Date post: | 16-Apr-2017 |
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Forward Looking Statements
Certain statements in this presentation constitute forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995.
These statements are related to forecasts of sales, market dynamics and 2016 outlookupdate, capital expenditures, costs and savings associated with realignment activities,lead free developments and management goals and objectives.
Watts cautions investors that any such forward-looking statements made by Watts arenot guarantees of future performance. All forward-looking statements are subject toknown and unknown risks, uncertainties and contingencies, many that are beyond thecontrol of Watts, which may cause actual results, performance or achievements todiffer materially from anticipated future results, performance or achievementsexpressed or implied by the forward-looking statements.
Factors that might affect forward-looking statements include overall economic andbusiness conditions, competitive factors, changes in laws affecting Watts, futureacquisitions of material assets or businesses by Watts, the demand for Watts’ productsand services and other factors identified in Watts’ most recent Annual Report on Form10-K and subsequent reports filed with the SEC.
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Who We Are
Global Leader in Residential and Commercial Water Products8/4/2016
• $1.5B Company with Balanced Business Model- 60% / 40% revenue split domestic / international- Strong presence in residential / commercial markets- Exposure to replacement markets & new
construction
• Leveraging Leading Brands and Key Market Drivers- Safety & Regulation - Energy Efficiency- Water Conservation
Multi-Year Transformation Underway- Delivering enhanced margin expansion
Strong Cash Generator Drives Capital Deployment
Leader in Residential / Commercial Water Products
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Residential Applications
One of the Broadest Product Offerings …8/4/2016
BATHROOMTempering Valves for Tubs, Showers and SinksElectric Tile WarmingHot Water On Demand Recirculation SystemsToilet Fill Valves
KITCHENUndersink Guardian Thermostatic Mixing ValvesReverse Osmosis Water Filtration SystemsIce Maker Filtration SystemsElectric Tile Warming
ALTERNATIVE ENERGYSolar Control PackagesGeothermal Control Packages
LAUNDRY ROOMAutomatic Washing Machine Shutoff ValvesWater Hammer ArrestorsAnti‐Scale SystemsGas Ball ValvesGas Connectors
BOILERTemperature and Pressure GaugesTempering ValvesSafety Relief ValvesFill ValvesBackflow PreventersBoiler DrainsAir SeparatorsFlow Control ValvesFloat Vents
Anti‐Scale SystemsWater SoftenersUV Disinfection SystemsWhole House Filtration Systems
WATER QUALITY
RADIANT HEAT PRODUCTSRadiant Underfloor Heating SystemsSnowmeltingElectronic Temperature Controls Quick Connect FittingsHydrocontrol PanelsPEX TubingManifolds
Backflow PreventersBall ValvesDrain TubesFloor DrainsGas Connectors
WATER HEATERT&P Relief ValvesTempering ValvesPressure Reducing ValvesExpansion TanksAnti‐Scale Systems
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Commercial Applications
WASTEWATER (DRAINAGE) SYSTEMRoof DrainsFloor DrainsTrench DrainsFixture CarriersHydrants
Acid Waste SystemsDouble Containment Piping SystemsRainwater Harvesting SystemsInterceptorsCleanouts
ALTERNATIVEENERGYSolar ControlPackages
HVAC SYSTEMCommercial BoilersWater HeatersExpansion TanksGauges & ThermometersBalancing ValvesSafety Relief Valves
Anti‐Scale SystemsElectronic Temperature ControlsTempering ValvesBackflow PreventersRadiant Snow Melting SystemsHydro‐control PanelsSteam TrapsStrainersFeed Water RegulatorsManifolds
FOOD SERVICE APPLICATIONSMovable Gas ConnectorsWater Filtration SystemsAnti‐Scale SystemsGas and Water Shutoff ValvesCommercial FaucetsGas RegulatorsThermostatic Mixing ValvesGrease InterceptorsStainless Steel Piping and Drains
POTABLE WATER SYSTEMWater HeatersGas ConnectorsReverse Osmosis WaterFiltration SystemWater SoftenersBackflow PreventersWater Pressure Reducing Valves
Anti‐Scale SystemsT&P Relief ValvesTempering ValvesMonitoring and Turbidity MonitorsStrainersButterfly ValvesWater Hammer Arrestors
UL/FM Fire Service StrainersAutomatic Control Valves Pre‐Engineered Valve StationsGate Valves
FIRE PROTECTION SYSTEMBackflow PreventersTransition RisersRelief ValvesCheck Valves
IRRIGATION SYSTEMBackflow PreventersBackflow EnclosuresAutomatic Control ValvesShutoff ValvesButterfly ValvesRelief ValvesWater Pressure Reducing Valves
… Unmatched in the Industry
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Investment Thesis
Winning With Commercial, Operational and Innovation Excellence8/4/2016
Strengthening the Foundation
Multi-year transformation underway Enhanced portfolio and more efficient organization; ongoing tailwind
Aligned to Favorable Macros
and Markets
Leading market positions in residential and commercial water, addressing global secular macro themes
Focus On Innovation and
Profitable Growth
Leveraging components to broaden application solutions offering Investment continues, fueling growth
Accretive Capital Deployment
Strong cash flow and efficient capital structure enables more deployment upside; disciplined acquirer
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Multi-year Transition Underway
8/4/2016
Multi-Year Restructuring Tailwind Helping To Offset Macro Challenges
European Restructuring● Realigned Cost Structure to Demand● Footprint Optimization● Sourcing Excellence
Americas / Asia Transformation ● Exited Non-core Products● Footprint Optimization● Sourcing Excellence
Continue to Drive Productivity; Reinvest for Growth● One Watts● Innovation / Application Solutions
2013 - 2014
2015 - 2016
2017 & Beyond
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Attractive End Markets
Balanced Portfolio Providing Tailwind For Growth8/4/2016
Residential Multi Family / Commercial
Light / General Industrial
Healthcare Hospitality Institutional / Educational
Specialty Products and Systems that Conserve and Safeguard the Flow of Fluid and Energy
Vert
ical
sEn
d M
arke
ts
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Aligned To Favorable Macro Trends
Addressing Global Secular Macro Themes 8/4/2016
• Code & specification driven
• Extensive certification process
• Emerging need globally
SAFETY & REGULATION ENERGY EFFICIENCY WATER CONSERVATION
• Environmental & emotional drivers
• Code & specification driven
• Emerging global demand
• Economic and environmental value proposition
• Application & engineering competencies critical
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Significant Margin Improvement
“Self Help” Story Drives Earnings Growth
+ Strong Incremental Sales Conversion
+ Commercial Excellence
+ Operational Excellence
+ Global SourcingBaseline
~10%
14% +
Operating
Margins
+ Transformation Initiatives
+ Portfolio Optimization
Volume Productivity Restructuring
Operating Margin Opportunity Next 5 Years
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Strong Cash Generation Drives Deployment Upside
Disciplined Capital Deployment
• Investing in high ROI CAPEX- Reinvestment ratio 80-100%
• Strategic M&A- Selective acquirer; disciplined valuation
and screening process
• Pay a competitive dividend- Consistent double-digit increases
• Stable share buyback- Offset option dilution at minimum
STRONG CASH GENERATION DEPLOYMENT PRIORITIES
2015E 2019T
>100% FCF Conversion
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Summary
Stronger Foundation Delivering Long-term Value Creation8/4/2016
• ~$1.5B Enhanced Water Portfolio
• Global Leading Brands in Highly Fragmented Industry
• Broad Solutions Across Balanced Geographies & End Markets
• Strong Presence in Repair/Replace & New Construction
• Strong Financial Position & Cash Flow Generation
• Disciplined Capital Allocation
• Grow Faster than Served Markets
• Earnings Growth through Commercial and Operational Excellence
• Re-investment in Innovation To Drive Growth and Margin Upside
• >100% Free Cash Flow Generation
• Accelerate Growth through Disciplined Acquisitions
• Return Excess Cash to Shareholders
WHO WE ARE OUR COMMITTMENTS