Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jul. 02, 2017 | Aug. 01, 2017 | |
Entity Registrant Name | WATTS WATER TECHNOLOGIES INC | |
Entity Central Index Key | 795,403 | |
Document Type | 10-Q | |
Document Period End Date | Jul. 2, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Class A | ||
Entity Common Stock, Shares Outstanding | 27,809,237 | |
Class B | ||
Entity Common Stock, Shares Outstanding | 6,379,290 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Jul. 02, 2017 | Dec. 31, 2016 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 217.5 | $ 338.4 |
Trade accounts receivable, less allowance for doubtful accounts of $15.1 million at July 2, 2017 and $14.2 million at December 31, 2016 | 245.5 | 198 |
Inventories, net | ||
Raw materials | 81.5 | 81.5 |
Work in process | 16.6 | 13.7 |
Finished goods | 160.7 | 144.2 |
Total Inventories | 258.8 | 239.4 |
Prepaid expenses and other assets | 37 | 40.5 |
Assets held for sale | 2.9 | 3.1 |
Total Current Assets | 761.7 | 819.4 |
PROPERTY, PLANT AND EQUIPMENT, NET | ||
Property, plant and equipment, at cost | 521.3 | 498.1 |
Accumulated depreciation | (329.7) | (308.4) |
Property, plant and equipment, net | 191.6 | 189.7 |
OTHER ASSETS: | ||
Goodwill | 544.7 | 532.7 |
Intangible assets, net | 194.6 | 202.5 |
Deferred income taxes | 2.7 | 3 |
Other, net | 16.6 | 15.9 |
TOTAL ASSETS | 1,711.9 | 1,763.2 |
CURRENT LIABILITIES: | ||
Accounts payable | 110.1 | 101.1 |
Accrued expenses and other liabilities | 122.3 | 136.8 |
Accrued compensation and benefits | 45.8 | 48.5 |
Current portion of long-term debt | 37.9 | 139.1 |
Total Current Liabilities | 316.1 | 425.5 |
LONG-TERM DEBT, NET OF CURRENT PORTION | 510.4 | 511.3 |
DEFERRED INCOME TAXES | 51.2 | 48.6 |
OTHER NONCURRENT LIABILITIES | 37 | 41.5 |
STOCKHOLDERS' EQUITY: | ||
Preferred Stock, $0.10 par value; 5,000,000 shares authorized; no shares issued or outstanding | ||
Additional paid-in capital | 543.7 | 535.2 |
Retained earnings | 372.1 | 348.5 |
Accumulated other comprehensive loss | (122) | (150.8) |
Total Stockholders' Equity | 797.2 | 736.3 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 1,711.9 | 1,763.2 |
Class A | ||
STOCKHOLDERS' EQUITY: | ||
Common Stock | 2.8 | 2.8 |
Class B | ||
STOCKHOLDERS' EQUITY: | ||
Common Stock | $ 0.6 | $ 0.6 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) $ in Millions | Jul. 02, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares |
Trade accounts receivable, allowance for doubtful accounts (in dollars) | $ | $ 15.1 | $ 14.2 |
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 |
Preferred Stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Class A | ||
Common Stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 |
Common Stock, shares authorized | 80,000,000 | 80,000,000 |
Common Stock, votes per share (Number of votes) | 1 | 1 |
Common Stock, issued shares | 27,840,962 | 27,831,013 |
Common Stock, outstanding shares | 27,840,962 | 27,831,013 |
Class B | ||
Common Stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 |
Common Stock, shares authorized | 25,000,000 | 25,000,000 |
Common Stock, votes per share (Number of votes) | 10 | 10 |
Common Stock, issued shares | 6,379,290 | 6,379,290 |
Common Stock, outstanding shares | 6,379,290 | 6,379,290 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2017 | Jul. 03, 2016 | Jul. 02, 2017 | Jul. 03, 2016 | |
Consolidated Statements of Operations | ||||
Net Sales | $ 378.5 | $ 371.1 | $ 725.7 | $ 715.3 |
Cost of goods sold | 221.8 | 220.4 | 425.2 | 429.4 |
GROSS PROFIT | 156.7 | 150.7 | 300.5 | 285.9 |
Selling, general and administrative expenses | 110.2 | 110.5 | 217.8 | 213.1 |
Restructuring | 1.7 | 3.2 | 2.2 | 4.6 |
Gain on disposition | (8.7) | (8.7) | ||
OPERATING INCOME | 44.8 | 45.7 | 80.5 | 76.9 |
Other expense (income): | ||||
Interest income | (0.2) | (0.3) | (0.4) | (0.5) |
Interest expense | 5 | 5.5 | 9.8 | 12.2 |
Other expense (income), net | 0.2 | (0.9) | 0.5 | (3.1) |
Total other expense | 5 | 4.3 | 9.9 | 8.6 |
INCOME BEFORE INCOME TAXES | 39.8 | 41.4 | 70.6 | 68.3 |
Provision for income taxes | 12.6 | 12.8 | 21.7 | 23.5 |
NET INCOME | $ 27.2 | $ 28.6 | $ 48.9 | $ 44.8 |
BASIC EPS | ||||
NET INCOME PER SHARE | $ 0.79 | $ 0.83 | $ 1.42 | $ 1.30 |
Weighted average number of shares (in shares) | 34.5 | 34.5 | 34.5 | 34.4 |
DILUTED EPS | ||||
NET INCOME PER SHARE | $ 0.79 | $ 0.83 | $ 1.42 | $ 1.30 |
Weighted average number of shares (in shares) | 34.5 | 34.5 | 34.5 | 34.5 |
Dividends declared per share (in dollars per share) | $ 0.19 | $ 0.18 | $ 0.37 | $ 0.35 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2017 | Jul. 03, 2016 | Jul. 02, 2017 | Jul. 03, 2016 | |
Consolidated Statements of Comprehensive Income | ||||
Net income | $ 27.2 | $ 28.6 | $ 48.9 | $ 44.8 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | 21.5 | (12.2) | 29.4 | 12.2 |
Reversal of foreign currency translation for sale of foreign entity, net of tax | (6.9) | (6.9) | ||
Cash flow hedges, net of tax | (0.7) | (1.7) | (0.6) | (1.9) |
Other comprehensive income (loss) | 20.8 | (20.8) | 28.8 | 3.4 |
Comprehensive income | $ 48 | $ 7.8 | $ 77.7 | $ 48.2 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 6 Months Ended | |
Jul. 02, 2017 | Jul. 03, 2016 | |
OPERATING ACTIVITIES | ||
Net income | $ 48.9 | $ 44.8 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation | 14.6 | 14.7 |
Amortization of intangibles | 11.1 | 10.2 |
Loss on disposal and impairment of goodwill, property, plant and equipment and other | 0.6 | 1.9 |
Gain on disposition | (8.3) | |
Gain on acquisition | (1.7) | |
Stock-based compensation | 6.9 | 7.3 |
Deferred income tax | 2.3 | (0.4) |
Changes in operating assets and liabilities, net of effects from business acquisitions and divestures: | ||
Accounts receivable | (41.5) | (30.6) |
Inventories | (13.1) | (5.5) |
Prepaid expenses and other assets | 2.6 | 1.8 |
Accounts payable, accrued expenses and other liabilities | (23.4) | (26.4) |
Net cash provided by operating activities | 9 | 7.8 |
INVESTING ACTIVITIES | ||
Additions to property, plant and equipment | (11) | (19.2) |
Proceeds from the sale of property, plant and equipment | 0.1 | |
Net proceeds from the sale of asset, and other | 1.9 | |
Business acquisitions, net of cash acquired | 0.1 | (2.1) |
Net cash used in investing activities | (8.9) | (21.3) |
FINANCING ACTIVITIES | ||
Proceeds from long-term borrowings | 20 | 530 |
Payments of long-term debt | (126.3) | (500.7) |
Payment of capital leases and other | (4.3) | (1.1) |
Proceeds from share transactions under employee stock plans | 0.5 | 2.7 |
Tax benefit of stock awards exercised | 0.2 | |
Payments to repurchase common stock | (9) | (17.6) |
Debt issuance costs | (2.1) | |
Dividends | (12.8) | (12) |
Net cash used in financing activities | (131.9) | (0.6) |
Effect of exchange rate changes on cash and cash equivalents | 10.9 | 4.6 |
DECREASE IN CASH AND CASH EQUIVALENTS | (120.9) | (9.5) |
Cash and cash equivalents at beginning of year | 338.4 | 296.2 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 217.5 | 286.7 |
Acquisition of businesses: | ||
Fair value of assets acquired | 5.7 | |
Cash paid, net of cash acquired | 2.1 | |
Gain on acquisition | 1.7 | |
Liabilities assumed | 1.9 | |
Issuance of stock under management stock purchase plan | 1 | 0.7 |
CASH PAID FOR: | ||
Interest | 9.5 | 11.7 |
Income taxes | $ 20.9 | $ 14.6 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jul. 02, 2017 | |
Basis of Presentation | |
Basis of Presentation | 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 July 2, 2017, the Consolidated Statements of Operations for the second quarters and six months ended July 2, 2017 and July 3, 2016, the Consolidated Statements of Comprehensive Income for the second quarters and six months ended July 2, 2017 and July 3, 2016, and the Consolidated Statements of Cash Flows for the six months ended July 2, 2017 and July 3, 2016. The consolidated balance sheet at December 31, 2016 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, 2016. 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, 2016. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2017. Certain prior year amounts have been reclassified to conform to the current year presentation. Reclassifications did not have a material impact on previously reported results of operations, financial position or cash flows. The Company operates on a 52-week fiscal year ending on December 31. Any quarterly data contained in this Quarterly Report on Form 10-Q generally reflect the results of operations for a 13-week period. 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. |
Accounting Policies
Accounting Policies | 6 Months Ended |
Jul. 02, 2017 | |
Accounting Policies | |
Accounting Policies | 2. Accounting Policies The significant accounting policies used in preparation of these consolidated financial statements for the three and six months ended July 2, 2017 are consistent with those discussed in Note 2 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Recently Adopted Accounting Standards In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. The revised guidance will be applied prospectively and is effective for calendar year-end SEC filers in 2020. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company’s adoption of the new guidance effective January 1, 2017 did not have a material impact on the Company's financial statements. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” ASU 2016‑09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as equity or liabilities, forfeitures, and classification on the statement of cash flows. The Company adopted this standard in the first quarter of 2017. The impact of the adoption of this standard resulted in the following: The Company elected to account for forfeitures as they occur, rather than estimate expected forfeitures over the vesting period of the respective grant. This was adopted using a modified retrospective approach with a cumulative effect adjustment of $0.5 million to retained earnings as of January 1, 2017. The Company no longer reclassifies the excess tax benefit from operating activities to financing activities in the Consolidated Statement of Cash Flows. This change has been applied prospectively in the Statement of Cash Flows. The Company had an excess tax benefit of $0.2 million in the six months ended July 3, 2016. The Company no longer records windfall or shortfall tax benefits to additional paid-in capital and records these tax benefits directly to operations. This change has been applied prospectively as is required by the standard and therefore the comparative period has not been adjusted. This change may create volatility in the Company’s effective tax rate on a prospective basis. In November 2015, the FASB issued ASU 2015-17, “Income Taxes: Balance Sheet Classification of Deferred Taxes.” ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016 and all interim periods thereafter. The Company adopted the provision of this ASU during the first quarter of 2017 and applied it retrospectively. As of December 31, 2016, the Company had $38.6 million of current deferred tax assets, $1.5 million of noncurrent deferred tax assets, and $85.7 million of noncurrent deferred tax liabilities. The adoption of this standard resulted in a reclassification of $38.6 million of current deferred tax assets to noncurrent deferred tax liabilities and a reclassification of $1.5 million of noncurrent deferred tax liabilities to noncurrent deferred tax assets. Therefore, the restated noncurrent deferred tax asset balance and noncurrent deferred tax liability balance as of December 31, 2016 was $3.0 million and $48.6 million, respectively. Adoption of this standard did not affect results of operations, retained earnings, or cash flows in the current or previous interim and annual reporting periods. In July 2015, the FASB issued ASU 2015-11, “Inventory: Simplifying the Measurement of Inventory.” This new standard changes inventory measurement from lower of cost or market to lower of cost and net realizable value. The standard eliminates the requirement to consider replacement cost or net realizable value less a normal profit margin when measuring inventory. ASU 2015-11 is effective in the first quarter of 2017 for public companies with calendar year ends, and should be applied prospectively with early adoption permitted. The adoption of this guidance did not have a material impact on the Company’s financial statements. Accounting Standards Updates In January 2017, the FASB issued ASU 2017-01 “Business Combinations (Topic 805)-Clarifying the Definition of a Business”, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are not a business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 converges revenue recognition under U.S. GAAP and International Financial Reporting Standards ("IFRS"). For U.S. GAAP, the standard generally eliminates transaction and industry-specific revenue recognition guidance. This includes current guidance on long-term construction-type contracts, software arrangements, real estate sales, telecommunication arrangements, and franchise sales. Under the new standard, revenue is recognized based on a five-step model. The FASB issued ASU 2015-14 in August 2015 which deferred the effective date of ASU 2014-09 for public companies to periods beginning after December 15, 2017, with early adoption permitted. The Company is assessing the impact of the guidance on its revenues by reviewing its contract portfolio to identify potential differences that would result from applying the new standard to its current revenue arrangements, including evaluation of potential performance obligations and variable consideration. The Company has substantially completed its contract portfolio analysis, and is evaluating the impact, if any, on changes to the Company’s financial results, business processes, systems, and controls under this new guidance. The Company is expected to use the modified retrospective approach of adoption, with a cumulative adjustment to opening retained earnings in the period of adoption. The Company will adopt the new standard effective January 1, 2018. Shipping and Handling Shipping and handling costs included in selling, general and administrative expense amounted to $13.0 million and $11.5 million for the second quarters of 2017 and 2016, respectively, and were $25.0 million and $22.9 million for the first six months of 2017 and 2016, respectively. Research and Development Research and development costs included in selling, general, and administrative expense amounted to $7.2 million and $6.4 million for the second quarters of 2017 and 2016, respectively, and was $14.3 million and $13.0 million for the first six months of 2017 and 2016, respectively. |
Acquisitions
Acquisitions | 6 Months Ended |
Jul. 02, 2017 | |
Acquisitions | |
Acquisitions | 3. Acquisitions PVI Industries, LLC On November 2, 2016, the Company acquired 100% of the shares of PVI Riverside Holdings, Inc., the parent company of PVI Industries, LLC (“PVI”). The aggregate purchase price, including the final working capital adjustment, was approximately $79.1 million. PVI is a leading manufacturer of commercial stainless steel water heating equipment, focused on the high capacity market in North America and is based in Fort Worth, Texas. PVI’s water heater product offering complements AERCO’s boiler products, allowing the Company to address customers’ heating and hot water requirements. The Company accounted for the transaction as a purchased business combination and the acquisition was funded partially with available cash and partially from borrowings under the Company’s Credit Agreement. During the second quarter of 2017 the Company finalized the purchase price allocation related to the purchase of PVI. The acquisition resulted in the recognition of $41.1 million in goodwill and $31.0 million in intangible assets. The intangible assets acquired consist of customer relationships valued at $17.6 million, developed technology valued at $10.2 million, and the trade name valued at $3.2 million. The goodwill is attributable to the workforce of PVI and the strategic platform adjacency that will allow Watts to extend its product offerings as a result of the acquisition. Approximately $6.9 million of the goodwill is deductible for tax purposes. The following table summarizes the value of the assets and liabilities acquired (in millions): Accounts receivable $ 5.7 Inventory 12.7 Fixed assets 8.1 Other assets 2.8 Intangible assets 31.0 Goodwill 41.1 Accounts payable (4.0) Accrued expenses and other (9.2) Deferred tax liability (9.1) Purchase price $ 79.1 Apex On November 30, 2015, the Company completed the acquisition of 80% of the outstanding shares of Apex Valves Limited (“Apex”). Apex specializes in the design and manufacturing of control valves for low and high pressure hot water and filtration systems. Apex also produces an extensive range of float and reservoir valves for the agricultural industry. The aggregate purchase price was approximately $20.4 million and the Company recorded a long-term liability of $5.5 million as the estimate of the acquisition date fair value on the contractual call option to purchase the remaining 20% within three years of closing. The Company acquired an additional 10% ownership in the first quarter of 2017 for approximately $2.9 million and now owns 90% of the outstanding shares of Apex. The Company maintains a long-term liability of approximately $3.0 million for the estimated fair value on the remaining 10% contractual call option. |
Goodwill & Intangibles
Goodwill & Intangibles | 6 Months Ended |
Jul. 02, 2017 | |
Goodwill and Intangibles | |
Goodwill & Intangibles | 4. Goodwill & Intangibles The Company operates in three geographic segments: Americas, Europe, and APMEA (Asia-Pacific, Middle East, and Africa). The changes in the carrying amount of goodwill by geographic segment are as follows: July 2, 2017 Gross Balance Accumulated Impairment Losses Net Goodwill Acquired Foreign Balance During Currency Balance Balance Impairment Balance January 1, the Translation July 2, January 1, Loss During July 2, July 2, 2017 Period (1) and Other 2017 2017 the Period 2017 2017 (in millions) Americas $ 434.7 2.0 0.3 437.0 $ (24.5) — (24.5) 412.5 Europe 234.9 — 8.8 243.7 (129.7) — (129.7) 114.0 APMEA 30.2 — 0.9 31.1 (12.9) — (12.9) 18.2 Total $ 699.8 2.0 10.0 711.8 $ (167.1) — (167.1) 544.7 (1) December 31, 2016 Gross Balance Accumulated Impairment Losses Net Goodwill Acquired Foreign Balance During Currency Balance Balance Impairment Balance January 1, the Translation December 31, January 1, Loss During December 31, December 31, 2016 Period and Other 2016 2016 the Period 2016 2016 (in millions) Americas $ 391.2 43.3 0.2 434.7 $ (24.5) — (24.5) 410.2 Europe 238.6 — (3.7) 234.9 (129.7) — (129.7) 105.2 APMEA 26.3 3.7 0.2 30.2 (12.9) — (12.9) 17.3 Total $ 656.1 47.0 (3.3) 699.8 $ (167.1) — (167.1) 532.7 Intangible assets include the following: July 2, 2017 December 31, 2016 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount (in millions) Patents $ 16.1 $ (15.0) $ 1.1 $ 16.1 $ (14.9) $ 1.2 Customer relationships 233.0 (125.3) 107.7 231.5 (117.3) 114.2 Technology 53.2 (21.2) 32.0 53.1 (19.2) 33.9 Trade names 25.4 (8.9) 16.5 25.1 (8.1) 17.0 Other 6.8 (6.0) 0.8 6.8 (5.9) 0.9 Total amortizable intangibles 334.5 (176.4) 158.1 332.6 (165.4) 167.2 Indefinite-lived intangible assets 36.5 — 36.5 35.3 — 35.3 $ 371.0 $ (176.4) $ 194.6 $ 367.9 $ (165.4) $ 202.5 Aggregate amortization expense for amortized intangible assets for the second quarter of 2017 and 2016 was $5.6 million and $5.1 million, respectively, and for the first six months of 2017 and 2016, was $11.1 million and $10.2 million, respectively. |
Financial Instruments and Deriv
Financial Instruments and Derivative Instruments | 6 Months Ended |
Jul. 02, 2017 | |
Financial Instruments and Derivative Instruments | |
Financial Instruments and Derivative Instruments | 5. Financial Instruments and Derivative Instruments Fair Value The carrying amounts of cash and cash equivalents, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments. The fair value of the Company’s 5.05% senior notes due 2020 is based on quoted market prices of similar notes (level 2). The fair value of the Company’s borrowings outstanding under the Credit Agreement, Facility Agreement, and 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: July 2, December 31, 2017 2016 (in millions) Carrying amount $ 551.2 $ 653.6 Estimated fair value $ 553.9 $ 658.3 Financial Instruments The Company measures certain financial assets and liabilities at fair value on a recurring basis, including deferred compensation plan assets and related liabilities, redeemable financial instruments, and derivatives. The fair values of these certain financial assets and liabilities were determined using the following inputs at July 2, 2017 and December 31, 2016: Fair Value Measurement at July 2, 2017 Using: Quoted Prices in Active Significant Other Significant Markets for Identical Observable Unobservable Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) (in millions) Assets Plan asset for deferred compensation(1) $ 3.2 $ 3.2 $ — $ — Interest rate swaps (1) $ 3.8 $ — $ 3.8 $ — Total assets $ 7.0 $ 3.2 $ 3.8 $ — Liabilities Plan liability for deferred compensation(2) $ 3.2 $ 3.2 $ — $ — Redeemable financial instrument(3) $ 3.0 $ — $ — $ 3.0 Total liabilities $ 6.2 $ 3.2 $ — $ 3.0 Fair Value Measurements at December 31, 2016 Using: Quoted Prices in Active Significant Other Significant Markets for Identical Observable Unobservable Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) (in millions) Assets Plan asset for deferred compensation(1) $ 3.0 $ 3.0 $ — $ — Interest rate swaps (1) $ 4.6 $ — $ 4.6 $ Total assets $ 7.6 $ 3.0 $ 4.6 $ — Liabilities Plan liability for deferred compensation(2) $ 3.0 $ 3.0 $ — $ — Redeemable financial instrument(3) 5.8 — — 5.8 Total liabilities $ 8.8 $ 3.0 $ — $ 5.8 (1) (2) (3) 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, 2016 to July 2, 2017. Total realized and unrealized Balance (gains) losses included in: Balance December 31, Net earnings Comprehensive July 2, 2016 Settlements Purchases adjustments income 2017 (in millions) Redeemable financial instrument $ 5.8 (2.9) $ — — $ 0.1 $ 3.0 In connection with the acquisition of Apex, a liability of $5.5 million was recognized on November 30, 2015 as the estimate of the acquisition date fair value of the mandatorily redeemable equity instrument. The Company acquired an additional 10% ownership in the first quarter of 2017 for approximately $2.9 million and now owns 90% of Apex outstanding shares. The remaining liability is classified as Level 3 under the fair value hierarchy as it is based on the commitment to purchase the remaining 10% of Apex shares within the next year, which is not observable in the market. Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of 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. Interest Rate Swaps On February 12, 2016, the Company entered into a Credit Agreement (the “Credit Agreement”) pursuant to which it received a funding commitment under a Term Loan of $300 million, of which the entire $300 million has been drawn on, and a Revolving Commitment (“Revolver”) of $500 million, of which $177.0 million has been drawn as of July 2, 2017. Both facilities mature on February 12, 2021. For each facility, the Company can choose either an Adjusted LIBOR or Alternative Base Rate (“ABR”). Upon intended election of Adjusted LIBOR as the interest rate, the Term Loan has quarterly interest payments that began in May 2016, quarterly principal repayments that commenced on March 31, 2017, with a balloon payment of principal on maturity date. The Revolver has quarterly interest payments that began in July 2016. Accordingly, the Company’s earnings and cash flows are exposed to interest rate risk from changes in Adjusted LIBOR. In order to manage the Company’s exposure to changes in cash flows attributable to fluctuations in LIBOR-indexed interest payments related to the Company’s floating rate debt, the Company entered into two interest rate swaps. For each interest rate swap, the Company receives the three-month USD-LIBOR subject to a 0% floor, and pays a fixed rate of 1.31375% on a notional amount of $225.0 million. The swaps mature on February 12, 2021. The Company formally documents the hedge relationships at hedge inception to ensure that its interest rate swaps qualify for hedge accounting. On a quarterly basis, the Company assesses whether the interest rate swaps are highly effective in offsetting changes in the cash flow of the hedged item. The Company does not hold or issue interest rate swaps for trading purposes. The swaps are designated as cash flow hedges. For the three and six months ended July 2, 2017, a loss of $0.8 million and $0.6 million, respectively, was recorded in Accumulated Other Comprehensive Income to recognize the effective portion of the fair value of interest rate swaps that qualify as a cash flow hedge. For the three and six months ended July 3, 2016, a loss of $1.7 million and 1.9 million, respectively, was recorded in Accumulated Other Comprehensive Income to recognize the effective portion of the fair value of interest rate swaps that qualify as a cash flow hedge. Non-Designated Cash Flow Hedge The Company’s 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. The Company uses foreign currency forward exchange contracts from time to time to manage the risk related to intercompany loans, intercompany purchases that occur during the course of a year, and certain open foreign currency denominated commitments to sell products to third parties. These forward exchange contracts are not designated as cash flow or fair value hedges. The Company entered into one forward contract in the fourth quarter of 2016 and one forward contract in the first quarter of 2017 to manage the foreign currency rate exposure between the Hong Kong Dollar and the euro regarding two intercompany loans. These forward contracts are marked-to-market with changes in the fair value recorded to earnings. The Company recognized a loss of $1.3 million and $2.1 million for the three and six months ended July 2, 2017, respectively, related to the forward exchange contracts. |
Restructuring and Other Charges
Restructuring and Other Charges, Net | 6 Months Ended |
Jul. 02, 2017 | |
Restructuring and Other Charges, Net | |
Restructuring and Other Charges, Net | 6. Restructuring and Other Charges, Net The Company’s Board of Directors approves all major restructuring programs that may involve the discontinuance of significant product lines or the shutdown of significant 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 liability is incurred. These costs are included in restructuring charges in the Company’s consolidated statements of operations. A summary of the pre‑tax cost by restructuring program is as follows: Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) Restructuring costs: 2015 Actions $ 1.6 $ 0.8 $ 1.6 $ 1.8 Other Actions 0.1 2.4 0.6 2.8 Total restructuring charges $ 1.7 $ 3.2 $ 2.2 $ 4.6 The Company recorded pre‑tax restructuring costs in its business segments as follows: Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) Americas $ 1.4 $ 0.8 $ 1.9 $ 1.6 Europe 0.1 2.5 0.1 2.9 APMEA 0.2 — 0.2 0.2 Corporate — (0.1) — (0.1) Total $ 1.7 $ 3.2 $ 2.2 $ 4.6 2015 Actions In 2015, the Board of Directors of the Company approved a transformation program relating to the Company’s Americas and APMEA businesses, which primarily involved the exit of low-margin, non-core product lines (“phase one”). The Company eliminated approximately $165 million of the combined Americas and APMEA net sales primarily within the Company’s do-it-yourself (DIY) distribution channel. The second phase of the program involves the consolidation of manufacturing facilities and distribution center network optimization. The second phase of the program involves reducing the square footage of the Company’s Americas facilities, which together with phase one, reduced the Americas net operating footprint by approximately 30%. The second phase is designed to improve the utilization of our remaining facilities, better leverage our cost structure, reduce working capital, and improve execution of customer delivery requirements. As of July 2, 2017, the second phase was substantially complete and is expected to be completed by the end of 2017. On a combined basis, the total estimated pre-tax cost for the Company’s transformation program related to its Americas and APMEA businesses is approximately $65 million, including restructuring costs of approximately $19.5 million, goodwill and intangible asset impairments of $13.5 million and other transformation and deployment costs of approximately $32 million. The other transformation and deployment costs include consulting and project management fees, inventory write-offs, and other associated costs. Costs of the program are expected to be incurred through 2017. The following table summarizes by type, the total expected, incurred and remaining pre-tax restructuring costs for the Company’s transformation program related to its Americas and APMEA businesses (phase one and phase two combined): Facility Legal and Asset exit Severance consultancy write‑downs and other Total (in millions) Costs incurred—2015 $ 8.5 0.7 1.6 2.8 13.6 Costs incurred—2016 (1.5) 0.2 2.9 0.5 2.1 Costs incurred—first quarter 2017 — — — — — Costs incurred—second quarter 2017 0.2 — 1.2 0.2 1.6 Remaining costs to be incurred — 0.1 0.6 1.5 2.2 Total expected restructuring costs $ 7.2 $ 1.0 $ 6.3 $ 5.0 $ 19.5 The following table summarizes total restructuring costs incurred for the three and six months ended July 2, 2017, incurred program to date and expected remaining pre-tax restructuring costs by business segment for the Company’s Americas and APMEA 2015 transformation program: Second Quarter Ended Six Months Ended Total July 2, July 2, Incurred Remaining Expected 2017 2017 to Date costs Costs (in millions) APMEA $ 0.2 $ 0.2 $ 4.6 $ — $ 4.6 Americas 1.4 1.4 12.7 2.2 14.9 Total restructuring costs $ 1.6 $ 1.6 $ 17.3 $ 2.2 $ 19.5 Details of the restructuring reserve activity for the Company’s Americas and APMEA 2015 transformation program for the period ended July 2, 2017 are as follows: Facility Legal and Asset exit Severance consultancy write-downs and other Total (in millions) Balance at December 31, 2016 $ 1.2 $ — $ — $ — $ 1.2 Net pre-tax restructuring charges — — — — — Utilization and foreign currency impact (0.6) — — — (0.6) Balance at April 2, 2017 $ 0.6 $ — $ — $ — $ 0.6 Net pre-tax restructuring charges 0.2 — 1.2 0.2 1.6 Utilization and foreign currency impact (0.1) — (1.2) (0.2) (1.5) Balance at July 2, 2017 $ 0.7 $ — $ — $ — $ 0.7 Other Actions The Company periodically initiates other actions which are not part of a major program. In the fourth quarter of 2015 management initiated certain restructuring actions and strategic initiatives with respect to the Company’s Europe segment in response to the economic challenges in Europe at the time and additional product rationalization efforts. The restructuring actions included severance benefits and limited costs relating to asset write offs, professional fees and relocation. Total “Other Actions” pre-tax restructuring expense was $ 0.1 million and $0. 6 million for the three and six months ended July 2, 2017, respectively . Total “Other Actions” pre-tax restructuring expense was $ 2.4 million and $2.8 million for the three and six months ended July 3, 2016, respectively . Included in “Other Actions” is the 2015 Europe restructuring initiatives, in addition to other minor initiatives for which the Company incurred restructuring expenses through the first six months of 2017 and 2016. The total pre-tax charge for the Europe 2015 restructuring initiatives is expected to be approximately $10 million, of which approximately $8.4 million has been incurred as of July 2, 2017 for the program to date. The remaining expected costs relate to severance and legal costs and are expected to be completed in 2017. The following table summarizes total expected, incurred and remaining pre-tax restructuring costs for the Europe 2015 restructuring actions: Facility Legal and Exit Severance consultancy and other Total (in millions) Costs incurred—2015 $ 6.6 $ — $ 0.3 $ 6.9 Costs incurred—2016 1.3 0.5 — 1.8 Adjustments to restructuring costs — first quarter 2017 (0.3) — — (0.3) Costs incurred—second quarter 2017 — — — — Remaining costs to be incurred 1.4 0.2 — 1.6 Total expected restructuring costs $ 9.0 $ 0.7 $ 0.3 $ 10.0 Details of the Company’s Europe 2015 restructuring reserve activity for the six months ended July 2, 2017 are as follows: Legal and Facility exit Severance Consultancy and other Total (in millions) Balance at December 31, 2016 $ 4.8 $ — $ — $ 4.8 Net pre-tax restructuring adjustments (0.3) — — (0.3) Utilization and foreign currency impact (0.9) — — (0.9) Balance at April 2, 2017 $ 3.6 $ — $ — $ 3.6 Net pre-tax restructuring charges — — — — Utilization and foreign currency impact (0.3) — — (0.3) Balance at July 2, 2017 $ 3.3 $ — $ — $ 3.3 |
Earnings per Share
Earnings per Share | 6 Months Ended |
Jul. 02, 2017 | |
Earnings per Share | |
Earnings per Share | 7. Earnings per Share The following tables set forth the reconciliation of the calculation of earnings per share: For the Second Quarter Ended July 2, 2017 For the Second Quarter Ended July 3, 2016 Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Amounts in millions, except per share information) Basic EPS: Net income $ 27.2 34.5 $ 0.79 $ 28.6 34.5 $ 0.83 Effect of dilutive securities: Common stock equivalents — — Diluted EPS: Net income $ 27.2 34.5 $ 0.79 $ 28.6 34.5 $ 0.83 Options to purchase 0.1 million shares of Class A common stock were outstanding during the second quarters of 2017 and 2016, respectively, but were not included in the computation of diluted EPS because to do so would be anti-dilutive. For the Six Months Ended July 2, 2017 For the Six Months Ended July 3, 2016 Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Amounts in millions, except per share information) Basic EPS: Net income $ 48.9 34.5 $ 1.42 $ 44.8 34.4 $ 1.30 Effect of dilutive securities: Common stock equivalents — 0.1 Diluted EPS: Net income $ 48.9 34.5 $ 1.42 $ 44.8 34.5 $ 1.30 Options to purchase 0.1 million and 0.2 million shares of Class A common stock were outstanding during the first six months of 2017 and 2016, respectively, but were not included in the computation of diluted EPS because to do so would be anti-dilutive. On July 27, 2015, the Company’s Board of Directors authorized the repurchase of up to $100 million of the Company’s Class A common stock from time to time on the open market or in privately negotiated transactions. In connection with this stock repurchase program, the Company entered into a Rule 10b5-1 plan, which permits 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 the Rule 10b5-1 plan the Company entered into with respect to the repurchase program. As of July 2, 2017, there was approximately $47.1 million remaining authorized for share repurchases under this program. The following table summarizes the cost and the number of shares of Class A common stock repurchased under the July 27, 2015 program during the three and six months ended July 2, 2017 and July 3, 2016: For the Second Quarter Ended For the Second Quarter Ended July 2, 2017 July 3, 2016 Number of shares Cost of shares Number of shares Cost of shares repurchased repurchased repurchased repurchased (amounts in millions, except share amount) Total stock repurchased during the period: 72,674 $ 4.5 91,500 $ 5.2 For the Six Months Ended For the Six Months Ended July 2, 2017 July 3, 2016 Number of shares Cost of shares Number of shares Cost of shares repurchased repurchased repurchased repurchased (amounts in millions, except share amount) Total stock repurchased during the period: 141,786 $ 9.0 359,000 $ 17.6 |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jul. 02, 2017 | |
Stock-Based Compensation | |
Stock-Based Compensation | 8. Stock‑Based Compensation The Company maintains one stock incentive plan, the Second Amended and Restated 2004 Stock Incentive Plan (the “2004 Stock Incentive Plan”). The Company grants shares of restricted stock and deferred shares 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 vest immediately. Employees’ restricted stock awards and deferred shares typically vest over a three‑year period at the rate of one‑third per year. The restricted stock awards and deferred shares are amortized to expense on a straight-line basis over the vesting period. The Company issued 115,408 and 110,295 shares of restricted stock awards and deferred shares during the first six months of 2017 and 2016, respectively, related to the Company’s annual grant. The Company also grants performance stock units to key employees under the 2004 Stock Incentive Plan. Performance stock units cliff vest at the end of a performance period set by the Compensation Committee of the Board of Directors at the time of grant. Upon vesting, the number of shares of the Company’s Class A common stock awarded to each performance stock unit recipient will be determined based on the Company’s performance relative to certain performance goals set at the time the performance stock units were granted. The recipient of a performance stock unit award may earn from zero shares to twice the number of target shares awarded to such recipient. The performance stock units are amortized to expense over the vesting period, and based on the Company’s performance relative to the performance goals, may be adjusted. Changes to the estimated shares expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the period of change. If the performance goals are not met, no awards are earned and previously recognized compensation expense is reversed. The Company granted 98,812 and 106,724 of annual awards for performance stock units during the first six months of 2017 and 2016, respectively. The performance goals for the performance stock units are based on the compound annual growth rate of the Company’s revenue over the three-year performance period and the Company’s return on invested capital (“ROIC”) for the third year of the performance period. The Company also has a Management Stock Purchase Plan that allows for the granting of restricted stock units (RSUs) to 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 provides the key employee with the right to purchase a share of Class A common stock at 80% of the fair market value on the date of grant. Beginning with annual incentive compensation for 2016, the purchase price for RSUs was increased from 67% to 80% of the fair market value of the Company’s Class A common stock. RSUs vest either annually over a three-year period from the grant date or upon the third anniversary of 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, from the date of grant. An aggregate of 2,000,000 shares of Class A common stock may be issued under the Management Stock Purchase Plan. The company granted 47,222 RSU’s and 88,882 RSU’s during the first six months of 2017 and 2016, 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: 2017 2016 Expected life (years) 3.0 3.0 Expected stock price volatility 25.0 % 24.8 % Expected dividend yield 1.2 % 1.3 % Risk-free interest rate 1.5 % 0.9 % The risk‑free interest rate is based upon the U.S. Treasury yield curve at the time of grant for the respective expected life of the RSUs. The expected life (estimated period of time outstanding) of RSUs and volatility were calculated using historical data. The expected dividend yield of stock is the Company’s best estimate of the expected future dividend yield. The above assumptions were used to determine the weighted average grant‑date fair value of RSUs granted of $16.84 and $18.15 in 2017 and 2016, respectively. A more detailed description of each of these plans can be found in Note 12 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. |
Segment Information
Segment Information | 6 Months Ended |
Jul. 02, 2017 | |
Segment Information | |
Segment Information | 9. Segment Information The Company operates in three geographic segments: Americas, Europe, and APMEA. Each of these segments sells similar products and has separate financial results that are reviewed by the Company’s chief operating decision‑maker. Each segment earns revenue and income almost exclusively from the sale of our products . The Company sells its products into various end markets around the world, with sales by region based upon location of the entity recording the sale. Products are sold into four product categories: 1) residential & commercial flow control products, 2) HVAC & gas products, 3) drainage & water re-use products, and 4) water quality products. The Americas sells products across all four product categories, Europe primarily sells residential & commercial flow products, HVAC & gas products and drainage products, and APMEA primarily sells residential & commercial flow products and HVAC & gas products. All intercompany sales transactions have been eliminated. The accounting policies for each segment are the same as those described in Note 2 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. As of January 1, 2017, the Company began reporting the results of Watts Industries Middle East FZE (“Watts Middle East”), an indirect, wholly owned subsidiary, as part of the Company’s former Asia-Pacific segment, which is now referred to as APMEA. Watts Middle East had previously been reported within the former EMEA segment, which is now referred to as Europe. This change in segment composition aligns with the structure of the Company’s internal organization and did not result in a material change to previously reported segment information. The 2016 results by segment have been retrospectively revised for comparative purposes. The following is a summary of the Company’s significant accounts and balances by segment, reconciled to its consolidated totals: Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) Net Sales Americas $ 250.5 $ 239.5 $ 479.2 $ 461.8 Europe 110.7 114.3 215.6 222.6 APMEA 17.3 17.3 30.9 30.9 Consolidated net sales $ 378.5 $ 371.1 $ 725.7 $ 715.3 Operating income (loss) Americas $ 39.6 $ 35.4 $ 70.7 $ 63.5 Europe 12.7 10.2 25.1 20.0 APMEA 1.8 9.8 2.8 11.5 Subtotal reportable segments 54.1 55.4 98.6 95.0 Corporate(*) (9.3) (9.7) (18.1) (18.1) Consolidated operating income 44.8 45.7 80.5 76.9 Interest income (0.2) (0.3) (0.4) (0.5) Interest expense 5.0 5.5 9.8 12.2 Other expense (income), net 0.2 (0.9) 0.5 (3.1) Income before income taxes $ 39.8 $ 41.4 $ 70.6 $ 68.3 Capital Expenditures Americas $ 3.8 $ 7.0 $ 8.1 $ 14.4 Europe 1.3 2.6 2.6 4.3 APMEA 0.1 0.4 0.3 0.5 Consolidated capital expenditures $ 5.2 $ 10.0 $ 11.0 $ 19.2 Depreciation and Amortization Americas $ 8.0 $ 6.7 $ 15.1 $ 13.3 Europe 4.6 4.9 8.9 9.8 APMEA 1.0 0.9 1.7 1.8 Consolidated depreciation and amortization $ 13.6 $ 12.5 $ 25.7 $ 24.9 Identifiable assets (at end of period) Americas $ 1,077.0 $ 1,000.5 Europe 523.2 594.3 APMEA 111.7 129.7 Consolidated identifiable assets $ 1,711.9 $ 1,724.5 Property, plant and equipment, net (at end of period) Americas $ 106.0 $ 95.3 Europe 78.4 81.4 APMEA 7.2 8.3 Consolidated property, plant and equipment, net $ 191.6 $ 185.0 * Corporate expenses are primarily for administrative compensation expense, compliance costs, professional fees, including corporate-related legal and audit expenses, shareholder services and benefit administration costs. Other than the change in composition as noted above, the above operating segments are presented on a basis consistent with the presentation included in the Company’s December 31, 2016 consolidated financial statements included in its Annual Report on Form 10-K. The U.S. property, plant and equipment of the Company’s Americas segment was $102.3 million and $91.5 million at July 2, 2017 and July 3, 2016, respectively. The following includes U.S. net sales of the Company’s Americas segment: Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) U.S. net sales $ 234.9 $ 223.5 $ 448.6 $ 431.5 The following includes intersegment sales for Americas, Europe and APMEA: Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) Intersegment Sales Americas $ 3.6 $ 3.4 $ 6.4 $ 6.2 Europe 4.0 3.0 7.9 5.8 APMEA 20.4 16.0 40.0 41.1 Intersegment sales $ 28.0 $ 22.4 $ 54.3 $ 53.1 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Jul. 02, 2017 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | 10. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss consists of the following: Accumulated Foreign Other Currency Cash Flow Comprehensive Translation Hedges Loss (in millions) Balance December 31, 2016 $ (153.7) $ 2.9 $ (150.8) Change in period 7.9 0.1 8.0 Balance April 2, 2017 $ (145.8) $ 3.0 $ (142.8) Change in period 21.5 (0.7) 20.8 Balance July 2, 2017 $ (124.3) $ 2.3 $ (122.0) Balance December 31, 2015 $ (128.2) $ — $ (128.2) Change in period 24.4 (0.2) 24.2 Balance April 03, 2016 $ (103.8) $ (0.2) $ (104.0) Change in period (12.2) (1.7) (13.9) Reversal of foreign currency translation (6.9) — (6.9) Balance July 03, 2016 $ (122.9) $ (1.9) $ (124.8) |
Debt
Debt | 6 Months Ended |
Jul. 02, 2017 | |
Debt | |
Debt | 11. Debt On February 12, 2016, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, certain subsidiaries of the Company who become borrowers under the Credit Agreement, JPMorgan Chase Bank, N.A., as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, and the other lenders referred to therein. The Credit Agreement provides for a $500 million, five‑year, senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a sublimit of up to $100 million in letters of credit. As of July 2, 2017, the Company had drawn $177.0 million on this line of credit. The Credit Agreement also provides for a $300 million, five‑year, term loan facility (the “Term Loan Facility”) available to the Company in a single draw, of which the entire $300 million had been drawn in February 2016. The Company had $288.8 million of borrowings outstanding on the term loan as of July 2, 2017 and $300.0 million outstanding as of July 3, 2016. Borrowings outstanding under the Revolving Credit Facility bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Eurocurrency rate loans, the ICE Benchmark Administration LIBOR rate plus an applicable percentage, ranging from 0.975% to 1.45%, determined by reference to the Company’s consolidated leverage ratio, 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 JPMorgan Chase Bank, N.A. as its “prime rate,” and (c) the ICE Benchmark Administration LIBOR rate plus 1.0%, plus an applicable percentage, ranging from 0.00% to 0.45%, determined by reference to the Company’s consolidated leverage ratio. Borrowings outstanding under the Term Loan Facility will bear interest at a fluctuating rate per annum equal to an applicable percentage defined as the ICE Benchmark Administration LIBOR rate plus an applicable percentage, ranging from 1.125% to 1.75%, determined by reference to the Company’s consolidated leverage ratio. The interest rates as of July 2, 2017 on the Revolving Credit Facility and on the Term Loan Facility were 2.42% and 2.68%, respectively. The loan under the Term Loan Facility amortizes as follows: 0% per annum during the first year, 7.5% in the second and third years, 10% in the fourth and fifth years, and the remaining unpaid balance paid in full on the maturity date. Payments when due are made ratably each year in quarterly installments. The Company paid quarterly installments totaling $11.2 million during the first half of 2017. In addition to paying interest under the Credit Agreement, the Company is also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. The Credit Agreement matures on February 12, 2021, subject to extension under certain circumstances and subject to the terms of the Credit Agreement. 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. Once repaid, amounts borrowed under the Term Loan Facility may not be borrowed again. The Company maintains letters of credit that guarantee its performance or payment to third parties in accordance with specified terms and conditions. Amounts outstanding were approximately $25.7 million as of July 2, 2017 and $24.9 million as of July 3, 2016. The Company’s letters of credit are primarily associated with insurance coverage. The Company’s letters of credit generally expire within one year of issuance and are drawn down against the Revolving Credit Facility. These instruments may exist or expire without being drawn down. Therefore, they do not necessarily represent future cash flow obligations. On December 16, 2016, Watts International Holdings Limited (“Watts International”), a wholly owned subsidiary of the Company, entered into a Facility Agreement (the “Facility Agreement”) among Watts International, as original borrower and original guarantor, Watts Water Technologies EMEA B.V., a wholly owned subsidiary of the Company (“Watts EMEA”), as original guarantor, JPMorgan Chase Bank, N.A., as sole bookrunner and sole lead arranger (“JP Morgan Chase Bank”), J.P. Morgan Europe Limited, as agent to the financial parties, and the other lenders referred to therein. The Facility Agreement provides for a €110 million, 364 day, term loan facility available to the Company in a single draw. On December 20, 2016, Watts International borrowed the full amount available for borrowing under the Facility Agreement. The loan bears interest at a rate per annum equal to (i) the Euro InterBank Offered Rate (EURIBOR), provided that if such rate is less than zero, then EURIBOR shall be deemed to be zero, plus (ii) a margin of 1.875%, provided that if no event of default is continuing and Watts International’s consolidated leverage ratio is at a specified level, the margin shall decrease to 1.50%. Accrued interest on the loan is payable on the last day of each interest period. The first interest period is set at one month and may be changed subsequently to a period of one, two, or three months (or such other period agreed with all the lenders). The Facility Agreement matures on December 19, 2017, subject to the terms of the Facility Agreement. Substantially all of the proceeds of the borrowings made on December 20, 2016 under the Facility Agreement were used to pay down $113 million outstanding under the Revolving Credit Facility. The Company made payments on the Facility Agreement of approximately €101.0 million during the first half of 2017. As of July 2, 2017, there is €9.0 million outstanding on the Facility Agreement. On July 20, 2017, the Company paid off the remaining €9.0 million outstanding on the Facility Agreement. As of July 2, 2017, the Company had $297.3 million of unused and available credit under the Revolving Credit Facility and was in compliance with all covenants related to the Credit Agreement and the Facility Agreement. The Company is a party to a note agreement as further detailed in Note 10 of the Notes to Consolidated Financial Statements of the Annual Report on Form 10-K for the year ended December 31, 2016. This note agreement requires 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 July 2, 2017, the Company was in compliance with all covenants regarding this note agreement. |
Contingencies and Environmental
Contingencies and Environmental Remediation | 6 Months Ended |
Jul. 02, 2017 | |
Contingencies and Environmental Remediation | |
Contingencies and Environmental Remediation | 12. Contingencies and Environmental Remediation 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. Other than the items described below, significant commitments and contingencies at July 2, 2017 are consistent with those discussed in Note 14 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. As of July 2, 2017, the Company estimates that the aggregate amount of reasonably possible loss in excess of the amount accrued for its legal contingencies is approximately $4.6 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, 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, as they are resolved over time, is not likely to have a material adverse effect on the financial condition of the Company, though the outcome could be material to the Company’s operating results for any particular period depending, in part, upon the operating results for such period. Connector Class Actions In November and December 2014, Watts Water Technologies, Inc. and Watts Regulator Co. were named as defendants in three separate putative nationwide class action complaints (Meyers v. Watts Water Technologies, Inc., United States District Court for the Southern District of Ohio; Ponzo v. Watts Regulator Co., United States District Court for the District of Massachusetts; Sharp v. Watts Regulator Co., United States District Court for the District of Massachusetts) seeking to recover damages and other relief based on the alleged failure of water heater connectors. On June 26, 2015, plaintiffs in the three actions filed a consolidated amended complaint, under the case captioned Ponzo v. Watts Regulator Co., in the United States District Court for the District of Massachusetts (hereinafter “Ponzo”). Watts Water Technologies was voluntarily dismissed from the Ponzo case. The complaint seeks among other items, damages in an unspecified amount, replacement costs, injunctive relief, declaratory relief, and attorneys’ fees and costs. On August 7, 2015, the Company filed a motion to dismiss the complaint, which motion was mooted by the class settlements. In February 2015, Watts Regulator Co. was named as a defendant in a putative nationwide class action complaint (Klug v. Watts Water Technologies, Inc., et al., United States District Court for the District of Nebraska) seeking to recover damages and other relief based on the alleged failure of the Company’s Floodsafe connectors (hereinafter “Klug”). On June 26, 2015, the Company filed a partial motion to dismiss the complaint. In response, on July 17, 2015, plaintiff filed an amended complaint which added additional named plaintiffs and sought to correct deficiencies in the original complaint, Klug v. Watts Regulator Co., United States District Court for the District of Nebraska. The complaint seeks among other items, damages in an unspecified amount, injunctive relief, declaratory relief, and attorneys’ fees and costs. On July 31, 2015, the Company filed a partial motion to dismiss the complaint which was granted in part and denied in part on December 29, 2015. The Company answered the amended complaint on February 2, 2016. No formal discovery was conducted. The Company participated in mediation sessions of the Ponzo and Klug cases in December 2015 and January 2016. On February 16, 2016, the Company reached an agreement in principle to settle all claims. The proposed total settlement amount is $14 million, of which the Company is expected to pay approximately $4.1 million after insurance proceeds, of up to $9.9 million. The parties executed final written settlement agreements in April 2016. Motions for preliminary approval of the settlements were submitted on May 4, 2016 before the District of Nebraska Federal Court. On December 7, 2016, the Court issued an order preliminarily approving the settlements. After a fairness hearing held on April 12, 2017, the Court entered Final Orders and Judgments approving the settlements on April 13, 2017. No appeals were filed and the settlements became final on May 15, 2017. During the fourth quarter of 2015, the Company recorded a liability of $14 million related to the Ponzo and Klug matters of which $7.8 million was included in current liabilities and $6.2 million in other noncurrent liabilities. The liability was reduced by $8.7 million during the first six months of 2017 for $0.8 million in notice and claims administrator payments, counsel fees of $4.3 million and initial contributions to the class action fund of $3.6 million. The remaining liability of $5.3 million will be paid over three years. A $9. 5 million receivable was recorded in current assets related to insurance proceeds due as of December 31, 2015 and was subsequently increased in the first quarter of 2017 to $9.9 million based on costs incurred as of April 3, 2017. The Company received the $9.9 million insurance proceeds in the second quarter of 2017. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jul. 02, 2017 | |
Subsequent Events | |
Subsequent Events | 13. Subsequent Events On August 1, 2017, the Company declared a quarterly dividend of nineteen cents ($0.19) per share on each outstanding share of Class A common stock and Class B common stock payable on September 15, 2017 to stockholders of record on September 1, 2017. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 6 Months Ended |
Jul. 02, 2017 | |
Accounting Policies | |
Estimates | Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Shipping and Handling | Shipping and Handling Shipping and handling costs included in selling, general and administrative expense amounted to $13.0 million and $11.5 million for the second quarters of 2017 and 2016, respectively, |
Research and Development | Research and Development Research and development costs included in selling, general, and administrative expense amounted to $7.2 million and $6.4 million for the second quarters of 2017 and 2016, respectively |
Acquisitions (Tables)
Acquisitions (Tables) | 6 Months Ended |
Jul. 02, 2017 | |
Acquisitions | |
Summary of the value of assets and liabilities acquired | The following table summarizes the value of the assets and liabilities acquired (in millions): Accounts receivable $ 5.7 Inventory 12.7 Fixed assets 8.1 Other assets 2.8 Intangible assets 31.0 Goodwill 41.1 Accounts payable (4.0) Accrued expenses and other (9.2) Deferred tax liability (9.1) Purchase price $ 79.1 |
Goodwill & Intangibles (Tables)
Goodwill & Intangibles (Tables) | 6 Months Ended |
Jul. 02, 2017 | |
Goodwill and Intangibles | |
Changes in the carrying amount of goodwill by geographic segment | July 2, 2017 Gross Balance Accumulated Impairment Losses Net Goodwill Acquired Foreign Balance During Currency Balance Balance Impairment Balance January 1, the Translation July 2, January 1, Loss During July 2, July 2, 2017 Period (1) and Other 2017 2017 the Period 2017 2017 (in millions) Americas $ 434.7 2.0 0.3 437.0 $ (24.5) — (24.5) 412.5 Europe 234.9 — 8.8 243.7 (129.7) — (129.7) 114.0 APMEA 30.2 — 0.9 31.1 (12.9) — (12.9) 18.2 Total $ 699.8 2.0 10.0 711.8 $ (167.1) — (167.1) 544.7 (1) December 31, 2016 Gross Balance Accumulated Impairment Losses Net Goodwill Acquired Foreign Balance During Currency Balance Balance Impairment Balance January 1, the Translation December 31, January 1, Loss During December 31, December 31, 2016 Period and Other 2016 2016 the Period 2016 2016 (in millions) Americas $ 391.2 43.3 0.2 434.7 $ (24.5) — (24.5) 410.2 Europe 238.6 — (3.7) 234.9 (129.7) — (129.7) 105.2 APMEA 26.3 3.7 0.2 30.2 (12.9) — (12.9) 17.3 Total $ 656.1 47.0 (3.3) 699.8 $ (167.1) — (167.1) 532.7 |
Schedule of Intangible assets | July 2, 2017 December 31, 2016 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount (in millions) Patents $ 16.1 $ (15.0) $ 1.1 $ 16.1 $ (14.9) $ 1.2 Customer relationships 233.0 (125.3) 107.7 231.5 (117.3) 114.2 Technology 53.2 (21.2) 32.0 53.1 (19.2) 33.9 Trade names 25.4 (8.9) 16.5 25.1 (8.1) 17.0 Other 6.8 (6.0) 0.8 6.8 (5.9) 0.9 Total amortizable intangibles 334.5 (176.4) 158.1 332.6 (165.4) 167.2 Indefinite-lived intangible assets 36.5 — 36.5 35.3 — 35.3 $ 371.0 $ (176.4) $ 194.6 $ 367.9 $ (165.4) $ 202.5 |
Financial Instruments and Der23
Financial Instruments and Derivative Instruments (Tables) | 6 Months Ended |
Jul. 02, 2017 | |
Financial Instruments and Derivative Instruments | |
Schedule of carrying amount and estimated fair market value of the company's long-term debt, including current portion | July 2, December 31, 2017 2016 (in millions) Carrying amount $ 551.2 $ 653.6 Estimated fair value $ 553.9 $ 658.3 |
Schedule of fair value of financial assets and liabilities | Fair Value Measurement at July 2, 2017 Using: Quoted Prices in Active Significant Other Significant Markets for Identical Observable Unobservable Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) (in millions) Assets Plan asset for deferred compensation(1) $ 3.2 $ 3.2 $ — $ — Interest rate swaps (1) $ 3.8 $ — $ 3.8 $ — Total assets $ 7.0 $ 3.2 $ 3.8 $ — Liabilities Plan liability for deferred compensation(2) $ 3.2 $ 3.2 $ — $ — Redeemable financial instrument(3) $ 3.0 $ — $ — $ 3.0 Total liabilities $ 6.2 $ 3.2 $ — $ 3.0 Fair Value Measurements at December 31, 2016 Using: Quoted Prices in Active Significant Other Significant Markets for Identical Observable Unobservable Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) (in millions) Assets Plan asset for deferred compensation(1) $ 3.0 $ 3.0 $ — $ — Interest rate swaps (1) $ 4.6 $ — $ 4.6 $ Total assets $ 7.6 $ 3.0 $ 4.6 $ — Liabilities Plan liability for deferred compensation(2) $ 3.0 $ 3.0 $ — $ — Redeemable financial instrument(3) 5.8 — — 5.8 Total liabilities $ 8.8 $ 3.0 $ — $ 5.8 (1) (2) (3) |
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) | Total realized and unrealized Balance (gains) losses included in: Balance December 31, Net earnings Comprehensive July 2, 2016 Settlements Purchases adjustments income 2017 (in millions) Redeemable financial instrument $ 5.8 (2.9) $ — — $ 0.1 $ 3.0 |
Restructuring and Other Charg24
Restructuring and Other Charges, Net (Tables) | 6 Months Ended |
Jul. 02, 2017 | |
Restructuring | |
Summary of the pre-tax cost by restructuring program | Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) Restructuring costs: 2015 Actions $ 1.6 $ 0.8 $ 1.6 $ 1.8 Other Actions 0.1 2.4 0.6 2.8 Total restructuring charges $ 1.7 $ 3.2 $ 2.2 $ 4.6 |
Summary of recorded pre-tax restructuring and other charges, net by business segment | Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) Americas $ 1.4 $ 0.8 $ 1.9 $ 1.6 Europe 0.1 2.5 0.1 2.9 APMEA 0.2 — 0.2 0.2 Corporate — (0.1) — (0.1) Total $ 1.7 $ 3.2 $ 2.2 $ 4.6 |
2015 Actions | Americas and APMEA | |
Restructuring | |
Summary of total expected, incurred and remaining pre-tax restructuring costs | Facility Legal and Asset exit Severance consultancy write‑downs and other Total (in millions) Costs incurred—2015 $ 8.5 0.7 1.6 2.8 13.6 Costs incurred—2016 (1.5) 0.2 2.9 0.5 2.1 Costs incurred—first quarter 2017 — — — — — Costs incurred—second quarter 2017 0.2 — 1.2 0.2 1.6 Remaining costs to be incurred — 0.1 0.6 1.5 2.2 Total expected restructuring costs $ 7.2 $ 1.0 $ 6.3 $ 5.0 $ 19.5 |
Summary of restructuring reserve activity | The following table summarizes total restructuring costs incurred for the three and six months ended July 2, 2017, incurred program to date and expected remaining pre-tax restructuring costs by business segment for the Company’s Americas and APMEA 2015 transformation program: Second Quarter Ended Six Months Ended Total July 2, July 2, Incurred Remaining Expected 2017 2017 to Date costs Costs (in millions) APMEA $ 0.2 $ 0.2 $ 4.6 $ — $ 4.6 Americas 1.4 1.4 12.7 2.2 14.9 Total restructuring costs $ 1.6 $ 1.6 $ 17.3 $ 2.2 $ 19.5 Details of the restructuring reserve activity for the Company’s Americas and APMEA 2015 transformation program for the period ended July 2, 2017 are as follows: Facility Legal and Asset exit Severance consultancy write-downs and other Total (in millions) Balance at December 31, 2016 $ 1.2 $ — $ — $ — $ 1.2 Net pre-tax restructuring charges — — — — — Utilization and foreign currency impact (0.6) — — — (0.6) Balance at April 2, 2017 $ 0.6 $ — $ — $ — $ 0.6 Net pre-tax restructuring charges 0.2 — 1.2 0.2 1.6 Utilization and foreign currency impact (0.1) — (1.2) (0.2) (1.5) Balance at July 2, 2017 $ 0.7 $ — $ — $ — $ 0.7 |
Other Actions | |
Restructuring | |
Summary of restructuring reserve activity | The following table summarizes total expected, incurred and remaining pre-tax restructuring costs for the Europe 2015 restructuring actions: Facility Legal and Exit Severance consultancy and other Total (in millions) Costs incurred—2015 $ 6.6 $ — $ 0.3 $ 6.9 Costs incurred—2016 1.3 0.5 — 1.8 Adjustments to restructuring costs — first quarter 2017 (0.3) — — (0.3) Costs incurred—second quarter 2017 — — — — Remaining costs to be incurred 1.4 0.2 — 1.6 Total expected restructuring costs $ 9.0 $ 0.7 $ 0.3 $ 10.0 Details of the Company’s Europe 2015 restructuring reserve activity for the six months ended July 2, 2017 are as follows: Legal and Facility exit Severance Consultancy and other Total (in millions) Balance at December 31, 2016 $ 4.8 $ — $ — $ 4.8 Net pre-tax restructuring adjustments (0.3) — — (0.3) Utilization and foreign currency impact (0.9) — — (0.9) Balance at April 2, 2017 $ 3.6 $ — $ — $ 3.6 Net pre-tax restructuring charges — — — — Utilization and foreign currency impact (0.3) — — (0.3) Balance at July 2, 2017 $ 3.3 $ — $ — $ 3.3 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 6 Months Ended |
Jul. 02, 2017 | |
Earnings per Share | |
Summary of reconciliation of the calculation of earnings per share | For the Second Quarter Ended July 2, 2017 For the Second Quarter Ended July 3, 2016 Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Amounts in millions, except per share information) Basic EPS: Net income $ 27.2 34.5 $ 0.79 $ 28.6 34.5 $ 0.83 Effect of dilutive securities: Common stock equivalents — — Diluted EPS: Net income $ 27.2 34.5 $ 0.79 $ 28.6 34.5 $ 0.83 Options to purchase 0.1 million shares of Class A common stock were outstanding during the second quarters of 2017 and 2016, respectively, but were not included in the computation of diluted EPS because to do so would be anti-dilutive. For the Six Months Ended July 2, 2017 For the Six Months Ended July 3, 2016 Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Amounts in millions, except per share information) Basic EPS: Net income $ 48.9 34.5 $ 1.42 $ 44.8 34.4 $ 1.30 Effect of dilutive securities: Common stock equivalents — 0.1 Diluted EPS: Net income $ 48.9 34.5 $ 1.42 $ 44.8 34.5 $ 1.30 |
Summary of the cost and number of Class A common stock repurchased | For the Second Quarter Ended For the Second Quarter Ended July 2, 2017 July 3, 2016 Number of shares Cost of shares Number of shares Cost of shares repurchased repurchased repurchased repurchased (amounts in millions, except share amount) Total stock repurchased during the period: 72,674 $ 4.5 91,500 $ 5.2 For the Six Months Ended For the Six Months Ended July 2, 2017 July 3, 2016 Number of shares Cost of shares Number of shares Cost of shares repurchased repurchased repurchased repurchased (amounts in millions, except share amount) Total stock repurchased during the period: 141,786 $ 9.0 359,000 $ 17.6 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jul. 02, 2017 | |
Stock-Based Compensation | |
Schedule of stock-based compensation fair value assumptions | 2017 2016 Expected life (years) 3.0 3.0 Expected stock price volatility 25.0 % 24.8 % Expected dividend yield 1.2 % 1.3 % Risk-free interest rate 1.5 % 0.9 % |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jul. 02, 2017 | |
Segment Information | |
Summary of the Company's significant accounts and balances by segment, reconciled to the consolidated totals | Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) Net Sales Americas $ 250.5 $ 239.5 $ 479.2 $ 461.8 Europe 110.7 114.3 215.6 222.6 APMEA 17.3 17.3 30.9 30.9 Consolidated net sales $ 378.5 $ 371.1 $ 725.7 $ 715.3 Operating income (loss) Americas $ 39.6 $ 35.4 $ 70.7 $ 63.5 Europe 12.7 10.2 25.1 20.0 APMEA 1.8 9.8 2.8 11.5 Subtotal reportable segments 54.1 55.4 98.6 95.0 Corporate(*) (9.3) (9.7) (18.1) (18.1) Consolidated operating income 44.8 45.7 80.5 76.9 Interest income (0.2) (0.3) (0.4) (0.5) Interest expense 5.0 5.5 9.8 12.2 Other expense (income), net 0.2 (0.9) 0.5 (3.1) Income before income taxes $ 39.8 $ 41.4 $ 70.6 $ 68.3 Capital Expenditures Americas $ 3.8 $ 7.0 $ 8.1 $ 14.4 Europe 1.3 2.6 2.6 4.3 APMEA 0.1 0.4 0.3 0.5 Consolidated capital expenditures $ 5.2 $ 10.0 $ 11.0 $ 19.2 Depreciation and Amortization Americas $ 8.0 $ 6.7 $ 15.1 $ 13.3 Europe 4.6 4.9 8.9 9.8 APMEA 1.0 0.9 1.7 1.8 Consolidated depreciation and amortization $ 13.6 $ 12.5 $ 25.7 $ 24.9 Identifiable assets (at end of period) Americas $ 1,077.0 $ 1,000.5 Europe 523.2 594.3 APMEA 111.7 129.7 Consolidated identifiable assets $ 1,711.9 $ 1,724.5 Property, plant and equipment, net (at end of period) Americas $ 106.0 $ 95.3 Europe 78.4 81.4 APMEA 7.2 8.3 Consolidated property, plant and equipment, net $ 191.6 $ 185.0 * Corporate expenses are primarily for administrative compensation expense, compliance costs, professional fees, including corporate-related legal and audit expenses, shareholder services and benefit administration costs. |
Schedule of U.S. net sales of the Company's Americas segment | Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) U.S. net sales $ 234.9 $ 223.5 $ 448.6 $ 431.5 |
Schedule of intersegment sales for Americas, EMEA and Asia-Pacific | Second Quarter Ended Six Months Ended July 2, July 3, July 2, July 3, 2017 2016 2017 2016 (in millions) Intersegment Sales Americas $ 3.6 $ 3.4 $ 6.4 $ 6.2 Europe 4.0 3.0 7.9 5.8 APMEA 20.4 16.0 40.0 41.1 Intersegment sales $ 28.0 $ 22.4 $ 54.3 $ 53.1 |
Accumulated Other Comprehensi28
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Jul. 02, 2017 | |
Accumulated Other Comprehensive Loss | |
Schedule of amounts recognized in accumulated other comprehensive income (loss) | Accumulated Foreign Other Currency Cash Flow Comprehensive Translation Hedges Loss (in millions) Balance December 31, 2016 $ (153.7) $ 2.9 $ (150.8) Change in period 7.9 0.1 8.0 Balance April 2, 2017 $ (145.8) $ 3.0 $ (142.8) Change in period 21.5 (0.7) 20.8 Balance July 2, 2017 $ (124.3) $ 2.3 $ (122.0) Balance December 31, 2015 $ (128.2) $ — $ (128.2) Change in period 24.4 (0.2) 24.2 Balance April 03, 2016 $ (103.8) $ (0.2) $ (104.0) Change in period (12.2) (1.7) (13.9) Reversal of foreign currency translation (6.9) — (6.9) Balance July 03, 2016 $ (122.9) $ (1.9) $ (124.8) |
Basis of Presentation (Details)
Basis of Presentation (Details) | 6 Months Ended |
Jul. 02, 2017 | |
Basis of Presentation | |
Length of fiscal year | 365 days |
Length of fiscal quarter | 91 days |
Accounting Policies - Recently
Accounting Policies - Recently Adopted Accounting Standards (Details) - USD ($) $ in Millions | 6 Months Ended | |||
Jul. 03, 2016 | Jul. 02, 2017 | Jan. 01, 2017 | Dec. 31, 2016 | |
New Accounting Pronouncements | ||||
Tax benefit of stock awards exercised | $ 0.2 | |||
Non-current deferred tax asset | $ 2.7 | $ 3 | ||
Noncurrent deferred tax liability | $ 51.2 | 48.6 | ||
Previously Reported | ||||
New Accounting Pronouncements | ||||
Current deferred tax assets | 38.6 | |||
Non-current deferred tax asset | 1.5 | |||
Noncurrent deferred tax liability | 85.7 | |||
Accounting Standards Update 2015-17 | Adjustment | ||||
New Accounting Pronouncements | ||||
Non-current deferred tax asset | 1.5 | |||
Noncurrent deferred tax liability | $ 38.6 | |||
Accounting Standars Update 2016-09 | ||||
New Accounting Pronouncements | ||||
Cumulative effect adjustment | $ 0.5 |
Accounting Policies - Other (De
Accounting Policies - Other (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2017 | Jul. 03, 2016 | Jul. 02, 2017 | Jul. 03, 2016 | |
Shipping and Handling | ||||
Shipping and handling costs included in selling, general and administrative expense | $ 13 | $ 11.5 | $ 25 | $ 22.9 |
Research and Development | ||||
Research and development costs included in selling, general, and administrative expense | $ 7.2 | $ 6.4 | $ 14.3 | $ 13 |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Millions | Apr. 02, 2017 | Nov. 02, 2016 | Nov. 30, 2015 | Apr. 02, 2017 | Jul. 02, 2017 | Dec. 31, 2016 |
Acquisition | ||||||
Goodwill resulted through acquisition | $ 544.7 | $ 532.7 | ||||
Redeemable financial instrument | ||||||
Acquisition | ||||||
Liability recorded at acquisition date fair value | $ 3 | $ 5.8 | ||||
PVI Riverside Holdings, Inc Member | ||||||
Acquisition | ||||||
Outstanding shares acquired (as a percent) | 100.00% | |||||
Aggregate consideration, net | $ 79.1 | $ 79.1 | ||||
Goodwill resulted through acquisition | 41.1 | |||||
Purchase price allocated to intangible assets | 31 | |||||
Goodwill deductible for tax purposes | 6.9 | |||||
Accounts receivable | 5.7 | |||||
Inventory | 12.7 | |||||
Fixed assets | 8.1 | |||||
Other assets | 2.8 | |||||
Accounts payable | (4) | |||||
Accrued expenses and other | 9.2 | |||||
Deferred tax liability | (9.1) | |||||
PVI Riverside Holdings, Inc Member | Customer relationships | ||||||
Acquisition | ||||||
Purchase price allocated to intangible assets | 17.6 | |||||
PVI Riverside Holdings, Inc Member | Technology | ||||||
Acquisition | ||||||
Purchase price allocated to intangible assets | 10.2 | |||||
PVI Riverside Holdings, Inc Member | Trade name | ||||||
Acquisition | ||||||
Purchase price allocated to intangible assets | $ 3.2 | |||||
Apex | ||||||
Acquisition | ||||||
Outstanding shares acquired (as a percent) | 10.00% | 80.00% | 10.00% | |||
Aggregate consideration, net | $ 20.4 | $ 2.9 | ||||
Aggregate ownership percentage | 90.00% | |||||
Shares remaining to be acquired | 20.00% | 10.00% | ||||
Number of years of closing | 3 years | |||||
Liability recorded at acquisition date fair value | $ 3 | |||||
Apex | Redeemable financial instrument | ||||||
Acquisition | ||||||
Liability recorded at acquisition date fair value | $ 5.5 |
Goodwill and Intangibles - Good
Goodwill and Intangibles - Goodwill (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Jul. 02, 2017 | Dec. 31, 2016 | |
Gross Balance | ||
Balance at the beginning of the period | $ 699.8 | $ 656.1 |
Acquired During the Period | 2 | 47 |
Foreign Currency Translation and Other | 10 | (3.3) |
Balance at the end of the period | 711.8 | 699.8 |
Accumulated Impairment Losses | ||
Balance at the beginning of the period | (167.1) | (167.1) |
Balance at the end of the period | (167.1) | (167.1) |
Net Goodwill | 544.7 | 532.7 |
Americas | ||
Gross Balance | ||
Balance at the beginning of the period | 434.7 | 391.2 |
Acquired During the Period | 2 | 43.3 |
Foreign Currency Translation and Other | 0.3 | 0.2 |
Balance at the end of the period | 437 | 434.7 |
Accumulated Impairment Losses | ||
Balance at the beginning of the period | (24.5) | (24.5) |
Balance at the end of the period | (24.5) | (24.5) |
Net Goodwill | 412.5 | 410.2 |
Europe | ||
Gross Balance | ||
Balance at the beginning of the period | 234.9 | 238.6 |
Foreign Currency Translation and Other | 8.8 | (3.7) |
Balance at the end of the period | 243.7 | 234.9 |
Accumulated Impairment Losses | ||
Balance at the beginning of the period | (129.7) | (129.7) |
Balance at the end of the period | (129.7) | (129.7) |
Net Goodwill | 114 | 105.2 |
APMEA | ||
Gross Balance | ||
Balance at the beginning of the period | 30.2 | 26.3 |
Acquired During the Period | 3.7 | |
Foreign Currency Translation and Other | 0.9 | 0.2 |
Balance at the end of the period | 31.1 | 30.2 |
Accumulated Impairment Losses | ||
Balance at the beginning of the period | (12.9) | (12.9) |
Balance at the end of the period | (12.9) | (12.9) |
Net Goodwill | $ 18.2 | $ 17.3 |
Goodwill and Intangibles - Inta
Goodwill and Intangibles - Intangibles (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jul. 02, 2017 | Jul. 03, 2016 | Jul. 02, 2017 | Jul. 03, 2016 | Dec. 31, 2016 | |
Intangible assets subject to amortization | |||||
Gross Carrying Amount | $ 334.5 | $ 334.5 | $ 332.6 | ||
Accumulated Amortization | (176.4) | (176.4) | (165.4) | ||
Net Carrying Amount | 158.1 | 158.1 | 167.2 | ||
Indefinite-lived intangible assets | |||||
Indefinite-lived intangible assets | 36.5 | 36.5 | 35.3 | ||
Intangible assets | |||||
Gross Carrying Amount | 371 | 371 | 367.9 | ||
Net Carrying Amount | 194.6 | 194.6 | 202.5 | ||
Aggregate amortization expense for amortized intangible assets | 5.6 | $ 5.1 | 11.1 | $ 10.2 | |
Patents | |||||
Intangible assets subject to amortization | |||||
Gross Carrying Amount | 16.1 | 16.1 | 16.1 | ||
Accumulated Amortization | (15) | (15) | (14.9) | ||
Net Carrying Amount | 1.1 | 1.1 | 1.2 | ||
Customer relationships | |||||
Intangible assets subject to amortization | |||||
Gross Carrying Amount | 233 | 233 | 231.5 | ||
Accumulated Amortization | (125.3) | (125.3) | (117.3) | ||
Net Carrying Amount | 107.7 | 107.7 | 114.2 | ||
Technology | |||||
Intangible assets subject to amortization | |||||
Gross Carrying Amount | 53.2 | 53.2 | 53.1 | ||
Accumulated Amortization | (21.2) | (21.2) | (19.2) | ||
Net Carrying Amount | 32 | 32 | 33.9 | ||
Trade name | |||||
Intangible assets subject to amortization | |||||
Gross Carrying Amount | 25.4 | 25.4 | 25.1 | ||
Accumulated Amortization | (8.9) | (8.9) | (8.1) | ||
Net Carrying Amount | 16.5 | 16.5 | 17 | ||
Other | |||||
Intangible assets subject to amortization | |||||
Gross Carrying Amount | 6.8 | 6.8 | 6.8 | ||
Accumulated Amortization | (6) | (6) | (5.9) | ||
Net Carrying Amount | $ 0.8 | $ 0.8 | $ 0.9 |
Financial Instruments and Der35
Financial Instruments and Derivative Instruments - Fair Value (Details) - USD ($) $ in Millions | Jul. 02, 2017 | Dec. 31, 2016 |
Long-term debt | ||
Carrying amount | $ 551.2 | $ 653.6 |
Estimated fair value | $ 553.9 | $ 658.3 |
5.05% Senior notes due 2020 | ||
Senior notes | ||
Interest rate (as a percent) | 5.05% |
Financial Instruments and Der36
Financial Instruments and Derivative Instruments - Fair Value on a Recurring Basis (Details) - Fair value measured on a recurring basis - USD ($) $ in Millions | Jul. 02, 2017 | Dec. 31, 2016 |
Assets | ||
Plan assets for deferred compensation | $ 3.2 | $ 3 |
Total assets | 7 | 7.6 |
Liabilities | ||
Plan liabilities for deferred compensation | 3.2 | 3 |
Redeemable financial instrument | 3 | 5.8 |
Total liabilities | 6.2 | 8.8 |
Interest Rate Swaps | ||
Assets | ||
Derivative outstanding | 3.8 | 4.6 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets | ||
Plan assets for deferred compensation | 3.2 | 3 |
Total assets | 3.2 | 3 |
Liabilities | ||
Plan liabilities for deferred compensation | 3.2 | 3 |
Total liabilities | 3.2 | 3 |
Significant Other Observable Inputs (Level 2) | ||
Assets | ||
Total assets | 3.8 | 4.6 |
Significant Other Observable Inputs (Level 2) | Interest Rate Swaps | ||
Assets | ||
Derivative outstanding | 3.8 | 4.6 |
Significant Unobservable Inputs (Level 3) | ||
Liabilities | ||
Redeemable financial instrument | 3 | 5.8 |
Total liabilities | $ 3 | $ 5.8 |
Financial Instruments and Der37
Financial Instruments and Derivative Instruments - Change in Fair value (Details) - USD ($) $ in Millions | Nov. 30, 2015 | Apr. 02, 2017 | Jul. 02, 2017 | Jul. 02, 2017 | Nov. 30, 2015 |
Apex | |||||
Reconciliation of changes in fair value of all financial assets and liabilities | |||||
Balance at the ending of the period | $ 3 | ||||
Liability recorded at acquisition date fair value | 3 | $ 3 | |||
Shares remaining to be acquired | 10.00% | 20.00% | |||
Outstanding shares acquired (as a percent) | 10.00% | 80.00% | |||
Purchase price | $ 20.4 | $ 2.9 | |||
Redeemable financial instrument | |||||
Reconciliation of changes in fair value of all financial assets and liabilities | |||||
Balance at the beginning of the period | 5.8 | 5.8 | |||
Settlements | (2.9) | ||||
Total realized and unrealized (gains) losses included in Comprehensive income | 0.1 | ||||
Balance at the ending of the period | 3 | ||||
Liability recorded at acquisition date fair value | $ 5.8 | $ 5.8 | $ 3 | ||
Redeemable financial instrument | Apex | |||||
Reconciliation of changes in fair value of all financial assets and liabilities | |||||
Balance at the ending of the period | 5.5 | ||||
Liability recorded at acquisition date fair value | $ 5.5 | $ 5.5 |
Financial Instruments and Der38
Financial Instruments and Derivative Instruments - Interest Rate Swaps and Non-Designated Cash Flow Hedge (Details) $ in Millions | Feb. 12, 2016USD ($)item | Apr. 02, 2017USD ($)item | Dec. 31, 2016item | Jul. 03, 2016USD ($) | Jul. 02, 2017USD ($) | Jul. 03, 2016USD ($) |
Term loan facility | Term Loan due February 2021 | ||||||
Interest Rate Swaps | ||||||
Face amount | $ 300 | |||||
Amount drawn | $ 300 | |||||
Senior unsecured revolving credit facility | ||||||
Interest Rate Swaps | ||||||
Amount drawn | 177 | |||||
Borrowing capacity | $ 500 | |||||
Forward exchange contracts | Non designated | ||||||
Interest Rate Swaps | ||||||
Number of derivative contracts entered | item | 1 | 1 | ||||
Forward exchange contracts | Non designated | Cash Flow Hedging | ||||||
Amount of Gain or (Loss) Recognized in Income on Derivatives | ||||||
Gain from derivatives recorded in statement of operations | $ (1.3) | (2.1) | ||||
Interest Rate Swaps | Designated | Cash Flow Hedging | ||||||
Interest Rate Swaps | ||||||
Number of derivative contracts entered | item | 2 | |||||
Derivative fixed interest rate | 1.31375% | |||||
Derivative notional amount | $ 225 | |||||
Gain (loss) recognized in Accumulated Other Comprehensive Loss, effective portion | $ 0.8 | $ 1.7 | $ (0.6) | $ 1.9 | ||
Interest Rate Swaps | Designated | Cash Flow Hedging | LIBOR | ||||||
Interest Rate Swaps | ||||||
Derivative, floor interest rate | 0.00% |
Restructuring and Other Charg39
Restructuring and Other Charges, Net (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2017 | Apr. 02, 2017 | Jul. 03, 2016 | Jul. 02, 2017 | Jul. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Restructuring | |||||||
Costs incurred | $ 1.7 | $ 3.2 | $ 2.2 | $ 4.6 | |||
Pre-tax restructuring charges, net | 1.7 | 3.2 | 2.2 | 4.6 | |||
Gain on sale of manufacturing facility | 8.3 | ||||||
Corporate | |||||||
Restructuring | |||||||
Pre-tax restructuring charges, net | (0.1) | (0.1) | |||||
Americas | |||||||
Restructuring | |||||||
Pre-tax restructuring charges, net | 1.4 | 0.8 | 1.9 | 1.6 | |||
Europe | |||||||
Restructuring | |||||||
Pre-tax restructuring charges, net | 0.1 | 2.5 | 0.1 | 2.9 | |||
APMEA | |||||||
Restructuring | |||||||
Pre-tax restructuring charges, net | 0.2 | 0.2 | 0.2 | ||||
2015 Actions | |||||||
Restructuring | |||||||
Pre-tax restructuring charges, net | 1.6 | 0.8 | 1.6 | 1.8 | |||
2015 Actions | Americas | |||||||
Restructuring | |||||||
Costs incurred | 1.4 | 1.4 | |||||
Total expected restructuring costs | 14.9 | 14.9 | |||||
Reduction of area of space (as a percent) | 30.00% | ||||||
Remaining costs | 2.2 | ||||||
Pre-tax program to date restructuring and other charges incurred | 12.7 | 12.7 | |||||
2015 Actions | Europe | |||||||
Restructuring | |||||||
Costs incurred | $ (0.3) | $ 1.8 | $ 6.9 | ||||
Remaining costs to be incurred | 1.6 | 1.6 | |||||
Total expected restructuring costs | 10 | 10 | |||||
2015 Actions | Europe | Severance | |||||||
Restructuring | |||||||
Costs incurred | $ (0.3) | 1.3 | 6.6 | ||||
Remaining costs to be incurred | 1.4 | 1.4 | |||||
Total expected restructuring costs | 9 | 9 | |||||
2015 Actions | APMEA | |||||||
Restructuring | |||||||
Costs incurred | 0.2 | 0.2 | |||||
Elimination of net sales | 165 | ||||||
Total expected restructuring costs | 4.6 | 4.6 | |||||
Pre-tax program to date restructuring and other charges incurred | 4.6 | 4.6 | |||||
2015 Actions | Americas and APMEA | |||||||
Restructuring | |||||||
Costs incurred | 1.6 | 1.6 | 2.1 | 13.6 | |||
Remaining costs to be incurred | 2.2 | 2.2 | |||||
Total expected restructuring costs | 19.5 | 19.5 | |||||
Goodwill and intangible asset impairment charges | 13.5 | ||||||
Other transformation and deployment costs | 32 | ||||||
Remaining costs | 2.2 | ||||||
Pre-tax program to date restructuring and other charges incurred | 17.3 | 17.3 | |||||
2015 Actions | Americas and APMEA | Minimum | |||||||
Restructuring | |||||||
Expected pre-tax program to date restructuring and other charges incurred | 65 | ||||||
2015 Actions | Americas and APMEA | Severance | |||||||
Restructuring | |||||||
Costs incurred | 0.2 | $ (1.5) | $ 8.5 | ||||
Total expected restructuring costs | 7.2 | 7.2 | |||||
Other Actions | |||||||
Restructuring | |||||||
Net pre-tax restructuring charges | 0.1 | 2.4 | 0.6 | 2.8 | |||
Pre-tax restructuring charges, net | 0.1 | $ 2.4 | 0.6 | $ 2.8 | |||
Other Actions | Europe | |||||||
Restructuring | |||||||
Costs incurred | 8.4 | ||||||
Total expected restructuring costs | $ 10 | $ 10 |
Restructuring and Other Charg40
Restructuring and Other Charges, Net (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2017 | Apr. 02, 2017 | Jul. 03, 2016 | Jul. 02, 2017 | Jul. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | $ 1.7 | $ 3.2 | $ 2.2 | $ 4.6 | |||
Restructuring reserve | |||||||
Costs incurred | 1.7 | 3.2 | 2.2 | 4.6 | |||
2015 Actions | Americas | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | 1.4 | 1.4 | |||||
Incurred to Date | 12.7 | 12.7 | |||||
Remaining costs | 2.2 | ||||||
Total expected restructuring costs | 14.9 | 14.9 | |||||
Restructuring reserve | |||||||
Costs incurred | 1.4 | 1.4 | |||||
2015 Actions | Europe | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | $ (0.3) | $ 1.8 | $ 6.9 | ||||
Remaining costs to be incurred | 1.6 | 1.6 | |||||
Total expected restructuring costs | 10 | 10 | |||||
Restructuring reserve | |||||||
Balance at the beginning of the period | 3.6 | 4.8 | 4.8 | ||||
Costs incurred | (0.3) | 1.8 | 6.9 | ||||
Utilization and foreign currency impact | (0.3) | (0.9) | |||||
Balance at the end of the period | 3.3 | 3.6 | 3.3 | 4.8 | |||
2015 Actions | Europe | Severance | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | (0.3) | 1.3 | 6.6 | ||||
Remaining costs to be incurred | 1.4 | 1.4 | |||||
Total expected restructuring costs | 9 | 9 | |||||
Restructuring reserve | |||||||
Balance at the beginning of the period | 3.6 | 4.8 | 4.8 | ||||
Costs incurred | (0.3) | 1.3 | 6.6 | ||||
Utilization and foreign currency impact | (0.3) | (0.9) | |||||
Balance at the end of the period | 3.3 | 3.6 | 3.3 | 4.8 | |||
2015 Actions | Europe | Legal and consultancy | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | 0.5 | ||||||
Remaining costs to be incurred | 0.2 | 0.2 | |||||
Total expected restructuring costs | 0.7 | 0.7 | |||||
Restructuring reserve | |||||||
Costs incurred | 0.5 | ||||||
2015 Actions | Europe | Facility exit and other | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | 0.3 | ||||||
Total expected restructuring costs | 0.3 | 0.3 | |||||
Restructuring reserve | |||||||
Costs incurred | 0.3 | ||||||
2015 Actions | Americas and APMEA | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | 1.6 | 1.6 | 2.1 | 13.6 | |||
Incurred to Date | 17.3 | 17.3 | |||||
Remaining costs | 2.2 | ||||||
Remaining costs to be incurred | 2.2 | 2.2 | |||||
Total expected restructuring costs | 19.5 | 19.5 | |||||
Restructuring reserve | |||||||
Balance at the beginning of the period | 0.6 | 1.2 | 1.2 | ||||
Costs incurred | 1.6 | 1.6 | 2.1 | 13.6 | |||
Utilization and foreign currency impact | (1.5) | (0.6) | |||||
Balance at the end of the period | 0.7 | 0.6 | 0.7 | 1.2 | |||
2015 Actions | Americas and APMEA | Severance | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | 0.2 | (1.5) | 8.5 | ||||
Total expected restructuring costs | 7.2 | 7.2 | |||||
Restructuring reserve | |||||||
Balance at the beginning of the period | 0.6 | 1.2 | 1.2 | ||||
Costs incurred | 0.2 | (1.5) | 8.5 | ||||
Utilization and foreign currency impact | (0.1) | (0.6) | |||||
Balance at the end of the period | 0.7 | $ 0.6 | 0.7 | 1.2 | |||
2015 Actions | Americas and APMEA | Legal and consultancy | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | 0.2 | 0.7 | |||||
Remaining costs to be incurred | 0.1 | 0.1 | |||||
Total expected restructuring costs | 1 | 1 | |||||
Restructuring reserve | |||||||
Costs incurred | 0.2 | 0.7 | |||||
2015 Actions | Americas and APMEA | Asset write-downs | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | 1.2 | 2.9 | 1.6 | ||||
Remaining costs to be incurred | 0.6 | 0.6 | |||||
Total expected restructuring costs | 6.3 | 6.3 | |||||
Restructuring reserve | |||||||
Costs incurred | 1.2 | 2.9 | 1.6 | ||||
Utilization and foreign currency impact | (1.2) | ||||||
2015 Actions | Americas and APMEA | Facility exit and other | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | 0.2 | 0.5 | 2.8 | ||||
Remaining costs to be incurred | 1.5 | 1.5 | |||||
Total expected restructuring costs | 5 | 5 | |||||
Restructuring reserve | |||||||
Costs incurred | 0.2 | $ 0.5 | $ 2.8 | ||||
Utilization and foreign currency impact | (0.2) | ||||||
Other Actions | |||||||
Restructuring reserve | |||||||
Net pre-tax restructuring charges | 0.1 | $ 2.4 | 0.6 | $ 2.8 | |||
Other Actions | Europe | |||||||
Summary of total expected, incurred and remaining pre-tax costs | |||||||
Costs incurred | 8.4 | ||||||
Total expected restructuring costs | $ 10 | 10 | |||||
Restructuring reserve | |||||||
Costs incurred | $ 8.4 |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jul. 02, 2017 | Jul. 03, 2016 | Jul. 02, 2017 | Jul. 03, 2016 | Jul. 27, 2015 | |
Net (loss) income | |||||
Net income | $ 27.2 | $ 28.6 | $ 48.9 | $ 44.8 | |
Shares | |||||
Shares (in shares) | 34,500,000 | 34,500,000 | 34,500,000 | 34,400,000 | |
Per Share Amount | |||||
Net income (in dollars per share) | $ 0.79 | $ 0.83 | $ 1.42 | $ 1.30 | |
Dilutive securities, principally common stock options | |||||
Common stock equivalents (in shares) | 100,000 | ||||
Net (loss) income | |||||
Net income | $ 27.2 | $ 28.6 | $ 48.9 | $ 44.8 | |
Weighted average number of shares: | |||||
Shares (in shares) | 34,500,000 | 34,500,000 | 34,500,000 | 34,500,000 | |
Securities not included in the computation of diluted EPS | |||||
Net income (in dollars per share) | $ 0.79 | $ 0.83 | $ 1.42 | $ 1.30 | |
Shares repurchased | |||||
Options to purchase shares of Class A common stock | 100,000 | 100,000 | 200,000 | ||
Number of shares repurchased | 141,786 | 359,000 | |||
Cost of shares repurchased | $ 9 | $ 17.6 | |||
Class A | |||||
Shares repurchased | |||||
Total value of shares of the entity's Class A common stock authorized to be repurchased | $ 100 | ||||
Remaining authorized repurchase amount | $ 47.1 | $ 47.1 | |||
July 27, 2015 | Class A | |||||
Shares repurchased | |||||
Number of shares repurchased | 91,500 | 72,674 | |||
Cost of shares repurchased | $ 5.2 | $ 4.5 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - $ / shares | 6 Months Ended | 12 Months Ended | |
Jul. 02, 2017 | Jul. 03, 2016 | Dec. 31, 2016 | |
Second Amended and Restated 2004 Stock Incentive Plan | Restricted stock | |||
Stock-based compensation | |||
Granted (in shares) | 115,408 | 110,295 | |
Second Amended and Restated 2004 Stock Incentive Plan | Restricted stock | Maximum | |||
Stock-based compensation | |||
Vesting period | 3 years | ||
Vesting rate per year for maximum vesting period | 0.33 | ||
Second Amended and Restated 2004 Stock Incentive Plan | Deferred shares | |||
Stock-based compensation | |||
Vesting period | 3 years | ||
Vesting rate per year for maximum vesting period | 0.33 | ||
Second Amended and Restated 2004 Stock Incentive Plan | Performance stock units | |||
Stock-based compensation | |||
Granted (in shares) | 98,812 | 106,724 | |
Management Stock Purchase Plan | Class A | |||
Stock-based compensation | |||
Purchase price as percentage of fair market value of common stock on grant date | 80.00% | 67.00% | |
Shares authorized | 2,000,000 | ||
Management Stock Purchase Plan | Restricted stock units (RSUs) | |||
Stock-based compensation | |||
Granted (in shares) | 47,222 | 88,882 | |
Fair value assumptions | |||
Expected life (years) | 3 years | 3 years | |
Expected stock price volatility (as a percent) | 25.00% | 24.80% | |
Expected dividend yield (as a percent) | 1.20% | 1.30% | |
Risk-free interest rate (as a percent) | 1.50% | 0.90% | |
Weighted average grant-date fair value (in dollars per share) | $ 16.84 | $ 18.15 | |
Management Stock Purchase Plan | Restricted stock units (RSUs) | Minimum | |||
Stock-based compensation | |||
Vesting period | 3 years |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jul. 02, 2017USD ($) | Jul. 03, 2016USD ($) | Jul. 02, 2017USD ($)item | Jul. 03, 2016USD ($) | Dec. 31, 2016USD ($) | |
Segment information | |||||
Number of geographic segments | item | 3 | ||||
Net Sales | $ 378.5 | $ 371.1 | $ 725.7 | $ 715.3 | |
Consolidated operating income (loss) | 44.8 | 45.7 | 80.5 | 76.9 | |
Interest income | (0.2) | (0.3) | (0.4) | (0.5) | |
Interest expense | 5 | 5.5 | 9.8 | 12.2 | |
Other expense (income), net | 0.2 | (0.9) | 0.5 | (3.1) | |
INCOME BEFORE INCOME TAXES | 39.8 | 41.4 | 70.6 | 68.3 | |
Capital Expenditures | 5.2 | 10 | 11 | 19.2 | |
Depreciation and Amortization | 13.6 | 12.5 | 25.7 | 24.9 | |
Identifiable assets (at end of period) | 1,711.9 | 1,724.5 | 1,711.9 | 1,724.5 | $ 1,763.2 |
Property, plant and equipment, net (at end of period) | 191.6 | 185 | 191.6 | 185 | $ 189.7 |
U.S. | |||||
Segment information | |||||
Property, plant and equipment, net (at end of period) | 102.3 | 91.5 | 102.3 | 91.5 | |
Reportable segments | |||||
Segment information | |||||
Consolidated operating income (loss) | 54.1 | 55.4 | 98.6 | 95 | |
Corporate | |||||
Segment information | |||||
Consolidated operating income (loss) | (9.3) | (9.7) | (18.1) | (18.1) | |
Intersegment sales | |||||
Segment information | |||||
Net Sales | 28 | 22.4 | 54.3 | 53.1 | |
Americas | |||||
Segment information | |||||
Net Sales | 250.5 | 239.5 | 479.2 | 461.8 | |
Capital Expenditures | 3.8 | 7 | 8.1 | 14.4 | |
Depreciation and Amortization | 8 | 6.7 | 15.1 | 13.3 | |
Identifiable assets (at end of period) | 1,077 | 1,000.5 | 1,077 | 1,000.5 | |
Property, plant and equipment, net (at end of period) | 106 | 95.3 | 106 | 95.3 | |
Americas | U.S. | |||||
Segment information | |||||
Net Sales | 234.9 | 223.5 | 448.6 | 431.5 | |
Americas | Reportable segments | |||||
Segment information | |||||
Consolidated operating income (loss) | 39.6 | 35.4 | 70.7 | 63.5 | |
Americas | Intersegment sales | |||||
Segment information | |||||
Net Sales | 3.6 | 3.4 | 6.4 | 6.2 | |
Europe | |||||
Segment information | |||||
Net Sales | 110.7 | 114.3 | 215.6 | 222.6 | |
Capital Expenditures | 1.3 | 2.6 | 2.6 | 4.3 | |
Depreciation and Amortization | 4.6 | 4.9 | 8.9 | 9.8 | |
Identifiable assets (at end of period) | 523.2 | 594.3 | 523.2 | 594.3 | |
Property, plant and equipment, net (at end of period) | 78.4 | 81.4 | 78.4 | 81.4 | |
Europe | Reportable segments | |||||
Segment information | |||||
Consolidated operating income (loss) | 12.7 | 10.2 | 25.1 | 20 | |
Europe | Intersegment sales | |||||
Segment information | |||||
Net Sales | 4 | 3 | 7.9 | 5.8 | |
APMEA | |||||
Segment information | |||||
Net Sales | 17.3 | 17.3 | 30.9 | 30.9 | |
Capital Expenditures | 0.1 | 0.4 | 0.3 | 0.5 | |
Depreciation and Amortization | 1 | 0.9 | 1.7 | 1.8 | |
Identifiable assets (at end of period) | 111.7 | 129.7 | 111.7 | 129.7 | |
Property, plant and equipment, net (at end of period) | 7.2 | 8.3 | 7.2 | 8.3 | |
APMEA | Reportable segments | |||||
Segment information | |||||
Consolidated operating income (loss) | 1.8 | 9.8 | 2.8 | 11.5 | |
APMEA | Intersegment sales | |||||
Segment information | |||||
Net Sales | $ 20.4 | $ 16 | $ 40 | $ 41.1 |
Accumulated Other Comprehensi44
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jul. 02, 2017 | Apr. 02, 2017 | Jul. 03, 2016 | Apr. 03, 2016 | Jul. 03, 2016 | |
Changes in accumulated other comprehensive income (loss) | |||||
Balance at the beginning of the period | $ (150.8) | ||||
Reversal of foreign currency translation | $ (6.9) | $ (6.9) | |||
Balance at the end of the period | $ (122) | ||||
Foreign Currency Translation | |||||
Changes in accumulated other comprehensive income (loss) | |||||
Balance at the beginning of the period | (145.8) | (153.7) | (103.8) | $ (128.2) | (128.2) |
Change in period | 21.5 | 7.9 | (12.2) | 24.4 | |
Reversal of foreign currency translation | (6.9) | ||||
Balance at the end of the period | (124.3) | (145.8) | (122.9) | (103.8) | (122.9) |
Cash Flow Hedges | |||||
Changes in accumulated other comprehensive income (loss) | |||||
Balance at the beginning of the period | 3 | 2.9 | (0.2) | ||
Change in period | (0.7) | 0.1 | (1.7) | (0.2) | |
Balance at the end of the period | 2.3 | 3 | (1.9) | (0.2) | (1.9) |
Accumulated Other Comprehensive Income (Loss) | |||||
Changes in accumulated other comprehensive income (loss) | |||||
Balance at the beginning of the period | (142.8) | (150.8) | (104) | (128.2) | (128.2) |
Change in period | 20.8 | 8 | (13.9) | 24.2 | |
Reversal of foreign currency translation | (6.9) | ||||
Balance at the end of the period | $ (122) | $ (142.8) | $ (124.8) | $ (104) | $ (124.8) |
Debt - Credit Agreement (Detail
Debt - Credit Agreement (Details) € in Millions | Jul. 20, 2017EUR (€) | Dec. 20, 2016USD ($) | Dec. 16, 2016USD ($) | Feb. 12, 2016USD ($) | Apr. 02, 2017USD ($) | Jul. 02, 2017USD ($) | Jul. 02, 2017EUR (€) | Jul. 02, 2017USD ($) | Dec. 16, 2016EUR (€) | Jul. 03, 2016USD ($) |
Credit Agreement | ||||||||||
Stand-by letters of credit outstanding | $ 25,700,000 | $ 24,900,000 | ||||||||
Letters of credit | ||||||||||
Credit Agreement | ||||||||||
Term of debt | 1 year | |||||||||
Credit Agreement | ||||||||||
Credit Agreement | ||||||||||
Term of debt | 5 years | |||||||||
Sublimit on letters of credit | $ 100,000,000 | |||||||||
Eurocurrency rate loans | LIBOR | Minimum | ||||||||||
Credit Agreement | ||||||||||
Interest rate added to base rate (as a percent) | 0.975% | |||||||||
Eurocurrency rate loans | LIBOR | Maximum | ||||||||||
Credit Agreement | ||||||||||
Interest rate added to base rate (as a percent) | 1.45% | |||||||||
Base rate loans and swing line loans | LIBOR | ||||||||||
Credit Agreement | ||||||||||
Interest rate added to base rate (as a percent) | 1.00% | 1.00% | ||||||||
Base rate loans and swing line loans | LIBOR | Minimum | ||||||||||
Credit Agreement | ||||||||||
Interest rate added to base rate (as a percent) | 0.00% | |||||||||
Base rate loans and swing line loans | LIBOR | Maximum | ||||||||||
Credit Agreement | ||||||||||
Interest rate added to base rate (as a percent) | 0.45% | |||||||||
Base rate loans and swing line loans | Federal funds | ||||||||||
Credit Agreement | ||||||||||
Interest rate added to base rate (as a percent) | 0.50% | 0.50% | ||||||||
Senior unsecured revolving credit facility | ||||||||||
Credit Agreement | ||||||||||
Borrowing capacity | $ 500,000,000 | |||||||||
Amount drawn | $ 177,000,000 | |||||||||
Interest rate on revolving credit facility (as a percent) | 2.42% | 2.42% | ||||||||
Unused and available credit under the credit agreement | $ 297,300,000 | |||||||||
Repayment of debt | $ 113,000,000 | |||||||||
Term loan facility | Term Loan due February 2021 | ||||||||||
Credit Agreement | ||||||||||
Term of debt | 5 years | |||||||||
Face amount | $ 300,000,000 | |||||||||
Interest rate on term loan facility (as a percent) | 2.68% | 2.68% | ||||||||
First year (as a percent) | 0.00% | |||||||||
Second and third years (as a percent) | 7.50% | |||||||||
Fourth and fifth years (as a percent) | 10.00% | |||||||||
Amount drawn | $ 300,000,000 | |||||||||
Borrowings outstanding | $ 288,800,000 | $ 300,000,000 | ||||||||
Repayment of debt | $ 11,200,000 | |||||||||
Term loan facility | LIBOR | Minimum | Term Loan due February 2021 | ||||||||||
Credit Agreement | ||||||||||
Interest rate added to base rate (as a percent) | 1.125% | |||||||||
Term loan facility | LIBOR | Maximum | Term Loan due February 2021 | ||||||||||
Credit Agreement | ||||||||||
Interest rate added to base rate (as a percent) | 1.75% | |||||||||
Facility Agreement | Watts International | ||||||||||
Credit Agreement | ||||||||||
Borrowing capacity | € | € 110 | |||||||||
Term of debt | 364 days | |||||||||
Borrowings outstanding | € | € 9 | |||||||||
Repayment of debt | € | € 9 | |||||||||
Frequency of interest payment, first option | 1 month | |||||||||
Frequency of interest payment, second option | 2 months | |||||||||
Frequency of interest payment, third option | 3 months | |||||||||
Facility Agreement | Euro Libor | Watts International | ||||||||||
Credit Agreement | ||||||||||
Minimum base rate (as a percent) | $ 0 | |||||||||
Interest rate added to base rate (as a percent) | 1.875% | |||||||||
Interest rate added to base rate, no default (as a percent) | 1.50% |
Contingencies and Environment46
Contingencies and Environmental Remediation (Details) $ in Millions | Feb. 16, 2016USD ($) | Dec. 31, 2014item | Jul. 02, 2017USD ($) | Jul. 02, 2017USD ($) | Apr. 02, 2017USD ($) | Dec. 31, 2015USD ($) |
Litigation contingencies | ||||||
Possible loss | $ 4.6 | $ 4.6 | ||||
Connector Class Action | ||||||
Litigation contingencies | ||||||
Number of class action complaints | item | 3 | |||||
Total settlement amount on proposed litigation | $ 14 | |||||
Possible loss on proposed estimate | 4.1 | |||||
Estimated insurance receivable | $ 9.9 | |||||
Liability recorded | 5.3 | 5.3 | $ 14 | |||
Liability recorded, current | 7.8 | |||||
Liability recorded, noncurrent | 6.2 | |||||
Insurance proceeds, current assets | $ 9.9 | $ 9.5 | ||||
Receivable receipts for insurance proceeds | $ 9.9 | |||||
Reduction in liability | 8.7 | |||||
Notice and claims administrator payments | 0.8 | |||||
Counsel fee payments | 4.3 | |||||
Contributions to the class action fund | $ 3.6 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent event | Aug. 01, 2017$ / shares |
Class A | |
Subsequent events | |
Quarterly dividend payable (in dollars per share) | $ 0.19 |
Class B | |
Subsequent events | |
Quarterly dividend payable (in dollars per share) | $ 0.19 |