Mueller Water Products · NYSE:MWA
Mueller Water Products — Oppenheimer 3rd Annual Industrials Conference (October 2008)
31 slides from Mueller Water Products's conference presentation, Oct 2, 2008
Slide 1: Oppenheimer 3rd Annual Industrials Conference
Oppenheimer 3 rd Annual Industrials Conference October 2, 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: Current Economic Climate
4 Current Economic Climate • Credit availability - Refinanced May 2007 - $260 million untapped revolver - Comfortably within our debt covenants • Banking relationships • Cash investments – $142 million at end of Q3 – Invested to preserve principal – Invested cash has increased in Q4 • Cost savings –
Slide 5: Leading Water Infrastructure Products Provider
5 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 6: Broad and Profitable Product Portfolio
6 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 7: Primary End Markets
7 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 8: Complete Water Transmission Solutions
8 Complete Water Transmission Solutions
Slide 9: Comprehensive Distribution Network
9 Comprehensive Distribution Network Installed base and specified products drive demand
Slide 10: Technical and Product Innovation
10 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
Slide 11: 75% of revenue comes from products that are #1 or #2
11 75% of revenue comes from products that are #1 or #2
Slide 12: The Water Infrastructure Industry
The Water Infrastructure Industry
Slide 13: An Aging Water Infrastructure Industry
13 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 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 Source: The EPA Clean Water and Drinking Water Infrastructure Gap Analysis 2002
Slide 16: An Aging Water Infrastructure
16 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 17: Water Infrastructure Market Opportunity
17 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
Slide 18: WW + u Cy £ a = a g =
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Slide 19: Management Actions
19 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 20: Consolidated Results
20 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 and 9-month Earnings per share adjusted for $36.4 million loss on early extinguishment of de
Slide 21: Free Cash Flow (YTD through June 30)
21 ($66.1) ($60.8 ) $45.1 $44.9 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 2008 2007 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)
Slide 22: Leverage Ratio and Interest Coverage
22 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 23: Near-Term Key Drivers
23 Near-Term 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 som
Slide 24: Raw Material Purchase Price Volatility
24 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 25: Potential Uses of Cash
25 Potential Uses of Cash • Reinvesting in the business • Paying dividends • Repaying debt • Repurchasing stock • Making strategic acquisitions
Slide 26: Strategy and Objectives
26 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 27: Investment Highlights
27 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 29: Segment Results & Reconciliation of GAAP to Non-GAAP Performance Measures
29 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 30: Net Sales and Operating Income
30 NET SALES OPERATING INCOME $509 $618 $664 $804 $775 $492 $465 $551 $598 $595 $543 $393 $387 $431 $485 $535 $557 $0 $200 $400 $600 $800 $1,000 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007 2002 2003 2004 2005 2006 2007 $107 $114 $142 $168 $179 $20 ($9) $4 $24 $33 $34 $8 $14 $27 $45 $
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Mueller Water Products — Oppenheimer 3rd Annual Industrials Conference (October 2008) on 6ix