-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WzN5MonlQbzs/aRrag4G3tPTnjasdQp+6yyNzCAxFF8mJoAk41dt23EYPux7MyvD P3xs8BEsjO2IODPcqddP8g== 0000795403-96-000013.txt : 19961115 0000795403-96-000013.hdr.sgml : 19961115 ACCESSION NUMBER: 0000795403-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATTS INDUSTRIES INC CENTRAL INDEX KEY: 0000795403 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [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: 001-11499 FILM NUMBER: 96661504 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 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 September 30, 1996 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 its charter) 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) (Zip Code) 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 reports), 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 October 31, 1996 - ------------------------------ ----------------------------- Class A Common, $.10 par value 15,796,638 Class B Common, $.10 par value 11,365,627 WATTS INDUSTRIES, INC. AND SUBSIDIARIES INDEX Part I. Financial Information Page # Item 1. Condensed Consolidated Balance Sheets 3 at September 30, 1996 and June 30, 1996. Condensed Consolidated Statements of 4 Earnings for the Three Months Ended September 30, 1996 and September 30, 1995. Condensed Consolidated Statements of 5 Cash Flows for the Three Months Ended September 30, 1996 and September 30, 1995. Notes to Condensed Consolidated 6,7, Financial Statements. 8,9, 10 Item 2. Management's Discussion and Analysis 11,12, of Financial Condition and Results of 13 Operations. Part II. Other Information Item 6. Exhibits and Reports on Form 8-K. 14 Signatures 15 Exhibit Index 16 Exhibit 11 - Computation of Per Share 17 Earnings. Exhibit 27 - Financial Data Schedule 18 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WATTS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share information) (Unaudited) Sept. 30, June 30, 1996 1996 _________ _________ CURRENT ASSETS Cash and cash equivalents....................$ 0 $ 0 Short-term investments....................... 0 0 Trade accounts receivable, less allowance for doubtful accounts of $8,129 and $8,822. 126,254 116,370 Inventories: Finished goods......................... 83,611 86,922 Work in process........................ 30,911 25,548 Raw materials.......................... 69,177 69,628 _________ _________ 183,699 182,098 Prepaid expenses and other assets............ 12,243 9,283 Deferred tax benefit......................... 21,123 24,662 Net assets held for sale .................... 0 78,401 _________ _________ Total Current Assets.................... 343,319 410,814 OTHER ASSETS Intangible assets, net....................... 6,147 6,248 Goodwill..................................... 80,128 79,489 Other........................................ 6,139 6,457 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at cost........ 267,239 260,328 Less allowance for depreciation............. (116,944) (112,378) _________ _________ 150,295 147,950 _________ _________ TOTAL ASSETS $ 586,028 $ 650,958 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable.............................$ 38,291 $ 46,022 Accrued expenses............................. 82,727 78,573 Accrued compensation and related items....... 8,087 7,756 Income taxes................................. 10,444 687 Current portion of long-term debt............ 2,860 2,907 _________ _________ Total Current Liabilities............... 142,409 135,945 LONG-TERM DEBT, less current portion............ 98,848 160,243 DEFERRED INCOME TAXES........................... 10,568 13,842 OTHER LIABILITIES............................... 10,053 10,291 MINORITY INTEREST............................... 11,192 11,054 STOCKHOLDERS' EQUITY Class A Common Stock, $.10 par value; 80,000,000 shares authorized, 16,168,138 shares issued and outstanding at Sept. 30, including shares in treasury................. 1,617 1,686 Class B Common Stock, $.10 par value; 25,000,000 shares authorized, 11,365,627 shares issued and outstanding at Sept. 30.... 1,136 1,136 Additional paid-in capital................... 55,385 67,930 Retained earnings............................ 263,121 249,415 Treasury Stock at cost - 431,500 shares at Sept. 30................................ (8,385) 0 Equity adjustment from translation........... 84 (584) _________ _________ Total Stockholders' Equity.............. 312,958 319,583 _________ _________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......$ 586,028 $ 650,958 ========= ========= See accompanying notes to condensed consolidated financial statements. WATTS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Amounts in thousands, except per share data) (Unaudited) Three Months Ended Sept. 30, Sept. 30, 1996 1995 _________ _________ Net sales ......................................$ 176,008 $ 154,129 Cost of goods sold ............................. 115,652 97,208 _________ _________ GROSS PROFIT ................................ 60,356 56,921 Selling, general & administrative expenses ..... 38,090 35,346 _________ _________ OPERATING EARNINGS ......................... 22,266 21,575 Other (income) expense: Interest income ............................. (99) (307) Interest expense ............................ 2,754 2,408 Other - net ................................. 189 603 _________ _________ 2,844 2,704 EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .............. 19,422 18,871 Income tax provision ........................... 7,076 7,207 _________ _________ EARNINGS FROM CONTINUING OPERATIONS .........$ 12,346 $ 11,664 EARNINGS FROM DISCONTINUED OPERATIONS ....... 79 470 GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS 3,208 0 _________ _________ NET EARNINGS.................................$ 15,633 $ 12,134 ========= ========= Primary and fully-diluted earnings per share : CONTINUING OPERATIONS ......................... $0.45 $0.39 DISCONTINUED OPERATIONS ....................... 0.00 0.02 GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS ... 0.12 0.00 _________ _________ NET EARNINGS .................................. $0.57 $0.41 ========= ========= Cash dividends per share.......................... $ .0700 $ .0625 See accompanying notes to condensed consolidated financial statements. WATTS INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Three Months Ended Sept. 30, Sept. 30, 1996 1995 _________ _________ OPERATING ACTIVITIES Net earnings from continuing operations $ 12,346 $ 11,664 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 5,618 6,028 Provision (benefit) for deferred income taxes 255 (1,160) Loss (gain) on disposal of fixed assets (41) 54 Changes in operating assets and liabilities, net of effects from business acquisitions and discontinued operations: Accounts receivable (9,641) (9,187) Inventories (961) (4,472) Prepaid expenses and other assets (2,593) (4,671) Accounts payable and accrued expenses (3,451) 9,822 _________ _________ 1,532 8,078 Net cash provided by discontinued operations 511 2,209 _________ _________ NET CASH PROVIDED BY OPERATING ACTIVITIES 2,043 10,287 INVESTING ACTIVITIES Additions to property, plant and equipment (6,724) (5,382) Proceeds from disposal of equipment 176 301 Increase in intangible assets (727) (679) Discontinued Operations: Additions to property, plant and equipment 0 268 Proceeds from sale of discontinued operations 90,581 0 Business acquisitions, net of cash acquired (862) (12,352) Net changes in short-term investments 0 5,275 _________ _________ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 82,444 (12,569) FINANCING ACTIVITIES Purchase of treasury stock (8,385) 0 Purchase and retirement of common stock (12,657) 0 Proceeds from exercise of stock options 43 44 Proceeds of long-term borrowings 18,173 17,500 Payments of long-term debt (79,705) (17,080) Cash dividends (1,927) (1,852) _________ _________ NET CASH USED IN FINANCING ACTIVITIES (84,458) (1,388) Effect of exchange rate changes on cash and cash equivalents (29) 327 _________ _________ (DECREASE) IN CASH AND CASH EQUIVALENTS 0 (3,343) Cash and cash equivalents at beginning of period 0 3,343 _________ _________ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 0 $ 0 ========= ========= See accompanying notes to condensed consolidated financial statements. 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 September 30, 1996, the Condensed Consolidated Statements of Earnings for the three months ended September 30, 1996 and September 30, 1995, and the Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 1996 and September 30, 1995. The balance sheet at June 30, 1996 has been derived from the audited financial statements at that date. The accounting policies followed by the Company are described in the June 30, 1996 financial statements which are contained in the Company's 1996 Annual Report. It is suggested that these financial statements be read in conjunction with the financial statements and notes included in the 1996 Annual Report to stockholders. 2. In January 1996, the Board of Directors of the Company approved a plan to dispose of the Company's Municipal Water Group of businesses, including Henry Pratt Company, James Jones Company and Edward Barber & Co., Ltd. These companies were sold on September 4, 1996. The results of operations of these companies for the period July 1, 1996 through September 4, 1996 have been reported as income from discontinued operations, net of income taxes, and the income statement for the three months ended September 30, 1995 has been reclassified to conform with the 1996 presentation. The following table sets forth summary information relating to the Municipal Water Group: Dollars in thousands July 1, 1996 Three Months through Ended September September 4, 30, 1995 1996 Revenues $13,958 $21,175 Costs and expenses $13,830 $20,373 Income before income taxes $ 128 $ 802 Income taxes $ 49 $ 332 Income from Discontinued Operations $ 79 $ 470 3. In August 1995, a wholly owned subsidiary of the Company purchased Societe des Etablissements Rene Trubert S.A.("Trubert") of Chartres, France. Trubert is a manufacturer of thermostatic mixing valves sold primarily for commercial and industrial applications to accurately control the temperature of water for human safety and process control. Trubert had net sales of approximately $8,000,000 for the twelve months ended June 30, 1995. In September of 1995, a wholly owned subsidiary of the Company acquired the Keane product line from Keane Controls Corporation. This product line consists of solenoid valves and regulators used in high pressure applications. The annual sales of these products are approximately $1,500,000. In September of 1995, a wholly owned subsidiary acquired the Kieley Mueller Control Valve product line from International Valve Corporation. This product line consists of linear and rotary control valves sold primarily for industrial process applications to accurately control the pressure, flow, and temperature of steam and process fluids. The annual sales of these products are approximately $2,800,000. In March of 1996, a wholly owned subsidiary of the Company purchased Artec, GmbH ("Artec") of Oberhausen, Germany. Artec assembles and distributes underfloor heating systems, radiator connection systems and plumbing pipe systems for the German plumbing and heating market. Artec had net sales of approximately $4,500,000 for the twelve months ended December 31, 1995. In September of 1996, a wholly owned subsidiary of the Company purchased certain assets and assumed certain liabilities of Consolidated Precision Corporation ("CPC") of Rivera Beach, Florida. CPC is a manufacturer of high quality control valves, manual and actuated shutoff valves, cryogenic filters, valve manifolds, and bayonet fittings for the cryogenic, ultra-high purity, and industrial gas markets. CPC had annual sales of approximately $2.5 million for the 12 months ending May 31, 1996. The aggregate purchase price for these acquisitions was $16,710,000. 4. The Company, like other worldwide manufacturing companies, is subject to a variety of potential liabilities connected with its business operations, including potential liabilities and expenses associated with possible product defects or failures and compliance with environmental laws. The Company maintains product liability and other insurance coverage which it believes to be generally in accordance with industry practices. Nonetheless, such insurance coverage may not be adequate to protect the Company fully against substantial damage claims which may arise from product defects and failures. Leslie Controls, Inc. and Spence Engineering Company, both subsidiaries of the Company, are involved as third- party defendants in various civil product liability actions pending in the U.S. District Court, Northern District of Ohio. The underlying claims have been filed by present or former employees of various shipping companies for personal injuries allegedly received as a result of exposure to asbestos. The shipping companies contend that they installed in their vessels certain valves manufactured by Leslie Controls and/or Spence Engineering which contained asbestos. The Company has resort to certain insurance coverage with respect to these matters. Coverage has been disputed by certain of the carriers and , therefore, recovery is questionable, a factor which the Company has considered in its evaluation of these matters. The Company has established certain reserves which it currently believes are adequate in light of the probable and estimable exposure of pending and threatened litigation of which it has knowledge. Based on facts presently known to it, the Company does not believe the outcome of these proceedings will have a material adverse effect on its financial condition, results of operations, or its liquidity. Certain of the Company's operations generate solid and hazardous wastes, which are disposed of elsewhere by arrangement with the owners or operators of disposal sites or with transporters of such waste. The Company's foundry and other operations are subject to various federal, state and local laws and regulations relating to environmental quality. Compliance with these laws and regulations requires the Company to incur expenses and monitor its operations on an ongoing basis. The Company cannot predict the effect of future requirements on its capital expenditures, earnings or competitive position due to any changes in federal, state or local environmental laws, regulations or ordinances. 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. Three of these sites, the Sharkey and Combe Landfills in New Jersey, and the San Gabriel Valley/El Monte, California water basin site, 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 certain developments, the Company elected not to enter into the de minimis settlement proposal with respect to the Sharkey Landfill 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. The EPA has formally notified several entities that they have been identified as being potentially responsible parties with respect to the San Gabriel Valley site. As the Company was not included in this group, its potential involvement in this matter is uncertain at this point given that either the PRPs named to date or the EPA could seek to expand the list of potentially responsible parties. In addition to the foregoing, the Solvent Recovery Service of New England site and the Old Southington landfill site, both in Connecticut, are on the National Priorities List but, with respect thereto, the Company has resort to indemnification from third parties and based on currently available information, the Company believes it will be entitled to participate in a de minimis capacity. With respect to the Combe Landfill, the Company is one of approximately 30 potentially responsible parties. The Company and all other PRP's have received a Supplemental Directive from the New Jersey Department of Environmental Protection & Energy in 1994 seeking to recover approximately $9 million in the aggregate for the operation, maintenance, and monitoring of the implemented remedial action taken up to that time in connection with the Combe Landfill North site. Certain of the PRP's, including the Company, are currently negotiating with the state only to assume maintenance of this site in an effort to reduce future costs. The Company and the remaining PRPs have also received a formal demand from the U.S. Environmental Protection Agency to recover approximately $17 million expended to date in the remediation of this 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 and in relation to 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, results of operations, or its liquidity. The Company has established balance sheet accruals which it currently believes are adequate in light of the probable and estimable 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 is 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 which may be material to the Company. 5. On April 16, 1996 and July 17, 1996 the Board of Directors authorized the Company to repurchase up to 2,000,000 and 1,000,000 shares respectively, of its Class A Common Stock through open market and private purchases. Since the commencement of the share repurchase plan, the Company had purchased 2,611,500 shares for an aggregate price of $50,195,812. The funds used to finance these stock purchases were generated from operations and borrowings from the unsecured line of credit. Item 2. WATTS INDUSTRIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Management Initiatives In fiscal 1996, the Company reevaluated its strategy and decided to restructure its business in an effort to improve the efficiency of the Company's worldwide operations. Divestiture As part of this strategy, the Company decided to divest itself of the Municipal Water Group of Companies, which consisted of Henry Pratt Company, James Jones Company, and Edward Barber & Company Ltd. This divestiture was completed on September 4, 1996 resulting in an after tax gain of $3,208,000 subject to potential post closing adjustments. The proceeds were used primarily to reduce long term debt and fund the Company's share repurchase program. This divestiture will enable the Company to focus its acquisition and growth strategies on its core markets, namely Plumbing and Heating and Water Quality, and Industrial, and Oil and Gas. The results of operations of the Municipal Water Group for fiscal 1997 have been reported as income from discontinued operations, net of income taxes, and the statement of earnings for prior periods has been reclassified to conform with the fiscal 1997 presentation. Restructuring Activities The Company also decided to undertake certain restructuring initiatives aimed at improving the efficiency of certain of its continuing operations. The two most significant initiatives are the relocation of Jameco Industries and the downsizing of Pibiviesse S.p.A. (PBVS). The Company has decided to relocate the manufacturing operations at Jameco Industries from Wyandanch, New York to a Watts Regulator plant in Spindale, North Carolina. The expansion of the Spindale facility, which will house the Jameco activity, is essentially complete. The Company anticipates this relocation will be completed this fiscal year. The Company has initiated a plan to streamline and downsize the operations of its PBVS subsidiary. This has resulted in reduced headcount and a reduction in certain fixed overhead costs. Since the start of the restructuring, in March of 1996, through September 30, 1996, 105 employees have been released and $2,279,000 has been paid in severance. The total provision for severance recorded in fiscal 1996 was $9,300,000. Conclusion It is expected that the restructuring plan will require more than two years to complete with some positive effects being realized during this fiscal year. Results of Operations Quarter Ended September 30, 1996 Compared to Quarter Ended September 30, 1995 Net sales from continuing operations increased $21,879,000 (14.2%) to $176,008,000. This increase was primarily attributable to increased shipments of Oil and Gas valves and Plumbing and Heating products which were partially offset by lower sales of steam related products. In addition, the inclusion of the net sales of acquired companies accounted for $3,284,000 of the sales increase. These acquisitions primarily included Societe des Etablissements Rene Trubert S.A. ("Trubert") acquired in August of 1995, located in Chartres, France; and Artec, GmbH ("Artec")acquired in March of 1996 located in Oberhausen, Germany. The Company had increased sales in Europe of $2,236,000 (10.5%). The Company intends to maintain its strategy of seeking acquisition opportunities as well as expanding its existing market position to achieve sales growth. Gross profit from continuing operations increased $3,435,000 (6.0%) to $60,356,000 and decreased as a percentage of net sales from 36.9% to 34.3%. Gross profit was adversely affected primarily as a result of higher sales of oil and gas products whose gross margin percentage is lower than the overall Company's gross margin percentage. In addition, the Company experienced lower sales volumes of steam products which resulted in both an unfavorable sales mix and lower absorption of fixed overhead costs. Selling, general and administrative expenses from continuing operations increased $2,744,000 (7.8%) to $38,090,000. This increase was primarily attributable to increased variable selling expenses associated with the increased sales of plumbing and heating and oil and gas products , in both Europe and the United States, combined with the expenses of acquired companies. Interest income from continuing operations decreased $208,000 (67.8%) to $99,000. This decrease was attributable to lower levels of cash and short-term investments. Interest expense from continuing operations increased $346,000 (14.4%) to $2,754,000. This increase was attributable to the increased average levels of debt incurred as a result of the stock buy-back program discussed in Note 5 of the financial statements. Net earnings from continuing operations increased $682,000 (5.9%) to $12,346,000. The Company's return on investment for the quarter ended September 30, 1996 was 15% as compared to 10.8% for the quarter ended September 30, 1995. The change in foreign exchange rates had an immaterial impact on the net results of operations. The weighted average number of common shares outstanding on September 30, 1996, decreased to 27,436,579 from 29,792,386 for primary earnings per share. This decrease was attributable to the Company purchasing Class A Common Stock on the open market in connection with its previously announced share repurchase program. Primary and fully diluted earnings per share from continuing operations were $.45 for the three months ended September 30, 1996 compared to earnings of $.39 for the three months ended September 30, 1995. Earnings from discontinued operations during the quarter ended September 30, 1996 were $.003 compared to $.02 for the three months ended September 30, 1995. Liquidity and Capital Resources During the quarter ended September 30, 1996, the Company received $90,581,000 of proceeds as a result of its sale of discontinued operations. These proceeds were used to reduce the borrowings under its line of credit and to fund additional share purchases under its existing share repurchase program. During the quarter ended September 30, 1996, the Company spent $6,724,000 on capital expenditures for continuing operations, primarily manufacturing machinery and equipment, as part of its commitment to continuously improve its manufacturing capabilities. Working capital at September 30, 1996 was $200,910,000 compared to $196,468,000 at June 30, 1996. The ratio of current assets to current liabilities was 2.4 to 1 at September 30, 1996 compared to 2.5 to 1 at June 30, 1996. Cash and short-term investments were zero at September 30, 1996 and June 30, 1996. The Company utilized overdraft facilities with certain banks during the quarter ended September 30, 1996, to minimize borrowings under its line of credit. Debt as a percentage of total capital employed was 24.5% at September 30, 1996 compared to 33.8% at June 30, 1996. This decreased percentage resulted from the use of the proceeds from the sale of discontinued operations to reduce long term debt. The Company has available an unsecured, $125,000,000 line of credit, which expires on August 31, 1999. The Company's intent is to utilize this credit facility to support the Company's acquisition program, working capital requirements from acquisitions, and for general corporate purposes. As of September 30, 1996, there were no borrowings under this line of credit. The Company from time to time is involved with environmental proceedings and incurs costs on an ongoing basis related to environmental matters. The Company has been named a potentially responsible party with respect to currently identified contaminated sites, which are in various stages of the remediation process. The Company has evaluated its potential exposure based on all currently available information and has recorded its estimate of its liability for environmental matters. The ultimate outcome of these environmental matters cannot be determined. The Company currently anticipates that it will not incur significant expenditures in fiscal 1997 in connection with any of these environmentally contaminated sites. Please see Note 4 to the accompanying condensed consolidated financial statements. The Company anticipates that available funds and those funds provided from current operations will be sufficient to meet current operating requirements and anticipated capital expenditures for at least the next 24 months. Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The exhibits are furnished elsewhere in this report. (b) A report on Form 8-K was filed with the Securities and Exchange Commission September 18, 1996. The following items were reported in the Form 8-K: (1) Item 2. Acquisition or Disposal of Assets (2) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. There were no financial statements filed with this Form 8-K. 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: November 11, 1996 By:/s/ Timothy P. Horne ________________ Timothy P. Horne President Date: November 11, 1996 By: /s/Kenneth J. McAvoy ____________________ Kenneth J. McAvoy Chief Financial Officer and Treasurer EXHIBIT INDEX Listed and indexed below are all Exhibits filed as part of this report. Exhibit No. Description 3.1 Restated Certificate of Incorporation, as amended.(1) 3.2 Amended and Restated By-Laws. (2) 11 Computation of earnings per share * 27 Financial Data Schedule * (1) Incorporated by reference to the relevant exhibit to the Registrant's Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 28, 1995. (2) Incorporated by reference to the relevant exhibit to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 1992. * Filed herewith. EX-11 2 EXHIBIT 11 WATTS INDUSTRIES , INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Unaudited) Three Months Ended September 30 1996 1995
____________ ____________ PRIMARY Average shares outstanding 27,406,598 29,627,112 Net effect of dilutive stock options - based on the treasury stock method using average market price 29,981 165,274 ____________ ____________ Total 27,436,579 29,792,386 ============ ============ Net earnings $15,633,000 $12,134,000 ============ ============ Earnings per share $ .57 $ .41 ============ ============ FULLY-DILUTED Average shares outstanding 27,406,598 29,627,112 Net effect of dilutive stock options - based on the treasury stock method using the quarter-end market price, if higher than average market price 46,045 184,548 ____________ ____________ Total 27,452,643 29,811,660 ============ ============ Net earnings $15,633,000 $12,134,000 ============ ============ Earnings per share $ .57 $ .41 ============ ============
EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-1997 SEP-30-1996 0 0 126,254 8,129 183,699 343,319 150,295 116,944 586,028 142,409 101,708 2,753 0 0 310,205 586,028 176,008 176,008 115,652 153,742 (3,728) 174 2,754 25,994 10,440 15,554 79 0 0 15,633 $.57 $.57 INCLUDES ONLY COST OF GOODS SOLD AND OPERATING EXPENSES. INCLUDES INTEREST EXPENSE AND LOSS PROVISION SHOWN BELOW.
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