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

If we are unable to effectively manage risks associated with changing technology, including artificial intelligence, product innovation and new product development, manufacturing techniques, distribution channels and business continuity, we may be at a competitive disadvantage.

The successful implementation of our business strategy requires us to continuously evolve our existing products and introduce new products to meet customers' needs in the industries we serve. Our products are characterized by stringent performance and specification requirements that mandate a high degree of manufacturing and engineering expertise. If we fail to meet these requirements, our business and ability to compete effectively could suffer. We believe our customers rigorously evaluate their suppliers on a number ofnumerous factors, including product quality, price competitiveness, technical and manufacturing expertise, development and product design capability, new product innovation, reliability and timeliness of delivery, operational flexibility, customer service and overall management. Our ongoing success depends on our ability to continue to meet our customers' changing specifications with respect to these criteria. We cannot ensure that we will be able to address technological advances or introduce new products that may be necessary to remain competitive within our businesses. Further, such new products and technologies may create additional exposure or risk. We cannot ensure that we can adequately protect our own technological developments to produce a sustainable competitive advantage. Furthermore, we may be subject to business continuity risk in the event of an unexpected loss of a material facility or operation. We cannot ensure adequate insurance protection against such a loss.

To operate more efficiently, control costs and refine our business focus, we periodically undertake restructuring plans, which can include facility consolidations, product rationalizations, workforce reductionsreductions, manufacturing and supply chain repositioning and other cost reduction initiatives. We also periodically choose to divest operations or product lines that we no longer believe are additive or complementary to our business or strategic direction. These plans are intended to reduce operating costs, to modify our footprint to reflect changes in the markets we serve, to reflect changes in business focus, to strengthen focus on our core business and/or to address overall manufacturing overcapacity, including as a result of acquisitions. If we do not successfully manage our current restructuring activities, or any other restructuring activities or divestitures that we may undertake in the future, expected efficiencies, benefits and cost savings might be delayed or not realized, and our operations and business could be disrupted.

Acquisitions, mergers and other business combinations are part of our growth strategy, and we have completed several in the last fewrecent years. We also sell or divest businesses, products and technologies from time to time. We cannot ensure that we will be able to complete any future acquisition or divestiture, successfully integrate any acquired business or operations, or accomplish our strategic objectives as a result of any such acquisition or divestiture.

From time to time, we have sold or divested businesses, products and technologies. With respect to some of these former businesses, we may contractually agree to indemnify the counterparties against, or otherwise retain, certain liabilities, including, certain lawsuits, tax liabilities, product liability claims, and environmental matters. Even without ongoing contractual indemnification obligations, we could be exposed to liabilities arising out of the businesses for certain activities prior to the divestitures. In addition, certain of the counterparties to those divestitures and/or the divested businesses have agreed to indemnify us or assume certain liabilities relating to those divestitures. However, there can be no assurance that the indemnity or assumption of liability by the counterparties or divested businesses will be sufficient to protect us against the full amount of these liabilities, or that a counterparty or divested business will be able to fully satisfy its obligations. Third parties also could seek to hold us responsible for any of the liabilities that a counterparty or divested business agreed to assume. Even if we ultimately succeed in recovering any amounts for which we were initially held liable, we may be temporarily required to bear these losses ourselves.losses.

We depend on 1,100approximately 1,000 independent sales representatives within North America, and approximately 65 third-party warehouses to distribute our products. In fiscal 2024,2025, our three largest independent distributors generated approximately 33%32% of our consolidated net sales with the largest accounting for 19%18% of consolidated net sales.

Our manufacturing processes depend on third parties for raw materials, in particular bronze, iron, brass, stainless steel, carbon steel, zinc, and engineered plastics. While we strive to maintain alternative sources for most raw materials, our business is subject to the risk of price fluctuations, including as a result of, or in reaction to, tariffs, import duties, or other trade protection measures instituted by the U.S. or other countries, inefficiencies in the event of a need to change our suppliers, and delays in the delivery of and potential unavailability of our raw materials. In 2025, the U.S. government announced additional tariffs on goods imported from various countries into the U.S., and in response, certain of those countries countered with reciprocal tariffs and other actions. The U.S. government continues to negotiate with countries regarding tariffs and other trade actions. Also, trade wars or outbreaks of infectious diseases, could impact the cost or availability of goods or materials, both imported and domestic, or adversely affect demand for our products. Any such price fluctuations or delays, if material, could harm our profitability or operations. In addition, the loss of a substantial number of suppliers could result in material cost increases or reduce our production capacity. In addition to suppliers, we also rely on third party shippers to assist in transportation of our product throughout the supply chain. Reduced availability of transportation and the associated cost increases could adversely impact our profitability or operations.

In addition, we depend heavily on information technology infrastructure to manage our business objectives and operations, support our customers’ requirements and protect sensitive information. In the regular course of our business, we also handle a range of sensitive security and customer information. We are subject to laws and rules issued by different agencies concerning safeguarding and maintaining the confidentiality of this information. There have been significant and increasing instances of data and security breaches, malicious interference with technology systems and industrial espionage involving companies in numerous industries, including cloud providers, and cybersecurity threats are becoming more complex. Like other companies, we have experienced, and will continue to experience, these types of threats; however, to date, we have not experienced a material threat or incident. In addition, at times a large percentage of our workforce may be working remotely, which may heighten these risks. While we have taken steps to maintain and enhance our cybersecurity by implementing additional security technologies, internal controls, network and data center resiliency, redundancy and disaster recovery processes and backup systems, upgrading our remote work environment and by obtaining insurance coverage, these measures may be inadequate and our technology systems could be vulnerable to disability, failures or unauthorized access. Furthermore, continued geopolitical turmoil, including the Russia-Ukraine conflict,turmoil has heightened the risk of cyberattacks. As discussed further below, the rapid evolution and increased adoption of artificial intelligence and machine learning technologies may intensify our cybersecurity risks. As a result, any inability by us to successfully manage our information systems, or respond effectively to any attack on or interference with our systems, including matters related to system and data security, privacy, reliability, compliance, performance and access, problems related to our systems caused by natural disasters, security breaches or malicious attacks, misuse of artificial intelligence tools, and any inability of these systems to fulfill their intended business purpose, could impede our ability to record or process orders, manufacture and ship in a timely manner, account for and collect receivables, protect sensitive data of the Company, our customers, our employees, our suppliers and other business partners, comply with our third party obligations of confidentiality and care, or otherwise carry on business in the normal course. Any such events could require costly remediation beyond levels covered by insurance and could cause us to lose customers and/or revenue, including as a result of legal or regulatory claims or proceedings, or damage our reputation, any of which could have a material adverse effect on our business and operating results.

The physical impacts of climate change on our operations are highly uncertain and could differ amongst the geographic regions of relevant markets and areas of operation. These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures. The impacts of climate change may materially and adversely affect the cost, production and financial performance of our operations. Further, any impacts to our business and financial condition as a result of climate change are likely to occur over an extended period of time and are therefore difficult to quantify with any degree of specificity. For example, extreme weather events may result in adverse physical effects on portions of our infrastructure, which could disrupt our supply chain and ultimately our business operations. In addition, disruption of transportation and distribution systems could result in reduced operational efficiency and customer service interruption. Climate relatedClimate-related events have the potential to disrupt our business, including the business of our suppliers, and may cause us to experience higher attrition, losses and additional costs to resume operations.

The unpredictable ebbing and flowingnature of new infectious diseases worldwide may continue to adversely impact our business, operations, suppliers and customers for the foreseeable future. Equally unpredictable are the responses of national and local governments and health authorities in affected regions to reduce community spread and protect employees, which may include mandatory shutdowns or limitations on all or certain types of business operations. The ultimate impact of an infectious disease outbreak on our business depends on the severity, location and duration of outbreaks, and the actions of government and health officials in response to the outbreaks, none of which is predictable at this time.

OurMacroeconomic debtconditions levelsand our credit agreement could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, inhibit us from making beneficial acquisitions, adversely impact our ability to implement our capital allocation strategy and prevent us from making debt service payments. In addition, changing or increasing interest rates, including the rates under our debt agreements, could adversely affect our business or financial condition.

Our required cash contributions or plan settlement expense related to our pension plans may increase further and we could experience a material change in the funded status of our defined benefit pension plans and the amount recorded in our consolidated balance sheets related to those plans. Additionally, our pension costs could increase in future years.

In 2025, the Company terminated its U.S. defined benefit pension plan (the "Pension Plan"). The plan termination is subject to regulatory review and requirements, which may result in additional funding. See Item 8, Note 14, Retirement Benefits for additional details. In addition, the Company still maintains other domestic and international (statutory) defined benefit plans. The funded status of the defined benefit pension plans depends on such factors as asset returns, market interest rates, legislative changes and funding regulations. If the returns on the assets of any of our plans were to decline in future periods, if market interest rates were to decline, if the Pension Benefit Guaranty Corporation ("PBGC") were to require additional contributions to any such plans as a result of acquisitions or if other actuarial assumptions were to be modified, our future required cash contributions and pension costs to such plans could increase. Any such increases could have a material andan adverse effect on our business, financial condition, results of operations or cash flows.

Our compliance with these policies, standards and third partythird-party certification requirements could be costly and could in some cases require us to change the way in which we operate. In addition, if we fail to comply, or if our compliance increases our costs and/or restricts our ability to do business as compared to our competitors that do not adhere to such standards, we could experience an adverse effect on our customer relationships, reputation, operations, cost structure and/or profitability.

Numerous governmental bodies have introduced or are contemplating legislative and regulatory changes in response to various climate change interest groups and the impact of climate change. Legislation and increased regulation relating to climate change and the transition to a low carbon economy could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations. Any future climate change relatedchange-related regulations could also negatively impact our ability to compete with companies situated in areas not subject to such requirements. Given the political significance and uncertainty around the impact of climate change and how it should be addressed, we cannot predict how legislation and regulation will affect our financial condition, operating performance and ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace about impacts on climate change by us could harm our reputation. Any of the foregoing could result in a material adverse effect on our business and financial condition.

Moreover,In inOctober recent years,2021, the Organization for Economic Co-operation and Development (“OECD”) andissued member countries have been focused on taxation issues relating to multi-national companies. In October 2021, more than 130 countries agreed to implement Pillar 2, a plan introduced by the OECD providingrules for a new global minimum tax rate(“Pillar 2”), which included the introduction of 15% (calculated on a country-by-country basis) for those companies having consolidated revenue of at least €750 million; with any shortfall of the 15% minimum tax resulting in a related tax assessment ("Top-Up Tax"). The implementation of the Pillar 2 global minimum tax rules(“Top-Up hasTax”) begunthat applies to apply for tax years beginning in 2024. TheTo maindate, purposeapproximately of140 suchcountries ruleshave issigned a framework agreeing to minimize tax base erosion and profit shifting from higher tax jurisdictions to lower tax jurisdictions by multi-national companies. On February 2, 2023, the OECD issued various administrative guidance including transitional safe harbor rules available in conjunction with the implementation of theimplement Pillar 2 global minimum tax.2. Based upon the current OECD rules and administrative guidance, as well as the related legislation of those countries in which haswe beendo enacted to date,business, the Company does not anticipate being subject to material Top-Up Taxes. The Company is continuing to monitor the potential impact of the Pillar 2 proposals and developments on our consolidated financial statements and related disclosures, including eligibility for any transitional safe harbor rules.

We completed the spin-off of our Process & Motion Control platform ("PMC") on October 4, 2021 in the Spin-Off Transaction, and, accordingly, the results of operations and financial condition associated with PMC have been reclassified to discontinued operations for all periods presented. As a result, the following discussion of results of operations and financial condition is centered on the Zurn Elkay Water Solutions business excluding PMC. The consolidated statements of cash flows for the years ended December 31, 2025, 2024, 2023, and 20222023 have not been adjusted to separately disclose cash flows related to the discontinued operations. See Item 8, Note 4,3, Discontinued Operations for additional information on cash flows associated with the discontinued operations.

Impairment of intangible assets and tangible fixed assets. The carrying value of long-lived assets, including amortizable intangible assets and tangible fixed assets, are evaluated for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment of amortizable intangible assets and tangible fixed assets is generally determined by comparing projected undiscounted cash flows to be generated by the asset, or group of assets, to its carrying value. If impairment is identified, a loss is recorded equal to the excess of the asset's net book value over its fair value, and the cost basis is adjusted. Determination of the fair value requires various estimates including internal cash flow estimates generated from the asset, quoted market prices and appraisals as appropriate to determine fair value. Actual results could vary from these estimates. During the years ended December 31, 20242025, 2024, and December 31, 2023, the Company recognized $2.0 million, $7.4 millionmillion, and $2.5 million of fixed asset impairment charges, respectively. The Company recognized no impairment charges during the during the year ended December 31, 2022.

Retirement benefits. We have significant pension and post-retirement benefit income and expense and assets/liabilities that are developed from actuarial valuations. These valuations include key assumptions regarding discount rates, expected return on plan assets, mortality rates, compensation increases, and the current health care cost trend rate. We consider current market conditions in selecting these assumptions. Changes in the related pension and post-retirement benefit income/costs or assets/liabilities may occur in the future due to changes in the assumptions and changes in asset values. As described in Note 14 to the consolidated financial statements, the Company’s Board of Directors approved a resolution to terminate the Company’s U.S. defined benefit pension plan (the “Pension Plan”) with the full freeze of benefit accruals under the Pension Plan effective March 31, 2025 and the termination of the Pension Plan effective April 1, 2025.

Income taxes. We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and recording the related deferred tax assets and liabilities. In October 2021, more than 130 countries agreed to implement Pillar 2, a plan introduced by the Organization for Economic Co-operation and Development (“OECD”) providingissued rules for a new global minimum tax rate(“Pillar 2”) which included the introduction of a 15% (calculated on a country-by-country basis) for those companies having consolidated revenue of at least €750 million. The implementation of the Pillar 2 global minimum tax rules has begun to apply for tax years beginning in 2024. The main purpose of such rules is to minimize tax base erosion and profit shifting from higher tax jurisdictions to lower tax jurisdictions by multi-national companies. On February 1, 2023, the Financial Accounting Standards Board (“FASB”) indicated that they view the minimum tax (“Top-Up Tax”) imposedthat underapplies Pillarto 2tax asyears an alternative minimum tax, and as such, it should be recognizedbeginning in the period incurred versus recognizing or adjusting deferred tax assets and liabilities. On February 2, 2023, the OECD issued various administrative guidance including transitional safe harbor rules available in conjunction with the implementation of the Pillar 2 global minimum tax.2024. Based upon the current OECD rules and administrative guidance, as well as the related legislation of those countries in which haswe beendo enacted to date,business, the Company does not anticipate being subject to material Top-Up Taxes. The Company is continuing to monitor the potential impact of the Pillar 2 proposals and developmentsdevelopment on our consolidated financial statements and related disclosures, including eligibility for any transitional safe harbor rules. On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act (“OBBBA”). OBBBA incorporates changes that extend several provisions of the Tax Cuts and Jobs Act (“TCJA”) of 2017 that were set to expire on December 31, 2025, including immediate expensing of domestic research and development expenses, 100% bonus depreciation, 100% depreciation of qualified production property, and reinstatement of utilizing EBITDA for the interest deduction limitation. These changes are effective for the Company’s fiscal year ending December 31, 2025. The Company is continuing to monitor these business tax provisions for further guidance from the U.S. Treasury and the Internal Revenue Service.

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, net operating losses (“NOL’sNOLs”), tax credit and other carryforwards. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As a result of this review, we established a full valuation allowance against U.S. federal and state capital loss carryforwards, as well as certain foreign NOL carryforwards and related deferred tax assets, and continuescontinue to maintain a partial valuation allowance against certain U.S. state NOL and tax credit carryforwards. As of December 31, 20242025 and 2023,2024, valuation allowances of $9.0$4.8 million and $12.0$9.0 million, respectively, were recorded against our deferred tax assets. See Item 8, Note 16,15, Income Taxes for additional information.

During the year ended December 31, 2021, we completed the spin-off of our PMC platform. The operating results of PMC are reported as discontinued operations in our consolidated statements of operations for all periods presented, as the Spin-Off Transaction represented a strategic shift that had a major impact on our operations and financial results. DuringThe consolidated statements of cash flows for the yearyears ended December 31, 2022,2025, we2024, receivedand $35.02023 millionhave fromnot Regalbeen Rexnordadjusted Corporationto asseparately adisclose resultcash offlows related to the finaldiscontinued working capital and cash balances at closing exceeding the targets stipulated in the Spin-Off Transaction agreement.operations.

_________________ (1)Selling, general and administrative income for the years ended December 31, 20242025, 2024, and 2023 includeincludes the release of certain accruals as a result of costs the Company will no longer incur related to the Spin-Off Transaction.

Net sales were $1,566.5$1,695.9 million for the year ended December 31, 2024,2025, a 2.4%8.3% increase year over year. Core sales growthgrew of 3%,8% year over year, including growth in nearly all product categories, was offset by a 100 basis point impact from the planned exit of certain residential sink products.categories.

Income from operations was $244.6$278.9 million for the year ended December 31, 2024,2025, or 15.6%16.4% of net sales, compared to income from operations of $191.4$244.6 million, or 12.5%15.6% of net sales, for the year ended December 31, 2023.2024. Income from operations as a percentage of net sales increased by 31080 basis points year over year dueas a result of the favorable impact of year-over-year sales growth (inclusive of price realization) and productivity savings being offset primarily by the adjustment to thestate benefitsinventories resultingat fromLast-In, productivityFirst-Out synergies("LIFO") and restructuring actions related to the Elkay Merger, as well as lower material costs and restructuring costs. The prior year also included a $11.4 million loss on divestiture of asbestos liabilities and certain assets. See Item 8, Note 17, Commitments and Contingencies for more information.cost.

Interest expense, net was $28.6 million for the year ended December 31, 2025 compared to $33.1 million for the year ended December 31, 2024 compared to $38.5 million for the year ended December 31, 2023.2024. The decrease in interest expense, net as compared to the prior year period is due to interest earned on higher cash balances and reduced interest expenseprimarily due to thelower priorinterest year voluntary prepayment on the Term Loan of $60.0 million. See Item 8, Note 11, Long-Term Debt for more information.rates.

Actuarial gain on pension and other postretirement benefit obligations for the year ended December 31, 2024,2025, was $1.4$0.5 million compared to a gain of $2.0$1.4 million for the year ended December 31, 2023.2024. The non-cash actuarial gain recognized for the year ended December 31, 2025 was primarily due to demographic and claims gains experienced during 2025 that were reflected in certain other post-retirement benefit plans. The non-cash actuarial gain recognized for the year ended December 31, 2024, was primarily due to a combination of discount rate increases coupled with demographic and claims gains experienced during 2024 that were reflected in the other post-retirement benefit plans. These gains were partially offset by an increase in the medical cost growth assumption from the prior measurement. The non-cash actuarial gain recognized for the year ended December 31, 2023, was primarily due to demographic gains experienced during 2023 that were reflected in other postretirement benefits plans. In addition, the post 65 medical provider options changed resulting in much lower premiums for the plans. Those gains were partially offset by a decrease in the discount rate from the prior measurement. See Item 8, Note 15,14, Retirement Benefits for more information.

Other expense,income (expense), net for the year ended December 31, 2024,2025, was $5.9$5.5 million compared to other expense,income (expense), net of $7.2$(5.9) million for the year ended December 31, 2023.2024. Other expense,income (expense), net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit plans and other non-operational gains and losses. The year-over-year change is primarily driven by incomethe recognizedgain inresulting connectionfrom with an insurancethe settlement in the prior year, partly offset by accruals for estimated environmental remediation costs in the prior year, foreign currency gains and lowertermination of our U.S. defined benefit pension plan costs in the current year.

The income tax provision for the year ended December 31, 2025 was $63.9 million, or an effective tax rate of 24.9%. The effective income tax rate for the year ended December 31, 2025 was above the U.S. federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments and the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations. The income tax provision for the year ended December 31, 2024 was $48.1 million, or an effective tax rate of 23.2%. The effective income tax rate for the year ended December 31, 2024 was above the U.S. federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments and the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations. The income tax provision for the year ended December 31, 2023 was $42.6 million, or an effective tax rate of 29.0%. The effective income tax rate for the year ended December 31, 2023 was above the U.S. federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes, the nondeductible loss on divestiture of asbestos liabilities and certain assets and the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments.

(2)Other (income) expense, net consists primarily of gains and losses from foreign currency transactions, the non-service cost components of net periodic benefit costs associated with our defined benefit plans and other non-operational gains and losses as defined in our credit agreement.

(4)Last-inLast-In, first-outFirst-Out ("LIFO") inventory adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement.

As of December 31, 2025, we had $300.5 million of cash and cash equivalents and $189.9 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2025, the available borrowings under our credit facility were reduced by $10.1 million due to outstanding letters of credit. As of December 31, 2024, we had $198.0 million of cash and cash equivalents and $188.7 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2024, the available borrowings under our credit facility were reduced by $11.3 million due to outstanding letters of credit. As of December 31, 2023, we had $136.7 million of cash and cash equivalents and $189.0 million of additional borrowing capacity. As of December 31, 2023, the available borrowings under our credit facility were reduced by $11.0 million, due to outstanding letters of credit.

The consolidated statements of cash flows for the yearyears ended December 31, 2025, 2024, December 31, 2023, and December 31, 20222023 have not been adjusted to separately disclose cash flows related to the discontinued operations. Refer to Item 8, Note 4,3, Discontinued Operations for further information.

Net cash provided by operating activities in the year ended December 31, 2024,2025, was $293.5$346.5 million compared to $253.9$293.5 million in the year ended December 31, 20232024 due to higher net income,income and lower use of cash for accruals, partially offset by cash used for trade working capital as well as benefits generated from ongoing productivity actions.capital.

Cash used for investing activities was $29.9 million in the year ended December 31, 2025 compared to $20.2 million in the year ended December 31, 20242024. comparedInvesting to $4.6 millionactivities in the year ended December 31, 2023.2025, included $29.9 million of capital expenditures. Investing activities infor the year ended December 31, 2024, included $21.8 million of capital expenditures, which were partially offset by the receipt of $1.6 million from the sale of certain long-lived assets. Investing activities for the year ended December 31, 2023, included $21.3 million of capital expenditures, which were partially offset by the receipt of $9.0 million in connection with an insurance settlement and $7.7 million from the sale of certain long-lived assets.

Cash used for financing activities was $217.3 million in the year ended December 31, 2025 compared to $207.5 million in the year ended December 31, 20242024. comparedFinancing to $239.2 millionactivities in the year ended December 31, 2023.2025 included $63.9 million of cash for the payment of dividends on our common stock, $159.9 million of cash for repurchases of our common stock, $0.8 million of net cash payments on outstanding debt, and $0.6 million of cash used for the payment of withholding taxes on employees' share-based payment awards, which were offset by $7.9 million of net cash proceeds associated with stock option exercises and Employee Stock Purchase Plan ("ESPP") contributions. Financing activities in the year ended December 31, 2024 included $56.6 million of cash for the payment of dividends on our common stock, $150.2 million of cash for repurchases of our common stock, $0.8 million of net cash payments on outstanding debt, and $8.6 million of cash used for the payment of withholding taxes on employees' share-based payment awards, which were partially offset by $8.7 million of net cash proceeds associated with stock option exercises and Employee Stock Purchase Plan ("ESPP") contributions. Financing activities in the year ended December 31, 2023 included $50.4 million of cash for the payment of dividends on our common stock, $125.1 million of cash for repurchases of our common stock, $64.9 million of net cash payments on outstanding debt, and $3.1 million of cash used for the payment of withholding taxes on employees' share-based payment awards, which were partially offset by $4.3 million of net cash proceeds associated with stock option exercises.

Approximately 11%10% of our sales originated outside of the United States in the year ended December 31, 2024.2025. Revenues and expenses denominated in foreign currencies are translated into USD at the end of the fiscal period using the average exchange rates in effect during the period. Fluctuations in currency exchange rates also impact the USD amount of our stockholders' equity. The assets and liabilities of our non-U.S. subsidiaries are translated into USD at the exchange rates in effect at the end of the fiscal periods. As of December 31, 2024,2025, stockholders' equity decreasedincreased by $10.0$4.9 million from December 31, 20232024 as a result of foreign currency translation adjustments. If the USD strengthened by 10% as of December 31, 2024,2025, the result would have decreased stockholders' equity by approximately $11.5$13.1 million.

As disclosed in Part I, Item 1A, "Risk Factors", of our Annual Report on Form 10-K for the year ended December 31, 2025, the Company’s business is subject to risks related to, among other factors, tariffs and other trade protection measures put in place by the United States or other countries. Starting in the first quarter of 2025, the United States government announced additional tariffs on goods imported from various countries into the U.S., and in response, certain of those countries countered with reciprocal tariffs and other actions. While the Company is well positioned to respond to the tariff environment, costs are impacted by trade policies. On February 20, 2026, the U.S. Supreme Court ruled that reciprocal tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were not authorized by the statute. The Company is the importer of record for certain raw materials and products that were previously subject to such reciprocal tariffs under IEEPA. Significant uncertainty remains regarding how and when any amounts may be recovered. We are evaluating the ruling and potential actions available to us. Because the process, timing, and amount of any recovery are uncertain, we have not recorded any potential benefit from a refund at this time.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Refer to Item 7, MD&A, of our Annual Report on Form 10-K for the year ended December 31, 2025 for information with respect to our critical accounting estimates which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management. Except for the items reported below, management believes that as of MarchJune 31,30, 2026, and during the period from January 1, 2026 through MarchJune 31,30, 2026, there has been no material change to this information.

On January 30, 2025, the Company's Board of Directors approved a resolution to terminate the Company's U.S. defined benefit pension plan (the "Pension Plan") with the full freeze of benefit accruals under the Pension Plan effective March 31, 2025 and the termination of the Pension Plan effective April 1, 2025. The Pension Plan freeze resulted in a curtailment gain of $0.7 million in the first quarter of 2025. During the year ended December 31, 2025, the Company entered into an agreement to purchase annuities from a third-party annuity provider and contributed $4.3 million to fund the liquidation of the Pension Plan. As a result, Pension Plan liabilities were settled and the Pension Plan was exited during the third quarter of 2025, resulting in a pre-tax settlement gain of $10.0 million from accumulated other comprehensive loss to other income,income (expense), net in the condensed consolidated statements of operations.

During the year ended December 31, 2021, the Company completed thea Spin-OffReverse TransactionMorris Trust tax-free spin-off transaction (the “Spin-Off Transaction”) of the Company's Process & Motion Control ("PMC") business. The operating results of PMC are reported as discontinued operations in the condensed consolidated statements of operations for all periods presented, as the Spin-Off Transaction of PMC represented a strategic shift that had a major impact on operations and financial results. The condensed consolidated statements of cash flows for the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 have not been adjusted to separately disclose cash flows related to the discontinued operations.

The major components of the income from discontinued operations, net of tax presented in the condensed consolidated statements of operations for the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, are as follows (in millions):

During the three and six months ended MarchJune 31,30, 2026, the Company continued to execute various restructuring actions. These initiatives were implemented to drive efficiencies and reduce operating costs while also modifying the Company's footprint to reflect changes in the markets it serves, the impact of mergers and acquisitions on the Company's overall manufacturing capacity and the refinement of its overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs and other facility rationalization costs. Management expects to continue executing similar initiatives to optimize the Company's operating margin and manufacturing footprint. As such, the Company expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs and other facility rationalization costs. For the three and six months ended MarchJune 31,30, 20262026, restructuring charges totaled $1.8 million and March$2.7 31,million, respectively. For the three and six months ended June 30, 2025, restructuring charges totaled $0.9$1.9 million and $1.7$3.6 million, respectively. Refer to Item 1, Note 2, Restructuring and Other Similar Charges for further information.

Three Months Ended MarchJune 31,30, 2026 compared with the Three Months Ended MarchJune 31,30, 2025:

Net sales were $433.0$491.0 million and $388.8$444.5 million during the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively, an increase of 11%10% year over year. Core sales improved 11%10% year over year, including growth in nearly all product categories.

Income from operations (Dollars in Millions)

During the three months ended MarchJune 31,30, 2026, income from operations was $82.1$152.3 million compared to $63.4$77.6 million during the three months ended MarchJune 31,30, 2025. IncomeDuring the quarter ended June 30, 2026, the Company received a $47.6 million IEEPA reciprocal tariff refund. Excluding this item, income from operations as a percentage of net sales increased by 270$27.1 million, an increase of 380 basis points year over year as a result of the favorable impact of year-over-year sales growth (inclusive of price realization) and Zurn Elkay Business System led productivity initiatives.

Interest expense, net was $6.2$6.1 million for the three months ended MarchJune 31,30, 2026, compared to $7.3$7.7 million for the three months ended MarchJune 31,30, 2025. The decrease in interest expense, net as compared to the prior year period is primarily due to reduced interest expense in the current year as a result of lower interest rates and interest earned on higher cash balances.

Other income,income (expense), net

Other income,income (expense), net for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, was $1.0$3.9 million and $0.0$(2.0) million, respectively. Other income,income (expense), net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit and postretirement plans and other non-operational gains and losses. The year-over-year change is primarily driven by lowera defined$4.4 benefitmillion planpurchase costsprice inadjustment therelated current year asto a result2023 divestiture of refundscertain recognizedlegal in connection with the U.S. pension plan termination, partially offset by the write off of $0.4 million of unamortized deferred financing costs.entities.

The income tax provision was $18.0$37.6 million for the three months ended MarchJune 31,30, 2026, compared to $15.1$17.8 million for the three months ended MarchJune 31,30, 2025. The effective income tax rate for the three months ended MarchJune 31,30, 2026 was 23.4%25.0% versus 26.9%26.2% for the three months ended MarchJune 31,30, 2025. The effective income tax rate for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 was above the U.S. federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and by the recognition of income tax benefits associated with share-based payments.

Net income for the three months ended MarchJune 31,30, 2026, was $58.9$113.3 million compared to net income of $43.6$50.5 million for the three months ended MarchJune 31,30, 2025. Diluted net income per share for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, was $0.35$0.67 and $0.26,$0.29, respectively. The year-over-year change is the result of the factors described above. Net income from discontinued operations, net of tax, was $0.0$0.8 million for the three months ended MarchJune 31,30, 2026 compared to net income from discontinued operations, net of tax, of $2.6$0.4 million for the three months ended MarchJune 31,30, 2025. Diluted net income per share from discontinued operations for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, was $0.00 and $0.02,$0.00, respectively.

The calculation of Adjusted EBITDA under our credit agreement as of MarchJune 31,30, 2026, is presented in the table in the "Covenant Compliance" section below. However, the results of such calculation could differ in the future based on the different types of adjustments that may be included in such respective calculations at the time. For the threesix months ended MarchJune 31,30, 2026, we reported net income of $58.9$172.2 million and Adjusted EBITDA for the same period of $116.0$252.0 million. See "Covenant Compliance" for a reconciliation of Adjusted EBITDA to GAAP net income.

Our credit agreement, which governs our senior secured credit facilities, contains, among other provisions, restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and the maintenance of certain financial ratios. Payment of borrowings under the credit agreement may be accelerated if there is an event of default. Events of default include the failure to pay principal and interest when due, a material breach of a representation or warranty, certain non-payments or defaults under other indebtedness, covenant defaults, events of bankruptcy and a change of control. Certain covenants contained in the credit agreement restrict our ability to take certain actions, such as incurring additional debt or making acquisitions, if we are unable to meet a maximum Total Net Leverage Ratio (consolidated indebtedness to Adjusted EBITDA) of 4.00 to 1.00 as of the end of each fiscal quarter. As of MarchJune 31,30, 2026, our Total Net Leverage Ratio was 0.570.36 to 1.00. Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions.

(2)Other income,(income) expense, net consists primarily of gains and losses from foreign currency transactions, the non-service cost components associated with our defined benefit and postretirement plans and other non-operational gains and losses as defined in our credit agreement.

(67)Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $234.4$326.9 million (as defined by the credit agreement) at MarchJune 31,30, 2026.

On February 19, 2026, the Companywe increased our revolving credit facility commitment from $200.0 million to $550.0 million and further extended the maturity date to February 19, 2031. Refer to Item 1, Note 12, Long-Term Debt for further information. Our primary sources of liquidity are available cash and cash equivalents, cash flow from operations, and borrowing availability of up to $550.0 million under our revolving credit facility.

As of MarchJune 31,30, 2026, we had $273.5$365.0 million of cash and cash equivalents and $540.1$540.3 million of additional borrowing capacity under our revolving credit facility. As of MarchJune 31,30, 2026, the available borrowings under our credit facility were reduced by $9.9$9.7 million due to outstanding letters of credit. As of December 31, 2025, we had $300.5 million of cash and cash equivalents and $189.9 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2025, the available borrowings under our credit facility were reduced by $10.1 million due to outstanding letters of credit.

Net cash provided by operating activities was $46.1$208.4 million and $42.9$153.5 million during the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively. The change in year-over-year operating cash flows was primarily the result of an increase in net incomeincome, and timinginclusive of other$47.6 assetsmillion IEEPA reciprocal tariff refund, partially offset by highercash use of cashused for trade working capital in support of higher sales volume during the threesix months ended MarchJune 31,30, 2026.

Cash used for investing activities was $3.4$6.3 million during the threesix months ended MarchJune 31,30, 2026 and $4.3$13.3 million during the threesix months ended MarchJune 31,30, 2025. Investing activities during the threesix months ended MarchJune 31,30, 2026, consisted of $3.4$6.3 million of capital expenditures. Investing activities during the threesix months ended MarchJune 31,30, 2025, consisted of $4.3$13.3 million of capital expenditures.

Cash used for financing activities was $69.2$136.5 million during the threesix months ended MarchJune 31,30, 2026, compared to $92.1$138.7 million during the threesix months ended MarchJune 31,30, 2025. During the threesix months ended MarchJune 31,30, 2026, we utilized $0.3$0.6 million of cash for payments on finance leases, $50.0$99.6 million to repurchase outstanding shares of our common stock, $18.4$36.8 million for the payment of common stock dividends, and $3.0 million for payment of debt issuance costs, which was partially offset by $2.5$3.5 million of proceeds from the exercise of stock options and ESPP contributions. During the threesix months ended MarchJune 31,30, 2025, we utilized $0.2$0.4 million of cash for payments on finance leases, $77.4$109.9 million to repurchase outstanding shares of our common stock, and $15.2$30.3 million for the payment of common stock dividends, which was partially offset by $0.7$1.9 million of proceeds from the exercise of stock options and ESPP contributions, net of taxes withheld and paid on employees' share-based awards.

As of MarchJune 31,30, 2026, we had $499.0$499.1 million of total indebtedness outstanding as follows (in millions):

(1)Includes unamortized original issue discount and debt issuance costs of $3.6$3.3 million at MarchJune 31,30, 2026.