Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Mueller Water Products, Inc. | d8k.htm |
 1
Gabelli
& Company
21
st
Annual Pump, Valve and Motor
Symposium
February 17, 2011
Exhibit 99.1 |
 2
Safe Harbor Statement
Safe Harbor Statement
This presentation 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 the Company intends, expects, plans, projects, believes or
anticipates will or may occur in the future are forward-looking
statements. Examples of forward-looking statements include, but are not
limited to, statements the Company makes regarding general economic conditions,
spending by municipalities, the outlook for the residential and
non-residential construction markets, improvements related to capacity
utilization, the recovery, if any, of the Company’s end markets, and the potential effect
of the refinancing on the Company’s operations, and the impact of these factors on
the Company’s businesses. Forward-looking statements are based on
certain assumptions and assessments made by the Company in light of its
experience and perception of 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 following: •
the spending level for water and wastewater infrastructure;
•
the demand level of manufacturing and construction activity;
•
the Company’s ability to service its debt obligations; and
•
the other factors that are described in the section entitled “RISK FACTORS”
in Item 1A of our Annual Report on Form 10-K.
Undue reliance should not be placed on any forward-looking statements. The Company
does not have any intention or obligation to update forward-looking
statements, except as required by law. |
 3
Non-GAAP Financial Measures
Non-GAAP Financial Measures
The Company presents adjusted income (loss) from operations, adjusted EBITDA, adjusted
net income (loss), adjusted net income (loss) per share, free cash flow and net
debt as non-GAAP measures. Adjusted income (loss) from operations
represents income (loss) from operations excluding impairment and restructuring.
Adjusted EBITDA represents income (loss) from operations excluding impairment,
restructuring, depreciation and amortization. The Company presents adjusted
EBITDA because it is a measure of performance management and believes it is
frequently used by securities analysts, investors and interested parties in the
evaluation of financial performance. Adjusted net income (loss) and adjusted net
income (loss) per share exclude impairment, restructuring, loss on early
extinguishment of debt, certain costs to settle interest rate swap contracts,
the tax on the repatriation of earnings from Canada and the income tax effects of the
previously mentioned items. These items are excluded because they are not
considered indicative of recurring operations. Free cash flow represents
cash flows from operating activities, less capital expenditures. It is presented
as a measurement of cash flow because it is commonly used by the investment
community. Net debt represents total debt less cash and cash equivalents. Net
debt is commonly used by the investment community as a measure of
indebtedness. Adjusted income (loss) from operations, adjusted EBITDA,
adjusted net income (loss), adjusted net income (loss) per share, free cash flow and net debt have
limitations as analytical tools, and investors should not consider any of these
non-GAAP measures in isolation or as a substitute for analysis of the
Company's results as reported under accounting principles generally accepted in
the United States ("GAAP"). A reconciliation of non-GAAP to GAAP results is included as an attachment to this
presentation and has been posted online at www.muellerwaterproducts.com.
|
 4
Leading North American provider of water
infrastructure and flow control products
and services
Investment Highlights
Leading brands in water infrastructure
Leveraging brands to expand smart water
infrastructure offering for diagnostic and data
management
Low-cost manufacturing processes
Increasing investment needed in water
infrastructure industry
One of the largest installed bases in the U.S. |
 5
Our Business
•
$1.3B LTM net sales (as of December 31, 2010)
•
Portfolio includes:
•
Fire hydrants
•
Valves
•
Pipe fittings
•
Ductile iron pipe
•
Metering systems
•
Leak detection
•
Specified in 100 largest U.S. metropolitan markets
(1)
•
More than 75% of FY2010 net sales from products
with #1 or #2 position
The largest publicly traded water infrastructure company in the United States
FY2010 Primary End Markets
(2)
Net Sales $1.3B
(1) Valves or hydrants
(2) Based on management estimates
* Residential construction systems driven primarily by new community development
|
 6
Ductile Iron
Pipe
Restrained Pipe
Joint
Joint
Restraints Joint Fittings
Broad Product Portfolio
$609
$74
$49
$123
SEGMENT NET SALES
PRODUCT
PORTFOLIO
ADJUSTED OPERATING
INCOME (LOSS)
(1)
$373
($51)
$19
($32)
$330
$25
$15
$40
Iron Gate
Valves
Butterfly, Ball
and Plug Valves
Fittings &
Couplings
Cast Iron
Fittings
Hangers &
Supports
Metering
Systems
Pipe Nipples
Hydrants
DEPRECIATION AND
AMORTIZATION
(2)
Est. 1857
Est. 1899
Est. 1999 (1850)
HISTORICAL ROOTS
ADJUSTED EBITDA
(1) (2)
($ in millions)
Note: All statistics are actuals for LTM ended December 31, 2010
(1) Segment operating income (loss) excludes corporate expenses of $34.2mm. Mueller Co.
excludes $0.4mm of restructuring. U.S. Pipe excludes $13.1mm of restructuring. Anvil excludes $1.1mm of restructuring.
(2) Segment depreciation and amortization excludes corporate depreciation of $0.6mm.
|
 7
Complete Water Transmission Solutions
Mueller Water Products
manufactures and
markets products and
services that are used in
the transmission,
distribution and
monitoring of safe, clean
drinking water and in
water treatment
facilities. |
 8 |
 9
Strategy And Objectives
Capitalize on the large,
attractive and growing
water infrastructure
markets worldwide
Maintain leadership positions with
customers and end users
Broaden breadth and depth of
products and services
Continue to enhance operational
and organizational excellence
Expand internationally |
 10
Our End Markets |
 11
Primary End Markets: 2006-2010
Since 2006, our exposure to the residential construction
market has declined from roughly 40% to 5%. |
 12
Historical Housing Starts |
 13
Non-Residential Construction |
 11
A Significant Market
Opportunity |
 15
Aging Water Infrastructure
“America’s drinking water systems
face an annual shortfall of at
least $11 billion
to replace aging
facilities that are near the end of
their useful lives and to comply
with existing and future federal
water regulations. This does not
account for growth in the demand
for drinking water over the next
20 years.”
2009 Report Card for America’s Infrastructure
American Society of Civil Engineers (ASCE) |
 16
The Market Opportunity Is Significant And Growing
Repair and Replacement Market
•
Aging water pipes need to be repaired/
replaced
•
Valves and hydrants typically replaced at
same time as pipes
•
Up to 15% -
30% of treated potable water lost
in leaky pipes
(2)
•
Emphasis on improving operational
efficiencies
Funding and Spending
•
90% funded at local level
(3)
•
29% of water systems charge less than cost
(4)
Future Drinking Water
Infrastructure Expenditure Needs
(1)
20-YR Need for
Water Infrastructure = $335B |
 17
Aging
Water Infrastructure |
 18
Increasing Federal Awareness of Funding Needs
•
At least 40 cities under consent decrees
—
Atlanta $4.0B
—
Washington, D.C. $2.6B
—
Baltimore City and county $1.7B
—
Kansas City $2.5B
—
Cincinnati $1.5B
•
1974/1996 Safe Drinking Water Act
•
2011 proposed federal budget
—
$1.3B for Drinking Water State
Revolving Funding (SRF)
Stronger EPA regulations should lead to increased investment
“New Jersey can maintain
a viable economy with a
sound environment only if
it ensures that its water
supply, wastewater and
stormwater
infrastructure
is effectively maintained in
a manner that produces
the lowest life-cycle cost.”
The Clean Water Council of
New Jersey -
October 2010 |
 19
Funding Water Infrastructure Repair
Sources of Funding
Water Infrastructure
Repair
(2)
Historical Water
Rates Compared to
Other Utilities
(1) |
 11
Actions & Business
Results |
 21
Management Actions/Initiatives
Objectives
Actions
Reduce costs and improve
operating leverage
•Closed six plants since FY2006
•Sold two non-core assets of Anvil
•Reduced headcount by about 24% from September 30, 2008 to December 31,
2010 from approximately 6,300 to approximately 4,800
•Took actions to lower labor costs
•Implemented Lean Six Sigma and other manufacturing improvements
(continuous improvement)
•Invested in new automated ductile iron pipe operation to lower costs
•Consolidated distribution centers and smaller manufacturing facilities at
Anvil Manage working capital and
capital expenditures to generate
free cash flow
•Capital spending decreased from FY2007/FY2008 levels
•FY2009 capital spending of $39.7 million; FY2010 capital spending of $32.8
million •Reduced inventory by $116.6 million in FY2009; $74.4 million
reduction in FY2010 •Reduced debt by $403 million from September 30, 2008
through December 31, 2010 •Inventory turns have improved about a full turn
at the end of December 2010 from
December 2009
Leverage Mueller brands to
pursue strategic growth
opportunities
•Acquired and invested in AMI technology
•Acquired leak detection and pipe condition assessment business
•Established first AMI wireless mesh agreement for water industry
•Entered
into
advanced
metering
agreement
with
Landis+Gyr
for
electric
meters |
 22
History of Strong Financial Performance
(see appendices for GAAP reconciliation) |
 Consolidated Non-GAAP Results
$ in millions (except per share amounts)
2011
2010
Net sales
$287.6
$313.1
Adj. income (loss) from operations
($2.4)
$0.7
Adj. operating income (loss) % of net sales
(0.8%)
0.2%
Adj. net loss per share
($0.06)
($0.07)
Adj. EBITDA
$17.7
$21.5
Adj. EBITDA % of net sales
6.2%
6.9%
First Quarter Fiscal
•
Financial results at both U.S. Pipe and Anvil improved year-over-year
•
Mueller Co. shipment volumes declined due to higher distributor inventory levels coming
into the quarter as well as uncertainty in the municipal market
•
Plant closure, manufacturing and other cost savings benefitted U.S. Pipe
•
Higher sales prices benefitted all three business segments; offset increased raw
material costs FY 1Q11 results exclude restructuring $1.9 million, $1.2 million net of tax; and
interest rate swap costs of $1.9 million, $1.2 million net of tax. FY 1Q10 results exclude
restructuring $0.4 million, $0.2 million net of tax. 23 |
 24
Refinancing Highlights
•
Recapitalization provides a long-term capital
structure
•
Extended maturities with no significant required
principal payments before 2015
•
Locked in long-term capital at attractive rates
•
Preserved deleveraging capability
•
Expect greater operational flexibility
•
Eliminated financial maintenance covenants with
excess availability at the greater of $34 million or
12.5% of facility amount
•
More than $123 million of excess availability at
December 31, 2010
•
Reduced limitations on business operations
including acquisitions, investments, restricted
payments and divestitures
New structure:
•
$420 million 7.375% Senior Subordinated Notes due
2017
•
$225 million 8.75
% Senior Unsecured Notes due
2020
•
$275 million ABL Revolver Credit Facility due 2015 |
 25
Key Financial Metrics
$37
$115
$94
$91
$30
$0
$20
$40
$60
$80
$100
$120
$140
FY2006
FY2007*
FY2008
FY2009**
FY2010***
Free Cash Flow
($ in millions)
$1,549
$1,127
$1,101
$1,096
$740
$692
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
Mar-2006
FY2006
FY2007*
FY2008
FY2009
FY2010
Total Debt
($ in millions)
$71
$88
$88
$40
$33
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
FY2006
FY2007
FY2008
FY2009
FY2010
Capital Expenditures
($ in millions)
* FY2007 results exclude $48.1 million of debt restructuring activities
** FY2009 results include $6.3 million of cash used to settle certain interest rate
swap contracts. *** FY2010 results include $18.3 million of cash used to
settle certain interest rate swap contracts. $73 million free cash flow average
over last five years Debt has declined $857 million from 2006
|
 26
Why Invest in MWA? |
 7
Supplemental Data |
 28
Segment Results and Reconciliation of Non-GAAP to GAAP
Performance Measures
(in millions, except per share amounts)
Three months ended December 31, 2010
Mueller Co.
U.S. Pipe
Anvil
Corporate
Total
GAAP results:
Net sales
129.8
$
74.4
$
83.4
$
-
$
287.6
$
Gross profit (loss)
29.2
$
(2.4)
$
22.4
$
0.4
$
49.6
$
Selling, general and administrative expenses
20.4
7.0
15.9
8.7
52.0
Restructuring
0.4
0.9
0.6
-
1.9
Income (loss) from operations
8.4
$
(10.3)
$
5.9
$
(8.3)
$
(4.3)
Interest expense, net
15.9
Income tax benefit
(8.1)
Net loss
(12.1)
$
Net loss per diluted share
(0.08)
$
Capital expenditures
3.2
$
1.4
$
1.4
$
0.4
$
6.4
$
Non-GAAP results:
Adjusted income (loss) from operations and EBITDA:
Income (loss) from operations
8.4
$
(10.3)
$
5.9
$
(8.3)
$
(4.3)
$
Impairment
-
-
-
-
-
Restructuring
0.4
0.9
0.6
-
1.9
Adjusted income (loss) from operations
8.8
(9.4)
6.5
(8.3)
(2.4)
Depreciation and amortization
11.7
4.5
3.7
0.2
20.1
Adjusted EBITDA
20.5
$
(4.9)
$
10.2
$
(8.1)
$
17.7
$
Adjusted net loss:
Net loss
(12.1)
$
Interest rate swap settlement costs, net of tax
1.2
Restructuring, net of tax
1.2
Adjusted net loss
(9.7)
$
Adjusted net loss per diluted share
(0.06)
$
Free cash flow:
Net cash provided by operating activities
5.2
$
Capital expenditures
(6.4)
Free cash flow
(1.2)
$
Net debt (end of period):
Current portion of long-term debt
0.8
$
Long-term debt
691.7
Total debt
692.5
Less cash and cash equivalents
(71.9)
Net debt
620.6
$
|
 29
Segment Results and Reconciliation of Non-GAAP to GAAP
Performance Measures
(in millions, except per share amounts)
Three months ended December 31, 2009
Mueller Co.
U.S. Pipe
Anvil
Corporate
Total
GAAP results:
Net sales
133.3
$
79.7
$
100.1
$
-
$
313.1
$
Gross profit (loss)
36.9
$
(4.0)
$
23.0
$
-
$
55.9
$
Selling, general and administrative expenses
20.9
7.9
18.5
7.9
55.2
Restructuring
0.1
0.3
-
-
0.4
Income (loss) from operations
15.9
$
(12.2)
$
4.5
$
(7.9)
$
0.3
Interest expense, net
16.8
Income tax benefit
(5.8)
Net loss
(10.7)
$
Net loss per diluted share
(0.07)
$
Capital expenditures
3.7
$
4.0
$
1.0
$
-
$
8.7
$
Non-GAAP results:
Adjusted income (loss) from operations and EBITDA:
Income (loss) from operations
15.9
$
(12.2)
$
4.5
$
(7.9)
$
0.3
$
Restructuring
0.1
0.3
-
-
0.4
Adjusted income (loss) from operations
16.0
(11.9)
4.5
(7.9)
0.7
Depreciation and amortization
12.4
4.4
3.9
0.1
20.8
Adjusted EBITDA
28.4
$
(7.5)
$
8.4
$
(7.8)
$
21.5
$
Adjusted net loss:
Net loss
(10.7)
$
Restructuring, net of tax
0.2
Adjusted net loss
(10.5)
$
Adjusted net loss per diluted share
(0.07)
$
Free cash flow:
Net cash provided by operating activities
60.1
$
Capital expenditures
(8.7)
Free cash flow
51.4
$
Net debt (end of period):
Current portion of long-term debt
11.7
$
Long-term debt
725.7
Total debt
737.4
Less cash and cash equivalents
(124.0)
Net debt
613.4
$
|
 30
Segment Results and Reconciliation of Non-GAAP to GAAP
Performance Measures
(in millions, except per share amounts)
Year ended September 30, 2010
Mueller Co.
U.S. Pipe
Anvil
Corporate
Total
GAAP results:
Net sales
612.8
$
377.8
$
346.9
$
-
$
1,337.5
$
Gross profit (loss)
170.3
$
(22.7)
$
88.8
$
-
$
236.4
$
Selling, general and administrative expenses
89.2
30.5
66.2
33.4
219.3
Restructuring
0.1
12.5
0.5
-
13.1
Income (loss) from operations
81.0
$
(65.7)
$
22.1
$
(33.4)
$
4.0
Interest expense, net
68.0
Loss on early extinguishment of debt
4.6
Income tax benefit
(23.4)
Net loss
(45.2)
$
Net loss per diluted share
(0.29)
$
Capital expenditures
15.6
$
11.0
$
6.0
$
0.2
$
32.8
$
Non-GAAP results:
Adjusted income (loss) from operations and EBITDA:
Income (loss) from operations
81.0
$
(65.7)
$
22.1
$
(33.4)
$
4.0
$
Restructuring
0.1
12.5
0.5
-
13.1
Adjusted income (loss) from operations
81.1
(53.2)
22.6
(33.4)
17.1
Depreciation and amortization
49.7
18.9
15.4
0.6
84.6
Adjusted EBITDA
130.8
$
(34.3)
$
38.0
$
(32.8)
$
101.7
$
Adjusted net loss:
Net loss
(45.2)
$
Restructuring, net of tax
7.9
Interest rate swap settlement costs, net of tax
4.8
Loss on early extinguishment of debt, net of tax
2.8
Tax on repatriation on Canadian earnings
2.2
Adjusted net loss
(27.5)
$
Adjusted net loss per diluted share
(0.18)
$
Free cash flow:
Net cash provided by operating activities
63.0
$
Capital expenditures
(32.8)
Free cash flow
30.2
$
Net debt (end of period):
Current portion of long-term debt
0.7
$
Long-term debt
691.5
Total debt
692.2
Less cash and cash equivalents
(83.7)
Net debt
608.5
$
|
 31
Segment Results and Reconciliation of Non-GAAP to GAAP
Performance Measures
(in millions, except per share amounts)
Year ended September 30, 2009
Mueller Co.
U.S. Pipe
Anvil
Corporate
Total
GAAP results:
Net sales
547.1
$
410.9
$
469.9
$
-
$
1,427.9
$
Gross profit (loss)
134.3
$
(5.7)
$
128.2
$
0.1
$
256.9
$
Selling, general and administrative expenses
84.2
35.6
84.9
34.4
239.1
Impairment and restructuring
820.7
101.1
96.7
0.2
1,018.7
Loss from operations
(770.6)
$
(142.4)
$
(53.4)
$
(34.5)
$
(1,000.9)
Interest expense, net
78.3
Loss on early extinguishment of debt
3.8
Income tax benefit
(86.3)
Net loss
(996.7)
$
Net loss per diluted share
(8.55)
$
Capital expenditures
16.2
$
11.2
$
11.9
$
0.4
$
39.7
$
Non-GAAP results:
Adjusted income (loss) from operations and EBITDA:
Loss from operations
(770.6)
$
(142.4)
$
(53.4)
$
(34.5)
$
(1,000.9)
$
Impairment and restructuring
820.7
101.1
96.7
0.2
1,018.7
Adjusted income (loss) from operations
50.1
(41.3)
43.3
(34.3)
17.8
Depreciation and amortization
50.9
21.1
17.6
0.6
90.2
Adjusted EBITDA
101.0
$
(20.2)
$
60.9
$
(33.7)
$
108.0
$
Adjusted net loss
Net loss
(996.7)
$
Impairment and restructuring, net of tax
954.9
Interest rate swap settlement costs, net of tax
3.8
Loss on early extinguishment of debt, net of tax
2.3
Adjusted net loss
(35.7)
$
Adjusted net loss per diluted share
(0.31)
$
Free cash flow:
Net cash provided by operating activities
130.5
$
Capital expenditures
(39.7)
Free cash flow
90.8
$
Net debt (end of period):
Current portion of long-term debt
11.7
$
Long-term debt
728.5
Total debt
740.2
Less cash and cash equivalents
(61.5)
Net debt
678.7
$
|
 12
Questions |