Watts Water Technologies

Q1 2013 Earnings Conference Call

May 1, 2013

0

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, 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 Watts’ most recent Annual Report on Form 10-K and subsequent reports filed with

the SEC.

1

Q1 2013 Results

• Revenue growth of 0.2% v 2012 - 30 bps FX, 20 bps acquisition, (30) bps organic

• Adjusted operating margin* = 8.4%, 50 bps above 2012

• NA adjusted margin up 140 bps, lead free impact approximately 30 bps

• EMEA adjusted margin declined 60 bps mainly due to volume decline

• Price/mix had negative impact in both NA and Europe

• Adjusted EPS* = $0.49, PY = $0.43

• Net effect of dilution from PY share buyback = +.02

Financial Highlights

Business Highlights

• Key European markets - France and Germany- soft in Q1

• France – general economy – wholesale market downs

• Germany – OEM delays

• US lead free initiative still on track

• Pricing competitive in certain NA markets – both retail and wholesale

• Emerging markets continue as source of growth – Asia, Middle East

* “Adjusted” excludes special items, see slide 14 for reconciliation

2

Market Dynamics EMEA

• Macro economic headwinds affecting more countries • France wholesale and DIY markets down 10% to 15% • Germany – softening • Italy – remains depressed • Drains business continued strong

• Stable growth in emerging markets • Solid order intake in March

North America • Positive residential construction • Repair & replace steady • No evidence of commercial end market recovery yet

Asia

• China economy remains strong • Commercial opportunities in Tier 2/3 cities • Continued preference for high quality imported products in key segments

3

Guidance Update - 2013

Now expect a sales decline in EMEA of 2% to 5% for the full year 2013, at constant

exchange rates

Continue to expect North America core business growth of 2% to 5% for the full year,

plus incremental 1% to 2% on top line for lead free sales

Expect accelerated growth in Asia of 20% to 25% for 2013

Still expect lead free to remain on track with headwinds in Q2 from foundry start-up and

lead free transition with customers, with incremental costs of $2m to $3m

Accelerating and initiating incremental footprint rationalization and SGA improvements

Retiring $75M of debt in May 2013

Board authorized up to $90M in total share repurchase ~$22M in 2013

Board authorized $.02 cents per share increase in dividend ~$18M spend in 2013

Expect $41M in Capex

4

Residential/Commercial

Flow Control

55%

HVAC/Gas 30%

Water Quality

6%

Drains and Re-use

9%

Revenue by Platform & Region

5

Q1 2012 Sales Q1 2013 Sales

Residential/Commerci

al Flow Control

55%

HVAC/Gas 30%

Water Quality

6%

Drains and Re-use

9%

U.S.A 52%

EMEA 41%

Asia 1%

Canada 6%

U.S.A 53%

EMEA 39%

Asia 2%

Canada 6%

Q1 2013 Financial Highlights (in millions except DEPS; see reconciliations in Appendix; continuing ops only)

$361.2

$362.1

Q1 12 Q1 13

Sales

$28.4

$30.5

Q1 12 Q1 13

Op Profit/ Margin*

7.9%

8.4%

$0.43

$0.49

Q1 12 Q1 13

DEPS from

Continuing Operations*

Sales Growth of 0.2%

Organic (0.3%), FX 0.3%

& Acquisitions 0.2%

* Excludes Special Items – see Slide 14

Net Dilution +$0.02

6

North American Operations (in millions)

Industries Served: Commercial, Residential, Irrigation, Fire Protection, Marine, Waterworks, Water Quality

$207.0 $213.0

$20.8 $24.2

Q1 12 Q1 13

Sales Op Profit*

* Excludes Special Items – see Slides 16 and 17

• Q1 Revenue growth of 2.9% v Q1 2012

• 260 bps organic & 30 bps acquisition

• Wholesale accelerated during the quarter, up +2.8%

• Q1 Adjusted operating margin = 11.4%

• 140 bps improvement v Q 1 2012

• 63% incremental operating profit leverage v Q1 2012

• Margin expansion hindered by competitive pricing/mix

• Lead-free incremental costs of $600k in Q1

7

EMEA Operations (in millions)

Industries Served : Water Protection, Sanitary, HVAC-Radiant Heat, Under floor, Fuel &Gas, Instrumentation and Electronics

$149.2 $142.4

$14.0 $12.6

Q1 12 Q1 13

Sales Op Profit *

* Excludes Special Items – see Slides 16 and 17

• Q1 Revenue decline of 4.6% v Q1 2012

• (550 bps) organic, 90 bps FX

• Drains sales strong

• France sales down 10% v Q1 2012

• German sales down 5.9% v Q1 2012

• Middle East sales up 68%

• Q1 Adjusted operating margin = 8.8%

• 60 bps reduction v Q1 2012 due to volume reduction and product mix

8

Asian Operations (in millions)

Industries Served : Institutional, Commercial and Residential Plumbing, Fire Protection and HVAC

$5.0

$6.7

$1.1

$2.9

Q1 12 Q1 13

Sales Op Profit*

* Excludes Special Items – see Slides 16 and 17

• Q1 Revenue growth of 34.0% v Q1 2012

• All organic

• Q1 Adjusted operating margin = 43.3%

• Driven by external and intercompany demand providing better plant absorption

• 2130 bps increase v Q1 2012

• Growth from focused strategy on heating and plumbing

9

Balances for all periods as a % of Trailing Twelve Months Sales

($ millions)

$ % $ %

Receivables 218.5 15.1% 224.2 15.4%

Inventory 299.7 20.7% 290.6 19.9%

Payables (134.1) (9.3%) (132.1) (9.1%)

Primary Working Capital 384.1 26.6% 382.7 26.2%

Q1 2013 Q1 2012

Primary Working Capital

Inventory investments to support lead free transition

10

($ millions)

March 31, 2013 April 1, 2012

Net Income 16.1$ 15.7$ Income (loss) from discontinued operations, net of taxes - 0.2 Net income from continuing operations 16.1 15.5

Depreciation and amortization 12.4 12.5 Change in working capital (32.1) (29.4) Other 0.9 4.4

Total Operating Activities (2.7) 3.0

Capital expenditures (11.0) (4.9) Proceeds from the sales of property, plant and equipment - 0.3 Business acquisitions, net of cash acquired - (17.6)

Total Investing Activities (11.0) (22.2)

Payments on long-term debt, capital leases and other (1.8) (4.6) Dividends (3.9) (4.2) Proceeds and tax benefit of stock option activity 1.9 6.4

Total Financing Activities (3.8) (2.4)

Effect of exchange rates (3.3) 1.6

Net cash provided by discontinued operations - 0.2

Net Decrease in Cash (20.8)$ (19.8)$

Free Cash Outflow (13.7)$ (1.6)$

Cash Flows

First Quarter Ended

• Free Cash outflow

due to typical Q1

seasonality

• Net WC increase

from investment in

lead free inventory

• Lead free foundry

Investment of

$5.6m driving

higher capex

spend

11

Appendix

12

($ millions except per share amounts) Q1 2013 Q1 2012 B/(W) %

Net sales 362.1$ 361.2$ 0.9$ 0.2%

Cost of goods sold 232.6 232.7 0.1 -

GROSS PROFIT 129.5 128.5 1.0 0.8%35.7% 35.6% +0.1p

Selling, general and administrative expenses 99.0 100.2 1.2 1.2%27.3% 27.7% +0.4p

Restructuring and other charges, net 2.2 1.7 (0.5) (29.4%)

OPERATING INCOME 28.3 26.6 1.7 6.4%7.8% 7.4% +0.5p

Other expense 5.9 5.1 (0.8) (15.7%)

INCOME FROM CONTINUING OPERATIONS 22.4 21.5 0.9 4.2%

Provision for income taxes 6.3 6.0 (0.3) (5.0%)

NET INCOME FROM CONTINUING OPERATIONS 16.1$ 15.5$ 0.6$ 3.9%

DILUTED EPS 0.45$ 0.42$ 0.03$ 7.1%

CONSOLIDATED STATEMENTS OF OPERATIONS

13

Capital Structure ($ millions)

03/31/13 12/31/12

Cash $251.0 $271.8

Other Long Term Debt $383.8 $384.6

Equity $936.0 $939.5

Net Debt to Capitalization 12.4% 10.7%

Strong liquidity profile with $270M of availability under existing credit facility

14

March 31, April 1,

2013 2012

Net sales $ 362.1 $ 361.2

Operating income - as reported $ 28.3 $ 26.6

Operating margin % 7.8% 7.4%

Adjustments for special items:

Restructuring and other charges, net 2.2 1.2

Goodwill and other long-lived asset impairment charges - 0.5

Acquisition accounting in cost of sales - 0.4

Legal and customs settlements - (0.3)

2.2 1.8

Operating income - as adjusted $ 30.5 $ 28.4

Adjusted operating margin % 8.4% 7.9%

Net income from continuing operations - as reported $ 16.1 $ 15.5

Adjustments for special items - tax affected:

Restructuring and other charges, net 1.5 0.7

Goodwill and other long-lived asset impairment charges - 0.3

Acquisition accounting - 0.3

Legal and customs settlements - (0.9)

1.5 0.4

Net income from continuing operations - as adjusted $ 17.6 $ 15.9

Continuing operations earnings per share - diluted

Diluted earnings per share - as reported $ 0.45 $ 0.42

Adjustments for special items 0.04 0.01

Diluted earnings per share - as adjusted $ 0.49 $ 0.43

RECONCILIATION OF GAAP "AS REPORTED" TO THE "ADJUSTED" NON-GAAP EXCLUDING THE

EFFECT OF ADJUSTMENTS FOR SPECIAL ITEMS

(Amounts in millions, except per share information)

(Unaudited)

First Quarter Ended

15

March 31, April 1,

2013 2012

Net cash provided by (used in) continuing operations - as reported $ (2.7) $ 3.0

Less: additions to property, plant, and equipment (11.0) (4.9)

Plus: proceeds from the sale of property, plant, and equipment - 0.3

Free cash flow $ (13.7) $ (1.6)

Net income from continuing operations - as reported $ 16.1 $ 15.5

Cash conversion rate of free cash outflow to net income -85.1% -10.3%

March 31, December 31,

2013 2012

Current portion of long-term debt $ 77.0 $ 77.1

Plus: Long-term debt, net of current portion 306.8 307.5

Less: Cash and cash equivalents (251.0) (271.8)

Net debt $ 132.8 $ 112.8

Net debt $ 132.8 $ 112.8

Plus: Total stockholders' equity 936.0 939.5

Capitalization $ 1,068.8 $ 1,052.3

Net debt to capitalization ratio 12.4% 10.7%

RECONCILIATION OF LONG-TERM DEBT (INCLUDING CURRENT PORTION) TO NET DEBT AND NET DEBT TO

CAPITALIZATION RATIO

(Amounts in millions)

(Unaudited)

RECONCILIATION OF NET CASH PROVIDED BY CONTINUING OPERATIONS TO FREE CASH FLOW

(Amounts in millions)

(Unaudited)

First Quarter Ended

16

($ millions)

North

America EMEA Asia Corporate Total

Reported GAAP Operating Income 24.0 10.6 2.9 (9.2) 28.3 % of sales 11.3% 7.4% 43.3% 7.8%

Adjustments for special items:- Restructuring and other charges, net 0.2 2.0 - - 2.2

0.2 2.0 - - 2.2

Adjusted Operating Income 24.2 12.6 2.9 (9.2) 30.5 % of sales 11.4% 8.8% 43.3% 8.4%

Adjusted Operating Income by Segment

Q1 2013

17

($ millions)

North

America EMEA Asia Corporate Total

Reported GAAP Operating Income 19.9 12.8 1.4 (7.5) 26.6 % of sales 9.6% 8.6% 28.0% 7.4%

Adjustments for special items:- Goodwill and other long-lived asset impairment charges 0.2 0.3 - - 0.5

- Restructuring and other charges, net 0.3 0.9 - - 1.2

- Legal and custom settlements - - (0.3) - (0.3)

- Acquisition accounting in cost of sales 0.4 - - - 0.4

0.9 1.2 (0.3) - 1.8

Adjusted Operating Income 20.8 14.0 1.1 (7.5) 28.4 % of sales 10.0% 9.4% 22.0% 7.9%

Adjusted Operating Income by Segment

Q1 2012

18

19