Discontinued Operations

12 Months Ended

Dec. 31, 2013

Discontinued Operations

Discontinued Operations

(3) Discontinued Operations

        On August 1, 2013, the Company completed the sale of all of the outstanding shares of an indirect wholly-owned subsidiary, Watts Insulation GmbH (Austroflex), receiving net cash proceeds of $7.9 million. Austroflex is an Austrian-based manufacturer of pre-insulated flexible pipe systems for district heating, solar applications and under-floor radiant heating systems. Austroflex did not meet performance expectations since its purchase approximately three years ago on June 28, 2010. The loss after tax on disposal of the business was approximately $2.2 million. Further, during the year ended December 31, 2011, the Company wrote down Austroflex's long-lived assets by $14.8 million. The Company will not have a substantial continuing involvement in Austroflex's operations and cash flows, and therefore Austroflex's results of operations have been presented as discontinued operations for all periods presented.

        On December 21, 2012, the Company completed the sale of all of the outstanding shares of its subsidiary, Flomatic Corporation (Flomatic). The sale excluded the backflow product line of Flomatic, which was retained by the Company. Flomatic Corporation, located in Glens Falls, New York, specializes in manufacturing and selling check valves, foot valves and automatic hydraulic control valves for the well water industry. The Company acquired Flomatic as part of its acquisition of Socla in April 2011. The Company determined that it would not have a substantial continuing involvement in Flomatic's operations and cash flows, and therefore Flomatic's results of operations have been presented as discontinued operations for all periods presented.

        In the first quarter of 2010, the Company recorded an estimated reserve of $5.3 million in discontinued operations in connection with its investigation of potential violations of the Foreign Corrupt Practices Act (FCPA) at Watts Valve (Changsha) Co., Ltd. (CWV), a former indirect wholly-owned subsidiary of the Company in China. On October 13, 2011, the Company entered into a settlement for $3.8 million with the Securities and Exchange Commission to resolve allegations concerning potential violations of the FCPA at CWV. In connection with this matter, in 2012, the Company received a $1.1 million payment from a service provider related to issues concerning a former divested operation.

        Condensed operating statements for discontinued operations are summarized below:

	Years Ended December 31,
	2013			2012			2011
	(in millions)
Operating income—FCPA matter (CWV)	$	—		$	1.1		$	1.7
Operating income—Flomatic		—			1.3			0.4
Loss on disposal—Flomatic		—			(3.8	)		—
Operating (loss) income—Austroflex		(0.2	)		0.2			(16.9	)
Loss on disposal—Austroflex		(2.2	)		—			—
Other		—			0.3			0.2
Loss before income taxes		(2.4	)		(0.9	)		(14.6	)
Income tax benefit (expense)		0.1			(1.1	)		3.8
Loss from discontinued operations, net of taxes	$	(2.3	)	$	(2.0	)	$	(10.8	)

        The Company did not recognize a tax benefit on the loss on the disposal of the Flomatic and Austroflex shares, as the Company does not believe it is more likely than not that a tax benefit would be realized.

        Revenues reported in discontinued operations are as follows:

	Years Ended December 31,
	2013		2012		2011
	(in millions)
Flomatic revenues	$	—	$	12.9	$	8.5
Austroflex revenues		9.5		18.2		20.7
Total revenues	$	9.5	$	31.1	$	29.2