Water Pik (NYSE:PIK)
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Water Pik Technologies, Inc. (NYSE:PIK) today announced
sales for the three months ended December 31, 2005 (the first quarter
of Fiscal Year 2006) were $79.7 million, an increase of 2.6 percent as
compared to sales of $77.6 million for the same period in 2004. Income
from continuing operations increased 0.5 percent to $4.8 million or
$0.37 per share for the first quarter 2006 as compared to $4.8 million
or $0.38 per share for the first quarter 2005. Net income was $4.8
million or $0.37 per share for the first quarter as compared to $6.0
million or $0.48 per share for the same prior year period, which
included $0.09 per share from the discontinued Heating Systems
business sold in June 2005. Operating expenses for the first quarter
2006 included $0.6 million or $0.03 per share net of tax of corporate
administrative costs related to our strategic alternatives review.
EBITDA (earnings before interest, taxes, depreciation and
amortization) decreased 4.1 percent to $10.0 million for the first
quarter as compared to $10.5 million for the same period in 2004.
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Three Months Ended
(In thousands, except per-share amounts) December 31,
(Unaudited) 2005 2004 % Change
======================================================================
Results from continuing operations
Sales $79,680 $77,624 2.6%
Operating income $7,643 $8,098 (5.6)%
Income from continuing operations $4,812 $4,789 0.5%
EBITDA $10,043 $10,475 (4.1)%
Diluted net income per share (a)
Continuing operations $0.37 $0.38 (2.6)%
Discontinued operations $- $0.09
--------- --------
Net Income $0.37 $0.48 (22.9)%
Weighted average common shares
outstanding - diluted 12,901 12,551
======================================================================
(a) Diluted net income per common share may not add due to rounding.
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Closure of Manufacturing Facility
During calendar year 2006, the Company plans to relocate all of
its remaining showerhead and water filtration production from the
Company's owned manufacturing facility in Loveland, Colorado,
primarily to existing offshore suppliers. This decision is part of our
operating strategy initiated several years ago to become a lower cost
manufacturer through facility consolidation and outsourcing
manufacturing to overseas suppliers. The closure of the Loveland
facility is targeted for completion in October 2006 followed by the
sale of the facility. Expenses for the fiscal year ending September
2006 relating to the Loveland closure, which will start in the March
2006 quarter, are estimated to be approximately $2.3 million after tax
or $0.17 per share, which includes accelerated depreciation of
approximately $0.9 million after tax and $0.4 million after tax of
under-absorbed facility carrying costs. Beginning in Fiscal Year 2007,
the annual product and facility cost savings are expected to exceed
the one-time costs associated with closing the facility.
"Our Pool Products business and our consolidated businesses
exceeded our expectations for the quarter," said Water Pik
Technologies' Chief Executive Officer Michael P. Hoopis. "For our
Personal Healthcare business, we expect an improving sales outlook in
the second half of Fiscal Year 2006 driven by new products and
distribution gains at key retail accounts. Over time, the Loveland
consolidation will measurably improve the profitability and return on
capital."
Recent Merger Announcement
On January 6, 2006, the Company announced that it had signed a
definitive agreement to be acquired by Coast Acquisition Corporation,
a newly-formed corporation 80 percent owned by The Carlyle Group, a
global private equity investment firm, and 20 percent owned by Zodiac
S.A., an industrial company listed on the Paris Stock Exchange. Under
the terms of the agreement, stockholders will receive $27.75 in cash
for each share of common stock. The aggregate consideration, on a
fully diluted equity value basis, is approximately $380 million. The
sale is expected to be completed in late April 2006, and is subject to
various conditions, including approval by the stockholders, the
expiration of the applicable waiting period under the
Hart-Scott-Rodino Act, and other customary closing conditions.
Business Segment Performance
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Three Months Ended
(Amounts in thousands) December 31,
(Unaudited) 2005 2004 % Change
======================================================================
Results from continuing operations
POOL PRODUCTS:
Sales $52,658 $48,054 9.6%
Gross profit $14,674 $12,445 17.9%
Operating income $6,546 $5,220 25.4%
EBITDA $7,519 $5,981 25.7%
Gross profit as a percent of sales 27.9% 25.9%
Operating income as a percent of sales 12.4% 10.9%
EBITDA as a percent of sales 14.3% 12.4%
======================================================================
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For the three months ended December 31, 2005, Pool Products:
-- Sales increased $4.6 million or 9.6 percent to $52.7 million
for the first quarter of Fiscal Year 2006 compared to the same
prior year period due primarily to continuing strong demand
for automatic salt chlorine generators, pumps, filters and new
product introductions, including a wireless, hand-held
AquaLink(R) control system.
-- Gross profit increased $2.2 million or 17.9 percent to $14.7
million or 27.9 percent of sales for the first quarter 2006
primarily due to higher sales and the benefit of leveraging
fixed manufacturing costs over a larger base of sales combined
with a favorable product mix.
-- EBITDA increased $1.5 million or 25.7 percent to $7.5 million
or 14.3 percent of sales for the first quarter 2006 compared
to $6.0 million or 12.4 percent of sales for the same prior
year period due primarily to higher sales and gross profit.
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Three Months Ended
(Amounts in thousands) December 31,
(Unaudited) 2005 2004 % Change
======================================================================
PERSONAL HEALTH CARE:
Oral health products $13,317 $13,442 (0.9)%
Shower products 12,204 13,852 (11.9)%
Other products 1,501 2,276 (34.1)%
--------- -------- ---------
Total sales $27,022 $29,570 (8.6)%
Gross profit $9,190 $12,161 (24.4)%
Operating income $1,097 $2,878 (61.9)%
EBITDA $2,524 $4,494 (43.8)%
Gross profit as a percent of sales 34.0% 41.1%
Operating income as a percent of sales 4.1% 9.7%
EBITDA as a percent of sales 9.3% 15.2%
======================================================================
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For the three months ended December 31, 2005, Personal Health
Care:
-- Sales decreased $2.5 million or 8.6 percent to $27.0 million
for the first quarter of Fiscal Year 2006 compared to the same
prior year period. Sales of Oral health products decreased
$0.1 million or 0.9 percent to $13.3 million due primarily to
lower sales in the competitive power flosser category
partially offset by higher domestic sales of dental water jets
and higher promotional sales of professional oral healthcare
products. Sales of Shower products decreased $1.6 million or
11.9 percent to $12.2 million due primarily to continued
competitive pressure on mature products, which offset first
quarter 2006 distribution gains at a key retail customer and
sales of our new AquaScape(TM) showerhead. Additionally, the
first quarter 2005 benefited from introductory sales of our
Dual Massage(TM) showerhead launched in September 2004. Sales
for the Other products category decreased $0.8 million to $1.5
million due to lower sales of water filtration products driven
by decreased distribution.
-- Gross profit decreased $3.0 million or 24.4 percent to $9.2
million or 34.0 percent of sales for the first quarter 2006
compared to $12.2 million or 41.1 percent of sales for the
same prior year period due to lower sales and the impact of
absorbing fixed costs within a smaller base of sales.
Additionally, the first quarter 2005 benefited from increased
manufacturing efficiencies due to higher production levels to
prepare for the outsourcing of a significant shower product
line, which occurred in June 2005.
-- EBITDA decreased $2.0 million or 43.8 percent to $2.5 million
or 9.3 percent of sales for the first quarter 2006 compared to
$4.5 million or 15.2 percent of sales for the same prior year
period due primarily to lower sales and gross profit.
Outlook
The Company maintains its previously announced outlook for sales
growth for Fiscal Year 2006 in the range of 3 to 5 percent. Earnings
per share for Fiscal Year 2006 are targeted in the range of $1.35 to
$1.45 per diluted share compared to $1.23 per diluted share from
continuing operations for Fiscal Year 2005. The updated outlook
includes the impact of the Loveland facility closure and the adoption
of new stock compensation rules under Statement of Financial
Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment" and
excludes costs associated with the announced merger.
Investor Conference Call and Web Cast
A conference call to discuss operating results for the three
months ended December 31, 2005 will be held with Mike Hoopis, Water
Pik Technologies' President and CEO, and Vic Streufert, the Company's
Vice President, Finance and CFO, at 8:00 am Pacific Standard Time
(11:00 am EST), Thursday, January 26, 2006. To access the live web
cast or an archived replay, please go to www.waterpik.com or
www.vcall.com.
If you are interested in listening to the conference call, please
dial 888-791-1856 at least five minutes before the scheduled
conference call start time. The access code for this conference call
is: PIK. Approximately two hours after the end of the call, you may
access a replay of the call by dialing 866-508-6485. The replay will
be available through 5:00 pm Pacific Standard Time on Tuesday, January
31st.
Important Merger Information
Water Pik Technologies, Inc. plans to file with the Securities and
Exchange Commission "SEC" and mail to its Stockholders a Proxy
Statement in connection with the transaction. The Proxy Statement will
contain important information about Water Pik Technologies, Inc., the
transaction and related matters. Investors and security holders are
urged to read the Proxy Statement carefully when it is available.
Investor and security holders will be able to obtain free copies of
the Proxy Statement and other documents filed with the SEC by Water
Pik Technologies, Inc. through the web site maintained by the SEC at
www.sec.gov. In addition, investors and security holders will be able
to obtain free copies of the Proxy Statement from Water Pik
Technologies, Inc. through the Company's web site at www.waterpik.com,
by contacting Investor Relations, Water Pik Technologies, Inc., 23
Corporate Plaza, Suite 246, Newport Beach, CA 92660, by email at
corpinfo@waterpik.com or by telephone at (949) 719-3700.
Water Pik Technologies, Inc. and its directors and executive
officers may be deemed to be participants in the solicitation of
proxies in respect of the transactions contemplated by the merger
agreement. Information about the directors and executive officers of
Water Pik Technologies, Inc. is contained in the Annual Report on Form
10-K, which was filed with the SEC on December 14, 2005. As of
December 5, 2005, Water Pik Technologies, Inc. directors and executive
officers beneficially owned 2,513,073 shares, or approximately 18.2
percent, of Water Pik Technologies, Inc. common stock.
Forward-looking Statements
In this press release, the statements from Mr. Hoopis are
forward-looking statements. Any other statements contained in this
press release, which are not historical fact, may be considered
forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Actual results could differ
materially from these forward-looking statements as a result of the
risk factors described in our filings with the Securities and Exchange
Commission, including, among others, our ability to develop new
products and execute our growth strategy, the uncertainty of new
product testing and regulatory approvals, the uncertainty that our
marketing efforts will achieve the desired results with respect to
existing or new products, our dependence on key customers, the
seasonal nature of our businesses, the impact of consumer confidence
and consumer spending, the effect of product liability claims, the
impact of rising commodity costs such as steel, copper, titanium,
resin and oil, risks associated with using foreign suppliers including
increased transportation costs, potential supply chain disruption and
foreign currency exchange rate fluctuations, failure to protect our
intellectual properties and our ability to integrate acquisitions and
realize expected synergies. With respect to our announcement on
January 6, 2006, the closing of the transaction and the closing date
are subject to the satisfaction of agreed upon closing conditions
specified in the definitive agreement and approval of the Water Pik
Technologies, Inc. stockholders. The failure to satisfy the closing
conditions could result in a failure of or delay in closing the
transaction. The reader is cautioned not to rely on any
forward-looking statements, as actual results may differ materially
from those reflected in the forward-looking statements. We do not have
any intention or obligation to update forward-looking statements, even
if new information, future events or other circumstances make them
incorrect or misleading.
Water Pik Technologies, Inc. is a leading developer, manufacturer
and marketer of innovative personal healthcare products and pool and
spa products sold under the Water Pik(R) and Jandy(R) brand names. The
Company has developed and introduced many products that are considered
the first of their kind and have led to the formation of new markets,
including the automatic toothbrush, end-of-faucet water filtration
system, pool heater and pulsating shower massage. The Company's
products are sold through a variety of channels, including home
centers, mass-merchandisers, drug store chains and specialty
retailers, wholesalers and contractors. Headquartered in Newport
Beach, California, the Company operates eight major facilities in the
United States and Canada. For more information, visit the Water Pik
Technologies, Inc. web site at www.waterpik.com.
Reconciliation of Non-GAAP Financial Measures and Regulation G
Disclosure
EBITDA represents earnings from operations before deductions for
interest expense and interest income, income taxes, depreciation and
amortization. We evaluate our operating results based on several
factors, including EBITDA. We believe that EBITDA is useful as a means
to evaluate our ability to service existing debt, to sustain potential
future increases in debt, to satisfy capital requirements and as a
measure used by lenders under our bank credit facility. EBITDA is also
used by management as a measure of evaluating the performance of our
two operating segments. We utilize EBITDA in our operating decision
making, including the allocation of capital resources and strategic
planning. We believe EBITDA is valuable to investors as a supplemental
measure of comparative operating performance before capital structure
costs such as depreciation, amortization and interest. We believe
providing this supplemental information enhances the investors'
analysis of overall operating performance. Additionally, EBITDA is
regularly used as supplemental information in the determination of
enterprise value. However, our use of EBITDA is not intended to
represent cash flows for the period. We do not regard EBITDA as
preferable to any measure of operating performance required by
accounting principles generally accepted in the United States
("GAAP"), such as operating income, net income, or cash flows provided
by operating activities. Accordingly, EBITDA should be considered in
addition to, and not as a substitute for, any measures of financial
performance prepared in accordance with GAAP. EBITDA, as used by us,
is not necessarily comparable with similarly titled measures of other
companies because all companies do not calculate EBITDA in the same
fashion.
The following tables represent condensed consolidated statements
of operations, consolidated and segment reconciliation of net income
to EBITDA and condensed consolidated balance sheets.
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WATER PIK TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
Three Months Ended
December 31,
2005 2004
======================================================================
Sales $79,680 $77,624
Gross profit 23,864 24,606
Selling expenses 8,876 9,530
General and administrative expenses 5,937 5,776
Research and development expenses 1,408 1,202
--------- --------
Operating income 7,643 8,098
Interest expense 61 365
Other income (241) (208)
--------- --------
Income from continuing operations before income
taxes 7,823 7,941
Income tax provision 3,011 3,152
--------- --------
Income from continuing operations 4,812 4,789
Discontinued operations
Income from operations of discontinued
product line - 1,778
Income tax provision - 592
--------- --------
Income on discontinued operations - 1,186
--------- --------
Net income $4,812 $5,975
========= ========
Diluted net income per common share (a)
Continuing operations $0.37 $0.38
Discontinued operations - 0.09
--------- --------
Net income $0.37 $0.48
Weighted average common shares outstanding -
diluted 12,901 12,551
======================================================================
(a) Diluted net income per common share may not add due to rounding.
WATER PIK TECHNOLOGIES, INC.
CONSOLIDATED AND SEGMENT RECONCILIATION OF NET INCOME TO EBITDA
(Amounts in thousands)
(Unaudited)
Three Months Ended
December 31,
2005 2004
======================================================================
WATER PIK TECHNOLOGIES, INC.
Net income $4,812 $5,975
Income on discontinued operations - 1,186
--------- --------
Income from continuing operations $4,812 $4,789
Interest expense (income), net (102) 341
Depreciation and amortization 2,322 2,193
Income tax expense 3,011 3,152
--------- --------
EBITDA from continuing operations $10,043 $10,475
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POOL PRODUCTS
Net income $4,187 $4,209
Income on discontinued operations - 1,186
--------- --------
Income from continuing operations $4,187 $3,023
Interest expense (income), net (162) 207
Depreciation and amortization 873 761
Income tax expense 2,621 1,990
--------- --------
EBITDA from continuing operations $7,519 $5,981
========= ========
PERSONAL HEALTH CARE
Net income $625 $1,766
Income on discontinued operations - -
--------- --------
Income from continuing operations $625 $1,766
Interest expense, net 60 134
Depreciation and amortization 1,449 1,432
Income tax expense 390 1,162
--------- --------
EBITDA from continuing operations $2,524 $4,494
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======================================================================
WATER PIK TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (1)
(Amounts in thousands)
December 31, September 30,
2005 2005
======================================================================
(Unaudited)
ASSETS
Cash and cash equivalents $12,744 $40,591
Accounts receivable, net 80,156 59,253
Inventories 37,538 36,753
Deferred income taxes 6,963 7,151
Prepaid expenses and other current
assets 3,988 2,886
------------ -------------
Total current assets 141,389 146,634
Property, plant and equipment, net 34,434 35,366
Goodwill, net 29,289 29,205
Deferred income taxes 456 26
Other assets 5,775 5,058
------------ -------------
TOTAL ASSETS $211,343 $216,289
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $19,870 $27,636
Accrued income taxes 3,082 1,636
Accrued liabilities 28,930 33,898
Current portion of long-term debt 15 15
------------ -------------
Total current liabilities 51,897 63,185
------------ -------------
Long-term debt, less current portion 17 37
Other accrued liabilities 6,588 5,866
------------ -------------
TOTAL LIABILITIES 58,502 69,088
------------ -------------
TOTAL STOCKHOLDERS' EQUITY 152,841 147,201
------------ -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $211,343 $216,289
=========================================== ============ =============
(1) The balance sheet as of September 30, 2005 includes some
reclassifications to conform to the current year financial
statement presentation.
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