The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto that appear elsewhere in this report. This report contains certain statements that may be deemed "forward-looking statements" within the meaning the Private Securities Litigation Reform Act of 1995. All statements that address activities, events or developments that the Company's management intends, expects, plans, projects, believes or anticipates will or may occur in the future are forward-looking statements. An example of a forward-looking statement is a statement we make regarding trending of end markets. Forward-looking statements are based on certain assumptions and assessments made by management in light of their experience and their perception of historical trends, current conditions and expected future developments. Actual results and the timing of events may differ materially from those contemplated by the forward-looking statements due to a number of factors, including regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:
• the spending level for water and wastewater infrastructure;

• the level of manufacturing and construction activity;

• our ability to service our debt obligations; and

• the other factors that are described in the section entitled "RISK FACTORS" in Item 1A. of annual report on Form 10-K for the year ended September 30, 2011 ("Annual Report").

Undue reliance should not be placed on any forward-looking statements. The Company does not have any intention or obligation to update forward-looking statements, except as required by law.
Overview
Organization
On October 3, 2005, Walter Energy acquired all outstanding shares of capital stock representing the Mueller Co. and Anvil businesses and contributed them to its U.S. Pipe business to form the Company. In June 2006, we completed an initial public offering of 28,750,000 shares of Series A common stock and in December 2006, Walter Energy distributed to its shareholders all of its equity interests in the Company, consisting of all of the Company's outstanding shares of Series B common stock. On January 28, 2009, each share of Series B common stock was converted into one share of Series A common stock. On April 1, 2012, we sold the businesses comprising our former U.S. Pipe segment. U.S. Pipe's results of operations have been reclassified as discontinued operations for all prior periods presented.
Unless the context indicates otherwise, whenever we refer to a particular year, we mean the fiscal year ended or ending September 30 in that particular calendar year. We manage our businesses and report operations through two business segments, Mueller Co. and Anvil, based largely on the products sold and the customers served.
Business
Consolidated net sales for the quarter ended June 30, 2012 of $275.9 million increased $16.3 million, or 6.3%, from the prior year period net sales of $259.6 million. Net sales increased due to higher shipment volumes at Mueller Co. and higher prices at both Mueller Co. and Anvil.
Most of the net sales of Mueller Co. are for water infrastructure related directly to municipal spending and residential construction activity in the United States.
Spending on water infrastructure by municipalities is based on the condition of their infrastructure systems and their access to funding. Funding generally comes from their overall fiscal condition and the availability of additional funds from the issuance of debt, higher tax rates or increased water rates. Municipalities may find it challenging to increase tax or water rates. We believe the general municipal spending environment continues to remain stable although budget pressures and economic uncertainty persist. According to U.S. Census Bureau data at June 30, 2012, state and local tax receipts grew at over 4% year-over-year for the fourth consecutive quarter. While both are showing improving trends, local tax receipt improvement is much weaker than state. We believe residential construction activity measures indicate the housing market may be stabilizing. U.S. Census Bureau data for housing starts, on a seasonally adjusted annualized basis, indicates that housing starts in June 2012 represented the sixth consecutive month of greater than 700,000 units. June 2012 housing permit activity was above 750,000 seasonally adjusted annualized starts for the first time since October 2008. Furthermore, June 2012 single family housing starts were above 500,000 seasonally adjusted annualized units for the third consecutive month and the 539,000 seasonally adjusted

annualized units reading was the strongest since April 2010.
As another potential future indicator, U.S. Census Bureau data shows housing permits in June 2012 above 700,000 seasonally adjusted annualized units for the fifth consecutive month. Both total and single family permits in June 2012 grew close to 20% on a year-over-year basis.
We believe an improving housing market would also bolster municipalities' fiscal condition, since local governments benefit from increased property taxes as well as connection and other ancillary fees associated with residential construction. We believe that our operating results benefited from a warmer winter in 2012 than 2011 in many of our markets, but we had been uncertain of the extent to which our increased shipment volume of valves and hydrants in the quarter ended March 31, 2012 was simply due to an earlier start to the construction season. Based on third quarter results, we are more confident that volume increases in the quarter ended March 31, 2012 were not solely a pull forward of construction activity due to weather, but also resulted from growth in our end markets. Overall we think the signs we are seeing in our water markets are mostly positive, giving us more confidence that our markets have stabilized and we could see some continued growth.
Most of Anvil's net sales are driven by commercial construction. Anvil has experienced growth in its oil & gas market since early calendar 2011, and we believe its other markets are relatively stable, though there was some decline during the quarter ended June 30, 2012 in its addressed industrial markets. We expect Anvil's oil & gas and fire protection markets to remain stable while we expect its industrial markets to remain soft in the quarter ending September 30, 2012.
Generally, raw material costs for both segments have continued to be relatively stable year-over-year, and we generally expect raw material costs to be slightly lower year-over-year in the quarter ending September 30, 2012.

Results of Operations

Three months ended June 30, 2012 compared to three months ended June 30, 2011
                                                                     2012
                                          Mueller Co.         Anvil         Corporate        Total
                                                                (in millions)
Net sales                              $         182.6     $      93.3     $         -     $    275.9
Gross profit                           $          51.6     $      28.0     $         -     $     79.6
Operating expenses:
Selling, general and administrative               27.0            18.1             8.1           53.2
Restructuring                                      0.7               -               -            0.7
Total operating expenses                          27.7            18.1             8.1           53.9
Operating income (loss)                $          23.9     $       9.9     $      (8.1 )         25.7
Interest expense, net                                                                            14.9
Loss on early extinguishment of debt                                                              1.5
Income before income taxes                                                                        9.3
Income tax expense                                                                                3.4
Income from continuing operations                                                                 5.9
Income from discontinued operations,
net of tax                                                                                        3.9
Net income                                                                                 $      9.8
                                                                     2011
                                          Mueller Co.          Anvil         Corporate        Total
                                                                (in millions)
Net sales                              $         165.8     $      93.8     $         -     $    259.6
Gross profit                           $          46.7     $      26.6     $      (0.2 )   $     73.1
Operating expenses:
Selling, general and administrative               23.9            17.0             7.2           48.1
Restructuring                                      0.2             0.1               -            0.3
Total operating expenses                          24.1            17.1             7.2           48.4
Operating income (loss)                $          22.6     $       9.5     $      (7.4 )         24.7
Interest expense, net                                                                            16.8
Income before income taxes                                                                        7.9
Income tax expense                                                                                1.0
Income from continuing operations                                                                 6.9
Loss from discontinued operations, net
of tax                                                                                           (9.6 )
Net loss                                                                                   $     (2.7 )

Consolidated Analysis
Net sales for the quarter ended June 30, 2012 increased to $275.9 million from $259.6 million in the prior year period. Net sales increased due to higher shipment volumes and higher pricing.
Gross profit for the quarter ended June 30, 2012 increased to $79.6 million from $73.1 million in the prior year period. Gross margin improved 70 basis points to 28.9% in the quarter ended June 30, 2012 from 28.2% in the prior year period and was positively impacted primarily by higher sales prices in both segments as well as higher shipment volumes at Mueller Co. Selling, general and administrative expenses ("SG&A") in the quarter ended June 30, 2012 increased to $53.2 million from $48.1 million in the prior year period. SG&A increased primarily due to higher employee-related expenses at Mueller Co. and Corporate, investments associated with Mueller Systems and Echologics and other costs.
Interest expense, net was $14.9 million in the quarter ended June 30, 2012 compared to $16.8 million in the prior year period. Interest rate swap contract expense represents the amortization of unrecognized expense related to interest rate swap contracts, all of which were terminated prior to 2011. Excluding these expenses, net interest expense declined $1.1 million in the quarter ended June 30, 2012 compared to the prior year period driven primarily by reduced borrowing levels.

In the quarter ended June 30, 2012, the loss on early extinguishment of debt of $1.5 million resulted from the redemption of $22.5 million of the 8.75% Senior Unsecured Notes.
The components of interest expense, net are detailed below.

                                                                   Three months ended
                                                                        June 30,
                                                                   2012              2011
                                                                      (in millions)
7.375% Senior Subordinated Notes                            $       7.7          $      7.7
8.75% Senior Unsecured Notes                                        4.8                 5.0
Interest rate swap contracts                                        1.3                 2.1
ABL Agreement borrowings                                            0.1                 0.5
Deferred financing fees amortization                                0.6                 0.5
Other interest expense                                              0.4                 1.1
                                                                   14.9                16.9
Interest income                                                       -                (0.1 )
                                                            $      14.9          $     16.8

The components of income tax expense (benefit) are provided below.

                                                     Three months ended                                Three months ended
                                                        June 30, 2012                                     June 30, 2011
                                                                      Discontinued                                      Discontinued
                                         Continuing operations         operations        Continuing operations           operations
                                                                                  (in millions)
Expense (benefit) from operations       $               3.8        $        (0.1 )      $              4.5          $           (5.7 )
Valuation allowance-related benefit                       -                 (4.2 )                       -                         -
Other discrete items                                   (0.4 )                  -                      (3.5 )                     4.5
Income tax expense (benefit)            $               3.4        $        (4.3 )      $              1.0          $           (1.2 )


Segment Analysis
Mueller Co.

Corporate
SG&A increased to $8.1 million in the quarter ended June 30, 2012 from $7.2
million in the prior year period primarily due to higher employee-related
expenses.
Nine months ended June 30, 2012 compared to nine months ended June 30, 2011
                                                                    2012
                                         Mueller Co.        Anvil         Corporate        Total
                                                               (in millions)
Net sales                              $       465.2     $     277.6     $         -     $    742.8
Gross profit                           $       113.7     $      80.8     $         -     $    194.5
Operating expenses:
Selling, general and administrative             75.0            53.1            22.2          150.3
Restructuring                                    1.9             0.2            (0.1 )          2.0
Total operating expenses                        76.9            53.3            22.1          152.3
Operating income (loss)                $        36.8     $      27.5     $     (22.1 )         42.2
Interest expense, net                                                                          46.1
Loss on early extinguishment of debt                                                            1.5
Loss before income taxes                                                                       (5.4 )
Income tax expense                                                                              4.1
Loss from continuing operations                                                                (9.5 )
Loss from discontinued operations, net
of tax                                                                                       (102.4 )
Net loss                                                                                 $   (111.9 )
                                                                    2011
                                         Mueller Co.         Anvil         Corporate        Total
                                                               (in millions)
Net sales                              $       444.5     $     263.8     $         -     $    708.3
Gross profit                           $       109.7     $      73.4     $       0.1     $    183.2
Operating expenses:
Selling, general and administrative             67.6            50.4            22.3          140.3
Restructuring                                    1.2             1.2               -            2.4
Total operating expenses                        68.8            51.6            22.3          142.7
Operating income (loss)                $        40.9     $      21.8     $     (22.2 )         40.5
Interest expense, net                                                                          49.0
Loss before income taxes                                                                       (8.5 )
Income tax benefit                                                                             (4.3 )
Loss from continuing operations                                                                (4.2 )
Loss from discontinued operations, net
of tax                                                                                        (24.3 )
Net loss                                                                                 $    (28.5 )

Consolidated Analysis
Net sales for the nine months ended June 30, 2012 increased to $742.8 million from $708.3 million in the prior year period. Net sales increased primarily due to higher pricing across both business segments and higher Mueller Co. shipment volumes.
Gross profit for the nine months ended June 30, 2012 increased to $194.5 million from $183.2 million in the prior year period. Gross margin was 26.2% in the nine months ended June 30, 2012 and 25.9% in the prior year period, reflecting higher sales prices across both business segments.
SG&A in the nine months ended June 30, 2012 increased to $150.3 million, or 20.2% of net sales, from $140.3 million, or 19.8% of net sales, in the prior year period. SG&A increased primarily due to higher employee-related expenses at Mueller Co. and Anvil, investments associated with Mueller Systems and Echologics and other costs.
Interest expense, net was $46.1 million in the nine months ended June 30, 2012 compared to $49.0 million in the prior year

period. Interest rate swap contract expense represents the amortization of unrecognized expense related to interest rate swap contracts, all of which were terminated prior to 2011. Excluding these expenses, net interest expense declined $1.2 million in the nine months ended June 30, 2012 compared to the prior year period primarily due to lower borrowing levels.
In the nine months ended June 30, 2012, the loss on early extinguishment of debt of $1.5 million resulted from the redemption of $22.5 million of the 8.75% Senior Unsecured Notes.
The components of interest expense, net are detailed below.

                                                               Nine months ended
                                                                   June 30,
                                                                2012         2011
                                                                 (in millions)
7.375% Senior Subordinated Notes                            $    23.2      $ 23.2
8.75% Senior Unsecured Notes                                     14.8        15.0
Interest rate swap contracts                                      4.3         6.0
ABL Agreement borrowings                                          1.0         1.3
Deferred financing fees amortization                              1.8         1.7
Other interest expense                                            1.2         2.0
                                                                 46.3        49.2
Interest income                                                  (0.2 )      (0.2 )
                                                            $    46.1      $ 49.0

After including the tax effect of the loss on the sale of U.S. Pipe, our deferred tax liabilities are insufficient to fully support our deferred tax assets, which include net operating loss carryforwards. Accordingly, we recorded income tax expense to establish valuation allowances related to deferred tax assets during the nine months ended June 30, 2012. GAAP requires us to allocate a portion of the valuation allowance charge relating to deferred tax assets at September 30, 2011 to continuing operations. Our net operating loss carryforwards remain available to offset future taxable earnings. The components of income tax expense (benefit) are provided below.

                                                    Nine months ended                                Nine months ended
                                                      June 30, 2012                                    June 30, 2011
                                                                    Discontinued                                     Discontinued
                                       Continuing operations         operations         Continuing operations         operations
                                                                               (in millions)
Benefit from operations               $             (2.4 )       $        (50.7 )      $             (4.9 )       $        (13.6 )
Valuation allowance-related expense                  5.9                   24.3                         -                      -
Other discrete items                                 0.6                      -                       0.6                    0.1
Income tax expense (benefit)          $              4.1         $        (26.4 )      $             (4.3 )       $        (13.5 )

Segment Analysis
Mueller Co.
Net sales in the nine months ended June 30, 2012 increased to $465.2 million from $444.5 million in the prior year period. Net sales increased due to higher shipment volumes and higher pricing.
Gross profit in the nine months ended June 30, 2012 increased to $113.7 million from $109.7 million in the prior year period. Gross margin decreased to 24.4% in the nine months ended June 30, 2012 compared to 24.7% in the prior year period, driven by a higher level of lower-margin sales at Mueller Systems and Echologics as these businesses expand their capabilities.
SG&A in the nine months ended June 30, 2012 increased to $75.0 million compared to $67.6 million in the prior year period. The majority of this increase related to ongoing investment in Echologics, which was acquired in December 2010, and Mueller Systems. SG&A was 16.1% of net sales in the nine months ended June 30, 2012 compared to 15.2% of net sales in the prior year period. Anvil
Net sales in the nine months ended June 30, 2012 increased to $277.6 million from $263.8 million in the prior year period. Net sales increased primarily due to higher pricing.
Gross profit in the nine months ended June 30, 2012 increased to $80.8 million from $73.4 million in the prior year period. Gross margin improved to 29.1% in the nine months ended ended June 30, 2012 from 27.8% in the prior year period, driven primarily by improved sales pricing.
SG&A increased to $53.1 million in the nine months ended June 30, 2012 compared to $50.4 million in the prior year period. This was the result of small increases that were not individually meaningful across the business. Corporate
SG&A decreased to $22.2 million in the nine months ended June 30, 2012 from $22.3 million in the prior year period.
Liquidity and Capital Resources
We had cash and cash equivalents of $53.7 million at June 30, 2012. We also had $141.3 million of borrowing capacity under our asset based lending agreement (the "ABL Agreement") using June 30, 2012 data. In April 2012, we received $94.0 million in cash, subject to additional adjustments, from the sale of U.S. Pipe. We believe there are net additional purchase price adjustments related to net working capital that would increase the purchase price by $9.2 million. However, the purchaser has claimed net purchase price adjustments related to net working capital that would reduce the purchase price by $5.2 million. This dispute will be resolved by an independent auditor who has been selected by the parties, and we cannot make a reliable estimate of what the resolution may be. The resolution of this purchase price adjustment dispute will result in an adjustment to our recorded loss on sale of discontinued operations.
During the quarter ended June 30, 2012, we repaid the outstanding balance of $48.0 million on the ABL Agreement and redeemed 10% aggregate principal amount, or $22.5 million, of the Senior Unsecured Notes at a redemption price of 103% plus accrued and unpaid interest and recorded a loss on early extinguishment of debt of $1.5 million.