Exhibit 99.1
[LETTERHEAD OF WATTS WATER TECHNOLOGIES,INC.]
FOR IMMEDIATE RELEASE Contact: William C. McCartney
Chief Financial Officer
Telephone: (978) 688-1811
Fax: (978) 688-2976
WATTS WATER TECHNOLOGIES REPORTS FIRST QUARTER 2004 RESULTS
North Andover, MA...May 4, 2004. Watts Water Technologies, Inc. (NYSE:
WTS) today announced results for the first quarter ended March 28, 2004. For the
first quarter of 2004, sales were $190,646,000, an increase of $24,954,000, or
15%, compared to the first quarter ended March 30, 2003. Net income for the
first quarter of 2004, was $11,001,000, which includes a net loss from
discontinued operations of $23,000. Income from continuing operations increased
$2,088,000, or 23%, for the first quarter of 2004, to $11,024,000, or $0.34 per
share, compared to income from continuing operations for the first quarter of
2003 of $8,936,000, or $0.33 per share. For the first quarter of 2004 earnings
per share were $0.34 per share, which includes an increase of approximately 17%
in outstanding shares resulting from the Company's Class A Common Stock offering
in December 2003.
Excluding costs incurred in both periods as a result of our manufacturing
restructuring plan, income from continuing operations increased $2,535,000, or
28%, to $11,748,000, or $0.36 per share, for the first quarter of 2004 compared
to $9,213,000, or $0.34 per share, for the first quarter of 2003. Please refer
to Table 1 included at the end of this press release for a reconciliation of
reported income from continuing operations to adjusted income from continuing
operations.
Patrick S. O'Keefe, Chief Executive Officer, commented, "We are pleased
with both our North American and European results for the first quarter of 2004.
Our overall increase in sales was achieved by the change in foreign exchange
rates, the contribution from acquired companies and internal growth. The change
in foreign exchange rates for the first quarter of 2004 increased our sales by
$8,820,000 over the first quarter of 2003, due primarily to the strengthening of
the euro versus the U.S. dollar. Our acquisitions contributed $6,023,000 of
sales for the first quarter of 2004, compared to the first quarter of 2003,
attributable to the acquisitions of Flowmatic Systems, Inc., Martin Orgee UK Ltd
and Giuliani Anello S.r.l. Our internal growth rate contributed $5,474,000 of
increased sales in the first quarter of 2004, compared to the first quarter of
2003. Additionally, due to the adoption of Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities-Revised"
(FIN 46R) we recorded $4,637,000 of revenue in the first quarter of 2004 as a
result of the consolidation of our minority owned subsidiary, Jameco
International LLC."
Mr. O'Keefe continued, "Our North American segment had an increase in
sales for the first quarter of 2004 of 11% to $125,620,000 compared to
$112,955,000 for the first quarter of 2003. This increase in North American
sales was due to the inclusion of $4,637,000 in sales resulting from the
consolidation of Jameco International LLC, internal sales growth of $3,657,000,
the inclusion of sales from the acquisition of Flowmatic Systems, Inc., acquired
on January 5, 2004, of $3,422,000, and $949,000 due to favorable foreign
exchange rates associated with the strengthening of the Canadian dollar versus
the U.S. dollar."
Mr. O'Keefe continued, "The internal sales growth in the North American
wholesale market increased by 6%. This increase was led by increased sales of
backflow prevention units, predominately due to customer demand for our Hunter
backflow line. We also saw increased sales of our plumbing and under-floor
radiant heating product lines. Our sales into the North American home
improvement retail market declined by 1% for the first quarter of 2004 from the
first quarter of 2003. The first quarter of 2003 was a strong quarter for North
American retail sales, impacted by an increase of approximately 50% over the
first quarter of 2002 in our Watts Brass and Tubular products. We believe we
will be able to post high single digit gains in the North American retail market
for the full fiscal year."
Mr. O'Keefe continued, "We derived 32% of our total sales for the first
quarter of 2004 from Europe compared to 29% for the first quarter of 2003. Sales
in Europe for the first quarter of 2004 increased $11,364,000, or 23%, compared
to the first quarter of 2003. This increase is due to the favorable foreign
exchange rates associated with the strengthening of the euro versus the U.S.
dollar, which accounted for $7,871,000, the inclusion of the sales from
acquisitions consummated during 2003 of $2,600,000 and internal sales growth of
$893,000. The internal sales growth is attributable to continued strength in the
European OEM markets which has been partially offset by a soft wholesale market.
On April 18, 2003 we acquired Martin Orgee U.K. Ltd. located in Kidderminster,
West Midlands, United Kingdom, and on July 30, 2003, we acquired Giuliani Anello
S.r.l. located in Bologna, Italy. The appreciation of the euro also had a
positive impact on income of $0.02 per share for the first quarter of 2004."
Mr. O'Keefe continued, "As previously announced, we are committed to
significantly lowering our product cost and in that respect we have consolidated
several of our manufacturing plants in North American and Europe. We have
expanded our manufacturing capacity in Tunisia and Bulgaria and continue to
expand in China, all of which have lower cost manufacturing. For the first
quarter of 2004 we recorded a pre-tax charge of approximately $1,177,000 in cost
of goods sold for accelerated depreciation for both the expected closure of a
U.S. manufacturing plant and a reduction in the estimated useful lives of
certain manufacturing equipment, both part of our cost reduction program.
On January 5, 2004, the Company acquired substantially all of the assets
of Flowmatic Systems, Inc. located in Dunnellon, Florida, for approximately
$16,700,000 in cash. Flowmatic designs and distributes high quality reverse
osmosis components and filtration equipment. Their product lines includes
stainless steel and plastic housings, filter cartridges, storage tanks, control
valves, as well as complete reverse osmosis systems for residential and
commercial applications.
On April 16, 2004, the Company acquired 90% of the stock of TEAM Precision
Pipe Work, Ltd., located in Ammanford, West Wales, United Kingdom for
approximately $17,000,000 subject to final adjustments, if any, as stipulated in
the purchase and sale agreement. TEAM custom designs and manufactures
manipulated pipe and hose tubing assemblies, which are utilized in the heating
ventilation and air conditioning markets. TEAM is a supplier to major original
equipment manufacturers of air conditioning systems and several of the major
European automotive air conditioning manufacturers
Watts Water Technologies, Inc. will hold a live web cast of its conference
call to discuss first quarter results for 2004 on Wednesday, May 5, 2004, at
3:00 p.m. Eastern Time. This press release and the live webcast can be accessed
by visiting the Investor Relations section of the Company's website at
www.wattswater.com. Following the web cast, an archived version of the call will
be available at the same address until May 5, 2005.
To supplement our unaudited consolidated financial statements presented on
a generally accepted accounting principles (GAAP) basis, we sometimes use
non-GAAP measures of net income, net income per share, income from continuing
operations or income from continuing operations per share, and net cash provided
by continuing operations that we believe are appropriate to enhance an overall
understanding of our historical financial performance and future prospects. The
non-GAAP results, which are adjusted to exclude certain costs, expenses, gains
and losses from the comparable GAAP measures, are an indication of our baseline
performance before gains, losses or other charges that are considered by
management to be outside of our core operating results. These non-GAAP results
are among the primary indicators management uses as a basis for evaluating our
financial performance as well as for forecasting future periods. For these
reasons, management believes these non-GAAP measures can be useful to investors,
potential investors and others. The presentation of this additional information
is not meant to be considered in isolation or as a substitute for net income or
income per share prepared in accordance with GAAP.
This Press Release includes statements that are not historical facts and
are considered forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements reflect Watts
Water Technologies' current views about future results of operations and other
forward-looking information. In some cases you can identify these statements by
forward-looking words such as "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "should," "will" and "would" or similar words. You
should not rely on forward-looking statements because Watts' actual results may
differ materially from those indicated by these forward-looking statements as a
result of a number of important factors. These factors include, but are not
limited to, the following: loss of market share through competition,
introduction of competing products by other companies, pressure on prices from
competitors, suppliers, and/or customers, failure to expand our markets through
acquisitions, failure or delay in developing new products, lack of acceptance of
new products, failure to manufacture products that meet required performance and
safety standards, foreign exchange rate fluctuations, cyclicality of industries,
such as plumbing and heating wholesalers and home improvement retailers, in
which the Company markets certain of its products, reductions in the supply of
raw materials, increases in the prices of raw materials, economic factors, such
as the levels of housing starts and remodeling, impacting the markets where the
Company's products are sold, manufactured, or marketed, environmental compliance
costs, product liability risks, the results and timing of the Company's
manufacturing restructuring plan, changes in the status of current litigation,
including the James Jones case, and other risks and uncertainties discussed
under the heading "Certain Factors Affecting Future Results" in the Watts Water
Technologies, Inc. Annual Report on Form 10-K for the year ended December 31,
2003 filed with the Securities Exchange Commission and other reports Watts files
from time to time with the Securities and Exchange Commission. Watts does not
intend to, and undertakes no duty to, update the information contained in this
Press Release.
Watts Water Technologies, Inc. is a world leader in the manufacture of
innovative products to control the efficiency, safety, and quality of water
within residential, commercial, and institutional applications. Its expertise in
a wide variety of water technologies enables it to be a comprehensive supplier
to the water industry.
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
First Quarter Ended
March 28, March 30,
2004 2003
--------- ----------
STATEMENTS OF INCOME
Net sales $ 190,646 $ 165,692
Income from continuing operations $ 11,024 $ 8,936
Loss from discontinued operations (23) (2,326)
--------- ---------
Net income $ 11,001 $ 6,610
========= =========
DILUTED EARNINGS PER SHARE
Weighted Average Number of
Common Shares & Equivalents 32,549 27,264
Earnings per Share:
Continuing operations $ 0.34 $ 0.33
Discontinued operations -- (0.09)
--------- ---------
Net income $ 0.34 $ 0.24
========= =========
Cash dividends per share $ 0.07 $ 0.06
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
(Unaudited)
March 28, December 31,
2004 2003
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 120,552 $ 149,361
Trade accounts receivable, less allowance for doubtful accounts of
$7,988 at March 28, 2004 and $7,772 at December 31, 2003 .......... 153,884 136,064
Inventories, net:
Raw materials ..................................................... 43,595 41,998
Work in process ................................................... 24,142 24,348
Finished goods .................................................... 105,469 90,253
--------- ---------
Total Inventories .............................................. 173,206 156,599
Prepaid expenses and other assets .................................... 13,818 8,500
Deferred income taxes ................................................ 23,320 23,552
Assets held for sale ................................................. 1,872 1,938
Assets of discontinued operations .................................... 4,050 4,460
--------- ---------
Total Current Assets .............................................. 490,702 480,474
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost ............................... 289,306 284,250
Accumulated depreciation ............................................. (145,694) (138,539)
--------- ---------
Property, plant and equipment, net ................................ 143,612 145,711
--------- ---------
OTHER ASSETS:
Goodwill ............................................................. 188,870 184,901
Other ................................................................ 31,928 27,557
--------- ---------
TOTAL ASSETS .............................................................. $ 855,112 $ 838,643
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ..................................................... $ 75,914 $ 74,068
Accrued expenses and other liabilities ............................... 63,210 55,252
Accrued compensation and benefits .................................... 16,976 18,466
Current portion of long-term debt .................................... 60,640 13,251
Liabilities of discontinued operations ............................... 11,771 11,302
--------- ---------
Total Current Liabilities ......................................... 228,511 172,339
--------- ---------
LONG-TERM DEBT, NET OF CURRENT PORTION .................................... 135,073 179,061
DEFERRED INCOME TAXES ..................................................... 15,384 15,978
OTHER NONCURRENT LIABILITIES .............................................. 24,720 25,588
MINORITY INTEREST ......................................................... 9,461 9,286
STOCKHOLDERS' EQUITY:
Preferred Stock, $.10 par value; 5,000,000 shares authorized;
no shares issued or outstanding ................................... -- --
Class A Common Stock, $.10 par value; 80,000,000 shares authorized;
1 vote per share; issued and outstanding: 24,789,410 shares at
March 28, 2004 and 24,459,121 shares at December 31, 2003 ......... 2,479 2,446
Class B Common Stock, $.10 par value; 25,000,000 shares authorized;
10 votes per share; issued and outstanding: 7,471,700 shares at
March 28, 2004 and 7,605,224 shares at December 31, 2003 .......... 747 761
Additional paid-in capital ........................................... 135,603 132,983
Retained earnings .................................................... 295,123 286,396
Accumulated other comprehensive income ............................... 8,011 13,805
--------- ---------
Total Stockholders' Equity ........................................ 441,963 436,391
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................ $ 855,112 $ 838,643
========= =========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
First Quarter Ended
March 28, March 30,
2004 2003
--------- ---------
Net sales .......................................................... $ 190,646 $ 165,692
Cost of goods sold ................................................. 124,831 109,928
--------- ---------
GROSS PROFIT .................................................. 65,815 55,764
Selling, general & administrative expenses ......................... 45,981 39,854
--------- ---------
OPERATING INCOME .............................................. 19,834 15,910
--------- ---------
Other (income) expense:
Interest income ............................................... (282) (115)
Interest expense .............................................. 2,569 2,084
Minority interest ............................................. 223 (21)
Other ......................................................... (248) (62)
--------- ---------
2,262 1,886
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ........ 17,572 14,024
Provision for income taxes ......................................... 6,548 5,088
--------- ---------
INCOME FROM CONTINUING OPERATIONS ............................ 11,024 8,936
Loss from discontinued operations, net of taxes of $14 and $1,455 .. (23) (2,326)
--------- ---------
NET INCOME .................................................... $ 11,001 $ 6,610
========= =========
BASIC EPS
Income (loss) per share:
Continuing operations ......................................... $ 0.34 $ 0.33
Discontinued operations ....................................... -- (0.09)
--------- ---------
NET INCOME .................................................... $ 0.34 $ 0.24
========= =========
Weighted average number of shares .................................. 32,136 27,065
========= =========
DILUTED EPS Income (loss) per share:
Continuing operations ......................................... $ 0.34 $ 0.33
Discontinued operations ....................................... -- (0.09)
--------- ---------
NET INCOME .................................................... $ 0.34 $ 0.24
========= =========
Weighted average number of shares .................................. 32,549 27,264
========= =========
Dividends per share .......................................... $ 0.07 $ 0.06
========= =========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
TABLE 1
RECONCILIATION OF REPORTED INCOME FROM CONTINUING OPERATIONS
TO ADJUSTED INCOME FROM CONTINUING OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
First Quarter Ended
March 28, March 30,
2004 2003
---------- ----------
Income from continuing operations $ 11,024 $ 8,936
Add back: cost of restructuring and related charges 724 277
---------- ----------
Adjusted income from continuing operations $ 11,748 $ 9,213
========== ==========
Diluted earnings per share
Continuing operations $ 0.34 $ 0.33
Add back: cost of restructuring and related charges 0.02 0.01
---------- ----------
Adjusted income from continuing operations $ 0.36 $ 0.34
========== ==========