- Earnings Of $0.15 Per Diluted Share Reported in First Quarter - -
Strong Operating Margin Performance - - Synergy Plan Achieves
Annual Run Rate of $41 Million - ATLANTA, Feb. 1
/PRNewswire-FirstCall/ -- Mueller Water Products, Inc. (NYSE: MWA;
MWA.B) today reported earnings of $17.0 million, or $0.15 per
diluted share for its first quarter ended Dec. 31, 2006, compared
with a loss of $48.8 million and a loss of $0.57 per diluted share
in the first quarter last year. In first quarter fiscal 2006,
results included certain acquisition and plant closure costs
aggregating $98.4 million. Net sales for the first quarter were
$411.9 million compared to $480.4 million last year. Prior year
results include revenues of approximately $30 million from
increased demand for ductile iron pipe caused by Hurricane Katrina.
"Our aggressive implementation of our synergy plan and operational
flexibility enabled us to deliver margins comparable with previous
operating performance despite a decline in revenues," said
Chairman, President and CEO Gregory E. Hyland. "I am pleased with
how we demonstrated our ability to respond to difficult market
conditions. We are well-positioned to benefit from future increases
in demand for our water infrastructure products. In fact, our
bookings recovered towards the end of the quarter and increased in
January year-over-year." Operating Results Consolidated net sales
for the first quarter were $411.9 million, compared to $480.4
million versus the same period last year. Declines in the
residential housing market contributed to lower revenues, but the
resulting decline in volumes was partially offset by product price
increases. Operating income for the quarter totaled $49.0 million,
compared to a loss of $39.5 million in the first quarter fiscal
2006. Prior-year results include expenses of $40.0 million to close
the U.S. Pipe Chattanooga, Tenn., valve and hydrant plant, and
$46.2 million and $12.2 million of acquisition related inventory
step-up charges at Mueller Co. and Anvil, respectively. Excluding
these items, operating income for last year's first quarter was
$58.9 million. The current period decrease in operating income of
$9.9 million was due to lower volumes across the water
infrastructure products of Mueller Co. and U.S. Pipe, which was
partially offset by selling price increases implemented during the
last twelve months primarily in response to higher raw material
costs. Adjusted EBITDA (see non-GAAP measures disclosure below) for
the quarter ended Dec. 31, 2006 totaled $73.4 million versus $82.7
million for the same period last year. However, the Adjusted EBITDA
margin was 17.8 percent, slightly higher than prior-year results.
These stable margins, despite the decrease in volume in our water
infrastructure products, were primarily the result of reducing
fixed costs through the Company's synergy plan and higher pricing.
Synergy Implementation Plan The Company continues to execute its
synergy implementation plan ahead of schedule. The synergy plan is
expected to achieve run rate operating income improvements at the
high end of the previously announced range of $40 to $50 million
early in fiscal 2008. Through December 31, 2006, the Company
already has achieved run rate synergy benefits of approximately $41
million. Segment Results Mueller Co. Segment For the quarter, the
Mueller Co. segment reported revenues of $167.1 million compared to
$180.4 million in the first quarter last year. Operating income was
$35.7 million, compared to a loss of $3.8 million in last year's
first quarter. Excluding the prior year acquisition-related
inventory charges of $46.2 million, operating income decreased $6.7
million. Volume decreased during the quarter principally due to the
decline in the residential construction market. The mix of products
sold also resulted in lower revenue and operating income compared
to last year. Revenue and operating income declines were partially
offset by the effects of price increases implemented during the
last twelve months. Additionally, the current period includes
revenue and operating income related to the U.S. Pipe valve and
hydrant product lines that were transferred to the Mueller Co.
segment on January 1, 2006. U.S. Pipe Segment Revenues for the
current period were $117.4 million versus $171.1 million for the
same period last year. Prior year results included approximately
$30 million of revenues related to the temporary substitution of
ductile iron pipe for PVC pipe due to Hurricane Katrina and
approximately $14 million of revenues from U.S. Pipe-branded valves
and hydrants that were transferred to the Mueller Co. segment on
January 1, 2006. Excluding these items, revenues were down $9.7
million due to a decrease in volume, partially offset by higher
selling prices and an improved product mix. The improvement is the
result of a focused strategy to emphasize and sell higher margin
value-added products, which enabled us to maintain margins despite
lower volumes. U.S. Pipe operating income was $7.2 million,
compared to a loss of $27.8 million in the prior period, which
included $40.0 million of closure costs related to the Chattanooga
valve and hydrant plant. Also, first quarter fiscal 2006 operating
income included benefits from valve and hydrant sales and increased
volume associated with Hurricane Katrina. Anvil Segment Revenues
were $133.6 million as compared to $132.8 million for the same
period last year. Revenues were consistent with last year as modest
price increases were partially offset by slight volume declines.
Operating income was $13.0 million versus a loss of $1.5 million
during last year's first quarter. Excluding the prior year
acquisition-related inventory charges of $12.2 million, operating
income increased $2.3 million, primarily due to higher pricing and
approximately $1.2 million of dumping duty proceeds awarded by the
federal government. Interest Expense Net interest expense for the
current quarter was $20.4 million, down $11.8 million from the
prior-year due to lower debt levels. The Company used net cash
proceeds from the initial public offering in June 2006 to pay down
debt. Use of Non-GAAP Measures Adjusted EBITDA represents income
before depreciation, amortization, interest expense, interest
income, income taxes, acquisition related adjustments such as the
cost of the closure of the U.S. Pipe Chattanooga facility and
adjustments made as a result of the acquisition to increase the
manufactured cost of acquired inventory to fair value. The Company
presents Adjusted EBITDA because we consider it an important
supplemental measure of performance and believe it is frequently
used by securities analysts, investors and other interested parties
in the evaluation of companies in the industry, substantially all
of which present Adjusted EBITDA when reporting their results. In
addition, the credit agreement uses EBITDA (with additional
adjustments) to measure compliance with covenants, such as interest
coverage and debt incurrence. A form of EBITDA also is widely used
by the Company and others in its industry to evaluate and price
potential acquisition candidates. Adjusted EBITDA has limitations
as an analytical tool, and investors should not consider it in
isolation or as a substitute for analysis of the Company's results
as reported under GAAP. Some of these limitations are: Adjusted
EBITDA does not reflect the Company's cash expenditures or future
requirements for capital expenditures or contractual commitments.
Adjusted EBITDA does not reflect changes in, or cash requirements
for, working capital needs. Adjusted EBITDA does not reflect the
significant interest expense, or the cash requirements necessary to
service interest or principal payments on debt. Although
depreciation and amortization are non-cash charges, the assets
being depreciated and amortized often will have to be replaced in
the future, and Adjusted EBITDA does not reflect any cash
requirements for such replacements; and other companies may
calculate Adjusted EBITDA differently than we do, limiting its
usefulness as a comparative measure. Adjusted EBITDA is a measure
of performance that is not required by, or presented in accordance
with, GAAP. Adjusted EBITDA is not a measurement of financial
performance under GAAP and should not be considered as an
alternative to net income, operating income or any other
performance measure derived in accordance with GAAP. Conference
Call Web cast Mueller Water Products Chairman, President and CEO
Greg Hyland and members of the Company's leadership team will
discuss quarterly results and other general business matters on a
conference call and live Web cast to be held on Friday, Feb. 2,
2007, at 9 a.m. EST. To listen to the event live or in archive,
visit the Company Web site at http://www.muellerwaterproducts.com/.
About Mueller Water Products Mueller Water Products is a leading
North American manufacturer and marketer of infrastructure and flow
control products for use in water distribution networks and
treatment facilities. Its broad product portfolio includes
engineered valves, hydrants, ductile iron pipe and pipe fittings,
which are utilized by municipalities, as well as the commercial and
residential construction, oil and gas, HVAC and fire protection
industries. With revenues of approximately $1.9 billion, the
Company is comprised of three main operating segments: Mueller Co.,
U.S. Pipe and Anvil. Based in Atlanta, Georgia, the Company employs
approximately 7,000 people. For more information about Mueller
Water Products, please visit the Company's Web site at
http://www.muellerwaterproducts.com/. Safe Harbor Statement Except
for historical information contained herein, the statements in this
release are forward-looking and made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and
uncertainties that may cause the actual results in future periods
of Mueller Water Products, Inc. to differ materially from
forecasted results. Those risks include, among others, changes in
customers' demand for our products, changes in raw material
pricing, labor, equipment and transportation costs, changes in
customer orders, pricing actions by the Company's competitors,
changes in law, the inability to successfully integrate an acquired
business, and general changes in economic conditions. Risks
associated with forward-looking statements are more fully described
in our filings with the Securities and Exchange Commission. Mueller
Water Products assumes no duty to update its forward-looking
statements as of any future date. MUELLER WATER PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (dollars in
millions) December 31, September 30, 2006 2006 Assets Cash and cash
equivalents $ 71.5 $ 81.4 Receivables, net of allowance for
doubtful accounts of $4.8 million at December 31, 2006 and
September 30, 2006 252.2 322.9 Inventories 491.5 454.6 Deferred
income taxes 42.5 42.6 Prepaid expenses 35.8 33.7 Total current
assets 893.5 935.2 Property, plant and equipment, net 338.8 337.0
Deferred financing fees 13.9 14.6 Identifiable intangibles, net
828.3 835.4 Goodwill 865.1 865.5 Other long-term assets 2.4 2.2
Total assets $ 2,942.0 $ 2,989.9 Liabilities and Shareholders'
Equity Current portion of long-term debt $ 9.0 $ 9.0 Accounts
payable 91.7 129.9 Accrued expenses and other current liabilities
92.6 116.3 Total current liabilities 193.3 255.2 Long-term debt
1,118.8 1,118.3 Accrued pension liability, net 45.2 43.7
Accumulated postretirement benefits obligation 45.5 46.3 Deferred
income taxes 276.5 278.5 Other long-term liabilities 20.8 20.9
Total liabilities 1,700.1 1,762.9 Common stock, $0.01 par value per
share: Class A - 400,000,000 shares authorized and 28,781,235
shares issued 0.3 0.3 Class B - 200,000,000 shares authorized and
85,844,920 shares issued 0.8 0.8 Capital in excess of par value
1,418.0 1,417.5 Accumulated deficit (156.0) (173.0) Accumulated
other comprehensive loss (21.2) (18.6) Total shareholders' equity
1,241.9 1,227.0 Total liabilities and shareholders' equity $
2,942.0 $ 2,989.9 MUELLER WATER PRODUCTS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three months
ended December 31, 2006 2005 (dollars in millions, except per share
amounts) Net sales $ 411.9 $ 480.4 Cost of sales 304.2 436.9 Gross
profit 107.7 43.5 Operating expenses: Selling, general and
administrative 57.1 57.1 Related party corporate charges 1.6 1.8
Facility rationalization, restructuring and related costs -- 24.1
Total operating expenses 58.7 83.0 Income (loss) from operations
49.0 (39.5) Interest expense, net of interest income 20.4 32.2
Income (loss) before income taxes 28.6 (71.7) Income tax expense
(benefit) 11.6 (22.9) Net income (loss) $ 17.0 $ (48.8) Basic and
diluted income (loss) per share $ 0.15 $ (0.57) Basic shares
114,615,970 85,844,920 Diluted shares 114,634,685 85,844,920
MUELLER WATER PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENT OF
SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME FOR THE THREE MONTHS
ENDED DECEMBER 31, 2006 (UNAUDITED) (dollars in millions) Common
Capital in Excess Accumulated Stock of Par Value Deficit Balance at
September 30, 2006 $ 1.1 $ 1,417.5 $ (173.0) Cash dividend paid,
$0.0175 per share (2.0) Share-based compensation 2.5 Comprehensive
income Net income 17.0 Foreign currency translation adjustments
Comprehensive income Balance at December 31, 2006 $ 1.1 $ 1,418.0 $
(156.0) Accumulated Other Comprehensive Comprehensive Income Loss
Total Balance at September 30, 2006 $ -- $ (18.6) $1,227.0 Cash
dividend paid, $0.0175 per share (2.0) Share-based compensation 2.5
Comprehensive income Net income 17.0 17.0 Foreign currency
translation adjustments (2.6) (2.6) (2.6) Comprehensive income $
14.4 Balance at December 31, 2006 $ (21.2) $1,241.9 MUELLER WATER
PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) Three months ended December 31, 2006 2005 (dollars in
millions) OPERATING ACTIVITIES Net income (loss) $ 17.0 $ (48.8)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation 17.3 17.2 Amortization of
intangibles 7.1 6.6 Amortization of deferred financing fees 0.7 1.2
Accretion on debt 2.7 3.3 Share-based compensation expense 2.5 --
Impairments of property, plant and equipment -- 19.2 Credit for
deferred income taxes (1.8) (25.8) Other, net (1.5) (0.8) Changes
in assets and liabilities, net of the effects of acquisitions:
Receivables 72.2 28.9 Inventories (38.0) 91.2 Prepaid expenses
(2.2) 1.0 Other non-current assets 0.3 -- Pension and other
long-term liabilities -- (4.4) Accounts payable (28.6) (0.8)
Accrued expenses and other current liabilities (23.8) (13.1) Net
cash provided by operating activities 23.9 74.9 INVESTING
ACTIVITIES Additions to property, plant and equipment (20.0) (16.0)
Decrease in amounts due to Walter -- (20.0) Net cash used in
investing activities (20.0) (36.0) FINANCING ACTIVITIES (Decrease)
increase in dollar value of bank checks outstanding (10.0) 0.6
Proceeds from short-term borrowings -- 55.9 Retirement of
short-term debt -- (55.9) Proceeds from long-term debt -- 1,050.0
Retirement of long-term debt (2.2) (615.3) Payment of deferred
financing fees -- (21.6) Dividend to shareholders (2.0) (444.5)
Dividend to Walter for acquisition costs -- (12.0) Walter
contribution of Predecessor Mueller's cash -- 76.3 Net cash (used
in) provided by financing activities (14.2) 33.5 Effect of exchange
rates on cash 0.4 -- Net (decrease) increase in cash and cash
equivalents (9.9) 72.4 Cash and cash equivalents at beginning of
period 81.4 -- Cash and cash equivalents at end of period $ 71.5 $
72.4 Schedule of non-cash investing and financing activities: On
October 3, 2005, the Company's former parent, Walter Industries,
purchased all the outstanding common stock of Predecessor Mueller.
(dollars in millions) Contribution of Predecessor Mueller by Walter
$ 932.9 Less: Cash of Predecessor Mueller received (76.3) Total net
assets received excluding cash $ 856.6 Subsequent to the
acquisition, Walter Industries forgave an intercompany receivable
from U.S. Pipe of $443.6 million. MUELLER WATER PRODUCTS, INC.
REPORTED GAAP RESULTS (UNAUDITED) (dollars in millions) Three
months ended December 31, 2006 2005 Net Sales Mueller Co. $ 167.1 $
180.4 U.S. Pipe 117.4 171.1 Anvil 133.6 132.8 Consolidating
Adjustments (6.2) (3.9) Total $ 411.9 $ 480.4 Operating Income
(Loss) Mueller Co. $ 35.7 $ (3.8) U.S. Pipe 7.2 (27.8) Anvil 13.0
(1.5) Corporate (6.9) (6.4) Total $ 49.0 $ (39.5) MUELLER WATER
PRODUCTS, INC. RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME
(UNAUDITED) (dollars in millions) Three months ended December 31,
2006 2005 Reported Operating Income (Loss) Mueller Co. $ 35.7 $
(3.8) U.S. Pipe 7.2 (27.8) Anvil 13.0 (1.5) Corporate (6.9) (6.4) $
49.0 $ (39.5) Depreciation Mueller Co. $ 6.5 $ 6.1 U.S. Pipe 5.5
6.3 Anvil 5.0 4.7 Corporate 0.3 0.1 $ 17.3 $ 17.2 Intangible
Amortization Mueller Co. $ 6.2 $ 5.9 Anvil 0.9 0.7 $ 7.1 $ 6.6
Unusual Adjustments Mueller Co. Inventory Step-Up $ -- $ 46.2 US
Pipe Chattanooga Plant Closure Costs -- 40.0 Anvil Inventory
Step-Up -- 12.2 $ -- $ 52.2 Adjusted EBITDA Mueller Co. $ 48.4 $
54.4 U.S. Pipe 12.7 18.5 Anvil 18.9 16.1 Corporate (6.6) (6.3) $
73.4 $ 82.7 Reported operating income (loss) $ 49.0 $ (39.5)
Interest expense, net of interest income 20.4 32.2 Income tax
expense (benefit) 11.6 (22.9) Net income (loss) $ 17.0 $ (48.8)
MUELLER WATER PRODUCTS, INC. RECONCILIATION OF ADJUSTED EBITDA TO
NET INCOME (UNAUDITED) (dollars in millions) Three months ended
December 31, 2006 2005 Adjusted EBITDA $ 73.4 $ 82.7 Adjustments:
Depreciation (17.3) (17.2) Amortization of intangibles (7.1) (6.6)
Closure of U.S. Pipe Chattanooga facility -- (40.0) Inventory
step-up -- (58.4) Interest expense, net of interest income 20.4
32.2 Income tax expense (benefit) 11.6 (22.9) Net income $ 17.0 $
(48.8) Investor Contact: Martie Edmunds Zakas Sr. Vice President -
Strategic Planning & Investor Relations 770-206-4237 Media
Contact: Katrina Blauvelt Director - Corporate Communications &
Public Affairs 770-206-4240 DATASOURCE: Mueller Water Products,
Inc. CONTACT: Investors, Martie Edmunds Zakas, Sr. Vice President -
Strategic Planning & Investor Relations, +1-770-206-4237, or ,
or Media, Katrina Blauvelt, Director - Corporate Communications
& Public Affairs, +1-770-206-4240, or , both of Mueller Water
Products, Inc. Web site: http://www.muellerwaterproducts.com/
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