(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
TABLE OF CONTENTS | ||
Page | ||
Item 1. | ||
Regulatory and Environmental Matters | ||
Securities Exchange Act Reports | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 5. | ||
Item 6. | ||
Item 7. | ||
Seasonality | ||
Critical Accounting Policies and Estimates | ||
Item 7A. | ||
Item 8. | ||
Item 9A. | ||
Item 10* | ||
Item 11* | ||
Item 12* | ||
Item 13* | ||
Item 14* | ||
Item 15 | ||
* | All or a portion of the referenced section is incorporated by reference from our definitive proxy statement that will be issued in connection with the upcoming 2020 Annual Meeting of Stockholders. |
Item 1. | BUSINESS |
Infrastructure | Technologies | |
Canada Valve™ | Echologics® | |
Centurion® | Echoshore® | |
Ez-Max® | ePulse® | |
Hydro Gate® | Hersey™ | |
Hydro-Guard® | LeakFinderRT® | |
Hymax® | LeakFinderST™ | |
Hymax Versa® | LeakListener® | |
Jones® | LeakTuner® | |
Krausz® | Mi.Echo® | |
Milliken™ | Mi.Data® | |
Mueller® | Mi.Hydrant™ | |
Pratt® | Mi.Net® | |
Repamax® | Mueller Systems® | |
Repaflex® | SentryxTM | |
Singer™ |
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Pratt | $ | 81.6 | $ | 71.9 | |||
Mueller Systems | 8.9 | 20.6 |
Location | Expiration of current agreement(s) | |
Chattanooga, TN | November 2019, January 2020 and October 2021 | |
Decatur, IL | June 2020 | |
Albertville, AL | October 2020 | |
Aurora, IL | September 2021 |
• | Diversion of management time and attention from existing operations; |
• | Difficulties in integrating acquired businesses, technologies and personnel into our business or into our compliance and control programs, particularly those that involve international operations; |
• | Working with partners or other ownership structures with shared decision-making authority (our interests and other ownership interests may be inconsistent); |
• | Difficulties in obtaining and verifying relevant information regarding a business or technology prior to the consummation of the transaction, including the identification and assessment of liabilities, claims or other circumstances, including those relating to intellectual property claims, that could result in litigation or regulatory exposure; |
• | Assumptions of liabilities that exceed our estimated amounts; |
• | Verifying the financial statements and other business information of an acquired business; |
• | Inability to obtain required regulatory approvals and/or required financing on favorable terms; |
• | Potential loss of key employees, contractual relationships or customers; |
• | Increased operating expenses related to the acquired businesses or technologies; |
• | The failure of new technologies, products or services to gain market acceptance with acceptable profit margins; |
• | Entering new markets in which we have little or no experience or in which competitors may have stronger market positions; |
• | Dilution of interests of holders of our common shares through the issuance of equity securities or equity-linked securities; and |
• | Inability to achieve expected synergies. |
• | Catastrophic events, such as fires, floods, explosions, natural disasters, severe weather or other similar occurrences; |
• | Terrorist attacks, war, mass shootings or other acts of violence; |
• | Interruptions in the delivery of raw materials, shortages of equipment or spare parts, or other manufacturing inputs; |
• | Adverse government regulations; |
• | Equipment or information systems breakdowns or failures; |
• | Violations of our permit requirements or revocation of permits; |
• | Releases of pollutants and hazardous substances to air, soil, surface water or ground water; and |
• | Labor disputes. |
Item 2. | PROPERTIES |
Location | Activity | Size (sq. ft.) | Owned or leased | ||||
Infrastructure: | |||||||
Albertville, AL | Manufacturing | 422,000 | Owned | ||||
Ariel, Israel | Manufacturing | 221,000 | Leased | ||||
Aurora, IL | Manufacturing | 147,000 | Owned | ||||
Aurora, IL | Distribution | 84,000 | Leased | ||||
Barrie, Ontario | Distribution | 50,000 | Leased | ||||
Brownsville, TX | Manufacturing | 50,000 | Leased | ||||
Calgary, Alberta | Distribution | 11,000 | Leased | ||||
Chattanooga, TN | Manufacturing | 525,000 | Owned | ||||
Chattanooga, TN | General and administration | 17,000 | Leased | ||||
Chattanooga, TN | Research and development | 22,000 | Leased | ||||
Cleveland, TN | Manufacturing | 109,500 | Owned | ||||
Dallas, TX | Distribution | 26,000 | Leased | ||||
Decatur, IL | Manufacturing | 467,000 | Owned | ||||
Hammond, IN | Manufacturing | 51,000 | Owned | ||||
Jingmen, China | Manufacturing | 154,000 | Owned | ||||
Kimball, TN | Manufacturing | 233,000 | Owned | ||||
Ocala, FL | Distribution | 50,000 | Leased | ||||
Ontario, CA | Distribution | 73,000 | Leased | ||||
Surrey, British Columbia | Manufacturing | 33,000 | Leased | ||||
Tai Cang, China | Manufacturing | 19,000 | Leased | ||||
Woodland, WA | Manufacturing | 20,000 | Leased | ||||
Sharjah, United Arab Emirates | Distribution | 10,000 | Leased | ||||
Technologies: | |||||||
Cleveland, NC | Manufacturing | 190,000 | Owned | ||||
Atlanta, GA | Research and development | 21,000 | Leased | ||||
Toronto, Ontario | Research and development | 18,000 | Leased | ||||
Corporate: | |||||||
Atlanta, GA | Corporate headquarters | 25,000 | Leased |
Item 3. | LEGAL PROCEEDINGS |
Item 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Item 6. | SELECTED FINANCIAL DATA |
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||
Statement of operations data: | ||||||||||||||||||||
Net sales | $ | 968.0 | $ | 916.0 | $ | 826.0 | $ | 800.6 | $ | 793.4 | ||||||||||
Cost of sales | 647.1 | 626.1 | 558.1 | 531.7 | 547.5 | |||||||||||||||
Gross profit | 320.9 | 289.9 | 267.9 | 268.9 | 245.9 | |||||||||||||||
Selling, general and administrative expenses | 182.7 | 166.7 | 155.4 | 149.5 | 147.6 | |||||||||||||||
Loss on Walter receivable | — | — | — | — | 11.6 | |||||||||||||||
Gain on sale of idle property | (2.4 | ) | (9.0 | ) | — | — | — | |||||||||||||
Other charges | 16.3 | 10.5 | 10.4 | 7.2 | 7.9 | |||||||||||||||
Interest expense, net | 19.8 | 20.9 | 22.2 | 23.6 | 27.5 | |||||||||||||||
Loss on early extinguishment of debt | — | 6.5 | — | — | 31.3 | |||||||||||||||
Walter Energy Accrual | 22.0 | — | — | — | — | |||||||||||||||
Pension costs other than service | 0.4 | 1.0 | 1.4 | 19.3 | (0.8 | ) | ||||||||||||||
Gain on settlement of interest rate swap contracts | — | (2.4 | ) | — | — | — | ||||||||||||||
Income before income taxes | 82.1 | 95.7 | 78.5 | 69.3 | 20.8 | |||||||||||||||
Income tax (benefit) expense | 18.3 | (9.9 | ) | 24.2 | 24.2 | 8.3 | ||||||||||||||
Income from continuing operations | 63.8 | 105.6 | 54.3 | 45.1 | 12.5 | |||||||||||||||
Discontinued operations(1) | — | — | 69.0 | 18.8 | 18.4 | |||||||||||||||
Net income | $ | 63.8 | $ | 105.6 | $ | 123.3 | $ | 63.9 | $ | 30.9 | ||||||||||
Earnings per basic share: | ||||||||||||||||||||
Continuing operations | $ | 0.40 | $ | 0.67 | $ | 0.34 | $ | 0.28 | $ | 0.08 | ||||||||||
Discontinued operations(1) | — | — | 0.43 | 0.12 | 0.11 | |||||||||||||||
Net income | $ | 0.40 | $ | 0.67 | $ | 0.77 | $ | 0.40 | $ | 0.19 | ||||||||||
Earnings per diluted share: | ||||||||||||||||||||
Continuing operations | $ | 0.40 | $ | 0.66 | $ | 0.34 | $ | 0.28 | $ | 0.08 | ||||||||||
Discontinued operations(1) | — | — | 0.42 | 0.11 | 0.11 | |||||||||||||||
Net income | $ | 0.40 | $ | 0.66 | $ | 0.76 | $ | 0.39 | $ | 0.19 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 157.8 | 158.2 | 160.1 | 161.3 | 160.5 | |||||||||||||||
Diluted | 159.0 | 159.7 | 161.8 | 163.4 | 163.2 | |||||||||||||||
Balance sheet data (at September 30): | ||||||||||||||||||||
Cash and cash equivalents | $ | 176.7 | $ | 347.1 | $ | 361.7 | $ | 195.0 | $ | 113.1 | ||||||||||
Working capital | 388.4 | 518.4 | 528.7 | 426.5 | 381.5 | |||||||||||||||
Property, plant and equipment, net | 217.1 | 150.9 | 122.3 | 108.4 | 100.0 | |||||||||||||||
Total assets | 1,337.3 | 1,291.9 | 1,258.3 | 1,280.6 | 1,229.8 | |||||||||||||||
Total debt | 446.3 | 445.0 | 480.6 | 484.4 | 488.3 | |||||||||||||||
Long-term liabilities | 566.5 | 560.0 | 627.2 | 675.3 | 694.0 | |||||||||||||||
Total liabilities | 745.0 | 727.1 | 768.8 | 861.1 | 862.0 | |||||||||||||||
Total equity | 592.3 | 564.8 | 489.5 | 419.5 | 367.8 | |||||||||||||||
Other data (year ended September 30): | ||||||||||||||||||||
Depreciation and amortization | 53.0 | 43.7 | 41.9 | 39.5 | 43.4 | |||||||||||||||
Capital expenditures | 86.6 | 55.7 | 40.6 | 31.5 | 27.2 | |||||||||||||||
Cash dividends declared per share | 0.2025 | 0.190 | 0.150 | 0.100 | 0.075 |
(1) | In 2017, we sold Anvil. The results of its operations and the gain on the sale of Anvil are classified as discontinued operations for 2015 through 2017, as applicable. |
Item 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Year ended September 30, 2019 | |||||||||||||||
Infrastructure | Technologies | Corporate | Total | ||||||||||||
(in millions) | |||||||||||||||
Net sales | $ | 871.0 | $ | 97.0 | $ | — | $ | 968.0 | |||||||
Gross profit | 302.9 | 18.0 | — | $ | 320.9 | ||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 121.3 | 26.7 | 34.7 | 182.7 | |||||||||||
Gain on sale of idle property | (2.4 | ) | — | — | (2.4 | ) | |||||||||
Strategic reorganization and other charges | 1.7 | — | 14.6 | 16.3 | |||||||||||
120.6 | 26.7 | 49.3 | 196.6 | ||||||||||||
Operating income (loss) | $ | 182.3 | $ | (8.7 | ) | $ | (49.3 | ) | 124.3 | ||||||
Pension costs other than service | 0.4 | ||||||||||||||
Interest expense, net | 19.8 | ||||||||||||||
Walter Energy Accrual | 22.0 | ||||||||||||||
Income before income taxes | 82.1 | ||||||||||||||
Income tax expense | 18.3 | ||||||||||||||
Net income | $ | 63.8 | |||||||||||||
Year ended September 30, 2018 | |||||||||||||||
Infrastructure | Technologies | Corporate | Total | ||||||||||||
(in millions) | |||||||||||||||
Net sales | $ | 818.8 | $ | 97.2 | $ | — | $ | 916.0 | |||||||
Gross profit | $ | 284.7 | $ | 5.2 | $ | — | $ | 289.9 | |||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 104.5 | 29.5 | 32.7 | 166.7 | |||||||||||
Gain on sale of idle property | — | — | (9.0 | ) | (9.0 | ) | |||||||||
Other charges | 0.1 | 0.1 | 10.3 | 10.5 | |||||||||||
104.6 | 29.6 | 34.0 | 168.2 | ||||||||||||
Operating income (loss) | $ | 180.1 | $ | (24.4 | ) | $ | (34.0 | ) | 121.7 | ||||||
Pension costs other than service | 1.0 | ||||||||||||||
Interest expense, net | 20.9 | ||||||||||||||
Loss on early extinguishment of debt | 6.5 | ||||||||||||||
Gain on settlement of interest rate swap contracts | (2.4 | ) | |||||||||||||
Income before income taxes | 95.7 | ||||||||||||||
Income tax benefit | (9.9 | ) | |||||||||||||
Net income | $ | 105.6 |
2019 | 2018 | ||||||
(in millions) | |||||||
Term Loan | $ | — | $ | 14.4 | |||
5.5% Senior Notes | 24.8 | 7.5 | |||||
Interest rate swap contracts | — | 0.6 | |||||
Deferred financing costs amortization | 1.2 | 1.6 | |||||
ABL Agreement | 0.6 | 0.6 | |||||
Capitalized interest | (3.0 | ) | — | ||||
Other interest expense | (0.2 | ) | 0.6 | ||||
23.3 | 25.3 | ||||||
Interest income | (3.5 | ) | (4.4 | ) | |||
$ | 19.8 | $ | 20.9 |
2019 | 2018 | ||||||
(in millions) | |||||||
Collections from customers | $ | 966.6 | $ | 895.5 | |||
Disbursements, other than interest and income taxes | (821.4 | ) | (742.8 | ) | |||
Interest payments, net | (23.6 | ) | (8.9 | ) | |||
Income tax payments, net | (29.1 | ) | (10.7 | ) | |||
Cash provided by operating activities | $ | 92.5 | $ | 133.1 |
• | Limitations on other debt, liens, investments and guarantees; |
• | Restrictions on dividends and redemptions of our capital stock and prepayments and redemptions of debt; and |
• | Restrictions on mergers and acquisition, sales of assets and transactions with affiliates. |
Moody’s | Standard & Poor’s | ||||||
September 30, | September 30, | ||||||
2019 | 2018 | 2019 | 2018 | ||||
Corporate credit rating | Ba2 | Ba2 | BB | BB | |||
ABL Agreement | Not rated | Not rated | Not rated | Not rated | |||
Notes | Ba3 | Ba3 | BB | BB | |||
Outlook | Stable | Stable | Stable | Stable |
2020 | 2021-2022 | 2023-2024 | After 2024 | Total | |||||||||||||||
(in millions) | |||||||||||||||||||
Debt principal payments | $ | 0.9 | $ | 1.1 | $ | 0.1 | $ | 450.0 | $ | 452.1 | |||||||||
Debt interest payments | 24.9 | 49.7 | 49.6 | 37.1 | 161.3 | ||||||||||||||
Operating leases | 6.1 | 9.3 | 7.5 | 15.8 | 38.7 | ||||||||||||||
Unconditional purchase obligations(1) | 115.4 | 0.8 | — | — | 116.2 | ||||||||||||||
Other current liabilities(2) | — | — | — | — | — | ||||||||||||||
$ | 147.3 | $ | 60.9 | $ | 57.2 | $ | 502.9 | $ | 768.3 |
(1) | Includes contractual obligations for purchases of raw materials and capital expenditures. |
(2) | Consists of obligations for required pension contributions. Actual payments may differ. We have not estimated required pension contributions beyond 2020. |
Item 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Item 9A. | CONTROLS AND PROCEDURES |
Item 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Name | Age | Position | |||
Scott Hall | 55 | President and Chief Executive Officer | |||
Marietta Edmunds Zakas | 60 | Executive Vice President and Chief Financial Officer | |||
Steven S. Heinrichs | 51 | Executive Vice President, Chief Legal and Compliance Officer and Secretary | |||
Michael S. Nancarrow | 45 | Vice President and Chief Accounting Officer | |||
Gregory S. Rogowski | 60 | Executive Vice President, Sales and Marketing | |||
William A. Cofield | 60 | Senior Vice President, Operations & Supply Chain | |||
M. Joseph Schrock | 51 | Vice President, Operations Controller | |||
Jennifer B. O’Keefe | 45 | Vice President, Human Resources | |||
Shirley C. Franklin | 74 | Director | |||
Thomas J. Hansen | 70 | Director | |||
Jerry W. Kolb | 83 | Director | |||
Mark J. O’Brien | 76 | Director | |||
Christine Ortiz | 49 | Director | |||
Bernard G. Rethore | 78 | Director | |||
Lydia W. Thomas | 75 | Director | |||
Michael T. Tokarz | 70 | Director | |||
Stephen C. Van Arsdell | 69 | Director |
Item 11. | EXECUTIVE COMPENSATION |
Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance | ||||||||||
Equity compensation plans approved by stockholders: | ||||||||||||
2006 Plan | 2,089,205 | (1) | $ | 4.89 | (2) | 7,022,737 | (3) | |||||
ESPP | 41,321 | — | 2,583,129 | (4) | ||||||||
Total | 2,130,526 | 9,605,866 |
(1) | Consists of the maximum number of shares that could to be earned upon exercise or vesting of outstanding stock-based awards granted under the 2006 Plan. This includes 747,646 shares associated with share-settled performance units that may not be earned, depending on Company performance, as described in Note 11. of the Notes to the Consolidated Financial Statements. |
(2) | Weighted average exercise price of options to acquire 862,390 shares of our common stock. |
(3) | The number of securities remaining available for future issuance under the 2006 Plan is 20,500,000 shares less the cumulative number of shares granted under the plan, assuming maximum payout of all share-settled performance units for which performance goals have not yet been set, plus the cumulative number of awards canceled under the plan and, after January 25, 2012, shares surrendered upon issuance to cover employees’ related tax liability. |
(4) | The number of securities remaining available for future issuance under the ESPP Plan is 5,800,000 shares less the cumulative number of shares that have been issued under the plan. |
Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Item 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Item 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
Index to financial statements | Page number | |
Reports of Independent Registered Public Accounting Firm | F-1 | |
Consolidated Balance Sheets at September 30, 2019 and 2018 | F-4 | |
Consolidated Statements of Operations for the years ended September 30, 2019, 2018 and 2017 | F-5 | |
Consolidated Statements of Comprehensive Income for the years ended September 30, 2019, 2018 and 2017 | F-6 | |
Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2019, 2018 and 2017 | F-7 | |
Consolidated Statements of Cash Flows for the years ended September 30, 2019, 2018 and 2017 | F-8 | |
Notes to Consolidated Financial Statements for the three years ended September 30, 2019 | F-9 |
(b) | Financial Statement Schedules |
(c) | Exhibits |
Exhibit no. | Document | |
2.1 | ||
2.2 | ||
2.3 | ||
2.4 | ||
2.5 | ||
3.1 | ||
3.2 | ||
4.3 | ||
10.2 | ||
10.3.1* | ||
10.4.2* |
Exhibit no. | Document | |
10.6.1* | ||
10.7* | ||
10.8* | ||
10.9* | ||
10.10* | ||
10.11.2* | ||
10.14 | ||
10.15* | ||
10.16* | ||
10.17.1* | ||
10.19 | ||
10.19.1 | ||
10.19.2 | ||
10.19.3 | ||
10.19.4 | ||
10.20* | ||
10.20.1* | ||
10.20.2* | ||
10.20.3* | ||
10.20.4* | ||
10.21 |
Exhibit no. | Document | |
10.29* | ||
10.29.1* | ||
10.29.2* | ||
10.29.3* | ||
10.29.4** | ||
10.30* | ||
10.30.1* | ||
10.30.2* | ||
10.30.3** | ||
10.31* | ||
10.31.1* | ||
10.31.2** | ||
10.32** | ||
14.1* | ||
21.1** | ||
23.1** | ||
31.1** | ||
31.2** | ||
32.1** | ||
32.2** | ||
101** | The following financial information from the Annual Report on Form 10-K for the year ended September 30, 2019, formatted in XBRL (Extensible Business Reporting Language), (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Other Comprehensive Income, (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements. |
* | Management compensatory plan, contract or arrangement |
** | Filed with this annual report |
MUELLER WATER PRODUCTS, INC. | |||
By: | /s/ Scott Hall | ||
Name: Scott Hall | |||
Title: President and Chief Executive Officer |
Signature | Title | Date | ||
/s/ Scott Hall | President and Chief Executive Officer | November 19, 2019 | ||
Scott Hall | ||||
/s/ Marietta Edmunds Zakas | Executive Vice President and Chief Financial Officer (principal financial officer) | November 19, 2019 | ||
Marietta Edmunds Zakas | ||||
/s/ Michael S. Nancarrow | Vice President and Chief Accounting Officer (principal accounting officer) | November 19, 2019 | ||
Michael S. Nancarrow | ||||
/s/ Shirley C. Franklin | Director | November 19, 2019 | ||
Shirley C. Franklin | ||||
/s/ Thomas J. Hansen | Director | November 19, 2019 | ||
Thomas J. Hansen | ||||
/s/ Jerry W. Kolb | Director | November 19, 2019 | ||
Jerry W. Kolb | ||||
/s/ Mark J. O’Brien | Director | November 19, 2019 | ||
Mark J. O’Brien | ||||
/s/ Christine Ortiz | Director | November 19, 2019 | ||
Christine Ortiz | ||||
/s/ Bernard G. Rethore | Director | November 19, 2019 | ||
Bernard G. Rethore | ||||
/s/ Lydia W. Thomas | Director | November 19, 2019 | ||
Lydia W. Thomas | ||||
/s/ Michael T. Tokarz | Director | November 19, 2019 | ||
Michael T. Tokarz | ||||
/s/ Stephen C. Van Arsdell | Director | November 19, 2019 | ||
Stephen C. Van Arsdell | ||||
Valuation of Intangible Assets Resulting from the Acquisition of Krausz Industries Development Ltd | |
Description of the Matter | As described in Note 4 to the consolidated financial statements, in December 2018, the Company completed its acquisition of Krausz Industries Development Ltd and subsidiaries (“Krausz”) for $140.7 million, net of cash acquired, including the assumption of certain debt of $13.2 million. The Company accounted for the business combination by recognizing the assets acquired and liabilities assumed at their estimated acquisition date fair values. Among the assets acquired, the Company recognized identifiable intangible assets of $45.4 million related to patents ($32.1 million), customer relationships ($8.7 million), and tradenames ($4.6 million). Auditing the fair values of the identified intangible assets was complex and subjective due to the significant estimation uncertainty in management’s estimates of the fair values of these assets. In particular, the patents and customer relationship intangible estimates were sensitive to significant assumptions such as forecasted revenues, EBITDA margins and discount rates. The tradenames intangible estimates were sensitive to forecasted revenues and the royalty rate. These significant assumptions are forward-looking and could be affected by future economic and market conditions. |
How We Addressed the Matter in Our Audit | We tested the Company’s controls over review of the fair values of the acquired intangible assets. This included testing controls over management’s review of the forecasted results, the discount rates and the royalty rate used in the fair value estimates. To test the valuation of the identifiable intangible assets, we performed audit procedures that included, among others, assessing valuation methodologies and testing the significant assumptions and underlying data used by the Company. For example, we evaluated the reasonableness of management’s forecasted revenues and EBITDA margins used in the fair value estimates by comparing those assumptions to the historical results of Krausz and current industry, market and economic forecasts. We also involved our valuation specialists to evaluate the valuation methodologies and the reasonableness of the discount rate and royalty rate assumptions used in the estimates. As part of this evaluation, we compared the discount rate and royalty rate assumptions to market data. In addition, we performed a sensitivity analysis on the significant assumptions to evaluate the change in the fair values of the intangible assets that would result from the changes in assumptions. |
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS | |||||||
September 30, | |||||||
2019 | 2018 | ||||||
(in millions, except share amounts) | |||||||
Assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Receivables, net | |||||||
Inventories | |||||||
Other current assets | |||||||
Total current assets | |||||||
Property, plant and equipment, net | |||||||
Intangible assets | |||||||
Goodwill | |||||||
Other noncurrent assets | |||||||
Total assets | $ | $ | |||||
Liabilities and equity: | |||||||
Current portion of long-term debt | $ | $ | |||||
Accounts payable | |||||||
Other current liabilities | |||||||
Total current liabilities | |||||||
Long-term debt | |||||||
Deferred income taxes | |||||||
Other noncurrent liabilities | |||||||
Total liabilities | |||||||
Commitments and contingencies (Note 17.) | |||||||
Common stock: 600,000,000 shares authorized; 157,462,140 and 157,332,121 shares outstanding at September 30, 2019 and 2018, respectively | |||||||
Additional paid-in capital | |||||||
Accumulated deficit | ( | ) | ( | ) | |||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Total Company stockholders’ equity | |||||||
Noncontrolling interest | |||||||
Total equity | |||||||
Total liabilities and equity | $ | $ |
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
Year ended September 30, | |||||||||||
2019 | 2018 | 2017 | |||||||||
(in millions, except per share amounts) | |||||||||||
Net sales | $ | $ | $ | ||||||||
Cost of sales | |||||||||||
Gross profit | |||||||||||
Operating expenses: | |||||||||||
Selling, general and administrative | |||||||||||
Gain on sale of idle property | ( | ) | ( | ) | |||||||
Other charges | |||||||||||
Total operating expenses | |||||||||||
Operating income | |||||||||||
Pension costs other than service | |||||||||||
Interest expense, net | |||||||||||
Loss on early extinguishment of debt | |||||||||||
Gain on settlement of interest rate swap contracts | ( | ) | |||||||||
Walter Energy Accrual | |||||||||||
Income before income taxes | |||||||||||
Income tax (benefit) expense | ( | ) | |||||||||
Income from continuing operations | |||||||||||
Income from discontinued operations | |||||||||||
Net income | $ | $ | $ | ||||||||
Earnings per basic share: | |||||||||||
Continuing operations | $ | $ | $ | ||||||||
Discontinued operations | |||||||||||
Net Income | $ | $ | $ | ||||||||
Earnings per diluted share: | |||||||||||
Continuing operations | $ | $ | $ | ||||||||
Discontinued operations | |||||||||||
Net income | $ | $ | $ | ||||||||
Weighted average shares outstanding: | |||||||||||
Basic | |||||||||||
Diluted | |||||||||||
Dividends declared per share | $ | $ | $ |
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||
Year ended September 30, | |||||||||||
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Net income | $ | $ | $ | ||||||||
Other comprehensive income (loss): | |||||||||||
Pension liability | ( | ) | |||||||||
Income tax effects | ( | ) | ( | ) | |||||||
Foreign currency translation | ( | ) | |||||||||
Derivative instruments | |||||||||||
Income tax effects | ( | ) | ( | ) | |||||||
( | ) | ||||||||||
Comprehensive income | $ | $ | $ |
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY FOR THE THREE YEARS ENDED SEPTEMBER 30, 2019 | |||||||||||||||||||||||
Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Non-controlling interest | Total | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Balance at September 30, 2016 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||
Net income (loss) | ( | ) | |||||||||||||||||||||
Dividends declared | ( | ) | ( | ) | |||||||||||||||||||
Stock-based compensation | |||||||||||||||||||||||
Shares retained for employee taxes | ( | ) | ( | ) | |||||||||||||||||||
Common stock issued | |||||||||||||||||||||||
Stock repurchased under buyback program | ( | ) | ( | ) | |||||||||||||||||||
Other comprehensive income, net of tax | |||||||||||||||||||||||
Balance at September 30, 2017 | ( | ) | ( | ) | |||||||||||||||||||
Net income | |||||||||||||||||||||||
Dividends declared | ( | ) | ( | ) | |||||||||||||||||||
Stock-based compensation | |||||||||||||||||||||||
Shares retained for employee taxes | ( | ) | ( | ) | |||||||||||||||||||
Common stock issued | |||||||||||||||||||||||
Stock repurchased under buyback program | ( | ) | ( | ) | |||||||||||||||||||
Other comprehensive income, net of tax | |||||||||||||||||||||||
Balance at September 30, 2018 | ( | ) | ( | ) | |||||||||||||||||||
Net income | |||||||||||||||||||||||
Dividends declared | ( | ) | ( | ) | |||||||||||||||||||
Stock-based compensation | |||||||||||||||||||||||
Shares retained for employee taxes | ( | ) | ( | ) | |||||||||||||||||||
Common stock issued | |||||||||||||||||||||||
Stock repurchased under buyback program | ( | ) | ( | ) | |||||||||||||||||||
Other comprehensive loss, net of tax | ( | ) | ( | ) | |||||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
Year ended September 30, | |||||||||||
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Operating activities: | |||||||||||
Net income | $ | $ | $ | ||||||||
Less income from discontinued operations | |||||||||||
Income from continuing operations | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation | |||||||||||
Amortization | |||||||||||
Retirement plans | |||||||||||
Deferred income taxes | ( | ) | ( | ) | |||||||
Stock-based compensation | |||||||||||
Loss on early extinguishment of debt | |||||||||||
Gain on disposal of assets | ( | ) | ( | ) | |||||||
Other, net | |||||||||||
Changes in assets and liabilities, net of acquisitions: | |||||||||||
Receivables | ( | ) | ( | ) | ( | ) | |||||
Inventories | ( | ) | ( | ) | ( | ) | |||||
Other assets | ( | ) | ( | ) | ( | ) | |||||
Accounts payable | ( | ) | |||||||||
Walter Energy Accrual | |||||||||||
Other current liabilities | ( | ) | ( | ) | |||||||
Pension obligations, related to contributions | ( | ) | ( | ) | |||||||
Long-term liabilities | ( | ) | |||||||||
Net cash provided by operating activities | |||||||||||
Investing activities: | |||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | |||||
Business acquisitions, net of cash acquired | ( | ) | ( | ) | |||||||
Proceeds from sales of assets | |||||||||||
Net cash used in investing activities | ( | ) | ( | ) | ( | ) | |||||
Financing activities: | |||||||||||
Repayment of debt | ( | ) | ( | ) | |||||||
Repayment of Krausz debt | ( | ) | |||||||||
Issuance of debt | |||||||||||
Dividends paid | ( | ) | ( | ) | ( | ) | |||||
Stock repurchased under buyback program | ( | ) | ( | ) | ( | ) | |||||
Common stock issued | |||||||||||
Deferred financing costs paid | ( | ) | ( | ) | |||||||
Employee taxes related to stock-based compensation | ( | ) | ( | ) | ( | ) | |||||
Other | ( | ) | |||||||||
Net cash used in financing activities | ( | ) | ( | ) | ( | ) | |||||
Net cash flows from discontinued operations: | |||||||||||
Operating activities | ( | ) | |||||||||
Investing activities | |||||||||||
Financing activities | ( | ) | |||||||||
Net cash provided by discontinued operations | |||||||||||
Effect of currency exchange rate changes on cash | ( | ) | ( | ) | |||||||
Net change in cash and cash equivalents | ( | ) | ( | ) | |||||||
Cash and cash equivalents at beginning of year | |||||||||||
Cash and cash equivalents at end of year | $ | $ | $ |
Note 1. | Organization |
Note 2. | Summary of Significant Accounting Policies |
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Balance at beginning of year | $ | $ | $ | ||||||||
Provision charged to expense | |||||||||||
Balances written off, net of recoveries | ( | ) | ( | ) | ( | ) | |||||
Reclassification under ASC 606 | ( | ) | |||||||||
Other | |||||||||||
Balance at end of year | $ | $ | $ |
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Balance at beginning of year | $ | $ | $ | ||||||||
Provision charged to expense | |||||||||||
Inventory disposed | ( | ) | ( | ) | ( | ) | |||||
Other | ( | ) | ( | ) | |||||||
Balance at end of year | $ | $ | $ |
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Balance at beginning of year | $ | $ | $ | ||||||||
Warranty accruals | |||||||||||
Warranty costs | ( | ) | ( | ) | ( | ) | |||||
Balance at end of year | $ | $ | $ |
Note 3. | Revenue from Contracts with Customers |
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Billed receivables | $ | $ | |||||
Unbilled receivables | |||||||
Total customer receivables, gross | $ | $ | |||||
Deferred revenues | $ | $ |
Note 4. | Acquisitions and Divestitures |
Gross cash proceeds | $ | ||
Noncash proceeds | |||
Total proceeds | |||
Transaction expenses | ( | ) | |
Net proceeds | |||
Assets and liabilities disposed | ( | ) | |
Gain on sale, pre-tax | |||
Income tax | ( | ) | |
Gain on sale, net of tax | $ |
Net sales | $ | ||
Cost of sales | |||
Gross profit | |||
Operating expenses: | |||
Selling, general and administrative | |||
Other charges | |||
Total operating expenses | |||
Operating income | |||
Interest expense, net | |||
Income before income taxes | |||
Income tax expense | |||
Gain on sale, net of tax | 67.9 | ||
Income from discontinued operations | $ |
Assets acquired, net of cash: | |||
Receivables | $ | ||
Inventories | |||
Other current assets | |||
Property, plant and equipment | |||
Intangible assets | |||
Goodwill | |||
Liabilities assumed: | |||
Accounts payable | |||
Other current liabilities | |||
Current and long term debt | |||
Deferred income tax liability | |||
Consideration paid | $ |
Assets, net of cash: | |||
Receivables | $ | ||
Inventories | |||
Other current assets | |||
Property, plant and equipment | |||
Other non-current assets | |||
Identified intangible assets: | |||
Patents | |||
Customer relationships | |||
Tradenames | |||
Favorable leasehold interests | |||
Goodwill | |||
Liabilities: | |||
Accounts payable | ( | ) | |
Other current liabilities | ( | ) | |
Deferred income taxes | ( | ) | |
Other non-current liabilities | ( | ) | |
Consideration paid | |||
Repayment of Krausz debt | ( | ) | |
Consideration paid included in net cash used in investing activities | $ |
Note 5. | Intangible Assets and Goodwill |
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Capitalized internal-use software: | |||||||
Cost | $ | $ | |||||
Accumulated amortization | ( | ) | ( | ) | |||
Net book value | |||||||
Business combination-related: | |||||||
Cost: | |||||||
Finite-lived intangible assets: | |||||||
Technology | |||||||
Customer relationships and other | |||||||
Indefinite-lived intangible assets: | |||||||
Trade names and trademarks | |||||||
Accumulated amortization: | |||||||
Technology | ( | ) | ( | ) | |||
Customer relationships and other | ( | ) | ( | ) | |||
( | ) | ( | ) | ||||
Net book value | |||||||
Total intangible assets net book value | $ | $ |
2019 | |||
(in millions) | |||
Balance at beginning of year | $ | ||
Acquisition of Krausz | |||
Change in foreign currency exchange rates | |||
Balance at end of year | $ |
Note 6. | Income Taxes |
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
U.S. | $ | $ | $ | ||||||||
Non-U.S. | ( | ) | ( | ) | |||||||
Income before income taxes | $ | $ | $ |
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Current: | |||||||||||
U.S. federal | $ | $ | $ | ||||||||
U.S. state and local | |||||||||||
Non-U.S. | |||||||||||
Deferred: | |||||||||||
U.S. federal | ( | ) | ( | ) | |||||||
U.S. state and local | ( | ) | ( | ) | ( | ) | |||||
Non-U.S. | ( | ) | ( | ) | |||||||
( | ) | ( | ) | ||||||||
Income tax (benefit) expense | $ | $ | ( | ) | $ |
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Expense at U.S. federal statutory income tax rates of 21%, 24.5% and 35%, respectively | $ | $ | $ | ||||||||
Adjustments to reconcile to income tax expense: | |||||||||||
State income taxes, net of federal benefit | |||||||||||
Domestic production activities deduction | ( | ) | ( | ) | |||||||
Tax credits | ( | ) | ( | ) | ( | ) | |||||
Nondeductible expenses, other than compensation | |||||||||||
Valuation allowances | |||||||||||
Foreign income taxes | |||||||||||
Nondeductible compensation | |||||||||||
Excess tax benefits related to stock compensation | ( | ) | ( | ) | ( | ) | |||||
Federal tax rate change | ( | ) | ( | ) | |||||||
Federal transition tax | ( | ) | |||||||||
Uncertain tax positions | ( | ) | |||||||||
Basis difference in foreign investment | ( | ) | |||||||||
Other | |||||||||||
Income tax (benefit) expense | $ | $ | ( | ) | $ |
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Deferred income tax assets: | |||||||
Inventory reserves | $ | $ | |||||
Accrued expenses | |||||||
Pension | |||||||
Stock-based compensation | |||||||
State net operating losses | |||||||
Federal credit carryovers | |||||||
Other | |||||||
Valuation allowance | ( | ) | ( | ) | |||
Total deferred income tax assets, net of valuation allowance | |||||||
Deferred income tax liabilities: | |||||||
Intangible assets | |||||||
Pension | |||||||
Basis difference in foreign investment | |||||||
Other | |||||||
Total deferred income tax liabilities | |||||||
Net deferred income tax liabilities | $ | $ | |||||
Balance sheet presentation: | |||||||
Deferred income taxes | $ | $ | |||||
Less deferred tax assets included in other noncurrent assets | |||||||
Net deferred income tax liabilities | $ | $ |
2019 | 2018 | ||||||
(in millions) | |||||||
Balance at beginning of year | $ | $ | |||||
Increases related to prior year positions | |||||||
Increases related to current year positions | |||||||
Decreases due to lapse in statute of limitations | ( | ) | ( | ) | |||
Balance at end of year | $ | $ |
Note 7. | Borrowing Arrangements |
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
5.5% Senior Notes | $ | $ | |||||
ABL Agreement | |||||||
Other | |||||||
Less deferred financing costs | ( | ) | ( | ) | |||
Less current portion of long-term debt | ( | ) | ( | ) | |||
Long-term debt | $ | $ |
Note 8. | Derivative Financial Instruments |
Note 9. | Retirement Plans |
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Service cost | $ | $ | $ | ||||||||
Components of net periodic benefit cost excluded from operating income following adoption of ASU 2017-07: | |||||||||||
Interest cost | |||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | |||||
Amortization of actuarial net loss | |||||||||||
Pension settlement | |||||||||||
Other | |||||||||||
Pension costs other than service | |||||||||||
Net periodic benefit cost | $ | $ | $ |
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Projected benefit obligations | $ | $ | |||||
Accumulated benefit obligations | |||||||
Fair value of plan assets |
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Projected benefit obligations | $ | $ | |||||
Accumulated benefit obligations | |||||||
Fair value of plan assets |
Balance at beginning of year | $ | ||
Actuarial gain | |||
Prior year actuarial loss amortization to net periodic cost | ( | ) | |
Balance at end of year | $ |
2019 | 2018 | 2017 | ||||||
Weighted average used to determine benefit obligations: | ||||||||
Discount rate | % | % | % | |||||
Weighted average used to determine net periodic cost: | ||||||||
Discount rate | % | % | % | |||||
Expected return on plan assets | % | % | % |
2019 | 2018 | ||||||
(in millions) | |||||||
Projected benefit obligations: | |||||||
Beginning of year | $ | $ | |||||
Service cost | |||||||
Interest cost | |||||||
Actuarial gain | ( | ) | |||||
Benefits paid | ( | ) | ( | ) | |||
Currency translation | ( | ) | ( | ) | |||
Decrease in obligation due to curtailment / settlement | ( | ) | |||||
End of year | $ | $ | |||||
Accumulated benefit obligations at end of year | $ | $ | |||||
Plan assets: | |||||||
Beginning of year | $ | $ | |||||
Actual return on plan assets | |||||||
Employer contributions | |||||||
Currency translation | ( | ) | ( | ) | |||
Benefits paid | ( | ) | ( | ) | |||
Settlements | ( | ) | |||||
Other | ( | ) | ( | ) | |||
End of year | $ | $ | |||||
Accrued benefit cost at end of year: | |||||||
Funded (unfunded) status | $ | ( | ) | $ | |||
Recognized on balance sheet: | |||||||
Other noncurrent assets | $ | $ | |||||
Other current liabilities | ( | ) | |||||
Other noncurrent liabilities | ( | ) | |||||
$ | ( | ) | $ | ||||
Recognized in accumulated other comprehensive loss, before tax: | |||||||
Prior year service cost | $ | $ | |||||
Net actuarial loss | |||||||
$ | $ |
Strategic asset allocation | Actual asset allocations at | ||||||||||||||||
September 30, | |||||||||||||||||
Tactical range | 2019 | 2018 | 2017 | ||||||||||||||
Fixed income investments | % | % | % | % | % | ||||||||||||
Equity investments | - | % | |||||||||||||||
Cash | - | % | |||||||||||||||
% | % | % | % |
• | Fixed income fund investments held by the investment trusts are valued using the closing price reported in the active market in which the investment is traded or based on yields currently available on comparable securities of issuers with similar credit ratings; |
• | Equity investments held by the investment trusts are valued using the closing price reported on the active market when reliable market quotations are readily available. When market quotations are not readily available, these assets are valued by a method the trustees believe accurately reflects fair value; and |
• | Mutual funds are valued at the closing price reported on the active market. |
September 30, 2019 | |||||||||||
Level 1 | Level 2 | Total | |||||||||
(in millions) | |||||||||||
Fixed income | $ | $ | $ | ||||||||
Equity: | |||||||||||
Large cap stocks: | |||||||||||
Large cap index funds | |||||||||||
Mid cap stocks: | |||||||||||
Mid cap index funds | |||||||||||
Small cap stocks: | |||||||||||
Small cap growth funds | |||||||||||
International stocks: | |||||||||||
Mutual funds | |||||||||||
International funds | |||||||||||
Total equity | |||||||||||
Cash and cash equivalents | |||||||||||
$ | $ | $ |
September 30, 2018 | |||||||||||
Level 1 | Level 2 | Total | |||||||||
(in millions) | |||||||||||
Fixed income | $ | $ | $ | ||||||||
Equity: | |||||||||||
Large cap stocks: | |||||||||||
Large cap index funds | |||||||||||
Mid cap stocks: | |||||||||||
Mid cap index funds | |||||||||||
Small cap stocks: | |||||||||||
Small cap growth funds | |||||||||||
International stocks: | |||||||||||
Mutual funds | |||||||||||
International funds | |||||||||||
Total equity | |||||||||||
Cash and cash equivalents | |||||||||||
$ | $ | $ |
2020 | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
2025-2029 |
Note 10. | Capital Stock |
Shares outstanding at September 30, 2016 | ||
Vesting of restricted stock units, net of shares withheld for taxes | ||
Exercise of stock options | ||
Exercise of employee stock purchase plan instruments | ||
Settlement of performance-based restricted stock units, net of shares withheld for taxes | ||
Stock repurchased under buyback program | ( | ) |
Shares outstanding at September 30, 2017 | ||
Vesting of restricted stock units, net of shares withheld for taxes | ||
Exercise of stock options | ||
Exercise of employee stock purchase plan instruments | ||
Settlement of performance-based restricted stock units, net of shares withheld for taxes | ||
Stock repurchased under buyback program | ( | ) |
Other | ( | ) |
Shares outstanding at September 30, 2018 | ||
Vesting of restricted stock units, net of shares withheld for taxes | ||
Exercise of stock options | ||
Exercise of employee stock purchase plan instruments | ||
Settlement of performance-based restricted stock units, net of shares withheld for taxes | ||
Stock repurchased under buyback program | ( | ) |
Shares outstanding at September 30, 2019 |
Note 11. | Stock-based Compensation Plans |
2019 | 2018 | 2017 | |||||||||
(in millions, except per share data) | |||||||||||
Decrease in operating income | $ | $ | $ | ||||||||
Decrease in net income | |||||||||||
Decrease in earnings per basic share | |||||||||||
Decrease in earnings per diluted share |
Restricted stock units | Weighted average grant date fair value per unit | Weighted average remaining contractual term (years) | Aggregate intrinsic value (millions) | |||||||||
Outstanding at September 30, 2016 | $ | |||||||||||
Granted | ||||||||||||
Vested | ( | ) | $ | |||||||||
Cancelled | ( | ) | ||||||||||
Outstanding at September 30, 2017 | ||||||||||||
Granted | ||||||||||||
Vested | ( | ) | ||||||||||
Cancelled | ( | ) | ||||||||||
Outstanding at September 30, 2018 | ||||||||||||
Granted | ||||||||||||
Vested | ( | ) | ||||||||||
Cancelled | ( | ) | ||||||||||
Outstanding at September 30, 2019 |
Award date | Settlement year | Performance period | Grant date per unit fair value | Units awarded | Units forfeited | Net units | Performance factor | Shares earned | ||||||||||||||
December 2, 2014 | 2018 | 2015 | $ | ( | ) | |||||||||||||||||
2016 | ( | ) | ||||||||||||||||||||
2017 | ( | ) | ||||||||||||||||||||
December 1, 2015 | 2019 | 2016 | ( | ) | ||||||||||||||||||
2017 | ( | ) | ||||||||||||||||||||
2018 | ( | ) | ||||||||||||||||||||
November 29, 2016 | 2020 | 2017 | ( | ) | ||||||||||||||||||
2018 | ( | ) | ||||||||||||||||||||
2019 | ( | ) | ||||||||||||||||||||
January 23, 2017 | 2020 | 2017 | ||||||||||||||||||||
2018 | ||||||||||||||||||||||
2019 | ||||||||||||||||||||||
November 28, 2017 | 2021 | 2018 | ||||||||||||||||||||
2019 | ( | ) | ||||||||||||||||||||
2020 | ( | ) | ||||||||||||||||||||
November 27, 2018 | 2022 | 2019 | $ | ( | ) | |||||||||||||||||
2020 | ( | ) | ||||||||||||||||||||
2021 | ( | ) |
Options | Weighted average exercise price per option | Weighted average remaining contractual term (years) | Aggregate intrinsic value (millions) | |||||||||
Outstanding at September 30, 2016 | $ | $ | ||||||||||
Exercised | ( | ) | ||||||||||
Cancelled | ( | ) | ||||||||||
Outstanding at September 30, 2017 | ||||||||||||
Exercised | ( | ) | ||||||||||
Cancelled | ||||||||||||
Outstanding at September 30, 2018 | ||||||||||||
Exercised | ( | ) | ||||||||||
Cancelled | ||||||||||||
Outstanding at September 30, 2019 | $ | $ | ||||||||||
Exercisable at September 30, 2019 | $ | $ | ||||||||||
Exercise price | Options | Weighted average exercise price | Weighted average remaining contractual term (years) | Exercisable options | Weighted average exercise price | |||||||||||||||||||
$ | - | $ | $ | $ | ||||||||||||||||||||
$ | - | $ | ||||||||||||||||||||||
$ | $ |
Phantom Plan units | Weighted average grant date fair value per unit | Weighted average remaining contractual term (years) | Aggregate intrinsic value (millions) | |||||||||
Outstanding at September 30, 2016 | $ | |||||||||||
Granted | ||||||||||||
Vested | ( | ) | $ | |||||||||
Cancelled | ( | ) | ||||||||||
Outstanding at September 30, 2017 | ||||||||||||
Granted | ||||||||||||
Vested | ( | ) | ||||||||||
Cancelled | ( | ) | ||||||||||
Outstanding at September 30, 2018 | ||||||||||||
Granted | ||||||||||||
Vested | ( | ) | ||||||||||
Cancelled | ( | ) | ||||||||||
Outstanding at September 30, 2019 |
Note 12. | Supplemental Balance Sheet Information |
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Inventories: | |||||||
Purchased components and raw material | $ | $ | |||||
Work in process | |||||||
Finished goods | |||||||
$ | $ | ||||||
Other current assets: | |||||||
Maintenance and repair tooling | $ | $ | |||||
Income taxes | |||||||
Other | |||||||
$ | $ | ||||||
Property, plant and equipment: | |||||||
Land | $ | $ | |||||
Buildings | |||||||
Machinery and equipment | |||||||
Construction in progress | |||||||
$ | $ | ||||||
Accumulated depreciation | ( | ) | ( | ) | |||
$ | $ | ||||||
Other current liabilities: | |||||||
Compensation and benefits | $ | $ | |||||
Customer rebates | |||||||
Taxes other than income taxes | |||||||
Warranty | |||||||
Environmental | |||||||
Income taxes | |||||||
Interest | |||||||
Restructuring and severance | |||||||
Walter Tax Liability | |||||||
Other | |||||||
$ | $ |
Note 13. | Supplemental Statement of Operations Information |
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Included in selling, general and administrative expenses: | |||||||||||
Research and development | $ | $ | $ | ||||||||
Advertising | |||||||||||
Interest expense, net: | |||||||||||
5.5% Senior Notes | $ | $ | $ | ||||||||
Term Loan | |||||||||||
Deferred financing costs amortization | |||||||||||
ABL Agreement | |||||||||||
Interest rate swap contracts | |||||||||||
Capitalized interest | ( | ) | |||||||||
Other interest expense | ( | ) | |||||||||
Interest income | ( | ) | ( | ) | ( | ) | |||||
$ | $ | $ |
Note 14. | Accumulated Other Comprehensive Loss |
Foreign currency translation | Pension liability, net of tax | Total | |||||||||
(in millions) | |||||||||||
Balance at September 30, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | |||||||
Amounts reclassified out of accumulated other comprehensive loss | |||||||||||
Other comprehensive income (loss) | ( | ) | ( | ) | |||||||
Balance at September 30, 2019 | $ | $ | ( | ) | $ | ( | ) |
Note 15. | Supplemental Cash Flow Information |
2019 | 2018 | 2017 | |||||||||
(in millions) | |||||||||||
Cash paid, net: | |||||||||||
Interest | $ | $ | $ | ||||||||
Income taxes | $ | $ | $ |
Note 16. | Segment Information |
2019 | 2018 | 2017 | ||||||
Percentage of gross sales: | ||||||||
10 largest customers | % | % | % | |||||
2 largest customers | % | % | % | |||||
Ferguson percentage of gross sales: | ||||||||
Consolidated | % | % | % | |||||
Infrastructure | % | % | % | |||||
Technologies | % | % | % | |||||
Core & Main percentage of gross sales: | ||||||||
Consolidated | % | % | % | |||||
Infrastructure | % | % | % |
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Customer receivables: | |||||||
Ferguson: | $ | $ | |||||
Core & Main: |
United States | Canada | Other | Total | ||||||||||||
(in millions) | |||||||||||||||
Property, plant and equipment, net: | |||||||||||||||
September 30, 2019 | $ | $ | $ | $ | |||||||||||
September 30, 2018 |
Year ended | |||||||
September 30, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Infrastructure disaggregated net revenues: | |||||||
Central | $ | $ | |||||
Northeast | |||||||
Southeast | |||||||
West | |||||||
United States | $ | $ | |||||
Canada | |||||||
Other international locations | |||||||
$ | $ | ||||||
Technologies disaggregated net revenues: | |||||||
Central | $ | $ | |||||
Northeast | |||||||
Southeast | |||||||
West | |||||||
United States | $ | $ | |||||
Canada and other international locations | |||||||
$ | $ |
Infrastructure | Technologies | Corporate | Total | ||||||||||||
(in millions) | |||||||||||||||
Net sales: | |||||||||||||||
2019 | $ | $ | $ | $ | |||||||||||
2018 | |||||||||||||||
2017 | |||||||||||||||
Operating income (loss): | |||||||||||||||
2019 | $ | $ | ( | ) | $ | ( | ) | $ | |||||||
2018 | ( | ) | ( | ) | |||||||||||
2017 | ( | ) | ( | ) | |||||||||||
Depreciation and amortization: | |||||||||||||||
2019 | $ | $ | $ | $ | |||||||||||
2018 | |||||||||||||||
2017 | |||||||||||||||
Total pension settlement and other charges: | |||||||||||||||
2019 | $ | $ | $ | $ | |||||||||||
2018 | |||||||||||||||
2017 | |||||||||||||||
Capital expenditures: | |||||||||||||||
2019 | $ | $ | $ | $ | |||||||||||
2018 | |||||||||||||||
2017 | |||||||||||||||
Total assets: | |||||||||||||||
September 30, 2019 | $ | $ | $ | $ | |||||||||||
September 30, 2018 | |||||||||||||||
Intangible assets, net: | |||||||||||||||
September 30, 2019 | $ | $ | $ | $ | |||||||||||
September 30, 2018 |
Note 18. | Subsequent Events |
Note 19. | Quarterly Consolidated Financial Information (Unaudited) |
Quarter | |||||||||||||||
Fourth | Third | Second | First | ||||||||||||
(in millions, except per share amounts) | |||||||||||||||
2019 | |||||||||||||||
Net sales | $ | $ | $ | $ | |||||||||||
Gross profit | |||||||||||||||
Operating income | |||||||||||||||
Net income | $ | $ | $ | $ | ( | ) | |||||||||
Earnings per basic share(1) | $ | $ | $ | $ | ( | ) | |||||||||
Earnings per diluted share(1) | $ | $ | $ | $ | ( | ) | |||||||||
2018 | |||||||||||||||
Net sales | $ | $ | $ | $ | |||||||||||
Gross profit | |||||||||||||||
Operating income | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Earnings per basic share(1) | $ | $ | $ | $ | |||||||||||
Earnings per diluted share(1) | $ | $ | $ | $ |
(1) | The sum of the quarterly amounts may not equal the full year amount due to rounding. |
Article 1. | Definitions |
(a) | “Base Salary” means, at any time, the then regular annual rate of pay Executive is receiving as annual salary, excluding amounts: (i) received under short-term or long-term incentive or other bonus plans, regardless of whether or not the amounts are deferred, or (ii) designated by the Company as payment toward reimbursement of expenses. |
(b) | “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. |
(c) | “Board” means the Board of Directors of the Company. |
(d) | “Cause” shall be determined by the Board in a duly adopted resolution in the exercise of good faith and reasonable judgment, and shall mean Executive’s (i) conviction or guilty plea |
(e) | “Change in Control” shall mean the occurrence of any one or more of the following events: |
(i) | The acquisition by any Person who is or becomes the Beneficial Owner of fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Section 1(e), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, including without limitation, a public offering of securities, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates, or (D) any acquisition by any corporation pursuant to a transaction which complies with subparagraphs (A), (B), and (C) of Section 1(e)(iii) hereof; |
(ii) | During any period of two consecutive years, individuals who at the beginning of such period constitute the Board (the “Incumbent Board”) cease for any reason other than retirement, death or disability to constitute at least a majority of the Board, provided that any individual becoming a director whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the directors of the Company or other actual or threatened solicitation of proxies of consents by or on behalf of a Person other than the Board; |
(iii) | Consummation of a reorganization, merger, or consolidation to which the Company is a party or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case unless, following such Business Combination: (A) all or substantially all of the individuals and entities who were the Beneficial Owners of Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors of the Company |
(iv) | Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. |
(f) | “Code” means the Internal Revenue Code of 1986, as amended. |
(g) | “Committee” means the Compensation and Human Resources Committee of the Board, or, if no Compensation and Human Resources Committee exists, then the full Board, or a committee of Board members, as appointed by the full Board to administer this Agreement. |
(h) | “Company” means Mueller Water Products, Inc., a Delaware corporation, or any successor thereto as provided in Article 9 herein. |
(i) | “Disability” or “Disabled” means that Executive has been physically or mentally incapacitated so as to render Executive incapable of performing the essential functions of any substantial gainful activity, or Executive has received income replacement benefits under a Company plan for at least 3 months, and, in either instance, that incapacity is expected to result in death or to last for a continuous period of at least 12 months. Executive’s receipt of disability benefits under the Company’s long-term disability plan or receipt of Social Security disability benefits shall be deemed conclusive evidence of Disability for purposes of this Agreement. |
(j) | “Effective Date of Termination” means the date on which a Qualifying Termination occurs, as provided in Section 2.2 herein, which triggers the payment of Severance Benefits hereunder. |
(k) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
(l) | “Federal Funds Rate” shall mean the “Federal Funds Rate” as published by The Wall Street Journal. |
(m) | “Good Reason” means, without Executive’s express written consent, the occurrence after a Change in Control of any one or more of the following: |
(i) | the assignment to Executive of any duties materially diminishing Executive’s position as an employee or officer of the Company or a substantial adverse alteration in the nature of Executive’s responsibilities and position from those in effect immediately prior to the Change in Control; |
(ii) | a material reduction by the Company of Executive’s Base Salary as in effect immediately prior to the date of the Change in Control, which for purposes of this Agreement the parties agree means a reduction of such Base Salary of 10% or more; |
(iii) | without the express written agreement of Executive, any assignment or change in duties that would require the relocation of Executive’s work place to a location that is more than fifty (50) miles from Executive’s work place immediately prior to a Change in Control; provided however, the relocation of Executive’s work place must also increase the regular commute distance between Executive’s residence and work place by more than fifty (50) miles (one-way); |
(iv) | the failure of the Company to obtain satisfactory agreement from any successor entity to assume and agree to perform the obligations under this Agreement; |
(v) | the failure of the Company to continue in effect, or continue Executive’s participation in, any compensation plan in which Executive participates immediately prior to the Change in Control which is material to Executive’s total compensation and such failure diminishes in a material way Executive’s total compensation (including but not limited to the Company’s stock option, incentive compensation, and bonus plans); |
(vi) | the taking of any action by the Company which would directly or indirectly materially reduce in the aggregate, the Company’s pension, life insurance, medical, health and accident, or disability plans, or other fringe benefit plans or arrangements, in which Executive was participating at the time of the Change in Control, or the material reduction by the Company in the number of paid vacation days to which Executive is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control; or |
(vii) | any uncured material breach by the Company of this Agreement. |
(n) | “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated. |
(o) | “Notice of Termination for Good Reason” shall mean a notice that (i) indicates the specific Good Reason provision or provisions relied upon and (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination for Good Reason. The failure by Executive to set forth in the Notice of Termination for Good Reason any facts or circumstances which contribute to the showing of Good Reason shall not waive any right of Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing Executive’s rights hereunder. |
(p) | “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d). |
(q) | “Qualifying Termination” means Executive’s termination of employment upon any of the events described in Section 2.2 herein. |
(r) | “Severance Benefits” mean the payment or provision of severance compensation and benefits as provided in Section 2.3 herein. |
Article 2. | Severance Benefits |
(a) | The Company’s involuntary termination of Executive’s employment without Cause; and |
(b) | Executive’s termination of Executive’s employment for Good Reason. |
(a) | A lump sum payment of accrued and unpaid Base Salary, any annual bonus award earned by Executive for a fiscal year of the Company that ended prior to Executive’s Effective Date of Termination that has not yet been paid, unused vacation or paid time off, and other accrued benefits through the Effective Date of Termination (together, the “Accrued Obligations”), paid on the same basis as paid upon any voluntary termination of employment. Such lump sum amount shall be paid in accordance with the Company’s normal payroll procedures. |
(b) | A lump sum amount equal to Executive’s annual bonus award earned as of the Effective Date of Termination, based on target performance (excluding any special bonus payments), except that the bonus will be prorated for the portion of the fiscal year during which Executive was actively employed. This payment will be in lieu of any other payment to be made to Executive under the annual bonus plan for such fiscal year in which Executive is then participating. |
(c) | A lump sum amount equal to two (2) multiplied by the sum of the following: (i) the higher of: (A) Executive’s Base Salary in effect upon the Effective Date of Termination, or (B) Executive’s Base Salary in effect on the date of the Change in Control; and (ii) the higher of: (A) Executive’s annual target bonus opportunity for the fiscal year of the Company in which Executive’s Effective Date of Termination occurs, or (B) the average of the actual annual bonuses earned (whether or not deferred) by Executive under the annual bonus plan (excluding any special bonus payments) in which Executive participated in the three (3) fiscal years of the Company preceding the fiscal year of the Company in which Executive’s Effective Date of Termination occurs. If Executive has less than three (3) years of annual bonus participation preceding the fiscal year of the Company in which Executive’s Effective Date of Termination occurs, then Executive’s annual target bonus established under the annual bonus plan in which Executive is then participating for the fiscal year of the Company in which Executive’s Effective Date of Termination occurs shall be used for each fiscal year that Executive did not participate in the annual bonus plan, up to a maximum of three (3) years, to calculate the three (3) year average bonus payment. |
(d) | (i) Upon the consummation of the Change in Control, with respect to Executive’s equity-based long-term incentive awards that are outstanding on the Effective Date, immediate full vesting and lapse of all restrictions on any and all such awards (including but not limited to stock options, stock appreciation rights and restricted stock awards) held by Executive, and any performance conditions applicable to any such awards shall be deemed satisfied at target performance without proration. This provision shall override any conflicting language contained in Executive’s respective award agreements outstanding on the Effective Date and such award agreements are hereby deemed amended. |
(e) | The Company will allow Executive to elect to continue medical and dental coverage for Executive and Executive’s eligible dependents (for the same coverages as provided to its active employees) for a period of 18 months (the “COBRA Period”) following Executive’s Effective Date of Termination, provided Executive (i) timely elects COBRA continuation coverage, and (ii) timely pays the applicable COBRA premiums, subject to the rules and limitations that apply to COBRA coverages. |
(f) | From Executive’s Effective Date of Termination until the earlier of (i) 24 months following such date of termination or (ii) the date immediately prior to the date of Executive’s employment with a subsequent employer, the Company will provide Executive with outplacement services from a nationally recognized outplacement firm selected by Executive, subject to the limits described in this subsection. The aggregate amount paid by the Company for outplacement services will not exceed an amount equal to thirty five percent (35%) of Executive’s Base Salary as of Executive’s Effective Date of Termination (the “Total Outplacement Value”). |
(g) | The Company will continue at its expense Executive’s group life insurance coverage for a period of 18 months following Executive’s Effective Date of Termination on the same terms and conditions and in the same amount as prior to termination of employment. |
Article 3. | Form and Timing of Severance Benefits |
Article 4. | Noncompetition and Confidentiality |
4.1 | Consideration for Restrictive Covenants. Severance Benefits paid under this Agreement to Executive shall constitute consideration for Executive’s agreement to be bound by the restrictive covenants set forth in this Article 4. |
4.2 | Noncompetition. Executive agrees as follows: |
(a) | Executive will not perform Competitive Services, directly or indirectly, for any person, entity, business, or enterprise in the United States (the “Territory”) engaged in the business of the Company as being carried on as of the date of termination of Executive’s employment (“Competing Business”) during the term of Executive’s employment with the Company and for a period of 12 months following the date of such termination of employment. For purposes of the foregoing restriction, “Competitive Services” means performing services in a senior leadership position for any person, firm, partnership, corporation, limited liability company, or other entity that manufactures water infrastructure or pipe-related products for use in non-residential construction and performing duties substantially similar to those duties Executive performs for the Company in the two years prior to Executive’s termination of |
(b) | Executive acknowledges and agrees that: |
(i) | Executive is familiar with the business of the Company and the commercial and competitive nature of the industry and recognizes that the value of the Company’s business would be injured if Executive performed Competitive Services for a Competing Business; |
(ii) | The restrictive covenants contained in this Agreement are essential to the continued good will and profitability of the Company; |
(iii) | In the course of employment with the Company, Executive will become familiar with the trade secrets and other Protected Information (as defined below) of the Company and its subsidiaries, affiliates, and related entities, and that Executive’s services will be of special, unique, and extraordinary value to the Company; and |
(iv) | Executive’s skills and abilities enable Executive to seek and obtain similar employment in a business other than a Competing Business, and Executive possesses other skills that will serve as the basis for employment opportunities that are not prohibited by this Agreement. When Executive’s employment with the Company terminates, Executive expects to be able to earn a livelihood without violating the terms of this Agreement. |
Article 5. | Protected Rights |
Article 6. | The Company’s Payment Obligation |
Article 7. | Term of Agreement |
Article 8. | Legal Remedies |
(a) | Executive and the Company agree that, except for the Company’s enforcement of the post-termination restrictions set forth in Article 4 of this Agreement, and except as otherwise provided in this Agreement, final and binding arbitration shall be the exclusive remedy for any controversy, dispute, or claim arising out of or relating to this Agreement or Executive’s employment with the Company, including Executive’s hire, treatment in the workplace, or termination of employment. For example, if Executive’s employment with the Company is terminated and Executive contends that the termination violates any statute, contract or public policy, then Executive will submit the matter to arbitration for resolution, in lieu of any court or jury trial to which Executive would otherwise might be entitled. |
(b) | This Section covers all common law and statutory claims, including, but not limited to, any claim for breach of contract (including this Agreement) and for violation of laws forbidding discrimination on the basis of race, sex, color, religion, age, national origin, disability, or any other basis covered by applicable federal, state, or local law, and includes claims against the Company and/or any parents, affiliates, owners, officers, directors, employees, agents, general partners or limited partners of the Company, to the extent such claims involve, in any way, this Agreement or Executive’s employment with the Company. This Section covers all judicial claims that could be brought by either party to this Agreement, but does not cover administrative claims for workers’ compensation or unemployment compensation benefits or the filing of charges with government agencies that prohibit waiver of the right to file a charge. |
(c) | The arbitration shall be governed by JAMS Employment Arbitration Rules and Procedure except as modified herein. If a party chooses to have the arbitration proceeding administered by a third party, then the arbitration shall be administered by JAMS. If a party chooses to have the arbitration administered by JAMS, then the arbitration will “commence” in accordance with the JAMS Employment Arbitration Rules and Procedure. If a party chooses to have this matter arbitrated privately, then the arbitration will be deemed to “commence” on the date that the party provides a demand for arbitration and notice of claims and remedies sought outlining the facts relied upon, legal theories, and statement of claimed relief (“Demand”). The responding party shall serve a response to the claims and any counterclaims within 15 business days from the date of receipt of the Demand. |
(d) | Any arbitration shall be held in Atlanta, Georgia (unless the parties mutually agree in writing to another location within the United States) within 120 days of the commencement of the arbitration. |
(e) | The arbitration shall take place before a single arbitrator to be appointed by mutual agreement of counsel for each party or, if counsel cannot agree, then pursuant to the procedures set forth by JAMS. The parties may not have any ex parte communications with the arbitrator. |
(f) | The arbitrator may award any relief otherwise available to the parties by law or equity. |
(g) | The parties will be limited to two depositions per side, and limited written discovery as may be required by the arbitrator, not to exceed that allowed under the Federal Rules of Civil Procedure. |
(h) | Any hearing shall be completed within 120 days of the date of commencement of the arbitration, as the term “commencement” is defined by JAMS. The arbitrator shall issue its award within 30 days of the last hearing day. |
(i) | Unless Executive objects, the Company will pay the arbitrator’s fees. Each party shall pay its own costs and attorneys’ fees, if any, unless the arbitrator rules otherwise. A court may enter judgment upon the arbitrator’s award, either by confirming the award, or vacating, modifying or correcting the award, on any ground referred to in the Federal Arbitration Act, or where the findings of fact are not supported by substantial evidence, or where the conclusions of law are erroneous. |
(j) | The provisions of this Section are severable, meaning that if any provision in this Section 8.2 (“Dispute Resolution: Mutual Agreement to Arbitrate”) is determined to be unenforceable and cannot be reformed under applicable law, the remaining provisions shall remain in full effect, provided however, that any amendment of an unenforceable provision shall only be to the extent necessary and shall preserve the intent of the parties hereto. It is agreed and understood that the scope of this Section, including questions of arbitrability of any dispute, shall be determined by the arbitrator. |
(k) | Executive acknowledges that prior to accepting the provisions of this Section 8.2 and signing this Agreement, Executive has been given an opportunity to consult |
Article 9. | Successors |
Article 10. | Miscellaneous |
MUELLER WATER PRODUCTS, INC. By: ________________________________ J. Scott Hall President and Chief Executive Officer | |
EXECUTIVE: _______________________ Gregory Rogowski |
Article 1. | Definitions |
(a) | “Base Salary” means, at any time, the then regular annual rate of pay Executive is receiving as annual salary, excluding amounts: (i) received under short-term or long-term incentive or other bonus plans, regardless of whether or not the amounts are deferred, or (ii) designated by the Company as payment toward reimbursement of expenses. |
(b) | “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. |
(c) | “Board” means the Board of Directors of the Company. |
(d) | “Cause” shall be determined by the Board in a duly adopted resolution in the exercise of good faith and reasonable judgment, and shall mean Executive’s (i) conviction or guilty plea |
(e) | “Change in Control” shall mean the occurrence of any one or more of the following events: |
(i) | The acquisition by any Person who is or becomes the Beneficial Owner of fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Section 1(e), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, including without limitation, a public offering of securities, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates, or (D) any acquisition by any corporation pursuant to a transaction which complies with subparagraphs (A), (B), and (C) of Section 1(e)(iii) hereof; |
(ii) | During any period of two consecutive years, individuals who at the beginning of such period constitute the Board (the “Incumbent Board”) cease for any reason other than retirement, death or disability to constitute at least a majority of the Board, provided that any individual becoming a director whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the directors of the Company or other actual or threatened solicitation of proxies of consents by or on behalf of a Person other than the Board; |
(iii) | Consummation of a reorganization, merger, or consolidation to which the Company is a party or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case unless, following such Business Combination: (A) all or substantially all of the individuals and entities who were the Beneficial Owners of Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors of the Company |
(iv) | Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. |
(f) | “Code” means the Internal Revenue Code of 1986, as amended. |
(g) | “Committee” means the Compensation and Human Resources Committee of the Board, or, if no Compensation and Human Resources Committee exists, then the full Board, or a committee of Board members, as appointed by the full Board to administer this Agreement. |
(h) | “Company” means Mueller Water Products, Inc., a Delaware corporation, or any successor thereto as provided in Article 9 herein. |
(i) | “Disability” or “Disabled” means that Executive has been physically or mentally incapacitated so as to render Executive incapable of performing the essential functions of any substantial gainful activity, or Executive has received income replacement benefits under a Company plan for at least 3 months, and, in either instance, that incapacity is expected to result in death or to last for a continuous period of at least 12 months. Executive’s receipt of disability benefits under the Company’s long-term disability plan or receipt of Social Security disability benefits shall be deemed conclusive evidence of Disability for purposes of this Agreement. |
(j) | “Effective Date of Termination” means the date on which a Qualifying Termination occurs, as provided in Section 2.2 herein, which triggers the payment of Severance Benefits hereunder. |
(k) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
(l) | “Federal Funds Rate” shall mean the “Federal Funds Rate” as published by The Wall Street Journal. |
(m) | “Good Reason” means, without Executive’s express written consent, the occurrence after a Change in Control of any one or more of the following: |
(i) | the assignment to Executive of any duties materially diminishing Executive’s position as an employee or officer of the Company or a substantial adverse alteration in the nature of Executive’s responsibilities and position from those in effect immediately prior to the Change in Control; |
(ii) | a material reduction by the Company of Executive’s Base Salary as in effect immediately prior to the date of the Change in Control, which for purposes of this Agreement the parties agree means a reduction of such Base Salary of 10% or more; |
(iii) | without the express written agreement of Executive, any assignment or change in duties that would require the relocation of Executive’s work place to a location that is more than fifty (50) miles from Executive’s work place immediately prior to a Change in Control; provided however, the relocation of Executive’s work place must also increase the regular commute distance between Executive’s residence and work place by more than fifty (50) miles (one-way); |
(iv) | the failure of the Company to obtain satisfactory agreement from any successor entity to assume and agree to perform the obligations under this Agreement; |
(v) | the failure of the Company to continue in effect, or continue Executive’s participation in, any compensation plan in which Executive participates immediately prior to the Change in Control which is material to Executive’s total compensation and such failure diminishes in a material way Executive’s total compensation (including but not limited to the Company’s stock option, incentive compensation, and bonus plans); |
(vi) | the taking of any action by the Company which would directly or indirectly materially reduce in the aggregate, the Company’s pension, life insurance, medical, health and accident, or disability plans, or other fringe benefit plans or arrangements, in which Executive was participating at the time of the Change in Control, or the material reduction by the Company in the number of paid vacation days to which Executive is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control; or |
(vii) | any uncured material breach by the Company of this Agreement. |
(n) | “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated. |
(o) | “Notice of Termination for Good Reason” shall mean a notice that (i) indicates the specific Good Reason provision or provisions relied upon and (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination for Good Reason. The failure by Executive to set forth in the Notice of Termination for Good Reason any facts or circumstances which contribute to the showing of Good Reason shall not waive any right of Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing Executive’s rights hereunder. |
(p) | “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d). |
(q) | “Qualifying Termination” means Executive’s termination of employment upon any of the events described in Section 2.2 herein. |
(r) | “Severance Benefits” mean the payment or provision of severance compensation and benefits as provided in Section 2.3 herein. |
Article 2. | Severance Benefits |
(a) | The Company’s involuntary termination of Executive’s employment without Cause; and |
(b) | Executive’s termination of Executive’s employment for Good Reason. |
(a) | A lump sum payment of accrued and unpaid Base Salary, any annual bonus award earned by Executive for a fiscal year of the Company that ended prior to Executive’s Effective Date of Termination that has not yet been paid, unused vacation or paid time off, and other accrued benefits through the Effective Date of Termination (together, the “Accrued Obligations”), paid on the same basis as paid upon any voluntary termination of employment. Such lump sum amount shall be paid in accordance with the Company’s normal payroll procedures. |
(b) | A lump sum amount equal to Executive’s annual bonus award earned as of the Effective Date of Termination, based on target performance (excluding any special bonus payments), except that the bonus will be prorated for the portion of the fiscal year during which Executive was actively employed. This payment will be in lieu of any other payment to be made to Executive under the annual bonus plan for such fiscal year in which Executive is then participating. |
(c) | A lump sum amount equal to two (2) multiplied by the sum of the following: (i) the higher of: (A) Executive’s Base Salary in effect upon the Effective Date of Termination, or (B) Executive’s Base Salary in effect on the date of the Change in Control; and (ii) the higher of: (A) Executive’s annual target bonus opportunity for the fiscal year of the Company in which Executive’s Effective Date of Termination occurs, or (B) the average of the actual annual bonuses earned (whether or not deferred) by Executive under the annual bonus plan (excluding any special bonus payments) in which Executive participated in the three (3) fiscal years of the Company preceding the fiscal year of the Company in which Executive’s Effective Date of Termination occurs. If Executive has less than three (3) years of annual bonus participation preceding the fiscal year of the Company in which Executive’s Effective Date of Termination occurs, then Executive’s annual target bonus established under the annual bonus plan in which Executive is then participating for the fiscal year of the Company in which Executive’s Effective Date of Termination occurs shall be used for each fiscal year that Executive did not participate in the annual bonus plan, up to a maximum of three (3) years, to calculate the three (3) year average bonus payment. |
(d) | (i) Upon the consummation of the Change in Control, with respect to Executive’s equity-based long-term incentive awards that are outstanding on the Effective Date, immediate full vesting and lapse of all restrictions on any and all such awards (including but not limited to stock options, stock appreciation rights and restricted stock awards) held by Executive, and any performance conditions applicable to any such awards shall be deemed satisfied at target performance without proration. This provision shall override any conflicting language contained in Executive’s respective award agreements outstanding on the Effective Date and such award agreements are hereby deemed amended. |
(e) | The Company will allow Executive to elect to continue medical and dental coverage for Executive and Executive’s eligible dependents (for the same coverages as provided to its active employees) for a period of 18 months (the “COBRA Period”) following Executive’s Effective Date of Termination, provided Executive (i) timely elects COBRA continuation coverage, and (ii) timely pays the applicable COBRA premiums, subject to the rules and limitations that apply to COBRA coverages. |
(f) | From Executive’s Effective Date of Termination until the earlier of (i) 24 months following such date of termination or (ii) the date immediately prior to the date of Executive’s employment with a subsequent employer, the Company will provide Executive with outplacement services from a nationally recognized outplacement firm selected by Executive, subject to the limits described in this subsection. The aggregate amount paid by the Company for outplacement services will not exceed an amount equal to thirty five percent (35%) of Executive’s Base Salary as of Executive’s Effective Date of Termination (the “Total Outplacement Value”). |
(g) | The Company will continue at its expense Executive’s group life insurance coverage for a period of 18 months following Executive’s Effective Date of Termination on the same terms and conditions and in the same amount as prior to termination of employment. |
Article 3. | Form and Timing of Severance Benefits |
Article 4. | Noncompetition and Confidentiality |
4.1 | Consideration for Restrictive Covenants. Severance Benefits paid under this Agreement to Executive shall constitute consideration for Executive’s agreement to be bound by the restrictive covenants set forth in this Article 4. |
4.2 | Noncompetition. Executive agrees as follows: |
(a) | Executive will not perform Competitive Services, directly or indirectly, for any person, entity, business, or enterprise in the United States (the “Territory”) engaged in the business of the Company as being carried on as of the date of termination of Executive’s employment (“Competing Business”) during the term of Executive’s employment with the Company and for a period of 12 months following the date of such termination of employment. For purposes of the foregoing restriction, “Competitive Services” means performing services in a senior leadership position for any person, firm, partnership, corporation, limited liability company, or other entity that manufactures water infrastructure or pipe-related products for use in non-residential construction and performing duties substantially similar to those duties Executive performs for the Company in the two years prior to Executive’s termination of |
(b) | Executive acknowledges and agrees that: |
(i) | Executive is familiar with the business of the Company and the commercial and competitive nature of the industry and recognizes that the value of the Company’s business would be injured if Executive performed Competitive Services for a Competing Business; |
(ii) | The restrictive covenants contained in this Agreement are essential to the continued good will and profitability of the Company; |
(iii) | In the course of employment with the Company, Executive will become familiar with the trade secrets and other Protected Information (as defined below) of the Company and its subsidiaries, affiliates, and related entities, and that Executive’s services will be of special, unique, and extraordinary value to the Company; and |
(iv) | Executive’s skills and abilities enable Executive to seek and obtain similar employment in a business other than a Competing Business, and Executive possesses other skills that will serve as the basis for employment opportunities that are not prohibited by this Agreement. When Executive’s employment with the Company terminates, Executive expects to be able to earn a livelihood without violating the terms of this Agreement. |
Article 5. | Protected Rights |
Article 6. | The Company’s Payment Obligation |
Article 7. | Term of Agreement |
Article 8. | Legal Remedies |
(a) | Executive and the Company agree that, except for the Company’s enforcement of the post-termination restrictions set forth in Article 4 of this Agreement, and except as otherwise provided in this Agreement, final and binding arbitration shall be the exclusive remedy for any controversy, dispute, or claim arising out of or relating to this Agreement or Executive’s employment with the Company, including Executive’s hire, treatment in the workplace, or termination of employment. For example, if Executive’s employment with the Company is terminated and Executive contends that the termination violates any statute, contract or public policy, then Executive will submit the matter to arbitration for resolution, in lieu of any court or jury trial to which Executive would otherwise might be entitled. |
(b) | This Section covers all common law and statutory claims, including, but not limited to, any claim for breach of contract (including this Agreement) and for violation of laws forbidding discrimination on the basis of race, sex, color, religion, age, national origin, disability, or any other basis covered by applicable federal, state, or local law, and includes claims against the Company and/or any parents, affiliates, owners, officers, directors, employees, agents, general partners or limited partners of the Company, to the extent such claims involve, in any way, this Agreement or Executive’s employment with the Company. This Section covers all judicial claims that could be brought by either party to this Agreement, but does not cover administrative claims for workers’ compensation or unemployment compensation benefits or the filing of charges with government agencies that prohibit waiver of the right to file a charge. |
(c) | The arbitration shall be governed by JAMS Employment Arbitration Rules and Procedure except as modified herein. If a party chooses to have the arbitration proceeding administered by a third party, then the arbitration shall be administered by JAMS. If a party chooses to have the arbitration administered by JAMS, then the arbitration will “commence” in accordance with the JAMS Employment Arbitration Rules and Procedure. If a party chooses to have this matter arbitrated privately, then the arbitration will be deemed to “commence” on the date that the party provides a demand for arbitration and notice of claims and remedies sought outlining the facts relied upon, legal theories, and statement of claimed relief (“Demand”). The responding party shall serve a response to the claims and any counterclaims within 15 business days from the date of receipt of the Demand. |
(d) | Any arbitration shall be held in Atlanta, Georgia (unless the parties mutually agree in writing to another location within the United States) within 120 days of the commencement of the arbitration. |
(e) | The arbitration shall take place before a single arbitrator to be appointed by mutual agreement of counsel for each party or, if counsel cannot agree, then pursuant to the procedures set forth by JAMS. The parties may not have any ex parte communications with the arbitrator. |
(f) | The arbitrator may award any relief otherwise available to the parties by law or equity. |
(g) | The parties will be limited to two depositions per side, and limited written discovery as may be required by the arbitrator, not to exceed that allowed under the Federal Rules of Civil Procedure. |
(h) | Any hearing shall be completed within 120 days of the date of commencement of the arbitration, as the term “commencement” is defined by JAMS. The arbitrator shall issue its award within 30 days of the last hearing day. |
(i) | Unless Executive objects, the Company will pay the arbitrator’s fees. Each party shall pay its own costs and attorneys’ fees, if any, unless the arbitrator rules otherwise. A court may enter judgment upon the arbitrator’s award, either by confirming the award, or vacating, modifying or correcting the award, on any ground referred to in the Federal Arbitration Act, or where the findings of fact are not supported by substantial evidence, or where the conclusions of law are erroneous. |
(j) | The provisions of this Section are severable, meaning that if any provision in this Section 8.2 (“Dispute Resolution: Mutual Agreement to Arbitrate”) is determined to be unenforceable and cannot be reformed under applicable law, the remaining provisions shall remain in full effect, provided however, that any amendment of an unenforceable provision shall only be to the extent necessary and shall preserve the intent of the parties hereto. It is agreed and understood that the scope of this Section, including questions of arbitrability of any dispute, shall be determined by the arbitrator. |
(k) | Executive acknowledges that prior to accepting the provisions of this Section 8.2 and signing this Agreement, Executive has been given an opportunity to consult |
Article 9. | Successors |
Article 10. | Miscellaneous |
MUELLER WATER PRODUCTS, INC. By: ________________________________ J. Scott Hall President and Chief Executive Officer | |
EXECUTIVE: ______________________ Marietta Edmunds Zakas |
Article 1. | Definitions |
(a) | “Base Salary” means, at any time, the then regular annual rate of pay Executive is receiving as annual salary, excluding amounts: (i) received under short-term or long-term incentive or other bonus plans, regardless of whether or not the amounts are deferred, or (ii) designated by the Company as payment toward reimbursement of expenses. |
(b) | “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. |
(c) | “Board” means the Board of Directors of the Company. |
(d) | “Cause” shall be determined by the Board in a duly adopted resolution in the exercise of good faith and reasonable judgment, and shall mean Executive’s (i) conviction or guilty plea |
(e) | “Change in Control” shall mean the occurrence of any one or more of the following events: |
(i) | The acquisition by any Person who is or becomes the Beneficial Owner of fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Section 1(e), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, including without limitation, a public offering of securities, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates, or (D) any acquisition by any corporation pursuant to a transaction which complies with subparagraphs (A), (B), and (C) of Section 1(e)(iii) hereof; |
(ii) | During any period of two consecutive years, individuals who at the beginning of such period constitute the Board (the “Incumbent Board”) cease for any reason other than retirement, death or disability to constitute at least a majority of the Board, provided that any individual becoming a director whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the directors of the Company or other actual or threatened solicitation of proxies of consents by or on behalf of a Person other than the Board; |
(iii) | Consummation of a reorganization, merger, or consolidation to which the Company is a party or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case unless, following such Business Combination: (A) all or substantially all of the individuals and entities who were the Beneficial Owners of Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors of the Company |
(iv) | Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. |
(f) | “Code” means the Internal Revenue Code of 1986, as amended. |
(g) | “Committee” means the Compensation and Human Resources Committee of the Board, or, if no Compensation and Human Resources Committee exists, then the full Board, or a committee of Board members, as appointed by the full Board to administer this Agreement. |
(h) | “Company” means Mueller Water Products, Inc., a Delaware corporation, or any successor thereto as provided in Article 9 herein. |
(i) | “Disability” or “Disabled” means that Executive has been physically or mentally incapacitated so as to render Executive incapable of performing the essential functions of any substantial gainful activity, or Executive has received income replacement benefits under a Company plan for at least 3 months, and, in either instance, that incapacity is expected to result in death or to last for a continuous period of at least 12 months. Executive’s receipt of disability benefits under the Company’s long-term disability plan or receipt of Social Security disability benefits shall be deemed conclusive evidence of Disability for purposes of this Agreement. |
(j) | “Effective Date of Termination” means the date on which a Qualifying Termination occurs, as provided in Section 2.2 herein, which triggers the payment of Severance Benefits hereunder. |
(k) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
(l) | “Federal Funds Rate” shall mean the “Federal Funds Rate” as published by The Wall Street Journal. |
(m) | “Good Reason” means, without Executive’s express written consent, the occurrence after a Change in Control of any one or more of the following: |
(i) | the assignment to Executive of any duties materially diminishing Executive’s position as an employee or officer of the Company or a substantial adverse alteration in the nature of Executive’s responsibilities and position from those in effect immediately prior to the Change in Control; |
(ii) | a material reduction by the Company of Executive’s Base Salary as in effect immediately prior to the date of the Change in Control, which for purposes of this Agreement the parties agree means a reduction of such Base Salary of 10% or more; |
(iii) | without the express written agreement of Executive, any assignment or change in duties that would require the relocation of Executive’s work place to a location that is more than fifty (50) miles from Executive’s work place immediately prior to a Change in Control; provided however, the relocation of Executive’s work place must also increase the regular commute distance between Executive’s residence and work place by more than fifty (50) miles (one-way); |
(iv) | the failure of the Company to obtain satisfactory agreement from any successor entity to assume and agree to perform the obligations under this Agreement; |
(v) | the failure of the Company to continue in effect, or continue Executive’s participation in, any compensation plan in which Executive participates immediately prior to the Change in Control which is material to Executive’s total compensation and such failure diminishes in a material way Executive’s total compensation (including but not limited to the Company’s stock option, incentive compensation, and bonus plans); |
(vi) | the taking of any action by the Company which would directly or indirectly materially reduce in the aggregate, the Company’s pension, life insurance, medical, health and accident, or disability plans, or other fringe benefit plans or arrangements, in which Executive was participating at the time of the Change in Control, or the material reduction by the Company in the number of paid vacation days to which Executive is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control; or |
(vii) | any uncured material breach by the Company of this Agreement. |
(n) | “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated. |
(o) | “Notice of Termination for Good Reason” shall mean a notice that (i) indicates the specific Good Reason provision or provisions relied upon and (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination for Good Reason. The failure by Executive to set forth in the Notice of Termination for Good Reason any facts or circumstances which contribute to the showing of Good Reason shall not waive any right of Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing Executive’s rights hereunder. |
(p) | “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d). |
(q) | “Qualifying Termination” means Executive’s termination of employment upon any of the events described in Section 2.2 herein. |
(r) | “Severance Benefits” mean the payment or provision of severance compensation and benefits as provided in Section 2.3 herein. |
Article 2. | Severance Benefits |
(a) | The Company’s involuntary termination of Executive’s employment without Cause; and |
(b) | Executive’s termination of Executive’s employment for Good Reason. |
(a) | A lump sum payment of accrued and unpaid Base Salary, any annual bonus award earned by Executive for a fiscal year of the Company that ended prior to Executive’s Effective Date of Termination that has not yet been paid, unused vacation or paid time off, and other accrued benefits through the Effective Date of Termination (together, the “Accrued Obligations”), paid on the same basis as paid upon any voluntary termination of employment. Such lump sum amount shall be paid in accordance with the Company’s normal payroll procedures. |
(b) | A lump sum amount equal to Executive’s annual bonus award earned as of the Effective Date of Termination, based on target performance (excluding any special bonus payments), except that the bonus will be prorated for the portion of the fiscal year during which Executive was actively employed. This payment will be in lieu of any other payment to be made to Executive under the annual bonus plan for such fiscal year in which Executive is then participating. |
(c) | A lump sum amount equal to two (2) multiplied by the sum of the following: (i) the higher of: (A) Executive’s Base Salary in effect upon the Effective Date of Termination, or (B) Executive’s Base Salary in effect on the date of the Change in Control; and (ii) the higher of: (A) Executive’s annual target bonus opportunity for the fiscal year of the Company in which Executive’s Effective Date of Termination occurs, or (B) the average of the actual annual bonuses earned (whether or not deferred) by Executive under the annual bonus plan (excluding any special bonus payments) in which Executive participated in the three (3) fiscal years of the Company preceding the fiscal year of the Company in which Executive’s Effective Date of Termination occurs. If Executive has less than three (3) years of annual bonus participation preceding the fiscal year of the Company in which Executive’s Effective Date of Termination occurs, then Executive’s annual target bonus established under the annual bonus plan in which Executive is then participating for the fiscal year of the Company in which Executive’s Effective Date of Termination occurs shall be used for each fiscal year that Executive did not participate in the annual bonus plan, up to a maximum of three (3) years, to calculate the three (3) year average bonus payment. |
(d) | (i) Upon the consummation of the Change in Control, with respect to Executive’s equity-based long-term incentive awards that are outstanding on the Effective Date, immediate full vesting and lapse of all restrictions on any and all such awards (including but not limited to stock options, stock appreciation rights and restricted stock awards) held by Executive, and any performance conditions applicable to any such awards shall be deemed satisfied at target performance without proration. This provision shall override any conflicting language contained in Executive’s respective award agreements outstanding on the Effective Date and such award agreements are hereby deemed amended. |
(e) | The Company will allow Executive to elect to continue medical and dental coverage for Executive and Executive’s eligible dependents (for the same coverages as provided to its active employees) for a period of 18 months (the “COBRA Period”) following Executive’s Effective Date of Termination, provided Executive (i) timely elects COBRA continuation coverage, and (ii) timely pays the applicable COBRA premiums, subject to the rules and limitations that apply to COBRA coverages. |
(f) | From Executive’s Effective Date of Termination until the earlier of (i) 24 months following such date of termination or (ii) the date immediately prior to the date of Executive’s employment with a subsequent employer, the Company will provide Executive with outplacement services from a nationally recognized outplacement firm selected by Executive, subject to the limits described in this subsection. The aggregate amount paid by the Company for outplacement services will not exceed an amount equal to thirty five percent (35%) of Executive’s Base Salary as of Executive’s Effective Date of Termination (the “Total Outplacement Value”). |
(g) | The Company will continue at its expense Executive’s group life insurance coverage for a period of 18 months following Executive’s Effective Date of Termination on the same terms and conditions and in the same amount as prior to termination of employment. |
Article 3. | Form and Timing of Severance Benefits |
Article 4. | Noncompetition and Confidentiality |
4.1 | Consideration for Restrictive Covenants. Severance Benefits paid under this Agreement to Executive shall constitute consideration for Executive’s agreement to be bound by the restrictive covenants set forth in this Article 4. |
4.2 | Noncompetition. Executive agrees as follows: |
(a) | Executive will not perform Competitive Services, directly or indirectly, for any person, entity, business, or enterprise in the United States (the “Territory”) engaged in the business of the Company as being carried on as of the date of termination of Executive’s employment (“Competing Business”) during the term of Executive’s employment with the Company and for a period of 12 months following the date of such termination of employment. For purposes of the foregoing restriction, “Competitive Services” means performing services in a senior leadership position for any person, firm, partnership, corporation, limited liability company, or other entity that manufactures water infrastructure or pipe-related products for use in non-residential construction and performing duties substantially similar to those duties |
(b) | Executive acknowledges and agrees that: |
(i) | Executive is familiar with the business of the Company and the commercial and competitive nature of the industry and recognizes that the value of the Company’s business would be injured if Executive performed Competitive Services for a Competing Business; |
(ii) | The restrictive covenants contained in this Agreement are essential to the continued good will and profitability of the Company; |
(iii) | In the course of employment with the Company, Executive will become familiar with the trade secrets and other Protected Information (as defined below) of the Company and its subsidiaries, affiliates, and related entities, and that Executive’s services will be of special, unique, and extraordinary value to the Company; and |
(iv) | Executive’s skills and abilities enable Executive to seek and obtain similar employment in a business other than a Competing Business, and Executive possesses other skills that will serve as the basis for employment opportunities that are not prohibited by this Agreement. When Executive’s employment with the Company terminates, Executive expects to be able to earn a livelihood without violating the terms of this Agreement. |
Article 5. | Protected Rights |
Article 6. | The Company’s Payment Obligation |
Article 7. | Term of Agreement |
Article 8. | Legal Remedies |
(a) | Executive and the Company agree that, except for the Company’s enforcement of the post-termination restrictions set forth in Article 4 of this Agreement, and except as otherwise provided in this Agreement, final and binding arbitration shall be the exclusive remedy for any controversy, dispute, or claim arising out of or relating to this Agreement or Executive’s employment with the Company, including Executive’s hire, treatment in the workplace, or termination of employment. For example, if Executive’s employment with the Company is terminated and Executive contends that the termination violates any statute, contract or public policy, then Executive will submit the matter to arbitration for resolution, in lieu of any court or jury trial to which Executive would otherwise might be entitled. |
(b) | This Section covers all common law and statutory claims, including, but not limited to, any claim for breach of contract (including this Agreement) and for violation of laws forbidding discrimination on the basis of race, sex, color, religion, age, national origin, disability, or any other basis covered by applicable federal, state, or local law, and includes claims against the Company and/or any parents, affiliates, owners, officers, directors, employees, agents, general partners or limited partners of the Company, to the extent such claims involve, in any way, this Agreement or Executive’s employment with the Company. This Section covers all judicial claims that could be brought by either party to this Agreement, but does not cover administrative claims for workers’ compensation or unemployment compensation benefits or the filing of charges with government agencies that prohibit waiver of the right to file a charge. |
(c) | The arbitration shall be governed by JAMS Employment Arbitration Rules and Procedure except as modified herein. If a party chooses to have the arbitration proceeding administered by a third party, then the arbitration shall be administered by JAMS. If a party chooses to have the arbitration administered by JAMS, then the arbitration will “commence” in accordance with the JAMS Employment Arbitration Rules and Procedure. If a party chooses to have this matter arbitrated privately, then the arbitration will be deemed to “commence” on the date that the party provides a demand for arbitration and notice of claims and remedies sought outlining the facts relied upon, legal theories, and statement of claimed relief (“Demand”). The responding party shall serve a response to the claims and any counterclaims within 15 business days from the date of receipt of the Demand. |
(d) | Any arbitration shall be held in Atlanta, Georgia (unless the parties mutually agree in writing to another location within the United States) within 120 days of the commencement of the arbitration. |
(e) | The arbitration shall take place before a single arbitrator to be appointed by mutual agreement of counsel for each party or, if counsel cannot agree, then pursuant to the procedures set forth by JAMS. The parties may not have any ex parte communications with the arbitrator. |
(f) | The arbitrator may award any relief otherwise available to the parties by law or equity. |
(g) | The parties will be limited to two depositions per side, and limited written discovery as may be required by the arbitrator, not to exceed that allowed under the Federal Rules of Civil Procedure. |
(h) | Any hearing shall be completed within 120 days of the date of commencement of the arbitration, as the term “commencement” is defined by JAMS. The arbitrator shall issue its award within 30 days of the last hearing day. |
(i) | Unless Executive objects, the Company will pay the arbitrator’s fees. Each party shall pay its own costs and attorneys’ fees, if any, unless the arbitrator rules otherwise. A court may enter judgment upon the arbitrator’s award, either by confirming the award, or vacating, modifying or correcting the award, on any ground referred to in the Federal Arbitration Act, or where the findings of fact are not supported by substantial evidence, or where the conclusions of law are erroneous. |
(j) | The provisions of this Section are severable, meaning that if any provision in this Section 8.2 (“Dispute Resolution: Mutual Agreement to Arbitrate”) is determined to be unenforceable and cannot be reformed under applicable law, the remaining provisions shall remain in full effect, provided however, that any amendment of an unenforceable provision shall only be to the extent necessary and shall preserve the intent of the parties hereto. It is agreed and understood that the scope of this Section, including questions of arbitrability of any dispute, shall be determined by the arbitrator. |
(k) | Executive acknowledges that prior to accepting the provisions of this Section 8.2 and signing this Agreement, Executive has been given an opportunity to consult |
Article 9. | Successors |
Article 10. | Miscellaneous |
MUELLER WATER PRODUCTS, INC. By: ________________________________ Marietta Edmunds Zakas Chief Financial Officer | |
EXECUTIVE: ________________________ J. Scott Hall |
Article 1. | Definitions |
(a) | “Base Salary” means, at any time, the then regular annual rate of pay Executive is receiving as annual salary, excluding amounts: (i) received under short-term or long-term incentive or other bonus plans, regardless of whether or not the amounts are deferred, or (ii) designated by the Company as payment toward reimbursement of expenses. |
(b) | “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. |
(c) | “Board” means the Board of Directors of the Company. |
(d) | “Cause” shall be determined by the Board in a duly adopted resolution in the exercise of good faith and reasonable judgment, and shall mean Executive’s (i) conviction or guilty plea |
(e) | “Change in Control” shall mean the occurrence of any one or more of the following events: |
(i) | The acquisition by any Person who is or becomes the Beneficial Owner of fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Section 1(e), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, including without limitation, a public offering of securities, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates, or (D) any acquisition by any corporation pursuant to a transaction which complies with subparagraphs (A), (B), and (C) of Section 1(e)(iii) hereof; |
(ii) | During any period of two consecutive years, individuals who at the beginning of such period constitute the Board (the “Incumbent Board”) cease for any reason other than retirement, death or disability to constitute at least a majority of the Board, provided that any individual becoming a director whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the directors of the Company or other actual or threatened solicitation of proxies of consents by or on behalf of a Person other than the Board; |
(iii) | Consummation of a reorganization, merger, or consolidation to which the Company is a party or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case unless, following such Business Combination: (A) all or substantially all of the individuals and entities who were the Beneficial Owners of Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors of the Company |
(iv) | Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. |
(f) | “Code” means the Internal Revenue Code of 1986, as amended. |
(g) | “Committee” means the Compensation and Human Resources Committee of the Board, or, if no Compensation and Human Resources Committee exists, then the full Board, or a committee of Board members, as appointed by the full Board to administer this Agreement. |
(h) | “Company” means Mueller Water Products, Inc., a Delaware corporation, or any successor thereto as provided in Article 9 herein. |
(i) | “Disability” or “Disabled” means that Executive has been physically or mentally incapacitated so as to render Executive incapable of performing the essential functions of any substantial gainful activity, or Executive has received income replacement benefits under a Company plan for at least 3 months, and, in either instance, that incapacity is expected to result in death or to last for a continuous period of at least 12 months. Executive’s receipt of disability benefits under the Company’s long-term disability plan or receipt of Social Security disability benefits shall be deemed conclusive evidence of Disability for purposes of this Agreement. |
(j) | “Effective Date of Termination” means the date on which a Qualifying Termination occurs, as provided in Section 2.2 herein, which triggers the payment of Severance Benefits hereunder. |
(k) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
(l) | “Federal Funds Rate” shall mean the “Federal Funds Rate” as published by The Wall Street Journal. |
(m) | “Good Reason” means, without Executive’s express written consent, the occurrence after a Change in Control of any one or more of the following: |
(i) | the assignment to Executive of any duties materially diminishing Executive’s position as an employee or officer of the Company or a substantial adverse alteration in the nature of Executive’s responsibilities and position from those in effect immediately prior to the Change in Control; |
(ii) | a material reduction by the Company of Executive’s Base Salary as in effect immediately prior to the date of the Change in Control, which for purposes of this Agreement the parties agree means a reduction of such Base Salary of 10% or more; |
(iii) | without the express written agreement of Executive, any assignment or change in duties that would require the relocation of Executive’s work place to a location that is more than fifty (50) miles from Executive’s work place immediately prior to a Change in Control; provided however, the relocation of Executive’s work place must also increase the regular commute distance between Executive’s residence and work place by more than fifty (50) miles (one-way); |
(iv) | the failure of the Company to obtain satisfactory agreement from any successor entity to assume and agree to perform the obligations under this Agreement; |
(v) | the failure of the Company to continue in effect, or continue Executive’s participation in, any compensation plan in which Executive participates immediately prior to the Change in Control which is material to Executive’s total compensation and such failure diminishes in a material way Executive’s total compensation (including but not limited to the Company’s stock option, incentive compensation, and bonus plans); |
(vi) | the taking of any action by the Company which would directly or indirectly materially reduce in the aggregate, the Company’s pension, life insurance, medical, health and accident, or disability plans, or other fringe benefit plans or arrangements, in which Executive was participating at the time of the Change in Control, or the material reduction by the Company in the number of paid vacation days to which Executive is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control; or |
(vii) | any uncured material breach by the Company of this Agreement. |
(n) | “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated. |
(o) | “Notice of Termination for Good Reason” shall mean a notice that (i) indicates the specific Good Reason provision or provisions relied upon and (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination for Good Reason. The failure by Executive to set forth in the Notice of Termination for Good Reason any facts or circumstances which contribute to the showing of Good Reason shall not waive any right of Executive hereunder or preclude Executive from asserting such fact or circumstance in enforcing Executive’s rights hereunder. |
(p) | “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d). |
(q) | “Qualifying Termination” means Executive’s termination of employment upon any of the events described in Section 2.2 herein. |
(r) | “Severance Benefits” mean the payment or provision of severance compensation and benefits as provided in Section 2.3 herein. |
Article 2. | Severance Benefits |
(a) | The Company’s involuntary termination of Executive’s employment without Cause; and |
(b) | Executive’s termination of Executive’s employment for Good Reason. |
(a) | A lump sum payment of accrued and unpaid Base Salary, any annual bonus award earned by Executive for a fiscal year of the Company that ended prior to Executive’s Effective Date of Termination that has not yet been paid, unused vacation or paid time off, and other accrued benefits through the Effective Date of Termination (together, the “Accrued Obligations”), paid on the same basis as paid upon any voluntary termination of employment. Such lump sum amount shall be paid in accordance with the Company’s normal payroll procedures. |
(b) | A lump sum amount equal to Executive’s annual bonus award earned as of the Effective Date of Termination, based on target performance (excluding any special bonus payments), except that the bonus will be prorated for the portion of the fiscal year during which Executive was actively employed. This payment will be in lieu of any other payment to be made to Executive under the annual bonus plan for such fiscal year in which Executive is then participating. |
(c) | A lump sum amount equal to two (2) multiplied by the sum of the following: (i) the higher of: (A) Executive’s Base Salary in effect upon the Effective Date of Termination, or (B) Executive’s Base Salary in effect on the date of the Change in Control; and (ii) the higher of: (A) Executive’s annual target bonus opportunity for the fiscal year of the Company in which Executive’s Effective Date of Termination occurs, or (B) the average of the actual annual bonuses earned (whether or not deferred) by Executive under the annual bonus plan (excluding any special bonus payments) in which Executive participated in the three (3) fiscal years of the Company preceding the fiscal year of the Company in which Executive’s Effective Date of Termination occurs. If Executive has less than three (3) years of annual bonus participation preceding the fiscal year of the Company in which Executive’s Effective Date of Termination occurs, then Executive’s annual target bonus established under the annual bonus plan in which Executive is then participating for the fiscal year of the Company in which Executive’s Effective Date of Termination occurs shall be used for each fiscal year that Executive did not participate in the annual bonus plan, up to a maximum of three (3) years, to calculate the three (3) year average bonus payment. |
(d) | (i) Upon the consummation of the Change in Control, with respect to Executive’s equity-based long-term incentive awards that are outstanding on the Effective Date, immediate full vesting and lapse of all restrictions on any and all such awards (including but not limited to stock options, stock appreciation rights and restricted stock awards) held by Executive, and any performance conditions applicable to any such awards shall be deemed satisfied at target performance without proration. This provision shall override any conflicting language contained in Executive’s respective award agreements outstanding on the Effective Date and such award agreements are hereby deemed amended. |
(e) | The Company will allow Executive to elect to continue medical and dental coverage for Executive and Executive’s eligible dependents (for the same coverages as provided to its active employees) for a period of 18 months (the “COBRA Period”) following Executive’s Effective Date of Termination, provided Executive (i) timely elects COBRA continuation coverage, and (ii) timely pays the applicable COBRA premiums, subject to the rules and limitations that apply to COBRA coverages. |
(f) | From Executive’s Effective Date of Termination until the earlier of (i) 24 months following such date of termination or (ii) the date immediately prior to the date of Executive’s employment with a subsequent employer, the Company will provide Executive with outplacement services from a nationally recognized outplacement firm selected by Executive, subject to the limits described in this subsection. The aggregate amount paid by the Company for outplacement services will not exceed an amount equal to thirty five percent (35%) of Executive’s Base Salary as of Executive’s Effective Date of Termination (the “Total Outplacement Value”). |
(g) | The Company will continue at its expense Executive’s group life insurance coverage for a period of 18 months following Executive’s Effective Date of Termination on the same terms and conditions and in the same amount as prior to termination of employment. |
Article 3. | Form and Timing of Severance Benefits |
Article 4. | Noncompetition and Confidentiality |
4.1 | Consideration for Restrictive Covenants. Severance Benefits paid under this Agreement to Executive shall constitute consideration for Executive’s agreement to be bound by the restrictive covenants set forth in this Article 4. |
4.2 | Noncompetition. Executive agrees as follows: |
(a) | Executive will not perform Competitive Services, directly or indirectly, for any person, entity, business, or enterprise in the United States (the “Territory”) engaged in the business of the Company as being carried on as of the date of termination of Executive’s employment (“Competing Business”) during the term of Executive’s employment with the Company and for a period of 12 months following the date of such termination of employment. For purposes of the foregoing restriction, “Competitive Services” means performing services in a senior leadership position for any person, firm, partnership, corporation, limited liability company, or other entity that manufactures water infrastructure or pipe-related products for use in non-residential construction and performing duties substantially similar to those duties Executive performs for the Company in the two years prior to Executive’s termination of |
(b) | Executive acknowledges and agrees that: |
(i) | Executive is familiar with the business of the Company and the commercial and competitive nature of the industry and recognizes that the value of the Company’s business would be injured if Executive performed Competitive Services for a Competing Business; |
(ii) | The restrictive covenants contained in this Agreement are essential to the continued good will and profitability of the Company; |
(iii) | In the course of employment with the Company, Executive will become familiar with the trade secrets and other Protected Information (as defined below) of the Company and its subsidiaries, affiliates, and related entities, and that Executive’s services will be of special, unique, and extraordinary value to the Company; and |
(iv) | Executive’s skills and abilities enable Executive to seek and obtain similar employment in a business other than a Competing Business, and Executive possesses other skills that will serve as the basis for employment opportunities that are not prohibited by this Agreement. When Executive’s employment with the Company terminates, Executive expects to be able to earn a livelihood without violating the terms of this Agreement. |
Article 5. | Protected Rights |
Article 6. | The Company’s Payment Obligation |
Article 7. | Term of Agreement |
Article 8. | Legal Remedies |
(a) | Executive and the Company agree that, except for the Company’s enforcement of the post-termination restrictions set forth in Article 4 of this Agreement, and except as otherwise provided in this Agreement, final and binding arbitration shall be the exclusive remedy for any controversy, dispute, or claim arising out of or relating to this Agreement or Executive’s employment with the Company, including Executive’s hire, treatment in the workplace, or termination of employment. For example, if Executive’s employment with the Company is terminated and Executive contends that the termination violates any statute, contract or public policy, then Executive will submit the matter to arbitration for resolution, in lieu of any court or jury trial to which Executive would otherwise might be entitled. |
(b) | This Section covers all common law and statutory claims, including, but not limited to, any claim for breach of contract (including this Agreement) and for violation of laws forbidding discrimination on the basis of race, sex, color, religion, age, national origin, disability, or any other basis covered by applicable federal, state, or local law, and includes claims against the Company and/or any parents, affiliates, owners, officers, directors, employees, agents, general partners or limited partners of the Company, to the extent such claims involve, in any way, this Agreement or Executive’s employment with the Company. This Section covers all judicial claims that could be brought by either party to this Agreement, but does not cover administrative claims for workers’ compensation or unemployment compensation benefits or the filing of charges with government agencies that prohibit waiver of the right to file a charge. |
(c) | The arbitration shall be governed by JAMS Employment Arbitration Rules and Procedure except as modified herein. If a party chooses to have the arbitration proceeding administered by a third party, then the arbitration shall be administered by JAMS. If a party chooses to have the arbitration administered by JAMS, then the arbitration will “commence” in accordance with the JAMS Employment Arbitration Rules and Procedure. If a party chooses to have this matter arbitrated privately, then the arbitration will be deemed to “commence” on the date that the party provides a demand for arbitration and notice of claims and remedies sought outlining the facts relied upon, legal theories, and statement of claimed relief (“Demand”). The responding party shall serve a response to the claims and any counterclaims within 15 business days from the date of receipt of the Demand. |
(d) | Any arbitration shall be held in Atlanta, Georgia (unless the parties mutually agree in writing to another location within the United States) within 120 days of the commencement of the arbitration. |
(e) | The arbitration shall take place before a single arbitrator to be appointed by mutual agreement of counsel for each party or, if counsel cannot agree, then pursuant to the procedures set forth by JAMS. The parties may not have any ex parte communications with the arbitrator. |
(f) | The arbitrator may award any relief otherwise available to the parties by law or equity. |
(g) | The parties will be limited to two depositions per side, and limited written discovery as may be required by the arbitrator, not to exceed that allowed under the Federal Rules of Civil Procedure. |
(h) | Any hearing shall be completed within 120 days of the date of commencement of the arbitration, as the term “commencement” is defined by JAMS. The arbitrator shall issue its award within 30 days of the last hearing day. |
(i) | Unless Executive objects, the Company will pay the arbitrator’s fees. Each party shall pay its own costs and attorneys’ fees, if any, unless the arbitrator rules otherwise. A court may enter judgment upon the arbitrator’s award, either by confirming the award, or vacating, modifying or correcting the award, on any ground referred to in the Federal Arbitration Act, or where the findings of fact are not supported by substantial evidence, or where the conclusions of law are erroneous. |
(j) | The provisions of this Section are severable, meaning that if any provision in this Section 8.2 (“Dispute Resolution: Mutual Agreement to Arbitrate”) is determined to be unenforceable and cannot be reformed under applicable law, the remaining provisions shall remain in full effect, provided however, that any amendment of an unenforceable provision shall only be to the extent necessary and shall preserve the intent of the parties hereto. It is agreed and understood that the scope of this Section, including questions of arbitrability of any dispute, shall be determined by the arbitrator. |
(k) | Executive acknowledges that prior to accepting the provisions of this Section 8.2 and signing this Agreement, Executive has been given an opportunity to consult |
Article 9. | Successors |
Article 10. | Miscellaneous |
MUELLER WATER PRODUCTS, INC. By: ________________________________ J. Scott Hall President and Chief Executive Officer | |
EXECUTIVE: ________________________ Steven S. Heinrichs |
Subsidiaries of Mueller Water Products, Inc. | ||||
Entity | State of incorporation or organization | Doing business as | ||
Echologics B.V. | Netherlands | N/A | ||
Echologics, LLC | Delaware | Delaware Echologics, LLC | ||
Echologics Delaware, LLC | ||||
Echologics of Delaware, LLC | ||||
Echologics Pte. Ltd. | Singapore | N/A | ||
Henry Pratt Company, LLC | Delaware | Hydro Gate | ||
Lined Valve Company | ||||
Milliken Valve | ||||
Henry Pratt International, LLC | Delaware | N/A | ||
James Jones Company, LLC | Delaware | James Jones Company of Delaware, LLC | ||
Jingmen Pratt Valve Co. Ltd. | People's Republic of China | N/A | ||
Krausz Industries Development Ltd. | Israel | N/A | ||
Krausz Industries Ltd. | Israel | N/A | ||
Krausz USA Inc. | Delaware | Krausz Industries, Inc. | ||
Mueller Canada Holdings Corp. | Canada | N/A | ||
Mueller Canada Ltd. | Canada | Echologics | ||
Mueller Canada | ||||
Mueller Canada Echologics | ||||
Mueller Co. International Holdings, LLC | Delaware | N/A | ||
Mueller Co. LLC | Delaware | Mueller Manufacturing Company, LLC | ||
Mueller Company, LLC | ||||
Mueller Co. LP | ||||
Mueller Co. New York LLC | ||||
Mueller Group Co-Issuer, Inc. | Delaware | N/A | ||
Mueller Group, LLC | Delaware | Mueller Flow, LLC | ||
Mueller Group of Delaware, LLC | ||||
Mueller International Holdings Limited | United Kingdom | N/A | ||
Mueller International, LLC | Delaware | Mueller International (N.H.) | ||
Mueller Middle East (FZE) | United Arab Emirates | N/A | ||
Mueller Property Holdings, LLC | Delaware | N/A | ||
Mueller Service California, Inc. | Delaware | N/A | ||
Mueller Service Co., LLC | Delaware | Mueller Service Co. of Delaware | ||
Mueller Service Co. of Delaware, LLC | ||||
Mueller Systems, LLC | Delaware | Mueller Systems of Delaware, LLC | ||
Mueller SV, Ltd. | Canada | Singer Valve | ||
MWP Israel, Ltd. | Israel | N/A | ||
OSP, LLC | Delaware | OSP Properties, LLC | ||
OPS of Delaware, Limited Liability Company | ||||
PCA-Echologics Pty Ltd. | Australia | N/A | ||
Singer Valve, LLC | North Carolina | N/A | ||
Singer Valve (Taicang) Co., Ltd. | People's Republic of China | N/A | ||
U.S. Pipe Valve & Hydrant, LLC | Delaware | NA |
1. | I have reviewed this Annual Report on Form 10-K of Mueller Water Products, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Scott Hall |
Scott Hall |
Chief Executive Officer |
1. | I have reviewed this Annual Report on Form 10-K of Mueller Water Products, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Marietta Edmunds Zakas |
Marietta Edmunds Zakas |
Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Scott Hall |
Scott Hall |
Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Marietta Edmunds Zakas |
Marietta Edmunds Zakas |
Chief Financial Officer |
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Business Combination (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition [Table Text Block] | The allocation of consideration to the assets and liabilities of these companies, is presented below, in millions.
The following is a summary of the estimated fair values of the net assets acquired (in millions):
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Subsequent Events |
12 Months Ended |
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Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On October 25, 2019, our board of directors declared a dividend of $0.0525 per share on our common stock, payable on or about November 20, 2019 to stockholders of record at the close of business on November 8, 2019. On October 3, 2019, we acquired the outstanding noncontrolling interest of our consolidated joint venture, which does business as Pratt Industrial, for $5.4 million in cash, subject to certain post-close adjustments. We will continue to include the results of Pratt Industrial in our Infrastructure segment.
|
Accumulated Other Comprehensive Loss |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income (Loss) Note [Text Block] | Accumulated Other Comprehensive Loss Accumulated other comprehensive loss is presented below.
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Supplemental Statement of Operations Information (Tables) |
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Supplemental Income Statement Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Operations, Supplemental Disclosures [Table Text Block] | Selected supplemental statement of operations information is presented below.
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Quarterly Consolidated Financial Information (Unaudited) (Tables) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Information |
(1) The sum of the quarterly amounts may not equal the full year amount due to rounding.
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Summary of Significant Accounting Policies (Schedule of Product Warranty Liability) (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
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Accounting Policies [Abstract] | ||||
Balance at end of year | $ 17.1 | $ 20.0 | $ 8.5 | $ 2.0 |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||||
Balance at beginning of year | 6.0 | |||
Product Warranty Expense | 3.9 | 18.7 | 12.3 | |
Warranty payments | (6.8) | (7.2) | $ (5.8) | |
Balance at end of year | $ 6.5 | $ 6.0 |
Supplemental Cash Flow Information (Schedule of Cash Flow, Supplemental Disclosures) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Cash paid, net: | |||
Interest | $ 23.6 | $ 8.9 | $ 19.5 |
Income taxes | $ 29.1 | $ 10.7 | $ 31.9 |
Income Taxes (Reconciliation of Statutory Taxes to Effective Taxes) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Income Tax Disclosure [Abstract] | |||
Tax at U.S. federal statutory income tax rate of 35% | $ 17.2 | $ 23.4 | $ 27.5 |
Adjustments to reconcile to income tax expense (benefit): | |||
Federal Valuation Allowance | 1.3 | 0.5 | 0.4 |
State income taxes, net of federal benefit | 3.2 | 4.8 | 2.7 |
Domestic production activities deduction | 0.0 | (2.4) | (4.5) |
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount | 0.0 | (42.5) | (0.4) |
Federal transition tax | (0.6) | 7.5 | 0.0 |
Uncertain tax positions | (1.4) | 0.0 | 0.0 |
Basis difference in foreign investment | (1.1) | 0.0 | 0.0 |
Excess tax benefits related to stock compensation | (0.3) | (0.6) | (2.1) |
Tax Credits | (1.8) | (1.7) | (1.4) |
Other nondeductible expenses | 1.3 | 0.5 | 0.6 |
Foreign income taxes | 0.1 | 0.0 | 0.3 |
Nondeductible compensation | 0.3 | 0.2 | 0.5 |
Other income tax | 0.1 | 0.4 | 0.6 |
Income tax expense (benefit) | $ 18.3 | $ (9.9) | $ 24.2 |
Income Taxes (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2017 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Mar. 31, 2018 |
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Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | 35.00% | |||
Weighted Average Deferred Income Tax Provision Rate | 25.00% | 39.00% | |||
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount | $ 0.0 | $ (42.5) | $ (0.4) | ||
Transition Tax Expense | $ 7.5 | ||||
Effective Income Tax Rate Reconciliation, Federal Transition Tax, Amount | (0.6) | 7.5 | 0.0 | ||
Unrecognized Tax Benefits, Interest on Income Taxes Accrued | 0.3 | 0.8 | |||
Income tax expense (benefit) | $ 18.3 | (9.9) | $ 24.2 | ||
Deferred Tax Assets, Tax Credit Carryforwards, Foreign | $ 4.5 |
Consolidated Statement Of Stockholders' Equity - USD ($) $ in Millions |
Total |
Common stock |
Additional paid-in capital |
Accumulated deficit |
Accumulated other comprehensive income (loss) |
Noncontrolling Interest [Member] |
Stock-based Compensation Related [Member] |
Stock-based Compensation Related [Member]
Common stock
|
Stock-based Compensation Related [Member]
Additional paid-in capital
|
Stock-based Compensation Related [Member]
Accumulated deficit
|
Stock-based Compensation Related [Member]
Accumulated other comprehensive income (loss)
|
Stock-based Compensation Related [Member]
Noncontrolling Interest [Member]
|
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Balance at Sep. 30, 2016 | $ 419.5 | $ 1.6 | $ 1,563.9 | $ (1,078.9) | $ (68.3) | $ 1.2 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net income (loss) | 123.2 | |||||||||||
Net Income (Loss) Attributable to Noncontrolling Interest | (0.1) | |||||||||||
Net Income (Loss) Attributable to Parent | 123.3 | 0.0 | 0.0 | 123.3 | 0.0 | |||||||
Dividends declared | (24.0) | 0.0 | (24.0) | 0.0 | 0.0 | 0.0 | ||||||
Stock-based compensation | 6.2 | 0.0 | 6.2 | 0.0 | 0.0 | 0.0 | ||||||
Shares retained for employee taxes | $ (2.7) | $ 0.0 | $ (2.7) | $ 0.0 | $ 0.0 | $ 0.0 | ||||||
Stock issued under stock compensation plans | 5.8 | 0.0 | 5.8 | 0.0 | 0.0 | 0.0 | ||||||
Stock repurchased under buyback program | (55.0) | 0.0 | (55.0) | 0.0 | 0.0 | 0.0 | ||||||
Other Comprehensive Income (Loss), Net of Tax | 16.5 | 0.0 | 0.0 | 0.0 | 16.5 | 0.0 | ||||||
Balance at Sep. 30, 2017 | 489.5 | 1.6 | 1,494.2 | (955.6) | (51.8) | 1.1 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net income (loss) | 106.0 | |||||||||||
Net Income (Loss) Attributable to Noncontrolling Interest | 0.4 | |||||||||||
Net Income (Loss) Attributable to Parent | 105.6 | 0.0 | 0.0 | 105.6 | 0.0 | |||||||
Dividends declared | (30.1) | 0.0 | (30.1) | 0.0 | 0.0 | 0.0 | ||||||
Stock-based compensation | 5.2 | 0.0 | 5.2 | 0.0 | 0.0 | 0.0 | ||||||
Shares retained for employee taxes | (2.1) | 0.0 | $ (2.1) | 0.0 | 0.0 | 0.0 | ||||||
Stock issued under stock compensation plans | 7.3 | 0.0 | 7.3 | 0.0 | 0.0 | 0.0 | ||||||
Stock repurchased under buyback program | (30.0) | 0.0 | (30.0) | 0.0 | 0.0 | 0.0 | ||||||
Other Comprehensive Income (Loss), Net of Tax | 19.0 | 0.0 | 0.0 | 0.0 | 19.0 | 0.0 | ||||||
Balance at Sep. 30, 2018 | 564.8 | 1.6 | 1,444.5 | (850.0) | (32.8) | 1.5 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net income (loss) | 64.5 | |||||||||||
Net Income (Loss) Attributable to Noncontrolling Interest | 0.7 | |||||||||||
Net Income (Loss) Attributable to Parent | 63.8 | 0.0 | 0.0 | 0.0 | ||||||||
Dividends declared | (32.0) | 0.0 | (32.0) | 0.0 | 0.0 | 0.0 | ||||||
Stock-based compensation | 4.3 | 0.0 | 4.3 | 0.0 | 0.0 | 0.0 | ||||||
Shares retained for employee taxes | $ (1.3) | $ 0.0 | $ 0.0 | $ 0.0 | $ 0.0 | |||||||
Stock issued under stock compensation plans | 5.2 | 0.0 | 5.2 | 0.0 | 0.0 | 0.0 | ||||||
Stock repurchased under buyback program | (10.0) | 0.0 | (10.0) | 0.0 | 0.0 | 0.0 | ||||||
Other Comprehensive Income (Loss), Net of Tax | (3.2) | 0.0 | 0.0 | 0.0 | (3.2) | 0.0 | ||||||
Balance at Sep. 30, 2019 | $ 592.3 | $ 1.6 | $ 1,410.7 | $ (786.2) | $ (36.0) | $ 2.2 |
Discontinued Operations, Assets Held for Sale and Divestitures Disposal Group, detail of Gain on Sale (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2017 |
Sep. 30, 2017 |
Jan. 06, 2017 |
Sep. 30, 2014 |
|
Disposal Group, Details of Gain on Sale [Line Items] | ||||
Disposal Group, Including Discontinued Operation, Consideration | $ 305.7 | |||
Discontinued Operations, Receivable from Buyer of Discontinued Operation | 1.9 | $ 11.8 | ||
Total proceeds | 307.6 | |||
Transaction expenses | (8.3) | |||
Net proceeds | 299.3 | |||
Assets and liabilities disposed | $ (189.8) | |||
Income before income taxes | $ 109.5 | |||
Income tax | $ (41.6) | |||
Gain on sale, net of tax | $ 67.9 |
Revenue from Contracts with Customers Narrative (Details) |
12 Months Ended |
---|---|
Sep. 30, 2019 | |
Transferred over Time [Member] | |
Disaggregation of Revenue [Line Items] | |
Percent of Revenue by Recognition Timing | 2.00% |
Transferred at Point in Time [Member] | |
Disaggregation of Revenue [Line Items] | |
Percent of Revenue by Recognition Timing | 98.00% |
Retirement Plans (Net Periodic Benefit Cost) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Service cost | $ 1.6 | $ 1.8 | $ 2.0 |
Interest cost | 13.9 | 14.3 | 14.3 |
Expected return on plan assets | (16.2) | (16.5) | (16.9) |
Amortization of net loss (gain) | 1.9 | 3.2 | 4.0 |
Curtailment / special settlement loss (gain) | 0.7 | 0.0 | 0.0 |
Other | 0.1 | 0.0 | 0.0 |
Defined Benefit Plan, Net Periodic Benefit Cost other than Service Cost | 0.4 | 1.0 | 1.4 |
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) | 2.0 | 2.8 | $ 3.4 |
Pension Plan, Defined Benefit [Member] | |||
Service cost | 1.6 | 1.8 | |
Interest cost | $ 13.9 | $ 14.3 |
Capital Stock (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Outstanding Shares [Roll Forward] | |||
Shares outstanding | 157,332,121 | 158,590,383 | 161,693,051 |
Exercised stock options | 726,636 | 851,628 | 905,834 |
Exercise of employee stock purchase plan | 167,806 | 150,669 | 150,174 |
Vesting of restricted stock units, net of shares withheld for taxes | 200,431 | 232,875 | 262,488 |
Treasury Stock, Shares, Acquired | (6,475) | ||
Shares outstanding | 157,462,140 | 157,332,121 | 158,590,383 |
Stock repurchased under buyback program | (1,074,234) | (2,573,475) | (4,581,227) |
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period | 86,516 | ||
Performance Shares [Member] | |||
Outstanding Shares [Roll Forward] | |||
Settlement of performance-based restricted stock units, net of shares withheld for taxes | 332,875 | 146,061 | |
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period | 109,380 | 160,063 |
Capital Stock |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note Disclosure | Capital Stock Common stock share activity is presented below.
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The components of income before income taxes from continuing operations are presented below.
On December 22, 2017, HR-1, commonly referred to as the Tax Cuts and Jobs Act (“Act”), was enacted, which made significant revisions to federal income tax laws, including lowering the corporate income tax rate to 21% from 35% effective January 1, 2018, overhauling the taxation of income earned outside the United States and eliminating or limiting certain deductions. Our deferred tax assets and liabilities are recorded at the enacted tax rates in effect when we expect to recognize the related tax expenses or benefits. The average of these rates varies slightly from year to year but historically has been approximately 39%. With the legislation changing rates taking place in the quarter ended December 31, 2017, we remeasured our deferred tax items at an average rate of approximately 25% and recorded an income tax benefit of $42.5 million. The Act also imposes a one-time transition tax on the undistributed, previously-untaxed, post-1986 foreign “earnings and profits” (as defined by the IRS) of certain U.S.-owned corporations. Determination of our transition tax liability requires us to calculate foreign earnings and profits going back to 1992 and then to assess our historical overall foreign loss position and the applicability of certain foreign tax credits. In March 2018, we recorded a provisional transition tax of $7.5 million for the one-time deemed repatriation tax on accumulated foreign earnings of our foreign subsidiaries. Upon further analyses of the Act and Notices and regulations issued and proposed by the U.S. Department of the Treasury and IRS, we finalized our calculations of the transition tax liability during the quarter ended December 31, 2018. As a result, we reduced our initial provision by $0.6 million, which is included as a component of income tax expense. As of September 30, 2019, the remaining balance of our transition obligation is $5.8 million, which will be paid over the next seven years, as provided in the Act. Other than for Krausz’s investment in its U.S. subsidiary, we have not provided income taxes for unrepatriated foreign earnings that may be subject to withholding tax or any outside basis differences inherent in our foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations. We have a foreign tax credit carryforward of $4.5 million that we do not expect to utilize prior to expiration. The components of income tax (benefit) expense are presented below.
The reconciliation between income tax expense at the U.S. federal statutory income tax rate and reported income tax expense from continuing operations is presented below.
Deferred income tax balances are presented below.
We reevaluate the need for a valuation allowance against our deferred tax assets each quarter, considering results to date, projections of taxable income, tax planning strategies and reversing taxable temporary differences. Our state net operating loss carryforwards, which expire between years 2024 and 2032, remain available to offset future taxable earnings. The following table summarizes information concerning our gross unrecognized tax benefits.
Substantially all unrecognized tax benefits would, if recognized, impact the effective tax rate. We recognize interest related to uncertain tax positions as interest expense and recognize any penalties incurred as a component of selling, general and administrative expenses. At September 30, 2019 and 2018, we had $0.3 million and $0.8 million, respectively, of accrued interest expense related to unrecognized tax benefits. The federal income tax returns for Mueller Co. and Anvil are closed for years prior to 2005 and for Mueller Water Products, Inc. for 2007 and 2008. Our 2009 through 2014 returns are closed except to the extent net operating losses from those years have been utilized on subsequent years’ returns. We also remain liable for any taxes related to U.S. Pipe sales for periods prior to 2012 pursuant to the terms of the sale agreement with the purchaser of the segment. Certain tax years remain open for our predecessor company, U.S. Pipe, which was a subsidiary of Walter Energy in those years. See Note 17. Our state income tax returns are generally closed for years prior to 2015, except to the extent of our state net operating loss carryforwards. Our Canadian income tax returns are generally closed for years prior to 2012. We do not have any material unpaid assessments.
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Discontinued Operations, Assets Held for Sale and Divestitures (Tables) |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Table Text Block] | The table below presents a summary of the sale of Anvil, in millions.
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Schedule of Discontinued Operations Income (Loss) [Table Text Block] | The table below presents a summary of the operating results for the Anvil discontinued operations in 2017, in millions. These operating results do not reflect what they would have been had Anvil not been classified as discontinued operations.
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Derivative Financial Instruments (Tables) |
12 Months Ended |
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Sep. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] | The values of our currency swap contracts were liabilities of $0.3 million and $0.9 million as of September 30, 2019 and 2018, respectively, and are included in other noncurrent liabilities in our Consolidated Balance Sheets.
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Stock-based Compensation Plans (Tables) |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block] | The effect of stock-based compensation on our statements of operations, including discontinued operations, is presented below.
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Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | Restricted stock unit activity under the 2006 Plan is summarized below.
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Schedule of Nonvested Performance-based Units Activity [Table Text Block] | Stock-settled PRSUs activity under the 2006 Plan is summarized below.
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Schedule of Share-based Compensation. Options | Stock option activity under the 2006 Plan is summarized below.
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Share-based Payment Arrangement, Option, Exercise Price Range [Table Text Block] | The ranges of exercise prices for stock options outstanding at September 30, 2019 are summarized below.
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Schedule of Share-based Compensation, Phantom Award, Activity | Phantom Plan activity is summarized below.
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Discontinued Operations, Assets Held for Sale and Divestitures Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||||
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Dec. 31, 2017 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 04, 2017 |
Jan. 06, 2017 |
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Disposal Group, Including Discontinued Operation, Consideration | $ 305.7 | |||||
Gain (Loss) on Disposition of Property Plant Equipment | $ 9.0 | $ 2.5 | $ 9.0 | $ 0.0 | ||
Cash [Member] | ||||||
Disposal Group, Including Discontinued Operation, Consideration | $ 7.4 | |||||
Prepaid Expenses and Other Current Assets [Member] | ||||||
Disposal Group, Including Discontinued Operation, Prepaid and Other Assets | 0.8 | |||||
Property, Plant and Equipment [Member] | ||||||
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment | 0.4 | |||||
Environmental Remediation [Member] | ||||||
Disposal Group, Including Discontinued Operation, Consideration | $ 1.2 |
Revenue from Contracts with Customers Components of Trade Receivables (Details) - USD ($) $ in Millions |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 |
Sep. 30, 2018 |
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Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | The table below represents the balances of our customer receivables and deferred revenues.
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Billed receivables | $ 171.0 | $ 165.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unbilled receivables | 4.5 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total customer receivables | 175.5 | 167.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred revenues | $ 4.7 | $ 3.3 |
Consolidated Statement of Comprehensive Income Statement - USD ($) $ in Millions |
12 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Net Income (Loss) Attributable to Parent | $ 63.8 | $ 105.6 | $ 123.3 |
Other comprehensive income (loss): | |||
Minimum pension liability | 13.3 | (27.4) | (17.4) |
Income tax effects | 3.8 | (6.9) | (6.7) |
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax | 6.3 | (3.0) | 2.8 |
Amortization of interest expense on terminated swap contracts | 0.0 | 2.4 | 4.9 |
Income tax effects | 0.0 | (0.9) | (1.9) |
Other Comprehensive Income (Loss), Net of Tax | (3.2) | 19.0 | 16.5 |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent | $ 60.6 | $ 124.6 | $ 139.8 |
Retirement Plans (Accumulated and Projected Benefit Obligations) (Details) - USD ($) $ in Millions |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Pension Plans with accumulated benefit obligations in excess of plan assets | ||
Projected benefit obligation | $ 356.6 | $ 6.3 |
Accumulated benefit obligation | 356.6 | 6.3 |
Fair value of plan assets | 351.6 | 5.0 |
Pension plans with plan assets in excess of accumulated benefit obligations | ||
Projected benefit obligation | 0.0 | 327.1 |
Accumulated benefit obligation | 0.0 | 327.1 |
Fair value of plan assets | $ 0.0 | $ 338.5 |
Retirement Plans (Assumptions Used) (Details) |
12 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Weighted average used to determine benefit obligations: | |||
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate | 3.26% | 4.37% | 3.88% |
Weighted average used to determine net periodic cost: | |||
Discount rate | 4.37% | 3.88% | 3.68% |
Expected return on plan assets | 4.93% | 4.68% | 5.16% |
Minimum [Member] | |||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||
Defined Benefit Plan Expected Return on Plan Assets Major Asset Classes Time Horizon | 10 |
Retirement Plans |
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Defined Benefit Plan [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Postretirement Benefits Disclosure | Retirement Plans We have had various pension plans (“Pension Plans”), which we have funded in accordance with their requirements and, where applicable, in amounts sufficient to satisfy the minimum funding requirements of applicable laws. The Pension Plans provided benefits based on years of service and compensation or at stated amounts for each year of service. The annual measurement date for all Pension Plans was September 30. During the quarter ended March 31, 2019, we settled our obligations to our Canadian pension plan participants through a combination of lump-sum payments and purchases of annuities. We made a net contribution to the plans of $0.7 million, which is included in pension costs other than service, to fund these settlements. As a result, we no longer have any plan assets or obligation in connection with any Canadian defined benefit pension plan. During 2018, with a recently negotiated labor contract, a group of our collectively bargained employees are no longer accruing benefits under a multi-employer pension plan. The affected employees are now participants in our defined contribution retirement plan with an employer match and one-time contribution of $0.4 million, which vests through 2020. During the quarter ended March 31, 2019, we recorded an estimated settlement liability for exiting this plan, which resulted in an expense of $1.1 million, which we included in other charges. During the quarter ended June 30, 2019, we paid this amount and have settled the liability to the multi-employer pension plan. As a result, at September 30, 2019, our only remaining defined benefit plan is our U.S. Pension Plan (“Plan”). We did not contribute to the Plan in 2018 or 2019 and do not anticipate contributing to the Plan in 2020. During March 2017, the Financial Accounting Standards Board issued Accounting Standards Update No. 2017-07 (“ASU 2017-07”). ASU 2017-07 required us to exclude from operating income the components of net periodic benefit cost other than service cost. We adopted ASU 2017-07 on October 1, 2017, and this adoption required reclassification of pension costs other than service in the 2017 results. The components of net periodic benefit cost for our Pension Plans are presented below.
Balance sheet information for Pension Plans with a net liability funded status is presented below.
Balance sheet information for Pension Plans with a net asset funded status is presented below.
Pension Plan activity in accumulated other comprehensive loss, before tax, in 2019 is presented below, in millions.
We amortize amounts in accumulated other comprehensive loss representing unrecognized prior year service cost and unrecognized loss related to the Pension Plans over the weighted average life expectancy of their inactive participants. Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to ten percent of the greater of the benefit obligation and the market-related value of assets. Gains and losses in excess of the corridor are generally amortized over the average remaining lifetime of the plan participants. We expect to amortize $2.8 million of unrecognized loss into net periodic benefit cost from accumulated other comprehensive loss in 2020. A summary of key assumptions for our Pension Plans is below.
Amounts recognized for Pension Plans are presented below.
The discount rates for determining the present value of pension obligations were selected using a “bond settlement” approach, which constructs a hypothetical bond portfolio that could be purchased such that the coupon payments and maturity values could be used to satisfy the projected benefit payments. The discount rate is the equivalent rate that results in the present value of the projected benefit payments equaling the market value of this bond portfolio. Only high quality (AA graded or higher), non-callable corporate bonds are included in this bond portfolio. We rely on the Pension Plans’ actuaries to assist in the development of the discount rate model. The expected returns on plan assets were determined with the assistance of the Pension Plans’ actuaries and investment consultants. Expected returns on plan assets were developed using forward looking returns over a time horizon of 10 to 15 years for major asset classes along with projected risk and historical correlations. We maintain a single trust that holds the assets of the Plan. Near the end of 2017, we directed our investment manager to adjust the asset allocation from about 30% equity investments to about 20% equity investments. This trust’s strategic asset allocations, tactical range at September 30, 2019 and actual asset allocations are presented below.
Assets of the Plan are allocated to various investments to attain diversification and reasonable risk-adjusted returns while also managing the exposure to asset and liability volatility. These ranges are targets and deviations may occur from time to time due to market fluctuations. Portfolio assets are typically rebalanced to the allocation targets at least annually. The assets of the Plan are primarily invested in investment trusts valued at net asset value, which in turn hold fixed income and equity investments. The valuation methodologies used to measure the assets of the Plan at fair value are:
The assets of the Plan by level within the fair value hierarchy are presented below.
Our estimated future pension benefit payments are presented below in millions.
Defined Contribution Retirement Plans-Certain of our employees participate in defined contribution 401(k) plans or similar non-U.S plans. We make matching contributions as a function of employee contributions. Matching contributions were $5.5 million, $4.7 million and $4.1 million during 2019, 2018 and 2017, respectively.
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Identifiable Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Identifiable Intangible Assets | Intangible Assets and Goodwill Intangible Assets Direct internal and external costs to develop software licensed by Technologies’ customers are capitalized. Capitalized costs are amortized over the 6-year estimated useful life of the software, beginning when the software is complete and ready for its intended use. At September 30, 2019, the remaining weighted-average amortization period for this software was 2.5 years. Amortization expense related to such software assets was $3.3 million, $2.9 million and $2.4 million for 2019, 2018 and 2017, respectively. Amortization expense for each of the next five years is scheduled to be $3.7 million in 2020, $2.9 million in 2021, $2.4 million in 2022, $1.9 million in 2023 and $1.2 million in 2024. At September 30, 2019, the remaining weighted-average amortization period for the business combination-related finite-lived customer relationship and technology intangible assets were 6.3 years and 5.2 years, respectively. Amortization expense related to these assets was $23.7 million, $19.9 million and $19.7 million for 2019, 2018 and 2017, respectively. Amortization expense for each of the next five years is scheduled to be $25.0 million in 2020, $24.9 million in 2021, $24.9 million in 2022, $24.6 million in 2023 and $24.1 million in 2024. Intangible assets are presented below.
Goodwill Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis each September 1st and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Changes in the carrying amount of goodwill were as follows:
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Supplemental Balance Sheet Information (Tables) |
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Schedule Of Selected Supplemental Balance Sheet Information [Table Text Block] | Selected supplemental balance sheet information is presented below.
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Identifiable Intangible Assets (Tables) |
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Schedule of Goodwill [Table Text Block] | Changes in the carrying amount of goodwill were as follows:
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Schedule of Intangible Assets and Goodwill [Table Text Block] | Intangible assets are presented below.
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Derivative Financial Instruments Fair Vale of Derivatives Table (Tables) |
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Derivatives, Fair Value [Line Items] | |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] | The values of our currency swap contracts were liabilities of $0.3 million and $0.9 million as of September 30, 2019 and 2018, respectively, and are included in other noncurrent liabilities in our Consolidated Balance Sheets.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments And Contingencies | 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 financial statements cannot be predicted with certainty as any such effect depends on the amount and timing of the resolution of such matters and potential insurance coverage. Other than the litigation described below, we do not believe that any of our outstanding litigation would have a material adverse effect on our business 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 accrue for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and reasonably estimable. In the acquisition agreement pursuant to which a predecessor to Tyco sold our businesses to a previous owner 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. Since 2007, Tyco has engaged in multiple corporate restructurings, split-offs and divestitures. While none of these transactions directly affects the indemnification obligations of the Tyco indemnitors under the 1999 acquisition agreement, the result of such transactions is that the assets of, and control over, such Tyco indemnitors has changed. Should any of these Tyco indemnitors become financially unable or fail to comply with the terms of the indemnity, we may be responsible for such obligations or liabilities. On July 13, 2010, Rohcan Investments Limited, 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$10.0 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. The purchaser of U.S. Pipe has been identified as a “potentially responsible party” (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) in connection with a former manufacturing facility operated by U.S. Pipe that was in the vicinity of a proposed Superfund site located in North Birmingham, Alabama. Under the terms of the acquisition agreement relating to our sale of U.S. Pipe, we agreed to indemnify the purchaser for certain environmental liabilities, including those arising out of the former manufacturing site in North Birmingham. Accordingly, the purchaser tendered the matter to us for indemnification, which we accepted. Ultimate liability for the site will depend on many factors that have not yet been determined, including the determination of EPA’s remediation costs, the number and financial viability of the other PRPs (there are four other PRPs currently) and the determination of the final allocation of the costs among the PRPs. Accordingly, because the amount of such costs cannot be reasonably estimated at this time, no amounts had been accrued for this matter at September 30, 2019. Walter Energy. We were a member of the Walter Energy federal tax consolidated group, through December 14, 2006, at which time the company was spun-off from Walter Industries. Until our spin-off from Walter Energy, we joined in the filing of the Walter Energy consolidated federal income tax return for each taxable year during which we were a member of the consolidated group. As a result, we are jointly and severally liable for the federal income tax liability, if any, of the consolidated group for each of those years. Accordingly, we could be liable in the event any such federal income tax liability is incurred, and not discharged, by any other member of the Walter Energy tax consolidated group for any period during which we were included in the Walter Energy tax consolidated group. In July 2015, Walter Energy filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in the Northern District of Alabama (“Chapter 11 Case”). On February 2, 2017, the Chapter 11 Case was converted to a liquidation proceeding under Chapter 7 of the U.S. Bankruptcy Code, pursuant to which Walter Energy is now in the process of being wound down and liquidated. The IRS had alleged that Walter Energy owed substantial amounts for prior taxable periods in which we were a member of the Walter Energy tax consolidated group (specifically, 1983-1994, 2000-2002 and 2005). On January 11, 2016, the IRS filed a proof of claim in the Chapter 11 Case, alleging that Walter Energy owed taxes,interest and penalties for the years 1983-1994, 2000-2002 and 2005 in an aggregate amount of $554.3 million ($229.1 million of which the IRS claimed was entitled to priority status in the Chapter 11 Case). The IRS asserted that its claim was based on an alleged settlement of Walter Energy’s tax liability for years 1983 through 1994, which Walter Energy disputed. In the proof of claim, the IRS included an alternative calculation in an aggregate amount of $860.4 million, which it asserted would be appropriate in the event the alleged settlement were determined to be non-binding ($535.3 million of which the IRS claimed was entitled to priority status in the Chapter 11 Case). The IRS had indicated its intent to pursue collection of amounts included in the proofs of claim from former members of the Walter Energy tax consolidated group. We have been working constructively with the parties involved in this matter in an effort to reach a consensual resolution with respect to the Walter Tax Liability. On November 5, 2019, we acknowledged and agreed to be bound by a settlement agreement between the bankruptcy trustee in the Walter Bankruptcy Case and the Internal Revenue Service to resolve the Walter Tax Liability. On November 18, 2019, the settlement agreement was approved by the U.S. Bankruptcy Court in the Northern District of Alabama which is responsible for the Walter Bankruptcy Case. The approval was made over the objection of a third party and is subject to appeal and/or a motion for reconsideration, the outcome of which cannot be predicted. Should the approval order become effective, under the terms of the settlement agreement, we would contribute approximately $22 million to the settlement, plus interest through the payment date, with another former Walter Energy subsidiary agreeing to contribute approximately $17 million to the settlement. At September 30, 2019, we had accrued a current liability of $22 million. No assurances as to the timing or outcome of any appeal or motion to reconsider the approval order can be made; however, we expect our liabilities with respect to the Walter Tax Liability will be fully resolved should the order become effective and we make the required contributions. Chapman v. Mueller Water Products, et al. In 2017, our warranty analyses identified that certain Technologies radio products produced prior to 2017 and installed in particularly harsh environments had been failing at higher than expected rates. During the quarter ended March 31, 2017, we conducted additional testing of these products and revised our estimates of warranty expenses. As a result, we recorded additional warranty expense of $9.8 million in the second quarter of 2017. During the quarter ended June 30, 2018, we completed a similar analysis and determined, based on this new information, that certain other Technologies products had been failing at higher-than-expected rates as well and that the average cost to repair or replace certain products under warranty was higher than previously estimated. As a result, in the third quarter of 2018, we recorded additional warranty expense of $14.1 million associated with such products. Related to the above warranty expenses, on April 11, 2019, an alleged stockholder filed a putative class action lawsuit against Mueller Water Products, Inc. and certain of our former and current officers (collectively, the “Defendants”) in the U.S. District Court for the Southern District of New York. The proposed class consists of all persons and entities that acquired our securities between May 9, 2016 and August 6, 2018 (the “Class Period”). The complaint alleges violations of the federal securities laws, including, among other things, that we made materially false and/or misleading statements and failed to disclose material adverse facts about our business, operations, and prospects during the proposed Class Period. The plaintiff seeks compensatory damages and attorneys’ fees and costs but does not specify the amount. Accordingly, we cannot reasonably estimate the amount of any cost or liabilities related to this matter, and therefore no amounts have been accrued related to this matter as of September 30, 2019. Defendants filed their motion to dismiss on November 1, 2019. We believe the allegations are without merit and intend to vigorously defend against the claims. However, the outcome of this legal proceeding cannot be predicted with certainty. Mass Shooting Event at our Henry Pratt Facility in Aurora, Illinois. On February 15, 2019, we experienced a mass shooting event at our Henry Pratt facility in Aurora, Illinois, in which five employees were killed and one employee and six law enforcement officers were injured. Various workers’ compensation claims arising from the event have been made to date, and we anticipate that additional claims may be made, and that liability under such claims, if any, is not expected to have a material adverse effect on our results of operations or cash flows. However, the possibility of other legal proceedings, and any related effects, arising from this event cannot be predicted with certainty. 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 divestitures of U.S. Pipe and Anvil, 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 monitor and analyze our warranty experience and costs periodically and may revise our warranty reserves as necessary. Critical factors in our reserve analyses include warranty terms, specific claim situations, incurred and projected failure rates, the nature of product failures, product and labor costs, and general business conditions. We are party to a number of other lawsuits arising in the ordinary course of business, including product liability cases for products manufactured by us or third parties. 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 business or prospects. Operating Leases. We maintain operating leases primarily for equipment and facilities. Rent expense was $5.8 million, $6.4 million and $5.8 million for 2019, 2018 and 2017, respectively. Future minimum payments under non-cancellable operating leases are $6.1 million, $5.1 million, $4.2 million, $3.8 million and $3.7 million during 2020, 2021, 2022, 2023 and 2024, respectively. Total minimum payments due beyond 2024 are $15.8 million.
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Supplemental Statement of Operations Information |
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Statement of Operations, Supplemental Disclosures [Text Block] | Supplemental Statement of Operations Information On September 7, 2017, we announced a strategic reorganization plan designed to accelerate our product innovation and revenue growth. We have adopted a matrix management structure, where business teams have line and cross-functional responsibility for managing distinct product portfolios. Engineering, operations, sales and marketing and other functions were centralized to better align with business needs and generate greater efficiencies. We recorded $4.6 million in other charges primarily for severance related to this strategic reorganization plan in 2018 and consider this plan to be complete at September 30, 2019. In October 2018, we announced the move of our Middleborough, Massachusetts research and development facility to Atlanta to consolidate our resources and accelerate product innovation through creation of a research and development center of excellence for software and electronics. Expenses incurred for these plans were primarily personnel-related and included in other charges in the Consolidated Statements of Operations. We recorded $4.3 million related to this strategic reorganization plan in 2019, and a $0.7 million accrual remains as of September 30, 2019. On February 15, 2019, we experienced a mass shooting tragedy at our Henry Pratt facility in Aurora, Illinois. The event resulted in the death of five employees and injuries to one employee and six law enforcement officials. For the year ended September 30, 2019, we incurred $5.1 million in expenses related to this tragedy, which are included in other charges, and a $0.9 million accrual remains as of September 30, 2019. These amounts are net of anticipated insurance recoveries. Selected supplemental statement of operations information is presented below.
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Summary of Significant Accounting Policies (Tables) |
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Financing Receivable, Current, Allowance for Credit Loss [Table Text Block] | The following table summarizes information concerning our allowance for credit losses.
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Schedule of Reserves for Excess and Obsolete Inventory | The following table summarizes information concerning our inventory valuation reserves.
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Schedule of Product Warranty Liability | Activity in accrued warranty, reported as part of both other current liabilities and other noncurrent liabilities, is presented below.
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Accumulated Other Comprehensive Loss (Tables) |
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Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | Accumulated other comprehensive loss is presented below.
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Organization | Organization Mueller Water Products, Inc., a Delaware corporation, together with its consolidated subsidiaries, operates in two business segments: Infrastructure and Technologies. Infrastructure (previously referred to as “Mueller Co.”) manufactures valves for water and gas systems, including butterfly, iron gate, tapping, check, knife, plug, automatic control and ball valves, as well as dry-barrel and wet-barrel fire hydrants and pipe repair products. Technologies (previously referred to as “Mueller Technologies”) offers metering systems, leak detection, pipe condition assessment and other products and services for the water infrastructure industry. The “Company,” “we,” “us” or “our” refer to Mueller Water Products, Inc. and its subsidiaries. With regard to the Company’s segments, “we,” “us” or “our” may also refer to the segment being discussed. In July 2014, Infrastructure acquired a 49% ownership in an industrial valve joint-venture for $1.7 million. Due to substantive control features in the joint-venture agreement, all of the joint venture’s assets, liabilities and results of operations are included in our consolidated financial statements. We included an adjustment for the income attributable to noncontrolling interest in selling, general and administrative expenses. Noncontrolling interest is recorded at its carrying value, which approximates fair value. As described in Note 18., Infrastructure acquired the noncontrolling interest on October 3, 2019. On December 3, 2018, we completed our acquisition of Krausz Development Ltd. and subsidiaries (“Krausz”). We include the financial statements of Krausz in our consolidated financial statements on a one-month lag. Refer to Note 4 for additional disclosures related to the acquisition. 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. Certain reclassifications have been made to previously reported amounts to conform to the current presentation. Unless the context indicates otherwise, whenever we refer to a particular year, we mean our fiscal year ended or ending September 30 in that particular calendar year.
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Number of Reportable Segments | business_segments | 2 | ||
Variable Interest Entity, Qualitative or Quantitative Information, Ownership Percentage | 49.00% | ||
Payments to Acquire Interest in Joint Venture | $ | $ 1.7 |
Income Taxes (Summary of Valuation Allowance) (Details) $ in Millions |
Sep. 30, 2019
USD ($)
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SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |
Balance at beginning of year | $ 1.9 |
Balance at end of year | $ 2.8 |
Segment Information (Schedule Of Selected Supplemental Balance Sheet Information) (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Segment Reporting Information [Line Items] | |||||||||||
Intercompany sales | $ 266.9 | $ 274.3 | $ 234.0 | $ 192.8 | $ 254.3 | $ 250.2 | $ 233.2 | $ 178.3 | $ 968.0 | $ 916.0 | $ 826.0 |
Operating income | 39.0 | $ 47.2 | $ 22.2 | $ 15.9 | 40.5 | $ 30.6 | $ 29.9 | $ 20.7 | 124.3 | 121.7 | 102.1 |
Depreciation and amortization | 53.0 | 43.7 | 41.9 | ||||||||
2016 | 16.3 | 10.5 | 10.4 | ||||||||
Capital expenditures | (86.6) | (55.7) | (40.6) | ||||||||
Property, plant and equipment, net | 217.1 | 150.9 | 217.1 | 150.9 | |||||||
Total assets | 1,337.3 | 1,291.9 | $ 1,337.3 | 1,291.9 | |||||||
Document Period End Date | Sep. 30, 2019 | ||||||||||
Intangible Assets, Net (Including Goodwill) | 529.4 | 420.2 | $ 529.4 | 420.2 | |||||||
Mueller Co. [Member] | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Intercompany sales | 871.0 | 818.8 | 739.9 | ||||||||
Operating income | 182.3 | 180.1 | 163.8 | ||||||||
Depreciation and amortization | 44.8 | 37.4 | 36.3 | ||||||||
2016 | 1.7 | 0.1 | 2.7 | ||||||||
Capital expenditures | (80.4) | (47.3) | (28.5) | ||||||||
Total assets | 1,107.8 | 843.9 | 1,107.8 | 843.9 | |||||||
Intangible Assets, Net (Including Goodwill) | 508.2 | 396.9 | 508.2 | 396.9 | |||||||
Mueller Technologies [Member] | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Intercompany sales | 97.0 | 97.2 | 86.1 | ||||||||
Operating income | (8.7) | (24.4) | (20.3) | ||||||||
Depreciation and amortization | 7.9 | 6.1 | 5.2 | ||||||||
2016 | 0.0 | 0.1 | 0.7 | ||||||||
Capital expenditures | (5.5) | (8.3) | (11.4) | ||||||||
Total assets | 100.3 | 87.1 | 100.3 | 87.1 | |||||||
Intangible Assets, Net (Including Goodwill) | 21.2 | 23.3 | 21.2 | 23.3 | |||||||
Corporate [Member] | |||||||||||
Segment Reporting Information [Line Items] | |||||||||||
Intercompany sales | 0.0 | 0.0 | 0.0 | ||||||||
Operating income | (49.3) | (34.0) | (41.4) | ||||||||
Depreciation and amortization | 0.3 | 0.2 | 0.4 | ||||||||
2016 | 14.6 | 10.3 | 7.0 | ||||||||
Capital expenditures | (0.7) | (0.1) | $ (0.7) | ||||||||
Total assets | 129.2 | 360.9 | 129.2 | 360.9 | |||||||
Intangible Assets, Net (Including Goodwill) | $ 0.0 | $ 0.0 | $ 0.0 | $ 0.0 |
Income Taxes (Disposal Groups, including Discontinued Operations) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Income tax expense (benefit) | $ 18.3 | $ (9.9) | $ 24.2 |
Retirement Plans Schedule of Amounts Expected to Amortize from AOCI to net income in the coming year (Details) - USD ($) $ in Millions |
12 Months Ended | |||
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Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Defined Benefit Plan Disclosure [Line Items] | ||||
Defined Benefit Plan, Amortization of Gain (Loss) | $ (1.9) | $ (3.2) | $ (4.0) | |
Forecast [Member] | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Defined Benefit Plan, Amortization of Gain (Loss) | $ (2.8) |
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