What changed in this filing

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Item 1. Financial Statements

2024-02-09 compared with 2023-08-04 · 136 added, 198 removed, 447 unchanged (43% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, September 30,

December 31, September 30,

(in millions, except share amounts)

22 unchanged sentences

60,000,000 shares authorized;

none outstanding at June 30, 2023, and September 30, 2022

none outstanding at December 31, 2023, and September 30, 2023

Common stock:

1 unchanged sentence

600,000,000 shares authorized;

156,424,123 and 155,844,138 shares outstanding at June 30, 2023, and September 30, 2022, respectively

156,112,060 and 155,871,932 shares outstanding at December 31, 2023, and September 30, 2023, respectively

Additional paid-in capital 1,231.9 1,240.4

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Nine months ended

June 30, June 30,

2023 2022 2023 2022

Three months ended

(in millions, except per share amounts)

4 unchanged sentences

Selling, general and administrative 56.9 62.9

Strategic reorganization and other charges 3.9 0.6 0.9 3.6

Strategic reorganization and other charges (benefits) 6.6 ( 3.7 )

Total operating expenses 63.5 59.2

Operating income 22.8 34.0

Other expenses (income):

Pension expense (benefit) other than service 0.9 ( 0.9 ) 2.8 ( 2.9 )

Other expenses:

Pension expense other than service 1.0 0.9

Interest expense, net 3.3 3.7

Net other expenses 4.7 3.3 14.2 10.1

Other expense 1.6 —

Total other expenses, net 5.9 4.6

Income before income taxes 16.9 29.4

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended Nine months ended

June 30, June 30,

2023 2022 2023 2022

Three months ended

(in millions)

Net income $ 14.3 $ 22.5

Other comprehensive income (loss), net of income tax:

Other comprehensive income, net of income tax:

Pension actuarial amortization 0.6 0.6

Foreign currency translation 13.3 4.0

Total other comprehensive loss ( 4.1 ) ( 17.3 ) ( 1.0 ) ( 14.5 )

Total other comprehensive income, net of income tax 13.9 4.6

Comprehensive income $ 28.2 $ 27.1

17 unchanged sentences

Balance at December 31, 2023 $ 1.6 $ 1,231.9 $ ( 467.5 ) $ ( 34.8 ) $ 731.2

Net income — — 21.3 — 21.3

Dividends declared — ( 9.5 ) — — ( 9.5 )

Stock-based compensation — 2.4 — — 2.4

Common stock issued — 0.4 — — 0.4

Other comprehensive loss, net of tax — — — ( 1.5 ) ( 1.5 )

Balance at March 31, 2023 $ 1.6 $ 1,264.3 $ ( 523.5 ) $ ( 41.5 ) $ 700.9

Net income — — 24.5 — 24.5

Dividends declared — ( 9.6 ) — — ( 9.6 )

Stock-based compensation — 1.7 — — 1.7

Shares retained for employee taxes — ( 0.1 ) — — ( 0.1 )

Common stock issued — 0.9 — — 0.9

Other comprehensive loss, net of tax — — — ( 4.1 ) ( 4.1 )

Balance at June 30, 2023 $ 1.6 $ 1,257.2 $ ( 499.0 ) $ ( 45.6 ) $ 714.2

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

MUELLER WATER PRODUCTS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

stock Additional

9 unchanged sentences

Shares retained for employee taxes — ( 1.5 ) — — ( 1.5 )

Stock repurchased under buyback program — ( 20.0 ) — — ( 20.0 )

Common stock issued — 0.6 — — 0.6

1 unchanged sentence

Balance at December 31, 2022 $ 1.6 $ 1,271.0 $ ( 544.8 ) $ ( 40.0 ) $ 687.8

Net income — — 23.6 — 23.6

Dividends declared — ( 9.1 ) — — ( 9.1 )

Stock-based compensation — 2.4 — — 2.4

Shares retained for employee taxes — 0.1 — — 0.1

Common stock issued — 0.4 — — 0.4

Other comprehensive loss, net of tax — — — ( 3.2 ) ( 3.2 )

Balance at March 31, 2022 $ 1.6 $ 1,307.6 $ ( 600.9 ) $ ( 2.2 ) $ 706.1

Net income — — 26.5 — 26.5

Dividends declared — ( 9.1 ) — — ( 9.1 )

Stock-based compensation — 2.2 — — 2.2

Shares retained for employee taxes — ( 0.1 ) — — ( 0.1 )

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

Common stock issued — 0.5 — — 0.5

Other comprehensive income, net of tax — — — ( 17.3 ) ( 17.3 )

Balance at June 30, 2022 $ 1.6 $ 1,296.1 $ ( 574.4 ) $ ( 19.5 ) $ 703.8

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

Three months ended

(in millions)

1 unchanged sentence

Net income $ 14.3 $ 22.5

Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation 9.5 7.8

2 unchanged sentences

Stock-based compensation 2.6 1.8

Pension net periodic cost (benefit) 3.4 ( 1.9 )

Pension cost 1.2 1.1

Deferred income taxes ( 3.4 ) ( 0.9 )

Inventory reserves provision 0.4 3.9

Inventory reserve provision 2.1 1.2

Other, net 0.3 0.5

Changes in assets and liabilities, net of acquisition:

Changes in assets and liabilities:

Receivables, net 49.7 26.4

4 unchanged sentences

Other noncurrent liabilities 3.4 ( 2.2 )

Net cash provided by operating activities 52.5 20.5

Net cash provided by (used in) operating activities 67.9 ( 6.5 )

Investing activities:

Capital expenditures ( 5.7 ) ( 9.9 )

Acquisition purchase price adjustment — 0.2

Proceeds from sale of assets 0.1 5.1

4 unchanged sentences

Common stock issued 0.4 0.6

Common stock repurchased under buyback program — ( 25.0 )

Payments for finance lease obligations ( 0.2 ) ( 0.1 )

5 unchanged sentences

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

Nine months ended

Three months ended

(in millions)

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023

AS OF AND FOR THE THREE MONTHS ENDED DECEMBER 31, 2023

Organization and Basis of Presentation

1 unchanged sentence

Water Flow Solutions and Water Management Solutions.

These segments are based on a management reorganization that became effective October 1, 2021.

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

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

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

The “Company,” “we,” “us” or “our” refer to Mueller Water Products, Inc.

1 unchanged sentence

With regard to the Company’s segments, “we,” “us” or “our” may also refer to the segment being discussed.

On June 14, 2021, we acquired all the outstanding capital stock of i2O Water Ltd (“i2O”), a provider of pressure management solutions to more than 100 water companies in 45 countries.

During the three months ended December 31, 2021, we recorded a purchase price adjustment of $ 0.2 million, resulting in a final purchase price of $ 19.5 million.

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 in recording assets, liabilities, sales and expenses as well as in the disclosure of contingent assets and liabilities.

Our condensed 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 as well as in the disclosure of contingent assets and liabilities for the reporting periods.

Actual results could differ from those estimates.

All significant intercompany balances and transactions have been eliminated.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2022.

These condensed consolidated financial statements do not include all information required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2023.

In our opinion, all normal and recurring adjustments that we consider necessary for a fair financial statement presentation have been made.

The condensed consolidated balance sheet at September 30, 2022 was derived from our audited financial statements, but it does not include all disclosures required by GAAP.

The condensed consolidated balance sheet at September 30, 2023 was derived from our audited financial statements.

Our business is seasonal as a result of the impact of cold weather conditions.

Net sales and operating income historically have been lowest in the three-month periods ending December 31 and March 31 when the northern United States and all of Canada generally face weather conditions that restrict significant construction activity.

Net sales and operating income historically have been lowest in the three-month periods ending December 31 and March 31 when the northern United States and most of Canada generally face weather conditions that restrict significant construction activity.

Therefore, the results of operations for the three months ending December 31, 2023 are not necessarily indicative of operating results that may be achieved for any other interim period or the full year.

Unless the context indicates otherwise, whenever we refer to a particular year, we mean our fiscal year ended or ending September 30 in that particular calendar year.

Recently Adopted Accounting Pronouncements

In December 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2022-06, “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848” (“ASU 2022-06”).

ASU 2022-06 defers the sunset date for applying the reference rate reform relief in Accounting Standards Codification (“ASC”) 848 to December 31, 2024 from December 31, 2022.

ASU 2022-06 became effective immediately upon issuance.

In March 2020, the FASB issued ASU No.

2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting" (“ASU 2020-04”).

This guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

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 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.

We adopted ASU 2020-04 on October 1, 2021 and there was no material impact to our financial statements.

In December 2019, the FASB issued ASU No.

2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” (“ASU 2019-12”).

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 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.

Restructuring

Between November 2019 and March 2021, we announced the purchase and closure of several facilities.

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 completed the closure of our facility in Aurora, Illinois during our fiscal year 2022.

The majority of the activities from these plants were transferred to our Kimball, Tennessee facility.

Additionally, during our fiscal year 2023, we incurred severance costs related to a reorganization of our sales force.

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

During the nine months ended June 30, 2023, we recorded amounts related to severance and transaction-related costs partially offset by a $ 4.0 million gain, before tax, on the sale of the Aurora, Illinois facility.

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

Nine months ended

Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

ASU 2023-07 requires public business entities that disclose information on their reportable segments to provide additional information on their significant expense categories and “other segment items,” which represent the difference between segment revenue less significant segment expense and a segment’s measure of profit or loss.

A description of “other segment items” is also required.

Further, certain segment related disclosures that were limited to annual disclosure are now required for interim periods.

Finally, public business entities are required to disclose the title and position of their Chief Operating Decision Maker (“CODM”) and explain how the CODM uses the reported measures of profit or loss to assess segment performance.

This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Upon adoption, ASU 2023-07 should be applied retrospectively to all prior periods.

We do not expect ASU 2023-07 to have a material impact on our financial statements and related disclosures.

In December 2023, the FASB issued ASU No 2023-09 “Income Taxes (Topic 740):

Improvements to Tax Disclosures” (“ASU 2023-09”).

ASU 2023-09 requires public business entities to disclose a tabular rate reconciliation utilizing percentages and reporting currency amounts in specific categories with certain reconciling items at or above the specified 5% threshold to improve the transparency and comparability of disclosures.

Additionally, entities are required to disclose the year to date amount of income taxes paid, net of refunds received, disaggregated by federal (national), state, and foreign jurisdictions.

Disclosure of all individual jurisdictions where income taxes paid, net of refunds received, is 5% or more of the total is also required.

This guidance is effective for fiscal years beginning after December 15, 2024 with early adoption permitted.

Upon adoption, ASU 2023-09 should be applied on a prospective basis while retrospective application is permitted.

We do not expect ASU 2023-09 to have a material impact on our financial statements and our related disclosures.

Strategic Reorganization and Other Charges

During the three months ended December 31, 2023, we recorded approximately $ 6.6 million in Strategic reorganization and other charges, primarily consisting of $ 1.5 million of expenses related to the cybersecurity incidents, expenses associated with our previously announced leadership transition as well as other transaction-related expenses.

During the three months ended December 31, 2022, we recorded a $ 4.0 million gain, before tax, on the sale of the Aurora, Illinois facility which was partially offset by transaction-related costs.

Activity in accrued strategic reorganization and other charges, reported as part of Other current liabilities, is presented below:

Three months ended

(in millions)

1 unchanged sentence

Amounts accrued 6.6 ( 3.7 )

Amounts paid ( 2.0 ) ( 3.0 )

Amounts (paid) received, net ( 5.4 ) 1.1

Ending balance $ 7.8 $ 0.7

20 unchanged sentences

Other direct costs associated with the transaction were capitalized and are being recognized as interest expense over the seven-year tax credit period.

Incremental costs to maintain the structure during the compliance period are expensed as incurred.

Incremental costs to maintain the structure during the compliance period were expensed as incurred and were immaterial to the financial statements.

Revenue from Contracts with Customers

4 unchanged sentences

Refer to Note 8.

for disaggregation of 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.

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

Geographical region represents the location of the customer.

8 unchanged sentences

The table below represents the balances of our customer receivables and deferred revenue:

June 30, September 30,

December 31, September 30,

(in millions)

7 unchanged sentences

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.

Our performance obligations are satisfied at a point in time for sales of equipment or product and over time for our software hosting and leak detection monitoring services.

Our performance obligations are satisfied at a point in time for sales of equipment and products or over time for our software hosting and leak detection monitoring services.

Performance obligations are supported by customer contracts, which provide frameworks for the nature of the distinct products or services.

6 unchanged sentences

Revenue for the sale of our products is recognized when the obligations of the terms of our contract are satisfied, which is when the customer is able to direct the use of and obtain substantially all of the benefits from the product, which generally occurs upon shipment when control of the product transfers to the customer.

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

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 warranties cannot be purchased separately from our products.

On limited products, we offer extended warranties which may be purchased separately.

Costs to Obtain or Fulfill a Contract

Shipping and handling costs associated with freight activities after the customer has obtained control of a product are included in cost of sales at the time the related revenue is recognized.

Shipping and handling costs associated with freight activities after the customer has obtained control of a product are accounted for as fulfillment costs and are expensed to Cost of sales within our condensed consolidated statement of operations at the time the related revenue is recognized.

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

Our sales 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, cancellations 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 do not capitalize the related costs and expense them as incurred.

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 the practical expedient to expense them as incurred and therefore do not capitalize the related costs.

The reconciliation between the U.S.

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

Three months ended Nine months ended

June 30, June 30,

2023 2022 2023 2022

Three months ended

federal statutory income tax rate 21.0 % 21.0 %

1 unchanged sentence

State income taxes, net of federal benefit 3.0 3.4

Excess tax benefits related to stock-based compensation — — 0.2 ( 0.3 )

Excess tax deficit related to stock-based compensation 0.8 0.7

Tax credits ( 2.7 ) ( 1.6 )

2 unchanged sentences

Nondeductible compensation 1.4 0.5

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

Uncertain tax positions ( 8.8 ) —

Valuation allowances 0.4 ( 0.2 )

1 unchanged sentence

Effective income tax rate 15.4 % 23.5 %

At June 30, 2023 and September 30, 2022, the gross liabilities for unrecognized income tax benefits were $ 5.3 million and $ 4.7 million, respectively, and are included in Other noncurrent liabilities.

At December 31, 2023 and September 30, 2023, the gross liabilities for unrecognized income tax benefits were $ 3.7 million and $ 5.0 million, respectively, and are included in Other noncurrent liabilities.

During the three months ended December 31, 2023, we recorded $ 1.6 million in income tax benefits due to the release of an uncertain tax position that expired on December 31, 2023.

Borrowing Arrangements

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

June 30, September 30,

December 31, September 30,

(in millions)

1 unchanged sentence

Finance leases 1.1 1.3

Total borrowings 451.6 451.6

Total debt 451.1 451.3

deferred financing costs 3.7 3.9

2 unchanged sentences

ABL Agreement.

Our asset-based lending agreement, as amended, (“ABL”) is provided by a syndicate of banking institutions and consists of a revolving credit facility for up to $ 175.0 million in borrowing that expires on July 29, 2025.

The ABL allows up to $ 25.0 million of swing line loans and up to $ 60.0 million of letters of credit.

The ABL permits us to increase the size of the credit facility by an additional $ 150.0 million in certain circumstances subject to adequate borrowing base availability.

On April 5, 2023, we amended the ABL.

This amendment replaced LIBOR-based loans with Secured Overnight Financing Rate (“SOFR”) based loans plus an adjustment of 10 basis points, among other immaterial modifications.

Borrowings under the ABL bear interest at a floating rate equal to SOFR plus an adjustment of 10 basis points plus an applicable margin range of 200 to 225 basis points, or a base rate, as defined in the ABL, plus an applicable margin range of from 100 to 125 basis points.

At June 30, 2023 the applicable margin for SOFR-based loans was 200 basis points and for base rate loans was 100 basis points.

In December 2023, we obtained a waiver under our ABL (“ABL Waiver”) to provide for additional time associated with certain technical reporting requirements that were delayed as a result of the cybersecurity incident announced on October 28, 2023.

Under the ABL Waiver, the maximum aggregate amount of borrowings and other credit extensions under the ABL was limited to $ 50.0 million at any time outstanding until all of the required reports were delivered.

During our first fiscal quarter of 2024, we delivered the required reports and on February 6, 2024, the ABL Waiver was terminated.

Accordingly, we are no longer subject to any additional restrictions or borrowing limitations under the ABL including the $ 50.0 million temporary limit on credit extensions.

Borrowings under the ABL bear interest at a floating rate equal to the Secured Overnight Financing Rate (“SOFR”) plus an adjustment of 10 basis points plus an applicable margin range of 200 to 225 basis points, or a base rate, as defined in the ABL, plus an applicable margin range of 100 to 125 basis points.

At December 31, 2023 the applicable margin for SOFR-based loans was 200 basis points and for base rate loans was 100 basis points.

The ABL is subject to mandatory prepayments if total outstanding borrowings under the ABL 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 and 10 % of the Loan Cap as defined in the ABL.

Excess availability based on June 30, 2023 data was $ 162.3 million, as reduced by $ 12.5 million of outstanding letters of credit and $ 0.2 million of accrued fees and expenses.

Excess availability based on December 31, 2023 data was $ 162.4 million, as reduced by $ 12.4 million of outstanding letters of credit and $ 0.2 million of accrued fees and expenses.

However, during the waiver period, credit extensions were temporarily limited to $ 50.0 million as set forth in the waiver.

4.0 % Senior Unsecured Notes.

1 unchanged sentence

We capitalized $ 5.5 million of financing costs which are being amortized over the term of the 4.0 % Senior Notes using the effective interest method.

Proceeds from the 4.0% Senior Notes, along with cash on hand, were used to redeem our previously existing 5.5% Unsecured Senior Notes.

Substantially all of our United States subsidiaries guarantee the 4.0 % Senior Notes, which are subordinate to borrowings under our ABL.

Based on quoted market prices, which is a Level 1 measurement, the outstanding 4.0% Senior Notes had a fair value of $ 400.7 million at June 30, 2023.

Based on quoted market prices, which is a Level 1 measurement, the outstanding 4.0 % Senior Notes had a fair value of $ 413.0 million at December 31, 2023.

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 June 30, 2023.

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.

Retirement Plans

The components of net periodic costs (benefits) for our pension plans are presented below:

Three months ended Nine months ended

June 30, June 30,

2023 2022 2023 2022

We believe we were in compliance with these covenants at December 31, 2023.

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 as set forth in the Indenture.

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

Retirement Plan

We have a defined benefit plan (“Pension Plan”) that we fund in accordance with its requirements in amounts sufficient to satisfy the minimum funding requirements of applicable laws.

The Pension Plan provides benefits based on years of service and compensation or at stated amounts for each year of service with an annual measurement date of September 30.

The components of net periodic cost for our Pension Plan are presented below:

Three months ended

(in millions)

Service cost $ 0.2 $ 0.2

Pension costs (benefits) other than service:

Pension expense other than service:

Interest cost 3.5 3.5

1 unchanged sentence

Amortization of actuarial net loss 0.8 0.9

Pension costs (benefits) other than service 0.9 ( 0.9 ) 2.8 ( 2.9 )

Net periodic costs (benefits) $ 1.1 $ ( 0.6 ) $ 3.4 $ ( 2.0 )

The amortization of actuarial losses, net of income tax, is recorded as a component of other comprehensive loss.

For each of the three months ended June 30, 2023 and 2022, the amortization of actuarial net loss is shown net of income tax of $ 0.2 million in the condensed consolidated statements of comprehensive income.

For the nine months ended June 30, 2023 and 2022, the amortization of actuarial loss is shown net of income tax of $ 0.8 million and $ 0.3 million respectively, in the condensed consolidated statements of comprehensive income.

Pension expense other than service 1.0 0.9

Net periodic cost $ 1.2 $ 1.1

The amortization of actuarial losses, net of income tax, is recorded as a component of Other comprehensive income.

For the three months ended December 31, 2023 and 2022, the amortization of actuarial net loss is shown net of income tax of $ 0.2 million and $ 0.3 million, respectively, in the condensed consolidated statements of comprehensive income.

Stock-based Compensation Plans

2 unchanged sentences

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

Grants issued during the nine months ended June 30, 2023 are as follows:

Grants issued during the three months ended December 31, 2023 are as follows:

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

8 unchanged sentences

Total - Quarter ended December 31, 2023 $ 11.3

Quarter ended March 31, 2023

Restricted stock units 82,769 $ 13.89 $ 1.1

Phantom Plan instruments 8,367 13.42 0.1

Employee stock purchase plan instruments 56,066 $ 2.21 0.1

Total - Quarter ended March 31, 2023 $ 1.3

Quarter ended June 30, 2023

Phantom Plan instruments 7,176 $ 13.93 $ 0.1

Employee stock purchase plan instruments 45,860 $ 2.28 0.1

Total - Quarter ended June 30, 2023 0.2

Total - Year to date ended June 30, 2023 $ 13.5

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.

12 unchanged sentences

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

At June 30, 2023, the outstanding Phantom Plan instruments had a fair value of $ 16.23 per instrument and our liability for Phantom Plan instruments was $ 3.5 million and is included within Other current and Other noncurrent liabilities.

At December 31, 2023, the outstanding Phantom Plan instruments had a fair value of $ 14.40 per instrument and our liability for Phantom Plan instruments was $ 2.0 million and is included within Other current and Other noncurrent liabilities.

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

12 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 issued 282,472 shares of common stock to settle PRSUs vested during the nine months ended June 30, 2023;

no shares of common stock were issued to settle PRSUs vested during the three months ended June 30, 2023.

Additionally, we issued 2,098 and 218,121 shares of common stock to settle restricted stock units vested during the three and nine months ended June 30, 2023, respectively.

Finally, we issued 2,896 and 64,847 shares of common stock to settle stock options exercised during the three and nine months ended June 30, 2023.

Common shares totaling 1,589 and 138,525 were surrendered to us to pay the applicable tax withholding obligations of equity award participants for the three and nine months ended June 30, 2023, respectively.

Operating income included stock-based compensation expense of $ 2.7 million and $ 2.5 million during the three months ended June 30, 2023 and 2022, respectively.

Operating income included stock-based compensation expense of $ 8.8 million and $ 7.6 million during the nine months ended June 30, 2023 and 2022, respectively.

At June 30, 2023, there was approximately $ 11.9 million of unrecognized compensation expense related to stock-based compensation arrangements, which will be expensed through February 2026.

We excluded 249,933 and 892,662 stock-based compensation instruments from the calculations of diluted earnings per share in the three months ended June 30, 2023 and 2022, respectively, and 1,156,428 and 750,343 for the nine months ended June 30, 2023 and 2022, respectively, since their inclusion would have been antidilutive.

Restricted stock units generally vest ratably over the life of the award, usually three years , on each anniversary date of the original grant.

Compensation expense for restricted stock units is recognized between the grant date and the vesting date (or the date on which a participant becomes Retirement-eligible, if sooner) on a straight line basis for each tranche of each award.

Fair values of restricted stock units are determined using the closing price of our common stock on the respective grant date.

Employee stock purchase plan instruments are shares of our common stock purchased by employees under the Mueller Water Products Inc.

2006 Employee Stock Purchase Plan (“ESPP”).

Generally, all full-time, active employees are eligible to participate in the ESPP, subject to certain restrictions.

Employee purchases are funded through payroll deductions, and excess payroll withholdings are returned to the employee.

The price for the shares purchased under the ESPP is 85 % of the lower of the closing price on the first day or the last day of the offering period.

We issued 168,897 shares of common stock to settle PRSUs vested during the three months ended December 31, 2023.

Additionally, we issued 146,760 shares of common stock to settle restricted stock units vested during the three months ended December 31, 2023.

Finally, we issued 3,582 shares of common stock to settle stock options exercised during the three months ended December 31, 2023.

Common shares totaling 109,961 were surrendered to us to pay the applicable tax withholding obligations of equity award participants for the three months ended December 31, 2023.

Operating income included stock-based compensation expense of $ 2.6 million and $ 2.7 million during the three months ended December 31, 2023 and 2022, respectively.

At December 31, 2023, there was approximately $ 16.8 million of unrecognized compensation expense related to stock-based compensation arrangements, which will be expensed through December 2026.

We excluded 712,164 and 1,274,371 stock-based compensation instruments from the calculations of diluted earnings per share in the three months ended December 31, 2023 and 2022, respectively, since their inclusion would have been antidilutive.

Supplemental Balance Sheet Information

Selected supplemental asset information is presented below:

June 30, September 30,

December 31, September 30,

(in millions)

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Selected supplemental liability information is presented below:

June 30, September 30,

December 31, September 30,

(in millions)

9 unchanged sentences

Workers' compensation accrual 4.3 4.0

CARES Act payroll tax liabilities — 4.4

Restructuring liabilities 2.2 3.3

Environmental liabilities 0.7 0.7

Strategic reorganization and other charges liabilities 7.8 6.6

Interest payable 0.8 5.3

8 unchanged sentences

Workers' compensation accrual 5.6 5.9

Environmental liabilities 3.6 3.6

Asset retirement obligation 4.2 4.2

Deferred development grant 2.5 2.5

1 unchanged sentence

Total other noncurrent liabilities $ 58.1 $ 54.2

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, all of which is within our Water Management Solutions segment, during the nine months ended June 30, 2023, in millions:

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis on September 1 of each fiscal year or more frequently 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, all of which is within our Water Management Solutions segment, during the three months ended December 31, 2023, in millions:

Balance at September 30, 2023:

2 unchanged sentences

Goodwill, net 93.7

Activity during the nine months ended June 30, 2023:

Activity during the three months ended December 31, 2023:

Change in foreign currency exchange rates 4.6

Balance at June 30, 2023

Balance at December 31, 2023

Segment Information

1 unchanged sentence

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

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

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

Summarized financial information for our segments is presented below:

Three months ended Nine months ended

June 30, June 30,

2023 2022 2023 2022

Three months ended

(in millions)

Net sales, excluding intercompany:

Net revenue, excluding intercompany:

Water Flow Solutions $ 141.3 $ 165.6

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Corporate — —

$ 11.9 $ 10.7 $ 32.4 $ 36.7

Water Flow Solutions disaggregated net sales:

Water Flow Solutions disaggregated revenue:

Central $ 38.5 $ 44.0

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$ 141.3 $ 165.6

Water Management Solutions disaggregated net sales:

Water Management Solutions disaggregated revenue:

Central $ 29.2 $ 41.5

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Balance at September 30, 2023 $ ( 28.5 ) $ ( 20.2 ) $ ( 48.7 )

Current period other comprehensive income (loss) 2.0 ( 3.0 ) ( 1.0 )

Balance at June 30, 2023 $ ( 34.3 ) $ ( 11.3 ) $ ( 45.6 )

For the nine months ended June 30, 2023, pension actuarial amortization included in the condensed consolidated statements of comprehensive income as a component of pension expense other than service was $ 2.8 million, net of income tax of $ 0.8 million.

Current period other comprehensive income 0.6 13.3 13.9

Balance at December 31, 2023 $ ( 27.9 ) $ ( 6.9 ) $ ( 34.8 )

For the three months ended December 31, 2023, pension actuarial amortization included in the condensed consolidated statements of comprehensive income as a component of pension expense other than service was $ 0.8 million, net of income tax of $ 0.2 million.

Refer to Note 5.

Retirement Plans for further information.

For the nine months ended June 30, 2023, foreign currency translation included in the condensed consolidated statements of comprehensive income was $ 3.0 million, net of $ 0 income tax.

For the three months ended December 31, 2023, foreign currency translation included in the condensed consolidated statements of comprehensive income was $ 13.3 million, net of no income tax.

Commitments and Contingencies

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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 June 30, 2023.

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.

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

While the extent to which the pandemic continues to affect 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.

Facility in Albertville, Alabama.

On June 15, 2021, we experienced a mass shooting event at our Mueller Co.

facility in Albertville, Alabama.

Various claims arising from the event have been filed to date, and we anticipate that additional claims may be made and that liability under such claims, if any, is not expected to have a materially adverse effect on our results of operations or cash flows.

However, the outcome of these claims, or legal proceedings, and related effects arising from this event cannot be predicted with certainty.

Indemnification .

Since the amounts of such costs cannot be reasonably estimated at this time, no amounts have been accrued for this matter at December 31, 2023.

Indemnifications .

We are a party to contracts in which it is common for us to agree to indemnify third parties for certain liabilities that arise out of or relate to the subject matter of the contract.

In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by gross negligence or willful misconduct.

We cannot estimate the potential amount of future payments under these indemnities unless events arise that would trigger a liability under the indemnities.

We cannot estimate the potential amount of future payments under these indemnities until events arise

that would trigger a liability under the indemnities.

Additionally, in connection with the sale of assets and the divestiture of businesses, such as the divestitures of U.S.

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Indemnities related to the pre-closing operations of sold assets or businesses normally do not represent additional liabilities to us, but simply serve to protect these parties from potential liability associated with our obligations existing at the time of the sale.

As with any liability, we have accrued for those pre-closing obligations that are considered probable and reasonably estimable.

We have accrued for those pre-closing obligations that are considered probable and reasonably estimable.

Should circumstances change, increasing the likelihood of payments related to a specific indemnity, we will accrue a liability when future payment is probable and the amount is reasonably estimable.

Other Matters.

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

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.

We offer warranties on many of our products, including products related to our metrology business line, which carry an extended warranty in many instances.

Our products are often utilized in harsh environmental conditions and are exposed to water and other exogenous factors such as flooding and other environmental conditions that are beyond our control.

We periodically monitor and analyze our warranty experience and costs.

Accordingly, should specific events or issues occur, additional warranty accruals may also be made relating to those issues or events.

Factors considered 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.

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 July 26, 2023 , our Board of Directors declared a dividend of $ 0.061 per share on our common stock, payable on or about August 21, 2023 to stockholders of record at the close of business on August 10, 2023 .

On January 25, 2024 , our Board of Directors declared a dividend of $ 0.064 per share on our common stock, payable on or about February 20, 2024 to stockholders of record at the close of business on February 9, 2024 .

As of February 6, 2024, we were in compliance with the required deliverables under the ABL and the waiver period terminated including the $ 50.0 million temporary limit on credit extensions.

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