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.
<TABLE>
EXHIBIT 11
WATTS INDUSTRIES , INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Three Months Ended
September 30
1996 1995
<CAPTION> ____________ ____________
<S> <C> <C>
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
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM SEPTEMBER 30, 1996 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 126,254
<ALLOWANCES> 8,129
<INVENTORY> 183,699
<CURRENT-ASSETS> 343,319
<PP&E> 150,295
<DEPRECIATION> 116,944
<TOTAL-ASSETS> 586,028
<CURRENT-LIABILITIES> 142,409
<BONDS> 101,708
<COMMON> 2,753
0
0
<OTHER-SE> 310,205
<TOTAL-LIABILITY-AND-EQUITY> 586,028
<SALES> 176,008
<TOTAL-REVENUES> 176,008
<CGS> 115,652
<TOTAL-COSTS> 153,742<F1>
<OTHER-EXPENSES> (3,728)<F2>
<LOSS-PROVISION> 174
<INTEREST-EXPENSE> 2,754
<INCOME-PRETAX> 25,994
<INCOME-TAX> 10,440
<INCOME-CONTINUING> 15,554
<DISCONTINUED> 79
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,633
<EPS-PRIMARY> $.57
<EPS-DILUTED> $.57
<FN>
<F1> INCLUDES ONLY COST OF GOODS SOLD AND OPERATING EXPENSES.
<F2> INCLUDES INTEREST EXPENSE AND LOSS PROVISION SHOWN BELOW.
</FN>
</TABLE>
