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Mueller Water Products, Inc.

Mueller Water Products, Inc.MWAEarnings & Financial Report

NYSE · Materials · Miscellaneous Fabricated Metal Products

Mueller Water Products, Inc. (MWP) is a publicly traded company headquartered in Atlanta, Georgia. It is one of the largest manufacturers and distributors of fire hydrants, gate valves, and other water infrastructure products in North America. MWP is made up of two business units—Mueller Co. and Mueller Technologies—that oversee more than a dozen brands and affiliates, including Echologics and Mueller Systems.

What changed in Mueller Water Products, Inc.'s 10-K — 2022 vs 2023

Top changes in Mueller Water Products, Inc.'s 2023 10-K

304 paragraphs added · 294 removed · 230 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

72 edited+11 added−9 removed44 unchanged
We seek to bring best practices focused on Lean manufacturing and Six Sigma business process improvement methodologi es, with an investment mindset to deliver manufacturing productivity improvements. We expect these efforts will facilitate innovation and new product development, drive sales growth and improve product margins.
We seek to bring best practices focused on Lean manufacturing and Six Sigma business process improvement methodologi es, with an investment mindset to deliver manufacturing productivity improvements. We expect these efforts will drive sales growth, improve product margins, and facilitate innovation and new product development.
In dry-barrel hydrants, the valve connecting the barrel of the hydrant to the water main is located below ground at or below the frost line, which keeps the upper barrel dry. Water Management Solutions sells dry-barrel fire hydrants under the Mueller and U.S.
In dry-barrel fire hydrants, the valve connecting the barrel of the hydrant to the water main is located below ground at or below the frost line, which keeps the upper barrel dry. Water Management Solutions sells dry-barrel fire hydrants under the Mueller and U.S.
RISK FACTORS-Seasonal demand for certain of our products and services may adversely affect our financial results.” Sales, Marketing and Distribution We sell primarily to national and regional waterworks distributors in the U.S. and Canada. Our distributor relationships are generally non-exclusive, but we attempt to align ourselves with key distributors in the principal markets we serve.
RISK FACTORS-Seasonal demand for certain of our products and services may adversely affect our financial results.” Sales, Marketing and Distribution We primarily sell to national and regional waterworks distributors in the U.S. and Canada. Our distributor relationships are generally non-exclusive, but we attempt to align ourselves with key distributors in the principal markets we serve.
The lost foam technique has several advantages over the green sand technique for high-volume products, including a reduction in the number of manual finishing operations, lower scrap levels and the ability to reuse some of the materials. Additionally, we design, manufacture, and assemble water metering products in Cleveland, North Carolina.
The lost foam technique has several advantages over the green sand technique, especially for high-volume products, including a reduction in the number of manual finishing operations, lower scrap levels and the ability to reuse some of the materials. Additionally, we design, manufacture, and assemble water metering products in Cleveland, North Carolina.
Pipe Valve and Hydrant brand names in the United States and Mueller and the Canada Valve™ brand names in Canada. Water Management Solutions also makes wet-barrel hydrants, where the valves are located in the hydrant nozzles and the barrel contains water at all times.
Pipe Valve and Hydrant brand names in the United States and Mueller and the Canada Valve™ brand names in Canada. Water Management Solutions also makes wet-barrel fire hydrants, where the valves are located in the hydrant nozzles and the barrel contains water at all times.
Water Management Solutions sells hydrants, repair and installation, natural gas, metering, leak detection and pressure control products and solutions. Our products are designed, manufactured and tested in compliance with relevant industry standards.
Water Management Solutions sells fire hydrants, repair and installation, natural gas, metering, leak detection and pressure management and control products and solutions. Our products are designed, manufactured and tested in compliance with relevant industry standards.
For more information regarding this matter as well as others that may affect our business, including our capital expenditures, earnings and competitive position, see “Item 1A. RISK FACTORS,” “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 17. of the Notes to Consolidated Financial Statements.
For more information regarding this matter as well as others that may affect our business, including our capital expenditures, earnings and competitive position, see “Item 1A. RISK FACTORS,” “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.
However, we consider the pool of proprietary information, consisting of expertise and trade secrets relating to the design, manufacture and operation of our products to be particularly important and valuable. We generally own the rights to the products that we manufacture and sell, and we are not dependent in any material way upon any license or franchise to operate.
However, we consider the pool of proprietary information, consisting of expertise and trade secrets relating to the design, manufacture and operation of our products to be particularly important and valuable. We generally own the rights to the products that we manufacture and sell, and we are not dependent in any material way upon any third-party license or franchise to operate.
RISK FACTORS-Strong competition could adversely affect prices and demand for our products and services, which would adversely affect our operating results.” There are only a few competitors for most of our product and service offerings. Many of our competitors are well-established companies with products that have strong brand recognition.
RISK FACTORS-Strong competition could adversely affect prices and demand for our products and services, which would adversely affect our operating results and financial condition.” There are only a few competitors for most of our product and service offerings. Many of our competitors are well-established companies with products that have strong brand recognition.
Location Expiration of current agreement(s) Chattanooga, TN January 2023 Chattanooga, TN October 2025 Decatur, IL June 2027 Albertville, AL October 2027 Securities Exchange Act Reports We file annual and quarterly reports, proxy statements and other information with the United States Securities and Exchange Commission (“SEC”) as required.
Location Expiration of current agreement(s) Chattanooga, TN November 2025 Chattanooga, TN January 2027 Decatur, IL June 2027 Albertville, AL October 2027 Securities Exchange Act Reports We file annual and quarterly reports, proxy statements and other information with the United States Securities and Exchange Commission (“SEC”) as required.
Net sales and operating income have historically been lowest in the quarters ending December 31 and March 31 when the northern United States and all of Canada generally face weather conditions that restrict significant construction and other field crew activity. See “Item 1A.
Net sales and operating income have historically been lowest in the quarters ending December 31 and March 31 when the northern United States and most of Canada generally face weather conditions that restrict significant construction and other field crew activity. See “Item 1A.
Water Management Solutions manufactures and sources a variety of water technology products under the Mueller ® brand name that are designed to help water providers accurately measure and control water usage. Water Management Solutions offers a complete lin e of residential, fire line and commercial metering solutions.
Water Management Solutions manufactures and sources a variety of water technology products under the Mueller ® brand name that are designed to help water providers accurately measure and control water usage. Water Management Solutions offers a complete lin e of residential, fire protection and commercial metering solutions.
Our operations are subject to federal, state and local laws, regulations and ordinances relating to various environmental, health and safety matters. We believe our operations are in compliance with, or we are taking actions designed to ensure compliance with, these laws, regulations and ordinances.
Our operations are subject to federal, state and local laws, regulations and ordinances relating to various environmental, health and safety matters. We believe our operations are in compliance with, or we are taking actions designed to reinforce compliance with, these laws, regulations and ordinances.
“ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ” and in Note 16. of the Notes to Consolidated Financial Statements in Part II, Item 8. “ FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ” of this Annual Report.
“ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ” and in Note 14. of the Notes to Consolidated Financial Statements in Part II, Item 8. “ FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ” of this Annual Report.
Item 1. BUSINESS Our Company Mueller Water Products, Inc. (“Mueller,” “we” or the “Company”) is a a leading manufacturer and marketer of products and services used in the transmission, distribution and measurement of water in North America. Our products and services are used by municipalities and the residential and non-residential construction industries.
Item 1. BUSINESS Our Company Mueller Water Products, Inc. (“Mueller,” “we,” “our,” or the “Company”) is a leading manufacturer and marketer of products and services used in the transmission, distribution and measurement of water in North America. Our products and services are used by municipalities and the residential and non-residential construction industries.
Water Management Solutions develops technologies and offers products and services under the Echologics ® brand name that can non-invasively (i.e., without disrupting service or introducing a foreign object into the water system) detect underground leaks and assess the condition of water mains comprised of a variety of materials.
Water Leak Detection and Pipe Condition Assessment Products and Services . Water Management Solutions develops technologies and offers products and services under the Echologics ® brand name that can non-invasively (i.e., without disrupting service or introducing a foreign object into the water system) detect underground leaks and assess the condition of water mains comprised of a variety of materials.
Pipe Valve and Hydrant, LLC Seasonality Parts of our business depends upon construction activity, which is seasonal in many areas as a result of the impact of cold weather conditions on construction.
Pipe Valve and Hydrant Seasonality Parts of our business depend upon construction activity, which is seasonal in many areas as a result of the impact of cold weather conditions on construction.
Our iron gate valve or fire hydrant products are specified for use in the largest 100 metropolitan areas in the United States. Our large installed base, broad product range and well-known brands have led to long-standing relationships with the key distributors and end users of our products. Our consolidated net sales were $1,247.4 million in 2022.
Our iron gate valve or fire hydrant products are specified for use in the largest 100 metropolitan areas in the United States. Our large installed base, broad product range and well-known brands have led to long-standing relationships with the key distributors and end users of our products. Our consolidated net sales were $1,275.7 million in 2023.
RISK FACTORS-Any 4 Table of Contents Index to Financial Statements inability to protect our intellectual property or our failure to effectively defend against intellectual property infringement claims could adversely affect our competitive position.” Our brand names include: Canada Valve ™ Echologics ® Centurion ® Echoshore ® Ez-Max ® ePulse ® Hydro Gate ® Hersey ™ Hydro-Guard ® i2O Water Ltd HYMAX® LeakFinderRT ® HYMAX VERSA ® LeakFinderST ™ Jones ® LeakListener ® Krausz ® LeakTuner ® Milliken ™ Mi.Echo® Mueller ® Mi.Data® Pratt ® Mi.Hydrant ™ Pratt Industrial ® Mi.Net ® Repamax ® Mueller Systems ® Repaflex ® Sentryx ™ Singer ™ U.S.
RISK FACTORS-Any inability to protect our intellectual property or our failure to effectively defend against intellectual property infringement claims could adversely affect our competitive position.” 4 Table of Contents Index to Financial Statements Our brand names include: Canada Valve ™ Centurion ® Echologics ® Echoshore ® ePulse ® Ez-Max ® Hersey ®™ Hydro Gate ® Hydro-Guard ® HYMAX ® HYMAX VERSA ® Jones ® Krausz ® LeakFinderRT ® LeakFinderST ™ LeakListener ® LeakTuner ® Milliken ™® Mueller ® Mueller Systems ® Pratt ® Pratt Industrial ® Repaflex ® Repamax ® Sentryx ™ Singer ™® U.S.
The primary focus of these operations is to develop new products, improve and refine existing products and obtain and assure compliance with industry approval certifications or standards, such as AWWA, UL, FM, NSF and The Public Health and Safety Company. R&D expenses were $24.5 million, $17.1 million and $15.0 million during 2022, 2021 and 2020, respectively.
The primary focus of these operations is to develop new products, improve and refine existing products and obtain and assure compliance with industry approval certifications or standards, such as AWWA, UL, FM, NSF and The Public Health and Safety Company. R&D expenses were $25.9 million, $24.5 million and $17.1 million during 2023, 2022 and 2021, respectively.
We believe the large installed base of Mueller fire hydrants throughout the United States and Canada, reputation for superior quality and performance as well as specification positions have contributed to the leading market position of its fire hydrants. This large installed base also leads to recurring sales of replacement hydrants and hydrant parts. Repair Products and Services.
We believe the large installed base of Mueller fire hydrants throughout the United States and Canada, reputation for superior quality and performance as well as specified position have contributed to the leading market position of our fire hydrants. This large installed base also leads to recurring sales of replacement fire hydrants and hydrant parts. Repair Products and Services.
Sales of the products are heavily influenced by the specifications for the underlying projects. Approximately 8% of Water Flow Solutions’ net sales were to Canadian customers in our fiscal year 2022, and approximately 7% in fiscal years 2021 and 2020.
Sales of the products are heavily influenced by the specifications for the underlying projects. Approximately 6% of Water Flow Solutions’ net sales were to Canadian customers in our fiscal year 2023, 8% in fiscal year 2022 and 7% in fiscal year 2021.
Our water distribution products are manufactured to meet or exceed American Water Works Association (“AWWA”) Standards and, where applicable, certified to National Science Foundation (“NSF”)/American National Standards Institute (“ANSI”) Standard 2 Table of Contents Index to Financial Statements 61 for potable water conveyance. Underwriters Laboratory (“UL”) and FM Approvals (“FM”) have approved many of these products.
Our water distribution products are manufactured to meet or exceed American Water Works Association (“AWWA”) standards and, where applicable, certified to National Science Foundation (“NSF”)/American National Standards Institute (“ANSI”) Standard 61 for potable water conveyance. Underwriters Laboratory (“UL”) and FM Approvals (“FM”) have approved many of these products.
We provide access to benefits and offer programs that support work-life balance and overall well-being, including financial, physical and mental health resources, such as those listed below.
We are dedicated to our employees’ health and well-being. We provide access to benefits and offer programs that support work-life balance and overall well-being, including financial, physical and mental health resources, such as those listed below.
Financial Health and Wellness Work-Life Balance Competitive Base Pay Medical, Dental and Vision Benefits (including telemedicine) Paid time off, paid holidays and jury duty pay Employee Incentive Plan (Annual Bonus) Flexible Spending Accounts and Health Savings Accounts Paid Parental Leave (maternity, paternity, adoption) Supplemental Pay (Overtime) Supplemental Health Benefits Elder Care and Childcare Assistance Employee Stock Purchase Plan Wellness Rewards Program Employee Assistance Program (mental health, legal, financial services) Recognition Pay and Service Awards Health Plan Incentives Associate Discount Programs and Services 401(k) Retirement Savings Plan with Company Match (Traditional and Roth) On-site and complimentary Vaccinations Flexible Work Arrangements Life Insurance (employee and dependents) Short-term and Long-term Disability Insurance Commitment to Diversity and Inclusion.
Financial Health and Wellness Work-Life Balance Competitive Base Pay Medical, Dental and Vision Benefits (including telemedicine) Paid time off, paid holidays and jury duty pay Employee Incentive Plan (Annual Bonus) Flexible Spending Accounts and Health Savings Accounts Paid Parental Leave (maternity, paternity, adoption) Supplemental Pay (Overtime) Supplemental Health Benefits Healthcare navigation/concierge program Employee Stock Purchase Plan Wellness Rewards Program Employee Assistance Program (mental health, legal, financial services) Recognition Pay and Service Awards Health Plan Incentives Associate Discount Programs and Services 401(k) Retirement Savings Plan with Company Match (Traditional and Roth) On-site and complimentary Vaccinations Flexible Work Arrangements Life Insurance (employee and dependents) Dependent Care Accounts Tuition Reimbursement Short-term and Long-term Disability Insurance Voluntary Benefits Offering No Deductible Medical Mental Health Benefits Commitment to Diversity and Inclusion.
Although we have long-standing relationships with most of our key distributors, we typically do not have long-term contracts with them, including our two largest distributors, which together accounted for approximately 40%, 39% and 34% of our gross sales in 2022, 2021 and 2020 fiscal years, respectively. See “Item 1A.
Although we have long-standing relationships with most of our key distributors, we typically do not have long-term contracts with them, including our two largest distributors, which together accounted for approximat ely 35%, 40% and 39% of our gross sales in 2023, 2022 and 2021 fiscal years, respectively . See “Item 1A.
Although Water Management Solutions’ market position is relatively small, we believe our electronically read meters and associated technology are well positioned to gain a greater share of these markets. Our principal competitors are Sensus, Neptune Technology Group Inc., Badger Meter, Inc., Itron, Inc., and Master Meter, Inc.
Although Water Management Solutions’ market position is relatively small, we believe our 6 Table of Contents Index to Financial Statements electronically read meters and associated technology are positioned to gain a greater share of these markets. Our principal competitors are Sensus, Neptune Technology Group Inc., Badger Meter, Inc., Itron, Inc., and Master Meter, Inc.
Water Management Solutions Water Management Solutions’ product and service portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, pressure control and software products. We recognized $533.3 million, $493.2 million and $431.9 million of net sales in our 2022, 2021, and 2020 fiscal years respectively, for Water Management Solutions products. Fire Hydrants.
Water Management Solutions Water Management Solutions’ portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection and pressure management and control products and solutions. We recognized $641.3 million, $533.3 million and $493.2 million of net sales in our 2023, 2022, and 2021 fiscal years respectively, for Water Management Solutions products and solutions. Fire Hydrants.
We have successfully negotiated and extended several of our collective bargaining agreeme nts in the past. Our locations with employees covered by such agreements are presented below.
We believe we have good relations with our employees, including those represented by collective bargaining agreements. We have successfully negotiated and extended several of our collective bargaining agreeme nts in the past. Our locations with employees covered by such agreements are presented below.
With our Singer valve and i2O products, we provide a range of intelligent water solutions including pressure control valves, advanced pressure management, network analytics, event management and date logging. Manufacturing See “Item 2. PROPERTIES” for a description of our principal manufacturing facilities.
We also provide gas valve products primarily for use in gas distribution systems. With our Singer Valve and i2O products, we provide a range of intelligent water solutions including pressure control valves, advanced pressure management, network analytics, event management and data logging. Manufacturing See “Item 2. PROPERTIES” for a description of our principal manufacturing facilities.
Our anticipated capital expenditures for environmental projects are not expected to have a material effect on our financial condition, results of operations or liquidity. 8 Table of Contents Index to Financial Statements Human Capital We believe our employees are our greatest asset and we strive to provide a safe, inclusive, high-performance culture where our people can thrive.
Our anticipated capital expenditures for environmental projects are not expected to have a material effect on our financial condition, results of operations or liquidity. Human Capital We believe our employees are our greatest asset and we strive to provide a safe, inclusive, high-performance culture where our people can thrive. We strive to recruit, develop, engage, train and protect our workforce.
Backlog for Water Management Solutions and Water Flow Solutions are as follows: September 30, 2022 2021 (in millions) Water Flow Solutions $ 419.1 $ 287.9 Water Management Solutions 309.8 152.3 Total backlog $ 728.9 $ 440.2 Sales cycles for metering systems can span several years, and it is common for customers to place orders throughout the contract period.
Backlog for Water Management Solutions and Water Flow Solutions are as follows: September 30, 2023 2022 (in millions) Water Flow Solutions $ 232.0 $ 419.1 Water Management Solutions 93.5 309.8 Total backlog $ 325.5 $ 728.9 Sales cycles for metering systems can span several years, and it is common for customers to place orders throughout the contract period.
Additionally, we have under construction a new brass foundry in Decatur, Illinois, that will replace our existing brass foundry located nearby in Decatur. Our foundries use both lost foam and green sand casting techniques. We use the lost foam technique for fire hydrant production in our Albertville, Alabama, facility and for iron gate valve production in our Chattanooga, Tennessee, facility.
Additionally, our new brass foundry in Decatur, Illinois, is nearly complete and will replace our existing brass foundry there. Our foundries use both lost foam and green sand casting techniques. We use the lost foam technique for fire hydrant production in our Albertville, Alabama facility and for iron gate valve production in our Chattanooga, Tennessee facility.
In Atlanta, Georgia, we design and support AMR and AMI systems in our research and development center of excellence for software and electronics. Our research and development center in Toronto, Ontario, Canada, designs and supports leak detection and condition assessment. Product design and support for our intelligent water solutions products and services for pressure management are in Southampton, United Kingdom.
In Atlanta, Georgia, we design and support AMR and AMI systems in our research and development center of excellence for software and electronics. Our research and development center in Toronto, Ontario, Canada, designs and supports leak detection and pipe condition assessment products and solutions.
Key elements of this strategy are as follows: Accelerate development of new products. We plan to continue to invest in our product development capabilities, including expanding our research and development staff, to develop and market new products and services. We expect to add new products to our portfolio and offer new products into different end markets.
We plan to continue to invest in our product development capabilities, including expanding our research and development staff, to develop and market new products and services. We expect to add new products to our portfolio and offer new products in different end markets.
Except for certain orders issued by environmental, health and safety regulatory agencies, with which we believe we are in compliance and which we believe are immaterial to our financial condition, results of operations and liquidity, we are not currently named as a party in any judicial or administrative proceeding relating to environmental, health and safety matters. 7 Table of Contents Index to Financial Statements Greenhouse gas ("GHG") emissions have increasingly become the subject of political and regulatory focus.
Except for certain orders issued by environmental, health and safety regulatory agencies, with which we believe we are in compliance and which we believe are immaterial to our financial condition, results of operations and liquidity, we are not currently named as a party in any judicial or administrative proceeding relating to environmental, health and safety matters.
We recognized $714.1 million, $617.8 million and $532.2 million of net sales in our 2022, 2021 and 2020 fiscal years, respectively, for Water Flow Solutions products. Water Valves and Related Products.
We recognized $634.4 million, $714.1 million and $617.8 million of net sales in our 2023, 2022 and 2021 fiscal years, respectively, for Water Flow Solutions products and solutions. 2 Table of Contents Index to Financial Statements Water Valves and Related Products.
As of November 18, 2022, women represented 27% and minorities represented 36% of our Board of Directors. We condemn human rights abuses and do not condone the use of slave or forced labor, human trafficking, child labor, the degrading treatment of individuals, physical punishment, or unsafe working conditions.
As of September 30, 2023, women represented 36% and minorities also represented 36% of our Board of Directors. 8 Table of Contents Index to Financial Statements We condemn human rights abuses and do not condone the use of slave or forced labor, human trafficking, child labor, the degrading treatment of individuals, physical punishment, or unsafe working conditions.
We leverage our proprietary acoustic technology to offer leak detection and condition assessment surveys. We also offer fixed leak detection systems that allow customers to continuously monitor and detect leaks on water distribution and transmission mains. We believe Water Management Solutions’ ability to offer non-invasive leak detection and pipe condition assessment services is a key competitive advantage.
We leverage our proprietary acoustic technology to offer leak detection and condition assessment surveys. We also offer fixed leak detection systems that allow customers to continuously monitor and detect leaks on water distribution and transmission mains.
The delivery lead time for certain product lines can be longer than one year, and we expect approximately 7% of Water Flow Solutions’ backlog at the end of 2022 will not be shipped until beyond 2023. Water Management Solutions manufactures or sources water meter systems that are sometimes ordered in large quantities with delivery dates over several years.
Water Management Solutions manufactures or sources water meter systems that are sometimes ordered in large quantities with delivery dates over several years. We expect approximately 2% of Water Management Solutions’ backlog at the end of 2023 will not be shipped until beyond 2024.
Patents, Licenses and Trademarks We have active patents relating to the design of our products and trademarks for our brands and products. We have filed and continue to file when appropriate, patent applications used in connection with our business and products.
Purchased parts and raw materials represented approximatel y 45% and 11%, respectively, of Cost of sales in 2023. Patents, Licenses and Trademarks We have active patents relating to the design of our products and trademarks for our brands and products. We have filed and continue to file when appropriate, patent applications used in connection with our business and products.
As our customers seek to use real-time data and analytics to manage and repair their aging infrastructures more efficiently, we believe we are uniquely positioned to provide solutions given our expertise and the large installed base of our products.
As our customers seek to use real-time data and analytics to manage and repair their aging pipe networks more efficiently, we believe we are well-positioned to provide solutions given our expertise and the large installed base of our products. Execute sales initiatives and channel strategies to enhance customer service and increase growth.
In order to meet longer-term capacity requirements and modernize some production facilities, however, we have expanded the large valve casting capabilities at the foundry located in Chattanooga, Tennessee, and are currently building out our new manufacturing facility in nearby Kimball, Tennessee to expa nd certain activities and assemble some of our large valves.
In order to meet longer-term capacity requirements and modernize some production facilities, we have expanded the large valve casting capabilities at the facility located in Chattanooga, Tennessee, and added a new facility nearby in Kimball, Tennessee to expa nd domestic manufacturing capabilities for specialty large valves.
Living wage is defined as the minimum necessary income for a worker to meet the worker’s basic needs, which can fluctuate based on physical location and other local factors. We base our calculations on a single worker with no children. We are dedicated to our employees’ health and well-being.
Employee Total Compensation and Benefits Philosophy. We pay at or above a living wage at each of our locations. Living wage is defined as the minimum necessary income for a worker to meet the worker’s basic needs, which can fluctuate based on physical location and other local factors. We base our calculations on a single worker with no children.
Copies of our filings, specified exhibits and corporate governance materials are also available free of charge by writing us using the address on the cover of this Annual Report. We are not including the information on our website as a part of, or incorporating it by reference into, this Annual Report.
Copies of our filings, specified exhibits and corporate governance materials are also available free of charge by writing us using the address on the cover of this Annual Report.
Wet-barrel hydrants are made for warm weather climates, such as in California and Hawaii, and are sold under the Jones ® brand name. Most municipalities have approved a limited number of fire hydrant brands for installation as a result of their desire to use the same tools and operating instructions across their systems and to minimize inventories of spare parts.
Most municipalities have approved a limited number of fire hydrant brands for installation as a result of their desire to use the same tools and operating instructions across their systems and to minimize inventories of spare parts.
Our primary competitors in the repair market are: Romac Industries, Smith Blair, Viking Johnson, AVK Group, JCM Industries, and Georg Fisher Ltd. 6 Table of Contents Index to Financial Statements Within Water Management Solutions, we also sell water metering products and systems, primarily in the United States.
Our repair solutions work well with all of these. Our primary competitors in the repair market are Romac Industries, Smith Blair, Viking Johnson, AVK Group, JCM Industries, and Georg Fisher Ltd. Water Management Solutions sells water metering products and systems, primarily in the United States.
These systems provide the utilities with more frequent and diverse data at specified intervals from the utilities’ meters and allow for two-way communication. Water Management Solutions sells both AMR and AMI systems and related products.
These systems provide the utilities with more frequent and diverse data at specified intervals from the utilities’ meters and allow for two-way communication. Water Management Solutions sells both AMR and AMI systems and related products. Our remote disconnect water meter enables the water flow to be stopped and started remotely via handheld devices or from a central operating facility.
Our principal executive office is located at 1200 Abernathy Road N.E., Suite 1200, Atlanta, Georgia 30328, and our main telephone number at that address is (770) 206-4200. 10 Table of Contents Index to Financial Statements
We are not including the information on our website as a part of, or incorporating it by reference into, this Annual Report. 9 Table of Contents Index to Financial Statements Our principal executive office is located at 1200 Abernathy Road N.E., Suite 1200, Atlanta, Georgia 30328, and our main telephone number at that address is (770) 206-4200. 10 Table of Contents Index to Financial Statements
At September 30, 2022, 64% of our hourly workforce was represented by collective bargaining agreements. Additionally, certain foreign countries where we have employees, such as China, provide by law for employee rights which include requirements similar to collective bargaining agreements. We believe we have good relations with our employees, including those represented by collective bargaining agreements.
At September 30, 2023, we employed approximately 3,200 people, of whom 81% work in the United States. At September 30, 2023, approximately 58% of our United States hourly workforce was represented by collective bargaining agreements. Additionally, certain foreign countries where we have employees, such as China, provide by law for employee rights which include requirements similar to collective bargaining agreements.
Water Management Solutions The Water Management Solutions product and service portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, pressure control and software products.
Net sales of products in the Water Flow Solutions business unit were approximately 50% of fiscal 2023 consolidated net sales. Water Management Solutions The Water Management Solutions product and service portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, and pressure management and control products and solutions.
Concern over potential climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting GHG emissions. In addition to certain federal proposals in the United States to regulate GHG emissions, many states and countries are considering and are enacting GHG legislation, regulations or international accords, either individually and/or as part of regional initiatives.
In addition to certain federal proposals in the United States to regulate GHG emissions, many states and countries are considering and are enacting GHG legislation, regulations or international accords, either individually and/or as part of 7 Table of Contents Index to Financial Statements regional initiatives.
The markets for products and services sold by Water Management Solutions are very competitive, with some mature products, and many end users are slow to transition to brands other than their historically preferred brands. We believe that our hydrants enjoy a strong competitive position based primarily on the extent of their installed base, product quality, specified position and brand recognition.
The markets for products and services sold by Water Management Solutions are very competitive, with some mature products, and many end users are slow to transition to brands other than their historically preferred brands.
We strive to recruit, develop, engage, train and protect our workforce. The following are key human capital measures and objectives on which the Company currently focuses. Core Values. Our core values of respect, integrity, trust, safety and inclusion shape our culture and define who we are.
The following are key human capital measures and objectives on which the Company currently focuses. Core Values. Our core values of respect, integrity, trust, safety and inclusion shape our culture and define who we are. We are committed to upholding fundamental human rights and believe that all human beings should be treated with dignity, fairness, and respect.
All employees are required to understand and obey local laws, to report any suspected violations, and to act in accordance with our Core Values and Code of Conduct. Recently, we completed a pay equity study for all employees and job grades based on gender and race, and believe we addressed identified anomalies with appropriate pay adjustments.
All employees are required to understand and obey local laws, to report any suspected violations, and to act in accordance with our Core Values and Code of Conduct. We concluded a comprehensive pay equity analysis in 2021 encompassing all staff members and job levels in addition to considering gender and race.
This data includes leak detection, pressure monitoring, advanced metering and water quality, which are aggregated and consolidated within the Sentryx ™ platform, providing utilities with critical information regarding their distribution systems. Drive operational excellence.
We continue to enhance our software platform, Sentryx ™ , which provides data intelligence to help water utilities make strategic and operational decisions. This data includes leak detection, pressure monitoring, advanced metering and water quality metrics, which are aggregated and consolidated within the Sentryx ™ platform, providing utilities with critical information to monitor and control their water networks.
Programs to strengthen our talent include an employee referral program, tuition reimbursement, continued training and development and succession planning. We also have partnerships with local and national educational institutions for our recruiting efforts. We prioritize employee engagement and transparency by implementing programs and processes to ensure our employees have opportunities to ask questions, voice concerns, and share feedback.
We strive to attract, develop and retain high-performing talent, and we support and reward employee performance. Programs to strengthen our talent include an employee referral program, tuition reimbursement, continued training and development and succession planning. We also have partnerships with local and national educational institutions for our recruiting efforts.
Net sales of products and services in the Water Management Solutions business unit were approximately 43% of fiscal 2022 consolidated net sales. 1 Table of Contents Index to Financial Statements Business Strategy Our business strategy is to capitalize on the large, attractive and growing water infrastructure markets worldwide.
Net sales of products and services in the Water Management Solutions business unit were approximately 50% of fiscal 2023 consolidated net sales. Business Strategy Our business strategy is to capitalize on the large, attractive and growing water infrastructure markets worldwide. Key elements of this strategy are as follows: Drive operational improvements and deliver benefits from capital investments.
The framework is now comprised of a series of councils including an executive council, a company-wide employee council and local employee councils at each plant as well as a corporate and sales team council. Talent Acquisition and Retention. We strive to attract, develop and retain high-performing talent, and we support and reward employee performance.
In our fiscal year 2022, we expanded our Diversity and Inclusion (“D&I”) Council framework to include a series of councils including an executive council, a company-wide employee council and local employee councils at each plant as well as a corporate and sales team council. Talent Acquisition and Retention.
Our principal competitors for hydrants are McWane, Inc. and American Cast Iron Pipe Company. We believe the markets for many of our repair products are open to product innovation. For our pipe repair products, we believe our brand names, including Krausz ® , are generally associated with premium products as a result of our patented technology and superior features.
We believe that our fire hydrants enjoy a strong competitive position primarily based on the extent of their installed base, product quality, specified position and brand recognition. Our principal competitors for fire hydrants are McWane, Inc. and American Cast Iron Pipe Company. We believe the markets for many of our repair products are open to product innovation.
Effective October 1, 2021, we implemented a new management structure designed to increase revenue growth, drive operational excellence, accelerate new product development and enhance profitability. We believe the reorganization has and will continue to strengthen the alignment of products, solutions and services with customer needs, accelerate new product introductions and improve product life cycle management.
Organization Updates Effective October 1, 2021, we implemented a new management structure designed to increase revenue growth, drive operational excellence, accelerate new product development and enhance profitability. Our two operating segments, Water Flow Solutions and Water Management Solutions, align with this management structure.
Additionally, Water Management Solutions produces machines and tools for tapping, drilling, extracting, installing and stopping-off, which are designed to work with its water and gas fittings and valves as an integrated system. We also provide gas valve products primarily for use in gas distribution systems.
We believe Water Management Solutions’ ability to offer non-invasive leak detection and pipe condition assessment services is a key competitive advantage. 3 Table of Contents Index to Financial Statements Additionally, Water Management Solutions produces machines and tools for tapping, drilling, extracting, installing and stopping-off, which are designed to work with its water and gas fittings and valves as an integrated system.
We expect approximatel y 1% of W ater Management Solutions’ backlog will not be shipped until beyond 2023. Due to demand levels in our end markets, we have experienced record levels of short-cycle backlog, primarily for our iron gate, service brass and hydrant products.
Due to higher demand levels in 2022, we experienced record levels of short-cycle backlog, primarily for our iron gate valves, service brass products and fire hydrants.
Our current marketing strategy is primarily focused on repair, joining and restraining of water infrastructure piping systems. The majority of this infrastructure consists of cast iron, ductile iron and plastic pipe. Our repair solutions work well with all of these.
For our pipe repair products, we believe our brand names, including Krausz ® and HYMAX ® , are generally associated with premium products as a result of our patented technology and superior features. Our current marketing strategy is primarily focused on repair, joining and restraining of water infrastructure piping systems, which consists of cast iron, ductile iron and plastic pipe.
Productivity improvements at our facilities should allow us to lower costs, which can fund additional manufacturing initiatives and continued investment in product development. Modernize manufacturing facilities. We are prioritizing capital investments throug h 2023 to modernize our manufacturing facilities and processes. We believe this modernization will improve product quality, drive non-pric e margin expansion and expand our product portfolio.
Productivity improvements within our facilities should allow us to lower costs, which can help fund additional manufacturing initiatives and continued investment in product development. Over the past five years, we have prioritized capital investments to modernize our manufacturing facilities and processes, expand capacity and capabilities for domestic manufacturing and accelerate new product development.
Purchased Components and Raw Materials Our products are made using various purchased components and seve ral basic raw materials, including brass ingot, scrap steel, sand and resin. Purchased parts and raw materials represented approximately 34% and 18%, r espectively, of Cost of sales in 2022.
Product design and support for our intelligent water solutions products and services for pressure management are in Southampton, United Kingdom. Purchased Components and Raw Materials Our products are made using various purchased components and seve ral basic raw materials that include brass ingot, scrap steel, sand and resin.
In addition, we are building a new brass foundry in Decatur, Illinois, scheduled to start-up initial production in 2023, although we do not expect full production until 2024 when it replaces our nearby, existing brass foundry. Continue to seek, acquire, and invest in businesses and technologies that expand our existing portfolio or allow us to enter new markets.
Continue to seek, acquire, and invest in businesses and technologies that expand our existing portfolio or allow us to enter new markets.
We also strive to ensure all offers to new employees or to employees being promoted internally are aligned with the market and equitable on an internal basis. In addition, we expanded our Diversity and Inclusion (“D&I”) Council framework during our 2022 fiscal year.
We believe we have made compensation adjustments to rectify compensation disparities. We also implemented hiring and promotional practices to support our goal of ensuring offers to new employees or to employees being promoted internally are aligned with the market and equitable on an internal basis.
This is accomplished in part by conducting an annual employee satisfaction survey, and quarterly town hall meetings. Our fiscal year 2022 employee turnover rate was approximately 28%. 9 Table of Contents Index to Financial Statements Leadership and Culture Development. As new generations enter the workforce, their passions and commitments to sustainability are fundamental to our future success.
We prioritize employee engagement and transparency by implementing programs and processes to ensure our employees have opportunities to ask questions, voice concerns, and share feedback. This is accomplished in part by conducting an annual employee satisfaction survey, and quarterly town hall meetings. Our fiscal year 2023 employee turnover rate was approximately 36%. Leadership and Culture Development.
Approximately 7% of Water Management Solutions’ net sales were to Canadian customers in fiscal year 2022, and 8% in fiscal years 2021 and 2020. 5 Table of Contents Index to Financial Statements Water Management Solutions also sells its water metering systems, products and services directly to municipalities and to waterworks distributors, and sells water leak detection, pressure monitoring, and pipe condition assessment products and services, and intelligent water network solutions primarily to municipalities and utility companies.
Water Management Solutions also sells its water metering, leak detection, including pipe condition assessment, and pressure management and control products and solutions directly to municipalities and to waterworks distributors.
Backlog We consider backlog to represent orders placed by customers for which goods or services have yet to be shipped. Backlog is a meaningful indicator for many of our product lines.
Approximate ly 6% of Water Management Solutions’ net sales were to Canadian customers in fiscal year 2023, 7% in fiscal year 2022 and 8% in fiscal year 2021. 5 Table of Contents Index to Financial Statements Backlog We consider backlog to represent orders placed by customers for which goods or services have yet to be shipped.
The Mueller Development Program (“MDP”) is designed to provide a pipeline for future talent. During 2022, we continued our Frontline Leader training program to offer tools in time management, communication, and team building, along with personal coaching. At September 30, 2022, we employed approximately 3,600 people, of whom 82% work in the United States.
As new generations enter the workforce, their dedication to sustainability is pivotal for our long-term prosperity. The Mueller Development Program (“MDP”) has been developed to create a pathway for upcoming talent. In 2022, we extended our Frontline Leader training program, offering resources in time management, communication, team building, and personal coaching.
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Organization Updates In October 2019, we acquired the remaining 51% noncontrolling ownership interest of our previously existing industrial valve joint venture, which we originally entered into in July 2014.
Added
Effective August 21, 2023, the Company’s Chief Executive Officer (“CEO”) left his role and Marietta Edmunds Zakas, the Company’s Chief Financial Officer (“CFO”) was named President and CEO. Steven S. Heinrichs, the Company’s Chief Legal and Compliance Officer, was named CFO, and continues to serve as Chief Legal and Compliance Officer. In addition, certain other management changes occurred.
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On June 14, 2021, we acquired all the outstanding capital stock of i2O Water Ltd (“i2O’), a provider of pressure management solutions to more than 100 water companies in 45 countries. i2O is organized under the laws of the United Kingdom.
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As a result, the Company incurred transition and retention expense which has been recorded to Strategic reorganization and other charges in our consolidated statements of operation s. Water Flow Solutions The Water Flow Solutions product portfolio includes iron gate valves, specialty valves and service brass products.
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Our two operating segments, Water Flow Solutions and Water Management Solutions, align with this new management structure. Water Flow Solutions The Water Flow Solutions product portfolio includes iron gate valves, specialty valves and service brass products. Net sales of products in the Water Flow Solutions business unit were approximately 57% of fiscal 2022 consolidated net sales.
Added
We believe these i nvestments will drive margin expansion by lowering costs, expand our product portfolio, and improve product quality. We have completed our large valve manufacturing expansion in Chattanooga, Tennessee and our new facility in Kimball, 1 Table of Contents Index to Financial Statements Tennessee, which included consolidating multiple facilities.
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We expect this expansion to come through internal investments as well as acquisitions. Develop and implement a fully-integrated intelligent technology platform for infrastructure testing, monitoring and control. We created a software platform, Sentryx ™ , that provides data intelligence to help water utilities make strategic and operational decisions.
Added
We expect these investments to support our domestic manufacturing capabilities for specialty and large valves and to capitalize on the growing need for highly engineered valves required for water infrastructure projects. During 2023, we started initial production at a new brass foundry in Decatur, Illinois, which will eventually replace our original brass foundry built there in the early 1900s.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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We depend on the Internet and our information technology infrastructure for electronic communications among our locations around the world and among our personnel and suppliers and customers. Cyber and other data security breaches of this infrastructure can create system disruptions, shutdowns or unauthorized disclosure of confidential information.
We depend on the Internet and our information technology infrastructure for electronic communications among our locations around the world and among our personnel, suppliers and customers. Cyber and other data security breaches of this infrastructure can create system disruptions, shutdowns or unauthorized disclosure of confidential information.
If these products and services fail to gain market acceptance, our opportunity to grow these businesses will be limited. 12 Table of Contents Index to Financial Statements Risks related to our business strategy We may not be able to adequately manage the risks associated with the introduction and deployment of new products and systems, including increased warranty costs.
If these products and services fail to gain market acceptance, our opportunity to grow these businesses will be limited. 12 Table of Contents Index to Financial Statements Risks related to our business strategy We may not be able to adequately manage the risks associated with installed products and the introduction and deployment of new products and systems, including increased warranty costs.
This includes spending on capital projects, such as developing or acquiring strategic 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.
This includes spending on capital projects; developing or acquiring strategic 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.
Cybersecurity threats are constantly evolving and can take a variety of forms, increasing the difficulty of detecting and successfully defending against them. Individual and groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states, continuously undertake attacks that pose threats to our customers and our information technology systems.
Cybersecurity threats are constantly evolving and can take a variety of forms, increasing the difficulty of preventing, detecting and successfully defending against them. Individual and groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states, continuously undertake attacks that pose threats to our customers and our information technology systems.
The final remediation costs of these environmental sites may exceed current 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.
The final 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.
Our success will depend in part on our ability to manage these risks, including costs associated with manufacturing, installation, maintenance and warranties. These challenges can be costly and technologically challenging, and we cannot determine in advance the ultimate effect they may have.
Our success will depend in part on our ability to manage these risks, including costs associated with design, manufacturing, installation, maintenance and warranties. These challenges can be costly and technologically challenging, and we cannot determine in advance the ultimate effect they may have.
These types of transactions involve numerous other risks, including but not limited to: • Diversion of management time and attention from existing operations, • Difficulties in integrating acquired businesses, technologies and personnel into our business or into our compliance and control programs, particularly those that include international operations, • Working with partners or other ownership structures with shared decision-making authority (our interests and other ownership interests may be inconsistent), • Difficulties in obtaining and verifying relevant information regarding a business or technology prior to the consummation of the transaction, including the identification and assessment of liabilities, claims or other circumstances, including those relating to intellectual property claims, that could result in litigation or regulatory exposure, • Assumptions of liabilities that exceed our estimated amounts, • Verifying the financial statements and other business information of an acquired business, • Inability to obtain required regulatory approvals and/or required financing on favorable terms, • Potential loss of key employees, contractual relationships or customers of the acquired company, • Increased operating expenses related to the acquired businesses or technologies, • The failure of new technologies, products or services to gain market acceptance with acceptable profit margins, • Entering new markets in which we have little or no experience or in which competitors may have stronger market positions, • Dilution of stockholder value through the issuance of equity securities or equity-linked securities, and • Inability to achieve expected synergies or the achievement of such synergies taking longer than expected to realize, including increases in revenue, enhanced efficiencies, or increased market share, or the benefits ultimately may be smaller than we expected.
These types of transactions involve numerous other risks, including but not limited to: • Diversion of management time and attention from existing operations, • Difficulties in integrating acquired businesses, technologies and personnel into our business or into our compliance and control programs, particularly those that include international operations, • Working with partners or other ownership structures with shared decision-making authority (our interests and other ownership interests may be inconsistent), • Difficulties in obtaining and verifying relevant information regarding a business or technology prior to the consummation of the transaction, including the identification and assessment of liabilities, claims or other circumstances, including those relating to intellectual property claims, that could result in litigation or regulatory exposure, • Assumptions of liabilities that exceed our estimated amounts, • Verification of financial statements and other business information of an acquired business, • Inability to obtain required regulatory approvals and/or required financing on favorable terms, • Potential loss of key employees, contractual relationships or customers of the acquired business, • Increased operating expenses related to the acquired businesses or technologies, • The failure of new technologies, products or services to gain market acceptance with acceptable profit margins, • Entering new markets in which we have little or no experience or in which competitors may have stronger market positions, • Dilution of stockholder value through the issuance of equity securities or equity-linked securities, and • Inability to achieve expected synergies or the achievement of such synergies taking longer than expected to realize, including increases in sales, enhanced efficiencies, or increased market share, or the benefits ultimately may be smaller than we expected.
In the normal course of our business, we are subject to claims and lawsuits, including from time to time claims for damages related to product liability and warranties, investigations by governmental agencies, litigation alleging the infringement of intellectual property rights and litigation related to employee matters and commercial disputes.
In the normal course of business, we are subject to claims and lawsuits, including from time to time, claims for damages related to product liability and warranties, investigations by governmental agencies, litigation alleging the infringement of intellectual property rights and litigation related to employee matters and commercial disputes.
For example, trade tensions between the United States and China have led to series of significant tariffs on the importation of certain product categories over recent years. The materials subject to these tariffs could impact our raw material costs as well.
For example, trade tensions between the United States and China have led to a series of significant tariffs on the importation of certain product categories over recent years. The materials subject to these tariffs could impact our raw material costs as well.
In addition, reductions or delays in federal spending related to water or wastewater infrastructure could adversely affect state or local projects and may adversely affect our financial results. Governments and private water entities may have limited abilities to increase taxes, water fees or water rates, as applicable.
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. Governments and private water entities may have limited abilities to increase taxes, water fees or water rates, as applicable.
For example, changes in interest rates and credit markets, including municipal bonds, mortgages, home equity loans and consumer credit, have in the past and may in the future significantly increase the costs of the projects in which our products are utilized, such as in new residential construction and water and wastewater infrastructure upgrade, repair and replacement projects, and lead to such projects being reduced, delayed and/or rescheduled, which could result in a decrease in our revenues and earnings and adversely affect our financial condition.
For example, changes in interest rates and credit markets, including municipal bonds, mortgages, home equity loans and consumer credit, have in the past and may in the future significantly increase the costs of the projects in which our products are utilized, such as in new residential construction and water and wastewater infrastructure upgrade, repair and replacement projects, and lead to such projects being reduced, delayed and/or rescheduled, which could result in a decrease in our sales and earnings and adversely affect our financial condition.
We may also be subject to intellectual property infringement claims from time to time, which may result in additional expenses and the diversion of resources to respond to these claims. Finally, for those products in our portfolio that rely on patent protection, once a patent has expired the product is further subjected to competition.
We may also be subject to intellectual property infringement claims from time to time, which may result in additional expense and the diversion of resources to respond to these claims. Finally, for those products in our portfolio that rely on patent protection, once a patent has expired the product is further subjected to competition.
If we do not successfully maintain our information and technology networks, including the security of those networks, our operations could be disrupted and unanticipated increases in costs and/or decreases in revenues could result. We rely on various information technology systems, some of which are controlled by outside service providers, to manage key aspects of our operations.
If we do not successfully maintain our information and technology networks, including the security of those networks, our operations could be disrupted and unanticipated increases in costs and/or decreases in sales could result. We rely on various information technology systems, some of which are controlled by outside service providers, to manage key aspects of our operations.
The regulatory environment related to cyber and information security, data collection and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs. Cyberattacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, unauthorized access to customer data, or harm to our reputation.
The regulatory environment related to cyber and information security, data collection and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs. Cyberattacks and security vulnerabilities could lead to reduced sales, increased costs, liability claims, unauthorized access to customer data, or harm to our reputation.
Our reliance on these vendors subjects us to a greater risk of shortages, and reduced control over delivery schedules of products, as well as a greater risk of increases in product costs. In instances where we stock lower levels of product inventories, a disruption in product availability could harm our financial performance and our ability to satisfy customer needs.
Our reliance on these vendors subjects us to a greater risk of shortages, and reduced control over delivery schedules of products, as well as a greater risk of increased product costs. In instances where we stock lower levels of product inventories, a disruption in product availability could harm our financial performance and our ability to satisfy customer needs.
The market for AMI is relatively new and continues to evolve, and the United States markets for water meter products and systems are highly competitive. Water utilities have traditionally been slow adopters of new technology and may not adopt AMI as quickly as we expect, partially as a result of the substantial investment related to installation of AMI systems.
The market for AMI continues to evolve, and the United States markets for water meter products and systems are highly competitive. Water utilities have traditionally been slow adopters of new technology and may not adopt AMI as quickly as we expect, partially as a result of the substantial investment related to installation of AMI systems.
Any acquisitions or investments may ultimately harm our business or financial condition, as they may not be successful and may ultimately have an adverse effect on our operating results or financial condition and/or result in impairment charges. Potential international business opportunities may expose us to additional risks, including currency exchange fluctuations.
Any acquisitions or investments may ultimately harm our business or financial condition, as they may not be successful and may ultimately have an adverse effect on our operating results, financial condition and/or result in impairment charges. Potential international business opportunities may expose us to additional risks, including foreign currency exchange rate fluctuations.
In the short term, net sales could decline if existing significant customers do not continue to purchase our products or services and new customers are not obtained to replace them. Strong competition could adversely affect prices and demand for our products and services, which would adversely affect our operating results.
In the short term, net sales could decline if existing significant customers do not continue to purchase our products or services and new customers are not obtained to replace them. Strong competition could adversely affect prices and demand for our products and services, which would adversely affect our operating results and financial condition.
In addition, we may be required to pay damage awards, penalties or settlements, or become subject to injunctions or other equitable remedies, that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, we may be required to pay damage awards, penalties or settlements, or become subject to injunctions or other equitable remedies, that could have a materially adverse effect on our business, financial condition, results of operations and cash flows.
Failure to comply with any environmental, health or safety requirements could result in the assessment of damages, the imposition of penalties, suspension of production, changes to equipment or processes or a cessation of operations at our facilities, any of which could have a material adverse effect on our business.
Failure to comply with any environmental, health or safety requirements could result in the assessment of damages, the imposition of penalties, suspension of production, changes to equipment or processes or a cessation of operations at our facilities, any of which could have a materially adverse effect on our business.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 17. of the Notes to Consolidated Financial Statements. Climate change and legal or regulatory responses thereto may have an adverse impact on our business and results of operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 15. of the Notes to Consolidated Financial Statements. Climate change and legal or regulatory responses thereto may have an adverse impact on our business and results of operations.
Our business depends on a small group of key customers for a significant portion of our sales. A majority of our products are sold primarily to distributors and our success depends on these outside parties operating their businesses profitably and effectively.
Our business depends on a small group of key customers for a significant portion of our sales. A majority of our products are sold primarily to distributors and our success depends on these third parties operating their businesses profitably and effectively.
Strikes, work stoppages or other forms of labor unrest at any of our plants could impair our ability to supply products to our distributors and customers, which could reduce our revenues, increase our expenses and expose us to customer claims.
Strikes, work stoppages or other forms of labor unrest at any of our plants could impair our ability to supply products to our distributors and customers, which could reduce our sales, increase our expenses and expose us to customer claims.
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 revenue and results of operations may be harmed.
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.
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 revenue and results of operations may be harmed.
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.
Normal operations at our key manufacturing facilities may be interrupted. Some of our key products, including fire hydrants, iron gate valves, service brass products, and repair products are manufactured at a single facility or few manufacturing facilities, that depend on critical pieces of heavy equipment that cannot be moved economically to other locations.
Normal operations at our key manufacturing facilities may be interrupted. Some of our key products, including fire hydrants, iron gate valves, service brass products, specialty valves and repair products are manufactured at a single facility or a few facilities, that depend on critical pieces of heavy equipment that cannot be moved economically to other locations or sourced quickly.
Accordingly, fluctuations in currency exchange rates may significantly increase the amount of United States dollars required for foreign currency expenses or significantly decrease the United States dollars we receive from revenues denominated in a foreign currency.
Accordingly, fluctuations in foreign currency exchange rates may significantly increase the amount of United States dollars required for foreign currency expenses or significantly decrease the United States dollars we receive from sales denominated in a foreign currency.
The increasing demand for qualified personnel makes it more difficult for us to attract and retain employees with requisite skill sets, particularly employees with specialized technical and trade experience. Changing demographics and labor work force trends also may result in a loss of knowledge and skills as experienced workers retire.
The increasing demand for qualified personnel makes it more difficult to attract and retain employees with requisite skill sets, particularly executive officers, as well as employees with specialized technical and trade experience. Changing demographics and labor work force trends also may result in a loss of knowledge and skills as experienced workers retire.
However, 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, revenue and profit.
However, 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.
We compete on the basis of a variety of factors, including the quality, price and innovation of our products, services and service levels. Our ability to retain customers in the face of competition depends on our ability to market our products and services to our customers and end users effectively.
We compete on the basis of a variety of factors, including the quality, price and innovation of our products, services and service levels, and product specifications and availability. Our ability to retain customers in the face of competition depends on our ability to market our products and services to our customers and end users effectively.
Additionally, these actors may reverse engineer trade secrets or other confidential intellectual property, or gain access to our networks and data centers, using social engineering techniques to induce our employees, users, partners, or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our users’ or customers’ data, or act in a coordinated manner to launch distributed denial of service attacks, deny or postpone access to critical water infrastructure telemetry through vulnerabilities in our cloud services and infrastructure, or logging, sensing, and telemetry products.
Additionally, these actors may reverse engineer trade secrets or other confidential intellectual property, or gain access to our networks and data centers, using social engineering techniques to induce our employees, users, partners, or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our users’ or customers’ data, or act in a coordinated manner to launch distributed denial of service attacks, deny or postpone access to critical water infrastructure telemetry through vulnerabilities in our cloud services and infrastructure, 17 Table of Contents Index to Financial Statements or logging, sensing, and telemetry products.
The operations at our manufacturing facilities may be interrupted or impaired by various operating risks, including, but not limited to: • Catastrophic events, such as fires, floods, explosions, natural disasters, severe weather or other similar occurrences, • Terrorist attacks, war, mass shootings or other acts of violence, • Interruptions in the delivery of raw materials, shortages of equipment or spare parts, or other manufacturing inputs, • Adverse government regulations, • Equipment or information systems breakdowns or failures, • Violations of our permit requirements or revocation of permits, • Releases of pollutants and hazardous substances to air, soil, surface water or ground water, • Labor disputes, and • Cyberattacks and events.
The operations at our manufacturing facilities may be interrupted or impaired by various operating risks, including, but not limited to: • Catastrophic events, such as fires, floods, explosions, natural disasters, public health crises, severe weather or other similar occurrences, • Terrorist attacks, wars, mass shootings or other acts of violence, • Interruptions in the delivery of raw materials or purchased parts, shortages of equipment or spare parts, or other manufacturing inputs, • Adverse government regulations, • Equipment or information systems breakdowns or failures, • Violations of our permit requirements or revocation of permits, • Release of pollutants and hazardous substances to air, soil, surface water or ground water, • Labor disputes, and • Cyberattacks and events.
Our ability to expand or maintain our business depends on our ability to hire, train and retain employees with the skills necessary to understand and adapt to the continuously developing needs of our customers.
Our ability to expand or maintain our business depends on our ability to hire, train and retain employees, including executive officers, with the skills necessary to understand and adapt to the continuously developing needs of our customers.
Certain products and solutions, primarily technology-enabled products and solutions, are sold directly to end users. Some of these customers represent a relatively high concentration of sales. Over time, expected growth in sales is expected to lessen the significance of individual customers.
Certain products and solutions, primarily technology-enabled products and solutions as well as gas repair products, are sold directly to end users. Some of these customers represent a relatively high concentration of sales. Over time, expected growth in sales is expected to lessen the significance of individual customers.
Furthermore, once claims are asserted for an alleged product defect by municipalities or other customers, it can be difficult to determine the level of potential exposure or liability related to such allegation to which the assertion of these claims will expand geographically.
Furthermore, once claims are asserted for an alleged product defect by customers, it can be difficult to determine the level of potential exposure or liability related to such allegation to which the assertion of these claims may expand geographically.
Although we have obtained insurance for product liability claims, such policies may not be available or adequate to 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 effective indemnification agreements with our subcontractors.
Although we have obtained 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 effective indemnification agreements with our subcontractors.
The success of our new products and systems, such as our smart hydrant and Sentryx ™ software platform, will depend on our ability to manage the risks associated with their introduction, including the risk that new products and systems may have quality or other defects or deficiencies in their early stages that result in their failure to satisfy performance or reliability requirements.
The success of our existing and new products and systems, such as our smart hydrant and Sentryx ™ software platform, will depend on our ability to manage the risks associated with their introduction and continued maintenance and management, including the risk that existing and new products and systems may have quality or other defects or deficiencies that result in their failure to satisfy performance or reliability requirements.
Inefficient or ineffective allocation of capital, along with increased capital expenditure levels to modernize our aging facilities and expand our capabilities, could adversely affect our operating results and/or stockholder value, including negatively impacting our available cash reserves and prevent acquisition or other cash-intensive opportunities. Our goal is to invest capital to generate long-term value for our stockholders.
Inefficient or ineffective allocation of capital, along with increased capital expenditure levels to modernize our aging facilities and expand our capabilities, could adversely affect our operating results and/or stockholder value, including a negative impact on our available cash reserves and prevent acquisition or other cash-intensive opportunities. Our goal is to invest capital to generate long-term value for our stockholders.
For example, the United States Foreign Corrupt Practices Act and similar anti-corruption laws outside of the United States generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence foreign government officials and certain others for the purpose of obtaining or retaining business, or obtaining an unfair advantage.
For example, the United States Foreign Corrupt Practices Act and similar anti-corruption laws outside of the United States 14 Table of Contents Index to Financial Statements generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence foreign government officials and certain others for the purpose of obtaining or retaining business, or obtaining an unfair advantage.
The methods we employ to protect our intellectual property rights may not adequately deter infringement, misappropriation or independent development of our technology, and they may not prevent an unauthorized party from obtaining or using information or intellectual property that we regard as proprietary or keep others from using brand names similar to our own.
The methods we employ to protect our intellectual property rights may not adequately deter infringement, misappropriation or 16 Table of Contents Index to Financial Statements independent development of our technology, and they may not prevent an unauthorized party from obtaining or using information or intellectual property that we regard as proprietary or keep others from using brand names similar to our own.
We may be unable to identify or successfully complete suitable acquisitions in the future and completed acquisitions may not be successful. 13 Table of Contents Index to Financial Statements Acquisitions and technology investments may involve significant cash expenditures, the incurrence of debt, operating losses and expenses that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We may be unable to identify or successfully complete suitable acquisitions in the future and completed acquisitions may not be successful. Acquisitions and technology investments may involve significant cash expenditures, the incurrence of debt, operating losses and expenses that could have a materially adverse effect on our business, financial condition, results of operations and cash flows.
Products under patent protection potentially generate significantly higher revenue and earnings than those not protected by patents. If we fail to successfully enforce our intellectual 16 Table of Contents Index to Financial Statements property rights or register new patents, our competitive position could suffer, which could adversely affect our business, financial condition, results of operations and cash flows.
Products under patent protection potentially generate significantly higher sales and earnings than those not protected by patents. If we fail to successfully enforce our intellectual property rights or register new patents, our competitive position could suffer, which could adversely affect our business, financial condition, results of operations and cash flows.
In particular, when purchased component or raw material prices increase rapidly or to significantly higher than normal levels, we may not be able to pass cost increases through to our customers on a timely basis, if at all, which would reduce our profitability and cash flows.
In particular, when purchased component or raw material prices increase rapidly or to significantly higher than normal levels, we may not be able to pass cost increases 21 Table of Contents Index to Financial Statements through to our customers on a timely basis, if at all, which would reduce our profitability and cash flows.
If we fail to achieve or improperly report on our 18 Table of Contents Index to Financial Statements 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 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.
Our supply chain is dependent on third party ocean-going container ships, rail, barge and trucking systems and, therefore, disruption in these logistics services because of weather-related problems, strikes, bankruptcies or other events could adversely affect our financial performance and financial condition, negatively impacting sales, profitability and cash flows.
Our supply chain is dependent on third party ocean-going container ships, rail, barge, air and trucking systems and, therefore, disruption in these logistics services because of weather-related problems, strikes, bankruptcies, inflation, public health crises, such as pandemics, or other events could adversely affect our financial performance and financial condition, negatively impacting sales, profitability and cash flows.
Our business, financial condition and results of operations may be adversely impacted by the effects of inflation. Inflation has the potential 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.
Inflation has the potential 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.
Many of our employees at our manufacturing locations are covered by collective bargaining agreements. While we generally have been able to renegotiate collective bargaining agreements on generally satisfactory terms, negotiations may be challenging as the Company must have a competitive cost structure in each market while meeting the compensation and benefits needs of our employees.
While we generally have been able to renegotiate collective bargaining agreements on generally satisfactory terms, negotiations may be challenging as the Company must have a competitive cost structure in each market while meeting the compensation and benefits needs of our employees.
We are subject to stringent environmental, health and safety laws and regulations that impose significant compliance costs. Any failure to satisfy these laws and regulations may adversely affect us. We are subject to stringent laws and regulations relating to the protection of the environment, health and safety and incur significant capital and other expenditures to comply with these requirements.
Any failure to comply with these laws and regulations may adversely affect us. We are subject to stringent laws and regulations relating to the protection of the environment, health and safety and incur significant capital and other expenditures to comply with these requirements.
The cost and availability of these materials are subject to economic forces largely beyond our control, including North American and international demand, inflation, foreign currency exchange rates, freight costs, tariffs, commodity speculation and other external factors beyond our control, such as the COVID-19 pandemic or other supply chain 20 Table of Contents Index to Financial Statements challenges.
The cost and availability of these materials are subject to economic forces largely beyond our control, including North American and international demand, inflation, foreign currency exchange rates, freight costs, tariffs, commodity speculation and other external factors, including public health crises (such as the COVID-19 pandemic) or other supply chain challenges.
Additionally, we may not have adequately anticipated or precluded such cybersecurity threats through our product design or development. These products, services and 17 Table of Contents Index to Financial Statements solutions inevitably contain vulnerabilities or critical security defects which may not been remedied and cannot be disclosed without compromising security.
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.
Significant adverse changes in credit and capital markets or changes in investments could result in discount rates or actual rates of return on plan assets being materially lower than projected and require us to increase pension contributions in future years to meet funding level requirements.
We may increase contributions to our pension plans to avoid or reduce these higher costs. Significant adverse changes in credit and capital markets or changes in investments could result in discount rates or actual rates of return on plan assets being materially lower than projected and require us to increase pension contributions in future years to meet funding level requirements.
Violations of these laws and regulations could result in criminal and civil sanctions, disrupt our business and adversely affect our brands, international expansion efforts, business and operating results. 14 Table of Contents Index to Financial Statements We earn revenues and incur expenses in foreign currencies as part of our operations outside of the United States.
Violations of these laws and regulations could result in criminal and civil sanctions, disrupt our business and adversely affect our brands, international expansion efforts, business and operating results. We make sales, incur expenses and invest cash in foreign currencies as part of our operations outside of the United States.
Furthermore, our ability to meet product delivery commitments and labor needs while controlling labor costs is subject to numerous external factors, including, but not limited to: • Market pressures with respect to prevailing wage rates, • Unemployment levels, • Health and other insurance costs, • The impact of legislation or regulations governing labor relations, immigration, minimum wage, and healthcare benefits, • Changing demographics, and • Our reputation within the labor market. 19 Table of Contents Index to Financial Statements We also compete with many other industries and businesses for most of our hourly production employees.
Furthermore, our ability to meet product delivery commitments and labor needs while controlling labor costs is subject to numerous external factors, including, but not limited to: • Market pressures with respect to prevailing wage rates, • Unemployment levels, • Health and other insurance costs, • The impact of legislation or regulations governing labor relations, immigration, minimum wage, and healthcare benefits, • Changing demographics, • Availability of skilled labor, and • Our reputation within the labor market.
Many of our products are big, bulky and heavy, which tend to increase transportation costs. We also have relatively few manufacturing sites, which tends to increase transportation distances to our customers and consequently increases our transportation costs. High transportation costs could make our products less competitive compared to similar or alternative products offered by competitors.
Many of our products are big, bulky and heavy, which tend to increase transportation costs. We also have relatively few manufacturing sites, which tends to increase transportation distances to our customers and consequently increases our transportation costs.
Seasonal demand for certain of our products and services may adversely affect our financial results. Sales of some of our products, including iron gate valves and fire hydrants, are seasonal, with lower sales in our first and second fiscal quarters when weather conditions throughout most of North America tend to be cold resulting in lower levels of construction activity.
Sales of some of our products, including iron gate valves and fire hydrants, are seasonal, with lower sales in our first and second fiscal quarters when weather conditions throughout the northern United States and most of Canada tend to be cold resulting in lower levels of construction activity.
Inflation may further exacerbate other risk factors, including supply chain disruptions, risks related to international operations and the recruitment and retention of qualified employees . 15 Table of Contents Index to Financial Statements Our high fixed costs may make it more difficult for us to respond to economic cycles.
Inflation may further exacerbate other risk factors, including supply chain disruptions, risks related to international operations and the recruitment and retention of qualified employees . Our high fixed costs may make it more difficult for us to respond to economic cycles. A significant portion of our cost structure is fixed, including manufacturing overhead, capital equipment and research and development costs.
Moreover, any insurance or indemnification rights that we have may be insufficient or unavailable to protect us against potential loss exposures. 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 17. of the Notes to Consolidated Financial Statements.
Moreover, any insurance or indemnification rights that we have may be insufficient or unavailable to protect us against potential loss exposures. See “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 7.
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. We may not realize the expected benefits from our strategic reorganization plans.
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.
Between November 2019 and September 2022, we transitioned all, or substantially all, operations from our facilities in Hammond, Indiana; Aurora, Illinois; Woodland, Washington; and Surrey, British Columbia, Canada; to our Kimball, Tennessee facility. We cannot guarantee that the activities under the restructuring and reorganization activities will result in the desired efficiencies and estimated cost savings, if any.
We may not realize the expected benefits from our strategic reorganization plans. Between November 2019 and September 2022, we transitioned all, or substantially all, operations from our facilities in Hammond, Indiana; Aurora, Illinois; Woodland, Washington; and Surrey, British Columbia, Canada; to our Kimball, Tennessee facility.
We may not be able to pass on the entire cost of price increases, or at all, for purchased components and raw materials to our customers or offset fully the effects of these higher costs through productivity improvements.
Inflation in material costs has occurred in 2022 and 2023 and we expect it to continue into fiscal 2024. We may not be able to pass on all, or any, of increased costs for purchased components and raw materials to our customers or offset fully the effects of these higher costs through productivity improvements.
Risks related to our human capital We depend on qualified personnel and, if we are unable to retain or hire executive officers, key employees and skilled personnel, we may not be able to achieve our strategic objectives and our business may be adversely affected.
Should any Tyco Indemnitor become financially unable or fail to comply with the terms of the indemnity, we may be responsible for such obligations or liabilities. 19 Table of Contents Index to Financial Statements Risks related to our human capital We depend on qualified personnel and if we are unable to retain or hire executive officers, key employees and skilled personnel, we may not be able to achieve our strategic objectives and our business may be adversely affected.
A significant portion of our cost structure is fixed, including manufacturing overhead, capital equipment and research and development costs. In a prolonged economic downturn, these fixed costs may cause our gross margins to erode and our earnings to decline. We may experience difficulties implementing upgrades to our software systems.
In a prolonged economic downturn, these fixed costs may cause our gross margins to erode and our earnings to decline. We may experience difficulties implementing upgrades to our software systems. We engage in implementations and upgrades to our software systems, including to our Enterprise Resource Planning (“ERP”) system.
In addition, compliance with the laws, regulations and taxes of multiple international jurisdictions increases our cost of doing business. International operations are subject to anti-corruption laws and anti-competition regulations, among others.
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. In addition, compliance with the laws, regulations and taxes of multiple international jurisdictions increases our cost of doing business. International operations are subject to anti-corruption laws and anti-competition regulations, among others.
An inability to provide wages and/or benefits that are competitive could adversely impact our ability to attract and retain employees. Further, changes in market compensation rates may adversely affect our labor costs. Our expenditures for pension obligations could be materially higher than we have predicted. We provide pension benefits to certain current and former employees.
We also compete with many other industries and businesses for most of our hourly production employees. An inability to provide wages and/or benefits that are competitive could adversely impact our ability to attract and retain employees. Further, changes in market compensation rates may adversely affect our labor costs.
Any software implementation or upgrade requires significant investment of human and financial resources and we may experience significant delays, increased costs and other difficulties.
The ERP is designed to accurately maintain the Company’s books and records and provide information important to the operation of the business to the Company’s management team. Any software implementation or upgrade requires significant investment of human and financial resources, and we may experience significant delays, increased costs and other difficulties.
Some countries that present potential good 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.
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.
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 affect our operating results.
We cannot guarantee that the activities under the restructuring and reorganization activities will result in the desired efficiencies and estimated cost savings, if any. 13 Table of Contents Index to Financial Statements 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 affect our operating results.
Competition for qualified personnel is intense and we may not be successful in attracting or retaining qualified personnel, which could negatively impact our business. If we are unable to negotiate collective bargaining agreements on satisfactory terms or we experience strikes, work stoppages, labor unrest or higher than normal absenteeism, our business could suffer.
If we are unable to negotiate collective bargaining agreements on satisfactory terms or we experience strikes, work stoppages, labor unrest or higher than normal absenteeism, our business could suffer. Many of our employees at our manufacturing locations are covered by collective bargaining agreements.
Cybersecurity threats can have cascading impacts that unfold with increasing speed across our internal networks and systems and those of our partners and customers.
Cybersecurity events, such as our October 2023 incident, have had and in the future may have cascading impacts that unfold with increasing speed across our internal networks and systems. Such threats may also impact the networks and systems of our business associates and customers.
To determine our future payment obligations under the plans, certain rates of return on the plans’ assets, growth rates of certain costs and participant longevity have been estimated. The proportion of the assets held by our United States pension plan invested in fixed income securities, instead of equity securities, has decreased over historical levels.
The proportion of the assets held by our United States pension plan invested in fixed income securities, instead of equity securities, has decreased over historical levels. This shift in asset allocation has not resulted in a material change to our estimated rate of return on plan assets for this plan.
The funded status of our pension plans may also be influenced by regulatory requirements, which can change unexpectedly and impose higher costs if funding levels are below certain thresholds. We may increase contributions to our pension plans to avoid or reduce these higher costs.
Assumed discount rates, expected return on plan assets and participant longevity have significant effects on the amounts reported for our pension obligations and pension expense. 20 Table of Contents Index to Financial Statements The funded status of our pension plans may also be influenced by regulatory requirements, which can change unexpectedly and impose higher costs if funding levels are below certain thresholds.
Failure to successfully manage these challenges could result in lost revenue, significant expense, and harm to our reputation.
Failure to successfully manage these challenges could result in lost sales, significant expense, and harm to our reputation. Our products and services may be affected from time to time by design and manufacturing defects that could materially adversely affect the business and result in harm to our reputation.
We made significant progress in fiscal 2022 on the construction of our new brass manufacturing facility in Decatur, Illinois, which we expect to substantially complete in 2023. 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.
For example, we have completed the construction of our large valve manufacturing expansion in Chattanooga, Tennessee, and a facility in Kimball, Tennessee and are nearly complete with our new brass manufacturing facility in Decatur, Illinois. To a large degree, capital efficiency reflects how well we manage key risks.
If we or our service providers are unable to prevent these breaches, our operations could be disrupted or we may suffer financial, reputational or other harm because of lost or misappropriated information. We may fail to effectively manage confidential data, which could harm our reputation, result in substantial additional costs and subject us to litigation.
Likewise, if we or our service providers are unable to prevent future cybersecurity incidents, our operations could be disrupted or we may suffer financial, reputational or other harm.
Misuse of our technology-enabled products, services and solutions could lead to reduced revenue, increased costs, liability claims, or harm to our reputation.
Further, customers and third-party providers increasingly demand rigorous contractual provisions regarding privacy, cybersecurity, data protection, confidentiality and intellectual property, which may also increase our overall compliance burden and related costs. Misuse of our technology-enabled products, services and solutions could lead to reduced sales, increased costs, liability claims, or harm to our reputation.
The result of these transactions is that the assets of, and control over, Tyco Indemnitors has changed. Should any Tyco Indemnitor become financially unable or fail to comply with the terms of the indemnity, we may be responsible for such obligations or liabilities.
The result of these transactions is that the assets of, and control over, Tyco Indemnitors has changed.
Although sales outside of the United States and Canada account for a relatively small percentage of our total net sales, we expect to increase our level of business activity outside of the United States and Canada, as illustrated by our December 2018 acquisition of Krausz Industries, that is based in Israel, and our acquisition in June 2021 of i2O Water Ltd, that is based in Southampton, United Kingdom.
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, Israel and the United Kingdom. Some countries that present potential good business opportunities also face political and economic instability and vulnerability to infrastructure and other disruptions.
Removed
For example, we have completed the construction of our large valve manufacturing expansion in Chattanooga, Tennessee and made an additional investment in a facility in Kimball, Tennessee to further expand our capabilities in the area and allow us to insource more products and operations.
Added
We offer several technologically enhanced, complex hardware and software products and services that can be affected by design and manufacturing defects. Unanticipated defects 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.
Removed
A part of our growth strategy depends on us expanding internationally.

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Item 2. Properties

Properties — owned and leased real estate

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Location Activity Square Footage Owned or leased Albertville, AL Manufacturing 422,000 Owned Ariel, Israel Manufacturing 221,000 Leased Atlanta, GA Corporate headquarters 25,000 Leased Atlanta, GA Research and development 21,000 Leased Barrie, Ontario Distribution 50,000 Leased Brownsville, TX Manufacturing 50,000 Leased Calgary, Alberta Distribution 40,000 Leased Chattanooga, TN Manufacturing 525,000 Owned Chattanooga, TN General and administration 17,000 Leased Chattanooga, TN Research and development 22,000 Leased Cleveland, NC Manufacturing 190,000 Owned Cleveland, TN Manufacturing 109,500 Owned Cleveland, TN Warehouse 100,000 Leased Dallas, TX Distribution 26,000 Leased Decatur, IL Manufacturing 467,000 Owned Emporia, KS Manufacturing 63,000 Leased Jingmen, China Manufacturing 154,000 Owned Kimball, TN Manufacturing 233,000 Owned Ocala, FL Distribution 50,000 Leased Ontario, CA Distribution 73,000 Leased Rosh Haayin, Israel General and administration 8,400 Leased Sharjah, United Arab Emirates Distribution 10,000 Leased Southampton, United Kingdom Research and development 2,300 Leased Toronto, Ontario Research and development 18,000 Leased We consider our facilities to be well maintained and believe we have sufficient capacity to meet our anticipated needs through 2023.
Location Activity Square Footage Owned or leased Albertville, AL Manufacturing 422,000 Owned Ariel, Israel Manufacturing 218,300 Leased Ariel, Israel Research and development 2,700 Leased Atlanta, GA Corporate headquarters 25,000 Leased Atlanta, GA Research and development 21,000 Leased Barrie, Ontario Distribution 50,000 Leased Brownsville, TX Manufacturing 50,000 Leased Calgary, Alberta Distribution 40,000 Leased Chattanooga, TN Manufacturing 525,000 Owned Chattanooga, TN General and administration 17,000 Leased Chattanooga, TN Research and development 22,000 Leased Cleveland, NC Manufacturing 190,000 Owned Cleveland, TN Manufacturing 109,500 Owned Cleveland, TN Distribution 100,000 Leased Dallas, TX Distribution 26,000 Leased Decatur, IL Manufacturing 467,000 Owned Decatur, IL Manufacturing 168,000 Owned Emporia, KS Distribution 63,000 Leased Jingmen, China Manufacturing 154,000 Owned Kimball, TN Manufacturing 233,000 Owned Ocala, FL Distribution 50,000 Leased Ontario, CA Distribution 73,000 Leased Rosh Haayin, Israel General and administration 8,400 Leased Southampton, United Kingdom Research and development 2,300 Leased Toronto, Ontario Research and development 18,000 Leased Our locations are not managed by segment as several of our locations are not dedicated to products from only one of our two segments.
Our leased properties have terms expiring at various dates through 2033. 22 Table of Contents Index to Financial Statements
We consider our facilities to be well maintained and believe we have sufficient capacity to meet our anticipated needs through 2024. Our leased properties have terms expiring at various dates through 2033. 23 Table of Contents Index to Financial Statements

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 17. of the Notes to Consolidated Financial Statements. 23 Table of Contents Index to Financial Statements PART II
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 15. of the Notes to Consolidated Financial Statements. 24 Table of Contents Index to Financial Statements PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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. In 2017, we announced an increase to the authorized amount of this program to $250.0 million.
The program does not commit us to a particular timing or quantity of purchases, and we may suspend or discontinue the program at any time. In 2017, we announced an increase to the authorized amount of this program to $250.0 million.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange under the trading symbol MWA. Covenants contained in certain of the debt instruments described in Note 8. of the Notes to Consolidated Financial Statements restrict our ability to declare and pay dividends.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange under the trading symbol MWA. Covenants contained in certain of the debt instruments described in Note 7. of the Notes to Consolidated Financial Statements restrict our ability to declare and pay dividends.
Building Materials & Fixtures Index (“DJ U.S. Building Materials & Fixtures”) since September 30, 2017. Total return values were calculated based on cumulative total return assuming (i) the investment of $100 in our common stock, the Russell 2000 and the DJ U.S. Building Materials & Fixtures on the dates indicated and (ii) reinvestment of all dividends.
Building Materials & Fixtures Index (“DJ U.S. Building Materials & Fixtures”) since September 30, 2018. Total return values were calculated based on cumulative total return assuming (i) the investment of $100 in our common stock, the Russell 2000 and the DJ U.S. Building Materials & Fixtures on the dates indicated and (ii) reinvestment of all dividends.
During the three months ended September 30, 2022, we repurchased 830,842 shares of our common stock for $10.0 million under our share repurchase authorization, and we had $100.0 million remaining under this authorization as of September 30, 2022.
During the three months ended September 30, 2023, we repurchased 714,830 shares of our common stock for $10.0 million under our share repurchase authorization, and we had $90.0 million remaining under this authorization as of September 30, 2023.
Future dividends will be declared at the discretion of our Board of Directors and will depend on our future earnings, financial condition and other factors. At September 30, 2022, there w ere 97 s tockholders of record for our common stock.
Future dividends will be declared at the discretion of our Board of Directors and will depend on our future earnings, financial condition and other factors. At September 30, 2023, there were 89 stockholders of record for our common stock.
Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum dollar value of shares that may yet be purchased under the plans or programs (in millions) July 1-31, 2022 200 $ 11.74 — $ 110.0 August 1-31, 2022 830,842 $ 12.02 830,842 $ 100.0 September 1-30, 2022 3,681 $ 10.53 — $ 100.0 Total 834,723 $ 12.01 830,842 24 Table of Contents Index to Financial Statements Stock Price Performance Graph The following graph compares the Company’s cumulative quarterly common stock price performance with the Russell 2000 Stock Index (“Russell 2000”) and the Dow Jones U.S.
Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum dollar value of shares that may yet be purchased under the plans or programs (in millions) July 1-31, 2023 426 $ 16.21 — $ 100.0 August 1-31, 2023 261,322 $ 13.91 252,336 $ 96.5 September 1-30, 2023 505,892 $ 13.96 462,494 $ 90.0 Total 767,640 $ 13.94 714,830 25 Table of Contents Index to Financial Statements Stock Price Performance Graph The following graph compares the Company’s cumulative quarterly common stock price performance with the Russell 2000 Stock Index (“Russell 2000”) and the Dow Jones U.S.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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We believe we have adequately accrued for these potential liabilities; however, facts and circumstances may change and could cause the actual liability to exceed the estimates, or may require adjustments to the recorded liability balances in the future. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures.
We believe we have adequately accrued for these potential liabilities; however, facts and circumstances may change and could cause the actual liability to exceed estimates, or may require adjustments to the recorded liability balances in the future. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued liabilities and other potential exposures.
Upon a change of control as defined in the Indenture, we would be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the outstanding principal amount of the 4.0% Senior Notes. 5.5% Senior Unsecured Notes On June 12, 2018, we privately issued $450.0 million of 5.5% Senior Unsecured Notes (“5.5% Senior Notes”), which were set to mature in 2026 and bore interest at 5.5%, paid semi-annually.
Upon a change of control, as defined, we would be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the outstanding principal amount of the 4.0% Senior Notes. 5.5% Senior Unsecured Notes On June 12, 2018, we privately issued $450.0 million of 5.5% Senior Unsecured Notes (“5.5% Senior Notes”), which were set to mature in 2026 and bore interest at 5.5%, paid semi-annually.
ABL Agreement Our ABL, as amended, is provided by a consortium of banking institutions and consists of a revolving credit facility that $175.0 million in borrowing that expires in July 29, 2025. Included in the ABL is the ability to borrow up to $25.0 million of swing line loans and up to $60.0 million of letters of credit.
ABL Agreement Our ABL, as amended, is provided by a consortium of banking institutions and consists of a revolving credit facility of $175.0 million in borrowing capacity that expires in July 29, 2025. Included in the ABL is the ability to borrow up to $25.0 million of swing line loans and up to $60.0 million of letters of credit.
RISK FACTORS-Seasonal demand for certain of our products and services may adversely affect our financial results.” Critical Accounting Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities.
RISK FACTORS-Seasonal demand for certain of our products and services may adversely affect our financial results.” Critical Accounting Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses and related disclosure of contingent assets and liabilities.
An indenture securing 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 believe we were in compliance with these covenants at September 30, 2022. There are no financial maintenance covenants associated with the Indenture.
An indenture securing 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 believe we were in compliance with these covenants at September 30, 2023. There are no financial maintenance covenants associated with the Indenture.
We weight the income and market approaches in a manner considering the risks of the underlying cash flows. This income approach is dependent on management’s best estimates of future operating results, including forecasted revenues, earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins and the selection of discount rates.
We weight the income and market approaches in a manner considering the risks of the underlying cash flows. This income approach is dependent on management’s best estimates of future operating results, including forecasted sales, earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins and the selection of discount rates.
These estimates are subject to change based on numerous factors including, among others, regulatory changes, technology changes, the investment performance of related assets, longevity of participants, the discount rate used and changes to plan designs.
These estimates are subject to change based on numerous factors including, among others, claim development, regulatory changes, technology changes, the investment performance of related assets, longevity of participants, the discount rate used and changes to plan designs.
Overview Business We adopted a new management structure effective October 1, 2021 which resulted in a change to our reportable segments. Under this new structure, we operate our business through two segments, Water Flow Solutions and Water Management Solutions.
Overview Business We adopted our current management structure effective October 1, 2021 which resulted in a change to our reportable segments. Under this structure, we operate our business through two segments, Water Flow Solutions and Water Management Solutions.
Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes. For more information on these and other contingencies, see Note 17. of the Notes to Consolidated Financial Statements. See also “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 1A. RISK FACTORS”.
Estimated future costs related to tax and legal matters are subject to change as events evolve and as additional information becomes available during the administrative and litigation processes. For more information on these and other contingencies, see Note 15. of the Notes to Consolidated Financial Statements. See also “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 1A.
We established the recorded liabilities for such items at September 30, 2022 using estimates for when such amounts will be paid and what the amounts of such payments will be.
We established the recorded liabilities for such items at September 30, 2023 using estimates for when such amounts will be paid and what the amounts of such payments will be.
Workers’ Compensation, Defined Benefit Pension Plans, Environmental and Other Long-term Liabilities We are obligated for various liabilities that ultimately will be determined over what could be very long future time periods.
RISK FACTORS.” Workers’ Compensation, Defined Benefit Pension Plans, Environmental and Other Long-term Liabilities We are obligated for various liabilities that ultimately will be determined over what could be very long future time periods.
Our stock repurchase program allows us to repurchase up to $250.0 million of our common stock, of which we had remaining authorization of $100.0 million as of September 30, 2022. 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.
Our stock repurchase program allows us to repurchase up to $250.0 million of our common stock, of which we had remaining authorization of $90.0 million as of September 30, 2023. 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.
At September 30, 2022, the applicable margin was 200 basis points for LIBOR-based loans and 100 basis points for base rate loans. 33 Table of Contents Index to Financial Statements 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.
At September 30, 2023, the applicable margin was 200 basis points for SOFR-based loans and 100 basis points for base rate loans. 32 Table of Contents Index to Financial Statements 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.
Revenue Recognition We recognize revenue when control of promised products or services is transferred to our customers, in amounts that reflect the consideration to which we expect to be entitled in exchange for those products or services.
Revenue Recognition For the majority of sales, we recognize revenue when control of promised products is transferred to our customers, in amounts that reflect the consideration to which we expect to be entitled in exchange for those products.
Income tax payments were higher during 2022 compared with the prior year primarily as a result of the timing of certain federal and state extension payments. We expect the effective tax rate in 2023 to be between 23% and 25%.
Income tax payments were higher during 2023 compared with the prior year primarily as a result of higher income before income taxes as well as the timing of certain federal and state extension payments. We expect the effective tax rate in 2024 to be between 23% and 25%.
Net sales and operating income historically have been lowest in the three month periods ending December 31 and March 31 when the northern United States and all of Canada generally face weather conditions that restrict significant construction activity. See “Item 1A.
Net sales and operating income historically have been lowest in the three month periods ending December 31 and March 31 when the northern United States and most of Canada generally face weather conditions that restrict significant construction activity.
We repurchased $35.0 million of our outstanding common stock during the fiscal year ended September 30, 2022 and had $100.0 million remaining under our share repurchase authorization as of September 30, 2022. The ABL and 4.0% Senior Notes contain customary representations and warranties, covenants and provisions governing an event of default.
We repurchased $10.0 million of our outstanding common stock during the fiscal year ended September 30, 2023 and had $90.0 million remaining under our share repurchase authorization as of September 30, 2023. The ABL and 4.0% Senior Notes contain customary representations and warranties, covenants and provisions governing an event of default.
If in our judgment persuasive evidence exists that the net realizable value of inventory is lower than its cost, the inventory value is written-down to its estimated net realizable value. Significant judgments regarding future events and market conditions must be made when estimating net realizable value.
If in our judgment persuasive evidence exists that the net realizable value of 34 Table of Contents Index to Financial Statements inventory is lower than its cost, the inventory value is written-down to its estimated net realizable value. Significant judgments regarding future events and market conditions must be made when estimating net realizable value.
The covenants restrict our ability to engage in certain specified activities including, but not limited to, the payment of dividends and the redemption of our common stock. Collections from customers were higher during the fiscal year ended September 30, 2022 as compared with the prior year period primarily as a result of net sales growth.
The covenants restrict our ability to engage in certain activities including, but not limited to, the payment of dividends and the redemption of our common stock. Collections from customers were higher during the fiscal year ended September 30, 2023 as compared with the prior year period primarily as a result of higher sales during the comparative periods.
As set forth in the Indenture, we may redeem some or all of the 4.0% Senior Notes at any time prior to June 15, 2024, at certain “make-whole” redemption prices and on or after June 15, 2024 at specified redemption prices.
We may redeem some or all of the 4.0% Senior Notes at any time prior to June 15, 2024, at certain “make-whole” redemption prices and on or after June 15, 2024 at specified redemption prices.
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 $382.1 million at September 30, 2022.
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 $393.7 million at September 30, 2023.
Moody’s Standard & Poor’s September 30, September 30, 2022 2021 2022 2021 Corporate credit rating Ba1 Ba1 BB BB ABL Agreement Not rated Not rated Not rated Not rated 4.0% Senior Notes Ba1 Ba1 BB BB Outlook Stable Stable Stable Stable Effect of Inflation We experience changing price levels primarily related to purchased components and raw materials.
Moody’s Standard & Poor’s September 30, September 30, 2023 2022 2023 2022 Corporate credit rating Ba1 Ba1 BB BB ABL Agreement Not rated Not rated Not rated Not rated 4.0% Senior Notes Ba1 Ba1 BB BB Outlook Stable Stable Stable Stable 33 Table of Contents Index to Financial Statements Effect of Inflation We experience changing price levels primarily related to purchased components and raw materials.
During the year ended September 30, 2022, we incurred a non-cash impairment charge on our goodwill of $6.8 million within the Water Flow Solutions segment.
During the year ended September 30, 2022, Water Flow Solutions incurred a non-cash goodwill impairment charge of $6.8 million.
Accounting for the Impairment of Goodwill and Indefinite-lived Intangible Assets We test goodwill and indefinite-lived intangible assets for impairment annually or more frequently if events or circumstances indicate possible impairment. We performed this annual impairment testing at September 1, 2022, using standard valuation methodologies and rates that we considered reasonable and appropriate.
Accounting for the Impairment of Goodwill and Indefinite-lived Intangible Assets We test goodwill and indefinite-lived intangible assets for impairment annually or more frequently if events or circumstances indicate possible impairment. We perform this annual impairment testing on September 1, using standard valuation methodologies and rates that we considered reasonable and appropriate. We evaluate goodwill for impairment using a quantitative analysis.
Capital expenditures decreased primarily as a result of lower expenditures associated with the new Decatur foundry as compared with the prior year period. We estimate 2023 capital expenditures will be between $70.0 million and $80.0 million.
Capital expenditures decreased compared with the prior year period primarily as a result of lower expenditures associated with the new Decatur, Illinois foundry. We estimate 2024 capital expenditures will be between $45.0 million and $50.0 million.
We estimate approximately 60% to 65% of the Company’s 2022 net sales were associated with repair and replacement directly related to municipal water infrastructure spending, approximately 25% to 30% were related to residential construction activity and less than 10% were related to natural gas utilities.
We estimate approximately 60% to 65% of the Company’s 2023 net sales were associated with repair and replacement of municipal water infrastructure, approximately 25% to 30% were related to residential construction activity and approximately 10% were related to natural gas utilities and industrial applications.
Finite-lived intangible assets, net totaling $88.5 million at September 30, 2022, are amortized over their estimated useful lives. Amortization expense was $28.5 million in 2022 and $28.2 million in 2021.
Finite-lived intangible assets, net totaling $61.4 million at September 30, 2023, are amortized over their estimated useful lives. Amortization expense was $28.1 million in 2023 and $28.5 million in 2022.
As of September 30, 2022, we have (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and include cash interest payments of $18.0 million in 2023 annually through 2029; (ii) cumulative cash obligations of $32.6 million for operating leases through 2033 and $1.7 million for finance leases through 2026; and (iii) purchase obligations for raw materials and other purchased parts of approximately $155.1 million which we will incur during 2023.
As of September 30, 2023, we have (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and include cash interest payments of $18.0 million in 2024 annually through 2029; (ii) cumulative cash obligations of $29.0 million for operating leases through 2033 and $1.4 million for finance leases through 2028; and (iii) purchase obligations for raw materials and other purchased parts of approximately $106.1 million and $1.4 million which we expect to incur during 2024 and 2025, respectively.
Borrowings under the ABL bear interest at a floating rate equal to the London Inter Bank Offered Rate (“LIBOR”) plus an applicable margin range of 200 to 225 basis points, or a base rate, as defined in the ABL, plus an applicable margin of 100 to 125 basis points.
Borrowings under the ABL bear interest at a floating rate equal to SOFR plus an adjustment of 10 basis points and an applicable margin range of 200 to 225 basis points, or a base rate, as defined in the ABL, plus an applicable margin of 100 to 125 basis points.
We estimate and accrue liabilities resulting from such matters based on a variety of factors, including outstanding legal claims and proposed settlements; assessments by counsel of pending or threatened litigation; and assessments of potential environmental liabilities and remediation costs.
Contingencies We are involved in litigation, investigations and claims arising in the normal course of business. We estimate and accrue liabilities resulting from such matters based on a variety of factors, including outstanding legal claims and proposed settlements; assessments by counsel of pending or threatened litigation; and assessments of potential environmental liabilities and remediation costs.
We anticipate our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flows will be sufficient to meet our anticipated operating needs, income tax payments, capital expenditures and debt service obligations as they become due through September 30, 2023.
We anticipate our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flows will be sufficient to meet our anticipated operating needs, income tax payments, capital expenditures and debt service obligations as they become due through the twelve months from the date of this filing.
Capital expenditures were $54.7 million in 2022. Depreciation expense was $32.0 million in 2022 compared with $31.4 million in 2021 as a result of generally higher level of capital expenditures over the last three years. Intangible assets were $361.2 million at September 30, 2022 and $392.5 million at September 30, 2021.
Depreciation expense was $34.4 million in 2023 compared with $32.0 million in 2022 as a result of generally higher level of capital expenditures over the last two years. Intangible assets were $334.0 million at September 30, 2023 and $361.2 million at September 30, 2022.
Undistributed earnings from our subsidiaries in Israel, Canada and China are considered to be permanently invested outside of the United States. At September 30, 2022, cash and cash equivalents included $40.5 million, $18.9 million, and $5.2 million in Israel, Canada and China, respectively.
Undistributed earnings from our subsidiaries in Israel, Canada and China are considered to be permanently invested outside of the United States. At September 30, 2023, cash and cash equivalents included $66.7 million, $8.7 million, and $10.9 million in Israel, Canada, and China, respectively.
We evaluate goodwill for impairment using a quantitative analysis. The carrying value of the reporting unit, including goodwill, is compared with the estimated fair value of the reporting unit utilizing a combination of the income and market approaches.
The carrying value of the reporting unit, including goodwill, is compared with the estimated fair value of the reporting unit utilizing a combination of the income and market approaches.
We declared a quarterly dividend of $0.061 per share on October 21, 2022, payable on or about November 21, 2022 to holders of record as of November 10, 2022, which will result in an estimated $9.5 million cash outlay.
We declared a quarterly dividend of $0.064 per common share on October 24, 2023, payable on or about November 20, 2023 to holders of record as of November 9, 2023, resulting in an estimated $10.0 million cash outlay.
We acquired 2,654,254 and 651,271 shares of our common stock in 2022 and 2021, respectively. We use letters of credit a nd surety bonds in the ordinary course of business to ensure the performance of contractual obligations. As of September 30, 2022, we had $14.1 million of letters of credit and $31.1 million of surety bonds outstan ding.
We repurchased 714,830 and 2,654,254 shares of our common stock in 2023 and 2022, respectively. We use letters of credit a nd surety bonds in the ordinary course of business to ensure the performance of contractual obligations. As of September 30, 2023, we had $12.4 million of letters of credit and $22.2 million of surety bonds outstanding.
After experiencing challenges in 2020 and 2021 resulting from the pandemic, municipal spending in 2022 recovered during the fiscal year as compared with the prior year. According to the United States Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates at September 30, 2022 increased 4.7%.
After experiencing challenges in 2020 and 2021 resulting from the pandemic, municipal spending on repair and replacement projects in 2023 and 2022 returned to more normalized levels. According to the United States Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates at September 30, 2023 increased 4.6%.
In 2023, we anticipate that inflation will continue to increase material and other costs. 26 Table of Contents Index to Financial Statements Results of Operations Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 Year ended September 30, 2022 Water Flow Solutions Water Management Solutions Corporate Consolidated (in millions) Net sales $ 714.1 $ 533.3 $ — $ 1,247.4 Gross profit 212.4 151.9 — $ 364.3 Operating expenses: Selling, general and administrative 87.1 102.8 48.8 238.7 Strategic reorganization and other charges 0.2 0.4 6.6 7.2 Goodwill impairment 6.8 — — 6.8 Total operating expenses 94.1 103.2 55.4 252.7 Operating income (loss) $ 118.3 $ 48.7 $ (55.4) 111.6 Pension benefit other than service (3.9) Interest expense, net 16.9 Income before income taxes 98.6 Income tax expense 22.0 Net income $ 76.6 Year ended September 30, 2021 Water Flow Solutions Water Management Solutions Corporate Consolidated (in millions) Net sales $ 617.8 $ 493.2 $ — $ 1,111.0 Gross profit $ 202.8 $ 155.7 $ — $ 358.5 Operating expenses: Selling, general and administrative 81.8 85.8 51.2 218.8 Strategic reorganization and other charges (benefits) 0.1 (0.4) 8.3 8.0 Total operating expenses 81.9 85.4 59.5 226.8 Operating income (loss) $ 120.9 $ 70.3 $ (59.5) 131.7 Pension benefit other than service (3.3) Interest expense, net 23.4 Loss on early extinguishment of debt 16.7 Income before income taxes 94.9 Income tax expense 24.5 Net income $ 70.4 Consolidated Analysis Net sales for 2022 increased $136.4 million, or 12.3%, to $1,247.4 million from $1,111.0 million in the prior year primarily as a result of higher pricing across most of our product lines in addition to increased volumes.
We currently are unable to estimate the impact that this will have on our financial results. 28 Table of Contents Index to Financial Statements Results of Operations Year Ended September 30, 2023 Compared to Year Ended September 30, 2022 Year ended September 30, 2023 Water Flow Solutions Water Management Solutions Corporate Consolidated (in millions) Net sales $ 634.4 $ 641.3 $ — $ 1,275.7 Gross profit 164.9 214.6 — 379.5 Operating expenses: Selling, general and administrative 85.3 106.9 49.7 241.9 Strategic reorganization and other charges — 1.7 8.5 10.2 Total operating expenses 85.3 108.6 58.2 252.1 Operating income (loss) $ 79.6 $ 106.0 $ (58.2) 127.4 Pension expense other than service 3.7 Interest expense, net 14.7 Income before income taxes 109.0 Income tax expense 23.5 Net income $ 85.5 Year ended September 30, 2022 Water Flow Solutions Water Management Solutions Corporate Consolidated (in millions) Net sales $ 714.1 $ 533.3 $ — $ 1,247.4 Gross profit 212.4 151.9 — 364.3 Operating expenses: Selling, general and administrative 87.1 102.8 48.8 238.7 Strategic reorganization and other charges 0.2 0.4 6.6 7.2 Goodwill impairment 6.8 — — 6.8 Total operating expenses 94.1 103.2 55.4 252.7 Operating income (loss) $ 118.3 $ 48.7 $ (55.4) 111.6 Pension benefit other than service (3.9) Interest expense, net 16.9 Income before income taxes 98.6 Income tax expense 22.0 Net income $ 76.6 Consolidated Analysis Net sales for 2023 increased $28.3 million, or 2.3%, to $1,275.7 million from $1,247.4 million in the prior year primarily as a result of higher pricing across most of our product lines partially offset by lower volumes at Water Flow Solutions.
Gross profit in 2022 decreased $3.8 million to $151.9 million from $155.7 million in the prior year. Gross margin decreased to 28.5% in 2022 from 31.6% in the prior year primarily as a result of higher cost of sales associated with inflation, and unfavorable manufacturing performance, partially offset by higher pricing and increased volumes.
Gross profit in 2023 increased $62.7 million or 41.3%, to $214.6 million from $151.9 million in the prior year. Gross margin increased to 33.5% in 2023 from 28.5% in the prior year primarily as a result of higher pricing and increased volumes across most product lines partially offset by unfavorable manufacturing performance and inflation.
Cash and cash equivalents decreased during 2022 as a result of capital expenditures of $54.7 million, dividend payments of $36.5 million, $35.0 million in share repurchases, and $6.4 million in effect of currency exchange rate changes on cash, partially offset by $52.3 million in cash provided by operating activities.
Cash and cash equivalents increased during 2023 as a result of $109.0 million in cash provided by operating activities, partially offset by capital expenditures of $47.6 million, dividend payments of $38.1 million, $10.0 million in common stock repurchases, and $4.3 million in effect of currency exchange rate changes on cash.
During the fiscal year 2022, we experienced a 40% increase in the average cost per ton of scrap steel and a 20% increase in the average cost of brass as compared to 2021.
During our fiscal year 2023, we experienced an 8% decrease in the average cost per ton of scrap steel and a 2% decrease in the average cost of brass as compared with our fiscal year 2022.
Interest expense, net declined $6.5 million in 2022 from the prior year primarily as a result of the retirement of our 5.5% Senior Unsecured Notes (“5.5% Senior Notes”), which were replaced with 4.0% Senior Unsecured Notes (“4.0% Senior Notes”) as well as an increase in capitalized interest on our large capital projects, and higher interest income. 2022 2021 (in millions) 5.5% Senior Notes $ — $ 17.6 4.0% Senior Notes 18.0 6.2 Deferred financing costs amortization 1.0 1.1 ABL Agreement 0.9 0.9 Capitalized interest (2.6) (2.3) Other interest expense 0.3 0.3 Total interest expense 17.6 23.8 Interest income (0.7) (0.4) Total interest expense, net $ 16.9 $ 23.4 Income tax expense of $22.0 million in 2022 resulted in an effective income tax rate of 22.3%, which was lower than the 25.8% rate in the prior year reflecting benefits from research and development tax credits and lower foreign tax rates.
Year ended September 30, 2023 2022 (in millions) 4.0% Senior Notes $ 18.0 $ 18.0 Deferred financing costs amortization 1.0 1.0 ABL Agreement 0.9 0.9 Capitalized interest (1.6) (2.6) Other interest expense 0.1 0.3 Total interest expense 18.4 17.6 Interest income (3.7) (0.7) Total interest expense, net $ 14.7 $ 16.9 Income tax expense of $23.5 million in 2023 resulted in an effective income tax rate of 21.6%, which was lower than the 22.3% rate in the prior year reflecting benefits from research and development tax credits and lower effective state tax rates due to state apportionment changes.
We expect to fund these cash requirements from cash on hand and cash generated from operations. Seasonality Our business is seasonal as a result of the impact of cold weather conditions.
Additionally, we will incur costs in 2024 to address and remediate the October 2023 cybersecurity incident, the extent of which is uncertain at this time. We expect to fund these cash requirements from cash on hand and cash generated from operations. Seasonality Our business is seasonal as a result of the impact of cold weather conditions.
Receivables, net were $228.0 million at September 30, 2022 and $212.2 million at September 30, 2021. This increase was primarily a result of the increase in net sales year over year. Inventories, net were $278.7 million at September 30, 2022 and $184.7 million at September 30, 2021.
Receivables, net were $217.1 million at September 30, 2023 and $228.0 million at September 30, 2022. This decrease was primarily a result of lower sales in the final quarter of the year compared with the prior year. Inventories, net were $297.9 million at September 30, 2023 and $278.7 million at September 30, 2022.
Other current liabilities and other noncurrent liabilities decreased as a result of employee incentive payouts, income tax payments, the repayment of the CARES Act employer payroll tax deferral and the payment of customer rebates. Capital expenditures were $54.7 million for 2022 compared with $62.7 million for 2021.
Other current liabilities and other noncurrent liabilities decreased as a result of employee incentive payouts, operating lease liabilities, and the repayment of the CARES Act employer payroll tax deferral, partially offset by an increase in the warranty accrual and returned goods refund liability. Capital expenditures were $47.6 million for 2023 compared with $54.7 million for 2022.
As a percentage of net sales, SG&A decreased 60 basis points to 19.1% of net sales from 19.7% in the prior year. Strategic reorganization and other charges for 2022 of $7.2 million primarily consisted of certain transaction-related costs, expenses associated with our ongoing restructuring activities, and the Albertville tragedy.
Strategic reorganization and other charges for 2023 of $10.2 million primarily consisted of expenses associated with the leadership transition and other restructuring charges related to severance in addition to certain transaction-related expenses. Strategic reorganization and other charges for 2022 of $7.2 million primarily consisted of certain transaction-related costs, expenses associated with our restructuring activities, and the Albertville tragedy.
The $8.5 million decrease in the net liability was primarily a result of reductions in intangible assets. 32 Table of Contents Index to Financial Statements Liquidity and Capital Resources We had cash and cash equivalents of $146.5 million at September 30, 2022 and approximately $160.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”) based on September 30, 2022 data.
The $12.5 million decrease in the net liability was primarily a result of an increase in deferred tax assets related to Internal Revenue Code Section 174 pertaining to the amortization of research and development expenditures which was first applicable to us beginning in our fiscal year 2023. 31 Table of Contents Index to Financial Statements Liquidity and Capital Resources We had cash and cash equivalents of $160.3 million at September 30, 2023 and approximately $162.4 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”) based on September 30, 2023 data.
Gross profit for 2022 increased $9.6 million, or 4.7%, to $212.4 million from $202.8 million in the prior year primarily as a result of higher pricing and increased volumes across most product lines except for service brass products, partially offset by higher cost of sales associated with inflation and unfavorable manufacturing performance, primarily at our brass foundry.
Gross profit for 2023 decreased $47.5 million, or 22.4%, to $164.9 million from $212.4 million in the prior year primarily as a result of lower volumes, as well as unfavorable manufacturing performance and inflation partially offset by higher pricing across most product lines. Gross margin was 26.0% in 2023, as compared with 29.7% in the prior year.
Additionally, a significant increase in costs of repair or replacement could require additional warranty expense. We monitor and analyze our warranty experience and costs periodically and revise our warranty accrual as necessary.
Additionally, a significant increase in costs to repair or replace could require additional warranty expense. We monitor and analyze our warranty experience and costs periodically and revise our warranty accrual as necessary. However, as we cannot predict actual future claims, the potential exists for the difference in any one reporting period to be material.
Segment Analysis Water Flow Solutions Net sales for 2022 increased $96.3 million, or 15.6%, to $714.1 million from $617.8 million in the prior year. Net sales increased primarily as a result of higher pricing and increased volumes across most of the Water Flow Solutions segment’s product lines.
Segment Analysis Water Flow Solutions Net sales for 2023 decreased $79.7 million, or 11.2%, to $634.4 million from $714.1 million in the prior year. Net sales decreased primarily as a result of lower volumes in iron gate valves and service brass products partially offset by higher pricing across most of Water Flow Solutions’ product lines.
Deferred income taxes were net liabilities of $86.3 million at September 30, 2022 and $94.8 million at September 30, 2021, primarily related to intangible assets.
Total outstanding debt was $447.4 million as of September 30, 2023 and $446.9 million as of September 30, 2022. Total debt increased due to the amortization of deferred financing costs. Deferred income taxes were net liabilities of $73.8 million at September 30, 2023 and $86.3 million at September 30, 2022, primarily related to intangible assets.
Selling, general and administrative expenses (“SG&A”) increased 9.1% to $238.7 million for 2022 from $218.8 million in the prior year.
Gross margin increased to 29.7% in 2023 as compared with 29.2% in the prior year. 29 Table of Contents Index to Financial Statements Selling, general and administrative expenses (“SG&A”) increased 1.3% to $241.9 million for 2023 from $238.7 million in the prior year.
During the year ended September 30, 2022, Water Flow Solutions incurred a non-cash goodwill impairment charge of $6.8 million. 28 Table of Contents Index to Financial Statements Water Management Solutions Net sales in 2022 increased 8.1% to $533.3 million from $493.2 million in the prior year primarily as a result of higher pricing across most of the Water Management Solutions segment’s product lines and increased volumes for fire hydrants, natural gas, and repair and installation product lines.
No impairment charge was recorded in 2023. 30 Table of Contents Index to Financial Statements Water Management Solutions Net sales in 2023 increased $108.0 million, or 20.3%, to $641.3 million from $533.3 million in the prior year primarily as a result of higher pricing across most of Water Management Solutions’ product lines and increased volumes, particularly of fire hydrants due to an elevated backlog, as well as across most product lines.
Our deferred tax liabilities and assets are based on our expectations of future operating performance, reversal of taxable temporary differences, tax planning strategies, interpretation of the tax regulations currently enacted and rulings in numerous tax jurisdictions. 35 Table of Contents Index to Financial Statements We only record tax benefits for positions that we believe are more likely than not of being sustained under audit examination based solely on the technical merits of the associated tax position.
Our deferred tax liabilities and assets are based on our expectations of future operating performance, reversal of taxable temporary differences, tax planning strategies, interpretation of the tax regulations currently enacted and rulings in numerous tax jurisdictions.
This increase was primarily a result of higher pricing and increased volumes which were partially offset by higher cost of sales 27 Table of Contents Index to Financial Statements associated with inflation, unfavorable manufacturing performance, including labor challenges, and supply chain disruptions. Gross margin decreased to 29.2% in 2022 as compared with 32.3% in the prior year.
Gross profit increased $15.2 million, or 4.2%, to $379.5 million for 2023 compared with $364.3 million in the prior year. This increase was primarily a result of higher pricing which was partially offset by lower volumes, unfavorable manufacturing performance, including labor and material inefficiencies and increased outsourcing, as well as inflation.
SG&A in 2021 increased $6.7 million, or 8.9% to $81.8 million from $75.1 million in the prior year primarily as a result of increased personnel-related costs including higher sales commissions associated with higher net sales and orders, inflation, information technology spending, and new product development.
SG&A increased 4.0% to $106.9 million in 2023 from $102.8 million in the prior year primarily as a result of higher costs associated with inflation, third-party fees, and new product development, partially offset by lower personnel-related and incentive costs. SG&A as a percentage of net sales was 16.7% for 2023 and 19.3% in the prior year.
Inventories increased during 2022 as a result of increased volume, inflationary costs, and inventory management due to supply chain issues. Property, plant and equipment, net was $301.6 million at September 30, 2022 and $283.4 million at September 30, 2021. Property, plant and equipment increased primarily as a result of our previously-announced capital expansion projects in Kimball, Tennessee and Decatur, Illinois.
Inventories increased during 2023 as a result of inflation and select inventory management to meet anticipated orders. Property, plant and equipment, net was $311.7 million at September 30, 2023 and $301.6 million at September 30, 2022. Property, plant and equipment increased as a result of $47.6 million in capital expenditures primarily associated with our new foundry in Decatur, Illinois.
The ABL permits us to increase the size of the credit facility by an additional $150.0 million in certain circumstances subject to adequate borrowing base availability.
The ABL permits us to increase the size of the credit facility by an additional $150.0 million in certain circumstances subject to adequate borrowing base availability. On April 5, 2023, we amended the ABL to replace LIBOR-based loans with Secured Overnight Financing Rate (“SOFR”) based loans plus an adjustment of 10 basis points, among other immaterial modifications.
Excess availability based on September 30, 2022 data was $160.7 million , as reduced by $14.1 million of outstanding letters of credit and $0.2 million of accrued fees and expenses. 4.0% Senior Unsecured Notes On May 28, 2021, we privately issued $450.0 million of 4.0% Senior Unsecured Notes (“4.0% Senior Notes”), which mature on June 15, 2029 and bear interest at 4.0%, paid semi-annually in June and December.
The maximum aggregate of borrowings and other credit extensions under the ABL is limited to $50.0 million at any time outstanding until all of the delayed deliveries required under the ABL have been made. 4.0% Senior Unsecured Notes On May 28, 2021, we privately issued $450.0 million of 4.0% Senior Unsecured Notes (“4.0% Senior Notes”), which mature on June 15, 2029 and bear interest at 4.0%, paid semi-annually in June and December.
SG&A as a percentage of net sales was 17.4% for 2021 and 18.2% in the prior year. Corporate SG&A increased by $6.7 million from $44.5 million in 2020 to $51.2 million in 2021 as a result of increased personnel-related expenses and inflation.
SG&A in 2023 decreased 2.1% to $85.3 million from $87.1 million in the prior year primarily as a result of lower personnel and incentive related costs partially offset by higher costs associated with inflation, increased third-party fees, and higher insurance expense. SG&A as a percentage of net sales was 13.4% and 12.2% for 2023 and 2022, respectively.
Other current liabilities decreased during 2022 primarily as a result of lower personnel-related expenses, including incentive compensation and sales commissions, as well as customer rebates and income taxes. Total outstanding debt was $446.9 million as of September 30, 2022 and September 30, 2021.
Accounts payable and other current liabilities were $218.1 million at September 30, 2023 and $240.2 million at September 30, 2022. Accounts payable decreased during 2023 as a result of timing and a comparative reduction in the volume of inventory purchases. Other current liabilities decreased during 2023 primarily as a result of lower personnel-related expenses, including incentive compensation.
We anticipate inflation in raw and other material costs in 2023, which may have an adverse effect on our margins to the extent we are unable to pass on such higher costs to our customers. 34 Table of Contents Index to Financial Statements Material Cash Requirements We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures.
We anticipate inflation in raw and other material costs in 2024, including on purchased components, which is likely to have an adverse effect on our margins to the extent we are unable to pass on such higher costs to our customers. During fiscal year 2023, we experienced labor inflation of approximately 4.5%, consistent with the U.S.
We performed our annual impairment testing at September 1, 2022. As a result of this quantitative testing, we recognized a $6.8 million goodwill impairment charge for a reporting unit within our Water Flow Solutions segment as the carrying value exceeded its fair value.
We performed our annual impairment testing at September 1, 2023. The results of the testing indicated that the fair value exceeded the carrying value of our reporting units which contain goodwill. As such, no impairment charge was recorded.
We expect amortization expense for these assets to be approximately $28 million and $27 million in the next two years with a decrease to approximately $8 million in fiscal 2025, approximately $6 million in fiscal 2026 and approximately $5 million in fiscal 2027.
We expect amortization expense for these assets to be approximately $27 million for 2024, decreasing to approximately $7 million in fiscal 2025, approximately $6 million in fiscal 2026 and fiscal 2027, and approximately $5 million in fiscal 2028. Indefinite-lived intangible assets, $272.6 million at September 30, 2023, are not amortized but are tested for potential impairment at least annually.
Our determination of the estimated fair value was based on a combination of the discounted cash flow method and the guideline public company method. Our testing indicated no other impairment. Warranty Cost We accrue for warranty expenses that can include customer costs of repair and/or replacement, including labor, materials, equipment, freight and reasonable overhead costs.
O ur determination of the estimated fair value was based on a combination of the discounted cash flow method and the guideline public company method.
Inventory purchases increased during the fiscal year ended September 30, 2022 as compared with the fiscal year ended September 30, 2021 as a result of inflation, increased sales, and inventory management due to supply chain factors.
Inventories increased during the fiscal year ended September 30, 2023 as a result of timing and an increased volume of inventory purchases, partially offset by a decrease in inventory backlog.
The increase in SG&A was primarily a result of higher travel and trade show expenditures, higher costs associated with inflation, investments in research and development as well as information technology, and the inclusion of i2O Water, partially offset by lower incentive compensation in personnel-related expenses and foreign exchange gains.
The increase in SG&A was primarily a result of higher costs associated with inflation, third-party fees, and insurance, partially offset by lower personnel-related and incentive costs. As a percentage of net sales, SG&A decreased 10 basis points to 19.0% of net sales from 19.1% in the prior year.
In November 2022, Blue Chip Economic Indicators forecasted a 12.3% de crease in housing starts for the calendar year 2023 compared to the calendar year 2022. Consolidated For our fiscal year 2023, we anticipate that consolidated net sales will be 6% to 8% higher t han our fiscal year 2022 primarily driven by the benefits of higher pricing.
For fiscal 2024, we anticipate that high interest rates will continue to impact housing starts and new lot and land development . In November 2023, Blue Chip Economic Indicators forecasted a 2.2% decrease in total housing starts for the calendar year 2024 compared to the calendar year 2023.
While demand from the new residential construction end market has been at healthy levels during fiscal 2022, especially for lot and land development activity, we anticipate that activity levels will slow during fiscal 2023 based on higher interest rates leading to a decrease in demand for new residential housing .
We anticipate lower demand in the municipal repair and replacement end market due to budgetary pressures on municipalities resulting from high interest rates and inflation, especially for smaller municipalities. Demand from the new residential construction end market decreased in fiscal 2023 reflecting a 12.9% decrease in total housing starts as compared with fiscal 2022 according to Census data.
Removed
While the economic effects of the pandemic have impacted revenues for some water utilities in the United States, water utilities were generally able to maintain repair and replacement activities. We expect the operating environment during fiscal year 2023 to be very challenging as a result of the inflationary environment, labor challenges and potential recession.
Added
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Removed
We anticipate healthy demand in the municipal repair and replacement market due to favorable budgets, especially at larger municipalities.
Added
Discussion of year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7. of our Annual Report on Form 10-K for the year ended September 30, 2022.
Removed
In 2022, we encountered increased material costs as a result of higher raw material prices, particularly brass ingot and scrap steel, as well as higher purchased parts, freight, labor costs and energy expenses.
Added
Effective August 21, 2023, the Company’s Chief Executive Officer (“CEO”) left his role and Marietta Edmunds Zakas, the Company’s Chief Financial Officer (“CFO”) was named President and CEO. Steven S. Heinrichs, the Company’s Chief Legal and Compliance Officer was named CFO and continues to serve as Chief Legal and Compliance Officer. In addition, certain other management changes occurred.
Removed
Gross profit increased $5.8 million, or 1.6%, to $364.3 million for 2022 compared with $358.5 million in the prior year.
Added
As a result, the Company incurred transition and retention expense which has been recorded to Strategic reorganization and other charges in our consolidated statements of operations.
Removed
For the fiscal year 2021, Strategic reorganization and other charges of $8.0 million primarily relate to termination benefits associated with our plant closures in Aurora, Illinois and Surrey, British Columbia, Canada, the Albertville tragedy, and certain transaction-related costs, partially offset by a one-time settlement gain in connection with an indemnification of a previously owned property.
Added
Recent Developments In October 2023, the Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel. While we have reopened the facility, the war increases the likelihood of supply interruptions and may hinder our ability to acquire the necessary materials we need to make our products.
Removed
Gross margin was 29.7% in 2022, as compared with 32.8% in the prior year. SG&A in 2022 increased 6.5% to $87.1 million from $81.8 million in the prior year primarily as a result of increased travel and trade show expenditures, higher costs associated with inflation, and investments in research and development and information technology.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Net sales and expenses of these subsidiaries are translated into United States dollars at the average currency exchange rate during the period.
Net sales and expenses of these subsidiaries are translated into United States dollars at the average relevant foreign currency exchange rate during the period.
See “Item 1A. RISK FACTORS-The prices of our purchased components and raw materials can be volatile.” 37 Table of Contents Index to Financial Statements Currency Risk Our principal assets, liabilities and operations outside the United States are in Israel, Canada and China. Foreign reporting entities are remeasured into local currencies with the effect reflected in the consolidated statements of operations.
RISK FACTORS-The prices of our purchased components and raw materials can be volatile.” 36 Table of Contents Index to Financial Statements Currency Risk Our principal assets, liabilities and operations outside the United States are in Israel, Canada and China. Foreign reporting entities are remeasured into local currencies with the effect reflected in the consolidated statements of operations.
Our product margins and level of profitability may fluctuate whether or not we sufficiently pass increases in purchased component and raw material costs on to our customers. We experience d a 40% increase in the average cost per ton of scrap steel and a 20% increase in the average cost of brass ingot in 2022 compared to 2021.
Our product margins and level of profitability may fluctuate whether or not we sufficiently pass increases in purchased component and raw material costs on to our customers. We experienced an 8% decrease in the average cost per ton of scrap steel and a 2% decrease in the average cost of brass ingot in 2023 compared to 2022. See “Item 1A.

Other MWA 10-K year-over-year comparisons