[Part I - Financial Information](index=4&type=section&id=Part%20I%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, and cash flows, with explanatory notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight increase in total assets and liabilities, with a minor decrease in total stockholders' equity from December 31, 2024, to June 30, 2025 Condensed Consolidated Balance Sheet Highlights (in Millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | Total current assets | $754.0 | $722.1 | | Total assets | $2,654.3 | $2,648.5 | | Total current liabilities | $278.3 | $247.8 | | Total liabilities | $1,089.9 | $1,061.7 | | Total stockholders' equity | $1,564.4 | $1,586.8 | - Receivables, net increased from **$202.2 million** at December 31, 2024, to **$240.1 million** at June 30, 2025[14](index=14&type=chunk) - Trade payables increased from **$71.7 million** at December 31, 2024, to **$88.9 million** at June 30, 2025[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported increased net sales and net income for both the three and six months ended June 30, 2025, compared to the prior year periods Condensed Consolidated Statements of Operations Highlights (in Millions, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $444.5 | $412.0 | $833.3 | $785.8 | | Gross profit | $202.3 | $186.3 | $383.3 | $356.4 | | Income from operations | $77.6 | $71.9 | $141.0 | $125.1 | | Net income | $50.5 | $46.0 | $94.1 | $80.3 | | Diluted net income per share | $0.29 | $0.27 | $0.55 | $0.46 | - Net sales increased by **7.9%** for the three months ended June 30, 2025, and by **6.0%** for the six months ended June 30, 2025, compared to the respective prior year periods[17](index=17&type=chunk) - Diluted net income per share from continuing operations increased from **$0.26 to $0.29** for the three months ended June 30, 2025, and from **$0.45 to $0.53** for the six months ended June 30, 2025[17](index=17&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income increased for both the three and six months ended June 30, 2025, primarily driven by higher net income and positive foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income Highlights (in Millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $50.5 | $46.0 | $94.1 | $80.3 | | Foreign currency translation adjustments | $4.9 | $(1.5) | $4.7 | $(4.0) | | Total comprehensive income | $55.4 | $44.5 | $98.8 | $76.3 | - Foreign currency translation adjustments shifted from a loss of **$(1.5) million** in Q2 2024 to a gain of **$4.9 million** in Q2 2025[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash provided by operating activities increased significantly for the six months ended June 30, 2025, primarily due to higher net income Condensed Consolidated Statements of Cash Flows Highlights (in Millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $153.5 | $139.0 | | Cash used for investing activities | $(13.3) | $(7.0) | | Cash used for financing activities | $(138.7) | $(104.2) | | Increase in cash, cash equivalents and restricted cash | $3.9 | $26.0 | | Cash, cash equivalents and restricted cash at end of period | $201.9 | $162.7 | - Repurchase of common stock increased to **$109.9 million** for the six months ended June 30, 2025, from **$79.9 million** in the prior year period[22](index=22&type=chunk) - Expenditures for property, plant and equipment increased to **$13.3 million** for the six months ended June 30, 2025, from **$8.6 million** in the prior year period[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's accounting policies, significant estimates, and specific financial statement line items [Note 1. Basis of Presentation and Significant Accounting Policies](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) The financial statements are prepared under GAAP and SEC rules, with new accounting pronouncements on income tax and expense disaggregation under evaluation - Zurn Elkay is a pure-play water management business focused on sustainable, specification-driven solutions for health, hydration, human safety, and the environment[27](index=27&type=chunk) - The company operates under the Zurn Elkay Business System (ZEBS), an operating philosophy grounded in continuous improvement to drive customer satisfaction and financial results[27](index=27&type=chunk) - ASU 2023-09 (Income Tax Disclosures) is effective for fiscal years beginning after December 15, 2024, and ASU 2024-03 (Expense Disaggregation) is effective for fiscal years beginning after December 15, 2026[28](index=28&type=chunk)[29](index=29&type=chunk) [Note 2. Restructuring and Other Similar Charges](index=8&type=section&id=Note%202.%20Restructuring%20and%20Other%20Similar%20Charges) The company continued restructuring actions to drive efficiencies, reduce operating costs, and optimize its manufacturing footprint Restructuring and Other Similar Charges (in Millions) | Charge Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Employee termination benefits | $0.8 | $0.2 | $1.3 | $0.4 | | Contract termination and other | $1.1 | $0.5 | $2.3 | $6.6 | | Total | $1.9 | $0.7 | $3.6 | $7.0 | - The restructuring accrual at June 30, 2025, was **$0.9 million**, down from **$1.2 million** at December 31, 2024[31](index=31&type=chunk) [Note 3. Discontinued Operations](index=9&type=section&id=Note%203.%20Discontinued%20Operations) The operating results of the Process & Motion Control (PMC) business, spun off in October 2021, are reported as discontinued operations Income from Discontinued Operations, Net of Tax (in Millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income from discontinued operations, net of tax | $0.4 | $0.7 | $3.0 | $1.0 | - The Spin-Off Transaction of the PMC business in October 2021 represented a strategic shift with a major impact on operations and financial results[33](index=33&type=chunk) [Note 4. Revenue Recognition](index=10&type=section&id=Note%204.%20Revenue%20Recognition) Revenue is recognized when control of products is transferred to the customer, typically upon shipment Revenue by Customer Type (in Millions) | Customer Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Institutional | $217.8 | $196.1 | $409.2 | $374.4 | | Commercial | $125.6 | $118.1 | $234.5 | $224.9 | | All other | $101.1 | $97.8 | $189.6 | $186.5 | | Total | $444.5 | $412.0 | $833.3 | $785.8 | Revenue by Geography (in Millions) | Geography | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $410.4 | $378.3 | $767.9 | $719.5 | | Canada | $25.3 | $23.8 | $45.4 | $44.9 | | Rest of world | $8.8 | $9.9 | $20.0 | $21.4 | | Total | $444.5 | $412.0 | $833.3 | $785.8 | - The company provides volume-based rebates and the right to return products to certain customers, which are accrued based on current facts and historical experience[42](index=42&type=chunk) [Note 5. Income Taxes](index=11&type=section&id=Note%205.%20Income%20Taxes) The income tax provision increased, with effective tax rates above the U.S. federal statutory rate due to various factors, and the impact of the OBBBA is under evaluation Income Tax Provision and Effective Rate | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $17.8 million | $16.5 million | $32.9 million | $25.5 million | | Effective income tax rate | 26.2% | 26.7% | 26.5% | 24.3% | - The effective income tax rate is primarily above the U.S. federal statutory rate of **21%** due to compensation deduction limitations under Section 162(m), state income taxes, and foreign income taxes[47](index=47&type=chunk)[48](index=48&type=chunk) - The total liability for net unrecognized tax benefits was **$2.0 million** as of June 30, 2025, up from **$1.8 million** at December 31, 2024[49](index=49&type=chunk) [Note 6. Earnings per Share](index=12&type=section&id=Note%206.%20Earnings%20per%20Share) Basic and diluted net income per share are calculated based on continuing and discontinued operations - Diluted net income per share from continuing operations was **$0.29** for Q2 2025 and **$0.53** for the six months ended June 30, 2025[17](index=17&type=chunk) - **0.1 million shares** were excluded from the diluted EPS calculation for the three and six months ended June 30, 2025, due to anti-dilutive effects[52](index=52&type=chunk) [Note 7. Stockholders' Equity](index=13&type=section&id=Note%207.%20Stockholders%27%20Equity) Total stockholders' equity decreased from $1,586.8 million at December 31, 2024, to $1,564.4 million at June 30, 2025 Stockholders' Equity Changes (in Millions) | Metric | December 31, 2024 | June 30, 2025 | | :------------------------------------ | :------------------ | :------------ | | Total stockholders' equity | $1,586.8 | $1,564.4 | | Repurchase of common stock (6 months) | N/A | $(109.9) | | Common stock dividends (6 months) | N/A | $(30.3) | | Stock-based compensation expense (6 months) | N/A | $19.5 | - The company repurchased **972,619 shares** of common stock for **$32.5 million** during the three months ended June 30, 2025, and **3,244,641 shares** for **$109.9 million** during the six months ended June 30, 2025[55](index=55&type=chunk) - Approximately **$130.3 million** of repurchase authority remained under the program at June 30, 2025[56](index=56&type=chunk) [Note 8. Accumulated Other Comprehensive Loss](index=14&type=section&id=Note%208.%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss improved from $(74.4) million at December 31, 2024, to $(69.7) million at June 30, 2025, primarily due to positive foreign currency translation adjustments Changes in Accumulated Other Comprehensive Loss (in Millions) | Metric | December 31, 2024 | June 30, 2025 | | :------------------------------------ | :------------------ | :------------ | | Balance at beginning/end of period | $(74.4) | $(69.7) | | Foreign currency translation and other | $(81.5) | $(76.8) | | Pension and Postretirement Plans | $7.1 | $7.1 | - Other comprehensive income before reclassifications was **$4.7 million** for the six months ended June 30, 2025, driven by foreign currency translation adjustments[57](index=57&type=chunk) [Note 9. Inventories](index=14&type=section&id=Note%209.%20Inventories) Total inventories, net, increased slightly from $272.6 million at December 31, 2024, to $275.8 million at June 30, 2025 Inventories by Class (in Millions) | Inventory Class | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :------------------ | | Finished goods | $233.2 | $228.7 | | Work in progress | $11.8 | $12.1 | | Raw materials | $50.8 | $44.8 | | Total inventories, net | $275.8 | $272.6 | - The LIFO adjustment increased from **$(13.0) million** at December 31, 2024, to **$(20.0) million** at June 30, 2025[58](index=58&type=chunk) [Note 10. Goodwill and Intangible Assets](index=15&type=section&id=Note%2010.%20Goodwill%20and%20Intangible%20Assets) Goodwill increased slightly due to currency translation adjustments, while net intangible assets decreased primarily due to amortization Goodwill and Intangible Assets (in Millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :------------------ | | Goodwill | $795.6 | $794.2 | | Total intangible assets, net | $863.9 | $891.6 | | Intangible asset amortization expense (6 months) | $29.3 | $29.5 | - The company expects to recognize **$58.7 million** in amortization expense for intangible assets in the year ending December 31, 2025[60](index=60&type=chunk) [Note 11. Other Current Liabilities](index=16&type=section&id=Note%2011.%20Other%20Current%20Liabilities) Other current liabilities increased from $136.2 million at December 31, 2024, to $153.4 million at June 30, 2025, driven mainly by increases in sales rebates, commissions, and income taxes payable Other Current Liabilities (in Millions) | Liability | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | Sales rebates | $77.9 | $73.2 | | Commissions | $12.4 | $9.2 | | Income taxes payable | $7.2 | $2.3 | | Total other current liabilities | $153.4 | $136.2 | [Note 12. Long-Term Debt](index=16&type=section&id=Note%2012.%20Long-Term%20Debt) Total long-term debt remained stable at $495.1 million, comprising a term loan and revolving credit facility, with the company in compliance with all debt covenants Long-Term Debt (in Millions) | Debt Type | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :------------------ | | Term loan | $475.7 | $475.0 | | Finance leases | $20.2 | $20.6 | | Total long-term debt | $495.1 | $494.8 | - The Term Loan has a maturity date of October 4, 2028, and its interest rate is based on Term SOFR plus an applicable margin, which was **2.00%** at June 30, 2025[69](index=69&type=chunk)[70](index=70&type=chunk) - The Revolving Credit Facility of **$200.0 million** had no amounts borrowed at June 30, 2025, with **$10.1 million** utilized for outstanding letters of credit[74](index=74&type=chunk) [Note 13. Fair Value Measurements](index=17&type=section&id=Note%2013.%20Fair%20Value%20Measurements) The company measures certain assets and liabilities at fair value on a recurring basis, primarily related to its nonqualified deferred compensation plan Fair Value of Deferred Compensation Plan Assets and Liabilities (in Millions) | Metric | June 30, 2025 (Level 1) | June 30, 2025 (Level 2) | June 30, 2025 (Total) | December 31, 2024 (Level 1) | December 31, 2024 (Level 2) | December 31, 2024 (Total) | | :------------------------------ | :---------------------- | :---------------------- | :-------------------- | :-------------------------- | :-------------------------- | :------------------------ | | Deferred compensation plan assets | $2.1 | $15.9 | $18.0 | $1.2 | $15.1 | $16.3 | | Deferred compensation plan liabilities | $20.9 | — | $20.9 | $18.9 | — | $18.9 | - The fair value of long-term debt was approximately **$503.0 million** at June 30, 2025, based on quoted market prices[80](index=80&type=chunk) [Note 14. Commitments and Contingencies](index=19&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) The company accrues for product warranty claims, with the liability increasing to $5.6 million, and is involved in legal actions, though management expects no material adverse effect Product Warranty Liability (in Millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $4.9 | $4.7 | | Charged to operations | $2.0 | $1.2 | | Claims settled | $(1.3) | $(1.1) | | Balance at end of period | $5.6 | $4.8 | - The company establishes accruals for legal matters when a liability is probable and costs are reasonably estimable[83](index=83&type=chunk) [Note 15. Retirement Benefits](index=19&type=section&id=Note%2015.%20Retirement%20Benefits) Net periodic pension cost decreased for both the three and six months ended June 30, 2025, primarily due to a curtailment gain recognized in Q1 2025 Net Periodic Retirement Benefit Cost (in Millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net periodic pension cost | $0.6 | $1.1 | $0.4 | $2.0 | | Net periodic other postretirement benefits cost | $0.1 | $0.1 | $0.2 | $0.2 | - The company terminated its U.S. defined benefit pension plan effective April 1, 2025, resulting in a curtailment gain of **$0.7 million** in Q1 2025[85](index=85&type=chunk) [Note 16. Stock-Based Compensation](index=20&type=section&id=Note%2016.%20Stock-Based%20Compensation) Stock-based compensation expense remained stable, with various equity awards granted and 1,909,866 shares remaining available under the Employee Stock Purchase Plan Stock-Based Compensation Expense (in Millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock-based compensation expense | $9.0 | $9.4 | $19.5 | $19.4 | Equity Awards Granted (Six Months Ended June 30, 2025) | Award Type | Number of Awards | Weighted Average Grant-Date Fair Value | | :---------------------- | :--------------- | :------------------------------------- | | Stock options | 66,540 | $13.11 | | Restricted stock units | 187,490 | $35.34 | | Performance stock units | 388,651 | $35.47 | | Common stock | 123,550 | $34.28 | - The ESPP, approved in May 2024, has **2,000,000 shares** available, with **1,909,866 shares** remaining for future issuance as of June 30, 2025[89](index=89&type=chunk)[90](index=90&type=chunk) [Note 17. Business Segment Information](index=20&type=section&id=Note%2017.%20Business%20Segment%20Information) The company operates as one reportable operating segment, managing and evaluating its operations on a consolidated basis due to similarities in products, processes, and customer base - The company is a pure-play water management business with a broad portfolio of specification-driven solutions[92](index=92&type=chunk) - The Chief Operating Decision Maker (CODM) is the Chief Executive Officer, who assesses performance based on Net income from continuing operations[93](index=93&type=chunk) Segment Profit (Net Income from Continuing Operations) (in Millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $444.5 | $412.0 | $833.3 | $785.8 | | Segment profit (Net income from continuing operations) | $50.1 | $45.3 | $91.1 | $79.3 | [Note 18. Subsequent Events](index=21&type=section&id=Note%2018.%20Subsequent%20Events) On July 24, 2025, the Board of Directors declared a quarterly cash dividend of $0.09 per share, payable on September 5, 2025 - A quarterly cash dividend of **$0.09 per share** was declared on July 24, 2025, to be paid on September 5, 2025[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance, condition, and liquidity, highlighting revenue and earnings drivers, restructuring impacts, non-GAAP measures, and debt covenant compliance [General](index=22&type=section&id=General) Zurn Elkay Water Solutions Corporation is a growth-oriented water management business, providing sustainable, specification-driven solutions - The company designs, procures, manufactures, and markets a broad portfolio of sustainable water management solutions[98](index=98&type=chunk) - The Zurn Elkay Business System (ZEBS) is the company's operating philosophy, emphasizing continuous improvement for superior customer satisfaction and financial results[98](index=98&type=chunk) [Recent Developments](index=22&type=section&id=Recent%20Developments) The company's business is subject to risks related to tariffs and other trade protection measures - Additional tariffs on goods imported into the U.S. from numerous countries were announced in Q1 2025, impacting company costs[100](index=100&type=chunk) - The company is well-positioned to respond to the tariff environment despite the cost impacts[100](index=100&type=chunk) [Critical Accounting Estimates](index=22&type=section&id=Critical%20Accounting%20Estimates) The condensed consolidated financial statements require management to make estimates and assumptions - No material changes to critical accounting estimates were reported as of June 30, 2025, compared to the prior Annual Report on Form 10-K[101](index=101&type=chunk) [Recent Accounting Pronouncements](index=22&type=section&id=Recent%20Accounting%20Pronouncements) Information regarding recent accounting pronouncements is detailed in Note 1, 'Basis of Presentation and Significant Accounting Policies,' within Item 1 of this report - Refer to Item 1, Note 1 for details on recent accounting pronouncements[102](index=102&type=chunk) [Discontinued Operations](index=22&type=section&id=Discontinued%20Operations) The Process & Motion Control (PMC) business, spun off in October 2021, continues to be reported as discontinued operations Income from Discontinued Operations, Net of Tax (in Millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income from discontinued operations, net of tax | $0.4 | $0.7 | $3.0 | $1.0 | - The condensed consolidated statements of cash flows have not been adjusted to separately disclose cash flows related to discontinued operations[103](index=103&type=chunk) [Restructuring and Other Similar Charges](index=23&type=section&id=Restructuring%20and%20Other%20Similar%20Charges) The company continued restructuring efforts to enhance efficiency and reduce costs, resulting in charges of $1.9 million for the three months and $3.6 million for the six months ended June 30, 2025 Restructuring Charges (in Millions) | Period | Restructuring Charges | | :------------------------------- | :-------------------- | | Three months ended June 30, 2025 | $1.9 | | Six months ended June 30, 2025 | $3.6 | - Management expects to continue similar initiatives to optimize operating margin and manufacturing footprint, anticipating further expenses[106](index=106&type=chunk) [Results of Operations - Three Months Ended June 30, 2025 compared with the Three Months Ended June 30, 2024](index=23&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030%2C%202025%20compared%20with%20the%20Three%20Months%20Ended%20June%2030%2C%202024) For the three months ended June 30, 2025, net sales and income from operations increased, while interest expense decreased [Net sales](index=23&type=section&id=Net%20sales) Net sales increased by 7.9% year-over-year to $444.5 million, with core sales improving by 8% across all product categories Net Sales (Three Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | % Change | | :------- | :----- | :----- | :----- | :------- | | Net sales | $444.5 | $412.0 | $32.5 | 7.9% | - Core sales improved **8%** year over year, including growth in all product categories[107](index=107&type=chunk) [Income from operations](index=24&type=section&id=Income%20from%20operations) Income from operations increased by 7.9% to $77.6 million, maintaining a consistent 17.5% of net sales Income from Operations (Three Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | % Change | | :-------------------- | :----- | :----- | :----- | :------- | | Income from operations | $77.6 | $71.9 | $5.7 | 7.9% | | % of net sales | 17.5% | 17.5% | —% | | - Operating income as a percentage of net sales remained consistent year over year at **17.5%**[108](index=108&type=chunk) [Interest expense, net](index=24&type=section&id=Interest%20expense%2C%20net) Net interest expense decreased to $7.7 million from $8.5 million in the prior year, primarily due to lower interest rates Interest Expense, Net (Three Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | | :--------------- | :---- | :---- | :----- | | Interest expense, net | $7.7 | $8.5 | $(0.8) | - The decrease in interest expense is primarily attributable to lower interest rates[109](index=109&type=chunk) [Other expense, net](index=24&type=section&id=Other%20expense%2C%20net) Other expense, net, increased to $2.0 million from $1.6 million, mainly due to higher non-operational and foreign currency transaction losses Other Expense, Net (Three Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | | :--------------- | :---- | :---- | :----- | | Other expense, net | $2.0 | $1.6 | $0.4 | - The year-over-year change is primarily driven by increased other non-operational and foreign currency transaction losses, offset by lower defined benefit plan costs[110](index=110&type=chunk) [Provision for income taxes](index=24&type=section&id=Provision%20for%20income%20taxes) The income tax provision increased to $17.8 million, with the effective tax rate at 26.2% Income Tax Provision (Three Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | | :-------------------- | :----- | :----- | :----- | | Income tax provision | $17.8 | $16.5 | $1.3 | | Effective income tax rate | 26.2% | 26.7% | | - The effective income tax rate was above the U.S. federal statutory rate of **21%** primarily due to compensation deduction limitations, state income taxes, and foreign income taxes[111](index=111&type=chunk) [Net income](index=24&type=section&id=Net%20income) Net income for the three months ended June 30, 2025, increased to $50.5 million from $46.0 million in the prior year Net Income (Three Months Ended June 30, in Millions, except per share) | Metric | 2025 | 2024 | Change | | :-------------------- | :----- | :----- | :----- | | Net income | $50.5 | $46.0 | $4.5 | | Diluted net income per share | $0.29 | $0.27 | $0.02 | - Net income from discontinued operations, net of tax, was **$0.4 million** in Q2 2025, down from **$0.7 million** in Q2 2024[113](index=113&type=chunk) [Results of Operations - Six Months Ended June 30, 2025 compared with the Six Months Ended June 30, 2024](index=25&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030%2C%202025%20compared%20with%20the%20Six%20Months%20Ended%20June%2030%2C%202024) For the six months ended June 30, 2025, net sales grew by 6%, and income from operations increased by 12.7%, leading to a net income of $94.1 million [Net sales](index=25&type=section&id=Net%20sales) Net sales increased by 6.0% year-over-year to $833.3 million, with core sales improving 7% across all product categories Net Sales (Six Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | % Change | | :------- | :----- | :----- | :----- | :------- | | Net sales | $833.3 | $785.8 | $47.5 | 6.0% | - Core sales improved **7%** year over year, including growth in all product categories, while foreign currency exchange rates reduced net sales by **1%**[114](index=114&type=chunk) [Income from operations](index=25&type=section&id=Income%20from%20operations) Income from operations increased by 12.7% to $141.0 million, with the operating margin improving by 100 basis points to 16.9% Income from Operations (Six Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | % Change | | :-------------------- | :----- | :----- | :----- | :------- | | Income from operations | $141.0 | $125.1 | $15.9 | 12.7% | | % of net sales | 16.9% | 15.9% | 1.0% | | - Income from operations as a percentage of net sales increased by **100 basis points** year over year[115](index=115&type=chunk) [Interest expense, net](index=25&type=section&id=Interest%20expense%2C%20net) Net interest expense decreased to $15.0 million from $17.3 million, primarily due to lower interest rates Interest Expense, Net (Six Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | | :--------------- | :---- | :---- | :----- | | Interest expense, net | $15.0 | $17.3 | $(2.3) | - The decrease in interest expense is primarily due to reduced interest rates in the current year[116](index=116&type=chunk) [Other expense, net](index=25&type=section&id=Other%20expense%2C%20net) Other expense, net, decreased to $2.0 million from $3.0 million, mainly due to lower defined benefit plan costs Other Expense, Net (Six Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | | :--------------- | :---- | :---- | :----- | | Other expense, net | $2.0 | $3.0 | $(1.0) | - The year-over-year change is primarily driven by lower defined benefit plan costs, partly offset by foreign currency transaction losses[117](index=117&type=chunk) [Provision for income taxes](index=25&type=section&id=Provision%20for%20income%20taxes) The income tax provision increased to $32.9 million, with the effective tax rate at 26.5% Income Tax Provision (Six Months Ended June 30, in Millions) | Metric | 2025 | 2024 | Change | | :-------------------- | :----- | :----- | :----- | | Income tax provision | $32.9 | $25.5 | $7.4 | | Effective income tax rate | 26.5% | 24.3% | | - The effective income tax rate for the six months ended June 30, 2025, was **26.5%**, compared to **24.3%** in the prior year[118](index=118&type=chunk) [Net income](index=25&type=section&id=Net%20income) Net income for the six months ended June 30, 2025, increased to $94.1 million from $80.3 million in the prior year Net Income (Six Months Ended June 30, in Millions, except per share) | Metric | 2025 | 2024 | Change | | :-------------------- | :----- | :----- | :----- | | Net income | $94.1 | $80.3 | $13.8 | | Diluted net income per share | $0.55 | $0.46 | $0.09 | - Net income from discontinued operations, net of tax, was **$3.0 million** in the six months ended June 30, 2025, up from **$1.0 million** in the prior year[119](index=119&type=chunk) [Non-GAAP Financial Measures](index=26&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP financial measures like Core sales, EBITDA, and Adjusted EBITDA to supplement GAAP results, providing insights into operating performance, comparability, and debt covenant compliance - Non-GAAP measures are used to enhance understanding of operating performance trends, improve comparability, and provide insight into debt covenant compliance[120](index=120&type=chunk) [Core sales](index=26&type=section&id=Core%20sales) Core sales is a non-GAAP measure that excludes the impact of mergers, acquisitions, divestitures, and foreign currency translation, facilitating more meaningful comparisons of net sales performance - Core sales excludes the impact of mergers and acquisitions, divestitures, and foreign currency translation[121](index=121&type=chunk) [EBITDA](index=26&type=section&id=EBITDA) EBITDA represents earnings before interest, taxes, depreciation, and amortization, used as a supplemental measure of performance and to evaluate debt service obligations - EBITDA is earnings before interest and other debt related activities, taxes, depreciation, and amortization[122](index=122&type=chunk) [Adjusted EBITDA](index=26&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA is a key measure for debt covenant compliance, reflecting unleveraged, pre-tax operating results by adjusting net income for non-operational, non-cash, or non-recurring items - Adjusted EBITDA is defined and adjusted in the credit agreement, used by lenders to measure performance with a Net First Lien Leverage Ratio[123](index=123&type=chunk) - Adjusted EBITDA is intended to show unleveraged, pre-tax operating results, excluding non-operational, non-cash, or non-recurring losses or gains[123](index=123&type=chunk) [Covenant Compliance](index=27&type=section&id=Covenant%20Compliance) The company's credit agreement includes restrictive covenants, with a maximum Net First Lien Leverage Ratio of 5.00 to 1.00, and was in compliance at 0.79 to 1.00 as of June 30, 2025 - The credit agreement requires maintaining a maximum total Net First Lien Leverage Ratio (consolidated indebtedness to Adjusted EBITDA) of **5.00 to 1.00**[127](index=127&type=chunk) - As of June 30, 2025, the company's Net First Lien Leverage Ratio was **0.79 to 1.00**, indicating compliance with debt covenants[127](index=127&type=chunk) Adjusted EBITDA Reconciliation (in Millions) | Metric | Six months ended June 30, 2024 | Twelve months ended December 31, 2024 | Six months ended June 30, 2025 | Twelve months ended June 30, 2025 | | :------------------------------------ | :----------------------------- | :------------------------------------ | :----------------------------- | :-------------------------------- | | Net income | $80.3 | $160.2 | $94.1 | $174.0 | | EBITDA | $168.4 | $332.9 | $185.8 | $350.3 | | Adjusted EBITDA | $194.3 | $390.4 | $215.9 | $412.0 | | Consolidated indebtedness (June 30, 2025) | N/A | N/A | N/A | $326.6 | | Net First Lien Leverage Ratio (June 30, 2025) | N/A | N/A | N/A | 0.79 | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash, cash flow from operations, and a $200.0 million revolving credit facility, deemed adequate for its short-term and long-term needs - Primary liquidity sources include cash and cash equivalents, cash flow from operations, and a **$200.0 million** revolving credit facility[132](index=132&type=chunk) Liquidity Position (in Millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :------------------ | | Cash and cash equivalents | $201.9 | $198.0 | | Additional borrowing capacity (revolving credit facility) | $189.9 | $188.7 | [Cash Flows](index=29&type=section&id=Cash%20Flows) Operating cash flow increased due to higher net income, while investing cash flow rose from capital expenditures, and financing cash flow increased due to stock repurchases and dividends Cash Flow Summary (Six Months Ended June 30, in Millions) | Activity | 2025 | 2024 | | :-------------------------- | :------ | :------ | | Operating activities | $153.5 | $139.0 | | Investing activities | $(13.3) | $(7.0) | | Financing activities | $(138.7) | $(104.2) | | Repurchase of common stock | $(109.9) | $(79.9) | | Payment of common stock dividends | $(30.3) | $(27.7) | - The increase in operating cash flows was primarily a result of an increase in net income[135](index=135&type=chunk) - Capital expenditures increased to **$13.3 million** in 2025 from **$8.6 million** in 2024[136](index=136&type=chunk) [Indebtedness](index=29&type=section&id=Indebtedness) As of June 30, 2025, total indebtedness was $495.9 million, primarily consisting of a term loan and finance leases Total Indebtedness (in Millions) | Debt Type | Total Debt at June 30, 2025 | Current Maturities of Debt | Long-term Portion | | :---------------- | :-------------------------- | :------------------------- | :---------------- | | Term loan | $475.7 | — | $475.7 | | Finance leases | $20.2 | $0.8 | $19.4 | | Total | $495.9 | $0.8 | $495.1 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency and interest rate changes, managed through operating activities and derivative financial instruments - The company is exposed to market risk from changes in foreign currency exchange rates and interest rates[140](index=140&type=chunk) - Risk management strategies include normal operating and financing activities, and derivative financial instruments such as foreign currency forward contracts and interest rate derivatives[140](index=140&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they are adequate and effective - The CEO and CFO concluded that the company's disclosure controls and procedures were adequate and effective as of June 30, 2025[142](index=142&type=chunk) - No material changes in internal control over financial reporting occurred during the last fiscal quarter[144](index=144&type=chunk) [Part II - Other Information](index=32&type=section&id=Part%20II%20OTHER%20INFORMATION) This part includes information on legal proceedings, equity security sales, other disclosures, and a list of exhibits [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 14, 'Commitments and Contingencies,' to the condensed consolidated financial statements in Part I, Item 1 of this report - Legal proceedings information is incorporated by reference from Note 14, 'Commitments and Contingencies'[146](index=146&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 972,619 shares of common stock for $32.5 million during the three months ended June 30, 2025, under its authorized repurchase program Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Approximate Dollar Value that may yet be Purchased Under the Plans or Programs | | :----------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------------- | | April 1 - April 30, 2025 | 474,146 | $30.83 | 474,146 | $148,186,986 | | May 1 - May 31, 2025 | 290,022 | $35.70 | 290,022 | $137,826,462 | | June 1 - June 30, 2025 | 208,451 | $36.12 | 208,451 | $130,293,403 | | Total/Average | 972,619 | $33.41 | 972,619 | N/A | - The Board of Directors approved increasing the share repurchase authority to **$500.0 million** on February 8, 2023[147](index=147&type=chunk) - The repurchased shares were canceled by the company upon receipt[147](index=147&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) During the three months ended June 30, 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025[149](index=149&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various plans, agreements, and certifications required by SEC regulations - Exhibits include the Performance Incentive Plan, forms of stock unit agreements, the Deferred Compensation Plan, and certifications from the CEO and CFO[151](index=151&type=chunk) [Signatures](index=34&type=section&id=Signatures) The report is duly signed on behalf of Zurn Elkay Water Solutions Corporation by David J. Pauli, Chief Financial Officer, on July 29, 2025 - The report was signed by David J. Pauli, Chief Financial Officer, on July 29, 2025[156](index=156&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) This section provides an overview of Zurn Elkay Water Solutions' strong second-quarter performance and updated financial outlook for the full year. [Second Quarter Highlights](index=1&type=section&id=Second%20Quarter%20Highlights) Zurn Elkay Water Solutions achieved strong Q2 2025 results with **8% core sales growth**, record **26.5% adjusted EBITDA margin**, over **$100 million** in free cash flow, and **0.7x** net debt leverage. - The company demonstrated strong performance in navigating global tariff dynamics through supply chain diversity, flexible pricing strategies, and the Zurn Elkay Business System[2](index=2&type=chunk) - The non-residential end market remained positive and stable, while the residential market showed slight softness but represents a smaller portion of the business, with the company's targeted growth initiatives driving solid organic growth[2](index=2&type=chunk) Key Financial Metrics (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | Notes | | :--------------------------------- | :------ | :------ | :--- | :--- | | Core Sales Growth | 8% | - | +8% | Includes early benefits from customer pull-forward and pricing actions | | Net Sales | $445M | $412M | +8% | | | Net Income from Continuing Operations | $50M | $45M | +$5M | | | Diluted EPS from Continuing Operations | $0.29 | $0.26 | +$0.03 | | | Adjusted EPS | $0.42 | $0.33 | +27% | | | Adjusted EBITDA | $118M | $104M | +13% | | | Adjusted EBITDA Margin | 26.5% | 25.3% | +120 bps | Record level, above the high end of guidance range | | Free Cash Flow | >$100M | - | - | Exceeded $100M for the first time, including $33M in share repurchases | | Net Debt Leverage | 0.7x | - | - | As of June 30, 2025 | | Share Repurchases | $33M (1.0M shares) | - | - | | [Third Quarter and Full Year Outlook](index=2&type=section&id=Third%20Quarter%20and%20Full%20Year%20Outlook) The company raised its full-year 2025 outlook, projecting at least **5%** core sales growth, adjusted EBITDA of **$420M-$430M**, and approximately **$300M** free cash flow. - The company raised its full-year 2025 outlook based on strong second-quarter performance and slightly higher expectations for the second half of the year[2](index=2&type=chunk)[4](index=4&type=chunk) - Third-quarter core sales growth and adjusted EBITDA margin are expected to be consistent with the second quarter[4](index=4&type=chunk) Full Year 2025 Outlook | Metric | Full Year 2025 Outlook (New) | Full Year 2025 Outlook (Old) | Change | | :----------------- | :------------------ | :------------------ | :--- | | Core Sales Growth | At least 5% YoY | - | Upgraded | | Adjusted EBITDA | $420M - $430M | $405M - $420M | Upgraded | | Free Cash Flow | Approx. $300M | - | Upgraded | [Company Overview](index=4&type=section&id=Company%20Overview) This section provides a brief introduction to Zurn Elkay Water Solutions, highlighting its business focus and commitment to sustainability. [About Zurn Elkay Water Solutions](index=4&type=section&id=About%20Zurn%20Elkay%20Water%20Solutions) Zurn Elkay Water Solutions is a growth-oriented pure-play water management business based in Milwaukee, Wisconsin, focused on sustainable water solutions for health, hydration, safety, and environment. - Zurn Elkay Water Solutions was recognized by Newsweek as one of "America's Most Responsible Companies" and "America's Greenest Companies," and by TIME as one of the "World's Best Companies for Sustainable Growth"[16](index=16&type=chunk) - The company offers professional-grade water safety and control products, flow system products, hygienic and environmental products, and filtered drinking water products for public and private spaces[16](index=16&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) This section details the company's financial results for the second quarter and first half of 2025, including key statements and balance sheet information. [Second Quarter 2025 Overview](index=2&type=section&id=Second%20Quarter%202025%20Overview) In Q2 2025, net and core sales grew **8%** to **$444.5 million**, with operating income increasing year-over-year but remaining consistent as a percentage of net sales due to offsetting factors. Key Financial Metrics (Three Months Ended June 30) | Metric | June 30, 2025 | June 30, 2024 | YoY Change | | :----------------------- | :-------------------- | :-------------------- | :------- | | Net Sales | $444.5M | $412.0M | +8% | | Core Sales Growth | 8% | - | +8% | | Operating Income | $77.6M | $71.9M | +$5.7M | | Operating Income as % of Net Sales | 17.5% | 17.5% | 0 bps | | Adjusted EBITDA | $117.9M | $104.3M | +13.0% | | Adjusted EBITDA as % of Net Sales | 26.5% | 25.3% | +120 bps | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported year-over-year growth in net sales, gross profit, and net income from continuing operations for Q2 and H1 2025. Consolidated Statements of Operations | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------- | :------- | :------- | :------- | :------- | | Net Sales | $444.5M | $412.0M | $833.3M | $785.8M | | Cost of Sales | $242.2M | $225.7M | $450.0M | $429.4M | | Gross Profit | $202.3M | $186.3M | $383.3M | $356.4M | | Operating Income | $77.6M | $71.9M | $141.0M | $125.1M | | Net Income from Continuing Operations | $50.1M | $45.3M | $91.1M | $79.3M | | Net Income | $50.5M | $46.0M | $94.1M | $80.3M | | Diluted EPS from Continuing Operations | $0.29 | $0.26 | $0.53 | $0.45 | | Diluted EPS | $0.29 | $0.27 | $0.55 | $0.46 | [Condensed Consolidated Statements of Comprehensive Income](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income increased year-over-year in Q2 and H1 2025, driven by net income growth and positive foreign currency translation adjustments. Consolidated Statements of Comprehensive Income | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------- | :------- | :------- | :------- | :------- | | Net Income | $50.5M | $46.0M | $94.1M | $80.3M | | Foreign Currency Translation Adjustment | $4.9M | ($1.5M) | $4.7M | ($4.0M) | | Total Comprehensive Income | $55.4M | $44.5M | $98.8M | $76.3M | [Condensed Consolidated Balance Sheets](index=14&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets slightly increased, with higher cash, receivables, and inventory, while total liabilities and equity remained stable. Consolidated Balance Sheets | Metric | June 30, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :--------------- | :--- | | Cash and Cash Equivalents | $201.9M | $198.0M | +$3.9M | | Accounts Receivable, Net | $240.1M | $202.2M | +$37.9M | | Inventories, Net | $275.8M | $272.6M | +$3.2M | | Total Current Assets | $754.0M | $722.1M | +$31.9M | | Total Assets | $2,654.3M | $2,648.5M | +$5.8M | | Total Current Liabilities | $278.3M | $247.8M | +$30.5M | | Long-Term Debt | $495.1M | $494.8M | +$0.3M | | Total Liabilities | $1,089.9M | $1,061.7M | +$28.2M | | Total Stockholders' Equity | $1,564.4M | $1,586.8M | -$22.4M | [Condensed Consolidated Statements of Cash Flows](index=15&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly increased in H1 2025, with slightly higher investing outflows and financing outflows primarily due to share repurchases and dividends. Consolidated Statements of Cash Flows | Metric | H1 2025 | H1 2024 | Change | | :----------------------- | :------- | :------- | :------- | :------- | | Cash Flow from Operating Activities | $153.5M | $139.0M | +$14.5M | | Cash Flow Used in Investing Activities | ($13.3M) | ($7.0M) | -$6.3M | | Cash Flow Used in Financing Activities | ($138.7M) | ($104.2M) | -$34.5M | | Net Increase in Cash and Cash Equivalents | $3.9M | $26.0M | -$22.1M | | Cash and Cash Equivalents at End of Period | $201.9M | $162.7M | +$39.2M | [Non-GAAP Financial Measures & Reconciliations](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) This section defines the non-GAAP financial measures used by the company and provides detailed reconciliations to their most directly comparable GAAP measures. [Definitions of Non-GAAP Measures](index=3&type=section&id=Definitions%20of%20Non-GAAP%20Measures) Management uses non-GAAP financial measures to assess operational performance, trends, and comparability, aiding investors in performance analysis and debt covenant compliance, but these are not substitutes for GAAP information. - Non-GAAP financial measures are used to enhance understanding of the company's underlying operating performance trends and provide comparability with historical and future periods, as well as with peers[7](index=7&type=chunk) - Management believes these measures are useful for investors to analyze performance and evaluate debt covenant compliance, but emphasizes they should not be considered a substitute for GAAP financial information[7](index=7&type=chunk) [Core Sales](index=3&type=section&id=Core%20Sales) Core sales exclude the impact of acquisitions, divestitures, and foreign currency translation to facilitate meaningful comparisons of net sales performance. - Core sales exclude the impact of acquisitions, divestitures, and foreign currency translation, aiming to facilitate easier and more meaningful comparisons of net sales performance with prior and future periods and with peers[8](index=8&type=chunk) [Adjusted Net Income and Adjusted Earnings Per Share](index=3&type=section&id=Adjusted%20Net%20Income%20and%20Adjusted%20Earnings%20Per%20Share) Adjusted net income and EPS exclude specific non-operating, non-cash, or non-recurring items such as actuarial gains/losses, restructuring costs, and intangible asset amortization. - Adjusted net income and adjusted diluted earnings per share exclude actuarial gains and losses on pension and post-retirement benefit obligations, restructuring and other similar charges, gains and losses on divestitures, discontinued operations, gains and losses on debt extinguishment, acquisition-related fair value adjustments, intangible asset amortization, LIFO inventory adjustments, and other non-operating, non-cash, or non-recurring gains or losses[9](index=9&type=chunk) [EBITDA](index=3&type=section&id=EBITDA) EBITDA, representing earnings before interest, taxes, depreciation, and amortization from continuing operations, is a key supplemental metric for evaluating performance and debt service capacity. - EBITDA, representing earnings before interest, taxes, depreciation, and amortization from continuing operations, is a key supplemental measure of performance often used by analysts and investors to assess the company's performance within its industry and its ability to service debt[10](index=10&type=chunk) - EBITDA is not a GAAP financial performance measure and should not be considered an alternative to cash flow from operating activities, liquidity, or net income, nor does it adjust for capital expenditures or recurring cash requirements[10](index=10&type=chunk) [Adjusted EBITDA](index=3&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA reflects the company's unlevered, pre-tax operating performance by excluding non-operating, non-cash, or non-recurring items, aiding in understanding debt covenant compliance. - Adjusted EBITDA aims to present the company's unlevered, pre-tax operating performance, reflecting financial performance based on operating factors, by excluding non-operating, non-cash, or non-recurring gains or losses, and helps investors understand debt covenant compliance[11](index=11&type=chunk) - Adjusted EBITDA has limitations, as it does not reflect cash requirements for capital expenditures, working capital needs, interest expense, tax payments, or future asset replacements[11](index=11&type=chunk) - "Adjusted EBITDA Margin" is defined as Adjusted EBITDA divided by net sales; "Net Debt Leverage" is total debt less cash divided by Adjusted EBITDA; and "Incremental Margin" or "Decremental Margin" is the change in Adjusted EBITDA divided by the change in net sales[12](index=12&type=chunk)[13](index=13&type=chunk) [Free Cash Flow](index=4&type=section&id=Free%20Cash%20Flow) Free cash flow, defined as cash flow from operations less capital expenditures, is used to analyze debt repayment capacity and forecast future periods. - Free cash flow is defined as cash flow from operating activities less capital expenditures, used to analyze the company's ability to repay debt and forecast future periods, but does not represent funds available for investment or other discretionary uses[14](index=14&type=chunk) - Free cash flow conversion is defined as free cash flow divided by net income[14](index=14&type=chunk) [Return on Invested Capital ("ROIC")](index=4&type=section&id=Return%20on%20Invested%20Capital%20(%22ROIC%22)) ROIC is a key supplemental financial performance metric and a long-term incentive measure, assessing management's ability to deploy capital for shareholder value creation. - ROIC is a key supplemental measure of financial performance and a performance measure for the company's long-term incentive plans, used to evaluate management's ability to deploy capital to create shareholder value[15](index=15&type=chunk) - ROIC is defined as net operating profit after tax for the trailing twelve months divided by average total invested capital for the trailing four quarters, where total invested capital is defined as stockholders' equity plus debt less cash and cash equivalents[15](index=15&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=7&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) The company provides detailed GAAP to non-GAAP reconciliations for Q2 and H1 2025 and 2024, transparently showing the calculation of adjusted EBITDA, adjusted net income, adjusted EPS, and free cash flow. [Three Months Ended June 30, 2025](index=7&type=section&id=Three%20Months%20Ended%20June%2030,%202025) This section presents the reconciliation of GAAP to non-GAAP financial measures for the three months ended June 30, 2025, detailing adjustments for key metrics. | Metric | Reported Results (GAAP) | Adjustments | Non-GAAP Results | | :--------------------------------- | :-------------- | :----- | :--------- | | Net Sales | $444.5M | $0 | $444.5M | | EBITDA | $99.7M | $18.2M | $117.9M | | Operating Income | $77.6M | $18.9M | $96.5M | | Income Before Income Taxes | $67.9M | $26.5M | $94.4M | | Net Income from Continuing Operations | $50.1M | $20.2M | $70.3M | | Net Income | $50.5M | $19.8M | $70.3M | | **EBITDA Adjustments:** | | | | | Restructuring and Similar Charges | $1.9M | | | | LIFO Adjustment | $7.3M | | | | Share-Based Compensation Expense | $9.0M | | | | **Income Before Income Taxes Adjustments:** | | | | | Intangible Asset Amortization | $14.6M | | | | Supply Chain Optimization and Footprint Relocation | $0.7M | | | | Other Expense, Net | $2.0M | | | [Six Months Ended June 30, 2025](index=8&type=section&id=Six%20Months%20Ended%20June%2030,%202025) This section presents the reconciliation of GAAP to non-GAAP financial measures for the six months ended June 30, 2025, detailing adjustments for key metrics. | Metric | Reported Results (GAAP) | Adjustments | Non-GAAP Results | | :--------------------------------- | :-------------- | :----- | :--------- | | Net Sales | $833.3M | $0 | $833.3M | | EBITDA | $185.8M | $30.1M | $215.9M | | Operating Income | $141.0M | $31.9M | $172.9M | | Income Before Income Taxes | $124.0M | $43.7M | $167.7M | | Net Income from Continuing Operations | $91.1M | $33.3M | $124.4M | | Net Income | $94.1M | $30.3M | $124.4M | | **EBITDA Adjustments:** | | | | | Restructuring and Similar Charges | $3.6M | | | | LIFO Adjustment | $7.0M | | | | Share-Based Compensation Expense | $19.5M | | | | **Income Before Income Taxes Adjustments:** | | | | | Intangible Asset Amortization | $29.3M | | | | Supply Chain Optimization and Footprint Relocation | $1.8M | | | | Other Expense, Net | $2.0M | | | [Three Months Ended June 30, 2024](index=9&type=section&id=Three%20Months%20Ended%20June%2030,%202024) This section presents the reconciliation of GAAP to non-GAAP financial measures for the three months ended June 30, 2024, detailing adjustments for key metrics. | Metric | Reported Results (GAAP) | Adjustments | Non-GAAP Results | | :--------------------------------- | :-------------- | :----- | :--------- | | Net Sales | $412.0M | $0 | $412.0M | | EBITDA | $93.6M | $10.7M | $104.3M | | Operating Income | $71.9M | $10.7M | $82.6M | | Income Before Income Taxes | $61.8M | $17.7M | $79.5M | | Net Income from Continuing Operations | $45.3M | $13.5M | $58.8M | | Net Income | $46.0M | $12.8M | $58.8M | | **EBITDA Adjustments:** | | | | | Restructuring and Similar Charges | $0.7M | | | | Other, Net | $0.2M | | | | LIFO Adjustment | $0.4M | | | | Share-Based Compensation Expense | $9.4M | | | | **Income Before Income Taxes Adjustments:** | | | | | Intangible Asset Amortization | $14.8M | | | | Other Expense, Net | $1.6M | | | [Six Months Ended June 30, 2024](index=10&type=section&id=Six%20Months%20Ended%20June%2030,%202024) This section presents the reconciliation of GAAP to non-GAAP financial measures for the six months ended June 30, 2024, detailing adjustments for key metrics. | Metric | Reported Results (GAAP) | Adjustments | Non-GAAP Results | | :--------------------------------- | :-------------- | :----- | :--------- | | Net Sales | $785.8M | $0 | $785.8M | | EBITDA | $168.4M | $25.9M | $194.3M | | Operating Income | $125.1M | $25.9M | $151.0M | | Income Before Income Taxes | $104.8M | $39.0M | $143.8M | | Net Income from Continuing Operations | $79.3M | $29.7M | $109.0M | | Net Income | $80.3M | $28.7M | $109.0M | | **EBITDA Adjustments:** | | | | | Restructuring and Similar Charges | $7.0M | | | | Other, Net | $0.4M | | | | LIFO Adjustment | ($0.9M) | | | | Share-Based Compensation Expense | $19.4M | | | | **Income Before Income Taxes Adjustments:** | | | | | Intangible Asset Amortization | $29.5M | | | | Other Expense, Net | $3.0M | | | [Adjusted EBITDA Reconciliation](index=11&type=section&id=Adjusted%20EBITDA%20Reconciliation) This table provides a detailed reconciliation of net income to Adjusted EBITDA for Q2 and H1 2025 and 2024, outlining specific adjustments. | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------- | :------- | :------- | :------- | :------- | | Net Income | $50.5M | $46.0M | $94.1M | $80.3M | | Net Income from Continuing Operations | ($0.4M) | ($0.7M) | ($3.0M) | ($1.0M) | | Provision for Income Taxes | $17.8M | $16.5M | $32.9M | $25.5M | | Other Expense, Net | $2.0M | $1.6M | $2.0M | $3.0M | | Net Interest Expense | $7.7M | $8.5M | $15.0M | $17.3M | | Operating Income | $77.6M | $71.9M | $141.0M | $125.1M | | **Adjustments:** | | | | | | Depreciation and Amortization | $22.1M | $21.7M | $44.8M | $43.3M | | Restructuring and Similar Charges | $1.9M | $0.7M | $3.6M | $7.0M | | Share-Based Compensation Expense | $9.0M | $9.4M | $19.5M | $19.4M | | LIFO Adjustment | $7.3M | $0.4M | $7.0M | ($0.9M) | | Other, Net | $0 | $0.2M | $0 | $0.4M | | **Adjusted EBITDA** | **$117.9M** | **$104.3M** | **$215.9M** | **$194.3M** | [Adjusted Net Income and EPS Reconciliation](index=12&type=section&id=Adjusted%20Net%20Income%20and%20EPS%20Reconciliation) This table provides a detailed reconciliation of net income to Adjusted Net Income and EPS for Q2 and H1 2025 and 2024, outlining specific adjustments. | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--------------------------------- | :------- | :------- | :------- | :------- | | Net Income | $50.5M | $46.0M | $94.1M | $80.3M | | Net Income from Continuing Operations | ($0.4M) | ($0.7M) | ($3.0M) | ($1.0M) | | Intangible Asset Amortization | $14.6M | $14.8M | $29.3M | $29.5M | | Restructuring and Similar Charges | $1.9M | $0.7M | $3.6M | $7.0M | | Supply Chain Optimization and Footprint Relocation | $0.7M | $0 | $1.8M | $0 | | LIFO Adjustment | $7.3M | $0.4M | $7.0M | ($0.9M) | | Other Expense, Net | $2.0M | $1.6M | $2.0M | $3.0M | | Other, Net | $0 | $0.2M | $0 | $0.4M | | Tax Impact | ($6.3M) | ($4.2M) | ($10.4M) | ($9.3M) | | **Adjusted Net Income** | **$70.3M** | **$58.8M** | **$124.4M** | **$109.0M** | | Diluted EPS from Continuing Operations (GAAP) | $0.29 | $0.26 | $0.53 | $0.45 | | **Adjusted Diluted EPS** | **$0.42** | **$0.33** | **$0.73** | **$0.62** | [Free Cash Flow Reconciliation](index=12&type=section&id=Free%20Cash%20Flow%20Reconciliation) This table provides a detailed reconciliation of cash flow from operating activities to Free Cash Flow for Q2 and H1 2025 and 2024. | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------- | :------- | :------- | :------- | :------- | | Cash Flow from Operating Activities | $110.6M | $85.1M | $153.5M | $139.0M | | Capital Expenditures for Property, Plant and Equipment | ($9.0M) | ($4.9M) | ($13.3M) | ($8.6M) | | **Free Cash Flow** | **$101.6M** | **$80.2M** | **$140.2M** | **$130.4M** | [Additional Information](index=5&type=section&id=Additional%20Information) This section provides details regarding the upcoming conference call and important cautionary statements about forward-looking information. [Conference Call Details](index=5&type=section&id=Conference%20Call%20Details) Zurn Elkay Water Solutions will host a conference call and webcast on July 30, 2025, to discuss Q2 2025 results, provide business updates, and answer investor questions. - The conference call and webcast will be held on **July 30, 2025**, at **8:30 AM ET**[17](index=17&type=chunk) - **Todd Adams**, Chairman and Chief Executive Officer, and **Dave Pauli**, Chief Financial Officer, will co-host the call[17](index=17&type=chunk) - Investors can participate via domestic toll-free dial-in at **800-715-9871** or international dial-in at **646-307-1963**, using access code **6071902**; the webcast will be available on the company's investor relations website at investors.zurnelkay.com[17](index=17&type=chunk) [Cautionary Statement on Forward-Looking Statements](index=5&type=section&id=Cautionary%20Statement%20on%20Forward-Looking%20Statements) This press release may contain forward-looking statements subject to risks and uncertainties, with no obligation to update, and actual results may differ materially from current expectations. - Forward-looking statements are based on information available as of the date of this release, and the company undertakes no obligation to update any such statements[19](index=19&type=chunk) - Actual results may differ materially from current expectations due to various factors, and investors should refer to the "Risk Factors" and "Cautionary Statement on Forward-Looking Statements" sections in the company's 10-K, 10-Q, and 8-K reports filed with the SEC for more information[19](index=19&type=chunk)

Company Overview - Zurn Water (ZWS) is expected to report a year-over-year increase in earnings, with a projected EPS of $0.36, reflecting a +9.1% change, and revenues of $425.26 million, up 3.2% from the previous year [3][12]. Earnings Expectations - The upcoming earnings report is anticipated to be released on July 29, and the stock may rise if the actual results exceed expectations, while a miss could lead to a decline [2][12]. - The consensus EPS estimate has been revised 0.73% higher in the last 30 days, indicating a positive reassessment by analysts [4]. Earnings Surprise Prediction - The Most Accurate Estimate for Zurn Water is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +0.30%, suggesting a likelihood of beating the consensus EPS estimate [12]. - The company has a Zacks Rank of 3, which indicates a hold position, but combined with the positive Earnings ESP, it suggests a favorable outlook for the upcoming earnings [12][10]. Historical Performance - In the last reported quarter, Zurn Water exceeded the expected EPS of $0.29 by delivering $0.31, resulting in a surprise of +6.90% [13]. - Over the past four quarters, Zurn Water has consistently beaten consensus EPS estimates [14]. Industry Context - Another company in the waste management sector, Waste Management (WM), is also expected to report earnings of $1.89 per share, reflecting a +3.9% year-over-year change, with revenues projected at $6.34 billion, up 17.4% [18][19]. - Waste Management's consensus EPS estimate has been revised 0.7% lower, but a higher Most Accurate Estimate has resulted in an Earnings ESP of +0.25%, indicating a potential earnings beat [19][20].

Financial Data and Key Metrics Changes - The company reported Q1 sales of $389 million, reflecting a 5% organic growth and a 4% reported growth, impacted by currency fluctuations [12][13] - Adjusted EBITDA for Q1 was $98 million, with an adjusted EBITDA margin of 25.2%, representing a 110 basis point year-over-year improvement [13][14] - Net debt leverage was below one at 0.9 times, including $77 million used for share repurchases during the quarter [14][15] Business Line Data and Key Metrics Changes - Non-residential end markets experienced mid-single-digit core sales growth, while residential and some commercial segments showed softness [12][13] - The company achieved strong margin expansion due to productivity initiatives and synergy actions from the previous year [13][14] Market Data and Key Metrics Changes - The company noted minimal impact from tariffs in Q1, with expectations of price-cost positivity based on implemented strategies [7][8] - By the end of 2026, only 2% to 3% of the company's cost of goods sold (COGS) will be sourced from China, indicating a significant reduction in supply chain exposure [9][34] Company Strategy and Development Direction - The company is focused on minimizing exposure to China and optimizing its supply chain to maintain competitive advantages [10][21] - Sustainability efforts have been recognized, with the company delivering 600 million gallons of filtered water in Q1, a 33% increase year-over-year [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current tariff environment and maintaining guidance for core growth and margin expansion [52][66] - The company anticipates low to mid-single-digit core sales growth for Q2 2025 and adjusted EBITDA margins between 25.5% and 26% [42][43] Other Important Information - The company has seen a 60% increase in submitted continuous improvement projects from associates, aimed at enhancing operational efficiency [40][41] - The company is evaluating M&A opportunities while maintaining a strong balance sheet and cash flow generation [15] Q&A Session Summary Question: Impact of pricing and operating adjustments on guidance - Management indicated that while there are many moving parts, they are confident in maintaining their guidance for the year despite potential demand destruction due to price increases [52][66] Question: Changes in project timing or MRO order trends - Management noted no significant changes in project timing or MRO activity, with some acceleration in orders observed ahead of price increases [57] Question: Clarification on price-cost neutrality - Management clarified that price-cost neutrality refers to dollar levels, indicating confidence in managing costs effectively [64] Question: Confidence in affirming full-year guidance amid potential tariff increases - Management expressed confidence in their ability to manage costs and maintain guidance, emphasizing their strong supply chain positioning [78][82] Question: Competitive positioning relative to peers - Management believes they are well-positioned from a cost perspective compared to competitors, with limited available capacity in the industry [111][115] Question: Share buyback strategy - The company plans to continue monitoring stock prices and make informed decisions regarding share buybacks, supported by strong cash flow [117]

Financial Data and Key Metrics Changes - The company reported Q1 sales of $389 million, representing 5% core growth and 4% reported growth, impacted by 1% from currency fluctuations [9][10] - Adjusted EBITDA for Q1 was $98 million, with an adjusted EBITDA margin of 25.2%, reflecting a 110 basis point year-over-year improvement [10][11] - Net debt leverage ended the quarter at 0.9 times, including $77 million used for share repurchases [11] Business Line Data and Key Metrics Changes - Mid single-digit core sales growth was observed in nonresidential end markets, while residential and some commercial segments showed softness [10] - The company achieved solid execution on growth initiatives, driving sales performance to the higher end of the outlook provided previously [10] Market Data and Key Metrics Changes - The company experienced a 33% increase in the volume of filtered water delivered in Q1, totaling 600 million gallons, driven by growth in the installed base of filtered units [12] Company Strategy and Development Direction - The company is focused on minimizing exposure to China, with plans to reduce COGS from China to 2-3% by the end of 2026 [6][20] - A multiyear strategy has been implemented to restructure the supply chain, aiming for a competitively advantaged cost structure [8][14] - The company is also committed to sustainability, having received recognition for its efforts in this area [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in being price cost positive despite potential new tariffs from non-China sources [6][8] - The company anticipates that the operating environment will involve some level of new tariffs or added costs for the foreseeable future [22][23] - Management reaffirmed full-year guidance, projecting core sales growth in the low to mid-single digits for Q2 [26] Other Important Information - The company has seen a 60% increase in submitted continuous improvement (CI) projects year-over-year, aimed at enhancing operational efficiency [25] - The company is actively evaluating M&A opportunities while maintaining a strong balance sheet and cash flow generation [11] Q&A Session Summary Question: Changes in guidance and volume/price contributions - Management indicated that while there have been many moving parts, they are confident in managing to at least the guidance provided in February [30][31] Question: Impact of pricing on demand - Management acknowledged potential demand destruction but emphasized that they are not constructing guidance based solely on this assumption [46][47] Question: Education vertical spending trends - Management reported no observed slowing or increased hesitancy in the education vertical [55] Question: Confidence in affirming full-year guidance amid tariff risks - Management expressed confidence in their ability to manage effectively despite potential tariff increases [58][59] Question: Competitive positioning and cost structure - Management believes they are well-positioned from a cost perspective relative to peers, with limited available capacity in the industry [108][112] Question: Share buyback strategy - Management confirmed the ability to continue share repurchases based on current cash flow and leverage position [113][114]

Core Insights - Zurn Water (ZWS) reported quarterly earnings of $0.31 per share, exceeding the Zacks Consensus Estimate of $0.29 per share, and showing an increase from $0.29 per share a year ago, resulting in an earnings surprise of 6.90% [1] - The company achieved revenues of $388.8 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.67% and increasing from $373.8 million year-over-year [2] - Zurn Water has consistently outperformed consensus EPS estimates over the last four quarters [2] Earnings Outlook - The future performance of Zurn Water's stock will largely depend on management's commentary during the earnings call and the sustainability of the stock's immediate price movement based on the recently released numbers [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.36 on revenues of $423.32 million, and for the current fiscal year, it is $1.35 on revenues of $1.62 billion [7] Industry Context - The Waste Removal Services industry, to which Zurn Water belongs, is currently ranked in the bottom 21% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment and stock performance [5][6]

[Private Securities Litigation Reform Act Safe Harbor Statement](index=3&type=section&id=Private%20Securities%20Litigation%20Reform%20Act%20Safe%20Harbor%20Statement) The report contains forward-looking statements subject to risks and uncertainties, with no obligation for public updates unless legally required - The report contains forward-looking statements, identified by words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," which are predictive and depend on future events. These statements are based on reasonable assumptions but are subject to risks and uncertainties detailed in the Annual Report on Form 10-K and other SEC filings. The company does not undertake to publicly update or revise any forward-looking statements, except as required by law[10](index=10&type=chunk) [Part I Financial Information](index=4&type=section&id=Part%20I%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's analysis for the quarter [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements and detailed explanatory notes for the quarter [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity, as of March 31, 2025 Condensed Consolidated Balance Sheets | Metric | March 31, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | | :-------------------------- | :-------------------------- | :--------------------------- | :---------------- | | Total assets | $2,608.3 | $2,648.5 | $(40.2) | | Total liabilities | $1,060.3 | $1,061.7 | $(1.4) | | Total stockholders' equity | $1,548.0 | $1,586.8 | $(38.8) | | Cash and cash equivalents | $144.7 | $198.0 | $(53.3) | | Receivables, net | $242.8 | $202.2 | $40.6 | | Inventories, net | $280.6 | $272.6 | $8.0 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance, including net sales, gross profit, and net income for Q1 2025 and 2024 Condensed Consolidated Statements of Operations | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | % Change | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Net sales | $388.8 | $373.8 | $15.0 | 4.0% | | Cost of sales | $207.8 | $203.7 | $4.1 | 2.0% | | Gross profit | $181.0 | $170.1 | $10.9 | 6.4% | | Income from operations | $63.4 | $53.2 | $10.2 | 19.2% | | Net income from continuing operations | $41.0 | $34.0 | $7.0 | 20.6% | | Net income | $43.6 | $34.3 | $9.3 | 27.1% | | Basic net income per share | $0.26 | $0.20 | $0.06 | 30.0% | | Diluted net income per share | $0.26 | $0.19 | $0.07 | 36.8% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details total comprehensive income, including net income and other comprehensive loss, for Q1 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Net income | $43.6 | $34.3 | $9.3 | | Other comprehensive loss | $(0.2) | $(2.5) | $2.3 | | Total comprehensive income | $43.4 | $31.8 | $11.6 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents cash flows from operating, investing, and financing activities for Q1 2025 and 2024 Condensed Consolidated Statements of Cash Flows | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | | :------------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Cash provided by operating activities | $42.9 | $53.9 | $(11.0) | | Cash used for investing activities | $(4.3) | $(2.1) | $(2.2) | | Cash used for financing activities | $(92.1) | $(30.9) | $(61.2) | | (Decrease) increase in cash, cash equivalents and restricted cash | $(53.3) | $20.4 | $(73.7) | | Cash, cash equivalents and restricted cash at end of period | $144.7 | $157.1 | $(12.4) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Basis of Presentation and Significant Accounting Policies](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note describes the company's business, operating philosophy, and significant accounting policies, including recent pronouncements - Zurn Elkay is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets sustainable, specification-driven water management solutions. The Zurn Elkay Business System (ZEBS) is its operating philosophy, focused on continuous improvement for customer satisfaction and financial results[26](index=26&type=chunk) - The FASB issued ASU 2023-09 (Income Taxes) effective for fiscal years beginning after December 15, 2024, and ASU 2024-03 (Expense Disaggregation) effective for fiscal years beginning after December 15, 2026. The Company is evaluating the impact of these new accounting pronouncements[27](index=27&type=chunk)[28](index=28&type=chunk) [Note 2. Restructuring and Other Similar Charges](index=8&type=section&id=Note%202.%20Restructuring%20and%20Other%20Similar%20Charges) This note details restructuring actions and charges aimed at improving efficiencies and reducing operating costs - The Company continued various restructuring actions during Q1 2025 to drive efficiencies, reduce operating costs, and modify its footprint, primarily through workforce reductions, lease termination costs, and other facility rationalization costs[29](index=29&type=chunk) Restructuring Charges | Restructuring Charges | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Employee termination benefits | $0.5 | $0.2 | $0.3 | | Contract termination and other associated costs | $1.2 | $6.1 | $(4.9) | | Total restructuring and other similar charges | $1.7 | $6.3 | $(4.6) | [Note 3. Discontinued Operations](index=8&type=section&id=Note%203.%20Discontinued%20Operations) This note explains the PMC business spin-off and its reporting as discontinued operations - The Process & Motion Control (PMC) business was spun off in October 2021 via a Reverse Morris Trust transaction, and its operating results are reported as discontinued operations for all periods presented[32](index=32&type=chunk) Discontinued Operations (Net of Tax) | Discontinued Operations (Net of Tax) | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | | :----------------------------------- | :------------------------------------- | :------------------------------------- | | Selling, general and administrative income | $(2.6) | $0.0 | | Income from discontinued operations before income tax | $2.6 | $0.0 | | Income tax benefit | $0.0 | $0.3 | | Income from discontinued operations, net of tax | $2.6 | $0.3 | [Note 4. Revenue Recognition](index=8&type=section&id=Note%204.%20Revenue%20Recognition) This note outlines revenue recognition policies, including details on customer type, geography, and backlog - Revenue for the majority of product sales is recognized at a point-in-time when control of the product is transferred to the customer, generally upon shipment from the Company's manufacturing facility[34](index=34&type=chunk) Revenue by Customer Type | Revenue by Customer Type | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | | :----------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Institutional | $191.4 | $178.3 | $13.1 | | Commercial | $108.9 | $106.8 | $2.1 | | All other | $88.5 | $88.7 | $(0.2) | | Total | $388.8 | $373.8 | $15.0 | Revenue by Geography | Revenue by Geography | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | | :------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | United States | $357.5 | $341.2 | $16.3 | | Canada | $20.1 | $21.1 | $(1.0) | | Rest of world | $11.2 | $11.5 | $(0.3) | | Total | $388.8 | $373.8 | $15.0 | - The Company had a backlog of **$72.3 million** as of March 31, 2025, with approximately **100%** expected to be recognized in the remaining nine months of the year ending December 31, 2025[40](index=40&type=chunk) [Note 5. Income Taxes](index=8&type=section&id=Note%205.%20Income%20Taxes) This note details the provision for income taxes and the effective income tax rate, explaining key drivers Income Tax Metric | Income Tax Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | | :---------------- | :------------------------------------- | :------------------------------------- | | Provision for income taxes | $15.1 | $9.0 | | Effective income tax rate | 26.9% | 20.9% | - The effective income tax rate for Q1 2025 was **26.9%**, up from **20.9%** in Q1 2024, primarily due to additional income taxes associated with compensation deduction limitations, state income taxes, and foreign income taxes, partially offset by share-based payment benefits[46](index=46&type=chunk) [Note 6. Earnings per Share](index=8&type=section&id=Note%206.%20Earnings%20per%20Share) This note details basic and diluted net income per share calculations, including anti-dilutive share effects - Diluted net income per share increased to **$0.26** for the three months ended March 31, 2025, from **$0.19** for the same period in 2024[16](index=16&type=chunk) - The computation for diluted net income per share excluded **0.2 million** and **0.5 million** shares for Q1 2025 and Q1 2024, respectively, due to their anti-dilutive effects[50](index=50&type=chunk) [Note 7. Stockholders' Equity](index=8&type=section&id=Note%207.%20Stockholders%27%20Equity) This note provides an overview of changes in stockholders' equity, including share repurchases Stockholders' Equity | Stockholders' Equity (Millions) | December 31, 2024 | March 31, 2025 | Change | | :------------------------------ | :---------------- | :------------- | :----- | | Total stockholders' equity | $1,586.8 | $1,548.0 | $(38.8) | | Retained deficit | $(1,168.7) | $(1,203.1) | $(34.4) | | Additional paid-in capital | $2,828.2 | $2,824.0 | $(4.2) | - During the three months ended March 31, 2025, the Company repurchased **2,272,022 shares** of common stock at a total cost of **$77.4 million**, at an average price of **$34.07** per share. Approximately **$162.8 million** of repurchase authority remained at March 31, 2025[53](index=53&type=chunk) [Note 8. Accumulated Other Comprehensive Loss](index=8&type=section&id=Note%208.%20Accumulated%20Other%20Comprehensive%20Loss) This note details the components and changes in accumulated other comprehensive loss for the period Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss (Millions) | December 31, 2024 | March 31, 2025 | | :-------------------------------------------- | :---------------- | :------------- | | Balance at beginning of period | $(74.4) | $(74.4) | | Other comprehensive loss before reclassifications | N/A | $(0.2) | | Net current period other comprehensive loss | N/A | $(0.2) | | Balance at end of period | $(74.4) | $(74.6) | [Note 9. Inventories](index=8&type=section&id=Note%209.%20Inventories) This note provides a breakdown of inventory components: finished goods, work in progress, and raw materials Inventories | Inventories (Millions) | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :----- | | Finished goods | $232.7 | $228.7 | $4.0 | | Work in progress | $11.9 | $12.1 | $(0.2) | | Raw materials | $48.7 | $44.8 | $3.9 | | Total inventories, net | $280.6 | $272.6 | $8.0 | [Note 10. Goodwill and Intangible Assets](index=8&type=section&id=Note%2010.%20Goodwill%20and%20Intangible%20Assets) This note details goodwill and intangible assets, including amortization expense and future expectations Goodwill and Intangible Assets | Asset Type (Millions) | December 31, 2024 | March 31, 2025 | Change | | :-------------------- | :---------------- | :------------- | :----- | | Goodwill | $794.2 | $794.4 | $0.2 | | Intangible assets, net | $891.6 | $877.2 | $(14.4) | - Intangible asset amortization expense totaled **$14.7 million** for both the three months ended March 31, 2025, and March 31, 2024[58](index=58&type=chunk) - The Company expects to recognize amortization expense on intangible assets subject to amortization of **$58.6 million** in the year ending December 31, 2025[59](index=59&type=chunk) [Note 11. Other Current Liabilities](index=8&type=section&id=Note%2011.%20Other%20Current%20Liabilities) This note breaks down other current liabilities, including sales rebates, commissions, and restructuring charges Other Current Liabilities | Other Current Liabilities (Millions) | March 31, 2025 | December 31, 2024 | Change | | :--------------------------------- | :------------- | :---------------- | :----- | | Sales rebates | $57.9 | $73.2 | $(15.3) | | Commissions | $12.0 | $9.2 | $2.8 | | Restructuring and other similar charges | $0.7 | $1.2 | $(0.5) | | Total other current liabilities | $124.3 | $136.2 | $(11.9) | [Note 12. Long-Term Debt](index=8&type=section&id=Note%2012.%20Long-Term%20Debt) This note details long-term debt, including term loans, finance leases, and debt covenant compliance Long-Term Debt | Long-Term Debt (Millions) | March 31, 2025 | December 31, 2024 | Change | | :------------------------ | :------------- | :---------------- | :----- | | Term loan | $475.4 | $475.0 | $0.4 | | Finance leases | $20.4 | $20.6 | $(0.2) | | Total long-term debt | $495.0 | $494.8 | $0.2 | - The Company's Net First Lien Leverage Ratio was **0.98 to 1.00** as of March 31, 2025, indicating compliance with all applicable covenants under the Credit Agreement[65](index=65&type=chunk)[69](index=69&type=chunk) - The Term Loan had weighted-average effective interest rates of **6.40%** for the three months ended March 31, 2025. The **$200.0 million** revolving credit facility had no amounts borrowed as of March 31, 2025, with **$11.1 million** utilized for outstanding letters of credit[70](index=70&type=chunk)[73](index=73&type=chunk) [Note 13. Fair Value Measurements](index=8&type=section&id=Note%2013.%20Fair%20Value%20Measurements) This note explains fair value measurement hierarchy and valuation of deferred compensation plan assets and liabilities - The Company classifies fair value measurements into a hierarchy (Level 1, 2, 3) based on the observability of inputs. Deferred compensation plan assets and liabilities are measured at fair value, primarily using Level 1 and Level 2 inputs[76](index=76&type=chunk)[77](index=77&type=chunk) Fair Value | Fair Value (Millions) | March 31, 2025 (Total) | December 31, 2024 (Total) | | :-------------------- | :--------------------- | :------------------------ | | Deferred compensation plan assets | $17.0 | $16.3 | | Deferred compensation plan liabilities | $19.3 | $18.9 | - The fair value of long-term debt was approximately **$500.8 million** as of March 31, 2025, based on quoted market prices[79](index=79&type=chunk) [Note 14. Commitments and Contingencies](index=8&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) This note outlines the company's product warranty liabilities and ongoing legal actions and claims Product Warranty Liability | Product Warranty Liability (Millions) | 3 Months Ended Mar 31, 2025 | 3 Months Ended Mar 31, 2024 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Balance at beginning of period | $4.9 | $4.7 | | Charged to operations | $0.9 | $0.4 | | Claims settled | $(0.6) | $(0.4) | | Balance at end of period | $5.2 | $4.7 | - The Company's subsidiaries are involved in various unresolved legal actions and claims in the ordinary course of business, but management believes the eventual outcome will not have a material adverse effect on the financial position, results of operations, or cash flows[82](index=82&type=chunk) [Note 15. Retirement Benefits](index=8&type=section&id=Note%2015.%20Retirement%20Benefits) This note details pension and other postretirement benefits, including a U.S. defined benefit plan termination Net Periodic (Income) Cost | Net Periodic (Income) Cost (Millions) | 3 Months Ended Mar 31, 2025 | 3 Months Ended Mar 31, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Pension Benefits | $(0.2) | $0.9 | | Other Postretirement Benefits | $0.1 | $0.1 | - The Company's Board of Directors approved the termination of the U.S. defined benefit pension plan, effective April 1, 2025, which resulted in a curtailment gain of **$0.7 million** in the first quarter of 2025[85](index=85&type=chunk) [Note 16. Stock-Based Compensation](index=8&type=section&id=Note%2016.%20Stock-Based%20Compensation) This note details stock-based compensation expense and equity awards, including the Employee Stock Purchase Plan - Stock-based compensation expense was **$10.5 million** for the three months ended March 31, 2025, compared to **$10.0 million** for the same period in 2024[87](index=87&type=chunk) - During Q1 2025, the Company granted **66,540** stock options, **180,356** restricted stock units, **386,168** performance stock units, and **78,143** common stock awards[88](index=88&type=chunk) - The Employee Stock Purchase Plan (ESPP) was approved in May 2024, with **2,000,000** shares available. In Q1 2025, **27,295** shares were issued under the ESPP, and **$0.2 million** of stock-based compensation expense was recognized[89](index=89&type=chunk)[90](index=90&type=chunk) [Note 17. Business Segment Information](index=8&type=section&id=Note%2017.%20Business%20Segment%20Information) This note explains the company's single reportable segment management and evaluation, detailing segment profit - The Company manages and evaluates its operations on a consolidated basis as one reportable operating segment due to similarities in its products, processes, customer base, and distribution methods[92](index=92&type=chunk) - The Chief Operating Decision Maker (CEO) assesses the Company's performance and makes capital allocation decisions based on Net income from continuing operations[93](index=93&type=chunk) Segment Profit | Segment Profit (Millions) | 3 Months Ended Mar 31, 2025 | 3 Months Ended Mar 31, 2024 | | :------------------------ | :-------------------------- | :-------------------------- | | Net sales | $388.8 | $373.8 | | Cost of sales | $207.8 | $203.7 | | Selling, general and administrative expenses | $101.2 | $95.9 | | Other segment items | $38.8 | $40.2 | | Segment profit (Net income from continuing operations) | $41.0 | $34.0 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial condition, results, liquidity, and debt covenant compliance [General](index=22&type=section&id=General) This section introduces Zurn Elkay's water management business focus and operating philosophy - Zurn Elkay Water Solutions Corporation is a growth-oriented, pure-play water management business focused on sustainable, specification-driven solutions to improve health, hydration, human safety, and the environment[97](index=97&type=chunk) - The Zurn Elkay Business System (ZEBS) is the company's operating philosophy, grounded in continuous improvement to drive superior customer satisfaction and financial results[97](index=97&type=chunk) [Critical Accounting Estimates](index=22&type=section&id=Critical%20Accounting%20Estimates) This section confirms no material changes to critical accounting estimates since the prior annual report - As of March 31, 2025, there have been no material changes to the critical accounting estimates reported in the Annual Report on Form 10-K for the year ended December 31, 2024[99](index=99&type=chunk) [Recent Accounting Pronouncements](index=22&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 1 for details on recent accounting pronouncements and their impact - Refer to Note 1, Basis of Presentation and Significant Accounting Policies, for information regarding recent accounting pronouncements (ASU 2023-09 and ASU 2024-03) and their potential impact[100](index=100&type=chunk) [Discontinued Operations](index=22&type=section&id=Discontinued%20Operations) This section discusses the spin-off of the PMC business and its reporting as discontinued operations - The Process & Motion Control (PMC) business was spun off in October 2021, and its operating results are reported as discontinued operations in the condensed consolidated statements of operations[101](index=101&type=chunk) Discontinued Operations (Net of Tax) | Discontinued Operations (Net of Tax) | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | | :----------------------------------- | :------------------------------------- | :------------------------------------- | | Net income from discontinued operations, net of tax | $2.6 | $0.3 | [Restructuring and Other Similar Charges](index=22&type=section&id=Restructuring%20and%20Other%20Similar%20Charges) This section highlights the decrease in restructuring charges due to ongoing efficiency initiatives - Restructuring charges decreased to **$1.7 million** in Q1 2025 from **$6.3 million** in Q1 2024, as the company continues initiatives to drive efficiencies and optimize its operating margin and manufacturing footprint[104](index=104&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including net sales, operating income, and net income [Net sales](index=22&type=section&id=Net%20sales) This section details the 4% net sales increase, driven by core sales growth, offset by foreign currency Net sales | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | % Change | | :------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Net sales | $388.8 | $373.8 | $15.0 | 4.0% | - Core sales improved **5%** year-over-year, driven by volume growth across all product categories, while foreign currency exchange rates reduced net sales by **1%**[105](index=105&type=chunk) [Income from operations](index=22&type=section&id=Income%20from%20operations) This section explains the 19.2% operating income increase due to productivity and lower restructuring charges Income from operations | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | % Change | | :-------------------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Income from operations | $63.4 | $53.2 | $10.2 | 19.2% | | % of net sales | 16.3% | 14.2% | 2.1% | N/A | - The increase in operating income and margin (**210 basis points**) was due to benefits from productivity initiatives, continuous improvement activities, lower restructuring charges, and carryover benefits of synergy actions[106](index=106&type=chunk) [Interest expense, net](index=22&type=section&id=Interest%20expense%2C%20net) This section attributes the decrease in net interest expense to reduced interest rates Interest expense, net | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | | :------------------ | :------------------------------------- | :------------------------------------- | :---------------- | | Interest expense, net | $7.3 | $8.8 | $(1.5) | - The decrease in interest expense, net, was primarily due to reduced interest rates in the current year[107](index=107&type=chunk) [Other expense, net](index=22&type=section&id=Other%20expense%2C%20net) This section explains the change in other expense, net, primarily due to lower defined benefit plan costs Other expense, net | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | | :--------------- | :------------------------------------- | :------------------------------------- | | Other expense, net | $0.0 | $1.4 | - The year-over-year change in other expense, net, was primarily driven by lower defined benefit plan costs, including a **$0.7 million** curtailment gain from the U.S. pension plan freeze and a higher expected return on plan assets[108](index=108&type=chunk) [Provision for income taxes](index=22&type=section&id=Provision%20for%20income%20taxes) This section details the increase in the effective income tax rate due to various tax adjustments Provision for income taxes | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | | :----------------------- | :------------------------------------- | :------------------------------------- | | Income tax provision | $15.1 | $9.0 | | Effective income tax rate | 26.9% | 20.9% | - The effective income tax rate for Q1 2025 was **26.9%**, up from **20.9%** in Q1 2024, primarily due to compensation deduction limitations, state income taxes, and foreign income taxes, partially offset by share-based payment benefits[109](index=109&type=chunk) [Net income](index=22&type=section&id=Net%20income) This section summarizes the overall increase in net income and diluted net income per share Net income | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 3 Months Ended Mar 31, 2024 (Millions) | Change (Millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Net income | $43.6 | $34.3 | $9.3 | | Diluted net income per share | $0.26 | $0.19 | $0.07 | | Net income from discontinued operations, net of tax | $2.6 | $0.3 | $2.3 | [Non-GAAP Financial Measures](index=22&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and explains non-GAAP financial measures like Core sales, EBITDA, and Adjusted EBITDA [Core sales](index=22&type=section&id=Core%20sales) This section defines Core sales as a non-GAAP measure for comparing net sales performance - Core sales is a non-GAAP measure that excludes the impact of mergers, acquisitions, divestitures, and foreign currency translation to facilitate easier and more meaningful comparisons of net sales performance[113](index=113&type=chunk) [EBITDA](index=22&type=section&id=EBITDA) This section defines EBITDA as a supplemental performance measure for evaluating debt service ability - EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a supplemental measure of performance used by analysts and investors to evaluate companies and their ability to meet debt service obligations[114](index=114&type=chunk) - EBITDA is not a GAAP measurement and should not be considered an alternative to cash flow from operating activities or net income[114](index=114&type=chunk) [Adjusted EBITDA](index=22&type=section&id=Adjusted%20EBITDA) This section explains Adjusted EBITDA's importance for credit agreement compliance and financial flexibility - Adjusted EBITDA is a critical measure under the company's credit agreement, impacting its ability to incur debt, make acquisitions, and distribute dividends, as lenders use it to calculate the Net First Lien Leverage Ratio[115](index=115&type=chunk) - Adjusted EBITDA for the three months ended March 31, 2025, was **$98.0 million**, compared to GAAP net income of **$43.6 million**[118](index=118&type=chunk) [Covenant Compliance](index=22&type=section&id=Covenant%20Compliance) This section details the company's compliance with credit agreement covenants, specifically the Net First Lien Leverage Ratio - The company's credit agreement contains restrictive covenants, including a maximum Net First Lien Leverage Ratio of **5.00 to 1.00**[119](index=119&type=chunk) Covenant Compliance Metrics | Metric | 3 Months Ended Mar 31, 2025 (Millions) | 12 Months Ended Mar 31, 2025 (Millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | | Net income | $43.6 | $169.5 | | EBITDA | $86.1 | $344.2 | | Adjusted EBITDA | $98.0 | $398.4 | | Consolidated indebtedness | N/A | $388.5 | | Net First Lien Leverage Ratio | N/A | 0.98 to 1.00 | - As of March 31, 2025, the Net First Lien Leverage Ratio was **0.98 to 1.00**, indicating compliance with all applicable covenants under the credit agreement[119](index=119&type=chunk)[121](index=121&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's primary liquidity sources and their adequacy for short-term and long-term needs - The primary sources of liquidity are available cash and cash equivalents, cash flow from operations, and borrowing availability of up to **$200.0 million** under the revolving credit facility[124](index=124&type=chunk) Liquidity and Capital Resources | Metric (Millions) | March 31, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------- | :---------------- | :----- | | Cash and cash equivalents | $144.7 | $198.0 | $(53.3) | | Additional borrowing capacity (revolving credit facility) | $188.9 | $188.7 | $0.2 | - The company believes its liquidity resources are adequate for its expected short-term and long-term needs[126](index=126&type=chunk) [Cash Flows](index=22&type=section&id=Cash%20Flows) This section analyzes cash flows from operating, investing, and financing activities, highlighting key changes Cash Flow Activity | Cash Flow Activity (Millions) | 3 Months Ended Mar 31, 2025 | 3 Months Ended Mar 31, 2024 | Change | | :---------------------------- | :-------------------------- | :-------------------------- | :----- | | Operating activities | $42.9 | $53.9 | $(11.0) | | Investing activities | $(4.3) | $(2.1) | $(2.2) | | Financing activities | $(92.1) | $(30.9) | $(61.2) | - The decrease in operating cash flow was primarily due to higher use of cash for trade working capital, partially offset by an increase in net income[127](index=127&type=chunk) - Cash used for financing activities significantly increased due to **$77.4 million** in common stock repurchases and **$15.2 million** for common stock dividends[129](index=129&type=chunk) [Indebtedness](index=22&type=section&id=Indebtedness) This section provides a summary of the company's outstanding long-term debt, including term loans and finance leases Indebtedness | Indebtedness (Millions) | March 31, 2025 | | :---------------------- | :------------- | | Term loan | $475.4 | | Finance leases | $20.4 | | Total indebtedness outstanding | $495.8 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from foreign currency and interest rate fluctuations through operations and derivatives - The company is exposed to market risk from changes in foreign currency exchange rates and interest rates[132](index=132&type=chunk) - These risks are managed through normal operating and financing activities, and at times, derivative financial instruments like foreign currency forward contracts and interest rate derivatives[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and procedures as of March 31, 2025, with no material changes - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were adequate and effective as of March 31, 2025[135](index=135&type=chunk) - There have been no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the last fiscal quarter[137](index=137&type=chunk) [Part II Other Information](index=31&type=section&id=Part%20II%20OTHER%20INFORMATION) This section covers legal proceedings, equity sales, other information, and exhibits filed with Form 10-Q [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions, but management anticipates no material adverse effect on financials - The Company's subsidiaries are involved in various unresolved legal actions, administrative proceedings, and claims in the ordinary course of business[82](index=82&type=chunk)[139](index=139&type=chunk) - Management believes the eventual outcome of these legal actions, individually or in aggregate, will not have a material adverse effect on the Company's financial position, results of operations, or cash flows[82](index=82&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 2.27 million common shares for $77.4 million in Q1 2025, with $162.8 million authority remaining - The Company's Board of Directors approved increasing the remaining share repurchase authority under the Repurchase Program to **$500.0 million** on February 8, 2023[140](index=140&type=chunk) Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Cost (Millions) | Remaining Authority (Millions) | | :------------------------ | :------------------------------- | :--------------------------- | :-------------------- | :----------------------------- | | Jan 1 - Jan 31, 2025 | 267,650 | $37.34 | $10.0 | $230.2 | | Feb 1 - Feb 28, 2025 | 1,659,223 | $33.62 | $55.8 | $174.4 | | Mar 1 - Mar 31, 2025 | 345,149 | $33.68 | $11.6 | $162.8 | | **Total/Average (Q1 2025)** | **2,272,022** | **$34.07** | **$77.4** | **$162.8 (as of Mar 31, 2025)** | [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) This section confirms no directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q1 2025 - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2025[142](index=142&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists Form 10-Q exhibits, including CEO and CFO certifications and Inline XBRL documents - Key exhibits include certifications of the Chief Executive Officer (31.1, 32.1) and Chief Financial Officer (31.2, 32.1), and Inline XBRL Instance Document (101.INS) and related taxonomy extension documents[144](index=144&type=chunk) [Signatures](index=33&type=section&id=Signatures) This section contains the official signatures for the report, confirming its submission - The report was signed on April 22, 2025, by David J. Pauli, Chief Financial Officer, on behalf of Zurn Elkay Water Solutions Corporation[149](index=149&type=chunk)

Exhibit 99.1 Press Release • Net sales in the quarter were $389 million compared with $374 million in last year's March quarter (+5% core sales , exchange rates reduced net sales by 1%). (1) • Net income from continuing operations was $41 million (diluted EPS from continuing operations of $0.24) compared with net income from continuing operations of $34 million (diluted EPS from continuing operations of $0.19) in the year-ago quarter. • Adjusted EPS was $0.31 compared with $0.29 in the year-ago quarter. (1) ...

Company Overview - Zurn Elkay Water Solutions Corporation (NYSE: ZWS) is highlighted as an intriguing business with potential for investment [1]. Industry Insights - Crude Value Insights focuses on the oil and natural gas sector, emphasizing cash flow generation and identifying companies with value and growth prospects [1].

Core Viewpoint - Wall Street anticipates flat earnings for Zurn Water (ZWS) in the upcoming quarter, with a consensus EPS estimate of $0.29, unchanged from the previous year, while revenues are expected to rise by 2.3% to $382.37 million [1][3]. Earnings Expectations - The stock may experience upward movement if actual earnings exceed expectations in the earnings report scheduled for April 22 [2]. - Conversely, if the earnings report falls short of estimates, the stock could decline [2]. Estimate Revisions - The consensus EPS estimate has been revised 0.08% higher in the last 30 days, indicating a slight bullish sentiment among analysts [4]. - The Zacks Earnings ESP for Zurn Water is +2.34%, suggesting a higher likelihood of beating the consensus EPS estimate [11]. Earnings Surprise Prediction - The Most Accurate Estimate for Zurn Water is above the Zacks Consensus Estimate, indicating recent analyst optimism regarding the company's earnings prospects [10]. - A positive Earnings ESP reading is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold) [8]. Historical Performance - Zurn Water has consistently beaten consensus EPS estimates, achieving a surprise of +10.34% in the last reported quarter and surpassing estimates in all four of the last quarters [12][13]. Conclusion - Zurn Water is positioned as a compelling candidate for an earnings beat, but investors should consider additional factors beyond earnings expectations when making investment decisions [16].