Mueller Water Products · NYSE:MWA
Mueller Water Products — Baird's 2016 Global Industrial Conference
37 slides from Mueller Water Products's conference presentation, Nov 7, 2016
Slide 1: Baird's 2016 Global Industrial Conference
Where Intelligence Meets Infrastructure® Baird’s 2016 Global Industrial Conference November 8, 2016
Slide 2: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES In an effort to provide investors with additional information regarding the Company's results as determined by GAAP, the Company also provides non-GAAP information that management believes is useful to investors. These non- GAAP measures have limitations as analytical too
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, b
Slide 4: Our Business and Primary End Markets
OUR BUSINESS AND PRIMARY END MARKETS PORTFOLIO Fire Hydrants Valves Metering Systems Piping Component Systems Leak Detection and Pipe Condition Assessment 60% Repair and replacement of municipal water distribution and treatment systems 30% Residential construction* 90% Non-residential construction 5
Slide 5: Investment Highlights
Leading provider of water infrastructure and flow control products and services in North America INVESTMENT HIGHLIGHTS Improved results driven by strong incremental operating leverage as end markets recover Leveraging Mueller brand and relationships to expand intelligent water technology offerings L
Slide 6: Business Performance: Long-Term Targets
BUSINESS PERFORMANCE: LONG-TERM TARGETS TOP-LINE GROWTH Mueller Co. growth of >5% Mueller Technologies >15% EARNINGS LEVERAGE Mueller Co. adjusted EBITDA margins of 25% - 30% Mueller Technologies adjusted EBITDA margins of 20% Anvil adjusted EBITDA margins in mid-teens OTHER Free cash flow greater t
Slide 7: Broad Product Portfolio
BROAD PRODUCT PORTFOLIO Note: All statistics are LTM ended September 30, 2016 (1) Mueller Co. adjusted operating income and adjusted EBITDA exclude certain other charges totaling $3.0 million. Anvil adjusted operating income and adjusted EBITDA exclude certain other charges totaling $2.3 million. Mu
Slide 8: Intelligent Water Technology
INTELLIGENT WATER TECHNOLOGY™ Mueller Water Products manufactures and markets products and offers services used in the transmission, distribution and measurement of safe, clean drinking water and in water treatment facilities. These products and services help utilities actively diagnose, monitor and
Slide 9: Water Infrastructure Landscape
WATER INFRASTRUCTURE LANDSCAPE Company estimates based on internal analysis and information from trade associations and distributor networks, where available. #1 PRODUCT POSITION #1 PRODUCT POSITION #1 PRODUCT POSITION #2 PRODUCT POSITION PAGE 9
Slide 10: Strategy and Objectives
STRATEGY AND OBJECTIVES Maintain leadership positions with customers and end users Leverage the Mueller brand Develop value-added products and services Leverage distribution network Improve customer service levels Continue to enhance operational and organizational excellence Strengthen balance sheet
Slide 11: Significant Market Opportunities
Significant Market Opportunities
Slide 12: Market Driver: Housing Starts
Source: U.S. Census Bureau MARKET DRIVER: HOUSING STARTS Homebuilders’ confidence is one driver of housing starts, and confidence could increase due to improving job growth in a key demographic for household formation: Millennials Source: NAHB, October 2016 Forecast: Blue Chip Economic Indicators, S
Slide 13: The Market Opportunity Is Significant and Growing
THE MARKET OPPORTUNITY IS SIGNIFICANT AND GROWING Valves and fire hydrants are typically replaced at the same time as pipes ASCE graded drinking water infrastructure a D(1) At least 40 cities under consent decrees: Atlanta, Baltimore, Washington, D.C., Suburban Washington, D.C. (WSSC), New Orleans (
Slide 14: Funding Water Infrastructure Repair
FUNDING WATER INFRASTRUCTURE REPAIR PAGE 14 (1) Bureau of Labor Statistics (2) 2016 Strategic Directions: U.S. Water Industry – Black & Veatch (3) American Water Works Association 2014 Water and Wastewater Rate Survey (4) EPA Clean Water and Drinking Water Infrastructure HISTORICAL WATER RATES COMPA
Slide 15: Growth Opportunities: Smart Water
GROWTH OPPORTUNITIES: SMART WATER FACTORS AFFECTING MUNICIPAL WATER SYSTEMS Water Conservation • 27% of U.S. experiencing drought conditions(1) • 240,000 water main breaks per year(2) • Up to 30% of treated water is lost or unaccounted for(3) • 1.7 trillion gallons lost per year at a national cost o
Slide 16: Mueller Technologies: Solutions for Today & Tomorrow
MUELLER TECHNOLOGIES: SOLUTIONS FOR TODAY & TOMORROW Smart Metering Leak Detection and Pipe Condition Assessment “In the wake of Flint, consumers appear more interested than ever in how their water supply is maintained and improved.” – Black & Veatch 2016 Strategic Directions in the U.S. Water Indus
Slide 17: Anvil Highlights
Leading domestic manufacturer of piping system components Significant FY2016 net sales from #1 or #2 product positions Customer service capabilities focused on quick delivery Domestically manufactured and domestically and internationally sourced products Network of over 1,000 distributors and 4,000
Slide 18: Anvil Key Markets
ANVIL KEY MARKETS Non-Residential Construction Oil & Gas Power/High Pressure Mechanical, Industrial & Fire Protection Oil & Gas Power Need Development 90% 5% 5% Mechanical and Industrial: Grooved, Iron/Steel Fittings, Staple Hangers, Pipe Nipples, Bull Plugs Fire Protection: O-Lets, Grooved Fittings
Slide 19: Market Driver: Non-Residential Construction
MARKET DRIVER: NON-RESIDENTIAL CONSTRUCTION The non-residential construction market is showing improvement Source: IHS Data as of October 2016 Source: American Institute of Architects Data as of September 2016 Non-Residential Construction (Real $ in Billions) AIA Architectural Billing Index Diffusio
Slide 20: Market Driver: Oil & Gas
$0 $20 $40 $60 $80 $100 $120 $140 $160 Oc t- 92 Oc t- 94 Oc t- 96 Oc t- 98 Oc t- 00 Oc t- 02 Oc t- 04 Oc t- 06 Oc t- 08 Oc t- 10 Oc t- 12 Oc t- 14 Oc t- 16 MARKET DRIVER: OIL & GAS Sales to the oil & gas market represented about 5% of Anvil’s FY2016 net sales Source: Baker Hughes Data as of October
Slide 21: Actions & Business Results
Actions & Business Results
Slide 22: Management Actions / Initiatives
MANAGEMENT ACTIONS / INITIATIVES Reduce costs and improve operating leverage Divested U.S. Pipe Divested three non-core assets of Anvil Implemented Lean Six Sigma and other manufacturing improvements: • Increased production capacity without footprint expansion • Lowered labor costs Closed seven plan
Slide 23: History of Strong Financial Performance
HISTORY OF STRONG FINANCIAL PERFORMANCE Net Sales Adjusted EBITDA(1) and Adjusted EBITDA Margin (1) Mueller Co. adjusted EBITDA excludes purchase accounting adjustments of $52.9 in 2006, goodwill and other impairment charges of $818.7 in 2009 and other charges of $0.1 in 2010, $1.4 in 2011, $2.5 in
Slide 24: Q4 Consolidated Non-GAAP Results
Q4 CONSOLIDATED NON-GAAP RESULTS Pleased that we continued to see margin expansion in all three of our businesses with a 7.6% increase in adjusted operating income Mueller Co.’s domestic sales of valves, hydrants and brass products increased 4.4%. Mueller Co. again had strong margin improvement with
Slide 25: Debt Structure
DEBT STRUCTURE Net debt leverage of 1.5x and net debt of $290.1 million at September 30, 2016, down from a peak of more than 6x No significant required principal payments on outstanding debt before November 2021 No financial maintenance covenants with excess availability at the greater of $17.5 mill
Slide 26: Capital Allocation
CAPITAL ALLOCATION Acquisitions Debt reduction Share repurchases Growth opportunities Dividends Free Cash Flow ($ in millions) PAGE 26
Slide 27: Why Invest in MWA?
WHY INVEST IN MWA? Water industry has fundamentally strong long-term dynamics Driven by need for new and upgraded infrastructure Limited number of suppliers to end markets Increasing public awareness of the importance of water infrastructure Strong competitive position Leading brand positions with l
Slide 28: Supplemental Data
Supplemental Data
Slide 29: Segment Results and Reconciliation of GAAP to Non-GAAP
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES PAGE 29 Quarter ended September 30, 2016 Mueller Co. Anvil Mueller Technologies Corporate Total (in millions, except per share amounts) GAAP Results: Net sales $ 190.1 $ 86.9 $ 25.5 $ — $ 302.5 Gross profit $ 71.5 $ 25.8 $ 6
Slide 30: Segment Results and Reconciliation of GAAP to Non-GAAP
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES PAGE 30 Quarter ended September 30, 2016 Mueller Co. Anvil Mueller Technologies Corporate Total (in millions, except per share amounts) Net income $ 26.5 Interest expense, net (1) 5.6 Income tax expense (1) 14.6 Operating in
Slide 31: Segment Results and Reconciliation of GAAP to Non-GAAP
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES PAGE 31 Quarter ended September 30, 2015 Mueller Co. Anvil Mueller Technologies Corporate Total (in millions, except per share amounts) GAAP results: Net sales $ 192.0 $ 93.7 $ 25.7 $ — $ 311.4 Gross profit $ 65.8 $ 25.5 $ 6
Slide 32: Segment Results and Reconciliation of GAAP to Non-GAAP
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES PAGE 32 Quarter ended September 30, 2015 Mueller Co. Anvil Mueller Technologies Corporate Total (in millions, except per share amounts) Net income $ 22.3 Pension settlement 0.5 Other charges 0.1 Income tax benefit of adjusti
Slide 33: Segment Results and Reconciliation of GAAP to Non-GAAP
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES PAGE 33 Year ended September 30, 2016 Mueller Co. Anvil Mueller Technologies Corporate Total (in millions, except per share amounts) GAAP Results: Net sales $ 715.7 $ 338.3 $ 84.9 $ — $ 1,138.9 Gross profit $ 250.7 $ 96.4 $
Slide 34: Segment Results and Reconciliation of GAAP to Non-GAAP
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES PAGE 34 Year ended September 30, 2016 Mueller Co. Anvil Mueller Technologies Corporate Total (in millions, except per share amounts) Net income $ 63.9 Interest expense, net (1) 23.6 Income tax expense (1) 33.1 Operating inco
Slide 35: Segment Results and Reconciliation of GAAP to Non-GAAP
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES PAGE 35 Year ended September 30, 2015 Mueller Co. Anvil Mueller Technologies Corporate Total (in millions, except per share amounts) GAAP results: Net sales $ 702.2 $ 371.1 $ 91.2 $ — $ 1,164.5 Gross profit $ 229.1 $ 101.1 $
Slide 36: Segment Results and Reconciliation of GAAP to Non-GAAP
SEGMENT RESULTS AND RECONCILIATION OF GAAP TO NON-GAAP PERFORMANCE MEASURES PAGE 36 Year ended September 30, 2015 Mueller Co. Anvil Mueller Technologies Corporate Total (in millions, except per share amounts) Net income $ 30.9 Interest expense, net (1) 27.6 Loss on early extinguishment of debt 31.3
Slide 37: Questions
Questions
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