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What changed in Mueller Water Products, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Mueller Water Products, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+278 added−285 removedSource: 10-K (2024-11-20) vs 10-K (2023-12-14)

Top changes in Mueller Water Products, Inc.'s 2024 10-K

278 paragraphs added · 285 removed · 215 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+11 added−15 removed51 unchanged
Biggest changeFinancial 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.
Biggest changeFinancial Health and Wellness Work-Life Balance Competitive base pay Medical, dental and vision insurance with mental/behavioral health benefits Paid time off, paid holidays and jury duty pay Bonus plans tied to company performance for all employees Flexible spending/health savings accounts Paid parental leave with 12 weeks of paid leave for eligible birth parents; 4 weeks paid parental leave for non-birth adoptive and foster parents Employee stock purchase plan at a discounted stock price Supplemental health benefits, including accident, hospital indemnity, critical illness and whole life coverage Employee assistance program Recognition pay and service awards Wellness rewards program Employee discount programs 401(k) retirement plans with a 5% company match and several pre-tax and after-tax savings options Health plan programs, including smoking cessation Employee engagement activities including family friendly events Short- and long-term disability insurance On-site and no-cost vaccinations Virtual healthcare options for general medicine and mental health needs Healthcare navigation service for managing existing benefits On-site health fairs and free health screenings Commitment to Diversity and Inclusion.
In connection with these efforts, we work to minimize the amount of water we use at our manufacturing facilities and maintain stringent water quality standards. Our processes are designed to return the water used in manufacturing at a quality level that does not negatively impact the receiving environment.
In connection with these efforts, we work to minimize the amount of water we use at our manufacturing facilities and maintain stringent water quality standards. Our processes are designed to return the water used in manufacturing to a quality level that does not negatively impact the receiving environment.
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.
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 endeavor to provide a safe, inclusive, high-performance culture where our people can thrive. We strive to recruit, develop, engage, train and protect our workforce.
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.
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.
We consider our installed base, product quality, customer service level, brand recognition, innovation, distribution and technical support to be competitive strengths. The competitive environment for most of Water Flow Solutions’ valve products is mature and many end users are slow to transition to brands other than their historically preferred brands making it difficult to increase market share in this environment.
We consider our installed base, product quality, customer service level, brand recognition, innovation, distribution and technical support to be competitive strengths. The competitive environment for most of Water Flow Solutions’ valve products is mature and many end users are slow to transition to brands other than their historically preferred brands making it difficult to increase market share.
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.
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 rates and the ability to reuse some of the materials. Additionally, we design, manufacture, and assemble water metering products in Cleveland, North Carolina.
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.
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 ® Milliken ™® Mueller ® Mueller Systems ® Pratt ® Pratt Industrial ® Repaflex ® Repamax ® Sentryx ™ Singer ® U.S.
Water Management Solutions also sells water leak detection and pipe condition assessment products and services in North America, the United Kingdom and select countries in Europe, Asia and the Middle East, with our primary markets being the United States and Canada. The worldwide market for leak detection and pipe condition assessment is highly fragmented with numerous competitors.
Additionally, Water Management Solutions sells water leak detection and pipe condition assessment products and services in North America, the United Kingdom and select countries in Europe, Asia and the Middle East, with our primary markets being the United States and Canada. The worldwide market for leak detection and pipe condition assessment is highly fragmented with numerous competitors.
Water Management Solutions manufactures dry-barrel and wet-barrel fire hydrants. Water Management Solutions sells fire hydrants for new water infrastructure development, fire protection systems and water infrastructure repair and replacement projects. Our fire hydrants consist of an upper barrel and nozzle section and a lower barrel and valve section that connects to a water main.
Water Management Solutions manufactures dry-barrel and wet-barrel fire hydrants. Water Management Solutions sells fire hydrants for new water infrastructure development, fire protection systems and water infrastructure repair and replacement projects. Our fire hydrants consist of an upper barrel and nozzle section and a lower barrel and valve section that connect to a water main.
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.
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 $1,314.7 million in 2024.
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.
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 United States and Canada. Our distributor relationships are generally non-exclusive, but we attempt to align ourselves with key distributors in the principal markets we serve.
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.
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 residential, fire protection and commercial metering solutions.
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.
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.
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.
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 $20.5 million, $25.9 million and $24.5 million during 2024, 2023 and 2022, respectively.
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.
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 $559.2 million, $641.3 million and $533.3 million of net sales in our 2024, 2023, and 2022 fiscal years respectively, for Water Management Solutions products and solutions. Fire Hydrants.
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.
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 6% of Water Management Solutions’ backlog at the end of 2024 will not be shipped until beyond 2025.
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.
We believe these i nvestments will drive margin expansion by lowering costs, expanding our product portfolio, and improving product quality. We have 1 Table of Contents Index to Financial Statements completed our large valve manufacturing expansion in Chattanooga, Tennessee and a new facility in Kimball, Tennessee, which included consolidating multiple facilities.
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.
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”), two third-party certification companies, have approved many of these products.
As part of this strategy, we may pursue international opportunities, including acquisitions, joint ventures and partnerships. Description of Products and Services We offer a broad line of water infrastructure, flow control, metering and leak detection products and services primarily in the United States and Canada. Water Flow Solutions sells iron gate and specialty valves, and service brass products.
As part of this strategy, we have pursued, and may continue to pursue, international opportunities, including acquisitions, joint ventures and partnerships. Description of Products and Services We offer a broad line of water infrastructure, and flow control products and services primarily in the United States and Canada. Water Flow Solutions sells iron gate and specialty valves, and service brass products.
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.
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 fiscal years 2024 and 2023, and 8% in fiscal year 2022.
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.
Productivity improvements within our facilities should allow us to lower costs, which can help fund additional manufacturing initiatives and continued investment in product development. Since 2018, we have prioritized capital investments to modernize our manufacturing facilities and processes, expand capacity and capabilities for domestic manufacturing and accelerate new product development.
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.
We recognized $755.5 million, $634.4 million and $714.1 million of net sales in our 2024, 2023 and 2022 fiscal years, respectively, for Water Flow Solutions products and solutions. 2 Table of Contents Index to Financial Statements Water Valves and Related Products.
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 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 approxim ately 38%, 35% and 40% of our gross sales in 2024, 2023 and 2022 fiscal years, respectively . See “Item 1A.
Water Management Solutions also sells pipe repair products, such as couplings, grips and clamps used to repair leaks, under the HYMAX ® , Mueller ® and Krausz ® brand names. Water Metering Products and Systems .
Water Management Solutions also sells pipe repair products, such as couplings, grips and clamps used to repair leaks, under the HYMAX ® , Mueller ® and Krausz ® brand names. Natural Gas Distribution Products .
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.
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.
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.
Water Management Solutions The Water Management Solutions product and service portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, as well as pressure management and control products and solutions. Net sales of products and services in the Water Management Solutions business unit were approximately 43% of fiscal 2024 consolidated net sales.
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.
Backlog for Water Management Solutions and Water Flow Solutions are as follows: September 30, 2024 2023 (in millions) Water Flow Solutions $ 199.0 $ 232.0 Water Management Solutions 103.5 93.5 Total backlog $ 302.5 $ 325.5 Sales cycles for metering systems can span several years, and it is common for customers to place orders throughout the contract period.
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.
Purchased parts and raw materials represented approxi mately 35% and 9%, respectively, of Cost of sales in 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.
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.
As of September 30, 2024, women and minorities each 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.
We continue to invest time and resources to deepen our channel partnerships and end customer relationships to increase our presence in the fastest growing markets. Additionally, we seek to attract and retain customers through product training and engineering resources to ascertain, educate and understand project requirements.
Expanding our systems and employee capabilities will allow us to improve our customer experience. We continue to invest time and resources to deepen our channel partnerships’ end-customer relationships to increase our presence in the fastest-growing markets. Additionally, we seek to attract and retain customers through product training and engineering resources to ascertain, educate and understand project requirements.
We also sell pressure control valves and pressure loggers through our Singer Valve and i2O products. The primary competitors for these products are Cla-Val, Watts, OCV, Ross Valve, Bermad and Halma.
Our principal competitors are Sensus, Neptune Technology Group Inc., Badger Meter, Inc., Itron, Inc., and Master Meter, Inc. We also sell pressure control valves and pressure loggers through our Singer Valve and i2O products. The primary competitors for these products are Cla-Val, Watts, OCV, Ross Valve, Bermad and Halma.
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.
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.
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.
We plan to continue to invest in our product development capabilities, including our research and development processes, 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. Foster culture through purpose, collaboration, inclusion and effectiveness.
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 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.
Backlog is a meaningful indicator for many of our product lines. The delivery lead time for certain product lines such as specialty valves can be longer than one year, and we expect approximately 22% of Water Flow Solutions’ backlog at the end of 2023 will not be shipped until beyond 2024.
The delivery lead time for certain product lines such as specialty valves 5 Table of Contents Index to Financial Statements can be longer than one year, and we expect approximately 17% of Water Flow Solutions’ backlog at the end of 2024 will not be shipped until beyond 2025.
“ 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.
“ 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. Organization Updates In August 2023, Marietta Edmunds Zakas was appointed to Chief Executive Officer and to the Board of Directors.
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.
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.
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.
Copies of our filings, specified exhibits and corporate governance materials are also available free of charge by writing to 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.
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.
At September 30, 2024, approximately 42% of our United States 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.
Research and Development Our primary research and development (“R&D”) facilities are located in Chattanooga, Tennessee; Ariel, Israel; Atlanta, Georgia; Toronto, Ontario; and Southampton, United Kingdom.
Our more significant competitors are Pure Technologies Ltd., Gutermann AG and Syrinix Ltd. Research and Development Our primary research and development (“R&D”) facilities are located in Chattanooga, Tennessee; Rosh Haayin, Israel; Atlanta, Georgia; Toronto, Ontario; and Southampton, United Kingdom.
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.
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. Water Metering Products and Systems .
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.
Wet-barrel fire 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 spare part inventories.
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
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
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.
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 are committed to providing fair and equitable pay. In 2021, we completed a pay equity analysis to ensure we met this commitment.
Continue to seek, acquire, and invest in businesses and technologies that expand our existing portfolio or allow us to enter new markets.
This communication is accomplished in part by conducting employee satisfaction surveys, global town halls and facility employee meetings. Continue to seek, acquire, and invest in businesses and technologies that expand our existing portfolio or allow us to enter new markets.
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.
Our repair solutions work well with each of these piping systems. 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 The gas repair products we sell are primarily used on distribution lines.
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.
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 have enacted, are enacting or are considering enacting GHG legislation, regulations or international accords, either individually and/or as part of regional initiatives.
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.
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. Water Leak Detection and Pipe Condition Assessment Products and Services .
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.
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.
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.
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. Approximate ly 6% of Water Management Solutions’ net sales were to Canadian customers in fiscal years 2024 and 2023, and 7% in fiscal year 2022.
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.
We have a series of Diversity and Inclusion (“D&I”) councils including an executive council, a company-wide employee council, local employee councils at each manufacturing facility, a corporate council and a sales team council. Talent Acquisition and Retention. We strive to attract, develop and retain high-performing talent, and we support and reward employee performance.
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.
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.
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.
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: Improve operational excellence and expand capabilities. We expect to make disciplined investments in our commercial and operational capabilities to drive additional performance improvements.
With an AMI system, a network of permanent data collectors or gateway receivers that are always active or listening for the radio transmission from the utilities’ meters gather the data. AMI systems eliminate the need for utility personnel to travel through service territories to collect meter reading data.
With an AMI system, a network of permanent data collectors or gateway receivers that are always active or listening 3 Table of Contents Index to Financial Statements for the radio transmission from the utilities’ meters gathers the data. Water Management Solutions sells both AMR and AMI systems and related products.
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.
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. Additionally, we expect these investments to drive operational efficiencies, expand capabilities for American-made products, advance our sustainability environmental initiatives, and help accelerate product development.
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.
We are focused on improving operational excellence, increasing supply chain efficiencies and developing advanced manufacturing capabilities to drive productivity across our facilities. We expect these efforts will drive sales growth, improve product margins, and facilitate innovation and new product development.
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.
This communication is accomplished in part by conducting an annual employee satisfaction survey, global quarterly town halls and periodic facility employee meetings. Our fiscal year 2024 United States employee turnover rate was approximately 22%. Leadership and Culture Development. As new generations enter the workforce, their dedication to sustainability is pivotal for our long-term prosperity.
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.
Heinrichs will continue to serve as CFO and Chief Legal and Compliance Officer until a new CFO has been named. 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 2024 consolidated net sales.
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 remote disconnect water meter enables the water flow to be stopped and started remotely via a handheld device or from a central operating facility. Manufacturing See “Item 2. PROPERTIES” for a description of our principal manufacturing facilities.
Our more significant competitors are Pure Technologies Ltd., Gutermann AG and Syrinix Ltd. Additionally, we sell gas repair products which are primarily used on distribution lines. Our primary competitors for these products are Smith Blair, T.D. Williamson, and A.Y. McDonald.
Our primary competitors for these products are Smith Blair, T.D. Williamson, and A.Y. McDonald. Water Management Solutions also sells water metering products and systems, primarily in the United States.
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.
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.
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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.
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Ms. Zakas formerly served as our Chief Financial Officer. In May 2024, Paul McAndrew, Chief Operating Officer, was promoted to President and Chief Operating Officer. In September 2024, we announced that Steven S. Heinrichs, the Company’s Chief Financial Officer (“CFO”) and Chief Legal and Compliance Officer, will be transitioning from his position effective on or about December 31, 2024. Mr.
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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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Additionally, our new brass foundry in Decatur, Illinois is operational, and in the first half of our fiscal 2025, we expect to close our old brass foundry which was built in the early 1900s.
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These three projects accounted for a significant portion of our capital expenditures over the past five years. They are expected to drive operational efficiencies, expand capabilities for American-made products, advance our sustainability environmental initiatives, and help accelerate product development. Accelerate product development and innovation.
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Accelerate sales growth through enhanced customer experience and innovation. We plan to continue to invest in process improvements to support our objective of being the preferred partner for our customers. We are making disciplined investments in our commercial teams to enhance our customer experience to further differentiate us in the market and support our opportunities for net sales growth.
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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.
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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 endeavor to recruit, develop, engage, train and protect our workforce. Our core values of respect, integrity, trust, safety and inclusion shape our culture and define who we are.
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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.
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We are making investments to enhance collaboration and teamwork throughout the organization to create a culture of talent development, enabling us to execute on our strategic opportunities and make Mueller a preferred place to work. We prioritize employee engagement and transparency by implementing programs and processes to provide our employees with opportunities to ask questions, voice concerns and share feedback.
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While our distribution network covers all of the major locations for our principal products in the United States and Canada, we want to continue to invest in process improvements to support our objective of being the preferred partner for our customers. Expanding the capabilities of our systems and employees will allow us to improve our customers’ experiences.
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Additionally, our new brass foundry in Decatur, Illinois, is operational and in the first half of our fiscal 2025, we expect to close our old brass foundry that was built in the 1900s. Our foundries use both lost foam and green sand-casting techniques.
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Wet-barrel fire hydrants are made for warm weather climates, such as in California and Hawaii, and are sold under the Jones ® brand name.
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With improvement in our manufacturing lead times, particularly for service brass products, we experienced a decrease in our overall backlog compared to the prior year.
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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.
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We are committed to upholding fundamental human rights and believe that all human beings should be treated with dignity, fairness, and respect. 8 Table of Contents Index to Financial Statements Employee Total Compensation and Benefits Philosophy. We offer financial, physical and mental health benefits, as well as programs that help employees take care of themselves and balance work-life considerations.
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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.
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We regularly analyze our compensation to remain competitive, targeting pay at or above the 50th percentile of the market standard at each of our locations. Our benefits and wellness programs are listed below.
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Greenhouse gas ("GHG") emissions have increasingly become the subject of political and regulatory focus. Concern over potential climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting GHG emissions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeProducts 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.
Biggest changeIf 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. 16 Table of Contents Index to Financial Statements 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.
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.
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 these sales. Over time, growth in sales is expected to lessen the significance of individual customers.
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 sales and results of operations may be harmed.
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 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, such as hurricanes, 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.
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.
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 business opportunities also face political and economic instability and vulnerability to infrastructure and other disruptions.
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.
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, which depend on critical pieces of heavy equipment that cannot be moved economically to other locations or sourced quickly.
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.
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.
The COVID-19 pandemic and the resulting impact on global economies have created a number of macroeconomic challenges that have impacted our business, including volatility and uncertainty in business planning, disruptions in global supply chains, material, freight and labor inflation, shortages of and delays in obtaining certain materials and component parts, and labor shortages.
The COVID-19 pandemic and the resulting impact on global economies created a number of macroeconomic challenges that impacted our business, including volatility and uncertainty in business planning, disruptions in global supply chains, material, freight and labor inflation, shortages of and delays in obtaining certain materials and component parts and labor shortages.
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.
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 or the extent to which the assertion of these claims may expand geographically.
These actors may use a wide variety of methods, which may include developing and deploying malicious software or exploiting vulnerabilities in hardware, software, radio communication protocols, or other infrastructure in order to attack our products and services.
These actors use a wide variety of methods, which may include developing and deploying malicious software or exploiting vulnerabilities in hardware, software, radio communication protocols or other infrastructure to attack our products and services.
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.
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 cost 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.
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.
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 a transaction, including the identification and assessment of liabilities, claims or other circumstances, including those relating to intellectual property claims, which could result in litigation or regulatory exposure, 13 Table of Contents Index to Financial Statements • Assumption 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.
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.
Inflation in material costs has occurred in 2023 and 2024 and we expect it to continue into fiscal 2025. 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.
Political events, international disputes, wars, terrorism, industrial accidents and other business interruptions can harm or disrupt international commerce as well as the global economy and could have a materially adverse effect on us and our customers, suppliers, logistics providers, distributors and other channel partners.
Geopolitical events, international disputes, wars, terrorism, industrial accidents and other business interruptions can harm or disrupt international commerce as well as the global economy and could have a materially adverse effect on us and our customers, suppliers, logistics providers, distributors and other channel partners.
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.
In addition, we may be required to pay damage awards, penalties or settlements, or become subject to injunctions or other equitable remedies, which 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 materially adverse effect on our business.
Failure to comply with any environmental, health or safety requirement 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.
As a result of the varying legal and regulatory requirements to which our cross-border activities are subject, we may not always be in compliance with the trade laws and regulations in all respects.
As a result of the varying legal and regulatory requirements to which our cross-border activities are subject, we have not always been, and may not always be, in compliance with the trade laws and regulations in all respects.
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.
Although we maintain insurance for certain product related claims, such policies may not be available to us or adequately cover the liability for damages, the cost of repairs and/or the expense of litigation. Current and future claims may arise out of events or circumstances not covered by insurance and not subject to effective indemnification agreements with our subcontractors.
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.
The increasing demand for qualified personnel makes it more difficult to attract and retain employees with requisite skill sets, 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.
We expect that our exposure to foreign currency exchange rate fluctuations will grow as the relative contribution of our operations outside the United States increases through both organic and inorganic growth.
We expect that our exposure to foreign currency exchange rate fluctuations will grow as the relative distribution of our operations outside the United States increases through both organic and inorganic growth.
If the Israel-Hamas war further escalates, additional restrictions and other governmental actions could increase the severity of the impact on our operations in Israel and could materially adversely affect our business. A severe disruption to our business may result in significant lost sales and may require substantial recovery time and expenditures to resume operations.
If the Israel-Hamas war continues, additional restrictions and other governmental actions could increase the severity of the impact on our operations in Israel and could materially adversely affect our business. A severe disruption to our business may result in significant lost sales and may require substantial recovery time and expenditures to resume operations.
Additionally, 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.
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 to 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, or deny or postpone access to critical water infrastructure telemetry through vulnerabilities in our cloud services and infrastructure, or logging, sensing and telemetry products.
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.
Inflation has recently affected and has the potential to continue to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, including purchased parts, commodity and raw material costs and labor.
Our expenditures for pension obligations could be materially higher than we have predicted. We provide pension benefits to certain current and former employees. 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.
Our expenditures for pension obligations could be materially higher than we have predicted. We provide pension benefits to certain current and former employees. To determine our future payment obligations under the plan, certain rates of return on the plan’s assets, growth rates of certain costs and participant longevity have been estimated.
This seasonality in demand has resulted in fluctuations in our sales and operating results. To satisfy demand during expected peak periods, we may incur costs associated with building inventory in off-peak periods, and our projections as to future needs may not be accurate.
This seasonality in demand makes it challenging to predict sales and has resulted in fluctuations in our sales and operating results. To satisfy demand during expected peak periods, we may incur costs associated with building inventory in off-peak periods, and our projections as to future needs may not be accurate.
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.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 15. of the Notes to Consolidated Financial Statements. 18 Table of Contents Index to Financial Statements Climate change and legal or regulatory responses thereto may have an adverse impact on our business and results of operations.
The Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel in October 2023. While we have partially reopened the facility, continued disruptions and escalations of conflicts in the area increase the likelihood of supply interruptions and may hinder our ability to acquire the necessary materials we need to make our products.
The Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel in October 2023. While we continue to operate the facility, continued disruptions and escalations of conflicts in the area increase the likelihood of supply interruptions and may continue to hinder our ability to acquire the necessary materials we need to make our products.
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.
Cybersecurity events 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.
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.
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.
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.
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 proper functioning of our information technology systems is important to the successful operation of our business. If critical information technology systems fail, or are otherwise unavailable, our ability to manufacture products, process orders, track credit risk, identify business opportunities, maintain proper levels of inventories, collect accounts receivable, pay expenses and otherwise manage our business would be adversely affected.
If critical information technology systems fail, or are otherwise unavailable, our ability to manufacture products, process orders, track credit risk, identify business opportunities, maintain proper levels of inventories, collect accounts receivable, pay expenses and otherwise manage our business would be adversely affected.
Our Krausz business includes a manufacturing facility in Ariel, Israel. Supply chain disruptions and our inability to appropriately staff the Ariel facility has limited, and may continue to limit, our ability to produce Krausz products.
Our Krausz business includes a manufacturing facility in Ariel, Israel. Supply chain disruptions, facility access and our inability to appropriately staff the Ariel facility has limited, and will likely continue to limit, our ability to produce Krausz products.
There is growing concern that a gradual increase in global average temperatures as a result of increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters.
The impacts of climate change are highly unpredictable, and there is growing concern that a gradual increase in global average temperatures as a result of increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters.
High transportation costs could make our products less competitive compared to similar or alternative products offered by competitors. 15 Table of Contents Index to Financial Statements Our business, financial condition and results of operations may be adversely impacted by the effects of inflation.
High transportation costs could make our products less competitive compared to similar or alternative products offered by competitors. Our business, financial condition and results of operations may be adversely impacted by the effects of inflation.
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.
We are subject to stringent environmental, health and safety laws and regulations that impose significant compliance costs. 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.
For example, certain federal legislation requires the use of American iron and steel products in certain water projects receiving certain federal appropriations. We have incurred costs in connection with ensuring our ability to certify to these requirements, including those associated with enhancing our assembly operations and sourcing practices.
For example, certain federal legislation requires the use of American iron and steel products in certain water projects receiving certain federal appropriations. In addition, we have incurred costs to comply with these requirements, including those associated with enhancing our assembly operations and sourcing practices.
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.
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.
If such consolidation continues, our distributors could be acquired by other distributors who have better relationships with our competitors, and consequently, 11 Table of Contents Index to Financial Statements pricing and profit margin pressure may intensify. Pricing and profit margin pressure or the loss of any one of our key distributors in any market could adversely affect our operating results.
If such consolidation continues, our distributors could be acquired by other distributors who have better relationships with our competitors, and consequently, pricing and profit margin pressure may intensify. Pricing and profit margin pressure or the loss of any one of our key distributors in any market could adversely affect our operating results.
Even where multiple sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of profits, which could harm our operating results. These relationships reduce our direct control over production.
Even where multiple sources of supply are available, the qualification of alternative suppliers and the establishment of reliable supplies could result in delays and a possible loss of profits, which could harm our operating results. 14 Table of Contents Index to Financial Statements These relationships reduce our direct control over production.
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 a prolonged economic downturn, these fixed costs may cause our gross margins to erode and our earnings to decline. 15 Table of Contents Index to Financial Statements 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.
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.
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 we must have a competitive cost structure in each market while meeting the compensation and benefits needs of our employees.
These distributors’ profitability and effectiveness can vary significantly from company to company and from region to region within the same company. Further, our largest distributors generally also carry competing products. We may fail to align our operations with successful distributors in any given market. Distributors in our industry have experienced consolidation in recent years.
These distributors’ profitability and effectiveness can vary significantly from company to company and from region to region within the same company. Further, our largest distributors generally also carry competing products. We may fail to align our operations with successful distributors in any given market. 11 Table of Contents Index to Financial Statements Distributors in our industry have experienced consolidation.
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.
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.
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.
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, new and ongoing public health crises, severe weather or other similar occurrences, • Terrorist attacks, governmental instability, national emergencies, 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, including trade protection measures and import or export duties or licensing requirements, • Equipment or information systems breakdowns or failures, • Maintenance outages to conduct maintenance activities that cannot be performed safely during operations, • Prolonged power failures or reductions, • 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.
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.
The success of our products and systems depends on our ability to manage the risks associated with their introduction and continued maintenance and management, including the risk that our products and systems may have quality or other defects or deficiencies that result in their failure to satisfy performance or reliability requirements.
Our efforts to protect this information may be unsuccessful as a result of employee errors or malfeasance, technical malfunctions, the actions of third parties such as a cyberattack or other factors.
Our efforts to protect this information may be unsuccessful as a result of employee errors or malfeasance, technical malfunctions, the actions of third parties such as a cyberattack or other factors. As previously reported, we have in the past experienced cybersecurity incidents.
Any improper actions could subject us to civil or criminal penalties, including material monetary fines, or other adverse actions, including denial of import or export privileges, and could harm our reputation and our business prospects.
Improper actions could subject us to civil or criminal penalties, including material monetary fines, or other adverse actions, including denial of import or export privileges, and could harm our reputation and our business prospects. See Note 15. of the Notes to Consolidated Financial Statements.
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.
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 the northern United States and most of Canada generally face weather conditions that restrict significant construction activity.
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.
Our success depends in part on our ability to manage these risks, including costs associated with design, manufacturing, installation, maintenance and warranties. Managing these risks can be costly and technologically challenging, and we cannot determine the ultimate effect they may 12 Table of Contents Index to Financial Statements have.
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.
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.
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.
The regulatory environment related to cyber and information security, data collection and privacy is increasingly rigorous and evolving, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional 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.
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 15. of the Notes to Consolidated Financial Statements.
Growing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment.
Growing concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment. Many of our manufacturing plants use significant amounts of electricity generated by burning fossil fuels, which release carbon dioxide.
The impacts of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations.
The impacts of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations. Climate change and efforts to limit climate change may impair our production capabilities, disrupt our supply chain or impact demand for our products.
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.
Inefficient or ineffective capital allocation, along with increased capital expenditures to modernize our aging facilities and expand our capabilities, could adversely affect, among other things, our operating results, cash availability, strategic opportunities and/or stockholder value. Our goal is to invest capital to generate long-term value for our stockholders.
The markets for our technology-enabled products and services have developed more slowly than we expected and may continue to do so.
The markets for our technology-enabled products and services have developed more slowly than we expected and may continue to do so. If these products and services fail to gain market acceptance, our opportunity to grow these businesses will be limited.
From time to time, there may be changes to our executive leadership team, including as a result of the hiring, departure or realignment of key personnel. For example, in August 2023, we experienced changes to our executive leadership team as a result of the departure of our Chief Executive Officer.
From time to time, there are changes to our executive leadership team, including as a result of the hiring, departure or realignment of key personnel.
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.
Many of our products are big, bulky and heavy, which tends 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. Additionally, energy and fuel costs can fluctuate markedly, which may result in significant cost increases particularly for the price of oil and gasoline.
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.
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.
As a result of the Israel-Hamas war, upon reopening the facility after a temporary shutdown, Palestinian employees have not been permitted to return to the area due to travel and movement restrictions imposed on Palestinian workers in connection with the war. This has resulted in some delays in our ability to produce and deliver products.
We employed Palestinians in our Ariel, Israel facility prior to August 2023. As a result of the Israel-Hamas war, upon reopening the facility after a temporary shutdown, Palestinian employees have not rejoined our workforce due to, among other things, travel and movement restrictions imposed on Palestinian workers in connection with the war.
As a result of the cybersecurity incidents we experienced in October 2023, we have incurred costs, and we expect to continue to incur costs, which may be significant, in connection with efforts to investigate, assess the relevant impacts, recover our systems, enhance our data security, and protect against unauthorized access to, or manipulation of, our systems and data.
We continue to incur costs in connection with efforts to investigate potential threats, assess relevant impacts, enhance our data security and protect against unauthorized access to, or manipulation of, our systems and data. Despite incurring these costs, we may not be able to prevent future cyber incidents.
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.
Individuals 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.
We may also be subject to investigations, claims, litigation and other proceedings outside the ordinary course of business, such as the June 2021 mass shooting event in our Albertville, Alabama facility.
We have in the past and may in the future be subject to investigations, claims, litigation and other proceedings outside the ordinary course of business.
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.
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.
If this situation continues and we are unable to successfully add supplemental staff resources with sufficient technical skills to replace such workers, we may experience increased delays in our ability to produce and deliver certain of our products to customers, and our results of operations could be adversely impacted.
If we are unable to recruit and train new staff resources with sufficient technical skills in a manner that allows us to increase production levels and meet customer delivery times, we may continue to experience delays in our ability to produce and deliver certain of our products to customers, and our results of operations could be adversely impacted.
In addition, if purchased components or raw materials are not available or not available on commercially reasonable terms, our sales, profitability and cash flows would be reduced. Our competitors may secure more reliable sources of purchased components and raw materials or they may obtain these supplies on more favorable terms than we do, which could give them a cost advantage.
In addition, if purchased components or raw materials are not available or not available on commercially reasonable terms, our sales, profitability and cash flows would be reduced.
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.
For example, ongoing 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. Further, President-elect Trump has proposed significantly increased tariffs on foreign imports into the United States, particularly from China.
Breaches of our facilities, network, or data security could disrupt the security of our systems and business applications, impair our ability to provide services to our customers and protect the privacy of their data, result in product development delays, compromise confidential or technical business information harming our reputation, result in theft or misuse of our intellectual property or other assets, require us to allocate more resources to improved technologies, or otherwise adversely affect our business.
Breaches of our facilities, network or data security have in the past and may in the future disrupt the security of our systems and business applications, impair our ability to provide services to our customers and require us to allocate more resources to improved technologies.
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.
Risks related to our business strategy We may not be able to adequately manage the risks associated with our products and systems, including increased warranty costs.
Increasing life spans for plan participants may increase the estimated benefit payments and increase the amounts reported for pension obligations, pension contributions and pension expense. If increased funding requirements are particularly significant and sustained, our overall liquidity could be materially reduced, which could cause us to reduce investments and capital expenditures, or restructure or refinance our debt, among other things.
If increased funding requirements are particularly significant and sustained, our overall liquidity could be materially reduced, which could cause us to reduce investments and capital expenditures, or restructure or refinance our debt, among other things. 20 Table of Contents Index to Financial Statements The Israel-Hamas war may continue to adversely affect our ability to staff and operate our Ariel, Israel facility.
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.
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.
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.
Competition for qualified personnel is intense, and we may not be successful in attracting or retaining qualified personnel, which could negatively impact our business. 19 Table of Contents Index to Financial Statements 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 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.
We rely on various information technology systems, some of which are controlled by outside service providers, to manage key aspects of our operations. The proper functioning of our information technology systems is important to the successful operation of our business.
The result of these transactions is that the assets of, and control over, Tyco Indemnitors has changed.
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.
Our business, operating results and financial condition may be negatively impacted by geopolitical events, including wars, terrorism, industrial accidents and other business interruptions.
Our competitors may secure more reliable sources of purchased components and raw materials or they may obtain these supplies on more favorable terms than we do, which could give them a cost advantage. 21 Table of Contents Index to Financial Statements Our business, operating results and financial condition may be negatively impacted by geopolitical events, including wars, terrorism, industrial accidents and other business interruptions.
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.
Such breaches may also impair our ability to protect the privacy of customer data, result in product development delays, compromise confidential or technical business information harming our reputation, result in theft or misuse of our intellectual property or other assets, or otherwise adversely affect our business. 17 Table of Contents Index to Financial Statements Misuse of our technology-enabled products, services and solutions could lead to reduced sales, increased costs, liability claims or harm to our reputation.
Removed
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.
Added
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.
Removed
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.
Added
Products under patent protection potentially generate significantly higher sales and earnings than those not protected by patents.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe 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
Biggest changeWe consider our facilities to be well maintained and believe we have sufficient capacity to meet our anticipated needs through 2025. Our leased properties have terms expiring at various dates through 2034. 25 Table of Contents Index to Financial Statements

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changeMANAGEMENT’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
Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 15. of the Notes to Consolidated Financial Statements. 26 Table of Contents Index to Financial Statements PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−0 removed1 unchanged
Biggest changePeriod 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.
Biggest changeIssuer Purchases of Equity Securities The following table presents the number and average price of shares purchased in each fiscal month of the fourth quarter of fiscal 2024: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (1)(2) Maximum dollar value of shares that may yet be purchased under the plans or programs (in millions) July 1-31, 2024 200 $ 17.56 — $ 80.0 August 1-31, 2024 18,633 $ 20.89 — $ 80.0 September 1-30, 2024 — $ — — $ 80.0 Total 18,833 $ 20.85 — (1) In 2015, we announced the authorization of a stock repurchase program for up to $50.0 million of our common stock.
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.
Building Materials & Fixtures Index (“DJ U.S. Building Materials & Fixtures”) since September 30, 2019. 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, 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.
(2) During the three months ended September 30, 2024, we repurchased no shares of our common stock pursuant to our share repurchase authorization, and we had $80.0 million remaining under this authorization as of September 30, 2024.
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.
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.
This figure does not include stockholders whose shares are held in the account of a stockbroker, bank or custodian on behalf of a stockholder or shares which are otherwise beneficially held. Equity Compensation Plan Information Information regarding our compensation plans under which equity securities are authorized for issuance is set forth in “Item 12.
At September 30, 2024, there were 82 stockholders of record for our common stock. This figure does not include stockholders whose shares are held in the account of a stockbroker, bank or custodian on behalf of a stockholder or shares which are otherwise beneficially held.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.” Sale of Unregistered Securities We did not issue any unregistered securities within the past three years. Issuer Purchases of Equity Securities In 2015, we announced the authorization of a stock repurchase program for up to $50.0 million of our common stock.
Equity Compensation Plan Information Information regarding our compensation plans under which equity securities are authorized for issuance is set forth in “Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.” Sale of Unregistered Securities We did not sell any unregistered securities within the last fiscal year.
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.
Covenants contained in certain of the debt instruments described in Note 7. of the Notes to Consolidated Financial Statements limit our ability to declare and pay cash dividends up to a certain threshold. 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.
Added
During the three months ended September 30, 2024, 18,833 shares were surrendered to us to pay the tax withholding obligations of participants in connections with the vesting of equity awards. 27 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

63 edited+40 added−40 removed17 unchanged
Biggest changeWe 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.
Biggest changeWe will continue to monitor the market and economic conditions impacting our business and take appropriate actions to address inflationary and other cost pressures by implementing price increases, cost containment measures and supplier management measures, among other actions. 30 Table of Contents Index to Financial Statements Results of Operations Year Ended September 30, 2024 Compared to Year Ended September 30, 2023 Year ended September 30, 2024 Water Flow Solutions Water Management Solutions Corporate Consolidated (in millions) Net sales $ 755.5 $ 559.2 $ — $ 1,314.7 Gross profit 271.9 187.1 — 459.0 Operating expenses: Selling, general and administrative 92.5 95.0 57.7 245.2 Strategic reorganization and other charges 0.2 1.8 13.8 15.8 Goodwill impairment — 16.3 — 16.3 Total operating expenses 92.7 113.1 71.5 277.3 Operating income (loss) $ 179.2 $ 74.0 $ (71.5) 181.7 Pension expense other than service 4.0 Interest expense, net 12.7 Other expense 1.6 Income before income taxes 163.4 Income tax expense 47.5 Net income $ 115.9 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 benefit 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 Consolidated Analysis Net sales for 2024 were $1,314.7 million as compared with $1,275.7 million in the prior year, an increase of $39.0 million or 3.1%, primarily as a result of higher pricing across most of our product lines, higher volumes at Water Flow Solutions, partially offset by lower volumes at Water Management Solutions which include a negative impact from the Israel-Hamas war of less than 2%. 31 Table of Contents Index to Financial Statements Gross profit for 2024 was $459.0 million as compared with $379.5 million in the prior year, an increase of $79.5 million or 20.9%, primarily a result of favorable manufacturing performance related to labor, overhead and logistics efficiencies and favorable price/cost.
We capitalized $5.5 million of financing costs, which are being amortized over the term of the 4.0% Senior Notes using the effective interest method. Proceeds from the 4.0% Senior Notes, along with cash on hand were used to redeem previously existing 5.5% Senior Notes.
We capitalized $5.5 million of financing costs, which are being amortized over the term of the 4.0% Senior Notes using the effective interest method. Proceeds from the 4.0% Senior Notes, along with cash on hand were used to redeem previously existing notes.
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.
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, 2024 as compared with the prior year period primarily as a result of higher sales during the comparative periods.
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.
Discussion of year-to-year comparisons between 2023 and 2022 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, 2023.
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.
We estimate approximately 60% to 65% of the Company’s 2024 net sales were associated with the 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.
We consider an accounting estimate to be critical if changes in the estimate that are reasonably likely to occur over time or the use of reasonably different estimates could have a material impact on our financial condition or results of operations. Our critical accounting estimates include the below items.
We consider an accounting estimate to be critical if changes in the estimate that are reasonably likely to occur over time or the use of reasonably different estimates could have a material impact on our financial condition or results of operations.
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.
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. See “Item 1A.
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.
We established the recorded liabilities for such items at September 30, 2024 using estimates for when such amounts will be paid and what the amounts of such payments will be.
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.
An indenture governing the 4.0% Senior Notes (“Indenture”) contains customary covenants and events of default, including covenants that limit our ability to incur certain debt and liens. There are no financial maintenance covenants associated with the Indenture. We believe we were in compliance with these covenants at September 30, 2024.
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.
We repurchased $10.0 million of our outstanding common stock during the fiscal year ended September 30, 2024 and had $80.0 million remaining under our share repurchase authorization as of September 30, 2024. The ABL and 4.0% Senior Notes contain customary representations and warranties, covenants and provisions governing an event of default.
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.
Our stock repurchase program allows us to repurchase up to $250.0 million of our common stock, of which we had remaining authorization of $80.0 million as of September 30, 2024. 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.
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%.
Income tax payments were higher during 2024 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 2025 to be between 25% and 27%.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
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, market and cost approaches as applicable.
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.
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 $430.2 million at September 30, 2024.
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.
As of September 30, 2024, 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 2025 annually through 2029; (ii) cumulative cash obligations of $32.9 million for operating leases through 2034 and $3.1 million for finance leases through 2029; and (iii) purchase obligations for raw materials and other purchased parts of approximately $104.8 million and $1.1 million which we expect to incur during 2025 and 2026, respectively.
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.
At September 30, 2024, the applicable margin was 150 basis points for SOFR-based loans and 50 basis points for base rate loans. The ABL is subject to mandatory prepayments if total outstanding borrowings under the ABL are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances.
Critical factors in our analyses include warranty terms, specific claim situations, general incurred and projected failure rates, the nature of product failures, product and labor costs, and general business conditions. These estimates are inherently uncertain as they are based on historical data.
Warranty cost estimates are revised throughout applicable warranty periods as better information regarding warranty costs becomes available. Critical factors in our analyses include warranty terms, specific claim situations, general incurred and projected failure rates, the nature of product failures, product and labor costs, and general business conditions. These estimates are inherently uncertain as they are based on historical data.
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.
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 150 to 175 basis points, or a base rate, as defined in the ABL, plus an applicable margin of 50 to 75 basis points.
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 estimate and accrue liabilities resulting from such matters based on a variety of factors, including outstanding legal claims and proposed settlements; assessments by legal counsel of pending or threatened litigation; and assessments of potential environmental liabilities and remediation costs.
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 after June 15, 2024, at specified redemption prices.
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.
We repurchased 636,789 and 714,830 shares of our common stock in 2024 and 2023, respectively. We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual obligations. As of September 30, 2024, we had $12.2 million of letters of credit and $13.8 million of surety bonds outstanding.
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.
Cash and cash equivalents increased during 2024 primarily as a result of $238.8 million in cash provided by operating activities, $4.0 million in effect of currency exchange rate changes on cash, partially offset by capital expenditures of $47.4 million, dividend payments of $39.9 million, and $10.0 million in common stock repurchases.
The ABL includes a commitment fee for any unused borrowing capacity of 37.5 basis points per annum. Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million and 10% of the Loan Cap as defined in the ABL.
At September 30, 2024, the commitment fee was 37.5 basis points. Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million and 10% of the Loan Cap as defined in the ABL.
Substantially all of our United States subsidiaries are borrowers under the ABL and are jointly and severally liable for any outstanding borrowings. Our obligations under the ABL are secured by a first-priority perfected lien on all of our United States inventory, accounts receivable, certain cash balances and other supporting obligations.
Our obligations under the ABL are secured by a first-priority perfected lien on all of our United States inventory, accounts receivable, certain cash balances and other supporting assets.
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 declared a quarterly dividend of $0.067 per common share on October 22, 2024, payable on or about November 20, 2024 to holders of record as of November 8, 2024, which we expect to result in an estimated $10.5 million cash outlay.
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 anticipate inflation in raw and other material costs in 2025, 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.
This method estimates a fair value by calculating an estimated discounted future cash flow stream from the hypothetical licensing of the indefinite-lived intangible assets. If this estimated fair value exceeds the carrying value, no impairment is indicated. This analysis is dependent on management’s best estimates of future operating results and the selection of reasonable discount rates and hypothetical royalty rates.
This method estimates a fair value by calculating an estimated discounted future cash flow stream from the hypothetical licensing of the indefinite-lived intangible assets. If this estimated fair value exceeds the carrying value, no impairment is indicated. Conversely, if the estimated fair value is less than the carrying value, impairment is indicated.
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.
Intangible assets were $309.7 million at September 30, 2024 and $334.0 million at September 30, 2023. Finite-lived intangible assets, net totaling $37.2 million at September 30, 2024, are amortized over their estimated useful lives. Amortization expense was $27.1 million in 2024 and $28.1 million in 2023.
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.
Segment Analysis Water Flow Solutions Net sales for 2024 were $755.5 million as compared with $634.4 million in the prior year, an increase of $121.1 million or 19.1%, primarily as a result of higher volumes in iron gate valves and service brass products as well as higher pricing across most of Water Flow Solutions’ product lines.
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.
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.
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.
Total debt increased due to the addition of new financing leases and the amortization of deferred financing costs. 33 Table of Contents Index to Financial Statements Deferred income taxes were net liabilities of $55.4 million at September 30, 2024 and $73.8 million at September 30, 2023, primarily related to intangible assets.
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.
The cost approach is based on the net aggregate value of the reporting unit’s underlying assets. The 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.
The incident caused temporary disruptions and limitations of access to portions of our business applications supporting aspects of our operations and corporate functions, which limited our ability to take orders and ship products.
The incident caused temporary disruptions and limitations of access to portions of our business applications supporting certain aspects of our operations including shipping, receiving and payment functions.
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.
Receivables, net were $208.9 million at September 30, 2024 and $217.1 million at September 30, 2023. This decrease was a result of lower days sales outstanding. Inventories, net were $301.7 million at September 30, 2024 and $297.9 million at September 30, 2023.
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.
We perform this annual impairment testing on September 1, using standard valuation methodologies and rates that we consider to be reasonable and appropriate. We evaluate goodwill for impairment using a quantitative analysis.
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.
Year ended September 30, 2024 2023 (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 (0.1) (1.6) Other interest expense 1.7 0.1 Total interest expense 21.5 18.4 Interest income (8.8) (3.7) Total interest expense, net $ 12.7 $ 14.7 Other expense for 2024 was $1.6 million for the release of an indemnification receivable related to an expired uncertain tax position.
Inventory cost includes an overhead component that can be affected by levels of production and actual costs incurred. We evaluate the need to record adjustments for impairment of inventory at least quarterly. This evaluation includes such factors as anticipated usage, inventory levels and ultimate product sales value.
We evaluate the need to record adjustments for impairment of inventory at least quarterly. This evaluation includes such factors as anticipated usage, inventory levels and ultimate product sales value. 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.
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.
Recent Developments In October 2023, the Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel. While we reopened the facility in November 2023, the war has caused supply chain challenges that continue to hinder our ability to most efficiently manufacture our products produced in Israel.
Shipping delays and investigation and remediation costs in connection with the incident are expected to adversely impact our results for the first quarter of 2024, and such impact may be material. We have largely restored the impacted applications and systems, and we continue to execute business continuity and restoration plans for the remaining impacted applications and systems.
Operational delays as well as investigation and remediation costs in connection with the incident adversely impacted our results for the first quarter of fiscal 2024; however, there was no material impact to our consolidated net sales for the full fiscal 2024. We have restored the impacted applications and systems.
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.
Liquidity and Capital Resources We had cash and cash equivalents of $309.9 million at September 30, 2024 and approximately $162.6 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”) based on September 30, 2024 data. Undistributed earnings from our subsidiaries in Israel, Canada and China are considered to be permanently invested outside of the United States.
Excess availability based on September 30, 2023 data was $162.4 million, as reduced by $12.4 million of outstanding letters of credit and $0.2 million of accrued fees and expenses.
Excess availability based on September 30, 2024 data was $162.6 million, as reduced by $12.2 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.
We accrue for the estimated cost of product warranties at the time of sale if such costs are determined to be reasonably estimable at that time. Warranty cost estimates are revised throughout applicable warranty periods as better information regarding warranty costs becomes available.
Warranty Cost We accrue for warranty expenses that may include customer costs of repair and/or replacement, including labor, materials, equipment, freight and reasonable overhead costs. We accrue for the estimated cost of product warranties at the time of sale if such costs are determined to be reasonably estimable at that time.
Bureau of Labor Statistics for the 12-month period ended September 30, 2023. Material Cash Requirements We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures.
Moody’s Standard & Poor’s September 30, September 30, 2024 2023 2024 2023 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 Material Cash Requirements We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures.
During the year ended September 30, 2022, we incurred a non-cash goodwill impairment charge of $6.8 million within the Water Flow Solutions segment. No impairment charge was recorded in 2023. Interest expense, net declined $2.2 million in 2023 from the prior year primarily as a result of higher interest income associated with higher interest rates.
Strategic reorganization and other charges for 2023 of $10.2 million primarily consisted of expenses associated with the leadership transition, severance and certain transaction-related expenses. During the year ended September 30, 2024, we incurred a non-cash goodwill impairment charge of $16.3 million within the Water Management Solutions segment. No goodwill impairment charge was recorded in 2023.
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.
SG&A as a percentage of net sales was 12.2% and 13.4% for 2024 and 2023, respectively. 32 Table of Contents Index to Financial Statements Water Management Solutions Net sales for 2024 were $559.2 million as compared with $641.3 million in the prior year, a decrease of $82.1 million or 12.8%, primarily as a result of lower volumes across most product lines, including the impact of the Israel-Hamas war, partially offset by higher pricing across most of Water Management Solutions’ product lines.
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.
Corporate SG&A for 2024 was $57.7 million as compared with $49.7 million in the prior year, an increase of $8.0 million or 16.1% primarily as a result of higher employee incentives, higher third-party fees, unfavorable foreign currency fluctuation and approximately 3% inflation, partially offset by lower salary and benefit expense associated with our restructuring activities.
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.
Gross profit for 2024 was $187.1 million as compared with $214.6 million in the prior year, a decrease of $27.5 million or 12.8%, primarily as a result of lower volumes including the impact of the Israel-Hamas war, partially offset by favorable price/cost and favorable manufacturing performance. Gross margin was 33.5% in both 2024 and 2023.
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.
Gross profit for 2024 was $271.9 million as compared with $164.9 million in the prior year, an increase of $107.0 million or 64.9%, primarily as a result of favorable manufacturing performance driven by labor, overhead and logistic efficiencies, higher volumes and favorable price/cost, partially offset by higher custom duties expense.
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.
SG&A for 2024 was $92.5 million as compared with $85.3 million in the prior year, an increase of $7.2 million or 8.4%, primarily as a result of higher employee incentives and approximately 3% inflation, partially offset by lower salary and benefit expense associated with our restructuring activities.
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.
The ABL includes the ability to borrow up to $25.0 million of swing line loans and up to $60.0 million of letters of credit.
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.
Property, plant and equipment increased as a result of $47.4 million in capital expenditures primarily associated with our new brass foundry in Decatur, Illinois, partially offset by depreciation expense of $39.1 million. Depreciation expense increased from $34.4 million in 2023 as a result of accelerated depreciation of certain assets.
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%.
According to the United States Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates at September 30, 2024 increased 5.2%. Total housing starts in fiscal 2024 decreased 1.6% as compared with fiscal 2023, according to the United States Census Bureau, despite a 13% increase in single family housing starts as compared with fiscal 2023.
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.
We expect amortization expense for these assets to be approximately $7 million for 2025, approximately $6 million in fiscal 2026 and fiscal 2027, approximately $5 million in fiscal 2028, and approximately $4 million in fiscal 2029. The reduction in amortization expense is a result of certain customer relationship intangibles becoming fully amortized.
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.
The $18.4 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 and an increase in other accrued expenses.
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.
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 if there is a Ratings Decline (as defined in the Indenture). 35 Table of Contents Index to Financial Statements Credit Ratings Our corporate credit rating and the credit ratings for our debt and outlook are presented below.
In December 2023, we obtained a waiver under our ABL to provide us additional time to deliver to the ABL lenders certain information that was delayed as a result of the cybersecurity incident.
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. 34 Table of Contents Index to Financial Statements In December 2023, we obtained a waiver under our ABL (“ABL Waiver”) to provide for additional time associated with certain reporting requirements that were delayed as a result of the cybersecurity incident announced on October 28, 2023.
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.
As a percentage of net sales, SG&A decreased 30 basis points to 18.7% of net sales from 19.0% in the prior year. Strategic reorganization and other charges for 2024 of $15.8 million primarily consisted of expenses associated with the leadership transition, certain transaction-related expenses, $1.8 million related to non-cash asset impairment, expenses associated with the cybersecurity incidents and severance.
During the year ended September 30, 2022, Water Flow Solutions incurred a non-cash goodwill impairment charge of $6.8 million.
SG&A as a percentage of net sales was 17.0% for 2024 and 16.7% in the prior year. During the year ended September 30, 2024, Water Management Solution incurred a non-cash goodwill impairment charge of $16.3 million. No goodwill impairment charge was recorded in 2023.
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.
SG&A for 2024 was $95.0 million as compared with $106.9 million in the prior year, a decrease of $11.9 million or 11.1% primarily due to lower salary and benefit expense associated with our restructuring activities and lower third-party fees, partially offset by unfavorable foreign currency fluctuation, higher employee incentives and approximately 3% inflation.
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.
Inventories increased during the fiscal year ended September 30, 2024 primarily as a result of inflation and timing of shipments. Other current liabilities and other noncurrent liabilities increased as a result of higher employee-related accruals, product liabilities, and customer rebates, partially offset by lower income taxes payable and accrued restructuring costs.
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.
Indefinite-lived intangible assets, $272.5 million at September 30, 2024, are not amortized but are tested for potential impairment at least annually. Accounts payable and other current liabilities were $257.2 million at September 30, 2024 and $218.1 million at September 30, 2023. Accounts payable increased during 2024 primarily as a result of timing and inflation.
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.
Capital expenditures remained fairly constant at $47.4 million for 2024 compared with $47.6 million for 2023. We estimate 2025 capital expenditures will be between $45.0 million and $50.0 million.
Removed
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.
Added
Overview Business We operate our business through two segments, Water Flow Solutions and Water Management Solutions. The Water Flow Solutions product portfolio includes iron gate valves, specialty valves and service brass products.
Removed
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.
Added
The Water Management Solutions product and service portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, as well as pressure management and control products and solutions. In August 2023, Marietta Edmunds Zakas was appointed to Chief Executive Officer and to the Board of Directors. Ms. Zakas formerly served as our Chief Financial Officer.
Removed
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.
Added
In May 2024, Paul McAndrew, Chief Operating Officer, was promoted to President and Chief Operating Officer. In September 2024, we announced that Steven S. Heinrichs, the Company’s Chief Financial Officer (“CFO”) and Chief Legal and Compliance Officer, will be transitioning from his position effective on or about December 31, 2024. Mr.
Removed
Supply disruptions from lack of access to materials has impacted, and continues to impact, our ability to produce and deliver our products on time and at favorable pricing from our facility in Ariel, Israel. As announced on October 28, 2023, we identified a cybersecurity incident impacting certain internal operations and information technology systems.
Added
Heinrichs will continue to serve as CFO and Chief Legal and Compliance Officer until a new CFO has been named.
Removed
Based on the information reviewed to date, we believe the unauthorized activity has been contained. All of our facilities are operational and have substantially returned to normalized operations. The cybersecurity incident consisted of unauthorized access and deployment of ransomware by a third party to a portion of our internal information infrastructure.
Added
After experiencing challenges resulting from the COVID-19 pandemic and subsequent supply disruptions in years 2020 through 2023, the seasonality of our business returned to more normalized levels in 2024, supported by municipal spending on repair and replacement projects and new residential construction activity.
Removed
Our investigation and remediation efforts remain ongoing, including an analysis of data accessed, exfiltrated or otherwise impacted in connection with the cybersecurity incidents.
Added
These supply chain disruptions have adversely impacted, and continue to adversely impact, our ability to optimally produce and deliver our products from our facility in Ariel, Israel. Additionally, production at this facility has been adversely impacted by limited labor availability in the region.
Removed
We continue to evaluate the business, financial and related impacts of the cybersecurity incidents. 27 Table of Contents Index to Financial Statements Outlook We expect the operating environment during fiscal 2024 to continue to be challenging as a result of high interest rates, the inflationary environment, labor challenges and a potential recession.
Added
We have made investments in recruiting and training new team members, expanding our suppliers and expediting product shipments to increase production levels and to meet customer delivery times. The cybersecurity incident in the first quarter of fiscal 2024 consisted of unauthorized access and deployment of ransomware by a third party to a portion of our internal information system infrastructure.
Removed
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.
Added
We completed the replacement of this system during the second quarter of fiscal 2024. 29 Table of Contents Index to Financial Statements In fiscal 2024, we incurred approximately $1.5 million of expenses related to the cybersecurity incidents.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur primary financial instruments are cash and cash equivalents. This includes cash in banks and highly rated, liquid money market investments. We believe these instruments are not subject to material potential near-term losses in future earnings from reasonably possible near-term changes in market rates or prices.
Biggest changeWe manage our exposures to these market risks through internally established policies and procedures, and when appropriate, through the use of foreign exchange contracts. We do not enter into derivatives or other financial instruments for trading or speculative purposes. Our primary financial instruments are cash and cash equivalents. This includes cash in banks and highly rated, liquid money market investments.
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.
RISK FACTORS-The prices of our purchased components and raw materials can be volatile.” 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.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We are exposed to various market risks, including potential losses arising from adverse changes in market prices and rates, such as various commodity prices and foreign exchange rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We are exposed to various market risks, including potential losses arising from adverse changes in market prices and rates, such as various commodity prices and foreign exchange rates.
Net sales and expenses of these subsidiaries are translated into United States dollars at the average relevant foreign 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. We may, in future periods, use derivative instruments to hedge a portion of our foreign currency exchange rate risk. 38 Table of Contents Index to Financial Statements
Commodity Price Risk Our products are made using various purchased components and several basic raw materials, including brass ingot, scrap steel, sand and resin. We expect prices for these items to fluctuate based on marketplace demand.
We believe these instruments are not subject to material potential near-term losses in future earnings from reasonably possible near-term changes in market rates or prices. Commodity Price Risk Our products are made using various purchased components and several basic raw materials, including brass ingot, scrap steel, sand and resin.
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.
We expect prices for these items to fluctuate based on marketplace demand. Our product margins and level of profitability may fluctuate depending on our ability to sufficiently pass increases in purchased component and raw material costs on to our customers.
Added
To manage commodity price risks, we monitor commodity price fluctuations and may adjust our selling prices accordingly or implement certain supplier pricing agreements. In 2024, we experienced approximately 1% inflation compared to 2023. See “Item 1A.

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