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Watts Water Technologies, Inc. (WTS - Analyst Report) has recently sold its subsidiary, Flomatic Corporation, to Boshart Industries Inc. for an undisclosed amount. The sale, however, excludes the backflow product line of Flomatic.

Located in Glens Falls, New York; Flomatic Corporation specializes in manufacturing and selling check valves, foot valves and automatic hydraulic control valves for the well water industry. Flomatic became a part of Watts Water with the acquisition of French valves and backflow preventers maker Danfoss Socla S.A.S. in April 2011.
 
Watts Water reported third-quarter 2012 adjusted earnings of 63 cents per share were down 8.7% from the year-ago quarter’s EPS of 69 cents. The earnings, however, beat the Zacks Consensus Estimate of 58 cents. 
 
Total revenue declined 3% to $361.2 million, missing the Zacks Consensus Estimate of $364 million. Decline in revenues was driven by negative impacts of foreign currency translation (5%). Organic growth rose 2% year over year in the reported quarter, driven by growth in Europe, the Middle East and Africa (EMEA) and Asia, partially mitigated by flat year-over-year growth in North America.
 
The transaction is expected to improve Watts Water’s cash position and can be utilized to further reduce its debt position. Cash and cash equivalents were $209.5 million as of September 30, 2012, compared with $250.6 million as of December 31, 2011. Long-term debt excluding current portion amounted to $307.8 million as of September 30, 2012, compared with $397.4 million as of December 31, 2011.
 
Watts Water’s cost saving initiatives will boost margins. However, weak economic condition in Europe is still a headwind for the company.
 
Watts Water, through its subsidiaries, manufactures innovative products to control the efficiency, safety, and quality of water within applications (residential, commercial, and institutional). Watts Water retains a short-term Zacks #2 Rank (Buy). Badger Meter Inc. (BMI - Analyst Report) is a Zacks #3 Rank (Hold) stock in the same industry.

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