MWA Mueller Water Products, Inc. - 10-K

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 in connection with 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 projects. 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, could 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 thus may adversely affect our financial results.

Governments and private water entities may have limited abilities to increase taxes, water fees or water rates, as applicable. 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, have in the past, and may in the future, significantly increase the cost of the projects in which our products are utilized, such as in new residential construction and water and wastewater infrastructure upgrade, repair and replacement projects, and lead to such projects being reduced, delayed and/or rescheduled, which could result in a decrease in our sales and earnings and adversely affect our financial condition. In addition, higher interest rates are often accompanied by inflation. We have in the past, and may in the future, 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 have had, and may in the future have, an adverse effect on 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 third 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.

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Distributors in our industry have experienced consolidation. If such consolidation continues, our distributors could be acquired by other distributors who have better relationships with our competitors, and consequently, pricing and profit margin pressure may intensify. Pricing and profit margin pressure or the loss of any one of our key distributors in any market could adversely affect our operating results.

Certain products and solutions, primarily technology-enabled products and solutions, as well as gas repair products are sold directly to end users. Some of these customers represent a relatively high concentration of these sales. Over time, growth in sales is expected to lessen the significance of individual customers. In the short term, net sales could decline if existing significant customers do not continue to purchase our products or services and new customers are not obtained to replace them.

Strong competition could adversely affect prices and demand for our products and services, which would adversely affect our operating results and financial condition.

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, and product specifications and availability. Our ability to retain customers in the face of competition depends on our ability to market our products and services to our customers and end users effectively.

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 United States and Canadian 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 and Canada 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 and 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 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. The markets for our technology-enabled products and services have developed more slowly than we expected and may continue to do so. If these products and services fail to gain market acceptance, our opportunity to grow these businesses will be limited.

Risks related to our business strategy

We may not be able to adequately manage the risks associated with our products, systems and solutions, including increased warranty costs.

The success of our products and systems depends on our ability to manage the risks associated with their introduction and continued maintenance and management, including the risk that our products and systems may have quality or other defects or deficiencies that result in their failure to satisfy performance or reliability requirements. Our success depends in part on our ability to manage these risks, including costs associated with design, manufacturing, installation, maintenance and warranties. Managing these risks can be costly and technologically challenging, and we cannot determine the ultimate effect they may

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have. The estimation of warranty liabilities involves considerable judgment due to the complex nature of these exposures and the unique circumstances of various claims. Furthermore, once customers assert claims for an alleged product defect, determining the potential exposure or liability related to such allegation or the extent to which the assertion of these claims may expand geographically may be difficult. Although we maintain insurance for certain product related claims, such policies may not be available to us or adequately cover the liability for damages, the cost of repairs and/or the expense of litigation. Current and future claims may arise out of events or circumstances not covered by insurance and not subject to comprehensive indemnification agreements with our subcontractors. Failure to successfully manage these challenges could result in lost sales, significant expense and harm to our reputation.

Our products and services may be affected from time to time by design and manufacturing defects that could materially adversely affect the business and result in harm to our reputation.

We offer several technologically enhanced, complex hardware and software products, services and solutions that can be negatively impacted by design and manufacturing defects. Defects can also exist in components and products we purchase from third parties. Component defects could make our products unsafe and create a risk of environmental or property damage and personal injury. In addition, our products, services and solutions can have quality issues and from time-to-time experience outages, disruptions, slowdowns or errors. As a result, our products and services may not perform as anticipated and may not meet customer expectations. There can be no assurance we will be able to detect and fix all issues and defects in products, services and solutions we offer. Failure to do so can result in widespread technical and performance issues negatively impacting our products, services and solutions. In addition, we can be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment, and/or intangible assets, and significant warranty and other expenses, including litigation costs. Quality problems can also adversely affect the experience for our customers and result in harm to our reputation, loss of competitive advantage, poor market acceptance, reduced demand for products, services and solutions, new products, services and solutions introduction delays and lost sales.

Inefficient or ineffective capital allocation, along with increased capital expenditures to modernize our aging facilities and expand our capabilities and capacity, could adversely affect our operating results, cash availability, strategic opportunities and/or stockholder value.

Our goal is to invest capital to generate long-term value for our stockholders. This includes spending on capital projects; developing or acquiring strategic businesses, technologies and product lines with the potential to strengthen our industry position; enhancing our existing set of product and service offerings or entering into new markets; as well as periodically returning value to our stockholders through share repurchases and dividends. 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.

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 impact 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.

Acquisitions and technology investments may involve significant cash expenditures, the incurrence of debt, operating losses and expenses that could have a materially adverse effect on our business, financial condition, results of operations and cash flows. These types of transactions involve numerous other risks, including but not limited to:

• Diversion of management time and attention from existing operations,

• Difficulties in integrating acquired businesses, technologies and personnel into our business or into our compliance and control programs, particularly those that include international operations,

• Working with partners or other ownership structures with shared decision-making authority (our interests and other ownership interests may be inconsistent),

• Difficulties in obtaining and verifying relevant information regarding a business or technology prior to the consummation of a transaction, including the identification and assessment of liabilities, claims or other circumstances, including those relating to intellectual property claims, which could result in litigation or regulatory exposure,

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• Assumption of liabilities that exceed our estimated amounts,

• Verification of financial statements and other business information of an acquired business,

• Inability to obtain required regulatory approvals and/or required financing on favorable terms,

• Potential loss of key employees, contractual relationships or customers of the acquired business,

• Increased operating expenses related to the acquired businesses or technologies,

• The failure of new technologies, products or services to gain market acceptance with acceptable profit margins,

• Entering new markets in which we have little or no experience or in which competitors may have stronger market positions,

• Dilution of stockholder value through the issuance of equity securities or equity-linked securities, and

• Inability to achieve expected synergies or the achievement of such synergies taking longer than expected to realize, including increases in sales, enhanced efficiencies or increased market share, or the benefits ultimately may be smaller than we expected.

Any acquisitions or investments may ultimately harm our business or financial condition, as they may not be successful and may ultimately have an adverse effect on our operating results, financial condition and/or result in impairment charges.

Potential international business opportunities may expose us to additional risks, including foreign currency exchange rate fluctuations.

Part of our growth strategy depends on expanding internationally. Although sales outside of the United States account for a relatively small percentage of our total net sales, we have business activity in Canada, China, Israel and the United Kingdom. Some countries that present potential business opportunities also face political and economic instability and vulnerability to infrastructure and other disruptions. 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 that such activities may divert our resources and management time.

In addition, compliance with the laws, regulations and taxes of multiple international jurisdictions increases our cost of doing business. International operations are subject to anti-corruption laws and anti-competition regulations, among others. 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.

We make sales, incur expenses and invest cash in foreign currencies as part of our operations outside of the United States. Accordingly, fluctuations in foreign currency exchange rates may significantly increase the amount of United States dollars required for foreign currency expenses or significantly decrease the United States dollars we receive from sales denominated in a foreign currency. 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 distribution 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, the qualification of alternative suppliers and the establishment of reliable supplies could result in delays and a possible loss of profits, which could harm our operating results.

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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 increased product costs. In instances where we stock lower levels of product inventories, a disruption in product availability could harm our financial performance and our ability to satisfy customer needs. 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, air and trucking systems and, therefore, disruption in these logistics services because of weather-related problems, such as hurricanes, strikes, bankruptcies, inflation, public health crises, such as pandemics, or other events could adversely affect our financial performance and financial condition, negatively impacting sales, profitability and cash flows.

The Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel, in October 2023. While we continue to operate the facility since reopening in November 2023, continued disruptions and escalations of conflicts in the area may increase the likelihood of supply interruptions and may continue to hinder our ability to acquire the necessary materials we need to make our products. Supply disruptions from lack of access to materials has impacted, and continues to impact, our ability to produce and deliver our products on time and at favorable pricing.

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 the northern United States and most of Canada generally face weather conditions that restrict significant construction activity. This seasonality in demand makes it challenging to predict sales and has resulted in fluctuations in our sales and operating results. To satisfy demand during expected peak periods, we may incur costs associated with building inventory in off-peak periods, and our projections as to future needs may not be accurate. 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 tends to increase transportation costs. We also have relatively few manufacturing sites, which tends to increase transportation distances to our customers and consequently increases our transportation costs. Additionally, energy and fuel costs can fluctuate markedly, which may result in significant cost increases particularly for the price of oil and gasoline. High transportation costs could make our products less competitive compared to similar or alternative products offered by competitors.

Our business, financial condition and results of operations may be adversely impacted by the effects of inflation.

Inflation has recently adversely affected and has the potential to continue to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, including purchased parts, commodity and raw material costs and labor. 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. Other inflationary pressures could affect wages, the cost and availability of components and raw materials and other inputs and our ability to meet customer demand. Inflation may further exacerbate other risk factors, including supply chain disruptions, risks related to international operations and the recruitment and retention of qualified employees .

Our high fixed costs may make it more difficult for us to respond to economic cycles.

A significant portion of our cost structure is fixed, including manufacturing overhead, capital equipment and research and development costs. In a prolonged economic downturn, these fixed costs may cause our gross margins to erode and our earnings to decline.

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We may experience difficulties implementing upgrades to our software systems.

We engage in implementations and upgrades to our software systems, including to our Enterprise Resource Planning (“ERP”) system. The ERP is designed to accurately maintain the Company’s books and records and provide information important to the operation of the business to the Company’s management team. Any software implementation or upgrade requires significant investment of human and financial resources, and we may experience significant delays, increased costs and other difficulties. Any significant disruption or deficiency in the design and implementation of our software systems, including our ERP, 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 invest significant resources in planning and project management, significant issues may arise.

Normal operations at our key manufacturing facilities may be interrupted.

Some of our key products, including fire hydrants, iron gate valves, service brass products, specialty valves and repair products are manufactured at a single facility or a few facilities, which depend on critical pieces of heavy equipment that cannot be moved economically to other locations or sourced quickly. 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, new and ongoing public health crises, severe weather or other similar occurrences,

• Terrorist attacks, governmental instability, national emergencies, wars, mass shootings or other acts of violence,

• Interruptions in the delivery of raw materials or purchased parts, shortages of equipment or spare parts or other manufacturing inputs,

• Adverse government regulations, including trade protection measures and import or export duties or licensing requirements,

• Equipment or information systems breakdowns or failures,

• Maintenance outages to conduct maintenance activities that cannot be performed safely during operations,

• Prolonged power failures or reductions,

• Violations of our permit requirements or revocation of permits,

• Release of pollutants and hazardous substances to air, soil, surface water or ground water,

• Labor disputes, and

• Cyberattacks and events.

The 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 methods we employ to protect our intellectual property rights may not adequately deter infringement, misappropriation or independent development of our technology, and they may not prevent an unauthorized party from obtaining or using information or intellectual property that we regard as proprietary or keep others from using brand names similar to our own. The 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 expense and the diversion of resources to respond to these claims. Finally, for those products in our portfolio that rely on patent protection, once a patent has expired the product is further subjected to competition. Products under patent protection potentially generate significantly higher sales and earnings than those not protected by patents. If we fail to successfully enforce our intellectual property rights or register new patents, our competitive position could suffer, which could adversely affect our business, financial condition, results of operations and cash flows.

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If we do not successfully maintain our information and technology networks, including the security of those networks, our operations could be disrupted and unanticipated increases in costs and/or decreases in sales could result.

We rely on various information technology systems, some of which are controlled by outside service providers, to manage key aspects of our operations. The 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, suppliers and customers. Cyber and other data security breaches of this infrastructure can create system disruptions, shutdowns or unauthorized disclosure of confidential information. Likewise, if we or our service providers are unable to prevent future cybersecurity incidents, our operations could be disrupted, or we may suffer financial, reputational or other harm. We continue to incur costs in connection with efforts to investigate potential threats, assess relevant impacts, enhance our data security and protect against unauthorized access to, or manipulation of, our systems and data. Despite incurring these costs, we may not be able to prevent future cyber incidents. Further, customers and third-party providers increasingly demand rigorous contractual provisions regarding privacy, cybersecurity, data protection, confidentiality and intellectual property, which may also increase our overall compliance burden and related costs.

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. As previously reported, we have in the past experienced cybersecurity incidents. 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 and evolving, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs.

Cyberattacks and security vulnerabilities could lead to reduced sales, increased costs, liability claims, unauthorized access to customer data or harm to our reputation.

Cybersecurity threats are constantly evolving and can take a variety of forms, increasing the difficulty of preventing, detecting and successfully defending against them.  Individuals and groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states, continuously undertake attacks that pose threats to our customers and our information technology systems.  These actors use a wide variety of methods, which may include developing and deploying malicious software or exploiting vulnerabilities in hardware, software, radio communication protocols or other infrastructure to attack our products and services. Additionally, these actors may reverse-engineer trade secrets or other confidential intellectual property, or gain access to our networks and data centers, using social engineering techniques to induce our employees, users, partners or customers to disclose passwords or other sensitive information or to take other actions to gain access to our data or our users’ or customers’ data, or act in a coordinated manner to launch distributed denial of service attacks, or deny or postpone access to critical water infrastructure telemetry through vulnerabilities in our cloud services and infrastructure, or logging, sensing and telemetry products. Inadequate account security practices may also result in unauthorized access to confidential data.

Despite the implementation of a variety of security controls and measures, as well as those of our third-party administrators and vendors, there is no assurance that such actions will be sufficient to prevent or detect another cybersecurity incident or other vulnerabilities, which may allow them to persist in the environment over long periods of time. Cybersecurity events have had, and in the future may have, cascading impacts that unfold with increasing speed across our internal networks and systems. Such threats may also impact the networks and systems of our business associates and customers. Breaches of our facilities, network or data security have in the past and may in the future disrupt the security of our systems and business applications, impair our ability to provide services to our customers and require us to allocate more resources to improved technologies. Such breaches may also impair our ability to protect the privacy of customer data, result in product development delays, compromise confidential or technical business information harming our reputation, result in theft or misuse of our intellectual property or other assets, or otherwise adversely affect our business.

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Challenges and uncertainties with respect to the development, deployment and use of artificial intelligence (“AI”) in our business and products, services and solutions may result in reputational harm, competitive disadvantages and adverse impacts to our operations, business and financial results.

We are in the initial stages of incorporating AI into our operations and our products, services and solutions. AI presents risks and challenges that could adversely impact our business. AI, especially during the early stages of the development and use, carries inherent risks with no guarantee that AI will enhance or improve our operations, products, services or solutions. Ineffective or inadequate AI development or deployment practices could result in unintended consequences. Any disruption, malfunction or failure in AI functionality could result in delays in production, use or sale of our products, services and solutions and adversely affect our business and reputation.

Further, we face risks of competitive disadvantage if our competitors more effectively leverage AI to drive operational efficiencies, create new or enhanced products, services and solutions or otherwise disrupt the marketplace. Failure to effectively develop, implement, use and manage AI may negatively impact our ability to compete, reduce revenue and adversely impact our business.

The legal and regulatory environment landscape surrounding AI is uncertain and rapidly evolving, including the areas of intellectual property, cybersecurity and privacy and data protection. Compliance with new or changing laws, regulations or industry standards relating to AI may require significant investment and resources, and may limit our ability to develop, implement or use AI, which may result in reputational harm, legal liability or other adverse effects on our operations, products, services, solutions and overall business.

Our vendors, suppliers and third-party providers may incorporate AI into their offerings with or without disclosing this use to us. These third-parties may not meet existing or rapidly evolving regulatory or industry standards related to privacy and data protection, or such AI use may result in unintended consequences related to our operations, products, services and solutions, any of which may adversely impact our reputation, operations, products, services, solutions and overall business. Further, threat actors may continue to develop and use AI to engage in illegal activities, including cyberattacks, to access, steal or misuse personal data, confidential information and intellectual property. Any of these uses of AI could damage our reputation, result in the loss of valuable property and information and adversely impact our business.

Misuse of our technology-enabled products, services and solutions could lead to reduced sales, 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 have been remedied and cannot be disclosed without compromising security. We may also make prioritization decisions in determining which vulnerabilities or security defects to fix, and the timing of these fixes, which could result in periods of 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 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 have in the past and may in the future be subject to investigations, claims, litigation and other proceedings outside the ordinary course of business. 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, which could have a materially 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

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DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 15. 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 comply with these laws and regulations may adversely affect us.

We are subject to stringent laws and regulations relating to the protection of the environment, health and safety and incur significant capital and other expenditures to comply with these requirements. Failure to comply with any environmental, health or safety requirement could result in the assessment of damages, the imposition of penalties, suspension of production, changes to equipment or processes or a cessation of operations at our facilities, any of which could have a materially adverse effect on our business. 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 strict, 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 or waste disposal 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 investigation or remediation costs of these environmental sites may exceed estimated costs, and additional sites in the future may require material remediation expenses. If actual expenditures exceed our estimates, our results of operations and financial position could be materially and adversely affected. See “Item 1. BUSINESS - Regulatory and Environmental Matters,” “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Contingencies” and Note 15. of the Notes to Consolidated Financial Statements.

Climate change and legal or regulatory responses thereto may have an adverse impact on our business and results of operations.

The impacts of climate change are highly unpredictable, and there is growing concern that a gradual increase in global average temperatures as a result of increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. These impacts present potential challenges to water related products, such as degradation of water quality and changes in water conservation or efficiency requirements. Certain events may disrupt the operations of our customers, creating customer shutdowns that prevent or defer sales of our products or services, while other events may drive increased demand for our products or services, which may create volatility in our business and results of operations.

Concern over climate change also may result in additional legal or regulatory requirements designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment. Many of our manufacturing plants use significant amounts of electricity generated by burning fossil fuels, which release carbon dioxide. 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. Climate change and efforts to limit climate change may impair our production capabilities, disrupt our supply chain or impact demand for our products. 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.

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

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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.

From time to time, there are changes to our executive leadership team, including as a result of the hiring, departure or realignment of key personnel. Any significant leadership change or senior management transition involves inherent risk, and any failure to find a necessary, suitable replacement on a timely basis to ensure a smooth transition could hinder our strategic planning, business execution and future performance. Our ability to expand or maintain our business depends on our ability to hire, train and retain employees, including executive officers, with the skills necessary to understand and adapt to the continuously developing needs of our customers. The increasing demand for qualified personnel makes it more difficult to attract and retain employees with requisite skill sets, as well as employees with specialized technical and trade experience. Changing demographics and labor work force trends also may result in a loss of knowledge and skills as experienced workers retire. 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 we 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 sales, 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,

• Availability of skilled labor, 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.

Our expenditures for pension obligations could be materially higher than we have predicted.

We provide pension benefits to certain current and former employees. To determine our future payment obligations under the plan, certain rates of return on the plan’s assets, growth rates of certain costs and participant longevity have been estimated. The proportion of fixed income and equity securities held by the plan is heavily weighted to fixed income and varies based on funding status in accordance with the plan’s governing investment policy. Assumed discount rates, expected return on plan

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assets and participant longevity have significant effects on the amounts reported for our pension obligations and pension expenses.

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 expenses. 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. In addition, we have incurred costs to comply with 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 have not always been, and may not always be, in compliance with the trade laws and regulations in all respects. Improper actions could subject us to civil or criminal penalties, including material monetary fines, or other adverse actions, including denial of import or export privileges, and could harm our reputation and our business prospects. See Note 15. of the Notes to Consolidated Financial Statements.

If significant tariffs or other restrictions continue to be placed on foreign imports by the United States and related countermeasures are taken by impacted foreign countries, our sales and results of operations may be harmed.

If significant tariffs or other restrictions continue to be placed on foreign imports by the United States and related countermeasures are taken by impacted foreign countries, our sales and results of operations may be harmed. For example, ongoing trade tensions between the United States and China have led to a series of significant tariffs being levied on certain of our product categories. Furthermore, the Trump administration has implemented tariffs on foreign imports into the United States from all of our supplier countries, as well as on specific commodities used in our operations, such as steel, aluminum, and copper. The materials subject to these tariffs can be expected to impact our raw material costs as well. If further tariffs are imposed on a broader range of imports, or if further retaliatory trade measures are taken by China or other countries in response to additional tariffs, we may be required to raise our prices or incur additional expenses, which may result in the loss of customers and harm our operating performance, sales and earnings.

The 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, inflation, foreign currency exchange rates, freight costs, tariffs, commodity speculation and other external factors, including public health crises (such as the COVID-19 pandemic) or other supply chain challenges. Inflation in material costs has occurred in 2024 and 2025 and we expect it to continue into fiscal 2026.

We may not be able to pass on all, or any, of increased costs for purchased components and raw materials to our customers or offset fully the effects of these higher costs through productivity improvements. In particular, when purchased component or raw material prices increase rapidly or to significantly higher than normal levels, we may not be able to pass cost increases through to our customers on a timely basis, if at all, which would reduce our profitability and cash flows. In 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

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and raw materials or they may obtain these supplies on more favorable terms than we do, which could give them a cost advantage.

Our business, operating results and financial condition may be negatively impacted by geopolitical events, including wars, terrorism, industrial accidents and other business interruptions.

Geopolitical events, international disputes, wars, terrorism, industrial accidents and other business interruptions can harm or disrupt international commerce as well as the global economy and could have a materially adverse effect on us and our customers, suppliers, logistics providers, distributors and other channel partners. The threat of terrorism and heightened security and military action in response thereto, or any other current or future acts of terrorism, wars, including the Israel-Hamas and Russia-Ukraine wars, and other events, including economic sanctions and trade restrictions, have disrupted the world’s economies and may cause further disruptions that could negatively impact our business, operating results and financial condition.

Our Krausz business includes a manufacturing facility in Ariel, Israel. In response to the operational challenges created by the Israel-Hamas war, we modified our Krausz operations. Such modifications may continue to adversely impact our operating results. If the current Israel-Hamas ceasefire agreement fails, additional restrictions and other governmental actions could increase the severity of the impact on our operations in Israel and could materially adversely affect our business. A severe disruption to our business may result in significant lost sales and may require substantial recovery time and expenditures to resume operations.

Additionally, if the current Israel-Hamas ceasefire agreement fails and there is additional loss of infrastructure and utilities services, such as energy, transportation, or telecommunications, plant closures and employee concerns in our Krausz business, we could experience increased costs and other negative financial impacts. If such disruptions result in delays or cancellations of customer orders or the manufacture or shipment of our products, our business, operating results and financial condition could be materially adversely affected.

Other risks related to our business

Our business, operations and markets, and those of our suppliers, business partners and customers, may be adversely affected by current and future outbreaks of infectious diseases or other health crises.

The COVID-19 pandemic and the resulting impact on global economies created a number of macroeconomic challenges that impacted our business, including volatility and uncertainty in business planning, disruptions in global supply chains, material, freight and labor inflation, shortages of and delays in obtaining certain materials and component parts and labor shortages.

Future outbreaks of infectious diseases may result in widespread or localized health crises that adversely affect general commercial activity and the economies and markets of the countries and localities in which we operate, sell and purchase goods and services. Any outbreak of infectious disease poses the risk that we or our employees, contractors, suppliers, customers, transportation providers and other business partners may be prevented or impaired from conducting ordinary business activities for an indefinite period of time, including self-imposed facility shutdowns to protect the health and well-being of our employees or government-mandated shutdowns. In addition, our suppliers, business partners and customers may also experience similar negative impacts. Global supply chains may be disrupted, causing shortages, which could impact our ability to manufacture or supply our products. This disruption of our employees, distributors, suppliers and customers may impact our sales and future operating results.

Item 1C.    CYBERSECURITY

Our Board of Directors maintains oversight responsibility for how we manage risk, and it charges management with assessing and mitigating that risk through the development, implementation and maintenance of our risk management processes, including our cybersecurity program. Our internal audit department, which reports to the Audit Committee, administers our enterprise risk assessment and, in coordination with our legal and compliance functions, is responsible for ongoing enterprise risk management assessments. Our internal audit department also regularly reports to the Board of Directors and its committees on risk-related issues.

The Audit Committee of the Board of Directors oversees our cybersecurity and data privacy programs and practices and consults with management regarding cybersecurity initiatives. This committee is also responsible for reviewing cyber and data security matters, including cybersecurity threats that we may face in our operations and our risk mitigation initiatives. At least twice a year, the Audit Committee receives updates on our cybersecurity and data privacy programs and practices from our Senior Vice President of Information Technology and our Senior Director of Information Security. The topics reported by the

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Senior Vice President of Information Technology and our Senior Director of Information Security include updates on cybersecurity threats we face, the status of projects to strengthen our information security systems, assessments of the cybersecurity program, and the emerging threat landscape, as well as the results of any third-party assessments conducted. Our Senior Vice President of Information Technology holds an undergraduate degree in Technology Management (Manufacturing Systems), and has served in various roles in information technology for over 20 years and within Mueller for over five years. Our Senior Director of Information Security holds an undergraduate degree in Computer Engineering and has served in various roles in information security and engineering within Mueller for over 21 years.

We have two cybersecurity teams, each dedicated to a specific area. Our Information Technology Cybersecurity team focuses on corporate programs, and our Products Cybersecurity team focuses on customer-facing programs. These teams work collaboratively to implement programs designed to protect our information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents in accordance with our incident response and recovery plans. To facilitate the success of our cybersecurity risk management program, these teams are responsible for addressing cybersecurity threats and responding to cybersecurity incidents. Through ongoing communications with these teams, the Senior Vice President of Information Technology, the Senior Director of Information Security and the General Counsel monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and report such threats and incidents to the Audit Committee when appropriate. Similarly, the Audit Committee reports cybersecurity threats and incidents to the full Board of Directors as appropriate.

Risk Management and Strategy

Risk Assessment

Our cybersecurity policies, standards, processes and practices are integrated into our enterprise risk management processes and are based on a recognized framework established by the National Institute of Standards and Technology (“NIST”) and combined with the Center of Internet Security (“CIS”) controls framework are used to develop actionable steps for improving technical defenses and protecting against common threats. In general, we seek to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, integrity and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur. We have established and maintain comprehensive incident response and recovery plans that detail our planned responses to cybersecurity incidents. These plans are tested and evaluated on a regular basis. We periodically assess and test the policies, standards, processes and practices that are designed to address cybersecurity threats and incidents. These efforts include a wide range of activities, including audits, assessments, tabletop exercises, threat modeling, vulnerability testing and other exercises focused on evaluating the effectiveness of our cybersecurity measures and planning.

Independent Assessments

We engage third parties to perform assessments of our cybersecurity programs, including information security maturity assessments, audits and independent reviews of our information security control environment and operating effectiveness. The results of such assessments, audits and reviews are reported to the Audit Committee and the Board of Directors, and we adjust our cybersecurity policies, standards, processes and practices as necessary based on the information provided by these assessments, audits and reviews.

Technical Safeguards

We deploy technical safeguards that are designed to protect our information systems from cybersecurity threats, including 24/7 detect and response services, network activity monitoring, phishing prevention, penetration testing and periodic IT security maturity assessments. As part of these efforts, we have engaged third-party cybersecurity providers to help deploy and monitor these safeguards and to assist in the event of a security incident or similar issue by conducting forensics reviews and assisting more broadly with the mitigation and remediation of any such event.

Third-Party Risks

We maintain a comprehensive, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems.

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Education and Awareness

All employees are required to complete information security awareness training upon joining the Company. Based on individual phishing test performance and job requirements, additional training may be offered or required on an as-needed basis.

Effects and Impacts of Cybersecurity Risks

As announced on October 28, 2023, we identified a cybersecurity incident impacting certain internal operations and information technology systems which adversely affected our ability to ship orders in the first quarter of fiscal 2024. All of our facilities were operational by mid-December 2023 and were returned to normalized operations. We incurred $1.5 million of expenses related to the cybersecurity incident in the first fiscal quarter of fiscal 2024. Additionally, we have invested and intend to continue to invest in strengthening our systems, cybersecurity training, policies, programs, response plans and other similar measures. As of the date of this report, except as set forth herein, we are not aware of any risks from cybersecurity threats that have materially affected us, including our business strategy, results of operations or financial condition. See “Item 1A. RISK FACTORS” - “If we do not successfully maintain our information and technology networks, including the security of those networks, our operations could be disrupted and unanticipated increases in costs and/or decreases in sales could result,” “We may fail to effectively manage confidential data, which could harm our reputation, result in substantial additional costs and subject us to litigation,” and “Cyberattacks and security vulnerabilities could lead to reduced sales, increased costs, liability claims, unauthorized access to customer data or harm to our reputation.”

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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”. This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussion of year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7. of our Annual Report on Form 10-K for the year ended September 30, 2024.

Overview

Business

We operate our business through two segments, Water Flow Solutions and Water Management Solutions. Water Flow Solutions’ portfolio includes iron gate valves, specialty valves and service brass products. Water Management Solutions’ portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, as well as pressure management and control products and solutions.

In January 2025, we announced the appointment of Ms. Melissa Rasmussen as Senior Vice President and Chief Financial Officer effective March 3, 2025. On March 1, 2025, Mr. Steven S. Heinrichs transitioned from his roles as Chief Financial Officer and Chief Legal Officer to Senior Advisor and remained an advisor until September 30, 2025. In August 2025, we announced the appointment of Ms. Richelle R. Feyerherm as Chief Accounting Officer effective August 15, 2025. Ms. Feyerherm also serves as the Company’s principal accounting officer. On November 6, 2025, we announced that Ms. Marietta Edmunds Zakas will retire as the Company’s Chief Executive Officer and as a member of the Company’s Board of Directors, effective as of February 9, 2026. In connection with Ms. Zakas’ retirement, the Company’s Board of Directors appointed Mr. Paul McAndrew as President and Chief Executive Officer, effective as of the Transition Date.

We estimate approximately 60% to 65% of the Company’s 2025 net sales were associated with the repair and replacement of municipal water infrastructure, approximately 25% to 30% were related to residential construction activity and approximately 10% were related to natural gas utilities and industrial applications.

After experiencing challenges resulting from the COVID-19 pandemic and subsequent supply disruptions in years 2020 through 2023, the seasonality of our business has since returned to more normalized levels, supported by municipal spending on repair and replacement projects and new residential construction activity. According to the United States Department of Labor, the trailing twelve-month average consumer price index for water and sewerage rates as of September 30, 2025 increased 4.6%. Total housing starts in fiscal 2025 decreased 1.1% as compared with fiscal 2024, according to the United States Census Bureau, which included a 5.2% decrease in single family housing starts as compared with fiscal 2024.

Recent Developments

In October 2023, the Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel. While we reopened the facility in November 2023, the war caused supply chain challenges that hindered our ability to most efficiently manufacture our products produced in Israel. While the facility was adversely impacted by this event, we have mitigated operational risk by expanding our suppliers and improving throughput in order to increase production levels and to meet customer delivery times. While net sales levels have returned to pre-war levels, margin expansion was further hindered by newly implemented tariffs on products manufactured in Israel and imported into the United States.

While newly implemented tariffs are adversely impacting several product lines, Repair and Specialty Valve product lines are bearing most of the higher costs. In response to tariffs that went into effect in the second half of fiscal 2025, we implemented additional pricing actions, which are expected to mostly offset tariff costs in dollar terms but will result in tariff-related impacts being dilutive to margins. As the tariffs remain uncertain and volatile, we will continue to monitor the situation and take appropriate actions to address inflationary and other cost pressures.

At the end of the first quarter, we ceased melting and casting operations at our legacy brass foundry and transitioned production to our state-of-the-art foundry. We expect this transition will improve operational efficiency and enable us to better serve our service brass customers. As part of Mueller’s overall strategy, we will continue investing in our foundries to expand

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capacity, increase manufacturing efficiencies and strategically position ourselves as the demand for domestic product is expected to increase given the uncertainty in the current geopolitical and tariff environment.

Outlook

For fiscal year 2026, we anticipate that consolidated net sales will increase between 1.4% and 2.8% as compared with fiscal 2025. The external operating environment remains uncertain as we face changes in government policies, including possible disruptions to global supply chains resulting from such changes, the interest rate and tariff environment, as well as geopolitical conditions and labor and material inflation and availability. We expect these challenges to continue into fiscal 2026. We continue to anticipate resilient demand associated with the municipal repair and replacement end market driven by the aging water infrastructure and increasing water rates, moderated by budgetary and operational pressures on municipalities. We anticipate that new residential construction activity and new lot and land development will be relatively constrained by the uncertainty in the economy, affordability concerns and interest rate environment, depending on the geographic region.

Our orders and shipments in 2025 reflected a more typical operating environment compared with the high backlog environment we experienced during and after the COVID-19 pandemic. For fiscal 2026, we assume that we will continue to experience a more normalized operating environment leading to normalized seasonality for consolidated net sales. Therefore, we anticipate quarterly consolidated net sales as a percentage of fiscal year 2026 consolidated net sales to be the highest in the third quarter and lowest in the first quarter, with a sequential increase in consolidated net sales in the second quarter as the construction season ramps up for the Spring. For fiscal 2026, we anticipate that inflation will continue to modestly impact manufacturing costs, primarily due to wage inflation, as well as raw materials and purchased parts. In addition, higher direct tariff costs of approximately 3% of costs of goods sold are expected to continue to contribute to inflationary pressures in 2026. While pricing actions were taken in 2025 in response to new tariffs, we will continue to monitor the market and economic conditions impacting our business and take appropriate actions to address inflationary and other cost pressures by implementing price increases, cost containment measures and supplier management measures, among other actions.

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Results of Operations

Year Ended September 30, 2025 Compared to Year Ended September 30, 2024

Year ended September 30, 2025

Water Flow

Solutions

Water

Management

Solutions

Corporate

Consolidated

(in millions)

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

Income before income taxes

Income tax expense

Net income

Year ended September 30, 2024

Water Flow

Solutions

Water

Management

Solutions

Corporate

Consolidated

(in millions)

Net sales

Gross profit

Operating expenses:

Selling, general and administrative

Strategic reorganization and other charges

Goodwill impairment

Total operating expenses

Operating income (loss)

Pension expense other than service

Interest expense, net

Other expense

Income before income taxes

Income tax expense

Net income

Consolidated Analysis

Net sales for 2025 were $1,429.7 million as compared with $1,314.7 million in the prior year, an increase of $115.0 million or 8.7%, primarily as a result of higher sales volumes and higher prices across most product lines.

Gross profit for 2025 was $516.7 million as compared with $459.0 million in the prior year, an increase of $57.7 million or 12.6%, primarily a result of higher volumes across most product lines, favorable pricing, and benefits from manufacturing performance efficiencies, partially offset by approximately 3% inflation and increased tariffs. Manufacturing performance was negatively impacted by a $4.1 million write-down of inventory and other assets associated with our legacy brass foundry in Decatur, Illinois. Gross margin increased to 36.1% in 2025 as compared with 34.9% in the prior year.

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Selling, general and administrative expenses (“SG&A”) for 2025 were $247.3 million as compared with $245.2 million in the prior year, an increase of $2.1 million or 0.9%, primarily due to inflation of approximately 3%, unfavorable foreign currency fluctuations, higher personnel-related expenses, including incentive-based compensation, and increased third-party fees. These increases were largely offset by lower intangible amortization, engineering costs, and bad debt expense. As a percentage of net sales, SG&A decreased 140 basis points to 17.3% of net sales from 18.7% in the prior year.

Strategic reorganization and other charges for 2025 of $8.8 million primarily consisted of expenses associated with our leadership transition, certain transaction-related expenses, severance and $1.0 million related to non-cash asset impairment. Strategic reorganization and other charges for 2024 of $15.8 million primarily consisted of expenses associated with our leadership transition, certain transaction-related expenses, $1.8 million related to non-cash asset impairment, expenses associated with the cybersecurity incidents and severance.

During the year ended September 30, 2025, there was no goodwill impairment charge recorded. For the year ended September 30, 2024, a $16.3 million non-cash goodwill impairment charge was recorded within the Water Management Solutions Segment.

Interest expense, net for 2025 was $6.6 million as compared with $12.7 million in the prior year, a decrease of $6.1 million or 48.0%, primarily as a result of higher interest income. The components of interest expense, net are provided below:

Year ended September 30,

(in millions)

4.0% Senior Notes

Deferred financing costs amortization

ABL Agreement

Capitalized interest

Other interest expense

Total interest expense

Interest income

Total interest expense, net

In 2025, there was no Other expense and, in 2024, there was $1.6 million Other expense for the release of an indemnification receivable related to an expired uncertain tax position.

Income tax expense of $62.5 million in 2025 resulted in an effective income tax rate of 24.6%, which was lower than the 29.1% rate in the prior year primarily as a result of certain non-deductible items recognized in 2024, including a non-cash goodwill impairment charge that did not reoccur in 2025, as well as changes in the valuation allowance related to certain state tax credits and foreign operating losses, tax benefits related to stock compensation, and higher foreign tax rate benefits.

Segment Analysis

Water Flow Solutions

Net sales for 2025 were $824.9 million as compared with $755.5 million in the prior year, an increase of $69.4 million or 9.2%, primarily as a result of higher sales volumes in iron gate valves and specialty products as well as higher pricing across most of Water Flow Solutions’ product lines.

Gross profit for 2025 was $296.3 million as compared with $271.9 million in the prior year, an increase of $24.4 million or 9.0%, primarily as a result of higher volumes in iron gate valves and specialty products, higher pricing and benefits from manufacturing efficiencies, partially offset by approximately 4% inflation and increased tariffs. Gross margin decreased slightly to 35.9% in 2025, as compared with 36.0% in the prior year primarily due to the negative impact of a $4.1 million write-down of inventory and other assets associated with the closure of our legacy brass foundry in Decatur, Illinois.

SG&A for 2025 was $90.3 million as compared with $92.5 million in the prior year, a decrease of $2.2 million or 2.4%, primarily as a result of lower intangible amortization, partially offset by higher personnel-related expenses, including incentive-based compensation, approximately 3% inflation, and higher third-party fees. SG&A as a percentage of net sales was 10.9% and 12.2% for 2025 and 2024, respectively.

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Water Management Solutions

Net sales for 2025 were $604.8 million as compared with $559.2 million in the prior year, an increase of $45.6 million or 8.2%, primarily as a result of higher sales volumes in hydrants and repair and installation products as well as higher pricing across most of Water Management Solutions’ product lines.

Gross profit for 2025 was $220.4 million as compared with $187.1 million in the prior year, an increase of $33.3 million or 17.8%, primarily as a result of higher pricing, benefits from manufacturing performance efficiencies, and higher volumes, which were partially offset by increased tariffs and 2% inflation. Gross margin was 36.4% in 2025 and 33.5% in 2024.

SG&A for 2025 was $96.9 million as compared with $95.0 million in the prior year, an increase of $1.9 million or 2.0% primarily due to unfavorable foreign currency fluctuation, inflation of approximately 3%, higher personnel-related expenses, including incentive-based compensation, and third-party fees, largely offset by lower intangible amortization, engineering costs and bad debt expense. SG&A as a percentage of net sales was 16.0% for 2025 and 17.0% in the prior year.

During the year ended September 30, 2025, there was no goodwill impairment charge recorded. For the year ended September 30, 2024, Water Management Solutions incurred a non-cash goodwill impairment charge of $16.3 million.

Corporate

SG&A for 2025 was $60.1 million as compared with $57.7 million in the prior year, an increase of $2.4 million or 4.2% primarily as a result of approximately 3% inflation, higher insurance expense, and unfavorable foreign currency fluctuation.

Liquidity and Capital Resources

As of September 30, 2025, we had cash and cash equivalents of $431.5 million and approximately $163.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”). Undistributed earnings from our subsidiaries in Israel, Canada and China are considered to be permanently reinvested outside of the United States. As of September 30, 2025, cash and cash equivalents included $84.3 million, $14.0 million, and $8.8 million in Israel, Canada, and China, respectively.

Historically, we have funded our liquidity requirements through cash flows from operating activities, borrowings under our credit facilities, and working capital management activities. Our primary historical cash requirements have been for working capital, capital expenditures, income tax payments, and contractual obligations, which primarily consist of required long-term debt and related interest payments and commitments under non-cancellable operating lease agreements. When appropriate, the Company may utilize liquidity towards debt service requirements, including voluntary debt prepayments, as well as repurchases of common stock or other securities, based on excess cash flows. The most significant components of our operating assets and liabilities are inventories, accounts receivable, prepaid expenses and other assets, accounts payable, and other payables and accrued expenses. We closely monitor various items related to cash flow including, but not limited to, cash receipts, cash disbursements, payment terms and discounts. We continue to be focused on these items in addition to other key measures we use to determine how our consolidated business and operating segments are performing.

We believe that cash on hand, cash expected to be generated from operations and the availability of borrowings under our ABL will be sufficient to fund our working capital requirements, liquidity obligations, anticipated capital expenditures, income tax payments and payments due under our existing debt for the next 12 months and thereafter for the foreseeable future. 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. Depending on our liquidity levels, conditions in the capital markets and other factors, we may from time to time consider the prepayment, refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our debt structure or business acquisitions.

Share Repurchase Program

Our stock repurchase program allows us to repurchase up to $250.0 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. We repurchased 591,553 and 636,789 shares of our common stock in 2025 and 2024, respectively.

We repurchased $15.0 million of our outstanding common stock during the fiscal year ended September 30, 2025 and had $65.0 million remaining under our share repurchase authorization as of September 30, 2025.

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ABL Agreement

Our ABL is provided by a syndicate of banking institutions and consists of a revolving credit facility of $175.0 million in borrowing capacity that matures the earlier of (a) March 16, 2029, which is ninety-one days prior to the stated maturity date of our 4.0% Senior Notes if the Notes are still outstanding on that date or (b) March 28, 2029. The ABL includes the ability to borrow up to $25.0 million of swing line loans and up to $60.0 million of letters of credit. The ABL permits us to increase the size of the credit facility by an additional $150.0 million in certain circumstances subject to adequate borrowing base availability.

Borrowings under the ABL bear interest at a floating rate equal to Secured Overnight Financing Rate (‘SOFR”) plus an adjustment of 10 basis points and an applicable margin range of 150 to 175 basis points, or a base rate, as defined in the ABL, plus an applicable margin of 50 to 75 basis points. As of September 30, 2025, the applicable margin was 150 basis points for SOFR-based loans and 50 basis points for base rate loans.

The ABL is subject to mandatory prepayments if total outstanding borrowings under the ABL are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances. The borrowing base under the ABL 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.

The ABL contains customary terms and conditions as well as various affirmative, negative and financial covenants that, among other things, may restrict the ability of us and our subsidiaries to pay dividends or repurchase stock.

Substantially all of our United States subsidiaries are borrowers under the ABL and are jointly and severally liable for any outstanding borrowings. Our obligations under the ABL are secured by a first-priority perfected lien on all of our United States inventory, accounts receivable, certain cash balances and other supporting assets.

The ABL includes a commitment fee for any unused borrowing capacity of 37.5 basis points per annum when the unused capacity is above 50% of the credit commitments, with a step down to 25.0 basis points per annum when unused capacity is less than or equal to 50% of the credit commitments. As of September 30, 2025, the commitment fee was 37.5 basis points.

Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million and 10% of the Loan Cap as defined in the ABL. Excess availability based on September 30, 2025 data was $163.7 million, as reduced by $11.1 million of outstanding letters of credit and $0.2 million of accrued fees and expenses.

We were in compliance with all required covenants as of September 30, 2025.

4.0% Senior Unsecured Notes

On May 28, 2021, we privately issued $450.0 million of 4.0% Senior Unsecured Notes (“4.0% Senior Notes”), which mature on June 15, 2029 and bear interest at 4.0%, paid semi-annually in June and December. We capitalized $5.5 million of financing costs, which are being amortized over the term of the 4.0% Senior Notes using the effective interest method. Proceeds from the 4.0% Senior Notes, along with cash on hand, were used to redeem previously existing notes. Substantially all of our U.S. subsidiaries guarantee the 4.0% Senior Notes, which are subordinate to borrowings under our ABL. Based on quoted market prices the outstanding 4.0% Senior Notes had a fair value of $434.1 million as of September 30, 2025.

An indenture governing the 4.0% Senior Notes (“Indenture”) contains customary covenants and events of default, including covenants that limit our ability to incur certain debt and liens. We were in compliance with all required covenants as of September 30, 2025. There are no financial maintenance covenants associated with the Indenture.

We may redeem some or all of the 4.0% Senior Notes at any time after June 15, 2024, at specified redemption prices. Upon a Change of Control (as defined in the Indenture), we would be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the outstanding principal amount if there is a Ratings Decline (as defined in the Indenture).

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Credit Ratings

Our corporate credit rating and the credit ratings for our debt and outlook are presented below:

Moody’s

Standard & Poor’s

September 30,

September 30,

Corporate credit rating

ABL Agreement

Not rated

Not rated

Not rated

Not rated

4.0% Senior Notes

Outlook

Stable

Stable

Positive

Stable

These ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agencies.

Net Cash Flows Provided by Operating Activities

Net cash flows provided by operating activities for the fiscal year ended September 30, 2025 decreased $19.5 million to $219.3 million, from $238.8 million for the fiscal year ended September 30, 2024. Net cash flows provided by operating activities was lower over the comparable periods primarily a result of a $67.7 million change in working capital and other assets and liabilities and a decrease of $27.6 million in non-cash reconciling items, largely offset by an increase in net income of $75.8 million.

Net Cash Flows Used in Investing Activities

Net cash flows used in investing activities for the fiscal year ended September 30, 2025 decreased $0.1 million to $47.1 million, from $47.2 million for the fiscal year ended September 30, 2024. Capital expenditures were generally consistent year over year.

Net Cash Flows Used in Financing Activities

Net cash flows used in financing activities for the fiscal year ended September 30, 2025 increased $12.3 million to $58.3 million, from $46.0 million for the fiscal year ended September 30, 2024. The increase in fiscal year ended September 30, 2025 primarily relates to an additional $5.0 million of shares repurchased under the share repurchase program, $3.0 million in less cash provided by common stock issuances, additional employee taxes related to stock-based compensation of $2.8 million and $2.0 million incremental dividends paid during the year.

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, 2025, we have (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and include cash interest payments of $18.0 million in 2026 annually through 2029; (ii) cumulative cash obligations of $ 32.8  million for operating leases through 2034 and $ 4.7  million for finance leases through 2030; and (iii) purchase obligations for raw materials and other purchased parts of $128.3 million and $1.1 million which we expect to incur during 2026 and 2027, respectively. Additionally, we expect to invest to strengthen our information technology systems, cybersecurity training, policies, programs, response plans and other similar measures. We expect to fund these cash requirements from cash on hand and cash generated from operations.

We estimate 2026 capital expenditures will be between $60.0 million and $65.0 million. We intend to increase capital investments in our facilities to expand production capacity and enhance operational capabilities, including investment in our two iron foundries.

We declared a quarterly dividend of $ 0.070 per common share on October 23, 2025 , payable on or about November 20, 2025 to holders of record as of November 10, 2025 , which will result in a $10.9 million cash outlay.

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Effect of Inflation

We experience changing price levels primarily related to purchased components and raw materials. During our fiscal year 2025, we experienced approximately 3% inflation as compared with our fiscal year 2024 for these inventory items. We anticipate inflation in raw and other material costs in 2026, including on purchased components, which is likely to have an adverse effect on our margins to the extent we are unable to pass on such higher costs to our customers. During fiscal year 2025, we experienced approximately 3% labor cost inflation, which is generally consistent with fiscal year 2024.

Seasonality

Parts of our business depend upon construction activity, which is seasonal in many areas as a result of the impact of cold weather conditions on construction. Net sales and operating income have historically been lowest in the first and second quarters ending December 31 and March 31, respectively, when the northern United States and most of Canada generally face weather conditions that restrict significant construction activity. 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, sales, 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.

Inventories, net

We record inventories at standard cost or estimated net realizable value. Standard cost reasonably approximates cost determined on the first-in, first-out basis. 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 are made when estimating net realizable value.

Accounting for the Impairment of Goodwill and Indefinite-lived Intangible Assets

We test goodwill and indefinite-lived intangible assets for impairment annually or more frequently if events or circumstances indicate possible impairment. We perform this annual impairment testing on September 1, using standard valuation methodologies and rates that we consider to be reasonable and appropriate.

We evaluate goodwill for impairment using a quantitative analysis. The carrying value of the reporting unit, including goodwill, is compared with the estimated fair value of the reporting unit utilizing a combination of the income and market approach as applicable. The income approach is based on projected debt-free cash flow which is discounted to the present value using discount rates that consider the timing and risk of the cash flows. The market approach is based on the guideline public company method, which uses market multiples to value our reporting units.

The income approach is dependent on management’s best estimates of future operating results, including forecasted sales, earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins and the selection of discount rates. There are inherent uncertainties related to the assumptions used and to management's application of these assumptions.

We test our trade name 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. Conversely, if the estimated fair value is less than the carrying value, 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.

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We performed our annual impairment testing as of September 1, 2025. The results of the testing indicated that the fair value exceeded the carrying value of our reporting unit that includes goodwill. As such, no impairment charge was recorded. Our determination of the estimated fair value was based on our concluded value using a combination of the income and market approach. Additionally, we performed our annual impairment testing of indefinite-lived intangible assets as of September 1, 2025 and concluded no impairment charges should be recorded.

Warranty Cost

We accrue for warranty expenses that may include customer costs of repair and/or replacement, including labor, materials, equipment, freight and overhead costs. We accrue for the estimated cost of product warranties at the time of sale. Warranty cost estimates are revised throughout applicable warranty periods as better information becomes available. Critical factors in our analyses include warranty terms, specific claim situations, historical 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 to repair or replace could require additional warranty expense. We monitor and analyze our warranty experience and costs periodically and revise our warranty accrual as necessary. However, as we cannot predict actual future claims, the potential exists for the difference in any one reporting period to be material.

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 legal 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 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 15. 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, including workers’ compensation, defined benefit pension plan and environmental liabilities. We established the recorded liabilities for such items as of September 30, 2025 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, claim development, regulatory changes, technology changes, the investment performance of related assets, longevity of participants, the discount rate used and changes to plan designs.