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 2005 RESULTS
North Andover, MA...August 2, 2005. Watts Water Technologies, Inc. (NYSE
Symbol "WTS") today announced results for the second quarter ended July 3, 2005.
Sales for the second quarter ended July 3, 2005 were $228,183,000, an increase
of $21,229,000, or 10%, from the second quarter last year. Net income for the
second quarter ended July 3, 2005, was $13,913,000, or $0.42 per share, which
includes a net loss from discontinued operations of $75,000, versus net income
of $13,953,000, or $0.43 per share, which included a net loss from discontinued
operations of $106,000 for the second quarter last year. Income from continuing
operations for the second quarter ended July 3, 2005 decreased $71,000, or 1%,,
to $13,988,000, or $0.42 per share, compared to income from continuing
operations for the second quarter last year of $14,059,000, or $0.43 per share.
Costs incurred for our manufacturing restructuring plan, net of tax, in
the second quarters of 2005 and 2004 were $241,000, or $0.01 per share, and
$344,000, or $0.01 per share, respectively.
Sales for the six months ended July 3, 2005 were $447,210,000, an increase
of $54,248,000, or 14%, from the same period last year. Net income for the six
months ended July 3, 2005, was $26,271,000, or $0.80 per share, which includes a
net loss from discontinued operations of $114,000, versus net income of
$24,954,000, or $0.77 per share, which included a net loss of $100,000 from
discontinued operations for the same period last year. Income from continuing
operations increased $1,331,000, or 5%, for the six months ended July 3, 2005,
to $26,385,000, or $0.80 per share, compared to income from continuing
operations for the same period last year of $25,054,000, or $0.77 per share.
Costs incurred for our manufacturing restructuring plans, net of tax, in
the six months of 2005 and 2004 were $737,000, or $0.02 per share, and
$1,068,000, or $0.03 per share, respectively.
Patrick S. O'Keefe, Chief Executive Officer, commented, "Our overall
increase in sales for the second quarter as compared to last year was achieved
by internal growth, contributions from acquired companies and the change in
foreign exchange rates. Our internal growth contributed $11,985,000 of the
increase in sales in the second quarter ended July 3, 2005. Acquisitions
contributed sales of $6,387,000 for the second quarter. This acquired growth was
attributable to the June 2005 acquisition of Alamo Water Refiners, Inc., the May
2005 acquisition of Electro Controls Ltd., the January 2005 acquisitions of HF
Scientific, Inc. and Sea Tech, Inc., and the May 2004 acquisition of Orion
Enterprises, Inc. The change in foreign exchange rates for the second quarter
ended July 3, 2005 increased our sales by $2,857,000, due primarily to the
strengthening of the euro versus the U.S. dollar."
"Our North American segment increased sales for the second quarter ended
July 3, 2005 by 13% to $157,116,000 compared to $138,782,000 last year. This
increase in North American sales was achieved through internal sales growth of
$11,674,000, the inclusion of sales from the acquisitions of Alamo Water
Refiners, Inc., HF Scientific, Inc., Sea Tech, Inc. and Orion Enterprises, Inc.
totaling $5,752,000, and $908,000 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
second quarter ended July 3, 2005 increased 8% as compared to the second quarter
last year. 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 12% for the second quarter ended July 3, 2005 over last
year. This increase was led by new product introductions including flood-safe
connectors, pre-soldered copper fittings, hot water heater connector kits and
hot water re-circulation pumps."
"We derived 28% of our total sales for the second quarter ended July 3,
2005 from Europe compared to 29% last year. Sales in Europe for the second
quarter ended July 3, 2005 increased $2,655,000, or 4% to $63,636,000, compared
to last year. 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 $1,949,000, the inclusion of the sales from the Electro Controls
Ltd acquisition of $635,000 and internal sales growth of $71,000. The
appreciation of the euro had a minimal impact on European income in the second
quarter ended July 3, 2005, compared with a $0.01 per share effect for the
second quarter last year."
"Sales in China increased 3% to $7,431,000 for the quarter ended July 3,
2005 from $7,191,000 last year. Earnings in China also improved as compared to
last year primarily due to the increased production levels."
"Operating income for the quarter ended July 3, 2005 declined 2% to
$24,201,000 as compared to $24,707,000 last year. This decrease is primarily
attributable to the increased costs of our raw materials. We have experienced
significant increases in costs of raw materials since June 2004, and copper and
oil prices remain at historic levels. During the quarter ended July 3, 2005, we
were not able to completely recover these increased costs through reduced
manufacturing costs or increased selling prices in the North American market. We
also incurred incremental pre-tax charges in the second quarter of 2005 of
$541,000 for an acquisition earn out being treated as compensation expense.
These increased costs were partially offset by decreased costs of $697,000 to
comply with the requirements of Section 404 under the Sarbanes-Oxley Act of
2002."
"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 second quarter ended July 3, 2005 we recorded a pre-tax
charge of approximately $398,000, which was comprised of $302,000 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 $96,000 recorded in selling,
general and administrative expenses for severance costs related to European
restructuring. This compares to $560,000 recorded in cost of goods sold last
year 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."
On July 8, 2005, the Company acquired the water connector business of the
Donald E. Savard Company located in San Gabriel, California. The acquisition of
the water connector business of Savard is consistent with the Company's theme of
water conservation, safety and control. This acquisition allows the Company to
expand its presence in one of its leading product lines with a brand name that
is well known to the plumbing wholesale market. Savard has annual revenues of
approximately $6 million.
On July 5, 2005, the Company acquired 100% of the outstanding stock of
Microflex N.V., located in Rotselaar, Belgium. Microflex produces and
distributes flexible, pre-insulated, waterproof PEX pipes for hot and cold water
transport, as well as a range of accessory products including couplings, caps,
and insulation kits in the HVAC and water protection markets. Microflex has
annual revenues of $8.5 million.
On June 20, 2005, the Company acquired the water softener business of
Alamo Water Refiners, Inc. located in San Antonio, Texas. The products of Alamo
are consistent with the Company's theme of water quality and provide many
synergistic opportunities when utilized in conjunction with its existing water
filtration and water quality businesses. The acquisition of Alamo also expands
its distribution presence into the southwestern U.S. markets. Alamo has annual
revenue of approximately $13 million.
On May 11, 2005, the Company acquired 100% of the outstanding stock of
Electro Controls Ltd. located in Hounslow, United Kingdom. Electro Controls
designs and assembles a range of electrical controls for the HVAC market, with
sales primarily in the United Kingdom with some export sales to the Middle East.
Electro Controls has annual revenue of approximate $4 million.
Watts Water Technologies, Inc. will hold a live web cast of its conference
call to discuss second quarter results for 2005 on Wednesday, August 3, 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 August 3, 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.
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, costs
associated with efforts to comply with 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. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Second Quarter Ended Six Months Ended
---------------------- ----------------------
July 3, June 27, July 3, June 27,
2005 2004 2005 2004
--------- --------- --------- ---------
STATEMENTS OF INCOME
Net sales $ 228,183 $ 206,954 $ 447,210 $ 392,962
Income from continuing operations $ 13,988 $ 14,059 $ 26,385 $ 25,054
Loss from discontinued operations (75) (106) (114) (100)
--------- --------- --------- ---------
Net income $ 13,913 $ 13,953 $ 26,271 $ 24,954
========= ========= ========= =========
DILUTED EARNINGS PER SHARE
Weighted Average Number of Common Shares & Equivalents 33,077 32,726 33,032 32,639
Earnings per Share:
Continuing operations $ 0.42 $ 0.43 $ 0.80 $ 0.77
Discontinued operations -- -- -- --
--------- --------- --------- ---------
Net income $ 0.42 $ 0.43 $ 0.80 $ 0.77
========= ========= ========= =========
Cash dividends per share $ 0.08 $ 0.07 $ 0.16 $ 0.14
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
(Unaudited)
July 3, December 31,
ASSETS 2005 2004
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents ............................................... $ 66,236 $ 65,913
Investment securities ................................................... -- 26,600
Trade accounts receivable, less allowance for doubtful accounts of
$7,913 at July 3, 2005 and $7,551 at December 31, 2004 ............... 171,726 150,073
Inventories, net:
Raw materials ........................................................ 65,306 61,250
Work in process ...................................................... 27,540 28,020
Finished goods ....................................................... 123,272 113,774
---------- ----------
Total Inventories ................................................. 216,118 203,044
Prepaid expenses and other assets ....................................... 16,755 14,359
Deferred income taxes ................................................... 28,297 27,463
Assets of discontinued operations ....................................... 9,372 10,227
---------- ----------
Total Current Assets ................................................. 508,504 497,679
---------- ----------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost .................................. 321,413 321,655
Accumulated depreciation ................................................ (175,512) (170,966)
---------- ----------
Property, plant and equipment, net ................................... 145,901 150,689
---------- ----------
OTHER ASSETS:
Goodwill ................................................................ 232,327 226,178
Other ................................................................... 54,103 49,702
---------- ----------
TOTAL ASSETS ................................................................ $ 940,835 $ 924,248
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................................ $ 76,577 $ 73,606
Accrued expenses and other liabilities .................................. 59,226 64,604
Accrued compensation and benefits ....................................... 28,685 29,679
Current portion of long-term debt ....................................... 6,198 4,981
Liabilities of discontinued operations .................................. 23,456 24,303
---------- ----------
Total Current Liabilities ............................................ 194,142 197,173
---------- ----------
LONG-TERM DEBT, NET OF CURRENT PORTION ...................................... 196,581 180,562
DEFERRED INCOME TAXES ....................................................... 20,235 19,578
OTHER NONCURRENT LIABILITIES ................................................ 24,657 26,632
MINORITY INTEREST ........................................................... 7,525 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: 25,174,148 shares at
July 3, 2005 and 25,049,338 shares at December 31, 2004 .............. 2,517 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
July 3, 2005 and at December 31, 2004 ................................ 734 734
Additional paid-in capital .............................................. 143,222 140,172
Retained earnings ....................................................... 345,194 324,145
Deferred compensation ................................................... (2,068) (1,386)
Accumulated other comprehensive income .................................. 8,096 26,618
---------- ----------
Total Stockholders' Equity ........................................... 497,695 492,788
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................................. $ 940,835 $ 924,248
========== ==========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
Second Quarter Ended Six Months Ended
------------------------ ------------------------
July 3, June 27, July 3, June 27,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net sales ........................................................ $ 228,183 $ 206,954 $ 447,210 $ 392,962
Cost of goods sold ............................................... 147,000 131,327 288,649 252,423
---------- ---------- ---------- ----------
GROSS PROFIT ................................................. 81,183 75,627 158,561 140,539
Selling, general & administrative expenses ....................... 56,886 50,920 112,592 96,054
Restructuring .................................................... 96 -- 458 --
---------- ---------- ---------- ----------
OPERATING INCOME ............................................. 24,201 24,707 45,511 44,485
---------- ---------- ---------- ----------
Other (income) expense:
Interest income .............................................. (329) (261) (638) (563)
Interest expense ............................................. 2,567 2,758 5,088 5,302
Minority interest ............................................ 72 340 137 515
Other ........................................................ (90) (92) (177) (256)
---------- ---------- ---------- ----------
2,220 2,745 4,410 4,998
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ....... 21,981 21,962 41,101 39,487
Provision for income taxes ....................................... 7,993 7,903 14,716 14,433
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS ........................... 13,988 14,059 26,385 25,054
Loss from discontinued operations, net of taxes .................. (75) (106) (114) (100)
---------- ---------- ---------- ----------
NET INCOME ................................................... $ 13,913 $ 13,953 $ 26,271 $ 24,954
========== ========== ========== ==========
BASIC EPS
Income per share:
Continuing operations ........................................ $ 0.43 $ 0.43 $ 0.81 $ 0.78
Discontinued operations ...................................... -- -- -- --
---------- ---------- ---------- ----------
NET INCOME ................................................... $ 0.43 $ 0.43 $ 0.81 $ 0.78
========== ========== ========== ==========
Weighted average number of shares ................................ 32,475 32,265 32,442 32,202
========== ========== ========== ==========
DILUTED EPS
Income per share:
Continuing operations ........................................ $ 0.42 $ 0.43 $ 0.80 $ 0.77
Discontinued operations ...................................... -- -- -- --
---------- ---------- ---------- ----------
NET INCOME ................................................... $ 0.42 $ 0.43 $ 0.80 $ 0.77
========== ========== ========== ==========
Weighted average number of shares ................................ 33,077 32,726 33,032 32,639
========== ========== ========== ==========
Dividends per share ......................................... $ 0.08 $ 0.07 $ 0.16 $ 0.14
========== ========== ========== ==========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Net Sales
Second Quarter Ended Six Months Ended
------------------------ ------------------------
July 3, June 27, July 3, June 27,
2005 2004 2005 2004
---------- ---------- ---------- ----------
North America $ 157,116 $ 138,782 304,593 259,764
Europe 63,636 60,981 130,070 121,014
China 7,431 7,191 12,547 12,184
---------- ---------- ---------- ----------
Total $ 228,183 $ 206,954 447,210 392,962
========== ========== ========== ==========
Operating Income
Second Quarter Ended Six Months Ended
------------------------ ------------------------
July 3, June 27, July 3, June 27,
2005 2004 2005 2004
---------- ---------- ---------- ----------
North America $ 19,695 $ 21,077 37,523 36,235
Europe 7,952 7,992 15,445 15,437
China 572 457 1,117 (1)
Corporate (4,018) (4,819) (8,574) (7,186)
---------- ---------- ---------- ----------
Total $ 24,201 $ 24,707 45,511 44,485
========== ========== ========== ==========