MWA 10-K & 10-Q changes, risk factors and insider trading

Our primary end markets are repair and replacement of water infrastructure, driven by municipal spending and new water infrastructure installation drivenin byconnection with new residential construction. As a result, a significant portion of our business depends on local, state and federal spending on water and wastewater infrastructure upgrade, repair and replacement.replacement projects. Funds for water and wastewater infrastructure repair and replacement typically come from local taxes, water fees and water rates. State and local governments and private water entities that do not adequately budget for expenditures when setting tax rates, water rates and water fees, as applicable, could be unable to pay for water infrastructure repair and replacement if they do not have access to other funding sources. In addition, reductions or delays in federal spending related to water or wastewater infrastructure could adversely affect state or local projects and thus may adversely affect our financial results.

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

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

We may not be able to adequately manage the risks associated with our productsproducts, systems and systems,solutions, including increased warranty costs.

The success of our products and systems depends on our ability to manage the risks associated with their introduction and continued maintenance and management, including the risk that our products and systems may have quality or other defects or deficiencies that result in their failure to satisfy performance or reliability requirements. Our success depends in part on our ability to manage these risks, including costs associated with design, manufacturing, installation, maintenance and warranties. Managing these risks can be costly and technologically challenging, and we cannot determine the ultimate effect they may have. WarrantyThe estimation of warranty liabilities andinvolves theconsiderable relatedjudgment reservedue estimation process is highly judgmental as a result ofto the complex nature of these exposures and the unique circumstances of eachvarious claim.claims. Furthermore, once customers assert claims are asserted for an alleged product defectdefect, by customers, it can be difficult to determinedetermining the level of potential exposure or liability related to such allegation or the extent to which the assertion of these claims may expand geographically.geographically may be difficult. Although we maintain insurance for certain product related claims, such policies may not be available to us or adequately cover the liability for damages, the cost of repairs and/or the expense of litigation. Current and future claims may arise out of events or circumstances not covered by insurance and not subject to effectivecomprehensive indemnification agreements with our subcontractors. Failure to successfully manage these challenges could result in lost sales, significant expense and harm to our reputation.

We offer several technologically enhanced, complex hardware and software productsproducts, services and servicessolutions that can be affectednegatively impacted by design and manufacturing defects. Unanticipated defectsDefects can also exist in components and products we purchase from third parties. Component defects could make our products unsafe and create a risk of environmental or property damage and personal injury. In addition, our offeringsproducts, services and solutions can have quality issues and from time-to-time experience outages, disruptions, slowdowns or errors. As a result, our products and services may not perform as anticipated and may not meet customer expectations. There can be no assurance we will be able to detect and fix all issues and defects in theproducts, hardware, softwareservices and servicessolutions we offer. Failure to do so can result in widespread technical and performance issues affectingnegatively impacting our offerings.products, services and solutions. In addition, we can be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment, and/or intangible assets, and significant warranty and other expenses, including litigation costs. Quality problems can also adversely affect the experience for our customers and result in harm to our reputation, loss of competitive advantage, poor market acceptance, reduced demand for productsproducts, services and services,solutions, new productproducts, services and servicesolutions introduction delays and lost sales.

Inefficient or ineffective capital allocation, along with increased capital expenditures to modernize our aging facilities and expand our capabilities,capabilities and capacity, could adversely affect, among other things,affect our operating results, cash availability, strategic opportunities and/or stockholder value.

Our goal is to invest capital to generate long-term value for our stockholders. This includes spending on capital projects; developing or acquiring strategic businesses;businesses, technologies and product lines with the potential to strengthen our industry position; enhancing our existing set of product and service offerings or entering into new markets; as well as periodically returning value to our stockholders through share repurchases and dividends. To a large degree, capital efficiency reflects how well we manage key risks. The actions taken to address specific risks may affect how well we manage the more general risk of capital efficiency. If we do not allocate properly and manage our capital, we may fail to produce expected financial results, and we may experience a reduction in stockholder value, including increased volatility in our stock price.

Our business strategy includes developing, acquiring and investing in companies and technologies that broaden our product portfolio or complement our existing business, which could be unsuccessful or consume significant resources and adversely affectimpact our operating results.

Part of our growth strategy depends on expanding internationally. Although sales outside of the United States account for a relatively small percentage of our total net sales, we have business activity in Canada, China, Israel and the United Kingdom. Some countries that present potential business opportunities also face political and economic instability and vulnerability to infrastructure and other disruptions. Seeking to expand our business internationally exposes us to additional risks, which include foreign exchange risks and currency fluctuations, as discussed more fully below, political and economic uncertainties, changes in local business conditions and national and international conflicts. A primary risk we face in connection with our export shipments relates to our ability to collect amounts due from customers. We also face the potential risks arising from staffing, monitoring and managing international operations, including the risk that such activities may divert our resources and management time.

The Israel-Hamas war caused a temporary shutdown in our facility in Ariel, IsraelIsrael, in October 2023. While we continue to operate the facility,facility since reopening in November 2023, continued disruptions and escalations of conflicts in the area may increase the likelihood of supply interruptions and may continue to hinder our ability to acquire the necessary materials we need to make our products. Supply disruptions from lack of access to materials has impacted, and continues to impact, our ability to produce and deliver our products on time and at favorable pricing.

Inflation has recently adversely affected and has the potential to continue to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, including purchased parts, commodity and raw material costs and labor. In an inflationary environment, we may be unable to raise the prices of our products sufficiently to keep up with the rate of inflation, which would reduce our profit margins and cash flows. Other inflationary pressures could affect wages, the cost and availability of components and raw materials and other inputs and our ability to meet customer demand. Inflation may further exacerbate other risk factors, including supply chain disruptions, risks related to international operations and the recruitment and retention of qualified employees.

As we continue to design and develop products, services and solutions that leverage our hosted or cloud-based resources, the internet-of-things and other wireless/remote technologies, and include networks of distributed and interconnected devices that contain sensors, data transfers and other computing capabilities, our customers’ data and systems may be subjected to harmful or illegal content or attacks, including potential cybersecurity threats. Additionally, we may not have adequately anticipated or precluded such cybersecurity threats through our product design or development. These products, services and solutions inevitably contain vulnerabilities or critical security defects which may not have been remedied and cannot be disclosed without compromising security. We may also make prioritization decisions in determining which vulnerabilities or security defects to fix, and the timing of these fixes, which could result in periods of compromised security. These vulnerabilities and security defects could expose us or our customers to a risk of loss, disclosure, or misuse of information/data; adversely affect our operating results; result in litigation, liability or regulatory action (including under laws related to privacy, data protection, data security, network security and consumer protection); deter customers or sellers from using our products, services and solutions; and otherwise harm our business and reputation.

In addition, certain statutes, such as CERCLA, may impose strict, joint and several liability for the costs of remedial investigations and actions on entities that generated waste, arranged for disposal of waste, transported to or selected the disposal sites and the past and present owners and operators of such sites. All such “potentially responsible parties” (“PRP”), or any one of them, including us, may be required to bear all of such costs regardless of fault, the legality of the original disposal or ownership of the disposal site. As a result, we may be required to conduct investigations and perform remedial activities at current and former operating and manufacturing sites or waste disposal sites where we have been deemed, or in the future could be named, a PRP with respect to such environmental liabilities, any of which could require us to incur material costs. The final investigation or remediation costs of these environmental sites may exceed estimated costs, and additional sites in the future may require material remediation expenses. If actual expenditures exceed our estimates, our results of operations and financial position could be materially and adversely affected. See “Item 1. BUSINESS - Regulatory and Environmental Matters,” - “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 15. of the Notes to Consolidated Financial Statements.

Growing concernConcern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment. Many of our manufacturing plants use significant amounts of electricity generated by burning fossil fuels, which release carbon dioxide. Increased energy or compliance costs and expenses as a result of increased legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our products. The impacts of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations. Climate change and efforts to limit climate change may impair our production capabilities, disrupt our supply chain or impact demand for our products. If we fail to achieve or improperly report on our progress toward achieving our goals and commitments to reduce our carbon footprint or in environmental and sustainability programs and initiatives, the results could have an adverse impact on our business and results of operations.

If significant tariffs or other restrictions continue to be placed on foreign imports by the United States and related countermeasures are taken by impacted foreign countries, our sales and results of operations may be harmed. For example, ongoing trade tensions between the United States and China have led to a series of significant tariffs being levied on certain of our product categories. Furthermore, the importationTrump of certain product categories over recent years. Further, President-elect Trumpadministration has proposed significantly increasedimplemented tariffs on foreign imports into the United States, particularlyStates from China.all of our supplier countries, as well as on specific commodities used in our operations, such as steel, aluminum, and copper. The materials subject to these tariffs can be expected to impact our raw material costs as well. If further tariffs are imposed on a broader range of imports, or if further retaliatory trade measures are taken by China or other countries in response to additional tariffs, we may be required to raise our prices or incur additional expenses, which may result in the loss of customers and harm our operating performance, sales and earnings.

Our Krausz business includes a manufacturing facility in Ariel, Israel. SupplyIn chainresponse disruptions,to facilitythe accessoperational andchallenges created by the Israel-Hamas war, we modified our inabilityKrausz tooperations. appropriatelySuch staffmodifications the Ariel facility has limited, and will likelymay continue to limit,adversely impact our abilityoperating to produce Krausz products. These impacts are requiring us to take various actions, including changing suppliers, restructuring business relationships, outsourcing portions of the manufacturing process and modifying the manner in which we staff our facilities. Changing our operations in response to wartime impacts can be expensive, time-consuming and disruptive to our operations.results. If the current Israel-Hamas warceasefire continues,agreement fails, additional restrictions and other governmental actions could increase the severity of the impact on our operations in Israel and could materially adversely affect our business. A severe disruption to our business may result in significant lost sales and may require substantial recovery time and expenditures to resume operations.

Additionally, toif the extent thecurrent Israel-Hamas warceasefire causesagreement fails and there is additional loss of infrastructure and utilities services, such as energy, transportation, or telecommunications, plant closures and employee concerns in our Krausz business, we could experience increased costs and other negative financial impacts. If such disruptions result in delays or cancellations of customer orders or the manufacture or shipment of our products, our business, operating results and financial condition could be materially adversely affected.

Future outbreaks of infectious diseases, including further developments in the COVID-19 pandemic,diseases may result in widespread or localized health crises that adversely affect general commercial activity and the economies and markets of the countries and localities in which we operate, sell and purchase goods and services. Any outbreak of infectious disease poses the risk that we or our employees, contractors, suppliers, customers, transportation providers and other business partners may be prevented or impaired from conducting ordinary business activities for an indefinite period of time, including self-imposed facility shutdowns to protect the health and well-being of our employees or government-mandated shutdowns. In addition, our suppliers, business partners and customers may also experience similar negative impacts. Global supply chains may be disrupted, causing shortages, which could impact our ability to manufacture or supply our products. This disruption of our employees, distributors, suppliers and customers may impact our sales and future operating results.

We operate our business through two segments, Water Flow Solutions and Water Management Solutions. The Water Flow Solutions productSolutions’ portfolio includes iron gate valves, specialty valves and service brass products. The Water Management Solutions product and serviceSolutions’ portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, as well as pressure management and control products and solutions.

After experiencing challenges resulting from the COVID-19 pandemic and subsequent supply disruptions in years 2020 through 2023, the seasonality of our business has since returned to more normalized levels in 2024,levels, supported by municipal spending on repair and replacement projects and new residential construction activity. According to the United States Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates atas of September 30, 20242025 increased 5.2%.4.6%. Total housing starts in fiscal 20242025 decreased 1.6%1.1% as compared with fiscal 2023,2024, according to the United States Census Bureau, despitewhich included a 13%5.2% increasedecrease in single family housing starts as compared with fiscal 2023.2024.

In October 2023, the Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel. While we reopened the facility in November 2023, the war has caused supply chain challenges that continue to hinderhindered our ability to most efficiently manufacture our products produced in Israel. TheseWhile supply chain disruptions have adversely impacted, and continue to adversely impact, our ability to optimally produce and deliver our products from ourthe facility in Ariel, Israel. Additionally, production at this facility has beenwas adversely impacted by limitedthis laborevent, availability in the region. Wewe have mademitigated investmentsoperational inrisk recruiting and training new team members,by expanding our suppliers and expeditingimproving productthroughput shipmentsin order to increase production levels and to meet customer delivery times. While net sales levels have returned to pre-war levels, margin expansion was further hindered by newly implemented tariffs on products manufactured in Israel and imported into the United States.

For fiscal year 2025, we anticipate that consolidated net sales will increase between 1.9% and 3.4% as compared with fiscal 2024. The external operating environment remains dynamic as we face uncertainties and challenges emanating from the interest rate environment, the Israel-Hamas war and unrest in the Middle East, as well as labor inflation and availability. We expect these challenges to continue during fiscal 2025. After our short-cycle channel and customer inventory levels largely normalized during the first quarter of 2024, ourOur orders and shipments in 2025 reflected a more typical operating environment compared with the high backlog environment we experienced during and after the COVID-19 pandemic. For fiscal 2025,2026, we assume that we will continue to experience a more normalized operating environment leading to normalized seasonality for consolidated net sales. Therefore, we anticipate quarterly consolidated net sales as a percentage of fiscal year 20252026 consolidated net sales to be the highest in the third quarter and lowest in the first quarter, with a sequential increase in consolidated net sales in the second quarter as the construction season ramps up for the Spring. We anticipate resilient demand in the municipal repair and replacement end market driven by the aging water infrastructure albeit moderated by budgetary and operational pressures on municipalities. Additionally, we anticipate that new residential construction activity and new lot and land development will be relatively constrained by the interest rate environment, depending on the geography. For fiscal 2025,2026, we anticipate that inflation will continue to modestly impact manufacturing costs, primarily due to wage inflation, as well as raw materials and purchased parts. WeIn addition, higher direct tariff costs of approximately 3% of costs of goods sold are expected to continue to contribute to inflationary pressures in 2026. While pricing actions were taken in 2025 in response to new tariffs, we will continue to monitor the market and economic conditions impacting our business and take appropriate actions to address inflationary and other cost pressures by implementing price increases, cost containment measures and supplier management measures, among other actions.

InterestNet expense, netsales for 20242025 waswere $12.7$1,429.7 million as compared with $14.7$1,314.7 million in the prior year, aan decreaseincrease of $2.0$115.0 million or 13.6%,8.7%, primarily as a result of higher interestsales income.volumes Theand componentshigher ofprices interestacross expense,most netproduct are provided below.lines.

In 2025, there was no Other expense forand, 2024in 2024, there was $1.6 million Other expense for the release of an indemnification receivable related to an expired uncertain tax position. There was no Other expense for 2023.

Income tax expense of $47.5$62.5 million in 20242025 resulted in an effective income tax rate of 29.1%,24.6%, which was higherlower than the 21.6%29.1% rate in the prior year primarily as a result of certain non-deductible items,items recognized in 2024, including a non-cash goodwill impairment,impairment ancharge increasethat did not reoccur in 2025, as well as changes in the valuation allowance related to certain state income tax ratecredits and lesserforeign operating losses, tax benefits related to stock compensation, and higher foreign tax rate benefits.

Net sales for 20242025 were $755.5$824.9 million as compared with $634.4$755.5 million in the prior year, an increase of $121.1$69.4 million or 19.1%,9.2%, primarily as a result of higher sales volumes in iron gate valves and service brassspecialty products as well as higher pricing across most of Water Flow Solutions’ product lines.

Gross profit for 20242025 was $271.9$296.3 million as compared with $164.9$271.9 million in the prior year, an increase of $107.0$24.4 million or 64.9%,9.0%, primarily as a result of favorable manufacturing performance driven by labor, overhead and logistic efficiencies, higher volumes in iron gate valves and favorablespecialty price/cost,products, higher pricing and benefits from manufacturing efficiencies, partially offset by higherapproximately custom4% dutiesinflation expense.and increased tariffs. Gross margin increaseddecreased slightly to 36.0%35.9% in 2024,2025, as compared with 26.0%36.0% in the prior year.year primarily due to the negative impact of a $4.1 million write-down of inventory and other assets associated with the closure of our legacy brass foundry in Decatur, Illinois.

SG&A for 20242025 was $92.5$90.3 million as compared with $85.3$92.5 million in the prior year, ana increasedecrease of $7.2$2.2 million or 8.4%,2.4%, primarily as a result of lower intangible amortization, partially offset by higher employeepersonnel-related incentivesexpenses, andincluding incentive-based compensation, approximately 3% inflation, partially offset by lower salary and benefithigher expensethird-party associated with our restructuring activities.fees. SG&A as a percentage of net sales was 12.2%10.9% and 13.4%12.2% for 20242025 and 2023,2024, respectively.

Net sales for 20242025 were $559.2$604.8 million as compared with $641.3$559.2 million in the prior year, aan decreaseincrease of $82.1$45.6 million or 12.8%,8.2%, primarily as a result of lowerhigher sales volumes acrossin mosthydrants productand lines,repair includingand theinstallation impactproducts ofas thewell Israel-Hamas war, partially offset byas higher pricing across most of Water Management Solutions’ product lines.

Gross profit for 20242025 was $187.1$220.4 million as compared with $214.6$187.1 million in the prior year, aan decreaseincrease of $27.5$33.3 million or 12.8%,17.8%, primarily as a result of lowerhigher volumespricing, includingbenefits thefrom impactmanufacturing ofperformance theefficiencies, Israel-Hamasand war,higher volumes, which were partially offset by favorableincreased price/costtariffs and favorable2% manufacturing performance.inflation. Gross margin was 36.4% in 2025 and 33.5% in both 2024 and 2023.2024.

SG&A for 20242025 was $95.0$96.9 million as compared with $106.9$95.0 million in the prior year, aan decreaseincrease of $11.9$1.9 million or 11.1%2.0% primarily due to lower salary and benefit expense associated with our restructuring activities and lower third-party fees, partially offset by unfavorable foreign currency fluctuation, inflation of approximately 3%, higher employeepersonnel-related incentivesexpenses, including incentive-based compensation, and approximatelythird-party 3%fees, inflation.largely offset by lower intangible amortization, engineering costs and bad debt expense. SG&A as a percentage of net sales was 17.0%16.0% for 20242025 and 16.7%17.0% in the prior year.

During the year ended September 30, 2025, there was no goodwill impairment charge recorded. For the year ended September 30, 2024, Water Management SolutionSolutions incurred a non-cash goodwill impairment charge of $16.3 million. No goodwill impairment charge was recorded in 2023.

SG&A for 20242025 was $57.7$60.1 million as compared with $49.7$57.7 million in the prior year, an increase of $8.0$2.4 million or 16.1%4.2% primarily as a result of higherapproximately employee3% incentives,inflation, higher third-partyinsurance fees,expense, and unfavorable foreign currency fluctuation and approximately 3% inflation, partially offset by lower salary and benefit expense associated with our restructuring activities.fluctuation.

WeAs of September 30, 2025, we had cash and cash equivalents of $309.9$431.5 million at September 30, 2024 and approximately $162.6$163.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”) based on September 30, 2024 data.. Undistributed earnings from our subsidiaries in Israel, Canada and China are considered to be permanently investedreinvested outside of the United States. AtAs of September 30, 2024,2025, cash and cash equivalents included $80.7$84.3 million, $10.3$14.0 million, and $10.0$8.8 million in Israel, Canada, and China, respectively.

We anticipatebelieve that cash on hand, cash expected to be generated from operations and the availability of borrowings under our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flowsABL will be sufficient to meetfund our working capital requirements, liquidity obligations, anticipated operatingcapital needs,expenditures, income tax payments, capital expenditurespayments and debt service obligations as they becomepayments due throughunder our existing debt for the twelvenext 12 months fromand thereafter for the dateforeseeable of this filing.future. However, our ability to make these payments will depend largely on our future operating performance, which may be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control. Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the prepayment, refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our debt structure or business acquisitions.

Borrowings under the ABL bear interest at a floating rate equal to Secured Overnight Financing Rate (‘SOFR”) plus an adjustment of 10 basis points and an applicable margin range of 150 to 175 basis points, or a base rate, as defined in the ABL, plus an applicable margin of 50 to 75 basis points. AtAs of September 30, 2024,2025, the applicable margin was 150 basis points for SOFR-based loans and 50 basis points for base rate loans.

The ABL is subject to mandatory prepayments if total outstanding borrowings under the ABL 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 is equal to the sum of (a) 85% of the value of eligible accounts receivable and (b) the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less certain reserves. Prepayments can be made at any time without penalty. The ABL allows for certain restricted payments such as cash dividends on our common stock up to certain thresholds.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. RISK FACTORS” in our 2025 Annual Report on Form 10-K, each of which could materially affect our business, financial condition, or operating results. These described risks are not the only risks facing us. Additional risks and uncertainties not known to us or that we deem to be immaterial also may materially adversely affect our business, financial conditioncondition, or operating results.

The Company is subject to significant tariffs and trade restrictions imposed by the United StatesU.S. on foreign imports, including on specific commodities used in our operations, such as steel, aluminum, and copper, as well as retaliatory measures by impacted foreign countries. In 2025, the U.S. government increased tariffs on imported steel and aluminum from 25% to 50% under Section 232 of the Trade Expansion Act (“Section 232”). The Section 232 tariff increase has resulted in material, upward pressure on certain purchased components and raw material costs, particularly with respect to Repair products imported to the U.S. that are produced by our Krausz business. While we have taken, and intend to continue to take, actions to mitigate these cost increases, including pricing actions and supplier diversification, there can be no assurance that such measures will be sufficient to offset the impact of current or future tariffs on our business, financial condition, or results of operations. If further tariffs are imposed on a broader range of imports, or if further retaliatory trade measures are taken by China or other countries in response to additional tariffs, we may be required to raise our prices or incur additional expenses, which may result in the loss of customers and harm our operating performance, salessales, and earnings.

While tariffs are adversely impacting several product lines, Repair and Specialty Valve product lines are bearing most of the higher costs. In 2025, the U.S. government announced significant changes to its trade policy, including tariff increases on imported steel and aluminum from 25% to 50% under Section 232 of the Trade Expansion Act (“Section 232”). The increase in Section 232 tariffs to 50% has resulted in material, upward pressure on certain purchased components and raw material costs, including the Repair products we import to the U.S. that are produced by our Krausz business, which have borne most of the higher costs. As previously disclosed, we have taken, and intend to continue to take, actions intended to mitigate these increases through, among other things, pricing actions and addingsupply suppliers.chain actions. Despite these actions, Section 232 tariffs are likely to continue to negatively impact the Company’s business, results of operations, and financial condition during the remainder of fiscal 2026. The ultimate impact of Section 232 tariffs remains to be determined and will depend on several factors, including our ability to successfully mitigate their impact and whether additional or incremental U.S. tariffs or other changes to trade policies are announced or imposed.

In January 2025, we ceased melting and casting operations at our legacy brass foundry and transitioned production to our new state-of-the-art foundry. We expect this transition will improve operational efficiency and enable us to better serve our service brass customers. As part of our overall strategy, we will continue investing in our foundries to expand capacity, increase manufacturing efficiencies, and position ourselves to respond to the expected increase in demand for domestic product given the uncertainty in the current geopolitical and tariff environment. The Company expects to incur certain costs related to the decommissioning and demolition of its legacy foundry, the amount of which is not estimable at this time.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

Net sales for the three months ended MarchJune 31,30, 2026 were $384.4$395.9 million as compared with $364.3$380.3 million in the prior year period, an increase of $20.1$15.6 million or 5.5%,4.1%, primarily as a result of higher pricing across most product lines andpartially increasedoffset by lower volumes.

Gross profit for the three months ended MarchJune 31,30, 2026 was $144.5$155.8 million as compared with $128.0$145.7 million in the prior year period, an increase of $16.5$10.1 million or 12.9%.6.9%. Gross margin was 37.6%39.4% in the three months ended MarchJune 31,30, 2026 as compared with 35.1%38.3% in the prior year period. Gross margin increased 250110 basis points primarily as a result of favorable pricing across most product lines, manufacturing efficiencies,lines and highernon-recurring volumes.tariff refunds. Gross profit was negatively impacted by increased tariffs as well as approximately 4% inflation.inflation, performance, lower volumes, $3.1 million of portfolio optimization costs, and product mix.

Selling, general and administrative expenses (“SG&A”) for the three months ended MarchJune 31,30, 2026 were $59.7$64.0 million as compared with $55.7$71.0 million in the prior year period, ana increasedecrease of $4.0$7.0 million or 7.2%,9.9%, primarily due to lower unfavorable impact of foreign currency exchange and incentive-based compensation partially offset by inflation of approximately 4%.3%. SG&A as a percentage of net sales was 15.5%16.2% and 15.3%18.7% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

Strategic reorganization and other charges for the three months ended MarchJune 31,30, 2026 were $4.4$11.2 million and consisted primarily of certain transaction-related expenses, non-cash asset impairment expenses in our Water Management Solutions segment, severance, and expenses associated with our leadership transition, certain transaction-related expenses, and severance.transition. Strategic reorganization and other charges for the three months ended MarchJune 31,30, 2025 were $2.4$1.0 million and consisted of expenses associated with our leadership transition, a non-cash asset impairment, and certain transaction-related expenses.transition.

Net interest expense for the three months ended MarchJune 31,30, 2026 was $1.6$0.7 million as compared with $2.3$1.7 million in the prior year period, a decrease of $0.7$1.0 million or 30.4%,58.8%, primarily due to higher interest income. The components of net interest expense are as shown below:

Income tax expense for the three months ended MarchJune 31,30, 2026 was $19.7$12.5 million as compared with $16.4$19.5 million in the prior year period, ana increasedecrease of $3.3$7.0 million or 20.1%,35.9%, drivenprimarily attributable to a tax benefit resulting from the recognition of a loss on a foreign subsidiary investment, partially offset by higher pre-tax income.income and a valuation allowance on foreign pre-tax earnings. The effective tax rate for the three months ended MarchJune 31,30, 2026 was 25.0%15.7% as compared with 24.2%27.1% in the prior year. The effective tax rate increaseddecreased primarily due to lower excessa tax benefitsbenefit from the recognition of a loss on stocka compensation.foreign subsidiary investment, partially offset by a valuation allowance related to the Company's foreign operations.

Net sales for the three months ended MarchJune 31,30, 2026 were $218.3$215.3 million as compared with $216.2$216.6 million in the prior year period, ana increasedecrease of $2.1$1.3 million or 1.0%,0.6%, primarily as a result of lower volumes mostly offset by higher pricing across most product lines partially offset by lower volumes.lines.

Gross profit for the three months ended MarchJune 31,30, 2026 was $87.1$89.5 million as compared with $77.0$83.8 million in the prior year period, an increase of $10.1$5.7 million or 13.1%.6.8%. This increase was primarily a result of manufacturing efficiencies and higher pricing across most product lines, non-recurring tariff refunds, and performance partially offset by increasedlower tariffs,volumes, approximately 6%5% inflation, and lowerproduct volumes.mix. Gross margin was 39.9%41.6% in the three months ended MarchJune 31,30, 2026 and 35.6%38.7% in the prior year period.

SG&A was $21.9 million for both the three months ended MarchJune 31,30, 2026 and 2025. SG&A was flat$23.5 year-over-yearmillion as compared with $23.3 million in the prior year period, an increase of $0.2 million or 0.9%, primarily as a result of inflation of approximately 3%4%, washigher personnel costs and unfavorable foreign currency impact. These increases were mostly offset by lower personnel-relatedthird-party costs, including incentive-based compensation.fees. SG&A as a percentage of net sales was 10.0%10.9% and 10.1%10.8% in the three months ended MarchJune 31,30, 2026 and 2025, respectively.

Net sales for the three months ended MarchJune 31,30, 2026 were $166.1$180.6 million as compared with $148.1$163.7 million in the prior year period, an increase of $18.0$16.9 million or 12.2%,10.3%, primarily as a result of increased volumes and higher pricing across most product lines.

Gross profit for the three months ended MarchJune 31,30, 2026 was $57.4$66.3 million as compared with $51.0$61.9 million in the prior year period, an increase of $6.4$4.4 million or 12.5%.7.1%. The increase was primarily a result of higher pricing across most product lines, increased volumes, and volumesnon-recurring tariff refunds, which were partially offset by increasedperformance, tariffs,$3.1 unfavorablemillion manufacturingof efficiencies,portfolio optimization costs, and approximately 3% inflation. Gross margin was 34.6%36.7% in the three months ended MarchJune 31,30, 2026 as compared with 34.4%37.8% in the prior year period.

SG&A for the three months ended MarchJune 31,30, 2026 was $21.9$23.8 million as compared with $19.6$31.6 million in the prior year period, ana increasedecrease of $2.3$7.8 million or 11.7%,24.7%, primarily due to lower unfavorable impact of foreign currency exchangeexchange, third-party fees and incentive-based compensation partially offset by approximately 4%2% inflation. SG&A as a percentage of net sales was 13.2% forand both19.3% ofin the three month periods ended MarchJune 31,30, 2026 and 2025.2025, respectively.

SG&A for the three months ended MarchJune 31,30, 2026 was $15.9$16.7 million as compared with $14.2$16.1 million in the prior year period, an increase of $1.7$0.6 million or 12.0% is3.7% primarily a result of higher third-party fees and approximately 3% inflation.inflation mostly offset by lower unfavorable impact of foreign currency exchange.

SixNine months ended MarchJune 31,30, 2026 Compared to SixNine months ended MarchJune 31,30, 2025

Net sales for the sixnine months ended MarchJune 31,30, 2026 were $702.6$1,098.5 million as compared with $668.6$1,048.9 million in the prior year period, an increase of $34.0$49.6 million or 5.1%,4.7%, primarily as a result of higher pricing across most product lines.lines slightly offset by lower volumes.

Gross profit for the sixnine months ended MarchJune 31,30, 2026 was $264.3$420.1 million as compared with $231.0$376.7 million in the prior year period, an increase of $33.3$43.4 million or 14.4%.11.5%. Gross margin was 37.6%38.2% in the sixnine months ended MarchJune 31,30, 2026 as compared with 34.5%35.9% in the prior year period. Gross margin increased 310230 basis points primarily as a result of higher pricing,pricing manufacturingacross efficienciesmost product lines, performance largely driven by the legacy brass foundry closure in Decatur, Illinois, as well as the favorable comparison to a $4.1 million write-down of inventory and other assets associated with our legacy brass foundry recorded in the prior year period, and increased volumes.period. Gross margin was negatively impacted by increased tariffs and approximately 4% inflation.inflation, increased tariffs, net of non-recurring tariff refunds, and $3.1 million of portfolio optimization costs in the current period.

SG&A for the sixnine months ended MarchJune 31,30, 2026 was $119.5$183.5 million as compared with $109.6$180.6 million in the prior year period, an increase of $9.9$2.9 million or 9.0%,1.6%, primarily due to approximately 3% inflation and higher personnel costs partially offset by lower incentive-based compensation and reduced unfavorable foreign currency exchange and approximately 3% inflation.impact. SG&A as a percentage of net sales was 17.0%16.7% and 16.4%17.2% for the sixnine months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively.

Strategic reorganization and other charges for the sixnine months ended MarchJune 31,30, 2026 were $7.7$18.9 million and consisted of certain transaction-related expenses, expenses associated with our leadership transition, non-cash asset impairment expenses in our Water Management Solutions segment, and severance. Strategic reorganization and other charges for the nine months ended June 30, 2025 were $5.1 million and consisted of expenses associated with our leadership transition, severance,non-cash asset impairment expenses in our Water Flow Solutions segment, and certain transaction-related expenses. Strategic reorganization and other charges for the six months ended March 31, 2025 were $4.1 million and consisted of expenses associated with our leadership transition, a non-cash asset impairment, and certain transaction-related expenses.

Net interest expense for the sixnine months ended MarchJune 31,30, 2026 was $2.6$3.3 million as compared with $3.9$5.6 million in the prior year period, a decrease of $1.3$2.3 million or 33.3%,41.1%, primarily due to higher interest income. The components of net interest expense are as shown below:

Income tax expense for the sixnine months ended MarchJune 31,30, 2026 was $32.2$44.7 million as compared with $26.9$46.4 million in the prior year period, ana increasedecrease of $5.3$1.7 million or 19.7%,3.7%, drivenprimarily attributable to a tax benefit resulting from the recognition of a loss on a foreign subsidiary investment, partially offset by higher pre-tax income.income and a valuation allowance on foreign pre-tax earnings. The effective tax rate for the sixnine months ended MarchJune 31,30, 2026 was 23.9%20.9% as compared with 23.7%25.0% in the prior year. The effective tax rate increaseddecreased primarily due to lower excessa tax benefitsbenefit from the recognition of a loss on stock compensation largely offset by a reductionforeign insubsidiary nondeductible compensation.investment.

Net sales for the sixnine months ended MarchJune 31,30, 2026 were $391.3$606.6 million as compared with $390.8$607.4 million in the prior year period, ana increasedecrease of $0.5$0.8 million or 0.1%, primarily as a result of lower volumes mostly offset by higher pricing across most product lines offset by lower volumes.lines.

Gross profit for the sixnine months ended MarchJune 31,30, 2026 was $157.9$247.4 million as compared with $132.1$215.9 million in the prior year period, an increase of $25.8$31.5 million or 19.5%.14.6%. This increase was primarily a result of favorable manufacturing efficiencies and higher pricing across most product lines,lines and performance, partially offset by increasedlower tariffs,volumes, approximately 5% inflation,inflation and lowerproduct volumes.mix. Gross margin was 40.4%40.8% in the sixnine months ended MarchJune 31,30, 2026 and 33.8%35.5% in the prior year period.

SG&A for the sixnine months ended MarchJune 31,30, 2026 was $43.3$66.8 million as compared with $41.7$65.0 million in the prior year period, an increase of $1.6$1.8 million or 3.8%,2.8%, primarily as a result of inflation of approximately 3%.3%, higher personnel related expenses, and unfavorable foreign currency impact. SG&A as a percentage of net sales was 11.1%11.0% and 10.7% in the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively.

Net sales for the sixnine months ended MarchJune 31,30, 2026 were $311.3$491.9 million as compared with $277.8$441.5 million in the prior year period, an increase of $33.5$50.4 million or 12.1%,11.4%, primarily as a result of higher volumes and higher pricing across most product lines.

Gross profit for the sixnine months ended MarchJune 31,30, 2026 was $106.4$172.7 million as compared with $98.9$160.8 million in the prior year period, an increase of $7.5$11.9 million or 7.6%.7.4%. The increase was primarily driven by higher pricing across most product lineslines, increased volumes, and increasedproduct volumes.mix. Gross margin was negatively impacted by performance, increased tariffstariffs, andnet of non-recurring tariff refunds, approximately 3% inflation.inflation and $3.1 million of portfolio optimization costs. Gross margin was 34.2%35.1% in the sixnine months ended MarchJune 31,30, 2026 as compared with 35.6%36.4% in the prior year period.

SG&A for the sixnine months ended MarchJune 31,30, 2026 was $46.4$70.2 million as compared with $39.9$71.5 million in the prior year period, ana increasedecrease of $6.5$1.3 million or 16.3%,1.8%, primarily due to reduced incentive-based compensation and lower unfavorable impact of foreign currency exchange, partially offset by approximately 3% inflation,inflation and higher personnel-relatedpersonnel expenses.costs. SG&A as a percentage of net sales was 14.9%14.3% and 14.4%16.2% in the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively.

SG&A for the sixnine months ended MarchJune 31,30, 2026 was $29.8$46.5 million as compared with $28.0$44.1 million in the prior year period, an increase of $1.8$2.4 million or 6.4%.5.4%. The increase was primarily driven by inflation of approximately 3% and3%, higher personnel-related expenses.expenses and third-party fees partially offset by lower unfavorable impact of foreign currency exchange.

We had cash and cash equivalents on hand of $421.0$495.3 million as of MarchJune 31,30, 2026 and $163.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”). As of MarchJune 31,30, 2026, cash and cash equivalents included $91.8$98.2 million, $9.4 million, and $9.2$9.0 million in Israel, Canada, and China, respectively.

We believe that cash on hand, cash expected to be generated from operations, and the availability of borrowings under our ABL will be sufficient to fund our working capital requirements, liquidity obligations, anticipated capital expenditures, income tax payments, and payments due under our existing debt for the next 12 months and thereafter. However, our ability to make these payments will depend largely on our future operating performance, which may be affected by general economic, financial, competitive, legislative, regulatory, business, and other factors beyond our control. Depending on our liquidity levels, conditions in the capital marketsmarkets, and other factors, we may from time to time consider the prepayment, refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our debt structure or business acquisitions.

Our stock repurchase program allows us to repurchase up to $250.0 million of our common stock. The program does not commit us to any particular timing or quantity of purchases, and we may suspend or discontinue the program at any time. We repurchased $5.5$15.5 million of our outstanding common stock during the sixnine months ended MarchJune 31,30, 2026 under our publicly announced share repurchase program, and as of MarchJune 31,30, 2026, we had $59.5$49.5 million remaining under our share repurchase authorization. During the sixnine months ended MarchJune 31,30, 2025, we repurchased $5.0$15.0 million of our outstanding common stock.

Borrowings under the ABL bear interest at a floating rate equal to Secured Overnight Financing Rate (“SOFR”) plus an adjustment of 10 basis points and an applicable margin range of 150 to 175 basis points, or a base rate (as defined in the ABL) plus an applicable margin range of 50 to 75 basis points. As of MarchJune 31,30, 2026, the applicable margin was 150 basis points for SOFR-based loans and 50 basis points for base rate loans.

The ABL includes a commitment fee for any unused borrowing capacity of 37.5 basis points per annum when the unused capacity is above 50% of the credit commitments, with a step down to 25.0 basis points per annum when unused capacity is less than or equal to 50% of the credit commitments. As of MarchJune 31,30, 2026, the commitment fee was 37.5 basis points.

Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million and 10% of the Loan Cap as defined in the ABL. Excess availability based on MarchJune 31,30, 2026 data was $163.7 million, as reduced by $11.1 million of outstanding letters of credit and $0.2 million of accrued fees and expenses.

We were in compliance with all required covenants under the ABL as of MarchJune 31,30, 2026.

On May 28, 2021, we privately issued $450.0 million of 4.0% Unsecured Senior Notes (the “4.0% Senior Notes”) which mature on June 15, 2029, and bear interest at 4.0%, paid semi-annually in June and December. We capitalized $5.5 million of financing costs, which are being amortized over the term of the 4.0% Senior Notes using the effective interest method. Proceeds from the 4.0% Senior Notes, along with cash on hand, were used to redeem our previously existing 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, the outstanding 4.0% Senior Notes had a fair value of $434.6$436.1 million as of MarchJune 31,30, 2026.

An indenture governing the 4.0% Senior Notes (“Indenture”) contains customary covenants and events of default, including covenants that limit our ability to incur certain debt and liens. We were in compliance with all required covenants under the Indenture as of MarchJune 31,30, 2026. There are no financial maintenance covenants associated with the Indenture.

Cash flows provided by operating activities decreasedincreased $20.0$18.4 million to $48.4$154.2 million during the sixnine months ended MarchJune 31,30, 2026 compared with $68.4$135.8 million in the prior year period. This was driven by higher non-cash adjustments of $40.5 million and an increase in net income of $30.5 million, partially offset by a $57.2$52.6 million change in working capital and other assets and liabilities, partially offset by an increase in net income of $15.7 million and higher non-cash adjustments of $21.5 million.liabilities.

Cash flows used in investing activities increased $10.8$9.7 million to $31.8$42.4 million during the sixnine months ended MarchJune 31,30, 2026 compared with $21.0$32.7 million in the prior year period. Capital expenditures were $31.9$43.6 million in the sixnine months ended MarchJune 31,30, 2026 as compared with $21.1$32.8 million in the prior year period. Capital expenditures increased primarily as a result of higher expenditures associated with our iron foundries as compared with the prior year period.

Cash flows used in financing activities increased $3.6$4.3 million to $30.5$51.5 million during the sixnine months ended MarchJune 31,30, 2026 as compared with $26.9$47.2 million in the prior year period. This was driven primarily by $2.6$2.4 million in less cash provided by common stock issuances, an increase of $0.9$1.4 million in dividends paid to shareholders, and an increase of $0.5 million in repurchases of common stock under the share repurchase program, partially offset by a decrease of $0.6 million in amounts withheld to pay employee taxes related to share-based compensation.program.

We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures. As of MarchJune 31,30, 2026, we had (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and include annual cash interest payments of $18.0 million in 2026 through 2029; (ii) cumulative cash obligations of $30.2$40.1 million for operating leases through 20342037 and $5.2$5.4 million for finance leases through 2031; and (iii) purchase obligations for raw materials and other purchased parts of approximately $122.5$108.1 million which we expect to incur during the next 12 months and $2.1$2.2 million beyond MarchJune 31,30, 2027. Additionally, we expect to invest to strengthen our information technology systems, cybersecurity training, policies, programs, response plans and other similar measures. We expect to fund these cash requirements from cash on hand and cash generated from operations.

We declared a quarterly dividend of $0.070 per share on AprilJuly 28, 2026, payable on or about MayAugust 20, 2026 to stockholders of record as of MayAugust 11,10, 2026, which will result in an estimated $11.0$10.9 million cash outlay.

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured finance” or “special purpose” entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, as of MarchJune 31,30, 2026, we did not have any undisclosed borrowings, debt, derivative contracts, or synthetic leases. Therefore, we were not exposed to any financing, liquidity, market, or credit risk that could have arisen had we engaged in such relationships.

Parts of our business depend upon construction activity, which is seasonal in many areas due to the impact of cold weather conditions on construction activity. Net sales and operating income have historically been lowest in our first and second quarters ending December 31 and March 31, respectively, when the northern U.S. and most of Canada generally face weather conditions that restrict significant construction activity. Therefore, the results of operations for the three and sixnine months ended MarchJune 31,30, 2026 are not necessarily indicative of operating results that may be achieved for any other interim period or the full year.