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Mueller Water Products Reports Fiscal 2012 Second Quarter Results

About Mueller Water Products, Inc.

Mueller Water Products, Inc. (NYSE: MWA) is a leading manufacturer and marketer of products and services used in the transmission, distribution and measurement of water. Our broad product portfolio includes engineered valves, fire hydrants, metering products and systems, leak detection and pipe condition assessment. We help municipalities increase operational efficiencies, improve customer service and prioritize capital spending, demonstrating why Mueller Water Products is Where Intelligence Meets Infrastructure™. The piping component systems produced by Anvil help build connections that last in commercial, industrial and oil & gas applications. Visit us at www.muellerwaterproducts.com.

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
           
March 31, September 30,
  2012     2011  
(in millions)
Assets:
Cash and cash equivalents $ 34.3 $ 61.0
Receivables, net 151.0 147.4
Inventories 190.8 175.9
Deferred income taxes 20.0 28.7
Other current assets 46.5 43.8
Current assets held for sale   156.6     142.0  
Total current assets 599.2 598.8
 
Property, plant and equipment, net 141.3 145.7
Identifiable intangible assets 587.8 602.4
Other noncurrent assets 26.9 30.4
Noncurrent assets held for sale   -     107.7  
 
Total assets $ 1,355.2   $ 1,485.0  
 
Liabilities and stockholders' equity:
Current portion of long-term debt $ 0.9 $ 0.9
Accounts payable 73.4 59.1
Other current liabilities 77.9 77.9
Current liabilities held for sale   45.1     56.9  
Total current liabilities 197.3 194.8
 
Long-term debt 691.6 677.4
Deferred income taxes 136.9 154.2
Other noncurrent liabilities   70.2     79.6  
Total liabilities   1,096.0     1,106.0  
 
Commitments and contingencies
 
Series A common stock: 600,000,000 shares authorized;
156,668,730 shares and 155,793,612 shares outstanding
at March 31, 2012 and September 30, 2011, respectively 1.6 1.6
Additional paid-in capital 1,590.6 1,593.2
Accumulated deficit (1,283.3 ) (1,161.6 )
Accumulated other comprehensive loss   (49.7 )   (54.2 )
Total stockholders' equity   259.2     379.0  
 
Total liabilities and stockholders' equity $ 1,355.2   $ 1,485.0  
 
 

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
                     
Three months ended Six months ended
March 31, March 31,
  2012     2011     2012     2011  
(in millions, except per share amounts)
 
Net sales $ 251.5 $ 235.5 $ 466.9 $ 448.7
Cost of sales   189.4     177.4     352.0     338.6  
 
Gross profit   62.1     58.1     114.9     110.1  
 
Operating expenses:
Selling, general and administrative 50.6 47.2 97.1 92.2
Restructuring   0.9     1.1     1.3     2.1  
Total operating expenses   51.5     48.3     98.4     94.3  
 
Operating income 10.6 9.8 16.5 15.8
 
Interest expense, net   15.6     16.3     31.2     32.2  
 
Income (loss) before income taxes (5.0 ) (6.5 ) (14.7 ) (16.4 )
Income tax expense (benefit) (a)   3.9     (1.1 )   0.7     (5.3 )
 
Income (loss) from continuing operations (8.9 ) (5.4 ) (15.4 ) (11.1 )
Income (loss) from discontinued operations, net of tax (b)   (100.9 )   (8.3 )   (106.3 )   (14.7 )

Net income (loss)
$ (109.8 ) $ (13.7 ) $ (121.7 ) $ (25.8 )
 
Net income (loss) per basic share:
Continuing operations $ (0.06 ) $ (0.04 ) $ (0.10 ) $ (0.07 )
Discontinued operations   (0.64 )   (0.05 )   (0.68 )   (0.10 )
Net income (loss) per basic share $ (0.70 ) $ (0.09 ) $ (0.78 ) $ (0.17 )
 
Net income (loss) per diluted share:
Continuing operations $ (0.06 ) $ (0.04 ) $ (0.10 ) $ (0.07 )
Discontinued operations   (0.64 )   (0.05 )   (0.68 )   (0.10 )
Net income (loss) per diluted share $ (0.70 ) $ (0.09 ) $ (0.78 ) $ (0.17 )
 
Weighted average shares outstanding:
Basic   156.5     155.4     156.2     155.1  
Diluted   156.5     155.4     156.2     155.1  
 
Dividends declared per share $ 0.0175   $ 0.0175   $ 0.0350   $ 0.0350  
 
 
(a)

Due to the loss incurred on the disposition of our U.S. Pipe business, income tax expense for the three months and six months ended March 31, 2012 includes a $5.9 million valuation allowance charge related to deferred tax asset balances at September 30, 2011 that has been allocated to continuing operations.
 
(b)

On April 1, 2012, the Company sold its U.S. Pipe business. U.S. Pipe's results of operations have been reclassified as discontinued operations, and its assets and liabilities reclassified as held for sale, for all periods presented.
 
 

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
SIX MONTHS ENDED MARCH 31, 2012
(UNAUDITED)
                               
 
Accumulated
Additional other
Common paid-in Accumulated comprehensive
stock capital deficit loss Total
(in millions)
 
Balance at September 30, 2011 $ 1.6 $ 1,593.2 $ (1,161.6 ) $ (54.2 ) $ 379.0
 

Net income (loss)
- - (121.7 ) - (121.7 )
Dividends declared - (5.5 ) - - (5.5 )
Stock-based compensation - 2.8 - - 2.8
Stock issued under stock compensation plans - 0.1 - - 0.1
Derivative instruments - - - 1.6 1.6
Foreign currency translation - - - 2.0 2.0
Minimum pension liability   -   -     -     0.9     0.9  
 
Balance at March 31, 2012 $ 1.6 $ 1,590.6   $ (1,283.3 ) $ (49.7 ) $ 259.2  
 
 

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                   
Six months ended
March 31,
  2012     2011  
(in millions)
Operating activities:

Net income (loss)
$ (121.7 ) $ (25.8 )

Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:

Income (loss) from discontinued operations
  106.3     14.7  

Income (loss) from continuing operations
(15.4 ) (11.1 )
 
Depreciation 15.5 17.0
Amortization 14.7 14.5
Stock-based compensation 2.6 3.6
Deferred income taxes 11.4 (7.2 )
Retirement plans 1.8 2.5
Interest rate swap contracts 3.0 3.9
Other, net 1.5 0.2
Changes in assets and liabilities:
Receivables (3.3 ) (4.6 )
Inventories (14.5 ) 1.6
Other current assets and other noncurrent assets 1.7 0.7
Accounts payable and other liabilities   1.5     (34.5 )
 
Net cash provided by (used in) operating activities
from continuing operations   20.5     (13.4 )
 
Investing activities:
Capital expenditures (12.1 ) (10.0 )
Acquisitions 0.5 (7.9 )
Proceeds from sales of assets   3.1     0.9  
 
Net cash provided by (used in) investing activities
from continuing operations   (8.5 )   (17.0 )
 
Financing activities:
Debt borrowings 14.0 0.1
Common stock issued 0.1 0.3
Payment of deferred financing fees - (0.3 )
Dividends paid (5.5 ) (5.4 )
Other   (0.4 )   0.2  
 
Net cash provided by (used in) financing activities
from continuing operations   8.2     (5.1 )
 
Net cash flows from discontinued operations:
Operating activities (44.8 ) (1.8 )
Investing activities   (3.1 )   (4.2 )
 
Net cash provided by (used in) discontinued operations   (47.9 )   (6.0 )
 
Effect of currency exchange rate changes on cash   1.0     1.3  
 
Cash and cash equivalents at beginning of period   61.0     84.0  
 
Cash and cash equivalents at end of period $ 34.3   $ 43.8  
 
 

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, 2012
Mueller Co. Anvil Corporate Total
GAAP results:
Net sales $ 154.5   $ 97.0   $ -   $ 251.5  
 
Gross profit $ 33.6 $ 28.5 $ - $ 62.1
Selling, general and administrative expenses 24.6 18.5 7.5 50.6
Restructuring expenses   0.8     0.1     -     0.9  
Operating income (loss) $ 8.2   $ 9.9   $ (7.5 ) 10.6
Interest expense, net 15.6
Income tax expense (benefit)   3.9  
Income (loss) from continuing operations (8.9 )
Income (loss) from discontinued operations, net of tax   (100.9 )
Net income (loss) $ (109.8 )
 
Net income (loss) per diluted share:
Continuing operations $ (0.06 )
Discontinued operations   (0.64 )
Net income (loss) per diluted share $ (0.70 )
 
Capital expenditures $ 3.8   $ 3.0   $ -   $ 6.8  
 
Non-GAAP results:
Adjusted operating income (loss) and EBITDA:
Operating income (loss) $ 8.2 $ 9.9 $ (7.5 ) $ 10.6
Restructuring   0.8     0.1     -     0.9  
Adjusted operating income (loss) 9.0 10.0 (7.5 ) 11.5
Depreciation and amortization   11.6     3.5     0.1     15.2  
Adjusted EBITDA $ 20.6   $ 13.5   $ (7.4 ) $ 26.7  
 
Adjusted operating margin   5.8 %   10.3 %   -     4.6 %
Adjusted EBITDA margin   13.3 %   13.9 %   -     10.6 %
 
Adjusted net income (loss):
Net income (loss) $ (109.8 )
Discontinued operations, net of tax 100.9
Interest rate swap settlement costs, net of tax 1.0
Restructuring, net of tax 0.6
Valuation allowance against beginning of the year
deferred tax assets   5.9  
Adjusted net income (loss) $ (1.4 )
Adjusted net income (loss) per diluted share $ (0.01 )
 
Free cash flow (from continuing operations):
Net cash provided by (used in) operating activities $ 11.9
Less capital expenditures   (6.8 )
Free cash flow $ 5.1  
 
Net debt (end of period):
Current portion of long-term debt $ 0.9
Long-term debt   691.6  
Total debt 692.5
Less cash and cash equivalents   (34.3 )
Net debt 658.2
Pro forma proceeds from the sale of U.S. Pipe   (94.0 )
Net debt $ 564.2  
 
Adjusted EBITDA (excluding U.S. Pipe):
Current quarter $ 26.7
Three prior quarters   91.3  
Adjusted EBITDA $ 118.0  
 
Net debt leverage (net debt divided by adjusted EBITDA)   4.8  
 
Net debt (December 31, 2011) $ 638.9
Adjusted EBITDA (four quarters ended December 31, 2011, including U.S. Pipe) $ 95.9
Net debt leverage at December 31, 2011 (net debt divided by adjusted EBITDA)   6.7  
 
 

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.       Anvil       Corporate       Total
GAAP results:
Net sales $ 148.9   $ 86.6   $ -   $ 235.5  
 
Gross profit $ 33.8 $ 24.4 $ (0.1 ) $ 58.1
Selling, general and administrative expenses 23.3 17.5 6.4 47.2
Restructuring expenses   0.6     0.5     -     1.1  
Operating income (loss) $ 9.9   $ 6.4   $ (6.5 ) 9.8
Interest expense, net 16.3
Income tax expense (benefit)   (1.1 )
Income (loss) from continuing operations (5.4 )
Income (loss) from discontinued operations, net of tax   (8.3 )
Net income (loss) $ (13.7 )
 
Net income (loss) per diluted share:
Continuing operations $ (0.04 )
Discontinued operations   (0.05 )
Net income (loss) per diluted share $ (0.09 )
 
Capital expenditures $ 3.7   $ 1.2   $ 0.1   $ 5.0  
 
Non-GAAP results:
Adjusted operating income (loss) and EBITDA:
Operating income (loss) $ 9.9 $ 6.4 $ (6.5 ) $ 9.8
Restructuring   0.6     0.5     -     1.1  
Adjusted operating income (loss) 10.5 6.9 (6.5 ) 10.9
Depreciation and amortization   12.2     3.5     0.2     15.9  
Adjusted EBITDA $ 22.7   $ 10.4   $ (6.3 ) $ 26.8  
 
Adjusted operating margin   7.1 %   8.0 %   -     4.6 %
Adjusted EBITDA margin   15.2 %   12.0 %   -     11.4 %
 
Adjusted net income (loss):
Net income (loss) $ (13.7 )
Discontinued operations, net of tax 8.3
Interest rate swap settlement costs, net of tax 1.2
Restructuring, net of tax   0.7  
Adjusted net income (loss) $ (3.5 )
Adjusted net income (loss) per diluted share $ (0.02 )
 
Free cash flow (from continuing operations):
Net cash provided by (used in) operating activities $ (19.5 )
Less capital expenditures   (5.0 )
Free cash flow $ (24.5 )
 
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  
 
 

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, 2012
Mueller Co. Anvil Corporate Total
GAAP results:
Net sales $ 282.6   $ 184.3   $ -   $ 466.9  
 
Gross profit $ 62.1 $ 52.8 $ - $ 114.9
Selling, general and administrative expenses 48.0 35.0 14.1 97.1
Restructuring expenses   1.2     0.2     (0.1 )   1.3  
Operating income (loss) $ 12.9   $ 17.6   $ (14.0 ) 16.5
Interest expense, net 31.2
Income tax expense (benefit)   0.7  
Income (loss) from continuing operations (15.4 )
Income (loss) from discontinued operations, net of tax   (106.3 )
Net income (loss) $ (121.7 )
 
Net income (loss) per diluted share:
Continuing operations $ (0.10 )
Discontinued operations   (0.68 )
Total net income (loss) $ (0.78 )
 
Capital expenditures $ 7.2   $ 4.9   $ -   $ 12.1  
 
Non-GAAP results:
Adjusted operating income (loss) and EBITDA:
Operating income (loss) $ 12.9 $ 17.6 $ (14.0 ) $ 16.5
Restructuring   1.2     0.2     (0.1 )   1.3  
Adjusted operating income (loss) 14.1 17.8 (14.1 ) 17.8
Depreciation and amortization   22.8     7.1     0.3     30.2  
Adjusted EBITDA $ 36.9   $ 24.9   $ (13.8 ) $ 48.0  
 
Adjusted operating margin   5.0 %   9.7 %   -     3.8 %
Adjusted EBITDA margin   13.1 %   13.5 %   -     10.3 %
 
Adjusted net income (loss):
Net income (loss) $ (121.7 )
Discontinued operations, net of tax 106.3
Interest rate swap settlement costs, net of tax 1.8
Restructuring, net of tax 0.8
Valuation allowance against beginning of the year
deferred tax assets   5.9  
Adjusted net income (loss) $ (6.9 )
Adjusted net income (loss) per diluted share $ (0.04 )
 
Free cash flow (from continuing operations):
Net cash provided by (used in) operating activities $ 20.5
Less capital expenditures   (12.1 )
Free cash flow $ 8.4  
 
Net debt (end of period):
Current portion of long-term debt $ 0.9
Long-term debt   691.6  
Total debt 692.5
Less cash and cash equivalents   (34.3 )
Net debt 658.2
Pro forma proceeds from sale of U.S. Pipe   (94.0 )
Net debt $ 564.2  
 
Adjusted EBITDA (excluding U.S. Pipe):
Current quarter $ 26.7
Three prior quarters   91.3  
Adjusted EBITDA $ 118.0  
 
Net debt leverage (net debt divided by adjusted EBITDA)   4.8  
 
Net debt (December 31, 2011) $ 638.9
Adjusted EBITDA (four quarters ended December 31, 2011, including U.S. Pipe) $ 95.9
Net debt leverage at December 31, 2011 (net debt divided by adjusted EBITDA)   6.7  
 
 

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.       Anvil       Corporate       Total
GAAP results:
Net sales $ 278.7   $ 170.0   $ -   $ 448.7  
 
Gross profit (loss) $ 63.0 $ 46.8 $ 0.3 $ 110.1
Selling, general and administrative expenses 43.7 33.4 15.1 92.2
Restructuring expenses   1.0     1.1     -     2.1  
Operating income (loss) $ 18.3   $ 12.3   $ (14.8 ) 15.8
Interest expense, net 32.2
Income tax benefit   (5.3 )
Income (loss) from continuing operations (11.1 )
Income (loss) from discontinued operations, net of tax   (14.7 )
Net income (loss) $ (25.8 )
 
Net income (loss) per diluted share:
Continuing operations $ (0.07 )
Discontinued operations   (0.10 )
Total net income (loss) $ (0.17 )
 
Capital expenditures $ 6.9   $ 2.6   $ 0.5   $ 10.0  
 
Non-GAAP results:
Adjusted operating income (loss) and EBITDA:
Operating income (loss) $ 18.3 $ 12.3 $ (14.8 ) $ 15.8
Restructuring   1.0     1.1     -     2.1  
Adjusted operating income (loss) 19.3 13.4 (14.8 ) 17.9
Depreciation and amortization   23.9     7.2     0.4     31.5  
Adjusted EBITDA $ 43.2   $ 20.6   $ (14.4 ) $ 49.4  
 
Adjusted operating margin   6.9 %   7.9 %   -     4.0 %
Adjusted EBITDA margin   15.5 %   12.1 %   -     11.0 %
 
Adjusted net income (loss):
Net income (loss) $ (25.8 )
Discontinued operations, net of tax 14.7
Interest rate swap settlement costs, net of tax 2.4
Restructuring, net of tax   1.3  
Adjusted net income (loss) $ (7.4 )
Adjusted net income (loss) per diluted share $ (0.05 )
 
Free cash flow (from continuing operations):
Net cash provided by (used in) operating activities $ (13.4 )
Less capital expenditures   (10.0 )
Free cash flow $ (23.4 )
 
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  

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