Mueller Water Products, Inc. 2006 Annual Report
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Mueller Water Products, Inc. 2006 Annual Report 1200 Abernathy Road, N.E. Suite 1200 STRONG PAST. STRONGER FUTURE. Atlanta, GA 30328 (770) 206-4200 2006 Annual Report LEADING BRANDS www.muellerwaterproducts.com INTERN AT I O N A L The 2006 Mueller Water Products, Inc. Annual Report saved the following trees water energy solid waste greenhouse gases resources by printing on 100% recycled fiber, 50% post-consumer waste, 30 6,557 14 1,434 2,424 and processed chlorine-free paper. fully grown gallons million BTUs pounds pounds Mueller Water Products, Inc. BOARD OF DIRECTORS OFFICERS SHAREHOLDER INFORMATION GREGORY E. HYLAND GREGORY E. HYLAND ANNUAL MEETING Chairman, President and Chief Executive Chairman, President and The annual meeting of stockholders Officer, Muellerater W Products, Inc. Chief Executive Officer of Mueller Water Products will be held March 22, 2007 at: DONALD N. BOYCE DALE B. SMITH Four Seasons Hotel Atlanta Retired Chairman and CEO, Chief Operating Officer, 75 14th Street IDEX Corporation Mueller Water Products, Inc. Atlanta, GA 30309 BUSINESS DESCRIPTION Chief Executive Officer, HOWARD L. CLARK, JR. Mueller Group CORPORATE OffICES Vice Chairman, Lehman Brothers, Inc. Mueller Water Products is a leading North American manufacturer and marketer of infrastructure Mueller Water Products, Inc. RAY TOROK JERRY W. KOLB 1200 Abernathy Road, N.E. and flow control products for use in water distribution networks and treatment facilities. Its broad President, U.S. Pipe Retired Vice Chairman, Suite 1200 product portfolio includes engineered valves, hydrants, ductile iron pipe and pipe fittings, which Deloitte & Touche LLP ThOMAS E. FISH Atlanta, GA 30328 are utilized by municipalities, as well as the commercial and residential construction, oil and gas, President, Anvil International (770) 206-4200 JOSEPH B. LEONARD Web site: www.muellerwaterproducts.com HVAC and fire protection industries. With revenues of approximately $1.9 billion, the Company is Chairman and CEO, DOYCE GASKIN comprised of three main operating segments: Mueller Co., U.S. Pipe and Anvil. Based in Atlanta, AirTran Holdings, Inc. Executive Vice President, INVESTOR CONTACT Mueller Group Investor Relations Georgia, the Company employs approximately 7,000 people. For more information about Mueller MARK J. O’BRIEN Mueller Water Products, Inc. Water Products, please visit the Company’s web site at www.muellerwaterproducts.com Chairman and CEO, ROBERT BARKER 1200 Abernathy Road, N.E. JWH Holding Company, LLC Executive Vice President, Suite 1200 General Counsel, Corporate Secretary BERNARD G. RETHORE Atlanta, GA 30328 & Chief Compliance Officer Chairman Emeritus, (770) 206-4237 Flowserve Corporation JEffERY W. SPRICK Fax (770) 206-4235 Senior Vice President & COMPLETE WATER TRANSMISSION SOLUTIONS NEIL A. SPRINGER MEDIA CONTACT Chief Accounting Officer; Fittings Restraint Managing Partner, Corporate Communications Interim Chief Financial Officer Springer & Associates LLC Mueller Water Products, Inc. Water Treatment Plant JENNIFER ThOMAS 1200 Abernathy Road, N.E. Ductile Iron Pressure Pipe MIchAEL T. TOKARZ Pump Station Butterfly Valve Executive Vice President & Suite 1200 Chairman, Walter Industries, Inc. Atlanta, GA 30328 Water from Source Chief HR/Administrative Officer and Chairman, MVC Capital (NYSE) (770) 206-4240 MARIETTA EDMUNDS ZAKAS Fax (770) 206-4235 Pipe Restraint Senior Vice President, Strategic Planning Oce Building & Investor Relations FORM 10-K Additional copies of the Company’s an- Fire Hydrant WALTER A. SMITH nual report to the Securities and Exchange Fittings, Couplings and Hangers Senior Vice President & Treasurer Commission on Form 10-K for the fiscal year ended Sept. 30, 2006 are available on the Company’s web site or by written request to: Investor Relations Corporation Valve Mueller Water Products, Inc. 1200 Abernathy Road, N.E. Suite 1200 Atlanta, GA 30328 Curb Valve Gate Valve COMMON STOCK Trading Symbol: MWA and MWA.B / Atlanta / Atlanta New York Stock Exchange Fittings, Couplings and Hangers TRANSFER AgENT AND REGISTRAR see eye The Bank of New York 101 Barclay Street Residential Homes Plug Valve and Check Valve New York, NY 10286 (800) 524-4458 INDEPENDENT AccOUNTANTS PricewaterhouseCoopers LLP Meter Valve, Meter Yoke, Water Meter Pump Station Wastewater Treatment Plant by and produced designed 10 Tenth Street, Suite 1400 Mueller Water Products, Inc. visited the NYSE to celebrate its initial public offering. In honor of Atlanta, GA 30309 the occasion, Chairman, President & CEO Gregory E. Hyland rang The Opening BellSM. Water Discharge after Treatment l Mueller Co. l Anvil International l U.S. Pipe Certificates of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act have been filed with the Securities and Exchange Commission. In addition, the Company’s Chief Executive Officer has submitted to the New York Stock Exchange (NYSE) a certificate certifying that he is not aware of any violations by the Company of the NYSE corporate governance listing standards. 2006 Annual Report 1 Gregory E. Hyland Chairman, President and Chief Executive Officer STroNG PAST. STRONGER FUTURE. 2006 was a momentous year for Mueller Water Products, And the initial achievements of our synergy program Inc., as we became a stand-alone company. We com- resulted in significant benefits in 2006, improving pleted the initial public offering and NYSE listing of our performance and better positioning us to remain approximately 25 percent of our common stock in May cost-competitive. 2006. The remaining shares were distributed on December The efforts of our operations team, led by Dale Smith and 14, 2006 in a spinoff. These actions successfully set the Ray Torok, demonstrated the management team’s ability to stage for Mueller to be the largest, publicly traded, pure successfully execute the synergy program while delivering play water infrastructure company. positive financial results. In fiscal 2006, we achieved a Our products can be found at every point in the distribu- synergy run rate of $35 million – earlier than originally tion of water – from its initial source to treatment facilities expected. We increased our estimated synergy benefits and, ultimately, to your home or business. We have the to $40 to $50 million, and we are striving for the high end largest installed base of iron gate valves, ductile iron pipe of the range. and fire hydrants in the United States. And because of the We consolidated the Pratt butterfly valve plant in Dixon, Ill., strength of our brands and products, we are approved by into Aurora, Ill., and Hammond, Ind., and moved additional and used in more than 90 percent of the estimated 54,000 operations to our plant in China. We closed U.S. Pipe’s water municipalities in the U.S. This leading position is Chattanooga, Tenn., plant and merged its valve and critical to our future growth. hydrant operation into the existing Mueller Co. plants in We are a “new” old company, with each of our three Chattanooga, Tenn., and Albertville, Ala. We closed our businesses, Mueller Co., U.S. Pipe and Anvil, manufacturing Milton, Canada plant and moved its hydrant production quality products for more than 100 years. We combined to Albertville. We announced the 2007 closure of the their strong heritage, expertise, talents and brand recogni- James Jones service brass and hydrant plant in California, tion into one company for a stronger future. began the consolidation of two Anvil foundry operations, and relocated a distribution center in Columbia, Pa. Along FISCAL 2006 BUSINESS REVIEW with the synergies achieved on the manufacturing side, In 2006, net sales rose 10 percent to $1.93 billion, up we also realigned sales of U.S. Pipe-branded fire hydrants from $1.75 billion of combined revenues in 2005. Higher and iron gate valves with those of Mueller Co. revenues and increased margins, despite the rising cost of raw materials, allowed us to achieve Adjusted EBITDA of BUSINESS OUTLooK $346.6 million, representing growth of 30 percent. These In fiscal 2007, we do face some challenges. Housing starts results were largely due to significant volume increases are down, which are expected to affect the Mueller Co. in some of our key water infrastructure products, such as and U.S. Pipe businesses. New infrastructure represents hydrants and iron gate valves. Revenues were driven by an estimated 40 percent of our total revenues. The initial strong demand in residential construction, as well as infra- accomplishments of our synergy program, which focused structure repair and replacement spending. Additionally, on reducing fixed costs, help us better deal with the demand for our commercial construction and oilfield challenges of a market downturn. products increased due to strong market conditions. 2 Mueller Water Products, Inc. STroNG PAST. STRONGER FUTURE. (concluded) We expect increased spending for repair and replacement In 2006, we made targeted acquisitions that expanded of the existing infrastructure in 2007. In fact, the American our product offering. We will continue to look at acquisi- Water Works Association predicts an 11 percent spending tions opportunistically. For example, our recent acquisition increase in infrastructure upgrades in 2007 alone. As exist- of Fast Fabricators increases our product offering in the ing infrastructure ages, replacement parts and products growing water and wastewater treatment plant market, are needed and should usually be compatible with those and opened new sales opportunities for our value-added already in a system. We have one of the largest installed ductile iron pipe products. bases of products, including more than three million fire We are focused on long-term growth and cash flow hydrants and nine million iron gate valves. This installed generation to build shareholder value. We are poised to base makes us a dynamically positioned company that take advantage of opportunities in the water infrastructure will be able to capitalize on future spending. market. Expansion is driving growth. The population is Finally, Anvil’s healthy businesses anticipate growth in increasing and there is a need to tap into new sources of commercial construction and oilfield spending.