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All information in this presentation, including forward-looking statements, is current as of the date of this presentation. Certain statements made or incorporated by reference in this presentation made by Company employees reflect management's estimates and beliefs and are intended to be Forward-Looking Statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on certain assumptions that the Company has made in light of its experience in the industry as well as its perspective of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties. In addition, the actual results for Fiscal Year 2006 are subject to audit. For a discussion of some of the important factors that could cause the Company's results to differ from those expressed in, or implied by, the following forward-looking statements, please refer to the Companys reports and other documents filed with the Securities and Exchange Commission. The Company does not undertake any obligation to update such forward-looking statements. This presentation includes certain non-GAAP financial measures, which exclude significant items and therefore have material limitations. Reconciliations of such non-GAAP measures to the most comparable GAAP financial measures are set forth in the footnotes or Appendix hereto.
Segment Segment
Highlights Highlights
Global leader in Whirlpool Baths and Spas Consumer and Residential Focus 47% International Sales Increasing Market Penetration
Bath
FY 2006 Sales $766.6 Million
Shower Enclosures
Commercial and Institutional Focus Broad Product Portfolio Strong and Consistent Cash Flows High Market Shares in Growing Markets North American Market is 98% of sales
Plumbing
FY 2006 Sales $435.8 Million
21.9%
18.0%
5.9%
$20
(1.0%) (1.8%)
$10 $0
4.6% 4.4%
FY 2003 FY 2004 FY 2005 FY 2006
FY 2003
FY 2004
FY 2005
FY 2006
$308.4
FY 2003
FY 2004
FY 2005
FY 2006
$0
FY 2003
FY 2004
FY 2005
FY 2006
Excludes restructuring and other charges (See Appendix) Operating Income before restructuring and other charges, plus depreciation and amortization (See Appendix) 12 month avg (Net PPE + Current Assets + Goodwill Current Liabilities) Last twelve months Operating Income before restructuring and other charges/Avg Capital Employed
Bath
$40 $30
1.0%
FY 2004 FY 2005 FY 2006
$20 $10 $0
FY 2003
FY 2004
FY 2005
FY 2006
$256.9
FY 2003 excludes impact related to the sale of technology licens e for $8.6 million (See Appendix) Operating Income before restructuring, plus depreciation and amortization (See Appendix) 12 month avg (Net PPE + Current Assets + Goodwill Current Liabilities) Operating Income before restructuring/Avg Capital Employed
Plumbing
Near historic low net debt levels at September 30, 2006 Improved coverage ratios
$468.9 $432.2
FY 2001
FY 2002
FY 2003
FY 2004
FY 2005
FY 2006
* For fiscal years 2006, 2005, 2004, 2003, 2002 and 2001, net debt was calculated by summing notes payable ($19.8 million, $22.0 million, $21.1 million, $23.5 million, $15.3
million, $12.0 million), current portion of long- term debt ($1.7 million, $1.5 million, $3.9 million, $25.2 million, $275.9 million, $436.5 million) and long-term debt ($381.8 million, $383.5 million, $446.8 million, $451.4 million, $516.9 million, $778.3 million) and subtracting cash & cash equivalents ($147.2 million, $110.2 million, $39.6 million, $31.2 million, $32.1 million, $65.2 million) and restricted cash collateral accounts--current ($12.4 million for FY 2005, $142.9 million for FY 2002) and non-current ($15.4 million for FY 2002, $4.4 million for FY 2001).
Leading Leading products products with with global global brand brand recognition. recognition.
Market Environment
US Plumbing Fixture Market Share, 2005 ($5.1 billion)
30.6% Others
4.1%
Crane
3.9%
MAAX
3.9%
Tomkins
11.1% Jacuzzi
3.6%
Elkay
Mansfield 3.2%
Source: Fredonia Group, Inc., US Plumbing Fixtures and Fitting Report, published 4/2006
Zhuhai, China
Chile
Brazil
Manufacturing Facilities Sales Offices Sourcing & Engineering
Bath
Sales by Geography
All Others 3% UK 23%
(1)
Spas 29%
Source: Company data -- based on available 2006 data. (1) Other includes South America and Asia. (2) Other primarily includes accessories, spare parts, and faucets.
Bath
10 11
Hydropool 5%
Jacuzzi Jacuzzi is is a a market market share share leader leader in in all all segments. segments.
Bath
11
Innovative Design
12
Astracast
13
United States
Whirlpool bath sales 2.1% growth in FY 06 Residential housing market
softening
Spa sales increased 1.8% FY 06 vs. 30-40% estimated industry sales decline in unit volume Margins off recent
improvement
Bath
14
INITIATIVES Applying ZURN model, with a focus on low-cost sourcing (China and Brazil) Downsized Dallas Closed Singapore sales office Downsize or consolidate other bath operations Expanding Brazilian facility for sourcing
Bath
15
Promote brand
JACUZZI licensing program Introduced premium J-400 spa collection Allocated space in 120 designer showrooms with nations largest wholesalers
Bath
16
Plumbing Segment
Plumbing
17
Market Environment
Firming Firming Market Market Environment Environment Growth Rate of Non Residential Construction Spending
Low cost producer Successful new product innovation Strong end user focus get in the spec National service center network Leading market positions and commercial brand names
600,000 Spend ($ in millions) 500,000 400,000 300,000 200,000 100,000 0 1994 1996 1998 2000 Year 2002 2004
Plumbing
18
Plumbing
19
20
Water Safety
Simple design Precise flow control Efficient Cost effective Fail safe
Plumbing
21
22
Ease of specification for engineer Saves time and labor for the mechanical contractor Entire installation backed by Zurn Reduces channel cost for wholesalers Peace of mind for owner
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Flushometers
Manual Sensor
24
Plumbing
25
Financial Results
Earnings from continuing operations Restructuring and other charges, net of tax
Twelve Months Ended September 30, 2006 2005 $ EPS $ EPS 43.8 $ 0.56 $ 58.0 $ 0.76 3.9 47.7 0.05 0.61 0.02 (0.02) 0.01 (0.02) (0.07) 0.21 0.02 (0.02) (0.18) $ 0.56 $ (24.7) 1.8 (8.8) 31.6 $ (0.32) 0.02 (0.12) 0.41 5.3 63.3 0.07 0.83 -
Adjustment to retirement benefits, net of tax Gain from ruling on environmental site, net of tax Foreign currency loss, net of tax Gain from the settlement of a property tax liability, net of tax Net non-operating asset gains, net of tax Non-cash reserve for deferred tax assets CEO retirement agreement, net of tax Italian tax interest income, net of tax Italian tax reserve adjustment Gain on sale of business, net of tax Debt retirement costs, net of tax Tax benefit on audit settlement Adjusted earnings from continuing operations $
1.6 (1.9) 0.9 (1.2) (5.1) 15.9 1.4 (1.4) (14.0) 43.9
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Net Debt
($ In Millions) Notes payable Current maturities of long-term debt Long term debt Total debt Less: Cash and cash equivalents Restricted cash collateral accounts Net debt $ 147.2 256.1 $ 110.2 12.4 284.4 $ 19.8 1.7 381.8 403.3 $ 22.0 1.5 383.5 407.0
Net Debt is Total Debt Less Cash and Cash Equivalents and Restricted Cash Collateral Accounts
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($ in millions)
FY 2006 capital expenditures $13 mm
$25
$18 $15 $18
$23
$23
$20
Depreciation approximately $18 - 20 mm $15 per annum Annual maintenance capital $10 $8 - $12 mm Invest in cost reductions and profit improvement projects
$13
$5
$0
FY 2001
FY 2002
FY 2003
FY 2004
FY 2005
FY 2006
29
Appendix
EBITDA
($ in millions) FY 2005 Operating Income $ 94.4 FY 2006 $ 103.6
$ 26.3 $ 9.4
$ 24.4 $ 6.0
$ 130.1
$ 134.0
31
Bath
($ in millions)
Adjusted Operating Income FY 2003 Operating income Restructuring and other charges Adjusted operating income $ $ 25.3 4.3 29.6 FY 2004 $ 57.2 3.5 $ 60.7 $ FY 2005 $ 30.1 4.5 34.6 FY 2006 $ 38.5 7.0 $ 45.5
FY 2003 Operating income Depreciation and amortization Restructuring and other charges(1) EBITDA before restructuring $ $ 25.3 9.8 4.3 39.4
(1) Excludes $1.2 million of accelerated depreciation already included in depreciation and amortization added back above.
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Plumbing
($ in millions)
Adjusted Operating Income FY 2003 Operating income Sale of technology license Adjusted operating income $ $ 62.1 (8.6) 53.5 $ FY 2004 $ 60.7 60.7 $ FY 2005 $ 75.3 75.3 $ FY 2006 $ 90.9 -90.9
EBITDA Before Restructuring and Other Charges FY 2003 Operating income Depreciation and amortization Sale of technology license EBITDA before restructuring $ $ 62.1 5.8 (8.6) 59.3 $ FY 2004 $ 60.7 5.6 66.3 $ FY 2005 $ 75.3 5.2 80.5 $ FY 2006 $ 90.9 4.4 95.3
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