Mueller Water Products, Inc.

We operate our business through two segments, Water Flow Solutions and Water Management Solutions. Water Flow Solutions’ portfolio includes iron gate valves, specialty valves and service brass products. Water Management Solutions’ portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, as well as pressure management and control products and solutions.

In January 2025, we announced the appointment of Ms. Melissa Rasmussen as Senior Vice President and Chief Financial Officer effective March 3, 2025. On March 1, 2025, Mr. Steven S. Heinrichs transitioned from his roles as Chief Financial Officer and Chief Legal Officer to Senior Advisor and remained an advisor until September 30, 2025. In August 2025, we announced the appointment of Ms. Richelle R. Feyerherm as Chief Accounting Officer effective August 15, 2025. Ms. Feyerherm also serves as the Company’s principal accounting officer. On November 6, 2025, we announced that Ms. Marietta Edmunds Zakas will retire as the Company’s Chief Executive Officer and as a member of the Company’s Board of Directors, effective as of February 9, 2026. In connection with Ms. Zakas’ retirement, the Company’s Board of Directors appointed Mr. Paul McAndrew as President and Chief Executive Officer, effective as of the Transition Date.

We estimate approximately 60% to 65% of the Company’s 2025 net sales were associated with the repair and replacement of municipal water infrastructure, approximately 25% to 30% were related to residential construction activity and approximately 10% were related to natural gas utilities and industrial applications.

After experiencing challenges resulting from the COVID-19 pandemic and subsequent supply disruptions in years 2020 through 2023, the seasonality of our business has since returned to more normalized levels, supported by municipal spending on repair and replacement projects and new residential construction activity. According to the United States Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates as of September 30, 2025 increased 4.6%. Total housing starts in fiscal 2025 decreased 1.1% as compared with fiscal 2024, according to the United States Census Bureau, which included a 5.2% decrease in single family housing starts as compared with fiscal 2024.

Recent Developments

In October 2023, the Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel. While we reopened the facility in November 2023, the war caused supply chain challenges that hindered our ability to most efficiently manufacture our products produced in Israel. While the facility was adversely impacted by this event, we have mitigated operational risk by expanding our suppliers and improving throughput in order to increase production levels and to meet customer delivery times. While net sales levels have returned to pre-war levels, margin expansion was further hindered by newly implemented tariffs on products manufactured in Israel and imported into the United States.

While newly implemented tariffs are adversely impacting several product lines, Repair and Specialty Valve product lines are bearing most of the higher costs. In response to tariffs that went into effect in the second half of fiscal 2025, we implemented additional pricing actions, which are expected to mostly offset tariff costs in dollar terms but will result in tariff-related impacts being dilutive to margins. As the tariffs remain uncertain and volatile, we will continue to monitor the situation and take appropriate actions to address inflationary and other cost pressures.

At the end of the first quarter, we ceased melting and casting operations at our legacy brass foundry and transitioned production to our state-of-the-art foundry. We expect this transition will improve operational efficiency and enable us to better serve our service brass customers. As part of Mueller’s overall strategy, we will continue investing in our foundries to expand capacity, increase manufacturing efficiencies and strategically position ourselves as the demand for domestic product is expected to increase given the uncertainty in the current geopolitical and tariff environment.

Outlook

For fiscal year 2026, we anticipate that consolidated net sales will increase between 1.4% and 2.8% as compared with fiscal 2025. The external operating environment remains uncertain as we face changes in government policies, including possible disruptions to global supply chains resulting from such changes, the interest rate and tariff environment, as well as geopolitical conditions and labor and material inflation and availability. We expect these challenges to continue into fiscal 2026. We continue to anticipate resilient demand associated with the municipal repair and replacement end market driven by the aging water infrastructure and increasing water rates, moderated by budgetary and operational pressures on municipalities. We anticipate that new residential construction activity and new lot and land development will be relatively constrained by the uncertainty in the economy, affordability concerns and interest rate environment, depending on the geographic region.

Our orders and shipments in 2025 reflected a more typical operating environment compared with the high backlog environment we experienced during and after the COVID-19 pandemic. For fiscal 2026, 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 2026 consolidated net sales to be the highest in the third quarter and lowest in the first quarter, with a sequential increase in consolidated net sales in the second quarter as the construction season ramps up for the Spring. For fiscal 2026, we anticipate that inflation will continue to modestly impact manufacturing costs, primarily due to wage inflation, as well as raw materials and purchased parts. In addition, higher direct tariff costs of approximately 3% of costs of goods sold are expected to continue to contribute to inflationary pressures in 2026. While pricing actions were taken in 2025 in response to new tariffs, we will continue to monitor the market and economic conditions impacting our business and take appropriate actions to address inflationary and other cost pressures by implementing price increases, cost containment measures and supplier management measures, among other actions.