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 FIRST QUARTER 2005 RESULTS
North Andover, MA...May 3, 2005. Watts Water Technologies, Inc. (NYSE
Symbol "WTS") today announced results for the first quarter ended April 3, 2005.
Sales for the first quarter ended April 3, 2005 were $219,027,000, an increase
of $33,019,000, or 18%, from the first quarter ended March 28, 2004. Net income
for the first quarter ended April 3, 2005, was $12,358,000, or $0.37 per share,
which includes a net loss from discontinued operations of $39,000. Income from
continuing operations increased $1,402,000, or 13%, for the first quarter ended
April 3, 2005, to $12,397,000, or $0.37 per share, compared to income from
continuing operations for the first quarter ended March 28, 2004 of $10,995,000,
or $0.34 per share.
Restructuring costs, net of tax, incurred in the first quarters of 2005
and 2004 were $496,000, or $0.02 per share, and $724,000, or $0.02 per share,
respectively.
Patrick S. O'Keefe, Chief Executive Officer, commented, "Our overall
increase in sales was achieved by internal growth, contributions from acquired
companies and the change in foreign exchange rates. Our internal growth
contributed $20,104,000 of the increase in sales in the first quarter ended
April 3, 2005 over the first quarter ended March 28, 2004. Our acquisitions
contributed $9,303,000 of sales for the first quarter ended April 3, 2005 over
the first quarter ended March 28, 2004. This acquired growth was attributable to
the January 2005 acquisitions of HF Scientific, Inc. and Sea Tech, Inc., the May
2004 acquisition of Orion Enterprises, Inc. and the April 2004 acquisition of
TEAM Precision Pipework, Ltd. The change in foreign exchange rates for the first
quarter ended April 3, 2005 increased our sales by $3,612,000 over the first
quarter ended March 28, 2004 due primarily to the strengthening of the euro
versus the U.S. dollar.
"Our North American segment increased sales for the first quarter ended
April 3, 2005 by 22% to $147,477,000 compared to $120,982,000 for the first
quarter ended March 28, 2004. This increase in North American sales was achieved
through internal sales growth of $19,245,000, the inclusion of sales from the
acquisitions of HF Scientific, Inc., Sea Tech, Inc. and Orion Enterprises, Inc.
totaling $6,500,000, and $750,000 due to favorable foreign exchange rates
associated with the strengthening of the Canadian dollar versus the U.S.
dollar."
"Internal sales growth in the North American wholesale market for the
first quarter ended April 3, 2005 increased 14% over the first quarter ended
March 28, 2004. 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 growth in the North American home improvement
retail market increased 22% for the first quarter ended April 3, 2005 over the
first quarter ended March 28, 2004. This increase was led by new product
introductions including pre-soldered copper fittings, hot water re-circulation
pumps and hot water heater connector kits."
"We derived 30% of our total sales for the first quarter ended April 3,
2005 from Europe compared to 32% in the first quarter ended March 28, 2004.
Sales in Europe for the first quarter ended April 3, 2005 increased $6,401,000,
or 11% to $66,434,000, compared to the first quarter ended March 28, 2004. 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
$2,862,000, the inclusion of the sales from the TEAM Precision Pipework, Ltd.
acquisition of $2,803,000 and internal sales growth of $736,000. The
appreciation of the euro also had a positive impact on European income of $0.01
per share in the first quarter ended April 3, 2005, compared with a $0.02 per
share effect for the first quarter ended March 28, 2004."
"Sales in China increased 2% to $5,116,000 for the quarter ended April
3, 2005 from $4,993,000 for the quarter ended March 28, 2004. The improvement in
earnings from Chinese operations over last year was primarily due to the
increased production levels and lower scrap expenses."
"We continue with the consolidation of our manufacturing plants in North
America and Europe while continuing to expand our manufacturing capacity in
China and other areas of the world in an effort to lower our cost of
manufacturing. For the first quarter ended April 3, 2005 we recorded a pre-tax
charge of approximately $774,000, which was comprised of $412,000 recorded in
cost of sales primarily 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 and $362,000 recorded in selling,
general and administrative expenses for severance costs related to European
restructuring. This compares to $1,177,000 recorded in cost of goods sold in the
first quarter ended March 28, 2004 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.
"We also incurred incremental pretax charges in the first quarter of
2005 including $709,000 for an acquisition earn-out being treated as
compensation expense and costs related to compliance with Sarbanes-Oxley
requirements of approximately $1,200,000."
On January 5, 2005, the Company acquired 100% of the outstanding stock
of HF Scientific, Inc., located in Fort Myers, Florida for approximately
$7,000,000 in cash plus $800,000 in assumed debt. HF Scientific manufactures and
distributes a line of instrumentation equipment, test kits and chemical reagents
used for monitoring water quality in a variety of applications.
On January 4, 2005, the Company acquired substantially all of the assets
of Sea Tech, Inc. located in Wilmington, North Carolina for approximately
$10,000,000 in cash. Sea Tech provides cost effective solutions for fluidic
connection needs. Sea Tech offers a wide range of standard and custom quick
connect fittings, valves and manifolds and pex tubing designed to address
specific customer requirements.
On May 21, 2004, a wholly-owned subsidiary of the Company acquired 100%
of the outstanding stock of McCoy Enterprises, Inc., which was subsequently
renamed Orion Enterprises, Inc. (Orion), located in Kansas City, Kansas, for
approximately $27,900,000 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 disposal products, double
containment piping systems, as well as a line of high purity pipes, fittings and
faucets.
On April 16, 2004, a wholly-owned subsidiary of the Company acquired 90%
of the stock of TEAM Precision Pipework, Ltd. (TEAM), located in Ammanford, West
Wales, United Kingdom for approximately $17,200,000 in cash 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 March 29, 2004, a wholly-owned subsidiary of the Company acquired the
40% equity interest in Taizhou Shida Plumbing Manufacturing Co., Ltd. (Shida),
that had been held by the Company's former joint venture partner for
approximately $3,000,000 in cash and the payment of $3,500,000 in connection
with a know-how transfer and non-compete agreement. As of April 3, 2005 the
Company had paid $5,750,000 in cash. The Company now owns 100% of Shida. The
Company had made prior investments in 2003 and 2002 totaling $8,000,000 in cash
for its initial 60% interest. Shida is a manufacturer of a variety of plumbing
products sold both into the Chinese domestic market and export markets.
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: shortages in and pricing of raw materials and
supplies including price increases by suppliers of raw materials and the
Company's ability to pass these costs on to customers, loss of market share
through competition, introduction of competing products by other companies,
pressure on prices from competitors, suppliers, and/or customers, diversion of
management's attention and costs associated with efforts to comply with Section
404 of the Sarbanes-Oxley Act of 2002, failure to meet the requirements under
Section 404 of the Sarbanes-Oxley Act of 2002, identification and disclosure of
material weaknesses in our internal controls over financial reporting, 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, 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, 2004 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. will hold a live web cast of its
conference call to discuss first quarter results for 2005 on Wednesday, May 4,
2005, at 2:00 p.m. Eastern Time. The press release and the live web cast can be
accessed by visiting the Investors 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 4, 2006.
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 share information)
(Unaudited)
First Quarter Ended
---------------------
April 3, March 28,
2005 2004
--------- --------
STATEMENTS OF INCOME
Net sales $ 219,027 $186,008
Income from continuing operations $ 12,397 $ 10,995
Income (loss) from discontinued operations (39) 6
--------- --------
Net income $ 12,358 $ 11,001
========= ========
DILUTED EARNINGS PER SHARE
Weighted Average Number of Common
Shares & Equivalents 33,032 32,549
Earnings per Share:
Continuing operations $ 0.37 $ 0.34
Discontinued operations -- --
--------- --------
Net income $ 0.37 $ 0.34
========= ========
Cash dividends per share $ 0.08 $ 0.07
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
(Unaudited)
April 3, December 31,
ASSETS 2005 2004
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 61,532 $ 65,913
Investment securities ................................................ -- 26,600
Trade accounts receivable, less allowance for doubtful accounts of
$7,319 at April 3, 2005 and $7,551 at December 31, 2004 ........... 156,675 150,073
Inventories, net:
Raw materials ..................................................... 55,778 53,942
Work in process ................................................... 28,637 28,020
Finished goods .................................................... 128,319 121,082
----------- -----------
Total Inventories .............................................. 212,734 203,044
Prepaid expenses and other assets .................................... 15,317 14,359
Deferred income taxes ................................................ 27,809 27,463
Assets of discontinued operations .................................... 8,644 10,227
----------- -----------
Total Current Assets .............................................. 482,711 497,679
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost ............................... 322,709 321,655
Accumulated depreciation ............................................. (174,698) (170,966)
----------- -----------
Property, plant and equipment, net ................................... 148,011 150,689
----------- -----------
OTHER ASSETS:
Goodwill ............................................................. 234,039 226,178
Other ................................................................ 54,120 49,702
----------- -----------
TOTAL ASSETS .............................................................. $ 918,881 $ 924,248
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ..................................................... $ 72,071 $ 73,606
Accrued expenses and other liabilities ............................... 63,051 64,604
Accrued compensation and benefits .................................... 25,638 29,679
Current portion of long-term debt .................................... 5,542 4,981
Liabilities of discontinued operations ............................... 23,456 24,303
----------- -----------
Total Current Liabilities ......................................... 189,758 197,173
----------- -----------
LONG-TERM DEBT, NET OF CURRENT PORTION .................................... 178,983 180,562
DEFERRED INCOME TAXES ..................................................... 20,476 19,578
OTHER NONCURRENT LIABILITIES .............................................. 25,558 26,632
MINORITY INTEREST ......................................................... 7,544 7,515
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: 25,091,676 shares at
April 3, 2005 and 25,049,338 shares at December 31, 2004 .......... 2,509 2,505
Class B Common Stock, $.10 par value; 25,000,000 shares authorized;
10 votes per share; issued and outstanding: 7,343,880 shares at
April 3, 2005 and at December 31, 2004 ............................ 734 734
Additional paid-in capital ........................................... 142,082 140,172
Retained earnings .................................................... 333,884 324,145
Deferred compensation ................................................ (2,380) (1,386)
Accumulated other comprehensive income ............................... 19,733 26,618
----------- -----------
Total Stockholders' Equity ........................................ 496,562 492,788
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................ $ 918,881 $ 924,248
=========== ===========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
First Quarter Ended
----------------------
April 3, March 28,
2005 2004
--------- ---------
Net sales ................................................... $ 219,027 $ 186,008
Cost of goods sold .......................................... 141,649 121,096
--------- ---------
GROSS PROFIT ........................................... 77,378 64,912
Selling, general & administrative expenses .................. 55,706 45,134
Restructuring ............................................... 362 --
--------- ---------
OPERATING INCOME ....................................... 21,310 19,778
--------- ---------
Other (income) expense:
Interest income ........................................ (309) (302)
Interest expense ....................................... 2,521 2,544
Minority interest ...................................... 65 175
Other .................................................. (87) (164)
--------- ---------
2,190 2,253
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES... 19,120 17,525
Provision for income taxes .................................. 6,723 6,530
--------- ---------
INCOME FROM CONTINUING OPERATIONS ..................... 12,397 10,995
Income (loss) from discontinued operations, net of taxes .... (39) 6
--------- ---------
NET INCOME ............................................. $ 12,358 $ 11,001
========= =========
BASIC EPS
Income per share:
Continuing operations .................................. $ 0.38 $ 0.34
Discontinued operations ................................ -- --
--------- ---------
NET INCOME ............................................. $ 0.38 $ 0.34
========= =========
Weighted average number of shares ........................... 32,408 32,136
========= =========
DILUTED EPS
Income per share:
Continuing operations .................................. $ 0.37 $ 0.34
Discontinued operations ................................ -- --
--------- ---------
NET INCOME ............................................. $ 0.37 $ 0.34
========= =========
Weighted average number of shares ........................... 33,032 32,549
========= =========
Dividends per share ................................... $ 0.08 $ 0.07
========= =========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Net Sales
First Quarter Ended
----------------------
April 3, March 28,
2005 2004
--------- ---------
North America $ 147,477 $ 120,982
Europe 66,434 60,033
China 5,116 4,993
--------- ---------
Total $ 219,027 $ 186,008
========= =========
Operating Income
First Quarter Ended
----------------------
April 3, March 28,
2005 2004
--------- ---------
North America $ 18,446 $ 16,434
Europe 7,493 7,445
China 545 (458)
Corporate (5,174) (3,643)
--------- ---------
Total $ 21,310 $ 19,778
========= =========