What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-06 compared with 2023-02-14 · 236 added, 413 removed, 1154 unchanged (36% of the section changed)

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Consolidated Financial Statements

As of December 31, 2022 and 2021 and for the years ended December 31, 2022 and December 31, 2021,

and the nine-month Transition Period ended December 31, 2020

As of December 31, 2023 and 2022 and for the years ended December 31, 2023, December 31, 2022,

and December 31, 2021

Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID:

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Zurn Elkay Water Solutions Corporation and Subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for the years ended December 31, 2022 and 2021 and the nine months ended December 31, 2020 and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years ended December 31, 2022 and 2021 and the nine months ended December 31, 2020, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Zurn Elkay Water Solutions Corporation and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

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The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

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

Valuation of acquired intangible assets

Description of the Matter As described in Note 3 to the consolidated financial statements, during the year ended December 31, 2022, the Company completed the merger with Elkay Manufacturing Company for a purchase price of $1,462.9 million.

The Company’s accounting for this merger included determining the fair value of the intangible assets acquired, which primarily included customer relationships and trade names.

Auditing the Company's accounting for its merger with Elkay was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of intangible assets of $865.5 million, which principally consisted of customer relationships and the Elkay trade name.

Accounting for acquisition of Elkay Manufacturing Company

Description of the Matter As described in Note 3 to the consolidated financial statements, during the year ended December 31, 2022, the Company completed the acquisition of Elkay Manufacturing Company (Elkay).

The Company’s accounting for this acquisition included determining the fair value of the intangible assets acquired, which primarily included customer relationships and trade names.

During 2023, the Company finalized the purchase accounting for the Elkay transaction with a final purchase price of $1,457.8 million after measurement period adjustments.

Auditing the Company's finalization of the accounting for its acquisition of Elkay was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of intangible assets of $865.5 million, which principally consisted of customer relationships and the Elkay trade name.

The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business.

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

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s accounting for mergers.

For example, our tests included controls over the estimation process supporting the recognition and measurement of customer relationships, and trade names.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s accounting for acquisitions, including measurement period adjustments.

For example, our tests included controls over the estimation process supporting the recognition and measurement of customer relationships, trade names, and measurement period adjustments.

We also tested management’s review of the valuation models and significant assumptions used in the valuations.

To test the estimated fair value of the customer relationship and trade name intangible assets, we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodology, evaluating the methods and significant assumptions used by management, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

To test the fair value of the customer relationship and trade name intangible assets, we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodology, evaluating the methods and significant assumptions used by management, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates and we evaluated the reasonableness of management’s forecasts of future cash flows by comparing the projections to historical results and certain peer companies.

We also evaluated evidence used by the Company in recording measurement period adjustments, including evaluation of the completeness and accuracy of the underlying data.

/s/ Ernst & Young LLP

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In our opinion, Zurn Elkay Water Solutions Corporation and subsidiaries’ (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting , management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Elkay Manufacturing Company, which is included in the 2022 consolidated financial statements of the Company and constituted $1,248.7 million and $912.0 million of total and net assets, respectively, as of December 31, 2022 and net sales of $ 264.4 million and a net loss of $ 11.5 million , for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Elkay Manufacturing Company.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and December 31, 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the years ended December 31, 2022 and 2021, and the nine months ended December 31, 2020 and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 14, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and December 31, 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 6, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Compensation and benefits 30.5 19.2

Current portion of pension and postretirement benefit obligations 1.6 1.3

Current portion of pension and other postretirement benefit obligations 1.3 1.6

Other current liabilities 131.8 145.9

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Long-term debt 494.4 530.2

Pension and postretirement benefit obligations 50.5 57.3

Pension and other postretirement benefit obligations 36.6 50.5

Deferred income taxes 210.0 221.4

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(in Millions, except share and per share amounts)

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

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Restructuring and other similar charges 15.3 15.4 3.7

Loss on divestiture of asbestos liabilities and certain assets 11.4 — —

Amortization of intangible assets 58.7 34.0 23.5

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Loss on the extinguishment of debt ( 0.9 ) — ( 20.4 )

Actuarial gain (loss) on pension and postretirement benefit obligations 1.9 1.2 ( 0.3 )

Actuarial gain on pension and other postretirement benefit obligations 2.0 1.9 1.2

Other income (expense), net ( 7.2 ) 1.7 ( 0.7 )

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(in Millions)

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

Net income $ 112.7 $ 61.7 $ 120.9

Other comprehensive income:

Foreign currency translation adjustments ( 4.2 ) ( 4.2 ) 37.8

Change in pension and postretirement defined benefit plans, net of tax 4.1 18.4 12.8

Other comprehensive (loss) income, net of tax ( 0.1 ) 14.2 50.6

Other comprehensive income (loss):

Foreign currency translation and other adjustments 3.6 ( 4.2 ) ( 4.2 )

Change in pension and other postretirement defined benefit plans, net of tax 3.7 4.1 18.4

Other comprehensive income (loss), net of tax 7.3 ( 0.1 ) 14.2

Total comprehensive income $ 120.0 $ 61.6 $ 135.1

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(Loss) Income Non-controlling interest (1) Total Stockholders’ Equity

Balance at March 31, 2020 $ 1.2 $ 1,348.3 $ 85.9 $ ( 124.4 ) $ 2.7 $ 1,313.7

Balance at December 31, 2020 $ 1.2 $ 1,392.9 $ 116.0 $ ( 73.8 ) $ 3.0 $ 1,439.3

Net income $ — $ — $ 120.9 $ — $ — $ 120.9

Foreign currency translation and other adjustments — — — ( 4.2 ) — ( 4.2 )

Change in pension and other postretirement defined benefit plans, net of $ 3.6 million income tax benefit

Change in pension and other postretirement defined benefit plans, net of $ 5.6 million of income tax

— — — 18.4 — 18.4

Total comprehensive income — — 120.9 14.2 — 135.1

Acquisition of non-controlling interest — ( 0.2 ) — — ( 0.1 ) ( 0.3 )

Stock-based compensation expense — 51.4 — — — 51.4

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Repurchase of common stock (2) — — ( 0.9 ) — — ( 0.9 )

Dividend received from Spin-Off Transaction — — 486.8 — — 486.8

Distribution of the net assets of the PMC business — — ( 1,923.3 ) ( 15.3 ) ( 3.0 ) ( 1,941.6 )

Common stock dividends ($ 0.30 per share)

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Foreign currency translation and other adjustments — — — ( 4.2 ) — ( 4.2 )

Change in pension and other postretirement defined benefit plans, net of $ 5.6 million income tax provision

Change in pension and other postretirement defined benefit plans, net of $ 2.2 million of income tax

— — — 4.1 — 4.1

Total comprehensive income — — 120.9 14.2 — 135.1

Total comprehensive income (loss) — — 61.7 ( 0.1 ) — 61.6

Stock-based compensation expense — 23.2 — — — 23.2

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Repurchase of common stock (2) — — ( 24.7 ) — — ( 24.7 )

Dividend received from Spin-Off Transaction — — 486.8 — — 486.8

Distribution of the net assets of the PMC business — — ( 1,923.3 ) ( 15.3 ) ( 3.0 ) ( 1,941.6 )

Proceeds associated with divestiture of discontinued operations — — 35.0 — — 35.0

Elkay Merger (3) 0.5 1,416.5 — — — 1,417.0

Common stock dividends ($ 0.20 per share)

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Foreign currency translation and other adjustments $ — $ — $ — $ 3.6 $ — 3.6

Change in pension and other postretirement defined benefit plans, net of $ 2.2 million income tax expense

Change in pension and other postretirement defined benefit plans, net of $ 1.2 million of income tax

$ — $ — $ — $ 3.7 $ — 3.7

Total comprehensive income (loss) — — 61.7 ( 0.1 ) — 61.6

Total comprehensive income — — 112.7 7.3 — 120.0

Stock-based compensation expense $ — $ 41.6 $ — $ — $ — 41.6

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Repurchase of common stock (2) $ ( 0.1 ) $ — $ ( 126.0 ) $ — $ — ( 126.1 )

Proceeds associated with divestiture of discontinued operations — — 35.0 — — 35.0

Elkay Merger (3) $ — $ ( 5.1 ) $ — $ — $ — ( 5.1 )

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____________________

(1) During the Transition Period, the Company acquired the remaining 30 % non-controlling interest in a PMC controlled subsidiary for a cash purchase price of $ 0.3 million.

(1) During the transition period ended December 31, 2020, the Company acquired the remaining 30 % non-controlling interest in a PMC controlled subsidiary for a cash purchase price of $ 0.3 million.

From the time of this transaction through the Spin-Off Transaction, non-controlling interest represents a 5 % non-controlling interest in another PMC joint venture relationship.

The Company has no remaining non-controlling interest subsequent to the Spin-Off Transaction.

(2) During the years ended December 31, 2022 and 2021 and the nine-month Transition Period ended December 31, 2020, the Company repurchased and canceled 1.1 million shares, 22,300 shares and 1.7 million shares of common stock at a total cost of $ 24.7 million, $ 0.9 million and $ 59.3 million at a weighted average price of $ 23.00 , $ 39.27 and $ 34.97 per share, respectively.

(2) During the years ended December 31, 2023, 2022, and 2021, the Company repurchased and canceled 5.3 million shares, 1.1 million shares and 22.3 thousand shares of common stock at a total cost of $ 125.0 million, $ 24.7 million and $ 0.9 million at a weighted average price of $ 23.66 , $ 23.00 and $ 39.27 per share, respectively.

For the year ended December 31, 2023, the Company recognized $ 1.0 million in excise tax on the repurchases.

See Note 18 Common Stock Repurchases for additional information.

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(in Millions)

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

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Amortization of intangible assets 58.7 34.0 33.4

Non-cash asset impairment 2.5 — —

Loss on divestiture of asbestos liabilities and certain assets 9.3 — —

Divestiture of asbestos liabilities and certain assets ( 13.0 ) — —

Loss (gain) on dispositions of long-lived assets ( 2.7 ) 0.3 ( 10.1 )

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Other non-cash expenses (income) 1.9 4.8 ( 3.6 )

Actuarial (gain) loss on pension and postretirement benefit obligations ( 1.9 ) 3.6 1.6

Actuarial (gain) loss on pension and other postretirement benefit obligations ( 2.0 ) ( 1.9 ) 3.6

Loss on the extinguishment of debt 0.9 — 20.4

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Changes in operating assets and liabilities:

Receivables 15.5 ( 66.6 ) 65.1

Inventories ( 17.6 ) ( 79.5 ) 0.5

Receivables, net 10.1 15.5 ( 66.6 )

Inventories, net 65.0 ( 17.6 ) ( 79.5 )

Other assets 2.5 36.5 ( 7.7 )

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(1) The Company has combined cash flows from discontinued operations with cash flows from continuing operations within operating, investing and financing categories.

As such cash and cash equivalents and restricted cash include $ 193.3 million of cash and cash equivalents from the discontinued operation as of December 31, 2020.

See notes to consolidated financial statements.

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In the opinion of management, the consolidated financial statements include all adjustments necessary for a fair presentation of the financial position and the results of operations for the periods presented.

Following the end of the Company's fiscal year ended March 31, 2020, the Company transitioned to a December 31 fiscal year-end date.

As a result, this Form 10-K includes financial information for the nine-month period from April 1, 2020 to December 31, 2020 (the "Transition Period").

Prior to the Transition Period, the Company’s fiscal year ended on March 31 of each year.

See Note 12, Comparative Twelve Month Financial Information for additional information.

Divestiture of Asbestos Liabilities and Certain Assets

On December 15, 2023, Zurn Holdings, Inc.

(“Holdings”) sold all of the equity interests of its direct subsidiary Zurn Industries, LLC (“Zurn Industries”), together with Zurn Industries’ direct and indirect subsidiaries that primarily held asbestos liabilities, certain assets and cash, in a stock sale transaction to an unaffiliated buyer (“Sale Transaction”).

As a result of the Sale Transaction, all asbestos obligations and liabilities, related insurance assets and associated deferred taxes, and other assets sold to the buyer, have been removed from the Company’s consolidated balance sheet effective December 15, 2023 and the Company no longer has any obligation with respect to pending and future asbestos claims related to the divested entities.

A loss on the divestiture of asbestos liabilities and certain assets of $ 11.4 million was recognized in the consolidated statements of operations for the twelve months ended December 31, 2023.

See Note 17, Commitments and Contingencies for additional information.

On February 12, 2022, Zurn Water Solutions Corporation (“Zurn”) entered into a definitive agreement to combine with Elkay Manufacturing Company (“Elkay”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among Zurn, Elkay, Zebra Merger Sub, Inc., a wholly owned subsidiary of Zurn (“Merger Sub”), and Elkay Interior Systems International, Inc., as representative of the stockholders of Elkay, providing for the merger of Elkay with and into Merger Sub, with Elkay surviving as a wholly owned subsidiary of Zurn (the “Merger”).

On July 1, 2022, the Merger was completed following which the Company changed its name to “Zurn Elkay Water Solutions Corporation” (“Zurn Elkay”, "we", "us", "our", or the “Company”).

Shares of the Company's common stock continue to trade on the New York Stock Exchange under the ticker symbol “ZWS”.

On July 1, 2022, the Merger was completed following which the Company changed its name to “Zurn Elkay Water Solutions Corporation”.

Shares of the Company's common stock are traded on the New York Stock Exchange under the ticker symbol “ZWS”.

See Note 3, Acquisitions for additional information.

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(“Land”), (ii) the shares of Land were distributed to the Company's stockholders pro rata, and (iii) Land was merged with a subsidiary of Regal Rexnord Corporation (formerly known as Regal Beloit Corporation), in which the stock of Land was converted into a specified number of shares of Regal Rexnord Corporation in accordance with the exchange ratio.

Following completion of the Spin-Off Transaction, the Company's name was changed to “Zurn Water Solutions Corporation” and the ticker symbol for its shares of common stock trading on the New York Stock Exchange was changed to “ZWS”.

Following completion of the Spin-Off Transaction, the Company's name was changed to “Zurn Water Solutions Corporation”.

As a result of the Spin-Off Transaction, in accordance with the authoritative guidance, the operating results of PMC are reported as discontinued operations in the consolidated statements of operations for all periods presented.

The consolidated statements of cash flows for the year ended December 31, 2022, the year ended December 31, 2021 and the nine-month Transition Period ended December 31, 2020 have not been adjusted to separately disclose cash flows related to the discontinued operations.

The consolidated statements of cash flows for the year ended December 31, 2023, December 31, 2022, and December 31, 2021 have not been adjusted to separately disclose cash flows related to the discontinued operations.

See Note 4, Discontinued Operations for additional information.

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See Note 14, Stock-Based Compensation and Note 15, Retirement Benefits, respectively, for additional information.

Zurn Elkay Water Solutions Corporation is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what the Company believes to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, human safety and the environment.

The Company's product portfolio includes professional grade water safety and control products, flow system products, hygienic and environmental products, and drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time.

The Companmy's heritage of innovation and specification has allowed it to provide highly-engineered, mission-critical solutions to customers for decades and affords it the privilege of having long-term, valued relationships with market leaders.

The Company operates in a disciplined way and the Zurn Elkay Business System (“ZEBS”), described below, is its operating philosophy.

Zurn Elkay is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what the Company believes to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, human safety and the environment.

The Company's product portfolio includes professional grade water safety and control products, flow system products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time.

The Company's heritage of innovation and specification has allowed it to

provide highly-engineered, mission-critical solutions to customers for decades and affords it the privilege of having long-term, valued relationships with market leaders.

The Company operates in a disciplined way and the Zurn Elkay Business System (“ZEBS”) is its operating philosophy.

Grounded in the spirit of continuous improvement, ZEBS creates a scalable, process-based framework that focuses on driving superior customer satisfaction and financial results by targeting world-class operating performance throughout all aspects of its business.

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Significant Customers

The Company’s largest customer accounted for 22 %, 23 % and 24 % of consolidated net sales for the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, respectively.

No other customers account for more than 10% of consolidated net sales for the year ended December 31, 2022, the year ended December 31, 2021, or the nine-month Transition Period ended December 31, 2020.

The Company’s largest customer accounted for 20 %, 22 % and 23 % of consolidated net sales for the years ended December 31, 2023, 2022, and 2021, respectively.

No other customers account for more than 10% of consolidated net sales for the years ended December 31, 2023, the 2022, or 2021.

Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at the lower of cost or market.

Market is determined based on estimated net realizable values.

The Company’s total inventories valued using the "last-in, first-out" (LIFO) method was 89 % and 84 % at December 31, 2022 and 2021, respectively.

The percentage of the Company’s total inventories valued using the "last-in, first-out" (LIFO) method was 92 % and 89 % at December 31, 2023 and 2022, respectively.

All remaining inventories are valued using the "first-in, first-out" (FIFO) method.

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If actual market conditions are less favorable than those projected by management, adjustments to established inventory reserves may be required.

The total write-down of inventories charged to expense was $ 0.8 million, $ 0.9 million and $ 1.5 million, during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, respectively.

The total write-down of inventories charged to expense was $ 3.4 million, $ 0.8 million and $ 0.9 million, during the years ended December 31, 2023, 2022, and 2021, respectively.

Property, Plant and Equipment

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However, the goodwill and intangible assets are tested annually for impairment, and may be tested more frequently if any triggering events occur that would reduce the recoverability of the asset.

In conducting the annual impairment test for goodwill, the Company has the option to first assess qualitative factors to determine whether it is more likely than not (> 50% likelihood) the fair value of any reporting unit is less than its carrying amount.

In conducting the annual impairment test for goodwill, the Company has the option to first assess qualitative factors to determine whether it is more likely than not (greater than 50% likelihood) the fair value of any reporting unit is less than its carrying amount.

If a qualitative assessment determines an impairment is more likely than not, the Company is required to perform a quantitative impairment test.

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Alternatively, the Company may elect to proceed directly to the quantitative impairment test.

In conducting a qualitative assessment, the Company utilizes a discounted cash flow methodology based on future business projections and a market value approach (guideline public company comparables).

In conducting a quantitative assessment, the Company utilizes a discounted cash flow methodology based on future business projections and a market value approach (guideline public company comparables).

The Company performs the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

If the carrying amount exceeds the fair value of the reporting unit, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value up to the amount of the recorded goodwill.

During the fourth quarter of the year ended December 31, 2022, the Company completed its annual goodwill impairment tests and elected to perform a qualitative assessment.

No goodwill impairment charges were recorded during the year ended December 31, 2022, the year ended December 31, 2021, or the nine-month Transition Period ended December 31, 2020.

During the fourth quarter of the year ended December 31, 2023, the Company completed its annual goodwill impairment tests and performed a quantitative assessment.

No goodwill impairment charges were recorded during the years ended December 31, 2023, 2022, or 2021.

Impairment of Long-Lived Assets

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If impairment is identified, a loss is recorded equal to the excess of the asset's net book value over its fair value, and the cost basis is adjusted accordingly.

The Company recognized no impairment charges of tangible fixed assets during the during the year ended December 31, 2022, the year ended December 31, 2021, or the nine-month Transition Period ended December 31, 2020, respectively.

During the year ended December 31, 2023, the Company recognized $ 2.5 million of fixed asset impairment charges.

The Company recognized no impairment charges of tangible fixed assets during the during the years ended December 31, 2022 or 2021.

Impairments are determined utilizing Level 3 inputs within the Fair Value hierarchy, and the Company reviews and considers input from outside specialists, when appropriate.

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The following table presents changes in the Company’s product warranty liability during each of the periods presented (in millions):

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

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In the ordinary course of the Company’s business, there is inherent uncertainty in quantifying the ultimate tax outcome of all the numerous transactions and required calculations relating to the Company’s tax positions.

Accruals for unrecognized tax benefits are provided for in accordance with the requirements of ASC 740, Income Taxes ("ASC 740").

Accruals for unrecognized tax benefits are provided for in accordance with the requirements of ASC 740, Income Taxes .

An unrecognized tax benefit represents the difference between the recognition of benefits related to uncertain tax positions for income tax reporting purposes and financial reporting purposes.

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Diluted net income per share from continuing and discontinued operations is computed based on the weighted average number of common shares outstanding, increased by the number of incremental shares that would have been outstanding if the potential dilutive shares were issued through the exercise of outstanding stock options to purchase common shares, except when the effect would be anti-dilutive.

The computation for diluted net income per share for the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 excludes 0.4 million, 0.7 million and 0.5 million common shares due to their anti-dilutive effects, respectively.

The computation for diluted net income per share for the years ended December 31, 2023, 2022, and 2021 excludes 0.3 million, 0.4 million and 0.7 million common shares due to their anti-dilutive effects, respectively.

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss, net of tax, for the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 are as follows (in millions):

Foreign Currency Translation and Other Pension and Postretirement Plans Total

Balance at March 31, 2020 $ ( 83.8 ) $ ( 40.6 ) $ ( 124.4 )

Other comprehensive income before reclassifications 37.8 13.0 50.8

Amounts reclassified from accumulated other comprehensive loss — ( 0.2 ) ( 0.2 )

The changes in accumulated other comprehensive loss, net of tax, for the years ended December 31, 2023, 2022, and 2021 are as follows (in millions):

Foreign Currency Translation and Other Adjustments Pension and Other Postretirement Plans Total

Balance at December 31, 2020 $ ( 46.0 ) $ ( 27.8 ) $ ( 73.8 )

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Other comprehensive (loss) income before reclassifications $ ( 4.2 ) $ 4.1 $ ( 0.1 )

Amounts reclassified from accumulated other comprehensive loss — — —

Balance at December 31, 2022 $ ( 75.1 ) $ 0.1 $ ( 75.0 )

The following table summarizes the amounts reclassified from accumulated other comprehensive loss to net income during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 (in millions):

Pension and postretirement plans Year Ended December 31, 2022 Year Ended December 31, 2021 Nine-Month Transition Period Ended December 31, 2020 Income Statement Line Item

Other comprehensive income before reclassifications $ 3.6 $ 3.7 $ 7.3

Balance at December 31, 2023 $ ( 71.5 ) $ 3.8 $ ( 67.7 )

The following table summarizes the amounts reclassified from accumulated other comprehensive loss to net income during the year ended December 31, 2021 (in millions):

Pension and other postretirement plans Year Ended December 31, 2021 Income Statement Line Item

Amortization of prior service credit $ ( 0.2 ) Other income (expense), net

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Foreign currency translation adjustments are included as a component of accumulated other comprehensive loss.

Currency transaction (gains) losses are included in other expense, net in the consolidated statements of operations and totaled $ 1.0 million, $ 0.4 million and $( 0.4 ) million for the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, respectively.

Currency transaction losses are included in other expense, net in the consolidated statements of operations and totaled $ 0.9 million, $ 1.0 million and $ 0.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Advertising Costs

Advertising costs are charged to selling, general and administrative expenses on the consolidated statements of operations as incurred and amounted to $ 12.5 million, $ 8.2 million and $ 5.5 million for the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, respectively.

Advertising costs are charged to selling, general and administrative expenses on the consolidated statements of operations as incurred and amounted to $ 18.4 million, $ 12.5 million and $ 8.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Research, Development and Engineering Costs

Research, development and engineering costs are charged to selling, general and administrative expenses on the consolidated statements of operations as incurred and amounted to $ 18.4 million, $ 14.0 million and $ 9.6 million for the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, respectively.

Research, development and engineering costs are charged to selling, general and administrative expenses on the consolidated statements of operations as incurred and amounted to $ 23.7 million, $ 18.4 million and $ 14.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Business Segment and Geographic Areas

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Net Sales Long-lived Assets

Year Ended December 31, 2022 Year Ended December 31, 2021 Nine-Month Transition Period Ended December 31, 2020 December 31, 2022 December 31, 2021 December 31, 2020

Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021 December 31, 2023 December 31, 2022 December 31, 2021

United States $ 1,368.8 $ 1,135.3 $ 792.8 $ 160.6 $ 165.9 $ 51.6

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Amounts attributed to the geographic regions for long-lived assets are based on the location of the entity that holds such assets.

In accordance with ASC 280, Segment Reporting , long-lived assets includes movable assets and excludes net intangible assets and goodwill.

In accordance with ASC 280, Segment Reporting , long-lived assets include property, plant, and equipment, net, which includes finance lease ROU assets, and excludes net intangible assets and goodwill.

Concentrations of Credit Risk

1 unchanged sentence

Recent Accounting Pronouncements

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

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

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

In 2020, the Board issued Accounting Standards Update No.

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which is described below.

The Board included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published.

At the time that Update 2020-04 was issued, the UK Financial Conduct Authority (FCA) had established its intent that it would no longer be necessary to persuade, or compel, banks to submit to LIBOR after December 31, 2021.

As a result, the sunset provision was set for December 31, 2022—12 months after the expected cessation date of all currencies and tenors of LIBOR.

In March 2021, the FCA announced that the intended cessation date of the overnight 1-, 3-, 6-, and 12-month tenors of USD LIBOR would be June 30, 2023, which is beyond the current sunset date of Topic 848.

Because the current relief in Topic 848 may not cover a period of time during which a significant number of modifications may take place, the amendments in this Update defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The amendments in this ASU are effective for all entities upon issuance of the update.

The Company did not modify any material contracts due to reference rate reform during the year ended December 31, 2022.

The Company will continue to evaluate the impact this guidance will have on its consolidated financial statements for all future transactions affected by reference rate reform during the time permitted.

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").

The amendments in this update provide 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 in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate that is expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022.

The Company did not modify any material contracts due to reference rate reform during the year ended December 31, 2022.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting.

The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its consolidated balance sheets, consolidated statements of operations, and consolidated statements of cash flows when implemented.

Year Ended December 31, 2022

On July 1, 2022, the Company and Elkay completed the Elkay Merger for a preliminary purchase price of $ 1,462.9 million.

Elkay, a market leader of commercial sinks and drinking water solutions, complements the Company's existing product portfolio.

The preliminary purchase price includes $ 1,417.0 million of Zurn's common stock based on Zurn's closing stock price of $ 27.48 on July 1, 2022, and $ 45.9 million of net cash payments for the repayment of Elkay's term loan and Elkay's transaction related costs outstanding that were in excess of Elkay's cash and cash equivalents at the time of closing.

On July 1, 2022, the Company completed the Elkay Merger for a purchase price (after final purchase price adjustments) of $ 1,457.8 million.

Elkay, a market leader of drinking water solutions and commercial sinks, complements the Company's existing product portfolio.

The purchase price includes $ 1,411.9 million of Zurn's common stock based on Zurn's closing stock price of $ 27.48 on July 1, 2022, and $ 45.9 million of net cash payments for the repayment of Elkay's term loan and Elkay's transaction related costs outstanding that were in excess of Elkay's cash and cash equivalents at the time of closing.

Pursuant to the terms of the merger agreement, the Company issued 51,564,524 shares of its common stock, which represented approximately 29 % of outstanding shares immediately following the Merger.

The total number of shares of the Company's common stock issued at closing was preliminary and subject to change upon finalization of customary post-closing adjustments with respect to cash, indebtedness and working capital.

The Company expects that approximately 186,000 of these shares will be returned to the Company in the first half of calendar year 2023 as a result of lower working capital and cash balances at closing compared to targets stipulated in the Merger Agreement.

During the six months ended June 30, 2023, the Company completed the final purchase price adjustments and the adjusted purchase price is reflected in the purchase price amounts above, following the return of 186,020 of the shares issued at closing to the Company as a result of lower working capital and cash balances at closing compared to targets stipulated in the merger agreement.

The shares returned to the Company were canceled upon receipt.

The Company incurred transaction-related costs of approximately $ 33.7 million for the twelve months ended December 31, 2022.

These costs were associated with legal and professional services and were recognized as selling, general and administrative expenses in the consolidated statements of operations.

In accordance with the Merger Agreement, the Company increased the size of its Board to eleven members, and appointed two directors designated by Elkay.

As of December 31, 2023, the Board consisted of ten members, including one director designated by Elkay.

2 unchanged sentences

As such, the Company applied the acquisition method of accounting to the identifiable assets and liabilities of the Elkay business, which have been measured at estimated fair value as of the date of the business combination.

The excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is not deductible for tax purposes.

Elkay’s assets and liabilities were measured at estimated fair value at July 1, 2022, primarily using Level 3 inputs.

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See Note 12, Fair Value Measurements, for additional information.

Due to the timing of the business combination and the nature of the net assets acquired, at December 31, 2022, the valuation process to determine the fair values is not complete and further adjustments are expected.

The Company has estimated the preliminary fair value of net assets acquired based on information currently available and will continue to adjust those estimates as additional information becomes available.

As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price allocation adjustments will be recorded during the measurement period, but no later than one year from the date of the Merger.

The Company will reflect measurement period adjustments in the period in which the adjustments are determined.

The preliminary fair value of the assets acquired and liabilities assumed were as follows (in millions):

As Reported September 30, 2022 Measurement Period Adjustments As Reported December 31, 2022

As of June 30, 2023, the valuation process to determine the fair values of the net assets acquired during the measurement period was complete.

The final fair value of the assets acquired and liabilities assumed were as follows (in millions):

As Reported June 30, 2023

Assets acquired:

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Compensation and benefits 39.3

Current portion of pension and postretirement benefit obligations 17.3 — 17.3

Current portion of pension and other postretirement benefit obligations 17.3

Other current liabilities 45.8

Operating lease liability 24.2

Pension and postretirement benefit obligations 3.6 — 3.6

Pension and other postretirement benefit obligations 3.6

Deferred income taxes 206.7

1 unchanged sentence

Total liabilities assumed 377.9

Total preliminary purchase price $ 1,462.9 $ — $ 1,462.9

Total purchase price $ 1,457.8

Unaudited Pro Forma Information

The following unaudited supplemental pro forma financial information presents the financial results from continuing operations for the year ended December 31, 2022 and 2021 as if the Elkay Merger had occurred on January 1, 2021.

The following unaudited supplemental pro forma financial information presents the financial results from continuing operations for the years ended December 31, 2022 and 2021 as if the Elkay Merger had occurred on January 1, 2021.

The pro forma financial information includes, where applicable, adjustments for:

8 unchanged sentences

Assuming dilution $ 0.59 $ ( 0.03 )

For the period from July 1, 2022 through December 31, 2022, Elkay had net sales and a net loss of $ 264.4 million and $ 11.5 million, respectively, which amounts include the impact of purchase accounting adjustments, and are included in the consolidated statements of operations for the period from July 1, 2022 through December 31, 2022.

For the period from July 1, 2022 through December 31, 2022, Elkay had net sales and a net loss of $ 264.4 million and $ 11.5 million, respectively, which include the impact of purchase accounting adjustments, and are included in the consolidated statements of operations for the period from July 1, 2022 through December 31, 2022.

Year Ended December 31, 2021

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On April 16, 2021, the Company acquired substantially all of the assets of Advance Technology Solutions, LLC (d/b/a ATS GREASEwatch) ("ATS GREASEwatch") for a cash purchase price of $ 4.5 million, excluding transaction costs and net of cash acquired.

The Company paid $ 3.8 million to the sellers at closing, with the remaining $ 0.7 million payable to the sellers upon settlement of certain indemnities within two years of closing, ATS GREASEwatch develops, manufactures and markets remote tank monitoring devices, alarms, software and services for various applications and provides technology to enhance and expand our current product offerings.

The Company paid $ 3.8 million to the sellers at closing and the remaining $ 0.7 million was paid out in 2022 and 2023 upon settlement of certain indemnities.

ATS GREASEwatch develops, manufactures and markets remote tank monitoring devices, alarms, software and services for various applications and provides technology to enhance and expand our current product offerings.

The acquisitions have been accounted for as business combinations and were recorded by allocating the purchase prices to the fair value of assets acquired and liabilities assumed at the acquisition dates.

5 unchanged sentences

GAAP disclosures related to these acquisitions have not been presented because the acquisitions did not significantly impact the Company's consolidated statements of operations or financial position.

Nine-Month Transition Period Ended December 31, 2020

On December 11, 2020, the Company acquired substantially all of the assets of Hadrian Manufacturing Inc.

and 100 % of the stock of Hadrian Inc.

(collectively "Hadrian") for a cash purchase price of $ 101.3 million, excluding transaction costs and net of cash acquired.

During the year ended December 31, 2021, the Company received a $ 0.4 million cash payment from the sellers in connection with finalizing the acquisition date trade working capital, which is included in the total cash purchase price above.

Hadrian, based in Burlington, Ontario, Canada, manufactures washroom partitions and lockers primarily used in institutional and commercial end markets and complements the Company's existing product portfolio.

The acquisition has been accounted for as a business combination and was recorded by allocating the preliminary purchase price to the fair value of assets acquired and liabilities assumed at the acquisition date.

The excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill.

The purchase price allocations associated with the acquisition resulted in goodwill of $ 43.0 million ($ 36.9 million tax deductible), other intangible assets of $ 32.4 million (including tradenames of $ 0.8 million and $ 31.6 million of customer relationships), $ 17.1 million of fixed assets, $ 9.7 million of trade working capital and other net liabilities of $ 0.9 million.

The purchase price allocations for Hadrian were adjusted during the year ended December 31, 2021, resulting in $ 0.3 million increase in goodwill related to final working capital adjustments and the refinement of the estimated fair value of the liabilities assumed.

The Company's results of operations include the acquired operations subsequent to the acquisition date.

Pro-forma results of operations and certain other U.S.

GAAP disclosures related to the acquisition have not been presented because they are not significant to the Company's consolidated statements of operations or financial position.

Discontinued Operations

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The operating results of PMC are reported as discontinued operations in the consolidated statements of operations for all periods presented, as the Spin-Off Transaction of PMC represented a strategic shift that had a major impact on operations and financial results.

The consolidated statements of cash flows for the year ended December 31, 2022, the year ended December 31, 2021, the nine-month Transition Period ended December 31, 2020 have not been adjusted to separately disclose cash flows related to the discontinued operations.

The consolidated statements of cash flows for the years ended December 31, 2023, 2022, and 2021 have not been adjusted to separately disclose cash flows related to the discontinued operations.

During the year ended December 31, 2022, the Company received $ 35.0 million from Regal Rexnord Corporation as a result of the final working capital and cash balances at closing exceeding the targets stipulated in the Spin-Off Transaction agreement.

1 unchanged sentence

These costs primarily related to professional fees associated with planning the Spin-Off Transaction, as well as Spin-Off Transaction activities within finance, tax, legal and information system functions and certain investment banking fees incurred upon completion of the Spin-Off Transaction.

The major components of the Income from discontinued operations, net of tax presented in the consolidated statements of operations during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 are included in the table below (in millions):

Year Ended Nine-Month Transition Period Ended

The major components of the Income from discontinued operations, net of tax presented in the consolidated statements of operations during the years ended December 31, 2023, 2022, and 2021 are included in the table below (in millions):

December 31, 2023 December 31, 2022

6 unchanged sentences

Interest expense, net — — 4.1

Actuarial loss on pension and postretirement benefit obligations — 4.8 1.3

Actuarial loss on pension and other postretirement benefit obligations — — 4.8

Other non-operating income, net — — ( 5.6 )

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____________________

(1) Selling, general and administrative expenses for the year ended December 31, 2023 include the reversal of certain accruals as a result of costs the Company will no longer incur related to the Spin-Off Transaction.

(2) Results of operations for the year ended December 31, 2022 includes the reversal of certain accruals as a result of costs the Company is obligated to indemnify Regal Rexnord Corporation for being lower than original estimates.

(3) Results of operations during the year ended December 31, 2021 reflect the period from January 1, 2021 through October 4, 2021, the date on which the Spin-Off Transaction of PMC was completed.

The consolidated statements of cash flows for the prior periods presented have not been adjusted to separately disclose cash flows related to discontinued operations.

The consolidated statements of cash flows for the periods presented have not been adjusted to separately disclose cash flows related to discontinued operations.

However, the significant investing and financing cash flows and other significant non-cash operating items associated with the discontinued operations were as follows (in millions):

Year Ended Nine-Month Transition Period Ended

December 31, 2022 December 31, 2021

December 31, 2022

December 31, 2021

Depreciation $ — $ 34.9

2 unchanged sentences

Deferred income taxes — 0.5

Actuarial loss on pension and postretirement benefit obligations — 4.8 1.3

Actuarial loss on pension and other postretirement benefit obligations — 4.8

Other non-cash (income) expenses — ( 0.3 )

19 unchanged sentences

The Company's restructuring plans are preliminary and the full extent of related expenses are not yet estimable.

The following table summarizes the Company's restructuring and other similar costs incurred during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 (in millions):

Year Ended Nine-Month Transition Period Ended

The following table summarizes the Company's restructuring and other similar charges incurred during the years ended December 31, 2023, 2022, and 2021 (in millions):

December 31, 2023 December 31, 2022 December 31, 2021

Employee termination benefits $ 3.4 $ 13.6 $ 3.7

Asset impairment charges 2.5 — —

Contract termination and other associated costs 9.4 1.8 —

Total restructuring and other similar costs $ 15.4 $ 3.7 $ 1.7

Total restructuring and other similar charges $ 15.3 $ 15.4 $ 3.7

Restructuring Costs To-date (Period from April 1, 2011 to December 31, 2023)

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Employee termination benefits $ 33.8

Asset impairment charges 2.5

Contract termination and other associated costs 18.5

Total restructuring and other similar costs $ 39.5

The following table summarizes the activity in the Company's accrual for restructuring and other similar costs for the years ended December 31, 2022 and 2021 (in millions):

Employee termination benefits Contract termination and other associated costs Total

Total restructuring and other similar charges $ 54.8

The following table summarizes the activity in the Company's accrual for restructuring and other similar charges for the years ended December 31, 2023 and 2022 (in millions):

Employee termination benefits Asset impairment charges Contract termination and other associated costs Total

Accrued restructuring costs, December 31, 2021

$ 2.4 $ — $ — $ 2.4

Elkay opening balance sheet accrual 4.7 — — 4.7

Charges 13.6 — 1.8 15.4

2 unchanged sentences

$ 7.8 $ — $ 1.2 $ 9.0

Elkay opening balance sheet accrual 4.7 — 4.7

Charges 3.4 2.5 9.4 15.3

Cash payments ( 10.5 ) — ( 10.0 ) ( 20.5 )

Non-cash charges — ( 2.5 ) — ( 2.5 )

Accrued restructuring costs, December 31, 2023 (1)

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____________________

(1) As of December 31, 2022, $ 8.4 million of the restructuring accrual is included in other current liabilities and $ 0.6 million is included in other liabilities in the consolidated balance sheets.

(1) As of December 31, 2023, the restructuring accrual is included in other current liabilities in the consolidated balance sheets.

As of December 31, 2022, $ 8.4 million of the restructuring accrual is included in other current liabilities and $ 0.6 million is included in other liabilities in the consolidated balance sheets.

Revenue Recognition

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The Company has elected to recognize the cost for freight and shipping when control of products has transferred to the customer as a component of cost of sales in the consolidated statements of operations.

The Company classifies shipping and handling fees

billed to customers as net sales and the corresponding costs are classified as cost of sales in the consolidated statements of operations.

The Company classifies shipping and handling fees billed to customers as net sales and the corresponding costs are classified as cost of sales in the consolidated statements of operations.

Revenue by Category

2 unchanged sentences

The following tables present revenue disaggregated by customer type and the geographic region of the end customer (in millions):

Year Ended Nine-Month Transition Period Ended

Customer Type December 31, 2023 December 31, 2022 December 31, 2021

3 unchanged sentences

Total $ 1,530.5 $ 1,281.8 $ 910.9

Year Ended Nine-Month Transition Period Ended

Geography December 31, 2023 December 31, 2022 December 31, 2021

26 unchanged sentences

As of December 31, 2023 and December 31, 2022, the contract assets capitalized are not significant.

During the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, contract asset amortization was not significant and no impairment losses were recognized.

During the years ended December 31, 2023, 2022, and 2021, contract asset amortization was not significant and no impairment losses were recognized.

The major classes of inventories are summarized as follows (in millions):

19 unchanged sentences

Net carrying amount as of December 31, 2021

Acquisitions (1) 8.8

Elkay Merger (1) 527.2

Purchase accounting adjustments (1) ( 1.3 )

1 unchanged sentence

Net carrying amount as of December 31, 2022

Elkay Merger(1) 527.2

Purchase accounting adjustments (1) 19.0

Currency translation adjustments ( 3.0 )

Net carrying amount as of December 31, 2023

1 unchanged sentence

(1) Refer to Note 3, Acquisitions for additional information regarding acquisitions.

Total cumulative goodwill impairment charges as of December 31, 2022 and 2021 was $ 337.1 million.

Total cumulative goodwill impairment charges as of December 31, 2023 and 2022 were $ 337.1 million.

The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of December 31, 2023 and December 31, 2022 consisted of the following (in millions):

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Total intangible assets, net 16 years $ 1,338.9 $ ( 329.2 ) $ 1,009.7

Intangible asset amortization expense totaled $ 34.0 million, $ 23.5 million and $ 16.9 million for the year ended December 31, 2022, the year ended December 31, 2021, the nine-month Transition Period ended December 31, 2020, respectively.

Intangible asset amortization expense totaled $ 58.7 million, $ 34.0 million and $ 23.5 million for the years ended December 31, 2023, 2022, and 2021, respectively.

There were no acquired intangibles in 2023.

Customer relationships and tradenames acquired during the year ended December 31, 2022 were assigned a weighted-average useful life of 16 years and 20 years, respectively.

Customer relationships acquired during the year ended December 31, 2021 were assigned a weighted-average useful life of 10 years.

The Company expects to recognize amortization expense on intangible assets subject to amortization of $ 58.8 million in 2024, $ 58.8 million in 2025, $ 58.6 million in 2026, $ 58.6 million in 2027, and $ 58.6 million in 2028.

5 unchanged sentences

Income taxes payable 3.5 2.3

Legal and environmental 2.3 3.0

Professional fees 0.6 2.3

Product warranty (2) 4.7 4.2

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(3) See more information related to the restructuring obligations balance within Note 5, Restructuring and Other Similar Charges.

(4) Includes projected liabilities related to losses arising from automobile, general and product liability claims.

(4) Includes projected liabilities related to losses arising from automobile, general, environmental, and product liability claims.

Long-Term Debt

22 unchanged sentences

In connection with the 2021 amendment of the Credit Agreement, the Company recognized a $ 20.4 million loss in the prior year on the extinguishment of debt, comprised of refinancing-related costs incurred and a non-cash write-off of debt issuance costs associated with the previous debt outstanding.

The Credit Agreement provided for the issuance of a term loan facility in an aggregate principal amount of $ 550.0 million.

The Credit Agreement provides for the issuance of a term loan facility in an aggregate principal amount of $ 550.0 million.

The proceeds of the Term Loan were, together with the dividend received by the Company in connection with the Spin-Off Transaction and cash on hand, used to (i) repay in full the aggregate principal amount outstanding of the Prior Term Loan, together with accrued interest thereon, (ii) redeem the $ 500 million of outstanding principal amount of the Notes, as described below, and (iii) pay related fees and expenses.

On October 11, 2023, the Company made a voluntary prepayment on its Term Loan of $ 60.0 million.

In connection with this prepayment, the Company recognized a $ 0.9 million loss on debt extinguishment to write off a portion of the unamortized debt issuance costs.

The Term Loan has a maturity date of October 4, 2028.

Commencing on March 31, 2022, the Borrowers are required to make quarterly payments of principal in an amount equal to $ 1.4 million on each quarter until the maturity date.

The Term Loan bears interest at the Borrowers’ option, by reference to a base rate or a rate based on LIBOR, in either case, plus an applicable margin determined quarterly based on the Borrowers’ Net First Lien Leverage Ratio as of the last day of each fiscal quarter.

If the Net First Lien Leverage Ratio is greater than 1.80 to 1.00, the applicable margin shall equal 1.25 % in the case of base rate borrowings and 2.25 % in the case of LIBOR borrowings.

In the event the Borrowers’ Net First Lien Leverage Ratio is less than or equal to 1.80 to 1.00, the applicable margin on both base rate and LIBOR borrowings would

decrease by 0.25 %.

Commencing on March 31, 2022, the Borrowers were required to make quarterly payments of principal in an amount equal to $ 1.4 million each quarter until the maturity date.

In connection with the voluntary prepayment of $ 60.0 million, the quarterly principal payments of $ 1.4 million are no longer required.

For purposes of the Term Loan, effective July 1, 2023, the secured overnight financing rate ("SOFR") replaced LIBOR, and accordingly, beginning July 1, 2023 the Term Loan bears interest at the Borrowers' option, by reference to a base rate or a rate based on Term SOFR, plus a Term SOFR adjustment of 0.115 %, 0.262 %, or 0.428 % for interest periods of one month, three months, and six months, respectively, plus an applicable margin based on the Borrowers' Net First Lien Leverage Ratio as of the last day of each fiscal quarter.

If the Net First Lien Leverage Ratio is greater than 1.80 to 1.00, the applicable margin shall equal 1.25 % in the case of base rate borrowings and 2.25 % in the case of SOFR borrowings.

In the event the Borrowers’ Net First Lien Leverage Ratio is less than or equal to 1.80 to 1.00, the applicable margin on both base rate and SOFR borrowings would decrease by 0.25 %.

The Borrowers’ Net First Lien Leverage Ratio was 1.19 to 1.00 as of December 31, 2023 and therefore the applicable rate is 2.00 %.

Prior to July 1, 2023, the Term Loan bore interest at the Borrowers’ option, by reference to a base rate or a rate based on LIBOR, in either case plus an applicable margin determined quarterly based on the Borrowers’ Net First Lien Leverage Ratio as of the last day of each fiscal quarter as illustrated above.

At December 31, 2023 and December 31, 2022, the borrowings under the Term Loan had weighted-average effective interest rates of 7.47 % and 6.39 %, respectively.

2 unchanged sentences

The Credit Agreement includes a $ 200.0 million revolving credit facility that has a maturity date of October 2, 2026.

Borrowings under the Revolving Credit Facility bear interest at the Borrowers’ option, by reference to a base rate or a rate based on LIBOR, in either case, plus an applicable margin determined quarterly based on the Borrowers’ Net First Lien Leverage Ratio as of the last day of each fiscal quarter.

If the Net First Lien Leverage Ratio is greater than 2.00 to 1.00, the applicable margin shall equal 1.00 % in the case of base rate borrowings and 2.00 % in the case of LIBOR borrowings.

In the event the Borrowers' Net First Lien Leverage Ratio is less than or equal to 2.00 to 1.00, the applicable margin on both base rate and LIBOR borrowings would decrease by 0.25 %.

Similar to the Term Loan, effective July 1, 2023, the SOFR replaced LIBOR, and accordingly, beginning July 1, 2023 the Revolving Credit Facility bears interest by reference to a base rate or a rate based on Term SOFR, plus a Term SOFR adjustment of 0.115 %, 0.262 %, or 0.428 % for interest periods of one month, three months, and six months, respectively, plus an applicable margin based on the Borrowers' Net First Lien Leverage Ratio as of the last day of each fiscal quarter.

If the Net First Lien Leverage Ratio is greater than 2.00 to 1.00, the applicable margin shall equal 1.00 % in the case of base rate borrowings and 2.00 % in the case of SOFR borrowings.

In the event the Borrowers' Net First Lien Leverage Ratio is less than or equal to 2.00 to 1.00, the applicable margin on both base rate and SOFR borrowings would decrease by 0.25 %.

The Borrowers’ Net First Lien Leverage Ratio was 1.19 to 1.00 as of December 31, 2023.

1 unchanged sentence

If the Net First Lien Leverage Ratio is greater than 2.00 to 1.00, the commitment fee is 0.50 %, and if the Company's Net First Lien Leverage Ratio is less than or equal to 2.00 to 1.00, the commitment fee is 0.375 %.

Prior to July 1, 2023, borrowings under the Revolving Credit Facility bore interest at the Borrowers’ option, by reference to a base rate or a rate based on LIBOR, in either case, plus an applicable margin determined quarterly based on the Borrowers’ Net First Lien Leverage Ratio as of the last day of each fiscal quarter as illustrated above.

At December 31, 2023 and December 31, 2022, there were no amounts borrowed under the Revolving Credit Facility.

21 unchanged sentences

Thereafter 16.9

Cash interest paid for the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 was $ 24.3 million, $ 34.7 million and $ 39.8 million, respectively.

Comparative Twelve Month Financial Information (Unaudited)

As discussed in Note 1, Basis of Presentation and Description of Business, this Form 10-K includes financial information for the Transition Period.

Consolidated Statements of Operations and Cash Flows for the years ended December 31, 2022, 2021 and 2020 are summarized below.

All data for the year ended December 31, 2020 is derived from the Company's unaudited consolidated financial statements.

Consolidated Statements of Operations

(in millions)

December 31, 2022 December 31, 2021 December 31, 2020

Net sales $ 1,281.8 $ 910.9 $ 746.1

Cost of sales 816.3 537.7 407.9

Gross profit 465.5 373.2 338.2

Selling, general and administrative expenses 309.0 239.0 206.1

Restructuring and other similar charges 15.4 3.7 2.0

Amortization of intangible assets 34.0 23.5 22.4

Income from operations 107.1 107.0 107.7

Non-operating expense:

Interest expense, net ( 26.9 ) ( 34.7 ) ( 45.9 )

Loss on the extinguishment of debt — ( 20.4 ) —

Actuarial gain (loss) on pension and postretirement benefit obligations 1.9 1.2 ( 21.2 )

Other income (expense), net 1.7 ( 0.7 ) ( 2.5 )

Income before income taxes 83.8 52.4 38.1

Provision for income taxes ( 26.8 ) ( 2.7 ) ( 9.5 )

Net income from continuing operations 57.0 49.7 28.6

Income from discontinued operations, net of tax 4.7 71.2 118.1

Net income $ 61.7 $ 120.9 $ 146.7

Basic net income per share:

Continuing operations $ 0.38 $ 0.41 $ 0.24

Discontinued operations $ 0.03 $ 0.59 $ 0.98

Net income $ 0.41 $ 1.00 $ 1.21

Diluted net income per share:

Continuing operations $ 0.37 $ 0.40 $ 0.23

Discontinued operations $ 0.03 $ 0.57 $ 0.96

Net income $ 0.40 $ 0.97 $ 1.19

Weighted-average number of common shares outstanding (in thousands):

Basic 151,581 121,493 120,764

Effect of dilutive equity awards 2,256 3,621 2,688

Diluted 153,837 125,114 123,452

Consolidated Statements of Cash Flows

(in millions)

December 31, 2022 December 31, 2021 December 31, 2020

Operating activities

Net income $ 61.7 $ 120.9 $ 146.7

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

Depreciation 20.5 44.1 53.2

Amortization of intangible assets 34.0 33.4 36.1

Loss (gain) on dispositions of long-lived assets 0.3 ( 10.1 ) ( 1.8 )

Deferred income taxes 0.5 ( 12.1 ) ( 14.7 )

Other non-cash expenses (income) 4.8 ( 3.6 ) 3.5

Actuarial (gain) loss on pension and postretirement benefit obligations ( 1.9 ) 3.6 37.4

Loss on the extinguishment of debt — 20.4 —

Stock-based compensation expense 25.0 51.4 44.8

Changes in operating assets and liabilities:

Receivables 15.5 ( 66.6 ) 10.8

Inventories ( 17.6 ) ( 79.5 ) 35.0

Other assets 36.5 ( 7.7 ) 23.8

Accounts payable ( 18.3 ) 99.1 ( 56.4 )

Accruals and other ( 64.0 ) 30.3 1.8

Cash provided by operating activities 97.0 223.6 320.2

Investing activities

Expenditures for property, plant and equipment ( 7.6 ) ( 23.3 ) ( 44.2 )

Acquisitions, net of cash acquired ( 44.8 ) ( 17.1 ) ( 161.4 )

Proceeds from dispositions of long-lived assets 1.3 14.3 9.0

Proceeds from insurance claims 9.5 — —

Proceeds associated with divestiture of discontinued operations 35.0 4.2 —

Cash used for investing activities ( 6.6 ) ( 21.9 ) ( 196.6 )

Financing activities

Proceeds from borrowings of debt 102.0 550.0 331.0

Repayments of debt ( 107.7 ) ( 1,126.7 ) ( 336.7 )

Dividend received from Spin-Off Transaction of PMC — 486.8 —

Cash transferred to PMC related to Spin-Off Transaction — ( 192.8 ) —

Payment of debt issuance costs — ( 28.8 ) —

Proceeds from exercise of stock options 2.5 24.9 37.5

Taxes withheld and paid on employees' share-based payment awards ( 0.7 ) ( 32.3 ) ( 9.4 )

Repurchase of common stock ( 24.7 ) ( 0.9 ) ( 140.0 )

Payment of common stock dividends ( 32.5 ) ( 36.4 ) ( 38.6 )

Cash used for financing activities ( 61.1 ) ( 356.2 ) ( 156.2 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1.1 ) ( 4.5 ) 11.2

Increase (decrease) in cash, cash equivalents and restricted cash 28.2 ( 159.0 ) ( 21.4 )

Cash, cash equivalents and restricted cash at beginning of period (1) 96.6 255.6 277.0

Cash, cash equivalents and restricted cash at end of period (1) $ 124.8 $ 96.6 $ 255.6

____________________

(1) The Company has combined cash flows from discontinued operations with cash flows from continuing operations within operating, investing and financing categories.

As such cash and cash equivalents and restricted cash include $ 193.3 million of cash and cash equivalents from the discontinued operation as of December 31, 2020.

Cash interest paid for the years ended December 31, 2023, 2022, and 2021 was $ 36.1 million, $ 24.3 million and $ 34.7 million, respectively.

Fair Value Measurements

1 unchanged sentence

ASC 820 also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques.

Observable inputs (highest level) reflect market data obtained from independent sources,

while unobservable inputs (lowest level) reflect internally developed assumptions about the assumptions a market participant would use.

Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed assumptions about the assumptions a market participant would use.

In accordance with ASC 820, fair value measurements are classified under the following hierarchy:

13 unchanged sentences

Acquisition Method of Accounting

The methods used to determine the fair value of significant identifiable assets and liabilities included in the allocation of the preliminary Elkay purchase price are discussed below.

The methods used to determine the fair value of significant identifiable assets and liabilities included in the allocation of the Elkay purchase price are discussed below.

Inventories - Acquired inventory was comprised of finished goods, work in process and raw materials.

2 unchanged sentences

The fair value of raw materials and supplies was determined based on replacement cost which approximates historical carrying value.

Property, Plant and Equipment - The preliminary fair value of property, plant, and equipment was determined based on assumptions that market participants would use in pricing an asset.

Property, Plant and Equipment - The fair value of property, plant, and equipment was determined based on assumptions that market participants would use in pricing an asset.

Leases, including Right-Of-Use ("ROU") Assets and Lease Liabilities - Lease liabilities were measured as of the acquisition date at the present value of future minimum lease payments over the remaining lease term and the incremental borrowing rate of the Company as if the acquired leases were new leases as of the acquisition date.

1 unchanged sentence

The remaining lease term was based on the remaining term at the acquisition date plus any renewal or extension options that the Company is reasonably certain will be exercised.

Identifiable Intangible Assets - The fair value estimates of the identifiable intangible assets are based upon assumptions that market participants would use in pricing an asset.

The preliminary fair value and weighted average useful life of the identifiable intangible assets are as follows (in millions):

Identifiable Intangible Assets - The fair value estimates of the identifiable intangible assets were based upon assumptions that market participants would use in pricing an asset.

The fair value and weighted average useful life of the identifiable intangible assets are as follows (in millions):

Fair Value Weighted Average Useful Life

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The goodwill is attributable to expected synergies and expanded market opportunities from combining the Company’s operations with those of Elkay.

The goodwill created in the acquisition is not expected to be deductible for tax purposes.

The goodwill created in the acquisition is not deductible for tax purposes.

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

9 unchanged sentences

Lease payments included in the measurement of the lease liabilities are comprised of fixed payments, variable payments that depend on an index or rate, and amounts probable to be paid if an option is reasonably certain to be exercised.

Variable lease payments, typically based on usage of the asset or changes in an index or rate, are excluded from the lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

Variable lease payments, typically based on usage of the asset or changes in

an index or rate, are excluded from the lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

ROU assets and lease liability balances recorded on the consolidated balance sheets are summarized as follows (in millions):

11 unchanged sentences

The components of lease expense reported in the consolidated statements of operations are as follows (in millions):

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

7 unchanged sentences

____________________

(1) Included in cost of sales and selling, general and administrative expenses.

(1) Included in cost of sales, selling, general and administrative expenses, and restructuring and other similar charges.

(2) Included in interest expense, net.

3 unchanged sentences

2024 $ 13.3 $ 2.4

2025 10.6 2.3

Thereafter 12.2 23.0

5 unchanged sentences

The weighted-average remaining lease terms and discount rates for leases are as follows:

Year Ended Nine-Month Transition Period Ended

Lease Term and Discount Rate December 31, 2023 December 31, 2022 December 31, 2021

6 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities are as follows (in millions):

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

3 unchanged sentences

ROU assets obtained in exchange for lease liabilities are as follows (in millions):

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

6 unchanged sentences

To date, equity awards consisting of stock options, Restricted Stock Units ("RSUs") and Performance Stock Units ("PSUs") have been issued under the Plan.

The Plan is administered by the Compensation Committee.

The options granted under the Plan have a maximum term of 10 years after the grant date.

Options and RSUs granted since fiscal 2016 generally vest ratably over 3 years.

Options and RSUs granted during the Transition Period vested in two equal installments, with the first installment vesting on the first anniversary of the grant date and the second installment vesting on December 31, 2021.

During the years ended December 31, 2022 and 2021, RSUs were granted to certain employees that vest ratably over 2 years.

During the years ended December 31, 2022 and 2021, RSUs were granted to certain employees that cliff vest after 2 years.

RSUs granted to nonemployee directors vest immediately, but shares are not issued until six months after the director's cessation of service.

Other than the PSUs granted during the Transition Period, PSUs generally cliff vest after 3 years.

PSUs granted during the Transition Period cliff vested based on performance in the period from April 1, 2020, through December 31, 2021.

The vesting of the PSUs granted during the Transition Period was accelerated in connection with the Spin-Off Transaction based on performance achieved through, and as of the Spin-Off Transaction date.

The Plan permits the grant of awards that may deliver up to an aggregate of 21,165,489 shares of common stock.

The Plan is administered by the Compensation Committee.

PSUs generally cliff vest after 3 years based on performance over that three-year period.

In connection with the Spin-Off Transaction, the Company made adjustments to the number of unvested stock options, RSUs and PSUs with the intention of preserving the intrinsic value of the recipient's awards prior to the Spin-Off.

1 unchanged sentence

Stock options and RSU's continue to vest in accordance with their original vesting period.

The vesting of PSU's granted prior to the beginning of 2021 was accelerated and all outstanding awards became fully vested

and were released at the time of the Spin-Off Transaction based on performance achieved through, and as of the Spin-Off Transaction date.

PSUs granted during 2021 continue to vest in accordance with their original vesting period.

These adjustments to the Company’s share-based compensation awards were deemed to be a modification of the awards and resulted in approximately $ 4.9 million of incremental expense, of which $ 0.2 million and $ 4.5 million was recognized during the years ended December 31, 2022 and 2021, respectively.

The remaining $ 0.2 million will be recognized over the 24 months following the completion of the Spin-Off Transaction.

The vesting of PSU's granted prior to the beginning of 2021 was accelerated and all outstanding awards became fully vested and were released at the time of the Spin-Off Transaction based on performance achieved through, and as of the Spin-Off Transaction date.

PSUs granted in October 2021 continue to vest in accordance with their original vesting period.

These adjustments to the Company’s share-based compensation awards were deemed to be a modification of the awards and resulted in approximately $ 4.9 million of incremental expense, of which $ 0.2 million, $ 0.2 million, and $ 4.5 million was recognized during the years ended December 31, 2023, 2022, and 2021, respectively.

On the date of the Spin-Off Transaction, the modification affected 124 grantees.

Stock options and RSUs outstanding that were held by employees who transferred to Regal Rexnord Corporation in connection with the Spin-Off Transaction were canceled and replaced by awards issued by Regal Rexnord Corporation.

Employees remaining with the Company did not receive share-based compensation awards of Regal Rexnord Corporation as a result of the Spin-Off Transaction.

Employees remaining with the Company did not receive share-based compensation awards of Regal Rexnord Corporation as a

result of the Spin-Off Transaction.

Except for the conversion of awards, the material terms of the awards held by employees who transferred to Regal Rexnord Corporation remained unchanged.

During the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, the Company recorded $ 25.0 million, $ 37.5 million and $ 22.9 million of stock-based compensation expense from continuing operations, respectively (the related tax benefit on these amounts subject to the 162(m) compensation limitations was $ 5.9 million for the year ended December 31, 2022, $ 9.2 million for the year ended December 31, 2021 and $ 5.3 million for the nine-month Transition Period ended December 31, 2020).

During the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, the Company also recorded $ 0.9 million, $ 18.6 million and $ 0.4 million, respectively, of an excess tax benefit related to stock options exercised during each period.

During the years ended December 31, 2023, 2022, and 2021, the Company recorded $ 40.0 million, $ 25.0 million and $ 37.5 million, respectively, of stock-based compensation expense from continuing operations (the related tax benefit on these amounts subject to the 162(m) compensation limitations during the years ended December 31, 2023, 2022, and 2021 was $ 9.8 million, $ 5.9 million, and $ 9.2 million, respectively).

During the year ended December 31, 2023, 2022, and 2021, the Company also recorded $ 2.0 million, $ 0.9 million and $ 18.6 million, respectively, of an excess tax benefit related to stock options exercised during each period.

As of December 31, 2023, there was $ 23.6 million of total unrecognized compensation cost related to non-vested stock options, RSUs and PSUs granted under the Plan.

2 unchanged sentences

The fair value of each option granted under the Plan was estimated on the date of grant using the Black-Scholes valuation model that uses the following weighted-average assumptions:

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

9 unchanged sentences

Treasury yield curve in effect at the date of grant.

The weighted-average grant date fair value of options granted under the Plan during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 was $ 9.79 , $ 13.54 and $ 7.69 , respectively.

The total fair value of options vested during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 was $ 0.9 million, $ 3.6 million and $ 4.6 million, respectively.

A summary of stock option activity during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 is as follows:

Year Ended Nine-Month Transition Period Ended

The weighted-average grant date fair value of options granted under the Plan during the years ended December 31, 2023, 2022, and 2021 was $ 8.28 , $ 9.79 and $ 13.54 , respectively.

The total fair value of options vested during the years ended December 31, 2023, 2022, and 2021 was $ 0.9 million, $ 0.9 million and $ 3.6 million, respectively.

A summary of stock option activity during the years ended December 31, 2023, 2022, and 2021 is as follows:

December 31, 2023 December 31, 2022 December 31, 2021

12 unchanged sentences

______________________

(1) The total intrinsic value of options exercised during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 was $ 3.8 million, $ 90.4 million and $ 19.9 million, respectively.

(1) The total intrinsic value of options exercised during the years ended December 31, 2023, 2022 , and 2021 was $ 11.0 million, $ 3.8 million and $ 90.4 million, respectively.

(2) The weighted average remaining contractual life of options outstanding was 4.1 years at December 31, 2023, 4.4 years at December 31, 2022 and 5.1 years at December 31, 2021.

10 unchanged sentences

Restricted Stock Units

During the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 the Company granted RSUs to certain of its officers, directors, and employees.

During the years ended December 31, 2023, 2022, and 2021 the Company granted RSUs to certain of its officers, directors, and employees.

The fair value of each award is determined based on the Company's closing stock price on the date of grant.

A summary of RSU activity during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 is as follows:

Year Ended Nine-Month Transition Period Ended

A summary of RSU activity during the years ended December 31, 2023, 2022, and 2021 is as follows:

December 31, 2023 December 31, 2022 December 31, 2021

10 unchanged sentences

Performance Stock Units

During the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, the Company granted PSUs to certain of its officers and employees.

The PSUs granted during the

nine-month Transition Period ended December 31, 2020, had a 21 month performance period (April 1, 2020, to December 31, 2021) while the PSUs granted during the years ended December 31, 2022 and December 31, 2021 have a three-year performance period, and are earned and vest, subject to continued employment, based on performance relative to metrics determined by the Compensation Committee.

During the years ended December 31, 2023, 2022, and 2021, the Company granted PSUs to certain of its officers and employees.

The PSUs granted during the years ended December 31, 2023, 2022, and 2021 have a three-year performance period, and are earned and vest, subject to continued employment, based on performance relative to metrics determined by the Compensation Committee.

The number of performance share awards earned, which can range between 0 % and 200 % of the target awards granted depending on the Company's actual performance during the respective performance period, will be satisfied with Zurn Elkay common stock.

A summary of PSU activity during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 is as follows:

Year Ended Nine-Month Transition Period Ended

A summary of PSU activity during the years ended December 31, 2023, 2022, and 2021 is as follows:

December 31, 2023 December 31, 2022 December 31, 2021

9 unchanged sentences

Nonvested PSUs at end of period 866,810 $ 27.88 939,459 $ 27.07 777,374 $ 26.27

During the nine-month Transition Period ended December 31, 2020, PSUs were granted with vesting based on goals related to free cash flow conversion.

During the year ended December 31, 2022 and the year ended December 31, 2021, PSUs were granted with vesting based on goals related to free cash flow conversion and return on invested capital.

During the years ended December 31, 2023, 2022, and 2021, PSUs were granted with vesting based on goals related to free cash flow conversion and return on invested capital.

The fair value of the portion of PSUs with vesting based on free cash flow conversion and return on invested capital is determined based on the Company's closing stock price on the date of grant.

2 unchanged sentences

Most of the Company’s employees are accumulating retirement income benefits through defined contribution plans.

However, the Company sponsors frozen pension plans for certain salaried participants and ongoing pension benefits for certain employees represented by collective bargaining.

However, the Company sponsors frozen pension plans for certain salaried participants and ongoing pension benefits for certain employees represented by

collective bargaining.

These plans provide for monthly pension payments to eligible employees upon retirement.

9 unchanged sentences

The corridor is 10% of the greater of the projected benefit obligation or the fair value of the plan assets.

In connection with this accounting policy, the Company recognized non-cash actuarial gain (loss) of $ 1.9 million, $ 1.2 million, and $( 0.3 ) million within the consolidated statements of operations from continuing operations, during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, respectively.

These amounts are recorded within Actuarial gain (loss) on pension and postretirement benefit obligations in the consolidated statements of operations.

In addition, the Company recognized non-cash actuarial losses associated with PMC plans of $ 4.8 million and $ 1.3 million during the year ended December 31, 2021 and the nine-month Transition Period ended December 31, 2020, respectively, which is recorded in income from discontinued operations, net of tax in the consolidated statements of operations.

In connection with this accounting policy, the Company recognized non-cash actuarial gain of $ 2.0 million, $ 1.9 million, and $ 1.2 million within the consolidated statements of operations from continuing operations, during the years ended December 31, 2023, 2022, and 2021, respectively.

These amounts are recorded within Actuarial gain on pension and other postretirement benefit obligations in the consolidated statements of operations.

On October 4, 2021, the Company completed the Spin-Off Transaction of the PMC business.

In accordance with the terms of the Spin-Off Transaction agreements, the net assets associated with the PMC business included in the Spin-Off Transaction included unfunded pension and postretirement benefit obligations of $ 80.4 million.

The transfer of these

obligations affiliated with certain defined benefit plans was accounted for as a settlement in accordance with the authoritative guidance, which required the Company to perform an interim remeasurement of certain plans.

In connection with the remeasurement, the Company recognized pre-tax non-cash actuarial losses of $ 4.8 million, which is recognized within income from discontinued operations, net of tax.

In accordance with the terms of the Spin-Off Transaction agreements, the net assets associated with the PMC business included in the Spin-Off Transaction included unfunded pension and other postretirement benefit obligations of $ 80.4 million.

The transfer of these obligations affiliated with certain defined benefit plans was accounted for as a settlement in accordance with the authoritative guidance, which required the Company to perform an interim remeasurement of certain plans.

In connection with the remeasurement, the Company recognized pre-tax non-cash actuarial losses of $ 4.8 million during the year ended December 31, 2021, which is recognized within income from discontinued operations, net of tax.

The components of net periodic benefit cost reported in the consolidated statements of operations are as follows (in millions):

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

5 unchanged sentences

PMC Spin-Off — — 5.7

Recognition of actuarial losses — — 1.6

Net periodic benefit (income) expense $ 4.7 $ ( 0.9 ) $ 2.1

6 unchanged sentences

Net periodic benefit (income) expense $ ( 1.4 ) $ ( 1.5 ) $ ( 2.0 )

During the year ended December 31, 2023, the recognition of $ 2.0 million of net non-cash actuarial gains was primarily due to demographic gains experienced during 2023 that were reflected in the other post-retirement benefit plans.

In addition, the post 65 medical provider options changed resulting in lower premiums for the plans.

These gains were partially offset by a decrease in discount rate from the prior measurement.

During the year ended December 31, 2022, the recognition of $ 1.9 million of net non-cash actuarial gains was primarily due to an increase in the discount rates utilized within remeasurement of the Company's defined benefit plans partially offset by unfavorable asset returns.

During the year ended December 31, 2021, the recognition of $ 3.6 million of net non-cash actuarial losses was primarily due to an increase in the discount rates utilized within remeasurement of the Company's defined benefit plans.

During the nine-month Transition Period ended December 31, 2020, the recognition of $ 1.6 million of non-cash actuarial loss was due to favorable asset performance and contributions made to the plan partially offset by decreases in the discount rate utilized within the annual remeasurement of the Company's defined benefit plans.

The Company made contributions to its U.S.

qualified pension plan trusts of $ 0.3 million, $ 2.0 million, and $ 6.0 million during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020, respectively.

qualified pension plan trusts of $ 11.0 million, $ 0.3 million and $ 2.0 million during the years ended December 31, 2023, 2022, and 2021, respectively.

The status of the plans is summarized as follows (in millions):

5 unchanged sentences

Interest cost ( 12.1 ) ( 8.6 ) ( 0.6 ) ( 0.4 )

Actuarial gains 61.3 25.7 1.2 1.3

Actuarial (losses) gains ( 5.1 ) 61.3 2.4 1.2

Benefits paid 19.6 19.9 1.4 18.7

Plan participant contributions — — ( 0.2 ) ( 0.2 )

Spin-Off Transaction — 318.8 — 2.7

Settlements — 0.1 — —

Benefit obligation at end of period $ ( 224.0 ) $ ( 226.3 ) $ ( 8.7 ) $ ( 11.7 )

4 unchanged sentences

Benefits paid ( 19.6 ) ( 19.9 ) ( 1.4 ) ( 1.4 )

Spin-Off Transaction — ( 238.4 ) — —

Plan assets at end of period $ 195.2 $ 186.2 $ — $ —

7 unchanged sentences

As of December 31, 2023, the Company had pension plans with a combined projected benefit obligation of $ 224.0 million compared to plan assets of $ 195.2 million, resulting in an under-funded status of $ 28.8 million compared to an under-funded status of $ 40.1 million at December 31, 2022.

The Company’s funded status improved during the year ended December 31, 2022 primarily due to increases in the discount rate assumption, partially offset by the obligations assumed in connection with the Elkay Merger.

The Company’s funded status improved during the year ended December 31, 2023 primarily due to the $ 11.0 million pension plan contribution.

Any further changes in the assumptions underlying the Company’s pension values, including those that arise as a result of declines in equity markets and changes in interest rates, could result in increased pension obligation and pension cost which could negatively affect the Company’s consolidated financial position and results of operations in future periods.

1 unchanged sentence

As of December 31, 2023

Benefits Postretirement

Benefits Other Postretirement

Benefits Total

Unrecognized prior service credit $ — $ — $ —

Unrecognized actuarial loss (gain) 0.4 ( 0.5 ) ( 0.1 )

Accumulated other comprehensive loss (income), gross 0.4 ( 0.5 ) ( 0.1 )

Deferred income tax (benefit) provision ( 0.1 ) 0.1 —

Accumulated other comprehensive loss (income), net $ 0.3 $ ( 0.4 ) $ ( 0.1 )

Unrecognized actuarial gain ( 4.1 ) ( 0.9 ) ( 5.0 )

Accumulated other comprehensive income, gross ( 4.1 ) ( 0.9 ) ( 5.0 )

Deferred income tax provision 1.0 0.2 1.2

Accumulated other comprehensive income, net $ ( 3.1 ) $ ( 0.7 ) $ ( 3.8 )

As of December 31, 2022

Benefits Postretirement

Benefits Other Postretirement

Benefits Total

Unrecognized prior service credit $ — $ — $ —

Unrecognized actuarial loss (gain) 0.4 ( 0.5 ) ( 0.1 )

62 unchanged sentences

Balanced funds (3) — — — 2.2 2.2

Alternative investment funds (4) — — — 1.1 1.1

Total $ 12.4 $ — $ — $ 173.8 $ 186.2

10 unchanged sentences

The mutual and commingled funds are primarily valued using the net asset value, which reflects the plan's share of the fair value of the investments.

(4) The Company's alternative investments include venture capital and partnership investments.

Alternative investments are valued using the net asset value, which reflects the plan's share of the fair value of the investments.

The Company is generally able to redeem investments at periodic times during the year with notice provided to the general partner.

The table below sets forth a summary of changes in the fair value of the Level 3 investments for the year ended December 31, 2021 (in millions):

Ending balance, December 31, 2020

Actual return on assets:

Related to assets held at reporting date —

Related to assets sold during the period —

Purchases, sales, issuances and settlements (1) ( 39.9 )

Transfers in and/or out of Level 3 —

Ending balance, December 31, 2021

(1) During the year ended December 31, 2021, all Level 3 assets were distributed in connection with the Spin-Off Transaction.

Expected benefit payments to be paid in each of the next five years and in the aggregate for the five years thereafter are as follows (in millions):

16 unchanged sentences

The Company sponsors certain defined-contribution savings plans for eligible employees.

Expense recognized related to these plans was $ 5.9 million, $ 5.5 million and $ 5.7 million during the year ended December 31, 2022, the year ended December 31, 2021, and the nine months ended December 31, 2020 , respectively.

Expense recognized related to these plans was $ 4.5 million, $ 5.9 million and $ 5.5 million during the years ended December 31, 2023, 2022, and 2021 , respectively.

During the year ended December 31, 2023, the Company utilized 201,053 shares of its common stock with a weighted average fair value of $ 25.06 per share in funding the cost.

42 unchanged sentences

As a result of this review, the Company established a full valuation allowance against U.S.

federal and state capital loss carryforwards, as well as certain state tax credit carryforwards, and continues to maintain a partial valuation allowance against certain foreign NOL carryforwards and other related foreign deferred tax assets, as well as certain U.S.

state NOL carryforwards.

federal and state capital loss carryforwards, as well as certain foreign NOL carryforwards and related deferred tax assets, and continues to maintain a partial valuation allowance against certain U.S.

state NOL and tax credit carryforwards.

In October 2021, more than 130 countries agreed to implement Pillar 2, a plan introduced by the Organization for Economic Co-operation and Development (“OECD”) providing for a global minimum tax rate of 15% (calculated on a country-by-country basis) for those companies having consolidated revenue of at least €750 million.

The implementation of the Pillar 2 global minimum tax rules is intended to apply for tax years beginning in 2024.

The main purpose of such rules is to minimize tax base erosion and profit shifting from higher tax jurisdictions to lower tax jurisdictions by multi-national companies.

On February 1, 2023, the Financial Accounting Standards Board indicated that they view the minimum tax (“Top-Up Tax”) imposed under Pillar 2 as an alternative minimum tax, and as such, it should be recognized in the period incurred versus recognizing or adjusting deferred tax assets and liabilities.

On February 2, 2023, the OECD issued various administrative guidance including transitional safe harbor rules available in conjunction with the implementation of the Pillar 2 global minimum tax.

Based upon the current OECD rules and administrative guidance, the Company does not anticipate being subject to material Top-Up Taxes as various tax jurisdictions begin enacting such legislation.

The Company is continuing to monitor

the potential impact of the Pillar 2 proposals and developments on our consolidated financial statements and related disclosures, including eligibility for any transitional safe harbor rules.

Income Tax Provision

The components of the provision for income taxes are as follows (in millions):

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

9 unchanged sentences

The provision for income taxes differs from the United States statutory income tax rate due to the following items (in millions):

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

8 unchanged sentences

§162(m) compensation limitation 6.2 3.3 5.1

Nondeductible loss on divestiture of asbestos liabilities and certain assets 2.0 — —

Net changes in valuation allowance 0.5 ( 0.8 ) 1.6

2 unchanged sentences

The provision for income taxes was calculated based upon the following components of income from continuing operations before income taxes (in millions):

Year Ended Nine-Month Transition Period Ended

December 31, 2023 December 31, 2022 December 31, 2021

28 unchanged sentences

Management has reviewed the deferred tax assets and has analyzed the uncertainty with respect to ultimately realizing the related tax benefits associated with such assets.

Based upon this analysis, management has determined that a valuation allowance should be established for the federal and state capital loss carryforwards, state credit carryforwards, certain foreign NOL carryforwards and related deferred tax assets, as well as certain state NOL carryforwards as of December 31, 2022.

Based upon this analysis, management has determined that a valuation allowance should be established for the federal and state capital loss carryforwards, certain foreign NOL carryforwards and related deferred tax assets, as well as certain state NOL and tax credit carryforwards as of December 31, 2023.

Significant factors considered by management in this determination included the historical operating results of the Company, as well as anticipated reversals of future taxable temporary differences.

10 unchanged sentences

In addition, at December 31, 2023, the Company had approximately $ 3.7 million of foreign NOL carryforwards, of which there is a recorded tax effected valuation allowance of $ 1.0 million.

The significant decrease in the deferred tax asset relating to federal and state capital loss carryforwards is the result of such credits expiring unutilized.

These expiring credits were effectively written off against the full valuation allowance previously recorded by the Company.

As such, the majority of the significant decrease in the valuation allowance was the result of this write-off.

No provision has been made for U.S.

federal income taxes related to approximately $ 26.1 million of undistributed earnings of foreign subsidiaries considered to be permanently reinvested.

The additional income tax liability that would result if such earnings were repatriated to the U.S., other than potential out-of-pocket withholding taxes of approximately $ 1.0 million, would not be expected to be significant to the Company’s consolidated financial statements.

No additional income tax liability would be expected to result if such earnings were repatriated to the U.S., other than potential out-of-pocket withholding taxes of approximately $ 1.3 million.

The Company’s total receivable for net accrued income taxes as of December 31, 2023 and 2022 was $ 13.5 million and $ 16.0 million, respectively.

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and as income taxes receivable in the consolidated balance sheets of $ 17.0 million and $ 18.3 million as of December 31, 2023 and 2022, respectively.

Net cash paid for income taxes to governmental tax authorities for the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 was $ 3.1 million, $ 57.8 million and $ 44.9 million, respectively.

Net cash paid for income taxes to governmental tax authorities for the years ended December 31, 2023, 2022, and 2021 was $ 45.7 million, $ 3.1 million and $ 57.8 million, respectively.

Liability for Unrecognized Tax Benefits

The Company's total liability for net unrecognized tax benefits as of December 31, 2023 and 2022 was $ 5.6 million and $ 5.5 million, respectively.

The following table represents a reconciliation of the beginning and ending amount of the gross unrecognized tax benefits, excluding interest and penalties, for the year ended December 31, 2022 and the year ended December 31, 2021 (in millions):

The following table represents a reconciliation of the beginning and ending amount of the gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2023 and 2022 (in millions):

December 31, 2023 December 31, 2022

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As of December 31, 2023 and 2022, the total amount of unrecognized tax benefits includes $ 1.1 million and $ 0.7 million of gross accrued interest and penalties, respectively.

The amount of net interest and penalties recorded as income tax expense during the year ended December 31, 2022, the year ended December 31, 2021, and the nine-month Transition Period ended December 31, 2020 was $ 0.2 million, $ 0.2 million, and $ 0.0 million , respectively.

The amount of net interest and penalties recorded as income tax expense during the years ended December 31, 2023, 2022, and 2021 was $ 0.4 million, $ 0.2 million, and $ 0.2 million, respectively.

The Company conducts business in multiple locations within and outside the U.S.

Consequently, the Company is subject to periodic income tax examinations by domestic and foreign income tax authorities.

Currently, the Company is undergoing routine, periodic income tax examinations in foreign jurisdictions.

During the nine-month Transition Period ended December 31, 2020, the Internal Revenue Service (the “IRS”) completed an income tax examination of the Company’s U.S.

consolidated federal income tax returns for the tax years ended March 31, 2016 and 2017.

The Company paid approximately $ 1.5 million upon the conclusion of such examination, all of which was previously accrued in the Company’s financial statements.

In accordance with the terms of the VAG sale agreement, the Company is required to indemnify the purchaser for any future income tax liabilities associated with all open tax years ending prior to, and including, the short period ended on the date of the Company's sale of VAG.

In accordance with the terms of the sale agreement relating to a group of certain previously owned legal entities (the parent of which was VAG Holding GbmH, “VAG”), the Company is required to indemnify the purchaser for any future income tax liabilities associated with all open tax years ending prior to, and including, the short period ended on the date of the Company's sale of VAG.

VAG was notified by the German tax authorities of its intention to conduct an income tax examination of the VAG German entities’ corporate income and trade tax returns for the tax years ended March 31, 2014 through 2020.

Similarly, in accordance with the Spin-Off Transaction, the Company is required to indemnify Regal Rexnord Corporation for any future income tax liabilities associated with PMC entities relating to all open tax years ending prior to, and including, the short period ended on the date of the Spin-Off.

There are currently a number of ongoing income tax examinations being conducted by the applicable tax authorities in various foreign tax jurisdictions with respect to certain PMC entities.

There are currently a number of ongoing tax examinations being conducted by the applicable tax authorities in Germany with respect to certain PMC entities.

It appears reasonably possible that the amounts of unrecognized income tax benefits and indemnification liabilities could change in the next twelve months upon conclusion of the current ongoing examinations;

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Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, based upon current information, management believes the eventual outcome of these unresolved legal actions, either individually or in the aggregate, will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.

Certain Company subsidiaries are subject to asbestos litigation.

As of December 31, 2022, Zurn Elkay and numerous other unrelated companies were defendants in approximately 6,000 asbestos related lawsuits representing approximately 7,000 claims.

Plaintiffs' claims allege personal injuries caused by exposure to asbestos used primarily in industrial boilers formerly manufactured by a segment of Zurn Elkay.

Zurn Elkay did not manufacture asbestos or asbestos components.

Instead, Zurn Elkay purchased them from suppliers.

These claims are being handled pursuant to a defense strategy funded by insurers.

As of December 31, 2022, the Company estimates the potential liability for the asbestos-related claims described above, as well as the claims expected to be filed in the next ten years , to be approximately $ 79.0 million, of which Zurn Elkay expects approximately $ 58.0 million to be paid in the next ten years on such claims, with the balance of the estimated liability being paid in subsequent years.

The $ 79.0 million was developed based on actuarial studies and represents the projected indemnity payout for current and future claims.

There are inherent uncertainties involved in estimating the number of future asbestos claims, future settlement costs, and the effectiveness of defense strategies and settlement initiatives.

As a result, actual liability could differ from the estimate described herein and could be substantial.

The liability for the asbestos-related claims is recorded in reserve for asbestos claims within the consolidated balance sheets.

Management estimates that the available insurance to cover this ten year estimated potential asbestos liability as of December 31, 2022 is $ 72.1 million.

The Company recorded a receivable from its insurance carriers, which corresponds to the amount of this potential asbestos liability that is covered by available insurance and is currently determined to be probable of recovery.

However, there is no assurance the Company's current insurance coverage will ultimately be available or that this asbestos liability will not ultimately exceed the Company's coverage limits.

On December 15, 2023, Zurn Holdings, Inc.

sold all of the equity interests of its direct subsidiary Zurn Industries, together with Zurn Industries’ direct and indirect subsidiaries that primarily held asbestos liabilities, certain assets and cash, in a stock sale transaction to an unaffiliated buyer.

In accordance with the terms of the stock sale agreement, a subsidiary of the Company will indemnify the buyer for breaches of representations or warranties, breaches of covenants, and certain other liabilities as long as such liabilities are entirely unrelated to asbestos liabilities or assets.

In addition, the buyer will indemnify the Company and its affiliates for breaches of representations or warranties, breaches of covenants, liabilities related to the operation of Zurn Industries’ and buyer’s operations post-closing and all claims arising out of asbestos liabilities and related insurance coverage.

As a result of the transaction, all asbestos obligations and liabilities, related insurance assets and associated deferred taxes, and other assets sold to the buyer, have been removed from the Company’s consolidated balance sheet effective

December 15, 2023 and the Company no longer has any obligation with respect to pending and future asbestos claims related to the divested entities.

As such, the divested entities have been deconsolidated from our 2023 financial results as the Company no longer owns or controls such entities.

Therefore, for the period ending December 31, 2023, all asbestos obligations and liabilities, related insurance assets and associated deferred taxes, and other assets of the divested subsidiaries are no longer reported on the consolidated balance sheet.

The Company recorded a loss on the divestiture of asbestos liabilities and certain assets of $ 11.4 million in the fourth quarter of 2023, including transaction expenses of $ 2.1 million.

Prior to the stock sale transaction, certain Company subsidiaries were subject to asbestos litigation.

As of December 31, 2022, certain Company subsidiaries and numerous other unrelated companies were defendants in approximately 6,000 asbestos related lawsuits representing approximately 7,000 claims.

Plaintiffs' claims alleged personal injuries caused by exposure to asbestos used primarily in industrial boilers formerly manufactured by a segment of Zurn Elkay's subsidiaries.

Those subsidiaries did not manufacture asbestos or asbestos components.

Instead, they were purchased from suppliers.

These claims were handled pursuant to a defense strategy funded by insurers.

In prior years, the asbestos liability was developed based on actuarial studies and represented the projected indemnity payout for current and future claims.

There were inherent uncertainties involved in estimating the number of future asbestos claims, future settlement costs, and the effectiveness of defense strategies and settlement initiatives.

As of December 31, 2022, the estimated potential liability for the asbestos-related claims described above, as well as the claims expected to be filed in the next ten years, was approximately $ 79.0 million which was recorded in the reserve for asbestos claims within the consolidated balance sheets.

In prior years, the Company also recorded a receivable from its insurance carriers, which corresponded to the amount of this potential asbestos liability that was covered by available insurance and was determined to be probable of recovery.

However, there was no assurance the Company's insurance coverage would ultimately be available or that this asbestos liability would not ultimately exceed the coverage limits.

Factors that could cause a decrease in the amount of available coverage or create gaps in coverage include:

changes in law governing the policies, potential disputes and settlements with the carriers regarding the scope of coverage, and insolvencies of one or more of the Company's carriers.

The receivable for probable asbestos-related recoveries is recorded in insurance for asbestos claims within the consolidated balance sheets.

During the year ended December 31, 2022, the Company recorded $ 6.9 million for the amount that the estimated potential liability exceeds a gap in the Company's estimated available insurance coverage.

This expense is recorded in other income (expense), net within the consolidated statements of operations.

During the year ended December 31, 2021 and the nine-month Transition Period ended December 31, 2020, no amounts were recorded in the consolidated statements of operations.

As of December 31, 2022, management estimated that the available insurance to cover the ten-year estimated potential asbestos-related liabilities was $ 72.1 million.

During the year ended December 31, 2022, the Company recorded $ 6.9 million for the amount that the estimated potential liability exceeded a gap in the Company's estimated available insurance coverage.

This expense was recorded in other income (expense), net within the consolidated statements of operations.

During the year ended December 31, 2021, no amounts were recorded in the consolidated statements of operations.

Common Stock Repurchases

During fiscal 2015, the Company's Board of Directors approved a common stock repurchase program (the "Repurchase Program") authorizing the repurchase of up to $ 200.0 million of the Company's common stock from time to time on the open market or in privately negotiated transactions.

On January 27, 2020, the Company's Board of Directors approved to increase the remaining share repurchase authority under the Repurchase Program to $ 300.0 million.

On January 27, 2020, the Company's Board of Directors approved increasing the remaining share repurchase authority under the Repurchase Program to $ 300.0 million.

On February 8, 2023, the Company's Board of Directors approved increasing the remaining share repurchase authority under the Repurchase Program to $ 500.0 million.

The Repurchase Program does not require the Company to acquire any particular amount of common stock and does not specify the timing of purchases or the prices to be paid;

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During the year ended December 31, 2023, the Company repurchased 5.3 million shares of common stock at a total cost of $ 125.0 million at a weighted average price of $ 23.66 per share.

During the year ended December 31, 2021, the Company repurchased 22,300 shares of common stock at a total cost of $ 0.9 million at a weighted average price of $ 39.27 per share.

During the nine-month Transition Period ended December 31, 2020, the Company repurchased 1.7 million shares of common stock at a total cost of $ 59.3 million at a weighted average price of $ 34.97 per share.

During the year ended December 31, 2022, the Company repurchased 1.1 million shares of common stock at a total cost of $ 24.7 million at a weighted average price of $ 23.00 per share.

During the year ended December 31, 2021, the Company repurchased 22.3 thousand shares of common stock at a total cost of $ 0.9 million at a weighted average price of $ 39.27 per share.

The repurchased shares were canceled by the Company upon receipt.

At December 31, 2023, a total of approximately $ 390.5 million of repurchase authority remained under the Repurchase Program.

Effective February 8, 2023, the Board approved an increase in the remaining share repurchase authority under the Repurchase Program to $ 500.0 million.

Quarterly Results of Operations (unaudited)

(in millions, except per share amounts)

Year Ended December 31, 2022

First Quarter Second Quarter Third Quarter

(1) Fourth Quarter Total

Net sales $ 239.6 $ 284.2 $ 417.7 $ 340.3 $ 1,281.8

Gross profit 101.9 113.8 140.4 109.4 465.5

Net income from continuing operations 29.4 36.4 ( 19.1 ) 10.3 57.0

Income from discontinued operations, net of tax 0.8 — — 3.9 4.7

Net income (loss) $ 30.2 $ 36.4 $ ( 19.1 ) $ 14.2 $ 61.7

Basic net income (loss) per share

Continuing operations $ 0.23 $ 0.29 $ ( 0.11 ) $ 0.06 $ 0.38

Discontinued operations $ 0.01 $ — $ — $ 0.02 $ 0.03

Net income (loss) $ 0.24 $ 0.29 $ ( 0.11 ) $ 0.08 $ 0.41

Diluted net income (loss) per share

Continuing operations $ 0.23 $ 0.28 $ ( 0.11 ) $ 0.06 $ 0.37

Discontinued operations $ 0.01 $ — $ — $ 0.02 $ 0.03

Net income (loss) $ 0.24 $ 0.28 $ ( 0.11 ) $ 0.08 $ 0.40

Year Ended December 31, 2021

First Quarter Second Quarter Third Quarter Fourth Quarter

Net sales $ 205.2 $ 243.7 $ 229.7 $ 232.3 $ 910.9

Gross profit 88.4 103.8 95.8 85.2 373.2

Net income from continuing operations 10.0 20.6 16.1 3.0 49.7

Income (loss) from discontinued operations, net of tax 40.0 52.6 48.0 ( 69.4 ) 71.2

Net income (loss) $ 50.0 $ 73.2 $ 64.1 $ ( 66.4 ) $ 120.9

Basic net income (loss) per share

Continuing operations $ 0.08 $ 0.17 $ 0.13 $ 0.02 $ 0.41

Discontinued operations $ 0.33 $ 0.44 $ 0.40 $ ( 0.56 ) $ 0.59

Net income (loss) $ 0.42 $ 0.61 $ 0.53 $ ( 0.53 ) $ 1.00

Diluted net income (loss) per share

Continuing operations $ 0.08 $ 0.17 $ 0.13 $ 0.02 $ 0.40

Discontinued operations $ 0.32 $ 0.42 $ 0.38 $ ( 0.54 ) $ 0.57

Net income (loss) $ 0.40 $ 0.59 $ 0.51 $ ( 0.52 ) $ 0.97

______________________

(1) The third quarter of the year ended December 31, 2022 includes the recognition of $ 33.7 million of transaction-related costs in connection with the Elkay Merger.

Refer to Note 3, Acquisitions for additional information.

(2) The fourth quarter of the year ended December 31, 2021 includes the recognition of a $ 20.4 million loss on extinguishment of debt following the refinancing of the Company's debt in connection with the Spin-Off Transaction.

Refer to Note 11, Long-Term Debt for additional information.

In addition, the Company recognized approximately $ 60.0 million of separation costs in connection with the Spin-Off Transaction that was recorded within the loss from discontinued operations, net of tax.

Refer to Note 4, Discontinued Operations for additional information.

Subsequent Event

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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-K

Item 8. Financial Statements and Supplementary Data