-
4Q18 sales increased 6% to $388 million; organic growth of 7%
-
4Q18 operating margin of 11.7%; up 150 bps on GAAP basis, up 30 bps
on adjusted basis
-
4Q18 GAAP EPS of $0.85 increased $0.92 compared to prior year;
results in 4Q17 include a tax charge of $0.73 per share related to the
Tax Cuts and Jobs Act of 2017 (the “Tax Act”)
-
4Q18 adjusted EPS up 19% to $0.88
-
2018 operating cash flow of $169 million and free cash flow of $136
million, a 9% and 7% increase, respectively, over the prior year
-
Announcing $150 million share repurchase program
NORTH ANDOVER, Mass.--(BUSINESS WIRE)--
Watts Water Technologies, Inc. (NYSE: WTS) today announced results for
the fourth quarter and full-year 2018.
“I am pleased that we finished the year with a strong fourth quarter. We
continued to drive top-line growth and margin expansion, which as in
prior quarters, was led by an excellent performance from the Americas,”
said Chief Executive Officer Robert J. Pagano Jr. “We delivered record
quarterly sales driven by solid organic growth in the Americas and
Europe. We leveraged our incremental sales and the benefits from
productivity and restructuring into higher operating income, and record
fourth quarter operating margin and earnings per share.”
Commenting on the stock repurchase program, Mr. Pagano noted, “This
action reflects our ongoing commitment to enhance shareholder value and
to execute our balanced cash allocation strategy. We expect to use
available cash to fund this program. We remain committed to our
long-term growth strategy of growing the business organically and
through acquisitions and we believe we will continue to have sufficient
capital available to fund future acquisitions and innovative
initiatives.”
Sales for the fourth quarter and the full year were $388 million and
$1.57 billion, up 6% and 7%, respectively, as compared to the similar
periods of 2017. Net income per diluted share (EPS) for the fourth
quarter and for the year ended December 31, 2018 was $0.85 and $3.64,
respectively, as compared to $(0.07) and $2.12 for the prior-year
periods. GAAP results for the current and prior year quarters and full
years were impacted by provisional adjustments relating to the Tax Act,
which will be finalized in our Annual Report on Form 10-K. Adjusted EPS
for the fourth quarter and year ended December 31, 2018 was $0.88 and
$3.74, respectively, as compared to $0.74 and $3.02 for the prior-year
periods. GAAP and adjusted EPS for the quarter and full year 2018
improved due to a strong operating performance in the Americas, the
benefits of tax reform and lower interest costs.
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,
|
|
|
|
|
|
|
2018
|
|
2017
|
|
% Change
|
|
|
2018
|
|
2017
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
$
|
387.6
|
|
$
|
366.3
|
|
|
6%
|
|
|
$
|
1,564.9
|
|
$
|
1,456.7
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
29.1
|
|
|
(2.3
|
)
|
|
|
|
|
|
124.8
|
|
|
73.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share
|
|
|
$
|
0.85
|
|
$
|
(0.07
|
)
|
|
|
|
|
$
|
3.64
|
|
$
|
2.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special items
|
|
|
|
|
|
0.03
|
|
|
0.81
|
|
|
|
|
|
|
0.10
|
|
|
0.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share (1) |
|
|
|
$
|
0.88
|
|
$
|
0.74
|
|
|
19%
|
|
|
$
|
3.74
|
|
$
|
3.02
|
|
24%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Special items and adjusted earnings per share represent non-GAAP
financial measures. For a reconciliation of GAAP to non-GAAP items
please see the tables attached to this press release.
Mr. Pagano concluded, “Our goals for 2018 were to accelerate organic
growth, drive margin expansion and continue to reinvest in future growth
and productivity initiatives. The team delivered on all counts, which
drove record financial results for the year. We will continue to focus
on these key metrics during the coming year. We also intend to introduce
our smart and connected product strategy in 2019, which we believe will
provide further differentiation for us in the marketplace.”
Fourth Quarter Financial Highlights:
Segment Update
Sales increased 6% and 7% on a reported and organic basis, respectively,
compared to the fourth quarter last year; reported operating margin
increased 150 basis points primarily from reduced restructuring and
impairment charges in 2018 and adjusted operating margin increased 30
basis points. Regionally:
-
Americas: Sales increased 10% on a
reported and organic basis with broad growth in plumbing, drains,
electronics, water quality and heating and hot water products.
Operating margin increased 130 and 60 basis points on a reported and
adjusted basis, respectively. Reported and adjusted operating margin
increased as benefits from price, volume, and productivity savings
were offset in part by growth investments and inflation. The reported
margin also expanded from reduced impairment charges in 2018.
-
Europe: Reported sales were flat,
impacted by negative foreign exchange movements, and up 3% organically
driven by continued strength in our drains and electronics businesses.
Operating margin increased 300 and 70 basis points on a reported and
adjusted basis, respectively. Reported and adjusted operating margin
expanded due to increased volume, price and productivity, including
benefits from restructuring programs that were partially offset by
growth investments and inflation. The reported margin also expanded
from reduced restructuring charges in 2018.
-
APMEA: Reported and organic sales
decreased 6% and 4%, respectively, as gains in greater Asia and the
Middle East and Africa were more than offset by continued weakness in
the China market. Reported sales were also impacted by negative
foreign exchange movement. Reported and adjusted operating margin both
increased 300 basis points, due to an increase in affiliate volume,
product mix and productivity, partially offset by growth investments
and inflation.
Cash Flow and Capital Allocation
-
For 2018, operating cash flow was $169 million and net capital
expenditures were $34 million, resulting in free cash flow of $136
million. In 2017, operating cash flow was $156 million, net capital
expenditures were $29 million and free cash flow was $127 million.
-
The Company repatriated $5.6 million in cash during the fourth
quarter. For 2018, $126.5 million was repatriated, a majority of which
was used to pay down revolving debt.
-
The Company repurchased approximately 144,000 shares of Class A common
stock at a cost of approximately $10.5 million during the fourth
quarter of 2018, under its previously announced share repurchase
program. For 2018, approximately 340,000 shares were purchased at a
cost of approximately $26 million, which more than offset dilution
from our stock compensation programs. Approximately $12 million
remains available for stock repurchases under the previous stock
repurchase program initiated in 2015, which has no expiration date.
-
The Company’s Board of Directors has authorized the repurchase of up
to $150 million of the Company’s Class A common stock from time to
time on the open market or in privately negotiated transactions. The
timing and number of any shares repurchased will be determined by the
Company’s management based on its evaluation of market conditions.
There is no expiration date for this program.
For a reconciliation of GAAP to non-GAAP items and a statement regarding
the usefulness of these measures to investors and management in
evaluating our operating performance, please see the tables attached to
this press release.
Watts Water Technologies, Inc. will hold a live webcast of its
conference call to discuss fourth quarter and year end results for 2018
on Friday, February 8, 2019, at 9:00 a.m. EST. This press release and
the live webcast can be accessed by visiting the Investor Relations
section of the Company's website at www.wattswater.com. Following the
webcast, an archived version of the call will be available at the same
address until February 8, 2020.
The Company's 2019 Annual Meeting of Stockholders will be held at 9:00
a.m. EDT on Friday, May 17, 2019 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 includes “forward-looking statements” as defined in
the Private Securities Litigation Reform Act of 1995, including
statements relating to our smart and connected product strategy in 2019.
These forward-looking statements reflect our current views about future
events. You should not rely on forward-looking statements because our
actual results may differ materially from those predicted as a result of
a number of potential risks and uncertainties. These potential risks and
uncertainties include, but are not limited to: the effects of the Tax
Act; the timing and expected impact of tariffs, the effectiveness, the
timing and the expected savings associated with our restructuring and
transformation programs and initiatives; current economic and financial
conditions, which can affect the housing and construction markets where
our products are sold, manufactured and marketed; shortages in and
pricing of raw materials and supplies; our ability to compete
effectively; changes in variable interest rates on our borrowings;
failure to expand our markets through acquisitions; failure to
successfully develop and introduce new product offerings or enhancements
to existing products; failure to manufacture products that meet required
performance and safety standards; foreign exchange rate fluctuations;
cyclicality of industries where we market our products, such as plumbing
and heating wholesalers and home improvement retailers; environmental
compliance costs; product liability risks; changes in the status of
current litigation; and other risks and uncertainties discussed under
the heading “Item 1A. Risk Factors” and in Note 15 of the Notes to the
Consolidated Financial Statements in our Annual Report on Form 10-K for
the year ended December 31, 2017 filed with the SEC and our subsequent
filings with the SEC. We undertake no duty to update the information
contained in this Press Release, except as required by law.
|
|
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,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Net sales
|
|
|
$
|
387.6
|
|
|
|
366.3
|
|
|
|
1,564.9
|
|
|
|
1,456.7
|
|
Cost of goods sold
|
|
|
|
221.7
|
|
|
|
217.1
|
|
|
|
908.4
|
|
|
|
854.3
|
|
GROSS PROFIT
|
|
|
|
165.9
|
|
|
|
149.2
|
|
|
|
656.5
|
|
|
|
602.4
|
|
Selling, general and administrative expenses
|
|
|
|
120.5
|
|
|
|
107.5
|
|
|
|
464.7
|
|
|
|
432.3
|
|
Restructuring
|
|
-
|
|
|
|
3.2
|
|
|
|
3.4
|
|
|
|
6.8
|
|
Other long-lived asset impairment charges
|
|
-
|
|
|
|
1.0
|
|
|
|
-
|
|
|
|
1.0
|
|
OPERATING INCOME
|
|
|
|
45.4
|
|
|
|
37.5
|
|
|
|
188.4
|
|
|
|
162.3
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
(0.1
|
)
|
|
|
(0.4
|
)
|
|
|
(0.8
|
)
|
|
|
(1.0
|
)
|
Interest expense
|
|
|
|
3.7
|
|
|
|
4.6
|
|
|
|
16.3
|
|
|
|
19.1
|
|
Other (income) expense, net
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
(1.7
|
)
|
|
|
1.1
|
|
Total other expense
|
|
|
|
3.9
|
|
|
|
4.5
|
|
|
|
13.8
|
|
|
|
19.2
|
|
INCOME BEFORE INCOME TAXES
|
|
|
|
41.5
|
|
|
|
33.0
|
|
|
|
174.6
|
|
|
|
143.1
|
|
Provision for income taxes
|
|
|
|
12.4
|
|
|
|
35.3
|
|
|
|
49.8
|
|
|
|
70.0
|
|
NET INCOME (LOSS)
|
|
|
$
|
29.1
|
|
|
$
|
(2.3
|
)
|
|
|
124.8
|
|
|
|
73.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE
|
|
|
$
|
0.85
|
|
|
|
(0.07
|
)
|
|
|
3.64
|
|
|
|
2.12
|
|
Weighted average number of shares
|
|
|
|
34.3
|
|
|
|
34.4
|
|
|
|
34.3
|
|
|
|
34.4
|
|
DILUTED EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE
|
|
|
$
|
0.85
|
|
|
|
(0.07
|
)
|
|
|
3.64
|
|
|
|
2.12
|
|
Weighted average number of shares
|
|
|
|
34.3
|
|
|
|
34.4
|
|
|
|
34.3
|
|
|
|
34.4
|
|
Dividends declared per share
|
|
|
$
|
0.21
|
|
|
$
|
0.19
|
|
|
|
0.82
|
|
|
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
(Amounts in millions, except share information)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
ASSETS
|
|
|
|
2018
|
|
|
2017
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
204.1
|
|
|
$
|
280.2
|
|
Trade accounts receivable, less allowance for doubtful accounts of
|
|
|
|
|
|
|
|
$15.0 million at December 31, 2018 and $14.3 million at December 31,
2017
|
|
|
|
205.5
|
|
|
|
216.1
|
|
Inventories, net:
|
|
|
|
|
|
|
|
Raw materials
|
|
|
|
87.4
|
|
|
|
81.8
|
|
Work in process
|
|
|
|
17.3
|
|
|
|
17.5
|
|
Finished goods
|
|
|
|
182.1
|
|
|
|
159.8
|
|
Total Inventories
|
|
|
|
286.8
|
|
|
|
259.1
|
|
Prepaid expenses and other current assets
|
|
|
|
24.9
|
|
|
|
26.7
|
|
Assets held for sale
|
|
|
|
-
|
|
|
|
1.5
|
|
Total Current Assets
|
|
|
|
721.3
|
|
|
|
783.6
|
|
PROPERTY, PLANT AND EQUIPMENT:
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost
|
|
|
|
537.4
|
|
|
|
525.8
|
|
Accumulated depreciation
|
|
|
|
(335.5
|
)
|
|
|
(327.3
|
)
|
Property, plant and equipment, net
|
|
|
|
201.9
|
|
|
|
198.5
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
544.8
|
|
|
|
550.5
|
|
Intangible assets, net
|
|
|
|
165.2
|
|
|
|
185.2
|
|
Deferred income taxes
|
|
|
|
1.6
|
|
|
|
1.6
|
|
Other, net
|
|
|
|
18.9
|
|
|
|
17.1
|
|
TOTAL ASSETS
|
|
|
$
|
1,653.7
|
|
|
$
|
1,736.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
127.2
|
|
|
$
|
123.8
|
|
Accrued expenses and other liabilities
|
|
|
|
130.6
|
|
|
|
125.8
|
|
Accrued compensation and benefits
|
|
|
|
60.9
|
|
|
|
55.3
|
|
Current portion of long-term debt
|
|
|
|
30.0
|
|
|
|
22.5
|
|
Total Current Liabilities
|
|
|
|
348.7
|
|
|
|
327.4
|
|
LONG-TERM DEBT, NET OF CURRENT PORTION
|
|
|
|
323.4
|
|
|
|
474.6
|
|
DEFERRED INCOME TAXES
|
|
|
|
38.5
|
|
|
|
55.2
|
|
OTHER NONCURRENT LIABILITIES
|
|
|
|
55.0
|
|
|
|
50.3
|
|
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: 27,646,465 shares at
December 31, 2018
|
|
|
|
|
|
|
|
and 27,724,192 shares at December 31, 2017
|
|
|
|
2.8
|
|
|
|
2.8
|
|
Class B common stock, $0.10 par value; 25,000,000 shares authorized;
|
|
|
|
|
|
|
|
10 votes per share; issued and outstanding: 6,329,290 shares at
December 31, 2018
|
|
|
|
|
|
|
|
and 6,379,290 at December 31, 2017
|
|
|
|
0.6
|
|
|
|
0.6
|
|
Additional paid-in capital
|
|
|
|
568.3
|
|
|
|
551.8
|
|
Retained earnings
|
|
|
|
437.5
|
|
|
|
372.9
|
|
Accumulated other comprehensive loss
|
|
|
|
(121.1
|
)
|
|
|
(99.1
|
)
|
Total Stockholders' Equity
|
|
|
|
888.1
|
|
|
|
829.0
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
$
|
1,653.7
|
|
|
$
|
1,736.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Amounts in millions)
|
(Unaudited)
|
|
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
124.8
|
|
|
$
|
73.1
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
28.9
|
|
|
|
29.7
|
|
Amortization of intangibles
|
|
|
|
19.6
|
|
|
|
22.5
|
|
Loss on disposal, impairment of intangibles, property, plant and
equipment, and other
|
|
|
|
0.2
|
|
|
|
2.1
|
|
Stock-based compensation
|
|
|
|
13.8
|
|
|
|
13.9
|
|
Deferred income tax
|
|
|
|
(15.3
|
)
|
|
|
6.4
|
|
Changes in operating assets and liabilities, net of effects
|
|
|
|
|
|
|
|
from business acquisitions and divestitures:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
6.0
|
|
|
|
(7.5
|
)
|
Inventories
|
|
|
|
(34.5
|
)
|
|
|
(8.4
|
)
|
Prepaid expenses and other assets
|
|
|
|
0.6
|
|
|
|
14.7
|
|
Accounts payable, accrued expenses and other liabilities
|
|
|
|
25.3
|
|
|
|
9.4
|
|
Net cash provided by operating activities
|
|
|
|
169.4
|
|
|
|
155.9
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
|
(35.9
|
)
|
|
|
(29.4
|
)
|
Purchase of intangible assets
|
|
(0.7
|
)
|
|
|
(1.5
|
)
|
Proceeds from the sale of property, plant and equipment
|
|
2.2
|
|
|
|
0.4
|
|
Net proceeds from the sale of assets, and other
|
|
0.2
|
|
|
|
3.1
|
|
Business acquisitions, net of cash acquired and other
|
|
(1.7
|
)
|
|
|
0.1
|
|
Net cash used in investing activities
|
|
|
|
(35.9
|
)
|
|
|
(27.3
|
)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds from long-term borrowings
|
|
50.0
|
|
|
|
20.0
|
|
Payments of long-term debt
|
|
|
|
(194.5
|
)
|
|
|
(178.0
|
)
|
Payment of capital leases and other
|
|
(6.6
|
)
|
|
|
(4.9
|
)
|
Proceeds from share transactions under employee stock plans
|
|
2.5
|
|
|
|
1.7
|
|
Payments to repurchase common stock
|
|
(26.0
|
)
|
|
|
(18.2
|
)
|
Dividends
|
|
|
|
(28.3
|
)
|
|
|
(25.9
|
)
|
Net cash used in financing activities
|
|
|
|
(202.9
|
)
|
|
|
(205.3
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(6.7
|
)
|
|
|
18.5
|
|
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
(76.1
|
)
|
|
|
(58.2
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
|
280.2
|
|
|
|
338.4
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR
|
|
|
$
|
204.1
|
|
|
$
|
280.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
|
|
|
|
SEGMENT INFORMATION
|
|
|
|
(Amounts in millions)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter Ended
|
|
Year Ended
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
|
December 31, 2018
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
$
|
256.3
|
|
|
$
|
233.6
|
|
|
$
|
1,032.1
|
|
|
$
|
951.9
|
|
Europe
|
|
|
|
115.3
|
|
|
|
115.7
|
|
|
|
467.0
|
|
|
|
440.3
|
|
APMEA
|
|
|
|
16.0
|
|
|
|
17.0
|
|
|
|
65.8
|
|
|
|
64.5
|
|
Total
|
|
|
$
|
387.6
|
|
|
$
|
366.3
|
|
|
$
|
1,564.9
|
|
|
$
|
1,456.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter Ended
|
|
Year Ended
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
|
December 31, 2018
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
$
|
43.0
|
|
|
$
|
36.3
|
|
|
$
|
171.1
|
|
|
$
|
146.8
|
|
Europe
|
|
|
|
12.6
|
|
|
|
9.1
|
|
|
|
49.8
|
|
|
|
47.6
|
|
APMEA
|
|
|
|
1.8
|
|
|
|
1.4
|
|
|
|
7.2
|
|
|
|
4.7
|
|
Corporate
|
|
|
|
(12.0
|
)
|
|
|
(9.3
|
)
|
|
|
(39.7
|
)
|
|
|
(36.8
|
)
|
Total
|
|
|
$
|
45.4
|
|
|
$
|
37.5
|
|
|
$
|
188.4
|
|
|
$
|
162.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter Ended
|
|
Year Ended
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
|
December 31, 2018
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
$
|
3.1
|
|
|
$
|
3.1
|
|
|
$
|
12.7
|
|
|
$
|
12.1
|
|
Europe
|
|
|
|
3.5
|
|
|
|
2.7
|
|
|
|
14.2
|
|
|
|
14.6
|
|
APMEA
|
|
|
|
19.7
|
|
|
|
16.9
|
|
|
|
88.4
|
|
|
|
69.7
|
|
Total
|
|
|
$
|
26.3
|
|
|
$
|
22.7
|
|
|
$
|
115.3
|
|
|
$
|
96.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance Indicators and Non-GAAP Measures
|
|
|
In this press release, we refer to non-GAAP financial measures
(including adjusted operating income, adjusted operating margins,
adjusted net income, adjusted earnings per share, organic sales,
free cash flow, cash conversion rate of free cash flow to net income
and net debt to capitalization ratio) 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
enhance the overall understanding of our historical financial
performance and give insight into our future prospects. Adjusted
operating income, adjusted operating margins, adjusted net income
and adjusted earnings per share eliminate certain expenses incurred
and gains recognized in the periods presented that relate primarily
to our global restructuring programs, transformation program costs,
impairment charges, acquisition related costs, and the related
income tax impacts on these items, the effect of the Tax Act and
other tax adjustments. Management then utilizes these adjusted
financial measures to assess the run-rate of the Company’s
operations against those of comparable periods. Organic sales growth
is a non-GAAP measure of sales growth excluding the impacts of
foreign exchange, acquisitions and divestitures from
period-over-period comparisons. Management believes reporting
organic sales growth provides useful information to investors,
potential investors and others, and allows for a more complete
understanding of underlying sales trends by providing sales growth
on a consistent basis. Free cash flow, cash conversion rate of free
cash flow to net income, 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.
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter Ended
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
387.6
|
|
|
$
|
366.3
|
|
|
$
|
1,564.9
|
|
|
$
|
1,456.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income - as reported
|
|
|
$
|
45.4
|
|
|
$
|
37.5
|
|
|
$
|
188.4
|
|
|
$
|
162.3
|
|
Operating margin %
|
|
|
|
11.7
|
%
|
|
|
10.2
|
%
|
|
|
12.0
|
%
|
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for special items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
|
-
|
|
|
|
3.2
|
|
|
|
3.4
|
|
|
|
6.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transformation costs
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges and other costs
|
|
|
|
-
|
|
|
|
1.0
|
|
|
|
-
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments for special items
|
|
|
$
|
-
|
|
|
$
|
4.2
|
|
|
$
|
3.4
|
|
|
$
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income - as adjusted
|
|
|
$
|
45.4
|
|
|
$
|
41.7
|
|
|
$
|
191.8
|
|
|
$
|
173.2
|
|
Adjusted operating margin %
|
|
|
|
11.7
|
%
|
|
|
11.4
|
%
|
|
|
12.3
|
%
|
|
|
11.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - as reported
|
|
|
$
|
29.1
|
|
|
$
|
(2.3
|
)
|
|
$
|
124.8
|
|
|
$
|
73.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for special items - tax affected:
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
|
-
|
|
|
|
2.3
|
|
|
|
2.5
|
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transformation costs
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges and other costs
|
|
|
|
-
|
|
|
|
0.6
|
|
|
|
-
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax adjustments
|
|
|
|
1.5
|
|
|
|
(0.3
|
)
|
|
|
1.5
|
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Tax Act
|
|
|
|
(0.5
|
)
|
|
|
25.1
|
|
|
|
(0.5
|
)
|
|
|
25.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjustments for special items - tax affected
|
|
|
$
|
1.0
|
|
|
$
|
27.7
|
|
|
$
|
3.5
|
|
|
$
|
30.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income - as adjusted
|
|
|
$
|
30.1
|
|
|
$
|
25.4
|
|
|
$
|
128.3
|
|
|
$
|
103.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share - as reported
|
|
|
$
|
0.85
|
|
|
|
(0.07
|
)
|
|
$
|
3.64
|
|
|
|
2.12
|
|
Adjustments for special items
|
|
|
|
0.03
|
|
|
|
0.81
|
|
|
|
0.10
|
|
|
|
0.90
|
|
Diluted earnings per share - as adjusted
|
|
|
$
|
0.88
|
|
|
$
|
0.74
|
|
|
$
|
3.74
|
|
|
$
|
3.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 2
|
SEGMENT INFORMATION - RECONCILIATION OF GAAP "AS REPORTED" TO THE
"ADJUSTED" NON-GAAP
|
EXCLUDING THE EFFECT OF ADJUSTMENTS FOR SPECIAL ITEMS
|
(Amounts in millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter Ended
|
|
|
Fourth Quarter Ended
|
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
Americas
|
|
Europe
|
|
APMEA
|
|
Corporate
|
|
Total
|
|
|
Americas
|
|
Europe
|
|
APMEA
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
256.3
|
|
115.3
|
|
16.0
|
|
-
|
|
387.6
|
|
$
|
233.6
|
|
115.7
|
|
17.0
|
|
-
|
|
366.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) - as reported
|
|
|
$
|
43.0
|
|
12.6
|
|
1.8
|
|
(12.0)
|
|
45.4
|
|
$
|
36.3
|
|
9.1
|
|
1.4
|
|
(9.3)
|
|
37.5
|
Operating margin %
|
|
|
|
16.8%
|
|
10.9%
|
|
11.3%
|
|
|
|
11.7%
|
|
|
15.5%
|
|
7.9%
|
|
8.3%
|
|
|
|
10.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for special items
|
|
|
$
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
$
|
1.5
|
|
2.7
|
|
-
|
|
-
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) - as adjusted
|
|
|
$
|
43.0
|
|
12.6
|
|
1.8
|
|
(12.0)
|
|
45.4
|
|
$
|
37.8
|
|
11.8
|
|
1.4
|
|
(9.3)
|
|
41.7
|
Adjusted operating margin %
|
|
|
|
16.8%
|
|
10.9%
|
|
11.3%
|
|
|
|
11.7%
|
|
|
16.2%
|
|
10.2%
|
|
8.3%
|
|
|
|
11.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
Americas
|
|
Europe
|
|
APMEA
|
|
Corporate
|
|
Total
|
|
|
Americas
|
|
Europe
|
|
APMEA
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
$
|
1,032.1
|
|
467.0
|
|
65.8
|
|
-
|
|
1,564.9
|
|
$
|
951.9
|
|
440.3
|
|
64.5
|
|
-
|
|
1,456.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) - as reported
|
|
|
$
|
171.1
|
|
49.8
|
|
7.2
|
|
(39.7)
|
|
188.4
|
|
$
|
146.8
|
|
47.6
|
|
4.7
|
|
(36.8)
|
|
162.3
|
Operating margin %
|
|
|
|
16.6%
|
|
10.7%
|
|
11.0%
|
|
|
|
12.0%
|
|
|
15.4%
|
|
10.8%
|
|
7.3%
|
|
|
|
11.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for special items
|
|
|
$
|
-
|
|
3.4
|
|
-
|
|
-
|
|
3.4
|
|
$
|
6.5
|
|
3.8
|
|
0.6
|
|
-
|
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) - as adjusted
|
|
|
$
|
171.1
|
|
53.2
|
|
7.2
|
|
(39.7)
|
|
191.8
|
|
$
|
153.3
|
|
51.4
|
|
5.3
|
|
(36.8)
|
|
173.2
|
Adjusted operating margin %
|
|
|
|
16.6%
|
|
11.4%
|
|
11.0%
|
|
|
|
12.3%
|
|
|
16.1%
|
|
11.7%
|
|
8.3%
|
|
|
|
11.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 3
|
SEGMENT INFORMATION - RECONCILIATION OF REPORTED NET SALES TO
ORGANIC SALES
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter Ended
|
|
|
|
|
Americas
|
|
|
Europe
|
|
|
APMEA
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net sales December 31, 2018
|
|
|
$
|
256.3
|
|
$
|
115.3
|
|
$
|
16.0
|
|
$
|
387.6
|
Reported net sales December 31, 2017
|
|
|
|
233.6
|
|
|
115.7
|
|
|
17.0
|
|
|
366.3
|
Dollar change
|
|
|
$
|
22.7
|
|
$
|
(0.4)
|
|
$
|
(1.0)
|
|
$
|
21.3
|
Net sales % increase (decrease)
|
|
|
|
9.7%
|
|
|
-0.3%
|
|
|
-5.9%
|
|
|
5.8%
|
Increase due to foreign exchange
|
|
|
|
0.3%
|
|
|
3.4%
|
|
|
1.9%
|
|
|
1.4%
|
Organic sales increase (decrease)
|
|
|
|
10.0%
|
|
|
3.1%
|
|
|
-4.0%
|
|
|
7.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
Americas
|
|
|
Europe
|
|
|
APMEA
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net sales December 31, 2018
|
|
|
$
|
1,032.1
|
|
$
|
467.0
|
|
$
|
65.8
|
|
$
|
1,564.9
|
Reported net sales December 31, 2017
|
|
|
|
951.9
|
|
|
440.3
|
|
|
64.5
|
|
|
1,456.7
|
Dollar change
|
|
|
$
|
80.2
|
|
$
|
26.7
|
|
$
|
1.3
|
|
$
|
108.2
|
Net sales % increase
|
|
|
|
8.4%
|
|
|
6.1%
|
|
|
2.0%
|
|
|
7.4%
|
Decrease due to foreign exchange
|
|
|
|
-
|
|
|
-4.3%
|
|
|
-0.4%
|
|
|
-1.3%
|
Organic sales increase
|
|
|
|
8.4%
|
|
|
1.8%
|
|
|
1.6%
|
|
|
6.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 4
|
RECONCILIATION OF NET CASH PROVIDED BY OPERATIONS TO FREE CASH
FLOW
|
(Amounts in millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net cash provided by operations - as reported
|
|
|
$
|
169.4
|
|
|
$
|
155.9
|
|
Less: additions to property, plant, and equipment
|
|
|
|
(35.9
|
)
|
|
|
(29.4
|
)
|
Plus: proceeds from the sale of property, plant, and equipment
|
|
|
|
2.2
|
|
|
|
0.4
|
|
Free cash flow
|
|
|
$
|
135.7
|
|
|
$
|
126.9
|
|
|
|
|
|
|
|
|
|
Net income - as reported
|
|
|
$
|
124.8
|
|
|
$
|
73.1
|
|
|
|
|
|
|
|
|
|
Cash conversion rate of free cash flow to net income
|
|
|
|
108.7
|
%
|
|
|
173.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TABLE 5
|
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,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
$
|
30.0
|
|
|
$
|
22.5
|
|
Plus: Long-term debt, net of current portion
|
|
|
|
323.4
|
|
|
|
474.6
|
|
Less: Cash and cash equivalents
|
|
|
|
(204.1
|
)
|
|
|
(280.2
|
)
|
Net debt
|
|
|
$
|
149.3
|
|
|
$
|
216.9
|
|
|
|
|
|
|
|
|
|
Net debt
|
|
|
$
|
149.3
|
|
|
$
|
216.9
|
|
Plus: Total stockholders' equity
|
|
|
|
888.1
|
|
|
|
829.0
|
|
Capitalization
|
|
|
$
|
1,037.4
|
|
|
$
|
1,045.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt to capitalization ratio
|
|
|
|
14.4
|
%
|
|
|
20.7
|
%
|
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190207005865/en/
Timothy M. MacPhee
Vice President – Investor Relations
Telephone:
(978) 689-6201
Fax: (978) 794-0353
Source: Watts Water Technologies, Inc