ATLANTA, Feb 03, 2009 /PRNewswire-FirstCall via COMTEX/ -- Mueller Water Products, Inc.
(NYSE: MWA) today reported net sales of $367.7 million and a net loss of
$400.0 million in the quarter ended December 31, 2008, which included a
goodwill impairment charge of $400.0 million. Summarized consolidated 2009
first quarter results compared to 2008 first quarter results are as follows:
-- Net sales for the 2009 first quarter were $367.7 million, down 10.8
percent compared to $412.3 million for the 2008 first quarter.
-- Loss from operations for the 2009 first quarter was $387.1 million
compared to income of $16.4 million for the 2008 first quarter. Excluding the
goodwill impairment charge and the restructuring items associated with the
closure of U.S. Pipe's manufacturing operations in Burlington, N.J., adjusted
income from operations for the 2009 first quarter was $12.7 million compared
to $32.6 million for the 2008 first quarter. Adjusted operating income margin
was 3.5 percent in the 2009 first quarter compared to 7.9 percent in the 2008
first quarter.
-- Adjusted EBITDA was $35.5 million in the 2009 first quarter compared to
$56.2 million in the 2008 first quarter. Adjusted EBITDA margin for the 2009
first quarter was 9.7 percent compared to 13.6 percent in the 2008 first
quarter.
-- During the 2009 first quarter, the Company determined that the
significant deterioration of equity markets made it more likely than not that
the carrying amount of its goodwill was impaired and recorded an estimated
impairment charge of $400 million.
-- Adjusted net income per diluted share was $0.00 for the 2009 first
quarter compared to $0.07 for the 2008 first quarter.
-- Net debt, which is total debt less cash and cash equivalents, at
December 31, 2008 decreased to $937.2 million from $962.2 million at December
31, 2007.
"Demand for our products dropped significantly during the first quarter of
fiscal 2009, with shipments of our core water infrastructure products down
between 30% and 40% year-over-year. A sharp decline in municipal spending
that had been growing in prior quarters was the primary driver of this
drop-off in orders," said Gregory E. Hyland, chairman, president and chief
executive officer of Mueller Water Products. "The liquidity crisis, budget
shortfalls and uncertainty surrounding the proposed federal stimulus bill all
factored into the decline in municipal spending. Until we see improvement in
our markets, we will continue to be aggressive in taking actions to offset the
volume decline, including reducing headcount and temporarily shutting down
manufacturing operations. We will take the steps necessary to respond to
near-term market conditions while ensuring we are well-positioned to address
the mounting water infrastructure needs in the future."
First Quarter Consolidated Results
Net sales for the quarter decreased $44.6 million year-over-year due to
lower shipment volumes of $80.0 million across all business segments and
unfavorable Canadian currency exchange rates, which were partially offset by
price increases implemented in 2008.
Adjusted income from operations for the quarter of $12.7 million decreased
$19.9 million from the prior year period. 2009 first quarter adjusted income
from operations was negatively impacted by higher raw material costs and lower
shipment volumes, partially offset by higher sales pricing, cost savings and
the gain on the sale of a building.
First Quarter Segment Results
Mueller Co. Segment
Net sales for the Mueller Co. segment of $119.6 million in the 2009 first
quarter declined from 2008 first quarter net sales of $161.6 million. Lower
shipment volumes of $49.0 million were partially offset by higher pricing of
$8.8 million. Shipment volumes of iron gate valves, hydrants and brass
service products in the quarter were below the prior year period.
Adjusted income from operations of $8.5 million and adjusted EBITDA of
$20.8 million in the 2009 first quarter compare to $24.8 million and $37.4
million, respectively, in the 2008 first quarter. Adjusted income from
operations was reduced primarily by $21.2 million of lower shipment volumes
and $6.1 million of higher costs of raw materials, partially offset by cost
reductions of $4.6 million and the higher sales pricing.
U.S. Pipe Segment
Net sales for the U.S. Pipe segment increased in the 2009 first quarter to
$115.7 million from $110.7 million in the 2008 first quarter. The sales
increase was attributable to $22.8 million of higher pricing partially offset
by $17.8 million of lower volume of ductile iron pipe shipments. Higher
pricing did not cover our higher costs of raw materials.
Adjusted loss from operations of $6.5 million and an adjusted EBITDA loss
of $0.4 million in the 2009 first quarter compare to adjusted income from
operations of $0.9 million and adjusted EBITDA of $6.8 million in the 2008
first quarter. The 2009 first quarter results were negatively impacted by
increased raw material costs of $30.4 million and $4.7 million related to
lower shipment volumes. These items were partially offset by cost savings of
$4.4 million and the higher sales pricing.
Anvil Segment
Net sales for the Anvil segment of $132.4 million in the 2009 first
quarter declined from 2008 first quarter net sales of $140.0 million. The net
sales decline was driven by $13.2 million of lower shipment volumes and $6.6
million due to unfavorable Canadian currency exchange rates. This decline was
partially offset by higher sales pricing of $12.2 million.
Income from operations of $21.3 million and EBITDA of $25.5 million in the
2009 first quarter compare to $15.9 million and $20.9 million, respectively,
in the 2008 first quarter. Income from operations increased principally due to
higher sales pricing and a $3.5 million gain on the sale of a building. The
2009 first quarter results were reduced by higher raw material costs of $3.5
million and under-absorbed overhead of $4.7 million.
Goodwill Impairment Charge
As a result of the significant deterioration of equity markets in fiscal
first quarter 2009, the Company evaluated its goodwill and other
indefinite-lived intangible assets for possible impairment. Due to higher
discount rates, the Company determined that its goodwill was impaired and
recorded an estimated impairment charge of $400 million. The final impairment
analysis requires a fair value determination of the Company's recorded and
unrecorded assets and liabilities, and the estimation of these fair values has
not been completed at this time. Any revision to the estimated impairment
charge will be recorded during the 2009 second quarter and is expected not to
exceed an additional $200 million.
The impairment charge is a non-cash item and therefore will not result in
any cash expenditures and will not affect the Company's cash position, cash
flows from operating activities, free cash flow, liquidity position or
availability under its credit facilities. Further, this charge is excluded
from all of the Company's financial results in evaluating financial covenants
under its debt agreements.
Burlington Closure Restructuring Charges
In 2008, the Company closed U.S. Pipe's manufacturing operations in
Burlington, N.J. while retaining the facility as a full-service distribution
center for customers in the Northeast. In connection with this action, the
Company recorded restructuring charges of $16.2 million, or $0.08 per share
after tax, in the 2008 first quarter. The Company expects to incur the
remaining charges of less than $1.0 million over the next six months.
Interest Expense, Net
Interest expense, net of interest income, was $17.3 million in the 2009
first quarter compared to $19.2 million in the 2008 first quarter. Interest
expense declined as a result of lower interest rates and lower average net
debt outstanding.
Income Tax Expense
In the 2009 first quarter, the total income tax benefit of $2.9 million
included a $1.2 million adjustment to reduce the valuation allowance related
to deferred tax assets. The income tax benefit also included $0.4 million
principally related to legacy state income tax matters that have been
effectively resolved. There was no income tax benefit related to the goodwill
impairment charge. Excluding these items, the effective income tax rate was
comparable to the 2008 first quarter.
Use of Non-GAAP Measures
The Company presents certain non-GAAP measures, including adjusted EBITDA,
adjusted income from operations, adjusted net income and free cash flow.
Adjusted EBITDA represents income before depreciation, amortization, interest
expense, interest income, income taxes, goodwill impairment and restructuring
charges. The Company presents adjusted EBITDA because it is an important
supplemental measure of performance, and management believes it is frequently
used by securities analysts, investors and interested parties in the
evaluation of financial performance. 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 accounting
principles generally accepted in the United States ("GAAP"). Adjusted income
from operations and adjusted net income exclude the goodwill impairment and
Burlington-related restructuring charges. These items are excluded since they
are considered unusual and not indicative of recurring operations.
Free cash flow, which represents cash flows from operating activities less
capital expenditures, is presented as a measurement of cash flow because it is
commonly used by the investment community. Further, management uses it as a
reflection of the cash that the Company has available for ongoing business
operations and discretionary purposes.
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, February 4, 2009 at 9:00 a.m. EST. Mueller Water Products'
chairman, president and chief executive officer, Gregory E. Hyland, and
members of the Company's leadership team will discuss the Company's recent
financial performance and respond to questions from financial analysts.
Mueller Water Products invites interested investors to listen to the call and
view the accompanying slide presentation, which will be carried live on its
Web site at www.muellerwaterproducts.com.
Investors interested in listening to the call should log on to the Web
site several minutes before the start of the call. After selecting the
presentation icon, investors should follow the instructions to ensure their
systems are set up to hear the event and view the accompanying presentation
slides.
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 to differ
materially from forecasted results. Those risks include, among others, changes
in customer orders and demand for our products; changes in raw material
prices, labor, equipment and transportation costs; pricing actions by the
Company and its competitors; changes in law; the ability to attract and retain
management and employees; the inability to successfully execute management
strategies with respect to cost reductions, production increases or decreases,
inventory control, and the integration of acquired businesses; and general
changes in economic and financial conditions, residential and non-residential
construction, and municipal spending. 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.
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 used by municipalities, as well as the residential and
non-residential construction, oil and gas, HVAC and fire protection
industries. With latest 12 months net sales of $1.8 billion, the Company is
comprised of three operating segments: Mueller Co., U.S. Pipe and Anvil. Based
in Atlanta, Georgia, the Company employs approximately 6,000 people. Mueller
Water Products Series A common stock trades on the New York Stock Exchange
under the ticker symbol MWA. For more information about Mueller Water
Products, please visit the Company's Web site at www.muellerwaterproducts.com.
MUELLER WATER PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions)
December 31, September 30,
2008 2008
Assets:
Cash and cash equivalents $151.8 $183.9
Receivables, net 209.5 298.2
Inventories 483.6 459.4
Deferred income taxes 48.7 48.2
Other current assets 66.1 60.6
Total current assets 959.7 1,050.3
Property, plant and equipment, net 348.9 356.8
Goodwill 470.7 871.5
Identifiable intangible assets,
net 782.5 789.8
Other noncurrent assets 19.8 21.8
Total assets $2,581.6 $3,090.2
Liabilities and stockholders'
equity:
Current portion of long-term debt $13.2 $9.7
Accounts payable 97.6 156.0
Other current liabilities 96.6 129.0
Total current liabilities 207.4 294.7
Long-term debt 1,075.8 1,085.8
Deferred income taxes 288.1 295.8
Other noncurrent liabilities 104.9 85.0
Total liabilities 1,676.2 1,761.3
Commitments and contingencies
Common stock:
Series A: 400,000,000 shares
authorized; 29,693,126 shares
and 29,528,763 shares
outstanding at December 31,
2008 and September 30, 2008,
respectively 0.3 0.3
Series B: 200,000,000 shares
authorized; 85,844,920 shares
outstanding at December 31,
2008 and September 30, 2008 0.9 0.9
Additional paid-in capital 1,430.4 1,428.9
Accumulated deficit (481.6) (81.6)
Accumulated other comprehensive
loss (44.6) (19.6)
Total stockholders' equity 905.4 1,328.9
Total liabilities and
stockholders' equity $2,581.6 $3,090.2
MUELLER WATER PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in millions, except per share amounts)
Three months ended
December 31,
2008 2007
Net sales $367.7 $412.3
Cost of sales 292.7 317.9
Gross profit 75.0 94.4
Operating expenses:
Selling, general and
administrative 62.3 61.8
Goodwill impairment 400.0 -
Restructuring (0.2) 16.2
Total operating expenses 462.1 78.0
Income (loss) from operations (387.1) 16.4
Interest expense, net 17.3 19.2
Gain on repurchase of debt (1.5) -
Loss before income taxes (402.9) (2.8)
Income tax benefit (2.9) (1.2)
Net loss $(400.0) $(1.6)
Net loss per basic share $(3.47) $(0.01)
Weighted average basic shares
outstanding 115.4 114.9
Dividends declared per share $0.0175 $0.0175
MUELLER WATER PRODUCTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 2008
(UNAUDITED)
(in millions)
Accumu-
lated
other
Additional Accumu- compre-
Common paid-in lated hensive
stock capital deficit loss Total
Balance at September 30, 2008 $1.2 $1,428.9 $(81.6) $(19.6) $1,328.9
Net loss - - (400.0) - (400.0)
Dividends declared - (2.0) - - (2.0)
Stock-based compensation - 3.3 - - 3.3
Stock issued under stock
compensation plans - 0.2 - - 0.2
Net unrealized loss on
derivative instruments - - - (13.8) (13.8)
Foreign currency translation - - - (11.1) (11.1)
Minimum pension liability - - - (0.1) (0.1)
Balance at December 31, 2008 $1.2 $1,430.4 $(481.6) $(44.6) $905.4
MUELLER WATER PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Three months ended
December 31,
2008 2007
Operating activities:
Net loss $(400.0) $(1.6)
Adjustments to reconcile loss to
net cash provided by
(used in) operating activities:
Depreciation 15.5 16.2
Amortization 7.3 7.4
Stock-based compensation 3.3 2.7
Gain on repurchase of debt (1.5) -
Deferred income taxes
(benefit) 1.1 (0.4)
Gain on sales of property,
plant and equipment (3.5) -
Asset impairments 400.0 14.8
Other, net 7.8 (0.8)
Changes in assets and liabilities:
Receivables 84.2 65.0
Inventories (34.6) (12.7)
Other current assets and other
noncurrent assets (9.9) (4.2)
Accounts payable and other
liabilities (87.6) (30.5)
Net cash provided by (used
in) operating activities (17.9) 55.9
Investing activities:
Capital expenditures (10.0) (16.8)
Proceeds from sales of property,
plant and equipment 3.9 7.1
Net cash used in investing
activities (6.1) (9.7)
Financing activities:
Decrease in outstanding checks (0.3) (5.4)
Debt paid and repurchased (4.9) (1.4)
Common stock issued 0.2 0.5
Dividends paid (2.0) (2.0)
Net cash used in financing
activities (7.0) (8.3)
Effect of currency exchange rate
changes on cash (1.1) 0.1
Net change in cash and cash
equivalents (32.1) 38.0
Cash and cash equivalents at
beginning of period 183.9 98.9
Cash and cash equivalents at end
of period $151.8 $136.9
MUELLER WATER PRODUCTS, INC.
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES
(UNAUDITED)
(in millions, except per share amounts)
Three months ended December 31, 2008
Mueller U.S.
Co. Pipe Anvil Corporate Total
GAAP results:
Net sales $119.6 $115.7 $132.4 $- $367.7
Income (loss) from operations $(332.0) $(65.8) $21.3 $(10.6) $(387.1)
Interest expense, net 17.3
Gain on repurchase of debt (1.5)
Income tax benefit (2.9)
Net loss $(400.0)
Net loss per basic share $(3.47)
Capital expenditures $3.3 $3.4 $3.2 $0.1 $10.0
Non-GAAP results:
Adjusted income (loss) from
operations and EBITDA:
Income (loss) from
operations $(332.0) $(65.8) $21.3 $(10.6) $(387.1)
Goodwill impairment 340.5 59.5 400.0
Restructuring - (0.2) - - (0.2)
Adjusted income (loss)
from operations 8.5 (6.5) 21.3 (10.6) 12.7
Depreciation and
amortization 12.3 6.1 4.2 0.2 22.8
Adjusted EBITDA $20.8 $(0.4) $25.5 $(10.4) $35.5
Adjusted net income, excluding
impairment and restructuring:
Net loss $(400.0)
Goodwill impairment 400.0
Restructuring - ($0.2)
million, net of tax (0.1)
Adjusted net loss,
excluding impairment and
restructuring $(0.1)
Adjusted net loss per
basic share, excluding
impairment and
restructuring $(0.00)
Free cash flow:
Net cash used by operating
activities $(17.9)
Capital expenditures (10.0)
Free cash flow $(27.9)
Net debt (end of period):
Current portion of long-term
debt $13.2
Long-term debt 1,075.8
Total debt 1,089.0
Less cash and cash
equivalents (151.8)
Net debt $937.2
Three months ended December 31, 2007
Mueller U.S.
Co. Pipe Anvil Corporate Total
GAAP results:
Net sales $161.6 $110.7 $140.0 $- $412.3
Income (loss) from operations $24.8 $(15.3) $15.9 $(9.0) $16.4
Interest expense, net 19.2
Income tax benefit (1.2)
Net loss $(1.6)
Net loss per basic share $(0.01)
Capital expenditures $4.4 $9.1 $3.3 $- $16.8
Non-GAAP results:
Adjusted income (loss) from
operations and EBITDA:
Income (loss) from operations $24.8 $(15.3) $15.9 $(9.0) $16.4
Restructuring - 16.2 - - 16.2
Adjusted income (loss) from
operations 24.8 0.9 15.9 (9.0) 32.6
Depreciation and amortization 12.6 5.9 5.0 0.1 23.6
EBITDA $37.4 $6.8 $20.9 $(8.9) $56.2
Adjusted net income, excluding
restructuring:
Net loss $(1.6)
Restructuring - $16.2 million,
net of tax 9.5
Adjusted net income,
excluding restructuring $7.9
Adjusted net income per
diluted share, excluding
restructuring $0.07
Free cash flow:
Net cash provided by operating
activities $55.9
Capital expenditures (16.8)
Free cash flow $39.1
Net debt (end of period):
Current portion of long-term
debt $6.1
Long-term debt 1,093.0
Total debt 1,099.1
Less cash and cash equivalents (136.9)
Net debt $962.2
SOURCE Mueller Water Products, Inc.
