverse customer base. Bradley’s complementary portfolio will enable the Company to provide its
customers with innovative water solutions, as it adds front-of-the-wall applications to its differentiated back-of-the-wall
portfolio. The acquisition of Bradley is intended to align with the Company’s strategy to enhance its product offerings,
drive growth and serve its customers.

Bradley’s operating results since the date of acquisition are included in the Americas segment. The Company accounted
for the transaction as a purchased business combination. During the fourth quarter of 2023, the Company performed the
preliminary purchase price allocation for the Bradley purchase, with immaterial adjustments expected in the first quarter
of 2024 related to the final working capital adjustment, final intangible asset valuations and deferred tax adjustments.
The acquisition resulted in the recognition of $96.6 million in goodwill and $114.6 million in intangible assets. The
intangible assets acquired consist of customer relationships valued at $84.6 million with estimated lives of 15 years and
the trade name valued at $30.0 million with an indefinite life. The goodwill is attributable to the workforce of Bradley
and the strategic platform adjacency that will allow Watts to extend its product offerings as a result of the acquisition.
For tax purposes, the Company accounted for the transaction as an asset acquisition and therefore the intangibles and
goodwill are deductible for tax purposes.

The following table summarizes the preliminary value of the assets and liabilities acquired (in millions):

Cash
Trade accounts receivable
Inventories, net
Prepaid expenses and other current assets
Property, Plant and Equipment
Intangible assets
Goodwill
Accounts payable
Employee benefits, other
Other current liabilities
Other noncurrent liabilities
Purchase price

9.2
23.5
38.4
3.4
47.6
114.6
96.6
(8.2)
(6.2)
(8.0)
(0.5)
310.4

The consolidated statement of operations for the year ended December 31, 2023 includes the results of Bradley since the
acquisition date and includes $33.4 million of revenues and $2.7 million of operating loss, which includes acquisition-
related costs of $3.3 million.

Supplemental pro-forma information (unaudited)

Had the Company completed the acquisition of Bradley at the beginning of 2022, net sales, net income and earnings per
share would have been as follows:

Year Ended December 31,

2023

2022

Net Sales
Net Income
Net income per share:
Basic EPS
Diluted EPS

(Amounts in millions, except per share information)
2,168.3
$
252.6
$

2,221.7
266.3

$
$

7.97
7.95

$
$

7.54
7.52

Net income for the years ended December 31, 2023 and December 31, 2022 was adjusted to include $6.6 million and
$4.1 million, respectively, of net interest expense related to the financing, $3.3 million and $4.2 million, respectively, of
net amortization expense resulting from the estimated allocation of purchase price to amortizable tangible and intangible
assets, and $3.2 million and $1.3 million, respectively, of income tax expense to align the effective tax rate. Net income
for the year ended December 31, 2023 and December 31, 2022 was also adjusted to exclude $4.6 million and $5.2

million, respectively, of net acquisition-related and purchase accounting charges. The pro-forma financial information
excludes adjustments for estimated cost synergies or other effects of the integration of Bradley.

(6) Goodwill & Intangibles

Goodwill

The Company performs its annual goodwill impairment testing for each reporting unit as of fiscal October month-end or
earlier if there is a triggering event or circumstance that indicates an impairment loss may have occurred. As of the
October 22, 2023 testing date, the Company had $589.6 million of goodwill on its balance sheet. In 2023, the Company
had eight reporting units. Bradley was acquired in the fourth quarter of 2023, after the goodwill testing date (October 22,
2023), however it was considered a separate reporting unit for the year ended December 31, 2023. One of these reporting
units, Water Quality, had no goodwill. The Company performed a qualitative analysis for each of the six reporting units,
which include Blücher, US Drains, Fluid Solutions-Europe, Fluid Solutions-Americas, Heating and Hot Water Solutions
(HHWS) and APMEA. As a result of the qualitative analyses, the Company determined that the fair values of the
reporting units were more likely than not greater than the carrying amounts. In 2023 and 2022, the Company did not
need to proceed beyond the qualitative analysis, and no goodwill impairments were recorded.

The Company completed two acquisitions during the year ended December 31, 2023. During the second quarter, the
Company completed the acquisition of the primary business assets of Enware within the APMEA region, resulting in
$0.9 million of goodwill. The acquisition of Enware was not considered material to the Company’s consolidated
financial statements. During the fourth quarter, the Company completed the acquisition of Bradley in a share purchase
transaction within the Americas region, resulting in $96.6 million of goodwill. The changes in the carrying amount of
goodwill by geographic segment were as follows:

Gross Balance

Accumulated Impairment Losses

Balance
January 1,
2023

Acquired
During
the
Period

Balance

Impairment

Balance

December 31,

January 1, Loss During December 31, December 31, December 31,

2023

the Period
(in millions)

2023

Foreign
Currency
Translation Net Goodwill
January 1,
2023 -

Americas $ 490.3 $ 96.6 $
Europe
APMEA

236.7
32.5

—
0.9

586.9 $ (24.5) $
236.7
33.4

(129.7)
(12.9)

Total $ 759.5 $ 97.5 $

857.0 $ (167.1) $

(24.5) $

— $
—
—
— $ (167.1) $

(129.7)
(12.9)

0.2 $
3.1
(0.2)
3.1 $

562.6
110.1
20.3
693.0

Gross Balance

Accumulated Impairment Losses

Balance
January 1,
2022

Acquired
During
the
Period

Balance

Impairment

Balance

December 31,

January 1, Loss During December 31, December 31, December 31,

2022

the Period
(in millions)

2022

Foreign
Currency
Translation Net Goodwill
January 1,
2022 -

Americas $ 490.9 $
Europe
APMEA

242.9
34.0

Total $ 767.8 $

— $
—
—
— $

490.9 $ (24.5) $
242.9
34.0
767.8 $ (167.1) $

(129.7)
(12.9)

— $
—
—
— $

(24.5)
(129.7)
(12.9)

(167.1) $

(0.6) $
(6.2)
(1.5)
(8.3) $

465.8
107.0
19.6
592.4

Long-Lived Assets

Indefinite-lived intangibles are tested for impairment at least annually or more frequently if events or circumstances,
such as a change in business conditions, indicate that it is “more likely than not” that an intangible asset might be
impaired. The Company performs its annual indefinite-lived intangibles impairment assessment in the fourth quarter of
each year. In 2023, the Company performed a combination of qualitative and quantitative assessments, and in 2022, the
Company performed a qualitative assessment for all tradenames. Based on the results of the assessments, the Company
did not recognize an impairment on any indefinite-lived intangibles in 2023 or 2022.

Intangible assets with estimable lives and other long-lived assets are reviewed for impairment at least quarterly or more
frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be
recoverable. Recoverability of intangible assets with estimable lives and other long-lived assets is measured by a
comparison of the carrying amount of an asset or asset group to future net undiscounted pre-tax cash flows expected to
be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the impairment
loss recognized is the amount by which the carrying amount of the asset or asset group exceeds the related estimated fair
value. Estimated fair value is based on either discounted future pre-tax operating cash flows or appraised values,
depending on the nature of the asset. The Company determines the discount rate for this analysis based on the weighted
average cost of capital using the market and guideline public companies for the related businesses and does not allocate
interest charges to the asset or asset group being measured. Judgment is required to estimate future operating cash flows.
In 2023 and 2021, there were no indications of the carrying amounts of intangible assets with estimable lives not being
recoverable. In 2022, the Company recognized a $1.3 million impairment charge for an amortizable technology asset.
The impairment was recognized within the Americas segment and due to changes in market expectations indicated the
carrying amount of the asset was no longer recoverable.

Intangible assets include the following:

December 31, 2023

December 31, 2022

Gross

Net

Gross

Net

Carrying Accumulated Carrying Carrying Accumulated Carrying
Amount Amortization Amount Amount Amortization Amount

Patents
Customer relationships
Technology
Trade names
Other

Total amortizable intangibles
Indefinite-lived intangible assets

(in millions)
— $

(5.0) $

$ 5.0 $
218.0
53.2
20.8
1.1
298.1
65.5

132.7
9.0
8.5
0.4
150.6
65.5
$ 363.6 $ (147.5) $ 216.1

(85.3)
(44.2)
(12.3)
(0.7)
(147.5)
—

5.0
175.1
53.2
19.8
1.1
254.2
35.0
$ 289.2

(5.0) $

(118.6)
(40.5)
(10.8)
(0.6)
(175.5)
—

—
56.5
12.7
9.0
0.5
78.7
35.0
(175.5) $ 113.7

The Company acquired $114.6 million in intangible assets as part of the Bradley acquisition, consisting of customer
relationships valued at $84.6 million, with an estimated useful life of 15 years, and an indefinite-lived trade name of
$30.0 million.

Aggregate amortization expense for amortized intangible assets for 2023, 2022 and 2021 was $13.2 million, $12.1
million and $13.7 million, respectively. Additionally, future amortization expense on amortizable intangible assets is
expected to be $17.7 million for 2024, $16.0 million for 2025, $15.5 million for 2026, $14.0 million for 2027 and $13.6
million for 2028. Amortization expense is provided on a straight-line basis over the estimated useful lives of the
intangible assets. The weighted-average remaining life of total amortizable intangible assets is 8.3 years. Customer
relationships, technology, trade names and other amortizable intangibles have weighted-average remaining lives of
12.1 years, 3.8 years, 11.4 years and 19.6 years, respectively. Indefinite-lived intangible assets include trade names and
trademarks. In 2023, we removed fully amortized intangible assets from both gross carrying amount and accumulated
amortization, with no effect to net carrying amount, in the amounts of $41.7 million for customer relationships.

(7) Inventories, net

Inventories consist of the following:

Raw materials
Work-in-process
Finished goods

December 31,

2023

2022

(in millions)

$ 150.6 $ 138.0
21.0
216.6
$ 399.3 $ 375.6

20.2
228.5

Raw materials, work-in-process and finished goods are net of valuation reserves of $48.2 million and $43.6 million as of
December 31, 2023 and 2022, respectively. Finished goods of $19.8 million and $18.2 million as of December 31, 2023
and 2022, respectively, were consigned.

(8) Property, Plant and Equipment

Property, plant and equipment consist of the following:

Land
Buildings and improvements
Machinery and equipment
Construction in progress
Property, plant and equipment, at cost
Accumulated depreciation
Property, plant, and equipment, net

(9) Leases

December 31,

2023

2022

(in millions)

$ 15.2 $
212.1
435.5
14.4
677.2
(429.0)

11.1
183.5
387.4
13.6
595.6
(398.8)
$ 248.2 $ 196.8

The Company has a variety of categories of lease arrangements, including real estate, automobiles, manufacturing
equipment, facility equipment, office equipment and certain service arrangements that are dependent on an identified
asset. The Company’s real estate leases, which consist primarily of manufacturing facilities, office space and
warehouses, represent approximately 91% of the Company’s operating lease liabilities and generally have a lease term
between 2 and 15 years. The remaining leases primarily consist of automobiles, machinery and equipment used in the
manufacturing processes (e.g., forklifts and pallets), general office equipment and certain service arrangements, each
with various lease terms. The Company’s automobile leases typically have terms ranging from 3 to 5 years. The
Company’s remaining population of leases have terms ranging from 2 to 15 years. Certain lease arrangements may
contain renewal terms ranging from 1 to 5 years. The majority of the Company’s real estate, automobile, and equipment
leases consist of fixed and variable lease payments. For the Company’s real estate leases, variable payments include
those for common area maintenance, property taxes, and insurance. For automobile leases, variable payments primarily
include maintenance, taxes, and insurance. For equipment leases, variable payments include maintenance and payments
based on usage. The Company has elected to account for lease and non-lease components as a single component for all
leases. Therefore, all fixed costs within a lease arrangement are included in the fixed lease payments for the single,
combined lease component and used to measure the lease liability. Variable lease costs are recognized in the period
when the event, activity, or circumstance in the lease agreement occurs.

Some of the Company’s lease agreements include Company options to either extend and/or early terminate the lease, the
costs of which are included in the Company’s lease liability to the extent that such options are reasonably certain of
being exercised. Renewal options are generally not included in the lease term for the Company’s existing leases because
the Company is not reasonably certain to exercise these renewal options. The Company does not generally enter into
leases involving the construction or design of the underlying asset, and nearly all of the assets the Company leases are
not specialized in nature. The Company’s leases generally do not include termination options for either party to the lease
or restrictive financial or other covenants. The Company’s lease agreements generally do not include residual value
guarantees.

Right-of-use asset amounts reported in the consolidated balance sheet by asset category as of December 31, 2023 and
2022 were as follows:

Operating Leases (1)
Real Estate
Automobile
Machinery and equipment

Total operating lease ROU Asset

Finance Leases (2)
Machinery and equipment
Automobile

Less: Accumulated depreciation

Finance Leases, net

December 31, 2023 December 31, 2022

(in millions)

45.9 $
3.6
0.7
50.2 $

9.4
0.1
(7.1)
2.4 $

40.0
2.4
0.9
43.3

10.6
0.1
(6.1)
4.6

(1) Included on the Company’s consolidated balance sheet in other assets (other, net).

(2) Included on the Company’s consolidated balance sheet in property, plant and equipment.

The maturity of the Company’s operating and finance lease liabilities as of December 31, 2023 was as follows:

2024
2025
2026
2027
2028
Thereafter
Total undiscounted minimum lease payments
Less imputed interest
Total lease liabilities
Included in the consolidated balance sheet
Current lease liabilities (included in accrued expenses and other liabilities)
Non-Current lease liabilities (included in other non-current liabilities)
Total lease liabilities

The total lease cost consisted of the following amounts:

Operating lease cost
Amortization of finance lease right-of-use assets
Interest on finance lease liabilities
Short-term lease cost
Sublease (income)
Variable lease cost
Total lease cost

December 31, 2023

Operating Leases Finance Leases

(in millions)

11.8 $
10.7
8.0
6.2
5.8
21.6
64.1 $
10.1
54.0 $

10.2
43.8
54.0 $

1.3
0.5
0.3
0.2
0.2
0.1
2.6
0.1
2.5

1.3
1.2
2.5

Year Ended

December 31, 2023 December 31, 2022

(in millions)

11.8 $
2.8
0.1
0.2
(0.3)
5.5
20.1 $

11.1
2.2
0.1
0.4
(0.2)
3.2
16.8

The following information represents supplemental disclosure for the statement of cash flows related to operating and
finance leases:

Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Total cash paid for amounts included in the measurement of lease liabilities
Finance lease liabilities arising from obtaining right-of-use assets
Operating lease liabilities arising from obtaining right-of-use assets

December 31, 2023 December 31, 2022

(in millions)

12.0 $
0.1
2.9
15.0
1.3
17.4

11.1
0.1
2.4
13.6
3.6
6.8

The following summarizes additional information related to operating and finance leases:

December 31, 2023

Weighted-average remaining lease term - finance leases
Weighted-average remaining lease term - operating leases
Weighted-average discount rate - finance leases
Weighted-average discount rate - operating leases

(10) Income Taxes

2.9 years
7.4 years
3.3 %
4.2 %

December 31, 2022
1.9 years
7.9 years
1.9 %
3.4 %

The significant components of the Company’s deferred income tax liabilities and assets are as follows:

December 31,

2023

2022

(in millions)

$ 27.8 $
48.6
—
2.6
10.7
4.9
94.6

21.3
26.3
26.6
0.6
7.9
5.7
88.4

11.1
5.2
11.0
6.1
17.4
6.7
1.6
14.8
12.3
1.0
29.7
11.6
128.5
(23.8)
104.7
$ 10.1 $

9.6
5.8
8.3
6.1
13.6
6.6
1.7
10.3
14.0
—
14.7
9.6
100.3
(20.3)
80.0
(8.4)

Deferred income tax liabilities:

Excess tax over book depreciation
Intangibles
Goodwill
Foreign earnings
Operating lease ROU assets
Other

Total deferred tax liabilities

Deferred income tax assets:

Accrued expenses
Product liability
Operating lease liabilities
Stock based compensation
Foreign tax credits
Net operating loss carry forward
Capital loss carry forward
Inventory reserves
Intangibles
Goodwill
Capitalized R&D
Other

Total deferred tax assets

Less: valuation allowance
Net deferred tax assets

Net deferred tax assets

The provision for income taxes is based on the following pre-tax income:

Domestic
Foreign

The provision for income taxes consists of the following:

2023

2021

Year Ended December 31,
2022
(in millions)
$ 204.3 $ 139.6
94.5
$ 307.6 $ 234.1

103.3

$ 228.2
121.3
$ 349.5

2023

Year Ended December 31,
2022
(in millions)

2021

Current tax expense:

Federal
Foreign
State

Deferred tax expense (benefit):

Federal
Foreign
State

Provision for income taxes

$ 54.6
35.6
15.8
106.0

$ 51.0 $ 32.0
30.3
14.4
76.7

23.2
11.5
85.7

(14.7)
0.2
(4.1)
(18.6)
$ 87.4

(12.1)
(13.7)
(3.8)
(29.6)

(4.8)
(2.4)
(1.1)
(8.3)
$ 56.1 $ 68.4

Actual income taxes reported are different than what would have been computed by applying the federal statutory tax
rate to income before income taxes. The reasons for these differences are as follows:

Computed expected federal income expense
State income taxes, net of federal tax benefit
Foreign tax rate differential
Restructuring of manufacturing supply chain operations
Valuation allowance
One time repatriation
Unrecognized tax benefits, net
Other, net

2023

2021

Year Ended December 31,
2022
(in millions)
$ 64.6 $ 49.2
6.6
4.3
29.3
(22.1)
—
2.0
(0.9)
$ 56.1 $ 68.4

$ 73.4
6.8
9.3
3.5
4.3
— (16.1)
0.4
3.5
—
1.2
(1.0)
1.4
(2.1)
(5.7)
$ 87.4

In 2021, the Company restructured its Mexican manufacturing supply chain operations, which resulted in $29.3 million
in additional tax expense, and was offset by a $22.1 million release of the valuation allowance on foreign tax credits, for
a net tax of $7.2 million. The additional tax expense was primarily related to the prepayment of future royalties from the
new structure, which resulted in current foreign source income. The foreign tax credit benefit significantly offset the
additional tax expense resulting from the new supply chain structure. In 2022, to further align the new supply chain
structure with developments, the Company modified the restructuring of its Mexican manufacturing supply chain
operations which resulted in the recognition of a $16.1 million deferred tax asset which will be amortized over 10 years.

At December 31, 2023, the Company had foreign and domestic net operating loss carry forwards of $33.0 million and
$1.0 million, respectively, for income tax purposes before considering valuation allowances; $23.9 million of the foreign
losses can be carried forward indefinitely, $9.1 million of the foreign losses expire in 2029 and 2030, and $0.6 million of
the domestic losses expire between 2035 and 2040 and $0.4 million of the domestic losses can be carried forward
indefinitely. The net operating losses consist of $23.9 million related to Austrian operations, $9.1 million related to
Switzerland operations and $1.0 million related to United States operations.

At December 31, 2023, the Company had a U.S. capital loss carry forward of $1.6 million before considering valuation
allowances that will expire in 2025.

At December 31, 2023 and December 31, 2022, the Company had foreign tax credit carry forwards of $17.4 million and
$13.6 million, respectively, for income tax purposes before considering valuation allowances. The foreign tax credit
carryforwards expire between 2027 and 2033.

At December 31, 2023 and December 31, 2022, the Company had valuation allowances of $23.8 million and $20.3
million, respectively. At December 31, 2023, $16.8 million related to foreign tax credits, $5.4 million related to Austrian
net operating losses, and $1.6 million related to the domestic capital loss carry forward. At December 31, 2022, $12.8
million related to foreign tax credits, $5.8 million related to Austrian net operating losses, and $1.7 million related to the
domestic capital loss carry forward. Management believes that the ability of the Company to use such foreign tax credits
and losses within the applicable carry forward period does not rise to the level of the more likely than not threshold. The
Company does not have a valuation allowance on other deferred tax assets, as management believes that it is more likely
than not that the Company will recover the net deferred tax assets. Management believes it is more likely than not that
the future reversals of the deferred tax liabilities, together with forecasted income, will be sufficient to fully recover the
deferred tax assets.

Subsequent to recording the Toll Tax as part of the Tax Cuts and Jobs Act of 2017, after December 2017, the Company
considers all of its foreign earnings to be permanently reinvested outside of the U.S. In the fourth quarter of 2023, the
Company determined it would make a one-time distribution of foreign earnings of $94 million. All other earnings after
December 2017 and all future foreign earnings are expected to be permanently reinvested outside of the U.S. It is not
practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities
associated with the hypothetical calculation.

Unrecognized Tax Benefits

As of December 31, 2023, the Company had gross unrecognized tax benefits of approximately $8.6 million,
approximately $5.8 million of which, if recognized, would affect the effective tax rate. The difference between the
amount of unrecognized tax benefits and the amount that would affect the effective tax rate consists of allowable
correlative adjustments that are available for certain jurisdictions.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at January 1, 2023
Increases related to prior year tax positions
Increases related to current year tax positions
Decreases due to lapse in statutes
Currency movement
Balance at December 31, 2023

(in millions)
7.2
$
1.4
0.3
(0.4)
0.1
8.6

The Company estimates that it is reasonably possible that the balance of unrecognized tax benefits as of December 31,
2023 may decrease by $0.2 million to $1.0 million in the next twelve months, as a result of lapses in statutes of
limitations and settlements and $0.1 million to $0.7 million of which, if recognized, would affect the effective tax rate.

The Company conducts business in a variety of locations throughout the world resulting in tax filings in numerous
domestic and foreign jurisdictions. The Company is subject to tax examinations regularly as part of the normal course of
business. The Company’s major jurisdictions are the U.S., France, Germany, Italy and Canada. The statute of limitations
in the U.S. is subject to tax examination for 2020 and later; France, Germany, Italy and Canada are subject to tax
examination for 2017 and later. All other jurisdictions, with few exceptions, are no longer subject to tax examinations in
state, local or international jurisdictions for tax years before 2017.

The Company accounts for interest and penalties related to uncertain tax positions as a component of income tax
expense.

(11) Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following:

Commissions and sales incentives payable
Product liability
Other
Income taxes payable

(12) Financing Arrangements

The Company’s debt consists of the following:

Line of Credit due March 2026
Less debt issuance costs (deduction from debt liability)
Total long-term debt

December 31,

2023

2022

(in millions)

$ 58.8 $
21.7
87.9
21.9

56.0
22.4
79.5
16.7
$ 190.3 $ 174.6

December 31,

2023

2022

(in millions)

$ 300.0
(1.7)

150.0
(2.4)
$ 298.3 $ 147.6

Principal payments during each of the next five years are due as follows (in millions): 2024: $0; 2025: $0; 2026: $300.0;
2027: $0; 2028: $0.

On March 30, 2021, the Company and certain of its 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.

The Revolving Credit Facility also includes sublimits of $100 million for letters of credit and $15 million for swing line
loans. As of December 31, 2023, the Company had drawn down $300.0 million on this line of credit and had $12.5
million in letters of credit outstanding, which resulted in $487.5 million of unused and available credit under the
Revolving Credit Facility. 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 the Company’s consolidated leverage ratio. For the
borrowings denominated in dollars, there is fixed 10 basis point adjustment if the reference rate is Term SOFR. The
weighted average interest rate on debt outstanding under the Revolving Credit Facility as of December 31, 2023 was
6.53%. The weighted average interest rate on debt outstanding inclusive of the interest rate swaps discussed in Note 17
of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of
December 31, 2023 was 4.89%. In addition to paying interest under the Credit Agreement, the Company is 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. The Company 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 December 31, 2023, the Company was compliance with all covenants related to the Credit Agreement.

The Credit Agreement impose various restrictions on the Company and its subsidiaries, including restrictions pertaining
to: (i) the incurrence of additional indebtedness, (ii) limitations on liens, (iii) making distributions, dividends and other
payments, (iv) mergers, consolidations and acquisitions, (v) dispositions of assets, (vi) certain consolidated leverage ratios
and consolidated interest coverage ratios, (vii) transactions with affiliates, (viii) changes to governing documents, and
(ix) changes in control.

The Company maintains letters of credit that guarantee its performance or payment to third parties in accordance with
specified terms and conditions. Amounts outstanding were $12.5 million as of December 31, 2023 and $12.1 million as
of December 31, 2022. The Company’s letters of credit are primarily associated with insurance coverage. The
Company’s letters of credit generally expire within one year of issuance. These instruments may exist or expire without
being drawn down. Therefore, they do not necessarily represent future cash flow obligations.

(13) Earnings per Share and Stock Repurchase Program

The Class A common stock and Class B common stock have equal dividend and liquidation rights. Each share of the
Company’s Class A common stock is entitled to one vote on all matters submitted to stockholders and each share of
Class B common stock is entitled to ten votes on all such matters. Shares of Class B common stock are convertible into
shares of Class A common stock on a one-to-one basis at the option of the holder. As of December 31, 2023, the
Company had reserved a total of 1,967,652 shares of Class A common stock for issuance under its stock-based
compensation plans and 5,958,290 shares for conversion of Class B common stock to Class A common stock.

Basic net income per common share is calculated by dividing net income by the weighted average number of common
shares outstanding. The calculation of diluted net income per share assumes the conversion of all dilutive securities.

Net income and the number of shares used to compute net income per share, basic and assuming full dilution, are
reconciled below:

2023

Year Ended December 31,
2022

2021

Per
Share
Income Shares Amount Income Shares Amount Income Shares Amount

Per
Share

Net

$ 262.1

33.4

(Amounts in millions, except per share information)
33.5

$ 165.7

$ 251.5

$ 7.51

$ 7.85

33.8 $ 4.90

Basic EPS
Dilutive securities,
principally common
stock options
Diluted EPS

—
$ 262.1

(0.03)
0.1
33.5 $ 7.82

—
$ 251.5

0.1
33.6

(0.03)
$ 7.48

—
$ 165.7

(0.02)
0.1
33.9 $ 4.88

On February 6, 2019, the Company’s Board of Directors authorized the repurchase of up to $150 million of the
Company’s Class A common stock, to be purchased from time to time on the open market or in privately negotiated
transactions. On July 31, 2023, the Board of Directors authorized a new stock repurchase program of up to $150 million
of the Company’s Class A common stock to be purchased from time to time on the open market or in privately
negotiated transactions. The Company has entered into a Rule 10b5-1 plan which permits shares to be repurchased under
both stock repurchase programs when the Company might otherwise be precluded from doing so under insider trading
laws. The repurchase programs may be suspended or discontinued at any time, subject to the terms of the Rule 10b5-1
plan the Company entered into with respect to the repurchase programs. As of December 31, 2023, there was
approximately $12.0 million remaining authorized for share repurchases under the 2019 repurchase program. The
Company had not made any share repurchases under the 2023 repurchase program as of December 31, 2023.

For the years ended December 31, 2023, 2022 and 2021, the Company repurchased 91,622 shares for $16.0 million,
493,733 shares for $69.4 million and 109,998 shares for $16.0 million, respectively.

(14) Stock-Based Compensation

As of December 31, 2023, the Company maintains one stock incentive plan, the Third Amended and Restated 2004
Stock Incentive Plan (the “2004 Stock Incentive Plan”). At December 31, 2023, 979,835 shares of Class A common
stock were available for future grants of new equity awards under this plan. The Company currently grants deferred
stock awards to key employees and stock awards to non-employee members of the Company’s Board of Directors under
the 2004 Stock Incentive Plan. The Company also previously granted shares of restricted stock to key employees. Stock
awards to non-employee members of the Company’s Board of Directors vest immediately. Employees’ restricted stock
awards and deferred stock awards typically vest over a three-year period at the rate of one-third per year. The shares that
are subject to restricted stock awards are outstanding upon grant of the restricted stock awards whereas the shares that
are subject to deferred stock awards are outstanding only upon vesting and settlement of the deferred stock award. The
restricted stock awards and deferred stock awards are amortized to expense on a straight-line basis over the vesting
period.

The Company also grants performance stock units to key employees under the 2004 Stock Incentive Plan. Performance
stock units cliff vest at the end of a performance period set by the Compensation Committee of the Board of Directors at
the time of grant, which is currently three years. Upon vesting, the number of shares of the Company’s Class A common
stock awarded to each performance stock unit recipient will be determined based on the Company’s performance relative
to certain performance goals set at the time the performance stock units were granted. The recipient of a performance
stock unit award may earn from zero shares to twice the number of target shares awarded to such recipient. The
performance stock units are amortized to expense over the vesting period, and based on the Company’s performance
relative to the performance goals, may be adjusted. Changes to the estimated shares expected to vest will result in
adjustments to the related share-based compensation expense that will be recorded in the period of change. If the
performance goals are not met, no awards are earned and previously recognized compensation expense is reversed. The
Company granted performance stock units in 2023, 2022 and 2021. The performance goals for the performance stock
units are based on the compound annual growth rate of the Company’s revenue over the three-year performance period
and the Company’s return on invested capital (ROIC) for the third year of the performance period.

Beginning in 2019, the Company included “retirement vesting” provisions in the agreements for its deferred stock
awards and performance stock units. These provisions provide that an employee who retires from the Company after
attaining age 55 and 10 years of service and who meets certain other requirements, including non-competition and non-
solicitation requirements, would be allowed to continue to vest in his or her deferred stock awards for the duration of the
vesting periods and would be entitled to receive a pro rata portion of his or her performance stock units based on the
period of service elapsed during the performance period. Beginning in 2022, a provision was added that requires the
employee remain employed through the last working day of the grant year in order to be entitled to retirement vesting of
the award in addition to the other provisions.

In 2015, the Company stopped granting stock options as part of its annual equity awards to employees. Previously under
the 2004 Stock Incentive Plan, key employees were granted nonqualified stock options to purchase the Company’s Class
A common stock. Minimal options remain outstanding, all of which are vested and expire ten years from the date of
grant. Options granted under the plan may have exercise prices of not less than 100% of the fair market value of the
Class A common stock on the date of grant. The Company’s practice was to grant all options at fair market value on the
grant date. Upon exercise of options, the Company issues shares of Class A common stock.

The Company also has a Management Stock Purchase Plan that allows for the granting of restricted stock units (RSUs)
to key employees. On an annual basis, key employees may elect to receive a portion of their annual incentive
compensation in RSUs instead of cash. Participating employees may use up to 50% of their annual incentive bonus to
purchase RSUs for a purchase price equal to 80% of the fair market value of the Company’s Class A common stock as
of the date of grant. RSUs vest either annually over a three-year period from the grant date or upon the third anniversary
of the grant date. Receipt of the shares underlying RSUs is deferred for a minimum of three years, or such greater
number of years as is chosen by the employee, from the date of grant. An aggregate of 2,000,000 shares of Class A
common stock may be issued under the Management Stock Purchase Plan. At December 31, 2023, 704,770 shares of
Class A common stock were available for future grants under the Company’s Management Stock Purchase Plan.

2004 Stock Incentive Plan

The following is a summary of unvested restricted stock and deferred stock awards activity and related information:

2021
Weighted
Average
Grant Date
Shares Fair Value Shares Fair Value Shares Fair Value

Year Ended December 31,
2022
Weighted
Average
Grant Date

2023
Weighted
Average
Grant Date

Unvested at beginning of year
Granted
Vested
Cancelled/Forfeitures
Unvested at end of year

121 $ 121.39
167.39
51
112.65
(76)
(3)
139.46
93 $ 149.96

(Shares in thousands)
138 $ 97.43
143.86
94.33
120.31

166 $ 77.97
128.32
81.70
93.98
121 $ 121.39 138 $ 97.43

61
(84)
(5)

64
(78)
(3)

The total fair value of shares vested during 2023, 2022 and 2021 was $12.7 million, $11.1 million and $10.5 million,
respectively. At December 31, 2023, total unrecognized compensation cost related to unvested restricted stock and
deferred stock awards was approximately $5.8 million with a total weighted average remaining term of 1.06 years. For
2023, 2022 and 2021, the Company recognized compensation costs of $9.3 million, $7.7 million and $7.6 million,
respectively.

The aggregate intrinsic value of restricted stock and deferred shares granted and outstanding approximated $19.4 million
representing the total pre-tax intrinsic value based on the Company’s closing Class A common stock price of $208.34 as
of December 31, 2023.

The following is a summary of unvested performance stock award activity and related information:

2023

Year Ended December 31,
2022

2021

Weighted
Average
Grant Date
Shares Fair Value Shares Fair Value Shares Fair Value

Weighted
Average
Grant Date

Unvested at beginning of year
Granted
Vested
Cancelled/Forfeitures
Unvested at end of year

99
(125)
(7)

146 $ 107.29
106.37
73.62
132.14
113 $ 142.53

(Shares in thousands)
178 $ 88.32
102.98
108
78.82
(136)
110.43
(4)
$ 107.29
146

61
(85)
(6)

208 $ 78.06
113.37
81.50
83.53
178 $ 88.32

The granted and vested shares activity include any adjustments required based on performance goal attainment on
vesting. The total fair value of shares vested during 2023, 2022 and 2021 was $21.1 million, $20.4 million and $10.8
million, respectively. At December 31, 2023, total unrecognized compensation cost related to unvested performance
stock awards was approximately $10.0 million with a total weighted average remaining term of 1.49 years. For 2023,
2022 and 2021, the Company recognized compensation costs of $9.7 million, $9.8 million and $14.6 million,
respectively.

The aggregate intrinsic value of performance shares granted and outstanding approximated $23.5 million representing
the total pre-tax intrinsic value based on the Company’s closing Class A common stock price of $208.34 as of
December 31, 2023.

The following is a summary of stock option activity and related information:

2023

Weighted Weighted
Average Average
Intrinsic
Exercise

Year Ended December 31,
2022

Weighted Weighted
Average Average
Intrinsic
Exercise

2021

Weighted Weighted
Average Average
Intrinsic
Exercise

Options Price

Value

Options Price
(Options in thousands)

Value

Options Price

Value

Outstanding at beginning of
year
Cancelled/Forfeitures
Exercised
Outstanding at end of year
Exercisable at end of year

1 $ 57.47
—
—
(1)
57.47
— $ 57.47 $ 150.87
— $ 57.47 $ 150.87

4 $ 52.92
—
—
(3)
51.36
1 $ 57.47
1 $ 57.47

$ 88.76
$ 88.76

5 $ 52.40
—
—
(1)
51.04
4 $ 52.92
4 $ 52.92

$ 141.25
$ 141.25

For 2023, 2022 and 2021, the Company did not recognize any compensation costs for options. As of December 31,
2023, there was no unrecognized compensation cost related to unvested options. As of December 31, 2023, the aggregate
intrinsic value of exercisable options was less than $0.1 million, representing the total pre-tax intrinsic value, based on
the Company’s closing Class A common stock price of $208.34 as of December 31, 2023, which would have been
received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of
options exercised for 2023, 2022 and 2021 was approximately $0.1 million, $0.3 million and $0.2 million, respectively.

At December 31, 2023, there were fewer than 400 stock options outstanding with a weighted average exercise price of
$57.47.

Management Stock Purchase Plan

Total unrecognized compensation cost related to unvested RSUs was approximately $1.7 million at December 31, 2023
with a total weighted average remaining term of 1.52 years. For 2023, 2022 and 2021, the Company recognized
compensation cost of $1.2 million, $0.9 million, and $0.7 million, respectively. Dividends declared for RSUs that are
paid to individuals but remain unpaid and accrued at December 31, 2023 totaled approximately $0.1 million.

A summary of the Company’s RSU activity and related information is shown in the following table:

Year Ended December 31,

2023

Weighted Weighted
Average Average
Purchase
Intrinsic
Price

Value

RSUs

2022
Weighted
Average
Purchase
Price

2021
Weighted
Average
Purchase

RSUs Price

Outstanding at beginning of year
Granted
Settled
Cancelled/Forfeitures
Outstanding at end of year
Vested at end of year

77 $ 94.78
130.27
26
66.94
(25)
(1)
124.04
77 $ 114.93 $
23 $ 104.17 $

RSUs
(RSUs in thousands)
85
29
(35)
(2)
77
24

$ 75.34
115.14
64.15
92.09
$ 94.78
$ 77.69

—
—

95
25
(34)
(1)
85
31

$ 64.54
97.98
61.38
77.03
$ 75.34
$ 65.29

As of December 31, 2023, the aggregate intrinsic values of outstanding and vested RSUs were approximately $7.2
million and $2.4 million, respectively, representing the total pre-tax intrinsic value, based on the Company’s closing
Class A common stock price of $208.34 as of December 31, 2023, which would have been received by the RSUs holders
had all RSUs settled as of that date. The total intrinsic value of RSUs settled for 2023, 2022 and 2021 was approximately
$2.4 million, $2.7 million and $2.1 million, respectively. Upon settlement of RSUs, the Company issues shares of
Class A common stock.

The following table summarizes information about RSUs outstanding at December 31, 2023:

Range of Purchase Prices

$69.76-$97.28
$97.29-$115.14
$115.15-$130.27

RSUs Outstanding

Number
Outstanding

Weighted Average
Purchase
Price
(RSUs in thousands)

Number
Vested

RSUs Vested
Weighted Average

Purchase
Price

23 $
28
26
77 $

97.28
115.14
130.27
114.93

14 $
9
—
23 $

97.28
115.14
—
104.17

The fair value of each share issued under the Management Stock Purchase Plan is estimated on the date of grant, using
the Black-Scholes-Merton Model, based on the following weighted average assumptions:

Expected life (years)
Expected stock price volatility
Expected dividend yield
Risk-free interest rate

2023

2022

3.0
33.7 %
0.80 %
4.1 %

3.0
33.7 %
0.80 %
2.0 %

The risk-free interest rate is based upon the U.S. Treasury yield curve at the time of grant for the respective expected life
of the RSUs. The expected life (estimated period of time outstanding) of RSUs and volatility were calculated using
historical data. The expected dividend yield of stock is the Company’s best estimate of the expected future dividend
yield.

The above assumptions were used to determine the weighted average grant-date fair value of RSUs granted of $57.50,
$47.26 and $37.49 during 2023, 2022 and 2021, respectively.

At December 31, 2023, the Company had total unrecognized compensation costs related to unvested stock-based
compensation arrangements of approximately $16.4 million and a total weighted average remaining term of 1.34 years.
For 2023, 2022 and 2021, the Company recognized compensation costs related to stock-based programs of $20.2
million, $18.4 million, and $22.9 million, respectively. For 2023, 2022 and 2021, stock compensation expense of $1.5
million, $1.3 million and $1.4 million, respectively, was recorded in cost of goods sold and $18.7 million, $17.1 million
and $21.5 million, respectively, was recorded in selling, general and administrative expenses. For 2023, 2022 and 2021,
the Company recorded $2.9 million, $2.8 million and $3.7 million, respectively, of tax benefit for its other stock-based
plans. For 2023, 2022 and 2021, the recognition of total stock-based compensation expense impacted both basic and
diluted net income per common share by $0.47, $0.43 and $0.53, respectively.

(15) Employee Benefit Plans

The Company’s U.S. employees are eligible to participate in the Company’s 401(k) savings plan. Since January 1, 2012,
the Company has provided a base contribution of 2% of an employee’s salary, regardless of whether the employee
participates in the plan. Further, the Company matches 100% of employee contributions of up to the first 4% of eligible
compensation. The Company’s match contributions for the years ended December 31, 2023, 2022 and 2021, were $8.1
million, $7.6 million and $6.6 million, respectively. Charges for Europe pension plans approximated $3.3 million, $4.3
million and $4.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. These costs relate to plans
administered by certain European subsidiaries, with benefits calculated according to government requirements and paid
out to employees upon retirement or change of employment.

With the acquisition of Bradley on October 23, 2023, the Company acquired the defined benefit retirement plan (“the
Pension Plan”) of Bradley. The Pension Plan was frozen effective September 30, 2011, and the Pension Plan pension
benefit obligation (“PBO”) was close to fully funded prior to the acquisition date. The Company terminated the Pension
Plan with an effective date of plan termination of December 31, 2023. Distribution of plan assets pursuant to the
termination will not be made until completion of the plan termination process with the Pension Benefit Guaranty
Corporation.

The Company expects the distribution for the Pension Plan to be completed by December 31, 2024. Except for retirees
receiving payments under the Pension Plan (or “in pay status”), participants in the Pension Plan will have the choice of
receiving either a single lump sum payment or an annuity. Retirees in pay status will continue to receive payments of
their benefits under the Pension Plan pursuant to their current annuity elections. The Company plans to purchase annuity
contracts from an insurance company for all retirees and participants that choose annuities as a payment option under the
Pension Plan. The lump sum payments paid to participants will represent the actuarial equivalent value of the
participants’ remaining accrued benefits under the Pension Plan as of the distribution date, calculated in accordance with
the terms of the plan and based on the participants’ ages on the distribution date.

As a result of the plan termination, and similar to the opening balance sheet liability, the December 31, 2023 balance
sheet liability was calculated on a termination basis by valuing the PBO on a going concern basis using the Pension Plan
cash flows and a spot curve as of December 31, 2023 conditions, for assumed lump sum election rates, lump sum cost,
and insurer premium.

The funded status of the defined benefit plans and amounts recognized in the consolidated balance sheets are as follows:

Year Ended

December 31, 2023

(in millions)

Change in projected benefit obligation
Balance at beginning of period (October 23, 2023) $
Service cost
Administration costs paid
Interest cost
Actuarial loss (gain)
Benefits paid
Balance at end of year
Change in fair value of plan assets
Balance at beginning of period (October 23, 2023) $
Actual gain (loss) on assets
Employer contributions
Administration costs paid
Benefits paid
Fair value of plan assets at end of the year
Funded (underfunded) status at end of year

$
$

68.0
—
—
0.7
5.5
(0.7)
73.5

67.9
7.2
—
—
(0.7)
74.4
0.9

Amounts recognized in the consolidated balance sheets are as follows:

Current liabilities
Noncurrent assets (liabilities)
Net amount recognized

December 31, 2023
(in millions)

—
0.9
0.9

Amounts recognized in accumulated other comprehensive income consist of:

Net actuarial gain recognized

December 31, 2023
(in millions)

(0.9)

The components of net periodic benefit cost are as follows:

Service cost - benefits earned
Interest costs on benefit obligation
Expected return on assets
Net actuarial loss amortization
Net periodic benefit cost

$
$

Year Ended
December 31, 2023
(in millions)

—
0.7
(0.7)
—
—

For fiscal year 2024, the estimated net actuarial loss for the defined benefit pension plans that will be amortized from
accumulated other comprehensive income into net periodic benefit cost is immaterial.

Assumptions:

Weighted-average assumptions used to determine benefit obligations:

Discount rate

Weighted-average assumptions used to determine net periodic benefit costs:

Discount rate
Long-term rate of return on assets

December 31, 2023
(in millions)

4.64 %

December 31, 2023
(in millions)

5.36 %
5.60 %

Discount rates were selected based upon rates of return assuming a plan termination basis as of December 31, 2023. The
discount rate selected was the equivalent rate for the estimated settlement liability. In selecting the expected long-term
rate of return on assets, the Company considers the average rate of earnings expected on the funds invested or to be
invested to provide for the benefits of this plan. This includes considering the trust’s asset allocation and the expected
returns likely to be earned over the life of the plan.

Plan assets

The Company’s investment policies employed an approach at the end of fiscal year 2023 to better match the asset
allocation to the liability duration due to the expected asset and liability transfer later in fiscal year 2024. A mix of cash
and fixed income investments were used to align to the expected liability settlement and equity investments were no
longer part of the portfolio. Fixed income investments consist of domestic and international corporate notes, federal and
state treasury notes, and money market funds. Investment and market risk are measured and monitored on an going
basis.

The weighted average asset allocations by asset category are as follows:

Asset Category
Cash
Equity
Fixed Income
Total

December 31, 2023
(in millions)

39 %
-
61
100 %

The following table presents the investments in the Pension Plan measured at fair value at December 31, 2023:

Level 1

Level 2

Level 3

Total

December 31, 2023

Cash
Fixed income securities
Corporate notes
Treasury notes
Other investments(a)
Total investments

28.9

—
12.7
1.7
43.3

$
$

(in millions)
— $

31.7
—
— $
$

31.7

— $

—
—
— $
— $

28.9

31.7
12.7
1.7
75.0

(a) Includes Aetna Co. Annuity Contract and accrued interest and dividends

Cash flows

The information related to the Company’s pension funds cash flow is as follows:

Employer contributions
Benefit payments

Year Ended
December 31, 2023
(in millions)

$
$

—
0.7

The Company does not expect to contribute any amounts in 2024 to the Pension Plan.

Expected benefit payments to be paid by the pension plans are as follows:

During fiscal year ending December 31, 2024
During fiscal year ending December 31, 2025
During fiscal year ending December 31, 2026
During fiscal year ending December 31, 2027
During fiscal year ending December 31, 2028
During fiscal year ending December 31, 2029 through December 31, 2033

(in millions)
73.5
$
N/A (1)
N/A (1)
N/A (1)
N/A (1)
N/A (1)

(1)

Benefits under the Pension Plan are expected to be distributed by December 31, 2024.

(16) Contingencies and Environmental Remediation

Accrual and Disclosure Policy

The Company is a defendant in numerous legal matters arising from its ordinary course of operations, including those
involving product liability, environmental matters, and commercial disputes.

The Company reviews its lawsuits and other legal proceedings on an ongoing basis and follows appropriate accounting
guidance when making accrual and disclosure decisions. The Company establishes accruals for matters when the
Company assesses that it is probable that a loss has been incurred and the amount of the loss can be reasonably
estimated. The Company does not establish accruals for such matters when the Company does not believe both that it is
probable that a loss has been incurred and that the amount of the loss can be reasonably estimated. The Company’s
assessment of whether a loss is probable is based on its assessment of the ultimate outcome of the matter following all
appeals.

Under the FASB-issued ASC 450 “Contingencies”, an event is “reasonably possible” if “the chance of the future event
or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event
or events occurring is slight”. Thus, references to the upper end of the range of reasonably possible loss for cases in
which the Company is able to estimate a range of reasonably possible loss mean the upper end of the range of loss for
cases for which the Company believes the risk of loss is more than slight.

There may continue to be exposure to loss in excess of any amount accrued. When it is possible to estimate the
reasonably possible loss or range of loss above the amount accrued for the matters disclosed, that estimate is aggregated
and disclosed. The Company records legal costs associated with its legal contingencies as incurred, except for legal costs
associated with product liability claims which are included in the actuarial estimates used in determining the product
liability accrual.

As of December 31, 2023, the Company estimates that the aggregate amount of reasonably possible loss in excess of the
amount accrued for its legal contingencies is approximately $4.6 million pre-tax. With respect to the estimate of
reasonably possible loss, management has estimated the upper end of the range of reasonably possible loss based on
(i) the amount of money damages claimed, where applicable, (ii) the allegations and factual development to date,
(iii) available defenses based on the allegations, and/or (iv) other potentially liable parties. This estimate is based upon
currently available information and is subject to significant judgment and a variety of assumptions and known and
unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary
significantly from the current estimate. In the event of an unfavorable outcome in one or more of the matters, the
ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating
results or cash flows for a particular quarterly or annual period, depending in part upon the operating results of such
period. However, based on information currently known to it, management believes that the ultimate outcome of all
matters, as they are resolved over time, is not likely to have a material adverse effect on the financial condition of the
Company.

Product Liability

The Company is subject to a variety of potential liabilities in connection with product liability cases. For our most
significant volume of liability matters, the Company maintains a high self-insured retention limit within its product
liability and general liability coverage, which the Company believes to be generally in accordance with industry
practices. For product liability cases in the U.S., management establishes its product liability accrual, which includes
estimated legal costs associated with accrued claims. For its most significant volume of liability matters, the Company
utilizes third-party actuarial valuations which incorporate historical trend factors, including, but not limited to, claim
frequency and loss severity, and the Company’s specific claims experience derived from loss reports provided by
third-party claims administrators. The product liability accrual is established after considering any applicable insurance
coverage. The product liability accrual represents the estimated ultimate losses for all reported and incurred but not
reported claims. Changes in the nature of product liability claims or the actual settlement amounts could affect the
adequacy of the estimates and require changes to the provisions. Because the liability is an estimate, the ultimate liability
may be more or less than reported.

Environmental Remediation

The Company has been named as a potentially responsible party (“PRP”) with respect to a limited number of identified
contaminated sites. The levels of contamination vary significantly from site to site as do the related levels of remediation
efforts. Environmental liabilities are recorded based on the most probable cost, if known, or on the estimated minimum
cost of remediation. Accruals are not discounted to their present value, unless the amount and timing of expenditures are
fixed and reliably determinable. The Company accrues estimated environmental liabilities based on assumptions, which
are subject to a number of factors and uncertainties. Circumstances that can affect the reliability and precision of these
estimates include identification of additional sites, environmental regulations, level of clean-up required, technologies
available, number and financial condition of other contributors to remediation and the time period over which
remediation may occur. The Company recognizes changes in estimates as new remediation requirements are defined or
as new information becomes available.

Chemetco, Inc. Superfund Site, Hartford, Illinois

In August 2017, Watts Regulator Co. (a wholly-owned subsidiary of the Company) received a “Notice of Environmental
Liability” from the Chemetco Site Group (“Group”) alleging that it is a PRP for the Chemetco, Inc. Superfund Site in
Hartford, Illinois (the “Site”) because it arranged for the disposal or treatment of hazardous substances that were
contained in materials sent to the Site and that resulted in the release or threat of release of hazardous substances at the
Site. The letter offered Watts Regulator Co. the opportunity to join the Group and participate in the Remedial
Investigation and Feasibility Study (“RI/FS”) for a portion of the Site. Watts Regulator Co. joined the Group in
September 2017 and was added in March 2018 as a signatory to the Administrative Settlement Agreement and Order on
Consent with the United States Environmental Protection Agency (“USEPA”) and the Illinois Environmental Protection
Agency (“IEPA”) governing completion of the RI/FS. The Remedial Investigation report has been completed for the first
portion of the site. For that same portion of the site, the draft Feasibility Study (“FS”) report was submitted to USEPA
and IEPA for review and comment in September 2021. USEPA and IEPA both issued comments on the draft FS. The
Group provided responses to the Agency comments on December 1, 2023. The deadline for submission of the revised FS
report has been deferred with USEPA’s consent until all Agency comments are resolved. Comments and final approval
from the EPA are required to complete the FS process.

Based on information currently known to it, management believes that Watts Regulator Co.’s share of the costs of the
RI/FS is not likely to have a material adverse effect on the financial condition of the Company, or have a material
adverse effect on the Company’s operating results for any particular period. The Company is unable to estimate a range
of reasonably possible loss for the above matter in which damages have not been specified because: (i) the FS process
for the first portion of the Site has not been completed, and the RI/FS process for the remainder of the Site has not yet
been initiated, to determine what remediation plans will be implemented and the costs of such plans; (ii) the total amount
of material sent to the Site, and the total number of PRPs who may or may not agree to fund or perform any remediation,
have not been determined; (iii) the share contribution for PRPs to any remediation has not been determined; and (iv) the
number of years required to implement a remediation plan acceptable to USEPA and IEPA is uncertain.

Asbestos Litigation

The Company is defending lawsuits in different jurisdictions, alleging injury or death as a result of exposure to asbestos.
The complaints in these cases typically name a large number of defendants and do not identify any particular Company
products as a source of asbestos exposure. To date, discovery has failed to yield evidence of substantial exposure to any
Company products and no judgments have been entered against the Company. Based on information currently known to
it, management believes that these matters are not likely to have a material adverse effect on the business or financial
condition of the Company, or to have a material adverse effect on the Company’s operating results for any particular
period.

Other Litigation

Other lawsuits and proceedings or claims, arising from the ordinary course of operations, are also pending or threatened
against the Company.

(17) Financial Instruments

Fair Value

The carrying amounts of cash and cash equivalents, trade receivables and trade payable approximate fair value because
of the short maturity of these financial instruments. The fair value of the Company’s variable rate debt under the
Revolving Credit Facility approximates its carrying value.

Financial Instruments

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including deferred
compensation plan assets and related liabilities, contingent consideration and derivatives. The fair values of these certain
financial assets and liabilities were determined using the following inputs at December 31, 2023 and December 31,
2022:

Fair Value Measurement at December 31, 2023 Using:

Quoted Prices in Active Significant Other
Markets for Identical

Significant
Unobservable

Observable
Inputs
(Level 2)

Inputs
(Level 3)

Total

Assets
(Level 1)

Assets
Plan asset for deferred compensation(1)
Interest rate swap(2)
Total assets
Liabilities
Plan liability for deferred compensation(3)
Interest rate swap(4)
Designated foreign currency hedges(5)
Total liabilities

$
$
$

$
$
$
$

2.3 $
6.5 $
8.8 $

2.3 $
2.0 $
0.2 $
4.5 $

(in millions)

2.3 $
— $
2.3 $

2.3 $
— $
— $
2.3 $

— $
6.5 $
6.5 $

— $
2.0 $
0.2 $
2.2 $

—
—
—

—
—
—
—

Fair Value Measurements at December 31, 2022 Using:

Quoted Prices in Active Significant Other
Markets for Identical

Significant
Unobservable

Observable
Inputs
(Level 2)

Inputs
(Level 3)

Total

Assets
(Level 1)

Assets
Plan asset for deferred compensation(1)
Interest rate swap(2)
Designated foreign currency hedges(5)
Total assets
Liabilities
Plan liability for deferred compensation(3)
Contingent consideration(6)
Total liabilities

$
$
$
$

$
$
$

1.9
$
9.3 $
0.2 $
11.4 $

1.9 $
2.5 $
4.4 $

(in millions)

1.9
$
— $
— $
1.9 $

1.9 $
— $
1.9 $

— $
9.3 $
0.2 $
9.5 $

— $
— $
— $

—
—

—

—
2.5
2.5

(1) Included on the Company’s consolidated balance sheet in other assets (other, net).

(2) As of December 31, 2023, $3.4 million classified in prepaid expenses and other current assets on the Company’s

consolidated balance sheet and $3.0 million classified in other assets (other, net).

(3) Included on the Company’s consolidated balance sheet in accrued compensation and benefits.

(4) As of December 31, 2023, $0.2 million classified in accrued expenses and other liabilities on the Company’s

consolidated balance sheet and $1.8 million classified in other noncurrent liabilities.

(5) Included on the Company’s consolidated balance sheet in prepaid expenses and other current assets.

(6) Included on the Company’s consolidated balance sheet in other noncurrent liabilities.

In connection with the immaterial acquisition of Sentinel Hydrosolutions, LLC (“Sentinel”), completed during the fourth
quarter of 2021, a contingent liability of $2.5 million was recognized as the estimate of the acquisition date fair value of
the contingent consideration. This liability was classified as Level 3 under the fair value hierarchy as it was based on the
probability of achievement of future performance metrics, which were not observable in the market. Failure to meet the
performance metrics would reduce this liability to zero, while complete achievement would increase the liability to a

maximum contingent consideration of approximately $4.5 million. The Sentinel contingent liability was reversed in the
fourth quarter of 2023 as performance metrics were not met.

Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and
consist primarily of money market funds, for which the carrying amount is a reasonable estimate of fair value.

The Company uses financial instruments from time to time to enhance its ability to manage risk, including foreign
currency and commodity pricing exposures, which exist as part of its ongoing business operations. The use of derivatives
exposes the Company to counterparty credit risk for nonperformance and to market risk related to changes in currency
exchange rates and commodity prices. The Company manages its exposure to counterparty credit risk through
diversification of counterparties. The Company’s counterparties in derivative transactions are substantial commercial
banks with significant experience using such derivative instruments. The impact of market risk on the fair value and cash
flows of the Company’s derivative instruments is monitored and the Company restricts the use of derivative financial
instruments to hedging activities. The Company does not enter into contracts for trading purposes nor does the Company
enter into any contracts for speculative purposes. The use of derivative instruments is approved by senior management
under written guidelines.

Interest Rate Swaps

On March 30, 2021, the Company entered into the Credit Agreement which extended the maturity date of the $800
million senior unsecured revolving credit facility from February 12, 2022 to March 30, 2026. On August 2, 2022, the
Company entered into Amendment No. 1 to the Credit Agreement to replace the LIBOR as a reference rate for
borrowings with Term SOFR and to provide for a fixed adjustment of 10 basis points added to Term SOFR for all Term
SOFR borrowings, subject to a 0.00% floor. Borrowings outstanding under the Revolving Credit Facility bear interest at
a fluctuating rate per annum as further detailed in Note 12.

In order to manage the Company’s exposure to changes in cash flows attributable to fluctuations in interest payments
related to the Company’s floating rate debt, the Company entered into an interest rate swap on March 30, 2021. Under
the interest rate swap agreement, the Company received the one-month USD-LIBOR subject to a 0.00% floor and paid a
fixed rate of 1.02975% on a notional amount of $100.0 million. On August 2, 2022, the Company amended the interest
rate swap to replace LIBOR as a reference rate for borrowings with Term SOFR. Under the amended interest rate swap
agreement, the Company receives the one-month Term SOFR subject to a -0.1% floor and pays a fixed rate of 0.942%
on a notional amount of $100.0 million. The Company elected the optional expedient in connection with amending its
interest rate swap to replace the reference rate from LIBOR to Term SOFR to consider the amendment as a continuation
of the existing contract without having to perform an assessment that would otherwise be required under U.S. GAAP.
The Company entered into an additional interest rate swap on October 23, 2023, as part of the acquisition of Bradley.
Under the interest rate swap agreement, the Company receives the one-month Term SOFR subject to a -0.1% floor and
pays a fixed rate of 4.844% on a notional amount of $100.0 million. Both swaps mature on March 30, 2026. The
Company formally documents the hedge relationships at hedge inception to ensure that its interest rate swaps qualify for
hedge accounting. On a quarterly basis, the Company assesses whether the interest rate swap is highly effective in
offsetting changes in the cash flow of the hedged item. The Company does not hold or issue interest rate swaps for
trading purposes. The swaps are designated as cash flow hedges. For the years ended December 31, 2023 and 2022, a net
loss of $3.6 million and a net gain of $6.3 million, respectively, was recorded in Accumulated Other Comprehensive
Loss to recognize the effective portion of the fair value of the interest rate swaps that qualifies as a cash flow hedge.

Designated Foreign Currency Hedges

The Company’s foreign subsidiaries transact most business, including certain intercompany transactions, in foreign
currencies. Such transactions are principally purchases or sales of materials. The Company has exposure to a number of
foreign currencies, including the Canadian dollar, the euro, and the Chinese yuan. The Company uses a layering
methodology, whereby at the end of each quarter, the Company enters into forward exchange contracts hedging
Canadian dollar to U.S. dollar, which hedge up to 85% of the forecasted intercompany purchase transactions between
one of the Company’s Canadian subsidiaries and the Company’s U.S. operating subsidiaries for the next twelve months.
The Company uses a similar layering methodology when entering into forward exchange contracts hedging U.S. dollar
to the Chinese yuan, which hedge up to 60% of the forecasted intercompany sales transactions between one of the
Company’s Chinese subsidiaries and one of the Company’s U.S. operating subsidiaries for the next twelve months. As
of December 31, 2023, all designated foreign exchange hedge contracts were cash flow hedges under ASC
815, Derivatives and Hedging. The Company records the effective portion of the designated foreign currency hedge
contracts in other comprehensive income until inventory turns and is sold to a third-party. Once the third-party
transaction associated with the hedged forecasted transaction occurs, the effective portion of any related gain or loss on
the designated foreign currency hedge is reclassified into earnings within cost of goods sold. In the event the notional
amount of the derivatives exceeds the forecasted intercompany purchases for a given month, the excess hedge position
will be attributed to the following month’s forecasted purchases. However, if the following month’s forecasted purchases
cannot absorb the excess hedge position from the current month, the effective portion of the hedge recorded in other
comprehensive income will be reclassified to earnings.

The notional amounts outstanding as of December 31, 2023 for the Canadian dollar to U.S. dollar contracts was $6.2
million. The fair value of the Company’s designated foreign hedge contracts outstanding as of December 31, 2023 was a
liability of $0.2 million. As of December 31, 2023, the amount expected to be reclassified into cost of goods sold from
other comprehensive income in the next twelve months is a gain of less than $0.1 million.

(18) Segment Information

The Company operates in three geographic segments: Americas, Europe, and APMEA. Each of these segments sells
similar products and solutions and has separate financial results that are reviewed by the Company’s chief operating
decision-maker. Each segment earns revenue and income almost exclusively from the sale of the Company’s products.
The Company sells its products into various end markets around the world with sales by region based upon location of
the entity recording the sale. See Note 4 for further detail on sales by region of the product categories. All intercompany
sales transactions have been eliminated. The accounting policies for each segment are the same as those described in
Note 2 of the Notes to Consolidated Financial Statements.

The following is a summary of the Company’s significant accounts and balances by segment, reconciled to its
consolidated totals:

2023

Year Ended December 31,
2022
(in millions)

2021

Net sales

Americas
Europe
APMEA

Consolidated net sales

Operating income (loss)

Americas
Europe
APMEA

Subtotal reportable segments

Corporate(*)

Consolidated operating income
Interest income
Interest expense
Other expense (income), net

Income before income taxes
Capital expenditures

Americas
Europe
APMEA

Consolidated capital expenditures

Depreciation and amortization

Americas
Europe
APMEA

Consolidated depreciation and amortization

Identifiable assets (at end of period)

Americas
Europe
APMEA

Consolidated identifiable assets

Property, plant and equipment, net (at end of period)

Americas
Europe
APMEA

Consolidated property, plant and equipment, net

$ 1,428.1 $ 1,390.0 $ 1,207.2
517.4
84.6
$ 2,056.3 $ 1,979.5 $ 1,809.2

512.1
116.1

499.1
90.4

325.2 $
70.4
16.1
411.7
(60.8)
350.9
(7.2)
8.2
0.4
349.5 $

283.9 $
66.7
14.0
364.6
(49.6)
315.0
(0.6)
7.0
1.0
307.6 $

20.8 $
8.0
0.9
29.7 $

31.5 $
9.6
2.2
43.3 $

16.2 $
11.2
0.7
28.1 $

27.4 $
10.3
2.0
39.7 $

211.0
63.6
14.4
289.0
(49.4)
239.6
—
6.3
(0.8)
234.1

17.6
8.5
0.6
26.7

29.8
12.6
2.7
45.1

$ 1,605.7 $ 1,222.8 $ 1,133.5
584.8
137.3
$ 2,309.4 $ 1,930.9 $ 1,855.6

569.1
134.6

583.5
124.6

174.0 $
69.9
4.3
248.2 $

124.1 $
68.4
4.3
196.8 $

121.3
74.5
4.9
200.7

* Corporate expenses are primarily for administrative compensation expense, compliance costs, professional fees,
including corporate-related legal and audit expenses, shareholder services and benefit administration costs.

The following includes U.S. net sales and U.S. property, plant and equipment of the Company’s Americas segment:

U.S. net sales
U.S. property, plant and equipment, net (at end of year)

$ 1,324.4
$ 161.5

2023

2021

December 31,
2022
(in millions)
$1,301.2 $ 1,123.9
$ 119.0 $ 116.2

The following includes intersegment sales for Americas, Europe and APMEA:

2023

December 31,
2022
(in millions)

2021

Intersegment Sales

Americas
Europe
APMEA

Intersegment sales

7.9
24.7
85.2
$ 117.8

(19) Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following:

11.1 $
24.7
71.4

9.3
29.1
120.5
$ 107.2 $ 158.9

Accumulated

Other

Foreign
Currency

Pension
Translation Adjustment Hedges (1)

Cash Flow Comprehensive

Loss

(in millions)

Balance December 31, 2021
Change in period
Balance December 31, 2022
Change in period
Balance December 31, 2023

$ (127.9) $

(29.1)

$ (157.0) $

9.7

$ (147.3) $

— $
—
— $
0.7
0.7

0.6 $
6.5
7.1 $
(3.9)
3.2 $

(127.3)
(22.6)
(149.9)
6.5
(143.4)

(1) Cash flow hedges include interest rate swaps and designated foreign currency hedges. See Note 17 for further details.

(20) Subsequent Events

On February 7, 2024, the Company declared a quarterly dividend of thirty-six cents ($0.36) per share on each
outstanding share of Class A common stock and Class B common stock payable on March 15, 2024 to stockholders of
record on March 1, 2024.

Business Acquisition

Effective January 1, 2024, the Company completed the acquisition of Josam Company following its conversion into
Josam Industries, LLC (“Josam”) in a share purchase transaction funded with cash on hand. The aggregate net purchase
price was approximately $98.7 million, net of cash of $4.1 million, and is subject to a final post-closing working capital
adjustment. Josam is based in Michigan City, Indiana, and is a leading provider and manufacturer of drainage and
plumbing products, serving commercial, industrial, and multi-family end markets for over 100 years. Josam’s annualized
sales are approximately $35 million. The Company will account for the transaction as a business combination in the first
quarter of 2024.

Watts Water Technologies, Inc. and Subsidiaries
Schedule II—Valuation and Qualifying Accounts
(Amounts in millions)

Balance At Additions
Beginning of Charged To Exchange/Acquisitions

Foreign

Period

Expense

Impact

Balance At

End of
Deductions Period

Year Ended December 31, 2021
Accounts Receivable Reserve Allowances
Reserve for excess and obsolete inventories
Year Ended December 31, 2022
Accounts Receivable Reserve Allowances
Reserve for excess and obsolete inventories
Year Ended December 31, 2023
$
Accounts Receivable Reserve Allowances
Reserve for excess and obsolete inventories $

$
$

11.1
33.4

10.3
33.0

$
$

3.4
8.7

5.2
17.5

10.7 $
39.5 $

4.0
16.3

(0.2)
(0.9)

(0.3)
(0.9)

1.7
5.9

(4.0) $
(8.2) $

(4.5) $
(10.1) $

10.3
33.0

10.7
39.5

(4.5) $ 11.9
(16.6) $ 45.1

Exhibit No.

EXHIBIT INDEX

Description

3.1 Restated Certificate of Incorporation, as amended. Incorporated by reference to the Registrant’s

Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (File No. 001-11499).

3.2 Amended and Restated By-Laws. Incorporated by reference to the Registrant’s Current Report on

Form 8-K dated July 31, 2023 (File No. 001-11499).
4† Description of the Registrant’s Class A Common Stock.
9.1

The Amended and Restated George B. Horne Voting Trust Agreement—1997 dated as of

September 14, 1999. Incorporated by reference to the Registrant’s Annual Report on Form 10-K for
year ended June 30, 1999 (File No. 001-11499).

10.1*

Supplemental Compensation Agreement effective as of September 1, 1996 between the Registrant and
Timothy P. Horne. Incorporated by reference to the Registrant’s Annual Report on Form 10-K for
year ended June 30, 1996 (File No. 001-11499).

10.2* Amendment No. 1, dated July 25, 2000, to Supplemental Compensation Agreement effective as of

September 1, 1996 between the Registrant and Timothy P. Horne. Incorporated by reference to the
Registrant’s Quarterly Report on Form 10-Q for quarter ended September 30, 2000 (File
No. 001-11499).

10.3* Amendment No. 2, dated October 23, 2002, to Supplemental Compensation Agreement effective as of
September 1, 1996 between the Registrant and Timothy P. Horne. Incorporated by reference to the
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (File
No. 001-11499).

10.4* Amendment No. 3, dated August 18, 2015, to Supplemental Compensation Agreement effective as of
September 1, 1996 between the Registrant and Timothy P. Horne. Incorporated by reference to the
Registrant’s Current Report on Form 8-K dated August 18, 2015 (File No. 001-11499).

10.5 Amended and Restated Stock Restriction Agreement dated October 30, 1991. Incorporated by

reference to the Registrant’s Current Report on Form 8-K dated November 14, 1991 (File
No. 001-11499).

10.6 Amendment, dated August 26, 1997, to Amended and Restated Stock Restriction Agreement dated
October 30, 1991. Incorporated by reference to the Registrant’s Annual Report on Form 10-K for
year ended June 30, 1997 (File No. 001-11499).

10.7 Registration Rights Agreement dated July 25, 1986. Incorporated by reference to the Registrant’s
Form S-1 (No. 33-6515) as part of the Second Amendment to such Form S-1 dated August 21,
1986.

10.8*†

Form of Indemnification Agreement between the Registrant and certain directors and officers of the

Registrant.

10.9* Watts Water Technologies, Inc. Executive Officer Incentive Bonus Plan. Incorporated by reference to

the Registrant’s Current Report on Form 8-K dated February 6, 2019 (File No. 001-11499).

10.10* Non-Employee Director Compensation Arrangements. Incorporated by reference to the Registrant’s

Quarterly Report on Form 10-Q for the quarter ended March 27, 2022 (File No. 001-11499).
10.11* Watts Water Technologies, Inc. Management Stock Purchase Plan Amended and Restated as of

November 1, 2021. Incorporated by reference to the Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2021 (File No. 001-11499).

10.12* Watts Water Technologies, Inc. Third Amended and Restated 2004 Stock Incentive Plan. Incorporated
by reference to the Registrant’s Current Report on Form 8-K dated May 11, 2022 (File
No. 001-11499).

10.13*

Form of Deferred Stock Award Agreement under the Watts Water Technologies, Inc. Third Amended
and Restated 2004 Stock Incentive Plan. Incorporated by reference to the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended June 26, 2022 (File No. 001-11499).

10.14*

Form of 2021 Performance Stock Unit Award Agreement under the Watts Water Technologies, Inc.

Second Amended and Restated 2004 Stock Incentive Plan. Incorporated by reference to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2021 (File
No. 001-11499)

Exhibit No.

Description

10.15*

Form of 2022 Performance Stock Unit Award Agreement under the Watts Water Technologies, Inc.

Second Amended and Restated 2004 Stock Incentive Plan. Incorporated by reference to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2022 (File
No. 001-11499).

10.16*

Form of 2023 Performance Stock Unit Award Agreement under the Watts Water Technologies, Inc.

Third Amended and Restated 2004 Stock Incentive Plan. Incorporated by reference to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 26, 2023 (File
No. 001-11499).

10.17* Watts Water Technologies, Inc. Executive Severance Plan, as amended and restated as of February 8,

10.18+

2018. Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2022 (File No. 001-11499).

Second Amended and Restated Credit Agreement, dated as of March 30, 2021, by and among the
Registrant, the Subsidiary Borrowers party thereto, the Lenders party thereto, JP Morgan Chase
Bank, N.A., as Administrative Agent, Bank of America N.A., Keybank National Association, Wells
Fargo Bank, National Association, and T.D. Bank, N.A., as Co-Syndication Agents, and PNC Bank,
National Association, U.S. Bank National Association, HSBC Bank USA, National Association and
HSBC Bank Canada, as Co-Documentation Agents. Incorporated by reference to the Registrant’s
Current Report on Form 8-K dated March 30, 2021 (File No. 001-11499).

10.19+

Second Amended and Restated Guaranty, dated as of March 30, 2021, by the Registrant and the

Subsidiaries of the Registrant set forth therein, in favor of JPMorgan Chase Bank N.A. and the other
lenders referred to therein. Incorporated by reference to the Registrant’s Current Report on
Form 8-K dated March 30, 2021 (File No. 001-11499).

10.20+ Amendment No. 1, dated August 2, 2022, to Second Amended and Restated Credit Agreement, dated
March 30, 2021, by and among the Registrant, the Subsidiary Borrowers party thereto, the Lenders
party thereto, JP Morgan Chase Bank, N.A., as Administrative Agent, Bank of America N.A.,
Keybank National Association, Wells Fargo Bank, National Association, and T.D. Bank, N.A., as
Co-Syndication Agents, and PNC Bank, National Association, U.S. Bank National Association,
HSBC Bank USA, National Association and HSBC Bank Canada, as Co-Documentation Agents.
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
September 25, 2022 (File No. 001-11499).

10.21† Amendment No. 2, dated December 12, 2023 to Second Amended and Restated Credit Agreement,
dated March 30, 2021, by and among the Registrant, the Subsidiary Borrowers party thereto, the
Lenders party thereto, JP Morgan Chase Bank, N.A., as Administrative Agent, Bank of America
N.A., Keybank National Association, Wells Fargo Bank, National Association, and T.D. Bank,
N.A., as Co-Syndication Agents, and PNC Bank, National Association, U.S. Bank National
Association, HSBC Bank USA, National Association and HSBC Bank Canada, as Co-
Documentation Agents.

10.22+ Unit Purchase Agreement, dated as of August 30, 2023, by and among G6 Adventures Corporation,

Bradley Corporation, the shareholders of G6 Adventures Corporation, Watts Regulator Co. and
Watts Water Technologies, Inc. Incorporated by reference to the Registrant’s Quarterly Report on
Form 10-Q for the quarter ended September 24, 2023 (File No. 001-11499).

10.23† Amendment, dated December 15, 2023, to Unit Purchase Agreement, dated as of August 30, 2023, by

and among G6 Adventures Corporation, Bradley Corporation, the shareholders of G6 Adventures
Corporation, Watts Regulator Co. and Watts Water Technologies, Inc.

10.24†

Second Amendment, dated January 31, 2024, to Unit Purchase Agreement, dated as of August 30,
2023, by and among G6 Adventures Corporation, Bradley Corporation, the shareholders of G6
Adventures Corporation, Watts Regulator Co. and Watts Water Technologies, Inc.

Subsidiaries

21†
23† Consent of KPMG LLP, Independent Registered Public Accounting Firm

31.1† Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the

Securities Exchange Act of 1934, as amended

Exhibit No.

Description

31.2† Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the

Securities Exchange Act of 1934, as amended

32.1†† Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350
32.2†† Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350

97*†
101.INS†
101.SCH†
101.CAL†
101.DEF†
101.LAB†
101.PRE†

Policy for Recovery of Erroneously Awarded Compensation
Inline XBRL Instance Document.
Inline XBRL Taxonomy Extension Schema Document.
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document.
Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management contract or compensatory plan or arrangement.

†

Filed herewith.

††

Furnished herewith.

The annexes, schedules, and certain exhibits to this Exhibit have been omitted pursuant to Item 601(a)(5) of
Regulation S-K. The Registrant hereby agrees to furnish a supplemental copy of any omitted schedule or
similar attachment to this Exhibit to the Securities and Exchange Commission upon its request.

Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting
Language): (i) Consolidated Statements of Operations for the Years ended December 31, 2023, 2022 and 2021,
(ii) Consolidated Statements of Comprehensive Income for the Years ended December 31, 2023, 2022 and 2021,
(iii) Consolidated Balance Sheets at December 31, 2023 and December 31, 2022, (iv) Consolidated Statements of
Stockholders’ Equity for the Years ended December 31, 2023, 2022 and 2021, (v) Consolidated Statements of Cash
Flows for the Years ended December 31, 2023, 2022 and 2021, and (vi) Notes to Consolidated Financial Statements.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has

duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

WATTS WATER TECHNOLOGIES, INC.

By:

/s/ ROBERT J. PAGANO, JR.
Robert J. Pagano, Jr.
Chief Executive Officer and President

DATED: February 21, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the

following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ ROBERT J. PAGANO, JR.

Chief Executive Officer, President, Chairperson of the

Board and Director

February 21, 2024

Robert J. Pagano, Jr.

(Principal Executive Officer)

/s/ SHASHANK PATEL
Shashank Patel

Chief Financial Officer
(Principal Financial Officer)

/s/ VIRGINIA A. HALLORAN
Virginia A. Halloran

Chief Accounting Officer
(Principal Accounting Officer)

/s/ REBECCA J. BOLL
Rebecca J. Boll

Director

/s/ CHRISTOPHER L. CONWAY
Christopher L. Conway

Director

/s/ MICHAEL J. DUBOSE
Michael J. Dubose

Director

February 21, 2024

February 16, 2024

February 18, 2024

/s/ DAVID A. DUNBAR
David A. Dunbar

/s/ LOUISE K. GOESER
Louise K. Goeser

/s/ W. CRAIG KISSEL
W. Craig Kissel

/s/ JOSEPH T. NOONAN
Joseph T. Noonan

/s/ MERILEE RAINES
Merilee Raines

/s/ JOSEPH W. REITMEIER
Joseph W. Reitmeier

Lead Independent Director

February 16, 2024

Director

WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP "AS REPORTED" TO THE "ADJUSTED" NON-GAAP
EXCLUDING THE EFFECT OF ADJUSTMENTS FOR SPECIAL ITEMS
(Amounts in millions, except per share information)
(Unaudited)

Net sales

Operating income - as reported

Operating margin %

Adjustments for special items:

Restructuring
Acquisition related costs
Contingent consideration adjustment
Gain on sale of asset
Long-lived asset impairment charges
Loss on disposal
Professional Fees / transformation
Footprint optimization

Total adjustments for special items

Operating income - as adjusted

Adjusted operating margin %

Net income - as reported

Adjustments for special items - tax effected:

Restructuring
Acquisition related costs
Contingent consideration adjustment
Gain on sale of asset
Long-lived asset impairment charges
Net gain on disposal
Professional Fees / transformation
Footprint optimization
Discrete tax items

Total adjustments for special items - tax effected

Net income - as adjusted

Diluted earnings per share - as reported

Adjustments for special items

Diluted earnings per share - as adjusted

CONSOLIDATED RESULTS

December 31,
2023

December 31,
2022

2,056.3

350.9
17.1%

5.5
11.3
(2.5)
-
-
-
-
-

14.3

365.2
17.8%

262.1

4.1
8.3
(2.5)
-
-
-
-
-
5.3

15.2

277.3

7.82
0.45
8.27

1,979.5

315.0
15.9%

10.6
-
-
(1.8)
-
-
-
-

8.8

323.8
16.4%

251.5

7.9
-
-
(1.4)
-
-
-
-
(18.2)

(11.7)

239.8

7.48
(0.35)
7.13

Year Ended
December 31,
2021

1,809.2

239.6
13.2%

19.3
-
-
-
-
-
-
-

19.3

258.9
14.3%

165.7

14.1
-
-
-
-
-
-
-
7.2

21.3

187.0

4.88
0.64
5.52

December 31,
2020

December 31,
2019

1,508.6

181.1
12.0%

9.9
1.3
(1.5)
-
1.4
0.6
-
1.1

12.8

193.9
12.9%

114.3

7.4
1.0
(1.5)
-
1.0
(0.7)
-
0.8
9.7

17.7

132.0

3.36
0.52
3.88

1,600.5

197.1
12.3%

4.3
0.9
-
-
-
-
3.1
0.8

9.1

206.2
12.9%

131.5

3.2
0.7
-
-
-
-
3.1
0.6
-

7.6

139.1

3.85
0.22
4.07

Global Leadership Team

Board of Directors

Robert J.
Pagano, Jr.
Chief Executive
Officer, President,
and Chairperson
of the Board of
Directors

Monica Barry
Chief Human
Resources Officer

James F. Dagley
President, Watts
Applied Solutions

Rebecca Boll
Director

Christopher L.
Conway
Chairperson of
the Compensation
Committee

Michael J.
DuBose
Director

David A. Dunbar
Lead Independent
Director

Andre Dhawan
Chief Operating
Officer

Kenneth R.
Lepage
General Counsel,
Chief Sustainability
Officer, and
Secretary

Elie A. Melhem
President,
Asia-Pacific,
the Middle East,
and Africa

Louise K. Goeser
Director

W. Craig Kissel
Chairperson of
the Governance
and Sustainability
Committee

Joseph T.
Noonan
Director

Robert J.
Pagano, Jr.
Chairperson of the
Board of Directors

Shashank Patel
Chief Financial
Officer

Ram
Ramakrishnan
Executive
Vice President,
Strategy and
Business
Development

Merilee Raines
Chairperson of the
Audit Committee

Joseph W.
Reitmeier
Director

Corporate
Information

Executive Offices 815 Chestnut Street North Andover, MA 01845-6098 Tel: (978) 688-1811
Registrar and Transfer Agent Broadridge Corporate Issuer Solutions, Inc.
P.O. Box 1342 Brentwood, NY 11717 Tel: (877) 830-4936
Auditors KPMG LLP Two Financial Center 60 South Street Boston, MA 02111
Stock Listing New York Stock Exchange Ticker Symbol: WTS

For more information
on Watts Water
Technologies, visit
our investor website
by scanning the
QR code or visiting
Watts.com/Investors

This Annual Report contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements that relate to prospective events or developments are forward-looking statements. Also, words such
as “intend,” “believe,” “anticipate,” “plan,” “expect,” and similar expressions identify forward-looking statements. We cannot
assure investors that our assumptions and expectations will prove to have been correct. There are a number of factors that
could cause our actual results to differ materially from those indicated or implied by forward-looking statements. These factors
include, but are not limited to, those set forth in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year
ended December 31, 2023, included in this Annual Report. Except as required by law, we undertake no intention or obligation
to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Watts Water Technologies, Inc.

Printed on recycled paper.

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