PART I


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

Item 1. FINANCIAL STATEMENTS

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	June 30,		September 30,
	2023		2022
	(in millions, except share amounts)
Assets:
Cash and cash equivalents	$	141.2	$	146.5
Receivables, net of allowance for credit losses of $6.4 million and $5.6 million	210.3		228.0
Inventories, net	312.7		278.7
Other current assets	27.2		26.8
Total current assets	691.4		680.0
Property, plant and equipment, net	306.9		301.6
Intangible assets, net	341.9		361.2
Goodwill, net	97.0		98.6
Other noncurrent assets	56.1		56.7
Total assets	$	1,493.3	$	1,498.1

Liabilities and stockholders’ equity:
Current portion of long-term debt	$	0.8	$	0.8
Accounts payable	101.0		122.8
Other current liabilities	98.1		117.4
Total current liabilities	199.9		241.0
Long-term debt	446.7		446.1
Deferred income taxes	80.0		86.3
Other noncurrent liabilities	52.5		55.4
Total liabilities	779.1		828.8

Commitments and contingencies (Note 10.)

Preferred stock: par value $0.01 per share; 60,000,000 shares authorized; none outstanding at June 30, 2023, and September 30, 2022	—		—
Common stock: par value $0.01 per share; 600,000,000 shares authorized; 156,424,123 and 155,844,138 shares outstanding at June 30, 2023, and September 30, 2022, respectively	1.6		1.6
Additional paid-in capital	1,257.2		1,279.6
Accumulated deficit	(499.0)		(567.3)
Accumulated other comprehensive loss	(45.6)		(44.6)
Total stockholders' equity	714.2		669.3
Total liabilities and stockholders' equity	$	1,493.3	$	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

Table of Contents

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three months ended				Nine months ended
	June 30,				June 30,
	2023		2022		2023		2022

	(in millions, except per share amounts)
Net sales	$	326.6	$	333.2	$	974.3	$	916.0
Cost of sales	226.5		234.9		683.2		637.3
Gross profit	100.1		98.3		291.1		278.7
Operating expenses:
Selling, general and administrative	60.6		60.8		187.7		175.1
Strategic reorganization and other charges	3.9		0.6		0.9		3.6
Total operating expenses	64.5		61.4		188.6		178.7
Operating income	35.6		36.9		102.5		100.0
Other expenses (income):
Pension expense (benefit) other than service	0.9		(0.9)		2.8		(2.9)
Interest expense, net	3.8		4.2		11.4		13.0
Net other expenses	4.7		3.3		14.2		10.1
Income before income taxes	30.9		33.6		88.3		89.9
Income tax expense	6.4		7.1		20.0		20.4
Net income	$	24.5	$	26.5	$	68.3	$	69.5

Net income per share:
Basic	$	0.16	$	0.17	$	0.44	$	0.44
Diluted	$	0.16	$	0.17	$	0.44	$	0.44

Weighted average shares outstanding:
Basic	156.4		157.0		156.2		157.6
Diluted	157.2		157.6		156.8		158.3

Dividends declared per share	$	0.061	$	0.058	$	0.183	$	0.174

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				Nine months ended
	June 30,				June 30,
	2023		2022		2023		2022

	(in millions)
Net income	$	24.5	$	26.5	$	68.3	$	69.5
Other comprehensive income (loss), net of income tax:
Pension actuarial amortization	0.8		0.3		2.0		1.0
Foreign currency translation	(4.9)		(17.6)		(3.0)		(15.5)
Total other comprehensive loss	(4.1)		(17.3)		(1.0)		(14.5)
Comprehensive income	$	20.4	$	9.2	$	67.3	$	55.0

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

Table of Contents

MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ 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
Net income	—		—		24.5		—		24.5
Dividends declared	—		(9.6)		—		—		(9.6)
Stock-based compensation	—		1.7		—		—		1.7
Shares retained for employee taxes	—		(0.1)		—		—		(0.1)
Common stock issued	—		0.9		—		—		0.9

Other comprehensive loss, net of tax	—		—		—		(4.1)		(4.1)
Balance at June 30, 2023	$	1.6	$	1,257.2	$	(499.0)	$	(45.6)	$	714.2

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

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MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
THREE MONTHS ENDED DECEMBER 31, 2017
(UNAUDITED)

Common
stock

Additional
paid-in
capital

Accumulated
deficit

Accumulated
other
comprehensive
loss
Non-controlling interest Total
(in millions)
Balance at September 30, 2017 $ 1.6
$ 1,494.2
$ (955.6 ) $ (51.8 ) $ 1.1
$ 489.5
Net income (loss) —
—
55.1
—
(0.1 ) 55.0
Dividends declared —
(6.3 ) —
—
—
(6.3 )
Stock repurchased under buyback program —
(10.0 ) —
—
—
(10.0 )
Shares retained for employee taxes —
(1.8 ) —
—
—
(1.8 )
Stock-based compensation —
2.0
—
—
—
2.0
Common stock issued —
4.3
—
—
—
4.3
Other comprehensive income, net of tax —
—
—
1.6
—
1.6
Balance at December 31, 2017 $ 1.6
$ 1,482.4
$ (900.5 ) $ (50.2 ) $ 1.0
$ 534.3
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


	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
Net income	—		—		26.5		—		26.5
Dividends declared	—		(9.1)		—		—		(9.1)
Stock-based compensation	—		2.2		—		—		2.2
Shares retained for employee taxes	—		(0.1)		—		—		(0.1)
Stock repurchased under buyback program	—		(5.0)		—		—		(5.0)
Common stock issued	—		0.5		—		—		0.5
Other comprehensive income, net of tax	—		—		—		(17.3)		(17.3)
Balance at June 30, 2022	$	1.6	$	1,296.1	$	(574.4)	$	(19.5)	$	703.8

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

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

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MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine months ended
	June 30,
	2023		2022
	(in millions)
Operating activities:
Net income	$	68.3	$	69.5
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition:
Depreciation	25.1		23.8
Amortization	21.0		21.1
Gain on sale of assets	(3.7)		—
Stock-based compensation	5.9		6.6
Pension net periodic cost (benefit)	3.4		(1.9)
Deferred income taxes	(6.7)		1.8
Inventory reserves provision	0.4		3.9
Other, net	0.7		0.7
Changes in assets and liabilities, net of acquisition:
Receivables, net	18.2		(10.6)
Inventories	(34.1)		(71.3)
Other assets	(2.0)		(5.5)
Accounts payable	(21.8)		6.7
Other current liabilities	(19.4)		(23.1)
Other noncurrent liabilities	(2.8)		(1.2)
Net cash provided by operating activities	52.5		20.5
Investing activities:
Capital expenditures	(32.4)		(36.7)
Acquisition purchase price adjustment	—		0.2
Proceeds from sale of assets	5.1		—
Net cash used in investing activities	(27.3)		(36.5)
Financing activities:


Dividends paid	(28.6)		(27.4)
Employee taxes related to stock-based compensation	(1.6)		(1.9)
Common stock issued	1.9		1.6

Common stock repurchased under buyback program	—		(25.0)

Payments for finance lease obligations	(0.9)		(0.4)
Net cash used in financing activities	(29.2)		(53.1)
Effect of currency exchange rate changes on cash	(1.3)		(3.5)
Net change in cash and cash equivalents	(5.3)		(72.6)
Cash and cash equivalents at beginning of period	146.5		227.5
Cash and cash equivalents at end of period	$	141.2	$	154.9

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

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	Nine months ended
	June 30,
	2023		2022

	(in millions)
Supplemental cash flow information:
Cash paid for interest, net	$	16.5	$	19.3
Cash paid for income taxes, net	$	27.5	$	22.2

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 NINE MONTHS ENDED ~~DECEMBER 31, 2017~~JUNE 30, 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 Accounting Standards Codification (“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 goodwill, and the effects of 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 ~~2019.~~years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. We ~~have~~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 ~~initial scoping and are implementing~~facility in Aurora, Illinois during our fiscal year 2022. The majority of the activities from these plants were transferred to our Kimball, Tennessee facility. Additionally, during our fiscal year 2023, we incurred severance costs related to a ~~project plan to evaluate revenue recognition practices for each revenue stream against the new requirements, to consider changes to the terms~~reorganization of our sales ~~contracts,~~force. In connection with these reorganizations, we recognized certain restructuring costs.

During the nine months ended June 30, 2023, we recorded amounts related to severance and ~~to design and implement processes to quantify~~transaction-related costs partially offset by a $4.0 million gain, before tax, on the ~~effects~~sale of ~~necessary changes. This work is ongoing, but at this time, we do not expect~~ the ~~new guidance to materially impact our stockholders' equity, net sales or operating income.~~

On September 7, 2017, we announced a strategic reorganization plan designed to accelerate our product innovation and revenue growth. We have adopted a matrix management structure, where business teams have line and cross-functional responsibility for managing distinct product portfolios, and engineering, operations, sales and marketing and other functions are centralized to better align with business needs and generate greater efficiencies. Costs and expenses in the quarter ended December 31, 2017 for this plan, included in strategic reorganization and other charges, were primarily personnel-related.

~~Table of Contents~~

~~Index to Financial Statements~~

Aurora, Illinois facility. Activity in accrued restructuring, reported as part of ~~other~~Other current liabilities, is presented ~~below.~~below:


	Nine months ended
	June 30,
	2023		2022
	(in millions)
Beginning balance	$	3.3	$	3.1
Amounts accrued	0.9		0.4
Amounts paid	(2.0)		(3.0)
Ending balance	$	2.2	$	0.5

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


~~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 segment and recorded a gain of $9.0 million on our Corporate segment. We received $7.4 million in 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 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 of the operating results for the Anvil discontinued operations during the quarter ended December 31, 2016. These operating results do not reflect what they would have been had Anvil not been sold.

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~~2020, we entered into a financing transaction with Wells Fargo Community Investment Holdings, LLC (“Wells Fargo”) related to asour brass foundry construction project in Decatur, Illinois under a qualified New Markets Tax Credit program (“NMTC”). The NMTC is a federal program intended to encourage capital investment in qualified lower income communities. Under the ~~Tax Cuts and Jobs Act (“Act”), was enacted, which made significant revisions to~~NMTC, investors claim federal income tax ~~laws, including lowering~~credits over a period of seven years in connection with qualified investments in the ~~corporate income~~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 ~~rate~~credits, which are subject to ~~21%~~100% recapture if we do not comply with various regulations and contractual provisions surrounding the foundry project. We have indemnified Wells Fargo for any loss or recapture of tax credits related to the transaction until the seven-year period elapses. We do not anticipate any credit recaptures will be required in connection with this arrangement.

The investment fund contributed $16.5 million cash for a 99.99% stake in a joint venture (“Sub-CDE”) with a CDE. The Sub-CDE then loaned $16.2 million to us, with the use of the loan proceeds restricted to foundry project expenditures. This transaction also includes a put/call provision under which we may be obligated or entitled to repurchase Wells Fargo’s interest in the investment fund. We believe that Wells Fargo will exercise its put option in December 2027 for nominal consideration, resulting in our becoming the sole owner of the investment fund, cancelling the related loans, and recognizing an estimated gain of $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 our consolidated financial statements.

Intercompany transactions between us and 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.

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Direct costs associated with Wells Fargo’s capital contribution were 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 ~~35% effective January 1, 2018, overhauling~~Contracts with Customers

We recognize revenue when control of promised products or services is transferred to our customers, in amounts that reflect the ~~taxation~~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 ~~income earned outside~~ the ~~United States~~parties are identified, the payment terms are identified, the contract has commercial substance and ~~eliminating~~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 ~~limiting certain deductions.~~arrangement with a customer.

~~Our~~

Disaggregation of Revenue

Refer to Note 8. for disaggregation of our revenues from contracts with customers by reportable segment and by geographical region, which we believe best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Geographical region represents the location of the customer.

Contract Asset and Liability Balances

Differences in the timing of revenue recognition, billing and cash collection result in customer receivables, advance payments and billings in excess of revenue recognized. Customer receivables include amounts billed and currently due from customers as well as unbilled amounts (i.e., contract assets). Amounts are billed in accordance with contractual terms and unbilled amounts arise when the timing of billing differs from the timing of revenue recognized.

Advance payments and billings in excess of revenue are recognized and recorded as deferred ~~tax assets and liabilities are provided at~~revenue, the ~~enacted tax rates in effect~~majority of which is classified as current based on the timing of when we expect to recognize ~~the related tax expenses or benefits. The average of these rates varies slightly from year to year but historically has been approximately 39%. With the legislation changing enacted rates taking place~~revenue. We include current deferred revenue within Other current liabilities in the ~~current quarter, we have remeasured~~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 pursuant to 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 ~~tax items at an average rate~~revenue:


	June 30,		September 30,
	2023		2022

	(in millions)
Billed receivables	$	211.2	$	230.5
Unbilled receivables	5.5		3.1
Gross customer receivables	216.7		233.6
Allowance for credit losses	(6.4)		(5.6)
Receivables, net	$	210.3	$	228.0

Deferred revenue	$	8.7	$	8.1

Table of ~~approximately 25%. This resulted~~Contents

Performance Obligations

A performance obligation is a promise in a ~~provisional income tax benefit~~contract to transfer a distinct good or service to the customer. Our performance obligations are satisfied at a point in time for sales of ~~$42.6 million,~~equipment or product and over time for our software hosting and leak detection monitoring services. Performance obligations are supported by customer contracts, which ~~is subject to change, if necessary, as we continue to analyze certain aspects~~provide frameworks for the nature of the ~~Act~~distinct products or services. The transaction price is adjusted for our estimate of variable consideration which may include discounts and ~~refine our calculations.~~ 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 do 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 ~~changes~~that the period between when we transfer a product or service to ~~this amount~~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.

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 ~~material.~~purchased separately from our products.

~~The Act also imposes~~

Costs to Obtain or Fulfill a ~~one-time transition tax~~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 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 lost collections. As the expected benefit associated with these incremental costs is generally one year or less based on the ~~undistributed, non-previously taxed, post-1986 foreign “earnings~~nature of the product sold and ~~profits” (as defined by~~benefits received, we do not capitalize the ~~IRS)~~related costs and expense them as incurred.

Table 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.Contents

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.~~below:


	Three months ended					Three months ended				Nine months ended
	December 31,					June 30,				June 30,
	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	3.2		3.3		3.2		3.3
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	—		—		0.2		(0.3)
Tax credits	(0.9	)	(0.8	)	Tax credits	(3.5)		(3.0)		(2.8)		(3.0)
Global Intangible Low-Taxed Income					Global Intangible Low-Taxed Income	1.1		1.1		1.1		1.1
Foreign income tax rate differential					Foreign income tax rate differential	(2.2)		(1.7)		(2.2)		(1.7)
Nondeductible compensation					Nondeductible compensation	0.9		0.9		0.9		0.9
Basis difference in foreign investment					Basis difference in foreign investment	—		(0.1)		—		(0.1)
Valuation allowances					Valuation allowances	—		—		—		0.3
Other	0.5		0.8		Other	0.2		(0.4)		1.3		1.2
	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	20.7	%	21.1	%	22.7	%	22.7	%

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

We ~~have granted~~grant various forms of stock-based compensation, including ~~stock options,~~market-based restricted stock units (“MRSUs”), restricted stock units, stock options and ~~both cash-settled and stock-settled~~ performance-based restricted stock units (“PRSUs”) under our Amended and Restated 2006 Mueller Water Products, Inc. Stock Incentive Plan (the “2006 Stock Plan”)., Phantom Plan instruments under our Mueller Water Products, Inc. 2012 Phantom Plan, and Employee stock purchase plan instruments under our 2006 Employee Stock Purchase Plan. Grants issued during the nine months ended June 30, 2023 are as follows:

~~A PRSU~~


	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	$	2.21	0.1
Total - Quarter ended March 31, 2023				$	1.3

Quarter ended June 30, 2023
Phantom Plan instruments	7,176	$	13.93	$	0.1
Employee stock purchase plan instruments	45,860	$	2.28	0.1
Total - Quarter ended June 30, 2023				0.2
Total - Year to date ended June 30, 2023				$	13.5

An MRSU award represents a target number of units that may be paid out at the end of a ~~multi-year~~three-year award cycle ~~consisting~~based on a calculation of our relative total shareholder return (“TSR”) performance as compared with the TSR of a ~~series~~selected peer group. Settlements, in our common shares, will range from zero to two times the number of ~~annual~~MRSUs granted, depending on our TSR performance ~~periods coinciding with our fiscal years. After we~~relative to that of the peer group.

Compensation expense attributed to MRSUs is based on the fair value of the awards on their respective grant dates, as determined using a Monte Carlo model. For these awards, compensation expense is recognized even if the awards are not earned or vested. The assumptions used to determine the ~~financial performance targets related~~grant date fair value are indicated below for awards granted to ~~PRSUs for a given performance period, typically~~date during the ~~first quarter~~current fiscal year.


						November 29, 2022
Variables used in determining grant date fair value:
Dividend yield						2.20%
Risk-free rate						4.20%
Expected term (in years)						2.83

The expected dividend yield is based on our estimated annual dividend and our stock price history at the grant date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield in effect at the grant date with a term equal to the expected term. The expected term represents the average period of ~~that fiscal year, we consider that portion of a PRSU award~~time the units are expected to be ~~granted. Thus,~~outstanding.

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At June 30, 2023, the outstanding Phantom Plan instruments had a fair value of $16.23 per instrument and our liability for Phantom Plan instruments was $3.5 million and is included within Other current and Other noncurrent liabilities.

Stock options generally vest ratably over three years on each anniversary date. Compensation expense attributed to stock options is based on the fair value of the awards on their respective grant dates, using a Black-Scholes model. The assumptions used to determine the grant date fair value are indicated below for awards granted to date during the current fiscal year.


			November 29, 2022
Variables used in determining grant date fair value:
Dividend yield			1.80%
Risk-free rate			3.89%
Expected term (in years)			6.00

A PRSU award consists of a ~~grant~~target number of units that may be paid out at the end of a three-year award cycle. Settlements, in ~~the year of award and grants in the designated following years. Settlement~~our common shares, will range from zero to two times the number of PRSUs granted, depending on our financial performance ~~against~~relative to the targets. ~~As determined at the date of award, PRSUs may settle in cash-value equivalent of, or directly in, shares of our common stock.~~

~~We awarded 171,288 stock-settled PRSUs in the quarter ended December 31, 2017 scheduled to settle in three years.~~

We issued ~~146,061 shares and 263,410~~282,472 shares of common stock to settle PRSUs vested during the ~~quarters~~nine months ended ~~December 31, 2017 and 2016, respectively,~~June 30, 2023; no shares of common stock were issued to settle ~~PRSUs.~~

~~In addition~~PRSUs vested during the three months ended June 30, 2023. Additionally, we issued 2,098 and 218,121 shares of common stock to ~~the PRSU activity, 213,532~~settle restricted stock units vested during the ~~quarter~~three and nine months ended ~~December 31, 2017.~~

We have granted cash-settled Phantom Plan instruments under the Mueller Water Products, Inc. Phantom Plan (“Phantom Plan”). At December 31, 2017, the outstanding Phantom Plan instruments had a fair valueJune 30, 2023, respectively. Finally, we issued 2,896 and 64,847 shares of ~~$12.53 per instrument and our liability for Phantom Plan instruments was $1.2 million.~~

~~We granted stock-based compensation awards under the 2006 Stock Plan, the Mueller Water Products, Inc. 2006 Employee Stock Purchase Plan and the Phantom Plan~~common stock to settle stock options exercised during the three and nine months ended ~~December 31, 2017 as follows.~~June 30, 2023. Common shares totaling 1,589 and 138,525 were surrendered to us to pay the applicable tax withholding obligations of equity award participants for the three and nine months ended June 30, 2023, respectively.

Number granted Weighted average grant date fair value per instrument
Total grant date fair value
(in millions)
Restricted stock units 171,288
$ 12.41
$ 2.1
Employee stock purchase plan instruments 35,099
2.28
0.1
Phantom Plan awards 160,672
12.41
2.0
PRSUs: 2018 award 57,092
12.41
0.7
2017 award 71,070
12.41
0.9
2016 award 71,072
12.41
0.9
$ 6.7

~~Income from continuing operations~~Operating income included stock-based compensation expense of ~~$2.4~~$2.7 million and ~~$2.7~~$2.5 million during the three months ended ~~December 31, 2017~~June 30, 2023 and ~~2016,~~2022, respectively. Operating income included stock-based compensation expense of $8.8 million and $7.6 million during the nine months ended June 30, 2023 and 2022, respectively. At ~~December 31, 2017,~~June 30, 2023, there was approximately ~~$8.9~~$11.9 million of unrecognized compensation expense related to stock-based compensation arrangements, ~~and 185,270 PRSUs that have been awarded for the 2019 and 2020 performance periods, for~~ which ~~performance goals have not been set.~~will be expensed through February 2026.

We excluded ~~70,996~~249,933 and ~~323,010 of~~892,662 stock-based compensation instruments from the calculations of diluted earnings per share in the three months ended June 30, 2023 and 2022, respectively, and 1,156,428 and 750,343 for the ~~quarters~~nine months ended ~~December 31, 2017~~June 30, 2023 and ~~2016,~~2022, respectively, since their inclusion would have been antidilutive.

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Note 7. Supplemental Balance Sheet Information

Selected supplemental asset information is presented below:


	June 30,		September 30,
	2023		2022

	(in millions)
Inventories:
Purchased components and raw materials	$	180.2	$	181.8
Work in process, net	64.9		56.8
Finished goods, net	67.6		40.1
Inventories, net	$	312.7	$	278.7

Other current assets:
Prepaid expenses	$	15.6	$	14.6
Non-trade receivables	1.7		1.6
Maintenance and repair supplies and tooling	3.9		2.8
Income taxes	0.8		0.8
Workers' compensation reimbursement receivable	1.5		2.6
Other current assets	3.7		4.4
Total other current assets	$	27.2	$	26.8

Property, plant and equipment:
Land	$	6.6	$	5.7
Buildings	104.0		87.6
Machinery and equipment	505.7		456.0
Construction in progress	59.4		104.7
Total property, plant and equipment	675.7		654.0
Accumulated depreciation	(368.8)		(352.4)
Property, plant and equipment, net	$	306.9	$	301.6

Other noncurrent assets:
Operating lease right-of-use assets	$	25.2	$	26.0
Maintenance and repair supplies and tooling	21.6		20.4
Workers' compensation reimbursement receivable	3.1		3.6
Pension asset	0.1		0.6
Note receivable	1.8		1.7
Deferred financing fees	0.8		1.0
Other noncurrent assets	3.5		3.4
Total other noncurrent assets	$	56.1	$	56.7

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Selected supplemental liability information is presented below:


	June 30,		September 30,
	2023		2022

	(in millions)
Other current liabilities:
Compensation and benefits	$	33.6	$	40.2
Customer rebates	12.7		16.2
Income taxes payable	6.4		7.5
Warranty accrual	7.9		6.5
Deferred revenue	8.7		8.1
Returned goods accrual	5.7		4.2
Taxes other than income taxes	2.7		4.4
Operating lease liabilities	5.1		4.4
Workers' compensation accrual	3.1		4.6
CARES Act payroll tax liabilities	—		4.4
Restructuring liabilities	2.2		3.3
Environmental liabilities	0.7		0.7
Interest payable	0.8		5.3
Other current liabilities	8.5		7.6
Total other current liabilities	$	98.1	$	117.4

Other noncurrent liabilities:
Operating lease liabilities	$	21.2	$	22.4
Warranty accrual	3.1		4.2
Transition tax liability	3.1		4.1
Uncertain tax position liability	5.3		4.7
NMTC liability	3.9		3.9
Workers' compensation accrual	6.1		6.5
Environmental liabilities	3.6		3.6

Deferred development grant	2.5		2.5
Other noncurrent liabilities	3.7		3.5
Total other noncurrent liabilities	$	52.5	$	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 nine months ended June 30, 2023, in millions:


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

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

December 31, September 30,
2017 2017
(in millions)
Inventories:
Purchased components and raw material $ 74.3
$ 67.7
Work in 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

at September 30, 2022:
~~Note 9.~~Goodwill	~~Segment Information~~ $	822.7
Accumulated impairment	(724.1)
Goodwill, net	98.6
Activity during the nine months ended June 30, 2023:
Change in foreign currency exchange rates	(1.6)
Balance at June 30, 2023	$	97.0

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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.~~below:


	Three months ended				Nine months ended
	June 30,				June 30,
	2023		2022		2023		2022

	(in millions)
Net sales, excluding intercompany:
Water Flow Solutions	$	150.1	$	195.9	$	472.9	$	534.7
Water Management Solutions	176.5		137.3		501.4		381.3
	$	326.6	$	333.2	$	974.3	$	916.0
Operating income (loss):
Water Flow Solutions	$	12.6	$	38.1	$	52.0	$	104.8
Water Management Solutions	39.0		12.0		90.3		35.1
Corporate	(16.0)		(13.2)		(39.8)		(39.9)
	$	35.6	$	36.9	$	102.5	$	100.0
Depreciation and amortization:
Water Flow Solutions	$	8.2	$	7.6	$	23.7	$	22.5
Water Management Solutions	7.6		7.2		22.3		22.2
Corporate	—		0.1		0.1		0.2
	$	15.8	$	14.9	$	46.1	$	44.9
Strategic reorganization and other charges (benefits):
Water Flow Solutions	$	0.1	$	—	$	0.1	$	—
Water Management Solutions	1.0		—		1.2		0.2
Corporate	2.8		0.6		(0.4)		3.4
	$	3.9	$	0.6	$	0.9	$	3.6
Capital expenditures:
Water Flow Solutions	$	7.5	$	8.1	$	23.1	$	29.6
Water Management Solutions	4.4		2.6		9.3		7.1
Corporate	—		—		—		—
	$	11.9	$	10.7	$	32.4	$	36.7
Water Flow Solutions disaggregated net sales:
Central	$	43.0	$	53.8	$	131.0	$	145.0
Northeast	31.7		29.4		93.4		90.5
Southeast	24.8		44.3		86.8		122.3
West	37.8		47.4		123.4		131.3
United States	137.3		174.9		434.6		489.1
Canada	9.8		18.8		29.2		40.7
Other international locations	3.0		2.2		9.1		4.9
	$	150.1	$	195.9	$	472.9	$	534.7
Water Management Solutions disaggregated net sales:
Central	$	47.4	$	37.7	$	133.2	$	101.1
Northeast	44.3		25.4		116.1		78.1
Southeast	37.1		27.8		109.8		79.6
West	31.2		30.8		93.0		77.8
United States	160.0		121.7		452.1		336.6
Canada	10.0		9.7		29.9		26.0
Other international locations	6.5		5.9		19.4		18.7
	$	176.5	$	137.3	$	501.4	$	381.3

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 actuarial amortization, net of income tax		Foreign currency translation, net of income tax		Total

	(in millions)
Balance at September 30, 2022	$	(36.3)	$	(8.3)	$	(44.6)
Current period other comprehensive income (loss)	2.0		(3.0)		(1.0)
Balance at June 30, 2023	$	(34.3)	$	(11.3)	$	(45.6)

For the nine months ended June 30, 2023, pension actuarial amortization included in the condensed consolidated statements of comprehensive income as a component of pension expense other than service was $2.8 million, net of income tax of $0.8 million. Refer to Note 5. Retirement Plans for further information. For the nine months ended June 30, 2023, foreign currency translation included in the condensed consolidated statements of comprehensive income was $3.0 million, net of $0 income tax.

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 against Mueller Canada Ltd. and its directors seeking C$10.0 million in damages arising from the defendants’ alleged environmental contamination of the property and breach of lease. Mueller Canada Ltd. leased the property from 1988 through 2008. We are pursuing indemnification from a former owner for certain potential liabilities that are alleged in this lawsuit, and we have accrued for other liabilities not covered by indemnification. On December 7, 2011, the Court denied the plaintiff’s motion for summary judgment.

The purchaser of U.S. Pipe has been identified as a “potentially responsible party” (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act ~~(“CERCLA”)~~ in connection with a former manufacturing facility operated by U.S. Pipe that was in the vicinity of a proposed Superfund site located in North Birmingham, Alabama. Under the terms of the acquisition agreement relating to our sale of U.S. Pipe, we agreed to indemnify the purchaser for certain environmental liabilities, including those arising out of the former manufacturing site in North Birmingham. Accordingly, the purchaser tendered the matter to us for indemnification, which we accepted. Ultimate liability for the site will depend on many factors that have not yet been determined, including the determination of ~~EPA’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 31, 2017.~~June 30, 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,~~July 26, 2023, our ~~board~~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~~August 21, 2023 to stockholders of record at the close of business on ~~February 9, 2018.~~August 10, 2023.

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~~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, inventory positions, 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 and inventory positions); 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 on valves, hydrants~~

We have experienced a variety of external challenges in 2023 including inflation, raw material availability and ~~gas~~supply chain disruptions, including from the war in Ukraine and labor challenges. Additionally, due to ongoing inventory destocking by our distribution partners, lead times returning to pre-pandemic levels for most of our products ~~effective~~and end markets adjusting to higher interest rates, especially new residential construction, we are seeing lower order rates for many products compared with the prior year. In July 2023, Blue Chip Economic Indicators forecasted an 11.6% decrease in ~~February 2018~~housing starts for ~~its U.S. and Canadian markets. We believe that some customers may accelerate orders prior~~the calendar year 2023 as compared to the ~~effective date~~calendar year 2022. In addition to experiencing lower production volumes at many of our facilities, 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 demand conditions to persist during the ~~price increases.~~balance of our fiscal year 2023. We will continue to closely monitor the challenging market conditions discussed above and the related uncertainties and risks on our business.

~~Technologies~~

~~The municipal market is the key end market for Technologies. These businesses are project-oriented~~

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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 31, 2017~~June 30, 2023 Compared to Three Months Ended ~~December 31, 2016~~June 30, 2022


	Three months ended June 30, 2023
	Water Flow Solutions		Water Management Solutions		Corporate		Total

	(in millions)
Net sales	$	150.1	$	176.5	$	—	$	326.6
Gross profit	$	33.6	$	66.5	$	—	$	100.1
Operating expenses:
Selling, general and administrative	20.9		26.5		13.2		60.6
Strategic reorganization and other charges	0.1		1.0		2.8		3.9
Total operating expenses	21.0		27.5		16.0		64.5
Operating income (loss)	$	12.6	$	39.0	$	(16.0)	35.6
Non-operating expenses:
Pension expense other than service							0.9
Interest expense, net							3.8
Income before income taxes							30.9
Income tax expense							6.4
Net income							$	24.5

	Three months ended June 30, 2022
	Water Flow Solutions		Water Management Solutions		Corporate		Total

	(in millions)
Net sales	$	195.9	$	137.3	$	—	$	333.2
Gross profit	$	60.8	$	37.5	$	—	$	98.3
Operating expenses:
Selling, general and administrative	22.7		25.5		12.6		60.8
Strategic reorganization and other charges	—		—		0.6		0.6
Total operating expenses	22.7		25.5		13.2		61.4
Operating income (loss)	$	38.1	$	12.0	$	(13.2)	36.9
Non-operating expenses:

Pension benefit other than service							(0.9)
Interest expense, net							4.2
Income before income taxes							33.6
Income tax expense							7.1
Net income							$	26.5

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 31, 2017 increased $11.1~~June 30, 2023 decreased $6.6 million or 2.0% to ~~$178.3~~$326.6 million ~~from $167.2~~as compared with $333.2 million ~~due~~in the prior year period primarily ~~to increased shipment volumes, including the addition~~as a result of ~~Singer Valve, and improved pricing at Infrastructure,~~a decrease in volume in our Water Flow Solutions segment, which ~~were~~was partially offset by higher pricing across most of our product lines in both our Water Flow Solutions and Water Management Solutions segments as well as an increase in volume ~~decline at Technologies.~~in our Water Management Solutions segment.

Gross profit ~~for~~in the ~~quarter~~three months ended ~~December 31, 2017~~June 30, 2023 increased ~~$3.6~~$1.8 million or 1.8% to ~~$55.4~~$100.1 million from ~~$51.8~~$98.3 million in the prior year period primarily as a result of higher pricing across most of our product lines. This increase was partially offset by overall lower net volume, unfavorable manufacturing performance predominately in Water Flow Solutions as well as inflation. The unfavorable manufacturing performance was due to outsourcing costs, product mix, supply chain disruption and machine downtime mainly in our foundry operations. Additionally, we incurred a $4.5 million warranty accrual charge in the prior year. Gross margin was 30.6% in the three months ended June 30, 2023 as compared with 29.5% in the prior year period.

Selling, general and administrative expenses (“SG&A”) in the three months ended June 30, 2023 decreased $0.2 million or 0.3% to $60.6 million from $60.8 million in the prior year period primarily due to ~~increased shipment volumes, improved pricing~~a decrease in personnel expense and ~~Infrastructure's improved operating efficiencies and other manufacturing cost savings,~~software licensing expense, 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~~higher inflation 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.foreign exchange. SG&A as a percentage of net sales was ~~22.3%~~18.6% and 18.2% for the three months ended June 30, 2023 and June 30, 2022, respectively.

Strategic reorganization and other charges in the ~~quarter~~three months ended ~~December 31, 2017~~June 30, 2023 was $3.9 million which primarily consisted of severance and ~~21.7%~~certain transaction-related expenses. Strategic reorganization and other charges for the three months ended June 30, 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 June 30, 2023 declined $0.4 million or 9.5% to $3.8 million as compared with $4.2 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.~~below:


	Three months ended
	June 30,
	2023		2022

	(in millions)
4.0% Senior Notes	$	4.5	$	4.5
Deferred financing costs amortization	0.1		0.2
ABL Agreement	0.3		0.3
Capitalized interest	(0.3)		(0.7)
Other interest expense	0.1		—
Total interest expense	4.7		4.3
Interest income	(0.9)		(0.1)
Interest expense, net	$	3.8	$	4.2

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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.~~below:


	Three months ended					Three months ended
	December 31,					June 30,
	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	3.2		3.3
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	(3.5)		(3.0)
Global Intangible Low-Taxed Income					Global Intangible Low-Taxed Income	1.1		1.1
Foreign income tax rate differential					Foreign income tax rate differential	(2.2)		(1.7)
Nondeductible compensation					Nondeductible compensation	0.9		0.9
Basis difference in foreign investment					Basis difference in foreign investment	—		(0.1)
Other	0.5		0.8		Other	0.2		(0.4)
	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	20.7	%	21.1	%

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 June 30, 2023 decreased $45.8 million or 23.4% to $150.1 million as compared with $195.9 million in the prior year period primarily as a result of lower volumes for iron gate valve and service brass products partially offset by higher pricing across most product lines and volume growth in specialty valve products.

Gross profit in the three months ended June 30, 2023 decreased $27.2 million or 44.7% to $33.6 million from $60.8 million in the prior year period. This decrease was primarily a result of lower volume, unfavorable sales mix and higher cost of sales associated with unfavorable manufacturing performance, including inefficiencies and start-up costs for the ~~quarter~~new brass foundry, and inflation, which were partially offset by higher pricing. Gross margin was 22.4% in the three months ended ~~December 31, 2017~~June 30, 2023 and 31.0% in the prior year period.

SG&A in the three months ended June 30, 2023 decreased $1.8 million to $20.9 million from $22.7 million in the prior year period primarily as a result of lower personnel expenses and software licensing expense partially offset by inflation. SG&A as a percentage of net sales was 13.9% and 11.6% in the three months ended June 30, 2023 and 2022, respectively.

Water Management Solutions

Net sales in the three months ended June 30, 2023 increased ~~9.4%~~$39.2 million or 28.6% to ~~$160.1~~$176.5 million as compared with $137.3 million in the prior year period primarily as a result of higher pricing across most product lines and increased volumes mainly in hydrant and water management applications products.

Gross profit in the three months ended June 30, 2023 was $66.5 million as compared with $37.5 million in the prior year period. Gross margin increased to ~~$146.3~~37.7% in the three months ended June 30, 2023 as compared with 27.3% 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 unfavorable manufacturing performance, largely due to higher costs as a result of outsourcing, as well as inflation.

SG&A in the three months ended June 30, 2023 increased $1.0 million to $26.5 million from $25.5 million in the prior year period primarily due to ~~higher shipment volumes,~~inflation and unfavorable foreign currency fluctuation, which was partially offset by lower personnel expenses. SG&A as a percentage of net sales was 15.0% and 18.6% in the ~~addition~~three months ended June 30, 2023 and 2022, respectively.

Table of ~~Singer Valve and favorable pricing.~~Contents

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

SG&A increased $0.6 million to ~~$52.5 million from $47.6~~$13.2 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 31, 2017~~June 30, 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 $12.6 million in the ~~prior year period. SG&A was 15.2%~~three months ended June 30, 2022 primarily as a result of inflation and ~~14.6%~~unfavorable foreign currency fluctuation partially offset by lower personnel expenses.

Table of ~~net sales for the quarters ended December 31, 2017 and 2016, respectively. These increases in SG&A were primarily due~~Contents

Nine Months Ended June 30, 2023 Compared to ~~higher personnel-related expenses and the additional SG&A of Singer Valve.~~Nine Months Ended June 30, 2022

~~Technologies~~


	Nine months ended June 30, 2023
	Water Flow Solutions		Water Management Solutions		Corporate		Total

	(in millions)
Net sales	$	472.9	$	501.4	$	—	$	974.3
Gross profit	117.4		173.7		—		$	291.1
Operating expenses:
Selling, general and administrative	65.3		82.2		40.2		187.7
Strategic reorganization and other charges (benefits)	0.1		1.2		(0.4)		0.9
Total operating expenses	65.4		83.4		39.8		188.6
Operating income (loss)	$	52.0	$	90.3	$	(39.8)	102.5
Non-operating expenses:
Pension expense other than service							2.8
Interest expense, net							11.4
Income before income taxes							88.3
Income tax expense							20.0
Net income							$	68.3

	Nine months ended June 30, 2022
	Water Flow Solutions		Water Management Solutions		Corporate		Total

	(in millions)
Net sales	$	534.7	$	381.3	$	—	$	916.0
Gross profit	169.9		108.8		—		$	278.7
Operating expenses:
Selling, general and administrative	65.1		73.5		36.5		175.1
Strategic reorganization and other charges	—		0.2		3.4		3.6
Total operating expenses	65.1		73.7		39.9		178.7
Operating income (loss)	$	104.8	$	35.1	$	(39.9)	100.0
Non-operating expenses:
Pension benefit other than service							(2.9)
Interest expense, net							13.0
Income before income taxes							89.9
Income tax expense							20.4
Net income							$	69.5

Consolidated Analysis

Net sales in the ~~quarter~~nine months ended ~~December 31, 2017 declined~~June 30, 2023 increased $58.3 million or 6.4% to ~~$18.2~~$974.3 million as compared with $916.0 million in the prior period as a result of higher pricing across most product lines and an increase in Water Management Solutions’ volume, partially offset by a decrease in volumes in our Water Flow Solutions segment.

Gross profit in the nine months ended June 30, 2023 increased $12.4 million or 4.4% to $291.1 million from ~~$20.9~~$278.7 million in the prior year period primarily ~~due~~as a result of higher pricing across most product lines, partially offset by net overall lower

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volume, unfavorable manufacturing performance, including outsourcing costs, and inflation. Additionally, we incurred a $4.5 million warranty accrual charge in the prior year. Gross margin was 29.9% in the nine months ended June 30, 2023 as compared with 30.4% in the prior year period.

SG&A in the nine months ended June 30, 2023 increased $12.6 million or 7.2% to $187.7 million from $175.1 million in the prior year period primarily as a result of higher personnel expenses, inflation, professional fees and increased travel and entertainment expenses, partially offset by lower ~~AMI shipment volumes,~~software licensing expense. SG&A as a percentage of net sales was 19.3% and 19.1% for the nine months ended June 30, 2023 and 2022, respectively.

Strategic reorganization and other charges in the nine months ended June 30, 2023 was $0.9 million which primarily related to severance and certain transaction-related expenses partially offset from a gain on the sale of our Aurora, Illinois facility. Strategic reorganization and other charges in the nine months ended June 30, 2022 was $3.6 million, which primarily related to the Albertville tragedy and termination benefits associated with our facility closures in Aurora, Illinois and Surrey, British Columbia, Canada.

Net interest expense in the nine months ended June 30, 2023 decreased $1.6 million or 12.3% to $11.4 million as compared with the prior year period of $13.0 million primarily as a result of increased interest income associated with higher interest rates. The components of net interest expense are provided below:


	Nine months ended
	June 30,
	2023		2022

	(in millions)
4.0% Senior Notes	$	13.5	$	13.5

Deferred financing costs amortization	0.7		0.7
ABL Agreement	0.7		0.7
Capitalized interest	(1.8)		(1.9)
Other interest expense	0.4		0.3
Total interest expense	13.5		13.3
Interest income	(2.1)		(0.3)
Interest expense, net	$	11.4	$	13.0

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


	Nine months ended
	June 30,
	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	3.2		3.3
Excess tax benefits related to stock-based compensation	0.2		(0.3)
Tax credits	(2.8)		(3.0)
Global Intangible Low-Taxed Income	1.1		1.1
Foreign income tax rate differential	(2.2)		(1.7)
Nondeductible compensation	0.9		0.9
Basis difference in foreign investment	—		(0.1)
Valuation allowances	—		0.3
Other	1.3		1.2
Effective income tax rate	22.7	%	22.7	%

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Segment Analysis

Water Flow Solutions

Net sales in the nine months ended June 30, 2023 decreased $61.8 million or 11.6% to $472.9 million as compared with $534.7 million in the prior year period primarily as a result of lower sales volume of iron gate valve products partially offset by increased ~~leak detection sales.~~pricing across most product lines.

Gross profit in the ~~quarter~~nine months ended ~~December 31, 2017~~June 30, 2023 decreased $52.5 million or 30.9% to $117.4 million from $169.9 million in the prior year period. The decrease was ~~$2.9~~primarily a result of lower volumes, higher cost of sales associated with unfavorable manufacturing performance, including inefficiencies and start-up costs for the new brass foundry and inflation which were partially offset by higher pricing. Gross margin was 24.8% in the nine months ended June 30, 2023 and 31.8% in the prior year period.

SG&A in the nine months ended June 30, 2023 increased $0.2 million or 0.3% to $65.3 million from $65.1 million in the prior year period primarily as a result of inflation partially offset by lower personnel expenses. SG&A as a percentage of net sales was 13.8% and 12.2% in the nine months ended June 30, 2023 and 2022, respectively.

Water Management Solutions

Net sales in the nine months ended June 30, 2023 increased $120.1 million or 31.5% to $501.4 million as compared with $381.3 million in the prior year period primarily as a result of higher pricing across most of the segment’s product lines and increased volumes, mainly in our hydrant products.

Gross profit in the nine months ended June 30, 2023 increased $64.9 million or 59.7% to ~~$4.2~~$173.7 million as compared with $108.8 million in the prior year period. Gross margin ~~declined~~increased to ~~15.9%~~34.6% in the ~~quarter~~nine months ended ~~December 31, 2017~~June 30, 2023 as compared ~~to 20.1%~~with 28.5% 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 $8.7 million or 11.8% to ~~$7.5~~$82.2 million ~~in the quarter ended December 31, 2017 compared to $6.4~~from $73.5 million in the prior year period ~~due to personnel-related~~primarily as a result of professional fees, inflation, and increased personnel expenses. 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 16.4% and 19.3% in the ~~prior year period.~~nine months ended June 30, 2023 and 2022, respectively.

Corporate

SG&A ~~was $7.9~~increased $3.7 million or 10.1% to $40.2 million in the ~~quarter~~nine months ended ~~December 31, 2017~~June 30, 2023 as compared ~~to $8.6~~with $36.5 million in the ~~prior year period.~~nine months ended June 30, 2022 primarily as a result of inflation and higher personnel expenses.

Liquidity and Capital Resources

We had cash and cash equivalents on hand of ~~$348.3~~$141.2 million at ~~December 31, 2017~~June 30, 2023 and ~~$96.3~~$162.3 million of additional borrowing capacity under our ABL ~~Agreement~~ based on ~~December 31, 2017 data, which, along with cash generated by operations, would be our source of incremental liquidity.~~June 30, 2023 data. Undistributed earnings from our subsidiaries in Israel, Canada, and China are considered to be permanently invested outside the United States. At ~~December 31, 2017,~~June 30, 2023, cash and cash equivalents included ~~$12.1~~$59.7 million, $7.5 million, and ~~$7.2~~$11.1 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 July 26, 2023, payable on or about August 21, 2023 to ~~benefit our liquidity through reduction~~stockholders of record as of August 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~~nine months ended ~~December 31, 2017,~~June 30, 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 provided by operating activities was $52.5 million during the nine months ended June 30, 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~~$20.5 million in the prior year period. ~~We estimate 2018~~The increase in net operating cash flow was primarily driven by improvements in working capital compared with the prior year period, including a lesser increase in Inventories and higher Receivables collections, partially offset by higher Accounts payable turnover.

Capital expenditures were $32.4 million in the nine months ended June 30, 2023 as compared with $36.7 million in the prior year period. Capital expenditures decreased primarily as a result of lower expenditures associated with the new Decatur foundry

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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~~$50.0 million and ~~$48 million, although we are also evaluating possibilities for additional capital expenditures in 2018.~~$55.0 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~~

On April 5, 2023, we amended the ABL. This amendment replaced LIBOR-based loans ~~and may have up to $60 million~~with SOFR-based loans plus an adjustment of ~~letters of credit outstanding.~~10 basis points, among other immaterial modifications.

Borrowings under the ABL ~~Agreement~~ bear interest at a floating rate equal to ~~LIBOR,~~SOFR plus aan adjustment of 10 basis points plus an 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 31, 2017,~~June 30, 2023, the applicable ~~LIBOR-based~~ margin was ~~125~~200 basis ~~points.~~points for SOFR-based loans, and 100 basis points for base rate loans.

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 June 30, 2023 data was $162.3 million, as reduced by $12.5 million of outstanding letters of credit and $0.2 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 $400.7 million at June 30, 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 June 30, 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 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.

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Our corporate credit rating and the credit rating for our debt are presented ~~below.~~below:

Moody’s

Standard & Poor's

Moody’s

Standard & Poor’s

December 31,

September 30,

December 31,

September 30,

June 30,

September 30,

June 30,

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 - June 30, 2023 and September 30, 2022	3
	Unaudited Condensed Consolidated Statements of Operations - Three and Nine Months Ended June 30, 2023 and 2022	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended June 30, 2023 and 2022	5
	Unaudited Condensed Consolidated Statements of Stockholders' Equity - Three and Nine Months Ended June 30, 2023 and 2022	6
	Unaudited Condensed Consolidated Statements of Cash Flows - Nine Months Ended June 30, 2023 and 2022	8
	Notes to the Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 4.	Controls and Procedures	34

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6.	Exhibits	35
	Signatures	35



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 31, 2016,~~June 30, 2023, 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).



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



	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~~



		MUELLER WATER PRODUCTS, INC.
Date:	~~February 8, 2018~~August 4, 2023	By:	/s/ ~~Michael S. Nancarrow~~Suzanne G. Smith
			~~Michael S. Nancarrow~~Suzanne G. Smith
			Chief Accounting Officer


~~Note 5.~~	~~Derivative Financial Instruments~~


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