What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2026-02-09 compared with 2025-02-10 · 53 added, 79 removed, 222 unchanged (37% of the section changed)

25 unchanged sentences

We cannot provide assurance that we will be able to maintain or increase the current market share of our products successfully in the future.

If we are unable to effectively manage risks associated with changing technology, product innovation and new product development, manufacturing techniques, distribution channels and business continuity, we may be at a competitive disadvantage.

If we are unable to effectively manage risks associated with changing technology, including artificial intelligence, product innovation and new product development, manufacturing techniques, distribution channels and business continuity, we may be at a competitive disadvantage.

The successful implementation of our business strategy requires us to continuously evolve our existing products and introduce new products to meet customers' needs in the industries we serve.

1 unchanged sentence

If we fail to meet these requirements, our business and ability to compete effectively could suffer.

We believe our customers rigorously evaluate their suppliers on a number of factors, including product quality, price competitiveness, technical and manufacturing expertise, development and product design capability, new product innovation, reliability and timeliness of delivery, operational flexibility, customer service and overall management.

We believe our customers rigorously evaluate their suppliers on numerous factors, including product quality, price competitiveness, technical and manufacturing expertise, development and product design capability, new product innovation, reliability and timeliness of delivery, operational flexibility, customer service and overall management.

Our ongoing success depends on our ability to continue to meet our customers' changing specifications with respect to these criteria.

We cannot ensure that we will be able to address technological advances or introduce new products that may be necessary to remain competitive within our businesses.

Further, such new

products and technologies may create additional exposure or risk.

We cannot ensure that we will be able to introduce new products that may be necessary to remain competitive within our businesses or to effectively adopt technological advances, including use of artificial intelligence, related to our products or operational processes.

If our competitors successfully leverage artificial intelligence, including generative artificial intelligence and machine learning to enhance efficiency, improve customer experience, or accelerate innovation more quickly or more successfully than us, this could affect our competitive position, profitability and results of operations.

Further, such new products and technologies may create additional exposure or risk.

In addition, there is potential for the misuse of artificial intelligence and machine-learning technology by our personnel while carrying out their responsibilities.

The deployment of generative artificial intelligence tools also creates opportunities for the misuse or loss of data, the inadvertent dissemination of our confidential or proprietary information or the inadvertent use of third parties' intellectual property.

We cannot ensure that we can adequately protect our own technological developments to produce a sustainable competitive advantage.

Furthermore, we may be subject to business continuity risk in the event of an unexpected loss of a material facility or operation.

Furthermore, we may be subject to business continuity risk in the event of an unexpected loss at a material facility or operation.

We cannot ensure adequate insurance protection against such a loss.

We may be unable to realize intended benefits from our ongoing Supply Chain Optimization and Footprint Repositioning initiatives, restructuring and divestiture efforts, and as a result our profitability or our business otherwise might be adversely affected.

To operate more efficiently, control costs and refine our business focus, we periodically undertake restructuring plans, which can include facility consolidations, product rationalizations, workforce reductions and other cost reduction initiatives.

We also periodically choose to divest operations or product lines that we no longer believe are additive or complementary to our business or strategic direction.

10 unchanged sentences

Additionally, dispositions or liabilities retained in connection with dispositions could negatively affect us.

Acquisitions, mergers and other business combinations are part of our growth strategy, and we have completed several in the last few years.

Acquisitions, mergers and other business combinations are part of our growth strategy, and we have completed several in recent years.

We also sell or divest businesses, products and technologies from time to time.

3 unchanged sentences

Acquisitions involve risks, including the possible inability to integrate an acquired business into our operations, potential failure to realize anticipated benefits, diversion of management's attention, issues in customer transitions, potential inadequacies of indemnities and other contractual remedies and unanticipated problems, risks or liabilities, including environmental, some or all of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Refer to Risks Related to the Merger with Elkay section below for additional considerations.

If dispositions are not completed in a timely manner, there may be a negative effect on our cash flows and/or our ability to execute our strategy.

2 unchanged sentences

With respect to some of these former businesses, we may contractually agree to indemnify the counterparties against, or otherwise retain, certain liabilities, including, certain lawsuits, tax liabilities, product liability claims, and environmental matters.

Even without ongoing contractual indemnification obligations, we could be exposed to liabilities arising out of the businesses for certain activities prior to the divestitures.

Even without ongoing contractual indemnification obligations, we could be exposed to liabilities arising out of the businesses for certain activities prior to the

divestitures.

In addition, certain of the counterparties to those divestitures and/or the divested businesses have agreed to indemnify us or assume certain liabilities relating to those divestitures.

1 unchanged sentence

Third parties also could seek to hold us responsible for any of the liabilities that a counterparty or divested business agreed to assume.

Even if we ultimately succeed in recovering any amounts for which we were initially held liable, we may be temporarily required to bear these losses ourselves.

Even if we ultimately succeed in recovering any amounts for which we were initially held liable, we may be temporarily required to bear these losses.

The loss or financial instability of any significant customer or customers accounting for our backlog could adversely affect our business, financial condition, results of operations or cash flows.

7 unchanged sentences

Termination of one or more of our relationships with any of our key independent distributors and / or a substantial number of independent representatives could have a material adverse effect on our business, financial condition, results of operations or cash flows.

We depend on 1,100 independent sales representatives and approximately 65 third-party warehouses to distribute our products.

We depend on approximately 1,000 independent sales representatives within North America, and approximately 65 third-party warehouses to distribute our products.

In fiscal 2025, our three largest independent distributors generated approximately 32% of our consolidated net sales with the largest accounting for 18% of consolidated net sales.

15 unchanged sentences

or other countries, inefficiencies in the event of a need to change our suppliers, and delays in the delivery of and potential unavailability of our raw materials.

In 2025, the U.S.

government announced additional tariffs on goods imported from various countries into the U.S., and in response, certain of those countries countered with reciprocal tariffs and other actions.

government continues to negotiate with countries regarding tariffs and other trade actions.

Also, trade wars or outbreaks of infectious diseases, could impact the cost or availability of goods or materials, both imported and domestic, or adversely affect demand for our products.

4 unchanged sentences

We do not typically enter into hedge transactions to reduce our exposure to purchase price risks and cannot ensure that we would be successful in recouping any increases if these risks were to materialize.

In addition, if we are unable to continue to purchase our required quantities of raw materials on commercially reasonable terms, or at all, or if we are unable to maintain or

enter into new purchase contracts for our larger commodities, our business operations could be disrupted and our profitability could be adversely impacted.

In addition, if we are unable to continue to purchase our required quantities of raw materials on commercially reasonable terms, or at all, or if we are unable to maintain or enter into new purchase contracts for our larger commodities, our business operations could be disrupted and our profitability could be adversely impacted.

The ongoing updates to our Enterprise Resource Planning ("ERP") systems, as well as failures of our data security and information technology infrastructure, cybersecurity breaches or misuse of artificial intelligence tools, could cause substantial business interruptions and adversely affect our business.

10 unchanged sentences

While we have taken steps to maintain and enhance our cybersecurity by implementing additional security technologies, internal controls, network and data center resiliency, redundancy and disaster recovery processes and backup systems, upgrading our remote work environment and by obtaining insurance coverage, these measures may be inadequate and our technology systems could be vulnerable to disability, failures or unauthorized access.

Furthermore, continued geopolitical turmoil, including the Russia-Ukraine conflict, has heightened the risk of cyberattacks.

Furthermore, continued geopolitical turmoil has heightened the risk of cyberattacks.

As discussed further below, the rapid evolution and increased adoption of artificial intelligence and machine learning technologies may intensify our cybersecurity risks.

2 unchanged sentences

We are also subject to an increasing number of evolving data privacy and security laws and regulations that impose requirements on us.

We collect, store, access and otherwise process various types of confidential or sensitive data, including proprietary business information, personal data and other information that is subject to privacy and security laws, regulations and/or customer-imposed controls.

and/or customer-imposed controls.

Failure to comply with such laws and regulations could result in the imposition of fines, penalties and other costs.

27 unchanged sentences

This disruption of our employees, distributors, suppliers and customers may impact our sales and future operating results.

The unpredictable ebbing and flowing of new infectious diseases worldwide may continue to adversely impact our business, operations, suppliers and customers for the foreseeable future.

Equally unpredictable are the responses of national and local governments and health authorities in affected regions to reduce community spread and protect employees, which may include mandatory shutdowns or limitations on all or certain types of business operations.

The unpredictable nature of new infectious diseases worldwide may continue to adversely impact our business, operations, suppliers and customers for the foreseeable future.

Equally unpredictable are the responses of national and local governments and health authorities in affected regions to reduce community spread and protect employees, which may include

mandatory shutdowns or limitations on all or certain types of business operations.

The ultimate impact of an infectious disease outbreak on our business depends on the severity, location and duration of outbreaks, and the actions of government and health officials in response to the outbreaks, none of which is predictable at this time.

7 unchanged sentences

Financial Risks

Our debt levels could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, inhibit us from making beneficial acquisitions, adversely impact our ability to

implement our capital allocation strategy and prevent us from making debt service payments.

Macroeconomic conditions and our credit agreement could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, inhibit us from making beneficial acquisitions, adversely impact our ability to implement our capital allocation strategy and prevent us from making debt service payments.

In addition, changing or increasing interest rates, including the rates under our debt agreements, could adversely affect our business or financial condition.

5 unchanged sentences

Our indebtedness could also have other important consequences with respect to our ability to manage and grow our business successfully.

We amended our credit facilities to switch from eurodollar loans based on LIBOR to term Secured Overnight Financing Rate (“SOFR”) loans.

SOFR is a relatively new reference rate, and its composition and characteristics are not the same as LIBOR.

It is not possible to predict what effect the change to SOFR may have on our interest rates.

As indicated above, SOFR is a relatively new reference rate.

Any failure of SOFR to gain market acceptance could cause it to be modified or discontinued.

Our current credit facilities provide a mechanism for determining an alternative rate of interest upon the occurrence of certain events related to the discontinuance of SOFR.

The change to SOFR or transition to other alternative rates, whether in connection with borrowings under the current credit facilities, or borrowings under replacement facilities or lines of credit, could expose our future borrowings to less favorable rates.

If the change to SOFR, or other alternative rates, results in increased alternative interest rates or if our lenders have increased costs due to such phase out or changes, then our debt that uses benchmark rates could be affected and, in turn, our cash flows and interest expense could be adversely impacted.

Also, in spite of the limitations in our credit agreement, we may still incur significantly more debt, which could intensify the risks described above on our business, results and financial condition.

11 unchanged sentences

These agreements contain covenants that restrict our ability to take certain actions, such as incurring additional debt, if we are unable to meet defined specified financial ratios, which could result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions.

Failure to comply with certain covenants in these agreements could result in a default.

Failure to comply with certain covenants in

these agreements could result in a default.

For more information, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.

14 unchanged sentences

Any determination requiring the impairment of goodwill or intangible assets would negatively affect our results of operations, particularly in the period in which we record any related charges, and financial condition.

Refer to Risks Related to the Merger with Elkay section below for additional considerations.

Our required cash contributions to our pension plans may increase further and we could experience a material change in the funded status of our defined benefit pension plans and the amount recorded in our consolidated balance sheets related to those plans.

Additionally, our pension costs could increase in future years.

Our required cash contributions or plan settlement expense related to our pension plans may increase and we could experience a change in the funded status of our defined benefit pension plans and the amount recorded in our consolidated balance sheets related to those plans.

Additionally, pension costs could increase in future years.

In 2025, the Company terminated its U.S.

defined benefit pension plan (the "Pension Plan").

The plan termination is subject to regulatory review and requirements, which may result in additional funding.

See Item 8, Note 14, Retirement Benefits for additional details.

In addition, the Company still maintains other domestic and international (statutory) defined benefit plans.

The funded status of the defined benefit pension plans depends on such factors as asset returns, market interest rates, legislative changes and funding regulations.

If the returns on the assets of any of our plans were to decline in future periods, if market interest rates were to decline, if the Pension Benefit Guaranty Corporation ("PBGC") were to require additional contributions to any such plans as a result of acquisitions or if other actuarial assumptions were to be modified, our future required cash contributions and pension costs to such plans could increase.

Any such increases could have a material and adverse effect on our business, financial condition, results of operations or cash flows.

The need to make contributions, which may be substantial, to such plans may reduce the cash available to meet our other obligations, including our obligations under our borrowing arrangements or to meet the needs of our business.

In addition, the PBGC may terminate our U.S.

defined benefit pension plans under limited circumstances, including in the event the PBGC concludes that the risk may increase unreasonably if such plans continue.

In the event one of our U.S.

defined benefit pension plans is terminated for any reason while it is underfunded, we could be required to make an immediate payment to the PBGC of all or a substantial portion of such plan's underfunding, as calculated by the PBGC based on its own assumptions (which might result in a larger obligation than that based on the assumptions we have used to fund such plan), and the PBGC could place a lien on material amounts of our assets.

Any such increases could have an adverse effect on our business, financial condition, results of operations or cash flows.

The need to make contributions to such plans may reduce the cash available to meet our other obligations, including our obligations under our borrowing arrangements or to meet the needs of our business.

Legal and Compliance Risks

1 unchanged sentence

In addition to complying with laws and applicable government regulations and requirements, prevailing industry standards, competitive pressures and/or our customers may require us to comply with further quality, social responsibility, climate-related or other business policies or standards, before customers and prospective customers commence, or continue, doing business with us.

These expectations, policies and standards may be more restrictive than current laws and regulations as well as our own pre-existing policies;

they may be customer-driven, established by the industry sectors in which we operate or

imposed by third-party organizations or other constituencies.

These expectations, policies and standards may be more restrictive than current laws and regulations as

well as our own pre-existing policies;

they may be customer-driven, established by the industry sectors in which we operate or imposed by third-party organizations or other constituencies.

Our compliance with these policies, standards and third-party certification requirements could be costly and could in some cases require us to change the way in which we operate.

12 unchanged sentences

and as a result, such changes could result in substantially higher taxes and, therefore, could have a significant adverse effect on our results or operations, financial conditions and liquidity.

Moreover, in recent years, the Organization for Economic Co-operation and Development (“OECD”) and member countries have been focused on taxation issues relating to multi-national companies.

In October 2021, more than 130 countries agreed to implement Pillar 2, a plan introduced by the 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;

with any shortfall of the 15% minimum tax resulting in a related tax assessment ("Top-Up Tax").

The implementation of the Pillar 2 global minimum tax rules has begun 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 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, as well as the related legislation of those countries which has been enacted to date, the Company does not anticipate being subject to material Top-Up Taxes.

In October 2021, the Organization for Economic Co-operation and Development (“OECD”) issued rules for a new global minimum tax (“Pillar 2”), which included the introduction of a 15% global minimum tax (“Top-Up Tax”) that applies to tax years beginning in 2024.

To date, approximately 140 countries have signed a framework agreeing to implement Pillar 2.

Based upon the current OECD rules and administrative guidance, as well as the related legislation of those countries in which we do business, the Company does not anticipate being subject to material Top-Up Taxes.

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.

On July 4, 2025, the U.S.

government enacted the One Big Beautiful Bill Act (“OBBBA”).

OBBBA extended several provisions of the Tax Cuts and Jobs Act (“TCJA”) of 2017 that were set to expire on December 31, 2025, including immediate expensing of domestic research and development expenses, 100% bonus depreciation, qualified production property 100% depreciation, and reinstatement of utilizing EBITDA for the interest deduction limitation.

The OBBBA incorporates additional changes to the U.S tax code that will be effective after January 1, 2026, including charitable contribution limitations, deductible meal limitations, and changes to the U.S.

system for taxing international corporate income.

We expect to continue to see future regulatory, administrative or legislative guidance.

The full extent of the impact remains uncertain at this time, and our current interpretations of, and assumptions regarding, OBBBA are subject to additional regulatory or administrative developments, including any regulations or other guidance promulgated by the U.S.

Internal Revenue Service (“IRS”).

We may incur significant costs for environmental compliance and/or to address liabilities under environmental laws and regulations, and our reputation may be adversely affected.

2 unchanged sentences

Some environmental laws and regulations impose requirements to investigate and remediate contamination on present and former owners and operators of facilities and sites, and on potentially responsible parties ("PRPs") for sites to which such parties may have sent waste for disposal.

Such liability can be imposed without regard to fault and, under certain circumstances, may be joint and several, resulting in one PRP being held responsible for the entire obligation.

Such liability can be imposed without regard to fault and, under certain circumstances,

may be joint and several, resulting in one PRP being held responsible for the entire obligation.

Liability may also include damages to natural resources.

On occasion we are involved in such investigations and/or cleanup, and also have been or could be named as a PRP in environmental matters.

insolvency of other responsible parties could require us to incur significant capital expenditures or operating costs materially in excess of our accruals.

The discovery of additional contamination, including at acquired facilities, the imposition of more stringent environmental, health and safety laws and regulations, including cleanup requirements, disputes with our insurers or the insolvency of other responsible parties could require us to incur significant capital expenditures or operating costs materially in excess of our accruals.

Future investigations we undertake may lead to discoveries of contamination that must be remediated, and decisions to close facilities may trigger remediation requirements that are not currently applicable.

15 unchanged sentences

Additionally, if our sustainability strategy and initiatives are misaligned with evolving stakeholder expectations, it could negatively impact our reputation.

Risks Related to the Spin-Off Transaction

If the Spin-Off Transaction does not qualify as a tax-free reorganization and distribution for purposes of U.S.

federal income taxes, we may be subject to substantial additional taxes.

In connection with the Spin-Off Transaction, we obtained a tax opinion and a private letter ruling from the IRS (“IRS Ruling”) as to certain aspects relevant to treatment of the various steps of the transaction as tax-free to us and our shareholders for U.S.

federal income tax purposes.

The tax opinion and IRS Ruling are based on certain factual representations and assumptions and covenants of the parties to the transaction.

If any of the factual representations and assumptions are materially false or incorrect, or one or more of the relevant covenants are breached, the validity of the tax opinion and IRS Ruling could be impaired.

Furthermore, a tax opinion only represents counsel’s best legal judgment, and is not binding on the IRS or the courts, which may disagree with the opinion.

If the IRS determines that some or all of the transactions comprising the Spin-Off Transaction are taxable to us, we and our shareholders at the time of the transaction could be subject to significant additional U.S federal and state income taxes.

In certain circumstances, we would be entitled to indemnity from Regal Rexnord Corporation for all or a portion of such additional tax, but there is no assurance that Regal Rexnord Corporation would have the ability to satisfy any such indemnity obligation.

Risks Related to the Merger with Elkay

We recorded substantial goodwill and other intangible assets as a result of the Merger that could become impaired and result in material non-cash charges to our results of operations in the future.

We account for the Merger as an acquisition of a business in accordance with GAAP.

Under the acquisition method of accounting, the assets and liabilities of Elkay and its subsidiaries have been recorded, as of the completion of the Merger, at their respective fair values.

Our reported financial condition and results of operations for periods after completion of the Merger reflect Elkay’s balances and results but have not been restated retroactively to reflect the historical financial position or results of operations of Elkay and its subsidiaries for periods prior to the Merger.

Under the acquisition method of accounting, the total purchase price was allocated to Elkay’s tangible assets and liabilities and identifiable intangible assets based on their fair values as of the date of completion of the Merger.

The excess of the purchase price over those fair values was recorded as goodwill.

the extent the value of goodwill or intangibles becomes impaired in the future, we may be required to incur material non-cash charges relating to such impairment.

Our operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.

Our results may suffer if we do not effectively manage our expanded operations following the Merger.

Following the Merger, the size of our business has increased significantly.

Our future success will depend, in part, on our ability to continue to manage this expanded business, resulting in risks and uncertainties, including the need to efficiently and timely integrate the operations and business of Elkay, to combine systems and management controls, and to integrate relationships with customers, vendors and business partners.

Sales of substantial amounts of the Zurn Elkay Common Stock in the open market by the former Elkay stockholders could depress the trading price of our common stock.

The former Elkay stockholders may wish to dispose of some or all of the Zurn Elkay Common Stock that they received in the Merger.

These sales may adversely affect the trading price of our Common Stock.

Certain former stockholders of Elkay have registration rights, the exercise of which could adversely affect the market price of our Common Stock.

In connection with the Merger, the Company and certain stockholders of Elkay entered into a Registration Rights Agreement, pursuant to which such stockholders have a right to demand registration of one public offering within the first three years after the closing of the Merger, subject to certain minimum and maximum thresholds and other customary conditions.

The existence and potential or actual exercise of such rights could adversely impact the market price of our Common Stock.

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 1A. Risk Factors