UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 26, 2004.
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007.

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 333-117473

MUELLER GROUP, ~~INC.~~ LLC

(Exact name of registrant as specified in its charter)

Delaware		37-1387813
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer identification No.)
500 West Eldorado St.
Decatur, IL 62522-1808
(Address of principal executive offices)
(217) 423-4471
(Registrant’s telephone number, including area code)

~~Indicate by~~1200 ~~check~~Abernathy ~~mark whether the Registrant (1) has filed all reports required to be~~Road ~~filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)~~Atlanta, ~~and (2) has been subject to such filing requirements for the past 90 days.~~GA ~~Yes o No. ý.~~30328

~~Indicate by check mark whether the registrant is an accelerated filer~~ (asAddress ~~defined~~of inprincipal ~~Rule~~executive ~~12b-2 of the Exchange Act.~~offices) ~~Yes o No ý~~

Common Stock		Shares Outstanding As of September 10, 2004
$0.01 Par Value		100

(770) 206-4200

~~MUELLER~~(Registrant’s ~~GROUP~~telephone number, ~~INC.~~including area code)

~~REPORT~~Indicate ONby ~~FORM~~check ~~10-Q~~mark whether ~~FOR~~the ~~THE~~Registrant ~~QUARTERLY~~(1) has ~~PERIOD~~filed ~~ENDED~~all ~~JUNE~~reports required to be filed by Section 2613 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), ~~2004~~and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

~~TABLE~~Indicate OFby ~~CONTENTS~~check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

	PART I – FINANCIAL INFORMATION
	Item 1. Unaudited Financial Statements
		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements of Operations
		Condensed Consolidated Statements of Cash Flows
		Notes to Condensed Consolidated Financial Statements
	Item 2. Management=s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
	PART II – OTHER INFORMATION
	Item 6. Exhibits
	Signatures

Large Accelerated Filer o Accelerated Filer o Non-accelerated Filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No

As of May 1, 2007 Mueller Group, LLC had 1 unit outstanding.

Certain items have been omitted under the reduced disclosure format pursuant to the General Instruction H(1) (a) and (b) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MUELLER GROUP, ~~INC.~~ LLC CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2007				September 30, 2006
	(dollars in millions)
Assets
Cash and cash equivalents		$	67.6			$	79.1
Receivables, net of allowance for doubtful accounts of $4.9 million and $4.8 million at March 31, 2007 and September 30, 2006, respectively		274.3				322.9
Inventories		510.8				454.6
Deferred income taxes		42.4				42.6
Prepaid expenses		35.7				33.7
Total current assets		930.8				932.9
Property, plant and equipment, net		343.7				337.0
Deferred financing fees and other long-term assets		13.7				16.8
Identifiable intangible assets, net		834.0				835.4
Goodwill		724.2				724.1
Total assets		$	2,846.4			$	2,846.2
Liabilities
Current portion of long-term debt		$	8.9			$	9.0
Accounts payable		115.4				129.9
Accrued expenses and other current liabilities		97.0				122.1
Total current liabilities		221.3				261.0
Long-term debt		996.9				1,002.0
Accrued pension liability, net		45.7				43.7
Accumulated postretirement benefits obligation		44.7				46.3
Deferred income taxes		299.8				294.0
Other long-term liabilities		20.9				20.9
Total liabilities		1,629.3				1,667.9
Shareholders’ Equity
Membership unit:
1 unit outstanding at March 31, 2007 and September 30, 2006		—				—
Capital in excess of par value		1,359.6				1,358.4
Accumulated deficit		(121.9		)		(161.5		)
Accumulated other comprehensive loss		(20.6		)		(18.6		)
Total shareholders’ equity		1,217.1				1,178.3
Total liabilities and shareholders’ equity		$	2,846.4			$	2,846.2

	September 30, 2003			June 26, 2004
	(unaudited) (dollars in millions)
Assets
Cash and cash equivalents	$	71.4		$	23.3
Receivables, less allowance for doubtful accounts of $4.9 in September 2003 and $4.4 in June 2004	137.3			155.5
Inventories	240.5			260.6
Deferred income taxes	5.6			7.3
Prepaid expenses and other current assets	29.8			25.9
Total current assets	484.6			472.6
Property, plant and equipment, net	208.4			192.8
Goodwill, net	163.2			163.2
Identifiable intangibles, net	63.0			57.7
Pension intangible	0.9			0.9
Deferred financing fees, net	12.0			33.6
Deferred income taxes	18.8			26.7
Other noncurrent assets	0.2			0.3
Total assets	$	951.1		$	947.8
Liabilities
Accounts payable	$	46.7		$	55.6
Current portion of long-term debt	6.2			2.4
Accrued expenses and other current liabilities	69.2			69.8
Total current liabilities	122.1			127.8
Long-term debt, net of current portion	569.5			930.1
Accrued pension liability	32.2			36.6
Other long-term liabilities	17.2			6.8
Total liabilities	741.0			1,101.3
Commitments and contingencies (Note 10)	—			—
Redeemable preferred stock	96.6			—
Shareholders’ equity
Common stock - $0.01 par value (100 shares authorized and issued)	—			—
Additional paid-in capital	145.3			—
Retained deficit	(11.3		)	(132.8		)
Accumulated other comprehensive loss	(20.5		)	(20.7		)
Total shareholders’ equity	113.5			(153.5		)
Total liabilities and shareholders’ equity	$	951.1		$	947.8

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

~~The accompanying notes are an integral part of the financial statements.~~1

3MUELLER GROUP, LLC CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

MUELLER GROUP, INC.

	Three months ended March 31,
	2007		2006
	(dollars in millions)
Net sales	$	459.7	$	434.9
Cost of sales	341.9		340.3
Gross profit	117.8		94.6
Operating expenses:
Selling, general and administrative	64.9		60.8
Related party corporate charges	—		2.0
Facility rationalization, restructuring and related costs	—		4.3
Total operating expenses	64.9		67.1
Income from operations	52.9		27.5
Interest expense, net of interest income	17.9		25.9
Income before income taxes	35.0		1.6
Income tax expense	14.8		0.6
Net income	$	20.2	$	1.0

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Six months ended March 31,
	2007		2006
	(dollars in millions)
Net sales	$	871.6	$	915.3
Cost of sales	646.1		777.2
Gross profit	225.5		138.1
Operating expenses:
Selling, general and administrative	122.0		117.9
Related party corporate charges	1.6		3.8
Facility rationalization, restructuring and related costs	—		28.4
Total operating expenses	123.6		150.1
Income (loss) from operations	101.9		(12.0		)
Interest expense, net of interest income	35.2		54.0
Income (loss) before income taxes	66.7		(66.0		)
Income tax expense (benefit)	27.1		(26.1		)
Net income (loss)	$	39.6	$	(39.9	)

	Three months ended
	June 28, 2003			June 26, 2004
	(unaudited) (dollars in millions)
Net sales	$	232.4		$	288.7
Cost of sales	170.5			205.7
Gross profit	61.9			83.0
Selling, general and administrative expense	39.2			47.5
Stock compensation expense	0.2			15.5
Facility rationalization and related costs	0.2			—
Operating income	22.3			20.0
Interest expense and early repayment costs	(9.1		)	(18.1		)
Interest income	0.1			0.1
Income before income taxes	13.3			2.0
Income tax expense (benefit)	5.5			(3.2		)
Net income	$	7.8		$	5.2

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

	Nine months ended
	June 28, 2003			June 26, 2004
	(unaudited) (dollars in millions)
Net sales	$	671.4		$	743.6
Cost of sales	495.4			533.7
Gross profit	176.0			209.9
Selling, general and administrative expense	113.9			126.5
Stock compensation expense	0.5			15.8
Facility rationalization and related costs	1.7			0.9
Operating income	59.9			66.7
Interest expense and early repayment costs	(28.3		)	(39.3		)
Interest income	0.4			0.3
Income before income taxes	32.0			27.7
Income tax expense	13.0			7.1
Net income	$	19.0		$	20.6

~~The~~MUELLER ~~accompanying~~GROUP, ~~notes~~LLC ~~are an integral part of the financial statements.~~

4CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY AND COMPREHENSIVE INCOME

~~MUELLER~~FOR ~~GROUP,~~THE SIX MONTHS ENDED MARCH ~~INC.~~31, 2007 (UNAUDITED)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Capital in Excess of Par Value			Accumulated Deficit				Comprehensive Income				Accumulated Other Comprehensive Loss				Total
Balance at September 30, 2006	$	1,358.4			$	(161.5	)		$	—			$	(18.6	)	$	1,178.3
Dividend paid to parent	(4.0		)													(4.0		)
Share-based compensation	5.2															5.2
Comprehensive income
Net income					39.6				39.6				—			39.6
Unrealized loss on derivative instruments									(0.8		)		(0.8		)	(0.8		)
Foreign currency translation adjustments									(1.2		)		(1.2		)	(1.2		)
Comprehensive income									$	37.6
Balance at March 31, 2007	$	1,359.6			$	(121.9	)						$	(20.6	)	$	1,217.1

	Nine months ended
	June 28, 2003			June 26, 2004
	(unaudited) (dollars in millions)
Cash flows from operating activities
Net income	$	19.0		$	20.6
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	35.5			34.3
Amortization of intangibles	12.5			13.5
Amortization of deferred financing fees	2.1			2.1
Amortization of tooling	1.7			1.7
Write off of deferred financing fees	—			7.0
Deferred income taxes	3.9			(9.6		)
Stock compensation (non-cash amounts)	0.5			3.2
Asset impairment	1.4			0.1
Unrealized gain on interest rate swaps	(9.8		)	(10.4		)
Changes in assets and liabilities, net of the effects of acquisitions:
Receivables	3.7			(14.7		)
Inventories	(21.2		)	(9.9		)
Prepaid expenses and other current assets	(1.0		)	2.2
Pension, net	4.4			4.0
Accounts payable, accrued expenses and other current liabilities	(5.2		)	6.1
Accrued royalty expense	(13.5		)	—
Other, net	(0.9		)	0.5
Net cash provided by operating activities	33.1			50.7
Cash flows from investing activities
Purchase of property, plant and equipment	(12.6		)	(17.4		)
Loss on disposal of property, plant and equipment	0.5			0.6
Acquisition of businesses, net of cash acquired	(11.2		)	(19.8		)
Decrease in restricted cash	11.6			—
Net cash provided by (used in) investing activities	(11.7		)	(36.6		)
Cash flows from financing activities
Proceeds from short-term borrowings	—			9.2
Payment of short-term debt	—			(9.2		)
Proceeds from long-term debt	—			960.0
Payment of long-term debt	(2.6		)	(603.4		)
Financing of assets through capital leases	(0.8		)	(1.0		)
Payment of deferred financing fees	—			(30.7		)
Dividends paid (excluding amounts paid to optionholders)	—			(387.3		)
Contributed capital	0.7			—
Net cash used in financing activities	(2.7		)	(62.4		)
Effect of exchange rate changes on cash	10.7			0.2
Increase (decrease) in cash and cash equivalents	29.4			(48.1		)
Cash and cash equivalents
Beginning of period	20.9			71.4
End of period	$	50.3		$	23.3

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

~~The accompanying notes are an integral part of the financial statements.~~3

5MUELLER GROUP, LLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

MUELLER GROUP, INC.

	Six months ended March 31,
	2007				2006
	(dollars in millions)
Operating Activities
Net income (loss)		$	39.6		$	(39.9	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		35.0			34.4
Amortization of intangibles		14.5			13.6
Amortization of deferred financing fees		1.3			2.2
Accretion on debt		(0.9		)	(1.6		)
Share-based compensation expense		5.2			0.3
Impairments of property, plant and equipment		—			21.3
Provision (credit) for deferred income taxes		6.8			(25.9		)
Other, net		2.5			(0.8		)
Changes in assets and liabilities, net of the effects of acquisitions:
Receivables		53.1			23.4
Inventories		(50.8		)	62.1
Prepaid expenses and other current assets		(1.5		)	1.8
Pension and other long-term liabilities		0.1			3.5
Accrued expenses and other current liabilities		(47.5		)	(24.3		)
Net cash provided by operating activities		57.4			70.1
Investing Activities
Additions to property, plant and equipment		(42.5		)	(30.9		)
Acquisitions of businesses, net of cash acquired		(22.5		)	(15.5		)
Decrease in amounts due to Walter		—			(15.6		)
Net cash used in investing activities		(65.0		)	(62.0		)
Financing Activities
Increase in dollar value of bank checks outstanding		3.9			9.7
Proceeds from short-term borrowings		—			55.9
Retirement of short-term debt		—			(55.9		)
Proceeds from long-term debt		—			1,050.0
Retirement of long-term debt		(4.3		)	(617.9		)
Payment of deferred financing fees		—			(21.6		)
Dividend to parent		(4.0		)	(444.5		)
Dividend to Walter for acquisition costs		—			(12.0		)
Walter contribution of Predecessor Mueller’s cash		—			67.4
Net cash (used in) provided by financing activities		(4.4		)	31.1
Effect of exchange rate changes on cash		0.5			—
Net (decrease) increase in cash and cash equivalents		(11.5		)	39.2
Cash and cash equivalents at beginning of period		79.1			—
Cash and cash equivalents at end of period		$	67.6		$	39.2

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~4

~~THREE~~MUELLER ~~MONTHS~~GROUP, ~~ENDED~~LLC CONDENSED ~~JUNE 28,~~CONSOLIDATED ~~2003~~STATEMENTS ~~AND JUNE 26,~~OF ~~2004~~CASH FLOWS (Continued) (UNAUDITED)

~~(UNAUDITED)~~Schedule of non-cash investing and financing activities:

1On October 3, 2005, the Company’s former parent, Walter Industries, Inc. ~~Basis~~, purchased all the outstanding common stock of ~~Presentation~~Predecessor Mueller in the Acquisition (as defined in Note 1).

The accompanying unaudited condensed consolidated financial statements of Mueller Group, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, the unaudited condensed consolidated financial statements and notes do not contain certain information included in the Company’s annual financial statements. In the opinion of management, all normal and recurring adjustments that are considered necessary for a fair presentation have been made. Operating results for the three months ended June 26, 2004 and the nine months ended June 26, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ended September 30, 2004. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended September 30, 2003 as seen in our registration statement filed on form S-4.

	(dollars in millions)
Contribution of Predecessor Mueller by Walter		$	932.9
Less: Cash of Predecessor Mueller received		(67.4		)
Total net assets received excluding cash		$	865.5

2Subsequent to the Acquisition (as defined in Note 1), the Company’s former parent, Walter Industries, Inc., ~~Segment~~forgave ~~Information~~an intercompany receivable with U.S. Pipe of $443.6 million.

~~Our operations consist of two operating segments under SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information”: Mueller Co. and Anvil.~~ The ~~operating~~accompanying ~~segments~~notes are ~~organized~~an ~~around differences~~integral inpart ~~products~~of ~~and are consistent with how~~ the ~~operating~~condensed ~~entities~~consolidated ~~are being~~financial ~~managed, how resources are being allocated, and information used by the chief operating decision maker~~statements. Mueller Co. products consist primarily of hydrants, water and gas valves and related products used in water, power and gas distribution. Anvil products consist primarily of pipe fittings and couplings, pipe nipples and hangers and purchased products related to piping systems used in a variety of applications.

The accounting policies of both of the segments are the same as those described in Note 3. Intersegment sales and transfers are made at established intersegment selling prices generally intended to cover costs. Our determination of segment earnings does not reflect allocations of certain corporate expenses not attributable to segment operations and intersegment eliminations, which we designate as Corporate in the segment presentation, and is before interest expense, interest income and income taxes. Corporate expenses include costs related to financial and administrative matters, treasury, risk management, human resources, legal counsel, and tax functions. Corporate assets include items booked at the date of the Company’s inception such as step-up on fixed assets and non-compete agreements with the predecessor parent company, as well as intellectual property. These assets and any related depreciation or amortization expense have not been pushed down to Mueller Co. and Anvil. Therefore, segment earnings are not reflective of results on a stand-alone basis.5

~~The~~MUELLER ~~Company~~GROUP, ~~evaluates~~LLC NOTES ~~segment~~TO ~~performance~~CONDENSED ~~based~~CONSOLIDATED onFINANCIAL ~~EBITDA. EBITDA~~STATEMENTS AS isOF ~~defined~~AND asFOR ~~income~~THE ~~(loss)~~THREE ~~before cumulative~~AND ~~effect~~SIX ofMONTHS ~~accounting~~ENDED MARCH 31, ~~change~~2007 ~~plus~~AND ~~income tax expense~~MARCH 31, ~~interest~~2006 ~~expense~~ (~~not net of interest income~~UNAUDITED)~~, depreciation and amortization expense.~~

~~Segment~~Note ~~assets consist primarily of accounts receivable, inventories, property, plant and equipment - net, goodwill, and identifiable intangibles~~1. ~~Summarized~~ ~~financial information for our segments follows:~~Organization

6Mueller Group, LLC (the “Company”) is a wholly-owned subsidiary of Mueller Water Products, Inc. (“Mueller Water”), a Delaware corporation. Mueller Water is the surviving corporation of the merger on February 2, 2006 of Mueller Water Products, LLC (Commission File Number: 333-116590) and Mueller Water Products Co-Issuer, Inc. with and into Mueller Holding Company, Inc., a Delaware corporation. On June 1, 2006, Mueller Water completed its initial public offering of its Series A common stock (NYSE: MWA). On December 14, 2006, Walter Industries, Inc. (“Walter”), a diversified New York Stock Exchange traded company (NYSE:WLT), distributed all of the Company’s outstanding Series B common stock (NYSE: MWA.B) to its shareholders.

	Three months ended June 26, 2004			Three months ended June 28, 2003			Nine months ended June 26, 2004			Nine months ended June 28, 2003
	(dollars in millions)
Net Sales:
Mueller Co.	$	172.4		$	136.0		$	432.7		$	384.2
Anvil	116.3			96.4			310.9			287.2
Consolidated	288.7			232.4			743.6			671.4
Intersegment sales:
Mueller Co.	4.1			3.2			10.1			9.6
Anvil	0.2			0.1			0.5			0.4
Consolidated	4.3			3.3			10.6			10.0
EBITDA:
Mueller Co.	45.2			32.9			111.4			94.0
Anvil	10.8			9.0			28.8			23.5
Corporate	(19.6		)	(2.7		)	(23.7		)	(7.5		)
Consolidated	36.4			39.2			116.5			110.0
Depreciation and amortization:
Mueller Co.	5.7			6.3			17.9			18.2
Anvil	4.3			4.2			12.7			12.5
Corporate	6.3			6.3			18.9			19.0
Consolidated	16.3			16.8			49.5			49.7
Impairment charges:
Mueller Co.	—			0.1			—			1.0
Anvil	—			0.1			0.1			0.4
Corporate	—			—			—			—
Consolidated	—			0.2			0.1			1.4
Capital expenditures:
Mueller Co.	3.1			2.9			9.3			7.8
Anvil	3.3			1.5			8.1			4.8
Corporate	—			—			—			—
Consolidated	6.4			4.4			17.4			12.6

On October 3, 2005, through a series of transactions (the “Acquisition”), Walter, through a wholly-owned subsidiary, acquired all outstanding shares of capital stock of the Company’s parent, Mueller Water Products, Inc. (“Predecessor Mueller”), which immediately was converted into Mueller Water Products, LLC, a Delaware limited liability company and contributed United States Pipe and Foundry Company, LLC (“U.S. Pipe”) to the acquired company. The results of operations of Predecessor Mueller are included in the Condensed Consolidated Statements of Operations beginning October 3, 2005.

7The Company was originally organized as United States Pipe and Foundry Company, Inc. (“Inc.”) and was a wholly-owned subsidiary of Walter. On September 23, 2005, Inc. was dissolved, United States Pipe and Foundry Company, LLC was organized in the state of Alabama, and the operations of Inc. were conducted under the form of a limited liability company. The Company has three operating segments, which are named after its leading brands in each segment: Mueller Co., U.S. Pipe and Anvil.

	At June 26, 2004		At September 30, 2003
Total assets:
Mueller Co.	$	505.7	$	498.9
Anvil	301.7		273.2
Corporate	140.4		179.0
Consolidated	947.8		951.1
Goodwill:
Mueller Co.	149.1		149.2
Anvil	14.1		14.0
Consolidated	163.2		163.2
Identifiable intangibles:
Mueller Co.	6.6		5.7
Anvil	7.5		1.6
Corporate	43.6		55.7
Consolidated	57.7		63.0

The condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses for the reporting periods. Actual results could differ from those estimates. All significant intercompany balances and transactions have been eliminated. In the opinion of management, all normal and recurring adjustments that are considered necessary for a fair financial statement presentation have been made. The condensed balance sheet data as of September 30, 2006 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

WeNote ~~present EBITDA because we consider it an important supplemental measure of our performance~~2. ~~A reconciliation~~ ~~of consolidated EBITDA to consolidated income before income~~Related ~~taxes~~Party ~~follows:~~Transactions

	Three months ended June 26, 2004			Three months ended June 28, 2003			Nine months ended June 26, 2004			Nine months ended June 28, 2003
	(dollars in millions)
Total consolidated EBITDA	$	36.4		$	39.2		$	116.5		$	110.0
Interest expense and early repayment costs	(18.1		)	(9.1		)	(39.3		)	(28.3		)
Depreciation and amortization	(16.3		)	(16.8		)	(49.5		)	(49.7		)
Income before income taxes	$	2.0		$	13.3		$	27.7		$	32.0

Related Party Transactions—The Company purchases foundry coke from Sloss Industries, Inc., which was an affiliate until December 14, 2006, for an amount that approximates the market value of comparable transactions. Costs included in cost of sales related to purchases from Sloss Industries, Inc. were $4.5 million and $5.4 million for the three months ended March 31, 2007 and 2006, respectively, and $9.0 million and $10.8 million for the six months ended March 31, 2007 and 2006, respectively.

~~Geographical~~Other ~~area~~services ~~information~~that ~~with~~Sloss ~~respect~~Industries, Inc. provides to ~~net~~the ~~sales,~~Company asinclude ~~determined by~~ the ~~location~~delivery of ~~the~~electrical ~~customer~~power ~~invoiced,~~to ~~and~~one ~~property, plant and equipment – net, as determined by the physical location~~ of the Company’s ~~assets~~facilities, ~~were~~rail ascar ~~follows~~switching ~~for~~ and the ~~nine~~leasing ~~months~~of ~~ended~~a ~~June 26, 2004 and June 28, 2003:~~distribution facility.

	Nine months ended June 26, 2004		Nine months ended June 28, 2003
	(dollars in millions)
Net sales:
United States	$	618.6	$	562.7
Canada	116.7		98.7
Other Countries	8.3		10.0
	$	743.6	$	671.4

Charges for such services were immaterial for the three months ended March 31, 2007, $0.4 million for the three months ended March 31, 2006, and $0.3 million and $0.8 million for the six months ended March 31, 2007 and 2006, respectively.

	At June 26, 2004		At September 30, 2003
Property, plant and equipment, net:
United States	$	180.1	$	195.1
Canada	11.4		12.4
Other Countries	1.3		0.9
	$	192.8	$	208.4

Related Party Allocations—Certain costs incurred by Walter such as insurance, executive salaries, professional service fees, human resources, transportation, healthcare and other centralized business functions were allocated to its subsidiaries. Certain costs that were considered directly related to the U.S. Pipe segment were charged to the Company and included in selling, general and administrative expenses. As of December 15, 2006, Walter is no longer considered a related party. These costs were approximately $0.5 million, $0.6 million and $1.0 million for the six months ended March 31, 2007 and the three months and six months ended March 31, 2006, respectively. Costs incurred by Walter that could not be directly attributed to its subsidiaries were allocated based on estimated annual revenues. Such costs were allocated to the Company and are recorded as related party corporate charges in the accompanying Condensed Consolidated Statements of Operations. There were no charges during the three months ended March 31, 2007 and $2.0 million of such charges for the three months ended March 31, 2006. Allocated expenses were $1.6 million and $3.8 million for the six months ended March 31, 2007 and 2006, respectively. While the Company considers the allocation of such costs to be reasonable, the cost of performing such services on its own behalf may vary from historically allocated amounts.

3Certain of the Company’s employees had been granted Walter restricted stock units and stock options under Walter’s share-based compensation plans. ~~Summary~~ In connection with Walter’s distribution of ~~Significant~~all of Mueller Water’s Series B common stock to its ~~Accounting~~shareholders ~~Policies~~on December 14, 2006, Walter cancelled these outstanding instruments. The Company had no expenses related to this share-based compensation allocated from Walter for the three months ended March 31, 2007 and expensed $0.2 million for the three months ended March 31, 2006, and $0.5 million and $0.2 million for the six months ended March 31, 2007 and 2006, respectively.

~~Fiscal~~Note ~~Year -The Company’s fiscal year ends on September 30~~3. ~~The Company’s third quarter ends on the Saturday preceding June 30.~~Acquisitions

~~Inventory~~Fast ~~-Inventories are recorded at the lower of cost (first-in~~Fabricators, ~~first-out) or market value~~ Inc. Additionally, the Company evaluates its inventory reserves in terms of excess and obsolete exposures. This evaluation includes such factors as anticipated usage, inventory turnover, inventory levels and ultimate product sales value. As such, these factors may change over time causing the reserve level to adjust accordingly.

~~Goodwill~~On January 4, ~~Intangible~~2007, ~~Assets~~the ~~and~~Company ~~Other~~acquired ~~Assets~~the assets ~~-In~~of ~~accordance~~Fast Fabricators, Inc., a ductile iron pipe fabricator ~~with~~headquartered ~~SFAS~~in NoBloomfield, Connecticut, for $22. ~~142~~5 million in cash, ~~“Goodwill~~net ~~and~~of cash ~~Other~~acquired. ~~Intangible~~In ~~Assets”~~March 2007, the Company noaccrued an additional amount due ~~longer~~of ~~amortizes~~$0.5 ~~goodwill,~~million ~~but~~based ~~instead~~on ~~tests~~the itfinal ~~for~~net ~~impairment~~asset atvalue, ~~least~~adjusting the purchase ~~annually~~price to $23.0 Inmillion. ~~addition,~~This ~~the~~accrued ~~Company~~amount nowas ~~longer~~paid ~~amortizes~~in ~~indefinite~~April 2007. ~~lived~~The ~~intangibles,~~purchase ~~such~~price asmay ~~tradenames,~~increase ~~but~~by ~~instead~~up ~~tests~~to ~~these~~$1.5 ~~assets~~million for ~~impairment~~an earnout holdback. The earnout holdback will be settled by March 15, 2008, based on the 2007 calendar year EBITDA as defined in ~~accordance~~the purchase agreement with the ~~standard~~seller. ~~until~~The Company ~~their~~has ~~lives~~deposited ~~are~~$1.5 ~~determined~~million tointo noescrow, ~~longer~~which is included in cash and becash ~~indefinite~~equivalents in the accompanying Condensed Consolidated Balance Sheet, for the Earnout Holdback. ~~Recognized~~The ~~intangible~~Company ~~assets~~cannot ~~that~~access ~~have~~these ~~definite~~funds ~~lives~~until ~~are~~the ~~amortized~~earnout, ~~over~~if ~~their~~any, ~~respective~~has ~~estimated~~been ~~useful lives~~paid.

~~Identifiable~~The estimated ~~intangible~~fair ~~assets~~values ~~consist~~ of the ~~following~~assets acquired and liabilities assumed are as follows (dollars in millions):

	September 30, 2003					June 26, 2004
Current assets	$	10.5
	Gross Carrying Amount			Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Identified intangibles	13.1
	(dollars in millions)
Goodwill	0.5
Amortized intangible assets
Plant, property, and equipment and other noncurrent assets	1.8
Non-compete agreements	$	82.9		$	67.2	$	84.7	$	80.0
Accounts payable and accrued liabilities	(2.9		)
Patents	0.5			0.1		0.5		0.1
Net assets acquired	$	23.0
Design and engineering drawing rights	2.9			0.6		7.3		0.9
Customer relationships	2.0			0.1		4.0		0.5
	88.3			68.0		96.5		81.5
Indefinite-lived intangible assets
Tradenames	42.7			—		42.7		—
	$	131.0		$	68.0	$	139.2	$	81.5

Aggregated amortization expense for the nine months ended June 28, 2003 and June 26, 2004 was $12.5 million and $13.5 million, respectively. Estimated amortization for the years ending September 30, 2004, 2005, 2006, 2007 and 2008 is $15.0 million, $1.2 million, $1.0 million, $0.4 million and $0.4 million, respectively. The $13.8 million decrease from 2004 to 2005 is due to a non-compete agreement becoming fully amortized in August 2004.7

9Acquisition of Predecessor Mueller by Walter Industries

~~The~~On ~~changes~~October 3, in2005, ~~various~~pursuant ~~amortizable~~to ~~intangible~~the ~~assets’~~agreement dated ~~gross~~June 17, ~~carrying~~2005, Walter acquired all of the outstanding common stock ~~amount~~of Predecessor Mueller for ~~the~~$944.0 ~~nine~~million ~~months~~and ~~ended~~assumed ~~June~~$1.05 billion of indebtedness. Predecessor Mueller was converted into a limited liability company on October 263, ~~2004~~2005 ~~relate~~and ~~primarily~~was merged with and into the Company on February 2, 2006. In conjunction with the acquisition, U.S. Pipe was contributed in a series of transactions to the Company on October 3, 2005. On February 23, ~~acquisitions~~2006, ~~(see~~Walter ~~Note~~received 4)$10.5 million based on the final closing cash and working capital, adjusting the purchase price to $933.5 million.

~~Deferred Financing Fees – Deferred costs of debt financing included in~~Walter’s ~~other~~acquisition ~~non-current assets are amortized over the life~~ of ~~the~~Predecessor ~~related~~Mueller ~~debt agreements,~~has ~~which~~been ~~range~~accounted ~~from one to eight years. Such costs are reassessed when amendments occur, in accordance with Emerging Issues Task Force (EITF) 96-19, “Debtors Accounting~~ for aas ~~Modification or Exchange of Debt Instruments”. During the quarter ended June 26, 2004, the Company entered into~~ a ~~new senior credit facility and issued new notes, as~~business ~~described~~combination inwith ~~Note 6~~U. ~~These transactions resulted in recording $30~~S.7 ~~million~~Pipe ofconsidered ~~new deferred financing fees, and because~~ the ~~new~~acquirer ~~credit~~for ~~facility~~accounting ~~represented~~purposes. ~~a partial extinguishment of the former credit~~The ~~facility,~~total apurchase ~~write-off~~price ofis ~~$6.6~~comprised ~~million~~ of ~~existing~~(dollars ~~deferred~~in ~~financing fees.~~millions):

Warranty Costs -The Company accrues for the estimated cost of product warranties at the time of sale based on historical experience. Adjustments to obligations for warranties are made as changes in the obligations become reasonably estimable. The following table summarizes information concerning the Company’s product warranty:

Acquisition of the outstanding common stock of Predecessor Mueller	$	918.1
Acquisition-related transaction costs	15.4
Total purchase price	$	933.5

	Three months ended June 26, 2004			Nine months ended June 26, 2004
	(dollars in millions)
Beginning balance	$	0.9		$	0.9
Accruals for warranties	2.0			4.5
Settlement of warranty claims	(0.9		)	(3.4		)
Accrual at June 26, 2004	$	2.0		$	2.0

Acquisition-related transaction costs include investment banking, legal and accounting fees and other external costs directly related to the Acquisition.

~~Income Taxes -~~The ~~Company’s current estimated effective tax~~ ~~rate~~excess ~~for fiscal 2004 is 40 percent, excluding discrete items. Discrete third quarter events which include the conclusion~~ of the ~~federal~~purchase ~~tax examination,~~price over the ~~conclusion~~net oftangible ~~certain state tax examinations~~ and ~~expiration~~identifiable ofintangible ~~certain~~assets ~~state~~is ~~statutes~~recorded ofas ~~limitation allowed the Company to adjust tax accruals by approximately $6~~goodwill.4 ~~million. Additional~~Based ~~third~~on ~~quarter~~current ~~financing~~fair ~~is expected to inhibit the Company’s ability to realize deferred tax assets related to Foreign Tax Credits. Therefore~~values, the ~~Company has recorded a full valuation allowance against such~~purchase ~~assets~~price ~~equal~~was toallocated ~~$0.5~~as ~~million. Additionally,~~follows a(dollars ~~deduction of Foreign Tax Credits of approximately $2.3 million was claimed~~ in ~~the third quarter, reducing the previously expected benefit by $1.4 million.~~millions):

A reconciliation of tax expense at the current estimated effective tax rate of 40% to the total recorded income tax expense for the quarter and nine months ended June 26, 2004 is as follows:

Receivables, net	$	177.4
Inventory	373.2
Property, plant and equipment	214.2
Identifiable intangible assets	856.9
Goodwill	660.3
Net other assets	351.2
Net deferred tax liabilities	(288.6		)
Debt	(1,411.1		)
Total purchase price allocation	$	933.5

10Note 4. Facility Rationalization, Restructuring and Related Costs

	Three months ended June 26, 2004			Nine months ended June 26, 2004
	(dollars in millions)
Tax expense at current estimated effective rate	$	0.9		$	11.2
Adjustment of tax accruals for conclusion of examinations and expiration of certain state statutes	(6.4		)	(6.4		)
Deduction of Foreign Tax Credits	1.4			1.4
Creation of valuation allowance related to Foreign Tax Credits	0.5			0.5
Other, including the effect on prior period deferred tax balances of change in effective rate	0.4			0.4
Tax expense (benefit) for period ended June 26, 2004	$	(3.2	)	$	7.1

On October 26, 2005 Walter announced plans to close U.S. Pipe’s Chattanooga, Tennessee plant and transfer the valve and hydrant production of that plant to Mueller Co.’s Chattanooga, Tennessee and Albertville, Alabama plants. The plant closed in 2006, resulting in the termination of approximately 340 employees. Exit costs totaled $49.9 million of which approximately $28.6 million was related to severance and fixed asset write-offs and qualified as restructuring and impairment charges. The remaining exit costs of $21.3 million were comprised of an inventory write-down totaling $11.4 million, a $9.0 million write-off of unabsorbed overhead costs and $0.9 million of other related costs, which were recognized in cost of sales during the year ended September 30, 2006. The Company paid $0.1 million and $0.4 million of the above-mentioned severance in the three and six months ended March 31, 2007, respectively.

~~Comprehensive~~On ~~Income~~January 26, ~~-The~~2006, the Company announced the closure of the Henry Pratt valve manufacturing facility in Dixon, Illinois, which is included in the Company’s ~~comprehensive~~Mueller ~~income~~Co. ~~for~~segment. The eventual closure of the ~~three~~facility ~~and~~is ~~the~~expected ~~nine~~to ~~months~~occur ~~ended~~in ~~June 26~~fiscal year 2007, ~~2004~~resulting ~~consisted~~in the termination of ~~foreign~~approximately 100 employees. Total estimated costs related ~~currency~~to ~~adjustments~~this closure are $3.7 million, including termination benefits of $(1.1) 0 million and property impairment charges of $01.27 million, ~~respectively,~~which ~~and~~were recorded as ~~minimum~~adjustments ~~pension~~to ~~liability~~goodwill ~~adjustments~~in ofthe ~~$(0~~year ended September 30, 2006.4) ~~million~~These restructuring ~~for~~costs ~~both~~were ~~periods.~~recorded to goodwill as the

Related Party Transactions -In April 2004, the Company paid Credit Suisse First Boston, LLC (“CSFB”), an affiliate of the DLJ Merchant Banking funds (a principal stockholder of Mueller Holdings (N.A.), Inc.), fees and expenses of $21.3 million in connection with the arrangement and syndication of our senior credit facility, the arrangement as sole lead bookrunning manager for our Second Priority Senior Secured Floating Rate notes due 2011 and our 10% Senior Subordinated Notes due 2012. The Company also paid CSFB a management fee of $0.1 million for each of the three month periods ended June 28, 2003 and June 26, 2004.8

~~Stock-Based~~overall ~~Compensation -The Company accounts for its stock-based compensation~~ plan ~~under~~to ~~Accounting~~close ~~Principles Board Opinion~~the ~~No. 25~~facility ~~(“APB~~was ~~No. 25”),~~identified ~~“Accounting~~prior ~~for Stock Issued~~ to ~~Employees,” which requires recognizing compensation costs based upon~~ the ~~intrinsic value of the equity instrument at the grant date~~Acquisition. The ~~FASB~~remaining ~~issued~~estimated ~~SFAS~~costs of No$1. ~~123, “Accounting~~0 ~~for~~million ~~Stock-Based~~are ~~Compensation,”~~for ~~which~~the ~~encourages~~transfer ~~companies~~and ~~to recognize~~installation ~~compensation~~of ~~costs~~equipment ~~based~~and temporary ~~upon~~outsourcing ~~the fair value~~ of ~~the~~manufacturing ~~equity~~and ~~instrument at~~will ~~the~~be ~~grant~~expensed ~~date.~~when ~~However, SFAS No~~incurred. ~~123~~ ~~allows companies to continue to~~The ~~apply~~Company ~~the~~paid ~~provisions~~$0.1 ofmillion ~~APB~~and No$0. 255 ~~and~~million ~~make~~of ~~pro~~the ~~forma~~above-mentioned ~~disclosures~~severance ~~assuming~~in athe ~~hypothetical~~three ~~fair~~and ~~value~~six ~~application.~~months ~~The~~ended ~~Company~~March 31, ~~has~~2007, ~~adopted the pro forma disclosure provisions of SFAS No~~respectively. ~~123.~~

~~The~~On November 18, 2006, the Company ~~recognizes~~announced ~~compensation~~the relocation ~~cost~~of ~~for~~pipe ~~stock-based~~nipple ~~compensation arrangements~~and ~~equal~~merchant tocoupling production in the ~~difference,~~Canvil manufacturing iffacility ~~any~~in Ontario, ~~between~~Canada to the ~~quoted~~Beck ~~market~~facility ~~price~~in Pennsylvania, both of ~~the~~which ~~stock~~are ~~option~~included ~~and~~in the ~~exercise~~Company’s ~~price~~Anvil atsegment. ~~the~~The ~~date~~consolidation of these ~~the~~product ~~grant~~lines in the Beck Facility was completed during the quarter ended ~~accordance~~March 31, ~~with~~2007, resulting in the ~~provisions~~termination of ~~APB~~approximately No60 employees. 25 Termination benefits of $1.8 ~~All~~million ~~options~~were ~~granted~~recorded ~~under~~as adjustments to goodwill in the ~~Management~~year ~~Incentive~~ended ~~Plan~~September 30, 2006. These restructuring costs were ~~issued~~recorded to atgoodwill ~~quoted~~as ~~market~~the ~~prices~~overall atplan to close the ~~date~~facility was identified prior to the Acquisition. In the current fiscal year, the Company revised its severance estimate, and decreased the goodwill balance and accrued severance by $0.4 million. The Company paid $0.5 million of ~~grant~~the above-mentioned severance in the three and six months ended March 31, 2007.

~~The~~Activity in ~~following~~accrued ~~table~~restructuring ~~illustrates~~and ~~the~~other ~~effect~~severance onfor ~~net income if~~ the ~~Company had~~three ~~applied~~and ~~the~~six ~~fair~~months ~~value recognition provisions of SFAS No.~~ended March ~~123~~31, ~~“Accounting~~ ~~for~~2007 ~~Stock-Based~~was ~~Compensation,”~~ as ~~amended~~follows by(dollars ~~SFAS~~in ~~No. 148 “Accounting for Stock-Based Compensation -Transition and Disclosure,” to stock-based employee compensation.~~millions):

	For the three months ended March 31, 2007				For the six months ended March 31, 2007
Beginning balance		$	4.2			$	5.3
Adjustments to accruals allocated to goodwill for plant closures identified prior to the Acquisition		—				(0.4		)
Accrued restructuring and other severance payments		(1.2		)		(1.9		)
Ending balance		$	3.0			$	3.0

	Three months ended June 28, 2003			Three months ended June 26, 2004		Nine months ended June 28, 2003			Nine months ended June 26, 2004
	(dollars in millions)
Net income, as reported	$	7.8		$	5.2	$	19.0		$	20.6
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(0.1		)	—		(0.3		)	(0.2		)
Pro forma net income	$	7.7		$	5.2	$	18.7		$	20.4

Note 5. Share-Based Compensation Plans

~~Use~~ Certain of ~~Estimates - The preparation of financial statements in accordance with accounting principles generally accepted in~~ the ~~United~~Company’s ~~States of~~employees ~~America~~had ~~requires~~been ~~management~~granted toWalter ~~make~~restricted ~~extensive~~stock ~~use~~units ~~of certain estimates~~ and ~~assumptions~~stock ~~that~~options ~~affect~~under ~~the~~Walter’s ~~reported~~share-based ~~amounts~~compensation ofplans. ~~assets~~The ~~and~~Company ~~liabilities and~~has ~~disclosure~~expensed of$0.5 ~~contingent~~million ~~assets~~related ~~and~~to ~~liabilities at~~ the ~~date~~share-based ofcompensation ~~the~~costs ~~financial~~allocated ~~statements~~from ~~and~~Walter for the ~~reported~~six ~~amounts~~months ofended ~~revenues~~March 31, ~~and~~2007. ~~expenses~~In ~~during~~connection ~~the~~with ~~reported~~Walter’s ~~periods.~~distribution ~~Significant~~of ~~estimates~~all inMueller ~~these~~Water’s ~~financial~~Series B ~~statements~~common ~~include allowances~~stock ~~for~~to ~~doubtful~~its shareholders ~~accounts~~on ~~receivable~~December 14, ~~estimates~~2006, ofWalter ~~future~~cancelled ~~cash~~these ~~flows~~outstanding ~~associated~~instruments ~~with~~and ~~assets,~~Mueller ~~asset~~Water ~~impairments,~~replaced ~~useful~~them ~~lives~~with ~~for~~restricted ~~depreciation~~stock units and ~~amortization,~~options ~~loss~~to ~~contingencies,~~acquire ~~net~~shares ~~realizable value~~ of ~~inventories,~~Mueller ~~income taxes~~Water’s ~~and~~common ~~tax~~stock. ~~valuation~~These ~~reserves~~equity ~~and~~awards were ~~the~~designed ~~determination~~to ofprovide ~~discount~~intrinsic ~~and~~value ~~other rate assumptions for pension~~ and ~~post-retirement~~terms ~~employee~~equal ~~benefit~~to ~~expenses.~~the Walter ~~Actual~~cancelled ~~results~~instruments ~~could~~as ~~differ from those estimates.~~follows:

4. Acquisitions

	Number of instruments		Range of exercise prices		Weighted average exercise price			Total compensation
	(millions)							(dollars in millions)
Restricted stock units		0.4				$	14.95		$	5.7
Traditional stock options		0.5	$	2.05 – 20.56		13.45			0.6
		0.9							$	6.3

Effective January 15, 2004, the Company acquired certain assets of STAR Pipe, Inc. (“STAR”). The acquisition is being accounted for in accordance with SFAS No. 141 and the operating results have been included in the consolidated results since the date of acquisition. STAR is a leading distributor of foreign-sourced cast and grooved fittings and couplings. The STAR acquisition provides an entry into the foreign-sourced product marketplace. The acquisition’s purchase price is $17 million, and was paid in cash.9

The Company ~~following~~also ~~summary~~granted ~~presents~~stock ~~the~~options ~~preliminary~~and ~~estimated~~restricted ~~fair~~stock ~~values~~units ofseparately during the ~~assets~~six ~~and~~months ~~liabilities~~ended ~~assumed as of January~~March 1531, ~~2004~~2007 as follows:

(dollars in millions)

	Number of instruments		Range of exercise prices		Weighted average fair value per instrument			Total compensation
	(millions)							(dollars in millions)
Restricted stock units		0.4				$	15.09		$	6.7
Traditional stock options		0.4	$	14.19-15.09		5.76			2.3
Employee stock purchase plan options		0.1				3.65			0.3
		0.9							$	9.3

Current assets	$	13.5
Property, plant & equipment	0.4
Intangible assets	6.7
Total assets	$	20.6
Current liabilities	3.6
Net assets acquired	$	17.0

As of March 31, 2007, there was approximately $28.1 million of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2006 Stock Incentive Plan, including the Walter replacement instruments described above. The Company expensed $2.7 million and $5.2 million related to share-based compensation for the three and six months ended March 31, 2007, respectively.

AsNote ~~part of the acquisition, the Company has agreed to a future payment to be made to the seller to the extent that the gross profit of the acquired business exceeds a targeted gross profit~~6. ~~The~~ ~~maximum potential deferred payment amount is $23 million. Management currently estimates the deferred~~Borrowing payment could total approximately $11 to $13 million for the deferred payment period which begins February 1, 2004 and ends January 31, 2007. The deferred payment amount indicated above is based on management’s best estimate, but the actual adjustment could be materiallyArrangements

12Long-Term Debt—Long-term debt consists of the following obligations:

different. The liability for such deferred payment will be recorded at the end of each deferred payment period, in accordance with the purchase agreement.

	March 31, 2007				September 30, 2006
	(dollars in millions)
2005 Mueller Credit Agreement		$	789.7			$	793.8
Senior subordinated notes		214.2				215.1
Capital lease obligations		1.9				2.1
		1,005.8				1,011.0
Less current portion		(8.9		)		(9.0		)
		$	996.9			$	1,002.0

~~The~~2005 Mueller ~~final~~Credit ~~purchase~~Agreement: On ~~price~~October 3, 2005, ~~allocation~~the isCompany ~~subject~~entered tointo ~~completion~~a ofcredit ~~certain~~agreement (the “2005 Mueller Credit ~~asset~~Agreement”) ~~valuations,~~consisting ~~which~~of ~~the~~a ~~Company~~$145 ismillion senior secured revolving credit facility maturing in October 2010 (the ~~process~~“2005 ofMueller ~~finalizing. The~~Revolving ~~preliminary~~Credit Facility”) ~~allocation~~and ofa ~~purchase~~$1,050 ~~price could~~million ~~change~~senior ~~based~~secured ~~upon~~term ~~completion~~loan ofmaturing ~~these~~in ~~valuations~~October 2012 (the “2005 Mueller Term Loan”). ~~Additionally,~~ toThe ~~the~~commitment ~~extent~~fee on the ~~fair~~unused ~~value~~portion of the ~~assets~~2005 ~~acquired~~Mueller ~~exceeds~~Revolving ~~purchase~~Credit ~~price,~~Facility ais ~~deferred~~0.375% ~~credit~~and ~~will~~the beinterest ~~recorded~~rate asis a ~~the~~floating ~~purchase~~interest ~~agreement~~rate ~~contains~~of a1.75% ~~provision~~over ~~for~~LIBOR. ~~future~~The ~~contingent~~2005 ~~consideration~~Mueller Term Loan carries ~~(deferred~~a ~~payment)~~floating interest rate of 2.0% over LIBOR.

~~The~~Senior Subordinated ~~preliminary~~Notes: In ~~intangible~~April 2004, ~~assets~~the Company ~~acquired~~issued ~~include~~$315.0 ~~trademarks,~~million ~~customer relationships~~principal ~~and~~face aamount ~~non-compete~~of ~~agreement~~senior ~~with~~subordinated notes ~~the~~due ~~former owners~~2012. ~~These~~ ~~intangibles~~The ~~are~~notes ~~being~~were ~~amortized~~recorded ~~over their~~at ~~estimated~~fair ~~useful~~value ~~lives~~in ofconnection ~~ten~~with ~~years~~the Acquisition, ~~three~~resulting ~~years~~in ~~and~~an ~~five~~effective ~~years, respectively~~interest rate of 9.2%.

~~Also~~Tender Offer—On ~~effective January~~May 151, ~~2004~~2007, the Company ~~acquired~~announced ~~certain~~a cash ~~assets~~tender ofoffer ~~Modern~~to ~~Molded~~repurchase ~~Products~~all ~~(“Modern~~of ~~Molded”). The~~the ~~acquisition~~outstanding isSenior ~~being~~Subordinated ~~accounted~~Notes ~~for in~~and ~~accordance~~consent ~~with~~solicitation ~~SFAS~~to ~~No.~~amend ~~141 and~~ the ~~operating~~related ~~results~~indentures ~~have been included~~ in ~~the~~ ~~consolidated~~connection ~~results~~with ~~since~~ the ~~date~~proposed refinancing of ~~acquisition. The~~the ~~purchase~~2005 ofMueller ~~the~~Credit ~~assets~~Agreement and ~~technology~~issuance of Modern Molded will allow the company to internally produce parts that we previously purchased. The acquisition will allow the Company to reduce spending as well as to increase product supply line predictability. The acquisition’s purchase price is $~~2.8~~ 350 million ~~and~~of ~~was paid~~new inSenior ~~cash~~Subordinated Notes.

~~The following summary presents the preliminary estimated fair values of the assets and liabilities assumed as of January 15, 2004:~~10

~~(dollars~~Note in7. ~~millions)~~Derivative Financial Instruments

Current assets	$	0.2
Property, plant & equipment	0.7
Intangible assets	1.9
Net assets acquired	$	2.8

Interest Rate Swaps—The Company uses interest rate swap contracts with a cumulative total notional amount of $425.0 million to hedge against cash-flow variability arising from changes in LIBOR rates in conjunction with its LIBOR-indexed variable rate borrowings. The Company recorded an unrealized loss from its swap contracts, net of tax, of $0.1 million at March 31, 2007 in accumulated other comprehensive income. These swaps have a fair value of $0.2 million at March 31, 2007, which is included in other long-term liabilities in the accompanying Condensed Consolidated Balance Sheet, and are accounted for as effective hedges.

Forward Foreign Currency Exchange Contracts—The Company ~~intangible~~uses ~~assets~~Canadian ~~acquired~~dollar ~~include~~forward exchange contracts with a ~~non~~cumulative notional amount of $26.7 million to hedge against cash-~~compete~~flow ~~agreement~~variability ~~with~~arising from changes in the Canadian dollar-U.S. dollar exchange rate in connection ~~former~~with ~~owners~~anticipated ~~and~~transactions, ~~purchased~~primarily ~~technology.~~ inventory purchases denominated in Canadian dollars. These ~~intangibles~~contracts are ~~being~~accounted ~~amortized~~for ~~over~~as ~~their~~effective ~~estimated~~hedges. ~~useful~~The Company ~~lives~~recorded an unrealized gain of $0.2 million, net of tax, from its forward exchange contracts at March 31, 2007. These forwards have a fair value of ~~five~~$0.3 ~~years~~million at March 31, 2007, which is included in deferred financing fees and other long-term assets in the accompanying Condensed Consolidated Balance Sheet.

The ~~following~~Company ~~unaudited~~has ~~pro~~also ~~forma~~entered ~~summary~~into ~~presents~~Canadian dollar forward exchange contracts reducing the ~~consolidated~~Company’s exposure to currency ~~results~~fluctuations from its Canadian-denominated intercompany loans. The instruments have a cumulative notional amount of ~~operations~~$32.8 million. With these instruments, the Company sells Canadian dollars for U.S. dollars at a weighted average rate of $0.864. Gains and losses on these instruments are included in selling, general and administrative expenses in the ~~quarter~~accompanying Condensed Consolidated Statement of Operations. The Company recorded a net loss of $0.2 million and ~~nine~~a net gain of $0.8 million for the three months and six months ended ~~June~~March 2831, 2007, ~~2003~~respectively. The Company entered into three Canadian dollar forward ~~and~~exchange ~~June~~contracts with a cumulative notional amount of $2.4 ~~26,~~million ~~2004~~to hedge against cash flow variability in connection with certain intercompany transactions that are not accounted for as ifeffective hedges during the ~~acquisitions~~quarter ended ofMarch 31, ~~STAR~~2007. ~~and~~The ~~Modern~~weighted ~~Molded~~average ~~had~~rate These instruments have a ~~occurred~~weighted asaverage translation rate of ~~October~~$0.819, expire in April and May 2007, and resulted in a loss of $0.1 million in the three and six month periods ended March 31, ~~2002:~~2007 that is included in selling, general and administrative expenses in the accompanying Condensed Consolidated Statement of Operations.

	Three months ended				Nine months ended
	June 28, 2003		June 26, 2004		June 28, 2003		June 26, 2004
	(dollars in millions)
Net Sales	$	238.5	$	288.7	$	688.4	$	751.2
Net income	8.2		5.2		19.9		20.9

Natural Gas Swaps—The Company uses natural gas swap contracts with a cumulative total notional amount of approximately 499,000 mmbtu to hedge against cash-flow variability arising from changes in natural gas prices on the NYMEX exchange in conjunction with its anticipated purchases of natural gas. These contracts fix the Company’s purchase price for natural gas at prices ranging from $6.67 to $7.56 per mmbtu for a total purchased volume of 499,000 mmbtu through September 30, 2007. The Company recorded an unrealized gain from its swap contracts, net of tax, of $0.2 million at March 31, 2007 in accumulated other comprehensive income. These swaps have a fair value of $0.3 million at March 31, 2007, which is included in deferred financing fees and other long-term assets in the accompanying Condensed Consolidated Balance Sheet, and are accounted for as effective hedges.

1311

~~The~~Note ~~unaudited~~8. ~~consolidated~~Pension ~~pro forma information is not necessarily~~and ~~indicative~~Other ofPost-employment ~~the combined results that would have occurred had the acquisitions occurred on that date, nor is it indicative of the results that may occur in the future.~~Benefits

~~5. New~~The components ~~Accounting~~of ~~Pronouncements~~net periodic benefit cost for pension and post-employment benefits for the three months and six months ended March 31, 2007 and 2006 are as follows:

In April 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except for certain hedging relationships designated after June 30, 2003. The adoption of this statement did not have any impact on the Company’s financial condition or results of operations.

	Pension Benefits								Other Benefits
	For the three months ended March 31,								For the three months ended March 31,
	2007				2006				2007				2006
	(dollars in millions)
Components of net periodic benefit cost
Service cost		$	1.6			$	1.9			$	0.1			$	0.2
Interest cost		5.1				4.7				0.3				0.3
Expected return on plan assets		(5.9		)		(4.9		)		—				—
Amortization of prior service cost (credit)		0.1				0.2				(0.6		)		(0.6		)
Amortization of net loss (gain)		0.5				1.8				(0.4		)		(0.2		)
Curtailment settlement loss (gain)		—				4.9				—				(1.1		)
Net periodic benefit cost (credit)		$	1.4			$	8.6			$	(0.6	)		$	(1.4	)

On December 24, 2003, the FASB issued a revision to Staff Interpretation (FIN) No. 46 (revised 2003), which clarified some of the provisions of the original Interpretation No. 46 “Consolidation of Variable Interest Entities,” and exempted certain entities from its requirements. The application of revised FIN 46 is required in financial statements of public entities that have interests in variable interest entities commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application by public entities, other than small business entities, for all other types of entities is required in financial statements for periods ending March 15, 2004. The Company does not believe the revised FIN No. 46 will have a material effect on its financial condition or results of operations and the Company will provide the disclosures, where appropriate, as provided for in revised FIN No. 46. At June 26, 2004 the Company did not have any entities that would be considered variable interest entities.

	Pension Benefits								Other Benefits
	For the six months ended March 31,								For the six months ended March 31,
	2007				2006				2007				2006
	(dollars in millions)
Components of net periodic benefit cost
Service cost		$	3.2			$	3.9			$	0.2			$	0.4
Interest cost		10.2				9.4				0.6				0.6
Expected return on plan assets		(11.8		)		(9.8		)		—				—
Amortization of prior service cost (credit)		0.2				0.3				(1.2		)		(1.2		)
Amortization of net loss (gain)		1.0				3.7				(0.8		)		(0.4		)
Curtailment settlement loss (gain)		—				4.9				—				(1.1		)
Net periodic benefit cost (credit)		$	2.8			$	12.4			$	(1.2	)		$	(1.7	)

OnFor ~~December 23, 2003,~~ the ~~FASB~~three ~~issued~~months ~~SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions~~ and ~~Other Postretirement~~ ~~Benefits.”~~six ~~SFAS~~months ~~No. 132~~ended ~~retains the disclosures required by the original Statement No.~~March ~~132~~31, ~~which~~2007, ~~standardized~~ the ~~disclosure~~Company ~~requirements~~had ~~for pensions~~no ~~and~~contributions ~~other postretirement benefits~~ to ~~the extent practicable and~~its ~~required~~pension ~~additional~~plans. ~~information~~The onCompany ~~changes~~presently inanticipates ~~the~~contributing ~~benefit obligations and fair~~approximately ~~values of plan assets~~$7.7 million ~~Additional disclosures have been added in response~~ to ~~concerns~~ ~~expressed~~fund byits ~~users~~pension ofplans ~~financial~~and ~~statements~~$2.0 ~~Those~~million ~~disclosures~~to ~~include information~~its ~~describing the types of plan assets, investment strategy,~~other ~~measurement~~post-employment ~~date(s),~~benefit plan ~~obligations, cash flows, and components of net periodic benefit cost recognized during interim periods. The provisions of Statement 132 remain~~ in ~~effect until the provisions of the revised Statement 132 are adopted. This revised Statement is effective for financial statements with~~ fiscal ~~years ending after December 15~~2007, ~~2003.~~and ~~The~~may ~~interim-period disclosures~~make ~~required~~further ~~by this revised Statement are effective for interim~~discretionary ~~periods beginning after December 15, 2003~~payments. ~~The Company has provided the additional required disclosure information.~~

OnNote ~~December 17, 2003, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No~~9. ~~104~~ ~~(SAB 104), Revenue Recognition,~~Supplementary ~~which~~Balance ~~supercedes~~Sheet SAB 101, Revenue Recognition in Financial Statements. SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of Emerging Issues Task Force (EITF) 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” Additionally, SAB 104 rescinds the SEC’s Revenue Recognition in Financial Statements Frequently Asked Questions and Answers issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition. The adoption of this bulletin did not have an impact on the Company’s financial condition or results of operations.Information

14Selected supplementary balance sheet information is presented below:

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity.” SFAS 150 establishes standards for how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that a company classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). As discussed in Note 7, Holdings issued 16% Senior Exchangeable Preferred Stock in connection with the formation of the Company which would be subject to SFAS 150 for the fiscal year beginning October 1, 2004. The preferred stock was redeemed by Holdings on April 23, 2004 (see Note 6). Therefore, the adoption of this statement will not have any impact on the Company’s financial condition or result of operations.

	March 31, 2007			September 30, 2006
	(dollars in millions)
Inventories
Purchased materials and manufactured parts		$	81.2		$	66.7
Work in process		128.2			127.7
Finished goods		301.4			260.2
		$	510.8		$	454.6

~~6. Borrowing Arrangements and Recapitalization~~12

Long-Term Debt:

	March 31, 2007				September 30, 2006
	(dollars in millions)
Property, plant and equipment
Land		$	28.3			$	28.4
Buildings		85.3				83.4
Machinery and equipment		512.9				489.9
Other		59.0				46.4
		685.5				648.1
Accumulated depreciation		(341.8		)		(311.1		)
		$	343.7			$	337.0

	September 30, 2003			June 26 2004
	March 31, 2007					September 30, 2006
	(dollars in millions)
Credit facility
Accrued expenses and other current liabilities
Term loans	$	523.4		$	515.0
Vacations and holidays		$	14.1				$	13.6
Senior subordinated notes	50.0			—
Workers compensation		5.8					6.0
Second Priority Senior Secured Notes	—			100.0
Accrued payroll and bonus		13.5					23.5
10% Senior Subordinated Notes	—			315.0
Accrued sales commissions		4.4					5.0
Capital lease obligations	2.3			2.5
Accrued other taxes		5.9					7.7
	575.7			932.5
Accrued warranty claims		2.8					2.7
Less current portion	(6.2		)	(2.4		)
Accrued environmental claims		—					2.5
	$	569.5		$	930.1
Accrued cash discounts and allowances		13.7					22.1
Accrued interest		13.9					13.6
Accrued restructuring and other severance		3.0					5.3
Accrued medical		4.2					3.7
Other		15.7					16.4
		$	97.0				$	122.1

ANote ~~schedule of~~10. Supplementary ~~debt~~Income ~~maturities~~Statement ~~as of June 26, 2004 is as follows:~~Information

	Less than 1 year		1 -3 years		4 - 5 years		After 5 years		Total
	(dollars in millions)
Term loans	$	1.4	$	10.9	$	10.9	$	491.8	$	515.0
Second Priority Senior Secured Notes	—		—		—		100.0		100.0
10% Senior Subordinated Notes	—		—		—		315.0		315.0
Capital lease obligations	1.0		1.5		—		—		2.5
Total debt maturities	$	2.4	$	12.4	$	10.9	$	906.8	$	932.5

The components of interest expense, net of interest income are presented below:

Recapitalization and refinancing

	Three months ended March 31,								Six months ended March 31,
	2007				2006				2007				2006
	(dollars in millions)
Interest expense, net of interest income
Contractual interest expense		$	18.7			$	25.4			$	37.4			$	50.6
Deferred financing fee amortization		0.6				1.1				1.3				2.2
Write-off of bridge loan commitment fees		—				—				—				2.5
Interest rate swap gains		(0.8		)		(0.1		)		(1.7		)		(0.5		)
Interest expense		18.5				26.4				37.0				54.8
Interest income		(0.6		)		(0.5		)		(1.8		)		(0.8		)
		$	17.9			$	25.9			$	35.2			$	54.0

AtNote ~~April 23, 2004 the Company completed a refinancing of existing term loans, issuance of $415 million of new notes and payment of a dividend to our parent company~~11. ~~Existing~~ ~~ownership~~Income Taxes

15The Company calculated its 2007 effective tax rate using Accounting Principles Board Opinion No. 28, which requires that an estimated annual effective tax rate be determined and applied to the pre-tax income. For the six months ended March 31, 2007, the Company determined its effective tax rate to be

~~of the Company was unchanged as a result of these transactions. The transactions are described further as follows:~~13

~~Second Priority Senior Secured Floating Rate Notes: The Company issued $100 million of such notes~~40. ~~Interest on the secured notes is payable at a rate equal to the three-month reserve-adjusted London-interbank offered rate, or LIBOR, which is reset quarterly, plus 4.75~~6% ~~on February 1, May 1, August 1 and November 1 of each year, beginning on August 1, 2004~~. ~~The~~ ~~interest~~The tax rate for the ~~first~~six ~~interest~~months ~~period~~ended ~~ending August~~March 131, ~~2004~~2006 was 5 39.895% ~~per annum~~. ~~The~~ ~~secured notes~~The ~~mature~~difference inbetween ~~2011 and are guaranteed by each of~~ the ~~existing~~federal, ~~domestic~~state, ~~restricted subsidiaries~~ and ~~secured~~foreign bystatutory ~~second-priority~~tax ~~liens~~rates onand the ~~assets securing the~~ ~~senior~~effective ~~credit~~tax ~~facility~~rate ~~(other~~is ~~than~~due ~~certain~~primarily ~~subsidiary stock and assets of our parent company). The secured notes contain customary covenants and events of default, including covenants that limit the Company’s ability~~ to ~~incur~~non-deductible ~~debt, pay~~interest ~~dividends and make investments and also include a maintenance covenant limiting the Company’s senior total leverage as a multiple of EBITDA, as defined in the indenture~~expense.

~~10%~~Note ~~Senior Subordinated Notes: The Company issued $315 million of such notes~~12. ~~Interest~~ onSegment the subordinated notes is payable at an annual rate of 10% on May 1 and November 1 of each year, beginning on November 1, 2004. The subordinated notes mature in 2012 and are guaranteed by each of the Company’s existing domestic restricted subsidiaries. The subordinated notes contain customary covenants and events of default, including covenants that limit our ability to incur debt, pay dividends and make investments.Information

Senior Credit Facility: The Company entered into a new senior credit facility, which includes a $545 million amortizing term loan maturing seven years after closing and an $80.0 million revolving credit facility that will terminate five years after closing. The revolving credit facility and/or the term loan facility is expected to be subject to a potential, although uncommitted, increase of up to an aggregate of $50.0 million at our request at any time prior to maturity. In addition, although uncommitted, a foreign currency sub-facility may be made available to one or more of the Company’s restricted foreign subsidiaries in an aggregate principal amount of up to the U.S. dollar equivalent of $30.0 million. This increase and the additional foreign currency sub-facility will only be available if one or more financial institutions agree to provide them.

	Three months ended March 31,								Six months ended March 31,
	2007				2006				2007				2006
	(dollars in millions)
Net sales
Mueller Co.		$	200.3			$	193.3			$	367.4			$	373.5
U.S. Pipe		133.3				119.7				250.7				290.8
Anvil		134.3				127.4				267.9				260.2
Consolidating eliminations		(8.2		)		(5.5		)		(14.4		)		(9.2		)
Consolidated		$	459.7			$	434.9			$	871.6			$	915.3
Income (loss) from operations
Mueller Co.		$	42.8			$	39.2			$	78.5			$	35.4
U.S. Pipe		6.8				(7.2		)		14.0				(35.0		)
Anvil		13.6				5.0				26.6				3.5
Corporate expense(1)		(10.3		)		(8.9		)		(17.2		)		(15.3		)
Consolidating eliminations		—				(0.6		)		—				(0.6		)
Consolidated		$	52.9			$	27.5			$	101.9			$	(12.0	)
Depreciation and amortization expense
Mueller Co.		$	13.0			$	12.9			$	25.7			$	24.9
U.S. Pipe		6.2				5.3				11.7				11.6
Anvil		5.7				5.9				11.6				11.3
Corporate		0.2				0.1				0.5				0.2
Consolidated		$	25.1			$	24.2			$	49.5			$	48.0
Capital expenditures
Mueller Co.		$	5.7			$	8.4			$	12.4			$	14.4
U.S. Pipe		12.1				3.1				19.9				10.5
Anvil		3.7				3.4				8.8				5.9
Corporate		1.0				—				1.4				0.1
Consolidated		$	22.5			$	14.9			$	42.5			$	30.9

~~Borrowings under the senior credit facility are generally expected to~~(1) Includes ~~bear~~certain ~~interest~~expenses ~~based~~not onallocated a margin over, at the Company’s option, the base rate or LIBOR. The applicable margin is 3.25% over LIBOR and 2.00% over the base rate for borrowings under the revolving senior credit facility and 3.25% over LIBOR and 2.00% over the base rate for term loans. Beginning at a time set forth in the senior credit facility, the applicable margin for revolving credit loans varies based upon the ratio of consolidated debt to ~~EBITDA, as defined in the senior credit facility~~segments. The Company’s obligations under the senior credit facility are guaranteed by our parent company and all of the existing or future domestic restricted subsidiaries and is secured by substantially all of the assets of the Company and the subsidiary guarantors, including a pledge of the capital stock of all the existing and future domestic subsidiaries, a pledge of no more than 65.0% of the voting stock of any foreign subsidiary, a pledge of all intercompany indebtedness in favor of the Company and its domestic restricted subsidiaries, and a pledge of the Company’s capital stock by its parent company. The senior credit facility contains customary covenants, including covenants that limit the ability to incur debt and liens, pay dividends and make investments and capital expenditures, and events of default.

~~The~~Note ~~net proceeds of these financings have been used to refinance the Company’s existing credit facility borrowings, pay a dividend to the Company’s parent company and pay related fees and expenses~~13. ~~The Company’s parent company~~ ~~has~~Commitments ~~used the proceeds of the offering to redeem its outstanding preferred stock~~ and ~~to pay a dividend to its equityholders.~~Contingencies

16Income Tax Litigation

AtA ~~April 29,~~dispute ~~2004,~~exists ~~Mueller~~with ~~Holdings~~regard to ~~(N.A.),~~federal ~~Inc.,~~income ~~the~~taxes ~~parent company~~for offiscal ~~Mueller~~years ~~Group,~~1980 ~~Inc.~~through ~~issued~~1994 ~~223,000~~allegedly ~~units,~~owed ~~each~~by the ~~consisting~~Walter ofconsolidated $1group,~~000 principal~~ ~~amount~~which atincluded ~~maturity~~the ofU.S. ~~143/4%~~Pipe ~~Senior~~segment ~~Discount~~during ~~Notes~~these ~~due~~periods. ~~2014~~It ~~and~~is ~~one~~estimated ~~warrant~~that tothe ~~purchase~~amount ~~109.80889~~of ~~shares~~tax ofpresently ~~Class~~claimed Aby ~~common~~the ~~stock,~~Internal ~~par~~Revenue ~~value~~Service is approximately $034.010 ~~per~~million ~~share,~~for ofissues ~~Mueller~~currently ~~Holdings~~in dispute ~~(N.A.),~~in ~~Inc.~~bankruptcy ~~After~~court ~~the separation~~for ~~date,~~matters unrelated to the ~~notes~~Company. ~~and~~This ~~the~~amount is ~~warrants~~subject ~~are~~to ~~separately~~interest ~~transferable~~and penalties. ~~The~~ ~~notes~~In ~~are~~addition, ~~Holdings’~~the ~~senior~~IRS ~~unsecured~~has issued a Notice ~~obligations~~of ~~and~~Proposed ~~rank~~Deficiency ~~equally~~assessing ~~with~~additional ~~all~~tax of ~~its~~$80.4 ~~existing~~million ~~and~~for ~~future~~the ~~senior~~fiscal ~~indebtedness.~~years ~~The~~ended ~~notes~~May 31, ~~are~~2000, ~~effectively~~December 31, ~~subordinated~~2000 toand ~~all~~December 31, 2001. ofAs ~~its~~a ~~existing~~matter ~~and future~~of ~~secured~~law, ~~debt~~the ~~and~~Company tois ~~all~~jointly ~~indebtedness~~ and ~~other~~severally ~~liabilities~~liable offor ~~its~~any ~~subsidiaries~~final tax determination. However, ~~including~~Walter management has indicated to the Company. ~~Holdings~~that ~~used~~they ~~the~~believe ~~proceeds~~that toWalter’s ~~pay~~tax anfiling ~~additional~~positions ~~dividend~~have tosubstantial ~~its~~merit and ~~equityholders.~~that they intend to defend vigorously any claims

~~At June 26, 2004, the Company was in compliance with all restrictive covenants.~~14

~~Use~~asserted. Walter management has further indicated to the Company that Walter has an accrual that they believe to be sufficient to cover the estimated probable loss, including interest and penalties. The Company has concluded the risk of loss ~~proceeds~~to ~~from~~the ~~recapitalization~~Company is not probable and ~~refinancing~~accordingly, no liability has been recorded in the Company’s condensed consolidated financial statements.

~~The Company used the net proceeds from these offerings and the credit~~Environmental facility borrowings to repay all existing loans under its existing credit facility together with accrued interest and a 1.0% prepayment premium thereon and to pay a dividend to our parent company, which was used to (i) redeem the preferred stock at a price equal to liquidation preference ($105.5 million at April 23, 2004) plus a 1.0% premium thereon, (ii) pay a dividend to its common stockholders of $1.91 per share, or approximately $386.6 million in the aggregate and (iii) make a payment to its employee optionholders of the excess of the per share dividend to our common stockholders over the exercise price of their options, or $12.6 million in the aggregate. Mueller Group retained approximately $10.0 million of proceeds from its offerings to be used for general corporate purposes.Matters

~~Senior~~The ~~Subordinated~~Company ~~Debt~~is ~~-The~~subject ~~senior~~to a wide variety of laws and ~~subordinated~~regulations ~~debt~~concerning atthe ~~September 30~~protection of the environment, ~~2003~~both ~~consisted~~with respect to the construction and operation of ~~promissory~~many ~~notes~~of its plants and with respect to aremediating ~~principal~~environmental ~~amount~~conditions ofthat ~~$50~~may exist at its own and other properties.~~0 million.~~ AThe ~~majority~~Company ofbelieves ~~these~~that ~~notes~~it ~~were~~is ~~owned~~in substantial compliance with orfederal, ~~held~~state byand anlocal ~~owner~~environmental oflaws ~~Holdings~~and regulations. ~~These~~The ~~notes~~Company accrues ~~accrued~~for ~~interest~~environmental atexpenses aresulting ~~rate~~from ofexisting conditions that ~~14.0%~~relate ~~per~~to ~~annum,~~past ~~payable~~operations ~~semi-annually~~when the costs are probable and reasonably estimable.

OnSolutia ~~November~~Inc. and Pharmacia Corporation filed suit against U.S. Pipe and Walter on January 145, 2003, ~~the~~for ~~Company~~contribution ~~redeemed~~and cost recovery by Solutia with respect to costs incurred and to be incurred by Solutia in performing remediation of polychlorinated biphenyls (PCBs) and heavy metals mandated by the ~~notes~~Environmental Protection Agency in ~~full~~Anniston, Alabama ~~along~~under an administrative consent order negotiated with ~~accrued~~the ~~and~~EPA ~~unpaid~~(an ~~interest~~“ACO”). ofThe ACO $0provides protection against contribution claims by third parties, such as Solutia.~~3 million~~ ~~and~~The ~~early~~Magistrate has entered an Order staying discovery in this matter ~~redemption~~but ~~penalty~~has ofallowed ~~$7.0 million.~~Solutia ~~Additionally,~~to $0proceed with “on-site” sampling discovery.~~4 million~~ Management believes that the likelihood of ~~deferred~~ ~~financing~~liability ~~fees~~in ~~were~~the ~~written~~contribution litigation ~~off~~is remote.

~~Interest~~The ~~Rate~~Company ~~Swap~~and -its ~~The~~U.S. ~~Company~~Pipe ~~has~~subsidiary ~~entered~~have been ~~into~~named ~~interest~~in ~~rate~~a ~~swap~~purported ~~agreements~~civil inclass ~~order~~action tocase ~~reduce~~originally ~~interest~~filed ~~rate~~on ~~risks and~~April 8, ~~manage~~2005 ~~interest~~in ~~expense.~~the AsCircuit Court of ~~June 26~~Calhoun County, ~~2004~~Alabama, aand ~~notional~~removed ~~principal~~to ~~amount~~the U.S. District Court for the Northern District of ~~$150~~Alabama under the Class ~~million~~Action Fairness inAct. ~~swap~~The ~~agreements~~putative isplaintiffs ~~still~~in ~~outstanding~~the ~~and~~case ~~scheduled~~filed toan amended complaint ~~mature~~with ~~between~~the ~~July 2004~~U.S. ~~and~~District ~~July~~Court on December ~~2005~~15, 2006. The ~~swap~~case ~~agreements~~was ~~effectively~~filed ~~convert~~against ~~floating-rate~~U.S. ~~debt~~Pipe ~~into~~and ~~fixed-rate~~other ~~debt~~foundries ~~and~~in ~~carry~~the anAnniston, ~~average~~Alabama ~~fixed~~area alleging ~~interest~~state ~~rate~~law oftort ~~7.55%~~claims at(negligence, ~~June 26~~failure to warn, ~~2004.~~wantonness, ~~Interest~~nuisance, trespass ~~differentials~~and tooutrage) bearising ~~paid or~~from ~~received~~creation ~~because~~and disposal of ~~swap~~“foundry ~~agreements~~sand” alleged ~~are~~to ~~reflected~~contain asharmful anlevels ~~adjustment~~of ~~to interest~~PCBs ~~expense~~and ~~over~~other ~~the~~toxins, ~~related~~including ~~debt~~arsenic, cadmium, ~~period~~chromium, lead and zinc. ~~While~~The ~~the~~plaintiffs ~~Company~~are isseeking ~~exposed~~damages tofor real ~~credit~~and ~~loss~~personal onproperty ~~its~~damage ~~interest~~and ~~rate~~for ~~swaps~~other unspecified personal injury. Management believes this matter is still in ~~the~~early ~~event~~stages of ~~non-performance~~litigation byand ~~the~~no ~~counterparties~~substantial todiscovery ~~such~~has ~~swaps~~taken place. In addition, management believes ~~such~~that both ~~nonperformance~~procedural isand substantive defenses would likely be available should this ~~unlikely~~class action be allowed to ~~occur~~proceed. ~~given~~At ~~the~~present, ~~financial~~management ~~resources~~has ofno reasonable basis to form a view with respect to the ~~counterparties~~probability of liability in this matter.

~~Distributions~~Although tothe ~~our Parent~~ Company ~~– Our~~now ~~parent~~produces ~~company~~a ~~has~~small amount of no-lead ~~material~~brass ~~assets~~products, ~~other~~most ~~than~~of ~~its~~the ~~ownership~~Company’s ofbrass valve ~~our~~products ~~capital~~contain approximately 5.0% lead. Environmental advocacy groups, ~~stock~~relying ~~and~~on ~~accordingly~~standards ~~depends~~established ~~upon~~by ~~distributions~~California’s ~~from~~Proposition us65, are seeking to eliminate ~~satisfy~~or ~~its~~reduce ~~cash~~the content of lead in water infrastructure products ~~needs~~offered for sale in California. ~~Our~~ ~~parent~~Some ~~company~~of the Company’s ~~principal~~subsidiaries have entered ~~cash~~into ~~needs~~settlement ~~will~~agreements bewith ~~debt~~these ~~service~~environmental onadvocacy ~~its~~groups ~~Senior~~to ~~Discount~~modify products ~~Notes~~or ~~due~~offer ~~2014~~substitutes for sale in California. ~~The~~ ~~parent~~Legislation ~~company~~to substantially ~~notes~~restrict dolead ~~not~~content ~~require~~in ~~cash~~water infrastructure products has been ~~interest~~introduced ~~payments~~in ~~until~~the ~~2009~~United ~~and~~States ~~contain~~Congress. ~~restrictive~~Congress ~~covenants~~or ~~that~~state ~~will,~~jurisdictions ~~among~~ other than ~~things,~~California ~~limit~~may ~~the~~enact ~~ability~~legislation ofsimilar ~~Mueller~~to ~~Holdings~~Proposition ~~and~~65 ~~its~~to ~~subsidiaries~~restrict the ~~(including~~content ~~us)~~of lead in water products, which could require the Company to incur additional ~~debt,~~capital ~~pay~~expenditures ~~dividends~~to ~~and~~modify ~~make~~production. ~~investments~~The Company incurred approximately $8. ~~Neither~~0 wemillion ~~nor~~in ~~any~~capital ofspending ~~our~~during ~~subsidiaries~~the year ended September 30, ~~guarantee~~2006 to implement a no-lead brass production line. Also, the ~~parent~~Company ~~company~~began consolidating ~~notes~~its two existing brass foundries into one facility, incurring $5.8 million and $2.0 million in capital spending during the year ended September 30, ~~Mueller~~2006 ~~Holdings~~and the six months ended March 31, ~~however~~2007, isrespectively. aThe Company expects to complete the foundry consolidation project during 2007 with total capital spending of approximately $11.0 million.

1715

~~holding~~Commitments ~~company~~ and ~~its ability to pay interest on the parent company~~ notes will be dependent upon the receipt of dividends from its subsidiaries. We are currently Mueller Holdings’ only direct subsidiary. However, the terms of our borrowing arrangements significantly restrict our ability to pay dividends to Mueller Holdings.Contingencies—Other

7As part of the acquisition on January 15, 2004 of the business of Star Pipe, Inc. ~~Shareholders’~~(“Star”), Anvil ~~Equity~~has agreed to a future payment to be made to the sellers of Star to the extent that the gross profit of the acquired business exceeds a targeted gross profit. The maximum potential payment amount is $23.0 million. The Company is in the process of determining the final settlement and currently estimates the payment to be approximately $3.0 million for the payment period that began February 1, 2004 and ended January 31, 2007. The Company will record the liability for such payment upon the resolution of the contingency with a corresponding increase to goodwill.

ANote ~~summary~~14. ~~of the changes in the components of Shareholders’ Equity~~Subsequent ~~since September 30, 2003 is as follows:~~Events

	Add’l Paid-In Capital			Retained Deficit			Accum. Other Compre- hensive. Loss			Total
	(dollars in millions)
Balance at September 30, 2003	$	145.3		$	(11.3	)	$	(20.5	)	$	113.5
Employee stock compensation	15.8			—			—			15.8
Accretion of redeemable preferred stock	(9.9		)	—			—			(9.9		)
Retirement of preferred stock by Holdings (1)	106.5			—			—			106.5
Dividends paid to parent company	(257.7		)	(142.1		)	—			(399.8		)
Net income	—			20.6			—			20.6
Change in foreign currency translation adjustment	—			—			0.2			0.2
Additional minimum pension liability, net of tax	—			—			(0.4		)	(0.4		)
Balance at June 26, 2004	$	—		$	(132.8	)	$	(20.7	)	$	(153.5	)

On May 1, 2007, the Company announced a cash tender offer to repurchase all of the outstanding Senior Subordinated Notes and consent solicitation to amend the related indentures in connection with the proposed refinancing of the 2005 Mueller Credit Agreement and issuance of $350 million of new Senior Surbordinated Notes.

~~(1)~~Note ~~Upon retirement of the mandatorily redeemable preferred stock with~~15. ~~proceeds~~Consolidating ofGuarantor ~~the~~and ~~notes by Holdings, the redemption was accounted for as a contribution to Additional Paid~~Non-InGuarantor ~~Capital.~~Financial Information

8The following information is included as a result of the guarantee by certain of the Company’s wholly owned U.S. ~~Redeemable~~subsidiaries ~~Preferred~~(“Guarantor Companies”) ~~Stock~~of the senior subordinated notes issued by Predecessor Mueller Group prior to the Acquisition on October 3, 2005 that have continued to be liabilities of the Company subsequent to the Acquisition. None of the Company’s other subsidiaries guarantee the debt. Each of the guarantees is joint and several and full and unconditional. “Mueller Group, LLC” (“Issuer”) includes the consolidated financial results of Mueller Group, LLC with all of its wholly-owned subsidiaries accounted for under the equity method.

~~Push~~Prior ~~Down~~to ~~Accounting~~the ofAcquisition ~~Redeemable~~on ~~Preferred~~October 3, 2005, U.S. ~~Stock~~Pipe ~~-Holdings~~was ~~used~~not a ~~portion~~Guarantor ~~of the dividend paid by the~~ Company ~~from the proceeds~~ of the ~~Company’s~~senior ~~offering~~subordinated ofnotes ~~Second Priority~~issued ~~Senior Secured Floating Rate Notes due 2011 and Senior Subordinated~~by ~~Notes~~Predecessor ~~due~~Mueller ~~2012~~Group. inThe ~~April 2004~~Consolidating toStatements ~~redeem~~of ~~Holdings’~~Operations ~~preferred~~for ~~stock described~~the ~~below~~three inand ~~full.~~six Asmonth aperiods ~~result~~ended March 31, ~~the~~2007 ~~Company~~and ~~has determined that~~ the ~~effect of using~~Consolidating ~~the~~Statement ~~proceeds~~ of ~~its~~Cash ~~current~~Flows ~~debt~~for ~~offering~~the tosix ~~retire~~months ~~Mueller~~ended ~~Holdings’ mandatorily~~March 31, ~~redeemable~~2007 ~~preferred~~and ~~stock required~~ the ~~Company to retroactively~~Consolidating ~~“push~~Balance ~~down”~~Sheet ~~the~~as ~~redeemable~~of ~~preferred~~March 31, ~~stock~~2007 ~~and~~ reflect itthe asresults anof ~~obligation in~~ the Company~~’s September 30~~, ~~2003 balance sheet in compliance with the~~ ~~provisions~~including ofU.S. ~~Staff Accounting Bulletin 54 (Topic 5-J)~~Pipe.

~~Redeemable Preferred Stock -In connection with the Company’s formation in 1999, Holdings issued two million shares of~~ 16% Senior Exchangeable Preferred Stock, due August 15, 2010, par value $0.01 per share (“preferred stock”). The preferred stock bears dividends at a rate of 16% per annum, which dividends will accrue or be payable in cash, at Holdings’ option until August 2006 and must be paid in cash thereafter when and if declared by Holdings’ board out of funds legally available therefor. The liquidation value on any future date is the sum of $25 per share plus the dividend accretion since issuance.

~~Upon~~Consolidating Statement ~~a change~~ of ~~control~~Operations For orMueller ~~upon~~Group, ~~the~~LLC For ~~payment by~~ the ~~Holdings~~Three ofMonths ~~certain types~~Ended ofMarch ~~restricted~~31, 2007

	Issuer				Guarantor Companies(1)				Non- Guarantor Companies				Consolidating Eliminating				Consolidated
	(dollars in millions)
Net sales		$	—			$	416.2			$	43.5			$	—			$	459.7
Cost of sales		—				304.4				37.5				—				341.9
Gross profit		—				111.8				6.0				—				117.8
Selling, general and administrative		—				57.9				7.0				—				64.9
Related party corporate charges		—				—				—				—				—
Facility rationalization, restructuring and related costs		—				—				—				—				—
Income (loss) from operations		—				53.9				(1.0		)		—				52.9
Interest expense, net of interest income		18.0				—				(0.1		)		—				17.9
Income (loss) before income tax expense (benefit)		(18.0		)		53.9				(0.9		)		—				35.0
Income tax expense (benefit)		(7.5		)		22.6				(0.3		)		—				14.8
Equity income from subsidiaries		30.7				(0.6		)		—				(30.1		)		—
Net income		$	20.2			$	30.7			$	(0.6	)		$	(30.1	)		$	20.2

~~payments, including payment of dividends on the common stock of~~For ~~Holdings,~~ the ~~preferred~~Six ~~stock~~Months isEnded ~~subject to redemption at the holder’s option at 101% of its liquidation preference. Additionally~~March 31, the stock is subject to mandatory redemption for cash in August 2010 out of funds legally available therefor. The Company’s credit facility imposes restrictions upon the Company’s ability to make distributions to Holdings. A failure by Holdings to pay dividends or redeem such stock when required or a breach of certain covenants would entitle the holders to two directors on Holdings’ board.2007

Prior to August 15, 2004, Holdings may redeem the preferred stock at 114% of liquidation value. On or after August 15, 2004, Holdings may at its option redeem the preferred stock at the following liquidation values:

	Issuer				Guarantor Companies(1)				Non- Guarantor Companies				Consolidating Eliminating				Consolidated
	(dollars in millions)
Net sales		$	—			$	782.9			$	88.7			$	—			$	871.6
Cost of sales		—				573.5				72.6				—				646.1
Gross profit		—				209.4				16.1				—				225.5
Selling, general and administrative		—				108.3				13.7				—				122.0
Related party corporate charges		—				1.6				—				—				1.6
Facility rationalization, restructuring and related costs		—				—				—				—				—
Income (loss) from operations		—				99.5				2.4				—				101.9
Interest expense, net of interest income		35.7				(0.3		)		(0.2		)		—				35.2
Income (loss) before income tax expense (benefit)		(35.7		)		99.8				2.6				—				66.7
Income tax expense (benefit)		(14.5		)		40.5				1.1				—				27.1
Equity income from subsidiaries		60.8				1.5				—				(62.3		)		—
Net income		$	39.6			$	60.8			$	1.5			$	(62.3	)		$	39.6

Year beginning August 15,	Percentage liquidation value
2004	108.000	%
2005	105.333	%
2006	102.667	%
2007 and thereafter	100.000	%

~~The~~Consolidating Balance ~~preferred~~Sheet For ~~stock,~~Mueller ~~in certain circumstances~~Group, ~~is exchangeable at the~~LLC ~~option~~March 31, ~~of Holdings for 16% Senior Subordinated Exchange Debentures due 2010.~~2007

The accretion of dividends of $1.9 million and $9.9 million for the three months and the nine months ended June 26, 2004, respectively, was accounted for as a non-cash transaction. The accretion reduces the net income available to common shareholders. As described in Note 6, the preferred stock was redeemed by Holdings on April 23, 2004.

	Issuer				Guarantor Companies(1)				Non- Guarantor Companies				Consolidating Eliminations				Consolidated
	(dollars in millions)
Assets
Cash and cash equivalents		$	70.9			$	(7.2	)		$	3.9			$	—			$	67.6
Receivables, net		—				244.4				29.9				—				274.3
Inventories		—				443.6				67.2				—				510.8
Deferred income taxes		—				42.4				—				—				42.4
Prepaid expenses		—				33.5				2.2				—				35.7
Total current assets		70.9				756.7				103.2				—				930.8
Property, plant and equipment, net		3.0				325.1				15.6				—				343.7
Deferred financing fees and other long-term assets		13.3				0.3				0.1				—				13.7
Deferred income taxes		—				4.4				(4.4		)		—				—
Identifiable intangibles, net		—				834.0				—				—				834.0
Goodwill		—				724.2				—				—				724.2
Investment in subsidiaries		1,439.7				66.0				—				(1,505.7		)		—
Total assets		$	1,526.9			$	2,710.7			$	114.5			$	(1,505.7	)		$	2,846.4
Liabilities
Accounts payable		$	—			$	106.6			$	8.8			$	—			$	115.4
Current portion of long-term debt		8.0				0.9				—				—				8.9
Deferred income taxes		—				—				—				—				—
Accrued expenses and other current liabilities		13.8				85.4				(2.2		)		—				97.0
Total current liabilities		21.8				192.9				6.6				—				221.3
Intercompany accounts		(707.9		)		665.1				42.8				—				—
Long-term debt		995.9				1.0				—				—				996.9
Accrued pension liability		—				46.6				(0.9		)		—				45.7
Accumulated postretirement benefits obligation		—				44.7				—				—				44.7
Deferred income taxes		—				299.8				—				—				299.8
Other long-term liabilities		—				20.9				—				—				20.9
Total liabilities		309.8				1,271.0				48.5				—				1,629.3
Shareholder’s equity (deficit)
Total shareholder’s equity (deficit)		1,217.1				1,439.7				66.0				(1,505.7		)		1,217.1
Total liabilities and shareholder’s equity (deficit)		$	1,526.9			$	2,710.7			$	114.5			$	(1,505.7	)		$	2,846.4

~~9. Derivative Instruments~~18

~~Changes~~Consolidating Statement ~~in the fair value~~ of ~~derivatives~~Cash ~~are recorded each period in~~Flows ~~earnings~~For orMueller ~~Accumulated Other Comprehensive Income (Loss)~~Group, ~~depending on whether~~LLC aFor ~~derivative is designated and effective as part of a hedge transaction and, if it is,~~ the ~~type~~Six ofMonths ~~hedge~~Ended transaction. Any gains and losses on derivative instruments that are reported in Accumulated Other Comprehensive Income (Loss) are included in earnings in the periods in which earnings are affected by the hedged item. All gains or losses on interest rate swaps since the adoption of SFAS No.March ~~133~~31, ~~have been included in earnings and have not been included in Accumulated Other Comprehensive Income (Loss) as the Company has not treated these instruments as hedges under SFAS 133.~~2007

For a derivative to qualify as a hedge at inception and throughout the hedge period, the Company must formally document the nature and relationships between the hedging instruments and hedged items, as well as its risk-management objectives, strategies for undertaking the various hedge transactions and method of assessing hedge effectiveness. Any financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period.

	Issuer			Guarantor Companies(1)				Non- Guarantor Companies				Consolidating Eliminations		Consolidated
	(dollars in millions)
Net cash provided by (used in) operating activities	$	(26.1	)		$	88.6			$	(5.1	)		—		$	57.4
Cash flows from investing activities
Capital expenditures	—				(40.8		)		(1.7		)		—		(42.5		)
Acquisition of business, net of cash acquired	—				(22.5		)		—				—		(22.5		)
Net cash used investing activities	—				(63.3		)		(1.7		)		—		(65.0		)
Cash flows from financing activities
Book cash overdrafts	—				3.9				—				—		3.9
Intercompany change	25.2				(25.3		)		0.1				—		—
Payment of long-term debt	(4.3		)		—				—				—		(4.3		)
Dividend paid to parent	(4.0		)		—				—				—		(4.0		)
Net cash provided by (used in) financing activities	16.9				(21.4		)		0.1				—		(4.4		)
Effect of exchange rate changes on cash	—				—				0.5				—		0.5
Increase in cash	(9.2		)		3.9				(6.2		)		—		(11.5		)
Cash and cash equivalents
Beginning of period	80.1				(11.1		)		10.1				—		79.1
End of period	$	70.9			$	(7.2	)		$	3.9			—		$	67.6

~~Interest~~(1) Guarantors ~~Rate~~include ~~Swaps -At June 26, 2004 and September 30, 2003~~ the ~~fair~~accounts ~~value~~ of ~~interest rate swaps was a liability~~the offollowing ~~$6.8 million~~direct and ~~$17.2 million,~~indirect ~~respectively,~~subsidiaries ~~and~~of ~~has~~Mueller ~~been recorded in Other Long-Term Liabilities on the Consolidated Balance Sheets.~~Group, LLC:

19Name State of Incorporation AnvilStar, LLC Delaware Anvil International, Inc. Delaware Henry Pratt Company Delaware Henry Pratt International Ltd Delaware Hersey Meters Co. Delaware Hydro Gate Acquisition Corp. Delaware James Jones Company California J.B. Smith Mfg. Co. Oklahoma Mueller Co. Illinois Mueller Service Co. Delaware Milliken Acquisition Corp. Delaware Mueller International, Inc. Delaware Mueller International, LLC Delaware Mueller International Finance, Inc. Delaware Mueller International Finance, LLC Delaware United States Pipe and Foundry Company, LLC Alabama

~~10. Commitments and Contingencies~~19

~~The~~ITEM ~~Company~~2. isMANAGEMENT’S ~~subject~~DISCUSSION toAND ~~retention~~ANALYSIS onOF ~~certain~~FINANCIAL ~~contracts,~~CONDITION ~~with~~AND ~~the retention~~RESULTS ~~portion~~OF ~~of the amount receivable paid upon project completion.~~OPERATIONS

InThe following discussion should be read in conjunction with the ~~normal~~audited ~~course~~consolidated offinancial ~~business,~~statements and notes thereto that appear in the Company’s ~~incurs~~Annual ~~claims~~Report filed on Form 10-K and with ~~respect~~the tocondensed ~~product~~consolidated ~~liability.~~financial ~~Such~~statements ~~claims~~that ~~are~~appear ~~insured~~elsewhere upin tothis quarterly report. This report contains certain ~~limits, with~~statements ~~such~~that ~~policies~~may ~~containing~~be ~~certain~~deemed ~~self~~“forward-~~insured~~looking statements” ~~retention~~within ~~limits~~the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. ~~Prior~~All tostatements, other than statements of historical ~~August 1999~~fact, ~~product~~that ~~liability~~address ~~and~~activities, ~~environmental~~events ~~claims~~or developments that ~~occurred~~we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain ~~subject~~assumptions toand ~~indemnification~~assessments made by ~~Tyco~~our management in light of their experience and their perception of historical trends, ~~based~~current onconditions and expected future developments. Actual results and the ~~provisions~~timing of events may differ significantly from those projected in such forward-looking statements due to a number of factors, including those set forth in the ~~acquisition~~section entitled “Risk ~~agreement~~Factors” in Item 1A of Part II of this Report.

~~Workers~~Mueller ~~compensation~~Group, ~~claims~~LLC ~~are self-insured by~~ (the “Company”) is toa ~~the extent~~wholly-owned subsidiary of ~~stop~~Mueller ~~loss~~Water ~~coverage~~Products, Inc. ~~per~~(“Mueller Water”), ~~claim.~~a ~~The~~Delaware ~~claim~~corporation. ~~liability~~Mueller Water is ~~recorded~~the ~~based~~surviving corporation of onthe anmerger ~~actuarially~~on ~~determined~~February 2, ~~estimate~~2006 of ~~the~~Mueller ~~present~~Water ~~value~~Products, ofLLC ~~the obligation~~(Commission ~~outstanding~~File atNumber: ~~year~~333-~~end~~116590) and Mueller Water Products Co-Issuer, Inc. with ~~The~~and ~~recorded~~into ~~reserve~~Mueller atHolding ~~September~~Company, 30Inc., ~~2003~~a ~~and~~ Delaware corporation. On June 261, 2006, ~~2004~~Mueller ~~was~~Water ~~approximately~~completed ~~$7.2~~its initial public offering of its Series ~~million~~A common ~~and~~stock $8(NYSE: MWA).0 On December ~~million~~14, 2006, Walter Industries, Inc. ~~respectively~~(“Walter”), a diversified New York Stock Exchange traded company (NYSE: WLT), distributed all of the Company’s outstanding Series B common stock (NYSE: MWA.B) to its shareholders.

~~The~~On ~~Company~~October 3, is2005, through ~~subject~~a toseries ~~warranty claims related to sales~~ of ~~water meters~~transactions ~~that~~(the ~~can~~“Acquisition”), beWalter, ~~read~~through ~~remotely by hand~~a wholly-~~held~~owned orsubsidiary, ~~drive-by~~acquired ~~electronic~~all ~~readers. Radio~~outstanding ~~transmitters~~shares ~~purchased from one~~ of ~~its~~capital ~~third~~stock ~~party vendors have~~of ~~demonstrated a high failure rate and actions to correct~~ the ~~issue~~Company’s ~~have~~parent, ~~been only~~Mueller ~~partially~~Water ~~effective~~Products, Inc. To(“Predecessor ~~date~~Mueller”), ~~the third party vendor has taken financial~~ ~~responsibility~~which ~~with~~immediately ~~respect~~was toconverted ~~this~~into ~~matter~~Mueller ~~and~~Water ~~the Company has incurred insignificant costs. However~~Products, LLC, ~~should the third party vendor be unable to~~a ~~correct~~Delaware ~~the~~limited ~~issue~~liability orcompany beand ~~unable~~contributed toUnited ~~meet~~States ~~its~~Pipe ~~warranty obligations with respect to~~and ~~this~~Foundry ~~matter, the~~ Company ~~may find it necessary to replace the third party vendors’ radio transmitters~~, ~~which is not expected to exceed $3~~ ~~million~~LLC, (“U. ~~The~~S. ~~Company~~Pipe”) ~~has estimated that it will incur costs of approximately $1 million related~~ to the ~~warranty~~acquired ~~claims~~company. ~~The Company has accrued $1 million as of June 26, 2004.~~

~~Certain~~In ofthis ~~our~~report, ~~products~~each ~~contain~~of the ~~lead.~~terms ~~Environmental~~“Mueller ~~advocacy groups~~Water, ~~relying~~” onthe ~~standards~~“Company,” ~~established by California’s Proposition 65~~“we,” ~~are~~“us” ~~seeking to eliminate~~ or ~~reduce the content of lead in some of~~ “our” ~~products~~refers ~~offered~~to ~~for~~Mueller ~~sale~~Water ~~in California~~Products, Inc. Inand ~~certain~~its ~~cases~~subsidiaries, weexcept ~~have~~where ~~entered~~the ~~into~~context ~~settlement~~makes ~~agreements~~clear ~~with~~that ~~these~~the ~~environmental~~reference ~~advocacy~~is ~~groups~~only to ~~modify~~Mueller ~~our~~Water ~~products or offer substitutes~~Products, Inc. ~~The Company may incur additional costs to implement the provisions under these settlement agreements. Further~~itself, ~~similar issues may be~~ ~~raised~~and byis ~~other~~not ~~advocacy~~inclusive ~~groups~~of inits ~~other jurisdictions under Proposition 65~~subsidiaries.

~~The~~Except ~~Company~~as ~~expects~~otherwise tonoted, we ~~incur~~present ~~costs~~all atfinancial ~~its steel~~ and ~~iron~~operating ~~foundries~~data ~~to comply~~on ~~with~~a ~~the~~fiscal ~~United~~year ~~States~~and ~~Environmental~~fiscal ~~Protection Agency’s National Emissions~~quarter ~~Standards~~basis. ~~for~~Our ~~Hazardous~~fiscal ~~Air~~year ~~Pollutants~~ends ~~which~~on ~~were issued April~~September 2230, ~~2004. The~~ ~~Company~~and isour insecond ~~the~~fiscal ~~process of~~quarter ~~performing~~ends ~~an analysis to assess the impact of these standards~~ on ~~the financial results of the Company~~March 31.

~~James~~Abbreviated ~~Jones~~Management’s ~~Company~~Narrative and its former parent company are defendants in a false claims lawsuit in which a former James Jones Company employee is suing on behalf of cities, water districts and municipalities. The employee alleges that the defendants sold allegedly non-conforming public water system parts to various government entities. The lawsuit seeks consequential damages, penalties and punitive damages. Mueller Co., which had also been named as a defendant, brought a summary judgment motion and was dismissed from this litigation in January 2004. Any liability associated with the lawsuit is covered by an indemnification from our previous owner.Analysis

OnThe Company’s net income for the three months ended March 31, ~~2004~~2007 was $20.2 million, ~~Anvil~~which compares ~~International~~to ~~entered~~$1.0 ~~into~~million ain ~~consent~~the prior year period. The prior year period ~~order~~includes ~~with~~U.S. Pipe Chattanooga plant closure costs of $6.7 million, pre-tax; expenses related to valuing the ~~Georgia~~acquired ~~Department~~inventory of ~~Natural~~Mueller ~~Resources~~Co. ~~regarding~~and Anvil ~~various~~segments at fair value at $12.0 million, pre-tax; and reduced interest ~~alleged~~expense ~~hazardous~~from ~~waste~~using ~~violations~~the net cash proceeds received from the initial public offering in June 2006. In addition, increased net income for the quarter was primarily driven by higher selling prices across all segments, as well as achievements resulting from the synergy plan, improved product mix, and cost reduction initiatives at ~~Anvil’s~~U.S. Pipe, but these items were partially offset by lower volumes. During the past twelve months, the Company has implemented selling price increases in response to higher raw material costs, most notably associated with both brass ingot, which is comprised primarily of copper, and scrap iron. The synergy plan, which includes certain plant closures and increased benefits from combining purchasing and commercial selling efforts of the segments, was started in January 2006. Synergy plan results for the current quarter include approximately $6.0 million of additional realized benefits compared to the prior year period. The lower

~~formerly operated Statesboro, Georgia site. Pursuant to the consent~~volumes ~~order,~~principally ~~Anvil~~relate ~~has agreed~~ to ~~pay~~higher amargin ~~settlement~~water ~~amount~~infrastructure ~~of $100~~products,~~000,~~ ~~comprised~~such ~~of a~~as ~~$50,000~~hydrants ~~monetary~~and ~~fine~~iron ~~and~~gate ~~$50~~valves,~~000~~ ~~towards~~as a ~~supplemental~~result ~~environmental~~of ~~project. Anvil~~softness ~~has~~in ~~also agreed to perform various investigatory and remedial actions at~~ the ~~site and its landfill. While the ultimate investigatory and remedial costs~~residential ~~are~~construction ~~currently unknown, the total costs are estimated to be between $0~~market.~~3 million and $0.5 million. The Company has accrued $0.3 million as of June 26, 2004.~~

~~In the opinion of management, accruals associated with contingencies~~Management ~~incurred~~has inidentified the ~~normal~~following ~~course~~significant ofdevelopments, ~~business~~trends ~~are~~and ~~sufficient.~~factors ~~Resolution of existing~~that ~~contingencies~~may isimpact ~~not~~our ~~expected~~future ~~to significantly affect the Company’s financial position and result of operations.~~results:

11· The Company recently announced an increase in ductile iron pipe selling prices effective January 2007 of about 4%. ~~Net~~The ~~Periodic~~Company ~~Benefit~~also ~~Cost~~announced –an ~~Defined~~increase in ~~Benefit~~valve ~~Plans~~and hydrant selling prices effective in February 2007 of approximately 5%. The Company has historically implemented price increases to alleviate rising raw material costs, but in certain market conditions the full amount of these increases may not be sustained.

· For ~~a detailed disclosure on~~ the ~~Company’s~~month ~~pension~~of ~~and employee benefits plans~~March 2007, ~~please~~new ~~refer~~privately-owned tohousing ~~Note~~unit 11starts ~~of the Company’s Audited Consolidated~~declined ~~Financial~~23% ~~Statements~~over ~~for~~March 2006. ~~the~~Approximately ~~year~~40% ~~ended~~of ~~September 30,~~fiscal ~~2003~~2006 asconsolidated ~~found in our~~net ~~registration~~sales ~~statement~~were ~~filed~~into onresidential ~~form~~construction ~~S-4~~end ~~(File No~~markets. ~~333-117473).~~

~~The~~· Management believes ~~following~~the ~~sets~~Company ~~forth~~will benefit from projected spending increases in the water ~~components~~infrastructure ofrepair ~~net~~and ~~periodic~~replacement ~~benefit~~market. ~~cost~~The ofAmerican Water Works ~~the~~Association ~~domestic~~forecasts ~~non-contributory~~that ~~defined~~project ~~benefit~~repair ~~plans~~and ~~for~~replacement ~~the~~spending ~~three~~will ~~months~~grow ~~and~~11% ~~the~~in ~~nine~~2007. ~~months~~The ~~ended~~Company’s ~~June 26~~U.S. Pipe segment public works quotation activity increased 18%, ~~2004:~~in tons, in fiscal 2007 compared to the prior year period.

	Three months ended June 26, 2004			Nine months ended June 26, 2004
	(dollars in millions)
Service cost	$	0.5		$	1.5
Interest cost	1.4			4.2
Expected return (loss) on plan assets	(1.1		)	(3.4		)
Amortization of loss	0.6			2.0
Net periodic cost	$	1.4		$	4.3

· Subsequent to the spinoff of the Company from Walter, the Company is no longer subject to corporate expense allocations from Walter. Such charges totaled $1.6 million and $8.0 million for the six months ended March 31, 2007 and the year ended September 30, 2006, respectively, and were recorded as a component of U.S. Pipe segment operating results. However, the Company’s corporate segment expenses are expected to increase as the Company provides certain services previously provided by Walter. The corporate segment is expected to incur increased expenses in the future, primarily employee-related costs, as staffing levels increase to replace the functionality previously provided by Walter, as well as increased audit costs related to Sarbanes-Oxley compliance, and other costs related to operating as a stand-alone public company.

~~Employer~~· The Company’s ~~Contributions~~synergy plan has achieved an annual operating income improvement run-rate benefits of $45 million as of March 31, 2007 and is expected to be at the high end of a $40 million to $50 million annual range by early fiscal 2008. Further significant volume or price declines may impede the Company’s ability to maintain or exceed its current synergy run rates. The synergy plan also contemplates plant closures that have been announced for certain facilities. Costs related to these plant closures, which will eliminate fixed plant costs, are expected to reduce future operating income.

As· During fiscal ~~of June 26~~2006, ~~2004,~~brass noingot ~~contributions~~costs rose from $1.60 per pound to approximately $3.00 per pound. Brass ingot costs have ~~been~~decreased ~~made~~slightly ~~and~~from ~~there~~that ~~are~~prior year nolevels ~~anticipated~~during ~~statutory~~the ~~funding~~current ~~requirements~~fiscal ~~for~~year. Also, during the ~~remainder~~current quarter, scrap iron prices increased from approximately $237 per net ton to a high of ~~2004~~$313 per net ton. These prices are expected to fluctuate based on marketplace demand.

12· On May 1, 2007, the Company announced a cash tender offer to repurchase all of the outstanding Senior Subordinated Notes and a consent solicitation to amend the related indentures in connection with a proposed refinancing of the 2005 Mueller Credit Agreement and issuance of up to $350 million of new Senior Subordinated Notes. ~~Supplementary~~ ~~Balance~~Management ~~Sheet~~expects these actions will be completed in the ~~Information~~third quarter of fiscal 2007. Annual interest expense is expected to decline after these actions are completed.

~~Selected supplementary balance sheet information is presented below:~~21

	September 30, 2003		June 26, 2004
	(dollars in millions)
Inventories
Purchased materials and manufactured parts	$	46.3	$	43.7
Work in process	65.6		71.9
Finished goods	128.6		145.0
	$	240.5	$	260.6

· During the remainder of the fiscal year, the Company plans to reduce the buildup of inventory. In order to achieve this, the Company may need to reduce man-hours worked in its foundries, which could cause compression of gross margins if the manufactured cost of those products rise.

21Results of Operations for the Three Months Ended March 31, 2007 Compared to the Three Months Ended March 31, 2006

13Net Sales. ~~Supplementary~~ Consolidated ~~Income~~net ~~Statement~~sales for the ~~Information~~three months ended March 31, 2007 were $459.7 million, an increase of $24.8 million, or 5.7%, from $434.9 million in the prior year period. This increase was primarily due to improved pricing selling prices, a favorable U.S. Pipe product mix, and the January 2007 acquisition of Fast Fabricators, Inc., but these items partially offset by a decline in volumes of $26 million primarily due to continued weakness in residential construction.

Gross Profit. Consolidated gross profit for the three months ended March 31, 2007 was $117.8 million, compared to $94.6 million in the prior year period. Gross margin increased to 25.6% in the current period compared to 21.8% in the prior year period. Cost of sales for the three months ended March 31, 2006 includes $12.0 million of purchase accounting adjustments related to valuing inventory acquired in the Acquisition at fair value. Excluding the impact of this adjustment, prior period gross margin would have been 24.5%. The ~~components~~improvement in gross profit is primarily due to reduction of ~~interest~~fixed ~~expense~~costs ~~are~~due ~~presented~~to ~~below:~~plant closures, and a favorable U.S. Pipe product mix, but these items were partially offset by increased raw material costs.

	Three months ended						Nine months ended
	June 28, 2003			June 26, 2004			June 28, 2003			June 26, 2004
	(dollars in millions)
Interest expense and early repayment costs:
Contractual interest expense	$	11.4		$	14.7		$	36.0		$	33.6
Deferred financing fee amortization	0.7			0.9			2.1			2.1
Senior subordinated debt early redemption penalty	—			—			—			7.0
Write off of deferred financing fees	—			6.6			—			7.0
Interest rate swap gains	(3.0		)	(4.1		)	(9.8		)	(10.4		)
Total interest expense and early repayment costs	$	9.1		$	18.1		$	28.3		$	39.3

Selling, General & Administrative. Consolidated expenses for the three months ended March 31, 2007 were $64.9 million, an increase of $4.1 million compared to $60.8 million in the prior year period. Expenses as a percentage of net sales increased to 14.1% in the current period compared to 13.9% in the prior year period.

ARelated ~~reconciliation~~Party Corporate Charges. The Company incurred no such costs in the current period since it is no longer a subsidiary of ~~net~~Walter. ~~income~~Historically, tocertain ~~income~~indirect ~~available~~costs incurred by Walter such as insurance, executive salaries, professional service fees, human resources, transportation, and other centralized business functions had been allocated to ~~common~~the Company’s U.S. Pipe segment. Costs of this nature that are ~~shareholders~~incurred isby asthe ~~follows:~~Company are now recorded in the Corporate segment and are not allocate to other segments.

	Three months ended						Nine months ended
	June 28, 2003			June 26, 2004			June 28, 2003			June 26, 2004
	(dollars in millions)
Net income	$	7.8		$	5.2		$	19.0		$	20.6
Less preferred share accretion	(3.6		)	(1.3		)	(10.4		)	(9.3		)
Net income available to common shareholders	$	4.2		$	3.9		$	8.6		$	11.3

Facility Rationalization, Restructuring and Related Costs. Restructuring costs of $4.3 million for the three months ended March 31, 2006 were related to the closure of U.S. Pipe’s Chattanooga, Tennessee valve and hydrant plant.

14Interest Expense, Net of Interest Income. ~~Stock~~ Interest expense, ~~Plans~~net of interest income, for the current period was $17.9 million, compared to $25.9 million in the prior year period. Net cash proceeds received from the initial public offering in June 2006 were used to pay down debt, resulting in lower interest expense in the current period.

~~Effective~~Income ~~August 31,~~Tax ~~2000, Holdings implemented its Management~~Expense ~~Incentive Plan and its Direct Investment Program~~(Benefit). ~~These stock plans were~~ Income ~~created~~tax ~~with~~expense for the ~~purpose~~current ofperiod ~~attracting,~~was ~~retaining~~$14.8 ~~and~~million ~~motivating~~as ~~key~~compared ~~employees of~~to ~~the Company~~$0.6 million ~~Prior~~in ~~to August 31, 2000,~~ the ~~Company~~prior ~~did~~year ~~not~~period. ~~have~~The ~~an employee~~effective ~~stock~~tax ~~option~~rate ~~plan~~for orthe asecond ~~stock purchase plan; however, certain employees~~fiscal quarter of ~~the~~2007 ~~Company~~was ~~had~~42.3%. ~~been~~The ~~granted~~effective ~~stock~~tax ~~and~~rate ~~stock~~for ~~options~~the ~~under~~second ~~Tyco’s~~fiscal ~~stock~~quarter ~~award~~of ~~plans~~2006 was 37.5%.

Direct Investment Program -Under the Direct Investment Program, certain employees are allowed to purchase a specific number of shares of Holdings, at a price equal to fair value at the time of the purchase. Under the plan, Holdings will loan the employee up to 50% of the total purchase price on a non-recourse basis. However, all shares of the plan are pledged as collateral. Holdings is authorized to grant 10 million shares under the plan and issued approximately 9.5 million shares at a purchase price of $1.00 per share and 0.5 million shares at a purchase price of $1.50 per share as of September 30, 2003. The Company recorded non-cash compensation expense of $1.0 million for the nine months ended June 26, 2004, related to the loan portion of the shares purchased pursuant to the Direct Investment Program.22

22Results of Operations for the Six Months Ended March 31, 2007 Compared to the Six Months Ended March 31, 2006

~~During~~Net Sales. Consolidated net ~~2003,~~sales for the ~~Company’s~~six ~~chief~~months ~~executive~~ended ~~officer~~March 31, ~~purchased~~2007 ~~476~~were $871.6 million,~~244~~ a ~~shares~~decrease of ~~Holdings~~$43.7 million, ~~stock~~or at4.8%, from $1915.503 ~~per~~million ~~share~~in ~~under~~ the ~~Direct~~prior ~~Investment~~year ~~Program~~period. AsThis decrease is due primarily to $114.0 million of lower volume primarily attributable to a ~~result~~weakness in residential construction, ~~the~~but ~~Company~~is partially ~~increased~~offset ~~paid~~by higher pricing of $71.0 million. In addition, sales in ~~capital~~the prior byyear include approximately $030.7 0 million in ~~2003~~ductile iron pipe sales associated with Hurricane Katrina.

InGross ~~connection~~Profit. Consolidated ~~with~~gross ~~the~~profit ~~recapitalization~~for ~~completed~~the six inmonths ~~April~~ended March ~~2004~~31, 2007 was $225.5 million, an increase of $87.4 ~~all~~million, ~~outstanding~~compared ~~employee~~to ~~loans~~$138.1 ~~were~~million ~~repaid~~in the prior year period. Gross margin increased to 25.9% in ~~full~~the bycurrent period compared to 15.1% in the ~~employees~~prior year period. ~~There~~ ~~are~~Excluding no$88.7 ~~remaining~~million ~~shares~~of ~~available~~prior ~~for~~year costs associated with the closure of U.S. Pipe’s Chattanooga facility and purchase asaccounting adjustments related to valuing inventory acquired in the Acquisition at fair value, gross margin would have been 24.8% in the prior period. The improvement in gross profit is due primarily to reduction of ~~June 26~~fixed costs due to plant closures and a favorable U.S. Pipe product mix, ~~2004~~but is partially offset by increased raw material costs.

~~Management~~Selling, ~~Incentive~~General & Administrative. Consolidated expenses ~~Plan~~for ~~-Under~~ the ~~Management~~six ~~Incentive~~months ~~Plan~~ended March 31, ~~Holdings~~2007 iswere ~~authorized~~$122.0 tomillion, ~~grant stock options to~~an ~~key~~increase ~~individuals~~ of ~~the Company~~$4.1 million, ~~The~~compared ~~options are granted~~ to ~~purchase~~$117.9 ~~common shares~~million ofin ~~Holdings at prices equal to~~ the ~~fair~~prior ~~value of the common shares on~~year ~~the date the options are granted~~period. ~~The~~Expenses ~~options~~as ~~become~~a ~~fully~~percentage ~~vested~~of ~~and exercisable~~net onsales ~~the~~increased ~~eighth~~to ~~anniversary~~14.0% ofin the ~~date~~current period ofcompared ~~grant,~~to ~~provided~~12.9% ~~that the individual is~~ in the ~~employment~~prior ofyear ~~the Company at all times during the vesting~~ period. ~~The~~This ~~agreement~~percentage ~~provides~~increase ~~for~~is due ~~accelerated~~to ~~vesting~~lower ifsales ~~certain~~in ~~milestones are~~the ~~achieved.~~current ~~The~~period ~~options~~and ~~expire~~increased oncorporate ~~the~~costs ~~tenth anniversary~~ of ~~the grant date~~$1.9 million.

~~Holdings~~Related isParty ~~authorized~~Corporate Charges. Certain overhead tocosts ~~grant~~incurred ~~options~~by ~~for~~Walter ~~15 million~~such ~~shares.~~as ~~All~~insurance, executive salaries, ~~options~~professional ~~granted~~service ~~have~~fees, anhuman ~~exercise~~resources, ~~price~~transportation, ~~equal~~and toother centralized ~~the~~business ~~fair~~functions ~~value~~were atpartially ~~the~~allocated ~~date~~to ~~of grant~~U.S. AsPipe ofand recorded ~~result,~~as noa ~~compensation~~component ~~expense~~of ~~was~~operating ~~required~~income. toThe becurrent ~~recognized~~period includes such ~~prior~~charges tothrough December 14, 2006, the ~~refinancing~~date ~~discussed~~the inCompany ~~Note~~spun-off 6from Walter.

InFacility ~~connection with the refinancing~~Rationalization, ~~Holdings modified these stock~~ ~~option~~Restructuring awards to accelerate vesting upon completion of a refinancing. A portion of the dividend distribution to Holdings was used to make a payment to its employee optionholders of the excess of the per share dividend to its common stockholders over the exercise price of their options, or approximately $12.6 million in the aggregate, and ~~the~~Related ~~options were cancelled~~Costs. ~~The~~ Restructuring ~~option~~costs ~~buyout resulted in a capital contribution from Holdings to the Company and an additional charge~~ of ~~approximately~~ $1428.~~8 million ($12.6 million cash charge and~~4 ~~$2.2~~ million ~~non-cash~~for ~~charge) upon completion of~~ the ~~refinancing~~six inmonths ~~the~~ended ~~quarter ending June~~March 2631, ~~2004. Additionally, the~~2006 ~~Company~~were ~~has recorded a non-cash compensation charge of approximately $0.7 million~~ related to the closure ~~loan portion~~ of ~~the~~U.S. ~~shares~~Pipe’s ~~purchased~~Chattanooga, ~~pursuant~~Tennessee ~~to the Direct Investment Program~~plant.

~~Information~~Interest ~~with~~Expense, ~~respect~~Net of Interest Income. Interest expense, net of interest income, for the current period was $35.2 million, compared to ~~stock~~$54.0 ~~option~~million ~~activity~~in ~~under~~the prior year period. Net cash proceeds received from the ~~Company’s~~initial public offering in June 2006 were used to pay down debt, ~~plan~~resulting isin lower interest expense in the current period. The prior year period also includes $2.5 million of expenses from bridge loan commitment fees incurred as ~~follows:~~a result of the Acquisition.

	Number of Common Shares		Option Price Per Share		Weighted Average Exercise Price
September 30, 2001	12,968,875		1.00		1.00
Granted	370,000		1.19		1.19
Cancelled	(106,900	)	1.00		1.00
September 30, 2002	13,231,975		$	1.00 to $1.19	$	1.01
Granted	1,700,000		1.50		1.50
Cancelled	(203,550	)	1.00		1.00
September 30, 2003	14,728,425		$	1.00 to $1.50	$	1.06
Cancelled	(120,656	)	$	1.00 to $1.50	$	1.12
March 27, 2004	14,607,769		$	1.00 to $1.50	$	1.06
Exercised	(14,607,769	)	$	1.00 to $1.50	$	1.06
June 26, 2004	0

Income Tax Expense (Benefit). Income tax expense for the current period was $27.1 million as compared to a benefit of $26.1 million in the prior year period. The effective tax rate for the first six months of fiscal 2007 was 40.6%. The effective tax rate for the first six months of fiscal 2006 was 39.5%.

23ITEM 4. CONTROLS AND PROCEDURES

~~There~~We ~~were~~maintain nodisclosure controls ~~options~~and ~~authorized~~procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, ~~granted~~processed, orsummarized and ~~outstanding~~reported ~~on June~~within the time periods specified in the SEC’s rules 26and forms, ~~2004~~and that such information is accumulated and communicated to the management, including the Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.

~~15. Facility Rationalization and Related Costs~~23

~~During~~The Company’s management, including the ~~three~~Chief ~~months~~Executive Officer and ~~nine~~Interim ~~months~~Chief ~~ended~~Financial ~~June 28~~Officer, ~~2003~~does not expect that our disclosure controls can prevent all errors and all fraud. A control system, ~~the~~no matter how well conceived and operated, can provide only ~~Company~~reasonable, ~~continued~~not ~~its~~absolute, ~~efforts~~assurance tothat ~~reduce~~the ~~operating~~objectives ~~costs~~of the control system are met. ~~After~~There ~~reviewing~~are ~~its~~inherent limitations in all control systems, including the ~~facility~~realities ~~utilization~~that judgments in decision-making can be faulty, and ~~associated~~that ~~assets~~breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the ~~Company~~individual ~~recorded~~acts ~~charges~~of one or more persons. The design of any ~~$0.2 million~~system of controls also is based in part upon certain assumptions about the likelihood of future events, and, ~~$1.7~~while ~~million~~our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, ~~respectively~~there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, ~~related~~misstatements due to error ~~asset~~or ~~impairment~~fraud may occur and not be detected.

~~For~~As of the ~~three~~end ~~months~~of ~~ended~~the period ~~June 26~~covered by this report, ~~2004~~we carried out an evaluation, under the supervision ~~Company~~and ~~recorded~~with nothe participation of management, including the Chief ~~charge. For~~Executive Officer along with the ~~nine~~Chief ~~months~~Financial ~~ended June 26~~Officer, ~~2004,~~of the ~~Company~~effectiveness of ~~recorded~~the ~~$0.9~~design ~~million,~~and ~~related~~operation of our disclosure controls and procedures pursuant to ~~asset~~Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon ~~impairment~~the foregoing, ~~environmental~~the ~~issues~~Chief atExecutive aOfficer ~~closed~~along ~~facility~~with inthe ~~Statesboro,~~Interim ~~GA (see~~Chief ~~note~~Financial ~~10)~~Officer concluded that our disclosure controls and ~~lease~~procedures ~~expense~~are effective at aproviding ~~closed~~reasonable assurance that all material information relating to Mueller Water Products, Inc. and ~~vacated~~its ~~facility~~subsidiaries required to be included in our Exchange Act reports is reported in a timely manner.

~~16.~~There ~~Subsequent~~have ~~Event~~been no significant changes in our internal procedures that significantly affected, or are reasonably likely to affect, our disclosure controls during the three months ended March 31, 2007.

OnPART II. ~~August 26, 2004, the Company entered into a First Amendment to its~~OTHER ~~Second Amended and Restated Credit Agreement, dated as of April 23, 2004 (the “Credit Agreement”).~~INFORMATION

~~The~~Item ~~First amendment provides for, among other things, (~~1~~) the reduction of the term loan pricing for LIBOR-based loans to LIBOR plus 2~~.~~75%~~ ~~and~~Legal ~~for Base Rate Loans to the Base Rate plus 1.50%, and (2) the ability to use certain available cash to retire junior debt subject to a maximum Leverage Ratio and maximum annual basket amounts.~~Proceeding

~~17.~~Refer ~~Consolidating~~to ~~Guarantor~~the ~~and~~information provided ~~Non-Guarantor~~in Note 13 to the Notes to Condensed Consolidated Financial ~~Information~~Statements presented in Item 1 of Part I of this quarterly report.

~~The~~Item following tables set forth the consolidating statements of operations and cash flows for the periods ended June 26, 2004 and June 28, 2003 and the consolidating balance sheets as of June 26, 2004 and September 30, 20031A. ~~The~~ ~~following information~~Risk is included as a result of the guarantee by certain of the Company’s wholly-owned U.S. subsidiaries (“Guarantor Companies”) of the second priority senior secured notes and senior subordinated notes issued by the Company. None of the Company’s other subsidiaries guarantee the debt. Each of the guarantees is joint and several and full and unconditional. “Mueller Group, Inc.” or “Issuer” includes the consolidated financial results of Mueller Group, Inc. with all of its wholly-owned subsidiaries accounted for under the equity method. Tax allocations between the Issuer and Guarantor Companies are based on a tax-sharing agreement between the parties.Factors

24Risks Relating to Our Business

~~Consolidating~~Our business ~~Statement~~may suffer as a result of ~~Operations~~a downturn in government spending related to infrastructure upgrades, repairs and replacements, or in the cyclical residential or non-residential building markets.

~~For~~Our business is primarily dependent upon spending on water and wastewater infrastructure upgrades, repairs and replacement, new water and wastewater infrastructure spending (which is dependent upon residential construction) and spending on non-residential construction. We are also subject to general economic conditions, the ~~Three~~need ~~Months~~for construction ~~Ended~~projects, ~~June 28~~interest rates and government incentives provided for public work projects. In addition, ~~2003~~a significant percentage of our products are ultimately used by municipalities or other governmental agencies in public water transmission and collection systems. As a result, our sales could decline as a result of declines in the number of projects planned by public water agencies, government spending cuts, general budgetary constraints, difficulty in obtaining necessary permits or the inability of government entities to issue debt. It is not unusual for water projects to be delayed and rescheduled for a number of reasons, including changes in project priorities and difficulties in complying with environmental and other government regulations. Spending growth in the infrastructure upgrades, repairs and replacement sector may slow in the future if state and local governments’ budgets are negatively impacted by downturns in the economy. Even if favorable economic conditions exist, state and local governments may choose not to address deferred infrastructure needs. Although the residential

	Issuer			Guarantor Companies			Non- Guarantor Companies			Consol- idating Eliminations			Consol- idated
Net Sales	$	—		$	192.7		$	39.7		$	—		$	232.4
Cost of sales	0.0			139.3			31.2			—			170.5
Royalty expense	—			(0.5		)	0.5			—			—
Gross profit	(0.0		)	53.9			8.0			—			61.9
Selling, general, & administrative expense	2.8			31.5			5.1			—			39.4
Facility rationalization & related costs	—			0.2			—			—			0.2
Operating income	(2.8		)	22.2			2.9			—			22.3
Interest expense and early repayment costs	(9.0		)	0.6			(0.7		)	—			(9.1		)
Interest income	0.1			—			—			—			0.1
Income (loss) before income taxes	(11.7		)	22.8			2.2			—			13.3
Income tax expense (benefit)	(4.8		)	9.4			0.9			—			5.5
Equity income from subsidiaries	14.7			1.3			—			(16.0		)	—
Net income	$	7.8		$	14.7		$	1.3		$	(16.0	)	$	7.8

~~Consolidating~~building market ~~Statement~~has experienced growth in recent years, this growth may not continue in the future. Recently, there have been steep declines in sales of ~~Operations~~both new and existing homes, which have impacted our volume in recent periods. The residential and non-residential building markets are cyclical. Any significant decline in the residential or non-residential building markets or governmental spending on infrastructure could lead to a significant decline in our sales, profitability and cash flows.

~~For~~Our ~~the~~industry ~~Three~~is ~~Months~~very ~~Ended~~competitive ~~June 26,~~and ~~2004~~some of our products are commodities.

	Issuer			Guarantor Companies			Non- Guarantor Companies			Consol- idating Eliminations			Consol- idated
Net Sales	$	—		$	246.5		$	42.2		$	—		$	288.7
Cost of sales	—			174.9			30.8			—			205.7
Royalty expense	—			(0.6		)	0.6			—			0.0
Gross profit	—			72.2			10.8			—			83.0
Selling, general, & administrative expense	19.5			38.2			5.3			—			63.0
Facility rationalization & related costs	—			—			—			—			—
Operating income	(19.5		)	34.0			5.5			—			20.0
Interest expense and early repayment costs	(18.0		)	0.7			(0.8		)	—			(18.1		)
Interest income	—			—			0.1			—			0.1
Income (loss) before income taxes	(37.5		)	34.7			4.8			—			2.0
Income tax expense (benefit)	(14.1		)	9.0			1.9			—			(3.2		)
Equity income from subsidiaries	28.6			2.9			—			(31.5		)	—
Net income	$	5.2		$	28.6		$	2.9		$	(31.5	)	$	5.2

The domestic and international markets for flow control products are competitive. While there are only a few competitors for most of our product offerings, many of them are well-established companies with strong brand recognition. In particular, our malleable iron and cast iron pipe fitting products, which together comprised 6% of our net sales for the six months ended March 31, 2007 and 5% of our net sales for the fiscal years ended September 30, 2006 and 2005, face competition from less expensive imports. Further, our pipe nipple and hanger products and our pipe fittings and couplings products, which together comprised 16% of our net sales for those two years and 17% of our net sales for the six months ended March 31, 2007, compete on the basis of price and are sold in fragmented markets with low barriers to entry, allowing less expensive domestic and foreign products to gain market share and reduce our margins. Also, competition for ductile iron pressure pipe sold by our U.S. Pipe segment comes not only from ductile pipe produced by a concentrated number of domestic manufacturers, but also from pipe composed of other materials, such as polyvinylchloride (PVC), high density polyethylene (HDPE), concrete, fiberglass, reinforced plastic and steel.

25Foreign competition is intense and could harm our sales, profitability and cash flows.

~~Consolidating~~In ~~Statement~~addition to domestic competition, we face the threat of ~~Operations~~foreign competition. The intensity of foreign competition is affected by fluctuations in the value of the U.S. dollar against foreign currencies, by the cost to ship competitive products into the North American markets and by the availability of trade remedies. Foreign competition is likely to further increase and certain product prices will continue to face downward pressure as our domestic competitors shift their operations or outsource manufacturing requirements overseas or source supplies from foreign vendors in an effort to reduce expenses.

~~For~~We depend ~~the~~on ~~Nine~~a ~~Months~~group ~~Ended~~of ~~June 28,~~major ~~2003~~distributors for a significant portion of our sales; any loss of these distributors could reduce our sales and continuing consolidation could cause price pressure.

	Issuer			Guarantor Companies			Non- Guarantor Companies			Consol- idating Eliminations			Consol- idated
Net Sales	$	—		$	574.9		$	96.5		$	—		$	671.4
Cost of sales	—			417.9			77.5			—			495.4
Royalty expense	—			(1.1		)	1.1			—			—
Gross profit	—			158.1			17.9			—			176.0
Selling, general, & administrative expense	8.0			93.9			12.5			—			114.4
Facility rationalization & related costs	—			1.7			—			—			1.7
Operating income	(8.0		)	62.5			5.4			—			59.9
Interest expense and early repayment costs	(28.1		)	1.9			(2.1		)	—			(28.3		)
Interest income	0.3			—			0.1			—			0.4
Income (loss) before income taxes	(35.8		)	64.4			3.4			—			32.0
Income tax expense (benefit)	(14.5		)	26.1			1.4			—			13.0
Equity income from subsidiaries	40.3			2.0			—			(42.3		)	—
Net income	$	19.0		$	40.3		$	2.0		$	(42.3	)	$	19.0

Approximately 35% and 38% of our net sales for the six months ended March 31, 2007 and the fiscal year ended September 30, 2006, respectively, were to our 10 largest distributors, and approximately 30% and 32% of our net sales for the six months ended March 31, 2007 and the fiscal year ended September 30, 2006, respectively, were to our three largest distributors: HD Supply, Ferguson Enterprises and Consolidated Pipe for the six months ended March 31, 2007, and HD Supply, Ferguson Enterprises and Groeniger for the fiscal year ended September 30, 2006. Our business relationships with most of our major distributor branches may be terminated at the option of either party upon zero to 60 days’ notice.

~~Consolidating~~While ~~Statement~~our relationships with our ten largest distributors have been long-lasting, distributors in our industry have experienced significant consolidation in recent years, and our distributors may be acquired by other distributors who buy products from our competitors. For example, Home Depot acquired National Waterworks in 2005 and then acquired Hughes Supply in March 2006. The combined business has been merged into one entity now called HD Supply. As a result, two of ~~Operations~~our largest distributors have been combined under common control. As consolidation among distributors continues, pricing pressure may result, which could lead to a significant decline in our profitability. Further, our ability to retain our customers in the face of competition generally depends on a variety of factors, including the quality and price of our products and services and our ability to market our products effectively. The loss of either HD Supply or Ferguson Enterprises as a distributor could reduce our levels of sales and profitability.

~~For the Nine Months Ended June 26, 2004~~25

	Issuer			Guarantor Companies		Non- Guarantor Companies			Consol- idating Eliminations			Consol- idated
Net Sales	$	—		$	633.3	$	110.3		$	—		$	743.6
Cost of sales	—			451.0		82.7			—			533.7
Gross profit	—			182.3		27.6			—			209.9
Selling, general, & administrative expense	23.7			104.1		14.5			—			142.3
Facility rationalization & related costs	—			0.9		—			—			0.9
Operating income	(23.7		)	77.3		13.1			—			66.7
Interest expense and early repayment costs	(39.2		)	2.4		(2.5		)	—			(39.3		)
Interest income	0.1			—		0.2			—			0.3
Income (loss) before income taxes	(62.8		)	79.7		10.8			—			27.7
Income tax expense (benefit)	(24.2		)	27.0		4.3			—			7.1
Equity income from subsidiaries	59.2			6.5		—			(65.7		)	—
Net income	$	20.6		$	59.2	$	6.5		$	(65.7	)	$	20.6

Our brass valve products contain lead, which may be replaced in the future.

26Our brass valve products, which constituted approximately 6% of our net sales for the six months ended March 31, 2007 and the fiscal year ended September 30, 2006, contain approximately 5.0% lead. Environmental advocacy groups, relying on standards established by California’s Proposition 65, are seeking to eliminate or reduce the content of lead in some of these products, including water meters and valves, and to limit their sale in California. Some of our business units have entered into settlement agreements with these environmental advocacy groups that have required them to either modify some of these products or offer substitutes for them with respect to products sold in California. Modifications of or substitutions for our products to meet or conform with regulatory requirements will require us to purchase more expensive raw materials, and we may not be able to pass these costs on to our customers. Federal legislation to substantially restrict lead content in water products has been introduced in Congress. Congress may adopt legislation that would require us to reduce or eliminate lead in our brass products, which could require us to incur substantial additional production expenses. In addition, advocacy groups or other parties may file suit against us, which could result in additional costs in connection with marketing and selling our brass products.

~~Condensed~~Our business ~~Consolidating~~is ~~Balance~~subject ~~Sheet~~to risk of price increases and fluctuations and delay in the delivery of raw materials and purchased components.

~~September 30~~Our business is subject to the risk of price increases and fluctuations and periodic delays in the delivery of raw materials and purchased components that are beyond our control. Our operations require substantial amounts of raw materials or purchased components, ~~2003~~such as steel pipe and scrap steel and iron, brass ingot, sand, resin, and natural gas. Management estimates that scrap metal and ferrous alloys used in the U.S. Pipe manufacturing process account for approximately 42% of the cost to manufacture ductile iron pipe and raw materials used in our manufacturing processes currently account for approximately 18% of the Mueller Co. and Anvil cost of goods sold. Fluctuations in the price and delivery of these materials may be driven by the supply/demand relationship for a material and factors particular to that material. In addition, if any of our suppliers seeks bankruptcy relief or otherwise cannot continue its business as anticipated or we cannot renew our supply contracts on favorable terms, the availability of raw materials could be reduced or the price of raw materials could increase.

	Issuer			Guarantor Companies (1)			Non- Guarantor Companies		Consol- idating Eliminations			Consol- idated
Assets
Cash and cash equivalents	$	53.3		$	1.6		$	16.5	—			$	71.4
Receivables, net	0.5			115.0			21.8		—			137.3
Inventories	—			200.6			39.9		—			240.5
Deferred income taxes	(0.1		)	5.7			—		—			5.6
Prepaid exp and other cur assets	0.1			28.0			1.7		—			29.8
Total current assets	53.8			350.9			79.9		—			484.6
Property, plant and equipment, net	0.9			194.4			13.1		—			208.4
Goodwill, net	—			163.1			0.1		—			163.2
Identifiable intangibles, net	(0.0		)	62.5			0.5		—			63.0
Pension intangible	—			0.9			—		—			0.9
Investment in subsidiaries	835.7			16.8			—		(852.5		)	—
Deferred financing fees, net	12.0			—			—		—			12.0
Deferred income taxes	(6.0		)	24.5			0.3		—			18.8
Other noncurrent assets	—			0.2			—		—			0.2
Total assets	$	896.4		$	813.3		$	93.9	$	(852.5	)	$	951.1
Liabilities
Accounts payable	$	1.1		$	36.2		$	9.4	—			$	46.7
Current portion of long-term debt	5.3			0.9			—		—			6.2
Accrued exp and other cur liabilities	7.5			53.1			8.6		—			69.2
Total current liabilities	13.9			90.2			18.0		—			122.1
Intercompany accounts	87.1			(145.7		)	58.6		—			—

Filing Compare · Mueller Group, Inc.