XNYS:MWA Mueller Water Products, Inc. Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x                              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
o                       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-32892


MUELLER WATER PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
20-3547095
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
1200 Abernathy Road N.E.
Suite 1200
Atlanta, GA 30328
(Address of principal executive offices)
(770) 206-4200
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer     x             Accelerated filer         o  
Non-accelerated filer      o            Smaller reporting company     o 
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

There were 156,800,818 shares of Series A common stock of the registrant outstanding at July 31, 2012.

 



PART I FINANCIAL INFORMATION
Item 1.
Financial Statements
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
June 30,
 
September 30,
 
2012
 
2011
 
(in millions)
Assets:
 
 
 
Cash and cash equivalents
$
53.7

 
$
61.0

Receivables, net
156.5

 
147.4

Inventories
196.9

 
175.9

Deferred income taxes
21.5

 
28.7

Other current assets
49.2

 
43.8

Current assets held for sale

 
142.0

Total current assets
477.8

 
598.8

Property, plant and equipment, net
140.5

 
145.7

Identifiable intangible assets
580.4

 
602.4

Other noncurrent assets
33.1

 
30.4

Noncurrent assets held for sale

 
107.7

Total assets
$
1,231.8

 
$
1,485.0

 
 
 
 
Liabilities and stockholders’ equity:
 
 
 
Current portion of long-term debt
$
1.3

 
$
0.9

Accounts payable
74.9

 
59.1

Other current liabilities
72.6

 
77.9

Current liabilities held for sale

 
56.9

Total current liabilities
148.8

 
194.8

Long-term debt
621.5

 
677.4

Deferred income taxes
135.6

 
154.2

Other noncurrent liabilities
60.0

 
79.6

Total liabilities
965.9

 
1,106.0

 
 
 
 
Commitments and contingencies (Note 12)


 


 
 
 
 
Common stock:
 
 
 
Series A common stock: 600,000,000 shares authorized;156,800,818 and 155,793,612 shares outstanding at June 30, 2012 and September 30, 2011, respectively
1.6

 
1.6

Additional paid-in capital
1,588.9

 
1,593.2

Accumulated deficit
(1,273.5
)
 
(1,161.6
)
Accumulated other comprehensive loss
(51.1
)
 
(54.2
)
Total stockholders’ equity
265.9

 
379.0

Total liabilities and stockholders’ equity
$
1,231.8

 
$
1,485.0





The accompanying notes are an integral part of the condensed consolidated financial statements.

1


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three months ended
 
Nine months ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
 
(in millions, except per share amounts)
Net sales
$
275.9

 
$
259.6

 
$
742.8

 
$
708.3

Cost of sales
196.3

 
186.5

 
548.3

 
525.1

Gross profit
79.6

 
73.1

 
194.5

 
183.2

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative
53.2

 
48.1

 
150.3

 
140.3

Restructuring
0.7

 
0.3

 
2.0

 
2.4

Total operating expenses
53.9

 
48.4

 
152.3

 
142.7

Operating income
25.7

 
24.7

 
42.2

 
40.5

Interest expense, net
14.9

 
16.8

 
46.1

 
49.0

Loss on early extinguishment of debt
1.5

 

 
1.5

 

Income (loss) before income taxes
9.3

 
7.9

 
(5.4
)
 
(8.5
)
Income tax expense (benefit)
3.4

 
1.0

 
4.1

 
(4.3
)
Income (loss) from continuing operations
5.9

 
6.9

 
(9.5
)
 
(4.2
)
Income (loss) from discontinued operations, net of tax
3.9

 
(9.6
)
 
(102.4
)
 
(24.3
)
Net income (loss)
9.8

 
(2.7
)
 
(111.9
)
 
(28.5
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
Natural gas hedges
0.3

 

 

 

Income tax effects
(0.1
)
 

 

 

  Interest rate swap contracts
1.3

 
2.1

 
4.3

 
6.0

Income tax effects
(0.5
)
 
(0.8
)
 
(1.7
)
 
(2.3
)
Foreign currency translation
(1.6
)
 
(0.1
)
 
0.4

 
3.1

Minimum pension liability
(1.0
)
 
0.3

 
0.3

 
34.7

Income tax effects
0.2

 
(0.3
)
 
(0.2
)
 
(13.7
)
Other


 

 

 
(0.3
)
 
(1.4
)
 
1.2

 
3.1

 
27.5

Comprehensive income (loss)
$
8.4

 
$
(1.5
)
 
$
(108.8
)
 
$
(1.0
)
 
 
 
 
 
 
 
 
Net income (loss) per basic share:
 
 
 
 
 
 
 
Continuing operations
$
0.04

 
0.04

 
$
(0.06
)
 
$
(0.03
)
Discontinued operations
0.02

 
(0.06
)
 
(0.66
)
 
(0.15
)
Net income (loss) per basic share
$
0.06

 
$
(0.02
)
 
$
(0.72
)
 
$
(0.18
)
 
 
 
 
 
 
 
 
Net income (loss) per diluted share:
 
 
 
 
 
 
 
  Continuing operations
$
0.04

 
$
0.04

 
$
(0.06
)
 
(0.03
)
  Discontinued operations
0.02

 
(0.06
)
 
(0.66
)
 
(0.15
)
Net income (loss) per diluted share
$
0.06

 
$
(0.02
)
 
$
(0.72
)
 
$
(0.18
)
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
156.7

 
155.5

 
156.4

 
155.2

Diluted
158.0

 
156.6

 
156.4

 
155.2

 
 
 
 
 
 
 
 
Dividends declared per share
$
0.0175

 
$
0.0175

 
$
0.0525

 
$
0.0525


The accompanying notes are an integral part of the condensed consolidated financial statements.

2


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Nine months ended
 
June 30,
 
2012
 
2011
 
(in millions)
Operating activities:
 
 
 
Net loss
$
(111.9
)
 
$
(28.5
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Loss from discontinued operations
102.4

 
24.3

Loss from continuing operations
(9.5
)
 
(4.2
)
 
 
 
 
Depreciation
23.2

 
25.3

Amortization
22.0

 
21.9

Loss on early extinguishment of debt
1.5

 

Stock-based compensation
3.8

 
4.9

Deferred income taxes
12.9

 
(14.5
)
Retirement plans
4.1

 
6.2

Interest rate swap contracts
4.3

 
6.0

Other, net
2.1

 
1.5

Changes in assets and liabilities, net of acquisitions:
 
 
 
Receivables
(9.2
)
 
(18.0
)
Inventories
(21.0
)
 
7.2

Other assets
(0.7
)
 
(2.0
)
Liabilities
(9.0
)
 
(34.5
)
Net cash provided by (used in) operating activities from continuing operations
24.5

 
(0.2
)
Investing activities:
 
 
 
Capital expenditures
(19.5
)
 
(15.9
)
Acquisitions
0.5

 
(7.9
)
Proceeds from sales of assets
0.4

 
1.1

Net cash used in investing activities from continuing operations
(18.6
)
 
(22.7
)
Financing activities:
 
 
 
Debt borrowings
0.4

 
0.5

Debt payments
(57.2
)
 

Common stock issued
0.3

 

Deferred financing fees paid

 
(0.4
)
Dividends paid
(8.2
)
 
(8.1
)
Other
0.3

 
0.6

Net cash used in financing activities from continuing operations
(64.4
)
 
(7.4
)
Net cash flows from discontinued operations:
 
 
 
  Operating activities
(36.6
)
 
(3.0
)
  Investing activities
87.4

 
(6.1
)
           Net cash provided by (used in) discontinued operations
50.8

 
(9.1
)
Effect of currency exchange rate changes on cash
0.4

 
1.1

Net change in cash and cash equivalents
(7.3
)
 
(38.3
)
Cash and cash equivalents at beginning of period
61.0

 
84.0

Cash and cash equivalents at end of period
$
53.7

 
$
45.7


The accompanying notes are an integral part of the condensed consolidated financial statements.

3


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
NINE MONTHS ENDED JUNE 30, 2012
(UNAUDITED) 
 
  Common  
stock
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
loss
 
Total    
 
(in millions)
Balance at September 30, 2011
$
1.6


$
1,593.2


$
(1,161.6
)

$
(54.2
)
 
$
379.0

Net loss

 

 
(111.9
)
 

 
(111.9
)
Dividends declared

 
(8.2
)
 

 

 
(8.2
)
Stock-based compensation

 
3.6

 

 

 
3.6

Stock issued under stock compensation plans

 
0.3

 

 

 
0.3

Derivative instruments

 

 

 
2.6

 
2.6

Foreign currency translation

 

 

 
0.4

 
0.4

Minimum pension liability

 

 

 
0.1

 
0.1

Balance at June 30, 2012
$
1.6

 
$
1,588.9

 
$
(1,273.5
)
 
$
(51.1
)
 
$
265.9





































The accompanying notes are an integral part of the condensed consolidated financial statements.

4


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
Organization
Mueller Water Products, Inc., a Delaware corporation, together with its consolidated subsidiaries, operates in two business segments: Mueller Co. and Anvil. Mueller Co. manufactures valves for water and gas systems, including butterfly, iron gate, tapping, check, plug and ball valves, as well as dry-barrel and wet-barrel fire hydrants and a broad range of metering, leak detection and pipe condition assessment products for the water infrastructure industry. Anvil manufactures and sources a broad range of products, including a variety of fittings, couplings, hangers, nipples and related products. The “Company,” “we,” “us” or “our” refer to Mueller Water Products, Inc. and its subsidiaries or their management. With regard to the Company's segments, “we,” “us” or “our” may also refer to the segment being discussed or its management.
On April 1, 2012, we sold the businesses comprising our former U.S. Pipe segment. U.S. Pipe's results of operations have been reclassified as discontinued operations, and its assets and liabilities reclassified as held for sale, for all prior periods presented.
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which require us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses and the disclosure of contingent assets and liabilities for the reporting periods. Actual results could differ from those estimates. All significant intercompany balances and transactions have been eliminated. In our opinion, all normal and recurring adjustments that we consider necessary for a fair financial statement presentation have been made. Certain reclassifications have been made to previously reported amounts to conform to the current presentation. The condensed consolidated balance sheet data at September 30, 2011 was derived from audited financial statements, but does not include all disclosures required by GAAP.
Unless the context indicates otherwise, whenever we refer to a particular year, we mean the fiscal year ended or ending September 30 in that particular calendar year.
Note 2.
Acquisition
On December 14, 2010, we acquired Echologics Engineering Inc., a leak detection and pipe condition assessment company headquartered in Toronto, Canada, for $7.9 million in cash, which included $1.5 million placed in escrow related primarily to sale contingencies. During the quarter ended December 31, 2011, we resolved one of these contingencies in our favor and reduced the purchase price by $0.5 million, which reduced the associated goodwill balance to zero. During the quarter ended March 31, 2012, we released $0.5 million from escrow to the sellers. In July 2012, we released the final $0.5 million to the sellers. We have included the operating results of this business in Mueller Co.'s results effective December 14, 2010. The final allocation of the purchase price of the related assets and liabilities is presented below, in millions.
Assets:
 
 
Receivables
 
$
0.3

Inventories
 
0.1

Other current assets
 
0.2

Property, plant and equipment
 
0.1

Identifiable intangible assets
 
7.3

Liabilities:
 
 
Accounts payable and other current liabilities
 
(0.2
)
Deferred income taxes
 
(0.4
)
 
 
$
7.4

Identifiable intangible assets consist of trade names and trademarks of $0.6 million that have indefinite useful lives and technology of $6.7 million that has an estimated useful life of 15 years.
Goodwill of $0.5 million was included in other noncurrent assets at September 30, 2011.
Note 3.
Discontinued Operations and Assets Held for Sale
On April 1, 2012, we sold the businesses comprising our former U.S. Pipe segment and received proceeds of $94.0 million in cash, subject to adjustments, and the agreement by the purchaser to reimburse us for expenditures to settle certain previously-existing liabilities estimated at $10.1 million at March 31, 2012. We believe there are net additional purchase price

5


adjustments related to net working capital that would increase the purchase price by $9.2 million. However, the purchaser has claimed net purchase price adjustments related to net working capital that would reduce the purchase price by $5.2 million. This dispute will be resolved by an independent auditor who has been selected by the parties, and we cannot make a reliable estimate of what the resolution may be. The resolution of this purchase price adjustment dispute will result in an adjustment to our recorded loss on sale of discontinued operations.
There were no assets or liabilities held for sale at June 30, 2012. The table below presents the components of the balance sheet accounts classified as assets and liabilities held for sale at September 30, 2011, in millions.
Assets:
 
  Cash
$
0.2

  Receivables, net
73.4

  Inventories
61.8

  Other current assets
6.6

     Total current assets held for sale
$
142.0

 
 
  Property, plant and equipment, net
$
98.1

  Identifiable intangible assets
8.5

  Other noncurrent assets
1.1

     Total noncurrent assets held for sale
$
107.7

 
 
Liabilities:
 
  Accounts payable
$
48.5

  Other current liabilities
8.4

     Total current liabilities held for sale
$
56.9

The table below represents a summary of the operating results for the U.S. Pipe discontinued operations. These operating results do not reflect what they would have been had U.S. Pipe not been classified as discontinued operations.
 
Three months ended
 
Nine months ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Net sales
$

 
$
107.1

 
$
197.0

 
$
257.3

Cost of sales

 
109.9

 
197.9

 
270.6

Gross loss

 
(2.8
)
 
(0.9
)
 
(13.3
)
Operating expenses (benefits)
(1.8
)
 
8.0

 
8.9

 
24.5

Operating income (loss)
1.8

 
(10.8
)
 
(9.8
)
 
(37.8
)
Interest expense

 

 
0.3

 

Loss on sale of discontinued operations
2.2

 

 
118.7

 

Income tax benefit
(4.3
)
 
(1.2
)
 
(26.4
)
 
(13.5
)
Income (loss) from discontinued operations, net of tax
$
3.9

 
$
(9.6
)
 
$
(102.4
)
 
$
(24.3
)
Note 4.
Income Taxes
After including the tax effect of the loss on the sale of U.S. Pipe, our deferred tax liabilities are insufficient to fully support our deferred tax assets, which include net operating loss carryforwards.  Accordingly, we recorded income tax expense to establish valuation allowances related to deferred tax assets during the quarter ended March 31, 2012. GAAP requires us to allocate a portion of the valuation allowance charge relating to deferred tax assets at September 30, 2011 to continuing operations.  Our net operating loss carryforwards remain available to offset future taxable earnings.

6


The components of income tax expense (benefit) are provided below.
 
Three months ended
 
Nine months ended
 
June 30, 2012
 
June 30, 2012
 
Continuing operations
 
Discontinued operations
 
Continuing operations
 
Discontinued operations
 
(in millions)
Expense (benefit) from operations
$
3.8

 
$
(0.1
)
 
$
(2.4
)
 
$
(50.7
)
Valuation allowance-related expense (benefit)

 
(4.2
)
 
5.9

 
24.3

Other discrete items
(0.4
)
 

 
0.6

 

Income tax expense (benefit)
$
3.4

 
$
(4.3
)
 
$
4.1

 
$
(26.4
)
At June 30, 2012 and September 30, 2011, the gross liabilities for unrecognized income tax benefits were $4.9 million and $7.8 million, respectively. The decrease is primarily related to the settlement of state audits and the expiration of the statute of limitations on a foreign issue.
We recognize interest related to uncertain income tax positions as interest expense and would recognize any penalties that may be incurred as selling, general and administrative expense. At June 30, 2012 and September 30, 2011, we had $1.0 million and $1.8 million, respectively, of accrued interest expense related to uncertain tax positions.
Generally, our state income tax returns are closed for years prior to 2007 and our Canadian income tax returns are closed for years prior to 2005. We concluded an audit by the Internal Revenue Service (the "IRS") for the years 2007 through 2010 with no adverse changes. We are also under audit by several states at various levels of completion. We do not have any material unpaid assessments.
Note 5.
Borrowing Arrangements
The components of long-term debt are presented below.
 
June 30,
 
September 30,
 
2012
 
2011
 
(in millions)
ABL Agreement
$

 
$
34.0

8.75% Senior Unsecured Notes
199.8

 
221.7

7.375% Senior Subordinated Notes
420.0

 
420.0

Other
3.0

 
2.6

 
622.8

 
678.3

Less current portion
(1.3
)
 
(0.9
)
Long-term debt
$
621.5

 
$
677.4

ABL Agreement. At June 30, 2012, our asset based lending agreement (the “ABL Agreement”) consisted of a revolving credit facility for up to $275 million of revolving credit borrowings, swing line loans and letters of credit. The ABL Agreement also permits us to increase the size of the credit facility by an additional $150 million in certain circumstances subject to adequate borrowing base availability. We may borrow up to $25 million through swing line loans and may have up to $60 million of letters of credit outstanding.
Borrowings under the ABL Agreement bear interest at a floating rate equal to LIBOR plus a margin ranging from 275 to 325 basis points, or a base rate, as defined in the ABL Agreement, plus a margin ranging from 175 to 225 basis points. At June 30, 2012, the applicable rates were LIBOR plus 300 basis points and the base rate plus 200 basis points.
The ABL Agreement terminates in August 2015. We pay a commitment fee of 50 basis points for any unused borrowing capacity and our obligations are secured by a first-priority perfected lien on all of our U.S. receivables and inventory, certain cash and other supporting obligations. Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $34 million and 12.5% of the aggregate commitments under the ABL Agreement. As measured using June 30, 2012 data, excess availability as reduced by outstanding letters of credit and accrued fees and expenses of $37.9 million was $141.3 million and our borrowing capacity was also $141.3 million.
8.75% Senior Unsecured Notes. The 8.75% Senior Unsecured Notes (the “Senior Unsecured Notes”) mature in September 2020 and bear interest at 8.75%, paid semi-annually. Based on quoted market prices, the outstanding Senior

7


Unsecured Notes had a fair value of $226.3 million at June 30, 2012.
On May 18, 2012, we redeemed $22.5 million aggregate principal amount for $23.2 million, plus accrued interest, and recorded a loss on early extinguishment of debt of $1.5 million. We may redeem up to $22.5 million aggregate principal amount of the Senior Unsecured Notes at a redemption price of 103% plus accrued and unpaid interest once in the year ending September 1, 2013. We may also redeem up to $78.8 million aggregate principal amount of the Senior Unsecured Notes at a redemption price of 108.75%, plus accrued and unpaid interest, with the net cash proceeds from certain equity offerings prior to September 2013, provided that at least $146.2 million aggregate principal amount remains outstanding immediately after such redemption. After August 2015, we may redeem the Senior Unsecured Notes at specified redemption prices plus accrued and unpaid interest. Upon a Change of Control (as defined in the indenture securing the Senior Unsecured Notes), we are required to offer to purchase the outstanding Senior Unsecured Notes at a purchase price of 101% plus accrued and unpaid interest. The Senior Unsecured Notes are subordinate to borrowings under the ABL Agreement.
The indenture securing the Senior Unsecured Notes contains customary covenants and events of default, including covenants that limit our ability to incur debt, pay dividends and make investments. Substantially all of our U.S. subsidiaries guarantee the Senior Unsecured Notes. We believe we were compliant with these covenants at June 30, 2012 and expect to remain in compliance through June 30, 2013.
7.375% Senior Subordinated Notes. The 7.375% Senior Subordinated Notes (the “Senior Subordinated Notes”) mature in June 2017 and bear interest at 7.375%, paid semi-annually. Based on quoted market prices, the outstanding Senior Subordinated Notes had a fair value of $420.0 million at June 30, 2012.
We may redeem any portion of the Senior Subordinated Notes at specified redemption prices plus accrued and unpaid interest, subject to limitations under our ABL agreement and the indenture related to our Senior Unsecured Notes. Upon a Change of Control (as defined in the indenture securing the Senior Subordinated Notes), we are required to offer to purchase the outstanding Senior Subordinated Notes at a purchase price of 101%, plus accrued and unpaid interest. The Senior Subordinated Notes are subordinate to borrowings under the ABL Agreement and the Senior Unsecured Notes.
The indenture securing the Senior Subordinated Notes contains customary covenants and events of default, including covenants that limit our ability to incur debt, pay dividends and make investments. Substantially all of our U.S. subsidiaries guarantee the Senior Subordinated Notes. We believe we were compliant with these covenants at June 30, 2012 and expect to remain in compliance through June 30, 2013.
Note 6.
Derivative Financial Instruments
Our business operations expose us to commodity price risk, which we managed to some extent using derivative instruments. We entered into natural gas swap contracts to manage the price risk associated with future purchases of natural gas used in certain of U.S. Pipe's manufacturing processes. We terminated all remaining natural gas swaps in the quarter ended June 30, 2012. We have used interest rate swap contracts to manage interest rate risk associated with our variable-rate borrowings in the past, but no such contracts have been outstanding since prior to September 30, 2010.
We designated our natural gas swap contracts and interest rate swap contracts as cash flow hedges of our purchases of natural gas and future interest payments, respectively. As a result, to the extent the hedges were effective, the changes in the fair value of these contracts prior to settlement were reported as a component of other comprehensive loss and reclassified into earnings in the periods during which the hedged transactions affected earnings. Gains and losses on those contracts representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness were recognized in earnings as they occur.
Our derivative contracts were recorded at fair value using publicly observable data such as market natural gas prices and market interest rates. We did not have any derivative contracts outstanding at June 30, 2012.



8


The effects of our natural gas swap contracts on the consolidated statements of operations are presented below, net of tax.
 
Three months ended
 
Nine months ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Gain (loss) recognized in other comprehensive income (loss)
$
0.5

 
$
(0.1
)
 
$

 
$
(0.1
)
Gain (loss) reclassified from accumulated other comprehensive loss into income
(0.2
)
 
0.1

 

 
0.1

Ineffectiveness loss recognized in income

 
(0.1
)
 

 
(0.1
)
Interest Rate Swap Contracts. In the quarters ended June 30, 2012 and 2011, we reclassified $1.3 million and $2.1 million, respectively, related to previously terminated interest rate swap contracts to interest expense from accumulated other comprehensive loss. In the nine months ended June 30, 2012 and 2011, we reclassified $4.3 million and $6.0 million, respectively, related to previously terminated interest rate swap contracts to interest expense from accumulated other comprehensive loss. The unamortized portion remaining in accumulated other comprehensive loss was $0.4 million, net of tax, at June 30, 2012, and the pre-tax component is scheduled to be amortized to interest expense through September 30, 2012.
Note 7.
Retirement Plans
The components of net periodic benefit cost allocated to continuing operations for defined benefit pension plans are as follows.
 
Three months ended
 
Nine months ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Service cost
$
0.7

 
$
0.3

 
$
1.3

 
$
0.8

Interest cost
7.5

 
2.3

 
12.7

 
7.6

Expected return on plan assets
(7.7
)
 
(2.6
)
 
(13.5
)
 
(8.4
)
Amortization of prior service cost
0.2

 
0.1

 
0.4

 
0.3

Amortization of actuarial net loss
0.2

 
0.6

 
1.8

 
2.2

Loss due to settlement or curtailment

 

 

 
0.7

Net periodic benefit cost
$
0.9

 
$
0.7

 
$
2.7

 
$
3.2

The amortization of unrecognized prior service cost and of actuarial losses, net of tax, are recorded as components of accumulated other comprehensive loss.
During the nine months ended June 30, 2012, we contributed $12.7 million to our defined benefit pension plans. We expect to contribute a total of $20 million to $22 million to our pension plans during 2012.
On April 1, 2012, we changed certain provisions of our pension and postretirement benefit plans affecting U.S. Pipe participants in these plans. These changes vested all accumulated pension benefits and then froze the plan such that no additional pension benefits would accumulate. Postretirement medical benefits will substantially cease on December 31, 2012. As a result of these provision changes, we remeasured the funded status of our U.S. pension plan and our other postretirement benefit plans in the quarter ended June 30, 2012. We recorded a pension curtailment expense of $0.2 million and an other postretirement benefit plan curtailment gain of $2.4 million, which are included in net income (loss) from discontinued operations for the three and nine months ended June 30, 2012.

9


The assets of the defined benefit pension plans at June 30, 2012 and September 30, 2011, by level within the fair value hierarchy, are presented below.
 
June 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(in millions)
Equity funds:
 
 
 
 
 
 
 
International funds
$

 
$
21.3

 
$

 
$
21.3

Large cap growth funds

 
7.0

 

 
7.0

Large cap value funds

 
36.3

 

 
36.3

Midcap index funds

 
4.9

 

 
4.9

Smallcap index funds

 
29.6

 

 
29.6

Mutual funds
116.7

 

 
 
 
116.7

Total equity funds
116.7

 
99.1

 

 
215.8

Bond funds

 
144.5

 

 
144.5

Cash
0.2

 
4.3

 

 
4.5

Other

 

 
1.5

 
1.5

      Total
$
116.9

 
$
247.9

 
$
1.5

 
$
366.3

 
September 30, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(in millions)
Equity funds:
 
 
 
 
 
 
 
Large cap growth funds
$

 
$
7.5

 
$

 
$
7.5

Large cap value funds

 
7.3

 

 
7.3

Midcap index funds

 
2.2

 

 
2.2

Mutual funds
137.1

 

 

 
137.1

Total equity funds
137.1

 
17.0

 

 
154.1

Bond funds

 
172.7

 

 
172.7

Cash
0.2

 
3.3

 

 
3.5

Other

 

 
1.5

 
1.5

      Total
$
137.3

 
$
193.0

 
$
1.5

 
$
331.8

Note 8.
Stock-based Compensation Plans
During the quarter ended December 31, 2011, the Company adopted the Mueller Water Products, Inc. Phantom Plan (the "Phantom Plan"). Phantom Plan awards entitle a recipient to a cash payment equal to the number of awards vesting multiplied by the closing price per share of our common stock on the vesting date. Awards generally vest in thirds on successive anniversaries of the grant date. Compensation expense for Phantom Plan awards is charged against income over the vesting period, based on the closing stock price at each balance sheet date until vested. Outstanding Phantom Plan awards had a fair value of $3.46 per instrument and a total fair value of $1.2 million at June 30, 2012.
We recorded stock-based compensation expense of $1.4 million and $4.2 million during the three and nine months ended June 30, 2012, respectively, and $0.8 million and $4.3 million during the three and nine months ended June 30, 2011, respectively. At June 30, 2012, there was approximately $4.3 million of unrecognized compensation expense related to stock-based awards.
Because the effect of including normally dilutive securities in the earnings per share calculation would have been antidilutive in loss periods, we excluded all stock-based compensation instruments from the calculations of diluted earnings per share in such periods. We excluded 5.0 million and 6.0 million of such instruments from the calculation of diluted earnings per share for the three months ended June 30, 2012 and 2011, respectively, because the impact of including them would have been antidilutive.

10


We granted equity awards under our Mueller Water Products, Inc. Amended and Restated 2006 Stock Incentive Plan, Mueller Water Products, Inc. 2006 Employee Stock Purchase Plan and Phantom Plan during the nine months ended June 30, 2012 as follows.    
 
Number of instruments
 
Weighted average grant date fair value per instrument
 
Total grant date fair value
 
(in millions, except per instrument value)
Quarter ended December 31, 2011:
 
 
 
 
 
Restricted stock units
1.2

 
$
2.04

 
$
2.4

Non-qualified stock options
0.6

 
1.23

 
0.7

Employee stock purchase plan instruments
0.1

 
1.95

 
0.3

Phantom Plan awards
0.4

 
2.03

 
0.7

Quarter ended March 31, 2012:
 
 
 
 
 
Restricted stock units
0.1

 
2.79

 
0.4

Non-qualified stock options
0.1

 
1.67

 
0.1

Employee stock purchase plan instruments
0.1

 
2.14

 
0.2

Quarter ended June 30, 2012:
 
 
 
 
 
Restricted stock units
0.1

 
3.46

 
0.3

Non-qualified stock options

 

 

Employee stock purchase plan instruments
0.1

 
2.94

 
0.3

 

 
 
 
$
5.4

Note 9.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss is presented below.
 
June 30,
 
September 30,
 
2012
 
2011
 
(in millions)
Net unrecognized loss on derivatives
$
(0.4
)
 
$
(3.0
)
Foreign currency translation
6.7

 
6.3

Minimum pension liability
(57.4
)
 
(57.5
)
 
$
(51.1
)
 
$
(54.2
)

11



Note 10.
Supplemental Balance Sheet Information
Selected supplemental balance sheet information is presented below.
 
June 30,
 
September 30,
 
2012
 
2011
 
(in millions)
Inventories:
 
 
 
Raw materials and purchased parts
$
74.5

 
$
56.2

Work in process
28.9

 
34.9

Finished goods
93.5

 
84.8

 
$
196.9

 
$
175.9

Other current assets:
 
 
 
Prepaid income taxes
$
13.8

 
$
12.6

Maintenance and repair tooling
23.7

 
24.2

Other
11.7

 
7.0

 
$
49.2

 
$
43.8

Property, plant and equipment:
 
 
 
Land
$
12.3

 
$
13.5

Buildings
70.4

 
70.2

Machinery and equipment
284.0

 
273.1

Construction in progress
12.6

 
10.4

 
379.3

 
367.2

Accumulated depreciation and amortization
(238.8
)
 
(221.5
)
 
$
140.5

 
$
145.7

Other current liabilities:
 
 
 
Compensation and benefits
$
34.6

 
$
31.6

Customer rebates
10.8

 
13.2

Interest
8.9

 
13.0

Taxes other than income taxes
3.7

 
3.5

Warranty
1.5

 
2.0

Severance
0.6

 
1.5

Income taxes
1.6

 
1.9

Restructuring
1.2

 
1.4

Environmental
0.3

 
0.3

Other
9.4

 
9.5

 
$
72.6

 
$
77.9


12



Note 11.
Segment Information
Summarized financial information for our segments is presented below.
 
Three months ended
 
Nine months ended
 
June 30,
 
June 30,
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Net sales, excluding intersegment sales:
 
 
 
 
 
 
 
Mueller Co.
$
182.6

 
$
165.8

 
$
465.2

 
$
444.5

Anvil
93.3

 
93.8

 
277.6

 
263.8

 
$
275.9

 
$
259.6

 
$
742.8

 
$
708.3

Intersegment sales:
 
 
 
 
 
 
 
Mueller Co.
$
1.5

 
$
2.1

 
$
5.3

 
$
6.7

Anvil
0.1

 

 
0.1

 
0.1

 
$
1.6

 
$
2.1

 
$
5.4

 
$
6.8

Operating income (loss):
 
 
 
 
 
 
 
Mueller Co.
$
23.9

 
$
22.6

 
$
36.8

 
$
40.9

Anvil
9.9

 
9.5

 
27.5

 
21.8

Corporate
(8.1
)
 
(7.4
)
 
(22.1
)
 
(22.2
)
 
$
25.7

 
$
24.7

 
$
42.2

 
$
40.5

Depreciation and amortization:
 
 
 
 
 
 
 
Mueller Co.
$
11.3

 
$
11.8

 
$
34.1

 
$
35.7

Anvil
3.6

 
3.7

 
10.7

 
10.9

Corporate
0.1

 
0.2

 
0.4

 
0.6

 
$
15.0

 
$
15.7

 
$
45.2

 
$
47.2

Restructuring:
 
 
 
 
 
 
 
Mueller Co.
$
0.7

 
$
0.2

 
$
1.9

 
$
1.2

Anvil

 
0.1

 
0.2

 
1.2

Corporate

 

 
(0.1
)
 

 
$
0.7

 
$
0.3

 
$
2.0

 
$
2.4

Capital expenditures:
 
 
 
 
 
 
 
Mueller Co.
$
4.8

 
$
4.1

 
$
12.0

 
$
11.0

Anvil
2.6

 
1.8

 
7.5

 
4.4

Corporate

 

 

 
0.5

 
$
7.4

 
$
5.9

 
$
19.5

 
$
15.9

Note 12.Commitments and Contingencies
We are involved in various legal proceedings that have arisen in the normal course of operations, including the proceedings summarized below. The effect of the outcome of these matters on our future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. Other than the litigation described below, we do not believe that any of our outstanding litigation would have a material adverse effect on our businesses, operations or prospects.
Environmental. We are subject to a wide variety of laws and regulations concerning the protection of the environment, both with respect to the operations at many of our properties and with respect to remediating environmental conditions that may exist at our own or other properties. We strive to comply with federal, state and local environmental laws and regulations. We accrue for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and reasonably estimable.
In September 1987, we implemented an Administrative Consent Order (“ACO”) for our Burlington, New Jersey property, which was required under the New Jersey Environmental Cleanup Responsibility Act (now known as the Industrial Site Recovery Act). The ACO required soil and ground-water cleanup, and we completed, and received final approval on, the soil cleanup required by the ACO. We expect ground-water issues as well as issues associated with the demolition of former manufacturing facilities at this site will continue and remediation by us could be required. Long-term ground-water monitoring

13


may also be required, but we do not know how long such monitoring would be required and do not believe monitoring or further remediation costs, if any, will have a material adverse effect on our financial condition or results of operations.
On July 13, 2010, Rohcan Investments Limited (“Rohcan”), the former owner of property leased by Mueller Canada Ltd. and located in Milton, Ontario, filed suit against Mueller Canada Ltd. and its directors seeking C$10 million in damages arising from the defendants' alleged environmental contamination of the property and breach of lease. Mueller Canada Ltd. leased the property from 1988 through 2008. We are pursuing indemnification from a former owner for certain potential liabilities that are alleged in this lawsuit, and we have accrued for other liabilities not covered by indemnification.  On December 7, 2011, the Court denied the plaintiff's motion for summary judgment.
In the acquisition agreement pursuant to which a predecessor to Tyco sold our Mueller Co. and Anvil businesses to the prior owners of these businesses in August 1999, Tyco agreed to indemnify us and our affiliates, among other things, for all “Excluded Liabilities.” Excluded Liabilities include, among other things, substantially all liabilities relating to the time prior to August 1999, including environmental liabilities. The indemnity survives indefinitely. Tyco's indemnity does not cover liabilities to the extent caused by us or the operation of our businesses after August 1999, nor does it cover liabilities arising with respect to businesses or sites acquired after August 1999. In June 2007, Tyco was separated into three separate publicly traded companies. In September 2011, Tyco International Ltd., one of the companies that was separated in the June 2007 split, announced it would split into three separate companies. Should Tyco's successors become financially unable or fail to comply with the terms of the indemnity, we may be responsible for such obligations or liabilities.
Walter Energy-related Income Taxes. Each member of a consolidated group for federal income tax purposes is severally liable for the federal income tax liability of each other member of the consolidated group for any year in which it is a member of the group at any time during such year. Each member of the Walter Energy consolidated group, which included us through December 14, 2006, is also jointly and severally liable for pension and benefit funding and termination liabilities of other group members, as well as certain benefit plan taxes. Accordingly, we could be liable under such provisions in the event any such liability is incurred, and not discharged, by any other member of the Walter Energy consolidated group for any period during which we were included in the Walter Energy consolidated group.
A dispute exists with regard to federal income taxes for 1980 through 1994 allegedly owed by the Walter Energy consolidated group. According to Walter Energy's last available public filing on the matter, Walter Energy's management estimated that the amount of tax claimed by the IRS was approximately $34.0 million for issues currently in dispute in bankruptcy court for matters unrelated to us. This amount is subject to interest and penalties. Of the $34.0 million in claimed tax, $21.0 million represents issues in which the IRS is not challenging the deductibility of the particular expense but only whether such expense is deductible in a particular year. Walter Energy's management believes that Walter Energy's financial exposure should be limited to interest and possible penalties and the amount of any tax claimed will be offset by favorable adjustments in other years.
In addition, the IRS previously issued a Notice of Proposed Deficiency assessing additional tax of $82.2 million for the fiscal years ended May 31, 2000 through December 31, 2005. Walter Energy filed a formal protest with the IRS, but had not reached a final resolution with the Appeals Division at June 30, 2012. The unresolved issues relate primarily to Walter Energy's method of recognizing revenue on the sale of homes and related interest on the installment notes receivable. The items at issue relate primarily to the timing of revenue recognition and consequently, should the IRS prevail on its positions, Walter Energy's financial exposure should be limited to interest and penalties. As a matter of law, we are jointly and severally liable for any final tax determination for any year in which any of our subsidiaries were members of the Walter Energy consolidated group, which means that we would be liable in the event Walter Energy is unable to pay any amounts owed. Walter Energy has disclosed that it believes its filing positions have substantial merit and that it intends to defend vigorously any claims asserted.
Walter Energy effectively controlled all of our tax decisions for periods during which we were a member of the Walter Energy consolidated group for federal income tax purposes and certain combined, consolidated or unitary state and local income tax groups. Under the terms of the income tax allocation agreement between us and Walter Energy dated May 26, 2006, we generally compute our tax liability on a stand-alone basis, but Walter Energy has sole authority to respond to and conduct all tax proceedings (including tax audits) relating to our federal income and combined state returns, to file all such returns on our behalf and to determine the amount of our liability to (or entitlement to payment from) Walter Energy for such previous periods. This arrangement may result in conflicts between Walter Energy and us.
The separation of the Company from Walter Energy on December 14, 2006 was intended to qualify as a tax-free spin-off under Section 355 of the Internal Revenue Code of 1986, as amended. In addition, the tax allocation agreement provides that if the spin-off is determined not to be tax-free pursuant to Section 355, we generally will be responsible for any taxes incurred by Walter Energy or its shareholders if such taxes result from certain of our actions or omissions and for a percentage of any such taxes that are not a result of our actions or omissions or Walter Energy's actions or omissions or taxes based upon our market

14


value relative to Walter Energy's market value. Additionally, to the extent that Walter Energy was unable to pay taxes, if any, attributable to the spin-off and for which it is responsible under the tax allocation agreement, we could be liable for those taxes as a result of being a member of the Walter Energy consolidated group for the year in which the spin-off occurred.
In accordance with the income tax allocation agreement, Walter Energy used certain tax assets of a predecessor to the Company in its calendar 2006 tax return for which payment to us is required. The income tax allocation agreement only requires Walter Energy to make the payment upon realization of the tax benefit by receiving a refund or otherwise offsetting taxes due. Walter Energy currently owes us $10.9 million that is payable pending completion of an IRS audit of Walter Energy's 2006 tax year and the related refund of tax from that year. We recorded this receivable in other noncurrent assets.
Indemnifications. We are a party to contracts in which it is common for us to agree to indemnify third parties for certain liabilities that arise out of or relate to the subject matter of the contract. In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by gross negligence or willful misconduct. We cannot estimate the potential amount of future payments under these indemnities until events arise that would trigger a liability under the indemnities.
Additionally, in connection with the sale of assets and the divestiture of businesses, such as the divestiture of our U.S. Pipe business (see Note 3. Discontinued Operations and Assets Held for Sale), we may agree to indemnify buyers and related parties for certain losses or liabilities incurred by these parties with respect to: (i) the representations and warranties made by us to these parties in connection with the sale and (ii) liabilities related to the pre-closing operations of the assets or business sold. Indemnities related to pre-closing operations generally include certain environmental and tax liabilities and other liabilities not assumed by these parties in the transaction.
Indemnities related to the pre-closing operations of sold assets or businesses normally do not represent additional liabilities to us, but simply serve to protect these parties from potential liability associated with our obligations existing at the time of the sale. As with any liability, we have accrued for those pre-closing obligations that are considered probable and reasonably estimable. Should circumstances change, increasing the likelihood of payments related to a specific indemnity, we will accrue a liability when future payment is probable and the amount is reasonably estimable.
Other Matters. We are party to a number of other lawsuits arising in the ordinary course of our businesses, including product liability cases for products manufactured by us or third parties. We provide for costs relating to these matters when a loss is probable and the amount is reasonably estimable. Administrative costs related to these matters are expensed as incurred. The effect of the outcome of these matters on our future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. While the results of litigation cannot be predicted with certainty, we believe that the final outcome of such other litigation is not likely to have a materially adverse effect on our consolidated financial statements.
Note 13.
Subsequent Events
On July 25, 2012 our board of directors declared a dividend of $0.0175 per share on our Series A common stock, payable on or about August 20, 2012 to stockholders of record at the close of business on August 10, 2012.


15



Note 14.
Consolidating Guarantor and Non-Guarantor Financial Information
The following information is included as a result of the guarantee by certain of our wholly-owned U.S. subsidiaries (“Guarantor Companies”) of the Senior Unsecured Notes and the Senior Subordinated Notes. None of our other subsidiaries guarantee the Senior Unsecured Notes or the Senior Subordinated Notes. Each of the guarantees is joint and several and full and unconditional. Fast Fabricators, LLC and United States Pipe and Foundry Company, LLC were released as Guarantor Companies in connection with the sale of U.S. Pipe and related balances are included with the Issuer financial information in the following tables.
Guarantor Companies are listed below.
 
 
 
    
State of
incorporation
or organization
Anvil International Holdings, LLC
 
Delaware
Anvil International, LLC
 
Delaware
AnvilStar, LLC
 
Delaware
Echologics, LLC
 
Delaware
Henry Pratt Company, LLC
 
Delaware
Henry Pratt International, LLC
 
Delaware
Hunt Industries, LLC
    
Delaware
Hydro Gate, LLC
 
Delaware
J.B. Smith Mfg. Co., LLC
 
Delaware
James Jones Company, LLC
 
Delaware
MCO 1, LLC
 
Alabama
MCO 2, LLC
 
Alabama
Milliken Valve, LLC
 
Delaware
Mueller Co. International Holdings, LLC
 
Delaware
Mueller Co. LLC
 
Delaware
Mueller Financial Services, LLC
    
Delaware
Mueller Group Co-Issuer, Inc.
    
Delaware
Mueller Group, LLC
    
Delaware
Mueller International, LLC
    
Delaware
Mueller Service California, Inc.
 
Delaware
Mueller Service Co., LLC
 
Delaware
Mueller Systems, LLC
    
Delaware
U.S. Pipe Valve & Hydrant, LLC
 
Delaware




16


Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
June 30, 2012
 
Issuer    
 
Guarantor
 companies 
 
Non-
guarantor
 companies 
 
Eliminations
 
Total    
 
 
 
 
 
(in millions)
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
30.9

 
$
(4.7
)
 
$
27.5

 
$

 
$
53.7

Receivables, net

 
137.9

 
18.6

 

 
156.5

Inventories

 
180.0

 
16.9

 

 
196.9

Deferred income taxes
21.0

 

 
0.5

 

 
21.5

Other current assets
21.4

 
26.8

 
1.0

 

 
49.2

Total current assets
73.3

 
340.0

 
64.5

 

 
477.8

Property, plant and equipment, net
1.9

 
130.2

 
8.4

 

 
140.5

Identifiable intangible assets

 
578.9

 
1.5

 

 
580.4

Other noncurrent assets
30.9

 
0.9

 
1.3

 

 
33.1

Investment in subsidiaries
(6.8
)
 
40.0

 

 
(33.2
)
 

Total assets
$
99.3

 
$
1,090.0

 
$
75.7

 
$
(33.2
)
 
$
1,231.8

Liabilities and stockholders' equity:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
0.3

 
$
1.0

 
$

 
$

 
$
1.3

Accounts payable
8.2

 
60.8

 
5.9

 

 
74.9

Other current liabilities
27.9

 
41.0

 
3.7

 

 
72.6

Total current liabilities
36.4

 
102.8

 
9.6

 

 
148.8

Long-term debt
619.8

 
1.7

 

 

 
621.5

Deferred income taxes
135.3

 

 
0.3

 

 
135.6

Other noncurrent liabilities
50.7

 
8.6

 
0.7

 

 
60.0

Intercompany accounts
(1,008.8
)
 
983.7

 
25.1

 

 

Total liabilities
(166.6
)
 
1,096.8

 
35.7

 

 
965.9

Stockholders' equity
265.9

 
(6.8
)
 
40.0

 
(33.2
)
 
265.9

Total liabilities and stockholders' equity
$
99.3

 
$
1,090.0

 
$
75.7

 
$
(33.2
)
 
$
1,231.8


17


Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
September 30, 2011
 
Issuer    
 
Guarantor
 companies 
 
Non-
guarantor
 companies 
 
Eliminations
 
Total    
 
 
 
 
 
(in millions)
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
36.2

 
$
(3.8
)
 
$
28.6

 
$

 
$
61.0

Receivables, net

 
131.8

 
15.6

 

 
147.4

Inventories

 
163.4

 
12.5

 

 
175.9

Deferred income taxes
28.1

 

 
0.6

 

 
28.7

Other current assets
15.4

 
27.3

 
1.1

 

 
43.8

Current assets held for sale
142.0

 

 

 

 
142.0

Total current assets
221.7

 
318.7

 
58.4

 

 
598.8

Property, plant and equipment, net
3.9

 
132.7

 
9.1

 

 
145.7

Identifiable intangible assets

 
600.9

 
1.5

 

 
602.4

Other noncurrent assets
27.6

 
0.9

 
1.9

 

 
30.4

Noncurrent assets held for sale
107.7

 

 

 

 
107.7

Investment in subsidiaries
(23.9
)
 
23.8

 

 
0.1

 

Total assets
$
337.0

 
$
1,077.0

 
$
70.9

 
$
0.1

 
$
1,485.0

Liabilities and stockholders' equity:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$

 
$
0.9

 
$

 
$

 
$
0.9

Accounts payable
6.1

 
49.3

 
3.7

 

 
59.1

Other current liabilities
30.1

 
44.9

 
2.9

 

 
77.9

Current liabilities held for sale
56.9

 

 

 

 
56.9

Total current liabilities
93.1

 
95.1

 
6.6

 

 
194.8

Long-term debt
676.0

 
1.4

 

 

 
677.4

Deferred income taxes
153.8

 

 
0.4

 

 
154.2

Other noncurrent liabilities
71.0

 
7.9

 
0.7

 

 
79.6

Intercompany accounts
(1,035.9
)
 
996.5

 
39.4

 

 

Total liabilities
(42.0
)
 
1,100.9

 
47.1

 

 
1,106.0

Stockholders' equity
379.0

 
(23.9
)
 
23.8

 
0.1

 
379.0

Total liabilities and stockholders' equity
$
337.0

 
$
1,077.0

 
$
70.9

 
$
0.1

 
$
1,485.0



18


Mueller Water Products, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
Three months ended June 30, 2012
 
Issuer    
 
Guarantor
 companies 
 
Non-
guarantor
 companies 
 
Eliminations
 
Total    
 
 
 
 
 
(in millions)
 
 
 
 
Net sales
$

 
$
238.7

 
$
37.2

 
$

 
$
275.9

Cost of sales

 
167.7

 
28.6

 

 
196.3

Gross profit

 
71.0

 
8.6

 

 
79.6

Operating expenses:
 
 
 
 
 
 
 
 
 
Selling, general and administrative
8.1

 
40.9

 
4.2

 

 
53.2

Restructuring

 
0.6

 
0.1

 

 
0.7

Total operating expenses
8.1

 
41.5

 
4.3

 

 
53.9

Operating income (loss)
(8.1
)
 
29.5

 
4.3

 

 
25.7

Interest expense, net
14.8

 
0.1

 

 

 
14.9

Loss on early extinguishment of debt
1.5

 

 

 

 
1.5

Income (loss) from before income taxes
(24.4
)
 
29.4

 
4.3

 

 
9.3

Income tax expense (benefit)
(9.0
)
 
10.7

 
1.7

 

 
3.4

Equity in income of subsidiaries
21.3

 
2.6

 

 
(23.9
)
 

Income from continuing operations
5.9

 
21.3

 
2.6

 
(23.9
)
 
5.9

Income from discontinued operations, net of tax
3.9

 

 

 

 
3.9

Net income
9.8

 
21.3

 
2.6

 
(23.9
)
 
9.8

 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Natural gas hedges, net of tax
0.2

 

 

 

 
0.2

Interest rate swap contracts, net of tax
0.8

 

 

 

 
0.8