UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
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
WATTS WATER TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or | (I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) | (Zip Code) |
(
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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 reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ☐ | ||
Non-accelerated filer ☐ | Smaller reporting company Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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 July 24, 2022 | |
Class A Common Stock, $0.10 par value | ||
Class B Common Stock, $0.10 par value |
1
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
| 3 | ||
3 | |||
Consolidated Balance Sheets at June 26, 2022 and December 31, 2021 (unaudited) | 3 | ||
4 | |||
5 | |||
6 | |||
8 | |||
9 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | ||
33 | |||
33 | |||
34 | |||
34 | |||
34 | |||
35 | |||
36 | |||
37 | |||
2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except share information)
(Unaudited)
June 26, | December 31, | |||||
| 2022 |
| 2021 | |||
ASSETS |
| |||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Trade accounts receivable, less reserve allowances of $ |
| |
| | ||
Raw materials | | | ||||
Work in process | | | ||||
Finished goods | | | ||||
Total Inventories | | | ||||
Prepaid expenses and other current assets |
| |
| | ||
Total Current Assets |
| |
| | ||
PROPERTY, PLANT AND EQUIPMENT |
|
| ||||
Property, plant and equipment, at cost | | | ||||
Accumulated depreciation | ( | ( | ||||
Property, plant and equipment, net | | | ||||
OTHER ASSETS: | ||||||
Goodwill |
| |
| | ||
Intangible assets, net |
| |
| | ||
Deferred income taxes |
| |
| | ||
Other, net |
| |
| | ||
TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses and other liabilities |
| |
| | ||
Accrued compensation and benefits |
| |
| | ||
Total Current Liabilities |
| |
| | ||
LONG-TERM DEBT |
| |
| | ||
DEFERRED INCOME TAXES |
| |
| | ||
OTHER NONCURRENT LIABILITIES |
| |
| | ||
STOCKHOLDERS’ EQUITY: | ||||||
Preferred Stock, $ |
|
| ||||
Class A common stock, $ |
| |
| | ||
Class B common stock, $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Retained earnings |
| |
| | ||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Total Stockholders’ Equity |
| |
| | ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | | $ | | ||
See accompanying notes to consolidated financial statements.
3
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in millions, except per share information)
(Unaudited)
Second Quarter Ended | Six Months Ended | ||||||||||||
June 26, | June 27, | June 26, | June 27, | ||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| |||||
Net sales | $ | | $ | | $ | | $ | | |||||
Cost of goods sold |
| |
| |
| |
| | |||||
GROSS PROFIT |
| |
| |
| |
| | |||||
Selling, general and administrative expenses |
| |
| |
| |
| | |||||
Restructuring |
| |
| |
| |
| | |||||
OPERATING INCOME |
| |
| |
| |
| | |||||
Other (income) expense: | |||||||||||||
Interest income |
| — |
| — |
| ( |
| — | |||||
Interest expense |
| |
| |
| |
| | |||||
Other (income) expense, net |
| — |
| ( |
| |
| ( | |||||
Total other expense |
| |
| |
| |
| | |||||
INCOME BEFORE INCOME TAXES |
| |
| |
| |
| | |||||
Provision for income taxes |
| |
| |
| |
| | |||||
NET INCOME | $ | | $ | | $ | | $ | | |||||
Basic EPS | |||||||||||||
NET INCOME PER SHARE | $ | | $ | | $ | | $ | | |||||
Weighted average number of shares |
| |
| |
| |
| | |||||
Diluted EPS | |||||||||||||
NET INCOME PER SHARE | $ | | $ | | $ | | $ | | |||||
Weighted average number of shares |
| |
| |
| |
| | |||||
Dividends declared per share | $ | | $ | | $ | | $ | | |||||
See accompanying notes to consolidated financial statements.
4
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
(Unaudited)
| Second Quarter Ended |
| Six Months Ended |
| |||||||||
June 26, | June 27, | June 26, | June 27, | ||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| |||||
Net income | $ | | $ | | $ | | $ | | |||||
Other comprehensive (loss) gain net of tax: | |||||||||||||
Foreign currency translation adjustments |
| ( |
| |
| ( |
| ( | |||||
Cash flow hedges | | ( | | ( | |||||||||
Other comprehensive (loss) gain |
| ( |
| |
| ( |
| ( | |||||
Comprehensive income | $ | | $ | | $ | | $ | | |||||
See accompanying notes to consolidated financial statements.
5
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in millions)
(Unaudited)
Accumulated | ||||||||||||||||||||||
Class A | Class B | Additional | Other | Total | ||||||||||||||||||
(For the six months ended | Common Stock | Common Stock | Paid-In | Retained | Comprehensive | Stockholders’ | ||||||||||||||||
June 26, 2022) |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Earnings |
| Loss |
| Equity | ||||||
Balance at December 31, 2021 |
| | $ | |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( | ( | ||||||||||||||
Comprehensive income | | |||||||||||||||||||||
Shares of Class A common stock issued upon the exercise of stock options |
| | — | — | — | | — | — | | |||||||||||||
Stock-based compensation |
| — | — | — | — | | — | — | | |||||||||||||
Stock repurchase |
| ( | ( | — | — | — | ( | — | ( | |||||||||||||
Net change in restricted and performance stock units | | — | — | — | | ( | — | ( | ||||||||||||||
Common stock dividends | — | — | — | — | — | ( | — | ( | ||||||||||||||
Balance at June 26, 2022 |
| | $ | |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
Accumulated | ||||||||||||||||||||||
Class A | Class B | Additional | Other | Total | ||||||||||||||||||
(For the second quarter ended | Common Stock | Common Stock | Paid-In | Retained | Comprehensive | Stockholders’ | ||||||||||||||||
June 26, 2022) |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Earnings |
| Loss |
| Equity | ||||||
Balance at March 27, 2022 |
| | $ | |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( | ( | ||||||||||||||
Comprehensive income | | |||||||||||||||||||||
Shares of Class A common stock issued upon the exercise of stock options | — | — | — | — | | — | — | | ||||||||||||||
Stock-based compensation |
| — | — | — | — | | — | — | | |||||||||||||
Stock repurchase |
| ( | — | — | — | — | ( | — | ( | |||||||||||||
Net change in restricted and performance stock units | | — | — | — | — | ( | — | ( | ||||||||||||||
Common stock dividends | — | — | — | — | — | ( | — | ( | ||||||||||||||
Balance at June 26, 2022 |
| | $ | |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
6
Accumulated | ||||||||||||||||||||||
Class A | Class B | Additional | Other | Total | ||||||||||||||||||
(For the six months ended | Common Stock | Common Stock | Paid-In | Retained | Comprehensive | Stockholders’ | ||||||||||||||||
June 27, 2021) |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Earnings |
| Loss |
| Equity | ||||||
Balance at December 31, 2020 |
| | $ | |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | ( | ( | ||||||||||||||
Comprehensive income | | |||||||||||||||||||||
Shares of Class B common stock converted to Class A common stock | | — | ( | — | — | — | — | — | ||||||||||||||
Shares of Class A common stock issued upon the exercise of stock options | | — | — | — | — | — | — | — | ||||||||||||||
Stock-based compensation | — | — | — | — | | — | — | | ||||||||||||||
Stock repurchase | ( | — | — | — | — | ( | — | ( | ||||||||||||||
Net change in restricted and performance stock units | | — | — | — | | ( | — | ( | ||||||||||||||
Common stock dividends | — | — | — | — | — | ( | — | ( | ||||||||||||||
Balance at June 27, 2021 | | $ | | | $ | | $ | | $ | | $ | ( | $ | | ||||||||
Accumulated | ||||||||||||||||||||||
Class A | Class B | Additional | Other | Total | ||||||||||||||||||
(For the second quarter ended | Common Stock | Common Stock | Paid-In | Retained | Comprehensive | Stockholders’ | ||||||||||||||||
June 27, 2021) |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Earnings |
| Loss |
| Equity | ||||||
Balance at March 28, 2021 |
| | $ | |
| | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net income | — | — | — | — | — | | — | | ||||||||||||||
Other comprehensive income | — | — | — | — | — | — | | | ||||||||||||||
Comprehensive income | | |||||||||||||||||||||
Shares of Class B common stock converted to Class A common stock | | — | ( | — | — | — | — | — | ||||||||||||||
Shares of Class A common stock issued upon the exercise of stock options | | — | — | — | — | — | — | — | ||||||||||||||
Stock-based compensation | — | — | — | — | | — | — | | ||||||||||||||
Stock repurchase | ( | — | — | — | — | ( | — | ( | ||||||||||||||
Net change in restricted and performance stock units | ( | — | — | — | — | — | — | — | ||||||||||||||
Common stock dividends | — | — | — | — | — | ( | — | ( | ||||||||||||||
Balance at June 27, 2021 | | $ | | | $ | | $ | | $ | | $ | ( | $ | | ||||||||
See accompanying notes to consolidated financial statements.
7
WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
Six Months Ended | ||||||
June 26, | June 27, | |||||
| 2022 |
| 2021 | |||
OPERATING ACTIVITIES | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation |
| |
| | ||
Amortization of intangibles |
| |
| | ||
Loss on disposal and impairment of property, plant and equipment and other |
| |
| | ||
Stock-based compensation |
| |
| | ||
Deferred income tax |
| ( |
| ( | ||
Changes in operating assets and liabilities: | ||||||
Accounts receivable |
| ( |
| ( | ||
Inventories |
| ( |
| ( | ||
Prepaid expenses and other assets |
| ( |
| ( | ||
Accounts payable, accrued expenses and other liabilities |
| |
| | ||
Net cash provided by operating activities |
| |
| | ||
INVESTING ACTIVITIES | ||||||
Additions to property, plant and equipment |
| ( |
| ( | ||
Proceeds from the sale of property, plant and equipment |
| |
| | ||
Net cash used in investing activities |
| ( |
| ( | ||
FINANCING ACTIVITIES | ||||||
Proceeds from long-term borrowings | |
| ||||