Mueller Water Products Reports Fiscal 2013 Third Quarter Results

Mueller Water Products Reports Fiscal 2013 Third Quarter Results

EPS from Continuing Operations of $0.10; Adjusted EPS of $0.08

Net Sales Increase of 8.5 Percent

ATLANTA--(BUSINESS WIRE)-- Mueller Water Products, Inc. (NYS: MWA) today reported net sales of $299.4 million and net income of $14.1 million for the fiscal 2013 third quarter ended June 30, 2013. The following compares 2013 third quarter results from continuing operations with the prior year period. In the third quarter, the Company:

• Increased net sales $23.5 million to $299.4 million from $275.9 million

• Improved adjusted operating income 25.4 percent to $33.1 million from $26.4 million

• Increased adjusted net income per diluted share to $0.08 from $0.05

• Improved adjusted EBITDA 15.2 percent to $47.7 million from $41.4 million

• Generated free cash flow of $37.7 million, as compared with negative $3.4 million for the 2012 third quarter

"We are pleased with our third quarter results, with an 8.5 percent increase in net sales and a 25.4 percent increase in adjusted operating income," said Gregory E. Hyland, chairman, president and chief executive officer of Mueller Water Products. "These results reflect our best overall quarter in the past five years with each of our business segments contributing to the improvement. Mueller Co. and Anvil each increased net sales and adjusted operating margins both year-over-year and sequentially.

"Mueller Co. continued to benefit from improved operating leverage and the ongoing recovery of our end markets. Net sales increased 9.1 percent and adjusted operating margin improved 180 basis points in the quarter to 15.3 percent. We also saw a strong increase in net sales for our metering and leak detection products and services in the third quarter, demonstrating the progress we continue to make in the marketplace.

"Anvil had a solid quarter, with net sales up 7.3 percent and adjusted operating income up 24.2 percent year-over-year.

"With our improved operating performance and free cash flow generation, we reduced our net debt leverage to 3.6x at June 30, 2013."

Third Quarter Consolidated Results

Net sales for the 2013 third quarter increased $23.5 million, or 8.5 percent, to $299.4 million from 2012 third quarter net sales of $275.9 million, due primarily to higher shipment volumes.

Adjusted operating income for the 2013 third quarter increased 25.4 percent to $33.1 million from adjusted operating income of $26.4 million for the 2012 third quarter. This increase was driven primarily by higher shipment volumes and higher sales prices. Selling, general and administrative expenses increased in the quarter but declined as a percent of net sales to 19.0 percent for the 2013 third quarter from 19.3 percent for the 2012 third quarter.

Third Quarter Segment Results

Mueller Co.

Net sales for the 2013 third quarter increased 9.1 percent to $199.3 million as compared with $182.6 million for the 2012 third quarter. This increase was due to higher shipment volumes particularly of our metering products.

Adjusted operating income for the 2013 third quarter improved 23.6 percent to $30.4 million as compared with $24.6 million for the 2012 third quarter. Adjusted operating margin for the 2013 third quarter improved 180 basis points to 15.3 percent as compared with 13.5 percent for the 2012 third quarter.

Anvil

Net sales for the 2013 third quarter increased 7.3 percent to $100.1 million as compared with $93.3 million for the 2012 third quarter. The increase resulted from higher shipment volumes and higher prices.

Adjusted operating income for the 2013 third quarter improved 24.2 percent to $12.3 million as compared with $9.9 million for the 2012 third quarter. Anvil's adjusted operating margin improved 170 basis points to 12.3 percent as compared with 10.6 percent for the 2012 third quarter.

Interest Expense, Net

Interest expense, net for the 2013 third quarter declined $0.9 million to $12.7 million from $13.6 million for the 2012 third quarter, excluding $1.3 million of non-cash costs for terminated interest rate swap contracts for the 2012 third quarter. This decrease was due to lower levels of total debt outstanding.

Income Taxes

During the 2013 third quarter, income tax expense was $4.2 million on pre-tax income of $20.2 million, or an effective income tax rate of 20.8 percent. The 2013 third quarter expense was reduced by $4.0 million related to a deferred tax asset valuation allowance adjustment. Excluding this adjustment, the effective tax rate for the 2013 third quarter was 40.5 percent and adjusted net income per share was $0.08.

Use of Non-GAAP Measures

The Company reports its financial results under accounting principles generally accepted in the United States ("GAAP"), as well as through the use of non-GAAP measures. The Company presents adjusted operating income (loss), adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per diluted share, free cash flow, net debt and net debt leverage as non-GAAP measures. Adjusted operating income (loss) represents operating income (loss) excluding restructuring. This amount divided by net sales is adjusted operating margin. Adjusted EBITDA represents operating income (loss) excluding restructuring, depreciation and amortization. This amount divided by net sales is adjusted EBITDA margin. The Company presents adjusted operating income (loss), adjusted operating margin, adjusted EBITDA and adjusted EBITDA margin because these are measures management believes are frequently used by securities analysts, investors and other interested parties in the evaluation of financial performance. Adjusted net income (loss) and adjusted net income (loss) per diluted share exclude, on an after-tax basis, discontinued operations, restructuring, certain costs from settled interest rate swap contracts, certain tax adjustments and expenses related to the early extinguishment of debt. 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 from continuing operations. It is presented as a measurement of cash flows because management believes it is commonly used by the investment community. Net debt represents total debt less cash and cash equivalents. Net debt leverage represents net debt divided by trailing 12 months adjusted EBITDA. Net debt and net debt leverage are commonly used by the investment community as measures of indebtedness. 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.

A reconciliation of non-GAAP to GAAP results is included as an attachment to this press release and has been posted online at www.muellerwaterproducts.com.

Conference Call Webcast

Mueller Water Products' quarterly earnings conference call will take place Wednesday, July 31, 2013 at 9:00 a.m. ET. Members of Mueller Water Products' leadership team will discuss the Company's recent financial performance and respond to questions from financial analysts. A live webcast of the call will be available on the Investor Relations section of the Company's website. Please go to the website (www.muellerwaterproducts.com) at least 15 minutes prior to the start of the call to register, download and install any necessary software. A replay of the call will be available for 30 days after the call. To access the replay, please dial 1-866-470-7045. The replay will also be available as a webcast on the Investor Relations section of the Company's website.

Forward-Looking Statements

This press release contains certain statements that may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that address activities, events or developments that we intend, expect, plan, project, believe or anticipate will or may occur in the future are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding recovery in our end markets and the progress we believe Mueller Co.'s metering and leak detection products and services are making in the marketplace. 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. 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.

About Mueller Water Products, Inc.

Mueller Water Products, Inc. (NYS: MWA) is a leading manufacturer and marketer of products and services used in the transmission, distribution and measurement of water. Our broad product and service portfolio includes engineered valves, fire hydrants, metering products and systems, leak detection and pipe condition assessment. We help municipalities increase operational efficiencies, improve customer service and prioritize capital spending, demonstrating why Mueller Water Products is Where Intelligence Meets Infrastructure®. The piping component systems produced by Anvil help build connections that last in commercial, industrial and oil & gas applications. Visit us at www.muellerwaterproducts.com