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 2007 RESULTS
North Andover, MA...July 31, 2007. Watts Water Technologies, Inc. (NYSE:
WTS) today announced results for the second quarter ended July 1, 2007. Sales
were $350,422,000, an increase of $50,247,000, or 17%, compared to the second
quarter of 2006. Net income for the second quarter of 2007 was $17,774,000, or
$0.46 per share, compared to net income of $22,446,000, or $0.68 per share for
the second quarter of 2006. Income from continuing operations for the second
quarter of 2007 decreased by $4,850,000, or 22%, to $17,693,000, or $0.45 per
share, compared to income from continuing operations for the second quarter of
2006 of $22,543,000, or $0.68 per share.
Sales for the first six months of 2007 were $696,514,000, an increase of
$121,389,000, or 21%, compared to the comparable period of 2006. Net income for
the first six months of 2007 was $37,766,000, or $0.97 per share, compared to
net income of $37,409,000, or $1.13 per share for the comparable period of 2006.
Income from continuing operations for the first six months of 2007 increased by
$110,000 to $37,740,000, or $0.97 per share, compared to income from continuing
operations for the comparable period of 2006 of $37,630,000, or $1.14 per share.
Income from continuing operations and net income for the second quarter
and first six months of 2006 included approximately $4,100,000, or $0.12 per
share, related to a gain on the sale of a building in 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 $1,900,000 and $3,700,000 in after-tax
income in the second quarter and first six months of 2007, respectively. The
issuance of an additional 5,750,000 shares had a dilutive impact on earnings per
share of $0.02 per share and $0.06 per share in the second quarter and first six
months of 2007, respectively, after considering the interest income from the net
proceeds.
Operating income for the second quarter of 2007 decreased by $8,244,000 to
$30,316,000, as compared to $38,560,000 for the second quarter of 2006.
Operating income in the second quarter of 2006 included a gain on the sale of a
building in Italy of $6,500,000 while operating income in the second quarter of
2007 included a net charge of approximately $2,945,000 related to an increase in
the Company's workers compensation reserve primarily due to a change in
estimate. The Company continues to experience profit pressures due to increased
raw material costs, which were partially offset by a favorable sales mix derived
from the North American wholesale market.
Patrick S. O'Keefe, Chief Executive Officer, commented, "Our sales
increase for the second quarter of 2007 was achieved through internal growth of
$26,583,000, or 9%, contributions from acquired companies of $16,590,000, or 6%,
and favorable changes in foreign exchange rates of $7,074,000, or 2%. Acquired
growth was primarily attributable to the 2006 acquisitions of ATS Expansion
Group, Black Teknigas, Limited, Changsha Valve Works, Kim Olofsson Safe
Corporation AB and Calflex Manufacturing, Inc."
"Sales in our North American segment increased for the second quarter of
2007 by $16,203,000, or 8%, to $224,452,000 compared to $208,249,000 for the
second quarter of 2006. This increase was achieved primarily through internal
sales growth of $14,851,000, or 7%, and the inclusion of acquired company sales
of $1,091,000, or 1%."
"Internal sales growth in the North American wholesale market increased
11% over the second quarter of 2006. This increase was primarily due to price
increases and unit growth in our commercial markets. Sales into the North
American home improvement retail market were down 7% for the second quarter of
2007 compared to the second quarter of 2006. This decrease was primarily due to
decreased unit sales of our residential brass and tubular products partially
offset by price increases."
"We derived 31% of our total sales for the second quarter of 2007 from our
European segment. European sales increased $24,365,000, or 29%, to $108,222,000
compared to $83,857,000 for the second quarter of 2006. This increase was
achieved through the inclusion of acquired company sales totaling $13,173,000,
or 16%, favorable foreign exchange movement associated with the strengthening of
the euro versus the US dollar of $6,195,000, or 7%, and internal growth of
$4,997,000, or 6%. Internal sales growth in the OEM market, especially in our
under-floor radiant heating and solar product lines, continued to be
particularly strong in the second quarter."
"China segment sales in the second quarter of 2007 increased $9,679,000 or
120%, to $17,748,000 compared to the second quarter of 2006. This increase was
achieved through internal growth of $6,735,000, or 83%, acquired company sales
totaling $2,326,000, or 29%, and favorable foreign exchange rates associated
with the Chinese yuan strengthening against the U.S. dollar of $618,000, or 8%.
The increase in internal growth is due to increased domestic shipments of
approximately $3,484,000 and the elimination of the one month reporting lag in
two of our Chinese entities, which amounted to approximately $3,251,000."
Watts Water Technologies, Inc. will hold a live web cast of its conference
call to discuss second quarter results for 2007 on Tuesday, July 31, 2007, at
5:00 p.m. Eastern Time. This press release and the live web cast can be accessed
by visiting the Investor Relations 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 July 31, 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
(Amounts in thousands, except per share information)
(Unaudited)
Second Quarter Ended Six Months Ended
------------------------ ------------------------
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
---------- ---------- ---------- ----------
STATEMENTS OF INCOME
- --------------------
Net sales ..................................... $ 350,422 $ 300,175 $ 696,514 $ 575,125
Income from continuing operations ............. $ 17,693 $ 22,543 $ 37,740 $ 37,630
Income (loss) from discontinued operations .... 81 (97) 26 (221)
---------- ---------- ---------- ----------
Net income .................................... $ 17,774 $ 22,446 $ 37,766 $ 37,409
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE
- --------------------------
Weighted Average Number of Common Shares
& Equivalents .............................. 39,027 33,038 39,005 33,015
Income (loss) per Share:
Continuing operations .................... $ 0.45 $ 0.68 $ 0.97 $ 1.14
Discontinued operations .................. -- -- -- (0.01)
---------- ---------- ---------- ----------
Net income ............................... $ 0.46 $ 0.68 $ 0.97 $ 1.13
========== ========== ========== ==========
Cash dividends per share ...................... $ 0.10 $ 0.09 $ 0.20 $ 0.18
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
(Unaudited)
July 1, December 31,
2007 2006
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................................ $ 327,437 $ 342,979
Investment securities ............................................................ 19,250 11,825
Trade accounts receivable, less allowance for doubtful accounts of
$13,968 at July 1, 2007 and $10,543 at December 31, 2006 ...................... 257,432 228,502
Inventories, net:
Raw materials ................................................................. 116,238 103,587
Work in process ............................................................... 46,195 39,593
Finished goods ................................................................ 188,868 173,236
----------- -----------
Total Inventories .......................................................... 351,301 316,416
Prepaid expenses and other assets ................................................ 21,403 15,842
Deferred income taxes ............................................................ 35,259 26,739
Assets of discontinued operations ................................................ 10,534 10,079
----------- -----------
Total Current Assets .......................................................... 1,022,616 952,382
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost ........................................... 408,522 391,923
Accumulated depreciation ......................................................... (200,661) (185,763)
----------- -----------
Property, plant and equipment, net ............................................ 207,861 206,160
----------- -----------
OTHER ASSETS:
Goodwill ......................................................................... 362,055 356,090
Other, net ....................................................................... 140,278 146,218
----------- -----------
TOTAL ASSETS .......................................................................... $ 1,732,810 $ 1,660,850
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................................................. $ 132,870 $ 120,954
Accrued expenses and other liabilities ........................................... 93,972 100,437
Accrued compensation and benefits ................................................ 36,866 42,593
Current portion of long-term debt ................................................ 12,734 7,522
Liabilities of discontinued operations ........................................... 27,483 27,852
----------- -----------
Total Current Liabilities ..................................................... 303,925 299,358
----------- -----------
LONG-TERM DEBT, NET OF CURRENT PORTION ................................................ 454,932 441,697
DEFERRED INCOME TAXES ................................................................. 39,294 34,585
OTHER NONCURRENT LIABILITIES .......................................................... 53,563 52,686
MINORITY INTEREST ..................................................................... 4,989 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: 31,390,495 shares at July 1, 2007
and 31,239,111 shares at December 31, 2006 .................................... 3,139 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 July 1, 2007
and at December 31, 2006 ...................................................... 729 729
Additional paid-in capital ....................................................... 374,545 367,795
Retained earnings ................................................................ 458,648 429,555
Accumulated other comprehensive income ........................................... 39,046 25,350
----------- -----------
Total Stockholders' Equity .................................................... 876,107 826,553
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................................ $ 1,732,810 $ 1,660,850
=========== ===========
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 1, July 2, July 1, July 2,
2007 2006 2007 2006
--------- --------- --------- ---------
Net sales .................................................... $ 350,422 $ 300,175 $ 696,514 $ 575,125
Cost of goods sold ........................................... 235,781 193,492 467,207 372,458
--------- --------- --------- ---------
GROSS PROFIT ............................................ 114,641 106,683 229,307 202,667
Selling, general & administrative expenses ................... 84,055 73,799 168,154 142,850
Restructuring and other charges .............................. 270 (5,676) 470 (5,441)
--------- --------- --------- ---------
OPERATING INCOME ........................................ 30,316 38,560 60,683 65,258
--------- --------- --------- ---------
Other (income) expense:
Interest income ......................................... (3,637) (891) (7,249) (1,309)
Interest expense ........................................ 6,744 4,952 13,051 9,144
Minority interest ....................................... (832) 58 (1,110) 142
Other ................................................... 356 (662) 1,077 (896)
--------- --------- --------- ---------
2,631 3,457 5,769 7,081
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ... 27,685 35,103 54,914 58,177
Provision for income taxes ................................... 9,992 12,560 17,174 20,547
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS ...................... 17,693 22,543 37,740 37,630
Income (loss) from discontinued operations, net of taxes ..... 81 (97) 26 (221)
--------- --------- --------- ---------
NET INCOME .............................................. $ 17,774 $ 22,446 $ 37,766 $ 37,409
========= ========= ========= =========
BASIC EPS
Income (loss) per share:
Continuing operations ................................... $ 0.46 $ 0.69 $ 0.98 $ 1.15
Discontinued operations ................................. $ -- -- -- --
--------- --------- --------- ---------
NET INCOME .............................................. $ 0.46 $ 0.69 $ 0.98 $ 1.15
========= ========= ========= =========
Weighted average number of shares ............................ 38,659 32,654 38,615 32,623
========= ========= ========= =========
DILUTED EPS
Income (loss) per share:
Continuing operations ................................... $ 0.45 $ 0.68 $ 0.97 $ 1.14
Discontinued operations ................................. -- -- -- (0.01)
--------- --------- --------- ---------
NET INCOME .............................................. $ 0.46 $ 0.68 $ 0.97 $ 1.13
========= ========= ========= =========
Weighted average number of shares ............................ 39,027 33,038 39,005 33,015
========= ========= ========= =========
Dividends per share ..................................... $ 0.10 $ 0.09 $ 0.20 $ 0.18
========= ========= ========= =========
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Net Sales
Second Quarter Ended Six Months Ended
----------------------- -----------------------
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
--------- --------- --------- ---------
North America .......... $ 224,452 $ 208,249 $ 442,777 $ 404,815
Europe ................. 108,222 83,857 223,767 156,116
China .................. 17,748 8,069 29,970 14,194
--------- --------- --------- ---------
Total .................. $ 350,422 $ 300,175 $ 696,514 $ 575,125
========= ========= ========= =========
Operating Income
Second Quarter Ended Six Months Ended
----------------------- -----------------------
July 1, July 2, July 1, July 2,
2007 2006 2007 2006
--------- --------- --------- ---------
North America .......... $ 20,216 $ 25,959 $ 41,415 $ 48,527
Europe ................. 12,833 15,608 27,243 25,178
China .................. 4,015 2,397 6,064 3,412
Corporate .............. (6,748) (5,404) (14,039) (11,859)
--------- --------- --------- ---------
Total .................. $ 30,316 $ 38,560 $ 60,683 $ 65,258
========= ========= ========= =========