Exhibit 99.1
WATTS REPORTS
FOURTH QUARTER AND FISCAL YEAR EARNINGS
North Andover, MA...February 6, 2001. Watts Industries, Inc. (NYSE Symbol "WTS")
today announced that it met consensus earnings estimates of $.28 per share for
continuing operations for its fourth quarter ended December 31, 2000.
Net income from continuing operations was $7,534,000 for the quarter ended
December 31, 2000 compared to $7,426,000 for the fourth quarter of 1999, an
increase of one (1) percent. This increase in profits was achieved in spite of a
slight decline in net sales. Net sales declined $2,035,000 (2%) to $127,609,000
for the fourth quarter of 2000 from $129,644,000 for the comparable period a
year ago. Diluted earnings per share for continuing operations were $.28 for the
fourth quarter of 2000 compared to $.28 for the fourth quarter of last year.
Watts Chairman and Chief Executive Officer, Timothy P. Horne said, "The trends
we discussed in our third quarter earnings release regarding a soft domestic
housing market continued into the fourth quarter. This softness adversely
affects sales to our plumbing and heating wholesalers. We were pleased however
that sales into the retail market increased by 9% in the quarter, led by the
Watts Regulator Company. The Company now derives more than 20% of its revenue in
Europe, and the Euro has depreciated approximately 15% versus last year's
quarter ended December 31. The weaker Euro had an adverse impact on sales of
$4,145,000 and on earnings of $.01 per share for the quarter. The acquisitions
of Spacemaker and Heatway, during the current fiscal year, have helped to
partially offset the soft housing market and the weaker Euro.
Net income from continuing operations for the 12 months ended December 31,
2000 increased $474,000 (2%) to $31,171,000 compared to $30,697,000 for last
fiscal year. Diluted earnings per share for continuing operations were $1.17 for
the twelve months ended December 31, 2000 compared to $1.15 for last fiscal
year. Net sales for the twelve month period ended December 31, 2000 increased 1%
to $516,100,000 compared to $509,656,000 for the last fiscal year."
Commenting on the full year results, Mr. Horne stated further, "We are
pleased that our sales into the retail market have increased 12% for the year
ended December 31, 2000 compared to 1999. The strength that we have seen in this
sector along with the contribution from the acquisitions of Heatway, Spacemaker,
and Cazzaniga have helped to offset in part the sluggish domestic wholesale
market and the unfavorable impact of the European exchange rates. The weaker
Euro has had an adverse impact on sales of $15,958,000 and on earnings per share
of $.05 per share for the twelve months ended December 31, 2000. Our operating
earnings have increased from 11.0% of sales in fiscal 1999 to 11.6% of sales in
fiscal 2000. This increase in operating earnings is due to the successful
integration of the acquisition of Cazzaniga, which was acquired in March 1999,
and cost reductions implemented during the current year.
The Company's continued emphasis on asset management has increased free
cash flow from continuing operations from $8,616,000 for the twelve
months ended December 31, 1999 to $36,409,000 for the 12 months ended December
31, 2000. The Company has also increased earnings before interest, taxes,
depreciation and amortization (EBITDA) for continuing operations by 7% from
$73,195,000 for the twelve months ended December 31, 1999 compared to
$78,353,000 for the twelve months ended December 31, 2000. This improvement in
cash flow has enabled the Company to reduce its long-term debt by $21,430,000
during fiscal year 2000 while at the same time funding and completing the
acquisitions of Spacemaker and Heatway. The Company's debt to capital employed
ratio has improved from 37.1% at December 31, 1999 to 31.4% at December 31,
2000."
On October 18, 1999 the Company completed the spin-off of its industrial
oil and gas group into a separate company. Accordingly, the Company has treated
the industrial oil and gas group as discontinued operations for accounting
purposes. In the twelve month period ended December 31, 1999 the Company
recognized certain costs associated with the execution of this transaction
against the income of the industrial oil and gas group. Excluding the cost of
this transaction, net earnings from discontinued operations in the twelve month
period ended December 31, 1999 were $8,456,000.
During the quarter ended December 31, 2000, the Company made an offer to
settle all of the claims of the Los Angeles Department of Water and Power in the
James Jones case (Los Angeles Department of Water and Power, ex rel. Nora Amenta
v. James Jones Company, et al). The Los Angeles Department of Water and Power
has indicated that it views this offer favorably and that it intends to seek its
approval. On January 19, 2001 the California False Claims Act claims filed by
the City of Pomona were dismissed. The Company expects the City of Pomona to
file for appellate review of this order, and the Company is currently unable to
predict the outcome of any appeal. On the present record, the vast majority of
the other cities named in this lawsuit are subject to a legal challenge similar
to that which resulted in the dismissal of Pomona's False Claims Act case. As a
result of these developments and management's current assessment of the case,
the Company recorded a charge of $7,170,000 after tax in the quarter ended
December 31, 2000 which represents the Company's current estimate of the cost to
bring the entire case to resolution. This charge is reported as loss from
discontinued operations. While this charge represents the after tax impact of
the Company's current estimate based on all available information, litigation is
inherently uncertain and the actual liability to the Company to fully resolve
the litigation could be materially higher than this estimate.
This Press Release may include statements which are not historical facts and are
considered forward looking within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward looking statements reflect Watts
Industries' current views about future events and financial performance.
Investors should not rely on forward looking statements, because they are
subject to a variety of risks, uncertainty, and other factors that could cause
actual results to differ materially from Watts Industries expectations and Watts
Industries expressly does not undertake any duty to update forward looking
statements. These factors include but are not limited to the following: loss of
market share through competition, introduction of competing products by other
companies, pressure on prices from competitors, suppliers, and/or customers,
regulatory obstacles, lack of acceptance of new products, changes in plumbing
and heating markets, changes in global demand for the Company's products,
changes of distribution of the Company's products, interest rates, foreign
exchange fluctuations, cyclicality of industries in which the Company markets
certain of its products, and general economic
factors in markets where the Company's products are sold, manufactured, or
marketed, changes in the status of current litigation, including the James Jones
case, and other factors discussed in the Company's reports filed with the
Securities and Exchange Commission.
Watts Industries, Inc. designs, manufactures and sells and an extensive
line of valves and other products to the water quality and water regulation and
control markets.
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
(UNAUDITED)
Fourth Quarter Ended Twelve Months Ended
December 31 December 31
2000 1999 2000 1999
-------------------------------------------------------------
STATEMENTS OF INCOME
Net sales $ 127,609,000 $ 129,644,000 $ 516,100,000 $ 509,656,000
Cost of sales 82,764,000 82,417,000 330,796,000 322,938,000
Selling, general and administrative 30,800,000 31,822,000 125,317,000 128,983,000
Restructuring charges 0 1,460,000 0 1,460,000
Other (income) expense, net 2,162,000 2,084,000 10,775,000 8,368,000
------------- ------------- ------------- -------------
Income before income taxes 11,883,000 11,861,000 49,212,000 47,907,000
Provision for income taxes 4,349,000 4,435,000 18,041,000 17,210,000
------------- ------------- ------------- -------------
Income from continuing operations 7,534,000 7,426,000 31,171,000 30,697,000
Income(Loss) from discontinued operations, net of tax (7,170,000) (481,000) (7,170,000) (3,143,000)
------------- ------------- ------------- -------------
Net income $ 364,000 $ 6,945,000 $ 24,001,000 $ 27,554,000
============= ============= ============= =============
DILUTED EARNINGS PER SHARE
Weighted Average Number of Common Shares
& Equivalents 26,542,645 26,765,051 26,551,237 26,683,809
Earnings (Loss) per Share:
Continuing operations $ 0.28 $ 0.28 $ 1.17 $ 1.15
Discontinued operations (0.27) (0.02) (0.27) (0.12)
------------- ------------- ------------- -------------
Net income $ 0.01 $ 0.26 $ 0.90 $ 1.03
============= ============= ============= =============
Cash dividends per share $ 0.0600 $ 0.0875 $ 0.2675 $ 0.3500
CONDENSED CONSOLIDATED FINANCIAL STATEMENT
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
(UNAUDITED)
Fourth Quarter Ended Twelve Months Ended
December 31 December 31
2000 1999 2000 1999
-------------------------------------------------------------
STATEMENTS OF INCOME
Net Sales $ 127,609,000 $ 129,644,000 $ 516,100,000 $ 509,656,000
------------- ------------- ------------- -------------
Income from continuing operations 7,534,000 7,426,000 31,171,000 30,697,000
Income(Loss) from discontinued operations, net of tax (7,170,000) (481,000) (7,170,000) (3,143,000)
------------- ------------- ------------- -------------
Net income $ 364,000 $ 6,945,000 $ 24,001,000 $ 27,554,000
============= ============= ============= =============
DILUTED EARNINGS PER SHARE
Weighted Average Number of Common Shares
& Equivalents 26,542,645 26,765,051 26,551,237 26,683,809
Earnings (Loss) per Share:
Continuing operations $ 0.28 $ 0.28 $ 1.17 $ 1.15
Discontinued operations (0.27) (0.02) (0.27) (0.12)
------------- ------------- ------------- -------------
Net income $ 0.01 $ 0.26 $ 0.90 $ 1.03
============= ============= ============= =============
Cash dividends per share $ 0.0600 $ 0.0875 $ 0.2675 $ 0.3500
COMPARATIVE CONDENSED BALANCE SHEET
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
December 31, 2000 December 31, 1999
-------------------------------------
(UNAUDITED)
Cash and short-term investments $ 15,235,000 $ 13,016,000
Other current assets 234,005,000 239,822,000
Property, plant and equipment, at cost 202,492,000 226,692,000
Less: accumulated depreciation (76,682,000) (96,461,000)
------------- -------------
Net property, plant and equipment 125,810,000 130,231,000
Other assets 106,975,000 104,009,000
------------- -------------
$ 482,025,000 $ 487,078,000
============= =============
Current liabilities $ 112,098,000 $ 111,098,000
Long-term debt 105,377,000 123,991,000
Deferred income taxes 15,463,000 13,630,000
Other liabilities 16,545,000 18,857,000
Stockholders' equity 232,542,000 219,502,000
------------- -------------
$ 482,025,000 $ 487,078,000
============= =============