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| 8-K - 8-K - Mueller Water Products, Inc. | form8-k05x08x17xinvestorpr.htm |
Where Intelligence
Meets Infrastructure
F E B R U A R Y 2 0 1 7
M U E L L E R W A T E R P R O D U C T S . C O M
Oppenheimer
12th Annual Industrial Growth Conference
May 9, 2017
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 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. 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 an
attachment to this presentation and have been posted
online at www.muellerwaterproducts.com.
PAGE 2
NON-GAAP Financial Measures
M U E L L E R W A T E R P R O D U C T S . C O M 2M A Y 2 0 1 7
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. Examples of forward-looking statements include, but are not limited to, statements we
make regarding our expectations for growth in our key end markets, predictability of warranty experience,
anticipated stronger operating leverage 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.
Forward-looking Statements
M U E L L E R W A T E R P R O D U C T S . C O M 3M A Y 2 0 1 7
The Company sold Anvil in January 2017. As a result, Anvil's operating results
for all prior periods, and the gain from its sale, have been classified as
discontinued operations. The Company filed a Form 8-K on February 21, 2017
which included the reclassified 2016 results by quarter.
PAGE 4
Reclassified Financials
M U E L L E R W A T E R P R O D U C T S . C O M 4M A Y 2 0 1 7
Introduction
M U E L L E R W A T E R P R O D U C T S . C O M 5M A Y 2 0 1 7
Repositioned Mueller Water Products as a higher-margin, pure-play water
infrastructure company in attractive core markets
Divested Anvil International (non-core asset) for net proceeds of approximately $250
million and further strengthened balance sheet
Creating value for shareholders by focusing on:
Organic growth
Acquisitions
Manufacturing excellence
Pure-play water
infrastructure company in
attractive core markets,
industry-leading margins,
strong balance sheet and
proven leadership team –
focused on growth.
Investment Highlights
Industry-leading adjusted
operating margins
Leading brand position in water
infrastructure
Attractive end markets poised
for increased investment
One of the largest installed
bases of iron gate valves and
fire hydrants in the U.S.
Strengthened balance sheet
through divestitures of non-
core assets, debt restructuring,
debt pay down and ongoing
focus on free cash flow
Acquiring and expanding
intelligent water technology
offerings
Improving results driven by
strong incremental operating
leverage as end markets grow
M U E L L E R W A T E R P R O D U C T S . C O M 6M A Y 2 0 1 7
Solid Product Portfolio & Attractive End Markets
M U E L L E R W A T E R P R O D U C T S . C O M
FY2016 NET SALES: $801 MILLION
PORTFOLIO
Fire Hydrants Valves Metering Systems
Leak Detection and
Pipe Condition
Assessment
60%
Repair and replacement
of municipal water
distribution and
treatment systems
30%
Residential
construction
10%
Natural gas
utilities
100%
Municipal spending
7M A Y 2 0 1 7
Brass
Business Performance: Long-Term Targets
M U E L L E R W A T E R P R O D U C T S . C O M
TOP-LINE GROWTH
• Mueller Co. >5%
• Mueller Technologies >15%
EARNINGS LEVERAGE
• Mueller Co. adjusted EBITDA margins >30%
• Mueller Technologies adjusted EBITDA margins ~20%
CAPITAL
MANAGEMENT
• Reduce working capital as a percentage of net sales
• Free cash flow to exceed adjusted income from continuing
operations
8M A Y 2 0 1 7
LTM Business Performance
M U E L L E R W A T E R P R O D U C T S . C O M 9
Note: All amounts shown are LTM ended March 31, 2017
(1) Mueller Co. adjusted operating income and adjusted EBITDA exclude charges totaling $4.1 million. Mueller
Technologies adjusted operating loss and adjusted EBITDA exclude charges totaling $10.3 million.
$ 716.7
165.1
35.3
200.4
Fire Hydrants, Iron Gate
Valves, Butterfly, Ball &
Plug Valves
$ 90.5
(8.0)
5.1
(2.9)
Metering Systems Leak
Detection and Pipe
Condition Assessment
$ 807.2
121.1
40.9
161.9
Water Infrastructure
M A Y 2 0 1 7
As of March 31, 2017
$ in millions
Net Sales
Adjusted Operating
Income(Loss)(1)
Depreciation &
Amortization
Adjusted EBITDA(1)
Product and Services
Portfolio
Intelligent Water Technology™
Mueller Water Products provides
products and offers services used in
the transmission, distribution and
measurement of safe, clean drinking
water and in water treatment facilities.
These smart technology products and
services help utilities actively diagnose,
monitor and control the delivery of
drinking water, making Mueller Water
Products an integral part of the water
system.
M U E L L E R W A T E R P R O D U C T S . C O M 1 0M A Y 2 0 1 7
Our Leading Product Positions
M U E L L E R W A T E R P R O D U C T S . C O M 1 1
#1 PRODUCTPOSITION #1 PRODUCTPOSITION #1
PRODUCT
POSITION #2 PRODUCTPOSITION
Company estimates based on internal analysis and information from trade associations and distributor networks, where available.
M A Y 2 0 1 7
Drivers of Success
Manufacturing Excellence
Increasing equipment efficiency
Reducing capital expenditures
payback period
Driving margin expansion
M U E L L E R W A T E R P R O D U C T S . C O M 1 2
Organic Growth
Growing end markets
Developing new products
Enhancing existing products
Exploring adjacencies
Acquisitions
Focusing on water industry
Pursuing growth opportunities via
– Channel
– Geography
– Technology
– Breadth of product line
M A Y 2 0 1 7
Why Invest in MWA?
M U E L L E R W A T E R P R O D U C T S . C O M 1 3
Fundamentally sound long-term dynamics
Aging infrastructure driving need for investment
Increasing public awareness of the need to
upgrade water infrastructure
Limited number of end-market suppliers
Strong operating leverage as end markets grow
Growing residential construction market
Increased municipal spending
Enhanced operational excellence initiatives
Strong competitive position
Leading brand and municipal specification
positions
Large installed base
Comprehensive distribution network and strong
end-user relationships
Low-cost manufacturing operations using lost
foam process for valves and hydrants
Leveraging strengths with emerging trends
Intelligent Water TechnologyTM solutions
Proprietary fixed leak detection offerings - both
domestically and internationally
Smart metering
Strategic acquisitions / partnerships
M A Y 2 0 1 7
Significant
Market
Opportunities
Market Driver: Housing Starts
M U E L L E R W A T E R P R O D U C T S . C O M 1 5
Source: U.S. Census Bureau
Forecast: Blue Chip Economic Indicators, March 2017
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
NAHB Housing Market Index - National (1987 – April 2017)
Seasonally Adjusted Annualized
Historical Housing Starts (1959 –2017)
Seasonally Adjusted Annualized
Rates-Units in 000’s
Source: NAHB, April 2017
M A Y 2 0 1 7
Bottom of prior
cycle
1959 to 2015:
Average 1,443
April 2009 – lowest
starts (499) since
Census Bureau
began keeping record
in 1959
2017 Blue Chip
Consensus
forecast of 1,280
The Market Opportunity is Significant & Growing
M U E L L E R W A T E R P R O D U C T S . C O M 1 6
Repair & Replacement Market
(1) ASCE: 2017 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
Future Drinking Water Infrastructure
Expenditure Needs3 Valves and fire hydrants are typically replaced at 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
Based on projected deterioration of pipes, entering decade of
accelerating need (see chart below)
M A Y 2 0 1 7
(2)
Funding Water Infrastructure Repair
M U E L L E R W A T E R P R O D U C T S . C O M 1 7
Historical Water Rates Compared to
Other Utilities(1)
CPI Utilities
(NSA 1982-1984 = 100)
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
4.1% for 12 months ended March 2017(1)
• 90% funded at local level(4)
• Drinking Water State Revolving Fund: $800 million in FY
2016
• WIFIA: $17 million with the economic impact of $2 billion
M A Y 2 0 1 7
(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 Gap Analysis
Bringing Intelligence to Water Infrastructure
M U E L L E R W A T E R P R O D U C T S . C O M 1 8
Water Conservation Customer Service Focus
Awareness/education
Ongoing monitoring
Sustainability
29% of U.S. experiencing
drought or abnormally dry
conditions(1)
240,000 water main
breaks per year(2)
Non-Revenue Water
Up to 30% of treated water is
lost or unaccounted for in the
water system(3)
Growing number of states
requiring water loss
audits(4)
(1) U.S. Drought Monitor May 2017
(2) EPA Aging Water Infrastructure Research Program
(3) Navigant Research
(4) National Resource Defense Council
M A Y 2 0 1 7
“Smart metering is a highly successful way of accurately
identifying water loss.” – Black & Veatch 2016 Strategic Directions
in the U.S. Water Industry
Bringing Intelligence to Water Infrastructure
M U E L L E R W A T E R P R O D U C T S . C O M 1 9
Provide longer-range
AMI systems
Manage water service
remotely
Detect leaks
Increase education with
consumer portal
A smart utility is a subset of a smart city and the
Mi.Net System is the backbone and platform for a
smart water network.
Detect leaks on fixed transmission
and distribution mains; ongoing
monitoring
Assess condition of distribution
and transmission mains
Smart Metering
Leak Detection and Pipe
Condition Assessment
M A Y 2 0 1 7
Remote Disconnect Meter
Mueller Systems Network
Operations Center
Providing data analytics to manage water assets
Leak Detection
Where Intelligence Meets Infrastructure®
M U E L L E R W A T E R P R O D U C T S . C O M 2 0M A Y 2 0 1 7
DETECTING LEAKS
Identify leaks on transmission
and distribution mains
FIGHTING FIRES
Protect people, homes and
property
ENSURING RELIABILITY
Industry-leading 350 psi
resilient wedge gate valve
All-ductile iron
COMMUNICATING
CRITICAL DATA
Monitor water usage
Manage water systems remotely
Enhance customer service
MONITORING
PRESSURE
Monitor water distribution system
pressure
Your Infrastructure
is speaking.
Are You Listening?
Actions &
Business
Results
Management Actions / Initiatives
Divested Anvil and U.S. Pipe
Implemented Lean Six Sigma and
other manufacturing improvements:
Increased production capacity
within existing footprint
Lowered labor costs
Reduced manufacturing footprint
Generated free cash flow of
approximately $80 million in
FY2016– history of strong
free cash flow generation
Reduced debt by more than
$600 million from September
30, 2008 through March 31,
2017
Amended term loan credit
agreement and reduced
applicable interest rate
spread by 75 basis points
Reduce costs and improve
operating leverage
Manage working capital and
capital expenditures to
generate free cash flow
Pursue strategic growth
opportunities by leveraging
the Mueller brand
Acquired automatic control valves
Acquired and investing in leak
detection and pipe condition
assessment technologies
Acquired and investing in AMI
technology
Enhanced Smart Water offering with
remote disconnect meter, integrated
leak detection and longer-range
communications capabilities
M U E L L E R W A T E R P R O D U C T S . C O M 2 2M A Y 2 0 1 7
Increased net sales 1.3 percent to $199.7
million as compared with $197.2 million last
year.
Adjusted gross margin increased 100 basis
points in the quarter
Both Mueller Co. and Mueller Technologies
contributed to the 5.9 percent increase in
adjusted operating income from continuing
operations to $23.2 million from $21.9
million last year.
Improved adjusted income from continuing
operations to $15.4 million, or $0.09 per
share, as compared with $10.8 million, or
$0.07 per share, last year.
Trailing 12 months adjusted EBITDA was
$161.9 million, or 20.1 percent of net sales.
PAGE 23
$ in millions except per share amounts
2Q17 results exclude charges totaling $12.3 million, $10.7 million net of tax
2Q16 results exclude charges totaling $0.8 million, $0.5 million net of tax
Q2 2017 CONSOLIDATED NON-GAAP RESULTS
M U E L L E R W A T E R P R O D U C T S . C O M 2 3M A Y 2 0 1 7
Q2 2017 Key Operating Take Aways
Mueller Technologies’ AMI business grew by 40%; sixth consecutive quarter of
year-over-year double digit growth in our AMI product line
Fourth consecutive quarter of improved adjusted operating performance year-
over-year at Mueller Technologies.
Both Mueller Co. and Mueller Technologies improved adjusted operating
margin and adjusted operating income compared with the prior year; 19th
consecutive quarter of adjusted operating margin expansion at Mueller Co.
Adjusted operating margin expansion driven by higher shipment volumes at
Mueller Technologies and productivity improvements at Mueller Co.
Acquired Singer Valve, which added net sales growth, but is not expected to
add a meaningful amount of adjusted operating income in FY 17
M U E L L E R W A T E R P R O D U C T S . C O M 2 4M A Y 2 0 1 7
Debt Structure
M U E L L E R W A T E R P R O D U C T S . C O M 2 5
■ Net debt leverage 0.9x 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
■ ~ $125 million excess availability as of March 31, 2017
Debt Maturity (at 3/31/2017)
$ in millions
Debt Structure at March 31, 2017
$225 million
ABL Agreement
Expires July 2021
$500 million
Term Loan B
LIBOR* + 250 bps
due November 2021
* Subject to a floor of 75 bps
M A Y 2 0 1 7
$3 $5 $5 $5 $5
$466
$0
$100
$200
$300
$400
$500
FY17 FY18 FY19 FY20 FY21 FY22
Managed Capital Allocation
M U E L L E R W A T E R P R O D U C T S . C O M 2 6M A Y 2 0 1 7
Acquisitions
Singer Valve
Share Repurchases
Authorized to repurchase up to $250
million
Announced $50 million accelerated
share repurchase program on
February 3, 2017, which concluded
at the end of April
Dividends
Increased quarterly dividend 33% to $0.04 per
share
Organic Growth Opportunities
Developing new products
Making capital investments
Debt Reduction
Supplemental
Data
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
PAGE 28
Quarter ended March 31, 2017
Mueller Co.
Mueller
Technologies Corporate Consolidated
(dollars in millions, except per share amounts)
Net sales $ 181.6 $ 18.1 $ — $ 199.7
Gross profit $ 58.9 $ (6.5) $ — $ 52.4
Selling, general and administrative expenses 23.0 7.1 8.9 39.0
Other charges 1.6 0.1 0.8 2.5
Operating income (loss) from continuing operations $ 34.3 $ (13.7) $ (9.7) 10.9
Interest expense, net 5.5
Income tax expense 0.7
Income from continuing operations $ 4.7
Income from continuing operations per diluted share $ 0.03
Capital expenditures $ 4.7 $ 5.2 $ — $ 9.9
Operating margin 18.9 % (75.7 )% 5.5 %
Reconciliation of Non-GAAP performance measures to GAAP performance
measures:
Income from continuing operations $ 4.7
Discrete warranty charge 9.8
Other charges 2.5
Income tax benefit of adjusting items (1.6)
Adjusted income from continuing operations $ 15.4
Weighted average diluted shares outstanding 162.5
Adjusted earnings per share $ 0.09
M U E L L E R W A T E R P R O D U C T S . C O M 2 8M A Y 2 0 1 7
PAGE 29
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
Quarter ended March 31, 2017
Mueller Co.
Mueller
Technologies Corporate Consolidated
(dollars in millions, except per share amounts)
Net income
$ 73.3
Less income from discontinued operations (68.6)
Interest expense, net (1) 5.5
Income tax expense (1) 0.7
Operating income (loss) from continuing operations $ 34.3 $ (13.7) $ (9.7) 10.9
Discrete warranty charge — 9.8 — 9.8
Other charges 1.6 0.1 0.8 2.5
Adjusted operating income (loss) from continuing operations 35.9 (3.8) (8.9) 23.2
Depreciation and amortization 9.1 1.4 0.1 10.6
Adjusted EBITDA $ 45.0 $ (2.4) $ (8.8) $ 33.8
Adjusted operating margin 19.8 % (21.0 )% 11.6 %
Adjusted EBITDA margin 24.8 % (13.3 )% 16.9 %
(1) We do not allocate interest or income taxes to our segments.
Adjusted EBITDA $ 45.0 $ (2.4) $ (8.8) $ 33.8
Three prior quarters' adjusted EBITDA 155.4 (0.5) (26.8) 128.1
Trailing twelve months' adjusted EBITDA $ 200.4 $ (2.9) $ (35.6) $ 161.9
Reconciliation of net debt to total debt (end of period):
Current portion of long-term debt $ 5.5
Long-term debt 476.3
Total debt 481.8
Less cash and cash equivalents 328.3
Net debt $ 153.5
Net debt leverage (net debt divided by trailing twelve months' adjusted EBITDA) 0.9x
Reconciliation of free cash flow to net cash provided by operating activities of
continuing operations:
Net cash provided by operating activities of continuing operations $ 3.6
Less capital expenditures (9.9)
Free cash flow $ (6.3)
M U E L L E R W A T E R P R O D U C T S . C O M 2 9M A Y 2 0 1 7
PAGE 30
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
Quarter ended March 31, 2016
Mueller
Co.
Mueller
Technologi
es Corporate
Consolidat
ed
(dollars in millions, except per share amounts)
Net sales $ 182.2 $ 15.0 $ — $ 197.2
Gross profit $ 57.7 $ 1.6 $ — $ 59.3
Selling, general and administrative expenses 22.4 6.5 8.5 37.4
Other charges 0.4 — 0.4 0.8
Operating income (loss) $ 34.9 $ (4.9) $ (8.9) 21.1
Interest expense, net 5.9
Income tax expense 4.9
Income from continuing operations $ 10.3
Income from continuing operations per diluted share $ 0.06
Capital expenditures $ 5.2 $ 2.0 $ — $ 7.2
Operating margin 19.2% (32.7 )% 10.7%
Reconciliation of Non-GAAP performance measures to
GAAP performance measures:
Income from continuing operations $ 10.3
Other charges 0.8
Income tax benefit of adjusting items (0.3)
Adjusted income from continuing operations $ 10.8
Weighted average diluted shares outstanding 163.1
Adjusted earnings per share $ 0.07
M U E L L E R W A T E R P R O D U C T S . C O M 3 0M A Y 2 0 1 7
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
Quarter ended March 31, 2016
Mueller Co.
Mueller
Technologies Corporate Consolidated
(dollars in millions, except per share amounts)
Net income $ 15.7
Less income from discontinued operations (5.4)
Interest expense, net (1) 5.9
Income tax expense (1) 4.9
Operating income (loss) from continuing operations $ 34.9 $ (4.9) $ (8.9) 21.1
Other charges 0.4 — 0.4 0.8
Adjusted operating income (loss) from continuing operations 35.3 (4.9) (8.5) 21.9
Depreciation and amortization 8.6 1.2 0.1 9.9
Adjusted EBITDA $ 43.9 $ (3.7) $ (8.4) $ 31.8
Adjusted operating margin 19.4% (32.7
)
% 11.1%
Adjusted EBITDA margin 24.1% (24.7
)
% 16.1%
(1) We do not allocate interest or income taxes to our segments.
Adjusted EBITDA $ 43.9 $ (3.7) $ (8.4) $ 31.8
Three prior quarters' adjusted EBITDA 144.2 (5.2) (22.5) 116.5
Trailing twelve months' adjusted EBITDA $ 188.1 $ (8.9) $ (30.9) $ 148.3
Reconciliation of net debt to total debt (end of period):
Current portion of long-term debt $ 5.6
Long-term debt 480.6
Total debt 486.2
Less cash and cash equivalents 93.6
Net debt $ 392.6
Net debt leverage (net debt divided by trailing twelve months' adjusted
EBITDA) 2.6x
Reconciliation of free cash flow to net cash provided by operating activities of continuing
operations:
Net cash provided by operating activities of continuing operations $ 3.2
Less capital expenditures (7.2)
Free cash flow $ (4.0)
M U E L L E R W A T E R P R O D U C T S . C O M 3 1M A Y 2 0 1 7
PAGE 32
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
Six months ended March 31, 2017
Mueller Co.
Mueller
Technologies Corporate Consolidated
(dollars in millions, except per share amounts)
Net sales $ 327.9 $ 39.0 $ — $ 366.9
Gross profit $ 106.4 $ (2.3) $ — $ 104.1
Selling, general and administrative expenses 44.3 13.5 17.7 75.5
Other charges 1.7 0.1 2.0 3.8
Operating income (loss) from continuing operations $ 60.4 $ (15.9) $ (19.7) 24.8
Interest expense, net 11.9
Income tax expense 2.8
Income from continuing operations $ 10.1
Income from continuing operations per diluted share $ 0.06
Capital expenditures $ 7.7 $ 6.3 $ 0.1 $ 14.1
Operating margin 18.4 % (40.8 )% 6.8 %
Reconciliation of Non-GAAP performance measures to GAAP
performance measures:
Income from continuing operations $ 10.1
Discrete warranty charge 9.8
Other charges 3.8
Income tax benefit of adjusting items (2.0)
Adjusted income from continuing operations $ 21.7
Weighted average diluted shares outstanding 163.2
Adjusted earnings per share $ 0.13
M U E L L E R W A T E R P R O D U C T S . C O M 3 2M A Y 2 0 1 7
PAGE 33
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
Six months ended March 31, 2017
Mueller Co.
Mueller
Technologies Corporate Consolidated
(dollars in millions, except per share amounts)
Net income $ 80.0
Less income from discontinued operations (69.9)
Interest expense, net (1) 11.9
Income tax expense (1) 2.8
Operating income (loss) from continuing operations $ 60.4 $ (15.9) $ (19.7) 24.8
Discrete warranty charge — 9.8 — 9.8
Other charges 1.7 0.1 2.0 3.8
Adjusted operating income (loss) from continuing operations 62.1 (6.0) (17.7) 38.4
Depreciation and amortization 18.1 2.6 0.2 20.9
Adjusted EBITDA $ 80.2 $ (3.4) $ (17.5) $ 59.3
Adjusted operating margin 18.9 % (15.4 )% 10.5 %
Adjusted EBITDA margin 24.5 % (8.7 )% 16.2 %
Free cash flow:
Net cash used in operating activities of continuing operations $ (16.3)
Less capital expenditures (14.1)
Free cash flow $ (30.4)
(1) We do not allocate interest or income taxes to our segments.
M U E L L E R W A T E R P R O D U C T S . C O M 3 3M A Y 2 0 1 7
PAGE 34
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
Six months ended March 31, 2016
Mueller Co.
Mueller
Technologies Corporate Consolidated
(dollars in millions, except per share amounts)
Net sales $ 326.9 $ 33.4 $ — $ 360.3
Gross profit $ 101.7 $ 5.2 $ — $ 106.9
Selling, general and administrative expenses 42.4 13.4 17.0 72.8
Other charges 0.6 0.5 0.5 1.6
Operating income (loss) $ 58.7 $ (8.7) $ (17.5) 32.5
Interest expense, net 12.0
Income tax expense 6.2
Income from continuing operations $ 14.3
Income from continuing operations per diluted share $ 0.09
Capital expenditures $ 8.8 $ 3.0 $ 0.1 $ 11.9
Operating margin 18.0% (26.0 )% 9.0%
Reconciliation of Non-GAAP performance measures to GAAP
performance measures:
Income from continuing operations $ 14.3
Other charges 1.6
Income tax benefit of adjusting items (0.5)
Adjusted income from continuing operations $ 15.4
Weighted average diluted shares outstanding 163.1
Adjusted earnings per share $ 0.09
M U E L L E R W A T E R P R O D U C T S . C O M 3 4M A Y 2 0 1 7
PAGE 35
SEGMENT RESULTS AND RECONCILIATION
OF GAAP TO NON-GAAP PERFORMANCE MEASURES
Six months ended March 31, 2016
Mueller Co.
Mueller
Technologies Corporate Consolidated
(dollars in millions, except per share amounts)
Net income $ 21.9
Less income from discontinued operations (7.6)
Interest expense, net (1) 12.0
Income tax expense (1) 6.2
Operating income (loss) from continuing operations $ 58.7 $ (8.7) $ (17.5) 32.5
Other charges 0.6 0.5 0.5 1.6
Adjusted operating income (loss) from continuing operations 59.3 (8.2) (17.0) 34.1
Depreciation and amortization 17.0 2.3 0.2 19.5
Adjusted EBITDA $ 76.3 $ (5.9) $ (16.8) $ 53.6
Adjusted operating margin 18.1% (24.6 )% 9.5%
Adjusted EBITDA margin 23.3% (17.7 )% 14.9%
Free cash flow:
Net cash used in operating activities of continuing operations $ (5.1)
Less capital expenditures (11.9)
Free cash flow $ (17.0)
(1) We do not allocate interest or income taxes to our segments.
M U E L L E R W A T E R P R O D U C T S . C O M 3 5M A Y 2 0 1 7
3 6
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 $3.0 in 2016.
Note: Mueller Co.
2002-2012 net sales
and adjusted EBITDA
include Mueller
Technologies in
these years
($ 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
Fiscal year ended September 30
M U E L L E R W A T E R P R O D U C T S . C O M M A Y 2 0 1 7
Questions