What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-11-19 compared with 2024-11-20 · 118 added, 136 removed, 169 unchanged (60% of the section changed)

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We operate our business through two segments, Water Flow Solutions and Water Management Solutions.

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

The Water Management Solutions product and service portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, as well as pressure management and control products and solutions.

In August 2023, Marietta Edmunds Zakas was appointed to Chief Executive Officer and to the Board of Directors.

Zakas formerly served as our Chief Financial Officer.

In May 2024, Paul McAndrew, Chief Operating Officer, was promoted to President and Chief Operating Officer.

In September 2024, we announced that Steven S.

Heinrichs, the Company’s Chief Financial Officer (“CFO”) and Chief Legal and Compliance Officer, will be transitioning from his position effective on or about December 31, 2024.

Heinrichs will continue to serve as CFO and Chief Legal and Compliance Officer until a new CFO has been named.

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, as well as pressure management and control products and solutions.

In January 2025, we announced the appointment of Ms.

Melissa Rasmussen as Senior Vice President and Chief Financial Officer effective March 3, 2025.

On March 1, 2025, Mr.

Heinrichs transitioned from his roles as Chief Financial Officer and Chief Legal Officer to Senior Advisor and remained an advisor until September 30, 2025.

In August 2025, we announced the appointment of Ms.

Feyerherm as Chief Accounting Officer effective August 15, 2025.

Feyerherm also serves as the Company’s principal accounting officer.

On November 6, 2025, we announced that Ms.

Marietta Edmunds Zakas will retire as the Company’s Chief Executive Officer and as a member of the Company’s Board of Directors, effective as of February 9, 2026.

In connection with Ms.

Zakas’ retirement, the Company’s Board of Directors appointed Mr.

Paul McAndrew as President and Chief Executive Officer, effective as of the Transition Date.

We estimate approximately 60% to 65% of the Company’s 2025 net sales were associated with the repair and replacement of municipal water infrastructure, approximately 25% to 30% were related to residential construction activity and approximately 10% were related to natural gas utilities and industrial applications.

After experiencing challenges resulting from the COVID-19 pandemic and subsequent supply disruptions in years 2020 through 2023, the seasonality of our business returned to more normalized levels in 2024, supported by municipal spending on repair and replacement projects and new residential construction activity.

According to the United States Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates at September 30, 2024 increased 5.2%.

Total housing starts in fiscal 2024 decreased 1.6% as compared with fiscal 2023, according to the United States Census Bureau, despite a 13% increase in single family housing starts as compared with fiscal 2023.

After experiencing challenges resulting from the COVID-19 pandemic and subsequent supply disruptions in years 2020 through 2023, the seasonality of our business has since returned to more normalized levels, supported by municipal spending on repair and replacement projects and new residential construction activity.

According to the United States Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates as of September 30, 2025 increased 4.6%.

Total housing starts in fiscal 2025 decreased 1.1% as compared with fiscal 2024, according to the United States Census Bureau, which included a 5.2% decrease in single family housing starts as compared with fiscal 2024.

Recent Developments

In October 2023, the Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel.

While we reopened the facility in November 2023, the war has caused supply chain challenges that continue to hinder our ability to most efficiently manufacture our products produced in Israel.

These supply chain disruptions have adversely impacted, and continue to adversely impact, our ability to optimally produce and deliver our products from our facility in Ariel, Israel.

Additionally, production at this facility has been adversely impacted by limited labor availability in the region.

We have made investments in recruiting and training new team members, expanding our suppliers and expediting product shipments to increase production levels and to meet customer delivery times.

The cybersecurity incident in the first quarter of fiscal 2024 consisted of unauthorized access and deployment of ransomware by a third party to a portion of our internal information system infrastructure.

The incident caused temporary disruptions and limitations of access to portions of our business applications supporting certain aspects of our operations including shipping, receiving and payment functions.

Operational delays as well as investigation and remediation costs in connection with the incident adversely impacted our results for the first quarter of fiscal 2024;

however, there was no material impact to our consolidated net sales for the full fiscal 2024.

We have restored the impacted applications and systems.

As reported on November 29, 2023, we identified a separate cybersecurity incident, which primarily related to a system that was at the end of its useful life and was already in the process of being replaced in the ordinary course of business.

We completed the replacement of this system during the second quarter of fiscal 2024.

While we reopened the facility in November 2023, the war caused supply chain challenges that hindered our ability to most efficiently manufacture our products produced in Israel.

While the facility was adversely impacted by this event, we have mitigated operational risk by expanding our suppliers and improving throughput in order to increase production levels and to meet customer delivery times.

While net sales levels have returned to pre-war levels, margin expansion was further hindered by newly implemented tariffs on products manufactured in Israel and imported into the United States.

While newly implemented tariffs are adversely impacting several product lines, Repair and Specialty Valve product lines are bearing most of the higher costs.

In response to tariffs that went into effect in the second half of fiscal 2025, we implemented additional pricing actions, which are expected to mostly offset tariff costs in dollar terms but will result in tariff-related impacts being dilutive to margins.

As the tariffs remain uncertain and volatile, we will continue to monitor the situation and take appropriate actions to address inflationary and other cost pressures.

At the end of the first quarter, we ceased melting and casting operations at our legacy brass foundry and transitioned production to our state-of-the-art foundry.

We expect this transition will improve operational efficiency and enable us to better serve our service brass customers.

As part of Mueller’s overall strategy, we will continue investing in our foundries to expand

Index to Financial Statements

In fiscal 2024, we incurred approximately $1.5 million of expenses related to the cybersecurity incidents.

We continue to address the impacts of the cybersecurity incidents, including making enhancements to our cybersecurity processes and analyzing the data accessed, exfiltrated or otherwise impacted in connection with the cybersecurity incidents.

capacity, increase manufacturing efficiencies and strategically position ourselves as the demand for domestic product is expected to increase given the uncertainty in the current geopolitical and tariff environment.

For fiscal year 2026, we anticipate that consolidated net sales will increase between 1.4% and 2.8% as compared with fiscal 2025.

The external operating environment remains dynamic as we face uncertainties and challenges emanating from the interest rate environment, the Israel-Hamas war and unrest in the Middle East, as well as labor inflation and availability.

We expect these challenges to continue during fiscal 2025.

After our short-cycle channel and customer inventory levels largely normalized during the first quarter of 2024, our orders and shipments reflected a more typical operating environment compared with the high backlog environment we experienced during and after the COVID-19 pandemic.

The external operating environment remains uncertain as we face changes in government policies, including possible disruptions to global supply chains resulting from such changes, the interest rate and tariff environment, as well as geopolitical conditions and labor and material inflation and availability.

We expect these challenges to continue into fiscal 2026.

We continue to anticipate resilient demand associated with the municipal repair and replacement end market driven by the aging water infrastructure and increasing water rates, moderated by budgetary and operational pressures on municipalities.

We anticipate that new residential construction activity and new lot and land development will be relatively constrained by the uncertainty in the economy, affordability concerns and interest rate environment, depending on the geographic region.

Our orders and shipments in 2025 reflected a more typical operating environment compared with the high backlog environment we experienced during and after the COVID-19 pandemic.

For fiscal 2026, we assume that we will continue to experience a more normalized operating environment leading to normalized seasonality for consolidated net sales.

Therefore, we anticipate quarterly consolidated net sales as a percentage of fiscal year 2026 consolidated net sales to be the highest in the third quarter and lowest in the first quarter, with a sequential increase in consolidated net sales in the second quarter as the construction season ramps up for the Spring.

We anticipate resilient demand in the municipal repair and replacement end market driven by the aging water infrastructure albeit moderated by budgetary and operational pressures on municipalities.

Additionally, we anticipate that new residential construction activity and new lot and land development will be relatively constrained by the interest rate environment, depending on the geography.

For fiscal 2026, we anticipate that inflation will continue to modestly impact manufacturing costs, primarily due to wage inflation, as well as raw materials and purchased parts.

We will continue to monitor the market and economic conditions impacting our business and take appropriate actions to address inflationary and other cost pressures by implementing price increases, cost containment measures and supplier management measures, among other actions.

In addition, higher direct tariff costs of approximately 3% of costs of goods sold are expected to continue to contribute to inflationary pressures in 2026.

While pricing actions were taken in 2025 in response to new tariffs, we will continue to monitor the market and economic conditions impacting our business and take appropriate actions to address inflationary and other cost pressures by implementing price increases, cost containment measures and supplier management measures, among other actions.

Index to Financial Statements

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Strategic reorganization and other charges 1.0 0.7 7.1 8.8

Goodwill impairment — 16.3 — 16.3

Total operating expenses 91.3 97.6 67.2 256.1

Operating income (loss) $ 205.0 $ 122.8 $ (67.2) 260.6

Pension expense other than service 4.0

Pension benefit other than service (0.2)

Interest expense, net 6.6

Other expense 1.6

Income before income taxes 254.2

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Strategic reorganization and other charges 0.2 1.8 13.8 15.8

Goodwill impairment — 16.3 — 16.3

Total operating expenses 92.7 113.1 71.5 277.3

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$ 179.2 $ 74.0 $ (71.5) 181.7

Pension benefit other than service 3.7

Pension expense other than service 4.0

Interest expense, net 12.7

Other expense 1.6

Income before income taxes 163.4

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Consolidated Analysis

Net sales for 2024 were $1,314.7 million as compared with $1,275.7 million in the prior year, an increase of $39.0 million or 3.1%, primarily as a result of higher pricing across most of our product lines, higher volumes at Water Flow Solutions, partially offset by lower volumes at Water Management Solutions which include a negative impact from the Israel-Hamas war of less than 2%.

Index to Financial Statements

Gross profit for 2024 was $459.0 million as compared with $379.5 million in the prior year, an increase of $79.5 million or 20.9%, primarily a result of favorable manufacturing performance related to labor, overhead and logistics efficiencies and favorable price/cost.

This increase was partially offset by negative impacts from the Israel-Hamas war of approximately 4%.

Net sales for 2025 were $1,429.7 million as compared with $1,314.7 million in the prior year, an increase of $115.0 million or 8.7%, primarily as a result of higher sales volumes and higher prices across most product lines.

Gross profit for 2025 was $516.7 million as compared with $459.0 million in the prior year, an increase of $57.7 million or 12.6%, primarily a result of higher volumes across most product lines, favorable pricing, and benefits from manufacturing performance efficiencies, partially offset by approximately 3% inflation and increased tariffs.

Manufacturing performance was negatively impacted by a $4.1 million write-down of inventory and other assets associated with our legacy brass foundry in Decatur, Illinois.

Gross margin increased to 36.1% in 2025 as compared with 34.9% in the prior year.

Selling, general and administrative expenses (“SG&A”) for 2024 were $245.2 million as compared with $241.9 million in the prior year, an increase of $3.3 million or 1.4%, primarily due to higher employee incentives, higher costs associated with approximately 3% inflation and the impact of foreign currency fluctuation, partially offset by a decrease in salary and benefit expense associated with our restructuring activities, third-party fees and engineering materials expense.

Index to Financial Statements

Selling, general and administrative expenses (“SG&A”) for 2025 were $247.3 million as compared with $245.2 million in the prior year, an increase of $2.1 million or 0.9%, primarily due to inflation of approximately 3%, unfavorable foreign currency fluctuations, higher personnel-related expenses, including incentive-based compensation, and increased third-party fees.

These increases were largely offset by lower intangible amortization, engineering costs, and bad debt expense.

As a percentage of net sales, SG&A decreased 140 basis points to 17.3% of net sales from 18.7% in the prior year.

Strategic reorganization and other charges for 2024 of $15.8 million primarily consisted of expenses associated with the leadership transition, certain transaction-related expenses, $1.8 million related to non-cash asset impairment, expenses associated with the cybersecurity incidents and severance.

Strategic reorganization and other charges for 2023 of $10.2 million primarily consisted of expenses associated with the leadership transition, severance and certain transaction-related expenses.

During the year ended September 30, 2024, we incurred a non-cash goodwill impairment charge of $16.3 million within the Water Management Solutions segment.

No goodwill impairment charge was recorded in 2023.

Strategic reorganization and other charges for 2025 of $8.8 million primarily consisted of expenses associated with our leadership transition, certain transaction-related expenses, severance and $1.0 million related to non-cash asset impairment.

Strategic reorganization and other charges for 2024 of $15.8 million primarily consisted of expenses associated with our leadership transition, certain transaction-related expenses, $1.8 million related to non-cash asset impairment, expenses associated with the cybersecurity incidents and severance.

During the year ended September 30, 2025, there was no goodwill impairment charge recorded.

For the year ended September 30, 2024, a $16.3 million non-cash goodwill impairment charge was recorded within the Water Management Solutions Segment.

Interest expense, net for 2025 was $6.6 million as compared with $12.7 million in the prior year, a decrease of $6.1 million or 48.0%, primarily as a result of higher interest income.

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Total interest expense, net $ 6.6 $ 12.7

Other expense for 2024 was $1.6 million for the release of an indemnification receivable related to an expired uncertain tax position.

There was no Other expense for 2023.

Income tax expense of $47.5 million in 2024 resulted in an effective income tax rate of 29.1%, which was higher than the 21.6% rate in the prior year primarily as a result of certain non-deductible items, including non-cash goodwill impairment, an increase in the state income tax rate and lesser foreign tax rate benefits.

In 2025, there was no Other expense and, in 2024, there was $1.6 million Other expense for the release of an indemnification receivable related to an expired uncertain tax position.

Income tax expense of $62.5 million in 2025 resulted in an effective income tax rate of 24.6%, which was lower than the 29.1% rate in the prior year primarily as a result of certain non-deductible items recognized in 2024, including a non-cash goodwill impairment charge that did not reoccur in 2025, as well as changes in the valuation allowance related to certain state tax credits and foreign operating losses, tax benefits related to stock compensation, and higher foreign tax rate benefits.

Segment Analysis

Water Flow Solutions

Net sales for 2024 were $755.5 million as compared with $634.4 million in the prior year, an increase of $121.1 million or 19.1%, primarily as a result of higher volumes in iron gate valves and service brass products as well as higher pricing across most of Water Flow Solutions’ product lines.

Gross profit for 2024 was $271.9 million as compared with $164.9 million in the prior year, an increase of $107.0 million or 64.9%, primarily as a result of favorable manufacturing performance driven by labor, overhead and logistic efficiencies, higher volumes and favorable price/cost, partially offset by higher custom duties expense.

Gross margin increased to 36.0% in 2024, as compared with 26.0% in the prior year.

SG&A for 2024 was $92.5 million as compared with $85.3 million in the prior year, an increase of $7.2 million or 8.4%, primarily as a result of higher employee incentives and approximately 3% inflation, partially offset by lower salary and benefit expense associated with our restructuring activities.

Net sales for 2025 were $824.9 million as compared with $755.5 million in the prior year, an increase of $69.4 million or 9.2%, primarily as a result of higher sales volumes in iron gate valves and specialty products as well as higher pricing across most of Water Flow Solutions’ product lines.

Gross profit for 2025 was $296.3 million as compared with $271.9 million in the prior year, an increase of $24.4 million or 9.0%, primarily as a result of higher volumes in iron gate valves and specialty products, higher pricing and benefits from manufacturing efficiencies, partially offset by approximately 4% inflation and increased tariffs.

Gross margin decreased slightly to 35.9% in 2025, as compared with 36.0% in the prior year primarily due to the negative impact of a $4.1 million write-down of inventory and other assets associated with the closure of our legacy brass foundry in Decatur, Illinois.

SG&A for 2025 was $90.3 million as compared with $92.5 million in the prior year, a decrease of $2.2 million or 2.4%, primarily as a result of lower intangible amortization, partially offset by higher personnel-related expenses, including incentive-based compensation, approximately 3% inflation, and higher third-party fees.

SG&A as a percentage of net sales was 10.9% and 12.2% for 2025 and 2024, respectively.

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Water Management Solutions

Net sales for 2024 were $559.2 million as compared with $641.3 million in the prior year, a decrease of $82.1 million or 12.8%, primarily as a result of lower volumes across most product lines, including the impact of the Israel-Hamas war, partially offset by higher pricing across most of Water Management Solutions’ product lines.

Gross profit for 2024 was $187.1 million as compared with $214.6 million in the prior year, a decrease of $27.5 million or 12.8%, primarily as a result of lower volumes including the impact of the Israel-Hamas war, partially offset by favorable price/cost and favorable manufacturing performance.

Gross margin was 33.5% in both 2024 and 2023.

SG&A for 2024 was $95.0 million as compared with $106.9 million in the prior year, a decrease of $11.9 million or 11.1% primarily due to lower salary and benefit expense associated with our restructuring activities and lower third-party fees, partially offset by unfavorable foreign currency fluctuation, higher employee incentives and approximately 3% inflation.

Net sales for 2025 were $604.8 million as compared with $559.2 million in the prior year, an increase of $45.6 million or 8.2%, primarily as a result of higher sales volumes in hydrants and repair and installation products as well as higher pricing across most of Water Management Solutions’ product lines.

Gross profit for 2025 was $220.4 million as compared with $187.1 million in the prior year, an increase of $33.3 million or 17.8%, primarily as a result of higher pricing, benefits from manufacturing performance efficiencies, and higher volumes, which were partially offset by increased tariffs and 2% inflation.

Gross margin was 36.4% in 2025 and 33.5% in 2024.

SG&A for 2025 was $96.9 million as compared with $95.0 million in the prior year, an increase of $1.9 million or 2.0% primarily due to unfavorable foreign currency fluctuation, inflation of approximately 3%, higher personnel-related expenses, including incentive-based compensation, and third-party fees, largely offset by lower intangible amortization, engineering costs and bad debt expense.

SG&A as a percentage of net sales was 16.0% for 2025 and 17.0% in the prior year.

During the year ended September 30, 2024, Water Management Solution incurred a non-cash goodwill impairment charge of $16.3 million.

No goodwill impairment charge was recorded in 2023.

SG&A for 2024 was $57.7 million as compared with $49.7 million in the prior year, an increase of $8.0 million or 16.1% primarily as a result of higher employee incentives, higher third-party fees, unfavorable foreign currency fluctuation and approximately 3% inflation, partially offset by lower salary and benefit expense associated with our restructuring activities.

Financial Condition

Cash and cash equivalents were $309.9 million at September 30, 2024 and $160.3 million at September 30, 2023.

Cash and cash equivalents increased during 2024 primarily as a result of $238.8 million in cash provided by operating activities, $4.0 million in effect of currency exchange rate changes on cash, partially offset by capital expenditures of $47.4 million, dividend payments of $39.9 million, and $10.0 million in common stock repurchases.

Receivables, net were $208.9 million at September 30, 2024 and $217.1 million at September 30, 2023.

This decrease was a result of lower days sales outstanding.

Inventories, net were $301.7 million at September 30, 2024 and $297.9 million at September 30, 2023.

Inventories increased during 2024 as a result of higher finished goods and approximately 1% inflation, partially offset by lower raw materials.

Property, plant and equipment, net was $318.8 million at September 30, 2024 and $311.7 million at September 30, 2023.

Property, plant and equipment increased as a result of $47.4 million in capital expenditures primarily associated with our new brass foundry in Decatur, Illinois, partially offset by depreciation expense of $39.1 million.

Depreciation expense increased from $34.4 million in 2023 as a result of accelerated depreciation of certain assets.

Intangible assets were $309.7 million at September 30, 2024 and $334.0 million at September 30, 2023.

Finite-lived intangible assets, net totaling $37.2 million at September 30, 2024, are amortized over their estimated useful lives.

Amortization expense was $27.1 million in 2024 and $28.1 million in 2023.

We expect amortization expense for these assets to be approximately $7 million for 2025, approximately $6 million in fiscal 2026 and fiscal 2027, approximately $5 million in fiscal 2028, and approximately $4 million in fiscal 2029.

The reduction in amortization expense is a result of certain customer relationship intangibles becoming fully amortized.

Indefinite-lived intangible assets, $272.5 million at September 30, 2024, are not amortized but are tested for potential impairment at least annually.

Accounts payable and other current liabilities were $257.2 million at September 30, 2024 and $218.1 million at September 30, 2023.

Accounts payable increased during 2024 primarily as a result of timing and inflation.

Other current liabilities increased during 2024 primarily as a result of higher personnel-related accruals, customer rebates, and product liabilities, partially offset by lower income taxes payable and accrued restructuring costs.

Total outstanding debt was $449.5 million as of September 30, 2024 and $447.4 million as of September 30, 2023.

Total debt increased due to the addition of new financing leases and the amortization of deferred financing costs.

Index to Financial Statements

Deferred income taxes were net liabilities of $55.4 million at September 30, 2024 and $73.8 million at September 30, 2023, primarily related to intangible assets.

The $18.4 million decrease in the net liability was primarily a result of an increase in deferred tax assets related to Internal Revenue Code Section 174 pertaining to the amortization of research and development expenditures and an increase in other accrued expenses.

During the year ended September 30, 2025, there was no goodwill impairment charge recorded.

For the year ended September 30, 2024, Water Management Solutions incurred a non-cash goodwill impairment charge of $16.3 million.

SG&A for 2025 was $60.1 million as compared with $57.7 million in the prior year, an increase of $2.4 million or 4.2% primarily as a result of approximately 3% inflation, higher insurance expense, and unfavorable foreign currency fluctuation.

Liquidity and Capital Resources

We had cash and cash equivalents of $309.9 million at September 30, 2024 and approximately $162.6 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”) based on September 30, 2024 data.

Undistributed earnings from our subsidiaries in Israel, Canada and China are considered to be permanently invested outside of the United States.

At September 30, 2024, cash and cash equivalents included $80.7 million, $10.3 million, and $10.0 million in Israel, Canada, and China, respectively.

We declared a quarterly dividend of $0.067 per common share on October 22, 2024, payable on or about November 20, 2024 to holders of record as of November 8, 2024, which we expect to result in an estimated $10.5 million cash outlay.

We repurchased $10.0 million of our outstanding common stock during the fiscal year ended September 30, 2024 and had $80.0 million remaining under our share repurchase authorization as of September 30, 2024.

The ABL and 4.0% Senior Notes contain customary representations and warranties, covenants and provisions governing an event of default.

The covenants restrict our ability to engage in certain activities including, but not limited to, the payment of dividends and the redemption of our common stock.

Collections from customers were higher during the fiscal year ended September 30, 2024 as compared with the prior year period primarily as a result of higher sales during the comparative periods.

Inventories increased during the fiscal year ended September 30, 2024 primarily as a result of inflation and timing of shipments.

Other current liabilities and other noncurrent liabilities increased as a result of higher employee-related accruals, product liabilities, and customer rebates, partially offset by lower income taxes payable and accrued restructuring costs.

Capital expenditures remained fairly constant at $47.4 million for 2024 compared with $47.6 million for 2023.

We estimate 2025 capital expenditures will be between $45.0 million and $50.0 million.

Income tax payments were higher during 2024 compared with the prior year primarily as a result of higher income before income taxes as well as the timing of certain federal and state extension payments.

We expect the effective tax rate in 2025 to be between 25% and 27%.

Our stock repurchase program allows us to repurchase up to $250.0 million of our common stock, of which we had remaining authorization of $80.0 million as of September 30, 2024.

As of September 30, 2025, we had cash and cash equivalents of $431.5 million and approximately $163.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”).

Undistributed earnings from our subsidiaries in Israel, Canada and China are considered to be permanently reinvested outside of the United States.

As of September 30, 2025, cash and cash equivalents included $84.3 million, $14.0 million, and $8.8 million in Israel, Canada, and China, respectively.

Historically, we have funded our liquidity requirements through cash flows from operating activities, borrowings under our credit facilities, and working capital management activities.

Our primary historical cash requirements have been for working capital, capital expenditures, income tax payments, and contractual obligations, which primarily consist of required long-term debt and related interest payments and commitments under non-cancellable operating lease agreements.

When appropriate, the Company may utilize liquidity towards debt service requirements, including voluntary debt prepayments, as well as repurchases of common stock or other securities, based on excess cash flows.

The most significant components of our operating assets and liabilities are inventories, accounts receivable, prepaid expenses and other assets, accounts payable, and other payables and accrued expenses.

We closely monitor various items related to cash flow including, but not limited to, cash receipts, cash disbursements, payment terms and discounts.

We continue to be focused on these items in addition to other key measures we use to determine how our consolidated business and operating segments are performing.

We believe that cash on hand, cash expected to be generated from operations and the availability of borrowings under our ABL will be sufficient to fund our working capital requirements, liquidity obligations, anticipated capital expenditures, income tax payments and payments due under our existing debt for the next 12 months and thereafter for the foreseeable future.

However, our ability to make these payments will depend largely on our future operating performance, which may be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.

Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the prepayment, refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our debt structure or business acquisitions.

Share Repurchase Program

Our stock repurchase program allows us to repurchase up to $250.0 million of our common stock.

The program does not commit us to any particular timing or quantity of purchases, and we may suspend or discontinue the program at any time.

We repurchased 591,553 and 636,789 shares of our common stock in 2025 and 2024, respectively.

We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual obligations.

As of September 30, 2024, we had $12.2 million of letters of credit and $13.8 million of surety bonds outstanding.

We anticipate our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flows will be sufficient to meet our anticipated operating needs, income tax payments, capital expenditures and debt service obligations as they become due through the twelve months from the date of this filing.

We repurchased $15.0 million of our outstanding common stock during the fiscal year ended September 30, 2025 and had $65.0 million remaining under our share repurchase authorization as of September 30, 2025.

Index to Financial Statements

ABL Agreement

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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.

Index to Financial Statements

In December 2023, we obtained a waiver under our ABL (“ABL Waiver”) to provide for additional time associated with certain 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 temporarily limited to $50.0 million 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 the $50.0 million temporary limit on credit extensions.

On March 28, 2024, we amended our ABL to, among other things, (i) extend the maturity date from July 29, 2025 to the earlier of (a) March 28, 2029 and (b) 91 days prior to the stated maturity date of the Company’s 4.0% Senior Notes due June 15, 2029 (as may be extended from time to time in accordance with the Indenture governing the notes) if the 4.0% Senior Notes are then outstanding, (ii) decrease the grid-based interest rate margins by approximately 50 basis points to 150 basis points for Secured Overnight Financing Rate (“SOFR”) loans and 50 basis points for base rate loans when average availability is greater than 50% of the aggregate revolving commitments, and to 175 basis points for SOFR loans and 75 basis points for base rate loans, when average availability is less than or equal to 50% of the aggregate revolving credit commitments and (iii) replace the previously fixed 37.5 basis point unused commitment fee with a grid-based, quarterly unused commitment fee equal to (a) 37.5 basis points if average daily outstanding credit extensions for such quarter under the ABL (“Total Outstandings”) are less than or equal to 50% of the aggregate revolving credit commitments or (b) 25.0 basis points if Total Outstandings for such quarter are greater than or equal to 50% of the aggregate revolving credit commitments.

We incurred approximately $0.9 million in debt issuance costs in connection with the ABL amendment which were capitalized and are amortized over the term of the ABL.

Borrowings under the ABL bear interest at a floating rate equal to SOFR plus an adjustment of 10 basis points and an applicable margin range of 150 to 175 basis points, or a base rate, as defined in the ABL, plus an applicable margin of 50 to 75 basis points.

At September 30, 2024, the applicable margin was 150 basis points for SOFR-based loans and 50 basis points for base rate loans.

Borrowings under the ABL bear interest at a floating rate equal to Secured Overnight Financing Rate (‘SOFR”) plus an adjustment of 10 basis points and an applicable margin range of 150 to 175 basis points, or a base rate, as defined in the ABL, plus an applicable margin of 50 to 75 basis points.

As of September 30, 2025, the applicable margin was 150 basis points for SOFR-based loans and 50 basis points for base rate loans.

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.

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Prepayments can be made at any time without penalty.

The ABL allows for certain restricted payments such as cash dividends on our common stock up to certain thresholds.

The ABL contains customary terms and conditions as well as various affirmative, negative and financial covenants that, among other things, may restrict the ability of us and our subsidiaries to pay dividends or repurchase stock.

Substantially all of our United States subsidiaries are borrowers under the ABL and are jointly and severally liable for any outstanding borrowings.

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The ABL includes a commitment fee for any unused borrowing capacity of 37.5 basis points per annum when the unused capacity is above 50% of the credit commitments, with a step down to 25.0 basis points per annum when unused capacity is less than or equal to 50% of the credit commitments.

At September 30, 2024, the commitment fee was 37.5 basis points.

As of September 30, 2025, the commitment fee was 37.5 basis points.

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 September 30, 2025 data was $163.7 million, as reduced by $11.1 million of outstanding letters of credit and $0.2 million of accrued fees and expenses.

We were in compliance with all required covenants as of September 30, 2025.

4.0% Senior Unsecured Notes

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subsidiaries guarantee the 4.0% Senior Notes, which are subordinate to borrowings under our ABL.

Based on quoted market prices the outstanding 4.0% Senior Notes had a fair value of $430.2 million at September 30, 2024.

Based on quoted market prices the outstanding 4.0% Senior Notes had a fair value of $434.1 million as of September 30, 2025.

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.

We were in compliance with all required covenants as of September 30, 2025.

There are no financial maintenance covenants associated with the Indenture.

We believe we were in compliance with these covenants at September 30, 2024.

We may redeem some or all of the 4.0% Senior Notes at any time after June 15, 2024, at specified redemption prices.

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4.0% Senior Notes Ba1 Ba1 BB BB

Outlook Stable Stable Stable Stable

Outlook Stable Stable Positive Stable

These ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agencies.

Net Cash Flows Provided by Operating Activities

Net cash flows provided by operating activities for the fiscal year ended September 30, 2025 decreased $19.5 million to $219.3 million, from $238.8 million for the fiscal year ended September 30, 2024.

Net cash flows provided by operating activities was lower over the comparable periods primarily a result of a $67.7 million change in working capital and other assets and liabilities and a decrease of $27.6 million in non-cash reconciling items, largely offset by an increase in net income of $75.8 million.

Net Cash Flows Used in Investing Activities

Net cash flows used in investing activities for the fiscal year ended September 30, 2025 decreased $0.1 million to $47.1 million, from $47.2 million for the fiscal year ended September 30, 2024.

Capital expenditures were generally consistent year over year.

Net Cash Flows Used in Financing Activities

Net cash flows used in financing activities for the fiscal year ended September 30, 2025 increased $12.3 million to $58.3 million, from $46.0 million for the fiscal year ended September 30, 2024.

The increase in fiscal year ended September 30, 2025 primarily relates to an additional $5.0 million of shares repurchased under the share repurchase program, $3.0 million in less cash provided by common stock issuances, additional employee taxes related to stock-based compensation of $2.8 million and $2.0 million incremental dividends paid during the year.

Material Cash Requirements

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(ii) cumulative cash obligations of $ 32.8 million for operating leases through 2034 and $ 4.7 million for finance leases through 2030;

and (iii) purchase obligations for raw materials and other purchased parts of approximately $104.8 million and $1.1 million which we expect to incur during 2025 and 2026, respectively.

Additionally, we expect to invest to strengthen our systems, cybersecurity training, policies, programs, response plans and other similar measures.

and (iii) purchase obligations for raw materials and other purchased parts of $128.3 million and $1.1 million which we expect to incur during 2026 and 2027, respectively.

Additionally, we expect to invest to strengthen our information technology systems, cybersecurity training, policies, programs, response plans and other similar measures.

We expect to fund these cash requirements from cash on hand and cash generated from operations.

We estimate 2026 capital expenditures will be between $60.0 million and $65.0 million.

We intend to increase capital investments in our facilities to expand production capacity and enhance operational capabilities, including investment in our two iron foundries.

We declared a quarterly dividend of $ 0.070 per common share on October 23, 2025 , payable on or about November 20, 2025 to holders of record as of November 10, 2025 , which will result in a $10.9 million cash outlay.

Index to Financial Statements

Effect of Inflation

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We anticipate inflation in raw and other material costs in 2026, including on purchased components, which is likely to have an adverse effect on our margins to the extent we are unable to pass on such higher costs to our customers.

During fiscal year 2024, we experienced approximately 3% labor inflation, which is slightly lower than the 3.8% released by the U.S.

Bureau of Labor Statistics for the 12-month period ended September 30, 2024.

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 most of Canada generally face weather conditions that restrict significant construction activity.

During fiscal year 2025, we experienced approximately 3% labor cost inflation, which is generally consistent with fiscal year 2024.

Parts of our business depend upon construction activity, which is seasonal in many areas as a result of the impact of cold weather conditions on construction.

Net sales and operating income have historically been lowest in the first and second quarters ending December 31 and March 31, respectively, when the northern United States and most of Canada generally face weather conditions that restrict significant construction activity.

See “Item 1A.

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Our critical accounting estimates include the below items.

Index to Financial Statements

Inventories, net

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We evaluate goodwill for impairment using a quantitative analysis.

The carrying value of the reporting unit, including goodwill, is compared with the estimated fair value of the reporting unit utilizing a combination of the income, market and cost approaches as applicable.

The income approach, which is a level 3 fair value measurement, is based on projected debt-free cash flow which is discounted to the present value using discount rates that consider the timing and risk of the cash flows.

The carrying value of the reporting unit, including goodwill, is compared with the estimated fair value of the reporting unit utilizing a combination of the income and market approach as applicable.

The income approach is based on projected debt-free cash flow which is discounted to the present value using discount rates that consider the timing and risk of the cash flows.

The market approach is based on the guideline public company method, which uses market multiples to value our reporting units.

The cost approach is based on the net aggregate value of the reporting unit’s underlying assets.

The income approach is dependent on management’s best estimates of future operating results, including forecasted sales, earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins and the selection of discount rates.

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This analysis is dependent on management’s best estimates of future operating results and the selection of reasonable discount rates and hypothetical royalty rates.

We performed our annual impairment testing at September 1, 2024.

As a result of this quantitative testing, we recognized a $16.3 million non-cash goodwill impairment charge for a reporting unit within our Water Management Solutions segment as the carrying value exceeded its fair value.

Our determination of the estimated fair value was based on our concluded value under the cost approach.

Additionally, we performed our annual impairment testing of indefinite-lived intangible assets at September 1, 2024 and recognized a $0.4 million non-cash impairment charge related to trade names within Water Management Solutions.

Our testing indicated no other impairment.

Index to Financial Statements

We performed our annual impairment testing as of September 1, 2025.

The results of the testing indicated that the fair value exceeded the carrying value of our reporting unit that includes goodwill.

As such, no impairment charge was recorded.

Our determination of the estimated fair value was based on our concluded value using a combination of the income and market approach.

Additionally, we performed our annual impairment testing of indefinite-lived intangible assets as of September 1, 2025 and concluded no impairment charges should be recorded.

Warranty Cost

We accrue for warranty expenses that may include customer 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 reasonably estimable at that time.

Warranty cost estimates are revised throughout applicable warranty periods as better information regarding warranty costs becomes available.

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 accrue for warranty expenses that may include customer costs of repair and/or replacement, including labor, materials, equipment, freight and overhead costs.

We accrue for the estimated cost of product warranties at the time of sale.

Warranty cost estimates are revised throughout applicable warranty periods as better information becomes available.

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

These estimates are inherently uncertain as they are based on historical data.

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However, as we cannot predict actual future claims, the potential exists for the difference in any one reporting period to be material.

Index to Financial Statements

Contingencies

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Workers’ Compensation, Defined Benefit Pension Plans, Environmental and Other Long-term Liabilities

We are obligated for various liabilities that ultimately will be determined over what could be very long future time periods.

We established the recorded liabilities for such items at September 30, 2024 using estimates for when such amounts will be paid and what the amounts of such payments will be.

We are obligated for various liabilities that ultimately will be determined over what could be very long future time periods, including workers’ compensation, defined benefit pension plan and environmental liabilities.

We established the recorded liabilities for such items as of September 30, 2025 using estimates for when such amounts will be paid and what the amounts of such payments will be.

These estimates are subject to change based on numerous factors including, among others, claim development, regulatory changes, technology changes, the investment performance of related assets, longevity of participants, the discount rate used and changes to plan designs.

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 7. Management’s Discussion and Analysis