Welcome and thank you for standing by. At this time all participants are in a listen-only mode. This call is being recorded. If you have any objections you may disconnect at this point. Your host today is Ms. Martie Zakas. Ma'am, you may begin.

Good morning, everyone. Welcome to Mueller Water Products' 2016 Fourth Quarter Conference Call. We issued our press release reporting results of operations for the quarter and full year ended September 30, 2016 yesterday afternoon. A copy of it is available on our website, muellerwaterproducts.com. Discussing the fourth quarter and full year results this morning are Greg Hyland, our Chairman, President and CEO, and Evan Hart, our CFO. This morning's call is being recorded and webcast live on the Internet. We have also posted slides on our website to help illustrate the quarter's and full year's results, as well as to address forward-looking statements and our non-GAAP performance and liquidity measures. At this time, please refer to slide two. This slide identifies certain non-GAAP financial measures referenced in our press release, on our slides and on this call, and discloses the reasons why we believe that these measures provide useful information to investors. Reconciliations between GAAP and non-GAAP performance and liquidity measures are included in the supplemental information within our press release and on our website. Slide three addresses forward-looking statements made on this call. This slide includes cautionary information, identifying important factors that could cause actual results to differ materially from those included in forward-looking statements, as well as specific examples of forward-looking statements. Please review slides two and three in their entirety. During this call, all references to a specific year or quarter, unless specified otherwise, refer to our fiscal year. Our fiscal year ends on September 30. A replay of this morning's call will be available for 30 days after the call at 1-866-513-1238. The archived webcast and corresponding slides will be available for at least 90 days in the Investor Relations section of our website. In addition, we will furnish a copy of our prepared remarks on Form 8-K later this morning. After the prepared remarks, we will open the call to questions. I'll now turn the call over to Greg.

Thanks, Martie. Thank you for joining us today, as we discuss our results for the 2016 fourth quarter and full year. I'll begin with a brief overview, followed by Evan's more detailed financial report. We are pleased that we continued to see margin expansion in all three of our businesses, which contributed to a 7.6% increase in adjusted operating income in the fourth quarter and which more than offset the impact of a slight decrease in revenue. For Mueller Water Products, adjusted EBITDA margin for the 2016 fourth quarter improved 120 basis points to 20.4%, and our adjusted EBITDA for the year increased to $198.1 million. Free cash flow was $105.7 million for the year or 132% of adjusted net income. Mueller Company's domestic sales of valves, hydrants and brass products increased 4.4% in the fourth quarter year-over-year. This growth was not enough to offset the expected sales decline of our Henry Pratt water treatment valves. Mueller Company again had strong margin improvement with adjusted EBITDA margin improving 150 basis points to 30.3%. Anvil's net sales for the 2016 fourth quarter decreased 7.3% due to lower shipment volumes into the mechanical and oil and gas markets. Despite lower net sales, Anvil's adjusted EBITDA margin increased 90 basis points this quarter. Mueller Technologies showed meaningful operating improvement in the fourth quarter on essentially flat year-over-year net sales. Favorable product mix contributed to this improvement. For Mueller Water Products, we again improved our adjusted operating performance in 2016 representing the seventh consecutive year of operating margin expansion. Our 2016 adjusted net income improved nearly 25% compared to the prior year and 2016 adjusted EBITDA margins was the highest in our history. We ended the year with net debt leverage down to 1.5 times. Adjusted net income per share for the quarter was up 21.4% to $0.17 versus $0.14 a year ago. For the full year adjusted net income per share increased 25% to $0.49 compared to $0.39 last year. As we look to 2017, we expect continued growth in our key end markets. As capacity utilization increases; we believe operating leverage will continue to be strong in all three businesses. I will provide additional comments on the quarter's results and developments in our end markets as well as our outlook for the 2017 full year and first quarter later in the call. With that, I'll turn the call over to Evan.

Thanks, Greg, and good morning, everyone. I'll first review our fourth quarter consolidated financial results and then discuss segment performance. 2016 fourth quarter net sales decreased $8.9 million or 2.9% to $302.5 million compared with $311.4 million last year, primarily due to lower shipment volumes at Anvil. Gross profit improved $103.6 million for the 2016 fourth quarter from $97.7 million last year. Gross margin increased 280 basis points to 34.2% from 31.4% in 2015. Selling, general and administrative expenses were $55.2 million in the quarter, compared with $52.7 million last year. The increase was due primarily to personnel-related expenses. Adjusted operating income for the 2016 fourth quarter increased 7.6% or $3.4 million to $48.4 million as compared with $45 million last year. Operating performance improved at Mueller Company, Anvil and Mueller Technologies. Adjusted EBITDA for the 2016 fourth quarter increased to $61.8 million compared with $59.9 million last year. In 2016, adjusted EBITDA was $198.1 million. Interest expense net for the 2016 fourth quarter was $5.6 million, down from $5.8 million last year. For 2016, interest expense net was $23.6 million, the lowest in our history. For the 2016 fourth quarter, income tax expense of $14.6 million was 35.5% of income before income taxes. Adjusted net income per share improved to $0.17 for the 2016 fourth quarter compared with $0.14 last year. I'll now move on to segment performance beginning with Mueller Company. Net sales for the 2016 fourth quarter of $190.1 million, decreased $1.9 million as compared with $192 million last year. Domestic shipments of valves, hydrants and brass products increased 4.4%, but were more than offset by lower shipments of water treatment valves at Henry Pratt. We experienced strong improvement in adjusted operating income in the 2016 fourth quarter, largely due to favorable product mix, lower raw material…

Thanks, Evan. I'll now comment further on our 2016 fourth quarter results and end markets and provide an overview of our expectations and outlook for the 2017 full year and first quarter, beginning with Mueller Company. While Mueller Company's domestic sales of valves, hydrants and brass products grew 4.4% year-over-year, this was below our expectations. We saw a nice growth in orders in the third quarter and that continued in July. However, we did see orders slow down in August through mid September. Orders rebounded somewhat at the end of September. Even though we had an easier comparison during this time period from a year ago because of the weather issues in May and June of 2015. In retrospect, we believe our distributors were building inventory in the third quarter and early in the fourth quarter and as a result, slowed down their ordering in August and most of September. In addition, I would again point out, as we discussed on our last call, we had a very difficult comparison for Pratt product line revenue this quarter. As we have mentioned a number of times, Pratt plant work is project driven and is subject to significant swings. The fourth quarter last year was our best quarter in several years. Pratt sales were down 16% this quarter. However, our backlog grew and is up entering 2017. Despite slightly lower net sales, Mueller Company's adjusted operating income improved in the fourth quarter, benefiting from favorable product mix, ongoing cost-saving initiatives and lower raw material costs. The 2016 fourth quarter is the 17th consecutive quarter where Mueller Company increased year-over-year adjusted operating income and adjusted operating margin. For the full year 2016, Mueller Company's adjusted operating income increased 11.7%. This increase reflects not only a favorable mix, but also an improvement in operating…

Thank you. We will now begin the question-and-answer session. Our first question comes from Mr. Seth Weber [RBC Capital Markets]. Sir, your line is now open.

Hi, thanks. This is Brendan Shea on for Seth. Looking at your Technologies business, the loss versus the gain that you had expected in the third quarter, I just want to make sure, is that due to the Lee County receiving the contract kind of late, or was there something else that played into that?

Yeah, so thanks for the question. That was the primary driver. As we said in our prepared remarks, we were advised in June that we would be awarded this contract. At that time and all indications were that we would be able to begin shipping this in September. So we included that in our outlook. As we look, there were a number of reasons that we ended up getting the actual contract this late last week. So we'll start begin shipping a little bit of that in this quarter. We'll begin shipping more of that in the second quarter. And then, as we said in our prepared remarks, that will carry out for several years. So when we look back at Mueller Technologies in the fourth quarter, our mix from expectations, though we had very nice year-over-year improvement of about – our operating performance improved closed to $1.5 million, being short the $500,000 – we were short of being profitable was related to the Lee County project, which again we expected to start shipping in September.

Okay. Thanks. And then, can you just go over any change to capital allocation priorities given your low debt leverage and healthy free cash flow generation?

Yeah, as Evan mentioned in his prepared remarks, our net debt leverage is currently at 1.5 times. Again, as you mentioned, we are confident about our outlook and about the future of free cash flow that we'll generate. We have a stronger balance sheet and have more flexibility. So we have been having more detailed capital allocation discussions with our board. As you know, during the last 18 months, we have increased dividends twice. We have repurchased shares, and we've also I think have evaluated pretty in-depth acquisition strategy with our board. So I can assure you that we are very thoughtfully looking at capital allocation options that we believe will best drive stockholder value. And I think where we are today; we certainly have a lot of flexibility.

Okay. That's it for me. Thank you.

Thank you.

Thank you. Our next question comes from Mr. Jose Garza [G.research LLC]. Sir, your line is now open.

Good morning, guys.

Good morning.

Good morning.

Jose.

I guess I just wanted to get your thoughts on just kind of what your inventory level is on the Mueller Co. side, Greg?

Jose, you're talking about in the distribution channel or our manufacturing facility?

In the distribution channel.

Yeah. Sorry. I think that the – as we said in our prepared remarks, we had very strong orders in the third quarter and in July. As we mentioned on our last call, domestic orders for valves and hydrants and brass products grew 13% in the third quarter. They were up another 10% in July. So, we – as we referenced, we started to see a slowdown in August. In fact, beginning in August for about a seven-week period, orders grew about 1%. We think that slowdown that began in August was due to elevated inventories at our distributors. We think the inventories were elevated because, one, the distributors did order aggressively in the April-June time period. And this was on top of a strong pre-buy, the February price increase in valves and hydrants. Two, in some areas, we think there was a slowing in the growth in construction. It probably slowed. If we look at some recent data, it appears that the growth of construction was a little less than it was earlier in the year. For instance, when looking at housing starts, single housing starts grew almost 15% in the first half of our fiscal year; continue to grow in the second half, but about 4%. So when we look at it, we think that in most – most of our distributors have already their inventories where they want them. I think we may have a few, the inventories still may be high, but all-in-all, we remain very bullish about end market demand in the – for 2017 housing starts, we expect to grow 8% municipal spending in mid single digits. So we think that even where distributors in some areas may have a little more than what they typically expect to have, that we think that'll get in line pretty quickly. So, but we think more of the issue is – what happened is that we saw very, very aggressive orders in the third quarter on top of a strong pre-buy, went in early in July. So we just said we went through a seven-week to eight-week, maybe a ten-week period of some adjustment there. We don't think we have any big issues with distributor inventories out of line and we think in most cases, for most of our distributors, they have them where they what them.

Okay. That's very helpful, Greg. Just kind of want to get your thoughts on where you see kind of the municipal kind of cycle in terms of where we are and then looking forward obviously you think next year's pretty decent but just talking further out?

Yeah, yeah. I'm not sure we're in – I think we're still in the middle of the cycle. I think that, as we stated, for the most part I think municipalities are healthier than they certainly were several years ago. The need to repair and replace the existing infrastructure hasn't gone away. I think of anything, there has been more discussion about the need to upgrade the infrastructure, I think that certainly became a greater focus – in greater focus after the Flint – you know the Flint issues. I think we're even seeing more and more discussion at the federal level about making money available for water infrastructure. I know that both presidential candidates have talk about that and that in both the houses in the Congress have talked about more and more money to be available for water infrastructure. So I think we're in the – right in the middle of the – of that cycle and as we said in our prepared remarks, we still expect – we still expect to see mid single digit growth in that market segment for our products.

Okay. And then, one last one on the Mueller Technologies that $10 million improvement, is that kind of across both platforms or more geared toward Mueller Systems?

You know it's both – both platforms will improve, a little more towards Mueller Systems. When we look at Mueller Systems, it was profitable for the last two quarters of our fiscal year 2016 fiscal year, as we said with the Lee County order that is now firmly in our backlog. Our – when we look at our AMI shipments in our backlog this year that are scheduled in our backlog this year versus what was scheduled in our backlog in – entering this year, it's up almost 80%. So we look for about two-thirds of that improvement probably coming from Mueller Systems, but we do expect to see the improvement at Echologics also. And as I said about a third of that improvement coming from Echologics/

Okay. That's very helpful. Thanks guys.

Thank you.

Thanks.

Thank you.

Great. Well, seeing that there are no additional questions. Thanks very much for your interest and I'm sure we'll be seeing everyone soon.

Thank you. And that concludes today's conference. Thank you all for participating. You may now disconnect.