WATTS WATER TECHNOLOGIES INC (Form: 10-Q, Received: 08/08/2013 10:58:25)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2013

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-11499

WATTS WATER TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		04-2916536
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

815 Chestnut Street, North Andover, MA		01845
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (978) 688-1811

(Former Name, Former Address and Former Fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

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

Class		Outstanding at August 5, 2013
Class A Common Stock, $0.10 par value		28,657,872

Class B Common Stock, $0.10 par value		6,588,680

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

INDEX

Part I. Financial Information

	Item 1. Financial Statements

		Consolidated Balance Sheets at June 30, 2013 and December 31, 2012 (unaudited)

		Consolidated Statements of Operations for the Second Quarters and Six Months Ended June 30, 2013 and July 1, 2012 (unaudited)

		Consolidated Statements of Comprehensive Income (Loss) for the Second Quarters and Six Months Ended June 30, 2013 and July 1, 2012 (unaudited)

		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and July 1, 2012 (unaudited)

		Notes to Consolidated Financial Statements (unaudited)

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk

	Item 4.	Controls and Procedures

Part II. Other Information

	Item 1.	Legal Proceedings

	Item 1A.	Risk Factors

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

	Item 6.	Exhibits

	Signatures

	Exhibit Index

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except share information)

(Unaudited)

	June 30,			December 31,
	2013			2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	181.9		$	271.8
Short-term investment securities	—			2.1
Trade accounts receivable, less allowance for doubtful accounts of $10.4 million at June 30, 2013 and $9.7 million at December 31, 2012	222.5			207.1
Inventories, net:
Raw materials	108.5			111.7
Work in process	21.4			20.5
Finished goods	177.0			158.5
Total Inventories	306.9			290.7
Prepaid expenses and other assets	26.9			22.7
Deferred income taxes	21.6			21.6
Total Current Assets	759.8			816.0
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost	524.2			515.0
Accumulated depreciation	(302.5		)	(291.4		)
Property, plant and equipment, net	221.7			223.6
OTHER ASSETS:
Goodwill	503.4			508.2
Intangible assets, net	137.7			146.6
Deferred income taxes	3.9			4.8
Other, net	9.3			9.8
TOTAL ASSETS	$	1,635.8		$	1,709.0
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	130.7		$	131.6
Accrued expenses and other liabilities	115.8			116.8
Accrued compensation and benefits	41.7			42.5
Current portion of long-term debt	2.1			77.1
Total Current Liabilities	290.3			368.0
LONG-TERM DEBT, NET OF CURRENT PORTION	306.3			307.5
DEFERRED INCOME TAXES	42.2			45.2
OTHER NONCURRENT LIABILITIES	43.8			48.8
STOCKHOLDERS’ EQUITY:
Preferred Stock, $0.10 par value; 5,000,000 shares authorized; no shares issued or outstanding	—			—
Class A Common Stock, $0.10 par value; 80,000,000 shares authorized; 1 vote per share; issued and outstanding 28,634,412 shares at June 30, 2013 and 28,673,639 shares at December 31, 2012	2.9			2.9
Class B Common Stock, $0.10 par value; 25,000,000 shares authorized; 10 votes per share; issued and outstanding, 6,588,680 shares at June 30, 2013 and at December 31, 2012	0.6			0.6
Additional paid-in capital	459.1			448.7
Retained earnings	513.5			498.1
Accumulated other comprehensive loss	(22.9		)	(10.8		)
Total Stockholders’ Equity	953.2			939.5
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,635.8		$	1,709.0

See accompanying notes to consolidated financial statements.

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in millions, except per share information)

(Unaudited)

	Second Quarter Ended						Six Months Ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Net sales	$	371.3		$	367.4		$	733.4		$	728.6
Cost of goods sold	237.6			237.0			470.2			469.7
GROSS PROFIT	133.7			130.4			263.2			258.9
Selling, general and administrative expenses	96.1			96.0			195.1			196.2
Restructuring and other charges, net	2.0			1.2			4.2			2.9
OPERATING INCOME	35.6			33.2			63.9			59.8
Other (income) expense:
Interest income	(0.2		)	(0.2		)	(0.3		)	(0.4		)
Interest expense	5.5			6.1			11.5			12.3
Other expense (income), net	1.4			—			1.4			(0.9		)
Total other expense	6.7			5.9			12.6			11.0
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	28.9			27.3			51.3			48.8
Provision for income taxes	10.0			9.1			16.3			15.1
NET INCOME FROM CONTINUING OPERATIONS	18.9			18.2			35.0			33.7
Income from discontinued operations, net of taxes	—			0.3			—			0.5
NET INCOME	$	18.9		$	18.5		$	35.0		$	34.2

BASIC EPS
Net income per share:
Continuing operations	$	0.53		$	0.50		$	0.99		$	0.92
Discontinued operations	—			0.01			—			0.01
NET INCOME	$	0.53		$	0.51		$	0.99		$	0.93
Weighted average number of shares	35.5			36.5			35.5			36.7

DILUTED EPS
Net income per share:
Continuing operations	$	0.53		$	0.50		$	0.98		$	0.92
Discontinued operations	—			0.01			—			0.01
NET INCOME	$	0.53		$	0.51		$	0.98		$	0.93
Weighted average number of shares	35.6			36.6			35.6			36.8

Dividends per share	$	0.13		$	0.11		$	0.24		$	0.22

See accompanying notes to consolidated financial statements.

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in millions)

(Unaudited)

	Second Quarter Ended					Six Months Ended
	June 30, 2013		July 1, 2012			June 30, 2013			July 1, 2012
Net income	$	18.9	$	18.5		$	35.0		$	34.2

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	7.5		(39.7		)	(12.4		)	(23.2		)
Defined benefit pension plans:
Amortization of net losses included in net periodic pension cost	0.1		0.1			0.3			0.3
Other comprehensive income (loss), net of tax	7.6		(39.6		)	(12.1		)	(22.9		)
Comprehensive income (loss)	$	26.5	$	(21.1	)	$	22.9		$	11.3

See accompanying notes to consolidated financial statements.

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)

	Six Months Ended
	June 30, 2013			July 1, 2012
OPERATING ACTIVITIES
Net income	$	35.0		$	34.2
Less: Income from discontinued operations, net of taxes	—			0.5
Net income from continuing operations	35.0			33.7
Adjustments to reconcile net income from continuing operations to net cash provided by (used in) continuing operating activities:
Depreciation	17.2			16.5
Amortization of intangibles	7.5			8.3
Stock-based compensation	3.9			2.5
Deferred income tax benefit	(1.8		)	(0.5		)
(Gain) loss on disposal and impairment of property, plant and equipment and other	(0.2		)	0.4
Changes in operating assets and liabilities, net of effects from business acquisitions and divestures:
Accounts receivable	(17.4		)	(21.2		)
Inventories	(17.6		)	(9.7		)
Prepaid expenses and other assets	(3.7		)	(9.3		)
Accounts payable, accrued expenses and other liabilities	(1.6		)	2.2
Net cash provided by continuing operations	21.3			22.9
INVESTING ACTIVITIES
Additions to property, plant and equipment	(18.0		)	(9.6		)
Proceeds from the sale of property, plant and equipment	1.4			0.3
Proceeds from the sale of asset held for sale	—			0.7
Proceeds from sale of securities	2.1			—
Business acquisitions, net of cash acquired	—			(17.5		)
Net cash used in investing activities	(14.5		)	(26.1		)
FINANCING ACTIVITIES
Proceeds from long-term debt	—			9.2
Payments of long-term debt	(76.1		)	(22.8		)
Payment of capital leases and other	(3.2		)	(1.2		)
Proceeds from share transactions under employee stock plans	3.9			6.0
Tax benefit of stock awards exercised	0.7			0.4
Dividends	(8.5		)	(8.2		)
Payments to repurchase common stock	(10.0		)	(63.2		)
Net cash used in financing activities	(93.2		)	(79.8		)
Effect of exchange rate changes on cash and cash equivalents	(3.5		)	(0.8		)
Net cash provided by operating activities of discontinued operations	—			1.0
DECREASE IN CASH AND CASH EQUIVALENTS	(89.9		)	(82.8		)
Cash and cash equivalents at beginning of year	271.8			250.6
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	181.9		$	167.8

NON-CASH INVESTING AND FINANCING ACTIVITIES
Acquisition of businesses:
Fair value of assets acquired	$	—		$	27.7
Cash paid, net of cash acquired	—			17.5
Liabilities assumed	$	—		$	10.2
Acquisitions of fixed assets under financing agreement	$	0.4		$	0.6
Issuance of stock under management stock purchase plan	$	0.8		$	0.4

CASH PAID FOR:
Interest	$	11.7		$	12.5
Income taxes	$	17.7		$	14.0

See accompanying notes to consolidated financial statements.

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WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. 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 June 30, 2013, the Consolidated Statements of Operations for the second quarters and six months ended June 30, 2013 and July 1, 2012, the Consolidated Statements of Comprehensive Income (Loss) for the second quarters and six months ended June 30, 2013 and July 1, 2012, and the Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and July 1, 2012.

The consolidated balance sheet at December 31, 2012 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, 2012. 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, 2012. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2013.

The Company operates on a 52-week fiscal year ending on December 31st. Any quarterly or six month data contained in this Quarterly Report on Form 10-Q generally reflect the results of operations for a 13-week period or 26-week period, respectively.

2. Accounting Policies

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. Actual results could differ from those estimates.

Goodwill and Long-Lived Assets

The changes in the carrying amount of goodwill by geographic segment are as follows:

June 30, 2013

Gross Balance

Accumulated Impairment Losses

Net Goodwill

Balance
January 1,
2013

Acquired
During
the
Period

Foreign
Currency
Translation
and Other

Balance
June 30,
2013

Balance
January 1,

2013

Impairment
Loss During
the Period

Balance
June 30,
2013

June 30,
2013

(in millions)

North America

225.6

—

(0.7

)

224.9

(24.2

)

—

(24.2

)

200.7

Europe, Middle East and Africa (EMEA)

293.9

—

(4.1

)

289.8

—

289.8

Asia

12.9

—

12.9

—

12.9

Total

532.4

—

(4.8

)

527.6

(24.2

)

—

(24.2

)

503.4

	July 1, 2012
	Gross Balance									Accumulated Impairment Losses								Net Goodwill
	Balance January 1, 2012		Acquired During the Period		Foreign Currency Translation and Other			Balance July 1, 2012		Balance January 1, 2012			Impairment Loss During the Period		Balance July 1, 2012			July 1, 2012
	(in millions)
North America	$	213.8	$	13.1	$	(0.3	)	$	226.6	$	(23.2	)	$	—	$	(23.2	)	$	203.4
EMEA	285.3		—		(10.8		)	274.5		—			—		—			274.5
Asia	12.7		—		(0.1		)	12.6		—			—		—			12.6
Total	$	511.8	$	13.1	$	(11.2	)	$	513.7	$	(23.2	)	$	—	$	(23.2	)	$	490.5

On January 31, 2012, the Company completed the acquisition of tekmar Control Systems (tekmar) in a share purchase transaction. The initial purchase price paid was CAD $18.0 million, with post-closing adjustments related to working capital and an earnout based on the attainment of certain future earnings levels. The initial purchase price paid was equal to approximately $17.8 million based on the exchange rate of Canadian dollar to U.S. dollar as of January 31, 2012. The total purchase price will not exceed CAD $26.2 million. The Company accounted for the transaction as a business combination. In January 2013, the Company completed a purchase price allocation that resulted in the recognition of $11.7 million in goodwill and $10.1 million in intangible assets.

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Goodwill and indefinite-lived intangible assets are tested for impairment at least annually or more frequently if events or circumstances indicate that it is “more likely than not” that they might be impaired, such as from a change in business conditions. The Company performs its annual impairment assessment of goodwill and indefinite-lived intangible assets in the fourth quarter of each year.

As of October 28, 2012, the annual impairment analysis date, the fair value of the EMEA reporting unit exceeded the carrying value by a significant amount. The EMEA reporting unit represents the EMEA geographic segment excluding the Blücher reporting unit. During the six months ended June 30, 2013, operating results for the EMEA reporting unit have been hindered by the downturn in the economic environment in Europe and continued to fall below the expected operating results and growth rates used in the calculation of the present value of future cash flow projections, triggering the decision to update the impairment analysis. As a result of the updated fair value assessment, it was determined that the fair value of the EMEA reporting unit did decrease from year end but continues to exceed its carrying value by approximately 15%. The Company also performed an analysis on the long-lived assets in the EMEA reporting unit as a result of the triggering event and concluded that these assets were not impaired.

Should the EMEA reporting unit’s operating results decline further for any reason, including if the European marketplace deteriorates beyond current expectations or should interest rates increase significantly, then the reporting unit’s goodwill may be at risk for impairment in the future. The EMEA reporting unit’s goodwill balance as of June 30, 2013 was $214.8 million.

Intangible assets with estimable lives and other long-lived assets are reviewed for impairment whenever 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 are measured by a comparison of the carrying amount of an asset or asset group to future net undiscounted pretax 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 pretax 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 based on the market and guideline public companies for the related business, and does not allocate interest charges to the asset or asset group being measured. Judgment is required to estimate future operating cash flows.

Intangible assets include the following:

	June 30, 2013							December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in millions)
Patents	$	16.5	$	(12.1	)	$	4.4	$	16.5	$	(11.7	)	$	4.8
Customer relationships	133.8		(74.0		)	59.8		134.3		(68.7		)	65.6
Technology	28.1		(10.3		)	17.8		28.5		(9.3		)	19.2
Trade Names	13.8		(2.6		)	11.2		13.9		(1.9		)	12.0
Other	8.6		(5.6		)	3.0		8.7		(5.5		)	3.2
Total amortizable intangibles	200.8		(104.6		)	96.2		201.9		(97.1		)	104.8
Indefinite-lived intangible assets	41.5		—			41.5		41.8		—			41.8
Total	$	242.3	$	(104.6	)	$	137.7	$	243.7	$	(97.1	)	$	146.6

Aggregate amortization expense for amortizable intangible assets for the second quarters of 2013 and 2012 was $3.7 million and $4.2 million, respectively, and for the first six months of 2013 and 2012 was $7.5 million and $8.3 million, respectively. Additionally, future amortization expense for the next five years on amortizable intangible assets is expected to be approximately $7.7 million for the remainder of 2013, $14.8 million for 2014, $14.5 million for 2015, $14.0 million for 2016 and $13.6 million for 2017. Amortization expense is recorded 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 8.8 years. Patents, customer relationships, technology, trade names and other amortizable intangibles have weighted-average remaining lives of 6.0 years, 6.1 years, 11.5 years, 11.2 years and 41.1 years, respectively. Indefinite-lived intangible assets primarily include trademarks and trade names.

Stock-Based Compensation

The Company maintains two stock incentive plans under which key employees have been granted incentive stock options (ISOs) and nonqualified stock options (NSOs) to purchase the Company’s Class A Common Stock. Only one plan, the Second Amended and Restated 2004 Stock Incentive Plan, is currently available for the grant of new stock options, which are currently being granted only to employees. Under the 2004 Stock Incentive Plan, options become exercisable over a four-year period at the rate of 25% per year and expire ten years after the grant date. ISOs and NSOs granted under the plans may have exercise prices of not less than 100% of the fair market value of the Class A Common Stock on the date of grant. The Company’s current practice is to grant all options at fair market value on the grant date. The Company issued 9,500 stock options during the first six months of 2013.

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The Company has also granted shares of restricted stock to key employees and stock awards to non-employee members of the Company’s Board of Directors under the 2004 Stock Incentive Plan. Stock awards to non-employee members of the Company’s Board of Directors are fully vested upon grant, and employees’ restricted stock awards vest over a three-year period at the rate of one-third per year. The restricted stock awards are amortized to expense on a straight-line basis over the vesting period. The Company issued 3,167 shares of restricted stock under the 2004 Stock Incentive Plan in the first six months of 2013.

The Company also has a Management Stock Purchase Plan that allows for the purchase of restricted stock units (RSUs) by key employees. On an annual basis, key employees may elect to receive a portion of their annual incentive compensation in RSUs instead of cash. Each RSU represents one share of Class A Common Stock and is purchased by the employee at 67% of the fair market value of the Company’s Class A Common Stock on the date of grant. RSUs vest annually over a three-year period from the grant date and receipt of the shares underlying RSUs is deferred for a minimum of three years or such greater number of years as is chosen by the employee. An aggregate of 2,000,000 shares of Class A Common Stock may be issued under the Management Stock Purchase Plan. The Company granted 44,777 RSUs and 63,739 RSUs in the first six months of 2013 and 2012, respectively.

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

	2013		2012
Expected life (years)	3.0		3.0
Expected stock price volatility	34.1	%	38.3	%
Expected dividend yield	0.9	%	1.1	%
Risk-free interest rate	0.4	%	0.4	%

The above assumptions were used to determine the weighted average grant-date fair value of RSUs of $18.05 and $15.68 in 2013 and 2012, respectively.

A more detailed description of each of these plans can be found in Note 12 of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Shipping and Handling

The Company’s shipping costs included in selling, general and administrative expenses were $10.2 million and $9.2 million for the second quarters of 2013 and 2012, respectively, and were $19.3 million and $18.8 million for the first six months of 2013 and 2012, respectively.

Research and Development

Research and development costs included in selling, general and administrative expenses were $5.5 million and $5.2 million for the second quarters of 2013 and 2012, respectively, and were $10.9 million and $10.5 million for the first six months of 2013 and 2012, respectively.

Taxes, Other than Income Taxes

Taxes assessed by governmental authorities on sale transactions are recorded on a net basis and excluded from sales in the Company’s consolidated statements of operations.

Income Taxes

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

New Accounting Standards

In July 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, which is intended to eliminate the diversity in practice in the presentation of unrecognized tax benefits in those instances. ASU 2013-11 is effective for fiscal years and interim periods beginning after December 15, 2013. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

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In March 2013, the FASB issued Accounting Standards Update (ASU) No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Group of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This ASU is intended to eliminate diversity in practice on the release of cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest. In addition, the amendments in this ASU resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. The provisions of this ASU are effective for interim and annual periods beginning after December 15, 2013, with early adoption permitted, and must be applied prospectively. The Company early adopted the ASU in fiscal year 2013.

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”, which requires additional disclosures about amounts reclassified out of OCI by component, either on the face of the income statement or as a separate footnote to the financial statements. ASU 2013-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The adoption of this guidance has not had a material impact on the Company’s financial statements.

3. Discontinued Operations

On December 21, 2012, the Company completed the sale of all of the outstanding shares of its subsidiary, Flomatic Corporation (Flomatic). The sale excluded the backflow product line of Flomatic, which was retained by the Company. Flomatic, located in Glens Falls, New York, specializes in manufacturing and selling check valves, foot valves and automatic hydraulic control valves for the well water industry. The Company acquired Flomatic as part of its acquisition of Danfoss Socla S.A.S. (Socla) in April 2011. The Company evaluated the operations of Flomatic and determined that it would not have a substantial continuing involvement in Flomatic’s operations and cash flows. As a result, Flomatic’s cash flows and operations were eliminated from the continuing operations of the Company and classified as discontinued operations for all periods presented.

	Second Quarter Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
	(in millions)
Operating income — Flomatic	$	—	$	0.5	$	—	$	0.8
Income before income taxes	—		0.5		—		0.8
Income tax expense .	—		0.2		—		0.3
Income from discontinued operations, net of taxes	$	—	$	0.3	$	—	$	0.5

Revenues reported in discontinued operations are as follows:

	Second Quarter Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
	(in millions)
Flomatic revenues.	$	—	$	3.7	$	—	$	6.7

Sale of Watts Insulation GmbH Austria (“Austroflex”)

On August 1, 2013, the Company completed the sale of all of the outstanding shares of an indirectly wholly-owned subsidiary, Austroflex, receiving proceeds from the sale of approximately $9 million. Austroflex is an Austrian-based manufacturer of pre-insulated flexible pipe systems for district heating, solar applications and under-floor radiant heating systems. Austroflex did not meet performance expectations since its purchase approximately three years ago. The estimated loss after tax on disposal of the business is approximately $2 million. Further, for the year ended December 31, 2011, the Company wrote down Austroflex’s long-lived assets by $14.8 million. Austroflex’s results of operations will be presented as discontinued operations beginning the third quarter of 2013. The carrying amounts of major classes of assets and liabilities associated with the assets held in use as of June 30, 2013 and December 31, 2012 are as follows:

	June 30, 2013		December 31, 2012
	(in millions)
Inventory and accounts receivable	$	4.9	$	3.7
Prepaid expenses and other assets	2.9		3.8
Property, plant and equipment	1.6		1.9
Goodwill	4.2		4.2
Assets of discontinued operations	$	13.6	$	13.6

Accrued expenses and other liabilities	$	2.3	$	1.9
Deferred income taxes	0.3		0.3
Liabilities of discontinued operations	$	2.6	$	2.2

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4. Financial Instruments and Derivative Instruments

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including deferred compensation plan assets and related liability, and contingent consideration. There were no designated cash flow hedges as of June 30, 2013 and December 31, 2012. The fair values of these certain financial assets and liabilities were determined using the following inputs at June 30, 2013 and December 31, 2012:

Fair Value Measurements at June 30, 2013 Using:

Quoted Prices in
Active
Markets for Identical
Assets

Significant Other
Observable
Inputs

Significant
Unobservable
Inputs

Total

(Level 1)

(Level 2)

(Level 3)

(in millions)

Assets

Plan asset for deferred compensation(1)

4.3

—

Total assets

4.3

—

Liabilities

Plan liability for deferred compensation(2)

4.3

—

Contingent consideration(3)

3.8

—

3.8

Total liabilities

8.1

4.3

—

3.8

	Fair Value Measurements at December 31, 2012 Using:
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(in millions)
Assets
Plan asset for deferred compensation(1)	$	4.2	$	4.2	$	—	$	—
Total assets	$	4.2	$	4.2	$	—	$	—
Liabilities
Plan liability for deferred compensation(2)	$	4.2	$	4.2	$	—	$	—
Contingent consideration(3)	5.2		—		—		5.2
Total liabilities	$	9.4	$	4.2	$	—	$	5.2

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

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

(3) Included in other noncurrent liabilities and accrued expenses and other liabilities on the Company’s consolidated balance sheet.

The table below provides a summary of the changes in fair value of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period December 31, 2012 to June 30, 2013.

	Balance		Purchases,			Total realized and unrealized (gains) losses included in:					Balance
	December 31, 2012		sales, settlements, net			Earnings		Comprehensive income			June 30, 2013
	(in millions)
Contingent consideration	$	5.2	$	(1.2	)	$	0.1	$	(0.3	)	$	3.8

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In connection with the tekmar acquisition in January 2012, a contingent liability of $5.1 million was recognized as the estimate of the acquisition date fair value of the contingent consideration. This liability was classified as Level 3 under the fair value hierarchy as it was based on the probability of achievement of a future performance metric as of the date of the acquisition, which was not observable in the market. Failure to meet the performance metrics would reduce this liability to zero, while complete achievement would increase this liability to the full remaining purchase price of $8.2 million. A portion of the contingent consideration was paid out during the period ended June 30, 2013, in the amount of $1.2 million, based on performance metrics achieved in fiscal year 2012. The contingent liability was increased by $0.1 million during the period based on performance metrics achieved to date.

Short-term investment securities as of December 31, 2012 consist of a certificate of deposit with a remaining maturity of greater than three months at the date of purchase, for which the carrying amount is a reasonable estimate of fair value. There were no short-term investment securities as of June 30, 2013.

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

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

The Company has exposure to a number of foreign currency rates, including the Canadian Dollar, the Euro, the Chinese Yuan and the British Pound. To manage this risk, the Company generally uses a layering methodology whereby at the end of any quarter the Company has generally entered into forward exchange contracts which hedge approximately 50% of the projected intercompany purchase transactions for the next twelve months. The Company primarily uses this strategy for purchases between Canada and the U.S. The average volume of contracts can vary but generally is approximately $4 million to $15 million in open contracts at the end of any given quarter. At June 30, 2013, the Company had contracts for notional amounts aggregating to $4.5 million. The Company accounts for the forward exchange contracts as an economic hedge. Realized and unrealized gains and losses on the contracts are recognized in other (income) expense in the consolidated statement of operations. These contracts do not subject the Company to significant market risk from exchange movement because they offset gains and losses on the related foreign currency denominated transactions.

Fair Value

The carrying amounts of cash and cash equivalents, short-term investments, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments.

The fair values of the Company’s 5.85% senior notes due 2016, and 5.05% senior notes due 2020, are based on a discounted cash flow model using comparable industrial companies, the Company’s credit metrics, the Company’s size, as well as current market interest rates quoted in active markets and are classified within Level 2 of the valuation hierarchy. The fair value of the Company’s variable rate debt approximates its carrying value. The carrying amount and the estimated fair market value of the Company’s long-term debt, including the current portion, are as follows:

	June 30,		December 31,
	2013		2012
	(in millions)
Carrying amount	$	308.4	$	384.6
Estimated fair value	$	337.1	$	420.8

5. Restructuring and Other Charges, Net

The Company’s Board of Directors approves all major restructuring programs that involve the discontinuance of product lines or the shutdown of facilities. From time to time, the Company takes additional restructuring actions, including involuntary terminations that are not part of a major program. The Company accounts for these costs in the period that the individual employees are notified or the

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liability is incurred. These costs are included in restructuring and other charges in the Company’s consolidated statements of operations.

The Company also periodically initiates other actions which are not part of a major program. In December 2012 and the first six months of 2013, the Company initiated restructuring activities in Europe to relocate certain manufacturing activities. Total expected costs are $6.0 million, including severance and relocation costs. The net after tax charge of $4.2 million will be incurred through mid-2014. A summary of the pre-tax cost by restructuring program is as follows:

	Second Quarter Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
	(in millions)
Restructuring costs:
2010 Actions	$	0.1	$	0.1	$	0.1	$	0.1
2011 Actions	—		0.1		—		0.6
Other Actions	1.9		0.9		4.1		1.6
Total restructuring charges	2.0		1.1		4.2		2.3
Other charges related to impairments	—		0.1		—		0.6
Total restructuring and other charges, net	$	2.0	$	1.2	$	4.2	$	2.9

The Company recorded pre-tax restructuring and other charges, net in its business segments as follows:

	Second Quarter Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
	(in millions)
North America	$	0.1	$	0.4	$	0.3	$	0.8
EMEA	1.9		0.8		3.9		2.1
Total	$	2.0	$	1.2	$	4.2	$	2.9

6. Earnings per Share

The following tables set forth the reconciliation of the calculation of earnings per share:

	For the Second Quarter Ended June 30, 2013					For the Second Quarter Ended July 1, 2012
	Income (Numerator)		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount
	(amounts in millions, except per share amounts)
Basic EPS
Net income:
Continuing operations	$	18.9	35.5	$	0.53	$	18.2	36.5	$	0.50
Discontinued operations	—			—		0.3			0.01
Net income	$	18.9		$	0.53	$	18.5		$	0.51
Effect of dilutive securities
Common stock equivalents			0.1					0.1
Diluted EPS
Net income:
Continuing operations	$	18.9		$	0.53	$	18.2		$	0.50
Discontinued operations	—			—		0.3			0.01
Net income	$	18.9	35.6	$	0.53	$	18.5	36.6	$	0.51

Options to purchase 0.4 million shares of Class A Common Stock were outstanding during each of the second quarters of 2013 and 2012, but were not included in the computation of diluted EPS because to do so would be anti-dilutive.

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	For the First Six Months Ended June 30, 2013					For the First Six Months Ended July 1, 2012
	Income (Numerator)		Shares (Denominator)	Per Share Amount		Income (Numerator)		Shares (Denominator)	Per Share Amount
	(amounts in millions, except per share amounts)
Basic EPS
Net income:
Continuing operations	$	35.0	35.5	$	0.99	$	33.7	36.7	$	0.92
Discontinued operations	—			—		0.5			0.01
Net income	$	35.0		$	0.99	$	34.2		$	0.93
Effect of dilutive securities
Common stock equivalents			0.1					0.1
Diluted EPS
Net income:
Continuing operations	$	35.0		$	0.98	$	33.7		$	0.92
Discontinued operations	—			—		0.5			0.01
Net income	$	35.0	35.6	$	0.98	$	34.2	36.8	$	0.93

Options to purchase 0.4 million shares of Class A Common Stock were outstanding during each of the first six months of 2013 and 2012, but were not included in the computation of diluted EPS because to do so would be anti-dilutive.

On April 30, 2013, the Company announced that its Board of Directors has authorized the repurchase of up to $90 million of the Company’s Class A Common Stock from time to time on the open market or in privately negotiated transactions. The timing and number of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time, subject to the terms of any Rule 10b5-1 plan the Company may enter into with respect to the repurchase program. During the quarter ended June 30, 2013, the Company repurchased approximately 213,000 shares of Class A common stock at a cost of approximately $10.0 million.

7. Segment Information

The Company operates in three geographic segments: North America, EMEA, and Asia. Each of these segments is managed separately and has separate financial results that are reviewed by the Company’s chief operating decision-maker. All intercompany sales transactions have been eliminated. Sales by region are based upon location of the entity recording the sale. The accounting policies for each segment are the same as those described in the summary of significant accounting policies.

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

	Second Quarter Ended						Six Months Ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
	(in millions)
Net Sales
North America	$	224.4		$	218.1		$	437.4		$	425.1
EMEA	138.6			142.8			281.0			292.0
Asia	8.3			6.5			15.0			11.5
Consolidated net sales	$	371.3		$	367.4		$	733.4		$	728.6

Operating income (loss)
North America	$	31.5		$	26.2		$	55.5		$	46.1
EMEA	9.8			12.0			20.4			24.8
Asia	2.4			2.1			5.3			3.5
Subtotal reportable segments	43.7			40.3			81.2			74.4

Corporate (*)	(8.1		)	(7.1		)	(17.3		)	(14.6		)
Consolidated operating income	35.6			33.2			63.9			59.8

Interest income	0.2			0.2			0.3			0.4
Interest expense	(5.5		)	(6.1		)	(11.5		)	(12.3		)
Other income (expense), net	(1.4		)	—			(1.4		)	0.9
Income from continuing operations before income taxes	$	28.9		$	27.3		$	51.3		$	48.8
Capital Expenditures
North America	$	4.6		$	1.8		$	12.8		$	4.4
EMEA	2.1			2.4			4.3			4.6
Asia	0.3			0.5			0.9			0.6
Consolidated capital expenditures	$	7.0		$	4.7		$	18.0		$	9.6

Depreciation and Amortization
North America	$	5.1		$	4.9		$	10.1		$	9.7
EMEA	6.6			6.8			13.3			14.1
Asia	0.6			0.5			1.3			1.0
Consolidated depreciation and amortization	$	12.3		$	12.2		$	24.7		$	24.8

Identifiable Assets (at end of period)
North America							$	743.0		$	779.1
EMEA							812.7			750.5
Asia.							80.1			90.8
Discontinued operations							—			10.9
Consolidated identifiable assets							$	1,635.8		$	1,631.3

Property, plant and equipment, net (at end of period)
North America							$	86.0		$	73.7
EMEA							121.1			123.9
Asia							14.6			14.5
Consolidated property, plant and equipment, net							$	221.7		$	212.1

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* Corporate expenses are primarily for administrative compensation expense, internal controls costs, professional fees, including legal and audit expenses, shareholder services and benefit administration costs. These costs are not allocated to the geographic segments as they are viewed as corporate functions that support all activities.

The above operating segments are presented on a basis consistent with the presentation included in the Company’s December 31, 2012 consolidated financial statements included in its Annual Report on Form 10-K.

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

	Second Quarter Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
	(in millions)

U.S. net sales	$	201.6	$	196.0	$	394.4	$	383.0
U.S. property, plant and equipment (at end of period)					$	81.0	$	68.2

The following includes intersegment sales for North America, EMEA and Asia:

	Second Quarter Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
	(in millions)
Intersegment Sales
North America	$	1.3	$	1.2	$	2.6	$	2.6
EMEA	2.4		2.0		5.1		4.6
Asia	47.5		35.3		89.1		66.4
Intersegment sales	$	51.2	$	38.5	$	96.8	$	73.6

The North America segment includes $3.8 million in assets held for sale at July 1, 2012.

The Company sells its products into various end markets around the world and groups net sales to third parties into four product categories. Because many of the Company’s sales are through distributors and third-party manufacturers’ representatives, a portion of the product categorization is based on management’s understanding of final product use and, as such, allocations have been made to align sales into a product category. Net sales to third parties for the four product categories are as follows:

	Second Quarter Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
	(in millions)
Net Sales
Residential & commercial flow control	$	209.2	$	207.5	$	409.6	$	405.7
HVAC & gas	107.0		106.9		214.7		216.6
Drains & water re-use	36.3		35.0		70.2		68.8
Water quality	18.8		18.0		38.9		37.5
Consolidated net sales	$	371.3	$	367.4	$	733.4	$	728.6

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8. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of the following:

	Foreign Currency Translation			Pension Adjustment			Accumulated Other Comprehensive Income (Loss)
	(in millions)

Balance December 31, 2012	$	14.4		$	(25.2	)	$	(10.8	)
Change in period	(19.9		)	0.2			(19.7		)
Balance March 31, 2013	$	(5.5	)	$	(25.0	)	$	(30.5	)
Change in period	7.5			0.1			7.6
Balance June 30, 2013	$	2.0		$	(24.9	)	$	(22.9	)

Balance December 31, 2011	$	0.1		$	(19.1	)	$	(19.0	)
Change in period	16.5			0.2			16.7
Balance April 1, 2012	$	16.6		$	(18.9	)	$	(2.3	)
Change in period	(39.7		)	0.1			(39.6		)
Balance July 1, 2012	$	(23.1	)	$	(18.8	)	$	(41.9	)

9. Debt

The Company’s credit agreement (the Credit Agreement) provides for a multi-currency $300.0 million, five-year, senior unsecured revolving credit facility which may be increased by an additional $150.0 million under certain circumstances and subject to the terms of the Credit Agreement. The Credit Agreement has a sublimit of up to $75.0 million in letters of credit. The Credit Agreement matures on June 18, 2015.

Borrowings outstanding under the Credit Agreement bear interest at a fluctuating rate per annum equal to (i) in the case of Eurocurrency rate loans, the British Bankers’ Association LIBOR rate plus an applicable percentage, ranging from 1.70% to 2.30%, determined by reference to the Company’s consolidated leverage ratio plus, in the case of certain lenders, a mandatory cost calculated in accordance with the terms of the Credit Agreement, or (ii) in the case of base rate loans and swing line loans, the highest of (a) the federal funds rate plus 0.5%, (b) the rate of interest in effect for such day as announced by Bank of America, N.A. as its “prime rate,” and (c) the British Bankers’ Association LIBOR rate plus 1.0%, plus an applicable percentage, ranging from 0.70% to 1.30%, determined by reference to the Company’s consolidated leverage ratio. In addition to paying interest under the Credit Agreement, the Company is also required to pay certain fees in connection with the credit facility, including, but not limited to, a facility fee and letter of credit fees. Under the Credit Agreement, the Company is required to satisfy and maintain specified financial ratios and other financial condition tests. The Company may repay loans outstanding under the Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Credit Agreement. As of June 30, 2013, the Company was in compliance with all covenants related to the Credit Agreement and had $270.4 million of unused and available credit under the Credit Agreement and $29.6 million of stand-by letters of credit outstanding on the Credit Agreement. The Company did not have any borrowings outstanding under the Credit Agreement at June 30, 2013.

The Company is a party to several note agreements as further detailed in Note 10 of Notes to Consolidated Financial Statements of the Annual Report on Form 10-K for the year ended December 31, 2012. These note agreements require the Company to maintain a fixed charge coverage ratio of consolidated EBITDA plus consolidated rent expense during the period to consolidated fixed charges. Consolidated fixed charges are the sum of consolidated interest expense for the period and consolidated rent expense. As of June 30, 2013, the Company was in compliance with all covenants regarding these note agreements. The Company repaid the $75.0 million of unsecured senior notes that matured on May 15, 2013 during the period ended June 30, 2013 with available cash.

10. Contingencies and Environmental Remediation

Accrual and Disclosure Policy

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

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

There may continue to be exposure to loss in excess of any amount accrued. When it is possible to estimate the reasonably possible loss or range of loss above the amount accrued for the matters disclosed, that estimate is aggregated and disclosed. The Company records legal costs associated with its legal contingencies as incurred.

As of June 30, 2013, the Company estimates that the aggregate amount of reasonably possible loss in excess of the amount accrued for its legal contingencies is approximately $8.2 million pre-tax. With respect to the estimate of reasonably possible loss, management has estimated the upper end of the range of reasonably possible loss based on (i) the amount of money damages claimed, where applicable, (ii) the allegations and factual development to date, (iii) available defenses based on the allegations, and/or (iv) other potentially liable parties. This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate. In the event of an unfavorable outcome in one or more of the matters described below, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to it, management believes that the ultimate outcome of all matters described below, as they are resolved over time, is not likely to have a material effect on the financial position of the Company.

On March 8, 2012, Watts Water Technologies, Inc., Watts Regulator Co., and Watts Plumbing Technologies (Taizho) Co., Ltd., among other companies, were named as defendants in a putative nationwide class action complaint filed in the U.S. District Court for the Northern District of California seeking to recover damages and other relief based on the alleged failure of toilet connectors. The complaint seeks among other items, damages in an unspecified amount, replacement costs, injunctive relief, and attorneys’ fees and costs.

The Company is unable to estimate a range of reasonably possible loss for the above matter in which damages have not been specified because: (i) the proceedings are in the early stages; (ii) there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (iii) there are significant factual issues to be resolved; and (iv) there are novel legal issues presented. However, based on information currently known to the Company, it does not believe that these proceedings will have a material effect on its financial position, results of operations, cash flows or liquidity.

Product Liability

The Company is subject to a variety of potential liabilities in connection with product liability cases. The Company maintains product liability and other insurance coverage, which the Company believes to be generally in accordance with industry practices. For product liability cases in the U.S., management establishes its product liability accrual by utilizing third-party actuarial valuations which incorporate historical trend factors and the Company’s specific claims experience derived from loss reports provided by third-party administrators. In other countries, the Company maintains insurance coverage with relatively high deductible payments, as product liability claims tend to be smaller than those experienced in the U.S.

Environmental Remediation

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

Asbestos Litigation

The Company is defending approximately 42 lawsuits in different jurisdictions, alleging injury or death as a result of exposure to asbestos. The complaints in these cases typically name a large number of defendants and do not identify any particular Company products as a source of asbestos exposure. To date, the Company has obtained a dismissal in every case before it has reached trial because discovery has failed to yield evidence of substantial exposure to any Company products.

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Other Litigation

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

11. Defined Benefit Plans

The Company sponsors funded and unfunded non-contributing defined benefit pension plans that together cover substantially all of its U.S. employees. Benefits are based primarily on years of service and employees’ compensation. The funding policy of the Company for these plans is to contribute an annual amount that does not exceed the maximum amount that can be deducted for federal income tax purposes. On October 31, 2011, the Company’s Board of Directors voted to cease accruals effective December 31, 2011 under both the Company’s Pension Plan and Supplemental Employees Retirement Plan.

The components of net periodic benefit cost are as follows:

	Second Quarter Ended						Six Months Ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
	(in millions)
Service cost — administrative costs	$	0.1		$	0.2		$	0.2		$	0.4
Interest costs on benefits obligation	1.4			1.4			2.8			2.8
Expected return on assets	(1.7		)	(1.7		)	(3.4		)	(3.5		)
Net actuarial loss amortization	0.2			0.1			0.4			0.3
Net periodic benefit cost	$	—		$	—		$	—		$	—

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

	Six Months Ended
	June 30, 2013		July 1, 2012
	(in millions)
Employer contributions	$	0.4	$	0.4

The Company expects to contribute approximately $0.4 million to its pension plans for the remainder of 2013.

12. Subsequent Events

Dividend Declared

On July 30, 2013, the Company declared a quarterly dividend of thirteen cents ($0.13) per share on each outstanding share of Class A Common Stock and Class B Common Stock payable on August 30, 2013 to stockholders of record at the close of business on August 19, 2013.

Approved European Restructuring Program

On July 30, 2013, the Board of Directors authorized the initiation of a restructuring program with respect to the Company’s European operations to reduce its European manufacturing footprint by approximately 10%, improve organizational and operational efficiency and better align costs with expected revenues in response to changing market conditions.

The restructuring program is expected to include a pre-tax charge to earnings totaling approximately $14.0 million, approximately $9.8 million of which is expected to be recorded through fiscal 2014 and the remainder of which is expected to be recorded during fiscal 2015. This total charge is expected to include costs for severance benefits, relocation, clean-up, professional fees and certain asset write-downs. The total net after-tax charge for the restructuring program is expected to be approximately $10.0 million. The restructuring program is expected to be completed by the end of the fourth quarter of fiscal 2015. Certain aspects of the restructuring program will be subject to further analysis and determinations by local management and consultation and negotiation with various outside agencies.

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Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

Overview

The following discussion and analysis are provided to increase understanding of, and should be read in conjunction with, the accompanying unaudited consolidated financial statements and notes. In this quarterly report on Form 10-Q, references to “the Company,” “Watts,” “we,” “us” or “our” refer to Watts Water Technologies, Inc. and its consolidated subsidiaries.

We operate on a 52-week fiscal year ending on December 31. Any quarterly data contained in this Quarterly Report on Form 10-Q generally reflects the results of operations for a 13-week period or 26-week period, respectively.

We are a leading supplier of products for use in the water quality, water safety, water flow control and water conservation markets in both North America and EMEA (Europe, Middle East and Africa), with a growing presence in Asia. For over 138 years, we have designed and manufactured products that promote comfort and safety of people and the quality and conservation of water used in commercial and residential applications. We earn revenue and income almost exclusively from the sale of our products. Our principal product lines are:

· Residential & commercial flow control products — includes products typically sold into plumbing and hot water applications such as backflow preventers, water pressure regulators, temperature and pressure relief valves, and thermostatic mixing valves.

· HVAC & gas products — includes 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. HVAC is an acronym for heating, ventilation and air conditioning.

· Drains & water re-use products — includes drainage products and engineered rain water harvesting solutions for commercial, industrial, marine and residential applications.

· Water quality products — includes point-of-use and point-of-entry water filtration, conditioning and scale prevention systems for both commercial and residential applications.

Our business is reported in three geographic segments: North America, EMEA and Asia. We distribute our products through three primary distribution channels: wholesale, do-it-yourself (DIY) and original equipment manufacturers (OEMs). Interest rates, the unemployment rate and credit availability have an indirect effect on the demand for our products due to the effect such rates have on the number of new residential and commercial construction starts and remodeling projects. All of these activities have an impact on our levels of sales and earnings. An additional factor that has an effect on our sales and operating income is fluctuation in foreign currency exchange rates, as approximately 46% of our sales in the second quarter ended June 30, 2013, and certain portions of our costs, assets and liabilities are denominated in currencies other than the U.S. dollar.

During the second quarter of 2013, sales increased $3.9 million primarily from the appreciation of the euro against the dollar of $2.1 million and from an organic increase in sales of $1.8 million. Organic sales increased by 0.5% compared to last year’s comparable period, primarily from increased sales in North America. Organic sales in the second quarter of 2013 increased in North America by $6.5 million, or 3.0%, and increased in Asia by $1.7 million, or 26.2%, offset by a decrease in EMEA of $6.4 million, or 4.5%. Organic sales growth excludes the impacts of acquisitions, divestitures and foreign exchange from year-over-year comparisons. We believe this provides investors with a more complete understanding of underlying sales trends by providing sales growth on a consistent basis. Gross margins increased in the second quarter of 2013 as compared to 2012 by 0.5 percentage points. Operating income of $35.6 million increased by 7.2% in the second quarter of 2013 as compared to the second quarter of 2012, driven by improved gross margins and flat SG&A costs. Foreign exchange movements were immaterial year to year.

We believe that the factors relating to our future growth include the demand for clean water around the world, a healthy economic environment that fosters residential and commercial construction, regulatory requirements relating to the quality and conservation of water, continued enforcement of plumbing and building codes, our ability to grow organically in select attractive market segments and geographic regions and the successful completion of selective acquisitions, both in our core markets as well as in new complementary markets. Our acquisition strategy focuses on businesses that manufacture preferred brand name products that address our themes of water quality, water conservation, water safety, water flow control, HVAC and related complementary markets. We target businesses that will provide us with one or more of the following: an entry into new markets, an increase in shelf space with existing customers, a new or improved technology or an expansion of the breadth of our water quality, water conservation, water safety and water flow control and HVAC products for the residential and commercial construction markets. We have completed 36 acquisitions since divesting our industrial and oil and gas business in 1999.

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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. Together with our commissioned manufacturers’ representatives, we have consistently advocated for the development and enforcement of such plumbing codes. We are focused on maintaining stringent quality control and testing procedures at each of our manufacturing facilities in order to manufacture products in compliance with code requirements and take advantage of the resulting demand for compliant products. We believe that the 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.

Historically, we have faced a risk relating to our ability to respond to raw material cost fluctuations. We manage this risk by monitoring related market prices, working with our suppliers to achieve the maximum level of stability in their costs and related pricing, seeking alternative supply sources when necessary, purchasing forward commitments for raw materials, when available, implementing cost reduction programs and passing increases in costs to our customers in the form of price increases.

Another risk we face in all areas of our business is competition. We consider brand preference, engineering specifications, code requirements, price, technological expertise, delivery times, quality and breadth of product offerings to be the primary competitive factors. We believe that product development, product testing capability, breadth of product offerings and investment in plant and equipment needed to manufacture products in compliance with code requirements represent a competitive advantage for us. We expect to spend approximately $37 million during 2013 for purchases of capital equipment, including our continuing conversion of a portion of our manufacturing facilities to lead free production.

Recent Events

Dividend Declared

On July 30, 2013, we declared a quarterly dividend of thirteen cents ($0.13) per share on each outstanding share of Class A Common Stock and Class B Common Stock payable on August 30, 2013 to stockholders of record at the close of business on August 19, 2013.

Sale of Watts Insulation GmbH Austria (“Austroflex”)

On August 1, 2013, we completed the sale of all of the outstanding shares of an indirectly wholly-owned subsidiary, Austroflex, receiving proceeds from the sale of approximately $9 million. Austroflex is an Austrian-based manufacturer of pre-insulated flexible pipe systems for district heating, solar applications and under-floor radiant heating systems. Austroflex did not meet performance expectations since its purchase approximately three years ago. The estimated loss after tax on disposal of the business is approximately $2 million. Further, for the year ended December 31, 2011, we wrote down Austroflex’s long-lived assets by $14.8 million. Austroflex’s results of operations will be presented as discontinued operations beginning the third quarter of 2013. The total assets as of June 30, 2013 and December 31, 2012 were $13.6 million and total liabilities as of June 30, 2013 and December 31, 2012 were $2.6 million and $2.2 million, respectively.

Approved European Restructuring Program

On July 30, 2013, the Board of Directors authorized the initiation of a restructuring program with respect to our European operations to reduce our European manufacturing footprint by approximately 10%, improve organizational and operational efficiency and better align costs with expected revenues in response to changing market conditions.

The restructuring program is expected to include a pre-tax charge to earnings totaling approximately $14.0 million, approximately $9.8 million of which is expected to be recorded through fiscal 2014 and the remainder of which is expected to be recorded during fiscal 2015. This total charge is expected to include costs for severance benefits, relocation, clean-up, professional fees and certain asset write-downs. The total net after-tax charge for the restructuring program is expected to be approximately $10.0 million. We expect to spend approximately $2.0 million in capital expenditures to consolidate certain European operations. The restructuring program is expected to be completed by the end of the fourth quarter of fiscal 2015. Certain aspects of the restructuring program will be subject to further analysis and determinations by local management and consultation and negotiation with various outside agencies.

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Results of Operations

Second Quarter Ended June 30, 2013 Compared to Second Quarter Ended July 1, 2012

Net Sales. Our business is reported in three geographic segments: North America, EMEA and Asia. Our net sales in each of these segments for each of the second quarters of 2013 and 2012 were as follows:

	Second Quarter Ended June, 2013				Second Quarter Ended July 1, 2012							% Change to Consolidated
	Net Sales		% Sales		Net Sales		% Sales		Change			Net Sales
	(dollars in millions)
North America	$	224.4	60.5	%	$	218.1	59.3	%	$	6.3		1.7	%
EMEA	138.6		37.3		142.8		38.9		(4.2		)	(1.1	)
Asia	8.3		2.2		6.5		1.8		1.8			0.5
Total	$	371.3	100.0	%	$	367.4	100.0	%	$	3.9		1.1	%

The change in net sales was attributable to the following:

											Change As a % of Consolidated Net Sales								Change As a % of Segment Net Sales
	North America			EMEA			Asia		Total		North America		EMEA		Asia		Total		North America		EMEA		Asia
	(dollars in millions)
Organic	$	6.5		$	(6.4	)	$	1.7	$	1.8	1.7	%	(1.7	)%	0.5	%	0.5	%	3.0	%	(4.4	)%	26.2	%
Foreign exchange	(0.2		)	2.2			0.1		2.1		—		0.6		—		0.6		(0.1	)	1.5		1.5
Total	$	6.3		$	(4.2	)	$	1.8	$	3.9	1.7	%	(1.1	)%	0.5	%	1.1	%	2.9	%	(2.9	)%	27.7	%

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

													Change As a % of Prior Year Sales
	Wholesale			DIY			OEMs			Total			Wholesale		DIY		OEMs
	(dollars in millions)
North America	$	6.2		$	(0.3	)	$	0.6		$	6.5		4.0	%	(0.7	)%	3.2	%
EMEA	(0.8		)	(1.0		)	(4.6		)	(6.4		)	(1.1	)	(20.4	)	(7.1	)
Asia	1.7			—			—			1.7			26.2		—		—
Total	$	7.1		$	(1.3	)	$	(4.0	)	$	1.8		3.1	%	(2.6	)%	(4.8	)%

Organic net sales in the North America wholesale and OEM markets increased in the second quarter of 2013, compared to the second quarter of 2012, mainly from increased sales in residential and commercial flow control and HVAC and gas product lines. Organic sales were essentially flat in the North America DIY market in the second quarter of 2013 compared to the second quarter of 2012. Pricing pressure in the retail channel offset unit volume increases during the quarter.

Organic net sales in the EMEA wholesale market decreased in the second quarter of 2013 as compared to the same period in 2012 primarily due to the economic market conditions in France and Germany, offset partially by continued growth in our drains and export business. Organic net sales into the EMEA OEM market decreased as compared to the second quarter of 2012 primarily due to slowness in the German HVAC market.

The net increase in sales due to foreign exchange was primarily due to the appreciation of the euro against the U.S. dollar. We cannot predict whether the euro will appreciate or depreciate against the U.S. dollar in future periods or whether future foreign exchange rate fluctuations will have a positive or negative impact on our net sales.

Gross Profit. Gross profit and gross profit as a percent of net sales (gross margin) for the second quarters of 2013 and 2012 were as follows:

	Second Quarter Ended
	June 30, 2013			July 1, 2012
	(dollars in millions)
Gross profit	$	133.7		$	130.4
Gross margin	36.0		%	35.5		%

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North America’s gross margin increased compared to the second quarter of 2012 due primarily to improved productivity, better product mix and favorable commodity costs, which largely offset inefficiencies related to our lead free conversion program and retail pricing pressure. EMEA’s gross margin decreased due primarily to lower overhead absorption related to reduced volume, partially offset by productivity and pricing initiatives.

Selling, General and Administrative Expenses. Selling, general and administrative, or SG&A, expenses for the second quarter of 2013 were essentially flat, increasing $0.1 million, or 0.1%, compared to the second quarter of 2012. The increase in SG&A expenses was attributable to the following:

	(in millions)			% Change

Organic	$	(0.3	)	(0.3	)%
Foreign exchange	0.4			0.4
Acquired	—			—
Total	$	0.1		0.1	%

The organic decrease in SG&A expenses was primarily due to reduced insurance costs of $0.5 million, reduced information technology related professional services costs of $0.8 million and reduced amortization of $0.5 million, partially offset by increased freight costs of $0.9 million and personnel costs from increased employee participation in the stock incentive plans of $0.6 million. The increase in SG&A expenses from foreign exchange was primarily due to the appreciation of the euro against the U.S. dollar in 2013. Total SG&A expenses, as a percentage of sales, were 25.9% in the second quarter of 2013 and 26.1% in the second quarter of 2012.

Restructuring and Other Charges, Net. In the second quarter of 2013, we recorded a net charge of $2.0 million primarily for involuntary terminations and other costs incurred as part of our Europe and North America restructuring plans, as compared to $1.2 million of restructuring charges for the second quarter of 2012. For a more detailed description of our current restructuring plans, see Note 5 of Notes to Consolidated Financial Statements.

Operating Income. Operating income (loss) by geographic segment for the second quarters of 2013 and 2012 were as follows:

	Second Quarter Ended									% Change to Consolidated Operating
	June 30, 2013			July 1, 2012			Change			Income
	(dollars in millions)
North America	$	31.5		$	26.2		$	5.3		15.9	%
EMEA	9.8			12.0			(2.2		)	(6.6	)
Asia	2.4			2.1			0.3			0.9
Corporate	(8.1		)	(7.1		)	(1.0		)	(3.0	)
Total	$	35.6		$	33.2		$	2.4		7.2	%

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

															Change										Change
															As a % of Consolidated Operating Income										As a % of Segment Operating Income
	North America			EMEA			Asia		Corp.			Total			North America		EMEA		Asia		Corp.		Total		North America		EMEA		Asia		Corp.
	(dollars in millions)
Organic	$	5.0		$	(1.2	)	$	0.2	$	(1.0	)	$	3.0		15.0	%	(3.6	)%	0.6	%	(3.0	)%	9.0	%	19.1	%	(10.0	)%	9.5	%	14.1	%
Foreign exchange	(0.1		)	0.2			0.1		—			0.2			(0.3	)	0.6		0.3		—		0.6		(0.4	)	1.7		4.8		—
Restructuring, impairment charges and other	0.4			(1.2		)	—		—			(0.8		)	1.2		(3.6	)	—		—		(2.4	)	1.5		(10.0	)	—		—
Total	$	5.3		$	(2.2	)	$	0.3	$	(1.0	)	$	2.4		15.9	%	(6.6	)%	0.9	%	(3.0	)%	7.2	%	20.2	%	(18.3	)%	14.3	%	14.1	%

The increase in consolidated operating income was due primarily to an increase in gross margin as previously discussed and maintaining SG&A expenses flat, on slightly higher sales volume. The increase in North America’s organic operating income was driven by improved gross profit driven by higher sales volume, better sales mix and productivity initiatives offset by lead free transition costs and retail pricing pressures. The EMEA organic operating income decrease was due to lower gross profit from volume declines, partially offset by SG&A expense reductions. Corporate costs increased over the prior year due to personnel costs of $1.5 million for investments in new positions, higher stock incentive plan costs, offset by $0.6 million in lower professional services.

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Interest Expense. Interest expense decreased $0.6 million, or 9.8%, for the second quarter of 2013 as compared to the second quarter of 2012 due to lower balance outstanding on the line of credit and the retirement in mid-May of $75 million in unsecured senior notes.

Other expense (income), net. Other expense (income), net increased $1.4 million for the second quarter of 2013 as compared to the second quarter of 2012, primarily due to foreign currency transaction losses in Asia as a result of the appreciation of the Chinese yuan against the U.S. dollar in 2013.

Income Taxes. Our effective income tax rate for continuing operations increased to 34.6% in the second quarter of 2013, from 33.3% for the second quarter of 2012. The increase was largely due to worldwide earnings mix as a result of North America contributing a larger portion to worldwide earnings in 2013 than in 2012.

Net Income. Net income from continuing operations for the second quarter of 2013 was $18.9 million, or $0.53 per common share, compared to $18.2 million, or $0.50 per common share, for the second quarter of 2012. Results for the second quarter of 2013 include an after-tax charge of $1.5 million, or $0.04 per common share, for restructuring and other charges, compared to $0.9 million, or $0.02 per common share, for the second quarter of 2012. Further, the effects of the share repurchase programs contributed $0.01 per common share in the second quarter of 2013.

Six Months Ended June 30, 2013 Compared to Six Months Ended July 1, 2012

Net Sales. Our business is reported in three geographic segments: North America, EMEA and Asia. Our net sales in each of these segments for each of the first six months of 2013 and 2012 were as follows:

	Six Months Ended				Six Months Ended							% Change to
	June 30, 2013				July 1, 2012							Consolidated
	Net Sales		% Sales		Net Sales		% Sales		Change			Net Sales
	(dollars in millions)
North America	$	437.4	59.6	%	$	425.1	58.3	%	$	12.3		1.7	%
EMEA	281.0		38.3		292.0		40.1		(11.0		)	(1.5	)
Asia	15.0		2.1		11.5		1.6		3.5			0.5
Total	$	733.4	100.0	%	$	728.6	100.0	%	$	4.8		0.7	%

The change in net sales was attributable to the following:

											Change As a % of Consolidated Net Sales								Change As a % of Segment Net Sales
	North America			EMEA			Asia		Total		North America		EMEA		Asia		Total		North America		EMEA		Asia
	(dollars in millions)
Organic	$	11.9		$	(14.6	)	$	3.4	$	0.7	1.6	%	(2.0	)%	0.5	%	0.1	%	2.8	%	(5.0	)%	29.6	%
Foreign exchange	(0.3		)	3.6			0.1		3.4		—		0.5		—		0.5		(0.1	)	1.2		0.8
Acquired	0.7			—			—		0.7		0.1		—		—		0.1		0.2		—		—
Total	$	12.3		$	(11.0	)	$	3.5	$	4.8	1.7	%	(1.5	)%	0.5	%	0.7	%	2.9	%	(3.8	)%	30.4	%

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

													Change As a % of Prior Year Sales
	Wholesale			DIY			OEMs			Total			Wholesale		DIY		OEMs
	(dollars in millions)
North America	$	10.4		$	—		$	1.5		$	11.9		3.4	%	—	%	4.6	%
EMEA	(4.9		)	(2.5		)	(7.2		)	(14.6		)	(3.3	)	(23.8	)	(5.5	)
Asia	3.4			—			—			3.4			29.6		—		—
Total	$	8.9		$	(2.5	)	$	(5.7	)	$	0.7		1.9	%	(2.5	)%	(3.4	)%

Organic net sales in the North America wholesale market increased in the first six months of 2013, compared to the first six months of 2012, mainly from increased sales in residential and commercial products and our HVAC product lines. Organic sales remained flat in the North America DIY market in the first six months of 2013 compared to the first six months of 2012 as unit sales increases were offset by pricing degradation. Organic net sales in the North America OEM market increased compared to the first six months of 2012 due primarily to the recovery in the sales to residential boiler manufacturers and into the food service OEM market.

Organic net sales in the EMEA wholesale market decreased in the first six months of 2013 as compared to the same period in 2012 primarily due to the economic market conditions in France and Germany, partially offset by continued growth in our drains and export

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business. Organic net sales into the EMEA OEM market decreased as compared to the first six months of 2012 primarily due to a slower HVAC market in Germany.

Acquired net sales growth in North America was due to the inclusion of tekmar sales for an entire six months in the 2013 period.

Gross Profit. Gross profit and gross profit as a percent of net sales (gross margin) for the first six months of 2013 and 2012 were as follows:

	Six Months Ended
	June 30, 2013			July 1, 2012
	(dollars in millions)
Gross profit	$	263.2		$	258.9
Gross margin	35.9		%	35.5		%

North America’s gross margin increased compared to the first six months of 2012 due primarily to improved productivity and better sales mix, which largely offset inefficiencies related to our lead free conversion program. EMEA’s gross margin decreased due primarily to lower overhead absorption related to reduced volume, partially offset by productivity initiatives. Pricing pressures in the retail channel in North America restricted gross margin expansion.

Selling, General and Administrative Expenses. Selling, general and administrative, or SG&A, expenses for the first six months of 2013 decreased $1.1 million, or 0.6%, compared to the first six months of 2012. The decrease in SG&A expenses was attributable to the following:

	(in millions)			% Change

Organic	$	(2.2	)	(1.1	)%
Foreign exchange	0.8			0.4
Acquired	0.3			0.1
Total	$	(1.1	)	(0.6	)%

The organic decrease in SG&A expenses was primarily due to reduced insurance costs of $1.2 million, reduced information technology related professional services costs of $0.9 million and reduced amortization of $0.9 million, partially offset by increased personnel costs due to an expanded stock incentive program and inflation. Reduced insurance costs primarily relate to lower product liability charges in North America of $0.8 million. The increase in SG&A expenses from foreign exchange was primarily due to the appreciation of the euro against the U.S. dollar in 2013. Acquired SG&A expenses were related to the tekmar acquisition. Total SG&A expenses, as a percentage of sales, were 26.6% in the first six months of 2013 and 26.9% in the first six months of 2012.

Restructuring and Other Charges, Net. In the first six months of 2013, we recorded a net charge of $4.2 million primarily for involuntary terminations and other costs incurred as part of our Europe and North America restructuring plans, as compared to $2.9 million of restructuring charges for the first six months of 2012. For a more detailed description of our current restructuring plans, see Note 5 of Notes to Consolidated Financial Statements.

Operating Income. Operating income (loss) by geographic segment for the first six months of 2013 and 2012 were as follows:

	Six Months Ended									% Change to Consolidated Operating
	June 30, 2013			July 1, 2012			Change			Income
	(dollars in millions)
North America	$	55.5		$	46.1		$	9.4		15.7	%
EMEA	20.4			24.8			(4.4		)	(7.3	)
Asia	5.3			3.5			1.8			3.0
Corporate	(17.3		)	(14.6		)	(2.7		)	(4.5	)
Total	$	63.9		$	59.8		$	4.1		6.9	%

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

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																Change										Change
																As a % of Consolidated Operating Income										As a % of Segment Operating Income
	North America			EMEA			Asia			Corp.			Total			North America		EMEA		Asia		Corp.		Total		North America		EMEA		Asia		Corp.
	(dollars in millions)
Organic	$	8.4		$	(2.8	)	$	2.0		$	(2.7	)	$	4.9		14.1	%	(4.7	)%	3.3	%	(4.5	)%	8.2	%	18.2	%	(11.3	)%	57.1	%	18.5	%
Foreign exchange	(0.1		)	0.3			0.1			—			0.3			(0.2	)	0.5		0.2		—		0.5		(0.2	)	1.2		2.9		—
Acquired	0.1			—			—			—			0.1			0.2		—		—		—		0.2		0.2		—		—		—
Restructuring, impairment charges and other	1.0			(1.9		)	(0.3		)	—			(1.2		)	1.6		(3.1	)	(0.5	)	—		(2.0	)	2.2		(7.6	)	(8.6	)	—
Total	$	9.4		$	(4.4	)	$	1.8		$	(2.7	)	$	4.1		15.7	%	(7.3	)%	3.0	%	(4.5	)%	6.9	%	20.4	%	(17.7	)%	51.4	%	18.5	%

The increase in consolidated operating income was due primarily to an increase in gross profit and a decrease of SG&A expenses as previously discussed. The increase in North America’s organic operating income was driven by improved gross profit driven by higher sales volume, better product mix and productivity initiatives. In addition, North America’s operating income benefitted from lower SG&A expenses. The EMEA operating income decrease was due to lower gross margin from volume declines and higher restructuring costs, partially offset by SG&A expense reductions. Corporate costs increased over the prior year due to personnel costs of $2.9 million for investments in new positions and higher stock incentive plan costs. The acquired operating income was related to the tekmar acquisition.

Interest Expense. Interest expense decreased $0.8 million, or 6.5%, for the first six months of 2013 as compared to the first six months of 2012 due to the lower balance outstanding on the line of credit and the retirement in mid-May of $75.0 million unsecured senior notes.

Other expense (income), net. Other expense (income), net increased $2.3 million for the first six months of 2013 as compared to the first six months of 2012, primarily due to foreign currency transaction losses in Asia as a result of the appreciation of the Chinese yuan against the U.S. dollar in 2013. Further a favorable customs settlement recorded in 2012 did not repeat in 2013.

Income Taxes. Our effective income tax rate for continuing operations increased to 31.8% in the first six months ended June 30, 2013, from 30.9% for the first six months ended July 1, 2012. The lower rate in 2012 was mainly due to reserve releases of approximately $0.8 million related primarily to the completion of a European subsidiary’s tax audit. The slight increase to the rate for 2013 can be attributed to worldwide earnings mix, with North America contributing a larger portion in 2013 than in 2012.

Net Income. Net income from continuing operations for the first six months of 2013 was $35.0 million, or $0.98 per common share, compared to $33.7 million, or $0.92 per common share, for the first six months of 2012. Results for the first six months of 2013 include an after-tax charge of $3.0 million, or $0.08 per common share, for restructuring and other charges, compared to $1.9 million, or $0.05 per common share, for the first six months of 2012. Further, the effects of the share repurchase programs contributed $0.03 per common share in the first six months of 2013.

Liquidity and Capital Resources

We generated $21.3 million of net cash from operating activities in the first six months of 2013 as compared to cash generation of $22.9 million in the first six months of 2012. This decrease is primarily due to the net change in inventory of approximately $7.9 million relating to the incremental inventory build for the lead free transition program offset by other changes in working capital. During the six month period ended June 30, 2013 we invested an incremental $27 million of inventory in preparation of customers transitioning to lead free inventory.

We used $14.5 million of net cash for investing activities for the first six months of 2013, for capital equipment, primarily related to our new lead free foundry. For the second half of fiscal year 2013, we expect to invest approximately $19 million in capital equipment as part of our ongoing commitment to improve our operating capabilities.

We used $93.2 million of net cash for financing activities for the first six months of 2013 primarily for the repayment of the $75.0 million of unsecured senior notes that matured on May 15, 2013, payments to repurchase approximately 213,000 shares of Class A common stock at a cost of approximately $10.0 million and payment of dividends of $8.5 million.

Our credit agreement (the Credit Agreement) provides for a multi-currency $300.0 million, five-year, senior unsecured revolving credit facility which may be increased by an additional $150.0 million under certain circumstances and subject to the terms of the Credit Agreement. The Credit Agreement has a sublimit of up to $75.0 million in letters of credit. The Credit Agreement matures on June 18, 2015.

Borrowings outstanding under the Credit Agreement bear interest at a fluctuating rate per annum equal to (i) in the case of Eurocurrency rate loans, the British Bankers’ Association LIBOR rate plus an applicable percentage, ranging from 1.70% to 2.30%, determined by reference to our consolidated leverage ratio plus, in the case of certain lenders, a mandatory cost calculated in accordance with the terms of the Credit Agreement, or (ii) in the case of base rate loans and swing line loans, the highest of (a) the federal funds rate plus 0.5%, (b) the rate of interest in effect for such day as announced by Bank of America, N.A. as its “prime rate,” and (c) the British Bankers’ Association LIBOR rate plus 1.0%, plus an applicable percentage, ranging from 0.70% to 1.30%, determined by reference to our consolidated leverage ratio. In addition to paying interest under the Credit Agreement, we are also required to pay certain fees in connection with the credit facility, including, but not limited to, a facility fee and letter of credit fees. Under the Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial condition tests. We may repay loans outstanding under the Credit Agreement from time to time without premium or penalty, other than customary

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breakage costs, if any, and subject to the terms of the Credit Agreement. As of June 30, 2013, we had $29.6 million of stand-by letters of credit outstanding under the Credit Agreement. As of June 30, 2013, we were in compliance with all covenants related to the Credit Agreement and had $270.4 million of unused and available credit under the Credit Agreement.

Working capital (defined as current assets less current liabilities) as of June 30, 2013 was $469.5 million compared to $448.0 million as of December 31, 2012. Cash and cash equivalents decreased to $181.9 million as of June 30, 2013, compared to $271.8 million as of December 31, 2012. The ratio of current assets to current liabilities was 2.6 to 1 as of June 30, 2013 and 2.2 to 1 as of December 31, 2012. The decrease in cash and cash equivalents was driven primarily by the repayment of debt, repurchase of stock and an increase in inventory and capital spending related to our lead free transition program.

As of June 30, 2013, we held $181.9 million in cash and cash equivalents. Of this amount, approximately $144.6 million of cash and cash equivalents was held by foreign subsidiaries. Our ability to fund operations from this balance could be limited by possible tax implications of moving proceeds across jurisdictions. Our U.S. operations currently generate sufficient cash flows to meet our domestic obligations. We also have the ability to borrow funds at reasonable interest rates, utilize the committed funds under our Credit Agreement or recall intercompany loans. However, if amounts held by foreign subsidiaries were needed to fund operations in the United States, we could be required to accrue and pay taxes to repatriate these funds. Such charges may include a federal tax of up to 35.0% on dividends received in the U.S., potential state income taxes and an additional withholding tax payable to foreign jurisdictions of up to 10.0%. However, our intent is to permanently reinvest undistributed earnings of foreign subsidiaries and we do not have any current plans to repatriate them to fund operations in the United States.

Non-GAAP Financial Measures

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. Other companies may define free cash flow differently. Free cash flow does not represent cash generated from operating activities in accordance with GAAP. Therefore it should not be considered an alternative to net cash provided by operations as an indication of our performance. The cash conversion rate of free cash flow to net income is also a measure of our performance in cash flow generation.

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

	Six Months Ended
	June 30, 2013			July 1, 2012
	(in millions)
Net cash provided by operating activities	$	21.3		$	22.9
Less: additions to property, plant, and equipment	(18.0		)	(9.6		)
Plus: proceeds from the sale of property, plant, and equipment	1.4			1.0
Free cash flow	$	4.7		$	14.3

Net income from continuing operations	$	35.0		$	33.7

Cash conversion rate of free cash flow to net income from continuing operations	13.4		%	42.4		%

Our free cash flow decreased in the first six months of 2013 when compared to the first six months of 2012 primarily due to cash investment in working capital and additional capital spending, primarily related to the lead free transition program.

Our net debt to capitalization ratio (a non-GAAP financial measure) for the first six months of 2013 was 11.7%, compared to 10.7% at December 31, 2012. The increase in net debt to capitalization ratio is due primarily to cash outlay related to our capital investment in our lead free foundry and our investment in lead free inventory. Management believes the net debt to capitalization ratio is an appropriate supplemental measure because it helps investors understand our ability to meet our financing needs and serves as a basis to evaluate our financial structure. Our computation may not be comparable to other companies that may define their net debt to capitalization ratios differently.

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

	June 30,			December 31,
	2013			2012
	(in millions )
Current portion of long-term debt	$	2.1		$	77.1
Plus: long-term debt, net of current portion	306.3			307.5
Less: cash and cash equivalents	(181.9		)	(271.8		)
Net debt	$	126.5		$	112.8

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	June 30,			December 31,
	2013			2012
	(in millions )
Net debt	$	126.5		$	112.8
Plus: total stockholders’ equity	953.2			939.5
Capitalization	$	1,079.7		$	1,052.3
Net debt to capitalization ratio	11.7		%	10.7		%

We maintain letters of credit that guarantee our performance or payment to third parties in accordance with specified terms and conditions. Amounts outstanding were approximately $29.6 million as of June 30, 2013 and $34.8 million at December 31, 2012. Our letters of credit are primarily associated with insurance coverage and, to a lesser extent, foreign purchases and generally expire within one year of issuance. These instruments may exist or expire without being drawn down; therefore they do not necessarily represent future cash flow obligations.

Off-Balance Sheet Arrangements

Except for operating lease commitments, 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.

Application of Critical Accounting Policies and Key Estimates

The preparation of our consolidated financial statements in accordance with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported. A critical accounting estimate is an assumption about highly uncertain matters and could have a material effect on the consolidated financial statements if another, also reasonable, amount were used, or, a change in the estimate is reasonably likely from period to period. We base our assumptions on historical experience and on other estimates that we believe are reasonable under the circumstances. Actual results could differ significantly from these estimates. There were no changes in accounting policies or significant changes in accounting estimates during the first six months of 2013.

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

Revenue recognition

We recognize revenue when all of the following criteria are met: (1) we have entered into a binding agreement, (2) the product has shipped and title has passed, (3) the sales price to the customer is fixed or is determinable and (4) collectability is reasonably assured. We recognize revenue based upon a determination that all criteria for revenue recognition have been met, which, based on the majority of our shipping terms, is considered to have occurred upon shipment of the finished product. Some shipping terms require the goods to be received by the customer before title passes. In those instances, revenues are not recognized until the customer has received the goods. We record estimated reductions to revenue for customer returns and allowances and for customer programs. Provisions for returns and allowances are made at the time of sale, derived from historical trends and form a portion of the allowance for doubtful accounts. Customer programs, which are primarily annual volume incentive plans, allow customers to earn credit for attaining agreed upon purchase targets from us. We record estimated reductions to revenue, made at the time of sale, for customer programs based on estimated purchase targets.

Allowance for doubtful accounts

The allowance for doubtful accounts is established to represent our best estimate of the net realizable value of the outstanding accounts receivable. The development of our allowance for doubtful accounts varies by region but in general is based on a review of past due amounts, historical write-off experience, as well as aging trends affecting specific accounts and general operational factors affecting all accounts. In addition, factors are developed in certain regions utilizing historical trends of sales and returns and allowances and cash discount activities to derive a reserve for returns and allowances and cash discounts.

We uniformly consider current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. We also aggressively monitor the creditworthiness of our largest customers, and periodically review customer credit limits to reduce risk. If circumstances relating to specific customers change or unanticipated changes occur in the general business environment, our estimates of the recoverability of receivables could be further adjusted.

Inventory valuation

Inventories are stated at the lower of cost or market with costs determined primarily on a first-in first-out basis. We utilize both specific product identification and historical product demand as the basis for determining our excess or obsolete inventory reserve. We identify all inventories that exceed a range of one to four years in sales. This is determined by comparing the current inventory balance

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against unit sales for the trailing twelve months. New products added to inventory within the past twelve months are excluded from this analysis. A portion of our products contain recoverable materials, therefore the excess and obsolete reserve is established net of any recoverable amounts. Changes in market conditions, lower-than-expected customer demand or changes in technology or features could result in additional obsolete inventory that is not saleable and could require additional inventory reserve provisions.

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

Goodwill and other intangibles

We have made numerous acquisitions over the years which included the recognition of a significant amount of goodwill. Goodwill is tested for impairment annually or more frequently if an event or circumstance indicates that an impairment loss may have been incurred. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, and determination of the fair value of each reporting unit. We estimate the fair value of our reporting units using an income approach based on the present value of estimated future cash flows. We believe this approach yields the most appropriate evidence of fair value as our reporting units are not easily compared to other corporations involved in similar businesses. We have determined we have eight reporting units including Residential and Commercial, Dormont, Drains & Water Re-use, BRAE, Water Quality, EMEA (Europe, Middle East and Africa), Blücher, and Asia. Our Water Quality reporting unit does not have goodwill.

We review goodwill for impairment as of October 31 utilizing either qualitative or quantitative analyses. We have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step (quantitative) impairment test is unnecessary.

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

1) A review of the most recent fair value calculation to identify the extent of the cushion between fair value and carrying amount, to determine if a substantial cushion existed.

2) A review of events and circumstances that have occurred since the most recent fair value calculation to determine if those events or circumstances would have affected our previous fair value assessment. Items identified and reviewed include macroeconomic conditions, industry and market changes, cost factor changes, events that affect the reporting unit, financial performance against expectations and the reporting unit’s performance relative to peers.

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

The second analysis for goodwill impairment involves a quantitative two-step process. The first step of the impairment test requires a comparison of the fair value of each of our reporting units to the respective carrying value. If the carrying value of a reporting unit is less than its fair value, no indication of impairment exists and a second step is not performed. If the carrying amount of a reporting unit is higher than its fair value, there is an indication that impairment may exist and a second step must be performed. In the second step, the impairment is computed by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of the goodwill. If the carrying amount of the reporting unit’s goodwill is greater than the implied fair value of its goodwill, an impairment loss must be recognized for the excess and charged to operations.

Inherent in our development of the present value of future cash flow projections are assumptions and estimates derived from a review of our operating results, business plans, expected growth rates, cost of capital and tax rates. We also make certain assumptions about future economic conditions and other market data. We develop our assumptions based on our historical results including sales growth, operating profits, working capital levels and tax rates.

We believe that the discounted cash flow model is sensitive to the selected discount rate. We use third-party valuation specialists to help develop appropriate discount rates for each reporting unit. We use standard valuation practices to arrive at a weighted average cost of capital based on the market and guideline public companies. The higher the discount rate, the lower the discounted cash flows. While we believe that our estimates of future cash flows are reasonable, different assumptions could significantly affect our valuations and result in impairments in the future.

As of October 28, 2012, the annual impairment analysis date, the fair value of the EMEA reporting unit exceeded the carrying value by a significant amount. During the six months ended June 30, 2013, operating results for the EMEA reporting unit have been hindered by the downturn in the economic environment in Europe and continued to fall below the expected operating results and growth rates used in the calculation of the present value of future cash flow projections, triggering the decision to update the impairment analysis. As a result of the updated fair value assessment, it was determined that the fair value of the EMEA reporting

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unit did decrease from year end but continues to exceed its carrying value by approximately 15%. We also performed an analysis on the long-lived assets in the EMEA reporting unit as a result of the triggering event and concluded that these assets were not impaired.

Should the EMEA reporting unit’s operating results decline further for any reason, including if the European marketplace deteriorates beyond our current expectations or should interest rates increase significantly, then the reporting unit’s goodwill may be at risk for impairment in the future. The EMEA reporting unit’s goodwill balance as of June 30, 2013 was $214.8 million.

Product liability and workers’ compensation costs

Because of retention requirements associated with our insurance policies, we are generally self-insured for potential product liability claims and for workers’ compensation costs associated with workplace accidents. We are subject to a variety of potential liabilities in connection with product liability cases and we maintain product liability and other insurance coverage, which we believe to be generally in accordance with industry practices. For product liability cases in the U.S., management establishes its product liability accrual by utilizing third-party actuarial valuations that incorporate historical trend factors and our specific claims experience derived from loss reports provided by third-party administrators. In other countries, we maintain insurance coverage with relatively high deductible payments, as product liability claims tend to be smaller than those experienced in the U.S. Changes in the nature of claims or the actual settlement amounts could affect the adequacy of this estimate and require changes to the provisions. Because the liability is an estimate, the ultimate liability may be more or less than reported.

Workers’ compensation liabilities in the U.S. are recognized for claims incurred (including claims incurred but not reported) and for changes in the status of individual case reserves. At the time a workers’ compensation claim is filed, a liability is estimated to settle the claim. The liability for workers’ compensation claims is determined based on management’s estimates of the nature and severity of the claims and based on analysis provided by third-party administrators and by various state statutes and reserve requirements. We have developed our own trend factors based on our specific claims experience, discounted based on risk-free interest rates. We employ third-party actuarial valuations to help us estimate our workers’ compensation accrual. In other countries where workers’ compensation costs are applicable, we maintain insurance coverage with limited deductible payments. Because the liability is an estimate, the ultimate liability may be more or less than reported and is subject to changes in discount rates.

We determine the trend factors for product liability and workers’ compensation liabilities based on consultation with outside actuaries.

We maintain excess liability insurance with outside insurance carriers to minimize our risks related to catastrophic claims in excess of all self-insured positions. Any material change in the aforementioned factors could have an adverse impact on our operating results.

Legal contingencies

We are a defendant in numerous legal matters including those involving environmental law and product liability as discussed in more detail in Part I, Item 1, “Business - Product Liability, Environmental and Other Litigation Matters,” of our Annual Report on Form 10-K for the year ended December 31, 2012. 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, net of any applicable insurance proceeds. 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 developed in consultation with outside counsel. While this assessment is based upon all available information, litigation is inherently uncertain and the actual liability to fully resolve this litigation cannot be predicted with any assurance of accuracy. In the event of an unfavorable outcome in one or more legal matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to our operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to us, management believes that the ultimate outcome of all legal contingencies, as they are resolved over time, is not likely to have a material effect on our financial position, results of operations, cash flows or liquidity.

Pension benefits

We account for our pension plans in accordance with GAAP, which involves recording a liability or asset based on the projected benefit obligation and the fair value of plan assets. Assumptions are made regarding the valuation of benefit obligations and the performance of plan assets. The primary assumptions are as follows:

· Weighted average discount rate—this rate is used to estimate the current value of future benefits. This rate is adjusted based on movement in long-term interest rates.

· Expected long-term rate of return on assets—this rate is used to estimate future growth in investments and investment earnings. The expected return is based upon a combination of historical market performance and anticipated future returns for a portfolio reflecting the mix of equity, debt and other investments indicative of our plan assets.

We determine these assumptions based on consultation with outside actuaries and investment advisors. Any variance in these assumptions could have a significant impact on future recognized pension costs, assets and liabilities. On October 31, 2011, our Board of Directors voted to cease accruals of additional benefits effective December 31, 2011 under both the Pension Plan and Supplemental Employees Retirement Plan.

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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. Management periodically reviews these rates with outside tax advisors and changes are made if material variances from expectations are identified.

We recognize deferred taxes for the expected future consequences of events that have been reflected in the consolidated financial statements. Deferred tax assets and liabilities are determined based on differences between the book values and tax bases of particular assets and liabilities, using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to offset any net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We consider estimated future taxable income and ongoing prudent tax planning strategies in assessing the need for a valuation allowance.

New Accounting Standards

In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, which is intended to eliminate the diversity in practice in the presentation of unrecognized tax benefits in those instances. ASU 2013-11 is effective for fiscal years, and interim periods beginning after December 15, 2013. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

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

Our foreign subsidiaries transact most business, including certain intercompany transactions, in foreign currencies. Such transactions are principally purchases or sales of materials and are denominated in European currencies or the U.S. or Canadian dollar. We use foreign currency forward exchange contracts to manage the risk related to intercompany purchases that occur during the course of a year and certain open foreign currency denominated commitments to sell products to third parties. Realized and unrealized gains and losses on the contracts we recognized in other (income) expense are not material.

We have historically had a low exposure on the cost of our debt to changes in interest rates. Information about our long-term debt, including principal amounts and related interest rates, appears in Notes 4 and 9 of this report and in Note 10 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2012.

We purchase significant amounts of bronze ingot, brass rod, cast iron, steel and plastic, which are utilized in manufacturing our many product lines. Our operating results can be adversely affected by changes in commodity prices if we are unable to pass on related price increases to our customers. We manage this risk by monitoring related market prices, working with our suppliers to achieve the maximum level of stability in their costs and related pricing, seeking alternative supply sources when necessary, purchasing forward commitments for raw materials, when available, implementing cost reduction programs, value engineering, and passing increases in costs onto our customers in the form of price increases.

Item 4. Controls and Procedures

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

There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2013, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In connection with these rules, we will continue to review and document our disclosure controls and procedures, including our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

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Part II. OTHER INFORMATION

Item l. Legal Proceedings

As disclosed in Part I, Item 1, “Product Liability, Environmental and Other Litigation Matters” of our Annual Report on Form 10-K for the year ended December 31, 2012, we are party to certain litigation. There have been no material developments with respect to our contingencies and environmental remediation proceedings during the quarter ended June 30, 2013.

Item 1A. Risk Factors

This report may include statements that are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views about future results of operations and other forward-looking information. In some cases you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should” and “would” or similar words. You should not rely on forward-looking statements because our actual results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to, the following: the current economic and financial condition, which can affect levels of housing starts and remodeling, affecting the markets where our products are sold, manufactured, or marketed; difficulties in converting lead free products; shortages in and pricing of raw materials and supplies; loss of market share through competition; introduction of competing products by other companies; pressure on prices from competitors, suppliers, and/or customers; changes in variable interest rates on our borrowings; identification and disclosure of material weaknesses in our internal control over financial reporting; failure to expand our markets through acquisitions; failure or delay in developing new products; lack of acceptance of new products; failure to manufacture products that meet required performance and safety standards; foreign exchange rate fluctuations; cyclicality of industries, such as plumbing and heating wholesalers and home improvement retailers, in which we market certain of our products; environmental compliance costs; product liability costs; the results and timing of our restructuring plans; changes in the status of current litigation, and other risks and uncertainties discussed in Part I, “Item 1A. Risk Factors” and in Note 14 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities Exchange Commission, and in other reports we file from time to time with the Securities and Exchange Commission.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We satisfy the minimum withholding tax obligation due upon the vesting of shares of restricted stock and the conversion of 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 three-month period ended June 30, 2013.

	Issuer Purchases of Equity Securities
Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2013 — April 28, 2013	129	$	45.64	—	—
April 29, 2013 — May 26, 2013	—	—		—	—
May 27, 2013 — June 30, 2013	1,848	$	47.54	—	—
Total	1,977	$	47.42	—	—

The following table includes information with respect to repurchases of our Class A Common Stock during the three-month period ended June 30, 2013 under our stock repurchase program.

	Issuer Purchases of Equity Securities
Period	(a) Total Number of Shares (or Units) Purchased (1)	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2013 — April 28, 2013	—	—		—	—
April 29, 2013 — May 26, 2013	71,033	$	47.19	71,033	$	86,648,277
May 27, 2013 — June 30, 2013	141,607	$	46.91	212,640	$	80,005,360
Total	212,640	$	47.00	212,640	$	80,005,360

(1) On April 30, 2013, the Board of Directors authorized a stock repurchase program of up to $90 million of the Company’s Class A Common Stock to be purchased from time to time on the open market or in privately negotiated transactions. The timing and number of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions. During the quarter ended June 30, 2013, we repurchased approximately $10.0 million of common stock.

Item 6. Exhibits

The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as part of this Quarterly Report on Form 10-Q and such Exhibit Index is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		WATTS WATER TECHNOLOGIES, INC.

Date:	August 8, 2013		By:	/s/ David J. Coghlan
				David J. Coghlan
				Chief Executive Officer (principal executive officer)

Date:	August 8, 2013		By:	/s/ Dean P. Freeman
				Dean P. Freeman
				Chief Financial Officer (principal financial officer)


Date:	August 8, 2013		By:	/s/ Timothy M. MacPhee
				Timothy M. MacPhee
				Treasurer and Chief Accounting Officer (principal accounting officer)

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EXHIBIT INDEX

Listed and indexed below are all Exhibits filed as part of this report.

Exhibit No.		Description

3.1		Restated Certificate of Incorporation, as amended (1)

3.2		Amended and Restated By-Laws (2)

10.1		Watts Water Technologies, Inc. Executive Incentive Bonus Plan(3)

10.2		Watts Water Technologies, Inc. Second Amended and Restated 2004 Stock Incentive Plan (3)

10.3		Form of Non-Qualified Stock Option Agreement under the Watts Water Technologies, Inc. Second Amended and Restated 2004 Stock Incentive Plan

10.4		Form of Restricted Stock Award Agreement under the Watts Water Technologies, Inc. Second Amended and Restated 2004 Stock Incentive Plan

10.5		Form of Deferred Stock Award Agreement under the Watts Water Technologies, Inc. Second Amended and Restated 2004 Stock Incentive Plan

10.6		Watts Water Technologies, Inc Management Stock Purchase Plan Amended and Restated as of July 30, 2013

10.7		Form of Indemnification Agreement between Watts Water Technologies, Inc. and certain directors and officers

10.8		Compromise Agreement among Watts UK Limited, Watts Industries Europe B.V., Watts Water Technologies, Inc. and John Dennis Cawte

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2		Certification of Principal Financial Officer pursuant Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350

101.INS*		XBRL Instance Document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

* Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at June 30, 2013 and December 31, 2012, (ii) Consolidated Statements of Operations for the Second Quarters Ended June 30, 2013 and July 1, 2012 and the Six Months Ended June 30, 2013 and July 1, 2012, (iii) Consolidated Statements of Comprehensive Income (Loss) for the Second Quarters Ended June 30, 2013 and July 1, 2012 and the Six Months Ended June 30, 2013 and July 1, 2012, (vi) Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and July 1, 2012, and (vii) Notes to Consolidated Financial Statements.

(1) Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-11499) for the quarter ended July 3, 2005.

(2) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-11499) dated April 29, 2013.

(3) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-11499) dated May 15, 2013.

Exhibit 10.3

NON-QUALIFIED STOCK OPTION AGREEMENT
FOR COMPANY EMPLOYEES, NON-EMPLOYEE DIRECTORS

AND CONSULTANTS

UNDER THE WATTS WATER TECHNOLOGIES, INC.
SECOND AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

The grant to the optionee (the “Optionee”) of an option (the “Stock Option”) to purchase on or prior to the expiration date (the “Expiration Date”) all or part of the number of shares of Class A Common Stock, par value $.10 per share (the “Option Shares”), of Watts Water Technologies, Inc. (the “Company”) at a price per share (the “Option Exercise Price”), all as set forth in the Stock Option grant notification provided through the Optionee’s stock plan account on the E*TRADE website, is subject to the provisions of the Company’s Second Amended and Restated 2004 Stock Incentive Plan (the “Plan”) and the terms and conditions contained in this Non-Qualified Stock Option Agreement (the “Agreement”). By accepting the grant of the Stock Option on the E*TRADE website, the Optionee agrees to the terms and conditions of this Agreement.

1. Exercisability Schedule . No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable in accordance with the following schedule: 25% of the Option Shares shall become exercisable on the first anniversary of the date of grant, an additional 25% of the Option Shares shall become exercisable on the second anniversary of the date of grant, an additional 25% of the Option Shares shall become exercisable on the third anniversary of the date of grant and the remaining 25% of the Option Shares shall become exercisable on the fourth anniversary of the date of grant.

Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, unless the Stock Option is terminated sooner as provided herein.

2. Manner of Exercise .

(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.

Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that have been beneficially owned by the Optionee for at least six months and are not then subject to any restrictions under any Company plan; (iii) by the Optionee delivering to the Company a properly executed exercise

notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above. Payment instruments will be received subject to collection.

The delivery of certificates representing the Option Shares will be contingent upon the Company’s receipt from the Optionee of full payment for the Option Shares, as set forth above and any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.

(b) Certificates for shares of Stock purchased upon exercise of this Stock Option shall be issued and delivered to the Optionee upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such issuance and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company shall have issued and delivered the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.

(c) The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.

(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.

3. Termination of Employment or Service . If the Optionee’s employment by or service with the Company or a Subsidiary (as defined in the Plan) is terminated, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.

(a) Termination Due to Death . If the Optionee’s employment or service terminates by reason of death, any Stock Option held by the Optionee shall become fully exercisable and may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier.

(b) Termination Due to Disability . If the Optionee’s employment or service terminates by reason of disability (as determined by the Administrator), any Stock Option held by the Optionee shall become fully exercisable and may thereafter be exercised by the Optionee for a period of 12 months from the date of termination or until the Expiration Date, if earlier.

(c) Termination for Cause . If the Optionee’s employment or service terminates for Cause, any Stock Option held by the Optionee shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean a vote by the Board resolving that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the indictment of the Optionee in connection with a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionee’s duties to the Company.

(d) Other Termination . If the Optionee’s employment or service terminates for any reason other than death, disability or Cause, and unless otherwise determined by the Administrator, any Stock Option held by the Optionee may be exercised, to the extent exercisable on the date of termination, for a period of six months from the date of termination or until the Expiration Date, if earlier. Any Stock Option that is not exercisable upon the Optionee’s termination of employment or service shall terminate immediately and be of no further force or effect.

The Administrator’s determination of the reason for termination of the Optionee’s employment or service shall be conclusive and binding on the Optionee and his or her representatives or legatees.

4. Incorporation of Plan . Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

5. Limitations on Transferability . This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.

6. Tax Withholding . The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Optionee may elect to have the minimum required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued, or (ii) transferring to the Company, a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due.

7. Compensation Recovery Policy . Notwithstanding anything contained in this Agreement to the contrary, all Stock Options awarded under this Agreement, and any any profits realized by the Optionee from the sale of Class A Common Stock obtained by the Optionee upon exercise of this Stock Option shall be subject to forfeiture or repayment pursuant to the terms of the Company’s Compensation Recovery Policy as in effect from time to time, including any amendments necessary for compliance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

8. Miscellaneous .

(a) Notice hereunder shall be given to the Company at its principal place of business, and shall be given to the Optionee at the address set forth below, or in either case at such other address as one party may subsequently furnish to the other party in writing.

(b) This Stock Option does not confer upon the Optionee any rights with respect to continuance of employment by or service with the Company or any Subsidiary.

Exhibit 10.4

RESTRICTED STOCK AWARD AGREEMENT

FOR COMPANY EMPLOYEES

UNDER THE WATTS WATER TECHNOLOGIES, INC.

SECOND AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

The award of shares of restricted Class A Common Stock (the “Restricted Stock”) of Watts Water Technologies, Inc. (the “Company”) made to the grantee (the “Grantee”), as set forth in the Restricted Stock award notification provided through the Grantee’s stock plan account on the E*TRADE website, is subject to the provisions of the Company’s Second Amended and Restated 2004 Stock Incentive Plan (the “Plan”) and the terms and conditions contained in this Restricted Stock Award Agreement (the “Agreement”). By accepting the award of Restricted Stock on the E*TRADE website, the Grantee agrees to the terms and conditions of this Agreement.

1. Acceptance of Award . The Grantee shall have no rights with respect to the Restricted Stock unless he or she shall have accepted the Restricted Stock award through the E*TRADE website. Upon acceptance of the award of Restricted Stock by the Grantee, (i) the shares of Restricted Stock so accepted shall be issued by the Company and held by the Company’s transfer agent in book entry form in a restricted account until such Restricted Stock is vested as provided in Paragraph 3 below, and (ii) the Grantee’s name shall be entered as the stockholder of record on the books of the Company. Thereupon, the Grantee shall have all the rights of a shareholder with respect to such shares, including voting and dividend rights, subject, however, to the restrictions and conditions specified in Paragraph 2 below.

2. Restrictions and Conditions .

(a) As set forth in Paragraph 1, the book entries representing the shares of Restricted Stock granted herein shall bear an appropriate legend, as determined by the Administrator in its sole discretion, to the effect that such shares are subject to restrictions as set forth herein and in the Plan.

(b) Shares of Restricted Stock granted herein may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of by the Grantee prior to vesting.

(c) If the Grantee’s employment with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason (other than death or disability) prior to vesting of shares of Restricted Stock granted herein, the unvested shares of Restricted Stock shall be immediately and automatically forfeited to the Company upon termination of employment, without payment of any consideration to the Grantee. The Grantee shall have no further rights with respect to any shares of Restricted Stock that are so forfeited.

3. Vesting of Restricted Stock . Unless otherwise provided in this Agreement or the Plan, the Restricted Stock shall vest in accordance with the following vesting schedule: 33 1 / 3 % of the total number of shares of Restricted Stock shall vest on the first anniversary of the date of grant, an additional 33 1 / 3 % of the total number of shares of Restricted Stock shall vest on the second anniversary of the date of grant, and the remaining 33 1 / 3 % of the total number of shares of

Restricted Stock shall vest on the third anniversary of the date of grant. The restrictions and conditions in Paragraph 2 shall lapse with respect to the number of shares of Restricted Stock specified as vested on each such vesting date.

Subsequent to such Vesting Date or Dates, the shares of Stock on which all restrictions and conditions have lapsed shall no longer be deemed Restricted Stock. Notwithstanding the foregoing, if the Grantee’s employment is terminated by reason of death or disability (as determined by the Administrator) prior to the vesting of shares of Restricted Stock granted herein, the unvested shares of Restricted Stock held by the Grantee shall become fully vested. The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 3.

4. Dividends . Dividends on shares of Restricted Stock shall be paid currently to the Grantee.

5. Incorporation of Plan . Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

6. Limitations on Transferability . This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.

7. Tax Withholding . The Grantee acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Grantee any federal, state, local or other taxes of any kind required by law to be withheld with respect to the vesting of the shares of Restricted Stock. The Grantee shall satisfy such tax withholding obligations by transferring to the Company, on each date on which shares of Restricted Stock vest under this Agreement, such number of shares of Restricted Stock that vest on such date as have a Fair Market Value equal to the amount of the Company’s tax withholding obligation in connection with the vesting of such shares of Restricted Stock. Such delivery of Restricted Stock to the Company shall be deemed to happen automatically, without any action required on the part of the Grantee, and the Company is hereby authorized to take such actions as are necessary to effect such delivery.

8. Compensation Recovery Policy . Notwithstanding anything contained in this Agreement to the contrary, all Restricted Stock awarded under this Agreement, and any shares of Class A Common Stock delivered to the Grantee upon vesting of Restricted Stock hereunder shall be subject to forfeiture or repayment pursuant to the terms of the Company’s Compensation Recovery Policy as in effect from time to time, including any amendments necessary for compliance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

9. Miscellaneous .

(a) Notice hereunder shall be given to the Company at its principal place of business, and shall be given to the Grantee at the address set forth below, or in either case at such other address as one party may subsequently furnish to the other party in writing.

(b) This Agreement does not confer upon the Grantee any rights with respect to continuation of employment by the Company or any Subsidiary.

Exhibit 10.5

DEFERRED STOCK AWARD AGREEMENT

FOR COMPANY EMPLOYEES

UNDER THE WATTS WATER TECHNOLOGIES, INC.

SECOND AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

The award of deferred Class A Common Stock (“Deferred Stock”) of Watts Water Technologies, Inc. (the “Company”) made to the grantee (the “Grantee”), as set forth in the Deferred Stock award notification provided through the Grantee’s stock plan account on the E*TRADE website, is subject to the provisions of the Company’s Second Amended and Restated 2004 Stock Incentive Plan (the “Plan”) and the terms and conditions contained in this Deferred Stock Award Agreement (the “Agreement”). By accepting the award of Deferred Stock on the E*TRADE website, the Grantee agrees to the terms and conditions of this Agreement.

1. Nature and Acceptance of Award . The Deferred Stock award entitles the Grantee to receive that number of shares of Class A Common Stock of the Company (“Stock”) as set forth on the E*TRADE website with respect to this award upon vesting as provided in this Agreement. The Grantee shall have no rights to the Deferred Stock or to receive the Stock upon settlement of the Deferred Stock under this Agreement unless he or she shall have accepted the Deferred Stock award through the E*TRADE website. Unless and until the shares of Stock are actually issued to the Grantee upon vesting of the Deferred Stock in accordance with this Agreement, the Grantee shall not by reason of being granted the Deferred Stock be deemed to be a shareholder of the Company or to have any other right to the Stock, except as otherwise provided in this Agreement. Accordingly, the Grantee has no right to vote or receive dividends or any other rights as a shareholder with respect to the shares of Deferred Stock.

2. Restrictions and Conditions .

(a) The Deferred Stock granted herein may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of by the Grantee.

(b) If the Grantee’s employment with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason (other than death or disability) prior to vesting of the Deferred Stock granted herein, the unvested shares of Deferred Stock shall be immediately and automatically forfeited to the Company upon termination of employment, without payment of any consideration to the Grantee. The Grantee shall have no further rights with respect to the Deferred Stock or to receive shares of Stock with respect thereto.

3. Vesting of Deferred Stock . Unless otherwise provided in this Agreement or the Plan, the Deferred Stock shall vest in accordance with the following vesting schedule: 33 1 / 3 % of the total number of shares of Deferred Stock shall vest on the first anniversary of the date of grant, an additional 33 1 / 3 % of the total number of shares of Deferred Stock shall vest on the second anniversary of the date of grant, and the remaining 33 1 / 3 % of the total number of shares of Deferred Stock shall vest on the third anniversary of the date of grant. Notwithstanding the foregoing, if the Grantee’s employment is terminated by reason of death or disability (as determined by the Administrator) prior to the vesting of shares of Deferred Stock granted herein,

the unvested shares of Deferred Stock held by the Grantee shall become fully vested. The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 3.

4. Delivery of Stock . As soon as practicable following the vesting of the Deferred Stock, the Company shall issue in the name of the Grantee that number of shares of Stock corresponding to this award, without any of the restrictions contained in Paragraph 2 applicable thereto. Notwithstanding anything herein to the contrary, the Company may postpone the issuance of the shares of Stock until it is satisfied that the issuance of such Stock will not violate any applicable law. The actual issuance of the shares of Stock shall be subject to the terms and conditions as the Company may establish from time to time in order to comply with applicable law.

5. Dividend Equivalents . An account shall be established for the Grantee, to which shall be credited dividend equivalents equal to the product of (a) the number of shares of Deferred Stock subject to this award, and (b) the dividend declared on a single share of Stock. To the extent the Grantee becomes vested in the Deferred Stock, the Grantee shall be entitled to a cash distribution of the dividend equivalents credited to his or her account at the same time as the shares of Stock are issued with respect to the Deferred Stock so vesting.

6. Incorporation of Plan . Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

7. Limitations on Transferability . This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.

8. Tax Withholding . The Grantee acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Grantee any federal, state, local or other taxes of any kind required by law to be withheld with respect to the grant or vesting of the Deferred Stock and/or payment of dividend equivalents thereon under Paragraph 5. The Grantee shall satisfy such tax withholding obligations on the Deferred Stock by transferring to the Company, on each date on which such tax liability shall arise, such number of shares of Stock or Deferred Stock as have a Fair Market Value equal to the amount of the Company’s tax withholding obligation in connection with such shares of Stock or Deferred Stock. Such delivery of Stock or Deferred Stock to the Company shall be deemed to happen automatically, without any action required on the part of the Grantee, and the Company is hereby authorized to take such actions as are necessary to effect such delivery. With respect to the dividend equivalents, the Grantee authorizes the Company to withhold from any cash payments thereof, the amount of all required tax withholdings.

9. Compensation Recovery Policy . Notwithstanding anything contained in this Agreement to the contrary, all Deferred Stock awarded under this Agreement, and any shares of Class A Common Stock issued upon settlement hereunder shall be subject to forfeiture or repayment pursuant to the terms of the Company’s Compensation Recovery Policy as in effect

from time to time, including any amendments necessary for compliance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

10. Miscellaneous .

(b) This Agreement does not confer upon the Grantee any rights with respect to continuation of employment by the Company or any Subsidiary.

Exhibit 10.6

WATTS WATER TECHNOLOGIES, INC.

MANAGEMENT STOCK PURCHASE PLAN

Amended and Restated as of July 30, 2013

I. INTRODUCTION

The purpose of the Watts Water Technologies, Inc. Management Stock Purchase Plan (the “Plan”) is to provide equity incentive compensation to selected management employees of Watts Water Technologies, Inc. (the “Company”) and its subsidiaries. Participants in the Plan may elect to receive restricted stock units (“RSUs”) in lieu of all or a portion of their annual incentive bonus and, in some circumstances, make after-tax contributions in exchange for RSUs. Each RSU represents the right to receive one share of the Company’s Class A Common Stock (the “Stock”) upon the terms and conditions stated herein. RSUs are granted at a discount of 33% from the fair market value of the Stock on the Valuation Date (as defined in Subsection IV(B) below). Vested RSUs will be settled in shares of Stock after a period of deferral selected by the participant, or upon termination of employment, if earlier.

The Plan is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the guidance promulgated thereunder (“Section 409A”). The Plan should be interpreted in a manner to comply with Section 409A, including that all uses of the terms “termination of employment” and “terminates his/her employment” shall mean a “separation from service” within the meaning of Treasury Regulation 1.409A-1(h). In addition, this Plan is a “top hat plan” subject to certain provisions of the Employee Retirement Income Security Act of 1974.

II. ADMINISTRATION

The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company (the “Committee”). Each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Act”). The Committee shall have

complete discretion and authority with respect to the Plan and its application, except as expressly limited herein. Determinations by the Committee shall be final and binding on all parties with respect to all matters relating to the Plan.

III. ELIGIBILITY

Management employees of the Company and its subsidiaries as designated by the Committee shall be eligible to participate in the Plan.

IV. PARTICIPATION

A. Restricted Stock Units . Participation in the Plan shall be based on the award of RSUs. Each RSU awarded to a participant shall be credited to a bookkeeping account established and maintained for that participant.

B. Valuation of RSUs; Fair Market Value of Stock . The value of each RSU, for purposes of the Plan, shall be determined as follows: The “Cost” of each RSU shall be equal to 67% of the fair market value of the Stock on the relevant Valuation Date. The “Valuation Date” for each year is the date that is the third business day after the date that the Company releases its year-end earnings to the public. The “Value” of each RSU shall be equal to its Cost plus simple interest per annum on such amount at the one-year U.S. Treasury Bill rate (as published in The Wall Street Journal ) in effect on the Valuation Date and each anniversary thereof. For all purposes of the Plan, the “fair market value of the Stock” on any given date shall mean the last reported sale price at which Stock is traded on such date or, if no Stock is traded on such date, the most recent date on which Stock was traded, as reflected on the New York Stock Exchange.

C. Election to Participate . Each year, each participant may elect to receive an award of RSUs under the Plan in lieu of any bonus payable for a subsequent calendar year by completing a Bonus Deferral and RSU Subscription Agreement (“Subscription Agreement”). The Subscription Agreement shall provide that the participant elects to receive RSUs in lieu of a specified portion of any annual incentive bonus to be earned in the following calendar year. Such portion may be expressed as either (1) a specified

percentage of the participant’s actual bonus amount; (2) the lesser of a specified percentage or a specified dollar amount of the participant’s actual bonus amount; or (3) a specified dollar amount up to 100% of the participant’s targeted maximum bonus. Any dollar amount specified must be at least $1,000; and any percentage specified must be at least 10% and not more than 100%. Amounts specified pursuant to methods (1) and (2) are entirely contingent on the amount of bonus actually awarded. Where the participant specifies a fixed dollar amount pursuant to method (3), however, the Subscription Agreement shall provide that, if the specified dollar amount exceeds the actual bonus amount awarded, the participant undertakes to pay the excess, in cash or by check, to the Company within five days after the date the participant receives notice of the bonus amount. If a management employee first commences employment with the Company after January 1 of a calendar year, such individual shall be permitted to elect to receive an award of RSUs under the Plan in lieu of any annual incentive bonus (or portion thereof, as permitted under this Subsection IV.(C)) for that first calendar year of eligibility by completing a Subscription Agreement and filing it with the Company no later than 30 days after such employee is first designated as eligible to participate in the Plan. With respect to such first calendar year of eligibility, an election to participate in the Plan shall apply only to the portion of the annual incentive bonus or targeted maximum which is attributable to earnings for service performed after the election is made.

D. Deferral Beyond Vesting Period . Each Subscription Agreement shall specify a deferral period, beyond the three -year vesting period, for the RSUs to which it pertains. The deferral period shall be expressed as a number of whole years, not less than three, beginning on the Valuation Date. Subscription Agreements must be received by the Company no later than December 31 of the year prior to the year in which the bonus amount will be earned; provided, however, that if a management employee first commences employment with the Company after January 1 of a calendar year, the Company must receive such employee’s Subscription Agreement for that calendar year

no later than 30 days after the employee is designated as eligible to participate in the Plan. Notwithstanding the foregoing, to the extent that any bonus deferred hereunder constitutes “performance-based compensation” within the meaning of Section 409A, Subscription Agreements with respect to such compensation must be received by the Company no later than six months before the end of the so-called performance period to which such bonus relates.

E. Changes to Deferral Period before December 31, 2005 . At any time before December 31, 2005, a participant may change the deferral period specified in a Subscription Agreement that was in effect prior to December 31, 2005.

F. Changes to Deferral Period after January 1, 2006 . Effective January 1, 2006, a participant may change the deferral period specified in a Subscription Agreement to extend the deferral period, provided, however, that any such change must be made at least 12 months before the original distribution date. Any such change shall not become effective for 12 months after it is made. In addition, any such change must extend the deferral period for a minimum of five additional years from the original distribution date. Participants are not permitted to change a deferral to reduce the length of a deferral period.

G. Award of RSUs . On each annual Valuation Date, the Company shall award RSUs to each participant as follows: Each participant’s account shall be credited with a whole number of RSUs determined by dividing the amount (expressed in dollars) that is determined under his or her Subscription Agreement by the Cost of each RSU awarded on such date. No fractional RSU will be credited and the amount equivalent in value to the fractional RSU will be paid out to the participant currently in cash.

V. VESTING AND SETTLEMENT OF RSUs

A. Vesting . Unless otherwise provided below by the Committee, a participant shall become vested in the RSUs that are awarded in a year over a three-year vesting period in which one-third of the RSUs shall vest on each anniversary of the

Valuation Date on which the RSUs were awarded as long as the participant remains employed by the Company or a subsidiary on each such anniversary date. In lieu of the foregoing vesting, the Committee, in its sole discretion, may designate in the Subscription Agreement that a participant shall vest in all of the RSUs that are awarded in a year on the third anniversary of the Valuation Date provided, that the participant remains continuously employed by the Company or a subsidiary through such anniversary date.

B. Settlement After Vesting . With respect to each vested RSU, the Company shall issue to the participant one share of Stock within 30 days after the earliest of: (i) the end of the deferral period specified in the participant’s Subscription Agreement pertaining to such RSU; (ii) the date of the participant’s termination of employment with the Company and its subsidiaries; (iii) the date of the participant’s death; or (iv) the date the participant becomes Disabled (as defined below).

For purposes of this Plan, a participant shall be “Disabled” if the participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the participant’s employer.

C. Settlement Prior to Vesting . If a participant terminates his/her employment with the Company, the participant’s nonvested RSUs shall be canceled and he or she shall receive a cash payment equal to the lesser of (a) the Value of such RSUs

or (b) an amount equal to the number of such RSUs multiplied by the fair market value of the Stock on the date of the participant’s termination of employment.

D. Committee’s Discretion . The Committee shall have complete discretion to determine the circumstances of a participant’s termination of employment, including whether the same is a result of Disability, and the Committee’s determination shall be final and binding on all parties and not subject to review or challenge by any participant or other person. Except as otherwise provided in Subsection VIII.(C) hereof, in no event may the Committee apply its discretion to accelerate the time or schedule of any payment made under the Plan.

E. Waiting Period Applicable to Officers . Notwithstanding the provisions of Subsections V.(B) and V.(C) above, any participant who is a “key employee” within the meaning of Section 416(i) of the Code (which generally includes any officers of the Company) may not receive any payment or settlement with respect to his/her RSUs in connection with his/her termination of employment until the expiration of a six month waiting period following such termination of employment. This waiting period does not apply to the termination of an officer’s employment as a result of the officer’s death or Disability (as defined in Subsection V.(B) above).

VI. DIVIDEND EQUIVALENT AMOUNTS

Whenever dividends (other than dividends payable only in shares of Stock) are paid with respect to Stock, each participant shall be paid an amount in cash equal to the number of his or her vested RSUs multiplied by the dividend value per share. In addition, each participant’s account shall be credited with an amount equal to the number of such participant’s nonvested RSUs multiplied by the dividend value per share. Amounts credited with respect to each nonvested RSU shall be paid, without interest, on the date the participant becomes vested in such RSU, or when the participant receives payment of his or her nonvested RSUs pursuant to Subsection V.(C).

VII. DESIGNATION OF BENEFICIARY

A participant may designate one or more beneficiaries to receive payments or shares of Stock in the event of his/her death. A designation of beneficiary may apply to a specified percentage or a participant’s entire interest in the Plan. Such designation, or any change therein, must be in writing and shall be effective upon receipt by the Company. If there is no effective designation of beneficiary, or if no beneficiary survives the participant, the participant’s estate shall be deemed to be the beneficiary.

VIII. SHARES ISSUABLE; MAXIMUM NUMBER OF RSUs; ADJUSTMENTS; CHANGE IN CONTROL

A. Shares Issuable . The aggregate maximum number of shares of Stock reserved and available for issuance under the Plan shall be 2,000,000. For purposes of this limitation, the shares of Stock underlying any RSUs that are canceled shall be added back to the shares of Stock available for issuance under the Plan. Shares subject to the Plan are authorized but unissued shares or shares that were once issued and subsequently re-acquired by the Company.

B. Adjustments . In the event of a stock dividend, stock split or similar change in capitalization affecting the Stock, the Committee shall make appropriate adjustments in (i) the number and kind of shares of Stock or securities with respect to which RSUs shall thereafter be granted, (ii) the number and kind of shares remaining subject to outstanding RSUs; (iii) the number of RSUs credited to each participant’s account; and (iv) the method of determining the value of RSUs.

C. Change in Control . In the event of any proposed merger, consolidation, sale, dissolution or liquidation of the Company, all non-vested RSUs shall become fully vested upon the effective date of such merger, consolidation, sale, dissolution or liquidation and the Committee in its sole discretion may, as to any outstanding RSUs, make such substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan and the number of shares subject to such RSUs as it may

determine on an equitable basis and as may be permitted by the terms of such transaction, or terminate such RSUs upon such terms and conditions as it shall provide. In the event that any such merger, consolidation, sale, dissolution or liquidation of the Company constitutes a “change in control event” for purposes of Section 409A, the Committee may terminate the Plan and make payment with respect to each RSU (taking into account any adjustment provided for herein), provided that such payment is made within 12 months of such change in control event.

IX. AMENDMENT OR TERMINATION OF PLAN

The Company reserves the right to amend or terminate the Plan at any time, by action of its Board of Directors, provided that no such action shall adversely affect a participant’s rights under the Plan with respect to RSUs awarded and vested before the date of such action, and provided, further, that Plan amendments shall be subject to approval by the Company’s shareholders to the extent required by the Act to ensure that awards are exempt under Rule 16b-3 promulgated under the Act or as otherwise required by applicable law, including the relevant listing requirements of the New York Stock Exchange.

X. MISCELLANEOUS PROVISIONS

A. No Distribution; Compliance with Legal Requirements . The Committee may require each person acquiring shares of Stock under the Plan to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof. No shares of Stock shall be issued until all applicable securities laws and other legal and stock exchange requirements have been satisfied. The Committee may require the placing of such stop-orders and restrictive legends on certificates for Stock as it deems appropriate.

B. Withholding . Participation in the Plan is subject to any required tax withholding on wages or other income of the participant in connection with the Plan. Each participant agrees, by entering the Plan, that the Company shall have the right to

deduct any such taxes by withholding shares of Stock otherwise issuable to him under the Plan with an aggregate fair market value (as of the date the withholding is effected) that would satisfy the minimum required tax withholding obligation.

C. Notices; Delivery of Stock Certificates . Any notice required or permitted to be given by the Company or the Committee pursuant to the Plan shall be deemed given when personally delivered or deposited in the United States mail, registered or certified, postage prepaid, addressed to the participant at the last address shown for the participant on the records of the Company. Delivery of stock certificates to persons entitled to receive them under the Plan shall be deemed effected for all purposes when the Company or a share transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to such person at his/her last known address on file with the Company.

D. Nontransferability of Rights . During a participant’s lifetime, any payment or issuance of shares under the Plan shall be made only to him/her. No RSU or other interest under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt by a participant or any beneficiary under the Plan to do so shall be void. No interest under the Plan shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of a participant or beneficiary entitled thereto.

E. Company’s Obligations to Be Unfunded and Unsecured . The Plan shall at all times be entirely unfunded, and no provision shall at any time be made with respect to segregating assets of the Company (including Stock) for payment of any amounts or issuance of any shares of Stock hereunder. No participant or other person shall have any interest in any particular assets of the Company (including Stock) by reason of the right to receive payment under the Plan, and any participant or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan.

F. Forfeiture and Claw-Back Provisions . Notwithstanding anything contained in the Plan to the contrary, all RSUs awarded under this agreement, and any shares of Class A Common Stock issued upon settlement of RSUs hereunder, shall be subject to forfeiture or repayment pursuant to the terms of the Company’s Compensation Recovery Policy as in effect from time to time, including any amendments necessary for compliance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

G. Governing Law . The terms of the Plan shall be governed, construed, administered and regulated in accordance with the laws of the Commonwealth of Massachusetts. In the event any provision of this Plan shall be determined to be illegal or invalid for any reason, the other provisions shall continue in full force and effect as if such illegal or invalid provision had never been included herein.

H. Effective Date of Plan . The Plan became effective as of October 17, 1995, upon approval by the holders of a majority of the shares of the Company’s Class A Common Stock and Class B Common Stock, voting as a single class, present or represented and entitled to vote at a meeting of the shareholders.

Exhibit 10.7

INDEMNIFICATION AGREEMENT

This Agreement made and entered into this day of , (the “Agreement”), by and between Watts Water Technologies, Inc., a Delaware corporation (the “Company,” which term shall include, where appropriate, any Entity (as hereinafter defined) controlled directly or indirectly by the Company) and (the “Indemnitee”):

WHEREAS, it is essential to the Company that it be able to retain and attract as directors and officers the most capable persons available;

WHEREAS, increased corporate litigation has subjected directors and officers to litigation risks and expenses, and the limitations on the availability of directors and officers liability insurance have made it increasingly difficult for the Company to attract and retain such persons;

WHEREAS, the Company’s Certificate of Incorporation and By-laws (the “Certificate of Incorporation” and “By-laws,” respectively) require it to indemnify its directors and officers to the fullest extent permitted by law and permit it to make other indemnification arrangements and agreements;

WHEREAS, the Company desires to provide Indemnitee with specific contractual assurance of Indemnitee’s rights to full indemnification against litigation risks and expenses (regardless, among other things, of any amendment to or revocation of the Certificate of Incorporation or By-laws or any change in the ownership of the Company or the composition of its Board of Directors);

WHEREAS, the Company intends that this Agreement provide Indemnitee with greater protection than that which is provided by the Company’s Certificate of Incorporation and By-laws; and

WHEREAS, Indemnitee is relying upon the rights afforded under this Agreement in continuing as a director or officer of the Company.

NOW, THEREFORE, in consideration of the promises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

1. Definitions .

(a) “Corporate Status” describes the status of a person who is serving or has served (i) as a director or officer of the Company, (ii) in any capacity with respect to any employee benefit plan of the Company, or (iii) as a director, partner, trustee, officer, employee, or agent of any other Entity at the request of the Company. For purposes of subsection (iii) of this Section 1(a), if Indemnitee is serving or has served as a director, partner, trustee, officer, employee or agent of a

Subsidiary, Indemnitee shall be deemed to be serving at the request of the Company.

(b) “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c) “Expenses” shall mean all fees, costs and expenses incurred by Indemnitee in connection with any Proceeding (as defined below), including, without limitation, attorneys’ fees, disbursements and retainers (including, without limitation, any such fees, disbursements and retainers incurred by Indemnitee pursuant to Sections 10 and 11(c) of this Agreement), fees and disbursements of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(d) “Indemnifiable Expenses,” “Indemnifiable Liabilities” and “Indemnifiable Amounts” shall have the meanings ascribed to those terms in Section 3(a) below.

(e) “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

(f) “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative, arbitrative or investigative, whether formal or informal, including a proceeding initiated by Indemnitee pursuant to Section 10 of this Agreement to enforce Indemnitee’s rights hereunder.

(g) “Subsidiary” shall mean any corporation, partnership, limited liability company, joint venture, trust or other Entity of which the Company owns (either directly or through or together with another Subsidiary of the Company) either (i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital equity interests of such corporation, partnership, limited liability company, joint venture or other Entity, or (B) 50% or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company, joint venture or other Entity.

2. Services of Indemnitee . In consideration of the Company’s covenants and commitments hereunder, Indemnitee agrees to serve or continue to serve as a director and/or officer of the Company. However, this Agreement shall not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any.

3. Agreement to Indemnify . The Company agrees to indemnify Indemnitee as follows:

(a) Proceedings Other Than By or In the Right of the Company . Subject to the exceptions contained in Section 4(a) below, if Indemnitee was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of Indemnitee’s Corporate Status, Indemnitee shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by Indemnitee in connection with such Proceeding (referred to herein as “Indemnifiable Expenses” and “Indemnifiable Liabilities,” respectively, and collectively as “Indemnifiable Amounts”).

(b) Proceedings By or In the Right of the Company . Subject to the exceptions contained in Section 4(b) below, if Indemnitee was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company by reason of Indemnitee’s Corporate Status, Indemnitee shall be indemnified by the Company against all Indemnifiable Expenses.

(c) Conclusive Presumption Regarding Standard of Care . In making any determination required to be made under Delaware law with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee submitted a request therefor in accordance with Section 5 of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

4. Exceptions to Indemnification . Indemnitee shall be entitled to indemnification under Sections 3(a) and 3(b) above in all circumstances other than with respect to any specific claim, issue or matter involved in the Proceeding out of which Indemnitee’s claim for indemnification has arisen, as follows:

(a) Proceedings Other Than By or In the Right of the Company . If indemnification is requested under Section 3(a) and it has been finally adjudicated by a court of competent jurisdiction that, in connection with such specific claim, issue or matter, Indemnitee failed to act (i) in good faith and (ii) in a manner

Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal Proceeding, Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful, Indemnitee shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b) Proceedings By or In the Right of the Company . If indemnification is requested under Section 3(b) and

(i) it has been finally adjudicated by a court of competent jurisdiction that, in connection with such specific claim, issue or matter, Indemnitee failed to act (A) in good faith and (B) in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, Indemnitee shall not be entitled to payment of Indemnifiable Expenses hereunder; or

(ii) it has been finally adjudicated by a court of competent jurisdiction that Indemnitee is liable to the Company with respect to such specific claim, Indemnitee shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter unless the Court of Chancery or another court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such Indemnifiable Expenses which such court shall deem proper; or

(iii) it has been finally adjudicated by a court of competent jurisdiction that Indemnitee is liable to the Company for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, the rules and regulations promulgated thereunder and amendments thereto or similar provisions of any federal, state or local statutory law, Indemnitee shall not be entitled to payment of Indemnifiable Expenses hereunder.

(c) Insurance Proceeds . To the extent payment is actually made to the Indemnitee under a valid and collectible insurance policy in respect of Indemnifiable Amounts in connection with such specific claim, issue or matter, Indemnitee shall not be entitled to payment of Indemnifiable Amounts hereunder except in respect of any excess beyond the amount of payment under such insurance.

5. Procedure for Payment of Indemnifiable Amounts . Indemnitee shall submit to the Company a written request specifying the Indemnifiable Amounts for which Indemnitee seeks payment under Section 3 of this Agreement and the basis for the claim. The Company shall pay such Indemnifiable Amounts to Indemnitee within sixty (60) calendar days of receipt of the request. At the request of the Company, Indemnitee shall furnish such documentation and information as are reasonably available to Indemnitee and necessary to establish that Indemnitee is entitled to indemnification hereunder.

6. Indemnification for Expenses of a Party Who is Wholly or Partly Successful . Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified against all Expenses reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Agreement, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, by reason of settlement, judgment, order or otherwise, shall be deemed to be a successful result as to such claim, issue or matter.

7. Effect of Certain Resolutions . Neither the settlement or termination of any Proceeding nor the failure of the Company to award indemnification or to determine that indemnification is payable shall create a presumption that Indemnitee is not entitled to indemnification hereunder. In addition, the termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, had reasonable cause to believe that Indemnitee’s action was unlawful.

8. Agreement to Advance Expenses; Undertaking . The Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding, including a Proceeding by or in the right of the Company, in which Indemnitee is involved by reason of such Indemnitee’s Corporate Status within ten (10) calendar days after the receipt by the Company of a written statement from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. To the extent required by Delaware law, Indemnitee hereby undertakes to repay any and all of the amount of Indemnifiable Expenses paid to Indemnitee if it is finally determined by a court of competent jurisdiction that Indemnitee is not entitled under this Agreement to indemnification with respect to such Expenses. This undertaking is an unlimited general obligation of Indemnitee.

9. Procedure for Advance Payment of Expenses . Indemnitee shall submit to the Company a written request specifying the Indemnifiable Expenses for which Indemnitee seeks an advancement under Section 8 of this Agreement, together with documentation evidencing that Indemnitee has incurred such Indemnifiable Expenses. Payment of Indemnifiable Expenses

under Section 8 shall be made no later than ten (10) calendar days after the Company’s receipt of such request.

10. Remedies of Indemnitee .

(a) Right to Petition Court . In the event that Indemnitee makes a request for payment of Indemnifiable Amounts under Sections 3 and 5 above or a request for an advancement of Indemnifiable Expenses under Sections 8 and 9 above and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, Indemnitee may petition the Court of Chancery to enforce the Company’s obligations under this Agreement.

(b) Burden of Proof . In any judicial proceeding brought under Section 10(a) above, the Company shall have the burden of proving that Indemnitee is not entitled to payment of Indemnifiable Amounts hereunder.

(c) Expenses . The Company agrees to reimburse Indemnitee in full for any Expenses incurred by Indemnitee in connection with investigating, preparing for, litigating, defending or settling any action brought by Indemnitee under Section 10(a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith, whether or not Indemnitee is successful in whole or in part in connection with any such action.

(d) Failure to Act Not a Defense . The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 10(a) above, and shall not create a presumption that such payment or advancement is not permissible.

11. Defense of the Underlying Proceeding .

(a) Notice by Indemnitee . Indemnitee agrees to notify the Company promptly upon being served with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any Proceeding which may result in the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to receive payments of Indemnifiable Amounts or advancements of Indemnifiable Expenses unless the Company’s ability to defend in such Proceeding is materially and adversely prejudiced thereby.

(b) Defense by Company . Subject to the provisions of the last sentence of this Section 11(b) and of Section 11(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to the payment of Indemnifiable Amounts hereunder; provided, however that the Company shall notify Indemnitee of any such decision to defend within ten (10) calendar days of receipt of notice of any such Proceeding under Section 11(a) above. The Company shall not, without the prior written consent of Indemnitee, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee or (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee. This Section 11(b) shall not apply to a Proceeding brought by Indemnitee under Section 10(a) above or pursuant to Section 19 below.

(c) Indemnitee’s Right to Counsel . Notwithstanding the provisions of Section 11(b) above, if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (i) Indemnitee reasonably concludes that he or she may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with the position of other defendants in such Proceeding, (ii) a conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) if the Company fails to assume the defense of such proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any action, suit or proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, at the expense of the Company, to represent Indemnitee in connection with any such matter.

12. Representations and Warranties of the Company . The Company hereby represents and warrants to Indemnitee as follows:

(a) Authority . The Company has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by the Company.

(b) Enforceability . This Agreement, when executed and delivered by the Company in accordance with the provisions hereof, shall be a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors’ rights generally.

13. Insurance . For a period of six (6) years following the date on which Indemnitee no longer serves as a director, officer or employee of the Company or any Subsidiary, and for such longer period, if any, for which Indemnitee may be subject to a Proceeding by reason of Indemnitee’s Corporate Status, the Company (i) shall maintain a policy or policies of insurance with one or more reputable insurance companies providing the Indemnitee with coverage in an amount not less than, and of a type and scope not materially less favorable to Indemnitee than, the directors’ and officers’ liability insurance coverage presently maintained by the Company, (ii) shall pay on a timely basis all premiums on such insurance and (iii) shall provide such notices and renewals in a complete and timely manner and take such other actions as may be required in order to keep such insurance in full force and effect. In all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s officers and directors.

14. Contract Rights Not Exclusive . The rights to payment of Indemnifiable Amounts and advancement of Indemnifiable Expenses provided by this Agreement shall be in addition to, but not exclusive of, any other rights which Indemnitee may have at any time under applicable law, the Company’s Certificate of Incorporation or By-laws, or any other agreement, vote of stockholders or directors (or a committee of directors), or otherwise, both as to action in Indemnitee’s official capacity and as to action in any other capacity as a result of Indemnitee’s serving as a director or officer of the Company.

15. Successors . This Agreement shall be (a) binding upon all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law) and (b) binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of Indemnitee. In the event that the Company or any of its successors or assigns (i) consolidates with or merges into any other person or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person or entity, then, and in each such case, proper provision shall be made so that the successors and assigns of the Company assume the obligations of the Company under this Agreement. This Agreement shall continue for the benefit of Indemnitee and such heirs, personal representatives, executors and administrators after Indemnitee has ceased to have Corporate Status.

16. Subrogation . In the event of any payment of Indemnifiable Amounts under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of Indemnitee against other persons, and Indemnitee shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

17. Change in Law . To the extent that a change in Delaware law (whether by statute or judicial decision) shall permit broader indemnification or advancement of expenses than is

provided under the terms of the By-laws and this Agreement, Indemnitee shall be entitled to such broader indemnification and advancements, and this Agreement shall be deemed to be amended to such extent.

18. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

19. Indemnitee as Plaintiff . Except as provided in Section 10(c) of this Agreement and in the next sentence, Indemnitee shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by Indemnitee against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Board of Directors of the Company has consented to the initiation of such Proceeding. This Section shall not apply to counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee.

20. Modifications and Waiver . Except as provided in Section 17 above with respect to changes in Delaware law which broaden the right of Indemnitee to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement (whether or not similar), nor shall such waiver constitute a continuing waiver.

21. General Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

(i)	If to Indemnitee, to:


(ii)	If to the Company, to:

	Watts Water Technologies, Inc.
	815 Chestnut Street
	North Andover, MA 01845
	Facsimile: (978) 688-2976
	Attention:

or to such other address as may have been furnished in the same manner by any party to the others.

22. Governing Law; Consent to Jurisdiction; Service of Process . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to its rules of conflict of laws. Each of the Company and the Indemnitee hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware and the courts of the United States of America located in the State of Delaware (the “Delaware Courts”) for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any litigation relating thereto except in such courts), waives any objection to the laying of venue of any such litigation in the Delaware Courts and agrees not to plead or claim in any Delaware Court that such litigation brought therein has been brought in an inconvenient forum. Each of the parties hereto agrees, (a) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party’s agent for acceptance of legal process, and (b) that service of process may also be made on such party by prepaid certified mail with a proof of mailing receipt validated by the United States Postal Service constituting evidence of valid service. Service made pursuant to (a) or (b) above shall have the same legal force and effect as if served upon such party personally within the State of Delaware. For purposes of implementing the parties’ agreement to appoint and maintain an agent for service of process in the State of Delaware, each such party does hereby appoint The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, as such agent and each such party hereby agrees to complete all actions necessary for such appointment.

23. [Prior Agreement . This Agreement supersedes and replaces in its entirety the Indemnification Agreement between the Indemnitee and the Company dated as of , .]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

	WATTS WATER TECHNOLOGIES, INC.


	By:
		Name:
		Title:


	INDEMNITEE



	Name:

Schedule of Omitted Information

Name of Indemnitee	Date of Agreement	Date of Prior Agreement (Section 23)	Person Signing on behalf of the Company
Roger A. Young	February 10, 2004	November 5, 2003	Patrick S. O’Keefe Chief Executive Officer
Daniel J. Murphy, III	February 10, 2004	November 5, 2003	Patrick S. O’Keefe Chief Executive Officer
Gordon W. Moran	February 10, 2004	November 5, 2003	Patrick S. O’Keefe Chief Executive Officer
Kenneth J. McAvoy	February 10, 2004	November 5, 2003	Patrick S. O’Keefe Chief Executive Officer
John K. McGillicuddy	February 10, 2004	November 5, 2003	Patrick S. O’Keefe Chief Executive Officer
Timothy P. Horne	February 10, 2004	August 7, 2002	Patrick S. O’Keefe Chief Executive Officer
Patrick S. O’Keefe	February 10, 2004	November 5, 2003	William C. McCartney Chief Financial Officer
William J. Merchant	February 10, 2004	November 5, 2003	Patrick S. O’Keefe Chief Executive Officer
Lester J. Taufen	February 10, 2004	November 5, 2003	Patrick S. O’Keefe Chief Executive Officer
Kenneth R. Lepage	February 10, 2004	November 5, 2003	Patrick S. O’Keefe Chief Executive Officer
William C. McCartney	February 10, 2004	November 5, 2003	Patrick S. O’Keefe Chief Executive Officer
Timothy MacPhee	February 10, 2004	Not Applicable	Patrick S. O’Keefe Chief Executive Officer
Ralph E. Jackson, Jr.	June 23, 2004	Not Applicable	Patrick S. O’Keefe Chief Executive Officer
William D. Martino	October 31, 2005	Not Applicable	Patrick S. O’Keefe Chief Executive Officer
Gregory J. Michaud	August 1, 2006	Not Applicable	Patrick S. O’Keefe Chief Executive Officer
Robert L. Ayers	October 30, 2006	Not Applicable	Patrick S. O’Keefe Chief Executive Officer
Richard J. Cathcart	October 29, 2007	Not Applicable	Patrick S. O’Keefe Chief Executive Officer
David J. Coghlan	June 16, 2008	Not Applicable	Patrick S. O’Keefe Chief Executive Officer
Kennett F. Burnes	February 9, 2009	Not Applicable	Patrick S. O’Keefe Chief Executive Officer
Merilee Raines	February 7, 2011	Not Applicable	David J. Coghlan Chief Executive Officer

Bernard Baert	August 1, 2011	Not Applicable	David J. Coghlan Chief Executive Officer
W. Craig Kissel	October 30, 2011	Not Applicable	David J. Coghlan Chief Executive Officer
Dean P. Freeman	October 29, 2012	Not Applicable	David J. Coghlan Chief Executive Officer
Joseph T. Noonan	May 15, 2013	Not Applicable	David J. Coghlan Chief Executive Officer

Exhibit 10.8

DATED

July 30, 2013

(1) WATTS UK LIMITED

(2) WATTS INDUSTRIES EUROPE B.V.

(3) WATTS WATER TECHNOLOGIES, INC.

- and -

(4) JOHN DENNIS CAWTE

COMPROMISE AGREEMENT

WITHOUT PREJUDICE AND SUBJECT TO CONTRACT

THIS AGREEMENT is made on

BETWEEN:

(1) WATTS UK LIMITED whose registered office is at [Grosvenor Business Park, Enterprise Way, Evesham, Worcestershire, WR11 1GA] ( “Company” );

(2) WATTS INDUSTRIES EUROPE B.V. whose registered office is at Kollergang 14, 6961 LZ, Eerbeek, Netherlands (“ Watts Europe ”);

(3) WATTS WATER TECHNOLOGIES, INC, whose registered office is at 815 Chestnut Street, North Andover, Massachusetts, 01845;

(4) JOHN DENNIS CAWTE of Tigh-an-Rhu, Prieston Road, Bridge of Weir, Renfrewshire PA11 3AW ( “Employee” ).

BACKGROUND:

A The Employee is employed under the terms of the Contract of Employment.

B Due to a difference in views on the corporate strategy in Europe, the Company and the Employee have agreed to terminate the Employee’s employment.

C The Employee’s employment will terminate on the Termination Date and the Employee will seek new challenges going forward.

D The Employee holds certain unvested stock options, unvested restricted stock awards and vested restricted stock pursuant to the Plan and as such each of Watts Water Technologies, Inc. have agreed to be a party to this Agreement to provide how the Employee’s unvested stock options, unvested restricted stock awards and vested restricted stock will be dealt with at the Termination Date.

IT IS AGREED:

1. DEFINITIONS AND INTERPRETATION

“Additional Tax” means further income tax, employee’s national insurance contributions, interest and/or penalties thereon arising in respect of the payments made and benefits provided under this agreement, other than the income tax deducted under clauses 2 or 3

“Associated Company” means a company which is an “associated employer” under section 231 of the Employment Rights Act 1996 or a company in which the Company or any Holding Company or Subsidiary is directly or indirectly beneficially interested in 10% (ten per cent) or more of that company’s issued ordinary share capital. For the avoidance of any doubt, this definition includes Watts Europe;

“Contract of Employment” means the agreement between the Employee and the Company which commenced on 10 October 2001;

“Holding Company” and “Subsidiary” have the meanings defined by section 1159 of the Companies Act 2006 (or any statutory modification or re-enactment of that Act) but for the purposes of section 1159(1) Companies Act 2006 a company shall be treated as a member of another if any shares in that other company are registered in the name of (i) a person by way

of security (where the company has provided the security); or (ii) a person as nominee for the company;

“Payment Date” means 14 days from the latest of:

(a) the date of receipt by the Company of a copy of this agreement signed by the Employee and the independent adviser’s certificate as required by clause 12.4 of this agreement;

(b) the Termination Date; and

“Plan” means the Watts Water Technologies, Inc. Second Amended and Restated 2004 Stock Incentive Plan;

“Termination Date” means 1 October 2013;

The Company is entering into this agreement for itself and as agent and trustee for all its Associated Companies and is duly authorised to do so.

References to any legislation shall be construed as references to legislation as from time to time amended, re-enacted or consolidated.

2. WORK TO THE TERMINATION DATE, OUTSTANDING SALARY, HOLIDAY PAY AND SHARE OPTIONS

2.1 The Employee shall continue to work in accordance with the terms of his Contract of Employment until 30 June 2013. From 30 June 2013 until the Termination Date the Employee shall be placed on garden leave and shall remain available on an on call basis primarily during regular business hours (of 9a.m to 5pm) or such other times as may reasonably be requested (having regard to the Employee being on garden leave) to provide a handover of his responsibilities however the Employee shall be released from all other employment duties.

2.2 On or before the Payment Date the Company will pay to the Employee:

2.2.1 all outstanding basic salary calculated to the Termination Date; and

2.2.2 66 days’ accrued but untaken holiday pay. The Company and the Employee have agreed that if the Employee accrues any additional holiday pay that he shall take any additional holiday which he may accrue prior to the Termination Date.

subject to statutory deductions for income tax and national insurance contributions.

2.3 The Employee shall submit any expenses claims in accordance with the Company’s expenses policy within 14 days of the date of this agreement and the Company shall reimburse the Employee for any expenses properly incurred prior to the Termination Date in the usual way.

2.4 Watts Water Technologies, Inc. agree, subject at all times to the rules of the Plan to: accelerate vesting of all of the Employee’s unvested stock options and restricted stock awards; and convert all vested restricted stock to shares of the Watts Water Technologies, Inc.’s Class A Common Stock, as of the Termination Date. Watts Water Technologies, Inc. agree, subject at all times to the rules of the Plan, to extend for the Employee the exercise period for all

stock options to two years from the Termination Date. The provisions of the Plan will continue to apply.

3. SEVERANCE PAYMENT

3.1 Subject to the Employee’s compliance with the terms of this Agreement, in full and final settlement of the claims set out in clauses 12.1 and 12.2 and of any outstanding claims the Employee may have arising out of the Employee’s employment with Company and its cessation, the Company will as compensation for loss of employment but without admission of liability pay to the Employee on or before the Payment Date the sum of £402,500 ( “Severance Payment” ).

3.2 It is the understanding of the parties to this agreement that the Severance Payment shall be subject to income tax and national insurance contributions in accordance with section 394 Income Tax (Earnings and Pensions) Act 2003.

4. REFERENCE

4.1 Subject always to the Company’s legal obligations regarding the giving of references, the Company agrees to provide the Employee with a reference in the terms of the letter at schedule 1 and agrees to respond to all employment reference enquiries in a manner consistent with this reference. If the Company obtains information after the date of this agreement which would have affected its decision to provide a reference in the terms at schedule 1 , it shall inform the Employee and may decline to give a reference.

5. LEGAL & PROFESSIONAL EXPENSES

5.1 The Company shall within 14 days of the production of an appropriate copy VAT invoice addressed to the Employee but marked as payable by the Company, pay to the Employee’s relevant independent adviser as referred to in clause 12.4.1 the Employee’s legal expenses relating exclusively to the negotiation and preparation of this agreement, up to a maximum of £7,500 plus VAT. Payment will be made direct to the Employee’s adviser.

5.2 The Company shall within 28 days of the production of an appropriate invoice addressed to the Company, pay to the Employee’s tax advisers, Deloitte, the Employee’s professional expenses relating to the tax advice concerning the Employee’s 2013/2014 tax affairs.

5.3 The Company shall within 28 days of the production of an appropriate invoice addressed to the Company, pay to the Employee’s financial advisers, RWC, the Employee’s professional expenses relating to financial advice concerning the Employee’s 2013/2014 financial affairs, up to a maximum of £10,000 plus VAT. Payment will be made direct to RWC.

6. WARRANTIES

The Employee warrants to the Company as a strict condition of this agreement that as at the date of this agreement:

6.1 the Employee has not commenced employment and has not agreed to accept nor received any offer of employment from any person, firm or company, the expression “employment” for the purpose of this clause to include any contract of service, any contract for services, any partnership or agency agreement;

6.2 the Employee has not done or failed to do anything amounting to a repudiatory breach of the express or implied terms of the Employee’s employment with the Company which if the

matter had come to the Company’s attention before the Termination Date would have entitled the Company to terminate the Employee’s employment summarily or if it had been done or omitted after the date of this agreement would have constituted a breach of any of its terms;

6.3 there are no matters of which the Employee is aware relating to any act or omission by the Employee or by any director, officer, employee or agent of the Company or any of its Associated Companies which if disclosed to the Company would or might affect the Company’s decision to enter into this agreement or which has not been disclosed to the Board; and

6.4 the Employee has not received any social security benefits in respect of any accident, injury or disease alleged to have occurred or been suffered in connection with any claim referred to in clause 12.1 and 12.2.

7. TAX INDEMNITY

The Employee shall be liable for all Additional Tax and shall indemnify the Company, Watts Europe or any of its Associated Companies on a continuing basis in respect of any Additional Tax which arises in respect of the payments and benefits under this agreement. The Company shall give the Employee reasonable notice of any demand for tax which may lead to liability on the Employee under this indemnity and shall provide him with relevant details which he may reasonably require to dispute such a demand (provided that nothing in this clause shall prevent the Company from complying with its legal obligations to HM Revenue & Customs or other competent body).

8. CONFIDENTIALITY

8.1 The Employee undertakes that he will not, whether directly or indirectly, make, publish or otherwise communicate any disparaging or derogatory statements, whether in writing or otherwise, concerning the Company or any of its Associated Companies or any of its or their officers, directors, shareholders or employees.

8.2 The Company undertakes that it will not, whether directly or indirectly (through any officers or directors or Associated Companies or any of their officers or directors), make, publish or otherwise communicate any disparaging or derogatory statements, whether in writing or otherwise, concerning the Employee.

8.3 The Employee and the Company agree to keep the terms on which the employment terminated, the existence and terms of this agreement and the substance of any discussions or negotiations leading to the conclusion of this agreement strictly confidential and agree not to disclose, communicate or otherwise make public the same to anyone, save where such disclosure is to HM Revenue & Customs, required by a regulatory requirement imposed on Watts Water Technologies, Inc, or required by law, or (where necessary and appropriate) to:

8.3.1 the Employee’s immediate family or legal or professional advisers, provided that they agree to keep the information confidential; or

8.3.2 the Employee’s insurer for the purposes of processing a claim for loss of employment; or

8.3.3 the relevant authorities for the purpose of claiming unemployment or other social security benefits; or

8.3.4 the Employee’s recruitment consultant or prospective employer to the extent necessary to discuss his employment history; or

8.3.5 otherwise in accordance with clause 9.3 below

8.4 If the Employee breaches clauses 8.1 or 8.3, Company shall write to the Employee and allow the Employee 14 days to rectify the breach or to provide a written explanation of the events.

9. POST-TERMINATION RESTRICTIONS

9.1 In consideration of the payment on the Payment Date of £100 (less deductions for income tax and National Insurance contributions) the Employee enters into the restrictions set out in this clause 9.

9.2 The Employee shall not without the prior written consent of the Company (such consent not to be unreasonably withheld), directly or indirectly, on his own behalf, or on behalf of any person, firm or company in connection with any business which is or is intended or about to be competitive with the Restricted Business (as defined below) or in relation to the provision of any goods or services similar to or competitive with those sold or provided by the Company for a period of 9 months from the Termination Date:

9.2.1 solicit or canvass the custom of any Customer (as defined below);

9.2.2 solicit or canvass the custom of any Potential Customer (as defined below);

9.2.3 deal with any Customer;

9.2.4 deal with any Potential Customer;

9.2.5 solicit or entice away, or attempt to entice away from the Company any Restricted Employee (as defined below);

9.2.6 employ, offer to employ or enter into partnership with any Restricted Employee with a view to using the knowledge or skills of such person in connection with any business or activity which is or is intended to be competitive with the Restricted Business.

9.3 The Employee shall not without the prior written consent of the Company (such consent not to be unreasonably withheld) for a period of 9 months from the Termination Date within the Restricted Territory (as defined below) set up, carry on, be employed in, provide services to, be associated with, or be engaged or interested in, whether as director, employee, principal, shareholder, partner or other owner, agent or otherwise, in any Competitor Business which is in competition with the Restricted Business save that this restriction shall not operate so as to prevent the Employee from being a shareholder of not more than three per cent of any public company whose shares or stocks are quoted or dealt in on any recognised investment exchange.

9.4 In clause 9 the following definitions shall apply:

9.5 “Customer” shall mean any person, firm or company who at the Termination Date or at any time during the 12 months immediately prior to such termination was a customer of the Company, Watts Industries Europe BV and/or any Associated Company and from whom in that 12 month period the Employee had obtained business on behalf of the Company, Watts Industries Europe BV and/or any Associated Company or to whom in that 12 month period

the Employee had provided or arranged the provision of goods or services on behalf of the Company, Watts Industries Europe BV and/or any Associated Company or for whom the Employee had management responsibility;

9.6 “Deal” shall mean for the purposes of clauses 9.2.3 and 9.2.4 accept business or make arrangements for business to be conducted;

9.7 “Potential Customer” shall mean any person, firm or company with whom either the Employee or any other employee of the Company, Watts Industries Europe BV and/or any Associated Company for whom the Employee had, at the date of the negotiations, management responsibility, carried out negotiations on behalf of the Company, Watts Industries Europe BV and/or any Associated Company at any time during the period of three months immediately prior to the date of this Agreement with a view to such person, firm or company becoming a customer of the Company, Watts Industries Europe BV and/or any Associated Company;

9.8 “Restricted Business” shall mean the business of Watts UK Limited, Watts Industries Europe BV and/or any Associated Company to the extent that the Employee had any material involvement during the period of 12 months immediately prior to the date of this Agreement.

“Competitor” shall mean any of:-

Aalberts Industries N.V.

Afriso

AYVAZ A.S.

BELIMO Holdings AG

Caleffi Group

Danfoss A/S

Emmeti S.p.A.

ESBS AB

Giacomini S.p.A.

Hans Sasserath & Co. KG (SYR)

HERZ-Armaturen Ges m.b.H.

Honeywell International Inc.

Kemper Valve & Fittings Corporation

LK Armatur AB

Möhlenhoff GmbH

Nibco Inc.

Orkli, S Coop

Oventrop Group of Companies

Reliance group

Rexnord Corporation

Taco, Inc.

VIR Valvoindustria Ing. Rizzio S.p.A. (VIR)

9.9 “Restricted Employee” shall mean any senior employee of the Company, Watts Industries Europe BV and/or any Associated Company employed at the Termination Date in the capacity of director or in any research, technical, IT, financial, marketing or sales function or other managerial role whom the Employee has managed or with whom he has worked at any time during the period of 12 months immediately prior to the Termination Date, and shall not include any employee employed in an administrative, clerical, manual or secretarial capacity;

9.10 “Restricted Territory” shall mean Europe, Middle East and Africa (“EMEA”)

10. DIRECTORSHIP

10.1 The Employee shall resign as a director of the Company, Watts Europe and any of its Associated Companies by signing the letter of resignation attached to this agreement at schedule 2, which shall be deemed to have been delivered to the Company, Watts Europe and the relevant Associated Companies as at the date of this agreement. For the avoidance of any doubt this resignation shall not be regarded as a breach of the Employee’s contract and shall not impact in anyway on the Employee’s status as an employee of the Company.

10.2 The Employee shall do all such acts as the Company and/or Watts Europe may require to effect the Employee’s resignation from other offices with the Company, Watts Europe or any of its Associated Companies or which the Employee held by reason of employment by the Company including (but without prejudice to the generality of the above) any trusteeships.

10.3 Having resigned as a director of the Company, Watts Europe and from such other offices which the Employee holds with any Associated Company the Employee will not hold himself out as having any continued authority in respect of or connection to the Company, Watts Europe or any Associated Company.

11. COMPANY PROPERTY

The Employee shall prior to the Termination Date:

11.1 Subject to clause 11.4, return to the Company all property belonging to the Company or any Associated Company including but not limited to car, keys, security pass, identity card, mobile telephone, or any other computer equipment (save for two printers that the Employee has at his house which he may retain the printers having no commercial value);

11.2 return to the Company all confidential information, documents and copies (whether written, printed, electronic, recorded or otherwise and wherever located) made, compiled or acquired by him during his employment with the Company or relating to the business or affairs of the Company or any Associated Company; and

11.3 delete irretrievably any information relating to the business or the affairs of the Company or any Associated Company that he has stored on any magnetic or optical disk or memory (other than any magnetic or optical disk or memory which has been or will be returned to the Company) and all matter derived from such sources,

11.4 return his Company lap top computer and ipad to the Company in order to allow the Company to remove all Company information (confidential or otherwise) together with all licences and the Employee will thereafter be able to retain the Company lap top computer and ipad.

which is in his possession or under his control outside the premises of the Company.

12. CLAIMS AGAINST THE COMPANY

12.1 But for this agreement, the Employee could bring proceedings against the Company, Watts Europe, its Associated Companies and their respective officers, directors, shareholders or employees for the contractual, statutory and tortious claims listed below, although for the avoidance of doubt the Company does not accept liability for such claims:

12.1.1 a claim that the termination of the Employee’s employment on the Termination Date was a wrongful dismissal;

12.1.2 a claim for breach of contract;

12.1.3 a claim that a failure by the Company to make a payment to the Employee of wages, fees, bonus, commission, holiday pay, sick pay, overtime payments or other benefits in kind was an unauthorised deduction from wages under the Employment Rights Act 1996 (as amended) ( “ERA” );

12.1.4 a claim that the termination of the Employee’s employment was an unfair dismissal under the ERA;

12.1.5 a claim for a redundancy payment whether statutory or otherwise;

12.1.6 the following claims under the Equality Act 2010 ( “Equality Act” ):

12.1.6.1 a claim that any act or omission of the Company at any time was unlawful direct or indirect discrimination or harassment because of or in relation to age under the Equality Act;

12.1.6.2 a claim that any act or omission of the Company at any time was unlawful direct or indirect discrimination because of or in relation to disability or because of something arising in consequence of the Employee’s disability or discrimination by failure to comply with a duty to make reasonable adjustments or harassment because of or related to disability under the Equality Act;

12.1.6.3 a claim that any act or omission of the Company at any time was unlawful direct or indirect discrimination or harassment because of or in relation to marriage or civil partnership under the Equality Act;

12.1.6.4 a claim that any act or omission of the Company at any time was unlawful direct or indirect discrimination or harassment because of or in relation to religion or belief under the Equality Act;

12.1.6.5 a claim that any act or omission of the Company at any time was unlawful discrimination or harassment because of or in relation to sex under the Equality Act;

12.1.6.6 a claim that any act or omission of the Company at any time was unlawful direct or indirect discrimination or harassment because of or in relation to sexual orientation under the Equality Act;

12.1.6.7 a claim that any act or omission of the Company at any time was victimisation under s.27 of the Equality Act;

12.1.7 a claim that by virtue of any act or omission of the Company at any time the Employee suffered a detriment on a ground set out in section 47B ERA (protected disclosure);

12.1.8 a claim under the Working Time Regulations 1998 ( “WTR” ) that the Company refused to permit the Employee to exercise a right to daily rest, weekly rest, rest breaks, annual leave or compensatory rest or refused to pay the Employee in respect of any period of annual leave or in lieu of untaken annual leave;

12.1.9 a claim that by virtue of any act or omission of the Company at any time the Employee suffered a detriment on a ground set out in section 45A ERA (working time) including a detriment related to the limit on weekly working time set out in regulation 4 WTR;

12.1.10 a claim that the Company failed to comply with its obligations under the Data Protection Act 1998;

12.1.11 all other claims (if any) whether contractual, statutory or otherwise and whether under European Union law and/or under the legislation in the local EU countries (amongst which explicitly including Dutch law) which the Employee has or may have against the Company or any of its Associated Companies or any of its affiliated companies outside the United Kingdom (including without limitation Watts Europe) or their respective officers, directors, shareholders or employees arising out of or in connection with the Employee’s employment or its termination.

12.2 The terms of this agreement are reached without admission of liability and are in full and final settlement of:

12.2.1 the Employee’s claims listed under clause 12.1; and

12.2.2 all other claims (if any) whether contractual, statutory or otherwise and whether under United Kingdom and/or Netherlands and/or European Union law which the Employee has or may have against the Company, Watts Europe or any of its Associated Companies or their respective officers, directors, shareholders or employees arising out of or in connection with the Employee’s employment or its termination or as a consequence of the Employee’s position as a director of the Company or its termination but excluding any claims:

12.2.2.1 for personal injury (other than any personal injury claim alleged to have been incurred in connection with clause 12.1.6 or 12.1.7); or

12.2.2.2 in respect of accrued pension rights; or

12.2.2.3 arising from all rights granted or available to the Employee under the Plan and as otherwise varied herein all fo which are preserved in full.

12.3 The Employee represents and warrants to the Company as a strict condition of this agreement that as at the date of this agreement :

12.3.1 he has disclosed to the relevant independent adviser (identified in clause 12.4.1 below) all facts or circumstances that may give rise to a claim against the Company, Watts Europe or any of its Associated Companies or their respective officers, directors, shareholders or employees and he is not aware of any facts or circumstances that may give rise to a claim against the Company, Watts Europe or any of its Associated Companies or their respective officers, directors, shareholders or employees other than those claims specified in clause 12.1; and

12.3.2 the claims listed at clause 12.1 include all of the complaints, claims and concerns which the Employee has against the Company, Watts Europe or any of its Associated Companies or their respective officers, directors shareholders or employees arising out of the Employee’s employment under the Contract of

Employment or any act or omission relating to the Employee’s employment or relating to, arising out of or connected to the manner of its termination.

12.4 The Employee further represents and warrants to the Company as a strict condition of this agreement that as at the date of this agreement :

12.4.1 the Employee has received independent legal advice from a relevant independent adviser as to the terms and effect of this agreement and in particular its effect on the Employee’s ability to pursue statutory rights before an employment tribunal. The name of the relevant independent adviser who has so advised the Employee is Bruce Caldow of Harper Macleod LLP of The Ca’d’oro, 45 Gordon Street, Glasgow, G1 3PE ( “Employee’s Adviser” ) and the Employee’s Adviser has signed the endorsement annexed to this agreement; and

12.4.2 the Employee has been advised by the Employee’s Adviser that at the date of this agreement there is in force, and at the time the Employee received the advice referred to above there was in force, a contract of insurance, or an indemnity provided for members of a profession or professional body, covering the risk of a claim by the Employee in respect of loss arising in consequence of that advice; and

12.4.3 the Employee has not issued proceedings before the employment tribunals, high court or county court in respect of any claim in connection with the Employee’s employment or its termination or the Contract of Employment or its termination and the Employee undertakes that no proceedings have been or will be issued in connection with the same and if such proceedings are issued the Employee accepts and agrees that all monies paid to the Employee under this agreement will be repayable to the Company, as a debt and upon demand; and

12.4.4 as at the date of this agreement, the Employee is not aware nor ought reasonably to be aware of any facts or matters which might give rise to a claim by the Employee for personal injury against the Company, Watts Europe or any of its Associated Companies.

12.5 The Company and the Employee agree and acknowledge that the conditions regulating compromise agreements and compromise contracts contained in section 147 of the Equality Act, section 203(3) of the ERA and in any other act or statutory instrument referred to in clause 12.1 are intended to be and have been satisfied.

12.6 The Employee shall indemnify the Company and/or Watts Europe in full and keep the Company fully indemnified for and against all and any claims, demands, judgements, orders, liabilities, damages, expenses or costs including without limitation all reasonable legal and professional fees and disbursements (together with VAT thereon) incurred by the Company and/or Watts Europe arising out of or in connection with any breach by the Employee of the warranties in this clause 12 which warranties the Company has relied upon in entering into this agreement.

12.7 The Employee agrees that, except for the payments and benefits provided for in clauses 2 and 3 he shall not be eligible for any further payment or provision of any remuneration, bonus, or other emolument or benefit from the Company, Watts Europe or any Associated Company relating to his employment or its termination.

13. ENTIRE AGREEMENT

13.1 This agreement constitutes the entire agreement and understanding between the parties in respect of the termination of the Employee’s employment and supersedes any previous agreement between the parties relating to such matters notwithstanding the terms of any previous agreement or arrangement expressed to survive termination.

13.2 Each of the parties acknowledges and agrees that in entering into this agreement, it does not rely on, and shall have no remedy in respect of, any statement, representation, warranty or understanding (whether negligently or innocently made) other than as expressly set out in this agreement. The only remedy available to any party in respect of any such statement, representation, warranty or understanding shall be for breach of contract under the terms of this agreement.

13.3 Nothing in this clause 13 shall operate to exclude any liability for fraud.

14. THIRD PARTY RIGHTS

The Contracts (Rights of Third Parties) Act 1999 ( “Act” ) shall only apply to this agreement in relation to any Associated Company or any officer, director, shareholder or employee of the Company or any Associated Company where any term is expressed for such person’s benefit and no other third party shall have any rights under it. This clause does not affect any right or remedy of any person which exists or is available otherwise than pursuant to the Act. The terms of this agreement may be varied amended or modified or the agreement may be suspended cancelled or terminated by agreement in writing between the parties or this agreement may be rescinded in each case without the consent of any third party.

15. GOVERNING LAW AND JURISDICTION

15.1 This agreement shall be governed by and construed in accordance with the law of England and Wales.

15.2 Each party irrevocably agrees to submit to the exclusive jurisdiction of the courts of England and Wales over any claim or matter arising under or in connection with this agreement.

16. COUNTERPARTS

This agreement may be executed in any number of counterparts each of which when executed by one or more of the parties hereto shall constitute an original but all of which shall constitute one and the same instrument.

17. MISCELLANEOUS

17.1 Notwithstanding that this agreement is marked “Without Prejudice and Subject to Contract” , it will, when dated and signed by all the parties named below and accompanied by the attached certificate signed by the relevant independent adviser, become an open and binding agreement between the parties.

17.2 Nothing in this agreement shall prevent the Employee from disclosing information which he is entitled to disclose under sections 43A to 43L of the Employment Rights Act 1996 provided that the disclosure is made in accordance with the provisions of that Act.

SIGNED	/s/ Karel D’Hulst

	For and on behalf of Watts UK Limited


SIGNED	/s/ Jeffrey Allan

	For and on behalf of Watts Industries Europe B.V.


SIGNED	/s/ Kenneth R. Lepage

	For and on behalf of Watts Water Technologies, Inc.


SIGNED	/s/ John Dennis Cawte

	John Dennis Cawte

INDEPENDENT ADVISER’S ENDORSEMENT ADDRESSED TO THE BOARD OF DIRECTORS OF THE COMPANY

I, Bruce Caldow of Harper Macleod LLP of The Ca’d’oro, 45 Gordon Street, Glasgow, G1 3PE confirm that I have given independent legal advice to John Dennis Cawte of Tigh-An-Rhu, Prieston Road, Bridge of Weir, Renfrewshire PA11 3AW as to the terms and effect of the above agreement and in particular its effect on his ability to pursue his rights before an employment tribunal.

I confirm that I am a “relevant independent adviser” (as such term is defined in section 203 of the Employment Rights Act 1996) and that there is and was at the time I gave the advice referred to above in force a contract of insurance, or an indemnity provided for members of a profession or professional body, covering the risk of a claim by John Dennis Cawte in respect of any loss arising in consequence of that advice.

SIGNED

/s/ Bruce Caldow

Bruce Caldow

SCHEDULE 1: AGREED REFERENCE

Dear

JOHN DENNIS CAWTE

Further to your recent request for a reference regarding the above, I can confirm that John Dennis Cawte worked for Watts UK Limited .from 10 October 2001 until 1 September 2013. John was employed as Group Managing Director, EMEA.

It is our company policy is to give a factual reference only. The information set out above is given in good faith but without any liability on the part of the Company, its employees or agents.

Yours sincerely

SCHEDULE 2: LETTER OF RESIGNATION

Private & Confidential
The Directors
Watts Industries Europe B.V.

July 30, 2013

Dear Sirs

Please accept this letter as formal notice of my resignation as a director of Watts Industries Europe B.V. and those of its subsidiaries of which I am a director. My resignation is to be effective immediately.

I confirm that I have no claims of any nature outstanding against Watts Industries Europe B.V or those of its subsidiaries of which I am a director and/or their directors, officers and employees arising out of or in connection with my directorships, or their termination, or the loss of any rights relating to them.

Yours faithfully

/s/ John Dennis Cawte

Exhibit 31.1

WATTS WATER TECHNOLOGIES, INC.

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, David J. Coghlan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Watts Water Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2013
	/s/ David J. Coghlan
	David J. Coghlan
	Chief Executive Officer

Exhibit 31.2

WATTS WATER TECHNOLOGIES, INC.

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Dean P. Freeman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Watts Water Technologies, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2013
	/s/ Dean P. Freeman
	Dean P. Freeman
	Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of Watts Water Technologies, Inc. (the “Company”) hereby certifies that, to his knowledge, the Company’s quarterly report on Form 10-Q to which this certification is attached (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act. In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

Date: August 8, 2013
	/s/ David J. Coghlan
	David J. Coghlan
	Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Date: August 8, 2013	/s/ Dean P. Freeman
	Dean P. Freeman
	Chief Financial Officer