Segment Information

12 Months Ended

Dec. 31, 2017

Segment Information

Segment Information

(17) Segment Information

The Company operates in three geographic segments: Americas, Europe, and APMEA. Each of these segments sells similar products and has separate financial results that are reviewed by the Company’s chief operating decision‑maker. Each segment earns revenue and income almost exclusively from the sale of our products. The Company sells its products into various end markets around the world with sales by region based upon location of the entity recording the sale. Products are sold into four product categories: 1) residential & commercial flow control products, 2) HVAC & gas products, 3) drainage and water re-use products, and 4) water quality products. The Americas sells products across all four product categories, Europe primarily sells residential & commercial flow products, HVAC & gas products, and drainage products, and APMEA primarily sells residential & commercial flow products and HVAC & gas products. All intercompany sales transactions have been eliminated. The accounting policies for each segment are the same as those described in the summary of significant accounting policies (see Note 2).

As of January 1, 2017, the Company began reporting the results of Watts Middle East as part of the Company’s former Asia-Pacific segment, which is now referred to as APMEA. Watts Middle East had previously been reported within the former EMEA segment, which is now referred to as Europe. This change in segment composition aligns with the structure of the Company’s internal organization and did not result in a material change to previously reported segment information. The 2016 and 2015 results by segment have been retrospectively revised for comparative purposes.

The following is a summary of the Company’s significant accounts and balances by segment, reconciled to its consolidated totals:

	Year Ended December 31,
	2017		2016		2015
	(in millions)
Net Sales
Americas	$	951.9	$	900.9	$	978.5
Europe		440.3		431.3		436.0
APMEA		64.5		66.2		53.2
Consolidated net sales	$	1,456.7	$	1,398.4	$	1,467.7
Operating income (loss)
Americas	$	146.8	$	127.1	$	109.9
Europe(**)		47.6		40.0		(99.6)
APMEA(***)		4.7		15.1		0.5
Subtotal reportable segments		199.1		182.2		10.8
Corporate(*)		(36.8)		(37.2)		(100.9)
Consolidated operating income (loss)		162.3		145.0		(90.1)
Interest income		(1.0)		(1.0)		(1.0)
Interest expense		19.1		22.6		24.3
Other expense (income), net		1.1		(4.4)		(2.4)
Income (loss) before income taxes	$	143.1	$	127.8	$	(111.0)
Capital Expenditures
Americas	$	20.7	$	25.7	$	19.0
Europe		8.0		8.9		7.5
APMEA		0.7		1.4		1.2
Consolidated capital expenditures	$	29.4	$	36.0	$	27.7
Depreciation and Amortization
Americas	$	30.8	$	28.8	$	29.0
Europe		18.6		19.3		21.0
APMEA		2.8		3.1		2.4
Consolidated depreciation and amortization	$	52.2	$	51.2	$	52.4
Identifiable assets (at end of period)
Americas	$	1,069.2	$	1,054.7	$	969.6
Europe		524.0		577.3		602.2
APMEA		143.3		131.2		119.0
Consolidated identifiable assets	$	1,736.5	$	1,763.2	$	1,690.8
Property, plant and equipment, net (at end of period)
Americas	$	109.3	$	106.2	$	88.6
Europe		82.1		75.6		82.2
APMEA		7.1		7.9		13.6
Consolidated property, plant and equipment, net	$	198.5	$	189.7	$	184.4

*     Corporate expenses are primarily for administrative compensation expense, compliance costs, professional fees, including corporate-related legal and audit expenses, shareholder services and benefit administration costs. Included in Corporate’s operating loss for 2015 is a $59.7 million charge related to the Company’s settlement of its Pension Plan and SERP benefit obligations. Refer to Note 14 “Employee Benefit Plans” for further discussion.

**   Included in Europe’s operating loss for 2015 is a $129.7 million charge related to goodwill impairment of the Europe reporting unit. Refer to Note 6 “Goodwill and Intangibles” for further discussion.

*** Included in APMEA’s operating income for 2016 is $8.7 million gain related to the sale of an operating subsidiary in China. Refer to Note 4 “Sale of Business” for further discussion.

The following includes U.S. net sales and U.S. property, plant and equipment of the Company’s Americas segment:

	December 31,
	2017		2016		2015
	(in millions)
U.S. net sales	$	886.2	$	839.2	$	909.2
U.S. property, plant and equipment, net (at end of year)	$	105.1	$	102.5	$	85.2

The following includes intersegment sales for Americas, Europe and APMEA:

	December 31,
	2017		2016		2015
	(in millions)
Intersegment Sales
Americas	$	12.1	$	12.0	$	8.2
Europe		14.6		12.3		10.5
APMEA		69.7		76.7		110.0
Intersegment sales	$	96.4	$	101.0	$	128.7

The Company sells its products into various end markets around the world and groups net sales to third parties into four product categories. Net sales to third parties for the four product categories are as follows:

	Year Ended December 31,
	2017		2016		2015
	(in millions)
Net Sales
Residential & commercial flow control	$	758.9	$	779.2	$	831.1
HVAC & gas		472.4		408.1		425.1
Drains & water re-use		145.4		132.3		131.0
Water quality		80.0		78.8		80.5
Consolidated net sales	$	1,456.7	$	1,398.4	$	1,467.7