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Mueller Water Products Reports Fiscal 2011 Second Quarter Results

About Mueller Water Products, Inc.

Mueller Water Products, Inc. manufactures and markets products and services that are used in the transmission and distribution of safe, clean drinking water and in water treatment facilities. Our broad product portfolio includes engineered valves, fire hydrants, pipe fittings, water meters and ductile iron pipe, which are used by municipalities, as well as the residential and non-residential construction industries. With latest 12 months net sales through March 31, 2011 of $1.3 billion, the Company is comprised of three operating segments: Mueller Co., U.S. Pipe and Anvil. Based in Atlanta, Georgia, the Company employs approximately 4,700 people. The Company's common stock trades on the New York Stock Exchange under the ticker symbol MWA. For more information about Mueller Water Products, Inc., please visit the Company's website at www.muellerwaterproducts.com.

   
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
                 
March 31, September 30,
  2011   2010
(in millions)
Assets:
Cash and cash equivalents $ 43.8 $ 83.7
Receivables, net 202.0 202.5
Inventories 272.3 268.4
Deferred income taxes 31.6 30.3
Other current assets     62.7       51.5  
Total current assets 612.4 636.4
 
Property, plant and equipment, net 253.4 264.4
Identifiable intangible assets 624.9 632.4
Other noncurrent assets     34.5       35.0  
 
Total assets   $ 1,525.2     $ 1,568.2  
 
Liabilities and stockholders' equity:
Current portion of long-term debt $ 0.7 $ 0.7
Accounts payable 105.6 93.2
Other current liabilities     74.9       89.8  
Total current liabilities 181.2 183.7
 
Long-term debt 691.8 691.5
Deferred income taxes 174.7 165.5
Other noncurrent liabilities     72.7       122.2  
Total liabilities     1,120.4       1,162.9  
 
Commitments and contingencies
 
Series A common stock: 600,000,000 shares authorized;
155,479,581 shares and 154,708,474 shares outstanding at
March 31, 2011 and September 30, 2010, respectively 1.6 1.5
Additional paid-in capital 1,596.4 1,597.5
Accumulated deficit (1,149.3 ) (1,123.5 )
Accumulated other comprehensive loss     (43.9 )     (70.2 )
Total stockholders' equity     404.8       405.3  
 
Total liabilities and stockholders' equity   $ 1,525.2     $ 1,568.2  
 
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
                                   
Three months ended Six months ended
March 31, March 31,
2011 2010 2011 2010
(in millions, except per share amounts)
 
Net sales $ 311.3 $ 301.8 $ 598.9 $ 614.9
Cost of sales   261.3     263.6     499.3     520.8  
 
Gross profit   50.0     38.2     99.6     94.1  
 
Operating expenses:
Selling, general and administrative 54.8 50.6 106.8 105.8
Restructuring   2.1     10.5     4.0     10.9  
Total operating expenses   56.9     61.1     110.8     116.7  
 
Loss from operations (6.9 ) (22.9 ) (11.2 ) (22.6 )
 
Interest expense, net 16.3 14.8 32.2 31.6
Loss on early extinguishment of debt   -     0.5     -     0.5  
 
Loss before income taxes (23.2 ) (38.2 ) (43.4 ) (54.7 )
Income tax benefit   (9.5 )   (14.5 )   (17.6 )   (20.3 )
 
Net loss $ (13.7 ) $ (23.7 ) $ (25.8 ) $ (34.4 )
 
Net loss per share:
Basic $ (0.09 ) $ (0.15 ) $ (0.17 ) $ (0.22 )
Diluted $ (0.09 ) $ (0.15 ) $ (0.17 ) $ (0.22 )
 
Weighted average shares outstanding:
Basic   155.4     154.4     155.1     154.2  
Diluted   155.4     154.4     155.1     154.2  
 
Dividends declared per share $ 0.0175   $ 0.0175   $ 0.035   $ 0.035  
 
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED MARCH 31, 2011
(UNAUDITED)
                                 
 
Accumulated

Additional

other

Common

paid-in

Accumulated comprehensive
 

stock

capital

  deficit loss Total
(in millions)
 
Balance at September 30, 2010 $ 1.5 $ 1,597.5 $ (1,123.5 ) $ (70.2 ) $ 405.3
 
Net loss - - (25.8 ) - (25.8 )
Dividends declared - (5.4 ) - - (5.4 )
Stock-based compensation - 4.1 - - 4.1
Stock issued under stock compensation plans 0.1 0.2 - - 0.3
Derivative instruments - - - 2.4 2.4
Foreign currency translation - - - 3.2 3.2
Minimum pension liability     -     -       -     20.7     20.7  
 
Balance at March 31, 2011   $ 1.6   $ 1,596.4     $ (1,149.3 ) $ (43.9 ) $ 404.8  
 
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                             
Six months ended
March 31,
2011 2010
(in millions)
Operating activities:
Net loss $ (25.8 ) $ (34.4 )
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation 25.7 26.6
Amortization 15.0 15.6
Non-cash restructuring - 6.2
Loss on early extinguishment of debt - 0.5
Stock-based compensation 4.1 4.7
Deferred income taxes (7.2 ) (14.4 )
Gain on disposal of assets (0.6 ) (5.0 )
Interest rate swap contracts 3.9 (0.8 )
Other, net 4.2 4.5
Changes in assets and liabilities:
Receivables 1.6 20.8
Inventories (2.9 ) 30.8
Other current assets and other noncurrent assets 0.2 28.2
Accounts payable and other liabilities   (33.0 )   (39.0 )
 
Net cash provided by (used in) operating activities   (14.8 )   44.3  
 
Investing activities:
Capital expenditures (14.2 ) (14.6 )
Acquisition of business, net of cash acquired (7.9 ) -
Proceeds from sales of assets   0.8     60.2  
 
Net cash provided by (used in) investing activities   (21.3 )   45.6  
 
Financing activities:
Increase in outstanding checks 0.2 1.5
Debt borrowings 0.1 -
Debt paid or repurchased - (45.3 )
Payment of deferred financing fees (0.3 ) -
Common stock issued 0.3 0.6
Dividends paid   (5.4 )   (5.5 )
 
Net cash used in financing activities   (5.1 )   (48.7 )
 
Effect of currency exchange rate changes on cash   1.3     1.9  
 
Net change in cash and cash equivalents (39.9 ) 43.1
Cash and cash equivalents at beginning of period   83.7     61.5  
 
Cash and cash equivalents at end of period $ 43.8   $ 104.6  
 
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES
(UNAUDITED)
(in millions, except per share amounts)
                                 
Three months ended March 31, 2011
Mueller Co. U.S. Pipe Anvil   Corporate Total
GAAP results:
Net sales $ 148.9   $ 75.8   $ 86.6     $ -   $ 311.3  
 
Gross profit (loss) $ 33.8 $ (8.1 ) $ 24.4 $ (0.1 ) $ 50.0
Selling, general and administrative expenses 23.3 7.6 17.5 6.4 54.8
Restructuring   0.6     1.0     0.5       -     2.1  
Income (loss) from operations $ 9.9   $ (16.7 ) $ 6.4     $ (6.5 ) (6.9 )
Interest expense, net 16.3
Income tax benefit   (9.5 )
Net loss $ (13.7 )
Net loss per diluted share $ (0.09 )
 
Capital expenditures $ 3.7   $ 2.8   $ 1.2     $ 0.1   $ 7.8  
 
Non-GAAP results:
Adjusted income (loss) from operations and EBITDA:
Income (loss) from operations $ 9.9 $ (16.7 ) $ 6.4 $ (6.5 ) $ (6.9 )
Restructuring   0.6     1.0     0.5       -     2.1  
Adjusted income (loss) from operations 10.5 (15.7 ) 6.9 (6.5 ) (4.8 )
Depreciation and amortization   12.2     4.7     3.5       0.2     20.6  
Adjusted EBITDA $ 22.7   $ (11.0 ) $ 10.4     $ (6.3 ) $ 15.8  
 
Adjusted operating margin   7.1 %   (20.7 )%   8.0 %     -     (1.5 )%
Adjusted EBITDA margin   15.2 %   (14.5 )%   12.0 %     -     5.1 %
 
Adjusted net loss:
Net loss $ (13.7 )
Restructuring, net of tax 1.3
Interest rate swap settlement costs, net of tax   1.2  
Adjusted net loss $ (11.2 )
Adjusted net loss per diluted share $ (0.07 )
 
Free cash flow:
Net cash used in operating activities $ (20.0 )
Capital expenditures   (7.8 )
Free cash flow $ (27.8 )
 
Net debt (end of period):
Current portion of long-term debt $ 0.7
Long-term debt   691.8  
Total debt 692.5
Less cash and cash equivalents   (43.8 )
Net debt $ 648.7  
 
 
Three months ended March 31, 2010
Mueller Co. U.S. Pipe Anvil   Corporate Total
GAAP results:
Net sales $ 141.2   $ 83.0   $ 77.6     $ -   $ 301.8  
 
Gross profit (loss) $ 32.2 $ (12.9 ) $ 18.9 $ - $ 38.2
Selling, general and administrative expenses 22.5 6.7 12.9 8.5 50.6
Restructuring   -     10.4     0.1       -     10.5  
Income (loss) from operations $ 9.7   $ (30.0 ) $ 5.9     $ (8.5 ) (22.9 )
Interest expense, net 14.8
Loss on early extinguishment of debt 0.5
Income tax benefit   (14.5 )
Net loss $ (23.7 )
Net loss per diluted share $ (0.15 )
 
Capital expenditures $ 3.4   $ 1.3   $ 1.1     $ 0.1   $ 5.9  
 
Non-GAAP results:
Adjusted income (loss) from operations and EBITDA:
Income (loss) from operations $ 9.7 $ (30.0 ) $ 5.9 $ (8.5 ) $ (22.9 )
Restructuring   -     10.4     0.1       -     10.5  
Adjusted income (loss) from operations 9.7 (19.6 ) 6.0 (8.5 ) (12.4 )
Depreciation and amortization   12.5     5.0     3.7       0.2     21.4  
Adjusted EBITDA $ 22.2   $ (14.6 ) $ 9.7     $ (8.3 ) $ 9.0  
 
Adjusted operating margin   6.9 %   (23.6 )%   7.7 %     -     (4.1 )%
Adjusted EBITDA margin   15.7 %   (17.6 )%   12.5 %     -     3.0 %
 
Adjusted net loss:
Net loss $ (23.7 )
Restructuring, net of tax 6.4
Interest rate swap settlement costs, net of tax (0.7 )
Loss on early extinguishment of debt, net of tax   0.3  
Adjusted net loss $ (17.7 )
Adjusted net loss per diluted share $ (0.11 )
 
Free cash flow:
Net cash used in operating activities $ (15.8 )
Capital expenditures   (5.9 )
Free cash flow $ (21.7 )
 
Net debt (end of period):
Current portion of long-term debt $ 10.3
Long-term debt   684.6  
Total debt 694.9
Less cash and cash equivalents   (104.6 )
Net debt $ 590.3  
 
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES
(UNAUDITED)
(in millions, except per share amounts)
                                 
Six months ended March 31, 2011
Mueller Co. U.S. Pipe Anvil   Corporate Total
GAAP results:
Net sales $ 278.7   $ 150.2   $ 170.0     $ -   $ 598.9  
 
Gross profit (loss) $ 63.0 $ (10.5 ) $ 46.8 $ 0.3 $ 99.6
Selling, general and administrative expenses 43.7 14.6 33.4 15.1 106.8
Restructuring   1.0     1.9     1.1       -     4.0  
Income (loss) from operations $ 18.3   $ (27.0 ) $ 12.3     $ (14.8 ) (11.2 )
Interest expense, net 32.2
Income tax benefit   (17.6 )
Net loss $ (25.8 )
Net loss per diluted share $ (0.17 )
 
Capital expenditures $ 6.9   $ 4.2   $ 2.6     $ 0.5   $ 14.2  
 
Non-GAAP results:
Adjusted income (loss) from operations and EBITDA:
Income (loss) from operations $ 18.3 $ (27.0 ) $ 12.3 $ (14.8 ) $ (11.2 )
Restructuring   1.0     1.9     1.1       -     4.0  
Adjusted income (loss) from operations 19.3 (25.1 ) 13.4 (14.8 ) (7.2 )
Depreciation and amortization   23.9     9.2     7.2       0.4     40.7  
Adjusted EBITDA $ 43.2   $ (15.9 ) $ 20.6     $ (14.4 ) $ 33.5  
 
Adjusted operating margin   6.9 %   (16.7 )%   7.9 %     -     (1.2 )%
Adjusted EBITDA margin   15.5 %   (10.6 )%   12.1 %     -     5.6 %
 
 
 
Adjusted net loss:
Net loss $ (25.8 )
Restructuring, net of tax 2.5
Interest rate swap settlement costs, net of tax   2.4  
Adjusted net loss $ (20.9 )
Adjusted net loss per diluted share $ (0.13 )
 
Free cash flow:
Net cash used in operating activities $ (14.8 )
Capital expenditures   (14.2 )
Free cash flow $ (29.0 )
 
Net debt (end of period):
Current portion of long-term debt $ 0.7
Long-term debt   691.8  
Total debt 692.5
Less cash and cash equivalents   (43.8 )
Net debt $ 648.7  
 
Six months ended March 31, 2010
Mueller Co. U.S. Pipe Anvil   Corporate Total
GAAP results:
Net sales $ 274.5   $ 162.7   $ 177.7     $ -   $ 614.9  
 
Gross profit (loss) $ 69.1 $ (16.9 ) $ 41.9 $ - $ 94.1
Selling, general and administrative expenses 43.4 14.6 31.4 16.4 105.8
Restructuring   0.1     10.7     0.1       -     10.9  
Income (loss) from operations $ 25.6   $ (42.2 ) $ 10.4     $ (16.4 ) (22.6 )
Interest expense, net 31.6
Loss on early extinguishment of debt 0.5
Income tax benefit   (20.3 )
Net loss $ (34.4 )
Net loss per diluted share $ (0.22 )
 
Capital expenditures $ 7.1   $ 5.3   $ 2.1     $ 0.1   $ 14.6  
 
Non-GAAP results:
Adjusted income (loss) from operations and EBITDA:
Income (loss) from operations $ 25.6 $ (42.2 ) $ 10.4 $ (16.4 ) $ (22.6 )
Restructuring   0.1     10.7     0.1       -     10.9  
Adjusted income (loss) from operations 25.7 (31.5 ) 10.5 (16.4 ) (11.7 )
Depreciation and amortization   24.9     9.4     7.6       0.3     42.2  
Adjusted EBITDA $ 50.6   $ (22.1 ) $ 18.1     $ (16.1 ) $ 30.5  
 
Adjusted operating margin   9.4 %   (19.4 )%   5.9 %     -     (1.9 )%
Adjusted EBITDA margin   18.4 %   (13.6 )%   10.2 %     -     5.0 %
 
Adjusted net loss
Net loss $ (34.4 )
Restructuring, net of tax 6.6
Interest rate swap settlement costs, net of tax (0.7 )
Loss on early extinguishment of debt, net of tax   0.3  
Adjusted net loss $ (28.2 )
Adjusted net loss per diluted share $ (0.18 )
 
Free cash flow:
Net cash provided by operating activities $ 44.3
Capital expenditures   (14.6 )
Free cash flow $ 29.7  
 
Net debt (end of period):
Current portion of long-term debt $ 10.3
Long-term debt   684.6  
Total debt 694.9
Less cash and cash equivalents   (104.6 )
Net debt $ 590.3  




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