UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x                              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,December 31, 2014
o                       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-32892
MUELLER WATER PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-3547095
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Abernathy Road N.E.
Suite 1200
Atlanta, GA 30328
(Address of principal executive offices)
(770) 206-4200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer     x             Accelerated filer         o  
Non-accelerated filer      o            Smaller reporting company     o 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
There were 159,712,042160,744,136 shares of common stock of the registrant outstanding at JulyJanuary 31, 2014.2015.
 



PART I
Item 1.FINANCIAL STATEMENTS
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

June 30, September 30,December 31, September 30,
2014 20132014 2014
(in millions, except share amounts)(in millions, except share amounts)
Assets:      
Cash and cash equivalents$150.9
 $123.6
$45.1
 $161.1
Receivables, net183.3
 164.5
138.8
 182.1
Inventories192.0
 208.5
217.3
 198.0
Deferred income taxes40.5
 26.7
35.6
 38.6
Other current assets46.5
 46.1
53.1
 44.1
Total current assets613.2
 569.4
489.9
 623.9
Property, plant and equipment, net142.8
 141.9
143.4
 146.3
Identifiable intangible assets532.9
 553.1
Intangible assets526.4
 533.6
Other noncurrent assets14.0
 17.5
17.3
 13.3
Total assets$1,302.9
 $1,281.9
$1,177.0
 $1,317.1
      
Liabilities and stockholders’ equity:   
Liabilities and equity:   
Current portion of long-term debt$56.3
 $1.3
$6.1
 $46.2
Accounts payable84.6
 101.2
76.7
 116.0
Other current liabilities70.6
 80.6
59.5
 82.2
Total current liabilities211.5
 183.1
142.3
 244.4
Long-term debt544.5
 599.5
493.5
 499.4
Deferred income taxes162.2
 141.5
142.3
 150.4
Other noncurrent liabilities40.9
 29.6
74.5
 71.3
Total liabilities959.1
 953.7
852.6
 965.5
      
Commitments and contingencies (Note 10)      
      
Common stock: 600,000,000 shares authorized; 159,663,477 and 158,234,300 shares outstanding at June 30, 2014 and September 30, 2013, respectively1.6
 1.6
Common stock: 600,000,000 shares authorized; 160,601,903 and 159,760,671 shares outstanding at December 31, 2014 and September 30, 2014, respectively1.6
 1.6
Additional paid-in capital1,581.6
 1,584.4
1,581.2
 1,582.8
Accumulated deficit(1,199.9) (1,229.2)(1,193.9) (1,173.7)
Accumulated other comprehensive loss(39.5) (28.6)(66.0) (60.7)
Total stockholders’ equity343.8
 328.2
Total liabilities and stockholders’ equity$1,302.9
 $1,281.9
Total Company stockholders’ equity322.9
 350.0
Noncontrolling interest1.5
 1.6
Total equity324.4
 351.6
Total liabilities and equity$1,177.0
 $1,317.1


The accompanying notes are an integral part of the consolidated financial statements.
1

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Nine months endedThree months ended
June 30, June 30,December 31,
2014 2013 2014 20132014 2013
(in millions, except per share amounts)(in millions, except per share amounts)
Net sales$318.5
 $299.4
 $864.0
 $827.6
$261.8
 $257.4
Cost of sales221.2
 209.4
 617.4
 603.2
190.5
 190.3
Gross profit97.3
 90.0
 246.6
 224.4
71.3
 67.1
Operating expenses:          
Selling, general and administrative55.3
 56.9
 162.5
 159.0
55.0
 53.0
Restructuring0.2
 0.2
 3.0
 1.3
8.2
 0.1
Total operating expenses55.5
 57.1
 165.5
 160.3
63.2
 53.1
Operating income41.8
 32.9
 81.1
 64.1
8.1
 14.0
Interest expense, net12.5
 12.7
 37.6
 39.0
9.4
 12.6
Loss on early extinguishment of debt—
 —
 —
 1.4
31.3
 —
Income before income taxes29.3
 20.2
 43.5
 23.7
Income tax expense10.8
 4.2
 14.2
 5.1
Income from continuing operations18.5
 16.0
 29.3
 18.6
Income (loss) from discontinued operations—
 (1.9) —
 8.7
Net income$18.5
 $14.1
 $29.3
 $27.3
Income (loss) before income taxes(32.6) 1.4
Income tax expense (benefit)(12.4) 0.3
Net income (loss)$(20.2) $1.1
          
Net income per basic share:       
Continuing operations$0.12
 $0.10
 $0.18
 $0.12
Discontinued operations—
 (0.01) —
 0.05
Net income$0.12
 $0.09
 $0.18
 $0.17
       
Net income per diluted share:       
Continuing operations$0.11
 $0.10
 $0.18
 $0.12
Discontinued operations—
 (0.01) —
 0.05
Net income$0.11
 $0.09
 $0.18
 $0.17
Net income (loss) per share:   
Basic$(0.13) $0.01
Diluted$(0.13) $0.01
          
Weighted average shares outstanding:          
Basic159.5
 158.0
 159.0
 157.6
160.1
 158.5
Diluted162.2
 160.7
 161.9
 160.0
160.1
 161.7
          
Dividends declared per share$0.0175
 $0.0175
 $0.0525
 $0.0525
$0.0175
 $0.0175


The accompanying notes are an integral part of the consolidated financial statements.
2

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
Three months ended
Three months ended Nine months endedDecember 31,
June 30, June 30,2014 2013
2014 2013 2014 2013(in millions)
(in millions)
Net income$18.5
 $14.1
 $29.3
 $27.3
Other comprehensive income (loss):       
Net income (loss)$(20.2) $1.1
Other comprehensive loss:   
Minimum pension liability(4.9) 2.3
 (14.7) 1.2
(5.2) (4.9)
Income tax effects1.9
 —
 5.7
 6.7
2.0
 1.9
Foreign currency translation2.1
 (1.9) (1.9) (3.7)(2.1) (2.0)
(0.9) 0.4

(10.9)
4.2
(5.3) (5.0)
Comprehensive income$17.6
 $14.5

$18.4
 $31.5
Comprehensive loss$(25.5) $(3.9)

The accompanying notes are an integral part of the consolidated financial statements.
3

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
NINE MONTHS ENDED JUNE 30, 2014
(UNAUDITED)
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
THREE MONTHS ENDED DECEMBER 31,
(UNAUDITED)		MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
THREE MONTHS ENDED DECEMBER 31,
(UNAUDITED)
  Common  
stock
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
loss
 Non-controlling interest Total    
  Common  
stock
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
loss
 Total    (in millions)
(in millions)
Balance at September 30, 2013$1.6
 $1,584.4
 $(1,229.2) $(28.6) $328.2
Net income—
 —
 29.3
 —
 29.3
Balance at September 30, 2014$1.6
 $1,582.8
 $(1,173.7) $(60.7) $1.6
 $351.6
Net loss—
 —
 (20.2) —
 (0.1) (20.3)
Dividends declared—
 (8.4) —
 —
 (8.4)—
 (2.8) —
 —
 —
 (2.8)
Stock-based compensation—
 5.1
 —
 —
 5.1
—
 1.9
 —
 —
 —
 1.9
Shares retained for employee taxes—
 (3.1) —
 —
 (3.1)—
 (2.2) —
 —
 —
 (2.2)
Stock issued under stock compensation plans—
 3.6
 —
 —
 3.6
—
 1.5
 —
 —
 —
 1.5
Other comprehensive loss, net of tax—
 —
 —
 (10.9) (10.9)—
 —
 —
 (5.3) —
 (5.3)
Balance at June 30, 2014$1.6
 $1,581.6
 $(1,199.9) $(39.5) $343.8
Balance at December 31, 2014$1.6
 $1,581.2
 $(1,193.9) $(66.0) $1.5
 $324.4


The accompanying notes are an integral part of the consolidated financial statements.
4

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months endedThree months ended
June 30,December 31,
2014 20132014 2013
(in millions)(in millions)
Operating activities:      
Net income$29.3
 $27.3
Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:   
Income from discontinued operations—
 (8.7)
Income from continuing operations29.3
 18.6
Net income (loss)$(20.2) $1.1
Adjustments to reconcile net income (loss) to net cash used by operating activities:   
Loss on early extinguishment of debt31.3
 —
Depreciation20.3
 22.3
7.0
 6.8
Amortization22.2
 22.1
7.3
 7.9
Asset impairment1.5
 —
Loss on early extinguishment of debt—
 1.4
Stock-based compensation5.2
 5.6
1.9
 2.4
Deferred income taxes13.4
 3.5
(4.0) 0.1
Retirement plans1.0
 3.1
0.1
 0.4
Other, net1.5
 1.8
3.8
 0.5
Changes in assets and liabilities, net of acquisitions:   
Changes in assets and liabilities:   
Receivables(18.9) (2.4)41.3
 29.7
Inventories16.2
 (19.0)(21.6) (6.1)
Other assets1.3
 (0.1)(0.7) 0.2
Liabilities(32.0) (14.1)(73.3) (46.8)
Net cash provided by operating activities from continuing operations61.0
 42.8
Net cash used by operating activities(27.1) (3.8)
Investing activities:      
Capital expenditures(25.5) (23.9)(7.2) (7.5)
Business acquisitions, net of cash acquired—
 (0.2)
Proceeds from sales of assets1.2
 0.1
3.6
 0.2
Net cash used in investing activities from continuing operations(24.3) (24.0)
Other0.3
 —
Net cash used in investing activities(3.3) (7.3)
Financing activities:      
Early repayment of debt—
 (23.2)
Dividends paid(8.4) (8.3)
Common stock issued3.6
 2.3
Shares retained for employee taxes(3.1) (1.5)
Payment of deferred financing fees—
 (0.7)
Proceeds from issuance of debt497.5
 —
Repayments of debt(570.2) —
Proceeds from issuance of common stock1.5
 0.9
Payments of deferred financing fees(7.9) —
Payments of dividends(2.8) (2.8)
Payments of employee taxes related to stock-based compensation(2.2) (3.0)
Other(0.1) 0.2
(0.2) 0.4
Net cash used in financing activities from continuing operations(8.0) (31.2)
Net cash flows from discontinued operations:   
Operating activities—
 (4.1)
Investing activities—
 4.5
Net cash provided by discontinued operations—
 0.4
Net cash used in financing activities(84.3) (4.5)
Effect of currency exchange rate changes on cash(1.4) (1.8)(1.3) (1.2)
Net change in cash and cash equivalents27.3
 (13.8)(116.0) (16.8)
Cash and cash equivalents at beginning of period123.6
 83.0
161.1
 123.6
Cash and cash equivalents at end of period$150.9
 $69.2
$45.1
 $106.8

The accompanying notes are an integral part of the consolidated financial statements.
5

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
Organization
Mueller Water Products, Inc., a Delaware corporation, together with its consolidated subsidiaries, operates in two business segments: Mueller Co. and Anvil. Mueller Co. manufactures valves for water and gas systems, including butterfly, iron gate, tapping, check, knife, plug and ball valves, as well as dry-barrel and wet-barrel fire hydrants and metering systems, and provides leak detection and pipe condition assessment products and services for the water infrastructure industry. Anvil manufactures and sources a broad range of products, including a variety of fittings, couplings, hangers and related products. The “Company,” “we,” “us” or “our” refer to Mueller Water Products, Inc. and its subsidiaries. With regard to the Company's segments, “we,” “us” or “our” may also refer to the segment being discussed.
In July 2014, Mueller Co. acquired a 49% ownership interest in an industrial valve joint venture for $1.7 million. Due to substantive control features in the operating agreement, all of the joint venture's assets, liabilities and results of operations are included in our consolidated financial statements. In the three months ended December 31, 2014, we included an adjustment for the loss attributable to noncontrolling interest in selling, general and administrative expenses. Noncontrolling interest is recorded at its carrying value, which approximates fair value.
Unless the context indicates otherwise, whenever we refer to a particular year, we mean our fiscal year ended or ending September 30 in that particular calendar year.
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses and the disclosure of contingent assets and liabilities for the reporting periods. Actual results could differ from those estimates. All significant intercompany balances and transactions have been eliminated. In our opinion, all normal and recurring adjustments that we consider necessary for a fair financial statement presentation have been made. Certain reclassifications have been made to previously reported amounts to conform to the current presentation. The condensed consolidated balance sheet data at September 30, 20132014 was derived from audited financial statements, but does not include all disclosures required by GAAP.
In May 2014, the Financial Accounting Standards Board issued new guidance for the recognition of revenue.  This new guidance applies to us beginning with our first quarter of fiscal 2018 and early adoption is not permitted.  We are in the early stages of evaluating the impact of the adoption of this guidance on our future financial statements and related disclosures and we have not yet reached any conclusions.
Note 2.
Restructuring and Discontinued Operations
In JanuaryDecember 2014, Mueller Co. changedsold certain assets related to its approach tomunicipal casting operations in Canada and closed the production of certain sizes of iron gate valves. This changeassociated facility. These actions resulted in an impairmentrestructuring expense of the related production equipment of $1.5$7.2 million, which is reported as restructuring expense for the nine months ended June 30,was comprised of a $2.5 million impairment charge, $2.3 million of accrued environmental remediation costs and $2.4 million of severance and other costs. These operations generated net sales of $11.5 million during 2014. This charge was based on our internal projections of future cash flows associated with the production equipment.
In April 2014, Anvil sold the production equipment and certain inventory at its Bloomington, Minnesota location for an immaterial gain. Anvil also signed a supply agreement with the buyer and terminated the employment of all employees at that location, which resulted in the withdrawal from the only multi-employer pension plan in which the Company had participated. At June 30, 2014, we maintained an accrual for our estimated withdrawal liability of $1.0 million. Also in April 2014, Anvil entered into an agreement to sell the land and buildings at this location, which had a net book value of $0.8 million at June 30, 2014, for estimated net proceeds of $3.5 million. We expect this sale will close during the second half of calendar 2014.
On April 1, 2012, we sold our former U.S. Pipe segment. During 2013, we received $4.5 million in cash for certain purchase price adjustments and reduced our loss on sale of discontinued operations accordingly.
Activity related to U.S. Pipe is presented as discontinued operations for the three and nine months ended June 30, 2013. The table below represents a summary of the operating results for these discontinued operations.
 Three months Nine months
 (in millions)
Operating income (loss)$(1.9) $3.7
Gain on sale of discontinued operations—
 5.0
Income (loss) from discontinued operations$(1.9) $8.7
We retained certain assets, liabilities and activities previously associated with our former U.S. Pipe segment, including ownership of certain real property and retention of pension and workers compensation obligations to employees of U.S. Pipe. Cash flows associated with some of these items are anticipated to continue indefinitely, but they are not clearly and closely related to the future operations of U.S. Pipe under its new ownership.

6
Table of Contents
Index to Financial Statements



Note 3.
Income Taxes
During the three months ended March 31, 2014, we completed an analysis of our taxable income apportionment by state. As a result of this analysis, we reduced our marginal tax rate, used in our calculation of deferred tax assets and liabilities, by 0.52%. This resulted in a net decrease in deferred tax liabilities and income tax expense of $2.0 million during the nine months ended June 30, 2014.
At the beginning of 2013, we had valuation allowances related to our deferred tax assets. We reevaluate the need for a valuation allowance against our U.S. deferred tax assets each quarter, considering results to date, projections of taxable income, tax planning strategies and reversing taxable temporary differences. DuringIn the three months ended June 30, 2014 we decreasedfourth quarter, based on our deferred tax asset valuation allowance and income tax expense by $1.1 million. During the nine months ended June 30, 2013, we decreased our U.S. deferred tax valuation allowance by $15.1 million, including $7.1 million in other comprehensive income and $3.5 million in discontinued operations. Notwithstanding the valuation allowance, our net operating loss carryforwards remain available to offsetexpectation of future taxable earnings.
The componentsincome, we credited to income substantially all of income tax expense on continuing operations are provided below.
 Three months ended Nine months ended
 June 30, June 30,
 2014 2013 2014 2013
 (in millions)
Expense from income before income taxes$11.9
 $8.1
 $17.5
 $9.6
Deferred tax asset valuation allowance adjustments(1.1) (4.0) (1.1) (4.5)
State tax rate change—
 —
 (2.0) —
Other discrete items—
 0.1
 (0.2) —
 $10.8
 $4.2
 $14.2
 $5.1
this valuation allowance.
At June 30,December 31, 2014 and September 30, 2013,2014, the gross liabilities for unrecognized income tax benefits were $2.7$2.6 million and $3.7$2.7 million, respectively.
We recognize interest related to uncertain income tax positions as interest expense and would recognize any penalties that may be incurred as selling, general and administrative expenses. At June 30,December 31, 2014 and September 30, 2013,2014, we had $0.8$0.6 million and $0.9$0.7 million, respectively, of accrued interest liabilities related to uncertain tax positions.
Our state income tax returns are generally closed for years prior to 2006, except to the extent of our state net operating loss carryforwards. Our Canadian income tax returns are generally closed for years prior to 2006. We are currently under audit by several states at various levels of completion. We do not have any material unpaid assessments.

6

Note 4.
Borrowing Arrangements
The components of our long-term debt are presented below.
June 30, September 30,December 31, September 30,
2014 20132014 2014
(in millions)(in millions)
ABL Agreement$—
 $—
$—
 $—
8.75% Senior Unsecured Notes178.2
 178.0
7.375% Senior Subordinated Notes420.0
 420.0
Term Loan497.5
 —
Senior Unsecured Notes—
 178.3
Senior Subordinated Notes—
 365.0
Other2.6
 2.8
2.1
 2.3
600.8
 600.8
499.6
 545.6
Less current portion(56.3) (1.3)(6.1) (46.2)
Long-term debt$544.5
 $599.5
$493.5
 $499.4
On November 25, 2014, we entered into a $500.0 million senior secured term loan (“Term Loan”). The proceeds from the Term Loan, along with other cash, were used to fund the prepayment of our 7.375% Senior Subordinated Notes (“Senior Subordinated Notes”) and 8.75% Senior Unsecured Notes (“Senior Unsecured Notes”) and the satisfaction and discharge of our obligations under the respective indentures. We recorded a loss on early extinguishment of debt of $31.3 million, which consisted of $25.2 million of tender and call premiums and $4.4 million of deferred finance fees and $1.7 million of unamortized discount written off. We capitalized $7.9 million of debt issuance costs, which will be amortized over the term of the Term Loan using the effective interest rate method.
ABL Agreement. At June 30,December 31, 2014, our asset based lending agreement (“ABL Agreement”) consisted of a revolving credit facility for up to $225 million of revolving credit borrowings, swing line loans and letters of credit. The ABL Agreement permits us to increase the size of the credit facility by an additional $150 million in certain circumstances subject to adequate

7

borrowing base availability. We may borrow up to $25 million through swing line loans and may have up to $60 million of letters of credit outstanding.
Borrowings under the ABL Agreement bear interest at a floating rate equal to LIBOR plus a margin ranging from 175 to 225 basis points, or a base rate, as defined in the ABL Agreement, plus a margin ranging from 75 to 125 basis points. At June 30,December 31, 2014, the applicable rate was LIBOR plus 175 basis points.
The ABL Agreement terminates on the earlier of (1) December 18, 2017 and (2) 60 days prior to the final maturity of our 7.375% Senior Subordinated Notes.. We pay a commitment fee for any unused borrowing capacity under the ABL Agreement of either 37.5 basis points per annum or 25 basis points per annum, based on daily average availability during the previous calendar quarter. At June 30,December 31, 2014, our commitment fee was 37.5 basis points. Our obligations under the ABL Agreement are secured by a first-priority perfected lien on all of our U.S. receivables and inventory,inventories, certain cash and other supporting obligations. Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $22.5 million and 10% of the aggregate commitments under the ABL Agreement. Excess availability based on June 30,December 31, 2014 data, as reduced by outstanding letters of credit and accrued fees and expenses of $29.129.2 million, was $161.5138.3 million.
8.75%Senior Unsecured Notes. The 8.75% Senior Unsecured Notes (“Senior Unsecured Notes”) mature on September 1, 2020Term Loan. The Senior Unsecured Notes balanceTerm Loan accrues interest at June 30, 2014a floating rate equal to LIBOR, subject to a floor of 0.75%, plus 325 basis points. We may voluntarily repay amounts borrowed under the Term Loan at any time. The principal amount of the Term Loan is required to be repaid in quarterly installments, commencing in March 2015, of $1.25 million with any remaining principal due on November 25, 2021. The Term Loan is guaranteed by substantially all of our U.S. subsidiaries and is secured by essentially all of our assets, though the ABL Agreement has a senior claim on certain collateral securing borrowings thereunder. The Term Loan is reported net of $1.8 millionunamortized discount of unamortized discount.$2.5 million. Based on quoted market prices, the outstanding Senior Unsecured NotesTerm Loan had a fair value of $199.4$500.3 million at June 30,December 31, 2014.
During the quarter ended March 31, 2013, we redeemed $22.5 million aggregate principal amount of the Senior Unsecured Notes at a redemption price of 103% of the principal amount, plus accruedThe Term Loan contains affirmative and unpaid interestnegative operating covenants applicable to us and recorded a loss on early extinguishment of debt of $1.4 million. After August 31, 2015, we may redeem the Senior Unsecured Notes at specified redemption prices. Upon a Change of Control (as defined in the indenture securing the Senior Unsecured Notes), we are required to offer to purchase the outstanding Senior Unsecured Notes at a purchase price of 101% of the principal amount. The Senior Unsecured Notes are guaranteed by essentially all of our U.S. subsidiaries, but are subordinate to borrowings under the ABL Agreement.
The indenture securing the Senior Unsecured Notes contains customary covenants and events of default, including covenants that limit our ability to incur debt, pay dividends and make investments.restricted subsidiaries. We believe we were compliant with these covenants at June 30,December 31, 2014 and expect to remain in compliance through June 30, 2015.
7.375%Senior Subordinated Notes. The 7.375% Senior Subordinated Notes (“Senior Subordinated Notes”) mature on June 1, 2017. Based on quoted market prices, the outstanding Senior Subordinated Notes had a fair value of $426.3 million at June 30, 2014.
On July 30, 2014, we announced our intention to redeem $55.0 million principal amount of the Senior Subordinated Notes at a redemption price of 101.229% of the principal amount on August 29, 2014. We we expect to record a loss on early extinguishment of debt of $1.0 million on the redemption date.
We may redeem any portion of the Senior Subordinated Notes at specified redemption prices, subject to restrictions in the Senior Unsecured Notes. Upon a Change of Control (as defined in the indenture securing the Senior Subordinated Notes), we are required to offer to purchase the outstanding Senior Subordinated Notes at a purchase price of 101% of the principal amount. The Senior Subordinated Notes are guaranteed by essentially all of our U.S. subsidiaries, but are subordinate to the borrowings under the ABL Agreement and the Senior Unsecured Notes.
The indenture securing the Senior Subordinated Notes contains customary covenants and events of default, including covenants that limit our ability to incur debt, pay dividends and make investments. We believe we were compliant with these covenants at June 30, 2014 and expect to remain in compliance through June 30, 2015.December 31, 2015.

87

Note. 5
Retirement Plans
The components of net periodic benefit cost allocated to continuing operations for defined benefit pension plans are as follows.
Three months ended Nine months endedThree months ended
June 30, June 30,December 31,
2014 2013 2014 20132014 2013
(in millions)(in millions)
Service cost$0.4
 $0.5
 $1.2
 $1.5
$0.5
 $0.4
Interest cost5.0
 1.6
 15.0
 4.8
5.0
 5.0
Expected return on plan assets(6.0) (2.2) (17.9) (6.5)(6.2) (5.9)
Amortization of actuarial net loss0.9
 0.8
 2.7
 2.3
0.8
 0.9
Net periodic benefit cost$0.3
 $0.7
 $1.0
 $2.1
$0.1
 $0.4
The amortization of actuarial losses, net of tax, is recorded as a component of other comprehensive income (loss).
We expect to make $0.7contributed $1 million of contributions to our U.S.Canadian pension planplans during the quarter ended December 31, 2014. For financial reporting purposes, our U.S. pension plan obligations were 99%89% funded at September 30, 2013.
We ceased postretirement medical benefits substantially on December 31, 2012. Related to this cessation of benefits, we recorded a benefit of $7.4 million, which is included in income from discontinued operations for the nine months ended June 30, 2013.2014.
Note 6.
Stock-based Compensation Plans
From time to time, we grant various forms of stock-based compensation, including stock options, restricted stock units and both cash-settled and stock-settled performance-based restricted stock units ("PRSUs") under our Amended and Restated 2006 Mueller Water Products, Inc. Stock Incentive Plan (the “2006 Stock Plan”).
PRSUs represent a target number of units that may be paid out at the end of a multi-year award cycle consisting of annual performance periods coinciding with our fiscal years. As determined at the date of grant, PRSUs may settle in cash-value equivalent of, or directly in, shares of our common stock. Settlement will range from zero to two times the number of PRSUs granted, depending on our financial performance against predetermined targets.
The cash-settled PRSUs granted in the quarter ended December 31, 2012 will settlesettled in the quarter endingended December 31, 2014. Outstanding cash-settled PRSUs had a fair value of $8.64 per share at June 30, 2014 and our liability for cash-settled PRSUs was $2.9 million at June 30, 2014.$4.0 million.
The stock-settled PRSUs granted in the quarters ended December 31, 2012, 2013 and 20132014 will settle in the quarters ending December 31, 2015, 2016, and 2016,2017, respectively. The stock prices used to value the awards were $5.22$5.22 for the 2013 performance period, and $8.52 for the 2014 performance period and $9.78 for the 2015 performance period.
From time to time, we grant Phantom Plan awards under the Mueller Water Products, Inc. Phantom Plan (“Phantom Plan”). At June 30,December 31, 2014, the outstanding Phantom Plan awards had a fair value of $8.64$10.24 per award and our liability for Phantom Plan awards was $2.8$1.9 million.

9

We granted stock-based compensation awards under the 2006 Stock Plan, the Mueller Water Products, Inc. 2006 Employee Stock Purchase Plan and the Phantom Plan during the ninethree months ended June 30,December 31, 2014 as follows.    
Number granted Weighted average grant date fair value per instrument Total grant date fair value (in millions)Number granted Weighted average grant date fair value per instrument Total grant date fair value (in millions)
Quarter ended December 31, 2013:     
Quarter ended December 31, 2014:     
Restricted stock units333,816
 $8.50
 $2.8
378,036
 $9.78
 $3.7
Employee stock purchase plan instruments56,643
 1.87
 0.1
51,574
 1.89
 0.1
Phantom Plan awards304,815
 8.52
 2.6
289,524
 9.78
 2.8
PRSUs272,531
 8.52
 2.3
240,691
 9.78
 2.4
Quarter ended March 31, 2014:     
Restricted stock units47,196
 8.58
 0.4
Non-qualified stock options86,904
 5.13
 0.4
Employee stock purchase plan instruments52,980
 1.80
 0.1
Quarter ended June 30, 2014:     
Employee stock purchase plan instruments46,067
 2.10
 0.1
    $8.8
    $9.0
We recorded stock-based compensation expense in continuing operations of $2.1$3.4 million and $2.9$4.1 million during the three months ended June 30, 2014 and 2013, respectively, and $8.2 million and $8.5 million during the nine months ended June 30,December 31, 2014 and 2013, respectively. At June 30,December 31, 2014, there was approximately $5.3$9.7 million of unrecognized compensation expense related to stock-based awards.

8

We excluderecorded a net loss for the quarter ended December 31, 2014. Therefore, all stock-based compensation instruments were excluded from the calculations of diluted earningsloss per share whencalculation since their inclusion of such instruments would have an antidilutive effect.been antidilutive. We excluded 1,117,275 and 1,499,916 of such1,127,281 instruments from the calculations of diluted earnings per share for the quartersquarter ended June 30, 2014 andDecember 31, 2013 respectively, and 1,103,986 and 1,456,579because the effect of including such instruments for the nine months ended June 30, 2014 and 2013, respectively.would also have been antidilutive.

10

Note 7.
Supplemental Balance Sheet Information
Selected supplemental balance sheet information is presented below.
June 30, September 30,December 31, September 30,
2014 20132014 2014
(in millions)(in millions)
Inventories:      
Purchased components and raw material$70.7
 $75.4
$76.1
 $72.0
Work in process33.3
 38.6
41.4
 34.5
Finished goods88.0
 94.5
99.8
 91.5
$192.0
 $208.5
$217.3
 $198.0
Other current assets:      
Maintenance and repair tooling$22.6
 $22.5
$22.3
 $22.6
Income taxes14.5
 14.9
21.4
 13.0
Other9.4
 8.7
9.4
 8.5
$46.5
 $46.1
$53.1
 $44.1
Property, plant and equipment:      
Land$10.4
 $10.6
$9.6
 $9.6
Buildings78.3
 75.5
76.8
 78.0
Machinery and equipment324.5
 305.7
329.1
 332.9
Construction in progress17.8
 19.6
19.3
 18.7
431.0
 411.4
434.8
 439.2
Accumulated depreciation(288.2) (269.5)(291.4) (292.9)
$142.8
 $141.9
$143.4
 $146.3
Other current liabilities:      
Compensation and benefits$32.7
 $37.3
$22.7
 $39.5
Customer rebates13.6
 15.5
19.8
 16.9
Interest8.2
 12.0
Taxes other than income taxes4.6
 5.0
3.7
 4.7
Warranty2.4
 2.8
2.5
 2.6
Income taxes1.8
 1.3
0.7
 0.7
Interest0.6
 10.7
Restructuring1.0
 —
1.3
 0.9
Environmental0.1
 0.2
2.5
 0.1
Other6.2
 6.5
5.7
 6.1
$70.6
 $80.6
$59.5
 $82.2

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Note 8.
Segment Information
Summarized financial information for our segments is presented below for the periods ended June 30.below.
Three months ended Nine months endedThree months ended
June 30, June 30,December 31,
2014 2013 2014 20132014 2013
(in millions)(in millions)
Net sales, excluding intercompany:          
Mueller Co.$214.0
 $199.3
 $570.3
 $538.5
$164.7
 $165.0
Anvil104.5
 100.1
 293.7
 289.1
97.1
 92.4
$318.5
 $299.4
 $864.0
 $827.6
$261.8
 $257.4
Intercompany sales:          
Mueller Co.$1.6
 $2.2
 $4.8
 $5.4
$1.9
 $1.6
Anvil—
 —
 0.1
 0.1
—
 —
$1.6
 $2.2
 $4.9
 $5.5
$1.9
 $1.6
Operating income (loss):          
Mueller Co.$42.2
 $30.2
 $84.3
 $61.5
$9.5
 $15.9
Anvil9.5
 12.3
 24.3
 27.3
7.2
 7.3
Corporate(9.9) (9.6) (27.5) (24.7)(8.6) (9.2)
$41.8
 $32.9
 $81.1
 $64.1
$8.1
 $14.0
Depreciation and amortization:          
Mueller Co.$10.4
 $10.9
 $31.6
 $33.5
$10.6
 $11.1
Anvil3.5
 3.6
 10.6
 10.6
3.6
 3.5
Corporate0.1
 0.1
 0.3
 0.3
0.1
 0.1
$14.0
 $14.6
 $42.5
 $44.4
$14.3
 $14.7
Restructuring:          
Mueller Co.$0.2
 $0.2
 $1.9
 $1.2
$8.1
 $0.1
Anvil—
 —
 1.1
 0.1
—
 —
Corporate0.1
 —
$0.2
 $0.2
 $3.0
 $1.3
$8.2
 $0.1
Capital expenditures:          
Mueller Co.$5.0
 $6.6
 $15.9
 $15.5
$4.6
 $4.4
Anvil2.2
 2.3
 9.4
 8.3
2.6
 3.1
Corporate—
 0.1
 0.2
 0.1
—
 —
$7.2
 $9.0
 $25.5
 $23.9
$7.2
 $7.5
Note 9.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss is presented below.
 Foreign currency translation Minimum pension liability, net of tax Total
 (in millions)
Balance at September 30, 2013$6.8
 $(35.4) $(28.6)
Current period other comprehensive loss(1.9) (9.0) (10.9)
Balance at June 30, 2014$4.9
 $(44.4) $(39.5)
 Minimum pension liability, net of tax Foreign currency translation Total
  
Balance at September 30, 2014$(63.1) $2.4
 $(60.7)
Current period other comprehensive loss(3.2) (2.1) (5.3)
Balance at December 31, 2014$(66.3) $0.3
 $(66.0)

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Note 10.
Commitments and Contingencies
We are involved in various legal proceedings that have arisen in the normal course of operations, including the proceedings summarized below. The effect of the outcome of these matters on our financial statements cannot be predicted with certainty as any such effect depends on the amount and timing of the resolution of such matters. Other than the litigation described below, we do not believe that any of our outstanding litigation will have a material adverse effect on our business or prospects.
Environmental. We are subject to a wide variety of laws and regulations concerning the protection of the environment, both with respect to the operations at many of our properties and with respect to remediating environmental conditions that may exist at our own or other properties. We strive to comply with federal, state and local environmental laws and regulations. We accrue for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and reasonably estimable.
In the acquisition agreement pursuant to which a predecessor to Tyco sold our Mueller Co. and Anvil businesses to the prior owners of these businesses in August 1999, Tyco agreed to indemnify us and our affiliates, among other things, for all “Excluded Liabilities.” Excluded Liabilities include, among other things, substantially all liabilities relating to the time prior to August 1999, including environmental liabilities. The indemnity survives indefinitely. Tyco's indemnity does not cover liabilities to the extent caused by us or the operation of our businesses after August 1999, nor does it cover liabilities arising with respect to businesses or sites acquired after August 1999. Since 2007, Tyco has engaged in multiple corporate restructurings, split-offs and divestitures. While none of these transactions directly affects the indemnification obligations of the Tyco indemnitors under the 1999 acquisition agreement, the result of such transactions is that the assets of, and control over, such Tyco indemnitors has changed. Should any of these Tyco indemnitors become financially unable or fail to comply with the terms of the indemnity, we may be responsible for such obligations or liabilities.
In September 1987, we implemented an Administrative Consent Order (“ACO”) for our Burlington, New Jersey property, which was required under the New Jersey Environmental Cleanup Responsibility Act (now known as the Industrial Site Recovery Act). The ACO required soil and ground-water cleanup, and we completed, and received final approval on, the soil cleanup required by the ACO. We retained this property related toupon the sale of our former U.S. Pipe segment. We expect ground-water issues as well as issues associated with the demolition of former manufacturing facilities at this site will continue and remediation by us could be required. Long-term ground-water monitoring may also be required, but we do not know how long such monitoring would be required and do not believe monitoring or further remediation costs, if any, will have a material adverse effect on any of our financial statements.
On July 13, 2010, Rohcan Investments Limited, the former owner of property leased by Mueller Canada Ltd. and located in Milton, Ontario, filed suit against Mueller Canada Ltd. and its directors seeking C$10.0 million in damages arising from the defendants' alleged environmental contamination of the property and breach of lease. Mueller Canada Ltd. leased the property from 1988 through 2008. We are pursuing indemnification from a former owner for certain potential liabilities that are alleged in this lawsuit, and we have accrued for other liabilities not covered by indemnification.  On December 7, 2011, the Court denied the plaintiff's motion for summary judgment.
Walter Energy-related Income Taxes. Each member of a consolidated group for federal income tax purposes is severally liable for the federal income tax liability of each other member of the consolidated group for any year in which it is a member of the group at any time during such year. Each member of the Walter Energy consolidated group, which included us through December 14, 2006, is also jointly and severally liable for pension and benefit funding and termination liabilities of other group members, as well as certain benefit plan taxes. Accordingly, we could be liable under such provisions in the event any such liability is incurred, and not discharged, by any other member of the Walter Energy consolidated group for any period during which we were included in the Walter Energy consolidated group.
A dispute exists with regard to federal income taxes for 1980 through 1994 allegedly owed by the Walter Energy consolidated group. According to Walter Energy's last available public filing on the matter, Walter Energy's management estimated that the amount of tax claimed by the IRS was approximately $34.0 million for issues currently in dispute in bankruptcy court for matters unrelated to us. This amount is subject to interest and penalties. Of the $34.0 million in claimed tax, $21.0 million represents issues in which the IRS is not challenging the deductibility of the particular expense but only whether such expense is deductible in a particular year. Walter Energy's management believes that Walter Energy's financial exposure should be limited to interest and possible penalties and the amount of any tax claimed will be offset by favorable adjustments in other years.
In addition, the IRS previously issued a Notice of Proposed Deficiency assessing additional tax of $82.2 million for the fiscal years ended May 31, 2000 through December 31, 2005. Walter Energy filed a formal protest with the IRS, but had not reached a final resolution with the Appeals Division at June 30,December 31, 2014. The unresolved issues relate primarily to Walter Energy's

1311

Energy's method of recognizing revenue on the sale of homes and related interest on the installment notes receivable. The items at issue relate primarily to the timing of revenue recognition and consequently, should the IRS prevail on its positions, Walter Energy's financial exposure should be limited to interest and penalties. As a matter of law, we are jointly and severally liable for any final tax determination for any year in which any of our subsidiaries were members of the Walter Energy consolidated group, which means that we would be liable in the event Walter Energy is unable to pay any amounts owed. Walter Energy has disclosed that it believes its filing positions have substantial merit and that it intends to defend vigorously any claims asserted.
Walter Energy effectively controlled all of our tax decisions for periods during which we were a member of the Walter Energy consolidated group for federal income tax purposes and certain combined, consolidated or unitary state and local income tax groups. Under the terms of the income tax allocation agreement between us and Walter Energy dated May 26, 2006, we generally compute our tax liability on a stand-alone basis, but Walter Energy has sole authority to respond to and conduct all tax proceedings (including tax audits) relating to our federal income and combined state tax returns, to file all such tax returns on our behalf and to determine the amount of our liability to (or entitlement to payment from) Walter Energy for such previous periods. This arrangement may result in conflicts between Walter Energy and us.
Our separation from Walter Energy on December 14, 2006 was intended to qualify as a tax-free spin-off under Section 355 of the Internal Revenue Code. In addition, the tax allocation agreement provides that if the spin-off is determined not to be tax-free pursuant to Section 355, we generally will be responsible for any taxes incurred by Walter Energy or its shareholders if such taxes result from certain of our actions or omissions and for a percentage of any such taxes that are not a result of our actions or omissions or Walter Energy's actions or omissions or taxes based upon our market value relative to Walter Energy's market value. Additionally, to the extent that Walter Energy was unable to pay taxes, if any, attributable to the spin-off and for which it is responsible under the tax allocation agreement, we could be liable for those taxes as a result of being a member of the Walter Energy consolidated group for the year in which the spin-off occurred.
In accordance with the income tax allocation agreement, Walter Energy used certain tax assets of one of our predecessors in its calendar 2006 tax return for which payment to us is required. The income tax allocation agreement only requires Walter Energy to make the payment upon realization of the tax benefit by receiving a refund or otherwise offsetting taxes due. Walter Energy currently owes us $11.6 million, which includes recent tax audit and amended tax return adjustments, that is payable pending completion of an IRS audit of Walter Energy's 2006 tax year and the related refund of tax from that year. This receivable is included in other current assets at June 30,December 31, 2014.
Indemnifications. We are a party to contracts in which it is common for us to agree to indemnify third parties for certain liabilities that arise out of or relate to the subject matter of the contract. In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by gross negligence or willful misconduct. We cannot estimate the potential amount of future payments under these indemnities until events arise that would trigger a liability under the indemnities.
Additionally, in connection with the sale of assets and the divestiture of businesses, such as the divestiture of our U.S. Pipe segment, we may agree to indemnify buyers and related parties for certain losses or liabilities incurred by these parties with respect to: (i) the representations and warranties made by us to these parties in connection with the sale and (ii) liabilities related to the pre-closing operations of the assets or business sold. Indemnities related to pre-closing operations generally include certain environmental and tax liabilities and other liabilities not assumed by these parties in the transaction.
Indemnities related to the pre-closing operations of sold assets or businesses normally do not represent additional liabilities to us, but simply serve to protect these parties from potential liability associated with our obligations existing at the time of the sale. As with any liability, we have accrued for those pre-closing obligations that are considered probable and reasonably estimable. Should circumstances change, increasing the likelihood of payments related to a specific indemnity, we will accrue a liability when future payment is probable and the amount is reasonably estimable.
Other Matters. In April 2014, Anvil sold the production equipmentis in a dispute with Victaulic Company (“Victaulic”) regarding two patents held by Victaulic, U.S. Patent 7,086,131 (the “131 Patent”) and certain inventory at its Bloomington, Minnesota location for an immaterial gain. Anvil also signed a supply agreementU.S. Patent 7,712,796 (the “796 Patent” and collectively with the buyer131 Patent, the “U.S. Patents”), which Anvil believes are invalid. The U.S. Patents potentially relate to a coupling product currently manufactured and withdrew frommarketed by Anvil. Anvil filed multiple reexamination requests with the only multi-employer pension planU.S. Patent and Trademark Office (the “PTO”) regarding the U.S. Patents, and the PTO granted the requests. Although the PTO examiner initially invalidated most of the claims of the 796 Patent, the PTO examiner affirmed the validity of the 796 Patent in September 2014. In October 2014, the PTO examiner rejected the original claim of the 131 Patent, but indicated the allowance of newly added claims that appear substantially similar to those included in the 796 Patent. The final PTO decisions with respect to the U.S. Patents will likely be appealed by Anvil and/or Victaulic. Relatedly, Anvil and Victaulic are engaged in lawsuits in the U.S. District Court for the Northern District of Georgia and in the Federal Court of Toronto, Ontario, Canada. The Georgia District Court litigation has

12

been stayed pending the final outcome of the ongoing reexaminations of the U.S. Patents by the PTO. Although Anvil intends to continue to vigorously contest the validity of the U.S. Patents, as well as Victaulic’s related patents in Canada, and to defend itself against any counterclaims made by Victaulic, the probability of a favorable or unfavorable outcome with respect to these proceedings is unknown. Any number of potential outcomes is possible due to the multiple claims associated with the proceedings, each of which is in different stages and subject to appeal. Further, there are a number of highly complex factual and technical issues involved, and it is uncertain whether a favorable or unfavorable result with respect to a particular ruling or proceeding will impact the Company had participated. At June 30, 2014,other matters in controversy. Accordingly, we maintained anhave not recorded any accrual for our estimated withdrawalwith respect to these proceedings and a range of liability of $1.0 million, although the ultimate liability could differ materially from our estimate. Also in April 2014, Anvil entered into an agreement to sell the land and buildings at this location, which had a net book value of $0.8 million at June 30, 2014, for estimated net proceeds of $3.5 million. We expect this sale will close during the second half of calendar 2014.is not reasonably estimable.
We are party to a number of other lawsuits arising in the ordinary course of business, including product liability cases for products manufactured by us or third parties. We provide for costs relating to these matters when a loss is probable and the amount is reasonably estimable. Administrative costs related to these matters are expensed as incurred. The effect of the

14

outcome of these matters on our future financial statements cannot be predicted with certainty as any such effect depends on the amount and timing of the resolution of such matters. While the results of litigation cannot be predicted with certainty, we believe that the final outcome of such other litigation is not likely to have a materially adverse effect on our business or prospects.
Note 11.
Subsequent Events
On July 1, 2014, we completed the acquisition of certain assets of Lined Valve Company Inc., a privately-held company which will become part of our Pratt product line, for $10.0 million, subject to a purchase price adjustment. Lined Valve Company Inc. reported net sales of $10.6 million for calendar 2013.
On July 22, 2014,January 28, 2015, our board of directors declared a dividend of $0.0175$0.0175 per share on our common stock, payable on or about AugustFebruary 20, 20142015 to stockholders of record at the close of business on August 11, 2004.
On July 30, 2014, we announced our intention to redeem $55.0 million principal amount of the Senior Subordinated Notes at a redemption price of 101.229% of the principal amount on August 29, 2014. We expect to record a loss on early extinguishment of debt of $1.0 million on the redemption date.February 10, 2015.

15

Note 12.
Consolidating Guarantor and Non-Guarantor Financial Information
The following information is included as a result of the guarantee by certain of our 100% owned U.S. subsidiaries (“Guarantor Companies”) of the Senior Unsecured Notes and the Senior Subordinated Notes. None of our other subsidiaries guarantee the Senior Unsecured Notes and the Senior Subordinated Notes. Each of the guarantees is joint and several and full and unconditional. Guarantor Companies are listed below.
Name
State of
incorporation
or organization
Anvil International, LLCDelaware
Echologics, LLCDelaware
Henry Pratt Company, LLCDelaware
Henry Pratt International, LLCDelaware
Hydro Gate, LLCDelaware
J.B. Smith Mfg. Co., LLCDelaware
James Jones Company, LLCDelaware
Milliken Valve, LLCDelaware
Mueller Co. LLCDelaware
Mueller Group, LLCDelaware
Mueller Group Co-Issuer, Inc.Delaware
Mueller International, L.L.C.Delaware
Mueller Property Holdings, LLCDelaware
Mueller Co. International Holdings, LLCDelaware
Mueller Service California, Inc.Delaware
Mueller Service Co., LLCDelaware
Mueller Systems, LLCDelaware
OSP, LLCDelaware
U.S. Pipe Valve & Hydrant, LLCDelaware
The Condensed Consolidating Statements of Cash Flows below present intercompany cash transfers as financing or investing cash flows, rather than as operating cash flows as was previously our practice. The prior period presentation has been updated to conform to the current period presentation.

1613

Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
June 30, 2014
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Assets:         
Cash and cash equivalents$120.5
 $(2.8) $33.2
 $—
 $150.9
Receivables, net0.2
 163.4
 19.7
 —
 183.3
Inventories—
 180.7
 11.3
 —
 192.0
Deferred income taxes40.1
 —
 0.4
 —
 40.5
Other current assets18.5
 25.4
 2.6
 —
 46.5
Total current assets179.3
 366.7
 67.2
 —
 613.2
Property, plant and equipment1.4
 133.5
 7.9
 —
 142.8
Identifiable intangible assets—
 530.9
 2.0
 —
 532.9
Other noncurrent assets12.4
 0.3
 1.3
 —
 14.0
Investment in subsidiaries261.9
 39.0
 —
 (300.9) —
Intercompany accounts882.7
 —
 —
 (882.7) —
Total assets$1,337.7
 $1,070.4
 $78.4
 $(1,183.6) $1,302.9
Liabilities and stockholders' equity:         
Current portion of long-term debt$55.0
 $1.3
 $—
 $—
 $56.3
Accounts payable4.7
 74.2
 5.7
 —
 84.6
Other current liabilities25.9
 39.7
 5.0
 —
 70.6
Total current liabilities85.6
 115.2
 10.7
 —
 211.5
Long-term debt543.2
 1.3
 —
 —
 544.5
Deferred income taxes161.6
 —
 0.6
 —
 162.2
Other noncurrent liabilities33.6
 6.6
 0.7
 —
 40.9
Intercompany accounts169.9
 685.4
 27.4
 (882.7) —
Total liabilities993.9
 808.5
 39.4
 (882.7) 959.1
 Stockholders' equity343.8
 261.9
 39.0
 (300.9) 343.8
Total liabilities and stockholders' equity$1,337.7
 $1,070.4
 $78.4
 $(1,183.6) $1,302.9

17

Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
September 30, 2013
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Assets:         
Cash and cash equivalents$86.6
 $(2.3) $39.3
 $—
 $123.6
Receivables, net0.1
 150.4
 14.0
 —
 164.5
Inventories—
 195.3
 13.2
 —
 208.5
Deferred income taxes26.3
 —
 0.4
 —
 26.7
Other current assets18.2
 25.7
 2.2
 —
 46.1
Total current assets131.2
 369.1
 69.1
 —
 569.4
Property, plant and equipment1.5
 132.0
 8.4
 —
 141.9
Identifiable intangible assets—
 551.3
 1.8
 —
 553.1
Other noncurrent assets16.0
 0.2
 1.3
 —
 17.5
Investment in subsidiaries155.2
 39.2
 —
 (194.4) —
Intercompany accounts882.7
 —
 —
 (882.7) —
Total assets$1,186.6
 $1,091.8
 $80.6
 $(1,077.1) $1,281.9
Liabilities and stockholders' equity:         
Current portion of long-term debt$—
 $1.3
 $—
 $—
 $1.3
Accounts payable4.6
 90.0
 6.6
 —
 101.2
Other current liabilities29.7
 46.6
 4.3
 —
 80.6
Total current liabilities34.3
 137.9
 10.9
 —
 183.1
Long-term debt598.0
 1.5
 —
 —
 599.5
Deferred income taxes140.9
 —
 0.6
 —
 141.5
Other noncurrent liabilities21.3
 7.5
 0.8
 —
 29.6
Intercompany accounts63.9
 789.7
 29.1
 (882.7) —
Total liabilities858.4
 936.6
 41.4
 (882.7) 953.7
 Stockholders' equity328.2
 155.2
 39.2
 (194.4) 328.2
Total liabilities and stockholders' equity$1,186.6
 $1,091.8
 $80.6
 $(1,077.1) $1,281.9

18

Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
Three months ended June 30, 2014
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Net sales$—
 $282.8
 $35.7
 $—
 $318.5
Cost of sales—
 188.8
 32.4
 —
 221.2
Gross profit—
 94.0
 3.3
 —
 97.3
Operating expenses:         
Selling, general and administrative9.8
 42.6
 2.9
 —
 55.3
Restructuring—
 0.1
 0.1
 —
 0.2
Total operating expenses9.8
 42.7
 3.0
 —
 55.5
Operating income (loss)(9.8) 51.3
 0.3
 —
 41.8
Interest expense (income), net12.4
 0.1
 —
 —
 12.5
Income (loss) before income taxes(22.2) 51.2
 0.3
 —
 29.3
Income tax expense (benefit)(8.7) 19.3
 0.2
 —
 10.8
Equity in income of subsidiaries32.0
 0.1
 —
 (32.1) —
Net income$18.5
 $32.0
 $0.1
 $(32.1) $18.5
Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
Three months ended June 30, 2013
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Net sales$—
 $263.6
 $35.8
 $—
 $299.4
Cost of sales—
 181.0
 28.4
 —
 209.4
Gross profit—
 82.6
 7.4
 —
 90.0
Operating expenses:         
Selling, general and administrative9.5
 43.7
 3.7
 —
 56.9
Restructuring—
 0.2
 —
 —
 0.2
Total operating expenses9.5
 43.9
 3.7
 —
 57.1
Operating income (loss)(9.5) 38.7
 3.7
 —
 32.9
Interest expense (income), net12.7
 0.1
 (0.1) —
 12.7
Income (loss) before income taxes(22.2) 38.6
 3.8
 —
 20.2
Income tax expense (benefit)(4.1) 6.6
 1.7
 —
 4.2
Equity in income of subsidiaries34.1
 2.1
 —
 (36.2) —
Income from continuing operations16.0
 34.1
 2.1
 (36.2) 16.0
Loss from discontinued operations(1.9) —
 —
 —
 (1.9)
Net income$14.1
 $34.1
 $2.1
 $(36.2) $14.1


19

Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
Nine months ended June 30, 2014
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Net sales$—
 $785.2
 $78.8
 $—
 $864.0
Cost of sales—
 549.4
 68.0
 —
 617.4
Gross profit—
 235.8
 10.8
 —
 246.6
Operating expenses:         
Selling, general and administrative27.3
 126.0
 9.2
 —
 162.5
Restructuring—
 2.9
 0.1
 —
 3.0
Total operating expenses27.3
 128.9
 9.3
 —
 165.5
Operating income (loss)(27.3) 106.9
 1.5
 —
 81.1
Interest expense (income), net37.6
 0.2
 (0.2) —
 37.6
Income (loss) before income taxes(64.9) 106.7
 1.7
 —
 43.5
Income tax expense (benefit)(25.5) 39.3
 0.4
 —
 14.2
Equity in income of subsidiaries68.7
 1.3
 —
 (70.0) —
Net income$29.3
 $68.7
 $1.3
 $(70.0) $29.3
Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
Nine months ended June 30, 2013
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Net sales$—
 $743.4
 $84.2
 $—
 $827.6
Cost of sales—
 534.2
 69.0
 —
 603.2
Gross profit—
 209.2
 15.2
 —
 224.4
Operating expenses:         
Selling, general and administrative24.6
 124.5
 9.9
 —
 159.0
Restructuring—
 1.3
 —
 —
 1.3
Total operating expenses24.6
 125.8
 9.9
 —
 160.3
Operating income (loss)(24.6) 83.4
 5.3
 —
 64.1
Interest expense (income), net39.0
 0.2
 (0.2) —
 39.0
Loss on early extinguishment of debt1.4
 —
 —
 —
 1.4
Income (loss) before income taxes(65.0) 83.2
 5.5
 —
 23.7
Income tax expense (benefit)(14.5) 17.8
 1.8
 —
 5.1
Equity in income of subsidiaries69.1
 3.7
 —
 (72.8) —
Income from continuing operations18.6
 69.1
 3.7
 (72.8) 18.6
Income from discontinued operations8.7
 —
 —
 —
 8.7
Net income$27.3
 $69.1
 $3.7
 $(72.8) $27.3



20

Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended June 30, 2014
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Net income$18.5
 $32.0
 $0.1
 $(32.1) $18.5
Other comprehensive income (loss):         
Minimum pension liability, net of tax(3.0) —
 —
 —
 (3.0)
Equity in other comprehensive income of subsidiaries2.1
 2.1
 —
 (4.2) —
Foreign currency translation—
 —
 2.1
 —
 2.1
 (0.9) 2.1
 2.1
 (4.2) (0.9)
Comprehensive income$17.6
 $34.1
 $2.2
 $(36.3) $17.6
Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended June 30, 2013
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Net income$14.1
 $34.1
 $2.1
 $(36.2) $14.1
Other comprehensive income (loss):         
Minimum pension liability, net of tax2.3
 —
 —
 —
 2.3
Equity in other comprehensive loss of subsidiaries(1.9) (1.9) —
 3.8
 —
Foreign currency translation—
 —
 (1.9) —
 (1.9)
 0.4
 (1.9) (1.9) 3.8
 0.4
Comprehensive income$14.5
 $32.2
 $0.2
 $(32.4) $14.5


21

Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income (Loss)
Nine months ended June 30, 2014
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Net income$29.3
 $68.7
 $1.3
 $(70.0) $29.3
Other comprehensive loss:         
Minimum pension liability, net of tax(9.0) —
 —
 —
 (9.0)
Equity in other comprehensive loss of subsidiaries(1.9) (1.9) —
 3.8
 —
Foreign currency translation—
 —
 (1.9) —
 (1.9)
 (10.9) (1.9) (1.9) 3.8
 (10.9)
Comprehensive income (loss)$18.4
 $66.8
 $(0.6) $(66.2) $18.4
Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Nine months ended June 30, 2013
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Net income$27.3
 $69.1
 $3.7
 $(72.8) $27.3
Other comprehensive income (loss):         
Minimum pension liability, net of tax7.9
 —
 —
 —
 7.9
Equity in other comprehensive loss of subsidiaries(3.7) (3.7) —
 7.4
 —
Foreign currency translation—
 —
 (3.7) —
 (3.7)
 4.2
 (3.7) (3.7) 7.4
 4.2
Comprehensive income$31.5
 $65.4
 $—
 $(65.4) $31.5



22

Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
Nine months ended June 30, 2014
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Operating activities:         
Net cash provided by (used in) operating activities$(85.0) $149.7
 $(3.7) $—
 $61.0
Investing activities:         
Capital expenditures(0.2) (24.3) (1.0) —
 (25.5)
Proceeds from sales of assets—
 1.2
 —
 —
 1.2
Intercompany—
 (127.4) 

 127.4
 —
Net cash used in investing activities(0.2) (150.5) (1.0) 127.4
 (24.3)
Financing activities:         
Dividends paid(8.4) —
 —
 —
 (8.4)
Common stock issued3.6
 —
 —
 —
 3.6
Shares retained for employee taxes(3.1) —
 —
 —
 (3.1)
Intercompany127.4
 —
 —
 (127.4) —
Other(0.4) 0.3
 —
 —
 (0.1)
Net cash provided by (used in) financing activities119.1
 0.3
 —
 (127.4) (8.0)
Effect of currency exchange rate changes on cash—
 —
 (1.4) —
 (1.4)
Net change in cash and cash equivalents33.9
 (0.5) (6.1) —
 27.3
Cash and cash equivalents at beginning of period86.6
 (2.3) 39.3
 —
 123.6
Cash and cash equivalents at end of period$120.5
 $(2.8) $33.2
 $—
 $150.9

23

Mueller Water Products, Inc. and Subsidiaries
Consolidating Statement of Cash Flows
Nine months ended June 30, 2013
 Issuer     
Guarantor
 companies 
 
Non-
guarantor
 companies 
 Eliminations Total    
     (in millions)    
Operating activities:         
Net cash provided by (used in) operating activities from continuing operations$(81.3) $119.4
 $4.7
 $—
 $42.8
Investing activities:         
Capital expenditures(0.1) (22.9) (0.9) —
 (23.9)
Business acquisitions, net of cash acquired—
 (0.2) —
 —
 (0.2)
Proceeds from sales of assets—
 0.1
 —
 —
 0.1
Intercompany—
 (97.6) —
 97.6
 —
Net cash used in investing activities from continuing operations(0.1) (120.6) (0.9) 97.6
 (24.0)
Financing activities:         
Early repayment of debt(23.2) —
 —
 —
 (23.2)
Dividends paid(8.3) —
 —
 —
 (8.3)
Common stock issued2.3
 —
 —
 —
 2.3
Shares retained for employee taxes(1.5) —
 —
 —
 (1.5)
Payment of deferred financing fees(0.7) —
 —
 —
 (0.7)
Intercompany97.6
 —
 —
 (97.6) —
Other—
 0.2
 —
 —
 0.2
Net cash provided by financing activities from continuing operations66.2
 0.2
 —
 (97.6) (31.2)
Net cash flows from discontinued operations:         
Operating activities(4.1) —
 —
 —
 (4.1)
Investing activities4.5
 —
 —
 —
 4.5
Net cash provided by discontinued operations0.4
 —
 —
 —
 0.4
Effect of currency exchange rate changes on cash—
 —
 (1.8) —
 (1.8)
Net change in cash and cash equivalents(14.8) (1.0) 2.0
 —
 (13.8)
Cash and cash equivalents at beginning of period53.3
 (3.7) 33.4
 —
 83.0
Cash and cash equivalents at end of period$38.5
 $(4.7) $35.4
 $—
 $69.2

24

Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto that appear elsewhere in this report. This report 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's management 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 we make regarding the general municipal spending environment, the condition of our end markets and the performance of each of Mueller Co. and Anvil over future periods. Forward-looking statements are based on certain assumptions and assessments made by management in light of their experience and their 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 annual report on Form 10-K for the year ended September 30, 20132014 ("Annual Report"). 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.
Overview
Organization
On October 3, 2005, Walter Energy acquired all outstanding shares of capital stock representing the Mueller Co. and Anvil businesses and contributed them to its U.S. Pipe business to form the Company. In June 2006, we completed an initial public offering of 28,750,000 shares of Series A common stock and in December 2006, Walter Energy distributed to its shareholders all of its equity interests in the Company, consisting of all of the Company's outstanding shares of Series B common stock. On January 28, 2009, each share of Series B common stock was converted into one share of Series A common stock and the Series A designation was discontinued.
Unless the context indicates otherwise, whenever we refer to a particular year, we mean our fiscal year ended or ending September 30 in that particular calendar year. We manage our businesses and report operations through two business segments, Mueller Co. and Anvil, based largely on the products sold and the customers served.
On April 1, 2012, we sold the businesses comprising our former U.S. Pipe segment. ActivityOverview
Mueller Co.
We estimate approximately 75% of Mueller Co.’s 2014 net sales were for water infrastructure upgrade, repair and replacement directly related to municipal spending, and approximately 20% were related to residential construction activity.
Economic forecasts for municipal spending appear to remain strong. For example, according to the U.S. PipeBureau of Economic Analysis, state and local tax receipts were at an all-time high for the quarter ended September 2014, and were up 2.3% year-over-year. In addition, according to the U.S. Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates increased 4.2%. We also view Mueller Co.’s quote activity as a key indicator of the direction of future municipal demand. During the 2015 first quarter, the number of quotations delivered by Mueller Co. increased 16% year-over-year and the dollar value increased by a greater percentage.
The year-over-year percentage change in housing starts is presented as discontinued operationsa key indicator of demand for 2013.
Business
We expect Mueller Co.'s products from residential construction. In December 2014, fourth quarter net sales percentageZelman & Associates forecasted 15.3% growth to be approximately 10% whenin housing starts for calendar 2015 compared with the prior year. In January 2015, Blue Chip Consensus forecasted 16.0% growth and IHS Global Insight forecasted 15.6% growth, in each case comparing calendar 2015 to the prior year. The average growth rate forecast is slightly lower than that forecasted several months ago, but remains higher than the actual 8.7% year-over-year growth in calendar 2014 and the 6% year-over-year growth for the quarter ended December 2014. Other macroeconomic indicators also tend to support continuing growth in demand for residential construction. For example, according to the U.S. Department of Labor, total non-farm payrolls increased at an average of 252,000 jobs per month for the year period driven principallyended December 2014, which is the highest yearly average since May 2000. Also, according to the U.S. Census Bureau, the number of households increased by continued1.6 million in the quarter ended December 2014, which is the largest increase since 2006.
Based in part on the forecasts for growth in municipal spending and residential construction.construction, we currently expect overall domestic shipments of our valves, hydrants and brass products to grow approximately 9% in the second quarter year-over-year, and we expect a slightly higher growth rate in the second half of 2015 when compared to the second half of 2014.
Net sales of our metering products declined year-over-year in the first quarter, and are also expected to decline year-over-year in the second quarter. However, orders for these products were up 24% year-over-year in the first quarter, and backlog has grown significantly since the end of 2014. Based on our current backlog and project pipeline, we expect shipments to be up more than 20% year-over-year in the second half of the year and essentially flat for the full year.

14

Overall for Mueller Co., we expect net sales in the second quarter to be essentially flat year-over-year, with domestic net sales growth in valves, hydrants and brass products being offset by declines in exports, in Canada and in our metering products. Based in part on the current outlook for residential construction and municipal spending, we expect Mueller Co.'s net sales to increase in 2015 in a range comparable to the 7.4% year-over-year increase in 2014. We also expect Mueller Co.'s 2014an increase in operating income as a percentin 2015, which will be weighted more towards the second half of the year than was the case in 2014.
Anvil
In 2014, approximately 75% of Anvil's net sales were generated by non-residential construction spending. Some leading indicators related to improve comparednon-residential construction are positive. For example, the Architectural Billings Index for December 2014 remained above 50. Also, Blue Chip Consensus forecasts 5.9% growth in non-residential fixed investment in calendar 2015.
Sales to the prior year period due to higher shipment volumes,oil & gas markets accounted for approximately 20% of Anvil’s net sales in 2014, and Anvil’s sales into these markets grew by approximately 14% year-over-year in the 2015 first quarter. Beginning in the second half of December 2014, however, atand continuing into January, the value of Anvil’s orders from the oil & gas markets dropped by approximately 25% year-over-year. The trend in rig counts is a lower rate than thatkey indicator of the direction of demand for Anvil’s products that are sold into the oil & gas markets. According to Baker Hughes, U.S. land-based rig counts have fallen 20% since September 2014 third quarter.to January 2015, reaching their lowest level since March 2010. Further reductions in the price of crude oil, which affects rig counts, could further adversely affect demand for Anvil’s products sold into these markets.
On July 1, 2014, we completed the acquisition of certain of the assets of Lined Valve Company Inc., a privately-held company, which will become part of our Pratt product line, for $10.0 million, subject to a purchase price adjustment. Lined Valve Company Inc. reportedWe expect Anvil’s net sales in the second quarter to decline year-over-year based largely on the value of $10.6 millionorders for calendar 2013.
At Anvil, weour products sold into the energy market in December 2014 and January 2015. We expect its 2014 fourth quarternon-residential net sales percentage growth will be in the low singlemid-single digits whenfor 2015 compared towith the prior year period.year. We also expect itsanticipated growth in Anvil’s non-residential construction market to be more than offset by the anticipated decline in sales into the oil & gas markets. Accordingly, we believe Anvil's net sales may decrease in 2015 compared with the prior year. Operating income could be flat or slightly lower, excluding a $2.5 million gain recorded in the 2014 fourth quarter from the sale of a building. We believe improvements in manufacturing efficiencies will partially offset lower margins due to a product mix shift between Anvil’s domestically produced products that are sold into the oil & gas markets and its non-residential construction products.
Consolidated
Overall for Mueller Water Products, we expect net sales percentage growth in the mid-single digits in 2015. Additionally, with increased production and shipment volumes at Mueller Co., we expect benefits from operating leverage to result in higher operating income to be slightly better than the prior year period.

and operating margin.

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Results of Operations
Three Months Ended June 30,December 31, 2014 Compared to Three Months Ended June 30,December 31, 2013
Three months ended December 31, 2014
Mueller Co. Anvil     Corporate   Total    
(in millions)
Net sales$164.7
 $97.1
 $—
 $261.8
Gross profit$45.2
 $26.1
 $—
 $71.3
Operating expenses:       
Selling, general and administrative27.6
 18.9
 8.5
 55.0
Restructuring8.1
 —
 0.1
 8.2
35.7
 18.9
 8.6
 63.2
Operating income (loss)$9.5
 $7.2
 $(8.6) 8.1
Interest expense, net      9.4
Loss on early extinguishment of debt      31.3
Loss before income taxes      (32.6)
Income tax benefit      (12.4)
Net loss      $(20.2)
       
Three months ended June 30, 2014Three months ended December 31 2013
Mueller Co. Anvil     Corporate   Total    Mueller Co. Anvil Corporate Total
(in millions)(in millions)
Net sales$214.0
 $104.5
 $—
 $318.5
$165.0
 $92.4
 $—
 $257.4
Gross profit$70.1
 $27.2
 $—
 $97.3
$41.7
 $25.4
 $—
 $67.1
Operating expenses:              
Selling, general and administrative27.7
 17.7
 9.9
 55.3
25.7
 18.1
 9.2
 53.0
Restructuring0.2
 —
 —
 0.2
0.1
 —
 —
 0.1
27.9
 17.7
 9.9
 55.5
25.8
 18.1
 9.2
 53.1
Operating income (loss)$42.2
 $9.5
 $(9.9) 41.8
$15.9
 $7.3
 $(9.2) 14.0
Interest expense, net      12.5
      12.6
Income before income taxes      29.3
      1.4
Income tax expense      10.8
      0.3
Net income      $18.5
      $1.1
       
Three months ended June 30, 2013
Mueller Co. Anvil Corporate Total
(in millions)
Net sales$199.3
 $100.1
 $—
 $299.4
Gross profit$59.4
 $30.6
 $—
 $90.0
Operating expenses:       
Selling, general and administrative29.0
 18.3
 9.6
 56.9
Restructuring0.2
 —
 —
 0.2
29.2
 18.3
 9.6
 57.1
Operating income (loss)$30.2
 $12.3
 $(9.6) 32.9
Interest expense, net      12.7
Income before income taxes      20.2
Income tax expense      4.2
Income from continuing operations      16.0
Loss from discontinued operations      (1.9)
Net income      $14.1
Consolidated Analysis
Net sales for the quarter ended June 30,December 31, 2014 increased to $318.5$261.8 million from $299.4$257.4 million in the prior year period. Net sales increased primarily due to increased shipment volumes of $17.7 million.$3.5 million at Anvil and improved pricing, although these factors were partially offset by a weaker Canadian dollar.
Gross profit for the quarter ended June 30,December 31, 2014 increased to $97.3$71.3 million from $90.0$67.1 million in the prior year period. Gross margin increased 40110 basis points to 30.5%27.2% in the quarter ended June 30,December 31, 2014 from 30.1%26.1% in the prior year period. Gross profit and gross margin benefited primarily from improved sales pricing, a higher margin product mix at Mueller Co. and Anvil's increased shipment volumes and higher sales pricing, partially offset by higher costs at Anvil.volumes.
Selling, general and administrative expenses ("SG&A") for the quarter ended June 30,December 31, 2014 decreasedincreased to $55.3$55.0 million from $56.9$53.0 million in the prior year period. SG&A as a percentage of net sales was 17.4%21.0% in the quarter ended June 30,December 31, 2014 and 19.0%20.6% in the prior year period. These improvements in SG&A were related primarily to decreased employee-related costs.

2616

Interest expense, net decreased in the quarter ended June 30, 2014 compared to the prior year period. The components of interest expense, net are detailed below.
 Three months ended
 June 30,
 2014 2013
 (in millions)
7.375% Senior Subordinated Notes$7.8
 $7.7
8.75% Senior Unsecured Notes4.0
 4.0
Deferred financing fees amortization0.5
 0.5
ABL Agreement0.3
 0.3
Other interest expense—
 0.2
 12.6
 12.7
Interest income(0.1) —
 $12.5
 $12.7
The components of income tax expense in continuing operations are provided below.
 Three months ended
 June 30,
 2014 2013
 (in millions)
Expense from income before income taxes$11.9
 $8.1
Deferred tax asset valuation allowance adjustments(1.1) (4.0)
Other discrete items—
 0.1
 $10.8
 $4.2
Segment Analysis
Mueller Co.
Net sales for the quarter ended June 30, 2014 increased to $214.0 million from $199.3 million in the prior year period. Net sales increased primarily due to $13.7 million of increased shipment volumes. Net sales from our core domestic valves, hydrants and brass products grew 28% year-over-year. We believe 2014 third quarter valve and hydrant shipments were favorably affected by the timing of price increases between years. Net sales declined for our Pratt product line approximately 21%, or $6 million, year-over-year. Net sales of metering systems were essentially the same compared to the prior year period.
Gross profit for the quarter ended June 30, 2014 increased to $70.1 million from $59.4 million in the prior year period primarily due to improved product mix and higher sales pricing. Gross margin increased to 32.8% for the quarter ended June 30, 2014 compared to 29.8% in the prior year period primarily due to improved product mix and higher sales pricing.
SG&A in the quarter ended June 30, 2014 decreased to $27.7 million from $29.0 million in the prior year period primarily due to expenses associated with lower professional fees. SG&A was 12.9% and 14.6% of net sales for the quarter ended June 30, 2014 and 2013, respectively.
Anvil
Net sales in the quarter ended June 30, 2014 increased to $104.5 million from $100.1 million in the prior year period. Net sales increased primarily due to higher shipment volumes, particularly to the oil & gas, commercial and industrial markets.
Gross profit in the quarter ended June 30, 2014 decreased to $27.2 million from $30.6 million in the prior year period. Gross margin declined to 26.0% in the quarter ended June 30, 2014 compared to 30.6% in the prior year period. The decline was due primarily to operational inefficiencies at its largest manufacturing facility.
SG&A decreased to $17.7 million in the quarter ended June 30, 2014 from $18.3 million in the prior year period primarily due to lower employee-related costs. SG&A was 16.9% of net sales for the quarter ended June 30, 2014 and 18.3% in the prior year period.

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Corporate
SG&A increased to $9.9 million in June 30, 2014 from $9.6 million in the prior year period primarily due to higher professional fees offset by lower employee-related costs.
Nine Months Ended June 30, 2014 Compared to Nine Months Ended June 30, 2013
 Nine months ended June 30, 2014
 Mueller Co. Anvil     Corporate   Total    
 (in millions)
Net sales$570.3
 $293.7
 $—
 $864.0
Gross profit$166.9
 $79.7
 $—
 $246.6
Operating expenses:       
Selling, general and administrative80.7
 54.3
 27.5
 162.5
Restructuring1.9
 1.1
 —
 3.0
 82.6
 55.4
 27.5
 165.5
Operating income (loss)$84.3
 $24.3
 $(27.5) 81.1
Interest expense, net      37.6
Income before income taxes      43.5
Income tax expense      14.2
Net income      $29.3
        
 Nine months ended June 30, 2013
 Mueller Co. Anvil Corporate Total
 (in millions)
Net sales$538.5
 $289.1
 $—
 $827.6
Gross profit$142.8
 $81.6
 $—
 $224.4
Operating expenses:       
Selling, general and administrative80.1
 54.2
 24.7
 159.0
Restructuring1.2
 0.1
 —
 1.3
 81.3
 54.3
 24.7
 160.3
Operating income (loss)$61.5
 $27.3
 $(24.7) 64.1
Interest expense, net      39.0
Loss on early extinguishment of debt      1.4
Income before income taxes      23.7
Income tax expense      5.1
Income from continuing operations      18.6
Income from discontinued operations      8.7
Net income      $27.3
Consolidated Analysis
Net sales for the nine months ended June 30, 2014 increased to $864.0 million from $827.6 million in the prior year period. Net sales increased due to $27.7 million of increased shipment volumes and $13.7 million of higher pricing, both of which were primarily at Mueller Co.
Gross profit for the nine months ended June 30, 2014 increased to $246.6 million from $224.4 million in the prior year period. Gross margin increased140 basis points to 28.5% in the nine months ended June 30, 2014 from 27.1% in the prior year period. Gross profit and gross margin benefited primarily from increased shipment volumes and higher sales pricing.
SG&A for the nine months ended June 30, 2014 increased to $162.5 million from $159.0 million in the prior year period. SG&A was 18.8% of net sales in the nine months ended June 30, 2014 and 19.2% in the prior year period.
Restructuring increased in the nine months ended June 30, 2014 compared to the prior year period due to an impairment of production equipment at Mueller Co. and the withdrawal from a multi-employer pension plan at Anvil. Mueller Co. changed its

28

approach to the production of certain sizes of iron gate valves and recorded a charge of $1.5 million. Anvil sold the production equipment and certain inventory at its Bloomington, Minnesota location and recorded an accrual for its estimated pension plan withdrawal liability of $1.0 million.
Interest expense, net decreased in the nine months ended June 30,December 31, 2014 compared to the prior year period due primarily to the refinancing completed in November 2014 whereby the lower-rate Term Loan replaced the Senior Subordinated Notes and the Senior Unsecured Notes. The refinancing, along with the $55.0 million redemption of Senior Subordinated Notes in August 2014, resulted in a lower level ofreduced total debtprincipal amount outstanding. The components of interest expense, net are detailed below.
 Nine months ended
 June 30,
 2014 2013
 (in millions)
7.375% Senior Subordinated Notes$23.2
 $23.2
8.75% Senior Unsecured Notes12.0
 12.8
Deferred financing fees amortization1.5
 1.6
ABL Agreement0.9
 1.2
Other interest expense0.3
 0.4
 37.9
 39.2
Interest income(0.3) (0.2)
 $37.6
 $39.0
During the nine months ended June 30, 2013, we redeemed $22.5 million principal amount of our 8.75% Senior Unsecured Notes for $23.2 million, plus accrued and unpaid interest. The resulting loss on early extinguishment of debt of $1.4 million includes the premium paid and the deferred financing costs and original issue discount that were written off.
During the nine months ended June 30, 2014, we completed an updated analysis of our income tax apportionment by state.  This analysis identified changes in the state tax apportionment primarily due to the sale of U.S. Pipe in 2012 and the adoption of either a weighted sales factor or single sales factor apportionment method by states that historically had used a 3-factor (property, payroll and sales) apportionment method. As a result of these changes, we reduced our marginal state income tax rate, used in calculations of our deferred tax assets and liabilities, by 0.52%.  This resulted in a decrease in income tax expense of $2.0 million.
 Three months ended
 December 31,
 2014 2013
 (in millions)
Term Loan$2.1
 $—
ABL Agreement0.3
 0.3
7.375% Senior Subordinated Notes4.0
 7.7
8.75% Senior Unsecured Notes2.4
 4.0
Deferred financing fees amortization0.5
 0.5
Other interest expense0.2
 0.2
 9.5
 12.7
Interest income(0.1) (0.1)
 $9.4
 $12.6
The components of income tax expense in continuing operations(benefit) are provided below.
 Nine months ended
 June 30,
 2014 2013
 (in millions)
Expense from income before income taxes$17.5
 $9.6
Deferred tax asset valuation allowance adjustments(1.1) (4.5)
State tax rate change(2.0) —
Other discrete items(0.2) —
 $14.2
 $5.1
 Three months ended
 December 31,
 2014 2013
 (in millions)
Expense (benefit) from income before income taxes$(12.3) $0.5
Other discrete items(0.1) (0.2)
 $(12.4) $0.3
Segment Analysis
Mueller Co.
Net sales for the nine monthsquarter ended June 30,December 31, 2014 increased to $570.3of $164.7 million from $538.5 were essentially flat as compared with $165.0 million in the prior year period. NetDomestic shipments of Mueller Co. base products, which excludes metering products and leak detection, increased approximately 9%, which was led by an increase in valve and hydrant sales increasedof approximately 11%. This was offset primarily due to $23.5by lower net sales of metering products of $7.6 million, of increased shipment volumes lower exports and $12.1 million of higher pricing. Net sales from our core domestic valves, hydrants and brass products grew 17% year-over-year.a weaker Canadian dollar.
Gross profit for the nine monthsquarter ended June 30,December 31, 2014 increased to $45.2 million from $41.7 million in the prior year period. Gross margin increased to 27.4% for the quarter ended December 31, 2014 compared to 25.3% in the prior year period. Both gross profit and gross margin improved primarily due to a higher margin product mix and improved sales pricing.
SG&A in the quarter ended December 31, 2014 increased to $27.6 million from $25.7 million in the prior year period. SG&A was 16.8% and 15.6% of net sales for the quarters ended December 31, 2014 and increased2013, respectively.
During the quarter, Mueller Co. ceased operations at a small foundry in Canada that produced primarily commodity municipal castings. This resulted in a loss of $7.2 million, which was most of the total restructuring expense of $8.1 million recorded in the quarter.

17

Anvil
Net sales in the quarter ended December 31, 2014 increased to $166.9$97.1 million from $142.8$92.4 million in the prior year period primarily due to increased shipment volumes and improved pricing. In the quarter, Anvil's net sales into the oil & gas markets grew approximately 14%, although orders decreased in mid-December. Shipments of mechanical and fire protection products grew by approximately 3% driven by non-residential construction.
Gross profit in the quarter ended December 31, 2014 increased to $26.1 million from $25.4 million in the prior year period due to increased shipment volumes and improved sales pricing that were partially offset by operational inefficiencies. Gross margin declined to 26.9% in the quarter ended December 31, 2014 compared with 27.5% in the prior year period primarily because higher manufacturing costs exceeded the benefits from increased shipment volumes and improved sales pricing. Gross margin
SG&A increased to 29.3% for$18.9 million in the nine monthsquarter ended June 30,December 31, 2014 compared to 26.5%from $18.1 million in the prior year period primarily due to higher shipment volumesemployee-related costs, professional fees and highera loss related to selling a vacant building. SG&A was 19.5% of net sales pricing.

29

SG&Afor the quarter ended December 31, 2014 and 19.6% in the nine months ended June 30,prior year period.
Corporate
SG&A decreased to $8.5 million in December 31, 2014 increased to $80.7from $9.2 million from $80.1 million in the prior year period primarily due to expenses associated with increased shipment volumes. SG&A was 14.2% and 14.9% of net sales for the nine months ended June 30, 2014 and 2013, respectively.
Anvil
Net sales in the nine months ended June 30, 2014 increased to $293.7 million from $289.1 million in the prior year period. Net sales increased primarily due to increased shipment volumes.
Gross profit in the nine months ended June 30, 2014 decreased to $79.7 million from $81.6 million in the prior year period. Gross margin declined to 27.1% in the nine months ended June 30, 2014 compared to 28.2% in the prior year period. These declines were due primarily to operational inefficiencies at its largest manufacturing facility.
SG&A increased to $54.3 million in the nine months ended June 30, 2014 from $54.2 million in the prior year period. SG&A was 18.5% of net sales for the nine months ended June 30, 2014 and 18.7% in the prior year period.
Corporate
SG&A increased to $27.5 million in the nine months ended June 30, 2014 from $24.7 million in the prior year period primarily due to higher professional fees. Expenses related to our former U.S. Pipe operations represented $2.2 million of the increased expenses in 2014.lower stock-based compensation expense.
Liquidity and Capital Resources
We refinanced our debt on November 25, 2014. We repaid all of our Senior Subordinated Notes and Senior Unsecured Notes and entered into a $500.0 million term loan which matures on November 25, 2021. We expect to realize annualized interest expense savings of approximately $22 million, assuming that LIBOR remains at or below a 0.75% floor and before the effect of interest rate risk management activities, if any. This excludes the loss on early extinguishment of debt we recorded in the quarter ended December 31, 2014 of $31.3 million. To complete the refinancing, which included net principal reduction and payment of premiums, fees and interest accrued at November 25, 2014, we used approximately $50 million of cash.
We had cash and cash equivalents of $150.945.1 million at June 30,December 31, 2014 and $161.5138.3 million of additional borrowing capacity under our ABL Agreement based on June 30,December 31, 2014 data. Undistributed earnings from our subsidiaries in Canada and China are considered to be permanently invested outside of the United States. At June 30,December 31, 2014, cash and cash equivalents included $27.933.6 million and $5.14.3 million in Canada and China, respectively.
On July 30, 2014, we announcedThe ABL Agreement and Term Loan contain customary representations and warranties, covenants and provisions governing an event of default.  The covenants restrict our intentionability to redeem $55.0 million aggregate principal amountengage in certain specified activities, including but not limited to the payment of our7.375%Senior Subordinated Notes at a redemption price of 101.229% of the principal amount on August 29, 2014. We expect to record a loss on early extinguishment of debt of $1.0 million ondividends and the redemption date. We anticipateof our annual interest expense will decline by approximately $4 million as a result of the redemption.
On July 1, 2014, we used $10.0 million to acquire certain assets of Lined Valve Company Inc.
On April 1, 2012, we sold our former U.S. Pipe segment. During the quarter ended December 31, 2012, we received an additional $4.5 million in cash for certain purchase price adjustments and reduced our loss on sale of discontinued operations accordingly.common stock.
Cash flows from operating activities are categorized below.
Nine months endedThree months ended
June 30,December 31,
2014 20132014 2013
(in millions)(in millions)
Collections from customers$845.2
 $825.3
$303.2
 $287.2
Disbursements, other than interest and income taxes(743.5) (740.9)(309.9) (275.3)
Interest payments, net(39.6) (40.9)(20.2) (15.7)
Income tax payments, net(1.1) (0.7)(0.2) —
Cash provided by operating activities$61.0
 $42.8
Cash used by operating activities$(27.1) $(3.8)
Collections from customers were higher during the ninethree months ended June 30,December 31, 2014 compared to the prior year period primarily related to increased net sales in the 2014 fourth quarter compared to a year ago.the 2013 fourth quarter.
Increased disbursements, other than interest and income taxes, during the ninethree months endedJune 30, December 31, 2014 reflect higher purchasing activity associated with increasing inventories and differences in the timing of expenditures.
Interest payments were higher net sales and timing differences, partially offset by a greater utilizationduring the three months ended December 31, 2014 compared to the prior year period due to the acceleration of inventory on hand during 2014.interest payments related to the debt that was retired with the November 2014 refinancing.

18

Capital expenditures were $25.57.2 million in the ninethree months ended June 30,December 31, 2014 compared to $23.97.5 million in the prior year period. We estimate 20142015 capital expenditures to be $35$36 million to $36 million.$38 million.

30

DuringWe contributed $1 million to our Canadian pension plans during the quarter ending September 30, 2014, weended December 31, 2014. We do not expect to make our 2014 contribution to our U.S.any additional pension plan of $0.7 million. The proportion of the assets held by our U.S. pension plan investedcontributions in fixed income securities, instead of equity securities, has increased over historical levels. Because of this shift in the strategic asset allocation, the estimated rate of return on these assets has decreased, which could ultimately cause our pension expense and our required contributions to this plan to increase.
We expect to exhaust substantially all of our remaining net operating loss carryforwards for U.S. federal income tax purposes by September 30, 2014. After they are exhausted, we expect our federal income tax payments to increase compared to the past several years. Our state net operating loss carryforwards will continue to be available in future years.2015.
We anticipate that our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flows will be sufficient to meet our anticipated operating expenses, income tax payments, capital expenditures and debt service obligations as they become due through June 30,December 31, 2015. However, our ability to make these payments will depend partly upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.
ABL Agreement
At June 30,December 31, 2014, the ABL Agreement consisted of a revolving credit facility for up to $225 million of revolving credit borrowings, swing line loans and letters of credit. The ABL Agreement permits us to increase the size of the credit facility by an additional $150 million in certain circumstances subject to adequate borrowing base availability. We may borrow up to $25 million through swing line loans and may have up to $60 million of letters of credit outstanding.
Borrowings under the ABL Agreement bear interest at a floating rate equal to LIBOR plus a margin ranging from 175 to 225 basis points, or a base rate, as defined in the ABL Agreement, plus a margin ranging from 75 to 125 basis points. At June 30,December 31, 2014, the applicable LIBOR-based margin was 175 basis points.
The ABL Agreement terminates on the earlier of (1) December 18, 2017 and (2) 60 days prior to the final maturity of our 7.375% Senior Subordinated Notes.. We pay a commitment fee for any unused borrowing capacity under the ABL Agreement of either 37.5 basis points per annum or 25 basis points per annum, based on daily average availability during the previous calendar quarter. At June 30,December 31, 2014, our commitment fee was 37.5 basis points. As measured using June 30,December 31, 2014 data, excess availability as reduced by outstanding letters of credit and accrued fees and expenses of $29.1$29.2 million was $161.5138.3 million.
The ABL Agreement is subject to mandatory prepayments if total outstanding borrowings under the ABL Agreement are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances. The borrowing base under the ABL Agreement is equal to the sum of (a) 85% of the value of eligible accounts receivable and (b) the lesser of (i) 65% of the value of eligible inventoryinventories or (ii) 85% of the net orderly liquidation value of the value of eligible inventory,inventories, less certain reserves. Prepayments can be made at any time with no penalty.
Substantially all of our U.S. subsidiaries are borrowers under the ABL Agreement and are jointly and severally liable for any outstanding borrowings. Our obligations under the ABL Agreement are secured by a first-priority perfected lien on all of our U.S. inventory,inventories, accounts receivable, certain cash and other supporting obligations.
Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $22.5 million and 10% of the aggregate commitments under the ABL Agreement. The ABL Agreement contains customary negative covenants and restrictions on our ability to engage in specified activities, such as:
limitations on other debt, liens, investments and guarantees;Term Loan
restrictions on dividends and redemptions of our capital stock and prepayments and redemptions of debt; and
restrictions on mergers and acquisition, sales of assets and transactions with affiliates.
8.75% Senior Unsecured Notes
We had $180.0$500.0 million face value outstanding under the Term Loan at December 31, 2014. Term Loan borrowings accrue interest at a floating rate equal to LIBOR, subject to a floor of 8.75% Senior Unsecured Notes, due on September 1, 20200.75%, outstandingplus 325 basis points. We may voluntarily repay amounts borrowed under the Term Loan at June 30, 2014, which was reported netany time. The principal amount of $1.8 million unamortized discount. After August 31, 2015, the Senior Unsecured Notes may be redeemed at specified redemption prices. Upon a “Change of Control” (as defined in the indenture securing the Senior Unsecured Notes), we areTerm Loan is required to offer to purchase the outstanding Senior Unsecured Notes atbe repaid in quarterly installments, commencing in March 2015, of $1.25 million. The Term Loan has a purchase priceterm of 101%seven years. The Term Loan is guaranteed by substantially all of the principal amount. The Senior Unsecured Notes are guaranteedour U.S. subsidiaries and secured by essentially all of our U.S. subsidiaries, but are subordinate to borrowings under the ABL Agreement.

31

7.375%Senior Subordinated Notes
We had $420.0 million face value of 7.375% Senior Subordinated Notes, due on June 1, 2017, outstanding at June 30, 2014. We may redeem any portion of the Senior Subordinated Notes at specified redemption prices, subject to restrictions in the Senior Unsecured Notes. Upon a “Change of Control” (as defined in the indenture securing the Senior Subordinated Notes), we are required to offer to purchase the outstanding Senior Subordinated Notes at 101% of the principal amount. The Senior Subordinated Notes are guaranteed by essentially all of our U.S. subsidiaries, but are subordinate to the borrowings underassets, though the ABL Agreement and the Senior Unsecured Notes.has a senior claim on certain collateral securing borrowings thereunder.
Our corporate credit rating and the credit rating for our debt are presented below.
Moody’s   Standard & Poor'sMoody’s   Standard & Poor's
June 30, September 30, June 30, September 30,December 31, September 30, December 31, September 30,
2014 2013 2014 20132014 2014 2014 2014
Corporate credit ratingB2 B2 BB- BB-B1 B1 BB- BB-
ABL AgreementNot rated Not rated Not rated Not ratedNot rated Not rated Not rated Not rated
8.75% Senior Unsecured NotesB1 B1 BB- BB-
7.375% Senior Subordinated NotesCaa1 Caa1 B B
Term LoanB2 n/a BB n/a
OutlookStable Stable Stable StableStable Stable Stable Stable

19

Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance"structured finance" or special purpose"special purpose" entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not have any undisclosed borrowings or debt or any derivative contracts or synthetic leases. Therefore, we are not exposed to any financing, liquidity, market or credit risk that could have arisen had we engaged in such relationships.
We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual obligations. At June 30,December 31, 2014, we had $28.928.8 million of letters of credit and $42.545.7 million of surety bonds outstanding.
Seasonality
Our business is dependent upon the construction industry, which is seasonal due to the impact of cold weather conditions. Net sales and operating income have historically been lowest in the quarterly periods ending December 31 and March 31 when the northern United States and all of Canada generally face weather conditions that restrict significant construction activity.

32

Item 4.CONTROLS AND PROCEDURES
During the quarter ended June 30,December 31, 2014, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and our Chief Financial Officer have concluded, based on an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) by our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, that such disclosure controls and procedures were effective as of the end of the period covered by this report.
Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls can prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of one or more persons. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and, while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.

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PART II OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
Refer to the information provided in Note 10 to the notes to the condensed consolidated financial statements presented in Item 1 of Part I of this report.
Item 1A.RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in PART I, “Item 1A. RISK FACTORS” in our Annual Report, each of which could materially affect our business, financial condition or operating results. These described risks are not the only risks facing us. Additional risks and uncertainties not known to us or that we deem to be immaterial also may materially adversely affect our business, financial condition or operating results.
Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the quarter ended June 30,December 31, 2014, we repurchased shares of our common stock as follows.
Period 
Total number of shares purchased(1)
 Average price paid per share Total number of shares purchased as part of publically announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs
April 1-30, 2014 —
 

 —
 —
May 1-31, 2014 6,688
 $8.53
 —
 —
June 1-30, 2014 —
 —
 —
 —
Total 6,688
 $8.53
 —
 —
Period 
Total number of shares purchased(1)
 Average price paid per share Total number of shares purchased as part of publically announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs
October 1-31, 2014 —
 

 —
 —
November 1-30, 2014 183,943
 $9.57
 —
 —
December 1-31, 2014 42,521
 9.94
 —
 —
Total 226,464
 $9.64
 —
 —
(1)  These are shares surrendered to us to pay the tax withholding obligations of participants in connection with the lapsing of restrictions on restricted stock units.
Item 6.EXHIBITS
Exhibit No. Document
10.23.1*Exhibit A (Metric and Targets for Fiscal 2013-15 Award Cycle)
10.24.1*Exhibit A (Metric and Targets for Fiscal 2014-16 Award Cycle)
10.27*Mueller Water Products, Inc. Form of Performance Restricted Stock Unit Award Agreement for October 1, 2014 to September 30, 2017 award cycle.
10.27.1*Exhibit A (Metric and Targets for Fiscal 2015-17 Award Cycle)
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1* Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101* 
The following financial information from the Quarterly Report on Form 10-Q for the quarter ended June 30,December 31, 2014, formatted in XBRL (Extensible Business Reporting Language), (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Other Comprehensive Income (Loss), (iv) the Condensed Consolidated Statements of Stockholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Condensed Consolidated Financial Statements.
* Filed with this quarterly report

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  MUELLER WATER PRODUCTS, INC.
Date:August 7, 2014February 6, 2015By:/s/ Evan L. Hart
   Evan L. Hart
   Chief Financial Officer


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