
~~Note 7.~~	Note 7. Stock-based Compensation Plans

We ~~have~~ granted various forms of stock-based compensation, including ~~stock options,~~market-based restricted stock units (“MRSUs”), restricted stock units, stock options 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”)., Phantom Plan instruments under our Mueller Water Products, Inc. 2012 Phantom Plan, and Employee stock purchase plan instruments under our 2006 Employee Stock Purchase Plan. Grants during the six months ended March 31, 2021 are as follows.

~~A PRSU~~


	Units granted	Weighted average grant date fair value per instrument		Total grant date fair value (in millions)
Quarter ended December 31, 2020
MRSUs	234,199	$	15.39	$	3.6
Phantom Plan instruments	180,987	11.86		2.1
Restricted stock units	129,081	11.86		1.5
Non-qualified stock options	423,405	3.05		1.3
PRSUs: 2020 award	60,019	11.86		0.7
2019 award	84,483	11.86		1.0
Employee stock purchase plan instruments	40,286	1.92		0.1

Quarter ended March 31, 2021
MRSUs	4,187	$	14.26	$	0.1
Phantom Plan instruments	1,254	11.94		0
Restricted stock units	82,565	12.81		1.1
Non-qualified stock options	8,115	3.08		0
Employee stock purchase plan instruments	35,325	2.24		0.1
				$	11.6

An MRSU award represents a target number of units that may be paid out at the end of a ~~multi-year~~three-year award cycle based on a calculation of our relative total shareholder return (“TSR”) performance as compared with a selected peer group's TSR. Settlements, in our common shares, will range from 0 to 2 times the number of MRSUs granted, depending on our TSR performance relative to that of the peer group.

Compensation expense attributable to MRSUs is based on the fair value of the awards on their respective grant dates, as determined using a Monte Carlo model. The assumptions used to determine the grant date fair value are indicated below.


	January 27, 2021		December 2, 2020
Variables used in determining grant date fair value:
Dividend yield	1.84	%	1.77	%
Risk-free rate	0.16	%	0.21	%
Expected term (in years)	2.67		2.83

The expected dividend yield is based on our estimated annual dividend and our stock price history at the grant date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield in effect at the grant date with a term equal to the expected term. The expected term represents the average period of time the units are expected to be outstanding.

At March 31, 2021, the outstanding Phantom Plan instruments had a fair value of $13.89 per instrument and our liability for Phantom Plan instruments was $2.0 million and is included within Other current liabilities and Other noncurrent liabilities.

Stock options generally vest on each anniversary date of the original grant ratably over three years. Compensation expense attributed to stock options is based on the fair value of the awards on their respective grant dates, as determined using a Black-Scholes model. The assumptions used to determine the grant date fair value are indicated below.


	January 27, 2021		December 2, 2020
Dividend yield	2.01	%	2.01	%
Risk-free rate	0.66	%	0.66	%
Expected term (in years)	6.00		6.00

A PRSU award consists of a number of units that may be paid out at the end of a three-year award cycle consisting of a series of annual performance periods coinciding with our fiscal years. After we ~~determine~~establish the financial performance targets related to PRSUs for a given performance period, typically during the first quarter of that fiscal year, we consider that portion of a PRSU award to be granted. Thus, each award consists of a grant in the year of award and grants in the ~~designated~~two following years. ~~Settlement~~Settlements, in our common shares, will range from ~~zero~~0 to ~~two~~2 times the number of PRSUs granted, depending on our financial performance ~~against~~relative to the targets. ~~As determined at the date of award, PRSUs may settle in cash-value equivalent of, or directly in, shares of our common stock.~~

We ~~awarded 171,288 stock-settled PRSUs in the quarter ended December 31, 2017 scheduled to settle in three years.~~

~~We issued 146,061 shares and 263,410~~did not issue any shares of common stock during the ~~quarters~~three months ended ~~December~~March 31, ~~2017 and 2016, respectively,~~2021. We issued 103,058 shares of common stock during the six months ended March 31, 2021 to settle ~~PRSUs.~~

~~In addition~~PRSUs during the period. Additionally, we issued 93,973 and 219,549 shares of common stock to ~~the PRSU activity, 213,532~~settle restricted stock units vested ~~during the quarter ended December 31, 2017.~~

We have granted cash-settled Phantom Plan instruments under the Mueller Water Products, Inc. Phantom Plan (“Phantom Plan”). At December 31, 2017, the outstanding Phantom Plan instruments had a fair valueand issued 45,517 and 108,950 shares of ~~$12.53 per instrument and our liability for Phantom Plan instruments was $1.2 million.~~

~~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~~common stock to settle stock options exercised during the three and six months ended ~~December~~March 31, ~~2017 as follows.~~2021, respectively.

Number granted Weighted average grant date fair value per instrument
Total grant date fair value
(in millions)
Restricted stock units 171,288
$ 12.41
$ 2.1
Employee stock purchase plan instruments 35,099
2.28
0.1
Phantom Plan awards 160,672
12.41
2.0
PRSUs: 2018 award 57,092
12.41
0.7
2017 award 71,070
12.41
0.9
2016 award 71,072
12.41
0.9
$ 6.7

~~Income from continuing operations~~Operating income included stock-based compensation expense of ~~$2.4~~$2.5 million and ~~$2.7~~$1.3 million during the three months ended ~~December~~March 31, ~~2017~~2021 and ~~2016,~~2020, respectively, and $5.0 million and $3.2 million during the six months ended March 31, 2021 and 2020, respectively. At ~~December~~March 31, ~~2017,~~2021, there was approximately ~~$8.9~~$13.2 million of unrecognized compensation expense related to stock-based compensation arrangements and ~~185,270~~there were 199,994 PRSUs that have been awarded for the ~~2019~~2021 and ~~2020~~2022 performance periods for which performance ~~goals have not been set.~~goal achievement cannot yet be determined.

We excluded ~~70,996~~664,082 and ~~323,010 of~~267,697 stock-based compensation instruments from the calculations of diluted earnings per share for the ~~quarters~~three months ended ~~December~~March 31, ~~2017~~2021 and ~~2016,~~2020, respectively, and 447,086 and 184,296 for the six months ended March 31, 2021 and 2020, respectively, since their inclusion would have been antidilutive.


~~Note 8.~~	Note 8. Supplemental Balance Sheet Information

Selected supplemental ~~balance sheet~~asset information is presented below.


	March 31,		September 30,
	2021		2020

	(in millions)
Inventories, net:
Purchased components and raw material	$	94.0	$	87.3
Work in process	34.3		32.4
Finished goods	51.1		42.8
Total inventories, net	$	179.4	$	162.5

Other current assets:
Prepaid expenses	$	10.5	$	10.9
Non-trade receivables	6.0		8.5
Maintenance and repair supplies and tooling	3.1		3.7
Income taxes	0.3		5.5
Other	2.8		0.4
Total other current assets	$	22.7	$	29.0

Property, plant and equipment, net:
Land	$	6.1	$	6.2
Buildings	81.9		80.4
Machinery and equipment	422.6		406.3
Construction in progress	68.4		57.4
Total property, plant and equipment	579.0		550.3
Accumulated depreciation	(310.5)		(296.5)
Total property, plant and equipment, net	$	268.5	$	253.8

Other noncurrent assets:
Operating lease right-of-use assets	$	24.7	$	25.6
Maintenance and repair supplies and tooling	18.7		17.5
Workers compensation reimbursement receivable	2.0		2.1
Pension assets	3.1		0.9
Note receivable	1.8		1.8
Deferred financing fees	1.5		1.3
Other	3.5		2.1
Total other noncurrent assets	$	55.3	$	51.3

December 31, September 30,
2017 2017
(in millions)
Inventories:
Purchased components and raw material $ 74.3
$ 67.7
Work in process 37.8
35.6
Finished goods 43.1
35.6
$ 155.2
$ 138.9

Other current assets:
Maintenance and repair tooling $ 3.2
$ 3.3
Income taxes 11.9
10.9
Other 11.4
10.2
$ 26.5
$ 24.4

Property, plant and equipment:
Land $ 5.5
$ 5.6
Buildings 51.4
53.4
Machinery and equipment 270.0
266.7
Construction in progress 25.2
24.7
352.1
350.4
Accumulated depreciation (229.8 ) (228.1 )
$ 122.3
$ 122.3
Other current liabilities:
Compensation and benefits $ 18.2
$ 26.9
Customer rebates 8.1
6.5
Taxes other than income taxes 2.4
3.2
Warranty 3.7
3.5
Income taxes 0.8
0.9
Environmental 1.2
1.3
Interest 0.7
0.6
Restructuring 4.2
3.3
Other 6.8
7.3
$ 46.1
$ 53.5
Selected supplemental liability information is presented below.


	March 31,		September 30,
	2021		2020

	(in millions)
Other current liabilities:
Compensation and benefits	$	28.9	$	32.8
Customer rebates	6.6		9.6
Warranty accrual	4.8		7.2
Deferred revenues	4.1		5.6
Refund liability	5.7		4.3
Taxes other than income taxes	4.3		3.9
Operating lease liabilities	3.9		4.0
Workers compensation accrual	2.9		2.7
CARES Act payroll tax liabilities	3.1		0
Restructuring liabilities	2.2		2.8
Environmental liabilities	1.2		1.2
Interest payable	7.3		7.3
Income taxes payable	1.8		0.2
Other	7.7		5.0
Total other current liabilities	$	84.5	$	86.6

Other noncurrent liabilities:
Operating lease liabilities	$	22.5	$	23.3
Warranty accrual	7.8		7.2
Transition tax liability	4.7		5.2
Unrecognized income tax benefits	4.7		4.5
NMTC liability	3.9		0
Workers compensation accrual	3.7		3.8
Asset retirement obligation	3.6		3.5
CARES Act payroll tax liabilities	3.1		3.3
Deferred development grant	2.5		2.5
Other	2.8		3.0
Total other noncurrent liabilities	$	59.3	$	56.3

Goodwill

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis each September 1st and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

The following table summarizes information concerning our goodwill balance for the six months ended March 31, 2021, in millions.


~~Note 9.~~Balance at September 30, 2020	~~Segment Information~~ $	99.8
Effects of changes in foreign currency exchange rates	0.9
Balance at March 31, 2021	$	100.7

Note 9. Segment Information

Summarized financial information for our segments is presented below. Net sales and operating income associated with certain products have been reclassified as Technologies segment items to conform to the current period presentation.


	Three months ended				Six months ended
	March 31,				March 31,
	2021		2020		2021		2020

	(in millions)
Net sales, excluding intercompany:
Infrastructure	$	246.9	$	239.9	$	462.8	$	432.2
Technologies	20.6		17.8		42.1		38.1
	$	267.5	$	257.7	$	504.9	$	470.3
Operating income (loss):
Infrastructure	$	52.6	$	50.3	$	94.2	$	85.8
Technologies	(4.6)		(4.6)		(6.1)		(6.4)
Corporate	(14.6)		(9.9)		(26.9)		(23.3)
	$	33.4	$	35.8	$	61.2	$	56.1
Depreciation and amortization:
Infrastructure	$	12.7	12.1		$	25.2	$	24.1
Technologies	2.0		2.1		4.1		4.1
Corporate	0		0.1		0.1		0.1
	$	14.7	$	14.3	$	29.4	$	28.3
Strategic reorganization and other (credits) charges:
Infrastructure	$	(0.7)	$	0.4	$	(0.6)	$	0.4
Technologies	0		0		0		0
Corporate	1.5		0.5		2.8		2.9
	$	0.8	$	0.9	$	2.2	$	3.3
Capital expenditures:
Infrastructure	$	14.8	$	21.2	$	29.5	$	35.7
Technologies	0.7		0.7		1.5		1.3
Corporate	0		0.2		0.1		0.3
	$	15.5	$	22.1	$	31.1	$	37.3
Infrastructure disaggregated net revenues:
Central	$	64.1	$	59.8	$	121.1	$	106.2
Northeast	43.2		55.0		89.0		96.7
Southeast	48.1		44.8		86.6		84.2
West	63.5		57.6		116.9		103.6
United States	218.9		217.2		413.6		390.7
Canada	20.4		15.0		32.5		26.6
Other international locations	7.6		7.7		16.7		14.9
	$	246.9	$	239.9	$	462.8	$	432.2
Technologies disaggregated net revenues:
Central	$	6.6	$	3.7	$	11.5	$	8.5
Northeast	3.4		4.5		6.9		10.8
Southeast	6.5		5.4		13.9		11.4
West	3.0		3.1		8.0		5.1
United States	19.5		16.7		40.3		35.8
Canada	0.1		0.3		0.4		0.9
Other international locations	1.0		0.8		1.4		1.4
	$	20.6	$	17.8	$	42.1	$	38.1

Three months ended
December 31,
2017 2016
(in millions)
Net sales, excluding intercompany:
Infrastructure $ 160.1
$ 146.3
Technologies 18.2
20.9
$ 178.3
$ 167.2
Intercompany sales:
Infrastructure $ —
$ 1.1
Technologies —
—
$ —
$ 1.1
Operating income (loss):
Infrastructure $ 28.1
$ 26.2
Technologies (4.7 ) (2.2 )
Corporate (2.7 ) (9.8 )
$ 20.7
$ 14.2
Depreciation and amortization:
Infrastructure $ 9.1
$ 9.0
Technologies 1.4
1.2
Corporate 0.1
0.1
$ 10.6
$ 10.3
Strategic reorganization and other charges:
Infrastructure $ —
$ 0.1
Technologies 0.1
—
Corporate 3.8
1.2
$ 3.9
$ 1.3
Capital expenditures:
Infrastructure $ 4.8
$ 3.0
Technologies 1.5
1.1
Corporate 0.1
0.1
$ 6.4
$ 4.2

Note 10. Accumulated Other Comprehensive Loss


~~Note 10.~~	~~Accumulated Other Comprehensive Loss~~

Accumulated other comprehensive loss is presented below.


	Pension, net of tax		Foreign currency translation		Total

	(in millions)
Balance at September 30, 2020	$	(32.7)	$	8.0	$	(24.7)
Current period other comprehensive income	1.0		4.0		5.0
Balance at March 31, 2021	$	(31.7)	$	12.0	$	(19.7)

Note 11. Commitments and Contingencies

Pension, net of tax Foreign currency translation Derivative instruments, net of tax Total

Balance at September 30, 2017 $ (47.0 ) $ (3.3 ) $ (1.5 ) $ (51.8 )
Current period other comprehensive income (loss) 0.5
0.1
1.0
1.6
Balance at December 31, 2017 $ (46.5 ) $ (3.2 ) $ (0.5 ) $ (50.2 )


~~Note 11.~~	~~Commitments and Contingencies~~

We are involved in various legal proceedings that have arisen in the normal course of operations, including the proceedings summarized below. 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 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.~~matters, unless otherwise indicated below. Other than the litigation described below, we do not believe that any of our outstanding litigation would 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 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 International plc, now Johnson Controls International plc (“JCI”), sold our businesses to a previous owner in August 1999, ~~Tyco~~JCI 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~~JCI’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~~JCI has engaged in multiple corporate restructurings, split-offs and divestitures. While none of these transactions directly affects the indemnification obligations of the ~~Tyco~~JCI indemnitors under the 1999 acquisition agreement, the result of such transactions is that the assets of, and control over, such ~~Tyco~~JCI indemnitors has changed. Should any of these ~~Tyco~~JCI indemnitors become financially unable or fail to comply with the terms of the indemnity, we may be responsible for such obligations or liabilities.

On July 13, 2010, Rohcan Investments Limited, the former owner of a 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.

~~The purchaser of~~ U.S. Pipe, which was sold in 2012, has been identified as a “potentially responsible party” (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act ~~(“CERCLA”)~~ in connection with a former manufacturing facility operated by U.S. Pipe that was in the vicinity of a proposed Superfund site located in North Birmingham, Alabama. Under the terms of the acquisition agreement relating to our sale of U.S. Pipe, we agreed to indemnify the purchaser for certain environmental liabilities, including those arising out of the former manufacturing site in North Birmingham. Accordingly, the purchaser tendered the matter to us for indemnification, which we accepted. Ultimate liability for the site will depend on many factors that have not yet been determined, including the determination of ~~EPA’s~~the Environmental Protection Agency’s remediation costs, the number and financial viability of the other PRPs (there are four other PRPs currently) and the determination of the final allocation of the costs among the PRPs. ~~Accordingly, because~~Since the ~~amount~~amounts of such costs cannot be reasonably estimated at this time, no amounts ~~had~~have been accrued for this matter at ~~December~~March 31, ~~2017.~~2021.

Walter Energy. ~~Each member~~On November 18, 2019, we paid approximately $22.2 million to the Internal Revenue Service in final settlement of a tax dispute related to our former parent company, Walter Energy, Inc.

The COVID-19 Pandemic. The pandemic has caused, and is likely to continue to cause, severe economic, market and other disruptions to the U.S. and global economies. We have taken action and continue to counter such disruption and work to protect the safety of our production workers as essential workers at our various manufacturing plants, distribution centers and research and development centers. We are uncertain of the ~~Walter Energy consolidated group, which included us through December 14, 2006, is jointly and severally liable for the federal income tax liability of each other member~~potential magnitude or duration of the ~~consolidated group for any year~~business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19, and while the extent to which the pandemic affects our results will depend on future developments, the outbreak could result in which it is a member of the group at any time during such year. Accordingly, we could be liable in the event any such federal income tax 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.

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 an 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) relatingmaterial effects 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.

As described further below, the IRS is currently alleging that Walter Energy owes substantial amounts for prior taxable periods (specifically, 1983-1994, 2000-2002 and 2005). As a matter of law, we are jointly and severally liable for any final tax determination, which means we would be liable in the event Walter Energy is unable to pay any amounts owed.

In July 2015, Walter Energy filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code before the Bankruptcy Court for the Northern District of Alabama (“Chapter 11 Case”). During the pendency of the Chapter 11 Case, we monitored the proceeding to determine whether we could be liable for all or a portion of this federal income tax liability if it is incurred, and not discharged, for any period during which we were included in the Walter Energy consolidated group. On January 11, 2016, the IRS filed a proof of claim in the Chapter 11 Case, alleging that Walter Energy owes taxes, interest and penalties for the years 1983-1994, 2000-2002 and 2005 in an aggregate amount of $554.3 million ($229.1 million of which the IRS claims is entitled to priority status in the Chapter 11 Case). The IRS asserts that its claim is based on an alleged settlement of Walter Energy’s tax liability for the 1983-1995 taxable periods in connection with Walter Energy’s prior bankruptcy proceeding in the United States Bankruptcy Court for the Middle District of Florida. In the proof of claim, the IRS included an alternative calculation in the event the alleged settlement of the prior bankruptcy court is found to be non-binding, which provides for a claim by the IRS in an aggregate amount of $860.4 million ($535.3 million of which the IRS claims is entitled to priority status in the Chapter 11 Case).

According to a quarterly report on Form 10-Q filed by Walter Energy with the SEC on November 5, 2015 (“Walter November 2015 Filing”), at September 30, 2015, Walter Energy had $33.0 million of accruals for unrecognized tax benefits in connection with the matters subject to the IRS claims. In the Walter November 2015 Filing, Walter Energy stated it believed it had sufficient accruals to address any claims, including interest and penalties, and did not believe that any potential difference between any final settlements and amounts accrued would have a material effect on Walter Energy’sfuture financial position, ~~but such potential difference could be material to its~~ results of operations, ~~in a future reporting period.~~cash flows and liquidity.

According to a Form 8-K filed by Walter Energy with the SEC on April 1, 2016 (“Walter April 2016 Filing”), on March 31, 2016, Walter Energy closed on the sale of substantially all of Walter Energy’s Alabama assets pursuant to the provisions of Sections 105, 363 and 365 of the Bankruptcy Code. The Walter April 2016 Filing further stated that Walter Energy would have no further material business operations after April 1, 2016 and Walter Energy was evaluating its options with respect to the wind down of its remaining assets. The asset sale did not impact the IRS’ proof of claim filed in the bankruptcy cases and the proof of claim, as well as the alleged tax liability thereunder, remain unresolved.

On February 2, 2017, at the request of Walter Energy, the Bankruptcy Court for the Northern District of Alabama signed an order converting the Chapter 11 Case to a liquidation proceeding under Chapter 7 of the U.S. Bankruptcy Code, pursuant to which Walter Energy will be wound-down and liquidated (“Chapter 7 Case”). In its objection contesting such conversion, the IRS indicated its intent to pursue collection of amounts included in the Proof of Claim from former members of the Walter Energy consolidated group.

We cannot predict whether or to what extent we may become liable for the tax-related amounts of the Walter Energy consolidated group asserted in the IRS’ proof of claim filed in the bankruptcy cases, in part, because: (i) the amounts owed by the Walter Energy consolidated group for certain of the taxable periods from 1980 through 2006 remain unresolved; (ii) it is unclear what priority, if any, the IRS will receive in the Chapter 7 Case with respect to its claims against Walter Energy, and whether and to what extent funds will be available in the Chapter 7 Case to pay priority tax claims. We also intend to vigorously assert any and all available defenses against any liability we may have as a member of the Walter Energy consolidated group. However, we cannot currently estimate our liability, if any, relating to the tax-related liabilities of Walter Energy’s consolidated tax group for tax years prior to 2007, and such liability could have a material adverse effect on our business, financial condition, liquidity or results of operations.

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~~divestitures of ~~assets and~~ the ~~divestiture of businesses, such as the divestitures of~~subsidiaries, U.S. Pipe and Anvil, 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. We monitor and analyze our warranty experience and costs periodically and revise our accruals as necessary. Critical factors in our analyses include warranty terms, specific claim situations, general incurred and projected failure rates, the nature of product failures, product and labor costs, and general business conditions.

We are party to a number of 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 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~~financial position, results of operations, cash flows or ~~prospects.~~liquidity.


~~Note 12.~~	Note 12. Subsequent Events

On ~~January 24, 2018,~~April 23, 2021, our ~~board~~Board of ~~directors~~Directors declared a dividend of ~~$0.05~~$0.0550 per share on our common stock, payable on or about ~~February~~May 20, ~~2018~~2021 to stockholders of record at the close of business on ~~February 9, 2018.~~May 10, 2021.


~~Item 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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 ~~we intend, expect, plan, project, believe~~the Company intends, expects, plans, projects, believes or ~~anticipate~~anticipates will or may occur in the future are forward-looking ~~statements.~~statements, including, without limitation, statements regarding outlooks, projections, forecasts, trend descriptions, the COVID-19 pandemic, go-to-market strategies, operational excellence, acceleration of new product development, end market performance, net sales performance, adjusted operating income and adjusted EBITDA performance, margins, capital expenditure plans, litigation outcomes, capital allocation and growth strategies, restructuring efficiencies and warranty charges. Forward-looking statements are based on certain assumptions and assessments made by ~~us in light of our~~the Company based on experience and perception of historical trends, current conditions and expected future developments.

Actual results and the timing of events may differ materially from those contemplated by the forward-looking statements due to a number of factors, including the extent, duration and severity of the impact of the COVID-19 pandemic on the Company’s operations and results, including effects on the financial health of customers (including collections), the financial/capital markets, government-mandated facility closures, COVID-19 related facility closures and other manufacturing restrictions, logistical challenges and supply chain interruptions, potential litigation and claims emanating from the COVID-19 pandemic, and health, safety and employee/labor issues in Company facilities around the world; unexpected or greater than expected increases in costs of raw materials and purchased components; regional, national or global political, economic, ~~business, competitive,~~ market and competitive conditions; cyclical and changing demand in core markets such as municipal spending; government monetary or fiscal policies; residential and nonresidential construction, and natural gas distribution; manufacturing and product performance; expectations for changes in volumes, continued execution of cost productivity initiatives and improved pricing; warranty exposures (including the adequacy of warranty reserves); the Company’s ability to successfully resolve significant legal proceedings, claims, lawsuits or government investigations; compliance with environmental, trade and anti-corruption laws and regulations; changing regulatory, ~~conditions~~trade and tariff conditions; failure to achieve expected cost savings, net sales expectations, profitability expectations and manufacturing efficiencies from restructuring and consolidation activities and our large capital investments in Chattanooga and Kimball, Tennessee and Decatur, Illinois; the failure to integrate and/or realize any of the anticipated benefits of recent acquisitions or divestitures; as well as other factors that are described ~~under~~in the section entitled “RISK FACTORS” in Item ~~1A.~~1A of ~~our annual report~~the Company’s most recently filed Annual Report on Form 10-K ~~for~~and in this Quarterly Report on Form 10-Q (all of which risks may be amplified by the ~~year ended September 30, 2017 (“Annual Report”)~~pandemic). Forward-looking statements are only as of the date they are made and do not guarantee future performance. The Company undertakes no duty to update its forward-looking statements except as required by law. Undue reliance should not be placed on any forward-looking statements. ~~The~~You are advised to review any further disclosures the Company ~~does not have any intention or obligation to update forward-looking statements, except as required by law.~~makes in subsequent Forms 10-K, 10-Q, 8-K and other reports filed with the U.S. Securities and Exchange Commission.

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, Infrastructure and Technologies, based largely on the products sold and the customers served.

Overview

Organization

On October 3, 2005, Walter Energy, Inc (“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 Mueller Water Products, Inc. (“Mueller” or the ~~Company.~~“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.

~~On January 6, 2017, we~~Mueller, completing our spin-off. We subsequently sold our ~~former~~U.S. Pipe and Anvil ~~segment. Amounts applicable to Anvil have been classified as discontinued operations.~~businesses in 2012 and 2017, respectively.

Business

We expect our two primary end markets, repair and replacement of water infrastructure driven by municipal spending and new water infrastructure installation driven by residential construction to grow in 2018. We expect the residential construction market to grow faster than municipal spending.

~~Infrastructure~~

We estimate approximately ~~60%~~60-65% of ~~Infrastructure’s 2017~~our 2020 net sales were for repair and replacement directly related to municipal water infrastructure spending, approximately ~~30%~~25-30% were related to residential construction activity and ~~approximately~~less than 10% were related to natural gas ~~utilities.~~utilities spending.

~~Infrastructure announced price increases on valves, hydrants and gas products effective in February 2018 for its U.S. and Canadian markets.~~ We ~~believe that some customers may accelerate orders prior~~expect the operating environment during our fiscal year 2021 to continue to be very challenging due to the ~~effective date~~uncertainty around the depth and duration of the pandemic, which has accelerated and may continue to accelerate inflation and global supply chain disruptions. We anticipate that growth in the residential construction end market will continue to help offset anticipated challenges in the project-related portion of the municipal market. In April 2021, Blue Chip Economic Indicators forecasted a 12% increase in housing starts for calendar 2021 compared to the prior year primarily due to the low interest rate environment in the United States.

We have continued to incur additional costs to address the pandemic as discussed herein, including costs associated with unfavorable volume variances, voluntary emergency paid leave, additional cleaning, disinfectants and sanitation materials for our employees and at our facilities. We expect to continue to incur such costs, which may be significant, as we continue to respond to the pandemic. All of our facilities are operational and our teams have worked effectively to address the few temporary closures we have experienced due to the pandemic. The last such closure was in August 2020. The pandemic also caused supply chain disruption that has resulted in higher costs in the manufacture of our products. We expect these conditions to persist in the near term and may worsen until the pandemic abates.

Infrastructure

In December 2018, we completed our acquisition of Krausz Industries Development Ltd. and subsidiaries (“Krausz”), a manufacturer of pipe couplings, grips and clamps with operations in the United States and Israel. During the three months ended March 31, 2021, we aligned the consolidation of Krausz in the consolidated financial statements which previously included results on a one-month reporting lag. The impact of the elimination of the reporting lag during the three and six months ended March 31, 2021 resulted in an increase of $6.0 million to net sales and $1.4 million in operating income.

In October 2019, we acquired the noncontrolling interest of our previously existing joint venture operation for a negotiated purchase price ~~increases.~~of $5.4 million.

Technologies

The municipal market is the key end market for Technologies. ~~These businesses are~~Our Technologies segment is typically project-oriented and ~~depend~~depends on ~~customer~~our customers’ adoption of ~~their~~our technology-based products and services. Mueller Systems is benefiting from its recent introduction of new, longer-range radio capabilities, and its growth strategy is focused on the AMI segment of the market. Mueller Systems’ 2018 first quarter AMI backlog was lower at December 31, 2017 than at December 31, 2016. Echologics had a greater number of projects under contract at at December 31, 2017 than at December 31, 2016.

Results of Operations

Three Months Ended ~~December~~March 31, ~~2017~~2021 Compared to Three Months Ended ~~December~~March 31, ~~2016~~2020


													Three months ended March 31, 2021
	Three months ended December 31, 2017												Infrastructure		Technologies		Corporate		Total
	Infrastructure		Technologies			Corporate			Total
	(in millions)												(in millions)
Net sales	$	160.1	$	18.2		$	—		$	178.3		Net sales	$	246.9	$	20.6	$	—	$	267.5
Gross profit	$	52.5	$	2.9		$	—		$	55.4		Gross profit	86.3		2.1		—		$	88.4
Operating expenses:												Operating expenses:
Selling, general and administrative	24.4		7.5			7.9			39.8			Selling, general and administrative	34.4		6.7		13.1		54.2
Gain on sale of idle property	—		—			(9.0		)	(9.0		)
Strategic reorganization and other charges	—		0.1			3.8			3.9
	24.4		7.6			2.7			34.7
Strategic reorganization and other (credits) charges												Strategic reorganization and other (credits) charges	(0.7)		—		1.5		0.8
Total operating expenses												Total operating expenses	33.7		6.7		14.6		55.0
Operating income (loss)	$	28.1	$	(4.7	)	$	(2.7	)	20.7			Operating income (loss)	$	52.6	$	(4.6)	$	(14.6)	33.4
Pension costs other than service									0.2
Other expenses (income):												Other expenses (income):
Pension benefit other than service												Pension benefit other than service							(0.8)
Interest expense, net									5.2			Interest expense, net							6.1
Income before income taxes									15.3			Income before income taxes							28.1
Income tax benefit									(39.8		)
Income from continuing operations									$	55.1
Income tax expense												Income tax expense							7.2
Net income												Net income							$	20.9

													Three months ended March 31, 2020
	Three months ended December 31, 2016												Infrastructure		Technologies		Corporate		Total
	Infrastructure		Technologies			Corporate			Total
	(in millions)												(in millions)
Net sales	$	146.3	$	20.9		$	—		$	167.2		Net sales	$	239.9	$	17.8	$	—	$	257.7
Gross profit	$	47.6	$	4.2		$	—		$	51.8		Gross profit	84.1		1.9		—		$	86.0
Operating expenses:												Operating expenses:
Selling, general and administrative	21.3		6.4			8.6			36.3			Selling, general and administrative	33.4		6.5		9.4		49.3
Other charges	0.1		—			1.2			1.3
	21.4		6.4			9.8			37.6
Strategic reorganization and other (credits) charges												Strategic reorganization and other (credits) charges	0.4		—		0.5		0.9
Total operating expenses												Total operating expenses	33.8		6.5		9.9		50.2
Operating income (loss)	$	26.2	$	(2.2	)	$	(9.8	)	14.2			Operating income (loss)	$	50.3	$	(4.6)	$	(9.9)	35.8
Pension costs other than service									0.3
Other expenses (income):												Other expenses (income):
Pension benefit other than service												Pension benefit other than service							(0.8)
Interest expense, net									6.4			Interest expense, net							6.0
Income before income taxes									7.5			Income before income taxes							30.6
Income tax expense									2.1			Income tax expense							6.8
Income from continuing operations									$	5.4
Net income												Net income							$	23.8

Consolidated Analysis

Net sales for the ~~quarter~~three months ended ~~December~~March 31, ~~2017~~2021 increased ~~$11.1~~3.8 percent or $9.8 million to ~~$178.3~~$267.5 million from ~~$167.2~~$257.7 million ~~due~~in the comparable prior year period. This increase was primarily ~~to increased shipment volumes, including~~a result of $6.0 million of Krausz sales recorded during the ~~addition of Singer Valve,~~three months ended March 31, 2021 by eliminating the one-month reporting lag as well as higher pricing for our products and ~~improved pricing at Infrastructure, which were partially offset by~~ volume ~~decline~~ at Technologies.

Gross profit for the ~~quarter~~three months ended ~~December~~March 31, ~~2017~~2021 increased ~~$3.6~~$2.4 million to ~~$55.4~~$88.4 million from ~~$51.8~~$86.0 million in the prior year period. Gross profit increased primarily as a result of stronger manufacturing performance, increased pricing and the benefit from the elimination of the Krausz one-month reporting lag. Partially offsetting the increase in gross profit were higher manufacturing costs due to inflation, $2.4 million in Inventory write-downs as a result of the announced plant closures in Aurora, Illinois and Surrey, British Columbia, Canada and $1.2 million in higher Cost of sales as a result of the pandemic. Gross margin was 33.0% for the three months ended March 31, 2021 compared to 33.4% in the prior year period.

Selling, general and administrative expenses (“SG&A”) for the three months ended March 31, 2021 increased $4.9 million to $54.2 million from $49.3 million in the prior year period primarily ~~due to increased shipment volumes, improved pricing and Infrastructure's improved operating efficiencies and other manufacturing cost savings,~~as a result of an increase in personnel-related expenses, partially offset by ~~increased material costs. Gross margin increased to 31.1%~~decreased expenditures for travel, trade shows and events as a result of the ~~quarter ended December 31, 2017 compared to 31.0% in the prior year period.~~

~~Selling, general and administrative expenses (“SG&A~~”) for the quarter ended December 31, 2017 increased to $39.8 million from $36.3 million in the prior year period due primarily to the acquisition of Singer Valve during the second quarter of last year and higher personnel-related expenses.pandemic. SG&A as a percentage of net sales was ~~22.3%~~20.3% and 19.1% in the ~~quarter~~three months ended ~~December~~March 31, ~~2017~~2021 and ~~21.7%~~2020, respectively.

Strategic reorganization and other charges for the three months ended March 31, 2021 were $0.8 million, which primarily consisted of termination benefits associated with the announced closures of our facilities in Aurora, Illinois and Surrey, British Columbia, Canada, as well as legal and professional service expenses, partially offset by a one-time settlement gain in connection with an indemnification from a previously owned property. Strategic reorganization and other charges for the ~~prior year period.~~

three months ended March 31, 2020 of $0.9 million included charges associated with the closure and consolidation of our Hammond, Indiana facility.

Interest expense, net ~~declined $1.2~~increased $0.1 million in the ~~quarter~~three months ended ~~December~~March 31, ~~2017~~2021 compared to the prior year ~~period.~~period primarily due to decreasing interest rates on cash balances. The components of interest expense, net are provided below.


	Three months ended
	March 31,
	2021		2020

	(in millions)
Notes	$	6.2	$	6.2
Deferred financing costs amortization	0.3		0.3
ABL Agreement	0.2		0.1
Capitalized interest	(0.6)		(0.5)
Other interest cost	0.1		0.2
	6.2		6.3
Interest income	(0.1)		(0.3)
Interest expense, net	$	6.1	$	6.0

Three months ended
December 31,
2017 2016
(in millions)
Term Loan $ 4.8
$ 5.1
Interest rate swap contracts 0.4
0.6
Deferred financing costs amortization 0.5
0.4
ABL Agreement 0.2
0.2
Other interest expense 0.1
0.2
6.0
6.5
Interest income (0.8 ) (0.1 )
$ 5.2
$ 6.4

On December 22, 2017, tax legislation was enacted that made significant revisions to federal income tax laws, including lowering the corporate income tax rate to 21 percent from 35 percent, overhauling the taxation of income earned outside the United States and eliminating or limiting certain deductions. Since the effective date of the tax rate change was January 1, 2018, we are subject to a blended federal statutory tax rate of 24.5 percent throughout fiscal 2018.

For the quarter ended December 31, 2017, we reported a net income tax benefit of $39.8 million, which was driven by a benefit of $42.6 million related to remeasurement of our net deferred income tax liabilities using the enacted tax rates in effect when we expect to recognize the related tax expenses or benefits. Other than this remeasurement benefit, income tax expense was $2.8 million, or 18.3 percent of income before income taxes. For the 2017 first quarter, income tax expense was 28.0 percent of income before income taxes. The reconciliation between the U.S. federal statutory income tax rate and the effective income tax rate is presented below.

Three months ended
December 31,
2017 2016
U.S. federal statutory income tax rate 24.5 % 35.0 %
Adjustments to reconcile to the effective tax rate:
State income taxes, net of federal benefit 4.3
3.9
Valuation allowance adjustment related to stock compensation (5.7 ) —
Excess tax benefits related to stock compensation (2.8 ) (7.6 )
Domestic production activities deduction (1.6 ) (3.3 )
Tax credits (0.9 ) (0.8 )
Other 0.5
0.8
18.3 % 28.0 %
Remeasurement of deferred taxes for change in rates (278.4 )% — %
Effective income tax rate (260.1 )% 28.0 %

Also under this legislation, we are subject to a one-time transition tax on undistributed foreign earnings, but the amount of this tax is not reasonably estimable at this time. Accordingly, no provision for this tax has been recorded, but will be recorded later in 2018.


	Three months ended
	March 31,
	2021		2020
U.S. federal statutory income tax rate	21.0	%	21.0	%
Adjustments to reconcile to the effective tax rate:
State income taxes, net of federal benefit	4.2		4.5
Excess tax (benefits) related to stock-based compensation	(0.3)		(0.5)
Tax credits	(1.1)		(1.5)
Global Intangible Low-taxed Income	0.6		(0.2)
Foreign income tax rate differential	(0.3)		(0.5)
Valuation allowance	(0.6)		(0.6)
Other	2.1		—
Effective income tax rate	25.6	%	22.2	%

Segment Analysis

Infrastructure

Net sales for the ~~quarter~~three months ended ~~December~~March 31, ~~2017~~2021 increased ~~9.4%~~2.9 percent to ~~$160.1~~$246.9 million compared to ~~$146.3~~$239.9 million in the prior year period. This increase was primarily a result of $6.0 million of Krausz sales recorded during the three months ended March 31, 2021 by eliminating the one-month reporting lag as well as higher pricing for our Infrastructure products.

Gross profit for the three months ended March 31, 2021 increased to $86.3 million from $84.1 million in the prior year period primarily due to improved manufacturing performance, increased pricing and the benefit from the elimination of the Krausz one-month reporting lag, which were partially offset by inflation on our Cost of sales, $2.4 million in Inventory write-downs as a result of the announced plant closures of Aurora, Illinois and Surrey, British Columbia, Canada and $1.0 million in higher Cost of sales related to the pandemic. Gross margin was 35.0% for the three months ended March 31, 2021 and was 35.1% in the prior year period.

SG&A for the three months ended March 31, 2021 increased to $34.4 million from $33.4 million in the prior year period. This increase was primarily the result of personnel-related expenses, which were partially offset by temporary expense reductions related to the pandemic, including reduced travel, trade shows and events. SG&A as a percentage of net sales was 13.9% for both the three months ended March 31, 2021 and 2020.

Technologies

Net sales for the three months ended March 31, 2021 increased to $20.6 million from $17.8 million in the prior year period, primarily due to higher shipment volumes ~~the addition~~ of ~~Singer Valve~~our metering and ~~favorable pricing.~~leak detection-related products.

Gross profit for the ~~quarter~~three months ended ~~December~~March 31, ~~2017 increased to $52.5~~2021 was $2.1 million from $47.6 million in the prior year period due to increased shipment volumes, improved operating efficiencies and other manufacturing cost savings. Gross margin increased to 32.8% for the quarter ended December 31, 2017 compared to ~~32.5% in the prior year period.~~

~~SG&A for the quarter ended December 31, 2017 increased to $24.4 million from $21.3~~$1.9 million in the prior year period. ~~SG&A~~Gross margin percentage was ~~15.2%~~10.2% and 14.6% of net sales for the quarters ended December 31, 2017 and 2016, respectively. These increases in SG&A were primarily due to higher personnel-related expenses and the additional SG&A of Singer Valve.

~~Technologies~~

~~Net sales~~10.7%, in the ~~quarter~~three months ended ~~December~~March 31, ~~2017 declined~~2021 and 2020, respectively.

SG&A increased to ~~$18.2~~$6.7 million from ~~$20.9~~$6.5 million in the prior year period primarily due to ~~lower AMI~~increased personnel-related expenses. SG&A as a percentage of net sales was 32.5% and 36.5% for the three months ended March 31, 2021 and 2020, respectively.

Corporate

SG&A was $13.1 million and $9.4 million in the three months ended March 31, 2021 and 2020, respectively. This increase was primarily the result of personnel-related expenses.

Six Months Ended March 31, 2021 Compared to Six Months Ended March 31, 2020


	Six months ended March 31, 2021
	Infrastructure		Technologies		Corporate		Total

	(in millions)
Net sales	$	462.8	$	42.1	$	—	$	504.9
Gross profit	160.0		6.8		—		$	166.8
Operating expenses:
Selling, general and administrative	66.4		12.9		24.1		103.4
Strategic reorganization and other (credits) charges	(0.6)		—		2.8		2.2
Total operating expenses	65.8		12.9		26.9		105.6
Operating income (loss)	$	94.2	$	(6.1)	$	(26.9)	61.2
Other expenses (income):
Pension benefit other than service							(1.6)
Interest expense, net							12.2
Income before income taxes							50.6
Income tax expense							13.0
Net income							$	37.6

	Six months ended March 31, 2020
	Infrastructure		Technologies		Corporate		Total

	(in millions)
Net sales	$	432.2	$	38.1	$	—	$	470.3
Gross profit	152.1		6.5		—		$	158.6
Operating expenses:
Selling, general and administrative	65.9		12.9		20.4		99.2
Strategic reorganization and other charges	0.4		—		2.9		3.3
Total operating expenses	66.3		12.9		23.3		102.5
Operating income (loss)	$	85.8	$	(6.4)	$	(23.3)	56.1
Other expenses (income):
Pension benefit other than service							(1.5)
Interest expense, net							13.4
Walter Energy Accrual							0.2
Income before income taxes							44.0
Income tax expense							9.9
Net income							$	34.1

Consolidated Analysis

Net sales for the six months ended March 31, 2021 increased 7.4 percent or $34.6 million to $504.9 million from $470.3 million primarily due to increased shipment volumes across most of our product lines, higher pricing and a result of $6.0 million in Krausz sales recorded during the three months ended March 31, 2021 by eliminating the one-month reporting lag.

Gross profit for the six months ended March 31, 2021 increased $8.2 million to $166.8 million from $158.6 million in the prior year period, primarily due to increased shipment volumes, higher pricing and the benefit from the elimination of the Krausz one-month reporting lag. These increases were partially offset by inflation and lesser expenditures associated with the pandemic, including voluntary emergency paid leave and other employee costs as well as additional sanitation and cleaning fees, and a $2.4 million inventory write-off associated with the announcement of our plant closures in Aurora, Illinois and Surrey, British Columbia, Canada. Gross margin was 33.0% for the six months ended March 31, 2021 compared to 33.7% in the prior year period.

Selling, general and administrative expenses (“SG&A”) for the six months ended March 31, 2021 increased ~~leak detection sales.~~to $103.4 million from $99.2 million in the prior year period primarily due to increases in personnel-related expenses. The increase was partially offset by temporary expense reductions related to the pandemic, including reduced travel, trade shows and events. SG&A as a percentage of net sales was 20.5% and 21.1% in the six months ended March 31, 2021 and 2020, respectively.

Strategic reorganization and other charges for the six months ended March 31, 2021 were $2.2 million, which primarily related to termination benefits associated with our announced plan closures in Aurora, Illinois and Surrey, British Columbia, Canada, as well as, legal and professional service expenses, partially offset by a one-time settlement gain in connection with an indemnification from a previously owned property. Strategic reorganization and other charges for the six months ended March 31, 2020 were $3.3 million primarily related to previously announced facility closures and legal and professional service expenses.

Interest expense, net declined $1.2 million in the six months ended March 31, 2021 compared to the prior year period primarily due to a non-cash adjustment to capitalized interest in the prior year. The components of net interest expense are provided below.


	Six months ended
	March 31,
	2021		2020

	(in millions)
Notes	$	12.4	$	12.4
Deferred financing costs amortization	0.6		0.6
ABL Agreement	0.4		0.3
Capitalized interest	(1.1)		0.7
Other interest cost	0.2		0.2
Interest expense	12.5		14.2
Interest income	(0.3)		(0.8)
Interest expense, net	12.2		13.4

The reconciliation between the U.S. federal statutory income tax rate and the effective income tax rate is presented below.


	Six months ended
	March 31,
	2021		2020
U.S. federal statutory income tax rate	21.0	%	21.0	%
Adjustments to reconcile to the effective tax rate:
State income taxes, net of federal benefit	4.2		4.5
Excess tax (benefits) related to stock-based compensation	(0.2)		(0.8)
Tax credits	(1.1)		(1.4)
Global Intangible Low-taxed Income	0.6		—
Foreign income tax rate differential	(0.3)		(0.6)
Valuation allowance	(0.2)		(0.6)
Other	1.7		0.4
Effective income tax rate	25.7	%	22.5	%

Segment Analysis

Infrastructure

Net sales for the six months ended March 31, 2021 increased 7.1 percent to $462.8 million compared to $432.2 million in the prior year period primarily due to higher shipment volumes across most of our product lines, higher pricing and the result of $6.0 million in Krausz sales recorded during the three months ended March 31, 2021 by eliminating the one-month reporting lag.

Gross profit for the six months ended March 31, 2021 increased $7.9 million to $160.0 million from $152.1 million in the ~~quarter~~prior year period primarily due to increased shipment volumes, higher pricing, improved manufacturing performance and the benefit from the elimination of the Krausz one-month reporting lag. These increases were partially offset by higher costs associated with inflation, a $2.4 million Inventory write-off associated with the announcement of the closure of our Aurora, Illinois and Surrey, British Columbia, Canada facilities and $2.4 million in expenses related to the pandemic, including voluntary emergency paid leave and other employee costs as well as additional sanitation and cleaning fees. Gross margin was 34.6% for the six months ended ~~December~~March 31, ~~2017~~2021 and was 35.2% in the prior year period.

SG&A for the six months ended March 31, 2021 increased to $66.4 million from $65.9 million in the prior year period. This increase was primarily due to increases in personnel-related expenses, partially offset by temporary expense reductions of $2.9 million ~~compared~~related to ~~$4.2~~the pandemic, including reduced travel, trade shows and events. SG&A as a percentage of net sales was 14.3% and 15.2% for the six months ended March 31, 2021 and 2020, respectively.

Technologies

Net sales for the six months ended March 31, 2021 increased to $42.1 million from $38.1 million in the prior year period, primarily due to higher shipment volumes of our metering and leak detection-related products.

Gross profit for the six months ended March 31, 2021 was $6.8 million and was $6.5 million in the prior year period. Gross margin ~~declined to 15.9%~~percentage was 16.2% and 17.1% in the ~~quarter~~six months ended ~~December~~March 31, ~~2017 compared to 20.1%~~2021 and 2020, respectively.

SG&A was $12.9 million in both the current and prior year ~~period. These declines were primarily due to lower shipment volumes.~~

periods. SG&A ~~increased to $7.5 million in the quarter ended December 31, 2017 compared to $6.4 million in the prior year period due to personnel-related expenses. SG&A increased to 41.2%~~as a percentage of net sales was 30.6% and 33.9% for the ~~quarter~~six months ended ~~December~~March 31, ~~2017 from 30.6% of net sales in the prior year period.~~2021 and 2020, respectively.

Corporate

SG&A was ~~$7.9~~$24.1 million and $20.4 million in the ~~quarter~~six months ended ~~December~~March 31, ~~2017 compared to $8.6 million in the prior year period.~~2021 and 2020, respectively. The increase was primarily as a result of higher personnel-related expenses.

Liquidity and Capital Resources

We had cash and cash equivalents on hand of ~~$348.3~~$228.2 million at ~~December~~March 31, ~~2017~~2021 and ~~$96.3~~$154.4 million of additional borrowing capacity under our ABL Agreement based on ~~December~~March 31, ~~2017 data, which, along with cash generated by operations, would be our source of incremental liquidity.~~2021 data. Undistributed earnings from our subsidiaries in Canada, China, and ~~China~~Israel are considered to be permanently invested outside the United States. At ~~December~~March 31, ~~2017,~~2021, cash and cash equivalents included ~~$12.1~~$29.7 million, $8.5 million and $7.2 million in Israel, Canada and China, respectively.

We ~~expect the recently enacted tax law changes to benefit our liquidity through reduction~~declared a quarterly dividend of $0.0550 per share on April 23, 2021, payable on or about May 20, 2021, which will result in overall income tax liability and through provisions allowing immediate deductibility for capital assets placed in service in the next five years. This benefit will be partially offset by payment of the transition tax discussed above. However, the transition tax may be paid over eight years, and we do not expect any payments to have a material liquidity impact in any particular year.an estimated $8.7 million cash outlay.

We ~~repurchased~~did not repurchase any shares of our outstanding common stock ~~for $10 million~~ during the ~~quarter~~three and six months ended ~~December~~March 31, ~~2017,~~2021 and we had ~~$180~~$145.0 million remaining onunder our share repurchase ~~authorization at that date.~~authorization.

The ABL Agreement and ~~Term Loan~~Notes contain customary representations and warranties, covenants and provisions governing an event of default. The covenants restrict our ability to engage in certain specified activities, including but not limited to the payment of dividends and the redemption of our common stock.

Cash flows from operating activities ~~of continuing operations~~ are categorized below.


								Six months ended
	Three months ended							March 31,
	December 31,							2021		2020
	2017			2016
	(in millions)							(in millions)
Collections from customers	$	216.1		$	194.6		Collections from customers	$	502.6	$	462.1
Disbursements, other than interest and income taxes	(211.3		)	(203.5		)	Disbursements, other than interest and income taxes	(422.7)		(424.8)
Walter Energy payment							Walter Energy payment	—		(22.2)
Interest payments, net	(4.4		)	(5.6		)	Interest payments, net	(12.5)		(12.2)
Income tax refunds (payments), net	0.1			(5.4		)
Income tax payments, net							Income tax payments, net	(4.2)		(5.9)
Cash provided by (used in) operating activities	$	0.5		$	(19.9	)	Cash provided by (used in) operating activities	$	63.2	$	(3.0)

Collections from customers were higher during the ~~three~~six months ended ~~December~~March 31, ~~2017~~2021 compared to the prior year period primarily due to ~~the timing of cash receipts and~~ net sales growth.

~~Increased~~

Decreased disbursements, other than interest and income taxes, during the ~~three~~six months ended ~~December~~March 31, ~~2017~~2021 primarily reflect ~~higher purchasing activity, higher costs for raw materials, and differences~~improvements in working capital management. Additionally, we disbursed $22.0 million related to the ~~timing~~final settlement of ~~expenditures.~~

~~Income~~the Walter tax ~~payments were lower during the three months ended December 31, 2017 compared to~~matter in the prior year ~~period because we began the current year quarter with U.S. federal income taxes prepaid.~~

period.

Capital expenditures were ~~$6.4~~$31.1 million in the ~~three~~six months ended ~~December~~March 31, ~~2017 compared to $4.2~~2021 and $37.3 million in the prior year period. ~~We estimate 2018~~These expenditures were primarily associated with previously announced large capital projects. For fiscal 2021, we have provided guidance that our capital expenditures ~~will~~are expected to be between ~~$40~~$80.0 million and ~~$48 million, although we are also evaluating possibilities for additional capital expenditures in 2018.~~$85.0 million.

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 ~~December~~March 31, ~~2018. However,~~2022.

We believe that additional borrowings through various financing alternatives remain available if required. The future effects of the pandemic cannot be predicted with certainty and may increase 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~~borrowing costs and other ~~factors beyond~~costs of capital or otherwise adversely affect our ~~control.~~financial condition and liquidity, and we cannot guarantee that we will have access to external financing at times and on terms we consider acceptable, or at all, or that we will not experience other liquidity issues in the future.

ABL Agreement

At ~~December~~March 31, ~~2017,~~2021, the ABL Agreement consisted of a $175.0 million revolving credit facility ~~for~~that includes up to ~~$225~~$25.0 million ~~of revolving credit borrowings,~~through swing line loans and may have up to $60.0 million of letters of credit. The ABL Agreement permits us to increase the size of the credit facility by an additional ~~$150~~$150.0 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 aan applicable margin ranging from ~~125~~200 to ~~150~~225 basis points, or a base rate, as defined in the ABL Agreement, plus aan applicable margin ranging from 25100 to 50125 basis points. At ~~December~~March 31, ~~2017,~~2021, the applicable ~~LIBOR-based margin~~rate was ~~125~~LIBOR plus 200 basis points.

~~The ABL Agreement terminates on July 13, 2021. We pay a commitment fee for any unused borrowing capacity under the ABL Agreement of 25 basis points per annum.~~

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) 70% of the value of eligible inventories or (ii) 85% of the net orderly liquidation value of ~~the value of~~ eligible inventories, less certain reserves. Prepayments ~~can~~may 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. inventories, accounts receivable, certain cash and other supporting obligations.

The ABL Agreement terminates on July 29, 2025 and includes a commitment fee for any unused borrowing capacity of 37.5 basis points per annum. Our obligations under the ABL Agreement are secured by a first-priority perfected lien on all of our U.S. receivables and 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 $17.5 million and 10% of the Loan Cap ~~under~~as defined in the ABL Agreement. Excess availability based on March 31, 2021 data was $154.4 million, as reduced by $13.8 million of outstanding letters of credit and $1.6 million of accrued fees and expenses.

~~Term Loan~~5.5% Senior Unsecured Notes

~~We had $485.1~~On June 12, 2018, we privately issued $450.0 million ~~face value outstanding under the Term Loan at December 31, 2017. Term Loan borrowings accrue~~of Senior Unsecured Notes (“Notes”), which mature in June 2026 and bear interest at ~~a floating rate equal to LIBOR, subject to a floor of 0.75%~~5.5%, plus 250 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 of $1.225 million. The Term Loan maturespayable semi-annually on ~~November 25, 2021. The Term Loan is guaranteed by substantially~~June 15 and December 15. Substantially all of our U.S. subsidiaries guarantee the Notes, which are subordinate to borrowings under the ABL Agreement. Based on quoted market prices, the outstanding Notes had a fair value of $465.8 million at March 31, 2021 and ~~secured by essentially~~September 30, 2020.

An indenture securing the Notes (“Indenture”) contains customary covenants and events of default, including covenants that limit our ability to incur certain debt and liens, pay dividends and make investments. There are no financial maintenance covenants associated with the Indenture. We believe we were in compliance with these covenants at March 31, 2021.

We may redeem some or all of ~~our assets, although~~ the ~~ABL Agreement has~~Notes at any time or from time to time prior to June 15, 2021 at certain “make-whole” redemption prices (as set forth in the Indenture) and on or after June 15, 2021 at specified redemption prices (as set forth in the Indenture). Additionally, we may redeem up to 40% of the aggregate principal amount of the Notes at any time or from time to time prior to June 15, 2021 with the net proceeds of specified equity offerings at specified redemption prices (as set forth in the

Indenture). Upon a ~~senior claim on certain collateral securing borrowings thereunder.~~change in control (as defined in the Indenture), we will be required to offer to purchase the Notes at a price equal to 101% of the outstanding principal amount of the Notes.

Our corporate credit rating and the credit rating for our debt are presented below. These ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agencies.

Moody’s

Standard & Poor’s

March 31,

September 30,

March 31,

September 30,

2021

2020

2021

2020

Corporate credit rating

Ba2

ABL Agreement

Not rated

Notes

Ba3

Outlook

Stable

Moody’s Standard & Poor's
December 31, September 30, December 31, September 30,
2017 2017 2017 2017
Corporate credit rating Ba3 Ba3 BB- BB-
ABL Agreement Not rated Not rated Not rated Not rated
Term Loan Ba3 Ba3 BB BB
Outlook Stable Stable Stable Stable

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, including any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured ~~finance~~”finance” or “special ~~purpose~~”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, at ~~December~~March 31, ~~2017~~2021 we did not have any undisclosed borrowings, debt, derivative contracts or synthetic leases. Therefore, we were 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 ~~December~~March 31, ~~2017,~~2021, we had ~~$17.5~~$13.8 million of letters of credit and ~~$35.6~~$43.5 million of surety bonds outstanding.

Seasonality

Our business is ~~dependent upon the construction industry, which is~~ seasonal ~~due to the impact~~as a result of cold weather conditions. Net sales and operating income have historically been lowest in the ~~quarterly~~three month 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.


~~Item 4.~~	~~CONTROLS AND PROCEDURES~~

Item 4. CONTROLS AND PROCEDURES

During the ~~quarter~~three months ended ~~December~~March 31, ~~2017,~~2021, we continued our multi-year implementation of upgrades to our enterprise resource planning (ERP) system and the implementation of a new information technology system for processing of payroll and employee-related transactions.

Aside from the above, 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.

As a result of the COVID-19 pandemic, many of our employees began working remotely in March 2020 and continued to do so as of the date of this filing. This change to our working environment has not had a material effect on our internal control over financial reporting. We will continue monitoring and assessing any impacts from the pandemic on our internal controls.

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.

PART II OTHER INFORMATION


~~Item 1.~~	~~LEGAL PROCEEDINGS~~

Item 1. LEGAL PROCEEDINGS

Refer to the information provided in Note 11. to the Notes to the Condensed Consolidated Financial Statements presented in Item 11. of Part I of this report.


~~Item 1A.~~	Item 1A. RISK FACTORS

~~Recent changes in U.S. tax law may have a significant impact on our Company~~

On December 22, 2017, HR-1, formerly referred to as the Tax Cuts and Jobs Act, (“Act”) was signed into law, significantly impacting several sections of the Internal Revenue Code. The Act, among other things, reduces the corporate tax rate to 21% from 35%, limits the deductibility of interest expense and executive compensation and implements a modified territorial tax system which includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. The Act requires complex computations to be performed that were not previously required in U.S. tax law, judgments to be made in interpretation of the provisions of the Act and estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. We are continuing to examine the impact of the Act, including certain provisions that will become applicable to us in fiscal year 2019 related to base erosion anti-abuse tax (“BEAT”), global intangible low-taxed income (“GILTI”), and other provisions that could adversely affect our effective tax rate in the future. The U.S. Treasury Department, the IRS, and other standard-setting bodies could interpret or issue guidance on how provisions of the Act will be applied or otherwise administered that is different from our interpretation. Furthermore, because there may be additional state income tax implications, we will continue to monitor changes in state and local tax laws to determine if state and local taxing authorities intend to conform or deviate from changes to U.S. federal tax legislation as a result of the Act.

In addition to the ~~risk factor above and~~ 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~~

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the ~~quarter~~three months ended ~~December~~March 31, ~~2017, we repurchased~~2021, 6,029 shares ~~of our common stock, including shares repurchased under our existing share repurchase authorization and shares~~were surrendered to us to pay the tax withholding obligations of participants in connection with the lapsing of restrictions on restricted stock ~~units, as follows.~~units.

We did not repurchase any shares of our common stock during the three months ended March 31, 2021, and we had $145.0 million remaining under our share repurchase authorization.

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publically announced plans or programs
Maximum dollar value of shares that may yet be purchased under the plans or programs
(in millions)
October 1-31, 2017 —
$ —
—
$ —
November 1-30, 2017 845,390
12.15
823,739
—
December 1-31, 2017 122,753
12.35
—
—
Total 968,143
$ 12.17
823,739
$ —

Item 6. EXHIBITS


~~Item 6.~~	~~EXHIBITS~~



Exhibit No.		Document
~~3.1~~18.1*		~~Amended and Restated By-laws of Mueller Water Products, Inc. Incorporated by reference to Exhibit 3.1 to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on December 4, 2017.~~Preferability Letter from Ernst & Young LLP, Independent Registered Public Accounting Firm.
10.20.5*31.1		Amendment to Executive Change -In-Control Severance Agreement, dated January 11, 2018, by and between Mueller Water Products and Gregory S. Rogowski. Incorporated by reference to Exhibit 10.2 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on January 12, 2018.
10.22.2**	Amendment to Executive Change -In-Control Severance Agreement, dated December 12, 2017, by and between Mueller Water Products and Keith L. Belknap. Incorporated by reference to Exhibit 10.2 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on December 13, 2017.
10.29.2**	Fourth Amendment to Employment Agreement, dated December 27, 2017, between Mueller Water Products, Inc. and Marietta Edmunds Zakas. Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on December 28, 2017.
10.29.3**	Amendment to Executive Change -In-Control Severance Agreement, dated January 11, 2018, by and between Mueller Water Products and Marietta Edmunds Zakas. Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on January 12, 2018.
10.30.2**	Amendment to Executive Change -In-Control Severance Agreement, dated December 12, 2017, by and between Mueller Water Products and J. Scott Hall. Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on December 13, 2017.
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 ~~December~~March 31, ~~2016,~~2021, 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 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.
104*		Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its iXBRL tags are embedded within the Inline XBRL document.

* Filed or furnished as applicable with this quarterly report

** Management compensatory plan, contract, or arrangement

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:	~~February 8, 2018~~May 4, 2021	By:	/s/ ~~Michael S. Nancarrow~~Suzanne G. Smith
			~~Michael S. Nancarrow~~Suzanne G. Smith
			Chief Accounting Officer



Delaware						20-3547095
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, par value $0.01	MWA	New York Stock Exchange


	March 31,		September 30,
	2021		2020

	(in millions, except share amounts)
Assets:
Cash and cash equivalents	$	228.2	$	208.9
Receivables, net of allowance of $5.8 million and $4.8 million	183.9		180.8
Inventories, net	179.4		162.5
Other current assets	22.7		29.0
Total current assets	614.2		581.2
Property, plant and equipment, net	268.5		253.8
Intangible assets	397.1		408.9
Goodwill	100.7		99.8
Other noncurrent assets	55.3		51.3
Total assets	$	1,435.8	$	1,395.0

Liabilities and equity:
Current portion of long-term debt	$	1.0	$	1.1
Accounts payable	74.7		67.3
Other current liabilities	84.5		86.6
Total current liabilities	160.2		155.0
Long-term debt	446.6		446.5
Deferred income taxes	100.3		96.5
Other noncurrent liabilities	59.3		56.3
Total liabilities	766.4		754.3

Commitments and contingencies (Note 11.)

Common stock: 600,000,000 shares authorized; 158,490,451 and 158,064,750 shares outstanding at March 31, 2021 and September 30, 2020, respectively	1.6		1.6
Additional paid-in capital	1,364.2		1,378.0
Accumulated deficit	(676.7)		(714.2)
Accumulated other comprehensive loss	(19.7)		(24.7)
Total stockholders’ equity	669.4		640.7
Total liabilities and equity	$	1,435.8	$	1,395.0

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

	December 31,			September 30,
	2017			2017
	(in millions, except share amounts)
Assets:
Cash and cash equivalents	$	348.3		$	361.7
Receivables, net	107.4			145.3
Inventories	155.2			138.9
Other current assets	26.5			24.4
Total current assets	637.4			670.3
Property, plant and equipment, net	122.3			122.3
Intangible assets	434.6			439.3
Other noncurrent assets	25.9			26.4
Total assets	$	1,220.2		$	1,258.3

Liabilities and equity:
Current portion of long-term debt	$	5.6		$	5.6
Accounts payable	51.3			82.5
Other current liabilities	46.1			53.5
Total current liabilities	103.0			141.6
Long-term debt	474.3			475.0
Deferred income taxes	76.2			115.1
Other noncurrent liabilities	32.4			37.1
Total liabilities	685.9			768.8

Commitments and contingencies (Note 11)

Common stock: 600,000,000 shares authorized; 158,539,376 and 158,590,383 shares outstanding at December 31, 2017 and September 30, 2017, respectively	1.6			1.6
Additional paid-in capital	1,482.4			1,494.2
Accumulated deficit	(900.5		)	(955.6		)
Accumulated other comprehensive loss	(50.2		)	(51.8		)
Total Company stockholders’ equity	533.3			488.4
Noncontrolling interest	1.0			1.1
Total equity	534.3			489.5
Total liabilities and equity	$	1,220.2		$	1,258.3


	Three months ended				Six months ended
	March 31,				March 31,
	2021		2020		2021		2020

	(in millions)
Common stock
Balance, beginning of period	$	1.6	$	1.6	$	1.6	$	1.6
Change in common stock at par value	0		0		0		0
Balance, end of period	1.6		1.6		1.6		1.6

Additional paid-in capital
Balance, beginning of period	1,370.9		1,401.3		1,378.0		1,410.7
Dividends declared	(8.7)		(8.3)		(17.4)		(16.6)
Shares repurchased under buyback program	0		(5.0)		0		(5.0)
Buyout of noncontrolling interest	0		0		0		(3.2)
Shares retained for employee taxes	(0.1)		0		(1.0)		(0.7)
Stock-based compensation	1.7		1.3		3.6		2.7
Stock issued under stock compensation plan	0.4		0.8		1.0		2.2
Balance, end of period	1,364.2		1,390.1		1,364.2		1,390.1

Accumulated deficit
Balance, beginning of period	(697.6)		(775.9)		(714.2)		(786.2)
Net income	20.9		23.8		37.6		34.1
Cumulative effect of accounting change	0		0		(0.1)		0
Balance, end of period	(676.7)		(752.1)		(676.7)		(752.1)

Accumulated other comprehensive (loss) income
Balance, beginning of period	(19.7)		(32.0)		(24.7)		(36.0)
Other comprehensive (loss) income	0		(1.1)		5.0		2.9
Balance, end of period	(19.7)		(33.1)		(19.7)		(33.1)

Noncontrolling interest
Balance, beginning of period	0		0		0		2.2
Acquisition of joint venture partner’s interest	0		0		0		(2.2)
Balance, end of period	0		0		0		0

Total stockholders' equity	$	669.4	$	606.5	$	669.4	$	606.5

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF EQUITY THREE MONTHS ENDED DECEMBER 31, 2017 (UNAUDITED)

	Common stock		Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive loss			Non-controlling interest			Total
	(in millions)
Balance at September 30, 2017	$	1.6	$	1,494.2		$	(955.6	)	$	(51.8	)	$	1.1		$	489.5
Net income (loss)	—		—			55.1			—			(0.1		)	55.0
Dividends declared	—		(6.3		)	—			—			—			(6.3		)
Stock repurchased under buyback program	—		(10.0		)	—			—			—			(10.0		)
Shares retained for employee taxes	—		(1.8		)	—			—			—			(1.8		)
Stock-based compensation	—		2.0			—			—			—			2.0
Common stock issued	—		4.3			—			—			—			4.3
Other comprehensive income, net of tax	—		—			—			1.6			—			1.6
Balance at December 31, 2017	$	1.6	$	1,482.4		$	(900.5	)	$	(50.2	)	$	1.0		$	534.3


~~Note 1.~~	~~Organization~~ Note. 1Organization and Basis of Presentation



	Three months ended
	December 31, 2017
	(in millions)
Beginning balance	$	3.3
Expense	2.3
Payments	(1.4		)
Ending balance	$	4.2



	Three months ended
	December 31, 2016
	(in millions)
Net sales	$	83.1
Cost of sales	62.8
Gross profit	20.3
Operating expenses:
Selling, general and administrative	18.3
Other charges	0.2
Total operating expenses	18.5
Operating income	1.8
Income tax expense	0.5
Income from discontinued operations	$	1.3



	Number granted	Weighted average grant date fair value per instrument		Total grant date fair value (in millions)
Restricted stock units	171,288	$	12.41	$	2.1
Employee stock purchase plan instruments	35,099	2.28		0.1
Phantom Plan awards	160,672	12.41		2.0
PRSUs: 2018 award	57,092	12.41		0.7
2017 award	71,070	12.41		0.9
2016 award	71,072	12.41		0.9
				$	6.7



	Pension, net of tax			Foreign currency translation			Derivative instruments, net of tax			Total

Balance at September 30, 2017	$	(47.0	)	$	(3.3	)	$	(1.5	)	$	(51.8	)
Current period other comprehensive income (loss)	0.5			0.1			1.0			1.6
Balance at December 31, 2017	$	(46.5	)	$	(3.2	)	$	(0.5	)	$	(50.2	)



	Moody’s		Standard & Poor's
	December 31,	September 30,	December 31,	September 30,
	2017	2017	2017	2017
Corporate credit rating	Ba3	Ba3	BB-	BB-
ABL Agreement	Not rated	Not rated	Not rated	Not rated
Term Loan	Ba3	Ba3	BB	BB
Outlook	Stable	Stable	Stable	Stable



Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publically announced plans or programs	Maximum dollar value of shares that may yet be purchased under the plans or programs (in millions)
October 1-31, 2017	—	$	—	—	$	—
November 1-30, 2017	845,390	12.15		823,739	—
December 1-31, 2017	122,753	12.35		—	—
Total	968,143	$	12.17	823,739	$	—


~~Item 1.~~	~~FINANCIAL STATEMENTS~~


~~Note 3.~~	~~Income Taxes~~


~~Note 5.~~	~~Derivative Financial Instruments~~


~~Note 6.~~	~~Retirement Plans~~