Mueller Water Products, Inc. is a Delaware corporation that was incorporated on September 22, 2005 under the name Mueller Holding Company, Inc. On June 1, 2006, we completed an initial public offering of 28,750,000 shares of our common stock, and on December 14, 2006, Walter Industries, Inc., our parent company at that time, distributed to its shareholders 85,844,920 shares of our common stock to complete a spin-off of the Company.

We are a leading manufacturer and marketer of products and services used in the transmission, distribution and measurement of water in North America. Our products and services are used by municipalities and the residential and non-residential construction industries. CertainSome of our products have leading positions due to their strong brand recognition and reputation for quality, service and innovation. We believe we have one of the largest installed bases of iron gate valves and fire hydrants in the United States. Our iron gate valve or fire hydrant products are specified for use in the largest 100 metropolitan areas in the United States. Our large installed base, broad product range and well-known brands have led to long-standing relationships with the key distributors and end users of our products. Our consolidated net sales were $826.0$964.1 million in 2017.2020.

Infrastructure manufactures valves for water and gas systems, including iron gate, butterfly, tapping, check, knife, plug, automatic control and ball valves, as well as dry-barrel and wet-barrel fire hydrants and a broad line of pipe repair products, such as clamps and couplings used to repair leaks. Infrastructure’s net sales were $739.9$885.5 million in 2017.2020. Sales of Infrastructure products are driven principally by spending on water and wastewater infrastructure upgrade, repair and replacement, and by construction of new water and wastewater infrastructure, which is typically associated with construction of new residential communities. Infrastructure sells its products primarily through waterworks distributors. We estimate approximately 60%believe a majority of Infrastructure’s 20172020 net sales were for infrastructure upgrade, repair and replacement. Infrastructure also sells products for pipe repair to natural gas utilities.

Technologies offers residential and commercial water metering, water leak detection and pipe condition assessment products, systems and services. Technologies’ net sales were $86.1$78.6 million in 2017.2020. Technologies is comprised of the Mueller Systems and Echologics businesses. Mueller Systems sells water metering systems, products, services and servicessoftware directly to municipalities and to waterworks distributors. Echologics sells water leak detection and pipe condition assessment products and services primarily to municipalities.

Our business strategy is to capitalize on the large, attractive and growing water infrastructure markets worldwide. Key elements of this strategy are as follows:

We plan to make increasingcontinue to increase investments in our product development capabilities, including expanding our engineering staff, to develop and market new products and services. We expect to add new products to our portfolio and offer new products into different end markets. We expect this expansion to come through internal investments as well as acquisitions.

We are bringing best practices focused on Lean manufacturing with an investment mindset to deliver manufacturing productivity improvements.

We will continue to evaluate the acquisition of strategic businesses, technologies and product lines that have the potential to strengthen our competitive positions, enhance or expand our existing product and service offerings, expand our technological capabilities, leverage our manufacturing capabilities, provide synergistic opportunities or that allow us to enter new markets.  As part of this strategy, we may pursue international opportunities, including acquisitions, joint ventures and partnerships, that allow us to expand product or service offerings or to enter new markets.

We offer a broad line of water infrastructure, flow control, metrology and leak detection products and services primarily in the United States and Canada. Infrastructure sells water and gas valves, fire hydrants and fire hydrants.pipe repair products. Technologies sells water metering products and systems and leak detection and pipe condition assessment products and services. Our products are designed, manufactured and tested in compliance with industry standards, where applicable.

Infrastructure’s water distribution products are manufactured to meet or exceed American Water Works Association (“AWWA”) Standards and, where applicable, certified to NSF/ANSI Standard 61 for potable water conveyance. In addition, Underwriters Laboratory (“UL”) and FM Approvals (“FM”) have approved many of these products. These products are typically specified by a water utility for use in its system.

Infrastructure also produces small valves, meter bars and line stopper fittings for use in gas systems, as well as machines and tools for tapping, drilling, extracting, installing and stopping-off, which are designed to work with its water and gas fittings and valves as an integrated system.

These fire hydrants consist of an upper barrel and nozzle section and a lower barrel and valve section that connects to a water main. In dry-barrel hydrants, the valve connecting the barrel of the hydrant to the water main is located below ground at or below the frost line, which keeps the upper barrel dry. Infrastructure sells dry-barrel fire hydrants under the Mueller and U.S. Pipe Valve and Hydrant brand names in the United States and the Canada Valve brand name in Canada. Infrastructure also makes wet-barrel hydrants, where the valves are located in the hydrant nozzles and the barrel contains water at all times. Wet-barrel hydrants are made for warm weather climates, such as in California and Hawaii, and are sold under the Jones brand name.

Most municipalities have approved a limited number of fire hydrant brands for installation within their systems due to their desiredesires to use the same tools and operating instructions across their systems and to minimize inventories of spare parts. We believe Infrastructure’s large installed base of fire hydrants throughout the United States and Canada, reputation for superior quality and performance and incumbent specification positions have contributed to the leading market positionsposition of its fire hydrants. This large installed base also leads to recurring sales of replacement hydrants and hydrant parts.

Technologies is comprised of companies that provide innovative solutions, products and services that actively diagnose, measure and monitor the delivery of water.

Sales of water metering products and systems accounted for 83%79%, 83%81% and 88%79% of Technologies’ net sales in 2017, 20162020, 2019 and 2015,2018, respectively.

See “Item 2. PROPERTIES” for a description of our principal manufacturing facilities.

We will continue to expand the use of Lean manufacturing and Six Sigma business improvement methodologies where appropriate to safely capture higher levels of quality, service and operational efficiency in our manufacturing facilities in both segments.

Infrastructure operates twelvefourteen manufacturing facilities located in the United States, Canada, Israel and China. These manufacturing operations include foundry, machining, fabrication, assembly, testing and painting operations. Not all facilities perform each of these operations. Infrastructure’s existing manufacturing capacity is sufficient for anticipated near-term requirements. However, in order to meet longer-term capacity requirements and modernize some production facilities, Infrastructure has no current plansexpanded its large valve casting capabilities at its foundry location in Chattanooga, Tennessee, is currently building out its new manufacturing facility in nearby Kimball, Tennessee to expand capacity.insource certain activities and assemble certain large valves, and has started construction of a new brass foundry in Decatur, Illinois that will replace our existing brass foundry located nearby in Decatur.

Infrastructure foundries use both lost foam and green sand casting techniques. Infrastructure uses the lost foam technique for fire hydrant production in its Albertville, Alabama facility and for iron gate valve production in its Chattanooga, Tennessee facility. The lost foam technique has several advantages over the green sand technique for high-volume products, including a reduction in the number of manual finishing operations, lower scrap levels and the ability to reuse some of the materials.

Mueller SystemsTechnologies operates one manufacturing facility in the United States and contracts with a manufacturing facility in Mexico. Mueller SystemsCertain Technologies products are also manufactured in facilities primarily dedicated to Infrastructure products. Technologies designs, manufactures and assembles water metering products in Cleveland, North Carolina, and designs and supports AMR and AMI systems in Middleborough, Massachusetts. Echologicsour research and development center of excellence for software and electronics in Atlanta, Georgia, and designs leak detection and condition assessment products in Toronto, Ontario.

We have active patents relating to the design of our products and trademarks for our brands and products. We have filed and continue to file, when appropriate, patent applications used in connection with our business and products. Many of the patents for technology underlying the majority of our products have been in the public domain for many years, and we do not believe third-party patents individually or in the aggregate are material to our business. However, we consider the pool of proprietary information, consisting of expertise and trade secrets relating to the design, manufacture and operation of our products to be particularly important and valuable. We generally own the rights to the products that we manufacture and sell, and we are not dependent in any material way upon any license or franchise to operate. See “Item 1A. RISK FACTORS-Any inability to protect our intellectual property or our failure to effectively defend against intellectual property infringement claims could adversely affect our competitive position.”

See “Item 1A. RISK FACTORS-Seasonal demand for certain of our products and services may adversely affect our financial results.” and “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Seasonality.”

We sell primarily to distributors. Our distributor relationships are generally non-exclusive, but we attempt to align ourselves with key distributors in the principal markets we serve. We believe “Mueller” is the most recognized brand in the U.S. water infrastructure industry.

Infrastructure sells its products primarily through waterworks distributors to a wide variety of end user customers, including municipalities, water and wastewater utilities, gas utilities, and fire protection and construction contractors. Sales of our products are heavily influenced by the specifications for the underlying projects. Approximately 8%7%, 8% and 9% of Infrastructure’s net sales were to Canadian customers in 2017, 20162020, 2019 and 2015,2018, respectively.

At September 30, 2017,2020, Infrastructure had 8875 sales representatives in the field and 91132 inside marketing and sales professionals, as well as 129113 independent manufacturer’s representatives. In addition to calling on distributors, these representatives call on municipalities, water companies and other end users to ensure the products specified for their projects are our products or comparable to our products.

Infrastructure’s extensive installed base, broad product range and well-known brands have led to many long-standing relationships with the key distributors in the principal markets we serve. Our distribution network covers all of the major locations for our principal products in the United States and Canada. Although we have long-standing relationships with most of our key distributors, we typically do not have long-term contracts with them, including our two largest distributors, which together accounted for approximately 34%35%, 35%34% and 34%35% of Infrastructure’s gross sales in 2017, 20162020, 2019 and 2015,2018, respectively. The loss of either of these distributors would have a material adverse effect on our business. See “Item 1A. RISK FACTORS-Our business depends on a small group of key customers for a significant portion of our sales.”

Mueller SystemsTechnologies sells its water metering systems, products and services directly to municipalities and to waterworks distributors. Echologicsdistributors and sells water leak detection and pipe condition assessment products and services primarily to municipalities orand to utilities. At September 30, 2017,2020, Technologies had 3536 sales representatives in the field. Technologies’ five largest customers accounted for approximately 48%45%, 49%50% and 54%47% of its gross sales in 2017, 20162020, 2019 and 2015,2018, respectively. See “Item 1A. RISK FACTORS-Our business depends on a small group of key customers for a significant portion of our sales.”

Sales cycles for metering systems can span several years and it is common for customers to place orders throughout the contract period. Although we believe we have a common understanding with our customer as to the total value of a contract when it is awarded, we do not recognize backlog until customer orders are received.

The U.S. and Canadian markets for water infrastructure and flow control products are very competitive. See “Item 1A. RISK FACTORS-Strong competition could adversely affect prices and demand for our products and services, which would adversely affect our operating results.” There are only a few competitors for most of our product and service offerings. Many of our competitors are well-established companies with products that have strong brand recognition. We consider our installed base, product quality, customer service level, brand recognition, innovation, distribution and technical support to be competitive strengths.

The competitive environment for most of Infrastructure’s valve and hydrant products is mature and many end users are slow to transition to brands other than their historically preferred brand. It is difficult to increase market share in this environment. We believe our fire hydrants and valves enjoy strong competitive positions based primarily on the extent of their installed base, product quality, specified position and brand recognition. Our principal competitors for fire hydrants and iron gate valves are McWane, Inc. and American Cast Iron Pipe Company. The primary competitors for our brass products are The Ford Meter Box Company, Inc. and A.Y. McDonald Mfg. Co. Many brass valves are interchangeable among different manufacturers. With respect to our specialty valve products such as butterfly, plug, and check valves, our principal competitors are mainly DeZURIK, Val-Matic and McWane, Inc.

The markets for products and services sold by Technologies are very competitive. Mueller Systems sells water metering products and systems, primarily in the United States. We believe a substantial portion of this market is in the process of transitioning from manually read meters to automatically read meters, but we also expect this transition to be relatively slow and that many end users will be reluctant to adopt brands other than their historically preferred brand. Although Mueller Systems’ market position is relatively small, we believe itsour automatically read meters and associated technology are well positioned to gain a greater share of these markets. ItsOur principal competitors are Sensus, Itron, Inc., Neptune Technology Group Inc., Badger Meter, Inc., Aclara LLC and Itron,Master Meter, Inc. Echologics sells water leak detection and pipe condition assessment products and services in North America, the United Kingdom and select countries in Europe, Asia and the Middle East, with itsour primary markets being the United States and Canada. The worldwide market for leak detection and pipe condition assessment is highly fragmented with numerous competitors. ItsOur more significant competitors are Pure Technologies Ltd., Gutermann AG and Syrinix Ltd.

Our primary research and development (“R&D”) facilities are located in Chattanooga, Tennessee and in Ariel, Israel for Infrastructure and in Middleborough, MassachusettsAtlanta, Georgia and Toronto, Ontario for Technologies. The primary focus of these operations is to develop new products, improve and refine existing products and obtain and assure compliance with industry approval certifications or standards (such as AWWA, UL, FM, NSF and The Public Health and Safety Company). At September 30, 2017,2020, we employed 8578 people dedicated to R&D activities.  R&D expenses were $12.1$15.0 million, $9.9$14.3 million and $12.1$11.6 million during 2017, 20162020, 2019 and 2015,2018, respectively.

Our operations are subject to numerous federal, state and local laws and regulations, both within and outside the United States, in areas such as: competition, government contracts, international trade, labor and employment, tax, licensing, consumer protection, environmental protection, workplace health and safety, and others.  These and other laws and regulations impact the manner in which we conduct our business, and changes in legislation or government policies can affect our operations, both favorably and unfavorably. For example, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and similar state laws affect our operations by, among other things, imposing investigation and cleanup requirements for threatened or actual releases of hazardous substances. Under CERCLA, joint and several liability may be imposed on operators, generators, site owners, lessees and others regardless of fault or the legality of the original activity that caused or resulted in the release of the hazardous substances. Thus, we may be subject to liability under CERCLA and similar state laws for properties that (1) we currently own, lease or operate, (2) we, our predecessors, or former subsidiaries previously owned, leased or operated, (3) sites to which we, our predecessors or former subsidiaries sent waste materials, and (4) sites at which hazardous substances from our facilities’ operations have otherwise come to be located. The purchaser of U.S. Pipe has been identified as a “potentially responsible party” (“PRP”) under CERCLA in connection with a former manufacturing facility operated by U.S. Pipe that was in the vicinity of a Superfund site located in North Birmingham, Alabama. Under the terms of the acquisition agreement relating to our sale of U.S. Pipe, we agreed to indemnify the purchaser for certain environmental liabilities, including those arising out of the former manufacturing site in North Birmingham. Accordingly, the purchaser tendered the matter to us for indemnification, which we accepted. Ultimate liability for the site will depend on many factors that have not yet been determined, including the determination of EPA’s remediation costs, the number and financial viability of the other PRPs (there are four other PRPs currently) and the determination of the final allocation of the costs among the PRPs. For more information regarding this matter as well as others that may affect our business, including our capital expenditures, earnings and competitive position, see “Item 1A. RISK FACTORS,” “Item 3. LEGAL PROCEEDINGS - Environmental,” “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 17.18. of the Notes to Consolidated Financial Statements.

We believe relations with our employees, including those represented by collective bargaining agreements, are good.

See Note 16.17. of the Notes to Consolidated Financial Statements.

Our principal executive offices are located at 1200 Abernathy Road N.E., Suite 1200, Atlanta, Georgia 30328, and our main telephone number at that address is (770) 206-4200.

Our primary end markets are repair and replacement of water infrastructure, driven by municipal spending and new water infrastructure installation driven by new residential construction. Sustained uncertainty about any of these end markets could cause our distributors and end use customers to delay purchasing, or determine not to purchase, our products or services. General economic and other factors, including unemployment levels, energy costs, the state of the credit markets (including municipal bonds, mortgages, home equity loans and consumer credit) and other factors beyond our control, could adversely affect our sales, profitability and cash flows.

Governments and private water entities may have limited abilities to increase taxes, water fees or water rates, as applicable. It is not unusual for water and wastewater projects to be delayed and rescheduled for a number of reasons, including changes in project priorities, increasing interest rates and inflation and difficulties in complying with environmental and other governmental regulations. In addition, reductions or delaysFor example, changes in federal spending related tointerest rates and credit markets (including municipal bonds, mortgages, home equity loans and consumer credit) can significantly increase the costs of the projects in which our products are utilized — such as new residential construction and water orand wastewater infrastructure upgrade, repair and replacement projects — and lead to such projects being reduced, delayed and/or rescheduled, which could adversely affect state or local projectsresult in a decrease in our revenues and mayearnings and adversely affect our financial results.condition. In addition, higher interest rates are often accompanied by inflation. In an inflationary environment, we may be unable to raise the prices of our products sufficiently to keep up with the rate of inflation, which would reduce our profit margins.

Some state and local governments have placed or may place significant restrictions on the use of water by their constituents. These types of water use restrictions may lead to reduced water revenues by private water entities, municipalities or other governmental agencies, which could similarly affect funding decisions for water-related projects.

Poor economic conditions may cause states, municipalities or private water entities to receive lower than anticipated revenues, which may lead to reduced or delayed funding for water infrastructure projects. Even if favorable economic conditions exist, water infrastructure owners may choose not to address deferred infrastructure needs due to a variety of political factors or competing spending priorities.

Low levels of spending for water and wastewater infrastructure construction activity could adversely affect our sales, profitability and cash flows.

Because a significant portion of our business depends on newNew water and wastewater infrastructure spending which in turn largely depends onis heavily dependent upon residential construction,construction. As a result, our financial performance depends significantly on the stability and growth of the residential construction market. This market depends on a variety of factors beyond our control, including household formation, consumer confidence, interest rates, inflation and the availability of mortgage financing, as well as the mix between single and multifamily construction, availability of construction labor and ultimately the extent to which new construction leads to the development of raw land. Adverse conditions or sustained uncertainty regarding the residential construction market could adversely affect our sales, profitability and cash flows.flows, including the risk that one or more of our distributors and/or end use customers decide to delay purchasing, or determine not to purchase, our products or services.

Infrastructure sells products primarily to distributors and our success depends on these outside parties operating their businesses profitably and effectively. These distributors’ profitability and effectiveness can vary significantly from company to company and from region to region within the same company. Further, our largest distributors generally also carry competing products. We may fail to align our operations with successful distributors in any given market.

Distributors in our industry have experienced consolidation in recent years. If such consolidation continues, our distributors could be acquired by other distributors who have better relationships with our competitors and pricing and profit margin pressure may intensify. Pricing and profit margin pressure or the loss of any one of our key distributors in any market could adversely affect our operating results.

Technologies primarily sells directly to end users. Some of these customers represent a relatively high concentration of net sales. Over time, expected growth in sales is expected to lessen the significance of individual customers. In the short term, net sales could decline if existing significant customers do not continue to purchase our products or services and new customers are not obtained to replace them.

The U.S. and Canadian markets for water infrastructure and flow control products are very competitive. While there are only a few competitors for most of our product and service offerings, many of our competitors are well-established companies with strong brand recognition. We compete on the basis of a variety of factors, including the quality, price and innovation of our products, services and service levels. Our ability to retain our customers in the face of competition depends on our ability to market our products and services to our customers and end users effectively.

The U.S. markets for water metering products and systems are highly competitive. Our primary competitors benefit from strong market positions and many end users are slow to transition to new products or new brands. Our ability to gain customers depends on our technological advancements and ability to market our products and services to our customers and end users effectively.

In addition to competition from North American companies, we face the threat of competition from outside of North America. The intensity of competition from these companies is affected by fluctuations in the value of the U.S. dollar against their local currencies, the cost to ship competitive products into North America and the availability of trade remedies, if any. Competition may also increase as a result of U.S. competitors shifting their operations to lower-cost countries or otherwise reducing their costs.

Our competitors may reduce the prices of their products or services, improve their quality, improve their functionality or enhance their marketing or sales activities. Any of these potential developments could adversely affect our prices and demand for our products and services.

Technologies'Technologies’ smart metering and leak detection and pipe condition assessment products and services have much less market history than many of Infrastructure'sInfrastructure’s products. Our investments in smart metering have primarily focused on the market for AMI and have been based on our belief that water utilities will transition over time from traditional manually-read meters to automatically-read meters. The market for AMI is relatively new and continues to evolve, and the U.S. markets for water meter products and systems are highly competitive. Water utilities have traditionally been slow adopters of new technology and may

The success of our new products and systems, such as our recently launched smart hydrant and Sentryx software platform, will depend on our ability to manage the risks associated with their introduction, including the risk that new products and systems may have quality or other defects or deficiencies in their early stages that result in their failure to satisfy performance or reliability requirements. Our success will depend in part on our ability to manage these risks, including costs associated with manufacturing, installation, maintenance and warranties. These challenges can be costly and technologically challenging, and we cannot determine in advance the ultimate effect they may have. For example, during the quarterquarters ended March 30, 2017 and June 30, 2018, we recorded a discrete warranty expenseexpenses of $9.8 million and $14.1 million, respectively, associated with certain radio products that Technologies produced between 2011 and 2014,prior to 2017, as described more fully in Note 17.18. to the Notes to the Consolidated Financial Statements. Warranty liabilities and the related reserve estimation process is highly judgmental due to the complex nature of these exposures and the unique circumstances of each claim. Furthermore, once claims are asserted for an alleged product defect by municipalities or other customers, it can be difficult to determine the level of potential exposure or liability related to such allegation to which the assertion of these claims will expand geographically. Although we have obtained insurance for product liability claims, such policies may not be available or adequate to cover the liability for damages, the cost of repairs and/or the expense of litigation. Current and future claims may arise out of events or circumstances not covered by insurance and not subject to effective indemnification agreements with our subcontractors. Failure to successfully manage these challenges could result in lost revenue, significant warranty and other expenses, and harm to our reputation.

During the quarter ended September 30, 2017,October 2018, we announced the move of our strategic reorganization plan designedMiddleborough, Massachusetts facility to Atlanta, which will allow us to consolidate our resources and accelerate our product innovation through creation of a research and revenue growth. In particular, we reconfigured our divisional structure around products, with five business teams that have linedevelopment center of excellence for software and cross-functional responsibility for managing distinct product portfolios. We believe the new organizational structure will be better aligned with business needs and generate greater efficiencies.

These measures, however, could yield unintended consequences, such as distractionDuring November 2019, we announced the purchase of a new facility in Kimball, Tennessee, which will allow us to support and enhance our investment in our Chattanooga large casting foundry. As a result of this reorganization, we announced the subsequent closures of our managementfacilities in Hammond, Indiana and employees, business disruption, inability to attract or retain key personnel, and reduced employee productivity, which could negatively affect our business, sales, financial condition and results of operations.Woodland, Washington. We expect to incur about $11have incurred $2.5 million in restructuring charges associated with the reorganization.related to this reorganization in fiscal 2020. We cannot guarantee that the activities under the restructuring and reorganization activities will result in the desired efficiencies and estimated cost savings.

WeAs part of our long-term business strategy, we will continue to evaluate the development or acquisition of strategic businesses, technologies and product lines with the potential to strengthen our industry position, enhance and expand our existing set of product and service offerings, or enter new markets. We may be unable to identify or successfully complete suitable acquisitions in the future and completed acquisitions may not be successful.

Any acquisitions or investments may ultimately harm our business or financial condition, as they may not be successful and may ultimately have an adverse effect on our operating results or financial condition and/or result in impairment charges.

In addition, compliance with the laws and regulations of multiple international jurisdictions increases our cost of doing business. International operations are subject to anti-corruption laws and anti-competition regulations, among others. For example, the U.S. Foreign Corrupt Practices Act and similar non-U.S. anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or ineffective allocationproviding anything of capitalvalue to improperly influence foreign government officials and certain others for the purpose of obtaining or retaining business, or obtaining an unfair advantage. Violations of these laws and regulations could result in criminal and civil sanctions, disrupt our business and adversely affect our brands, international expansion efforts, business and operating results and/results.

We earn revenues and incur expenses in foreign currencies as part of our operations outside of the United States. Accordingly, fluctuations in currency exchange rates may significantly increase the amount of U.S. dollars required for foreign currency expenses or stockholder value.significantly decrease the U.S. dollars we receive from foreign currency revenues. As a result, changes between the foreign exchange rates and the U.S. dollar affect the amounts we record for our foreign assets, liabilities, revenues and expenses, and could have a negative effect on our financial results. We expect that our exposure to foreign currency exchange rate fluctuations will grow as the relative contribution of our non-U.S. operations increases through both organic and inorganic growth.

We maintain several single-source or limited-source supplier relationships with manufacturers, including some outside of the United States. If the supply of a critical single- or limited-source product is delayed or curtailed, we may not be able to ship the related products in desired quantities or in a timely manner. Even where multiple sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of sales, which could harm our operating results.

These relationships reduce our direct control over production. Our reliance on these vendors subjects us to a greater risk of shortages, and reduced control over delivery schedules of products, as well as a greater risk of increases in product costs. In instances where we stock lower levels of product inventories, a disruption in product availability could harm our financial performance and our ability to satisfy customer needs. In addition, defective products from these manufacturers could reduce product reliability and harm our reputation.

A disruption within our logistics or supply chain network at any of the freight companies that deliver us components for our manufacturing operations in the United States or ship our fully-assembled products to our customers could adversely affect our business and result in lost sales or harm to our reputation. Our supply chain is dependent on third party ocean-going container ships, rail, barge and trucking systems and, therefore, disruption in these logistics services because of weather-related problems, strikes, bankruptcies or other events could adversely affect our financial performance and financial condition, negatively impacting sales, profitability and cash flows.

Transportation costs can be an important factor in a customer’s purchasing decision. Many of our products are big, bulky and heavy, which tend to increase transportation costs. We also have relatively few manufacturing sites, which tends to increase transportation distances to our customers and costs. High transportation costs could make our products less competitive compared to similar or alternative products offered by competitors.

The occurrence of any of these events may impair our production capabilities and adversely affect our sales, profitability and cash flows.

Our business depends on our technology and expertise, which were largely developed internally and are not subject to statutory protection. We rely on a combination of patent protection, copyright and trademark laws, trade secrets protection, employee and third-party confidentiality agreements and technical measures to protect our intellectual property rights. The measures that we take to protect our intellectual property rights may not adequately deter infringement, misappropriation or independent development of our technology, and they may not prevent an unauthorized party from obtaining or using information or intellectual property that we regard as proprietary or keep others from using brand names similar to our own. The disclosure, misappropriation or infringement of our intellectual property could harm our competitive position. In addition, our actions to enforce our rights may result in substantial costs and the diversion of management time and other resources. We may also be subject to intellectual property infringement claims from time to time, which may result in additional expenses and diverting resources to respond to these claims. Finally, for those products in our portfolio that rely on patent protection, once a patent has expired the product is more subject to competition. Products under patent protection potentially generate significantly higher revenue and earnings than those not protected by patents. If we fail to successfully enforce our intellectual property rights or register new patents, our competitive position could suffer, which could adversely affect our business, financial condition, results of operations and cash flows.

We rely on various information technology systems, some of which are controlled by outside service providers, to manage key aspects of our operations. The proper functioning of our information technology systems is important to the successful operation of our business. If critical information technology systems fail, or are otherwise unavailable, our ability to manufacture products, process orders, track credit risk, identify business opportunities, maintain proper levels of inventories, collect accounts receivable, pay expenses and otherwise manage our business would be adversely affected.

We depend on the Internet and our information technology infrastructure for electronic communications among our locations around the world and betweenamong our personnel and suppliers and customers. SecurityCyber and other data security breaches of this infrastructure can create system disruptions, shutdowns or unauthorized disclosure of confidential information. If we or our service providers are unable to prevent these breaches, our operations could be disrupted or we may suffer financial, reputational or other harm because of lost or misappropriated information.

As we grow our Technologies businesses, we continue to accumulate increasing volumes of customer data. In addition, we store personal information in connection with our human resources operations. Our efforts to protect this information may be unsuccessful due to employee errors or malfeasance, technical malfunctions, the actions of third parties (such as cyber attack) or other factors. If our cyber defenses and other countermeasures we deploy are unable to protect personal data, it could be accessed or disclosed improperly, which could expose us to liability, harm our reputation and deter current and potential users from using our products and services. The regulatory environment related to cyber and information security, data collection and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs.

In the normal course of our business, we are subject to claims and lawsuits, including from time to time claims for damages related to product liability and warranties, investigations by governmental agencies, litigation alleging the infringement of intellectual property rights and litigation related to employee matters and commercial disputes. We may also be subject to investigations, claims, litigation and other proceedings outside the ordinary course of business, such as the February 2019 mass shooting event we experienced in our Aurora, Illinois facility. Defending these lawsuits and becoming involved in these investigations may divert our management’s attention, and may cause us to incur significant expenses.expenses, even if there is no evidence that our systems or components were the cause of the claim. In addition, we may be required to pay damage awards, penalties or settlements, or become subject to injunctions or other equitable remedies, that could have a material adverse effect on our business, financial condition, results of operations and cash flows. If we were required to participate in a product recall or take other action to address a product liability or other claim, our reputation could be harmed. Moreover, any insurance or indemnification rights that we have may be insufficient or unavailable to protect us against potential loss exposures. See “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 3. LEGAL PROCEEDINGS - Environmental,” “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 17.18. of the Notes to Consolidated Financial Statements.

We are subject to stringent laws and regulations relating to the protection of the environment, health and safety and incur significant capital and other expenditures to comply with these requirements. Failure to comply with any environmental, health or safety requirements could result in the assessment of damages, the imposition of penalties, suspension of production, changes to equipment or processes or a cessation of operations at our facilities, any of which could have a material adverse effect on our business. Because these laws are complex, subject to change and may be applied retroactively, we cannot predict with certainty the extent of our future liabilities with respect to environmental, health and safety matters and whether they will be material.

In addition, certain statutes such as CERCLA may impose joint and several liability for the costs of remedial investigations and actions on entities that generated waste, arranged for disposal of waste, transported to or selected the disposal sites and the past and present owners and operators of such sites. All such PRPs“potentially responsible parties” (“PRP”) (or any one of them, including us) may be required to bear all of such costs regardless of fault, the legality of the original disposal or ownership of the disposal site. As a result, we may be required to conduct investigations and perform remedial activities at current and former operating and manufacturing sites where we have been, or in the future could be, named a PRP with respect to such environmental liabilities, any of which could require us to incur material costs. The final remediation costs of these environmental sites may exceed current estimated costs, and additional sites in the future may require material remediation expenses. If actual expenditures exceed our estimates, our results of operations and financial position could be materially and adversely affected. See “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 3. LEGAL PROCEEDINGS - Environmental,” “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 17. of the Notes to Consolidated Financial Statements.

Under the terms of the acquisition agreement relating to the August 1999 sale by Tyco of our businesses to a previous owner of these businesses, we are indemnified by certain Tyco entities (“Tyco Indemnitors”) for all liabilities arising in connection with the operation of these businesses prior to their sale by Tyco, including with respect to products manufactured or sold prior to the closing of that transaction, as well as certain environmental liabilities. These indemnities survive indefinitely and are not subject to any dollar limits. In the past, Tyco Indemnitors have made substantial payments and assumed defense of claims in connection with these indemnification obligations. Tyco’s indemnity does not cover liabilities to the extent caused by us or the operation of our businesses after August 1999, nor does it cover liabilities arising with respect to businesses or sites acquired after August 1999. Since 2007, Tyco has engaged in multiple corporate restructurings, split-offs and divestitures. The result of these transactions is that the assets of, and control over, Tyco Indemnitors has changed. Should any Tyco Indemnitor become financially unable or fail to comply with the terms of the indemnity, we may be responsible for such obligations or liabilities.

Our ability to expand or maintain our business depends on our ability to hire, train and retain employees with the skills necessary to understand and adapt to the continuously developing needs of our customers. The increasing demand for qualified personnel makes it more difficult for us to attract and retain employees with requisite skill sets, particularly employees with specialized technical and trade experience. Changing demographics and labor work force trends also may result in a loss of knowledge and skills as experienced workers retire. If we fail to attract, motivate, train and retain qualified personnel, or if we experience excessive turnover, we may experience declining sales, manufacturing delays or other inefficiencies, increased recruiting, training and relocation costs and other difficulties, and our business, financial condition, results of operations and cash flows could be materially and adversely affected. Competition for qualified personnel is intense particularly in several regions of the United States whereand we manufacture products and particularly within Technologies. We may not be successful in attracting or retaining qualified personnel, which could negatively impact our business.

We provide pension benefits to certain current and former employees. To determine our future payment obligations under the plans, certain rates of return on the plans’ assets, growth rates of certain costs and participant longevity have been estimated. The proportion of the assets held by our U.S. pension plan invested in fixed income securities, instead of equity securities, has increased over historical levels. This shift in asset allocation has resulted in a decrease in the estimated rate of return on plan assets for this plan. Assumed discount rates, expected return on plan assets and participant longevity have significant effects on the amounts reported for the pension obligations and pension expense.

The funded status of our pension plans can also be influenced by regulatory requirements, which can change unexpectedly and impose higher costs if funding levels are below certain thresholds. We may increase contributions to our pension plans to avoid or reduce these higher costs.

Significant adverse changes in credit and capital markets or changes in investments could result in discount rates or actual rates of return on plan assets being materially lower than projected and require us to increase pension contributions in future years to meet funding level requirements. Increasing life spans for plan participants may increase the estimated benefit payments and increase the amounts reported for pension obligations, pension contributions and pension expense. If increased funding requirements are particularly significant and sustained, our overall liquidity could be materially reduced, which could cause us, among other things, to reduce investments and capital expenditures, or restructure or refinance our debt.

Our operations require importing and exporting goods and technology among countries on a regular basis. Thus, the sale and shipment of our products and services across international borders, as well as the purchase of components and products from international sources, subject us to extensive trade laws and regulations. Trade laws and regulations are complex, differ by country, and are enforced by a variety of government agencies. Because we are subject to extensive trade laws and regulations in the countries in which we operate, we are subject to the risk that laws and regulations could change in a way that would expose us to additional costs, penalties or liabilities, and our policies and procedures may not always protect us from actions that would violate international trade laws and regulations. For example, certain federal legislation requires the use of American iron and steel products in certain water projects receiving certain federal appropriations. We have incurred costs in connection with ensuring our ability to certify to these requirements, including those associated with enhancing our assembly operations and sourcing practices. As a result of the varying legal and regulatory requirements to which our cross-border activities are subject, we may not always be in compliance with the trade laws and regulations in all respects. Any improper actions could subject us to civil or criminal penalties, including material monetary fines, or other adverse actions, including denial of import or export privileges, and could harm our reputation and our business prospects.

Our operations require substantial amounts of purchased components and raw materials, such as scrap steel, sand, resin, brass ingot and steel pipe. We generally purchase components and raw materials at current market prices. The cost and availability of these materials are subject to economic forces largely beyond our control, including North American and international demand, foreign currency exchange rates, freight costs, tariffs and commodity speculation.

We may not be able to pass on the entire cost of price increases for purchased components and raw materials to our customers or offset fully the effects of these higher costs through productivity improvements. In particular, when purchased component or raw material prices increase rapidly or to significantly higher than normal levels, we may not be able to pass cost increases through to our customers on a timely basis, if at all, which would reduce our profitability and cash flows. In addition, if purchased components or raw materials were not available or not available on commercially reasonable terms, our sales, profitability and cash flows would be reduced. Our competitors may secure more reliable sources of purchased components and raw materials or they may obtain these supplies on more favorable terms than we do, which could give them a cost advantage.

The outbreak of COVID-19 is impacting cities, states and Canada account forcountries around the world and is temporarily changing the way we live and work. The pandemic has also caused a small percentage ofshift in how we manage our total net sales,business, think about work and how our work gets done. Businesses as well as federal, state and local governments have implemented significant measures to attempt to mitigate this public health crisis and may continue to take additional actions. Although we expect to increase our level of business activity outsidecannot determine the ultimate severity or duration of the United States and Canada. Some countries that present good business opportunities also face political and economic instability and vulnerability to infrastructure and other disruptions. Seeking to expand our business internationally exposes us to additional risks, which include political and economic uncertainties, currency fluctuations, changes in local business conditions and national and international conflicts. A primary risk we face in connection with our export shipments relates to our ability to collect amounts due from customers. We also facepandemic at this time, the potential risks arising from staffing, monitoring and managing international operations, including the risk such activities may divert our resources and management time.

We have incurred additional costs to address the pandemic as discussed in PART II, “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,”, including costs associated with unfavorable volume variances, voluntary emergency paid leave, additional cleaning, disinfectants and cash flows.

We consider our facilities to be well maintained and believe we have sufficient capacity to meet our anticipated needs through 2018.2021. Our leased properties have terms expiring at various dates through January 2024.2033.

We are involved in various legal proceedings that have arisen in the normal course of operations, including the proceedings summarized below.

See “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 1A. RISK FACTORS - We are subject to increasingly stringent environmental, health and safety laws and regulations that impose significant compliance costs. Any failure to satisfy these laws and regulations may adversely affect us,” “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 17.18. of the Notes to Consolidated Financial Statements.

Our common stock is listed on the New York Stock Exchange under the trading symbol MWA.

Covenants contained in certain of the debt instruments described in Note 7.8. of the Notes to Consolidated Financial Statements restrict the amount we can pay in cash dividends. Future dividends will be declared at the discretion of our board of directors and will depend on our future earnings, financial condition and other factors.

The information regarding our compensation plans under which equity securities are authorized for issuance is set forth in “Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.”

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto that appear elsewhere in this annual report.

On OctoberDecember 3, 2005, Walter Energy acquired all outstanding shares of capital stock representing the Mueller Co. and Anvil businesses and contributed them to its U.S. Pipe business to form the Company. In June 2006,2018, we completed an initial public offeringour acquisition of common stockKrausz Industries Development Ltd. and in December 2006, Walter Energy distributed to its shareholders allsubsidiaries (“Krausz”), a manufacturer of its equity interestspipe couplings, grips and clamps with operations in the Company, completingUnited States and Israel, for $140.7 million, net of cash acquired, including the assumption and simultaneous repayment of certain debt of $13.2 million. The acquisition of Krausz was financed with cash on hand. The results of Krausz are included within our spin-off.Infrastructure segment for all periods following the acquisition date.

Unless the context indicates otherwise, whenever we refer to a particular year, we mean our fiscal year ended or ending September 30 in that particular calendar year.

We operate our business through two segments, Infrastructure formerly referred to as Mueller Co., and Technologies, formerly referred to as Mueller Technologies.

We estimate approximately 60% to 65% of Infrastructure’s 2017the Company’s 2020 net sales were forassociated with repair and replacement directly related to municipal water infrastructure spending, approximately 25% to 30% were related to residential construction activity and approximatelyless than 10% were related to natural gas utilities.

Municipal spending in 20162020 was relatively strongimpacted by the pandemic in the second half of our year, and although the industry recovered towards the end of our fiscal year as compared with the prior year, and economic forecasts predicted this trend would continue. However, we believe municipal spending was down year over year in 2017.uncertainty remains related to the pandemic. According to the U.S. Bureau of Economic Analysis, state and local tax receipts for the quarter ended September 30, 20172020 were updown year-over-year and, accordingprimarily due to pandemic conditions. According to the U.S. Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates at September 30, 20172020 increased 3.9%3.3%. However, water conservation efforts particularly in areas impacted by recent drought conditions,and the economic effects of the pandemic have resulted in lower overall receipts for some U.S. water utilities.

The year-over-year percentage change in housing starts is a key indicator of demand for Infrastructure’s products sold in the residential construction market. In September 2017, Zelman & AssociatesOctober 2020, Blue Chip Economic Indicators forecasted a 6%4.5% increase in housing starts for calendar 2018 compared to the prior year. In October 2017, Blue Chip Economic Indicators forecasted a 7% increase in housing starts for calendar 20182021 compared to the prior year.

The municipal market is the key end market for theTechnologies. The businesses in Technologies companies. These businesses are primarily project-oriented and depend on customer adoption of their technology-based products and services. We entered 20182021 with a backlog of $23.2$48.2 million at Mueller Systems, largely for AMI products, some of which will ship in 2022 and with higher volume of projects awarded for Echologics.beyond.

OverallFor our fiscal year 2021, we anticipate that consolidated net sales will be between flat and 3 percent higher than the prior year as we believe that continued strong growth in 2018the residential construction end market will offset any challenges in the project-related areas of our business. In 2020, we benefited from declining costs for Mueller Water Products,raw materials, particularly brass ingot and scrap steel but we expect year-over-year net sales percentage growth between 4% and 7%. We expect higher operating income and for productivity improvements to increase operating margin. We expect a conversion margin of 35% to 40% of our net sales growth.inflation in raw material costs in 2021.

Net sales for 2017 increased 3.2%2020 decreased 0.4% to $826.0$964.1 million from $800.6$968.0 million in the prior year due primarily to higher shipment volumes of $15.4 million and $10.3 million in net sales of Singer Valve, which we acquired in February 2017.

Selling, general and administrative expenses (“SG&A”) increased 3.4%8.6% to $156.4$198.4 million for 20172020 from $151.2$182.7 million in the prior year, but was 18.9% as a percentand increased 170 basis points to 20.6% of net sales for both years.from 18.9% of net sales in the prior year. The increase in SG&A was primarily due to the acquisitionaddition of Singer Valve.SG&A of Krausz in the first quarter and increased personnel-related and information technology costs, which were offset by pandemic-driven temporary benefits of $6.8 million resulting from reduced travel, trade show and event spending as well as temporary employee furloughs and temporary salary reductions.

Other charges for 20172020 consisted primarily of costs related to the settlement of the Siemens litigation, our previously announced strategic reorganizationreorganizations, the retirement of an executive, and costs associated with the acquisition of Singer Valve. For 2016,Krausz. In 2019, other charges consisted primarily of costs associated withrelated to our previously announced strategic reorganizations, the demolitionAurora tragedy and the acquisition of Krausz, net of a surplus facility.

Income tax expense of $22.1 million in 2020 was $24.2 million for both 2017 and 2016, but theat an effective income tax rate decreased to 30.8% in 2017 from 34.9%of 23.5%, which was higher than the 22.3% rate in the prior year, primarily due to increased domestic manufacturing deductions and excesswhich included tax benefits related to stock compensation.the Walter Energy tax matter and U.S. federal transition tax.

Net sales for 20172020 increased 3.4%1.7% to $739.9$885.5 million from $715.7$871.0 million in the prior year. Net sales increased primarily due to higher shipment volumesfavorable pricing of $14.0$16.6 million and $10.3 million ininclusion of first quarter 2020 Krausz net sales, of Singer Valve, which we acquired in February 2017. Domestic shipments of valves, hydrants and brass products increased 1.7% in 2017 compared to 2016.offset lower organic volume.

Gross profit for 20172020 increased 3.5%4.5% to $259.5$316.4 million from $250.7$302.9 million in the prior year primarily due to increased shipment volumes.favorable sales pricing and Krausz gross profit, partially offset by $8.0 million due to pandemic-related costs and production inefficiencies. Gross profit in 2019 was reduced by $6.8 million of Krausz inventory fair value amortization. Gross margin was 35.1% for 2017 and 35.0%35.7% in 2020, a 90 basis point improvement versus 34.8% in the prior year.

SG&A in 20172020 increased 5.7%6.4% to $93.4$129.1 million from $88.4$121.3 million in the prior year primarily due to the inclusion of Krausz SG&A in the first quarter and increased personnel-related and information technology costs, which were partially offset by $5.4 million in temporary pandemic-driven savings resulting from reduced travel, trade show and the acquisition of Singer Valve.event spending as well as temporary employee furloughs and temporary salary reductions. SG&A was 12.6%14.6% and 12.4%13.9% of net sales for 20172020 and 2016,2019, respectively.

Net sales in 2017 increased2020 decreased to $86.1$78.6 million from $84.9$97.0 million in the prior year primarily due to $1.4 millionlower shipment volumes at both Echologics and Mueller Systems due to timing of large customer orders in the prior year and the effects of the pandemic, which were partially offset by higher shipment volumes.prices.

Gross profit in 20172020 decreased $9.2$6.2 million to $8.0$11.8 million from $17.2$18.0 million in the prior year. Gross margin declineddecreased to 9.3%15.0% in 20172020 from 20.3%18.6% in the prior year. These decreases areGross profit and gross margin were primarily duereduced by lower volumes as well as $1.5 million of pandemic-related costs and production inefficiencies.

SG&A was $35.4$44.5 million in both 20172020 and 2016.$34.7 million 2019. SG&A was higher in 2020 due to increased personnel-related costs and information technology costs, which were offset by pandemic-driven benefits resulting from temporary reduced travel, trade show and event spending as well as temporary employee furloughs and temporary salary reductions.