Organization

6 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Basis of Presentation

Mueller Water Products, Inc., a Delaware corporation, together with its consolidated subsidiaries, operates in two business segments: Infrastructure and Technologies. Infrastructure 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 and a broad line of pipe connection and repair products, such as clamps and couplings used to repair leaks. Technologies offers metering systems, leak detection, pipe condition assessment and other related smart-enabled 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.

In July 2014, Infrastructure acquired a 49% ownership interest in an industrial valve joint venture for $1.7 million. As a result of substantive control features in the operating agreement, all of the joint venture’s assets, liabilities and results of operations were included in our consolidated financial statements. Infrastructure acquired the remaining 51% ownership interest in the business in October 2019.

During the three months ended March 31, 2021, we aligned the consolidation of the financial statements of Krausz Industries Development Ltd. and subsidiaries (“Krausz”) in the Company’s consolidated financial statements, eliminating the previous inclusion of Krausz financial statements with a one-month reporting lag. We believe this change in accounting principle is preferable as the financial statements of all of our subsidiaries are now reported on the same basis, providing the most current information available. In accordance with applicable accounting literature, the elimination of the one-month reporting lag is considered to be a change in accounting principle. The effect of the elimination of the reporting lag during the three and six months ended March 31, 2021 resulted in an increase of $6.0 million to net sales and an increase of $1.4 million to operating income. We concluded that the effect of this change is not material to the balance sheets, statements of operations, statements of cash flows, net income and earnings per share and therefore have not retrospectively applied this change.

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 in recording assets, liabilities, sales and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. All significant intercompany balances and transactions have been eliminated. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2020. 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 at September 30, 2020 was derived from audited financial statements, but it does not include all disclosures required by GAAP.

Our business is seasonal as a result of cold weather conditions. Net sales and operating income have historically been lowest in the three month 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.

In preparing these financial statements in conformity with GAAP, we have considered and, where appropriate, reflected the effects of the COVID-19 pandemic on our operations. The pandemic continues to provide significant challenges to the U.S. and global economies.

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.

During 2016, the Financial Accounting Standards Board (“FASB”) issued standard ASC 326 - Current Expected Credit Losses to replace the “incurred loss” impairment approach with an “expected loss” approach, which requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We have completed historical and forward-looking analyses for receivables and adopted this guidance effective October 1, 2020. Upon adoption, there was no material impact to our financial statements.

In November 2019, we announced the purchase of a new facility in Kimball, Tennessee to support and enhance our investment in our Chattanooga, Tennessee large casting foundry. As a result, we announced subsequent closures of our facilities in Hammond, Indiana and Woodland, Washington. Expenses incurred for these closures were primarily related to personnel and inventory and are included in Strategic reorganization and other charges.

In March 2021, we announced the planned closures of our facilities in Aurora, Illinois and Surrey, British Columbia, Canada. Most of the activities from these plants will be transferred to our Kimball, Tennessee facility. We expect to substantially complete these facility closures by the third quarter of our fiscal year 2022 and expect to incur total expenses related to this restructuring of approximately $14.0 million, including termination benefit costs of approximately $4.8 million and other associated costs of $9.2 million. Of the total $14.0 million estimated costs, approximately $3.6 million are expected to be non-cash charges. Expenses incurred during the three months ended March 31, 2021 were approximately $3.3 million, including approximately $0.9 million of termination benefit costs which are included in Strategic reorganization and other charges and approximately $2.4 million in inventory write-downs which are included in Cost of sales.

Activity in accrued restructuring, reported as part of other current liabilities, is presented below.


	Six months ended
	March 31,
	2021		2020

	(in millions)
Beginning balance	$	2.8	$	1.7
Expenses incurred	1.0		1.6
Amounts paid	(1.6)		(2.7)
Ending balance	$	2.2	$	0.6