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What changed in WATTS WATER TECHNOLOGIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WATTS WATER TECHNOLOGIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+318 added−282 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-21)

Top changes in WATTS WATER TECHNOLOGIES INC's 2023 10-K

318 paragraphs added · 282 removed · 237 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

82 edited+18 added−19 removed81 unchanged
Biggest changeRefer 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.
Biggest changeThe 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.
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 products, solutions and systems 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.
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.
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 people can thrive.
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.
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. ● Employee Engagement Surveys.
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.
Leak detection has also become an important product group helping avoid costly water-based damage and loss, providing the ability shut off water supply remotely at the first detection of a leak with our Leak Defense system.
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.
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 devices.
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.
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 and, ultimately, to succession planning across our organization.
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 have consistently advocated for the development and enforcement of plumbing codes and are committed to providing products to meet these standards. ​ Products ​ We have a broad range of products in terms of design distinction, size and configuration. We classify our many products into four global product categories.
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.
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 strengths.
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.
Risk Factors” and Note 15 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.
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.
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.
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.
During 2022, 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 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.
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 Age Position Robert J.
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”). ​ 12 Table of Contents 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 Age Position Robert J.
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.
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. ​ 13 Table of Contents Shashank Patel has served as Chief Financial Officer of the Company since July 2018. Mr.
The material 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.
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. ​ 11 Table of Contents 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.
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.
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. ​ 15 Table of Contents W.
Craig Kissel has served as a director of the Company since October 2011. Mr. Kissel has served as Lead Independent Director of our Board of Directors since February 2022 and served as the Chairperson of our Board of Directors from October 2014 to February 2022. Mr.
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.
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 12 Table of Contents President Finance, Corporate Controller, and President of Industrial Products.
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.
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.
Thousands of other customers constituted the balance of our net sales in each of those years. ​ 5 Table of Contents 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.
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 ​ An integral part of our mission to build a high performance, values-driven culture is creating an inclusive culture that welcomes and celebrates diversity.
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.
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 have made substantial progress in minimizing the environmental impact of our operations.
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.
Approximately 4% of our net sales in 2022, and 5% of our net sales in 2021 and 2020 were to DIY chains. The DIY channel primarily includes sales related to valves and a portion of our water quality products. ​ In 2022, 2021 and 2020, no customer accounted for more than 10% of our total net sales.
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.
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.
The timing of any price reductions and decreases in commodity costs may not align. As a result, our margins could be affected. ​ 6 Table of Contents With limited exceptions, we have multiple suppliers for our components and raw materials.
Kissel served as a director of 14 Table of Contents 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.
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.
In addition, our goal is to embed sustainability throughout the lifecycle of our products by creating safe, efficient, long-lasting products made with high-recycling-value materials wherever possible. ​ Social Responsibility ​ We are committed to creating both economic and social value and strive to have a positive impact on our global community.
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.
Residential & commercial flow control and protection products accounted for approximately 52%, 53% and 52% of our total net sales in 2022, 2021 and 2020, respectively. ​ ● HVAC & gas products—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 .
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. ​ 4 Table of Contents ● 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.
Lennox International is a leading global provider of climate control solutions and 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. ​
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. ​ 16 Table of Contents
Approximately 21% of our net sales in 2022, and 19% of our net sales in 2021 and 2020 were through our specialty channel. The specialty channel primarily includes sales related to high-efficiency boilers and water heaters, water filtration and conditioning products, specialty floor and tile products, food service products and leak detection products. ​ DIY Chains.
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.
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. ​ 5 Table of Contents We aim to inform and educate our channel partners, installers and end-use customers on how to maximize our product solutions.
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 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 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.
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.
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 10 Table of Contents and safety.
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 2022, we continued to invest in our systems and in 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, ​ 2022 2021 2020 ​ ​ (in millions) Capital expenditures ​ $ 28.1 ​ $ 26.7 ​ $ 43.8 Depreciation ​ $ 27.6 ​ $ 31.4 ​ $ 31.3 ​ 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.
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, ​ 2023 2022 2021 ​ ​ (in millions) Capital expenditures ​ $ 29.7 ​ $ 28.1 ​ $ 26.7 Depreciation ​ $ 30.1 ​ $ 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.
Water quality products accounted for approximately 7%, 6% and 7% of our total net sales in 2022, 2021 and 2020, respectively. ​ Commercial and Operational Excellence ​ We strive to invest in product innovation that meets the wants and needs of our customers.
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.
Drainage & water re-use products accounted for approximately 10% of our total net sales in 2022 and 2021, and 11% of our total net sales in 2020. ​ ● Water quality products—includes point-of-use and point-of-entry water filtration, monitoring, conditioning and scale prevention systems for commercial, marine and residential applications.
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.
HVAC is an acronym for heating, ventilation and air conditioning. ​ 4 Table of Contents ● Drainage & water re-use products—includes drainage products and engineered rain water harvesting solutions for commercial, industrial, marine and residential applications, including connected roof drain systems .
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.
Approximately 60%, 61% and 60% of our net sales in 2022, 2021 and 2020, respectively, were to wholesale distributors for commercial and residential applications. ​ OEMs. Approximately 15% of our net sales in 2022, 2021 and 2020 were to OEMs.
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.
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 core competencies. ● Safety.
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.
We have completed 12 acquisitions since 2012. 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 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 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 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 7 Table of Contents loss.
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.
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.
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 dedicated investments are areas of strength for us. Manufacturing operations consistently maintain stringent quality control and testing procedures, thus ensuring products remain in continuous compliance with all requirements.
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.
Over the years, we have continued to bring innovation to our markets, with smart and connected advancement in our backflow product line now providing sensors for flood detection, notification, and tampering security, providing potential to avoid tremendous water loss from undetected floods.
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.
Pagano, Jr. ​ 60 ​ Chief Executive Officer, President, Chairperson of the Board and Director Shashank Patel ​ 62 ​ Chief Financial Officer Monica Barry ​ 52 ​ Chief Human Resources Officer Andre Dhawan ​ 59 ​ Chief Operating Officer Kenneth R. Lepage ​ 52 ​ General Counsel, Chief Sustainability Officer & Secretary Elie A.
Pagano, Jr. ​ 61 ​ Chief Executive Officer, President, Chairperson of the Board and Director Shashank Patel ​ 63 ​ Chief Financial Officer Monica Barry ​ 53 ​ Chief Human Resources Officer Andre Dhawan ​ 60 ​ Chief Operating Officer Kenneth R. Lepage ​ 53 ​ General Counsel, Chief Sustainability Officer & Secretary Elie A.
These product categories are: ​ ● Residential & commercial flow control and protection products—includes products typically sold into plumbing and hot water applications such as backflow preventers, water pressure regulators, temperature and pressure relief valves, thermostatic mixing valves and leak detection and protection products.
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.
Risk Factors” and Note 15 of the Notes to the Consolidated Financial Statements, both of which are incorporated herein by reference. ​ 11 Table of Contents Asbestos Litigation ​ We are defending approximately 550 lawsuits in different jurisdictions, alleging injury or death as a result of exposure to asbestos.
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.
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 2022, we were recognized for the fourth year in a row as one of Newsweek’s Most Responsible Companies.
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.
Internally, we have reduced our global water consumption and greenhouse gas emissions, improved our safety performance, made our work environment more diverse, equitable and inclusive, and maintained robust ethics and compliance programs to help ensure 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.
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.
Many of our flow control and protection products are now smart and connected, warning of leaks and floods with alerts to Business Management Systems (BMS) and/or personal devices giving our customers greater insight into their water management and the ability to shut off the water supply to avoid waste and mitigate damages .
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.
We continually strive to cultivate and support a highly engaged and productive workforce. ​ 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 diverse professionals. ● We engage with external professional recruiting firms to supplement our internal recruiting efforts as needed. ● We have a rich 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. ​ Professional Development ​ ● Leadership & Inclusivity.
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. ​ 8 Table of Contents Professional Development ​ ● Leadership & Inclusivity.
In 2022, we launched a global, multi-phased leadership 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 enabling our employees to practice new habits and build inclusive behaviors.
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.
Most of our HVAC products feature advanced controls enabling customers to easily connect to the Building Automation System for better monitoring, control and operation . HVAC & gas products accounted for approximately 31% of our total net sales in 2022 and 2021, and 30% of our total net sales in 2020.
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.
Our top ten customers accounted for $431.7 million, or 21.8%, of our total net sales in 2022; $371.5 million, or 20.5%, of our total net sales in 2021; and $344.1 million, or 22.8%, of our total net sales in 2020.
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.
We have also encouraged the visibility of diverse employees through the formation of employee resource groups, which are voluntary employee-led groups that provide a forum for employees to share common interests and experiences, gain professional development support, engage with our leadership teams, and drive initiatives to improve diversity, equity and inclusion at Watts. ​ Sustainability ​ Commitment to Sustainability ​ We have demonstrated our commitment to environmental sustainability by reducing our impact on the environment in multiple areas of our global business and by providing innovative products and solutions that enable our customers to reduce their impact on the environment.
We formed employee resource groups, which are voluntary, employee-led groups open to all that provide a forum for employees to share common interests and experiences, gain professional development support, engage with our leadership teams, and drive initiatives to improve DEI at Watts. ​ Sustainability ​ Focus on Sustainability ​ We have demonstrated our focus on environmental sustainability by reducing our impact on the environment in multiple areas of our global business and by providing innovative products and solutions that can help customers to reduce their impact on the environment.
During 2022, we worked with Planet Water to fund the construction of six AquaTowers and AquaSan systems, which provide clean, safe drinking water for up to 10,800 people in Cambodia, India, Mexico, the Philippines and Indonesia. ​ 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.
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.
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. 8 Table of Contents ● Performance Management Training.
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 also 9 Table of Contents strive to have a positive impact on the communities in which we live and work and other communities in need through community involvement, educational partnerships and charitable giving. ​ Sustainability Leadership ​ In May 2022, our Board amended the charter of our Nominating and Corporate Governance Committee to rename it as the Governance and Sustainability Committee and to assign it primary responsibility for the oversight of our ESG efforts and strategy.
We also strive to have a positive impact on the communities in which we live and work and other communities in need through community involvement, educational partnerships and charitable giving. ​ Sustainability Leadership ​ The Governance and Sustainability Committee of our Board of Directors has primary responsibility for the oversight of our ESG efforts and strategy.
Reitmeier had served as Vice President of Finance for the LII Commercial business segment of Lennox International from 2007 to July 2012 and as Director of Internal Audit from 2005 to 2007.
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.
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. ​ 13 Table of Contents Christopher L. Conway has served as a director of the Company since June 2015. 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.
Our focus is on differentiated products and solutions that will provide greater opportunity to distinguish ourselves in the marketplace. We continue to migrate away from commoditized products where it is more difficult to add value. Our goal is to be a solutions provider, not merely a components supplier.
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.
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 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.
Reitmeier has served as a director of the Company since February 2016. Mr. Reitmeier has served as Executive Vice President & Chief Financial Officer of Lennox International Inc. since July 2012. Mr.
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.
Noonan ​ 41 ​ Director Merilee Raines(1)(3) ​ 67 ​ Director Joseph W. Reitmeier(1)(3) ​ 58 ​ Director (1) Member of the Audit Committee ​ (2) Member of the Compensation Committee ​ (3) Member of the Governance and Sustainability Committee ​ Robert J.
Craig Kissel(2)(3) ​ 73 ​ Director Joseph T. Noonan ​ 42 ​ Director Merilee Raines(1)(3) ​ 68 ​ Director Joseph W. Reitmeier(1)(3) ​ 59 ​ Director (1) Member of the Audit Committee ​ (2) Member of the Compensation Committee ​ (3) Member of the Governance and Sustainability Committee ​ Robert J.
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 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.
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. ​ We are committed to reducing our manufacturing and operating costs using Lean methodologies to drive improvement across all key processes.
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.
Melhem ​ 59 ​ President, Asia-Pacific, the Middle East & Africa Non-Employee Directors ​ ​ ​ ​ Christopher L. Conway(2)(3) ​ 67 ​ Director Michael J. Dubose(2)(3) ​ 67 ​ Director David A. Dunbar(1)(3) ​ 61 ​ Director Louise K. Goeser(2)(3) ​ 69 ​ Director W. Craig Kissel(2)(3) ​ 72 ​ Lead Independent Director Joseph T.
Melhem ​ 60 ​ President, Asia-Pacific, the Middle East & Africa Non-Employee Directors ​ ​ ​ ​ Rebecca J. Boll(1)(3) ​ 52 ​ Director Christopher L. Conway(2)(3) ​ 68 ​ Director Michael J. Dubose(2)(3) ​ 68 ​ Director David A. Dunbar(1)(3) ​ 62 ​ Lead Independent Director Louise K. Goeser(2)(3) ​ 70 ​ Director W.
Dubose has served as President of the Fisher Healthcare Division of Thermo Fisher Scientific Inc. since March 2019. 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.
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.
We believe we are still tracking to achieve our goal of 25% by the end of 2023. ​ ​ 3 Table of Contents 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 products, solutions and technologies that enable our customers to reduce the negative impact they have on the environment.
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. ​ ​ 3 Table of Contents 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.
By developing and promoting our talented people, we are creating value for our customers and shareholders while advancing our Environmental, Social, and Corporate Governance (“ESG”) goals. 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.
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.
As of December 31, 2022, we had approximately 4,600 employees globally, including 2,100 in the Americas, 2,200 in Europe and 300 in APMEA. At Watts, we strive to attract, develop, retain and engage high performing talent and we reward employee performance.
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.
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.
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.
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 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 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.
Our General Counsel and Chief Sustainability Officer also chairs our global Sustainability Steering Committee, which is made up of senior company leaders and is responsible for formulating our sustainability strategy and overseeing the execution of our environmental, social and governance initiatives. ​ Sustainability Strategy ​ The materiality principle is one of the core principles of the Global Reporting Initiative (GRI).
Our General Counsel and Chief Sustainability Officer also chairs our global Sustainability Steering Committee, which is made up of senior company leaders and is responsible for formulating our sustainability strategy and overseeing the execution of our environmental, social and governance initiatives. ​ 10 Table of Contents Climate Change Impact ​ Climate change and the increasing focus on sustainability have also created opportunities for our business.
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.
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.
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.
Our path to innovation starts and ends with our employees, who are fundamental to the vibrancy and success of Watts.
We were also promoted to the “low-risk” category by Sustainalytics in their annual ESG Risk Rating Report. ​ More information about our sustainability efforts is included in our latest Sustainability Report, available at https://investors.wattswater.com/sustainability.
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.
In 2022, 80% of our employee population participated in a pulse survey to gain feedback on a core set of engagement items and performance drivers aligned to our business priorities. ● Performance Management Framework. We maintain a robust annual performance management process across the organization.
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.
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. Mr.
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.
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 of Directors, or Board, and used to develop and refine other aspects of our overall human capital management and other growth strategies.
Survey results are also reviewed with our Board and used to develop and refine other aspects of our overall human capital management strategies.
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.
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.
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. ​ 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.
Item 1. BUSINESS. ​ 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, acquisitions may involve a number of risks, including, but not limited to: ● 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; ● 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.
Biggest changeIn 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.
Any failure to comply with those requirements may also affect demand for our products or our ability to source key materials. We establish our own goals with respect to reducing our impact on the environment.
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.
If economic conditions worsen in the future, our revenues and profits could decrease or trigger additional 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.
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.
Any damage to, or failure of, our systems or the 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.
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.
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, 2022, Timothy P. Horne beneficially owned 5,938,290 shares of Class B common stock.
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.
Accordingly, currency fluctuations could cause our U.S. dollar costed products to be less competitive than our competitors’ products costed in other currencies. 16 Table of Contents 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.
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.
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 price, demand levels, exchange rates and imposition of or changes in tariff rates.
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.
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 such parties may have sent waste for disposal, requirements to investigate and remediate contamination.
A failure by us to comply with applicable requirements or maintain the permits required for our operations could result in civil or criminal fines, 22 Table of Contents 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.
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, customer service and overall management.
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.
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 plan to replace 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 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.
In lieu of amortization, we are required to perform an annual impairment review of both goodwill and indefinite-lived intangible assets. In 2022, 2021 and 2020, 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 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.
Under these registration rights, the holders of Class B common stock may require, on 22 Table of Contents up to two occasions that we register their shares for public resale.
Under these registration rights, the holders of Class B common stock may require, on 25 Table of Contents up to two occasions that we register their shares for public resale.
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 2022, our top ten customers accounted for approximately 22% of our total net sales with no one customer accounting for more than 10% of our total net sales.
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.
“Business—Product Liability, Environmental and Other Litigation Matters” and Note 15 of the Notes to the Consolidated Financial Statements, both of which are incorporated herein by reference. 20 Table of Contents 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.
“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.
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, 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.
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.
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, 2022, Timothy P.
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.
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.
Our insurance policies may not cover the costs of a product recall. ​ 21 Table of Contents 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.
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 34%, 38% and 37% of our net sales in 2022, 2021 and 2020, respectively, were from sales outside of the U.S.
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.
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, 2022, there were outstanding 27,314,679 shares of our Class A common stock and 5,958,290 shares of our Class B common stock.
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.
Additionally, concern over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate the effects of climate change, including limitations on greenhouse gas emissions, 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.
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.
We also cannot be certain that our 19 Table of Contents 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.
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.
The ongoing war in Ukraine has 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.
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. ​ 17 Table of Contents 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.
“Business—Product Liability, Environmental and Other Litigation Matters” and Note 15 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 worldwide are subject to 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, the generation, handling, storage, treatment and disposal of hazardous wastes and other materials, and the remediation of contaminated sites.
“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.
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 the war in Ukraine.
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.
Credit market conditions may prevent commercial and residential builders or developers from obtaining the necessary capital to 15 Table of Contents continue existing projects or to start new projects.
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.
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, 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; and otherwise harm our business and reputation.
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.
Horne beneficially owned approximately 18.0% 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 68.4% of the total outstanding voting power. As long as Mr.
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.
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; ● 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; and ● foreign exchange rate fluctuations, which could also materially affect our reported results.
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; 18 Table of Contents ● 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.
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. Central banks have raised interest rates to slow inflationary conditions.
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.
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, 2022, our balance sheet included goodwill, indefinite-lived intangible assets, amortizable intangible assets and property, plant and equipment of $592.4 million, $35.0 million, $78.7 million and $196.8 million, respectively.
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.
We depend heavily on information technology infrastructure including third-party data centers and other third-party cloud services to manage our business objectives and operations, support our customers’ requirements and protect sensitive information.
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.
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 acquisition strategy 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 increase market share for our existing product categories.
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. ​ 20 Table of Contents 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.
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 of war, terrorism or governmental instability, including the war in Ukraine; ● our failure to comply with anti-corruption laws and regulations of the U.S. government and various international jurisdictions, such as the U.S.
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.
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.
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.
Such liability can be imposed without regard to fault and, under certain circumstances, may be joint and several, resulting in one PRP being held responsible for the entire obligation. Liability may also include damages to natural resources.
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.
The availability of components and finished goods from international sources could be adversely impacted by, among other things, interruptions in production by suppliers including due to pandemics or other public health crises, suppliers’ allocations to other purchasers, threats of wars and global geo-political instability, and new laws, tariffs or regulations. ​ As a global manufacturer and distributor, we are facing additional risks related to ongoing disruptions and increased costs in our supply chain and logistics.
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.
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.
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.
On occasion we are involved in such investigations and/or cleanup, and also have been and could continue to be named as a PRP in environmental matters. ​ 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.
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.
These impairments were due to market value expectations indicating the carrying amounts of these assets were in excess of the fair value. In 2021 none of our long-lived assets were impaired. ​ 21 Table of Contents There can be no assurances that future goodwill, indefinite-lived intangible assets or other long-lived asset impairments will not occur.
In 2023 and 2021 none of our long-lived assets were impaired. ​ 24 Table of Contents There can be no assurances that future goodwill, indefinite-lived intangible assets or other long-lived asset impairments will not occur.
While the overarching framework has been published, we are awaiting legislation and detailed guidance to assess the full implications. ​ 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.
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.
Cyber security 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 experienced certain cyber security attacks and may continue to experience them going forward, potentially with more frequency. We have a portion of our workforce working remotely, which may heighten these risks.
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.
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.
Furthermore, we may be subject to business continuity risk in the event of an unexpected loss of a material facility or operation.
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 can lead to adverse publicity, resulting in an adverse effect on our business or damage to our reputation. ​ Our ability to achieve savings through our restructuring and business transformation activities may be adversely affected by management’s ability to fully execute the 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.
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.
Congress could advance other tax legislation proposals in the future that could have a material impact on our financial statements and we will continue to evaluate the impact of the IRA as additional information becomes available. ​
Congress could advance other tax legislation proposals in the future that could have a material impact on our financial statements. ​ ​
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.
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.
The impact of the COVID-19 pandemic and other future public health crises and pandemics may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section. ​ Company Risk Factors ​ Our business and financial performance may be adversely affected by information technology and other business disruptions. ​ Our business may be impacted by disruptions, including information technology attacks or failures, threats to physical security, as well as damaging weather, fire or other acts of nature.
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.
If these additional expenses are significant, it could adversely affect our business, financial condition and results of operations. ​ 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, 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.
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.
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. ​ 18 Table of Contents 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.
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.
Our information technology risks also relate to cyber security attacks and disruptions caused by potential failures in the performance of our primary enterprise resource planning (ERP) system. ​ Cyber security attacks, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data.
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.
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. 17 Table of Contents The COVID-19 pandemic has adversely affected, and may continue to adversely affect, our business, financial condition, results of operations and prospects. ​ The COVID-19 pandemic, the resulting global economic slowdown, and the reopening of global economies that has followed have created a number of macroeconomic challenges that have impacted our business, including volatility and uncertainty in business planning, disruptions in global supply chains, material, freight and labor inflation, shortages of and delays in obtaining certain materials and component parts, and labor shortages.
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.
In 2022, we recognized a pre-tax non-cash impairment charge of $1.3 million related to a technology intangible asset. In 2020, we recognized a pre-tax non-cash impairment charge of $1.4 million related to a long-lived asset and a technology intangible asset.
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.
Our success will depend on our ability to continue to meet customers’ changing specifications with respect to these criteria. 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 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.
We have adopted measures and incurred cost to mitigate potential risks associated with information technology disruptions and cybersecurity threats; however, there is no assurance that these measures will prevent cyber-attacks or security breaches.
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.
While we have taken steps to reduce interruptions by implementing additional internal controls, network and data center resiliency, redundancy and recovery processes, these measures may be inadequate.
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.
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. Also, companies acquired recently and in the future may not achieve anticipated revenues, cost synergies, profitability or cash flows that justify our investment in them.
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.
Although the global supply chain disruptions have shown signs of easing, some logistics issues and electronic component shortages remain. We are experiencing inflation across our cost of materials, labor, transportation, and energy. Labor shortages and workforce disruptions have affected our manufacturing and distribution processes, as well as those of our suppliers.
Although recent global supply chain disruptions have normalized, labor shortages have affected our manufacturing and distribution processes, as well as those of our suppliers.
Removed
The economic conditions for fiscal year 2023 are predicted to be very challenging as a result of the inflationary environment, higher interest rates, labor challenges and potential recession.
Added
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.
Removed
We cannot predict how ongoing inflation, risk of recession, the war in Ukraine, COVID-19 restrictions, supply chain disruptions and related costs may impact our ability to service our customers or the potential impact on our profit margins going forward.
Added
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.
Removed
The U.S. dollar strengthened as compared to many foreign currencies, including the Euro, during fiscal 2022, which adversely affected reported revenues of our international subsidiaries.
Added
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.
Removed
New variants of COVID-19 and other future public health crises and pandemics may affect our operating and financial results in a manner that is not presently known to us or not presently considered to be a significant risk to our operations.
Added
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.
Removed
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.
Added
Measures to contain a public health crisis may intensify other risks described in these Risk Factors.
Removed
In 2022, several countries have announced the intention to bring these into effect starting from 2024.
Added
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 19 Table of Contents portion of our workforce working remotely, which may heighten these risks.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
For example, effective patent, trademark, copyright and trade secret protection may be unavailable or limited in some of the countries in which we operate.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePauls, NC ​ Manufacturing ​ Owned San Antonio, TX ​ Warehouse/Distribution ​ Owned Spindale, NC ​ Distribution Center ​ Owned Fort Worth, TX ​ Manufacturing/Distribution ​ Leased Fort Myers, FL ​ Manufacturing/Distribution ​ Leased Blauvelt, NY ​ Manufacturing/Distribution ​ Leased Sparks, NV ​ Distribution Center ​ Leased Vernon, BC, Canada ​ Manufacturing/Distribution ​ Leased Woodland, CA ​ Manufacturing ​ Leased Groveport, OH ​ Distribution Center ​ Leased ​ Europe: ​ Location Principal Use Owned/Leased Biassono, Italy ​ Manufacturing/Distribution ​ Owned Hautvillers, France ​ Manufacturing ​ Owned Landau, Germany ​ Manufacturing/Distribution ​ Owned Plovdiv, Bulgaria ​ Manufacturing ​ Owned Sorgues, France ​ Distribution Center ​ Owned Vildbjerg, Denmark ​ Manufacturing/Distribution ​ Owned Virey-le-Grand, France ​ Manufacturing/Distribution ​ Owned Rosières, France ​ Manufacturing/Distribution ​ Owned Gardolo, Italy ​ Manufacturing ​ Owned Monastir, Tunisia ​ Manufacturing ​ Leased St.
Biggest changePauls, NC ​ Manufacturing ​ Owned Menomonee Falls, WI ​ Manufacturing/Distribution ​ Owned Germantown, WI ​ Manufacturing/Distribution ​ Owned Michigan City, IN ​ Manufacturing/Distribution ​ Owned Spindale, NC ​ Distribution Center ​ Owned Fort Worth, TX ​ Manufacturing/Distribution ​ Leased Fort Myers, FL ​ Manufacturing/Distribution ​ Leased Blauvelt, NY ​ Manufacturing/Distribution ​ Leased Sparks, NV ​ Distribution Center ​ Leased Vernon, BC, Canada ​ Manufacturing/Distribution ​ Leased Woodland, CA ​ Manufacturing ​ Leased Groveport, OH ​ Distribution Center ​ Leased ​ 28 Table of Contents Europe: ​ Location Principal Use Owned/Leased Biassono, Italy ​ Manufacturing/Distribution ​ Owned Hautvillers, France ​ Manufacturing ​ Owned Landau, Germany ​ Manufacturing/Distribution ​ Owned Plovdiv, Bulgaria ​ Manufacturing ​ Owned Sorgues, France ​ Distribution Center ​ Owned Vildbjerg, Denmark ​ Manufacturing/Distribution ​ Owned Virey-le-Grand, France ​ Manufacturing/Distribution ​ Owned Rosières, France ​ Manufacturing/Distribution ​ Owned Gardolo, Italy ​ Manufacturing ​ Owned Monastir, Tunisia ​ Manufacturing ​ Leased St.
Item 2. PROPERTIES. ​ We maintain 32 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.
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.
Neots, United Kingdom ​ Distribution ​ Leased ​ Asia-Pacific, Middle East, and Africa: ​ Location Principal Use Owned/Leased Ningbo, Beilun, China ​ Manufacturing ​ Owned Shanghai, China ​ APMEA Headquarters ​ Leased Ningbo, Beilun District, China ​ Distribution Center ​ Leased Auckland, New Zealand ​ Manufacturing/Distribution ​ Leased Dubai, United Arab Emirates ​ Sales Office/Distribution ​ Leased Perth, Australia ​ Distribution ​ Leased Melbourne, Australia ​ Distribution ​ 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. ​ 24 Table of Contents
Neots, United Kingdom ​ Distribution ​ Leased ​ Asia-Pacific, Middle East, and Africa: ​ Location Principal Use Owned/Leased Ningbo, Beilun, China ​ Manufacturing ​ Owned Shanghai, China ​ APMEA Headquarters ​ Leased Ningbo, Beilun District, China ​ Distribution Center ​ Leased Auckland, New Zealand ​ Manufacturing/Distribution ​ Leased Dubai, United Arab Emirates ​ Sales Office/Distribution ​ Leased Caringbah, New South Wales, Australia ​ Manufacturing/Distribution ​ Leased Kewdale, Western Australia, Australia ​ Distribution ​ Leased Campbellfield, Victoria, Australia ​ Distribution ​ 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

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 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 15 of the Notes to Consolidated Financial Statements, both of which are incorporated herein by reference. ​ Item 4. MINE SAFETY DISCLOSURES. ​ Not applicable. PART II ​
Biggest changeItem 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.
Added
MINE SAFETY DISCLOSURES. ​ Not applicable. 29 Table of Contents PART II ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWhile 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 and the conversion of deferred stock awards and restricted stock units into shares of Class A common stock by automatically withholding from the shares being issued a number of shares with an aggregate fair market value on the date of such vesting or conversion that would satisfy the withholding amount due. ​ The following table includes information with respect to shares of our Class A common stock withheld to satisfy withholding tax obligations during the quarter ended December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ (d) Maximum Number (or ​ ​ (a) Total ​ ​ ​ ​ (c) Total Number of ​ Approximate Dollar ​ ​ Number of ​ ​ ​ ​ Shares (or Units) ​ Value) of Shares (or ​ ​ Shares (or ​ (b) Average ​ Purchased as Part of ​ Units) that May Yet Be ​ ​ Units) ​ Price Paid per ​ Publicly Announced ​ Purchased Under the Period ​ Purchased ​ Share (or Unit) ​ Plans or Programs ​ Plans or Programs September 26, 2022 – October 23, 2022 293 ​ $ 129.82 — — October 24, 2022 – November 20, 2022 200 ​ $ 143.37 — — November 21, 2022 – December 31, 2022 ​ 298 ​ $ 146.23 ​ — ​ — Total 791 ​ $ 139.43 — — ​ 25 Table of Contents The following table includes information with respect to repurchases of our Class A common stock during the three-month period ended December 31, 2022 under our 2019 stock repurchase program. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuer Purchases of Equity Securities (1) ​ ​ ​ ​ ​ (d) Maximum Number (or ​ ​ (a) Total ​ ​ ​ ​ (c) Total Number of ​ Approximate Dollar ​ ​ Number of ​ (b) Average ​ Shares (or Units) ​ Value) of Shares (or ​ ​ Shares (or ​ Price Paid ​ Purchased as Part of ​ Units) that May Yet Be ​ ​ Units) ​ per Share ​ Publicly Announced ​ Purchased Under the Period ​ Purchased(1) ​ (or Unit) ​ Plans or Programs ​ Plans or Programs September 26, 2022 – October 23, 2022 10,004 ​ $ 127.00 10,004 ​ $ 31,036,028 October 24, 2022 – November 20, 2022 8,706 ​ $ 142.60 8,706 ​ $ 29,794,519 November 21, 2022 – December 31, 2022 ​ 12,067 ​ $ 151.37 ​ 12,067 ​ $ 27,967,967 Total 30,777 ​ $ 140.94 30,777 ​ ​ ​ (1) On February 7, 2019, we announced that the 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.
Biggest changeWe 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 ​ ​ (a) Total ​ ​ ​ ​ (c) Total Number of ​ Approximate Dollar ​ ​ Number of ​ (b) Average ​ Shares (or Units) ​ Value) of Shares (or ​ ​ Shares (or ​ Price Paid ​ Purchased as Part of ​ Units) that May Yet Be ​ ​ Units) ​ per Share ​ Publicly Announced ​ Purchased Under the Period ​ Purchased(1) ​ (or Unit) ​ Plans or Programs ​ Plans or Programs September 25, 2023 – October 22, 2023 7,069 ​ $ 175.08 7,069 ​ $ 165,026,242 October 23, 2023 – November 19, 2023 6,956 ​ $ 180.37 6,956 ​ $ 163,771,607 November 20, 2023 – December 31, 2023 ​ 9,028 ​ $ 199.75 ​ 9,028 ​ $ 161,968,227 Total 23,053 ​ $ 186.31 23,053 ​ ​ ​ (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.
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. ​ 26 Table of Contents 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.
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. ​ 30 Table of Contents 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, 2017 and that all dividends were reinvested.
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.
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 22, 2023 was 61.
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 22, 2023 was 10. ​ 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.
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.
Cumulative Total Return ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Watts Water Technologies, Inc. 100.00 ​ 85.88 ​ 134.14 ​ 165.20 ​ 265.38 ​ 201.49 S & P 500 100.00 ​ 95.62 ​ 125.72 ​ 148.85 ​ 191.58 ​ 156.89 Russell 2000 100.00 ​ 88.99 ​ 111.70 ​ 134.00 ​ 153.85 ​ 122.41 ​ 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] ​ Not applicable. 27 Table of Contents
Cumulative Total Return ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Watts Water Technologies, Inc. 100.00 ​ 156.19 ​ 192.37 ​ 309.02 ​ 234.63 ​ 336.88 S & P 500 100.00 ​ 131.49 ​ 155.68 ​ 200.37 ​ 164.08 ​ 207.21 Russell 2000 100.00 ​ 125.52 ​ 150.58 ​ 172.90 ​ 137.56 ​ 160.85 ​ 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] ​ 31 Table of Contents
Aggregate common stock dividend payments in 2021 were $34.3 million, which consisted of $28.2 million and $6.1 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.
Added
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.
Added
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.
Added
The additional $150 million has been reflected in the maximum dollar value of shares that may yet be purchased in column (d) above.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. ​ [RESERVED] 27 Item 7. ​ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 28 Item 7A. ​ QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 41 Item 8. ​ FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 42
Biggest changeItem 6. ​ [RESERVED] 31 Item 7. ​ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 32 Item 7A. ​ QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 46 Item 8. ​ FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 46

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOperating income of $315.0 million increased by $75.4 million, or 31.5%, in 2022 compared to 2021. 29 Table of Contents This increase was primarily driven by incremental price, savings from productivity and restructuring actions, partially offset by inflation and incremental investments. ​ Management’s discussion and analysis of our financial condition, results of operations and cash flows as of and for the year ended December 31, 2020 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, 2021. ​ Recent Developments ​ On February 6, 2023, we declared a quarterly dividend of thirty cents ($0.30) per share on each outstanding share of Class A common stock and Class B common stock payable on March 15, 2023 to stockholders of record on March 1, 2023. ​ Results of Operations ​ Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 ​ Net Sales.
Biggest changeBoll 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. ​ 34 Table of Contents Results of Operations ​ Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 ​ Net Sales.
HVAC is an acronym for heating, ventilation and air conditioning. ​ ● Drainage & water re-use products—includes drainage products and engineered rain water harvesting solutions for commercial, industrial, marine and residential applications , including connected roof drain systems. ​ ● Water quality products—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.
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. ​ ● 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.
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%, determined by reference to our consolidated leverage ratio, 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.
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.
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 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.
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.
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 those involving environmental issues and product liability as discussed in more detail in Part I, Item 1.
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.
The timing and number of shares repurchased will be determined based on our evaluation of market conditions and other factors, see Note 12 of Notes to Consolidated Financial Statements in this Annual Report 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 the 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.
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.
For nearly 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.
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.
In addition to paying interest under the Amended Credit Agreement, we are also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees.
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 Amended Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Amended Credit Agreement .
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 .
“Business—Product Liability, Environmental and Other Litigation Matters” and Note 15 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.
“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.
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. 28 Table of Contents Over the past several years we have been building our smart and connected foundation by expanding our internal capabilities and making strategic acquisitions.
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. ​ 32 Table of Contents Over the past several years we have been building our smart and connected products foundation by expanding our internal capabilities and making strategic acquisitions.
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, 2022 are not necessarily indicative of future results. Management cannot predict the full impact of the uncertainties discussed above.
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.
We regularly review our estimates of variable consideration on the transaction price and recognize changes in 38 Table of Contents 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.
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.
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 2022, we did not need to proceed beyond the qualitative analysis, and no goodwill impairments were recorded.
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.
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.
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. 45 Table of Contents ​ 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.
See Note 11 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 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 5 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. ​ (c) Relates to the lease liabilities recognized for right-of-use assets of financing leases with a lease term longer than twelve months.
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 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. ​ 43 Table of Contents Accounting guidance allows us to assess goodwill for impairment utilizing either qualitative or quantitative analyses.
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, gain on sale of asset, and the related income tax impacts on these items and other tax adjustments.
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.
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 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 44 Table of Contents liability and general liability coverage, which we believe to be generally in accordance with industry practices.
See Note 5 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 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.
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.
A reconciliation to the most closely related U.S. 40 Table of Contents 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.
There were no significant changes in our accounting policies or significant changes in our accounting estimates during 2022. ​ We periodically discuss the development, selection and disclosure of the estimates with our Audit Committee.
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.
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.
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 42 Table of Contents reasonable, amount were used, or, a change in the estimate is reasonably likely from period to period.
Many of our flow control and protection products are now smart and connected warning of leaks and floods with alerts to Business Management Systems (BMS) and/or personal devices giving our customers greater insight into their water management and the ability to shut off the water supply to avoid waste and mitigate damage. ​ ● HVAC & gas products—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.
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.
Such charges may include potential state income taxes and other tax charges. ​ Covenant Compliance Under the Amended Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial condition tests as of December 31, 2022.
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.
When it is possible to estimate reasonably possible 40 Table of Contents 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.
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.
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. ​ 36 Table of Contents A reconciliation of U.S.
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.
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. ​ 31 Table of Contents Operating Income (Loss).
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).
Management believes the following critical accounting policies reflect our more significant estimates and assumptions. ​ Revenue recognition ​ We recognize revenue under the core principle to depict the transfer of control to our customers in an amount reflecting the consideration to which we expect to be entitled.
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.
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 Amended Credit Agreement. The Amended Credit Agreement defines Consolidated EBITDA to exclude unusual or non-recurring charges and gains.
The financial ratios include a consolidated interest coverage ratio based on 38 Table of Contents 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.
Amounts outstanding were approximately $12.1 million as of December 31, 2022 and $14.0 million as of December 31, 2021. 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.
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.
Our principal product categories include: ​ ● Residential & commercial flow control and protection products—includes products typically sold into plumbing and hot water applications such as backflow preventers, water pressure regulators, temperature and pressure relief valves, thermostatic mixing valves and leak detection and protection 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.
Consolidated funded debt, as defined in the Amended 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, 2022, our actual financial ratios calculated in accordance with the Amended Credit Agreement compared to the required levels under the Amended Credit Agreement were as follows: ​ ​ ​ ​ ​ ​ ​ Actual Ratio Required Level ​ ​ ​ Minimum level Interest Charge Coverage Ratio 54.1 to 1.00 3.50 to 1.00 ​ ​ ​ Maximum level Leverage Ratio 0.00 to 1.00 3.50 to 1.00 ​ As of December 31, 2022, we were in compliance with all covenants related to the Amended Credit Agreement. ​ In addition to financial ratios, the Amended 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, 2022 was $571.9 million compared to $453.0 million as of December 31, 2021.
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: ​ ​ ​ ​ ​ ​ ​ Actual Ratio Required Level ​ ​ ​ Minimum level Interest Charge Coverage Ratio 45.5 to 1.00 3.50 to 1.00 ​ ​ ​ Maximum level Leverage Ratio 0.00 to 1.00 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 2.5 to 1 as of December 31, 2022 compared to 2.1 to 1 as of December 31, 2021.
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.
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, ​ ​ 2022 ​ 2021 ​ ​ (in millions) Current portion of long‑term debt $ — ​ $ — Plus: long-term debt, net of current portion ​ 147.6 ​ 141.9 Less: cash and cash equivalents ​ (310.8) ​ (242.0) Net debt ​ $ (163.2) ​ $ (100.1) ​ A reconciliation of capitalization is provided below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ 2022 ​ 2021 ​ ​ ​ (in millions) Net debt ​ $ (163.2) ​ $ (100.1) ​ Total stockholders’ equity ​ 1,300.6 ​ 1,173.2 ​ Capitalization ​ $ 1,137.4 ​ $ 1,073.1 ​ Net debt to capitalization ratio ​ (14.3) % (9.3) % ​ ​ Application of Critical Accounting Policies and Key Estimates ​ The preparation of our consolidated financial statements in accordance with U.S.
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 ​ ​ (in millions) Current portion of long‑term debt $ — ​ $ — Plus: long-term debt, net of current portion ​ 298.3 ​ 147.6 Less: cash and cash equivalents ​ (350.1) ​ (310.8) Net debt ​ $ (51.8) ​ $ (163.2) ​ A reconciliation of capitalization is provided below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ ​ ​ (in millions) Net debt ​ $ (51.8) ​ $ (163.2) ​ Total stockholders’ equity ​ 1,513.3 ​ 1,300.6 ​ Capitalization ​ $ 1,461.5 ​ $ 1,137.4 ​ Net debt to capitalization ratio ​ (3.5) % (14.3) % ​ Application of Critical Accounting Policies and Key Estimates ​ The preparation of our consolidated financial statements in accordance with U.S.
Most of our HVAC products feature advanced controls enabling customers to easily connect to the Building Automation System for better monitoring, control and operation.
Most of our HVAC products and solutions feature advanced controls enabling customers to easily connect to the BMS for better monitoring, control and operation.
We believe free cash flow 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ December 31, ​ ​ ​ 2022 ​ 2021 ​ ​ ​ (in millions) Net cash provided by operating activities ​ $ 224.0 ​ $ 180.8 ​ Less: additions to property, plant, and equipment ​ (28.1) ​ (26.7) ​ Plus: proceeds from the sale of property, plant, and equipment ​ 5.2 ​ 5.1 ​ Free cash flow ​ $ 201.1 ​ $ 159.2 ​ Net income —as reported ​ $ 251.5 ​ $ 165.7 ​ Cash conversion rate of free cash flow to net income ​ 80.0 % 96.1 % ​ 37 Table of Contents Our free cash flow increased in 2022 when compared to 2021 primarily driven by higher net income and lower investment in inventory, partially offset by lower accounts payable balances associated with the reduction in inventory purchases and increased payments related to income taxes, restructuring and employee and customer incentives . ​ Our net debt to capitalization ratio, a non-GAAP financial measure used by management, at December 31, 2022 was (14.3)% for 2022 compared to (9.3)% in 2021.
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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ ​ ​ (in millions) Net cash provided by operating activities ​ $ 310.8 ​ $ 224.0 ​ Less: additions to property, plant, and equipment ​ (29.7) ​ (28.1) ​ Plus: proceeds from the sale of property, plant, and equipment ​ — ​ 5.2 ​ Free cash flow ​ $ 281.1 ​ $ 201.1 ​ Net income —as reported ​ $ 262.1 ​ $ 251.5 ​ Cash conversion rate of free cash flow to net income ​ 107.2 % 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.
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, 2022 are presented in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Next Beyond Contractual Obligations ​ Total ​ 12 Months ​ 12 Months ​ ​ (in millions) Long-term debt obligations, including current maturities(a) ​ $ 150.0 ​ $ — ​ $ 150.0 Operating lease obligations(b) ​ 54.8 ​ 10.4 ​ 44.4 Finance lease obligations(c) ​ 4.7 ​ 3.0 ​ 1.7 Pension contributions(d) ​ 9.2 ​ 0.5 ​ 8.7 Interest(e) ​ 13.2 ​ 5.2 ​ ​ 8.0 2017 Tax Act Toll Tax payable(f) ​ ​ 18.7 ​ ​ 3.4 ​ ​ 15.3 Capital expenditures(g) ​ ​ 6.3 ​ ​ 6.3 ​ ​ — Other(h) ​ 54.6 ​ 54.1 ​ 0.5 Total ​ $ 311.5 ​ $ 82.9 ​ $ 228.6 (a) Relates to the drawdown on the line of credit under the Amended Credit Agreement as recognized in the consolidated balance sheet.
These instruments may exist or expire without being drawn down; therefore, they do not necessarily represent future cash flow obligations. ​ 39 Table of Contents Our contractual obligations as of December 31, 2023 are presented in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Next Beyond Contractual Obligations ​ Total ​ 12 Months ​ 12 Months ​ ​ (in millions) Long-term debt obligations, including current maturities(a) ​ $ 300.0 ​ $ — ​ $ 300.0 Operating lease obligations(b) ​ 64.1 ​ 11.8 ​ 52.3 Finance lease obligations(c) ​ 2.6 ​ 1.3 ​ 1.3 Pension contributions(d) ​ 9.2 ​ 0.5 ​ 8.7 Interest(e) ​ 25.6 ​ 13.5 ​ ​ 12.1 2017 Tax Act Toll Tax payable(f) ​ ​ 15.3 ​ ​ 6.8 ​ ​ 8.5 Capital expenditures(g) ​ ​ 6.1 ​ ​ 6.1 ​ ​ — Purchase obligations(h) ​ 171.9 ​ 165.4 ​ 6.5 Total ​ $ 594.8 ​ $ 205.4 ​ $ 389.4 ​ (a) Relates to drawdowns on the line of credit under the Credit Agreement as recognized in the consolidated balance sheet.
We spent $1.3 million more on net capital expenditures and $9.1 million less for acquisitions in 2022 compared to 2021. ​ We used $121.7 million of net cash from financing activities in 2022 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.
In 2022, w e 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.
Subsequent to recording the Toll Tax as part of the Tax Cuts and Jobs Act of 2017, our intent is to permanently reinvest undistributed earnings of foreign subsidiaries, and we do not have any current plans to repatriate post-Toll Tax foreign earnings to fund operations in the United States.
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.
We performed a qualitative analysis for each of the six remaining 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 23, 2022 testing date, we had $581.2 million of goodwill on our balance sheet.
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.
For our 2022 impairment assessment, which occurred as of October 23, 2022, we performed a qualitative assessment for all trademarks and tradenames as each intangible asset’s fair value significantly exceeded the carrying value in the previous quantitative assessment performed and each had sales growth in 2022, and no other indicators of impairment were present.
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.
See Note 14 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 Amended 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 investment totals of $40 million to $45 million discussed above. ​ (h) The majority relates to commodity commitments, as well as the contingent consideration related to an immaterial acquisition. ​ 35 Table of Contents 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.
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.
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. ​ Results for 2021 include an after-tax charge of $14.1 million, or $0.42 per common share, for restructuring and $7.2 million, or $0.22 per common share, for an income tax adjustment related to the restructuring of our Mexican manufacturing supply chain operations. 32 Table of Contents Liquidity and Capital Resources ​ 2022 and 2021 Cash Flows ​ We generated $224.0 million of net cash from operating activities in 2022 as compared to $180.8 million in 2021.
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.
As of December 31, 2022, we had drawn down $150.0 million on this line of credit and had $12.1 million in letters of credit outstanding, which resulted in $637.9 million of unused and available credit under the Revolving Credit Facility.
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.
The weighted average interest rate on debt outstanding under the Revolving Credit Facility as of December 31, 2022 was 5.35%. The weighted average interest rate on debt outstanding inclusive of the interest rate swap discussed in Note 11 of the Notes to Consolidated Financial Statements and interest rates under the Revolving Credit Facility as of December 31, 2022 was 3.23%.
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%.
GAAP results to these adjusted non-GAAP measures is provided below (dollars in millions, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 1,979.5 ​ $ 1,809.2 ​ ​ ​ ​ ​ ​ ​ Operating income - as reported ​ ​ 315.0 ​ ​ 239.6 Operating margin % ​ ​ 15.9% ​ ​ 13.2% ​ ​ ​ ​ ​ ​ ​ Adjustments for special items: ​ ​ ​ ​ Restructuring ​ ​ 10.6 ​ ​ 19.3 Gain on sale of asset ​ ​ (1.8) ​ ​ — ​ ​ ​ ​ ​ ​ ​ Total adjustments for special items ​ $ 8.8 ​ $ 19.3 ​ ​ ​ ​ ​ ​ ​ Operating income - as adjusted ​ $ 323.8 ​ $ 258.9 Adjusted operating margin % ​ ​ 16.4% ​ ​ 14.3% ​ ​ ​ ​ ​ ​ ​ Net income - as reported ​ $ 251.5 ​ $ 165.7 ​ ​ ​ ​ ​ ​ ​ Adjustments for special items - tax effected: ​ ​ ​ ​ ​ ​ Restructuring ​ ​ 7.9 ​ ​ 14.1 Tax adjustments ​ ​ (18.2) ​ ​ 7.2 Gain on sale of asset ​ ​ (1.4) ​ ​ — ​ ​ ​ ​ ​ ​ ​ Total adjustments for special items - tax effected: ​ $ (11.7) ​ $ 21.3 ​ ​ ​ ​ ​ ​ ​ Net income as adjusted ​ $ 239.8 ​ $ 187.0 ​ ​ ​ ​ ​ ​ ​ Diluted earnings per share - as reported ​ $ 7.48 ​ $ 4.88 Adjustments for special items ​ (0.35) ​ 0.64 Diluted earnings per share - as adjusted ​ $ 7.13 ​ $ 5.52 ​ Free cash flow is a non-GAAP measure that does not represent cash generated from operating activities in accordance with U.S.
GAAP results to these adjusted non-GAAP measures is provided below (dollars in millions, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ 2,056.3 ​ $ 1,979.5 ​ ​ ​ ​ ​ ​ ​ Operating income - as reported ​ ​ 350.9 ​ ​ 315.0 Operating margin % ​ ​ 17.1% ​ ​ 15.9% ​ ​ ​ ​ ​ ​ ​ Adjustments for special items: ​ ​ ​ ​ Restructuring ​ ​ 5.5 ​ ​ 10.6 Acquisition-related costs ​ ​ 11.3 ​ ​ — Contingent consideration adjustment ​ ​ (2.5) ​ ​ — Gain on sale of asset ​ ​ — ​ ​ (1.8) ​ ​ ​ ​ ​ ​ ​ Total adjustments for special items ​ $ 14.3 ​ $ 8.8 ​ ​ ​ ​ ​ ​ ​ Operating income - as adjusted ​ $ 365.2 ​ $ 323.8 Adjusted operating margin % ​ ​ 17.8% ​ ​ 16.4% ​ ​ ​ ​ ​ ​ ​ Net income - as reported ​ $ 262.1 ​ $ 251.5 ​ ​ ​ ​ ​ ​ ​ Adjustments for special items - tax effected: ​ ​ ​ ​ ​ ​ Restructuring ​ ​ 4.1 ​ ​ 7.9 Acquisition-related costs ​ ​ 8.3 ​ ​ — Contingent consideration adjustment ​ ​ (2.5) ​ ​ — Gain on sale of asset ​ ​ — ​ ​ (1.4) Discrete tax items ​ ​ 5.3 ​ ​ (18.2) ​ ​ ​ ​ ​ ​ ​ Total adjustments for special items - tax effected: ​ $ 15.2 ​ $ (11.7) ​ ​ ​ ​ ​ ​ ​ Net income as adjusted ​ $ 277.3 ​ $ 239.8 ​ ​ ​ ​ ​ ​ ​ Diluted earnings per share - as reported ​ $ 7.82 ​ $ 7.48 Restructuring ​ 0.12 ​ 0.23 Acquisition-related costs ​ 0.25 ​ — Contingent consideration adjustment ​ (0.08) ​ — Gain on sale of asset ​ — ​ (0.04) Discrete tax items ​ 0.16 ​ (0.54) Diluted earnings per share - as adjusted ​ $ 8.27 ​ $ 7.13 ​ 41 Table of Contents Free cash flow is a non-GAAP measure that does not represent cash generated from operating activities in accordance with U.S.
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. ​ The change in net sales due to acquisitions relates to an immaterial acquisition in the Americas segment in the fourth quarter of 2021. ​ Gross Profit.
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.
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 2023 and thereafter for the foreseeable future. ​ We anticipate investing between $40 million to $45 million in capital expenditures during 2023 to improve our manufacturing capabilities and invest in technology and other commercial and operational excellence initiatives. ​ We anticipate spending approximately $6.0 million during 2023 related to various restructuring programs.
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.
We have completed 12 acquisitions since 2012. Our acquisition strategy focuses on businesses that promote our key macro themes around safety and regulation, energy efficiency and water conservation.
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.
Selling, general and administrative, or SG&A, expenses increased $42.3 million, or 8.3%, in 2022 compared to 2021.
Selling, general and administrative, or SG&A, expenses increased $55.8 million, or 10.2%, in 2023 compared to 2022.
Our net sales in each of these segments for the years ended December 31, 2022 and December 31, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ ​ ​ ​ % Change to ​ ​ December 31, 2022 ​ December 31, 2021 ​ ​ ​ ​ Consolidated ​ Net Sales % Sales Net Sales % Sales Change Net Sales ​ ​ (dollars in millions) Americas ​ $ 1,390.0 ​ 70.2 % $ 1,207.2 ​ 66.7 % $ 182.8 ​ 10.1 % Europe ​ 499.1 25.2 ​ 517.4 28.6 ​ (18.3) (1.0) ​ APMEA ​ 90.4 4.6 ​ 84.6 4.7 ​ 5.8 0.3 ​ Total ​ $ 1,979.5 100.0 % $ 1,809.2 100.0 % $ 170.3 9.4 % ​ The change in net sales was attributable to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As a % ​ Change As a % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Consolidated Net Sales ​ of Segment Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas ​ Europe ​ APMEA ​ Total ​ Americas ​ Europe ​ APMEA ​ Total ​ Americas ​ Europe ​ APMEA ​ ​ (dollars in millions) Organic ​ $ 180.1 ​ $ 44.1 ​ $ 11.4 $ 235.6 10.0 % 2.4 % 0.6 % 13.0 % 14.9 % 8.5 % 13.5 % Foreign exchange ​ (3.4) ​ (62.4) ​ (5.7) ​ (71.5) (0.2) (3.4) (0.3) (3.9) (0.3) (12.0) (6.6) ​ Acquired ​ 6.1 ​ — ​ — ​ 6.1 0.3 — — 0.3 0.5 — — ​ Total ​ $ 182.8 ​ $ (18.3) ​ $ 5.7 ​ $ 170.2 10.1 % (1.0) % 0.3 % 9.4 % 15.1 % (3.5) % 6.9 % ​ Our products are sold to wholesalers, OEMs, DIY chains, and through various specialty channels.
Our net sales in each of these segments for the years ended December 31, 2023 and December 31, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ ​ ​ ​ % Change to ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ ​ Consolidated ​ Net Sales % Sales Net Sales % Sales Change Net Sales ​ ​ (dollars in millions) Americas ​ $ 1,428.1 ​ 69.5 % $ 1,390.0 ​ 70.2 % $ 38.1 ​ 1.9 % Europe ​ 512.1 24.9 ​ 499.1 25.2 ​ 13.0 0.7 ​ APMEA ​ 116.1 5.6 ​ 90.4 4.6 ​ 25.7 1.3 ​ Total ​ $ 2,056.3 100.0 % $ 1,979.5 100.0 % $ 76.8 3.9 % ​ The change in net sales was attributable to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As a % ​ Change As a % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Consolidated Net Sales ​ of Segment Net Sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas ​ Europe ​ APMEA ​ Total ​ Americas ​ Europe ​ APMEA ​ Total ​ Americas ​ Europe ​ APMEA ​ ​ (dollars in millions) Organic ​ $ 8.0 ​ $ 3.8 ​ $ 4.5 $ 16.3 0.4 % 0.2 % 0.2 % 0.8 % 0.5 % 0.8 % 5.0 % Foreign exchange ​ (3.3) ​ 9.2 ​ (4.0) ​ 1.9 (0.2) 0.5 (0.2) 0.1 (0.2) 1.8 (4.5) ​ Acquired ​ 33.4 ​ — ​ 25.2 ​ 58.6 1.7 — 1.3 3.0 2.4 — 27.9 ​ Total ​ $ 38.1 ​ $ 13.0 ​ $ 25.7 ​ $ 76.8 1.9 % 0.7 % 1.3 % 3.9 % 2.7 % 2.6 % 28.4 % ​ Our products are sold to wholesalers, OEMs, DIY chains, and through various specialty channels.
These payments were partially offset by proceeds from drawdowns on our line of credit totaling $40.0 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 (the “Credit Agreement”).
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 acquired SG&A costs related to an immaterial acquisition in the Americas segment in the fourth quarter of 2021. Total SG&A expenses, as a percentage of sales, were 27.8% in 2022 compared to 28.1% in 2021. ​ Restructuring.
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.
Operating income (loss) by geographic segment for 2022 and 2021 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change to ​ Year Ended ​ ​ Consolidated ​ December 31, ​ December 31, ​ ​ Operating ​ ​ ​ 2022 2021 Change Income ​ ​ (dollars in millions) ​ ​ ​ Americas ​ $ 283.9 $ 211.0 $ 72.9 30.4 % Europe ​ 66.7 ​ 63.6 ​ 3.1 1.3 ​ APMEA ​ 14.0 ​ 14.4 ​ (0.4) (0.1) ​ Corporate ​ (49.6) ​ (49.4) ​ (0.2) (0.1) ​ Total ​ $ 315.0 ​ $ 239.6 ​ $ 75.4 31.5 % ​ The increase (decrease) in operating income (loss) is attributable to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As a % of ​ Change As a % of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated Operating Income ​ Segment Operating Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas ​ Europe ​ APMEA ​ Corporate ​ Total ​ Americas ​ Europe ​ APMEA ​ Corporate ​ Total ​ Americas ​ Europe ​ APMEA ​ Corporate ​ ​ (dollars in millions) Organic ​ $ 75.2 ​ $ 1.0 ​ $ 1.1 ​ $ (0.2) ​ $ 77.1 ​ 31.4 % 0.4 % 0.5 % (0.1) % 32.2 % 35.6 % 1.6 % 7.6 % 0.4 % Foreign exchange ​ ​ (0.5) ​ ​ (8.8) ​ ​ (1.8) ​ ​ — ​ ​ (11.1) ​ (0.3) ​ (3.6) ​ (0.7) ​ — ​ (4.6) ​ (0.2) ​ (13.8) ​ (12.5) ​ — Acquired ​ ​ 0.7 ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.7 ​ 0.3 ​ — ​ — ​ — ​ 0.3 ​ 0.3 ​ — ​ — ​ — Restructuring, impairment charges ​ (2.5) ​ 10.9 ​ 0.3 ​ — ​ 8.7 (1.0) 4.5 0.1 — 3.6 (1.2) 17.1 2.1 — ​ Total ​ $ 72.9 ​ $ 3.1 ​ $ (0.4) ​ $ (0.2) ​ $ 75.4 30.4 % 1.3 % (0.1) % (0.1) % 31.5 % 34.5 % 4.9 % (2.8) % 0.4 % ​ The increase in organic operating income was primarily due to incremental price and savings from productivity and restructuring actions.
Operating income (loss) by geographic segment for 2023 and 2022 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change to ​ Year Ended ​ ​ Consolidated ​ December 31, ​ December 31, ​ ​ Operating ​ ​ ​ 2023 2022 Change Income ​ ​ (dollars in millions) ​ ​ ​ Americas ​ $ 325.2 $ 283.9 $ 41.3 13.1 % Europe ​ 70.4 ​ 66.7 ​ 3.7 1.2 ​ APMEA ​ 16.1 ​ 14.0 ​ 2.1 0.7 ​ Corporate ​ (60.8) ​ (49.6) ​ (11.2) (3.6) ​ Total ​ $ 350.9 ​ $ 315.0 ​ $ 35.9 11.4 % ​ 36 Table of Contents The increase (decrease) in operating income (loss) is attributable to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As a % of ​ Change As a % of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated Operating Income ​ Segment Operating Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas ​ Europe ​ APMEA ​ Corporate ​ Total ​ Americas ​ Europe ​ APMEA ​ Corporate ​ Total ​ Americas ​ Europe ​ APMEA ​ Corporate ​ ​ (dollars in millions) Organic ​ $ 41.6 ​ $ (4.0) ​ $ 2.3 ​ $ (11.2) ​ $ 28.7 ​ 13.2 % (1.3) % 0.7 % (3.6) % 9.0 % 14.7 % (6.0) % 16.4 % 22.6 % Foreign exchange ​ ​ (1.1) ​ ​ 1.2 ​ ​ (0.1) ​ ​ — ​ ​ — ​ (0.4) ​ 0.4 ​ — ​ — ​ — ​ (0.4) ​ 1.8 ​ (0.7) ​ — Acquired ​ ​ 1.2 ​ ​ — ​ ​ 1.0 ​ ​ — ​ ​ 2.2 ​ 0.4 ​ — ​ 0.3 ​ — ​ 0.7 ​ 0.4 ​ — ​ 7.1 ​ — Restructuring, impairment charges ​ (0.4) ​ 6.5 ​ (1.1) ​ — ​ 5.0 (0.1) 2.1 (0.3) — 1.7 (0.1) 9.8 (7.8) — ​ Total ​ $ 41.3 ​ $ 3.7 ​ $ 2.1 ​ $ (11.2) ​ $ 35.9 13.1 % 1.2 % 0.7 % (3.6) % 11.4 % 14.6 % 5.6 % 15.0 % 22.6 % ​ Operating income increased $35.9 million, or 11.4%, in 2023 compared to 2022.
The increase in cash generated was primarily due to higher net income and lower investment in inventory, partially offset by lower accounts payable balances associated with the reduction in inventory purchases and increased payments related to income taxes, restructuring and employee and customer incentives . ​ We used $22.9 million of net cash for investing activities in 2022 compared to $30.7 million used in 2021.
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.
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.
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.
Management believes reporting organic sales growth provides useful information to investors, potential investors and others, because it allows for additional insight into underlying sales trends by providing sales growth on a consistent basis. We reconcile the change in organic sales to our reported sales for each region within our results below.
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.
Gross profit and gross profit as a percent of net sales (gross margin) for 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, 2022 ​ December 31, 2021 ​ ​ ​ (dollars in millions) Gross profit ​ $ 874.3 ​ $ 767.1 ​ Gross margin ​ 44.2 % 42.4 % ​ Gross profit and gross margin increased primarily from incremental price, productivity and restructuring savings, partially offset by inflation related to material and labor costs and higher logistic and energy costs. ​ Selling, General and Administrative Expenses.
Gross profit and gross profit as a percent of net sales (gross margin) for 2023 and 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ (dollars in millions) Gross profit ​ $ 960.9 ​ $ 874.3 ​ Gross margin ​ 46.7 % 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.
The increase in SG&A expenses was attributable to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ (in millions) % Change Organic ​ $ 54.2 10.6 % Foreign exchange ​ (15.4) (3.0) ​ Acquired ​ ​ 3.5 ​ 0.7 ​ Total ​ $ 42.3 8.3 % ​ The organic increase was primarily due to an increase in investments of $23.0 million, including in our smart and connected and commercial excellence initiatives, general inflation of $15.7 million, increased variable costs due to the higher sales of $14.4 million and an increase in marketing, travel and other normalized spending of $11.2 million compared to 2021.
The increase in SG&A expenses was attributable to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ (in millions) % Change Organic ​ $ 33.1 6.0 % Foreign exchange ​ 0.6 0.1 ​ Acquired ​ ​ 22.1 ​ 4.0 ​ Total ​ $ 55.8 10.1 % ​ 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.
Other expense (income) increased $1.8 million to an expense balance of $1.0 million compared to 2021. The increase was primarily due to $1.0 million of additional expense related to the reduction in deferred compensation plan assets. Refer to Note 16 Financial Instruments of Notes to Consolidated Financial Statements in this Annual Report on Form10-K for further details. ​ Income Taxes.
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.
The change was driven by an increase in net cash of $68.8 million, partially offset by an increase in debt outstanding of $5.7 million at December 31, 2022 compared to December 31, 2021.
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.
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. 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.
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.
The Credit Agreement amended the Company’s borrowings under the Amended and Restated Credit Agreement entered into on April 24, 2020 (the “Prior Credit Agreement”), to extend the maturity date of the $800 million senior unsecured revolving credit facility from February 12, 2022 to March 30, 2026 (the “Revolving Credit Facility”).
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.
These increases were partially offset by $11.5 million due to productivity initiatives and a decrease in short-term and long-term compensation expense of $6.9 million. The decrease in foreign exchange was mainly due to the appreciation of the U.S. dollar against the euro.
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.
As of December 31, 2022, we were in compliance with all covenants related to the Amended Credit Agreement. 33 Table of Contents As of December 31, 2022, we held $310.8 million in cash and cash equivalents. Of this amount, $221.2 million was held by foreign subsidiaries. Our U.S. operations typically generate sufficient cash flows to meet our domestic obligations.
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.
Net sales for 2022 increased 9.4%, or $170.3 million, on a reported basis and 13.0%, or $235.6 million, on an organic basis, compared to 2021, primarily driven by incremental price across all of our operating segments.
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 majority of the trademarks and tradenames are expected to have sales growth in 2023, with a few expected to potentially have minimal sales decline in 2023 but sales growth in 2024. As a result of our qualitative 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 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.
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. ​ Market activity levels have generally recovered from the COVID-19 pandemic.
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 change in organic net sales by channel was attributable to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As a % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Prior Year Sales ​ Wholesale OEMs DIY Specialty Total Wholesale OEMs DIY ​ Specialty ​ (dollars in millions) ​ Americas ​ $ 99.2 ​ $ 7.8 ​ $ 5.6 ​ $ 67.5 ​ $ 180.1 14.3 % 8.1 % 7.1 % 20.0 % Europe ​ 21.0 ​ 23.2 ​ (0.1) ​ ​ — ​ 44.1 6.3 12.8 ​ (3.3) ​ — ​ APMEA ​ 8.7 ​ 2.9 ​ — ​ ​ (0.2) ​ 11.4 11.0 52.7 — ​ (66.7) ​ Total ​ $ 128.9 ​ $ 33.9 ​ $ 5.5 ​ $ 67.3 ​ $ 235.6 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Organic net sales in the Americas increased primarily due to incremental price across all of our channels, as well as higher volume within our heating and hot water solution products.
The change in organic net sales by channel was attributable to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change As a % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Prior Year Sales ​ Wholesale OEMs DIY Specialty Total Wholesale OEMs DIY ​ Specialty ​ (dollars in millions) ​ Americas ​ $ 47.0 ​ $ (3.2) ​ $ (1.9) ​ $ (33.9) ​ $ 8.0 5.9 % (3.1) % (2.3) % (8.2) % Europe ​ (1.4) ​ 5.2 ​ — ​ ​ — ​ 3.8 (0.4) 2.9 ​ — ​ — ​ APMEA ​ 4.8 ​ (0.3) ​ — ​ ​ — ​ 4.5 5.8 (3.8) — ​ — ​ Total ​ $ 50.4 ​ $ 1.7 ​ $ (1.9) ​ $ (33.9) ​ $ 16.3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Americas net sales increased $38.1 million, or 2.7%, in 2023 compared to 2022.
In 2022, we also benefited from the release of tax reserves of $2.5 million due to statute of limitation expirations. ​ Net Income. Net income for 2022 was $251.5 million, or $7.48 per common share on a diluted basis, compared to $165.7 million, or $4.88 per common share on a diluted basis, for 2021.
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.
Our effective income tax rate decreased to 18.2% in 2022, from 29.2% in 2021. The decrease is primarily due to a $16.1 million tax benefit related to the modification of the structure of our Mexican supply chain operations in 2022, while the initial restructuring of our Mexican supply chain operations in 2021 resulted in a net $7.2 million tax charge.
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.
Our expectation is that it may continue in the first quarter of 2023 and we will monitor this as the year progresses. 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.
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.
GAAP. ​ The Revolving Credit Facility also includes sub-limits of $100 million for letters of credit and $15 million for swing line loans.
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.
If we determine it is not more likely than not, then no further quantitative analysis is required. 39 Table of Contents In 2022, we had seven reporting units. One of these reporting units, Water Quality, had no goodwill.
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.
As of December 31, 2022, there were no material adjustments to our valuation allowances. See Note 9 of Notes to the Consolidated Financial Statements in this Annual Report for further disclosures.
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.
If we were to perform a quantitative assessment, the methodology we employ is the relief from royalty method, a subset of the income approach. During 2022, 2021, and 2020, no impairment was recognized on our indefinite-lived intangible assets.
During 2023, 2022, and 2021, no impairment was recognized on our indefinite-lived intangible assets.
In 2021, w e used $118.6 million of net cash from financing activities primarily due to long-term debt repayments of $95.0 million, dividend payments of $34.3 million, tax withholding payments on vested stock awards of $9.6 million and payments of $16.0 million to repurchase approximately 110,000 shares of Class A common stock.
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. 37 Table of Contents ​ 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.
China’s sales growth was primarily driven by higher demand for commercial valves within data centers. ​ The net decrease in sales due to foreign exchange was mostly due to the appreciation of the U.S. dollar against the euro and Chinese yuan in 2022.
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. ​ 35 Table of Contents 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−0 removed8 unchanged
Biggest changeOn 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.
Biggest changeUnder 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.
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 16 of Notes to the Consolidated Financial Statements for further details.
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.
We have entered into forward exchange contracts which hedge approximately 80% to 85% of the forecasted intercompany 41 Table of Contents purchases between one of our Canadian subsidiaries and our U.S. operating subsidiaries for the next twelve months.
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.
The swap matures on March 30, 2026. Information about our long-term debt facility and related interest rates appears in Note 16 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.
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.
The fair value of our designated foreign hedge contracts outstanding as of December 31, 2022 was an asset of $0.2 million. Under the Amended Credit Agreement, our earnings and cash flows are exposed to fluctuations in interest payments related to our floating rate debt.
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.
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.
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.
Added
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.

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