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 THIRD QUARTER 2005 RESULTS
North Andover, MA. October 31, 2005. Watts Water Technologies, Inc. (NYSE
Symbol "WTS") today announced results for the third quarter ended October 2,
2005. Sales for the third quarter ended October 2, 2005 were $232,729,000, an
increase of $22,539,000, or 11%, from the third quarter last year. Net income
for the third quarter ended October 2, 2005 was $13,368,000, or $0.40 per share,
which includes a loss from discontinued operations of $71,000, versus net income
of $13,705,000, or $0.42 per share, which included a loss from discontinued
operations of $130,000 for the third quarter last year. Income from continuing
operations for the third quarter ended October 2, 2005 decreased $396,000, or
3%, to $13,439,000, or $0.41 per share, compared to income from continuing
operations for the third quarter last year of $13,835,000, or $0.42 per share.
Costs incurred for our manufacturing restructuring plan, net of tax, in
the third quarters of 2005 and 2004 were $655,000, or $0.02 per share, and
$349,000, or $0.01 per share, respectively.
Sales for the nine months ended October 2, 2005 were $679,939,000, an
increase of $76,787,000, or 13%, from the same period last year. Net income for
the nine months ended October 2, 2005 was $39,639,000, or $1.20 per share, which
includes a loss from discontinued operations of $185,000, versus net income of
$38,659,000, or $1.18 per share, which included a loss of $230,000 from
discontinued operations for the same period last year. Income from continuing
operations increased $935,000, or 2%, for the nine months ended October 2, 2005,
to $39,824,000, or $1.21 per share, compared to income from continuing
operations for the same period last year of $38,889,000, or $1.19 per share.
Costs incurred for our manufacturing restructuring plans, net of tax, in
the nine months of 2005 and 2004 were $1,392,000, or $0.04 per share, and
$1,417,000, or $0.04 per share, respectively.
Patrick S. O'Keefe, Chief Executive Officer, commented, "Our overall
increase in sales for the third quarter as compared to last year was achieved by
internal growth and contributions from acquired companies. Changes in net
foreign exchange had a minimal positive effect on sales. Our internal growth
contributed $11,845,000 of the increase in sales in the third quarter ended
October 2, 2005. Acquisitions contributed sales of $10,473,000 for the third
quarter. This acquired growth was attributable to the July 2005 acquisitions of
the water connecter business of Donald E. Savard Company and Microflex N.V., the
June 2005 acquisition of the water softener business of Alamo Water Refiners,
Inc., the May 2005 acquisition of Electro Controls Ltd., and the January 2005
acquisitions of HF Scientific, Inc. and Sea Tech, Inc."
"Our North American segment increased sales for the third quarter ended
October 2, 2005 by 14% to $160,029,000 compared to $140,403,000 last year. This
increase in North American sales was achieved through internal sales growth of
$11,757,000, the inclusion of sales from the acquisitions of the water connecter
business of Donald E. Savard Company, the water softener business of Alamo Water
Refiners, Inc., HF Scientific, Inc. and Sea Tech, Inc. totaling $6,924,000, and
$945,000 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
third quarter ended October 2, 2005 increased 8% as compared to the third
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 13% for the third quarter ended October 2,
2005 over last year. This increase was primarily due to the new product
introduction of FloodSafeTM connectors."
"We derived 28% of our total sales for the third quarter ended October 2,
2005 from Europe compared to 30% last year. Sales in Europe for the third
quarter ended October 2, 2005 increased $3,168,000, or 5%, to $65,554,000,
compared to last year. This increase is due to the inclusion of the acquired
sales of Microflex N.V. and Electro Controls Ltd. totaling $3,549,000, internal
sales growth of $495,000 offset by $876,000 of unfavorable foreign exchange
associated with the weakening of the euro versus the U.S. dollar. We experienced
increased market share gains in Germany due to increased marketing and sales
efforts and increased sales into the Eastern European wholesale market, offset
by decreased sales in the OEM market primarily due to the weak economic
environments."
"Sales in China decreased $255,000 to $7,146,000 for the quarter ended
October 2, 2005 from $7,401,000 last year. Sales into the Chinese domestic
market increased offset by a decrease in the Chinese export market which is now
handled by our U.S. subsidiaries. Our China segment experienced favorable
foreign exchange rates associated with the strengthening of the yuan versus the
U.S. dollar."
"Operating income for the quarter ended October 2, 2005 remained
relatively flat at $22,905,000 as compared to $22,890,000 last year. This 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. We were not able to completely
recover these increased costs through reduced manufacturing costs or increased
selling prices in the North American market. Additionally, the economies in our
main European countries of Germany, Italy and France continued to be weak. These
factors are offset by the contribution of operating income from our acquired
companies and increased profits in China due to increased capacity utilization
and low cost sourcing."
"We are continuing 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 third quarter ended October 2, 2005 we recorded a pre-tax
charge of approximately $995,000, which was comprised of $991,000 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 $4,000 recorded in selling, general
and administrative expenses for severance costs related to European
restructuring. This compares to $567,000 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.
Watts Water Technologies, Inc. will hold a live web cast of its conference
call to discuss third quarter results for 2005 on Tuesday, November 1, 2005, at
3:00 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 November 1, 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 or to absorb these costs
by reducing manufacturing costs, 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
(Amounts in thousands, except per share information)
(Unaudited)
Third Quarter Ended Nine Months Ended
------------------------------ ------------------------------
October 2, September 26, October 2, September 26,
2005 2004 2005 2004
------------- ------------- ------------- -------------
STATEMENTS OF INCOME
Net sales $ 232,729 $ 210,190 $ 679,939 $ 603,152
Income from continuing operations $ 13,439 $ 13,835 $ 39,824 $ 38,889
Loss from discontinued operations (71) (130) (185) (230)
------------- ------------- ------------- -------------
Net income $ 13,368 $ 13,705 $ 39,639 $ 38,659
============= ============= ============= =============
DILUTED EARNINGS PER SHARE
Weighted Average Number of Common
Shares & Equivalents 33,062 32,792 33,006 32,673
Earnings per Share:
Continuing operations $ 0.41 $ 0.42 $ 1.21 $ 1.19
Discontinued operations -- -- (0.01) (0.01)
------------- ------------- ------------- -------------
Net income $ 0.40 $ 0.42 $ 1.20 $ 1.18
============= ============= ============= =============
Cash dividends per share $ 0.08 $ 0.07 $ 0.24 $ 0.21
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
(Unaudited)
October 2, December 31,
2005 2004
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 56,876 $ 65,913
Investment securities .................................................. -- 26,600
Trade accounts receivable, less allowance for doubtful accounts of
$8,690 at October 2, 2005 and $7,551 at December 31, 2004 ........... 171,802 150,073
Inventories, net:
Raw materials ....................................................... 74,162 61,250
Work in process ..................................................... 27,013 28,020
Finished goods ...................................................... 121,313 113,774
------------- -------------
Total Inventories ................................................ 222,488 203,044
Prepaid expenses and other assets ...................................... 17,936 14,359
Deferred income taxes .................................................. 28,265 27,463
Assets of discontinued operations ...................................... 9,480 10,227
------------- -------------
Total Current Assets ................................................ 506,847 497,679
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost ................................. 306,421 321,655
Accumulated depreciation ............................................... (160,581) (170,966)
------------- -------------
Property, plant and equipment, net .................................. 145,840 150,689
------------- -------------
OTHER ASSETS:
Goodwill ............................................................... 240,756 226,178
Other .................................................................. 60,075 49,702
------------- -------------
TOTAL ASSETS ................................................................ $ 953,518 $ 924,248
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 75,614 $ 73,606
Accrued expenses and other liabilities ................................. 68,959 64,604
Accrued compensation and benefits ...................................... 30,715 29,679
Current portion of long-term debt ...................................... 6,043 4,981
Liabilities of discontinued operations ................................. 22,914 24,303
------------- -------------
Total Current Liabilities ........................................... 204,245 197,173
------------- -------------
LONG-TERM DEBT, NET OF CURRENT PORTION ...................................... 185,081 180,562
DEFERRED INCOME TAXES ....................................................... 21,971 19,578
OTHER NONCURRENT LIABILITIES ................................................ 24,407 26,632
MINORITY INTEREST ........................................................... 7,715 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: 25,189,164 shares at
October 2, 2005 and 25,049,338 shares at December 31, 2004 .......... 2,519 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
October 2, 2005 and at December 31, 2004 ............................ 734 734
Additional paid-in capital ............................................. 143,517 140,172
Retained earnings ...................................................... 355,956 324,145
Deferred compensation .................................................. (1,935) (1,386)
Accumulated other comprehensive income ................................. 9,308 26,618
------------- -------------
Total Stockholders' Equity .......................................... 510,099 492,788
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................................. $ 953,518 $ 924,248
============= =============
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
Third Quarter Ended Nine Months Ended
----------------------------- ----------------------------
October 2, September 26, October 2, September 26,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales ................................................. $ 232,729 $ 210,190 $ 679,939 $ 603,152
Cost of goods sold ........................................ 152,916 135,822 441,565 388,245
------------ ------------ ------------ ------------
GROSS PROFIT ......................................... 79,813 74,368 238,374 214,907
Selling, general & administrative expenses ................ 56,908 51,478 169,958 147,532
------------ ------------ ------------ ------------
OPERATING INCOME ..................................... 22,905 22,890 68,416 67,375
------------ ------------ ------------ ------------
Other (income) expense:
Interest income ...................................... (243) (229) (881) (792)
Interest expense ..................................... 2,579 2,628 7,667 7,930
Minority interest .................................... 106 380 243 895
Other ................................................ (369) (239) (546) (495)
------------ ------------ ------------ ------------
2,073 2,540 6,483 7,538
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 20,832 20,350 61,933 59,837
Provision for income taxes ................................ 7,393 6,515 22,109 20,948
------------ ------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS ................... 13,439 13,835 39,824 38,889
Loss from discontinued operations, net of taxes ........... (71) (130) (185) (230)
------------ ------------ ------------ ------------
NET INCOME ........................................... $ 13,368 $ 13,705 $ 39,639 $ 38,659
============ ============ ============ ============
BASIC EPS Income (loss) per share:
Continuing operations ................................ $ 0.41 $ 0.43 $ 1.23 $ 1.21
Discontinued operations .............................. -- (0.01) (0.01) (0.01)
------------ ------------ ------------ ------------
NET INCOME ........................................... $ 0.41 $ 0.42 $ 1.22 $ 1.20
============ ============ ============ ============
Weighted average number of shares ......................... 32,525 32,320 32,470 32,242
============ ============ ============ ============
DILUTED EPS Income (loss) per share:
Continuing operations ................................ $ 0.41 $ 0.42 $ 1.21 $ 1.19
Discontinued operations .............................. -- -- (0.01) (0.01)
------------ ------------ ------------ ------------
NET INCOME ........................................... $ 0.40 $ 0.42 $ 1.20 $ 1.18
============ ============ ============ ============
Weighted average number of shares ......................... 33,062 32,792 33,006 32,673
============ ============ ============ ============
Dividends per share ................................. $ 0.08 $ 0.07 $ 0.24 $ 0.21
============ ============ ============ ============
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Net Sales
Third Quarter Ended Nine Months Ended
---------------------------- ----------------------------
October 2, September 26, October 2, September 26,
2005 2004 2005 2004
------------ ------------ ------------ ------------
North America $ 160,029 $ 140,403 464,622 400,167
Europe 65,554 62,386 195,624 183,400
China 7,146 7,401 19,693 19,585
------------ ------------ ------------ ------------
Total $ 232,729 $ 210,190 679,939 603,152
============ ============ ============ ============
Operating Income
Third Quarter Ended Nine Months Ended
---------------------------- ----------------------------
October 2, September 26, October 2, September 26,
2005 2004 2005 2004
------------ ------------ ------------ ------------
North America $ 17,829 $ 18,565 55,352 54,800
Europe 7,854 8,023 23,299 23,460
China 1,433 1,277 2,550 1,276
Corporate (4,211) (4,975) (12,785) (12,161)
------------ ------------ ------------ ------------
Total $ 22,905 $ 22,890 68,416 67,375
============ ============ ============ ============