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| file | filename |
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| 8-K - 8-K - Mueller Water Products, Inc. | form8-k110716.htm |
Where Intelligence
Meets Infrastructure®
Baird’s 2016 Global Industrial Conference
November 8, 2016
NON-GAAP FINANCIAL MEASURES
In an effort to provide investors with additional information
regarding the Company's 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 the Company's
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 net income, adjusted net
income per share, adjusted operating income, 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. The Company presents free cash flow
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 supplemental
data in this presentation and have been posted online at
www.muellerwaterproducts.com.
PAGE 2
FORWARD-LOOKING STATEMENTS
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 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. 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
and subsequent Quarterly Reports on Form 10-Q. Undue
reliance should not be placed on any forward-looking
statements. We do not have any intent to update forward-
looking statements, except as required by law.
PAGE 3
OUR BUSINESS AND PRIMARY END MARKETS
PORTFOLIO
Fire Hydrants Valves Metering Systems Piping Component Systems
Leak Detection and
Pipe Condition
Assessment
60%
Repair and
replacement
of municipal
water
distribution
and treatment
systems
30%
Residential
construction*
90%
Non-residential
construction
5%
Oil & gas
10%
Natural gas
utilities
5%
Power/high pressure
* Driven primarily by new community development
FY2016 NET SALES: $1.1 BILLION
Net sales: $716mm Net sales: $338mm
100%
Municipal spending
Net sales: $85mm
PAGE 4
Leading provider of water infrastructure
and flow control products and services
in North America
INVESTMENT HIGHLIGHTS
Improved results driven by strong incremental
operating leverage as end markets recover
Leveraging Mueller brand and relationships to
expand intelligent water technology offerings Leading brands in water infrastructure and one of
the largest installed bases of iron gate valves and
fire hydrants in the U.S.
Increased investment and improved operating
efficiencies are needed in water infrastructure industry
Transformed Company by acquiring or developing
new technologies, adjusting portfolio and
improving processes
Strengthened Company’s balance sheet through
debt restructuring, lower debt levels and ongoing
focus on free cash flow
Industry-leading adjusted operating margins
associated with Mueller Co. products
PAGE 5
BUSINESS PERFORMANCE: LONG-TERM TARGETS
TOP-LINE GROWTH
Mueller Co. growth of >5%
Mueller Technologies >15%
EARNINGS LEVERAGE
Mueller Co. adjusted EBITDA margins of 25% - 30%
Mueller Technologies adjusted EBITDA margins of 20%
Anvil adjusted EBITDA margins in mid-teens
OTHER
Free cash flow greater than adjusted net income
Reducing working capital as a percentage of net sales
PAGE 6
BROAD PRODUCT PORTFOLIO
Note: All statistics are LTM ended September 30, 2016
(1) Mueller Co. adjusted operating income and adjusted EBITDA exclude certain other charges totaling $3.0 million. Anvil adjusted operating income and adjusted
EBITDA exclude certain other charges totaling $2.3 million. Mueller Technologies adjusted operating loss and adjusted EBITDA exclude other charges totaling
$0.9 million.
Net Sales
Adjusted Operating
Income(Loss)(1)
Depreciation & Amortization
Adjusted EBITDA(1)
Product and Services Portfolio
$ 715.7
162.3
34.2
196.5
Fire Hydrants
Iron Gate Valves
Butterfly, Ball & Plug
Valves
$ 338.3
29.1
13.1
42.2
Cast Iron Fittings
Pipe Nipples
Fittings & Couplings
Hangers & Supports
Metering Systems
Leak Detection and
Pipe Condition
Assessment
(5.4)
4.8
(10.2)
$ 84.9
$ in millions
PAGE 7
INTELLIGENT WATER TECHNOLOGY™
Mueller Water Products
manufactures and markets
products and offers services
used in the transmission,
distribution and measurement
of safe, clean drinking water
and in water treatment
facilities. These products and
services help utilities actively
diagnose, monitor and control
the delivery of safe, clean
drinking water.
PAGE 8
WATER INFRASTRUCTURE LANDSCAPE
Company estimates based on internal analysis and information from trade associations and distributor networks, where available.
#1 PRODUCT POSITION #1 PRODUCT POSITION #1
PRODUCT
POSITION #2
PRODUCT
POSITION
PAGE 9
STRATEGY AND OBJECTIVES
Maintain leadership positions
with customers and end users
Leverage the Mueller brand
Develop value-added products
and services
Leverage distribution network
Improve customer service levels
Continue to enhance
operational and organizational
excellence
Strengthen balance sheet
Implemented Lean Six Sigma
Consolidated plants
Divested U.S. Pipe
Acquire and invest in
businesses and technologies
that expand our portfolio or
allow us to enter new markets
Expand leak detection and
pipe condition assessment
domestically and internationally
Expand Intelligent Water Technology
offerings
Develop fixed leak detection
technology solutions
Enhance Advanced Metering
Infrastructure (AMI) system with
longer-range communications
capabilities, remote disconnect
meter and consumer portal
Capitalize on the large, attractive and growing
water infrastructure markets worldwide
PAGE 10
Significant
Market
Opportunities
Source: U.S. Census Bureau
MARKET DRIVER: HOUSING STARTS
Homebuilders’ confidence is one driver of housing starts, and confidence could
increase due to improving job growth in a key demographic for household
formation: Millennials
Source: NAHB, October 2016
Forecast: Blue Chip Economic Indicators, September 2016
NAHB Housing Market Index - National (1987 – October 2016)
Seasonally Adjusted Annualized
Historical Housing Starts (1959 – September 2016)
Seasonally Adjusted Annualized
Rates-Units in 000’s
1959 to 2015:
Average 1,443
Bottom of prior
cycle
April 2009 – lowest starts
(499) since Census
Bureau began keeping
record in 1959
2017 Blue Chip
Consensus
forecast of
1,280
PAGE 12
THE MARKET OPPORTUNITY IS SIGNIFICANT AND GROWING
Valves and fire hydrants are typically replaced at the same
time as pipes
ASCE graded drinking water infrastructure a D(1)
At least 40 cities under consent decrees: Atlanta,
Baltimore, Washington, D.C., Suburban Washington, D.C.
(WSSC), New Orleans
(1) ASCE: 2013 Report Card for America’s Infrastructure
(2) The EPA Clean Water and Drinking Water Infrastructure Gap Analysis 2002
(3) EPA 2013 Drinking Water Needs Survey and Assessment
PAGE 13
FUNDING WATER INFRASTRUCTURE REPAIR
PAGE 14
(1) Bureau of Labor Statistics
(2) 2016 Strategic Directions: U.S. Water Industry – Black & Veatch
(3) American Water Works Association 2014 Water and Wastewater Rate Survey
(4) EPA Clean Water and Drinking Water Infrastructure
HISTORICAL WATER RATES COMPARED
TO OTHER UTILITIES(1)
Long-term trends in consumer prices (CPI) for utilities (1953-2016)
TOP WATER INDUSTRY ISSUES(2)
UTILITY SOURCES OF FUNDING
Majority of utilities have service connection fees
and/or capital recovery charges, with median fees
of about $5,800(3)
CPI for water and sewerage maintenance increased
3.8% for 12 months ended September 2016 (1)
90% funded at local level(4)
Aging water and wastewater infrastructure
Justifying capital improvement
programs
Managing capital costs
Managing operational costs
Resilience
CPI Utilities
(NSA 1982-1984 = 100)
Information technology
GROWTH OPPORTUNITIES: SMART WATER
FACTORS AFFECTING MUNICIPAL WATER SYSTEMS
Water Conservation
• 27% of U.S. experiencing
drought conditions(1)
• 240,000 water main
breaks per year(2)
• Up to 30% of treated water is
lost or unaccounted for(3)
• 1.7 trillion gallons lost per
year at a national cost of $2.6
billion per year(4)
• Budget constraints
• Capital spending prioritization
(1) U.S. Drought Monitor – November 2016
(2) EPA Aging Water Infrastructure Research Program
(3) Navigant Research
(4) National Geological Survey
Operational Efficiencies
Non-Revenue Water Customer Service Focus
• Awareness/education
• Ongoing monitoring
• Sustainability
Mi.Data Consumer Portal
PAGE 15
MUELLER TECHNOLOGIES: SOLUTIONS FOR TODAY & TOMORROW
Smart Metering Leak Detection and
Pipe Condition Assessment
“In the wake of Flint, consumers appear more interested than ever in how their
water supply is maintained and improved.”
– Black & Veatch 2016 Strategic Directions in the U.S. Water Industry
Mueller Systems’
National Operations Center
INTELLIGENT WATER TECHNOLOGY™
• Longer-range AMI systems
• Remote Disconnect
Meter (RDM)
• Leak detection
• Consumer portal
• Fixed transmission and distribution
main leak detection / monitoring
• Condition assessment
420 RDM
Echologics’
acoustic fixed
leak detection
Utilize
Existing
Infrastructure
PAGE 16
Leading domestic manufacturer
of piping system components
Significant FY2016 net sales
from #1 or #2 product
positions
Customer service capabilities
focused on quick delivery
Domestically manufactured and
domestically and internationally
sourced products
Network of over 1,000 distributors
and 4,000 distributor locations
Track record of solid adjusted
EBITDA margins
PAGE 17
ANVIL KEY MARKETS
Non-Residential
Construction
Oil & Gas
Power/High
Pressure
Mechanical,
Industrial &
Fire Protection
Oil & Gas
Power Need
Development
90%
5%
5%
Mechanical and Industrial:
Grooved, Iron/Steel Fittings,
Staple Hangers, Pipe Nipples,
Bull Plugs
Fire Protection: O-Lets,
Grooved Fittings and
Couplings, Iron Fittings,
Staple Hangers, Pipe Nipples
Hammer Union, Swages
and Bull Plugs, Forged Steel
Fittings, Pipe Nipples,
Iron/Steel Fittings
Engineered Hangers
Victaulic, Ward,
Erico, Bonney Forge,
Westbrook
Victaulic, Ward,
Tolco, Ceirco, Tyco
Kemper, C&C,
Westbrook,
Bonney Forge, Ward,
Phoenix Capital
Lisega, Piping Tech,
Bergen
KEY MARKETS % FY2016 NET SALES MARKET DRIVERS PRODUCTS KEY COMPETITORS
PAGE 18
MARKET DRIVER: NON-RESIDENTIAL CONSTRUCTION
The non-residential construction market is showing improvement
Source: IHS
Data as of October 2016 Source: American Institute of Architects
Data as of September 2016
Non-Residential Construction
(Real $ in Billions)
AIA Architectural Billing Index
Diffusion Index (> 50 = expansion)
PAGE 19
$2
91
$3
27
$3
37
$2
87
$2
36
$2
23
$2
23
$2
15
$2
18
$2
33
$2
49
$2
60
$2
66
$2
69
$0
$50
$100
$150
$200
$250
$300
$350
$400
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
$0
$20
$40
$60
$80
$100
$120
$140
$160
Oc
t-
92
Oc
t-
94
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t-
96
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t-
98
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00
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02
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06
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t-
08
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t-
10
Oc
t-
12
Oc
t-
14
Oc
t-
16
MARKET DRIVER: OIL & GAS
Sales to the oil & gas market represented about 5% of Anvil’s FY2016 net sales
Source: Baker Hughes
Data as of October 2016
Source: FactSet
Data as of October 2016
U.S. Land Based Rig Count Oil Price - WTI ($/bbl)
PAGE 20
0
500
1,000
1,500
2,000
2,500
Oc
t-
90
Oc
t-
92
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94
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16
Actions &
Business
Results
MANAGEMENT ACTIONS / INITIATIVES
Reduce costs and improve
operating leverage
Divested U.S. Pipe
Divested three non-core assets of
Anvil
Implemented Lean Six Sigma and
other manufacturing improvements:
• Increased production capacity
without footprint expansion
• Lowered labor costs
Closed seven plants
Consolidated distribution centers and
smaller manufacturing facilities
at Anvil
Manage working capital and
capital expenditures to generate
free cash flow
Generated free cash flow of
$105.7mm – history of strong free
cash flow generation
Reduced debt by more than $600mm
from September 30, 2008 through
September 30, 2016
Pursue strategic growth
opportunities by leveraging
the Mueller brand
Acquired leak detection and pipe
condition assessment
technologies
Developed fixed leak detection
technology capabilities
Acquired and invested in
AMI technology
Enhanced Smart Water offering
with remote disconnect meter,
integrated leak detection and
longer-range communications
capabilities
PAGE 22
HISTORY OF STRONG FINANCIAL PERFORMANCE
Net Sales
Adjusted
EBITDA(1) and
Adjusted EBITDA
Margin
(1) Mueller Co. adjusted EBITDA excludes purchase accounting adjustments of $52.9 in 2006,
goodwill and other impairment charges of $818.7 in 2009 and other charges of $0.1 in 2010, $1.4 in
2011, $2.5 in 2012, $1.5 in 2013, $2.1 in 2014, $8.4 in 2015 and $3.0 in 2016.
Note: Mueller Co.
2002-2012 net
sales and adjusted
EBITDA include
Mueller
Technologies in
these years
PAGE 23
($ in millions)
$
5
0
9
$
5
3
6
$
6
1
8
$
6
6
4
$
8
0
4
$
7
5
6
$
7
1
8
$
5
4
7
$
6
1
3
$
6
0
6
$
6
5
2
$
6
3
2
$
6
7
9
$
7
0
2
$
7
1
6
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
$131 $139
$167
$190
$248
$207
$179
$101
$131
$103 $106
$140
$167
$184
$197
25.7% 25.9%
27.0%
28.6%
30.8%
27.3%
24.9%
18.5%
21.3%
17.0% 16.2%
22.2%
24.5%
26.2%
27.5%
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
$
3
9
3
$
3
8
7
$
4
3
1
$
4
8
5
$
5
3
5
$
5
5
6
$
5
9
5
$
4
7
0
$
3
4
7
$
3
5
9
$
3
7
2
$
3
9
1
$
4
0
1
$
3
7
1
$
3
3
8
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
$48 $38 $47
$62 $73
$81
$94
$61
$38 $48
$52 $55 $56 $45 $42
12.2%
9.8% 10.9%
12.8% 13.6%
14.6%
15.8%
13.0%
11.0%
13.2% 14.0% 13.9% 14.1% 12.2% 12.5%
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
(1) Anvil adjusted EBITDA excludes purchase accounting adjustments of $17.3 in 2006,
goodwill impairment charges of $92.7 in 2009 and other charges of $0.4 in 2009, $0.5 in 2010,
$1.2 in 2011, $0.3 in 2012, $0.1 in 2013, $0.9 in 2014, $0.7 in 2015 and $2.3 in 2016
Fiscal year ended September 30
Q4 CONSOLIDATED NON-GAAP RESULTS
Pleased that we continued to see margin expansion in all
three of our businesses with a 7.6% increase in adjusted
operating income
Mueller Co.’s domestic sales of valves, hydrants and brass
products increased 4.4%. Mueller Co. again had strong
margin improvement with adjusted EBITDA margin of 30.3%
Anvil’s net sales decreased 7.3% due to lower shipment
volumes into the mechanical and oil & gas markets. Anvil's
adjusted EBITDA margin increased 90 basis points
Mueller Technologies had meaningful operating improvement
on essentially flat year-over-year net sales
Adjusted net income per share for the quarter was up 21.4%
to $0.17
2016 adjusted net income per share increased about 25% to
$0.49
7th consecutive year of operating margin expansion at MWP
2016 adjusted EBITDA margin of 17.4% - highest in our
history
4Q16 results exclude certain charges totaling $1.7 million, $1.1 million net of tax
4Q15 results exclude certain charges totaling $0.6 million, $0.4 million net of tax
PAGE 24
Fourth Quarter 2016 2015
Net sales $ 302.5 $ 311.4
Adj. operating income $ 48.4 $ 45.0
Adj. operating margin 16.0 % 14.5 %
Adj. net income per share $ 0.17 $ 0.14
Adj. EBITDA $ 61.8 $ 59.9
Adj. EBITDA margin 20.4 % 19.2 %
$ in millions except per share amounts
DEBT STRUCTURE
Net debt leverage of 1.5x and net debt of
$290.1 million at September 30, 2016, down
from a peak of more than 6x
No significant required principal payments on
outstanding debt before November 2021
No financial maintenance covenants with
excess availability at the greater of $17.5
million or 10.0% of facility amount
• $169 million of excess availability
(as measured using September 30, 2016 data)
DEBT STRUCTURE AT SEPTEMBER 30, 2016
$225 million
ABL Agreement
Expires July 2021*
$500 million
Term Loan B
LIBOR* + 325 bps
due November
2021
* Subject to a floor of 75 bps
Debt Maturity (at 9/30/2016)
$ in millions
Total Debt
$ in millions
PAGE 25
* As amended July 2016
$1.549
$1,127 $1,101 $1.096
$740
$692 $678
$623 $601
$546
$489 $485
CAPITAL ALLOCATION
Acquisitions
Debt reduction
Share repurchases
Growth opportunities
Dividends
Free Cash Flow
($ in millions)
PAGE 26
WHY INVEST IN MWA?
Water industry has fundamentally strong
long-term dynamics
Driven by need for new and upgraded
infrastructure
Limited number of suppliers to end markets
Increasing public awareness of the importance of
water infrastructure
Strong competitive position
Leading brand positions with large installed base
Leading municipal specification positions
Comprehensive distribution network and strong
end-user relationships
Low-cost manufacturing operations using lost foam
process for valves and hydrants
Strong operating leverage as end markets grow
Recovery of residential construction market
Increased municipal spending
Operational excellence initiatives
Leveraging strengths with emerging trends
Develop Intelligent Water TechnologyTM solutions
Grow proprietary fixed leak detection offerings
domestically and internationally
Expand smart metering
Strategic acquisitions / partnerships
PAGE 27
Supplemental
Data
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
PAGE 29
Quarter ended September 30, 2016
Mueller Co. Anvil
Mueller
Technologies Corporate Total
(in millions, except per share amounts)
GAAP Results:
Net sales $ 190.1 $ 86.9 $ 25.5 $ — $ 302.5
Gross profit $ 71.5 $ 25.8 $ 6.3 $ — $ 103.6
Selling, general and administrative expenses 22.6 16.3 6.8 9.5 55.2
Other charges — 0.8 0.4 0.5 1.7
Operating income (loss) $ 48.9 $ 8.7 $ (0.9 ) $ (10.0 ) 46.7
Interest expense, net 5.6
Income tax expense 14.6
Net income $ 26.5
Net income per diluted share $ 0.16
Capital expenditures $ 11.9 $ 2.3 $ 2.5 $ 0.1 $ 16.8
Operating margin 25.7 % 10.0 % (3.5 )% 15.4 %
Reconciliation of Non-GAAP performance measures to GAAP
performance measures:
Net income $ 26.5
Other charges 1.7
Income tax benefit of adjusting items (0.6 )
Adjusted net income $ 27.6
Weighted average diluted shares outstanding 163.9
Adjusted net income per diluted share $ 0.17
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
PAGE 30
Quarter ended September 30, 2016
Mueller Co. Anvil
Mueller
Technologies Corporate Total
(in millions, except per share amounts)
Net income $ 26.5
Interest expense, net (1) 5.6
Income tax expense (1) 14.6
Operating income (loss) $ 48.9 $ 8.7 $ (0.9 ) $ (10.0 ) 46.7
Other charges — 0.8 0.4 0.5 1.7
Adjusted operating income (loss) 48.9 9.5 (0.5 ) (9.5 ) 48.4
Depreciation and amortization 8.7 3.2 1.3 0.2 13.4
Adjusted EBITDA $ 57.6 $ 12.7 $ 0.8 $ (9.3 ) $ 61.8
Adjusted operating margin 25.7 % 10.9 % (2.0 )% 16.0 %
Adjusted EBITDA margin 30.3 % 14.6 % 3.1 % 20.4 %
Reconciliation of free cash flow to net cash provided by
operating activities:
Net cash provided by operating activities $ 71.5
Less capital expenditures (16.8 )
Free cash flow $ 54.7
(1) We do not allocate interest or income taxes to our segments.
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
PAGE 31
Quarter ended September 30, 2015
Mueller Co. Anvil
Mueller
Technologies Corporate Total
(in millions, except per share amounts)
GAAP results:
Net sales $ 192.0 $ 93.7 $ 25.7 $ — $ 311.4
Gross profit $ 65.8 $ 25.5 $ 6.4 $ — $ 97.7
Selling, general and administrative expenses 20.2 16.6 8.2 7.7 52.7
Pension settlement 0.2 0.3 — — 0.5
Other charges — — — 0.1 0.1
Operating income (loss) $ 45.4 $ 8.6 $ (1.8 ) $ (7.8 ) 44.4
Interest expense, net 5.8
Income tax expense 16.3
Net income $ 22.3
Net income per diluted share $ 0.14
Capital expenditures $ 7.4 $ 1.8 $ 1.9 $ 0.1 $ 11.2
Operating margin 23.6 % 9.2 % (7.0 )% 14.3 %
Reconciliation of non-GAAP performance measures to GAAP
performance measures:
Net income $ 22.3
Pension settlement 0.5
Other charges 0.1
Income tax benefit of adjusting items (0.2 )
Income tax asset valuation allowance 0.3
Adjusted net income $ 23.0
Weighted average diluted shares outstanding 163.1
Adjusted net income per diluted share $ 0.14
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
PAGE 32
Quarter ended September 30, 2015
Mueller Co. Anvil
Mueller
Technologies Corporate Total
(in millions, except per share amounts)
Net income $ 22.3
Pension settlement 0.5
Other charges 0.1
Income tax benefit of adjusting items (0.2 )
Income tax asset valuation allowance 0.3
Adjusted net income $ 23.0
Weighted average diluted shares outstanding 163.1
Adjusted net income per diluted share $ 0.14
Net income $ 22.3
Interest expense, net (1) 5.8
Income tax expense (1) 16.3
Operating income (loss) $ 45.4 $ 8.6 $ (1.8 ) $ (7.8 ) $ 44.4
Pension settlement 0.2 0.3 — — 0.5
Other charges — — — 0.1 0.1
Adjusted operating income (loss) 45.6 8.9 (1.8 ) (7.7 ) 45.0
Depreciation and amortization 9.7 3.9 1.2 0.1 14.9
Adjusted EBITDA $ 55.3 $ 12.8 $ (0.6 ) $ (7.6 ) $ 59.9
Adjusted operating margin 23.8 % 9.5 % (7.0 )% 14.5 %
Adjusted EBITDA margin 28.8 % 13.7 % (2.3 )% 19.2 %
Reconciliation of free cash flow to net cash provided by
operating activities:
Net cash provided by operating activities $ 68.6
Less capital expenditures (11.2 )
Free cash flow $ 57.4
(1) We do not allocate interest or income taxes to our segments.
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
PAGE 33
Year ended September 30, 2016
Mueller Co. Anvil
Mueller
Technologies Corporate Total
(in millions, except per share amounts)
GAAP Results:
Net sales $ 715.7 $ 338.3 $ 84.9 $ — $ 1,138.9
Gross profit $ 250.7 $ 96.4 $ 17.2 $ — $ 364.3
Selling, general and administrative expenses 88.4 67.3 27.4 35.7 218.8
Pension settlement 2.2 0.5 — 13.9 16.6
Other charges 0.8 1.8 0.9 4.8 8.3
Operating income (loss) $ 159.3 $ 26.8 $ (11.1 ) $ (54.4 ) 120.6
Interest expense, net 23.6
Income tax expense 33.1
Net income $ 63.9
Net income per diluted share $ 0.39
Capital expenditures $ 24.3 $ 7.9 $ 7.0 $ 0.2 $ 39.4
Operating margin 22.3 % 7.9 % (13.1 )% 10.6 %
Reconciliation of Non-GAAP performance measures to GAAP
performance measures:
Net income $ 63.9
Pension settlement 16.6
Other charges 8.3
Income tax benefit of adjusting items (8.9 )
Adjusted net income $ 79.9
Weighted average diluted shares outstanding 163.4
Adjusted net income per diluted share $ 0.49
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
PAGE 34
Year ended September 30, 2016
Mueller Co. Anvil
Mueller
Technologies Corporate Total
(in millions, except per share amounts)
Net income $ 63.9
Interest expense, net (1) 23.6
Income tax expense (1) 33.1
Operating income (loss) $ 159.3 $ 26.8 $ (11.1 ) $ (54.4 ) 120.6
Pension settlement 2.2 0.5 — 13.9 16.6
Other charges 0.8 1.8 0.9 4.8 8.3
Adjusted operating income (loss) 162.3 29.1 (10.2 ) (35.7 ) 145.5
Depreciation and amortization 34.2 13.1 4.8 0.5 52.6
Adjusted EBITDA $ 196.5 $ 42.2 $ (5.4 ) $ (35.2 ) $ 198.1
Adjusted operating margin 22.7 % 8.6 % (12.0 )% 12.8 %
Adjusted EBITDA margin 27.5 % 12.5 % (6.4 )% 17.4 %
Reconciliation of net debt to total debt (end of period):
Current portion of long-term debt $ 5.9
Long-term debt 479.2
Total debt 485.1
Less cash and cash equivalents (195.0 )
Net debt $ 290.1
Net debt leverage (net debt divided by adjusted EBITDA) 1.5x
Reconciliation of free cash flow to net cash provided by
operating activities:
Net cash provided by operating activities $ 145.1
Less capital expenditures (39.4 )
Free cash flow $ 105.7
(1) We do not allocate interest or income taxes to our segments.
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
PAGE 35
Year ended September 30, 2015
Mueller Co. Anvil
Mueller
Technologies Corporate Total
(in millions, except per share amounts)
GAAP results:
Net sales $ 702.2 $ 371.1 $ 91.2 $ — $ 1,164.5
Gross profit $ 229.1 $ 101.1 $ 17.1 $ — $ 347.3
Selling, general and administrative expenses 83.8 70.4 29.9 32.3 216.4
Pension settlement 0.2 0.3 — — 0.5
Loss on Walter receivable — — — 11.6 11.6
Other charges 8.2 0.4 0.1 0.5 9.2
Operating income (loss) $ 136.9 $ 30.0 $ (12.9 ) $ (44.4 ) 109.6
Interest expense, net 27.6
Loss on early extinguishment of debt 31.3
Income tax expense 19.8
Net income $ 30.9
Net income per diluted share $ 0.19
Capital expenditures $ 20.5 $ 10.3 $ 6.5 $ 0.2 $ 37.5
Reconciliation of Non-GAAP performance measures to GAAP
performance measures:
Net income $ 30.9
Pension settlement 0.5
Loss on Walter receivable 11.6
Other charges 9.2
Loss on early extinguishment of debt 31.3
Income tax benefit of adjusting items (19.8 )
Income tax valuation allowance 0.3
Adjusted net income $ 64.0
Weighted average diluted shares outstanding 163.2
Adjusted net income per diluted share $ 0.39
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
PAGE 36
Year ended September 30, 2015
Mueller Co. Anvil
Mueller
Technologies Corporate Total
(in millions, except per share amounts)
Net income $ 30.9
Interest expense, net (1) 27.6
Loss on early extinguishment of debt 31.3
Income tax expense (1) 19.8
Operating income (loss) $ 136.9 $ 30.0 $ (12.9 ) $ (44.4 ) 109.6
Pension settlement 0.2 0.3 — — 0.5
Loss on Walter receivable — — — 11.6 11.6
Other charges 8.2 0.4 0.1 0.5 9.2
Adjusted operating income (loss) 145.3 30.7 (12.8 ) (32.3 ) 130.9
Depreciation and amortization 38.8 14.7 4.2 0.4 58.1
Adjusted EBITDA $ 184.1 $ 45.4 $ (8.6 ) $ (31.9 ) $ 189.0
Adjusted operating margin 20.7 % 8.3 % (14.0 )% 11.2 %
Adjusted EBITDA margin 26.2 % 12.2 % (9.4 )% 16.2 %
Reconciliation of net debt to total debt (end of period):
Current portion of long-term debt $ 6.1
Long-term debt 482.9
Total debt 489.0
Less cash and cash equivalents (113.1 )
Net debt $ 375.9
Net debt leverage (net debt divided by adjusted EBITDA) 2.0x
Reconciliation of free cash flow to net cash provided by
operating activities:
Net cash provided by operating activities $ 87.8
Less capital expenditures (37.5 )
Free cash flow $ 50.3
(1) We do not allocate interest or income taxes to our segments.
Questions