Breaking News

Tweet TWEET

Watts Water Technologies Reports Fourth Quarter and Full Year Results for 2012

  Watts Water Technologies Reports Fourth Quarter and Full Year Results for
  2012

Business Wire

NORTH ANDOVER, Mass. -- February 19, 2013

Watts Water Technologies, Inc. (NYSE: WTS) today announced results for the
fourth quarter and year ended December 31, 2012. Net income per diluted share
for the fourth quarter of 2012 was $0.44, as compared to $0.47 for the fourth
quarter of 2011. Net income per diluted share from continuing operations (EPS)
for the fourth quarter of 2012 was $0.52 as compared to $0.47 for the fourth
quarter of 2011. Adjusting for special items, fourth quarter 2012 adjusted EPS
was $0.61, compared to fourth quarter 2011 adjusted EPS of $0.56. A summary of
fourth quarter and full year financial results is as follows:

                                                                 
                Fourth Quarter and Full Year Earnings Summary
                                                                         
(In
millions,          Fourth quarter ended December
except per         31                                 Year ended December 31
share
information)
                   2012        2011        %          2012          2011        %
                                           Change                               Change
                                                                                
Sales              $ 359.2     $ 357.5     0.5  %     $ 1,445.6     $ 1,428.1   1    %
                                                                                
Net income
from                 18.4        17.2      7    %       70.6          64.4      10   %
continuing
operations
                                                                                
Income
(loss) from
discontinued         (2.9  )     (0.2  )   NA           (2.2    )     2.0       NA
operations,
net of taxes
                                                                 
Net income         $ 15.5     $ 17.0     -9   %     $ 68.4       $ 66.4      3    %
                                                                                
Diluted
earnings per
share from         $ 0.52      $ 0.47      11   %     $ 1.96        $ 1.72      14   %
continuing
operations
                                                                                
Special              0.09        0.10                   0.22          0.46
items
                                                                                
Adjusted
earnings per
share from         $ 0.61      $ 0.56      9    %     $ 2.18        $ 2.18      0.0  %
continuing
operations
                                                                                     

All financial information and period-to-period references are on a continuing
operations basis unless otherwise noted. Reconciliations to discontinued
operations and generally accepted accounting principles (GAAP) and non-GAAP
reconciliations are provided in the attached financial tables. 2011 fourth
quarter and year-to-date results have been recast to reflect Flomatic as a
discontinued operation.

Fourth Quarter/Full Year Highlights:

  *Fourth quarter 2012 sales were essentially flat compared with fourth
    quarter of 2011, with organic growth and acquired growth being
    substantially offset by the impact of negative foreign exchange, related
    primarily to a weakening of the euro against the U.S dollar.
  *Adjusted 2012 fourth quarter EPS of $0.61 represents an increase of 8.9%
    over the fourth quarter of 2011. Excluding the acquisition of tekmar
    Control Systems (tekmar), the net effect of the share repurchase program
    and the effect of the negative impact of a weakening euro, the increase
    was 4% over the fourth quarter of last year.
  *Adjusted earnings were positively affected by a favorable blended tax rate
    in EMEA driven by the mix of earnings by country.
  *Adjusted operating margin of 10.4% for the fourth quarter of 2012 was
    essentially flat with the fourth quarter of 2011; operating margins on a
    GAAP basis increased 1.2 percentage points to 8.6% in the fourth quarter
    of 2012, as compared to the fourth quarter of 2011.
  *Full year 2012 sales increased mainly due to acquisitions and organic
    growth, offset substantially by a negative foreign exchange impact. Full
    year sales were the highest since 2008.
  *Adjusted 2012 full year EPS from continuing operations of $2.18 was flat
    with 2011. Excluding the results of acquisitions, the share repurchase
    program (net) and the effect of foreign exchange, adjusted EPS from
    continuing operations was $2.10, or 4% below 2011 adjusted EPS.
  *2012 free cash flow of $104.8 million represented a 148% cash conversion
    rate of free cash flow to net income from continuing operations. 2012 is
    the fifth consecutive year that free cash flow has exceeded net income.
  *Completed the disposal of Flomatic Corporation (Flomatic) in the fourth
    quarter of 2012, recognizing a net after-tax loss on disposal of
    approximately $3.8 million in discontinued operations. Results for the
    years ended December 31, 2012 and 2011 have been recast to reflect
    Flomatic as a discontinued operation. EPS was reduced by $0.02 for the
    full year 2012 and $0.01 for the full year 2011.

North American sales increased $8.9 million to $205.9 million in the fourth
quarter of 2012, compared to $197.0 million for the fourth quarter of 2011.
This increase was due to an organic sales increase of $4.7 million, or 2.4%,
acquired sales of $3.6 million and by favorable foreign exchange movements of
$0.6 million associated with the strengthening of the Canadian dollar against
the U.S. dollar. Sales into the North American wholesale market were flat
organically during the fourth quarter as compared to the same period in 2011.
Organic sales into the North American DIY home improvement market increased
9.0% for the fourth quarter of 2012 as compared to the fourth quarter of 2011,
primarily from increased sales of residential and commercial products and
water quality products.

Europe, Middle East and Africa (EMEA) sales decreased $9.1 million to $145.3
million for the fourth quarter or 2012, compared to $154.4 million for the
fourth quarter of 2011. The decrease was due to unfavorable foreign exchange
movements associated with the weakening of the Euro versus the U.S. dollar of
$5.7 million and a reduction in organic sales of $3.4 million or (2.2%).
Organic sales in the EMEA wholesale market increased by approximately 1% but
were offset by a 4% reduction in OEM sales, as compared to the fourth quarter
of 2011. EMEA segment sales represented approximately 40% and 43% of total
Company sales in the fourth quarters of 2012 and 2011, respectively.

The full year 2012 sales increase of $17.5 million was due to growth from
acquisitions of $51.5 million and organic growth of $10.3 million, offset by
unfavorable foreign exchange movements of $44.3 million. Organic sales growth
in North America of 1.9% was substantially offset by a decrease in EMEA
organic sales of 1.5%. Asia organic sales increased 18% for the year by
expanded marketing and sales efforts in that region.

Full year free cash flow was $104.8 million in 2012, as compared to free cash
flow of $105.6 million in 2011. The conversion rate of free cash flow to net
income from continuing operations was 148% as compared to 164% in 2011. This
is the fifth consecutive year that the Company generated free cash flows in
excess of 140% of net income. At December 31, 2012, net debt to capitalization
ratio was 10.7%, as compared to 13.9% at December 31, 2011, the decrease
driven primarily by cash generation during the year. As of year-end, the
Company had approximately $272 million of cash on hand and approximately $265
million in available credit under our credit agreement.

David J. Coghlan, Chief Executive Officer, commented, “We were pleased with
our overall performance in the quarter. Compared to the fourth quarter of
2011, our organic sales increased by approximately 1%, with increases in both
the North America and Asia segments being offset by a decrease in the EMEA
segment. Adjusted operating margins of 10.4% were consistent with the third
quarter driven by stronger sales than anticipated in North America. Overall,
this year again proved challenging for the end markets we serve as sales
increased organically by only 1%. EMEA organic sales decreased by 1.5% for the
year. However, given the overall market environment within Europe, we were
pleased with that result. In North America, we invested in our lead-free
conversion program, which negatively affected 2012 results, but we expect
positions us well for the future. We were also very pleased with our continued
progress in Asia, as we saw 18% organic growth in 2012, albeit it from a small
base.”

Mr. Coghlan concluded, “In closing, as part of our One Watts strategy we made
some important investments in both people and systems which affected near-term
operating margins but will position us well as we move ahead. We took a
leadership position in initiating the transition to lead-free products, which
we believe will be an important driver in our industry for many years. We are
seeing the start of a residential construction recovery in the U.S. and we
expect Europe will continue to be a challenge. However, we like our position
in the expanding emerging Eastern Europe and Middle East export markets.
Lastly, we are starting to see some meaningful growth in our Asia business as
we continue to invest and focus our efforts in leveraging the substantial
market expansion opportunities we see there.”

In this press release we refer to non-GAAP financial measures (including
adjusted operating income, adjusted operating margins, adjusted net income
from continuing operations, adjusted earnings per share, adjusted earnings per
share excluding acquisitions, share repurchases and foreign exchange impact,
free cash flow, net debt to capitalization ratio and the cash conversion rate
of free cash flow to net income from continuing operations) and provide a
reconciliation of those non-GAAP financial measures to the corresponding
financial measures contained in our consolidated financial statements prepared
in accordance with GAAP. We believe that these financial measures are
appropriate to enhance an overall understanding of our historical financial
performance and future prospects. Adjusted operating income, adjusted
operating margins, adjusted net income from continuing operations and adjusted
earnings per share eliminate certain expenses incurred in the periods
presented that relate primarily to our global restructuring programs,
impairment charges, CEO separation costs and CFO retention costs, significant
legal settlements, product liability and workers’ compensation accrual
increases or decreases, acquisition earn out adjustments, due diligence costs,
acquisition accounting costs, tax adjustments, and other costs and related tax
benefits. Also, adjusted earnings per share excluding acquisitions, share
repurchases and foreign exchange impact, exclude the effect of each of those
items on adjusted EPS. Management then utilizes these adjusted financial
measures to assess the run-rate of the Company’s continuing operations against
those of comparable periods without the distortion of those factors. Free cash
flow and the net debt to capitalization ratio, which are adjusted to exclude
certain cash inflows and outlays, and include only certain balance sheet
accounts from the comparable GAAP measures, are an indication of our
performance in cash flow generation and also provide an indication of the
Company's relative balance sheet leverage to other industrial manufacturing
companies. The cash conversion rate of free cash flow to net income from
continuing operations is also a measure of our performance in cash flow
generation. These non-GAAP financial measures are among the primary indicators
management uses as a basis for evaluating our cash flow generation and our
capitalization structure. In addition, free cash flow is used as a criterion
to measure and pay certain compensation-based incentives. For these reasons,
management believes these non-GAAP financial measures can be useful to
investors, potential investors and others. The Company’s non-GAAP financial
measures may not be comparable to similarly titled measures reported by other
companies. The presentation of this additional information is not meant to be
considered in isolation or as a substitute for financial measures prepared in
accordance with GAAP.

Watts Water Technologies, Inc. will hold a live web cast of its conference
call to discuss fourth quarter and year end results for 2012 on Wednesday,
February 20, 2013, at 9:00 a.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 February 20,
2014.

The Company's 2013 Annual Meeting of Stockholders will be held at 9:00 a.m. on
Wednesday, May 15, 2013 at the Company’s executive offices located at 815
Chestnut Street, North Andover, Massachusetts.

Watts Water Technologies, Inc., through its subsidiaries, 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. Watts’s expertise in a wide variety of water technologies
enables it to be a comprehensive supplier to the water industry.

This Press Release may include 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” 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: the current economic and financial condition, which
can affect levels of housing starts and remodeling, affecting the markets
where the Company’s products are sold, manufactured, or marketed; shortages in
and pricing of raw materials and supplies; 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; environmental compliance costs; product liability
risks; the results and timing of the Company’s manufacturing restructuring
plan; changes in the status of current litigation; and other risks and
uncertainties discussed under the heading “Item 1A. Risk Factors” and in Note
14 of the Notes to the Consolidated Financial Statements in the Watts Water
Technologies, Inc. Annual Report on Form 10-K for the year ended December 31,
2011 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, except as required by law.

WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in millions, except per share information)
(Unaudited)
                                                           
                    Fourth Quarter Ended             Year Ended
                    December 31,     December        December        December
                                     31,             31,             31,
                    2012             2011            2012            2011
STATEMENTS OF
INCOME
                                                                     
Net sales           $  359.2         $  357.5        $ 1,445.6       $ 1,428.1
                                                                     
Net income
from                $  18.4          $  17.2         $ 70.6          $ 64.4
continuing
operations
Income (loss)
from                  (2.9   )        (0.2   )      (2.2    )      2.0
discontinued
operations
Net income          $  15.5         $  17.0        $ 68.4         $ 66.4
                                                                     
                                                                     
DILUTED
EARNINGS PER
SHARE
                                                                     
Weighted
Average
Number of              35.5             36.8           36.1            37.5
Common Shares
& Equivalents
                                                                     
Net income
(loss) per
share
Continuing          $  0.52          $  0.47         $ 1.96          $ 1.72
operations
Discontinued          (0.08  )        -            (0.06   )      0.05
operations
Net income          $  0.44         $  0.47        $ 1.90         $ 1.78
                                                                     
                                                                     
Cash
dividends per       $  0.11          $  0.11         $ 0.44          $ 0.44
share
                                                                       

WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except share information)
(Unaudited)
                                                           
                                                                  
                                               December 31,       December 31,
ASSETS                                         2012               2011
CURRENT ASSETS:
Cash and cash equivalents                    $ 271.8            $ 250.6
Short-term investment securities               2.1                4.1
Trade accounts receivable, less
allowance for doubtful accounts of             207.1              205.9
$9.7 million at December 31, 2012 and
$9.1 million at December 31, 2011
Inventories, net:
Raw materials                                  111.7              104.6
Work in process                                20.5               28.6
Finished goods                                 158.5             147.4     
Total Inventories                              290.7              280.6
Prepaid expenses and other assets              22.7               26.4
Deferred income taxes                          21.6               28.3
Assets held for sale                           -                  4.6
Assets of discontinued operations              -                 14.0      
Total Current Assets                           816.0             814.5     
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment                  515.0              491.0
Accumulated depreciation                       (291.4    )        (267.9    )
Property, plant and equipment, net             223.6             223.1     
OTHER ASSETS:
Goodwill                                       508.2              488.6
Intangible assets, net                         146.6              151.0
Deferred income taxes                          4.8                6.7
Other, net                                     9.8               10.1      
TOTAL ASSETS                                 $ 1,709.0         $ 1,694.0   
                                                                  
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                             $ 131.6            $ 126.1
Accrued expenses and other liabilities         116.8              109.0
Accrued compensation and benefits              42.5               45.9
Current portion of long-term debt              77.1               2.0
Liabilities of discontinued operations         -                 2.6       
Total Current Liabilities                      368.0             285.6     
LONG-TERM DEBT, NET OF CURRENT PORTION         307.5              397.4
DEFERRED INCOME TAXES                          45.2               52.7
OTHER NONCURRENT LIABILITIES                   48.8               38.5
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.10 par value;
5,000,000 shares authorized;                   -                  -
no shares issued or outstanding
Class A Common Stock, $0.10 par value;
80,000,000 shares authorized;
1 vote per share; issued and
outstanding: 28,673,639 shares at              2.9                2.9
December 31, 2012
and 29,471,414 shares at December 31,
2011
Class B Common Stock, $0.10 par value;
25,000,000 shares authorized;
10 votes per share; issued and               0.6                0.7
outstanding: 6,588,680 shares at
December 31, 2012
and 6,953,680 at December 31, 2011
Additional paid-in capital                     448.7              420.1
Retained earnings                              498.1              515.1
Accumulated other comprehensive loss           (10.8     )        (19.0     )
Total Stockholders' Equity                     939.5             919.8     
TOTAL LIABILITIES AND STOCKHOLDERS'          $ 1,709.0         $ 1,694.0   
EQUITY
                                                                            

                                                             
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in millions, except per share information)
(Unaudited)
                                                                     
                         Fourth Quarter Ended        Year Ended
                         December      December      December        December
                         31,           31,           31,             31,
                         2012          2011          2012            2011
Net sales              $ 359.2       $ 357.5       $ 1,445.6       $ 1,428.1
Cost of goods sold       229.5        229.6        928.1          915.3   
GROSS PROFIT             129.7         127.9         517.5           512.8
Selling, general
and administrative       96.0          91.3          384.8           377.6
expenses
Restructuring and        2.4           0.6           4.3             8.8
other charges, net
Goodwill and other
long-lived asset         0.4           17.1          3.4             17.4
impairment charges
(Gain on)
adjustment to            -            (7.7   )      1.6            (7.7    )
disposal of
business
OPERATING INCOME         30.9         26.6         123.4          116.7   
Other (income)
expense:
Interest income          (0.2   )      (0.3   )      (0.7     )      (1.0    )
Interest expense         6.2           6.7           24.6            25.8
Other expense            0.7          0.4          (0.8     )      0.8     
(income), net
Total other              6.7          6.8          23.1           25.6    
expense
INCOME FROM
CONTINUING               24.2          19.8          100.3           91.1
OPERATIONS BEFORE
INCOME TAXES
Provision for            5.8          2.6          29.7           26.7    
income taxes
NET INCOME FROM
CONTINUING               18.4          17.2          70.6            64.4
OPERATIONS
Income (loss) from
discontinued             (2.9   )      (0.2   )      (2.2     )      2.0     
operations, net of
taxes
NET INCOME             $ 15.5       $ 17.0       $ 68.4         $ 66.4    
                                                                     
BASIC EPS
Net income (loss)
per share:
Continuing             $ 0.52        $ 0.47        $ 1.96          $ 1.73
operations
Discontinued             (0.08  )      -            (0.06    )      0.05    
operations
NET INCOME             $ 0.44       $ 0.47       $ 1.90         $ 1.78    
Weighted average         35.4         36.8         36.0           37.3    
number of shares
DILUTED EPS
Net income (loss)
per share:
Continuing             $ 0.52        $ 0.47        $ 1.96          $ 1.72
operations
Discontinued             (0.08  )      -            (0.06    )      0.05    
operations
NET INCOME             $ 0.44       $ 0.47       $ 1.90         $ 1.78    
Weighted average         35.5         36.8         36.1           37.5    
number of shares
Dividends per          $ 0.11       $ 0.11       $ 0.44         $ 0.44    
share
                                                                             

                                                            
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
                                                 Year Ended
                                                 December 31,     December 31,
                                                 2012             2011
OPERATING ACTIVITIES
Net income                                     $ 68.4           $ 66.4
Income (loss) from discontinued                  (2.2     )       2.0      
operations, net of taxes
Net income from continuing operations            70.6             64.4
Adjustments to reconcile net income from
continuing operations to net
cash provided by continuing operating
activities:
Depreciation                                     33.8             33.0
Amortization of intangibles                      15.6             17.9
Stock-based compensation                         6.6              8.3
Deferred income tax benefit                      -                (0.5     )
Loss on disposal and impairment of
goodwill, property, plant and equipment          4.1              5.2
and other
Changes in operating assets and
liabilities, net of effects
from business acquisitions and
divestures:
Accounts receivable                              1.8              3.4
Inventories                                      (6.2     )       3.4
Prepaid expenses and other assets                0.9              (7.9     )
Accounts payable, accrued expenses and           4.7             0.2      
other liabilities
Net cash provided by continuing operations       131.9           127.4    
INVESTING ACTIVITIES
Additions to property, plant and equipment       (30.6    )       (22.6    )
Proceeds from the sale of property, plant        3.5              0.8
and equipment
Investments in securities                        (2.1     )       (8.1     )
Proceeds from sale of securities                 4.1              8.1
Purchase of intangible assets and other          (0.1     )       (0.9     )
Business acquisitions, net of cash               (17.5    )       (165.5   )
acquired
Net cash used in investing activities            (42.7    )       (188.2   )
FINANCING ACTIVITIES
Proceeds from long-term debt                     9.2              184.0
Payment of long-term debt                        (23.9    )       (168.0   )
Payment of capital leases and other              (2.9     )       (2.6     )
Proceeds from share transactions under           17.8             5.4
employee stock plans
Tax benefit of stock awards exercised            0.9              0.8
Dividends                                        (16.0    )       (16.3    )
Payments to repurchase common stock              (65.8    )       (27.2    )
Net cash used in financing activities            (80.7    )       (23.9    )
Effect of exchange rate changes on cash          3.2              7.3
and cash equivalents
Net cash provided by (used in) operating         1.4             (1.1     )
activities of discontinued operations
Net cash provided by (used in) investing         8.1             (0.1     )
activities of discontinued operations
INCREASE (DECREASE) IN CASH AND CASH             21.2            (78.6    )
EQUIVALENTS
Cash and cash equivalents at beginning of        250.6           329.2    
year
CASH AND CASH EQUIVALENTS AT END OF YEAR       $ 271.8         $ 250.6    
                                                                           

WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in millions)
(Unaudited)
                                                         
                                                                   
Net Sales
                                                                   
                 Fourth Quarter Ended              Year Ended
                 December 31,     December 31,     December        December
                                                   31,             31,
                 2012             2011             2012            2011
                                                                   
North            $  205.9         $  197.0         $ 835.0         $ 810.9
America
EMEA                145.3            154.4           583.8           595.5
Asia               8.0            6.1           26.8          21.7    
Total            $  359.2        $  357.5        $ 1,445.6      $ 1,428.1 
                                                                   
                                                                   
Operating Income (Loss)
                                                                   
                 Fourth Quarter Ended              Year Ended
                 December 31,     December 31,     December        December
                                                   31,             31,
                 2012             2011             2012            2011
                                                                   
North            $  24.9          $  27.8          $ 96.5          $ 111.6
America
EMEA                12.7             (2.5   )        52.6            28.7
Asia                2.2              9.5             6.5             12.2
Corporate          (8.9   )        (8.2   )       (32.2   )      (35.8   )
Total            $  30.9         $  26.6         $ 123.4        $ 116.7   
                                                                   
                                                                   
                                                                   
Intersegment Sales
                                                                   
                 Fourth Quarter Ended              Year Ended
                 December 31,     December 31,     December        December
                                                   31,             31,
                 2012             2011             2012            2011
                                                                   
North            $  1.4           $  0.7           $ 5.3           $ 3.3
America
EMEA                3.0              2.0             10.9            8.4
Asia               36.7           35.9          139.0         132.9   
Total            $  41.1         $  38.6         $ 155.2        $ 144.6   
                                                                             

                                                            
                                                                    
TABLE 1
RECONCILIATION OF GAAP "AS REPORTED" TO THE "ADJUSTED" NON-GAAP EXCLUDING THE
EFFECT OF ADJUSTMENTS FOR SPECIAL ITEMS
(Amounts in millions, except per share information)
(Unaudited)
                                                                    
                        Fourth Quarter Ended        Year Ended
                        December      December      December        December
                        31,           31,           31,             31,
                        2012          2011          2012            2011
                                                                    
Net sales             $ 359.2       $ 357.5       $ 1,445.6       $ 1,428.1
                                                                    
Operating income      $ 30.9        $ 26.6        $ 123.4         $ 116.7
- as reported
Operating margin        8.6    %      7.4    %      8.5      %      8.2      %
%
                                                                    
Adjustments for
special items:
Restructuring and
other charges,          2.4           1.8           5.3             10.0
net
Earnout                 -             (1.2   )      (1.0     )      (1.2     )
adjustment
Goodwill and
other long-lived        0.4           17.1          3.4             17.4
asset impairment
charges
Acquisition
accounting in           -             (0.7   )      0.4             4.7
cost of sales
Due diligence           -             -             -               1.1
costs and other
CEO separation          -             -             -               6.3
costs
Legal and customs       2.8           -             2.5             (1.1     )
settlements
(Gain on)
adjustment to           -             (7.7   )      1.6             (7.7     )
disposal of TWVC
Pension                 -             1.5           -               1.5
curtailment loss
CFO retention           0.7          -            1.5            -        
costs
                        6.3          10.8         13.7           31.0     
                                                                    
Operating income      $ 37.2        $ 37.4        $ 137.1         $ 147.7
- as adjusted
Adjusted
operating margin        10.4   %      10.5   %      9.5      %      10.3     %
%
                                                                    
                                                                    
Net income from
continuing            $ 18.4        $ 17.2        $ 70.6          $ 64.4
operations - as
reported
                                                                    
Adjustments for
special items -
tax affected:
Restructuring and
other charges,          1.6           1.2           3.6             6.6
net
Earnout                 -             (1.2   )      (1.0     )      (1.2     )
adjustment
Goodwill and
other long-lived        0.3           13.3          2.5             13.5
asset impairment
charges
Acquisition             -             (0.4   )      0.3             3.2
accounting
Due diligence           -             -             -               1.1
costs
CEO separation          -             -             -               3.9
costs
Legal and customs       1.7           -             0.8             (0.7     )
settlements
(Gain on)
adjustment to           -             (11.4  )      1.6             (11.4    )
disposal of TWVC
Pension                 -             0.9           -               0.9
curtailment loss
CFO retention           0.4           -             0.9             -
costs
European tax            (0.7   )      1.1          (0.7     )      1.1      
adjustments
                        3.3          3.5          8.0            17.0     
                                                                    
Net income from
continuing            $ 21.7        $ 20.7        $ 78.6          $ 81.4
operations - as
adjusted
                                                                    
                                                                    
Continuing
operations
earnings per
share - diluted
Diluted earnings
per share - as        $ 0.52        $ 0.47        $ 1.96          $ 1.72
reported
Adjustments for         0.09         0.10         0.22           0.46     
special items
Diluted earnings
per share - as        $ 0.61       $ 0.56       $ 2.18         $ 2.18     
adjusted
                                                                             

TABLE 2
RECONCILIATION OF ADJUSTED GAAP EARNINGS PER SHARE TO ADJUSTED EARNINGS PER
SHARE EXCLUDING ACQUISITIONS, SHARE REPURCHASES AND FOREIGN EXCHANGE IMPACT
(Amounts in millions)
(Unaudited)
                                                            
                                         Fourth Quarter Ended     Year Ended
                                         December 31,             December 31,
                                         2012                     2012
Adjusted Non-GAAP earnings per         $ 0.61                   $ 2.18
share
Acquisitions                             (0.02        )           (0.09    )
Share repurchase, net of dilution        (0.02        )           (0.08    )
activity
Foreign exchange impact                  0.01                    0.09     
Adjusted Non-GAAP earnings per
share excluding acquisitions,          $ 0.58                  $ 2.10     
share repurchases and foreign
exchange impact
                                                                           

TABLE 3
RECONCILIATION OF NET CASH PROVIDED BY CONTINUING OPERATIONS TO FREE CASH FLOW
(Amounts in millions)
(Unaudited)
                                                           
                                              Year Ended
                                              December 31,        December 31,
                                              2012                2011
                                                                  
Net cash provided by continuing          $    131.9            $  127.4
operations - as reported
Less: additions to property, plant,           (30.6)             (22.6)   
and equipment
Plus: proceeds from the sale of               3.5                0.8      
property, plant, and equipment
Free cash flow                           $    104.8           $  105.6    
                                                                  
Net income from continuing               $    70.6            $  64.4     
operations - as reported
                                                                  
Cash conversion rate of free cash             148.4     %         164.0    %
outflow to net income
                                                                  
                                                                  
TABLE 4
RECONCILIATION OF LONG-TERM DEBT (INCLUDING CURRENT PORTION) TO NET DEBT AND
NET DEBT TO CAPITALIZATION RATIO
(Amounts in millions)
(Unaudited)
                                                                  
                                                                  
                                              December 31,        December 31,
                                              2012                2011
                                                                  
Current portion of long-term debt        $    77.1             $  2.0
Plus: Long-term debt, net of                  307.5               397.4
current portion
Less: Cash and cash equivalents               (271.8)            (250.6)  
Net debt                                 $    112.8           $  148.8    
                                                                  
Net debt                                 $    112.8            $  148.8
Plus: Total stockholders' equity              939.5              919.8    
Capitalization                           $    1,052.3         $  1,068.6  
                                                                  
                                                                  
Net debt to capitalization ratio              10.7      %         13.9     %

Contact:

Watts Water Technologies, Inc.
Dean Freeman, 978-688-1811
Executive Vice President,
Chief Financial Officer
Fax: 978-688-2976
 
Press spacebar to pause and continue. Press esc to stop.