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 2006 RESULTS
North Andover, MA...May 2, 2006. Watts Water Technologies, Inc. (NYSE:
WTS) today announced results for the first quarter ended April 2, 2006. Sales
were $274,950,000, an increase of $55,923,000, or 26%, compared to the first
quarter of 2005. Net income for the first quarter of 2006 was $14,963,000, or
$0.46 per share, which included a loss from discontinued operations of $124,000,
versus net income of $12,358,000, or $0.37 per share, which included a loss from
discontinued operations of $39,000, for the first quarter of 2005. Income from
continuing operations for the first quarter of 2006 increased by $2,690,000, or
22%, to $15,087,000, or $0.46 per share, compared to income from continuing
operations for the first quarter of 2005 of $12,397,000, or $0.37 per share.
The Company adopted Financial Accounting Standards Board Statement No.
123R (FAS 123R) that requires the Company to expense the value of employee stock
options and similar awards effective January 1, 2006. This resulted in
incremental pre-tax costs in selling, general and administrative expense of
approximately $450,000 for the first quarter of 2006 compared to the comparable
period last year.
Patrick S. O'Keefe, Chief Executive Officer, commented, "We are pleased
with our overall performance in the first quarter of 2006. We achieved record
results with all segments contributing to our growth in sales and earnings. The
increase in sales was achieved through contributions from acquired companies and
internal growth, offset by an adverse change in foreign exchange rates.
Acquisitions contributed 17% or $37,126,000; internal growth was 11% and
contributed $23,255,000; and a net unfavorable foreign exchange movement,
primarily due to the euro devaluation against the dollar, offset these increases
by 2%, or $4,458,000. Acquired growth was attributable to the December 2005
acquisitions of Core Industries Inc. (FEBCO, Mueller Steam Specialty and Polyjet
Valves product lines) and Dormont Manufacturing Company, the November 2005
acquisition of Flexflow Tubing LLP, the July 2005 acquisitions of the water
connecter business of the Donald E. Savard Company and Microflex N.V., the June
2005 acquisition of the water softener business of Alamo Water Refiners, Inc.,
and the May 2005 acquisition of Electro Controls Ltd."
"Our North American segment sales increased for the first quarter of 2006
by 33% to $196,566,000 compared to $147,477,000 for first quarter of 2005. This
increase was achieved through the inclusion of acquired sales totaling
$34,316,000, or 23%, internal sales growth of $13,967,000, or 9%, and favorable
foreign exchange rates of $806,000 associated with the strengthening of the
Canadian dollar versus the U.S. dollar."
"Internal sales in our North American wholesale market increased 9% over
the first quarter of 2005. This increase was led by increased sales of water
pressure regulators, relief valves and backflow prevention units, as well as
strength in the plumbing and under-floor radiant heating product lines. Internal
growth in our North American home improvement retail market was 10% for the
first quarter of 2006 over the first quarter of 2005. This increase was led by
increased sales of fittings and supply lines and under-floor radiant heating
product lines."
"We derived 26% of our total sales for the first quarter of 2006 from our
European segment. European sales increased $5,825,000, or 9%, to $72,259,000
compared to the first quarter of 2005. Internal growth of 13%, or $8,450,000,
and acquired growth of 4%, or $2,810,000, was offset by an unfavorable foreign
exchange movement associated with the weakening of the euro versus the US dollar
of $5,435,000. Our internal growth in Europe was broad-based with most markets
and channels exhibiting improvement."
"China's segment sales in the first quarter of 2006 increased $1,009,000,
or 20%, to $6,125,000 compared to the first quarter of 2005. Internal growth was
$838,000, or 17%, and $171,000, or 3%, was due to favorable foreign exchange
rates associated with the yuan strengthening against the U.S. dollar. The
internal growth in China was due to a 22% increase in the domestic market, as
well as, an increase into the export market over the comparable period last
year."
"Our operating income for the first quarter of 2006 increased by
$5,222,000, or 25%, to $26,532,000 as compared to $21,310,000 in 2005. Internal
growth was 12%, or $2,568,000, with positive performances from each segment.
Acquisitions provided $2,590,000, or 12%, and reduced quarter-on-quarter
restructuring costs contributed to the increase with unfavorable foreign
exchange movements offsetting these increases."
O'Keefe concluded, "On April 27, 2006, we restructured our long-term debt.
We completed a private placement offering of $225,000,000 of 5.85% senior
unsecured notes payable in April 2016. We used the net proceeds from the notes
to repay $147,000,000 outstanding under our revolving credit facility. The
balance of the net proceeds will be used to finance future acquisitions and for
general corporate purposes. Additionally, we amended our revolving credit
facility, increasing our borrowing capacity from $300,000,000 to $350,000,000,
reducing the interest spread and extending the term to April 2011."
The Company incurred costs, net of tax, of $149,000 and $496,000,
respectively, in the first quarters of 2006 and 2005 for its manufacturing
restructuring plan. In the first quarter of 2006, the Company recorded a net
pre-tax charge of approximately $235,000 primarily for severance costs related
to European restructuring efforts. For the first quarter of 2005, the Company
recorded a pre-tax charge of approximately $774,000, which consisted 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.
The loss from discontinued operations in the first quarters of 2006 and
2005 were for costs associated with the James Jones litigation.
Watts Water Technologies, Inc. will hold a live web cast of its conference
call to discuss first quarter results for 2006 on Tuesday, May 2, 2006, at 5:00
p.m. Eastern Time. This 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 2, 2007.
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 recent 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, changes in
variable interest rates on Company borrowings, identification and disclosure of
material weaknesses in our internal control 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, affecting 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 "Item 1A. Risk
Factors" in the Watts Water Technologies, Inc. Annual Report on Form 10-K for
the year ended December 31, 2005 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
First Quarter Ended
-------------------------
April 2, April 3,
2006 2005
--------- ---------
Net sales .......................................................... $ 274,950 $ 219,027
Cost of goods sold ................................................. 179,132 141,649
--------- ---------
GROSS PROFIT ................................................... 95,818 77,378
Selling, general & administrative expenses ......................... 69,051 55,706
Restructuring ...................................................... 235 362
--------- ---------
OPERATING INCOME ............................................... 26,532 21,310
--------- ---------
Other (income) expense:
Interest income ................................................ (418) (309)
Interest expense ............................................... 4,192 2,521
Minority interest .............................................. 84 65
Other .......................................................... (400) (87)
--------- ---------
3,458 2,190
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .......... 23,074 19,120
Provision for income taxes ......................................... 7,987 6,723
--------- ---------
INCOME FROM CONTINUING OPERATIONS .............................. 15,087 12,397
Loss from discontinued operations, net of taxes .................... (124) (39)
--------- ---------
NET INCOME ..................................................... $ 14,963 $ 12,358
========= =========
BASIC EPS
Income per share:
Continuing operations .......................................... $ 0.46 $ 0.38
Discontinued operations ........................................ -- --
--------- ---------
NET INCOME ..................................................... $ 0.46 $ 0.38
========= =========
Weighted average number of shares .................................. 32,591 32,408
========= =========
DILUTED EPS
Income per share:
Continuing operations .......................................... $ 0.46 $ 0.37
Discontinued operations ........................................ -- --
--------- ---------
NET INCOME ..................................................... $ 0.46 $ 0.37
========= =========
Weighted average number of shares .................................. 32,823 33,032
========= =========
Dividends per share ............................................ $ 0.09 $ 0.08
========= =========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
First Quarter Ended
--------------------------
April 2, April 3,
2006 2005
--------- ---------
STATEMENTS OF INCOME
Net sales $ 274,950 $ 219,027
Income from continuing operations $ 15,087 $ 12,397
Loss from discontinued operations (124) (39)
--------- ---------
Net income $ 14,963 $ 12,358
========= =========
DILUTED EARNINGS PER SHARE
Weighted Average Number of Common
Shares & Equivalents 32,823 33,032
Earnings per Share:
Continuing operations $ 0.46 $ 0.37
Discontinued operations -- --
--------- ---------
Net income $ 0.46 $ 0.37
========= =========
Cash dividends per share $ 0.09 $ 0.08
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
(Unaudited)
April 2, December 31,
2006 2005
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................................ $ 45,677 $ 45,758
Trade accounts receivable, less allowance for doubtful accounts of
$9,293 at April 2, 2006 and $9,296 at December 31, 2005 ........................... 191,079 177,364
Inventories, net:
Raw materials ..................................................................... 91,189 84,087
Work in process ................................................................... 26,205 23,201
Finished goods .................................................................... 144,350 135,549
----------- -----------
Total Inventories .............................................................. 261,744 242,837
Prepaid expenses and other assets .................................................... 17,889 25,361
Deferred income taxes ................................................................ 30,620 27,540
Assets of discontinued operations .................................................... 8,155 9,555
----------- -----------
Total Current Assets .............................................................. 555,164 528,415
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost ............................................... 348,187 328,812
Accumulated depreciation ............................................................. (171,738) (163,813)
----------- -----------
Property, plant and equipment, net ................................................ 176,449 164,999
----------- -----------
OTHER ASSETS:
Goodwill ............................................................................. 293,643 296,636
Other, net ........................................................................... 106,640 110,920
----------- -----------
TOTAL ASSETS ............................................................................. $ 1,131,896 $ 1,100,970
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ..................................................................... $ 99,506 $ 91,053
Accrued expenses and other liabilities ............................................... 65,594 67,071
Accrued compensation and benefits .................................................... 26,269 28,496
Current portion of long-term debt .................................................... 7,391 13,635
Liabilities of discontinued operations ............................................... 23,054 23,068
----------- -----------
Total Current Liabilities ......................................................... 221,814 223,323
----------- -----------
LONG-TERM DEBT, NET OF CURRENT PORTION ................................................... 308,259 293,350
DEFERRED INCOME TAXES .................................................................... 25,355 24,803
OTHER NONCURRENT LIABILITIES ............................................................. 30,082 32,187
MINORITY INTEREST ........................................................................ 7,976 7,831
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: 25,353,181 shares at
April 2, 2006 and 25,205,210 shares at December 31, 2005 .......................... 2,535 2,521
Class B Common Stock, $.10 par value; 25,000,000 shares authorized;
10 votes per share; issued and outstanding: 7,293,880 shares at
April 2, 2006 and 7,343,880 at December 31, 2005 .................................. 729 734
Additional paid-in capital ........................................................... 145,130 142,694
Retained earnings .................................................................... 380,142 368,264
Accumulated other comprehensive income ............................................... 9,874 5,263
----------- -----------
Total Stockholders' Equity ........................................................ 538,410 519,476
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................................... $ 1,131,896 $ 1,100,970
=========== ===========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Net Sales
First Quarter Ended
-------------------------
April 2, April 3,
2006 2005
--------- ---------
North America $ 196,566 $ 147,477
Europe 72,259 66,434
China 6,125 5,116
--------- ---------
Total $ 274,950 $ 219,027
========= =========
Operating Income
First Quarter Ended
-------------------------
April 2, April 3,
2006 2005
--------- ---------
North America $ 22,402 $ 18,446
Europe 9,570 7,493
China 1,015 545
Corporate (6,455) (5,174)
--------- ---------
Total $ 26,532 $ 21,310
========= =========