Mueller Water Products · NYSE:MWA
Mueller Water Products — Bank of America 38th Annual Investment Conference 2008
30 slides from Mueller Water Products's conference presentation, Sep 16, 2008
Slide 1: Bank of America 38th Annual Investment Conference
Bank of America 38 th Annual Investment Conference September 16, 2008 Exhibit 99.1
Slide 2: Safe Harbor Statement
2 Safe Harbor Statement Except for historical information contained herein, the statements in this presentation 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
Slide 3: Key Attributes of Mueller Water Products
3 Key Attributes of Mueller Water Products • Leading water infrastructure products provider • Strong brands highly recognized for quality • Low-cost manufacturing operations • Attractive and growing water infrastructure industry
Slide 4: Leading Water Infrastructure Products Provider
4 Leading Water Infrastructure Products Provider • Large installed base of products in U.S. • Leading specifications position, including top 50 U.S. markets (a) Before corporate expenses LTM Net Sales: $1,837 MM LTM Adjusted EBITDA: $262 MM LTM Adjusted EBITDA Margin: 14.3%
Slide 5: Broad and Profitable Product Portfolio
5 SEGMENT NET SALES PRODUCT PORTFOLIO ADJUSTED OPERATING INCOME (a) DEPRECIATION AND AMORTIZATION (b) HISTORICAL ROOTS EBITDA (a) (b) Restrained Joint Pipe Ductile Iron Pipe Joint Restraint Joint Fitting Broad and Profitable Product Portfolio $728MM $127MM $50MM $177MM $530MM $13MM $23MM $36MM $579M
Slide 6: Primary End Markets
6 Primary End Markets • 70% of FY2007 net sales was water infrastructure related • 50% was repair and replacement (public sector) • 50% was residential construction • 30% of FY2007 net sales was commercial construction related Source: Management Estimates 2007 Net Sales
Slide 7: Complete Water Transmission Solutions
7 Complete Water Transmission Solutions
Slide 8: Comprehensive Distribution Network
8 Comprehensive Distribution Network Installed base and specified products drive demand
Slide 9: Technical and Product Innovation
9 Technical and Product Innovation • Manufacturing excellence - Commitment to being low-cost producer • Lost foam manufacturing process - Only manufacturer utilizing process for valves and hydrants - Reduced production costs by 15% • Automating ductile iron pipe manufacturing - Cuts labor costs in h
Slide 10: 75% of revenue comes from products that are #1 or #2
10 75% of revenue comes from products that are #1 or #2
Slide 11: The Water Infrastructure Industry
The Water Infrastructure Industry
Slide 12: An Aging Water Infrastructure Industry
12 An Aging Water Infrastructure Industry • Water leakage rates as high as 20% • Water systems serving 2 to 3 times more people than originally intended (1) • Water infrastructure graded a “D-” by American Society of Civil Engineers • Existing and future legislation could lead to increased infrastru
Slide 13: An Aging Water Infrastructure
13 An Aging Water Infrastructure Source: The EPA Clean Water and Drinking Water Infrastructure Gap Analysis 2002 %
Slide 14: An Aging Water Infrastructure
14 An Aging Water Infrastructure Source: The EPA Clean Water and Drinking Water Infrastructure Gap Analysis 2002
Slide 15: An Aging Water Infrastructure
15 An Aging Water Infrastructure • Aging water pipes need to be rehabilitated or replaced • Valves and hydrants typically replaced at same time as pipes Source: EPA 2003 Drinking Water Needs Survey and Assessment
Slide 16: Water Infrastructure Market Opportunity
16 Water Infrastructure Market Opportunity • Growing repair and replace market • Public spending on water infrastructure expected to increase 17% in 2008 (Oct. 2007 AWWA survey) • 55% of Mueller Co.’s net sales in 2007 • 45% of U.S. Pipe’s net sales in 2007 • Rate increases • Average annual rate inc
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Slide 18: Management Actions
18 Management Actions • Completed synergy plan - At high end of range of $40 - $50 million • Continue to reduce fixed and variable costs - Closed Burlington facility - Expected to generate $15 - $17 million in annualized savings - Reduced headcount at Mueller Co. and U.S. Pipe by approx. 150 positio
Slide 19: Consolidated Results
19 First Nine Months Fiscal 2008 adjusted to exclude $17.9 million, $10.9 million net of tax ($0.10 per share), of restructuring charges related to the closure of Burlington manufacturing operations. FY 3Q07 Earnings per share adjusted for $36.4 million loss on early extinguishment of debt ($21.0 mi
Slide 20: Free Cash Flow (YTD through June 30)
20 ($66.1) ($60.8 ) Free Cash Flow (YTD through June 30) $105.9 $111.0 Free Cash Flow Capital Expenditures Cash flow from Operations 1) 2007 excludes $48.1 million of cash costs related to debt refinancing activities during FY 3Q07 2) YTD 2008 excludes $10.9 million, net of tax, costs related to the
Slide 21: Leverage Ratio and Interest Coverage
21 3.5X 3.7X 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Leverage Ratio Interest Coverage 5.25X Maintenance Debt Covenants 2.5X Covenant restriction Maximum Minimum LTM as of June 30, 2008
Slide 22: Key Drivers
22 Key Drivers Residential Construction Repair and Replace Commercial Construction Water Infrastructure Distributors Raw Materials Pricing Housing starts down 30.6% Q3 2008 vs. Q3 2007 Public spending on water infrastructure expected to continue to increase long term, although there is some uncertai
Slide 23: Raw Material Purchase Price Volatility
23 Raw Material Purchase Price Volatility U.S. Pipe • July 2008 - $533 per ton up 8% from April. Up 134% from July 2007 Mueller Co. • July 2008 - $699 per ton up 24% from April. Up 59% from July 2007 • Brass ingot increased from $2.64 per pound in January 2008 to $3.10 per pound in July 2008, essent
Slide 24: Potential Uses of Cash
24 Potential Uses of Cash • Reinvesting in the business • Paying dividends • Repaying debt • Repurchasing stock • Making strategic acquisitions
Slide 25: Strategy and Objectives
25 Strategy and Objectives • Maintain market leadership positions • Expand internationally • Continue to enhance operational excellence • Broaden breadth and depth of products and services Capitalize on the large, attractive and growing water infrastructure markets worldwide
Slide 26: Investment Highlights
26 Investment Highlights • Attractive long-term water industry dynamics - Driven by new and upgraded infrastructure - Limited number of suppliers to end markets • Strong competitive position - Leading brand positions with large installed base - Leading municipal specification positions - Comprehensi
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Slide 28: Segment Results & Reconciliation of GAAP to Non-GAAP Performance Measures
28 Segment Results & Reconciliation of GAAP to Non- GAAP Performance Measures $ in Millions (except EPS) Q1 '07 Q2 '07 Q3 '07 Q4 '07 FY 07 Q1 '08 Q2 '08 Q3 '08 LTM Net sales: Mueller Co. 162.1 195.9 203.1 195.0 756.1 161.6 168.9 203.0 728.5 U.S. Pipe 116.4 129.7 153.3 137.7 537.1 110.7 114.2 167.7 5
Slide 29: Net Sales and Operating Income
29 NET SALES OPERATING INCOME (a) Fiscal year end as of September 30. (b) Financials for 2002 and 2003 are calendar year while 2004 – 2007 a fiscal year ending September 30 th . (c) Excludes $6.5 million of litigation settlement expenses in 2003. (d) Excludes environmental-related insurance settleme
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