Mueller Water Products Inc

Previous wording

In October 2023, the Israel-Hamas war caused a temporary shutdown of our facility in Ariel, Israel. While we reopened the facility in November 2023, the war caused supply chain challenges that continue to hinder our ability to most efficiently manufacture our products produced in Israel. These supply chain disruptions have adversely impacted, and continue to adversely impact, our ability to efficiently produce and deliver our products from our facility in Ariel, Israel. Additionally, production at this facility has been adversely impacted by limited labor availability in the region. We have made investments in recruiting and training new team members, expanding our suppliers and expediting product shipments to increase production levels and meet customer delivery times.

Current wording

In October 2023, the Israel-Hamas war caused a temporary shutdown of our facility in Ariel, Israel. While we reopened the facility in November 2023, the war caused supply chain disruption and labor availability challenges that hindered, and continue to hinder, our ability to most efficiently manufacture and deliver our products from our facility in Ariel, Israel. We have made investments in recruiting and training new team members and expanding our suppliers to increase production levels, as well as expediting product shipments and increasing inventory safety stock to meet customer delivery times.

Previous wording

In January 2025, we announced the appointment of Ms. Melissa Rasmussen as Senior Vice President and Chief Financial Officer effective March 4, 2025. As previously announced, Mr. Steve Heinrichs will transition from his Chief Financial Officer and Chief Legal Officer roles and remain available to the Company on a consulting basis through September 30, 2025.

Current wording

In January 2025, we announced the appointment of Ms. Melissa Rasmussen as Senior Vice President and Chief Financial Officer effective March 3, 2025 and Mr. Steven Heinrichs transitioned from his Chief Financial Officer and Chief Legal Officer roles to Senior Advisor and remains available to the Company on a consulting basis through September 30, 2025.

Previous wording

For fiscal year 2025, we anticipate that consolidated net sales will increase between 4.2% and 5.7% as compared with fiscal 2024, which does not include any impact as a result of the recently announced tariffs. The external operating environment remains dynamic as we face uncertainties and challenges emanating from changes in government policies, the interest rate environment, the Israel-Hamas war and unrest in the Middle East, as well as labor inflation and availability. We expect these challenges to continue during the remainder of fiscal 2025. After our short-cycle channel and customer inventory levels largely normalized during the first quarter of 2024, our orders and shipments reflected a more typical operating environment compared with the high backlog environment we experienced during and after the COVID-19 pandemic. For the remainder of fiscal 2025, we assume that we will continue to experience a more normalized operating environment leading to normalized seasonality for consolidated net sales. Therefore, we anticipate quarterly consolidated net sales as a percentage of fiscal year 2025 consolidated net sales to be the highest in the third quarter and lowest in the first quarter, with a sequential increase in consolidated net sales in the second quarter as the construction season ramps up for the spring season. In January 2025, Blue Chip Economic Indicators forecasted a 0.7% increase in housing starts for the calendar year 2025 as compared to the calendar year 2024. We anticipate resilient demand in the municipal repair and replacement end market driven by the aging water infrastructure albeit moderated by budgetary and operational pressures on municipalities.

Current wording

After our short-cycle channel and customer inventory levels largely normalized during the first quarter of 2024, our orders and shipments reflected a more typical demand environment compared with the high backlog environment we experienced during and after the COVID-19 pandemic. For the remainder of fiscal 2025, we assume that we will continue to experience a more normalized demand environment leading to more normalized seasonality for consolidated net sales. Therefore, we anticipate quarterly consolidated net sales as a percentage of fiscal year 2025 consolidated net sales to be the highest in the third quarter and lowest in the first quarter, with a sequential increase in consolidated net sales in the second quarter as the construction season ramps up for the spring season.

Previous wording

Additionally, we anticipate that new residential construction activity and new lot and land development will be relatively constrained by the interest rate environment, depending on the geographic region. For the remainder of fiscal 2025, we anticipate that inflation will continue to modestly impact manufacturing costs, primarily due to wage inflation, as well as raw materials and purchased parts. We will continue to monitor the market and economic conditions impacting our business and take appropriate actions to address inflationary and other cost pressures, including new tariffs, by implementing price increases, cost containment measures and supplier management measures, among other mitigating actions.

Current wording

Inventory costs for the first six months of 2025 experienced approximately 1.4% inflation. For the remainder of fiscal 2025, we anticipate that inflation will rise, particularly for purchased parts due to new tariffs enacted after January 2025. At this time, excluding the impact of tariffs, we expect inflation to modestly impact manufacturing and transportation costs. We will continue to monitor the market and economic conditions impacting our business and take appropriate actions to address inflationary and other cost pressures, including new tariffs, by implementing price increases, cost containment measures and supplier management measures, among other mitigating actions.

Previous wording

Selling, general and administrative expenses (“SG&A”) for the three months ended December 31, 2024 were $53.9 million as compared with $56.9 million in the prior year period, a decrease of $3.0 million or 5.3%, primarily due to lower amortization and favorable foreign exchange impacts, partially offset by approximately 3% inflation, higher third-party fees and personnel-related expense. SG&A as a percentage of net sales was 17.7% and 22.2% for the three months ended December 31, 2024 and December 31, 2023, respectively.

Current wording

Selling, general and administrative expenses (“SG&A”) for the three months ended March 31, 2025 were $55.7 million as compared with $63.7 million in the prior year period, a decrease of $8.0 million or 12.6%, primarily due to lower amortization, incentive and travel expenses as well as favorable foreign exchange impacts, partially offset by approximately 3% inflation. SG&A as a percentage of net sales was 15.3% and 18.0% for the three months ended March 31, 2025 and March 31, 2024, respectively.

Previous wording

Strategic reorganization and other charges for the three months ended December 31, 2024 were $1.7 million and consisted of expenses associated with our leadership transition and severance. Strategic reorganization and other charges for the three months ended December 31, 2023 were $6.6 million and consisted of expenses associated with our leadership transition, cybersecurity incidents and certain transaction-related expenses.

Current wording

Strategic reorganization and other charges for the three months ended March 31, 2025 were $2.4 million and consisted of expenses associated with our leadership transition, non-cash asset impairment and certain transaction-related expenses. Strategic reorganization and other charges for the three months ended March 31, 2024 were $3.2 million and consisted of expenses associated with our leadership transition, severance and certain transaction-related expenses.

Previous wording

Net interest expense for the three months ended December 31, 2024 was $1.6 million as compared with $3.3 million in the prior year period, a decrease of $1.7 million or 51.5%, primarily due to higher interest income. The components of net interest expense are as shown below:

Current wording

Net interest expense for the three months ended March 31, 2025 was $2.3 million as compared with $3.6 million in the prior year period, a decrease of $1.3 million or 36.1%, primarily due to higher interest income. The components of net interest expense are as shown below:

Previous wording

SG&A for the three months ended December 31, 2024 was $13.8 million as compared with $13.1 million in the prior year period, an increase of $0.7 million or 5.3%, primarily as a result of approximately 3% inflation and higher third-party fees partially offset by lower personnel-related expense.

Current wording

SG&A for the three months ended March 31, 2025 was $14.2 million as compared with $14.9 million in the prior year period, a decrease of $0.7 million or 4.7%, primarily as a result of lower compensation as well as consulting and professional fees partially offset by approximately 3% inflation.

Previous wording

Gross profit for the three months ended December 31, 2024 was $55.1 million as compared with $46.6 million in the prior year period, an increase of $8.5 million or 18.2%. This increase was primarily a result of higher volumes and favorable price/cost, partially offset by the $3.3 million write-down of inventory and other assets associated with our legacy brass foundry in Decatur, Illinois, which ceased production in January 2025. Gross margin was 31.6% in the three months ended December 31, 2024 and 33.0% in the prior year period.

Current wording

Gross profit for the six months ended March 31, 2025 was $132.1 million as compared with $123.8 million in the prior year period, an increase of $8.3 million or 6.7%. This increase was primarily a result of higher volumes across most product lines and favorable price/cost, partially offset by manufacturing inefficiencies, including a $4.1 million write-down of inventory and other assets associated with our legacy brass foundry in Decatur, Illinois. Inflation impacted Gross profit by approximately 5%. Gross margin was 33.8% in the six months ended March 31, 2025 and 35.7% in the prior year period.

Previous wording

Gross profit for the three months ended December 31, 2024 was $47.9 million as compared with $39.7 million in the prior year period, an increase of $8.2 million or 20.7%. The increase was primarily driven by higher volumes in hydrants, and favorable price/cost partially offset by impacts of the Israel-Hamas war. Gross margin was 36.9% in the three months ended December 31, 2024 as compared with 34.5% in the prior year period.

Current wording

Gross profit for the six months ended March 31, 2025 was $98.9 million as compared with $92.9 million in the prior year period, an increase of $6.0 million or 6.5%. The increase was primarily driven by higher volume across most product lines and favorable price/cost, partially offset by manufacturing inefficiencies. Inflation impacted Gross profit by approximately 2%. Gross margin was 35.6% in the six months ended March 31, 2025 as compared with 35.4% in the prior year period.

Previous wording

We had cash and cash equivalents on hand of $338.2 million at December 31, 2024 and $163.0 million of additional borrowing capacity under our ABL based on December 31, 2024 data. At December 31, 2024, cash and cash equivalents included $73.3 million, $12.0 million and $11.6 million in Israel, Canada and China, respectively.

Current wording

We had cash and cash equivalents on hand of $329.2 million at March 31, 2025 and $163.0 million of additional borrowing capacity under our ABL based on March 31, 2025 data. At March 31, 2025, cash and cash equivalents included $72.3 million, $7.5 million and $6.5 million in Israel, Canada and China, respectively.

Previous wording

We did not repurchase any of our outstanding common stock during the three months ended December 31, 2024 under our publicly announced share repurchase program, and as of December 31, 2024, we had $80.0 million remaining under our share repurchase authorization.

Current wording

We repurchased $5.0 million of our outstanding common stock during the six months ended March 31, 2025 under our publicly announced share repurchase program, and as of March 31, 2025, we had $75.0 million remaining under our share repurchase authorization.

Previous wording

The ABL and 4.0% Senior Notes contain customary representations and warranties, covenants and provisions governing an event of default. These covenants restrict our ability to engage in certain activities, including but not limited to, the payment of dividends and the redemption of our common stock.

Current wording

The ABL and 4.0% Senior Notes contain customary representations and warranties, covenants and provisions governing an event of default. These covenants restrict our ability to engage in certain activities, including but not limited to, the payment of cash dividends and the redemption of our common stock.

Previous wording

Net cash provided by operating activities was $54.1 million during the three months ended December 31, 2024 as compared with net cash provided by operating activities of $67.9 million in the prior year period. The decrease in net operating cash flow was primarily driven by changes in working capital, including Other current liabilities such as incentive compensation, partially offset by higher Net income compared with the prior year period.

Current wording

Net cash provided by operating activities was $68.4 million during the six months ended March 31, 2025 as compared with net cash provided by operating activities of $62.2 million in the prior year period. The increase in net operating cash flow was primarily driven by higher net income partially offset by changes in working capital, including decreases in Other current liabilities such as incentive compensation.

Previous wording

Capital expenditures were $11.9 million in the three months ended December 31, 2024 as compared with $5.7 million in the prior year period. Capital expenditures increased primarily as a result of timing and higher expenditures associated with our foundries as compared with the prior year period. For the fiscal year 2025, we have provided guidance that our capital expenditures are expected to be between $45.0 million and $50.0 million.

Current wording

Capital expenditures were $21.1 million in the six months ended March 31, 2025 as compared with $15.8 million in the prior year period. Capital expenditures increased primarily as a result of timing and higher expenditures associated with our foundries, including replacement of aged lost foam equipment, and cybersecurity infrastructure improvements as compared with the prior year period. For the fiscal year 2025, we have provided guidance that our capital expenditures are expected to be between $45.0 million and $50.0 million.

Previous wording

We anticipate that our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flows will be sufficient to meet our anticipated operating needs, income tax payments, capital expenditures and debt service obligations as they become due through the next twelve months from the date of this filing. However, our ability to make these payments will depend largely on our future operating performance, which may be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.

Current wording

We anticipate that our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flows will be sufficient to meet our anticipated operating needs, income tax payments, capital expenditures and debt service obligations as they become due through the next twelve months from the date of this filing. However, our ability to make these payments will depend largely on our future operating performance, which may be affected by general economic, financial, competitive, legislative, regulatory, geopolitical, business and other factors beyond our control.

Previous wording

The ABL is subject to mandatory prepayments if total outstanding borrowings under the ABL are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances. The borrowing base under the ABL is equal to the sum of (a) 85% of the value of eligible accounts receivable and (b) the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less certain reserves.

Current wording

The ABL is subject to mandatory prepayments if total outstanding borrowings under the ABL are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances. The borrowing base under the ABL is equal to the sum of (a) 85% of the value of eligible accounts receivable and (b) the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less certain reserves. Prepayments can be made at any time without penalty.

Previous wording

Substantially all of our United States subsidiaries are borrowers under the ABL and are jointly and severally liable for outstanding borrowings. Our obligations under the ABL are secured by a first-priority perfected lien on all of our United States inventory, accounts receivable, certain cash balances and other supporting assets.

Current wording

Substantially all of our United States (“U.S.”) subsidiaries are borrowers under the ABL and are jointly and severally liable for outstanding borrowings. Our obligations under the ABL are secured by a first-priority perfected lien on all of our U.S. inventory, accounts receivable, certain cash balances and other supporting assets.

Previous wording

Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million and 10% of the Loan Cap (as defined in the ABL). Excess availability based on December 31, 2024 data was $163.0 million, as reduced by $11.8 million of outstanding letters of credit and $0.2 million of accrued fees and expenses.

Current wording

Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million and 10% of the Loan Cap. Excess availability based on March 31, 2025 data was $163.0 million, as reduced by $11.8 million of outstanding letters of credit and $0.2 million of accrued fees and expenses.

Previous wording

On May 28, 2021, we privately issued $450.0 million of 4.0% Unsecured Senior Notes (“4.0% Senior Notes”), which mature on June 15, 2029, and bear interest at 4.0%, paid semi-annually in June and December. We capitalized $5.5 million of financing costs, which are being amortized over the term of the 4.0% Senior Notes using the effective interest method. Proceeds from the 4.0% Senior Notes, along with cash on hand, were used to redeem our previously existing notes. Substantially all of our United States subsidiaries guarantee the 4.0% Senior Notes, which are subordinate to borrowings under our ABL. Based on quoted market prices, which is a Level 1 measurement, the outstanding 4.0% Senior Notes had a fair value of $416.8 million at December 31, 2024.

Current wording

On May 28, 2021, we privately issued $450.0 million of 4.0% Unsecured Senior Notes (“4.0% Senior Notes”), which mature on June 15, 2029, and bear interest at 4.0%, paid semi-annually in June and December. We capitalized $5.5 million of financing costs, which are being amortized over the term of the 4.0% Senior Notes using the effective interest method. Proceeds from the 4.0% Senior Notes, along with cash on hand, were used to redeem our previously existing notes. Substantially all of our U.S. subsidiaries guarantee the 4.0% Senior Notes, which are subordinate to borrowings under our ABL. Based on quoted market prices, which is a Level 1 measurement, the outstanding 4.0% Senior Notes had a fair value of $419.4 million at March 31, 2025.

Previous wording

We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures. As of December 31, 2024, we had (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and include annual cash interest payments of $18.0 million in 2025 through 2029, (ii) cumulative cash obligations of $34.3 million for operating leases through 2034 and $2.8 million for finance leases through 2030, and (iii) purchase obligations for raw materials and other purchased parts of approximately $103.6 million which we expect to incur during the next 12 months and $3.0 million beyond June 30, 2025. Additionally, we expect to invest to strengthen our systems, cybersecurity training, policies, programs, response plans and other similar measures. We expect to fund these cash requirements from cash on hand and cash generated from operations.

Current wording

We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures. As of March 31, 2025, we had (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and include annual cash interest payments of $18.0 million in 2025 through 2029, (ii) cumulative cash obligations of $32.8 million for operating leases through 2034 and $3.8 million for finance leases through 2030, and (iii) purchase obligations for raw materials and other purchased parts of approximately $110.9 million which we expect to incur during the next 12 months and $2.1 million beyond March 31, 2026. Additionally, we expect to invest to strengthen our systems, cybersecurity training, policies, programs, response plans and other similar measures. We expect to fund these cash requirements from cash on hand and cash generated from operations.

Previous wording

We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual obligations. At December 31, 2024, we had $11.8 million of letters of credit and $11.5 million of surety bonds outstanding.

Current wording

We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual obligations. At March 31, 2025, we had $11.8 million of letters of credit and $12.4 million of surety bonds outstanding.

Previous wording

Our business is seasonal as a result of the impact of cold weather conditions. Net sales and operating income historically have been lowest in the three-month periods ending December 31 and March 31 when the northern United States and most of Canada generally face weather conditions that restrict significant construction and other field crew activity. Therefore, the results of operations for the three months ended December 31, 2024 are not necessarily indicative of operating results that may be achieved for any other interim period or the full year.

Current wording

Our business is seasonal as a result of the impact of cold weather conditions. Net sales and operating income historically have been lowest in the three-month periods ending December 31 and March 31 when the northern U.S. and most of Canada generally face weather conditions that restrict significant construction and other field crew activity. Therefore, the results of operations for the three months ended March 31, 2025 are not necessarily indicative of operating results that may be achieved for any other interim period or the full year.