WATTS WATER TECHNOLOGIES INC, 10-Q filed on 8/9/2012
Quarterly Report
Document and Entity Information
6 Months Ended
Jul. 1, 2012
Jul. 31, 2012
Class A Common Stock
Jul. 31, 2012
Class B Common Stock
Entity Registrant Name
WATTS WATER TECHNOLOGIES INC 
 
 
Entity Central Index Key
0000795403 
 
 
Document Type
10-Q 
 
 
Document Period End Date
Jul. 01, 2012 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
27,764,589 
6,953,680 
Document Fiscal Year Focus
2012 
 
 
Document Fiscal Period Focus
Q2 
 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Jul. 1, 2012
Dec. 31, 2011
CURRENT ASSETS:
 
 
Cash and cash equivalents
$ 167.8 
$ 250.6 
Short-term investment securities
4.1 
4.1 
Trade accounts receivable, less allowance for doubtful accounts of $9.7 million at July 1, 2012 and $9.1 million at December 31, 2011
223.3 
207.1 
Inventories, net:
 
 
Raw materials
104.6 
107.7 
Work in process
22.3 
28.7 
Finished goods
159.9 
147.8 
Total Inventories
286.8 
284.2 
Prepaid expenses and other assets
35.8 
26.6 
Deferred income taxes
27.8 
28.3 
Assets held for sale
14.7 
4.6 
Total Current Assets
760.3 
805.5 
PROPERTY, PLANT AND EQUIPMENT:
 
 
Property, plant and equipment, at cost
487.6 
494.8 
Accumulated depreciation
(275.5)
(268.1)
Property, plant and equipment, net
212.1 
226.7 
OTHER ASSETS:
 
 
Goodwill
490.5 
490.4 
Intangible assets, net
149.5 
154.6 
Deferred income taxes
9.1 
10.2 
Other, net
9.8 
10.1 
TOTAL ASSETS
1,631.3 
1,697.5 
CURRENT LIABILITIES:
 
 
Accounts payable
125.9 
126.5 
Accrued expenses and other liabilities
117.4 
109.2 
Accrued compensation and benefits
39.5 
45.9 
Current portion of long-term debt
77.0 
2.0 
Total Current Liabilities
359.8 
283.6 
LONG-TERM DEBT, NET OF CURRENT PORTION
308.1 
397.4 
DEFERRED INCOME TAXES
55.9 
58.2 
OTHER NONCURRENT LIABILITIES
38.4 
38.5 
STOCKHOLDERS' EQUITY:
 
 
Preferred Stock, $0.10 par value; 5,000,000 shares authorized; no shares issued or outstanding
   
   
Additional paid-in capital
432.3 
420.1 
Retained earnings
475.2 
515.1 
Accumulated other comprehensive loss
(41.9)
(19.0)
Total Stockholders' Equity
869.1 
919.8 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
1,631.3 
1,697.5 
Class A Common Stock
 
 
STOCKHOLDERS' EQUITY:
 
 
Common Stock
2.8 
2.9 
Class B Common Stock
 
 
STOCKHOLDERS' EQUITY:
 
 
Common Stock
$ 0.7 
$ 0.7 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Jul. 1, 2012
Dec. 31, 2011
Trade accounts receivable, allowance for doubtful accounts (in dollars)
$ 9.7 
$ 9.1 
Preferred Stock, par value (in dollars per share)
$ 0.10 
$ 0.10 
Preferred Stock, shares authorized
5,000,000 
5,000,000 
Preferred Stock, shares issued
Preferred Stock, shares outstanding
Class A Common Stock
 
 
Common Stock, par value (in dollars per share)
$ 0.10 
$ 0.10 
Common Stock, shares authorized
80,000,000 
80,000,000 
Common Stock, votes per share (Number of votes)
Common Stock, issued shares
27,844,816 
29,471,414 
Common Stock, outstanding shares
27,844,816 
29,471,414 
Class B Common Stock
 
 
Common Stock, par value (in dollars per share)
$ 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
6,953,680 
6,953,680 
Common Stock, outstanding shares
6,953,680 
6,953,680 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jul. 1, 2012
Jul. 3, 2011
Jul. 1, 2012
Jul. 3, 2011
Net sales
$ 371.1 
$ 375.7 
$ 735.3 
$ 705.6 
Cost of goods sold
239.3 
245.4 
473.9 
454.3 
GROSS PROFIT
131.8 
130.3 
261.4 
251.3 
Selling, general & administrative expenses
96.9 
98.2 
197.9 
195.2 
Restructuring and other charges
1.2 
5.5 
2.9 
6.6 
OPERATING INCOME
33.7 
26.6 
60.6 
49.5 
Other (income) expense:
 
 
 
 
Interest income
(0.2)
(0.2)
(0.4)
(0.5)
Interest expense
6.1 
6.7 
12.3 
12.6 
Other expense, net
 
0.6 
(0.9)
0.7 
Total other expense
5.9 
7.1 
11.0 
12.8 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
27.8 
19.5 
49.6 
36.7 
Provision for income taxes
9.3 
6.6 
15.4 
12.7 
NET INCOME FROM CONTINUING OPERATIONS
18.5 
12.9 
34.2 
24.0 
Income from discontinued operations, net of taxes
 
1.7 
 
1.7 
NET INCOME
$ 18.5 
$ 14.6 
$ 34.2 
$ 25.7 
Net income per share:
 
 
 
 
Continuing operations (in dollars per share)
$ 0.51 
$ 0.34 
$ 0.93 
$ 0.64 
Discontinued operations (in dollars per share)
 
$ 0.05 
 
$ 0.05 
NET INCOME (in dollars per share)
$ 0.51 
$ 0.39 
$ 0.93 
$ 0.69 
Weighted average number of shares (in shares)
36.5 
37.6 
36.7 
37.6 
Net income per share:
 
 
 
 
Continuing operations (in dollars per share)
$ 0.51 
$ 0.34 
$ 0.93 
$ 0.64 
Discontinued operations (in dollars per share)
 
$ 0.05 
 
$ 0.05 
NET INCOME (in dollars per share)
$ 0.51 
$ 0.39 
$ 0.93 
$ 0.68 
Weighted average number of shares (in shares)
36.6 
37.8 
36.8 
37.7 
Dividends per share (in dollars per share)
$ 0.11 
$ 0.11 
$ 0.22 
$ 0.22 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jul. 1, 2012
Jul. 3, 2011
Jul. 1, 2012
Jul. 3, 2011
Net income
$ 18.5 
$ 14.6 
$ 34.2 
$ 25.7 
Other comprehensive income (loss), net of tax:
 
 
 
 
Foreign currency translation adjustments
(39.7)
14.7 
(23.2)
48.7 
Defined benefit pension plans:
 
 
 
 
Amortization of prior service cost included in net periodic pension cost
 
0.1 
 
0.2 
Amortization of net losses included in net periodic pension cost
0.1 
0.7 
0.3 
1.4 
Defined benefit pension plans
0.1 
0.8 
0.3 
1.6 
Other comprehensive income (loss), net of tax
(39.6)
15.5 
(22.9)
50.3 
Comprehensive income (loss)
$ (21.1)
$ 30.1 
$ 11.3 
$ 76.0 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jul. 1, 2012
Jul. 3, 2011
OPERATING ACTIVITIES
 
 
Net income
$ 34.2 
$ 25.7 
Less: Income from discontinued operations, net of taxes
 
1.7 
Net income from continuing operations
34.2 
24.0 
Adjustments to reconcile net income from continuing operations to net cash provided by continuing operating activities:
 
 
Depreciation
16.7 
16.1 
Amortization
8.4 
9.3 
Stock-based compensation
2.5 
5.8 
Deferred income taxes benefit
(0.5)
(4.7)
Loss on disposal and impairment of property, plant and equipment and other
0.4 
0.5 
Changes in operating assets and liabilities, net of effects from business acquisitions and divestitures:
 
 
Accounts receivable
(21.4)
(14.0)
Inventories
(9.7)
(14.7)
Prepaid expenses and other assets
(9.2)
(4.0)
Accounts payable, accrued expenses and other liabilities
2.5 
2.4 
Net cash provided by continuing operations
23.9 
20.7 
INVESTING ACTIVITIES
 
 
Additions to property, plant and equipment
(9.6)
(12.0)
Proceeds from the sale of property, plant and equipment
1.0 
0.6 
Purchase of short-term investment securities
 
(4.1)
Proceeds from the sale of short-term investment securities
 
4.1 
Business acquisitions, net of cash acquired
(17.5)
(162.9)
Net cash used in investing activities
(26.1)
(174.3)
FINANCING ACTIVITIES
 
 
Proceeds from long-term debt
9.2 
184.0 
Payments of long-term debt
(22.8)
(99.9)
Payment of capital leases and other
(1.2)
(1.3)
Proceeds from share transactions under employee stock plans
6.0 
3.0 
Tax benefit of stock awards exercised
0.4 
0.4 
Dividends
(8.2)
(8.3)
Payments to repurchase common stock
(63.2)
 
Net cash provided by (used in) financing activities
(79.8)
77.9 
Effect of exchange rate changes on cash and cash equivalents
(0.8)
13.2 
DECREASE IN CASH AND CASH EQUIVALENTS
(82.8)
(62.5)
Cash and cash equivalents at beginning of year
250.6 
329.2 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
167.8 
266.7 
Acquisition of businesses:
 
 
Fair value of assets acquired
27.7 
218.8 
Cash paid, net of cash acquired
17.5 
162.9 
Liabilities assumed
10.2 
55.9 
Acquisition of fixed assets under financing agreements
0.6 
4.3 
Issuance of stock under management stock purchase plan
0.4 
0.4 
CASH PAID FOR:
 
 
Interest
12.5 
12.2 
Income taxes
$ 14.0 
$ 20.1 
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 July 1, 2012, the Consolidated Statements of Operations for the second quarter and six months ended July 1, 2012 and July 3, 2011, the Consolidated Statements of Comprehensive Income for the second quarter and six months ended July 1, 2012 and July 3, 2011, and the Consolidated Statements of Cash Flows for the six months ended July 1, 2012 and July 3, 2011.

 

The balance sheet at December 31, 2011 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, 2011.  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, 2011. Operating results for the interim period presented are not necessarily indicative of the results to be expected for the year ending December 31, 2012.

 

The Company operates on a 52-week fiscal year ending on December 31st.  Any quarterly or six- month data contained in this Quarterly Report on Form 10-Q generally reflect the results of operations for a 13-week period or 26-week period, respectively.

 

Certain amounts in the 2011 consolidated financial statements have been reclassified to permit comparison with the 2012 presentation.  These reclassifications had no effect on reported results of operations or stockholders’ equity.

Accounting Policies
Accounting Policies

2. Accounting Policies

 

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.

 

Goodwill and Long-Lived Assets

 

The changes in the carrying amount of goodwill by geographic segment are as follows:

 

 

 

Gross Balance

 

Accumulated Impairment Losses

 

Net
Goodwill

 

 

 

Balance
January 1,
2011

 

Acquired
During
the
Period

 

Foreign
Currency
Translation
and Other

 

Balance
July 3,
2011

 

Balance
January 1,
2011

 

Impairment
Loss During
the Period

 

Balance
July 3,
2011

 

July 3,
2011

 

 

 

(in millions)

 

North America

 

$

213.8

 

$

2.5

 

$

 

$

216.3

 

$

(22.0

)

$

 

$

(22.0

)

$

194.3

 

Europe, Middle East and Africa (EMEA)

 

228.1

 

62.5

 

17.2

 

307.8

 

 

 

 

307.8

 

Asia

 

8.1

 

4.3

 

0.2

 

12.6

 

 

 

 

12.6

 

Total

 

$

450.0

 

$

69.3

 

$

17.4

 

$

536.7

 

$

(22.0

)

$

 

$

(22.0

)

$

514.7

 

 

 

 

Gross Balance

 

Accumulated Impairment Losses

 

Net
Goodwill

 

 

 

Balance
January 1,
2012

 

Acquired
During
the
Period

 

Foreign
Currency
Translation
and Other

 

Balance
July 1,
2012

 

Balance
January 1,
2012

 

Impairment
Loss During
the Period

 

Balance
 July 1,
2012

 

July 1,
2012

 

 

 

(in millions)

 

North America

 

$

215.6

 

$

13.1

 

$

(2.1

)

$

226.6

 

$

(23.2

)

$

 

$

(23.2

)

$

203.4

 

EMEA

 

285.3

 

 

(10.8

)

274.5

 

 

 

 

274.5

 

Asia

 

12.7

 

 

(0.1

)

12.6

 

 

 

 

12.6

 

Total

 

$

513.6

 

$

13.1

 

$

(13.0

)

$

513.7

 

$

(23.2

)

$

 

$

(23.2

)

$

490.5

 

 

On January 31, 2012, the Company completed the acquisition of tekmar Control Systems (tekmar) in a share purchase transaction.  A designer and manufacturer of control systems used in heating, ventilation, and air conditioning applications, tekmar is expected to enhance the Company’s hydronic systems product offerings in the U.S. and Canada.  The initial purchase price paid was CAD $18.0 million, with post-closing adjustments related to working capital and an earn-out based on the attainment of certain future earnings levels.  The total purchase price will not exceed CAD $26.2 million.  The Company is accounting for the transaction as a business combination.  The Company completed a preliminary purchase price allocation that resulted in the recognition of $13.1 million in goodwill and $10.1 million in intangible assets.  Intangible assets consist primarily of acquired technology with an estimated life of 10 years, distributor relationships with an estimated life of 7 years, and a trade name with an estimated life of 20 years.  The goodwill is not expected to be deductible for tax purposes.

 

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 impairment assessment of goodwill and indefinite-lived intangible assets in the fourth quarter of each year.

 

As of October 30, 2011, the annual impairment analysis date, the fair value of the Company’s Europe, Middle East and Africa (EMEA) reporting unit exceeded the carrying value by approximately 9%.  Operating results for the EMEA reporting unit have been hindered by the downturn in the economic environment in Europe and continued to fall below expectations during the six months ended July 1, 2012, triggering the decision to update the impairment analysis.  As a result of the updated fair value assessment, it was determined that the fair value of the EMEA reporting unit continues to exceed its carrying value, a result of a decrease in discount rate and a reduction of net debt offset by lower short-term projections.  The Company also performed an analysis on the long-lived assets in the EMEA reporting unit as a result of the triggering event and concluded that these assets were not impaired.

 

Should the EMEA reporting unit’s operating results decline further because the European marketplace deteriorates beyond our current expectations or should interest rates increase significantly, then the reporting unit’s goodwill may be at risk for impairment in the future. The EMEA reporting unit’s goodwill balance as of July 1, 2012 was $202.7 million.

 

Intangible assets with estimable lives and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of intangible assets with estimable lives and other long-lived assets are measured by a comparison of the carrying amount of an asset or asset group to future net undiscounted pretax cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the impairment loss recognized is the amount by which the carrying amount of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future pretax operating cash flows or appraised values, depending on the nature of the asset. The Company determines the discount rate for this analysis based on the weighted average cost of capital based on the market and guideline public companies for the related business and does not allocate interest charges to the asset or asset group being measured.  Judgment is required to estimate future operating cash flows.

 

Intangible assets include the following:

 

 

 

July 1, 2012

 

December 31, 2011

 

 

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Amount

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Amount

 

 

 

(in millions)

 

Patents

 

$

16.3

 

$

(11.2

)

$

5.1

 

$

16.5

 

$

(10.8

)

$

5.7

 

Customer relationships

 

132.1

 

(63.9

)

68.2

 

135.8

 

(57.7

)

78.1

 

Technology

 

28.1

 

(8.2

)

19.9

 

19.8

 

(7.1

)

12.7

 

Trade Names

 

13.0

 

(1.3

)

11.7

 

13.4

 

(0.8

)

12.6

 

Other

 

8.6

 

(5.5

)

3.1

 

8.5

 

(5.4

)

3.1

 

Total amortizable intangibles

 

198.1

 

(90.1

)

108.0

 

194.0

 

(81.8

)

112.2

 

Indefinite-lived intangible assets

 

41.5

 

 

41.5

 

42.4

 

 

42.4

 

Total

 

$

239.6

 

$

(90.1

)

$

149.5

 

$

236.4

 

$

(81.8

)

$

154.6

 

 

Aggregate amortization expense for amortizable intangible assets for the second quarters of 2012 and 2011 was $4.2 million and $5.3 million, respectively, and for the first six months of 2012 and 2011 was $8.4 million and $9.3 million, respectively.  Additionally, future amortization expense for the next five years on amortizable intangible assets is expected to be approximately $7.6 million for the remainder of 2012, $15.0 million for 2013, $14.8 million for 2014, $14.5 million for 2015 and $14.1 million for 2016. Amortization expense is recorded on a straight-line basis over the estimated useful lives of the intangible assets. The weighted-average remaining life of total amortizable intangible assets is 10.0 years. Patents, customer relationships, technology, trade names and other amortizable intangibles have weighted-average remaining lives of 6.9 years, 7.0 years, 12.2 years, 12.1 years and 42.1 years, respectively. Intangible assets not subject to amortization consist of certain trademarks and trade names.

 

Stock-Based Compensation

 

The Company maintains three stock incentive plans under which key employees and non-employee members of the Company’s Board of Directors have been granted incentive stock options (ISOs) and nonqualified stock options (NSOs) to purchase the Company’s Class A Common Stock. Only one plan, the 2004 Stock Incentive Plan, is currently available for the grant of new stock options, which are currently being granted only to employees.  Under the 2004 Stock Incentive Plan, options become exercisable over a four-year period at the rate of 25% per year and expire ten years after the grant date. ISOs and NSOs granted under the plans may have exercise prices of not less than 100% and 50% of the fair market value of the Class A Common Stock on the date of grant, respectively. The Company’s current practice is to grant all options at fair market value on the grant date. The Company did not issue any stock options during the first six months of 2012 and 2011.

 

The Company has also granted shares of restricted stock to key employees and stock awards to non-employee members of the Company’s Board of Directors under the 2004 Stock Incentive Plan, which vest either immediately, or over a three-year period at the rate of one-third per year. The restricted stock awards are amortized to expense on a straight-line basis over the vesting period. The Company did not issue any restricted stock in the first six months of 2012 and issued 1,400 shares of restricted stock in the first six months of 2011.

 

The Company also has a Management Stock Purchase Plan that allows for the purchase of restricted stock units (RSUs) by key employees.  On an annual basis, key employees may elect to receive a portion of their annual incentive compensation in RSUs instead of cash.  Each RSU represents one share of Class A Common Stock and is purchased by the employee at 67% of the fair market value of the Company’s Class A Common Stock on the date of grant.  RSUs vest annually over a three-year period from the grant date and receipt of the shares underlying RSUs is deferred for a minimum of three years or such greater number of years as is chosen by the employee.  An aggregate of 2,000,000 shares of Class A Common Stock may be issued under the Management Stock Purchase Plan. The Company granted 63,739 RSUs and 96,454 RSUs in the first six months of 2012 and 2011, respectively.

 

The fair value of each RSU 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:

 

 

 

2012

 

2011

 

Expected life (years)

 

3.0

 

3.0

 

Expected stock price volatility

 

38.3

%

44.9

%

Expected dividend yield

 

1.1

%

1.2

%

Risk-free interest rate

 

0.4

%

1.2

%

 

The above assumptions were used to determine the weighted average grant-date fair value of RSUs of $15.68 and $16.25 in 2012 and 2011, respectively.

 

A more detailed description of each of these stock and stock option plans can be found in Note 12 of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

 

On May 23, 2012, William C. McCartney provided notice of his intention to retire as Chief Financial Officer of the Company.  On June 14, 2012, the Company entered into a retention agreement with Mr. McCartney.  Pursuant to the retention agreement, Mr. McCartney will continue employment with the Company until December 14, 2012 and will assist the Company in identifying a successor and transitioning his responsibilities and duties to the new Chief Financial Officer. Pursuant to Mr. McCartney fulfilling his duties under the retention agreement, the Company will record a pre-tax charge of approximately $1.5 million over the retention period, consisting of expected cash payments of $0.7 million and a non-cash charge of $0.8 million for the modification of stock options and restricted stock awards.  In addition, Mr. McCartney will receive a performance bonus he would have been entitled to had he been employed by the Company through December 31, 2012.  The charge recorded in the second quarter related to the retention agreement was immaterial.

 

On January 26, 2011, Patrick S. O’Keefe resigned from his positions as Chief Executive Officer, President and Director.  Pursuant to a separation agreement, the Company recorded a charge of $6.3 million, consisting of $3.3 million in expected cash severance and a non-cash charge of $3.0 million for the modification of stock options and restricted stock awards.

 

Shipping and Handling

 

The Company’s shipping costs included in selling, general and administrative expenses were $8.9 million and $9.9 million for the second quarters of 2012 and 2011, respectively, and were $18.8 million and $18.7 million for the first six months of 2012 and 2011, respectively.

 

Research and Development

 

Research and development costs included in selling, general and administrative expenses were $5.3 million and $5.7 million for the second quarters of 2012 and 2011, respectively, and were $10.7 million for both the first six months of 2012 and 2011, respectively.

 

Taxes, Other than Income Taxes

 

Taxes assessed by governmental authorities on sale transactions are recorded on a net basis and excluded from sales in the Company’s consolidated statements of operations.

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

New Accounting Standards

 

In December 2011, the Financial Accounting Standards Board (FASB) issued an amendment to the accounting guidance for disclosure of offsetting assets and liabilities and related arrangements. The amendment expands the disclosure requirements in that entities will be required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The amendment is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013, and shall be applied retrospectively. The Company does not expect the adoption of this accounting pronouncement will have a material impact on its financial statements.

 

In July 2012, the FASB issued an amendment to the requirements for indefinite-lived intangible asset impairment testing. The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is more likely than not that the fair value of an indefinite-lived intangible asset is greater than its carrying amount, then performing the impairment test is unnecessary. The Company intends to adopt this new standard effective with its annual impairment testing date of October 30, for the year ending December 31, 2012.

Discontinued Operations and Assets Held For Sale
Discontinued Operations and Assets Held For Sale

3. Discontinued Operations and Assets Held For Sale

 

In the first quarter of 2010, the Company recorded an estimated reserve of $5.3 million in discontinued operations in connection with its investigation of potential violations of the Foreign Corrupt Practices Act (FCPA) at Watts Valve (Changsha) Co., Ltd. (CWV), a former indirect wholly-owned subsidiary of the Company in China. On October 13, 2011, the Company entered into a settlement for $3.8 million with the Securities and Exchange Commission to resolve allegations concerning potential violations of the FCPA at CWV. During the quarter ended July 3, 2011, the Company revised the reserve to $3.8 million based on the pending settlement.  See Note 3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

 

July 1,
2012

 

July 3,
2011

 

July 1,
2012

 

July 3,
2011

 

 

 

(in millions)

 

Reserve release - FCPA matter (CWV)

 

$

 

$

1.7

 

$

 

$

1.7

 

Gain on disposal — TEAM

 

 

0.3

 

 

0.3

 

Income (loss) before income taxes

 

 

2.0

 

 

2.0

 

Income tax expense

 

 

0.3

 

 

0.3

 

Income from discontinued operations, net of taxes

 

$

 

$

1.7

 

$

 

$

1.7

 

 

During the quarter ended July 1, 2012, the Company’s Board of Directors approved the disposal of an operation within the Company’s North America segment.  The Company evaluated the fair value less cost to sell the net assets and determined that the fair value exceeded the carrying value. The Company recorded the net assets of $10.9 million, representing gross assets of $14.0 million less liabilities of $3.1 million, as assets held for sale.  The revenues and results of operations are not material to the Company.  The Company will not have continuing involvement after a sale is completed.

Financial Instruments and Derivative Instruments
Financial Instruments and Derivative Instruments

4. Financial Instruments and Derivative Instruments

 

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including foreign currency derivatives, deferred compensation plan assets and related liability, and contingent consideration. There were no cash flow hedges as of July 1, 2012.  The fair values of these certain financial assets and liabilities were determined using the following inputs at July 1, 2012 and December 31, 2011:

 

 

 

Fair Value Measurements at July 1, 2012 Using:

 

 

 

 

 

Quoted Prices in
Active
Markets for Identical
Assets

 

Significant Other
Observable
Inputs

 

Significant
Unobservable
Inputs

 

 

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Plan asset for deferred compensation(1)

 

$

4.1

 

$

4.1

 

$

 

$

 

Total assets

 

$

4.1

 

$

4.1

 

$

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

Plan liability for deferred compensation(2)

 

$

4.1

 

$

4.1

 

$

 

$

 

Contingent consideration(3)

 

6.1

 

 

 

6.1

 

Total liabilities

 

$

10.2

 

$

4.1

 

$

 

$

6.1

 

 

 

 

Fair Value Measurements at December 31, 2011 Using:

 

 

 

 

 

Quoted Prices in Active
Markets for Identical Assets

 

Significant Other
Observable
Inputs

 

Significant
Unobservable
Inputs

 

 

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Plan asset for deferred compensation(1)

 

$

4.0

 

$

4.0

 

$

 

$

 

Total assets

 

$

4.0

 

$

4.0

 

$

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

Plan liability for deferred compensation(2)

 

$

4.0

 

$

4.0

 

$

 

$

 

Contingent consideration(3)

 

1.1

 

 

 

1.1

 

Total liabilities

 

$

5.1

 

$

4.0

 

$

 

$

1.1

 

 

 

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

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

(3)          Included in other noncurrent liabilities and accrued expenses and other liabilities on the Company’s consolidated balance sheet.

 

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, 2011 to July 1, 2012.

 

 

 

Balance

 

Purchases,

 

Total realized and
unrealized gains
(losses) included in:

 

Balance

 

 

 

December 31,
2011

 

sales,
settlements, net

 

Earnings

 

Comprehensive
income

 

July 1,
2012

 

 

 

(in millions)

 

Contingent consideration

 

$

1.1

 

$

5.1

 

$

0.1

 

$

(0.2

)

$

6.1

 

 

In 2010, a contingent liability of $1.9 million was recognized as an estimate of the acquisition date fair value of the contingent consideration in the BRAE acquisition. This liability was classified as Level 3 under the fair value hierarchy as it was based on the weighted probability of achievement of a future performance metric as of the date of the acquisition, which was not observable in the market.  During the year ended December 31, 2011, the estimate of the fair value of the contingent consideration was reduced to $1.1 million based on the revised probability of achievement of the future performance metric.  Failure to meet the performance metric would reduce this liability to zero, while complete achievement would increase this liability to the full remaining purchase price of $4.8 million.

 

In connection with the tekmar Control Systems acquisition in 2012, a contingent liability of $5.1 million was recognized as the estimate of the acquisition date fair value of the contingent consideration (see Note 12). This liability was classified as Level 3 under the fair value hierarchy as it was based on the probability of achievement of a future performance metric 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 this liability to the full remaining purchase price of CAD $8.2 million.

 

Short-term investment securities as of July 1, 2012 consist of a certificate of deposit with a remaining maturity of greater than three months at the date of purchase, for which the carrying amount is a reasonable estimate of fair value.

 

Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of certificates of deposit and 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.

 

The Company has exposure to a number of foreign currency rates, including the Canadian Dollar, the Euro, the Chinese Yuan and the British Pound. To manage this risk, the Company generally uses a layering methodology whereby at the end of any quarter, the Company has generally entered into forward exchange contracts which hedge approximately 50% of the projected intercompany purchase transactions for the next twelve months. The Company primarily uses this strategy for the purchases between Canada and the U.S. The average volume of contracts can vary but generally is approximately $2 million to $15 million in open contracts at the end of any given quarter. At July 1, 2012, the Company had contracts for notional amounts aggregating approximately $2.0 million. The Company accounts for the forward exchange contracts as an economic hedge. Realized and unrealized gains and losses on the contracts are recognized in other (income) expense in the consolidated statement of operations. These contracts do not subject the Company to significant market risk from exchange movement because they offset gains and losses on the related foreign currency denominated transactions.  The fair value of these contracts as of July 1, 2012 was not material.

 

Fair Value

 

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

 

The fair values of the Company’s 5.47% senior notes due 2013, 5.85% senior notes due 2016 and 5.05% senior notes due 2020, are based on a discounted cash flow model using like industrial companies, the Company’s credit metrics, the Company’s size, as well as current market interest rates quoted in active markets and are classified within Level 2 of the valuation hierarchy.  The fair value of 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:

 

 

 

July 1,

 

December 31,

 

 

 

2012

 

2011

 

 

 

(in millions)

 

Carrying amount

 

$

385.1

 

$

399.4

 

Estimated fair value

 

$

422.7

 

$

440.5

 

Restructuring and Other Charges
Restructuring and Other Charges

5. Restructuring and Other Charges

 

The Company’s Board of Directors approves all major restructuring programs that involve the discontinuance of product lines or the shutdown of 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 individual employees are notified or the liability is incurred.  These costs are included in restructuring and other charges in the Company’s consolidated statements of operations.  In April 2011, the Board approved an integration program in association with the acquisition of Danfoss Socla S.A.S. (Socla).  The program was designed to integrate certain operations and management structures of Socla with a total estimated pre-tax cost of $6.4 million with costs being incurred through 2012.  As of July 1, 2012, the Company revised its forecast to $4.4 million due to lower than expected severance costs.

 

The Company also periodically initiates other actions which are not part of a major program.  In 2011, the Company initiated restructuring activities with respect to the Company’s operating facilities in Europe, which included the closure of a facility. The Europe restructuring activities are expected to include pre-tax costs of approximately $2.6 million, including costs for severance and shut-down costs. The total net after-tax charge is $1.8 million with costs being incurred through 2012.  In 2012, the Company commenced restructuring activities in North America to relocate certain production activities, which include the closure of two manufacturing sites occurring through 2013.  Total expected costs are $2.8 million, including severance and shutdown costs.  The net after tax charge of $1.8 million will be incurred through the middle of 2013.

 

A summary of the pre-tax cost by restructuring program is as follows:

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

 

July 1,
2012

 

July 3,
2011

 

July 1,
2012

 

July 3,
2011

 

 

 

(in millions)

 

Restructuring costs:

 

 

 

 

 

 

 

 

 

2010 Actions

 

$

0.1

 

$

1.8

 

$

0.1

 

$

2.7

 

2011 Actions

 

0.1

 

3.4

 

0.6

 

3.6

 

Other Actions

 

0.9

 

 

1.6

 

 

Total restructuring charges

 

1.1

 

5.2

 

2.3

 

6.3

 

Other charges related to impairments

 

0.1

 

0.3

 

0.6

 

0.3

 

Total restructuring and other charges

 

$

1.2

 

$

5.5

 

$

2.9

 

$

6.6

 

 

The Company recorded net pre-tax restructuring and other charges in its business segments as follows:

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

 

July 1,
2012

 

July 3,
2011

 

July 1,
2012

 

July 3,
2011

 

 

 

(in millions)

 

North America

 

$

0.4

 

$

 

$

0.8

 

$

0.1

 

EMEA

 

0.8

 

5.3

 

2.1

 

6.3

 

Asia.

 

 

0.2

 

 

0.2

 

Total

 

$

1.2

 

$

5.5

 

$

2.9

 

$

6.6

 

 

2011 Actions

 

The following table summarizes the total expected, incurred and remaining pre-tax severance costs for the 2011 Socla integration program:

 

Reportable Segment

 

Total Expected
Costs

 

Incurred through
July 1, 2012

 

Remaining Costs at
July 1, 2012

 

 

 

(in millions)

 

EMEA

 

$

4.2

 

$

3.5

 

$

0.7

 

Asia

 

0.2

 

0.2

 

 

Total

 

$

4.4

 

$

3.7

 

$

0.7

 

 

The Company expects to spend the remaining costs by the end of 2012.

 

Details of the Company’s 2011 Socla integration reserves for severance for the six months ended July 1, 2012 are as follows:

 

 

 

Six Months Ended

 

 

 

July 1, 2012

 

 

 

(in millions)

 

Balance at December 31, 2011

 

$

0.4

 

Net pre-tax restructuring charges

 

0.5

 

Utilization and foreign currency impact

 

(0.3

)

Balance at April 1, 2012

 

$

0.6

 

Net pre-tax restructuring charges

 

0.1

 

Utilization and foreign currency impact

 

(0.6

)

Balance at July 1, 2012

 

$

0.1

 

 

The Company expects to exhaust the remaining reserve by the end of 2012.

 

The following table summarizes expected, incurred and remaining severance costs for 2011 Socla integration actions:

 

 

 

Incurred through
July 1, 2012

 

 

 

(in millions)

 

Expected costs

 

$

4.4

 

Costs incurred — 2011

 

(3.1

)

Costs incurred — quarter ended April 1, 2012

 

(0.5

)

Costs incurred — quarter ended July 1, 2012

 

(0.1

)

Remaining costs at July 1, 2012

 

$

0.7

 

Earnings per Share
Earnings per Share

6. Earnings per Share

 

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

 

 

 

For the Second Quarter Ended July 1, 2012

 

For the Second Quarter Ended July 3, 2011

 

 

 

Income
(Numerator)

 

Shares
(Denominator)

 

Per Share
Amount

 

Income
(Numerator)

 

Shares
(Denominator)

 

Per Share
Amount

 

 

 

(amounts in millions, except per share amounts)

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

18.5

 

36.5

 

$

0.51

 

$

12.9

 

37.6

 

$

0.34

 

Discontinued operations

 

 

 

 

 

1.7

 

 

 

0.05

 

Net income

 

$

18.5

 

 

 

$

0.51

 

$

14.6

 

 

 

$

0.39

 

Effect of dilutive securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock equivalents

 

 

 

0.1

 

 

 

 

 

0.2

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

18.5

 

 

 

$

0.51

 

$

12.9

 

 

 

$

0.34

 

Discontinued operations

 

 

 

 

 

1.7

 

 

 

0.05

 

Net income

 

$

18.5

 

36.6

 

$

0.51

 

$

14.6

 

37.8

 

$

0.39

 

 

Options to purchase 0.4 million and 0.3 million shares of Class A Common Stock were outstanding during the second quarters of 2012 and 2011, respectively, but were not included in the computation of diluted EPS because to do so would be anti-dilutive.

 

 

 

For the Six Months Ended July 1, 2012

 

For the Six Months Ended July 3, 2011

 

 

 

Income
(Numerator)

 

Shares
(Denominator)

 

Per Share
Amount

 

Income
(Numerator)

 

Shares
(Denominator)

 

Per Share
Amount

 

 

 

(amounts in millions, except per share amounts)

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

34.2

 

36.7

 

$

0.93

 

$

24.0

 

37.6

 

$

0.64

 

Discontinued operations

 

 

 

 

 

1.7

 

 

 

0.05

 

Net income

 

$

34.2

 

 

 

$

0.93

 

$

25.7

 

 

 

$

0.69

 

Effect of dilutive securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock equivalents

 

 

 

0.1

 

 

 

 

 

0.1

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

34.2

 

 

 

$

0.93

 

$

24.0

 

 

 

$

0.64

 

Discontinued operations

 

 

 

 

 

1.7

 

 

 

0.05

 

Net income

 

$

34.2

 

36.8

 

$

0.93

 

$

25.7

 

37.7

 

$

0.68

 

 

Options to purchase 0.4 million and 0.3 million shares of Class A Common Stock were outstanding during the first six months of 2012 and 2011, respectively, but were not included in the computation of diluted EPS because to do so would be anti-dilutive.

 

On May 16, 2012, the Board of Directors authorized a stock repurchase program of up to two million shares of the Company’s Class A Common Stock.  During the quarter ended July 1, 2012, the Company repurchased approximately 1.9 million shares of Class A common stock at a cost of approximately $63.2 million.  The stock repurchase program was completed in July 2012.

Segment Information
Segment Information

7. Segment Information

 

The Company operates in three geographic segments: North America, EMEA, and Asia. Each of these segments is managed separately and has separate financial results that are reviewed by the Company’s chief operating decision-maker. All intercompany sales transactions have been eliminated. Sales by region are based upon location of the entity recording the sale. The accounting policies for each segment are the same as those described in the summary of significant accounting policies.

 

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

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

 

July 1,
2012

 

July 3,
2011

 

July 1,
2012

 

July 3,
2011

 

 

 

(in millions)

 

Net Sales

 

 

 

 

 

 

 

 

 

North America

 

$

221.8

 

$

212.0

 

$

431.8

 

$

414.1

 

EMEA

 

142.8

 

157.8

 

292.0

 

281.8

 

Asia

 

6.5

 

5.9

 

11.5

 

9.7

 

Consolidated net sales

 

$

371.1

 

$

375.7

 

$

735.3

 

$

705.6

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

North America

 

$

26.7

 

$

26.3

 

$

46.9

 

$

53.0

 

EMEA

 

12.0

 

6.9

 

24.8

 

16.6

 

Asia

 

2.1

 

0.9

 

3.5

 

1.7

 

Subtotal reportable segments

 

40.8

 

34.1

 

75.2

 

71.3

 

 

 

 

 

 

 

 

 

 

 

Corporate (*)

 

(7.1

)

(7.5

)

(14.6

)

(21.8

)

Consolidated operating income

 

33.7

 

26.6

 

60.6

 

49.5

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

0.2

 

0.2

 

0.4

 

0.5

 

Interest expense

 

(6.1

)

(6.7

)

(12.3

)

(12.6

)

Other

 

 

(0.6

)

0.9

 

(0.7

)

Income from continuing operations before income taxes

 

27.8

 

$

19.5

 

$

49.6

 

$

36.7

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures

 

 

 

 

 

 

 

 

 

North America

 

$

1.8

 

$

1.9

 

$

4.4

 

$

5.3

 

EMEA

 

2.4

 

3.2

 

4.6

 

6.3

 

Asia

 

0.5

 

0.3

 

0.6

 

0.4

 

Consolidated capital expenditures

 

$

4.7

 

$

5.4

 

$

9.6

 

$

12.0

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

 

 

 

 

 

 

 

North America

 

$

5.2

 

$

5.2

 

$

10.0

 

$

9.6

 

EMEA

 

6.8

 

8.4

 

14.1

 

14.8

 

Asia

 

0.5

 

0.5

 

1.0

 

1.0

 

Consolidated depreciation and amortization

 

$

12.5

 

$

14.1

 

$

25.1

 

$

25.4

 

 

 

 

 

 

 

 

 

 

 

Identifiable Assets (at end of period)

 

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

$

790.0

 

$

844.9

 

EMEA

 

 

 

 

 

750.5

 

948.8

 

Asia

 

 

 

 

 

90.8

 

85.1

 

Discontinued operations

 

 

 

 

 

 

1.6

 

Consolidated identifiable assets

 

 

 

 

 

$

1,631.3

 

$

1,880.4

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

North America

 

 

 

 

 

$

73.7

 

$

83.8

 

EMEA

 

 

 

 

 

123.9

 

153.1

 

Asia

 

 

 

 

 

14.5

 

15.3

 

Consolidated property, plant and equipment, net

 

 

 

 

 

$

212.1

 

$

252.2

 

 

 

*     Corporate expenses are primarily for administrative compensation expense, internal controls costs, professional fees, including legal and audit expenses, shareholder services and benefit administration costs. These costs are not allocated to the geographic segments as they are viewed as corporate functions that support all activities.

 

The above operating segments are presented on a basis consistent with the presentation included in the Company’s December 31, 2011 consolidated financial statements included in its Annual Report on Form 10-K.

 

The following includes U.S. net sales and U.S. property, plant and equipment of the Company’s North America segment:

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

 

July 1, 
2012

 

July 3, 
2011

 

July 1, 
2012

 

July 3, 
2011

 

 

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

U.S. net sales

 

$

199.7

 

$

192.5

 

$

389.7

 

$

375.4

 

U.S. property, plant and equipment (at end of period)

 

 

 

 

 

$

71.6

 

$

78.6

 

 

The following includes intersegment sales for North America, EMEA and Asia:

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

 

July 1, 
2012

 

July 3, 
2011

 

July 1, 
2012

 

July 3, 
2011

 

 

 

(in millions)

 

Intersegment Sales

 

 

 

 

 

 

 

 

 

North America

 

$

1.2

 

$

0.8

 

$

2.6

 

$

1.7

 

EMEA

 

2.0

 

2.3

 

4.6

 

4.2

 

Asia

 

35.3

 

37.2

 

66.4

 

67.9

 

Intersegment sales

 

$

38.5

 

$

40.3

 

$

73.6

 

$

73.8

 

 

The North America segment includes $14.7 million in assets held for sale at July 1, 2012. The North America segment and the Asia segment include $3.8 million and $6.2 million, respectively, in assets held for sale at July 3, 2011.

 

The Company sells its products into various end markets around the world and groups net sales to third parties into four product categories.  Because many of the Company’s sales are through distributors and third-party manufacturers’ representatives, a portion of the product categorization is based on management’s understanding of final product use and, as such, allocations have been made to align sales into a product category.  Net sales to third parties for the four product categories are as follows:

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

 

July 1, 
2012

 

July 3, 
2011

 

July 1, 
2012

 

July 3, 
2011

 

 

 

(in millions)

 

Net Sales

 

 

 

 

 

 

 

 

 

Residential & commercial flow control

 

$

211.3

 

$

199.2

 

$

412.5

 

$

365.6

 

HVAC & gas

 

106.8

 

122.1

 

216.6

 

235.6

 

Drains & water re-use

 

35.0

 

36.6

 

68.7

 

67.7

 

Water quality

 

18.0

 

17.8

 

37.5

 

36.7

 

Consolidated net sales

 

$

371.1

 

$

375.7

 

$

735.3

 

$

705.6

 

Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss)

8.  Accumulated Other Comprehensive Income (Loss)

 

Accumulated other comprehensive income (loss) consists of the following:

 

 

 

Foreign
Currency
Translation

 

Pension
Adjustment

 

Accumulated Other
Comprehensive
Income (Loss)

 

 

 

(in millions)

 

 

 

 

 

 

 

 

 

Balance December 31, 2011

 

$

5.6

 

$

(24.6

)

$

(19.0

)

Change in period

 

16.5

 

0.2

 

16.7

 

Balance April 1, 2012

 

$

22.1

 

$

(24.4

)

$

(2.3

)

Change in period

 

(39.7

)

0.1

 

(39.6

)

Balance July 1, 2012

 

$

(17.6

)

$

(24.3

)

$

(41.9

)