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Watts Water Technologies Q4 2007 Earnings Call Transcript

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2008-02-12 19:04:07.0

Tags: Watts Water Technologies Inc.

Question-and-Answer Session

Operator

(Operator Instruction) And your first question comes from the line of Amit Daryani of RBC Capital Markets. Please proceed, sir.

Amit Daryani - RBC Capital Markets

Thanks, guys just a quick question of production issues in China thinking about $1.5 million headwind. Is it the same size that we're trying to right size at this point and also are those issues resolved over here or are they going to continue in Q1?

Bill McCartney

Amit, it's a different site, the site that we move right sizing is up Tianjin where we make more of the infrastructure related valves. The site that we are talking about with the production issues, is down in Southern China and we have made a lot progress on those issues, we think they are behind us.

Amit Daryani - RBC Capital Markets

All right. And then, I just want to make sure that I got the things right but last you spoken about $20 million headwind on revenue because of the product line divestures. You said $29 million, so does that mean we have incrementally walked away from $9 million more of product line or did I just hear you wrong?

Bill McCartney

No, I think $20 million might have been year-to-date number, I am not sure, but there is only one issue here. And this is some low gross, unacceptably low gross margin business we had with some of our retail customers that we chose to exit.

Amit Daryani - RBC Capital Markets

All right. And then just, regarding Europe, you highlighted especially softer trends in Germany, I think, of pretty big headwind on the organic growth line. Could you just talk about what you're seeing in other parts of the Europe, especially France, which is probably one of your bigger markets?

Pat O'Keefe

Yeah. This is Pat, I think what you are seeing is a general slowdown. It didn't flow into a lot of the same things that are hitting the United States which is their credit and severance and other issues.

Bill McCartney

You're right. We have been concerned primarily about Germany, but you're seeing some of that trickle down into Italy plants and even to a certain extent into the U.K. So, this has been a relatively slow quarter for Europe. Beginning of the year was much stronger and the end of the year was much slower. We are seeing that slowdown really sort of predominantly in Germany but also towards lesser extent in the other countries.

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