What changed in this filing

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Item 1. Financial Statements

2020-05-05 compared with 2020-02-05 · 148 added, 77 removed, 519 unchanged (30% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, September 30,

March 31, September 30,

(in millions, except share amounts)

21 unchanged sentences

600,000,000 shares authorized;

157,889,045 and 157,462,140 shares outstanding at December 31, 2019 and September 30, 2019, respectively 1.6 1.6

157,707,895 and 157,462,140 shares outstanding at March 31, 2020 and September 30, 2019, respectively 1.6 1.6

Additional paid-in capital 1,390.1 1,410.7

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended

Three months ended Six months ended

March 31, March 31,

2020 2019 2020 2019

(in millions, except per share amounts)

26 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended

Three months ended Six months ended

March 31, March 31,

2020 2019 2020 2019

(in millions)

4 unchanged sentences

Foreign currency translation ( 1.6 ) 4.3 1.8 3.1

( 1.1 ) 5.8 2.9 5.0

Comprehensive income (loss) $ 22.7 $ 16.7 $ 37.0 $ ( 5.1 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three months ended

Three months ended Six months ended

March 31, March 31,

2020 2019 2020 2019

(in millions)

5 unchanged sentences

Dividends declared ( 8.3 ) ( 7.9 ) ( 16.6 ) ( 15.8 )

Shares repurchased under buyback program ( 5.0 ) — ( 5.0 ) —

Buyout of noncontrolling interest — — ( 3.2 ) —

21 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended

Six months ended

(in millions)

16 unchanged sentences

Long-term liabilities ( 6.0 ) ( 8.8 )

Net cash (used in) provided by operating activities

Net cash (used in) operating activities

( 3.0 ) ( 29.1 )

Investing activities:

10 unchanged sentences

Common stock issued 2.2 3.6

Common stock repurchased under buyback program ( 5.0 ) —

Other 0.5 0.1

Net cash used in financing activities

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2019

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2020

Mueller Water Products, Inc., a Delaware corporation, together with its consolidated subsidiaries, operates in two business segments:

8 unchanged sentences

We included an adjustment for the income attributable to the noncontrolling interest in selling, general and administrative expenses.

Infrastructure acquired the remaining 51 % interest in the business on October 3, 2019.

Infrastructure acquired the remaining 51 % interest in the business in October 2019.

On December 3, 2018, we completed our acquisition of Krausz Development Ltd.

1 unchanged sentence

We include the financial statements of Krausz in our consolidated financial statements on a one-month lag.

For the quarter ended December 31, 2018, the consolidated statements of operations and of cash flows exclude the results of Krausz’s operations.

Refer to Note 2.

6 unchanged sentences

The condensed consolidated balance sheet data at September 30, 2019 was derived from audited financial statements, but it does not include all disclosures required by GAAP.

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.

As of March 31, 2020, such impacts did not result in the impairment of the carrying value of our assets.

COVID-19 continues to cause significant disruptions to the U.S.

and global economies.

While we do not believe these disruptions had a material effect on our financial position or operations through March 31, 2020, there is no assurance that the pandemic will not have a material effect on our future financial position, results of operations, cash flows, or liquidity.

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.

HR-1, commonly referred to as the Tax Cuts and Jobs Act, was enacted on December 22, 2017 and made significant revisions to federal income tax laws, including lowering the corporate income tax rate to 21 % from 35 %, effective January 1, 2018.

In 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance for the recognition of revenue and requiring additional financial statement disclosures.

8 unchanged sentences

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

Three months ended

Six months ended

(in millions)

8 unchanged sentences

We have recognized the assets acquired and liabilities assumed at their estimated acquisition date fair values, with the excess of the purchase price over the estimated fair values of the identifiable net assets acquired recorded as goodwill.

The accounting for the business combination is considered final.

During the quarter, we reduced property, plant and equipment by $ 0.3 million, which resulted in an increase in goodwill of $ 0.3 million.

The following is a summary of the fair values of the net assets acquired (in millions):

4 unchanged sentences

Property, plant and equipment 8.1

Other noncurrent assets 1.7

Identified intangible assets:

6 unchanged sentences

Deferred income taxes ( 11.2 )

Other noncurrent liabilities ( 1.7 )

Fair value of assets acquired, net of liabilities assumed 140.7

3 unchanged sentences

The goodwill is nondeductible for income tax purposes.

The intangible assets of $ 47.7 million consist of indefinite-lived tradenames and patents, customer relationships and favorable leasehold interests with an estimated weighted average useful life of approximately 12 years.

We determined the values of the intangible assets using discounted cash flow methods.

The amortizable intangible assets acquired have a weighted average useful life of approximately 12 years.

Revenue from Contracts with Customers

14 unchanged sentences

The table below represents the balances of our customer receivables and deferred revenues.

December 31, September 30,

March 31, September 30,

(in millions)

9 unchanged sentences

We have elected to use the practical expedient to not adjust the transaction price of a contract for the effects of a significant financing component if, at the inception of the contract, we expect that the period between when we transfer a product or service to a customer and when a customer remits payment will be one year or less.

Revenues from products and services transferred to customers at a point in time represented 98 % of our revenues in the three months ended December 31, 2019 and 2018.

Revenues from products and services transferred to customers at a point in time represented 99 % of our revenues in the six months ended March 31, 2020 and 2019 respectively.

The revenues recognized at a point in time related to the sale of our products was recognized when the obligations of the terms of our contract were satisfied, which generally occurs upon shipment, when control of the product transfers to the customer.

Revenues from products and services transferred to customers over time represented 2 % of our revenues in the three months ended December 31, 2019 and 2018.

Revenues from products and services transferred to customers over time represented 1 % of our revenues in the six months ended March 31, 2020 and 2019 respectively.

We offer warranties to our customers in the form of assurance-type warranties, which provide assurance that the products provided will function as intended and comply with any agreed-upon specifications.

These cannot be purchased separately.

There was no change to our warranty accounting as a result of the implementation of the new revenue standard and we will continue to use our current cost accrual method in accordance with GAAP.

There was no change to our warranty accounting as a result of the implementation of the new revenue standard and we continue to use our current cost accrual method.

Costs to Obtain or Fulfill a Contract

21 unchanged sentences

We recognize short-term lease expense in our condensed consolidated income statements on a straight-line basis over the lease term.

Our short-term lease expense for the quarter ended December 31, 2019 and short-term lease commitments at December 31, 2019 are immaterial.

Our short-term lease expense for the three and six months ended March 31, 2020 and short-term lease commitments at March 31, 2020 are immaterial.

We have certain lease contracts with terms and conditions that provide for variability in the payment amount based on changes in facts or circumstances occurring after the commencement date.

These variable lease payments are recognized in our condensed consolidated income statements as the obligation is incurred.

At December 31, 2019, we had no material, legally-binding minimum lease payments for operating leases signed but not yet commenced.

At March 31, 2020, we had no material, legally-binding minimum lease payments for operating leases signed but not yet commenced.

We did not have material subleases, leases that imposed significant restrictions or covenants, material related party leases or sale-leaseback arrangements.

The components of lease cost for the three months ended December 31, 2019 are presented below, in millions.

The components of lease cost are presented below.

Three months ended Six months ended

March 31, 2020 March 31, 2020

(in millions)

Operating lease cost $ 1.6 3.2

1 unchanged sentence

Total lease expense $ 1.9 $ 3.8

Supplemental information related to leases for the three months ended December 31, 2019 is presented below, in millions.

Cash Flow Information:

Operating cash flows from operating leases $ 1.4

Financing cash flows from finance leases $ 0.3

Supplemental information related to leases as of December 31, 2019 is presented below, in millions.

Balance Sheet Information:

Right of use assets Balance Sheet Caption

Supplemental cash flow information related to leases for the six months ended March 31, 2020 is presented below, in millions.

Operating cash flows used in operating leases $ 2.9

Financing cash flows used in finance leases $ 0.7

Supplemental information describing where lease-related assets and liabilities are reflected in the Condensed Consolidated Balance Sheet at March 31, 2020 is presented below, in millions.

Right of use assets:

Operating leases Other noncurrent assets $ 26.7

1 unchanged sentence

Total right of use assets $ 29.2

Lease liabilities Balance Sheet Caption

Lease liabilities:

Operating leases - current Other current liabilities $ 4.4

3 unchanged sentences

Total lease liabilities $ 31.0

Additional supplemental information related to leases as of December 31, 2019 is presented below.

Lease term and discount rate:

Supplemental information related to lease terms and discount rates at March 31, 2020 is presented below.

Weighted-average remaining lease term (years):

4 unchanged sentences

Finance leases 5.23 %

Total lease liabilities at December 31, 2019 have scheduled maturities as follows:

Total lease liabilities at March 31, 2020 have scheduled maturities as follows:

Operating Leases Finance Leases

7 unchanged sentences

federal statutory income tax rate and the effective tax rate is presented below.

Three months ended

Three months ended Six months ended

March 31, March 31,

2020 2019 2020 2019

federal statutory income tax rate 21.0 % 21.0 % 21.0 % 21.0 %

9 unchanged sentences

Walter Energy Accrual — — — ( 12.9 )

Remeasurement related to tax law changes — 2.1

Transition tax — — — 4.7

Effective income tax rate 22.2 % 26.4 % 22.5 % 16.7 %

At December 31, 2019 and September 30, 2019, the gross liabilities for unrecognized income tax benefits were $ 3.5 million and $ 3.3 million, respectively.

At March 31, 2020 and September 30, 2019, the gross liabilities for unrecognized income tax benefits were $ 3.8 million and $ 3.3 million, respectively.

Borrowing Arrangements

The components of our long-term debt are presented below.

December 31, September 30,

March 31, September 30,

(in millions)

11 unchanged sentences

subsidiaries guarantee the Notes, which are subordinate to borrowings under the ABL.

Based on quoted market prices, the outstanding Notes had a fair value of $ 473.6 million at December 31, 2019.

Based on quoted market prices, the outstanding Notes had a fair value of $ 435.4 million at March 31, 2020.

ABL Agreement .

At December 31, 2019, our asset based lending agreement (“ABL Agreement”) consisted of a revolving credit facility for up to $ 175 million of revolving credit borrowings, swing line loans and letters of credit.

At March 31, 2020, our asset based lending agreement (“ABL Agreement”) consisted of a revolving credit facility for up to $ 175 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.

1 unchanged sentence

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 December 31, 2019, the applicable rate was LIBOR plus 125 basis points.

At March 31, 2020, the applicable rate was LIBOR plus 125 basis points.

The ABL Agreement terminates on July 13, 2021 .

3 unchanged sentences

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 December 31, 2019 data, as reduced by outstanding letters of credit and accrued fees and expenses of $ 14.5 million, was $ 122.0 million.

Excess availability based on March 31, 2020 data, as reduced by outstanding letters of credit and accrued fees and expenses of $ 13.9 million, was $ 159.0 million.

Derivative Financial Instruments

5 unchanged sentences

We have not designated these swaps as hedges and the changes in their fair values are included in earnings, where they offset the currency gains and losses associated with the intercompany loan.

The values of our currency swap contracts were liabilities of $ 0.6 million and $ 0.3 million as of December 31, 2019 and September 30, 2019, respectively, and are included in other noncurrent liabilities in our Condensed Consolidated Balance Sheets.

The values of our currency swap contracts were an asset of $ 0.8 million and a liability $ 0.3 million as of March 31, 2020 and September 30, 2019, respectively, and are included in other noncurrent assets and noncurrent liabilities, respectively, in our Condensed Consolidated Balance Sheets.

Retirement Plans

The components of net periodic benefit cost for our pension plans are presented below.

Three months ended

Three months ended Six months ended

March 31, March 31,

2020 2019 2020 2019

(in millions)

4 unchanged sentences

Amortization of actuarial net loss 0.6 0.5 1.3 1.0

Curtailment/special settlement loss (gain) — 1.0 — 1.0

Pension costs (benefits) other than service ( 0.8 ) 1.0 ( 1.5 ) 0.9

1 unchanged sentence

The amortization of actuarial losses, net of tax, is recorded as a component of other comprehensive loss.

During the quarter ended March 31, 2019, we settled our obligation to our Canadian pension plan participants through a combination of lump sum payments and purchases of annuities.

We made a contribution to the plans of $ 1.0 million, which is included in pension costs other than service, to fund these settlements.

Also during the quarter ended March 31, 2019, we recorded an estimated settlement liability for our exiting a multi-employer pension plan at one of our manufacturing locations, which resulted in an expense of $ 1.1 million that we included in strategic reorganization and other charges.

We subsequently paid the liability in May 2019.

Stock-based Compensation Plans

5 unchanged sentences

Settlements, in our common shares, will range from zero to two times the number of PRSUs granted, depending on our financial performance against the targets.

A MRSU award represents a target number of units that may be paid out at the end of a three year award cycle based on a calculation of the Company's relative total shareholder return (“TSR”) performance as compared with a selected peer group's total shareholder return.

A MRSU award represents a target number of units that may be paid out at the end of a three-year award cycle based on a calculation of the Company's relative total shareholder return (“TSR”) performance as compared with a selected peer group's TSR.

Settlements, in our common shares, will range from zero to two times the number of MRSUs granted, depending on our TSR performance versus the peer group.

The per-unit fair value of the MRSU award was $ 14.94 , as determined using a Monte Carlo simulation with the following inputs:

December 31, 2019

The table below provides information regarding MRSU awards, which were valued using Monte Carlo simulations on the dates the units were granted.

December 3, 2019 January 28, 2020 February 24, 2020

Fair Value at grant date $ 14.94 $ 16.76 $ 18.17

Units granted 147,213 2,763 7,498

Variables used in determining grant date fair value:

Dividend yield 1.87 % 1.76 % 1.73 %

1 unchanged sentence

Expected term (in years) 2.83 2.67 2.60

We awarded 196,284 stock-settled PRSUs and 147,213 MRSUs in the three months ended December 31, 2019 that are scheduled to settle in 3 years.

We issued 93,647 shares and 181,065 shares of common stock during the three months ended December 31, 2019 and 2018, respectively, to settle PRSUs that vested during the periods.

In addition to the PRSU activity, 132,303 restricted stock units vested during the three months ended December 31, 2019, respectively.

We awarded 209,966 stock-settled PRSUs and 157,474 MRSUs in the six months ended March 31, 2020 that are scheduled to settle in 3 years.

We issued 93,647 shares and 181,065 shares of common stock during the six months ended March 31, 2020 and 2019, respectively, to settle PRSUs that vested during those periods.

In addition to the PRSU activity, we issued 114,691 and 246,994 shares of common stock for restricted stock units vested during the three and six months ended March 31, 2020, respectively.

We have granted cash-settled Phantom Plan instruments under the Mueller Water Products, Inc.

Phantom Plan (“Phantom Plan”).

At December 31, 2019, the outstanding Phantom Plan instruments had a fair value of $ 11.98 per instrument and our liability for Phantom Plan instruments was $ 1.0 million.

At March 31, 2020, the outstanding Phantom Plan instruments had a fair value of $ 8.01 per instrument and our liability for Phantom Plan instruments was $ 1.0 million.

We granted stock-based compensation awards under the 2006 Stock Plan, the Mueller Water Products, Inc.

2006 Employee Stock Purchase Plan, and the Phantom Plan during the three months ended December 31, 2019 as follows.

2006 Employee Stock Purchase Plan, and the Phantom Plan during the six months ended March 31, 2020 as follows.

Number granted Weighted average grant date fair value per instrument Total grant date fair value

(in millions)

Quarter ended December 31, 2019

Restricted stock units 162,433 $ 11.26 $ 1.8

5 unchanged sentences

MRSUs 147,213 14.94 2.2

Operating income included stock-based compensation expense of $ 1.9 million and $ 1.7 million during the three months ended December 31, 2019 and 2018, respectively.

At December 31, 2019, there was approximately $ 11.8 million of unrecognized compensation expense related to stock-based compensation arrangements and there were 218,292 PRSUs that have been awarded for the 2021 and 2022 performance periods for which performance goals have not been set.

We excluded 108,976 and 165,467 of stock-based compensation instruments from the calculations of diluted earnings per share for the quarters ended December 31, 2019 and 2018, respectively, since their inclusion would have been antidilutive.

Quarter ended March 31, 2020

Restricted stock units 118,684 12.14 1.4

Employee stock purchase plan instruments 53,876 2.09 0.1

2020 award 13,682 12.09 0.2

MRSUs 10,261 17.79 0.2

Operating income included stock-based compensation expense of $ 1.3 million and $ 1.0 million during the three months ended March 31, 2020 and 2019, respectively and $ 3.2 million and $ 2.7 million during the six months ended March 31, 2020 and 2019, respectively.

At March 31, 2020, there was approximately $ 10.4 million of unrecognized compensation expense related to stock-based compensation arrangements and there were 232,262 PRSUs that have been awarded for the 2021 and 2022 performance periods for which performance goals have not been set.

We excluded 267,697 and 202,245 of stock-based compensation instruments from the calculations of diluted earnings per share for the quarters ended March 31, 2020 and 2019, respectively, and 184,296 and 1,077,983 for the six months ended March 31, 2020 and 2019, respectively, since their inclusion would have been antidilutive.

Supplemental Balance Sheet Information

Selected supplemental balance sheet information is presented below.

December 31, September 30,

Selected supplemental asset information is presented below.

March 31, September 30,

(in millions)

4 unchanged sentences

Other current assets:

Maintenance and repair tooling $ 4.2 $ 4.2

Prepaid expenses $ 10.8 $ 9.6

Non-trade receivables 7.0 6.3

Maintenance and repair supplies and tooling 4.0 4.2

Income taxes 0.5 4.7

8 unchanged sentences

$ 239.0 $ 217.1

Other noncurrent assets:

Operating lease right of use asset $ 26.7 $ —

Maintenance and repair supplies and tooling 17.2 16.4

Workers compensation reimbursement receivable 3.0 3.1

Note receivable 1.8 1.8

Other 3.2 2.6

$ 51.9 $ 23.9

Selected supplemental liability information is presented below.

March 31, September 30,

(in millions)

Other current liabilities:

8 unchanged sentences

Walter Energy Accrual — 22.0

Operating lease liabilities 4.4 —

Deferred revenues 4.1 4.7

Refund liability 4.0 3.3

Other 5.2 5.2

$ 67.4 $ 93.0

Other noncurrent liabilities:

Operating lease liabilities $ 24.0 $ —

Warranty 9.4 10.7

Transition tax 4.1 5.8

Unrecognized income tax benefits 3.8 3.3

Asset retirement obligation 3.6 3.6

Pension 2.9 5.0

Workers compensation 1.4 1.9

Other 2.5 2.9

$ 51.7 $ 33.2

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 1 st 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.

As a result of the COVID-19 pandemic, with deteriorating market and business conditions, we noted that there were indicators that an impairment loss may have occurred.

Further, we determined it was more likely than not that the goodwill and indefinite-lived intangibles of Krausz could be impaired as of March 31, 2020.

We performed an interim impairment assessment for Krausz, both qualitative and quantitative, and determined Krausz’s goodwill and indefinite-lived assets were not impaired.

However, the excess of the fair value over the carrying value was not significant, the use of different key assumptions could result in a materially different outcome, and we cannot provide assurance that our estimates will be realized.

The following table summarizes information concerning our goodwill balance for the six months ended March 31, 2020, in millions.

Balance at beginning of year $ 95.7

Purchase accounting adjustments 0.3

Change in foreign currency exchange rates 1.7

Balance as of March 31, 2020 $ 97.7

Segment Information

Summarized financial information for our segments is presented below.

Three months ended

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March 31, March 31,

2020 2019 2020 2019

(in millions)

17 unchanged sentences

Corporate 0.5 5.8 2.9 9.0

$ 0.9 $ 6.9 $ 3.3 $ 10.1

Capital expenditures:

16 unchanged sentences

Southeast 5.3 7.0 11.1 13.8

West 3.0 1.5 5.0 4.2

United States 16.3 19.3 34.9 38.7

8 unchanged sentences

Current period other comprehensive income 1.1 1.8 $ 2.9

Balance at December 31, 2019 $ ( 35.5 ) $ 3.5 $ ( 32.0 )

Balance at March 31, 2020 $ ( 34.9 ) $ 1.8 $ ( 33.1 )

Commitments and Contingencies

27 unchanged sentences

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 have been accrued for this matter at December 31, 2019.

Since the amounts of such costs cannot be reasonably estimated at this time, no amounts have been accrued for this matter at March 31, 2020.

Walter Energy .

We were a member of the Walter Energy, Inc (“Walter Energy”) federal tax consolidated group through December 14, 2006, at which time the Company was spun-off from Walter Energy.

Until our spin-off from Walter Energy, we joined in the filing of Walter Energy’s consolidated federal income tax return for each taxable year during which we were a member of the consolidated group.

As a result, we were jointly and severally liable for the federal income tax liability, if any, of the consolidated group for each of those years.

In July 2015, Walter Energy filed for bankruptcy protection under Chapter 11 of the U.S.

Bankruptcy Code in the Northern District of Alabama (“Bankruptcy Case”).

The Internal Revenue Service (“IRS”) alleged that Walter Energy owed substantial amounts (“Walter Tax Liability”), and on January 11, 2016, the IRS filed a proof of claim in the Bankruptcy Case, alleging that Walter Energy owed taxes, interest and penalties in an aggregate amount of $ 554.3 million.

In the proof of claim, the IRS included an alternative calculation in an aggregate amount of $ 860.4 million.

On November 5, 2019, we agreed to be bound by a settlement agreement between the bankruptcy trustee in the Bankruptcy Case and the IRS 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.

Under the terms of the settlement agreement, we contributed approximately $ 22.2 million to the settlement.

All appeal periods have expired, and our liabilities with respect to the Walter Tax Liability have been fully resolved.

On November 18, 2019, we paid approximately $ 22.2 million to the IRS in final settlement of a tax dispute related to our former parent company, Walter Energy, Inc., as described more fully in Note 17.

to our Form 10-K for the year ended September 30, 2019.

Mueller Water Products, et al.

12 unchanged sentences

Defendants filed their motion to dismiss on November 1, 2019 and second motion to dismiss (in response to the second amended complaint filed on December 24, 2019) on January 31, 2020.

Additionally, the parties have filed their respective briefs and await the Court’s decision.

We believe the allegations are without merit and intend to vigorously defend against the claims.

3 unchanged sentences

On or about August 22, 2013, Mueller Systems, LLC (“Mueller Systems”) entered into an agreement with Siemens Industries, Inc (“Siemens”) to provide automated meter infrastructure (“AMI”) products and services to Siemens as part of Siemens’ project for the City of Jackson, MS (the “City”).

This project included products and services for the City’s water treatment plants, sewer lines and billing system, which were provided by parties other than Mueller Systems (the “Project”).

This project included products and services, which were provided by parties other than Mueller Systems, for the City’s water treatment plants, sewer lines and billing system (the “Project”).

On June 11, 2018, the City filed a lawsuit against Siemens and several of its contractors (excluding Mueller Systems) for multiple claims related to the Project, including claims for fraud, negligence, breach of implied warranty of good workmanship, negligent representation, civil conspiracy, unjust enrichment, breach of contract and breach of covenant of good faith and fair dealing (“Siemens Lawsuit”).

1 unchanged sentence

On November 12, 2019, the City filed an amended complaint, adding Mueller Systems as a defendant in the Siemens Lawsuit.

Mueller Systems is reviewing the claims to determine the portion, if any, of the City’s alleged damages that may be related to Mueller Systems’ AMI products and services.

However, there remains a high degree of uncertainty around these claims, as well as their potential effect on Mueller Systems’ future operations, earnings, cash flows and financial condition.

In February 2020, the City dismissed all claims against Mueller Systems in the Siemens Lawsuit.

On March 27, 2020, the City and Siemens executed a settlement agreement whereby Siemens agreed to pay the City $ 89.8 million (“Settlement Amount”) in order to settle the Siemens Lawsuit (the “Settlement”).

As a result of the Settlement, Siemens is seeking to recover some or all of the Settlement Amount from Mueller Systems.

Mueller Systems is reviewing the matter to determine the portion, if any, of the Settlement Amount that may be related to Mueller Systems’ AMI products and services.

However, there remains a high degree of uncertainty around this matter, as well as the potential effect on Mueller Systems’ future operations, earnings, cash flows and financial condition.

In the event Siemens initiates legal proceedings, we intend to vigorously defend against any such action.

However, the outcome of any legal proceeding cannot be predicted with certainty.

Accordingly, at this time, it is not practicable to estimate the magnitude and timing of any possible obligations or payments.

20 unchanged sentences

Subsequent Events

On January 30, 2020 , our board of directors declared a dividend of $ 0.0525 per share on our common stock, payable on or about February 20, 2020 to stockholders of record at the close of business on February 10, 2020 .

On April 23, 2020 , our board of directors declared a dividend of $ 0.0525 per share on our common stock, payable on or about May 20, 2020 to stockholders of record at the close of business on May 11, 2020 .

The COVID-19 pandemic has caused, and is likely to continue to cause, severe economic, market and other disruptions to the U.S.

and global economies.

As a result of this pandemic, we experienced increasingly adverse business conditions, especially in the latter half of March and through the date of this report.

We are taking steps to maximize liquidity by limiting cash expenditures, including furloughing significant numbers of our employees, implementing temporary shutdowns of our manufacturing facilities or portions of our manufacturing facilities, implementing temporary salary reductions for our senior leadership team, reduced fees for our Board of Directors and aggressively reducing general and administrative spending.

We are uncertain of the potential full magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19, and while the extent to which COVID-19 affects our results will depend on future developments, the outbreak could result in material effects to our future financial position, results of operations, cash flows and liquidity.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements