Q3'16 earningsdeckfinal

© 2016 Watts Water Technologies
Watts Water Technologies
3Q 2016 Earnings Conference Call
November 3, 2016

Forward Looking Statements
Certain statements in this presentation constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.
These statements are related to forecasts of sales, margins, earnings, earnings per share, capital
expenditures, water market growth, acquisition strategy, lead free developments, and management goals
and objectives.
Watts cautions investors that any such forward-looking statements made by Watts are not guarantees of
future performance. All forward-looking statements are subject to known and unknown risks, uncertainties,
and contingencies, many that are beyond the control of Watts, which may cause actual results, performance
or achievements to differ materially from anticipated future results, performance or achievements expressed
or implied by the forward-looking statements.
Factors that might affect forward-looking statements include overall economic and business conditions,
competitive factors, changes in laws affecting Watts, future acquisitions of material assets or businesses by
Watts, the demand for Watts’ products and services and other factors identified in “Item 1A. Risk Factors” in
Watts’ most recent Annual Report on Form 10-K and in subsequent reports filed with the SEC.
11/2/2016 2

3Q 2016 Overview
11/2/2016 3
Solid Results; Reshaping Portfolio
• Delivered strong operating margins and EPS growth
• Top-line headwinds in Americas
• Continued investments support future growth and productivity
• Transformation initiatives on track
• End markets remain mixed
• Acquired PVI Industries LLC; continuing to enhance portfolio

3Q 2016 Financial Summary
11/2/2016 4
Strong Margin Expansion Despite Top-Line Headwinds
• 7% sales decrease
− Undifferentiated exit (7%)
 Acquisition +1%; organic (1%)
• Operating profit ~flat
 Lower volume and growth investments offsetting
favorable product mix and productivity
• 70 bps operating margin expansion
• 6% EPS increase
+ Operational / acquisition +$0.05
+ Interest / tax rate +$0.04
− Exit of undifferentiated products ($0.05)
3Q16 3Q15
Sales $341.1 $366.3
Operating Profit
(1)
$41.4 $41.7
Margin % 12.1% 11.4%
Net Income
(1)
$24.6 $23.6
EPS
(1)
$0.71 $0.67
Tax Rate 33.3% 35.0%
(1) Organic sales growth, Operating Profit, Operating Margin, Net Income and EPS are non-GAAP financial measures, see slides 14 and 15 for reconciliation
(M)
Comments

3Q16 3Q153Q16 3Q15
• Operating profit(1)
$36.3M
 Up $0.4M or 1%
• Operating margin(1)
+210 bps
+ Mix and productivity
+ Favorable absorption
− Volume
− Investments
• Exit of undifferentiated products ($23M)
• AERCO down double digits
 Project delays, certifications, competition
• Core plumbing up LSD; drains up double digits
• Retail down, future headwind
Up 210 bps
Americas
11/2/2016 5
Record Margin Performance
Operating Margin
(1)
Sales
Down 12 %
Organic(1)
down 3%
(M)
(1) Organic sales growth, Operating Profit and Operating Margin are non-GAAP financial measures, see slides 14 and 16 for reconciliation
$215.8 $245.0 16.8% 14.7%

3Q16 3Q153Q16 3Q15
$12.9M
 Up $0.9M or 7%
+100 bps
+ Productivity
+ Restructuring
− Investments
EMEA
11/2/2016 6
Strong Productivity Driving Margins
Sales Operating Margin
(1)
Up 100 bps
• Fluid Solutions and Drains relatively flat
• Strong Electronics performance continues
• Growth in Italy and Middle East; Germany, UK
and Eastern Europe down; France flat
• Brexit driving uncertainty in market
Down 1%
Organic(1)
Flat
(M)
$109.8 $110.9 11.8% 10.8%

3Q16 3Q153Q16 3Q15
Asia-Pacific
11/2/2016 7
China Commercial Recovery; Growth Ex China Continues
• China growth +34%
 Residential heating and commercial valves up
• Growth outside of China +19% organically
• APEX $3M, undifferentiated products ($1M)
$1.9M
 Up $0.2M, or 12%
down 400 bps
‒ Intercompany sales reduction – undifferentiated
+ Volume, APEX contribution
+ Productivity
Sales Operating Margin
(1)
Down 400 bps
(M)
Up 49%
Organic(1)
up 26%
$15.5 $10.4 16.3%12.3%

Cash Flow
11/2/2016 8
Driving for 100% Free Cash Conversion
• Strong quarterly cash flow performance
• Impact of Americas transformation on working
capital; continued reduction by year-end
• Capital spend increased 37% to support
growth and productivity initiatives
• YTD repurchased 433K shares for ~$22M
• 2015 FCF includes one-time liability
settlements of $49M
• Expect momentum to continue in 4Q’16
FCF = Cash Flow from Operations Less Capital Expenditures. FCF is a non-GAAP measure, see slide 17 for calculation of FCF
Comments
(M)
Q3 2016 Q3 2015
Net income 66.7 5.2
Depreciation and amortization 38.0 39.7
Change in working capital and other (35.1) (3.0)
Total Operating Activities 69.6 41.9
Capital expenditures, net of proceeds (26.3) (19.1)
Asset sale and Other 2.1 33.8
Total Investing Activities (24.2) 14.7
Net proceeds (payments) on long-term debt 27.3 (4.7)
Dividends (18.2) (17.2)
Payments to repurchase common stock (22.2) (32.0)
Debt issue costs (2.1) -
Proceeds and tax benefit of stock option activity 7.7 2.3
Total Financing Activities (7.5) (51.6)
Effect of exchange rates 4.5 (17.3)
Net increase (decrease) in cash 42.4 (12.3)
Free Cash Flow 43.3 22.8
Nine months Ended

4Q 2016 Outlook
Continued Strong Operating Margin Expansion
• Reduced shipping days impact in 4Q’16 (offset from 1Q’16)
 Sales ~ (400 bps), Operating Margins ~ (50 bps)
• Anticipated sales growth rates marginally higher than 3Q’16
 Exit of undifferentiated products impact ~$10M vs. 4Q’15
 Retail sales erosion of ~$3M
• Operating margin expansion vs 4Q’15, down sequentially
• PVI included in results for two months
• Seasonally, a strong quarter for cash flow
11/2/2016 9

PVI Acquisition Summary
10
Expands WTS’ Commercial Solution Offering
Strategic Rationale
• Compelling synergies with AERCO
− Enables comprehensive heating / hot water solutions
− Complementary end markets
− Continued market shift to high efficiency solutions
• Addresses macro themes
• Strong brand recognition, product breadth
• Superior technology and engineering capabilities
• Highly regarded manufacturer representative network
• Seasoned leadership team
Transaction Financials
• ~$78M purchase price, ~ 11x EBITDA ex. synergies
• Estimate annual year 3 synergies of $2M to $3M
• Primarily funded with debt
• Accretive to 2017 EPS ~$0.06 (ex items)
Product Family Compatibility
PVI AERCO
• Leading provider of ASME commercial stainless steel
water heating equipment; focused on high capacity
market (> 500k BTU)
• ~$50M in annual sales
• Large and growing installed base
• Headquartered In Forth Worth TX; 230+ employees
11/2/2016

Summary
11/2/2016 11
Making Significant Progress
• Strong YTD margin and EPS performance
• Continue to invest for growth and productivity
• Transformation on track
• Balanced capital deployment

Appendix

© 2016 Watts Water Technologies 13
Consolidated Statements of Operations
11/2/2016
(in millions except per share amounts)
(M)
(Unaudited)
2016 2015 B/(W) %
Net sales 341.1$ 366.3$ (25.2)$ (7%)
Cost of goods sold 199.1 224.1 25.0 11%
Gross profit 142.0 142.2 (0.2) (0%)
41.6% 38.8% +2.8p
Selling, general & administrative expenses 104.5 166.6 62.1 37%
30.6% 45.5% +14.9p
Restructuring and other charges, net 1.0 5.8 4.8 83%
Operating income (loss) 36.5 (30.2) 66.7 (221%)
10.7% -8.2% 18.9%
Other (income) expense 4.1 5.7 1.6 28%
Income before taxes 32.4 (35.9) 68.3 (190%)
Provision (benefit) for income taxes 10.5 (10.2) (20.7) 203%
Net income (loss) 21.9$ (25.7)$ 47.6$ (185%)
Diluted earnings per share 0.63$ (0.73)$ 1.36$ (186%)
Thrid Quarter Ended

Reconciliation of Reported Sales to Organic Sales
11/2/2016
(in millions except per share information)
(Unaudited)
(M)
Americas EMEA
Asia-
Pacific Total
Reported net sales 3Q'16 $ 215.8 $ 109.8 $ 15.5 $ 341.1
Reported net sales 3Q'15 245.0 110.9 10.4 366.3
Dollar change $ (29.2) $ (1.1) $ 5.1 $ (25.2)
Net sales %increase (decrease) -12% -1% 49% -7%
Decrease due to foreign exchange - 1% 5% -
Decrease due to divestitures 9% - 16% 7%
(Increase) due to acquisition - - -44% -1%
Subtotal 9% 1% -23% 6%
Organic sales increase (decrease) -3% 0% 26% -1%
Americas EMEA
Asia-
Pacific Total
Reported net sales 3Q'16 $ 677.6 $ 338.2 $ 40.6 $ 1,056.4
Reported net sales 3Q'15 745.2 332.1 32.1 1,109.4
Dollar change $ (67.6) $ 6.1 $ 8.5 $ (53.0)
Net sales %increase (decrease) -9% 2% 26% -5%
Decrease due to foreign exchange 1% 1% 4% 1%
Decrease due to divestitures 11% - 17% 8%
(Increase) due to acquisition - - -35% -1%
Subtotal 12% 1% -14% 8%
Organic sales increase (decrease) 3% 3% 12% 3%
Nine Months Ended
Third Quarter Ended

Reconciliation of GAAP “As Reported” to “Adjusted”
Non-GAAP Excluding Effect of Adjustments for Special Items
11/2/2016
(in millions except per share information) Third Quarter Ended
2016 2015 2016 2015
Net sales $ 341.1 $ 366.3 1,056.4 $ 1,109.4
Operating income (loss) - as reported $ 36.5 $ (30.2) 113.4 $ 27.4
Operating margin % 10.7% -8.2% 10.7% 2.5%
Adjustments for special items:
Gain on disposition - - (8.7) -
Acquisitions related costs - - 0.6 1.1
Restructuring / severance related costs 1.0 5.8 5.6 12.5
Deployment costs related to tranformation activities 3.9 1.4 11.9 7.3
Pension/other - 64.7 - 64.7
Total adjustments for special items $ 4.9 $ 71.9 9.4 $ 85.6
Operating income - as adjusted $ 41.4 $ 41.7 122.8 $ 113.0
Adjusted operating margin % 12.1% 11.4% 11.6% 10.2%
Net income (loss) - as reported $ 21.9 $ (25.7) 66.7 $ 5.2
Adjustments for special items - tax affected:
Gain on disposition - - (8.3) -
Acquisitions related - - (0.5) 0.7
Restructuring / severance 0.6 3.6 3.6 8.3
Deployment costs related to tranformation activities 2.3 1.1 7.3 5.0
Pension/ other (0.2) 44.6 1.5 44.6
Total adjustments for special items - tax affected:$ 2.7 $ 49.3 3.6 $ 58.6
Net income - as adjusted $ 24.6 $ 23.6 70.3 $ 63.8
Earnings per share
Diluted earnings per share - as reported $ 0.63 $ (0.73) 1.93 $ 0.15
Adjustments for special items 0.08 1.40 0.11 1.66
Diluted earnings per share - as adjusted $ 0.71 $ 0.67 2.04 $ 1.81
Nine Months YTD
(Unaudited)
(M)

Adjusted Operating Income by Segment
11/2/2016
(in millions)
Americas EMEA
Asia -
Pacific Corp. Total Americas EMEA
Asia -
Pacific Corp. Total
Reported GAAP Operating Income 32.2$ 12.5 1.4 (9.6) 36.5 30.3$ 10.9 1.2 (72.6) (30.2)
% of sales 14.9% 11.4% 9.0% 10.7% 12.4% 9.8% 11.5% -8.2%
Adjustments for special items 4.1$ 0.4 0.5 (0.1) 4.9 5.6$ 1.1 0.5 64.7 71.9
Adjusted Operating Income 36.3$ 12.9$ 1.9$ (9.7)$ 41.4$ 35.9$ 12.0 1.7 (7.9) 41.7
% of sales 16.8% 11.8% 12.3% 12.1% 14.7% 10.8% 16.3% 11.4%
Americas EMEA
Asia -
Pacific Corp. Total Americas EMEA
Asia -
Pacific Corp. Total
Reported GAAP Operating Income 95.7$ 33.2 12.2 (27.7) 113.4 90.6$ 25.7 0.9 (89.8) 27.4
% of sales 14.1% 9.8% 30.0% 10.7% 12.2% 7.7% 2.8% 2.5%
Adjustments for special items 13.1$ 3.4 (7.0) (0.1) 9.4 11.8$ 5.1 3.9 64.8 85.6
Adjusted Operating Income 108.8$ 36.6 5.2 (27.8) 122.8 102.4$ 30.8 4.8 (25.0) 113.0
% of sales 16.1% 10.8% 12.8% 11.6% 13.7% 9.3% 15.0% 10.2%
Q3 2016 Q3 2015
Nine Months YTD Nine Months YTD
(M)
(Unaudited)

Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow
2016 2015
Net cash provided by operating activities - as reported $ 69.6 $ 41.9
Less: additions to property, plant, and equipment (26.3) (19.2)
Plus: proceeds from the sale of property, plant, and equipment - 0.1
Free cash flow $ 43.3 $ 22.8
Net income - as reported $ 66.7 $ 5.2
Cash conversion rate of free cash flow to net income 64.9% 438.5%
RECONCILIATION OF NET CASH PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW
Nine Months Ended
(M)
11/2/2016
(Unaudited)

Reconciliation Long-term Debt (including current portion)
to Net Debt to Capitalization Ratio
11/2/2016
Oct. 2 December 31,
2016 2015
Current portion of long-term debt $ 1.3 $ 1.1
Plus: Long-term debt, net of current portion 601.6 574.2
Less: Cash and cash equivalents (338.6) (296.2)
Net debt $ 264.3 $ 279.1
Net debt $ 264.3 $ 279.1
Plus: Total stockholders' equity 756.4 704.9
Capitalization $ 1,020.7 $ 984.0
Net debt to capitalization ratio 25.9% 28.4%
(M)
(Unaudited)

Q3'16 earningsdeckfinal

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