Water Pik prepares for new offering

FORT COLLINS — A Fort Collins staple for 40 years, Water Pik is again doing business under its own name.

Now called Water Pik Technologies, the company that created the oral irrigator has been on its own since spinning off from Allegheny Teledyne on November 29.

Now, the new company has an entirely different set of challenges. The main one is struggling with a federal tax requirement that threatens to dilute its stock earnings per share.

When Water Pik spun off, the U.S. Internal Revenue Service required the company to make a public equity offering of $15 million starting the end of November 2000. The problem for Water Pik is that the company already has 9 million shares of stock out there.

With the current stock price hovering from $6 to $8 a share, raising $15 million means selling an additional 7 million shares — without any guarantee of a corresponding in-crease in net earnings, said Jeff D’Eliscu, director of investor relations at the company’s Newport Beach, Calif., office.

“That is a dilution of our earnings,” D’Eliscu said. “What we’re dealing with is uncertainty on the part of our investors, and we have told people we are considering alternatives.”

D’Eliscu said the company is looking to delay the offering or raise the offering in some way other than stock, such as a private placement or a dead offering.

Water Pik is also struggling with the usual suspects: market volatility and small caps, but the IRS requirement is the lead weight the company would like to have lifted from its chest.

Teledyne spun off Water Pik because it was believed that Water Pik would have greater access to the capital market on its own than through the parent company and that a smaller management team would give the company greater focus. The only connection between Teledyne and Water Pik, said D’Eliscu, is that “a majority of our board will be Teledyne members for the next two years.”

Water Pik has eight major facilities in the United States and employs approximately 1,600 people. In 1998, the businesses that make up Water Pik Technologies generated total revenue of $236 million.

The company still manufactures the oral irrigator and has a history of innovations such as the automatic toothbrush, the pulsating shower massager, the pool heater and the faucet-mounted water filter.

The modern company has also branched out into two main lines, said D’Eliscu. The first line is the “old guard” of the irrigator, the shower massager, the water filtrator, a dental-plaque remover and other oral-health products for dental professionals. These devices made up 52 percent of annual revenues the company earned in 1998.

The second line includes California-based pool products sold under the Laars and Jandy brand names. They include pool heaters, valves and pumps, filters, fiber-optic lighting and an automatic pool cleaner. These products accounted for 33 percent of 1998 annual revenues.

The company also manufactures commercial boilers and water heaters for commercial, residential and industrial uses, such as the Laars Endurance modulating boiler and the Mighty Max series of boilers and water heaters. These ac-counted for 16 percent of 1998 revenues.

D’Eliscu said Water Pik has a fourfold strategy for growth and attracting more investment. The first prong is to acquire more companies that manufacture products related to dental care, or any of the other products in the “old guard” line. Then, the company will use the Water Pik name almost as a seal of approval to try and improve sales of those ac-quired products.

“The Water Pik name has high value,´ said D’Eliscu. “People know it and respect it. It’s a strategic fit to what we will be doing.

“The average person doesn’t recognize the Laars and Jandy names, but pool professionals do,” D’Eliscu said.

The second prong of the company’s strategy is to accelerate new product development.

Water Pik has three products that have either come out recently or are due out sometime this year. The first is a misting device that attaches to the showerhead the same way the shower massager does. In the case of the mister, it can produce a hot “steam bath” in a personal shower or refresh with a cold mist.

The second pro-duct is what D’Eli-scu calls the “Water Pik flosser” — a battery-operated device, smaller than a flashlight, with a vibrating tip that can be inserted between the teeth the same way traditional dental floss can.

“It’s small so that it can slip into a purse or pocket.” D’Eliscu said.

The LX pool heater is the third new product. It will combine a series of cosmetic changes to an existing pool heater, with a digital control the company already manufactures to control pool temperature, pumps, lighting and system diagnostics.

D’Eliscu said the company has an additional “handful” of personal health-care products it plans to unveil at the Housewares Show in Chicago in January, plus two pool products that will not be available until the fourth quarter of this year. D’Eliscu declined to talk further about any of these products.

The third prong of the company’s growth strategy is to expand into product lines that are beyond oral care, showerheads and filters. D’Eliscu said the company is looking for devices that don’t have great brand-name recognition.

The fourth prong is greater efforts to drive products to the low-cost position by streamlining manufacturing processes and implementing state-of-the-art production techniques.

“We’re looking to lower our own costs by investing in greater manufacturing efficiency,” D’Eliscu said.

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