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Mueller Water Products Reports Fiscal 2011 Second Quarter Results

Interest Expense, Net

Interest expense, net for the 2011 second quarter of $16.3 million included $2.0 million of non-cash costs related to interest rate swap contracts. Although these contracts were terminated prior to fiscal 2011, the related costs are being amortized over the original term of the swap contracts. Interest expense, net for the 2010 second quarter of $14.8 million included a benefit of $0.8 million related to terminated interest rate swap contracts. Excluding these terminated swap contract costs, interest expense, net decreased $1.3 million primarily due to a lower effective interest rate.

Subsequent Event

The Board of Directors of Mueller Water Products, Inc., after considering many factors, has authorized the exploration of a variety of alternatives for U.S. Pipe, including strategic alternatives such as the sale of a controlling interest in that business to a third party, a joint venture with a third party or other financial or structural alternatives, both domestic and international. A key objective will be to ensure that U.S. Pipe continues as a strong brand by delivering quality goods and services to its customers, with the same commitment to high customer service that has distinguished its business in the past.

No decision has been made at this time to enter into any transaction and there can be no assurance that the exploration of alternatives will result in a transaction or as to the terms, conditions or timetable of any such transaction. It is the Company’s policy not to comment on any specific discussions or any potential corporate transaction unless and until it enters into a definitive agreement with respect to such a transaction.

Use of Non-GAAP Measures

The Company presents adjusted income (loss) from operations, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per share, free cash flow and net debt as non-GAAP measures. Adjusted income (loss) from operations represents income (loss) from operations excluding restructuring. Adjusted operating margin represents adjusted income (loss) from operations as a percent of net sales. Adjusted EBITDA represents income (loss) from operations excluding restructuring, depreciation and amortization. Adjusted EBITDA margin represents adjusted EBITDA as a percent of net sales. The Company presents adjusted income (loss) from operations, adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin because these are measures management believes are frequently used by securities analysts, investors and interested parties in the evaluation of financial performance. Adjusted net income (loss) and adjusted net income (loss) per share exclude restructuring, certain costs from settled interest rate swap contracts and the income tax effects of the previously mentioned items. These items are excluded because they are not considered indicative of recurring operations. Free cash flow represents cash flow from operating activities less capital expenditures. It is presented as a measurement of cash flow because it is commonly used by the investment community. Net debt represents total debt less cash and cash equivalents. Net debt is commonly used by the investment community as a measure of indebtedness. Adjusted income (loss) from operations, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per share, free cash flow and net debt have limitations as analytical tools, and securities analysts, investors and interested parties should not consider any of these non-GAAP measures in isolation or as a substitute for analysis of the Company's results as reported under accounting principles generally accepted in the United States ("GAAP").

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