What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-06 compared with 2026-02-05 · 162 added, 75 removed, 160 unchanged (60% of the section changed)

9 unchanged sentences

an inability to attract or retain a skilled and diverse workforce, increased competition related to the workforce, and labor markets;

an inability to protect the Company’s information systems against service interruption, risks resulting from possible future cybersecurity incidents, misappropriation of data or breaches of security;

an inability to protect the Company’s information systems against service interruption;

risks resulting from possible future cybersecurity incidents;

misappropriation of data or breaches of security;

failure to comply with personal data protection and privacy laws;

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We estimate approximately 60% to 65% of our fiscal 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.

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 (the “Transition Date”).

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.

On February 9, 2026, Ms.

Marietta Edmunds Zakas retired as the Company’s Chief Executive Officer and as a member of the Company’s Board of Directors.

Paul McAndrew started serving as the Company’s President and Chief Executive Officer on this date.

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

We reopened the facility in November 2023, but the war caused supply chain challenges that decreased the manufacturing efficiencies for our products produced in Israel.

We reopened the facility in November 2023, but the war caused supply chain challenges that reduced the manufacturing efficiencies for our products

produced in Israel.

While the facility was adversely impacted by this event, we have mitigated operational risk by adding 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 has been hindered by tariffs on products manufactured in Israel and imported into the United States.

While net sales levels have returned to pre-war levels, margin expansion has been hindered by tariffs on products manufactured in Israel and imported into the United States (“U.S.”).

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

In 2025, the United States government announced significant changes to its trade policy, including tariff increases on imported steel and aluminum from 25% to 50% under Section 232 of the Trade Expansion Act (“Section 232”).

The increase in Section 232 tariffs to 50% has resulted in material, upward pressure on certain purchased components and raw material costs, including the Repair products we import to the United States that are produced by our Krausz business, which have borne most of the higher costs.

As previously disclosed, we have, and intend to continue to take, appropriate actions to address these increases through, among other things, pricing actions and adding suppliers.

In 2025, the U.S.

government announced significant changes to its trade policy, including tariff increases on imported steel and aluminum from 25% to 50% under Section 232 of the Trade Expansion Act (“Section 232”).

The increase in Section 232 tariffs to 50% has resulted in material, upward pressure on certain purchased components and raw material costs, including the Repair products we import to the U.S.

that are produced by our Krausz business, which have borne most of the higher costs.

As previously disclosed, we have taken, and intend to continue to take, actions intended to mitigate these increases through, among other things, pricing actions and adding suppliers.

Despite these actions, Section 232 tariffs are likely to continue to negatively impact the Company’s business, results of operations, and financial condition during fiscal 2026.

The ultimate impact of Section 232 tariffs remains to be determined and will depend on several factors, including our ability to successfully mitigate their impact and whether additional or incremental U.S.

tariffs or other measures are announced or imposed.

tariffs or other changes to trade policies are announced or imposed.

In January 2025, we ceased melting and casting operations at our legacy brass foundry and transitioned production to our new state-of-the-art foundry.

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For fiscal year 2026, we anticipate that consolidated net sales will increase between 2.8% and 4.2% as compared with fiscal 2025.

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 during the remainder of fiscal 2026.

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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.

We are anticipating a more normalized operating environment in fiscal 2026 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 construction activity ramps up in the Spring.

We typically experience quarterly seasonality with consolidated net sales highest in the third quarter and lowest in the first quarter, with a sequential increase in the second quarter as construction activity ramps up in the Spring.

For the remainder of 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.

In addition, higher direct tariff costs of approximately 3% of costs of sales are expected to continue to contribute to inflationary pressures during the remainder of fiscal 2026.

In addition, we expect higher direct tariff costs of approximately 3% of costs of sales to continue to contribute to inflationary pressures during the remainder of fiscal 2026.

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

Results of Operations

Three Months Ended December 31, 2025 Compared to Three Months Ended December 31, 2024

Three months ended December 31, 2025

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Three months ended March 31, 2026

Water Flow Solutions Water Management Solutions Corporate Total

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Net income $ 59.1

Three months ended December 31, 2024

Three months ended March 31, 2025

Water Flow Solutions Water Management Solutions Corporate Total

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Non-operating expenses:

Pension benefit other than service (0.1)

Interest expense, net 2.3

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Consolidated Analysis

Net sales for the three months ended December 31, 2025 were $318.2 million as compared with $304.3 million in the prior year period, an increase of $13.9 million or 4.6%, primarily as a result of higher pricing across most product lines.

Gross profit for the three months ended December 31, 2025 was $119.8 million as compared with $103.0 million in the prior year period, an increase of $16.8 million or 16.3%, primarily as a result of favorable pricing, manufacturing efficiencies largely driven by the legacy brass foundry closure in Decatur Illinois, and a $3.3 million write-down of inventory and other assets associated with our legacy brass foundry in the prior year period.

Gross profit was negatively impacted by increased tariffs and approximately 4% inflation.

As a result, gross margin was 37.6% in the three months ended December 31, 2025 as compared with 33.8% in the prior year period.

Selling, general and administrative expenses (“SG&A”) for the three months ended December 31, 2025 were $59.8 million as compared with $53.9 million in the prior year period, an increase of $5.9 million or 10.9%, primarily due to higher personnel-related expenses, inflation of approximately 3% and unfavorable foreign currency fluctuations.

SG&A as a percentage of net sales was 18.8% and 17.7% for the three months ended December 31, 2025 and 2024, respectively.

Strategic reorganization and other charges for the three months ended December 31, 2025 were $3.3 million and consisted primarily of severance and expenses associated with our leadership transition.

Strategic reorganization and other charges for the three months ended December 31, 2024 were $1.7 million and consisted of expenses associated with our leadership transition and severance.

Net interest expense for the three months ended December 31, 2025 was $1.0 million as compared with $1.6 million in the prior year period, a decrease of $0.6 million or 37.5%, primarily due to higher interest income.

Net sales for the three months ended March 31, 2026 were $384.4 million as compared with $364.3 million in the prior year period, an increase of $20.1 million or 5.5%, primarily as a result of higher pricing across most product lines and increased volumes.

Gross profit for the three months ended March 31, 2026 was $144.5 million as compared with $128.0 million in the prior year period, an increase of $16.5 million or 12.9%.

Gross margin was 37.6% in the three months ended March 31, 2026 as compared with 35.1% in the prior year period.

Gross margin increased 250 basis points primarily as a result of favorable pricing

across most product lines, manufacturing efficiencies, and higher volumes.

Gross profit was negatively impacted by increased tariffs as well as approximately 4% inflation.

Selling, general and administrative expenses (“SG&A”) for the three months ended March 31, 2026 were $59.7 million as compared with $55.7 million in the prior year period, an increase of $4.0 million or 7.2%, primarily due to unfavorable foreign currency exchange and inflation of approximately 4%.

SG&A as a percentage of net sales was 15.5% and 15.3% for the three months ended March 31, 2026 and 2025, respectively.

Strategic reorganization and other charges for the three months ended March 31, 2026 were $4.4 million and consisted primarily of expenses associated with our leadership transition, certain transaction-related expenses, and severance.

Strategic reorganization and other charges for the three months ended March 31, 2025 were $2.4 million and consisted of expenses associated with our leadership transition, a non-cash asset impairment, and certain transaction-related expenses.

Net interest expense for the three months ended March 31, 2026 was $1.6 million as compared with $2.3 million in the prior year period, a decrease of $0.7 million or 30.4%, primarily due to higher interest income.

The components of net interest expense are as shown below:

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Interest expense, net $ 1.6 $ 2.3

Income tax expense for the three months ended December 31, 2025 was $12.5 million as compared with $10.5 million in the prior year period, an increase of $2.0 million or 19.0% driven by higher pre-tax income.

The effective tax rate for the three months ended December 31, 2025 was 22.4% as compared with 22.9% in the prior year.

The effective tax rate was generally consistent period over period.

Income tax expense for the three months ended March 31, 2026 was $19.7 million as compared with $16.4 million in the prior year period, an increase of $3.3 million or 20.1%, driven by higher pre-tax income.

The effective tax rate for the three months ended March 31, 2026 was 25.0% as compared with 24.2% in the prior year.

The effective tax rate increased primarily due to lower excess tax benefits on stock compensation.

Segment Analysis

Water Flow Solutions

Net sales for the three months ended December 31, 2025 were $173.0 million as compared with $174.6 million in the prior year period, a decrease of $1.6 million or 0.9%, primarily as a result of lower volumes of service brass products, partially offset by higher pricing across most product lines and increased volumes of specialty valves.

Gross profit for the three months ended December 31, 2025 was $70.8 million as compared with $55.1 million in the prior year period, an increase of $15.7 million or 28.5%.

This increase was primarily a result of manufacturing efficiencies, higher pricing across most product lines, and a $3.3 million write-down of inventory and other assets associated with our legacy brass foundry in Decatur, Illinois in the prior year period, partially offset by approximately 5% inflation, lower volumes and increased tariffs.

Gross margin was 40.9% in the three months ended December 31, 2025 and 31.6% in the prior year period.

SG&A for the three months ended December 31, 2025 was $21.4 million as compared with $19.8 million in the prior year period, an increase of $1.6 million or 8.1%, primarily as a result of higher personnel-related expenses and inflation of approximately 3%.

SG&A as a percentage of net sales was 12.4% and 11.3% in the three months ended December 31, 2025 and 2024, respectively.

Net sales for the three months ended March 31, 2026 were $218.3 million as compared with $216.2 million in the prior year period, an increase of $2.1 million or 1.0%, primarily as a result of higher pricing across most product lines partially offset by lower volumes.

Gross profit for the three months ended March 31, 2026 was $87.1 million as compared with $77.0 million in the prior year period, an increase of $10.1 million or 13.1%.

This increase was primarily a result of manufacturing efficiencies and higher pricing across most product lines, partially offset by increased tariffs, approximately 6% inflation, and lower volumes.

Gross margin was 39.9% in the three months ended March 31, 2026 and 35.6% in the prior year period.

SG&A was $21.9 million for both the three months ended March 31, 2026 and 2025.

SG&A was flat year-over-year as inflation of approximately 3% was offset by lower personnel-related costs, including incentive-based compensation.

SG&A as a percentage of net sales was 10.0% and 10.1% in the three months ended March 31, 2026 and 2025, respectively.

Water Management Solutions

Net sales for the three months ended December 31, 2025 were $145.2 million as compared with $129.7 million in the prior year period, an increase of $15.5 million or 12.0%, primarily as a result of higher pricing across most product lines and higher volumes of hydrants, partially offset by lower volumes of natural gas distribution and repair products.

Gross profit for the three months ended December 31, 2025 was $49.0 million as compared with $47.9 million in the prior year period, an increase of $1.1 million or 2.3%.

The increase was primarily a result of higher pricing and higher volumes which was partially offset by increased tariffs, unfavorable manufacturing efficiencies, and approximately 3% inflation.

Gross margin was 33.7% in the three months ended December 31, 2025 as compared with 36.9% in the prior year period.

SG&A for the three months ended December 31, 2025 was $24.5 million as compared with $20.3 million in the prior year period, an increase of $4.2 million or 20.7%, primarily due to unfavorable foreign currency impacts, higher personnel-related expenses, third-party fees and approximately 3% inflation.

SG&A as a percentage of net sales was 16.9% and 15.7% in the three months ended December 31, 2025 and 2024, respectively.

SG&A for the three months ended December 31, 2025 was $13.9 million as compared with $13.8 million in the prior year period, an increase of $0.1 million or 0.7% is primarily a result of higher personnel-related expenses and approximately 3% inflation, which was mostly offset by lower third-party fees.

Net sales for the three months ended March 31, 2026 were $166.1 million as compared with $148.1 million in the prior year period, an increase of $18.0 million or 12.2%, primarily as a result of increased volumes and higher pricing across most product lines.

Gross profit for the three months ended March 31, 2026 was $57.4 million as compared with $51.0 million in the prior year period, an increase of $6.4 million or 12.5%.

The increase was primarily a result of higher pricing and volumes which were partially offset by increased tariffs, unfavorable manufacturing efficiencies, and approximately 3% inflation.

Gross margin was 34.6% in the three months ended March 31, 2026 as compared with 34.4% in the prior year period.

SG&A for the three months ended March 31, 2026 was $21.9 million as compared with $19.6 million in the prior year period, an increase of $2.3 million or 11.7%, primarily due to unfavorable foreign currency exchange and approximately 4% inflation.

SG&A as a percentage of net sales was 13.2% for both of the three month periods ended March 31, 2026 and 2025.

SG&A for the three months ended March 31, 2026 was $15.9 million as compared with $14.2 million in the prior year period, an increase of $1.7 million or 12.0% is primarily a result of higher third-party fees and approximately 3% inflation.

Six months ended March 31, 2026 Compared to Six months ended March 31, 2025

Six months ended March 31, 2026

Water Flow Solutions Water Management Solutions Corporate Total

(in millions)

Net sales $ 391.3 $ 311.3 $ — $ 702.6

Gross profit $ 157.9 $ 106.4 $ — $ 264.3

Operating expenses:

Selling, general and administrative 43.3 46.4 29.8 119.5

Strategic reorganization and other charges — 0.2 7.5 7.7

Total operating expenses 43.3 46.6 37.3 127.2

Operating income (loss) $ 114.6 $ 59.8 $ (37.3) 137.1

Non-operating expenses:

Interest expense, net 2.6

Income before income taxes 134.5

Income tax expense 32.2

Net income $ 102.3

Six months ended March 31, 2025

Water Flow Solutions Water Management Solutions Corporate Total

(in millions)

Net sales $ 390.8 $ 277.8 $ — $ 668.6

Gross profit $ 132.1 $ 98.9 $ — $ 231.0

Operating expenses:

Selling, general and administrative 41.7 39.9 28.0 109.6

Strategic reorganization and other charges 1.0 0.4 2.7 4.1

Total operating expenses 42.7 40.3 30.7 113.7

Operating income (loss) $ 89.4 $ 58.6 $ (30.7) 117.3

Non-operating expenses:

Pension benefit other than service (0.1)

Interest expense, net 3.9

Income before income taxes 113.5

Income tax expense 26.9

Net income $ 86.6

Consolidated Analysis

Net sales for the six months ended March 31, 2026 were $702.6 million as compared with $668.6 million in the prior year period, an increase of $34.0 million or 5.1%, primarily as a result of higher pricing across most product lines.

Gross profit for the six months ended March 31, 2026 was $264.3 million as compared with $231.0 million in the prior year period, an increase of $33.3 million or 14.4%.

Gross margin was 37.6% in the six months ended March 31, 2026 as compared with 34.5% in the prior year period.

Gross margin increased 310 basis points primarily as a result of higher pricing, manufacturing efficiencies largely driven by the legacy brass foundry closure in Decatur, Illinois, a $4.1 million write-down of

inventory and other assets associated with our legacy brass foundry in the prior year period, and increased volumes.

Gross margin was negatively impacted by increased tariffs and approximately 4% inflation.

SG&A for the six months ended March 31, 2026 was $119.5 million as compared with $109.6 million in the prior year period, an increase of $9.9 million or 9.0%, primarily due to unfavorable foreign currency exchange and approximately 3% inflation.

SG&A as a percentage of net sales was 17.0% and 16.4% for the six months ended March 31, 2026 and March 31, 2025, respectively.

Strategic reorganization and other charges for the six months ended March 31, 2026 were $7.7 million and consisted of expenses associated with our leadership transition, severance, and certain transaction-related expenses.

Strategic reorganization and other charges for the six months ended March 31, 2025 were $4.1 million and consisted of expenses associated with our leadership transition, a non-cash asset impairment, and certain transaction-related expenses.

Net interest expense for the six months ended March 31, 2026 was $2.6 million as compared with $3.9 million in the prior year period, a decrease of $1.3 million or 33.3%, primarily due to higher interest income.

The components of net interest expense are as shown below:

Six months ended

(in millions)

4.0% Senior Notes $ 9.0 $ 9.0

Deferred financing costs amortization 0.5 0.5

ABL Agreement 0.4 0.4

Capitalized interest (0.5) (0.2)

Other interest expense 0.3 0.4

Total interest expense 9.7 10.1

Interest income (7.1) (6.2)

Interest expense, net $ 2.6 $ 3.9

Income tax expense for the six months ended March 31, 2026 was $32.2 million as compared with $26.9 million in the prior year period, an increase of $5.3 million or 19.7%, driven by higher pre-tax income.

The effective tax rate for the six months ended March 31, 2026 was 23.9% as compared with 23.7% in the prior year.

The effective tax rate increased primarily due to lower excess tax benefits on stock compensation largely offset by a reduction in nondeductible compensation.

Segment Analysis

Water Flow Solutions

Net sales for the six months ended March 31, 2026 were $391.3 million as compared with $390.8 million in the prior year period, an increase of $0.5 million or 0.1%, primarily as a result of higher pricing across most product lines offset by lower volumes.

Gross profit for the six months ended March 31, 2026 was $157.9 million as compared with $132.1 million in the prior year period, an increase of $25.8 million or 19.5%.

This increase was primarily a result of favorable manufacturing efficiencies and higher pricing across most product lines, partially offset by increased tariffs, approximately 5% inflation, and lower volumes.

Gross margin was 40.4% in the six months ended March 31, 2026 and 33.8% in the prior year period.

SG&A for the six months ended March 31, 2026 was $43.3 million as compared with $41.7 million in the prior year period, an increase of $1.6 million or 3.8%, primarily as a result of inflation of approximately 3%.

SG&A as a percentage of net sales was 11.1% and 10.7% in the six months ended March 31, 2026 and 2025, respectively.

Water Management Solutions

Net sales for the six months ended March 31, 2026 were $311.3 million as compared with $277.8 million in the prior year period, an increase of $33.5 million or 12.1%, primarily as a result of higher volumes and higher pricing across most product lines.

Gross profit for the six months ended March 31, 2026 was $106.4 million as compared with $98.9 million in the prior year period, an increase of $7.5 million or 7.6%.

The increase was primarily driven by higher pricing across most product lines and increased volumes.

Gross margin was negatively impacted by increased tariffs and approximately 3% inflation.

Gross margin was 34.2% in the six months ended March 31, 2026 as compared with 35.6% in the prior year period.

SG&A for the six months ended March 31, 2026 was $46.4 million as compared with $39.9 million in the prior year period, an increase of $6.5 million or 16.3%, primarily due to unfavorable foreign currency exchange, approximately 3% inflation, and higher personnel-related expenses.

SG&A as a percentage of net sales was 14.9% and 14.4% in the six months ended March 31, 2026 and 2025, respectively.

SG&A for the six months ended March 31, 2026 was $29.8 million as compared with $28.0 million in the prior year period, an increase of $1.8 million or 6.4%.

The increase was primarily driven by inflation of approximately 3% and higher personnel-related expenses.

Liquidity and Capital Resources

We had cash and cash equivalents on hand of $459.6 million as of December 31, 2025 and $163.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”).

As of December 31, 2025, cash and cash equivalents included $88.6 million, $14.9 million and $8.4 million in Israel, Canada, and China, respectively.

We had cash and cash equivalents on hand of $421.0 million as of March 31, 2026 and $163.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”).

As of March 31, 2026, cash and cash equivalents included $91.8 million, $9.4 million, and $9.2 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.

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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 $5.5 million of our outstanding common stock during the three months ended December 31, 2025 under our publicly announced share repurchase program, and as of December 31, 2025, we had $59.5 million remaining under our share repurchase authorization.

During the three months ended December 31, 2024, we did not repurchase any shares of our outstanding common stock.

We repurchased $5.5 million of our outstanding common stock during the six months ended March 31, 2026 under our publicly announced share repurchase program, and as of March 31, 2026, we had $59.5 million remaining under our share repurchase authorization.

During the six months ended March 31, 2025, we repurchased $5.0 million of our outstanding common stock.

ABL Agreement

Our ABL is provided by a syndicate of banking institutions and consists of a revolving credit facility for up to $175.0 million in borrowing capacity that matures the earlier of (a) March 16, 2029, which is ninety-one days prior to the stated maturity date of our 4.0% Senior Notes if the Notes are still outstanding on that date or (b) March 28, 2029.

Our asset-based lending agreement, as amended, (the “ABL”) is provided by a syndicate of banking institutions and consists of a revolving credit facility for up to $175.0 million in borrowing capacity that matures the earlier of (a) March 16, 2029, which is ninety-one days prior to the stated maturity date of our 4.0% Senior Notes if the Notes are still outstanding on that date or (b) March 28, 2029.

The ABL includes the ability to borrow 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.

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 range of 50 to 75 basis points.

As of December 31, 2025, 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 range of 50 to 75 basis points.

As of March 31, 2026, 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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The ABL contains customary terms and conditions as well as various affirmative, negative, and financial covenants that may, among other things, restrict our and our subsidiaries’ ability to pay dividends, repurchase stock, or make certain other payments as described in the ABL.

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

Our obligations under the ABL are secured by a first-priority perfected lien on all of our United States inventory, accounts receivable, certain cash balances and other supporting assets.

Substantially all of our U.S.

subsidiaries are borrowers under the ABL and are jointly and severally liable for outstanding borrowings.

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

inventory, accounts receivable, certain cash balances, and other supporting assets.

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.

As of December 31, 2025, the commitment fee was 37.5 basis points.

As of March 31, 2026, 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 December 31, 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 under the ABL as of December 31, 2025.

Excess availability based on March 31, 2026 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 under the ABL as of March 31, 2026.

4.0% Senior Unsecured Notes

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Proceeds from the 4.0% Senior Notes, along with cash on hand, were used to redeem our previously existing 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, the outstanding 4.0% Senior Notes had a fair value of $438.7 million as of December 31, 2025.

Substantially all of our U.S.

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 $434.6 million as of March 31, 2026.

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 under the Indenture as of December 31, 2025.

We were in compliance with all required covenants under the Indenture as of March 31, 2026.

There are no financial maintenance covenants associated with the Indenture.

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The table below summarizes net cash flows provided by (used in) operating activities, investing activities, and financing activities:

Three months ended

Six months ended

(in millions)

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Net Cash Flows Provided by Operating Activities

Cash flows provided by operating activities increased $7.1 million to $61.2 million during the three months ended December 31, 2025 compared with $54.1 million in the prior year period.

This was driven by an increase in net income of $7.9 million and higher non-cash adjustments of $7.5 million, partially offset by a $8.3 million change in working capital and other assets and liabilities.

Cash flows provided by operating activities decreased $20.0 million to $48.4 million during the six months ended March 31, 2026 compared with $68.4 million in the prior year period.

This was driven by a $57.2 million change in working capital and other assets and liabilities, partially offset by an increase in net income of $15.7 million and higher non-cash adjustments of $21.5 million.

Net Cash Flows Used in Investing Activities

Capital expenditures were $17.2 million in the three months ended December 31, 2025 as compared with $11.9 million in the prior year period.

Cash flows used in investing activities increased $10.8 million to $31.8 million during the six months ended March 31, 2026 compared with $21.0 million in the prior year period.

Capital expenditures were $31.9 million in the six months ended March 31, 2026 as compared with $21.1 million in the prior year period.

Capital expenditures increased primarily as a result of higher expenditures associated with our iron foundries as compared with the prior year period.

Net Cash Flows Used in Financing Activities

Cash flows used in financing activities increased $6.5 million to $19.6 million during the three months ended December 31, 2025 as compared with $13.1 million in the prior year period.

This was driven primarily by $5.5 million repurchases of common stock under the share repurchase program and $0.9 million in less cash provided by common stock issuances.

Cash flows used in financing activities increased $3.6 million to $30.5 million during the six months ended March 31, 2026 as compared with $26.9 million in the prior year period.

This was driven primarily by $2.6 million in less cash provided by common stock issuances, an increase of $0.9 million in dividends paid to shareholders, and an increase of $0.5 million in repurchases of common stock under the share repurchase program, partially offset by a decrease of $0.6 million in amounts withheld to pay employee taxes related to share-based compensation.

Credit Ratings

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Moody’s Standard & Poor’s

December 31, September 30, December 31, September 30,

March 31, September 30, March 31, September 30,

2026 2025 2026 2025

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We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures.

As of December 31, 2025, we had (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and include annual cash interest payments of $18.0 million in 2026 through 2029;

As of March 31, 2026, we had (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and include annual cash interest payments of $18.0 million in 2026 through 2029;

(ii) cumulative cash obligations of $30.2 million for operating leases through 2034 and $5.2 million for finance leases through 2031;

and (iii) purchase obligations for raw materials and other purchased parts of approximately $127.8 million which we expect to incur during the next 12 months and $0.5 million beyond December 31, 2026.

Additionally, we expect to invest to strengthen our information technology systems,

cybersecurity training, policies, programs, response plans and other similar measures.

and (iii) purchase obligations for raw materials

and other purchased parts of approximately $122.5 million which we expect to incur during the next 12 months and $2.1 million beyond March 31, 2027.

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.

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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 share on January 22, 2026, payable on or about February 20, 2026 to stockholders of record as of February 10, 2026, which will result in an estimated $10.9 million cash outlay.

We declared a quarterly dividend of $0.070 per share on April 28, 2026, payable on or about May 20, 2026 to stockholders of record as of May 11, 2026, which will result in an estimated $11.0 million cash outlay.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured finance” or “special purpose” entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

In addition, as of December 31, 2025, we did not have any undisclosed borrowings, debt, derivative contracts or synthetic leases.

In addition, as of March 31, 2026, we did not have any undisclosed borrowings, debt, derivative contracts, or synthetic leases.

Therefore, we were not exposed to any financing, liquidity, market, or credit risk that could have arisen had we engaged in such relationships.

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

Net sales and operating income have historically been lowest in our 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.

Therefore, the results of operations for the three months ended December 31, 2025 are not necessarily indicative of operating results that may be achieved for any other interim period or the full year.

Net sales and operating income have historically been lowest in our first and second quarters ending December 31 and March 31, respectively, when the northern U.S.

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

Therefore, the results of operations for the three and six months ended March 31, 2026 are not necessarily indicative of operating results that may be achieved for any other interim period or the full year.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses and related disclosure of contingent assets and liabilities.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosure of contingent assets and liabilities.

These estimates are based upon experience and on various other assumptions we believe to be reasonable under the circumstances.

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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 2. Management’s Discussion and Analysis