Post on 31-Mar-2019
WATTS WATER TECHNOLOGIES, INC.
CORPORATE PRESENTATIONCORPORATE PRESENTATION
2009
0
Forward-looking statementsForward looking statements
Certain statements in this presentation constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are related to forecasts of sales, earnings, earnings per share, water market growth, management goals and objectives.
Watts cautions investors that any such forward-looking statements made by Watts are not guarantees of future performance. All forward-looking statements are subject to known and g p g junknown risks, uncertainties and contingencies, many that are beyond the control of Watts, which may cause actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implies by the forward-looking statements.
Factors that might affect forward-looking statements include overall economics and business conditions, competitive factors, changes in laws affecting Watts, future acquisitions of material assets or businesses by Watts, the demand for Watts’ products and services and other factors identified in Watts’ most recent Annual Report on Form 10-K and subsequent reports filed with the SECreports filed with the SEC.
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Watts overview – who we areW tt i l d i t l t d d tWatts is a leader in water-related products
$1.5bn in sales for 2008
$64.8mm in income from operations for 2008 (excluding restructuring and goodwill ( g g gimpairment)
$47.2mm in income from operations for 2008 (GAAP)
Mix split between residential and commercialMix split between residential and commercial
45% of sales currently outside of U.S.
Replacement business significant
1874
Today
Sales in over 100
1985 19991986 1996$124MSales: $137M $730M including municipal
$644M l di i i l$800M pre-spin$475M i1874
Founded First Acquisition
Initial Public Offering
Focus on water
Sales in over 100 countries
Manufacturing in 11 countries
6,300 employees
Exited municipal market
$644M excluding municipal $475M post-spin
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6, p y
BATHROOMThermostatic Tempering Valves for Tubs, Showers and SinksElectric Tile Warming
What we do - Water by Watts(Residential Applications)
gQuarter Turn Stop ValvesHot Water Demand Recirculation SystemsDecorative FaucetsBath Waste DrainsP-TrapsToilet Ball Cock Valves
KITCHENReverse Osmosis Water Filtration SystemsThermostatic Mixing ValvesElectric Tile Warming Toilet Ball Cock Valves
LAUNDRY ROOMWashing Machine Shutoff ValvesW t H A t
gFlexible Connectors for Faucets, Dishwashers and Ice MakersIce Maker Filtration SystemsQuarter Turn Stop ValvesMetal & Plastic Tubular Products Water Hammer Arrestors
Flexible Connectors for Faucets and Washing MachinesGas Ball Valves
Products
RADIANT HEAT PRODUCTSRadiant Underfloor Heating S t
BOILERTemperature and Pressure GaugesTempering ValvesSafety Relief ValvesSystems
SnowmeltingElectronic Temperature Controls Quick Connect Fittings
WATER HEATER
Safety Relief ValvesFill ValvesBackflow PreventersBoiler DrainsAir SeparatorsFlow Control ValvesP V l
Hydrocontrol PanelsPEX TubingManifolds
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T&P Relief ValvesTempering ValvesPressure Reducing ValvesExpansion TanksWater Detector Shutoffs
Backflow PreventersBall ValvesDrain TubesFloor DrainsGas Connectors
Purge ValvesFloat Vents
HVAC SYSTEMBalancing ValvesFeed Water RegulatorsBackflow PreventersR di t U d fl H ti
ManifoldsElectronic Temperature ControlsSafety Relief Valves
What we do - Water by Watts(Commercial Applications)
Radiant Underfloor Heating SystemsRadiant Snowmelting SystemsHydrocontrol PanelsPEX Plumbing System
WASTEWATER (DRAINAGE) SYSTEMRoof DrainsFloor DrainsTrench Drains
CleanoutsInterceptorsHydrants
Safety Relief ValvesAutomatic Air Vent ValvesExpansion TanksTempering ValvesFlow SwitchesGauges &
IRRIGATION SYSTEMBackflow Preventers
Fixture CarriersAcid Waste Systems
yThermometersSteam TrapsStrainersGas Connectors
FOOD SERVICE APPLICATIONSBackflow PreventersBackflow EnclosuresAutomatic Control ValvesThrough-the-Wall ShutoffsBall Valves
Movable Gas ConnectorsWater Filtration SystemsInternal Fluid Conveyance AssembliesGas and Water Shutoff ValvesCommercial FaucetsM t l & Pl ti T b l P tButterfly Valves
Relief ValvesWater Pressure Reducing Valves
Metal & Plastic Tubular PartsGas RegulatorsThermostatic Mixing ValvesGrease InterceptorsFloat ValvesEquipment Placement Systems
FIRE PROTECTION SYSTEMBackflow PreventersTransition Risers
UL/FM Fire Service StrainersAutomatic Control Valves Pre-Engineered Valve Stations
POTABLE WATER SYSTEMGas ConnectorsPEX Plumbing SystemsReverse Osmosis WaterFiltration System
Ball ValvesT&P Relief ValvesTempering ValvesWater ConnectorsShower Valves
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gRelief ValvesCheck ValvesGate Valves
Water SoftenersBackflow PreventersPre-Engineered Valve StationsWater Pressure Reducing ValvesGate, Globe & Check Valves
Monitoring and Turbidity MonitorsStrainersButterfly ValvesAnti-Scale Systems
Pure play global leader in water
Why invest in Watts?
Highly attractive market fundamentals in waterIncreasing energy costs are a revenue driver
Attractive franchiseLeading brands in growing categoriesComprehensive product offering and distribution capabilitySignificant recurring revenue streamLow cost/Lean manufacturing strategyLow cost/Lean manufacturing strategy
Strong growth storyProven industry consolidatorIncreasing international and emerging market presenceIncreasing international and emerging market presenceSuccess in code development and enforcementCapital structure provides stabilityCash flow supports growth
Solid foundation
Diversified business model provides stable platform for growth
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Large and attractive market
Demand for water growing at 3x population growth and will grow by 40% by 2020
Current global market size $365bn+ Key market growth drivers
Components/
Equipment
Purification/
FiltrationSystems Services Operations
growth and will grow by 40% by 2020
Increasing requirements for energy and water conservation
Alternative fuels to heat water require Watts’
Municipal
Alternative fuels to heat water require Watts technology
Increasingly stringent industry codes and potential for legislative action
Industrial
Asian infrastructure inadequate to support growing population and economic development
Residential filtration market already estimated at ~$1.25 billion with solid long-term growth
Commercial
Residential $ g g
New drain platform in Europe
Watts addressable market > $60 billion
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Brand Leverage
Brand
Premium brands allow for premium pricing and input cost recapture
D l l d i Develop complementary products in existing markets
Brand name expansion to new markets through acquisitions
P dProducts
Unparalleled product breadth
Long-standing tradition of product quality
I ti d t d ig
Codes
Innovative product design
Focus on meeting local code requirements
Promote code adoption and enforcement to create entry barriers
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Global distribution capability with limited customer concentration
ChinaNorth American RetailNorth American
concentration
China$37mm/3%
North American Retail$167mm/12%
Wholesale$639mm/46%
European OEM$228mm/16%
European Wholesale$298mm/22%
European DIY$18mm/1%
8Fourth quarter 2008 annualized
Global Manufacturing Footprint
Substantial presence in low cost regions
Implementing Lean techniques
Plant consolidationsPlant consolidations
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Watts is uniquely placed to successfully capitalize on industry trendsindustry trends
Industry trends Watts advantage
Disciplined acquisition strategy with proven track record
Consolidation of manufacturers
C lid ti f N th A i Consolidation of North American Wholesalers/European OEM customers
Broadest product line with most effective distribution capabilities
Expanding footprint in high growth Growth in emerging markets
Expanding footprint in high growth Chinese and Eastern European markets
Renewable energy
Volatile commodity costs
Robust existing product offering
Manufacturing strategy/aggressive cost reductions/price increases
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cost reductions/price increases
Expanding installed base supports replacement business
119.6 124.5 128.2
U.S. Housing Stock (millions of units)
68.7
88.4102.3
1970 1980 1990 2000 2005 20071970 1980 1990 2000 2005 2007
Source: HUD
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We have been highly successful in promoting industry code de elopment and ed cationcode development and education
Consistently advocate development and enforcement of industry codes
Industry codes based on Watts product specifications create a significant growth opportunity and barrier to market entry
Approximately 66% of sales are derived Approximately 66% of sales are derived from code approved products
Efforts include thermostatic scald protection in the American Society of S it E i ASSE 1069/1070Sanitary Engineers ASSE 1069/1070
Subsequent adoption into national and state codes
Recently included in the Recommended Backflow Product List prepared by the Chinese National Backflow Standards Committee
U.S. Pex codes
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Watts has successfully acquired and integrated 48 companies since 1987companies since 1987
Acquisition strategyDisciplined acquisition criteria
Business logic
“Water by Watts”
Proprietary brand namesNew Technologies
Geographic Expansion
Proprietary brand names
Entry into new markets
Product line expansionCore water
Product AdjacenciesHunter
Technologies(2002)
H.F. Scientific
(2005)Changsha
Financial
Accretive to EPS Year 1
CFROI in mid-teens Year 1
products
Premier WaterSystems (2001)
Flowmatic(2004)Dormont
(2005)
Changsha Valve(2006)
CFROI in mid teens Year 1
EVA positive in Year 2+
Systems (2001)
ATS Expansion(2006)
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(2006)
BLÜCHER
Revenue 2007 $89M$ 9
Purchase Price - $170M
Accretion in year 2 $0 20 / shareAccretion in year 2 - $0.20 / share
Blucher offers the broadest range of stainless steel drainage systems in Europe
New platform for Watts in Europe
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BLÜCHER
Growth Strategy
Geographic expansion
New products
Leverage specification opportunitiesopportunities
Fragmented market
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BLÜCHER
M k t S dMarkets Served
Housing 25%
Commercial 25%
Marine 20%
Industrial 30%
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Our diversified business model
Geography
Chi 3%
Products
Based on 2008 Sales
China 3%
Specialty Plumbing &
Heating
DIY
Water Quality 54%54%
17%17%
13%13%Europe37%37%
5%5%
Canada
U.S.A.General Plumbing
Quality 54%54%
16%16%55%55%
CustomerDistribution channel
22%22% Wholesale
OEM
20%20%
Top 10
65%65%13%13%
W olesale
DIY
20%20%
80%80%Other
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Watts has an enviable track record of consistent revenue growth
$1 231
$1,382$1,459Fiscal year; $ millions
$1,231
$924
$825
$702$616
$549$549$516$522
$478$445 (1)$450$414$373
1995 1996 1997 1998 1999 1999.5 2000 2001 2002 2003 2004 2005 2006 2007 2008
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1 Includes impact of two divestitures completed in 1997
Note: 1997-1999 shown of fiscal year ending June 30; 1999.5 represents an annualized 1st half 1999 for illustrative purposes; 2000-2008 as calendar year basis
Sales
Financial ResultsIncome from Continuing Operations
(in millions) (Excluding restructuring and goodwill impairment)(in millions)
$83
$1,231
$1,382$1,459
$76
$65
2006 2007 2008 2006 2007 2008
Income from Continuing Operations(GAAP)
(in millions)
$77 $78
$47
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2006 2007 2008
Capital Structure
12/31/08 12/31/07
Cash $165 6 $290 3Cash $165.6 $290.3
Revolving Line of Credit 55.0 81.8
Other Long Term Debt 359 3 351 7Other Long Term Debt 359.3 351.7
Equity 842.4 915.5
Net Debt to Capitalization 22.8% 13.5%
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Cash Flow
12/31/08 12/31/07
Cash from Operations $146.4 $91.7
Net Capital Expenditures (25.5) (37.2)
Free Cash Flow $120.9 $54.5
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Why invest in Watts?
Pure-play opportunity in attractive water market
Conservative capital structure
Well positioned to benefit from:
Water market stabilityEmerging marketsRenewable energy
Strong track record of delivering growth
Stable, diversified business
Leader in industry
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consolidation
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