Second Quarter Financial Highlights
Second quarter 2024 performance relative to second quarter 2023
Sales of $597 million increased 12% on a reported basis, which included sales from acquisitions, and were flat organically. Organic sales growth within the Americas and APMEA was offset by volume weakness in Europe. Sales from acquisitions totaled $65 million and were reported within the Americas. Unfavorable foreign exchange movements decreased sales by approximately $2 million.
Operating margin decreased 10 basis points on a reported basis and 70 basis points on an adjusted basis. Adjusted operating margin decreased primarily due to the dilutive impact of acquisitions, volume deleverage in Europe, inflation and incremental investments which more than offset favorable price and productivity. Reported operating margin was favorably impacted by a reduction in restructuring charges and a non-recurring gain on the sale of a building, partially offset by incremental acquisition-related charges.
Regional Performance
Americas
Sales of $448 million increased 22% on a reported basis and 5% on an organic basis due to price realization and growth in core valve products and our heating and hot water products, which was partly attributed to project timing. The acquisitions of Bradley and Josam contributed $65 million in sales, or 17% to reported growth.
Operating margin decreased 70 basis points on a reported basis and 60 basis points on an adjusted basis as benefits from price realization, volume and productivity were more than offset by inflation, incremental investments and the dilutive impact of the Bradley acquisition. Reported operating margin was unfavorably impacted by acquisition-related charges which more than offset a non-recurring gain on the sale of a building.
Europe
Sales of $114 million decreased 16% on a reported basis and 15% on an organic basis. Unfavorable foreign exchange movements decreased reported sales by 1%. Lower volumes in fluid solutions products, particularly in the OEM channel that was impacted by reduced government energy incentives in Germany and Italy and the related heat pump destocking, more than offset price realization.
Operating margin decreased 580 basis points on a reported basis and 620 basis points on an adjusted basis as inflation and the significant impact of volume deleverage more than offset benefits from price realization, product mix and productivity. Reported operating margin was favorably impacted by the reduction in restructuring charges.
APMEA
Sales of $35 million increased 16% on a reported basis and 18% on an organic basis. Unfavorable foreign exchange movements decreased reported sales by 2%. Sales increased due to growth in all major countries in the segment, which was partly due to project timing.
Operating margin increased 1,010 basis points on a reported basis and 70 basis points on an adjusted basis as benefits from volume leverage and productivity more than offset inflation, incremental investments and the dilutive impact of the Enware acquisition. Reported operating margin was favorably impacted by the reduction in restructuring and acquisition charges.
Cash Flow and Capital Allocation
For the first six months of 2024, operating cash flow was $131 million and net capital expenditures were $11 million, resulting in free cash flow of $120 million. In the comparable period last year, operating cash flow was $101 million and net capital expenditures were $12 million, resulting in free cash flow of $89 million. Operating and free cash flow increased due to higher net income and lower working capital investment. Sequential improvement in operating and free cash flow is expected throughout 2024 due to normal seasonality.
Effective July 12, 2024, the Company amended and extended its revolving credit facility through July 12, 2029. The extended facility maintains the prior interest rate spread and financial covenants of the prior credit facility and amends the accordion option to $400 million.
The Company repurchased approximately 20,000 shares of Class A common stock at a cost of $4.1 million during the second quarter of 2024. For the first six months of 2024, the Company repurchased approximately 40,000 shares at a cost of $8.1 million. Approximately $4 million remains available for stock repurchases under the stock repurchase program authorized in 2019 and $150 million under the stock repurchase program authorized in 2023. There is no expiration date for these programs.