The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto that appear elsewhere in this report. This report contains certain statements that may be deemed “forward-looking statements” within the meaning of the federal securities laws. All statements that address activities, events or developments that the Company intends, expects, plans, projects, believes or anticipates will or may occur in the future are forward-looking statements, including, without limitation, statements regarding outlooks, projections, forecasts, expectations, commitments, trend descriptions, and the ability to capitalize on trends, value creation, long-term strategies, and the execution or acceleration thereof, operational improvements, inventory positions, the benefits of capital investments, financial or operating performance, including driving increased margins, operational and commercial initiatives, capital allocation and growth strategy plans, and the demand for the Company’s products. Forward-looking statements are based on certain assumptions and assessments made by the Company in light of the Company’s experience and perception of historical trends, current conditions, and expected future developments.
Actual results and the timing of events may differ materially from those contemplated by the forward-looking statements due to a number of factors, including, without limitation, changing regulatory, trade and tariff conditions, including the impact of the Section 232 tariffs on the products produced by our Krausz business; logistical challenges and supply chain disruptions, geopolitical conditions, public health crises, or other events; inventory and in-stock positions of our distributors and end customers; an inability to realize the anticipated benefits from our operational initiatives, including our large capital investments, plant closures, and reorganization and related strategic realignment activities; an inability to attract or retain a skilled and diverse workforce, increased competition related to the workforce, and labor markets; an inability to protect the Company’s information systems against service interruption; risks resulting from possible future cybersecurity incidents; misappropriation of data or breaches of security; failure to comply with personal data protection and privacy laws; cyclical and changing demand in core markets such as municipal spending, residential construction and natural gas distribution; government monetary or fiscal policies; the impact of adverse weather conditions; the impact of manufacturing and product performance; the impact of wage, commodity and materials price inflation; foreign exchange rate fluctuations; the impact of higher interest rates; the impact of warranty charges and claims, and related accommodations; the strength of our brands and reputation; an inability to successfully resolve significant legal proceedings or government investigations; compliance with environmental, trade and anti-corruption laws and regulations; climate change and legal or regulatory responses thereto; the failure to integrate and/or realize any of the anticipated benefits of acquisitions or divestitures; an inability to achieve our goals and commitments in environmental and sustainability programs; and other factors that are described in the section entitled “RISK FACTORS” in Item 1A. of the Company’s most recent Annual Report on Form 10-K and later filings on Form 10-Q, as applicable.
Forward-looking statements do not guarantee future performance and are only as of the date they are made. The Company undertakes no duty to update its forward-looking statements except as required by law. Undue reliance should not be placed on any forward-looking statements. You are advised to review any further disclosures the Company makes on related subjects in subsequent Forms 10-K, 10-Q, 8-K, and other reports filed with the United States Securities and Exchange Commission.
Overview
Business
We operate our business through two segments: Water Flow Solutions and Water Management Solutions. Water Flow Solutions’ portfolio includes iron gate valves, specialty valves, and service brass products. Water Flow Solutions represented approximately 58% of our fiscal 2025 net sales. Water Management Solutions’ portfolio includes fire hydrants, repair and installation, natural gas, metering, leak detection, as well as pressure management and control products and solutions. Water Management Solutions represented approximately 42% of our fiscal 2025 net sales.
We estimate approximately 60% to 65% of our fiscal 2025 net sales were associated with the repair and replacement of municipal water infrastructure, approximately 25% to 30% were related to residential construction activity and approximately 10% were related to natural gas utilities and industrial applications.
In October 2023, the Israel-Hamas war caused a temporary shutdown in our facility in Ariel, Israel. We reopened the facility in November 2023, but the war caused supply chain challenges that reduced the manufacturing efficiencies for our products produced in Israel. While the facility was adversely impacted by this event, we have mitigated operational risk by adding suppliers and improving throughput in order to increase production levels and to meet customer delivery times. While net sales
25
Table of Contents
levels have returned to pre-war levels, margin expansion has been hindered by tariffs on products manufactured in Israel and imported into the United States (“U.S.”).
While tariffs are adversely impacting several product lines, Repair and Specialty Valve product lines are bearing most of the higher costs. In 2025, the U.S. government announced significant changes to its trade policy, including tariff increases on imported steel and aluminum from 25% to 50% under Section 232 of the Trade Expansion Act (“Section 232”). The increase in Section 232 tariffs to 50% has resulted in material, upward pressure on certain purchased components and raw material costs, including the Repair products we import to the U.S. that are produced by our Krausz business, which have borne most of the higher costs. As previously disclosed, we have taken, and intend to continue to take, actions to mitigate these increases through, among other things, pricing and supply chain actions. Despite these actions, Section 232 tariffs are likely to continue to negatively impact the Company’s business, results of operations, and financial condition during the remainder of fiscal 2026. The ultimate impact of Section 232 tariffs remains to be determined and will depend on several factors, including our ability to successfully mitigate their impact and whether additional or incremental U.S. tariffs or other changes to trade policies are announced or imposed.
In January 2025, we ceased melting and casting operations at our legacy brass foundry and transitioned production to our new state-of-the-art foundry. We expect this transition will improve operational efficiency and enable us to better serve our service brass customers. As part of our overall strategy, we will continue investing in our foundries to expand capacity, increase manufacturing efficiencies, and position ourselves to respond to the expected increase in demand for domestic product given the uncertainty in the current geopolitical and tariff environment. The Company expects to incur certain costs related to the decommissioning and demolition of its legacy foundry, the amount of which is not estimable at this time.
For fiscal year 2026, we anticipate that consolidated net sales will increase between 2.8% and 3.5% as compared with fiscal 2025. The external operating environment remains uncertain as we face changes in government policies, including possible disruptions to global supply chains resulting from such changes, the interest rate and tariff environment, as well as geopolitical conditions and increased labor and material costs, and constraints of labor and material availability. We expect these challenges to continue during the remainder of fiscal 2026. We continue to anticipate resilient demand associated with the municipal repair and replacement end market driven by the aging water infrastructure and increasing water rates, moderated by budgetary and operational pressures on municipalities. We anticipate that new residential construction activity and new lot and land development will be relatively constrained by the uncertainty in the economy, affordability concerns, and interest rate environment, depending on the geographic region.
We typically experience quarterly seasonality with consolidated net sales highest in the third quarter and lowest in the first quarter, with a sequential increase in the second quarter as construction activity ramps up in the Spring. For the remainder of fiscal 2026, we anticipate that inflation will continue to modestly impact manufacturing costs, primarily due to wage inflation, as well as raw materials and purchased parts. In addition, we expect higher direct tariff costs of approximately 3% of costs of sales to continue to contribute to inflationary pressures during the remainder of fiscal 2026. While pricing actions were taken in fiscal 2025 in response to new tariffs, we will continue to monitor the market and economic conditions impacting our business and take appropriate actions to mitigate inflationary and other cost pressures, including by implementing price increases, cost containment measures and supplier management measures, among other actions.
26
Table of Contents
Results of Operations
Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
Three months ended June 30, 2026
Water Flow Solutions Water Management Solutions Corporate Total
(in millions)
Net sales $ 215.3 $ 180.6 $ — $ 395.9
Gross profit 89.5 66.3 — 155.8
Operating expenses:
Selling, general and administrative 23.5 23.8 16.7 64.0
Strategic reorganization and other charges — 6.6 4.6 11.2
Total operating expenses 23.5 30.4 21.3 75.2
Operating income (loss) $ 66.0 $ 35.9 $ (21.3) 80.6
Non-operating expenses:
Pension expense other than service 0.1
Interest expense, net 0.7
Income before income taxes 79.8
Income tax expense 12.5
Net income $ 67.3
Three months ended June 30, 2025
Water Flow Solutions Water Management Solutions Corporate Total
(in millions)
Net sales $ 216.6 $ 163.7 $ — $ 380.3
Gross profit 83.8 61.9 — 145.7
Operating expenses:
Selling, general and administrative 23.3 31.6 16.1 71.0
Strategic reorganization and other charges — 0.2 0.8 1.0
Total operating expenses 23.3 31.8 16.9 72.0
Operating income (loss) $ 60.5 $ 30.1 $ (16.9) 73.7
Non-operating expenses:
Interest expense, net 1.7
Income before income taxes 72.0
Income tax expense 19.5
Net income $ 52.5
Consolidated Analysis
Net sales for the three months ended June 30, 2026 were $395.9 million as compared with $380.3 million in the prior year period, an increase of $15.6 million or 4.1%, primarily as a result of higher pricing across most product lines partially offset by lower volumes.
Gross profit for the three months ended June 30, 2026 was $155.8 million as compared with $145.7 million in the prior year period, an increase of $10.1 million or 6.9%. Gross margin was 39.4% in the three months ended June 30, 2026 as compared with 38.3% in the prior year period. Gross margin increased 110 basis points primarily as a result of favorable pricing across
27
Table of Contents
most product lines and non-recurring tariff refunds. Gross profit was negatively impacted by approximately 4% inflation, performance, lower volumes, $3.1 million of portfolio optimization costs, and product mix.
Selling, general and administrative expenses (“SG&A”) for the three months ended June 30, 2026 were $64.0 million as compared with $71.0 million in the prior year period, a decrease of $7.0 million or 9.9%, primarily due to lower unfavorable impact of foreign currency exchange and incentive-based compensation partially offset by inflation of approximately 3%. SG&A as a percentage of net sales was 16.2% and 18.7% for the three months ended June 30, 2026 and 2025, respectively.
Strategic reorganization and other charges for the three months ended June 30, 2026 were $11.2 million and consisted primarily of certain transaction-related expenses, non-cash asset impairment expenses in our Water Management Solutions segment, severance, and expenses associated with our leadership transition. Strategic reorganization and other charges for the three months ended June 30, 2025 were $1.0 million and consisted of expenses associated with our leadership transition.
Net interest expense for the three months ended June 30, 2026 was $0.7 million as compared with $1.7 million in the prior year period, a decrease of $1.0 million or 58.8%, primarily due to higher interest income. The components of net interest expense are as shown below:
Three months ended
June 30,
2026 2025
(in millions)
4.0% Senior Notes $ 4.5 $ 4.5
Deferred financing costs amortization 0.3 0.2
ABL Agreement 0.2 0.2
Capitalized interest (0.4) (0.1)
Other interest expense 0.3 —
Total interest expense 4.9 4.8
Interest income (4.2) (3.1)
Interest expense, net $ 0.7 $ 1.7
Income tax expense for the three months ended June 30, 2026 was $12.5 million as compared with $19.5 million in the prior year period, a decrease of $7.0 million or 35.9%, primarily attributable to a tax benefit resulting from the recognition of a loss on a foreign subsidiary investment, partially offset by higher pre-tax income and a valuation allowance on foreign pre-tax earnings. The effective tax rate for the three months ended June 30, 2026 was 15.7% as compared with 27.1% in the prior year. The effective tax rate decreased primarily due to a tax benefit from the recognition of a loss on a foreign subsidiary investment, partially offset by a valuation allowance related to the Company's foreign operations.
Segment Analysis
Water Flow Solutions
Net sales for the three months ended June 30, 2026 were $215.3 million as compared with $216.6 million in the prior year period, a decrease of $1.3 million or 0.6%, primarily as a result of lower volumes mostly offset by higher pricing across most product lines.
Gross profit for the three months ended June 30, 2026 was $89.5 million as compared with $83.8 million in the prior year period, an increase of $5.7 million or 6.8%. This increase was primarily a result of higher pricing across most product lines, non-recurring tariff refunds, and performance partially offset by lower volumes, approximately 5% inflation, and product mix. Gross margin was 41.6% in the three months ended June 30, 2026 and 38.7% in the prior year period.
SG&A for the three months ended June 30, 2026 was $23.5 million as compared with $23.3 million in the prior year period, an increase of $0.2 million or 0.9%, primarily as a result of inflation of approximately 4%, higher personnel costs and unfavorable foreign currency impact. These increases were mostly offset by lower third-party fees. SG&A as a percentage of net sales was 10.9% and 10.8% in the three months ended June 30, 2026 and 2025, respectively.
28
Table of Contents
Water Management Solutions
Net sales for the three months ended June 30, 2026 were $180.6 million as compared with $163.7 million in the prior year period, an increase of $16.9 million or 10.3%, primarily as a result of increased volumes and higher pricing across most product lines.
Gross profit for the three months ended June 30, 2026 was $66.3 million as compared with $61.9 million in the prior year period, an increase of $4.4 million or 7.1%. The increase was primarily a result of higher pricing across most product lines, increased volumes, and non-recurring tariff refunds, which were partially offset by performance, $3.1 million of portfolio optimization costs, and approximately 3% inflation. Gross margin was 36.7% in the three months ended June 30, 2026 as compared with 37.8% in the prior year period.
SG&A for the three months ended June 30, 2026 was $23.8 million as compared with $31.6 million in the prior year period, a decrease of $7.8 million or 24.7%, primarily due to lower unfavorable impact of foreign currency exchange, third-party fees and incentive-based compensation partially offset by approximately 2% inflation. SG&A as a percentage of net sales was 13.2% and 19.3% in the three month periods ended June 30, 2026 and 2025, respectively.
Corporate
SG&A for the three months ended June 30, 2026 was $16.7 million as compared with $16.1 million in the prior year period, an increase of $0.6 million or 3.7% primarily a result of higher third-party fees and approximately 3% inflation mostly offset by lower unfavorable impact of foreign currency exchange.
29
Table of Contents
Nine months ended June 30, 2026 Compared to Nine months ended June 30, 2025
Nine months ended June 30, 2026
Water Flow Solutions Water Management Solutions Corporate Total
(in millions)
Net sales $ 606.6 $ 491.9 $ — $ 1,098.5
Gross profit 247.4 172.7 — 420.1
Operating expenses:
Selling, general and administrative 66.8 70.2 46.5 183.5
Strategic reorganization and other charges — 6.8 12.1 18.9
Total operating expenses 66.8 77.0 58.6 202.4
Operating income (loss) $ 180.6 $ 95.7 $ (58.6) 217.7
Non-operating expenses:
Pension expense other than service 0.1
Interest expense, net 3.3
Income before income taxes 214.3
Income tax expense 44.7
Net income $ 169.6
Nine months ended June 30, 2025
Water Flow Solutions Water Management Solutions Corporate Total
(in millions)
Net sales $ 607.4 $ 441.5 $ — $ 1,048.9
Gross profit 215.9 160.8 — 376.7
Operating expenses:
Selling, general and administrative 65.0 71.5 44.1 180.6
Strategic reorganization and other charges 1.0 0.6 3.5 5.1
Total operating expenses 66.0 72.1 47.6 185.7
Operating income (loss) $ 149.9 $ 88.7 $ (47.6) 191.0
Non-operating expenses:
Pension benefit other than service (0.1)
Interest expense, net 5.6
Income before income taxes 185.5
Income tax expense 46.4
Net income $ 139.1
Consolidated Analysis
Net sales for the nine months ended June 30, 2026 were $1,098.5 million as compared with $1,048.9 million in the prior year period, an increase of $49.6 million or 4.7%, primarily as a result of higher pricing across most product lines slightly offset by lower volumes.
Gross profit for the nine months ended June 30, 2026 was $420.1 million as compared with $376.7 million in the prior year period, an increase of $43.4 million or 11.5%. Gross margin was 38.2% in the nine months ended June 30, 2026 as compared with 35.9% in the prior year period. Gross margin increased 230 basis points primarily as a result of higher pricing across most
30
Table of Contents
product lines, performance largely driven by the legacy brass foundry closure in Decatur, Illinois, as well as the favorable comparison to a $4.1 million write-down of inventory and other assets associated with our legacy brass foundry recorded in the prior year period. Gross margin was negatively impacted by approximately 4% inflation, increased tariffs, net of non-recurring tariff refunds, and $3.1 million of portfolio optimization costs in the current period.
SG&A for the nine months ended June 30, 2026 was $183.5 million as compared with $180.6 million in the prior year period, an increase of $2.9 million or 1.6%, primarily due to approximately 3% inflation and higher personnel costs partially offset by lower incentive-based compensation and reduced unfavorable foreign currency exchange impact. SG&A as a percentage of net sales was 16.7% and 17.2% for the nine months ended June 30, 2026 and June 30, 2025, respectively.
Strategic reorganization and other charges for the nine months ended June 30, 2026 were $18.9 million and consisted of certain transaction-related expenses, expenses associated with our leadership transition, non-cash asset impairment expenses in our Water Management Solutions segment, and severance. Strategic reorganization and other charges for the nine months ended June 30, 2025 were $5.1 million and consisted of expenses associated with our leadership transition, non-cash asset impairment expenses in our Water Flow Solutions segment, and certain transaction-related expenses.
Net interest expense for the nine months ended June 30, 2026 was $3.3 million as compared with $5.6 million in the prior year period, a decrease of $2.3 million or 41.1%, primarily due to higher interest income. The components of net interest expense are as shown below:
Nine months ended
June 30,
2026 2025
(in millions)
4.0% Senior Notes $ 13.5 $ 13.5
Deferred financing costs amortization 0.8 0.7
ABL Agreement 0.6 0.6
Capitalized interest (0.9) (0.3)
Other interest expense 0.6 0.4
Total interest expense 14.6 14.9
Interest income (11.3) (9.3)
Interest expense, net $ 3.3 $ 5.6
Income tax expense for the nine months ended June 30, 2026 was $44.7 million as compared with $46.4 million in the prior year period, a decrease of $1.7 million or 3.7%, primarily attributable to a tax benefit resulting from the recognition of a loss on a foreign subsidiary investment, partially offset by higher pre-tax income and a valuation allowance on foreign pre-tax earnings. The effective tax rate for the nine months ended June 30, 2026 was 20.9% as compared with 25.0% in the prior year. The effective tax rate decreased primarily due to a tax benefit from the recognition of a loss on a foreign subsidiary investment.
Segment Analysis
Water Flow Solutions
Net sales for the nine months ended June 30, 2026 were $606.6 million as compared with $607.4 million in the prior year period, a decrease of $0.8 million or 0.1%, primarily as a result of lower volumes mostly offset by higher pricing across most product lines.
Gross profit for the nine months ended June 30, 2026 was $247.4 million as compared with $215.9 million in the prior year period, an increase of $31.5 million or 14.6%. This increase was primarily a result of higher pricing across most product lines and performance, partially offset by lower volumes, approximately 5% inflation and product mix. Gross margin was 40.8% in the nine months ended June 30, 2026 and 35.5% in the prior year period.
SG&A for the nine months ended June 30, 2026 was $66.8 million as compared with $65.0 million in the prior year period, an increase of $1.8 million or 2.8%, primarily as a result of inflation of approximately 3%, higher personnel related expenses, and unfavorable foreign currency impact. SG&A as a percentage of net sales was 11.0% and 10.7% in the nine months ended June 30, 2026 and 2025, respectively.
31
Table of Contents
Water Management Solutions
Net sales for the nine months ended June 30, 2026 were $491.9 million as compared with $441.5 million in the prior year period, an increase of $50.4 million or 11.4%, primarily as a result of higher volumes and higher pricing across most product lines.
Gross profit for the nine months ended June 30, 2026 was $172.7 million as compared with $160.8 million in the prior year period, an increase of $11.9 million or 7.4%. The increase was primarily driven by higher pricing across most product lines, increased volumes, and product mix. Gross margin was negatively impacted by performance, increased tariffs, net of non-recurring tariff refunds, approximately 3% inflation and $3.1 million of portfolio optimization costs. Gross margin was 35.1% in the nine months ended June 30, 2026 as compared with 36.4% in the prior year period.
SG&A for the nine months ended June 30, 2026 was $70.2 million as compared with $71.5 million in the prior year period, a decrease of $1.3 million or 1.8%, primarily due to reduced incentive-based compensation and lower unfavorable impact of foreign currency exchange, partially offset by approximately 3% inflation and higher personnel costs. SG&A as a percentage of net sales was 14.3% and 16.2% in the nine months ended June 30, 2026 and 2025, respectively.
Corporate
SG&A for the nine months ended June 30, 2026 was $46.5 million as compared with $44.1 million in the prior year period, an increase of $2.4 million or 5.4%. The increase was primarily driven by inflation of approximately 3%, higher personnel-related expenses and third-party fees partially offset by lower unfavorable impact of foreign currency exchange.
Liquidity and Capital Resources
We had cash and cash equivalents on hand of $495.3 million as of June 30, 2026 and $163.7 million of additional borrowing capacity under our asset-based lending arrangement (the “ABL”). As of June 30, 2026, cash and cash equivalents included $98.2 million, $9.4 million, and $9.0 million in Israel, Canada, and China, respectively.
Historically, we have funded our liquidity requirements through cash flows from operating activities, borrowings under our credit facilities, and working capital management activities. Our primary historical cash requirements have been for working capital, capital expenditures, income tax payments, and contractual obligations, which primarily consist of required long-term debt and related interest payments and commitments under non-cancellable operating lease agreements. When appropriate, the Company may utilize liquidity towards debt service requirements, including voluntary debt prepayments and repurchases of common stock or other securities, based on excess cash flows. The most significant components of our operating assets and liabilities are inventories, accounts receivable, prepaid expenses and other assets, accounts payable, and other payables and accrued expenses. We monitor various items related to cash flow, including, but not limited to, cash receipts, cash disbursements, payment terms, and discounts. We continue to focus on these items in addition to other key measures we use to evaluate how our consolidated business and operating segments are performing.
We believe that cash on hand, cash expected to be generated from operations, and the availability of borrowings under our ABL will be sufficient to fund our working capital requirements, liquidity obligations, anticipated capital expenditures, income tax payments, and payments due under our existing debt for the next 12 months and thereafter. However, our ability to make these payments will depend largely on our future operating performance, which may be affected by general economic, financial, competitive, legislative, regulatory, business, and other factors beyond our control. Depending on our liquidity levels, conditions in the capital markets, and other factors, we may from time to time consider the prepayment, refinancing or issuance of debt, issuance of equity or other securities, the proceeds of which could provide additional liquidity for our operations, as well as modifications to our debt structure or business acquisitions.
Share Repurchase Program
Our stock repurchase program allows us to repurchase up to $250.0 million of our common stock. The program does not commit us to any particular timing or quantity of purchases, and we may suspend or discontinue the program at any time. We repurchased $15.5 million of our outstanding common stock during the nine months ended June 30, 2026 under our publicly announced share repurchase program, and as of June 30, 2026, we had $49.5 million remaining under our share repurchase authorization. During the nine months ended June 30, 2025, we repurchased $15.0 million of our outstanding common stock.
32
Table of Contents
ABL Agreement
Our asset-based lending agreement, as amended, (the “ABL”) is provided by a syndicate of banking institutions and consists of a revolving credit facility for up to $175.0 million in borrowing capacity that matures the earlier of (a) March 16, 2029, which is ninety-one days prior to the stated maturity date of our 4.0% Senior Notes if the Notes are still outstanding on that date or (b) March 28, 2029. The ABL includes the ability to borrow up to $25.0 million of swing line loans and up to $60.0 million of letters of credit. The ABL permits us to increase the size of the credit facility by an additional $150.0 million in certain circumstances subject to adequate borrowing base availability.
Borrowings under the ABL bear interest at a floating rate equal to Secured Overnight Financing Rate (“SOFR”) plus an adjustment of 10 basis points and an applicable margin range of 150 to 175 basis points, or a base rate (as defined in the ABL) plus an applicable margin range of 50 to 75 basis points. As of June 30, 2026, the applicable margin was 150 basis points for SOFR-based loans and 50 basis points for base rate loans.
The ABL is subject to mandatory prepayments if total outstanding borrowings under the ABL are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances. The borrowing base under the ABL is equal to the sum of (a) 85% of the value of eligible accounts receivable and (b) the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less certain reserves. Prepayments can be made at any time without penalty.
The ABL contains customary terms and conditions as well as various affirmative, negative, and financial covenants that may, among other things, restrict our and our subsidiaries’ ability to pay dividends, repurchase stock, or make certain other payments as described in the ABL.
Substantially all of our U.S. subsidiaries are borrowers under the ABL and are jointly and severally liable for outstanding borrowings. Our obligations under the ABL are secured by a first-priority perfected lien on all of our U.S. inventory, accounts receivable, certain cash balances, and other supporting assets.
The ABL includes a commitment fee for any unused borrowing capacity of 37.5 basis points per annum when the unused capacity is above 50% of the credit commitments, with a step down to 25.0 basis points per annum when unused capacity is less than or equal to 50% of the credit commitments. As of June 30, 2026, the commitment fee was 37.5 basis points.
Borrowings are not subject to any financial maintenance covenants unless excess availability is less than the greater of $17.5 million and 10% of the Loan Cap as defined in the ABL. Excess availability based on June 30, 2026 data was $163.7 million, as reduced by $11.1 million of outstanding letters of credit and $0.2 million of accrued fees and expenses.
We were in compliance with all required covenants under the ABL as of June 30, 2026.
4.0% Senior Unsecured Notes
On May 28, 2021, we privately issued $450.0 million of 4.0% Unsecured Senior Notes (the “4.0% Senior Notes”) which mature on June 15, 2029, and bear interest at 4.0%, paid semi-annually in June and December. We capitalized $5.5 million of financing costs, which are being amortized over the term of the 4.0% Senior Notes using the effective interest method. Proceeds from the 4.0% Senior Notes, along with cash on hand, were used to redeem our previously existing notes. Substantially all of our U.S. subsidiaries guarantee the 4.0% Senior Notes, which are subordinate to borrowings under our ABL. Based on quoted market prices, the outstanding 4.0% Senior Notes had a fair value of $436.1 million as of June 30, 2026.
An indenture governing the 4.0% Senior Notes (“Indenture”) contains customary covenants and events of default, including covenants that limit our ability to incur certain debt and liens. We were in compliance with all required covenants under the Indenture as of June 30, 2026. There are no financial maintenance covenants associated with the Indenture.
We may redeem some or all of the 4.0% Senior Notes at any time after June 15, 2024, at specified redemption prices. Upon a Change of Control (as defined in the Indenture), we could be required to offer to purchase the 4.0% Senior Notes at a price equal to 101% of the outstanding principal amount if there is a Ratings Decline (as defined in the Indenture).
33
Table of Contents
Cash Flows
The table below summarizes net cash flows provided by (used in) operating activities, investing activities, and financing activities:
Nine months ended
June 30,
2026 2025
(in millions)
Net cash flows provided by operating activities $ 154.2 $ 135.8
Net cash flows used in investing activities (42.4) (32.7)
Net cash flows used in financing activities $ (51.5) $ (47.2)
Net Cash Flows Provided by Operating Activities
Cash flows provided by operating activities increased $18.4 million to $154.2 million during the nine months ended June 30, 2026 compared with $135.8 million in the prior year period. This was driven by higher non-cash adjustments of $40.5 million and an increase in net income of $30.5 million, partially offset by a $52.6 million change in working capital and other assets and liabilities.
Net Cash Flows Used in Investing Activities
Cash flows used in investing activities increased $9.7 million to $42.4 million during the nine months ended June 30, 2026 compared with $32.7 million in the prior year period. Capital expenditures were $43.6 million in the nine months ended June 30, 2026 as compared with $32.8 million in the prior year period. Capital expenditures increased primarily as a result of higher expenditures associated with our iron foundries as compared with the prior year period.
Net Cash Flows Used in Financing Activities
Cash flows used in financing activities increased $4.3 million to $51.5 million during the nine months ended June 30, 2026 as compared with $47.2 million in the prior year period. This was driven primarily by $2.4 million in less cash provided by common stock issuances, an increase of $1.4 million in dividends paid to shareholders, and an increase of $0.5 million in repurchases of common stock under the share repurchase program.
Credit Ratings
Our corporate credit rating and the credit ratings for our debt and outlook are presented below:
Moody’s Standard & Poor’s
June 30, September 30, June 30, September 30,
2026 2025 2026 2025
Corporate credit rating Ba1 Ba1 BB+ BB
ABL Agreement Not rated Not rated Not rated Not rated
4.0% Senior Notes Ba1 Ba1 BB+ BB
Outlook Stable Stable Stable Positive
These ratings are not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agencies.
Material Cash Requirements
We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures. As of June 30, 2026, we had (i) debt obligations related to our $450.0 million 4.0% Senior Notes which mature in 2029 and include annual cash interest payments of $18.0 million in 2026 through 2029; (ii) cumulative cash obligations of $40.1 million for operating leases through 2037 and $5.4 million for finance leases through 2031; and (iii) purchase obligations for raw materials and other purchased parts of approximately $108.1 million which we expect to incur during the next 12 months and $2.2 million
34
Table of Contents
beyond June 30, 2027. Additionally, we expect to invest to strengthen our information technology systems, cybersecurity training, policies, programs, response plans and other similar measures. We expect to fund these cash requirements from cash on hand and cash generated from operations.
For the fiscal year 2026, our capital expenditures are expected to be between $60.0 million and $65.0 million. We intend to increase capital investments in our facilities to expand production capacity and enhance operational capabilities, including investment in our two iron foundries.
We declared a quarterly dividend of $0.070 per share on July 28, 2026, payable on or about August 20, 2026 to stockholders of record as of August 10, 2026, which will result in an estimated $10.9 million cash outlay.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “structured finance” or “special purpose” entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, as of June 30, 2026, we did not have any undisclosed borrowings, debt, derivative contracts, or synthetic leases. Therefore, we were not exposed to any financing, liquidity, market, or credit risk that could have arisen had we engaged in such relationships.
Seasonality
Parts of our business depend upon construction activity, which is seasonal in many areas due to the impact of cold weather conditions on construction activity. Net sales and operating income have historically been lowest in our first and second quarters ending December 31 and March 31, respectively, when the northern U.S. and most of Canada generally face weather conditions that restrict significant construction activity. Therefore, the results of operations for the three and nine months ended June 30, 2026 are not necessarily indicative of operating results that may be achieved for any other interim period or the full year.
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosure of contingent assets and liabilities. These estimates are based upon experience and on various other assumptions we believe to be reasonable under the circumstances. Actual results may differ from these estimates. We consider an accounting estimate to be critical if changes in the estimate that are reasonably likely to occur over time or the use of reasonably different estimates could have a material impact on our financial condition or results of operations. Our critical accounting estimates can be found in the “Critical Accounting Estimates” section in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2025 Annual Report on Form 10-K. There have been no changes in the Company’s determination of critical accounting estimates since September 30, 2025.
35
Table of Contents