Acquisitions

12 Months Ended

Dec. 31, 2023

Acquisitions

Acquisitions

(5) Acquisitions

Enware

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

Bradley

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

Bradley is based in Menomonee Falls, WI, and is a provider and manufacturer of commercial washroom and

emergency safety products serving commercial (primarily institutional) and industrial end markets for over 100 years.

Bradley offers a comprehensive product portfolio that includes plumbing fixtures, washroom accessories and emergency

safety products to a diverse customer base. Bradley’s complementary portfolio will enable the Company to provide its customers with innovative water solutions, as it adds front-of-the-wall applications to its differentiated back-of-the-wall portfolio. The acquisition of Bradley is intended to align with the Company’s strategy to enhance its product offerings, drive growth and serve its customers.

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

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

Cash	$	9.2
Trade accounts receivable		23.5
Inventories, net		38.4
Prepaid expenses and other current assets		3.4
Property, Plant and Equipment		47.6
Intangible assets		114.6
Goodwill		96.6
Accounts payable		(8.2)
Employee benefits, other		(6.2)
Other current liabilities		(8.0)
Other noncurrent liabilities		(0.5)
Purchase price	$	310.4

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

Supplemental pro-forma information (unaudited)

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

	Year Ended December 31,
	2023		2022
	(Amounts in millions, except per share information)
Net Sales	$	2,221.7	$	2,168.3
Net Income	$	266.3	$	252.6
Net income per share:
Basic EPS	$	7.97	$	7.54
Diluted EPS	$	7.95	$	7.52

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

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