What changed in this filing

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Item 1. Financial Statements

2024-04-23 compared with 2023-10-31 · 165 added, 212 removed, 406 unchanged (48% of the section changed)

3 unchanged sentences

(in Millions, except share amounts)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Current assets:

1 unchanged sentence

Receivables, net 222.9 210.2

Inventories 284.3 366.7

Inventories, net 286.6 277.6

Income taxes receivable 7.6 17.0

4 unchanged sentences

Goodwill 794.3 796.0

Insurance for asbestos claims 72.1 72.1

Other assets 64.7 70.5

12 unchanged sentences

Operating lease liability 34.7 37.3

Reserve for asbestos claims 78.9 79.0

Other liabilities 63.9 65.0

4 unchanged sentences

shares issued and outstanding:

172,623,478 at September 30, 2023 and 176,876,406 at December 31, 2022

172,868,217 at March 31, 2024 and 172,262,163 at December 31, 2023

Additional paid-in capital 2,845.2 2,847.0

7 unchanged sentences

(in Millions, except share and per share amounts)

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three Months Ended

March 31, 2024 March 31, 2023

Net sales $ 373.8 $ 372.1

4 unchanged sentences

Amortization of intangible assets 14.7 14.7

Income (loss) from operations 60.1 ( 10.1 ) 158.6 87.3

Income from operations 53.2 43.7

Non-operating expense:

Interest expense, net ( 8.8 ) ( 9.6 )

Other income (expense), net ( 2.5 ) 0.6 ( 3.3 ) 0.3

Income (loss) before income taxes 47.7 ( 17.5 ) 125.5 69.6

Other expense, net ( 1.4 ) ( 2.4 )

Income before income taxes 43.0 31.7

Provision for income taxes ( 9.0 ) ( 9.1 )

Net income (loss) from continuing operations 35.2 ( 19.1 ) 90.7 46.7

Net income from continuing operations 34.0 22.6

Income from discontinued operations, net of tax 0.3 0.2

Net income (loss) $ 41.4 $ ( 19.1 ) $ 98.8 $ 47.5

Basic net income (loss) per share:

Net income $ 34.3 $ 22.8

Basic net income per share:

Continuing operations $ 0.20 $ 0.13

Discontinued operations $ 0.04 $ — $ 0.05 $ 0.01

Net income (loss) $ 0.24 $ ( 0.11 ) $ 0.57 $ 0.33

Diluted net income (loss) per share:

Net income $ 0.20 $ 0.13

Diluted net income per share:

Continuing operations $ 0.19 $ 0.13

Discontinued operations $ 0.04 $ — $ 0.05 $ 0.01

Net income (loss) $ 0.24 $ ( 0.11 ) $ 0.56 $ 0.33

Net income $ 0.19 $ 0.13

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

6 unchanged sentences

(in Millions)

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Net income (loss) $ 41.4 $ ( 19.1 ) $ 98.8 $ 47.5

Other comprehensive income (loss):

Three Months Ended

March 31, 2024 March 31, 2023

Net income $ 34.3 $ 22.8

Other comprehensive loss:

Foreign currency translation adjustments ( 2.5 ) ( 0.1 )

Other comprehensive income (loss), net of tax ( 2.1 ) ( 4.1 ) 1.4 ( 4.1 )

Total comprehensive income (loss) $ 39.3 $ ( 23.2 ) $ 100.2 $ 43.4

Other comprehensive loss, net of tax ( 2.5 ) ( 0.1 )

Total comprehensive income $ 31.8 $ 22.7

See notes to the condensed consolidated financial statements.

2 unchanged sentences

(in Millions)

Nine Months Ended

September 30, 2023 September 30, 2022

Three Months Ended

March 31, 2024 March 31, 2023

Operating activities

3 unchanged sentences

Amortization of intangible assets 14.7 14.7

Non-cash asset impairment 2.5 —

Non-cash restructuring charges 5.2 —

Loss on dispositions of long-lived assets 0.2 —

11 unchanged sentences

Expenditures for property, plant and equipment ( 3.7 ) ( 5.2 )

Acquisitions, net of cash acquired — ( 44.8 )

Proceeds from dispositions of long-lived assets 1.6 —

Proceeds from insurance claims 9.0 —

Proceeds associated with divestiture of discontinued operations — 35.0

Cash used for investing activities ( 2.1 ) ( 5.2 )

3 unchanged sentences

Proceeds from exercise of stock options 2.1 0.6

Taxes withheld and paid on employees' share-based payment awards ( 1.9 ) ( 0.5 )

Repurchase of common stock ( 18.9 ) ( 37.0 )

8 unchanged sentences

Notes to Condensed Consolidated Financial Statements

September 30, 2023

March 31, 2024

Basis of Presentation and Significant Accounting Policies

4 unchanged sentences

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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.

On July 1, 2022, Zurn Water Solutions Corporation ("Zurn") completed its combination with Elkay Manufacturing Company (“Elkay”) through the Merger of Elkay with and into a newly created subsidiary of the Company, with Elkay surviving as a wholly owned subsidiary of Zurn Elkay (the “Merger” or "Elkay Transaction").

1 unchanged sentence

See Note 2, Acquisition, for additional information on the Elkay Transaction.

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.

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, hydration, human safety and the environment.

The Company's product portfolio includes professional grade water safety and control products, flow systems 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.

2 unchanged sentences

Reclassifications

Certain prior year amounts have been reclassified to conform to the presentation used for the nine months ended September 30, 2023.

On July 1, 2022, the Company completed the Elkay Merger for a purchase price of $ 1,457.8 million.

Certain prior year amounts have been reclassified to conform to the presentation used for the three months ended March 31, 2024.

Recent Accounting Pronouncements

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.

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.

1 unchanged sentence

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.

During the six months ended June 30, 2023, we completed the final 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.

During the first quarter of 2023, we completed the final 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.

In accordance with the merger agreement, at closing the Company increased the size of its Board of Directors to eleven members and appointed two directors designated by Elkay.

As of September 30, 2023, the Board of Directors consisted of ten members, including one director designated by Elkay.

As of March 31, 2024, the Board of Directors consisted of ten members, including one director designated by Elkay.

Zurn senior management immediately prior to the consummation of the Elkay Merger remained as the executive officers of the Company immediately after the Elkay Merger.

1 unchanged sentence

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 expected to be deductible for tax purposes.

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 values at July 1, 2022, primarily using Level 3 inputs.

24 unchanged sentences

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 nine months ended September 30, 2022 as if the Elkay Merger had occurred on January 1, 2022.

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

(i) additional amortization expense that would have been recognized related to the acquired intangible assets, (ii) additional depreciation expense that would have been recognized related to the acquired property, plant, and equipment, (iii) removing Elkay Merger-Related costs recognized by Elkay during the nine months ended September 30, 2022 as these costs will not affect the combined operations, and (iv) the estimated income tax effect on the pro forma adjustments.

The pro forma financial information excludes adjustments for estimated cost synergies or other effects of the integration of the Elkay Merger.

The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the Elkay Merger been completed as of the date indicated or the results that may be obtained in the future.

Nine Months Ended

September 30, 2022

Net sales $ 1,240.2

Net income from continuing operations $ 71.4

Earnings per share from continuing operations

Assuming dilution $ 0.49

Restructuring and Other Similar Charges

During the three and nine months ended September 30, 2023, the Company continued to execute various restructuring actions.

During the three months ended March 31, 2024, the Company continued to execute various restructuring actions.

These initiatives were implemented to drive efficiencies and reduce operating costs while also modifying the Company's footprint to reflect changes in the markets it serves, the impact of acquisitions, including Elkay, on the Company's overall manufacturing capacity and the refinement of its overall product portfolio.

3 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 charges during the three and nine months ended September 30, 2023 and September 30, 2022, (in millions):

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

The following table summarizes the Company's restructuring and other similar charges during the three months ended March 31, 2024 and March 31, 2023, (in millions):

Three Months Ended

March 31, 2024 March 31, 2023

Employee termination benefits $ 0.2 $ 0.9

Contract termination and other associated costs 6.1 1.0

Total restructuring and other similar costs $ 2.2 $ 11.7 $ 11.9 $ 13.1

The following table summarizes the activity in the Company's restructuring accrual for the nine months ended September 30, 2023 (in millions):

Total restructuring and other similar charges $ 6.3 $ 1.9

The following table summarizes the activity in the Company's restructuring accrual for the three months ended March 31, 2024 (in millions):

Employee termination benefits Contract termination and other associated costs Total

3 unchanged sentences

Non-cash charges (2) — ( 5.2 ) ( 5.2 )

Accrued Restructuring Costs, September 30, 2023 (1) $ 2.0 $ 0.2 $ 2.2

Accrued restructuring costs, March 31, 2024 (1) $ 0.3 $ 0.8 $ 1.1

____________________

(1) As of September 30, 2023, the restructuring accrual is included in other current liabilities in the condensed 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 condensed consolidated balance sheets.

(2) Non-cash charges consist of asset impairments based on Level 3 inputs.

(1) As of March 31, 2024 and December 31, 2023, the restructuring accrual is included in other current liabilities in the condensed consolidated balance sheets.

(2) Non-cash charges consist primarily of asset impairments based on Level 3 inputs.

Discontinued Operations

1 unchanged sentence

(“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.

The operating results of PMC are reported as discontinued operations in the condensed 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 condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and September 30, 2022 have not been adjusted to separately disclose cash flows related to the discontinued operations.

During 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.

The major components of the Income from discontinued operations, net of tax presented in the condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and September 30, 2022, are as follows (in millions):

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Selling, general and administrative expenses (1) $ 6.6 $ — $ 8.4 $ —

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 condensed consolidated statements of cash flows for the three months ended March 31, 2024 and March 31, 2023 have not been adjusted to separately disclose cash flows related to the discontinued operations.

The major components of the Income from discontinued operations, net of tax presented in the condensed consolidated statements of operations for the three months ended March 31, 2024 and March 31, 2023, are as follows (in millions):

Three Months Ended

March 31, 2024 March 31, 2023

Income from discontinued operations before income tax — —

Income tax (expense) benefit ( 0.4 ) — ( 0.3 ) 0.8

Income tax benefit 0.3 0.2

Income from discontinued operations, net of tax $ 0.3 $ 0.2

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

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):

Nine Months Ended

September 30, 2023 September 30, 2022

Proceeds associated with divestiture of discontinued operations $ — $ 35.0

Revenue Recognition

15 unchanged sentences

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

Three Months Ended Nine Months Ended

Customer Type September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three Months Ended

Customer Type March 31, 2024 March 31, 2023

Institutional $ 178.3 $ 167.9

2 unchanged sentences

Total $ 373.8 $ 372.1

Three Months Ended Nine Months Ended

Geography September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three Months Ended

Geography March 31, 2024 March 31, 2023

United States $ 341.2 $ 344.5

9 unchanged sentences

A contract liability exists when the Company has received consideration or the amount is due from the customer in advance of revenue recognition.

Contract liabilities and contract assets as of September 30, 2023 and December 31, 2022 were not material.

The Company had backlog of $ 45.8 million as of September 30, 2023, which represents the most likely amount of consideration expected to be received in satisfying the remaining backlog under open contracts.

The Company has elected to use the optional exemption provided by ASC 606-10-50-14A for variable consideration, and has not included estimated rebates in the amount of unsatisfied performance obligations.

The Company expects to recognize approximately 95 % of the backlog in the remaining three months of the year ending December 31, 2023, and the remaining approximately 5 % in 2024 and beyond.

Contract liabilities and contract assets as of March 31, 2024 and December 31, 2023 were not material.

The Company had backlog of $ 50.4 million as of March 31, 2024, which represents the most likely amount of consideration expected to be received in satisfying the remaining backlog under open contracts.

The Company utilizes the optional exemption provided by ASC 606-10-50-14A for variable consideration, and has not included estimated rebates in the amount of unsatisfied performance obligations.

The Company expects to recognize approximately 99 % of the backlog in the remaining nine months of the year ending December 31, 2024, and the remaining approximately 1 % in 2025 and beyond.

Timing of Performance Obligations Satisfied at a Point in Time

9 unchanged sentences

If the amortization period of these costs is expected to be greater than one year, the costs would be subject to capitalization.

As of September 30, 2023 and December 31, 2022, the contract assets capitalized, as well as amortization recognized in the three and nine months ended September 30, 2023 and September 30, 2022, are not significant and no impairment losses were recognized.

As of March 31, 2024 and December 31, 2023, the contract assets capitalized, as well as amortization recognized in the three months ended March 31, 2024 and March 31, 2023, are not significant and no impairment losses were recognized.

Allowance for Credit Losses

7 unchanged sentences

federal statutory rate, state tax rates in the jurisdictions where the Company does business and the Company's ability to utilize various tax credits, capital loss and net operating loss (“NOL”) 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 December 20, 2022, the OECD issued various administrative guidance including transitional safe harbor rules available in conjunction with the implementation of the Pillar 2 global minimum tax.

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.

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.

As of March 31, 2024, the Company has determined that no accrual is currently required for Top-Up Taxes.

The Company regularly reviews its deferred tax assets for recoverability and valuation allowances are established based on historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences, as deemed appropriate.

In addition, all other available positive and negative evidence is taken into consideration for purposes of determining the proper balances of such valuation allowances.

In addition, all other available positive and negative evidence is taken into consideration for the purpose of determining the proper balances of such valuation allowances.

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

federal and state capital loss carryforwards and 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.

Future changes to the balances of these valuation allowances, as a result of this continued review and analysis by the Company, could impact the financial statements for such period of change.

The income tax provision was $ 12.5 million for the three months ended September 30, 2023, compared to $ 1.6 million for the three months ended September 30, 2022.

The effective income tax rate for the three months ended September 30, 2023 was 26.2 % versus ( 9.1 )% for the three months ended September 30, 2022.

The effective income tax rate for the three months ended September 30, 2023 was above the U.S.

federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S.

federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments.

The income tax provision recognized on the loss from operations for the three months ended September 30, 2022 was primarily due to non-deductible transactions costs associated with the Merger, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S.

federal statutory rate, partially offset by the reduction in the valuation allowance associated with certain state NOL carryforwards.

The income tax provision was $ 34.8 million for the nine months ended September 30, 2023, compared to $ 22.9 million for the nine months ended September 30, 2022.

The effective income tax rate for the nine months ended September 30, 2023 was 27.7 % versus 32.9 % for the nine months ended September 30, 2022.

The effective income tax rate for the nine months ended September 30, 2023 was above the U.S.

The income tax provision was $ 9.0 million for the three months ended March 31, 2024, compared to $ 9.1 million for the three months ended March 31, 2023.

The effective income tax rate for the three months ended March 31, 2024 was 20.9 % versus 28.7 % for the three months ended March 31, 2023.

The effective income tax rate for the three months ended March 31, 2024 was slightly below the U.S.

federal statutory rate of 21% primarily as the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S.

federal statutory rate, was effectively offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and income tax benefits associated with share-based payments.

The effective income tax rate for the three months ended March 31, 2023 was above the U.S.

federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments.

The effective income tax rate for the nine months ended September 30, 2022 was above the U.S.

federal statutory rate of 21% primarily due to non-deductible transactions costs associated with the Merger, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S.

federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments and the reduction in the valuation allowance associated with certain state NOL carryforwards.

The Company’s total liability for net unrecognized tax benefits as of September 30, 2023 and December 31, 2022 was $ 5.5 million.

federal statutory rate, partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations.

The Company’s total liability for net unrecognized tax benefits as of March 31, 2024 and December 31, 2023 was $ 3.5 million and $ 5.6 million, respectively.

The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in income tax expense.

As of September 30, 2023 and December 31, 2022, the total amount of unrecognized tax benefits includes gross accrued interest and penalties of $ 1.0 million and $ 0.7 million, respectively.

The Company recognized $ 0.3 million and $ 0.0 million of net interest and penalties as income tax expense during the nine months ended September 30, 2023 and September 30, 2022, respectively.

As of March 31, 2024 and December 31, 2023, the total amount of unrecognized tax benefits includes gross accrued interest and penalties of $ 0.7 million and $ 1.1 million, respectively.

The Company recognized $( 0.3 ) million and $ 0.1 million of net interest and penalties as income tax (benefit) expense during the three months ended March 31, 2024 and March 31, 2023, respectively.

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

7 unchanged sentences

With certain exceptions, the Company is no longer subject to U.S.

federal income tax examinations for tax years ending prior to March 31, 2020, state and local income tax examinations for years ending prior to March 31, 2019 or significant foreign income tax examinations for years ending prior to March 31, 2018.

federal income tax examinations for tax years ending prior to December 31, 2020, state and local income tax examinations for years ending prior to March 31, 2020 or significant foreign income tax examinations for years ending prior to March 31, 2019.

Earnings per Share

1 unchanged sentence

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 three and nine months ended September 30, 2023 excludes 0.3 million shares due to their anti-dilutive effects.

The computation for diluted net income per share for the three and nine months ended September 30, 2022 excludes 2.3 million and 0.8 million shares due to their anti-dilutive effects, respectively.

The computation for diluted net income per share for the three months ended March 31, 2024 and March 31, 2023 excludes 0.5 million and 1.2 million shares due to their anti-dilutive effects, respectively.

Stockholders' Equity

5 unchanged sentences

Proceeds from exercise of stock options — 0.6 — — 0.6

Taxes withheld and paid on employees' share-based payment awards — ( 0.5 ) — — ( 0.5 )

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

Common stock dividends ($ 0.03 per share)

— ( 3.8 ) — — ( 3.8 )

Balance at March 31, 2022 $ 1.3 $ 1,437.0 $ ( 1,171.7 ) $ ( 72.9 ) $ 193.7

Total comprehensive income (loss) — — 36.4 ( 2.0 ) 34.4

Stock-based compensation expense — 3.8 — — 3.8

Proceeds from exercise of stock options — 1.3 — — 1.3

Common stock dividends ($ 0.03 per share)

— ( 3.8 ) — — ( 3.8 )

Balance at June 30, 2022 $ 1.3 $ 1,438.3 $ ( 1,135.3 ) $ ( 74.9 ) $ 229.4

Total comprehensive loss — — ( 19.1 ) ( 4.1 ) ( 23.2 )

Stock-based compensation expense — 7.8 — — 7.8

Proceeds from exercise of stock options — 0.1 — — 0.1

Repurchase of common stock — — ( 37.0 ) — ( 37.0 )

Elkay Merger (2) — ( 5.1 ) — — ( 5.1 )

Common stock issued to fund defined contribution plans — 0.8 — — 0.8

Common stock dividends ($ 0.07 per share)

— ( 8.7 ) — — ( 8.7 )

Balance at September 30, 2022 $ 1.8 $ 2,850.2 $ ( 1,154.4 ) $ ( 79.0 ) $ 1,618.6

Balance at March 31, 2023 $ 1.8 $ 2,851.9 $ ( 1,179.1 ) $ ( 75.1 ) $ 1,599.5

Common stock (1) Additional

4 unchanged sentences

Balance at December 31, 2023 $ 1.7 $ 2,847.0 $ ( 1,178.2 ) $ ( 67.7 ) $ 1,602.8

Total comprehensive income (loss) — — 22.8 ( 0.1 ) 22.7

Stock-based compensation expense — 11.2 — — 11.2

Proceeds from exercise of stock options — 0.6 — — 0.6

Elkay Merger (2) — ( 5.1 ) — — ( 5.1 )

Common stock issued to fund defined contribution plans — 0.8 — — 0.8

Repurchase of common stock — — ( 37.0 ) — ( 37.0 )

Common stock dividends ($ 0.07 per share)

— ( 8.7 ) — — ( 8.7 )

Balance at March 31, 2023 $ 1.8 $ 2,851.9 $ ( 1,179.1 ) $ ( 75.1 ) $ 1,599.5

Total comprehensive income — — 34.3 ( 2.5 ) 31.8

4 unchanged sentences

— ( 13.9 ) — — ( 13.9 )

Balance at June 30, 2023 $ 1.7 $ 2,853.7 $ ( 1,195.3 ) $ ( 71.5 ) $ 1,588.6

Total comprehensive income (loss) — — 41.4 ( 2.1 ) 39.3

Stock-based compensation expense — 10.0 — — 10.0

Proceeds from exercise of stock options — 0.7 — — 0.7

Taxes withheld and paid on employees' share-based payment awards — ( 1.9 ) — — ( 1.9 )

Repurchase of common stock — — ( 13.0 ) — ( 13.0 )

Common stock dividends ($ 0.07 per share)

— ( 12.1 ) — — ( 12.1 )

Balance at September 30, 2023 $ 1.7 $ 2,850.4 $ ( 1,166.9 ) $ ( 73.6 ) $ 1,611.6

Balance at March 31, 2024 $ 1.7 $ 2,845.2 $ ( 1,162.8 ) $ ( 70.2 ) $ 1,613.9

____________________

(1) During the three and nine months ended September 30, 2023, the Company issued 135,502 and 462,738 shares of common stock, respectively, upon the exercise of stock options, vesting of restricted stock units, and for other common stock issuances.

During the three and nine months ended September 30, 2022, the Company issued 51,577,307 and 52,039,485 shares of common stock, respectively, upon the exercise of stock options, vesting of restricted stock units, the Elkay Merger, and for other common stock issuances.

(2) During the nine months ended September 30, 2023, 186,020 of the shares issued at closing of the Elkay Merger were returned to the Company as a result of lower working capital and cash balances at closing compared to targets stipulated in the Merger Agreement.

(1) During the three months ended March 31, 2024 and March 31, 2023, the Company issued 1,226,898 and 156,319 shares of common stock, upon the exercise of stock options, vesting of restricted stock units and performance stock units, and for other common stock issuances, respectively.

(2) During the three months ended March 31, 2023, 186,020 of the shares issued at closing of the Elkay Merger were returned 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.

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however, the program will continue until the maximum amount of dollars authorized have been expended or until it is modified or terminated by the Board of Directors.

During the three months ended September 30, 2023, the Company repurchased 444,606 shares of common stock at a total cost of $ 13.0 million at a weighted average price of $ 29.24 per share.

During the nine months ended September 30, 2023, the Company repurchased 4,434,475 shares of common stock at a total cost of $ 100.1 million at a weighted average price of $ 22.55 per share.

During the three months ended March 31, 2024, the Company repurchased 620,844 shares of common stock at a total cost of $ 18.9 million at a weighted average price of $ 30.41 per share.

During the three months ended March 31, 2023, the Company repurchased 1,682,756 shares of common stock at a total cost of $ 37.0 million at a weighted average price of $ 21.99 per share.

The repurchased shares were canceled by the Company upon receipt.

During the three and nine months ended September 30, 2022, the Company did no t repurchase any shares of common stock.

Approximately $ 415.5 million of the existing authority remained under the Repurchase Program at September 30, 2023.

Approximately $ 371.6 million of the existing authority remained under the Repurchase Program at March 31, 2024.

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2023, are as follows (in millions):

The changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2024, are as follows (in millions):

Foreign Currency Translation and Other Pension and Postretirement Plans Total

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Net current period other comprehensive income ( 2.5 ) — ( 2.5 )

Balance at September 30, 2023 $ ( 73.7 ) $ 0.1 $ ( 73.6 )

There were no amounts reclassified from accumulated other comprehensive loss to net income during the three and nine months ended September 30, 2023 and 2022.

Balance at March 31, 2024 $ ( 74.0 ) $ 3.8 $ ( 70.2 )

There were no amounts reclassified from accumulated other comprehensive loss to net income during the three months ended March 31, 2024 and 2023.

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Finished goods $ 233.3 $ 224.8

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Goodwill and Intangible Assets

The changes in the net carrying value of goodwill for the nine months ended September 30, 2023, are presented below (in millions):

The changes in the net carrying value of goodwill for the three months ended March 31, 2024, are presented below (in millions):

Net carrying amount as of December 31, 2023 $ 796.0

Currency translation adjustments ( 1.7 )

Purchase accounting adjustments (1) 19.0

Net carrying amount as of September 30, 2023 $ 795.3

(1) Refer to Note 2, Acquisition for additional information regarding the acquisition.

The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of September 30, 2023 and December 31, 2022 are as follows (in millions):

September 30, 2023

Net carrying amount as of March 31, 2024 $ 794.3

The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of March 31, 2024 and December 31, 2023 are as follows (in millions):

March 31, 2024

Weighted Average Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount

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Total intangible assets, net 16 years $ 1,340.7 $ ( 388.3 ) $ 952.4

Intangible asset amortization expense totaled $ 14.7 million and $ 14.5 million for the three months ended September 30, 2023 and September 30, 2022, respectively.

Intangible asset amortization expense totaled $ 44.0 million and $ 19.1 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

The Company expects to recognize amortization expense on the intangible assets subject to amortization of $ 58.7 million in the year ending December 31, 2023 (inclusive of the $ 44.0 million of amortization expense recognized in the nine months ended September 30, 2023), $ 58.7 million in 2024, $ 58.7 million in 2025, $ 58.5 million in 2026, $ 58.5 million in 2027 and $ 58.5 million in 2028.

Intangible asset amortization expense totaled $ 14.7 million and $ 14.7 million for the three months ended March 31, 2024 and March 31, 2023, respectively.

The Company expects to recognize amortization expense on the intangible assets subject to amortization of $ 58.7 million in the year ending December 31, 2024 (inclusive of the $ 14.7 million of amortization expense recognized in the three months ended March 31, 2024), $ 58.7 million in 2025, $ 58.5 million in 2026, $ 58.5 million in 2027, $ 58.5 million in 2028 and $ 58.5 million in 2029.

Other Current Liabilities

Other current liabilities are summarized as follows (in millions):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Commissions $ 11.2 $ 8.6

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Income taxes payable 3.4 3.5

Legal and environmental 0.9 2.3

Professional fees 1.1 0.6

Product warranty (1) 4.7 4.7

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____________________

(1) See more information related to the product warranty obligations within Note 15, Commitments and Contingencies.

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

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

(1) See more information related to the product warranty obligations balance within Note 15, Commitments and Contingencies.

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

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

Long-Term Debt

Long-term debt is summarized as follows (in millions):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Term loan (1) $ 473.9 $ 473.6

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____________________

(1) Includes unamortized debt issuance costs of $ 8.0 million and $ 9.2 million at September 30, 2023 and December 31, 2022, respectively.

(1) Includes unamortized debt issuance costs of $ 6.4 million and $ 6.8 million at March 31, 2024 and December 31, 2023, respectively.

Senior Secured Credit Facility

On October 4, 2021, ZBS Global, Inc.

(“Holdings”), Zurn Holdings, Inc., Zurn LLC (together, the “Original Borrowers”), the lenders from time to time party thereto, and Credit Suisse AG, Cayman Islands Branch, as administrative agent for the lenders (in such capacity, the “Administrative Agent”) entered into a Fourth Amended and Restated First Lien Credit Agreement, which was amended by that certain Amendment No.

1 to Fourth Amended and Restated First Lien Credit Agreement dated as of July 1, 2022 (the "Amendment") (as so amended, the “Credit Agreement”).

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1 dated as of July 1, 2022, executed by Elkay and its domestic subsidiaries, and certain other collateral documents.

The Credit Agreement contains representations, warranties, covenants and events of default, including, without limitation, a financial covenant under which the Borrowers are, if certain conditions are met, obligated to maintain on a consolidated basis, as of the end of each fiscal quarter, a certain maximum Net First Lien Leverage Ratio (as defined in the

Credit Agreement).

As of September 30, 2023, the Borrowers were in compliance with all applicable covenants under the Credit Agreement.

As of March 31, 2024, the Borrowers were in compliance with all applicable covenants under the Credit Agreement.

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 a $ 625 million term loan, together with accrued interest thereon, (ii) redeem the $ 500 million of outstanding principal amount of the 4.875 % notes, and (iii) pay related fees and expenses.

In October 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.

The Borrowers are 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, quarterly principal payments 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.

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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 1.26 to 1.00 as of September 30, 2023, and therefore the applicable margin is 2.00 %.

The Borrowers’ Net First Lien Leverage Ratio was 1.06 to 1.00 as of March 31, 2024, and therefore the applicable margin 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 September 30, 2023 and for the nine months then ended, the borrowings under the Term Loan had weighted-average effective interest rates of 7.43 % and 6.97 %, respectively.

On October 11, 2023 the Company made a voluntary principal repayment of the Term Loan in the amount of $ 60.0 million.

At March 31, 2024 and for the three months then ended, the borrowings under the Term Loan had weighted-average effective interest rates of 7.41 % and 7.45 %, respectively.

Revolving Credit Facility

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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 1.26 to 1.00 as of September 30, 2023.

The Borrowers’ Net First Lien Leverage Ratio was 1.06 to 1.00 as of March 31, 2024.

The Borrowers are also required to pay a quarterly commitment fee on the average daily unused portion of the Revolving Credit Facility for each fiscal quarter and fees in connection with the issuance of letters of credit.

1 unchanged sentence

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 September 30, 2023 and December 31, 2022, there were no amounts borrowed under the Revolving Credit Facility.

As of September 30, 2023 and December 31, 2022, $ 5.8 million and $ 7.5 million of the Revolving Credit Facility was considered utilized in connection with outstanding letters of credit, respectively.

At March 31, 2024 and December 31, 2023, there were no amounts borrowed under the Revolving Credit Facility.

As of March 31, 2024 and December 31, 2023, $ 11.2 million and $ 11.0 million of the Revolving Credit Facility was considered utilized in connection with outstanding letters of credit, respectively.

Finance Leases

At September 30, 2023 and December 31, 2022, the Company had finance lease obligations of $ 21.8 million and $ 0.6 million, respectively.

At March 31, 2024 and December 31, 2023, the Company had finance lease obligations of $ 21.5 million and $ 21.7 million, respectively.

Fair Value Measurements

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

participants.

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

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Deferred compensation plan liabilities are classified within other liabilities on the condensed consolidated balance sheets.

The following table provides a summary of the Company's assets and liabilities that were recognized at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 (in millions):

Fair Value as of September 30, 2023

The following table provides a summary of the Company's assets and liabilities that were recognized at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 (in millions):

Fair Value as of March 31, 2024

Level 1 Level 2 Level 3 Total

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Deferred compensation plan liabilities 14.7 — — 14.7

There were no transfers of assets between levels at September 30, 2023 and December 31, 2022, respectively.

There were no transfers of assets between levels at March 31, 2024 and December 31, 2023, respectively.

Fair Value of Non-Derivative Financial Instruments

The carrying amounts of cash, receivables, payables and accrued liabilities approximated fair value at September 30, 2023 and December 31, 2022, due to the short-term nature of those instruments.

The fair value of long-term debt as of September 30, 2023 and December 31, 2022, was approximately $ 562.2 million and $ 543.1 million, respectively.

The carrying amounts of cash, receivables, payables and accrued liabilities approximated fair value at March 31, 2024 and December 31, 2023, due to the short-term nature of those instruments.

The fair value of long-term debt as of March 31, 2024 and December 31, 2023, was approximately $ 503.7 million and $ 503.9 million, respectively.

The fair value is based on quoted market prices for the same instruments.

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The following table presents changes in the Company’s product warranty liability (in millions):

Nine Months Ended

September 30, 2023 September 30, 2022

Three Months Ended

March 31, 2024 March 31, 2023

Balance at beginning of period $ 4.7 $ 4.2

Acquired obligations — 3.4

Charged to operations 0.4 0.5

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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 September 30, 2023, Zurn and numerous other unrelated companies were defendants in approximately 6,000 asbestos related lawsuits representing approximately 7,500 claims.

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

Zurn did not manufacture asbestos or asbestos components.

Instead, Zurn purchased them from suppliers.

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

As of September 30, 2023, 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 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 condensed consolidated balance sheets.

Management estimates that the available insurance to cover this ten year estimated potential asbestos liability as of September 30, 2023 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.

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

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 condensed consolidated balance sheets.

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.

Retirement Benefits

The components of net periodic (benefit) cost are as follows (in millions):

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Three Months Ended

March 31, 2024 March 31, 2023

Pension Benefits:

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The Company recognizes the net actuarial gains or losses in excess of the corridor in operating results during the final quarter of each fiscal year (or upon any required re-measurement event).

During the nine months ended September 30, 2023 and September 30, 2022, the Company made contributions of $ 0.2 million and $ 1.0 million, respectively, to its U.S.

During the three months ended March 31, 2024, the Company did not make any contributions to its U.S.

qualified pension plan trusts.

During the three months ended March 31, 2023, the Company made contributions of $ 0.1 million to its U.S.

qualified pension plan trusts.

See Note 15, Retirement Benefits, to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for further information regarding retirement benefits.

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The Zurn Elkay Water Solutions Corporation Performance Incentive Plan (the "Plan") is utilized to provide performance incentives to the Company's officers, employees, directors and certain others by permitting grants of equity awards (for common stock), as well as performance-based cash awards, to such persons to encourage them to maximize the Company's performance and create value for the Company's stockholders.

For the three months ended September 30, 2023 and September 30, 2022, the Company recognized $ 10.0 million and $ 7.8 million of stock-based compensation expense, respectively.

For the nine months ended September 30, 2023 and September 30, 2022, the Company recognized $ 30.5 million and $ 15.5 million of stock-based compensation expense, respectively.

During the nine months ended September 30, 2023, the Company granted the following stock options, restricted stock units, performance stock units and common stock to directors, executive officers, and certain other employees:

For the three months ended March 31, 2024 and March 31, 2023, the Company recognized $ 10.0 million and $ 10.3 million of stock-based compensation expense, respectively.

During the three months ended March 31, 2024, the Company granted the following stock options, restricted stock units, performance stock units, and common stock to directors, executive officers, and certain other employees:

Award Type Number of Awards Weighted Average Grant-Date Fair Value

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See Note 14, Stock-Based Compensation, to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, for further information regarding stock-based compensation.

Subsequent Events

On October 19, 2023, the Company's Board of Directors declared a quarterly cash dividend on the Company's common stock of $ 0.08 per-share to be paid on December 7, 2023, to stockholders of record as of November 20, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements