SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2015
WATTS WATER TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE |
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001-11499 |
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04-2916536 |
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(State or Other Jurisdiction |
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(Commission File Number) |
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(IRS Employer |
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of Incorporation) |
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Identification No.) |
815 Chestnut Street, North Andover, Massachusetts 01845
(Address of Principal Executive Offices) (Zip Code)
(978) 688-1811
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On October 28, 2015, Watts Water Technologies, Inc. (the “Company”) announced its financial results for the fiscal quarter ended September 27, 2015. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information in Item 2.02 of this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 2.05. Costs Associated with Exit or Disposal Activities.
On October 26, 2015, the Board of Directors of the Company completed its approval of the second phase of the Company’s transformation program related to its Americas and Asia-Pacific businesses (“phase two”). Phase two involves reducing the square footage of the Company’s North American facilities. A portion of the phase two transformation program was approved by the Company’s Board of Directors on August 27, 2015 but was not previously disclosed because the Company had not yet notified affected employees. The Company plans to begin notifying employees affected by phase two on October 29, 2015. Phase two is expected to improve utilization of the Company’s remaining facilities, better leverage the Company’s cost structure, reduce working capital and improve execution of customer delivery requirements. Together, the first and second phases of the Company’s transformation program are expected to reduce the net square footage of the Company’s North American facilities by approximately 30%. Phase two is expected to include pre-tax charges totaling approximately $30 to $35 million, approximately $5 million of which are expected to be non-cash charges. The total pre-tax charge for phase two is expected to include $4 million for severance benefits; $6 million for relocation, clean-up and other related exit costs; $2 million for accelerated depreciation and amortization of long-lived assets; and $18 to $23 million in other transformation and deployment costs, including inventory charges, information technology expenses, consulting and project management fees, and other associated costs. The total net after-tax charge for phase two is expected to be approximately $18 to $22 million, with the Company incurring costs through 2017. The Company expects to spend approximately $3 million in capital expenditures to consolidate its operations as part of phase two. The Company estimates annual cash savings to be approximately $10 million (pretax), which the Company expects to fully realize by 2018. Phase two of the Company’s transformation and restructuring program described above is subject to the finalization and execution of detailed implementation plans. Consequently, the actual timing and costs of restructuring and other transformation costs, as well as the benefits of the program, may vary from current estimates. To the extent required by applicable rules, the Company may file one or more amendments to this Current Report on Form 8-K or include such disclosure in a future period report on Form 10-Q or 10-K as details of the transformation and restructuring plan are refined and estimates of costs and charges are finalized.
For information relating to the Company’s initial phase of the transformation program, which the Company announced on February 17, 2015, please see the Company’s Current Report on Form 8-K filed on February 17, 2015, as supplemented by Note 19 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2014, Note 5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015, and Note 5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 28, 2015.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On October 27, 2015, the Board of Directors of the Company approved an amendment and restatement of the Company’s Management Stock Purchase Plan (the “Plan”). The Plan provides management employees with the opportunity to defer part of their annual bonus and apply the deferred bonus towards the purchase of restricted stock units. The changes to the Plan approved by the Board of Directors limit the amount of a participant’s annual bonus that may be applied to the purchase of restricted stock units to 50% of the participant’s actual bonus amount and increases the price at which the restricted stock units are purchased from 67% of fair market value to 80% of fair market value.
A copy of the Company’s Management Stock Purchase Plan as amended and restated as of October 27, 2015 incorporating the above described changes is attached as Exhibit 10.1 to this Current Report.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
See Exhibit Index attached hereto.
SIGNATURE
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 hereunto duly authorized.
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Date: October 28, 2015 |
WATTS WATER TECHNOLOGIES, INC. | |
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By: |
/s/ Kenneth R. Lepage |
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Kenneth R. Lepage |
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General Counsel |
Exhibit 10.1
WATTS WATER TECHNOLOGIES, INC.
MANAGEMENT STOCK PURCHASE PLAN
Amended and Restated as of October 27, 2015
I. INTRODUCTION
The purpose of the Watts Water Technologies, Inc. Management Stock Purchase Plan (the “Plan”) is to provide equity incentive compensation to selected management employees of Watts Water Technologies, Inc. (the “Company”) and its subsidiaries. Participants in the Plan may elect to receive restricted stock units (“RSUs”) in lieu of a portion of their annual incentive bonus. Each RSU represents the right to receive one share of the Company’s Class A Common Stock (the “Stock”) upon the terms and conditions stated herein. RSUs are granted at a discount of 20% from the fair market value of the Stock on the Valuation Date (as defined in Subsection IV(B) below). Vested RSUs will be settled in shares of Stock after a period of deferral selected by the participant, or upon termination of employment, if earlier.
The Plan is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the guidance promulgated thereunder (“Section 409A”). The Plan should be interpreted in a manner to comply with Section 409A, including that all uses of the terms “termination of employment” and “terminates his/her employment” shall mean a “separation from service” within the meaning of Treasury Regulation 1.409A-1(h). In addition, this Plan is a “top hat plan” subject to certain provisions of the Employee Retirement Income Security Act of 1974.
II. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company (the “Committee”). Each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Act”). The Committee shall have complete discretion and authority with respect to the Plan and its application, except as
expressly limited herein. Determinations by the Committee shall be final and binding on all parties with respect to all matters relating to the Plan.
III. ELIGIBILITY
Management employees of the Company and its subsidiaries as designated by the Committee shall be eligible to participate in the Plan.
IV. PARTICIPATION
A. Restricted Stock Units. Participation in the Plan shall be based on the award of RSUs. Each RSU awarded to a participant shall be credited to a bookkeeping account established and maintained for that participant.
B. Valuation of RSUs; Fair Market Value of Stock. The value of each RSU, for purposes of the Plan, shall be determined as follows: The “Cost” of each RSU shall be equal to 80% of the fair market value of the Stock on the relevant Valuation Date. The “Valuation Date” for each year is the date that is the third business day after the date that the Company releases its year-end earnings to the public. The “Value” of each RSU shall be equal to its Cost plus simple interest per annum on such amount at the one-year U.S. Treasury Bill rate (as published in The Wall Street Journal) in effect on the Valuation Date and each anniversary thereof. For all purposes of the Plan, the “fair market value of the Stock” on any given date shall mean the last reported sale price at which Stock is traded on such date or, if no Stock is traded on such date, the most recent date on which Stock was traded, as reflected on the New York Stock Exchange.
C. Election to Participate. Each year, each participant may elect to receive an award of RSUs under the Plan in lieu of a portion of any bonus payable for the subsequent calendar year by completing a Bonus Deferral and RSU Subscription Agreement (“Subscription Agreement”). The Subscription Agreement shall provide that the participant elects to receive RSUs in lieu of a specified portion of any annual incentive bonus to be earned in the following calendar year. Such portion may be expressed as a specified percentage of the participant’s actual bonus amount up to 50% of
such bonus amount. Any percentage specified must be at least 10% and not more than 50%. Amounts specified are entirely contingent on the amount of bonus actually awarded. If a management employee first commences employment with the Company after January 1 of a calendar year, such individual shall be permitted to elect to receive an award of RSUs under the Plan in lieu of a portion of his or her annual incentive bonus for that first calendar year of eligibility by completing a Subscription Agreement and filing it with the Company no later than 30 days after such employee is first designated as eligible to participate in the Plan. With respect to such first calendar year of eligibility, an election to participate in the Plan shall apply only to the portion of the annual incentive bonus or targeted maximum which is attributable to earnings for service performed after the election is made.
D. Deferral Beyond Vesting Period. Each Subscription Agreement shall specify a deferral period, beyond the three -year vesting period, for the RSUs to which it pertains. The deferral period shall be expressed as a number of whole years, not less than three, beginning on the Valuation Date. Subscription Agreements must be received by the Company no later than December 31 of the year prior to the year in which the bonus amount will be earned; provided, however, that if a management employee first commences employment with the Company after January 1 of a calendar year, the Company must receive such employee’s Subscription Agreement for that calendar year no later than 30 days after the employee is designated as eligible to participate in the Plan. Notwithstanding the foregoing, to the extent that any bonus deferred hereunder constitutes “performance-based compensation” within the meaning of Section 409A, Subscription Agreements with respect to such compensation must be received by the Company no later than six months before the end of the so-called performance period to which such bonus relates.
E. Changes to Deferral Period. A participant may change the deferral period specified in a Subscription Agreement to extend the deferral period, provided, however,
that any such change must be made at least 12 months before the original distribution date. Any such change shall not become effective for 12 months after it is made. In addition, any such change must extend the deferral period for a minimum of five additional years from the original distribution date. Participants are not permitted to change a deferral to reduce the length of a deferral period.
F. Award of RSUs. On each annual Valuation Date, the Company shall award RSUs to each participant as follows: Each participant’s account shall be credited with a whole number of RSUs determined by dividing the amount (expressed in dollars) that is determined under his or her Subscription Agreement by the Cost of each RSU awarded on such date. No fractional RSU will be credited and the amount equivalent in value to the fractional RSU will be paid out to the participant currently in cash.
V. VESTING AND SETTLEMENT OF RSUs
A. Vesting. Unless otherwise provided below by the Committee, a participant shall become vested in the RSUs that are awarded in a year over a three-year vesting period in which one-third of the RSUs shall vest on each anniversary of the Valuation Date on which the RSUs were awarded as long as the participant remains employed by the Company or a subsidiary on each such anniversary date. In lieu of the foregoing vesting, the Committee, in its sole discretion, may designate in the Subscription Agreement that a participant shall vest in all of the RSUs that are awarded in a year on the third anniversary of the Valuation Date provided, that the participant remains continuously employed by the Company or a subsidiary through such anniversary date.
B. Settlement After Vesting. With respect to each vested RSU, the Company shall issue to the participant one share of Stock within 30 days after the earliest of: (i) the end of the deferral period specified in the participant’s Subscription Agreement pertaining to such RSU; (ii) the date of the participant’s termination of employment with
the Company and its subsidiaries; (iii) the date of the participant’s death; or (iv) the date the participant becomes Disabled (as defined below).
For purposes of this Plan, a participant shall be “Disabled” if the participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the participant’s employer.
C. Settlement Prior to Vesting. If a participant terminates his/her employment with the Company, the participant’s nonvested RSUs shall be canceled and he or she shall receive a cash payment equal to the lesser of (a) the Value of such RSUs or (b) an amount equal to the number of such RSUs multiplied by the fair market value of the Stock on the date of the participant’s termination of employment.
D. Committee’s Discretion. The Committee shall have complete discretion to determine the circumstances of a participant’s termination of employment, including whether the same is a result of Disability, and the Committee’s determination shall be final and binding on all parties and not subject to review or challenge by any participant or other person. Except as otherwise provided in Subsection VIII.(C) hereof, in no event may the Committee apply its discretion to accelerate the time or schedule of any payment made under the Plan.
E. Waiting Period Applicable to Officers. Notwithstanding the provisions of Subsections V.(B) and V.(C) above, any participant who is a “specified employee” within the meaning of Section 409A of the Code (which generally includes any officers of the
Company) may not receive any payment or settlement with respect to his/her RSUs in connection with his/her termination of employment until the expiration of a six month waiting period following such termination of employment. This waiting period does not apply to the termination of an officer’s employment as a result of the officer’s death or Disability (as defined in Subsection V.(B) above).
VI. DIVIDEND EQUIVALENT AMOUNTS
Whenever dividends (other than dividends payable only in shares of Stock) are paid with respect to Stock, each participant shall be paid an amount in cash equal to the number of his or her vested RSUs multiplied by the dividend value per share. In addition, each participant’s account shall be credited with an amount equal to the number of such participant’s nonvested RSUs multiplied by the dividend value per share. Amounts credited with respect to each nonvested RSU shall be paid, without interest, on the date the participant becomes vested in such RSU, or when the participant receives payment of his or her nonvested RSUs pursuant to Subsection V.(C).
VII. DESIGNATION OF BENEFICIARY
A participant may designate one or more beneficiaries to receive payments or shares of Stock in the event of his/her death. A designation of beneficiary may apply to a specified percentage or a participant’s entire interest in the Plan. Such designation, or any change therein, must be in writing and shall be effective upon receipt by the Company. If there is no effective designation of beneficiary, or if no beneficiary survives the participant, the participant’s estate shall be deemed to be the beneficiary.
VIII. SHARES ISSUABLE; MAXIMUM NUMBER OF RSUs; ADJUSTMENTS; CHANGE IN CONTROL
A. Shares Issuable. The aggregate maximum number of shares of Stock reserved and available for issuance under the Plan shall be 2,000,000. For purposes of this limitation, the shares of Stock underlying any RSUs that are canceled shall be added back to the shares of Stock available for issuance under the Plan. Shares subject to the
Plan are authorized but unissued shares or shares that were once issued and subsequently re-acquired by the Company.
B. Adjustments. In the event of a stock dividend, stock split or similar change in capitalization affecting the Stock, the Committee shall make appropriate adjustments in (i) the number and kind of shares of Stock or securities with respect to which RSUs shall thereafter be granted, (ii) the number and kind of shares remaining subject to outstanding RSUs; (iii) the number of RSUs credited to each participant’s account; and (iv) the method of determining the value of RSUs.
C. Change in Control. In the event of any proposed merger, consolidation, sale, dissolution or liquidation of the Company, all non-vested RSUs shall become fully vested upon the effective date of such merger, consolidation, sale, dissolution or liquidation and the Committee in its sole discretion may, as to any outstanding RSUs, make such substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan and the number of shares subject to such RSUs as it may determine on an equitable basis and as may be permitted by the terms of such transaction, or terminate such RSUs upon such terms and conditions as it shall provide. In the event that any such merger, consolidation, sale, dissolution or liquidation of the Company constitutes a “change in control event” for purposes of Section 409A, the Committee may terminate the Plan and make payment with respect to each RSU (taking into account any adjustment provided for herein), provided that such payment is made within 12 months of such change in control event.
IX. AMENDMENT OR TERMINATION OF PLAN
The Company reserves the right to amend or terminate the Plan at any time, by action of its Board of Directors, provided that no such action shall adversely affect a participant’s rights under the Plan with respect to RSUs awarded and vested before the date of such action, and provided, further, that Plan amendments shall be subject to approval by the Company’s shareholders to the extent required by the Act to ensure that
awards are exempt under Rule 16b-3 promulgated under the Act or as otherwise required by applicable law, including the relevant listing requirements of the New York Stock Exchange.
X. MISCELLANEOUS PROVISIONS
A. No Distribution; Compliance with Legal Requirements. The Committee may require each person acquiring shares of Stock under the Plan to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof. No shares of Stock shall be issued until all applicable securities laws and other legal and stock exchange requirements have been satisfied. The Committee may require the placing of such stop-orders and restrictive legends on certificates for Stock as it deems appropriate.
B. Withholding. Participation in the Plan is subject to any required tax withholding on wages or other income of the participant in connection with the Plan. Each participant agrees, by entering the Plan, that the Company shall have the right to deduct any such taxes by withholding shares of Stock otherwise issuable to him under the Plan with an aggregate fair market value (as of the date the withholding is effected) that would satisfy the minimum required tax withholding obligation.
C. Notices; Delivery of Stock Certificates. Any notice required or permitted to be given by the Company or the Committee pursuant to the Plan shall be deemed given when personally delivered or deposited in the United States mail, registered or certified, postage prepaid, addressed to the participant at the last address shown for the participant on the records of the Company. Delivery of stock certificates to persons entitled to receive them under the Plan shall be deemed effected for all purposes when the Company or a share transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to such person at his/her last known address on file with the Company.
D. Nontransferability of Rights. During a participant’s lifetime, any payment or issuance of shares under the Plan shall be made only to him/her. No RSU or other interest under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt by a participant or any beneficiary under the Plan to do so shall be void. No interest under the Plan shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of a participant or beneficiary entitled thereto.
E. Company’s Obligations to Be Unfunded and Unsecured. The Plan shall at all times be entirely unfunded, and no provision shall at any time be made with respect to segregating assets of the Company (including Stock) for payment of any amounts or issuance of any shares of Stock hereunder. No participant or other person shall have any interest in any particular assets of the Company (including Stock) by reason of the right to receive payment under the Plan, and any participant or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan.
F. Forfeiture and Claw-Back Provisions. Notwithstanding anything contained in the Plan to the contrary, all RSUs awarded under this agreement, and any shares of Class A Common Stock issued upon settlement of RSUs hereunder, shall be subject to forfeiture or repayment pursuant to the terms of the Company’s Compensation Recovery Policy as in effect from time to time, including any amendments necessary for compliance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
G. Governing Law. The terms of the Plan shall be governed, construed, administered and regulated in accordance with the laws of the Commonwealth of Massachusetts. In the event any provision of this Plan shall be determined to be illegal or invalid for any reason, the other provisions shall continue in full force and effect as if such illegal or invalid provision had never been included herein.
H. Effective Date of Plan. The Plan became effective as of October 17, 1995, upon approval by the holders of a majority of the shares of the Company’s Class A Common Stock and Class B Common Stock, voting as a single class, present or represented and entitled to vote at a meeting of the shareholders.
Exhibit 99.1
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FOR IMMEDIATE RELEASE |
Contact: |
Timothy M. MacPhee | |
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Vice President — Investor Relations | |
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Telephone: |
(978) 688-1811 |
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Fax: |
(978) 688-2976 |
WATTS WATER TECHNOLOGIES REPORTS THIRD QUARTER RESULTS FOR 2015 AND ANNOUNCES AGREEMENT TO PURCHASE APEX VALVES LIMITED
· Reported sales of $366.3 million
· Adjusted operating margin of 11.4%; GAAP operating margin of (8.2%)
· Adjusted EPS of $0.67; GAAP EPS of ($0.73)
· Foreign currency exchange rates negatively affected revenue growth by 6.5% and EPS by $0.06
· Signed definitive agreement to purchase the shares of Apex Valves Limited
· Finalized sale of certain non-core product lines to Sioux Chief Mfg. Co. for approximately $33 million
· Completed the settlement of pension and other long-term obligations
North Andover, MA….October 28, 2015. Watts Water Technologies, Inc. (NYSE: WTS) today announced third quarter sales of $366.3 million, a decrease of 2.6%, as compared to the same period last year. Third quarter net loss per diluted share (EPS) was ($0.73) as compared to net income of $0.64 for the third quarter of 2014. Adjusted for special items, third quarter EPS was $0.67, or 4% below last year. A summary of third quarter financial results is as follows:
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Third quarter ended |
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(In millions, except per share information) |
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Sept 27, |
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Sept 28, |
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% Change |
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Sales |
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$ |
366.3 |
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$ |
376.0 |
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(3 |
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Net (loss) income |
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(25.7 |
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22.6 |
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Diluted (loss) earnings per share |
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$ |
(0.73 |
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$ |
0.64 |
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Special items |
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1.40 |
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0.06 |
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Adjusted earnings per share |
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$ |
0.67 |
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$ |
0.70 |
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(4 |
)% |
Note: Organic sales growth excludes the impacts of acquisitions, divestitures and foreign exchange from year-to-year comparisons
Third Quarter Highlights:
· Reported sales decreased by 2.6% in the third quarter, while organic sales declined by 1%.
· Regionally, organic sales increased approximately 2% in the Americas, declined 3.5% in Europe, the Middle East and Africa (EMEA) and declined 5% in Asia-Pacific. AERCO sales were $34.9 million in the quarter.
· Adjusted operating margin of 11.4% was 0.2 percentage points below the third quarter of 2014. Year over year, lower sales volume, plant under absorption and anticipated higher G&A expenses were partially offset by favorable product mix, productivity and other cost savings initiatives; operating margins on a GAAP basis decreased 19.6 percentage points to (8.2%) in the third quarter of 2015 as compared to the same period last year.
· Adjusted 2015 third quarter EPS was $0.67, $0.03 lower compared to the prior year. Foreign currency negatively impacted quarterly earnings by $0.06. AERCO contributed $0.12 of adjusted EPS in the third quarter of 2015. The effect of our product rationalization initiatives negatively impacted quarterly earnings by $0.05.
· Announced Phase 2 of the Americas transformation program, which together with Phase 1, is expected to reduce our Americas net operating footprint by approximately 30%. Phase 2 is expected to improve utilization of our remaining facilities and better leverage our cost structure.
· Signed agreement to purchase 80% of the outstanding shares of Apex Valves Limited (“Apex”), a New Zealand company, for approximately $22 million, with a commitment to purchase the remaining 20% ownership within three years of closing. The transaction is expected to close in the fourth quarter.
· Finalized the sale to Sioux Chief Mfg. Co. (“Sioux Chief”) of certain assets related to Watts’ fittings, brass & tubular and vinyl tubing product lines. The net selling price was approximately $33 million, after inventory adjustments and transaction fees.
· Signed an agreement in principle to sell a manufacturing facility in China, that is dedicated to producing non-core product.
· Completed the settlement of certain long-term obligations, including our pension plan and supplemental employee retirement plan, resulting in a third quarter pre-tax P&L charge of approximately $65 million, with total cash outlays of approximately $49 million.
· Excluding the cash outflow related to the settlement of long-term obligations, free cash flow for the nine months ended September 2015 was $72 million, a 25% increase compared to the same period last year, primarily driven by reduced inventory levels.
· The Company repurchased approximately 235 thousand shares of Company stock during the third quarter, at a cost of approximately $13 million.
Robert J. Pagano Jr., Chief Executive Officer, commented, “I am pleased with the progress we’ve made on our many initiatives during the third quarter. We completed the sale of U.S non-core product lines and associated assets, settled our pension obligations, and continued to make headway on existing transformation programs, including entering into an agreement to sell a manufacturing facility in China dedicated to non-core products, and finalizing the details of Phase 2 of the Americas transformation program. Operationally, despite the reduction in sales volumes and incremental general and administrative charges, our adjusted margin profile was fairly consistent with the third quarter last year. Overall, we were pleased with the third quarter results and the progress achieved on our transformational efforts.”
Commenting on the purchase of Apex, Mr. Pagano noted, “The Apex acquisition will allow us to expand our Asia-Pacific presence with a leading supplier of control valves for hot water and filtration applications primarily in the New Zealand market place. Annual sales approximated $12 million in 2014, with a strong operating margin profile.”
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 third quarter results for 2015 on Thursday, October 29, 2015, 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 October 29, 2016.
Watts Water Technologies, Inc., through its subsidiaries, is a world leader in the manufacture of innovative products that promote safety, energy efficiency and water conservation used in commercial, residential, and industrial applications. Its 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 expectations for Asia-Pacific expansion and margin growth. 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: failure to close on the purchase of Apex or the sale of the manufacturing facility in China; the timing and the expected costs and savings associated with our ongoing restructuring and transformation programs and initiatives; the current economic and financial condition, 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 14 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2014 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)
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Third Quarter Ended |
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Nine Months Ended |
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September 27, |
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September 28, |
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September 27, |
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September 28, |
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2015 |
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2014 |
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2015 |
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2014 |
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Net sales |
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$ |
366.3 |
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$ |
376.0 |
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$ |
1,109.4 |
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$ |
1,137.2 |
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Cost of goods sold |
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224.1 |
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237.9 |
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690.9 |
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726.8 |
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GROSS PROFIT |
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142.2 |
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138.1 |
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418.5 |
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410.4 |
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Selling, general and administrative expenses |
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166.6 |
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95.0 |
|
378.6 |
|
298.1 |
| ||||
|
Restructuring |
|
5.8 |
|
0.4 |
|
12.5 |
|
7.2 |
| ||||
|
OPERATING (LOSS) INCOME |
|
(30.2 |
) |
42.7 |
|
27.4 |
|
105.1 |
| ||||
|
Other (income) expense: |
|
|
|
|
|
|
|
|
| ||||
|
Interest income |
|
(0.3 |
) |
(0.1 |
) |
(0.7 |
) |
(0.4 |
) | ||||
|
Interest expense |
|
6.2 |
|
4.8 |
|
18.0 |
|
14.6 |
| ||||
|
Other (income) expense, net |
|
(0.2 |
) |
1.6 |
|
(0.8 |
) |
1.9 |
| ||||
|
Total other expense |
|
5.7 |
|
6.3 |
|
16.5 |
|
16.1 |
| ||||
|
(LOSS) INCOME BEFORE INCOME TAXES |
|
(35.9 |
) |
36.4 |
|
10.9 |
|
89.0 |
| ||||
|
(Benefit) provision for income taxes |
|
(10.2 |
) |
13.8 |
|
5.7 |
|
31.0 |
| ||||
|
NET (LOSS) INCOME |
|
$ |
(25.7 |
) |
$ |
22.6 |
|
$ |
5.2 |
|
$ |
58.0 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
BASIC EPS |
|
|
|
|
|
|
|
|
| ||||
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
| ||||
|
NET (LOSS) INCOME |
|
$ |
(0.73 |
) |
$ |
0.64 |
|
$ |
0.15 |
|
$ |
1.64 |
|
|
Weighted average number of shares |
|
35.0 |
|
35.3 |
|
35.0 |
|
35.3 |
| ||||
|
DILUTED EPS |
|
|
|
|
|
|
|
|
| ||||
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
| ||||
|
NET (LOSS) INCOME |
|
$ |
(0.73 |
) |
$ |
0.64 |
|
$ |
0.15 |
|
$ |
1.64 |
|
|
Weighted average number of shares |
|
35.0 |
|
35.4 |
|
35.1 |
|
35.4 |
| ||||
|
Dividends declared per share |
|
$ |
0.17 |
|
$ |
0.15 |
|
$ |
0.49 |
|
$ |
0.43 |
|
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except share information)
(Unaudited)
|
|
|
September 27, |
|
December 31, |
| ||
|
|
|
2015 |
|
2014 |
| ||
|
ASSETS |
|
|
|
|
| ||
|
CURRENT ASSETS: |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
288.8 |
|
$ |
301.1 |
|
|
Trade accounts receivable, less allowance for doubtful accounts of $11.5 million at September 27, 2015 and $10.6 million at December 31, 2014 |
|
220.8 |
|
207.8 |
| ||
|
Inventories, net: |
|
|
|
|
| ||
|
Raw materials |
|
93.2 |
|
104.8 |
| ||
|
Work in process |
|
16.4 |
|
16.7 |
| ||
|
Finished goods |
|
144.7 |
|
170.1 |
| ||
|
Total Inventories |
|
254.3 |
|
291.6 |
| ||
|
Prepaid expenses and other assets |
|
32.8 |
|
27.4 |
| ||
|
Deferred income taxes |
|
54.4 |
|
45.3 |
| ||
|
Assets held for sale |
|
2.2 |
|
1.1 |
| ||
|
Total Current Assets |
|
853.3 |
|
874.3 |
| ||
|
PROPERTY, PLANT AND EQUIPMENT: |
|
|
|
|
| ||
|
Property, plant and equipment |
|
495.4 |
|
526.7 |
| ||
|
Accumulated depreciation |
|
(310.3 |
) |
(323.4 |
) | ||
|
Property, plant and equipment, net |
|
185.1 |
|
203.3 |
| ||
|
OTHER ASSETS: |
|
|
|
|
| ||
|
Goodwill |
|
613.9 |
|
639.0 |
| ||
|
Intangible assets, net |
|
189.6 |
|
210.1 |
| ||
|
Deferred income taxes |
|
4.5 |
|
4.7 |
| ||
|
Other, net |
|
11.9 |
|
16.6 |
| ||
|
TOTAL ASSETS |
|
$ |
1,858.3 |
|
$ |
1,948.0 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
|
CURRENT LIABILITIES: |
|
|
|
|
| ||
|
Accounts payable |
|
$ |
103.6 |
|
$ |
120.8 |
|
|
Accrued expenses and other liabilities |
|
141.9 |
|
138.8 |
| ||
|
Accrued pension plan settlements |
|
— |
|
40.0 |
| ||
|
Accrued compensation and benefits |
|
47.6 |
|
44.2 |
| ||
|
Current portion of long-term debt |
|
226.4 |
|
1.9 |
| ||
|
Total Current Liabilities |
|
519.5 |
|
345.7 |
| ||
|
LONG-TERM DEBT, NET OF CURRENT PORTION |
|
351.6 |
|
577.8 |
| ||
|
DEFERRED INCOME TAXES |
|
95.2 |
|
77.4 |
| ||
|
OTHER NONCURRENT LIABILITIES |
|
31.3 |
|
34.7 |
| ||
|
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: 28,162,869 shares at September 27, 2015 and 28,552,065 shares at December 31, 2014 |
|
2.8 |
|
2.9 |
| ||
|
Class B Common Stock, $0.10 par value; 25,000,000 shares authorized; 10 votes per share; issued and outstanding: 6,479,290 shares at September 27, 2015 and December 31, 2014 |
|
0.6 |
|
0.6 |
| ||
|
Additional paid-in capital |
|
508.3 |
|
497.4 |
| ||
|
Retained earnings |
|
454.5 |
|
500.6 |
| ||
|
Accumulated other comprehensive loss |
|
(105.5 |
) |
(89.1 |
) | ||
|
Total Stockholders’ Equity |
|
860.7 |
|
912.4 |
| ||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
1,858.3 |
|
$ |
1,948.0 |
|
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
|
|
|
Nine Months Ended |
| ||||
|
|
|
September 27, |
|
September 28, |
| ||
|
|
|
2015 |
|
2014 |
| ||
|
OPERATING ACTIVITIES |
|
|
|
|
| ||
|
Net income |
|
$ |
5.2 |
|
$ |
58.0 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
|
Depreciation |
|
23.8 |
|
24.7 |
| ||
|
Amortization of intangibles |
|
15.9 |
|
11.1 |
| ||
|
Loss on disposal and impairment of goodwill, property, plant and equipment and other |
|
1.6 |
|
0.1 |
| ||
|
Stock-based compensation |
|
7.7 |
|
6.0 |
| ||
|
Deferred income tax benefit |
|
(11.3 |
) |
1.1 |
| ||
|
Defined benefit plans settlement |
|
59.7 |
|
— |
| ||
|
Changes in operating assets and liabilities, net of effects from business acquisitions and divestures: |
|
|
|
|
| ||
|
Accounts receivable |
|
(20.0 |
) |
(18.5 |
) | ||
|
Inventories |
|
7.3 |
|
(5.3 |
) | ||
|
Prepaid expenses and other assets |
|
(5.3 |
) |
17.9 |
| ||
|
Accounts payable, accrued expenses and other liabilities |
|
(42.7 |
) |
(21.6 |
) | ||
|
Net cash provided by operating activities |
|
41.9 |
|
73.5 |
| ||
|
|
|
|
|
|
| ||
|
INVESTING ACTIVITIES |
|
|
|
|
| ||
|
Additions to property, plant and equipment |
|
(19.2 |
) |
(16.1 |
) | ||
|
Proceeds from the sale of property, plant and equipment |
|
0.1 |
|
0.4 |
| ||
|
Net proceeds from the sale of assets, and other |
|
33.8 |
|
— |
| ||
|
Net cash provided by (used in) investing activities |
|
14.7 |
|
(15.7 |
) | ||
|
|
|
|
|
|
| ||
|
FINANCING ACTIVITIES |
|
|
|
|
| ||
|
Payments of long-term debt |
|
(1.3 |
) |
(1.6 |
) | ||
|
Payments of capital leases and other |
|
(3.4 |
) |
(3.3 |
) | ||
|
Proceeds from share transactions under employee stock plans |
|
2.1 |
|
10.5 |
| ||
|
Tax benefit of stock awards exercised |
|
0.2 |
|
1.9 |
| ||
|
Payments to repurchase common stock |
|
(32.0 |
) |
(29.1 |
) | ||
|
Debt issuance costs |
|
— |
|
(2.0 |
) | ||
|
Dividends |
|
(17.2 |
) |
(15.2 |
) | ||
|
Net cash used in financing activities |
|
(51.6 |
) |
(38.8 |
) | ||
|
Effect of exchange rate changes on cash and cash equivalents |
|
(17.3 |
) |
(14.5 |
) | ||
|
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
(12.3 |
) |
4.5 |
| ||
|
Cash and cash equivalents at beginning of year |
|
301.1 |
|
267.9 |
| ||
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
288.8 |
|
$ |
272.4 |
|
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in millions)
(Unaudited)
Net Sales
|
|
|
Third Quarter Ended |
|
Nine Months Ended |
| ||||||||
|
|
|
September 27, 2015 |
|
September 28, 2014 |
|
September 27, 2015 |
|
September 28, 2014 |
| ||||
|
Americas* |
|
$ |
245.0 |
|
$ |
228.6 |
|
$ |
745.2 |
|
$ |
689.5 |
|
|
EMEA |
|
110.9 |
|
136.4 |
|
332.1 |
|
419.4 |
| ||||
|
Asia-Pacific |
|
10.4 |
|
11.0 |
|
32.1 |
|
28.3 |
| ||||
|
Total |
|
$ |
366.3 |
|
$ |
376.0 |
|
$ |
1,109.4 |
|
$ |
1,137.2 |
|
Operating Income (Loss)
|
|
|
Third Quarter Ended |
|
Nine Months Ended |
| ||||||||
|
|
|
September 27, 2015 |
|
September 28, 2014 |
|
September 27, 2015 |
|
September 28, 2014 |
| ||||
|
Americas* |
|
$ |
30.3 |
|
$ |
33.4 |
|
$ |
90.6 |
|
$ |
85.0 |
|
|
EMEA |
|
10.9 |
|
15.1 |
|
25.7 |
|
37.1 |
| ||||
|
Asia-Pacific |
|
1.2 |
|
1.7 |
|
0.9 |
|
4.7 |
| ||||
|
Corporate |
|
(72.6 |
) |
(7.5 |
) |
(89.8 |
) |
(21.7 |
) | ||||
|
Total |
|
$ |
(30.2 |
) |
$ |
42.7 |
|
$ |
27.4 |
|
$ |
105.1 |
|
Intersegment Sales
|
|
|
Third Quarter Ended |
|
Nine Months Ended |
| ||||||||
|
|
|
September 27, 2015 |
|
September 28, 2014 |
|
September 27, 2015 |
|
September 28, 2014 |
| ||||
|
Americas |
|
$ |
2.1 |
|
$ |
1.5 |
|
$ |
5.8 |
|
$ |
4.6 |
|
|
EMEA |
|
2.3 |
|
3.3 |
|
7.8 |
|
10.7 |
| ||||
|
Asia-Pacific |
|
27.9 |
|
36.5 |
|
91.0 |
|
116.9 |
| ||||
|
Total |
|
$ |
32.3 |
|
$ |
41.3 |
|
$ |
104.6 |
|
$ |
132.2 |
|
*Americas third quarter and first nine months 2015 results include the AERCO acquisition
Key Performance Indicators and Non-GAAP Measures
In this press release we refer to non-GAAP financial measures (including adjusted operating income, adjusted operating income excluding the AERCO acquisition, adjusted operating margins, adjusted operating margins excluding the AERCO acquisition, adjusted net income, adjusted earnings per share, adjusted earnings per share excluding the AERCO acquisition, free cash flow, free cash flow excluding long-term liability settlements, net debt to capitalization ratio and the cash conversion rate of free cash flow to net income) 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 and adjusted earnings per share eliminate certain expenses incurred in the periods presented that relate primarily to our global restructuring programs, deployment costs, acquisition costs, purchase accounting adjustments, Defined Benefit Plans settlement and related tax benefits. Adjusted operating income, operating margins and earnings per share excluding the AERCO acquisition eliminate the acquisition results from our consolidated results since the date of acquisition. 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, free cash flow excluding long-term liability settlements, 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 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.
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
|
|
|
Third Quarter Ended |
|
Nine Months Ended |
| ||||||||
|
|
|
September 27, |
|
September 28, |
|
September 27, |
|
September 28, |
| ||||
|
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net sales |
|
$ |
366.3 |
|
$ |
376.0 |
|
$ |
1,109.4 |
|
$ |
1,137.2 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Operating (loss) income - as reported |
|
$ |
(30.2 |
) |
$ |
42.7 |
|
$ |
27.4 |
|
$ |
105.1 |
|
|
Operating margin % |
|
-8.2 |
% |
11.4 |
% |
2.5 |
% |
9.2 |
% | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Adjustments for special items: |
|
|
|
|
|
|
|
|
| ||||
|
Acquisition related costs |
|
|
|
|
|
|
|
|
| ||||
|
- Acquisition costs |
|
— |
|
— |
|
0.2 |
|
— |
| ||||
|
- Purchase accounting adjustment |
|
— |
|
— |
|
0.9 |
|
— |
| ||||
|
|
|
— |
|
— |
|
1.1 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Restructuring |
|
5.8 |
|
0.4 |
|
12.5 |
|
7.2 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
EMEA & Americas transformation costs |
|
1.4 |
|
0.7 |
|
7.3 |
|
5.8 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Long-term obligation settlements |
|
64.7 |
|
— |
|
64.7 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total adjustments for special items |
|
$ |
71.9 |
|
$ |
1.1 |
|
$ |
85.6 |
|
$ |
13.0 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Operating income - as adjusted |
|
$ |
41.7 |
|
$ |
43.8 |
|
$ |
113.0 |
|
$ |
118.1 |
|
|
Adjusted operating margin % |
|
11.4 |
% |
11.6 |
% |
10.2 |
% |
10.4 |
% | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net (loss) income - as reported |
|
$ |
(25.7 |
) |
$ |
22.6 |
|
$ |
5.2 |
|
$ |
58.0 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Adjustments for special items - tax affected: |
|
|
|
|
|
|
|
|
| ||||
|
Acquisition related costs |
|
|
|
|
|
|
|
|
| ||||
|
- Acquisition costs |
|
— |
|
— |
|
0.1 |
|
— |
| ||||
|
- Purchase accounting adjustment |
|
— |
|
— |
|
0.6 |
|
— |
| ||||
|
|
|
— |
|
— |
|
0.7 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Restructuring |
|
3.6 |
|
0.3 |
|
8.3 |
|
4.8 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
EMEA & Americas transformation costs |
|
1.1 |
|
0.5 |
|
5.0 |
|
4.2 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Long-term obligation settlements |
|
44.6 |
|
— |
|
44.6 |
|
— |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
European tax adjustments |
|
— |
|
1.3 |
|
— |
|
1.3 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total adjustments for special items - tax affected: |
|
$ |
49.3 |
|
$ |
2.1 |
|
$ |
58.6 |
|
$ |
10.3 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income - as adjusted |
|
$ |
23.6 |
|
$ |
24.7 |
|
$ |
63.8 |
|
$ |
68.3 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted (loss) earnings per share - as reported |
|
$ |
(0.73 |
) |
$ |
0.64 |
|
$ |
0.15 |
|
$ |
1.64 |
|
|
Adjustments for special items |
|
1.40 |
|
0.06 |
|
1.66 |
|
0.30 |
| ||||
|
Diluted earnings per share - as adjusted |
|
$ |
0.67 |
|
$ |
0.70 |
|
$ |
1.81 |
|
$ |
1.94 |
|
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)
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Third Quarter Ended |
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Third Quarter Ended |
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September 27, 2015 |
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September 28, 2014 |
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Americas |
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EMEA |
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Asia- |
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Corporate |
|
Total |
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Americas |
|
EMEA |
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Asia- |
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Corporate |
|
Total |
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Net sales |
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$ |
245.0 |
|
110.9 |
|
10.4 |
|
— |
|
366.3 |
|
$ |
228.6 |
|
136.4 |
|
11.0 |
|
— |
|
376.0 |
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Operating income (loss) - as reported |
|
$ |
30.3 |
|
10.9 |
|
1.2 |
|
(72.6 |
) |
(30.2 |
) |
$ |
33.4 |
|
15.1 |
|
1.7 |
|
(7.5 |
) |
42.7 |
|
|
Operating margin % |
|
12.4 |
% |
9.8 |
% |
11.5 |
% |
|
|
-8.2 |
% |
14.6 |
% |
11.1 |
% |
15.5 |
% |
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|
11.4 |
% | ||
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Adjustments for special items |
|
$ |
5.6 |
|
1.1 |
|
0.5 |
|
64.7 |
|
71.9 |
|
$ |
— |
|
1.1 |
|
— |
|
— |
|
1.1 |
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Operating income (loss) - as adjusted |
|
$ |
35.9 |
|
12.0 |
|
1.7 |
|
(7.9 |
) |
41.7 |
|
$ |
33.4 |
|
16.2 |
|
1.7 |
|
(7.5 |
) |
43.8 |
|
|
Adjusted operating margin % |
|
14.7 |
% |
10.8 |
% |
16.3 |
% |
|
|
11.4 |
% |
14.6 |
% |
11.9 |
% |
15.5 |
% |
|
|
11.6 |
% | ||
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|
|
Nine Months Ended |
|
Nine Months Ended |
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September 27, 2015 |
|
September 28, 2014 |
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|
|
Americas |
|
EMEA |
|
Asia- |
|
Corporate |
|
Total |
|
Americas |
|
EMEA |
|
Asia- |
|
Corporate |
|
Total |
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|
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|
|
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|
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Net sales |
|
$ |
745.2 |
|
332.1 |
|
32.1 |
|
— |
|
1,109.4 |
|
$ |
689.5 |
|
419.4 |
|
28.3 |
|
— |
|
1,137.2 |
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Operating income (loss) - as reported |
|
$ |
90.6 |
|
25.7 |
|
0.9 |
|
(89.8 |
) |
27.4 |
|
$ |
85.0 |
|
37.1 |
|
4.7 |
|
(21.7 |
) |
105.1 |
|
|
Operating margin % |
|
12.2 |
% |
7.7 |
% |
2.8 |
% |
|
|
2.5 |
% |
12.3 |
% |
8.8 |
% |
16.6 |
% |
|
|
9.2 |
% | ||
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Adjustments for special items |
|
$ |
11.8 |
|
5.1 |
|
3.9 |
|
64.8 |
|
85.6 |
|
$ |
2.3 |
|
9.9 |
|
— |
|
0.8 |
|
13.0 |
|
|
|
|
|
|
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|
|
|
|
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Operating income (loss) - as adjusted |
|
$ |
102.4 |
|
30.8 |
|
4.8 |
|
(25.0 |
) |
113.0 |
|
$ |
87.3 |
|
47.0 |
|
4.7 |
|
(20.9 |
) |
118.1 |
|
|
Adjusted operating margin % |
|
13.7 |
% |
9.3 |
% |
15.0 |
% |
|
|
10.2 |
% |
12.7 |
% |
11.2 |
% |
16.6 |
% |
|
|
10.4 |
% | ||
TABLE 3
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH
FLOW AND ADJUSTED FREE CASH FLOW
(Amounts in millions)
(Unaudited)
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|
Nine Months Ended |
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|
|
September 27, |
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September 28, |
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|
2015 |
|
2014 |
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Net cash provided by operating activities - as reported |
|
$ |
41.9 |
|
$ |
73.5 |
|
|
Less: additions to property, plant, and equipment |
|
(19.2 |
) |
(16.1 |
) | ||
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Plus: proceeds from the sale of property, plant, and equipment |
|
0.1 |
|
0.4 |
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Free cash flow |
|
$ |
22.8 |
|
$ |
57.8 |
|
|
|
|
|
|
|
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Net income - as reported |
|
$ |
5.2 |
|
$ |
58.0 |
|
|
|
|
|
|
|
| ||
|
Cash conversion rate of free cash flow to net income |
|
438.5 |
% |
99.7 |
% | ||
|
|
|
|
|
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|
Free cash flow |
|
$ |
22.8 |
|
$ |
57.8 |
|
|
Plus: payments made on long-term obligations |
|
49.2 |
|
— |
| ||
|
Free cash flow - as adjusted |
|
$ |
72.0 |
|
$ |
57.8 |
|
TABLE 4
RECONCILIATION OF LONG-TERM DEBT (INCLUDING CURRENT PORTION) TO NET DEBT
AND NET DEBT TO CAPITALIZATION RATIO
(Amounts in millions)
(Unaudited)
|
|
|
September 27, |
|
December 31, |
| ||
|
|
|
2015 |
|
2014 |
| ||
|
|
|
|
|
|
| ||
|
Current portion of long-term debt |
|
$ |
226.4 |
|
$ |
1.9 |
|
|
Plus: Long-term debt, net of current portion |
|
351.6 |
|
577.8 |
| ||
|
Less: Cash and cash equivalents |
|
(288.8 |
) |
(301.1 |
) | ||
|
Net debt |
|
$ |
289.2 |
|
$ |
278.6 |
|
|
|
|
|
|
|
| ||
|
Net debt |
|
$ |
289.2 |
|
$ |
278.6 |
|
|
Plus: Total stockholders’ equity |
|
860.7 |
|
912.4 |
| ||
|
Capitalization |
|
$ |
1,149.9 |
|
$ |
1,191.0 |
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|
|
|
|
|
|
| ||
|
Net debt to capitalization ratio |
|
25.2 |
% |
23.4 |
% | ||