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 December 31, 1993 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 report),
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 January 31, 1994
- ------------------------------ -------------------------------
Class A Common, $.10 par value 8,979,989
Class B Common, $.10 par value 5,744,335
<PAGE>
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information Page #
Item 1. Condensed Consolidated Balance Sheets 3
at December 31, 1993 and June 30, 1993.
Condensed Statements of Consolidated 4
Earnings for the Three Months Ended
December 31, 1993 and December 31, 1992.
Condensed Statements of Consolidated 5
Earnings for the Six Months Ended
December 31, 1993 and December 31, 1992.
Condensed Statements of Consolidated 6
Cash Flows for the Six Months Ended
December 31, 1993 and December 31, 1992.
Notes to Condensed Consolidated 7,8,9
Financial Statements.
Item 2. Management's Discussion and Analysis 10,11,
of Financial Condition and Results of 12,13
Operations.
Part II. Other Information
Item 4. Submission of Matters to a Vote of 14
Security Holders.
Item 5. Other Information. 14,15,
Item 6. Exhibits and Reports Filed on Form 8-K. 16
Exhibit 11 - Computation of Per Share 17,18
Earnings.
Signatures 19
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share information)
(Unaudited)
Dec. 31, June 30,
ASSETS 1993 1993
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.................. $ 6,808 $ 16,937
Short-term investments..................... 52,165 66,198
Trade accounts receivable, less allowance
for doubtful accounts of $4129 and $3565. 81,046 68,099
Inventories:
Finished goods........................... 44,923 48,910
Work in process.......................... 39,273 33,939
Raw materials............................ 49,501 49,064
----------- -----------
133,697 131,913
Prepaid expenses and other current assets.. 10,141 9,494
Deferred income taxes...................... 9,529 8,551
----------- -----------
Total Current Assets............... 293,386 301,192
OTHER ASSETS
Goodwill, net of accumulated amortization.. 89,799 87,017
Other...................................... 12,746 13,205
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment-at cost...... 225,992 218,247
Less allowance for depreciation............ ( 92,788) ( 83,986)
----------- -----------
Property, plant and equipment-net.......... 133,204 134,261
----------- -----------
TOTAL ASSETS................................. $ 529,135 $ 535,675
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
<C> <C>
CURRENT LIABILITIES
Accounts payable........................... $ 20,290 $ 21,180
Accrued expenses........................... 36,553 40,441
Accrued compensation and related items..... 6,796 10,059
Income taxes............................... 993 4,494
Notes payable and current portion of
long-term debt........................... 1,738 2,366
----------- -----------
Total Current Liabilities.......... 66,370 78,540
LONG-TERM DEBT, less current portion......... 99,775 101,468
DEFERRED INCOME TAXES........................ 13,667 13,435
OTHER LIABILITIES............................ 9,256 7,112
STOCKHOLDERS' EQUITY
Class A Common Stock,$.10 par value;
40,000,000 shares authorized, 8,958,889
shares issued and outstanding............ 896 923
Class B Common Stock,$.10 par value;
13,000,000 shares authorized, 5,744,635
shares issued and outstanding............ 574 574
Additional paid-in capital............... 91,743 101,491
Retained earnings........................ 253,494 235,052
Equity adjustment from translation....... ( 6,640) ( 2,920)
----------- -----------
Total Stockholders' Equity......... 340,067 335,120
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $ 529,135 $ 535,675
=========== ===========
<FN>
See accompanying notes to condensed consolidated financial statements.
Certain amounts as of June 30, 1993 have been reclassified to permit
comparison with December 31, 1993.
</TABLE>
<PAGE>
<TABLE>
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
(Amounts in thousands except per share data)
(Unaudited)
Three Months Ended
-------------------------
Dec. 31, Dec. 31,
1993 1992
----------- -----------
<C> <C>
Net sales.................................... $ 127,734 $ 113,909
Cost of goods sold........................... 78,392 70,010
----------- -----------
GROSS PROFIT....................... 49,342 43,899
Selling, general & administrative expenses... 30,263 26,984
Unusual charges.............................. 7,000
----------- -----------
OPERATING INCOME................... 19,079 9,915
Other (income) expense:
Interest income......................... ( 727) ( 1,003)
Interest expense........................ 2,204 2,594
Other-net............................... 415 203
----------- -----------
1,892 1,794
----------- -----------
EARNINGS BEFORE INCOME TAXES 17,187 8,121
Provision for income taxes................... 6,639 3,125
----------- -----------
NET EARNINGS....................... $ 10,548 $ 4,996
=========== ===========
<C> <C>
Earnings per share: Primary................. $ .71 $ .33
Fully Diluted........... $ .71 $ .33
Cash dividends per share..................... $ .09 $ .07
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
(Amounts in thousands except per share data)
(Unaudited)
Six Months Ended
-------------------------
Dec. 31, Dec. 31,
1993 1992
----------- -----------
<C> <C>
Net sales.................................... $ 258,315 $ 223,525
Cost of goods sold........................... 159,701 138,440
Cost of goods sold........................... ----------- -----------
GROSS PROFIT....................... 98,614 85,085
Selling, general & administrative expenses... 60,357 51,079
Unusual charges.............................. 7,000
----------- -----------
OPERATING INCOME................... 38,257 27,006
Other (income) expense:
Interest income......................... ( 1,525) ( 2,581)
Interest expense........................ 4,568 4,728
Other-net............................... 754 506
----------- -----------
3,797 2,653
----------- -----------
EARNINGS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME TAXES..... 34,460 24,353
Provision for income taxes................... 13,375 9,425
----------- -----------
EARNINGS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE............... 21,085 14,928
Cumulative effect on prior years (to June 30,
1992) of change in accounting ............. 3,132
----------- -----------
NET EARNINGS....................... $ 21,085 $ 11,796
=========== ===========
Primary and fully-diluted earnings per share: <C> <C>
Earnings before cumulative effect
of accounting change....................... $ 1.42 $ .99
Cumulative effect of accounting change..... -.21
----------- -----------
Net earnings............................... $ 1.42 $ .78
=========== ===========
Cash dividends per share..................... $ .18 $ .14
=========== ===========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended
-------------------------
Dec. 31, Dec. 31,
1993 1992
----------- -----------
<C> <C>
OPERATING ACTIVITIES
Net earnings $ 21,085 $ 11,796
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 11,027 9,663
Provision for deferred income taxes ( 155) ( 572)
Cumluative effect of change in
accounting for income taxes 3,132
(Gain)Loss on disposal of fixed assets ( 21) 35
Changes in oper. assets and liab., net
of effects from business acquisitions:
Accounts receivable ( 11,419) ( 2,760)
Inventories ( 253) ( 5,020)
Prepaid expenses and other assets ( 265) ( 1,980)
Accounts payable and accrued expenses ( 5,385) ( 4,985)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,614 9,309
INVESTING ACTIVITIES
Additions to property, plant, and equipment ( 8,418) ( 12,889)
Proceeds from disposal of fixed assets 67 46
Increase in intangible assets ( 1,068) ( 970)
Business acquisitions, net of cash acquired:
Waletzko Armaturen ( 1,970)
Rockford Controls ( 1,958)
Intermes Group ( 6,094) ( 17,000)
Other Acquisitions ( 4,927)
Repayment of debt of acquired businesses ( 1,964)
Net changes in short-term investments 14,033 11,742
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES ( 8,371) ( 22,999)
FINANCING ACTIVITIES
Purchase of treasury stock ( 12,064)
Proceeds from exercise of stock options 1,444 517
Proceeds of short-term borrowings 415 12,521
Payments of long-term debt ( 2,533) ( 394)
Cash dividends ( 2,643) ( 2,091)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES ( 15,381) 10,553
Effect of exchange rates on cash and cash
equivalents ( 991) ( 154)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS ( 10,129) ( 3,291)
Cash and cash equiv. at beginning of period 16,937 9,989
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,808 $ 6,698
=========== ===========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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 December 31,
1993, the Condensed Statements of Consolidated Earnings for the
three and six months ended December 31, 1993 and December 31,
1992, and the Condensed Statements of Consolidated Cash Flows
for six months ended December 31, 1993 and December 31, 1992.
The balance sheet at June 30, 1993 has been derived from the
audited financial statements at that date. The accounting
policies followed by the Company are described in the June 30,
1993 financial statements which are contained in the Company's
1993 Annual Report. It is suggested that these financial
statements be read in conjunction with the financial statements
and notes included in the Annual Report to stockholders.
2. On November 6, 1992, an indirect subsidiary of the Company
acquired Intermes, S.p.A. ("Intermes") for an aggregate cash
purchase price of U.S. $17,000,000 plus a contingent payment
that will total U.S. $8,500,000, plus the assumption of
$23,000,000 of debt. $6,094,000 of this contingency was paid
during the quarter ended September 30, 1993 with the remainder
scheduled to be paid over a five-year period. Intermes,
headquartered in Caldaro, Italy, manufactures and sells plumbing
and heating valves and controls through wholesaler distribution.
In addition, Intermes partially owns I.S.I., S.p.A. ("ISI")
located in Pergine Valsugana, Italy. ISI manufactures butterfly
valves and other valve products relating to municipal water
markets. Intermes' sales for the twelve-month period ended June
30, 1993 were approximately U.S.$42,800,000.
On May 18, 1993, the Company acquired Edward Barber (UK) Limited
("EBCO"). Headquartered in Tottenham, London, EBCO
manufactures and sells valves, meter boxes, and accessories to
the municipal water market. Sales of EBCO for the twelve months
ended December 31, 1992 were approximately $11,500,000. The
company, which was founded in 1908, also operates a non-ferrous
foundry operation in nearby Willesden.
<PAGE>
3. Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standard ("SFAS") No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions".
The Statement requires that the projected future cost of
providing postretirement benefits, such as health care and life
insurance, be recognized on an accrual basis as employees render
service instead of when benefits are paid. The extent of these
types of benefits provided by the Company is limited to one of
its subsidiaries acquired on September 30, 1991. Based on the
acquisition date of this subsidiary and the adoption date of
July 1, 1993, the Company is required under the Statement to
account for the projected liability for these benefits on a
prospective basis and has elected to adjust its purchase price
allocation for the acquisition. Accordingly, the Company has
recorded a liability of $2,087,000 and a corresponding increase
to goodwill and related deferred tax asset. The effect of the
adoption on operating results from the date of acquisition to
June 30, 1993 was immaterial.
4. Effective July 1, 1992, the Company changed its method of
accounting for income taxes from the deferred method to the
liability method required by SFAS No. 109, "Accounting for
Income Taxes". As permitted under the new rules, prior years'
financial statements have not been restated.
The cumulative effect of adopting SFAS No. 109 as of July 1,
1992 was to decrease net income by $3,132,000, for the fiscal
year ended June 30, 1993. Application of the new income tax
rules decreased pretax income by approximately $100,000 because
of increased depreciation expense as a result of SFAS No. 109's
requirement to report assets acquired in prior business
combinations at their pretax amounts.
5. 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 matter, 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 recent
developments, the Company elected not to enter into the de
minimis settlement proposal. No allocations have been made to
date with respect to the other two sites. With respect to the
Combe Landfill, the Company is one of approximately 23
potentially responsible parties.
<PAGE>
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 or in relation to that of 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.
The Company has established balance sheet accruals which it
currently believes are adequate in light of the potential
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 may be somewhat
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.
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Quarter Ended December 31, 1993 Compared to
Quarter Ended December 31, 1992
Net sales increased $13,825,000 (12.1%) to $127,734,000. This
increase was primarily attributable to the inclusion of the net sales
of acquired companies. The net sales of Intermes, S.p.A.
("Intermes") acquired in November 1992, Edward Barber Company
("EBCO") acquired in May 1993, and Ancon Products, Inc. ("Ancon")
acquired in July 1993 represented approximately 66% of the increase.
The Company had increased unit shipments of oil and gas valves, water
plumbing and heating valves, and steam valves, as well as decreased
unit shipments of aerospace/military valves. The Company believes
this decrease in aerospace/military valves to be a long-term
situation. The Company intends to maintain its strategy of seeking
acquisition opportunities as well as developing its international
sales to achieve sales growth.
Gross profit increased $5,443,000 (12.4%) to $49,342,000 and
increased as a percentage of net sales from 38.5% to 38.6%. This
increase in gross profit was primarily attributable to improved
manufacturing performance and increased sales levels in the Company's
European subsidiaries and the decreased cost of bronze ingot.
Selling, general and administrative expenses decreased
$3,721,000 (11.0%) to $30,263,000. The Company recorded $7,000,000 of
unusual charges in the quarter ended December 31, 1992 for
environmental matters and costs associated with the downsizing and
restructuring of certain acquired companies. Selling, general and
administrative expenses would have increased $3,279,000 (12.1%)
without these charges. This increase is primarily attributable to
the inclusion of the expenses of Intermes and other acquired
companies discussed above. These increased expenses were partially
offset by reduced spending at several subsidiaries as a result of
downsizing programs implemented during last fiscal year.
Interest income decreased $276,000 (27.5%) to $727,000. This
decrease is primarily attributable to the decreased levels of cash
and short-term investments. Interest expense decreased $390,000
(15.0%) to $2,204,000. This decrease is attributable to the
decreased levels of long-term debt.
Earnings before income taxes increased $9,066,000 (111.6%) to
$17,187,000. Earnings before income taxes and the unusual charges
increased $2,066,000 (13.7%). Net earnings increased $5,552,000
(111.1%) to $10,548,000. Net earnings before unusual charges
increased $1,212,000 (13.0%).
<PAGE>
The weighted average number of common shares outstanding on
December 31, 1993 decreased to 14,816,464 from 15,053,205 for primary
earnings per share. This decrease is the result of the purchase by
the Company of 342,700 shares of Class A common stock. Primary and
fully diluted earnings per share were $.71 for the quarter ended
December 31, 1993 compared to $.62 before unusual charges for the
quarter ended December 31, 1992.
The following table illustrates the change in earnings per share
for the quarter ended December 31st:
1993 1992
Earnings per share as reported $.71 $.33
Unusual charges $.29
---- ----
$.71 $.62
Six Months Ended December 31, 1993 Compared to
Six Months Ended December 31, 1992
Net sales increased $34,790,000 (15.6%) to $258,315,000. This
increase is primarily attributable to the inclusion of the net sales
of acquired companies. The net sales of Intermes, Edward Barber
Company, and Ancon represented approximately 68% of the increase.
The Company had increased unit shipments of oil and gas valves, water
plumbing and heating valves, steam valves, and increased
international sales, as well as decreased unit shipments of
aerospace/military valves.
Gross profit increased $13,529,000 (15.9%) to $98,614,000 and
increased as a percentage of sales from 38.1% to 38.2%. This
increase is primarily attributable to improved manufacturing
performance and sales levels in the Company's international
subsidiaries, and the decreased cost of bronze ingot.
Selling, general and administrative expenses increased
$2,278,000 (3.9%) to $60,357,000. Selling, general and
administrative expenses would have increased $9,278,000 (18.2%)
without the $7,000,000 of unusual charges in the period ended
December 31, 1992. This increase is primarily attributable to the
inclusion of the expenses of acquired companies and increased
commissions associated with the higher sales volume. These increases
were partially offset by decreased spending at several subsidiaries
as a result of downsizing programs implemented during last fiscal
year.
The Company from time to time is involved with environmental
proceedings and incurs costs on an ongoing basis related to
environmental matters. See Note 5 to Notes of Condensed Consolidated
Financial Statements for further discussion.
<PAGE>
Interest income decreased $1,056,000 (40.9%) to $1,525,000 due
to decreased levels of cash and short-term investments.
Earnings before income taxes and unusual charges increased
$3,107,000 (9.9%) to $34,460,000. Net earnings before unusual
charges and the cumulative effect of the change in accounting method
due to the implementation of SFAS No. 109 as described in Footnote 4
increased $1,817,000 (9.4%).
The weighted average number of common shares outstanding on
December 31, 1993 decreased to 14,817,924 from 15,049,041 for primary
earnings per share. This decrease is the result of the purchase by
the Company of 342,700 shares of Class A Common Stock during the
current fiscal year. Primary and fully diluted earnings per share
were $1.42 for the six months ended December 31, 1993 compared to
$1.28 before unusual charges and the cumulative effect of the
accounting change in accounting method for the six months ended
December 31, 1992.
The following table illustrates the change in earnings per share
for the six months ended December 31st:
1993 1992
Earnings per share as reported $1.42 $ .78
Unusual charges $ .29
Cumulative effect of change in
accounting method $ .21
----- -----
$1.42 $1.28
Liquidity and Capital Resources
During the six months ended December 31, 1993, the Company
purchased 342,700 shares of its Class A common stock through open
market repurchases for an aggregate price of $12,064,000. A
subsidiary of the Company purchased Ancon Products, Inc. located in
Scarborough, Ontario, Canada. Ancon manufactures a wide range of
floor and roof drains, intercepters, backwater valves, yard hydrants,
and stainless and carbon steel specialty products used primarily in
commercial and industrial construction applications. The Company
also purchased Enpoco Canada, Ltd., a manufacturer of drains located
in Ontario, Canada. The aggregate purchase price for these
acquisitions was $4,927,000. The Company also repaid $1,846,000 of
debt acquired with one of the companies. The Company made contingent
payments of $6,094,000 as part of the Intermes acquisition. The
Company also spent $8,418,000 on capital expenditures as part of its
current fiscal year budget of $22,000,000.
<PAGE>
The principal sources of funds to finance these acquisitions,
capital expenditures, debt repayments and stock repurchases were the
issuance by the Company on November 26, 1991 of $75,000,000 aggregate
principal amount of its 8.375% Notes Due 2003 and funds provided from
operations.
The change in foreign exchange rates since June 30, 1993 did not
have a material impact on the results of operations or the financial
condition of the Company.
Working capital at December 31, 1993 was $227,016,000 compared
to $222,652,000 at June 30, 1993. Cash and short-term investments
were $58,973,000 at December 31, 1993 compared to $83,135,000 at June
30, 1993. The ratio of current assets to current liabilities was 4.4
to 1 at December 31, 1993 compared to 3.8 to 1 at June 30, 1993.
Debt as a percentage of capital employed was 23.0% at December 31,
1993 compared to 23.7% at June 30, 1993.
The Company anticipates that funds provided from operations will
be sufficient to meet operating requirements and anticipated capital
expenditures for at least the next 24 months.
<PAGE>
Item 4. Submission of Matters to Vote of Security Holders
(a) The annual meeting of stockholders of the Company was held
on October 19, 1993.
(c) The results of the voting on the proposals considered at
the annual meeting of stockholders are as follows:
1. Election of Directors
Timothy P. Horne, Charles W. Grigg, Frederic B. Horne, Noah
T. Herndon, Gordon W. Moran and Daniel J. Murphy, III were
each elected as a Director of the Company for a term
expiring at the next annual meeting of stockholders and
voting results were as follows:
Mr. T.Horne:65,469,407 votes FOR;10,696 votes WITHHELD.
Mr. Grigg: 65,469,107 votes FOR;10,996 votes WITHHELD.
Mr. F.Horne:65,469,107 votes FOR;10,996 votes WITHHELD.
Mr. Herndon:65,471,107 votes FOR;10,996 votes WITHHELD.
Mr. Moran: 65,470,807 votes FOR; 9,296 votes WITHHELD.
Mr. Murphy: 65,470,807 votes FOR; 9,296 votes WITHHELD.
2. Ratification of Independent Auditors
The selection of Ernst & Young as the independent auditors
of the Company for the current fiscal year was ratified and
voting results were as follows:
65,465,951 FOR; 3,771 AGAINST; 10,381 ABSTAINED; and 0
Broker Non-Votes.
Item 5. Other Information
On January 18, 1994, the Board of Directors of the
Corporation declared a two-for-one stock split of the
Corporation's outstanding Class A Common Stock, par value
$.10 per share, and Class B Common Stock, par value $.10
per share, to be effected in the form of a stock dividend
equal to one share of Class A Common Stock for each share
of Class A Common Stock outstanding on the record date, and
one share of Class B Common Stock for each share of Class B
Common Stock outstanding on the record date, all such
shares to be fully paid and nonassessable. The stock
dividend is payable on March 15, 1994 to holders of Class A
Common Stock and Class B Common Stock of record as of the
close of business on March 1, 1994. Upon the effectiveness
of such dividend, there shall be designated as additional
capital of the Corporation an amount equal to the aggregate
par value of the shares of Class A Common Stock and Class B
Common Stock of the Corporation being declared as a
dividend.
<PAGE>
Upon the effectiveness of such stock dividend, the
Corporation shall increase by 100% the number of shares of
Class A Common Stock reserved for issuance in connection
with, and decrease by 50% the exercise price with respect
to, any options heretofore granted and now outstanding and
hereafter granted under the Corporation's 1986 Incentive
Stock Option Plan, the 1989 Nonqualified Stock Option Plan,
and the 1991 Non-Employee Directors' Nonqualified Stock
Option Plan, all in accordance with the anti-dilution
provisions of each such Plan. The number of shares of
Class A Common Stock and the exercise price of each stock
option granted prior to and outstanding as of the effective
date of the dividend under the Corporation's 1986 Incentive
Stock Option Plan, the 1989 Nonqualified Stock Option Plan,
or the 1991 Non-Employee Directors' Nonqualified Stock
Option Plan, respectively, and each option agreement
outstanding thereunder, shall be adjusted so that the
number of shares that may be purchased upon exercise of any
such option agreement will be increased by 100% and the
exercise price will be decreased by 50% per share.
The Board of Directors of the Corporation also voted on
January 18, 1994 to increase the quarterly cash dividend
paid on the Corporation's Class A Common Stock and Class B
Common Stock by $.02 per share to $.11 per share on a
present (pre-split) basis. The dividend will be payable on
March 15, 1994 to stockholders of record on March 1, 1994.
Charles W. Grigg resigned effective January 18, 1994 as
Director, President and Chief Operating Officer of the
Company. The Board of Directors elected Timothy P. Horne,
the Company's Chairman and Chief Executive Officer, to
serve as President. The Board of Directors of Watts
Industries, Inc. has also been increased to eight members
and Ms. Wendy Lane, Chairman of Lane Holdings, Inc., a
private equity investor, and Messrs. David A. Bloss, Sr.
and Kenneth J. McAvoy, the Company's Executive Vice
President and Chief Financial Officer, respectively, were
elected as Directors. Ms. Lane is also a Director of
Rexnord Corporation and formerly was a Managing Director at
Donaldson, Lufkin & Jenrette Securities Corporation.
<PAGE>
On January 1, 1994, Timothy P. Horne, Frederic B. Horne and
George B. Horne executed the 1994 Designation of Primary
and Secondary Designees of the Horne Family Voting Trust
Agreement, appointing as successor trustees under such
trust Mr. Noah T. Herndon, as the primary designee, and Mr.
John R. LeClaire, Esq., as the secondary designee. Mr.
Herndon is a Director of Watts Industries, Inc. and Mr.
LeClaire is a partner at Goodwin, Procter & Hoar, a law
firm which performs legal services for the Company.
Item 6 Exhibits and Reports Filed on Form 8-K
There were no reports filed on Form 8-K for the quarter
ended December 31, 1993.
Watts Industries, Inc.
Exhibit 11 -- Computation of Per Share Earnings
Three Months Ended
December 31
-------------------------
1993 1992
----------- -----------
[C] [C]
PRIMARY
- -------
Average shares outstanding 14,691,042 14,932,345
Net effect of dilutive stock
options - based on the treasury
stock method using average market 125,422 120,860
price
----------- -----------
Total 14,816,464 15,053,205
=========== ===========
Earnings before income taxes and
cumulative effect of change in
accounting for income taxes $ 17,187,546 $ 8,120,657
Income taxes 6,639,656 3,125,095
----------- -----------
Earnings before cumulative effect
of accounting change 10,547,890 4,995,562
Cumulative effect as of June 30,
1992 of change in method of
accounting for income taxes
----------- -----------
Net earnings $ 10,547,890 4,995,562
=========== ===========
Earnings per share:
Earnings before cumulative effect
of accounting change $ .71 $ .33
Cumulative effect of accounting
change
----------- -----------
Net earnings $ .71 $ .33
=========== ===========
<PAGE>
Six Months Ended
December 31
-------------------------
1993 1992
----------- -----------
[C] [C]
PRIMARY
- -------
Average shares outstanding 14,726,282 14,926,605
Net effect of dilutive stock
options - based on the treasury
stock method using average market 91,642 122,436
price
----------- -----------
Total 14,817,924 15,049,041
=========== ===========
Earnings before income taxes and
cumulative effect of change in
accounting for income taxes $ 34,460,064 $ 24,352,127
Income taxes 13,374,614 9,424,509
----------- -----------
Earnings before cumulative effect
of accounting change 21,085,450 14,927,618
Cumulative effect as of June 30,
1992 of change in method of
accounting for income taxes -3,132,000
----------- -----------
Net earnings $ 21,085,450 $ 11,795,618
=========== ===========
Earnings per share:
Earnings before cumulative effect
of accounting change $ 1.42 $ .99
Cumulative effect of accounting
change -.21
----------- -----------
Net earnings $ 1.42 $ .78
=========== ===========
<PAGE>
Watts Industries, Inc.
Exhibit 11 -- Computation of Per Share Earnings
Three Months Ended
December 31
-------------------------
1993 1992
----------- -----------
[C] [C]
FULLY DILUTED
- -------------
Average shares outstanding 14,691,042 14,932,345
Net effect of dilutive stock
options - based on the treasury
stock method using the quarter-end
market price, if higher than 162,179 135,565
average market price
----------- -----------
Total 14,853,221 15,067,910
=========== ===========
Earnings before income taxes and
cumulative effect of change in
accounting for income taxes $ 17,187,546 $ 8,120,657
Income taxes 6,639,656 3,125,095
----------- -----------
Earnings before cumulative effect
of accounting change 10,547,890 4,995,562
Cumulative effect as of June 30,
1992 of change in method of
accounting for income taxes
----------- -----------
Net earnings $ 10,547,890 $ 4,995,562
=========== ===========
Earnings per share:
Earnings before cumulative effect
of accounting change $ .71 $ .33
Cumulative effect of accounting
change
----------- -----------
Net earnings $ .71 $ .33
=========== ===========
<PAGE>
Six Months Ended
December 31
-------------------------
1993 1992
----------- -----------
[C] [C]
FULLY DILUTED
- -------------
Average shares outstanding 14,726,282 14,926,605
Net effect of dilutive stock
options - based on the treasury
stock method using the quarter-end
market price, if higher than 162,179 135,565
average market price
----------- -----------
Total 14,888,461 15,062,170
=========== ===========
Earnings before income taxes and
cumulative effect of change in
accounting for income taxes $ 34,460,064 $ 24,352,127
Income taxes 13,374,614 9,424,509
----------- -----------
Earnings before cumulative effect
of accounting change 21,085,450 14,927,618
Cumulative effect as of June 30,
1992 of change in method of
accounting for income taxes -3,132,000
----------- -----------
Net earnings $ 21,085,450 $ 11,795,618
=========== ===========
Earnings per share:
Earnings before cumulative effect
of accounting change $ 1.42 $ .99
Cumulative effect of accounting
change -.21
----------- -----------
Net earnings $ 1.42 $ .78
=========== ===========
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: February 7, 1994 By: _________________________
Kenneth J. McAvoy
Vice President of Finance
and Treasurer; Principal
Financial Officer
