Watts Water exceeded expectations in the third quarter with record sales of $612 million, up 13% reported and 9% organic, led by the Americas where organic sales rose 13% on favorable price, volume, and roughly $11 million of pull-forward demand. Adjusted operating margin expanded 140 basis points to 18.5% and adjusted EPS rose 23% to $2.50, prompting management to raise full-year organic growth and margin guidance, while the company closed the Haws acquisition. Europe organic sales declined 2% amid continued market weakness that management sees nearing a bottom, and ongoing risks from tariffs, the U.S. government shutdown, and soft residential markets were flagged.
Thank you and good morning, everyone. Welcome to our third-quarter earnings conference call. Joining me today are Bob Pagano, President and CEO, and Ryan Lada, our CFO. During today's call, Bob will provide an overview of the third quarter, a business update and an update on our outlook for 2025. Ryan will discuss the details of our third-quarter performance, and provide our outlook for the fourth quarter and for the full year. Following our remarks, we will address questions related to the information covered during the call. Today's webcast is accompanied by a presentation, which can be found in the investor relations section of our website.
We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to the presentation. I'd like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watts' publicly available filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I will turn the call over to Bob.
Thank you, Diane. Good morning, everyone. Please turn to slide three, and I'll provide an overview of the quarter. We're pleased with our strong third-quarter results, which exceeded expectations. Watts' multi-year track record of success would not be possible without the dedication, collaboration, and support of our team members and business partners, and I'd like to express my sincere gratitude. Organic sales increased 9% in the quarter, with favorable pricing in the Americas, volume, and pull-forward demand more than offsetting a decline in Europe. We also benefited from incremental sales from our I-CON and EasyWater acquisitions, and favorable foreign exchange movements. Adjusted operating margin of 18.5% was better than anticipated due to favorable price, volume leverage, productivity, and mix. Year-to-date free cash flow continues to be solid, and we expect to generate seasonally strong free cash flow through year-end.
The balance sheet remains healthy, and we have ample flexibility to support our disciplined capital allocation strategy. On that note, we're excited to have acquired Haws Corporation, a leading global brand providing emergency safety and hydration solutions for use in industrial, institutional, and non-residential end markets for more than 120 years. The addition of Haws' innovative specified product portfolio enhances our value proposition and broadens our capabilities. Haws has annual sales of approximately $60 million, and is expected to be modestly diluted to margins for the first year, while we integrate and realize the benefits of synergies, leveraging the OneWatts performance system. I'm also pleased with the integrations of Bradley, Josam, I-CON, and EasyWater, which are progressing well, and synergy realization is tracking ahead of our original estimates. We continue to proactively manage tariff-related challenges through strategic pricing and supply chain optimization.
The tariff environment remains uncertain, but based on tariffs in effect as of today, our global direct tariff impact in 2025 is estimated to be $40 million, consistent with our guidance at the last earnings call. We have successfully handled the cost impact so far in 2025, and plan to continue doing so. Now, an update on our outlook for the remainder of the year. Due to our strong third-quarter performance and our expectations for the fourth quarter, we are increasing our full-year sales and margin outlook. Tariff-related price increases, foreign exchange movements, strong data center sales, and the acquisition of Haws are all favorable relative to the sales outlook we provided in August.
However, there's ongoing uncertainty around the impact of supply chain disruptions and tariffs, including the effect on new construction and global GDP, as well as around the impact of the U.S. government shutdown. As a reminder, GDP is a proxy for our repair and replacement business, which represents approximately 60% of total revenue. With that, let me turn the call over to Ryan, who will address our third quarter results and our fourth quarter, and full-year outlook in more detail. Ryan?
Thank you, Bob. Good morning, everyone. Please turn to slide four, which highlights our third quarter results. Sales reached $612 million, setting a third quarter record for Watts. This reflects growth of 13% on a reported basis and 9% on an organic basis. Strong organic growth in the Americas more than offset a decline in Europe and a flat quarter in APMEA. In the Americas, reported sales were up 16%, and organic sales were up 13%, exceeding expectations. Growth was driven by favorable price, volume, and approximately $11 million of pull-forward demand. Sales from the I-CON and EasyWater acquisitions added another $11 million, or 3% to Americas reported growth. Europe reported sales were up 4%, while organic sales were down 2%, as market weakness more than offset price. Reported sales in Europe benefited from favorable foreign exchange.
APMEA sales decreased 1% on a reported basis, and were flat on an organic basis. Growth in Australia and the Middle East was offset by declines in China and New Zealand. Compared to prior year, adjusted EBITDA of $128 million increased 21%. Adjusted EBITDA margin of 20.9% increased 140 basis points. Adjusted operating income of $113 million increased 22%, and adjusted operating margin of 18.5% was up 140 basis points. Adjusted EBITDA and operating income were supported by favorable price, leverage in the Americas, and productivity. These benefits more than offset inflation, volume deleverage in Europe, tariffs, and investments. Our Americas segment margin increased 180 basis points to 23.7%. Europe segment margin increased 160 basis points to 12.2%, and APMEA segment margin increased 90 basis points to 19.4%.
Adjusted earnings per share of $2.50 were up 23% compared to the prior year, with contributions from operations, acquisitions, foreign exchange, and reduced interest expense. The adjusted effective tax rate in the quarter was 25.8%, an increase of 60 basis points relative to the third quarter of 2024. This increase was primarily due to the recent changes in U.S. tax regulations related to the One Big Beautiful Bill Act. For GAAP purposes, we incurred $1.9 million of pre-tax restructuring charges related to the exit of a facility in France and other actions within Europe. Our free cash flow year-to-date through the third quarter was $216 million, compared to $204 million last year. The cash flow increase was driven by higher net income and lower tax payments resulting from the change in U.S. tax regulations, which more than offset inventory investment and increased CapEx.
We expect seasonally strong free cash flow in the fourth quarter, and are on track to achieve our full-year goal of free cash flow conversion greater than or equal to 100% of net income. The balance sheet remains strong. Our quarter-end net debt-to-capitalization ratio was -15%, and our net leverage is negative 0.5x. Our solid cash flow and healthy balance sheet continue to give us capital allocation optionality. Now, on slide five, let's review our assumptions about our fourth quarter and full-year outlook. As Bob mentioned, we are raising our full-year sales and margin outlook. This is driven by a strong third quarter, incremental price, favorable foreign exchange, and strong sales in data centers. We are also benefiting from incremental sales of approximately $10 million, related to the acquisition of Haws Corporation, which will be included in our Americas segment.
We now anticipate organic sales growth of 4%-5%, a three-point increase to the midpoint from our previous outlook. Our reported sales growth is expected to be up 7%-8%, a four-point increase from our previous outlook. This reflects incremental revenue from the Haws acquisition, and favorable foreign exchange impacts detailed by region in the appendix. Regionally, we anticipate stronger sales growth in the Americas and Europe, while APMEA is projected to be slightly below our previous outlook. We are raising our full-year adjusted EBITDA margin outlook to a range of up 140-150 basis points, an increase of 55 basis points from the midpoint of our previous outlook. We are also raising our full-year adjusted operating margin expansion to a range of up 140-150 basis points, an increase of 65 basis points from the midpoint of our previous outlook.
Our updated outlook includes 10 basis points of dilution from the Haws acquisition. It also assumes $40 million in estimated direct tariff costs, consistent with our previous guidance. This is based on tariffs in effect as of today. Our free cash flow expectation remains in line with our previous outlook. We expect to deliver free cash flow conversion of greater than or equal to 100% of net income in 2025. Next, a few items to consider for the fourth quarter. On an organic basis, we expect sales growth of 4%-8%. Regionally, we expect high single-digit growth in the Americas, low single-digit growth in APMEA and slight declines in Europe. The sequential slowdown in the Americas reflects the pull-forward demand discussed earlier. We expect approximately $20 million in incremental sales in the Americas from the I-CON, EasyWater, and Haws acquisitions.
Additionally, we estimate a foreign exchange tailwind of approximately $10 million in the quarter. Regional assumptions are detailed in the appendix. Fourth quarter adjusted EBITDA margin is expected to be in the range of 19.6%-20.1%, an increase of 30-80 basis points. Adjusted operating margin is projected to be between 17%-17.5%, or up 20-70 basis points. Price and volume leverage in the Americas should more than offset volume deleverage in Europe, and dilution from the Haws acquisition. The sequential margin decline reflects normal seasonality and the impact of the Haws acquisition. Other key inputs for the fourth quarter and full year can be found in the appendix. With that, I'll turn the call back over to Bob, before we move to Q&A. Bob?
Thanks, Ryan. On slide six, I'd like to summarize our comments before we address your questions. Our third quarter performance was better than anticipated, with record third quarter sales, operating income, and earnings per share driven by strong performance in our Americas region and better-than-expected results in Europe. We continue to execute well amid an uncertain trade environment, and we expect that price and our global supply chain strategy will enable us to continue navigating effectively.
As a result of our strong third-quarter performance and fourth-quarter expectations, we are increasing our full-year sales and margin outlook. We successfully closed on the acquisition of Haws Corporation earlier this week, and look forward to welcoming them to the Watts family of brands. Our balance sheet remains strong, and provides ample flexibility to support our capital allocation priorities. I'm confident in the resilience of our business and our team's ability to execute, despite the uncertain environment as we continue to create durable, long-term value for our shareholders. With that, operator, please open the line for questions.