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 2007 RESULTS
North Andover, MA...May 1, 2007. Watts Water Technologies, Inc. (NYSE:
WTS) today announced results for the first quarter ended April 1, 2007. Sales
were $346,092,000, an increase of $71,142,000, or 26%, compared to the first
quarter of 2006. Net income for the first quarter of 2007 was $19,992,000, or
$0.51 per share, compared to net income of $14,963,000, or $0.46 per share for
the first quarter of 2006. Income from continuing operations for the first
quarter of 2007 increased by $4,960,000, or 33%, to $20,047,000, or $0.51 per
share, compared to income from continuing operations for the first quarter of
2006 of $15,087,000, or $0.46 per share. Income from continuing operations for
the first quarter of 2007 includes a tax refund of $1,910,000, or $0.05 per
share, due to recent changes in the tax laws of Italy.
In November 2006, the Company completed a public offering of 5,750,000
shares of Class A common stock and received net proceeds of approximately
$219,000,000. The net proceeds are currently being invested in short-term
securities, which provided approximately $1,800,000 in after-tax income in the
first quarter of 2007. The additional 5,750,000 shares had a dilutive impact of
$0.04 per share in the first quarter of 2007, after considering the interest
income from the net proceeds.
Patrick S. O'Keefe, Chief Executive Officer, commented, "Our sales
increase was achieved through internal growth of $35,389,000, or 13%,
contributions from acquired companies of $27,878,000, or 10%, and favorable
changes in foreign exchange rates of $7,875,000, or 3%. Acquired growth was
primarily attributable to the 2006 acquisitions of ATS Expansion Group, Changsha
Valve Works, Black Teknigas, Limited, Kim Olofsson Safe Corporation AB and
Calflex Manufacturing, Inc."
"Sales in our North American segment increased for the first quarter of
2007 by $21,759,000, or 11%, to $218,325,000 compared to $196,566,000 for the
first quarter of 2006. This increase was achieved through internal sales growth
of $20,210,000, or 10% and the inclusion of acquired company sales of
$1,661,000, or 1%."
"Internal sales growth in the North American wholesale market increased
13% over the first quarter of 2006. This increase was primarily due to price
increases and unit growth in our commercial markets. Internal growth in the
North American home improvement retail market was 2% for the first quarter of
2007 over the first quarter of 2006. This increase was primarily due to price
increases partially offset by decreased sales of residential products."
"We derived 33% of our total sales for the first quarter of 2007 from our
European segment. European sales increased $43,286,000, or 60%, to $115,545,000
compared to $72,259,000 for the first quarter of 2006. This increase was
achieved through the inclusion of acquired company sales totaling $22,745,000,
or 31%, internal growth of $12,878,000, or 18%, and favorable foreign exchange
movement associated with the strengthening of the euro versus the US dollar of
$7,663,000, or 11%. Our internal growth in Europe was fairly broad-based with
most channels performing well. Sales growth in the German OEM market, especially
in our under-floor radiant heating and solar product lines, was particularly
strong in the first quarter."
"China segment sales in the first quarter of 2007 increased $6,097,000 or
100%, to $12,222,000 compared to the first quarter of 2006. This increase was
achieved through the inclusion of acquired company sales totaling $3,472,000, or
57%, internal growth of $2,301,000, or 38%, and favorable foreign exchange rates
associated with the Chinese yuan strengthening against the U.S. dollar of
$324,000, or 5%."
Mr. O'Keefe commented, "Our operating income for the first quarter of 2007
increased by $3,835,000, or 14%, to $30,367,000 as compared to $26,532,000 for
the first quarter of 2006. Operating margins in the first quarter of 2007
decreased by approximately 80 basis points to 8.8% as compared to 9.6% in the
first quarter of 2006. The decrease in operating margin is primarily due to a
decline in gross margin percentage caused by increased raw material costs
partially offset by a decrease in selling and general administrative expenses as
a percent of sales."
The effective tax rate for the first quarter of 2007 was 26% compared with
35% in the first quarter of 2006. The decrease was primarily due to a tax refund
recorded in Italy of approximately $1,910,000 and by higher profits in China
being taxed at lower effective rates.
Watts Water Technologies, Inc. will hold a live web cast of its conference
call to discuss first quarter results for 2007 on Tuesday, May 1, 2007, 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 1, 2008.
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, 2006 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
First Quarter Ended
--------------------------
April 1, April 2,
2007 2006
--------- ---------
STATEMENTS OF INCOME
Net sales ...................................... $ 346,092 $ 274,950
Income from continuing operations .............. $ 20,047 $ 15,087
Loss from discontinued operations .............. (55) (124)
--------- ---------
Net income ..................................... $ 19,992 $ 14,963
========= =========
DILUTED EARNINGS PER SHARE
Weighted Average Number of Common
Shares & Equivalents ........................... 38,981 32,823
Income (loss) per Share:
Continuing operations ..................... $ 0.51 $ 0.46
Discontinued operations ................... -- --
--------- ---------
Net income ................................ $ 0.51 $ 0.46
========= =========
Cash dividends per share ....................... $ 0.10 $ 0.09
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
(Unaudited)
April 1, December 31,
ASSETS 2007 2006
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 319,833 $ 342,979
Investment securities .................................................. 19,250 11,825
Trade accounts receivable, less allowance for doubtful accounts of
$12,556 at April 1, 2007 and $10,543 at December 31, 2006 ........... 251,624 228,502
Inventories, net:
Raw materials ....................................................... 110,465 103,587
Work in process ..................................................... 43,986 39,593
Finished goods ...................................................... 176,977 173,236
----------- -----------
Total Inventories ................................................ 331,428 316,416
Prepaid expenses and other assets ...................................... 20,665 15,842
Deferred income taxes .................................................. 33,215 26,739
Assets of discontinued operations ...................................... 10,102 10,079
----------- -----------
Total Current Assets ................................................ 986,117 952,382
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost ................................. 399,053 391,923
Accumulated depreciation ............................................... (193,482) (185,763)
----------- -----------
Property, plant and equipment, net .................................. 205,571 206,160
----------- -----------
OTHER ASSETS:
Goodwill ............................................................... 358,273 356,090
Other, net ............................................................. 143,674 146,218
----------- -----------
TOTAL ASSETS ................................................................ $ 1,693,635 $ 1,660,850
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 123,144 $ 120,954
Accrued expenses and other liabilities ................................. 96,763 100,437
Accrued compensation and benefits ...................................... 35,778 42,593
Current portion of long-term debt ...................................... 7,614 7,522
Liabilities of discontinued operations ................................. 27,821 27,852
----------- -----------
Total Current Liabilities ........................................... 291,120 299,358
----------- -----------
LONG-TERM DEBT, NET OF CURRENT PORTION ...................................... 453,963 441,697
DEFERRED INCOME TAXES ....................................................... 38,256 34,585
OTHER NONCURRENT LIABILITIES ................................................ 53,558 52,686
MINORITY INTEREST ........................................................... 5,731 5,971
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: 31,351,684 shares at
April 1, 2007 and 31,239,111 shares at December 31, 2006 ............ 3,135 3,124
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 1, 2007 and at December 31, 2006 ........................... 729 729
Additional paid-in capital ............................................. 372,351 367,795
Retained earnings ...................................................... 444,744 429,555
Accumulated other comprehensive income ................................. 30,048 25,350
----------- -----------
Total Stockholders' Equity .......................................... 851,007 826,553
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................................. $ 1,693,635 $ 1,660,850
=========== ===========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share information)
(Unaudited)
First Quarter Ended
----------------------
April 1, April 2,
2007 2006
--------- ---------
Net sales ................................................... $ 346,092 $ 274,950
Cost of goods sold .......................................... 231,426 179,132
--------- ---------
GROSS PROFIT ........................................... 114,666 95,818
Selling, general & administrative expenses .................. 84,099 69,051
Restructuring and other charges ............................. 200 235
--------- ---------
OPERATING INCOME ....................................... 30,367 26,532
--------- ---------
Other (income) expense:
Interest income ........................................ (3,612) (418)
Interest expense ....................................... 6,307 4,192
Minority interest ...................................... (278) 84
Other .................................................. 721 (400)
--------- ---------
3,138 3,458
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .. 27,229 23,074
Provision for income taxes .................................. 7,182 7,987
--------- ---------
INCOME FROM CONTINUING OPERATIONS ...................... 20,047 15,087
Loss from discontinued operations, net of taxes ............. (55) (124)
--------- ---------
NET INCOME ............................................. $ 19,992 $ 14,963
========= =========
BASIC EPS
Income (loss) per share:
Continuing operations .................................. $ 0.52 $ 0.46
Discontinued operations ................................ $ -- --
--------- ---------
NET INCOME ............................................. $ 0.52 $ 0.46
========= =========
Weighted average number of shares ........................... 38,571 32,591
========= =========
DILUTED EPS
Income (loss) per share:
Continuing operations .................................. $ 0.51 $ 0.46
Discontinued operations ................................ -- --
--------- ---------
NET INCOME ............................................. $ 0.51 $ 0.46
========= =========
Weighted average number of shares ........................... 38,981 32,823
========= =========
Dividends per share ................................... $ 0.10 $ 0.09
========= =========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Net Sales
First Quarter Ended
----------------------
April 1, April 2,
2007 2006
--------- ---------
North America ...................... $ 218,325 $ 196,566
Europe ............................. 115,545 72,259
China .............................. 12,222 6,125
--------- ---------
Total .............................. $ 346,092 $ 274,950
========= =========
Operating Income
First Quarter Ended
----------------------
April 1, April 2,
2007 2006
--------- ---------
North America ...................... $ 21,199 $ 22,402
Europe ............................. 14,410 9,570
China .............................. 2,049 1,015
Corporate .......................... (7,291) (6,455)
--------- ---------
Total .............................. $ 30,367 $ 26,532
========= =========