OVERVIEW
Mueller Water Products, Inc. (NYSE:MWA) is a leading manufacturer and marketer of products and services used in the
transmission, distribution and measurement of water in North America. Our broad product and service portfolio includes
engineered valves, fire hydrants, pipe connection and repair products, metering products, leak detection, pipe condition
assessment, pressure management products and software technology that provides critical water system data. We help
municipalities increase operational efficiencies, improve customer service and prioritize capital spending, demonstrating why
Mueller Water Products is Where Intelligence Meets Infrastructure®.
Mueller Water Products is one of the only companies that can fulfill the needs of water utilities from end to end – at the
source, at the plant, below the ground, on the street and in the cloud. Built on a solid legacy of innovation, we have the
expertise and vision to provide advanced infrastructure and technology solutions for transmitting, distributing, measuring
and monitoring water more safely and effectively than ever before.
Mueller brands include Mueller®, Echologics®, Hydro Gate®, Hydro-Guard®,
HYMAX®, i2O®, Jones®, Krausz®, Mi.Net®, Milliken®, Pratt®, Pratt Industrial®,
Singer® and U.S. Pipe Valve and Hydrant.
To learn more visit www.muellerwaterproducts.com.
CEO’S LETTER
J. SCOTT HALL I President and Chief Executive Officer
December 22, 2021
Dear Fellow Shareholders,
With a nearly 165-year legacy serving customers in the water industry, Mueller has stood the test of time.
As I reflect on 2021, I am proud of what we have accomplished and how our teams have navigated these
challenging times.
While the pandemic and global supply chain disruptions continue to impact people and businesses across the
world, our teams have remained focused on manufacturing products and serving our customers. Additionally,
we continued to focus on our strategic priorities, including developing technology enabled solutions that help
deliver safe clean drinking water, increasing operational efficiencies, and progressing on our Environmental,
Social and Governance (ESG) targets and goals.
As our teams continued to execute in this unprecedented environment, we also experienced tragedy at our
Albertville, Alabama facility. On June 15, 2021, two employees were killed, and two other employees were
severely injured during a mass shooting. Ever true to our values and culture, our employees worked together
to support the victims, the families of the victims and each other.
Even during these challenging times, our teams rallied to deliver strong financial performance. For the year,
the Company:
• Achieved net sales of $1,111.0 million, an increase of 15.2 percent
• Achieved adjusted EBITDA of $203.6 million, an increase of 6.8 percent
• Increased operating cash flow by $16.4 million to $156.7 million and improved free cash flow
by $21.4 million to $94.0 million
• Reduced our interest expense through new debt issuance
• Increased our quarterly dividend per share by 4.8%
Building on what we’ve accomplished this year, we are positioned to enhance our leadership position in the
water industry and have taken action to help ensure opportunities for future growth. We recently announced
a new management structure beginning with the first quarter of 2022, with two business divisions: Water
Flow Solutions and Water Management Solutions. The new management structure is designed to increase
revenue growth, drive operational excellence, accelerate new product development and enhance profitability.
Thank you to our stockholders for your support during these challenging times and throughout our
transformational journey, as we are determined to become the leading provider of technology enabled
solutions to water utilities. I am excited about the path forward and the possibilities ahead.
Sincerely,
J. Scott Hall
President and
Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2021
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
Commission file number: 001-32892
MUELLER WATER PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
20-3547095
(I.R.S. Employer Identification Number)
1200 Abernathy Road N.E.
Suite 1200
Atlanta, GA 30328
(Address of Principal Executive Offices)
Registrant’s telephone number: (770) 206-4200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.01
Trading Symbol
MWA
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files.) ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
☐ Accelerated filer
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): ☒ Large accelerated filer
☐ Non-accelerated filer
☐ Emerging growth company
☐ Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant had filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
There were 157,999,037 shares of common stock of the registrant outstanding at November 10, 2021. At March 31, 2021, the aggregate
market value of the voting and non-voting common stock held by non-affiliates (assuming only for purposes of this computation that directors
and executive officers may be affiliates) was $2,176.3 million based on the closing price per share as reported on the New York Stock
Exchange.
Applicable portions of the Proxy Statement for the upcoming 2022 Annual Meeting of Stockholders of the Company are incorporated by
reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Introductory Note
In this Annual Report on Form 10-K (“Annual Report”), (1) the “Company,” “we,” “us” or “our” refer to Mueller Water
Products, Inc. and its subsidiaries (2) “Infrastructure” refers to our Infrastructure segment (3) “Technologies” refers to our
Technologies segment (4) “Anvil” refers to our former Anvil segment, which we sold on January 6, 2017; and (5) “U.S. Pipe”
refers to our former U.S. Pipe segment, which we sold on April 1, 2012. With regard to the Company’s segments, “we,” “us”
or “our” may also refer to the segment being discussed.
Certain of the titles and logos of our products referenced in this Annual Report are part of our intellectual property. Each
trade name, trademark or service mark of any other company appearing in this Annual Report is the property of its owner.
Unless the context indicates otherwise, whenever we refer in this Annual Report to a particular year, we mean our fiscal
year ended or ending September 30 in that particular calendar year. We manage our business and report operations through two
business segments, Infrastructure and Technologies, based largely on the products they sell and the customers they serve.
Industry and Market Data
In this Annual Report, we rely on and refer to information and statistics from third-party sources regarding economic
conditions and trends, the demand for our water infrastructure, flow control, technology products, other products and services
and the competitive conditions we face in serving our customers and end users. We believe these sources of information and
statistics are reasonably accurate, but we have not independently verified them.
Most of our primary competitors are not publicly traded companies. Only limited current public information is available
with respect to the size of our end markets and our relative competitive position. Our statements in this Annual Report
regarding our end markets and competitive positions are based on our beliefs, studies and judgments concerning industry
trends.
Forward-Looking Statements
This Annual Report contains certain statements that may be deemed “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements that address activities, events or developments that we
intend, expect, plan, project, design, believe or anticipate will or may occur in the future are forward-looking statements.
Examples of forward-looking statements include, but are not limited to, statements we make regarding our business strategy,
capital allocation plans, expectations for net sales and operating income margins, the outlook for general economic conditions,
spending by municipalities and the residential and non-residential construction markets and the impact of these factors on our
business and our expected financial performance. Forward-looking statements are based on certain assumptions and
assessments made by us in light of our experience and perception of historical trends, current conditions and expected future
developments. Actual results and the timing of events may differ materially from those contemplated by the forward-looking
statements as a result of a number of factors, including regional, national or global political, economic, business, competitive,
market and regulatory conditions and the other factors described under the section entitled “RISK FACTORS” in Item 1A of
Part I of this Annual Report.
Undue reliance should not be placed on any forward-looking statements. We do not have any intention or obligation to
update forward-looking statements, except as required by law.
TABLE OF CONTENTS
Page
PART I
Item 1.
BUSINESS
Our Company
Business Strategy
Description of Products and Services
Manufacturing
Purchased Components and Raw Materials
Patents, Licenses and Trademarks
Seasonality
Sales, Marketing and Distribution
Backlog
Competition
Research and Development
Regulatory and Environmental Matters
Human Capital
Securities Exchange Act Reports
Item 1A. RISK FACTORS
Item 2.
Item 3.
PROPERTIES
LEGAL PROCEEDINGS
PART II
Item 5.
Item 6.
Item 7.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Equity Compensation Plan Information
Sale of Unregistered Securities
Issuer Purchases of Equity Securities
Stock Price Performance Graph
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Results of Operations
Financial Condition
Liquidity and Capital Resources
Effect of Inflation
Material Cash Requirements
Seasonality
Critical Accounting Policies and Estimates
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Item 8.
Item 9A. CONTROLS AND PROCEDURES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PART III
Item 10* DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 11* EXECUTIVE COMPENSATION
Item 12*
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Item 13* CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Item 14*
PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
Item 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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All or a portion of the referenced section is incorporated by reference from our definitive proxy statement that will
be issued in connection with the upcoming 2022 Annual Meeting of Stockholders.
This Page Intentionally Left Blank
Item 1.
BUSINESS
Our Company
PART I
Mueller Water Products, Inc. is a Delaware corporation that was incorporated on September 22, 2005 under the name
Mueller Holding Company, Inc.
We are a leading manufacturer and marketer of products and services used in the transmission, distribution and
measurement of water in North America. Our products and services are used by municipalities and the residential and non-
residential construction industries. Some of our products have leading positions as a result of their strong brand recognition and
reputation for quality, service and innovation. We believe we have one of the largest installed bases of iron gate valves and fire
hydrants in the United States. Our iron gate valve or fire hydrant products are specified for use in the largest 100 metropolitan
areas in the United States. Our large installed base, broad product range and well-known brands have led to long-standing
relationships with the key distributors and end users of our products. Our consolidated net sales were $1,111.0 million in 2021.
We operate our business through two segments, Infrastructure and Technologies. Segment sales, operating results and
additional financial data and commentary are provided in the Segment Analysis section in Part II, Item 7. “MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and in Note 16. of the
Notes to Consolidated Financial Statements in Part II, Item 8. “FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA” of this Annual Report.
Organization Updates
On December 3, 2018, we completed our acquisition of Krausz Industries Development Ltd. and subsidiaries (“Krausz”), a
manufacturer of pipe couplings, grips and clamps with operations in the United States and Israel, for $140.7 million, net of cash
acquired, including the assumption and simultaneous repayment of certain debt of $13.2 million. The acquisition of Krausz
was financed with cash on hand. The results of Krausz are included within our Infrastructure segment for all periods following
the acquisition date.
In October 2019, we acquired the remaining 51% noncontrolling ownership interest of our previously existing joint venture
operation.
On June 14, 2021, we acquired all the outstanding capital stock of i2O Water Ltd (“i2O’), a provider of pressure
management solutions to more than 100 water companies in 45 countries. i2O is organized under the laws of the United
Kingdom. The consolidated balance sheet at September 30, 2021 includes the preliminary estimated fair values of the net assets
of i2O. The results of i2O’s operations and cash flows for the period subsequent to the acquisition are included in the
consolidated statement of operations and consolidated statement of cash flows, respectively, since the acquisition date.
Infrastructure
Infrastructure manufactures valves for water and gas systems, including iron gate, butterfly, tapping, check, knife, plug,
automatic control and ball valves, as well as dry-barrel and wet-barrel fire hydrants, service brass products and a broad line of
pipe repair products, such as clamps and couplings used to repair leaks. Infrastructure’s net sales were $1,022.0 million in
2021. Sales of Infrastructure products are driven principally by spending on water and wastewater infrastructure upgrade,
repair and replacement, and by construction of new water and wastewater infrastructure, which is typically associated with
construction of new residential communities. Infrastructure sells its products primarily through waterworks distributors. We
believe a majority of Infrastructure’s 2021 net sales were for infrastructure upgrade, repair and replacement. Infrastructure also
sells products for pipe repair to natural gas utilities.
Technologies
Technologies offers residential and commercial water metering, water leak detection and pipe condition assessment
products, systems and services. Technologies’ net sales were $89.0 million in 2021. Technologies sells water metering
systems, products, services and software directly to municipalities and to waterworks distributors, and water leak detection and
pipe condition assessment products and services primarily to municipalities. i2O, which we acquired during our fiscal third
quarter of 2021, sells pressure management intelligent water network solutions and software.
1
Business Strategy
Our business strategy is to capitalize on the large, attractive and growing water infrastructure markets worldwide. Key
elements of this strategy are as follows:
Accelerate development of new products.
We plan to continue to increase investments in our product development capabilities, including expanding our engineering
staff, to develop and market new products and services. We expect to add new products to our portfolio and offer new products
into different end markets. We expect this expansion to come through internal investments as well as acquisitions.
Develop and implement fully-integrated intelligent technology platform for infrastructure testing, monitoring and
control.
We have introduced a new software platform, Sentryx, that provides data intelligence to help water utilities make strategic
and operational decisions. As our customers seek to use real-time data and analytics to manage and repair their aging
infrastructures more efficiently, we believe we are uniquely positioned to provide solutions given our expertise and the large
installed base of our products. This data includes leak detection, pressure monitoring, advanced metering and water quality,
which are aggregated and consolidated within the Sentryx platform, providing utilities with critical information regarding their
distribution systems.
Drive operational excellence.
We seek to bring best practices focused on Lean manufacturing with an investment mindset to deliver manufacturing
productivity improvements. We expect these efforts will facilitate innovation and new product development, helping us drive
sales growth and improve product margins. Productivity improvements at our facilities should allow us to lower costs, which
can fund additional manufacturing initiatives and continued investment in product development.
Modernize manufacturing facilities.
We are prioritizing capital investments through 2023 to modernize our manufacturing facilities and processes. We believe
this modernization will improve product quality, drive non-price margin expansion and expand our product portfolio. Our large
valve manufacturing expansion in Chattanooga, Tennessee continued to ramp up production in 2021, and we expect to enter
full-scale production in 2022. We are building out our new facility in Kimball, Tennessee to expand our machining and
assembly capabilities in the Chattanooga area. In March 2021, we announced plans to consolidate our facilities in Aurora,
Illinois and Surrey, British Columbia into the Kimball facility. We expect these investments will allow us to capitalize on the
growing need for large valves as a result of the migration to more densely populated, urban areas and an increased focus by
customers on products made in America. In addition, we are building a new brass foundry in Decatur, Illinois, scheduled to
begin production late in 2022, to replace our nearby, existing brass foundry.
Continue to seek to acquire and invest in businesses and technologies that expand our existing portfolio of businesses or
allow us to enter new markets.
We will continue to evaluate the acquisition of strategic businesses, technologies and product lines that have the potential
to strengthen our competitive position, enhance or expand our existing product and service offerings, expand our technological
capabilities, leverage our manufacturing capabilities, provide synergistic opportunities, enhance our customer relationships or
allow us to enter new markets. As part of this strategy, we may pursue international opportunities, including acquisitions, joint
ventures and partnerships.
Description of Products and Services
We offer a broad line of water infrastructure, flow control, metrology and leak detection products and services primarily in
the United States and Canada. Infrastructure sells water and gas valves, service brass, fire hydrants and pipe repair products.
Technologies sells water metering products and systems as well as leak detection and pipe condition assessment products and
services. Our products are designed, manufactured and tested in compliance with relevant industry standards.
Infrastructure
Infrastructure manufactures valves for water and gas systems, as well as fire hydrants, service brass and pipe repair
products for water distribution.
2
Infrastructure’s water distribution products are manufactured to meet or exceed American Water Works Association
(“AWWA”) Standards and, where applicable, certified to NSF/ANSI Standard 61 for potable water conveyance. In addition,
Underwriters Laboratory (“UL”) and FM Approvals (“FM”) have approved many of these products. These products are
typically specified by a water utility for use in its infrastructure system.
Water and Gas Valves and Related Products. Infrastructure manufactures valves for water and gas systems, including iron
gate, butterfly, tapping, check, knife, plug, automatic control and ball valves, and sells these products under a variety of brand
names, including Mueller, Pratt, U.S. Pipe Valve and Hydrant, and Singer Valve. Water and gas valves and related products,
generally made of iron or brass, accounted for $681.1 million, $583.2 million and $576.4 million of our gross sales in our 2021,
2020 and 2019 fiscal years, respectively. These valve products are used to control distribution and transmission of potable
water, non-potable water or gas. Water valve products typically range in size from ¾ inch to 36 inches in diameter.
Infrastructure also manufactures significantly larger valves as custom orders through some of its product lines. Most of these
valves are used in water transmission or distribution, water treatment facilities or industrial applications.
Infrastructure also produces machines and tools for tapping, drilling, extracting, installing and stopping-off, which are
designed to work with its water and gas fittings and valves as an integrated system.
Fire Hydrants. Infrastructure manufactures dry-barrel and wet-barrel fire hydrants. Sales of fire hydrants and fire hydrant
parts accounted for $236.7 million, $201.4 million and $199.7 million of our gross sales in our 2021, 2020 and 2019 fiscal
years, respectively. Infrastructure sells fire hydrants for new water infrastructure development, fire protection systems and
water infrastructure repair and replacement projects.
These fire hydrants consist of an upper barrel and nozzle section and a lower barrel and valve section that connects to a
water main. In dry-barrel hydrants, the valve connecting the barrel of the hydrant to the water main is located below ground at
or below the frost line, which keeps the upper barrel dry. Infrastructure sells dry-barrel fire hydrants under the Mueller and
U.S. Pipe Valve and Hydrant brand names in the United States and the Canada Valve brand name in Canada. Infrastructure
also makes wet-barrel hydrants, where the valves are located in the hydrant nozzles and the barrel contains water at all times.
Wet-barrel hydrants are made for warm weather climates, such as in California and Hawaii, and are sold under the Jones brand
name.
Most municipalities have approved a limited number of fire hydrant brands for installation within their systems as a result
of their desire to use the same tools and operating instructions across their systems and to minimize inventories of spare parts.
We believe Infrastructure’s large installed base of fire hydrants throughout the United States and Canada, reputation for
superior quality and performance as well as specification positions have contributed to the leading market position of its fire
hydrants. This large installed base also leads to recurring sales of replacement hydrants and hydrant parts.
Repair Products and Services. Infrastructure also sells pipe repair products, such as couplings, grips and clamps used to
repair leaks, under the HYMAX, Mueller and Krausz brand names.
Technologies
Technologies provides innovative technology-based solutions, products and services that actively diagnose, measure and
monitor the delivery of water.
Water Metering Products and Systems. In Technologies, we manufacture and source a variety of water technology
products under the Mueller and Hersey brand names that are designed to help water providers accurately measure and control
water usage. Technologies offers a complete line of residential, fire line and commercial metering solutions. Residential and
commercial water meters are generally classified as either manually read meters or remotely read meters via radio technology.
A manually read meter consists of a water meter and a register that gives a visual meter reading display. Meters equipped with
radio transmitters (endpoints) use encoder registers to convert the measurement data from the meter (mechanical or static) into
an encrypted digital format which is then transmitted via radio frequency to a receiver that collects and formats the data
appropriately for water utility billing systems. These remotely or electronically read systems are either automatic meter reading
(“AMR”) systems or fixed network advanced metering infrastructure (“AMI”) systems. With an AMR system, utility personnel
with mobile equipment, including a radio receiver, computer and reading software, collect the data from utilities’ meters. With
an AMI system, a network of permanent data collectors or gateway receivers that are always active or listening for the radio
transmission from the utilities’ meters gather the data. AMI systems eliminate the need for utility personnel to travel through
service territories to collect meter reading data. These systems provide the utilities with more frequent and diverse data at
specified intervals from the utilities’ meters and allow for two-way communication. Technologies sells both AMR and AMI
systems and related products. Our remote disconnect water meter enables the water flow to be stopped and started remotely via
handheld devices or from a central operating facility.
3
Sales of water metering products and systems accounted for 78%, 79% and 81% of Technologies’ net sales in our 2021,
2020 and 2019 fiscal years, respectively.
Water Leak Detection and Pipe Condition Assessment Products and Services. Technologies develops technologies and
offers products and services under the Echologics brand name that can non-invasively (without disrupting service or
introducing a foreign object into the water system) detect underground leaks and assess the condition of water mains comprised
of a variety of materials. We leverage our proprietary acoustic technology to offer leak detection and condition assessment
surveys. We also offer fixed leak detection systems that allow customers to continuously monitor and detect leaks on water
distribution and transmission mains. We believe Technologies’ ability to offer non-invasive leak detection and pipe condition
assessment services is a key competitive advantage.
Intelligent Water Network Solutions. i2O, which was acquired in June of 2021, develops and provides a range of intelligent
water solutions including advanced pressure management, network analytics, event management and data logging.
Manufacturing
See “Item 2. PROPERTIES” for a description of our principal manufacturing facilities.
We will continue to expand the use of Lean manufacturing and Six Sigma business improvement methodologies where
appropriate to safely capture higher levels of quality, service and operational efficiency in our manufacturing facilities in both
segments.
Infrastructure
Infrastructure operates eleven manufacturing facilities located in the United States, Canada, Israel and China. These
manufacturing operations include foundry, machining, fabrication, assembly, testing and painting operations. Not all facilities
perform each of these operations. Infrastructure’s existing manufacturing capacity is sufficient for anticipated near-term
requirements. However, in order to meet longer-term capacity requirements and modernize some production facilities,
Infrastructure has expanded its large valve casting capabilities at its foundry located in Chattanooga, Tennessee, and is currently
building out its new manufacturing facility in nearby Kimball, Tennessee to insource certain activities and assemble certain
large valves. Additionally, Infrastructure is constructing a new brass foundry in Decatur, Illinois that will replace our existing
brass foundry located nearby in Decatur.
Infrastructure foundries use both lost foam and green sand casting techniques. Infrastructure uses the lost foam technique
for fire hydrant production in its Albertville, Alabama facility and for iron gate valve production in its Chattanooga, Tennessee
facility. The lost foam technique has several advantages over the green sand technique for high-volume products, including a
reduction in the number of manual finishing operations, lower scrap levels and the ability to reuse some of the materials.
Technologies
Technologies designs, manufactures, and assembles water metering products in Cleveland, North Carolina. Certain
Technologies products are also manufactured in facilities primarily dedicated to Infrastructure products. Technologies designs
and supports AMR and AMI systems in our research and development center of excellence for software and electronics in
Atlanta, Georgia, designs leak detection and condition assessment products in Toronto, Ontario and designs and supports
intelligent water solutions products and services in Southampton, United Kingdom.
Purchased Components and Raw Materials
Our products are made using various purchased components and several basic raw materials, including brass ingot, scrap
steel, sand and resin. Purchased parts and raw materials represented approximately 36% and 20%, respectively, of Cost of sales
in 2021.
Patents, Licenses and Trademarks
We have active patents relating to the design of our products and trademarks for our brands and products. We have filed
and continue to file, when appropriate, patent applications used in connection with our business and products. Many of the
patents for technology underlying the majority of our products have been in the public domain for many years, and we do not
believe third-party patents individually or in the aggregate are material to our business. However, we consider the pool of
proprietary information, consisting of expertise and trade secrets relating to the design, manufacture and operation of our
4
products to be particularly important and valuable. We generally own the rights to the products that we manufacture and sell,
and we are not dependent in any material way upon any license or franchise to operate. See “Item 1A. RISK FACTORS-Any
inability to protect our intellectual property or our failure to effectively defend against intellectual property infringement claims
could adversely affect our competitive position.”
The table below highlights selected brand names by segment.
Infrastructure
Technologies
Canada Valve™
Centurion®
Ez-Max®
Hydro Gate®
Hydro-Guard®
HYMAX®
HYMAX VERSA®
Jones®
Krausz®
Milliken™
Mueller®
Pratt®
Pratt Industrial®
Repamax®
Repaflex®
Singer™
U.S. Pipe Valve and Hydrant, LLC
Seasonality
Echologics®
Echoshore®
ePulse®
Hersey™
i2O Water Ltd
LeakFinderRT®
LeakFinderST™
LeakListener®
LeakTuner®
Mi.Echo®
Mi.Data®
Mi.Hydrant™
Mi.Net®
Mueller Systems®
Sentryx™
Our water infrastructure business depends upon construction activity, which is seasonal in many areas as a result of the
impact of cold weather conditions on construction. Net sales and operating income have historically been lowest in the quarters
ending December 31 and March 31 when the northern United States and all of Canada generally face weather conditions that
restrict significant construction and other field crew activity. Generally speaking, for Infrastructure, approximately 45% of a
fiscal year’s net sales occurs in the first half of the fiscal year with 55% occurring in the second half of the fiscal year, though
this pattern was disrupted by the pandemic in 2020. See “Item 1A. RISK FACTORS-Seasonal demand for certain of our
products and services may adversely affect our financial results.”
Sales, Marketing and Distribution
We sell primarily to distributors. Our distributor relationships are generally non-exclusive, but we attempt to align
ourselves with key distributors in the principal markets we serve. We believe “Mueller” is the most recognized brand in the
United States water infrastructure industry.
Infrastructure
Infrastructure sells its products primarily through waterworks distributors to a wide variety of end user customers,
including municipalities, water and wastewater utilities, gas utilities, and fire protection and construction contractors. Sales of
our products are heavily influenced by the specifications for the underlying projects. Approximately 8%, 7% and 8% of
Infrastructure’s net sales were to Canadian customers in our 2021, 2020 and 2019 fiscal years, respectively.
Infrastructure’s extensive installed base, broad product range and well-known brands have led to many long-standing
relationships with the key distributors in the principal markets we serve. Our distribution network covers all of the major
locations for our principal products in the United States and Canada. Although we have long-standing relationships with most
of our key distributors, we typically do not have long-term contracts with them, including our two largest distributors, which
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together accounted for approximately 38%, 35% and 34% of Infrastructure’s gross sales in our 2021, 2020 and 2019 fiscal
years, respectively. The loss of either of these distributors would have a material adverse effect on our business. See “Item 1A.
RISK FACTORS-Our business depends on a small group of key customers for a significant portion of our sales.”
Technologies
Technologies sells its water metering systems, products and services directly to municipalities and to waterworks
distributors, and sells water leak detection and pipe condition assessment products and services, and intelligent water network
solutions primarily to municipalities and to utility companies. Technologies’ five largest customers accounted for
approximately 48%, 45% and 50% of its gross sales in our 2021, 2020 and 2019 fiscal years, respectively. The loss of any of
these customers would have a material adverse effect on our business. See “Item 1A. RISK FACTORS-Our business depends
on a small group of key customers for a significant portion of our sales.”
Backlog
We consider backlog to represent orders placed by customers for which goods or services have yet to be shipped. Backlog
is a meaningful indicator for several of our product lines in Infrastructure and in our metering business in Technologies. The
delivery lead time for these product lines can be longer than one year, and we expect approximately 6% of Infrastructure’s
backlog at the end of 2021 will not be shipped until beyond 2022. Technologies manufactures or sources water meter systems
that are sometimes ordered in large quantities with delivery dates over several years, and we expect approximately 23% of
Technologies’ backlog will not be shipped until beyond 2022. Backlogs for Infrastructure and Technologies are as follows.
Infrastructure
Technologies
Total backlog
September 30,
2021
2020
(in millions)
391.2 $
49.0
440.2
147.6
72.8
220.4
$
Sales cycles for metering systems can span several years, and it is common for customers to place orders throughout the
contract period. Although we believe we have a common understanding with our customer as to the total value of a contract
when it is awarded, we do not include customer orders in our backlog until the customer order is received.
Competition
The United States and Canadian markets for water infrastructure and flow control products are very competitive. See
“Item 1A. RISK FACTORS-Strong competition could adversely affect prices and demand for our products and services, which
would adversely affect our operating results.” There are only a few competitors for most of our product and service offerings.
Many of our competitors are well-established companies with products that have strong brand recognition. We consider our
installed base, product quality, customer service level, brand recognition, innovation, distribution and technical support to be
competitive strengths.
The competitive environment for most of Infrastructure’s valve and hydrant products is mature and many end users are
slow to transition to brands other than their historically preferred brand making it difficult to increase market share in this
environment. We believe our fire hydrants and valves enjoy strong competitive positions based primarily on the extent of their
installed base, product quality, specified position and brand recognition. Our principal competitors for fire hydrants and iron
gate valves are McWane, Inc. and American Cast Iron Pipe Company. The primary competitors for our brass products are The
Ford Meter Box Company, Inc. and A.Y. McDonald Mfg. Co. Many brass valves are interchangeable among different
manufacturers. With respect to our specialty valve products such as butterfly, plug, and check valves, our principal competitors
are mainly DeZURIK, Val-Matic and McWane, Inc.
6
We believe the markets for many of Infrastructure’s repair products are open to product innovation. Our current marketing
is primarily focused on repair, joining and restraining of water infrastructure piping systems. The majority of this infrastructure
consists of cast iron, ductile iron and plastic pipe, and our repair solutions work well with all of these. We believe our brand
names are generally associated with premium products as a result of our patented technology and features. Our primary
competitors in the repair market are: Romac Industries, Smith Blair, Viking Johnson, AVK Group, JCM Industries, and Georg
Fisher Ltd.
The markets for products and services sold by Technologies are very competitive. Technologies sells water metering
products and systems, primarily in the United States. We believe a substantial portion of this market is in the process of
transitioning from manually read meters to electronically read meters, but we also expect this transition to be relatively slow
and that many end users will be reluctant to adopt brands other than their historically preferred brand. Although Technologies’
market position is relatively small, we believe our electronically read meters and associated technology are well positioned to
gain a greater share of these markets. Our principal competitors are Sensus, Itron, Inc., Neptune Technology Group Inc.,
Badger Meter, Inc., and Master Meter, Inc. Technologies also sells water leak detection and pipe condition assessment products
and services in North America, the United Kingdom and select countries in Europe, Asia and the Middle East, with our primary
markets being the United States and Canada. The worldwide market for leak detection and pipe condition assessment is highly
fragmented with numerous competitors. Our more significant competitors are Pure Technologies Ltd., Gutermann AG and
Syrinix Ltd.
Research and Development
Our primary research and development (“R&D”) facilities are located in Chattanooga, Tennessee and Ariel, Israel for
Infrastructure and in Atlanta, Georgia, Toronto, Ontario and Southampton, United Kingdom for Technologies. The primary
focus of these operations is to develop new products, improve and refine existing products and obtain and assure compliance
with industry approval certifications or standards, such as AWWA, UL, FM, NSF and The Public Health and Safety Company.
At September 30, 2021, we employed 46 people dedicated to R&D activities. R&D expenses were $17.1 million, $15.0 million
and $14.3 million during 2021, 2020 and 2019, respectively.
Regulatory and Environmental Matters
Our operations are subject to numerous federal, state and local laws and regulations, both within and outside the United
States, in areas such as: competition, government contracts, international trade, labor and employment, tax, licensing, consumer
protection, environmental protection, workplace health and safety, and others. These and other laws and regulations impact the
manner in which we conduct our business, and changes in legislation or government policies can affect our operations, both
favorably and unfavorably. For example, the Comprehensive Environmental Response, Compensation and Liability Act
(“CERCLA”) and similar state laws affect our operations by, among other things, imposing investigation and cleanup
requirements for threatened or actual releases of hazardous substances. Under CERCLA, joint and several liability may be
imposed on operators, generators, site owners, lessees and others regardless of fault or the legality of the original activity that
caused or resulted in the release of the hazardous substances. Thus, we may be subject to liability under CERCLA and similar
state laws for properties that (1) we currently own, lease or operate, (2) we, our predecessors, or former subsidiaries previously
owned, leased or operated, (3) sites to which we, our predecessors or former subsidiaries sent waste materials, and (4) sites at
which hazardous substances from our facilities’ operations have otherwise come to be located. The purchaser of U.S. Pipe has
been identified as a “potentially responsible party” (“PRP”) under CERCLA in connection with a former manufacturing facility
operated by U.S. Pipe that was in the vicinity of a Superfund site located in North Birmingham, Alabama. Under the terms of
the acquisition agreement relating to our sale of U.S. Pipe, we agreed to indemnify the purchaser for certain environmental
liabilities, including those arising out of the former manufacturing site in North Birmingham. Accordingly, the purchaser
tendered the matter to us for indemnification, which we accepted. Ultimate liability for the site will depend on many factors
that have not yet been determined, including the determination of the Environmental Protection Agency’s (“EPA”) remediation
costs, the number and financial viability of the other PRPs (there are three other PRPs currently) and the determination of the
final allocation of the costs among the PRPs. For more information regarding this matter as well as others that may affect our
business, including our capital expenditures, earnings and competitive position, see “Item 1A. RISK FACTORS,” “Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Contingencies” and Note 17. of the Notes to Consolidated Financial Statements.
7
Our operations are subject to federal, state and local laws, regulations and ordinances relating to various environmental,
health and safety matters. We believe our operations are in compliance with, or we are taking actions designed to ensure
compliance with, these laws, regulations and ordinances. However, the nature of our operations exposes us to the risk of claims
concerning non-compliance with environmental, health and safety laws or standards, and there can be no assurance that material
costs or liabilities will not be incurred in connection with those claims. Except for certain orders issued by environmental,
health and safety regulatory agencies, with which we believe we are in compliance and which we believe are immaterial to our
financial condition, results of operations and liquidity, we are not currently named as a party in any judicial or administrative
proceeding relating to environmental, health and safety matters.
Greenhouse gas ("GHG") emissions have increasingly become the subject of political and regulatory focus. Concern over
potential climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting GHG
emissions. In addition to certain federal proposals in the United States to regulate GHG emissions, many states and countries
are considering and are enacting GHG legislation, regulations or international accords, either individually and/or as part of
regional initiatives. It is likely that additional climate change related mandates will be forthcoming, and it is expected that they
may adversely impact our costs by increasing energy costs and raw material prices, requiring operational or equipment
modifications to reduce emissions and creating costs to comply with regulations or to mitigate the financial consequences of
such compliance.
We work to minimize the amount of water we use at our manufacturing facilities and maintain stringent water quality
standards. Our processes are designed to return the water used in manufacturing at a quality level that does not negatively
impact the receiving environment.
Future events, such as changes in existing laws and regulations, new legislation to limit GHG emissions or contamination
of sites owned, operated or used for waste disposal by us, including currently unknown contamination and contamination
caused by prior owners and operators of such sites or other waste generators, may give rise to additional costs which could have
a material effect on our financial condition, results of operations or liquidity.
Our anticipated capital expenditures for environmental projects are not expected to have a material effect on our financial
condition, results of operations or liquidity.
Human Capital
We believe our employees are our greatest asset and we strive to provide a safe, inclusive, high-performance culture where
our people thrive. We strive to recruit, develop, engage, train and protect our workforce. The following are key human capital
measures and objectives on which the Company currently focuses.
Core Values. Our core values of respect, integrity, trust, safety and inclusion shape our culture and define who we are.
These are guiding principles that we live by every day and are evident in everything we do. We are committed to upholding
fundamental human rights and believe that all human beings should be treated with dignity, fairness, and respect.
Employee Total Compensation and Benefits Philosophy. We pay at or above a living wage at each of our locations. Living
wage is defined as the minimum necessary income for a worker to meet the worker’s basic needs, which can fluctuate based on
physical location and other local factors. We based our calculations on a single worker with no children. We are dedicated to
our employees and their health and well-being. We provide access to benefits and offer programs that support work-life
balance and overall well-being including financial, physical and mental health resources, such as those listed below.
8
Financial
Competitive Base Pay
Employee Incentive Plan (Annual
Bonus)
Health and Wellness
Medical, Dental and Vision
Benefits (including telemedicine)
Flexible Spending Accounts and
Health Savings Accounts
Supplemental Pay (Overtime)
Supplemental Health Benefits
Employee Stock Purchase Plan
Recognition Pay and Service
Awards
401(k) Retirement Savings Plan
with Company Match (Traditional
and Roth)
Life Insurance (employee and
dependents)
Short-term and Long-term
Disability Insurance
Wellness Rewards Program
Health Plan Incentives
On-site and complimentary
Vaccinations
Work-Life Balance
Paid time off, paid holidays and
jury duty pay
Paid Parental Leave (maternity,
paternity, adoption)
Elder Care and Childcare
Assistance
Employee Assistance Program
(mental health, legal, financial
services)
Associate Discount Programs and
Services
Flexible Work Arrangements
Commitment to Diversity and Inclusion. We strive to promote inclusion in the workplace, engage with communities to
build on our understanding of potential human rights issues, and encourage our suppliers to treat their employees, and to
interact with their communities, in a manner that respects human rights. We condemn human rights abuses and do not condone
the use of slave or forced labor, human trafficking, child labor, the degrading treatment of individuals, physical punishment, or
unsafe working conditions. All employees are required to understand and obey local laws, to report any suspected violations,
and to act in accordance with our Core Values and Code of Conduct. We have recently completed a pay equity study for all
employees and job grades based on gender and race. We believe we addressed any anomalies identified through appropriate pay
adjustments. We also strive to ensure all new employee offers and internal promotions are aligned with the market and are
equitable on an internal basis. We launched a Diversity and Inclusion (“D&I”) Council during our 2021 fiscal year that is
governed by executive sponsors and includes representatives from each United States plant location, as well as our
Headquarters. Our D&I Council is working to establish an overall diversity and inclusion framework for the Company.
We recognize the importance of having diverse perspectives on our Board of Directors and aspire to promote diversity. Our
diversity and inclusion framework includes Board of Directors and leadership development. As of September 30, 2021, women
represented 27% and minorities represented 36% of our Board of Directors.
Talent Acquisition and Retention. We strive to attract, develop and retain high-performing talent, and we support and
reward employee performance. Programs to strengthen our talent include an employee referral program, tuition reimbursement,
continued training and development and succession planning. We also have partnerships with local and national educational
institutions for our recruiting efforts. We prioritize employee engagement and transparency by implementing programs and
processes to ensure our employees have opportunities to ask questions, voice concerns, and share feedback. This is
accomplished in part by conducting an annual employee satisfaction survey, through quarterly town hall meetings, and regular
video messages from our executives. Our fiscal year 2021 turnover rate was approximately 25%.
Leadership and Culture Development. As new generations enter the workforce, their passions and commitments to
sustainability are fundamental to our future success. The Mueller Development Program (“MDP”) is designed to provide a
pipeline for future talent. During 2021, we also launched our Frontline Leader training program at all of our plant locations to
offer tools in time management, communication, and team building, along with personal coaching.
9
At September 30, 2021, we employed approximately 3,400 people, of whom 85% work in the United States. At
September 30, 2021, 66% of our hourly workforce was represented by collective bargaining agreements. We believe we have
good relations with our employees, including those represented by collective bargaining agreements.
We successfully negotiated and extended several of our collective bargaining agreements in the past two years. Our
locations with employees covered by such agreements are presented below.
Location
Expiration of current agreement(s)
Chattanooga, TN
Decatur, IL
Albertville, AL
Aurora, IL
Securities Exchange Act Reports
October 2022, January 2023
June 2025
October 2025
August 2022
We file annual and quarterly reports, proxy statements and other information with the United States Securities and
Exchange Commission (“SEC”) as required. You may read and print materials that we have filed with the SEC from its
website at www.sec.gov. Our SEC filings may also be viewed and copied at the SEC public reference room located at 100 F
Street, N.E., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the public
reference room.
In addition, certain of our SEC filings, including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our
current reports on Form 8-K, our proxy statements and any amendments to them can be viewed and printed free of charge from
the investor information section of our website at www.muellerwaterproducts.com. Copies of our filings, specified exhibits and
corporate governance materials are also available free of charge by writing us using the address on the cover of this Annual
Report. We are not including the information on our website as a part of, or incorporating it by reference into, this Annual
Report.
Our principal executive office is located at 1200 Abernathy Road N.E., Suite 1200, Atlanta, Georgia 30328, and our main
telephone number at that address is (770) 206-4200.
10
Item 1A.
RISK FACTORS
Risks related to our industries
A significant portion of our business depends on spending for water and wastewater infrastructure construction activity.
Our primary end markets are repair and replacement of water infrastructure, driven by municipal spending and new water
infrastructure installation driven by new residential construction. As a result, a significant portion of our business depends on
local, state and federal spending on water and wastewater infrastructure upgrade, repair and replacement. Funds for water and
wastewater infrastructure repair and replacement typically come from local taxes, water fees and water rates. State and local
governments and private water entities that do not adequately budget for expenditures when setting tax rates, water rates and
water fees, as applicable, may be unable to pay for water infrastructure repair and replacement if they do not have access to
other funding sources. In addition, reductions or delays in federal spending related to water or wastewater infrastructure could
adversely affect state or local projects and may adversely affect our financial results.
Governments and private water entities may have limited abilities to increase taxes, water fees or water rates, as applicable.
It is not unusual for water and wastewater projects to be delayed and rescheduled for a number of reasons, including changes in
project priorities, increasing interest rates, inflation and difficulties in complying with environmental and other governmental
regulations. For example, changes in interest rates and credit markets, including municipal bonds, mortgages, home equity
loans and consumer credit, can significantly increase the costs of the projects in which our products are utilized, such as in new
residential construction and water and wastewater infrastructure upgrade, repair and replacement projects, and lead to such
projects being reduced, delayed and/or rescheduled, which could result in a decrease in our revenues and earnings and adversely
affect our financial condition. In addition, higher interest rates are often accompanied by inflation. In an inflationary
environment, we may be unable to raise the prices of our products sufficiently to keep up with the rate of inflation, which would
reduce our profit margins and cash flows.
Some state and local governments may place significant restrictions on the use of water by their constituents and/or
increase their water conservation efforts. These types of water use restrictions and water conservation efforts may lead to
reduced water revenues by private water entities, municipalities or other governmental agencies, which could similarly affect
funding decisions for water-related projects.
Poor economic conditions may cause states, municipalities or private water entities to receive lower than anticipated
revenues, which may lead to reduced or delayed funding for water infrastructure projects. Even if favorable economic
conditions exist, water infrastructure owners may choose not to address deferred infrastructure needs as a result of a variety of
political factors or competing spending priorities.
Low levels of spending for water and wastewater infrastructure construction activity could adversely affect our sales,
profitability and cash flows.
Residential construction activity is important to our business and adverse conditions or sustained uncertainty within this
market could adversely affect our financial results.
New water and wastewater infrastructure spending is heavily dependent upon residential construction. As a result, our
financial performance depends significantly on the stability and growth of the residential construction market. This market
depends on a variety of factors beyond our control, including household formation, consumer confidence, interest rates,
inflation and the availability of mortgage financing, as well as the mix between single and multifamily construction, availability
of construction labor and ultimately the extent to which new construction leads to the development of raw land. Adverse
conditions or sustained uncertainty regarding the residential construction market could adversely affect our sales, profitability
and cash flows, including the risk that one or more of our distributors and/or end use customers decide to delay purchasing, or
determine not to purchase, our products or services.
Our business depends on a small group of key customers for a significant portion of our sales.
A majority of our products are sold primarily to distributors and our success depends on these outside parties operating
their businesses profitably and effectively. These distributors’ profitability and effectiveness can vary significantly from
company to company and from region to region within the same company. Further, our largest distributors generally also carry
competing products. We may fail to align our operations with successful distributors in any given market.
Distributors in our industry have experienced consolidation in recent years. If such consolidation continues, our
distributors could be acquired by other distributors who have better relationships with our competitors, and consequently,
11
pricing and profit margin pressure may intensify. Pricing and profit margin pressure or the loss of any one of our key
distributors in any market could adversely affect our operating results.
Certain products and solutions, primarily technology-enabled products and solutions, are sold directly to end users. Some
of these customers represent a relatively high concentration of sales. Over time, expected growth in sales is expected to lessen
the significance of individual customers. In the short term, net sales could decline if existing significant customers do not
continue to purchase our products or services and new customers are not obtained to replace them.
Strong competition could adversely affect prices and demand for our products and services, which would adversely
affect our operating results.
The United States and Canadian markets for water infrastructure and flow control products are very competitive. While
there are only a few competitors for most of our product and service offerings, many of our competitors are well-established
companies with strong brand recognition. We compete on the basis of a variety of factors, including the quality, price and
innovation of our products, services and service levels. Our ability to retain customers in the face of competition depends on
our ability to market our products and services to our customers and end users effectively.
The United States markets for water metering products and systems are highly competitive. Our primary competitors
benefit from strong market positions and many end users are slow to transition to new products or new brands. Our ability to
attract new customers depends on our technological advancements and ability to market our products and services to our
customers and end users effectively.
In addition to competition from North American companies, we face the threat of competition from outside of North
America. The intensity of competition from these companies is affected by fluctuations in the value of the United States dollar
against foreign local currencies, the cost to ship competitive products into North America and the availability of trade remedies,
if any. Competition may also increase as a result of competitors located in the United States shifting their operations to lower-
cost countries or otherwise reducing their costs.
Our competitors may reduce the prices of their products or services, improve their quality, improve their functionality or
enhance their marketing or sales activities. Any of these potential developments could adversely affect our prices and demand
for our products and services.
The long-term success of our newer systems and solutions, including the related products, software and services, such
as smart metering, leak detection, pressure monitoring and pipe condition assessment, depends on market acceptance.
Our technology-enabled smart metering, leak detection, pressure monitoring and pipe condition assessment products and
services have much less market history than many of our traditional products. Our investments in smart metering have
primarily focused on the market for AMI and have been based on our belief that water utilities will transition over time from
traditional manually-read meters to automatically-read meters. The market for AMI is relatively new and continues to evolve,
and the United States markets for water meter products and systems are highly competitive. Water utilities have traditionally
been slow adopters of new technology and may not adopt AMI as quickly as we expect, partially as a result of the substantial
investment related to installation of AMI systems. The strong market positions of our primary competitors may also slow the
adoption of our products. Similarly, the adoption of our pressure monitoring, leak detection and pipe condition assessment
products and services depends on the willingness of our customers to invest in new product and service offerings, and the pace
of adoption may be slower than we expect. If the market for our technology-enabled products and services develops more
slowly than we expect or these products and services fail to gain market acceptance, our opportunity to grow these businesses
will be limited.
12
Risks related to our business strategy
We may not be able to adequately manage the risks associated with the introduction and deployment of new products
and systems, including increased warranty costs.
The success of our new products and systems, such as our recently launched smart hydrant and Sentryx software platform,
will depend on our ability to manage the risks associated with their introduction, including the risk that new products and
systems may have quality or other defects or deficiencies in their early stages that result in their failure to satisfy performance
or reliability requirements. Our success will depend in part on our ability to manage these risks, including costs associated with
manufacturing, installation, maintenance and warranties. These challenges can be costly and technologically challenging, and
we cannot determine in advance the ultimate effect they may have. Warranty liabilities and the related reserve estimation
process is highly judgmental as a result of the complex nature of these exposures and the unique circumstances of each claim.
Furthermore, once claims are asserted for an alleged product defect by municipalities or other customers, it can be difficult to
determine the level of potential exposure or liability related to such allegation to which the assertion of these claims will expand
geographically. Although we have obtained insurance for product liability claims, such policies may not be available or
adequate to cover the liability for damages, the cost of repairs and/or the expense of litigation. Current and future claims may
arise out of events or circumstances not covered by insurance and not subject to effective indemnification agreements with our
subcontractors. Failure to successfully manage these challenges could result in lost revenue, significant expense, and harm to
our reputation.
Inefficient or ineffective allocation of capital, along with increased capital expenditure levels to modernize our aging
facilities and expand our capabilities, could adversely affect our operating results and/or stockholder value, including
negatively impacting our available cash reserves and prevent acquisition or other cash-intensive opportunities.
Our goal is to invest capital to generate long-term value for our stockholders. This includes spending on capital projects,
such as developing or acquiring strategic businesses, technologies and product lines with the potential to strengthen our industry
position, enhancing our existing set of product and service offerings, or entering into new markets, as well as periodically
returning value to our stockholders through share repurchases and dividends. For example, we have completed the construction
of our large valve manufacturing expansion in Chattanooga, Tennessee and made an additional investment in a facility in
Kimball, Tennessee to further expand our capabilities in the area and allow us to insource more products and operations. We
also expect to make significant progress in fiscal 2022 on the construction of our new brass manufacturing facility in Decatur,
Illinois, which we expect to be completed in 2023. To a large degree, capital efficiency reflects how well we manage key risks.
The actions taken to address specific risks may affect how well we manage the more general risk of capital efficiency. If we do
not allocate properly and manage our capital, we may fail to produce expected financial results, and we may experience a
reduction in stockholder value, including increased volatility in our stock price.
We may not realize the expected benefits from our strategic reorganization plans.
In fiscal 2019, we relocated our research and development activities from our Middleborough, Massachusetts facility to
Atlanta, Georgia, which consolidated our resources and should accelerate product innovation through creation of a research and
development center of excellence for software and electronics in Atlanta.
Between November 2019 and March 2021, we announced the purchase and closure of several facilities. We purchased a
new facility in Kimball, Tennessee, to support and enhance our investment in our Chattanooga, Tennessee large casting
foundry. As a result of this reorganization, we closed our facilities in Hammond, Indiana and Woodland, Washington. We also
announced the planned closures of our facilities in Aurora, Illinois and Surrey, British Columbia, Canada. Most of the activities
from these plants will be transferred to our Kimball, Tennessee facility. We expect to substantially complete these facility
closures by the third quarter of our fiscal year 2022 and expect to incur total expenses related to this restructuring of
approximately $14.0 million. We cannot guarantee that the activities under the restructuring and reorganization activities will
result in the desired efficiencies and estimated cost savings, if any.
Our business strategy includes developing, acquiring and investing in companies and technologies that broaden our
product portfolio or complement our existing business, which could be unsuccessful or consume significant resources and
adversely affect our operating results.
As part of our long-term business strategy, we continue to evaluate the development or acquisition of strategic businesses,
technologies and product lines with the potential to strengthen our industry position, enhance and expand our existing set of
product and service offerings, or enter new markets. We may be unable to identify or successfully complete suitable
acquisitions in the future and completed acquisitions may not be successful.
13
Acquisitions and technology investments may involve significant cash expenditures, the incurrence of debt, operating
losses and expenses that could have a material adverse effect on our business, financial condition, results of operations and cash
flows. These types of transactions involve numerous other risks, including but not limited to:
•
•
Diversion of management time and attention from existing operations,
Difficulties in integrating acquired businesses, technologies and personnel into our business or into our
compliance and control programs, particularly those that include international operations,
• Working with partners or other ownership structures with shared decision-making authority (our interests and
other ownership interests may be inconsistent),
•
•
•
•
•
•
•
•
•
•
Difficulties in obtaining and verifying relevant information regarding a business or technology prior to the
consummation of the transaction, including the identification and assessment of liabilities, claims or other
circumstances, including those relating to intellectual property claims, that could result in litigation or regulatory
exposure,
Assumptions of liabilities that exceed our estimated amounts,
Verifying the financial statements and other business information of an acquired business,
Inability to obtain required regulatory approvals and/or required financing on favorable terms,
Potential loss of key employees, contractual relationships or customers of the acquired company,
Increased operating expenses related to the acquired businesses or technologies,
The failure of new technologies, products or services to gain market acceptance with acceptable profit margins,
Entering new markets in which we have little or no experience or in which competitors may have stronger market
positions,
Dilution of stockholder value through the issuance of equity securities or equity-linked securities, and
Inability to achieve expected synergies or the achievement of such synergies taking longer than expected to
realize, including increases in revenue, enhanced efficiencies, or increased market share, or the benefits ultimately
may be smaller than we expected.
Any acquisitions or investments may ultimately harm our business or financial condition, as they may not be successful
and may ultimately have an adverse effect on our operating results or financial condition and/or result in impairment charges.
Potential international business opportunities may expose us to additional risks, including currency exchange
fluctuations.
A part of our growth strategy depends on us expanding internationally. Although sales outside of the United States and
Canada account for a relatively small percentage of our total net sales, we expect to increase our level of business activity
outside of the United States and Canada, as illustrated by our December 2018 acquisition of Krausz Industries, which is based
in Israel, and our acquisition in June 2021 of i2O Water Ltd, which is based in Southampton, United Kingdom. Some countries
that present potential good business opportunities also face political and economic instability and vulnerability to infrastructure
and other disruptions. Seeking to expand our business internationally exposes us to additional risks, which include foreign
exchange risks and currency fluctuations, as discussed more fully below, political and economic uncertainties, changes in local
business conditions and national and international conflicts. A primary risk we face in connection with our export shipments
relates to our ability to collect amounts due from customers. We also face the potential risks arising from staffing, monitoring
and managing international operations, including the risk such activities may divert our resources and management time.
In addition, compliance with the laws, regulations and taxes of multiple international jurisdictions increases our cost of
doing business. International operations are subject to anti-corruption laws and anti-competition regulations, among others.
For example, the United States Foreign Corrupt Practices Act and similar anti-corruption laws outside of the United States
generally prohibit companies and their intermediaries from making improper payments or providing anything of value to
improperly influence foreign government officials and certain others for the purpose of obtaining or retaining business, or
obtaining an unfair advantage. Violations of these laws and regulations could result in criminal and civil sanctions, disrupt our
business and adversely affect our brands, international expansion efforts, business and operating results.
14
We earn revenues and incur expenses in foreign currencies as part of our operations outside of the United States.
Accordingly, fluctuations in currency exchange rates may significantly increase the amount of United States dollars required for
foreign currency expenses or significantly decrease the United States dollars we receive from revenues denominated in a
foreign currency. Changes between a foreign exchange rate and the United States dollar affect the amounts we record for our
foreign assets, liabilities, revenues and expenses, and could have a negative effect on our financial results. We expect that our
exposure to foreign currency exchange rate fluctuations will grow as the relative contribution of our operations outside the
United States increases through both organic and inorganic growth.
Risks related to our operations
Our reliance on vendors for certain products, some of which are single-source or limited source suppliers, could harm
our business by adversely affecting product availability, reliability or cost.
We maintain several single-source or limited-source supplier relationships with manufacturers, including some outside of
the United States. If the supply of a critical single- or limited-source product is delayed or curtailed, we may not be able to ship
the related products in desired quantities or in a timely manner. Even where multiple sources of supply are available,
qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of
profits, which could harm our operating results.
These relationships reduce our direct control over production. Our reliance on these vendors subjects us to a greater risk of
shortages, and reduced control over delivery schedules of products, as well as a greater risk of increases in product costs. In
instances where we stock lower levels of product inventories, a disruption in product availability could harm our financial
performance and our ability to satisfy customer needs. In addition, defective products from these manufacturers could reduce
product reliability and harm our reputation.
A disruption in our supply chain or other factors impacting the distribution of our products could adversely affect our
business.
A disruption within our logistics or supply chain network at any of the freight companies that deliver components for our
manufacturing operations in the United States or ship our fully-assembled products to our customers could adversely affect our
business and result in lost sales and increased expenses or harm to our reputation. Our supply chain is dependent on third party
ocean-going container ships, rail, barge and trucking systems and, therefore, disruption in these logistics services because of
weather-related problems, strikes, bankruptcies or other events could adversely affect our financial performance and financial
condition, negatively impacting sales, profitability and cash flows.
Seasonal demand for certain of our products and services may adversely affect our financial results.
Sales of some of our products, including iron gate valves and fire hydrants, are seasonal, with lower sales in our first and
second fiscal quarters when weather conditions throughout most of North America tend to be cold resulting in lower levels of
construction activity. This seasonality in demand has resulted in fluctuations in our sales and operating results. To satisfy
demand during expected peak periods, we may incur costs associated with building inventory in off-peak periods, and our
projections as to future needs may not be accurate. Because many of our expenses are fixed, seasonal trends can cause
reductions in our profitability and profit margins and deterioration of our financial condition during periods affected by lower
production or sales activity.
Transportation costs are relatively high for most of our products.
Transportation costs can be an important factor in a customer’s purchasing decision. Many of our products are big, bulky
and heavy, which tend to increase transportation costs. We also have relatively few manufacturing sites, which tends to
increase transportation distances to our customers and consequently increases our transportation costs. High transportation
costs could make our products less competitive compared to similar or alternative products offered by competitors.
Our high fixed costs may make it more difficult for us to respond to economic cycles.
A significant portion of our cost structure is fixed, including manufacturing overhead, capital equipment and research and
development costs. In a prolonged economic downturn, these fixed costs may cause our gross margins to erode and our
earnings to decline.
15
We may experience difficulties implementing upgrades to our enterprise resource planning system.
We continue to be engaged in a multi-year implementation of upgrades to our enterprise resource planning system (“ERP”)
and other systems. The ERP is designed to accurately maintain the company’s books and records and provide information
important to the operation of the business to the Company’s management team. These upgrades will require significant
investment of human and financial resources. In implementing the ERP upgrade, we may experience significant delays,
increased costs and other difficulties. Any significant disruption or deficiency in the design and implementation of the ERP
upgrades could adversely affect our ability to process orders, ship product, send invoices and track payments, fulfill contractual
obligations or otherwise operate our business. While we have invested significant resources in planning and project
management, significant implementation issues may arise.
Normal operations at our key manufacturing facilities may be interrupted.
Some of our key products, including fire hydrants and iron gate valves, are manufactured at a single facility or few
manufacturing facilities, that depend on critical pieces of heavy equipment that cannot be moved economically to other
locations. We are therefore limited in our ability to shift production among locations. The operations at our manufacturing
facilities may be interrupted or impaired by various operating risks, including, but not limited to:
•
•
•
•
•
•
•
•
•
Catastrophic events, such as fires, floods, explosions, natural disasters, severe weather or other similar
occurrences,
Terrorist attacks, war, mass shootings or other acts of violence,
Interruptions in the delivery of raw materials, shortages of equipment or spare parts, or other manufacturing
inputs,
Adverse government regulations,
Equipment or information systems breakdowns or failures,
Violations of our permit requirements or revocation of permits,
Releases of pollutants and hazardous substances to air, soil, surface water or ground water,
Labor disputes, and
Cyberattacks and events.
The occurrence of any of these events may impair our production capabilities and adversely affect our sales, profitability
and cash flows.
Any inability to protect our intellectual property or our failure to effectively defend against intellectual property
infringement claims could adversely affect our competitive position.
Our business depends on our technology and expertise, which were largely developed internally and are not subject to
statutory protection. We rely on a combination of patent protection, copyright and trademark laws, trade secrets protection,
employee and third-party confidentiality agreements as well as technical measures to protect our intellectual property rights.
The measures that we take to protect our intellectual property rights may not adequately deter infringement, misappropriation or
independent development of our technology, and they may not prevent an unauthorized party from obtaining or using
information or intellectual property that we regard as proprietary or keep others from using brand names similar to our own.
The disclosure, misappropriation or infringement of our intellectual property could harm our competitive position. In addition,
our actions to enforce our rights may result in substantial costs and the diversion of management time and other resources. We
may also be subject to intellectual property infringement claims from time to time, which may result in additional expenses and
the diversion of resources to respond to these claims. Finally, for those products in our portfolio that rely on patent protection,
once a patent has expired the product is further subjected to competition. Products under patent protection potentially generate
significantly higher revenue and earnings than those not protected by patents. If we fail to successfully enforce our intellectual
property rights or register new patents, our competitive position could suffer, which could adversely affect our business,
financial condition, results of operations and cash flows.
16
If we do not successfully maintain our information and technology networks, including the security of those networks,
our operations could be disrupted and unanticipated increases in costs and/or decreases in revenues could result.
We rely on various information technology systems, some of which are controlled by outside service providers, to manage
key aspects of our operations. The proper functioning of our information technology systems is important to the successful
operation of our business. If critical information technology systems fail, or are otherwise unavailable, our ability to
manufacture products, process orders, track credit risk, identify business opportunities, maintain proper levels of inventories,
collect accounts receivable, pay expenses and otherwise manage our business would be adversely affected.
We depend on the Internet and our information technology infrastructure for electronic communications among our
locations around the world and among our personnel and suppliers and customers. Cyber and other data security breaches of
this infrastructure can create system disruptions, shutdowns or unauthorized disclosure of confidential information. If we or our
service providers are unable to prevent these breaches, our operations could be disrupted or we may suffer financial,
reputational or other harm because of lost or misappropriated information.
We may fail to effectively manage confidential data, which could harm our reputation, result in substantial additional
costs and subject us to litigation.
As we grow our technology-enabled products, services and solutions, we continue to accumulate increasing volumes of
customer data. In addition, we store personal information in connection with our human resources operations. Our efforts to
protect this information may be unsuccessful as a result of employee errors or malfeasance, technical malfunctions, the actions
of third parties such as a cyberattack or other factors. If our cyber defenses and other countermeasures are unable to protect
personal data, it could be accessed or disclosed improperly, which could expose us to liability, harm our reputation and deter
current and potential users from using our products and services. The regulatory environment related to cyber and information
security, data collection and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our
business, and compliance with those requirements could result in additional costs.
Cyberattacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, unauthorized
access to customer data, or harm to our reputation.
Cybersecurity threats are constantly evolving and can take a variety of forms, increasing the difficulty of detecting and
successfully defending against them. Individual and groups of hackers and sophisticated organizations, including state-
sponsored organizations or nation-states, continuously undertake attacks that pose threats to our customers and our information
technology systems. These actors may use a wide variety of methods, which may include developing and deploying malicious
software or exploiting vulnerabilities in hardware, software, radio communication protocols, or other infrastructure in order to
attack our products and services. Additionally, these actors may reverse engineer trade secrets or other confidential intellectual
property, or gain access to our networks and data centers, using social engineering techniques to induce our employees, users,
partners, or customers to disclose passwords or other sensitive information or take other actions to gain access to our data or our
users’ or customers’ data, or act in a coordinated manner to launch distributed denial of service attacks, deny or postpone access
to critical water infrastructure telemetry through vulnerabilities in our cloud services and infrastructure, or logging, sensing, and
telemetry products. Inadequate account security practices may also result in unauthorized access to confidential data.
We may have no current capability to detect certain vulnerabilities, which may allow them to persist in the environment
over long periods of time. Cybersecurity threats can have cascading impacts that unfold with increasing speed across our
internal networks and systems and those of our partners and customers. Breaches of our facilities, network, or data security
could disrupt the security of our systems and business applications, impair our ability to provide services to our customers and
protect the privacy of their data, result in product development delays, compromise confidential or technical business
information harming our reputation, result in theft or misuse of our intellectual property or other assets, require us to allocate
more resources to improved technologies, or otherwise adversely affect our business.
Misuse of our technology-enabled products, services and solutions could lead to reduced revenue, increased costs,
liability claims, or harm to our reputation.
As we continue to design and develop products, services and solutions that leverage our hosted or cloud-based resources,
the internet-of-things and other wireless/remote technologies and include networks of distributed and interconnected devices
that contain sensors, data transfers and other computing capabilities, our customers’ data and systems may be subjected to
harmful or illegal content or attacks, including potential cybersecurity threats. Additionally, we may not have adequately
anticipated or precluded such cybersecurity threats through our product design or development. These products, services and
solutions inevitably contain vulnerabilities or critical security defects which may not been remedied and cannot be disclosed
without compromising security. We may also make prioritization decisions in determining which vulnerabilities or security
17
defects to fix, and the timing of these fixes, which could result in compromised security. These vulnerabilities and security
defects could expose us or our customers to a risk of loss, disclosure, or misuse of information/data; adversely affect our
operating results; result in litigation, liability, or regulatory action (including under laws related to privacy, data protection, data
security, network security, and consumer protection); deter customers or sellers from using our products, services and solutions;
and otherwise harm our business and reputation.
We are subject to a variety of claims, investigations and litigation that could adversely affect our results of operations
and harm our reputation.
In the normal course of our business, we are subject to claims and lawsuits, including from time to time claims for damages
related to product liability and warranties, investigations by governmental agencies, litigation alleging the infringement of
intellectual property rights and litigation related to employee matters and commercial disputes. We may also be subject to
investigations, claims, litigation and other proceedings outside the ordinary course of business, such as the June 2021 mass
shooting event in our Albertville, Alabama facility. Defending these lawsuits and becoming involved in these investigations
may divert management’s attention, and may cause us to incur significant expenses, even if there is no evidence that our
systems or practices were the cause of the claim. In addition, we may be required to pay damage awards, penalties or
settlements, or become subject to injunctions or other equitable remedies, that could have a material adverse effect on our
business, financial condition, results of operations and cash flows. Moreover, any insurance or indemnification rights that we
have may be insufficient or unavailable to protect us against potential loss exposures. See “Item 1. BUSINESS - Regulatory
and Environmental Matters,” “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Contingencies” and Note 17. of the Notes to Consolidated Financial Statements.
We are subject to stringent environmental, health and safety laws and regulations that impose significant compliance
costs. Any failure to satisfy these laws and regulations may adversely affect us.
We are subject to stringent laws and regulations relating to the protection of the environment, health and safety and incur
significant capital and other expenditures to comply with these requirements. Failure to comply with any environmental, health
or safety requirements could result in the assessment of damages, the imposition of penalties, suspension of production, changes
to equipment or processes or a cessation of operations at our facilities, any of which could have a material adverse effect on our
business. Because these laws are complex, subject to change and may be applied retroactively, we cannot predict with certainty
the extent of our future liabilities with respect to environmental, health and safety matters and whether they will be material.
In addition, certain statutes such as CERCLA may impose joint and several liability for the costs of remedial investigations
and actions on entities that generated waste, arranged for disposal of waste, transported to or selected the disposal sites and the
past and present owners and operators of such sites. All such “potentially responsible parties” (“PRP”), or any one of them,
including us, may be required to bear all of such costs regardless of fault, the legality of the original disposal or ownership of
the disposal site. As a result, we may be required to conduct investigations and perform remedial activities at current and
former operating and manufacturing sites where we have been deemed, or in the future could be, named a PRP with respect to
such environmental liabilities, any of which could require us to incur material costs. The final remediation costs of these
environmental sites may exceed current estimated costs, and additional sites in the future may require material remediation
expenses. If actual expenditures exceed our estimates, our results of operations and financial position could be materially and
adversely affected. See “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and
Note 17. of the Notes to Consolidated Financial Statements.
Climate change and legal or regulatory responses thereto may have an adverse impact on our business and results of
operations.
There is growing concern that a gradual increase in global average temperatures as a result of increased concentration of
carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the
globe and an increase in the frequency and severity of natural disasters. Many of our manufacturing plants use significant
amounts of electricity generated by burning fossil fuels, which releases carbon dioxide. Such climate change may impair our
production capabilities, disrupt our supply chain or impact demand for our products. Growing concern over climate change
also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and
other greenhouse gas emissions on the environment. Increased energy or compliance costs and expenses as a result of increased
legal or regulatory requirements may cause disruptions in, or an increase in the costs associated with, the manufacturing and
distribution of our products. The impacts of climate change and legal or regulatory initiatives to address climate change could
have a long-term adverse impact on our business and results of operations. If we fail to achieve or improperly report on our
progress toward achieving our goals and commitments to reduce our carbon footprint or in environmental and sustainability
programs and initiatives, the results could have an adverse impact on our business and results of operations.
18
We rely on successors to Tyco to indemnify us for certain liabilities and they may become financially unable or fail to
comply with the terms of the indemnity.
Under the terms of the acquisition agreement relating to the August 1999 sale by Tyco of businesses which make up certain
of the companies within Mueller Water Products, Inc., we are indemnified by certain Tyco entities (“Tyco Indemnitors”) for all
liabilities arising in connection with the operation of these businesses prior to their sale by Tyco, including with respect to
products manufactured or sold prior to the closing of that transaction, as well as certain environmental liabilities. These
indemnities survive indefinitely and are not subject to any dollar limits. In the past, Tyco Indemnitors have made substantial
payments and assumed defense of claims in connection with these indemnification obligations. Tyco’s indemnity does not
cover liabilities to the extent caused by us or the operation of our businesses after August 1999, nor does it cover liabilities
arising with respect to businesses or sites acquired after August 1999. Since 2007, Tyco has engaged in multiple corporate
restructurings, split-offs and divestitures. The result of these transactions is that the assets of, and control over, Tyco
Indemnitors has changed. Should any Tyco Indemnitor become financially unable or fail to comply with the terms of the
indemnity, we may be responsible for such obligations or liabilities.
Risks related to our human capital
We depend on qualified personnel and, if we are unable to retain or hire executive officers, key employees and skilled
personnel, we may not be able to achieve our strategic objectives and our business may be adversely affected.
Our ability to expand or maintain our business depends on our ability to hire, train and retain employees with the skills
necessary to understand and adapt to the continuously developing needs of our customers. The increasing demand for qualified
personnel makes it more difficult for us to attract and retain employees with requisite skill sets, particularly employees with
specialized technical and trade experience. Changing demographics and labor work force trends also may result in a loss of
knowledge and skills as experienced workers retire. If we fail to attract, motivate, train and retain qualified personnel, or if we
experience excessive turnover, we may experience declining sales, manufacturing delays or other inefficiencies, increased
recruiting, training and relocation costs and other difficulties, and our business, financial condition, results of operations and
cash flows could be materially and adversely affected. Competition for qualified personnel is intense and we may not be
successful in attracting or retaining qualified personnel, which could negatively impact our business.
If we are unable to negotiate collective bargaining agreements on satisfactory terms or we experience strikes, work
stoppages, labor unrest or higher than normal absenteeism, our business could suffer.
Many of our employees at our manufacturing locations are covered by collective bargaining agreements. While we
generally have been able to renegotiate collective bargaining agreements on generally satisfactory terms, negotiations may be
challenging as the Company must have a competitive cost structure in each market while meeting the compensation and
benefits needs of our employees. If we are unable to renew collective bargaining agreements on satisfactory terms, our labor
costs could increase, which could impact our financial position and results of operations. Strikes, work stoppages or other
forms of labor unrest at any of our plants could impair our ability to supply products to our distributors and customers, which
could reduce our revenues, increase our expenses and expose us to customer claims.
Furthermore, our ability to meet product delivery commitments and labor needs while controlling labor costs is subject to
numerous external factors, including, but not limited to:
•
•
•
•
•
•
Market pressures with respect to prevailing wage rates,
Unemployment levels,
Health and other insurance costs,
The impact of legislation or regulations governing labor relations, immigration, minimum wage, and
healthcare benefits,
Changing demographics, and
Our reputation within the labor market.
We also compete with many other industries and businesses for most of our hourly production employees. An inability to
provide wages and/or benefits that are competitive could adversely impact our ability to attract and retain employees. Further,
changes in market compensation rates may adversely affect our labor costs.
19
Our expenditures for pension obligations could be materially higher than we have predicted.
We provide pension benefits to certain current and former employees. To determine our future payment obligations under
the plans, certain rates of return on the plans’ assets, growth rates of certain costs and participant longevity have been estimated.
The proportion of the assets held by our United States pension plan invested in fixed income securities, instead of equity
securities, has decreased over historical levels. This shift in asset allocation has not resulted in a material change to our
estimated rate of return on plan assets for this plan. Assumed discount rates, expected return on plan assets and participant
longevity have significant effects on the amounts reported for the pension obligations and pension expense.
The funded status of our pension plans may also be influenced by regulatory requirements, which can change unexpectedly
and impose higher costs if funding levels are below certain thresholds. We may increase contributions to our pension plans to
avoid or reduce these higher costs.
Significant adverse changes in credit and capital markets or changes in investments could result in discount rates or actual
rates of return on plan assets being materially lower than projected and require us to increase pension contributions in future
years to meet funding level requirements. Increasing life spans for plan participants may increase the estimated benefit
payments and increase the amounts reported for pension obligations, pension contributions and pension expense. If increased
funding requirements are particularly significant and sustained, our overall liquidity could be materially reduced, which could
cause us to reduce investments and capital expenditures, or restructure or refinance our debt, among other things.
Risks related to our international operations
Any failure to satisfy international trade laws and regulations or to otherwise comply with changes or other trade
developments may adversely affect us.
Our operations require importing and exporting goods and technology among countries on a regular basis. Thus, the sale
and shipment of our products and services across international borders, as well as the purchase of components and products
from international sources, subject us to extensive trade laws and regulations. Trade laws and regulations are complex, differ
by country, and are enforced by a variety of government agencies. Because we are subject to extensive trade laws and
regulations in the countries in which we operate, we are subject to the risk that laws and regulations could change in a manner
that would expose us to additional costs, penalties or liabilities, and our policies and procedures may not always protect us from
actions that would violate international trade laws and regulations. For example, certain federal legislation requires the use of
American iron and steel products in certain water projects receiving certain federal appropriations. We have incurred costs in
connection with ensuring our ability to certify to these requirements, including those associated with enhancing our assembly
operations and sourcing practices. As a result of the varying legal and regulatory requirements to which our cross-border
activities are subject, we may not always be in compliance with the trade laws and regulations in all respects. Any improper
actions could subject us to civil or criminal penalties, including material monetary fines, or other adverse actions, including
denial of import or export privileges, and could harm our reputation and our business prospects.
If significant tariffs or other restrictions continue to be placed on foreign imports by the United States and related
countermeasures are taken by impacted foreign countries, our revenue and results of operations may be harmed.
If significant tariffs or other restrictions continue to be placed on foreign imports by the United States and related
countermeasures are taken by impacted foreign countries, our revenue and results of operations may be harmed. For example,
trade tensions between the United States and China have led to series of significant tariffs on the importation of certain product
categories over recent years. The materials subject to these tariffs could impact our raw material costs as well. However, if
further tariffs are imposed on a broader range of imports, or if further retaliatory trade measures are taken by China or other
countries in response to additional tariffs, we may be required to raise our prices or incur additional expenses, which may result
in the loss of customers and harm our operating performance, revenue and profit.
The prices of our purchased components and raw materials can be volatile.
Our operations require substantial amounts of purchased components and raw materials, such as scrap steel, sand, resin,
brass ingot and steel pipe. The cost and availability of these materials are subject to economic forces largely beyond our control,
including North American and international demand, foreign currency exchange rates, freight costs, tariffs and commodity
speculation and other external factors beyond our control, such as the COVID-19 pandemic or other supply chain challenges.
Temporary industry-wide shortages of raw materials have occurred in fiscal 2021, which have led to increased raw material
price volatility which may continue into fiscal 2022.
We may not be able to pass on the entire cost of price increases, or at all, for purchased components and raw materials to
our customers or offset fully the effects of these higher costs through productivity improvements. In particular, when purchased
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component or raw material prices increase rapidly or to significantly higher than normal levels, we may not be able to pass cost
increases through to our customers on a timely basis, if at all, which would reduce our profitability and cash flows. In addition,
if purchased components or raw materials are not available or not available on commercially reasonable terms, our sales,
profitability and cash flows would be reduced. Our competitors may secure more reliable sources of purchased components
and raw materials or they may obtain these supplies on more favorable terms than we do, which could give them a cost
advantage.
Other risks related to our business
The negative impact of the COVID-19 pandemic on our operations may increase
The COVID-19 pandemic continues to have meaningful adverse impacts on our financial condition and results of
operations as discussed in PART II, “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.” As the impact of the pandemic continues, we may continue to experience
additional plant closures, limitations in the ways we operate within our facilities, illness or quarantine of our employees, supply
chain disruptions, transportation delays, cost increases, more extensive travel restrictions, closures or disruptions of businesses
and facilities, or social, economic, political or labor instability in the affected areas. These same factors may continue to impact
our suppliers, customers and distributors and the severity of such impacts could increase. The health implications of the
pandemic are extensive and the extent, duration and severity of the pandemic remain highly uncertain. We are unable to
estimate the impact of measures we have taken thus far, additional measures we may undertake in the future and the actions
taken, or that will be taken, by governmental agencies. Should there be unexpected health implications for our employees,
communities or others, we could face litigation or other claims and suffer damage to our reputation, brand and operations,
which could adversely affect our business.
We have incurred additional costs to address the pandemic as discussed in PART II, “Item 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”, including costs
associated with unfavorable volume variances, voluntary emergency paid leave, incentive payments for vaccinations, additional
cleaning, disinfectants and sanitation materials for our employees and at our facilities. We expect to continue to incur such
costs, which may be significant, as we continue to implement operational changes in response to the pandemic. The pandemic
is causing disruptions in our supply chain that have caused and could result in further higher costs in the manufacture and
delivery of our products. We expect these conditions to persist for the near term and may worsen until the pandemic abates.
Further, we expect additional costs, added administrative burdens and other negative cost and operational impacts as a result of
the United States’ Occupational Safety and Health Administration (“OSHA”) emergency temporary standard (the “Vaccine/
Test Mandate”) related to COVID-19 vaccination and testing requirements.
Continued disruptions in our markets and the global economy may cause us to have to assess impairments of our assets and
cause us to incur and record non-cash impairment charges.
Management is focused on mitigating the impact of the pandemic on our operations, which has required, and will continue
to require, a large investment of time and resources across our business and may delay other strategic initiatives and large
capital projects that are important to the business. Additionally, many of our employees are working remotely. An extended
period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not
limited to cybersecurity risks, and consequently impair our ability to manage our business.
The extent to which the pandemic and the evolving regulatory environment impacts us will depend on a number of factors
and developments that we are not able to predict or control, including, among others: the severity of the virus; the duration of
the outbreak; governmental, business and other actions which could include limits on funding for our products or services; the
health of and the effect on our workforce; and the potential effects on our internal controls including those over financial
reporting and information technology as a result of changes in working environments such as shelter-in-place and similar orders
that are applicable to our employees, including management. In addition, if the pandemic continues to create disruptions or
turmoil in the credit or financial markets, it could adversely affect our ability to access capital on favorable terms, it at all, and
continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.
The Vaccine/Test Mandate, if implemented as initially enacted, will require us to ensure that all of our employees in the
United States are fully vaccinated or, if not, are tested for COVID-19 on a weekly basis, which could be difficult and costly. As
ordered via a stay by the U.S. Court of Appeals for the Fifth Circuit, OSHA suspended the implementation of the Vaccine/Test
Mandate so the outcome and timing of the implementation of the Vaccine/Test Mandate is presently unclear. We intend to
implement the Vaccine/Test Mandate by the deadline set forth by the standard once the stay and suspension of the
implementation of the Vaccine/Test Mandate are removed. Further, additional vaccine and testing mandates may be announced
in jurisdictions in which we operate our business, and there could be potential conflict with actions by certain states that are in
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conflict with the Vaccine/Test Mandate, the impacts of which remain uncertain. With ongoing health, supply chain, shipping,
employment and other pandemic-related shortages of materials and workers, it is possible that the Vaccine/Test Mandate could
result in labor disruptions, employee attrition and difficulty securing future labor needs as well as have impacts on the broader
employment market and supply chain, which could have an adverse effect on our revenues, costs, financial condition and
results of operations and subject us to various employee claims as well as other related legal liability.
The pandemic may also impact third parties with which we do business, and each of their financial conditions, including
their viability and ability to pay for our products and services; which could adversely impact us. The extent of the impact of the
pandemic on our operations and financial results depends on future developments and is highly uncertain. The situation is ever
changing and future impacts may materialize that are not yet known.
Item 2.
PROPERTIES
Our principal properties are listed below.
Location
Activity
Square
Footage
Owned or
leased
Infrastructure:
Albertville, AL
Ariel, Israel
Aurora, IL
Aurora, IL
Barrie, Ontario
Brownsville, TX
Calgary, Alberta
Chattanooga, TN
Chattanooga, TN
Chattanooga, TN
Cleveland, TN
Dallas, TX
Decatur, IL
Emporia, KS
Jingmen, China
Kimball, TN
Ocala, FL
Ontario, CA
Manufacturing
Manufacturing
Manufacturing
Distribution
Distribution
Manufacturing
Distribution
Manufacturing
General and administration
Research and development
Manufacturing
Distribution
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Distribution
Distribution
Rosh Haayin, Israel
Surrey, British Columbia
Sharjah, United Arab Emirates
Technologies:
Cleveland, NC
Atlanta, GA
General and administration
Manufacturing
Distribution
Manufacturing
Research and development
Southampton, United Kingdom
Research and development
Research and development
Toronto, Ontario
Corporate:
Atlanta, GA
422,000
221,000
147,000
84,000
50,000
50,000
11,000
525,000
17,000
22,000
109,500
26,000
467,000
28,000
154,000
233,000
50,000
73,000
8,400
33,000
10,000
190,000
21,000
2,300
18,000
Owned
Leased
Owned
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Owned
Leased
Owned
Leased
Owned
Owned
Leased
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Corporate headquarters
25,000
Leased
We consider our facilities to be well maintained and believe we have sufficient capacity to meet our anticipated needs
through 2022. Our leased properties have terms expiring at various dates through 2033.
22
Item 3.
LEGAL PROCEEDINGS
We are involved in various legal proceedings that have arisen in the normal course of operations. The effect of the
outcome of these matters on our financial statements cannot be predicted with certainty as any such effect depends on the
amount and timing of the resolution of such matters. Other than the litigation described elsewhere in this Annual Report, we do
not believe that any of our outstanding litigation would have a material adverse effect on our business or prospects.
See “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 1A. RISK FACTORS - We are subject to
increasingly stringent environmental, health and safety laws and regulations that impose significant compliance costs. Any
failure to satisfy these laws and regulations may adversely affect us,” “Item 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 17. of the Notes
to Consolidated Financial Statements.
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Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
Our common stock is listed on the New York Stock Exchange under the trading symbol MWA.
Covenants contained in certain of the debt instruments described in Note 8. of the Notes to Consolidated Financial
Statements restrict our ability to declare and pay dividends. Future dividends will be declared at the discretion of our Board of
Directors and will depend on our future earnings, financial condition and other factors.
At September 30, 2021, there were 98 stockholders of record for our common stock. This figure does not include
stockholders whose shares are held in the account of a stockbroker, bank or custodian on behalf of a stockholder or shares
which are otherwise beneficially held.
Equity Compensation Plan Information
Information regarding our compensation plans under which equity securities are authorized for issuance is set forth in
“Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.”
Sale of Unregistered Securities
We did not issue any unregistered securities within the past three years.
Issuer Purchases of Equity Securities
In 2015, we announced the authorization of a stock repurchase program for up to $50.0 million of our common stock. The
program does not commit us to any particular timing or quantity of purchases, and we may suspend or discontinue the program
at any time. In 2017, we announced an increase to the authorized amount of this program to $250.0 million. At September 30,
2021, we had remaining authorization of $135.0 million to repurchase shares of our common stock.
During the quarter ended September 30, 2021, we repurchased $10.0 million in shares, which totaled 651,271 shares of our
common stock.
Period
July 1-31, 2021
August 1-31, 2021
September 1-30, 2021
Total
Total number
of shares
purchased as
part of
publicly
announced
plans or
programs
Maximum
dollar value of
shares that
may yet be
purchased
under the
plans or
programs
(in millions)
— $
— $
— $
— $
145.0
135.0
135.0
135.0
Total number
of shares
purchased
Average price
paid per share
—
— $
651,271 $
— $
651,271 $
15.33
—
15.33
24
Stock Price Performance Graph
The following graph compares the Company’s cumulative quarterly common stock price performance with the Russell
2000 Stock Index (“Russell 2000”) and the Dow Jones U.S. Building Materials & Fixtures Index (“DJ U.S. Building Materials
& Fixtures”) since September 30, 2016. Total return values were calculated based on cumulative total return assuming (i) the
investment of $100 in our common stock, the Russell 2000 and the DJ U.S. Building Materials & Fixtures on the dates
indicated and (ii) reinvestment of all dividends.
Item 6.
[Reserved]
Not applicable.
25
Comparison of Cumulative Total ReturnAssumes Initial Investment of $100Total Return since September 30, 2016Mueller Water Products, IncRussell 2000DJ U.S. Building Materials & FixturesSep-16Mar-17Sep-17Mar-18Sep-18Mar-19Sep-19Mar-20Sep-20Mar-21Sep-21$0$50$100$150$200 Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and related notes
included in Item 8. “Financial Statements and Supplementary Data” of this Annual Report. This discussion and analysis
contains forward-looking statements that involve risks, uncertainties and other factors that may cause actual results to differ
materially from those projected in any forward-looking statements, as discussed in “Disclosure Regarding Forward-Looking
Statements.” These risks and uncertainties include but are not limited to those set forth in “Item 1A. RISK FACTORS”.
Overview
Business
We operate our business through two segments, Infrastructure and Technologies.
We estimate approximately 60% to 65% of the Company’s 2021 net sales were associated with repair and replacement
directly related to municipal water infrastructure spending, approximately 25% to 30% were related to residential construction
activity and less than 10% were related to natural gas utilities.
In 2021, both Infrastructure and Technologies were impacted by raw material and other cost inflation, supply chain
disruptions and labor availability challenges.
We expect the operating environment to continue to be very challenging in 2022, as a result of the uncertainty around the
depth and duration of the pandemic. We may continue to be impacted by raw material and other cost inflation, supply chain
disruptions and labor availability challenges. While we expect that the municipal repair and replacement activity and new
residential construction end markets will remain healthy in 2022, we do anticipate that growth will slow down relative to the
strong recovery experienced during 2021. In 2022, we believe that supply chain disruptions could extend overall build cycles
for new residential construction, including lot development.
Infrastructure
After experiencing challenges in 2020 resulting from the pandemic, municipal spending in 2021 recovered during the fiscal
year as compared with the prior year. According to the United States Department of Labor, the trailing twelve-month average
consumer price index for water and sewerage rates at September 30, 2021 increased 3.0%. While the economic effects of the
pandemic have impacted revenues for some water utilities in the United States, the economic recovery enabled water utilities to
maintain repair and replacement activities. While uncertainty related to the pandemic continues to impact the operating
environment, residential construction activity was very strong in 2021 after recovering in 2020. The year over year percentage
change in housing starts is a key indicator of demand for Infrastructure’s products sold in the residential construction market.
The strength of the residential construction activity during 2021 was reflected in total housing starts in the United States
increasing approximately 18%. In October 2021, Blue Chip Economic Indicators forecasted a 1.3% decrease in housing starts
for the calendar year 2022 compared to the calendar year 2021.
Technologies
The municipal water market is the key end market for Technologies. As compared with Infrastructure products,
Technologies products and services are primarily project-oriented and often depend on customer adoption of our technology-
based products and services.
Consolidated
For our fiscal year 2022, we anticipate that consolidated net sales will be 4% to 8% higher than our fiscal year 2021 driven
by the benefits of higher pricing and increased shipment volumes, resulting from modest growth in our end markets and our
ability to deliver the backlog at Infrastructure and Technologies. In 2021, we encountered increased material costs as a result of
higher raw material prices, particularly brass ingot and scrap steel, as well as higher freight, labor costs and energy expenses. In
2022, we anticipate that inflation will continue to lead to higher costs.
26
Results of Operations
Year Ended September 30, 2021 Compared to Year Ended September 30, 2020
Infrastructure
Year ended September 30, 2021
Technologies
Corporate
Total
$
$
Net sales
Gross profit
Operating expenses:
Selling, general and administrative
Strategic reorganization and other (benefits)
charges
Total operating expenses
Operating income (loss)
Pension benefit other than service
Interest expense, net
Loss on early extinguishment of debt
Income before income taxes
Income tax expense
Net income
1,022.0 $
345.0
(in millions)
89.0 $
13.5
— $
— $
1,111.0
358.5
141.0
26.6
(0.3)
140.7
204.3 $
—
26.6
(13.1) $
51.2
8.3
59.5
(59.5)
218.8
8.0
226.8
131.7
(3.3)
23.4
16.7
94.9
24.5
70.4
$
Infrastructure
Year ended September 30, 2020
Technologies
Corporate
Total
Net sales
Gross profit
Operating expenses:
Selling, general and administrative
Strategic reorganization and other charges
Total operating expenses
Operating income (loss)
Pension benefit other than service
Interest expense, net
Walter Energy accrual
Income before income taxes
Income tax expense
Net income
Consolidated Analysis
$
$
$
883.6 $
315.7 $
129.1
0.6
129.7
186.0 $
(in millions)
80.5 $
12.5 $
24.8
0.1
24.9
(12.4) $
— $
— $
44.5
12.3
56.8
(56.8)
$
964.1
328.2
198.4
13.0
211.4
116.8
(3.0)
25.5
0.2
94.1
22.1
72.0
Net sales for 2021 increased 15.2% to $1,111.0 million from $964.1 million in the prior year primarily as a result of higher
shipment volume across most of our product lines and higher pricing. Additionally, net sales benefited as a result of $6.0
million of Krausz sales from the elimination of the one-month reporting lag.
Gross profit increased $30.3 million to $358.5 million for 2021 compared with $328.2 million in the prior year. This
increase was primarily a result of increased shipment volume and higher pricing, partially offset by higher manufacturing costs
as a result of inflation, higher labor costs, and a $2.4 million inventory write-off associated with the announcement of our plant
closures in Aurora, Illinois and Surrey, British Columbia, Canada. Gross margin decreased to 32.3% in 2021 as compared with
34.0% in the prior year.
27
Selling, general and administrative expenses (“SG&A”) increased 10.3% to $218.8 million for 2021 from $198.4 million in
the prior year. As a percentage of net sales, SG&A decreased 90 basis points to 19.7% of net sales from 20.6% in the prior
year. The increase in SG&A was primarily a result of increased personnel-related expenses, including incentive compensation,
sales commissions associated with higher net sales and orders, and stock-based compensation. Additional increases were a
result of inflation, new product development and information technology spending. Fiscal year 2020 SG&A included
pandemic-driven benefits from temporarily reduced travel, trade show and event spending as well as temporary employee
furloughs and temporary salary reductions.
Strategic reorganization and other charges for 2021 primarily relate to termination benefits associated with our plant
closures in Aurora, Illinois and Surrey, British Columbia, Canada, the June 2021 mass shooting tragedy at our Albertville
facility, and certain transaction-related costs, partially offset by a one-time settlement gain in connection with an
indemnification of a previously owned property. In 2020, Strategic reorganization and other charges primarily relate to a legal
settlement, facility closure costs, transaction costs associated with the acquisition of Krausz, and personnel matters.
Interest expense, net declined $2.1 million in 2021 from the prior year primarily as a result of the retirement of our 5.5%
Senior Unsecured Notes (“5.5% Senior Notes”), which were replaced with 4.0% Senior Unsecured Notes (“4.0% Senior
Notes”) as well as an increase in capitalized interest on our large capital projects, partially offset by lower interest income.
5.5% Senior Notes
4.0% Senior Notes
Deferred financing costs amortization
ABL Agreement
Capitalized interest
Other interest expense
Total interest expense
Interest income
Total interest expense, net
2021
2020
(in millions)
17.6 $
6.2
1.1
0.9
(2.3)
0.3
23.8
(0.4)
23.4 $
24.8
—
1.2
0.6
(0.3)
0.3
26.6
(1.1)
25.5
$
$
Income tax expense of $24.5 million in 2021 included an effective income tax rate of 25.8%, which was higher than the
23.5% rate in the prior year.
Segment Analysis
Infrastructure
Net sales for 2021 increased $138.4 million, or15.7%, to $1,022.0 million from $883.6 million in the prior year. Net sales
increased primarily as a result of increased shipment volume, favorable pricing and $6.0 million in Krausz net sales as a result
of the elimination of the one-month reporting lag. We believe the increased shipment volume was a result of strong demand
driven by residential construction and municipal repair and replacement activity.
Gross profit for 2021 increased $29.3 million, or 9.3%, to $345.0 million from $315.7 million in the prior year primarily as
a result of increased shipment volume, higher sales pricing and the benefit of the elimination of the Krausz one-month reporting
lag. These increases were partially offset by higher material and other costs associated with inflation, specifically related to
brass ingot, scrap steel and purchased parts, a $2.4 million inventory write-off associated with the announcement of the closure
of our Aurora, Illinois and Surrey, British Columbia, Canada facilities and $2.9 million in expenses related to the pandemic,
including voluntary emergency paid leave and other employee costs as well as additional sanitation and cleaning expenses.
Gross margin was 33.8% in 2021, a 190 basis point decrease compared with 35.7% in the prior year.
SG&A in 2021 increased 9.2% to $141.0 million from $129.1 million in the prior year primarily as a result of increased
personnel-related costs including higher sales commissions associated with higher net sales and orders, inflation, information
technology spending, and new product development. Fiscal year 2020 SG&A included pandemic-driven benefits resulting
from temporarily reduced travel, trade show and event spending as well as temporary employee furloughs and temporary salary
reductions. SG&A was 13.8% and 14.6% of net sales for 2021 and 2020, respectively.
28
Technologies
Net sales in 2021 increased to $89.0 million from $80.5 million in the prior year primarily as a result of higher shipment
volumes and the acquisition of i2O.
Gross profit in 2021 increased $1.0 million to $13.5 million from $12.5 million in the prior year as a result of higher
shipment volumes, partially offset by inflation and inventory adjustments. Gross margin decreased to 15.2% in 2021 from
15.5% in the prior year.
SG&A increased to $26.6 million in 2021 from $24.8 million in the prior year primarily as a result of personnel-related
expenses. Fiscal year 2020 SG&A included pandemic-driven benefits resulting from temporarily reduced travel, trade show
and event spending as well as temporary employee furloughs and temporary salary reductions. SG&A as a percentage of net
sales was 29.9% for 2021 and 30.8% in the prior year.
Corporate
SG&A increased by $6.7 million from $44.5 million in 2020 to $51.2 million in 2021 as a result of increased personnel-
related expenses and inflation. Fiscal year 2020 SG&A included pandemic-driven benefits resulting from temporary reductions
in travel, trade show and event spending as well as temporary employee furloughs and temporary salary reductions.
Year Ended September 30, 2020 Compared to Year Ended September 30, 2019
Management’s Discussion and Analysis comparing the results for the year ended September 30, 2020 to the results for the
year ended September 30, 2019 can be found in our Form 10-K for the year ended September 30, 2020.
Financial Condition
Cash and cash equivalents were $227.5 million at September 30, 2021 and $208.9 million at September 30, 2020. Cash
and cash equivalents increased during 2021 as a result of $156.7 million in cash provided by operating activities, partially offset
by capital expenditures of $62.7 million, dividend payments of $34.8 million, the $19.7 million acquisition of i2O, $12.4
million in debt repayments, net, and $10.0 million in share repurchases.
Receivables, net were $212.2 million at September 30, 2021 and $180.8 million at September 30, 2020. This increase was
primarily a result of the increase in net sales year over year.
Inventories, net were $184.7 million at September 30, 2021 and $162.5 million at September 30, 2020. Inventories
increased during 2021 as a result of increased volume and inflationary costs.
Property, plant and equipment, net was $283.4 million at September 30, 2021 and $253.8 million at September 30, 2020.
Property, plant and equipment increased primarily as a result of our previously-announced capital expansion projects in
Kimball, Tennessee and Decatur, Illinois. Capital expenditures, including software development costs capitalized and
capitalized interest, were $62.7 million in 2021. Depreciation expense was $31.4 million in 2021 compared to $29.6 million in
2020 as a result of generally higher level of capital expenditures over the last three years.
Intangible assets were $392.5 million at September 30, 2021 and $408.9 million at September 30, 2020. Finite-lived
intangible assets, net totaling $118.7 million at September 30, 2021, are amortized over their estimated useful lives.
Amortization expense was $28.2 million in both 2021 and 2020. We expect amortization expense for these assets to range
between approximately $27 million and $29 million in each of the next three years with a decrease to approximately $6 million
in fiscal 2025 and approximately $5 million in fiscal 2026. Indefinite-lived intangible assets, $273.8 million at September 30,
2021, are not amortized but are tested for possible impairment at least annually.
Accounts payable and other current liabilities were $219.1 million at September 30, 2021 and $153.9 million at
September 30, 2020. Payables increased during 2021 as a result of increased production volume and the impact of higher
material costs. Other current liabilities increased during 2021 primarily as a result of personnel-related expenses, including
incentive compensation and sales commissions, as well as customer rebates and income taxes.
Total outstanding debt was $446.9 million at September 30, 2021 and $447.6 million at September 30, 2020.
Deferred income taxes were net liabilities of $94.8 million at September 30, 2021 and $96.3 million at September 30, 2020,
primarily related to intangible assets. The $1.5 million decrease in the net liability was primarily the result of an increase in
deferred tax assets related to increased inventory reserves partially offset by an increase in deferred tax liabilities related to
29
bonus depreciation for plant, property and equipment and the cost basis difference of a foreign subsidiary, net of reductions in
deferred tax liabilities related to intangible assets.
Liquidity and Capital Resources
We had cash and cash equivalents of $227.5 million at September 30, 2021 and approximately $158.7 million of additional
borrowing capacity under our ABL Agreement based on September 30, 2021 data. Undistributed earnings from our
subsidiaries in Israel, Canada and China are considered to be permanently invested outside of the United States. At September
30, 2021, cash and cash equivalents included $39.2 million, $12.6 million, and $3.5 million in Israel, Canada and China,
respectively.
Net cash provided by operating activities was $156.7 million for 2021 compared with $140.3 million for 2020 primarily as
a result of the Walter tax matter which was paid in 2020 and did not recur in 2021.
Capital expenditures were $62.7 million for 2021 compared with $67.7 million for 2020. We estimate 2022 capital
expenditures will be between $70 million and $80 million. We expect our capital expenditures will be elevated over the next
several years as we invest more in our machinery, equipment and facilities for product introductions, enhanced productivity and
maintenance. Additionally, in fiscal year 2021, we completed construction of our large casting foundry in Chattanooga,
Tennessee, initiated the construction of a new brass foundry in Decatur, Illinois that will replace our existing foundry in
Decatur, and are building out our facility in Kimball, Tennessee to leverage our large casting foundry, consolidate other plants
and to insource various parts and components.
Income tax payments were higher during 2021 compared with the prior year primarily as a result of the Walter tax matter,
which was expensed in 2019 and was deducted for tax purposes in 2020. This did not recur in 2021. We expect the effective
tax rate in 2022 to be between 25% and 27%.
In 2015, we announced the authorization of a stock repurchase program for up to $50.0 million of our common stock. The
program does not commit us to any particular timing or quantity of purchases, and we may suspend or discontinue the program
at any time. In 2017, we announced an increase in the authorization of this program to $250.0 million. We acquired 651,271
and 418,374 shares of our common stock in 2021 and 2020, respectively. At September 30, 2021, we had remaining
authorization of $135.0 million to repurchase shares of our common stock.
We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of contractual
obligations. At September 30, 2021, we had $15.0 million of letters of credit and $36.7 million of surety bonds outstanding.
We anticipate our existing cash, cash equivalents and borrowing capacity combined with our expected operating cash flows
will be sufficient to meet our anticipated operating needs, capital expenditures and debt service obligations as they become due
through September 30, 2022. However, our ability to make these payments will depend largely on our future operating
performance, which may be affected by general economic, financial, competitive, legislative, regulatory, business and other
factors beyond our control.
ABL Agreement
At September 30, 2021, our asset-based lending agreement (“ABL Agreement”) consisted of a $175.0 million revolving
credit facility that includes up to $25.0 million of swing line loans and allows for up to $60.0 million of letters of credit. The
ABL Agreement permits us to increase the size of the credit facility by an additional $150.0 million in certain circumstances
subject to adequate borrowing base availability.
Borrowings under the ABL Agreement bear interest at a floating rate equal to the London Inter Bank Offered Rate
(“LIBOR”) plus an applicable margin of 200 to 225 basis points, or a base rate, as defined in the ABL Agreement, plus an
applicable margin of 100 to 125 basis points. At September 30, 2021, the LIBOR-based applicable margin was 200 basis
points.
30
The ABL Agreement is subject to mandatory prepayments if total outstanding borrowings under the ABL Agreement are
greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in
certain circumstances. The borrowing base under the ABL Agreement is equal to the sum of (a) 85% of the value of eligible
accounts receivable and (b) the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation
value of eligible inventory, less certain reserves. Prepayments can be made at any time without penalty.
Substantially all of our United States subsidiaries are borrowers under the ABL Agreement and are jointly and severally
liable for any outstanding borrowings. Our obligations under the ABL Agreement are secured by a first-priority perfected lien
on all of our United States inventory, accounts receivable, certain cash and other supporting obligations.
The ABL Agreement terminates on July 29, 2025 and includes an annual commitment fee for any unused borrowing
capacity of 37.5 basis points. Borrowings are not subject to any financial maintenance covenants unless excess availability is
less than the greater of $17.5 million and 10% of the Loan Cap as defined in the ABL Agreement. Excess availability based on
September 30, 2021 data was $158.7 million, as reduced by $15.0 million of outstanding letters of credit and $1.3 million of
accrued fees and expenses.
4.0% Senior Unsecured Notes
On May 28, 2021, we privately issued $450.0 million of 4.0% Senior Unsecured Notes (“4.0% Senior Notes”), which
mature in June 2029 and bear interest at 4.0%, paid semi-annually in June and December. We capitalized $5.5 million of
financing costs, which are being amortized over the term of the 4.0% Senior Notes using the effective interest rate method.
Proceeds from the 4.0% Senior Notes, along with cash on hand were used to redeem previously existing 5.5% Senior Notes.
Substantially all of our United States subsidiaries guarantee the 4.0% Senior Notes, which are subordinate to borrowings under
our ABL Agreement.
An indenture securing the 4.0% Senior Notes (“Indenture”) contains customary covenants and events of default, including
covenants that limit our ability to incur certain debt and liens. There are no financial maintenance covenants associated with the
Indenture. We believe we were in compliance with these covenants at September 30, 2021.
As set forth in the Indenture, we may redeem some or all of the 4.0% Senior Notes at any time prior to June 15, 2024 at
certain “make-whole” redemption prices and on or after June 15, 2024 at specified redemption prices. Additionally, we may
redeem up to 40% of the aggregate principal amount of the 4.0% Senior Notes at any time prior to June 15, 2024 with the net
proceeds of specified equity offerings at specified redemption prices as set forth in the Indenture. Upon a change of control as
defined in the Indenture, we would be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the
outstanding principal amount of the 4.0% Senior Notes.
5.5% Senior Unsecured Notes
On June 12, 2018, we privately issued $450.0 million of 5.5% Senior Unsecured Notes (“5.5% Senior Notes”), which were
set to mature in 2026 and bore interest at 5.5%, paid semi-annually. We called the 5.5% Senior Notes effective June 17, 2021
and settled with proceeds from the issuance of the 4.0% Senior Notes and cash on hand. As a result, we incurred $16.7 million
in loss on early extinguishment of debt, comprised of a $12.4 million call premium and a $4.3 million write-off of the
remaining deferred debt issuance costs associated with the retirement of the 5.5% Senior Notes.
Credit Ratings
Our corporate credit rating and the credit ratings for our debt and outlook are presented below.
Corporate credit rating
ABL Agreement
4.0% Senior Notes
5.5% Senior Notes
Outlook
Moody’s
September 30,
Standard & Poor’s
September 30,
2021
Ba1
Not rated
Ba1
N/A
Stable
2020
Ba2
Not rated
N/A
Ba3
Stable
2021
BB
Not rated
BB
N/A
Stable
2020
BB
Not rated
N/A
BB
Stable
31
Effect of Inflation
We experience changing price levels primarily related to purchased components and raw materials. Infrastructure
experienced a 33% increase in the average cost per ton of scrap steel and a 35% increase in the average cost of brass ingot in
2021 compared to 2020. Technologies was also unfavorably affected by the 35% increase in the average cost of brass ingot.
We anticipate inflation in raw and other material costs in 2022, which may have an adverse effect on our margins to the extent
we are unable to pass on such higher costs to our customers.
Material Cash Requirements
We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures. As of
September 30, 2021, we have (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and
include cash interest payments of $18.9 million in 2022 and $18.0 million annually thereafter through 2029, (ii) operating and
finance lease obligations that total $34.9 million in cash payments through 2033 and $2.3 million thereafter through 2026,
respectively, and (iii) purchase obligations for raw materials and other parts within our Infrastructure segment of approximately
$122.9 million which we will incur during 2022. We expect to fund these cash requirements from cash on hand and cash
generated from operations.
Seasonality
Our water infrastructure business depends on construction activity. Net sales and operating income have historically been
lowest in the quarters ending December 31 and March 31 when the northern United States and all of Canada generally face
weather conditions that restrict significant construction and other field crew activity. Generally speaking, for Infrastructure,
approximately 45% of a fiscal year’s net sales occurs in the first half of the fiscal year with 55% occurring in the second half of
the fiscal year, though this pattern was disrupted by the pandemic in 2020. See “Item 1A. RISK FACTORS-Seasonal demand
for certain of our products and services may adversely affect our financial results.”
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States
(“GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues,
expenses and related disclosure of contingent assets and liabilities. These estimates are based upon experience and on various
other assumptions we believe to be reasonable under the circumstances. Actual results may differ from these estimates. We
consider an accounting estimate to be critical if changes in the estimate that are reasonably likely to occur over time or the use
of reasonably different estimates could have a material impact on our financial condition or results of operations. Our critical
accounting estimates include the below items.
Revenue Recognition
We recognize revenue when control of promised products or services is transferred to our customers, in amounts that
reflect the consideration to which we expect to be entitled in exchange for those products or services. We account for a contract
when it has approval and commitment from both parties, the rights of the parties are identified, the payment terms are
identified, the contract has commercial substance and collectability of consideration is probable. We determine the appropriate
revenue recognition for our contracts with customers by analyzing the type, terms and conditions of each contract or
arrangement with a customer. See Note 3. for more information regarding our revenues.
Inventories, net
We record inventories at the lower of first-in, first-out method cost or estimated net realizable value. Inventory cost
includes an overhead component that can be affected by levels of production and actual costs incurred. We evaluate the need to
record adjustments for impairment of inventory at least quarterly. This evaluation includes such factors as anticipated usage,
inventory levels and ultimate product sales value. If in our judgment persuasive evidence exists that the net realizable value of
inventory is lower than its cost, the inventory value is written-down to its estimated net realizable value. Significant judgments
regarding future events and market conditions must be made when estimating net realizable value.
Income Taxes
We recognize deferred tax liabilities and deferred tax assets for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Deferred tax liabilities and assets are determined based on the
32
differences between the financial statements and the tax basis of assets and liabilities, using enacted tax rates in effect for the
years in which the differences are expected to reverse. A valuation allowance is provided to offset any net deferred tax assets
when, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be
realized. Our tax balances are based on our expectations of future operating performance, reversal of taxable temporary
differences, tax planning strategies, interpretation of the tax regulations currently enacted and rulings in numerous tax
jurisdictions.
We only record tax benefits for positions that we believe are more likely than not of being sustained under audit
examination based solely on the technical merits of the associated tax position. The amount of tax benefit recognized for any
position that meets the more-likely-than-not threshold is the largest amount of the tax benefit that we believe is greater than
50% likely of being realized.
Accounting for the Impairment of Goodwill and Indefinite-lived Intangible Assets
We test indefinite-lived intangible assets and goodwill for impairment annually or more frequently if events or
circumstances indicate possible impairment. We performed this annual impairment testing at September 1, 2021, using
standard valuation methodologies and rates that we considered reasonable and appropriate.
We evaluated goodwill for impairment using a quantitative analysis. We performed this annual impairment testing at
September 1, and concluded that our goodwill was not impaired. This analysis is dependent on management’s best estimates of
future operating results, including forecasted revenues, earnings before interest, taxes, depreciation and amortization
(“EBITDA”) margins and the selection of reasonable discount rates. We also consider the guideline public company method
when estimating the fair value of our reporting units. We tested the indefinite-lived intangible assets for impairment using a
“royalty savings method,” which is a variation of the discounted cash flow method. This method estimates a fair value by
calculating an estimated discounted future cash flow stream from the hypothetical licensing of the indefinite-lived intangible
assets. If this estimated fair value exceeds the carrying value, no impairment is indicated. This analysis is dependent on
management’s best estimates of future operating results and the selection of reasonable discount rates and hypothetical royalty
rates. We performed this annual impairment testing at September 1, and concluded that our indefinite-lived intangible assets
were not impaired. Significantly different projected operating results could result in different conclusions regarding
impairment.
Other long-lived assets, including finite-lived intangible assets, are amortized over their respective estimated useful lives
and reviewed for impairment if events or circumstances indicate possible impairment.
Warranty Costs
We accrue for warranty expenses that can include customer costs of repair and/or replacement, including labor, materials,
equipment, freight and reasonable overhead costs. We accrue for the estimated cost of product warranties at the time of sale if
such costs are determined to be reasonably estimable at that time. Warranty cost estimates are revised throughout applicable
warranty periods as better information regarding warranty costs becomes available. Critical factors in our analyses include
warranty terms, specific claim situations, general incurred and projected failure rates, the nature of product failures, product and
labor costs, and general business conditions. These estimates are inherently uncertain as they are based on historical data. If
warranty claims are made in the current period for issues that have not historically been the subject of warranty claims and were
not taken into consideration in establishing the accrual or if claims for issues already considered in establishing the accrual
exceed expectations, warranty expense may exceed the accrual for that particular product. Additionally, a significant increase
in costs of repair or replacement could require additional warranty expense. We monitor and analyze our warranty experience
and costs periodically and revise our warranty accrual as necessary. However, as we cannot predict actual future claims, the
potential exists for the difference in any one reporting period to be material.
33
Contingencies
We are involved in litigation, investigations and claims arising in the normal course of business. We estimate and accrue
liabilities resulting from such matters based on a variety of factors, including outstanding legal claims and proposed
settlements; assessments by counsel of pending or threatened litigation; and assessments of potential environmental liabilities
and remediation costs. We believe we have adequately accrued for these potential liabilities; however, facts and circumstances
may change and could cause the actual liability to exceed the estimates, or may require adjustments to the recorded liability
balances in the future. As we learn new facts concerning contingencies, we reassess our position both with respect to accrued
liabilities and other potential exposures. Estimates particularly sensitive to future changes include liabilities recorded for
environmental remediation, tax and legal matters. Estimated future environmental remediation costs are subject to change as a
result of such factors as the uncertain magnitude of cleanup costs, the unknown time and extent of such remedial actions that
may be required, and the determination of our liability in proportion to that of other responsible parties. Estimated future costs
related to tax and legal matters are subject to change as events evolve and as additional information becomes available during
the administrative and litigation processes. For more information on these and other contingencies, see Note 17. of the Notes to
Consolidated Financial Statements. See also “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 1A. RISK
FACTORS”.
Workers’ Compensation, Defined Benefit Pension Plans, Environmental and Other Long-term Liabilities
We are obligated for various liabilities that ultimately will be determined over what could be very long future time periods.
We established the recorded liabilities for such items at September 30, 2021 using estimates for when such amounts will be
paid and what the amounts of such payments will be. These estimates are subject to change based on numerous factors,
including among others, regulatory changes, technology changes, the investment performance of related assets, longevity of
participants, the discount rate used and changes to plan designs.
Business Combinations
We recognize assets acquired and liabilities assumed at their estimated acquisition date fair values, with the excess of
purchase price over the estimated fair values of identifiable net assets recorded as goodwill. Assigning fair values requires us to
make significant estimates and assumptions regarding the fair value of identifiable intangible assets. We may refine these
estimates if necessary over a period not to exceed one year by taking into consideration new information that, if known at the
acquisition date, would have affected the fair values recognized for assets acquired and liabilities assumed.
Significant estimates and assumptions are used in estimating the value of acquired identifiable intangible assets, including
estimating future cash flows based on forecasted revenues and EBITDA margins that we expect to generate following the
acquisition, selecting an applicable royalty rate where needed, applying an appropriate discount rate to estimate a present value
of those cash flows and determining their useful lives. These assumptions are forward-looking and could be affected by future
economic and market conditions.
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to various market risks, including potential losses arising from adverse changes in market prices and rates,
such as various commodity prices and foreign exchange rates. We do not enter into derivatives or other financial instruments
for trading or speculative purposes.
Our primary financial instruments are cash and cash equivalents. This includes cash in banks and highly rated, liquid
money market investments. We believe these instruments are not subject to material potential near-term losses in future
earnings from reasonably possible near-term changes in market rates or prices.
Commodity Price Risk
Our products are made using various purchased components and several basic raw materials, including brass ingot, scrap
steel, sand and resin. We expect prices for these items to fluctuate based on marketplace demand. Our product margins and
level of profitability may fluctuate whether or not we pass increases in purchased component and raw material costs on to our
customers.
Infrastructure experienced a 33% increase in the average cost per ton of scrap steel and a 35% increase in the average cost
of brass ingot in 2021 compared to 2020. Technologies was also unfavorably affected by the 35% increase in the average cost
of brass ingot. See “Item 1A. RISK FACTORS-The prices of our purchased components and raw materials can be volatile.”
34
Currency Risk
Our principal assets, liabilities and operations outside the United States are in Israel, Canada and China. These assets and
liabilities are translated into United States dollars at currency exchange rates in effect at the end of each period, with the effect
of such translation reflected in other comprehensive income (loss). Our stockholders’ equity will fluctuate depending upon the
weakening or strengthening of the United States dollar against these non-United States currencies. Net sales and expenses of
these subsidiaries are translated into United States dollars at the average currency exchange rate during the period.
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Reports of Independent Registered Public Accounting Firm, Consolidated Financial Statements and the accompanying
Notes to Consolidated Financial Statements that are filed as part of this Annual Report are listed under “Item 15. EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES” and are set forth beginning on page F-1.
35
Item 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the
reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission
and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the
Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the
period covered by this Annual Report. Based on this evaluation, those officers have concluded that, at September 30, 2021, our
disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2021, we continued our multi-year implementation of upgrades to our enterprise
resource planning (“ERP”) system.
Aside from the above, there were no changes in internal control over financial reporting during the quarter ended
September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined
in Rule 13a-15(f) of the Exchange Act). Internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We assessed the effectiveness of our internal control over financial reporting at September 30, 2021. In making this
assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control - Integrated Framework (2013 framework). After doing so, management concluded that, at September 30,
2021, our internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting at September 30, 2021 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their report which is included in this Annual Report.
Item 9B.
OTHER INFORMATION
Not applicable.
Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
36
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The name, age at November 18, 2021 and position of each of our executive officers and directors at September 30, 2021
are presented below.
Name
Age
Position
Scott Hall
Steven S. Heinrichs
Marietta Edmunds Zakas
William A. Cofield
Scott P. Floyd
Todd P. Helms
Chad D. Mize
Kenji Takeuchi
Richelle R. Feyerherm
Suzanne G. Smith
Mark J. O’Brien
Shirley C. Franklin
Thomas J. Hansen
Jerry W. Kolb
Christine Ortiz
Bernard G. Rethore
Jeffery S. Sharritts
Lydia W. Thomas
Michael T. Tokarz
Stephen C. Van Arsdell
57 President and Chief Executive Officer
53 Executive Vice President, Chief Legal and Compliance Officer and Secretary
62 Executive Vice President and Chief Financial Officer
62 Senior Vice President, Operations & Supply Chain
52 Senior Vice President, Infrastructure
54 Senior Vice President, Chief Human Resource Officer
45 Senior Vice President, Sales and Marketing
49 Senior Vice President, Technology Solutions
50 Vice President, Operations Controller
54 Vice President and Chief Accounting Officer
78 Non-Executive Chairman of the Board of Directors
76 Director
72 Director
85 Director
51 Director
80 Director
53 Director
77 Director
72 Director
71 Director
Scott Hall has served as our President and Chief Executive Officer since January 2017. He served as President and CEO of
Textron’s Industrial segment from December 2009 until January 2017. Mr. Hall joined Textron in 2001 as president of Tempo,
a multi-facility roll-up of communication test equipment. He was named president of Greenlee, a manufacturer of tools used in
installing wire and cable, in 2003 when Tempo became part of Textron’s Greenlee business unit. Prior to joining Textron, Mr.
Hall had several leadership roles at General Cable, a leading manufacturer of wire and cable. Mr. Hall ran General Cable’s
Canadian businesses before taking over responsibility for General Cable’s global Communications business. Mr. Hall earned
his Bachelor of Commerce degree from Memorial University of Newfoundland and a Master of Business Administration from
the University of Western Ontario Ivey School of Business.
Steven S. Heinrichs has served as our Executive Vice President, Chief Legal and Compliance Officer and Secretary since
August 2018. He served as Senior Vice President, General Counsel and Secretary of Neenah, Inc. (f/k/a Neenah Paper, Inc.),
which spun off from Kimberly-Clark Corporation in December 2004, from June 2004 to July 2018. Mr. Heinrichs joined
Kimberly-Clark as Chief Counsel, Pulp and Paper and General Counsel for Neenah, Inc. Prior to his employment with
Kimberly-Clark, Mr. Heinrichs served as Associate General Counsel and Assistant Secretary for Mariner Health Care, Inc., a
nursing home and long-term acute care hospital company. Before joining Mariner Health Care in 2003, Mr. Heinrichs served
as Associate General Counsel and Assistant Secretary for American Commercial Lines LLC, a leading inland barge and
shipbuilding company from 1998 through 2003. Mr. Heinrichs engaged in the private practice of law with Skadden, Arps,
Slate, Meagher and Flom LLP and Shuttleworth, Smith, McNabb and Williams PLLC from 1994 through 1998. Mr. Heinrichs
earned a Master of Business Administration from the Kellogg School of Management at Northwestern University in 2008, his
law degree from Tulane University in 1994, and his Bachelor of Arts degree from the University of Virginia.
37
Marietta Edmunds Zakas has served as our Executive Vice President and Chief Financial Officer since January 2018. She
served as Senior Vice President, Strategy, Corporate Development and Communications from November 2006 to December
2017. She was also the interim head of Human Resources from January 2016 to December 2017. Previously, Ms. Zakas held
various positions at Russell Corporation, an athletic apparel, footwear and equipment company, culminating in her role as
Corporate Vice President, Chief of Staff, Business Development and Treasurer. She earned a Bachelor of Arts degree with
honors from Randolph-Macon Woman’s College (now known as Randolph College), a Master of Business Administration
degree from the University of Virginia Darden School of Business and a Juris Doctor from the University of Virginia School of
Law. Ms. Zakas is a director of Atlantic Capital Bank and Atlantic Capital Bancshares.
William A. Cofield has served as our Senior Vice President, Operations & Supply Chain since January 2018. Previously,
Mr. Cofield served as Vice President of Operations and Supply Chain for MGA Entertainment from May 2014 to December
2018 and Vice President of Operations for the Rubbermaid business within Newell Brands, Inc. (formerly Newell Rubbermaid,
Inc.) from January 2009 to May 2014. Mr. Cofield earned his Bachelor of Science degree from the United States Military
Academy. Upon graduation, he was commissioned as an officer in the United States Army where he served for 10 years. Mr.
Cofield achieved the rank of Major before resigning his commission.
Scott P. Floyd has served as our Senior Vice President, Water Flow Solutions since October 2021. He served as Senior
Vice President, Infrastructure from June 2020 to September 2021; Vice President and General Manager - Specialty Valves from
February 2019 to May 2020; Plant Manager of our Cleveland, Tennessee facility from October 2007 to February 2019; Plant
Manager of our Brownsville, Texas facility from March 2016 to February 2019; and Operations Manager of our Cleveland,
Tennessee facility from September 1998 to October 2007.
Todd P. Helms has served as our Senior Vice President and Chief Human Resources Officer since February 2020.
Previously, Mr. Helms held the position of Executive Vice President and Chief Human Resource Officer at Synovus Financial
Corporation and as Senior Vice President, Human Resources at Genuine Parts Company. Mr. Helms earned a Bachelor of
Science degree from King College, a Bachelor of Mechanical Engineering from Georgia Institute of Technology and a Master
of Business Administration from Ohio University.
Chad D. Mize has served as our Senior Vice President, Sales and Marketing since October 2019. He served as Vice
President and General Manager of the Brass, Gas and Repair Value Stream from October 2017 to September 2019; Chief
Financial Officer and Vice President of Mueller Co. LLC from March 2010 to September 2017; Corporate Controller from
January 2007 to February 2010; and Manager of Financial Reporting and Analysis from October 2004 to December 2006.
Previously, Mr. Mize served as Senior Audit Supervisor of Archer Daniels Midland from May 1998 to September 2004. Mr.
Mize earned a Bachelor of Science degree from Illinois State University and a Master of Business Administration from Millikin
University.
Kenji Takeuchi has served as our Senior Vice President, Water Management Solutions since October 2021. He served as
Senior Vice President, Technology Solutions from October 2019 to September 2021. Previously, Mr. Takeuchi served as a
Startup Catalyst at the Advanced Technology Development Center at Georgia Tech, Georgia’s technology incubator. Prior to
that, he served as Chief Technology Officer and Vice President of Engineering of Honeywell International Inc. and held various
executive-level positions at Flextronics, culminating in his role as Vice President, Products and Technology. Mr. Takeuchi
earned a Bachelor of Mechanical Engineering from Georgia Institute of Technology and a Master of Engineering from the
University of California at Berkeley and completed the Executive Education Program at Stanford University’s Graduate School
of Business.
Richelle R. Feyerherm has served as our Vice President, Operations Controller since November 2019. Previously, Ms.
Feyerherm served as a Financial Officer of the Water Products division of Lonza Group, Ltd. from October 2011 to February
2019. Ms. Feyerherm earned her Bachelor of Science degree from the State University of New York and is a certified public
accountant.
Suzanne G. Smith has served as our Vice President and Chief Accounting Officer since January 2021. Previously, Ms.
Smith served as Chief Accounting Officer for ModivCare Inc, from February 2019 through November 2020 and for Cumulus
Media from May 2017 through February 2019 and served as Vice President and Corporate Controller for EmployBridge
Holdings from 2015 to 2017. Ms Smith is a certified public accountant, and she earned a Bachelor of Science degree from The
Ohio State University and a Master of Business Administration from Georgia State University.
38
Mark J. O’Brien has been a member of our Board of Directors since April 2006 and has served as our Non-Executive
Chairman since January 2018. He served as Chairman of Walter Investment Management Corp. (formerly Walter Industries’
Homes Business), a mortgage portfolio owner and mortgage originator and servicer, from 2009 through December 2015, and
he served as its Chief Executive Officer from 2009 to October 2015. Mr. O’Brien has been President and Chief Executive
Officer of Brier Patch Capital and Management, Inc., a real estate management and investment firm, since 2004. He served in
various executive capacities at Pulte Homes, Inc., a home building company, for 21 years, retiring as President and Chief
Executive Officer in 2003. Mr. O’Brien earned a Bachelor of Arts degree in history from the University of Miami.
Shirley C. Franklin has been a member of our Board of Directors since November 2010. Ms. Franklin serves as the
President of Clarke Franklin Associates, a management consulting firm. In addition, Ms. Franklin serves as Chair of the board
of directors of the National Center for Civil and Human Rights and is a board member of the Paul Volcker Alliance, both non-
profit organizations dedicated to public service missions. From 2002 to 2010, Ms. Franklin was mayor of Atlanta, Georgia.
Ms. Franklin earned a Bachelor of Arts degree in sociology from Howard University and a Master’s degree in sociology from
the University of Pennsylvania.
Thomas J. Hansen has been a member of our Board of Directors since October 2011. Until 2012, Mr. Hansen served as
Vice Chairman of Illinois Tool Works Inc. (“ITW”), a manufacturer of fasteners and components, consumable systems and a
variety of specialty products and equipment. He joined ITW in 1980 as sales and marketing manager of the Shakeproof
Industrial Products businesses. From 1998 until May 2006, Mr. Hansen served as Executive Vice President of ITW. Mr.
Hansen earned a Bachelor of Science degree in marketing from Northern Illinois University and a Master of Business
Administration degree from Governors State University.
Jerry W. Kolb has been a member of our Board of Directors since April 2006. From 1986 to 1998, Mr. Kolb served as a
Vice Chairman of Deloitte LLP, a registered public accounting firm. Mr. Kolb earned a Bachelor of Science degree in
accountancy with highest honors from the University of Illinois and Master of Business Administration degree in finance from
DePaul University. Mr. Kolb is a certified public accountant.
Christine Ortiz has been a member of our Board of Directors since November 2018. Dr. Ortiz is the Morris Cohen
Professor of Materials Science and Engineering at the Massachusetts Institute of Technology. The author of more than 200
scholarly publications, she has supervised research projects across multiple academic disciplines, received 30 national and
international honors, including the Presidential Early Career Award in Science and Engineering awarded to her by President
George W. Bush, and served as the Dean for Graduate Education at MIT from 2010 to 2016. She is also the founder of an
innovative, nonprofit, post-secondary educational institution, Station1. Dr. Ortiz earned a Bachelor of Science degree from
Rensselaer Polytechnic Institute and a Master of Science degree and a Doctor of Philosophy degree from Cornell University,
each in the field of materials science and engineering.
Bernard G. Rethore has been a member of our Board of Directors since April 2006. Mr. Rethore has served as Chairman
Emeritus of Flowserve Corporation, a manufacturer of pumps, valves, seals and components, since 2000. From January 2000
to April 2000, he served as Flowserve’s Chairman and previously served as its Chairman, President and Chief Executive
Officer. In 2008, Mr. Rethore was honored by the Outstanding Directors Exchange as an Outstanding Director of the Year, and
in 2012, he was designated a Board Leadership Fellow by the National Association of Corporate Directors. Mr. Rethore earned
a Bachelor of Arts degree in Economics (Honors) from Yale University and a Master of Business Administration degree from
the Wharton School of the University of Pennsylvania, where he was a Joseph P. Wharton Scholar and Fellow.
Jeffery S. Sharritts has been a member of our Board of Directors since March 2021. Mr. Sharritts is the Senior Vice
President of the Americas at Cisco. Mr. Sharritts has previously served as its Senior Vice President, U.S. Commercial Sales
from 2014 to 2018. Mr Sharritts holds Advisory Board Member positions with the Georgia Chamber of Commerce and Metro
Atlanta Chamber of Commerce. Mr. Sharritts earned a Bachelor of Science degree in Business Administration from The Ohio
State University.
Lydia W. Thomas has been a member of our Board of Directors since January 2008. Dr. Thomas served as President and
Chief Executive Officer of Noblis, Inc., a public interest scientific research, technology and strategy company, from 1996 to
2007. She was previously with The MITRE Corporation, Center for Environment, Resources and Space, serving as Senior Vice
President and General Manager from 1992 to 1996, Vice President from 1989 to 1992 and Technical Director from 1982 to
1989. In 2013, she was honored by the Outstanding Directors Exchange as an Outstanding Director of the Year. Dr. Thomas is
also a member of the Council on Foreign Relations. She earned a Bachelor of Science degree in zoology from Howard
University, a Master of Science degree in microbiology from American University and a Doctor of Philosophy degree in
cytology from Howard University.
39
Michael T. Tokarz has been a member of our Board of Directors since April 2006. From 1985 until 2002, Mr. Tokarz
served as a member of the limited liability company that serves as the general partner of Kohlberg Kravis Roberts & Co. L.P., a
private equity company. He served as non-executive Chairman of the Board of Walter Energy, Inc. until July 2016, and until
May 2017, he served as a director of CNO Financial Group, Inc. (formerly Conseco, Inc.), an insurance provider, and as a
director of Walter Investment Management Corp. Mr. Tokarz has served as a director of the Tokarz Group, LLC, an
investment company, since 2002 and of MVC Capital, Inc., a registered investment company, since 2003. In 2007, he was
honored by the Outstanding Directors Exchange as an Outstanding Director of the Year. Mr. Tokarz earned a Bachelor of Arts
degree in economics with high distinction and a Master of Business Administration degree in finance from the University of
Illinois.
Stephen C. Van Arsdell has been a member of our Board of Directors since July 2019. Mr. Van Arsdell is a former senior
partner of Deloitte LLP, where he served as Chairman and Chief Executive Officer of Deloitte & Touche LLP from 2010-2012
and as Deputy Chief Executive Officer from 2009-2010. He also served as a member of Deloitte’s board of directors from
2003-2009, during which time he held the position of Vice Chairman. Mr. Van Arsdell has served as a member of the board of
directors of First Midwest Bancorp, Inc. since 2017 and has been a member of the audit committee of Brown Brothers
Harriman since 2015. Mr. Van Arsdell earned both a Bachelor of Science degree in Accounting and a Masters of Accounting
Science degree from the University of Illinois. He is a certified public accountant.
Additional Information
Additional information required by this item will be contained in our definitive proxy statement issued in connection with
the 2022 Annual Meeting of Stockholders filed with the SEC within 120 days after September 30, 2021 and is incorporated
herein by reference.
Our website address is www.muellerwaterproducts.com. You may read and print our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and any amendments to those reports from the
investor relations section of our website free of charge. These reports are available on our website soon after we file them with
or furnish them to the SEC. These reports should also be available through the SEC’s website at www.sec.gov.
We have adopted a written code of conduct that applies to all directors, officers and employees, including a separate code
that applies only to our principal executive officer and senior financial officers in accordance with Section 406 of the Sarbanes-
Oxley Act of 2002 and the rules of the SEC promulgated thereunder. Our Code of Business Conduct and Ethics is available in
the corporate governance section of our website. In the event that we make changes in, or provide waivers from, the provisions
of this Code of Business Conduct and Ethics for which SEC disclosure is required, we will make such disclose in the corporate
governance section of our website.
We have adopted corporate governance guidelines. The guidelines and the charters of our board committees are available
in the corporate governance section of our website. Copies of the Code of Business Conduct and Ethics, corporate governance
guidelines and board committee charters are also available in print upon written request to the Corporate Secretary, Mueller
Water Products, Inc., 1200 Abernathy Road N.E., Suite 1200, Atlanta, GA 30328.
Item 11.
EXECUTIVE COMPENSATION
The information required by this item will be contained in our definitive proxy statement issued in connection with the
2022 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Except for the information set forth below and the information set forth in “Part II, Item 5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES,” the information required by this item will be contained in our definitive proxy statement issued in connection
with the 2022 Annual Meeting of Stockholders and is incorporated herein by reference.
40
Securities Authorized for Issuance under Equity Compensation Plans
We have two compensation plans under which our equity securities are authorized for issuance. The Mueller Water
Products, Inc. 2006 Employee Stock Purchase Plan (“ESPP”) was approved by our sole stockholder in May 2006 and amended
by our stockholders in February 2016. The Mueller Water Products, Inc. 2006 Stock Incentive Plan (“2006 Plan”) was
approved by our sole stockholder in May 2006 and amended by our stockholders in January 2008, January 2009 and January
2012.
The following table sets forth certain information relating to these equity compensation plans at September 30, 2021.
Equity compensation plans approved by
stockholders:
2006 Plan
ESPP
Total
Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
Weighted average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available
for future issuance
$
2,195,769 (1)
33,381
2,229,150
10.67 (2)
—
5,806,070 (3)
2,254,023 (4)
8,060,093
(1) Consists of the maximum number of shares that could be earned upon exercise or vesting of outstanding stock-based
awards granted under the 2006 Plan. This includes 1,199,873 shares associated with share-settled performance units
that may or may not be earned, depending on Company performance or stock market performance, as described in
Note 12. of the Notes to the Consolidated Financial Statements.
(2) Weighted-average exercise price of 599,799 options.
(3) The number of securities initially available for issuance under the 2006 Plan was 20,500,000 shares.
(4) The number of securities initially available for issuance under the ESPP Plan was 5,800,000 shares.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this item will be contained in our definitive proxy statement issued in connection with the
2022 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item will be contained in our definitive proxy statement issued in connection with the
2022 Annual Meeting of Stockholders and is incorporated herein by reference.
41
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
PART IV
Index to financial statements
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at September 30, 2021 and 2020
Consolidated Statements of Operations for the years ended September 30, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income for the years ended September 30, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended September 30, 2021, 2020 and 2019
Notes to Consolidated Financial Statements for the three years ended September 30, 2021
Page
number
F-1
F-4
F-5
F-6
F-7
F-8
F-9
(b) Financial Statement Schedules
The information required by Schedule II is included in the Notes to Consolidated Financial Statements. All other
schedules required by Item 15(b) are not applicable or not required.
(c) Exhibits
Exhibit
no.
Document
2.1
2.2
2.3
2.5
3.1
3.2
4.2
10.2
Agreement and Plan of Merger dated as of June 17, 2005 among Mueller Water Products, Inc., Walter
Industries, Inc., JW MergerCo, Inc. and DLJ Merchant Banking II, Inc., as stockholders’ representative.
Incorporated by reference to Exhibit 2.1 to Mueller Water Products, Inc. Form 8-K (File no. 333-116590) filed
on June 21, 2005.
Letter Agreement dated as of February 23, 2006 between Walter Industries, Inc. and Mueller Water
Products, Inc. Incorporated by reference to Exhibit 10.1 to Mueller Water Products, Inc. Form 8-K (File no.
333-131521) filed February 27, 2006.
Agreement and Plan of Merger, dated as of January 31, 2006, by and among Mueller Holding Company, Inc.,
Mueller Water Products, LLC and Mueller Water Products Co-Issuer, Inc. Incorporated by reference
to Exhibit 2.1 Mueller Water Products, Inc. Form 8-K (File no. 333-116590) filed on February 3, 2006.
Purchase Agreement dated as of January 6, 2017, by and among OEP Pioneer LLC, OEP Pioneer (Canada)
Holdings Corp., Mueller Co. LLC, Anvil International, LLC and Mueller Water Products, Inc. Incorporated by
reference to Exhibit 2.1 to Mueller Water Products, Inc. Form 8-K (File No. 001-32892) filed January
10, 2017.
Amended and Restated Bylaws of Mueller Water Products, Inc. Incorporated by reference to Exhibit 3.1
to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on December 4, 2017.
Second Restated Certificate of Incorporation of Mueller Water Products, Inc. Incorporated by reference
to Exhibit 3.2 to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on January 25, 2012.
Description of Securities registered under Section 12 of the Securities Exchange Act of 1934.
Income Tax Allocation Agreement by and among Walter Industries, Inc., the Walter Affiliates (as defined
therein), Mueller Water Products, Inc. and the Mueller Affiliates (as defined therein). Incorporated by
reference to Exhibit 10.2 to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on May
30, 2006.
10.3.1* Mueller Water Products, Inc. Second Amended and Restated 2006 Stock Incentive Plan. Incorporated by
reference to Exhibit D to Mueller Water Products, Inc. Form DEF 14A (File no. 001-32892) filed on
January 15, 2016.
10.4.2* Mueller Water Products, Inc. Form of Notice of Stock Option Grant. Incorporated by reference to Exhibit
10.4.2 to Mueller Water Products, Inc. Form 10-K (File no. 001-32892) filed on November 26, 2014.
10.6.1* Mueller Water Products, Inc. Amended and Restated 2006 Employee Stock Purchase Plan. Incorporated by
10.7*
10.8*
reference to Exhibit C to Mueller Water Products, Inc. Form DEF 14A (File no. 001-32892) filed on
January 15, 2016.
Mueller Water Products, Inc. Directors’ Deferred Fee Plan. Incorporated by reference to Exhibit 10.7
to Mueller Water Products, Inc. 8-K (File no. 001-32892) filed on May 30, 2006.
Form of Mueller Water Products, Inc. Director Indemnification Agreement. Incorporated by reference
to Exhibit 99.2 to Mueller Water Products, Inc. 8-K (File no. 001-32892) filed on October 31, 2008.
42
Exhibit
no.
10.9*
10.10*
Document
Executive Incentive Plan of Mueller Water Products, Inc. Incorporated by reference to Exhibit 10.6 to Mueller
Water Products, Inc. 8-K (File no. 001-32892) filed on May 30, 2006.
Mueller Water Products, Inc. Executive Deferred Compensation Plan. Incorporated by reference to Exhibit
99.3 to Mueller Water Products, Inc. 8-K (File no. 001-32892) filed on October 31, 2008.
10.14
10.11.2* Amended and Restated Mueller Water Products, Inc. Supplemental Defined Contribution Plan, effective as of
January 1, 2009. Incorporated by reference to Exhibit 10.13.2 to Mueller Water Products, Inc. Form 8-K (File
no. 001-32892) filed on February 9, 2009.
Joint Litigation Agreement dated December 14, 2006 between Walter Industries, Inc. and Mueller Water
Products, Inc. Incorporated by reference to Exhibit 10.3 to Mueller Water Products, Inc. Form 8-K (File no.
001-32892) filed on December 19, 2006.
Form of Amendment to Executive Employment Agreement. Incorporated by reference to Exhibit 99.1
to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on February 6, 2009.
10.16*
10.17.1* Mueller Water Products, Inc. Amended and Restated 2010 Management Incentive Plan. Incorporated by
10.19
10.19.1
10.19.2
10.19.3
10.21
10.29*
10.29.2*
reference to Exhibit B to Mueller Water Products, Inc. Form DEF 14A (File no. 001-32892) filed on
January 15, 2016.
Credit Agreement, dated August 26, 2010, among Mueller Water Products, Inc. and the borrowing subsidiaries
named on the signature pages thereto, each as a Borrower, certain financial institutions, as Lenders, JPMorgan
Chase Bank, N.A., as Syndication Agent, Wells Fargo Bank, National Association and SunTrust Bank, as Co-
Documentation Agents, Bank of America, N.A. as Administrative Agent and Banc of America Securities LLC
and J.P. Morgan Securities Inc., as Joint Lead Arrangers and Joint Bookrunners. Incorporated by reference to
Exhibit 10.23 to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on August 27, 2010.
First Amendment to Credit Agreement, dated December 18, 2012. Incorporated by reference to Exhibit
10.20.1 to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed on December 19, 2012.
Second Amendment to Credit Agreement, dated November 25, 2014. Incorporated by reference to Exhibit
10.19.2 to Mueller Water Products, Inc. Form 10-K (File no. 001-32892) filed on November 26, 2014.
Third Amendment to Credit Agreement, dated July 12, 2016. Incorporated by reference to Exhibit 10.19.3
to Mueller Water Products, Inc. Form 10-Q (File no. 001-32892) filed on August 8, 2016.
Purchase Agreement, dated March 7, 2012, among Mueller Water Products, Inc., Mueller Group, LLC and
USP Holdings Inc. Incorporated by reference to Exhibit 2.3 to Mueller Water Products, Inc. Form 8-K
(File no. 001-32892) filed on March 8, 2012.
Employment Agreement, dated September 15, 2008, as amended, between Mueller Water Products Inc. and
Marietta Edmunds Zakas. Incorporated by reference to Exhibit 10.28 to Mueller Water Products, Inc. Form
10-K (File no. 001-32892) filed November 22, 2016.
Fourth Amendment, dated December 27, 2017, to Employment Agreement, dated September 15, 2008, as
amended, between Mueller Water Products Inc. and Marietta Edmunds Zakas. Incorporated by reference
to Exhibit 10.1 to Mueller Water Products, Inc. Form 8-K (File no. 001-32892) filed December 28, 2017.
10.29.4* Executive Change-in-Control Severance Agreement, dated September 30, 2019 by and between Mueller Water
10.30*
Products and Marietta Edmunds Zakas
Employment Agreement, dated January 4, 2017, by and between Mueller Water Products Inc. and John
Scott Hall. Incorporated by reference to Exhibit 10.2 to Mueller Water Products, Inc. Form 8-K (File No.
001-32892) filed January 10, 2017.
10.30.3* Executive Change-in-Control Severance Agreement, dated September 30, 2019 by and between Mueller Water
10.31*
Products and J. Scott Hall
Employment Agreement, dated July 18, 2018, by and between Mueller Water Products Inc. and Steven S.
Heinrichs. Incorporated by reference to Exhibit 10.31 to Mueller Water Products, Inc. Form 10-K (File No.
001-32892) filed November 21, 2018.
10.31.2* Executive Change-in-Control Severance Agreement, dated September 30, 2019 by and between Mueller Water
Products and Steven S. Heinrichs
10.32 ** Mueller Water Products, Inc. Form of Performance Restricted Stock Unit Award Agreement
10.33 ** Mueller Water Products, Inc. Form of Restricted Stock Unit Award Agreement
10.34 ** Mueller Water Products, Inc. Form of Stock Option Grant Award Agreement
14.1*
21.1**
23.1**
31.1**
31.2**
Code of Business Conduct and Ethics for Mueller Water Products, Inc. Incorporated by reference to
Exhibit 14.1 to Mueller Water Products, Inc. Form 10-Q (File no. 00132892) filed on February 7, 2014.
Subsidiaries of Mueller Water Products, Inc.
Consent of Independent Registered Accounting Firm.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
43
Document
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
The following financial information from the Annual Report on Form 10-K for the year ended September 30,
2021, formatted in XBRL (Extensible Business Reporting Language), (i) the Consolidated Balance Sheets, (ii)
the Consolidated Statements of Operations and Other Comprehensive Income, (iii) the Consolidated
Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to
Consolidated Financial Statements.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Exhibit
no.
32.1**
32.2**
101**
104**
*
**
Management compensatory plan, contract or arrangement
Filed with this Annual Report
44
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 18, 2021
SIGNATURES
MUELLER WATER PRODUCTS, INC.
By:
/s/ Scott Hall
Name: Scott Hall
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, as amended, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Scott Hall
Scott Hall
Title
Date
President and Chief Executive Officer
November 18, 2021
/s/ Marietta Edmunds Zakas
Marietta Edmunds Zakas
Executive Vice President and Chief Financial
Officer (principal financial officer)
November 18, 2021
/s/ Suzanne G. Smith
Suzanne G. Smith
/s/ Mark J. O’Brien
Mark J. O’Brien
/s/ Shirley C. Franklin
Shirley C. Franklin
/s/ Thomas J. Hansen
Thomas J. Hansen
/s/ Jerry W. Kolb
Jerry W. Kolb
/s/ Christine Ortiz
Christine Ortiz
/s/ Bernard G. Rethore
Bernard G. Rethore
/s/ Jeffery S. Sharritts
Jeffery S. Sharritts
/s/ Lydia W. Thomas
Lydia W. Thomas
/s/ Michael T. Tokarz
Michael T. Tokarz
/s/ Stephen C. Van Arsdell
Stephen C. Van Arsdell
Vice President and Chief Accounting Officer
(principal accounting officer)
November 18, 2021
Non-Executive Chairman of the Board of
Directors
November 18, 2021
November 18, 2021
November 18, 2021
November 18, 2021
November 18, 2021
November 18, 2021
November 18, 2021
November 18, 2021
November 18, 2021
November 18, 2021
Director
Director
Director
Director
Director
Director
Director
Director
Director
45
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Mueller Water Products, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mueller Water Products, Inc. and subsidiaries (the
Company) as of September 30, 2021 and 2020, the related consolidated statements of operations, comprehensive income, equity
and cash flows for each of the three years in the period ended September 30, 2021, and the related notes (collectively referred to
as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at September 30, 2021 and 2020, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 2021, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of September 30, 2021, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated November 18, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
F- 1
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the account or disclosure to which it relates.
Valuation of Goodwill - Krausz Industries Reporting Unit
Description of the
Matter
As described in Note 6 to the consolidated financial statements, goodwill is tested at the reporting unit
level on an annual basis and between annual tests if an event occurs or circumstances change that would
more likely than not reduce the fair value of a reporting unit below its carrying value. As of September 1,
2021, the Company performed a quantitative assessment of the $91.2 million in goodwill of the Krausz
Industries (“Krausz”) reporting unit. The Company determined the fair value of the Krausz reporting unit
using valuation techniques including the discounted cash flow method, a form of the income approach,
and the guideline public company method, a form of the market approach.
Auditing management’s impairment test over the Krausz reporting unit goodwill using the discounted
cash flow method involved especially subjective judgments due to the significant estimation uncertainty
in determining the fair value of the reporting unit. In particular, the fair value estimate was sensitive to
significant assumptions such as forecasted revenues, EBITDA margins and the discount rate. These
significant assumptions are forward-looking and could be affected by future industry, market and
economic conditions.
How We
Addressed the
Matter in Our
Audit
We tested the Company’s controls over review of the fair value of the Krausz reporting unit. This
included testing controls over management’s review of the valuation model and the significant
assumptions described above.
To test the estimated fair value of the Krausz reporting unit, we performed audit procedures that included,
among others, assessing the methodologies used to estimate fair value, testing the significant assumptions
used to develop the fair value estimate, and testing the underlying data used by the Company in its
analysis for completeness and accuracy. For example, we evaluated the reasonableness of management’s
forecasted revenues and EBITDA margins used in the fair value estimates by comparing those
assumptions to the historical results of Krausz and current industry, market and economic forecasts. We
also involved our valuation specialists to evaluate the valuation methodologies and the reasonableness of
the discount rate. As part of this evaluation, we compared the discount rate to market data. In addition, we
performed a sensitivity analysis on the significant assumptions to evaluate the potential change in the fair
value of the reporting unit that would result from the changes in assumptions.
We have served as the Company’s auditor since 2007.
Atlanta, Georgia
November 18, 2021
/s/ Ernst & Young LLP
F- 2
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Mueller Water Products, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Mueller Water Products, Inc. and subsidiaries’ internal control over financial reporting as of September 30,
2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Mueller Water Products,
Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of
September 30, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of September 30, 2021 and 2020, the related consolidated
statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended
September 30, 2021, and the related notes and our report dated November 18, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Atlanta, Georgia
November 18, 2021
/s/ Ernst & Young LLP
F- 3
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Assets:
Cash and cash equivalents
Receivables, net of allowance for credit losses of $3.5 million and $2.5 million
Inventories, net
Other current assets
Total current assets
Property, plant and equipment, net
Intangible assets, net
Goodwill
Other noncurrent assets
Total assets
Liabilities and stockholders’ equity:
Current portion of long-term debt
Accounts payable
Other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes
Other noncurrent liabilities
Total liabilities
Commitments and contingencies (Note 17.)
September 30,
2021
2020
(in millions, except share amounts)
$
$
$
227.5 $
212.2
184.7
29.3
653.7
283.4
392.5
115.1
73.3
1,518.0 $
1.0 $
92.0
127.1
220.1
445.9
95.1
62.0
823.1
208.9
180.8
162.5
29.0
581.2
253.8
408.9
99.8
51.3
1,395.0
1.1
67.3
86.6
155.0
446.5
96.5
56.3
754.3
Common stock: 600,000,000 shares authorized; 157,955,433 and 158,064,750 shares
outstanding at September 30, 2021 and 2020, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
1.6
1,342.2
(643.9)
(5.0)
694.9
1,518.0 $
1.6
1,378.0
(714.2)
(24.7)
640.7
1,395.0
The accompanying notes are an integral part of the consolidated financial statements.
F- 4
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended September 30,
2021
2019
2020
(in millions, except per share amounts)
Net sales
Cost of sales
Gross profit
Operating expenses:
Selling, general and administrative
Gain on sale of idle property
Strategic reorganization and other charges
Total operating expenses
Operating income
Pension (benefit) cost other than service
Interest expense, net
Loss on early extinguishment of debt
Walter Energy accrual
Income before income taxes
Income tax expense
Net income
Net income per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
964.1 $
635.9
328.2
198.4
—
13.0
211.4
116.8
(3.0)
25.5
—
0.2
94.1
22.1
72.0 $
968.0
647.1
320.9
182.7
(2.4)
16.3
196.6
124.3
0.4
19.8
—
22.0
82.1
18.3
63.8
$
1,111.0 $
752.5
358.5
218.8
—
8.0
226.8
131.7
(3.3)
23.4
16.7
—
94.9
24.5
70.4 $
$
$
$
0.44 $
0.44 $
0.46 $
0.45 $
0.40
0.40
158.4
159.2
157.8
158.6
157.8
159.0
Dividends declared per share
$
0.22 $
0.21 $
0.2025
The accompanying notes are an integral part of the consolidated financial statements.
F- 5
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive income (loss):
Pension
Income tax effects
Foreign currency translation
Total other comprehensive income (loss)
Total comprehensive income
2021
Year ended September 30,
2020
(in millions)
2019
$
70.4 $
72.0 $
63.8
14.1
(3.6)
9.2
19.7
90.1 $
4.4
(1.1)
8.0
11.3
83.3 $
(13.3)
3.8
6.3
(3.2)
60.6
$
The accompanying notes are an integral part of the consolidated financial statements.
F- 6
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE YEARS ENDED SEPTEMBER 30, 2021
Common
stock
Additional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
(loss) income
Non-
controlling
interest
Total
(in millions)
Balance at September 30,
2018
Net income
Dividends declared
Stock-based compensation
Shares retained for employee
taxes
Common stock issued
Stock repurchased under
buyback program
Other comprehensive loss,
net of tax
Balance at September 30,
2019
Net income
Dividends declared
Stock-based compensation
Shares retained for employee
taxes
Common stock issued
Stock repurchased under
buyback program
Acquisition of joint venture
partner’s interest
Other comprehensive
income, net of tax
Balance at September 30,
2020
Net income
Dividends declared
Cumulative effect of
accounting change (Note 2.)
Stock-based compensation
Shares retained for employee
taxes
Common stock issued
Stock repurchased under
buyback program
Other comprehensive
income, net of tax
Balance at September 30,
2021
$
1.6 $
—
—
—
1,444.5 $
—
(32.0)
4.3
(850.0) $
63.8
—
—
(32.8) $
—
—
—
1.5 $
0.7
—
—
—
—
—
—
1.6
—
—
—
—
—
—
—
—
1.6
—
—
—
—
—
—
—
—
(1.3)
5.2
(10.0)
—
1,410.7
—
(33.1)
5.3
(0.9)
3.5
(5.0)
(2.5)
—
1,378.0
—
(34.8)
—
8.1
(1.0)
1.9
(10.0)
—
—
—
—
—
(786.2)
72.0
—
—
—
—
—
—
—
(714.2)
70.4
—
(0.1)
—
—
—
—
—
—
—
—
(3.2)
(36.0)
—
—
—
—
—
—
—
11.3
(24.7)
—
—
—
—
—
—
—
19.7
—
—
—
—
2.2
—
—
—
—
—
—
(2.2)
—
—
—
—
—
—
—
—
—
—
564.8
64.5
(32.0)
4.3
(1.3)
5.2
(10.0)
(3.2)
592.3
72.0
(33.1)
5.3
(0.9)
3.5
(5.0)
(4.7)
11.3
640.7
70.4
(34.8)
(0.1)
8.1
(1.0)
1.9
(10.0)
19.7
$
1.6 $
1,342.2 $
(643.9) $
(5.0) $
— $
694.9
The accompanying notes are an integral part of the consolidated financial statements.
F- 7
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
2021
Year ended September 30,
2020
(in millions)
2019
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
$
70.4 $
72.0 $
63.8
activities:
Depreciation
Amortization
Loss on early extinguishment of debt
Stock-based compensation
Pension (benefit) cost
Deferred income taxes
Inventory reserves provision
Gain on disposal of assets
Other, net
Changes in assets and liabilities, net of acquisitions:
Receivables, net
Inventories, net
Other assets
Accounts payable
Walter Energy accrual
Other current liabilities
Pension obligations, related to contributions
Other noncurrent liabilities
Net cash provided by operating activities
Investing activities:
Capital expenditures
Acquisitions, net of cash acquired
Proceeds from sales of assets
Net cash used in investing activities
Financing activities:
Repayment of 5.5% Senior Notes
Issuance of 4.0% Senior Notes
Dividends paid
Deferred financing costs paid
Proceeds from financing transaction
Acquisition of joint venture partner’s interest
Employee taxes related to stock-based compensation
Common stock issued
Stock repurchased under buyback program
Repayment of Krausz debt
Other
Net cash used in financing activities
Effect of currency exchange rate changes on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
31.4
28.2
16.7
8.1
(1.9)
(5.3)
3.1
—
1.3
(29.9)
(23.5)
(4.9)
23.0
—
37.5
—
2.5
156.7
(62.7)
(19.7)
0.7
(81.7)
(462.4)
450.0
(34.8)
(6.0)
3.9
—
(1.0)
1.9
(10.0)
—
(0.4)
(58.8)
2.4
18.6
208.9
29.6
28.2
—
5.3
2.8
7.2
4.3
—
3.7
(7.5)
24.9
0.9
(17.6)
(22.0)
6.6
—
1.9
140.3
(67.7)
—
0.2
(67.5)
—
—
(33.1)
(1.1)
—
(5.2)
(0.9)
3.5
(5.0)
—
0.4
(41.4)
0.8
32.2
176.7
26.0
27.0
—
4.3
2.0
1.3
2.4
(2.5)
2.4
(1.4)
(19.8)
(7.4)
(11.0)
22.0
(6.1)
(0.7)
(9.8)
92.5
(86.6)
(127.5)
2.3
(211.8)
—
—
(32.0)
—
—
—
(1.3)
5.2
(10.0)
(13.2)
0.4
(50.9)
(0.2)
(170.4)
347.1
The accompanying notes are an integral part of the consolidated financial statements.
F- 8
Cash and cash equivalents at end of year
Supplemental cash flow information:
Cash paid for interest
Cash paid for income taxes
$
$
$
227.5 $
208.9 $
176.7
25.3 $
16.8 $
24.3 $
15.3 $
22.2
29.1
The accompanying notes are an integral part of the consolidated financial statements.
F- 9
Note 1.
Organization
MUELLER WATER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mueller Water Products, Inc., a Delaware corporation, together with its consolidated subsidiaries, operates in two business
segments: Infrastructure and Technologies. Infrastructure manufactures valves for water and gas systems, including butterfly,
iron gate, tapping, check, knife, plug, automatic control and ball valves, as well as dry-barrel and wet-barrel fire hydrants and
pipe repair products. Technologies offers metering systems, leak detection, pipe condition assessment and other products and
services for the water infrastructure industry. The “Company,” “we,” “us” or “our” refer to Mueller Water Products, Inc. and
its subsidiaries. With regard to the Company’s segments, “we,” “us” or “our” may also refer to the segment being discussed.
We sold our Anvil segment on January 6, 2017 and our U.S. Pipe segment on April 1, 2012.
We have approximately 3,400 employees globally, of which 66% of our hourly workers are covered by collective
bargaining agreements.
In July 2014, Infrastructure acquired a 49% ownership in an industrial valve joint-venture for $1.7 million. As a result of
substantive control features in the joint-venture agreement, all of the joint venture’s assets, liabilities and results of operations
were included in our consolidated financial statements. The noncontrolling interest portion was included in selling, general and
administrative expenses. Noncontrolling interest was recorded at its carrying value, which approximated fair value.
Infrastructure acquired the remaining 51% noncontrolling interest on October 3, 2019.
On December 3, 2018, we completed our acquisition of Krausz Industries Development Ltd. and subsidiaries (“Krausz”).
During our 2020 and 2019 fiscal years, we included the financial statements of Krausz on a one-month lag. Refer to Note 5. for
additional disclosures. During the three months ended March 31, 2021, we aligned the consolidation of the financial statements
of Krausz in the Company’s consolidated financial statements, eliminating the previous inclusion of Krausz financial statements
with a one-month reporting lag. In accordance with applicable accounting literature, the elimination of the one-month reporting
lag is considered to be a change in accounting principle. We believe this change in accounting principle is preferable as the
financial statements of all of our subsidiaries are now reported on the same basis, providing the most current information
available. The effect of the elimination of the reporting lag during the year ended September 30, 2021 resulted in an increase of
$6.0 million to net sales and an increase of $1.4 million to operating income. We concluded that the effect of this change is not
material to the balance sheets, statements of operations, statements of cash flows, net income and earnings per share and
therefore have not retrospectively applied this change.
On June 14, 2021, we acquired all the outstanding capital stock of i2O Water Ltd (“i2O”) a provider of pressure
management solutions to more than 100 water companies in 45 countries. The consolidated balance sheet at September 30,
2021 includes the preliminary estimated fair values of the net assets of i2O. The Company is still reviewing the impact of taxes
and certain other items. The results of i2O’s operations and cash flows for the period subsequent to the acquisition are included
in the consolidated statement of operations and consolidated statement of cash flows, respectively. Refer to Note 5. for
additional disclosures related to the acquisition.
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the
United States of America (“GAAP”), which require us to make certain estimates and assumptions that affect the reported
amounts of assets, liabilities, sales and expenses and the disclosure of contingent assets and liabilities for the reporting periods.
Actual results could differ from those estimates. All significant intercompany balances and transactions have been eliminated.
Certain reclassifications have been made to previously reported amounts to conform to the current presentation.
Unless the context indicates otherwise, whenever we refer to a particular year, we mean our fiscal year ended or ending
September 30 in that particular calendar year.
New Markets Tax Credit Program On December 22, 2020, we entered into a financing transaction with Wells Fargo
Community Investment Holdings, LLC (“Wells Fargo”) related to our brass foundry construction project in Decatur, Illinois
under a qualified New Markets Tax Credit program (“NMTC”). The NMTC is a federal program intended to encourage capital
investment in qualified lower income communities. Under the NMTC, investors claim federal income tax credits over a period
of seven years in connection with qualified investments in the equity of community development entities (“CDE”s), which are
privately managed investment institutions that are certified to make qualified low-income community investments, such as in
our foundry project.
Under the NMTC, Wells Fargo contributed capital of $4.8 million to an investment fund and we loaned $12.2 million to the
fund. Wells Fargo is entitled to the associated tax credits, which are subject to 100% recapture if we do not comply with
various regulations and contractual provisions surrounding the foundry project. We have indemnified Wells Fargo for any loss
F- 10
or recapture of tax credits related to the transaction until the seven-year period elapses. We do not anticipate any credit
recaptures will be required in connection with this arrangement.
The investment fund contributed $16.5 million cash for a 99.99% stake in a joint venture (“Sub-CDE”) with a CDE. The
Sub-CDE then loaned $16.2 million to us, with the use of the loan proceeds restricted to foundry project expenditures.
This transaction also includes a put/call provision under which we may be obligated or entitled to repurchase Wells Fargo’s
interest in the investment fund. We believe that Wells Fargo will exercise its put option in December 2027 for nominal
consideration, resulting in our becoming the sole owner of the investment fund, cancelling the related loans, and recognizing an
estimated gain of $3.9 million.
We determined that the investment fund and the Sub-CDE are variable interest entities (“VIEs”) and that we are the primary
beneficiary of the VIEs. The ongoing activities of the VIEs, namely collecting and remitting interest and fees and administering
NMTC compliance, were contemplated in the initial design of the transaction and are not expected to significantly affect
economic performance throughout the life of the VIEs. Additionally, we are obligated to deliver tax benefits and provide
various other guarantees to Wells Fargo and to absorb the losses of the VIEs. Wells Fargo does not have a material interest in
the underling economics of the project. Consequently, we have included the financial statements of the VIEs in our
consolidated financial statements.
Intercompany transactions between us and the VIEs have been eliminated in consolidation. Wells Fargo’s contribution to
the investment fund is consolidated in our financial statements as an Other noncurrent liability as a result of its redemption
features.
Direct costs associated with Wells Fargo’s capital contribution have been netted against the recorded proceeds, resulting in a
net cash contribution of $3.9 million. Other direct costs associated with the transaction were capitalized and will be recognized
as interest expense over the seven-year tax credit period. Incremental costs to maintain the structure during the compliance
period are expensed as incurred.
Note 2.
Summary of Significant Accounting Policies
Cash and Cash Equivalents. All highly liquid investments with remaining maturities of 90 days or less when purchased
are classified as cash equivalents. Where there is no right of offset against cash balances, outstanding checks are included in
accounts payable.
Receivables, net. Receivables are amounts due from customers. To reduce credit risk, credit investigations are generally
performed prior to accepting orders from new customers and, when necessary, letters of credit, bonds or other instruments are
required to ensure payment.
We present trade receivables net of customer discounts and an allowance for credit losses. Our consolidated statements of
operations reflect the measurement of credit losses for newly recognized trade receivables, as well as the expected increases or
decreases of expected credit losses that have taken place during the period. When we determine a specific trade receivable will
not be collected, we charge off the uncollectible amount against the allowance. Our periodic evaluations of expected credit
losses are based upon our judgments regarding prior collection experience, specific customer creditworthiness, other current
conditions, and forecasts of current economic trends within the industries served that may affect the collectability of the
reported amounts. Significantly weaker than anticipated industry or economic conditions could impact our customers’ ability to
pay such that actual credit losses may be greater than the amounts provided for in this allowance.
The following table summarizes information concerning our allowance for credit losses.
Balance at beginning of year
Provision charged to expense
Other
Balance at end of year
2021
2020
(in millions)
2019
$
$
2.5 $
1.1
(0.1)
3.5 $
1.5 $
1.1
(0.1)
2.5 $
1.4
0.3
(0.2)
1.5
Inventories, net. Inventories are recorded at the lower of first-in, first-out method cost or estimated net realizable value.
We evaluate our inventory in terms of excess and obsolete exposures. This evaluation includes such factors as anticipated
usage, inventory turnover, inventory levels and ultimate product sales value. Inventory cost includes an overhead component
F- 11
that is affected by levels of production and actual costs incurred. We periodically evaluate the effects of production levels and
costs capitalized as part of inventory.
The following table summarizes information concerning our inventory valuation reserves.
Balance at beginning of year
Provision charged to expense
Inventory disposed
Other
Balance at end of year
2021
2020
(in millions)
2019
$
$
11.7 $
5.9
(3.6)
0.8
14.8 $
7.5 $
4.7
(0.7)
0.2
11.7 $
5.1
3.4
(1.2)
0.2
7.5
Maintenance and repair supplies and tooling. Maintenance and repair supplies and tooling is included in Other current
assets and Other noncurrent assets. Costs for perishable tools and maintenance items are expensed when put into service. Costs
for more durable items are amortized over their estimated useful lives, ranging from 3 to 10 years.
Property, Plant and Equipment, net. Property, plant and equipment is recorded at cost, less accumulated depreciation.
Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are
10 to 20 years for land improvements, 10 to 40 years for buildings and 3 to 15 years for machinery and equipment. Leasehold
improvements and capitalized leases are depreciated using the straight-line method over the lesser of the useful life of the asset
or the remaining lease term. Gains and losses upon disposition are reflected in operating results in the period of disposition.
Direct internal and external costs to implement computer systems and internal-use software are capitalized. Capitalized
costs are depreciated over the estimated useful life of the system or software, generally six years, beginning when software is
ready for its intended use.
Liabilities are recognized at fair value for asset retirement obligations related to plant and landfill closures in the period in
which they are reasonably estimable and the carrying amounts of the related long-lived assets are correspondingly adjusted.
Over time, the liabilities are accreted to their estimated future values. At September 30, 2021 and 2020, asset retirement
obligations were $3.8 million.
Leases. Refer to Note 4. for information regarding our leases.
Accounting for the Impairment of Long-Lived Assets. We test indefinite-lived intangible assets and goodwill for
impairment annually or more frequently if events or circumstances indicate impairment is possible. We perform our annual
impairment testing at September 1. We amortize finite-lived intangible assets over their respective estimated useful lives and
review for impairment if events or circumstances indicate impairment is possible. Refer to Note 6. for information regarding
our impairment testing.
Workers’ Compensation. Our exposure to workers’ compensation claims is generally limited to $0.8 million per incident.
Liabilities, including those related to claims incurred but not reported, are recorded principally using annual valuations based on
discounted future expected payments and using historical data combined with insurance industry data when historical data is
limited. Our gross workers’ compensation liabilities were $10.5 million as of September 30, 2021, and we expect to recover
$3.5 million in insurance which is included as a receivable in Other current assets and Other noncurrent assets as of September
30, 2021. As of September 30, 2020, our net worker’s compensation liability was $6.2 million.
Warranty Costs. We accrue for warranty expenses, which include costs of repair and/or replacement, including labor,
materials, equipment, freight and reasonable overhead costs. We accrue for the estimated cost of product warranties at the time
of sale if such costs are determined to be probable and reasonably estimable at that time. We monitor and analyze our warranty
experience and costs periodically and may revise our warranty accruals as necessary. Critical factors in our accrual analyses
include warranty terms, specific claim situations, general incurred and projected failure rates, the nature of product failures,
product and labor costs, and general business conditions.
Activity in our accrued warranty, reported as part of both other current liabilities and other noncurrent liabilities, is
presented below.
F- 12
Balance at beginning of year
Warranty accruals
Warranty costs
Balance at end of year
2021
2020
(in millions)
2019
$
$
14.4 $
3.5
(8.2)
9.7 $
17.1 $
2.6
(5.3)
14.4 $
20.0
3.9
(6.8)
17.1
Deferred Financing Costs. Costs to finance debt are charged to expense over the lives of the debt agreements. Remaining
costs and the future period over which financing costs would be charged to expense are reassessed when amendments to the
related financing agreements or prepayments occur.
Deferred financing costs are offset against the underlying long-term debt in the accompanying consolidated balance sheets.
Deferred financing costs under agreements that do not have outstanding debt and in other instances, such as our ABL
Agreement and with regard to our NMTC transaction, are included in Other noncurrent assets consistent with the life of the
instrument. Deferred financing costs of $6.6 million at September 30, 2021 are scheduled to amortize as follows: $1.0 million
related to the ABL Agreement and $0.3 million related to the NMTC transaction which are amortized on a straight-line basis
and; $5.3 million related to the 4.0% Senior Unsecured Notes (“4.0% Senior Notes”) which is amortized using the effective
interest rate method. All such amortization will be over the remaining term of the respective debt. Refer to Note 8. for
disclosures related to our borrowing arrangements.
Derivative Instruments and Hedging Activities. We manage U.S. dollar - Canadian dollar exchange rate risk related to an
intercompany loan with swap contracts, which we have not designated as hedges. As a result, the changes in the fair value of
these contracts are reported currently in earnings. The values of our currency swap contracts were liabilities of $1.1 million and
$0.2 million as of September 30, 2021 and 2020, respectively, and are included in Other current liabilities and Other noncurrent
liabilities, respectively, in our consolidated balance sheets. The currency swap contracts expire in February 2022.
Income Taxes. Deferred tax liabilities and deferred tax assets are recognized for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Such liabilities and assets are determined based on the
differences between the financial statement basis and the tax basis of assets and liabilities, using tax rates in effect for the years
in which the differences are expected to reverse. A valuation allowance is provided when, based upon the available evidence, it
is more likely than not that some or all of the deferred tax assets will not be realized.
We only record tax benefits for positions that management believes are more likely than not of being sustained under audit
based solely on the technical merits of the associated tax position. The amount of tax benefit recognized for any position that
meets the more-likely-than-not threshold is the largest amount of the tax benefit that we believe is greater than 50% likely of
being realized.
Environmental Expenditures. We capitalize environmental expenditures that increase the life or efficiency of noncurrent
assets or that reduce or prevent environmental contamination. We accrue for environmental expenses resulting from existing
conditions that relate to past operations when the costs are probable and reasonably estimable. We are indemnified under an
agreement with a predecessor to Tyco for certain environmental liabilities that existed at August 16, 1999. Refer to Note 17.
for additional disclosures regarding our environmental liabilities.
Revenue Recognition. Refer to Note 3. for disclosures regarding our revenues.
Stock-based Compensation. Compensation expense for stock-based awards granted to employees and directors is based on
the fair value at the grant dates for our stock-settled share awards and is based on the fair value at each reporting date for our
cash-settled share awards. Refer to Note 12. for more information regarding our stock-based compensation. Stock-based
compensation expense is included within Selling, general and administrative expenses.
Research and Development. Research and development costs are expensed as incurred.
Advertising. Advertising costs are expensed as incurred.
Translation of Foreign Currency. Assets and liabilities of our businesses whose functional currencies are not denominated
in the United States dollar are translated into United States dollars using currency exchange rates at the balance sheet date.
Revenues and expenses are translated at average currency exchange rates during the period. Foreign currency translation gains
F- 13
and losses are reported as a component of accumulated other comprehensive income (loss). Gains and losses resulting from
foreign currency transactions are included in earnings as incurred.
Recently Adopted Accounting Pronouncements
During 2016, the Financial Accounting Standards Board (“FASB”) issued standard Accounting Standard Codification
(“ASC”) 326 - Current Expected Credit Losses (“ASC 326”) to replace the “incurred loss” impairment approach with an
“expected loss” approach. This requires consideration of a broader range of reasonable and supportable information to estimate
credit losses. We have completed historical and forward-looking analyses for receivables and adopted this guidance effective
October 1, 2020. Upon adoption, there was an immaterial impact of $0.1 million to our retained earnings.
Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, "Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by
clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis
of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other
clarifications. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020,
including interim periods within that fiscal year, with early adoption permitted. We will adopt this standard on October 1, 2021
and it is not expected to have a material impact on our financial statements.
In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting" (“ASU 2020-04”). The new guidance provides optional expedients and
exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if
certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London Inter Bank
Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. ASU 2020-04 is
effective from March 12, 2020, but can be adopted prospectively from a date within an interim period subsequent to March 12,
2020. We are currently evaluating our contracts and the optional expedients provided by ASU 2020-04. We will adopt this
standard on October 1, 2021 and it is not expected to have a material impact on our financial statements.
Note 3.
Revenue from Contracts with Customers
We recognize revenue when control of promised products or services is transferred to our customers, in amounts that
reflect the consideration to which we expect to be entitled in exchange for those products or services. We account for a contract
when it has approval and commitment from both parties, the rights of the parties are identified, the payment terms are
identified, the contract has commercial substance and collectability of consideration is probable. We determine the appropriate
revenue recognition for our contracts with customers by analyzing the type, terms and conditions of each contract or
arrangement with a customer.
Disaggregation of Revenue
Refer to Note 16. for disaggregation our revenues from contracts with customers by reportable segment and by
geographical region, which we believe best depicts how the nature, amount, timing and uncertainty of our revenue and cash
flows are affected by economic factors. Geographical region represents the location of the customer.
Contract Asset and Liability Balances
Differences in the timing of revenue recognition, billing and cash collection result in customer receivables, advance
payments and billings in excess of revenue recognized. Customer receivables include amounts billed and currently due from
customers as well as unbilled amounts (contract assets). Amounts are billed in accordance with contractual terms and unbilled
amounts arise when the timing of billing differs from the timing of revenue recognized.
Advance payments and billings in excess of revenue are recognized and recorded as deferred revenue, the majority of
which is classified as current based on the timing when we expect to recognize revenue. We include current deferred revenue
within Other current liabilities in the accompanying consolidated balance sheets. Deferred revenues represent contract
liabilities and are recorded when customers remit cash payments in advance of our satisfaction of performance obligations
under contractual arrangements. Contract liabilities are reversed when the performance obligation is satisfied and revenue is
recognized.
F- 14
The table below represents the balances of our customer receivables and deferred revenues.
Billed receivables
Unbilled receivables
Total customer receivables, gross
Deferred revenues
Performance Obligations
September 30,
2021
2020
(in millions)
217.0 $
2.3
219.3 $
180.3
5.3
185.6
5.4 $
5.6
$
$
$
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Our performance
obligations are satisfied at a point in time as related to sales of equipment or over time as related to our software hosting and
leak detection monitoring services. Performance obligations are supported by customer contracts, which provide frameworks
for the nature of the distinct products or services. We allocate the transaction price of each contract to the performance
obligations on the basis of standalone selling price and recognize revenue when control of the performance obligation transfers
to the customer. The transaction price is adjusted for our estimate of variable consideration which may include discounts, and
rebates. To estimate variable consideration, we apply the expected value or the most likely amount method, based on whichever
method most appropriately predicts the amount of consideration we expect to receive. The method applied is typically based on
historical experience and known trends. We constrain the amounts of variable consideration that are included in the transaction
price, to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur
or when uncertainties around the variable consideration are resolved.
We exclude from the measurement of the transaction price all taxes assessed by a governmental authority. We classify
shipping and handling costs, such as freight to our customers’ destinations, as a component of cost of goods sold.
We have elected to use the practical expedient to not adjust the transaction price of a contract for the effects of a significant
financing component if, at the inception of the contract, we expect that the period between when we transfer a product or
service to a customer and when a customer remits payment will be one year or less.
Revenues from products and services transferred to customers at a point in time represented 98% , 99% and 98% of our
revenues in the years ended September 30, 2021, 2020 and 2019, respectively. The revenues recognized at a point in time
related to the sale of our products are recognized when the obligations of the terms of our contract are satisfied, which generally
occurs upon shipment when control of the product transfers to the customer.
Revenues from products and services transferred to customers over time represented 2%, 1% and 2% of our revenues in the
years ended September 30, 2021, 2020 and 2019, respectively.
We offer warranties to our customers in the form of assurance-type warranties, which provide assurance that the products
provided will function as intended and comply with any agreed-upon specifications. These cannot be purchased separately.
Costs to Obtain or Fulfill a Contract
We incur certain incremental costs to obtain a contract, which primarily relate to incremental sales commissions. Our
commissions are paid based on a combination of orders and shipments, and we reserve the right to claw back any commissions
in case of product returns or lost collections. As the expected benefit associated with these incremental costs is generally one
year or less based on the nature of the product sold and benefits received, we have applied a practical expedient and therefore
do not capitalize the related costs and expense them as incurred.
F- 15
Note 4.
Leases
On October 1, 2019, we adopted ASC 842 - Leases utilizing the modified retrospective approach. Adoption of the new
standard resulted in an increase to total assets and liabilities as a result of recording lease right-of-use assets (“ROU”) and lease
liabilities related to our operating lease portfolio.
We elected three practical expedients for transition, which include the carry forward of our leases without reassessing
whether any contracts are leases or contain leases, lease classification and initial direct costs as well as applying hindsight when
determining the lease term and when assessing impairment of ROU assets at the adoption date. This allows us to update our
assessments according to new information and changes in facts and circumstances that have occurred since lease inception.
Presentation of Leases
We lease certain office, warehouse, manufacturing, distribution, and research and development facilities and equipment
under operating leases. Our leases have remaining lease terms of up to 12 years. The terms and conditions of our leases may
include options to extend or terminate the lease which are considered and included in the lease term when these options are
reasonably certain of exercise.
We determine if a contract is, or contains, a lease at inception by evaluating whether the contract conveys the right to
control the use of an identified asset. For all classes of leased assets, we have elected the practical expedient to account for any
non-lease components in the contract together with the related lease component in the same unit of account.
ROU assets and lease liabilities are recognized in our consolidated balance sheets at the commencement date based on the
present value of remaining lease payments over the lease term. Additionally, ROU assets include any lease payments made at
or before the commencement date, as well as any initial direct costs incurred, and are reduced by any lease incentives received.
As most of our operating leases do not provide an implicit rate, we apply our incremental borrowing rate to determine the
present value of remaining lease payments. Our incremental borrowing rate is determined based on information available at the
commencement date of the lease.
For all classes of leased assets, we have applied an accounting policy election to exclude short-term leases from recognition
in our consolidated balance sheets. A short-term lease has a lease term of 12 months or less at the commencement date and
does not include a purchase option that is reasonably certain of exercise. We recognize short-term lease expense in our
condensed consolidated statements of operations on a straight-line basis over the lease term.
Our short-term lease expense for the years ended September 30, 2021 and 2020 and short-term lease commitments at
September 30, 2021 are immaterial.
We have certain lease contracts with terms and conditions that provide for variability in the payment amount based on
changes in facts or circumstances occurring after the commencement date. These variable lease payments are recognized in our
consolidated statements of operations as the obligation is incurred.
F- 16
At September 30, 2021, any legally-binding minimum lease payments for operating leases signed but not yet commenced,
subleases, leases that imposed significant restrictions or covenants, related party leases or sale-leaseback arrangements were
immaterial.
The components of lease cost are presented below.
Operating lease cost
Finance lease cost
Total lease expense
2021
Year ended September 30,
2020
(in millions)
2019
$
$
6.1 $
1.2
7.3 $
6.3 $
1.3
7.6 $
5.8
1.0
6.8
Supplemental cash flow information related to leases are presented below, in millions.
Operating cash used for operating leases
Financing cash used for finance leases
Supplemental information regarding our lease assets and liabilities is below.
Right-of-use assets:
Operating leases
Finance leases
Total right-of-use assets
Lease liabilities:
Operating leases - current
Operating leases - noncurrent
Finance leases - current
Finance leases - noncurrent
Total lease liabilities
Other noncurrent assets
Plant, property and equipment
Other current liabilities
Other noncurrent liabilities
Current portion of long-term debt
Long-term debt
Supplemental information related to lease terms and discount rates are presented below.
Weighted-average remaining lease term (years):
Operating leases
Finance leases
Weighted-average interest rate:
Operating leases
Finance leases
Total lease liabilities at September 30, 2021 have scheduled maturities as follows:
Year ended September 30,
2021
2020
$
$
6.1 $
1.2 $
6.1
1.3
September 30,
2021
2020
(in millions)
$
$
$
$
27.1 $
2.2
29.3 $
4.0 $
24.6
1.0
1.2
30.8 $
25.6
2.5
28.1
4.0
23.3
1.1
1.4
29.8
Year ended September 30,
2021
2020
7.82
2.53
5.36 %
4.24 %
7.87
2.52
5.64 %
4.96 %
F- 17
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: imputed interest
Present value of lease liabilities
Note 5.
Acquisitions
Acquisition of Krausz
Operating
Leases
Finance
Leases
$
$
(in millions)
5.4 $
5.0
4.7
4.3
4.1
11.5
35.0
(6.4)
28.6 $
1.1
0.7
0.3
0.1
0.1
—
2.3
(0.1)
2.2
On December 3, 2018, we completed our acquisition of the outstanding equity of Krausz, a manufacturer of pipe couplings,
grips and clamps with operations in the United States and Israel, for $140.7 million, net of cash acquired, including the
assumption and simultaneous repayment of certain debt of $13.2 million. The acquisition of Krausz was financed with cash on
hand. We believe that the Krausz product line is complementary to our existing Infrastructure products and will improve our
positioning in the pipe repair market.
We have recognized the assets acquired and liabilities assumed at their estimated acquisition date fair values, with the
excess of the purchase price over the estimated fair values of the identifiable net assets acquired recorded as goodwill. During
2020, we reduced property, plant and equipment by $0.3 million, which resulted in an increase to goodwill of $0.3 million. The
accounting for the business combination is considered final.
The results of Krausz, including net sales of $37.2 million for 2019, are included within our Infrastructure segment for all
periods following the acquisition date.
The goodwill below is attributable to the strategic opportunities and synergies that we expect to arise from the acquisition
of Krausz and the value of its workforce and is nondeductible for income tax purposes. Identified intangible assets consist of
patents, customer relationships and favorable leasehold interests with an estimated weighted-average useful life of
approximately 12 years and trade names with an indefinite life. Values of intangible assets were determined using a discounted
cash flow method.
F- 18
$
The following is a summary of the estimated fair values of the net assets acquired (in millions):
Assets, net of cash:
Receivables
Inventories
Other current assets
Property, plant and equipment
Other non-current assets
Identified intangible assets:
Patents
Customer relationships
Trade names
Favorable leasehold interests
Goodwill
Liabilities:
Accounts payable
Other current liabilities
Deferred income taxes
Other non-current liabilities
Consideration paid
Repayment of Krausz debt
Consideration paid included in net cash used in investing activities
$
6.9
17.0
0.2
8.1
1.7
32.1
8.7
4.6
2.3
80.4
(5.5)
(2.9)
(11.2)
(1.7)
140.7
(13.2)
127.5
Acquisition of i2O Water Ltd
On June 14, 2021, we acquired all of the outstanding capital stock of i2O Water Ltd for $19.7 million, net of cash acquired.
The purchase agreement provides for customary final adjustments, including a net working capital adjustment, which we expect
to occur during the calendar year 2021.
We have recognized the assets acquired and liabilities assumed at their estimated acquisition date fair values, with the excess
of the purchase price over the estimated fair values of the identifiable net assets acquired recorded as goodwill. The accounting
for the business combination is considered to be preliminary. We are still reviewing the impact of taxes and other certain items.
The results of i2O are included within our Technologies segment.
The goodwill below is attributable to the strategic opportunities and synergies that we expect to arise from the acquisition of
i2O and the value of its workforce. The goodwill is nondeductible for income tax purposes. Identified intangible assets consist
of customer relationships, non-compete agreements and developed technology with an estimated weighted-average useful life
of approximately 12 years and trade names with an indefinite life. Values of intangible assets were determined using a
discounted cash flow method.
F- 19
The following is a summary of the preliminary estimated fair values of the net assets acquired (in millions):
Assets, net of cash:
Receivables
Inventories
Other current assets
Identified intangible assets:
Tradename
Customer relationships
Non-compete agreements
Developed technology
Goodwill
Liabilities:
Accounts payable
Other current liabilities
Fair value of net assets acquired, net of cash
Note 6.
Intangible Assets and Goodwill
$
$
0.5
0.6
0.9
1.8
2.1
0.1
3.5
12.1
(0.8)
(1.1)
19.7
Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment)
on an annual basis each September 1st and between annual tests if an event occurs or circumstances change that would more
likely than not reduce the fair value of a reporting unit below its carrying value. We completed our annual impairment tests of
intangible assets and goodwill as of September 1, 2021, and determined there were no impairments. Our goodwill primarily
relates to the Krausz reporting unit which was $91.2 million as of September 1, 2021.
Intangible Assets
Direct internal and external costs to develop software licensed by Technologies’ customers are capitalized and amortized
over the 6-year estimated useful life of the software, beginning when the software is ready for its intended use. At
September 30, 2021, the remaining weighted-average amortization period for this software was 1.8 years. Amortization
expense related to such software assets was $3.3 million in each of our 2021, 2020 and 2019 fiscal years. Amortization expense
for each of the next five years is scheduled to be $3.5 million in 2022, $2.7 million in 2023, $2.1 million in 2024, $1.1 million
in 2025 and $0.5 million in 2026.
At September 30, 2021, the remaining weighted-average amortization period for business combination-related finite-lived
customer relationships and technology intangible assets were 4.4 years and 4.5 years, respectively. Amortization expense
related to these assets was $25.2 million, $24.9 million and $23.7 million for 2021, 2020 and 2019, respectively. Amortization
expense for each of the next five years is scheduled to be $25.4 million in 2022, $24.8 million in 2023, $24.8 million in 2024,
$5.2 million in 2025 and $4.4 million in 2026.
F- 20
Intangible assets are presented below.
Capitalized internal-use software:
Cost
Accumulated amortization
Capitalized internal-use software, net
Business combination-related:
Cost:
Finite-lived intangible assets:
Technology
Customer relationships and other
Indefinite-lived intangible assets:
Trade names and trademarks
Accumulated amortization:
Technology
Customer relationships and other
Business combination-related intangible assets, net
Intangible assets, net
Goodwill
September 30,
2021
2020
(in millions)
34.1 $
(24.1)
10.0 $
31.5
(20.8)
10.7
123.5
373.0
273.8
770.3 $
(85.8)
(302.0)
(387.8)
382.5
392.5 $
118.5
370.2
271.6
760.4
(81.0)
(281.2)
(362.2)
398.2
408.9
$
$
$
$
Our goodwill balance by reportable segment is as follows: (i) Infrastructure balance of $103.0 million and (ii)
Technologies balance of $12.1 million.
Changes in the carrying amount of goodwill were as follows:
Balance at beginning of year
Acquisition of Krausz
Acquisition of i2O Water Ltd
Change in foreign currency exchange rates
Balance at end of year
Note 7.
Income Taxes
September 30,
2021
2020
(in millions)
99.8 $
—
12.1
3.2
115.1 $
95.7
0.3
—
3.8
99.8
$
$
The components of income before income taxes are presented below.
U.S.
Non-U.S.
Income before income taxes
2021
2020
(in millions)
2019
$
$
94.0 $
0.9
94.9 $
89.7 $
4.4
94.1 $
78.4
3.7
82.1
F- 21
The Tax Cuts and Jobs Act (the “Act”) imposed a one-time transition tax on the undistributed, previously untaxed,
post-1986 foreign “earnings and profits” (as defined by the IRS) of certain United States-owned corporations. At September
30, 2021, the remaining balance of our transition obligation is $4.7 million, which will be paid annually through January 2026,
as provided in the Act. Other than for Krausz’s investment in its United States subsidiary, we have not recorded income taxes
for unrepatriated foreign earnings that may be subject to withholding tax or any outside cost basis differences inherent in our
foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations. We have a foreign tax credit
carryforward of $4.5 million, for which we have recorded a valuation allowance as we do not expect to utilize it prior to
expiration.
The federal income tax returns for Mueller Co. are closed for years prior to 2005 and for Mueller Water Products, Inc. for
2007 and 2008. Our 2009 through 2016 returns are closed except to the extent net operating losses from those years have been
utilized on subsequent years’ returns. We also remain liable for any taxes related to U.S. Pipe income for periods prior to 2012
pursuant to the terms of the sale agreement with the purchaser of the segment.
Our state income tax returns are generally closed for years prior to 2017, except to the extent of our state net operating loss
carryforwards. Our Canadian income tax returns are generally closed for years prior to 2014. We do not have any material
unpaid assessments.
F- 22
The components of income tax expense are as follows:
Current:
U.S. federal
U.S. state and local
Non-U.S.
Total current income tax expense
Deferred:
U.S. federal
U.S. state and local
Non-U.S.
Total deferred income tax (benefit) expense
Income tax expense
2021
2020
(in millions)
2019
$
$
21.9 $
6.3
1.6
29.8
(4.7)
(1.3)
0.7
(5.3)
24.5 $
10.9 $
2.7
1.3
14.9
5.6
2.0
(0.4)
7.2
22.1 $
11.6
3.9
1.5
17.0
2.5
(0.4)
(0.8)
1.3
18.3
The reconciliation between income tax expense at the United States federal statutory income tax rate and reported income
tax expense is presented below.
2021
2020
(in millions)
2019
$
19.9 $
19.8 $
17.2
Expense at U.S. federal statutory income tax rates of 21%, 21%,
and 24.5%, respectively
Adjustments to reconcile to income tax expense:
State income taxes, net of federal benefit
Uncertain tax positions
Nondeductible compensation
Nondeductible expenses, other than compensation
Valuation allowances
Basis difference in foreign investment
Foreign income taxes
Federal transition tax
Excess tax benefits related to stock compensation
Tax credits
Other
Income tax expense
$
3.1
0.3
0.6
0.5
(0.4)
1.5
(1.2)
—
(0.2)
(1.6)
2.0
24.5 $
3.3
1.0
0.6
0.4
0.1
0.1
—
—
(0.5)
(1.8)
(0.9)
22.1 $
The following table summarizes information concerning our gross unrecognized tax benefits.
Balance at beginning of year
Increase related to current year positions
Decrease as a result of statute of limitations lapse
Balance at end of year
2021
2020
$
$
(in millions)
4.5 $
0.6
(0.3)
4.8 $
3.2
(1.4)
0.3
1.3
1.3
(1.1)
0.1
(0.6)
(0.3)
(1.8)
0.1
18.3
3.3
1.5
(0.3)
4.5
Substantially all unrecognized tax benefits would, if recognized, impact the effective tax rate. We recognize interest
related to uncertain tax positions as interest expense and recognize any penalties incurred as a component of selling, general and
administrative expenses. At September 30, 2021 and 2020, we had $0.6 million and $0.4 million, respectively, of accrued
interest expense related to unrecognized tax benefits.
F- 23
Deferred income tax balances are presented below.
Deferred income tax assets:
Accrued expenses
Lease liabilities
Inventories
State net operating losses
Net operating losses and credit carryovers
Stock-based compensation
Pension
Other
Total deferred income tax assets
Valuation allowance
Total deferred income tax assets, net of valuation allowance
Deferred income tax liabilities:
Intangible assets
Lease assets
Basis difference in foreign investment
Pension
Property, plant and equipment
Other
Total deferred income tax liabilities
Net deferred income tax liabilities
September 30,
2021
2020
(in millions)
$
$
12.7 $
8.2
6.1
2.8
14.8
3.8
—
2.9
51.3
(13.6)
37.7
86.3
7.6
6.8
3.9
27.4
0.5
132.5
94.8 $
12.2
7.3
4.6
3.0
3.0
2.6
0.2
1.1
34.0
(2.9)
31.1
90.2
6.6
5.0
—
25.1
0.5
127.4
96.3
We reevaluate the need for a valuation allowance against our deferred tax assets each quarter considering results to date,
projections of taxable income, tax planning strategies and reversing taxable temporary differences.
Our state net operating loss carryforwards, which expire between the years 2024 and 2032, remain available to offset future
taxable earnings.
Note 8.
Borrowing Arrangements
The components of our long-term debt are as follows:
4.0% Senior Notes
5.5% Senior Notes
ABL Agreement
Other
Less deferred financing costs
Less current portion of long-term debt
Long-term debt
September 30,
2021
2020
(in millions)
450.0 $
—
—
2.2
452.2
(5.3)
(1.0)
445.9 $
—
450.0
—
2.5
452.5
(4.9)
(1.1)
446.5
$
$
The scheduled maturities of all borrowings outstanding at September 30, 2021 for each of the following years are $1.0
million in 2022, $0.7 million in 2023, $0.3 million in 2024, $0.1 million in 2025 and $0.1 million in 2026.
F- 24
ABL Agreement. Our ABL Agreement consists of a revolving credit facility for up to $175 million that includes up to $25
million through swing line loans and may have up to $60 million of letters of credit. The ABL Agreement permits us to
increase the size of the credit facility by an additional $150 million in certain circumstances subject to adequate borrowing base
availability.
Borrowings under the amended ABL Agreement bear interest at a floating rate equal to LIBOR plus an applicable margin
range of 200 to 225 basis points, or a base rate, as defined in the ABL Agreement, plus an applicable margin range of from 100
to 125 basis points. At September 30, 2021 the applicable margin was LIBOR plus 200 basis points.
The ABL Agreement is subject to mandatory prepayments if total outstanding borrowings under the ABL Agreement are
greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in
certain circumstances. The borrowing base under the ABL Agreement is equal to the sum of (a) 85% of the value of eligible
accounts receivable and (b) the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation
value of the value of eligible inventory, less certain reserves. Prepayments can be made at any time without penalty.
Substantially all of our United States subsidiaries are borrowers under the ABL Agreement and are jointly and severally
liable for any outstanding borrowings. Our obligations under the ABL Agreement are secured by a first-priority perfected lien
on all of our United States inventory, accounts receivable, certain cash and other supporting obligations.
The ABL Agreement terminates on July 29, 2025 and includes a commitment fee for any unused borrowing capacity of
37.5 basis points per annum. Borrowings are not subject to any financial maintenance covenants unless excess availability is
less than the greater of $17.5 million and 10% of the Loan Cap as defined in the ABL Agreement. Excess availability based on
September 30, 2021 data was $158.7 million, as reduced by $15.0 million of outstanding letters of credit and $1.3 million of
accrued fees and expenses.
4.0% Senior Unsecured Notes. On May 28, 2021, we privately issued $450.0 million of 4.0% Senior Notes, which mature
on June 15, 2029 and bear interest at 4.0%, paid semi-annually in June and December. We capitalized $5.5 million of financing
costs, which are being amortized over the term of the 4.0% Senior Notes using the effective interest method. Proceeds from the
4.0% Senior Notes, along with cash on hand were used to redeem our previously existing 5.5% Senior Notes. Substantially all
of our United States subsidiaries guarantee the 4.0% Senior Notes, which are subordinate to borrowings under our ABL
Agreement. Based on quoted market prices, which is a Level 1 measurement, the outstanding 4.0% Senior Notes had a fair
value of $467.3 million as of September 30, 2021.
An indenture securing the 4.0% Senior Notes (“Indenture”) contains customary covenants and events of default, including
covenants that limit our ability to incur certain debt and liens. There are no financial maintenance covenants associated with the
Indenture. We believe we were in compliance with these covenants at September 30, 2021.
As set forth in the Indenture, we may redeem some or all of the 4.0% Senior Notes at any time or from time to time prior
to June 15, 2024 at certain “make-whole” redemption prices and on or after June 15, 2024 at specified redemption prices.
Additionally, we may redeem up to 40% of the aggregate principal amount of the 4.0% Senior Notes at any time or from time
to time prior to June 15, 2024 with the net proceeds of specified equity offerings at specified redemption prices. Upon a change
of control, we would be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the outstanding
principal amount of the 4.0% Senior Notes.
5.5% Senior Unsecured Notes. On June 12, 2018, we privately issued $450.0 million of 5.5% Senior Notes, which were
set to mature in June 2026 and bore interest at 5.5%, paid semi-annually. We called the 5.5% Senior Notes effective June 17,
2021 and redeemed the 5.5% Senior Notes with the proceeds from the 4.0% Senior Notes and cash on hand. As a result, we
incurred $16.7 million in loss on extinguishment of debt, comprised of a $12.4 million call premium and a $4.3 million write-
off of the remaining deferred debt issuance costs.
.
Note 9.
Derivative Financial Instruments
In connection with the acquisition of Singer Valve in 2017, we loaned funds to one of our Canadian subsidiaries. Although
this intercompany loan has no direct effect on our consolidated financial statements, it creates exposure to currency risk for the
Canadian subsidiary. To reduce this exposure, we entered into a United States dollar-Canadian dollar swap contract with the
Canadian subsidiary and an offsetting Canadian dollar-United States dollar swap with a domestic bank. We have not
designated these swaps as hedges and the changes in their fair value are included in earnings, where they offset the currency
gains and losses associated with the intercompany loan.
F- 25
The values of our currency swap contracts were liabilities of $1.1 million and $0.2 million as of September 30, 2021 and
2020, respectively, and are included in Other current liabilities and Other noncurrent liabilities, respectively in our consolidated
balance sheets. The currency swap contracts expire in February 2022.
Note 10.
Retirement Plans
Defined Benefit Plans. We have had various pension plans (“Pension Plans”), which we funded in accordance with their
requirements and, where applicable, in amounts sufficient to satisfy the minimum funding requirements of applicable laws. The
Pension Plans provided benefits based on years of service and compensation or at stated amounts for each year of service. The
annual measurement date for all Pension Plans was September 30. After September 30, 2019, our only remaining defined
benefit plan was our United States Pension Plan (“Plan”).
During 2019, we settled our obligations to our Canadian pension plan participants through a combination of lump-sum
payments and purchases of annuities. We made a net contribution to the plans of $0.7 million, which was included in pension
costs other than service, to fund these settlements. As a result, we no longer have any plan assets or obligation in connection
with any Canadian defined benefit pension plan.
During 2018, under terms of a negotiated labor contract, a group of our collectively bargained employees are no longer
accruing benefits under a multi-employer pension plan. The affected employees are now participants in our defined
contribution retirement plan with an employer match and one-time contribution of $0.4 million, which vested through 2020.
During 2019, we recorded and paid an estimated settlement liability for exiting this plan, which resulted in an expense of $1.1
million, which we included in Strategic reorganization and other charges. As a result, we no longer have any plan assets or
obligation in connection with any multi-employer pension plan.
A summary of key assumptions for the valuations of our Pension Plans is as follows
Weighted average used to determine benefit obligations:
Discount rate
Weighted average used to determine net periodic cost:
Discount rate
Expected return on plan assets
2021
2020
2019
3.01 %
2.84 %
3.26 %
2.84 %
4.50 %
3.26 %
5.00 %
4.37 %
4.93 %
The discount rates for determining the present value of pension obligations were selected using a “bond settlement”
approach, which constructs a hypothetical bond portfolio that could be purchased such that the coupon payments and maturity
values could be used to satisfy the projected benefit payments. The discount rate is the equivalent rate that results in the present
value of the projected benefit payments equaling the market value of this bond portfolio. Only high quality (AA graded or
higher), non-callable corporate bonds are included in this bond portfolio. We rely on the Pension Plans’ actuaries to assist in
the development of the discount rate model.
The expected returns on plan assets were determined with the assistance of the Pension Plans’ actuaries and investment
consultants. Expected returns on plan assets were developed using forward looking returns over a time horizon of 10 to 15
years for major asset classes along with projected risk and historical correlations.
F- 26
Amounts recognized for Pension Plans are presented below.
Projected benefit obligations:
Beginning of year
Service cost
Interest cost
Actuarial gain
Benefits paid
End of year
Accumulated benefit obligations at end of year
Plan assets:
Beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
End of year
Accrued benefit cost at end of year:
Funded status
Recognized on balance sheet:
Other noncurrent assets
Recognized in accumulated other comprehensive income (loss), before tax:
Net actuarial loss
2021
2020
(in millions)
359.5 $
1.5
9.9
(10.8)
(23.3)
336.8 $
336.8 $
360.4 $
16.4
—
(23.3)
353.5 $
16.8 $
16.8 $
59.9
59.9 $
356.6
1.5
11.2
13.7
(23.5)
359.5
359.5
351.6
32.2
0.1
(23.5)
360.4
0.9
0.9
74.0
74.0
$
$
$
$
$
$
$
$
The components of net periodic benefit cost for our Pension Plans are presented below.
Service cost
Components of net periodic cost (benefit) excluded from operating
income:
Interest cost
Expected return on plan assets
Amortization of actuarial net loss
Pension settlement
Other
Pension (benefit) cost other than service
Net periodic benefit (benefit) cost
2021
2020
(in millions)
2019
$
1.5 $
1.5 $
1.6
9.9
(15.7)
2.5
—
—
(3.3)
(1.8) $
11.2
(16.9)
2.8
—
(0.1)
(3.0)
(1.5) $
13.9
(16.2)
1.9
0.7
0.1
0.4
2.0
$
F- 27
Plan activity in accumulated other comprehensive loss, before tax, in 2021 is presented below, in millions.
Balance at beginning of year
Actuarial gain
Prior year actuarial loss amortization to net periodic cost
Balance at end of year
$
$
74.0
(11.6)
(2.5)
59.9
We amortize amounts in accumulated other comprehensive loss representing unrecognized prior year service cost and
unrecognized loss related to the Pension Plans over the weighted average life expectancy of their inactive participants.
Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to 10% of the greater of the
benefit obligation and the market-related value of assets. Gains and losses in excess of the corridor are generally amortized
over the average remaining lifetime of the plan participants.
We expect to amortize $1.7 million of unrecognized loss into net periodic benefit cost from accumulated other
comprehensive loss in 2022.
Strategic asset allocations, tactical range at September 30, 2021 and actual asset allocations are as follows:
Fixed income investments
Equity investments
Cash
Strategic asset
allocation
70 %
30
—
100 %
Tactical range
70 %
30 %
5 %
65 -
25 -
0 -
Actual asset allocations at
September 30,
2020
2021
2019
70 %
29
1
100 %
78 %
21
1
100 %
79 %
19
2
100 %
Assets of the Plan are allocated to various investments to attain diversification and reasonable risk-adjusted returns while
also managing the exposure to asset and liability volatility. These ranges are targets and deviations may occur from time to
time as a result of market fluctuations. Portfolio assets are typically rebalanced to the allocation targets at least annually.
The assets of the Plan are primarily invested in investment trusts valued at net asset value, which in turn hold fixed income
and equity investments. The valuation methodologies used to measure the assets of the Plan at fair value are:
•
•
Fixed income fund investments held by the investment trusts are valued using the closing price reported in the active
market in which the investment is traded or based on yields currently available on comparable securities of issuers
with similar credit ratings;
Equity investments held by the investment trusts are valued using the closing price reported on the active market when
reliable market quotations are readily available. When market quotations are not readily available, these assets are
valued by a method the trustees believe accurately reflects fair value; and
• Mutual funds are valued at the closing price reported on the active market.
F- 28
The assets of the Plan by level within the fair value hierarchy are as follows:
Fixed income
Equity:
Large cap index funds
International stocks:
International funds
Total equity
Cash and cash equivalents
Fixed income
Equity:
Large cap index funds
Mid cap index funds
Small cap growth funds
International stocks:
Mutual funds
International funds
Total equity
Cash and cash equivalents
Level 1
September 30, 2021
Level 2
(in millions)
Total
$
176.7 $
70.3 $
247.0
52.1
—
52.5
104.6
1.9
283.2 $
—
—
—
70.3 $
52.1
52.5
104.6
1.9
353.5
Level 1
September 30, 2020
Level 2
(in millions)
Total
— $
280.3 $
280.3
—
—
—
7.4
—
7.4
3.3
10.7 $
32.8
13.5
12.7
—
10.4
69.4
—
349.7 $
$
$
32.8
13.5
12.7
7.4
10.4
76.8
3.3
360.4
24.1
23.9
23.5
23.1
22.7
104.7
$
$
$
Our estimated future pension benefit payments are presented below (in millions).
2022
2023
2024
2025
2026
2027-2031
Defined Contribution Retirement Plans. Certain of our employees participate in defined contribution 401(k) plans or
similar plans outside of the United States. We make matching contributions as a function of employee contributions which
were $5.9 million, $5.3 million and $5.5 million during 2021, 2020 and 2019, respectively.
F- 29
Note 11.
Capital Stock
Common stock share activity is presented below.
Shares outstanding at September 30, 2018
Vesting of restricted stock units, net of shares withheld for taxes
Exercise of stock options
Exercise of employee stock purchase plan instruments
Settlement of performance-based restricted stock units, net of shares withheld for taxes
Stock repurchased under buyback program
Shares outstanding at September 30, 2019
Vesting of restricted stock units, net of shares withheld for taxes
Exercise of stock options
Exercise of employee stock purchase plan instruments
Settlement of performance-based restricted stock units, net of shares withheld for taxes
Stock repurchased under buyback program
Shares outstanding at September 30, 2020
Vesting of restricted stock units, net of shares withheld for taxes
Exercise of stock options
Exercise of employee stock purchase plan instruments
Settlement of performance-based restricted stock units, net of shares withheld for taxes
Stock repurchased under buyback program
Shares outstanding at September 30, 2021
157,332,121
200,431
726,636
167,806
109,380
(1,074,234)
157,462,140
242,112
534,291
182,971
61,610
(418,374)
158,064,750
182,024
151,399
146,135
62,396
(651,271)
157,955,433
Note 12.
Stock-based Compensation Plans
The effect of stock-based compensation on our consolidated statements of operations is presented below.
2021
2020
(in millions, except per share data)
2019
Decrease in operating income
Decrease in net income
Decrease in earnings per basic share
Decrease in earnings per diluted share
$
11.0 $
8.0
0.05
0.05
7.2 $
5.5
0.03
0.03
5.5
4.3
0.03
0.03
We excluded 578,005, 267,298 and 106,896 instruments from the calculation of diluted earnings per share for 2021, 2020
and 2019, respectively, because the effect of including them would have been antidilutive.
At September 30, 2021, there was approximately $8.6 million of unrecognized compensation expense related to stock-
based awards not yet vested. We expect to recognize this expense over a weighted average life of approximately 1.4 years.
The Mueller Water Products, Inc. 2006 Stock Incentive Plan (“2006 Plan”) authorizes an aggregate of 20,500,000 shares of
common stock that may be granted through the issuance of stock-based awards. Any awards canceled are available for
reissuance. Generally, all of our employees and members of our Board of Directors are eligible to participate in the 2006 Plan.
At September 30, 2021, 5,806,070 shares of common stock were available for future grants of awards under the 2006 Plan.
This total assumes that the maximum number of shares will be earned for awards for which the final number of shares to be
earned has not yet been determined.
An award granted under the 2006 Plan vests at such times and in such installments as set by the Compensation and Human
Resources Committee of our Board of Directors (“Compensation Committee”), but no award will be exercisable after the 10-
year anniversary of the date on which it is granted. Management expects some instruments will be forfeited prior to vesting.
Grants to members of our Board of Directors are expected to vest fully. Based on historical forfeitures, we expect grants to
others to be forfeited at an annual rate of 2%.
F- 30
Restricted Stock Units. Depending on the specific terms of each award, restricted stock units generally vest ratably over
the life of the award, usually three years, on each anniversary date of the original grant. Compensation expense for restricted
stock units is recognized between the grant date and the vesting date (or the date on which a participant becomes Retirement-
eligible, if sooner) on a straight-line basis for each tranche of each award. Fair values of restricted stock units are determined
using the closing price of our common stock on the respective dates of grant.
Restricted stock unit activity under the 2006 Plan is summarized below.
Outstanding at September 30, 2018
Granted
Vested
Cancelled
Outstanding at September 30, 2019
Granted
Vested
Cancelled
Outstanding at September 30, 2020
Granted
Vested
Cancelled
Outstanding at September 30, 2021
Restricted
stock units
Weighted
average
grant date fair
value per unit
12.14
10.10
11.75
11.43
11.31
11.55
11.40
11.48
11.41
12.29
11.62
11.41
11.78
481,562 $
233,830
(259,107)
(19,263)
437,022
301,979
(295,241)
(35,254)
408,506
220,795
(228,121)
(5,083)
396,097 $
Weighted
average
remaining
contractual
term (years)
Aggregate
intrinsic
value
(millions)
1.0
0.9
0.9
0.8
$
$
$
2.6
3.4
2.8
Performance-Based Awards. Our performance-based awards consist of performance-based restricted stock units
(“PRSUs”). PRSUs represent a target number of units that may be paid out at the end of a multi-year award cycle consisting of
annual performance periods coinciding with our fiscal years. As determined at the date of award, PRSUs may settle in cash-
value equivalent of, or directly in, shares of our common stock. Settlement will range from zero to two times the number of
PRSUs granted, depending on our financial performance against predetermined targets. The grant date for each year’s
performance period is set when the Compensation Committee establishes performance goals for the period, normally within 90
days of the beginning of each performance period. At the end of each annual performance period, the Compensation
Committee confirms performance against the applicable performance targets. PRSUs do not convey voting rights or earn
dividends. PRSUs vest on the last day of an award cycle, unless vested sooner as a result of a “Change of Control” of the
Company, or the death, disability or Retirement of a participant.
We recognize compensation expense for stock-settled PRSUs starting on the first day of the applicable performance period
and ending on the respective vesting dates. We base the recognized compensation expense upon the number of units awarded
for each performance period, the closing price of our common stock on the grant date and the estimated performance factor. In
2021 and 2020, 103,058 shares and 93,647 shares, respectively, vested related to PRSUs.
F- 31
Stock-settled PRSUs activity under the 2006 Plan is summarized below.
Award date
Settlement
year
Performance
period
November 29, 2016
2020
January 23, 2017
2020
November 28, 2017
2021
November 27, 2018
2022
December 3, 2019
2023
2017
2018
2019
2017
2018
2019
2018
2019
2020
2019
2020
2021
2020
2021
2022
Grant
date per
unit fair
value
$
$
$
$
$
$
$
$
$
$
$
$
$
$
13.26
12.50
10.53
13.15
12.50
10.53
12.50
10.53
11.26
10.53
11.26
11.86
11.26
11.86
Units
awarded
Units
forfeited
Net units
Performance
factor
Shares
earned
59,285
59,286
59,290
19,012
19,011
19,011
57,092
57,092
57,104
110,954
110,954
110,967
69,988
69,989
69,989
(5,279)
(39,910)
(39,909)
—
—
—
—
(4,793)
(21,679)
54,006
19,376
19,381
19,012
19,011
19,011
57,092
52,299
35,425
(8,751)
102,203
(13,182)
(28,478)
(2,391)
(9,614)
(9,614)
97,772
82,489
67,597
60,375
60,375
1.000
1.357
0.645
1.000
1.357
0.645
1.357
0.645
0.909
0.645
0.909
1.161
0.909
1.161
54,006
26,294
12,501
19,012
25,798
12,263
77,474
33,733
32,202
65,921
88,875
95,770
61,446
70,096
Market-Based Awards. Our market-based awards consist of market-based restricted stock units (“MRSUs”). MRSUs
represent a target number of units that may be paid out at the end of a three-fiscal year award cycle based on a calculation of our
relative total shareholder return (“TSR”) performance as compared with the TSRs of a selected peer group. Settlements in our
common shares, will range from zero to two times the number of MRSUs granted, depending on our TSR performance ranking
within the peer group. The fair values of MRSUs are fixed at the date of grant and the related expense is recognized ratably
over the vesting period, which is roughly three years from the date of grant.
The table below provides information regarding MRSU awards, which were valued using Monte Carlo simulations on the
grant date.
January 27,
2021
December 2,
2020
February 24,
2020
January 28,
2020
December 3,
2019
Fair value at grant date
$
Units granted
Variables used in determining grant
date fair value:
Dividend yield
Risk-free rate
Expected term (in years)
14.26
4,187
$
15.39
$
234,199
$
18.17
7,498
16.76
2,763
$
14.94
147,213
1.84 %
0.16 %
2.67
1.77 %
0.21 %
2.83
1.73 %
1.23 %
2.60
1.76 %
1.44 %
2.67
1.87 %
1.53 %
2.83
Stock Options. Stock options generally vest on each anniversary date of the original grant ratably over three years.
Compensation expense attributed to stock options is based on the fair value of the awards on their respective grant dates, as
determined using a Black-Scholes model.
F- 32
The assumptions used to determine the grant date fair value are indicated below for grants issued during our 2021 fiscal
year.
Variables used in determining grant date fair value:
Dividend yield
Risk-free rate
Expected term (in years)
January 27,
2021
December 2,
2020
2.01%
0.66%
6.0
2.01%
0.66%
6.0
The expected dividend yield is based on our estimated annual dividend and our stock price history at the grant date. The
risk-free interest rate is based on the United States Treasury zero-coupon yield in effect at the grant date with a term equal to the
expected term. The expected term represents the average period of time the options are expected to be outstanding.
Stock option activity under the 2006 Plan is summarized below.
Weighted
average
exercise
price
per option
Weighted
average
remaining
contractual
term (years)
Aggregate
intrinsic
value
(millions)
Outstanding at September 30, 2018
Exercised
Cancelled
Outstanding at September 30, 2019
Exercised
Cancelled
Outstanding at September 30, 2020
Granted
Exercised
Cancelled
Outstanding at September 30, 2021
Options
1,589,026 $
(726,636)
—
862,390 $
(534,291)
—
328,099 $
431,520
(151,399)
(8,421)
599,799 $
5.03
5.20
—
4.89
4.15
—
6.11
11.86
4.09
—
10.67
Exercisable at September 30, 2021
176,700 $
7.83
1.9 $
2.0 $
2.3 $
7.8 $
2.2 $
10.3
4.4
5.5
3.3
1.4
1.7
2.7
1.3
Stock option exercise prices are equal to the closing price of our common stock on the relevant grant date.
The ranges of exercise prices for stock options outstanding at September 30, 2021 are summarized below.
Exercise price
Options
Weighted
average
exercise price
Weighted
average
remaining
contractual
term (years)
$ 0.00 - $ 4.99
$ 5.00 - $ 9.99
$10.00 - $14.99
13,930 $
162,770
423,099 $
599,799 $
2.79
8.26
11.86
10.67
0.3
2.4
10.2
7.8
Exercisable
options
Weighted
average
exercise price
13,930 $
162,770
— $
176,700 $
2.79
8.26
—
7.83
Employee Stock Purchase Plan. The Mueller Water Products, Inc. 2006 Employee Stock Purchase Plan (“ESPP”)
authorizes the sale of up to 5,800,000 shares of our common stock to employees. Generally, all full-time, active employees are
eligible to participate in the ESPP, subject to certain restrictions. Employee purchases are funded through payroll deductions,
and any excess payroll withholdings are returned to the employee. The price for shares purchased under the ESPP is 85% of
the lower of the closing price on the first day or the last day of the offering period. At September 30, 2021, 2,254,023 shares
were available for issuance under the ESPP.
F- 33
Phantom Plan. Under the Mueller Water Products, Inc. Phantom Plan adopted in 2012 (“Phantom Plan”), we have
awarded “phantom units” to certain non-officer employees. A phantom unit settles in cash equal to the price of one share of our
common stock on the vesting date. Phantom units vest ratably over three years on each anniversary date of the original grant.
We recognize compensation expense for phantom units on a straight-line basis for each tranche of each award based on the
closing price of our common stock at each balance sheet date. The outstanding phantom units had a fair value of $15.22 per
unit at September 30, 2021 and our accrued liability for such units was $3.5 million.
Phantom Plan activity is summarized below.
Outstanding at September 30, 2018
Granted
Vested
Cancelled
Outstanding at September 30, 2019
Granted
Vested
Cancelled
Outstanding at September 30, 2020
Granted
Vested
Cancelled
Outstanding at September 30, 2021
Weighted
average
grant date
fair value
per unit
Weighted
average
remaining
contractual
term (years)
Aggregate
intrinsic
value
(millions)
Phantom
Plan units
262,773 $
180,747
(132,289)
(55,077)
256,154
188,973
(118,908)
(11,744)
314,475
185,808
(131,182)
(24,257)
344,844 $
12.12
10.53
11.61
11.61
11.26
11.23
11.16
11.91
11.30
11.51
0.6
0.9
0.9
0.9
$
$
$
1.4
1.3
1.6
F- 34
September 30,
2021
2020
(in millions)
100.9 $
41.6
42.2
184.7 $
12.8 $
10.7
0.2
2.9
0.8
1.9
29.3 $
6.1 $
84.6
433.3
83.7
607.7 $
(324.3)
283.4 $
27.1 $
19.3
2.7
1.8
16.8
1.3
4.3
73.3 $
87.3
32.4
42.8
162.5
10.9
6.4
5.5
3.7
—
2.5
29.0
6.2
80.4
406.3
57.4
550.3
(296.5)
253.8
25.6
17.5
2.1
1.8
0.9
1.3
2.1
51.3
$
$
$
$
$
$
$
$
$
Note 13.
Supplemental Balance Sheet Information
Selected supplemental asset information is presented below.
Inventories, net:
Purchased components and raw materials
Work in process
Finished goods
Total inventories, net
Other current assets:
Prepaid expenses
Non-trade receivables
Income taxes
Maintenance and repair supplies and tooling
Workers’ compensation reimbursement receivable
Other current assets
Total other current assets
Property, plant and equipment, net:
Land
Buildings
Machinery and equipment
Construction in progress
Total property, plant and equipment
Accumulated depreciation
Total property, plant and equipment, net
Other noncurrent assets:
Operating lease right-of-use assets
Maintenance and repair supplies and tooling
Workers’ compensation reimbursement receivable
Note receivable
Pension assets
Deferred financing fees
Other noncurrent assets
Total noncurrent assets
F- 35
Selected supplemental liability information is presented below.
Other current liabilities:
Compensation and benefits
Customer rebates
Interest payable
Warranty accrual
Deferred revenues
Refund liability
Operating lease liabilities
Taxes other than income taxes
Restructuring liabilities
Environmental liabilities
Income taxes payable
Workers’ compensation accrual
CARES Act payroll tax liabilities
Other current liabilities
Total current liabilities
Other noncurrent liabilities:
Operating lease liabilities
Warranty accrual
Transition tax liability
Uncertain tax position liability
Workers' compensation accrual
NMTC liability
Asset retirement obligation
CARES Act payroll tax liabilities
Deferred development grant
Other noncurrent liabilities
Total noncurrent liabilities
CARES Act
September 30,
2021
2020
(in millions)
$
$
$
$
44.6 $
19.6
6.2
6.7
5.4
6.0
4.0
4.4
3.1
1.2
8.5
2.6
3.6
11.2
127.1 $
24.6 $
3.0
4.7
4.8
7.9
3.9
3.6
3.6
2.5
3.4
62.0 $
32.8
9.6
7.3
7.2
5.6
4.3
4.0
3.9
2.8
1.2
0.2
2.7
—
5.0
86.6
23.3
7.2
5.2
4.5
3.8
—
3.5
3.3
2.5
3.0
56.3
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The
CARES Act is a relief package intended to assist in many aspects of the American economy through direct secured loans and
deferrals of the employer portion of social security taxes through the end of calendar year 2020, with 50% of the deferral due
December 31, 2021 and the remainder due December 31, 2022. For the fiscal year ended September 30, 2021, we have elected
to defer these obligations, which are approximately $7.2 million as shown above.
F- 36
Note 14.
Supplemental Statement of Operations Information
Between November 2019 and March 2021, we announced the purchase and closure of several facilities. We purchased a
new facility in Kimball, Tennessee, to support and enhance our investment in our Chattanooga, Tennessee large casting foundry
and closed our facilities in Hammond, Indiana and Woodland, Washington. We also announced the planned closures of our
facilities in Aurora, Illinois and Surrey, British Columbia, Canada. The majority of the activities from these plants will be
transferred to our Kimball, Tennessee facility. We expect to substantially complete the Aurora and Surrey facility closures by
the third quarter of fiscal year 2022 and expect to incur total expenses related to this restructuring of approximately $14.0
million, including termination benefit costs of approximately $4.8 million and other associated costs of $9.2 million. Of the
total $14.0 million estimated costs, approximately $3.6 million are expected to be non-cash charges. Expenses incurred during
the years ended September 30, 2021 and September 30, 2020 were approximately $5.6 million and $2.5 million, respectively.
The $5.6 million incurred during fiscal 2021 included approximately $3.2 million of termination benefit costs which are
included in Strategic reorganization and other charges and approximately $2.4 million in inventory write-downs which are
included in Cost of sales.
On June 15, 2021, we experienced a mass shooting tragedy at our Mueller Co. facility in Albertville, Alabama. The event
resulted in the deaths of two employees and injuries to two employees. For the year ended September 30, 2021, we incurred
expenses of $2.1 million related to this tragedy, which are included in Strategic reorganization and other charges. These
amounts are net of anticipated insurance recoveries.
Activity in accrued restructuring, reported as part of other current liabilities, is presented below.
Beginning balance
Expenses incurred
Amounts paid
Ending balance
2021
2020
2019
(in millions)
$
$
$
$
2.8 $
5.4 $
(5.1) $
3.1 $
1.7 $
4.8 $
(3.7) $
2.8 $
0.9
6.6
(5.8)
1.7
Selected supplemental statement of operations information is presented below.
Included in selling, general and administrative expenses:
Research and development
Advertising
Interest expense, net:
5.5% Senior Notes
4.0% Senior Notes
Deferred financing costs amortization
ABL Agreement
Capitalized interest
Other interest expense
Interest income
2021
2020
(in millions)
2019
$
$
$
$
17.1 $
3.2 $
17.6 $
6.2
1.1
0.9
(2.3)
0.3
23.8
(0.4)
23.4 $
15.0 $
3.3 $
24.8 $
—
1.2
0.6
(0.3)
0.3
26.6
(1.1)
25.5 $
14.3
7.1
24.8
—
1.2
0.6
(3.0)
(0.2)
23.3
(3.5)
19.8
F- 37
Note 15.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is as follows:
Balance at September 30, 2020
Other comprehensive income before reclassifications
Amounts reclassified out of accumulated other comprehensive loss
Other comprehensive income
Balance at September 30, 2021
Note 16.
Segment Information
Foreign
currency
translation
Pension
liability, net of
tax
(in millions)
Total
$
$
8.0 $
9.2
—
9.2
17.2 $
(32.7) $
8.6
1.9
10.5
(22.2) $
(24.7)
17.8
1.9
19.7
(5.0)
Our operations consist of two reportable segments: Infrastructure and Technologies. These segments are organized
primarily based on products sold and customers served and are consistent with how the segments are managed, how resources
are allocated and how information is used by the chief operating decision maker. Infrastructure manufactures valves for water
and gas systems including butterfly, iron gate, tapping, check, knife, plug, automatic control and ball valves and dry-barrel and
wet-barrel fire hydrants and pipe repair products. Technologies offers metering, leak detection, pipe condition assessment and
other products and services for the water infrastructure industry.
Segment results are not reflective of their results on a stand-alone basis. Intersegment sales and transfers are made at
selling prices generally intended to cover costs. Infrastructure personnel provide certain administrative services, including
management of accounts payable and accounts receivable, without any allocation of cost to Technologies. We do not believe
the costs of such administrative services are material to the segment’s results. The determination of segment results excludes
certain expenses designated as Corporate because they are not directly attributable to segment operations. Interest expense, loss
on early extinguishment of debt and income taxes are not allocated to the segments. Corporate expenses include those costs
incurred by our corporate function, such as accounting, treasury, risk management, human resources, legal, tax and other
administrative functions and also costs associated with assets and liabilities retained following the sales of U.S. Pipe and Anvil.
Corporate assets principally consist of our cash, operating lease assets, and certain real property previously owned by U.S. Pipe
and Anvil. Business segment assets consist primarily of receivables, inventories, property, plant and equipment, intangible
assets and other noncurrent assets.
Our largest customers are Ferguson and Core & Main. Information regarding concentrations of our net sales and accounts
receivable is presented below.
Percentage of gross revenue:
10 largest customers
2 largest customers
Ferguson percentage of gross revenue:
Consolidated
Infrastructure
Technologies
Core & Main percentage of gross revenue:
Consolidated
Infrastructure
2021
2020
2019
58 %
37 %
19 %
18 %
33 %
18 %
20 %
53 %
34 %
17 %
16 %
22 %
17 %
19 %
53 %
34 %
18 %
17 %
30 %
16 %
18 %
F- 38
Customer receivables:
Core & Main
Ferguson
Geographical area information is presented below.
September 30,
2021
2020
(in millions)
$
48.1 $
32.1
37.1
26.1
Property, plant and equipment, net:
September 30, 2021
September 30, 2020
United States
Israel
Other
Total
(in millions)
$
263.9 $
234.7
13.8 $
12.8
5.7 $
6.3
283.4
253.8
Infrastructure disaggregated net revenues:
Central
Northeast
Southeast
West
United States
Canada
Other international locations
Technologies disaggregated net revenues:
Central
Northeast
Southeast
West
United States
Canada and other international locations
2021
Year ended
September 30,
2020
(in millions)
2019
$
$
$
$
$
$
259.5 $
195.5
201.0
254.7
910.7 $
81.4
29.9
1,022.0 $
21.2 $
15.1
31.2
16.8
84.3 $
4.7
89.0 $
221.7 $
187.0
161.9
216.4
787.0 $
65.5
31.1
883.6 $
19.2 $
20.2
22.7
13.9
76.0 $
4.5
80.5 $
214.2
183.1
162.7
212.8
772.8
69.0
29.2
871.0
27.8
20.4
33.5
10.3
92.0
5.0
97.0
F- 39
Summarized financial information for our segments is presented below.
Net revenue:
2021
2020
2019
Operating income (loss):
2021
2020
2019
Depreciation and amortization:
2021
2020
2019
Strategic reorganization and other charges:
2021
2020
2019
Capital expenditures:
2021
2020
2019
Intangible assets, net and goodwill
September 30, 2021
September 30, 2020
Inventories, net:
September 30, 2021
September 30, 2020
Infrastructure
Technologies
Corporate
Total
(in millions)
$
$
$
$
$
1,022.0 $
883.6
871.0
204.3 $
186.7
182.3
51.3 $
49.1
44.8
(0.3) $
0.6
1.7
59.1 $
64.5
80.4
$
473.2 $
490.8
162.0
143.5
89.0 $
80.5
97.0
(13.1) $
(13.1)
(8.7)
8.1 $
8.5
7.9
— $
0.1
—
3.5 $
2.8
5.5
34.4 $
17.9
22.7
19.0
— $
—
—
(59.5) $
(56.8)
(49.3)
0.2 $
0.2
0.3
8.3 $
12.3
14.6
0.1 $
0.4
0.7
— $
—
—
—
1,111.0
964.1
968.0
131.7
116.8
124.3
59.6
57.8
53.0
8.0
13.0
16.3
62.7
67.7
86.6
507.6
508.7
184.7
162.5
Note 17.
Commitments and Contingencies
We are involved in various legal proceedings that have arisen in the normal course of operations, including the proceedings
summarized below. The effect of the outcome of these matters on our financial statements cannot be predicted with certainty as
any such effect depends on the amount and timing of the resolution of such matters and potential insurance coverage. Other
than the litigation described below, we do not believe that any of our outstanding litigation would have a material adverse effect
on our business or prospects.
Environmental. We are subject to a wide variety of laws and regulations concerning the protection of the environment,
both with respect to the operations at many of our properties and with respect to remediating environmental conditions that may
exist at our own or other properties. We accrue for environmental expenses resulting from existing conditions that relate to past
operations when the costs are probable and reasonably estimable.
Under the terms of the acquisition agreement relating to the August 1999 sale by Tyco of businesses which make up certain
of the companies within Mueller Water Products, Inc., we are indemnified by certain Tyco entities for, among other things, all
“Excluded Liabilities.” Excluded Liabilities include, among other things, substantially all liabilities relating to the time prior to
August 1999, including environmental liabilities. The indemnity survives indefinitely. Tyco’s indemnity does not cover
liabilities to the extent caused by us or the operation of our businesses after August 1999, nor does it cover liabilities arising
with respect to businesses or sites acquired after August 1999. Since 2007, Tyco has engaged in multiple corporate
restructurings, split-offs and divestitures. While none of these transactions directly affects the indemnification obligations of
the Tyco indemnitors under the 1999 acquisition agreement, the result of such transactions is that the assets of, and control
F- 40
over, such Tyco indemnitors has changed. Should any of these Tyco indemnitors become financially unable or fail to comply
with the terms of the indemnity, we may be responsible for such obligations or liabilities.
On July 13, 2010, Rohcan Investments Limited, the former owner of property leased by Mueller Canada Ltd. and located in
Milton, Ontario, filed suit against Mueller Canada Ltd. and its directors seeking C$10.0 million in damages arising from the
defendants’ alleged environmental contamination of the property and breach of lease. Mueller Canada Ltd. leased the property
from 1988 through 2008. We are pursuing indemnification from a former owner for certain potential liabilities that are alleged
in this lawsuit, and we have accrued for other liabilities not covered by indemnification. On December 7, 2011, the Court
denied the plaintiff’s motion for summary judgment.
The purchaser of U.S. Pipe has been identified as a “potentially responsible party” (“PRP”) under the Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”) in connection with a former manufacturing facility
operated by U.S. Pipe that was in the vicinity of a proposed Superfund site located in North Birmingham, Alabama. Under the
terms of the acquisition agreement relating to our sale of U.S. Pipe, we agreed to indemnify the purchaser for certain
environmental liabilities, including those arising out of the former manufacturing site in North Birmingham. Accordingly, the
purchaser tendered the matter to us for indemnification, which we accepted. Ultimate liability for the site will depend on many
factors that have not yet been determined, including the determination of EPA’s remediation costs, the number and financial
viability of the other PRPs (there are four other PRPs currently) and the determination of the final allocation of the costs among
the PRPs. Accordingly, because the amount of such costs cannot be reasonably estimated at this time, no amounts had been
accrued for this matter at September 30, 2021.
Walter Energy. We were a member of the Walter Energy, Inc (“Walter Energy”) federal tax consolidated group through
December 14, 2006, at which time the Company was spun-off from Walter Energy. Accordingly, we were jointly and severally
liable for the federal income tax liability, if any, of the consolidated group for each of those years. As a result of a proof of
claim filed by the IRS against Walter Energy in its 2015 bankruptcy case, we paid $22.2 million, including additional accrued
interest, to the IRS in final settlement of this tax dispute. All appeal periods have expired, and our liabilities with respect to the
Walter Tax Liability have been fully resolved.
The COVID-19 Pandemic. The pandemic has caused, and is likely to continue to cause, severe economic, market and other
disruptions to the United States and global economies. As a result of the pandemic, we experienced adverse business
conditions during the year, including significant costs to mitigate the pandemic effects. During the course of the pandemic, we
have taken steps, as reasonably necessary, to maximize liquidity by limiting cash expenditures, including furloughing
significant numbers of our employees, implementing temporary shutdowns of our manufacturing facilities or portions of our
manufacturing facilities, implementing temporary salary reductions for our senior leadership team, deferral of capital
expenditures, reduced fees for our Board of Directors and aggressively reducing general and administrative spending. We will
continue to take steps as necessary. We are uncertain of the potential full magnitude or duration of the business and economic
impacts from the unprecedented public health effort to contain and combat the spread of COVID-19, and while the extent to
which the pandemic affects our results will depend on future developments, the outbreak could result in material effects to our
future financial position, results of operations, cash flows and liquidity.
Mass Shooting Event at our Mueller Co. Facility in Albertville, Alabama. On June 15, 2021, we experienced a mass
shooting event at our Mueller Co. facility in Albertville, Alabama, in which two employees were killed and two employees
were injured. Various workers’ compensation claims arising from the event have been made to date, and we anticipate that
additional claims may be made, and that liability under such claims, if any, is not expected to have a material adverse effect on
our results of operations or cash flows. However, the possibility of other legal proceedings, and any related effects, arising from
this event cannot be predicted with certainty.
Indemnifications. We are a party to contracts in which it is common for us to agree to indemnify third parties for certain
liabilities that arise out of or relate to the subject matter of the contract. In some cases, this indemnity extends to related
liabilities arising from the negligence of the indemnified parties, but usually excludes any liabilities caused by gross negligence
or willful misconduct. We cannot estimate the potential amount of future payments under these indemnities until events arise
that would trigger a liability under the indemnities.
Additionally, in connection with the sale of assets and the divestiture of businesses, such as the divestitures of U.S. Pipe
and Anvil, we may agree to indemnify buyers and related parties for certain losses or liabilities incurred by these parties with
respect to: (i) the representations and warranties made by us to these parties in connection with the sale and (ii) liabilities related
to the pre-closing operations of the assets or business sold. Indemnities related to pre-closing operations generally include
certain environmental and tax liabilities and other liabilities not assumed by these parties in the transaction.
F- 41
Indemnities related to the pre-closing operations of sold assets or businesses normally do not represent additional liabilities
to us, but simply serve to protect these parties from potential liability associated with our obligations existing at the time of the
sale. As with any liability, we have accrued for those pre-closing obligations that are considered probable and reasonably
estimable. Should circumstances change, increasing the likelihood of payments related to a specific indemnity, we will accrue a
liability when future payment is probable and the amount is reasonably estimable.
Other Matters. We monitor and analyze our warranty experience and costs periodically and may revise our warranty
accruals as necessary. Critical factors in our reserve analyses include warranty terms, specific claim situations, incurred and
projected failure rates, the nature of product failures, product and labor costs, and general business conditions.
We are party to a number of other lawsuits arising in the ordinary course of business, including product liability cases for
products manufactured by us or third parties. While the results of litigation cannot be predicted with certainty, we believe that
the final outcome of such other litigation is not likely to have a material adverse effect on our business or prospects.
Note 18.
Subsequent Events
On October 22, 2021, our Board of Directors declared a dividend of $0.0580 per share on our common stock, a 5.5%
increase from the prior quarter, payable on or about November 22, 2021 to stockholders of record at the close of business on
November 10, 2021.
Additionally, we announced a new management structure effective October 1, 2021. The new structure is designed to
increase revenue growth, drive operational excellence, accelerate new product development and enhance profitability. We
anticipate the reorganization will strengthen the alignment of products, solutions and services with customer needs, accelerate
new product introductions and improve product life cycle management. The two newly named business units are Water Flow
Solutions and Water Management Solutions.
• Water Flow Solutions’ product portfolio includes iron gate valves, specialty valves and service brass products. Net
sales of products in the Water Flow Solutions business unit were approximately 60% of fiscal 2021 consolidated net
sales.
• Water Management Solutions’ product and service portfolio includes fire hydrants, repair and installation, natural gas,
metering, leak detection, pressure control and software products. Net sales of products in the Water Management
Solutions business unit were approximately 40% of fiscal 2021 consolidated net sales.
F- 42
Subsidiaries of Mueller Water Products, Inc.
Entity
State of incorporation or
organization
Doing business as
Exhibit 21.1
CAM Valves and Automation, LLC
Echologics B.V.
Echologics, LLC
Kansas
Netherlands
Delaware
Echologics Pte. Ltd.
Henry Pratt Company, LLC
Singapore
Delaware
Henry Pratt International, LLC
i2O Water Ltd
i2O Water International Holdings
Limited
i2O Water Latinoamérica S.A.S.
i2O Water Malaysia Sdn. Bhd.
i2O Water Spain SLU
James Jones Company, LLC
Jingmen Pratt Valve Co., Ltd.
Krausz Industries Development Ltd.
Krausz Industries Ltd.
Krausz USA Inc.
Mueller Canada Holdings Corp.
Mueller Canada Ltd.
Delaware
United Kingdom
United Kingdom
Colombia
Malaysia
Spain
Delaware
People’s Republic of China
Israel
Israel
Delaware
Canada
Canada
Mueller Co. International Holdings,
LLC
Mueller Co. LLC
Delaware
Delaware
Mueller Denmark ApS
Mueller FBM, Inc.
Mueller Group Co-Issuer, Inc.
Mueller Group, LLC
Denmark
Delaware
Delaware
Delaware
Mueller International Holdings
Limited
Mueller International, LLC
Mueller Middle East (FZE)
Mueller Products and Solutions,
LLC
United Kingdom
Delaware
United Arab Emirates
Delaware
Pratt Industrial
N/A
Delaware Echologics, LLC
Echologics Delaware, LLC
Echologics of Delaware, LLC
N/A
Hydro Gate
Lined Valve Company
Milliken Valve
N/A
N/A
N/A
N/A
N/A
N/A
James Jones Company of Delaware, LLC
N/A
N/A
N/A
Krausz Industries, Inc.
N/A
Echologics
Mueller Canada
Mueller Canada Echologics
N/A
Mueller Manufacturing Company, LLC
Mueller Company, LLC
Mueller Co. LP
Mueller Co. New York LLC
N/A
N/A
N/A
Mueller Flow, LLC
Mueller Group of Delaware, LLC
N/A
Mueller International (N.H.)
N/A
N/A
Mueller Property Holdings, LLC
Delaware
N/A
Mueller Service California, Inc.
Mueller Service Co., LLC
Mueller Systems, LLC
Mueller SV, Ltd.
MWP Israel, Ltd
OSP, LLC
Delaware
Delaware
Delaware
Canada
Israel
Delaware
PCA-Echologics Pty Ltd.
Singer Valve (Taicang) Co., Ltd.
U.S. Pipe Valve & Hydrant, LLC
Australia
People’s Republic of China
Delaware
Exhibit 21.1
N/A
Mueller Service Co. of Delaware
Mueller Service Co. of Delaware, LLC
Mueller Systems of Delaware, LLC
Singer Valve
N/A
OSP Properties, LLC
OSP of Delaware, Limited Liability Company
N/A
N/A
N/A
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
a. Registration Statement (Form S-8 No. 333-179441) pertaining to the Mueller Water Products, Inc.
Amended and Restated 2006 Stock Incentive Plan, and
b. Registration Statement (Form S-8 No. 333-209834) pertaining to the Mueller Water Products, Inc.
Amended and Restated 2006 Stock Incentive Plan;
of our reports dated November 18, 2021 with respect to the consolidated financial statements of Mueller Water
Products, Inc. and the effectiveness of internal control over financial reporting of Mueller Water Products, Inc.
included in this Annual Report (Form 10-K) for the year ended September 30, 2021.
/s/ Ernst & Young LLP
Atlanta, Georgia
November 18, 2021
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott Hall, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Mueller Water Products, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s
board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: November 18, 2021
/s/ Scott Hall
Scott Hall
Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Marietta Edmunds Zakas, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Mueller Water Products, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s
board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: November 18, 2021
/s/ Marietta Edmunds Zakas
Marietta Edmunds Zakas
Chief Financial Officer
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the accompanying Annual Report on Form 10-K of Mueller Water Products, Inc. (the “Company”) for
the year ended September 30, 2021 (the “Report”), I, Scott Hall, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
Exhibit 32.1
operations of the Company.
Dated: November 18, 2021
/s/ Scott Hall
Scott Hall
Chief Executive Officer
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the accompanying Annual Report on Form 10-K of Mueller Water Products, Inc. (the “Company”) for
the year ended September 30, 2021 (the “Report”), I, Marietta Edmunds Zakas, Executive Vice President and Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
Exhibit 32.2
operations of the Company.
Dated: November 18, 2021
/s/ Marietta Edmunds Zakas
Marietta Edmunds Zakas
Chief Financial Officer
BOARD OF DIRECTORS
Mark J. O’Brien
Non-Executive Chairman
Prior Chairman and
Chief Executive Officer
Walter Investment
Management Corp.
J. Scott Hall
President and Chief Executive Officer
Mueller Water Products, Inc.
Shirley C. Franklin
President
Clarke-Franklin & Associates, Inc.
Former Mayor of Atlanta
EXECUTIVE OFFICERS
J. Scott Hall
President and Chief Executive Officer
Marietta Edmunds Zakas
Executive Vice President and
Chief Financial Officer
Steven S. Heinrichs
Executive Vice President,
Chief Legal and Compliance Officer
and Secretary
Thomas J. Hansen
Prior Vice Chairman
Illinois Tool Works Inc.
Jerry W. Kolb
Prior Vice Chairman
Deloitte LLP
Christine Ortiz
Morris Cohen Professor of
Materials Science and Engineering
Massachusetts Institute of Technology
Bernard G. Rethore
Chairman Emeritus and
Prior Chief Executive Officer
Flowserve Corporation
Jeffery S. Sharritts
Senior Vice President of the Americas
Cisco Systems, Inc.
Lydia W. Thomas
Prior President and
Chief Executive Officer
Noblis, Inc.
Michael T. Tokarz
Chairman and Managing Principal
Tokarz Group LLC
Stephen C. Van Arsdell
Prior Senior Partner,
Deloitte LLP and Prior
Chairman and Chief Executive Officer
Deloitte & Touche LLP
Suzanne G. Smith
Vice President and
Chief Accounting Officer
Chad D. Mize
Senior Vice President,
Sales and Marketing
William A. Cofield
Senior Vice President,
Operations and Supply Chain
Richelle R. Feyerherm
Vice President,
Operations Controller
Todd P. Helms
Senior Vice President,
Chief Human Resources Officer
Kenji Takeuchi
Senior Vice President,
Water Management Solutions
Scott Floyd
Senior Vice President,
Water Flow Solutions
Common Stock
Trading Symbol: MWA
New York Stock Exchange
Transfer Agent and Registrar
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462 South 4th Street, Suite 1600
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Foreign Shareowners:
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STOCKHOLDER INFORMATION
Annual Meeting
The annual meeting of stockholders of
Mueller Water Products, Inc. will be held
February 7, 2022 at 10:00 a.m. ET
virtually via live webcast at:
www.meetnow.global/MFCCZPC
Corporate Office
Mueller Water Products, Inc.
1200 Abernathy Road, N.E.
Suite 1200
Atlanta, GA 30328
(770) 206-4200
www.muellerwaterproducts.com
Investor Contact
Investor Relations
Mueller Water Products, Inc.
1200 Abernathy Road, N.E.
Suite 1200
Atlanta, GA 30328
770-206-4116
Fax: (770) 206-4260
Media Contact
Corporate Communications
Mueller Water Products, Inc.
1200 Abernathy Road, N.E.
Suite 1200
Atlanta, GA 30328
(770) 206-4131
Fax: (770) 206-4235
Form 10-K
A copy of the Company’s Annual
Report on Form 10-K for the fiscal
year ended September 30, 2021,
including financial statements, is
available on the Company’s website
at www.muellerwaterproducts.com
or by written request to:
Investor Relations
Mueller Water Products, Inc.
1200 Abernathy Road, N.E.
Suite 1200
Atlanta, GA 30328
MUELLER®
ECHOLOGICS®
HYDRO GATE®
HYDRO-GUARD®
HYMAX®
i2O®
JONES®
KRAUSZ ®
MI.NET®
MILLIKEN®
PRATT®
PRATT INDUSTRIAL®
SINGER®
U.S. PIPE VALVE
AND HYDRANT
Mueller Water Products, Inc.
1200 Abernathy Road, N.E., Suite 1200
Atlanta, GA 30328
www.muellerwaterproducts.com
©2021 Mueller Water Products, Inc.
Trademarks referred to herein are owned
by Mueller International, LLC or other
affiliates of Mueller Water Products, Inc.
The papers used in the production of this Annual Report are all certified for Forest Stewardship Council® (FSC®) standards, which promote
environmentally appropriate, socially beneficial, and economically viable management of the world’s forests. This Annual Report was printed
by a facility in North America that uses exclusively vegetable-based inks.