What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-05 · 110 added, 109 removed, 558 unchanged (28% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, September 30,

June 30, September 30,

(in millions, except share amounts)

21 unchanged sentences

600,000,000 shares authorized;

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

157,762,860 and 157,462,140 shares outstanding at June 30, 2020 and September 30, 2019, respectively 1.6 1.6

Additional paid-in capital 1,383.3 1,410.7

1 unchanged sentence

Accumulated other comprehensive loss ( 34.3 ) ( 36.0 )

Total Company stockholders’ equity 606.5 590.1

Total stockholders’ equity 609.7 590.1

Noncontrolling interest — 2.2

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2020 2019 2020 2019

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Net other expense 5.4 4.6 17.5 54.8

Income (loss) before income taxes 30.6 14.8 44.0 ( 12.1 )

Income tax expense (benefit) 6.8 3.9 9.9 ( 2.0 )

Net income (loss) $ 23.8 $ 10.9 $ 34.1 $ ( 10.1 )

Net income (loss) per share:

Income before income taxes 14.6 42.6 58.6 30.5

Income tax expense 3.4 8.9 13.3 6.9

Net income $ 11.2 $ 33.7 $ 45.3 $ 23.6

Net income per share:

Basic $ 0.07 $ 0.21 $ 0.29 $ 0.15

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2020 2019 2020 2019

(in millions)

Net income (loss) $ 23.8 $ 10.9 $ 34.1 $ ( 10.1 )

Net income $ 11.2 $ 33.7 $ 45.3 $ 23.6

Other comprehensive income (loss):

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( 1.2 ) 0.7 1.7 5.7

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

Comprehensive income $ 10.0 $ 34.4 $ 47.0 $ 29.3

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2020 2019 2020 2019

14 unchanged sentences

Balance, beginning of period ( 752.1 ) ( 860.1 ) ( 786.2 ) ( 850.0 )

Net income (loss) 23.8 10.9 34.1 ( 10.1 )

Net income 11.2 33.7 45.3 23.6

Balance, end of period ( 740.9 ) ( 826.4 ) ( 740.9 ) ( 826.4 )

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

(in millions)

Operating activities:

Net income (loss) $ 34.1 $ ( 10.1 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net income $ 45.3 $ 23.6

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 21.7 19.1

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Other current liabilities 6.0 ( 15.9 )

Long-term liabilities ( 6.0 ) ( 8.8 )

Net cash (used in) operating activities

( 3.0 ) ( 29.1 )

Other noncurrent liabilities ( 6.4 ) ( 10.4 )

Net cash provided by operating activities

Investing activities:

22 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2020

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2020

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

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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.

As of June 30, 2020, such effects did not result in the impairment of the carrying value of our assets.

The pandemic continues to provide significant challenges 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.

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

On October 1, 2018, we adopted the new guidance related to revenue recognition from contracts with customers using the modified retrospective approach and no transition adjustment was required.

for more information regarding our adoption of this guidance .

In 2016, FASB issued new guidance for the recognition of lease assets and lease liabilities for those leases currently referred to as operating leases and requiring additional financial statement disclosures.

In 2016, Financial Accounting Standards Board (“FASB”) issued new guidance for the recognition of lease assets and lease liabilities for those leases referred to as operating leases and requiring additional financial statement disclosures.

On October 1, 2019, we adopted the new guidance related to leases using the modified retrospective transition method.

for more information regarding our adoption of this guidance.

In October 2018, we announced the move of our Middleborough, Massachusetts research and development facility to Atlanta to consolidate our resources and accelerate product innovation through creation of a research and development center of excellence for software and electronics.

In November 2019, we announced the planned move of our manufacturing facility in Hammond, Indiana to our new facility in Kimball, Tennessee.

Expenses incurred for these moves were primarily personnel-related and are included in strategic reorganization and other charges in the Condensed Consolidated Statements of Operations.

In 2016, FASB issued new guidance to introduce a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses.

We will adopt this guidance and apply it to our accounts receivable beginning in the first quarter of fiscal 2021, and we do not believe it will have a material effect on our consolidated financial statements.

In October 2018, we announced the move of our Middleborough, Massachusetts research and development operations to Atlanta to consolidate our resources and to accelerate product innovation through the creation of a research and development center of excellence for software and electronics.

In November 2019, we announced the planned move of our manufacturing operations in Hammond, Indiana to our new facility in Kimball, Tennessee.

Expenses incurred for these moves were primarily related to personnel and inventory and were included in strategic reorganization and other charges in the Condensed Consolidated Statements of Operations.

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

Six months ended

Nine months ended

(in millions)

Beginning balance $ 1.7 $ 0.9

Expense accrued 1.6 3.4

Expenses related to personnel and other 1.7 5.5

Expenses related to inventory 1.4 —

Amounts paid ( 1.5 ) ( 4.6 )

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Disaggregation of Revenue

We disaggregate our revenues from contracts with customers by reportable segment (Note 11.) and further by geographical region as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

We disaggregate our revenues from contracts with customers by reportable segment (see Note 11.) and further by geographical region as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Geographical region represents the location of the customer.

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

March 31, September 30,

June 30, 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 99 % of our revenues in the six months ended March 31, 2020 and 2019 respectively.

Revenues from products and services transferred to customers at a point in time represented 99 % of our revenues in the nine months ended both June 30, 2020 and 2019.

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 1 % of our revenues in the six months ended March 31, 2020 and 2019 respectively.

Revenues from products and services transferred to customers over time represented 1 % of our revenues in the nine months ended both June 30, 2020 and 2019.

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.

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Presentation of Leases

The Company leases certain office, warehouse, manufacturing, distribution, and research and development facilities and equipment under operating leases.

We lease certain office, warehouse, manufacturing, distribution, and research and development facilities and equipment under operating leases.

Our leases have remaining lease terms of 1 year to 14 years.

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Our incremental borrowing rate is determined based on information available at the commencement date of the lease.

Operating leases are included in other noncurrent assets, other current liabilities and noncurrent liabilities in our condensed consolidated balance sheets.

Finance leases are included in property, plant and equipment, current portion of long-term debt and long-term debt in our condensed consolidated balance sheets.

For all classes of leased assets, we have applied an accounting policy election to exclude short-term leases from recognition in our condensed consolidated balance sheets.

A short-term lease has a lease term of 12 months or less at the commencement date and does not include a purchase option that is reasonably certain of exercise.

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

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

Our short-term lease expense for the three and nine months ended June 30, 2020 and short-term lease commitments at June 30, 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 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.

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

At June 30, 2020, any legally-binding minimum lease payments for operating leases signed but not yet commenced, subleases, leases that imposed significant restrictions or covenants, related party leases or sale-leaseback arrangements were immaterial.

The components of lease cost are presented below.

Three months ended Six months ended

March 31, 2020 March 31, 2020

Three months ended Nine months ended

June 30, 2020 June 30, 2020

(in millions)

2 unchanged sentences

Total lease expense $ 1.9 $ 5.7

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

Supplemental cash flow information related to leases for the nine months ended June 30, 2020 is presented below, in millions.

Operating cash flows used in operating leases $ 4.5

Financing cash flows used in finance leases $ 1.0

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.

Supplemental information describing where lease-related assets and liabilities are reflected in the Condensed Consolidated Balance Sheet at June 30, 2020 is presented below, in millions.

Right of use assets:

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Total lease liabilities $ 30.8

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

Supplemental information related to lease terms and discount rates at June 30, 2020 is presented below.

Weighted-average remaining lease term (years):

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Finance leases 5.03 %

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

Total lease liabilities at June 30, 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 Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2020 2019 2020 2019

7 unchanged sentences

Valuation allowances ( 0.3 ) — ( 0.5 ) —

Reversal of uncertain tax positions ( 2.1 ) ( 5.2 ) ( 0.5 ) ( 7.2 )

Other 2.6 1.9 2.0 3.6

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Effective income tax rate 23.3 % 20.9 % 22.6 % 22.7 %

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.

At June 30, 2020 and September 30, 2019, the gross liabilities for unrecognized income tax benefits were $ 3.5 million and $ 3.3 million, respectively.

Borrowing Arrangements

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

March 31, September 30,

June 30, 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 $ 435.4 million at March 31, 2020.

Based on quoted market prices, the outstanding Notes had a fair value of $ 460.1 million at June 30, 2020.

ABL Agreement .

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.

Our asset based lending agreement (“ABL Agreement”) consists of a revolving credit facility for up to $ 175 million of revolving credit borrowings, swing line loans and letters of credit.

On July 30, 2020, we amended the ABL Agreement (See Note 14).

This amendment, among other things, (i) extended the termination date of the facility, (ii) established a LIBOR “floor” of 75 basis points, (iii) increased interest rates on borrowings, (iv) increased the rate of the unused commitment fee, and (v) increased our ability to pay cash dividends.

The amended 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 we are permitted to issue up to $ 60 million of letters of credit.

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

Borrowings under the amended ABL Agreement bear interest at a floating rate equal to LIBOR, plus a margin ranging from 200 to 225 basis points, or a base rate, as defined in the ABL Agreement, plus a margin ranging from 100 to 125 basis points.

At July 31, 2020, the applicable rate was LIBOR plus 200 basis points.

The amended ABL Agreement terminates on July 29, 2025 and provides for a commitment fee for any unused borrowing capacity of 37.5 basis points per annum.

Our obligations under the ABL Agreement are secured by a first-priority perfected lien on all of our U.S.

1 unchanged sentence

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

Excess availability based on June 30, 2020 data, as reduced by outstanding letters of credit and accrued fees and expenses of $ 13.9 million, was $ 116.1 million.

Derivative Financial Instruments

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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 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.

The values of our currency swap contracts were an asset of $ 0.1 million and a liability $ 0.3 million as of June 30, 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 Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2020 2019 2020 2019

5 unchanged sentences

Amortization of actuarial net loss 0.7 0.5 2.0 1.5

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

Curtailment/special settlement loss — — — 1.0

Pension costs (benefits) other than service ( 0.7 ) ( 0.1 ) ( 2.2 ) 0.8

2 unchanged sentences

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.

We made a contribution to the plans of $ 1.0 million, which was 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.

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Expected term (in years) 2.83 2.67 2.60

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 awarded 209,966 stock-settled PRSUs and 157,474 MRSUs in the nine months ended June 30, 2020 that are scheduled to settle in three years .

We issued 93,647 shares and 181,065 shares of common stock during the nine months ended June 30, 2020 and 2019, respectively, to settle PRSUs that vested during those periods.

In addition to the PRSU activity, we issued 1,618 and 248,612 shares of common stock for restricted stock units vested during the three and nine months ended June 30, 2020, respectively.

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

Phantom Plan (“Phantom Plan”).

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.

At June 30, 2020, the outstanding Phantom Plan instruments had a fair value of $ 9.43 per instrument and our liability for Phantom Plan instruments was $ 1.6 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 six months ended March 31, 2020 as follows.

2006 Employee Stock Purchase Plan, and the Phantom Plan during the nine months ended June 30, 2020 as follows.

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

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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.

Quarter ended June 30, 2020:

Restricted stock units 2,118 9.20 —

Employee stock purchase plan instruments 48,282 3.64 0.2

Operating income included stock-based compensation expense of $ 1.8 million and $ 1.4 million during the three months ended June 30, 2020 and 2019, respectively and $ 5.0 million and $ 4.2 million during the nine months ended June 30, 2020 and 2019, respectively.

At June 30, 2020, there was approximately $ 8.9 million of unrecognized compensation expense related to stock-based compensation arrangements and there were 218,966 PRSUs that have been awarded for the 2021 and 2022 performance periods for which performance goals have not been set.

We excluded 474,423 and 202,245 of stock-based compensation instruments from the calculations of diluted earnings per share for the quarters ended June 30, 2020 and 2019, respectively, and 274,009 and 167,775 for the nine months ended June 30, 2020 and 2019, respectively, since their inclusion would have been antidilutive.

Supplemental Balance Sheet Information

Selected supplemental asset information is presented below.

March 31, September 30,

June 30, September 30,

(in millions)

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Selected supplemental liability information is presented below.

March 31, September 30,

June 30, September 30,

(in millions)

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Refund liability 4.8 3.3

Accrued settlements 10.1 0.2

Other 3.8 5.0

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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.

During the second quarter ended March 31, 2020, we performed an interim 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.

With our third quarter results and amid the continued pandemic, we reviewed our previous assumptions, our revised expectations and determined it was not more-likely-than-not that the goodwill and indefinite-lived intangibles were impaired as of June 30, 2020.

However, with continued uncertainty related to the pandemic, we cannot provide assurance that our estimates will be realized.

The following table summarizes information concerning our goodwill balance for the nine months ended June 30, 2020, in millions.

Balance at beginning of year $ 95.7

1 unchanged sentence

Change in foreign currency exchange rates 0.4

Balance as of March 31, 2020 $ 97.7

Balance as of June 30, 2020 $ 96.4

Segment Information

Summarized financial information for our segments is presented below.

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2020 2019 2020 2019

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Current period other comprehensive income 1.7 — $ 1.7

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

Balance at June 30, 2020 $ ( 34.3 ) $ — $ ( 34.3 )

Commitments and Contingencies

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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.

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.

Since the amounts of such costs cannot be reasonably estimated at this time, no amounts have been accrued for this matter at June 30, 2020.

Walter Energy .

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and certain of our former and current officers (collectively, the “Defendants”) in the U.S.

District Court for the Southern District of New York.

District Court for the Southern District of New York (the “Court”).

The proposed class consists of all persons and entities that acquired our securities between May 9, 2016 and August 6, 2018 (the “Class Period”).

The complaint alleges violations of the federal securities laws, including, among other things, that we made materially false and/or misleading statements and failed to disclose material adverse facts about our business, operations, and prospects during the proposed Class Period.

The plaintiff seeks compensatory damages and attorneys’ fees and costs but does not specify the amount.

Accordingly, we cannot reasonably estimate the amount of any cost or liabilities related to this matter and therefore no amounts have been accrued related to this matter as of December 31, 2019.

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.

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

On June 11, 2020, the Court granted Defendants’ motion to dismiss and dismissed the action with prejudice.

The time period for appealing the Court’s decision has expired.

City of Jackson, MS v.

Siemens Industry, Inc., et al.

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”).

On or about August 22, 2013, Mueller Systems, LLC (“Mueller Systems”) entered into an agreement with Siemens Industries, Inc (“Siemens”) to provide advanced metering 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, which were provided by parties other than Mueller Systems, for the City’s water treatment plants, sewer lines and billing system (the “Project”).

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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.

As a result of the Settlement, Siemens is seeking to recover a portion of the Settlement Amount from Mueller Systems, and the parties are in negotiations to resolve this matter on reasonable terms, conditions and amounts.

At June 30, 2020, we have accrued a liability of $ 10.0 million in connection with this matter and have also recorded an asset for related insurance proceeds of $ 5.0 million.

However, the settlement agreement is not final and the ultimate loss could materially differ from this amount.

Should settlement negotiations fail and a legal action ultimately arise against us in this matter, we intend to vigorously defend against such legal action.

However, the outcome of a legal action in this matter, if any, cannot be predicted with certainty.

The COVID-19 Pandemic.

The 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 the pandemic, we experienced adverse business conditions during our third quarter.

We have taken and continue to take 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, deferral of capital expenditures, 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 the pandemic 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.

Mass Shooting Event at our Henry Pratt Facility in Aurora, Illinois.

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Subsequent Events

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.

On July 28, 2020 , our board of directors declared a dividend of $ 0.0525 per share on our common stock, payable on August 20, 2020 to stockholders of record at the close of business on August 10, 2020 .

On July 30, 2020, we amended our ABL Agreement.

This amendment, among other things, (i) extended the termination date of the revolving credit facility to July 29, 2025, (ii) established a LIBOR “floor” of 75 basis points, (iii) increased the margin applying to LIBOR-based loans to a range between 200 to 225 basis points, and the margin applying to base rate loans to a range between 100 to 125 basis points, (iv) increased the commitment fee applicable to unused amounts under the revolving credit commitment to 37.5 basis points and (v) increased our ability to issue cash dividends.

On August 5, 2020 , we announced the closure of our Woodland, Washington knife gate manufacturing operations, which will be relocated to our new facility in Kimball, Tennessee.

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