Watts Water Technologies, Inc. (WTS) swung to a net profit for the quarter ended Oct. 02, 2016. The company has made a net profit of $21.90 million, or $ 0.63 a share in the quarter, against a net loss of $25.70 million, or $0.73 a share in the last year period. On the other hand, adjusted net income for the quarter stood at $24.60 million, or $0.71 a share compared with $23.60 million or $0.67 a share, a year ago. Revenue during the quarter dropped 6.88 percent to $341.10 million from $366.30 million in the previous year period. Gross margin for the quarter expanded 281 basis points over the previous year period to 41.63 percent. Operating margin for the quarter period stood at positive 10.70 percent as compared to a negative 8.24 percent for the previous year period.
Operating income for the quarter was $36.50 million, compared with an operating loss of $30.20 million in the previous year period.
However, the adjusted operating income for the quarter stood at $41.40 million compared to $41.70 million in the prior year period. At the same time, adjusted operating margin improved 75 basis points in the quarter to 12.14 percent from 11.38 percent in the last year period.
Remarking on operating results, chief executive officer, Robert J. Pagano Jr., said, "We delivered another strong quarter of EPS growth and operating margin expansion despite some top-line headwinds. Margins continued to benefit from our transformation and productivity initiatives. We had a strong quarter in cash flow generation, and we expect that trend to continue through the fourth quarter."
Operating cash flow improves significantly
Watts Water Technologies, Inc. has generated cash of $69.60 million from operating activities during the nine month period, up 66.11 percent or $27.70 million, when compared with the last year period. The company has spent $24.20 million cash to meet investing activities during the nine month period as against cash inflow of $14.70 million in the last year period
The company has spent $7.50 million cash to carry out financing activities during the nine month period as against cash outgo of $51.60 million in the last year period.
Cash and cash equivalents stood at $338.60 million as on Oct. 02, 2016, up 17.24 percent or $49.80 million from $288.80 million on Sep. 27, 2015.
Working capital increases sharply
Watts Water Technologies, Inc. has recorded an increase in the working capital over the last year. It stood at $599.80 million as at Oct. 02, 2016, up 79.69 percent or $266 million from $333.80 million on Sep. 27, 2015. Current ratio was at 3.19 as on Oct. 02, 2016, up from 1.64 on Sep. 27, 2015.
Cash conversion cycle (CCC) has decreased to 69 days for the quarter from 116 days for the last year period. Days sales outstanding went up to 59 days for the quarter compared with 56 days for the same period last year.
Days inventory outstanding has decreased to 55 days for the quarter compared with 103 days for the previous year period. At the same time, days payable outstanding went up to 45 days for the quarter from 44 for the same period last year.
Debt moves up marginally
Watts Water Technologies, Inc. has witnessed an increase in total debt over the last one year. It stood at $602.90 million as on Oct. 02, 2016, up 4.31 percent or $24.90 million from $578 million on Sep. 27, 2015. Total debt was 34.50 percent of total assets as on Oct. 02, 2016, compared with 31.10 percent on Sep. 27, 2015. Debt to equity ratio was at 0.80 as on Oct. 02, 2016, up from 0.67 as on Sep. 27, 2015.
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