WATTS WATER TECHNOLOGIES INC, 10-Q filed on 5/3/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
Apr. 28, 2019
Entity Registrant Name WATTS WATER TECHNOLOGIES INC  
Entity Central Index Key 0000795403  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Filer Category Large Accelerated Filer  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Class A    
Entity Common Stock, Shares Outstanding   27,692,316
Class B    
Entity Common Stock, Shares Outstanding   6,279,290
v3.19.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
CURRENT ASSETS:    
Cash and cash equivalents $ 170.2 $ 204.1
Trade accounts receivable, less allowance for doubtful accounts of $15.3 million at March 31, 2019 and $15.0 million at December 31, 2018 240.6 205.5
Inventory, Net [Abstract]    
Raw materials 95.2 87.4
Work in process 17.4 17.3
Finished goods 181.3 182.1
Total Inventories 293.9 286.8
Prepaid expenses and other assets 25.2 24.9
Total Current Assets 729.9 721.3
PROPERTY, PLANT AND EQUIPMENT, NET    
Property, plant and equipment, at cost 539.2 537.4
Accumulated depreciation (339.6) (335.5)
Property, plant and equipment, net 199.6 201.9
OTHER ASSETS:    
Goodwill 543.0 544.8
Intangible assets, net 161.0 165.2
Deferred income taxes 2.2 1.6
Other, net 47.7 18.9
TOTAL ASSETS 1,683.4 1,653.7
CURRENT LIABILITIES:    
Accounts payable 111.5 127.2
Accrued expenses and other liabilities 137.1 130.6
Accrued compensation and benefits 43.2 60.9
Current portion of long-term debt 30.0 30.0
Total Current Liabilities 321.8 348.7
LONG-TERM DEBT, NET OF CURRENT PORTION 341.1 323.4
DEFERRED INCOME TAXES 42.6 38.5
OTHER NONCURRENT LIABILITIES 72.8 51.8
STOCKHOLDERS' EQUITY:    
Preferred Stock, $0.10 par value; 5,000,000 shares authorized; no shares issued or outstanding
Additional paid-in capital 576.6 568.3
Retained earnings 452.1 440.7
Accumulated other comprehensive loss (127.0) (121.1)
Total Stockholders' Equity 905.1 891.3
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,683.4 1,653.7
Class A    
STOCKHOLDERS' EQUITY:    
Common Stock 2.8 2.8
Class B    
STOCKHOLDERS' EQUITY:    
Common Stock $ 0.6 $ 0.6
v3.19.1
Consolidated Balance Sheets (Parenthetical)
$ in Millions
Mar. 31, 2019
USD ($)
$ / shares
shares
Dec. 31, 2018
USD ($)
$ / shares
shares
Trade accounts receivable, allowance for doubtful accounts (in dollars) | $ $ 15.3 $ 15.0
Preferred Stock, par value (in dollars per share) | $ / shares $ 0.10 $ 0.10
Preferred Stock, shares authorized 5,000,000 5,000,000
Preferred Stock, shares issued 0 0
Preferred Stock, shares outstanding 0 0
Class A    
Common Stock, par value (in dollars per share) | $ / shares $ 0.10 $ 0.10
Common Stock, shares authorized 80,000,000 80,000,000
Common Stock, votes per share (Number of votes) 1 1
Common Stock, issued shares 27,710,297 27,646,465
Common Stock, outstanding shares 27,710,297 27,646,465
Class B    
Common Stock, par value (in dollars per share) | $ / shares $ 0.10 $ 0.10
Common Stock, shares authorized 25,000,000 25,000,000
Common Stock, votes per share (Number of votes) 10 10
Common Stock, issued shares 6,279,290 6,329,290
Common Stock, outstanding shares 6,279,290 6,329,290
v3.19.1
Consolidated Statements of Operations - USD ($)
shares in Millions, $ in Millions
3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Consolidated Statements of Operations    
Net Sales $ 388.7 $ 378.5
Cost of goods sold 224.5 221.8
GROSS PROFIT 164.2 156.7
Selling, general and administrative expenses 116.1 112.8
Restructuring 1.4  
OPERATING INCOME 46.7 43.9
Other (income) expense:    
Interest income (0.1) (0.4)
Interest expense 3.6 4.3
Other expense, net 0.5 0.7
Total other expense 4.0 4.6
INCOME BEFORE INCOME TAXES 42.7 39.3
Provision for income taxes 11.7 11.1
NET INCOME $ 31.0 $ 28.2
BASIC EPS    
NET INCOME PER SHARE $ 0.91 $ 0.82
Weighted average number of shares (in shares) 34.2 34.3
DILUTED EPS    
NET INCOME PER SHARE $ 0.91 $ 0.82
Weighted average number of shares (in shares) 34.2 34.4
Dividends declared per share (in dollars per share) $ 0.21 $ 0.19
v3.19.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Consolidated Statements of Comprehensive Income    
Net income $ 31.0 $ 28.2
Other comprehensive (loss) income, net of tax:    
Foreign currency translation adjustments (4.6) 9.7
Cash flow hedges (1.3) 2.8
Other comprehensive (loss) income (5.9) 12.5
Comprehensive income $ 25.1 $ 40.7
v3.19.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Millions
Class A
Common Stock
Class B
Common Stock
Additional Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Total
Balance at the beginning of the period at Dec. 31, 2017 $ 2.8 $ 0.6 $ 551.8 $ 372.9 $ (99.1) $ 829.0
Balance (in shares) at Dec. 31, 2017 27,724,192 6,379,290        
Increase (Decrease) in Stockholders' Equity            
Change in accounting principle       (0.7)   (0.7)
Net income       28.2   28.2
Other comprehensive income         12.5 12.5
Comprehensive income           40.7
Shares of Class B common stock converted to Class A common stock (in shares) 50,000 (50,000)        
Shares of Class A common stock issued upon the exercise of stock options (in shares) 4,880          
Stock-based compensation     2.7     2.7
Stock repurchase       (6.2)   (6.2)
Stock repurchase (in shares) (80,055)          
Issuance of net shares of restricted Class A common stock       (1.9)   (1.9)
Issuance of net shares of restricted Class A common stock (in shares) 91,968          
Net change in restricted stock units     0.9 (2.0)   (1.1)
Net change in restricted stock units (in shares) 61,511          
Common stock dividends       (6.7)   (6.7)
Balance at the end of the period at Apr. 01, 2018 $ 2.8 $ 0.6 555.4 383.6 (86.6) 855.8
Balance (in shares) at Apr. 01, 2018 27,852,496 6,329,290        
Balance at the beginning of the period at Dec. 31, 2018 $ 2.8 $ 0.6 568.3 440.7 (121.1) 891.3
Balance (in shares) at Dec. 31, 2018 27,646,465 6,329,290        
Increase (Decrease) in Stockholders' Equity            
Net income       31.0   31.0
Other comprehensive income         (5.9) (5.9)
Comprehensive income           25.1
Shares of Class B common stock converted to Class A common stock (in shares) 50,000 (50,000)        
Shares of Class A common stock issued upon the exercise of stock options     0.6     0.6
Shares of Class A common stock issued upon the exercise of stock options (in shares) 9,881          
Stock-based compensation     4.6     4.6
Stock repurchase       (5.6)   (5.6)
Stock repurchase (in shares) (74,409)          
Net change in restricted stock units     3.1 (6.7)   (3.6)
Net change in restricted stock units (in shares) 78,360          
Common stock dividends       (7.3)   (7.3)
Balance at the end of the period at Mar. 31, 2019 $ 2.8 $ 0.6 $ 576.6 $ 452.1 $ (127.0) $ 905.1
Balance (in shares) at Mar. 31, 2019 27,710,297 6,279,290        
v3.19.1
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
OPERATING ACTIVITIES    
Net income $ 31.0 $ 28.2
Adjustments to reconcile net income to net cash used in operating activities:    
Depreciation 7.5 7.1
Amortization of intangibles 3.9 5.6
Loss on disposal and impairment of property, plant and equipment and other 0.5  
Stock-based compensation 4.6 2.7
Deferred income tax 4.5 (4.4)
Changes in operating assets and liabilities, net of effects from business acquisitions and divestures:    
Accounts receivable (36.3) (13.9)
Inventories (7.8) (19.7)
Prepaid expenses and other assets 0.2 (1.6)
Accounts payable, accrued expenses and other liabilities (32.3) (30.1)
Net cash used in operating activities (24.2) (26.1)
INVESTING ACTIVITIES    
Additions to property, plant and equipment (6.9) (7.3)
Business acquisitions, net of cash acquired and other   (1.5)
Net cash used in investing activities (6.9) (8.8)
FINANCING ACTIVITIES    
Proceeds from long-term borrowings 30.0 20.0
Payments of long-term debt (12.5) (70.6)
Payment of finance leases and other (7.2) (0.4)
Proceeds from share transactions under employee stock plans 0.6  
Payments to repurchase common stock (5.6) (6.2)
Dividends (7.3) (6.7)
Net cash used in financing activities (2.0) (63.9)
Effect of exchange rate changes on cash and cash equivalents (0.8) 3.3
DECREASE IN CASH AND CASH EQUIVALENTS (33.9) (95.5)
Cash and cash equivalents at beginning of year 204.1 280.2
CASH AND CASH EQUIVALENTS AT END OF PERIOD 170.2 184.7
Acquisition of businesses:    
Fair value of assets acquired   0.7
Cash paid, net of cash acquired   1.3
Liabilities assumed   (0.6)
Issuance of stock under management stock purchase plan 1.2 1.1
CASH PAID FOR:    
Interest 2.6 4.0
Income taxes $ 2.9 $ 7.0
v3.19.1
Basis of Presentation
3 Months Ended
Mar. 31, 2019
Basis of Presentation  
Basis of Presentation

WATTS WATER TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

 

1. Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the Watts Water Technologies, Inc. (the Company) Consolidated Balance Sheet as of March 31, 2019, the Consolidated Statements of Operations for the first quarters ended March 31, 2019 and April 1, 2018, the Consolidated Statements of Comprehensive Income for the first quarters ended March 31, 2019 and April 1, 2018, the Consolidated Statements of Stockholders’ Equity for the first quarters ended March 31, 2019 and April 1, 2018, and the Consolidated Statements of Cash Flows for the first quarters ended March 31, 2019 and April 1, 2018.

 

The consolidated balance sheet at December 31, 2018 has been derived from the audited consolidated financial statements at that date. The accounting policies followed by the Company are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.  The financial statements included in this report should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2018. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2019.  

 

The Company operates on a 52-week fiscal year ending on December 31.  Any quarterly data contained in this Quarterly Report on Form 10-Q generally reflect the results of operations for a 13-week period.

 

Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

v3.19.1
Accounting Policies
3 Months Ended
Mar. 31, 2019
Accounting Policies  
Accounting Policies

2. Accounting Policies

 

The significant accounting policies used in preparation of these consolidated financial statements for the three months ended March 31, 2019 are consistent with those discussed in Note 2 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, with the exception of the Company’s change in its accounting policy for Leases resulting from the adoption of ASC 842 described herein.

 

Leases

 

The Company has leases for the following classes of underlying assets: real estate, automobiles, manufacturing equipment, facility equipment, office equipment and certain service arrangements that are dependent on an identified asset. The Company determines if an arrangement qualifies as a lease at its inception. The Company, as the lessee, recognizes in the statement of financial position a liability to make lease payments and a right-of-use asset (“ROU”) representing the right to use the underlying asset for both finance and operating leases with a lease term longer than twelve months. The Company elected the short-term lease recognition exemption for all leases that qualify and does not recognize ROU assets or lease liabilities for short-term leases. The Company recognizes short-term lease payments on a straight-line basis over the lease term in the consolidated statement of operations. The Company determines the initial classification and measurement of its ROU assets and lease liabilities at the lease commencement date and thereafter if modified.

For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases and is subsequently measured at amortized cost using the effective interest method.

Measuring the lease liability requires certain estimates and judgements. These estimates and judgments include how the Company determines 1) the discount rate it uses to discount the unpaid lease payments to present value; 2) lease term; and 3) lease payments.

·

The present value of lease payments is determined using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, the Company uses the incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under a similar term. The Company’s incremental borrowing rate is determined by using a portfolio approach by geographic region, considering many factors, such as the Company’s specific credit risk, the amount of the lease payments, collateralized nature of the lease, both borrowing term and the lease term, and geographical economic considerations.

·

The lease term for all of the Company’s leases includes the fixed, noncancelable term of the lease plus (a) all periods, if any, covered by options to extend the lease if the Company is reasonably certain to exercise that option (b) all periods, if any, covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option (c) all periods, if any, covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor. When determining if a renewal option is reasonably certain of being exercised, the Company considers several economic factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, underlying contractual obligations, or specific characteristics unique to that particular lease that would make it reasonably certain to exercise such option.

·

Lease payments included in the measurement of the lease liability include the following:

o

Fixed payments, including in-substance fixed payments, owed over the lease term (which includes termination penalties the Company would owe if the lease term assumes Company exercise of a termination option), less any lease incentives paid or payable to the Company;

o

Variable lease payments that depend on an index or rate initially measured using the index or rate at the commencement date; 

o

Amounts expected to be payable under a Company-provided residual value guarantee;

o

The exercise price of a Company option to purchase the underlying asset if the Company is reasonably certain to exercise that option; and

o

Fees paid by the Company to the owners of a special purpose entity for structuring the transaction.

 

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for the lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received.

For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in cost of goods sold or within selling, general and administrative expenses in the consolidated statements of operations, based on the primary use of the ROU asset.

For finance leases, the Company recognizes the amortization of the ROU asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized in depreciation in the consolidated statements of operations. The interest expense related to finance leases is recognized using the effective interest method and is included within interest expense.

Variable lease payments associated with the Company’s leases are recognized in the period when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs and are included in cost of goods sold or within selling, general and administrative expenses in the consolidated statements of operations, based on the primary use of the ROU asset.

ROU assets for operating and finance leases are periodically reduced by impairment losses. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment- Overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in a remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in the statement of operations.

Recently Adopted Accounting Standards

 

In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (Topic 815)-Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends the hedge accounting guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in the financial statements. This guidance permits hedge accounting for risk components in hedging relationships that involve nonfinancial risk, reduces complexity in hedging for fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedging ineffectiveness, and simplifies certain hedge effectiveness assessment requirements. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. The Company adopted this standard in the first quarter of 2019, and it did not have a material impact on the Company’s financial statements.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016‑02 requires a lessee to recognize in the statement of financial position a liability to make lease payments an ROU asset representing the right to use the underlying asset for the lease term for both finance and operating leases with a term longer than twelve months. Topic 842 was subsequently amended by ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,” ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU 2018-11 “Targeted Improvements.” ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018 and all interim periods thereafter. Under ASC 842, leases are classified as finance or operating, with the classification determining the pattern and classification of expense recognition in the income statement.

 

A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. The Company may choose to use either 1) the effective date of the standard or 2) the beginning of the earliest comparable period presented in the financial statements as the date of initial application. The Company adopted the new standard on January 1, 2019 and used the effective date of the standard as the date of the Company’s initial application. By electing this approach, the financial information and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The Company designed the necessary changes to its existing processes and configured all system requirements that were necessary to implement this new standard.

 

The new standard provides a number of optional practical expedients throughout the transition. The Company elected the “package of practical expedients,” which permits the Company to not reassess under the new standard the Company’s prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The Company also elected the practical expedient not to separate lease and non-lease components for all of the Company’s leases.

 

As a result of adopting ASC 842, the Company recorded operating ROU assets of $33.6 million and operating lease liabilities of $33.9 million as of January 1, 2019 on the consolidated balance sheet. The difference between the ROU assets and lease liabilities related to the impact of eliminating deferred and prepaid lease payments recognized under the previous lease accounting standard. The Company’s adoption of ASC 842 did not result in a change to the Company’s recognition of its existing finance leases as of January 1, 2019.  The adoption of the new lease accounting standard did not have a material impact on either the consolidated statement of operations or the consolidated statement of cash flows. However, ASU 2016-02 has significantly affected the Company’s disclosures about noncash activities related to leases. Additionally, the Company’s lease-related disclosures have significantly increased as of and for the period ended March 31, 2019 as compared to prior years. See Note 4 to the consolidated financial statements.

 

Shipping and Handling

 

Shipping and handling costs included in selling, general and administrative expenses amounted to $13.9 million and $13.2 million for the first quarters of 2019 and 2018, respectively. 

 

Research and Development

 

Research and development costs included in selling, general and administrative expenses amounted to $9.3 million and $8.5 million for the first quarters of 2019 and 2018, respectively.

v3.19.1
Revenue Recognition
3 Months Ended
Mar. 31, 2019
Revenue Recognition  
Revenue Recognition

3. Revenue Recognition

 

The Company is a leading supplier of products that manage and conserve the flow of fluids and energy into, through and out of buildings in the residential and commercial markets of the Americas, Europe, and AsiaPacific, Middle East, and Africa (“APMEA”). For over 140 years, the Company has designed and produced valve systems that safeguard and regulate water systems, energy efficient heating and hydronic systems, drainage systems and water filtration technology that helps purify and conserve water.

 

The Company distributes products through four primary distribution channels: wholesale, original equipment manufacturers (OEMs), specialty, and do-it-yourself (DIY). The Company operates in three geographic segments: Americas, Europe, and APMEA. Each of these segments sells similar products, which are comprised of the following principal product lines:

 

·

Residential & commercial flow control products—includes products typically sold into plumbing and hot water applications such as backflow preventers, water pressure regulators, temperature and pressure relief valves, and thermostatic mixing valves.

·

HVAC & gas products—includes commercial highefficiency boilers, water heaters and heating solutions, hydronic and electric heating systems for underfloor radiant applications, custom heat and hot water solutions, hydronic pump groups for boiler manufacturers and alternative energy control packages, and flexible stainless steel connectors for natural and liquid propane gas in commercial food service and residential applications. HVAC is an acronym for heating, ventilation and air conditioning.

·

Drainage & water reuse products—includes drainage products and engineered rain water harvesting solutions for commercial, industrial, marine and residential applications.

·

Water quality products—includes pointofuse and pointofentry water filtration, conditioning and scale prevention systems for both commercial and residential applications.

 

The following table disaggregates revenue, which is presented as net sales in the financial statements, for each reportable segment, by distribution channel and principal product line:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2019

 

 

 

 

(in millions)

 

 

Distribution Channel

 

Americas

 

Europe

 

APMEA

 

Consolidated

Wholesale

 

$

145.6

 

$

79.5

 

$

12.6

 

$

237.7

OEM

 

 

20.8

 

 

36.0

 

 

0.5

 

 

57.3

Specialty

 

 

76.1

 

 

 —

 

 

0.4

 

 

76.5

DIY

 

 

16.4

 

 

0.8

 

 

 —

 

 

17.2

Total

 

$

258.9

 

$

116.3

 

$

13.5

 

$

388.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2019

 

 

 

 

(in millions)

 

 

Principal Product Line

 

Americas

 

Europe

 

APMEA

 

Consolidated

Residential & Commercial Flow Control

 

$

147.4

 

$

45.4

 

$

10.7

 

$

203.5

HVAC and Gas Products

 

 

68.7

 

 

48.5

 

 

2.1

 

 

119.3

Drainage and Water Re-use Products

 

 

18.1

 

 

21.9

 

 

0.5

 

 

40.5

Water Quality Products

 

 

24.7

 

 

0.5

 

 

0.2

 

 

25.4

Total

 

$

258.9

 

$

116.3

 

$

13.5

 

$

388.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended April 1, 2018

 

 

 

 

(in millions)

 

 

Distribution Channel

 

Americas

 

Europe

 

APMEA

 

Consolidated

Wholesale

 

$

136.6

 

$

82.7

 

$

13.9

 

$

233.2

OEM

 

 

19.1

 

 

39.5

 

 

0.5

 

 

59.1

Specialty

 

 

67.6

 

 

 —

 

 

 —

 

 

67.6

DIY

 

 

17.8

 

 

0.8

 

 

 —

 

 

18.6

Total

 

$

241.1

 

$

123.0

 

$

14.4

 

$

378.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended April 1, 2018

 

 

 

 

(in millions)

 

 

Principal Product Line

 

Americas

 

Europe

 

APMEA

 

Consolidated

Residential & Commercial Flow Control

 

$

139.9

 

$

47.2

 

$

9.5

 

$

196.6

HVAC and Gas Products

 

 

62.5

 

 

53.9

 

 

4.3

 

 

120.7

Drainage and Water Re-use Products

 

 

16.5

 

 

21.6

 

 

0.3

 

 

38.4

Water Quality Products

 

 

22.2

 

 

0.3

 

 

0.3

 

 

22.8

Total

 

$

241.1

 

$

123.0

 

$

14.4

 

$

378.5

 

 

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to represent the contract with a customer. The Company’s contracts with customers are generally for products only and typically do not include other performance obligations such as professional services, extended warranties, or other material rights. In situations where sales are to a distributor, the Company has concluded that its contracts are with the distributor as the Company holds a contract bearing enforceable rights and obligations only with the distributor. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. As the Company’s standard payment terms are less than one year, the Company has elected  not to assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment from the Company’s manufacturing site or distribution center, or delivery to the customer’s named location. In certain circumstances, revenue from shipments to retail customers is recognized only when the product is consumed by the customer, as based on the terms of the arrangement, transfer of control is not satisfied until that point in time. In determining whether control has transferred, the Company considers if there is a present right to payment, physical possession and legal title, along with risks and rewards of ownership having transferred to the customer. In certain circumstances, the Company manufactures customized product without alternative use for its customers. However, as these arrangements do not entitle the Company a right to payment of cost plus a profit for work completed, the Company has concluded that revenue recognition at the point in time control transfers is appropriate and not over time recognition.

 

At times, the Company receives orders for products to be delivered over multiple dates that may extend across reporting periods. The Company invoices for each delivery upon shipment and recognizes revenues for each distinct product delivered, assuming transfer of control has occurred. As scheduled delivery dates are within one year, under the optional exemption provided by the guidance, revenues allocated to future shipments of partially completed contracts are not disclosed.

 

The Company generally provides an assurance warranty that its products will substantially conform to the published specification. The Company’s liability is limited to either a credit equal to the purchase price or replacement of the defective part. Returns under warranty have historically been immaterial. The Company does not consider activities related to such warranty, if any, to be a separate performance obligation. For certain of its products, the Company will separately sell extended warranty and service policies to its customers. The Company considers the sale of the extended warranty a separate performance obligation. These policies typically are for periods ranging from one to three years. Payments received are deferred and recognized over the policy period. For all periods presented, the revenue recognized and the revenue deferred under these policies is not material to the consolidated financial statements.

 

The timing of revenue recognition, billings and cash collections from the Company’s contracts with customers can vary based on the payment terms and conditions in the customer contracts. In some cases, customers will partially prepay for their goods; in other cases, after appropriate credit evaluations, payment is due in arrears. In addition, there are constraints which cause variability in the ultimate consideration to be recognized. These constraints typically include early payment discounts, volume rebates, rights of return, cooperative advertising, and market development funds.  The Company includes these constraints in the estimated transaction price when there is a basis to reasonably estimate the amount of variable consideration.  These estimates are based on historical experience, anticipated future performance and the Company’s best judgment at the time. When the timing of the Company’s recognition of revenue is different from the timing of payments made by the customer, the Company recognizes either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Contracts with payment in arrears are recognized as receivables. The opening and closing balances of the Company’s contract assets and contract liabilities are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract

 

Contract

 

Contract

 

 

Assets

 

Liabilities - Current

 

Liabilities - Noncurrent

 

 

 

 

 

(in millions)

 

 

 

Balance - January 1, 2019

 

$

1.0

 

$

11.3

 

$

2.7

Change in period

 

 

(0.7)

 

 

0.1

 

 

 —

Balance - March 31, 2019

 

$

0.3

 

$

11.4

 

$

2.7

 

 

 

 

 

 

 

 

 

 

Balance - January 1, 2018

 

$

0.6

 

$

11.3

 

$

2.1

Change in period

 

 

1.1

 

 

0.2

 

 

0.3

Balance - April 1, 2018

 

$

1.7

 

$

11.5

 

$

2.4

 

The amount of revenue recognized during the three months ended March 31, 2019 that was included in the opening contract liability balance was $3.3 million. This revenue consists primarily of revenue recognized for shipments of product which had been prepaid as well as the amortization of extended warranty and service policy revenue. The Company did not recognize any material revenue from obligations satisfied in prior periods.  The change in Contract Liabilities is not material for the three months ended March 31, 2019. There were no impairment losses related to Contract Assets for the three months ended March 31, 2019.

 

The Company incurs costs to obtain and fulfill a contract; however, the Company has elected to recognize all incremental costs to obtain a contract as an expense when incurred if the amortization period is one year or less. The Company has elected to treat shipping and handling activities performed after the customer has obtained control of the related goods as a fulfillment cost and the related cost is accrued for in conjunction with the recording of revenue for the goods.

v3.19.1
Leases
3 Months Ended
Mar. 31, 2019
Leases  
Leases

4. Leases 

 

The Company adopted ASC 842 effective January 1, 2019. The Company has a variety of categories of lease arrangements, including real estate, automobiles, manufacturing equipment, facility equipment, office equipment and certain service arrangements that are dependent on an identified asset. The Company’s real estate leases, which are comprised primarily of manufacturing facilities and warehouses, represent approximately 80% of the Company’s operating lease liabilities and generally have a lease term between 2 and 15 years. The remaining leases primarily consist of automobiles, machinery and equipment used in the manufacturing processes (e.g., forklifts and pallets), general office equipment and certain service arrangements, each with various lease terms. The Company’s automobile leases typically have terms ranging from 3 to 5 years. The Company’s remaining population of leases have terms ranging from 2 to 15 years. Certain lease arrangements may contain renewal terms ranging from 1 to 5 years. The majority of the Company’s real estate, automobile, and equipment leases are comprised of fixed lease payments plus, for many of the Company’s leases, variable payments. For the Company’s real estate leases, variable payments include those for common area maintenance, property taxes, and insurance. For automobile leases, variable payments primarily include maintenance, taxes, and insurance. For equipment leases, variable payments include maintenance and payments based on usage. The Company has elected to account for lease and non-lease components as a single component for all leases. Therefore, all fixed costs within a lease arrangement are included in the fixed lease payments for the single, combined lease component and used to measure the lease liability. Variable lease costs are recognized in the period when the event, activity, or circumstance in the lease agreement occurs.

 

Some of the Company’s lease agreements include Company options to either extend and/or early terminate the lease, the costs of which are included in the Company’s lease liability to the extent that such options are reasonably certain of being exercised. Renewal options are generally not included in the lease term for the Company’s existing leases because the Company is not reasonably certain to exercise these renewal options. The Company does not generally enter into leases involving the construction or design of the underlying asset, and nearly all of the assets the Company leases are not specialized in nature. The Company’s leases generally do not include termination options for either party to the lease or restrictive financial or other covenants. The Company’s lease agreements generally do not include residual value guarantees.

 

Right-of-use asset amounts reported in the consolidated balance sheet by asset category as of March 31, 2019 were as follows:

 

 

 

 

 

 

 

March 31, 2019

 

 

(in millions)

Operating Leases (1)

 

 

 

Real Estate

 

$

24.4

Automobile

 

 

3.3

Machinery and equipment

 

 

3.5

Total operating lease ROU Asset

 

$

31.2

 

 

 

 

Finance Leases (2)

 

 

 

Real Estate

 

$

14.5

Machinery and equipment

 

 

3.7

Less: Accumulated depreciation

 

 

(8.1)

Finance Leases, net

 

$

10.1


(1)Included on the Company’s consolidated balance sheet in other assets (other, net).

 

(2)Included on the Company’s consolidated balance sheet in property, plant and equipment.

 

The maturity of the Company’s operating and finance lease liabilities as of March 31, 2019 was as follows:

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

    

Operating Leases

    

Finance Leases

 

 

(in millions)

2019 (excluding the three months ended March 31, 2019)

 

$

10.7

 

$

1.7

2020

 

 

8.7

 

 

1.6

2021

 

 

4.6

 

 

0.5

2022

 

 

3.0

 

 

0.3

2023

 

 

2.3

 

 

 —

Thereafter

 

 

4.4

 

 

 —

Total undiscounted minimum lease payments

 

$

33.7

 

$

4.1

Less imputed interest

 

 

2.2

 

 

0.3

Total lease liabilities

 

$

31.5

 

$

3.8

Included in the consolidated balance sheet

 

 

 

 

 

 

Current lease liabilities (included in other current liabilities)

 

 

10.0

 

 

1.7

Non-Current lease liabilities (included in other non-current liabilities)

 

 

21.5

 

 

2.1

Total lease liabilities

 

$

31.5

 

$

3.8

 

The total lease cost was comprised of the following amounts:

 

 

 

 

 

 

 

March 31, 2019

 

 

(in millions)

Operating lease cost

 

$

2.9

Amortization of finance lease right-out-use assets:

 

 

0.3

Variable lease cost

 

 

0.8

Total lease cost

 

$

4.0

 

The following information represents supplemental disclosure for the statement of cash flows related to operating and finance leases:

 

 

 

 

 

 

 

March 31, 2019

 

 

(in millions)

Operating cash flows from operating leases

 

$

3.0

Financing cash flows from finance leases

 

 

0.4

Total cash paid for amounts included in the measurement of lease liabilities

 

 

3.4

Operating lease liabilities arising from obtaining right-of-use assets

 

 

0.3

 

The following summarizes additional information related to operating and finance leases:

 

 

 

 

 

 

 

 

March 31, 2019

Weighted-average remaining lease term - finance leases

 

 

2.8

years

Weighted-average remaining lease term - operating leases

 

 

4.6

years

Weighted-average discount rate - finance leases

 

 

3.8

%

Weighted-average discount rate - operating leases

 

 

 3.1

%

 

v3.19.1
Goodwill & Intangibles
3 Months Ended
Mar. 31, 2019
Goodwill and Intangibles  
Goodwill & Intangibles

5. Goodwill & Intangibles

 

The Company operates in three geographic segments: Americas, Europe, and APMEA. The changes in the carrying amount of goodwill by geographic segment are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

 

Gross Balance

 

Accumulated Impairment Losses

 

Net Goodwill

 

 

 

 

Acquired

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

During

 

Currency

 

Balance

 

Balance

 

Impairment

 

Balance

 

 

 

 

January 1,

 

the

 

Translation

 

March 31,

 

January 1,

 

Loss During

 

March 31,

 

March 31,

 

    

2019

    

Period

    

and Other

    

2019

    

2019

    

the Period

    

2019

    

2019

 

 

(in millions)

Americas

 

$

438.1

 

 

 —

 

$

0.1

 

$

438.2

 

$

(24.5)

 

 

 

$

(24.5)

 

$

413.7

Europe

 

 

243.7

 

 

 —

 

 

(2.0)

 

 

241.7

 

 

(129.7)

 

 

 —

 

 

(129.7)

 

 

112.0

APMEA

 

 

30.1

 

 

 —

 

 

0.1

 

 

30.2

 

 

(12.9)

 

 

 

 

(12.9)

 

 

17.3

Total

 

$

711.9

 

 

 —

 

$

(1.8)

 

$

710.1

 

$

(167.1)

 

 

 —

 

$

(167.1)

 

$

543.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

Gross Balance

 

Accumulated Impairment Losses

 

Net Goodwill

 

 

 

 

Acquired

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

During

 

Currency

 

Balance

 

Balance

 

Impairment

 

Balance

 

 

 

 

January 1,

 

the

 

Translation

 

December 31,

 

January 1,

 

Loss During

 

December 31,

 

December 31,

 

    

2018

    

Period

    

and Other

    

2018

    

2018

    

the Period

    

2018

    

2018

 

 

(in millions)

Americas

 

$

437.4

 

$

1.5

 

$

(0.8)

 

$

438.1

 

$

(24.5)

 

$

 —

 

$

(24.5)

 

$

413.6

Europe

 

 

249.3

 

 

 —

 

 

(5.6)

 

 

243.7

 

 

(129.7)

 

 

 —

 

 

(129.7)

 

 

114.0

APMEA

 

 

30.9

 

 

 —

 

 

(0.8)

 

 

30.1

 

 

(12.9)

 

 

 —

 

 

(12.9)

 

 

17.2

Total

 

$

717.6

 

$

1.5

 

$

(7.2)

 

$

711.9

 

$

(167.1)

 

$

 —

 

$

(167.1)

 

$

544.8


 

 

Intangible assets include the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

December 31, 2018

 

 

Gross

 

 

 

 

Net

 

Gross

 

 

 

 

Net

 

 

Carrying

 

Accumulated

 

Carrying

 

Carrying

 

Accumulated

 

Carrying

 

    

Amount

    

Amortization

    

Amount

    

Amount

    

Amortization

    

Amount

 

 

(in millions)

Patents

 

$

16.1

 

$

(15.8)

 

$

0.3

 

$

16.1

 

$

(15.8)

 

$

0.3

Customer relationships

 

 

232.9

 

 

(149.3)

 

 

83.6

 

 

232.9

 

 

(146.9)

 

 

86.0

Technology

 

 

54.6

 

 

(28.3)

 

 

26.3

 

 

54.6

 

 

(27.3)

 

 

27.3

Trade names

 

 

26.1

 

 

(11.9)

 

 

14.2

 

 

26.1

 

 

(11.5)

 

 

14.6

Other

 

 

4.3

 

 

(3.6)

 

 

0.7

 

 

4.3

 

 

(3.5)

 

 

0.8

Total amortizable intangibles

 

 

334.0

 

 

(208.9)

 

 

125.1

 

 

334.0

 

 

(205.0)

 

 

129.0

Indefinite-lived intangible assets

 

 

35.9

 

 

 —

 

 

35.9

 

 

36.2

 

 

 —

 

 

36.2

 

 

$

369.9

 

$

(208.9)

 

$

161.0

 

$

370.2

 

$

(205.0)

 

$

165.2

 

Aggregate amortization expense for amortized intangible assets for the first quarters of 2019 and 2018 was $3.9 million and $5.6 million, respectively.

v3.19.1
Restructuring
3 Months Ended
Mar. 31, 2019
Restructuring  
Restructuring

6. Restructuring

 

The Company’s Board of Directors approves all major restructuring programs that may involve the discontinuance of significant product lines or the shutdown of significant facilities. From time to time, the Company takes additional restructuring actions, including involuntary terminations that are not part of a major program. The Company accounts for these costs in the period that the liability is incurred. These costs are included in restructuring charges in the Company’s consolidated statements of operations.

 

In the third quarter of 2018, management initiated restructuring actions primarily associated with the European headquarters as well as cost savings initiatives at certain European manufacturing facilities.  These actions included reductions in force and other related costs within the Company’s Europe segment.  The total restructuring charges associated with the program were initially estimated to be approximately $5.0 million.  The Company increased its total expected pre-tax charges for the program to approximately $6.0 million as of March 31, 2019, primarily related to increased severance and other related costs.  Pre-tax restructuring charges of approximately $1.4 million were incurred for the three months ended March 31, 2019 relating to additional severance benefits and cost cutting actions, resulting in approximately $5.4 million of total program costs incurred to date.   The costs are expected to be fully incurred within the year ending December 31, 2019.  The restructuring reserve associated with these actions was approximately $3.0 million as of March 31, 2019, and primarily relates to severance benefits.

 

v3.19.1
Financial Instruments and Derivative Instruments
3 Months Ended
Mar. 31, 2019
Financial Instruments and Derivative Instruments  
Financial Instruments and Derivative Instruments

7. Financial Instruments and Derivative Instruments

 

Fair Value

 

The carrying amounts of cash and cash equivalents, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments.

 

The fair value of the Company’s 5.05% senior notes due 2020 is based on quoted market prices of similar notes (level 2).  The fair value of the Company’s borrowings outstanding under the Credit Agreement and the Company’s variable rate debt approximates its carrying value. The carrying amount and the estimated fair market value of the Company’s long-term debt, including the current portion, are as follows:

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

    

2019

    

2018

 

 

(in millions)

Carrying amount

 

$

372.5

 

$

355.0

Estimated fair value

 

$

373.1

 

$

355.4

 

Financial Instruments

 

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including deferred compensation plan assets and related liabilities, redeemable financial instruments, and derivatives. The fair values of these financial assets and liabilities were determined using the following inputs at March 31, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at March 31, 2019 Using:

 

 

 

 

 

Quoted Prices in Active

 

Significant Other

 

Significant

 

 

 

 

 

Markets for Identical

 

Observable

 

Unobservable

 

 

 

 

 

Assets

 

Inputs

 

Inputs

 

    

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

 

(in millions)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Plan asset for deferred compensation(1)

 

$

2.5

 

$

2.5

 

$

 —

 

$

 —

Interest rate swaps (1)

 

$

4.8

 

$

 —

 

$

4.8

 

$

 —

Designated foreign currency hedge (1)

 

$

0.2

 

$

 —

 

$

0.2

 

$

 —

Total assets

 

$

7.5

 

$

2.5

 

$

5.0

 

$

 —

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Plan liability for deferred compensation(2)

 

$

2.5

 

$

2.5

 

$

 —

 

$

 —

Redeemable financial instrument(3)

 

$

2.8

 

$

 —

 

$

 —

 

$

2.8

Total liabilities

 

$

5.3

 

$

2.5

 

$

 —

 

$

2.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2018 Using:

 

 

 

 

 

Quoted Prices in Active

 

Significant Other

 

Significant

 

 

 

 

 

Markets for Identical

 

Observable

 

Unobservable

 

    

 

 

 

Assets

 

Inputs

 

 Inputs

 

 

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

 

(in millions)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Plan asset for deferred compensation(1)

 

$

2.6

 

$

2.6

 

$

 —

 

$

 —

Interest rate swaps (1)

 

$

6.5

 

$

 —

 

$

6.5

 

$

 —

Total assets

 

$

9.1

 

$

2.6

 

$

6.5

 

$

 —

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Plan liability for deferred compensation(2)

 

$

2.6

 

$

2.6

 

$

 —

 

$

 —

Redeemable financial instrument(3)

 

$

2.8

 

$

 —

 

$

 —

 

$

2.8

Total liabilities

 

$

5.4

 

$

2.6

 

$

 —

 

$

2.8


(1)Included on the Company’s consolidated balance sheet in other assets (other, net).

 

(2)Included on the Company’s consolidated balance sheet in accrued compensation and benefits.

 

(3)Included on the Company’s consolidated balance sheet in other current liabilities and relates to a mandatorily redeemable equity instrument as part of the Apex Valves Limited (“Apex”) acquisition in 2015.

 

The table below provides a summary of the changes in fair value of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period December 31, 2018 to March 31, 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total realized and unrealized

 

 

 

 

 

Balance

 

 

 

 

 

 

(gains) losses included in:

 

Balance

 

 

December 31,

 

 

 

 

 

 

Net earnings

 

Comprehensive

 

March 31,

 

    

2018

    

Settlements

    

Purchases

    

adjustments

    

income

    

2019

 

 

(in millions)

Redeemable financial instrument

 

$

2.8

 

 

 —

 

$

 —

 

 

 —

 

$

 —

 

$

2.8

 

On November 30, 2015, the Company acquired 80% of the outstanding shares of Apex Valves Limited (“Apex”). The aggregate purchase price was approximately $20.4 million and the Company recorded a long-term liability of $5.5 million as the estimate of the acquisition date fair value on the contractual call option to purchase the remaining 20% within three years of closing. The Company acquired an additional 10% ownership in the first quarter of 2017 for approximately $2.9 million and now owns 90% of Apex outstanding shares. The remaining liability is classified as Level 3 under the fair value hierarchy as it is based on the commitment to purchase the remaining 10% of Apex shares which is not observable in the market. In the fourth quarter of 2018 the Company executed an agreement to extend the exercise of the contractual call option, which it expects to settle by the end of 2019.

 

Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of money market funds, for which the carrying amount is a reasonable estimate of fair value.

 

The Company uses financial instruments from time to time to enhance its ability to manage risk, including foreign currency and commodity pricing exposures, which exist as part of its ongoing business operations. The use of derivatives exposes the Company to counterparty credit risk for nonperformance and to market risk related to changes in currency exchange rates and commodity prices. The Company manages its exposure to counterparty credit risk through diversification of counterparties. The Company’s counterparties in derivative transactions are substantial commercial banks with significant experience using such derivative instruments. The impact of market risk on the fair value and cash flows of the Company’s derivative instruments is monitored and the Company restricts the use of derivative financial instruments to hedging activities. The Company does not enter into contracts for trading purposes nor does the Company enter into any contracts for speculative purposes. The use of derivative instruments is approved by senior management under written guidelines.

 

Interest Rate Swaps

 

On February 12, 2016, the Company entered into a Credit Agreement (the “Credit Agreement”) pursuant to which it received a funding commitment under a Term Loan of $300 million, of which the entire $300 million has been drawn on, and a Revolving Commitment (“Revolver”) of $500 million, of which $50.0 million had been drawn as of March 31, 2019.  Both facilities mature on February 12, 2021.  For each facility, the Company can choose either an Adjusted LIBOR or Alternative Base Rate (“ABR”). Accordingly, the Company’s earnings and cash flows are exposed to interest rate risk from changes in Adjusted LIBOR. In order to manage the Company’s exposure to changes in cash flows attributable to fluctuations in LIBOR-indexed interest payments related to the Company’s floating rate debt, the Company entered into two interest rate swaps. For each interest rate swap, the Company receives the three-month USD-LIBOR subject to a 0% floor, and pays a fixed rate of 1.31375% on a notional amount of $225.0 million. The swaps mature on February 12, 2021.  The Company formally documents the hedge relationships at hedge inception to ensure that its interest rate swaps qualify for hedge accounting. On a quarterly basis, the Company assesses whether the interest rate swaps are highly effective in offsetting changes in the cash flow of the hedged item. The Company does not hold or issue interest rate swaps for trading purposes. The swaps are designated as cash flow hedges. For the three months ended March 31, 2019, a loss of $1.3 million was recorded in Accumulated Other Comprehensive Income to recognize the effective portion of the fair value of interest rate swaps that qualify as a cash flow hedge. For the three months ended April 1, 2018, a gain of $1.9 million was recorded in Accumulated Other Comprehensive Income to recognize the effective portion of the fair value of interest rate swaps that qualify as a cash flow hedge.

 

Designated Foreign Currency Hedges

 

The Company’s foreign subsidiaries transact most business, including certain intercompany transactions, in foreign currencies. Such transactions are principally purchases or sales of materials. The Company has exposure to a number of foreign currencies, including the Canadian Dollar, the euro, and the Chinese Yuan. Since the first quarter of 2018, the Company has used a layering methodology, whereby at the end of each quarter, the Company enters into forward exchange contracts hedging Canadian Dollar to U.S. Dollar, which hedge approximately 70% to 80% of the forecasted intercompany purchase transactions between one of the Company’s Canadian subsidiaries and the Company’s U.S. operating subsidiaries for the next twelve months. Beginning in the first quarter of 2019, the Company has used the similar layering methodology and entered into forward exchange contracts hedging U.S. Dollar to the Chinese Yuan, which hedge approximately 60% of the forecasted intercompany sales transactions between one of the Company’s Chinese subsidiaries and one of the Company’s U.S. operating subsidiaries for the next twelve months. As of March 31, 2019, all designated foreign exchange hedge contracts were cash flow hedges under ASC 815, Derivatives and Hedging ("ASC 815").  The Company records the effective portion of the designated foreign currency hedge contracts in other comprehensive income until inventory turns and is sold to a third-party. Once the third-party transaction associated with the hedged forecasted transaction occurs, the effective portion of any related gain or loss on the designated foreign currency hedge will be reclassified into earnings within cost of goods sold. In the event the notional amount of the derivatives exceeds the forecasted intercompany purchases for a given month, the excess hedge position will be attributed to the following month’s forecasted purchases. However, if the following month’s forecasted purchases cannot absorb the excess hedge position from the current month, the effective portion of the hedge recorded in other comprehensive income will be reclassified to earnings.

 

The notional amounts outstanding as of March 31, 2019 for the Canadian Dollar to U.S. Dollar contracts and the U.S. Dollar to the Chinese Yuan contracts were $13.5 million and $13.2 million, respectively. The combined fair value of the Company’s designated foreign hedge contracts outstanding as of March 31, 2019 was $0.2 million. As of March 31, 2019, the amount expected to be reclassified into cost of goods sold from other comprehensive income in the next twelve months for both programs is a gain of $0.3 million.

v3.19.1
Earnings per Share and Stock Repurchase Program
3 Months Ended
Mar. 31, 2019
Earnings per Share and Stock Repurchase Program  
Earnings per Share and Stock Repurchase Program

8. Earnings per Share and Stock Repurchase Program

 

The following tables set forth the reconciliation of the calculation of earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2019

 

For the Three Months Ended April 1, 2018

 

 

 

Income

 

Shares

 

Per Share

 

Income

 

Shares

 

Per Share

 

 

    

(Numerator)

    

(Denominator)

    

Amount

    

(Numerator)

    

(Denominator)

    

Amount

 

 

 

(Amounts in millions, except per share information)

 

Basic EPS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

31.0

 

34.2

 

$

0.91

 

$

28.2

 

34.3

 

$

0.82

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock equivalents

 

 

 

 

 —

 

 

 

 

 

 

 

0.1

 

 

 

 

Diluted EPS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

31.0

 

34.2

 

$

0.91

 

$

28.2

 

34.4

 

$

0.82

 

 

There were no options to purchase Class A common stock outstanding during the three months ended March 31, 2019 or April 1, 2018 that would have been anti-dilutive.

 

On July 27, 2015, the Company’s Board of Directors authorized the repurchase of up to $100 million of the Company’s Class A common stock from time to time on the open market or in privately negotiated transactions. On February 6, 2019, the Board of Directors authorized an additional stock repurchase program of up to $150 million of the Company’s Class A common stock to be purchased from time to time on the open market or in privately negotiated transactions. Consistent with the July 27, 2015 stock repurchase program, the Company entered into a Rule 10b5-1 plan, which permits shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws.  The repurchase program may be suspended or discontinued at any time, subject to the terms of the Rule 10b5-1 plan the Company entered into with respect to the repurchase program. As of March 31, 2019, there was approximately $6.2 million remaining authorized for share repurchases under the July 27, 2015 program. The Company had not made any share repurchases under the February 6, 2019 program as of March 31, 2019.

 

The following table summarizes the cost and the number of shares of Class A common stock repurchased under the July 27, 2015 program during the three months ended March 31, 2019 and April 1, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Three Months Ended

 

 

March 31, 2019

 

April 1, 2018

 

 

Number of shares

 

Cost of shares

 

Number of shares

 

Cost of shares

 

    

repurchased

    

repurchased

    

repurchased

    

repurchased

 

 

(amounts in millions, except share amount)

Total stock repurchased during the period:

 

74,409

 

$

5.6

 

80,055

 

$

6.2

 

v3.19.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2019
Stock-Based Compensation  
Stock-Based Compensation

9. Stock‑Based Compensation

 

The Company issued 89,053 and 105,902 shares of restricted stock and deferred shares during the first three months of 2019 and 2018, respectively.  The company grants these awards to key employees and stock awards to non‑employee members of the Company’s Board of Directors under the 2004 Stock Incentive Plan. Stock awards to employees typically vest over a three-year period and awards to non‑employee members of the Company’s Board of Directors vest immediately.

 

The Company also grants performance stock units to key employees under the 2004 Stock Incentive Plan.  Performance stock units cliff vest at the end of a three-year performance period with the number of shares of the Company’s Class A common stock awarded to each performance stock unit recipient determined based on the Company’s performance relative to certain performance goals set at the time the performance stock units were granted. The performance stock units are amortized to expense over the vesting period, and based on the Company’s performance relative to the performance goals, which may be adjusted with changes to the related expense recorded in the period of adjustment. If the performance goals are not met, no awards are earned and previously recognized compensation expense is reversed. The Company granted 82,898 and 94,215 performance stock units during the first three months of 2019 and 2018, respectively.

 

Under the Management Stock Purchase Plan (“MSPP”) the Company granted 36,670 restricted stock units (“RSUs”) and 36,208 RSUs during the first three months of 2019 and 2018, respectively.  The MSPP allows for the granting of RSUs to key employees. On an annual basis, key employees may elect to receive a portion of their annual incentive compensation in RSUs instead of cash. Participating employees may use up to 50% of their annual incentive bonus to purchase RSUs for a purchase price equal to 80% of the fair market value of the Company’s Class A common stock as of the date of grant.

 

The fair value of each share issued under the Management Stock Purchase Plan is estimated on the date of grant, using the Black‑Scholes‑Merton Model, based on the following weighted average assumptions:

 

 

 

 

 

 

 

 

    

2019

    

2018

    

Expected life (years)

 

3.0

 

3.0

 

Expected stock price volatility

 

23.3

%  

24.1

%  

Expected dividend yield

 

1.1

%  

1.0

%  

Risk-free interest rate

 

2.5

%  

2.4

%  

 

The risk‑free interest rate is based upon the U.S. Treasury yield curve at the time of grant for the respective expected life of the RSUs. The expected life (estimated period of time outstanding) of RSUs and volatility were calculated using historical data. The expected dividend yield of stock is the Company’s best estimate of the expected future dividend yield.

 

The above assumptions were used to determine the weighted average grant‑date fair value of RSUs granted of $22.16 and $21.80 in 2019 and 2018, respectively.

 

A more detailed description of each of these plans can be found in Note 14 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

v3.19.1
Segment Information
3 Months Ended
Mar. 31, 2019
Segment Information  
Segment Information

10. Segment Information

 

The Company operates in three geographic segments: Americas, Europe, and APMEA. Each of these segments sells similar products and has separate financial results that are reviewed by the Company’s chief operating decision‑maker. Each segment earns revenue and income almost exclusively from the sale of its products.  The Company sells its products into various end markets around the world, with sales by region based upon location of the entity recording the sale. See Note 3 for further detail on the product lines sold into by region. All intercompany sales transactions have been eliminated. The accounting policies for each segment are the same as those described in Note 2, and in Note 2 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

The following is a summary of the Company’s significant accounts and balances by segment, reconciled to its consolidated totals:

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

    

2019

    

2018

 

 

 

 

 

 

 

Net Sales

 

 

    

 

 

    

Americas

 

$

258.9

 

$

241.1

Europe

 

 

116.3

 

 

123.0

APMEA

 

 

13.5

 

 

14.4

Consolidated net sales

 

$

388.7

 

$

378.5

Operating income

 

 

 

 

 

 

Americas

 

$

43.1

 

$

36.4

Europe

 

 

13.2

 

 

14.9

APMEA

 

 

1.3

 

 

1.4

Subtotal reportable segments

 

 

57.6

 

 

52.7

Corporate(*)

 

 

(10.9)

 

 

(8.8)

Consolidated operating income

 

 

46.7

 

 

43.9

Interest income

 

 

(0.1)

 

 

(0.4)

Interest expense

 

 

3.6

 

 

4.3

Other expense, net

 

 

0.5

 

 

0.7

Income before income taxes

 

$

42.7

 

$

39.3

Capital Expenditures

 

 

 

 

 

 

Americas

 

$

3.9

 

$

4.6

Europe

 

 

3.0

 

 

2.5

APMEA

 

 

 —

 

 

0.2

Consolidated capital expenditures

 

$

6.9

 

$

7.3

Depreciation and Amortization

 

 

 

 

 

 

Americas

 

$

7.1

 

$

7.1

Europe

 

 

3.6

 

 

4.9

APMEA

 

 

0.7

 

 

0.7

Consolidated depreciation and amortization

 

$

11.4

 

$

12.7

Identifiable assets (at end of period)

 

 

 

 

 

 

Americas

 

$

1,050.1

 

$

1,001.9

Europe

 

 

524.9

 

 

548.2

APMEA

 

 

108.4

 

 

138.4

Consolidated identifiable assets

 

$

 1,683.4

 

$

1,688.5

Property, plant and equipment, net (at end of period)

 

 

 

 

 

 

Americas

 

$

114.3

 

$

110.3

Europe

 

 

78.7

 

 

83.7

APMEA

 

 

6.6

 

 

7.1

Consolidated property, plant and equipment, net

 

$

199.6

 

$

201.1


*     Corporate expenses are primarily for administrative compensation expense, compliance costs, professional fees, including corporate-related legal and audit expenses, shareholder services and benefit administration costs.

 

The above operating segments are presented on a basis consistent with the presentation included in the Company’s December 31, 2018 consolidated financial statements included in its Annual Report on Form 10-K.

 

The U.S. property, plant and equipment of the Company’s Americas segment was $110.3 million and $106.2 million at March 31, 2019 and April 1, 2018, respectively.

 

The following includes U.S. net sales of the Company’s Americas segment:

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

March 31,

 

April 1,

 

    

2019

    

2018

 

 

(in millions)

U.S. net sales

 

$

243.5

 

$

225.2

 

The following includes intersegment sales for Americas, Europe and APMEA:

 

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

March 31,

 

April 1,

 

    

2019

    

2018

 

 

(in millions)

Intersegment Sales

 

 

    

 

 

    

Americas

 

$

2.9

 

$

2.6

Europe

 

 

3.6

 

 

3.4

APMEA

 

 

16.9

 

 

16.7

Intersegment sales

 

$

23.4

 

$

22.7

 

v3.19.1
Accumulated Other Comprehensive Loss
3 Months Ended
Mar. 31, 2019
Accumulated Other Comprehensive Loss  
Accumulated Other Comprehensive Loss

11. Accumulated Other Comprehensive Loss

 

Accumulated other comprehensive loss consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Accumulated 

 

 

Foreign

 

 

 

 

Other

 

 

Currency

 

 

Cash Flow

 

Comprehensive

 

    

Translation

    

 

Hedges (1)

    

Loss

 

 

(in millions)

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2018

 

$

(126.3)

 

$

5.2

 

$

(121.1)

Change in period

 

 

(4.6)

 

 

(1.3)

 

 

(5.9)

Balance March 31, 2019

 

$

(130.9)

 

$

3.9

 

$

(127.0)

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2017

 

$

(102.6)

 

$

3.5

 

$

(99.1)

Change in period

 

 

9.7

 

 

2.8

 

 

12.5

Balance April 01, 2018

 

$

(92.9)

 

$

6.3

 

$

(86.6)


(1)

Cash flow hedges include interest rate swaps and designated foreign currency hedges. See Note 7 for further details.

v3.19.1
Debt
3 Months Ended
Mar. 31, 2019
Debt  
Debt

12. Debt

 

In February 2016, the Company entered into the Credit Agreement among the Company, certain subsidiaries of the Company who become borrowers under the Credit Agreement, JPMorgan Chase Bank, N.A., as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, and the other lenders referred to therein. The Credit Agreement provides for a $500 million, five‑year, senior unsecured revolving credit facility (the “Revolving Credit Facility”) with a sublimit of up to $100 million in letters of credit. As of March 31, 2019, the Company had drawn $50.0 million on this line of credit. The Credit Agreement also provides for a $300 million, five‑year, term loan facility (the “Term Loan Facility”) available to the Company in a single draw, of which the entire $300 million had been drawn in February 2016. The Company had $247.5 million of borrowings outstanding on the Term Loan Facility as of March 31, 2019 and $271.9 million outstanding as of April 1, 2018. The Company paid total installments on the Term Loan Facility of $7.5 million during the first three months of 2019. The interest rates as of March 31, 2019 on the Revolving Credit Facility and on the Term Loan Facility were 3.54% and 3.95%, respectively. The terms of Credit Agreement are further detailed in Note 12 of the Notes to Consolidated Financial Statements of the Annual Report on Form 10-K for the year ended December 31, 2018.

 

The Company maintains letters of credit that guarantee its performance or payment to third parties in accordance with specified terms and conditions. Amounts outstanding were $25.8 million as of March 31, 2019 and $25.7 million as of April 1, 2018. The Company’s letters of credit are primarily associated with insurance coverage. The Company’s letters of credit generally expire within one year of issuance and are drawn down against the Revolving Credit Facility. These instruments may exist or expire without being drawn down. Therefore, they do not necessarily represent future cash flow obligations.

 

As of March 31, 2019, the Company had $424.2 million of unused and available credit under the Revolving Credit Facility and was in compliance with all covenants related to the Credit Agreement.

 

The Company is a party to a note agreement as further detailed in Note 12 of the Notes to Consolidated Financial Statements of the Annual Report on Form 10-K for the year ended December 31, 2018.  This note agreement requires the Company to maintain a fixed charge coverage ratio of consolidated EBITDA plus consolidated rent expense during the period to consolidated fixed charges.  Consolidated fixed charges are the sum of consolidated interest expense for the period and consolidated rent expense.  As of March 31, 2019, the Company was in compliance with all covenants regarding this note agreement. 

v3.19.1
Contingencies and Environmental Remediation
3 Months Ended
Mar. 31, 2019
Contingencies and Environmental Remediation  
Contingencies and Environmental Remediation

13. Contingencies and Environmental Remediation

 

The Company is a defendant in numerous legal matters arising from its ordinary course of operations, including those involving product liability, environmental matters, and commercial disputes.

 

Other than the items described below, significant commitments and contingencies at March 31, 2019 are consistent with those discussed in Note 16 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

As of March 31, 2019, the Company estimates that the aggregate amount of reasonably possible loss in excess of the amount accrued for its legal contingencies is approximately $5.2 million pre‑tax. With respect to the estimate of reasonably possible loss, management has estimated the upper end of the range of reasonably possible loss based on (i) the amount of money damages claimed, where applicable, (ii) the allegations and factual development to date, (iii) available defenses based on the allegations, and/or (iv) other potentially liable parties. This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate. In the event of an unfavorable outcome in one or more of the matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to it, management believes that the ultimate outcome of all matters, as they are resolved over time, is not likely to have a material adverse effect on the financial condition of the Company, though the outcome could be material to the Company’s operating results for any particular period depending, in part, upon the operating results for such period.

 

Chemetco, Inc. Superfund Site, Hartford, Illinois

 

In August 2017, Watts Regulator Co. (a wholly-owned subsidiary of the Company) received a “Notice of Environmental Liability” from the Chemetco Site Group (“Group”) alleging that it is a potentially responsible party for the Chemetco, Inc. Superfund Site in Hartford, Illinois (the “Site”) because it arranged for the disposal or treatment of hazardous substances that were contained in materials sent to the Site and that resulted in the release or threat of release of hazardous substances at the Site. The letter offered Watts Regulator Co. the opportunity to join the Group and participate in the Remedial Investigation and Feasibility Study (“RI/FS”) at the Site.  Watts Regulator Co. joined the Group in September 2017 and was added in March 2018 as a signatory, together with 43 other new Group members, to the Administrative Settlement Agreement and Order on Consent with the United States Environmental Protection Agency (“USEPA”) governing completion of the RI/FS. The Group currently has nearly 200 members. The Group brought suit in the United States District Court for the Southern District of Illinois seeking response costs from other potentially responsible parties in February 2018. To date, the Group has entered settlements with more than 600 defendants, and with several former Group members, for payment of response costs. On March 1, 2019, the Group’s claims against the remaining defendants were dismissed voluntarily, without prejudice, to allow the Group time to complete its reconstruction of computerized transaction records maintained by the former Site owner. Based on information currently known to it, management believes that Watts Regulator Co.’s share of the costs of the RI/FS is not likely to have a material adverse effect on the financial condition of the Company, or have a material adverse effect on the Company’s operating results for any particular period. The Company is unable to estimate a range of reasonably possible loss for the above matter in which damages have not been specified because: (i) the RI/FS has not been completed to determine what remediation plan will be implemented and the costs of such plan; (ii) the total number of potentially responsible parties who may or may not agree to fund or perform any remediation has not yet been determined; (iii) the share contribution for potentially responsible parties to any remediation has not been determined; and (iv) the number of years required to complete the RI/FS and implement a remediation plan acceptable to USEPA is uncertain.

v3.19.1
Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2019
Accounting Policies  
Leases

Leases

 

The Company has leases for the following classes of underlying assets: real estate, automobiles, manufacturing equipment, facility equipment, office equipment and certain service arrangements that are dependent on an identified asset. The Company determines if an arrangement qualifies as a lease at its inception. The Company, as the lessee, recognizes in the statement of financial position a liability to make lease payments and a right-of-use asset (“ROU”) representing the right to use the underlying asset for both finance and operating leases with a lease term longer than twelve months. The Company elected the short-term lease recognition exemption for all leases that qualify and does not recognize ROU assets or lease liabilities for short-term leases. The Company recognizes short-term lease payments on a straight-line basis over the lease term in the consolidated statement of operations. The Company determines the initial classification and measurement of its ROU assets and lease liabilities at the lease commencement date and thereafter if modified.

For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases and is subsequently measured at amortized cost using the effective interest method.

Measuring the lease liability requires certain estimates and judgements. These estimates and judgments include how the Company determines 1) the discount rate it uses to discount the unpaid lease payments to present value; 2) lease term; and 3) lease payments.

·

The present value of lease payments is determined using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, the Company uses the incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under a similar term. The Company’s incremental borrowing rate is determined by using a portfolio approach by geographic region, considering many factors, such as the Company’s specific credit risk, the amount of the lease payments, collateralized nature of the lease, both borrowing term and the lease term, and geographical economic considerations.

·

The lease term for all of the Company’s leases includes the fixed, noncancelable term of the lease plus (a) all periods, if any, covered by options to extend the lease if the Company is reasonably certain to exercise that option (b) all periods, if any, covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option (c) all periods, if any, covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor. When determining if a renewal option is reasonably certain of being exercised, the Company considers several economic factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, underlying contractual obligations, or specific characteristics unique to that particular lease that would make it reasonably certain to exercise such option.

·

Lease payments included in the measurement of the lease liability include the following:

o

Fixed payments, including in-substance fixed payments, owed over the lease term (which includes termination penalties the Company would owe if the lease term assumes Company exercise of a termination option), less any lease incentives paid or payable to the Company;

o

Variable lease payments that depend on an index or rate initially measured using the index or rate at the commencement date; 

o

Amounts expected to be payable under a Company-provided residual value guarantee;

o

The exercise price of a Company option to purchase the underlying asset if the Company is reasonably certain to exercise that option; and

o

Fees paid by the Company to the owners of a special purpose entity for structuring the transaction.

 

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for the lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received.

For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in cost of goods sold or within selling, general and administrative expenses in the consolidated statements of operations, based on the primary use of the ROU asset.

For finance leases, the Company recognizes the amortization of the ROU asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized in depreciation in the consolidated statements of operations. The interest expense related to finance leases is recognized using the effective interest method and is included within interest expense.

Variable lease payments associated with the Company’s leases are recognized in the period when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs and are included in cost of goods sold or within selling, general and administrative expenses in the consolidated statements of operations, based on the primary use of the ROU asset.

ROU assets for operating and finance leases are periodically reduced by impairment losses. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment- Overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize.

The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in a remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in the statement of operations.

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

 

In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (Topic 815)-Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends the hedge accounting guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in the financial statements. This guidance permits hedge accounting for risk components in hedging relationships that involve nonfinancial risk, reduces complexity in hedging for fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedging ineffectiveness, and simplifies certain hedge effectiveness assessment requirements. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. The Company adopted this standard in the first quarter of 2019, and it did not have a material impact on the Company’s financial statements.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016‑02 requires a lessee to recognize in the statement of financial position a liability to make lease payments an ROU asset representing the right to use the underlying asset for the lease term for both finance and operating leases with a term longer than twelve months. Topic 842 was subsequently amended by ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,” ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU 2018-11 “Targeted Improvements.” ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018 and all interim periods thereafter. Under ASC 842, leases are classified as finance or operating, with the classification determining the pattern and classification of expense recognition in the income statement.

 

A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. The Company may choose to use either 1) the effective date of the standard or 2) the beginning of the earliest comparable period presented in the financial statements as the date of initial application. The Company adopted the new standard on January 1, 2019 and used the effective date of the standard as the date of the Company’s initial application. By electing this approach, the financial information and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The Company designed the necessary changes to its existing processes and configured all system requirements that were necessary to implement this new standard.

 

The new standard provides a number of optional practical expedients throughout the transition. The Company elected the “package of practical expedients,” which permits the Company to not reassess under the new standard the Company’s prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The Company also elected the practical expedient not to separate lease and non-lease components for all of the Company’s leases.

 

As a result of adopting ASC 842, the Company recorded operating ROU assets of $33.6 million and operating lease liabilities of $33.9 million as of January 1, 2019 on the consolidated balance sheet. The difference between the ROU assets and lease liabilities related to the impact of eliminating deferred and prepaid lease payments recognized under the previous lease accounting standard. The Company’s adoption of ASC 842 did not result in a change to the Company’s recognition of its existing finance leases as of January 1, 2019.  The adoption of the new lease accounting standard did not have a material impact on either the consolidated statement of operations or the consolidated statement of cash flows. However, ASU 2016-02 has significantly affected the Company’s disclosures about noncash activities related to leases. Additionally, the Company’s lease-related disclosures have significantly increased as of and for the period ended March 31, 2019 as compared to prior years. See Note 4 to the consolidated financial statements.

Shipping and Handling

Shipping and Handling

 

Shipping and handling costs included in selling, general and administrative expenses amounted to $13.9 million and $13.2 million for the first quarters of 2019 and 2018, respectively.

Research and Development

Research and Development

 

Research and development costs included in selling, general and administrative expenses amounted to $9.3 million and $8.5 million for the first quarters of 2019 and 2018, respectively

Estimates

Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

v3.19.1
Revenue Recognition (Tables)
3 Months Ended
Mar. 31, 2019
Revenue Recognition  
Schedule of disaggregation of revenue

 

 

For the three months ended March 31, 2019

 

 

 

 

(in millions)

 

 

Distribution Channel

 

Americas

 

Europe

 

APMEA

 

Consolidated

Wholesale

 

$

145.6

 

$

79.5

 

$

12.6

 

$

237.7

OEM

 

 

20.8

 

 

36.0

 

 

0.5

 

 

57.3

Specialty

 

 

76.1

 

 

 —

 

 

0.4

 

 

76.5

DIY

 

 

16.4

 

 

0.8

 

 

 —

 

 

17.2

Total

 

$

258.9

 

$

116.3

 

$

13.5

 

$

388.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2019

 

 

 

 

(in millions)

 

 

Principal Product Line

 

Americas

 

Europe

 

APMEA

 

Consolidated

Residential & Commercial Flow Control

 

$

147.4

 

$

45.4

 

$

10.7

 

$

203.5

HVAC and Gas Products

 

 

68.7

 

 

48.5

 

 

2.1

 

 

119.3

Drainage and Water Re-use Products

 

 

18.1

 

 

21.9

 

 

0.5

 

 

40.5

Water Quality Products

 

 

24.7

 

 

0.5

 

 

0.2

 

 

25.4

Total

 

$

258.9

 

$

116.3

 

$

13.5

 

$

388.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended April 1, 2018

 

 

 

 

(in millions)

 

 

Distribution Channel

 

Americas

 

Europe

 

APMEA

 

Consolidated

Wholesale

 

$

136.6

 

$

82.7

 

$

13.9

 

$

233.2

OEM

 

 

19.1

 

 

39.5

 

 

0.5

 

 

59.1

Specialty

 

 

67.6

 

 

 —

 

 

 —

 

 

67.6

DIY

 

 

17.8

 

 

0.8

 

 

 —

 

 

18.6

Total

 

$

241.1

 

$

123.0

 

$

14.4

 

$

378.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended April 1, 2018

 

 

 

 

(in millions)

 

 

Principal Product Line

 

Americas

 

Europe

 

APMEA

 

Consolidated

Residential & Commercial Flow Control

 

$

139.9

 

$

47.2

 

$

9.5

 

$

196.6

HVAC and Gas Products

 

 

62.5

 

 

53.9

 

 

4.3

 

 

120.7

Drainage and Water Re-use Products

 

 

16.5

 

 

21.6

 

 

0.3

 

 

38.4

Water Quality Products

 

 

22.2

 

 

0.3

 

 

0.3

 

 

22.8

Total

 

$

241.1

 

$

123.0

 

$

14.4

 

$

378.5

 

Schedule of contract assets and contract liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Contract

 

Contract

 

Contract

 

 

Assets

 

Liabilities - Current

 

Liabilities - Noncurrent

 

 

 

 

 

(in millions)

 

 

 

Balance - January 1, 2019

 

$

1.0

 

$

11.3

 

$

2.7

Change in period

 

 

(0.7)

 

 

0.1

 

 

 —

Balance - March 31, 2019

 

$

0.3

 

$

11.4

 

$

2.7

 

 

 

 

 

 

 

 

 

 

Balance - January 1, 2018

 

$

0.6

 

$

11.3

 

$

2.1

Change in period

 

 

1.1

 

 

0.2

 

 

0.3

Balance - April 1, 2018

 

$

1.7

 

$

11.5

 

$

2.4

 

v3.19.1
Leases (Tables)
3 Months Ended
Mar. 31, 2019
Leases  
Schedule of right-of-use asset amounts reported in consolidated balance sheet

 

 

 

 

 

 

March 31, 2019

 

 

(in millions)

Operating Leases (1)

 

 

 

Real Estate

 

$

24.4

Automobile

 

 

3.3

Machinery and equipment

 

 

3.5

Total operating lease ROU Asset

 

$

31.2

 

 

 

 

Finance Leases (2)

 

 

 

Real Estate

 

$

14.5

Machinery and equipment

 

 

3.7

Less: Accumulated depreciation

 

 

(8.1)

Finance Leases, net

 

$

10.1


(1)Included on the Company’s consolidated balance sheet in other assets (other, net).

 

(2)Included on the Company’s consolidated balance sheet in property, plant and equipment.

Schedule of maturity of operating and finance lease liabilities

 

 

 

 

 

 

 

 

 

March 31, 2019

 

    

Operating Leases

    

Finance Leases

 

 

(in millions)

2019 (excluding the three months ended March 31, 2019)

 

$

10.7

 

$

1.7

2020

 

 

8.7

 

 

1.6

2021

 

 

4.6

 

 

0.5

2022

 

 

3.0

 

 

0.3

2023

 

 

2.3

 

 

 —

Thereafter

 

 

4.4

 

 

 —

Total undiscounted minimum lease payments

 

$

33.7

 

$

4.1

Less imputed interest

 

 

2.2

 

 

0.3

Total lease liabilities

 

$

31.5

 

$

3.8

Included in the consolidated balance sheet

 

 

 

 

 

 

Current lease liabilities (included in other current liabilities)

 

 

10.0

 

 

1.7

Non-Current lease liabilities (included in other non-current liabilities)

 

 

21.5

 

 

2.1

Total lease liabilities

 

$

31.5

 

$

3.8

 

Schedule of total lease cost and cash flows related to operating and finance leases

The total lease cost was comprised of the following amounts:

 

 

 

 

 

 

 

March 31, 2019

 

 

(in millions)

Operating lease cost

 

$

2.9

Amortization of finance lease right-out-use assets:

 

 

0.3

Variable lease cost

 

 

0.8

Total lease cost

 

$

4.0

 

The following information represents supplemental disclosure for the statement of cash flows related to operating and finance leases:

 

 

 

 

 

 

 

March 31, 2019

 

 

(in millions)

Operating cash flows from operating leases

 

$

3.0

Financing cash flows from finance leases

 

 

0.4

Total cash paid for amounts included in the measurement of lease liabilities

 

 

3.4

Operating lease liabilities arising from obtaining right-of-use assets

 

 

0.3

 

Schedule of additional information associated with leases

 

 

 

 

 

 

 

March 31, 2019

Weighted-average remaining lease term - finance leases

 

 

2.8

years

Weighted-average remaining lease term - operating leases

 

 

4.6

years

Weighted-average discount rate - finance leases

 

 

3.8

%

Weighted-average discount rate - operating leases

 

 

 3.1

%

 

v3.19.1
Goodwill & Intangibles (Tables)
3 Months Ended
Mar. 31, 2019
Goodwill and Intangibles  
Changes in the carrying amount of goodwill by geographic segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

 

Gross Balance

 

Accumulated Impairment Losses

 

Net Goodwill

 

 

 

 

Acquired

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

During

 

Currency

 

Balance

 

Balance

 

Impairment

 

Balance

 

 

 

 

January 1,

 

the

 

Translation

 

March 31,

 

January 1,

 

Loss During

 

March 31,

 

March 31,

 

    

2019

    

Period

    

and Other

    

2019

    

2019

    

the Period

    

2019

    

2019

 

 

(in millions)

Americas

 

$

438.1

 

 

 —

 

$

0.1

 

$

438.2

 

$

(24.5)

 

 

 

$

(24.5)

 

$

413.7

Europe

 

 

243.7

 

 

 —

 

 

(2.0)

 

 

241.7

 

 

(129.7)

 

 

 —

 

 

(129.7)

 

 

112.0

APMEA

 

 

30.1

 

 

 —

 

 

0.1

 

 

30.2

 

 

(12.9)

 

 

 

 

(12.9)

 

 

17.3

Total

 

$

711.9

 

 

 —

 

$

(1.8)

 

$

710.1

 

$

(167.1)

 

 

 —

 

$

(167.1)

 

$

543.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

Gross Balance

 

Accumulated Impairment Losses

 

Net Goodwill

 

 

 

 

Acquired

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

During

 

Currency

 

Balance

 

Balance

 

Impairment

 

Balance

 

 

 

 

January 1,

 

the

 

Translation

 

December 31,

 

January 1,

 

Loss During

 

December 31,

 

December 31,

 

    

2018

    

Period

    

and Other

    

2018

    

2018

    

the Period

    

2018

    

2018

 

 

(in millions)

Americas

 

$

437.4

 

$

1.5

 

$

(0.8)

 

$

438.1

 

$

(24.5)

 

$

 —

 

$

(24.5)

 

$

413.6

Europe

 

 

249.3

 

 

 —

 

 

(5.6)

 

 

243.7

 

 

(129.7)

 

 

 —

 

 

(129.7)

 

 

114.0

APMEA

 

 

30.9

 

 

 —

 

 

(0.8)

 

 

30.1

 

 

(12.9)

 

 

 —

 

 

(12.9)

 

 

17.2

Total

 

$

717.6

 

$

1.5

 

$

(7.2)

 

$

711.9

 

$

(167.1)

 

$

 —

 

$

(167.1)

 

$

544.8


 

 

Schedule of Intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

December 31, 2018

 

 

Gross

 

 

 

 

Net

 

Gross

 

 

 

 

Net

 

 

Carrying

 

Accumulated

 

Carrying

 

Carrying

 

Accumulated

 

Carrying

 

    

Amount

    

Amortization

    

Amount

    

Amount

    

Amortization

    

Amount

 

 

(in millions)

Patents

 

$

16.1

 

$

(15.8)

 

$

0.3

 

$

16.1

 

$

(15.8)

 

$

0.3

Customer relationships

 

 

232.9

 

 

(149.3)

 

 

83.6

 

 

232.9

 

 

(146.9)

 

 

86.0

Technology

 

 

54.6

 

 

(28.3)

 

 

26.3

 

 

54.6

 

 

(27.3)

 

 

27.3

Trade names

 

 

26.1

 

 

(11.9)

 

 

14.2

 

 

26.1

 

 

(11.5)

 

 

14.6

Other

 

 

4.3

 

 

(3.6)

 

 

0.7

 

 

4.3

 

 

(3.5)

 

 

0.8

Total amortizable intangibles

 

 

334.0

 

 

(208.9)

 

 

125.1

 

 

334.0

 

 

(205.0)

 

 

129.0

Indefinite-lived intangible assets

 

 

35.9

 

 

 —

 

 

35.9

 

 

36.2

 

 

 —

 

 

36.2

 

 

$

369.9

 

$

(208.9)

 

$

161.0

 

$

370.2

 

$

(205.0)

 

$

165.2

 

v3.19.1
Financial Instruments and Derivative Instruments (Tables)
3 Months Ended
Mar. 31, 2019
Financial Instruments and Derivative Instruments  
Schedule of carrying amount and estimated fair market value of the company's long-term debt, including current portion

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

    

2019

    

2018

 

 

(in millions)

Carrying amount

 

$

372.5

 

$

355.0

Estimated fair value

 

$

373.1

 

$

355.4

 

Schedule of fair value of financial assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at March 31, 2019 Using:

 

 

 

 

 

Quoted Prices in Active

 

Significant Other

 

Significant

 

 

 

 

 

Markets for Identical

 

Observable

 

Unobservable

 

 

 

 

 

Assets

 

Inputs

 

Inputs

 

    

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

 

(in millions)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Plan asset for deferred compensation(1)

 

$

2.5

 

$

2.5

 

$

 —

 

$

 —

Interest rate swaps (1)

 

$

4.8

 

$

 —

 

$

4.8

 

$

 —

Designated foreign currency hedge (1)

 

$

0.2

 

$

 —

 

$

0.2

 

$

 —

Total assets

 

$

7.5

 

$

2.5

 

$

5.0

 

$

 —

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Plan liability for deferred compensation(2)

 

$

2.5

 

$

2.5

 

$

 —

 

$

 —

Redeemable financial instrument(3)

 

$

2.8

 

$

 —

 

$

 —

 

$

2.8

Total liabilities

 

$

5.3

 

$

2.5

 

$

 —

 

$

2.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2018 Using:

 

 

 

 

 

Quoted Prices in Active

 

Significant Other

 

Significant

 

 

 

 

 

Markets for Identical

 

Observable

 

Unobservable

 

    

 

 

 

Assets

 

Inputs

 

 Inputs

 

 

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

 

(in millions)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Plan asset for deferred compensation(1)

 

$

2.6

 

$

2.6

 

$

 —

 

$

 —

Interest rate swaps (1)

 

$

6.5

 

$

 —

 

$

6.5

 

$

 —

Total assets

 

$

9.1

 

$

2.6

 

$

6.5

 

$

 —

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Plan liability for deferred compensation(2)

 

$

2.6

 

$

2.6

 

$

 —

 

$

 —

Redeemable financial instrument(3)

 

$

2.8

 

$

 —

 

$

 —

 

$

2.8

Total liabilities

 

$

5.4

 

$

2.6

 

$

 —

 

$

2.8


(1)Included on the Company’s consolidated balance sheet in other assets (other, net).

 

(2)Included on the Company’s consolidated balance sheet in accrued compensation and benefits.

 

(3)Included on the Company’s consolidated balance sheet in other current liabilities and relates to a mandatorily redeemable equity instrument as part of the Apex Valves Limited (“Apex”) acquisition in 2015.

Summary of the changes in fair value of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total realized and unrealized

 

 

 

 

 

Balance

 

 

 

 

 

 

(gains) losses included in:

 

Balance

 

 

December 31,

 

 

 

 

 

 

Net earnings

 

Comprehensive

 

March 31,

 

    

2018

    

Settlements

    

Purchases

    

adjustments

    

income

    

2019

 

 

(in millions)

Redeemable financial instrument

 

$

2.8

 

 

 —

 

$

 —

 

 

 —

 

$

 —

 

$

2.8

 

v3.19.1
Earnings per Share and Stock Repurchase Program (Tables)
3 Months Ended
Mar. 31, 2019
Earnings per Share and Stock Repurchase Program  
Summary of reconciliation of the calculation of earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2019

 

For the Three Months Ended April 1, 2018

 

 

 

Income

 

Shares

 

Per Share

 

Income

 

Shares

 

Per Share

 

 

    

(Numerator)

    

(Denominator)

    

Amount

    

(Numerator)

    

(Denominator)

    

Amount

 

 

 

(Amounts in millions, except per share information)

 

Basic EPS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

31.0

 

34.2

 

$

0.91

 

$

28.2

 

34.3

 

$

0.82

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock equivalents

 

 

 

 

 —

 

 

 

 

 

 

 

0.1

 

 

 

 

Diluted EPS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

31.0

 

34.2

 

$

0.91

 

$

28.2

 

34.4

 

$

0.82

 

 

Summary of the cost and number of Class A common stock repurchased

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Three Months Ended

 

 

March 31, 2019

 

April 1, 2018

 

 

Number of shares

 

Cost of shares

 

Number of shares

 

Cost of shares

 

    

repurchased

    

repurchased

    

repurchased

    

repurchased

 

 

(amounts in millions, except share amount)

Total stock repurchased during the period:

 

74,409

 

$

5.6

 

80,055

 

$

6.2

 

v3.19.1
Stock-Based Compensation (Tables)
3 Months Ended
Mar. 31, 2019
Stock-Based Compensation  
Schedule of stock-based compensation fair value assumptions

 

 

 

 

 

 

 

    

2019

    

2018

    

Expected life (years)

 

3.0

 

3.0

 

Expected stock price volatility

 

23.3

%  

24.1

%  

Expected dividend yield

 

1.1

%  

1.0

%  

Risk-free interest rate

 

2.5

%  

2.4

%  

 

v3.19.1
Segment Information (Tables)
3 Months Ended
Mar. 31, 2019
Segment Information  
Summary of the Company's significant accounts and balances by segment, reconciled to the consolidated totals

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

    

2019

    

2018

 

 

 

 

 

 

 

Net Sales

 

 

    

 

 

    

Americas

 

$

258.9

 

$

241.1

Europe

 

 

116.3

 

 

123.0

APMEA

 

 

13.5

 

 

14.4

Consolidated net sales

 

$

388.7

 

$

378.5

Operating income

 

 

 

 

 

 

Americas

 

$

43.1

 

$

36.4

Europe

 

 

13.2

 

 

14.9

APMEA

 

 

1.3

 

 

1.4

Subtotal reportable segments

 

 

57.6

 

 

52.7

Corporate(*)

 

 

(10.9)

 

 

(8.8)

Consolidated operating income

 

 

46.7

 

 

43.9

Interest income

 

 

(0.1)

 

 

(0.4)

Interest expense

 

 

3.6

 

 

4.3

Other expense, net

 

 

0.5

 

 

0.7

Income before income taxes

 

$

42.7

 

$

39.3

Capital Expenditures

 

 

 

 

 

 

Americas

 

$

3.9

 

$

4.6

Europe

 

 

3.0

 

 

2.5

APMEA

 

 

 —

 

 

0.2

Consolidated capital expenditures

 

$

6.9

 

$

7.3

Depreciation and Amortization

 

 

 

 

 

 

Americas

 

$

7.1

 

$

7.1

Europe

 

 

3.6

 

 

4.9

APMEA

 

 

0.7

 

 

0.7

Consolidated depreciation and amortization

 

$

11.4

 

$

12.7

Identifiable assets (at end of period)

 

 

 

 

 

 

Americas

 

$

1,050.1

 

$

1,001.9

Europe

 

 

524.9

 

 

548.2

APMEA

 

 

108.4

 

 

138.4

Consolidated identifiable assets

 

$

 1,683.4

 

$

1,688.5

Property, plant and equipment, net (at end of period)

 

 

 

 

 

 

Americas

 

$

114.3

 

$

110.3

Europe

 

 

78.7

 

 

83.7

APMEA

 

 

6.6

 

 

7.1

Consolidated property, plant and equipment, net

 

$

199.6

 

$

201.1


*     Corporate expenses are primarily for administrative compensation expense, compliance costs, professional fees, including corporate-related legal and audit expenses, shareholder services and benefit administration costs.

Schedule of U.S. net sales of the Company's Americas segment

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

March 31,

 

April 1,

 

    

2019

    

2018

 

 

(in millions)

U.S. net sales

 

$

243.5

 

$

225.2

 

Schedule of intersegment sales for Americas, EMEA and Asia-Pacific

 

 

 

 

 

 

 

 

 

First Quarter Ended

 

 

March 31,

 

April 1,

 

    

2019

    

2018

 

 

(in millions)

Intersegment Sales

 

 

    

 

 

    

Americas

 

$

2.9

 

$

2.6

Europe

 

 

3.6

 

 

3.4

APMEA

 

 

16.9

 

 

16.7

Intersegment sales

 

$

23.4

 

$

22.7

 

v3.19.1
Accumulated Other Comprehensive Loss (Tables)
3 Months Ended
Mar. 31, 2019
Accumulated Other Comprehensive Loss  
Schedule of amounts recognized in accumulated other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Accumulated 

 

 

Foreign

 

 

 

 

Other

 

 

Currency

 

 

Cash Flow

 

Comprehensive

 

    

Translation

    

 

Hedges (1)

    

Loss

 

 

(in millions)

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2018

 

$

(126.3)

 

$

5.2

 

$

(121.1)

Change in period

 

 

(4.6)

 

 

(1.3)

 

 

(5.9)

Balance March 31, 2019

 

$

(130.9)

 

$

3.9

 

$

(127.0)

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2017

 

$

(102.6)

 

$

3.5

 

$

(99.1)

Change in period

 

 

9.7

 

 

2.8

 

 

12.5

Balance April 01, 2018

 

$

(92.9)

 

$

6.3

 

$

(86.6)


Cash flow hedges include interest rate swaps and designated foreign currency hedges. See Note 7 for further details.

v3.19.1
Basis of Presentation (Details)
3 Months Ended
Mar. 31, 2019
Basis of Presentation  
Length of fiscal year 365 days
Length of fiscal quarter 91 days
v3.19.1
Accounting Policies - Leases (Details) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
Practical expedients - Package true  
Practical expedients - Hindsight false  
Operating right-of-use assets $ 31.2  
Operating lease liabilities $ 31.5  
ASU 2016-02 | Adjustment    
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
Operating right-of-use assets   $ 33.6
Operating lease liabilities   $ 33.9
v3.19.1
Accounting Policies - Other (Details) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Shipping and Handling    
Shipping and handling $ 13.9 $ 13.2
Research and Development    
Research and development costs included in selling, general, and administrative expense $ 9.3 $ 8.5
v3.19.1
Revenue Recognition (Details)
$ in Millions
3 Months Ended
Mar. 31, 2019
segment
Mar. 31, 2019
item
Mar. 31, 2019
USD ($)
Apr. 01, 2018
USD ($)
Disaggregation of Revenue        
Number of distribution channels | item   4    
Number of geographic segments 3 3    
Revenue     $ 388.7 $ 378.5
Wholesale        
Disaggregation of Revenue        
Revenue     237.7 233.2
OEM        
Disaggregation of Revenue        
Revenue     57.3 59.1
Specialty        
Disaggregation of Revenue        
Revenue     76.5 67.6
DIY        
Disaggregation of Revenue        
Revenue     17.2 18.6
Residential & commercial flow control        
Disaggregation of Revenue        
Revenue     203.5 196.6
HVAC & gas        
Disaggregation of Revenue        
Revenue     119.3 120.7
Drainage & water re-use        
Disaggregation of Revenue        
Revenue     40.5 38.4
Water quality        
Disaggregation of Revenue        
Revenue     25.4 22.8
Americas        
Disaggregation of Revenue        
Revenue     258.9 241.1
Americas | Wholesale        
Disaggregation of Revenue        
Revenue     145.6 136.6
Americas | OEM        
Disaggregation of Revenue        
Revenue     20.8 19.1
Americas | Specialty        
Disaggregation of Revenue        
Revenue     76.1 67.6
Americas | DIY        
Disaggregation of Revenue        
Revenue     16.4 17.8
Americas | Residential & commercial flow control        
Disaggregation of Revenue        
Revenue     147.4 139.9
Americas | HVAC & gas        
Disaggregation of Revenue        
Revenue     68.7 62.5
Americas | Drainage & water re-use        
Disaggregation of Revenue        
Revenue     18.1 16.5
Americas | Water quality        
Disaggregation of Revenue        
Revenue     24.7 22.2
Europe        
Disaggregation of Revenue        
Revenue     116.3 123.0
Europe | Wholesale        
Disaggregation of Revenue        
Revenue     79.5 82.7
Europe | OEM        
Disaggregation of Revenue        
Revenue     36.0 39.5
Europe | DIY        
Disaggregation of Revenue        
Revenue     0.8 0.8
Europe | Residential & commercial flow control        
Disaggregation of Revenue        
Revenue     45.4 47.2
Europe | HVAC & gas        
Disaggregation of Revenue        
Revenue     48.5 53.9
Europe | Drainage & water re-use        
Disaggregation of Revenue        
Revenue     21.9 21.6
Europe | Water quality        
Disaggregation of Revenue        
Revenue     0.5 0.3
APMEA        
Disaggregation of Revenue        
Revenue     13.5 14.4
APMEA | Wholesale        
Disaggregation of Revenue        
Revenue     12.6 13.9
APMEA | OEM        
Disaggregation of Revenue        
Revenue     0.5 0.5
APMEA | Specialty        
Disaggregation of Revenue        
Revenue     0.4  
APMEA | Residential & commercial flow control        
Disaggregation of Revenue        
Revenue     10.7 9.5
APMEA | HVAC & gas        
Disaggregation of Revenue        
Revenue     2.1 4.3
APMEA | Drainage & water re-use        
Disaggregation of Revenue        
Revenue     0.5 0.3
APMEA | Water quality        
Disaggregation of Revenue        
Revenue     $ 0.2 $ 0.3
v3.19.1
Revenue Recognition - Contract Liabilities (Details) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Jan. 01, 2019
Jan. 01, 2018
Contract with Customer, Asset        
Contract Assets $ 0.3 $ 1.7 $ 1.0 $ 0.6
Change in period (0.7) 1.1    
Contract Liabilities        
Contract Liabilities - Current 11.4 11.5 11.3 11.3
Increase (decrease) - Current Liabilities 0.1 0.2    
Current Liabilities - Noncurrent 2.7 2.4 $ 2.7 $ 2.1
Increase (decrease) - Noncurrent Liabilities   $ 0.3    
Revenue recognized, contract liability 3.3      
Impairment loss related to Contract Assets $ 0.0      
v3.19.1
Leases (Details)
3 Months Ended
Mar. 31, 2019
Lessee, Lease, Description [Line Items]  
Option to extend - Operating true
Option to extend - Finance true
Option to terminate - Operating true
Option to terminate - Finance true
Minimum  
Lessee, Lease, Description [Line Items]  
Renewal term - Operating 1 year
Renewal term - Finance 1 year
Maximum  
Lessee, Lease, Description [Line Items]  
Renewal term - Operating 5 years
Renewal term - Finance 5 years
Real Estate  
Lessee, Lease, Description [Line Items]  
Percentage of operating lease liabilities 80.00%
Real Estate | Minimum  
Lessee, Lease, Description [Line Items]  
Lease term - Operating 2 years
Real Estate | Maximum  
Lessee, Lease, Description [Line Items]  
Lease term - Operating 15 years
Automobile | Minimum  
Lessee, Lease, Description [Line Items]  
Lease term - Operating 3 years
Automobile | Maximum  
Lessee, Lease, Description [Line Items]  
Lease term - Operating 5 years
Remaining | Minimum  
Lessee, Lease, Description [Line Items]  
Lease term - Operating 2 years
Lease term - Finance 2 years
Remaining | Maximum  
Lessee, Lease, Description [Line Items]  
Lease term - Operating 15 years
Lease term - Finance 15 years
v3.19.1
Leases - Balance sheet by asset category (Details) - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
Apr. 01, 2018
Lessee, Lease, Description [Line Items]      
Operating lease ROU Asset $ 31.2    
Property, plant and equipment, gross 539.2 $ 537.4  
Less: Accumulated depreciation (339.6) (335.5)  
Property, plant and equipment, net 199.6 $ 201.9 $ 201.1
Finance Leased Asset      
Lessee, Lease, Description [Line Items]      
Less: Accumulated depreciation (8.1)    
Property, plant and equipment, net 10.1    
Finance Leased Real Estate      
Lessee, Lease, Description [Line Items]      
Property, plant and equipment, gross 14.5    
Finance Leased Machinery and Equipment      
Lessee, Lease, Description [Line Items]      
Property, plant and equipment, gross 3.7    
Real Estate      
Lessee, Lease, Description [Line Items]      
Operating lease ROU Asset 24.4    
Automobile      
Lessee, Lease, Description [Line Items]      
Operating lease ROU Asset 3.3    
Machinery and equipment      
Lessee, Lease, Description [Line Items]      
Operating lease ROU Asset $ 3.5    
v3.19.1
Leases - Maturities (Details)
$ in Millions
Mar. 31, 2019
USD ($)
Operating leases maturities:  
2019 (excluding the three months ended March 31, 2019) $ 10.7
2020 8.7
2021 4.6
2022 3.0
2023 2.3
Thereafter 4.4
Total undiscounted minimum lease payments 33.7
Less imputed interest 2.2
Total lease liabilities 31.5
Current lease liabilities (included in other current liabilities) 10.0
Non-Current lease liabilities (included in other non-current liabilities) 21.5
Finance leases maturities:  
2019 (excluding the three months ended March 31, 2019) 1.7
2020 1.6
2021 0.5
2022 0.3
Total undiscounted minimum lease payments 4.1
Less imputed interest 0.3
Total lease liabilities 3.8
Current lease liabilities (included in other current liabilities) 1.7
Non-Current lease liabilities (included in other non-current liabilities) $ 2.1
v3.19.1
Leases - Lease Cost (Details)
$ in Millions
3 Months Ended
Mar. 31, 2019
USD ($)
Lease cost  
Operating lease cost $ 2.9
Finance lease cost:  
Amortization of right-of-use assets 0.3
Variable lease cost 0.8
Total lease cost $ 4.0
v3.19.1
Leases - Cash flows (Details)
$ in Millions
3 Months Ended
Mar. 31, 2019
USD ($)
Leases  
Operating cash flows from operating leases $ 3.0
Financing cash flows from finance leases 0.4
Total cash paid for amounts included in the measurement of lease liabilities 3.4
Operating lease liabilities arising from obtaining right-of-use assets $ 0.3
v3.19.1
Leases - Additional information (Details)
Mar. 31, 2019
Leases  
Weighted-average remaining lease term - finance leases 2 years 9 months 18 days
Weighted-average remaining lease term - operating leases 4 years 7 months 6 days
Weighted-average discount rate - finance leases 3.80%
Weighted-average discount rate - operating leases 3.10%
v3.19.1
Goodwill and Intangibles - Goodwill (Details)
$ in Millions
3 Months Ended 12 Months Ended
Mar. 31, 2019
USD ($)
segment
Mar. 31, 2019
USD ($)
item
Mar. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Gross Balance        
Balance at the beginning of the period     $ 711.9 $ 717.6
Acquired During the Period       1.5
Foreign Currency Translation and Other     (1.8) (7.2)
Balance at the end of the period     710.1 711.9
Accumulated Impairment Losses        
Balance at the beginning of the period     (167.1) (167.1)
Balance at the end of the period     (167.1) (167.1)
Net Goodwill $ 543.0 $ 543.0 543.0 544.8
Number of geographic segments 3 3    
Americas        
Gross Balance        
Balance at the beginning of the period     438.1 437.4
Acquired During the Period       1.5
Foreign Currency Translation and Other     0.1 (0.8)
Balance at the end of the period     438.2 438.1
Accumulated Impairment Losses        
Balance at the beginning of the period     (24.5) (24.5)
Balance at the end of the period     (24.5) (24.5)
Net Goodwill $ 413.7 $ 413.7 413.7 413.6
Europe        
Gross Balance        
Balance at the beginning of the period     243.7 249.3
Foreign Currency Translation and Other     (2.0) (5.6)
Balance at the end of the period     241.7 243.7
Accumulated Impairment Losses        
Balance at the beginning of the period     (129.7) (129.7)
Balance at the end of the period     (129.7) (129.7)
Net Goodwill 112.0 112.0 112.0 114.0
APMEA        
Gross Balance        
Balance at the beginning of the period     30.1 30.9
Foreign Currency Translation and Other     0.1 (0.8)
Balance at the end of the period     30.2 30.1
Accumulated Impairment Losses        
Balance at the beginning of the period     (12.9) (12.9)
Balance at the end of the period     (12.9) (12.9)
Net Goodwill $ 17.3 $ 17.3 $ 17.3 $ 17.2
v3.19.1
Goodwill and Intangibles - Intangibles (Details) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Dec. 31, 2018
Intangible assets subject to amortization      
Gross Carrying Amount $ 334.0   $ 334.0
Accumulated Amortization (208.9)   (205.0)
Net Carrying Amount 125.1   129.0
Indefinite-lived intangible assets      
Indefinite-lived intangible assets 35.9   36.2
Intangible assets      
Gross Carrying Amount 369.9   370.2
Net Carrying Amount 161.0   165.2
Aggregate amortization expense for amortized intangible assets 3.9 $ 5.6  
Patents      
Intangible assets subject to amortization      
Gross Carrying Amount 16.1   16.1
Accumulated Amortization (15.8)   (15.8)
Net Carrying Amount 0.3   0.3
Customer relationships      
Intangible assets subject to amortization      
Gross Carrying Amount 232.9   232.9
Accumulated Amortization (149.3)   (146.9)
Net Carrying Amount 83.6   86.0
Technology      
Intangible assets subject to amortization      
Gross Carrying Amount 54.6   54.6
Accumulated Amortization (28.3)   (27.3)
Net Carrying Amount 26.3   27.3
Trade name      
Intangible assets subject to amortization      
Gross Carrying Amount 26.1   26.1
Accumulated Amortization (11.9)   (11.5)
Net Carrying Amount 14.2   14.6
Other      
Intangible assets subject to amortization      
Gross Carrying Amount 4.3   4.3
Accumulated Amortization (3.6)   (3.5)
Net Carrying Amount $ 0.7   $ 0.8
v3.19.1
Restructuring (Details) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Mar. 31, 2019
Sep. 30, 2018
Restructuring      
Costs incurred $ 1.4    
Restructuring reserve      
Costs incurred 1.4    
2018 Actions | Europe      
Restructuring      
Pre-tax program to date restructuring and other charges incurred   $ 5.4  
Total expected restructuring costs   6.0 $ 5.0
Restructuring reserve 3.0 $ 3.0  
Costs incurred 1.4    
Restructuring reserve      
Costs incurred 1.4    
Balance at the end of the period $ 3.0    
v3.19.1
Financial Instruments and Derivative Instruments - Fair Value (Details) - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
Long-term debt    
Carrying amount $ 372.5 $ 355.0
Estimated fair value $ 373.1 $ 355.4
5.05% Senior notes due 2020    
Senior notes    
Interest rate (as a percent) 5.05%  
v3.19.1
Financial Instruments and Derivative Instruments - Fair Value on a Recurring Basis (Details) - Fair value measured on a recurring basis - USD ($)
$ in Millions
Mar. 31, 2019
Dec. 31, 2018
Assets    
Plan assets for deferred compensation $ 2.5 $ 2.6
Total assets 7.5 9.1
Liabilities    
Plan liabilities for deferred compensation 2.5 2.6
Redeemable financial instrument 2.8 2.8
Total liabilities 5.3 5.4
Interest Rate Swaps    
Assets    
Derivative outstanding 4.8 6.5
Forward exchange contracts    
Assets    
Derivative outstanding 0.2  
Quoted Prices in Active Markets for Identical Assets (Level 1)    
Assets    
Plan assets for deferred compensation 2.5 2.6
Total assets 2.5 2.6
Liabilities    
Plan liabilities for deferred compensation 2.5 2.6
Total liabilities 2.5 2.6
Significant Other Observable Inputs (Level 2)    
Assets    
Total assets 5.0 6.5
Significant Other Observable Inputs (Level 2) | Interest Rate Swaps    
Assets    
Derivative outstanding 4.8 6.5
Significant Other Observable Inputs (Level 2) | Forward exchange contracts    
Assets    
Derivative outstanding 0.2  
Significant Unobservable Inputs (Level 3)    
Liabilities    
Redeemable financial instrument 2.8 2.8
Total liabilities $ 2.8 $ 2.8
v3.19.1
Financial Instruments and Derivative Instruments - Change in Fair value (Details) - USD ($)
$ in Millions
3 Months Ended
Nov. 30, 2015
Apr. 02, 2017
Mar. 31, 2019
Dec. 31, 2018
Apex        
Reconciliation of changes in fair value of all financial assets and liabilities        
Shares remaining to be acquired (as a percent) 20.00%   10.00%  
Call option term 3 years      
Outstanding shares acquired (as a percent) 80.00% 10.00%    
Purchase price $ 20.4 $ 2.9    
Aggregate ownership percentage     90.00%  
Redeemable financial instrument        
Reconciliation of changes in fair value of all financial assets and liabilities        
Liability recorded at acquisition date fair value     $ 2.8 $ 2.8
Redeemable financial instrument | Apex        
Reconciliation of changes in fair value of all financial assets and liabilities        
Liability recorded at acquisition date fair value $ 5.5      
v3.19.1
Financial Instruments and Derivative Instruments - Interest Rate Swaps and Non-Designated Cash Flow Hedge (Details)
$ in Millions
3 Months Ended 12 Months Ended
Feb. 12, 2016
USD ($)
item
Mar. 31, 2019
USD ($)
Apr. 01, 2018
USD ($)
Dec. 31, 2018
Derivative instruments        
Percentage of projected intercompany purchases hedged by forward exchange contracts   60.00%    
Period of projected intercompany purchase transactions   12 months   12 months
Minimum        
Derivative instruments        
Percentage of projected intercompany purchases hedged by forward exchange contracts       70.00%
Maximum        
Derivative instruments        
Percentage of projected intercompany purchases hedged by forward exchange contracts       80.00%
Term loan facility | Term Loan due February 2021        
Interest Rate Swaps        
Face amount $ 300.0      
Amount drawn   $ 300.0    
Senior unsecured revolving credit facility        
Interest Rate Swaps        
Amount drawn   50.0    
Borrowing capacity $ 500.0      
Forward exchange contracts | Designated        
Derivative instruments        
Fair value of derivative asset   0.2    
Amount of Gain or (Loss) Recognized in Income on Derivatives        
Amount expected to be reclassified   $ 0.3    
Period of time for expected reclassification   12 months    
Canadian Dollar to US Dollar Contracts        
Interest Rate Swaps        
Derivative notional amount   $ 13.5    
US Dollar to Chinese Yuan Contracts        
Interest Rate Swaps        
Derivative notional amount   13.2    
Interest Rate Swaps | Designated | Cash Flow Hedging        
Interest Rate Swaps        
Number of derivative contracts entered | item 2      
Derivative fixed interest rate 1.31375%      
Derivative notional amount $ 225.0      
Gain (loss) recognized in Accumulated Other Comprehensive Loss, effective portion   $ (1.3) $ 1.9  
Interest Rate Swaps | Designated | Cash Flow Hedging | LIBOR        
Interest Rate Swaps        
Derivative, floor interest rate 0.00%      
v3.19.1
Earnings per Share and Stock Repurchase Program (Details) - USD ($)
$ / shares in Units, $ in Millions
3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Feb. 06, 2019
Jul. 27, 2015
Net (loss) income        
Net income $ 31.0 $ 28.2    
Shares        
Shares (in shares) 34,200,000 34,300,000    
Per Share Amount        
Net income (in dollars per share) $ 0.91 $ 0.82    
Dilutive securities, principally common stock options        
Common stock equivalents (in shares)   100,000    
Net (loss) income        
Net income $ 31.0 $ 28.2    
Weighted average number of shares:        
Shares (in shares) 34,200,000 34,400,000    
Securities not included in the computation of diluted EPS        
Net income (in dollars per share) $ 0.91 $ 0.82    
Dilutive securities, principally common stock options        
Options to purchase shares of Class A common stock, anti-dilutive 0 0    
Shares repurchased        
Number of shares repurchased 74,409 80,055    
Cost of shares repurchased $ 5.6 $ 6.2    
Class A        
Shares repurchased        
Value of shares of the entity's Class A common stock authorized to be repurchased     $ 150.0 $ 100.0
July 27, 2015 | Class A        
Shares repurchased        
Remaining authorized repurchase amount $ 6.2      
v3.19.1
Stock-Based Compensation (Details) - $ / shares
3 Months Ended 12 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Dec. 31, 2018
Second Amended and Restated 2004 Stock Incentive Plan      
Stock-based compensation      
Vesting period 3 years    
Second Amended and Restated 2004 Stock Incentive Plan | Restricted stock      
Stock-based compensation      
Granted (in shares) 89,053    
Second Amended and Restated 2004 Stock Incentive Plan | Deferred shares      
Stock-based compensation      
Granted (in shares)   105,902  
Second Amended and Restated 2004 Stock Incentive Plan | Performance stock units      
Stock-based compensation      
Vesting period 3 years    
Granted (in shares) 82,898 94,215  
Management Stock Purchase Plan | Maximum      
Stock-based compensation      
Percentage of annual incentive bonus that may be used to purchase RSU's 50.00%    
Management Stock Purchase Plan | Class A      
Stock-based compensation      
Purchase price as percentage of fair market value of common stock on grant date 80.00%    
Management Stock Purchase Plan | Restricted stock units (RSUs)      
Stock-based compensation      
Granted (in shares) 36,670 36,208  
Fair value assumptions      
Expected life (years) 3 years   3 years
Expected stock price volatility (as a percent) 23.30%   24.10%
Expected dividend yield (as a percent) 1.10%   1.00%
Risk-free interest rate (as a percent) 2.50%   2.40%
Weighted average grant-date fair value (in dollars per share) $ 22.16 $ 21.80  
v3.19.1
Segment Information (Details)
$ in Millions
3 Months Ended
Mar. 31, 2019
USD ($)
segment
Mar. 31, 2019
USD ($)
item
Mar. 31, 2019
USD ($)
Apr. 01, 2018
USD ($)
Dec. 31, 2018
USD ($)
Segment information          
Number of geographic segments 3 3      
Revenue     $ 388.7 $ 378.5  
Consolidated operating income (loss)     46.7 43.9  
Interest income     (0.1) (0.4)  
Interest expense     3.6 4.3  
Other expense, net     0.5 0.7  
INCOME BEFORE INCOME TAXES     42.7 39.3  
Capital Expenditures     6.9 7.3  
Depreciation and Amortization     11.4 12.7  
Identifiable assets (at end of period) $ 1,683.4 $ 1,683.4 1,683.4 1,688.5 $ 1,653.7
Property, plant and equipment, net (at end of period) 199.6 199.6 199.6 201.1 $ 201.9
Residential & commercial flow control          
Segment information          
Revenue     203.5 196.6  
HVAC & gas          
Segment information          
Revenue     119.3 120.7  
Drainage & water re-use          
Segment information          
Revenue     40.5 38.4  
Water quality          
Segment information          
Revenue     25.4 22.8  
U.S.          
Segment information          
Property, plant and equipment, net (at end of period) 110.3 110.3 110.3 106.2  
Reportable segments          
Segment information          
Consolidated operating income (loss)     57.6 52.7  
Corporate          
Segment information          
Consolidated operating income (loss)     (10.9) (8.8)  
Intersegment sales          
Segment information          
Revenue     23.4 22.7  
Americas          
Segment information          
Revenue     258.9 241.1  
Capital Expenditures     3.9 4.6  
Depreciation and Amortization     7.1 7.1  
Identifiable assets (at end of period) 1,050.1 1,050.1 1,050.1 1,001.9  
Property, plant and equipment, net (at end of period) 114.3 114.3 114.3 110.3  
Americas | Residential & commercial flow control          
Segment information          
Revenue     147.4 139.9  
Americas | HVAC & gas          
Segment information          
Revenue     68.7 62.5  
Americas | Drainage & water re-use          
Segment information          
Revenue     18.1 16.5  
Americas | Water quality          
Segment information          
Revenue     24.7 22.2  
Americas | U.S.          
Segment information          
Revenue     243.5 225.2  
Americas | Reportable segments          
Segment information          
Consolidated operating income (loss)     43.1 36.4  
Americas | Intersegment sales          
Segment information          
Revenue     2.9 2.6  
Europe          
Segment information          
Revenue     116.3 123.0  
Capital Expenditures     3.0 2.5  
Depreciation and Amortization     3.6 4.9  
Identifiable assets (at end of period) 524.9 524.9 524.9 548.2  
Property, plant and equipment, net (at end of period) 78.7 78.7 78.7 83.7  
Europe | Residential & commercial flow control          
Segment information          
Revenue     45.4 47.2  
Europe | HVAC & gas          
Segment information          
Revenue     48.5 53.9  
Europe | Drainage & water re-use          
Segment information          
Revenue     21.9 21.6  
Europe | Water quality          
Segment information          
Revenue     0.5 0.3  
Europe | Reportable segments          
Segment information          
Consolidated operating income (loss)     13.2 14.9  
Europe | Intersegment sales          
Segment information          
Revenue     3.6 3.4  
APMEA          
Segment information          
Revenue     13.5 14.4  
Capital Expenditures       0.2  
Depreciation and Amortization     0.7 0.7  
Identifiable assets (at end of period) 108.4 108.4 108.4 138.4  
Property, plant and equipment, net (at end of period) $ 6.6 $ 6.6 6.6 7.1  
APMEA | Residential & commercial flow control          
Segment information          
Revenue     10.7 9.5  
APMEA | HVAC & gas          
Segment information          
Revenue     2.1 4.3  
APMEA | Drainage & water re-use          
Segment information          
Revenue     0.5 0.3  
APMEA | Water quality          
Segment information          
Revenue     0.2 0.3  
APMEA | Reportable segments          
Segment information          
Consolidated operating income (loss)     1.3 1.4  
APMEA | Intersegment sales          
Segment information          
Revenue     $ 16.9 $ 16.7  
v3.19.1
Accumulated Other Comprehensive Loss (Details) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2019
Apr. 01, 2018
Changes in accumulated other comprehensive income (loss)    
Balance at the beginning of the period $ (121.1)  
Balance at the end of the period (127.0)  
Foreign Currency Translation    
Changes in accumulated other comprehensive income (loss)    
Balance at the beginning of the period (126.3) $ (102.6)
Change in period (4.6) 9.7
Balance at the end of the period (130.9) (92.9)
Cash Flow Hedges    
Changes in accumulated other comprehensive income (loss)    
Balance at the beginning of the period 5.2 3.5
Change in period (1.3) 2.8
Balance at the end of the period 3.9 6.3
Accumulated Other Comprehensive Income (Loss)    
Changes in accumulated other comprehensive income (loss)    
Balance at the beginning of the period (121.1) (99.1)
Change in period (5.9) 12.5
Balance at the end of the period $ (127.0) $ (86.6)
v3.19.1
Debt - Credit Agreement (Details) - USD ($)
$ in Millions
3 Months Ended
Feb. 12, 2016
Mar. 31, 2019
Apr. 01, 2018
Credit Agreement      
Stand-by letters of credit outstanding   $ 25.8 $ 25.7
Term Loan due February 2021      
Credit Agreement      
Repayment of debt   $ 7.5  
Letters of credit      
Credit Agreement      
Term of debt   1 year  
5.05% Senior notes due 2020      
Credit Agreement      
Interest rate (as a percent)   5.05%  
Credit Agreement      
Credit Agreement      
Term of debt 5 years    
Sublimit on letters of credit $ 100.0    
Senior unsecured revolving credit facility      
Credit Agreement      
Borrowing capacity $ 500.0    
Amount drawn   $ 50.0  
Interest rate on revolving credit facility (as a percent)   3.54%  
Unused and available credit under the credit agreement   $ 424.2  
Term loan facility | Term Loan due February 2021      
Credit Agreement      
Term of debt 5 years    
Face amount $ 300.0    
Interest rate on term loan facility (as a percent)   3.95%  
Amount drawn   $ 300.0  
Borrowings outstanding   $ 247.5 $ 271.9
v3.19.1
Contingencies and Environmental Remediation (Details)
$ in Millions
3 Months Ended
Mar. 31, 2019
USD ($)
item
Litigation contingencies  
Possible loss | $ $ 5.2
Chemetco Superfund Site | CWV  
Litigation contingencies  
Number of companies included in group for environmental liability notice 200
Number of companies joining group for environmental liability notice 43
Number of settlements 600