Exhibit 99.1
FOR IMMEDIATE RELEASE | Investor Contact: Martie Edmunds Zakas |
February 1, 2007 | Sr. Vice President - Strategic Planning & Investor Relations |
| 770-206-4237 |
| mzakas@muellerwp.com |
| |
| Media Contact: Katrina Blauvelt |
| Director - Corporate Communications & Public Affairs |
| 770-206-4240 |
| kblauvelt@muellerwp.com |
MUELLER WATER PRODUCTS ANNOUNCES FIRST QUARTER 2007 RESULTS
- Earnings of $0.15 per Diluted Share Reported in First Quarter -
- Strong Operating Margin Performance -
- Synergy Plan Achieves Annual Run Rate of $41 Million -
(ATLANTA) — Mueller Water Products, Inc. (NYSE: MWA, MWA.B) today reported earnings of $17.0 million, or $0.15 per diluted share for its first quarter ended Dec. 31, 2006, compared with a loss of $48.8 million and a loss of $0.57 per diluted share in the first quarter last year. In first quarter fiscal 2006, results included certain acquisition and plant closure costs aggregating $98.4 million. Net sales for the first quarter were $411.9 million compared to $480.4 million last year. Prior year results include revenues of approximately $30 million from increased demand for ductile iron pipe caused by Hurricane Katrina.
“Our aggressive implementation of our synergy plan and operational flexibility enabled us to deliver margins comparable with previous operating performance despite a decline in revenues,” said Chairman, President and CEO Gregory E. Hyland. “I am pleased with how we demonstrated our ability to respond to difficult market conditions. We are well-positioned to benefit from future increases in demand for our water infrastructure products. In fact, our bookings recovered towards the end of the quarter and increased in January year-over-year.”
Operating Results
Consolidated net sales for the first quarter were $411.9 million, compared to $480.4 million versus the same period last year. Declines in the residential housing market contributed to lower revenues, but the resulting decline in volumes was partially offset by product price increases.
Operating income for the quarter totaled $49.0 million, compared to a loss of $39.5 million in the first quarter fiscal 2006. Prior-year results include expenses of $40.0 million to close the U.S. Pipe Chattanooga, Tenn., valve and hydrant plant, and $46.2 million and $12.2 million of acquisition related inventory step-up charges at Mueller Co. and Anvil, respectively. Excluding these items, operating income for last year’s first quarter was $58.9 million. The current period decrease in operating income of $9.9 million was due to lower volumes across the water infrastructure products of Mueller Co. and U.S. Pipe, which was partially offset by selling price
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increases implemented during the last twelve months primarily in response to higher raw material costs.
Adjusted EBITDA (see non-GAAP measures disclosure below) for the quarter ended Dec. 31, 2006 totaled $73.4 million versus $82.7 million for the same period last year. However, the Adjusted EBITDA margin was 17.8 percent, slightly higher than prior-year results. These stable margins, despite the decrease in volume in our water infrastructure products, were primarily the result of reducing fixed costs through the Company’s synergy plan and higher pricing.
Synergy Implementation Plan
The Company continues to execute its synergy implementation plan ahead of schedule. The synergy plan is expected to achieve run rate operating income improvements at the high end of the previously announced range of $40 to $50 million early in fiscal 2008. Through December 31, 2006, the Company already has achieved run rate synergy benefits of approximately $41 million.
Segment Results
Mueller Co. Segment
For the quarter, the Mueller Co. segment reported revenues of $167.1 million compared to $180.4 million in the first quarter last year. Operating income was $35.7 million, compared to a loss of $3.8 million in last year’s first quarter. Excluding the prior year acquisition-related inventory charges of $46.2 million, operating income decreased $6.7 million. Volume decreased during the quarter principally due to the decline in the residential construction market. The mix of products sold also resulted in lower revenue and operating income compared to last year. Revenue and operating income declines were partially offset by the effects of price increases implemented during the last twelve months. Additionally, the current period includes revenue and operating income related to the U.S. Pipe valve and hydrant product lines that were transferred to the Mueller Co. segment on January 1, 2006.
U.S. Pipe Segment
Revenues for the current period were $117.4 million versus $171.1 million for the same period last year. Prior year results included approximately $30 million of revenues related to the temporary substitution of ductile iron pipe for PVC pipe due to Hurricane Katrina and approximately $14 million of revenues from U.S. Pipe-branded valves and hydrants that were transferred to the Mueller Co. segment on January 1, 2006. Excluding these items, revenues were down $9.7 million due to a decrease in volume, partially offset by higher selling prices and an improved product mix. The improvement is the result of a focused strategy to emphasize and sell higher margin value-added products, which enabled us to maintain margins despite lower volumes.
U.S. Pipe operating income was $7.2 million, compared to a loss of $27.8 million in the prior period, which included $40.0 million of closure costs related to the Chattanooga valve and hydrant plant. Also, first quarter fiscal 2006 operating income included benefits from valve and hydrant sales and increased volume associated with Hurricane Katrina.
Anvil Segment
Revenues were $133.6 million as compared to $132.8 million for the same period last year. Revenues were consistent with last year as modest price increases were partially offset by slight volume declines.
Operating income was $13.0 million versus a loss of $1.5 million during last year’s first quarter. Excluding the prior year acquisition-related inventory charges of $12.2 million, operating income increased $2.3 million, primarily due to higher pricing and approximately $1.2 million of dumping duty proceeds awarded by the federal government.
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Interest Expense
Net interest expense for the current quarter was $20.4 million, down $11.8 million from the prior-year due to lower debt levels. The Company used net cash proceeds from the initial public offering in June 2006 to pay down debt.
Use of Non-GAAP Measures
Adjusted EBITDA represents income before depreciation, amortization, interest expense, interest income, income taxes, acquisition related adjustments such as the cost of the closure of the U.S. Pipe Chattanooga facility and adjustments made as a result of the acquisition to increase the manufactured cost of acquired inventory to fair value. The Company presents Adjusted EBITDA because we consider it an important supplemental measure of performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the industry, substantially all of which present Adjusted EBITDA when reporting their results.
In addition, the credit agreement uses EBITDA (with additional adjustments) to measure compliance with covenants, such as interest coverage and debt incurrence.
A form of EBITDA also is widely used by the Company and others in its industry to evaluate and price potential acquisition candidates.
Adjusted EBITDA has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Some of these limitations are:
Adjusted EBITDA does not reflect the Company’s cash expenditures or future requirements for capital expenditures or contractual commitments. Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs.
Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on debt. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
Adjusted EBITDA is a measure of performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measure derived in accordance with GAAP.
Conference Call Web cast
Mueller Water Products Chairman, President and CEO Greg Hyland and members of the Company’s leadership team will discuss quarterly results and other general business matters on a conference call and live Web cast to be held on Friday, Feb. 2, 2007, at 9 a.m. EST. To listen to the event live or in archive, visit the Company Web site at www.muellerwaterproducts.com.
About Mueller Water Products
Mueller Water Products is a leading North American manufacturer and marketer of infrastructure and flow control products for use in water distribution networks and treatment facilities. Its
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broad product portfolio includes engineered valves, hydrants, ductile iron pipe and pipe fittings, which are utilized by municipalities, as well as the commercial and residential construction, oil and gas, HVAC and fire protection industries. With revenues of approximately $1.9 billion, the Company is comprised of three main operating segments: Mueller Co., U.S. Pipe and Anvil. Based in Atlanta, Georgia, the Company employs approximately 7,000 people. For more information about Mueller Water Products, please visit the Company’s Web site at www.muellerwaterproducts.com.
Safe Harbor Statement
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the actual results in future periods of Mueller Water Products, Inc. to differ materially from forecasted results. Those risks include, among others, changes in customers’ demand for our products, changes in raw material pricing, labor, equipment and transportation costs, changes in customer orders, pricing actions by the Company’s competitors, changes in law, the inability to successfully integrate an acquired business, and general changes in economic conditions. Risks associated with forward-looking statements are more fully described in our filings with the Securities and Exchange Commission. Mueller Water Products assumes no duty to update its forward-looking statements as of any future date.
- MWA -
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