10-Q 1 mwa63017-10xq.htm MWA 6.30.17 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-32892
MUELLER WATER PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

Delaware |  | 20-3547095
(State or other jurisdiction of |  | (I.R.S. Employer
incorporation or organization) |  | Identification No.)

1200 Abernathy Road N.E.
Suite 1200
Atlanta, GA 30328
(Address of principal executive offices)
(770) 206-4200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer x Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
There were 158,588,182 sh ares of common stock of the registrant outstanding at July 31, 2017.

PART I

Item 1. | FINANCIAL STATEMENTS

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| June 30, |  | September 30,
| 2017 |  | 2016
| (in millions, except share amounts)
Assets: |  |  |
Cash and cash equivalents | $ | 353.2 |  |  | $ | 195.0 |
Receivables, net | 140.7 |  |  | 131.8 |
Inventories | 141.1 |  |  | 130.7 |
Other current assets | 20.0 |  |  | 12.7 |
Current assets held for sale | — |  |  | 142.1 |
Total current assets | 655.0 |  |  | 612.3 |
Property, plant and equipment, net | 110.1 |  |  | 108.4 |
Intangible assets | 442.0 |  |  | 434.6 |
Other noncurrent assets | 27.1 |  |  | 25.4 |
Noncurrent assets held for sale | — |  |  | 99.9 |
Total assets | $ | 1,234.2 |  |  | $ | 1,280.6 |
Liabilities and equity: |  |  |
Current portion of long-term debt | $ | 5.5 |  |  | $ | 5.6 |
Accounts payable | 58.7 |  |  | 73.7 |
Other current liabilities | 46.9 |  |  | 61.7 |
Current liabilities held for sale | — |  |  | 44.8 |
Total current liabilities | 111.1 |  |  | 185.8 |
Long-term debt | 475.7 |  |  | 478.8 |
Deferred income taxes | 99.0 |  |  | 109.9 |
Other noncurrent liabilities | 86.1 |  |  | 85.8 |
Noncurrent liabilities held for sale | — |  |  | 0.8 |
Total liabilities | 771.9 |  |  | 861.1 |
Commitments and contingencies (Note 13) |  |  |
Common stock: 600,000,000 shares authorized; 158,514,187 and 161,693,051 shares outstanding at June 30, 2017 and September 30, 2016, respectively | 1.6 |  |  | 1.6 |
Additional paid-in capital | 1,497.5 |  |  | 1,563.9 |
Accumulated deficit | (974.9 | ) |  | (1,078.9 | )
Accumulated other comprehensive loss | (63.0 | ) |  | (68.3 | )
Total Company stockholders’ equity | 461.2 |  |  | 418.3 |
Noncontrolling interest | 1.1 |  |  | 1.2 |
Total equity | 462.3 |  |  | 419.5 |
Total liabilities and equity | $ | 1,234.2 |  |  | $ | 1,280.6 |

The accompanying notes are an integral part of the condensed consolidated financial statements.
1

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three months ended |  | Nine months ended
| June 30, |  | June 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
| (in millions, except per share amounts)
Net sales | $ | 232.2 |  |  | $ | 224.7 |  |  | $ | 599.1 |  |  | $ | 585.0 |
Cost of sales | 149.7 |  |  | 141.5 |  |  | 412.5 |  |  | 394.9 |
Gross profit | 82.5 |  |  | 83.2 |  |  | 186.6 |  |  | 190.1 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 38.7 |  |  | 39.4 |  |  | 114.2 |  |  | 112.2 |
Pension settlement | — |  |  | 16.6 |  |  | — |  |  | 16.6 |
Other charges | 1.2 |  |  | 4.6 |  |  | 5.0 |  |  | 6.2 |
Total operating expenses | 39.9 |  |  | 60.6 |  |  | 119.2 |  |  | 135.0 |
Operating income | 42.6 |  |  | 22.6 |  |  | 67.4 |  |  | 55.1 |
Interest expense, net | 5.1 |  |  | 6.0 |  |  | 17.0 |  |  | 18.0 |
Income before income taxes | 37.5 |  |  | 16.6 |  |  | 50.4 |  |  | 37.1 |
Income tax expense | 13.4 |  |  | 5.6 |  |  | 16.2 |  |  | 11.8 |
Income from continuing operations | 24.1 |  |  | 11.0 |  |  | 34.2 |  |  | 25.3 |
Income (loss) from discontinued operations | (0.1 | ) |  | 4.5 |  |  | 69.8 |  |  | 12.1 |
Net income | $ | 24.0 |  |  | $ | 15.5 |  |  | $ | 104.0 |  |  | $ | 37.4 |
Income per basic share: |  |  |  |  |  |  |
Continuing operations | $ | 0.15 |  |  | $ | 0.07 |  |  | $ | 0.21 |  |  | $ | 0.15 |
Discontinued operations | — |  |  | 0.03 |  |  | 0.44 |  |  | 0.08 |
Net income | $ | 0.15 |  |  | $ | 0.10 |  |  | $ | 0.65 |  |  | $ | 0.23 |
Income per diluted share: |  |  |  |  |  |  |
Continuing operations | $ | 0.15 |  |  | $ | 0.07 |  |  | $ | 0.21 |  |  | $ | 0.15 |
Discontinued operations | — |  |  | 0.02 |  |  | 0.43 |  |  | 0.08 |
Net income | $ | 0.15 |  |  | $ | 0.09 |  |  | $ | 0.64 |  |  | $ | 0.23 |
Weighted average shares outstanding: |  |  |  |  |  |  |
Basic | 159.1 |  |  | 161.6 |  |  | 160.6 |  |  | 161.2 |
Diluted | 160.6 |  |  | 163.6 |  |  | 162.4 |  |  | 163.3 |
Dividends declared per share | $ | 0.04 |  |  | $ | — |  |  | $ | 0.11 |  |  | $ | 0.07 |

The accompanying notes are an integral part of the condensed consolidated financial statements.
2

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| Three months ended |  | Nine months ended
| June 30, |  | June 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
| (in millions)
Net income | $ | 24.0 |  |  | $ | 15.5 |  |  | $ | 104.0 |  |  | $ | 37.4 |
Other comprehensive income (loss): |  |  |  |  |  |  |
Minimum pension liability | 1.0 |  |  | 7.2 |  |  | 3.0 |  |  | (1.2 | )
Income tax effects | (0.4 | ) |  | (2.8 | ) |  | (1.2 | ) |  | 0.5 |
Foreign currency translation | 1.2 |  |  | (0.2 | ) |  | 0.7 |  |  | 0.8 |
Derivative fair value change | (0.7 | ) |  | (1.8 | ) |  | 4.5 |  |  | (4.9 | )
Income tax effects | 0.3 |  |  | 0.7 |  |  | (1.7 | ) |  | 1.9 |
| 1.4 |  |  | 3.1 |  |  | 5.3 |  |  | (2.9 | )
Comprehensive income | $ | 25.4 |  |  | $ | 18.6 |  |  | $ | 109.3 |  |  | $ | 34.5 |

The accompanying notes are an integral part of the condensed consolidated financial statements.
3

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF EQUITY NINE MONTHS ENDED JUNE 30, 2017 (UNAUDITED)
| Common stock |  | Additional paid-in capital |  | Accumulated deficit |  | Accumulated other comprehensive loss |  | Non-controlling interest |  | Total
| (in millions)
Balance at September 30, 2016 | $ | 1.6 |  |  | $ | 1,563.9 |  |  | $ | (1,078.9 | ) |  | $ | (68.3 | ) |  | $ | 1.2 |  |  | $ | 419.5 |
Net income | — |  |  | — |  |  | 104.0 |  |  | — |  |  | (0.1 | ) |  | 103.9 |
Dividends declared | — |  |  | (17.6 | ) |  | — |  |  | — |  |  | — |  |  | (17.6 | )
Stock repurchased under buyback program | — |  |  | (55.0 | ) |  | — |  |  | — |  |  | — |  |  | (55.0 | )
Shares retained for employee taxes | — |  |  | (2.7 | ) |  | — |  |  | — |  |  | — |  |  | (2.7 | )
Stock-based compensation | — |  |  | 3.7 |  |  | — |  |  | — |  |  | — |  |  | 3.7 |
Stock issued under stock compensation plans | — |  |  | 5.2 |  |  | — |  |  | — |  |  | — |  |  | 5.2 |
Other comprehensive income, net of tax | — |  |  | — |  |  | — |  |  | 5.3 |  |  | — |  |  | 5.3 |
Balance at June 30, 2017 | $ | 1.6 |  |  | $ | 1,497.5 |  |  | $ | (974.9 | ) |  | $ | (63.0 | ) |  | $ | 1.1 |  |  | $ | 462.3 |

The accompanying notes are an integral part of the condensed consolidated financial statements.
4

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Nine months ended
| June 30,
| 2017 |  | 2016
| (in millions)
Operating activities: |  |  |
Net income | $ | 104.0 |  |  | $ | 37.4 |
Less income from discontinued operations | 69.8 |  |  | 12.1 |
Income from continuing operations | 34.2 |  |  | 25.3 |
Adjustments to reconcile income from continuing operations to net cash provided by operating activities: |  |  |
Depreciation | 14.9 |  |  | 13.4 |
Amortization | 16.2 |  |  | 15.9 |
Stock-based compensation | 3.5 |  |  | 3.5 |
Retirement plans | 2.6 |  |  | 20.2 |
Deferred income taxes | (14.4 | ) |  | (8.5 | )
Other, net | 1.4 |  |  | 3.0 |
Changes in assets and liabilities, net of acquisition: |  |  |
Receivables | (5.8 | ) |  | (13.0 | )
Inventories | (4.6 | ) |  | 4.8 |
Other assets | (4.0 | ) |  | (5.7 | )
Liabilities | (18.6 | ) |  | (4.5 | )
Net cash provided by operating activities | 25.4 |  |  | 54.4 |
Investing activities: |  |  |
Business acquisitions, net of cash acquired | (26.0 | ) |  | — |
Capital expenditures | (21.6 | ) |  | (17.0 | )
Proceeds from sales of assets | 0.2 |  |  | 0.2 |
Net cash used in investing activities | (47.4 | ) |  | (16.8 | )
Financing activities: |  |  |
Stock repurchased under buyback program | (55.0 | ) |  | — |
Dividends | (17.6 | ) |  | (11.3 | )
Employee taxes related to stock-based compensation | (2.7 | ) |  | (3.2 | )
Repayments of debt | (3.7 | ) |  | (3.8 | )
Issuance of common stock | 5.2 |  |  | 2.9 |
Deferred financing costs | (1.0 | ) |  | (0.1 | )
Other | 0.2 |  |  | (0.3 | )
Net cash used in financing activities | (74.6 | ) |  | (15.8 | )
Net cash flows from discontinued operations: |  |  |
Operating activities | (42.5 | ) |  | 19.2 |
Investing activities | 297.2 |  |  | (5.6 | )
Financing activities | (0.1 | ) |  | — |
Net cash provided by discontinued operations | 254.6 |  |  | 13.6 |
Effect of currency exchange rate changes on cash | 0.2 |  |  | (0.2 | )
Net change in cash and cash equivalents | 158.2 |  |  | 35.2 |
Cash and cash equivalents at beginning of period | 195.0 |  |  | 113.1 |
Cash and cash equivalents at end of period | $ | 353.2 |  |  | $ | 148.3 |

The accompanying notes are an integral part of the condensed consolidated financial statements.
5

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2017
Note 1. Organization
Mueller Water Products, Inc., a Delaware corporation, together with its consolidated subsidiaries, operates in two business segments: Mueller Co. and Mueller Technologies. Mueller Co. manufactures valves for water and gas systems, including butterfly, iron gate, tapping, check, knife, plug and ball valves, as well as dry-barrel and wet-barrel fire hydrants. Mueller Technologies offers metering systems, leak detection, pipe condition assessment and other related products and services. 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.
On January 6, 2017, we sold our former Anvil segment. Anvil's results of operations and the gain from its sale have been classified as discontinued operations, and its assets and liabilities have been classified as held for sale, for all periods presented.
Mueller Co. owns a 49% ownership interest in an industrial valve joint venture. Due to substantive control features in the operating agreement, all of the joint venture's assets, liabilities and results of operations are included in our consolidated financial statements. The net loss attributable to noncontrolling interest is included in selling, general and administrative expenses. Noncontrolling interest is recorded at its carrying value, which approximates fair value.
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.
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses and the disclosure of contingent assets and liabilities for the reporting periods. Actual results could differ from those estimates. All significant intercompany balances and transactions have been eliminated. In our opinion, all normal and recurring adjustments that we consider necessary for a fair financial statement presentation have been made. The condensed consolidated balance sheet data at September 30, 2016 was derived from audited financial statements, but does not include all disclosures required by GAAP.
Note 2. Divestiture
On January 6, 2017, we sold our former Anvil segment to affiliates of One Equity Partners for cash proceeds of $305.7 million and the agreement by the purchaser to reimburse us for expenditures to settle certain previously existing liabilities.
The table below presents a summary of the sale of Anvil, in millions.

Gross cash proceeds | $ | 305.7 |
Noncash proceeds | 1.9 |
Total proceeds | 307.6 |
Transaction expenses | (8.3 | )
Net proceeds | 299.3 |
Assets and liabilities disposed | (189.8 | )
Gain on sale, pre-tax | 109.5 |
Income tax | (41.6 | )
Gain on sale, net of tax | $ | 67.9 |

6

The table below presents a summary of the operating results for the Anvil discontinued operations. These operating results do not reflect what they would have been had Anvil not been classified as discontinued operations.

| Three months ended |  | Nine months ended
| June 30, |  | June 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
| (in millions)
Net sales | $ | — |  |  | $ | 85.4 |  |  | $ | 83.1 |  |  | $ | 251.4 |
Cost of sales | — |  |  | 61.5 |  |  | 62.8 |  |  | 180.8 |
Gross profit | — |  |  | 23.9 |  |  | 20.3 |  |  | 70.6 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 0.1 |  |  | 16.5 |  |  | 17.0 |  |  | 51.4 |
Other charges | — |  |  | 0.4 |  |  | 0.2 |  |  | 0.4 |
Total operating expenses | 0.1 |  |  | 16.9 |  |  | 17.2 |  |  | 51.8 |
Income (loss) before income taxes | (0.1 | ) |  | 7.0 |  |  | 3.1 |  |  | 18.8 |
Income tax expense | — |  |  | 2.5 |  |  | 1.2 |  |  | 6.7 |
| (0.1 | ) |  | 4.5 |  |  | 1.9 |  |  | 12.1 |
Gain on sale, net of tax | — |  |  | — |  |  | 67.9 |  |  | — |
Income (loss) from discontinued operations | $ | (0.1 | ) |  | $ | 4.5 |  |  | $ | 69.8 |  |  | $ | 12.1 |

The table below presents the components of the balance sheet accounts classified as assets and liabilities held for sale and the related net deferred income tax liability.

| September 30,
| 2016
| (in millions)
Assets: |
Receivables, net | $ | 54.9 |
Inventories | 83.1 |
Other current assets | 4.1 |
Total current assets held for sale | 142.1 |
Property, plant and equipment, net | 46.7 |
Intangible assets | 51.4 |
Other noncurrent assets | 1.8 |
Total noncurrent assets held for sale | 99.9 |
Total assets held for sale | $ | 242.0 |
Liabilities: |
Current portion of long-term debt | $ | 0.3 |
Accounts payable | 27.1 |
Other current liabilities | 17.4 |
Total current liabilities held for sale | 44.8 |
Long-term debt | 0.4 |
Other noncurrent liabilities | 0.4 |
Total noncurrent liabilities held for sale | 0.8 |
Total liabilities held for sale | $ | 45.6 |
Net deferred income tax liability associated with discontinued operations | $ | 13.0 |

7

Note 3. Acquisition
On February 15, 2017, we acquired Singer Valve, a manufacturer of automatic control valves, and its affiliate that distributes Singer Valve products in the U.S, for an aggregate cash consideration of $26.4 million, net of post-closing adjustments. Singer Valve had net sales of approximately $15 million in calendar 2016 and is included in our Mueller Co. segment. During the third quarter, we also acquired the Chinese affiliate of Singer Valve for $0.2 million in cash. The initial allocation of consideration to the assets and liabilities of these companies, which is still subject to change, is presented below, in millions.

Assets acquired and liabilities assumed: |
Cash | $ | 0.6 |
Receivables | 1.9 |
Inventories | 5.8 |
Other current assets | 0.5 |
Property, plant and equipment | 1.0 |
Intangible assets and goodwill | 17.7 |
Accounts payable | (0.7 | )
Other current liabilities | (0.2 | )
Consideration paid | $ | 26.6 |

We have not yet completed our final valuation of intangible assets, but we expect that any goodwill recognized will be deductible for income tax purposes.
Note 4. Income Taxes
At June 30, 2017 and September 30, 2016, the gross liabilities for unrecognized income tax benefits were $3.0 million and $2.8 million, respectively.
The reconciliation between the U.S. federal statutory income tax rate and the effective tax rate is presented below.

| Three months ended |  | Nine months ended
| June 30, |  | June 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Adjustments to reconcile to the effective tax rate: |  |  |  |  |  |  |
U.S. federal statutory income tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State tax apportionment change | — |  |  | — |  |  | 1.7 |  |  | — |
State income taxes, net of federal benefit | 3.9 |  |  | 4.5 |  |  | 3.9 |  |  | 4.4 |
Excess tax benefit for stock-based compensation | (0.2 | ) |  | 0.7 |  |  | (4.6 | ) |  | (1.4 | )
Tax credits | (1.0 | ) |  | (2.2 | ) |  | (1.7 | ) |  | (2.8 | )
U.S. manufacturing deduction | (4.7 | ) |  | (4.2 | ) |  | (4.5 | ) |  | (3.7 | )
Other | 2.7 |  |  | (0.1 | ) |  | 2.3 |  |  | 0.3 |
Effective tax rate | 35.7 | % |  | 33.7 | % |  | 32.1 | % |  | 31.8 | %

Note 5. Borrowing Arrangements
The components of our long-term debt are presented below.

| June 30, |  | September 30,
| 2017 |  | 2016
| (in millions)
ABL Agreement | $ | — |  |  | $ | — |
Term Loan | 486.0 |  |  | 489.4 |
Other | 1.5 |  |  | 1.3 |
| 487.5 |  |  | 490.7 |
Less deferred financing costs | 6.3 |  |  | 6.3 |
Less current portion | 5.5 |  |  | 5.6 |
Long-term debt | $ | 475.7 |  |  | $ | 478.8 |

8

ABL Agreement. At June 30, 2017, our asset based lending agreement (“ABL Agreement”) consisted of a revolving credit facility for up to $225 million of revolving credit borrowings, swing line loans and letters of credit. The ABL Agreement permits us to increase the size of the credit facility by an additional $150 million in certain circumstances subject to adequate borrowing base availability. We may borrow up to $25 million through swing line loans and may have up to $60 million of letters of credit outstanding.
Borrowings under the ABL Agreement bear interest at a floating rate equal to LIBOR, plus a margin ranging from 125 to 150 basis points, or a base rate, as defined in the ABL Agreement, plus a margin ranging from 25 to 50 basis points. At June 30, 2017, the applicable rate was LIBOR plus 150 basis points.
The ABL Agreement terminates on July 13, 2021. We pay a commitment fee for any unused borrowing capacity under the ABL Agreement of 25 basis points per annum. Our obligations under the ABL Agreement are secured by a first-priority perfected lien on all of our U.S. receivables and inventories, certain cash and other supporting obligations. Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million and 10% of the Loan Cap as defined in the ABL Agreement. Excess availability based on June 30, 2017 data, as reduced by outstanding letters of credit, swap contract liabilities and accrued fees and expenses of $23.5 million, was $109.5 million.
Term Loan. On November 25, 2014, we entered into a $500.0 million senior secured term loan (“Term Loan”). The proceeds from the Term Loan, along with other cash, were used to prepay our 7.375% Senior Subordinated Notes and 8.75% Senior Unsecured Notes and to satisfy and discharge our obligations under the respective indentures. During the quarter ended March 31, 2017, we amended the Term Loan, resulting in a 75 basis point reduction in the interest rate spread.
The Term Loan accrues interest at a floating rate equal to LIBOR, subject to a floor of 0.75%, plus 250 basis points. At June 30, 2017, the weighted-average effective interest rate was 4.36%. We may voluntarily repay amounts borrowed under the Term Loan at any time. The principal amount of the Term Loan is required to be repaid in quarterly installments of $1.225 million, with any remaining principal due on November 25, 2021. The Term Loan is guaranteed by substantially all of our U.S. subsidiaries and is secured by essentially all of our assets, although the ABL Agreement has a senior claim on certain collateral securing borrowings thereunder. The Term Loan is reported net of unamortized discount, which was $1.6 million at June 30, 2017. Based on quoted market prices, the outstanding Term Loan had a fair value of $490.6 million at June 30, 2017.
The Term Loan contains affirmative and negative operating covenants applicable to us and our restricted subsidiaries. We believe we were compliant with these covenants at June 30, 2017 and expect to remain in compliance through June 30, 2018.
Note 6. Derivative Financial Instruments
We are exposed to interest rate risk that we manage to some extent using derivative instruments. Under our April 2015 interest rate swap contracts, we receive interest calculated using 3-month LIBOR, subject to a floor of 0.75%, and pay fixed interest at 2.341%, on an aggregate notional amount of $150.0 million. These swap contracts effectively fix the cash interest rate on $150.0 million of our borrowings under the Term Loan at 4.841% through September 30, 2021.
We have designated our interest rate swap contracts as cash flow hedges of our future interest payments and elected to apply the “shortcut” method of assessing hedge effectiveness. As a result, the gains and losses on the swap contracts are reported as a component of other comprehensive income or loss and are reclassified into interest expense as the related interest payments are made. During the quarter and nine months ended June 30, 2017, we included $0.4 million and $1.5 million of such interest expense, respectively, in income from continuing operations.
In connection with the acquisition of Singer Valve discussed in Note 3., Mueller Water Products, Inc. loaned funds to one of our Canadian subsidiaries. Although this intercompany loan has no direct effect on our consolidated financial statements, it creates exposure to currency risk for the Canadian subsidiary. To reduce this exposure, we entered into a U.S. dollar-Canadian dollar swap contract with the Canadian subsidiary and an offsetting Canadian dollar-U.S. dollar swap with a domestic bank. We have not designated these swaps as hedges and the changes in their fair value are included in earnings, where they offset the currency gain or loss associated with the intercompany loan.
9

The fair values of the swap contracts are presented below.

| June 30, |  | September 30,
| 2017 |  | 2016
| (in millions)
Interest rate swap contracts, designated as cash flow hedges: |  |  |
Other current liabilities | $ | 1.3 |  |  | $ | 2.0 |
Other noncurrent liabilities | 1.5 |  |  | 5.3 |
Total liability | $ | 2.8 |  |  | $ | 7.3 |
Currency swap contracts, not designated as hedges: |  |  |
Other noncurrent liabilities | $ | 0.8 |  |  | $ | — |

The fair values and the classification of the fair values of the interest rate swaps between current and noncurrent portions are based on calculated cash flows using publicly available interest rate forward rate yield curve information, but amounts due at the actual settlement dates are dependent on actual rates in effect at the settlement dates and may differ significantly from amounts shown above.
The fair values of the currency swaps are as reported to us by the bank counterparty, which we believe to be a reliable source.
Note 7. Retirement Plans
During March 2017, the Financial Accounting Standards Board issued Accounting Standards Update No. 2017-07 (“ASU 2017-07”). This amendment to GAAP will require us to exclude the components of net periodic benefit cost other than service cost from operating income on October 1, 2018, with early adoption permitted. We plan to adopt this amendment on October 1, 2017, and this adoption will require reclassification of 2017 and 2016 results. The components of net periodic benefit cost for our pension plans and the effects this adoption will have on operating income are presented below.

| Three months ended |  | Nine months ended
| June 30, |  | June 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
| (in millions)
Service cost | $ | 0.5 |  |  | $ | 0.5 |  |  | $ | 1.5 |  |  | $ | 1.3 |
Components of net periodic benefit cost that will be excluded from operating income upon adoption of ASU 2017-07: |  |  |  |  |  |  |
Interest cost | 3.6 |  |  | 5.0 |  |  | 10.8 |  |  | 15.1 |
Expected return on plan assets | (4.2 | ) |  | (4.9 | ) |  | (12.7 | ) |  | (15.1 | )
Amortization of actuarial net loss | 1.0 |  |  | 0.7 |  |  | 3.0 |  |  | 2.3 |
Pension settlement | — |  |  | 16.6 |  |  | — |  |  | 16.6 |
| 0.4 |  |  | 17.4 |  |  | 1.1 |  |  | 18.9 |
Net periodic benefit cost | $ | 0.9 |  |  | $ | 17.9 |  |  | $ | 2.6 |  |  | $ | 20.2 |

The amortization of actuarial losses, net of tax, is recorded as a component of other comprehensive loss.
During the 2016 third quarter, our U.S. pension plan (“Plan”) completed a pension obligation settlement program targeting vested, terminated participants not yet receiving benefits. Approximately 75% of eligible participants accepted settlement offers. The Plan distributed assets totaling $58.5 million and remeasured its liabilities in June 2016. We incurred a non-cash charge of $16.6 million as a result of the program, which had an immaterial impact on the Plan’s funded ratio.
10

Note 8. Capital Stock
Common stock share activity is presented below.

Shares outstanding at September 30, 2016 | 161,693,051 |
Shares repurchased | (4,581,227 | )
Exercise of stock options | 872,452 |
Vesting of restricted stock units, net of shares withheld for taxes | 256,155 |
Settlement of performance-based restricted stock units, net of shares withheld for taxes | 160,063 |
Exercise of employee stock purchase plan instruments | 113,693 |
Shares outstanding at June 30, 2017 | 158,514,187 |

In February 2017, we entered into an accelerated share repurchase agreement with Bank of America, N.A. paid them $50 million. We subsequently received 4,139,255 shares of our common stock based on the average of the daily volume-weighted average prices of our common stock over the purchase period, less a fixed discount .
In May 2017 and June 2017, we repurchased an additional 441,972 shares of our common stock for a total cost of $5.0 million through open market purchases.
Note 9. Stock-based Compensation Plans
We have granted various forms of stock-based compensation, including stock options, restricted stock units and both cash-settled and stock-settled performance-based restricted stock units (“PRSUs”) under our Amended and Restated 2006 Mueller Water Products, Inc. Stock Incentive Plan (“2006 Stock Plan”). We have also granted cash-settled Phantom Plan instruments under the Mueller Water Products, Inc. Phantom Plan (“Phantom Plan”).
A PRSU award represents a target number of units that may be paid out at the end of a multi-year award cycle consisting of a series of annual performance periods coinciding with our fiscal years. After we determine the financial performance targets related to PRSUs for a given performance period, typically during the first quarter of that fiscal year, that portion of a PRSU award becomes granted. Thus, each award consists of a grant in the year of award and grants in the designated following years. Settlement will range from zero to two times the number of PRSUs granted, depending on our financial performance against the targets. As determined at the date of award, PRSUs may settle in cash-value equivalent of, or directly in, shares of our common stock.
The stock-settled PRSUs awarded in 2014 settled in the quarter ended December 31, 2016 with an issuance of 263,410 shares of our common stock. This settlement reflected payouts of 1.021 times target for the 2016 performance period, zero times target for the 2015 performance period and two times target for the 2014 performance period.
The 234,895 stock-settled PRSUs awarded in the nine months ended June 30, 2017 will settle in three years.
During the quarter and nine months ended June 30, 2017, 3,334 and 350,295 restricted stock units vested, respectively.
At June 30, 2017, the outstanding Phantom Plan instruments had a fair value of $11.68 per instrument and our liability for Phantom Plan instruments was $2.2 million.
11

We granted stock-based compensation under the 2006 Stock Plan, the Mueller Water Products, Inc. 2006 Employee Stock Purchase Plan and the Phantom Plan during the nine months ended June 30, 2017 as follows.

|  | Number granted |  | Weighted average grant date fair value per instrument |  | Total grant date fair value (in millions)
Quarter ended December 31, 2016: |  |  |  |  |  |
Restricted stock units |  | 177,861 |  |  | $ | 13.26 |  |  | $ | 2.4 |
Employee stock purchase plan instruments |  | 39,231 |  |  | 2.34 |  |  | 0.1 |
Phantom Plan awards |  | 187,115 |  |  | 13.26 |  |  | 2.5 |
PRSUs: 2017 award |  | 59,285 |  |  | 13.26 |  |  | 0.8 |
2016 award |  | 73,826 |  |  | 13.26 |  |  | 1.0 |
2015 award |  | 68,556 |  |  | 13.26 |  |  | 0.9 |
Quarter ended March 31, 2017: |  |  |  |  |  |
Restricted stock units |  | 165,999 |  |  | 12.82 |  |  | 2.1 |
Employee stock purchase plan instruments |  | 38,267 |  |  | 2.44 |  |  | 0.1 |
Phantom Plan awards |  | 12,145 |  |  | 12.66 |  |  | 0.2 |
PRSUs: 2017 award |  | 19,012 |  |  | 13.15 |  |  | 0.2 |
Quarter ended June 30, 2017: |  |  |  |  |  |
Employee stock purchase plan instruments |  | 36,195 |  |  | 2.70 |  |  | 0.1 |
|  |  |  |  |  | $ | 10.4 |

Income from continuing operations included stock-based compensation expense of $0.4 million and $2.0 million during the quarters ended June 30, 2017 and 2016, respectively, and $5.1 million and $5.6 million during the nine months ended June 30, 2017 and 2016, respectively. At June 30, 2017, there was approximately $8.7 million of unrecognized compensation expense related to stock-based compensation arrangements, and 219,866 PRSUs that have been awarded for the 2018 and 2019 performance periods, for which performance goals have not been set.
We excluded 165,186 and 257,811 of stock-based compensation instruments from the calculations of diluted earnings per share for the quarters ended June 30, 2017 and 2016, respectively, and 208,868 and 925,296 for the nine months ended June 30, 2017 and 2016, respectively, since their inclusion would have been antidilutive.
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Note 10. Supplemental Balance Sheet Information
Selected supplemental balance sheet information is presented below.

| June 30, |  | September 30,
| 2017 |  | 2016
| (in millions)
Inventories: |  |  |
Purchased components and raw material | $ | 68.0 |  |  | $ | 67.0 |
Work in process | 33.6 |  |  | 31.4 |
Finished goods | 39.5 |  |  | 32.3 |
| $ | 141.1 |  |  | $ | 130.7 |
Property, plant and equipment: |  |  |
Land | $ | 5.6 |  |  | $ | 5.7 |
Buildings | 52.7 |  |  | 50.6 |
Machinery and equipment | 261.2 |  |  | 248.3 |
Construction in progress | 14.4 |  |  | 14.8 |
| 333.9 |  |  | 319.4 |
Accumulated depreciation | (223.8 | ) |  | (211.0 | )
| $ | 110.1 |  |  | $ | 108.4 |
Other current liabilities: |  |  |
Compensation and benefits | $ | 23.9 |  |  | $ | 32.7 |
Customer rebates | 6.3 |  |  | 8.3 |
Taxes other than income taxes | 3.0 |  |  | 3.0 |
Warranty | 4.7 |  |  | 2.0 |
Income taxes | 0.2 |  |  | 4.6 |
Environmental | 1.7 |  |  | 5.0 |
Interest | 0.5 |  |  | 0.5 |
Other | 6.6 |  |  | 5.6 |
| $ | 46.9 |  |  | $ | 61.7 |

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Note 11. Segment Information
Summarized financial information for our segments is presented below.

| Three months ended |  | Nine months ended
| June 30, |  | June 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
| (in millions)
Net sales, excluding intercompany: |  |  |  |  |  |  |
Mueller Co. | $ | 207.6 |  |  | $ | 198.7 |  |  | $ | 535.5 |  |  | $ | 525.6 |
Mueller Technologies | 24.6 |  |  | 26.0 |  |  | 63.6 |  |  | 59.4 |
| $ | 232.2 |  |  | $ | 224.7 |  |  | $ | 599.1 |  |  | $ | 585.0 |
Operating income (loss): |  |  |  |  |  |  |
Mueller Co. | $ | 52.9 |  |  | $ | 51.7 |  |  | $ | 113.3 |  |  | $ | 110.4 |
Mueller Technologies | (1.6 | ) |  | (1.5 | ) |  | (17.5 | ) |  | (10.2 | )
Corporate | (8.7 | ) |  | (27.6 | ) |  | (28.4 | ) |  | (45.1 | )
| $ | 42.6 |  |  | $ | 22.6 |  |  | $ | 67.4 |  |  | $ | 55.1 |
Depreciation and amortization: |  |  |  |  |  |  |
Mueller Co. | $ | 8.9 |  |  | $ | 8.5 |  |  | $ | 27.0 |  |  | $ | 25.5 |
Mueller Technologies | 1.2 |  |  | 1.2 |  |  | 3.8 |  |  | 3.5 |
Corporate | 0.1 |  |  | 0.1 |  |  | 0.3 |  |  | 0.3 |
| $ | 10.2 |  |  | $ | 9.8 |  |  | $ | 31.1 |  |  | $ | 29.3 |
Pension settlement and other charges: |  |  |  |  |  |  |
Mueller Co. | $ | 0.4 |  |  | $ | 2.4 |  |  | $ | 2.1 |  |  | $ | 3.0 |
Mueller Technologies | — |  |  | — |  |  | 0.1 |  |  | 0.5 |
Corporate | 0.8 |  |  | 18.8 |  |  | 2.8 |  |  | 19.3 |
| $ | 1.2 |  |  | $ | 21.2 |  |  | $ | 5.0 |  |  | $ | 22.8 |
Capital expenditures: |  |  |  |  |  |  |
Mueller Co. | $ | 6.1 |  |  | $ | 3.6 |  |  | $ | 13.8 |  |  | $ | 12.4 |
Mueller Technologies | 1.3 |  |  | 1.5 |  |  | 7.6 |  |  | 4.5 |
Corporate | 0.1 |  |  | — |  |  | 0.2 |  |  | 0.1 |
| $ | 7.5 |  |  | $ | 5.1 |  |  | $ | 21.6 |  |  | $ | 17.0 |

Mueller Technologies' operating loss for the nine months ended June 30, 2017 includes a warranty expense of $9.8 million, as described in Note 13.
Note 12. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss is presented below.

| Minimum pension liability, net of tax |  | Foreign currency translation |  | Derivative instruments, net of tax |  | Total
Balance at September 30, 2016 | $ | (57.7 | ) |  | $ | (6.1 | ) |  | $ | (4.5 | ) |  | $ | (68.3 | )
Current period other comprehensive income | 1.8 |  |  | 0.7 |  |  | 2.8 |  |  | 5.3 |
Balance at June 30, 2017 | $ | (55.9 | ) |  | $ | (5.4 | ) |  | $ | (1.7 | ) |  | $ | (63.0 | )

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Note 13. 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. 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.
In September 1987, we implemented an Administrative Consent Order (“ACO”) for our Burlington, New Jersey property, which was required under the New Jersey Environmental Cleanup Responsibility Act (now known as the Industrial Site Recovery Act). The ACO required soil and ground-water cleanup, and we completed, and received final approval on, the soil cleanup required by the ACO. We retained this property when we sold our former U.S. Pipe segment. We expect ground-water issues as well as issues associated with the demolition of former manufacturing facilities at this site will continue and remediation by us could be required. Long-term ground-water monitoring may also be required, but we do not know how long such monitoring would be required and do not believe monitoring or further remediation costs, if any, will have a material adverse effect on any of our financial statements.
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” which is sometimes referred to as “Superfund”) 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 located 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 whether the site will be added to the National Priorities List and designated as a “Superfund site,” 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, if any. Accordingly, because the amount of such costs cannot be reasonably estimated at this time, no amounts were accrued for this matter at June 30, 2017.
Walter Energy. Each member of the Walter Energy consolidated group, which included us (including our subsidiaries) through December 14, 2006, is jointly and severally liable for the federal income tax liability of each other member of the consolidated group for any year in which it is a member of the group at any time during such year. 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 consolidated group for any period during which we were included in the Walter Energy consolidated group.
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Walter Energy effectively controlled all of our tax decisions for periods during which we were a member of the Walter Energy consolidated group for federal income tax purposes and certain combined, consolidated or unitary state and local income tax groups. Under the terms of an income tax allocation agreement between us and Walter Energy, dated May 26, 2006, we generally computed our tax liability on a stand-alone basis, but Walter Energy has sole authority to respond to and conduct all tax proceedings (including tax audits) relating to our federal income and combined state tax returns, to file all such tax returns on our behalf and to determine the amount of our liability to (or entitlement to payment from) Walter Energy for such previous periods.
According to Walter Energy's last quarterly report on Form 10-Q filed with the SEC on November 5, 2015 (“Walter November 2015 Filing”), a dispute exists with the IRS with regard to federal income taxes for years 1980 to 1994 and 1999 to 2001 allegedly owed by the Walter Energy consolidated group, which included U.S. Pipe during these periods. As a matter of law, we are jointly and severally liable for any final tax determination, which means we would be liable in the event Walter Energy is unable to pay any amounts owed. According to the Walter November 2015 Filing, at September 30, 2015, Walter Energy had $33.0 million of accruals for unrecognized tax benefits on the matters subject to disposition. In the Walter November 2015 Filing, Walter Energy stated it believed it had sufficient accruals to address any claims, including interest and penalties, and did not believe that any potential difference between any final settlements and amounts accrued would have a material effect on Walter Energy's financial position, but such potential difference could be material to its results of operations in a future reporting period.
In July 2015, Walter Energy filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code before the Bankruptcy Court for the Northern District of Alabama (“Chapter 11 Case”). During the pendency of the Chapter 11 Case, we monitored the proceeding to determine whether we could be liable for all or a portion of this federal income tax liability if it is incurred, and not discharged, for any period during which we were included in the Walter Energy consolidated group.
On January 11, 2016, the IRS filed a proof of claim (“Proof of Claim”) in the Chapter 11 Case, alleging that Walter Energy owes amounts for prior taxable periods (specifically, 1983-1994, 2000-2002 and 2005) in an aggregate amount of $554.3 million ($229.1 million of which the IRS claims is entitled to priority status in the Chapter 11 Case). The IRS asserts that its claim is based on an alleged settlement of Walter Energy’s tax liability for the 1983-1995 taxable periods in connection with Walter Energy’s prior bankruptcy proceeding in the United States Bankruptcy Court for the Middle District of Florida. In the Proof of Claim, the IRS included an alternative calculation in the event the alleged settlement of the prior bankruptcy court is found to be non-binding, which provides for a claim by the IRS in an aggregate amount of $860.4 million ($535.3 million of which the IRS claims is entitled to priority status in the Chapter 11 Case).
According to a current report on Form 8-K filed by Walter Energy with the SEC on April 1, 2016 (“Walter April 2016 Filing”), on March 31, 2016, Walter Energy closed on the sale of substantially all of Walter Energy's Alabama assets pursuant to the provisions of Sections 105, 363 and 365 of the U.S. Bankruptcy Code. The Walter April 2016 Filing further stated that Walter Energy would have no further material business operations after April 1, 2016 and Walter Energy was evaluating its options with respect to the wind-down of its remaining assets. The asset sale did not impact the Proof of Claim, and the Proof of Claim and the alleged tax liability thereunder remain unresolved.
On February 2, 2017, at the request of Walter Energy, the Bankruptcy Court for the Northern District of Alabama signed an order converting the Chapter 11 Case to a liquidation proceeding under Chapter 7 of the U.S. Bankruptcy Code, pursuant to which Walter Energy will be wound-down and liquidated (“Chapter 7 Case”). In its objection contesting such conversion, the IRS indicated its intent to pursue collection of amounts included in the Proof of Claim from former members of the Walter Energy consolidated group.
We cannot predict whether or to what extent we may become liable for the tax-related amounts of the Walter Energy consolidated group asserted in the Proof of Claim, in part, because: (i) the amounts owed by the Walter Energy consolidated group for certain of the taxable periods from 1980 through 2006 remain unresolved and (ii) it is unclear what priority, if any, the IRS will receive in the Chapter 7 Case with respect to its claims against Walter Energy. We intend to vigorously assert any and all available defenses against any liability we may have as a member of the Walter Energy consolidated group. However, we cannot currently estimate our liability, if any, relating to the tax-related liabilities of Walter Energy’s consolidated tax group for tax years prior to 2007, and such liability could have a material adverse effect on our business, financial condition, liquidity or results of operations.
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.
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Additionally, in connection with the sale of assets and the divestiture of businesses, such as the divestiture of our former U.S. Pipe and Anvil segments, 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, tax 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. Certain Mueller Technologies radio products produced between 2011 and 2014 and installed in particularly harsh environments have 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 related warranty expenses. Consequently, we recorded an additional warranty expense of $9.8 million associated with these products in that quarter.
We are party to a number of lawsuits arising in the ordinary course of business, including product liability cases for products manufactured by us or third parties. We provide for costs relating to these matters when a loss is probable and the amount is reasonably estimable. Administrative costs related to these matters are expensed as incurred. The effect of the outcome of these matters on our future financial statements cannot be predicted with certainty as any such effect depends on the amount and timing of the resolution of such matters. While the results of litigation cannot be predicted with certainty, we believe that the final outcome of such other litigation is not likely to have a materially adverse effect on our business or prospects.
Note 14. Subsequent Events
On July 26, 2017, our board of directors declared a dividend of $0.04 per share on our common stock, payable on or about August 21, 2017 to stockholders of record at the close of business on August 11, 2017.
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Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto that appear elsewhere in this report. This report contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that address activities, events or developments that we intend, expect, plan, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements are based on certain assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions and expected future developments. Actual results and the timing of events may differ materially from those contemplated by the forward-looking statements due to a number of factors, including regional, national or global political, economic, business, competitive, market and regulatory conditions and the other factors described under the section entitled “RISK FACTORS” in Item 1A. of our annual report on Form 10-K for the year ended September 30, 2016 (“Annual Report”). Undue reliance should not be placed on any forward-looking statements. The Company does not have any intention or obligation to update forward-looking statements, except as required by law.
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. We manage our businesses and report operations through two business segments, Mueller Co. and Mueller Technologies, based largely on the products sold and the customers served.
Overview
Organization
On October 3, 2005, Walter Energy acquired all outstanding shares of capital stock representing the Mueller Co. and Anvil businesses and contributed them to its U.S. Pipe business to form the Company. In June 2006, we completed an initial public offering of 28,750,000 shares of Series A common stock and in December 2006, Walter Energy distributed to its shareholders all of its equity interests in the Company, consisting of all of the Company’s outstanding shares of Series B common stock. On January 28, 2009, each share of Series B common stock was converted into one share of Series A common stock and the Series A designation was discontinued.
On April 2, 2012, we sold our former U.S. Pipe segment. On January 6, 2017, we sold our former Anvil segment. Anvil's results of operations and the gain from its sale have been classified as discontinued operations, and its assets and liabilities have been classified as held for sale, for prior periods presented.
In February 2017, we acquired Singer Valve, a manufacturer of automatic control valves, and its affiliate that distributes Singer Valve products in the U.S, for an aggregate cash purchase price of $26.4 million, net of post-closing adjustments. During the third quarter, we also acquired the Chinese affiliate of Singer Valve for $0.2 million in cash. Singer Valve had net sales of approximately $15 million in calendar 2016 and is included in our Mueller Co. segment.
Business
We expect our two primary end markets, repair and replacement of water infrastructure driven by municipal spending and new water infrastructure installation driven by residential construction, to grow in 2017. We expect the residential construction market to grow faster than municipal spending. For the full year 2017, we expect consolidated net sales percentage growth to be in the low-to-mid single digits.
Mueller Co.
We estimate approximately 60% of Mueller Co.’s 2016 net sales were for repair and replacement directly related to municipal water infrastructure spending, approximately 30% were related to residential construction activity and approximately 10% were related to natural gas utilities. We continue to expect municipal spending and residential construction activity to grow through 2017.
Since the third quarter of 2016, our average cost for our primary raw materials, brass ingot and scrap steel, have increased 25% and 30%, respectively. This environment can also increase our cost of purchased parts. We expect material costs will continue to rise during the fourth quarter and we cannot reliably predict when these costs will stabilize. While we have announced price increases in response to these increased costs, the acceptance of the price increases is uncertain.
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Mueller Technologies
The municipal market is the key end market for Mueller Technologies. Mueller Technologies is currently comprised of two businesses, Mueller Systems and Echologics. These businesses are project-oriented and depend on customer adoption of their technology-based products and services. Mueller Systems is focused on the AMI segment of the market. Echologics is focused on leak detection and pipe condition assessment. We ended the 2017 third quarter with higher AMI backlog at Mueller Systems and a greater number of projects under contract at Echologics, in each case as compared with the prior year.
Results of Operations
Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

| Three months ended June 30, 2017
| Mueller Co. |  | Mueller Technologies |  | Corporate |  | Total
| (in millions)
Net sales | $ | 207.6 |  |  | $ | 24.6 |  |  | $ | — |  |  | $ | 232.2 |
Gross profit | $ | 76.9 |  |  | $ | 5.6 |  |  | $ | — |  |  | $ | 82.5 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 23.6 |  |  | 7.2 |  |  | 7.9 |  |  | 38.7 |
Other charges | 0.4 |  |  | — |  |  | 0.8 |  |  | 1.2 |
| 24.0 |  |  | 7.2 |  |  | 8.7 |  |  | 39.9 |
Operating income (loss) | $ | 52.9 |  |  | $ | (1.6 | ) |  | $ | (8.7 | ) |  | 42.6 |
Interest expense, net |  |  |  |  |  |  | 5.1 |
Income before income taxes |  |  |  |  |  |  | 37.5 |
Income tax expense |  |  |  |  |  |  | 13.4 |
Income from continuing operations |  |  |  |  |  |  | $ | 24.1 |
| Three months ended June 30, 2016
| Mueller Co. |  | Mueller Technologies |  | Corporate |  | Total
| (in millions)
Net sales | $ | 198.7 |  |  | $ | 26.0 |  |  | $ | — |  |  | $ | 224.7 |
Gross profit | $ | 77.5 |  |  | $ | 5.7 |  |  | $ | — |  |  | $ | 83.2 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 23.4 |  |  | 7.2 |  |  | 8.8 |  |  | 39.4 |
Pension settlement and other charges | 2.4 |  |  | — |  |  | 18.8 |  |  | 21.2 |
| 25.8 |  |  | 7.2 |  |  | 27.6 |  |  | 60.6 |
Operating income (loss) | $ | 51.7 |  |  | $ | (1.5 | ) |  | $ | (27.6 | ) |  | 22.6 |
Interest expense, net |  |  |  |  |  |  | 6.0 |
Loss before income taxes |  |  |  |  |  |  | 16.6 |
Income tax expense |  |  |  |  |  |  | 5.6 |
Income from continuing operations |  |  |  |  |  |  | $ | 11.0 |

Consolidated Analysis
Net sales for the quarter ended June 30, 2017 increased $7.5 million to $232.2 million from $224.7 million due primarily to increased shipment volumes at Mueller Co., including Singer Valve, which we acquired in February 2017.
Gross profit for the quarter ended June 30, 2017 declined $0.7 million to $82.5 million from $83.2 million in the prior year period primarily due to higher material costs more than offsetting the benefits from higher shipment volumes and productivity improvements. Gross margin declined to 35.5% for the quarter ended June 30, 2017 compared to 37.0% in the prior year period for the same reasons.
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Selling, general and administrative expenses (“SG&A”) for the quarter ended June 30, 2017 decreased to $38.7 million from $39.4 million in the prior year period due primarily to lower personnel-related expenses more than offsetting the incremental expenses of Singer Valve. SG&A as a percentage of net sales was 16.7% in the quarter ended June 30, 2017 and 17.5% in the prior year period.
Interest expense, net decreased $0.9 million in the quarter ended June 30, 2017 compared to the prior year period. The components of interest expense, net are provided below.

| Three months ended
| June 30,
| 2017 |  | 2016
| (in millions)
Term Loan | $ | 4.5 |  |  | $ | 5.0 |
Interest rate swap contracts | 0.4 |  |  | — |
Deferred financing costs amortization | 0.5 |  |  | 0.5 |
ABL Agreement | 0.2 |  |  | 0.3 |
Other interest expense | 0.1 |  |  | 0.3 |
| 5.7 |  |  | 6.1 |
Interest income | (0.6 | ) |  | (0.1 | )
| $ | 5.1 |  |  | $ | 6.0 |

Segment Analysis
Mueller Co.
Net sales for the quarter ended June 30, 2017 increased 4.5% to $207.6 million from $198.7 million in the prior year period, due primarily to increased shipment volumes, including those of Singer Valve.
Gross profit for the quarter ended June 30, 2017 decreased to $76.9 million from $77.5 million in the prior year period primarily due to higher material costs, partially offset by productivity improvements and the effect of purchase accounting on inventory cost at Singer Valve. Gross margin declined to 37.0% for the quarter ended June 30, 2017 compared to 39.0% in the prior year period primarily for the same reasons.
SG&A for the quarter ended June 30, 2017 increased to $23.6 million from $23.4 million in the prior year period. Additional expenses of Singer Valve were mostly offset by lower personnel-related expenses. SG&A was 11.4% and 11.8% of net sales for the quarters ended June 30, 2017 and 2016, respectively.
Mueller Technologies
Net sales in the quarter ended June 30, 2017 decreased 5.4% to $24.6 million from $26.0 million in the prior year period. Mueller Technologies net sales of AMR systems and visual read meters were lower year-over-year, but were partially offset by higher shipments of AMI and leak detection/condition assessment products.
Gross profit was $5.6 million in the quarter ended June 30, 2017 and $5.7 million in the prior year period. Gross margin increased to 22.8% in the quarter ended June 30, 2017 compared to 21.9% in the prior year period. The overall net sales decline resulted in the decreased gross profit, but gross margin increased because sales of AMI and leak detection/condition assessment products generally earn higher margins.
SG&A in the quarter ended June 30, 2017 was $7.2 million, the same amount as the prior year period. SG&A increased to 29.3% of net sales for the quarter ended June 30, 2017 from 27.7% of net sales in the prior year period.
Corporate
SG&A was $7.9 million in the quarter ended June 30, 2017 and $8.8 million in the prior year period. This decrease was primarily due to lower personnel-related expenses.
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Nine Months Ended June 30, 2017 Compared to Nine Months Ended June 30, 2016

| Nine months ended June 30, 2017
| Mueller Co. |  | Mueller Technologies |  | Corporate |  | Total
| (in millions)
Net sales | $ | 535.5 |  |  | $ | 63.6 |  |  | $ | — |  |  | $ | 599.1 |
Gross profit | $ | 183.3 |  |  | $ | 3.3 |  |  | $ | — |  |  | $ | 186.6 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 67.9 |  |  | 20.7 |  |  | 25.6 |  |  | 114.2 |
Other charges | 2.1 |  |  | 0.1 |  |  | 2.8 |  |  | 5.0 |
| 70.0 |  |  | 20.8 |  |  | 28.4 |  |  | 119.2 |
Operating income (loss) | $ | 113.3 |  |  | $ | (17.5 | ) |  | $ | (28.4 | ) |  | 67.4 |
Interest expense, net |  |  |  |  |  |  | 17.0 |
Income before income taxes |  |  |  |  |  |  | 50.4 |
Income tax expense |  |  |  |  |  |  | 16.2 |
Income from continuing operations |  |  |  |  |  |  | $ | 34.2 |
| Nine months ended June 30, 2016
| Mueller Co. |  | Mueller Technologies |  | Corporate |  | Total
| (in millions)
Net sales | $ | 525.6 |  |  | $ | 59.4 |  |  | $ | — |  |  | $ | 585.0 |
Gross profit | $ | 179.2 |  |  | $ | 10.9 |  |  | $ | — |  |  | $ | 190.1 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative | 65.8 |  |  | 20.6 |  |  | 25.8 |  |  | 112.2 |
Pension settlement and other charges | 3.0 |  |  | 0.5 |  |  | 19.3 |  |  | 22.8 |
| 68.8 |  |  | 21.1 |  |  | 45.1 |  |  | 135.0 |
Operating income (loss) | $ | 110.4 |  |  | $ | (10.2 | ) |  | $ | (45.1 | ) |  | 55.1 |
Interest expense, net |  |  |  |  |  |  | 18.0 |
Loss before income taxes |  |  |  |  |  |  | 37.1 |
Income tax expense |  |  |  |  |  |  | 11.8 |
Income from continuing operations |  |  |  |  |  |  | $ | 25.3 |

Consolidated Analysis
Net sales for the nine months ended June 30, 2017 increased $14.1 million to $599.1 million from $585.0 million due primarily to increased shipment volumes at both Mueller Co., including those of Singer Valve, and Mueller Technologies.
Gross profit for the nine months ended June 30, 2017 declined $3.5 million to $186.6 million from $190.1 million in the prior year period primarily due to the $9.8 million warranty expense recorded at Mueller Technologies in the 2017 second quarter. This was partially offset by increased shipment volumes and Mueller Co.'s productivity improvements. Gross margin declined to 31.1% for the nine months ended June 30, 2017 compared to 32.5% in the prior year period due to this warranty expense.
SG&A for the nine months ended June 30, 2017 increased to $114.2 million from $112.2 million in the prior year period due primarily to the incremental expenses of Singer Valve. SG&A as a percentage of net sales was 19.1% in the nine months ended June 30, 2017 and 19.2% in the prior year period.
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Interest expense, net declined $1.0 million in the nine months ended June 30, 2017 compared to the prior year period. The components of interest expense, net are provided below.

| Nine months ended
| June 30,
| 2017 |  | 2016
| (in millions)
Term Loan | $ | 14.3 |  |  | $ | 15.3 |
Interest rate swap contracts | 1.5 |  |  | — |
Deferred financing costs amortization | 1.3 |  |  | 1.4 |
ABL Agreement | 0.6 |  |  | 0.9 |
Other interest expense | 0.5 |  |  | 0.6 |
| 18.2 |  |  | 18.2 |
Interest income | (1.2 | ) |  | (0.2 | )
| $ | 17.0 |  |  | $ | 18.0 |

Segment Analysis
Mueller Co.
Net sales for the nine months ended June 30, 2017 increased 1.9% to $535.5 million compared to $525.6 million in the prior year period due primarily to increased shipment volumes, including Singer Valve.
Gross profit for the nine months ended June 30, 2017 increased to $183.3 million from $179.2 million in the prior year period due primarily to productivity improvements, partially offset by higher material costs. Gross margin increased to 34.2% for the nine months ended June 30, 2017 compared to 34.1% in the prior year period.
SG&A for the nine months ended June 30, 2017 increased to $67.9 million from $65.8 million in the prior year period primarily due to Singer Valve. SG&A was 12.7% and 12.5% of net sales for the nine months ended June 30, 2017 and 2016, respectively.
Mueller Technologies
Net sales in the nine months ended June 30, 2017 increased 7.1% to $63.6 million from $59.4 million in the prior year period primarily due to higher AMI shipment volumes.
Gross profit in the nine months ended June 30, 2017 was $3.3 million compared to $10.9 million in the prior year period, and gross margin declined to 5.2% in the nine months ended June 30, 2017 compared to 18.4% in the prior year period. These declines were primarily due to the $9.8 million warranty expense recorded in the 2017 second quarter.
SG&A was $20.7 million in the nine months ended June 30, 2017 compared to $20.6 million in the prior year period. SG&A decreased to 32.5% of net sales for the nine months ended June 30, 2017 from 34.7% of net sales in the prior year period.
Corporate
SG&A was $25.6 million in the nine months ended June 30, 2017 compared to $25.8 million in the prior year period.
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Liquidity and Capital Resources
We amended our term loan credit agreement in February 2017, which reduced the applicable interest rate spread by 75 basis points.
We had cash and cash equivalents of $353.2 million at June 30, 2017 and $109.5 million of additional borrowing capacity under our ABL Agreement based on June 30, 2017 data. Undistributed earnings of our subsidiaries in Canada and China are considered to be permanently invested outside the United States. At June 30, 2017, cash and cash equivalents included $15.2 million and $6.9 million in Canada and China, respectively.
Our ABL Agreement and Term Loan discussed below contain customary representations and warranties, covenants and provisions governing an event of default. The covenants restrict our ability to engage in certain specified activities, including but not limited to the payment of dividends and the redemption of our common stock.
Cash flows from operating activities of continuing operations are categorized below.

| Nine months ended
| June 30,
| 2017 |  | 2016
| (in millions)
Collections from customers | $ | 593.4 |  |  | $ | 571.9 |
Disbursements, other than interest and income taxes | (529.1 | ) |  | (487.4 | )
Interest payments, net | (15.0 | ) |  | (15.8 | )
Income tax payments, net | (23.9 | ) |  | (14.3 | )
Cash provided by operating activities | $ | 25.4 |  |  | $ | 54.4 |

Collections from customers were higher during the nine months ended June 30, 2017 compared to the prior year period primarily due to an increase in applicable net sales and improved timing of receipts.
Increased disbursements, other than interest and income taxes, during the nine months ended June 30, 2017 primarily reflect differences in the timing of expenditures.
During the nine months ended June 30, 2017, we repurchased 4.6 million shares of our common stock for a total cost of $55.0 million.
We acquired Singer Valve for $26.6 million during the nine months ended June 30, 2017.
Capital expenditures were $21.6 million in the nine months ended June 30, 2017 compared to $17.0 million in the prior year period. We estimate 2017 capital expenditures will be between $36 million and $38 million.
We anticipate that our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flows will be sufficient to meet our anticipated operating expenses, income tax payments, capital expenditures and debt service obligations as they become due through June 30, 2018. However, our ability to make these payments will depend partly upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.
ABL Agreement
At June 30, 2017, the ABL Agreement consisted of a revolving credit facility for up to $225 million of revolving credit borrowings, swing line loans and letters of credit. The ABL Agreement permits us to increase the size of the credit facility by an additional $150 million in certain circumstances subject to adequate borrowing base availability. We may borrow up to $25 million through swing line loans and may have up to $60 million of letters of credit outstanding.
Borrowings under the ABL Agreement bear interest at a floating rate equal to LIBOR, plus a margin ranging from 125 to 150 basis points, or a base rate, as defined in the ABL Agreement, plus a margin ranging from 25 to 50 basis points. At June 30, 2017, the applicable LIBOR-based margin was 150 basis points.
The ABL Agreement terminates on July 13, 2021. We pay a commitment fee for any unused borrowing capacity under the ABL Agreement of 25 basis points per annum.
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The ABL Agreement is subject to mandatory prepayments if total outstanding borrowings under the ABL Agreement are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances. The borrowing base under the ABL Agreement is equal to the sum of (a) 85% of the value of eligible accounts receivable and (b) the lesser of (i) 70% of the value of eligible inventories or (ii) 85% of the net orderly liquidation value of the value of eligible inventories, less certain reserves. Prepayments can be made at any time with no penalty.
Substantially all of our U.S. subsidiaries are borrowers under the ABL Agreement and are jointly and severally liable for any outstanding borrowings. Our obligations under the ABL Agreement are secured by a first-priority perfected lien on all of our U.S. inventories, accounts receivable, certain cash and other supporting obligations.
Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million and 10% of the Loan Cap under the ABL Agreement.
Term Loan
We had $487.6 million face value outstanding under the Term Loan at June 30, 2017. During the quarter ended March 31, 2017, we amended the Term Loan, which reduced the applicable interest rate spread by 75 basis points. Term Loan borrowings accrue interest at a floating rate equal to LIBOR, subject to a floor of 0.75%, plus 250 basis points. We may voluntarily repay amounts borrowed under the Term Loan at any time. The principal amount of the Term Loan is required to be repaid in quarterly installments of $1.225 million. The Term Loan matures on November 25, 2021. The Term Loan is guaranteed by substantially all of our U.S. subsidiaries and secured by essentially all of our assets, although the ABL Agreement has a senior claim on certain collateral securing borrowings thereunder.
Our corporate credit rating and the credit rating for our debt are presented below.

| Moody’s |  | Standard & Poor's
| June 30, |  | September 30, |  | June 30, |  | September 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Corporate credit rating | Ba3 |  | Ba3 |  | BB- |  | BB-
ABL Agreement | Not rated |  | Not rated |  | Not rated |  | Not rated
Term Loan | Ba3 |  | Ba3 |  | BB |  | BB
Outlook | Stable |  | Stable |  | Stable |  | Stable

Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured finance” or “special purpose” entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, at June 30, 2017 we did not have any undisclosed borrowings, debt, derivative contracts or synthetic leases. Therefore, we were not exposed to any financing, liquidity, market or credit risk that could have arisen had we engaged in such relationships.
We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual obligations. At June 30, 2017, we had $19.8 million of letters of credit and $46.8 million of surety bonds outstanding.
Seasonality
Our business is dependent upon the construction industry, which is seasonal due to the impact of cold weather conditions. Net sales and operating income have historically been lowest in the quarterly periods ending December 31 and March 31 when the northern United States and all of Canada generally face weather conditions that restrict significant construction activity.
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Item 4. | CONTROLS AND PROCEDURES

During the quarter ended June 30, 2017, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and our Chief Financial Officer have concluded, based on an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) by our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, that such disclosure controls and procedures were effective as of the end of the period covered by this report.
Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls can prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of one or more persons. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and, while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.
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PART II OTHER INFORMATION

Item 1. | LEGAL PROCEEDINGS

Refer to the information provided in Note 13. to the notes to the condensed consolidated financial statements presented in Item 1 of Part I of this report.

Item 1A. | RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in PART I, “Item 1A. RISK FACTORS” in our Annual Report, each of which could materially affect our business, financial condition or operating results. These described risks are not the only risks facing us. Additional risks and uncertainties not known to us or that we deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended June 30, 2017, we repurchased shares of our common stock, including shares surrendered to us to pay the tax withholding obligations of participants in connection with the lapsing of restrictions on restricted stock units, as follows.

Period |  | Total number of shares purchased |  | Average price paid per share |  | Total number of shares purchased as part of publicly announced plans or programs |  | Maximum dollar value of shares that may yet be purchased under the plans or programs (in millions)
April 1-30, 2017 |  | 601,061 |  |  | $ | 8.32 |  |  | 601,061 |  |  | $ | — |
May 1-31, 2017 |  | 797,994 |  |  | 8.79 |  |  | 796,886 |  |  | — |
June 1-30, 2017 |  | 263,572 |  |  | 11.39 |  |  | 263,572 |  |  | — |
Total |  | 1,662,627 |  |  | $ | 9.03 |  |  | 1,661,519 |  |  | $ | — |

In April and May 2017, we received 1,219,547 shares related to the February 2017 accelerated share repurchase agreement with Bank of America, N.A., which fulfilled the agreement. We repurchased a total of 4,139,255 shares under that agreement for $50.0 million.

Item 6. | EXHIBITS

Exhibit No. |  | Document
31.1* |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1* |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101* |  | The following financial information from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, formatted in XBRL (Extensible Business Reporting Language), (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Other Comprehensive Loss, (iv) the Condensed Consolidated Statements of Stockholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Condensed Consolidated Financial Statements.

* Filed with this quarterly report
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | MUELLER WATER PRODUCTS, INC.
Date: | August 9, 2017 | By: | /s/ Evan L. Hart
|  |  | Evan L. Hart
|  |  | Chief Financial Officer

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