Accounting Policies (Policies)

3 Months Ended

Mar. 27, 2022

Accounting Policies

Shipping and Handling

Shipping and Handling

Shipping and handling costs included in selling, general and administrative expenses amounted to $17.7 million and $15.4 million for the first quarters of 2022 and 2021, respectively.

Research and Development

Research and Development

Research and development costs included in selling, general and administrative expenses amounted to $11.9 million and $10.9 million for the first quarters of 2022 and 2021, respectively.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the Watts Water Technologies, Inc. (the “Company”) Consolidated Balance Sheet as of March 27, 2022, the Consolidated Statements of Operations for the first quarters ended March 27, 2022 and March 28, 2021, the Consolidated Statements of Comprehensive Income for the first quarters ended March 27, 2022 and March 28, 2021, the Consolidated Statements of Stockholders’ Equity for the first quarters ended March 27, 2022 and March 28, 2021, and the Consolidated Statements of Cash Flows for the first quarters ended March 27, 2022 and March 28, 2021.

The consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date. The accounting policies followed by the Company are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The financial statements included in this report should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2022.

The Company operates on a 52-week fiscal year ending on December 31, with each quarter, except the fourth quarter, ending on a Sunday. Any quarterly data contained in this Quarterly Report on Form 10-Q generally reflect the results of operations for a 13-week period.

Estimates

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We are not aware of any specific event or circumstance that would require updates to the Company’s estimates or judgments or require the Company to revise the carrying value of the Company’s assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ from those estimates.