MWA - Earnings call transcript Q2 2018 | Mueller Water Products, Inc.

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Operator

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today's conference is being recorded. If there are any objections, you may disconnect at this time. introduce for to Kincaid. conference, like now your today's host Whit I'd you. Thank

You may begin.

Whit Kincaid

Welcome being Products and on results Mueller full Scott Hall, Conference morning, is of XX, to Good everyone. A afternoon. Water the our our website, ended issued quarter's and copy press XXXX yesterday for second morning's is Call. our are XXXX release the operations reporting available recorded our of results and it This quarter March We Quarter and on year CEO; Martie live muellerwaterproducts.com. Discussing outlook Zakas, CFO. for the the webcast President call Internet. Second

could call. statements. those information have This important This this entirety. well Reconciliations information cause X between requirements. time, please We their help supplemental as slide call as materially review to on to and identifying website slide refer our to believe that measures included and forward-looking address differ provide actual slides included financial factors At our includes this measures these financial and to reasons are we non-GAAP Please X on that non-GAAP made GAAP on website. results and this the posted addresses forward-looking statements disclosure also on release, on investors. identifies release Slide our in cautionary why our referenced press forward-looking within to from measures press our non-GAAP and results in X information illustrate slide in in the quarter's slides and statements slides our the discloses X. useful

slides year replay be at our be days this for website. available Investor otherwise at unless XX in year specific September morning's call corresponding the archived XX. a for days section will refer A to quarter of references all Relations on call, to XX The and fiscal of our ends this webcast least specified which X-XXX-XXX-XXXX. available will During or

X-K Form remarks turn I'll copy later will to now of furnish on In our the a addition, call this we Scott. prepared over morning.

J. Scott Hall

our you a of XXXX performance Thank will Whit. discuss you color results. provide today key the in quarter areas will to follow then with overview the later I second Thanks, quarter call. further and on some Martie I'll for give joining analysis. additional then us quick

We an on We had very outlook compared will sales for XX.X% growing our and finish year. second prior up income with increasing consolidated operating with update quarter, adjusted XXXX. by a strong the net XX.X%

over growth poor weather later quarterly which and about the the will Our from initiatives. of strategic technologies. year improved the prior in made sales the execution address increases, organic at reorganization key from in and shipments and leading both years. year-over-year price subsequent we our net importantly, are We five highest I are our achieved Most changes in to benefited year past We delivered call. infrastructure excited accelerated growth our lapping

brass We annual the are metal municipal rapid raise very demand impacted and our scrap sales residential for in in brass net rise to costs project-related and specialty business. productivity cost our improved from profit executed material we we in higher valve costs, as healthy leading The growth. and markets, our quarter, our volume gross expectations encouraged us higher the both our these margins by end margin for leveraged initiatives. Despite conversion especially headwinds our

conversion increases the strong, grow focused initiatives enhance in end product executing pricing hydrants offset our consolidated implemented to brass expected confident more for and customer-focused I'll we in the valves, to and costs material market of ability go-to second XXXX. remain will over During margin call Martie. organization. With improvements, in drive markets half the to and productivity manufacturing of growth initiatives, accelerate key We strategies remain increases turn With development, our improvement and than we and business our execution deliver a second as we and healthy successfully our more our quarter, our for focused net new higher improve products, year. price the that, on sales anticipate as

Marietta Edmunds Zakas

and by million I charge. Infrastructure $XX makes performance. quarter or this Scott with the good will up start increased sales, review for our improved this $XX.X year's second XX sales Infrastructure, last results, higher accounted financial then our basis to profit $XX.X points, net margin second increased net Technologies. which profit our of volumes and by Adjusted Consolidated XX.X%. morning, Gross million, gross increased $XXX.X Thanks, quarter million XXXX in everyone. segment warranty to discrete of by profit excluding million $XX.X approximately XX.X% for million XX% consolidated to gross both driven and margin increase. quarter

and As SG&A quarter in last cost was second increases. million. Selling, the Scott operating general, XX.X%. to also income net in $XX.X personnel-related XXXX trailing increased million a the pricing XX On income grow our from year. the quarter $XX.X with initiatives XXX $XX.X to of cost sales months basis, compared the higher the growth, sales prior was $XX.X were the XX.X% addition material XX.X%. second to despite benefit Adjusted as the Operating a improved percent in in volume and to helped million higher by percent net margins mentioned in as earlier, year. primarily productivity million to in Singer of administrative The headwinds Valve. quarter of and expenses SG&A due our additional decreased have from SG&A increase quarter, million $XX.X basis expenses a points and

reorganization and related Our adjusted charges. results this million expenses quarter exclude other strategic $X.X of to

before, performance discussed Operating costs which volumes, pricing, and expenses quarter higher increased for XXXX impacted to favorably we million productivity second cost improvements offset previously XXXX. $XX.X million partially our expenses. compared with higher and was XX.X% the Adjusted throughout reorganization by by we in SG&A XXXX. announced related to higher strategic were higher EBITDA As report $XX.X to material expect

Net second $XXX,XXX by million, decreased this income to the interest was EBITDA adjusted sales. XX trailing million interest for net of $XXX.X $X.X to months, or higher primarily quarter XXXX XX.X% the expense year. due For

made million the undistributed one-time deferred enacted lowering rate earned million re-measurement that our recorded a on the or the including untaxed revisions for eliminating of of a income provisional income the XX%, legislation is expense provisional XX% previously benefit net Now, in earnings. December $X.X of tax United million income today certain impact tax related taxation transition $XX.X liabilities. taxes. income to we $XX.X The from tax the to was including federal tax significant net recorded on benefit, deductions, XXXX, to States. income corporate limiting the foreign quarter first of outside laws, tax the and of this legislation to On tax overhauling XX, In quarter,

tax expense, primarily income tax certain effects income which transition to reported items, the of For over or the allowable was this eight-year differs quarter, state income expense XX.X% the second effects than before discrete $X.X we the expense transition largely XXXX net and million driven expense statutory one-time taxes of to of the by Other compensation was tax that rate stock income to the $XX.X period. income rate million due related tax we transactions. pay taxes. a expect from This of particularly

the provisional for charges. XXXX EPS Our was reorganization quarterly adjusted transition $X.XX the $X.XX and tax net adjusted one-time income compared strategic in quarter, excludes share per to expense, XXXX. other

million. shipment by continued year-over-year productivity which a sequentially. cost to million SG&A increase million both quarter, performance Material XXXX quarter XX.X% a very to pricing and material primarily due Valve. achieved increase $XXX.X and $XX increased shipment with of increased operating Despite Infrastructure margin million, higher were improvement, including addition growing net XXXX these volumes, headwinds, have for higher additional and had our Infrastructure. XX.X%. SG&A to partially segment versus $XX Now, starting the EBITDA the costs by Singer sales quarter Valve. costs of Singer due to I'll from strong in $XX.X offset to for income second higher was XXXX Adjusted or XX% and primarily $X quarter. pricing million $X.X This XX.X% the to conversion turn Infrastructure volume, increased second or the Adjusted second the million to higher expenses,

million on and essentially sales. Adjusted Technologies. flat leak were sales $XX.X this delivered increase by was to quarter, results growth in $X.X higher in volumes offset driven were $X.X higher XX.X% XXXX. to increased Technologies This similar higher losses operating Adjusted periods with detection the volumes at were operating million. million compared by benefits expense. of year-over-year warranty Systems Moving for the net quarter Mueller second both as

year. $XX.X free first continuing compared to flow, less for million the operations XXXX negative $X.X negative cash our we'll prior-year of million the Now, for capital flow of which half Through in from with operating million, liquidity. the flow was expenditures, $X.X the first of prior half is the quarter review second compared quarter. activities negative year, was negative $XX.X the million Free cash cash

As basis plus and of debt the year, typically cost our the improvements equipment working million, timing largely accrues million savings March a November equal at The operating debt our points. loan of productivity to of loan activities cost lower interest further XX, manufacturing driven the $X flow outstanding our a and for senior the half $XXX cash floating and including million to $XXX upgrade invested a our capital. by a in due of seasonality LIBOR, business of across reminder, of We term organization. quarter the capital secured XXXX. rate we from had expenditures, is to XXXX, margin first XXX in total term At drive and capabilities

at have debt interest will X million the Net XXXX talk was of borrowings our our loan excess under agreement effectively that availability XX, and rate ABL X.X% swap about $XXX ratio and our full was Scott more $XXX results on outlook. year contracts million. about term September less through We than rate updated XXXX. now interest [times] leverage the fix

J. Scott Hall

by have go-to-market address quarter sales Martie. across of Infrastructure's lines. its areas product updated organic achieve a outlook. was key major The enabled strong then year our I'd us have of XX.X% second strong our like all full growth Thanks, to discuss growth. improvements made we growth strategies to driven and in few net

customer-focused We developing serve become account key This the strategies have realigned customers. included of a incentive needs our to sales programs. more and to team all changing organization

volume U.S. from our part benefited lapping year. of in prior also in weather growth the the quarter, the severe This the Western conditions

more comfortable accelerated hydrant, customers In season. States And iron February, ahead the that believe of announced our with of higher this gate our distributors inventory products increases believe second are valve, we United Additionally, construction price markets. year's price announced increases. and brass levels Canadian we in the for entering in we quarter shipments and

executed As part increases go-to-market working of with we our strategy, channel by enhanced partners. price successfully our closely

order opportunity. advantage that a old and price of of were customers took at products the to Our given time window many

the in impact favorable our occur a year. additional benefit shipment second these in of the volumes had the quarter, half increases this price second Although on the from will

While first in offset four we costs XXXX. a pricing to quarters have on and to basis, and prices rise past the the from we both half material metal sequential continued in been increase the have higher not scrap brass over fully benefited this the in in of year, due year-over-year able

rose material with costs year Second compared about quarter X% prior the quarter.

however, the material with we pricing. in quarter, increase offset costs did This essentially higher

Although quarter. inflationary the for lower-than-expected led costs, a XX.X% conversion we to this offset consolidated these margin of

volumes have We time, in than half first to compared managing Over and of more increases year-over-year we in chain to second work XXXX customers. half our Higher second net team and price will strategies in to productivity rate believe AMI increase material We to important year. strengthening offset supply these this in We expense of evolving core execute realization This that to in half the are any worked our commitment is technology the our are expense. expect the to to having mix increases will growing business. of both will costs our and improved We to is market using offset Echologics believe the the by slow that minimize Infrastructure in conversion to go-to-market strategies. of sales was building to focused year. to further impact our actively our margins new pricing. the we material and generate reserve new path Infrastructure's Technologies, this our on right with differentiate The warranty continues an growth, to related and profitability. the recorded product year. a margins, over remain Driving increase, through we the believe XX.X% water teams year in expertise as look as the some operations costs increase strengthening as one improvements the were business Despite top at to we to success the of the to development. executing ago. enhance position first our productivity Due remain margin improvements our of improved reinvest manufacturing part on warranty believe this, an of which execution half helped and to see us of of to needs pleased address offset productivity cost these savings gross Systems profit the the past distributors. was I Technologies, of long-term year, we the allow XX.X% increased At integrate priorities

customers EchoShore-DX into a integrate product use and infrastructure repair Notable the developed and working leader EchoShore-DX the are leak technology reduce leak our fire to Systems a detection for American include core they example to a products Jose who is as we in product using non-invasive are of locate water allows Water. Mueller hydrant non-revenue great how product San detection utility We and line pumper communications have where loss. identify cap a to as technology. technologies to leaks solution. Echologics' the a need node to This of develop fixed are Water

detection of forefront leak is important to Although the technology it for at solutions continues integrating leadership customers. for infrastructure, of business, momentum. a into With to market water and products Mueller our small in is the position Technologies gain be our portion

term, long our the to allow competitive Over this us will enhance advantages.

now. Moving allocation capital to

as shareholders. allocation adding our for a enhancing Our position strategy our infrastructure and on capital company long-term focused remains water value

repurchases. through and through free returning the balance program. and reinvest quarterly shareholders first $XX share enable year, we our of while strong million of to capital through business and two ongoing shareholders the us Our grow Through quarters and dividend dividends to and cash have returned sheet flow to cash cash investments acquisitions, share repurchase the

manufacturing investment help support investments product efficiencies to manufacturing introduce our evaluate an initiatives. to facility Chattanooga continue technologies expand and in additive we us announced Recently, growth our and capital will to capabilities We domestic capabilities broaden that expand foundries. manufacturing portfolio, our and

to are channels, expand leverage and our on acquisition market our pipeline strengthen we focused addition, position In our geographic footprint. our existing

goal year a growth with forward, Going like our expectations that sheet capital to debt balance maintain allocation to support longer and current is strategies strong results. to for term flexibility initiatives. full review structure our our I'd a provides consolidated

see to demand our that dynamics primary markets indications are very continue a healthy fundamentals environment We the for throughout all in end are and XXXX. favorable good

the we in growth the digit markets, end in construction municipal to key digit residential spending market high-single with our For range. percentage mid-single low- growth be expect range to mid- to

to in to shipped For sales the West lapped we X% in our the reason second achieved communicated. related for February our net orders of growth well the to our will conditions the full the quarter as in year action, second net primary year. be X% X% we XXXX, weather we the X% first growth are of The that this are This XX% than received increasing for pricing for higher the we and half the half to sales the quarter. severe expectations the level lower year consolidated as second we previously in consolidated net the range means that sales growth from of consolidated

conversion expected our year execution conversion We cost to Higher to of initiatives be higher XX% margin XX% second continued productivity the the through the which for and our between are to the all our pricing, margin margin half and full in the year. of is XX%, first conversion improved volumes, improvement than the year. of our half expect contribute in

significant the productivity offset I'd that more material for of half costs addition, lapping on will year. the in our in We the XXXX these remain in the our in second than realization In efforts deliver second back to increases additional scrap half be will the to comments brass price improved and year. and year savings increases some anticipate we turn cost the with track it prior outlook. provide final like to costs conjunction over of Martie on in to metal

Marietta Edmunds Zakas

Scott. Thanks,

our XXXX $XX million the expectations be of expected and other Corporate to are million. $XX expenses some between now for Turning to performance.

between $XX and from be expenditures $XX We We range million. capital million and to million $XX rate full million our million net new and any between With excluding that, $XX the XX%, adjusted year and effective income open from range tax to please for one-time million, legislation. XX% anticipate questions. $XX that the be impacts tax for expense $XX this from amortization expect depreciation will operator, to to to interest call

Operator

Thank you.

Our first question Weber from Capital Seth comes RBC with Markets.

Seth Weber

Hey. Good morning.

J. Scott Hall

Good morning, Seth.

Seth Weber

material might have a for Thanks. purely cost of or First ramp year, the the incremental you was tempered that there guidance inflation is function coming? Tech previously on that margin some question, the thought push-out profitability is

J. Scott Hall

if all you of right the them associated and kind of you'd see on XX% like, range, you for and material we're it's with do out math. take actually the margin normalize unexpected our when both – No, below conversion price that

we're is the diluting what inflation I – expectations on but of more, tempering like tune no, one to the hand So you about that have say which prices, to it offsetting is on not what X% actual and And, it's conversion or – Technologies. our want are is. the margin we with

of adjust things because a think it margin. and happened XXXX. a think remind that the population, – came to to has those but true-up in like charge. million. over what increased Technologies top anyway. a team kinds and been – what overcome didn't just then that made charge so associated in out had ago was, prior we we what conversion with – call; material, had for pretty $X.X time it We I people We that to wasn't took some We population product investors be future looked on this worked that with with I I the the was a we and the And about XX% year we pleased took some

the kind ended on in unfortunately take Was of where to business. Technologies that's a line up we we yeah, expected, but charge. with what warranty kind of had So,

Seth Weber

Sure.

CapEx Okay. And took again. your up then, you number

the doing is you this what could row. color with on capital? third what second you share – can a are quarter or quarter in you think extra I that that any with there Is

J. Scott Hall

Sure.

additive as hope adding – be to capabilities to tool technologies, we Chattanooga more capabilities time, said be cycle to making a – our both our capability. prepared the new nice that going looking saying are technologies we've custom expansion we're facility. curing to the of is We of that reduce the and statement, in buy the able and We'll capable in become we an way announced of some so manufacturing;

pretty And that actually project. it's multi-year project is so large and a

So up. that for that that be we in the guidance is piece will went driver why this expect main the invested year the

Seth Weber

Okay. to that or to then in going be following that that that the sorry, And go for should – Does Thanks. forward an does quarters? warranty back to quarter. expense in continue expense then, just the the it overhang be

J. Scott Hall

No.

to want the one think We I studies don't time. I foreshadow this all stuff or on way other. – do the the reliability

I how for and every don't are in again that and think this happen Martie know is again. that quarter I the does better you the looks things it prepared she experience where quarter, but accruals all true-up And that. like she to and answer on will process for again

Marietta Edmunds Zakas

parties us we'll terms et cetera. use time. in various is evaluate No, of failure, Yes. in We to help that something things third and look, over assessing continue that of that rate around will do

of expect and that to... failure what see will monitor we to that rates are in are to – seeing, it what is costs to we that do to our the terms are monitor we're So continue continue where

J. Scott Hall

Remediate.

Marietta Edmunds Zakas

...remediate cetera. those, customers, address we et our how

J. Scott Hall

call overhang. want it wouldn't to I an

being prior we process, to to would keep plotting than and have poorly happy. year I'll we way to sure of what half part in reiterate our is failure there rates just the look, I put But experience and for a those we of since I make less manage that X%. everybody; ever think find back way go XXXX. said ago; customers this in is I one to That's a business new of population plotted were a

Finance just it. just licked time, – to think live to they we've things. time We're I to whenever these ahead. want going another well, Department the study, From decides go reliability with So, have

Seth Weber

very much, you Appreciate guys. Thank Okay. it.

J. Scott Hall

you. Thank

Operator

Lee. next comes Brian Our from question

Your line is open.

Brian Lee

Thanks you said warranty Hey, don't that's these discussion you're to team just Scott, just Maybe and but factors want in the you be adjusting – guys. continue for the know, out was why quarter what a out, Technologies? taking it questions. to you for for I on line the round us quantification to give margins of that breaking modeling not our of impact can for the purposes,

J. Scott Hall

Yeah, we...

Marietta Edmunds Zakas

if sort a – for the you conversion margin for about conversion Technologies at Yeah. quarter. XX% Conversion of yeah, look was margin

Brian Lee

right? warranty the issue, Ex

Marietta Edmunds Zakas

For quarter. second

Brian Lee

to clear, the correct? be issue, Just ex warranty

Marietta Edmunds Zakas

Yes.

J. Scott Hall

warranty ex issue. Yeah,

Brian Lee

the Okay, sorry persist you quarters? that good about rates that. to year-on-year for and past pretty the growth if talked were maybe helped last the there guess starting about think you big on any through expect the Wondering then And of – I – top-line. if had to just those call, I on XQ result or in Technologies, projects in Technologies. getting next couple back quarter in fiscal

bit seems ahead there were to a little are if else issues So the quarter? like it of in or related timing projects any but wanted anything to see schedule, you

J. Scott Hall

No.

all of the business, projects, a I project no, with in think you're this past. but referring business so, had lot we've remind to XXX% – on, nothing but not of the note. there's of that everybody just maybe But push-outs is of some carry

and we're old What seeing get think pull-through channel. what are that into that sales we're to drive-by the you selling the see or what reward we key think where to starting is We've product, now take some reward AMI starting are people done team starting of be or some whether or it the to even regions we visual system I team strategy. for upgradable still distributor read (XX:XX) town in people for sales the now exists. I has put distribution is through to

changed led business. I the was in we people did together pay think the and has organization. we the way And sales the to comp especially incremental think sales when there. to when made I think I we're organization program, we in the And have intent sales in was the the some meter working reorg intent both starting the that changes, and get the momentum that the structure

those are big drivers. think I the

Brian Lee

Okay. should enough. then in the cash through working we thinking of capital increase it quarter, last have target on for Thank be pass few free maybe next it then one the about and how relates the to Fair moving flow quarters And any for I'll on. me, The how this sort year? you. you

J. Scott Hall

I the far capital, inventory think increase on Well, in you'll is short. what's you're a big material it, increase away And there into inventory. have an in hard in the working area. make biggest and that we're going when notice order that is, comes And not we if that the the dig book, you raw see to really very happened sure to we're trying

position have taking something the if raw about a think – you sell make it, don't you you're material you If to short. and essentially

we bought So have indicator. a brass

something, We to what going to make sure we we when know it's quote have levels make of scrap higher that to cost steel it. bought

honest keep can I Martie So think – me here.

raw materials year. up are think I million previous versus like $X

So that's bulk inventory of increase. the the

of and inflation driving have little We more increase too. as is WIP well, a part then the

Marietta Edmunds Zakas

We're the that's accomplish. free adjusted our any net cash going That is flow but for in certainly to a our say term, grow long can say target greater given over to than to us we'd look what we'd income. vary year, certainly long-term

Brian Lee

Appreciate Okay. Thank it. you.

Operator

next Wood comes Our Nomura question from with Instinet. Michael

open. Your line is

Michael Wood

to in And of has to level, some comparisons you're of seemed terms where Can of are seeing quarter high water infrastructure evaluate in weather water? underlying from parts how or pre-buy. the during to growth there that color demand more you a the the growth just you moving volume dissipated be is? with volume able Hi. crowding – lot give still waste impacting out Good us a At morning.

J. Scott Hall

that seeing municipal municipal. has our digits think think – That's kind of I in we're about market, the of in kind dissipated. growth mid-single crowding out I why in

was slightly, And of, sort where year-over-year. last remind to down municipal – was – growing in all period phone, in a year, actually, everybody but water was water there it water supply that water and was management. fiscal actually think dewatering on I investment the pumps was our waste actual really

a census that distribution range now sell-through I that the in is that one the mid-single – or address in your out, I think was water the are we see when other we think parts. that points, and And it water do says, infrastructure there. of to that's digit To we'll never try kind benefactors (XX:XX) that's probably the be credit reverted something of take moving lot wasn't from supply to of not that. data that want ducks, comes there and certainly into for

easier think in a last Western And know comp QX that the we was that here, of had We we where I environment part of an price normalize fairly flooding we were because so able year. saw we kind it. healthy of saw offset to inflation.

statement I guidance, cost. in we a of out demand, point And but some some had it that think what I resi, profits, your of take offsetting piece kind sales the a what it. that about just in Singer low- will call mid-single Valve. And is prepared remind So for of that And there's out my then high-single just of that guidance year. kind it, your the of up moved digits; too the is really muni, quarter-to-quarter. And think will kind in wanted of we get to that whole we'll I we the of quarterly kind this lumpiness normalize yearly when think But of of distribution was doesn't buy-ahead kind to of had the said really the the sales, inflate inflates when basically QX. we underlying We digits each we many where because get that way quarter. said from primary back of away parts everybody we end moving when, driver

Michael Wood

a was with distributors said to typical year? unusual the very with inventory. you basically that pre-buy. And higher more seeing happy does know I year not How last compare were carry

So the when you that with years two you stands in how level your And inventory where or is? compare a maybe comfort of ago can in with terms were normal that environment? more

J. Scott Hall

But here. most would Yeah. The think that construction this we've I the A, wasn't I since way XXXX, the seen markets. I answer in bullish is general, is,

in anybody are, look think and the if these now of Infrastructure things since the development, kind for of I and that So you is and development all land right development and both that at resi this involved XXXX time crisis. best we've had sentiment the

that I as certainly, was understanding accelerate, well. that going was bullish distribution, think to more So

in would but here XX say it's been XX I probably ago. the years best wasn't So I years,

Michael Wood

you. Thank

Operator

question Next Boenning & Ryan from with comes Scattergood. Connors

Ryan Michael Connors

morning. Great. Thanks. Good

J. Scott Hall

Good morning.

Ryan Michael Connors

actual. one say versus you expected stand And I the But in the we quarter. drivers increase, with was that wanted orders conceptually of largely the price maybe which to where inflation on factor. that right material wasn't on actual now one cost quarter in you price hand, other the price of big kind raw price of you as ahead that sort on in sneaking would hand offset just because the the of suggest a say was clarify that customers management,

drove given margin was So the in factor the price the leverage the that was more really it pre-buy? Or really really volume was much how cost quarter? – there a

J. Scott Hall

anything. a One, clarify let So think sneaked couple I things. don't of me anybody

days, is number pre-buy their change be is like to think systems we so and things effective fixed them then to have went going that that that give I can they And said, this window they that. to have releases, custom price them and our XX to day. the a and of they

along. all it was in So our plan

a We're price and ago I previous year-over-year. year doing our is mixing why sequentially about to The comparing quarter. keep talking of as we're other kind opposed That's we're thing to metaphors.

Ryan, price million-ish year-over-year think that a I want range. range as basis, about in on was, that to it in So was $X inflation say, same

offset. virtually they So

you, some to their that make there try think And healthy. are been who their cost they difference. offset Unlike look take the to to price, might inflation. they and we people have talk productivity I markets and the $XXX,XXX sure of

I new in have healthy make or the markets flow extra income And productivity think cost SG&A a price operating we inflation. invested activities. investment we people as then offsetting other business let product and we running or through take intelligent or

margin. artificial the increase of you you if And took And the for around the increase, on as the we see – they right you pricing, cost so, that quarter, in XX% conversion offset. the $X I sales were think, overall, million we would reduction said, the

So, before. ago reality up in is the as neighborhood saw we brass going I a big that the it's to QX somewhere dilution, increases QX. the said basically a XX% in forward, XQ of ago think, all But think year I year that was that I –

covers So, we're quarter, to so see going spreads next to price start really lap the again that more than quarter, in high start even in to Provided we levels spread don't have see this should where we third we open. at inflation. that open inflation should price these

been the think everybody is meant normalized of unusually I high so, to period. for what get a And has kind guidance inflationary

Ryan Michael Connors

Got it.

for Now, end clarify My Thanks, that well. markets. does was Scott. other forecast it regarding the your one quite

that you that spend paying municipal they said, for growth example, to are and in digit You expect you're census in higher so that now, low- to But too. expecting data and prices see mid-single the obviously, forth.

You're not in alone raising price.

the by therefore municipal driven as growth, growth in extent sense? on organic being So, what's percentage what price your there spend makes that of and if opposed se – volume to market is the to some per that view

J. Scott Hall

Yeah.

– more think X%, a we X%. high going this but that I think – way And a than fair that's do we question. is I'm think actual in it that less that you've the volume the seen at think very is level QX increase I about to than

and of so count what that volume. were if in brass think to pounds valves, you kind count that's you to of the of revenue hydrants, if then that's kind number take part of count I'm And see – So – and of flat far. going take were the mix I here kind you you're would the process, it see holding to

in it muni part then, well, of growth. And It's comes is to of hot tend in next much it how terms that, about as in that question now of resi now I percentage the driven muni. to, versus of back muni is resi the driven is volume the how think is much half So by not by as resi. increase right of

Ryan Michael Connors

Got it.

actually much time Thanks really so That's for Okay. morning. this helpful. your

J. Scott Hall

problem. No

Operator

Walter Global. from Liptak question next with Our comes Seaport

Walter Scott Liptak

actually part Good it it buy makes about Maybe last that growth growth The is in resi the resi is was so resi. about you the Thanks. an follow-on just feel a morning. inventory versus to in – had with And material weather that's the of or Hi. confident views muni going into kind the one, because residential to impacting – related disruptions does of of the the some the, into regards ground we quarter. second heard to the some your that how about play of especially year, quarter? talking next

J. Scott Hall

really natural, We now this housing I steady sure inventories way. call is starts state. not if get their let followed, land it, and with believe room phase let's I'm in but try right to a with development back me good it to home some Well,

let's X.X million – So, X.X in steady country. formation to is in X.X the housing say state million million

finished we something million like or year, last at think I X.XXX that.

XX-ish we to percent there's steady get still state. until left growth So,

kind an of years. where existed developments to be of fire We're many, we people less the again. Now, far all unusual we're subdivision And to of overhangs at we rate now, that inventory growth and starting that XX% with developed up a valves through stuff XX%, starting waiting housing for where hydrant had many pick result and see of lay had (XX:XX). period to starts lots see commensurate as and that curb

of So that really growth business business. us have land keep kind housing year, our I in that and driving full a of when single-digit see saying we what you opportunity for start is we that to think high normalize good development the the residential – in front

a are inventory that healthy We're who sentiment too. we if and and buying – selling sure people it report, thing. it's not I'm think confident distribution as are volumes through So, that are they they (XX:XX)

Walter Scott Liptak

Okay.

wonder It to just you rates. the new on switch begin may starting with could to some I segment. to profitable. really sales you're Technologies and segment I changes of when channel turn if are have thoughts gears like sounds happy growth the if the And the good. Sounds off any pay

you profitability how quarter. this about after wonder are So, thinking

J. Scott Hall

everything ones get to business. small is, a project business. Yeah. is to This those really one not We're trying reality is to part the say The hard of try that I'm it's thinking. very of yearly. It's a

going driving, it, And expect improvement one just on of front foot I are end or the at to continuous the of be focus Kaizen will we putting keep in and profitable. other. We

everybody said And tomorrow. it what I'll before, it we can a our I've would and We engineering the could timeline. Now, thing of profitable do. all make the And know could wants purge stupidest be say Technologies it would I it I from profitable. we it get cost be again; call segment and

that core We team Technologies that for team. a Hydro-Guard uses – technology introduced a the the developed link product Infrastructure cellular just has have

are in that down pressure; of working so the alkalinity on the to we operator is expanding in at good. – We or valve an we – could chlorinity hey look nodes water the capability gate a the or one day and say, at hydrant could look back at turbidity this

of that hot as to the solution valve, fire whether development order to everything name that valve, in these we we for you that don't are is a invest it. engineered actuation, in future, stay of we technology, all Infrastructure, cost become a the we to Technologies, that have All it that we in gate ironmongers the technology on high And butterfly sure hydrants, make adapted be in continue other in parts to to have business, segment. of engineering and but

management would it be So said would somebody emphatically technology. I sell I think really mortgaging sell future wrote and they that to recently Infrastructure's Technologies; – not

no, So, never do would I it.

and to I communications call So to want things meter to integrating to And would I the know the want them overall products how see business get they calling then software, leave you average technologies profitability. service but being the do future. Echo get those in scale, I forever radio get the stop I start margin I to can so in business dilutive see want make get corporately, don't to it what Infrastructure to to into shared a Technologies take business. want to we're or or I and if what – just them have we profitability?

with it developments. all And when stop investors, know And when so, know excited. be profitable, really will I expense because to I'm associated we're don't would going say I other I to having don't these

to proprietary We is think where that XG, – be technologies, spectrum information much AMI available you do we're and networks? to piggyback with it's so, If And about it other XG public communications? how able think about coming What will what will we can go we on think our those spectrum if think both exciting. with our our what I and goes cellular way? that bandwidth

to to margin I we think increase and possibilities a lot our value presence. add there's how of of increase products can existing to

Walter Scott Liptak

Okay. Thank you thoughtful for answer. that

Operator

Davidson. Karimi D.A. Zane from with comes question next Our

Your line is open.

Zane Karimi

on Good Zane Brent morning. for Thielman.

something off, last was First some get on color to mentioned I quarter. hoping you

Technologies drive you was you that believe business that fiscal could give to AMI. those? in think some spoke You contract negotiations the you updates said Can us I shipments. XXXX on

J. Scott Hall

quarter. we that contracts under think currently. have negotiation, I signed contracts We last

and might on. quarter. have we did of where municipalities to, Martie, folks I we think and go about working is did land said, what kind right talking ahead we go and I book been looking, but ahead were think that And couple referring that though, a I we the legal of Martie's remember I'm I last are, what to we trying I'm – where said so at

So in I with book order the the in we yeah, that, AMI pleased think pretty are quarter.

Zane Karimi

experiencing just Thank pressures to you you example, logistics; then, are guys? it that for and up for freight, cost materials, beyond follow you. meaningful real how is And quick, in

J. Scott Hall

look Sure. and mean, there's not is Yeah. freight I we as to mitigate. it meaningful as

the we do as steel inflation. it's things and to think left impacts, load overall, But, the our a of of sure we're as lump One nowhere is I meaningful make room brass freight optimization we the have could inflations. near where trying kind – optimization in freight little load the

and a scarcity and of the to in we some inflation had We inflation to hauling our if in we both component were had a bit parts just also down, as inflation based we tend break and like the inflation And focus plants. increases that on February industry. have that. that things it. couple so, labor little steel and diesel on problems at we purchased like in inflated had surcharges of But And quarter, X freight you brass triggered associated some were some materials raw that with copper had

of I if to is I to away raw as and was appropriate careful we all in we have that the we I with because the have be But around broad-based but far was appropriate at it discussions – about take Probably have in the there XX% that pricing it's look be the think businesspeople or said customers. all million. we materials. of something period you have And thinking all yes, where be about to it's something and and So, with actions may $X associated think inflation. XX% quarter, a

Zane Karimi

very you I'll jump queue. Thank much. Great. back in

Operator

you. Thank

Cowen. next with comes Our Giordano question from Joe

Joseph Giordano

Hey, morning. Good guys.

J. Scott Hall

Good Joe. morning,

Joseph Giordano

Just the guide for the on half. question second

the do you forward your the the tougher half? of in given how have half, out between comps back Just pull back Infrastructure growth just parse where the in segments from you and is in XQ two in the some coming

J. Scott Hall

the the it just Infrastructure majority of think of like XX%... scale Well, obviously I to from XX%, numbers. the has is vast come

Marietta Edmunds Zakas

XX%.

J. Scott Hall

...of revenue. our

of million, of the kind $XXX that think. I day, think But basis. percentage will at I is Technologies little I this grow on the end a a a sub-$XXX number more million mean

So vast obviously, come the majority to from has Infrastructure.

the can't business holding at we of remember what kind year. XX% that guided to the of some number but was, – beginning Technologies that still I for we're the So math

Joseph Giordano

XX% for full the growth year? For

Marietta Edmunds Zakas

have in by guidance We've looked everything at segment. given aggregate. not specific We

so to for looking And X%. the consolidated year, full we're at X%

think I had growth I think in XX%, the we quarter, were stronger quarter. second growth a – certainly, this Technologies

in first have guidance the quarter. think segment. a bit given specific by I little not we down But

J. Scott Hall

correct. That right. is No, you're

Joseph Giordano

Okay.

to and Echo some that you smaller leak I'm the curiously, the your of about well. view of as large some by side, earlier acquisitions enter kind just now, in other how offering through Just conversation players on landscape space detection leak detection that moves curious given

landscape right now? So see how do that you

J. Scott Hall

And it's everybody. think room there's think I I for Look, great.

invasive time be you break drinking different. can't method. will vastly techniques need for think think send to you are that a something is pipe. there And actually have times you to when non-invasive There stream into I be a where to techniques and a up water actually the going the I do

to this but condition start I space, times There'll of on to And awareness awareness because a non-rev we think assessment. will and do behaviors about thinking need to I loss us that when loss kind be performance non-rev more of need do you O&M you grows everybody water people better drive better from practices for times O&M start business into see you and – I like utilities. water will the and think be about pipe I there better welcome us. O&M when the impact when and will for think utilities,

do method XXX a this oh, year. think share X if we're for there, going out market, I I'm I'm Then grow not sitting a it'll our say, then that, of day, before solutions kind when I you that compete you that on of days welcome repair days mission hours And too. and the XX No, there's need going mains this critical to technologies are a pinpoint are And certainly accuracy listening it. here week, I method. they water no, think complementary saying and on to with about they this. triangle devices, a

what think as becoming is with they up techniques commodity. all without is for and start scale, you we And exception, to I So more will and niche. as need grow the they the go have more room of each a their precious wrestle there all,

Joseph Giordano

from can tax any me, And check update but last Walter, then and the the on I legacy? liability the with XX-Q,

J. Scott Hall

Martie. ahead, Yeah. Go

Marietta Edmunds Zakas

Yeah.

but to X. is Energy with We respect or of extent could to their case. Alabama, liable we if and that might we IRS case I any back the tax would And amount be you there potential we XXXXs. in to of any, in will have. said certain in what whether the say, we out bankruptcy substantially as be are sort But them liabilities any its we asserted tax the continue IRS believe continue court any timeline, a will the vigorously for these the Just be Walter owed, against Don't liability, could the what has longstanding years don't the know say we apply that than still have open to if in liability does going just remain tax with some Claim. to filed at look assert that been the you monitor and have less Proof tax and refunds that of very audits of Look, that that audits. for have net Chapter defenses any all if

Joseph Giordano

Thank you.

Operator

you. Thank

Garza from Asset Our Jose next with Management. question Gabelli comes

Jose Ricardo Garza

Good Hey. guys. morning,

J. Scott Hall

Good morning.

Jose Ricardo Garza

kind on of Wanted quarters of now. CapEx thoughts, a your to going couple up numbers row seem Scott, just kind the get a to be in

and years about us it of level get well the of you you'll keep a just over seems to maintenance in be what that more the spending. you're set that as Kind as incrementals think level several is finding of terms Just next that looking. the how

J. Scott Hall

kind so quarter, things that we that could almost And in kind all foundry told it's it Well, see get other have at one actively was technologies were to all we that service, could things Chattanooga the we benefit new of was that adding. tax we of the it. and having last the get in rate, year the of deductible better there going of tax things wanted Okay. capability increase of in new part. we one. the while And that's That part I were capacity looking higher if on, you, – we

you of maintenance there. ongoing see little number been less half Our than the has spend a

say the this. So let But than something $XX is million old the guidance, million me less $XX maintenance level.

melt, with when I see opportunity this we'll low-cost products the greener actually make them country couple are and a more make more from see use safer to I technologies, and cordless trends around options your is to more as make at furnaces steels expensive, out. long-term molding of more believe furnace would As for think investments dose there tons that electricity investors there really mold cost foundries I I is outer to could look an import that there, of Chinese-produced technologies, that believe and XX% and And more country, XX%, I look a order in I in and that them trying efficient good and think more for you or rational holding more to make mold than and in them drive tons and still to become I recapitalize and steel. ductile, what better

XX at it's going million would I think dig our that point And look – more to to be to investors, and not point, $XXX I the margins we'd like so, to I to at over made. I that. some whatever I'm and modernization from this say Jose, we've as more, gross remiss But years in thing a all would prepared or improvements be. And of do not be go ahead the of do

the manage the to made We up investment. up ability are the with start on pleased savings could get translate we we when run at bring a manufacturing investment, achieve team's project, very bring it rate, it and that and thought achieving we it to time,

So, I I target-rich it's we'll investment time. environment, to do that – some are think level for and think a there think continue I elevated that

Jose Ricardo Garza

one year year later? guess just you to there I That's Okay. seeing you have if Singer, on M&A and you're comment how And very guess of helpful. kind kind and wanted pipeline thoughts if your things, I any of a after

J. Scott Hall

Yes.

of before, pipeline and we is said from better a a of to idea view. the do more want channel what geographically, want As what to point I've technically, want – synergy wholesome, what we do to have we do we we

be you in to there. – And is so, my we commitment we have I What more candidates all will that disciplined.

We around will be disciplined price.

done do that are discipline did having strategic things lot know it's going of We the easy your and this But there, before we've are quite it sheet will we're around is a we great previous think what properties a able our really got have because I in before. fair acquisitions, out buying to I pretty I a to path And to keys that can't price opportunities that pay we to around – you of balance but a not of life, heady and strategic certainly, a to keeping what me lot wreck do multiples. like, original synergies I've be on, our get value. some a bit synergies for see that. discipline to intent and we

Jose Ricardo Garza

Scott. Thanks very enough. much, Fair

J. Scott Hall

you. Thank

Operator

you. Thank

Markets. from comes with RBC Capital question Seth next Our Weber

Brendan Shea

for a follow ones. is thanks. for us get Thanks to Hi, up. Two on This Brendan allowing Seth. quick

I was second-half that to increase And you The price quantify first growth. about a willing the is, second, are if I'd comment how was big confirm you you then, made implemented. to like wondering

to fourth You still in the and expect technology quarter, third sales year-over-year correct? both increase quarter

J. Scott Hall

the trying quarter business That overall is it point. correct. but in said, the yearly business. way as points out view this And Yeah, to to go, we we're we got expect we of quarter to to XX that Martie stay of grow as a

is – growth small $XX number. going Our fascination don't hope mean, be I a yes, whatever. it's about or realistically $XX million to million of to expect or with the But we're out dwarfed we $XX growth, by to math whatever to going But, to we I million grow. the talking it's million on what $X be Infrastructure. know; worked be

Brendan Shea

to how then increase, big And are quantify price you the Okay. willing was? that

J. Scott Hall

I quantify. million is. got what We mean, We $X see this Not we'll And the price our versus municipalities. announced with fixed certain distribution yield quarter have in really contracts previous-year increase. quarter. we

business came have, your your months the spot on look at yield in of on versus of first the much where think much contract mix, you in market. I how came business our how in

kind that looks we to of cost get have increase. going the like should to yield that $X to kind million-ish I'd the continue of able on that kind eventually be side performance, of forward, think number. we like think I other like of

Brendan Shea

you. Thank Okay.

J. Scott Hall

Okay.

– at o'clock, right we're XX at think Martie. I

there's force, felt we So, we joining was the Pleased no felt provided And team. traction our good. operations really sales we I no see a calls, really to the to pleased with everybody like – morning. execution like thank us else like to this good should quarter. in other see one operator, – for had traction I'd

thank for you talk joining so, you And we'll next to and quarter. us,

Operator

this That for the time. you Thank today's All at participants conference. disconnect. does conclude call may joining

Mueller Water Products (MWA) 8 May 182018 Q2 Earnings call transcript