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What changed in Zurn Elkay Water Solutions Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Zurn Elkay Water Solutions Corp'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.

+206 added−215 removedSource: 10-K (2025-02-10) vs 10-K (2024-02-06)

Top changes in Zurn Elkay Water Solutions Corp's 2024 10-K

206 paragraphs added · 215 removed · 185 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe do not currently anticipate any significant additional expenditures related to maintaining compliance; however, due to the evolving nature of laws and regulations and changes thereto, there can be no assurance that current expenditures will be adequate or that violations will not occur. Additional Information The address of our principal executive office is 511 West Freshwater Way, Milwaukee, Wisconsin 53204.
Biggest changeOn occasion we are involved in such investigations and/or cleanup, and we have been named as a PRP in environmental matters and could be named in future matters. 10 We do not currently anticipate any significant additional expenditures related to maintaining compliance; however, due to the evolving nature of laws and regulations and changes thereto, there can be no assurance that current expenditures will be adequate or that violations will not occur.
Our independent sales representatives work with building owners, engineers, architects, and operators, contractors, and builders, to specify our products for their use and with wholesalers to assess and meet the needs of building contractors in construction projects. They also combine knowledge of our products’ installation methods and delivery availability with local market expertise to provide contractors with value-added service.
Our independent sales representatives work with building owners, engineers, architects, operators, contractors, and builders, to specify our products for their use and with wholesalers to assess and meet the needs of building contractors in construction projects. They also combine knowledge of our products’ installation methods and delivery availability with local market expertise to provide contractors with value-added service.
PEX tubing is manufactured from cross-linked polyethylene and is designed for high temperature and 7 pressure fluid distribution piping applications for both potable water and radiant heating systems in the residential and nonresidential construction industries. These systems are engineered to meet stringent NSF and ASTM standards helping water professionals provide safe and efficient building and site water management solutions.
PEX tubing is manufactured from cross-linked polyethylene and is designed for high temperature and pressure fluid distribution piping applications for both potable water and radiant heating systems in the residential and nonresidential construction industries. These systems are engineered to meet stringent NSF and ASTM standards helping water professionals provide safe and efficient building and site water management solutions.
ITEM 1. BUSINESS. Overview Zurn Elkay Water Solutions Corporation ("Zurn Elkay", "we", "us", "our", or the "Company") is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, human safety and the environment.
ITEM 1. BUSINESS. Overview Zurn Elkay Water Solutions Corporation ("Zurn Elkay", "we", "us", "our", or the "Company") is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, hydration, human safety and the environment.
This information is used by our customers’ operations and maintenance staff through their 9 facility and automation control systems and cloud-based portals to minimize unplanned system downtime and improve the productivity and safety of their operations. Suppliers and Raw Materials The principal materials used in our manufacturing processes are commodities and components available from numerous sources.
This information is used by our customers’ operations and maintenance staff through their facility and automation control systems and cloud-based portals to minimize unplanned system downtime and improve the productivity and safety of their operations. Suppliers and Raw Materials The principal materials used in our manufacturing processes are commodities and components available from numerous sources.
Linear drainage systems are used to capture and direct storm water in a wide variety of institutional, commercial, industrial and transportation infrastructure applications. Our wastewater pre-treatment products include oil and grease interceptors and separators, acid neutralization systems and remote monitoring systems and are marketed under the Zurn® and Green Turtle® brands.
Linear drainage systems are used to capture and direct storm water in a wide variety of institutional, commercial, industrial and transportation infrastructure applications. Our wastewater pre-treatment products include oil and grease interceptors and separators, acid neutralization systems and remote monitoring systems and are marketed under the Zurn®, Green Turtle®, and Wade® brands.
Each year all employees are trained on various policies and procedures along with matters specific to their respective roles within the organization. We monitor metrics to ensure the health of our company 10 culture and alignment with our values and strategic business priorities. Each year, we survey our employees to better understand what matters most to them.
Each year all employees are trained on various policies and procedures along with matters specific to their respective roles within the organization. We monitor metrics to ensure the health of our company culture and alignment with our values and strategic business priorities. Each year, we survey our employees to better understand what matters most to them.
Water control solutions that protect human health and gravity drainage products that protect the environment are sold under the Zurn® brand and are typically required in the early stages of a construction or retrofit project, when potable water and non-potable water control and drainage systems are installed. Water control products include PEX piping, valves, fittings and installation tools.
Water control solutions that protect human health and gravity drainage products that protect the environment are sold under the Zurn® brand and are typically required in the early stages of a construction or retrofit project, when potable water and 7 non-potable water control and drainage systems are installed. Water control products include PEX piping, valves, fittings and installation tools.
Our Business Zurn Elkay is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, human safety and the environment.
Our Business Zurn Elkay is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, hydration, human safety and the environment.
Our drinking water products are sold under the Elkay® and Halsey Taylor® brand names and filtered units include water filters certified by NSF and ANSI to reduce the level of contaminants in water, including lead and certain per- and polyfluoroalkyl substances ("PFAS") chemicals.
Our drinking water products are sold under the Elkay® and Halsey Taylor® brand names and filtered units include water filters certified by NSF and ANSI to reduce the level of contaminants in water, including lead, microplastics, and certain per- and polyfluoroalkyl substances ("PFAS") chemicals.
Elkay’s water dispensing and filtration products, predominantly comprised of filtered bottle filling stations, water fountains and water dispensers, are often plumbed directly into building water systems and required to comply with strict applicable codes and standards.
Elkay’s water dispensing and filtration products, predominantly comprised of filtered bottle filling stations, water fountains and water dispensers, and filtered faucets, are often plumbed directly into building water systems and required to comply with strict applicable codes and standards.
We are led by an experienced, high-caliber management team that employs ZEBS as a proven operating philosophy to drive excellence and world-class performance in all aspects of our business, and which includes our "Voice of the Customer" process to promote superior customer satisfaction. Our physical footprint encompasses 29 principal manufacturing and warehouse facilities located primarily in North America.
We are led by an experienced, high-caliber management team that employs ZEBS as a proven operating philosophy to drive excellence and world-class performance in all aspects of our business, which includes our "Voice of the Customer" process to promote superior customer satisfaction. Our physical footprint encompasses 27 principal manufacturing and warehouse facilities located primarily in North America.
We use approximately 1,055 independent sales representatives, along with a network of regional distribution centers and third-party warehouses, to provide our customers with same-day service and quick response times. Zurn®, Elkay®, JUST®, Hadrian®, and Wilkins® benefit from strong brand recognition, which is enhanced by a strong propensity to replace "like-for-like" products.
We use approximately 1,100 independent sales representatives, along with a network of regional distribution centers and third-party warehouses, to provide our customers with same-day service and quick response times. Zurn®, Elkay®, JUST®, Hadrian®, and Wilkins® benefit from strong brand recognition, which is enhanced by a strong propensity to replace "like-for-like" products.
The purchase price included 51,378,504 shares of Zurn's common stock ($1,411.9 million based on Zurn's closing stock price of $27.48 on July 1, 2022), and $45.9 million of net cash payments for the repayment of Elkay's existing term loan and Elkay's transaction related costs outstanding that were in excess of Elkay's cash and cash equivalents balance at the time of closing.
The purchase price included 51,378,504 shares of Zurn's common stock ($1,411.9 million based on Zurn's closing stock price of $27.48 per share on July 1, 2022), and $45.9 million of net cash payments for the repayment of Elkay's existing term loan and Elkay's transaction related costs outstanding that were in excess of Elkay's cash and cash equivalents balance at the time of closing.
Zurn Elkay has approximately 230 active patents in the United States and approximately 90 foreign active patents as of December 31, 2023. Product innovation is crucial in the institutional and commercial plumbing products markets because new products must continually be developed to meet specifications and regulatory demands as well as customer needs.
Zurn Elkay has approximately 230 active patents in the United States and approximately 90 foreign active patents as of December 31, 2024. Product innovation is crucial in the institutional and commercial plumbing products markets because new products must continually be developed to meet specifications and regulatory demands as well as customer needs.
Our product portfolio includes professional grade water safety and control products, flow system products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time.
Our product portfolio includes professional grade water safety and control products, flow systems products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time.
Our product portfolio includes professional grade water safety and control products, flow system products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time.
Our product portfolio includes professional grade water safety and control products, flow systems products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time.
Such liability can be imposed without regard to fault and, under certain circumstances, may be joint and several, resulting in one PRP being held responsible for the entire obligation. Liability may also include damages to natural resources.
Such liability can be imposed without regard to fault and, under certain circumstances, may be joint and several, resulting in one PRP being held responsible for the entire obligation. Liability may also include damage to natural resources.
Following the Spin-Off Transaction, the operating results and financial position of the Process & Motion Control platform are reported as discontinued operations within our consolidated financial statements and we operate as a single Water Management platform. 5 ZEBS ZEBS creates a scalable, process-based framework that focuses on driving superior customer satisfaction and financial results by targeting world-class operating performance throughout all aspects of our business.
The operating results and financial position of the Process & Motion Control platform are reported as discontinued operations within our consolidated financial statements and we operate as a single Water Management platform. 5 ZEBS ZEBS creates a scalable, process-based framework that focuses on driving superior customer satisfaction and financial results by targeting world-class operating performance throughout all aspects of our business.
We utilize an extensive sales and marketing network spanning approximately 30 countries, which consists of approximately 1,055 independent sales representatives across 173 sales agencies. Specifically, it has been our experience that, once an architect, engineer, contractor, or owner has specified our product with satisfactory results, that person will generally continue to use our products in future projects.
We utilize an extensive sales and marketing network spanning approximately 30 countries, which consists of approximately 1,100 independent sales representatives across 180 sales agencies. Specifically, it has been our experience that, once an architect, engineer, contractor, or owner has specified our product with satisfactory results, that person will generally continue to use our products in future projects.
Zurn Elkay's hygienic and environmental products include primarily sensor-operated flush valves marketed under the Aquaflush®, AquaSense® and AquaVantage® brand names and heavy-duty commercial faucets marketed under the AquaSpec® brand name. Innovative water conserving fixtures are marketed under the EcoVantage® and Zurn One® brand names.
Zurn Elkay's hygienic and environmental products include primarily sensor-operated flush valves marketed under the Aquaflush®, AquaSense® and AquaVantage® brand names, heavy-duty commercial faucets marketed under the AquaSpec® brand name, and flush valves and faucets marketed under the Hydro X Power® brand name. Innovative water conserving fixtures are marketed under the EcoVantage® and Zurn One® brand names.
At 0.68 TRIR and 0.26 LTIR per 100 associates, we are better than best-in-class benchmarks. We are also committed to improving the holistic health and well-being of our associates and have various programs in place to provide information, activities and support for assisting healthy choices.
At 0.65 TRIR and 0.11 LTIR per 100 associates, we are better than best-in-class benchmarks. We are also committed to improving the holistic health and well-being of our associates and have various programs in place to provide information, activities and support for assisting healthy choices.
In addition, our website includes (i) the charters for the Audit Committee, Nominating and Corporate Governance Committee, Compensation Committee, and Environmental, Social and Governance Committee of our Board of Directors; (ii) our Corporate Governance Guidelines; and (iii) our Code of Business Conduct and Ethics.
In addition, our website includes (i) the charters for the Audit Committee, Nominating and Corporate Governance Committee, Compensation Committee, and Sustainability Committee of our Board of Directors; (ii) our Corporate Governance Guidelines; and (iii) our Code of Business Conduct and Ethics.
The Company’s largest customer accounted for 20%, 22% and 23% of consolidated net sales for the years ended December 31, 2023, 2022, and 2021, respectively. No other customers account for more than 10% of consolidated net sales for the years ended December 31, 2023, the 2022, or 2021.
The Company’s largest customer accounted for 19%, 20% and 22% of consolidated net sales for the years ended December 31, 2024, 2023, and 2022, respectively. No other customers account for more than 10% of consolidated net sales for the years ended December 31, 2024, 2023, or 2022.
Through continual training and engaging associates and visitors in addressing safety issues, we have reduced our Total Recordable Incident Rate ("TRIR") by 44% when compared to the combined Zurn Elkay rate for calendar year 2022 an d also reduced our Lost Time Incident Rate ("LTIR") by 30% over the same period.
Through continual training and engaging associates and visitors in addressing safety issues, we have reduced our Total Recordable Incident Rate ("TRIR") by 46% when compared to the combined Zurn Elkay rate for calendar year 2022, at the time of the Merger, an d also reduced our Lost Time Incident Rate ("LTIR") by 70% over the same period.
Among our leading brands are Zurn®, Elkay®, and Wilkins®. Drinking Water Products With the Elkay Merger, we added a leading drinking water product line that includes an extensive collection of filtered drinking water delivery products oriented around providing the cleanest, superior tasting water while improving overall water hygiene, accessibility and sustainability.
Among our leading brands are Zurn®, Elkay®, and Wilkins®. Drinking Water Products Our drinking water product line includes an extensive collection of filtered drinking water delivery products oriented around providing the cleanest, superior tasting water while improving overall water hygiene, accessibility and sustainability.
The respective purchase prices for these transactions are stated net of cash acquired and exclude transaction costs. • July 1, 2022 - We completed the merger with Elkay, a market leader of drinking water solutions and commercial sinks which complements the offerings of our existing product portfolio. The purchase price (after final purchase price adjustments) was $1,457.8 million.
The purchase price for this transaction is stated net of cash acquired and excludes transaction costs. • July 1, 2022 - We completed the merger with Elkay, a market leader of drinking water solutions and commercial sinks which complements the offerings of our existing product portfolio. The final purchase price (after final purchase price adjustments) was $1,457.8 million.
We recognize and value our associates for the unique perspectives they bring to Zurn Elkay – from different ages, ethnic and cultural backgrounds, sexual orientation, gender identity and expression, veteran status and abilities, including individuals who bring diverse opinions, experience and leadership styles to their work at Zurn Elkay. Inclusion is built into our key human resources programs and processes.
We recognize and value our associates for the unique perspectives they bring to Zurn Elkay – from different ages, ethnic and cultural backgrounds, sexual orientation, gender identity and expression, veteran status and abilities, including individuals who bring diverse opinions, experience and leadership styles to their work at Zurn Elkay.
We believe this collective diversity makes our business stronger. Training and Talent Development: We are committed to having a workplace that fosters learning, development and innovation. Our leadership team conducts a robust program of employee engagement and we have invested in the personal and professional development of our employees.
Training and Talent Development: We are committed to having a workplace that fosters learning, development and innovation. Our leadership team conducts a robust program of employee engagement and we have invested in the personal and professional development of our employees.
The combination of World Dryer’s eco-friendly hand dryers, Just Manufacturing's stainless steel product portfolio, Hadrian’s partition systems and Zurn Elkay's water-efficient hygienic and environmental products allows us to deliver a bundle of products known as "BrightShield by Zurn" to our customers, what we believe is the most comprehensive hygienic and environmental content to new and existing buildings.
The combination of Elkay's wide array of sinks recognized for their design, durability and aesthetics, World Dryer’s eco-friendly hand dryers, Just Manufacturing's stainless steel product portfolio, Hadrian’s partition systems and Zurn Elkay's water-efficient hygienic and environmental products allows us to deliver a bundle of products to our customers, what we believe is the most comprehensive hygienic and environmental content to new and existing buildings.
Human Capital Management As of December 31, 2023, we had approximately 2,400 employees, of whom approximately 1,875 were employed in the United States. Approximately 120 of our United States employees are represented by labor unions. We are currently party to three collective bargaining agreements in the United States with expiration dates in October 2024 and November 2026.
Human Capital Management As of December 31, 2024, we had approximately 2,500 employees, of whom approximately 1,900 were employed in the United States. Approximately 160 of our United States employees are represented by labor unions. We are currently party to four collective bargaining agreements in the United States with expiration dates in November 2026, October 2027, and January 2028.
Customers Our water safety and control, flow systems, hygienic and environmental, and drinking water products are sold for new construction, remodeling and retrofit applications to customers in institutional, commercial, waterworks and residential end markets and are distributed through independent sales representatives, plumbing wholesalers and industry-specific distributors in the waterworks, foodservice, industrial, janitorial, sanitation and siteworks industries.
The number of shares issued in connection with the merger represented approximately 29% of outstanding shares immediately following the Merger. 8 Customers Our water safety and control, flow systems, hygienic and environmental, and drinking water products are sold for new construction, remodeling and retrofit applications to customers in institutional, commercial, waterworks and residential end markets and are distributed through independent sales representatives, plumbing wholesalers and industry-specific distributors in the waterworks, foodservice, industrial, janitorial, sanitation and siteworks industries.
We serve a broad and diverse array of institutional and commercial end markets, and to a lesser extent waterworks and residential end markets, with solid fundamental long-term growth characteristics.
We serve a broad and diverse array of institutional and commercial end markets, and to a lesser extent waterworks and residential 6 end markets, with solid fundamental long-term growth characteristics. We believe there continues to be long-term growth potential in our markets.
Our strategy is to grow strategically by acquiring leading companies in attractive markets with businesses that we believe will benefit from ZEBS to increase customer satisfaction, revenue growth and operating margins.
Acquisitions Mergers and acquisitions are a critical part of the Zurn Elkay growth strategy. Our strategy is to grow strategically by acquiring leading companies in attractive markets with businesses that we believe will benefit from ZEBS to increase customer satisfaction, revenue growth and operating margins.
As a result, our operating results have been, and in the future likely will be, negatively affected during economic downturns. See Item 1A Risk Factors of this report for information on the risks associated with general economic conditions.
Our business also depends upon general economic conditions and other market factors beyond our control, and we serve customers in cyclical industries. As a result, our operating results have been, and in the future likely will be, negatively affected during economic downturns. See Item 1A Risk Factors of this report for information on the risks associated with general economic conditions.
(“Land”), (ii) the shares of Land were distributed to our stockholders pro rata, and (iii) Land was merged with a subsidiary of Regal Rexnord Corporation (formerly known as Regal Beloit Corporation), in which the stock of Land was converted into shares of Regal Rexnord Corporation. Following completion of the Spin-Off Transaction, we changed our name to “Zurn Water Solutions Corporation”.
(“Land”), (ii) the shares of Land were distributed to our stockholders pro rata, and (iii) Land was merged with a subsidiary of Regal Rexnord Corporation (formerly known as Regal Beloit Corporation), in which the stock of Land was converted into shares of Regal Rexnord Corporation.
The key materials used in our manufacturing activities include: brass, castings, copper, zinc, stainless steel, forgings, plate steel, high-performance engineered plastic and resin. Our global sourcing strategy is to maintain alternate sources of supply for our important materials and components wherever possible.
The key materials used in our manufacturing activities include: bronze, iron, brass, stainless steel, carbon steel, zinc, and engineered plastics. Our global sourcing strategy is to maintain alternate sources of supply for our important materials and components wherever possible.
Our Human Resources programs are designed to, among other aims, foster diversity and inclusion, develop talent for critical roles and leadership positions, reward and support associates through competitive compensation and benefits, and promote the health and safety of our associates.
Our Human Resources programs are designed to, among other aims, develop talent for critical roles and leadership positions, reward and support associates through competitive compensation and benefits, and promote the health and safety of our associates. Associates: We are committed to fostering, cultivating and preserving a culture of inclusion and belonging where our associates are engaged and fulfilled.
Applications include restaurants and institutional foodservice operations, office buildings, hotels, entertainment venues, schools, grocery and convenience stores, airports, vehicle service garages, and fleet operations and maintenance facilities. Acid neutralization systems are primarily used in schools, hospitals and laboratories. In fiscal 2021, we acquired substantially all of the assets of Advance Technology Solutions, LLC (d/b/a ATS GREASEwatch) ("ATS GREASEwatch").
Applications include restaurants and institutional foodservice operations, office buildings, hotels, entertainment venues, schools, grocery and convenience stores, airports, vehicle service garages, and fleet operations and maintenance facilities. Acid neutralization systems are primarily used in schools, hospitals and laboratories.
Although competition exists across all of our businesses, we do not believe that any one competitor directly competes with us across the breadth of all of our product lines.
The markets in which we participate are relatively fragmented with competitors across a broad range of industries, sectors, and product lines. Although competition exists across all of our businesses, we do not believe that any one competitor directly competes with us across the breadth of all of our product lines.
Key valve products include backflow preventers, fire system valves, pressure reducing valves and thermostatic mixing valves. These highly specified and engineered flow control devices protect and control the potable water supply and emergency water supply within a building or site.
These highly specified and engineered flow control devices protect and control the potable water supply and emergency water supply within a building or site.
Seasonality Demand for our products is primarily driven by institutional and commercial building activity, remodeling and retrofit opportunities, and to a lesser extent, new home starts as well as waterworks expansion. Accordingly, weather has an impact on the seasonality of certain end markets.
See Item 1A Risk Factors of this report for more information on the risks associated with backlog. 9 Seasonality Demand for our products is primarily driven by institutional and commercial building activity, remodeling and retrofit opportunities, and to a lesser extent, new home starts as well as waterworks expansion.
Backlog Our backlog of unshipped orders was approximately $51 million and $42 million as of December 31, 2023 and December 31, 2022, respectively. As of December 31, 2023, our backlog is all expected to ship during the year ending December 31, 2024. See Item 1A Risk Factors of this report for more information on the risks associated with backlog.
Backlog Our backlog of unshipped orders was approximately $49 million and $51 million as of December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024, our backlog is all expected to ship during the year ending December 31, 2025.
The EcoVantage® fixture systems promote water-efficiency, health and hygiene and assist in achieving compliance with certain water conservation requirements, and generate savings for building owners in new construction and retrofit bathroom fixture installations. In 2020, we acquired Just Manufacturing Company ("Just Manufacturing") a leading manufacturer of stainless steel sinks and plumbing fixtures primarily used in institutional and commercial end markets.
The EcoVantage® fixture systems promote water-efficiency, health and hygiene and assist in achieving compliance with certain water conservation requirements, and generate savings for building owners in new construction and retrofit bathroom fixture installations.
Elkay's drinking water solutions are designed to meet or exceed facility needs and specifications of education, healthcare, hospitality, multifamily, municipal, office, retail and commercial facilities. Water Safety and Control Products Our water safety and control products are sold under the Zurn® and Wilkins® brand names and encompass a wide range of valve and water distribution control products.
Elkay's drinking water solutions are designed to meet or exceed facility needs and specifications of education, healthcare, hospitality, multifamily, municipal, office, retail and commercial facilities, as well as residential applications.
With the exception of our remodeling and retrofit opportunities, weather is an important variable as it significantly impacts construction. Spring and summer months in the United States and Canada represent the main construction season with increased construction in the institutional, commercial, and waterworks markets, as well as new housing starts.
Spring and summer months in the United States and Canada represent the main construction season with increased construction in the institutional, commercial, and waterworks markets, as well as new housing starts. As a result, sales generally decrease slightly in the first and fourth quarters as compared to the second and third quarters of the calendar year.
Our phone number is (855) 480-5050. Our website address is www.zurnelkay.com.
Additional Information The address of our principal executive office is 511 West Freshwater Way, Milwaukee, Wisconsin 53204. Our phone number is (855) 480-5050. Our website address is www.zurnelkay.com.
In our last three fiscal years, we have completed several acquisitions focused on expanding our product portfolio and presence in the end markets we serve; those acquisitions are further described below.
In 2022, we completed the Elkay Merger, which expanded our product portfolio and presence in the end markets we serve; that transaction is further described below.
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Prior to the completion of the Spin-Off Transaction our business consisted of two platforms: Process & Motion Control and Water Management.
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Water Safety and Control Products Our water safety and control products are sold under the Zurn® and Wilkins® brand names and encompass a wide range of valve and water distribution control products. Key valve products include backflow preventers, fire system valves, pressure reducing valves and thermostatic mixing valves.
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We believe there continues to be long-term growth potential in our markets. 6 The markets in which we participate are relatively fragmented with competitors across a broad range of industries, sectors, and product lines.
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Zurn Elkay's hygienic and environmental products also include stainless steel, quartz, fireclay-ceramic, and cast iron sinks marketed under the Elkay® brand name and stainless steel sinks and plumbing fixtures marketed under the JUST® brand name, as well as restroom partition systems and lockers, marketed under the Hadrian® brand name, which are primarily used in institutional and commercial end markets.
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ATS GREASEwatch, develops, manufactures and markets remote tank monitoring devices, alarms, software and services for various applications and provides technology to enhance and expand our current product offerings. In addition, we expanded our high-quality flow systems portfolio during fiscal 2021 with the acquisition of the Wade Drains ("Wade") product line from McWane, Inc.
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Accordingly, weather has an impact on the seasonality of certain end markets. With the exception of our remodeling and retrofit opportunities, weather is an important variable as it significantly impacts construction.
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The acquisition of the Wade product line leverages Zurn Elkay’s existing expertise in flow systems to expand our market coverage and offer an additional brand of drainage and environmental products.
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In addition, we acquired substantially all of the assets of Hadrian Manufacturing Inc. and 100% of the stock of Hadrian, Inc. (collectively “Hadrian”) a leading manufacturer of restroom partition systems and lockers primarily used in institutional and commercial end markets.
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In fiscal 2022, we completed the merger with Elkay, a leading manufacturer and distributor of drinking water solutions and commercial and residential sinks. Elkay offers a wide array of sinks recognized for their design, durability and aesthetics. These products are commonly used in education, healthcare, hotel and lodging, office, retail, transportation, recreation and leisure, public, industrial, and residential applications.
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Elkay's sinks are sold in various forms, with stainless steel representing the most popular, followed by quartz, fireclay-ceramic, cast iron, and other materials. 8 Acquisitions Mergers and acquisitions are a critical part of the Zurn Elkay growth strategy.
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The number of shares issued in connection with the merger represented approximately 29% of outstanding shares immediately following the Merger. • November 17, 2021 - We expanded our high-quality flow systems portfolio with the acquisition of the Wade product line, which includes a wide range of specified commercial flow systems products for customers across North America.
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The acquisition leveraged our existing expertise in flow systems to expand our market coverage and offer an additional brand of drainage and environmental products.
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The cash purchase price (net of final purchase price adjustments) was $12.6 million. • April 16, 2021 - We acquired substantially all of the assets of ATS GREASEwatch, a developer, manufacturer and marketer of remote tank monitoring devices, alarms, software and services for various applications, and the acquisition provides technology to enhance and expand our current product offerings and complements our existing product portfolio.
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As a result, sales generally decrease slightly in the first and fourth quarters as compared to the second and third quarters of the calendar year. Our business also depends upon general economic conditions and other market factors beyond our control, and we serve customers in cyclical industries.
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Diversity and Inclusion: We are committed to fostering, cultivating and preserving a culture of diversity and inclusion where our associates are engaged and fulfilled.
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On occasion we are involved in such investigations and/or cleanup, and we have been named as a PRP in environmental matters and could be named in future matters.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe loss or financial instability of any significant customer or customers accounting for our backlog could adversely affect 13 our business, financial condition, results of operations or cash flows. A substantial part of our business is concentrated with a few customers, and we have certain customers that are significant to our business.
Biggest changeEven if we ultimately succeed in recovering any amounts for which we were initially held liable, we may be temporarily required to bear these losses ourselves. 13 The loss or financial instability of any significant customer or customers accounting for our backlog could adversely affect our business, financial condition, results of operations or cash flows.
A drop or weakness in consumer confidence, prolonged adverse weather conditions, lack of availability or increased cost of credit, tightened credit standards or increased unemployment could materially impact demand for and sales of our products and/or result in downward pressure on product pricing and our profit margins, any or all of which could adversely affect our financial results.
A drop or weakness in consumer confidence, prolonged adverse weather conditions, lack of availability or increased cost of credit, tightened credit standards or increased unemployment could materially impact demand for sales of our products and/or result in downward pressure on product pricing and our profit margins, any or all of which could adversely affect our financial results.
The restrictions contained in the credit agreement could: • limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans; • restrict our ability to repurchase shares of our common stock and/or adversely impact our ability to implement capital allocation strategy; • adversely affect our ability to finance our operations, to enter into strategic acquisitions, to fund investments or other capital needs or to engage in other business activities that would be in our interest; and • limit our access to the cash generated by our subsidiaries.
The restrictions contained in the credit agreement could: • limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans; • restrict our ability to repurchase shares of our common stock and/or adversely impact our ability to implement capital allocation strategy; 17 • adversely affect our ability to finance our operations, to enter into strategic acquisitions, to fund investments or other capital needs or to engage in other business activities that would be in our interest; and • limit our access to the cash generated by our subsidiaries.
The Company is continuing to monitor the potential impact of the Pillar 2 proposals and developments on our consolidated financial statements and related disclosures, including eligibility for any transitional safe harbor rules. 19 We may incur significant costs for environmental compliance and/or to address liabilities under environmental laws and regulations, and our reputation may be adversely affected.
The Company is continuing to monitor the potential impact of the Pillar 2 proposals and developments on our consolidated financial statements and related disclosures, including eligibility for any transitional safe harbor rules. We may incur significant costs for environmental compliance and/or to address liabilities under environmental laws and regulations, and our reputation may be adversely affected.
We recently amended our credit facilities to switch from eurodollar loans based on LIBOR to term Secured Overnight Financing Rate (“SOFR”) loans. SOFR is a relatively new reference rate, and its composition and characteristics are not the same as LIBOR. It is not possible to predict what effect the change to SOFR may have on our interest rates.
We amended our credit facilities to switch from eurodollar loans based on LIBOR to term Secured Overnight Financing Rate (“SOFR”) loans. SOFR is a relatively new reference rate, and its composition and characteristics are not the same as LIBOR. It is not possible to predict what effect the change to SOFR may have on our interest rates.
These agreements contain covenants that restrict our ability to take certain actions, such as incurring additional debt, if 17 we are unable to meet defined specified financial ratios, which could result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions.
These agreements contain covenants that restrict our ability to take certain actions, such as incurring additional debt, if we are unable to meet defined specified financial ratios, which could result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions.
The discovery of additional contamination, including at acquired facilities, the imposition of more stringent environmental, health and safety laws and regulations, including cleanup requirements, disputes with our insurers or the insolvency of other responsible parties could require us to incur significant capital expenditures or operating costs materially in excess of our accruals.
The discovery of additional contamination, including at acquired facilities, the imposition of more stringent environmental, health and safety laws and regulations, including cleanup requirements, disputes with our insurers or the 19 insolvency of other responsible parties could require us to incur significant capital expenditures or operating costs materially in excess of our accruals.
Increased frequency of weather events could disrupt construction activity and adversely affect the demand for our products. Demand for our products is primarily driven by commercial construction activity, remodeling and retrofit opportunities, and to a lesser extent, new home starts. Weather is an important variable affecting financial performance as it significantly impacts construction activity.
Increased frequency of weather events could disrupt construction activity and adversely affect the demand for our products. Demand for our products is primarily driven by institutional and commercial construction activity, remodeling and retrofit opportunities, and to a lesser extent, new home starts. Weather is an important variable affecting financial performance as it significantly impacts construction activity.
As indicated above, SOFR is a relatively new reference rate. Any failure of SOFR to gain market acceptance could cause the SOFR to be modified or discontinued. Our current credit facilities provide a mechanism for determining an alternative rate of interest upon the occurrence of certain events related to the discontinuance of SOFR.
As indicated above, SOFR is a relatively new reference rate. Any failure of SOFR to gain market acceptance could cause it to be modified or discontinued. Our current credit facilities provide a mechanism for determining an alternative rate of interest upon the occurrence of certain events related to the discontinuance of SOFR.
These expectations, policies and standards may be more restrictive than current laws and regulations as well as our own pre-existing policies; they may be customer-driven, established by the industry sectors in which we operate or imposed by third-party organizations or other constituencies.
These expectations, policies and standards may be more restrictive than current laws and regulations as well as our own pre-existing policies; they may be customer-driven, established by the industry sectors in which we operate or 18 imposed by third-party organizations or other constituencies.
In addition, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 for a further discussion of some of the factors that could affect future results. If any of these risks materialize, our business, financial condition, results of operations or cash flows could be materially and adversely affected.
In addition, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 for further discussion of some of the factors that could affect future results. If any of these risks materialize, our business, financial condition, results of operations or cash flows could be materially and adversely affected.
Financial Risks Our debt levels could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, inhibit us from making beneficial acquisitions, adversely impact our ability to implement our capital allocation strategy and prevent us from making debt service payments.
Financial Risks Our debt levels could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, inhibit us from making beneficial acquisitions, adversely impact our ability to 16 implement our capital allocation strategy and prevent us from making debt service payments.
To the extent the value of goodwill or intangibles becomes impaired in the future, we may be required to incur material non-cash charges relating to such impairment. Our operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.
To 20 the extent the value of goodwill or intangibles becomes impaired in the future, we may be required to incur material non-cash charges relating to such impairment. Our operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.
Our future success will depend, in part, on our ability to manage this expanded business, resulting in risks and uncertainties, including the need to efficiently and timely integrate the operations and business of Elkay, to combine systems and management controls, and to integrate relationships with customers, vendors and business partners.
Our future success will depend, in part, on our ability to continue to manage this expanded business, resulting in risks and uncertainties, including the need to efficiently and timely integrate the operations and business of Elkay, to combine systems and management controls, and to integrate relationships with customers, vendors and business partners.
We may be unable to realize intended benefits from our ongoing Supply Chain Optimization and Footprint Repositioning initiatives, restructuring and divestiture efforts, and as a result our profitability may be hurt or our business otherwise might be adversely affected.
We may be unable to realize intended benefits from our ongoing Supply Chain Optimization and Footprint Repositioning initiatives, restructuring and divestiture efforts, and as a result our profitability or our business otherwise might be adversely affected.
The existence and potential or actual exercise of such rights could adversely impact the market price of our Common Stock. 21 ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
The existence and potential or actual exercise of such rights could adversely impact the market price of our Common Stock. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
Defaults by any of the customers that have placed significant orders with us, whether because of bankruptcy, illiquidity, operational problems or otherwise, could have a significant adverse effect on our net sales, profitability and cash flow. As of December 31, 2023, all of our backlog was scheduled to ship during the year ending December 31, 2024.
Defaults by any of the customers that have placed significant orders with us, whether because of bankruptcy, illiquidity, operational problems or otherwise, could have a significant adverse effect on our net sales, profitability and cash flow. As of December 31, 2024, all of our backlog was scheduled to ship during the year ending December 31, 2025.
For a more detailed description of the limitations on our ability to incur additional indebtedness, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources. Our goodwill and intangible assets are valued at an amount that is high relative to our total assets and in excess of our stockholders equity.
For a more detailed description of the limitations on our ability to incur additional indebtedness, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources. Our goodwill and intangible assets are valued at an amount that is high relative to our total assets and in excess of our stockholders' equity.
As a result, any inability by us to successfully manage our information systems, or respond effectively to any attack on or interference with our systems, including matters related to system and data security, privacy, reliability, compliance, performance and access, problems related to our systems caused by natural disasters, security breaches or malicious attacks, and any inability of these systems to fulfill their intended business purpose, could impede our ability to record or process orders, manufacture and ship in a timely manner, account for and collect receivables, protect sensitive data of the Company, our customers, our employees, our suppliers and other business partners, comply with our third party obligations of confidentiality and care, or otherwise carry on business in the normal course.
As a result, any inability by us to successfully manage our information systems, or respond effectively to any attack on or interference with our systems, including matters related to system and data security, privacy, reliability, compliance, performance and access, problems related to our systems caused by natural disasters, security breaches or malicious attacks, misuse of artificial intelligence tools, and any inability of these systems to fulfill their intended business purpose, could impede our ability to record or process orders, manufacture and ship in a timely manner, account for and collect receivables, protect sensitive data of the Company, our customers, our employees, our suppliers and other business partners, comply with our third party obligations of confidentiality and care, or otherwise carry on business in the normal course.
In addition, changing or increasing interest rates, including the rates under our debt agreements, could adversely affect our business or financial condition. As a leveraged company, our ability to generate sufficient cash flow from operations to make scheduled payments on our debt will depend on a range of economic, competitive and business factors, many of which are outside our control.
In addition, changing or increasing interest rates, including the rates under our debt agreements, could adversely affect our business or financial condition. Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt will depend on a range of economic, competitive and business factors, many of which are outside our control.
The implementation of the Pillar 2 global minimum tax rules is intended to apply for tax years beginning in 2024. The main purpose of such rules is to minimize tax base erosion and profit shifting from higher tax jurisdictions to lower tax jurisdictions by multi-national companies.
The implementation of the Pillar 2 global minimum tax rules has begun to apply for tax years beginning in 2024. The main purpose of such rules is to minimize tax base erosion and profit shifting from higher tax jurisdictions to lower tax jurisdictions by multi-national companies.
Like other companies, we have experienced, and will continue to experience, these types of threats; however, to date, we have not experienced a material threat or incident. In addition, at times a large percentage of our workforce may be working remotely in response to outbreaks of infectious disease, which may heighten these risks.
Like other companies, we have experienced, and will continue to experience, these types of threats; however, to date, we have not experienced a material threat or incident. In addition, at times a large percentage of our workforce may be working remotely, which may heighten these risks.
Future outbreaks of infectious diseases, including further developments in the COVID pandemic, may result in widespread or localized health crises that adversely affect general commercial activity and the economies and financial markets of the countries and localities in which we operate, sell, and purchases goods and services.
Future outbreaks of infectious diseases may result in widespread or localized health crises that adversely affect general commercial activity and the economies and financial markets of the countries and localities in which we operate, sell, and purchases goods and services.
Certain former stockholders of Elkay have registration rights, the exercise of which could adversely affect the market price of our Common Stock.
These sales may adversely affect the trading price of our Common Stock. Certain former stockholders of Elkay have registration rights, the exercise of which could adversely affect the market price of our Common Stock.
The ongoing updates to our Enterprise Resource Planning ("ERP") systems, as well as failures of our data security and information technology infrastructure or cybersecurity breaches, could cause substantial business interruptions and adversely affect our business. Utilizing a phased approach, we continue to update our ERP systems across our Zurn Elkay operations.
The ongoing updates to our Enterprise Resource Planning ("ERP") systems, as well as failures of our data security and information technology infrastructure, cybersecurity breaches or misuse of artificial intelligence tools, could cause substantial business interruptions and adversely affect our business. We continue to update our ERP systems across our Zurn Elkay operations.
Therefore, an unsuccessful litigation matter or product liability defense could have a material adverse effect on our business, financial condition, results of operations or cash flows. See Item 8, Note 17, Commitments and Contingencies for additional details.
Therefore, an unsuccessful litigation matter or product liability defense could have a material adverse effect on our business, financial condition, results of operations or cash flows. See Item 8, Note 17, Commitments and Contingencies for additional details. Our inability to achieve our sustainability strategy goals and targets could adversely impact our business, financial condition, results of operations or cash flows.
The long-term effect of climate change could decrease demand for certain of our products. 15 Climate change may impact rainfall and water availability in many areas in unpredictable and different ways, which may change the way building owners and municipalities manage drinking, waste and storm water and may lead to new or modified regulations that may impact the market for our products.
Climate change may impact rainfall and water availability in many areas in unpredictable and different ways, which may change the way building owners and municipalities manage drinking, waste and storm water and may lead to new or modified regulations that may impact the market for our products.
We depend on 1,055 independent sales representatives and approximately 70 third-party warehouses to distribute our products. In fiscal 2023, our three largest independent distributors generated approximately 33% of our consolidated net sales with the largest accounting for 20% of consolidated net sales.
We depend on 1,100 independent sales representatives and approximately 65 third-party warehouses to distribute our products. In fiscal 2024, our three largest independent distributors generated approximately 33% of our consolidated net sales with the largest accounting for 19% of consolidated net sales.
As of December 31, 2023, our goodwill and intangible assets totaled $796.0 million and $952.4 million, respectively, and represent a substantial portion of our assets. These assets result from our acquisitions, representing the excess of cost over the fair value of the tangible net assets we have acquired.
As of December 31, 2024, our goodwill and intangible assets totaled $794.2 million and $891.6 million, respectively, and represent a substantial portion of our assets. These assets result from our acquisitions, representing the excess of cost over the fair value of the tangible net assets we have acquired.
For example, an unusually severe or prolonged winter can lead to reduced or delayed construction activity which could magnify the seasonal decline in our net sales and earnings during the winter months and hamper the typical seasonal increase in net sales and earnings during the spring months.
For example, an unusually severe or prolonged winter can lead to reduced or delayed construction activity which could magnify the seasonal decline in our net sales and earnings during the winter months and hamper the typical seasonal increase in net sales and earnings during the spring months. 15 The long-term effect of climate change could decrease demand for certain of our products.
Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms would have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms would have a material adverse effect on our business, financial condition, results of operations and cash flows. Our indebtedness could also have other important consequences with respect to our ability to manage and grow our business successfully.
In the event one of our U.S. defined benefit pension plans is terminated for any reason while it is underfunded, we could be required to make an immediate payment to the PBGC of all or a substantial portion of such plan's underfunding, as calculated by the PBGC based on its own assumptions (which might result in a larger obligation than that based on the assumptions we have used to fund such plan), and the PBGC could place a lien on material amounts of our assets. 18 Legal and Compliance Risks Our failure to comply with government regulations and requirements, third-party certification requirements and policies and standards driven by our customers or other constituencies, including those related to social responsibility, could adversely affect our reputation, business and results of operations.
In the event one of our U.S. defined benefit pension plans is terminated for any reason while it is underfunded, we could be required to make an immediate payment to the PBGC of all or a substantial portion of such plan's underfunding, as calculated by the PBGC based on its own assumptions (which might result in a larger obligation than that based on the assumptions we have used to fund such plan), and the PBGC could place a lien on material amounts of our assets.
Risks Related to the Spin-Off Transaction If the Spin-Off Transaction does not qualify as a tax-free reorganization and distribution for purposes of U.S. federal income taxes, we may be subject to substantial additional taxes.
Additionally, if our sustainability strategy and initiatives are misaligned with evolving stakeholder expectations, it could negatively impact our reputation. Risks Related to the Spin-Off Transaction If the Spin-Off Transaction does not qualify as a tax-free reorganization and distribution for purposes of U.S. federal income taxes, we may be subject to substantial additional taxes.
Operational Risks Increases in the cost, and/or the availability, of raw materials, including as a result of tariffs or other trade protection measures, could adversely affect our business, financial condition, results of operations or cash flows.
Operational Risks Increases in the cost, and/or the availability, of raw materials, including as a result of tariffs or other trade protection measures, could adversely affect our business, financial condition, results of operations or cash flows. Our manufacturing processes depend on third parties for raw materials, in particular bronze, iron, brass, stainless steel, carbon steel, zinc, and engineered plastics.
On February 2, 2023, the OECD issued various administrative guidance including transitional safe harbor rules available in conjunction with the implementation of the Pillar 2 global minimum tax. Based upon the current OECD rules and administrative guidance, the Company does not anticipate being subject to material Top-Up Taxes as various tax jurisdictions begin enacting such legislation.
On February 2, 2023, the OECD issued various administrative guidance including transitional safe harbor rules available in conjunction with the implementation of the Pillar 2 global minimum tax.
During the year ended December 31, 2023, our top five customers accounted for approximately 39% of our consolidated net sales, with one customer accounting for 20% of consolidated net sales.
A substantial part of our business is concentrated with a few customers, and we have certain customers that are significant to our business. During the year ended December 31, 2024, our top five customers accounted for approximately 39% of our consolidated net sales, with one customer accounting for 19% of consolidated net sales.
Third parties also could seek to hold us responsible for any of the liabilities that a counterparty or divested business agreed to assume. Even if we ultimately succeed in recovering any amounts for which we were initially held liable, we may be temporarily required to bear these losses ourselves.
Third parties also could seek to hold us responsible for any of the liabilities that a counterparty or divested business agreed to assume.
Removed
Our manufacturing processes depend on third parties for raw materials, in particular bar steel, brass, castings, copper, forgings, high-performance engineered plastic, plate steel, resin, sheet steel and zinc, as well as petroleum and other carbon-based fuel products.
Added
Furthermore, continued geopolitical turmoil, including the Russia-Ukraine conflict, has heightened the risk of cyberattacks. As discussed further below, the rapid evolution and increased adoption of artificial intelligence and machine learning technologies may intensify our cybersecurity risks.
Removed
Our indebtedness could also have other important consequences with respect to our ability to manage and grow our 16 business successfully, including the following: • it may limit our ability to borrow money for our working capital, capital expenditures, strategic initiatives, acquisitions or other purposes; • it may make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under our credit agreement and our other indebtedness; • a portion of our cash flow from operations will be dedicated to the repayment of our indebtedness and so will not be available for other purposes; • it may limit our flexibility in planning for, or reacting to, changes in our operations or business, or in taking advantage of strategic opportunities; • at times we may be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage; • it may make us more vulnerable to downturns in our business or the economy; • it may restrict us from making strategic acquisitions or divestitures, introducing new technologies or exploiting business opportunities; and • along with the financial and other restrictive covenants in the documents governing our indebtedness, among other things, may limit our ability to borrow additional funds, make acquisitions or capital expenditures, acquire or dispose of assets or take certain of the actions mentioned above, or adversely impact our ability to implement our capital allocation strategy (which includes paying dividends on our common stock), any of which could restrict our operations and business plans.
Added
Artificial intelligence presents challenges that can impact our business by posing security risks to confidential or proprietary information and personal data. The use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences to our business operations.
Removed
As a result of the Spin-Off Transaction, we are subject to certain limitations on Company actions for two years, including certain business combinations, that might otherwise be advantageous. 20 Under relevant agreements governing the Spin-Off Transaction, we are prohibited from taking certain actions during the two-year period following the closing that could cause aspects of the Spin-Off Transaction to fail to qualify for their intended tax treatment.
Added
We may adopt and integrate artificial intelligence tools into our systems for specific use cases after review by our Legal and Information Security teams. Our vendors and third-party partners may incorporate artificial intelligence tools into their offerings with or without disclosing this use to us.
Removed
If we breach or are deemed to have breached these restrictions, the tax-free treatment of some or all of the Spin-Off Transaction could be impaired, and we could be subject to substantial additional U.S. federal and state income taxes. These restrictions might interfere with our current business and prevent us from taking advantage of opportunities that might be advantageous.
Added
The providers of these artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards concerning privacy and data protection, which may result in a loss of intellectual property or confidential information and/or cause harm to our reputation and the public perception of the effectiveness of our security measures.
Removed
We may be unable to successfully integrate Elkay’s business into our business or achieve the anticipated benefits of the Merger. The success of the Merger depends, in part, on our ability to realize the anticipated benefits and cost savings from adding Elkay’s businesses, and we cannot assure successful integration or realization of the anticipated benefits of the Merger.
Added
Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property. Any of these outcomes could damage our reputation, result in the loss of valuable property and information and adversely impact our business.
Removed
Potential difficulties that may be encountered as we continue the integration process which may result in Zurn Elkay performing differently than expected include, among others: • the inability to successfully integrate Elkay in a manner that permits the achievement of full revenue, expected cash flows and cost savings anticipated from the Merger; • not realizing anticipated synergies; • integrating personnel from Elkay and the loss of key employees; • potential unknown liabilities and unforeseen expenses; • integrating relationships with customers, vendors and business partners; • performance shortfalls as a result of the diversion of management’s attention caused by completing the Merger and integrating Elkay’s operations; and • the disruption of, or the loss of momentum in, our ongoing business or inconsistencies in standards, controls, procedures and policies.
Added
Legal and Compliance Risks Our failure to comply with government regulations and requirements, third-party certification requirements and policies and standards driven by our customers or other constituencies, including those related to social responsibility, could adversely affect our reputation, business and results of operations.
Removed
These sales may adversely affect the trading price of our Common Stock. Certain of these stockholders, who received Zurn Elkay shares in the Merger aggregating approximately 23% of our outstanding common stock as of December 31, 2023, agreed not to sell or transfer their shares, subject to certain exceptions, prior to December 31, 2023.
Added
Based upon the current OECD rules and administrative guidance, as well as the related legislation of those countries which has been enacted to date, the Company does not anticipate being subject to material Top-Up Taxes.
Added
Achieving our sustainability strategy goals and targets included in our annual Sustainability Report may be impacted by factors such as availability of resources, technological advances, legislative and regulatory changes, and customer or supplier requirements, many of which are not in our control.
Added
We are committed to meeting these goals and targets, however, the inability to do so could adversely impact our business or financial condition. Also, changing standards for measuring and reporting on applicable sustainability metrics could result in increased costs and adversely impact our results of operations or cash flows.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeA cybersecurity governance council, comprised of executive leaders, meets at least quarterly to review the Company’s cybersecurity program and its effectiveness. This cybersecurity governance council receives updates and reports from the Company’s global cybersecurity team (discussed below) on the cybersecurity program and its effectiveness relating to the prevention, detection, mitigation and remediation of cybersecurity incidents.
Biggest changeThis cybersecurity governance council receives updates and reports from the Company’s global cybersecurity team (discussed below) on the cybersecurity program and its effectiveness relating to the prevention, detection, mitigation and remediation of cybersecurity incidents.
The CIO provides key results and findings from these assessments to the cybersecurity governance council and Audit Committee. The Company has a robust incident response plan intended to help provide timely remediation to cybersecurity incidents and also to help provide notice of any material incidents to the appropriate internal and external entities.
The CIO provides key results and findings from these assessments to the cybersecurity governance council and Audit 21 Committee. The Company has a robust incident response plan intended to help provide timely remediation to cybersecurity incidents and also to help provide notice of any material incidents to the appropriate internal and external entities.
As a result, any inability by us to successfully manage our information systems, or respond effectively to any attack on or interference with our systems, including matters related to system and data security, privacy, reliability, compliance, performance and access, problems related to our systems caused by natural disasters, security breaches or malicious attacks, and any inability of these systems to fulfill 22 their intended business purpose, could impede our ability to record or process orders, manufacture and ship in a timely manner, account for and collect receivables, protect sensitive data of the Company, our customers, our employees, our suppliers and other business partners, comply with our third party obligations of confidentiality and care, or otherwise carry on business in the normal course.
As a result, any inability by us to successfully manage our information systems, or respond effectively to any attack on or interference with our systems, including matters related to system and data security, privacy, reliability, compliance, performance and access, problems related to our systems caused by natural disasters, security breaches or malicious attacks, misuse of artificial intelligence tools, and any inability of these systems to fulfill their intended business purpose, could impede our ability to record or process orders, manufacture and ship in a timely manner, account for and collect receivables, protect sensitive data of the Company, our customers, our employees, our suppliers and other business partners, comply with our third party obligations of confidentiality and care, or otherwise carry on business in the normal course.
Our Board has extensive cybersecurity experience, including two members of the Audit Committee who have received a certificate in cybersecurity oversight from the Carnegie Mellon University Software Engineering Institute. Cybersecurity risk also is monitored, assessed and managed as part of the Company’s integrated Enterprise Risk Management program on an ongoing basis.
Our Board has extensive cybersecurity experience, including two members of the Audit Committee who have received a certificate in cybersecurity oversight from the Carnegie Mellon University Software Engineering Institute. Cybersecurity risk also is monitored, assessed and managed as part of the Company’s integrated Enterprise Risk Management program.
The CIO has more than 35 years of information technology experience, including approximately 17 years serving as a CIO. To assess, identify and manage material risks from cybersecurity threats and to prevent, detect and respond to cybersecurity threats, including threats associated with the use of third-party service providers, the Company has a robust cybersecurity program.
The CIO has more than 36 years of information technology experience, including approximately 18 years serving as a CIO. To assess, identify and manage material risks from cybersecurity threats and to prevent, detect and respond to cybersecurity threats, including threats associated with the use of third-party service providers, the Company has a robust cybersecurity program.
Failure to comply with such laws and regulations could result in the imposition of fines, penalties and other costs. 23
Failure to comply with such laws and regulations could result in the imposition of fines, penalties and other costs. 22
In addition, at times a large percentage of our workforce may be working remotely in response to outbreaks of infectious disease, which may heighten these risks.
In addition, at times a large percentage of our workforce may be working remotely, which may heighten these risks.
Added
A cybersecurity governance council, comprised of executive leaders, including the two members of the Audit Committee with cybersecurity experience, meets at least quarterly to review the Company’s cybersecurity program and its effectiveness.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2023, we had 29 principal manufacturing and warehouse facilities as set forth below: Total Square Feet Location Number of Facilities Owned Leased USA Arizona 1 — 46,100 California 3 157,500 315,300 Georgia 1 — 262,600 Illinois 5 590,500 421,300 North Carolina 5 392,200 413,200 Ohio 1 42,500 — Pennsylvania 3 119,000 99,300 South Carolina 1 — 125,000 Texas 3 175,000 115,700 International Canada 4 72,600 195,600 Mexico 1 106,100 — United Arab Emirates 1 — 6,000 We believe our principal manufacturing and warehouse facilities are suitable for our operations and provide sufficient capacity for our current and future anticipated needs.
Biggest changeAs of December 31, 2024, we had 27 principal manufacturing and warehouse facilities as set forth below: Total Square Feet Location Number of Facilities Owned Leased USA Arizona 1 — 46,100 California 2 157,500 186,100 Georgia 1 — 262,600 Illinois 4 590,500 286,800 North Carolina 5 392,200 415,500 Ohio 1 42,500 — Pennsylvania 4 119,000 216,000 Texas 3 175,000 284,200 International Canada 4 72,600 195,600 Mexico 1 106,100 — United Arab Emirates 1 — 6,000 We believe our principal manufacturing and warehouse facilities are suitable for our operations and provide sufficient capacity for our current and future anticipated needs.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAdams joined us in 2004, and has served in various roles of increasing responsibility, including President and Chief Financial Officer. Mark W. Peterson became our Senior Vice President and Chief Financial Officer in 2011. Mr. Peterson previously served as Vice President and Controller of Zurn Elkay and as a divisional CFO. Mr. Peterson is a certified public accountant.
Biggest changeAdams joined us in 2004, and has served in various roles of increasing responsibility, including President and Chief Financial Officer. David J. Pauli became our Chief Financial Officer in 2024. Mr.
ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. * * * 24 Information about our Executive Officers The following table sets forth information concerning our executive officers as of the date of this report: Name Age Position(s) In Current Position(s) since Todd A. Adams 53 Chairman of the Board and Chief Executive Officer 2020 Mark W.
ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. * * * 23 Information about our Executive Officers The following table sets forth information concerning our executive officers as of the date of this report: Name Age Position(s) In Current Position(s) since Todd A. Adams 54 Chairman of the Board and Chief Executive Officer 2020 David J.
Wehr 59 Executive Advisor 2024 Information about the business experience of our executive officers during at least the past five fiscal years is as follows: Todd A. Adams became our Chairman of the Board in 2020 and Chief Executive Officer in 2009. Mr.
Troutman 58 Chief Information Officer 2007 Information about the business experience of our executive officers during at least the past five fiscal years is as follows: Todd A. Adams became our Chairman of the Board in 2020 and Chief Executive Officer in 2009. Mr.
Troutman became Zurn Elkay's Chief Information Officer at Zurn Elkay in 2007 and an executive officer in 2017. Before joining Zurn Elkay, he was with AT&T, Lucent, and Agere Systems in various senior information technology positions implementing global industry leading solutions and processes. Craig G. Wehr was named Executive Advisor in 2024. Mr.
Troutman became Zurn Elkay's Chief Information Officer at Zurn Elkay in 2007 and an executive officer in 2017. Before joining Zurn Elkay, he was with AT&T, Lucent, and Agere Systems in various senior information technology positions implementing global industry leading solutions and processes. 24 PART II
Peterson 52 Senior Vice President and Chief Financial Officer 2011 Sudhanshu Chhabra 57 Vice President, Zurn Elkay Business Systems 2018 Jeffrey J. LaValle 45 Vice President, General Counsel and Secretary 2022 Jeffrey A. Schoon 42 President 2024 Michael D. Troutman 57 Chief Information Officer 2007 Craig G.
Pauli 42 Chief Financial Officer 2024 Sudhanshu Chhabra 58 Vice President, Zurn Elkay Business Systems 2018 Jeffrey J. LaValle 46 Vice President, General Counsel and Corporate Secretary 2022 Mark W. Peterson 53 Chief Administrative Officer 2024 Jeffrey A. Schoon 43 President 2024 Michael D.
LaValle was a partner at Quarles & Brady LLP, a national full-service law firm. Jeffrey A. Schoon became President of Zurn Elkay in 2024. Mr.
LaValle was a partner at Quarles & Brady LLP, a national full-service law firm. Mark W. Peterson became our Chief Administrative Officer in 2024. Mr.
Removed
Wehr served as Chief Operating Officer of Zurn Elkay since 2022. Mr. Wehr previously served in various positions with Zurn Elkay since 1993, including as President of Zurn and Vice President / General Manager of Zurn Specification Drain Operations. 25 PART II
Added
Pauli joined Zurn Elkay in 2012, and has served in various roles of increasing responsibility, including Vice President and Controller from 2016 to 2024, Vice President - Investor Relations since 2021, and a divisional CFO. Prior to joining Zurn Elkay, Mr. Pauli was with Deloitte. Mr. Pauli is a certified public accountant.
Added
Peterson previously served as Senior Vice President and Chief Financial Officer from 2011 to 2024 and, prior to that, as Vice President and Controller of Zurn Elkay and as a divisional CFO since joining the Company in 2006. Jeffrey A. Schoon became President of Zurn Elkay in 2024. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeISSUER PURCHASES OF EQUITY SECURITIES Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Approximate Dollar Value that may yet be Purchased Under the Plans or Programs (1) Period October 1 - October 31, 2023 — $ — — $ 415,473,453 November 1 - November 30, 2023 315,939 $ 29.13 315,939 $ 406,264,702 December 1 - December 31, 2023 532,867 $ 29.65 532,867 $ 390,456,946 Total/Average 848,806 $ 29.45 848,806 (1) See explanation of the Repurchase Program above. 26 Performance Graph Set forth below is a line graph comparing the cumulative total shareholder return of our common stock with the Standard & Poor's (the "S&P") 500 Index and the S&P 1500 Industrials Index for the years ended December 31, 2023, December 31, 2022, December 31, 2021, the nine-month transition period ended December 31, 2020, and our preceding full fiscal year.
Biggest changeISSUER PURCHASES OF EQUITY SECURITIES Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Approximate Dollar Value that may yet be Purchased Under the Plans or Programs (1) Period October 1 - October 31, 2024 227,728 $ 36.49 227,728 $ 252,236,711 November 1 - November 30, 2024 144,698 $ 39.25 144,698 $ 246,554,377 December 1 - December 31, 2024 161,142 $ 39.26 161,142 $ 240,224,683 Total/Average 533,568 $ 38.08 533,568 (1) See explanation of the Repurchase Program above. 25 Performance Graph Set forth below is a line graph comparing the cumulative total shareholder return of our common stock with the Standard & Poor's (the "S&P") 500 Index and the S&P 1500 Industrials Index for the years ended December 31, 2024, December 31, 2023, December 31, 2022, December 31, 2021, and our preceding nine-month transition period ended December 31, 2020.
The graph assumes the value of the investment in our common stock and each index was $100 on March 31, 2019, and that all dividends were reinvested.
The graph assumes the value of the investment in our common stock and each index was $100 on March 31, 2020, and that all dividends were reinvested.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Shares of our common stock trade on the New York Stock Exchange under the ticker symbol “ZWS”. As of February 1, 2024, there were 27 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Shares of our common stock trade on the New York Stock Exchange under the ticker symbol “ZWS”. As of February 5, 2025, there were 24 holders of record of our common stock.
A substantially greater number of holders of Zurn Elkay common stock are beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. Dividend Policy On February 1, 2023, May 4, 2023, and July 20, 2023 our Board of Directors declared a quarterly cash dividend on our common stock of $0.07 per share.
A substantially greater number of holders of Zurn Elkay common stock are beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. Dividend Policy On February 1, 2024, May 2, 2024, and July 25, 2024 our Board of Directors declared a quarterly cash dividend on our common stock of $0.08 per share.
The shareholder return shown on the graph below is not necessarily indicative of future performance and the indices included do not necessarily reflect management's opinion that such indices are an appropriate measure of the relative performance of Zurn Elkay's stock. 3/31/2019 3/31/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Zurn Elkay Water Solutions Corporation (1) $ 100.00 $ 90.00 $ 159.00 $ 305.00 $ 179.00 $ 251.00 S&P 500 Index $ 100.00 $ 93.00 $ 137.00 $ 176.00 $ 144.00 $ 182.00 S&P 1500 Industrials Index $ 100.00 $ 80.00 $ 124.00 $ 152.00 $ 142.00 $ 171.00 (1) Zurn Elkay Water Solutions Corporation historical prices were adjusted to reflect the impact of the Spin-Off Transaction that was completed on October 4, 2021.
The shareholder return shown on the graph below is not necessarily indicative of future performance and the indices included do not necessarily reflect management's opinion that such indices are an appropriate measure of the relative performance of Zurn Elkay's stock. 3/31/2020 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Zurn Elkay Water Solutions Corporation (1) $ 100 $ 174 $ 327 $ 190 $ 264 $ 335 S&P 500 Index $ 100 $ 145 $ 184 $ 149 $ 185 $ 228 S&P 1500 Industrials Index $ 100 $ 152 $ 184 $ 169 $ 200 $ 231 (1) Zurn Elkay Water Solutions Corporation historical prices were adjusted to reflect the impact of the Spin-Off Transaction that was completed on October 4, 2021.
During the three and twelve months ended December 31, 2023, we repurchased approximately $25.0 million and $125.0 million, respectively, of our common stock. The remaining repurchase authority under the Repurchase Program at December 31, 2023 was $390.5 million.
During the three and twelve months ended December 31, 2024, we repurchased approximately $20.3 million and $150.2 million, respectively, of our common stock. The remaining repurchase authority under the Repurchase Program at December 31, 2024 was $240.2 million.
On October 19, 2023 and February 1, 2024 our Board of Directors declared a quarterly cash dividend on our common stock of $0.08 per share.
On October 23, 2024 and January 30, 2025 our Board of Directors declared a quarterly cash dividend on our common stock of $0.09 per share.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe major components of the Income from discontinued operations, net of tax presented in the consolidated statements of operations during the years ended December 31, 2023, 2022, and 2021 are included in the table below (in millions): Year Ended (1) Year Ended (2) Year Ended (3) December 31, 2023 December 31, 2022 December 31, 2021 Net sales $ — $ — $ 973.0 Cost of sales — — 598.6 Selling, general and administrative expenses (income) (8.4) (2.9) 260.2 Restructuring and other similar charges — — 1.9 Amortization of intangible assets — — 9.9 Interest expense, net — — 4.1 Actuarial loss on pension and other postretirement benefit obligations — — 4.8 Other non-operating income, net — — (5.6) Income from discontinued operations before income tax 8.4 2.9 99.1 Income tax (provision) benefit 0.1 1.8 (28.0) Equity method investment income — — 0.3 Non-controlling interest income — — (0.2) Income from discontinued operations, net of tax $ 8.5 $ 4.7 $ 71.2 ____________________ (1) Selling, general and administrative expenses for the year ended December 31, 2023 include the reversal of certain accruals as a result of costs the Company will no longer incur related to the Spin-Off Transaction.
Biggest changeThe major components of the Income from discontinued operations, net of tax presented in the consolidated statements of operations during the years ended December 31, 2024, 2023, and 2022 are included in the table below (in millions): Year Ended (1) (1) (2) December 31, 2024 December 31, 2023 December 31, 2022 Selling, general and administrative income (0.7) (8.4) (2.9) Income from discontinued operations before income tax 0.7 8.4 2.9 Income tax benefit 0.6 0.1 1.8 Income from discontinued operations, net of tax $ 1.3 $ 8.5 $ 4.7 ____________________ (1) Selling, general and administrative income for the years ended December 31, 2024 and 2023 include the release of certain accruals as a result of costs the Company will no longer incur related to the Spin-Off Transaction.
Discontinued Operations 31 During the year ended December 31, 2021, we completed the spin-off of our PMC platform. The operating results of PMC are reported as discontinued operations in our consolidated statements of operations for all periods presented, as the Spin-Off Transaction represented a strategic shift that had a major impact on our operations and financial results.
Discontinued Operations During the year ended December 31, 2021, we completed the spin-off of our PMC platform. The operating results of PMC are reported as discontinued operations in our consolidated statements of operations for all periods presented, as the Spin-Off Transaction represented a strategic shift that had a major impact on our operations and financial results.
On February 1, 2023, the Financial Accounting Standards Board indicated that they view the minimum tax (“Top-Up Tax”) imposed under Pillar 2 as an alternative minimum tax, and as such, it should be recognized in the period incurred versus recognizing or adjusting deferred tax assets and liabilities.
On February 1, 2023, the Financial Accounting Standards Board (“FASB”) indicated that they view the minimum tax (“Top-Up Tax”) imposed under Pillar 2 as an alternative minimum tax, and as such, it should be recognized in the period incurred versus recognizing or adjusting deferred tax assets and liabilities.
Investing activities in the year ended December 31, 2023, included $21.3 million of capital expenditures, which were partially offset by the receipt of $9.0 million in connection with an insurance settlement and $7.7 million from the sale of certain long-lived assets.
Investing activities for the year ended December 31, 2023, included $21.3 million of capital expenditures, which were partially offset by the receipt of $9.0 million in connection with an insurance settlement and $7.7 million from the sale of certain long-lived assets.
This section cites to the discussion of new or revised accounting pronouncements and standards in Item 8, Note 2, Significant Accounting Policies of our consolidated financial statements. Overview of Recent Developments . This section provides a description of the recent events impacting our results of operations. Results of Operations . This section provides an analysis of our results of operations.
This section cites the discussion of new or revised accounting pronouncements and standards in Item 8, Note 2, Significant Accounting Policies of our consolidated financial statements. Overview of Recent Developments . This section provides a description of the recent events impacting our results of operations. Results of Operations . This section provides an analysis of our results of operations.
We exclude the effect of acquisitions and divestitures because the nature, size and number of acquisitions and divestitures can vary dramatically from period to period and between us and our peers, and can also obscure underlying business trends and make comparisons of long-term performance difficult.
We exclude the effect of mergers and acquisitions and divestitures because the nature, size and number of mergers and acquisitions and divestitures can vary dramatically from period to period and between us and our peers, and can also obscure underlying business trends and make comparisons of long-term performance difficult.
As of December 31, 2023, we had $136.7 million of cash and cash equivalents and $189.0 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2023, the available borrowings under our credit facility were reduced by $11.0 million due to outstanding letters of credit.
As of December 31, 2023, we had $136.7 million of cash and cash equivalents and $189.0 million of additional borrowing capacity. As of December 31, 2023, the available borrowings under our credit facility were reduced by $11.0 million, due to outstanding letters of credit.
In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results. 35 In addition, certain of these expenses added back in calculating Adjusted EBITDA can represent the reduction of cash that could be used for other corporate purposes.
In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results. 34 In addition, certain of these expenses added back in calculating Adjusted EBITDA can represent the reduction of cash that could be used for other corporate purposes.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2022 Form 10-K . Non-GAAP Financial Measures . This section provides an explanation of certain financial measures we use that are not in accordance with U.S. generally accepted accounting principles ("GAAP"). Covenant Compliance . This section provides a discussion of certain restrictive covenants in our credit agreement.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2023 Form 10-K . Non-GAAP Financial Measures . This section provides an explanation of certain financial measures we use that are not in accordance with U.S. generally accepted accounting principles ("GAAP"). Covenant Compliance . This section provides a discussion of certain restrictive covenants in our credit agreement.
Off-Balance Sheet Arrangements We do not have any off-balance sheet or non-consolidated special-purpose entities. 38 Contractual Obligations Our primary material cash requirements include the payment of interest and principal on our outstanding term loans and finance lease obligations, purchase commitments, operating lease obligations, and pension and other post-retirement plans.
Off-Balance Sheet Arrangements We do not have any off-balance sheet or non-consolidated special-purpose entities. 37 Contractual Obligations Our primary material cash requirements include the payment of interest and principal on our outstanding term loans and finance lease obligations, purchase commitments, operating lease obligations, and pension and other post-retirement plans.
Provision for income taxes The income tax provision for the year ended December 31, 2023 was $42.6 million, or an effective tax rate of 29.0%.
The income tax provision for the year ended December 31, 2023 was $42.6 million, or an effective tax rate of 29.0%.
Approximately 11% of our sales originated outside of the United States in the year ended December 31, 2023. Revenues and expenses denominated in foreign currencies are translated into USD at the end of the fiscal period using the average exchange rates in effect during the period. Fluctuations in currency exchange rates also impact the USD amount of our stockholders' equity.
Approximately 11% of our sales originated outside of the United States in the year ended December 31, 2024. Revenues and expenses denominated in foreign currencies are translated into USD at the end of the fiscal period using the average exchange rates in effect during the period. Fluctuations in currency exchange rates also impact the USD amount of our stockholders' equity.
The purchase price includes $1,411.9 million of our common stock based on the closing stock price of $27.48 on July 1, 2022, and $45.9 million of net cash payments for the repayment of Elkay's term loan and Elkay's transaction related costs outstanding that were in excess of Elkay's cash and cash equivalents at the time of closing.
The purchase price includes $1,411.9 million of our common stock based on the closing stock price of $27.48 per share on July 1, 2022, and $45.9 million of net cash payments for the repayment of Elkay's term loan and Elkay's transaction related costs outstanding that were in excess of Elkay's cash and cash equivalents at the time of closing.
The year-over-year change in net income is primarily the result of the factors described above. 34 Non-GAAP Financial Measures Non-GAAP financial measures are intended to supplement and not replace financial measures prepared in accordance with GAAP. The following non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis.
The year-over-year change in net income is primarily the result of the factors described above. 33 Non-GAAP Financial Measures Non-GAAP financial measures are intended to supplement and not replace financial measures prepared in accordance with GAAP. The following non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis.
A discussion of cash flows for the year ended December 31, 2022 compared to December 31, 2021 can be found within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2022 Form 10-K . Contractual Obligations . This section provides a discussion of our commitments as of December 31, 2023.
A discussion of cash flows for the year ended December 31, 2023 compared to December 31, 2022 can be found within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2023 Form 10-K . Contractual Obligations . This section provides a discussion of our commitments as of December 31, 2024.
The calculation of Adjusted EBITDA under our credit agreement as of December 31, 2023, is presented in the table in the Covenant Compliance section below. However, the results of such calculation could differ in the future based on the different types of adjustments that may be included in such respective calculations at the time.
The calculation of Adjusted EBITDA under our credit agreement as of December 31, 2024, is presented in the table in the Covenant Compliance section below. However, the results of such calculation could differ in the future based on the different types of adjustments that may be included in such respective calculations at the time.
Our product portfolio includes professional grade water safety and control products, flow system products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time.
Our product portfolio includes professional grade water safety and control products, flow systems products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time.
This section discusses our exposure to potential losses arising from adverse changes in interest rates and foreign exchange rates. 28 Company Overview We are a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, human safety and the environment.
This section discusses our exposure to potential losses arising from adverse changes in interest rates and foreign exchange rates. 27 Company Overview We are a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, hydration, human safety and the environment.
Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in our consolidated statements of operations. 29 Impairment of intangible assets and tangible fixed assets.
Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in our consolidated statements of operations. 28 Impairment of intangible assets and tangible fixed assets.
As a result of this review, we established a full valuation allowance against U.S. federal and state capital loss carryforwards, as well as certain foreign NOL carryforwards and related deferred tax assets, and continue to maintain a partial valuation allowance against certain U.S. state NOL and tax credit carryforwards.
As a result of this review, we established a full valuation allowance against U.S. federal and state capital loss carryforwards, as well as certain foreign NOL carryforwards and related deferred tax assets, and continues to maintain a partial valuation allowance against certain U.S. state NOL and tax credit carryforwards.
In providing analysis of the results of our operations, we have provided a comparison of our year ended December 31, 2023 to the year ended December 31, 2022. A discussion of the financial performance for the year ended December 31, 2022 compared to December 31, 2021 can be found within "Item 7.
In providing analysis of the results of our operations, we have provided a comparison of our year ended December 31, 2024 to the year ended December 31, 2023. A discussion of the financial performance for the year ended December 31, 2023 compared to December 31, 2022 can be found within "Item 7.
Liquidity and Capital Resources . This section provides an analysis of our cash flows and year-to-year comparisons for our years ended December 31, 2023 and 2022, as well as a discussion of our indebtedness and its potential effects on our liquidity.
Liquidity and Capital Resources . This section provides an analysis of our cash flows and year-to-year comparisons for our years ended December 31, 2024 and 2023, as well as a discussion of our indebtedness and its potential effects on our liquidity.
Therefore, a 100 basis point increase in Term SOFR above where it closed as of December 31, 2023 would increase the annual interest expense under our term loan facility by approximately $4.9 million.
Therefore, a 100 basis point increase in Term SOFR above where it closed as of December 31, 2024 would increase the annual interest expense under our term loan facility by approximately $4.9 million.
Cash Flows The consolidated statements of cash flows for the year ended December 31, 2023, December 31, 2022, and December 31, 2021 have not been adjusted to separately disclose cash flows related to the discontinued operations.
Cash Flows The consolidated statements of cash flows for the year ended December 31, 2024, December 31, 2023, and December 31, 2022 have not been adjusted to separately disclose cash flows related to the discontinued operations.
The implementation of the Pillar 2 global minimum tax rules is intended to apply for tax years beginning in 2024. The main purpose of such rules is to minimize tax base erosion and profit shifting from higher tax jurisdictions to lower tax jurisdictions by multi-national companies.
The implementation of the Pillar 2 global minimum tax rules has begun to apply for tax years beginning in 2024. The main purpose of such rules is to minimize tax base erosion and profit shifting from higher tax jurisdictions to lower tax jurisdictions by multi-national companies.
During the year ended December 31, 2023, the weighted-average interest rate was 7.09%. Our net income is affected by changes in market interest rates on our variable-rate obligations. As discussed above, our term loan facilities bear interest at Term SOFR (subject to a 0.5% floor), plus a Term SOFR adjustment plus an applicable margin.
During the year ended December 31, 2024, the weighted-average interest rate was 7.28%. Our net income is affected by changes in market interest rates on our variable-rate obligations. As discussed above, our term loan facilities bear interest at Term SOFR (subject to a 0.5% floor), plus a Term SOFR adjustment plus an applicable margin.
The Company recognized no impairment charges during the during the years ended December 31, 2022 or 2021. Goodwill, trademarks and certain tradenames have indefinite lives and are not amortized. However, the goodwill and intangible assets are tested annually for impairment, and may be tested more frequently if any triggering events occur that would reduce the recoverability of the asset.
The Company recognized no impairment charges during the during the year ended December 31, 2022. Goodwill, trademarks and certain tradenames have indefinite lives and are not amortized. However, the goodwill and intangible assets are tested annually for impairment, and may be tested more frequently if any triggering events occur that would reduce the recoverability of the asset.
Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions. 36 Set forth below is a reconciliation of net income to Adjusted EBITDA for the year ended December 31, 2023.
Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions. 35 Set forth below is a reconciliation of net income to Adjusted EBITDA for the year ended December 31, 2024.
As of December 31, 2023 and 2022, our liability for unrecognized tax benefits was $5.6 million and $5.5 million, respectively. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, net operating losses (“NOL’s”), tax credit and other carryforwards.
As of December 31, 2024 and 2023, our liability for unrecognized tax benefits was $1.8 million and $5.6 million, respectively. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, net operating losses (“NOL’s”), tax credit and other carryforwards.
As of December 31, 2023 and 2022, valuation allowances of $12.0 million and $32.2 million, respectively, were recorded against our deferred tax assets. See Item 8 Note 16, Income Taxes for additional information. Commitments and Contingencies. We are subject to proceedings, lawsuits and other claims related to environmental, labor, product and other matters.
As of December 31, 2024 and 2023, valuation allowances of $9.0 million and $12.0 million, respectively, were recorded against our deferred tax assets. See Item 8, Note 16, Income Taxes for additional information. Commitments and Contingencies. We are subject to proceedings, lawsuits and other claims related to environmental, labor, product and other matters.
As a result, the following discussion of results of operations and financial condition is centered on the Zurn business excluding PMC. The consolidated statements of cash flows for the years ended December 31, 2023, 2022, and 2021 have not been adjusted to separately disclose cash flows related to the discontinued operations.
As a result, the following discussion of results of operations and financial condition is centered on the Zurn Elkay Water Solutions business excluding PMC. The consolidated statements of cash flows for the years ended December 31, 2024, 2023, and 2022 have not been adjusted to separately disclose cash flows related to the discontinued operations.
The largest component of our cost of sales is cost of materials, which represented approximately 37% of net sales in the year ended December 31, 2023. We purchase a broad range of materials and components throughout the world in connection with our manufacturing activities.
The largest component of our cost of sales is cost of materials, which represented approximately 33% of net sales in the year ended December 31, 2024. We purchase a broad range of materials and components throughout the world in connection with our manufacturing activities.
Determination of the fair value requires various estimates including internal cash flow estimates generated from the asset, quoted market prices and appraisals as appropriate to determine fair value. Actual results could vary from these estimates. During the year ended December 31, 2023, the Company recognized $2.5 million of fixed asset impairment charges.
Determination of the fair value requires various estimates including internal cash flow estimates generated from the asset, quoted market prices and appraisals as appropriate to determine fair value. Actual results could vary from these estimates. During the years ended December 31, 2024 and December 31, 2023, the Company recognized $7.4 million and $2.5 million of fixed asset impairment charges, respectively.
If the USD strengthened by 10% as of December 31, 2023, the result would have decreased stockholders' equity by approximately $11.7 million. As of December 31, 2023, we had not entered into foreign currency forward contracts.
If the USD strengthened by 10% as of December 31, 2024, the result would have decreased stockholders' equity by approximately $11.5 million. As of December 31, 2024, we had not entered into foreign currency forward contracts.
(6) Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $91.9 million (as defined by the credit agreement) at December 31, 2023.
(6) Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $159.2 million (as defined by the credit agreement) at December 31, 2024.
As of December 31, 2023, our outstanding borrowings under the term loan facility were $473.6 million (net of $6.8 million unamortized debt issuance costs) and bore a weighted-average effective interest rate of 7.47%, determined as Term SOFR (subject to a 0.5% floor), plus a Term SOFR adjustment of 0.115%, plus an applicable margin of 2.00%.
As of December 31, 2024, our outstanding borrowings under the term loan facility were $475.0 million (net of $5.4 million unamortized debt issuance costs) and bore a weighted-average effective interest rate of 6.42%, determined as Term SOFR (subject to a 0.5% floor), plus a Term SOFR adjustment of 0.115%, plus an applicable margin of 2.00%.
The assets and liabilities of our non-U.S. subsidiaries are translated into USD at the exchange rates in effect at the end of the fiscal periods. As of December 31, 2023, stockholders' equity increased by $3.6 million from December 31, 2022 as a result of foreign currency translation adjustments.
The assets and liabilities of our non-U.S. subsidiaries are translated into USD at the exchange rates in effect at the end of the fiscal periods. As of December 31, 2024, stockholders' equity decreased by $10.0 million from December 31, 2023 as a result of foreign currency translation adjustments.
Net income from continuing operations Our net income from continuing operations for the year ended December 31, 2023, was $104.2 million, compared to net income from continuing operations of $57.0 million for the year ended December 31, 2022, as a result of the factors described above.
Net income from continuing operations Our net income from continuing operations for the year ended December 31, 2024, was $158.9 million, compared to net income from continuing operations of $104.2 million for the year ended December 31, 2023, as a result of the factors described above.
Actuarial gain on pension and other postretirement benefit obligations Actuarial gain on pension and other postretirement benefit obligations for the year ended December 31, 2023, was $2.0 million compared to a gain of $1.9 million for the year ended December 31, 2022.
Actuar ial gain on pension and other postretirement benefit obligations Actuarial gain on pension and other postretirement benefit obligations for the year ended December 31, 2024, was $1.4 million compared to a gain of $2.0 million for the year ended December 31, 2023.
Indebtedness As of December 31, 2023 we had $495.3 million of total indebtedness outstanding as follows (in millions): Total Debt at December 31, 2023 Current Maturities of Long-Term Debt Long-term Portion Term loan (1) $ 473.6 $ — $ 473.6 Finance leases 21.7 0.9 20.8 Total $ 495.3 $ 0.9 $ 494.4 ____________________ (1) Includes unamortized original issue discount and debt issuance costs of $6.8 million at December 31, 2023.
Indebtedness As of December 31, 2024 we had $495.6 million of total indebtedness outstanding as follows (in millions): Total Debt at December 31, 2024 Current Maturities of Long-Term Debt Long-term Portion Term loan (1) $ 475.0 $ — $ 475.0 Finance leases 20.6 0.8 19.8 Total $ 495.6 $ 0.8 $ 494.8 ____________________ (1) Includes unamortized original issue discount and debt issuance costs of $5.4 million at December 31, 2024.
Elkay Merger On July 1, 2022, we completed the Elkay Merger for a purchase price (after final purchase price adjustments) of $1,457.8 million. Elkay, a market leader of filtered drinking water solutions and commercial sinks, complements our existing product portfolio.
See Item 8, Note 17, Commitments and Contingencies for more information. 30 Elkay Merger On July 1, 2022, we completed the Elkay Merger for a purchase price (after final purchase price adjustments) of $1,457.8 million. Elkay, a market leader of filtered drinking water solutions and commercial sinks, complements our existing product portfolio.
Loss on extinguishment of debt During the year ended December 31, 2023, we recognized a $0.9 million loss on the extinguishment of debt in connection with the write off of a portion of the unamortized debt issuance costs due to a $60.0 million Term Loan voluntary prepayment.
During the year ended December 31, 2023, we recognized a $0.9 million loss on the extinguishment of debt in connection with the write off of a portion of the unamortized debt issuance costs due to a $60.0 million Term Loan voluntary prepayment. See Item 8, Note 11, Long-Term Debt for more information.
The obligation for other postretirement benefits other than pension also is actuarially determined and is affected by assumptions including the discount rate and expected future increase in per capita costs of covered other postretirement health care benefits.
See Item 8, Note 15, Retirement Benefits for additional information. The obligation for other postretirement benefits other than pension also is actuarially determined and is affected by assumptions including the discount rate and expected future increase in per capita costs of covered other postretirement health care benefits.
As of December 31, 2023, our Net First Lien Leverage Ratio was 1.2 to 1.0.
As of December 31, 2024, our Net First Lien Leverage Ratio was 0.86 to 1.0.
See Item 8, Note 5, Restructuring and Other Similar Charges for more information. 32 Results of Operations Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 Net sales (Dollars in Millions) Year Ended December 31, 2023 December 31, 2022 Change % Change Net sales $ 1,530.5 $ 1,281.8 $ 248.7 19.4 % Net sales were $1,530.5 million for the year ended December 31, 2023, a 19.4% increase year over year.
See Item 8, Note 5, Restructuring and Other Similar Charges for more information. 31 Results of Operations Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023 Net sales (Dollars in Millions) Year Ended December 31, 2024 December 31, 2023 Change % Change Net sales $ 1,566.5 $ 1,530.5 $ 36.0 2.4 % Net sales were $1,566.5 million for the year ended December 31, 2024, a 2.4% increase year over year.
Diluted net income per share from continuing operations was $0.59 for the year ended December 31, 2023, as compared to $0.37 per share for the year ended December 31, 2022. Net income Net income for the year ended December 31, 2023, was $112.7 million compared to $61.7 million for the year ended December 31, 2022.
Diluted net income per share from continuing operations was $0.91 per share for the year ended December 31, 2024, as compared to $0.59 per share for the year ended December 31, 2023. Net income Net income for the year ended December 31, 2024, was $160.2 million compared to $112.7 million for the year ended December 31, 2023.
Diluted net income per share was $0.64 for the year ended December 31, 2023, compared to $0.40 for the year ended December 31, 2022. Income from discontinued operations, net of tax, was $8.5 million for the year ended December 31, 2023 compared to $4.7 million for the year ended December 31, 2022.
Diluted net income per share was $0.92 per share for the year ended December 31, 2024, compared to $0.64 per share for the year ended December 31, 2023. Income from discontinued operations, net of tax, was $1.3 million for the year ended December 31, 2024 compared to $8.5 million for the year ended December 31, 2023.
Major raw materials and components include brass, castings, copper, zinc, stainless steel, forgings, plate steel, high-performance engineered plastic and resin. We have a strategic sourcing program that is designed to significantly reduce the number of direct and indirect suppliers we use and to lower the cost of purchased materials. Selling, general and administrative expenses.
Major raw materials and components include bronze, iron, brass, stainless steel, carbon steel, zinc, and engineered plastics. We have a strategic sourcing program that is designed to significantly reduce the number of direct and indirect suppliers we use and to lower the cost of purchased materials. Selling, general and administrative expenses.
A loss on the divestiture of asbestos liabilities and certain assets of $11.4 million was recognized in the consolidated statements of operations for the twelve months ended December 31, 2023. See Item 8, Note 17, Commitments and Contingencies for more information.
A loss on the divestiture of asbestos liabilities and certain assets of $11.4 million was recognized in the consolidated statements of operations for the twelve months ended December 31, 2023.
During the fourth quarter of the year ended December 31, 2023, we completed our annual goodwill impairment test and elected to perform a quantitative assessment. No goodwill impairment charges were recorded during the years ended December 31, 2023, 2022, or 2021. Retirement benefits.
During the fourth quarter of the year ended December 31, 2024, we completed our annual goodwill and intangible asset impairment tests and elected to perform a qualitative assessment. No goodwill impairment charges were recorded during the years ended December 31, 2024, 2023, or 2022.
The effective income tax rate for the year ended December 31, 2022 was above the U.S. federal statutory rate of 21% primarily due to non-deductible transaction costs associated with the Elkay Merger, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments and the reduction in the valuation allowance associated with certain state NOL carryforwards.
The effective income tax rate for the year ended December 31, 2024 was above the U.S. federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments and the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations.
Cash used for financing activities was $239.2 million in the year ended December 31, 2023 compared to cash used for financing activities of $61.1 million in the year ended December 31, 2022.
Cash used for financing activities was $207.5 million in the year ended December 31, 2024 compared to $239.2 million in the year ended December 31, 2023.
We reported net income in the year ended December 31, 2023, of $112.7 million and Adjusted EBITDA for the same period of $339.5 million. See "Covenant Compliance" for a reconciliation of Adjusted EBITDA to GAAP net income.
We reported net income in the year ended December 31, 2024, of $160.2 million and Adjusted EBITDA for the same period of $390.4 million. See "Covenant Compliance" for a reconciliation of Adjusted EBITDA to GAAP net income.
Income from operations (Dollars in Millions) Year Ended December 31, 2023 December 31, 2022 Change % Change Income from operations $ 191.4 $ 107.1 $ 84.3 78.7 % % of net sales 12.5 % 8.4 % 4.1 % Income from operations was $191.4 million for the year ended December 31, 2023, or 12.5% of net sales, compared to income from operations of $107.1 million, or 8.4% of net sales, for the year ended December 31, 2022.
Income from operations (Dollars in Millions) Year Ended December 31, 2024 December 31, 2023 Change % Change Income from operations $ 244.6 $ 191.4 $ 53.2 27.8 % % of net sales 15.6 % 12.5 % 3.1 % Income from operations was $244.6 million for the year ended December 31, 2024, or 15.6% of net sales, compared to income from operations of $191.4 million, or 12.5% of net sales, for the year ended December 31, 2023.
As of December 31, 2022, we had $124.8 million of cash and cash equivalents and $192.5 million of additional borrowing capacity. As of December 31, 2022, the available borrowings under our credit facility were reduced by $7.5 million, due to outstanding letters of credit.
As of December 31, 2024, we had $198.0 million of cash and cash equivalents and $188.7 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2024, the available borrowings under our credit facility were reduced by $11.3 million due to outstanding letters of credit.
We have significant pension and post-retirement benefit income and expense and assets/liabilities that are developed from actuarial valuations. These valuations include key assumptions regarding discount rates, expected return on plan assets, mortality rates, compensation increases, and the current health care cost trend rate. We consider current market conditions in selecting these assumptions.
These valuations include key assumptions regarding discount rates, expected return on plan assets, mortality rates, compensation increases, and the current health care cost trend rate. We consider current market conditions in selecting these assumptions.
(in millions) Year Ended December 31, 2023 Net income $ 112.7 Income from discontinued operations, net of tax (1) (8.5) Provision for income taxes 42.6 Actuarial gain on pension and other postretirement benefit obligations (2.0) Other expense, net (2) 7.2 Loss on the extinguishment of debt 0.9 Interest expense, net 38.5 Depreciation and amortization 87.9 EBITDA 279.3 Adjustments to EBITDA Restructuring and other similar charges (3) 15.3 Stock-based compensation expense 40.0 LIFO gain (4) (6.5) Loss on divestiture of asbestos liabilities and certain assets (5) 11.4 Subtotal of adjustments to EBITDA 60.2 Adjusted EBITDA 339.5 Consolidated indebtedness (6) $ 403.4 Net First Lien Leverage Ratio (7) 1.19 ____________________ (1) Income from discontinued operations, net of tax is not included in Adjusted EBITDA in accordance with the terms of our credit agreement.
(in millions) Year Ended December 31, 2024 Net income $ 160.2 Income from discontinued operations, net of tax (1) (1.3) Provision for income taxes 48.1 Actuarial gain on pension and other postretirement benefit obligations (1.4) Other expense, net (2) 5.9 Interest expense, net 33.1 Depreciation and amortization 88.3 EBITDA 332.9 Adjustments to EBITDA Restructuring and other similar charges (3) 13.5 Stock-based compensation expense 37.9 LIFO (4) 5.5 Other, net (5) 0.6 Subtotal of adjustments to EBITDA 57.5 Adjusted EBITDA 390.4 Consolidated indebtedness (6) $ 336.4 Net First Lien Leverage Ratio (7) 0.86 ____________________ (1) Income from discontinued operations, net of tax is not included in Adjusted EBITDA in accordance with the terms of our credit agreement.
These initiatives were intended to drive efficiencies and reduce operating costs while also modifying our footprint to reflect changes in the markets we serve, the impact of acquisitions on our overall manufacturing capacity and the refinement of our overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs, and other facility rationalization costs.
Restructuring and Other Similar Charges During the year ended December 31, 2024, we continued to execute various restructuring actions. These initiatives were intended to drive efficiencies and reduce operating costs while also modifying our footprint to reflect changes in the markets we serve, the impact of acquisitions on our overall manufacturing capacity and the refinement of our overall product portfolio.
Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 Net cash provided by operating activities in the year ended December 31, 2023, was $253.9 million compared to $97.0 million in the year ended December 31, 2022 due to higher net income as a result of a full year of Elkay sales, lower use of cash for trade working capital as well as benefits generated from ongoing productivity actions.
Refer to Item 8, Note 4, Discontinued Operations for further information. 36 Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023 Net cash provided by operating activities in the year ended December 31, 2024, was $293.5 million compared to $253.9 million in the year ended December 31, 2023 due to higher net income, lower use of cash for trade working capital as well as benefits generated from ongoing productivity actions.
The increase in interest expense as compared to the prior year period is primarily a result of higher year-over-year interest rates, partially offset by a decrease in interest expense as a result of a voluntary prepayment on the Term Loan of $60.0 million. See Item 8, Note 11, Long-Term Debt for more information.
The decrease in interest e xpense, net as compared to the prior year period is due to interest earned on higher cash balances and reduced interest expense due to the prior year voluntary prepayment on the Term Loan of $60.0 million. See Item 8, Note 11, Long-Term Debt for more information.
During the years ended December 31, 2023, 2022, and 2021, we recognized a non-cash actuarial gain from continuing operations of $2.0 million, $1.9 million, and $1.2 million, respectively, in connection with re-measurements of our plans.
During the years ended December 31, 2024, 2023, and 2022, we recognized a non-cash actuarial gain from continuing operations of $1.4 million, $2.0 million, and $1.9 million, respectively, in connection with re-measurements of our plans. Net periodic benefit costs recorded on a quarterly basis are primarily comprised of service and interest cost and the expected return on plan assets.
Other income (expense), net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit plans and other non-operational gains and losses. The year-over-year change is primarily driven by higher interest cost within the non-service cost components of our defined benefit plans and lower expected return on plan assets.
Other expense, net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit plans and other non-operational gains and losses.
Financing activities in the year ended December 31, 2022 included $32.5 million of cash for the payment of dividends on our common stock, $24.7 million of cash for repurchases of our common stock, $5.7 million of net cash payments on outstanding debt, which were partially offset by $1.8 million of net cash proceeds associated with stock option exercises.
Financing activities in the year ended December 31, 2024 included $56.6 million of cash for the payment of dividends on our common stock, $150.2 million of cash for repurchases of our common stock, $0.8 million of net cash payments on outstanding debt, and $8.6 million of cash used for the payment of withholding taxes on employees' share-based payment awards, which were partially offset by $8.7 million of net cash proceeds associated with stock option exercises and Employee Stock Purchase Plan ("ESPP") contributions.
We expect to continue executing similar initiatives to optimize our operating margin and manufacturing footprint. As such, we expect further expenses related to workforce reductions, potential impairment of assets, lease termination costs, and other facility rationalization costs. We recorded restructuring charges of $15.3 million, $15.4 million and $3.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.
These restructuring actions primarily resulted in workforce reductions, lease termination costs, and other facility rationalization costs. We expect to continue executing similar initiatives to optimize our operating margin and manufacturing footprint. As such, we expect further expenses related to workforce reductions, potential impairment of assets, lease termination costs, and other facility rationalization costs.
The income tax provision for the year ended December 31, 2022 was $26.8 million, or an effective tax rate of 32.0%.
Provision for income taxes The income tax provision for the year ended December 31, 2024 was $48.1 million, or an effective tax rate of 23.2%.
(2) Results of operations for the year ended December 31, 2022 includes the reversal of certain accruals as a result of costs we are obligated to indemnify Regal Rexnord Corporation for being lower than original estimates.
(2) Results of operations for the year ended December 31, 2022 include the release of certain accruals as a result of costs we are obligated to under indemnification being lower than original estimates. See Item 8, Note 4, Discontinued Operations for more information.
There was no loss on the extinguishment of debt recognized for the year ended December 31, 2022. See Item 8, Note 11, Long-Term Debt for more information.
Loss on extinguishment of debt There was no loss on the extinguishment of debt recognized for the year ended December 31, 2024.
(4) Last-in first-out (LIFO) inventory adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement. (5) Loss on divestiture of asbestos liabilities and certain assets are excluded in calculating Adjusted EBITDA as defined in our credit agreement.
(4) Last-in first-out (LIFO) inventory adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement. (5) Other, net consists of gains and losses on the disposition of long-lived assets in accordance with the terms of our credit agreement.
See Item 8, Note 15, Retirement Benefits for more information. 33 Other income (expense), net Other expense, net for the year ended December 31, 2023, was $7.2 million compared to other income, net of $1.7 million for the year ended December 31, 2022.
Those gains were partially offset by a decrease in the discount rate from the prior measurement. See Item 8, Note 15, Retirement Benefits for more information. 32 Other income (expense), net Other expense, net for the year ended December 31, 2024, was $5.9 million compared to other expense, net of $7.2 million for the year ended December 31, 2023.
Income from operations as a percentage of net sales increased by 410 basis points year over year due to the benefits of productivity synergies and restructuring actions as well as lower material and transportation costs, partially offset by the loss on divestiture of asbestos liabilities and certain assets (see Item 8, Note 17, Commitments and Contingencies), higher non-cash stock-based compensation and incremental depreciation and intangible asset amortization resulting from the Elkay Merger.
Income from operations as a percentage of net sales increased by 310 basis points year over year due to the benefits resulting from productivity synergies and restructuring actions related to the Elkay Merger, as well as lower material costs and restructuring costs. The prior year also included a $11.4 million loss on divestiture of asbestos liabilities and certain assets.
Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. Core sales Core sales excludes the impact of acquisitions (such as the Elkay merger), divestitures (such as PMC) and foreign currency translation.
Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. Core sales Core sales excludes the impact of mergers and acquisitions, divestitures and foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparisons of our net sales performance with prior and future periods and to our peers.
The Company is continuing to monitor the potential impact of the Pillar 2 proposals and developments on our consolidated financial statements and related disclosures, including eligibility for any transitional safe harbor rules. 30 We assess our income tax positions and record tax liabilities for all years subject to examination based upon management’s evaluation of the facts and circumstances and information available at the reporting dates.
The 29 Company is continuing to monitor the potential impact of the Pillar 2 proposals and developments on our consolidated financial statements and related disclosures, including eligibility for any transitional safe harbor rules.
On February 2, 2023, the OECD issued various administrative guidance including transitional safe harbor rules available in conjunction with the implementation of the Pillar 2 global minimum tax. Based upon the current OECD rules and administrative guidance, the Company does not anticipate being subject to material Top-Up Taxes as various tax jurisdictions begin enacting such legislation.
On February 2, 2023, the OECD issued various administrative guidance including transitional safe harbor rules available in conjunction with the implementation of the Pillar 2 global minimum tax.
These gains were partially offset by a decrease in the discount rate from the prior measurement. The non-cash actuarial gain recognized for the year ended December 31, 2022, was primarily due to a year over year increase in discount rates assumptions utilized in performing the annual remeasurement of our defined benefit plans, partially offset by unfavorable asset performance.
The non-cash actuarial gain recognized for the year ended December 31, 2024, was primarily due to a combination of discount rate increases coupled with demographic and claims gains experienced during 2024 that were reflected in the other post-retirement benefit plans. These gains were partially offset by an increase in the medical cost growth assumption from the prior measurement.
Investing activities for the year ended December 31, 2022, included $7.6 million of capital expenditures and net cash payments of $44.8 million in connection with acquisitions, which were partially offset by the receipt of $35.0 million from Regal Rexnord Corporation in connection with the final net assets transferred in the PMC Spin-Off Transaction, the receipt of $9.5 million in connection with an insurance settlement and $1.3 million from the sale of certain long-lived assets.
Cash used for investing activities was $20.2 million in the year ended December 31, 2024 compared to $4.6 million in the year ended December 31, 2023. Investing activities in the year ended December 31, 2024, included $21.8 million of capital expenditures, which were partially offset by the receipt of $1.6 million from the sale of certain long-lived assets.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of results of operations and financial condition includes periods prior to the acquisitions of the assets of Advance Technology Solutions, LLC (d/b/a ATS GREASEwatch) ("ATS GREASEwatch"), and the assets of Wade Drains ("Wade"), and the acquisition of Elkay in the Elkay merger.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of results of operations and financial condition includes periods prior to the acquisition of Elkay. Our financial performance includes the Elkay business subsequent to July 1, 2022, the date of the acquisition.
Our financial performance includes the ATS GREASEwatch business subsequent to April 16, 2021, the Wade business subsequent to November 17, 2021, and the Elkay business subsequent to July 1, 2022, the respective dates of their acquisitions. Accordingly, the discussion and analysis does not reflect any impact of ATS GREASEwatch, Wade, or Elkay transactions prior to the respective closing dates.
Accordingly, the discussion and analysis does not reflect any impact of the Elkay transaction prior to the closing date.
Additionally, income from operations for the year ended December 31, 2022 included merger costs of $33.7 million and a purchase accounting fair value adjustment of $18.9 million related to the Elkay Merger. Interest expense, net Interest expense, net was $38.5 million for the year ended December 31, 2023 compared to $26.9 million for the year ended December 31, 2022.
See Item 8, Note 17, Commitments and Contingencies for more information. Interest expense, net Interest expense, net was $33.1 million for the year ended December 31, 2024 compared to $38.5 million for the year ended December 31, 2023.
Removed
Net periodic benefit costs recorded on a quarterly basis are primarily comprised of service and interest cost, amortization of unrecognized prior service cost and the expected return on plan assets. See Item 8, Note 15, Retirement Benefits for additional information.
Added
During the year ended December 31, 2024, we recorded a $0.6 million impairment charge related to an indefinite-lived tradename no longer used. No intangible asset impairment charges were recorded during the years ended December 31, 2023 or 2022. Retirement benefits. We have significant pension and post-retirement benefit income and expense and assets/liabilities that are developed from actuarial valuations.

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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 changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information with respect to the Company's market risk is contained under the caption "Quantitative and Qualitative Disclosures About Market Risk" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. 39
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information with respect to the Company's market risk is contained under the caption "Quantitative and Qualitative Disclosures About Market Risk" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. 38

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