Watts Water Technologies Reports Fourth Quarter and Full Year Results for 2011

February 21, 2012
By

NORTH ANDOVER, Mass., Feb 20, 2012 (BUSINESS WIRE) —
Watts Water Technologies, Inc.


/quotes/zigman/245827/quotes/nls/wts WTS
-0.10%



today announced results for
the fourth quarter ended December 31, 2011. Net income per diluted share
from continuing operations (EPS) for the fourth quarter of 2011 was
$0.46. Adjusting for special items, fourth quarter 2011 adjusted EPS was
$0.56, compared to fourth quarter 2010 adjusted EPS of $0.40. A summary
of fourth quarter and full year financial results is as follows:


                                                                                         Fourth Quarter and Full Year Earnings Summary
                                                                           -------------------------------------------------------------------------
        (In millions, except per share information)                          Fourth quarter ended December 31          Year ended December 31
                                                                           ------------------------------------  -----------------------------------
                                                                                2011         2010     % Change       2011         2010     % Change
                                                                           -------------- ---------- ----------  ------------ ------------ --------
        Sales                                                                $ 360.2      316.7        14 %        $ 1,436.6  1,274.6            13 %
        Net income from continuing operations                                   17.1       11.4        50 %             64.7     63.1             3 %
        Income (loss) from discontinued operations                              (0.1)     (0.1)       -                1.7     (4.3)          NA
        Net income                                                           $  17.0       11.3        50 %        $    66.4     58.8            13 %
                                                                           === =====      =====      ==== ====   === =======  =======      ======== =
        Diluted earnings per share from continuing operations                $  0.46       0.30        53 %        $    1.73     1.69             2 %
        Special items                                                           0.10       0.10                         0.46     0.28
        Adjusted earnings per share                                          $  0.56       0.40        40 %        $    2.19     1.97            11 %
        


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.

Fourth Quarter/Full Year Highlights and Subsequent Event:


Fourth quarter 2011 sales increased 14% from the fourth quarter of
2010, 10% from acquisitions and 4% from organic growth.


Adjusted 2011 fourth quarter EPS of $0.56 represents an increase of
40% over the fourth quarter of 2010. Excluding the results of Danfoss
Socla S.A.S and related acquired business (Socla), the increase is 33%
over the fourth quarter of last year.


Adjusted operating margins increased by 0.7 percentage points to 10.3%
for the fourth quarter of 2011 as compared to the fourth quarter of
2010; operating margins on a GAAP basis decreased 0.1 percentage
points to 7.3% in the fourth quarter of 2011, as compared to the
fourth quarter of 2010.


Full year 2011 sales increased mainly due to acquisitions, organic
growth and favorable foreign exchange.


Adjusted 2011 full year EPS of $2.19 represents an increase of 11%
over 2010. Excluding the results of Socla, the increase was 5% above
adjusted earnings for 2010.


2011 free cash flow of $106.3 million represented a 164% cash
conversion rate of free cash flow to net income from continuing
operations. 2011 is the fourth consecutive year that free cash flow
has exceeded net income.


On January 31, 2012, we finalized the purchase of tekmar Control
Systems.

The fourth quarter 2011 sales increase was due to contributions from the
Socla acquisition of 10%, and from organic sales growth of 4%. Operating
income for the fourth quarter of 2011 was $26.4 million, which yielded
operating margins of 7.3%, compared to operating income in the fourth
quarter of 2010 of $23.4 million, which yielded operating margins of
7.4%. On an adjusted basis, operating income in the fourth quarter of
2011 was $37.2 million compared to $30.3 million in the fourth quarter
of 2010, a 23% increase. On an adjusted basis, operating margins
increased 0.7 percentage points to 10.3% in the fourth quarter of 2011,
compared to 9.6% on an adjusted basis for the fourth quarter of 2010.

North American sales increased $10.8 million to $199.7 million in the
fourth quarter of 2011, compared to $188.9 million for the fourth
quarter of 2010. This increase was due to an organic sales increase of
$8.3 million and acquired sales of $2.7 million, offset partially by
unfavorable foreign exchange movements of $0.2 million associated with
the weakening of the Canadian dollar against the U.S. dollar. Sales into
the North American wholesale market increased organically by 5% during
the fourth quarter as compared to the same period in 2010, primarily
from increased sales in both our residential and commercial, and gas and
HVAC product lines. Organic sales into the North American DIY home
improvement market increased 3% for the fourth quarter of 2011 as
compared to the fourth quarter of 2010 primarily from increased sales of
residential and commercial products.

European sales increased $32.5 million to $154.4 million for the fourth
quarter or 2011, compared to $121.9 million for the fourth quarter of
2010. This increase was primarily due to sales from acquired companies
of $28.3 million, and an organic sales increase of $5.2 million, offset
partially by unfavorable foreign exchange movements associated with the
weakening of the euro versus the U.S. dollar of $1.0 million. Organic
sales in the European wholesale market and the OEM market both increased
by 5% over the fourth quarter of 2010. Sales of our drain product lines
drove the wholesale sales increase, and the OEM market increase was
driven by gas HVAC products. European segment sales represented
approximately 43% and 39% of total Company sales in the fourth quarters
of 2011 and 2010, respectively.

The full year 2011 sales increase of $162.0 million was due to growth
from acquisitions of $105.0 million, organic growth of $29.0 million and
favorable foreign exchange movements of $28.0 million. EPS for the full
year 2011 was $1.73. This represents an increase of 2% as compared to
$1.69 of EPS reported for the full year 2010. Adjusting for special
items, 2011 EPS was $2.19, compared to 2010 adjusted EPS of $1.97, an
increase of 11%. Excluding the Socla acquisition, 2011 full year
adjusted earnings were $2.06, 5% above adjusted earnings of $1.97 for
the full year 2010.

David J. Coghlan, Chief Executive Officer, commented, “Compared to the
fourth quarter of 2010, our organic sales increased by 4%, with
increases in both the North American and Europe segments. For each
incremental organic sales dollar, organic operating earnings increased
by 37% in the fourth quarter. Adjusted operating income increased by 23%
in the fourth quarter of 2011 as compared to the fourth quarter of 2010,
driven by Socla’s contribution, margin contribution from incremental
sales and productivity initiatives. We recorded two large transactions
during the fourth quarter. The first was an after-tax charge of $11.3
million for the impairment of long-lived assets of a subsidiary in
Europe that has not performed up to expectations. The second transaction
was an after-tax gain of $11.4 million recorded upon the disposition of
a former subsidiary in Asia. Although the year proved challenging for
the end markets we serve, for the full year 2011 we grew sales
organically by 2% and had operating income growth of 12% on an adjusted
basis.”

Mr. Coghlan concluded, “We continued to generate strong cash flows this
year, delivering $106.3 million of free cash flow in 2011, as compared
to free cash flow of $91.0 million in 2010. Our conversion rate of free
cash flow to net income from continuing operations was 164% as compared
to 144% in 2010. This is the fourth consecutive year that we generated
free cash flows in excess of net income. At December 31, 2011, our net
debt to capitalization ratio was 13.9%, as compared to 5.2% at December
31, 2010, and the increase driven by cash utilized for, and debt
incurred, as part of the Socla acquisition. As of year-end, we had
approximately $251 million of cash on hand and approximately $252
million in available credit under our credit agreement. Finally, on
January 31, 2012, we finalized the purchase of tekmar Controls Systems,
a Canadian-based designer and manufacturer of control solutions for HVAC
applications. We believe the tekmar product line will dovetail nicely
with our existing hydronic systems offerings. In closing, we were
particularly pleased with the way our teams closed out some challenging
restructuring programs, drove our continuous improvement efforts and
responded to commodity cost issues while delivering strong sales growth
and an 11% increase in adjusted EPS. These were significant
accomplishments in challenging economic times.”

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 Socla, 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,
significant legal settlements, product liability and workers’
compensation accrual 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 Socla, exclude the effect of a newly acquired company.
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 results for 2011 on Tuesday,
February 21, 2012, 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 21, 2013.

The Company’s 2012 Annual Meeting of Stockholders will be held at 9:00
a.m. on Wednesday, May 16, 2012 at the Company’s executive offices
located at 815 Chestnut Street, North Andover, Massachusetts.

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 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” in the Watts Water Technologies, Inc.
Annual Report on Form 10-K for the year ended December 31, 2010 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 31,    December 31,      December 31,
                                                                      2011             2010            2011              2010
                                                                     -----            -----       ---------------      -------
        STATEMENTS OF INCOME (LOSS)
        ------------------------------------------------------
        Net sales                                                  $ 360.2          $ 316.7            $ 1,436.6     $ 1,274.6
        Net income from continuing operations                      $  17.1          $  11.4            $    64.7     $    63.1
        Income (loss) from discontinued operations                    (0.1)           (0.1)                1.7          (4.3)
                                                                     ----- ----       ----- ----         -------       ------- ----
        Net income                                                 $  17.0          $  11.3            $    66.4     $    58.8
                                                                ==== =====       ==== =====       ====== =======  ==== =======
        DILUTED EARNINGS PER SHARE
        ------------------------------------------------------
        Weighted Average Number of Common Shares  Equivalents        36.8             37.6                 37.5          37.4
        Net income (loss) per share
             Continuing operations                                 $  0.46          $  0.30            $    1.73     $    1.69
             Discontinued operations                                     -                -                 0.05         (0.12)
                                                                     -----            -----              -------       ------- ----
             Net income                                            $  0.46          $  0.30            $    1.78     $    1.57
                                                                ==== =====       ==== =====       ====== =======  ==== =======
        Cash dividends per share                                   $  0.11          $  0.11            $    0.44     $    0.44
        



                                               WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
                                                         CONSOLIDATED BALANCE SHEETS
                                               (Amounts in millions, except share information)
                                                                 (Unaudited)
                                                                                                     December 31,      December 31,
        ASSETS                                                                                           2011              2010
                                                                                                     -------------     -------------
        CURRENT ASSETS:
                       Cash and cash equivalents                                                   $   250.6         $   329.2
                       Short-term investment securities                                                  4.1               4.0
                       Trade accounts receivable, less allowance for doubtful accounts of
                          $9.1 million at December 31, 2011 and $8.9 million at December 31,           207.1             186.9
                          2010
                       Inventories, net:
                          Raw materials                                                                107.7             101.9
                          Work in process                                                               28.7              19.9
                          Finished goods                                                               147.8             143.8
                                                                                                     -------           -------
                             Total Inventories                                                         284.2             265.6
                       Prepaid expenses and other assets                                                26.6              18.4
                       Deferred income taxes                                                            37.4              41.1
                       Assets held for sale                                                              4.6              10.0
                       Assets of discontinued operations                                                   -               1.8
                                                                                                     -------           -------
                          Total Current Assets                                                         814.6             857.0
                                                                                                     -------           -------
        PROPERTY, PLANT AND EQUIPMENT:
                       Property, plant and equipment                                                   494.8             450.5
                       Accumulated depreciation                                                       (268.1)          (253.0)
                                                                                                     ------- ----      ------- ----
                          Property, plant and equipment, net                                           226.7             197.5
                                                                                                     -------           -------
        OTHER ASSETS:
                       Goodwill                                                                        490.4             428.0
                       Intangible assets, net                                                          154.6             152.6
                       Deferred income taxes                                                             1.1               0.9
                       Other, net                                                                       10.1              10.1
                                                                                                     -------           -------
        TOTAL ASSETS                                                                               $ 1,697.5         $ 1,646.1
                                                                                                     =======           =======
        LIABILITIES AND STOCKHOLDERS' EQUITY
        CURRENT LIABILITIES:
                       Accounts payable                                                            $   126.5         $   113.9
                       Accrued expenses and other liabilities                                          109.2             115.6
                       Accrued compensation and benefits                                                45.9              42.6
                       Current portion of long-term debt                                                 2.0               0.7
                       Liabilities of discontinued operations                                              -               5.8
                                                                                                     -------           -------
                          Total Current Liabilities                                                    283.6             278.6
                                                                                                     -------           -------
        LONG-TERM DEBT, NET OF CURRENT PORTION                                                         397.4             378.0
        DEFERRED INCOME TAXES                                                                           58.2              40.1
        OTHER NONCURRENT LIABILITIES                                                                    38.5              47.9
        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: 29,471,414 shares in 2011
                          and 30,102,677 shares in 2010                                                  2.9               3.0
                       Class B Common Stock, $0.10 par value; 25,000,000 shares authorized;
                          10 votes per share; issued and outstanding: 6,953,680 shares in each
                          of 2011
                          and 2010                                                                       0.7               0.7
                       Additional paid-in capital                                                      420.1             405.2
                       Retained earnings                                                               515.1             492.9
                       Accumulated other comprehensive loss                                            (19.0)            (0.3)
                                                                                                     ------- ----      ------- ----
                          Total Stockholders' Equity                                                   919.8             901.5
                                                                                                     -------           -------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                 $ 1,697.5         $ 1,646.1
                                                                                                     =======           =======
        



                                                             WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
                                                                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                                           (Amounts in millions, except per share information)
                                                                               (Unaudited)
                                                                                                    Fourth Quarter Ended                    Year Ended
                                                                                               -------------------------------    ------------------------------
                                                                                               December 31,      December 31,     December 31,     December 31,
                                                                                                   2011              2010             2011             2010
                                                                                               -------------     -------------    -------------    -------------
        Net sales                                                                            $  360.2          $  316.7         $ 1,436.6        $ 1,274.6
        Cost of goods sold                                                                      231.7             203.8             921.1            809.7
                                                                                               ------            ------           -------          -------
                                     GROSS PROFIT                                               128.5             112.9             515.5            464.9
        Selling, general  administrative expenses                                               92.1              84.3             379.9            336.7
        Restructuring and other charges (income)                                                  0.6               4.0               8.8             12.6
        Goodwill and other long-lived asset impairment charges                                   17.1               1.2              17.4              1.4
        Gain on disposal of business                                                             (7.7)               -              (7.7)              -
                                                                                               ------ -----      ------           ------- ----     -------
                                     OPERATING INCOME                                            26.4              23.4             117.1            114.2
                                                                                               ------            ------           -------          -------
        Other (income) expense:
                                     Interest income                                             (0.3)            (0.3)            (1.0)           (1.0)
                                     Interest expense                                             6.7               6.1              25.8             22.8
                                     Other, net                                                   0.4              (0.8)             0.8             (2.1)
                                                                                               ------            ------ -----     -------          ------- ----
                                                                                                  6.8               5.0              25.6             19.7
                                                                                               ------            ------           -------          -------
                                     INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES       19.6              18.4              91.5             94.5
        Provision for income taxes                                                                2.5               7.0              26.8             31.4
                                                                                               ------            ------           -------          -------
                                     NET INCOME FROM CONTINUING OPERATIONS                       17.1              11.4              64.7             63.1
        Income (loss) from discontinued operations, net of taxes                                 (0.1)            (0.1)             1.7             (4.3)
                                                                                               ------ -----      ------ -----     -------          ------- ----
                                     NET INCOME                                              $   17.0          $   11.3         $    66.4        $    58.8
                                                                                               ======            ======           =======          =======
        BASIC EPS
        Net income (loss) per share:
                                     Continuing operations                                   $   0.47          $   0.30         $    1.73        $    1.69
                                     Discontinued operations                                        -                 -              0.05            (0.12)
                                                                                               ------            ------           -------          ------- ----
                                     NET INCOME                                              $   0.46          $   0.30         $    1.78        $    1.58
                                                                                               ======            ======           =======          =======
        Weighted average number of shares                                                        36.8              37.4              37.3             37.3
                                                                                               ======            ======           =======          =======
        DILUTED EPS
        Net income (loss) per share:
                                     Continuing operations                                   $   0.46          $   0.30         $    1.73        $    1.69
                                     Discontinued operations                                        -                 -              0.05            (0.12)
                                                                                               ------            ------           -------          ------- ----
                                     NET INCOME                                              $   0.46          $   0.30         $    1.78        $    1.57
                                                                                               ======            ======           =======          =======
        Weighted average number of shares                                                        36.8              37.6              37.5             37.4
                                                                                               ======            ======           =======          =======
                                      Dividends per share                                    $   0.11          $   0.11         $    0.44        $    0.44
                                                                                               ======            ======           =======          =======
        



                                                     WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
                                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                  (Amounts in millions)
                                                                       (Unaudited)
                                                                                                                             Year Ended
                                                                                                                    ----------------------------
                                                                                                                    December 31,   December 31,
                                                                                                                        2011           2010
                                                                                                                    -------------  -------------
        OPERATING ACTIVITIES
                                           Net income                                                             $   66.4       $   58.8
                                           Income (loss) from discontinued operations                                  1.7           (4.3)
                                                                                                                    ------         ------ -----
                                           Net income from continuing operations                                      64.7           63.1
                                           Adjustments to reconcile net income from continuing operations to net
                                              cash provided by continuing operating activities:
                                              Depreciation                                                            33.3           30.5
                                              Amortization of intangibles                                             18.1           14.3
                                              Stock-based compensation                                                 8.3            4.7
                                              Deferred income tax benefit                                             (0.6)         (6.9)
                                              Loss on disposal and impairment of goodwill, property, plant and         5.2            2.6
                                              equipment and other
                                              Changes in operating assets and liabilities, net of effects
                                                 from business acquisitions and divestures:
                                                 Accounts receivable                                                   3.5           (8.2)
                                                 Inventories                                                           3.1            0.8
                                                 Prepaid expenses and other assets                                    (8.0)          9.0
                                                 Accounts payable, accrued expenses and other liabilities              0.6            3.5
                                                                                                                    ------         ------
                                           Net cash provided by continuing operating activities                      128.2          113.4
                                                                                                                    ------         ------
        INVESTING ACTIVITIES
                                           Additions to property, plant and equipment                                (22.7)        (24.6)
                                           Proceeds from the sale of property, plant and equipment                     0.8            2.2
                                           Investments in securities                                                  (8.1)         (4.0)
                                           Proceeds from sale of securities                                            8.1            6.5
                                           Purchase of intangible assets and other                                    (0.9)         (1.0)
                                           Business acquisitions, net of cash acquired                              (165.5)        (36.3)
                                                                                                                    ------ -----   ------ -----
                                           Net cash used in investing activities                                    (188.3)        (57.2)
                                                                                                                    ------ -----   ------ -----
        FINANCING ACTIVITIES
                                           Proceeds from long-term debt                                              184.0           75.0
                                           Payments of long-term debt                                               (168.0)        (50.9)
                                           Payments of capital lease and other                                        (2.6)         (1.2)
                                           Proceeds from share transactions under employee stock plans                 5.4            3.4
                                           Tax benefit of stock awards exercised                                       0.8            0.2
                                           Debt issuance costs                                                           -           (3.2)
                                           Dividends                                                                 (16.3)        (16.4)
                                           Payments to repurchase common stock                                       (27.2)            -
                                                                                                                    ------ -----   ------
                                           Net cash provided (used) by financing activities                          (23.9)          6.9
                                                                                                                    ------ -----   ------
        Effect of exchange rate changes on cash and cash equivalents                                                   7.3           (2.7)
        Net cash provided (used) in operating activities of discontinued                                              (1.9)          5.5
        operations
        Net cash provided by investing activities of discontinued operations                                             -            5.1
                                                                                                                    ------         ------
        INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                             (78.6)         71.0
        Cash and cash equivalents at beginning of year                                                               329.2          258.2
                                                                                                                    ------         ------
        CASH AND CASH EQUIVALENTS AT END OF YEAR                                                                  $  250.6       $  329.2
                                                                                                                    ======         ======
        



                           WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
                                         SEGMENT INFORMATION
                                        (Amounts in millions)
                                             (Unaudited)
                                              Net Sales
                            Fourth Quarter Ended                     Year Ended
                      --------------------------------- -------------------------------------
                        December 31,     December 31,      December 31,       December 31,
                            2011             2010              2011               2010
                           -----            -----            -------            -------
        North America    $ 199.7          $ 188.9          $   819.4          $   785.5
        Europe             154.4            121.9              595.5              468.3
        Asia                 6.1              5.9               21.7               20.8
                           -----            -----            -------            -------
        Total            $ 360.2          $ 316.7          $ 1,436.6          $ 1,274.6
                      ==== =====       ==== =====       ==== =======       ==== =======
                                       Operating Income (Loss)
                            Fourth Quarter Ended                     Year Ended
                      --------------------------------- -------------------------------------
                        December 31,     December 31,      December 31,       December 31,
                            2011             2010               2011               2010
                           -----            -----            -------            -------
        North America    $  27.6          $  24.2          $   112.0          $   106.4
        Europe              (2.5)            6.5               28.7               43.7
        Asia                 9.5              0.7               12.2               (0.5)
        Corporate           (8.2)           (8.0)            (35.8)            (35.4)
                           ----- ----       ----- ----       ------- ----       ------- ----
        Total            $  26.4          $  23.4          $   117.1          $   114.2
                      ==== =====       ==== =====       ==== =======       ==== =======
                                         Intersegment Sales
                            Fourth Quarter Ended                     Year Ended
                      --------------------------------- -------------------------------------
                        December 31,     December 31,      December 31,       December 31,
                            2011             2010               2011               2010
                           -----            -----            -------            -------
        North America    $   0.7          $   0.7          $     3.3          $     3.6
        Europe               2.0              1.4                8.4                7.6
        Asia                35.9             30.3              132.9              115.8
                           -----            -----            -------            -------
        Total            $  38.6          $  32.4          $   144.6          $   127.0
                      ==== =====       ==== =====       ==== =======       ==== =======
        



                                                                          TABLE 1
                                              RECONCILIATION OF GAAP "AS REPORTED" TO THE "ADJUSTED" NON-GAAP
                                                            EXCLUDING THE EFFECT OF ADJUSTMENTS
                                                    (Amounts in millions, except per share information)
                                                                        (Unaudited)
                                                                                    Fourth Quarter Ended                     Year Ended
                                                                               -------------------------------     -------------------------------
                                                                               December 31,      December 31,      December 31,      December 31,
                                                                                   2011              2010              2011              2010
                                                                               -------------     -------------     -------------     -------------
        Net sales                                                            $  360.2          $  316.7          $ 1,436.6         $ 1,274.6
        Operating income - as reported                                       $   26.4          $   23.4          $   117.1         $   114.2
             Operating margin %                                                   7.3 %             7.4 %              8.2 %             9.0 %
        Adjustments:
             Cost of goods sold - restructuring and other charges                   -               0.2                  -               1.5
             Restructuring                                                        1.8               4.0               10.0              12.6
             Earnout adjustment                                                  (1.2)               -               (1.2)               -
             Impairment charges                                                  17.1               1.2               17.4               1.4
             Product liability and workers' compensation accrual decreases          -              (3.0)                -              (4.5)
             Acquisition accounting                                              (0.7)               -                4.7                 -
             Due diligence costs and other                                          -               4.5                1.1               7.1
             CEO separation costs                                                   -                 -                6.3                 -
             Legal settlements                                                      -                 -               (1.1)               -
             Gain related to sale of TWVC                                        (7.7)               -               (7.7)               -
             Pension curtailment loss                                             1.5                 -                1.5                 -
                                                                               ------            ------            -------           -------
                                                                                 10.8               6.9               31.0              18.1
                                                                               ------            ------            -------           -------
        Operating income - as adjusted                                       $   37.2          $   30.3          $   148.1         $   132.3
             Adjusted operating margin %                                         10.3 %             9.6 %             10.3 %            10.4 %
        Net income from continuing operations - as reported                  $   17.1          $   11.4          $    64.7         $    63.1
        Adjustments - tax affected:
             Cost of goods sold - restructuring and other charges                   -               0.1                  -               1.0
             Restructuring                                                        1.2               2.1                6.6               9.6
             Earnout adjustment                                                  (0.7)               -               (0.7)               -
             Impairment charges                                                  12.8               1.1               13.0               1.2
             Product liability and workers' compensation accrual decreases          -              (1.9)                -              (2.8)
             CEO separation costs                                                   -                 -                3.9                 -
             Legal settlements                                                      -                 -               (0.7)               -
             Acquisition accounting                                              (0.4)               -                3.2                 -
             Due diligence costs                                                    -               2.3                1.1               4.1
             Pension curtailment loss                                             0.9                 -                0.9                 -
             Gain related to sale of TWVC                                       (11.4)               -              (11.4)               -
             Tax adjustments                                                      1.1                 -                1.1              (2.8)
                                                                               ------            ------            -------           ------- ----
                                                                                  3.5               3.7               17.0              10.3
                                                                               ------            ------            -------           -------
        Net income from continuing operations - as adjusted                  $   20.6          $   15.1          $    81.7         $    73.4
        Continuing operations earnings per share - diluted
        Diluted earnings per share - as reported                             $   0.46          $   0.30          $    1.73         $    1.69
        Adjustments                                                              0.10              0.10               0.46              0.28
                                                                               ------            ------            -------           -------
        Diluted earnings per share - as adjusted                             $   0.56          $   0.40          $    2.19         $    1.97
                                                                               ======            ======            =======           =======
        Socla diluted earnings per share - as reported                       $   0.04          $      -          $       -         $       -
        Adjustments related to Socla                                            (0.01)        $      -               0.13         $       -
                                                                               ------ -----      ------            -------           -------
        Diluted earnings per share - Socla as adjusted                       $   0.03          $      -          $    0.13         $       -
                                                                               ------            ------            -------           -------
        Diluted earnings per share - as adjusted, excluding Socla            $   0.53          $   0.40          $    2.06         $    1.97
                                                                               ======            ======            =======           =======
        



                                                    TABLE 2
                        RECONCILIATION OF NET CASH PROVIDED BY CONTINUING OPERATIONS TO
                                                FREE CASH FLOW
                                             (Amounts in millions)
                                                  (Unaudited)
                                                                                   Year Ended
                                                                          -----------------------------
                                                                          December 31,    December 31,
                                                                              2011            2010
                                                                          -------------   -------------
        Net cash provided by continuing operations - as reported        $   128.2       $   113.4
        Less: additions to property, plant, and equipment                   (22.7)         (24.6)
        Plus: proceeds from the sale of property, plant, and equipment        0.8             2.2
                                                                          -------         -------
        Free cash flow                                                  $   106.3       $    91.0
                                                                          =======         =======
        Net income from continuing operations - as reported             $    64.7       $    63.1
                                                                          =======         =======
        Cash conversion rate of free cash outflow to net income from        164.3 %         144.2 %
        continuing operations
                                                                          ======= ====    ======= ====
        



                                           TABLE 3
               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,
                                                            2011            2010
                                                        -------------   -------------
        Current portion of long-term debt             $     2.0       $     0.7
        Plus: Long-term debt, net of current portion      397.4           378.0
        Less: Cash and cash equivalents                  (250.6)        (329.2)
                                                        ------- ----    ------- ----
        Net debt                                      $   148.8       $    49.5
                                                        =======         =======
        Net debt                                      $   148.8       $    49.5
        Plus: Total stockholders' equity                  919.8           901.5
                                                        -------         -------
        Capitalization                                $ 1,068.6       $   951.0
                                                        =======         =======
        Net debt to capitalization ratio                   13.9 %           5.2 %
                                                        ======= ====    ======= ====
        


SOURCE: Watts Water Technologies, Inc.


        
        Watts Water Technologies, Inc. 
        William C. McCartney, 978-688-1811 
        Chief Financial Officer 
        Fax: 978-688-2976
        


Copyright Business Wire 2012

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