Exhibit 99.1
FOR IMMEDIATE RELEASE Contact: William C. McCartney
- --------------------- Chief Financial Officer
Telephone: (978) 688-1811
Fax: (978) 688-2976
WATTS WATER TECHNOLOGIES REPORTS SECOND QUARTER 2004 RESULTS
North Andover, MA...August 3, 2004. Watts Water Technologies, Inc. (NYSE:
WTS) today announced results for the second quarter ended June 27, 2004
reflecting a sales and net income increase of 23% and 72%, respectively, over
the second quarter ended June 29, 2003. For the second quarter of 2004, sales
were $212,694,000, an increase of $39,182,000, or 23%, compared to the second
quarter of 2003. For the second quarter of 2004, net income was $13,953,000, an
increase of $5,847,000, or 72%, compared to the second quarter of 2003. Net
income for the second quarter of 2004 and 2003 includes losses from discontinued
operations of $72,000 and $574,000, respectively.
Income from continuing operations for the second quarter of 2004 was
$14,025,000, or $0.43 per share, an increase of $5,345,000, or 62%, compared to
income from continuing operations for the second quarter of 2003 of $8,680,000,
or $0.32 per share. Income from continuing operations for the second quarter of
2004 and 2003 includes costs incurred for our manufacturing restructuring plan
of $344,000, or $0.01 per share, and $399,000, or $0.01 per share, respectively.
The six months ended June 27, 2004 reflect a sales and net income increase
of 19% and 70%, respectively, over the six months ended June 29, 2003. For the
six months ended 2004, sales were $403,340,000, an increase of $64,136,000, or
19%, compared to the six months ended 2003. Net income for the six months ended
2004, was $24,954,000, an increase of $10,238,000, or 70%, compared to the six
months ended June 29, 2003. Net income for the six months ended 2004 and 2003
includes losses from discontinued operations of $95,000 and $2,900,000,
respectively.
Income from continuing operations for the six months ended 2004 was
$25,049,000, or $0.77 per share, an increase of $7,433,000, or 42%, compared to
income from continuing operations for the six months ended 2003 of $17,616,000,
or $0.65 per share. Income from continuing operations for the six months ended
2004 and 2003 includes costs incurred for our manufacturing restructuring plan
of $1,068,000, or $0.03 per share, and $676,000, or $0.03 per share,
respectively.
Patrick S. O'Keefe, Chief Executive Officer, commented, "We are pleased
with the second quarter results from all three of our geographic segments, North
America, Europe and China. Our overall increase in sales was achieved by
internal growth, the contribution from acquired companies, and the change in
foreign exchange rates. In comparing our sales during the second quarter of 2004
with the second quarter of 2003, our internal growth rate, which was 11%,
contributed $19,069,000, the acquisitions of McCoy Enterprises, Inc, TEAM
Precision Pipework, Ltd, Flowmatic Systems, Inc., and Giuliani Anello S.r.l.
contributed $11,299,000 and the change in foreign exchange rates contributed
$3,074,000 due primarily to the strengthening of the euro versus the U.S.
dollar. Additionally, due to the adoption of Financial Accounting Standards
Board Interpretation No. 46, "Consolidation of Variable Interest
Entities-Revised" (FIN 46R) we recorded $5,740,000 of revenue in the second
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 sales for the second
quarter of 2004 increased 22% to $144,522,000 compared to $118,162,000 for the
second quarter of 2003. This increase in North American sales was due to
internal sales growth of $14,300,000, the inclusion of $6,116,0000 in sales from
the acquisition of McCoy Enterprises, Inc., acquired on May 21, 2004, and
Flowmatic Systems, Inc., acquired on January 5, 2004, the inclusion of
$5,740,000 in sales resulting from the consolidation of Jameco International
LLC, and $204,000 due to favorable foreign exchange rates associated with the
strengthening of the Canadian dollar versus the U.S. dollar."
Mr. O'Keefe continued, "Internal sales in the North American wholesale
market increased by 13% over the second quarter of 2003. This increase was led
by increased sales of backflow prevention units, as well as, strength in our
plumbing and under-floor radiant heating product lines. Our internal sales into
the North American home improvement retail market increased by 11% for the
second quarter of 2004 over the second quarter of 2003.
Mr. O'Keefe continued, "We derived 29% of our total sales for the second
quarter of 2004 from Europe. Sales in Europe for the second quarter of 2004
increased $10,752,000, or 21%, compared to the second quarter of 2003. This
increase is due to the inclusion of $5,183,000 in sales from the acquisitions of
TEAM Precision Pipe Work, Ltd., acquired on April 16, 2004 and Giuliani Anello
S.r.l. acquired on July 30, 2003, $2,870,000 due to favorable foreign exchange
rates associated with the strengthening of the euro versus the U.S. dollar and
internal sales growth of $2,699,000. The internal sales growth is attributable
to market share gains in the European wholesale markets."
Mr. O'Keefe continued, "We are pleased that our China segment was
profitable in the second quarter. We are experiencing an improved order entry
rate at our TWT joint venture in Tianjin. At our recently established wholly
owned facility, also in Tianjin, we were able to absorb all our manufacturing
expenses due to improved manufacturing efficiencies and increased production
volumes. Also, in the quarter we purchased the 40% equity interest in Shida that
had been held by our former joint venture partner, giving us 100% ownership."
Mr. O'Keefe continued, "For the second quarter of 2004 we recorded a
pre-tax charge of approximately $560,000 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. This represents a reduction from the amount
recorded in the first quarter of 2004 because we have postponed the expected
closure date of a manufacturing facility and extended the estimated useful lives
of production equipment due to revised production requirements. Also in this
quarter we have incurred and recorded pre-tax charges of approximately
$1,400,000 for costs to comply with new accounting and financial controls
requirements under the Sarbanes-Oxley Act.
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 include
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 $16,500,000 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
On May 21, 2004, the Company acquired McCoy Enterprises, Inc., which we
subsequently renamed Orion Enterprises, Inc., located in Kansas City, Kansas,
for approximately $27,800,000 in cash. Orion distributes its products under the
brand names of Orion, Flo Safe and Laboratory Enterprises. Orion's product lines
include a complete line of acid resistant waste products, double containment
piping systems, as well as, a line of high purity pipes, fittings and faucets.
Watts Water Technologies, Inc. will hold a live web cast of its conference
call to discuss second quarter results for 2004 on Wednesday, August 4, 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 August 3, 2005.
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)
Second Quarter Ended Six Months Ended
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
------------ ------------ ------------ ------------
STATEMENTS OF INCOME
Net sales $ 212,694 $ 173,512 $ 403,340 $ 339,204
Income from continuing operations $ 14,025 $ 8,680 $ 25,049 $ 17,616
Loss from discontinued operations (72) (574) (95) (2,900)
------------ ------------ ------------ ------------
Net income $ 13,953 $ 8,106 $ 24,954 $ 14,716
============ ============ ============ ============
DILUTED EARNINGS PER SHARE
Weighted Average Number of Common Shares & Equivalents 32,726 27,472 32,639 27,352
Earnings per Share:
Continuing operations $ 0.43 $ 0.32 $ 0.77 $ 0.65
Discontinued operations -- (0.02) -- (0.11)
------------ ------------ ------------ ------------
Net income $ 0.43 $ 0.30 $ 0.77 $ 0.54
============ ============ ============ ============
Cash dividends per share $ 0.07 $ 0.06 $ 0.14 $ 0.12
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
(Unaudited)
June 27, December 31,
2004 2003
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 76,128 $ 149,361
Trade accounts receivable, less allowance for doubtful accounts of
$8,681 at June 27, 2004 and $7,772 at December 31, 2003 ........... 162,681 136,064
Inventories, net:
Raw materials ..................................................... 50,490 41,998
Work in process ................................................... 24,508 24,348
Finished goods .................................................... 119,604 90,253
--------- ---------
Total Inventories .............................................. 194,602 156,599
Prepaid expenses and other assets .................................... 14,168 8,500
Deferred income taxes ................................................ 23,221 23,552
Assets held for sale ................................................. 1,629 1,938
Assets of discontinued operations .................................... 8,937 4,460
--------- ---------
Total Current Assets .............................................. 481,366 480,474
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost ............................... 301,343 284,250
Accumulated depreciation ............................................. (152,051) (138,539)
--------- ---------
Property, plant and equipment, net ................................ 149,292 145,711
--------- ---------
OTHER ASSETS:
Goodwill ............................................................. 209,732 184,901
Other ................................................................ 49,567 27,557
--------- ---------
TOTAL ASSETS ............................................................. $ 889,957 $ 838,643
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ..................................................... $ 80,325 $ 74,068
Accrued expenses and other liabilities ............................... 60,421 55,252
Accrued compensation and benefits .................................... 20,623 18,466
Current portion of long-term debt .................................... 71,648 13,251
Liabilities of discontinued operations ............................... 22,446 11,302
--------- ---------
Total Current Liabilities ......................................... 255,463 172,339
--------- ---------
LONG-TERM DEBT, NET OF CURRENT PORTION ................................... 131,483 179,061
DEFERRED INCOME TAXES .................................................... 18,182 15,978
OTHER NONCURRENT LIABILITIES ............................................. 24,824 25,588
MINORITY INTEREST ........................................................ 6,463 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: 24,828,141 shares at
June 27, 2004 and 24,459,121 shares at December 31, 2003 .......... 2,483 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
June 27, 2004 and 7,605,224 shares at December 31, 2003 ........... 747 761
Additional paid-in capital ........................................... 136,590 132,983
Deferred compensation ................................................ (783) --
Retained earnings .................................................... 306,816 286,396
Accumulated other comprehensive income ............................... 7,689 13,805
--------- ---------
Total Stockholders' Equity ........................................ 453,542 436,391
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................... $ 889,957 $ 838,643
========= =========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
Second Quarter Ended Six Months Ended
------------------------ ------------------------
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net sales ................................................... $ 212,694 $ 173,512 403,340 $ 339,204
Cost of goods sold .......................................... 136,305 114,947 261,136 224,875
---------- ---------- ---------- ----------
GROSS PROFIT ............................................ 76,389 58,565 142,204 114,329
Selling, general & administrative expenses .................. 51,883 42,111 97,864 81,965
Restructuring ............................................... -- 114 -- 114
---------- ---------- ---------- ----------
OPERATING INCOME ........................................ 24,506 16,340 44,340 32,250
---------- ---------- ---------- ----------
Other (income) expense:
Interest income ......................................... (237) (267) (519) (382)
Interest expense ........................................ 2,784 2,820 5,353 4,904
Minority interest ....................................... 283 (17) (479) (152)
Other ................................................... (231) (90) 506 (38)
---------- ---------- ---------- ----------
2,599 2,446 4,861 4,332
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .. 21,907 13,894 39,479 27,918
Provision for income taxes .................................. 7,882 5,214 14,430 10,302
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS ...................... 14,025 8,680 25,049 17,616
Loss from discontinued operations, net of taxes ............. (72) (574) (95) (2,900)
---------- ---------- ---------- ----------
NET INCOME .............................................. $ 13,953 $ 8,106 24,954 $ 14,716
========== ========== ========== ==========
BASIC EPS Income (loss) per share:
Continuing operations ................................... $ 0.43 $ 0.32 0.78 $ 0.65
Discontinued operations ................................. -- (0.02) -- (0.11)
---------- ---------- ---------- ----------
NET INCOME .............................................. $ 0.43 $ 0.30 0.78 $ 0.54
========== ========== ========== ==========
Weighted average number of shares ........................... 32,265 27,210 32,202 27,139
========== ========== ========== ==========
DILUTED EPS Income (loss) per share:
Continuing operations ................................... $ 0.43 $ 0.32 0.77 $ 0.65
Discontinued operations ................................. -- (0.02) -- (0.11)
---------- ---------- ---------- ----------
NET INCOME .............................................. $ 0.43 $ 0.30 0.77 $ 0.54
========== ========== ========== ==========
Weighted average number of shares ........................... 32,726 27,472 32,639 27,352
========== ========== ========== ==========
Dividends per share .................................... $ 0.07 $ 0.06 0.14 $ 0.12
========== ========== ========== ==========