PART I


~~Item 1.~~	~~FINANCIAL STATEMENTS~~

Item 1. FINANCIAL STATEMENTS

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 31,		September 30,
	2023		2022
	(in millions, except share amounts)
Assets:
Cash and cash equivalents	$	89.2	$	146.5
Receivables, net of allowance for credit losses of $6.3 million and $5.6 million	229.3		228.0
Inventories, net	321.8		278.7
Other current assets	29.3		26.8
Total current assets	669.6		680.0
Property, plant and equipment, net	304.9		301.6
Intangible assets, net	348.8		361.2
Goodwill	99.0		98.6
Other noncurrent assets	54.8		56.7
Total assets	$	1,477.1	$	1,498.1

Liabilities and stockholders’ equity:
Current portion of long-term debt	$	0.9	$	0.8
Accounts payable	103.7		122.8
Other current liabilities	86.7		117.4
Total current liabilities	191.3		241.0
Long-term debt	446.6		446.1
Deferred income taxes	86.8		86.3
Other noncurrent liabilities	51.5		55.4
Total liabilities	776.2		828.8

Commitments and contingencies (Note 10.)

Common stock: 600,000,000 shares authorized; 156,366,647 and 155,844,138 shares outstanding at March 31, 2023, and September 30, 2022, respectively	1.6		1.6
Additional paid-in capital	1,264.3		1,279.6
Accumulated deficit	(523.5)		(567.3)
Accumulated other comprehensive loss	(41.5)		(44.6)
Total stockholders’ equity	700.9		669.3
Total liabilities and stockholders’ equity	$	1,477.1	$	1,498.1

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

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, net 107.4
145.3
Inventories 155.2
138.9
Other current assets 26.5
24.4
Total current assets 637.4
670.3
Property, plant and equipment, net 122.3
122.3
Intangible assets 434.6
439.3
Other noncurrent assets 25.9
26.4
Total assets $ 1,220.2
$ 1,258.3

Liabilities and equity:
Current portion of long-term debt $ 5.6
$ 5.6
Accounts payable 51.3
82.5
Other current liabilities 46.1
53.5
Total current liabilities 103.0
141.6
Long-term debt 474.3
475.0
Deferred income taxes 76.2
115.1
Other noncurrent liabilities 32.4
37.1
Total liabilities 685.9
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, respectively 1.6
1.6
Additional paid-in capital 1,482.4
1,494.2
Accumulated deficit (900.5 ) (955.6 )
Accumulated other comprehensive loss (50.2 ) (51.8 )
Total Company stockholders’ equity 533.3
488.4
Noncontrolling interest 1.0
1.1
Total equity 534.3
489.5
Total liabilities and equity $ 1,220.2
$ 1,258.3

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MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three months ended				Six months ended
	March 31,				March 31,
	2023		2022		2023		2022

	(in millions, except per share amounts)
Net sales	$	332.9	$	310.5	$	647.7	$	582.8
Cost of sales	235.1		217.7		456.7		402.4
Gross profit	97.8		92.8		191.0		180.4
Operating expenses:
Selling, general and administrative	64.2		58.0		127.1		114.3
Strategic reorganization and other charges (benefits)	0.7		0.6		(3.0)		3.0
Total operating expenses	64.9		58.6		124.1		117.3
Operating income	32.9		34.2		66.9		63.1
Other expenses (income):
Pension expense (benefit) other than service	1.0		(1.0)		1.9		(2.0)
Interest expense, net	3.9		4.5		7.6		8.8
Net other expenses	4.9		3.5		9.5		6.8
Income before income taxes	28.0		30.7		57.4		56.3
Income tax expense	6.7		7.1		13.6		13.3
Net income	$	21.3	$	23.6	$	43.8	$	43.0

Net income per share:
Basic	$	0.14	$	0.15	$	0.28	$	0.27
Diluted	$	0.14	$	0.15	$	0.28	$	0.27

Weighted average shares outstanding:
Basic	156.3		156.9		157.9		157.6
Diluted	156.9		157.5		158.5		158.4

Dividends declared per share	$	0.061	$	0.058	$	0.122	$	0.116

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

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 sales 122.9
115.4
Gross profit 55.4
51.8
Operating expenses:
Selling, general and administrative 39.8
36.3
Gain on sale of idle property (9.0 ) —
Strategic reorganization and other charges 3.9
1.3
Total operating expenses 34.7
37.6
Operating income 20.7
14.2
Pension costs other than service 0.2
0.3
Interest expense, net 5.2
6.4
Income before income taxes 15.3
7.5
Income tax expense (benefit) (39.8 ) 2.1
Income from continuing operations 55.1
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:
Basic 158.5
161.8
Diluted 160.0
164.6

Dividends declared per share $ 0.04
$ 0.03

Table of Contents

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three months ended				Six months ended
	March 31,				March 31,
	2023		2022		2023		2022

	(in millions)
Net income	$	21.3	$	23.6	$	43.8	$	43.0
Other comprehensive income (loss):
Pension actuarial amortization	0.9		0.4		1.8		0.8
Income tax effects	(0.3)		—		(0.6)		(0.1)
Foreign currency translation	(2.1)		(3.6)		1.9		2.1
Total other comprehensive income (loss), net	(1.5)		(3.2)		3.1		2.8
Comprehensive income	$	19.8	$	20.4	$	46.9	$	45.8

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

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):
Pension 0.8
1.0
Income tax effects (0.3 ) (0.4 )
Foreign currency translation 0.1
(1.5 )
Derivative fair value change 1.6
4.7
Income tax effects (0.6 ) (1.8 )
1.6
2.0
Comprehensive income $ 56.7
$ 8.7

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MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


	Common stock		Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive (loss) income		Total
	(in millions)
Balance at September 30, 2022	$	1.6	$	1,279.6	$	(567.3)	$	(44.6)	$	669.3
Net income	—		—		22.5		—		22.5
Dividends declared	—		(9.5)		—		—		(9.5)
Stock-based compensation	—		1.8		—		—		1.8
Shares retained for employee taxes	—		(1.5)		—		—		(1.5)
Common stock issued	—		0.6		—		—		0.6

Other comprehensive income, net of tax	—		—		—		4.6		4.6
Balance at December 31, 2022	$	1.6	$	1,271.0	$	(544.8)	$	(40.0)	$	687.8
Net income	—		—		21.3		—		21.3
Dividends declared	—		(9.5)		—		—		(9.5)
Stock-based compensation	—		2.4		—		—		2.4

Common stock issued	—		0.4		—		—		0.4

Other comprehensive loss, net of tax	—		—		—		(1.5)		(1.5)
Balance at March 31, 2023	$	1.6	$	1,264.3	$	(523.5)	$	(41.5)	$	700.9


	Common stock		Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive (loss) income		Total
	(in millions)
Balance at September 30, 2021	$	1.6	$	1,342.2	$	(643.9)	$	(5.0)	$	694.9
Net income	—		—		19.4		—		19.4
Dividends declared	—		(9.2)		—		—		(9.2)
Stock-based compensation	—		2.0		—		—		2.0
Shares retained for employee taxes	—		(1.9)		—		—		(1.9)
Stock repurchased under buyback program	—		(20.0)		—		—		(20.0)
Common stock issued	—		0.7		—		—		0.7
Other comprehensive income, net of tax	—		—		—		6.0		6.0
Balance at December 31, 2021	$	1.6	$	1,313.8	$	(624.5)	$	1.0	$	691.9
Net income	—		—		23.6		—		23.6
Dividends declared	—		(9.1)		—		—		(9.1)
Stock-based compensation	—		2.4		—		—		2.4
Shares retained for employee taxes	—		0.1		—		—		0.1

Common stock issued	—		0.4		—		—		0.4
Other comprehensive loss, net of tax	—		—		—		(3.2)		(3.2)
Balance at March 31, 2022	$	1.6	$	1,307.6	$	(600.9)	$	(2.2)	$	706.1

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

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

Table of Contents

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six months ended
	March 31,
	2023		2022
	(in millions)
Operating activities:
Net income	$	43.8	$	43.0
Adjustments to reconcile net income to net cash (used in) provided by operating activities, net of acquisition:
Depreciation	16.3		16.0
Amortization	14.0		14.0
Gain on sale of assets	(3.7)		—
Stock-based compensation	4.2		4.4
Pension net periodic cost (benefit)	2.2		(1.3)
Deferred income taxes	0.1		6.1
Inventory reserves provision	1.7		3.3
Other, net	0.6		0.5
Changes in assets and liabilities, net of acquisition:
Receivables, net	(0.9)		(9.7)
Inventories	(44.5)		(47.5)
Other assets	(1.9)		(2.4)
Accounts payable	(19.3)		15.8
Other current liabilities	(30.9)		(36.0)
Other noncurrent liabilities	(3.9)		(5.4)
Net cash (used in) provided by operating activities	(22.2)		0.8
Investing activities:
Capital expenditures	(20.5)		(26.0)
Acquisition purchase price adjustment	—		0.2
Proceeds from sale of assets	5.1		—
Net cash used in investing activities	(15.4)		(25.8)
Financing activities:


Dividends paid	(19.0)		(18.3)
Employee taxes related to stock-based compensation	(1.5)		(1.8)
Common stock issued	1.0		1.1

Common stock repurchased under buyback program	—		(20.0)

Payments for finance lease obligations	(0.6)		(0.1)
Net cash used in financing activities	(20.1)		(39.1)
Effect of currency exchange rate changes on cash	0.4		0.7
Net change in cash and cash equivalents	(57.3)		(63.4)
Cash and cash equivalents at beginning of period	146.5		227.5
Cash and cash equivalents at end of period	$	89.2	$	164.1

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

Table of Contents

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 operations 55.1
5.4
Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:
Depreciation 4.9
4.9
Amortization 5.7
5.4
Stock-based compensation 2.0
1.8
Retirement plans 0.7
0.8
Deferred income taxes (39.7 ) (2.1 )
Gain on sale of idle property (9.0 ) —
Other, net 0.7
0.3
Changes in assets and liabilities:
Receivables 38.4
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 operations 0.5
(19.9 )
Investing activities:
Capital expenditures (6.4 ) (4.2 )
Proceeds from sales of assets 7.4
—
Net cash provided by (used in) investing activities of continuing operations 1.0
(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 issued 4.3
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 cash 0.1
(0.7 )
Net change in cash and cash equivalents (13.4 ) (22.7 )
Cash and cash equivalents at beginning of period 361.7
195.0
Cash and cash equivalents at end of period $ 348.3
$ 172.3


	Six months ended
	March 31,
	2023		2022

	(in millions)
Supplemental cash flow information:
Cash paid for interest, net	$	8.2	$	10.2
Cash paid for income taxes, net	$	21.1	$	15.6

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

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MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE AND SIX MONTHS ENDED ~~DECEMBER~~MARCH 31, ~~2017~~2023

(UNAUDITED)


~~Note 1.~~	~~Organization~~ Note 1.Organization and Basis of Presentation

Mueller Water Products, Inc., a Delaware corporation, together with its consolidated subsidiaries, operates in two business segments: ~~Infrastructure~~Water 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. Water Flow Solutions’ portfolio includes iron gate ~~tapping, check, knife, plug~~valves, specialty valves and ~~ball valves, as well as dry-barrel~~service brass products. Water Management Solutions’ portfolio includes fire hydrants, repair and ~~wet-barrel fire hydrants. Technologies offers~~installation, natural gas, metering, ~~systems,~~ leak detection, ~~pipe condition assessment~~pressure control and ~~other related~~software products and services. 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” may also refer to the segment being discussed.

On ~~January 6, 2017,~~June 14, 2021, we ~~sold our former Anvil segment. Amounts applicable~~acquired all the outstanding capital stock of i2O Water Ltd (“i2O”), a provider of pressure management solutions to ~~Anvil have been classified as discontinued operations.~~

~~Infrastructure owns~~more than 100 water companies in 45 countries. During the three months ended December 31, 2021, we recorded a ~~49% ownership interest~~purchase price adjustment of $0.2 million, resulting in ~~an industrial valve joint venture. Due to substantive control features in the operating agreement, all~~a final purchase price of the joint venture's assets, liabilities and results of operations are included in our consolidated financial statements. The net loss attributable to noncontrolling interest is included in selling, general and administrative expenses. Noncontrolling interest is recorded at its carrying value, which approximates fair value.

~~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.~~$19.5 million.

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 of~~in recording assets, liabilities, sales and expenses ~~and~~as 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.~~2022. 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, ~~2017~~2022 was derived from our 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 from~~Our business is seasonal as a result of the impact 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 ended~~three-month 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.

Unless the context indicates otherwise, whenever we ~~have reclassified $0.2 million from selling, general and administrative expenses and $0.1 million from cost of sales~~refer to ~~pension costs other than service.~~a particular year, we mean our fiscal year ended or ending September 30 in that particular calendar year.

~~On February 15, 2017, we acquired Singer Valve. Singer had net sales of $3.7 million in 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 discussed in Note 3.Recently Adopted Accounting Pronouncements

In ~~May 2014,~~December 2022, the Financial Accounting Standards Board (“FASB”) issued ~~new~~Accounting Standards Update (“ASU”) No. 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848” (“ASU 2022-06”). ASU 2022-06 defers the sunset date for applying the reference rate reform relief in ASC 848 to December 31, 2024 from December 31, 2022. ASU 2022-06 became effective immediately upon issuance. 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 may 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 ASU 2020-04 on October 1, 2021 and there was no material impact to our financial statements.

In December 2019, the FASB issued 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 using~~franchise tax, the ~~modified retrospective transition method beginning~~evaluation of a step up in the ~~first quarter~~tax basis of ~~fiscal 2019. We have completed our initial scoping~~goodwill, 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~~enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications. ASU 2019-12 was 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.

Table of Contents

Restructuring

Between November 2019 and March 2021, we 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 completed the closure of our facility in Aurora, Illinois during our fiscal year 2022. The majority of the activities from these plants were transferred to our Kimball, Tennessee facility. In connection with these reorganizations, we recognized certain restructuring costs. During the three months ended December 31, 2022, we recorded a $4.0 million gain, before tax, on the sale of the Aurora, Illinois facility. The restructuring accrual amounts as of March 31, 2023 and September 30, 2022 were immaterial.

New Markets Tax Credit Program

On December 22, 2020, we entered into a financing transaction with Wells Fargo Community Investment Holdings, LLC (“Wells Fargo”) related to our brass foundry construction project in Decatur, Illinois under a qualified New Markets Tax Credit program (“NMTC”). The NMTC is ~~ongoing, but at this time,~~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 are certified to make qualified low-income community investments, such as in our foundry project.

Under the NMTC, Wells Fargo contributed capital of $4.8 million to an investment fund and we 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 ~~expect~~comply with various regulations and contractual provisions surrounding 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.~~foundry project. We have ~~adopted~~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 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 centralized99.99% stake in a joint venture (“Sub-CDE”) with a CDE. The Sub-CDE then loaned $16.2 million to ~~better align~~us, with ~~business needs and generate greater efficiencies. Costs and expenses~~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 ~~quarter ended~~investment fund. We believe that Wells Fargo will exercise its put option in December ~~31, 2017~~2027 for ~~this plan,~~nominal consideration, resulting in our becoming the sole owner of the investment fund, cancelling the related loans, and recognizing an estimated gain of $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 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 ~~strategic reorganization~~our consolidated financial statements.

Intercompany transactions between us and ~~other charges,~~the VIEs have been eliminated in consolidation. Wells Fargo’s contribution to the investment fund is consolidated in our financial statements within Other noncurrent liabilities as a result of its redemption features.

Direct costs associated with Wells Fargo’s capital contribution were ~~primarily personnel-related.~~netted against the recorded proceeds, resulting in a net cash 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. Revenue from Contracts with Customers

We recognize revenue when control of promised products or services is transferred to our customers, in amounts that reflect the consideration to which we expect to be entitled in exchange for those products or services. We account for a contract when it has approval and commitment from both parties, the rights 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 arrangement with a customer.

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~~Index to Financial Statements~~

Disaggregation of Revenue

~~Activity in accrued restructuring, reported as part~~

Refer to Note 8. for disaggregation of ~~other current liabilities, is presented below.~~

Three months ended
December 31, 2017
(in millions)
Beginning balance $ 3.3
Expense 2.3
Payments (1.4 )
Ending balance $ 4.2


~~Note 2.~~	~~Discontinued Operations and Divestitures~~

~~On December 4, 2017, we sold an idle property in Burlington, New Jersey that had previously been a plant in~~ our ~~former U.S. Pipe~~revenues from contracts with customers by reportable segment and ~~recorded a gain~~by geographical region, which we believe best depicts how the nature, amount, timing and uncertainty of ~~$9.0 million on~~ our ~~Corporate segment. We received $7.4 million in~~revenue and cash ~~recorded net current assets of $0.8 million and conveyed plant, property and equipment with a net carrying value of $0.4 million, and~~flows are affected by economic factors. Geographical region represents the ~~buyer assumed related environmental liabilities with a carrying value of $1.2 million.~~

~~On January 6, 2017, we sold our former Anvil segment to affiliates of One Equity Partners. The table below presents a summary~~location of the ~~operating results for~~customer.

Contract Asset and Liability Balances

Differences in the ~~Anvil discontinued operations during~~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 ~~quarter ended December 31, 2016. These operating results do not reflect what they would have been had Anvil not been sold.~~timing of billing differs from the timing of revenue recognized.

Three months ended
December 31, 2016
(in millions)
Net sales $ 83.1
Cost of sales 62.8
Gross profit 20.3
Operating expenses:
Selling, general and administrative 18.3
Other charges 0.2
Total operating expenses 18.5
Operating income 1.8
Income tax expense 0.5
Income from discontinued operations $ 1.3


~~Note 3.~~	~~Income Taxes~~

~~On December 22, 2017, HR-1, formerly referred to~~Advance payments and billings in excess of revenue are recognized and recorded as deferred revenue, the ~~Tax Cuts and Jobs Act (“Act”), was enacted,~~majority of which ~~made significant revisions to federal income tax laws, including lowering~~is classified as current based on the ~~corporate income tax rate to 21% from 35% effective January 1, 2018, overhauling the taxation~~timing 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 recognize revenue. We include current deferred revenue within Other current liabilities in the accompanying condensed consolidated balance sheets. Deferred revenue represents contract liabilities and is recorded when customers remit cash payments in advance of our satisfaction of performance obligations under contractual arrangements. Contract liabilities are reversed when the performance obligation is satisfied and revenue is recognized.

The table below represents the balances of our customer receivables and deferred revenue.


	March 31,		September 30,
	2023		2022

	(in millions)
Billed receivables	$	231.7	$	230.5
Unbilled receivables	3.9		3.1
Gross customer receivables	235.6		233.6
Allowance for credit losses	(6.3)		(5.6)
Receivables, net	$	229.3	$	228.0

Deferred revenue	$	7.8	$	8.1

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Our performance obligations are satisfied at a point in time for sales of equipment or product over time for our software hosting and leak detection monitoring services. Performance obligations are supported by customer contracts, which provide frameworks for the nature of the distinct products or services. The transaction price is adjusted for our 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 typically based on historical experience and known trends. We constrain the amounts of variable consideration that are included in the transaction price, to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or when uncertainties around the variable consideration are resolved.

We exclude from the measurement of the transaction price all taxes assessed by a governmental authority.

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.

Revenue for the sale of our products is recognized when the obligations of the terms of our contract are satisfied, which is when the customer is able to direct the use of and obtain substantially all of the benefits from the product, which generally occurs upon shipment when control of the product transfers to the customer.

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We offer warranties to our customers which provide assurance that the products provided will function as intended and comply with any agreed-upon specifications. These warranties cannot be purchased separately from our products.

Costs to Obtain or Fulfill a Contract

Shipping and handling costs associated with freight activities after the customer has obtained control of a product are included in cost of sales at the time the related ~~tax expenses~~revenue is recognized.

We incur certain incremental costs to obtain a contract, which primarily relate to incremental sales commissions. Our sales 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, cancellations or ~~benefits. The average~~lost collections. As the expected benefit associated with these incremental costs is generally one year or less based on the nature of ~~these rates varies slightly from year to year but historically has been approximately 39%. With~~ the ~~legislation changing enacted rates taking place in the current quarter,~~product sold and benefits received, we have remeasured our deferred tax items at an average rate of approximately 25%. This resulted in a provisional income tax benefit of $42.6 million, which is subject to change, if necessary, as we continue to analyze certain aspects ofapplied the ~~Act~~practical expedient and ~~refine our calculations. We~~ do not ~~expect changes to this amount to be material.~~capitalize the related costs and expense them as incurred.

The Act also imposes a one-time transition tax on the undistributed, non-previously taxed, post-1986 foreign “earnings 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, but we are unable at this time to reasonably estimate our transition tax liability, and therefore we have not recorded any amount for this tax at December 31, 2017.

Note 3. Income Taxes

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.

The reconciliation between the U.S. federal statutory income tax rate and the effective income tax rate is presented below.


	Three months ended					Three months ended				Six months ended
	December 31,					March 31,				March 31,
	2017		2016			2023		2022		2023		2022
U.S. federal statutory income tax rate	24.5	%	35.0	%	U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%	21.0	%
Adjustments to reconcile to the effective tax rate:					Adjustments to reconcile to the effective tax rate:
State income taxes, net of federal benefit	4.3		3.9		State income taxes, net of federal benefit	3.4		3.6		3.4		3.6
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	)
Excess tax benefits related to stock-based compensation					Excess tax benefits related to stock-based compensation	—		—		0.3		(0.2)
Tax credits	(0.9	)	(0.8	)	Tax credits	(1.5)		(1.3)		(1.5)		(1.3)
Global Intangible Low-Taxed Income					Global Intangible Low-Taxed Income	0.8		0.8		0.8		0.8
Foreign income tax rate differential					Foreign income tax rate differential	(1.6)		(1.4)		(1.6)		(1.4)
Nondeductible compensation					Nondeductible compensation	0.6		—		0.6		—
Valuation allowances					Valuation allowances	—		(0.3)		(0.2)		0.2
Other	0.5		0.8		Other	1.2		0.7		0.9		0.9
	18.3	%	28.0	%
Remeasurement of deferred taxes for change in rates	(278.4	)	—
Effective income tax rate	(260.1	)%	28.0	%	Effective income tax rate	23.9	%	23.1	%	23.7	%	23.6	%

At ~~December~~March 31, ~~2017~~2023 and September 30, ~~2017,~~2022, the gross liabilities for unrecognized income tax benefits were ~~$3.1~~$4.9 million and ~~$3.0~~$4.7 million, ~~respectively.~~respectively, and are included in Other noncurrent liabilities.


~~Note 4.~~	~~Borrowing Arrangements~~ Note 4. Borrowing Arrangements

The components of our long-term debt are ~~presented below.~~as follows:


	March 31,		September 30,
	2023		2022

	(in millions)
4.0% Senior Notes	$	450.0	$	450.0
Finance leases	1.7		1.6
Total borrowings	451.7		451.6
Less: deferred financing costs	(4.2)		(4.7)
Less: current portion	(0.9)		(0.8)
Long-term debt	$	446.6	$	446.1

December 31, September 30,
2017 2017
(in millions)
ABL Agreement $ —
$ —
Term Loan 483.7
484.8
Other 1.7
1.7
485.4
486.5
Less deferred financing costs 5.5
5.9
Less current portion 5.6
5.6
Long-term debt $ 474.3
$ 475.0

ABL ~~Agreement. At December 31, 2017, our asset based~~Agreement. Our asset-based lending agreement, as amended, (“~~ABL Agreement”~~ABL”) ~~consisted~~is provided by a syndicate of banking institutions and consists of a revolving credit facility for up to ~~$225~~$175.0 million in borrowing that expires on July 29, 2025. The ABL allows up to $25.0 million of ~~revolving credit borrowings,~~ swing line loans and 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~~

Table of ~~letters~~Contents

As of ~~credit outstanding.~~

~~Borrowings~~March 31, 2023, borrowings under the ABL ~~Agreement bear~~bore interest at a floating rate equal to LIBOR plus aan applicable margin ~~ranging from 125~~range of 200 to ~~150~~225 basis points, or a base rate, as defined in the ABL, ~~Agreement,~~ plus aan applicable margin ~~ranging~~range of from 25100 to 50125 basis points. At ~~December~~March 31, ~~2017,~~2023 the applicable margin for LIBOR based loans was 200 basis points and for base rate loans was ~~LIBOR plus 125~~100 basis points.

On April 5, 2023, we amended the ABL. This amendment replaced LIBOR-based loans with Secured Overnight Financing Rate (“SOFR”) based loans plus an adjustment of 10 basis points, among other immaterial modifications.

The ABL ~~Agreement terminates on July 13, 2021. We pay a commitment fee for any unused borrowing capacity~~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 ~~25 basis points per annum.~~overdue accounts receivable in certain circumstances. The borrowing base under the ABL 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 and are jointly and severally liable for outstanding borrowings. Our obligations under the ABL ~~Agreement~~ are secured by a first-priority perfected lien on all of our ~~U.S. receivables and inventories,~~United States inventory, accounts receivable, certain cash balances and other supporting ~~obligations.~~assets.

The ABL 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 and 10% of the Loan Cap as defined in the ~~ABL Agreement.~~ABL. Excess availability based on ~~December~~March 31, ~~2017~~2023 data was $162.5 million, as reduced by $12.4 million of outstanding letters of credit ~~swap contract liabilities~~ and $0.1 million of accrued fees and ~~expenses~~expenses.

4.0% Senior Unsecured Notes. On May 28, 2021, we privately issued $450.0 million of ~~$19.8~~4.0% Senior Unsecured Notes (“4.0% Senior Notes”), which mature on June 15, 2029 and bear interest at 4.0%, paid semi-annually in June and December. We capitalized $5.5 million ~~was $96.3 million.~~

~~Term Loan. On November 25, 2014, we entered into a $500.0 million senior secured~~of financing costs which are being amortized over the term ~~loan (“Term Loan”). The proceeds~~of the 4.0% Senior Notes using the effective interest method. Proceeds from the ~~Term Loan,~~4.0% Senior Notes, along with ~~other~~ cash on hand, were used to ~~prepay~~redeem our ~~7.375%~~previously existing 5.5% Unsecured Senior ~~Subordinated Notes and 8.75% Senior Unsecured Notes and to satisfy and discharge our obligations under the respective indentures.~~

The Term Loan accrues interest at a floating rate equal to LIBOR, subject to a floor of 0.75%, plus 250 basis points. At December 31, 2017, the weighted-average 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 substantiallyNotes. Substantially all of our ~~U.S.~~United States subsidiaries ~~and is secured by essentially all of~~guarantee the 4.0% Senior Notes, which 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.ABL. Based on quoted market prices, which is a Level 1 measurement, the outstanding ~~Term Loan~~4.0% Senior Notes had a fair value of ~~$490~~$407.9 million at ~~December~~March 31, ~~2017.~~2023.

~~The Term Loan~~

An indenture governing the 4.0% Senior Notes (“Indenture”) contains ~~affirmative~~customary covenants and ~~negative operating~~events of default, including covenants ~~applicable~~that 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 ~~compliant~~in compliance with these covenants at ~~December~~March 31, ~~2017~~2023.

As set forth in the Indenture, we may redeem some or all of the 4.0% Senior Notes at any time prior to June 15, 2024 at certain “make-whole” redemption prices and ~~expect~~on 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 an~~the aggregate ~~notional~~principal amount of ~~$150.0 million. These swap contracts effectively fix~~ the ~~cash interest rate on $150.0 million~~4.0% Senior Notes at any time prior to June 15, 2024 with the net proceeds of ~~our borrowings under~~specified equity offerings at specified redemption prices. Upon a change of control, we would be required to offer to purchase the ~~Term Loan~~4.0% Senior Notes at ~~4.841% from September 30, 2016 through September 30, 2021.~~

~~We have designated our interest rate swap contracts as cash flow hedges of our future interest payments and elected~~a price equal to apply the “shortcut” method of assessing hedge effectiveness. As a result, the gains and losses on the swap contracts are reported as a component of other comprehensive loss 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.

~~The fair values~~101% of the ~~swap contracts are presented below.~~outstanding principal amount.

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 liabilities 0.2
1.3
$ 0.9
$ 2.5

Currency swap contracts, not designated as hedges:
Other noncurrent liabilities $ 1.3
$ 1.3

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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 5. Retirement Plans


~~Note 6.~~	~~Retirement Plans~~

The components of net periodic ~~benefit cost~~costs (benefits) for our pension plans are presented below.


	Three months ended							Three months ended				Six months ended
	December 31,							March 31,				March 31,
	2017			2016				2023		2022		2023		2022
	(in millions)							(in millions)
Service cost	$	0.5		$	0.5		Service cost	$	0.2	$	0.3	$	0.4	$	0.6
Pension costs other than service:
Pension costs (benefits) other than service:							Pension costs (benefits) other than service:
Interest cost	3.6			3.6			Interest cost	3.5		2.4		7.0		4.8
Expected return on plan assets	(4.2		)	(4.3		)	Expected return on plan assets	(3.4)		(3.8)		(6.9)		(7.6)
Amortization of actuarial net loss	0.8			1.0			Amortization of actuarial net loss	0.9		0.4		1.8		0.8
	0.2			0.3
Net periodic benefit cost	$	0.7		$	0.8
Pension costs (benefits) other than service							Pension costs (benefits) other than service	1.0		(1.0)		1.9		(2.0)
Net periodic costs (benefits)							Net periodic costs (benefits)	$	1.2	$	(0.7)	$	2.3	$	(1.4)

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~~Note 8.~~	Note 7. Supplemental Balance Sheet Information

Selected supplemental ~~balance sheet~~asset information is presented below.


	March 31,		September 30,
	2023		2022

	(in millions)
Inventories:
Purchased components and raw materials	$	197.1	$	181.8
Work in process, net	60.5		56.8
Finished goods, net	64.2		40.1
Total inventories	$	321.8	$	278.7

Other current assets:
Prepaid expenses	$	17.7	$	14.6
Non-trade receivables	1.7		1.6
Maintenance and repair supplies and tooling	3.8		2.8
Income taxes	0.8		0.8
Workers’ compensation reimbursement receivable	1.4		2.6
Other current assets	3.9		4.4
Total other current assets	$	29.3	$	26.8

Property, plant and equipment:
Land	$	6.6	$	5.7
Buildings	103.9		87.6
Machinery and equipment	501.3		456.0
Construction in progress	53.6		104.7
Total property, plant and equipment	665.4		654.0
Accumulated depreciation	(360.5)		(352.4)
Property, plant and equipment, net	$	304.9	$	301.6

Other noncurrent assets:
Operating lease right-of-use assets	$	24.3	$	26.0
Maintenance and repair supplies and tooling	21.0		20.4
Workers’ compensation reimbursement receivable	2.8		3.6
Pension asset	0.2		0.6
Note receivable	1.8		1.7
Deferred financing fees	0.8		1.0
Other noncurrent assets	3.9		3.4
Total other noncurrent assets	$	54.8	$	56.7

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December 31, September 30,
2017 2017
(in millions)
Inventories:
Purchased components and raw material $ 74.3
$ 67.7
Work in process 37.8
35.6
Finished goods 43.1
35.6
$ 155.2
$ 138.9

Other current assets:
Maintenance and repair tooling $ 3.2
$ 3.3
Income taxes 11.9
10.9
Other 11.4
10.2
$ 26.5
$ 24.4

Property, plant and equipment:
Land $ 5.5
$ 5.6
Buildings 51.4
53.4
Machinery and equipment 270.0
266.7
Construction in progress 25.2
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 rebates 8.1
6.5
Taxes other than income taxes 2.4
3.2
Warranty 3.7
3.5
Income taxes 0.8
0.9
Environmental 1.2
1.3
Interest 0.7
0.6
Restructuring 4.2
3.3
Other 6.8
7.3
$ 46.1
$ 53.5
Selected supplemental liability information is presented below.


	March 31,		September 30,
	2023		2022

	(in millions)
Other current liabilities:
Compensation and benefits	$	29.3	$	40.2
Customer rebates	8.5		16.2
Income taxes payable	0.3		7.5
Warranty accrual	7.6		6.5
Deferred revenue	7.8		8.1
Refund liability	5.3		4.2
Taxes other than income taxes	4.3		4.4
Operating lease liabilities	4.8		4.4
Workers’ compensation accrual	2.9		4.6
CARES Act payroll tax liabilities	—		4.4
Restructuring liabilities	1.2		3.3
Environmental liabilities	0.7		0.7
Interest payable	5.3		5.3
Other current liabilities	8.7		7.6
Total other current liabilities	$	86.7	$	117.4

Other noncurrent liabilities:
Operating lease liabilities	$	20.6	$	22.4
Warranty accrual	3.4		4.2
Transition tax liability	3.1		4.1
Uncertain tax position liability	4.9		4.7
NMTC liability	3.9		3.9
Workers’ compensation accrual	6.3		6.5
Asset retirement obligation	3.6		3.6

Deferred development grant	2.5		2.5
Other noncurrent liabilities	3.2		3.5
Total other noncurrent liabilities	$	51.5	$	55.4

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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, all of which is within our Water Management Solutions segment, during the six months ended March 31, 2023, in millions.


~~Note 9.~~Balance at September 30, 2022:	~~Segment Information~~
Goodwill	$	822.7
Accumulated impairment	(724.1)
Goodwill, net	98.6
Activity during the six months ended March 31, 2023:
Change in foreign currency exchange rates	0.4
Balance at March 31, 2023	$	99.0

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Note 8. Segment Information

We have two reportable segments, Water Flow Solutions and Water Management Solutions. Water Flow Solutions’ portfolio includes iron gate valves, specialty valves and service brass products. Water Management Solutions’ portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, pressure control and software products and services. Summarized financial information for our segments is presented below.


	Three months ended				Six months ended
	March 31,				March 31,
	2023		2022		2023		2022

	(in millions)
Net sales, excluding intercompany:
Water Flow Solutions	$	157.2	$	183.9	$	322.8	$	338.8
Water Management Solutions	175.7		126.6		324.9		244.0
	$	332.9	$	310.5	$	647.7	$	582.8
Operating income (loss):
Water Flow Solutions	$	15.2	$	35.4	$	39.4	$	66.7
Water Management Solutions	31.7		11.7		51.3		23.2
Corporate	(14.0)		(12.9)		(23.8)		(26.8)
	$	32.9	$	34.2	$	66.9	$	63.1
Depreciation and amortization:
Water Flow Solutions	$	7.8	$	7.5	$	15.5	$	14.9
Water Management Solutions	7.7		7.3		14.7		15.0
Corporate	—		—		0.1		0.1
	$	15.5	$	14.8	$	30.3	$	30.0
Strategic reorganization and other charges (benefits):
Water Flow Solutions	$	—	$	—	$	—	$	—
Water Management Solutions	0.2		0.1		0.2		0.1
Corporate	0.5		0.5		(3.2)		2.9
	$	0.7	$	0.6	$	(3.0)	$	3.0
Capital expenditures:
Water Flow Solutions	$	7.8	$	12.1	$	15.6	$	21.5
Water Management Solutions	2.8		2.9		4.9		4.5
Corporate	—		—		—		—
	$	10.6	$	15.0	$	20.5	$	26.0
Water Flow Solutions disaggregated net revenue:
Central	$	44.0	$	50.7	$	88.0	$	91.2
Northeast	30.4		31.1		61.7		61.1
Southeast	28.6		40.7		62.0		78.0
West	36.4		45.8		85.6		83.9
United States	139.4		168.3		297.3		314.2
Canada	15.0		14.0		19.4		21.9
Other international locations	2.8		1.6		6.1		2.7
	$	157.2	$	183.9	$	322.8	$	338.8
Water Management Solutions disaggregated net revenue:
Central	$	44.3	$	34.6	$	85.8	$	63.4
Northeast	40.6		28.4		71.8		52.7
Southeast	39.4		26.3		72.7		51.8
West	32.7		22.3		61.8		47.0
United States	157.0		111.6		292.1		214.9
Canada	12.6		8.7		19.9		16.3
Other international locations	6.1		6.3		12.9		12.8
	$	175.7	$	126.6	$	324.9	$	244.0

Three months ended
December 31,
2017 2016
(in millions)
Net sales, excluding intercompany:
Infrastructure $ 160.1
$ 146.3
Technologies 18.2
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
Technologies 1.4
1.2
Corporate 0.1
0.1
$ 10.6
$ 10.3
Strategic reorganization and other charges:
Infrastructure $ —
$ 0.1
Technologies 0.1
—
Corporate 3.8
1.2
$ 3.9
$ 1.3
Capital expenditures:
Infrastructure $ 4.8
$ 3.0
Technologies 1.5
1.1
Corporate 0.1
0.1
$ 6.4
$ 4.2

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Note 9. Accumulated Other Comprehensive Income (Loss)


~~Note 10.~~	~~Accumulated Other Comprehensive Loss~~

Accumulated other comprehensive ~~loss~~income (loss) is ~~presented below.~~as follows:


	Pension, net of tax		Foreign currency translation		Total

	(in millions)
Balance at September 30, 2022	$	(36.3)	$	(8.3)	$	(44.6)
Current period other comprehensive income	1.2		1.9		3.1
Balance at March 31, 2023	$	(35.1)	$	(6.4)	$	(41.5)

Note 10. 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. Legal and 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 ~~material~~materially adverse effect on our ~~business~~financial 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~~a lawsuit 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. On November 15, 2022, Mueller Canada Ltd. ~~leased~~agreed to pay Rohcan Investments Limited C$1.5 million in settlement of all liability, damages and other claims related to the ~~property from 1988 through 2008.~~lawsuit. We have paid the settlement amount to Rohcan Investments Limited, and are pursuing indemnification from a former owner for certain potential liabilities that ~~are~~were 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.~~lawsuit.

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’s~~the 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, because~~Since the ~~amount~~amounts of such costs cannot be reasonably estimated at this time, no amounts ~~had~~have been accrued for this matter at ~~December~~March 31, ~~2017.~~2023.

~~Walter Energy. Each member~~

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The COVID-19 Pandemic. The pandemic has caused, and is likely to continue to cause, severe economic, market and other disruptions to the ~~Walter Energy consolidated group, which included us through December 14, 2006, is jointly~~U.S. and ~~severally liable for~~global economies. We have taken action and continue to counter such disruption, and work to protect the federal income tax liability of each other member of the consolidated group for any year 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~~safety of our ~~tax decisions for periods during~~employees. While the extent to 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~~pandemic continues to affect our results will depend on future developments, 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) relatingpandemic could result in material 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.~~

~~According~~mass shooting event at our Mueller Co. facility in Albertville, Alabama. 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 stated~~we anticipate that ~~Walter Energy would have no further material business operations after April 1, 2016~~additional 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 respect~~is 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~~materially 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~~

Indemnification. 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~~unless 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 ~~business~~financial position, results of operations, cash flows or ~~prospects.~~liquidity.


~~Note 12.~~	Note 11. Subsequent Events

On ~~January 24, 2018,~~April 5, 2023, we amended our ~~board~~ABL to replace LIBOR-based loans with SOFR-based loans plus a 10 basis point adjustment, among other immaterial modifications.

On April 25, 2023, our Board of ~~directors~~Directors declared a dividend of ~~$0.05~~$0.061 per share on our common stock, payable on or about ~~February 20, 2018~~May 22, 2023 to stockholders of record at the close of business on ~~February 9, 2018.~~May 10, 2023.

Table of Contents


~~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.~~ federal securities laws. All statements that address activities, events or developments that ~~we intend, expect, plan, project, believe~~the Company intends, expects, plans, projects, believes or ~~anticipate~~anticipates will or may occur in the future are forward-looking ~~statements.~~statements, including, without limitation, statements regarding outlooks, projections, forecasts, expectations, commitments, trend descriptions and the ability to capitalize on trends, value creation, Board and committee composition plans, long-term strategies and the execution or acceleration thereof, operational improvements, the benefits of capital investments, financial or operating performance including improving sales growth and driving increased margins, capital allocation and growth strategy plans, the Company’s product portfolio positioning and the demand for the Company’s products. Forward-looking statements are based on certain assumptions and assessments made by usthe Company in light of ~~our~~the 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, without limitation, including ~~regional, national~~the future impact of the COVID-19 pandemic on the Company’s operations and results, including effects on the financial health of customers (including collections); logistical challenges and supply chain disruptions, geopolitical conditions, or ~~global political, economic, business, competitive, market~~other events; an inability to realize the anticipated benefits from our operational initiatives, including our large capital investments in Chattanooga and Kimball, Tennessee, and Decatur, Illinois, plant closures, and our reorganization and related strategic realignment activities; an inability to attract or retain a skilled and diverse workforce, increased competition related to the workforce and labor markets; an inability to protect the Company’s information systems against service interruption, misappropriation of data or breaches of security; failure to comply with personal data protection and privacy laws; cyclical and changing demand in core markets such as municipal spending, residential construction, and natural gas distribution; government monetary or fiscal policies; the impact of adverse weather conditions; the impact of manufacturing and product performance; the impact of wage, commodity and materials price inflation; foreign exchange rate fluctuations; the impact of warranty claims; an inability to successfully resolve significant legal proceedings or government investigations; compliance with environmental, trade and anti-corruption laws and regulations; climate change and legal or regulatory ~~conditions~~responses thereto; changing regulatory, trade and tariff conditions; 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 goals; and other factors that are described ~~under~~in the section entitled “RISK FACTORS” in Item ~~1A.~~1A of ~~our annual report~~the Company’s most recent Annual Report on Form 10-K ~~for~~and later filings on Form 10-Q, as applicable.

Forward-looking statements do not guarantee future performance and are only as of the ~~year ended September 30, 2017 (“Annual Report”).~~date they are made. 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. ~~The~~You 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 on related subjects 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~~Approximately 60% to 65% of 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% of Infrastructure’s 2017~~2022 net sales were ~~for~~associated with repair and replacement directly related to municipal water infrastructure spending, approximately 25% to 30% of net sales were related to residential construction activity and ~~approximately~~less than 10% of net sales were related to natural gas ~~utilities.~~utilities spending.

~~Infrastructure announced price increases~~We expect the operating environment during fiscal year 2023 to be very challenging as a result of the ongoing inflationary pressures, labor challenges and the slowdown in residential construction. We anticipate healthy demand in the municipal repair and replacement market due to favorable budgets, especially at larger municipalities. While demand from the new residential construction end market was at healthy levels during our fiscal year 2022, especially for lot and land development activity, we anticipate that activity levels will slow in 2023 based on ~~valves, hydrants and gas products effective~~higher interest rates leading to a decrease in ~~February 2018~~demand for ~~its U.S. and Canadian markets. We believe that some customers may accelerate orders prior~~new residential housing. In April 2023, Blue Chip Economic Indicators forecasted a 17.4% decrease in housing starts for the calendar year 2023 as compared to the ~~effective date~~calendar year 2022.

We continue to experience inflation and supply chain disruptions, including from the war in Ukraine and the pandemic, which have impacted the availability of some raw materials for our manufacturing facilities and our suppliers. In addition, we continue to incur additional costs at our facilities associated with unfavorable manufacturing performance and labor which have contributed to higher costs to manufacture our products and in our capital expenditures. We expect challenging conditions to persist during our fiscal year 2023. We will continue to closely monitor the impact of the ~~price increases.~~war in Ukraine, COVID-19 and the challenging market conditions discussed above and the related uncertainties and risks on our business.

~~Technologies~~

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~~The municipal market is the key end market for Technologies. These businesses are project-oriented~~We have two reportable segments: Water Flow Solutions and ~~depend on customer adoption~~Water Management Solutions. Water Flow Solutions’ portfolio includes iron gate valves, specialty valves and service brass products. Water Flow Solutions represented 57% of ~~their technology-based~~our fiscal 2022 net sales. Water Management Solutions’ portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, pressure control and software products and services. ~~Mueller Systems is benefiting from its recent introduction~~Water Management Solutions represented 43% of new, longer-range radio capabilities, and its growth strategy is focused on the AMI segment of the market. Mueller Systems’ 2018 first quarter AMI backlog was lower at December 31, 2017 than at December 31, 2016. Echologics had a greater number of projects under contract at at December 31, 2017 than at December 31, 2016.our fiscal 2022 net sales.

Results of Operations

Three Months Ended ~~December~~March 31, ~~2017~~2023 Compared to Three Months Ended ~~December~~March 31, ~~2016~~2022


	Three months ended March 31, 2023
	Water Flow Solutions		Water Management Solutions		Corporate		Total

	(in millions)
Net sales	$	157.2	$	175.7	$	—	$	332.9
Gross profit	$	37.2	$	60.6	$	—	$	97.8
Operating expenses:
Selling, general and administrative	22.0		28.7		13.5		64.2
Strategic reorganization and other charges	—		0.2		0.5		0.7
Total operating expenses	22.0		28.9		14.0		64.9
Operating income (loss)	$	15.2	$	31.7	$	(14.0)	32.9
Non-operating expenses:
Pension expense other than service							1.0
Interest expense, net							3.9
Income before income taxes							28.0
Income tax expense							6.7
Net income							$	21.3

	Three months ended March 31, 2022
	Water Flow Solutions		Water Management Solutions		Corporate		Total

	(in millions)
Net sales	$	183.9	$	126.6	$	—	$	310.5
Gross profit	$	57.0	$	35.8	$	—	$	92.8
Operating expenses:
Selling, general and administrative	21.6		24.0		12.4		58.0
Strategic reorganization and other charges	—		0.1		0.5		0.6
Total operating expenses	21.6		24.1		12.9		58.6
Operating income (loss)	$	35.4	$	11.7	$	(12.9)	34.2
Non-operating expenses:

Pension benefit other than service							(1.0)
Interest expense, net							4.5
Income before income taxes							30.7
Income tax expense							7.1
Net income							$	23.6

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 administrative 24.4
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 administrative 21.3
6.4
8.6
36.3
Other charges 0.1
—
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

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Consolidated Analysis

Net sales ~~for~~in the ~~quarter~~three months ended ~~December~~March 31, ~~2017~~2023 increased ~~$11.1~~$22.4 million or 7.2% to ~~$178.3~~$332.9 million ~~from $167.2~~as compared with $310.5 million ~~due~~in the prior year period primarily toas a result of higher pricing across most of our product lines and increased ~~shipment~~ volumes ~~including the addition of Singer Valve, and improved pricing at Infrastructure,~~in our Water Management Solutions segment, which ~~were~~was partially offset by ~~volume decline at Technologies.~~lower volumes in certain products in the Water Flow Solutions segment.

Gross profit ~~for~~in the ~~quarter~~three months ended ~~December~~March 31, ~~2017~~2023 increased ~~$3.6~~$5.0 million or 5.4% to ~~$55.4~~$97.8 million from ~~$51.8~~$92.8 million in the prior year period primarily as a result of higher pricing across most of our product lines, which was partially offset by higher cost of sales and lower volumes in certain products. The higher cost of sales was primarily a result of inflation and unfavorable manufacturing performance due to outsourcing costs, product mix, supply chain disruptions and machine downtime mainly in our foundry operations. Gross margin was 29.4% in the three months ended March 31, 2023 as compared with 29.9% in the prior year period.

Selling, general and administrative expenses (“SG&A”) in the three months ended March 31, 2023 increased $6.2 million or 10.7% to $64.2 million from $58.0 million in the prior year period primarily due to inflation, deferred compensation expense, consulting and legal fees and increased ~~shipment volumes, improved pricing~~travel and Infrastructure's improved operating efficiencies and other manufacturing cost savings, partially offset by increased material costs. Gross margin increased to 31.1% for the quarter ended December 31, 2017 compared to 31.0% in the prior year period.

~~Selling, general and administrative expenses (“SG&A~~”) for the quarter ended December 31, 2017 increased to $39.8 million from $36.3 million in the prior year period due primarily to the acquisition of Singer Valve during the second quarter of last year and higher personnel-related expenses.trade show expenditures. SG&A as a percentage of net sales was ~~22.3%~~19.3% and 18.7% for the three months ended March 31, 2023 and March 31, 2022, respectively.

Strategic reorganization and other charges in the ~~quarter~~three months ended ~~December~~March 31, ~~2017~~2023 was $0.7 million which primarily consisted of severance and ~~21.7%~~certain transaction-related expenses. Strategic reorganization and other charges for the three months ended March 31, 2022 was $0.6 million, which primarily consisted of costs associated with the closures of our facilities in Aurora, Illinois and Surrey, British Columbia, Canada.

Net interest expense in the three months ended March 31, 2023 declined $0.6 million or 13.3% to $3.9 million as compared with $4.5 million in the prior year ~~period.~~

~~Interest expense, net declined $1.2 million in the quarter ended December 31, 2017 compared~~period primarily due to ~~the prior year period.~~higher interest income as a result of higher interest rates. The components of net interest expense ~~net~~ are provided below.


	Three months ended
	March 31,
	2023		2022

	(in millions)
4.0% Senior Notes	$	4.5	$	4.5
Deferred financing costs amortization	0.3		0.3
ABL Agreement	0.2		0.2
Capitalized interest	(0.8)		(0.6)
Other interest cost	0.2		0.2
Total interest expense	4.4		4.6
Interest income	(0.5)		(0.1)
Interest expense, net	$	3.9	$	4.5

Table of Contents

Three months ended
December 31,
2017 2016
(in millions)
Term Loan $ 4.8
$ 5.1
Interest rate swap contracts 0.4
0.6
Deferred financing costs amortization 0.5
0.4
ABL Agreement 0.2
0.2
Other interest expense 0.1
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 income tax rate is presented below.


	Three months ended					Three months ended
	December 31,					March 31,
	2017		2016			2023		2022
U.S. federal statutory income tax rate	24.5	%	35.0	%	U.S. federal statutory income tax rate	21.0	%	21.0	%
Adjustments to reconcile to the effective tax rate:					Adjustments to reconcile to the effective tax rate:
State income taxes, net of federal benefit	4.3		3.9		State income taxes, net of federal benefit	3.4		3.6
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	)	Tax credits	(1.5)		(1.3)
Global Intangible Low-taxed Income					Global Intangible Low-taxed Income	0.8		0.8
Foreign income tax rate differential					Foreign income tax rate differential	(1.6)		(1.4)

Nondeductible compensation					Nondeductible compensation	0.6		—
Valuation allowances					Valuation allowances	—		(0.3)
Other	0.5		0.8		Other	1.2		0.7
	18.3	%	28.0	%
Remeasurement of deferred taxes for change in rates	(278.4	)%	—	%
Effective income tax rate	(260.1	)%	28.0	%	Effective income tax rate	23.9	%	23.1	%

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~~

Water Flow Solutions

Net sales in the three months ended March 31, 2023 decreased $26.7 million or 14.5% to $157.2 million as compared with $183.9 million in the prior year period primarily as a result of lower volumes for iron gate and service brass products partially offset by higher pricing across most of the ~~quarter~~segment’s product lines.

Gross profit in the three months ended ~~December~~March 31, ~~2017~~2023 decreased $19.8 million or 34.7% to $37.2 million from $57.0 million in the prior year period primarily as a result of lower volumes and higher cost of sales associated with unfavorable manufacturing performance and inflation, which were partially offset by higher pricing. Gross margin was 23.7% in the three months ended March 31, 2023 and 31.0% in the prior year period.

SG&A in the three months ended March 31, 2023 increased ~~9.4%~~$0.4 million to ~~$160.1~~$22.0 million from $21.6 million in the prior year period primarily as a result of inflation. SG&A as a percentage of net sales was 14.0% and 11.7% in the three months ended March 31, 2023 and 2022, respectively.

Water Management Solutions

Net sales in the three months ended March 31, 2023 increased $49.1 million or 38.8% to $175.7 million as compared with $126.6 million in the prior year period primarily as a result of higher volumes, mainly in hydrant and water application products, and increased pricing across most of the segment’s product lines.

Gross profit in the three months ended March 31, 2023 was $60.6 million as compared with $35.8 million in the prior year period. Gross margin increased to ~~$146.3~~34.5% in the three months ended March 31, 2023 as compared with 28.3% in the prior year period primarily as a result of higher pricing and increased volumes, which were partially offset by higher cost of sales associated with inflation and unfavorable manufacturing performance.

SG&A in the three months ended March 31, 2023 increased $4.7 million to $28.7 million from $24.0 million in the prior year period primarily due to higher ~~shipment volumes,~~personnel costs, professional fees and investments in engineering related to new product development. SG&A as a percentage of net sales was 16.3% and 19.0% in the ~~addition of Singer Valve~~three months ended March 31, 2023 and ~~favorable pricing.~~2022, respectively.

~~Gross profit for the quarter ended December 31, 2017~~

Corporate

SG&A increased $1.1 million to ~~$52.5 million from $47.6~~$13.5 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% for the quarter~~three months ended ~~December~~March 31, ~~2017~~2023 as 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~~with $12.4 million in the ~~prior year period. SG&A was 15.2%~~three months ended March 31, 2022 primarily as a result of deferred compensation expense and ~~14.6%~~inflation.

Table of ~~net sales for the quarters ended December~~Contents

Six Months Ended March 31, ~~2017 and 2016, respectively. These increases in SG&A were primarily due~~2023 Compared to ~~higher personnel-related expenses and the additional SG&A of Singer Valve.~~Six Months Ended March 31, 2022

~~Technologies~~


	Six months ended March 31, 2023
	Water Flow Solutions		Water Management Solutions		Corporate		Total

	(in millions)
Net sales	$	322.8	$	324.9	$	—	$	647.7
Gross profit	83.8		107.2		—		$	191.0
Operating expenses:
Selling, general and administrative	44.4		55.7		27.0		127.1
Strategic reorganization and other charges (benefits)	—		0.2		(3.2)		(3.0)
Total operating expenses	44.4		55.9		23.8		124.1
Operating income (loss)	$	39.4	$	51.3	$	(23.8)	66.9
Non-operating expenses:
Pension expense other than service							1.9
Interest expense, net							7.6
Income before income taxes							57.4
Income tax expense							13.6
Net income							$	43.8

	Six months ended March 31, 2022
	Water Flow Solutions		Water Management Solutions		Corporate		Total

	(in millions)
Net sales	$	338.8	$	244.0	$	—	$	582.8
Gross profit	109.1		71.3		—		$	180.4
Operating expenses:
Selling, general and administrative	42.4		48.0		23.9		114.3
Strategic reorganization and other charges	—		0.1		2.9		3.0
Total operating expenses	42.4		48.1		26.8		117.3
Operating income (loss)	$	66.7	$	23.2	$	(26.8)	63.1
Non-operating expenses:
Pension benefit other than service							(2.0)
Interest expense, net							8.8
Income before income taxes							56.3
Income tax expense							13.3
Net income							$	43.0

Consolidated Analysis

Net sales in the ~~quarter~~six months ended ~~December~~March 31, ~~2017 declined~~2023 increased $64.9 million or 11.1% to ~~$18.2~~$647.7 million as compared with $582.8 million in the prior period primarily as a result of higher pricing across most of our product lines partially offset by lower volumes in certain products in the Water Flow Solutions segment.

Gross profit in the six months ended March 31, 2023 increased $10.6 million or 5.9% to $191.0 million from ~~$20.9~~$180.4 million in the prior year period primarily ~~due~~as a result of higher pricing, which was partially offset by unfavorable manufacturing performance, including outsourcing costs, supply chain disruptions, inflation and lower volumes in certain products. Gross margin was 29.5% in the six months ended March 31, 2023 as compared with 31.0% in the prior year period.

Table of Contents

SG&A in the six months ended March 31, 2023 increased $12.8 million or 11.2% to $127.1 million from $114.3 million in the prior year period primarily as a result of professional fees, inflation, increased travel and entertainment expenses and personnel expenses. SG&A as a percentage of net sales was 19.6% in each of the six months ended March 31, 2023 and 2022.

Strategic reorganization and other charges in the six months ended March 31, 2023 was a benefit of $3.0 million which primarily related to a gain from the sale of our Aurora, Illinois facility partially offset by transaction expenses. Strategic reorganization and other charges in the six months ended March 31, 2022 was $3.0 million, which primarily related to the Albertville tragedy and restructuring activities.

Net interest expense in the six months ended March 31, 2023 decreased $1.2 million or 13.6% to $7.6 million as compared with the prior year period of $8.8 million primarily as a result of increased interest income associated with higher interest rates. The components of net interest expense are provided below.


	Six months ended
	March 31,
	2023		2022

	(in millions)
4.0% Senior Notes	$	9.0	$	9.0

Deferred financing costs amortization	0.6		0.5
ABL Agreement	0.4		0.4
Capitalized interest	(1.5)		(1.2)
Other interest cost	0.3		0.3
Total interest expense	8.8		9.0
Interest income	(1.2)		(0.2)
Interest expense, net	$	7.6	$	8.8

The reconciliation between the U.S. federal statutory income tax rate and the effective income tax rate is presented below.


	Six months ended
	March 31,
	2023		2022
U.S. federal statutory income tax rate	21.0	%	21.0	%
Adjustments to reconcile to the effective tax rate:
State income taxes, net of federal benefit	3.4		3.6
Excess tax benefits related to stock-based compensation	0.3		(0.2)
Tax credits	(1.5)		(1.3)
Global Intangible Low-taxed Income	0.8		0.8
Foreign income tax rate differential	(1.6)		(1.4)
Nondeductible compensation	0.6		—
Valuation allowances	(0.2)		0.2
Other	0.9		0.9
Effective income tax rate	23.7	%	23.6	%

Table of Contents

Segment Analysis

Water Flow Solutions

Net sales in the six months ended March 31, 2023 decreased $16.0 million or 4.7% to $322.8 million as compared with $338.8 million in the prior year period primarily as a result of lower ~~AMI shipment volumes,~~sales volume across several of the segment’s product lines partially offset by increased ~~leak detection sales.~~pricing across most product lines.

Gross profit in the ~~quarter~~six months ended ~~December~~March 31, ~~2017~~2023 decreased $25.3 million or 23.2% to $83.8 million from $109.1 million in the prior year period primarily as a result of lower volumes and higher cost of sales associated with unfavorable manufacturing performance and inflation which were partially offset by higher pricing. Gross margin was ~~$2.9~~26.0% in the six months ended March 31, 2023 and 32.2% in the prior year period.

SG&A in the six months ended March 31, 2023 increased $2.0 million or 4.7% to $44.4 million from $42.4 million in the prior year period primarily as a result of legal and consulting fees and higher costs associated with inflation. SG&A as a percentage of net sales was 13.8% and 12.5% in the six months ended March 31, 2023 and 2022, respectively.

Water Management Solutions

Net sales in the six months ended March 31, 2023 increased $80.9 million or 33.2% to $324.9 million as compared with $244.0 million in the prior year period primarily as a result of higher pricing across most of the segment’s product lines and increased volumes.

Gross profit in the six months ended March 31, 2023 increased $35.9 million or 50.4% to ~~$4.2~~$107.2 million as compared with $71.3 million in the prior year period. Gross margin ~~declined~~increased to ~~15.9%~~33.0% in the ~~quarter~~six months ended ~~December~~March 31, ~~2017~~2023 as compared ~~to 20.1%~~with 29.2% in the prior year ~~period. These declines were~~period primarily ~~due to lower shipment volumes.~~as a result of higher pricing and higher volumes partially offset by unfavorable manufacturing performance and inflation.

SG&A increased $7.7 million or 16.0% to ~~$7.5~~$55.7 million ~~in the quarter ended December 31, 2017 compared to $6.4~~from $48.0 million in the prior year period ~~due to personnel-related expenses.~~primarily as a result of legal and consulting fees, personnel expenses, inflation, investments in engineering and increased travel and trade show expenditures. SG&A ~~increased to 41.2%~~as a percentage of net sales ~~for the quarter ended December 31, 2017 from 30.6% of net sales~~was 17.1% and 19.7% in the ~~prior year period.~~six months ended March 31, 2023 and 2022, respectively.

Corporate

SG&A ~~was $7.9~~increased $3.1 million or 13.0% to $27.0 million in the ~~quarter~~six months ended ~~December~~March 31, ~~2017~~2023 as compared ~~to $8.6~~with $23.9 million in the ~~prior year period.~~six months ended March 31, 2022 primarily as a result of higher personnel expenses, inflation and consulting fees.

Liquidity and Capital Resources

We had cash and cash equivalents on hand of ~~$348.3~~$89.2 million at ~~December~~March 31, ~~2017~~2023 and ~~$96.3~~$162.5 million of additional borrowing capacity under our ABL ~~Agreement~~ based on ~~December~~March 31, ~~2017 data, which, along with cash generated by operations, would be our source of incremental liquidity.~~2023 data. Undistributed earnings from our subsidiaries in Israel, Canada, and China are considered to be permanently invested outside the United States. At ~~December~~March 31, ~~2017,~~2023, cash and cash equivalents included ~~$12.1~~$46.4 million, $1.5 million, and ~~$7.2~~$9.4 million in Israel, Canada, and China, respectively.

We ~~expect the recently enacted tax law changes~~declared a quarterly dividend of $0.061 per share on April 25, 2023, payable on or about May 22, 2023 to ~~benefit our liquidity through reduction~~holders of record as of May 10, 2023, 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 $9.5 million cash outlay.

We ~~repurchased shares~~did not repurchase any of our outstanding common stock ~~for $10 million~~ during the ~~quarter~~six months ended ~~December~~March 31, ~~2017,~~2023 and we had ~~$180~~$100.0 million remaining onof our share repurchase ~~authorization at that date.~~authorization.

The ABL ~~Agreement~~ and ~~Term Loan~~4.0% 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~~Net cash used in operating activities was $22.2 million during the six months ended March 31, 2023 as compared with net cash provided by 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), net 0.1
(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, 2017 compared to the prior year period primarily due to the timing of cash receipts and net sales growth.~~

Increased disbursements, other than interest and income taxes, 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 during the three months ended December 31, 2017 compared to the prior year period because we began the current year quarter with U.S. federal income taxes prepaid.~~

~~Capital expenditures were $6.4 million in the three months ended December 31, 2017 compared to $4.2~~$0.8 million in the prior year period. ~~We estimate 2018~~The decrease in net operating cash flow was primarily a result of higher Accounts payable turnover offset by higher collections of Receivables.

Capital expenditures were $20.5 million in the six months ended March 31, 2023 as compared with $26.0 million in the prior year period. Capital expenditures decreased primarily as a result of lower expenditures associated with the new Decatur

Table of Contents

foundry as compared with the prior year period. For fiscal year 2023, we have provided guidance that our capital expenditures ~~will~~are expected to be between ~~$40~~$60.0 million and ~~$48 million, although we are also evaluating possibilities for additional capital expenditures in 2018.~~$70.0 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.~~the twelve months from the date of this filing. However, our ability to make these payments will depend ~~partly upon~~largely on our future operating performance, which ~~will~~may be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.

ABL Agreement

~~At December 31, 2017, the~~Our ABL ~~Agreement consisted~~is provided by a syndicate of banking institutions and consists of a revolving credit facility for up to ~~$225~~$175.0 million in borrowings that expires on July 28, 2025. The ABL permits us to borrow up to $25.0 million of ~~revolving credit borrowings,~~ swing line loans and 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~~

As of ~~letters of credit outstanding.~~

~~Borrowings~~March 31, 2023, borrowings under the ABL ~~Agreement bear~~bore interest at a floating rate equal to LIBOR plus aan applicable margin ranging from ~~125~~200 to ~~150~~225 basis points, or a base rate, as defined in the ABL, ~~Agreement,~~ plus aan applicable margin ~~ranging~~range from 25100 to 50125 basis points. At ~~December~~March 31, ~~2017,~~2023, the applicable ~~LIBOR-based~~ margin was ~~125~~200 basis ~~points.~~points for LIBOR-based loans, and 100 basis points for base rate loans.

On April 5, 2023, we amended our ABL to replace LIBOR-based loans with SOFR-based loans plus a 10 basis point adjustment, among other immaterial modifications. The applicable margin on borrowings remained unchanged following the amendment to the ABL.

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,~~inventory, 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 assets.

The ABL 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 and 10% of the Loan Cap ~~under~~as defined in the ~~ABL Agreement.~~ABL. Excess availability based on March 31, 2023 data was $162.5 million, as reduced by $12.4 million of outstanding letters of credit and $0.1 million of accrued fees and expenses.

~~Term Loan~~

~~We had $485.1~~4.0% Senior Unsecured Notes

On May 28, 2021, we privately issued $450.0 million ~~face value outstanding under the Term Loan at December 31, 2017. Term Loan borrowings accrue~~of 4.0% Senior Unsecured Notes (“4.0% Senior Notes”), which mature on June 15, 2029 and bear interest at ~~a floating rate equal to LIBOR, subject to a floor~~4.0%, 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 under~~financing costs, which are being amortized over the ~~Term Loan at any time. The principal amount~~term of the ~~Term Loan is required~~4.0% 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 substantially~~redeem previously existing 5.5% Unsecured Senior Notes. Substantially all of our U.S. subsidiaries guarantee the 4.0% Senior Notes, which are subordinate to borrowings under our ABL. Based on quoted market prices, which is a Level 1 measurement, the outstanding 4.0% Senior Notes had a fair value of $407.9 million at March 31, 2023.

An indenture governing the 4.0% Senior Notes (“Indenture”) contains customary covenants and ~~secured by essentially~~events 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 March 31, 2023.

As set forth in the Indenture, we may redeem some or all of ~~our assets, although~~ the ~~ABL Agreement has~~4.0% Senior Notes at any time prior to June 15, 2024 at certain “make-whole” redemption prices and on or after June 15, 2024 at specified redemption prices. Additionally, we may redeem up to 40% of the aggregate principal amount of the 4.0% Senior Notes at any time prior to June 15, 2024 with the net

Table of Contents

proceeds of specified equity offerings at specified redemption prices. Upon a ~~senior claim on certain collateral securing borrowings thereunder.~~change in 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.

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

Moody’s

Standard & Poor’s

December 31,

September 30,

December 31,

September 30,

March 31,

September 30,

March 31,

September 30,

2017

2023

2022

2023

2022

Corporate credit rating

Ba3

BB-

Corporate credit rating

Ba1

ABL Agreement

Not rated

ABL Agreement

Not rated

Term Loan

Ba3

4.0% Senior Notes

Ba1

Outlook

Stable

Outlook

Stable



Delaware						20-3547095
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01	MWA	New York Stock Exchange



ITEM		PAGE
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets - March 31, 2023 and September 30, 2022	3
	Unaudited Condensed Consolidated Statements of Operations - Three and Six Months Ended March 31, 2023 and 2022	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income - Three and Six Months Ended March 31, 2023 and 2022	5
	Unaudited Condensed Consolidated Statements of Equity - Three and Six Months Ended March 31, 2023 and 2022	6
	Unaudited Condensed Consolidated Statements of Cash Flows - Six Months Ended March 31, 2023 and 2022	7
	Notes to the Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 6.	Exhibits	32
	Signatures	32


	Number granted	Weighted average grant date fair value per instrument		Total grant date fair value (in millions)












Quarter ended December 31, 2022
MRSUs	166,284	$	15.08	$	2.5
PRSUs	166,284	$	11.41	$	1.9
Restricted stock units	228,692	$	11.39	$	2.6
Phantom Plan instruments	267,093	$	11.41	$	3.0
Non-qualified stock options	573,279	$	3.31	$	1.9
Employee stock purchase plan instruments	47,463	$	2.56	$	0.1
Total - Quarter ended December 31, 2022				$	12.0

Quarter ended March 31, 2023
Restricted stock units	82,769	$	13.89	$	1.1
Phantom Plan instruments	8,367	$	13.42	$	0.1
Employee stock purchase plan instruments	56,066	$	2.28	$	0.1
Total - Quarter ended March 31, 2023				$	1.3
Total - Year to date ended March 31, 2023				$	13.3


	November 29, 2022
Variables used in determining grant date fair value:
Dividend yield	2.20	%
Risk-free rate	4.20	%
Expected term (in years)	2.8



	Three months ended
	December 31, 2017
	(in millions)
Beginning balance	$	3.3
Expense	2.3
Payments	(1.4		)
Ending balance	$	4.2



	Three months ended
	December 31, 2016
	(in millions)
Net sales	$	83.1
Cost of sales	62.8
Gross profit	20.3
Operating expenses:
Selling, general and administrative	18.3
Other charges	0.2
Total operating expenses	18.5
Operating income	1.8
Income tax expense	0.5
Income from discontinued operations	$	1.3


~~Note 7.~~	~~Stock-based Compensation Plans~~ Note 6. Stock-based Compensation Plans


	November 29, 2022
Dividend yield	1.80	%
Risk-free rate	3.89	%
Expected term (in years)	6.00



	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	)



	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 administrative	24.4		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 administrative	21.3		6.4			8.6			36.3
Other charges	0.1		—			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


~~Item 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~



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	$	—



Exhibit No.		Document
~~3.1~~10.1*		~~Amended and Restated By-laws of Mueller Water Products, Inc. Incorporated by reference~~Sixth Amendment to ~~Exhibit 3.1 to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on December 4, 2017.~~Credit Agreement, dated April 5, 2023
10.20.5*31.1		Amendment to Executive Change -In-Control Severance Agreement, dated January 11, 2018, by and between Mueller Water Products and Gregory S. Rogowski. Incorporated by reference to Exhibit 10.2 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on January 12, 2018.
10.22.2**	Amendment to Executive Change -In-Control Severance Agreement, dated December 12, 2017, by and between Mueller Water Products and Keith L. Belknap. Incorporated by reference to Exhibit 10.2 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on December 13, 2017.
10.29.2**	Fourth Amendment to Employment Agreement, dated December 27, 2017, between Mueller Water Products, Inc. and Marietta Edmunds Zakas. Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on December 28, 2017.
10.29.3**	Amendment to Executive Change -In-Control Severance Agreement, dated January 11, 2018, by and between Mueller Water Products and Marietta Edmunds Zakas. Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on January 12, 2018.
10.30.2**	Amendment to Executive Change -In-Control Severance Agreement, dated December 12, 2017, by and between Mueller Water Products and J. Scott Hall. Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed on December 13, 2017.
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.
32.1*		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.
32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		The following financial information from the Quarterly Report on Form 10-Q for the quarter ended ~~December~~March 31, ~~2016,~~2022, formatted in XBRL (Extensible Business Reporting Language), (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Unaudited Condensed Consolidated Statements of ~~Other~~ Comprehensive ~~Loss~~Income, (iv) the Unaudited Condensed Consolidated Statements of Stockholders' Equity, (v) the Unaudited Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements.
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).



		MUELLER WATER PRODUCTS, INC.
Date:	~~February 8, 2018~~May 9, 2023	By:	/s/ ~~Michael S. Nancarrow~~Suzanne G. Smith
			~~Michael S. Nancarrow~~Suzanne G. Smith
			Chief Accounting Officer