Watts Water(US:WTS)2022-02-22 16:34Financial Performance - The company achieved record performance for 2021 despite the impact of the COVID-19 pandemic and supply chain disruptions[25]. - Approximately 61% of net sales in 2021 were to wholesale distributors for commercial and residential applications[27]. - Residential & commercial flow control products accounted for approximately 53% of total net sales in 2021[29]. - The top ten customers accounted for $371.5 million, or 20.5% of total net sales in 2021[32]. Capital Expenditures and Investments - Capital expenditures in 2021 were $26.7 million, a decrease from $43.8 million in 2020[35]. - The company launched 21 new smart and connected product offerings in 2021[48]. - The company continues to invest in its smart and connected product pipeline, enhancing energy savings and safety[46]. - The company has invested in manufacturing capabilities to maintain high levels of quality and efficiency[34]. - The company launched the Connected IntelliFlow® Washing Machine flood prevention system and ACV Assure™ Municipal Water Monitoring System solution[47]. Employee Engagement and Diversity - As of December 31, 2021, the company had 4,597 employees globally, with 2,063 in the Americas, 2,239 in Europe, and 295 in APMEA[50]. - In 2021, 82% of employees participated in the global employee engagement survey, providing valuable feedback for workplace improvement[56]. - The company has developed a comprehensive talent management strategy to attract, develop, and retain top talent in a competitive environment[50]. - The company has initiated a comprehensive approach to diversity, equity, and inclusion, including employee resource groups to support diverse employees[55]. Environmental Responsibility - The company funded the construction of six AquaTowers and AquaSan systems, providing clean drinking water for up to 10,800 people in Cambodia, India, Mexico, the Philippines, and Vietnam during 2021[62]. - The company was recognized as one of Newsweek's Most Responsible Companies, ranking 100th overall and 5th within its industry classification in 2021[65]. - The company is committed to reducing its global water consumption and greenhouse gas emissions through smart monitoring systems and energy reduction projects[61]. - The company’s General Counsel and Chief Sustainability Officer oversees sustainability matters, reporting directly to the CEO[59]. Risk Management - The company is experiencing high inflationary pressures in commodity markets, particularly with copper and stainless steel[36]. - The company maintains product liability and other insurance coverage, which may not be adequate to fully protect against substantial damage claims[67]. - The company has been named as a potentially responsible party for a limited number of identified contaminated sites, with environmental liabilities recorded based on probable costs[68]. Financial Instruments and Currency Risks - The company reported consolidated earnings subject to translation risks due to foreign currency exchange rate fluctuations, particularly with the euro, Canadian dollar, and Chinese yuan[252]. - The company utilizes derivative financial instruments primarily to mitigate exposure to adverse fluctuations in foreign exchange rates, interest rates, and raw material costs, adhering to a policy of using these instruments solely for hedging purposes[251]. - Approximately 80% to 85% of forecasted intercompany purchases between a Canadian subsidiary and U.S. operating subsidiaries are hedged using forward exchange contracts for the next twelve months[253]. - Up to 60% of forecasted intercompany sales transactions between a Chinese subsidiary and U.S. operating subsidiaries are hedged using forward exchange contracts for the next twelve months[253]. - The fair value of designated foreign hedge contracts outstanding as of December 31, 2021, was a liability balance of less than $0.1 million[253]. - An interest rate swap agreement was entered into on March 30, 2021, with a notional amount of $100.0 million, paying a fixed rate of 1.02975%[254]. - The interest rate swap matures on March 30, 2026[254]. Commodity Management - The company purchases significant amounts of bronze ingot, brass rod, cast iron, stainless steel, and plastic for manufacturing[255]. - The company manages commodity price risk by monitoring market prices and working with suppliers for cost stability[255]. - The company seeks alternative supply sources when necessary to mitigate commodity price risks[255]. - The company aims to pass on increases in commodity costs to customers to the maximum extent possible[255].