Water Pik Technologies, Inc

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Water Pik Technologies, Inc.

23 Corporate Plaza, Suite 246
Newport Beach, California 92660
U.S.A.
Telephone: (949) 719-3700
Fax: (949) 719-6472
Web site: http://www.waterpik.com

Private Company
Incorporated: 1962 as Aqua Tec Corp.
Employees: 1,200
Sales: $321.3 million (2005)
NAIC: 335211 Electric Housewares and Household Fan Manufacturing

Water Pik Technologies, Inc., is a manufacturer of personal care and pool products, which it markets under the Water Pik, Jandy, and Air Energy brand names. The company's personal care products include showerheads, oral health products, and water filtration products. Approximately two-thirds of its revenues are generated from the pool and spa side of its business. The Jandy line of products includes pool and spa heaters, and controls, valves, pumps, and filters designed for pools and spas. The Air Energy line includes commercial and residential water-heating systems. A private investment firm, The Carlyle Group, owns 80 percent of Water Pik Technologies, while Groupe Zodiac, a diversified France-based manufacturer best known as an inflatable boat maker, owns the remaining 20 percent.

ORIGINS

Water Pik Technologies' legacy of innovation began with the homespun efforts of Dr. Gerald Moyer, a dentist living in Fort Collins, Colorado. After noting the problems his older patients suffered with their gums, Moyer searched for a solution and struck upon the idea of developing a device that could spray a forceful, steady stream of water into a patient's mouth, which, he theorized, would rid the gums of food particles and bacteria while also massaging the gums. Convinced of the merits of his proposed device, he began looking for a way to power it, embarking on a search for someone with expertise in motors that introduced him to John W. Mattingly, a hydraulic engineer and professor at Colorado State University. Mattingly was intrigued by the challenge presented by Moyer, and began experimenting with ways to power the oral irrigator, eventually settling upon a motor using a hollowed and flared piston. The device worked, but not in the way envisioned by either Moyer or Mattingly. Instead of producing a steady stream of water, the prototype oral irrigator issued a pulsating stream.

Despite the aberrant flow of water, Moyer was convinced the oral irrigator would work. He asked several of his patients to test the device and received positive feedback, particularly from one of his patients, Gene Rouse. Rouse believed in the commercial viability of the oral irrigator, becoming an energetic promoter of its introduction into the marketplace. He made Moyer's cause his own, soliciting dentists to invest in the device so he could obtain the capital to begin production. Once he had secured the start-up capital, he formed Aqua Tec Corp. in 1962, operating the company out of a rented house in Fort Collins. Initially, Rouse, who was appointed president of Aqua Tec, and Moyer identified the dental community as the target market for the device, unveiling the oral irrigator at an annual dental convention, where it piqued the interest of those in attendance and gave Rouse and Moyer their first stream of revenue. Rouse used the product's exposure to attract a larger audience, forging an agreement to distribute Aqua Tec's product to dental supply dealers, which enabled consumers to purchase the oral irrigator from their dentists. Next, Rouse paved the way for the device's debut on retail shelves by distributing it through mainstream drug, appliance, and hardware distributors, putting the Aqua Tec oral irrigator directly in the hands of consumers. By 1967, Rouse had secured the patents for the irrigator technology, thanks largely to the pulsating flow of water, which made the company's device more patentable than if its water flow was constant.

Shortly after the patents for the oral irrigator were secured, Aqua Tec attracted the attention of a suitor, ushering in a new era for the six-employee business that continued to operate out of a rented house. Teledyne, Inc. took notice of the promising venture in Fort Collins, and made its move. Founded not long before Aqua Tec, Los Angeles-based Teledyne experienced a far more active start to its business life than the small oral hygiene firm it eyed in the late 1960s. Teledyne was founded in 1960 and went public in 1962, when the company began to acquire a slew of companies involved in numerous markets, including specialty metals, aviation, electronics, industrial, and consumer. At one point, Teledyne controlled more than 100 small companies, and Aqua Tec became one of those companies after the Los Angeles-based conglomerate acquired it and changed its name to Teledyne Aqua Tec.

PRODUCT LINE EXPANSION
UNDER TELEDYNE'S CONTROL

During the 1970s, Teledyne was regarded as one of the most successful housewares suppliers in the country. A large part of the company's reputation was built on the commercial applications of pulsating water—the fortuitous flaw in Mattingly's mechanical design that helped Rouse patent the technology for the oral irrigator and made Teledyne a major success in the consumer market. Teledyne executives did not perceive the commercial wonders pulsating water could deliver, however, at least not at first. Executives in charge of Teledyne Aqua Tec wanted to incorporate pulsating water into a new product, a showerhead, but they needed the approval of the parent company to fund further development of the project. Teledyne executives balked at the idea of marketing a replacement showerhead primarily because the product category did not exist. During the early 1970s, the market for showerheads was limited to new-home construction and bathroom-renovation projects; general contractors purchased showerheads, not consumers. The Teledyne Aqua Tec team, led by Rouse, persisted in its efforts to produce and to market a specialty showerhead, offering to acquire the concept from Teledyne and press ahead with production and promotion on its own. Teledyne executives eventually relented, which led to the introduction in 1974 of The Original Shower Massage, a showerhead that featured pulsating jets of water and created an entirely new product category for the consumer market. The following year, Teledyne Aqua Tec changed its name to Teledyne Water Pik, anointing the pulsating technology with the brand name that would enjoy widespread recognition.

The Water Pik brand flourished under the control of Teledyne, developing into arguably the most well known name in the oral hygiene and personal care markets. Within Teledyne's consumer segment, Teledyne Water Pik was joined by several companies, most notably Teledyne Laars, a manufacturer of swimming pool and spa heaters that Teledyne had acquired in 1966. Although involved in different businesses, Laars and Water Pik would be linked together through two major deals that dramatically changed the future of both companies. The transforming events occurred during the 1990s, after Water Pik and Laars had benefited from years of growth under the Teledyne corporate umbrella, creating the Water Pik Technologies of the 21st century.

COMPANY PERSPECTIVES

Since Waterpik Technologies began in 1962, we've been a leading developer, manufacturer and marketer of revolutionary health care products for the entire family. Waterpik has been fortunate to be recognized in many ways for its fine products, and it continues to be involved in important community activities and causes.

In 1996, Teledyne completed a massive merger with Allegheny Ludlum Corp., a specialty steel and specialty metals company based in Pittsburgh, Pennsylvania. The merger created Allegheny Teledyne Incorporated, a more than $3 billion-in-sales conglomerate involved in specialty metals, aerospace and electronics, industrial, and consumer markets that counted Teledyne Laars and Teledyne Water Pik among its businesses. The year of the merger also marked Teledyne Laars' acquisition of Jandy Industries, Inc., a manufacturer of electronic control systems, automatic valves, and automatic cleaners for the swimming pool and spa industries. Jandy's inclusion within the consumer segment of the Allegheny Teledyne conglomerate was significant, adding another brand to what later would constitute Water Pik Technologies.

INDEPENDENCE IN 1999

The final step in the process that turned Teledyne Water Pik into Water Pik Technologies occurred not long after the merger of Allegheny Ludlum and Teledyne. Executives of the merged company decided in 1998 to concentrate their efforts on Allegheny Teledyne's core assets, a decision that set the stage for the divestiture of Teledyne Water Pik and the pool and water-heating products sold under the Laars and Jandy brands. The restructuring effort was announced in January 1999 and completed in November 1999, when Allegheny Technologies Incorporated was created and Water Pik Technologies, Inc. was spun off as a separate, publicly traded company. At the time of the spinoff, the company generated more than $235 million in annual sales, distributing its products to approximately 45,000 wholesale and retail outlets. A Water Pik Technologies senior executive explained the company's objectives as it embarked on a new era of independence, issuing a statement quoted in the December 6, 1999 issue of the trade publication HFN. "As we look forward," the executive said, "our mission is going to be an innovative, new products company that delivers consistent sales and earnings growth for shareholders. Right now there's a lot of work going on with new product development. In addition, acquisition is part of our strategy going forward. So there's a lot of work being done to identify acquisition opportunities for the company."

Water Pik Technologies' plan to focus on new product introductions was underway before its separation from Allegheny Teledyne. In early 1999, the Misting Massage showerhead debuted, followed by the introduction of the Adjustable Shower Massage showerhead, and a revamped line of oral irrigators. Once independent for the first time in 30 years, the company continued to introduce new products, registering considerable success with its electric Water Pik Flosser, which debuted in March 2000. On the acquisition front, the company began to complete deals before its spinoff as well, purchasing a manufacturer of pool maintenance products and accessories, Olympic, in August 1999. Next, Water Pik Technologies acquired Air Energy Heat Pumps, Inc. in June 2003. Based in Ft. Lauderdale, Florida, Air Energy made heat pumps for swimming pools and spas. In January 2004, the company acquired Huron Tech Systems, a Jacksonville, Florida-based maker of automatic salt chlorine generators used to sanitize swimming pool and spa water.

KEY DATES

1962:: Water Pik Technologies' predecessor, Aqua Tec Corp., is formed, occupying a rented house in Ft. Collins, Colorado.
1967:: Aqua Tec is acquired by Teledyne, Inc., becoming Teledyne Aqua Tec.
1974:: Following up on its initial success with oral irrigators, Teledyne Aqua Tec introduces The Original Shower Massage.
1975:: Teledyne Aqua Tec changes its name to Teledyne Water Pik.
1996:: Teledyne merges with Allegheny Ludlum Corp., creating Allegheny Teledyne Inc.
1999:: Teledyne Water Pik is spun off from Allegheny Teledyne, creating a separate, publicly traded company named Water Pik Technologies, Inc.
2005:: Water Pik Technologies sells Laars Heating Systems.
2006:: The company is acquired by The Carlyle Group and Groupe Zodiac.

After Water Pik Technologies spent several years following through on its promise to introduce new products and to acquire other companies, the first indications of what would be another transforming event for the company emerged. In its January 31, 2005 issue, Pool & Spa News reported that Water Pik Technologies was mulling over several strategic options, including the possible sale of the company, either piecemeal or in its entirety. The company reportedly retained J.P. Morgan Securities Inc. to help weigh its options, sparking speculation from industry pundits about the future direction of Water Pik Technologies. When the company sold the assets related to Laars in June 2005 for $24.3 million, further questions were raised about what senior executives were plotting, casting a cloud of uncertainty that did not clear until the first half of 2006.

ACQUISITION OF
WATER PIK: 2006

In April 2006, Water Pik Technologies' status as a publicly traded company ended. The company was acquired by Coast Acquisition Corp., a company formed by The Carlyle Group and Groupe Zodiac to complete the $380 million deal. Carlyle, a private investment firm with more than $30 billion in assets under its management, took an 80 percent stake in Water Pik Technologies. The remaining 20 percent interest was taken by Zodiac, a Cedex, France-based company involved in five major business areas, including a marine division that manufactured inflatable boats, inflatable pools, and pool products. The acquisition led some industry analysts to speculate Water Pik Technologies eventually would be split in two, freeing its pool and spa business, which accounted for two-thirds of Water Pik Technologies' revenue and a majority of its net income, to operate as a separate company. One Water Pik Technologies executive, in a May 22, 2006 interview with Pool & Spa News, offered an explanation of the acquisition that hinted at a possible split of the company's personal care business and its pool and spa business. "Carlyle purchased Water Pik to get Jandy," the executive said. "When we were Water Pik, the management team really wanted us to be a personal healthcare business. There was not as much focus on the Jandy side of it … now the resources will be focused on Jandy."

The acquisition of Water Pik Technologies answered some of the questions raised in 2005 about the future of the company, but some questions remained unanswered. Whether or not the Water Pik and Jandy brands would remain together could only be answered by the actions of the company's new owners. Regardless of their decision, the Water Pik brand enjoyed enviable recognition within the consumer market, making it highly likely that the personal care business born from Dr. Gerald Moyer's invention would continue to market its pulsating technology in various forms well into the future.

Jeffrey L. Covell