UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 20172021
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-32892
MUELLER WATER PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

Delaware20-3547095
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
1200 Abernathy Road N.E.N.E
Suite 1200
Atlanta, GA 30328
(Address of principal executive offices)
(770) 206-4200
(Registrant'sRegistrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer     x                 Accelerated filer         o
Non-accelerated filer      o                Smaller reporting company     o
(Do not check if a smaller reporting company)Emerging growth company    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes xNo
There were 158,754,223156,873,419 shares of $0.01 par value common stock of the registrant outstanding at January 31, 2018.
2022, which trade under the ticker symbol MWA on the New York Stock Exchange.




TABLE OF CONTENTS

ITEMPAGE

2

Table of Contents

PART I
Item 1.FINANCIAL STATEMENTS
Item 1.     FINANCIAL STATEMENTS
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 December 31,September 30,
 20212021
 (in millions, except share amounts)
Assets:
Cash and cash equivalents$207.3 $227.5 
Receivables, net of allowance for credit losses of $4.1 million and $3.5 million180.4 212.2 
Inventories, net209.7 184.7 
Other current assets30.6 29.3 
Total current assets628.0 653.7 
Property, plant and equipment, net286.9 283.4 
Intangible assets, net386.9 392.5 
Goodwill117.7 115.1 
Other noncurrent assets74.0 73.3 
Total assets$1,493.5 $1,518.0 
Liabilities and stockholders’ equity:
Current portion of long-term debt$1.0 $1.0 
Accounts payable83.9 92.0 
Other current liabilities114.4 127.1 
Total current liabilities199.3 220.1 
Long-term debt445.9 445.9 
Deferred income taxes99.3 95.1 
Other noncurrent liabilities57.1 62.0 
Total liabilities801.6 823.1 
Commitments and contingencies (Note 12.)
Common stock: 600,000,000 shares authorized; 156,834,758 and 157,955,433 shares outstanding at December 31, 2021 and September 30, 2021, respectively1.6 1.6 
Additional paid-in capital1,313.8 1,342.2 
Accumulated deficit(624.5)(643.9)
Accumulated other comprehensive income (loss)1.0 (5.0)
Total stockholders’ equity691.9 694.9 
Total liabilities and stockholders’ equity$1,493.5 $1,518.0 

The accompanying notes are an integral part of the condensed consolidated financial statements.
3
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

 December 31, September 30,
 2017 2017
 (in millions, except share amounts)
Assets:   
Cash and cash equivalents$348.3
 $361.7
Receivables, net107.4
 145.3
Inventories155.2
 138.9
Other current assets26.5
 24.4
Total current assets637.4
 670.3
Property, plant and equipment, net122.3
 122.3
Intangible assets434.6
 439.3
Other noncurrent assets25.9
 26.4
Total assets$1,220.2
 $1,258.3
    
Liabilities and equity:   
Current portion of long-term debt$5.6
 $5.6
Accounts payable51.3
 82.5
Other current liabilities46.1
 53.5
Total current liabilities103.0
 141.6
Long-term debt474.3
 475.0
Deferred income taxes76.2
 115.1
Other noncurrent liabilities32.4
 37.1
Total liabilities685.9
 768.8
    
Commitments and contingencies (Note 11)   
    
Common stock: 600,000,000 shares authorized; 158,539,376 and 158,590,383 shares outstanding at December 31, 2017 and September 30, 2017, respectively1.6
 1.6
Additional paid-in capital1,482.4
 1,494.2
Accumulated deficit(900.5) (955.6)
Accumulated other comprehensive loss(50.2) (51.8)
Total Company stockholders’ equity533.3
 488.4
Noncontrolling interest1.0
 1.1
Total equity534.3
 489.5
Total liabilities and equity$1,220.2
 $1,258.3


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three months ended
December 31,
 20212020
(in millions, except per share amounts)
Net sales$272.3 $237.4 
Cost of sales184.7 159.0 
Gross profit87.6 78.4 
Operating expenses:
Selling, general and administrative56.3 49.2 
Strategic reorganization and other charges2.4 1.4 
Total operating expenses58.7 50.6 
Operating income28.9 27.8 
Other expenses (income):
Pension benefit other than service(1.0)(0.8)
Interest expense, net4.3 6.1 
Net other expenses3.3 5.3 
Income before income taxes25.6 22.5 
Income tax expense6.2 5.8 
Net income$19.4 $16.7 
Net income per share:
Basic$0.12 $0.11 
Diluted$0.12 $0.11 
Weighted average shares outstanding:
Basic158.0 158.1 
Diluted158.9 158.8 
Dividends declared per share$0.058 $0.055 

The accompanying notes are an integral part of the condensed consolidated financial statements.
4
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three months ended
 December 31,
 2017 2016
 (in millions, except per share amounts)
Net sales$178.3
 $167.2
Cost of sales122.9
 115.4
Gross profit55.4
 51.8
Operating expenses:   
Selling, general and administrative39.8
 36.3
Gain on sale of idle property(9.0) 
Strategic reorganization and other charges3.9
 1.3
Total operating expenses34.7
 37.6
Operating income20.7
 14.2
Pension costs other than service0.2
 0.3
Interest expense, net5.2
 6.4
Income before income taxes15.3
 7.5
Income tax expense (benefit)(39.8) 2.1
Income from continuing operations55.1
 5.4
Income from discontinued operations
 1.3
Net income$55.1
 $6.7
    
Income per basic share:   
Continuing operations$0.35
 $0.03
Discontinued operations
 0.01
Net income$0.35
 $0.04
    
Income per diluted share:   
Continuing operations$0.34
 $0.03
Discontinued operations
 0.01
Net income$0.34
 $0.04
    
Weighted average shares outstanding:   
Basic158.5
 161.8
Diluted160.0
 164.6
    
Dividends declared per share$0.04
 $0.03


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 Three months ended
December 31,
20212020
 (in millions)
Net income$19.4 $16.7 
Other comprehensive income (loss):
Pension0.4 0.7 
Income tax effects(0.1)(0.2)
Foreign currency translation5.7 4.5 
Total comprehensive income6.0 5.0 
Comprehensive income$25.4 $21.7 

The accompanying notes are an integral part of the condensed consolidated financial statements.
5
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 Three months ended
 December 31,
 2017 2016
 (in millions)
Net income$55.1
 $6.7
Other comprehensive income (loss):   
Pension0.8
 1.0
Income tax effects(0.3) (0.4)
Foreign currency translation0.1
 (1.5)
Derivative fair value change1.6
 4.7
Income tax effects(0.6) (1.8)
 1.6
 2.0
Comprehensive income$56.7
 $8.7


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY 
(UNAUDITED)
Three months ended
December 31,
20212020
(in millions)
Common stock
Balance, beginning of period$1.6 $1.6 
Change in common stock at par value— — 
Balance, end of period1.6 1.6 
Additional paid-in capital
Balance, beginning of period1,342.2 1,378.0 
Dividends declared(9.2)(8.7)
Shares retained for employee taxes(1.9)(0.9)
Shares repurchased under buyback program(20.0)— 
Stock-based compensation2.0 1.9 
Stock issued under stock compensation plan0.7 0.6 
Balance, end of period1,313.8 1,370.9 
Accumulated deficit
Balance, beginning of period(643.9)(714.2)
Net income19.4 16.7 
Cumulative effect of accounting change— (0.1)
Balance, end of period(624.5)(697.6)
Accumulated other comprehensive income (loss)
Balance, beginning of period(5.0)(24.7)
Other comprehensive income6.0 5.0 
Balance, end of period1.0 (19.7)
Total stockholders' equity$691.9 $655.2 

The accompanying notes are an integral part of the condensed consolidated financial statements.
6
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY 
THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)
 
  Common  
stock
 
Additional
paid-in
capital
 
Accumulated
deficit
 
Accumulated
other
comprehensive
loss
 Non-controlling interest Total    
 (in millions)
Balance at September 30, 2017$1.6
 $1,494.2
 $(955.6) $(51.8) $1.1
 $489.5
Net income (loss)
 
 55.1
 
 (0.1) 55.0
Dividends declared
 (6.3) 
 
 
 (6.3)
Stock repurchased under buyback program
 (10.0) 
 
 
 (10.0)
Shares retained for employee taxes
 (1.8) 
 
 
 (1.8)
Stock-based compensation
 2.0
 
 
 
 2.0
Common stock issued
 4.3
 
 
 
 4.3
Other comprehensive income, net of tax
 
 
 1.6
 
 1.6
Balance at December 31, 2017$1.6
 $1,482.4
 $(900.5) $(50.2) $1.0
 $534.3


MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three months ended
December 31,
 20212020
 (in millions)
Operating activities:
Net income$19.4 $16.7 
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition:
Depreciation8.0 7.7 
Amortization7.2 7.0 
Stock-based compensation2.0 1.9 
Pension benefit(0.7)(0.5)
Deferred income taxes3.6 1.6 
Inventory reserves provision3.5 0.9 
Other, net1.0 0.5 
Changes in assets and liabilities, net of acquisition:
Receivables, net31.9 24.0 
Inventories(28.3)(4.8)
Other assets(0.8)(1.3)
Accounts payable(8.4)(9.4)
Other current liabilities(12.8)(9.9)
Other noncurrent liabilities(5.8)(0.3)
Net cash provided by operating activities19.8 34.1 
Investing activities:
Capital expenditures(11.0)(15.6)
Acquisition purchase price adjustment0.2 — 
Proceeds from sales of assets— 0.1 
Net cash used in investing activities(10.8)(15.5)
Financing activities:
Dividends paid(9.2)(8.7)
Employee taxes related to stock-based compensation(1.9)(0.9)
Common stock issued0.7 0.6 
Proceeds from financing transaction— 3.9 
Deferred financing costs paid— (0.5)
Common stock repurchased under buyback program(20.0)— 
Capital leases(0.1)(0.2)
Net cash used in financing activities(30.5)(5.8)
Effect of currency exchange rate changes on cash1.3 1.3 
Net change in cash and cash equivalents(20.2)14.1 
Cash and cash equivalents at beginning of period227.5 208.9 
Cash and cash equivalents at end of period$207.3 $223.0 

The accompanying notes are an integral part of the condensed consolidated financial statements.
7

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three months ended
 December 31,
 2017 2016
 (in millions)
Operating activities:   
Net income$55.1
 $6.7
Less income from discontinued operations
 1.3
Income from continuing operations55.1
 5.4
Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:   
Depreciation4.9
 4.9
Amortization5.7
 5.4
Stock-based compensation2.0
 1.8
Retirement plans0.7
 0.8
Deferred income taxes(39.7) (2.1)
Gain on sale of idle property(9.0) 
Other, net0.7
 0.3
Changes in assets and liabilities:   
Receivables38.4
 27.4
Inventories(16.3) (12.2)
Other assets(0.8) (0.8)
Liabilities(41.2) (50.8)
Net cash provided by (used in) operating activities of continuing operations0.5
 (19.9)
Investing activities:   
Capital expenditures(6.4) (4.2)
Proceeds from sales of assets7.4
 
Net cash provided by (used in) investing activities of continuing operations1.0
 (4.2)
Financing activities:   
Dividends(6.3) (4.8)
Employee taxes related to stock-based compensation(1.8) (2.5)
Repayments of debt(1.2) (1.3)
Common stock issued4.3
 0.4
Stock repurchased under buyback program(10.0) 
Other
 0.1
Net cash used in financing activities of continuing operations(15.0) (8.1)
Net cash flows from discontinued operations:   
  Operating activities
 12.4
  Investing activities
 (2.1)
Financing activities
 (0.1)
Net cash provided by discontinued operations
 10.2
Effect of currency exchange rate changes on cash0.1
 (0.7)
Net change in cash and cash equivalents(13.4) (22.7)
Cash and cash equivalents at beginning of period361.7
 195.0
Cash and cash equivalents at end of period$348.3
 $172.3


 Three months ended
December 31,
 20212020
 (in millions)
Supplemental cash flow information
Cash paid for interest, net$10.0 $12.4 
Cash paid for income taxes0.4 0.7 
The accompanying notes are an integral part of the condensed consolidated financial statements.
8

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 20172021
(UNAUDITED)
Note 1.
Organization
Note. 1Organization and Basis of Presentation
Mueller Water Products, Inc., a Delaware corporation, together with its consolidated subsidiaries, operates in two2 business segments: InfrastructureWater Flow Solutions and Technologies. Infrastructure manufactures valves for water and gas systems, including butterfly,Water Management Solutions. These segments are based on a management reorganization that became effective October 1, 2021; prior period information has been recast to conform to the current presentation. Water Flow Solutions’ product portfolio includes iron gate tapping, check, knife, plugvalves, specialty valves and ball valves, as well as dry-barrelservice brass products. Water Management Solutions’ product and wet-barrelservice portfolio includes fire hydrants. Technologies offershydrants, repair and installation, natural gas, metering, systems, leak detection, pipe condition assessmentpressure control and other related products and services.software products. The “Company,” “we,” “us” or “our” refer to Mueller Water Products, Inc. and its subsidiaries. With regard to the Company’s segments, “we,” “us” or “our”subsidiaries, and may also refer to the segment being discussed.
On January 6, 2017,December 3, 2018, we soldcompleted our former Anvil segment. Amountsacquisition of Krausz Industries Development Ltd. and subsidiaries (“Krausz”). During the year ended September 30, 2021, we aligned the consolidation of the financial statements of Krausz in the Company’s consolidated financial statements, eliminating the previous inclusion of Krausz financial statements with a one-month reporting lag. In accordance with applicable accounting literature, the elimination of the one-month reporting lag is considered to Anvil have been classifiedbe a change in accounting principle. We believe this change in accounting principle is preferable as discontinued operations.
Infrastructure owns a 49% ownership interestthe financial statements of all of our subsidiaries are now reported on the same basis, providing the most current information available. The effect of the elimination of the reporting lag during the year ended September 30, 2021 resulted in an industrial valve joint venture. Dueincrease of $6.0 million to substantive control featuresnet sales and an increase of $1.4 million to operating income. We concluded that the effect of this change is not material to the balance sheets, statements of operations, statements of cash flows, net income and earnings per share and therefore have not retrospectively applied this change.
On June 14, 2021, we acquired all the outstanding capital stock of i2O Water Ltd (“i2O”), a provider of pressure management solutions to more than 100 water companies in 45 countries. The consolidated balance sheet at September 30, 2021 included the operating agreement, allpreliminary estimated fair values of the joint venture'snet assets liabilitiesof i2O. The Company is still reviewing the impact of taxes and certain other items. The results of i2O’s operations and cash flows subsequent to the acquisition are included in ourthe Company’s consolidated financial statements. The net loss attributablestatement of operations and consolidated statement of cash flows, respectively. Refer to noncontrolling interest is included in selling, general and administrative expenses. Noncontrolling interest is recorded at its carrying value, which approximates fair value.
UnlessNote 2. for additional disclosures related to 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.acquisition.
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require us to make certain estimates and assumptions that affect the reported amounts ofin recording assets, liabilities, sales and expenses andas well as in the disclosure of contingent assets and liabilities for the reporting periods.liabilities. Actual results could differ from those estimates. All significant intercompany balances and transactions have been eliminated. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2017.2021. In our opinion, all normal and recurring adjustments that we consider necessary for a fair financial statement presentation have been made. Certain reclassifications have been made to previously reported amounts to conform to the current presentation. The condensed consolidated balance sheet data at September 30, 20172021 was derived from audited financial statements, but it does not include all disclosures required by GAAP.
On October 1, 2017, we adopted Financial Accountings Standards Board Accounting Standards Update No. 2017-07, which requires us to exclude fromOur business is seasonal as a result of cold weather conditions. Net sales and operating income the components of net periodic benefit cost other than service cost. Accordingly,historically have been lowest in the Condensed Consolidated Statement of Operations for the three months endedmonth periods ending December 31 2016,and March 31 when the northern United States and all of Canada generally face weather conditions that restrict significant construction activity.

In preparing these financial statements in conformity with GAAP, we have reclassified $0.2 million from selling, generalconsidered and, administrative expenses and $0.1 million from cost of sales to pension costs other than service.
On February 15, 2017, we acquired Singer Valve. Singer had net sales of $3.7 million inwhere appropriate, included the quarter ended December 31, 2017 and is included in Infrastructure.
HR-1, formerly referred to as the Tax Cuts and Jobs Act, was enacted on December 22, 2017 and made significant revisions to federal income tax laws, including lowering the corporate income tax rate to 21% from 35%, effective January 1, 2018. The effects of these revisions are discussedthe COVID-19 pandemic on our operations. The pandemic continues to provide significant challenges to the U.S. and global economies.

Unless the context indicates otherwise, whenever we refer to a particular year, we mean our fiscal year ended or ending September 30 in Note 3.that particular calendar year.
In May 2014,Recently Adopted Accounting Guidance
During 2016, the Financial Accounting Standards Board (“FASB”) issued newAccounting Standards Codification (“ASC”) 326 - Current Expected Credit Losses to replace the “incurred loss” impairment approach with an “expected loss” approach, which requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We have completed historical and forward-looking analyses for receivables and adopted this guidance effective October 1, 2020. Upon adoption, there was no material impact to our financial statements.
9

In December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by clarifying and amending existing guidance related to the recognition of revenue and requiring additional financial statement disclosures.  We plan to adopt this guidance usingfranchise tax, the modified retrospective transition method beginningevaluation of a step up in the firsttax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. We adopted this standard on October 1, 2021 and there was no material impact to our financial statements.
In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" (“ASU 2020-04”). This guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London Inter Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. ASU 2020-04 is effective from March 12, 2020, but can be adopted prospectively from a date within an interim period subsequent to March 12, 2020. We evaluated our contracts and the optional expedients provided by ASU 2020-04. We adopted this standard on October 1, 2021 and there was no material impact to our financial statements.
Restructuring
Since November 2019, we have announced the purchase and closure of several facilities. We purchased a new facility in Kimball, Tennessee to support and enhance our investment in our Chattanooga, Tennessee large casting foundry and closed our facilities in Hammond, Indiana, Woodland, Washington and Surrey, British Columbia, Canada. We also announced the closure of our facility in Aurora, Illinois which we expect to complete by the third quarter of fiscal 2019. Weyear 2022. The majority of the activities from these facilities have completedbeen, or will be, transferred to our initial scoping and are implementing a project plan to evaluate revenue recognition practices for each revenue stream against the new requirements, to consider changes to the terms of our sales contracts, and to design and implement processes to quantify the effects of necessary changes. This work is ongoing, but at this time, we do not expect the new guidance to materially impact our stockholders' equity, net sales or operating income.
On September 7, 2017, we announced a strategic reorganization plan designed to accelerate our product innovation and revenue growth. We have adopted a matrix management structure, where business teams have line and cross-functional responsibility for managing distinct product portfolios, and engineering, operations, sales and marketing and other functions are centralized to better align with business needs and generate greater efficiencies. Costs and expenses in the quarter ended December 31, 2017 for this plan, included in strategic reorganization and other charges, were primarily personnel-related.

6



Kimball, Tennessee facility. Activity in accrued restructuring, reported as part of otherOther current liabilities, is presented below.
Three months ended
December 31,
20212020
(in millions)
Beginning balance$3.1 $2.8 
Expenses incurred1.2 0.2 
Amounts paid(1.3)(1.1)
Ending balance$3.0 $1.9 

 Three months ended
 December 31, 2017
 (in millions)
Beginning balance$3.3
Expense2.3
Payments(1.4)
Ending balance$4.2
New Markets Tax Credit Program
Note 2.Discontinued Operations and Divestitures
On December 4, 2017,22, 2020, we sold an idle propertyentered into a financing transaction with Wells Fargo Community Investment Holdings, LLC (“Wells Fargo”) related to our brass foundry construction project in Burlington,Decatur, Illinois under a qualified New JerseyMarkets Tax Credit program (“NMTC”). The NMTC is a federal program intended to encourage capital investment in qualified lower income communities. Under the NMTC, investors claim federal income tax credits over a period of seven years in connection with qualified investments in the equity of community development entities (“CDE”s), which are privately managed investment institutions that had previously been a plantare certified to make qualified low-income community investments, such as in our former U.S. Pipe segmentfoundry project.
Under the NMTC, Wells Fargo contributed capital of $4.8 million to an investment fund and recordedwe loaned $12.2 million to the fund. Wells Fargo is entitled to the associated tax credits, which are subject to 100% recapture if we do not comply with various regulations and contractual provisions surrounding the foundry project. We have indemnified Wells Fargo for any loss or recapture of tax credits related to the transaction until the seven-year period elapses. We do not anticipate any credit recaptures will be required in connection with this arrangement.
The investment fund contributed $16.5 million cash for a 99.99% stake in a joint venture (“Sub-CDE”) with a CDE. The Sub-CDE then loaned $16.2 million to us, with the use of the loan proceeds restricted to foundry project expenditures. This transaction also includes a put/call provision under which we may be obligated or entitled to repurchase Wells Fargo’s interest in the investment fund. We believe that Wells Fargo will exercise its put option in December 2027 for nominal consideration, resulting in our becoming the sole owner of the investment fund, cancelling the related loans, and recognizing an estimated gain of $9.0 million on$3.9 million.
We determined that the investment fund and the Sub-CDE are variable interest entities (“VIEs”) and that we are the primary beneficiary of the VIEs. The ongoing activities of the VIEs, namely collecting and remitting interest and fees and administering NMTC compliance, were contemplated in the initial design of the transaction and are not expected to
10

significantly affect economic performance throughout the life of the VIEs. Additionally, we are obligated to deliver tax benefits and provide various other guarantees to Wells Fargo and to absorb the losses of the VIEs. Wells Fargo does not have a material interest in the underlying economics of the project. Consequently, we have included the financial statements of the VIEs in our Corporate segment. We received $7.4 millionconsolidated financial statements.
Intercompany transactions between us and the VIEs have been eliminated in cash,consolidation. Wells Fargo’s contribution to the investment fund is consolidated in our financial statements as an Other noncurrent liability as a result of its redemption features.
Direct costs associated with Wells Fargo’s capital contribution have been netted against the recorded net current assets of $0.8 million and conveyed plant, property and equipment withproceeds, resulting in a net carryingcash contribution of $3.9 million. Other direct costs associated with the transaction were capitalized and are being recognized as interest expense over the seven-year tax credit period. Incremental costs to maintain the structure during the compliance period are expensed as incurred.

Note 2.    Acquisitions
Acquisition of i2O Water Ltd
On June 14, 2021, we acquired all the outstanding capital stock of i2O for $19.7 million, net of cash acquired. The purchase agreement provided for customary final adjustments, including a net working capital adjustment that was completed during the three months ended December 31, 2021, resulting in a purchase price of $19.5 million.
We have recognized the assets acquired and liabilities assumed at their estimated acquisition date fair values, with the excess of the purchase price over the estimated fair values of the identifiable net assets acquired recorded as goodwill. The accounting for the business combination is considered to be preliminary. We are still gathering information related to income taxes and certain other items. The results of i2O are included in our Water Management Solutions segment.
The goodwill below is attributable to the strategic opportunities and synergies that we expect to arise from the acquisition of i2O and the value of $0.4 million,its workforce. The goodwill is nondeductible for income tax purposes. Identified intangible assets consist of customer relationships, non-compete agreements and the buyer assumed related environmental liabilitiesdeveloped technology with an estimated weighted-average useful life of approximately 12 years and trade names with an indefinite life. Values of intangible assets were determined using a carrying value of $1.2 million.discounted cash flow method.
On January 6, 2017, we sold our former Anvil segment to affiliates of One Equity Partners. The table below presentsfollowing is a summary of the operating results forpreliminary estimated fair values of the Anvil discontinued operations during the quarter ended December 31, 2016. These operating results do not reflect what they would have been had Anvil not been sold.net assets acquired (in millions):
 Three months ended
 December 31, 2016
 (in millions)
Net sales$83.1
Cost of sales62.8
Gross profit20.3
Operating expenses: 
Selling, general and administrative18.3
Other charges0.2
Total operating expenses18.5
Operating income1.8
Income tax expense0.5
Income from discontinued operations$1.3
Note 3.Assets, net of cash:Income Taxes
Receivables$0.5 
Inventories0.6 
Other current assets0.9 
Identified intangible assets:
     Tradename1.8 
     Customer relationships2.1 
     Non-compete agreements0.1 
     Developed technology3.5 
Goodwill11.9 
Liabilities:
Accounts payable(0.8)
Other current liabilities(1.1)
     Fair value of net assets acquired, net of cash$19.5 
On December 22, 2017, HR-1, formerly referred

11

Note 3.    Revenue from Contracts with Customers
We recognize revenue when control of promised products or services is transferred to asour customers, in amounts that reflect the Tax Cuts and Jobs Act (“Act”), was enacted,consideration to which made significant revisions to federal income tax laws, including lowering the corporate income tax rate to 21% from 35% effective January 1, 2018, overhauling the taxation of income earned outside the United States and eliminating or limiting certain deductions.
Our deferred tax assets and liabilities are provided at the enacted tax rates in effect when we expect to recognizebe entitled in exchange for those products or services. We account for a contract when it has approval and commitment from both parties, the related tax expensesrights of the parties are identified, the payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We determine the appropriate revenue recognition for our contracts with customers by analyzing the type, terms and conditions of each contract or benefits. The averagearrangement with a customer.
Disaggregation of these rates varies slightlyRevenue
We disaggregate our revenues from year to year but historically has been approximately 39%. Withcontracts with customers by reportable segment (see Note 10.) and further by geographical region as we believe this best depicts how the legislation changing enacted rates taking placenature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Geographical region represents the location of the customer.
Contract Asset and Liability Balances
Differences in the timing of revenue recognition, billing and cash collection result in customer receivables, advance payments and billings in excess of revenue recognized. Customer receivables include amounts billed and currently due from customers as well as unbilled amounts (i.e., contract assets). Amounts are billed in accordance with contractual terms and unbilled amounts arise when the timing of billing differs from the timing of revenue recognized.
Advance payments and billings in excess of revenue are recognized and recorded as deferred revenue, the majority of which we expect to receive within one year and therefore is included within Other current quarter, we have remeasuredliabilities in the accompanying consolidated balance sheets. Deferred revenues represent contract liabilities and are recorded when customers remit cash payments in advance of our satisfaction of performance obligations under contractual arrangements. Contract liabilities are relieved and revenue is recognized when the performance obligation is satisfied.
The table below represents the balances of our customer receivables and deferred tax items at an average rate of approximately 25%. This resultedrevenues.
December 31,September 30,
20212021
(in millions)
Billed receivables$181.8 $213.4 
Unbilled receivables2.7 2.3 
Gross customer receivables184.5 215.7 
Allowance for credit losses(4.1)(3.5)
Receivables, net$180.4 $212.2 
Deferred revenues$7.4 $5.4 
Performance Obligations
A performance obligation is a promise in a provisional income tax benefitcontract to transfer a distinct good or service to the customer. Our performance obligations are satisfied at a point in time for sales of $42.6 million,equipment or over time for our software hosting and leak detection monitoring services. Performance obligations are supported by customer contracts, which is subject to change, if necessary, as we continue to analyze certain aspectsprovide frameworks for the nature of the Actdistinct products or services. We allocate the transaction price of each contract to the performance obligations on the basis of standalone selling price and refinerecognize revenue when control of the performance obligation transfers to the customer. The transaction price is adjusted for our calculations.estimate of variable consideration which may include discounts, and rebates. To estimate variable consideration, we apply the expected value or the most likely amount method, based on whichever method most appropriately predicts the amount of consideration we expect to receive. The method applied is based typically on historical experience and known trends. We do not expect changes to thisrecognize variable consideration in the event there are uncertainties in the amount of variable consideration to be material.paid nor when it is probable there will be a significant reversal in the related revenue.
We exclude from the measurement of the transaction price all taxes assessed by a governmental authority. We classify shipping and handling costs, such as freight to our customers’ destinations, as a component of Cost of sales.
We have elected to use the practical expedient to not adjust the transaction price of a contract for the effects of a significant financing component if, at the inception of the contract, we expect that the period between when we transfer a product or service to a customer and when a customer remits payment will be one year or less.
12

The Act also imposesrevenues recognized at a one-time transition taxpoint in time related to the sale of our products are recognized when the obligations of the terms of our contract are satisfied, which generally occurs upon shipment when control of the product transfers to the customer.
We offer warranties to our customers in the form of assurance-type warranties that provide assurance that the products provided will function as intended and comply with any agreed-upon specifications. These cannot be purchased separately.
Costs to Obtain or Fulfill a Contract
We incur certain incremental costs to obtain a contract, which primarily relate to incremental sales commissions. Our commissions are paid based on a combination of orders and shipments, and we reserve the right to claw back any commissions in case of product returns or lost collections. As the expected benefit associated with these incremental costs is generally one year or less based on the undistributed, non-previously taxed, post-1986 foreign “earningsnature of the product sold and profits” (as defined by the IRS) of certain U.S.-owned corporations. Determination of our transition tax liability requires us to calculate foreign earnings and profits going back to 1992, which in many cases requires information that is not readily available, and then to assess our historical overall foreign loss position and the applicability of certain foreign tax credits. We are gathering this information and completing these calculations, butbenefits received, we are unable at this time to reasonably estimate our transition tax liability,have applied a practical expedient and therefore we havedo not recorded any amount for this tax at December 31, 2017.capitalize the related costs and expense them as incurred.

In addition to the deferred tax remeasurement item discussed above, our income tax benefit includes federal income tax expense on our current period earnings at a full-year blended rate of 24.5%, since the rate reduction in the Act is effective on January 1, 2018. Note 4. Income Taxes
The reconciliation between the U.S. federal statutory income tax rate and the effective income tax rate is presented below.
 Three months ended
December 31,
20212020
U.S. federal statutory income tax rate21.0 %21.0 %
Adjustments to reconcile to the effective tax rate:
State income taxes, net of federal benefit3.9 4.5 
Excess tax benefits related to stock-based compensation(1.0)(0.6)
Tax credits(1.2)(1.4)
Global Intangible Low-Taxed Income0.3 0.6 
Foreign income tax rate differential(0.7)(0.9)
Valuation allowances1.4 1.5 
Other0.5 1.1 
Effective income tax rate24.2 %25.8 %
 Three months ended
 December 31,
 2017 2016
U.S. federal statutory income tax rate24.5 % 35.0 %
Adjustments to reconcile to the effective tax rate:   
State income taxes, net of federal benefit4.3
 3.9
Valuation allowance adjustment related to stock compensation(5.7) 
Excess tax benefits related to stock compensation(2.8) (7.6)
Domestic production activities deduction(1.6) (3.3)
Tax credits(0.9) (0.8)
Other0.5
 0.8
 18.3 % 28.0 %
Remeasurement of deferred taxes for change in rates(278.4) 
Effective income tax rate(260.1)% 28.0 %

At December 31, 20172021 and September 30, 2017,2021, the gross liabilities for unrecognized income tax benefits were $3.1$4.6 million and $3.0$4.8 million, respectively.respectively, and are included in Other noncurrent liabilities.
Note 4.
Borrowing Arrangements
Note 5. Borrowing Arrangements
The components of our long-term debt are presented below.as follows:
 December 31,September 30,
 20212021
 (in millions)
4.0% Senior Notes$450.0 $450.0 
Finance leases2.0 2.2 
Total borrowings452.0 452.2 
Less deferred financing costs(5.1)(5.3)
Less current portion(1.0)(1.0)
Long-term debt$445.9 $445.9 

 December 31, September 30,
 2017 2017
 (in millions)
ABL Agreement$
 $
Term Loan483.7
 484.8
Other1.7
 1.7
 485.4
 486.5
Less deferred financing costs5.5
 5.9
Less current portion5.6
 5.6
Long-term debt$474.3
 $475.0
ABL Agreement. Our ABL Agreement. At December 31, 2017, our asset based lending agreement (“ABL Agreement”) consisted consists of a revolving credit facility for up to $225$175.0 million of revolving credit borrowings,which includes up to $25.0 million through swing line loans and may have up to $60.0 million of letters of credit. The ABL Agreement permits us to increase the size of the credit facility by an additional $150$150.0 million in certain circumstances subject to adequate borrowing base availability. We may borrow up to $25 million through swing line loans and may have up to $60 million of letters of credit outstanding.
Borrowings under the ABL Agreement bear interest at a floating rate equal to LIBOR plus aan applicable margin ranging from 125range of 200 to 150225 basis points, or a base rate, as defined in the ABL Agreement, plus aan applicable margin rangingrange of from 25100 to 50125 basis points. At December 31, 2017,2021 the applicable ratemargin was LIBOR plus 125200 basis points.
The ABL Agreement terminates on July 13, 2021. We pay a commitment fee for any unused borrowing capacityis subject to mandatory prepayments if total outstanding borrowings under the ABL Agreement are greater than the aggregate commitments under the revolving credit facility or if we dispose of 25 basis points per annum.overdue accounts receivable in
13

certain circumstances. The borrowing base under the ABL Agreement is equal to the sum of (a) 85% of the value of eligible accounts receivable and (b) the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less certain reserves. Prepayments can be made at any time without penalty.
Substantially all of our United States subsidiaries are borrowers under the ABL Agreement and are jointly and severally liable for any outstanding borrowings. Our obligations under the ABL Agreement are secured by a first-priority perfected lien on all of our U.S. receivables andUnited States inventories, accounts receivable, certain cash and other supporting obligations.related items.
The ABL Agreement terminates on July 29, 2025 and includes a commitment fee for any unused borrowing capacity of 37.5 basis points per annum. Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million andor 10% of the Loan Cap as defined in the ABL Agreement. Excess availability based on December 31, 20172021 data was $133.8 million, as reduced by $15.0 million of outstanding letters of credit swap contract liabilities and $1.4 million of accrued fees and expensesexpenses.
4.0% Senior Unsecured Notes. On May 28, 2021, we privately issued $450.0 million of $19.8 million, was $96.3 million.

Term Loan. On November 25, 2014, we entered into a $500.0 million senior secured term loan (“Term Loan”). The proceeds from the Term Loan, along with other cash, were used to prepay our 7.375% Senior Subordinated Notes and 8.75%4.0% Senior Unsecured Notes (“4.0% Senior Notes”), which mature on June 15, 2029 and to satisfy and discharge our obligations under the respective indentures.
The Term Loan accruesbear interest at a floating rate equal to LIBOR, subject to a floor4.0%, paid semi-annually in June and December. We capitalized $5.5 million of 0.75%, plus 250 basis points. At December 31, 2017,financing costs that are being amortized over the weighted-averageterm of the 4.0% Senior Notes using the effective interest rate was 4.60%. We may voluntarily repay amounts borrowed under the Term Loan at any time. The principal amount of the Term Loan is required to be repaid in quarterly installments of $1.225 million, with any remaining principal due on November 25, 2021. The Term Loan is guaranteed by substantiallymethod. Substantially all of our U.S. subsidiaries and is secured by essentially all ofguarantee the 4.0% Senior Notes that are subordinate to borrowings under our assets, although the ABL Agreement has a senior claim on certain collateral securing borrowings thereunder. The Term Loan is reported net of unamortized discount, which was $1.4 million at December 31, 2017.Agreement. Based on quoted market prices that are a Level 1 measurement, the outstanding Term Loan4.0% Senior Notes had a fair value of $490$456.9 million at December 31, 2017.2021.
The Term LoanAn indenture governing the 4.0% Senior Notes (“Indenture”) contains affirmativecustomary covenants and negative operatingevents of default, including covenants applicablethat limit our ability to usincur certain debt and our restricted subsidiaries.liens. There are no financial maintenance covenants associated with the Indenture. We believe we were compliantin compliance with these covenants at December 31, 20172021.
As set forth in the Indenture, we may redeem some or all of the 4.0% Senior Notes at any time or from time to time prior to June 15, 2024 at certain “make-whole” redemption prices and expecton or after June 15, 2024 at specified redemption prices. Additionally, we may redeem up to remain in compliance through December 31, 2018.
Note 5.
Derivative Financial Instruments
We are exposed to interest rate risk that we manage to some extent using derivative instruments. Under our April 2015 interest rate swap contracts, we receive interest calculated using 3-month LIBOR, subject to a floor40% of 0.75%, and pay fixed interest at 2.341%, on anthe aggregate notionalprincipal amount of $150.0 million. These swap contracts effectively fix the cash interest rate on $150.0 million4.0% Senior Notes at any time or from time to time prior to June 15, 2024 with the net proceeds of specified equity offerings at specified redemption prices. Upon a change of control, we would be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the outstanding principal amount of the 4.0% Senior Notes.
Note 6. Derivative Financial Instruments
In connection with the acquisition of Singer Valve in 2017, we loaned funds to one of our borrowings underCanadian subsidiaries. Although this intercompany loan has no direct effect on our consolidated financial statements, it creates exposure to currency risk for the Term Loan at 4.841% from September 30, 2016 through September 30, 2021.
Canadian subsidiary. To reduce this exposure, we entered into a U.S. dollar-Canadian dollar swap contract with the Canadian subsidiary and an offsetting Canadian dollar-U.S. dollar swap with a domestic bank. We have not designated our interest rate swap contractsthese swaps as cash flow hedges of our future interest payments and elected to apply the “shortcut” method of assessing hedge effectiveness. As a result,changes in their fair value are included in earnings, offsetting the currency gains and losses onassociated with the intercompany loan.
The values of our currency swap contracts are reported as a componentwere liabilities of other comprehensive loss$1.2 million and $1.1 million at December 31, 2021 and September 30, 2021, respectively, and are reclassified into interest expense as the related interest payments are made. During the quarters ended December 31, 2017 and December 31, 2016, we included $0.4 million and $0.6 million of such interest expense in income from continuing operations, respectively.
Other current liabilities. The fair values of thecurrency swap contracts are presented below.expire in February 2022.
14
 December 31, September 30,
 2017 2017
 (in millions)
Interest rate swap contracts, designated as cash flow hedges:   
Other current liabilities$0.7
 $1.2
Other noncurrent liabilities0.2
 1.3
 $0.9
 $2.5
    
Currency swap contracts, not designated as hedges:   
Other noncurrent liabilities$1.3
 $1.3

The fair values and the classification of the fair values between current and noncurrent portions are based on calculated cash flows using publicly available interest rate forward rate yield curve information, but amounts due at the actual settlement dates are dependent on actual rates in effect at the settlement dates and may differ significantly from amounts shown above.Note 7. Retirement Plans

Note 6.
Retirement Plans
The components of net periodic benefit cost for our pension plans are presented below.
Three months ended
December 31,
 20212020
 (in millions)
Service cost$0.3 $0.4 
Pension costs (benefits) other than service:
Interest cost2.4 2.5 
Expected return on plan assets(3.8)(3.9)
Amortization of actuarial net loss0.4 0.6 
Pension benefits other than service(1.0)(0.8)
Net periodic benefit$(0.7)$(0.4)
 Three months ended
 December 31,
 2017 2016
 (in millions)
Service cost$0.5
 $0.5
Pension costs other than service:   
Interest cost3.6
 3.6
Expected return on plan assets(4.2) (4.3)
Amortization of actuarial net loss0.8
 1.0
 0.2
 0.3
Net periodic benefit cost$0.7
 $0.8

The amortization of actuarial losses, net of tax, is recorded as a component of other comprehensive loss.income (loss).
Note 7.
Stock-based Compensation Plans
Note 8. Stock-based Compensation Plans
We have grantedgrant various forms of stock-based compensation, including stock options,market-based restricted stock units (“MRSUs”), restricted stock units, stock options and both cash-settled and stock-settled performance-based restricted stock units (“PRSUs”) under our Amended and Restated 2006 Mueller Water Products, Inc. Stock Incentive Plan (the “2006 Stock Plan”)., Phantom Plan instruments under our Mueller Water Products, Inc. 2012 Phantom Plan, and Employee stock purchase plan instruments under our 2006 Employee Stock Purchase Plan. Grants issued during the three months ended December 31, 2021 are as follows:
Number grantedWeighted average grant date fair value per instrumentTotal grant date fair value
(in millions)
Quarter ended December 31, 2021
    MRSUs230,089 $15.76 $3.6 
    Phantom Plan instruments199,549 $13.64 $2.7 
    Restricted stock units135,129 $13.64 $1.8 
    Non-qualified stock options457,482 $3.43 $1.6 
    PRSUs: 2020 award57,627 $13.81 $0.8 
    Employee stock purchase plan instruments38,069 $3.01 $0.1 
$10.6 
A PRSUAn MRSU award represents a target number of units that may be paid out at the end of a multi-yearthree-year award cycle based on a calculation of our relative total shareholder return (“TSR”) performance as compared with a selected peer group's TSR. Settlements, in our common shares, will range from zero to 2 times the number of MRSUs granted, depending on our TSR performance relative to that of the peer group.
Compensation expense attributed to MRSUs is based on the fair value of the awards on their respective grant dates, as determined using a Monte Carlo model. The assumptions used to determine the grant-date fair value are indicated below.
November 30, 2021
Variables used in determining grant date fair value:
Dividend yield1.70 %
Risk-free rate0.76 %
Expected term (in years)2.83

The expected dividend yield is based on our estimated annual dividend and our stock price history at the grant date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield in effect at the grant date with a term equal to the expected term. The expected term represents the average period of time the units are expected to be outstanding.
15

At December 31, 2021, the outstanding Phantom Plan instruments had a fair value of $14.40 per instrument and our liability for Phantom Plan instruments was $1.9 million and is included within current and noncurrent liabilities.

Stock options generally vest ratably over three years on each anniversary date. Compensation expense attributed to stock options is based on the fair value of the awards on their respective grant dates, using a Black-Scholes model. The assumptions used to determine the grant-date fair value are indicated below.
November 30, 2021
Dividend yield1.62 %
Risk-free rate1.33 %
Expected term (in years)6.00

The expected dividend yield is based on our estimated annual dividend and our stock price history at the grant date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield in effect at the grant date with a term equal to the expected term. The expected term represents the average period of time the options are expected to be outstanding.
A PRSU award consists of a number of units that may be paid out at the end of a three-year award cycle consisting of a series of annual performance periods coinciding with our fiscal years. After we determineestablish the financial performance targets related to PRSUs for a given performance period, typically during the first quarter of that fiscal year, we consider that portion of a PRSU award to be granted. Thus, each award consists of a grant in the year of award and grants in the designatedtwo following years. SettlementSettlements, in our common shares, will range from zero to two2 times the number of PRSUs granted, depending on our financial performance againstrelative to the targets. As determined at the date of award, PRSUs may settle in cash-value equivalent of, or directly in, shares of our common stock.
We awarded 171,288 stock-settled PRSUs in the quarter ended December 31, 2017 scheduled to settle in three years.
We issued 146,061 shares and 263,410240,412 shares of common stock during the quarters ended December 31, 2017 and 2016, respectively, to settle PRSUs.
In addition to the PRSU activity, 213,532 restricted stock units vested during the quarter ended December 31, 2017.
We have granted cash-settled Phantom Plan instruments under the Mueller Water Products, Inc. Phantom Plan (“Phantom Plan”). At December 31, 2017, the outstanding Phantom Plan instruments had a fair value of $12.53 per instrument and our liability for Phantom Plan instruments was $1.2 million.
We granted stock-based compensation awards under the 2006 Stock Plan, the Mueller Water Products, Inc. 2006 Employee Stock Purchase Plan and the Phantom Plan during the three months ended December 31, 2017 as follows.2021 to settle PRSUs vested during the period. Additionally, we issued 130,018 and 141,135 shares of common stock to settle restricted stock units vested and stock options exercised, respectively, during the three months ended December 31, 2021.
  Number granted Weighted average grant date fair value per instrument 
Total grant date fair value
(in millions)
Restricted stock units 171,288
 $12.41
 $2.1
Employee stock purchase plan instruments 35,099
 2.28
 0.1
Phantom Plan awards 160,672
 12.41
 2.0
PRSUs: 2018 award 57,092
 12.41
 0.7
2017 award 71,070
 12.41
 0.9
2016 award 71,072
 12.41
 0.9
      $6.7

Income from continuing operationsOperating income included stock-based compensation expense of $2.4$2.6 million and $2.7$2.5 million during the three months ended December 31, 20172021 and 2016,2020, respectively. At December 31, 2017,2021, there was approximately $8.9$14.5 million of unrecognized compensation expense related to stock-based compensation arrangements and 185,270there were 57,627 PRSUs that have been awarded for the 2019 and 20202022 performance periods,period for which performance goals have not been set.goal achievement cannot yet be determined.
We excluded 70,996277,344 and 323,010 of258,522 stock-based compensation instruments from the calculations of diluted earnings per share forin the quartersthree months ended December 31, 20172021 and 2016,2020, respectively, since their inclusion would have been antidilutive.
16

Note 9. Supplemental Balance Sheet Information
Selected supplemental asset information is presented below.
 December 31,September 30,
 20212021
 (in millions)
Inventories:
Purchased components and raw material$125.9 $100.9 
Work in process41.5 41.6 
Finished goods42.3 42.2 
Total inventories$209.7 $184.7 
Other current assets:
Prepaid expenses$13.8 $12.8 
Non-trade receivables10.0 10.7 
Maintenance and repair supplies and tooling2.7 2.9 
Income taxes0.2 0.2 
Workers’compensation reimbursement receivable0.8 0.8 
Other current assets3.1 1.9 
Total other current assets$30.6 $29.3 
Property, plant and equipment:
Land$5.5 $6.1 
Buildings84.4 84.6 
Machinery and equipment436.2 433.3 
Construction in progress91.5 83.7 
Total property, plant and equipment617.6 607.7 
Accumulated depreciation(330.7)(324.3)
Property, plant and equipment, net$286.9 $283.4 
Other noncurrent assets:
Operating lease right-of-use assets$26.4 $27.1 
Maintenance and repair supplies and tooling19.8 19.3 
Workers’ compensation reimbursement receivable2.7 2.7 
Pension asset17.9 16.8 
Note receivable1.8 1.8 
Deferred financing fees1.2 1.3 
Other noncurrent assets4.2 4.3 
Total other noncurrent assets$74.0 $73.3 

17

Selected supplemental liability information is presented below.
 December 31,September 30,
 20212021
 (in millions)
Other current liabilities:
Compensation and benefits$28.4 $44.6 
Customer rebates27.4 19.6 
Warranty accrual5.6 6.7 
Deferred revenues7.4 5.4 
Refund liability5.2 6.0 
Taxes other than income taxes4.6 4.4 
Operating lease liabilities3.6 4.0 
Workers’ compensation accrual2.7 2.6 
CARES Act payroll tax liabilities3.6 3.6 
Restructuring liabilities3.1 3.1 
Environmental liabilities— 1.2 
Interest payable0.8 6.2 
Income taxes payable10.8 8.5 
Other current liabilities11.2 11.2 
Total other current liabilities$114.4 $127.1 
Other noncurrent liabilities:
Operating lease liabilities$23.8 $24.6 
Warranty accrual3.1 3.0 
Transition tax liability4.7 4.7 
Uncertain tax position liability4.6 4.8 
NMTC liability3.9 3.9 
Workers’ compensation accrual8.1 7.9 
Asset retirement obligation3.6 3.6 
CARES Act payroll tax liabilities— 3.6 
Deferred development grant2.5 2.5 
Other noncurrent liabilities2.8 3.4 
Total other noncurrent liabilities$57.1 $62.0 

Goodwill
Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis each September 1st and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.
The following table summarizes information concerning our goodwill balance in the three months ended December 31, 2021, in millions.
Note 8.Balance at September 30, 2021
Supplemental Balance Sheet Information
$
Selected supplemental balance sheet information is presented below.
 December 31, September 30,
 2017 2017
 (in millions)
Inventories:   
Purchased components and raw material$74.3
 $67.7
Work in process37.8
 35.6
Finished goods43.1
 35.6
 $155.2
 $138.9
    
Other current assets:   
Maintenance and repair tooling$3.2
 $3.3
Income taxes11.9
 10.9
Other11.4
 10.2
 $26.5
 $24.4
    
Property, plant and equipment:   
Land$5.5
 $5.6
Buildings51.4
 53.4
Machinery and equipment270.0
 266.7
Construction in progress25.2
 24.7
 352.1
 350.4
Accumulated depreciation(229.8) (228.1)
 $122.3
 $122.3
Other current liabilities:   
Compensation and benefits$18.2
 $26.9
Customer rebates8.1
 6.5
Taxes other than income taxes2.4
 3.2
Warranty3.7
 3.5
Income taxes0.8
 0.9
Environmental1.2
 1.3
Interest0.7
 0.6
Restructuring4.2
 3.3
Other6.8
 7.3
 $46.1
 $53.5

115.1 
Note 9.Acquisition purchase price adjustment
Segment Information
(0.2)
Effects of changes in foreign currency exchange rates2.8 
Balance at December 31, 2021$117.7 

18

Note 10. Segment Information
We adopted a new management structure effective October 1, 2021; prior period information has been recast to conform to the current presentation. The recasting has no effect on our previously reported consolidated balance sheets, consolidated statements of operations, or consolidated statements of cash flows. The two newly named business units and reportable segments are Water Flow Solutions and Water Management Solutions. Water Flow Solutions’ product portfolio includes iron gate valves, specialty valves and service brass products. Water Management Solutions’ product and service portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, pressure control and software products. Summarized financial information for our segments is presented below.
Three months ended
December 31,
20212020
 (in millions)
Net sales, excluding intercompany:
Water Flow Solutions$154.9 $128.8 
Water Management Solutions117.4 108.6 
$272.3 $237.4 
Operating income (loss):
Water Flow Solutions$31.3 $23.1 
Water Management Solutions11.4 17.0 
Corporate(13.8)(12.3)
$28.9 $27.8 
Depreciation and amortization:
Water Flow Solutions$7.4 $7.4 
Water Management Solutions7.7 7.2 
Corporate0.1 0.1 
$15.2 $14.7 
Strategic reorganization and other charges:
Water Flow Solutions$— $0.1 
Water Management Solutions0.1 — 
Corporate2.3 1.3 
$2.4 $1.4 
Capital expenditures:
Water Flow Solutions$9.4 $12.3 
Water Management Solutions1.6 3.2 
Corporate— 0.1 
$11.0 $15.6 
Water Flow Solutions disaggregated net revenues:
Central$40.5 $35.0 
Northeast30.0 24.9 
Southeast37.3 23.1 
West38.1 36.3 
United States145.9 119.3 
Canada7.9 5.7 
Other international locations1.1 3.8 
$154.9 $128.8 
Water Management Solutions disaggregated net revenues:
Central$28.8 $26.8 
Northeast24.3 24.4 
Southeast25.5 22.6 
West24.7 22.1 
United States103.3 95.9 
Canada7.6 6.7 
Other international locations6.5 6.0 
$117.4 $108.6 
19

 Three months ended
 December 31,
 2017 2016
 (in millions)
Net sales, excluding intercompany:   
Infrastructure$160.1
 $146.3
Technologies18.2
 20.9
 $178.3
 $167.2
Intercompany sales:   
Infrastructure$
 $1.1
Technologies
 
 $
 $1.1
Operating income (loss):   
Infrastructure$28.1
 $26.2
Technologies(4.7) (2.2)
Corporate(2.7) (9.8)
 $20.7
 $14.2
Depreciation and amortization:   
Infrastructure$9.1
 $9.0
Technologies1.4
 1.2
Corporate0.1
 0.1
 $10.6
 $10.3
Strategic reorganization and other charges:   
Infrastructure$
 $0.1
Technologies0.1
 
Corporate3.8
 1.2
 $3.9
 $1.3
Capital expenditures:   
Infrastructure$4.8
 $3.0
Technologies1.5
 1.1
Corporate0.1
 0.1
 $6.4
 $4.2


Note 10.
Accumulated Other Comprehensive Loss
Note 11. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive lossincome (loss) is presented below.as follows:
  Pension, net of taxForeign currency translationTotal
(in millions)
Balance at September 30, 2021$(22.2)$17.2 $(5.0)
Current period other comprehensive income0.3 5.7 $6.0 
Balance at December 31, 2021$(21.9)$22.9 $1.0 

Note 12. Commitments and Contingencies
   Pension, net of tax Foreign currency translation Derivative instruments, net of tax Total
  
Balance at September 30, 2017$(47.0) $(3.3) $(1.5) $(51.8)
Current period other comprehensive income (loss)0.5
 0.1
 1.0
 1.6
Balance at December 31, 2017$(46.5) $(3.2) $(0.5) $(50.2)

Note 11.
Commitments and Contingencies
We are involved in various legal proceedings that have arisen in the normal course of operations, including the proceedings summarized below. We provide for costs relating to these matters when a loss is probable and the amount is reasonably estimable. Administrative costs related to these matters are expensed as incurred. The effect of the outcome of these matters on our financial statements cannot be predicted with certainty as any such effect depends on the amount and timing of the resolution of such matters. Other than the litigation described below, we do not believe that any of our outstanding litigation would have a materialmaterially adverse effect on our businessfinancial position, results of operations, cash flows or prospects.liquidity.
Environmental. We are subject to a wide variety of laws and regulations concerning the protection of the environment, both with respect to the operations at many of our properties and with respect to remediating environmental conditions that may exist at our own or other properties. We accrue for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and reasonably estimable.
In the acquisition agreement pursuant to which a predecessor to Tyco International plc, now Johnson Controls International plc (“Tyco”), sold our businesses to a previous owner in August 1999, Tyco agreed to indemnify us and our affiliates, among other things, for all “Excluded Liabilities.” Excluded Liabilities include, among other things, substantially all liabilities relating to the time prior to August 1999, including environmental liabilities. The indemnity survives indefinitely. 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. While none of these transactions directly affects the indemnification obligations of the Tyco indemnitors under the 1999 acquisition agreement, the result of such transactions is that the assets of, and control over, such Tyco indemnitors has changed. Should any of these Tyco indemnitors become financially unable or fail to comply with the terms of the indemnity, we may be responsible for such obligations or liabilities.
On July 13, 2010, Rohcan Investments Limited, the former owner of property leased by Mueller Canada Ltd. and located in Milton, Ontario, filed suit against Mueller Canada Ltd. and its directors seeking C$10.0 million in damages arising from the defendants’ alleged environmental contamination of the property and breach of lease. Mueller Canada Ltd. leased the property from 1988 through 2008. We are pursuing indemnification from a former owner for certain potential liabilities that are alleged in this lawsuit, and we have accrued for other liabilities not covered by indemnification.  On December 7, 2011, the Court denied the plaintiff’s motion for summary judgment.
The purchaser of U.S. Pipe has been identified as a “potentially responsible party” (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) in connection with a former manufacturing facility operated by U.S. Pipe that was in the vicinity of a proposed 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’sthe Environmental Protection Agency’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. Accordingly, becauseSince the amountamounts of such costs cannot be reasonably estimated at this time, no amounts hadhave been accrued for this matter at December 31, 2017.2021.
Walter Energy. Each member
20

The COVID-19 Pandemic. The pandemic has caused, and is likely to continue to cause, severe economic, market and other disruptions to the U.S. and global economies. We have taken action and continue to counter such disruption, and work to protect the safety of our employees. We are uncertain of the Walter Energy consolidated group, which included us through December 14, 2006, is jointly and severally liable for the federal income tax liability of each other memberpotential full magnitude or duration of the consolidated group for any yearbusiness and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19, and while the extent to which the pandemic affects our results will depend on future developments, the outbreak could result in which it is a member of the group at any time during such year. Accordingly, we could be liable in the event any such federal income tax liability is incurred, and not discharged, by any other member of the Walter Energy consolidated group for any period during which we were included in the Walter Energy consolidated group.
Walter Energy effectively controlled all of our tax decisions for periods during which we were a member of the Walter Energy consolidated group for federal income tax purposes and certain combined, consolidated or unitary state and local income tax groups. Under the terms of an income tax allocation agreement between us and Walter Energy, dated May 26, 2006, we generally compute our tax liability on a stand-alone basis, but Walter Energy has sole authority to respond to and conduct all tax proceedings (including tax audits) relatingmaterial effects to our federal income and combined state tax returns, to file all such tax returns on our behalf and to determine the amount of our liability to (or entitlement to payment from) Walter Energy for such previous periods.
As described further below, the IRS is currently alleging that Walter Energy owes substantial amounts for prior taxable periods (specifically, 1983-1994, 2000-2002 and 2005). As a matter of law, we are jointly and severally liable for any final tax determination, which means we would be liable in the event Walter Energy is unable to pay any amounts owed.

In July 2015, Walter Energy filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code before the Bankruptcy Court for the Northern District of Alabama (“Chapter 11 Case”). During the pendency of the Chapter 11 Case, we monitored the proceeding to determine whether we could be liable for all or a portion of this federal income tax liability if it is incurred, and not discharged, for any period during which we were included in the Walter Energy consolidated group. On January 11, 2016, the IRS filed a proof of claim in the Chapter 11 Case, alleging that Walter Energy owes taxes, interest and penalties for the years 1983-1994, 2000-2002 and 2005 in an aggregate amount of $554.3 million ($229.1 million of which the IRS claims is entitled to priority status in the Chapter 11 Case).  The IRS asserts that its claim is based on an alleged settlement of Walter Energy’s tax liability for the 1983-1995 taxable periods in connection with Walter Energy’s prior bankruptcy proceeding in the United States Bankruptcy Court for the Middle District of Florida.  In the proof of claim, the IRS included an alternative calculation in the event the alleged settlement of the prior bankruptcy court is found to be non-binding, which provides for a claim by the IRS in an aggregate amount of $860.4 million ($535.3 million of which the IRS claims is entitled to priority status in the Chapter 11 Case).
According to a quarterly report on Form 10-Q filed by Walter Energy with the SEC on November 5, 2015 (“Walter November 2015 Filing”), at September 30, 2015, Walter Energy had $33.0 million of accruals for unrecognized tax benefits in connection with the matters subject to the IRS claims. In the Walter November 2015 Filing, Walter Energy stated it believed it had sufficient accruals to address any claims, including interest and penalties, and did not believe that any potential difference between any final settlements and amounts accrued would have a material effect on Walter Energy’sfuture financial position, but such potential difference could be material to its results of operations, cash flows and liquidity.
Mass Shooting Event at our Mueller Co. Facility in Albertville, Alabama. On June 15, 2021, we experienced a future reporting period.
Accordingmass shooting event at our Mueller Co. facility in Albertville, Alabama, in which two employees were killed and two employees were injured. Various claims arising from the event have been filed to a Form 8-K filed by Walter Energy with the SEC on April 1, 2016 (“Walter April 2016 Filing”), on March 31, 2016, Walter Energy closed on the sale of substantially all of Walter Energy’s Alabama assets pursuant to the provisions of Sections 105, 363date and 365 of the Bankruptcy Code.  The Walter April 2016 Filing further statedwe anticipate that Walter Energy would have no further material business operations after April 1, 2016additional claims may be made and Walter Energy was evaluating its options with respect to the wind down of its remaining assets.  The asset sale did not impact the IRS’ proof of claim filed in the bankruptcy cases and the proof of claim, as well as the alleged taxthat liability thereunder, remain unresolved.
On February 2, 2017, at the request of Walter Energy, the Bankruptcy Court for the Northern District of Alabama signed an order converting the Chapter 11 Case to a liquidation proceeding under Chapter 7 of the U.S. Bankruptcy Code, pursuant to which Walter Energy will be wound-down and liquidated (“Chapter 7 Case”). In its objection contesting such conversion, the IRS indicated its intent to pursue collection of amounts included in the Proof of Claim from former members of the Walter Energy consolidated group.
We cannot predict whether or to what extent we may become liable for the tax-related amounts of the Walter Energy consolidated group asserted in the IRS’ proof of claim filed in the bankruptcy cases, in part, because: (i) the amounts owed by the Walter Energy consolidated group for certain of the taxable periods from 1980 through 2006 remain unresolved; (ii) it is unclear what priority,claims, if any, the IRS will receive in the Chapter 7 Case with respectis not expected to its claims against Walter Energy, and whether and to what extent funds will be available in the Chapter 7 Case to pay priority tax claims.  We also intend to vigorously assert any and all available defenses against any liability we may have as a member of the Walter Energy consolidated group.  However, we cannot currently estimate our liability, if any, relating to the tax-related liabilities of Walter Energy’s consolidated tax group for tax years prior to 2007, and such liability could have a material adverse effect on our business, financial condition, liquidity or results of operations.operations or cash flows. However, the outcome of these claims, or legal proceedings, and related effects arising from this event cannot be predicted with certainty.
Indemnifications. We are a party to contracts in which it is common for us to agree to indemnify third parties for certain liabilities that arise out of or relate to the subject matter of the contract. In some cases, this indemnity extends to related liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by gross negligence or willful misconduct. We cannot estimate the potential amount of future payments under these indemnities until events arise that would trigger a liability under the indemnities.
Additionally, in connection with the sale of assets and the divestiture of businesses, such as the divestitures of U.S. Pipe and Anvil, we may agree to indemnify buyers and related parties for certain losses or liabilities incurred by these parties with respect to: (i) the representations and warranties made by us to these parties in connection with the sale and (ii) liabilities related to the pre-closing operations of the assets or business sold. Indemnities related to pre-closing operations generally include certain environmental and tax liabilities and other liabilities not assumed by these parties in the transaction.
Indemnities related to the pre-closing operations of sold assets or businesses normally do not represent additional liabilities to us, but simply serve to protect these parties from potential liability associated with our obligations existing at the time of the sale. As with any liability, we have accrued for those pre-closing obligations that are considered probable and reasonably estimable. Should circumstances change, increasing the likelihood of payments related to a specific indemnity, we will accrue a liability when future payment is probable and the amount is reasonably estimable.

Other Matters. We monitor and analyze our warranty experience and costs periodically and may revise our accruals as necessary. Critical factors in our analyses include warranty terms, specific claim situations, general incurred and projected failure rates, the nature of product failures, product and labor costs, and general business conditions.
We are party to a number of lawsuits arising in the ordinary course of business, including product liability cases for products manufactured by us or third parties. We provide for costs relating to these matters when a loss is probable and the amount is reasonably estimable. Administrative costs related to these matters are expensed as incurred. The effect of the outcome of these matters on our future financial statements cannot be predicted with certainty as any such effect depends on the amount and timing of the resolution of such matters. While the results of litigation cannot be predicted with certainty, we believe that the final outcome of such other litigation is not likely to have a materially adverse effect on our businessfinancial position, results of operations, cash flows or prospects.liquidity.
Note 12.
Note 13. Subsequent Events
On January 24, 2018,27, 2022, our boardBoard of directorsDirectors declared a dividend of $0.05$0.058 per share on our common stock, payable on or about February 20, 201821, 2022 to stockholders of record at the close of business on February 9, 2018.10, 2022.
21

Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto that appear elsewhere in this report. This report contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that address activities, events or developments that we intend, expect, plan, project, believethe Company intends, expects, plans, projects, believes or anticipateanticipates will or may occur in the future are forward-looking statements.statements, including, without limitation, statements regarding outlooks, projections, forecasts, trend descriptions, the COVID-19 pandemic, go-to-market strategies, operational excellence, acceleration of new product development, end market performance, net sales performance, adjusted operating income and adjusted EBITDA performance, margins, capital expenditure plans, litigation outcomes, capital allocation, growth strategies, restructuring efficiencies and warranty charges. Forward-looking statements are based on certain assumptions and assessments made by usthe Company in light of ourthe Company’s experience and perception of historical trends, current conditions and expected future developments.
Actual results and the timing of events may differ materially from those contemplated by the forward-looking statements due to a number of factors, including the extent, duration and severity of the impact of the pandemic on the Company’s operations and results, including effects on the financial health of customers (including collections), the Company and the financial/capital markets, government-mandated facility closures, COVID-19 related facility closures and other manufacturing restrictions, logistical challenges and supply chain interruptions, potential litigation and claims emanating from the COVID-19 pandemic, and health, safety and employee/labor issues in Company facilities around the world; unexpected or greater than expected increases in costs of raw materials and purchased components; regional, national or global political, economic, business, competitive, market and competitive conditions; cyclical and changing demand in core markets such as municipal spending; government monetary or fiscal policies; residential and nonresidential construction, and natural gas distribution; manufacturing and product performance; expectations for changes in volumes, continued execution of cost productivity initiatives and improved pricing; warranty exposures (including the adequacy of warranty reserves); the Company’s ability to successfully resolve significant legal proceedings, claims, lawsuits or government investigations; compliance with environmental, trade and anti-corruption laws and regulations; changing regulatory, conditionstrade and tariff conditions; failure to achieve expected cost savings, net sales expectations, profitability expectations and manufacturing efficiencies from restructuring and consolidation activities and our large capital investments in Chattanooga and Kimball, Tennessee and Decatur, Illinois; the failure to integrate and/or realize any of the anticipated benefits of recent acquisitions or divestitures; an inability to achieve some or all of our Environmental, Social and Governance (“ESG”) goals; as well as other factors that are described underin the section entitled “RISK FACTORS” in Item 1A.1A of our annual reportthe Company’s most recently filed Annual Report on Form 10-K forand in this Quarterly Report on Form 10-Q (all of which risks may be amplified by the year ended September 30, 2017 (“Annual Report”)pandemic). Forward-looking statements are only as of the date they are made and do not guarantee future performance. The Company undertakes no duty to update its forward-looking statements except as required by law. Undue reliance should not be placed on any forward-looking statements. TheYou are advised to review any further disclosures the Company does not have any intention or obligation to update forward-looking statements, except as required by law.makes in subsequent Forms 10-K, 10-Q, 8-K and other reports filed with the U.S. Securities and Exchange Commission.
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 manage our businesses and report operations through two business segments, Infrastructure and Technologies, based largely on the products sold and the customers served.
Overview
Organization
On October 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, we completed an initial public offering of 28,750,000 shares of Series A common stock and in December 2006, Walter Energy distributed to its shareholders all of its equity interests in the Company, consisting of all of the Company’s outstanding shares of Series B common stock. On January 28, 2009, each share of Series B common stock was converted into one share of Series A common stock and the Series A designation was discontinued.
On January 6, 2017, we sold our former Anvil segment. Amounts applicable to Anvil have been classified as discontinued operations.
Business
We expect our two primary end markets, repair and replacement of water infrastructure driven by municipal spending and new water infrastructure installation driven by residential construction to grow in 2018. We expect the residential construction market to grow faster than municipal spending.
Infrastructure
We estimate approximately 60%55-60% of Infrastructure’s 2017our 2021 net sales were for repair and replacement directly related to municipal water infrastructure spending, approximately 30%30-35% were related to residential construction activity and approximatelyless than 10% were related to natural gas utilities.utilities spending.
Infrastructure announced price increases on valves, hydrantsWe expect the operating environment during fiscal year 2022 to be very challenging as a result of the uncertainty around the depth and gas products effectiveduration of the pandemic which has accelerated and may continue to accelerate, inflation, labor availability and global supply chain disruptions. We anticipate that growth in February 2018the residential construction end market will help offset anticipated challenges in the project-related portion of the municipal market. In January 2022, Blue Chip Economic Indicators forecasted housing starts to be flat for its U.S.calendar 2022 as compared with the prior year despite robust demand for housing and Canadian markets. low inventories.
We believehave continued to incur additional costs to address the pandemic as discussed herein, including costs associated with unfavorable manufacturing variances, labor shortages, and additional cleaning, including disinfectants and sanitation materials, for our employees and at our facilities. We expect to continue to incur such costs that some customers may accelerate orders priorbe significant as we continue to respond to the pandemic. All of our facilities are operational and our teams have worked effectively to address the few temporary closures we have experienced due to the pandemic. The last such closure was in August 2020. The pandemic also caused supply chain disruption that has resulted in higher costs in the manufacture of our products. We expect these conditions to persist in the near term and may worsen until the pandemic abates.
22

We announced a new management structure effective dateOctober 1, 2021. The new structure is designed to increase revenue growth, drive operational excellence, accelerate new product development and enhance profitability. We anticipate the reorganization will strengthen the alignment of the price increases.products, solutions and services with customer needs, accelerate new product introductions and improve product life cycle management. The two newly named business units and reportable segments are Water Flow Solutions and Water Management Solutions.
TechnologiesWater Flow Solutions’ product portfolio includes iron gate valves, specialty valves and service brass products. Water Flow Solutions represented 56% of our fiscal 2021 net sales. Water Management Solutions’ product and service portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, pressure control and software products. Water Management Solutions represented 44% of our fiscal 2021 net sales.
The municipal market is the key end market for Technologies. These businesses are project-oriented and depend on customer adoption
23


Results of Operations
Three Months Ended December 31, 20172021 Compared to Three Months Ended December 31, 2016
 Three months ended December 31, 2017
 Infrastructure Technologies Corporate   Total    
 (in millions)
Net sales$160.1
 $18.2
 $
 $178.3
Gross profit$52.5
 $2.9
 $
 $55.4
Operating expenses:       
Selling, general and administrative24.4
 7.5
 7.9
 39.8
Gain on sale of idle property
 
 (9.0) (9.0)
Strategic reorganization and other charges
 0.1
 3.8
 3.9
 24.4
 7.6
 2.7
 34.7
Operating income (loss)$28.1
 $(4.7) $(2.7) 20.7
Pension costs other than service      0.2
Interest expense, net      5.2
Income before income taxes      15.3
Income tax benefit      (39.8)
Income from continuing operations      $55.1
        
 Three months ended December 31, 2016
 Infrastructure Technologies Corporate Total
 (in millions)
Net sales$146.3
 $20.9
 $
 $167.2
Gross profit$47.6
 $4.2
 $
 $51.8
Operating expenses:       
Selling, general and administrative21.3
 6.4
 8.6
 36.3
Other charges0.1
 
 1.2
 1.3
 21.4
 6.4
 9.8
 37.6
Operating income (loss)$26.2
 $(2.2) $(9.8) 14.2
Pension costs other than service      0.3
Interest expense, net      6.4
Income before income taxes      7.5
Income tax expense      2.1
Income from continuing operations      $5.4
2020
 Three months ended December 31, 2021
 Water Flow SolutionsWater Management SolutionsCorporate  Total    
 (in millions)
Net sales$154.9 $117.4 $— $272.3 
Gross profit52.1 35.5 — $87.6 
Operating expenses:
Selling, general and administrative20.8 24.0 11.5 56.3 
Strategic reorganization and other charges— 0.1 2.3 2.4 
Total operating expenses20.8 24.1 13.8 58.7 
Operating income (loss)$31.3 $11.4 $(13.8)28.9 
Non-operating expenses:
Pension benefit other than service(1.0)
Interest expense, net4.3 
Income before income taxes25.6 
Income tax expense6.2 
Net income$19.4 
 Three months ended December 31, 2020
 Water Flow SolutionsWater Management SolutionsCorporateTotal
 (in millions)
Net sales$128.8 $108.6 $— $237.4 
Gross profit41.9 36.5 — $78.4 
Operating expenses:
Selling, general and administrative18.7 19.5 11.0 49.2 
Strategic reorganization and other charges0.1 — 1.3 1.4 
Total operating expenses18.8 19.5 12.3 50.6 
Operating income (loss)$23.1 $17.0 $(12.3)27.8 
Pension benefit other than service(0.8)
Interest expense, net6.1 
Income before income taxes22.5 
Income tax expense5.8 
Net income$16.7 
Consolidated Analysis
Net sales forin the quarterthree months ended December 31, 20172021 increased $11.1$34.9 million or 14.7% to $178.3$272.3 million from $167.2as compared with $237.4 million duein the prior period primarily toas a result of increased shipment volumes including the additionand higher pricing across most of Singer Valve, and improved pricing at Infrastructure, which were partially offset by volume decline at Technologies.our product lines.
Gross profit forin the quarterthree months ended December 31, 20172021 increased $3.6$9.2 million to $55.4$87.6 million from $51.8$78.4 million in the prior year period, primarily due toas a result of increased shipment volumes improvedand higher pricing and Infrastructure's improved operating efficiencies and other manufacturing cost savings,which were partially offset by increased material costs.higher costs of sales associated with inflation, unfavorable manufacturing performance, labor challenges, supply chain disruptions and our restructuring activity. Gross margin increased to 31.1% forwas 32.2% in the quarterthree months ended December 31, 20172021 as compared to 31.0%with 33.0% in the prior year period.
Selling, general and administrative expenses (“SG&A&A”) forin the quarterthree months ended December 31, 20172021 increased to $39.8$56.3 million from $36.3$49.2 million in the prior year period due primarily as a result of the inclusion of i2O Water, higher travel and trade show expenditures, inflation, increased information technology related activities, and personnel-related costs. SG&A as a percentage of net sales was 20.7% for both the three months ended December 31, 2021 and 2020.
24

Strategic reorganization and other charges in the three months ended December 31, 2021 were $2.4 million which primarily consisted of expenses associated with the Albertville tragedy, as well as termination benefits associated with the previously announced closures of our facilities in Aurora, Illinois and Surrey, British Columbia, Canada. Strategic reorganization and other charges in the three months ended December 31, 2020 were $1.4 million and primarily related to transaction costs as well as legal and professional service expenses.
Interest expense, net declined $1.8 million in the acquisitionthree months ended December 31, 2021 as compared with the prior year period primarily as a result of Singer Valve during the second quarterrefinancing of lastour 5.5% Senior Unsecured Notes (“5.5% Senior Notes”) with the 4.0% Senior Notes. The components of net interest expense are provided below.
Three months ended
December 31,
20212020
 (in millions)
5.5% Senior Notes$— $6.2 
4.0% Senior Notes4.5 — 
Deferred financing costs amortization0.2 0.3 
ABL Agreement0.2 0.2 
Capitalized interest(0.6)(0.6)
Other interest cost0.1 0.2 
Total interest expense4.4 6.3 
Interest income(0.1)(0.2)
Interest expense, net$4.3 $6.1 

The reconciliation between the U.S. federal statutory income tax rate and the effective income tax rate is presented below.
 Three months ended
December 31,
20212020
U.S. federal statutory income tax rate21.0 %21.0 %
Adjustments to reconcile to the effective tax rate:
State income taxes, net of federal benefit3.9 4.5 
Excess tax benefits related to stock-based compensation(1.0)(0.6)
Tax credits(1.2)(1.4)
Global Intangible Low-taxed Income0.3 0.6 
Foreign income tax rate differential(0.7)(0.9)
Valuation allowances1.4 1.5 
Other0.5 1.1 
Effective income tax rate24.2 %25.8 %

Segment Analysis
Water Flow Solutions
Net sales in the three months ended December 31, 2021 increased 20.3% to $154.9 million as compared with $128.8 million in the prior year period primarily as a result of increased shipment volumes and higher pricing across most of the segment’s product lines.
Gross profit in the three months ended December 31, 2021 increased 24.3% to $52.1 million from $41.9 million in the prior year period primarily as a result of higher pricing, increased shipment volumes, and favorable manufacturing performance, partially offset by higher costs associated with inflation. Gross margin was 33.6% in the three months ended December 31, 2021 and 32.5% in the prior year period.
25

SG&A in the three months ended December 31, 2021 increased to $20.8 million from $18.7 million in the prior year period primarily as a result of increased travel and trade show expenditures, inflation, increased information technology related activities, and higher personnel-related expenses. SG&A as a percentage of net sales was 22.3%13.4% and 14.5% in the quarterthree months ended December 31, 20172021 and 21.7%2020, respectively.
Water Management Solutions
Net sales in the prior year period.

Interest expense, net declined $1.2 million in the quarterthree months ended December 31, 20172021 increased 8.1% to $117.4 million as compared to the prior year period. The components of interest expense, net are provided below.
 Three months ended
 December 31,
 2017 2016
 (in millions)
Term Loan$4.8
 $5.1
Interest rate swap contracts0.4
 0.6
Deferred financing costs amortization0.5
 0.4
ABL Agreement0.2
 0.2
Other interest expense0.1
 0.2
 6.0
 6.5
Interest income(0.8) (0.1)
 $5.2
 $6.4
On December 22, 2017, tax legislation was enacted that made significant revisions to federal income tax laws, including lowering the corporate income tax rate to 21 percent from 35 percent, overhauling the taxation of income earned outside the United States and eliminating or limiting certain deductions. Since the effective date of the tax rate change was January 1, 2018, we are subject to a blended federal statutory tax rate of 24.5 percent throughout fiscal 2018.
For the quarter ended December 31, 2017, we reported a net income tax benefit of $39.8 million, which was driven by a benefit of $42.6 million related to remeasurement of our net deferred income tax liabilities using the enacted tax rates in effect when we expect to recognize the related tax expenses or benefits. Other than this remeasurement benefit, income tax expense was $2.8 million, or 18.3 percent of income before income taxes. For the 2017 first quarter, income tax expense was 28.0 percent of income before income taxes. The reconciliation between the U.S. federal statutory income tax rate and the effective tax rate is presented below.
 Three months ended
 December 31,
 2017 2016
U.S. federal statutory income tax rate24.5 % 35.0 %
Adjustments to reconcile to the effective tax rate:   
State income taxes, net of federal benefit4.3
 3.9
Valuation allowance adjustment related to stock compensation(5.7) 
Excess tax benefits related to stock compensation(2.8) (7.6)
Domestic production activities deduction(1.6) (3.3)
Tax credits(0.9) (0.8)
Other0.5
 0.8
 18.3 % 28.0 %
Remeasurement of deferred taxes for change in rates(278.4)%  %
Effective income tax rate(260.1)% 28.0 %
Also under this legislation, we are subject to a one-time transition tax on undistributed foreign earnings, but the amount of this tax is not reasonably estimable at this time. Accordingly, no provision for this tax has been recorded, but will be recorded later in 2018.
Segment Analysis
Infrastructure
Net sales for the quarter ended December 31, 2017 increased 9.4% to $160.1 million compared to $146.3with $108.6 million in the prior year period, primarily due to higher shipment volumes, the additionas a result of Singer Valve and favorable pricing.
Gross profit for the quarter ended December 31, 2017 increased to $52.5 million from $47.6 million in the prior year period due to increased shipment volumes improved operating efficiencies and other manufacturing cost savings. Gross margin increased to 32.8% forhigher pricing across most of the quarter ended December 31, 2017 compared to 32.5% in the prior year period.

SG&A for the quarter ended December 31, 2017 increased to $24.4 million from $21.3 million in the prior year period. SG&A was 15.2% and 14.6% of net sales for the quarters ended December 31, 2017 and 2016, respectively. These increases in SG&A were primarily due to higher personnel-related expenses and the additional SG&A of Singer Valve.
Technologies
Net sales in the quarter ended December 31, 2017 declined to $18.2 million from $20.9 million in the prior year period primarily due to lower AMI shipment volumes, partially offset by increased leak detection sales.segment’s product lines.
Gross profit in the quarterthree months ended December 31, 20172021 was $2.9$35.5 million as compared to $4.2with $36.5 million in the prior year period. Gross margin declined to 15.9%30.2% in the quarterthree months ended December 31, 20172021 as compared to 20.1%with 33.6% in the prior year period. These declines wereperiod primarily due to loweras a result of higher Cost of sales associated with inflation and unfavorable manufacturing performance which was partially offset by higher pricing and increased shipment volumes.
SG&A increased to $7.5$24.0 million in the quarter ended December 31, 2017 compared to $6.4from $19.5 million in the prior year period due toprimarily as a result of the inclusion of i2O Water, engineering investments, inflation, increased travel and trade show expenditures, and higher personnel-related expenses. SG&A increased to 41.2%as a percentage of net sales forwas 20.4% and 18.0% in the quarterthree months ended December 31, 2017 from 30.6% of net sales in the prior year period.2021 and 2020, respectively.
Corporate
SG&A was $7.9increased to $11.5 million in the quarterthree months ended December 31, 20172021 as compared to $8.6with $11.0 million in the prior year period.three months ended December 31, 2020 primarily as a result of inflation and higher personnel-related expenses.
Liquidity and Capital Resources
We had cash, and cash equivalents on hand of $348.3$207.3 million at December 31, 20172021 and $96.3$133.8 million of additional borrowing capacity under our ABL Agreement based on December 31, 2017 data, which, along with cash generated by operations, would be our source of incremental liquidity.2021 data. Undistributed earnings from our subsidiaries in Canada, China, and ChinaIsrael are considered to be permanently invested outside the United States. At December 31, 2017,2021, cash and cash equivalents included $12.1$40.6 million, $24.3 million, and $7.2$2.9 million in Israel, Canada, and China, respectively.
We expect the recently enacted tax law changesdeclared a quarterly dividend of $0.058 per share on January 27, 2022, payable on February 21, 2022 to benefit our liquidity through reductionholders of record as of February 10, 2022, which will result in overall income tax liability and through provisions allowing immediate deductibility for capital assets placed in service in the next five years. This benefit will be partially offset by payment of the transition tax discussed above. However, the transition tax may be paid over eight years, and we do not expect any payments to have a material liquidity impact in any particular year.an estimated $9.2 million cash outlay.
We repurchased shares$20.0 million of our outstanding common stock for $10 million during the quarterthree months ended December 31, 2017,2021 and we had $180$115.0 million remaining onof our share repurchase authorization at that date.authorization.
The ABL Agreement and Term Loan4.0% Senior Notes contain customary representations and warranties, covenants and provisions governing an event of default.  The covenants restrict our ability to engage in certain specified activities, including but not limited to the payment of dividends and the redemption of our common stock.
Cash flows from operating activities of continuing operations are categorized below.
 Three months ended
 December 31,
 2017 2016
 (in millions)
Collections from customers$216.1
 $194.6
Disbursements, other than interest and income taxes(211.3) (203.5)
Interest payments, net(4.4) (5.6)
Income tax refunds (payments), net0.1
 (5.4)
Cash provided by (used in) operating activities$0.5
 $(19.9)
Collections from customers were higher during the three months ended December 31, 20172021 as compared towith the prior year period primarily due to the timingas a result of cash receipts and net sales growth.
Increased disbursements, other than interest and income taxes,growth between the periods. Inventory purchases increased during the three months ended December 31, 2017 reflect higher purchasing activity, higher costs for raw materials, and differences in the timing of expenditures.
Income tax payments were lower during2021 as compared with the three months ended December 31, 2017 compared to2020 as a result of inflation, increased sales volume and supply change management. Other current liabilities and other noncurrent liabilities decreased as a result of employee incentive payouts and the prior year period because we beganrepayment of the current year quarter with U.S. federal income taxes prepaid.CARES Act employer payroll tax deferral.


Capital expenditures were $6.4$11.0 million in the three months ended December 31, 20172021 as compared to $4.2with $15.6 million in the prior year period. We estimate 2018Capital expenditures decreased as a result of lower expenditures associated with the new Decatur foundry as compared with the prior year period. For fiscal year 2022, we have provided guidance that our capital expenditures willare expected to be between $40$70.0 million and $48 million, although we are also evaluating possibilities for additional capital expenditures in 2018.$80.0 million.
We anticipate that our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flows will be sufficient to meet our anticipated operating expenses, income tax payments, capital expenditures and debt service obligations as they become due through December 31, 2018. However,2022.
We believe that additional borrowings through various financing alternatives remain available if required. The future effects of the pandemic cannot be predicted with certainty and may increase our ability to make these payments will depend partly upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, businessborrowing costs and other factors beyondcosts of capital or otherwise adversely affect our control.financial condition and liquidity, and we cannot guarantee that we will have access to external
26

financing at times and on terms we consider acceptable, or at all, or that we will not experience other liquidity issues in the future.
ABL Agreement
At December 31, 2017,2021, the ABL Agreement consisted of a $175.0 million revolving credit facility forwhich includes up to $225$25.0 million of revolving credit borrowings,through swing line loans and may have up to $60.0 million of letters of credit. The ABL Agreement permits us to increase the size of the credit facility by an additional $150$150.0 million in certain circumstances subject to adequate borrowing base availability. We may borrow up to $25 million through swing line loans and may have up to $60 million of letters of credit outstanding.
Borrowings under the ABL Agreement bear interest at a floating rate equal to LIBOR, plus aan applicable margin ranging from 125200 to 150225 basis points, or a base rate, as defined in the ABL Agreement, plus aan applicable margin ranging from 25100 to 50125 basis points. At December 31, 2017,2021, the applicable LIBOR-based marginrate was 125LIBOR plus 200 basis points.
The ABL Agreement terminates on July 13, 2021. We pay a commitment fee for any unused borrowing capacity under the ABL Agreement of 25 basis points per annum.
The ABL Agreement is subject to mandatory prepayments if total outstanding borrowings under the ABL Agreement are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances. The borrowing base under the ABL Agreement is equal to the sum of (a) 85% of the value of eligible accounts receivable and (b) the lesser of (i) 70% of the value of eligible inventories or (ii) 85% of the net orderly liquidation value of the value of eligible inventories, less certain reserves. Prepayments can be made at any time with no penalty.
Substantially all of our U.S. subsidiaries are borrowers under the ABL Agreement and are jointly and severally liable for any outstanding borrowings. Our obligations under the ABL Agreement are secured by a first-priority perfected lien on all of our U.S. inventories, accounts receivable, certain cash and other supporting obligations.related items.
The ABL Agreement terminates on July 29, 2025 and includes a commitment fee for any unused borrowing capacity of 37.5 basis points per annum. Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million andor 10% of the Loan Cap underas defined in the ABL Agreement.
Term Loan
We had $485.1 million face value outstanding under the Term Loan at Excess availability based on December 31, 2017. Term Loan borrowings accrue2021 data was $133.8 million, as reduced by $15.0 million of outstanding letters of credit and $1.4 million of accrued fees and expenses.
4.0% Senior Unsecured Notes
On May 28, 2021, we privately issued $450.0 million of 4.0% Senior Unsecured Notes (“4.0% Senior Notes”), which mature in December 2029 and bear interest at a floating rate equal to LIBOR, subject to a floor4.0%, paid semi-annually in June and December. We capitalized $5.5 million of 0.75%, plus 250 basis points. We may voluntarily repay amounts borrowed underfinancing costs, which are being amortized over the Term Loan at any time. The principal amountterm of the Term Loan is required4.0% Senior Notes using the effective interest method. Proceeds from the 4.0% Senior Notes, along with cash on hand were used to be repaid in quarterly installments of $1.225 million. The Term Loan matures on November 25, 2021. The Term Loan is guaranteed by substantiallyredeem previously existing 5.5% Senior Notes. Substantially all of our U.S. subsidiaries guarantee the 4.0% Senior Notes, which are subordinate to borrowings under our ABL Agreement. Based on quoted market prices, the outstanding 4.0% Senior Notes had a fair value of $456.9 million at December 31, 2021.
An indenture governing the 4.0% Senior Notes (“Indenture”) contains customary covenants and secured by essentiallyevents of default, including covenants that limit our ability to incur certain debt and liens. There are no financial maintenance covenants associated with the Indenture. We believe we were in compliance with these covenants at December 31, 2021.
We may redeem some or all of our assets, although the ABL Agreement has4.0% Senior Notes at any time or from time to time prior to June 15, 2024 at certain “make-whole” redemption prices (as set forth in the Indenture) and on or after June 15, 2024 at specified redemption prices (as set forth in the Indenture). Additionally, we may redeem up to 40% of the aggregate principal amount of the 4.0% Senior Notes at any time or from time to time prior to June 15, 2024 with the net proceeds of specified equity offerings at specified redemption prices (as set forth in the Indenture). Upon a senior claimchange in control (as defined in the Indenture), we would be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the outstanding principal amount of the 4.0% Senior Notes.
5.5% Senior Unsecured Notes
On June 12, 2018, we privately issued $450.0 million of 5.5% Senior Notes, which were set to mature in 2026 and bore interest at 5.5%, paid semi-annually. We called the 5.5% Senior Notes effective June 17, 2021 and settled with proceeds from the issuance of the 4.0% Senior Notes and cash on certain collateral securing borrowings thereunder.hand. As a result, we incurred $16.7 million in loss on extinguishment of debt, comprised of a $12.4 million call premium and a $4.3 million write-off of the remaining deferred debt issuance costs associated with the retirement of the 5.5% Senior Notes.
27

Our corporate credit rating and the credit rating for our debt are presented below. These ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agencies.
 Moody’s  Standard & Poor’s
December 31,September 30,December 31,September 30,
2021202120212021
Corporate credit ratingBa1Ba1BBBB
ABL AgreementNot ratedNot ratedNot ratedNot rated
4.0% Senior NotesBa1Ba1BBBB
OutlookStableStableStableStable

 Moody’s   Standard & Poor's
 December 31, September 30, December 31, September 30,
 2017 2017 2017 2017
Corporate credit ratingBa3 Ba3 BB- BB-
ABL AgreementNot rated Not rated Not rated Not rated
Term LoanBa3 Ba3 BB BB
OutlookStable Stable Stable Stable

Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured financefinance” or “special purposepurpose” entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, at December 31, 20172021 we did not have any undisclosed borrowings, debt, derivative contracts or synthetic leases. Therefore, we were not exposed to any financing, liquidity, market or credit risk that could have arisen had we engaged in such relationships.
We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual obligations. At December 31, 2017,2021, we had $17.5$15.0 million of letters of credit and $35.6$32.5 million of surety bonds outstanding.
Seasonality
Our business is dependent upon the construction industry, which is seasonal due toas a result of the impact of cold weather conditions. Net sales and operating income historically have historically been lowest in the quarterlythree month periods ending December 31 and March 31 when the northern United States and all of Canada generally face weather conditions that restrict significant construction activity.
Item 4.CONTROLS AND PROCEDURES
During the quarter ended December 31, 2017, there wereItem 4.    CONTROLS AND PROCEDURES
There have been no changes in our internal control over financial reporting thatwhich have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.reporting during the quarter ended December 31, 2021.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and our Chief Financial Officer have concluded, based on an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) by our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, that such disclosure controls and procedures were effective as of the end of the period covered by this report.
Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls can prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There are inherent limitations in all control systems, including the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of one or more persons. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and, while our disclosure controls and procedures are designed to be effective under circumstances where they should reasonably be expected to operate effectively, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.
28

PART II OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
Item 1.    LEGAL PROCEEDINGS
Refer to the information provided in Note 11.12. to the Notes to the Condensed Consolidated Financial Statements presented in Item 11. of Part I of this report.
Item 1A.
Item 1A.     RISK FACTORS
Recent changes in U.S. tax law may have a significant impact on our Company

On December 22, 2017, HR-1, formerly referred to as the Tax Cuts and Jobs Act, (“Act”) was signed into law, significantly impacting several sections of the Internal Revenue Code. The Act, among other things, reduces the corporate tax rate to 21% from 35%, limits the deductibility of interest expense and executive compensation and implements a modified territorial tax system which includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. The Act requires complex computations to be performed that were not previously required in U.S. tax law, judgments to be made in interpretation of the provisions of the Act and estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. We are continuing to examine the impact of the Act, including certain provisions that will become applicable to us in fiscal year 2019 related to base erosion anti-abuse tax (“BEAT”), global intangible low-taxed income (“GILTI”), and other provisions that could adversely affect our effective tax rate in the future. The U.S. Treasury Department, the IRS, and other standard-setting bodies could interpret or issue guidance on how provisions of the Act will be applied or otherwise administered that is different from our interpretation. Furthermore, because there may be additional state income tax implications, we will continue to monitor changes in state and local tax laws to determine if state and local taxing authorities intend to conform or deviate from changes to U.S. federal tax legislation as a result of the Act.

In addition to the risk factor above and other information set forth in this report, you should carefully consider the factors discussed in PART I, “Item 1A. RISK FACTORS” in our Annual Report, each of which could materially affect our business, financial condition or operating results. These described risks are not the only risks facing us. Additional risks and uncertainties not known to us or that we deem to be immaterial also may materially adversely affect our business, financial condition or operating results.
Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the quarterthree months ended December 31, 2017, we repurchased2021, 141,062 shares of our common stock, including shares repurchased under our existing share repurchase authorization and shareswere surrendered to us to pay the tax withholding obligations of participants in connection with the lapsingvesting of restrictions on restricted stock units, as follows.units.

We repurchased 1,408,274 shares of our common stock during the three months ended December 31, 2021 for $20.0 million under our share repurchase authorization, and we had $115.0 million remaining under this authorization.

PeriodTotal number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of publicly announced plans or programsMaximum dollar value of shares that may yet be purchased under the plans or programs (in millions)
October 1-31, 2021— $— — $135.0 
November 1-30, 2021606,400 $14.57 — 126.2 
December 1-31, 2021801,874 $13.89 — 115.0 
Total1,408,274 $14.18 — 

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publically announced plans or programs 
Maximum dollar value of shares that may yet be purchased under the plans or programs
 (in millions)
October 1-31, 2017 
 $
 
 $
November 1-30, 2017 845,390
 12.15
 823,739
 
December 1-31, 2017 122,753
 12.35
 
 
Total 968,143
 $12.17
 823,739
 $

Item 6. EXHIBITS
Item 6.EXHIBITS
Exhibit No.Document
3.131.1*

10.20.5**

10.22.2**

10.29.2**

10.29.3**

10.30.2**

31.1*
31.2*
32.1*
32.2*
101*
104*Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its iXBRL tags are embedded within the Inline XBRL document.
*     Filed with this quarterly report
**     Management compensatory plan, contract, or arrangement
29

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MUELLER WATER PRODUCTS, INC.
Date:February 8, 20184, 2022By:/s/ Michael S. NancarrowSuzanne G. Smith
Michael S. NancarrowSuzanne G. Smith
Chief Accounting Officer


23
30