What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-03 · 69 added, 57 removed, 578 unchanged (18% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, September 30,

June 30, September 30,

(in millions, except share amounts)

21 unchanged sentences

600,000,000 shares authorized;

156,986,382 and 157,955,433 shares outstanding at March 31, 2022, and September 30, 2021, respectively

156,612,167 and 157,955,433 shares outstanding at June 30, 2022, and September 30, 2021, respectively

Additional paid-in capital 1,296.1 1,342.2

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2022 2021 2022 2021

11 unchanged sentences

Interest expense, net 4.2 6.8 13.0 19.0

Loss on early extinguishment of debt — 16.7 — 16.7

Net other expenses 3.3 22.7 10.1 33.3

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2022 2021 2022 2021

5 unchanged sentences

Foreign currency translation ( 17.6 ) 4.4 ( 15.5 ) 8.5

Total comprehensive (loss) income, net ( 3.2 ) — 2.8 5.0

Total other comprehensive (loss) income, net ( 17.3 ) 4.9 ( 14.5 ) 9.9

Comprehensive income $ 9.2 $ 19.3 $ 55.0 $ 61.9

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2022 2021 2022 2021

25 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

(in millions)

4 unchanged sentences

Amortization 21.1 21.2

Loss on early extinguishment of debt — 16.7

Stock-based compensation 6.6 6.3

13 unchanged sentences

Capital expenditures ( 36.7 ) ( 46.1 )

Acquisition purchase price adjustment 0.2 —

Acquisition, net of cash acquired 0.2 ( 19.7 )

Proceeds from sales of assets — 0.4

2 unchanged sentences

Financing activities:

Issuance of debt — 450.0

Repayment of debt — ( 462.4 )

Dividends paid ( 27.4 ) ( 26.1 )

1 unchanged sentence

Common stock issued 1.6 1.5

Proceeds from financing transaction — 3.9

Deferred financing costs paid — ( 6.0 )

Common stock repurchased under buyback program ( 25.0 ) —

Capital leases ( 0.1 ) ( 0.5 )

Proceeds from financing transaction — 3.9

Financing leases ( 0.4 ) ( 0.5 )

Net cash used in financing activities

5 unchanged sentences

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

Six months ended

Nine months ended

(in millions)

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2022

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2022

Organization and Basis of Presentation

9 unchanged sentences

and subsidiaries (“Krausz”).

During the quarter ended March 31, 2021, we aligned the consolidation of the financial statements of Krausz in the Company’s consolidated financial statements, eliminating the previous inclusion of Krausz financial statements with a one-month reporting lag.

During the year ended September 30, 2021, we aligned the consolidation of the financial statements of Krausz in the Company’s consolidated financial statements, eliminating the previous inclusion of Krausz financial statements with a one-month reporting lag.

In accordance with applicable accounting literature, the elimination of the one-month reporting lag is considered to be a change in accounting principle.

28 unchanged sentences

ASU 2019-12 simplifies the accounting for income taxes by clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications.

ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted.

ASU 2019-12 was effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted.

We adopted this standard on October 1, 2021 and there was no material impact to our financial statements.

4 unchanged sentences

The amendments apply only to contracts and hedging relationships that reference the London Inter Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

ASU 2020-04 is effective from March 12, 2020, but can be adopted prospectively from a date within an interim period subsequent to March 12, 2020.

ASU 2020-04 is effective from March 12, 2020, but may be adopted prospectively from a date within an interim period subsequent to March 12, 2020.

We evaluated our contracts and the optional expedients provided by ASU 2020-04.

3 unchanged sentences

We purchased a new facility in Kimball, Tennessee to support and enhance our investment in our Chattanooga, Tennessee large casting foundry and closed our facilities in Hammond, Indiana, Woodland, Washington and Surrey, British Columbia, Canada.

We also announced the closure of our facility in Aurora, Illinois which we expect to complete substantially by the third quarter of fiscal year 2022.

The majority of the activities from these facilities have been, or will be, transferred to our Kimball, Tennessee facility.

We also announced the closure of our facility in Aurora, Illinois which we expect to complete substantially by the end of fiscal 2022.

The majority of the activities from these facilities have been transferred to our Kimball, Tennessee facility.

In connection with these reorganizations, we recognized certain restructuring costs.

Activity in accrued restructuring, reported as part of Other current liabilities, is presented below.

Six months ended

Nine months ended

(in millions)

16 unchanged sentences

We determined that the investment fund and the Sub-CDE are variable interest entities (“VIEs”) and that we are the primary beneficiary of the VIEs.

The ongoing activities of the VIEs, namely collecting and remitting interest and fees and administering NMTC compliance, were contemplated in the initial design of the transaction and are not expected to

significantly affect economic performance throughout the life of the VIEs.

Additionally, we are obligated to deliver tax benefits and provide various other guarantees to Wells Fargo and to absorb the losses of the VIEs.

45 unchanged sentences

Th e table below represents the balances of our customer receivables and deferred revenue.

March 31, September 30,

June 30, September 30,

(in millions)

26 unchanged sentences

federal statutory income tax rate and the effective income tax rate is presented below.

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2022 2021 2022 2021

6 unchanged sentences

Foreign income tax rate differential ( 1.7 ) ( 0.4 ) ( 1.7 ) ( 0.4 )

Nondeductible compensation 0.9 0.6 0.9 0.6

Basis difference in foreign investment (0.1) 1.2 (0.1) 1.2

Valuation allowances — — 0.3 0.7

1 unchanged sentence

Effective income tax rate 21.1 % 28.0 % 22.7 % 26.3 %

At March 31, 2022 and September 30, 2021, the gross liabilities for unrecognized income tax benefits were $ 4.7 million and $ 4.8 million, respectively, and are included in Other noncurrent liabilities.

At June 30, 2022 and September 30, 2021, the gross liabilities for unrecognized income tax benefits were $ 4.9 million and $ 4.8 million, respectively, and are included in Other noncurrent liabilities.

Borrowing Arrangements

The components of our long-term debt are as follows:

March 31, September 30,

June 30, September 30,

(in millions)

9 unchanged sentences

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

At March 31, 2022 the applicable margin for LIBOR based loans was 200 basis points and for base rate loans was 100 basis points.

At June 30, 2022 the applicable margin for LIBOR based loans was 200 basis points and for base rate loans was 100 basis points.

The ABL Agreement is subject to mandatory prepayments if total outstanding borrowings under the ABL Agreement are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances.

5 unchanged sentences

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

Excess availability based on March 31, 2022 data was $160.1 million, as reduced by $ 14.7 million of outstanding letters of credit and $ 0.2 million of accrued fees and expenses.

Excess availability based on June 30, 2022 data was $160.7 million, as reduced by $ 14.1 million of outstanding letters of credit and $ 0.2 million of accrued fees and expenses.

4.0% Senior Unsecured Notes.

3 unchanged sentences

subsidiaries guarantee the 4.0% Senior Notes that are subordinate to borrowings under our ABL Agreement.

Based on quoted market prices that are a Level 1 measurement, the outstanding 4.0% Senior Notes had a fair value of $ 426.0 million at March 31, 2022.

Based on quoted market prices that are a Level 1 measurement, the outstanding 4.0% Senior Notes had a fair value of $ 392.8 million at June 30, 2022.

An indenture governing the 4.0% Senior Notes (“Indenture”) contains customary covenants and events of default, including covenants that limit our ability to incur certain debt and liens.

There are no financial maintenance covenants associated with the Indenture.

We believe we were in compliance with these covenants at March 31, 2022.

We believe we were in compliance with these covenants at June 30, 2022.

As set forth in the Indenture, we may redeem some or all of the 4.0% Senior Notes at any time prior to June 15, 2024 at certain “make-whole” redemption prices and on or after June 15, 2024 at specified redemption prices.

Additionally, we may redeem up to 40% of the aggregate principal amount of the 4.0% Senior Notes at any time prior to June 15, 2024 with the net proceeds of specified equity offerings at specified redemption prices.

Upon a change of control, we would be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the outstanding principal amount of the 4.0% Senior Notes.

Upon a change of control, we would be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the outstanding principal amount.

Derivative Financial Instruments

9 unchanged sentences

The components of net periodic benefit cost for our pension plans are presented below.

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2022 2021 2022 2021

12 unchanged sentences

2012 Phantom Plan, and Employee stock purchase plan instruments under our 2006 Employee Stock Purchase Plan.

Grants issued during the six months ended March 31, 2022 are as follows:

Grants issued during the nine months ended June 30, 2022 are as follows:

Number granted Weighted average grant date fair value per instrument Total grant date fair value

10 unchanged sentences

Employee stock purchase plan instruments 38,512 3.39 0.1

Quarter ended June 30, 2022

Restricted stock units 4,285 11.66 —

Employee stock purchase plan instruments 40,946 2.94 0.1

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

11 unchanged sentences

The expected term represents the average period of time the units are expected to be outstanding.

At March 31, 2022, the outstanding Phantom Plan instruments had a fair value of $ 12.92 per instrument and our liability for Phantom Plan instruments was $ 2.1 million and is included within Other current and Other noncurrent liabilities.

At June 30, 2022, the outstanding Phantom Plan instruments had a fair value of $ 11.73 per instrument and our liability for Phantom Plan instruments was $ 2.5 million and is included within Other current and Other noncurrent liabilities.

Stock options generally vest ratably over three years on each anniversary date.

13 unchanged sentences

Settlements, in our common shares, will range from zero to two times the number of PRSUs granted, depending on our financial performance relative to the targets.

We did not issue any shares of common stock to settle PRSUs vested during the three months ended March 31, 2022;

however, we issued 240,412 shares of common stock to settle PRSUs vested during the six months ended March 31, 2022.

Additionally, we issued 104,380 and 235,095 shares of common stock to settle restricted stock units vested during the three and six months ended March 31, 2022, respectively.

Finally, we issued no shares of common stock to settle stock options exercised during the three months ended March 31, 2022;

however, we issued 24,153 shares of common stock to settle stock options exercised during the six months ended March 31, 2022.

Operating income included stock-based compensation expense of $ 2.5 million in each of the three months ended March 31, 2022 and 2021.

Operating income included stock-based compensation expense of $5.1 million and $5.0 million during the six months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, there was approximately $ 13.3 million of unrecognized compensation expense related to stock-based compensation arrangements and there were 58,139 PRSUs that have been awarded for the 2022 performance period for which performance goal achievement cannot yet be determined.

We excluded 944,631 and 664,082 stock-based compensation instruments from the calculations of diluted earnings per share in the three months ended March 31, 2022 and 2021, respectively, and 563,299 and 447,086 for the six months ended March 31, 2022 and 2021, respectively, since their inclusion would have been antidilutive.

We did not issue any shares of common stock to settle PRSUs vested during the three months ended June 30, 2022;

however, we issued 240,412 shares of common stock to settle PRSUs vested during the nine months ended June 30, 2022.

Additionally, we issued 3,716 and 238,811 shares of common stock to settle restricted stock units vested during the three and nine months ended June 30, 2022, respectively.

Finally, we issued no shares of common stock to settle stock options exercised during the three months ended June 30, 2022;

however, we issued 24,153 shares of common stock to settle stock options exercised during the nine months ended June 30, 2022.

Operating income included stock-based compensation expense of $ 2.5 million and $3.4 million for the three months ended June 30, 2022 and 2021, respectively.

Operating income included stock-based compensation expense of $7.6 million and $8.4 million during the nine months ended June 30, 2022 and 2021, respectively.

At June 30, 2022, there was approximately $ 10.5 million of unrecognized compensation expense related to stock-based compensation arrangements and there were 53,067 PRSUs that have been awarded for the 2022 performance period for which performance goal achievement cannot yet be determined.

We excluded 892,662 and 131,178 stock-based compensation instruments from the calculations of diluted earnings per share in the three months ended June 30, 2022 and 2021, respectively, and 750,343 and 566,666 for the nine months ended June 30, 2022 and 2021, respectively, since their inclusion would have been antidilutive.

Supplemental Balance Sheet Information

Selected supplemental asset information is presented below.

March 31, September 30,

June 30, September 30,

(in millions)

29 unchanged sentences

Selected supplemental liability information is presented below.

March 31, September 30,

June 30, September 30,

(in millions)

28 unchanged sentences

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 1 st 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.

The following table summarizes information concerning our goodwill balance in the six months ended March 31, 2022, in millions.

The following table summarizes information concerning our goodwill balance in the nine months ended June 30, 2022, in millions.

Balance at September 30, 2021 $ 115.1

1 unchanged sentence

Effects of changes in foreign currency exchange rates ( 6.6 )

Balance at March 31, 2022 $ 115.8

Balance at June 30, 2022 $ 108.6

Segment Information

3 unchanged sentences

The two newly named business units and reportable segments are Water Flow Solutions and Water Management Solutions.

Water Flow Solutions’ product portfolio includes iron gate valves, specialty valves and service brass products.

Solutions’ product portfolio includes iron gate valves, specialty valves and service brass products.

Water Management Solutions’ product and service portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, pressure control and software products.

Su mmarized financial information for our segments is presented below.

Three months ended Six months ended

March 31, March 31,

Three months ended Nine months ended

June 30, June 30,

2022 2021 2022 2021

48 unchanged sentences

Current period other comprehensive income 1.0 ( 15.5 ) $ ( 14.5 )

Balance at March 31, 2022 $ ( 21.5 ) $ 19.3 $ ( 2.2 )

Balance at June 30, 2022 $ ( 21.2 ) $ 1.7 $ ( 19.5 )

Commitments and Contingencies

27 unchanged sentences

Ultimate liability for the site will depend on many factors that have not yet been determined, including the determination of the Environmental Protection Agency’s remediation costs, the number and financial viability of the other PRPs (there are four other PRPs currently) and the determination of the final allocation of the costs among the PRPs.

Since the amounts of such costs cannot be reasonably estimated at this time, no amounts have been accrued for this matter at March 31, 2022.

Since the amounts of such costs cannot be reasonably estimated at this time, no amounts have been accrued for this matter at June 30, 2022.

The COVID-19 Pandemic.

2 unchanged sentences

We have taken action and continue to counter such disruption, and work to protect the safety of our employees.

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.

While the extent to which the pandemic affects our results will depend on future developments, the pandemic could result in material effects to our future financial position, results of operations, cash flows and liquidity.

Mass Shooting Event at our Mueller Co.

18 unchanged sentences

Critical factors in our 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.

During the three months ended June 30, 2022, we recorded $ 4.5 million of warranty obligations.

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

1 unchanged sentence

Subsequent Events

On April 22, 2022 , our Board of Directors declared a dividend of $ 0.058 per share on our common stock, payable on or about May 20, 2022 to stockholders of record at the close of business on May 10, 2022 .

On July 27, 2022 , our Board of Directors declared a dividend of $ 0.058 per share on our common stock, payable on or about August 22, 2022 to stockholders of record at the close of business on August 10, 2022 .

In July 2022, the Company entered into an amendment to the collective bargaining agreement with Albertville, AL USWA 65B to extend the current agreement to October 2027 on substantially similar terms.

In August 2022, the Company entered into an amendment to its Decatur, IL collective bargaining agreement with Local 7-838 United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO (United Steelworkers, USW) to extend the current agreement to June 2027 on substantially similar terms.

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-Q

Item 1. Financial Statements