Watts Water Technologies Inc. (WTS, Financial) filed Quarterly Report for the period ended 2010-10-03.
Watts Water Technologies Inc. has a market cap of $1.24 billion; its shares were traded at around $33.55 with a P/E ratio of 17 and P/S ratio of 1. The dividend yield of Watts Water Technologies Inc. stocks is 1.3%. Watts Water Technologies Inc. had an annual average earning growth of 6.1% over the past 10 years. GuruFocus rated Watts Water Technologies Inc. the business predictability rank of 3-star.WTS is in the portfolios of John Keeley of Keeley Fund Management, Mario Gabelli of GAMCO Investors, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates.
Another risk we face in all areas of our business is competition. We consider brand preference, engineering specifications, code requirements, price, technological expertise, delivery times and breadth of product offerings to be the primary competitive factors. As mentioned previously, we believe that the product development, product testing capability and investment in plant and equipment needed to manufacture products in compliance with code requirements represent a barrier to entry for competitors. We are committed to maintaining our capital equipment at a level consistent with current technologies, and thus we expect to spend approximately $4.0 to $7.0 million during the remainder of 2010.
In September 2010, our Board of Directors approved a restructuring program with respect to certain operating facilities in the United States. The restructuring program includes the shutdown of two manufacturing facilities in North Carolina. Operations at these facilities will be consolidated into our manufacturing facilities in New Hampshire, Missouri and other locations. The program is expected to include pre-tax charges totaling approximately $4.9 million, including costs for severance, shutdown costs and equipment write-downs. Additionally, we are expecting training and pre-production set-up costs of approximately $2.0 million. The total net after-tax charge for this restructuring program is expected to be approximately $4.1 million (including $0.4 million in non-cash charges), with costs being incurred through 2011. We expect to spend approximately $1.2 million in capital expenditures to consolidate operations. Annual cash savings, net of tax, are estimated to be approximately $1.6 million, which we expect to fully realize by the second half of 2012. The restructuring program is expected to be completed by the end of the third quarter of 2011.
During the nine months ended October 3, 2010, we made two acquisitions with an estimated aggregate purchase price of $36.1 million, including the estimated fair value of contingent consideration. We also made a payment of approximately $0.5 million on an earn-out of a previously acquired company.
Restructuring and Other Charges. In the third quarter of 2010, we recorded a charge of $3.0 million primarily for severance and other costs incurred as part of our 2010 restructuring programs, as compared to $6.3 million for the third quarter of 2009. For a more detailed description of our current restructuring plans, see Note 5 of Notes to Consolidated Financial Statements.
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Watts Water Technologies Inc. has a market cap of $1.24 billion; its shares were traded at around $33.55 with a P/E ratio of 17 and P/S ratio of 1. The dividend yield of Watts Water Technologies Inc. stocks is 1.3%. Watts Water Technologies Inc. had an annual average earning growth of 6.1% over the past 10 years. GuruFocus rated Watts Water Technologies Inc. the business predictability rank of 3-star.WTS is in the portfolios of John Keeley of Keeley Fund Management, Mario Gabelli of GAMCO Investors, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors, Chuck Royce of Royce& Associates.
Highlight of Business Operations:
During the third quarter and first nine months of 2010, organic sales increased by 4.9% and 6.0%, respectively, over last years comparable periods, partially due to the additional working days in the first nine months of 2010 mentioned previously and partially due to increased sales volume. Organic sales in the third quarter of 2010 increased in all three segments over the third quarter of 2009; North America by $7.6 million, or 4.1%, Europe by $6.9 million, or 5.9%, and China by $0.2 million, or 4.2%. We define organic sales growth as the increase or decrease in sales for the current period compared to the prior period, excluding the impact of the change in foreign currency exchange, and excluding sales in the: (1) current period from business and product line acquisitions that are included in our actual results of operations for less than twelve months, and (2) prior period from business and product line divestitures that are included in our actual results of operations for the twelve-month period prior to the divestiture. Key drivers of the increase in sales are from our principal product lines, particularly plumbing and heating products and backflow preventers in North America, drain products in Europe, and to new product introductions. Despite these increases, we are experiencing a softening in our North American business partially due to destocking at our major retail customers due to the expiration of the first-time homebuyer tax credit. We are continuing to drive greater plant absorption in many of our facilities and, along with productivity initiatives through Lean and Six Sigma programs, continuing to improve incremental gross margin and operating margin performance. The effects of foreign currency movements and the U.S. commercial marketplace partially offset these increases in organic sales. Foreign currency movements, mainly related to the weakening of the euro against the U.S. dollar, negatively affected both our third quarter and first nine months diluted earnings by ($0.03) as compared to the comparable periods of 2009. The U.S. commercial marketplace continues to be weak, and we do not expect improvement in this end market during the balance of 2010 and well into 2011.Another risk we face in all areas of our business is competition. We consider brand preference, engineering specifications, code requirements, price, technological expertise, delivery times and breadth of product offerings to be the primary competitive factors. As mentioned previously, we believe that the product development, product testing capability and investment in plant and equipment needed to manufacture products in compliance with code requirements represent a barrier to entry for competitors. We are committed to maintaining our capital equipment at a level consistent with current technologies, and thus we expect to spend approximately $4.0 to $7.0 million during the remainder of 2010.
In September 2010, our Board of Directors approved a restructuring program with respect to certain operating facilities in the United States. The restructuring program includes the shutdown of two manufacturing facilities in North Carolina. Operations at these facilities will be consolidated into our manufacturing facilities in New Hampshire, Missouri and other locations. The program is expected to include pre-tax charges totaling approximately $4.9 million, including costs for severance, shutdown costs and equipment write-downs. Additionally, we are expecting training and pre-production set-up costs of approximately $2.0 million. The total net after-tax charge for this restructuring program is expected to be approximately $4.1 million (including $0.4 million in non-cash charges), with costs being incurred through 2011. We expect to spend approximately $1.2 million in capital expenditures to consolidate operations. Annual cash savings, net of tax, are estimated to be approximately $1.6 million, which we expect to fully realize by the second half of 2012. The restructuring program is expected to be completed by the end of the third quarter of 2011.
During the nine months ended October 3, 2010, we made two acquisitions with an estimated aggregate purchase price of $36.1 million, including the estimated fair value of contingent consideration. We also made a payment of approximately $0.5 million on an earn-out of a previously acquired company.
Restructuring and Other Charges. In the third quarter of 2010, we recorded a charge of $3.0 million primarily for severance and other costs incurred as part of our 2010 restructuring programs, as compared to $6.3 million for the third quarter of 2009. For a more detailed description of our current restructuring plans, see Note 5 of Notes to Consolidated Financial Statements.
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