Watts Water Technologies Reports Record Second Quarter Results

Watts Water Technologies, Inc. (NYSE: WTS) today announced second
quarter 2018 results.

Commenting on operating results, Chief Executive Officer Robert J.
Pagano Jr., said, “We continued to drive strong top-line growth and
productivity during the quarter, especially in the Americas. This
enabled us to deliver record sales, adjusted operating margin and EPS.
For the first half of 2018, we delivered 5% organic growth, double digit
earnings growth and strong operating margin. We are raising our full
year organic sales growth outlook given results to date and our
prospects for the second half of 2018.”

Sales during the second quarter of $408 million increased 8% compared to
the same period in 2017. Second quarter net income per diluted share
(EPS) on both a GAAP and adjusted basis was $1.05, as compared to $0.79
on a GAAP basis and $0.83 on an adjusted basis for the prior-year
period. EPS improved due to volume and productivity, a lower effective
tax rate, lower non-operating expense and favorable foreign exchange. A
summary of second quarter financial results is as follows:

July 1,2018

July 2,2017

Financial Highlights

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 web cast of its
conference call to discuss second quarter results for 2018 on Thursday,
August 2, 2018, at 9:00 a.m. Eastern Time. This press release and the
live web cast can be accessed by visiting the Investors section of the
Company’s website at www.wattswater.com. Following the web cast, an
archived version of the call will be available at the same address until
August 2, 2019.

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 long-term growth strategy and our 2018
outlook, including full year organic sales growth and free cash flow
improvements during the second half of 2018. 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 final impact of the 2017 Tax Cuts
and Jobs Act; the timing and expected impact of proposed 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.

Intangible assets, net


Deferred income taxes


Accrued expenses and other liabilities


Current portion of long-term debt

Total Current Liabilities

Total Stockholders’ Equity

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 outflow 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, deployment costs, acquisition related
costs, and the related income tax impacts on these items, 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 outflow 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 outflow 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.

except per share information)(Unaudited)CONSOLIDATED

Adjusted operating margin %



Adjusted operating margin %



in millions)(Unaudited)

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