Mueller Water Products, Inc.

Previous wording

While tariffs are adversely impacting several product lines, Repair and Specialty Valve product lines are bearing most of the higher costs. In 2025, the U.S. government announced significant changes to its trade policy, including tariff increases on imported steel and aluminum from 25% to 50% under Section 232 of the Trade Expansion Act (“Section 232”). The increase in Section 232 tariffs to 50% has resulted in material, upward pressure on certain purchased components and raw material costs, including the Repair products we import to the U.S. that are produced by our Krausz business, which have borne most of the higher costs. As previously disclosed, we have taken, and intend to continue to take, actions intended to mitigate these increases through, among other things, pricing actions and adding suppliers. Despite these actions, Section 232 tariffs are likely to continue to negatively impact the Company’s business, results of operations, and financial condition during fiscal 2026. The ultimate impact of Section 232 tariffs remains to be determined and will depend on several factors, including our ability to successfully mitigate their impact and whether additional or incremental U.S. tariffs or other changes to trade policies are announced or imposed.

Current wording

While tariffs are adversely impacting several product lines, Repair and Specialty Valve product lines are bearing most of the higher costs. In 2025, the U.S. government announced significant changes to its trade policy, including tariff increases on imported steel and aluminum from 25% to 50% under Section 232 of the Trade Expansion Act (“Section 232”). The increase in Section 232 tariffs to 50% has resulted in material, upward pressure on certain purchased components and raw material costs, including the Repair products we import to the U.S. that are produced by our Krausz business, which have borne most of the higher costs. As previously disclosed, we have taken, and intend to continue to take, actions to mitigate these increases through, among other things, pricing and supply chain actions. Despite these actions, Section 232 tariffs are likely to continue to negatively impact the Company’s business, results of operations, and financial condition during the remainder of fiscal 2026. The ultimate impact of Section 232 tariffs remains to be determined and will depend on several factors, including our ability to successfully mitigate their impact and whether additional or incremental U.S. tariffs or other changes to trade policies are announced or imposed.

Previous wording

In January 2025, we ceased melting and casting operations at our legacy brass foundry and transitioned production to our new 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 our overall strategy, we will continue investing in our foundries to expand capacity, increase manufacturing efficiencies, and position ourselves to respond to the expected increase in demand for domestic product given the uncertainty in the current geopolitical and tariff environment.

Current wording

In January 2025, we ceased melting and casting operations at our legacy brass foundry and transitioned production to our new 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 our overall strategy, we will continue investing in our foundries to expand capacity, increase manufacturing efficiencies, and position ourselves to respond to the expected increase in demand for domestic product given the uncertainty in the current geopolitical and tariff environment. The Company expects to incur certain costs related to the decommissioning and demolition of its legacy foundry, the amount of which is not estimable at this time.

Previous wording

For fiscal year 2026, we anticipate that consolidated net sales will increase between 2.8% and 4.2% 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 increased labor and material costs, and constraints of labor and material availability. We expect these challenges to continue during the remainder of 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.

Current wording

For fiscal year 2026, we anticipate that consolidated net sales will increase between 2.8% and 3.5% 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 increased labor and material costs, and constraints of labor and material availability. We expect these challenges to continue during the remainder of 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.

Previous wording

Gross profit for the three months ended March 31, 2026 was $144.5 million as compared with $128.0 million in the prior year period, an increase of $16.5 million or 12.9%. Gross margin was 37.6% in the three months ended March 31, 2026 as compared with 35.1% in the prior year period. Gross margin increased 250 basis points primarily as a result of favorable pricing across most product lines, manufacturing efficiencies, and higher volumes. Gross profit was negatively impacted by increased tariffs as well as approximately 4% inflation.

Current wording

Gross profit for the three months ended June 30, 2026 was $155.8 million as compared with $145.7 million in the prior year period, an increase of $10.1 million or 6.9%. Gross margin was 39.4% in the three months ended June 30, 2026 as compared with 38.3% in the prior year period. Gross margin increased 110 basis points primarily as a result of favorable pricing across most product lines and non-recurring tariff refunds. Gross profit was negatively impacted by approximately 4% inflation, performance, lower volumes, $3.1 million of portfolio optimization costs, and product mix.

Previous wording

Selling, general and administrative expenses (“SG&A”) for the three months ended March 31, 2026 were $59.7 million as compared with $55.7 million in the prior year period, an increase of $4.0 million or 7.2%, primarily due to unfavorable foreign currency exchange and inflation of approximately 4%. SG&A as a percentage of net sales was 15.5% and 15.3% for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Selling, general and administrative expenses (“SG&A”) for the three months ended June 30, 2026 were $64.0 million as compared with $71.0 million in the prior year period, a decrease of $7.0 million or 9.9%, primarily due to lower unfavorable impact of foreign currency exchange and incentive-based compensation partially offset by inflation of approximately 3%. SG&A as a percentage of net sales was 16.2% and 18.7% for the three months ended June 30, 2026 and 2025, respectively.

Previous wording

Strategic reorganization and other charges for the three months ended March 31, 2026 were $4.4 million and consisted primarily of expenses associated with our leadership transition, certain transaction-related expenses, and severance. 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, a non-cash asset impairment, and certain transaction-related expenses.

Current wording

Strategic reorganization and other charges for the three months ended June 30, 2026 were $11.2 million and consisted primarily of certain transaction-related expenses, non-cash asset impairment expenses in our Water Management Solutions segment, severance, and expenses associated with our leadership transition. Strategic reorganization and other charges for the three months ended June 30, 2025 were $1.0 million and consisted of expenses associated with our leadership transition.

Previous wording

Net interest expense for the three months ended March 31, 2026 was $1.6 million as compared with $2.3 million in the prior year period, a decrease of $0.7 million or 30.4%, 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 June 30, 2026 was $0.7 million as compared with $1.7 million in the prior year period, a decrease of $1.0 million or 58.8%, primarily due to higher interest income. The components of net interest expense are as shown below:

Previous wording

Net sales for the three months ended March 31, 2026 were $166.1 million as compared with $148.1 million in the prior year period, an increase of $18.0 million or 12.2%, primarily as a result of increased volumes and higher pricing across most product lines.

Current wording

Net sales for the three months ended June 30, 2026 were $180.6 million as compared with $163.7 million in the prior year period, an increase of $16.9 million or 10.3%, primarily as a result of increased volumes and higher pricing across most product lines.

Previous wording

SG&A for the three months ended March 31, 2026 was $21.9 million as compared with $19.6 million in the prior year period, an increase of $2.3 million or 11.7%, primarily due to unfavorable foreign currency exchange and approximately 4% inflation. SG&A as a percentage of net sales was 13.2% for both of the three month periods ended March 31, 2026 and 2025.

Current wording

SG&A for the three months ended June 30, 2026 was $23.8 million as compared with $31.6 million in the prior year period, a decrease of $7.8 million or 24.7%, primarily due to lower unfavorable impact of foreign currency exchange, third-party fees and incentive-based compensation partially offset by approximately 2% inflation. SG&A as a percentage of net sales was 13.2% and 19.3% in the three month periods ended June 30, 2026 and 2025, respectively.

Previous wording

SG&A for the three months ended March 31, 2026 was $15.9 million as compared with $14.2 million in the prior year period, an increase of $1.7 million or 12.0% is primarily a result of higher third-party fees and approximately 3% inflation.

Current wording

SG&A for the three months ended June 30, 2026 was $16.7 million as compared with $16.1 million in the prior year period, an increase of $0.6 million or 3.7% primarily a result of higher third-party fees and approximately 3% inflation mostly offset by lower unfavorable impact of foreign currency exchange.

Previous wording

Gross profit for the six months ended March 31, 2026 was $264.3 million as compared with $231.0 million in the prior year period, an increase of $33.3 million or 14.4%. Gross margin was 37.6% in the six months ended March 31, 2026 as compared with 34.5% in the prior year period. Gross margin increased 310 basis points primarily as a result of higher pricing, manufacturing efficiencies largely driven by the legacy brass foundry closure in Decatur, Illinois, a $4.1 million write-down of inventory and other assets associated with our legacy brass foundry in the prior year period, and increased volumes. Gross margin was negatively impacted by increased tariffs and approximately 4% inflation.

Current wording

Gross profit for the nine months ended June 30, 2026 was $420.1 million as compared with $376.7 million in the prior year period, an increase of $43.4 million or 11.5%. Gross margin was 38.2% in the nine months ended June 30, 2026 as compared with 35.9% in the prior year period. Gross margin increased 230 basis points primarily as a result of higher pricing across most product lines, performance largely driven by the legacy brass foundry closure in Decatur, Illinois, as well as the favorable comparison to a $4.1 million write-down of inventory and other assets associated with our legacy brass foundry recorded in the prior year period. Gross margin was negatively impacted by approximately 4% inflation, increased tariffs, net of non-recurring tariff refunds, and $3.1 million of portfolio optimization costs in the current period.

Previous wording

Strategic reorganization and other charges for the six months ended March 31, 2026 were $7.7 million and consisted of expenses associated with our leadership transition, severance, and certain transaction-related expenses. Strategic reorganization and other charges for the six months ended March 31, 2025 were $4.1 million and consisted of expenses associated with our leadership transition, a non-cash asset impairment, and certain transaction-related expenses.

Current wording

Strategic reorganization and other charges for the nine months ended June 30, 2026 were $18.9 million and consisted of certain transaction-related expenses, expenses associated with our leadership transition, non-cash asset impairment expenses in our Water Management Solutions segment, and severance. Strategic reorganization and other charges for the nine months ended June 30, 2025 were $5.1 million and consisted of expenses associated with our leadership transition, non-cash asset impairment expenses in our Water Flow Solutions segment, and certain transaction-related expenses.

Previous wording

Net interest expense for the six months ended March 31, 2026 was $2.6 million as compared with $3.9 million in the prior year period, a decrease of $1.3 million or 33.3%, primarily due to higher interest income. The components of net interest expense are as shown below:

Current wording

Net interest expense for the nine months ended June 30, 2026 was $3.3 million as compared with $5.6 million in the prior year period, a decrease of $2.3 million or 41.1%, primarily due to higher interest income. The components of net interest expense are as shown below:

Previous wording

Income tax expense for the three months ended March 31, 2026 was $19.7 million as compared with $16.4 million in the prior year period, an increase of $3.3 million or 20.1%, driven by higher pre-tax income. The effective tax rate for the three months ended March 31, 2026 was 25.0% as compared with 24.2% in the prior year. The effective tax rate increased primarily due to lower excess tax benefits on stock compensation.

Current wording

Income tax expense for the nine months ended June 30, 2026 was $44.7 million as compared with $46.4 million in the prior year period, a decrease of $1.7 million or 3.7%, primarily attributable to a tax benefit resulting from the recognition of a loss on a foreign subsidiary investment, partially offset by higher pre-tax income and a valuation allowance on foreign pre-tax earnings. The effective tax rate for the nine months ended June 30, 2026 was 20.9% as compared with 25.0% in the prior year. The effective tax rate decreased primarily due to a tax benefit from the recognition of a loss on a foreign subsidiary investment.

Previous wording

Net sales for the six months ended March 31, 2026 were $391.3 million as compared with $390.8 million in the prior year period, an increase of $0.5 million or 0.1%, primarily as a result of higher pricing across most product lines offset by lower volumes.

Current wording

Net sales for the nine months ended June 30, 2026 were $606.6 million as compared with $607.4 million in the prior year period, a decrease of $0.8 million or 0.1%, primarily as a result of lower volumes mostly offset by higher pricing across most product lines.

Previous wording

SG&A for the six months ended March 31, 2026 was $43.3 million as compared with $41.7 million in the prior year period, an increase of $1.6 million or 3.8%, primarily as a result of inflation of approximately 3%. SG&A as a percentage of net sales was 11.1% and 10.7% in the six months ended March 31, 2026 and 2025, respectively.

Current wording

SG&A for the nine months ended June 30, 2026 was $66.8 million as compared with $65.0 million in the prior year period, an increase of $1.8 million or 2.8%, primarily as a result of inflation of approximately 3%, higher personnel related expenses, and unfavorable foreign currency impact. SG&A as a percentage of net sales was 11.0% and 10.7% in the nine months ended June 30, 2026 and 2025, respectively.

Previous wording

Net sales for the six months ended March 31, 2026 were $311.3 million as compared with $277.8 million in the prior year period, an increase of $33.5 million or 12.1%, primarily as a result of higher volumes and higher pricing across most product lines.

Current wording

Net sales for the nine months ended June 30, 2026 were $491.9 million as compared with $441.5 million in the prior year period, an increase of $50.4 million or 11.4%, primarily as a result of higher volumes and higher pricing across most product lines.

Previous wording

SG&A for the six months ended March 31, 2026 was $29.8 million as compared with $28.0 million in the prior year period, an increase of $1.8 million or 6.4%. The increase was primarily driven by inflation of approximately 3% and higher personnel-related expenses.

Current wording

SG&A for the nine months ended June 30, 2026 was $46.5 million as compared with $44.1 million in the prior year period, an increase of $2.4 million or 5.4%. The increase was primarily driven by inflation of approximately 3%, higher personnel-related expenses and third-party fees partially offset by lower unfavorable impact of foreign currency exchange.

Previous wording

We had cash and cash equivalents on hand of $421.0 million as of March 31, 2026 and $163.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”). As of March 31, 2026, cash and cash equivalents included $91.8 million, $9.4 million, and $9.2 million in Israel, Canada, and China, respectively.

Current wording

We had cash and cash equivalents on hand of $495.3 million as of June 30, 2026 and $163.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”). As of June 30, 2026, cash and cash equivalents included $98.2 million, $9.4 million, and $9.0 million in Israel, Canada, and China, respectively.

Previous wording

Our stock repurchase program allows us to repurchase up to $250.0 million of our common stock. The program does not commit us to any particular timing or quantity of purchases, and we may suspend or discontinue the program at any time. We repurchased $5.5 million of our outstanding common stock during the six months ended March 31, 2026 under our publicly announced share repurchase program, and as of March 31, 2026, we had $59.5 million remaining under our share repurchase authorization. During the six months ended March 31, 2025, we repurchased $5.0 million of our outstanding common stock.

Current wording

Our stock repurchase program allows us to repurchase up to $250.0 million of our common stock. The program does not commit us to any particular timing or quantity of purchases, and we may suspend or discontinue the program at any time. We repurchased $15.5 million of our outstanding common stock during the nine months ended June 30, 2026 under our publicly announced share repurchase program, and as of June 30, 2026, we had $49.5 million remaining under our share repurchase authorization. During the nine months ended June 30, 2025, we repurchased $15.0 million of our outstanding common stock.

Previous wording

On May 28, 2021, we privately issued $450.0 million of 4.0% Unsecured Senior Notes (the “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, the outstanding 4.0% Senior Notes had a fair value of $434.6 million as of March 31, 2026.

Current wording

On May 28, 2021, we privately issued $450.0 million of 4.0% Unsecured Senior Notes (the “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, the outstanding 4.0% Senior Notes had a fair value of $436.1 million as of June 30, 2026.

Previous wording

Cash flows provided by operating activities decreased $20.0 million to $48.4 million during the six months ended March 31, 2026 compared with $68.4 million in the prior year period. This was driven by a $57.2 million change in working capital and other assets and liabilities, partially offset by an increase in net income of $15.7 million and higher non-cash adjustments of $21.5 million.

Current wording

Cash flows provided by operating activities increased $18.4 million to $154.2 million during the nine months ended June 30, 2026 compared with $135.8 million in the prior year period. This was driven by higher non-cash adjustments of $40.5 million and an increase in net income of $30.5 million, partially offset by a $52.6 million change in working capital and other assets and liabilities.

Previous wording

Cash flows used in investing activities increased $10.8 million to $31.8 million during the six months ended March 31, 2026 compared with $21.0 million in the prior year period. Capital expenditures were $31.9 million in the six months ended March 31, 2026 as compared with $21.1 million in the prior year period. Capital expenditures increased primarily as a result of higher expenditures associated with our iron foundries as compared with the prior year period.

Current wording

Cash flows used in investing activities increased $9.7 million to $42.4 million during the nine months ended June 30, 2026 compared with $32.7 million in the prior year period. Capital expenditures were $43.6 million in the nine months ended June 30, 2026 as compared with $32.8 million in the prior year period. Capital expenditures increased primarily as a result of higher expenditures associated with our iron foundries as compared with the prior year period.

Previous wording

Cash flows used in financing activities increased $3.6 million to $30.5 million during the six months ended March 31, 2026 as compared with $26.9 million in the prior year period. This was driven primarily by $2.6 million in less cash provided by common stock issuances, an increase of $0.9 million in dividends paid to shareholders, and an increase of $0.5 million in repurchases of common stock under the share repurchase program, partially offset by a decrease of $0.6 million in amounts withheld to pay employee taxes related to share-based compensation.

Current wording

Cash flows used in financing activities increased $4.3 million to $51.5 million during the nine months ended June 30, 2026 as compared with $47.2 million in the prior year period. This was driven primarily by $2.4 million in less cash provided by common stock issuances, an increase of $1.4 million in dividends paid to shareholders, and an increase of $0.5 million in repurchases of common stock under the share repurchase program.

Previous wording

We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures. As of March 31, 2026, 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 2026 through 2029; (ii) cumulative cash obligations of $30.2 million for operating leases through 2034 and $5.2 million for finance leases through 2031; and (iii) purchase obligations for raw materials and other purchased parts of approximately $122.5 million which we expect to incur during the next 12 months and $2.1 million beyond March 31, 2027. Additionally, we expect to invest to strengthen our information technology 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 June 30, 2026, 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 2026 through 2029; (ii) cumulative cash obligations of $40.1 million for operating leases through 2037 and $5.4 million for finance leases through 2031; and (iii) purchase obligations for raw materials and other purchased parts of approximately $108.1 million which we expect to incur during the next 12 months and $2.2 million beyond June 30, 2027. Additionally, we expect to invest to strengthen our information technology 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 declared a quarterly dividend of $0.070 per share on April 28, 2026, payable on or about May 20, 2026 to stockholders of record as of May 11, 2026, which will result in an estimated $11.0 million cash outlay.

Current wording

We declared a quarterly dividend of $0.070 per share on July 28, 2026, payable on or about August 20, 2026 to stockholders of record as of August 10, 2026, which will result in an estimated $10.9 million cash outlay.

Previous wording

Parts of our business depend upon construction activity, which is seasonal in many areas due to the impact of cold weather conditions on construction activity. Net sales and operating income have historically been lowest in our first and second quarters ending December 31 and March 31, respectively, when the northern U.S. and most of Canada generally face weather conditions that restrict significant construction activity. Therefore, the results of operations for the three and six months ended March 31, 2026 are not necessarily indicative of operating results that may be achieved for any other interim period or the full year.

Current wording

Parts of our business depend upon construction activity, which is seasonal in many areas due to the impact of cold weather conditions on construction activity. Net sales and operating income have historically been lowest in our first and second quarters ending December 31 and March 31, respectively, when the northern U.S. and most of Canada generally face weather conditions that restrict significant construction activity. Therefore, the results of operations for the three and nine months ended June 30, 2026 are not necessarily indicative of operating results that may be achieved for any other interim period or the full year.