-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, j4Hs+Liar3qR2nbwsuOoqCYvZCEHO6W/b1vKHQhlX4EWEBEkZ9x+SraS7CVbcUim nHOlclpT354IiH5W51GfaA== 0000795403-94-000011.txt : 19940516 0000795403-94-000011.hdr.sgml : 19940516 ACCESSION NUMBER: 0000795403-94-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATTS INDUSTRIES INC CENTRAL INDEX KEY: 0000795403 STANDARD INDUSTRIAL CLASSIFICATION: 3490 IRS NUMBER: 042916536 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14787 FILM NUMBER: 94527884 BUSINESS ADDRESS: STREET 1: 815 CHESTNUT ST CITY: NORTH ANDOVER STATE: MA ZIP: 01845 BUSINESS PHONE: 5086881811 MAIL ADDRESS: STREET 2: 815 CHESTNUT STREET CITY: NORTH ANDOVER STATE: MA ZIP: 01845 10-Q 1 COVER & INDEX SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q ___ / X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1994 or ___ / / Transition report pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934 For the transition period from _______________ to_______________ Commission file number 0-14787 WATTS INDUSTRIES, INC. (Exact name of registrant as specified in itscharter) DELAWARE 04-2916536 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 815 Chestnut Street, North Andover, MA 01845 (Address of principal executive offices) (ZipCode) Registrant's telephone number, including area code (508)688-1811 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at April 30,1994 - ---------------------------- ---------------------------- Class A Common, $.10 par value 17,971,178 Class B Common, $.10 par value 11,488,670 WATTS INDUSTRIES, INC. AND SUBSIDIARIES INDEX Part I. Financial Information Page # Item 1. Condensed Consolidated Balance Sheets 3 at March 31, 1994 and June 30, 1993. Condensed Statements of Consolidated 4 Earnings for the Three Months Ended March 31, 1994 and March 31, 1993. Condensed Statements of Consolidated 5 Earnings for the Nine Months Ended March 31, 1994 and March 31, 1993. Condensed Statements of Consolidated 6 Cash Flows for the Nine Months Ended March 31, 1994 and March 31, 1993. Notes to Condensed Consolidated 7,8,9 Financial Statements. Item 2. Management's Discussion and Analysis 10,11, of Financial Condition and Results of 12,13 Operations. Part II. Other Information Item 5. Other Information. 14 Item 6. Exhibits and Reports Filed on Form 8-K. 14 Exhibit 11 - Computation of Per Share 15,16 Earnings. Signatures 17 EX-27 2 FINANCIAL DATA SCHEDULES WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. PART I. FINANCIAL INFORMATION WATTS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands except share information) (Unaudited) March 31, June 30, ASSETS 1994 1993 ---------- --------- CURRENT ASSETS Cash and cash equivalents.................. $ 13,367 $ 16,937 Short-term investments..................... 52,975 66,198 Trade accounts receivable, less allowance for doubtful accounts of $4150 and $3565. 86,574 68,099 Inventories: Finished goods........................... 53,721 48,910 Work in process.......................... 38,193 33,939 Raw materials............................ 49,452 49,064 ---------- --------- 141,366 131,913 Prepaid expenses and other current assets.. 8,996 9,494 Deferred income taxes...................... 10,522 8,551 ---------- --------- Total Current Assets............... 313,800 301,192 OTHER ASSETS Goodwill, net of accumulated amortization.. 90,612 87,017 Other...................................... 12,358 13,205 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment-at cost...... 229,772 218,247 Less allowance for depreciation............ ( 97,069) ( 83,986) ---------- --------- Property, plant and equipment-net.......... 132,703 134,261 ---------- --------- TOTAL ASSETS................................. $ 549,473 $ 535,675 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable........................... $ 21,812 $ 21,180 Accrued expenses........................... 41,678 40,441 Accrued compensation and related items..... 8,301 10,059 Income taxes............................... 2,484 4,494 Notes payable and current portion of long-term debt........................... 1,618 2,366 ---------- --------- Total Current Liabilities.......... 75,893 78,540 LONG-TERM DEBT, less current portion......... 99,160 101,468 DEFERRED INCOME TAXES........................ 14,280 13,435 OTHER LIABILITIES............................ 8,392 7,112 STOCKHOLDERS' EQUITY Class A Common Stock,$.10 par value; 40,000,000 shares authorized, 17,971,178 shares issued and outstanding at March 31 1,797 923 Class B Common Stock,$.10 par value; 13,000,000 shares authorized, 11,488,670 shares issued and outstanding at March 31 1,149 574 Additional paid-in capital............... 92,564 101,491 Retained earnings........................ 261,442 235,052 Equity adjustment from translation....... ( 5,204) ( 2,920) ---------- --------- Total Stockholders' Equity......... 351,748 335,120 ---------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $ 549,473 $ 535,675 ========== ========= See accompanying notes to condensed consolidated financial statements. Certain amounts as of June 30, 1993 have been reclassified to permit comparison with March 31, 1994. WATTS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS (Amounts in thousands except per share data) (Unaudited) Three Months Ended -------------------- March 31, March 31, 1994 1993 ---------- --------- Net sales.................................... $ 133,532 $ 119,764 Cost of goods sold........................... 82,841 75,009 ---------- --------- GROSS PROFIT....................... 50,691 44,755 Selling, general & administrative expenses... 30,818 29,083 ---------- --------- OPERATING INCOME................... 19,873 15,672 Other (income) expense: Interest income......................... ( 680) ( 1,189) Interest expense........................ 2,161 2,430 Other-net............................... 321 13 ---------- --------- 1,802 1,254 ---------- --------- EARNINGS BEFORE INCOME TAXES 18,071 14,418 Provision for income taxes................... 7,031 5,851 ---------- --------- NET EARNINGS....................... $ 11,040 $ 8,567 ========== ========= Primary and fully-diluted earnings per share $ .37 $ .28 Cash dividends per share..................... $.055 $.045 See accompanying notes to condensed consolidated financial statements. WATTS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS (Amounts in thousands except per share data) (Unaudited) Nine Months Ended -------------------- March 31, March 31, 1994 1993 ---------- --------- Net sales.................................... $ 391,847 $ 343,289 Cost of goods sold........................... 242,542 213,449 ---------- --------- GROSS PROFIT....................... 149,305 129,840 Selling, general & administrative expenses... 91,175 80,162 Unusual charges.............................. 7,000 ---------- --------- OPERATING INCOME................... 58,130 42,678 Other (income) expense: Interest income......................... ( 2,205) ( 3,770) Interest expense........................ 6,729 7,158 Other-net............................... 1,075 519 ---------- --------- 5,599 3,907 ---------- --------- EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES..... 52,531 38,771 Provision for income taxes................... 20,406 15,276 ---------- --------- EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE............... 32,125 23,495 Cumulative effect on prior years (to June 30, 1992) of change in accounting ............. 3,132 ---------- --------- NET EARNINGS....................... $ 32,125 $ 20,363 ========== ========= Primary and fully-diluted earnings per share: Earnings before cumulative effect of accounting change....................... $ 1.08 $ .78 Cumulative effect of accounting change..... -.10 ---------- --------- Net earnings............................... $ 1.08 $ .68 ========== ========= Cash dividends per share..................... $ .145 $ .115 ========== ========= See accompanying notes to condensed consolidated financial statements. WATTS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Amounts in thousands) (Unaudited) Nine Months Ended --------------------- March 31, March 31, 1994 1993 ---------- --------- OPERATING ACTIVITIES Net earnings $ 32,125 $ 20,363 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 16,621 14,757 Provision for deferred income taxes 336 ( 525) Cumulative effect of change in accounting for income taxes 3,132 (Gain)Loss on disposal of fixed assets ( 23) 18 Changes in operating assets and liabilities,net of effects from business acquisitions: Accounts receivable ( 16,857) ( 7,892) Inventories ( 8,129) ( 2,287) Prepaid expenses and other assets ( 54) ( 2,555) Accounts payable and accrued expenses 2,593 ( 1,250) ---------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 26,612 23,761 INVESTING ACTIVITIES Additions to property, plant, and equipment ( 12,722) ( 18,993) Proceeds from disposal of fixed assets 310 123 Increase in intangible assets ( 1,068) ( 970) Business acquisitions, net of cash acquired: Waletzko Armaturen ( 1,970) Rockford Controls ( 1,958) Intermes Group ( 6,094) ( 17,000) Other Acquisitions ( 4,783) Repayment of debt of acquired businesses ( 2,018) ( 6,000) Net changes in short-term investments 13,223 27,232 ---------- --------- NET CASH (USED IN) INVESTING ACTIVITIES ( 13,152) ( 19,536) FINANCING ACTIVITIES Purchase and retirement of treasury stock ( 12,064) Proceeds from exercise of stock options 2,164 1,099 Proceeds of short-term borrowings 526 521 Payments of long-term debt ( 3,434) ( 665) Cash dividends ( 4,263) ( 3,438) ---------- --------- NET CASH (USED IN) FINANCING ACTIVITIES ( 17,071) ( 2,483) Effect of exchange rates on cash and cash equivalents 41 ( 469) ---------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 3,570) 1,273 Cash and cash equivalents at beginning of period 16,937 9,989 ---------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,367 $ 11,262 ========== ========= See accompanying notes to condensed consolidated financial statements.
EX-15 3 NOTE & MD&A WATTS INDUSTRIES, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all necessary adjustments, consisting only of adjustments of a normal recurring nature, to present fairly Watts Industries, Inc.'s Condensed Consolidated Balance Sheet as of March 31, 1994, the Condensed Statements of Consolidated Earnings for the three and nine months ended March 31, 1994 and March 31, 1993, and the Condensed Statements of Consolidated Cash Flows for the nine months ended March 31, 1994 and March 31, 1993. The balance sheet at June 30, 1993 has been derived from the audited financial statements at that date. The accounting policies followed by the Company are described in the June 30, 1993 financial statements which are contained in the Company's 1993 Annual Report. It is suggested that these financial statements be read in conjunction with the financial statements and notes included in the 1993 Annual Report to stockholders. 2. On January 18, 1994, the Company's Board of Directors authorized a 2-for-1 stock split in the form of a 100% stock dividend payable on March 15, 1994 to stockholders of record March 1, 1994. All references in the financial statements to average number of shares outstanding and related prices, and per share amounts have been restated to reflect the split. 3. On November 6, 1992, an indirect subsidiary of the Company acquired Intermes, S.p.A. ("Intermes") for an aggregate cash purchase price of U.S. $17,000,000 plus a contingent payment that will total U.S. $8,500,000, plus the assumption of $23,000,000 of debt. $6,094,000 of this contingency was paid during the quarter ended September 30, 1993 with the remainder scheduled to be paid through 1997. Intermes, headquartered in Caldaro, Italy, manufactures and sells plumbing and heating valves and controls through wholesaler distribution. In addition, Intermes partially owns I.S.I., S.p.A. ("ISI") located in Pergine Valsugana, Italy. ISI manufactures butterfly valves and other valve products relating to municipal water markets. Intermes' sales for the twelve-month period ended June 30, 1993 were approximately U.S.$42,800,000. On May 18, 1993, the Company acquired Edward Barber (UK) Limited ("EBCO"). Headquartered in Tottenham, London, EBCO manufactures and sells valves, meter boxes, and accessories to the municipal water market. Sales of EBCO for the twelve months ended December 31, 1992 were approximately U.S.$11,500,000. EBCO, which was founded in 1908, also operates a non-ferrous foundry operation in nearby Willesden. 4. Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions". SFAS No. 106 requires that the projected future cost of providing postretirement benefits, such as health care and life insurance, be recognized on an accrual basis as employees render service instead of when benefits are paid. The extent of these types of benefits provided by the Company is limited to one of its subsidiaries acquired on September 30, 1991. Based on the acquisition date of this subsidiary and the adoption date of July 1, 1993, the Company is required under the Statement to account for the projected liability for these benefits on a prospective basis and has elected to adjust its purchase price allocation for the acquisition. Accordingly, the Company has recorded a liability of $2,087,000 and a corresponding increase to goodwill and related deferred tax asset. The effect of the adoption of SFAS 106 on operating results from the date of acquisition to June 30, 1993 was immaterial. 5. Effective July 1, 1992, the Company changed its method of accounting for income taxes from the deferred method to the liability method required by SFAS No. 109, "Accounting for Income Taxes". As permitted under the new rules, prior years' financial statements have not been restated. The cumulative effect of adopting SFAS No. 109 as of July 1, 1992 was to decrease net income by $3,132,000, for the fiscal year ended June 30, 1993. 6. The Company is currently a party to or otherwise involved with various administrative or legal proceedings under federal, state or local environmental laws or regulations involving a number of sites, in some cases as a participant in a group of potentially responsible parties. Four of these sites, the Sharkey and Combe Landfills in New Jersey, the San Gabriel Valley/El Monte, California water basin matter, and the Jack's Creek/Sitkin Smelting Superfund site in Pennsylvania, are listed on the National Priorities List. With respect to the Sharkey Landfill, the Company has been allocated .75% of the remediation costs, an amount which is not material to the Company. Based on recent developments, the Company elected not to enter into the de minimis settlement proposal and has instead decided to participate in the remediation as a participating party. No allocations have been made to date with respect to the Combe Landfill or San Gabriel Valley sites. While a formal allocation has not been completed with respect to the Jack's Creek site, the draft volumetric ranking allocated a .2847% share of the total weight to the Company, which the Company believes should entitle it to participate as a de minimis party. With respect to the Combe Landfill, the Company is one of approximately 30 potentially responsible parties. The Company and all other PRP's recently received a Supplemental Directive from the New Jersey Department of Environmental Protection & Energy seeking to recover approximately $9 million in the aggregate for the operation, maintenance, and monitoring of the implemented remedial action taken to date in connection with the Combe Landfill North site. Given the number of parties involved in most environmental sites, the multiplicity of possible solutions, the evolving technology and the years of remedial activity required, it is difficult to estimate with certainty the total cost of remediation, the timing and extent of remedial actions which may be required, and the amount of liability, if any, of the Company alone or in relation to that of other responsible parties. Based on facts presently known to it, the Company does not believe that the outcome of these proceedings will have a material adverse effect on its financial condition. The Company has established balance sheet accruals which it currently believes are adequate in light of the potential exposure of pending and threatened environmental litigation and proceedings of which it has knowledge. In this regard, with respect to certain of these matters, the Company has resort either to some degree of insurance coverage or indemnifications from third parties which are expected to defray to some extent the effect thereof. With respect to insurance, coverage of some of these claims has been disputed by the carriers based on standard reservations and, therefore, recovery may be somewhat questionable, a factor which has been considered in the Company's evaluation of these matters. Although difficult to quantify based on the complexity of the issues and the limitation on available information, the Company believes that its accruals for the estimated costs associated with such matters adequately provide for the Company's estimated foreseeable liability for these sites, however, given the nature and scope of the Company's manufacturing operations, there can be no assurance that the Company will not become subject to other environmental proceedings and liabilities in the future. WATTS INDUSTRIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Quarter Ended March 31, 1994 Compared to Quarter Ended March 31, 1993 Net sales increased $13,768,000 (11.5%) to $133,532,000. This increase was attributable to the inclusion of the net sales of acquired companies and increased unit shipments of certain product lines. The net sales of Edward Barber Company ("EBCO") acquired in May 1993, and Ancon Products, Inc. ("Ancon") acquired in July 1993 represented approximately 40% of the increase. The Company had increased unit shipments of water plumbing and heating valves, oil and gas valves, as well as decreased unit shipments of water safety and flow control valves and aerospace/military valves. While the Company believes this decrease in aerospace/military valves to be a long-term situation, the Company also believes there will be no further material deterioration in this market in the foreseeable future. The Company intends to maintain its strategy of seeking acquisition opportunities as well as developing its international sales to achieve sales growth. Gross profit increased $5,936,000 (13.3%) to $50,691,000 and increased as a percentage of net sales from 37.4% to 38.0%. This increase in gross profit was primarily attributable to an improved sales mix, increased absorption of fixed expenses in the manufacturing plants associated with the increased level of production and sales, and decreased costs of bronze ingot. Selling, general and administrative expenses increased $1,735,000 (6.0%) to $30,818,000 and decreased as a percentage of sales from 24.3% to 23.1%. This increased spending is primarily attributable to the inclusion of the expenses of acquired companies discussed above, and increased commissions associated with the higher sales volume. These increased expenses were partially offset by reduced spending at several subsidiaries as a result of downsizing programs implemented during fiscal year 1993. Interest income decreased $509,000 (42.8%) to $680,000. This decrease is primarily attributable to the decreased levels of cash and short-term investments. Interest expense decreased $269,000 (11.1%) to $2,161,000. This decrease is attributable to the decreased levels of long-term debt. Earnings before income taxes increased $3,653,000 (25.3%) to $18,071,000. Net earnings increased $2,473,000 (28.9%) to $11,040,000. The weighted average number of common shares outstanding on March 31, 1994, after giving effect for the 2-for-1 stock split, decreased to 29,756,414 from 30,116,380 for primary earnings per share. This decrease is the result of the repurchase by the Company of 685,400 shares of Class A Common Stock purchased during the first quarter of the fiscal year. Primary and fully diluted earnings per share were $.37 for the quarter ended March 31, 1994 compared to $.28 for the quarter ended March 31, 1993. Nine Months Ended March 31, 1994 Compared to Nine Months Ended March 31, 1993 Net sales increased $48,558,000 (14.1%) to $391,847,000. This increase is primarily attributable to the inclusion of the net sales of acquired companies. The net sales of Intermes acquired in November 1992, EBCO, and Ancon represented approximately 60% of the increase. The Company had increased unit shipments of water plumbing and heating valves, oil and gas valves, and increased international sales, as well as decreased unit shipments of water safety and flow control valves and aerospace/military valves. Gross profit increased $19,465,000 (15.0%) to $149,305,000 and increased as a percentage of sales from 37.8% to 38.1%. This increase is primarily attributable to an improved sales mix, improved manufacturing performance, and decreased costs of bronze ingot. Selling, general and administrative expenses increased $4,013,000 (4.6%) to $91,175,000. The Company recorded $7,000,000 of unusual charges in the quarter ended December 31, 1992 for environmental matters and costs associated with the downsizing and restructuring of certain acquired companies. Selling, general and administrative expenses would have increased $11,013,000 (13.7%) without the $7,000,000 of unusual charges in the period ended December 31, 1992. This increase is primarily attributable to the inclusion of the expenses of acquired companies and increased commissions associated with the higher sales volume. These increases were partially offset by decreased spending at several subsidiaries as a result of downsizing programs implemented during last fiscal year. The Company from time to time is involved with environmental proceedings and incurs costs on an ongoing basis related to environmental matters. See Note 5 to Notes of Condensed Consolidated Financial Statements for further discussion. Interest income decreased $1,565,000 (41.5%) to $2,205,000 due to decreased levels of cash and short-term investments. Earnings before income taxes and unusual charges increased $6,760,000 (14.8%) to $52,531,000. Net earnings before unusual charges and the cumulative effect of the change in accounting method due to the implementation of SFAS No. 109 as described in Footnote 4 increased $4,291,000 (15.4%) to $32,125,000. The weighted average number of common shares outstanding on March 31, 1994 decreased to 29,676,036 from 30,104,182 for primary earnings per share. This decrease is the result of the purchase by the Company of 685,400 shares of Class A Common Stock during the current fiscal year. Primary and fully diluted earnings per share were $1.08 for the nine months ended March 31, 1994 compared to $.92 before unusual charges and the cumulative effect of the accounting change in accounting method for the nine months ended March 31, 1993. The following table illustrates the impact of unusual charges and the accounting change on earnings per share for the nine months ended March 31st: 1994 1993 Earnings per share as reported $1.08 $.68 Unusual charges $.14 Cumulative effect of change in accounting method $.10 ----- ---- $1.08 $.92 Liquidity and Capital Resources During the nine months ended March 31, 1994, the Company repurchased 685,400 shares of its Class A Common Stock through open market repurchases for an aggregate price of $12,064,000. The Company's repurchase program is now complete. A subsidiary of the Company purchased Ancon Products, Inc. located in Scarborough, Ontario, Canada. Ancon manufactures a wide range of floor and roof drains, intercepters, backwater valves, yard hydrants, and stainless and carbon steel specialty products used primarily in commercial and industrial construction applications. The Company also purchased Enpoco Canada, Ltd., a manufacturer of drains located in Ontario, Canada. The aggregate purchase price for these acquisitions was U.S.$4,783,000. The Company also repaid $2,018,000 of debt acquired with one of the companies. The Company made contingent payments of $6,094,000 as part of the Intermes acquisition. The Company also spent $12,722,000 on capital expenditures, primarily manufacturing machinery and equipment, as part of its current fiscal year budget of $22,000,000. The principal sources of funds to finance these acquisitions, capital expenditures, debt repayments and stock repurchases were the issuance by the Company on November 26, 1991 of $75,000,000 aggregate principal amount of its 8.375% Notes Due 2003 and funds provided from operations. The change in foreign exchange rates since June 30, 1993 did not have a material impact on the results of operations or the financial condition of the Company. Working capital at March 31, 1994 was $237,907,000 compared to $222,652,000 at June 30, 1993. Cash and short-term investments were $66,342,000 at March 31, 1994 compared to $83,135,000 at June 30, 1993. The ratio of current assets to current liabilities was 4.1 to 1 at March 31, 1994 compared to 3.8 to 1 at June 30, 1993. Debt as a percentage of capital employed was 22.3% at March 31, 1994 compared to 23.7% at June 30, 1993. The Company anticipates that funds provided from operations will be sufficient to meet operating requirements and anticipated capital expenditures for at least the next 24 months. Item 5. Other Information On January 18, 1994, the Board of Directors of the Corporation declared a two-for-one stock split of the Corporation's outstanding Class A Common Stock, par value $.10 per share, and Class B Common Stock, par value $.10 per share, to be effected in the form of a stock dividend equal to one share of Class A Common Stock for each share of Class A Common Stock outstanding on the record date, and one share of Class B Common Stock for each share of Class B Common Stock outstanding on the record date, all such shares to be fully paid and nonassessable. The stock dividend was payable on March 15, 1994 to holders of Class A Common Stock and Class B Common Stock of record as of the close of business on March 1, 1994. Upon the effectiveness of such dividend, there shall be designated as additional capital of the Corporation an amount equal to the aggregate par value of the shares of Class A Common Stock and Class B Common Stock of the Corporation being declared as a dividend. Upon the effectiveness of such stock dividend, the Corporation shall increase by 100% the number of shares of Class A Common Stock reserved for issuance in connection with, and decrease by 50% the exercise price with respect to, any options heretofore granted and now outstanding and hereafter granted under the Corporation's 1986 Incentive Stock Option Plan, the 1989 Nonqualified Stock Option Plan, and the 1991 Non-Employee Directors' Nonqualified Stock Option Plan, all in accordance with the anti-dilution provisions of each such Plan. The number of shares of Class A Common Stock and the exercise price of each stock option granted prior to and outstanding as of the effective date of the dividend under the Corporation's 1986 Incentive Stock Option Plan, the 1989 Nonqualified Stock Option Plan, or the 1991 Non-Employee Directors' Nonqualified Stock Option Plan, respectively, and each option agreement outstanding thereunder, shall be adjusted so that the number of shares that may be purchased upon exercise of any such option agreement will be increased by 100% and the exercise price will be decreased by 50% per share. Item 6 Exhibits and Reports Filed on Form 8-K There were no reports filed on Form 8-K for the quarter ended March 31, 1994. EX-15 4 EPS CALCULATIONS Watts Industries, Inc. Exhibit 11 -- Computation of Per Share Earnings Three Months Ended March 31 ----------------------- 1994 1993 -------- -------- [C] [C] PRIMARY - ----------- Average shares outstanding 29,447,848 29,926,476 Net effect of dilutive stock options - based on the treasury stock method using average market 308,566 189,904 price ----------- ----------- Total 29,756,414 30,116,380 =========== =========== Earnings before income taxes and cumulative effect of change in accounting for income taxes $ 18,071,240 $ 14,418,081 Income taxes 7,031,320 5,850,726 ----------- ----------- Earnings before cumulative effect of accounting change 11,039,920 8,567,355 Cumulative effect as of June 30, 1992 of change in method of accounting for income taxes ----------- ----------- Net earnings $ 11,039,920 $ 8,567,355 =========== =========== Earnings per share: Earnings before cumulative effect of accounting change $ .37 $ .28 Cumulative effect of accounting change ----------- ----------- Net earnings $ .37 $ .28 =========== =========== Watts Industries, Inc. Exhibit 11 -- Computation of Per Share Earnings Three Months Ended March 31 ----------------------- 1994 1993 -------- -------- [C] [C] FULLY DILUTED - ------------- Average shares outstanding 29,447,848 29,926,476 Net effect of dilutive stock options - based on the treasury stock method using the quarter-en market price, if higher than 337,903 189,926 average market price ----------- ----------- Total 29,785,751 30,116,402 =========== =========== Earnings before income taxes and cumulative effect of change in accounting for income taxes $ 18,071,240 $ 14,418,081 Income taxes 7,031,320 5,850,726 ----------- ----------- Earnings before cumulative effect of accounting change 11,039,920 8,567,355 Cumulative effect as of June 30, 1992 of change in method of accounting for income taxes ----------- ----------- Net earnings $ 11,039,920 $ 8,567,355 =========== =========== Earnings per share: Earnings before cumulative effect of accounting change $ .37 $ .28 Cumulative effect of accounting change ----------- ----------- Net earnings $ .37 $ .28 =========== =========== Watts Industries, Inc. Exhibit 11 -- Computation of Per Share Earnings Nine Months Ended March 31 ----------------------- 1994 1993 -------- -------- [C] [C] PRIMARY - ----------- Average shares outstanding 29,450,991 29,877,632 Net effect of dilutive stock options - based on the treasury stock method using average market 225,045 226,550 price ----------- ----------- Total 29,676,036 30,104,182 =========== =========== Earnings before income taxes and cumulative effect of change in accounting for income taxes $ 52,531,304 $ 38,770,208 Income taxes 20,405,934 15,275,235 ----------- ----------- Earnings before cumulative effect of accounting change 32,125,370 23,494,973 Cumulative effect as of June 30, 1992 of change in method of accounting for income taxes (3,132,000) ----------- ----------- Net earnings $ 32,125,370 $ 20,362,973 =========== =========== Earnings per share: Earnings before cumulative effect of accounting change $ 1.08 $ .78 Cumulative effect of accounting change ( .10) ----------- ----------- Net earnings $ 1.08 $ .68 =========== =========== Watts Industries, Inc. Exhibit 11 -- Computation of Per Share Earnings Nine Months Ended March 31 ----------------------- 1994 1993 -------- -------- [C] [C] FULLY DILUTED - ------------- Average shares outstanding 29,450,991 29,877,632 Net effect of dilutive stock options - based on the treasury stock method using the quarter-en market price, if higher than 337,903 238,446 average market price ----------- ----------- Total 29,788,894 30,116,078 =========== =========== Earnings before income taxes and cumulative effect of change in accounting for income taxes $ 52,531,304 $ 38,770,208 Income taxes 20,405,934 15,275,235 ----------- ----------- Earnings before cumulative effect of accounting change 32,125,370 23,494,973 Cumulative effect as of June 30, 1992 of change in method of accounting for income taxes (3,132,000) ----------- ----------- Net earnings $ 32,125,370 $ 20,362,973 =========== =========== Earnings per share: Earnings before cumulative effect of accounting change $ 1.08 $ .78 Cumulative effect of accounting change ( .10) ----------- ----------- Net earnings $ 1.08 $ .68 =========== =========== EX-99 5 SIGNATURES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WATTS INDUSTRIES, INC. Date: May 13, 1994 By: /s/Kenneth J. McAvoy Kenneth J. McAvoy Vice President of Finance and Treasurer; Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----