Mueller Water Products · NYSE:MWA
Mueller Water Products — Morgan Stanley Global Industrials Unplugged 2010
37 slides from Mueller Water Products's conference presentation, Aug 31, 2010
Slide 1: Morgan Stanley Global Industrials Unplugged August 31, 2010
Morgan Stanley Global Industrials Unplugged August 31, 2010 Exhibit 99.1
Slide 2: Safe Harbor Statement
2 Safe Harbor Statement 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 the Company intends, expects, plans, p
Slide 3: Non-GAAP Financial Measures
3 Non-GAAP Financial Measures The Company presents adjusted income (loss) from operations, adjusted EBITDA, adjusted net loss, adjusted net loss per share, free cash flow and net debt as non-GAAP measures. Adjusted income (loss) from operations represents income (loss) from operations excluding impa
Slide 4: Investment Highlights
4 Investment Highlights Leading North American provider of water infrastructure and flow control products in attractive and growing water industry One of the largest installed bases in the U.S. Strong brands Leading specification positions in 99 of 100 largest U.S. metropolitan areas Low-cost manufa
Slide 5: Our Business
5 Our Business • $1.4B LTM net sales (as of June 30, 2010) • Portfolio includes: • Fire hydrants • Valves • Pipe fittings • Ductile iron pipe • Water meters • Specified in 99 of the largest 100 U.S. metropolitan areas • Approximately 75% of FY2009 net sales from products with #1 or #2 position (1) B
Slide 6: Broad Product Portfolio
6 SEGMENT NET SALES PRODUCT PORTFOLIO ADJUSTED OPERATING INCOME (LOSS) (1) DEPRECIATION AND AMORTIZATION (2) HISTORICAL ROOTS ADJUSTED EBITDA (1) (2) Broad Product Portfolio $607 $80 $50 $130 $388 ($49) $19 ($31) $370 $18 $16 $34 Iron Gate Valves Butterfly, Ball and Plug Valves Fittings & Couplings
Slide 7: HOA Fens Sinan
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Slide 8: Company estimates based on internal analysis and information from trade associations
8 * Company estimates based on internal analysis and information from trade associations and our distributor networks, where available.
Slide 9: Mueller Water Products
Mueller Water Products
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Slide 11: Primary End Markets
11 Non-Residential Construction $430mm 30% Repair and Replacement (Public) $850mm 85% Water Infrastructure $1B 70% Primary End Markets Residential Construction* (Private) $150mm 15% FY2009 Net Sales: $1.4B Source: Management estimates * Residential is driven primarily by community development
Slide 12: Aging Water Infrastructure
12 Average life of 100 year old and 75 year old pipe is converging, contributing to accelerating need for pipe replacement. Aging Water Infrastructure (1) The EPA Clean Water and Drinking Water Infrastructure Gap Analysis 2002
Slide 13: Mueller Water Products
Mueller Water Products
Slide 14: Aging Water Infrastructure
13 Aging Water Infrastructure • An average of 700 water mains break daily in U.S. (about one every two minutes) (1) • Los Angeles typically has up to five breaks daily; 225 major breaks each year (2) • Baltimore water main break in March 2010 left 100,000 people without water (3) (1) Saving U.S. Wat
Slide 15: Aging Water Infrastructure
14 Aging Water Infrastructure “Crumbling infrastructure has a direct impact on our personal and economic health, and the nation’s infrastructure crisis is endangering our future prosperity.” D. Wayne Klotz, P.E., F.ASCE President American Society of Civil Engineers
Slide 16: The Market Opportunity Is Significant And Growing
15 The Market Opportunity Is Significant And Growing Repair and Replacement Market • Aging water pipes need to be rehabilitated / replaced • Valves and hydrants typically replaced at same time as pipes • 15% - 30% of treated potable water lost in leaky pipes (2) Funding and Spending • 90% funded at
Slide 17: Sources of Funding Water Infrastructure Repair
16 Sources of Funding Water Infrastructure Repair (2) Historical Water Rates Compared to Other Utilities (1) Funding 2010 Water Infrastructure Repair Sources: (1) Bureau of Labor Statistics (2) AWWA State of the Industry Report 2009 Other 23% Bonds 3% Loans 46% Operational Savings 24% Rate Increases
Slide 18: Increasing Federal Awareness of Funding Needs
17 Increasing Federal Awareness of Funding Needs • At least 30 cities under consent decrees — Atlanta $4.0B — Washington, D.C. $2.8B — Baltimore City and county $1.7B — Cincinnati $1.5B • 1974/1996 Safe Drinking Water Act • 1998 Disinfectants and Disinfection Byproducts Rule • 2011 proposed federal
Slide 19: Historical Housing Starts
18 Historical Housing Starts Historical Housing Starts (1991 - July 2010) Seasonally Adjusted Annualized 1,150 1,400 1,650 1,900 2,150 2,400 1991-2009 Average 1,515 Bottom of prior down cycle (798,000) April - Lowest starts (479,000) since Census Bureau began keeping records in 1959 2010 Forecast =
Slide 20: Update on End Markets – Residential Construction
19 Update on End Markets – Residential Construction Significant Economic Downturns (1) (1) Seasonally adjusted and annualized data from U.S. Census Bureau. Housing starts in thousands. Significant Downturns Peak Trough Length of % Decline Length of Recovery Trough + 12 Months Month Starts Month Star
Slide 21: Non-Residential Construction
20 Non-Residential Construction Average 3-Month Change in Non-Residential Construction Data as of July 21, 2010 Non-Residential Construction Actual / Forecast
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Slide 23: History Of Strong Financial Performance
22 NET SALES OPERATING INCOME & OPERATING MARGIN $107 $114 $142 $168 $222 $179 $153 $75 $4 $24 $33 $34 $2 $8 $14 $27 $45 $51 $59 $76 $45 $20 13.7% 0.7% 4.0% 5.5% 0.4% 2.0% 3.6% 6.3% 9.3% 9.5% 10.6% 12.8% 9.5% 21.3% 21.3% 23.7% 27.6% 21.0% 25.3% 23.0% 4.1% 6.3% (1.9%) (9.7%) ($50) $0 $50 $100 $150 $2
Slide 24: Consolidated Non-GAAP Results
23 Consolidated Non-GAAP Results • Began to see the benefits of January valve and hydrant price increases • Average prices on pipe shipments at U.S. Pipe were down YOY but up sequentially. Order price up sequentially. • Significant improvement in operating margins on increased volumes, manufacturing
Slide 25: Mueller Water Products
Mueller Water Products
Slide 26: Refinancing Highlights
24 $49 Refinancing Highlights • Recapitalization provides a long-term capital structure • Extends maturities with no required principal payments before 2015 • Locks in long term capital at attractive rates • Preserves deleveraging capability • Expect greater operational flexibility • Elimination of
Slide 27: Mueller Water Products
Mueller Water Products
Slide 28: Capital Structure
25 Capital Structure Notes: * FY 2007 excludes $48.1 million of cash costs related to debt restructuring activities. Reduced debt by $856mm from March 31, 2006 through June 30, 2010 Reduced debt by $269mm in the 12 months ended June 30, 2010 Free Cash Flow ($ in millions) $37 $115 $94 $91 $14 $0 $20
Slide 29: Investment Highlights
26 Investment Highlights • Water industry has fundamentally strong long-term 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
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Slide 31: Segment Results and Reconciliation of Non-GAAP to GAAP
28 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (in millions, except per share amounts) Three months ended June 30, 2010 Mueller Co. U.S. Pipe Anvil Corporate Total GAAP results: Net sales 174.6 $ 120.2 $ 81.1 $ - $ 375.9 $ Gross profit (loss) 52.1 $ (2.7) $ 21.1 $ 0.1
Slide 32: Segment Results and Reconciliation of Non-GAAP to GAAP
29 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (in millions, except per share amounts) Three months ended June 30, 2009 Mueller Co. U.S. Pipe Anvil Corporate Total GAAP results: Net sales 154.6 $ 96.7 $ 111.9 $ - $ 363.2 $ Gross profit (loss) 35.8 $ (6.0) $ 28.1 $ (0.
Slide 33: Segment Results and Reconciliation of Non-GAAP to GAAP
30 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (in millions, except per share amounts) Nine months ended June 30, 2010 Mueller Co. U.S. Pipe Anvil Corporate Total GAAP results: Net sales 449.1 $ 282.9 $ 258.8 $ - $ 990.8 $ Gross profit (loss) 121.2 $ (19.6) $ 63.0 $ 0
Slide 34: Segment Results and Reconciliation of Non-GAAP to GAAP
31 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (in millions, except per share amounts) Nine months ended June 30, 2009 Mueller Co. U.S. Pipe Anvil Corporate Total GAAP results: Net sales 389.0 $ 305.6 $ 358.5 $ - $ 1,053.1 $ Gross profit (loss) 89.3 $ (6.3) $ 104.8 $
Slide 35: Segment Results And Reconciliation Of Non-GAAP To GAAP
32 Segment Results And Reconciliation Of Non-GAAP To GAAP Performance Measures (in millions, except per share amounts) Year ended September 30, 2009 Mueller Co. U.S. Pipe Anvil Corporate Total GAAP results: Net sales 547.1 $ 410.9 $ 469.9 $ - $ 1,427.9 $ Loss from operations (770.6) $ (142.4) $ (53.
Slide 36: Segment Results And Reconciliation Of Non-GAAP To GAAP
33 Segment Results And Reconciliation Of Non-GAAP To GAAP Performance Measures (in millions, except per share amounts) Year ended September 30, 2008 Mueller Co. U.S. Pipe Anvil Corporate Total GAAP results: Net sales 718.1 $ 546.0 $ 595.2 $ - $ 1,859.3 $ Income (loss) from operations 128.4 $ (17.4)
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