Mueller Water Products · NYSE:MWA
Mueller Water Products — Bank of America Merrill Lynch 2012 Leveraged Finance Conference
34 slides from Mueller Water Products's conference presentation, Dec 4, 2012
Slide 1: Bank of America Merrill Lynch 2012 Leveraged Finance Conference
Bank of America Merrill Lynch 2012 Leveraged Finance Conference December 4, 2012
Slide 2: Non-GAAP Financial Measures
Non-GAAP Financial Measures The Company presents adjusted operating income (loss), adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income (loss), adjusted net income (loss) per diluted share, free cash flow, net debt and net debt leverage as non-GAAP measures. Adjust
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation 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,
Slide 4: Our Business
Our Business • $1 billion LTM net sales (as of Sept. 30, 2012)(1) • Portfolio includes: • Fire hydrants • Valves • Metering systems • Piping component systems • Leak detection • Pipe condition assessment • Specified in 100 largest U.S. metropolitan markets(2) 4 (1) From continuing operations (2) Val
Slide 5: Investment Highlights
5 Investment Highlights Leading North American provider of water infrastructure and flow control products and services Leveraging Mueller brand and relationships to expand intelligent water technology offerings for diagnostic analysis and data management Expected improved results due to strong incre
Slide 6: Business Performance: Long-Term Targets
Business Performance: Long-Term Targets 6 Top-Line Growth Other Top-Line Growth • Mueller Co. base business organic growth of 5% - 10%+ in normalized end market conditions • Emerging technology products and services >20% Earnings Leverage • Mueller Co. adjusted EBITDA margins of 20%+ in normalized e
Slide 7: Broad Product Portfolio
Est. 1857 Broad Product Portfolio 7 Note: All statistics are LTM ended September 30, 2012 (1) Adjusted operating income excludes corporate expenses of $31 mm. Mueller Co. excludes $2.5 mm of restructuring. Anvil excludes $0.3 mm of restructuring. (2) Depreciation and amortization excludes corporate
Slide 8: Water Transmission Solutions
Water Transmission Solutions 8 Mueller Water Products manufactures and markets products and services that are used in the transmission, distribution and measurement of safe, clean drinking water and in water treatment facilities.
Slide 9: Market Positions vs. Competitors
9 #1 #1 #1 #2 ACIPCO A.Y. McDonald DeZURIK Ford Meter Box McWane * Company estimates based on internal analysis and information from trade associations and our distributor networks, where available.
Slide 10: Strategy and Objectives
Strategy and Objectives 10 Maintain leadership positions with customers and end users Continue to enhance operational & organizational excellence Broaden breadth and depth of products and services Expand Internationally • Leveraging the Mueller brand • Developing value-added products and services •
Slide 11: Our End Markets
11 Our End Markets
Slide 12: Residential Construction: Housing Starts and Household Formation
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 19 48 19 50 19 52 19 54 19 56 19 58 19 60 19 62 19 64 19 66 19 68 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 20 10 YOY Change in Household Formation (thousands of housholds) A
Slide 13: Non-Residential Construction
Non-Residential Construction 13 The non-residential construction market appears to have stabilized Non-Residential Construction Actual/Forecast Data as of November 21, 2012 Source: IHS Global Insight Data as of November 21, 2012
Slide 14: Anvil Highlights
Anvil Highlights 14 Leading domestic manufacturer of piping system components Significant FY2012 net sales from #1 or #2 segment positions Customer service capabilities focused on quick delivery Network of more than 5,000 distributor locations Track record of operational excellence (solid adjusted E
Slide 15: Anvil Key Products
Anvil Key Products 15 Percent of Net Sales(1) Market Drivers Products Key Competitors Product Segment Energy (Oil & Gas) Power/High Pressure Mechanical Industrial & Fire Protection 75% 20% 5% Non-Residential Building Construction Oil & Gas Production Power Need Development Mechanical: Grooved, Iron/
Slide 16: Significant Market Opportunities
16 Significant Market Opportunities
Slide 17: The Market Opportunity Is Significant And Growing
• Valves and hydrants typically replaced at same time as pipes • ASCE graded drinking water infrastructure a D-(1) • At least 36 states projected water shortages between “now and 2013”(2) (3) The Market Opportunity Is Significant And Growing 17 Sources: (1) ASCE: 2009 Report Card for America’s Infra
Slide 18: Funding Water Infrastructure
Funding Water Infrastructure Stronger EPA regulations should lead to increased investment • At least 40 cities under consent decrees — Atlanta — Washington, D.C. — Baltimore City and county — Kansas City — Cincinnati Municipal Bond Market • Jan – Sept 2012 new issuances up 43% over the same period i
Slide 19: Funding Water Infrastructure Repair
Funding Water Infrastructure Repair 19 Sources: (1) Bureau of Labor Statistics - FactSet (2) AWWA State of the Industry Report 2012 (3) EPA Clean Water and Drinking Water Infrastructure (4) AWWA 2010 Water and Wastewater Rate Survey (5) Americans on the U.S. Water Crisis, ITT 2010 Historical Water R
Slide 20: Significant Growth Opportunities
Significant Growth Opportunities • Investing in Smart Metering and Leak Detection/Condition Assessment Technology • Expect demand for AMI to grow 20%/year through 2015 in water market* • Leak detection and pipe condition assessment technology will help water utilities prioritize capital spending • L
Slide 21: Opportunities: AMI/Smart Metering
Opportunities: AMI/Smart Metering 21 OPPORTUNITY SOLUTION CUSTOMERS COMPETITORS Smart Metering • Advanced Metering Infrastructure 20% of market - or about $200 million today* • Forecasted to grow an average of 20% per year through 2015* • Transition from one-way to two-way AMI systems • Two-way mesh
Slide 22: Opportunities: Pipe Condition Assessment and Leak Detection
Opportunities: Pipe Condition Assessment and Leak Detection 22 OPPORTUNITY SOLUTION END USERS COMPETITORS Pipe Condition Assessment and Leak Detection • Constrained municipal budgets • Greater attention on pipe condition assessment • Help prioritize capital spending • Pioneered acoustic, non-invasiv
Slide 23: Actions & Business Results
23 Actions & Business Results
Slide 24: Management Actions / Initiatives
Management Actions / Initiatives 24 Objectives Actions Reduce costs and improve operating leverage Manage working capital and capital expenditures to generate free cash flow Pursue strategic growth opportunities by leveraging the Mueller brand • Closed six plants since FY2006 • Divested two non-core
Slide 25: History of Strong Financial Performance
History of Strong Financial Performance (see appendices for GAAP reconciliation) 25 (a) (b) ($ in millions) NET SALES ADJUSTED EBITDA & ADJ. EBITDA MARGINS a) Fiscal year ended September 30. Reflects inventory step-up costs of $53 million in 2006; restructuring charges of $2 million in 2009; goodwil
Slide 26: Consolidated Non-GAAP Results
Consolidated Non-GAAP Results • Meaningful improvement in net sales, adjusted operating income and adjusted EBITDA year-over-year • Net sales increased 9.7%; adjusted EBITDA increased 30.0%; adjusted diluted EPS increased $0.06 to $0.03 from a loss of $0.03 last year; free cash flow was $45.4 millio
Slide 27: Debt Structure
Debt Structure • Lowered our net debt leverage to 4.2x as of September 30, 2012 • Debt maturities with no significant required principal payments before 2017 • No financial maintenance covenants with excess availability at the greater of $34 million or 12.5% of facility amount o $140.6 million of ex
Slide 28: Why Invest in MWA?
Why Invest in MWA? 28 • Leading brand position with large installed base • Leading municipal specification positions • Comprehensive distribution network and strong end-user relationships • Low-cost manufacturing operations • Recovery of residential construction market • Increased municipal spending
Slide 29: Supplemental Data
29 Supplemental Data
Slide 30: Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures
Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures 30 ($ in millions, except per share amounts) Three months ended September 30, 2012 Mueller Co. Anvil Corporate Total GAAP results: Net sales 187.2$ 93.9$ -$ 281.1$ Gross profit 49.1$ 27.5$ -$ 76.6$ Selling, general and admin
Slide 31: Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures
Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures 31 ($ in millions, except per share amounts) Three months ended September 30, 2011 Mueller Co. Anvil Corporate Total GAAP results: Net sales 161.0$ 95.3$ -$ 256.3$ Gross profit 37.3$ 27.7$ (0.1)$ 64.9$ Selling, general and a
Slide 32: Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures
Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures 32 ($ in millions, except per share amounts) Year ended September 30, 2012 Mueller Co. Anvil Corporate Total GAAP results: Net sales 652.4$ 371.5$ -$ 1,023.9$ Gross profit 162.8$ 108.3$ -$ 271.1$ Selling, general and adminis
Slide 33: Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures
Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures 33 ($ in millions, except per share amounts) Year ended September 30, 2011 Mueller Co. Anvil Corporate Total GAAP results: Net sales 605.5$ 359.1$ -$ 964.6$ Gross profit 147.0$ 101.1$ -$ 248.1$ Selling, general and administr
Slide 34: Questions
34 Questions
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