MUELLER WATER PRODUCTS

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. At the end of today's presentation, we will conduct a question and answer session. To ask a question, please press star 1. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to Whit Kincaid. You may begin.

Good morning. I hope everyone is doing well. Thank you for joining us on Muir Water Products' third quarter 2020 conference call. We issued our press release reporting results of operations for the quarter ended June 30, 2020, yesterday afternoon. A copy of it is available on our website, MuellerWaterProducts.com. Scott Hall, our President and CEO, and Marty Zakas, our CFO, will be discussing third quarter's results, market conditions, and our current outlook for the fourth quarter. This morning's call is being recorded and webcast live on the Internet. We have also posted slides on our website to accompany today's discussion, as well as to address forward-looking statements and our non-GAAP disclosure requirements. At this time, please refer to slide 2. This slide identifies 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 non-GAAP and GAAP financial measures are included in the supplemental information within our press release and on our website. Slide 3 addresses forward-looking statements made on this call. This slide includes cautionary information identifying important factors that could cause actual results that differ materially from those included in forward-looking statements. Please review slides 2 and 3 in their entirety. During this call, all references to a specific year or quarter, unless specified otherwise, refer to our fiscal year, which ends on September 30. A replay of this morning's call will be available for 30 days at 1-866-461-2738. 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. I'll now turn the call over to Scott.

Thanks, Whit. Thank you for joining us today. I hope everyone in the audience is staying safe and healthy during this challenging time. Before we discuss our third quarter results for 2020, I will provide a brief update on how we are adapting to the challenges from the ongoing COVID-19 pandemic. Like everyone else, as I think back over this past year, I am amazed at how quickly the world where we live and work has shifted. Since our last earnings call, the initial shock to our employees, customers, and communities has turned into a more normalized cadence as we adapt to a new normal. We took swift action implementing enhanced safety and hygiene processes to create safe and healthy working environments for our employees, customers, suppliers, and communities. These are now part of our standard work procedures. Our response team continues to provide leadership through this crisis as the pandemic continues to evolve. We take great pride in being an essential business providing products and services needed to manage and maintain our nation's critical water infrastructure. During the quarter, our manufacturing plants and distribution centers continued to supply products to customers with minimal disruption as a result of the pandemic. I have been impressed by how effectively our teams have transitioned to the new health and safety protocols, which is helping us address the positive COVID-19 tests and exposures that we have experienced. We continue to proactively monitor our supply chain and we did not experience any material supply chain issues during the quarter. I believe that our execution in this environment is a testament to our employees and their resolve. Moving on to the third quarter. We realized a 16.7% decrease in consolidated net sales during the quarter. I was pleased that our net sales were better than our expectations for a year-over-year decrease between 20 and 30%, as we worked closely with our customers and channel partners to reduce the effects of the pandemic on our business. We saw a smaller than expected downturn in residential construction activity during the quarter. As expected, our channel partners reacted quickly to protect their balance sheets and cash flows by meeting demand with their existing inventory. The increase in construction activity after the initial shelter-in-place orders in April and May led to a significant sequential growth in sales and orders in June. Overall, we believe that our key end markets, excluding certain project-related areas, experienced a mid-single digit decrease during the quarter. However, there was a wide range of performance depending on geography, with some markets close to flat versus the prior year. The lower volumes and additional expenses related to the pandemic resulted in a 33% decrease in adjusted EBITDA during the quarter. As a reminder, we anticipated elevated decremental margins given our fixed cost structure, especially for our core products, and additional expenses related to the pandemic. Due to the decrease in volumes, we immediately took actions to adjust our production capacity and SG&A expenses with a combination of temporary furloughs, dowry reductions, and elimination of some discretionary spending. We benefited from positive pricing dynamics during the quarter, despite the additional challenges from lower market volumes. Additionally, lower raw material costs helped offset inflation from purchase components and labor, in addition to higher tariffs. Despite the decrease in adjusted EBITDA, we generated strong free cash flow during the quarter, resulting in a $59 million increase in cash on our balance sheet. Our performance during such a challenging period positions us well to face additional uncertainty from the pandemic as markets continue to recover. Overall, I couldn't be more proud of everyone at Mueller as they continue to respond to the disruption from the pandemic and to adapt to our new environment. As we look forward, Our top priorities remain focused on keeping our employees safe, protecting our communities, delivering exceptional products and support to our customers, and increasing cash flow. We remain hopeful that our end markets will continue to improve in the fourth quarter. Later in the call, I will discuss the current market conditions and our outlook for the fourth quarter of this year. With that, I'll turn the call over to Marty.