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Mueller Water Products Reports 2017 Fourth Quarter and Fiscal Year Results

ATLANTA, Nov. 01, 2017 (GLOBE NEWSWIRE) -- Mueller Water Products, Inc. (NYSE:MWA) today announced that for its fiscal fourth quarter ended September 30, 2017, net sales were $226.9 million and net income was $19.3 million, or $0.12 per diluted share. For the fiscal year ended September 30, 2017, net sales were $826.0 million and net income was $123.3 million, or $0.76 per diluted share.

In the 2017 fourth quarter, the Company:

  • Increased net sales 5.2 percent to $226.9 million as compared with $215.6 million in the prior year period

  • Improved income from continuing operations to $20.1 million, which included $4.2 million in charges related to its previously announced strategic reorganization, as compared with $19.8 million in the prior year period

  • Improved adjusted income from continuing operations 18.1 percent to $24.1 million as compared with $20.4 million in the prior year period

  • Delivered adjusted income from continuing operations per diluted share of $0.15, a 25.0 percent increase as compared with $0.12 in the prior year period

In the full fiscal year, the Company:

  • Increased net sales 3.2 percent over the prior year to $826.0 million

  • Improved income from continuing operations to $54.3 million as compared with $45.1 million in the prior year

  • Increased adjusted EBITDA to $163.8 million and adjusted EBITDA margin to 19.8 percent

  • Delivered adjusted income from continuing operations per diluted share of $0.44, an 18.9 percent increase as compared with $0.37 in the prior year

“I am pleased with the 7.5 percent net sales growth that Infrastructure delivered this quarter,” said Scott Hall, president and chief executive officer of Mueller Water Products. “Overall, during the quarter, consolidated net sales increased 5.2 percent due to volume growth, pricing and the addition of Singer Valve to our Infrastructure portfolio, partially offset by lower volume in Technologies' meter business. Increased pricing covered our higher material costs.

“I am also encouraged by the manufacturing productivity improvements we continued to achieve in the fourth quarter. A critical component of our long-term strategy is sustained investment in our facilities and engineering to drive new product innovations and productivity improvements across the organization.

“Looking to 2018 and beyond, we anticipate continued growth in our primary end markets, including residential construction and municipal infrastructure. So, combining our internal programs with the positive external environment, we believe we are well positioned for long-term growth.”

Fourth Quarter Consolidated Results

Net sales for the 2017 fourth quarter increased $11.3 million, or 5.2 percent, to $226.9 million as compared with $215.6 million for the 2016 fourth quarter.

Operating income for the 2017 fourth quarter was $33.3 million, which included charges of $4.2 million related to the previously announced strategic reorganization, and $37.8 million for the 2016 fourth quarter. Adjusted operating income from continuing operations for the 2017 fourth quarter of $38.9 million was essentially flat as compared with the 2016 fourth quarter.

Fourth Quarter Segment Results

The Company renamed its Mueller Co. segment "Infrastructure" and its Mueller Technologies segment "Technologies."

Infrastructure

Net sales for the 2017 fourth quarter increased 7.5 percent to $204.4 million as compared with $190.1 million for the 2016 fourth quarter. Infrastructure increased shipments of valves, hydrants and brass products and realized the benefit of the addition of Singer Valve.

Operating income for the 2017 fourth quarter improved 2.5 percent to $50.1 million as compared with $48.9 million for the 2016 fourth quarter. Adjusted operating income for the 2017 fourth quarter improved 4.1 percent to $50.9 million as compared with $48.9 million for the 2016 fourth quarter. Operating income increased primarily due to increased shipment volumes and favorable sales pricing, partially offset by higher material costs.

Technologies

Net sales for the 2017 fourth quarter were $22.5 million as compared with $25.5 million for the 2016 fourth quarter. While Echologics' net sales increased slightly, Mueller Systems' net sales declined during the quarter.

Operating loss was $2.8 million for the 2017 fourth quarter and $0.9 million for the 2016 fourth quarter. Adjusted operating loss was $2.2 million for the 2017 fourth quarter and $0.5 million for the 2016 fourth quarter. These increased losses were due primarily to lower shipment volumes at Mueller Systems.

Other Charges

Other charges for the 2017 fourth quarter included $4.2 million related to the previously announced strategic reorganization.

Interest Expense

Fourth quarter net interest expense was $5.2 million for 2017 and $5.6 million for 2016. For the full year 2017, net interest expense decreased $1.4 million primarily as a result of the debt repricing completed during the second quarter.

Income Taxes

For the 2017 fourth quarter, income tax expense was $8.0 million on income before income taxes of $28.1 million, for an effective income tax rate of 28.5 percent, as compared with an effective income tax rate of 38.5 percent in the prior year quarter. The 2017 fourth quarter effective tax rate was lower primarily due to increases in domestic manufacturing deductions and R&D tax credits, as well as reductions in the tax rates applied to state deferred tax liabilities.

For the fiscal year, the effective tax rate was 30.8 percent as compared with an effective income tax rate of 34.9 percent in the prior year. The 2017 full year effective tax rate was lower primarily due to increased domestic manufacturing deductions and tax benefits related to stock compensation.

Use of Non-GAAP Measures

In an effort to provide investors with additional information regarding its results as determined by GAAP, the Company also provides 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 its results as reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

The Company presents 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 the Company's 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 the Company's recurring performance.

The Company presents 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. Free cash flow is presented because management believes it is commonly used by the investment community to measure the Company's 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’ quarterly earnings conference call will take place Thursday, November 2, 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 the Company’s website. Please go to the 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 1-866-359-6497. An archive of the webcast will also be available on the Investor Relations section of the Company’s 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 that may occur in the future are forward-looking statements. The words “projected,” “designed,” “will,” “expects,” “intend,” and other similar expressions identify forward-looking statements. Forward-looking statements are based on certain assumptions and assessments made by the Company in light of its experience, historical trends, current conditions and expected future developments. 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 the Company's most recently filed Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Undue reliance should not be placed on any forward-looking statements. Management does not have any intent 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®. Visit us at www.muellerwaterproducts.com.


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30,
2017 2016
(in millions, except share amounts)
Assets:
Cash and cash equivalents$361.7 $195.0
Receivables, net145.3 131.8
Inventories138.9 130.7
Other current assets24.4 12.7
Current assets held for sale 142.1
Total current assets670.3 612.3
Property, plant and equipment, net122.3 108.4
Intangible assets and goodwill439.3 434.6
Other noncurrent assets26.4
25.4
Noncurrent assets held for sale 99.9
Total assets$1,258.3 $1,280.6
Liabilities and equity:
Current portion of long-term debt$5.6 $5.6
Accounts payable82.5 73.7
Other current liabilities53.5 61.7
Current liabilities held for sale 44.8
Total current liabilities141.6 185.8
Long-term debt475.0 478.8
Deferred income taxes115.1 109.9
Other noncurrent liabilities37.1 85.8
Noncurrent liabilities held for sale 0.8
Total liabilities768.8 861.1
Commitments and contingencies
Common stock: 600,000,000 shares authorized; 158,590,383 and 161,693,051 shares outstanding at September 30, 2017 and 2016, respectively1.6 1.6
Additional paid-in capital1,494.2 1,563.9
Accumulated deficit(955.6) (1,078.9)
Accumulated other comprehensive loss(51.8) (68.3)
Total Company stockholders’ equity488.4 418.3
Noncontrolling interest1.1 1.2
Total equity489.5 419.5
Total liabilities and equity$1,258.3 $1,280.6


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Year ended
September 30, September 30,
2017 2016 2017 2016
(in millions, except per share amounts)
Net sales$226.9 $215.6 $826.0 $800.6
Cost of sales146.0 137.8 558.5 532.7
Gross profit80.9 77.8 267.5 267.9
Operating expenses:
Selling, general and administrative42.2 39.0 156.4 151.2
Pension settlement (1) 16.6
Other charges (2)5.4 1.0 10.4 7.2
Total operating expenses47.6 40.0 166.8 175.0
Operating income33.3 37.8 100.7 92.9
Interest expense, net5.2 5.6 22.2 23.6
Income before income taxes28.1 32.2 78.5 69.3
Income tax expense (3)8.0 12.4 24.2 24.2
Income from continuing operations20.1 19.8 54.3 45.1
Income (loss) from discontinued operations(0.8) 6.7 69.0 $18.8
Net income$19.3 $26.5 $123.3 $63.9
Income per basic share:
Continuing operations$0.13 $0.12 $0.34 $0.28
Discontinued operations(0.01) 0.04 0.43 0.12
Net income$0.12 $0.16 $0.77 $0.40
Income per diluted share:
Continuing operations$0.13 $0.12 $0.34 $0.28
Discontinued operations(0.01) 0.04 0.42 0.11
Net income$0.12 $0.16 $0.76 $0.39
Weighted average shares outstanding:
Basic158.6 161.7 160.1 161.3
Diluted160.2 163.9 161.8 163.4
Dividends declared per share$0.04 $0.03 $0.15 $0.10
(1) During fiscal 2016, we completed a pension benefit settlement program intended to reduce obligations associated with providing future pension benefits.
(2) During the fourth quarter, we announced a restructuring and strategic reorganization, resulting in accrual of severance and other charges of $4.2 million.
(3) Income tax expense in the 2017 fourth quarter was reduced by domestic manufacturing deductions, R&D tax credits and reductions in the tax rates applied to state deferred tax liabilities, resulting in an effective tax rate of 28.5 percent.


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Year ended
September 30,
2017 2016
(in millions)
Operating activities:
Net income$123.3 $63.9
Less income from discontinued operations69.0 18.8
Income from continuing operations54.3 45.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation19.8 18.3
Amortization22.1 21.2
Retirement plans3.4 21.0
Deferred income taxes(4.0) (8.4)
Stock-based compensation6.0 4.7
Other, net1.1 3.8
Changes in assets and liabilities, net of acquisitions:
Receivables(9.9) (12.3)
Inventories(1.9) 3.5
Other assets(3.4) (5.7)
Pension contributions(35.0)
Other liabilities6.9 23.3
Net cash provided by operating activities59.4 114.5
Investing activities:
Capital expenditures(40.6) (31.5)
Business acquisitions, net of cash acquired(26.6)
Proceeds from sales of assets0.9 0.3
Net cash used in investing activities(66.3) (31.2)
Financing activities:
Repayment of debt(4.9) (5.0)
Dividends paid(24.0) (16.1)
Stock repurchased under buyback program(55.0)
Shares retained for employee taxes(2.7) (3.3)
Deferred financing fees paid(1.0) (1.2)
Common stock issued5.8 3.3
Other0.4 (1.4)
Net cash used in financing activities(81.4) (23.7)
Net cash flows from discontinued operations
Operating activities(43.3) 30.6
Investing activities297.2 (7.9)
Financing activities(0.1)
Net cash provided by discontinued operations253.8 22.7
Effect of currency exchange rate changes on cash1.2 (0.4)
Net change in cash and cash equivalents166.7 81.9
Cash and cash equivalents at beginning of year195.0 113.1
Cash and cash equivalents at end of year$361.7 $195.0


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES
(UNAUDITED)
Quarter ended September 30, 2017
Infrastructure Technologies Corporate Total
(in millions, except per share amounts)
Net sales$204.4 $22.5 $ $226.9
Gross profit$76.2 $4.7 $ $80.9
Selling, general and administrative expenses25.5 6.9 9.8 42.2
Other charges0.6 0.6 4.2 5.4
Operating income (loss) from continuing operations$50.1 $(2.8) $(14.0) 33.3
Interest expense, net 5.2
Income tax expense 8.0
Income from continuing operations $20.1
Income from continuing operations per diluted share $0.13
Capital expenditures$14.7 $3.8 $0.5 $19.0
Operating margin24.5% (12.4)% 14.7%
Reconciliation of Non-GAAP performance measures to GAAP performance measures:
Income from continuing operations $20.1
Other charges 5.4
Inventory purchase accounting adjustment 0.2
Income tax benefit of adjusting items (1.6)
Adjusted income from continuing operations $24.1
Weighted average diluted shares outstanding 160.2
Adjusted income from continuing operations per diluted share $0.15
Net income $19.3
Plus loss from discontinued operations 0.8
Interest expense, net (1) 5.2
Income tax expense (1) 8.0
Operating income (loss) from continuing operations$50.1 $(2.8) $(14.0) 33.3
Other charges0.6 0.6 4.2 5.4
Inventory purchase accounting adjustment0.2 0.2
Adjusted operating income (loss) from continuing operations50.9 (2.2) (9.8) 38.9
Depreciation and amortization9.3 1.4 0.1 10.8
Adjusted EBITDA$60.2 $(0.8) $(9.7) $49.7
Adjusted operating margin24.9% (9.8)% 17.1%
Adjusted EBITDA margin29.5% (3.6)% 21.9%
Reconciliation of free cash flow to net cash provided by operating activities of continuing operations:
Net cash provided by operating activities of continuing operations $34.0
Less capital expenditures (19.0)
Free cash flow $15.0
(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)
Quarter ended September 30, 2016
Infrastructure Technologies Corporate Total
(in millions, except per share amounts)
Net sales$190.1 $25.5 $ $215.6
Gross profit$71.5 $6.3 $ $77.8
Selling, general and administrative expenses22.6 6.8 9.6 39.0
Other charges 0.4 0.6 1.0
Operating income (loss) from continuing operations$48.9 $(0.9) $(10.2) 37.8
Interest expense, net 5.6
Income tax expense 12.4
Income from continuing operations $19.8
Income from continuing operations per diluted share $0.12
Capital expenditures$11.9 $2.5 $0.1 $14.5
Operating margin25.7% (3.5)% 17.5%
Reconciliation of non-GAAP performance measures to GAAP performance measures:
Income from continuing operations $19.8
Other charges 1.0
Income tax benefit of adjusting items (0.4)
Adjusted income from continuing operations $20.4
Weighted average diluted shares outstanding 163.9
Adjusted income from continuing operations per diluted share $0.12
Net income $26.5
Less income from discontinued operations (6.7)
Interest expense, net (1) 5.6
Income tax expense (1) 12.4
Operating income (loss) from continuing operations$48.9 $(0.9) $(10.2) 37.8
Other charges 0.4 0.6 1.0
Adjusted operating income (loss) from continuing operations48.9 (0.5) (9.6) 38.8
Depreciation and amortization8.7 1.3 0.2 10.2
Adjusted EBITDA$57.6 $0.8 $(9.4) $49.0
Adjusted operating margin25.7% (2.0)% 18.0%
Adjusted EBITDA margin30.3% 3.1% 22.7%
Reconciliation of free cash flow to net cash provided by operating activities of continuing operations:
Net cash provided by operating activities of continuing operations $60.1
Less capital expenditures (14.5)
Free cash flow $45.6
(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)
Year ended September 30, 2017
Infrastructure Technologies Corporate Total
(in millions, except per share amounts)
Net sales$739.9 $86.1 $ $826.0
Gross profit$259.5 $8.0 $ $267.5
Selling, general and administrative expenses93.4 27.6 35.4 156.4
Other charges2.7 0.7 7.0 10.4
Operating income (loss) from continuing operations$163.4 $(20.3) $(42.4) 100.7
Interest expense, net 22.2
Income tax expense 24.2
Income from continuing operations $54.3
Income from continuing operations per diluted share $0.34
Capital expenditures$28.5 $11.4 $0.7 $40.6
Operating margin22.1% (23.6)% 12.2%
Reconciliation of Non-GAAP performance measures to GAAP performance measures:
Income from continuing operations $54.3
Discrete warranty charge 9.8
Inventory purchase accounting adjustment 1.0
Other charges 10.4
Income tax benefit of adjusting items (4.3)
Adjusted income from continuing operations $71.2
Weighted average diluted shares outstanding 161.8
Adjusted income from continuing operations per diluted share $0.44
Net income $123.3
Less income from discontinued operations (69.0)
Interest expense, net (1) 22.2
Income tax expense (1) 24.2
Operating income (loss) from continuing operations$163.4 (20.3) $(42.4) 100.7
Discrete warranty charge 9.8 9.8
Inventory purchase accounting adjustment1.0 1.0
Other charges2.7 0.7 7.0 10.4
Adjusted operating income (loss) from continuing operations167.1 (9.8) (35.4) 121.9
Depreciation and amortization36.3 5.2 0.4 41.9
Adjusted EBITDA$203.4 $(4.6) $(35.0) $163.8
Adjusted operating margin22.6% (11.4)% 14.8%
Adjusted EBITDA margin27.5% (5.3)% 19.8%
(1) We do not allocate interest or income taxes to our segments.
Reconciliation of net debt to total debt (end of period):
Current portion of long-term debt $5.6
Long-term debt 475.0
Total debt 480.6
Less cash and cash equivalents (361.7)
Net debt $118.9
Net debt leverage (net debt divided by adjusted EBITDA) 0.7x
Reconciliation of free cash flow to net cash provided by operating activities:
Net cash provided by operating activities $59.4
Less capital expenditures (40.6)
Free cash flow $18.8


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES
(UNAUDITED)
Year ended September 30, 2016
Infrastructure Technologies Corporate Total
(in millions, except per share amounts)
Net sales$715.7 $84.9 $ $800.6
Gross profit$250.7 $17.2 $ $267.9
Selling, general and administrative expenses88.4 27.4 35.4 151.2
Pension settlement2.2 14.4 16.6
Other charges0.8 0.9 5.5 7.2
Operating income (loss) from continuing operations$159.3 $(11.1) $(55.3) 92.9
Interest expense, net 23.6
Income tax expense 24.2
Income from continuing operations $45.1
Income per diluted share from continuing operations $0.28
Capital expenditures$24.3 $7.0 $0.2 $31.5
Operating margin22.3% (13.1)% 11.6%
Reconciliation of Non-GAAP performance measures to GAAP performance measures:
Income from continuing operations $45.1
Pension settlement 16.6
Other charges 7.2
Income tax benefit of adjusting items (8.1)
Adjusted income from continuing operations $60.8
Weighted average diluted shares outstanding 163.4
Adjusted income from continuing operations per diluted share $0.37
Net income $63.9
Less income from discontinued operations (18.8)
Interest expense, net (1) 23.6
Income tax expense (1) 24.2
Operating income (loss) from continuing operations$159.3 $(11.1) $(55.3) 92.9
Pension settlement2.2 14.4 16.6
Other charges0.8 0.9 5.5 7.2
Adjusted operating income (loss) from continuing operations162.3 (10.2) (35.4) 116.7
Depreciation and amortization34.2 4.8 0.5 39.5
Adjusted EBITDA$196.5 $(5.4) $(34.9) $156.2
Adjusted operating margin22.7% (12.0)% 14.6%
Adjusted EBITDA margin27.5% (6.4)% 19.5%
(1) We do not allocate interest or income taxes to our segments.
Reconciliation of net debt to total debt (end of period):
Current portion of long-term debt $5.6
Long-term debt 478.8
Total debt 484.4
Less cash and cash equivalents (195.0)
Net debt $289.4
Net debt leverage (net debt divided by adjusted EBITDA) 1.9x
Reconciliation of free cash flow to net cash provided by operating activities:
Net cash provided by operating activities $114.5
Less capital expenditures (31.5)
Free cash flow $83.0

Investor Contact: Martie Edmunds Zakas
Executive Vice President - Strategy, Corporate Development
& Communications
770-206-4237
mzakas@muellerwp.com

Media Contact: Yolanda Kokayi
Director - Communications
770-206-4131
ykokayi@muellerwp.com

Source:MUELLER WATER PRODUCTS