Consolidated Balance Sheets (Parenthetical) $ in Millions |
Jun. 27, 2021
USD ($)
$ / shares
shares
|
Dec. 31, 2020
USD ($)
$ / shares
shares
|
---|---|---|
Trade accounts receivable, reserve allowances | $ | $ 11.4 | $ 11.1 |
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 | 120,000,000 | 120,000,000 |
Common Stock, votes per share (Number of votes) | 1 | 1 |
Common Stock, issued shares | 27,577,110 | 27,478,512 |
Common Stock, outstanding shares | 27,577,110 | 27,478,512 |
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 | 6,074,290 | 6,144,290 |
Common Stock, outstanding shares | 6,074,290 | 6,144,290 |
Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2021 |
Jun. 28, 2020 |
Jun. 27, 2021 |
Jun. 28, 2020 |
|
Consolidated Statements of Operations | ||||
Net sales | $ 467.0 | $ 338.7 | $ 880.3 | $ 721.3 |
Cost of goods sold | 266.9 | 203.8 | 506.5 | 423.6 |
GROSS PROFIT | 200.1 | 134.9 | 373.8 | 297.7 |
Selling, general and administrative expenses | 130.4 | 97.6 | 244.2 | 212.6 |
Restructuring | 17.0 | 5.3 | 17.3 | 5.3 |
Other long-lived asset impairment charge | 1.0 | 1.0 | ||
OPERATING INCOME | 52.7 | 31.0 | 112.3 | 78.8 |
Other (income) expense: | ||||
Interest income | (0.1) | (0.2) | ||
Interest expense | 1.5 | 4.0 | 3.5 | 7.0 |
Other expense (income), net | (0.5) | (0.4) | (0.8) | (0.1) |
Total other expense | 1.0 | 3.5 | 2.7 | 6.7 |
INCOME BEFORE INCOME TAXES | 51.7 | 27.5 | 109.6 | 72.1 |
Provision for income taxes | 14.2 | 7.3 | 30.4 | 19.9 |
NET INCOME | $ 37.5 | $ 20.2 | $ 79.2 | $ 52.2 |
Basic EPS | ||||
NET INCOME PER SHARE | $ 1.11 | $ 0.60 | $ 2.34 | $ 1.54 |
Weighted average number of shares | 33.8 | 33.8 | 33.8 | 33.9 |
Diluted EPS | ||||
NET INCOME PER SHARE | $ 1.11 | $ 0.59 | $ 2.34 | $ 1.53 |
Weighted average number of shares | 33.9 | 34.0 | 33.9 | 34.0 |
Dividends declared per share | $ 0.26 | $ 0.23 | $ 0.49 | $ 0.46 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2021 |
Jun. 28, 2020 |
Jun. 27, 2021 |
Jun. 28, 2020 |
|
Consolidated Statements of Comprehensive Income | ||||
Net income | $ 37.5 | $ 20.2 | $ 79.2 | $ 52.2 |
Other comprehensive income (loss) net of tax: | ||||
Foreign currency translation adjustments | 5.8 | 10.0 | (8.3) | (6.5) |
Cash flow hedges | (0.8) | (0.3) | (0.9) | (1.2) |
Other comprehensive income (loss) | 5.0 | 9.7 | (9.2) | (7.7) |
Comprehensive income | $ 42.5 | $ 29.9 | $ 70.0 | $ 44.5 |
Basis of Presentation |
6 Months Ended |
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Jun. 27, 2021 | |
Basis of Presentation | |
Basis of Presentation | 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 June 27, 2021, the Consolidated Statements of Operations for the second quarters and six months ended June 27, 2021 and June 28, 2020, the Consolidated Statements of Comprehensive Income for the second quarters and six months ended June 27, 2021 and June 28, 2020, the Consolidated Statements of Stockholders’ Equity for the second quarters and six months ended June 27, 2021 and June 28, 2020, and the Consolidated Statements of Cash Flows for the six months ended June 27, 2021 and June 28, 2020. The consolidated balance sheet at December 31, 2020 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, 2020. 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, 2020. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2021, and may be further impacted by the effects of the Coronavirus Disease 2019 (“COVID-19”) global pandemic. The Company operates on a -week fiscal year ending on December 31, with each quarter, except the fourth quarter, ending on a Sunday. Any quarterly data contained in this Quarterly Report on Form 10-Q generally reflect the results of operations for a -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. The COVID-19 pandemic has created uncertainty in the global economy. There have been no comparable recent events that provide guidance as to the effect COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 continues to impact the Company’s business, results of operations and financial condition will depend on future developments, which are uncertain and difficult to predict. We are not aware of any specific event or circumstance that would require updates to the Company’s estimates or judgments or require the Company to revise the carrying value of the Company’s assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ from those estimates. |
Accounting Policies |
6 Months Ended |
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Jun. 27, 2021 | |
Accounting Policies | |
Accounting Policies | 2. Accounting Policies The significant accounting policies used in preparation of these consolidated financial statements for the second quarter ended June 27, 2021 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, 2020. Recently Adopted Accounting Standards In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications. The effective date for adoption of this ASU is the calendar year beginning January 1, 2021 with early adoption permitted. The Company adopted this standard in the first quarter of 2021, and it did not have a material impact on the Company’s financial statements. In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company adopted this standard in the second quarter of 2021, and it did not have a material impact on the Company’s financial statements. Shipping and Handling Shipping and handling costs included in selling, general and administrative expenses amounted to $17.5 million and $12.5. million for the second quarters of 2021 and 2020, respectively, and were $32.9 million and $26.5 million for the first six months of 2021 and 2020, respectfully. Research and Development Research and development costs included in selling, general and administrative expenses amounted to $11.0 million and $9.8. million for the second quarters of 2021 and 2020, respectively and were $21.8 million and $21.3 million for the first six months of 2021 and 2020, respectfully. |
Revenue Recognition |
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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 commercial and residential markets of the Americas, Europe, and Asia-Pacific, 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:
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:
The Company generally 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 these extended warranties and service policies to be separate performance obligations. These policies typically are for periods ranging from 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:
The amount of revenue recognized during the second quarter and six months ended June 27, 2021 that was included in the opening contract liability balance was $4.7 million and $8.5 million, respectively. The amount of revenue recognized during the second quarter and six months ended June 28, 2020 that was included in the opening contract liability balance was $2.5 million and $4.8 million, respectfully. 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. There were no impairment losses related to contract assets for the second quarters and six months ended June 27, 2021 and June 28, 2020. 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. |
Goodwill & Intangibles |
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Goodwill & Intangibles | 4. 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:
Goodwill and indefinite-lived intangible assets are tested for impairment at least annually or more frequently if events or circumstances indicate that it is “more likely than not” that they might be impaired, such as from a change in business conditions. The Company performs its annual goodwill and indefinite-lived intangible assets impairment assessment in the fourth quarter of each year. At the most recent annual impairment test which occurred in the fourth quarter of 2020, the Company performed qualitative fair value assessments, including an evaluation of certain key assumptions for all seven of its reporting units. The Company concluded that the fair value of all seven reporting units exceeded their carrying values at that time. Intangible assets include the following:
Aggregate amortization expense for amortized intangible assets for the second quarters ended June 27, 2021 and June 28, 2020 was $3.4 million and $3.8 million, respectfully, and for the first six months of 2021 and 2020 was $7.3 million and $7.6 million, respectively. |
Financial Instruments and Derivative Instruments |
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Financial Instruments and Derivative Instruments | 5. 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 borrowings under the Second Amended and Restated Credit Agreement entered into on March 30, 2021 (the “Second Amended Credit Agreement”) approximate their carrying value. 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, contingent consideration, and derivatives. The fair values of these financial assets and liabilities were determined using the following inputs at June 27, 2021 and December 31, 2020:
(3)Included on the Company’s consolidated balance sheet in accrued expenses and other liabilities. (4)Included on the Company’s consolidated balance sheet in other noncurrent liabilities and relates to contingent consideration as part of the acquisition of Australian Valve Group Pty Ltd (“AVG”). 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, 2020 to June 27, 2021.
In connection with the immaterial acquisition of AVG completed during the third quarter of 2020, a contingent liability of $2.8 million was recognized as the estimate of the acquisition date fair value of the contingent consideration. This liability was classified as Level 3 under the fair value hierarchy as it was based on the probability of achievement of future performance metrics as of the date of the acquisition, which was not observable in the market. Failure to meet the performance metrics would reduce this liability to zero, while complete achievement would increase the liability to a maximum contingent consideration of $4.5 million. The liability as of the second quarter ended June 27, 2021 was $3.9 million after increasing the liability by $0.8 million during the quarter due to increased probability of achieving higher performance metrics. 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 March 30, 2021, the Company entered into the Second Amended Credit Agreement. The Second Amended Credit Agreement amends the Amended Credit Agreement to extend the maturity date of the $800 million senior unsecured revolving credit facility from February 12, 2022 to March 30, 2026. The senior unsecured revolving credit facility under the Second Amended Credit Agreement (the "New Revolving Credit Facility") also includes sublimits of $100 million for letters of credit and $15 million for swing line loans. Borrowings outstanding under the New Revolving Credit Facility will bear interest at a fluctuating rate per annum as further detailed in Note 11. 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 an interest rate swap on March 30, 2021. Under the interest rate swap agreement, the Company receives the one-month USD-LIBOR subject to a 0.00% floor and pays a fixed rate of 1.02975% on a notional amount of $100.0 million. The swap matures on March 30, 2026. 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 swap is 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 second quarter and six months ended June 27, 2021 a loss of $0.5 million was recorded in Accumulated Other Comprehensive Loss to recognize the effective portion of the fair value of the interest rate swap that qualifies as a cash flow hedge. On February 12, 2016, the Company entered into a Credit Agreement (the “Prior Credit Agreement”) pursuant to which it received a funding commitment under a Term Loan of $300 million, and a Revolving Commitment (“Revolver”) of $500 million. For each facility, the Company could choose either an Adjusted LIBOR or Alternative Base Rate (“ABR”). Accordingly, the Company’s earnings and cash flows were 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 received the three-month USD-LIBOR subject to a 0.00% floor and paid a fixed rate of 1.31375% on a notional amount of $225.0 million. The swaps were expected to mature on the same date as the Prior Credit Agreement on February 12, 2021, and were designated as cash flow hedges. On April 24, 2020, the Company entered into an Amended and Restated Credit Agreement (the “Amended Credit Agreement”). The Amended Credit Agreement amended and restated the Prior Credit Agreement in its entirety while increasing the amount of revolving credit available from $500 million to $800 million, and extending the maturity by one additional year to February 2022. As part of the Amended Credit Agreement, the LIBOR rate was subject to a 1.00% floor as opposed to a 0.00% floor in the Prior Credit Agreement. The change in the LIBOR floor in the Amended Credit Agreement caused the interest rate swaps to no longer be considered highly effective in offsetting changes in the cash flow of the hedged item, as critical terms of the Amended Credit Agreement no longer matched the hedged item. As a result, the cash flow hedges no longer qualified for hedge accounting as of the date of execution of the Amended Credit Agreement. The Company subsequently began recognizing the mark-to-market fair value adjustments on a monthly basis in the consolidated statement of operations and continued to do so through the expiration date of the swaps, which occurred on February 12, 2021. For the first quarter ended March 28, 2021 an immaterial amount was recorded into interest expense related to the change in mark-to-market fair value adjustments. 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. The Company uses 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 80% to 85% 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. The Company uses a similar layering methodology when entering into forward exchange contracts hedging U.S. dollar to the Chinese yuan, which hedge up to 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 June 27, 2021, all designated foreign exchange hedge contracts were cash flow hedges under ASC 815, Derivatives and Hedging. 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 is 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 June 27, 2021 for the Canadian dollar to U.S. dollar contracts and the U.S. dollar to the Chinese yuan contracts were $15.9 million and $7.6 million, respectively. The fair value of the Company’s designated foreign hedge contracts outstanding as of June 27, 2021 was a liability of $0.3 million. As of June 27, 2021, the amount expected to be reclassified into cost of goods sold from other comprehensive income in the next twelve months is a loss of $0.3 million. |
Restructuring and Other Charges, Net |
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Restructuring and Other Charges, Net | 6. Restructuring and Other Charges, Net 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 in which the liability is incurred. These costs are included in restructuring charges in the Company’s consolidated statements of operations. A summary of the pre-tax cost by restructuring program is as follows:
The Company recorded pre-tax restructuring costs in its business segments as follows:
2021 France Actions On June 25, 2021, the Board of Directors approved a restructuring program with respect to the Company’s operating facilities in France, within its Europe operating segment. The restructuring program is expected to include the shutdown of the Company’s manufacturing facility in Méry, France and the consolidation of that facility’s operations primarily into the Company’s facilities in Virey-le-Grand and Hautvillers, France. The program is expected to include pre-tax charges totaling approximately $26.3 million, including costs for severance, relocation, clean-up and certain asset write-downs, and result in the elimination of approximately 80 positions at the Méry, France facility. As a result of the facility consolidations, the net headcount reduction in France is expected to be approximately 50 positions. Total net after-tax charges for this restructuring program are expected to be approximately $19.0 million (including approximately $2.0 million in non-cash charges), with costs being incurred through the second half of 2022, at which time the restructuring program is expected to be completed. The Company expects to spend approximately $1.0 million in capital expenditures to consolidate operations. Annual cash savings, net of tax, are estimated to be approximately $3.0 million, which the Company expects to fully realize by 2023. The following table summarizes by type, the total expected, incurred and remaining pre-tax restructuring costs for the Company’s restructuring program related to the 2021 France Actions:
Details of the restructuring reserve activity for the Company’s 2021 France Actions for the period ended June 27, 2021 are as follows:
Other Actions The Company periodically initiates other actions which are not part of a major program. Included in “Other Actions” for the second quarter ended June 28, 2020, were actions taken in the Americas, Europe and APMEA segments and Corporate primarily in response to the COVID-19 pandemic. During the second quarter ended June 27, 2021, total pre-tax charges for the 2020 Other Actions were reduced by approximately $1.0 million due to revised estimates for severance costs, health benefits and outplacement support. This resulted in total expected program restructuring charges of approximately $9.9 million, of which $9.6 million had been expensed through the period ended June 27, 2021. The remaining expected costs relate to facility exit and other exit costs and are expected to be completed in the second half of 2021. The restructuring reserve associated with these actions as of June 27, 2021 was approximately $2.0 million and primarily related to severance benefits. |
Earnings per Share and Stock Repurchase Program |
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Earnings per Share and Stock Repurchase Program | 7. Earnings per Share and Stock Repurchase Program The following tables set forth the reconciliation of the calculation of earnings per share:
There were no options to purchase Class A common stock outstanding during the second quarters and six months ended June 27, 2021 or June 28, 2020 that would have been anti-dilutive. On February 6, 2019, the Company’s Board of Directors authorized the repurchase 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. For the stock repurchase program, the Company entered into Rule 10b5-1 plans, which permit 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 plans the Company entered into with respect to the repurchase program. As of June 27, 2021, there was $105.6 million remaining authorized for share repurchases under the $150 million program. For the second quarters ended June 27, 2021 and June 28, 2020, the Company repurchased 30,917 shares for $4.0 million and 78,828 shares for $6.4 million, respectively. For the first six months of 2021 and 2020, the Company repurchased 62,070 shares for $7.8 million and 253,535 shares for $21.1 million, respectively. |
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Stock-Based Compensation | 8. Stock-Based Compensation The Company issued 52,230 and 80,052 shares of restricted stock and deferred stock awards during the first six months of 2021 and 2020, respectively. The Company grants shares of deferred stock awards to key employees and restricted 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 vest in their entirety at the end of a performance period set by the Compensation Committee of the Board of Directors at the time of grant, which is currently three years. Upon vesting, the number of shares of the Company’s Class A common stock awarded to each performance stock unit recipient will be 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 46,774 and 73,106 performance stock units during the first six months of 2021 and 2020, respectively. Under the Management Stock Purchase Plan (“MSPP”), the Company granted 24,690 and 27,495 of restricted stock units (“RSUs”) during the first six months of 2021 and 2020, 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 MSPP is estimated on the date of grant, using the Black-Scholes-Merton Model, based on the following weighted average assumptions:
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 the discount on RSUs granted in 2021 and 2020 of $37.12 and $22.36, respectively. A more detailed description of each of these plans can be found in Note 13 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. |
Segment Information |
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Segment Information | 9. 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 above 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, 2020. The following is a summary of the Company’s significant accounts and balances by segment, reconciled to its consolidated totals:
* 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, 2020 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 $116.0 million and $120.0 million at June 27, 2021 and June 28, 2020, respectively. The following includes U.S. net sales of the Company’s Americas segment:
The following includes intersegment sales for Americas, Europe and APMEA:
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Accumulated Other Comprehensive Loss |
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Accumulated Other Comprehensive Loss | 10. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss consists of the following:
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Debt |
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Debt | |
Debt | 11. Debt On March 30, 2021, the Company entered into the Second Amended Credit Agreement. The Second Amended Credit Agreement amends the Amended Credit Agreement to extend the maturity date of the $800 million senior unsecured revolving credit facility from February 12, 2022 to March 30, 2026. Among other changes, the Second Amended Credit Agreement increases the Company’s maximum consolidated leverage ratio (including both the base ratio and the ratio permitted during temporary step-ups following certain acquisitions), adjusts certain fees to reflect market conditions and reduces the 1.00% floor on the adjusted LIBOR rate to 0.00%. The New Revolving Credit Facility also includes sublimits of $100 million for letters of credit and $15 million for swing line loans. As of June 27, 2021, the Company had drawn down $195.0 million on this line of credit and had $14.0 million in letters of credit outstanding, which resulted in $591.0 million of unused and available credit under the New Revolving Credit Facility. Borrowings outstanding bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Eurocurrency rate loans, the adjusted British Bankers Association LIBOR rate plus an applicable percentage, ranging from 1.075% to 1.325%, determined by reference to the Company's consolidated leverage ratio, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than 1.00%) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on such day plus 0.50% and (c) the adjusted LIBOR rate plus 1.00% for a one month interest period in dollars. The weighted average interest rate on debt outstanding under the New Revolving Credit Facility as of June 27, 2021 was 1.16%. The weighted average interest rate on debt outstanding inclusive of the interest rate swap discussed in Note 5 of the Notes to Consolidated Financial Statements and interest rates under the New Revolving Credit Facility as of June 27, 2021 was 1.65%. As of June 27, 2021, the Company was in compliance with all covenants related to the Second Amended Credit Agreement. In addition to paying interest under the Second Amended Credit Agreement, the Company is also required to pay certain fees in connection with the New Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. The Second Amended Credit Agreement matures on March 30, 2026, subject to extension under certain circumstances and subject to the terms of the Second Amended Credit Agreement. The Company may repay loans outstanding under the Second Amended Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the Second Amended Credit Agreement. Both the Amended Credit Agreement and the Second Amended Credit Agreement impose various restrictions on the Company and its subsidiaries, including restrictions pertaining to: (i) the incurrence of additional indebtedness, (ii) limitations on liens, (iii) making distributions, dividends and other payments, (iv) mergers, consolidations and acquisitions, (v) dispositions of assets, (vi) certain consolidated leverage ratios and consolidated interest coverage ratios, (vii) transactions with affiliates, (viii) changes to governing documents, and (ix) changes in control. 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 $14.0 million as of June 27, 2021. 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. These instruments may exist or expire without being drawn down. Therefore, they do not necessarily represent future cash flow obligations. The Amended Credit Agreement amended and restated the Prior Credit Agreement in its entirety while increasing the amount of revolving credit available from $500 million to $800 million and extended the maturity by additional year to February 2022. The senior unsecured revolving credit facility (the "Revolving Credit Facility") also included sublimits of $100 million for letters of credit and $15 million for swing line loans. The term loan facility under the Prior Credit Agreement was terminated and paid off effective April 24, 2020, with funds from the Revolving Credit Facility. Borrowings outstanding under the Revolving Credit Facility bore interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Eurocurrency rate loans, the adjusted British Bankers Association LIBOR rate (which at all times will not be less than 1.00%) plus an applicable percentage, ranging from 1.50% to 2.10%, determined by reference to the Company's consolidated leverage ratio, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than 2.00%) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on such day plus 0.50% and (c) the adjusted LIBOR rate plus 1.00% for a one month interest period in dollars. In addition to paying interest under the Amended Credit Agreement, the Company was also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. The terms of the Amended Credit Agreement are further detailed in Note 11 of the Notes to Consolidated Financial Statements of the Annual Report on Form 10-K for the year ended December 31, 2020. |
Contingencies and Environmental Remediation |
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Jun. 27, 2021 | |
Contingencies and Environmental Remediation | |
Contingencies and Environmental Remediation | 12. Contingencies and Environmental Remediation In the ordinary course of business, the Company is involved in disputes, litigation, and governmental or regulatory inquiries and investigations, both pending and threatened, including those involving product liability, environmental matters, and commercial disputes. Other than the items described below, significant commitments and contingencies at June 27, 2021 are consistent with those discussed in Note 15 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. As of June 27, 2021, the Company estimates that the aggregate amount of reasonably possible loss in excess of the amount accrued for its contingencies is approximately $4.0 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”) for a portion of the Site. Watts Regulator Co. joined the Group in September 2017 and was added in March 2018 as a signatory to the Administrative Settlement Agreement and Order on Consent with the United States Environmental Protection Agency (“USEPA”) governing completion of the RI/FS. The Remedial Investigation report has been completed, and the draft Feasibility Study report is due to be submitted to U.S. Environmental Protection Agency (USEPA) near the end of August 2021. 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 for the first portion of the Site has not been completed, and the RI/FS process for the remainder of the Site has not yet been initiated, to determine what remediation plans will be implemented and the costs of such plans; (ii) the total amount of material sent to the Site, and the total number of potentially responsible parties who may or may not agree to fund or perform any remediation, have not 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 implement a remediation plan acceptable to USEPA is uncertain. Income Taxes In determining its provision for income taxes, the Company makes certain judgments and interpretations with respect to tax laws in jurisdictions in which the Company has business operations. Because of the complex nature of these laws, in the normal course of our business, the Company is subject to challenges from U.S. and non-U.S. income tax authorities regarding the amount of income taxes due. These challenges may result in adjustments to the timing or amount of taxable income or deductions or the allocation of taxable income among tax jurisdictions. The Company recognizes a tax benefit when it is more likely than not that its position will result in a tax deduction or credit. As of June 27, 2021, the Company had gross unrecognized tax benefits of approximately $9.0 million. As a result of recent challenges from a non-U.S. income tax authority, it is reasonably possible that the unrecognized tax benefits associated with this matter could increase by $4.6 million in the next twelve months. The Company also estimates that it is reasonably possible that other matters included in unrecognized tax benefits at June 27, 2021 may decrease by $2.0 million to $2.5 million in the next twelve months as a result of lapse in statutes of limitations and potential settlements. |
Subsequent Events |
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Jun. 27, 2021 | |
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Subsequent Events | 13. Subsequent Events On August 2, 2021, the Company declared a quarterly dividend of twenty-six cents ($0.26) per share on each outstanding share of Class A common stock and Class B common stock payable on September 15, 2021 to stockholders of record on September 1, 2021.
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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 June 27, 2021, the Consolidated Statements of Operations for the second quarters and six months ended June 27, 2021 and June 28, 2020, the Consolidated Statements of Comprehensive Income for the second quarters and six months ended June 27, 2021 and June 28, 2020, the Consolidated Statements of Stockholders’ Equity for the second quarters and six months ended June 27, 2021 and June 28, 2020, and the Consolidated Statements of Cash Flows for the six months ended June 27, 2021 and June 28, 2020. The consolidated balance sheet at December 31, 2020 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, 2020. 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, 2020. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2021, and may be further impacted by the effects of the Coronavirus Disease 2019 (“COVID-19”) global pandemic. The Company operates on a -week fiscal year ending on December 31, with each quarter, except the fourth quarter, ending on a Sunday. Any quarterly data contained in this Quarterly Report on Form 10-Q generally reflect the results of operations for a -week period. |
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. The COVID-19 pandemic has created uncertainty in the global economy. There have been no comparable recent events that provide guidance as to the effect COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 continues to impact the Company’s business, results of operations and financial condition will depend on future developments, which are uncertain and difficult to predict. We are not aware of any specific event or circumstance that would require updates to the Company’s estimates or judgments or require the Company to revise the carrying value of the Company’s assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ from those estimates. |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications. The effective date for adoption of this ASU is the calendar year beginning January 1, 2021 with early adoption permitted. The Company adopted this standard in the first quarter of 2021, and it did not have a material impact on the Company’s financial statements. In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company adopted this standard in the second quarter of 2021, and it did not have a material impact on the Company’s financial statements. |
Shipping and Handling | Shipping and Handling Shipping and handling costs included in selling, general and administrative expenses amounted to $17.5 million and $12.5. million for the second quarters of 2021 and 2020, respectively, and were $32.9 million and $26.5 million for the first six months of 2021 and 2020, respectfully. |
Research and Development | Research and Development Research and development costs included in selling, general and administrative expenses amounted to $11.0 million and $9.8. million for the second quarters of 2021 and 2020, respectively and were $21.8 million and $21.3 million for the first six months of 2021 and 2020, respectfully. |
Revenue Recognition (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 27, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of disaggregation of revenue |
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Schedule of contract assets and contract liabilities |
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Goodwill & Intangibles (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 27, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill & Intangibles | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the carrying amount of goodwill by geographic segment |
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Schedule of Intangible assets |
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Financial Instruments and Derivative Instruments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 27, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of financial assets and liabilities |
(3)Included on the Company’s consolidated balance sheet in accrued expenses and other liabilities. (4)Included on the Company’s consolidated balance sheet in other noncurrent liabilities and relates to contingent consideration as part of the acquisition of Australian Valve Group Pty Ltd (“AVG”). |
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Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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) |
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Restructuring and Other Charges, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Summary of the pre-tax cost by restructuring programs |
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Summary of recorded pre-tax restructuring costs by business segment |
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Summary of total expected, incurred and remaining pre-tax restructuring costs |
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Summary of restructuring reserve activity |
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Earnings per Share and Stock Repurchase Program (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 27, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share and Stock Repurchase Program | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of reconciliation of the calculation of earnings per share |
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Stock-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 27, 2021 | |||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | |||||||||||||||||||||||||||||||||||||
Schedule of stock-based compensation fair value assumptions |
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Segment Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Information | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the Company's significant accounts and balances by segment, reconciled to the consolidated totals |
* 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. |
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Schedule of U.S. net sales of the Company's Americas segment |
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Schedule of intersegment sales for Americas, EMEA and Asia-Pacific |
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Accumulated Other Comprehensive Loss (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 27, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of amounts recognized in accumulated other comprehensive income (loss) |
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Basis of Presentation (Details) |
6 Months Ended |
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Jun. 27, 2021 | |
Basis of Presentation | |
Length of fiscal year | 365 days |
Length of fiscal quarter | 91 days |
Accounting Policies - Shipping and Handling, and Other (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2021 |
Jun. 28, 2020 |
Jun. 27, 2021 |
Jun. 28, 2020 |
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Shipping and Handling | ||||
Shipping and handling | $ 17.5 | $ 12.5 | $ 32.9 | $ 26.5 |
Research and Development | ||||
Research and development costs included in selling, general, and administrative expense | $ 11.0 | $ 9.8 | $ 21.8 | $ 21.3 |
Revenue Recognition - Performance obligation (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 |
Jun. 27, 2021 |
---|---|
Minimum | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year |
Maximum | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 3 years |
Revenue Recognition - Contract Liabilities (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jun. 27, 2021 |
Mar. 28, 2021 |
Jun. 28, 2020 |
Mar. 29, 2020 |
Jun. 27, 2021 |
Jun. 28, 2020 |
Dec. 31, 2020 |
Dec. 31, 2019 |
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Contract with Customer, Asset | ||||||||
Contract Assets | $ 0.3 | $ 0.3 | $ 0.3 | $ 0.4 | ||||
Change in period | (0.1) | |||||||
Contract Liabilities | ||||||||
Contract Liabilities - Current | $ 14.5 | $ 14.5 | 11.7 | 11.7 | $ 14.5 | 11.7 | $ 13.5 | 11.5 |
Increase (decrease) - Current Liabilities | 1.0 | 0.2 | ||||||
Contract Liabilities - Noncurrent | 2.4 | 2.3 | 2.7 | 2.8 | 2.4 | 2.7 | $ 2.5 | $ 2.9 |
Increase (decrease) - Noncurrent Liabilities | 0.1 | $ (0.2) | (0.1) | $ (0.1) | ||||
Revenue recognized, contract liability | 4.7 | 2.5 | 8.5 | 4.8 | ||||
Impairment loss related to Contract Assets | $ 0.0 | $ 0.0 | $ 0.0 | $ 0.0 |
Restructuring and Other Charges, Net - Pre-tax Restructuring (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2021 |
Jun. 28, 2020 |
Jun. 27, 2021 |
Jun. 28, 2020 |
|
Restructuring | ||||
Total restructuring and other charges, net | $ 17.0 | $ 5.3 | $ 17.3 | $ 5.3 |
Net sales | 467.0 | 338.7 | 880.3 | 721.3 |
Corporate | ||||
Restructuring | ||||
Pre-tax restructuring charges, net | 0.1 | 0.1 | ||
Europe | ||||
Restructuring | ||||
Pre-tax restructuring charges, net | 17.9 | (0.3) | 17.9 | (0.3) |
Net sales | 136.8 | 88.1 | 259.7 | 198.3 |
Americas | ||||
Restructuring | ||||
Pre-tax restructuring charges, net | (0.7) | 4.6 | (0.7) | 4.6 |
Net sales | 307.1 | 237.4 | 579.9 | 499.8 |
2021 France Actions | ||||
Restructuring | ||||
Total expected restructuring costs | 26.3 | 26.3 | ||
Non-cash charges | 2.0 | 2.0 | ||
Total expected restructuring and related costs, after tax | 19.0 | |||
Restructuring cost, pre-tax | 18.0 | 18.0 | ||
Other Actions | ||||
Restructuring | ||||
Pre-tax restructuring charges, net | (1.0) | $ 5.3 | (0.7) | $ 5.3 |
Total expected restructuring costs | $ 9.9 | $ 9.9 |
Contingencies and Environmental Remediation (Details) $ in Millions |
Jun. 27, 2021
USD ($)
|
---|---|
Litigation contingencies | |
Possible loss | $ 4.0 |
Gross unrecognized tax benefits | 9.0 |
Increase in unrecognized tax benefits, that is reasonably possible | 4.6 |
Minimum | |
Litigation contingencies | |
Decrease in unrecognized tax benefits, that is reasonably possible | 2.0 |
Maximum | |
Litigation contingencies | |
Decrease in unrecognized tax benefits, that is reasonably possible | $ 2.5 |
Subsequent Events (Details) - Subsequent event |
Aug. 02, 2021
$ / shares
|
---|---|
Class A | |
Subsequent events | |
Quarterly dividend payable (in dollars per share) | $ 0.26 |
Class B | |
Subsequent events | |
Quarterly dividend payable (in dollars per share) | $ 0.26 |