Watts Water TechnologiesWatts Water TechnologiesQ3Q3 2013 Earnings Conference Call2013 Earnings Conference Call

October 30, 2013October 30, 2013

ForwardForward--looking Statementslooking Statements

Certain statements in this presentation constitute forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995.

These statements are related to forecasts of sales, earnings, earnings per share, capitalexpenditures, water market growth, acquisition strategy, lead free developments andmanagement goals and objectives.

Watts cautions investors that any such forward-looking statements made by Watts are noty g yguarantees of future performance. All forward-looking statements are subject to known andunknown risks, uncertainties and contingencies, many that are beyond the control of Watts,which may cause actual results, performance or achievements to differ materially fromanticipated future results, performance or achievements expressed or implied by theforward looking statementsforward-looking statements.

Factors that might affect forward-looking statements include overall economic and businessconditions, competitive factors, changes in laws affecting Watts, future acquisitions ofmaterial assets or businesses by Watts, the demand for Watts’ products and services andother factors identified in Watts’ most recent Annual Report on Form 10 K and subsequentother factors identified in Watts most recent Annual Report on Form 10-K and subsequentreports filed with the SEC.

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Consolidated Financial Highlights Consolidated Financial Highlights –– Q3 2013 Q3 2013

• Revenue growth of 5.4% - 360 organic & 180 bps FX

Adjusted operating margin* 9 4% 110 bps below 2012• Adjusted operating margin* = 9.4%, 110 bps below 2012• NA product liability impact approximately 95 bps; lead

free impact approximately 65 bps • EMEA adjusted margin increased 70 bps mainly due to • EMEA adjusted margin increased 70 bps mainly due to

SGA savings and productivity • Price had negative impact in NA retail

Adj t d EPS* $0 58 PY $0 62 • Adjusted EPS* = $0.58, PY = $0.62 • $0.10 – Product liability & lead free cost included in adj. EPS

• Disposed Austroflex - $2 2m loss in Disc ops • Disposed Austroflex $2.2m loss in Disc ops.

• Repurchased $10m shares during Q3* “Adjusted” excludes special items see slide 23 for reconciliation • * “Adjusted” excludes special items, see slide 23 for reconciliation

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Q3 2013 Market Overview Q3 2013 Market Overview –– North America North America

• New residential market remains solid• New starts 950k *, 22% growth for 2013

• Repair & replace market steady • 11% * growth for 2013

• Commercial market – starting to see signs of pick-up• YTD July down 2.1%*, pockets of growth

ABI trend positive credit still a bottleneck • ABI trend positive, credit still a bottleneck

* Source - Reed Construction Data

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Q3 2013 Market Overview Q3 2013 Market Overview -- EMEA EMEA

• Overall market confidence appears to be improving

O k t till tt• Our markets still spotty• France – sales flat v Q3 2012• Germany – down 8.2% v Q3 2012y• Drains – down 5% v Q3 2012 – tough comps• Middle East sales down in Q3 – drains project work• Italy – still softItaly still soft

• Stable order entry exiting Q3

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Q3 2013 Market Overview Q3 2013 Market Overview –– Asia Asia

• Economic environment in China still positive • GDP 7.8%

• Sales growth in heating and valves products• Driven by new products • Strong regional growth• Focus on Tier 2/3 cities

• Expanding sales in Australia through new distribution

• Continued focus on higher end market sales • Continued focus on higher end market sales

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Revenue by Platform and Region Revenue by Platform and Region –– Q3Q3 2013 2013

Q3 2012 Sales

Water Quality

5%

Drains and Re-use

10% Water Quality

5%

Drains and Re-use

11%

Q3 2012 SalesQ3 2013 Sales

Residential/Commercial

Flow Control

HVAC/Gas25%

Residential/Commercial Flow Control

59%

HVAC/Gas25%

Control60%

59%

CanadaQ3 2013 SalesQ3 2012 Sales

CanadaAsia2%

6% Asia2%

6%

U.S.A53%

EMEA39%

U.S.A52%EMEA

40%

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Revenue by Platform and Region Revenue by Platform and Region –– September YTD 2013 September YTD 2013

YTD 2013 S l YTD 2012 Sales

Water Quality

5%

Drains and Re-use

10%Water Quality

5%

Drains and Re-use

10%

YTD 2013 Sales YTD 2012 Sales

Residential/HVAC/Gas

23%Residential/Commercial

HVAC/Gas23%

Commercial Flow

Control62%

Flow Control62%

CanadaYTD 2013 Sales

YTD 2012 Sales

Asia2%

Canada6%

Asia2%

Canada6%

YTD 2013 Sales

U.S.A54%

EMEA38%

U.S.A52%

EMEA40%

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Q3Q3 2013 Financial Highlights2013 Financial Highlights(in millions except DEPS; see reconciliations in Appendix; continuing ops only)

DEPS f DEPS f

$371.8 SalesSales Op Op Profit/ Profit/

MarginMargin**DEPS from DEPS from Continuing Continuing Operations*Operations*

$352.8 $36.9

$34 9

10.5%

9.4%

$0.62

$0 8 $34.9 $0.58

Q3 12 Q3 13 Q3 12 Q3 13 Q3 12 Q3 13Q Q

Sales Growth of 5.4%Organic 3.6%FX 1.8%

• $2.4m in Q3 plant LF inefficiencies/logistics costs• Margins impacted by $3.5M product liability increase• $0.10 – product liability & lead free costs EPS impact

* Excludes Special Items – see Slide 23 9

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

DEPS f DEPS f

SalesSales

Op Op Profit/ Profit/ MarginMargin**

9.4%$1.65

DEPS from DEPS from Continuing Continuing Operations*Operations*

$1 097 5

$103.3

9.3%

$1,072.9

$1,097.5

$100.0 $1.57

YTD 12 YTD 13 YTD 12 YTD 13 YTD 12 YTD 13YTD 12 YTD 13 3

Sales Growth of 2.3%Organic 1.3%FX 0.9%

Net Accretion +$0.03• YTD LF Impact of $4.4M

Acquired 0.1%* Excludes Special Items – see Slide 23

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North American OperationsNorth American Operations(in millions)

Q3 Revenue Q3 Revenue growth of growth of 8.1% 8.1% v v Q3 2012Q3 2012• 860 bps organic growth offset by 50 bps FX decline• Wholesale accelerated during the quarter, up +9.6%

Q3 Adj d Q3 Adj d i i i i 2%2%Q3 Adjusted Q3 Adjusted operating margin = operating margin = 11.2%11.2%• 210 bps decline v Q3 2012• Product liability incremental costs of $3.5m in Q3=160 bps• Lead-free incremental costs of $2.4m in Q3 = 110 bps• Margin expansion hindered by competitive pricing in retailMargin expansion hindered by competitive pricing in retail• Lead-free pricing holding

$204.0 $220.5

Sales Op Profit*

$27.1 $24.7

Q3 12 Q3 13

13.3% 11.2%

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

* Excludes Special Items – see Slide 2411

North American OperationsNorth American Operations(in millions)

September YTD Revenue September YTD Revenue growth of growth of 4.6% 4.6% v v 20122012• 470 bps organic growth offset by FX decline• Wholesale growth of 5.5%

September YTD Adjusted September YTD Adjusted operating margin = operating margin = 12.2%12.2%• 40 bps improvement v 2012• Margin expansion hindered by competitive pricing in

retail • Lead-free incremental costs of $4.4m

Sales Op Profit*

$629.1 $657.9

Sales Op o t

$74.5 $80.5 11.8% 12.2%

Industries Served: Commercial,

Sept YTD 12 Sept YTD 13Residential, Irrigation, Fire Protection, Marine, Waterworks, Water Quality

* Excludes Special Items – see Slide 24 12

EMEAEMEA OperationsOperations(in millions)

Q3 Q3 Revenue Revenue growth of 0.8% growth of 0.8% v v Q3 Q3 20122012• (420 bps) organic, 500 bps FX• Drains sales down 5% v Q3 2012• France sales flat v Q3 2012• France sales flat v Q3 2012• German sales down 8.2% v Q3 2012• Middle East sales down – 2012 major drains project

•• Q3 Q3 Adjusted operating margin = Adjusted operating margin = 11.5%11.5%• 70 bps increase v Q3 2012 due to productivity and p Q p y

SG&A cost savings

$141.5 $142.7 Sales Op Profit*

$15.3 $16.4

10.8% 11.5%Industries Served : Water Protection, Sanitary, HVAC-Radiant Heat, Under

Q3 12 Q3 13

* Excludes Special Items – see Slide 24

floor, Fuel &Gas, Instrumentation and Electronics

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EMEAEMEA OperationsOperations(in millions)

September YTD Revenue September YTD Revenue decline of decline of 2.1% 2.1% v v Q3 Q3 20122012• (460 bps) organic, 250 bps FX• Drains sales strong• France sales down 7.6% v 2012• German sales down 8.5% v 2012• Middle East sales up 10%

•• September YTD Adjusted September YTD Adjusted operating margin = operating margin = 9.9%9.9%• 10 bps decrease v 2012

V l d li b t ti ll ff t b SG&A i g • Volume decline substantially offset by SG&A savings, price and productivity

$425.0 $416.0

Sales Op Profit*

$42.4 $41.0

S t YTD 12 S t YTD 13

10.0% 9.9%Industries Served : Water Protection, Sanitary, HVAC-Radiant Heat, Under

Sept YTD 12 Sept YTD 13

* Excludes Special Items – see Slide 24

floor, Fuel &Gas, Instrumentation and Electronics

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Asia OperationsAsia Operations(in millions)

Q3 Revenue Q3 Revenue growth of growth of 17.8% 17.8% v v Q3 2012Q3 2012• 1510 bps organic, 270 bps FX

Q3 Adjusted operating margin = 23.3%Q3 Adjusted operating margin = 23.3%• (960) bps decrease v Q3 2012• Driven by product mix

Growth from residential valve and heating productsGrowth from residential valve and heating products

$7 3

$8.6

Sales Op Profit*

$7.3

32 9% 23 3%

$2.4 $2.0

Q3 12 Q3 13

32.9% 23.3%

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

* Excludes Special Items – see Slide 2415

Asia OperationsAsia Operations(in millions)

September YTD Revenue September YTD Revenue growth of growth of 25.5% 25.5% v v 20122012• 2390 bps organic, 160 bps FX

September YTD Adjusted operating margin = 30.9%September YTD Adjusted operating margin = 30.9%p j p g gp j p g g• 110 bps increase v 2012• Driven by SG&A cost containment and better plant

absorption on higher volumesGrowth from focused strategy on heating and plumbing Growth from focused strategy on heating and plumbing

$23.6 Sales Op Profit*

$18.8

30 9%

$5.6 $7.3

Sept YTD 12 Sept YTD 13

29.8%30.9%

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

* Excludes Special Items – see Slide 2416

Primary Working CapitalPrimary Working Capital(in millions)

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

($ illi ) Sep 13 Sep 12($ millions)

$ % $ %Receivables 228.9 15.8% 217.2 15.2%

Sep-13 Sep-12

DSO 55.0 55.7

Inventory 310.8 21.4% 296.1 20.8%Inv Turns 3 1 3 1 Inv Turns 3.1 3.1

Payables (134.6) (9.3%) (127.7) (9.0%)DPO 32.0 32.4

Primary Working Capital 405.1 27.9% 385.6 27.0%

Sales increase in US driving receivables up; inventory investment to support lead-free transition

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Cash FlowsCash Flows(in millions)

($ millions) Sept. 29, 2013 Sept. 30, 2012

Net income from continuing operations 52.7 52.2

D i ti d ti ti 36 4 36 0

Nine Months Ended

• Net WC increase from investment in lead free inventory

• Lead free foundry Investment of

Depreciation and amortization 36.4 36.0

Change in working capital and other (21.4) (16.7)

Total Operating Activities 67.7 71.5

Capital expenditures, net of proceeds (21.2) (17.7) Investment of $9.5m driving higher capex spend

• Free cash flow reduced from lead free initiatives

Business acquisitions, net of cash acquired - (17.5)

Net proceeds from sale of securities 2.1 2.0 Total Investing Activities (19.1) (33.2)

Net payments on long-term debt, capital leases and other (80.3) (16.3)

Dividends (13.1) (12.1)

Payments to repurchase common stock (20.0) (65.8)

Proceeds and tax benefit of stock option activity 11.1 11.0

Total Financ ing Activities (102.3) (83.2) Eff f h 1 8 1 6 Effect of exchange rates 1.8 1.6 Net cash provided by discontinued operations 7.3 2.2 Net Decrease in Cash (44.6)$ (41.1)$

Free Cash Outflow 46.5$ 53.8$

* See Slide 25 for calculation of free cash flow 18

Guidance Update Guidance Update -- 20132013

Expect full year sales decline in EMEA of 4% to 5%, at constant exchange rates

E pect f ll ear North America core b siness growth of 3% to 5% pl s Expect full year North America core business growth of 3% to 5%, plus

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

Expect full year sales growth in Asia of 20% to 25%

Expect lead free transition to accelerate further in Q4, with incremental costs

of $1.0 m in Q4 – Now expect full year lead free impact to be $5.4M

Additional $3m of share repurchases in Q4, total repurchases of $23m for 2013 Additional $3m of share repurchases in Q4, total repurchases of $23m for 2013

Expect approximately $32m in total Capex spend for 2013

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Appendix

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Consolidated Statements of Operations Consolidated Statements of Operations -- Q3 and YTD Q3 and YTD (in millions except per share amounts)

2013 2012 B/(W) % 2013 2012 B/(W) %

Net sales 371.8$ 352.8$ 19.0$ 5.4% 1,097.5$ 1,072.9$ 24.6$ 2.3%

Third Quarter Nine Months Ended

Cost of goods sold 237.9 225.1 (12.8) - 701.9 688.0 (13.9) -

GROSS PROFIT 133.9 127.7 6.2 4.9% 395.6 384.9 10.7 2.8%36.0% 36.2% (0.2p) 36.0% 35.9% +0.1p

SG&A 100 7 91 7 (9 0) (9 8%) 294 0 285 9 (8 1) (2 8%)SG&A 100.7 91.7 (9.0) (9.8%) 294.0 285.9 (8.1) (2.8%)

27.1% 26.0% (1.1p) 26.8% 26.6% (0.2p)

Restructuring and other charges, net 3.0 3.5 0.5 14.3% 7.2 6.4 (0.8) (12.5%)

OPERATING INCOME 30.2 32.5 (2.3) -7.1% 94.4 92.6 1.8 1.9%( )

8.1% 9.2% (1.1p) 8.6% 8.6% (0.0p)

Other expense 5.3 5.4 0.1 1.9% 17.9 16.4 (1.5) (9.1%)

INCOME FROM CONTINUING OPERATIONS 24.9 27.1 (2.2) -8.1% 76.5 76.2 0.3 0.4%

Provision for income taxes 7.4 8.8 1.4 15.9% 23.8 24.0 0.2 0.8%

NET INCOME FROM CONTINUING OPERATIONS 17.5$ 18.3$ (0.8)$ -4.4% 52.7$ 52.2$ 0.5$ 1.0%

DILUTED EPS 0.49$ 0.52$ (0.03)$ -5.8% 1.48$ 1.44$ 0.04$ 2.8%DILUTED EPS 0.49$ 0.52$ (0.03)$ 5.8% 1.48$ 1.44$ 0.04$ 2.8%

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Capital StructureCapital Structure(in millions)

09/29/13 12/31/12

Cash $227.2 $271.3

Long Term Debt $308.3 $384.6

Equity $985.9 $939.5

Net Debt to Capitalization 7.6% 10.8%

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

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See Slide 25 for reconciliation of net debt to capitalization

Reconciliation of Reconciliation of GAAPGAAP “As Reported” To The “Adjusted” Non“As Reported” To The “Adjusted” Non-- GAAPGAAP EExcluding The xcluding The Effect Of Adjustments For Special ItemsEffect Of Adjustments For Special Items

(in millions except per share information)

September 29, September 30, September 29, September 30,2013 2012 2013 2012

Net sales $ 371.8 $ 352.8 $ 1,097.5 $ 1,072.9

Operating income - as reported $ 30.2 $ 32.5 $ 94.4 $ 92.6

Third Quarter Ended Nine Months Ended

Operating margin % 8.1% 9.2% 8.6% 8.6%Adjustments for special items: Restructuring and other charges, net 2.8 (0.5) 7.0 1.8 Goodwill and other long-lived asset impairment charges 0.2 2.4 0.2 3.0 Adjustment to disposal of business 1.6 1.6 Acquisition accounting in cost of sales - - - 0.4

Legal and customs settlement 1 7 1 7 (0 3) Legal and customs settlement 1.7 - 1.7 (0.3) CFO retention costs - 0.9 - 0.9

$ 4.7 4.4 $ 8.9 7.4

Operating income - as adjusted $ 34.9 $ 36.9 $ 103.3 $ 100.0 Adjusted operating margin % 9.4% 10.5% 9.4% 9.3%

Net income from continuing operations - as reported $ 17.5 $ 18.3 $ 52.7 $ 52.2 Adjustments for special items - tax affected: Restructuring and other charges, net 2.0 (0.4) 5.0 1.1 Goodwill and other long-lived asset impairment charges 0.1 1.8 0.1 2.1 Adjustment to disposal of business 1.6 1.6 Acquisition accounting in cost of sales - - - 0.3 Legal and customs settlement 1.0 - 1.0 (0.9)

CFO retention costs - 0.5 - 0.5 CFO retention costs 0.5 0.5 $ 3.1 3.5 $ 6.1 4.7

Net income from continuing operations - as adjusted $ 20.6 $ 21.8 $ 58.8 $ 56.9

Continuing operations earnings per share - dilutedDiluted earnings per share - as reported $ 0.49 $ 0.52 $ 1.48 $ 1.44 Adjustments for special items 0.09 0.10 0.17 0.13 Diluted earnings per share - as adjusted $ 0 58 $ 0 62 $ 1 65 $ 1 57

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Diluted earnings per share - as adjusted $ 0.58 $ 0.62 $ 1.65 $ 1.57

Adjusted Operating Income by Segment Adjusted Operating Income by Segment (in millions)

North America EMEA Asia Corp. Total

North America EMEA Asia Corp. Total

Reported GAAP Operating Income 23.5 13.4 2.0 (8.7) 30.2 25.5 14.9 0.8 (8.7) 32.5

Q3 2013 Q3 2012

( ) ( )% of sales 10.7% 9.4% 23.3% 8.1% 12.5% 10.5% 11.0% 9.2%

Adjustments for special items:

- Restructuring and other charges, net 1.2 3.0 - 0.5 4.7 1.6 0.4 1.6 0.8 4.4

1.2 3.0 - 0.5 4.7 1.6 0.4 1.6 0.8 4.4

Adjusted Operating Income 24.7 16.4 2.0 (8.2) 34.9 27.1 15.3 2.4 (7.9) 36.9 % of sales 11.2% 11.5% 23.3% 9.4% 13.3% 10.8% 32.9% 10.5%

September YTD 2013 September YTD 2012

North America EMEA Asia Corp. Total

North America EMEA Asia Corp. Total

Reported GAAP Operating Income 79.0 34.1 7.3 (26.0) 94.4 71.6 40.0 4.3 (23.3) 92.6 % of sales 12.0% 8.2% 30.9% 8.6% 11.4% 9.4% 22.9% 8.6%

Adjustments for special items:

- Restructuring and other charges, net 1.5 6.9 - 0.5 8.9 2.9 2.4 1.3 0.8 7.4

1.5 6.9 - 0.5 8.9 2.9 2.4 1.3 0.8 7.4

Adjusted Operating Income 80.5 41.0 7.3 (25.5) 103.3 74.5 42.4 5.6 (22.5) 100.0 12 2% 9 9% 30 9% 9 4% 11 8% 10 0% 29 8% 9 3%% of sales 12.2% 9.9% 30.9% 9.4% 11.8% 10.0% 29.8% 9.3%

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Reconciliation of Net Cash Provided By Continuing Operations To Free Cash Flow And LongReconciliation of Net Cash Provided By Continuing Operations To Free Cash Flow And Long--Term DebtTerm Debt (including current portion) (including current portion) To Net Debt and Net Debt To Capitalization RatioTo Net Debt and Net Debt To Capitalization Ratio

(in millions)

(Unaudited)

Sept. 29, Sept. 30,

2013 2012

Nine Months Ended

(Unaudited)

Net cash provided by continuing operations - as reported $ 67.7 $ 71.5

Less: additions to property, plant, and equipment (22.6) (18.6)

Plus: proceeds from the sale of property, plant, and equipment 1.4 0.9

Free cash outflow $ 46.5 $ 53.8

Net income from continuing operations - as reported $ 52.7 $ 52.2

Cash conversion rate of free cash outflow to net income 88.2% 103.1%

S t 29 D b 31

(Unaudited)

Sept. 29, December 31,

2013 2012

Current portion of long-term debt $ 2.1 $ 77.1

Plus: Long-term debt, net of current portion 306.2 307.5

L C h d h i l t (227 2) (271 3)Less: Cash and cash equivalents (227.2) (271.3)

Net debt $ 81.1 $ 113.3

Net debt $ 81.1 $ 113.3

Plus: Total stockholders' equity 985.9 939.5Plus: Total stockholders equity 985.9 939.5

Capitalization $ 1,067.0 $ 1,052.8

Net debt to capitalization ratio 7.6% 10.8%

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