What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2020-11-19 compared with 2019-11-20 · 629 added, 505 removed, 1115 unchanged (50% of the section changed)

14 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We did not include in our assessment the internal controls of Krausz, which we acquired in fiscal 2019 and included in the our results for the year ended September 30, 2019.

At September 30, 2019, Krausz total assets represented 12.5% of our total assets and Krausz represented 3.9% of our net sales for the year ended September 30, 2019.

We assessed the effectiveness of our internal control over financial reporting at September 30, 2020.

5 unchanged sentences

The name, age at November 18, 2020 and position of each of our executive officers and directors at September 30, 2020 are presented below.

President and Chief Executive Officer

Marietta Edmunds Zakas

Executive Vice President and Chief Financial Officer

Executive Vice President, Chief Legal and Compliance Officer and Secretary

Vice President and Chief Accounting Officer

Executive Vice President, Sales and Marketing

Senior Vice President, Operations & Supply Chain

Joseph Schrock

Vice President, Operations Controller

Vice President, Human Resources

Christine Ortiz

Name Age Position

Scott Hall 56 President and Chief Executive Officer

Heinrichs 52 Executive Vice President, Chief Legal and Compliance Officer and Secretary

Marietta Edmunds Zakas 61 Executive Vice President and Chief Financial Officer

Cofield 61 Senior Vice President, Operations & Supply Chain

Helms 53 Senior Vice President, Chief Human Resource Officer

Mize 44 Senior Vice President, Sales and Marketing

Feyerherm 49 Vice President, Operations Controller

Nancarrow 46 Vice President and Chief Accounting Officer

Franklin 75 Director

Hansen 71 Director

Kolb 84 Director

O’Brien 77 Director

Christine Ortiz 50 Director

Rethore 79 Director

Thomas 76 Director

Tokarz 71 Director

Van Arsdell 70 Director

Scott Hall has served as our President and Chief Executive Officer since January 2017.

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Hall earned his Bachelor of Commerce degree from Memorial University of Newfoundland and his MBA from the University of Western Ontario Ivey School of Business.

Marietta Edmunds Zakas has served as our Executive Vice President and Chief Financial Officer since January 2018.

She served as Senior Vice President, Strategy, Corporate Development and Communications from November 2006 to December 2017.

She was also the interim head of Human Resources from January 2016 to December 2017.

Previously, Ms.

Zakas held various positions at Russell Corporation, an athletic apparel, footwear and equipment company, culminating in her role as Corporate Vice President, Chief of Staff, Business Development and Treasurer.

She earned a Bachelor of Arts degree with honors from Randolph-Macon Woman’s College (now known as Randolph College), a Master of Business Administration degree from the University of Virginia Darden School of Business and a Juris Doctor from the University of Virginia School of Law.

Zakas is a director of Atlantic Capital Bank and Atlantic Capital Bancshares.

Heinrichs has served as our Executive Vice President, Chief Legal and Compliance Officer and Secretary since August 2018.

8 unchanged sentences

Heinrichs earned his MBA from the Kellogg School of Management at Northwestern University in 2008, his law degree from Tulane University in 1994, and his Bachelor of Arts degree from the University of Virginia.

Marietta Edmunds Zakas has served as our Executive Vice President and Chief Financial Officer since January 2018.

She served as Senior Vice President, Strategy, Corporate Development and Communications from November 2006 to December 2017.

She was also the interim head of Human Resources from January 2016 to December 2017.

Previously, Ms.

Zakas is a director of Atlantic Capital Bank and Atlantic Capital Bancshares.

Index to Financial Statements

Nancarrow has served as our Vice President and Chief Accounting Officer since January 2018.

He served as the Company’s Senior Director, Financial Reporting and Assistant Controller since December 2014 and the Company’s Director of Financial Reporting since September 2006.

Nancarrow earned a Bachelor of Science degree from The Ohio State University and is a certified public accountant.

Rogowski has served as our Executive Vice President, Business Development since October 2017.

Mr Rogowski also served as our Executive Vice President, Sales and Marketing from October 2017 to September 2019, and was President of Infrastructure from May 2009 to October 2017.

Previously, Mr.

Rogowski was President and/or Chief Executive Officer of Performance Fibers, Inc., a polyester industrial fibers business from 2004 to 2009.

He earned a Bachelor of Science degree from Virginia Polytechnic Institute and State University, a Master of Science degree from the University of Akron and a Master of Business Administration degree from the University of Richmond.

Cofield has served as our Senior Vice President, Operations & Supply Chain since January 2018.

5 unchanged sentences

Cofield achieved the rank of Major before resigning his commission.

Joseph Schrock has served as our Vice President and General Manager of our Brass, Gas and Repair Value Stream since October 2019.

Schrock served as our Vice President, Operations Controller from January 2018 to September 2019, Vice President, Operations Controller of Mueller Co.

LLC from October 2017 to January 2018, Senior Director of Finance, Controller from February 2016 to September 2017, Division Controller from May 2010 to January 2016 and Plant Controller from May 2005 to April 2010.

Helms has served as our Senior Vice President and Chief Human Resources Officer since February 2020.

Previously, Mr.

Schrock served as Division Controller of the MasterBrand Cabinets division of Fortune Brands Home & Security, Inc.

from January 2004 to April 2005 and was Division Accounting Manager from November 1995 to December 2003.

Schrock earned his Bachelor of Science degree and his Executive MBA from Millikin University.

O’Keefe has served as our Vice President, Human Resources since December 2017, and was Senior Director, Talent & Rewards/Human Resources from January 2016 to November 2017.

Helms held the position of Executive Vice President and Chief Human Resource Officer at Synovus Financial Corporation and of Senior Vice President, Human Resources at Genuine Parts Company.

Helms earned a Bachelor of Science degree from King College, a Bachelor of Mechanical Engineering from Georgia Institute of Technology and a Master of Business Administration from Ohio University.

Mize has served as our Senior Vice President, Sales and Marketing since October 2019.

He served as Vice President and General Manager of the Brass, Gas and Repair Value Stream from October 2017 to September 2019;

Chief Financial Officer and Vice President of Mueller Co.

LLC from March 2010 to September 2017;

Corporate Controller from January 2007 to February 2010;

and Manager of Financial Reporting and Analysis from October 2004 to December 2006.

Previously, Mr.

Mize served as Senior Audit Supervisor of Archer Daniels Midland from May 1998 to September 2004.

Mize earned a Bachelor of Science degree from Illinois State University and a Master of Business Administration from Millikin University.

Feyerherm has served as our Vice President, Operations Controller since November 2019.

Previously, Ms.

O’Keefe served as our Director, Talent Management & Human Resources, from February 2014 to December 2015;

Senior Manager, Talent Management and Human Resources from June 2011 to January 2014;

Employee Services Manager from February 2010 to June 2011;

and Manager, Health and Welfare Plans from February 2007 to February 2010.

She earned a Bachelor of Arts degree from Furman University.

Feyerherm served as a Financial Officer of the Water Products division of Lonza Group, Ltd.

from October 2011 to February 2019.

Feyerherm earned her Bachelor of Science degree from the State University of New York and is a certified public accountant.

Nancarrow has served as our Vice President and Chief Accounting Officer since January 2018.

He served as our Senior Director, Financial Reporting and Assistant Controller since December 2014 and our Director of Financial Reporting since September 2006.

Nancarrow earned a Bachelor of Science degree from The Ohio State University and is a certified public accountant.

Franklin has been a member of our board of directors since November 2010.

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Tokarz has been a member of our board of directors since April 2006.

Since 2002, Mr.

Tokarz has served as a member of the Tokarz Group, LLC, an investment company.

From 1985 until 2002, Mr.

1 unchanged sentence

L.P., a private equity company.

He served as non-executive Chairman of the Board of Walter Energy, Inc.

until July 2016, and until May 2017, he served as a director of CNO Financial Group, Inc.

(formerly Conseco, Inc.), an insurance provider, and as a director of Walter Investment Management Corp.

Tokarz has served as a director of the Tokarz Group, LLC, an investment company, since 2002 and of MVC Capital, Inc., a registered investment company, since 2003.

In 2007, he was honored by the Outstanding Directors Exchange as an Outstanding Director of the Year.

1 unchanged sentence

Van Arsdell has been a member of our board of directors since July 2019.

Van Arsdell is a former senior partner of Deloitte LLP, where he served as Chairman and Chief Executive Officer of Deloitte LLP from 2010-2012 and as Deputy Chief Executive Officer from 2009-2010.

He also served as a member of Deloitte’s Board from 2003-2009.

During this time, he held the position of Vice-Chairman of the Board and served on and chaired various committees thereof, including the Audit and Finance Committee.

He is currently a member of the Dean’s Advisory Council for the Gies College of Business at the University of Illinois and a member of the Board of Directors and a past Chair of the University of Illinois Alumni Alliance.

He also currently serves on the Board of Trustees of The Morton Arboretum, for which he is the Treasurer and Chair of the Finance Committee, and is a past chair of the Board of Trustees of The Conservation Foundation.

Van Arsdell earned both a Bachelor of Science degree in Accounting and a Masters of Accounting Science degree from the University of Illinois, where he was a James Scholar.

Van Arsdell is a former senior partner of Deloitte LLP, where he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP from 2010-2012 and as Deputy Chief Executive Officer from 2009-2010.

He also served as a member of Deloitte’s board of directors from 2003-2009, during which time he held the position of Vice-Chairman.

Van Arsdell has served as a member of the board of directors of First Midwest Bancorp, Inc.

since 2015 and has been a member of the audit committee of Brown Brothers Harriman since 2017.

Van Arsdell earned both a Bachelor of Science degree in Accounting and a Masters of Accounting Science degree from the University of Illinois.

He is a certified public accountant.

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outstanding options,

warrants and rights

Weighted average

warrants and rights Weighted average

exercise price of

outstanding options,

warrants and rights

Number of securities

warrants and rights Number of securities

remaining available

1 unchanged sentence

Equity compensation plans approved by stockholders:

Consists of the maximum number of shares that could to be earned upon exercise or vesting of outstanding stock-based awards granted under the 2006 Plan.

This includes 747,646 shares associated with share-settled performance units that may not be earned, depending on Company performance, as described in Note 11.

1,807,482 (1)

6,575,797 (3)

37,607 — 2,400,158 (4)

Total 1,845,089 8,975,955

(1) Consists of the maximum number of shares that could be earned upon exercise or vesting of outstanding stock-based awards granted under the 2006 Plan.

This includes 1,070,877 shares associated with share-settled performance units that may not be earned, depending on Company performance or stock market performance, as described in Note 12.

of the Notes to the Consolidated Financial Statements.

9 unchanged sentences

(a) Financial Statements

Index to financial statements

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at September 30, 2019 and 2018

Consolidated Statements of Operations for the years ended September 30, 2019, 2018 and 2017

Consolidated Statements of Comprehensive Income for the years ended September 30, 2019, 2018 and 2017

Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2019, 2018 and 2017

Consolidated Statements of Cash Flows for the years ended September 30, 2019, 2018 and 2017

Notes to Consolidated Financial Statements for the three years ended September 30, 2019

Financial Statement Schedules

Index to financial statements Page

Reports of Independent Registered Public Accounting Firm F-1

Consolidated Balance Sheets at September 30, 2020 and 2019 F-4

Consolidated Statements of Operations for the years ended September 30, 2020, 2019 and 2018 F-5

Consolidated Statements of Comprehensive Income for the years ended September 30, 2020, 2019 and 2018 F-6

Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2020, 2019 and 2018 F-7

Consolidated Statements of Cash Flows for the years ended September 30, 2020, 2019 and 2018 F-8

Notes to Consolidated Financial Statements for the three years ended September 30, 2020 F-9

(b) Financial Statement Schedules

Except for Schedule II, Valuation and Qualifying Accounts, the schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and, therefore, have been omitted.

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333-116590) filed on February 3, 2006.

Certificate of Merger, dated February 2, 2006, of Mueller Water Products, LLC and Mueller Water Products Co-Issuer, Inc.

with and into Mueller Holding Company, Inc.

Incorporated by reference to Exhibit 3.1.2 to Mueller Water Products, Inc.

Form 8-K (File no.

333-116590) filed on February 3, 2006.

2.5 Purchase Agreement dated as of January 6, 2017, by and among OEP Pioneer LLC, OEP Pioneer (Canada) Holdings Corp., Mueller Co.

15 unchanged sentences

001-32892) filed on June 12, 2018.

4.2 ** Description of Securities registered under Section 12 of the Securities Exchange Act of 1934.

10.2 Income Tax Allocation Agreement by and among Walter Industries, Inc., the Walter Affiliates (as defined therein), Mueller Water Products, Inc.

13 unchanged sentences

001-32892) filed on November 26, 2014.

Index to Financial Statements

10.6.1* Mueller Water Products, Inc.

8 unchanged sentences

001-32892) filed on May 30, 2006.

Index to Financial Statements

10.8* Form of Mueller Water Products, Inc.

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001-32892) filed on December 19, 2006.

Form of Executive Change-in-Control Severance Agreement.

Incorporated by reference to Exhibit 99.3 to Mueller Water Products, Inc.

Form 8-K (File no.

001-32892) filed on October 6, 2008.

10.16* Form of Amendment to Executive Employment Agreement.

26 unchanged sentences

001-32892) filed on August 8, 2016.

Agreement, by and between Mueller Water Products, Inc.

and Gregory S.

Rogowski, dated May 5, 2017.

Incorporated by reference to Exhibit 10.20.4 to Mueller Water Products, Inc.

Form 10-Q (File no.

001-32892) filed May 9, 2017.

Employment Agreement, dated April 10, 2009, between Mueller Water Products, Inc.

and Gregory Rogowski.

Incorporated by reference to Exhibit 10.26 to Mueller Water Products, Inc.

Form 10-K (File no.

001-32892) filed on November 23, 2010.

Amendment, dated December 1, 2009, to an Executive Employment Agreement, dated May 12, 2009, between Mueller Water Products, Inc.

and Gregory Rogowski.

Incorporated by reference to Exhibit 10.27 to Mueller Water Products, Inc.

Form 10-K (File no.

001-32892) filed on November 23, 2010.

Executive Change-in-Control Severance Agreement, dated May 4, 2009, between Mueller Water Products, Inc.

and Gregory Rogowski.

Incorporated by reference to Exhibit 10.28 to Mueller Water Products, Inc.

Form 10-K (File no.

001-32892) filed on November 23, 2010.

Amendment, dated March 31, 2012, to Executive Employment Agreement, dated September 9, 2005, between Mueller Water Products, Inc.

and Gregory Rogowski.

Incorporated by reference to Exhibit 99.1 to Mueller Water Products, Inc.

Form 10-Q (File no.

001-32892) filed on May 10, 2012.

Amendment, dated January 11, 2018, to Executive Change-in-Control Severance Agreement, dated May 4, 2009, between Mueller Water Products, Inc.

and Gregory Rogowski.

Incorporated by reference to Exhibit 10.2 to Mueller Water Products, Inc.

Form 8-K (File no.

001-32892) filed on January 12, 2018.

10.21 Purchase Agreement, dated March 7, 2012, among Mueller Water Products, Inc., Mueller Group, LLC and USP Holdings Inc.

2 unchanged sentences

001-32892) filed on March 8, 2012.

Index to Financial Statements

10.29* Employment Agreement, dated September 15, 2008, as amended, between Mueller Water Products Inc.

3 unchanged sentences

001-32892) filed November 22, 2016.

Executive Change-in-Control Severance Agreement, dated September 15, 2008, between Mueller Water Products and Marietta Edmunds Zakas.

Incorporated by reference to Exhibit 10.28.1 to Mueller Water Products, Inc.

Form 10-K (File no.

001-32892) filed November 22, 2016.

10.29.2* Fourth Amendment, dated December 27, 2017, to Employment Agreement, dated September 15, 2008, as amended, between Mueller Water Products Inc.

3 unchanged sentences

001-32892) filed December 28, 2017.

Amendment, dated January 11, 2018, to Executive Change-in-Control Severance Agreement, dated September 15, 2008, between Mueller Water Products and Marietta Edmunds Zakas.

Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc.

Form 8-K (File no.

001-32892) filed January 12, 2018.

10.29.4* Executive Change-in-Control Severance Agreement, dated September 30, 2019 by and between Mueller Water Products and Marietta Edmunds Zakas

4 unchanged sentences

001-32892) filed January 10, 2017.

Executive Change-in-Control Severance Agreement, dated January 4, 2017, by and between Mueller Water Products and John Scott Hall.

Incorporated by reference to Exhibit 10.3 to Mueller Water Products, Inc.

Form 8-K (File No.

001-32892) filed January 10, 2017.

Amendment, dated December 12, 2017, to Executive Change-in-Control Severance Agreement, dated January 4, 2017, by and between Mueller Water Products and J.

Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc.

Form 8-K (File No.

001-32892) filed December 13, 2017.

10.30.3* Executive Change-in-Control Severance Agreement, dated September 30, 2019 by and between Mueller Water Products and J.

4 unchanged sentences

001-32892) filed November 21, 2018.

Executive Change-in-Control Severance Agreement, dated July 18, 2018, by and between Mueller Water Products and Steven S.

Incorporated by reference to Exhibit 10.31.1 to Mueller Water Products, Inc.

Form 10-K (File No.

001-32892) filed November 21, 2018.

10.31.2* Executive Change-in-Control Severance Agreement, dated September 30, 2019 by and between Mueller Water Products and Steven S.

Executive Change-in-Control Severance Agreement, dated September 30, 2019 by and between Mueller Water Products and Gregory Rogowski

14.1* Code of Business Conduct and Ethics for Mueller Water Products, Inc.

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32.1** Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Index to Financial Statements

32.2** Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101** The following financial information from the Annual Report on Form 10-K for the year ended September 30, 2020, formatted in XBRL (Extensible Business Reporting Language), (i) the Consolidated Balance Sheets , (ii) the Consolidated Statements of Operations and Other Comprehensive Income , (iii) the Consolidated Statements of Stockholders’ Equity , (iv) the Consolidated Statements of Cash Flows , and (v) the Notes to Consolidated Financial Statements .

104** Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management compensatory plan, contract or arrangement

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Pursuant to the requirements of the Securities Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Scott Hall

President and Chief Executive Officer

November 19, 2019

/s/ Marietta Edmunds Zakas

Executive Vice President and Chief Financial Officer (principal financial officer)

November 19, 2019

Signature Title Date

/s/ Scott Hall President and Chief Executive Officer November 18, 2020

/s/ Marietta Edmunds Zakas Executive Vice President and Chief Financial Officer (principal financial officer) November 18, 2020

Marietta Edmunds Zakas

/s/ Michael S.

Vice President and Chief Accounting Officer (principal accounting officer)

November 19, 2019

Nancarrow Vice President and Chief Accounting Officer (principal accounting officer) November 18, 2020

/s/ Shirley C.

November 19, 2019

Franklin Director November 18, 2020

/s/ Thomas J.

November 19, 2019

/s/ Christine Ortiz

November 19, 2019

Hansen Director November 18, 2020

Kolb Director November 18, 2020

O’Brien Director November 18, 2020

/s/ Christine Ortiz Director November 18, 2020

Christine Ortiz

/s/ Bernard G.

November 19, 2019

Rethore Director November 18, 2020

Director November 18, 2020

/s/ Michael T.

November 19, 2019

Tokarz Director November 18, 2020

/s/ Stephen C.

November 19, 2019

Van Arsdell Director November 18, 2020

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Mueller Water Products, Inc.

To the Stockholders and the Board of Directors of Mueller Water Products, Inc.

Opinion on the Financial Statements

20 unchanged sentences

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Valuation of Intangible Assets Resulting from the Acquisition of Krausz Industries Development Ltd

Description of the Matter

As described in Note 4 to the consolidated financial statements, in December 2018, the Company completed its acquisition of Krausz Industries Development Ltd and subsidiaries (“Krausz”) for $140.7 million, net of cash acquired, including the assumption of certain debt of $13.2 million.

The Company accounted for the business combination by recognizing the assets acquired and liabilities assumed at their estimated acquisition date fair values.

Among the assets acquired, the Company recognized identifiable intangible assets of $45.4 million related to patents ($32.1 million), customer relationships ($8.7 million), and tradenames ($4.6 million).

Auditing the fair values of the identified intangible assets was complex and subjective due to the significant estimation uncertainty in management’s estimates of the fair values of these assets.

In particular, the patents and customer relationship intangible estimates were sensitive to significant assumptions such as forecasted revenues, EBITDA margins and discount rates.

The tradenames intangible estimates were sensitive to forecasted revenues and the royalty rate.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit

We tested the Company’s controls over review of the fair values of the acquired intangible assets.

This included testing controls over management’s review of the forecasted results, the discount rates and the royalty rate used in the fair value estimates.

To test the valuation of the identifiable intangible assets, we performed audit procedures that included, among others, assessing valuation methodologies and testing the significant assumptions and underlying data used by the Company.

Valuation of Goodwill - Krausz Reporting Unit

Description of the Matter As described in Note 6 to the consolidated financial statements, goodwill is tested at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

As of September 1, 2020, the Company performed a quantitative assessment of the $87.7 million in goodwill of the Krausz Industries (“Krausz”) reporting unit.

The Company determined the fair value of the Krausz reporting unit using valuation techniques including the discounted cash flow method, a form of the income approach, and the guideline public company method, a form of the market approach.

Auditing management’s impairment test over the Krausz reporting unit goodwill using the discounted cash flow method involved especially subjective judgments due to the significant estimation uncertainty in determining the fair value of the reporting unit.

In particular, the fair value estimate was sensitive to significant assumptions such as forecasted revenues, EBITDA margins and the discount rate.

These significant assumptions are forward-looking and could be affected by future industry, market and economic conditions.

How We Addressed the Matter in Our Audit We tested the Company’s controls over review of the fair value of the Krausz reporting unit.

This included testing controls over management’s review of the valuation model and the significant assumptions described above.

To test the estimated fair value of the Krausz reporting unit, we performed audit procedures that included, among others, assessing the methodologies used to estimate fair value, testing the significant assumptions used to develop the fair value estimate, and testing the underlying data used by the Company in its analysis for completeness and accuracy.

For example, we evaluated the reasonableness of management’s forecasted revenues and EBITDA margins used in the fair value estimates by comparing those assumptions to the historical results of Krausz and current industry, market and economic forecasts.

We also involved our valuation specialists to evaluate the valuation methodologies and the reasonableness of the discount rate and royalty rate assumptions used in the estimates.

As part of this evaluation, we compared the discount rate and royalty rate assumptions to market data.

In addition, we performed a sensitivity analysis on the significant assumptions to evaluate the change in the fair values of the intangible assets that would result from the changes in assumptions.

We also involved our valuation specialists to evaluate the valuation methodologies and the reasonableness of the discount rate.

As part of this evaluation, we compared the discount rate to market data.

In addition, we performed a sensitivity analysis on the significant assumptions to evaluate the potential change in the fair value of the reporting unit that would result from the changes in assumptions.

We have served as the Company’s auditor since 2007.

3 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Mueller Water Products, Inc.

To the Stockholders and Board of Directors of Mueller Water Products, Inc.

Opinion on Internal Control over Financial Reporting

3 unchanged sentences

and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Krausz Industries Development Ltd.

and subsidiaries, which is included in the 2019 consolidated financial statements of the Company and constituted 12.5% of total assets as of September 30, 2019 and 3.9% of net sales for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Krausz Industries Development Ltd.

and subsidiaries.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended September 30, 2020, and the related notes and our report dated November 18, 2020 expressed an unqualified opinion thereon.

25 unchanged sentences

Receivables, net 180.8 172.8

Inventories 162.5 191.4

Other current assets 29.0 26.0

2 unchanged sentences

Intangible assets 408.9 433.7

Goodwill 99.8 95.7

Other noncurrent assets 51.3 23.9

Total assets $ 1,395.0 $ 1,337.3

Liabilities and equity:

16 unchanged sentences

Noncontrolling interest — 2.2

Total equity 640.7 592.3

Total liabilities and equity $ 1,395.0 $ 1,337.3

5 unchanged sentences

Year ended September 30,

2020 2019 2018

(in millions, except per share amounts)

Net sales $ 964.1 $ 968.0 $ 916.0

Cost of sales 635.9 647.1 626.1

Gross profit 328.2 320.9 289.9

Operating expenses:

4 unchanged sentences

Operating income 116.8 124.3 121.7

Pension costs other than service

Pension costs (benefits) other than service ( 3.0 ) 0.4 1.0

Interest expense, net 25.5 19.8 20.9

3 unchanged sentences

Income before income taxes 94.1 82.1 95.7

Income tax (benefit) expense

Income from continuing operations

Income from discontinued operations

Earnings per basic share:

Continuing operations

Discontinued operations

Earnings per diluted share:

Continuing operations

Discontinued operations

Income tax expense (benefit) 22.1 18.3 ( 9.9 )

Net income $ 72.0 $ 63.8 $ 105.6

Net income per share:

Basic $ 0.46 $ 0.40 $ 0.67

Diluted $ 0.45 $ 0.40 $ 0.66

Weighted average shares outstanding:

Basic 157.8 157.8 158.2

Diluted 158.6 159.0 159.7

Dividends declared per share $ 0.2100 $ 0.2025 $ 0.1900

5 unchanged sentences

Year ended September 30,

2020 2019 2018

(in millions)

Net income $ 72.0 $ 63.8 $ 105.6

Other comprehensive income (loss):

4 unchanged sentences

Income tax effects — — ( 0.9 )

11.3 ( 3.2 ) 19.0

Comprehensive income $ 83.3 $ 60.6 $ 124.6

5 unchanged sentences

FOR THE THREE YEARS ENDED SEPTEMBER 30, 2020

stock Additional

capital Accumulated

deficit Accumulated

comprehensive

Non-controlling interest

loss Non-controlling interest Total

(in millions)

Balance at September 30, 2017 $ 1.6 $ 1,494.2 $ ( 955.6 ) $ ( 51.8 ) $ 1.1 $ 489.5

Net income (loss)

Net income — — 105.6 — 0.4 106.0

Dividends declared — ( 30.1 ) — — — ( 30.1 )

5 unchanged sentences

Balance at September 30, 2018 1.6 1,444.5 ( 850.0 ) ( 32.8 ) 1.5 564.8

Net income — — 63.8 — 0.7 64.5

Dividends declared — ( 32.0 ) — — — ( 32.0 )

5 unchanged sentences

Balance at September 30, 2019 1.6 1,410.7 ( 786.2 ) ( 36.0 ) 2.2 592.3

Net income — — 72.0 — — 72.0

Dividends declared — ( 33.1 ) — — — ( 33.1 )

3 unchanged sentences

Stock repurchased under buyback program — ( 5.0 ) — — — ( 5.0 )

Acquisition of joint venture partner’s interest — ( 2.5 ) — — ( 2.2 ) ( 4.7 )

Other comprehensive loss, net of tax — — — 11.3 — 11.3

6 unchanged sentences

Year ended September 30,

2020 2019 2018

(in millions)

Operating activities:

Less income from discontinued operations

Income from continuing operations

Net income $ 72.0 $ 63.8 $ 105.6

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

Depreciation 29.6 26.0 20.9

Amortization 28.2 27.0 22.8

Retirement plans 2.8 2.0 2.8

3 unchanged sentences

Gain on disposal of assets — ( 2.5 ) ( 9.0 )

Other, net 8.0 2.4 3.4

Changes in assets and liabilities, net of acquisitions:

Receivables ( 7.5 ) ( 1.4 ) ( 18.9 )

Inventories 24.9 ( 17.4 ) ( 18.4 )

Other assets 0.9 ( 7.4 ) ( 2.0 )

Accounts payable ( 17.6 ) ( 11.0 ) 7.7

Walter Energy Accrual

Walter Energy accrual (payment) ( 22.0 ) 22.0 —

Other current liabilities 6.6 ( 6.1 ) 32.7

2 unchanged sentences

Net cash provided by operating activities

140.3 92.5 133.1

Investing activities:

4 unchanged sentences

Financing activities:

Repayment of debt

Repayment of Krausz debt

Issuance of debt

Dividends paid ( 33.1 ) ( 32.0 ) ( 30.1 )

Acquisition of joint venture partner’s interest ( 5.2 ) — —

Stock repurchased under buyback program ( 5.0 ) ( 10.0 ) ( 30.0 )

Common stock issued 3.5 5.2 7.3

Deferred financing costs paid

Employee taxes related to stock-based compensation ( 0.9 ) ( 1.3 ) ( 2.1 )

Repayment of debt — — ( 486.3 )

Repayment of Krausz debt — ( 13.2 ) —

Issuance of debt — — 450.0

Deferred financing costs paid ( 1.1 ) — ( 6.9 )

Other 0.4 0.4 ( 0.2 )

Net cash used in financing activities ( 41.4 ) ( 50.9 ) ( 98.3 )

Net cash flows from discontinued operations:

Operating activities

Investing activities

Financing activities

Net cash provided by discontinued operations

Effect of currency exchange rate changes on cash 0.8 ( 0.2 ) ( 1.5 )

16 unchanged sentences

In July 2014, Infrastructure acquired a 49 % ownership in an industrial valve joint-venture for $ 1.7 million.

Due to substantive control features in the joint-venture agreement, all of the joint venture’s assets, liabilities and results of operations are included in our consolidated financial statements.

Due to substantive control features in the joint-venture agreement, all of the joint venture’s assets, liabilities and results of operations were included in our consolidated financial statements.

We included an adjustment for the income attributable to noncontrolling interest in selling, general and administrative expenses.

Noncontrolling interest is recorded at its carrying value, which approximates fair value.

As described in Note 18.

Noncontrolling interest was recorded at its carrying value, which approximated fair value.

Infrastructure acquired the noncontrolling interest on October 3, 2019.

2 unchanged sentences

We include the financial statements of Krausz in our consolidated financial statements on a one-month lag.

Refer to Note 4 for additional disclosures related to the acquisition.

Refer to Note 5.

for additional disclosures related to the acquisition.

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses and the disclosure of contingent assets and liabilities for the reporting periods.

14 unchanged sentences

Index to Financial Statements

During 2016, FASB issued standard ASC 326 - Current Expected Credit Losses to replace the previous GAAP “incurred loss” impairment approach with an approach intended to reflect “expected credit losses,” which will require consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

During 2016, FASB issued standard ASC 326 - Current Expected Credit Losses to replace the existing GAAP “incurred loss” impairment approach with an approach intended to reflect “expected credit losses,” which will require consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

We will be required to use a forward-looking expected credit loss model for receivables.

The standard will be adopted upon the effective date for us beginning October 1, 2020.

We are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes, and systems.

While we are in process of completing our analysis, we do not expect the effect of this adoption on October 1, 2020 on our financial statements to be material.

The following table summarizes information concerning our allowance for credit losses.

2020 2019 2018

(in millions)

2 unchanged sentences

Balances written off, net of recoveries — ( 0.2 ) ( 0.7 )

Reclassification under ASC 606

Reclassification due to adoption of revenue accounting standard

Other 0.3 — 0.1

Balance at end of year $ 4.8 $ 3.5 $ 4.0

5 unchanged sentences

The following table summarizes information concerning our inventory valuation reserves.

2020 2019 2018

(in millions)

2 unchanged sentences

Inventory disposed ( 0.7 ) ( 1.2 ) ( 1.2 )

Other 0.2 0.2 ( 0.3 )

Balance at end of year $ 11.7 $ 7.5 $ 5.1

8 unchanged sentences

Direct internal and external costs to implement computer systems and internal-use software are capitalized.

Capitalized costs are depreciated over the estimated useful life of the system or software, generally 6 years, beginning when site installation or module development is complete and ready for use.

Capitalized costs are depreciated over the estimated useful life of the system or software, generally 6 years, beginning when software is complete and ready for its intended use.

Liabilities are recognized at fair value for asset retirement obligations related to plant and landfill closures in the period in which they are reasonably estimable and the carrying amounts of the related long-lived assets are correspondingly increased.

1 unchanged sentence

At September 30, 2020 and 2019, asset retirement obligations were $ 3.8 million and $ 4.5 million, respectively.

Index to Financial Statements

Leases- During 2016, FASB issued Accounting Standards Update 2016-02 Leases , which will require us to recognize lease assets and lease liabilities for those leases currently referred to as operating leases.

This Update is effective for 2020 and requires the modified retrospective application and adoption of the requirement.

We will adopt this guidance using the modified retrospective transition method beginning in the first quarter of 2020.

We expect to record operating lease “right-of-use” assets and related lease liabilities of approximately $30.0 million each.

Leases- Refer to Note 4.

for information regarding our leases.

Accounting for the Impairment of Long-Lived Assets- We test indefinite-lived intangible assets and goodwill for impairment annually (or more frequently if events or circumstances indicate possible impairment.) We perform our annual impairment testing at September 1.

We amortize finite-lived intangible assets over their respective estimated useful lives and review for impairment if events or circumstances indicate possible impairment.

Refer to Note 6.

for information regarding our impairment testing.

Index to Financial Statements

Workers Compensation- Our exposure to workers compensation claims is generally limited to $ 1 million per incident.

6 unchanged sentences

On an undiscounted basis, workers compensation liabilities were $ 7.2 million and $ 8.7 million at September 30, 2020 and 2019, respectively.

On a discounted basis, workers compensation liabilities were $ 7.6 million and $ 7.7 million at September 30, 2019 and 2018 , respectively.

We apply a risk-free discount rate, generally a U.S.

For purposes of discounting these liabilities, we apply a risk-free discount rate, generally a U.S.

Treasury bill rate, for each policy period.

The rate used is one with a duration that corresponds to the weighted average expected payout period for each policy period.

We apply the rate with a duration that corresponds to the weighted average expected payout period for each policy period.

Once a discount rate is applied to a policy period, it remains the discount rate for that policy period until all claims are paid.

On a discounted basis, workers compensation liabilities were $ 6.2 million and $ 7.6 million at September 30, 2020 and 2019, respectively.

Warranty Costs- We accrue for warranty expenses, which can include costs of repair and/or replacement, including labor, materials, equipment, freight and reasonable overhead costs.

We accrue for the estimated cost of product warranties at the time of sale if such costs are determined to be probable and reasonably estimable at that time.

We monitor and analyze our warranty experience and costs periodically and may revise our warranty reserves as necessary.

Critical factors in our reserve analyses include warranty terms, specific claim situations, general incurred and projected failure rates, the nature of product failures, product and labor costs, and general business conditions.

As discussed in Note 17.

, we recognized $ 14.1 million and $ 9.8 million of Technologies’ warranty expense during the years ended September 30, 2018 and 2017 , respectively, related to certain radios and other products sold in prior periods.

We monitor and analyze our warranty experience and costs periodically and may revise our warranty accruals as necessary.

Critical factors in our accrual analyses include warranty terms, specific claim situations, general incurred and projected failure rates, the nature of product failures, product and labor costs, and general business conditions.

We recognized $ 14.1 million of Technologies’ warranty expense during the year ended September 30, 2018 related to certain radios and other products sold in prior periods.

Activity in accrued warranty, reported as part of both other current liabilities and other noncurrent liabilities, is presented below.

2020 2019 2018

(in millions)

10 unchanged sentences

All such amortization will be over the remaining term of the respective debt.

Index to Financial Statements

Derivative Instruments and Hedging Activities- We managed interest rate risk to some extent using derivative instruments.

Refer to Note 8.

for disclosures related to our ABL agreement.

Derivative Instruments and Hedging Activities- Prior to June 30, 2018, we managed interest rate risk to some extent using derivative instruments.

We had designated our interest rate swap contracts as cash flow hedges of interest payments.

4 unchanged sentences

As a result, the changes in the fair value of these contracts are reported currently in earnings.

Index to Financial Statements

Income Taxes- Deferred tax liabilities and deferred tax assets are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns.

13 unchanged sentences

We are indemnified under an agreement with a predecessor to Tyco for certain environmental liabilities that existed at August 16, 1999.

Revenue Recognition - See Note 3.

for more information regarding our revenues.

Refer to Note 18.

for additional disclosures regarding our environmental liabilities.

Revenue Recognition -Refer to Note 3.

for disclosures regarding our revenues.

Stock-based Compensation- Compensation expense for stock-based awards granted to employees and directors is based on the fair value at the grant dates for our stock-settled share awards and is based on the fair value at each reporting date for our cash-settled share awards.

Refer to Note 12.

for more information regarding our stock-based compensation.

8 unchanged sentences

Gains and losses resulting from foreign currency transactions are included in earnings as incurred.

Index to Financial Statements

Revenue from Contracts with Customers

We recognize revenue when control of promised products or services is transferred to our customers, in amounts that

reflect the consideration to which we expect to be entitled in exchange for those products or services.

We account for a

contract when it has approval and commitment from both parties, the rights of the parties are identified, the payment terms are

identified, the contract has commercial substance and collectability of consideration is probable.

We determine the appropriate

revenue recognition for our contracts with customers by analyzing the type, terms and conditions of each contract or

arrangement with a customer.

We recognize revenue when control of promised products or services is transferred to our customers, in amounts that reflect the consideration to which we expect to be entitled in exchange for those products or services.

We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, the payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

We determine the appropriate revenue recognition for our contracts with customers by analyzing the type, terms and conditions of each contract or arrangement with a customer.

Disaggregation of Revenue

We disaggregate our revenues from contracts with customers by reportable segment ( Note 16.

), and further by geographical region as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Refer to Note 17.

for disaggregation our revenues from contracts with customers by reportable segment and by geographical region, which we believe best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Geographical region represents the location of the customer.

Index to Financial Statements

Contract Asset and Liability Balances

The timing of revenue recognition, billings and cash collections results in customer receivables, advance payments and billings in excess of revenue recognized.

Differences in the timing of revenue recognition, billing and cash collection result in customer receivables, advance payments and billings in excess of revenue recognized.

Customer receivables include amounts billed and currently due from customers as well as unbilled amounts (contract assets).

Amounts are billed in accordance with contractual terms and unbilled amounts arise when the timing of billing differs from the timing of revenue recognized.

Advance payments and billings in excess of revenue are recognized and recorded as deferred revenue, the majority of

which is classified as current based on the timing when we expect to recognize revenue.

We include current deferred revenue

as part of our accrued expenses.

Deferred revenues represent contract liabilities and are recorded when customers remit

contractual cash payments in advance of us satisfying performance obligations under contractual arrangements.

liabilities are reversed when the performance obligation is satisfied and revenue is recognized.

Advance payments and billings in excess of revenue are recognized and recorded as deferred revenue, the majority of which is classified as current based on the timing when we expect to recognize revenue.

We include current deferred revenue as part of our accrued expenses.

Deferred revenues represent contract liabilities and are recorded when customers remit cash payments in advance of our satisfaction of performance obligations under contractual arrangements.

Contract liabilities are reversed when the performance obligation is satisfied and revenue is recognized.

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

14 unchanged sentences

Revenues from products and services transferred to customers over time represented 1 % of our revenues in the year ended September 30, 2020.

Index to Financial Statements

We offer warranties to our customers in the form of assurance-type warranties, which provide assurance that the products provided will function as intended and comply with any agreed-upon specifications.

These cannot be purchased separately.

There was no change to our warranty accounting as a result of the implementation of the new revenue standard and we will continue to use our current cost accrual method in accordance with GAAP.

Costs to Obtain or Fulfill a Contract

We incur certain incremental costs to obtain a contract, which primarily relate to incremental sales commissions.

commissions are paid based on shipment rather than on order and we reserve the right to claw back any commissions in case of

product returns or lost collections.

As the expected benefit associated with these incremental costs is one year or less based on

the nature of the product sold and benefits received, we have applied a practical expedient and therefore do not capitalize the

related costs and expense them as incurred, consistent with our previous accounting treatment.

Our commissions are paid based on a combination of orders and shipments and we reserve the right to claw back any commissions in case of product returns or lost collections.

As the expected benefit associated with these incremental costs is generally one year or less based on the nature of the product sold and benefits received, we have applied a practical expedient and therefore do not capitalize the related costs and expense them as incurred, consistent with our previous accounting treatment.

Index to Financial Statements

We adopted the new leasing standard utilizing the modified retrospective approach on October 1, 2019.

Adoption of the new standard resulted in an increase to total assets and liabilities due to the recording of lease right-of-use assets (“ROU”) and lease liabilities related to our operating lease portfolio.

We elected the package of three practical expedients for transition, which include the carry forward of our leases without reassessing whether any contracts are leases or contain leases, lease classification and initial direct costs and applying hindsight when determining the lease term and when assessing impairment of right-of-use assets at the adoption date.

This allows us to update our assessments according to new information and changes in facts and circumstances that have occurred since lease inception.

Presentation of Leases

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

Our leases have remaining lease terms of up to 13 years.

The terms and conditions of our leases may include options to extend or terminate the lease which are considered and included in the lease term when these options are reasonably certain of exercise.

We determine if a contract is (or contains) a lease at inception by evaluating whether the contract conveys the right to control the use of an identified asset.

For all classes of leased assets, we have elected the practical expedient to account for any non-lease components in the contract together with the related lease component in the same unit of account.

ROU assets and lease liabilities are recognized in our consolidated balance sheets at the commencement date based on the present value of remaining lease payments over the lease term.

Additionally, ROU assets include any lease payments made at or before the commencement date, as well as any initial direct costs incurred, and are reduced by any lease incentives received.

As most of our operating leases do not provide an implicit rate, we apply our incremental borrowing rate to determine the present value of remaining lease payments.

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

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

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

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

Our short-term lease expense for the year ended September 30, 2020 and short-term lease commitments at September 30, 2020 are immaterial.

We have certain lease contracts with terms and conditions that provide for variability in the payment amount based on changes in facts or circumstances occurring after the commencement date.

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

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

The components of lease cost are presented below.

Year ended September 30,

2020 2019 2018

(in millions)

Operating lease cost $ 6.3 $ 5.8 $ 6.4

Finance lease cost 1.3 1.0 0.8

Total lease expense $ 7.6 $ 6.8 $ 7.2

Supplemental cash flow information related to leases for the year ended September 30, 2020 is presented below, in millions.

Operating cash used for operating leases $ 6.1

Financing cash used for finance leases $ 1.3

Index to Financial Statements

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

Right of use assets:

Operating leases Other noncurrent assets $ 25.6

Finance leases Plant, property and equipment 2.5

Total right of use assets $ 28.1

Lease liabilities:

Operating leases - current Other current liabilities $ 4.0

Operating leases - noncurrent Other noncurrent liabilities 23.3

Finance leases - current Current portion of long-term debt 1.1

Finance leases - noncurrent Long-term debt 1.4

Total lease liabilities $ 29.8

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

Weighted-average remaining lease term (years):

Operating leases 7.87

Finance leases 2.52

Weighted-average interest rate:

Operating leases 5.64 %

Finance leases 4.96 %

Total lease liabilities at September 30, 2020 have scheduled maturities as follows:

Operating Leases Finance Leases

(in millions)

2021 $ 5.5 $ 1.2

Thereafter 12.5 —

Total lease payments 34.9 2.7

imputed interest 7.6 0.2

Present value of lease liabilities $ 27.3 $ 2.5

Acquisitions and Divestitures

Divestiture of Anvil

On January 6, 2017, we sold Anvil to affiliates of One Equity Partners for cash proceeds of $ 305.7 million and the agreement by the purchaser to reimburse us for expenditures to settle certain previously existing liabilities.

The table below presents a summary of the sale of Anvil, in millions.

Gross cash proceeds

Noncash proceeds

Total proceeds

Transaction expenses

Assets and liabilities disposed

Gain on sale, pre-tax

Gain on sale, net of tax

The table below presents a summary of the operating results for the Anvil discontinued operations in 2017, in millions.

These operating results do not reflect what they would have been had Anvil not been classified as discontinued operations.

Cost of sales

Operating expenses:

Selling, general and administrative

Other charges

Total operating expenses

Operating income

Interest expense, net

Income before income taxes

Income tax expense

Gain on sale, net of tax

Income from discontinued operations

Divestiture of Burlington plant

On December 4, 2017, we sold an idle property in Burlington, New Jersey that had previously been a plant in our former

On December 4, 2017, we sold an idle property in Burlington, New Jersey that had previously been a plant in our former U.S.

Pipe segment and recorded a gain of $ 9.0 million in our Corporate segment.

We received $ 7.4 million, recorded net current assets of $ 0.8 million and conveyed plant, property and equipment with a net carrying value of $ 0.4 million, and the buyer assumed related environmental liabilities with a carrying value of $ 1.2 million.

Index to Financial Statements

Acquisition of Singer Valve

On February 15, 2017, we acquired Singer Valve, a manufacturer of automatic control valves, and its affiliates for aggregate cash consideration of $ 26.6 million net of post-closing adjustments.

Singer Valve had net sales of approximately $ 15 million in calendar 2016 and is included in Infrastructure.

The allocation of consideration to the assets and liabilities of these companies, is presented below, in millions.

Assets acquired, net of cash:

Other current assets

Property, plant and equipment

Intangible assets

Liabilities assumed:

Accounts payable

Other current liabilities

Current and long term debt

Deferred income tax liability

Consideration paid

Acquisition of Krausz

2 unchanged sentences

We believe that the Krausz product line is complementary to our existing Infrastructure products and will improve our positioning in the pipe repair market.

We have recognized the assets acquired and liabilities assumed at their estimated acquisition date fair values, with the

excess of the purchase price over the estimated fair values of the identifiable net assets acquired recorded as goodwill.

accounting for the business combination is based on currently available information and is considered preliminary.

We are still gathering information about property, plant, and equipment, based on facts that existed as of the date of the acquisition.

In addition, not all Israeli tax returns for the year ended December 31, 2018 have been completed, and completion of these returns may identify changes to tax-related amounts that existed at the acquisition date and require adjustment to the opening balance sheet.

During 2019, we made adjustments to our initially-recorded estimates of the fair value of the assets acquired and liabilities assumed, which decreased net working capital by $ 2.0 million , increased non-current assets and non-current liabilities by $ 1.7 million each, increased deferred income taxes by $ 9.9 million and increased intangible assets by $ 37.8 million , and which resulted in a net decrease in goodwill of $ 21.4 million .

The final accounting for the business combination may differ materially from that presented in these consolidated financial statements.

The results of Krausz, including net sales of $ 37.2 million , are included within our Infrastructure segment for all periods following the acquisition date.

The preliminary estimated goodwill below is attributable to the strategic opportunities and synergies that we expect to arise

from the acquisition of Krausz and the value of its workforce.

Index to Financial Statements

We have recognized the assets acquired and liabilities assumed at their estimated acquisition date fair values, with the excess of the purchase price over the estimated fair values of the identifiable net assets acquired recorded as goodwill.

During 2020, we reduced property, plant and equipment by $ 0.3 million, which resulted in an increase to goodwill of $ 0.3 million.

The accounting for the business combination is considered final.

The results of Krausz, including net sales of $ 37.2 million for 2019, are included within our Infrastructure segment for all periods following the acquisition date.

The goodwill below is attributable to the strategic opportunities and synergies that we expect to arise from the acquisition of Krausz and the value of its workforce.

The goodwill is nondeductible for income tax purposes.

Identified intangible assets consist of patents, customer relationships and favorable leasehold interests with an estimated weighted average useful life of approximately 12 years and tradenames with an indefinite life.

Values of intangible assets were determined using a discounted cash flow method.

Index to Financial Statements

The following is a summary of the estimated fair values of the net assets acquired (in millions):

Assets, net of cash:

Receivables $ 6.9

Inventories 17.0

Other current assets 0.2

3 unchanged sentences

Customer relationships 8.7

Trade names 4.6

Favorable leasehold interests 2.3

Goodwill 80.4

Accounts payable ( 5.5 )

6 unchanged sentences

Intangible Assets and Goodwill

At March 31, 2020, as a result of the COVID-19 pandemic, we performed a quantitative interim impairment assessment for goodwill and indefinite-lived intangible assets associated with the Krausz acquisition and concluded that these assets were not impaired.

We completed our annual goodwill impairment test and determined th ere were no impairments at September 1, 2020.

Intangible Assets

4 unchanged sentences

Amortization expense for each of the next five years is scheduled to be $ 3.2 million in 2021, $ 2.7 million in 2022, $ 2.2 million in 2023, $ 1.5 million in 2024 and $ 0.8 million in 2025.

Index to Financial Statements

At September 30, 2020, the remaining weighted-average amortization period for the business combination-related finite-lived customer relationship and technology intangible assets were 4.2 years and 3.9 years, respectively.

1 unchanged sentence

Amortization expense for each of the next five years is scheduled to be $ 24.9 million in 2021, $ 24.7 million in 2022, $ 24.7 million in 2023, $ 24.3 million in 2024 and $ 4.8 million in 2025.

Index to Financial Statements

Intangible assets are presented below.

2 unchanged sentences

Capitalized internal-use software:

Cost $ 31.5 $ 30.2

Accumulated amortization ( 20.8 ) ( 17.5 )

2 unchanged sentences

Finite-lived intangible assets:

Technology 118.5 116.6

Customer relationships and other 370.2 370.0

2 unchanged sentences

Accumulated amortization:

Technology ( 81.0 ) ( 76.4 )

Customer relationships and other ( 281.2 ) ( 260.6 )

( 362.2 ) ( 337.0 )

Net book value 398.2 421.0

Total intangible assets net book value $ 408.9 $ 433.7

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis each September 1st and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Changes in the carrying amount of goodwill were as follows:

September 30,

(in millions)

3 unchanged sentences

Balance at end of year $ 99.8 $ 95.7

Index to Financial Statements

The components of income before income taxes from continuing operations are presented below.

2020 2019 2018

(in millions)

$ 89.7 $ 78.4 $ 97.3

4.4 3.7 ( 1.6 )

Income before income taxes $ 94.1 $ 82.1 $ 95.7

Index to Financial Statements

On December 22, 2017, HR-1, commonly referred to as the Tax Cuts and Jobs Act (“Act”), was enacted, which made significant revisions to federal income tax laws, including lowering the corporate income tax rate to 21 % from 35 % effective January 1, 2018, overhauling the taxation of income earned outside the United States and eliminating or limiting certain deductions.

Our deferred tax assets and liabilities are recorded at the enacted tax rates in effect when we expect to recognize the related tax expenses or benefits.

The average of these rates varies slightly from year to year but historically has been approximately 39 % .

The average of these rates varies slightly from year to year but historically had been approximately 39 %.

With the legislation changing rates taking place in the quarter ended December 31, 2017, we remeasured our deferred tax items at an average rate of approximately 25 % and recorded an income tax benefit of $ 42.5 million.

The Act also imposes a one-time transition tax on the undistributed, previously-untaxed, post-1986 foreign “earnings and profits” (as defined by the IRS) of certain U.S.-owned corporations.

Determination of our transition tax liability requires us to calculate foreign earnings and profits going back to 1992 and then to assess our historical overall foreign loss position and the applicability of certain foreign tax credits.

In March 2018, we recorded a provisional transition tax of $ 7.5 million for the one-time deemed repatriation tax on accumulated foreign earnings of our foreign subsidiaries.

Upon further analyses of the Act and Notices and regulations issued and proposed by the U.S.

Department of the Treasury and IRS, we finalized our calculations of the transition tax liability during the quarter ended December 31, 2018.

As a result, we reduced our initial provision by $0.6 million , which is included as a component of income tax expense.

As of September 30, 2019, the remaining balance of our transition obligation is $5.8 million , which will be paid over the next seven years, as provided in the Act.

The Act also imposed a one-time transition tax on the undistributed, previously-untaxed, post-1986 foreign “earnings and profits” (as defined by the IRS) of certain U.S.-owned corporations.

In 2018, we recorded a provisional transition tax of $ 7.5 million for the one-time deemed repatriation tax on accumulated foreign earnings of our foreign subsidiaries.

We finalized our calculation of this transition tax liability during 2019 and reduced our initial provision by $0.6 million.

At September 30, 2020, the remaining balance of our transition obligation is $5.8 million, which will be paid annually through January 2026, as provided in the Act.

Other than for Krausz’s investment in its U.S.

subsidiary, we have not provided income taxes for unrepatriated foreign earnings that may be subject to withholding tax or any outside basis differences inherent in our foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations.

We have a foreign tax credit carryforward of $ 4.5 million that we do not expect to utilize prior to expiration.

We have a foreign tax credit carryforward of $ 4.5 million, which we have not recognized because we do not expect to utilize it prior to expiration.

The federal income tax returns for Mueller Co.

and Anvil are closed for years prior to 2005 and for Mueller Water Products, Inc.

for 2007 and 2008.

Our 2009 through 2015 returns are closed except to the extent net operating losses from those years have been utilized on subsequent years’ returns.

We also remain liable for any taxes related to U.S.

Pipe income for periods prior to 2012 pursuant to the terms of the sale agreement with the purchaser of the segment.

Our state income tax returns are generally closed for years prior to 2016, except to the extent of our state net operating loss carryforwards.

Our Canadian income tax returns are generally closed for years prior to 2013.

We do not have any material unpaid assessments.

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

2020 2019 2018

(in millions)

federal $ 10.9 $ 11.6 $ 25.7

state and local 2.7 3.9 7.1

14.9 17.0 33.4

federal 5.6 2.5 ( 42.6 )

state and local 2.0 ( 0.4 ) ( 1.0 )

( 0.4 ) ( 0.8 ) 0.3

7.2 1.3 ( 43.3 )

Income tax (benefit) expense $ 22.1 $ 18.3 $ ( 9.9 )

1 unchanged sentence

The reconciliation between income tax expense at the U.S.

federal statutory income tax rate and reported income tax expense from continuing operations is presented below.

federal statutory income tax rate and reported income tax expense is presented below.

2020 2019 2018

(in millions)

3 unchanged sentences

State income taxes, net of federal benefit 3.3 3.2 4.8

Domestic production activities deduction

Uncertain tax positions 1.0 ( 1.4 ) —

Nondeductible compensation 0.6 0.3 0.2

Nondeductible expenses, other than compensation 0.4 1.3 0.5

Valuation allowances 0.1 1.3 0.5

Basis difference in foreign investment 0.1 ( 1.1 ) —

Foreign income taxes — 0.1 —

Nondeductible compensation

Excess tax benefits related to stock compensation

Domestic production activities deduction — — ( 2.4 )

Federal tax rate change — — ( 42.5 )

Federal transition tax — ( 0.6 ) 7.5

Uncertain tax positions

Basis difference in foreign investment

Income tax (benefit) expense

Excess tax benefits related to stock compensation ( 0.5 ) ( 0.3 ) ( 0.6 )

Tax credits ( 1.8 ) ( 1.8 ) ( 1.7 )

Other ( 0.9 ) 0.1 0.4

Income tax expense (benefit) $ 22.1 $ 18.3 $ ( 9.9 )

The following table summarizes information concerning our gross unrecognized tax benefits.

(in millions)

Balance at beginning of year $ 3.3 $ 3.3

Increases related to current year positions 1.5 0.4

Increases related to prior year positions — 2.0

Decreases due to lapse in statute of limitations ( 0.3 ) ( 2.4 )

Balance at end of year $ 4.5 $ 3.3

Substantially all unrecognized tax benefits would, if recognized, impact the effective tax rate.

We recognize interest related to uncertain tax positions as interest expense and recognize any penalties incurred as a component of selling, general and administrative expenses.

At September 30, 2020 and 2019, we had $ 0.4 million and $ 0.3 million, respectively, of accrued interest expense related to unrecognized tax benefits.

Index to Financial Statements

Deferred income tax balances are presented below.

2 unchanged sentences

Deferred income tax assets:

Inventory reserves

Accrued expenses $ 12.2 $ 10.0

Stock-based compensation

Lease liabilities 7.3 —

Inventory 4.6 11.7

State net operating losses 3.0 2.8

Federal credit carryovers 3.0 2.8

Stock-based compensation 2.6 2.7

Pension 0.2 1.7

Other 1.1 2.4

Valuation allowance ( 2.9 ) ( 2.8 )

2 unchanged sentences

Intangible assets 90.2 95.6

Lease assets 6.6 —

Basis difference in foreign investment 5.0 4.7

Other 25.6 18.9

Total deferred income tax liabilities 127.4 119.2

Net deferred income tax liabilities $ 96.3 $ 87.9

Balance sheet presentation:

Deferred income taxes

Less deferred tax assets included in other noncurrent assets

Net deferred income tax liabilities

Index to Financial Statements

We reevaluate the need for a valuation allowance against our deferred tax assets each quarter, considering results to date, projections of taxable income, tax planning strategies and reversing taxable temporary differences.

Our state net operating loss carryforwards, which expire between years 2024 and 2032, remain available to offset future taxable earnings.

The following table summarizes information concerning our gross unrecognized tax benefits.

(in millions)

Balance at beginning of year

Increases related to prior year positions

Increases related to current year positions

Decreases due to lapse in statute of limitations

Balance at end of year

Substantially all unrecognized tax benefits would, if recognized, impact the effective tax rate.

We recognize interest related to uncertain tax positions as interest expense and recognize any penalties incurred as a component of selling, general and administrative expenses.

At September 30, 2019 and 2018 , we had $ 0.3 million and $ 0.8 million , respectively, of accrued interest expense related to unrecognized tax benefits.

The federal income tax returns for Mueller Co.

and Anvil are closed for years prior to 2005 and for Mueller Water Products, Inc.

for 2007 and 2008.

Our 2009 through 2014 returns are closed except to the extent net operating losses from those years have been utilized on subsequent years’ returns.

We also remain liable for any taxes related to U.S.

Pipe sales for periods prior to 2012 pursuant to the terms of the sale agreement with the purchaser of the segment.

Certain tax years remain open for our predecessor company, U.S.

Pipe, which was a subsidiary of Walter Energy in those years.

Our state income tax returns are generally closed for years prior to 2015, except to the extent of our state net operating loss carryforwards.

Our Canadian income tax returns are generally closed for years prior to 2012.

We do not have any material unpaid assessments.

Borrowing Arrangements

4 unchanged sentences

ABL Agreement — —

Other 2.5 2.1

Less deferred financing costs ( 4.9 ) ( 5.8 )

4 unchanged sentences

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

On July 19, 2018, we reduced our borrowing limit from $ 225 million to $ 175 million and wrote off a portion of the associated deferred financing costs, resulting in a loss on early extinguishment of debt of $ 0.3 million .

The ABL Agreement also permits us to increase the size of the credit facility by an additional $ 150 million in certain circumstances.

We may borrow up to $ 25 million through swing line loans and may have up to $ 60 million of letters of credit outstanding.

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

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

Index to Financial Statements

Borrowings under the ABL Agreement bear interest at a floating rate equal to LIBOR plus a margin ranging from 125 to 150 basis points, or a base rate, as defined in the ABL Agreement, plus a margin ranging from 25 to 50 basis points.

The amended ABL Agreement permits us to increase the size of the credit facility by an additional $ 150 million in certain circumstances subject to adequate borrowing base availability.

We may borrow up to $ 25 million through swing line loans and may have up to $ 60 million of letters of credit outstanding.

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

At September 30, 2020 the applicable rate was LIBOR plus 200 basis points.

The ABL Agreement terminates on July 13, 2021 .

We pay a commitment fee for any unused borrowing capacity under the ABL Agreement of 25 basis points per annum.

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

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

receivables and inventories, certain cash and other supporting obligations.

Borrowings are not subject to financial maintenance covenants unless excess availability is less than the greater of $ 17.5 million and 10 % of the Loan Cap as defined in the ABL Agreement.

Excess availability based on September 30, 2019 data, as reduced by outstanding letters of credit and accrued fees and expenses of $ 15.9 million , was approximately $ 140 million .

Excess availability based on September 30, 2020 data, as reduced by outstanding letters of credit and accrued fees and expenses of $ 14.1 million, was $ 133.9 million.

5.5% Senior Unsecured Notes.

11 unchanged sentences

We had a $ 500.0 million senior secured term loan (“Term Loan”), which accrued interest at a floating rate equal to LIBOR, subject to a floor of 0.75 %, plus 250 basis points.

The principal amount of the Term Loan was required to be repaid in quarterly installments, with any remaining principal due on November 25, 2021 .

We repaid the Term Loan on June 15, 2018 with the proceeds from the issuance of the Notes and cash on hand.

14 unchanged sentences

We have not designated these swaps as hedges and the changes in their fair value are included in earnings, where they offset the currency gains and losses associated with the intercompany loan.

The values of our currency swap contracts were liabilities of $ 0.3 million and $ 0.9 million as of September 30, 2019 and 2018, respectively, and are included in other noncurrent liabilities in our Consolidated Balance Sheets.

Index to Financial Statements

The values of our currency swap contracts were liabilities of $ 0.2 million and $ 0.3 million as of September 30, 2020 and 2019, respectively, and are included in other noncurrent liabilities in our Consolidated Balance Sheets.

Retirement Plans

We have had various pension plans (“Pension Plans”), which we have funded in accordance with their requirements and, where applicable, in amounts sufficient to satisfy the minimum funding requirements of applicable laws.

Defined Benefit Plans.

We have had various pension plans (“Pension Plans”), which we funded in accordance with their requirements and, where applicable, in amounts sufficient to satisfy the minimum funding requirements of applicable laws.

The Pension Plans provided benefits based on years of service and compensation or at stated amounts for each year of service.

The annual measurement date for all Pension Plans was September 30.

During the quarter ended March 31, 2019, we settled our obligations to our Canadian pension plan participants through a combination of lump-sum payments and purchases of annuities.

We made a net contribution to the plans of $ 0.7 million , which is included in pension costs other than service, to fund these settlements.

As a result, we no longer have any plan assets or obligation in connection with any Canadian defined benefit pension plan.

During 2018, with a recently negotiated labor contract, a group of our collectively bargained employees are no longer accruing benefits under a multi-employer pension plan.

The affected employees are now participants in our defined contribution retirement plan with an employer match and one-time contribution of $ 0.4 million , which vests through 2020.

During the quarter ended March 31, 2019, we recorded an estimated settlement liability for exiting this plan, which resulted in an expense of $ 1.1 million , which we included in other charges.

During the quarter ended June 30, 2019, we paid this amount and have settled the liability to the multi-employer pension plan.

As a result, at September 30, 2019, our only remaining defined benefit plan is our U.S.

After September 30, 2019, our only remaining defined benefit plan was our U.S.

Pension Plan (“Plan”).

We did not contribute to the Plan in 2018 or 2019 and do not anticipate contributing to the Plan in 2020.

During March 2017, the Financial Accounting Standards Board issued Accounting Standards Update No.

2017-07 (“ASU 2017-07”).

ASU 2017-07 required us to exclude from operating income the components of net periodic benefit cost other than service cost.

We adopted ASU 2017-07 on October 1, 2017, and this adoption required reclassification of pension costs other than service in the 2017 results.

The components of net periodic benefit cost for our Pension Plans are presented below.

(in millions)

Components of net periodic benefit cost excluded from operating income following adoption of ASU 2017-07:

Interest cost

Expected return on plan assets

Amortization of actuarial net loss

Pension settlement

Pension costs other than service

Net periodic benefit cost

Balance sheet information for Pension Plans with a net liability funded status is presented below.

September 30,

(in millions)

Projected benefit obligations

Accumulated benefit obligations

Fair value of plan assets

Index to Financial Statements

Balance sheet information for Pension Plans with a net asset funded status is presented below.

September 30,

(in millions)

Projected benefit obligations

Accumulated benefit obligations

Fair value of plan assets

Pension Plan activity in accumulated other comprehensive loss, before tax, in 2019 is presented below, in millions.

Balance at beginning of year

Actuarial gain

Prior year actuarial loss amortization to net periodic cost

Balance at end of year

We amortize amounts in accumulated other comprehensive loss representing unrecognized prior year service cost and unrecognized loss related to the Pension Plans over the weighted average life expectancy of their inactive participants.

Actuarial gains and losses are amortized using a corridor approach.

The gain/loss corridor is equal to ten percent of the greater of the benefit obligation and the market-related value of assets.

Gains and losses in excess of the corridor are generally amortized over the average remaining lifetime of the plan participants.

We expect to amortize $ 2.8 million of unrecognized loss into net periodic benefit cost from accumulated other comprehensive loss in 2020 .

A summary of key assumptions for our Pension Plans is below.

During 2019, we settled our obligations to our Canadian pension plan participants through a combination of lump-sum payments and purchases of annuities.

We made a net contribution to the plans of $ 0.7 million, which was included in pension costs other than service, to fund these settlements.

As a result, we no longer have any plan assets or obligation in connection with any Canadian defined benefit pension plan.

During 2018, under terms of a negotiated labor contract, a group of our collectively bargained employees are no longer accruing benefits under a multi-employer pension plan.

The affected employees are now participants in our defined contribution retirement plan with an employer match and one-time contribution of $ 0.4 million, which vested through 2020.

During 2019, we recorded and paid an estimated settlement liability for exiting this plan, which resulted in an expense of $ 1.1 million, which we included in other charges.

As a result, we no longer have any plan assets or obligation in connection with any multi-employer pension plan.

A summary of key assumptions for the valuations of our Pension Plans is below.

2020 2019 2018

Weighted average used to determine benefit obligations:

Discount rate

2.84 % 3.26 % 4.37 %

Weighted average used to determine net periodic cost:

Discount rate

3.26 % 4.37 % 3.88 %

Expected return on plan assets

5.00 % 4.93 % 4.68 %

The discount rates for determining the present value of pension obligations were selected using a “bond settlement” approach, which constructs a hypothetical bond portfolio that could be purchased such that the coupon payments and maturity values could be used to satisfy the projected benefit payments.

The discount rate is the equivalent rate that results in the present value of the projected benefit payments equaling the market value of this bond portfolio.

Only high quality (AA graded or higher), non-callable corporate bonds are included in this bond portfolio.

We rely on the Pension Plans’ actuaries to assist in the development of the discount rate model.

The expected returns on plan assets were determined with the assistance of the Pension Plans’ actuaries and investment consultants.

Expected returns on plan assets were developed using forward looking returns over a time horizon of 10 to 15 years for major asset classes along with projected risk and historical correlations.

Index to Financial Statements

3 unchanged sentences

Beginning of year $ 356.6 $ 333.4

Service cost 1.5 1.6

Interest cost 11.2 13.9

3 unchanged sentences

Decrease in obligation due to curtailment / settlement — ( 6.5 )

End of year $ 359.5 $ 356.6

Accumulated benefit obligations at end of year $ 359.5 $ 356.6

4 unchanged sentences

Benefits paid ( 23.5 ) ( 23.9 )

Settlements — ( 6.5 )

Other — ( 0.2 )

End of year $ 360.4 $ 351.6

Accrued benefit cost at end of year:

2 unchanged sentences

Other noncurrent assets $ 0.9 $ —

Other current liabilities

Other noncurrent liabilities — ( 5.0 )

$ 0.9 $ ( 5.0 )

Recognized in accumulated other comprehensive loss, before tax:

Prior year service cost

Net actuarial loss 74.0 78.4

The discount rate is the equivalent rate that results in the present value of the projected benefit payments equaling the market value of this bond portfolio.

Only high quality (AA graded or higher), non-callable corporate bonds are included in this bond portfolio.

We rely on the Pension Plans’ actuaries to assist in the development of the discount rate model.

The expected returns on plan assets were determined with the assistance of the Pension Plans’ actuaries and investment consultants.

Expected returns on plan assets were developed using forward looking returns over a time horizon of 10 to 15 years for major asset classes along with projected risk and historical correlations.

$ 74.0 $ 78.4

The components of net periodic benefit cost for our Pension Plans are presented below.

2020 2019 2018

(in millions)

Service cost $ 1.5 $ 1.6 $ 1.8

Components of net periodic cost (benefit) excluded from operating income:

Interest cost 11.2 13.9 14.3

Expected return on plan assets ( 16.9 ) ( 16.2 ) ( 16.5 )

Amortization of actuarial net loss 2.8 1.9 3.2

Pension settlement — 0.7 —

Other ( 0.1 ) 0.1 —

Pension costs (benefit) other than service ( 3.0 ) 0.4 1.0

Net periodic benefit cost (benefit) $ ( 1.5 ) $ 2.0 $ 2.8

Index to Financial Statements

P lan activity in accumulated other comprehensive loss, before tax, in 2020 is presented below, in millions.

Balance at beginning of year $ 78.4

Actuarial gain ( 1.6 )

Prior year actuarial loss amortization to net periodic cost ( 2.8 )

Balance at end of year $ 74.0

Actuarial gains and losses are amortized using a corridor approach.

The gain/loss corridor is equal to ten percent of the greater of the benefit obligation and the market-related value of assets.

Gains and losses in excess of the corridor are generally amortized over the average remaining lifetime of the plan participants.

We expect to amortize $ 2.5 million of unrecognized loss into net periodic benefit cost from accumulated other comprehensive loss in 2021.

We maintain a single trust that holds the assets of the Plan.

Near the end of 2017, we directed our investment manager to adjust the asset allocation from about 30 % equity investments to about 20 % equity investments.

Near the end of 2020, we directed our investment manager to adjust the asset allocation from about 20 % equity investments to about 30 % equity investments in 2021.

This trust’s strategic asset allocations, tactical range at September 30, 2020 and actual asset allocations are presented below.

Strategic asset allocation

Actual asset allocations at

Strategic asset allocation Actual asset allocations at

September 30,

2 unchanged sentences

Equity investments 20 15 - 20 % 21 19 21

Cash — 0 - 5 % 1 2 2

100 % 100 % 100 % 100 %

Assets of the Plan are allocated to various investments to attain diversification and reasonable risk-adjusted returns while also managing the exposure to asset and liability volatility.

7 unchanged sentences

• Mutual funds are valued at the closing price reported on the active market.

Index to Financial Statements

The assets of the Plan by level within the fair value hierarchy are presented below.

September 30, 2020

Level 1 Level 2 Total

(in millions)

Large cap stocks:

Fixed income $ — $ 280.3 $ 280.3

Large cap index funds — 32.8 32.8

Mid cap stocks:

Mid cap index funds — 13.5 13.5

Small cap stocks:

Small cap growth funds — 12.7 12.7

International stocks:

Mutual funds 7.4 — 7.4

International funds — 10.4 10.4

Total equity 7.4 69.4 76.8

Cash and cash equivalents 3.3 — 3.3

Index to Financial Statements

$ 10.7 $ 349.7 $ 360.4

September 30, 2019

Level 1 Level 2 Total

(in millions)

Large cap stocks:

Fixed income $ — $ 277.8 $ 277.8

Large cap index funds — 29.8 29.8

Mid cap stocks:

Mid cap index funds — 9.8 9.8

Small cap stocks:

Small cap growth funds — 9.6 9.6

International stocks:

Mutual funds 6.9 — 6.9

International funds — 10.3 10.3

Total equity 6.9 59.5 66.4

Cash and cash equivalents 7.4 — 7.4

$ 14.3 $ 337.3 $ 351.6

Our estimated future pension benefit payments are presented below in millions.

2026-2030 108.2

Defined Contribution Retirement Plans- Certain of our employees participate in defined contribution 401(k) plans or similar non-U.S plans.

10 unchanged sentences

Stock repurchased under buyback program ( 2,573,475 )

Other ( 6,475 )

Shares outstanding at September 30, 2018 157,332,121

12 unchanged sentences

Stock-based Compensation Plans

The effect of stock-based compensation on our statements of operations, including discontinued operations, is presented below.

The effect of stock-based compensation on our statements of operations is presented below.

2020 2019 2018

(in millions, except per share data)

23 unchanged sentences

Restricted stock unit activity under the 2006 Plan is summarized below.

Restricted stock units

grant date fair value per unit

Restricted stock units Weighted

grant date fair value per unit Weighted

term (years) Aggregate

Outstanding at September 30, 2017 625,830 $ 11.23 0.9

Granted 276,658 12.20

Vested ( 342,038 ) 10.84 $ 4.2

Cancelled ( 78,888 ) 11.41

Outstanding at September 30, 2018 481,562 12.14 1.0

Granted 233,830 10.10

Vested ( 259,107 ) 11.75 2.6

Cancelled ( 19,263 ) 11.43

Outstanding at September 30, 2019 437,022 11.31 0.9

Granted 301,979 11.55

Vested ( 295,241 ) 11.40 3.4

Cancelled ( 35,254 ) 11.48

Outstanding at September 30, 2020 408,506 11.41 0.8

Performance Shares.

Performance-based restricted stock units (“PRSUs”) represent a target number of units that may be paid out at the end of a multi-year award cycle consisting of annual performance periods coinciding with our fiscal years.

Performance-Based Awards.

Our performance-based awards consist of performance-based restricted stock units (“PRSUs”).

PRSUs represent a target number of units that may be paid out at the end of a multi-year award cycle consisting of annual performance periods coinciding with our fiscal years.

As determined at the date of award, PRSUs may settle in cash-value equivalent of, or directly in, shares of our common stock.

Settlement will range from zero to two times the number of PRSUs granted, depending on our financial performance against predetermined targets.

Committee establishes performance goals within 90 days of the beginning of each performance period, with such date referred to as the “grant date”.

The grant date for each year’s performance period is set when the Comp.

Committee establishes performance goals for the period, normally within 90 days of the beginning of each performance period.

At the end of each annual performance period, the Comp.

2 unchanged sentences

PRSUs vest on the last day of an award cycle, unless vested sooner due to a “Change of Control” of the Company, or the death, disability or Retirement of a participant.

Index to Financial Statements

We recognize compensation expense for stock-settled PRSUs starting on the first day of the applicable performance period and ending on the respective vesting dates.

1 unchanged sentence

In 2020 and 2019, 93,647 shares and 181,065 shares, respectively, vested related to PRSUs.

Index to Financial Statements

Stock-settled PRSUs activity under the 2006 Plan is summarized below.

Settlement year

Performance period

Grant date per unit fair value

Units forfeited

Performance factor

December 2, 2014

Award date Settlement year Performance period Grant date per unit fair value Units

awarded Units forfeited Net units Performance factor Shares

December 1, 2015 2019 2016 $ 9.38 77,823 ( 3,998 ) 73,825 1.021 75,375

2017 13.26 77,824 ( 3,997 ) 73,827 1.000 73,827

2018 12.50 77,824 ( 61,841 ) 15,983 1.357 21,689

November 29, 2016 2020 2017 13.26 59,285 ( 5,279 ) 54,006 1.000 54,006

2018 12.50 59,286 ( 39,910 ) 19,376 1.357 26,294

2019 10.53 59,290 ( 39,909 ) 19,381 0.645 12,501

January 23, 2017 2020 2017 13.15 19,012 — 19,012 1.000 19,012

2018 12.50 19,011 — 19,011 1.357 25,798

2019 10.53 19,011 — 19,011 0.645 12,263

November 28, 2017 2021 2018 12.50 57,092 — 57,092 1.357 77,474

2019 10.53 57,092 ( 4,793 ) 52,299 0.645 33,733

2020 11.26 57,104 ( 21,679 ) 35,425 0.909 32,202

November 27, 2018 2022 2019 10.53 110,954 ( 8,751 ) 102,203 0.645 65,921

2020 11.26 110,954 ( 13,182 ) 97,772 0.909 88,875

2021 110,967 ( 26,484 ) 84,483

December 3, 2019 2023 2020 11.26 69,988 ( 2,747 ) 67,241 0.909 61,123

2021 69,989 ( 9,970 ) 60,019

2022 69,989 ( 9,970 ) 60,019

Market-Based Awards.

Our market-based awards consist of market-based restricted stock units (“MRSUs”).

MRSUs represent a target number of units that may be paid out at the end of a three-fiscal year award cycle based on a calculation of our relative total shareholder return (“TSR”) performance as compared with the TSRs of a selected peer group.

Settlements in our common shares, will range from zero to two times the number of MRSUs granted, depending on our TSR performance ranking within the peer group.

The fair values of MRSUs are fixed at the date of grant and the related expense is recognized ratably over the vesting period, which is roughly three years from the date of grant.

The table below provides information regarding MRSU awards, which were valued using Monte Carlo simulations on the dates the units were granted.

December 3, 2019 January 28, 2020 February 24, 2020

Fair value at grant date $ 14.94 $ 16.76 $ 18.17

Units granted 147,213 2,763 7,498

Variables used in determining grant date fair value:

Dividend yield 1.87 % 1.76 % 1.73 %

Risk-free rate 1.53 % 1.44 % 1.23 %

Expected term (in years) 2.83 2.67 2.60

Stock Options.

3 unchanged sentences

No stock options were granted since 2015.

Index to Financial Statements

Stock option activity under the 2006 Plan is summarized below.

Options Weighted

per option Weighted

term (years) Aggregate

Outstanding at September 30, 2017 2,440,654 $ 5.72 2.5 $ 17.3

Exercised ( 851,628 ) 7.00 3.8

Cancelled — —

Outstanding at September 30, 2018 1,589,026 5.03 1.9 10.3

Exercised ( 726,636 ) 5.20 4.4

Cancelled — —

Outstanding at September 30, 2019 862,390 4.89 2.0 5.5

Exercised ( 534,291 ) 4.15 3.3

Cancelled — —

Outstanding at September 30, 2020 328,099 $ 6.11 2.3 $ 1.4

Exercisable at September 30, 2020 328,099 $ 6.11 2.3 $ 1.4

Index to Financial Statements

Stock option exercise prices are equal to the closing price of our common stock on the relevant grant date.

The ranges of exercise prices for stock options outstanding at September 30, 2020 are summarized below.

Exercise price

exercise price

Exercisable options

Exercise price Options Weighted

exercise price Weighted

term (years) Exercisable options Weighted

exercise price

$ 0.00 - $ 4.99 129,949 $ 3.19 0.8 129,949 $ 3.19

$ 5.00 - $ 9.99 198,150 8.02 3.3 198,150 8.02

328,099 $ 6.11 2.3 328,099 $ 6.11

Employee Stock Purchase Plan.

12 unchanged sentences

The outstanding phantom units had a fair value of $ 10.39 per unit at September 30, 2020 and our accrued liability for such units was $ 2.2 million.

Index to Financial Statements

Phantom Plan activity is summarized below.

Plan units Weighted

per unit Weighted

term (years) Aggregate

Outstanding at September 30, 2017 352,007 $ 11.36 0.9

Granted 163,199 12.40

Vested ( 170,675 ) $ 2.1

Cancelled ( 81,758 ) 12.10

Outstanding at September 30, 2018 262,773 12.12 0.6

Granted 180,747 10.53

Vested ( 132,289 ) 1.4

Cancelled ( 55,077 ) 11.61

Outstanding at September 30, 2019 256,154 11.39 0.9

Granted 188,973 11.26

Vested ( 118,908 ) 1.3

Cancelled ( 11,744 ) 11.23

Outstanding at September 30, 2020 314,475 11.16 0.9

1 unchanged sentence

Supplemental Balance Sheet Information

Selected supplemental balance sheet information is presented below.

Selected supplemental asset information is presented below.

September 30,

3 unchanged sentences

Finished goods 42.8 52.5

$ 162.5 $ 191.4

Other current assets:

Prepaid expenses $ 10.9 $ 9.6

Non-trade receivables 8.5 6.3

Income taxes 5.5 4.7

Maintenance and repair tooling 3.7 4.2

Other 0.4 1.2

$ 29.0 $ 26.0

Property, plant and equipment:

Land $ 6.2 $ 5.2

Buildings 80.4 68.9

Machinery and equipment 406.3 362.9

Construction in progress 57.4 48.0

$ 550.3 $ 485.0

Accumulated depreciation ( 296.5 ) ( 267.9 )

$ 253.8 $ 217.1

Other noncurrent assets:

Operating lease right of use asset $ 25.6 $ —

Maintenance and repair supplies and tooling 17.5 16.4

Workers compensation reimbursement receivable 2.1 3.1

Note receivable 1.8 1.8

Pension asset 0.9 —

Other 3.4 2.6

$ 51.3 $ 23.9

Index to Financial Statements

Selected supplemental liability information is presented below.

September 30,

(in millions)

Other current liabilities:

1 unchanged sentence

Customer rebates 9.6 8.7

Interest 7.3 7.3

Warranty 7.2 6.5

Deferred revenues 5.6 4.7

Refund liability 4.3 3.3

Operating lease liabilities 4.0 —

Taxes other than income taxes 3.9 3.3

Environmental

Restructuring and severance 2.8 1.7

Environmental 1.2 1.2

Income taxes 0.2 0.6

Accrued settlements 0.2 0.2

Walter tax liability — 22.0

Other 4.8 5.0

$ 86.6 $ 93.0

Other noncurrent liabilities:

Operating lease liabilities $ 23.3 $ —

Warranty 7.2 10.7

Transition tax 5.2 5.8

Unrecognized income tax benefits 4.5 3.3

Workers compensation 3.8 1.9

Asset retirement obligation 3.5 3.6

CARES Act deferred tax liabilities 3.3 —

Deferred development grant 2.5 —

Pension — 5.0

Other 3.0 2.9

$ 56.3 $ 33.2

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.

The CARES Act is a relief package intended to assist in many aspects of the American economy through direct secured loans and deferrals of the employer portion of social security taxes through the end of calendar year 2020, with 50% of the deferral due December 31, 2021 and the remainder due December 31, 2022.

For the fiscal year ended, September 30, 2020, we have elected these tax deferrals, which are approximately $3.3 million as shown above.

Supplemental Statement of Operations Information

On September 7, 2017, we announced a strategic reorganization plan designed to accelerate our product innovation and revenue growth.

We have adopted a matrix management structure, where business teams have line and cross-functional responsibility for managing distinct product portfolios.

Engineering, operations, sales and marketing and other functions were centralized to better align with business needs and generate greater efficiencies.

We recorded $ 4.6 million in other charges primarily for severance related to this strategic reorganization plan in 2018 and consider this plan to be complete at September 30, 2019.

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

Expenses incurred for these plans were primarily personnel-related and included in other charges in the Consolidated Statements of Operations.

We recorded $ 4.3 million related to this strategic reorganization plan in 2019, and a $ 0.7 million accrual remains as of September 30, 2019.

During October 2018, we announced the move of our Middleborough, Massachusetts facility to Atlanta, which will allow us to consolidate our resources and accelerate product innovation through creation of a research and development center of excellence for software and electronics in Atlanta, Georgia.

We incurred expenses of $ 0.5 million and $ 4.3 million as of September 30, 2020 and 2019, respectively, related to this reorganization, which are included in other charges, and it was essentially completed in 2020.

Index to Financial Statements

During November 2019, we announced the purchase of a new facility in Kimball, Tennessee, which will allow us to support and enhance our investment in our Chattanooga large casting foundry.

As a result of this reorganization, we announced the subsequent closures of our facilities in Hammond, Indiana and Woodland, Washington.

We have incurred expenses of $ 2.5 million related to this reorganization in fiscal 2020, which is included in other charges.

On February 15, 2019, we experienced a mass shooting tragedy at our Henry Pratt facility in Aurora, Illinois.

The event resulted in the death of five employees and injuries to one employee and six law enforcement officials.

For the year ended September 30, 2019 , we incurred $ 5.1 million in expenses related to this tragedy, which are included in other charges, and a $0.9 million accrual remains as of September 30, 2019.

The event resulted in the deaths of five employees and injuries to one employee and six law enforcement officials.

For the years ended September 30, 2020 and September 30, 2019, we incurred expenses of $ 0.9 million and $ 5.1 million, respectively, related to this tragedy, which are included in other charges.

These amounts are net of anticipated insurance recoveries.

Selected supplemental statement of operations information is presented below.

2020 2019 2018

(in millions)

1 unchanged sentence

Research and development $ 15.0 $ 14.3 $ 11.6

Advertising 3.3 7.1 7.1

Interest expense, net:

3 unchanged sentences

Interest rate swap contracts — — 0.6

Term Loan — — 14.4

Capitalized interest ( 0.3 ) ( 3.0 ) —

Other interest expense 0.3 ( 0.2 ) 0.6

26.6 23.3 25.3

Interest income ( 1.1 ) ( 3.5 ) ( 4.4 )

$ 25.5 $ 19.8 $ 20.9

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss is presented below.

Foreign currency translation

Pension liability, net of tax

Foreign currency translation Pension liability, net of tax Total

(in millions)

Balance at September 30, 2019 $ — $ ( 36.0 ) $ ( 36.0 )

Other comprehensive income (loss) before reclassifications

Other comprehensive income before reclassifications 8.0 1.2 9.2

Amounts reclassified out of accumulated other comprehensive loss — 2.1 2.1

Other comprehensive income (loss)

Other comprehensive income 8.0 3.3 11.3

Balance at September 30, 2020 $ 8.0 $ ( 32.7 ) $ ( 24.7 )

1 unchanged sentence

Supplemental cash flow information is presented below.

2020 2019 2018

(in millions)

Cash paid, net:

Interest $ 24.3 $ 22.2 $ 8.9

Income taxes $ 15.3 $ 29.1 $ 10.7

Index to Financial Statements

13 unchanged sentences

Pipe and Anvil.

Corporate assets principally consist of our cash and certain real property previously owned by U.S.

Corporate assets principally consist of our cash, operating lease assets, and certain real property previously owned by U.S.

Pipe and Anvil.

Business segment assets consist primarily of receivables, inventories, property, plant and equipment, intangible assets and other noncurrent assets.

Index to Financial Statements

Our top customers are Ferguson and Core & Main.

Our largest customers are Ferguson and Core & Main.

Information regarding concentrations of our net sales and accounts receivable is presented below.

Percentage of gross sales:

2020 2019 2018

Percentage of gross revenue:

10 largest customers 53 % 53 % 54 %

2 largest customers 34 % 34 % 34 %

Ferguson percentage of gross sales:

Ferguson percentage of gross revenue:

Consolidated 17 % 18 % 19 %

Infrastructure 16 % 17 % 18 %

Core & Main percentage of gross sales:

Technologies 22 % 30 % 28 %

Core & Main percentage of gross revenue:

Consolidated 17 % 16 % 15 %

Infrastructure 19 % 18 % 17 %

2 unchanged sentences

Customer receivables:

Core & Main $ 37.1 $ 31.9

Ferguson 26.1 25.8

Index to Financial Statements

Geographical area information is presented below.

United States

United States Israel Other Total

(in millions)

2 unchanged sentences

September 30, 2019 201.3 9.7 6.1 217.1

Index to Financial Statements

September 30,

1 unchanged sentence

Infrastructure disaggregated net revenues:

Central $ 222.2 $ 214.2

Northeast 187.5 183.1

Southeast 162.3 162.7

West 216.9 212.8

United States $ 788.9 $ 772.8

Canada 65.5 69.0

Other international locations 31.1 29.2

$ 885.5 $ 871.0

Technologies disaggregated net revenues:

Central $ 18.7 $ 27.8

Northeast 19.7 20.4

Southeast 22.1 33.5

West 13.6 10.3

United States $ 74.1 $ 92.0

Canada and other international locations 4.5 5.0

$ 78.6 $ 97.0

Index to Financial Statements

Summarized financial information for our segments is presented below.

Infrastructure

Infrastructure Technologies Corporate Total

(in millions)

2020 $ 885.5 $ 78.6 $ — $ 964.1

2019 871.0 97.0 — 968.0

2018 818.8 97.2 — 916.0

Operating income (loss):

2020 $ 186.7 $ ( 13.1 ) $ ( 56.8 ) $ 116.8

2019 182.3 ( 8.7 ) ( 49.3 ) 124.3

2018 180.1 ( 24.4 ) ( 34.0 ) 121.7

Depreciation and amortization:

Total pension settlement and other charges:

2020 $ 49.1 $ 8.5 $ 0.2 $ 57.8

2019 44.8 7.9 0.3 53.0

2018 37.4 6.1 0.2 43.7

Other charges:

2020 $ 0.6 $ 0.1 $ 12.3 $ 13.0

2019 1.7 — 14.6 16.3

2018 0.1 0.1 10.3 10.5

Capital expenditures:

2020 $ 64.5 $ 2.8 $ 0.4 $ 67.7

2019 80.4 5.5 0.7 86.6

2018 47.3 8.3 0.1 55.7

Total assets:

34 unchanged sentences

Walter Energy .

We were a member of the Walter Energy federal tax consolidated group, through December 14, 2006, at which time the company was spun-off from Walter Industries.

Until our spin-off from Walter Energy, we joined in the filing of the Walter Energy consolidated federal income tax return for each taxable year during which we were a member of the consolidated group.

As a result, we are jointly and severally liable for the federal income tax liability, if any, of the consolidated group for each of those years.

Accordingly, we could be liable in the event any such federal income tax liability is incurred, and not discharged, by any other member of the Walter Energy tax consolidated group for any period during which we were included in the Walter Energy tax consolidated group.

We were a member of the Walter Energy, Inc (“Walter Energy”) federal tax consolidated group through December 14, 2006, at which time the Company was spun-off from Walter Energy.

Until our spin-off from Walter Energy, we joined in the filing of Walter Energy’s consolidated federal income tax return for each taxable year during which we were a member of the consolidated group.

As a result, we were jointly and severally liable for the federal income tax liability, if any, of the consolidated group for each of those years.

In July 2015, Walter Energy filed for bankruptcy protection under Chapter 11 of the U.S.

Bankruptcy Code in the Northern District of Alabama (“Chapter 11 Case”).

On February 2, 2017, the Chapter 11 Case was converted to a liquidation proceeding under Chapter 7 of the U.S.

Bankruptcy Code, pursuant to which Walter Energy is now in the process of being wound down and liquidated.

The IRS had alleged that Walter Energy owed substantial amounts for prior taxable periods in which we were a member of the Walter Energy tax consolidated group (specifically, 1983-1994, 2000-2002 and 2005).

On January 11, 2016, the IRS filed a proof of claim in the Chapter 11 Case, alleging that Walter Energy owed taxes,interest and penalties for the years 1983-1994, 2000-2002 and 2005 in an aggregate amount of $ 554.3 million ( $ 229.1 million of which the IRS claimed was entitled to priority status in the Chapter 11 Case).

The IRS asserted that its claim was based on an alleged settlement of Walter Energy’s tax liability for years 1983 through 1994, which Walter Energy disputed.

In the proof of claim, the IRS included an alternative calculation in an aggregate amount of $ 860.4 million , which it asserted would be appropriate in the event the alleged settlement were determined to be non-binding ( $ 535.3 million of which the IRS claimed was entitled to priority status in the Chapter 11 Case).

The IRS had indicated its intent to pursue collection of amounts included in the proofs of claim from former members of the Walter Energy tax consolidated group.

We have been working constructively with the parties involved in this matter in an effort to reach a consensual resolution with respect to the Walter Tax Liability.

On November 5, 2019, we acknowledged and agreed to be bound by a settlement agreement between the bankruptcy trustee in the Walter Bankruptcy Case and the Internal Revenue Service to resolve the Walter Tax Liability.

On November 18, 2019, the settlement agreement was approved by the U.S.

Bankruptcy Court in the Northern District of Alabama which is responsible for the Walter Bankruptcy Case.

The approval was made over the objection of a third party and is subject to appeal and/or a motion for reconsideration, the outcome of which cannot be predicted.

Should the approval order become effective, under the terms of the settlement agreement, we would contribute approximately $ 22 million to the settlement, plus interest through the payment date, with another former Walter Energy subsidiary agreeing to contribute approximately $ 17 million to the settlement.

At September 30, 2019, we had accrued a current liability of $ 22 million .

No assurances as to the timing or outcome of any appeal or motion to reconsider the approval order can be made;

however, we expect our liabilities with respect to the Walter Tax Liability will be fully resolved should the order become effective and we make the required contributions.

Bankruptcy Code in the Northern District of Alabama (“Bankruptcy Case”).

The IRS alleged that Walter Energy owed substantial amounts (“Walter Tax Liability”), and on January 11, 2016, the IRS filed a proof of claim in the Bankruptcy Case, alleging that Walter Energy owed taxes, interest and penalties in an aggregate amount of $554.3 million.

In the proof of claim, the IRS included an alternative calculation in an aggregate amount of $860.4 million.

At September 30, 2019, we had accrued a current liability of $ 22.0 million in connection with this matter.

On November 18, 2019, we paid $22.2 million, including additional accrued interest, to the IRS in final settlement of this tax dispute.

All appeal periods have expired, and our liabilities with respect to the Walter Tax Liability have been fully resolved.

City of Jackson, MS v.

Siemens Industry, Inc., et al.

On or about August 22, 2013, Mueller Systems, LLC (“Mueller Systems”) entered into an agreement with Siemens Industries, Inc (“Siemens”) to provide advanced metering infrastructure (“AMI”) products and services to Siemens as part of Siemens’ project for the City of Jackson, MS (the “City”).

This project included products and services, which were provided by parties other than Mueller Systems, for the City’s water treatment plants, sewer lines and billing system (the “Project”).

On June 11, 2018, the City filed a lawsuit against Siemens and several of its contractors (excluding Mueller Systems) for multiple claims related to the Project, including claims for fraud, negligence, breach of implied warranty of good workmanship, negligent representation, civil conspiracy, unjust enrichment, breach of contract and breach of covenant of good faith and fair dealing (“Siemens Lawsuit”).

In the Siemens Lawsuit, the City alleged damages in excess of $450.0 million.

On November 12, 2019, the City filed an amended complaint, adding Mueller Systems as a defendant in the Siemens Lawsuit.

In February 2020, the City dismissed all claims against Mueller Systems in the Siemens Lawsuit.

On March 27, 2020, the City and Siemens executed a settlement agreement whereby Siemens agreed to pay the City $89.8 million (“Settlement Amount”) in order to settle the Siemens Lawsuit (the “Settlement”).

Following the Settlement, Siemens sought to recover a portion of the Settlement Amount from Mueller Systems, and the parties entered negotiations to resolve the matter.

In September 2020, we resolved the matter, paid Siemens approximately $ 10 million, and recovered $ 5.0 million from insurance.

The COVID-19 Pandemic.

The pandemic has caused, and is likely to continue to cause, severe economic, market and other disruptions to the U.S.

and global economies.

As a result of the pandemic, we experienced adverse business conditions during the year, including significant costs to mitigate the pandemic effects.

We have taken and continue to take steps to maximize liquidity by limiting cash expenditures, including furloughing significant numbers of our employees, implementing temporary shutdowns of our manufacturing facilities or portions of our manufacturing facilities, implementing temporary salary reductions for our senior leadership team, deferral of capital expenditures, reduced fees for our Board of Directors and aggressively reducing general and administrative spending.

We are uncertain of the potential full magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19, and while the extent to which the pandemic affects our results will depend on future developments, the outbreak could result in material effects to our future financial position, results of operations, cash flows and liquidity.

Index to Financial Statements

Mueller Water Products, et al.

In 2017, our warranty analyses identified that certain Technologies radio products produced prior to 2017 and installed in particularly harsh environments had been failing at higher than expected rates.

During the quarter ended March 31, 2017, we conducted additional testing of these products and revised our estimates of warranty expenses.

As a result, we recorded additional warranty expense of $ 9.8 million in the second quarter of 2017.

During the quarter ended June 30, 2018, we completed a similar analysis and determined, based on this new information, that certain other Technologies products had been failing at higher-than-expected rates as well and that the average cost to repair or replace certain products under warranty was higher than previously estimated.

As a result, in the third quarter of 2018, we recorded additional warranty expense of $ 14.1 million associated with such products.

Related to the above warranty expenses, on April 11, 2019, an alleged stockholder filed a putative class action lawsuit against Mueller Water Products, Inc.

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

District Court for the Southern District of New York.

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

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

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

Accordingly, we cannot reasonably estimate the amount of any cost or liabilities related to this matter, and therefore no amounts have been accrued related to this matter as of September 30, 2019.

Defendants filed their motion to dismiss on November 1, 2019.

We believe the allegations are without merit and intend to vigorously defend against the claims.

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

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

14 unchanged sentences

Other Matters.

We monitor and analyze our warranty experience and costs periodically and may revise our warranty reserves as necessary.

We monitor and analyze our warranty experience and costs periodically and may revise our warranty accruals as necessary.

Critical factors in our reserve analyses include warranty terms, specific claim situations, incurred and projected failure rates, the nature of product failures, product and labor costs, and general business conditions.

During 2018, our warranty analysis identified that certain other Technologies products had been failing at higher-than-expected rates, and that the average cost to repair or replace certain products under warranty was higher than previously estimated.

As a result, we recorded an additional warranty expense of $ 14.1 million associated with such products.

We are party to a number of other lawsuits arising in the ordinary course of business, including product liability cases for products manufactured by us or third parties.

While the results of litigation cannot be predicted with certainty, we believe that the final outcome of such other litigation is not likely to have a materially adverse effect on our business or prospects.

Operating Leases.

We maintain operating leases primarily for equipment and facilities.

Rent expense was $ 5.8 million , $ 6.4 million and $ 5.8 million for 2019 , 2018 and 2017 , respectively.

Future minimum payments under non-cancellable operating leases are $ 6.1 million , $ 5.1 million , $ 4.2 million , $ 3.8 million and $ 3.7 million during 2020 , 2021 , 2022 , 2023 and 2024 , respectively.

Total minimum payments due beyond 2024 are $ 15.8 million .

Index to Financial Statements

While the results of litigation cannot be predicted with certainty, we believe that the final outcome of such other litigation is not likely to have a material adverse effect on our business or prospects.

Subsequent Events

On October 25, 2019 , our board of directors declared a dividend of $ 0.0525 per share on our common stock, payable on or about November 20, 2019 to stockholders of record at the close of business on November 8, 2019 .

On October 3, 2019, we acquired the outstanding noncontrolling interest of our consolidated joint venture, which does business as Pratt Industrial, for $ 5.4 million in cash, subject to certain post-close adjustments.

We will continue to include the results of Pratt Industrial in our Infrastructure segment.

On October 23, 2020 , our board of directors declared a dividend of $ 0.0550 per share on our common stock, a 5 percent increase from the prior quarter, payable on or about November 20, 2020 to stockholders of record at the close of business on November 10, 2020 .

Index to Financial Statements

Quarterly Consolidated Financial Information (Unaudited)

Fourth Third Second First

(in millions, except per share amounts)

Net sales $ 265.3 $ 228.5 $ 257.7 $ 212.6

Gross profit 93.9 75.7 86.0 72.6

Operating income 40.7 20.0 35.8 20.3

Net income $ 26.7 $ 11.2 $ 23.8 $ 10.3

Earnings per basic share (1)

$ 0.17 $ 0.07 $ 0.15 $ 0.07

Earnings per diluted share (1)

$ 0.17 $ 0.07 $ 0.15 $ 0.06

Net sales $ 266.9 $ 274.3 $ 234.0 $ 192.8

Gross profit 88.8 97.2 74.8 60.1

Operating income 39.0 47.2 22.2 15.9

Earnings per basic share (1)

Earnings per diluted share (1)

Net income (loss) $ 40.2 $ 33.7 $ 10.9 $ ( 21.0 )

Earnings (loss) per basic share (1)

$ 0.26 $ 0.21 $ 0.07 $ ( 0.13 )

Earnings (loss) per diluted share (1)

$ 0.25 $ 0.21 $ 0.07 $ ( 0.13 )

(1) The sum of the quarterly amounts may not equal the full year amount due to rounding.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures