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Mueller Water Products Reports 2017 Third Quarter Results

ATLANTA, Aug. 03, 2017 (GLOBE NEWSWIRE) -- Mueller Water Products, Inc. (NYSE:MWA) announced today that for its fiscal third quarter ended June 30, 2017, net sales were $232.2 million and net income was $24.0 million, or $0.15 per diluted share compared with $0.09 in the prior year quarter. Operating income from continuing operations was $42.6 million.

In the 2017 third quarter, we:

  • Increased net sales 3.3% to $232.2 million as compared with $224.7 million in the 2016 third quarter;

  • Increased adjusted operating income from continuing operations to $44.6 million as compared with $43.8 million in the 2016 third quarter; and

  • Improved adjusted income from continuing operations to $0.16 per diluted share as compared with $0.15 per diluted share in the 2016 third quarter. Adjusted income from continuing operations was $25.4 million in the 2017 third quarter and $25.0 million in the 2016 third quarter.

“Overall we are pleased with third quarter net sales growth of 3.3 percent, which was about as we expected, highlighted by 4.5 percent growth at Mueller Co. Additionally, although overall net sales declined slightly at Mueller Technologies, we experienced net sales growth with both our AMI products and at Echologics,” said Scott Hall, president and chief executive officer of Mueller Water Products. “For our fourth quarter, we expect consolidated net sales percentage growth to improve year-over-year to mid-single digits.

“Operationally, in the third quarter we continued to execute on our productivity plans and realize the resulting targeted cost savings. However, higher material costs represented stronger-than-expected headwinds in the quarter, offsetting all of our productivity gains.

“During the quarter, we also completed our $50 million accelerated share repurchase program and repurchased an additional $5 million under our existing share repurchase authorization.

“All in all, we were pleased with the quarter. Progress in the market, progress in integrating Singer Valve, and progress in operational improvements all met our expectations.

“Going forward, we will continue to execute on our initiatives to drive productivity improvements, accelerate product development and deliver exceptional value for our customers.”

Consolidated Results

Net sales increased 3.3 percent in the 2017 third quarter to $232.2 million as compared with $224.7 million for the 2016 third quarter. Net sales increased due to volume growth at Mueller Co. and the February acquisition of Singer Valve.

Adjusted operating income from continuing operations increased 1.8 percent to $44.6 million as compared with $43.8 million for the 2016 third quarter. Volume growth, productivity improvements and lower SG&A expenses were partially offset by higher material costs.

Segment Results

Mueller Co.

Mueller Co. net sales for the 2017 third quarter increased 4.5 percent to $207.6 million as compared with $198.7 million for the 2016 third quarter. The increase was largely due to volume growth in both the U.S. and Canada as well as the addition of Singer Valve.

Mueller Co. operating income increased to $52.9 million in the 2017 third quarter compared with $51.7 million in the 2016 third quarter. Adjusted operating income was $54.1 million in both the 2017 third quarter and 2016 third quarter. Adjusted operating income benefited from volume growth and productivity improvements, offset by higher material costs. Adjusted operating margin decreased 110 basis points to 26.1 percent for the 2017 third quarter compared with 27.2 percent for the 2016 third quarter.

Mueller Technologies

Mueller Technologies net sales decreased $1.4 million to $24.6 million in the 2017 third quarter as compared with $26.0 million for the 2016 third quarter due to lower shipment volumes. Higher net sales of AMI and leak detection/condition assessment products were more than offset by lower net sales of AMR and visual read meters.

Operating loss was $1.6 million in the 2017 third quarter and $1.5 million in the 2016 third quarter.

Interest Expense, Net

Net interest expense decreased $0.9 million to $5.1 million in the 2017 third quarter as compared with $6.0 million in the 2016 third quarter.

Discontinued Operations

Discontinued operations pertain to our former Anvil business, which we sold in January 2017.

Use of Non-GAAP Measures

In an effort to provide investors with additional information regarding our results as determined by GAAP, we also provide non-GAAP information that management believes is useful to investors. These non-GAAP measures have limitations as analytical tools, and securities analysts, investors and other interested parties should not consider any of these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

We present adjusted income from continuing operations, adjusted income from continuing operations per share, adjusted operating income from continuing operations, adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin as performance measures because management uses these measures in evaluating our underlying performance on a consistent basis across periods and in making decisions about operational strategies. Management also believes these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of our recurring performance.

We present net debt and net debt leverage as performance measures because management uses them in evaluating its capital management, and the investment community commonly uses them as measures of indebtedness. We present free cash flow because management believes it is commonly used by the investment community to measure our ability to create liquidity.

The calculations of these non-GAAP measures and reconciliations to GAAP results are included as an attachment to this press release and have been posted online at www.muellerwaterproducts.com.

Conference Call Webcast

Mueller Water Products will conduct its quarterly earnings conference call on Friday, August 4, 2017 at 9:00 a.m. ET. Members of Mueller Water Products’ leadership team will discuss the Company's recent financial performance and respond to questions from financial analysts. A live webcast of the call will be available on the Investor Relations section of our website. Please go to our website (www.muellerwaterproducts.com) at least 15 minutes prior to the start of the call to register, download and install any necessary software. A replay of the call will be available for 30 days and can be accessed by dialing 1-866-446-5476. An archive of the webcast will also be available on the Investor Relations section of our website.

Forward-Looking Statements

This press release contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that address activities, events or developments that we intend, expect, plan, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on certain assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions and expected future developments. Examples of forward-looking statements include, but are not limited to, statements we make regarding our expectations for growth in our key end markets and financial results. Actual results and the timing of events may differ materially from those contemplated by the forward-looking statements due to a number of factors, including regional, national or global political, economic, business, competitive, market and regulatory conditions and the other factors that are described in the section entitled “RISK FACTORS” in Item 1A of our most recently filed Annual Report on Form 10-K. Undue reliance should not be placed on any forward-looking statements. We do not have any intention or obligation to update forward-looking statements, except as required by law.

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 in North America. Our broad product and service 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®. For more information about Mueller Water Products, visit www.muellerwaterproducts.com.


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, September 30,
2017 2016
(in millions, except share amounts)
Assets:
Cash and cash equivalents$353.2 $195.0
Receivables, net140.7 131.8
Inventories141.1 130.7
Other current assets20.0 12.7
Current assets held for sale 142.1
Total current assets655.0 612.3
Property, plant and equipment, net110.1 108.4
Intangible assets442.0 434.6
Other noncurrent assets27.1 25.4
Noncurrent assets held for sale 99.9
Total assets$1,234.2 $1,280.6
Liabilities and equity:
Current portion of long-term debt$5.5 $5.6
Accounts payable58.7 73.7
Other current liabilities46.9 61.7
Current liabilities held for sale 44.8
Total current liabilities111.1 185.8
Long-term debt475.7 478.8
Deferred income taxes99.0 109.9
Other noncurrent liabilities86.1 85.8
Noncurrent liabilities held for sale 0.8
Total liabilities771.9 861.1
Commitments and contingencies
Common stock: 600,000,000 shares authorized; 158,514,187 and 161,693,051 shares
outstanding at June 30, 2017 and September 30, 2016, respectively
1.6 1.6
Additional paid-in capital1,497.5 1,563.9
Accumulated deficit(974.9) (1,078.9)
Accumulated other comprehensive loss(63.0) (68.3)
Total Company stockholders’ equity461.2 418.3
Noncontrolling interest1.1 1.2
Total equity462.3 419.5
Total liabilities and equity$1,234.2 $1,280.6



MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Nine months ended
June 30, June 30,
2017 2016 2017 2016
(in millions, except per share amounts)
Net sales$232.2 $224.7 $599.1 $585.0
Cost of sales149.7 141.5 412.5 394.9
Gross profit82.5 83.2 186.6 190.1
Operating expenses:
Selling, general and administrative38.7 39.4 114.2 112.2
Pension settlement 16.6 16.6
Other charges1.2 4.6 5.0 6.2
Total operating expenses39.9 60.6 119.2 135.0
Operating income42.6 22.6 67.4 55.1
Interest expense, net5.1 6.0 17.0 18.0
Income before income taxes37.5 16.6 50.4 37.1
Income tax expense13.4 5.6 16.2 11.8
Income from continuing operations24.1 11.0 34.2 25.3
Income (loss) from discontinued operations (0.1) 4.5 69.8 12.1
Net income$24.0 $15.5 $104.0 $37.4
Income per basic share:
Continuing operations$0.15 $0.07 $0.21 $0.15
Discontinued operations 0.03 0.44 0.08
Net income$0.15 $0.10 $0.65 $0.23
Income per diluted share:
Continuing operations$0.15 $0.07 $0.21 $0.15
Discontinued operations 0.02 0.43 0.08
Net income$0.15 $0.09 $0.64 $0.23
Weighted average shares outstanding:
Basic159.1 161.6 160.6 161.2
Diluted160.6 163.6 162.4 163.3
Dividends declared per share$0.04 $ $0.11 $0.07




MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended
June 30,
2017 2016
(in millions)
Operating activities:
Net income$104.0 $37.4
Less income from discontinued operations69.8 12.1
Income from continuing operations34.2 25.3
Adjustments to reconcile income from continuing operations to net cash provided by
operating activities of continuing operations:
Depreciation14.9 13.4
Amortization16.2 15.9
Stock-based compensation3.5 3.5
Retirement plans2.6 20.2
Deferred income taxes(14.4) (8.5)
Other, net1.4 3.0
Changes in assets and liabilities, net of acquisitions:
Receivables(5.8) (13.0)
Inventories(4.6) 4.8
Other assets(4.0) (5.7)
Liabilities(18.6) (4.5)
Net cash provided by operating activities of continuing operations25.4 54.4
Investing activities:
Business acquisitions, net of cash acquired(26.0)
Capital expenditures(21.6) (17.0)
Proceeds from sales of assets0.2 0.2
Net cash used in investing activities of continuing operations(47.4) (16.8)
Financing activities:
Stock repurchased under buyback program(55.0)
Dividends(17.6) (11.3)
Employee taxes related to stock-based compensation(2.7) (3.2)
Repayments of debt(3.7) (3.8)
Issuance of common stock5.2 2.9
Deferred financing costs(1.0) (0.1)
Other0.2 (0.3)
Net cash used in financing activities of continuing operations(74.6) (15.8)
Net cash flows from discontinued operations:
Operating activities(42.5) 19.2
Investing activities297.2 (5.6)
Financing activities(0.1)
Net cash provided by discontinued operations254.6 13.6
Effect of currency exchange rate changes on cash0.2 (0.2)
Net change in cash and cash equivalents158.2 35.2
Cash and cash equivalents at beginning of period195.0 113.1
Cash and cash equivalents at end of period$353.2 $148.3



MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES
(UNAUDITED)
Quarter ended June 30, 2017
Mueller Co. Mueller
Technologies
Corporate Consolidated
(dollars in millions, except per share amounts)
Net sales$207.6 $24.6 $ $232.2
Gross profit$76.9 $5.6 $ $82.5
Selling, general and administrative expenses23.6 7.2 7.9 38.7
Other charges0.4 0.8 1.2
Operating income (loss) from continuing operations$52.9 $(1.6) $(8.7) 42.6
Interest expense, net 5.1
Income tax expense 13.4
Income from continuing operations $24.1
Income from continuing operations per diluted share $0.15
Capital expenditures$6.1 $1.3 $0.1 $ 7.5
Operating margin 25.5 % (6.5)% 18.3 %
Reconciliation of Non-GAAP performance measures to GAAP performance measures:
Income from continuing operations $24.1
Inventory purchase accounting adjustment 0.8
Other charges 1.2
Income tax benefit of adjusting items (0.7)
Adjusted income from continuing operations $25.4
Weighted average diluted shares outstanding 160.6
Adjusted income from continuing operations per share $0.16
Net income $24.0
Plus loss from discontinued operations 0.1
Interest expense, net (1) 5.1
Income tax expense (1) 13.4
Operating income (loss) from continuing operations$52.9 $(1.6) $(8.7) 42.6
Inventory purchase accounting adjustment0.8 0.8
Other charges0.4 0.8 1.2
Adjusted operating income (loss) from continuing operations54.1 (1.6) (7.9) 44.6
Depreciation and amortization8.9 1.2 0.1 10.2
Adjusted EBITDA$63.0 $(0.4) $(7.8) $54.8
Adjusted operating margin26.1 % (6.5)% 19.2 %
Adjusted EBITDA margin30.3 % (1.6)% 23.6 %
(1) We do not allocate interest or income taxes to our segments.
Adjusted EBITDA$63.0 $(0.4) $(7.8) $54.8
Three prior quarters' adjusted EBITDA137.8 (2.6) (26.9) 108.3
Trailing twelve months' adjusted EBITDA$200.8 $(3.0) $(34.7) $163.1
Reconciliation of net debt to total debt (end of period):
Current portion of long-term debt $5.5
Long-term debt 475.7
Total debt 481.2
Less cash and cash equivalents 353.2
Net debt $128.0
Net debt leverage (net debt divided by trailing twelve months' adjusted EBITDA) 0.8x
Reconciliation of free cash flow to net cash provided by operating activities of continuing operations:
Net cash provided by operating activities of continuing operations $41.7
Less capital expenditures (7.5)
Free cash flow $34.2



MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES
(UNAUDITED)
Quarter ended June 30, 2016
Mueller Co. Mueller
Technologies
Corporate Consolidated
(dollars in millions, except per share amounts)
Net sales$198.7 $26.0 $ $224.7
Gross profit$77.5 $5.7 $ $83.2
Selling, general and administrative expenses23.4 7.2 8.8 39.4
Pension settlement2.2 14.4 16.6
Other charges0.2 4.4 4.6
Operating income (loss)$51.7 $(1.5) $(27.6) 22.6
Interest expense, net 6.0
Income tax expense 5.6
Income from continuing operations $11.0
Income from continuing operations per diluted share $0.07
Capital expenditures$3.6 $1.5 $ $5.1
Operating margin26.0 % (5.8)% 10.1 %
Reconciliation of Non-GAAP performance measures to GAAP performance measures:
Income from continuing operations $11.0
Pension settlement 16.6
Other charges 4.6
Income tax benefit of adjusting items (7.2)
Adjusted income from continuing operations $25.0
Weighted average diluted shares outstanding 163.6
Adjusted income from continuing operations per share $0.15
Net income $15.5
Less income from discontinued operations (4.5)
Interest expense, net (1) 6.0
Income tax expense (1) 5.6
Operating income (loss) from continuing operations$51.7 $(1.5) $(27.6) 22.6
Pension settlement2.2 14.4 16.6
Other charges0.2 4.4 4.6
Adjusted operating income (loss) from continuing operations54.1 (1.5) (8.8) 43.8
Depreciation and amortization8.5 1.2 0.1 9.8
Adjusted EBITDA$62.6 $(0.3) $(8.7) $53.6
Adjusted operating margin27.2 % (5.8)% 19.5 %
Adjusted EBITDA margin31.5 % (1.2)% 23.9 %
(1) We do not allocate interest or income taxes to our segments.
Adjusted EBITDA$62.6 $(0.3) $(8.7) $53.6
Three prior quarters' adjusted EBITDA131.6 (6.5) (23.8) 101.3
Trailing twelve months' adjusted EBITDA$194.2 $(6.8) $(32.5) $154.9
Reconciliation of net debt to total debt (end of period):
Current portion of long-term debt $5.6
Long-term debt 479.7
Total debt 485.3
Less cash and cash equivalents 148.3
Net debt $337.0
Net debt leverage (net debt divided by trailing twelve months' adjusted EBITDA) 2.2x
Reconciliation of free cash flow to net cash provided by operating activities of continuing operations:
Net cash provided by operating activities of continuing operations 59.5
Less capital expenditures (5.1)
Free cash flow $54.4



MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES
(UNAUDITED)
Nine months ended June 30, 2017
Mueller Co. Mueller
Technologies
Corporate Consolidated
(dollars in millions, except per share amounts)
Net sales$535.5 $63.6 $ $599.1
Gross profit$183.3 $3.3 $ $186.6
Selling, general and administrative expenses67.9 20.7 25.6 114.2
Other charges2.1 0.1 2.8 5.0
Operating income (loss) from continuing operations$113.3 $(17.5) $(28.4) 67.4
Interest expense, net 17.0
Income tax expense 16.2
Income from continuing operations $34.2
Income from continuing operations per diluted share $0.21
Capital expenditures$13.8 $7.6 $0.2 $21.6
Operating margin21.2 % (27.5)% 11.3 %
Reconciliation of Non-GAAP performance measures to GAAP performance measures:
Income from continuing operations $34.2
Discrete warranty charge 9.8
Inventory purchase accounting adjustment 0.8
Other charges 5.0
Income tax benefit of adjusting items (2.7)
Adjusted income from continuing operations $47.1
Weighted average diluted shares outstanding 162.4
Adjusted income from continuing operations per share $0.29
Net income $104.0
Less income from discontinued operations (69.8)
Interest expense, net (1) 17.0
Income tax expense (1) 16.2
Operating income (loss) from continuing operations$113.3 $(17.5) $(28.4) 67.4
Discrete warranty charge 9.8 9.8
Inventory purchase accounting adjustment0.8 0.8
Other charges2.1 0.1 2.8 5.0
Adjusted operating income (loss) from continuing operations116.2 (7.6) (25.6) 83.0
Depreciation and amortization27.0 3.8 0.3 31.1
Adjusted EBITDA$143.2 $(3.8) $(25.3) $114.1
Adjusted operating margin21.7 % (11.9)% 13.9 %
Adjusted EBITDA margin26.7 % (6.0)% 19.0 %
Free cash flow:
Net cash provided by operating activities of continuing operations $25.4
Less capital expenditures (21.6)
Free cash flow $3.8
(1) We do not allocate interest or income taxes to our segments.


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES
(UNAUDITED)
Nine months ended June 30, 2016
Mueller Co. Mueller
Technologies
Corporate Consolidated
(dollars in millions, except per share amounts)
Net sales$525.6 $59.4 $ $585.0
Gross profit$179.2 $10.9 $ $190.1
Selling, general and administrative expenses65.8 20.6 25.8 112.2
Pension settlement2.2 14.4 16.6
Other charges0.8 0.5 4.9 6.2
Operating income (loss)$110.4 $(10.2) $(45.1) 55.1
Interest expense, net 18.0
Income tax expense 11.8
Income from continuing operations $25.3
Income from continuing operations per diluted share $0.15
Capital expenditures$12.4 $4.5 $0.1 $17.0
Operating margin21.0 % (17.2)% 9.4 %
Reconciliation of Non-GAAP performance measures to GAAP performance measures:
Income from continuing operations $25.3
Pension settlement 16.6
Other charges 6.2
Income tax benefit of adjusting items (7.7)
Adjusted income from continuing operations $40.4
Weighted average diluted shares outstanding 163.3
Adjusted income from continuing operations per share $0.25
Net income $37.4
Less income from discontinued operations (12.1)
Interest expense, net (1) 18.0
Income tax expense (1) 11.8
Operating income (loss) from continuing operations$110.4 $(10.2) $(45.1) 55.1
Pension settlement2.2 14.4 16.6
Other charges0.8 0.5 4.9 6.2
Adjusted operating income (loss) from continuing operations113.4 (9.7) (25.8) 77.9
Depreciation and amortization25.5 3.5 0.3 29.3
Adjusted EBITDA$138.9 $(6.2) $(25.5) $107.2
Adjusted operating margin21.6 % (16.3)% 13.3 %
Adjusted EBITDA margin26.4 % (10.4)% 18.3 %
Free cash flow:
Net cash provided by operating activities of continuing operations $54.4
Less capital expenditures (17.0)
Free cash flow $37.4
(1) We do not allocate interest or income taxes to our segments.


Investor Contacts: Martie Edmunds Zakas Sr. Vice President - Strategy, Corporate Development & Communications 770-206-4237 mzakas@muellerwp.com John DeYarman Director - Strategy, Corporate Development & Investor Relations 770-206-4228 jdeyarman@muellerwp.com

Source:Mueller Water Products, Inc.