WATTS WATER TECHNOLOGIES INC Goodwill & Intangibles Disclosure

(6) Goodwill & Intangibles

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Goodwill

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The Company performs its annual goodwill impairment testing for each reporting unit as of fiscal October month-end or more frequently if there is a triggering event or circumstance that indicates an impairment loss may have occurred. As of the October 26, 2025 testing date, the Company had $780.0 million of goodwill on its balance sheet. In 2025, the Company had eight reporting units. The Company performed a qualitative analysis for seven reporting units, which include Blücher, Front-of-the-Wall, US Drains, Water Quality, Fluid Solutions-Americas, Heating and Hot Water Solutions (“HHWS”) and APMEA. The Company performed a quantitative analysis for the Fluid Solutions-Europe reporting unit in connection with the annual strategic plan and due to underperformance to prior year and budget, primarily cause by the challenging European economic environment in 2025. The Company estimated the fair value of the reporting unit using a weighted calculation of the income approach and the market approach. The income approach calculated the present value of expected future cash flows and included the impact of recent underperformance of the reporting unit due to the continued challenging macroeconomic environment in Europe and lowered expectations for the reporting unit going forward included in the strategic plan. The guideline public company method (market approach) calculated estimated fair values based on valuation multiples derived from stock prices and enterprise values of publicly traded companies that are comparable to the Company. The implied fair value of the goodwill exceeded the carrying value of goodwill, therefore no goodwill impairment was recorded. As a result of the qualitative and quantitative analyses, the Company determined that the fair values of the reporting units were more likely than not greater than the carrying amounts. In 2024 and 2023, the Company did not need to proceed beyond the qualitative analysis, and no goodwill impairments were recorded.

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The Company operates in three geographic segments: Americas, Europe, and APMEA. The changes in the carrying amount of goodwill by geographic segment are as follows:

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During the year ended 2025, the Company completed the acquisitions of Superior, Haws, EasyWater and I-CON, resulting in an increase in goodwill within the Americas segment of $111.6 million, and completed the acquisition of Saudi Cast resulting in an increase in goodwill within the APMEA segment of $17.9 million. The final working capital adjustments for Superior, Haws and Saudi Cast are expected to be completed in the first quarter of 2026. During the year ended December 31, 2024, the Company completed the acquisition of Josam, resulting in $35.1 million of goodwill, and made adjustments to the purchase price allocation of Bradley Corporation, which was acquired in 2023, resulting in a $4.0 million reduction in goodwill, both within the Americas region.

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Long-Lived Assets

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Indefinite-lived intangibles are tested for impairment at least annually or more frequently if events or circumstances, such as a change in business conditions, indicate that it is “more likely than not” that an intangible asset might be impaired. The Company performs its annual indefinite-lived intangibles impairment assessment in the fourth quarter of each year. In 2025, 2024 and 2023, the Company performed a qualitative assessment for all tradenames. Based on the results of the assessments, the Company did not recognize an impairment on any indefinite-lived intangibles in 2025, 2024 or 2023.

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Intangible assets with estimable lives and other long-lived assets are reviewed for potential indicators of impairment at least quarterly or more frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of intangible assets with estimable lives and other long-lived assets is evaluated by a comparison of the carrying amount of an asset or asset group to future net undiscounted pre-tax cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the impairment loss recognized is the amount by which the carrying amount of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future pre-tax operating cash flows or appraised values, depending on the nature of the asset. The Company determines the discount rate for this analysis based on the weighted average cost of capital using the market and guideline public companies for the related businesses and does not allocate interest charges to the asset or asset group being measured. Judgment is required to estimate future operating cash flows. In 2025, 2024 and 2023, there were no indications of the carrying amounts of intangible assets with estimable lives not being recoverable.

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Intangible assets include the following:

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With the completion of the acquisitions of Saudi Cast, Superior, Haws, EasyWater and I-CON in 2025, the Company acquired intangible assets of $78.0 million, consisting of an amortizable technology asset valued at $2.3 million with an estimated useful life of 5 years, customer relationships valued at $63.1 million with estimated useful lives of 10 to 15 years, definite-lived trade names valued at $5.6 million with estimated useful lives of 10 to 15 years and indefinite-lived trade names valued at $7.0 million. During the year ended December 31, 2024, the Company acquired $39.4 million in intangible assets as part of the Josam acquisition, consisting of customer relationships valued at $33.5 million, with an estimated useful life of 15 years, and an indefinite-lived trade name of $5.9 million.

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Aggregate amortization expense for amortized intangible assets for 2025, 2024 and 2023 was $20.6 million, $19.8 million and $13.2 million, respectively. Additionally, future amortization expense on amortizable intangible assets is expected to be $23.9 million for 2026, $22.2 million for 2027, $22.0 million for 2028, $21.7 million for 2029, $20.4 million for 2030 and $105.0 million for beyond 2030. Amortization expense is provided on a straight-line basis over the estimated useful lives of the intangible assets. The weighted-average remaining life of total amortizable intangible assets is 8.2 years. Customer relationships, technology, trade names and other amortizable intangibles have weighted-average remaining lives of 11.4 years, 3.6 years, 11.5 years and 25.3 years, respectively. Indefinite-lived intangible assets include trade names and trademarks.