Zurn Elkay Water Solutions Corp

Previous wording

During the three and six months ended June 30, 2026, the Company received refunds of approximately $47.6 million related to previously paid IEEPA reciprocal tariffs on certain raw materials and products. The Company continues to evaluate additional recovery opportunities associated with reciprocal tariffs previously paid under IEEPA. While amounts have been received, uncertainty remains regarding the process, timing, and total amount of any additional recoveries, including the resolution of administrative procedures and any further legal developments. Accordingly, the Company has not recorded any additional potential benefit from refunds beyond amounts received at this time.

Current wording

During the three and nine months ended September 30, 2026, the Company received refunds of approximately $1.5 million and $49.1 million, respectively, related to previously paid IEEPA reciprocal tariffs on certain raw materials and products. The Company continues to evaluate additional recovery opportunities associated with reciprocal tariffs previously paid under IEEPA. While amounts have been received, uncertainty remains regarding the process, timing, and total amount of any additional recoveries, including the resolution of administrative procedures and any further legal developments. Accordingly, the Company has not recorded any additional potential benefit from refunds beyond amounts received at this time.

Previous wording

On July 21, 2026, we acquired 100% of the stock of Intellihot, Inc. ("Intellihot") for a total preliminary cash purchase price of approximately $108.5 million, excluding transaction costs and net of cash acquired. Intellihot, based in Vernon Hills, Illinois, is a leader in tankless water heater solutions serving the healthcare, education, hospitality and commercial end markets.

Current wording

On July 21, 2026, the Company acquired (via merger) 100% of the stock of Intellihot, Inc. ("Intellihot") for total consideration transferred of $107.3 million, excluding transaction costs and net of $2.1 million of cash acquired. Intellihot, based in Vernon Hills, Illinois, is a leader in tankless water heater solutions serving the healthcare, education, hospitality and commercial end markets. Our results of operations include the acquired operations subsequent to July 20, 2026.

Previous wording

During the year ended December 31, 2021, the Company completed a Reverse Morris Trust tax-free spin-off transaction (the “Spin-Off Transaction”) of the Company's Process & Motion Control ("PMC") business. 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 six months ended June 30, 2026 and June 30, 2025 have not been adjusted to separately disclose cash flows related to the discontinued operations.

Current wording

During the year ended December 31, 2021, the Company completed a Reverse Morris Trust tax-free spin-off transaction (the “Spin-Off Transaction”) of the Company's Process & Motion Control ("PMC") business. 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, 2026 and September 30, 2025 have not been adjusted to separately disclose cash flows related to the discontinued operations.

Previous wording

The major components of the income from discontinued operations, net of tax presented in the condensed consolidated statements of operations for the three and six months ended June 30, 2026 and June 30, 2025, are as follows (in millions):

Current wording

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, 2026 and September 30, 2025, are as follows (in millions):

Previous wording

During the three and six months ended June 30, 2026, 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 mergers and acquisitions on the Company's overall manufacturing capacity and the refinement of its overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs and other facility rationalization costs. Management expects to continue executing similar initiatives to optimize the Company's operating margin and manufacturing footprint. As such, the Company expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs and other facility rationalization costs. For the three and six months ended June 30, 2026, restructuring charges totaled $1.8 million and $2.7 million, respectively. For the three and six months ended June 30, 2025, restructuring charges totaled $1.9 million and $3.6 million, respectively. Refer to Item 1, Note 2, Restructuring and Other Similar Charges for further information.

Current wording

During the three and nine months ended September 30, 2026, 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 mergers and acquisitions on the Company's overall manufacturing capacity and the refinement of its overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs and other facility rationalization costs. Management expects to continue executing similar initiatives to optimize the Company's operating margin and manufacturing footprint. As such, the Company expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs and other facility rationalization costs. For the three and nine months ended September 30, 2026, restructuring charges totaled $1.4 million and $4.1 million, respectively. For the three and nine months ended September 30, 2025, restructuring charges totaled $1.8 million and $5.4 million, respectively. Refer to Item 1, Note 3, Restructuring and Other Similar Charges for further information.

Previous wording

Net sales were $491.0 million and $444.5 million during the three months ended June 30, 2026 and June 30, 2025, respectively, an increase of 10% year over year. Core sales improved 10% year over year, including growth in all product categories.

Current wording

Net sales were $495.1 million and $455.4 million during the three months ended September 30, 2026 and September 30, 2025, respectively, an increase of 9% year over year. Core sales improved 7% year over year, including growth in nearly all product categories, as well as an additional 2% increase resulting from our acquisition of Intellihot.

Previous wording

During the three months ended June 30, 2026, income from operations was $152.3 million compared to $77.6 million during the three months ended June 30, 2025. During the quarter ended June 30, 2026, the Company received a $47.6 million IEEPA reciprocal tariff refund. Excluding this item, income from operations increased by $27.1 million, an increase of 380 basis points year over year as a result of the favorable impact of year-over-year sales growth (inclusive of price realization) and Zurn Elkay Business System led productivity initiatives.

Current wording

During the three months ended September 30, 2026, income from operations was $108.2 million compared to $77.5 million during the three months ended September 30, 2025. Income from operations as a percentage of net sales increased by 490 basis points year over year as a result of product mix, Zurn Elkay Business System led productivity initiatives and supply chain repositioning.

Previous wording

Interest expense, net was $6.1 million for the three months ended June 30, 2026, compared to $7.7 million for the three months ended June 30, 2025. The decrease in interest expense, net as compared to the prior year period is a result of lower interest rates and interest earned on higher cash balances.

Current wording

Interest expense, net was $6.3 million for the three months ended September 30, 2026, compared to $7.1 million for the three months ended September 30, 2025. The decrease in interest expense, net as compared to the prior year period is primarily the result of lower interest rates.

Previous wording

Other income (expense), net for the three months ended June 30, 2026 and June 30, 2025, was $3.9 million and $(2.0) million, respectively. Other income (expense), net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit and postretirement plans and other non-operational gains and losses. The year-over-year change is primarily driven by a $4.4 million purchase price adjustment related to a 2023 divestiture of certain legal entities.

Current wording

Other income, net for the three months ended September 30, 2026 and September 30, 2025, was $0.7 million and $8.7 million, respectively. Other income, net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit and postretirement plans and other non-operational gains and losses. The year-over-year change is primarily driven by the settlement and exit of our U.S. defined benefit pension plan in the prior year.

Previous wording

The income tax provision was $37.6 million for the three months ended June 30, 2026, compared to $17.8 million for the three months ended June 30, 2025. The effective income tax rate for the three months ended June 30, 2026 was 25.0% versus 26.2% for the three months ended June 30, 2025. The effective income tax rate for the three months ended June 30, 2026 and June 30, 2025 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 certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and by the recognition of income tax benefits associated with share-based payments.

Current wording

The income tax provision was $26.5 million for the three months ended September 30, 2026, compared to $19.5 million for the three months ended September 30, 2025. The effective income tax rate for the three months ended September 30, 2026 was 25.8% versus 24.7% for the three months ended September 30, 2025. The effective income tax rate for the three months ended September 30, 2026 and September 30, 2025 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 certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and by the recognition of income tax benefits associated with share-based payments.

Previous wording

Net income for the three months ended June 30, 2026, was $113.3 million compared to net income of $50.5 million for the three months ended June 30, 2025. Diluted net income per share for the three months ended June 30, 2026 and June 30, 2025, was $0.67 and $0.29, respectively. The year-over-year change is the result of the factors described above. Net income from discontinued operations, net of tax, was $0.8 million for the three months ended June 30, 2026 compared to net income from discontinued operations, net of tax, of $0.4 million for the three months ended June 30, 2025. Diluted net income per share from discontinued operations for the three months ended June 30, 2026 and June 30, 2025, was $0.00 and $0.00, respectively.

Current wording

Net income for the three months ended September 30, 2026, was $76.3 million compared to net income of $61.8 million for the three months ended September 30, 2025. Diluted net income per share for the three months ended September 30, 2026 and September 30, 2025, was $0.45 and $0.36, respectively. The year-over-year change is the result of the factors described above. Net income from discontinued operations, net of tax, was $0.2 million for the three months ended September 30, 2026 compared to net income from discontinued operations, net of tax, of $2.2 million for the three months ended September 30, 2025. Diluted net income per share from discontinued operations for the three months ended September 30, 2026 and September 30, 2025, was $0.00 and $0.01, respectively.

Previous wording

Six Months Ended June 30, 2026 compared with the Six Months Ended June 30, 2025:

Current wording

Nine Months Ended September 30, 2026 compared with the Nine Months Ended September 30, 2025:

Previous wording

Net sales were $924.0 million and $833.3 million during the six months ended June 30, 2026 and June 30, 2025, respectively, an increase of 11% year-over-year. Core sales improved 11% year over year, including growth in all product categories.

Current wording

Net sales were $1,419.1 million and $1,288.7 million during the nine months ended September 30, 2026 and September 30, 2025, respectively, an increase of 10% year-over-year. Core sales improved 9% year over year, including growth in nearly all product categories, as well as an additional 1% increase associated with the acquisition of Intellihot.

Previous wording

Income from operations during the six months ended June 30, 2026 was $234.4 million compared to $141.0 million during the six months ended June 30, 2025. During the six months ended June 30, 2026, the Company received a $47.6 million IEEPA reciprocal tariff refund. Excluding this item, income from operations increased by $45.8 million, an increase of 330 basis points year over year as a result of the favorable impact of year-over-year sales growth (inclusive of price realization) and Zurn Elkay Business System led productivity initiatives.

Current wording

Income from operations during the nine months ended September 30, 2026 was $342.6 million compared to $218.5 million during the nine months ended September 30, 2025. During the nine months ended September 30, 2026, the Company received $49.1 million of IEEPA reciprocal tariff refunds. Excluding the tariff refunds, income from operations increased by $75.0 million, an increase of 370 basis points year over year as a result of product mix, Zurn Elkay Business System led productivity initiatives and supply chain repositioning.

Previous wording

Interest expense, net was $12.3 million during the six months ended June 30, 2026, compared to $15.0 million during the six months ended June 30, 2025. The decrease in interest expense, net as compared to the prior year period is a result of lower interest rates and interest earned on higher cash balances.

Current wording

Interest expense, net was $18.6 million during the nine months ended September 30, 2026, compared to $22.1 million during the nine months ended September 30, 2025. The decrease in interest expense, net as compared to the prior year period is a result of lower interest rates and interest earned on higher cash balances.

Previous wording

Other income (expense), net during the six months ended June 30, 2026 was $4.9 million compared to $(2.0) million during the six months ended June 30, 2025. Other income (expense), net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit plans and other non-operational gains and losses. The year-over-year change is primarily driven bya $4.4 million purchase price adjustment related to a 2023 divestiture of certain legal entities and foreign currency transaction gains, partially offset by the write off of $0.4 million of unamortized deferred financing costs.

Current wording

Other income, net during the nine months ended September 30, 2026 was $5.6 million compared to $6.7 million during the nine months ended September 30, 2025. Other income, net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit plans and other non-operational gains and losses. The year-over-year change is primarily driven bythe settlement and exit of our U.S. defined benefit pension plan in the prior year and a $4.4 million purchase price adjustment related to a 2023 divestiture of certain legal entities in the current year.

Previous wording

The income tax provision was $55.6 million for the six months ended June 30, 2026, compared to $32.9 million for the six months ended June 30, 2025. The effective income tax rate for the six months ended June 30, 2026 was 24.5% versus 26.5% for the six months ended June 30, 2025. The effective income tax rate for the six months ended June 30, 2026 and June 30, 2025 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.

Current wording

The income tax provision was $82.1 million for the nine months ended September 30, 2026, compared to $52.4 million for the nine months ended September 30, 2025. The effective income tax rate for the nine months ended September 30, 2026 was 24.9% versus 25.8% for the nine months ended September 30, 2025. The effective income tax rate for the nine months ended September 30, 2026 and September 30, 2025 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 certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and the recognition of income tax benefits associated with share-based payments.

Previous wording

Net income for the six months ended June 30, 2026, was $172.2 million compared to $94.1 million for the six months ended June 30, 2025. Diluted net income per share for the six months ended June 30, 2026 and June 30, 2025, was $1.02 and $0.55, respectively. The year-over-year change is the result of the factors described above. Net income from discontinued operations, net of tax, was $0.8 million for the six months ended June 30, 2026 compared to $3.0 million for the six months ended June 30, 2025. Diluted net income per share from discontinued operations for the six months ended June 30, 2026 and June 30, 2025, was $0.00 and $0.02, respectively.

Current wording

Net income for the nine months ended September 30, 2026, was $248.5 million compared to $155.9 million for the nine months ended September 30, 2025. Diluted net income per share for the nine months ended September 30, 2026 and September 30, 2025, was $1.47 and $0.91, respectively. The year-over-year change is the result of the factors described above. Net income from discontinued operations, net of tax, was $1.0 million for the nine months ended September 30, 2026 compared to $5.2 million for the nine months ended September 30, 2025. Diluted net income per share from discontinued operations for the nine months ended September 30, 2026 and September 30, 2025, was $0.00 and $0.03, respectively.

Previous wording

The calculation of Adjusted EBITDA under our credit agreement as of June 30, 2026, is presented in the table in the "Covenant Compliance" section below. However, the results of such calculation could differ in the future based on the different types of adjustments that may be included in such respective calculations at the time. For the six months ended June 30, 2026, we reported net income of $172.2 million and Adjusted EBITDA for the same period of $252.0 million. See "Covenant Compliance" for a reconciliation of Adjusted EBITDA to GAAP net income.

Current wording

The calculation of Adjusted EBITDA under our credit agreement as of September 30, 2026, is presented in the table in the "Covenant Compliance" section below. However, the results of such calculation could differ in the future based on the different types of adjustments that may be included in such respective calculations at the time. For the nine months ended September 30, 2026, we reported net income of $248.5 million and Adjusted EBITDA for the same period of $392.1 million. See "Covenant Compliance" for a reconciliation of Adjusted EBITDA to GAAP net income.

Previous wording

Our credit agreement, which governs our senior secured credit facilities, contains, among other provisions, restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and the maintenance of certain financial ratios. Payment of borrowings under the credit agreement may be accelerated if there is an event of default. Events of default include the failure to pay principal and interest when due, a material breach of a representation or warranty, certain non-payments or defaults under other indebtedness, covenant defaults, events of bankruptcy and a change of control. Certain covenants contained in the credit agreement restrict our ability to take certain actions, such as incurring additional debt or making acquisitions, if we are unable to meet a maximum Total Net Leverage Ratio (consolidated indebtedness to Adjusted EBITDA) of 4.00 to 1.00 as of the end of each fiscal quarter. As of June 30, 2026, our Total Net Leverage Ratio was 0.36 to 1.00. Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions.

Current wording

Our credit agreement, which governs our senior secured credit facilities, contains, among other provisions, restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and the maintenance of certain financial ratios. Payment of borrowings under the credit agreement may be accelerated if there is an event of default. Events of default include the failure to pay principal and interest when due, a material breach of a representation or warranty, certain non-payments or defaults under other indebtedness, covenant defaults, events of bankruptcy and a change of control. Certain covenants contained in the credit agreement restrict our ability to take certain actions, such as incurring additional debt or making acquisitions, if we are unable to meet a maximum Total Net Leverage Ratio (consolidated indebtedness to Adjusted EBITDA) of 4.00 to 1.00 as of the end of each fiscal quarter. As of September 30, 2026, our Total Net Leverage Ratio was 0.47 to 1.00. Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions.

Previous wording

(2)Other (income) expense, net consists primarily of gains and losses from foreign currency transactions, the non-service cost components associated with our defined benefit and postretirement plans and other non-operational gains and losses as defined in our credit agreement.

Current wording

(2)Other income, net consists primarily of gains and losses from foreign currency transactions, the non-service cost components associated with our defined benefit and postretirement plans and other non-operational gains and losses as defined in our credit agreement.

Previous wording

(7)Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $326.9 million (as defined by the credit agreement) at June 30, 2026.

Current wording

(7)Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $269.5 million (as defined by the credit agreement) at September 30, 2026.

Previous wording

As of June 30, 2026, we had $365.0 million of cash and cash equivalents and $540.3 million of additional borrowing capacity under our revolving credit facility. As of June 30, 2026, the available borrowings under our credit facility were reduced by $9.7 million due to outstanding letters of credit. As of December 31, 2025, we had $300.5 million of cash and cash equivalents and $189.9 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2025, the available borrowings under our credit facility were reduced by $10.1 million due to outstanding letters of credit.

Current wording

As of September 30, 2026, we had $307.1 million of cash and cash equivalents and $540.8 million of additional borrowing capacity under our revolving credit facility. As of September 30, 2026, the available borrowings under our credit facility were reduced by $9.2 million due to outstanding letters of credit. As of December 31, 2025, we had $300.5 million of cash and cash equivalents and $189.9 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2025, the available borrowings under our credit facility were reduced by $10.1 million due to outstanding letters of credit.

Previous wording

Net cash provided by operating activities was $208.4 million and $153.5 million during the six months ended June 30, 2026 and June 30, 2025, respectively. The change in year-over-year operating cash flows was primarily the result of an increase in net income, inclusive of $47.6 million IEEPA reciprocal tariff refund, partially offset by cash used for trade working capital in support of higher sales volume during the six months ended June 30, 2026.

Current wording

Net cash provided by operating activities was $320.6 million and $254.8 million during the nine months ended September 30, 2026 and September 30, 2025, respectively. The change in year-over-year operating cash flows was primarily the result of an increase in net income, inclusive of $49.1 million IEEPA reciprocal tariff refunds, partially offset by cash used for trade working capital in support of higher sales volume during the nine months ended September 30, 2026.

Previous wording

Cash used for investing activities was $6.3 million during the six months ended June 30, 2026 and $13.3 million during the six months ended June 30, 2025. Investing activities during the six months ended June 30, 2026, consisted of $6.3 million of capital expenditures. Investing activities during the six months ended June 30, 2025, consisted of $13.3 million of capital expenditures.

Current wording

Cash used for investing activities was $123.4 million during the nine months ended September 30, 2026 and $20.7 million during the nine months ended September 30, 2025. Investing activities during the nine months ended September 30, 2026, consisted of $16.1 million of capital expenditures and $107.3 million used to fund the acquisition of Intellihot. Investing activities during the nine months ended September 30, 2025, consisted of $20.7 million of capital expenditures.

Previous wording

Cash used for financing activities was $136.5 million during the six months ended June 30, 2026, compared to $138.7 million during the six months ended June 30, 2025. During the six months ended June 30, 2026, we utilized $0.6 million of cash for payments on finance leases, $99.6 million to repurchase outstanding shares of our common stock, $36.8 million for the payment of common stock dividends, and $3.0 million for payment of debt issuance costs, which was partially offset by $3.5 million of proceeds from the exercise of stock options and ESPP contributions. During the six months ended June 30, 2025, we utilized $0.4 million of cash for payments on finance leases, $109.9 million to repurchase outstanding shares of our common stock, and $30.3 million for the payment of common stock dividends, which was partially offset by $1.9 million of proceeds from the exercise of stock options and ESPP contributions, net of taxes withheld and paid on employees' share-based awards.

Current wording

Cash used for financing activities was $189.3 million during the nine months ended September 30, 2026, compared to $174.1 million during the nine months ended September 30, 2025. During the nine months ended September 30, 2026, we utilized $1.0 million of cash for payments on finance leases, $134.7 million to repurchase outstanding shares of our common stock, $55.0 million for the payment of common stock dividends, $3.0 million for payment of debt issuance costs, which was partially offset by $4.4 million of proceeds from the exercise of stock options and ESPP contributions. During the nine months ended September 30, 2025, we utilized $0.6 million of cash for payments on finance leases, $134.9 million to repurchase outstanding shares of our common stock, and $45.4 million for the payment of common stock dividends, which was partially offset by $6.8 million of proceeds from the exercise of stock options and ESPP contributions, net of taxes withheld and paid on employees' share-based awards.

Previous wording

As of June 30, 2026, we had $499.1 million of total indebtedness outstanding as follows (in millions):

Current wording

As of September 30, 2026, we had $500.3 million of total indebtedness outstanding as follows (in millions):

Previous wording

(1)Includes unamortized original issue discount and debt issuance costs of $3.3 million at June 30, 2026.

Current wording

(1)Includes unamortized original issue discount and debt issuance costs of $2.9 million at September 30, 2026.