Zurn Elkay Water Solutions Corp (ZWS)
SIC breadcrumb: Manufacturing > Industrial And Commercial Machinery And Computer Equipment > SIC 3560 General Industrial Machinery & Equipment
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1439288. Latest filing source: 0001628280-26-006372.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 1,695,900,000 | USD | 2025 | 2026-02-09 |
| Net income | 198,000,000 | USD | 2025 | 2026-02-09 |
| Assets | 2,679,400,000 | USD | 2025 | 2026-02-09 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-09. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001439288.json. Derived margins are computed from the extracted annual SEC facts.
| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 1,712,500,000 | 1,851,600,000 | 2,050,900,000 | 746,100,000 | 910,900,000 | 1,281,800,000 | 1,530,500,000 | 1,566,500,000 | 1,695,900,000 | |
| Net income | 67,900,000 | 74,100,000 | 75,900,000 | 34,300,000 | 146,700,000 | 120,900,000 | 61,700,000 | 112,700,000 | 160,200,000 | 198,000,000 |
| Operating income | 174,300,000 | 203,200,000 | 266,400,000 | 305,600,000 | 107,700,000 | 107,000,000 | 107,100,000 | 191,400,000 | 244,600,000 | 278,900,000 |
| Gross profit | 665,200,000 | 626,400,000 | 706,500,000 | 784,800,000 | 338,200,000 | 373,200,000 | 465,500,000 | 648,100,000 | 707,000,000 | 764,800,000 |
| Diluted EPS | 0.66 | 0.64 | 0.62 | 0.28 | 1.19 | 0.97 | 0.40 | 0.64 | 0.92 | 1.15 |
| Assets | 3,354,800,000 | 3,539,300,000 | 3,423,700,000 | 3,259,700,000 | 3,401,100,000 | 1,077,700,000 | 2,864,000,000 | 2,667,000,000 | 2,648,500,000 | 2,679,400,000 |
| Liabilities | 2,766,800,000 | 2,468,700,000 | 2,210,900,000 | 2,028,700,000 | 1,961,800,000 | 951,300,000 | 1,249,000,000 | 1,064,200,000 | 1,061,700,000 | 1,076,100,000 |
| Stockholders' equity | 588,600,000 | 1,070,600,000 | 1,212,700,000 | 1,228,600,000 | 1,439,300,000 | 126,400,000 | 1,615,000,000 | 1,602,800,000 | 1,586,800,000 | 1,603,300,000 |
| Cash and cash equivalents | 484,600,000 | 490,100,000 | 193,200,000 | 292,500,000 | 62,300,000 | 96,600,000 | 124,800,000 | 136,700,000 | 198,000,000 | 300,500,000 |
| Net margin | 4.33% | 4.10% | 1.67% | 19.66% | 13.27% | 4.81% | 7.36% | 10.23% | 11.68% | |
| Operating margin | 11.87% | 14.39% | 14.90% | 14.44% | 11.75% | 8.36% | 12.51% | 15.61% | 16.45% |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-21. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001439288.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2022-Q2 | 2022-06-30 | 0.28 | reported discrete quarter | ||
| 2022-Q3 | 2022-09-30 | -0.11 | reported discrete quarter | ||
| 2023-Q1 | 2023-03-31 | 0.13 | reported discrete quarter | ||
| 2023-Q2 | 2023-06-30 | 403,200,000 | 34,600,000 | 0.20 | reported discrete quarter |
| 2023-Q3 | 2023-09-30 | 398,400,000 | 41,400,000 | 0.24 | reported discrete quarter |
| 2023-Q4 | 2023-12-31 | 356,800,000 | 13,900,000 | derived Q4 = FY annual - nine-month YTD | |
| 2024-Q1 | 2024-03-31 | 373,800,000 | 34,300,000 | 0.19 | reported discrete quarter |
| 2024-Q2 | 2024-06-30 | 412,000,000 | 46,000,000 | 0.27 | reported discrete quarter |
| 2024-Q3 | 2024-09-30 | 410,000,000 | 43,500,000 | 0.25 | reported discrete quarter |
| 2024-Q4 | 2024-12-31 | 370,700,000 | 36,400,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2025-03-31 | 388,800,000 | 43,600,000 | 0.26 | reported discrete quarter |
| 2025-Q2 | 2025-06-30 | 444,500,000 | 50,500,000 | 0.29 | reported discrete quarter |
| 2025-Q3 | 2025-09-30 | 455,400,000 | 61,800,000 | 0.36 | reported discrete quarter |
| 2025-Q4 | 2025-12-31 | 407,200,000 | 42,100,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2026-03-31 | 433,000,000 | 58,900,000 | 0.35 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001628280-26-026281.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Zurn Elkay Water Solutions Corporation is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, hydration, human safety and the environment. Our product portfolio includes professional grade water safety and control products, flow systems products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time. Zurn Elkay's heritage of innovation and specification has allowed us to provide highly-engineered, mission-critical solutions to customers for decades and affords us the privilege of having long-term, valued relationships with market leaders. We operate in a disciplined way and the Zurn Elkay Business System (“ZEBS”) is our operating philosophy. Grounded in the spirit of continuous improvement, ZEBS creates a scalable, process-based framework that focuses on driving superior customer satisfaction and financial results by targeting world-class operating performance throughout all aspects of our business.
The following information should be read in conjunction with the audited consolidated financial statements and notes thereto, along with Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), in our Annual Report on Form 10-K for the year ended December 31, 2025.
Recent Developments
As disclosed in Part I, Item 1A, "Risk Factors", of our Annual Report on Form 10-K for the year ended December 31, 2025, the Company’s business is subject to risks related to, among other factors, tariffs and other trade protection measures put in place by the United States or other countries. Starting in the first quarter of 2025, the United States government announced additional tariffs on goods imported from various countries into the U.S., and in response, certain of those countries countered with reciprocal tariffs and other actions. While the Company is well positioned to respond to the tariff environment, costs are impacted by trade policies. On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were not authorized by the statute. The Company is the importer of record for certain raw materials and products that were previously subject to such tariffs under IEEPA. Significant uncertainty remains regarding how and when any amounts may be recovered. We are evaluating the ruling and potential actions available to us. Because the process, timing, and amount of any recovery are uncertain, we have not recorded any potential benefit from a refund at this time.
Critical Accounting Estimates
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Refer to Item 7, MD&A, of our Annual Report on Form 10-K for the year ended December 31, 2025 for information with respect to our critical accounting estimates which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management. Except for the items reported below, management believes that as of March 31, 2026, and during the period from January 1, 2026 through March 31, 2026, there has been no material change to this information.
Recent Accounting Pronouncements
See Item 1, Note 1, Basis of Presentation and Significant Accounting Policies regarding recent accounting pronouncements.
22
Table of Contents
U.S. Pension Plan Termination & Settlement
On January 30, 2025, the Company's Board of Directors approved a resolution to terminate the Company's U.S. defined benefit pension plan (the "Pension Plan") with the full freeze of benefit accruals under the Pension Plan effective March 31, 2025 and the termination of the Pension Plan effective April 1, 2025. The Pension Plan freeze resulted in a curtailment gain of $0.7 million in the first quarter of 2025. During the year ended December 31, 2025, the Company entered into an agreement to purchase annuities from a third-party annuity provider and contributed $4.3 million to fund the liquidation of the Pension Plan. As a result, Pension Plan liabilities were settled and the Pension Plan was exited during the third quarter of 2025, resulting in a pre-tax settlement gain of $10.0 million from accumulated other comprehensive loss to other income, net in the condensed consolidated statements of operations.
See Item 1, Note 15, Retirement Benefits for additional information.
Discontinued Operations
During the year ended December 31, 2021, the Company completed the Spin-Off Transaction (the “Spin-Off Transaction”) of the Company's Process & Motion Control ("PMC") business. The operating results of PMC are reported as discontinued operations in the condensed consolidated statements of operations for all periods presented, as the Spin-Off Transaction of PMC represented a strategic shift that had a major impact on operations and financial results. The condensed consolidated statements of cash flows for the three months ended March 31, 2026 and March 31, 2025 have not been adjusted to separately disclose cash flows related to the discontinued operations.
The major components of the income from discontinued operations, net of tax presented in the condensed consolidated statements of operations for the three months ended March 31, 2026 and March 31, 2025, are as follows (in millions):
Three Months Ended
March 31, 2026
March 31, 2025
Selling, general and administrative income (1)
$
—
$
(2.6)
Income from discontinued operations before income tax
—
2.6
Income from discontinued operations, net of tax
$
—
$
2.6
(1)Selling, general and administrative income includes the release of certain accruals as a result of costs the Company will no longer incur related to the Spin-Off Transaction.
See Item 1, Note 3, Discontinued Operations for additional information.
Restructuring and Other Similar Charges
During the three months ended March 31, 2026, the Company continued to execute various restructuring actions. These initiatives were implemented to drive efficiencies and reduce operating costs while also modifying the Company's footprint to reflect changes in the markets it serves, the impact of mergers and acquisitions on the Company's overall manufacturing capacity and the refinement of its overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs and other facility rationalization costs. Management expects to continue executing similar initiatives to optimize the Company's operating margin and manufacturing footprint. As such, the Company expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs and other facility rationalization costs. For the three months ended March 31, 2026 and March 31, 2025, restructuring charges totaled $0.9 million and $1.7 million, respectively. Refer to Item 1, Note 2, Restructuring and Other Similar Charges for further information.
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Table of Contents
Results of Operations
Three Months Ended March 31, 2026 compared with the Three Months Ended March 31, 2025:
Net sales
(Dollars in Millions)
Three Months Ended
March 31, 2026
March 31, 2025
Change
% Change
Net sales
$
433.0
$
388.8
$
44.2
11.4
%
Net sales were $433.0 million and $388.8 million during the three months ended March 31, 2026 and March 31, 2025, respectively, an increase of 11% year over year. Core sales improved 11% year over year, including growth in nearly all product categories.
Income from operations
(Dollars in Millions)
Three Months Ended
March 31, 2026
March 31, 2025
Change
% Change
Income from operations
$
82.1
$
63.4
$
18.7
29.5
%
% of net sales
19.0
%
16.3
%
2.7
%
During the three months ended March 31, 2026, income from operations was $82.1 million compared to $63.4 million during the three months ended March 31, 2025. Income from operations as a percentage of net sales increased by 270 basis points year over year as a result of the favorable impact of year-over-year sales growth (inclusive of price realization) and Zurn Elkay Business System led productivity initiatives.
Interest expense, net
Interest expense, net was $6.2 million for the three months ended March 31, 2026, compared to $7.3 million for the three months ended March 31, 2025. The decrease in interest expense, net as compared to the prior year period is primarily due to reduced interest expense in the current year as a result of lower interest rates and interest earned on higher cash balances.
Other income, net
Other income, net for the three months ended March 31, 2026 and March 31, 2025, was $1.0 million and $0.0 million, respectively. Other income, net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit and postretirement plans and other non-operational gains and losses. The year-over-year change is primarily driven by lower defined benefit plan costs in the current year as a result of refunds recognized in connection with the U.S. pension plan termination, partially offset by the write off of $0.4 million of unamortized deferred financing costs.
Provision for income taxes
The income tax provision was $18.0 million for the three months ended March 31, 2026, compared to $15.1 million for the three months ended March 31, 2025. The effective income tax rate for the three months ended March 31, 2026 was 23.4% versus 26.9% for the three months ended March 31, 2025. The effective income tax rate for the three months ended March 31, 2026 and March 31, 2025 was above the U.S. federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and by the recognition of income tax benefits associated with share-based payments.
On a quarterly basis, we review and analyze our valuation allowances associated with deferred tax assets relating to certain foreign and state net operating loss carryforwards as well as U.S. federal and state capital loss carryforwards. In conjunction with this analysis, we weigh both positive and negative evidence for purposes of determining the proper balances of such valuation allowances. Future changes to the balances of these valuation allowances, as a result of our continued review and analysis, could impact the financial statements for such period of change.
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Table of Contents
Net income
Net income for the three months ended March 31, 2026, was $58.9 million compared to net income of $43.6 million for the three months ended March 31, 2025. Diluted net income per share for the three months ended March 31, 2026 and March 31, 2025, was $0.35 and $0.26, respectively. The year-over-year change is the result of the factors described above. Net income from discontinued operations, net of tax, was $0.
[Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We completed the spin-off of our Process & Motion Control platform ("PMC") on October 4, 2021 in the Spin-Off Transaction, and, accordingly, the results of operations and financial condition associated with PMC have been reclassified to discontinued operations for all periods presented. As a result, the following discussion of results of operations and financial condition is centered on the Zurn Elkay Water Solutions business excluding PMC. The consolidated statements of cash flows for the years ended December 31, 2025, 2024, and 2023 have not been adjusted to separately disclose cash flows related to the discontinued operations. See Item 8, Note 3, Discontinued Operations for additional information on discontinued operations.
This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors" in Item 1A of this report. Actual results may differ materially from those contained in any forward-looking statements. See also "Cautionary Notice Regarding Forward-Looking Statements" found elsewhere in this report.
The information contained in this section is provided as a supplement to the consolidated financial statements and the related notes included elsewhere in this report to help provide an understanding of our financial condition, changes in our financial condition and results of our operations. This section is organized as follows:
Company Overview. This section provides a general description of our business.
Financial Statement Presentation. This section provides a brief description of certain items and accounting policies that appear in our financial statements and general factors that impact these items.
Critical Accounting Estimates. This section discusses the accounting policies and estimates that we consider to be important to our financial condition and results of operations and that require significant judgment and estimates by management in their application.
Recent Accounting Pronouncements. This section cites the discussion of new or revised accounting pronouncements and standards in Item 8, Note 2, Significant Accounting Policies of our consolidated financial statements.
Overview of Recent Developments. This section provides a description of the recent events impacting our results of operations.
Results of Operations. This section provides an analysis of our results of operations. In providing analysis of the results of our operations, we have provided a comparison of our year ended December 31, 2025 to the year ended December 31, 2024. A discussion of the financial performance for the year ended December 31, 2024 compared to December 31, 2023 can be found within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 Form 10-K.
Non-GAAP Financial Measures. This section provides an explanation of certain financial measures we use that are not in accordance with U.S. generally accepted accounting principles ("GAAP").
Covenant Compliance. This section provides a discussion of certain restrictive covenants in our credit agreement.
Liquidity and Capital Resources. This section provides an analysis of our cash flows and year-to-year comparisons for our years ended December 31, 2025 and 2024, as well as a discussion of our indebtedness and its potential effects on our liquidity. A discussion of cash flows for the year ended December 31, 2024 compared to December 31, 2023 can be found within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 Form 10-K.
Contractual Obligations. This section provides a discussion of our commitments as of December 31, 2025.
Quantitative and Qualitative Disclosures about Market Risk. This section discusses our exposure to potential losses arising from adverse changes in interest rates and foreign exchange rates.
25
Company Overview
We are a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what we believe to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, hydration, human safety and the environment. Our product portfolio includes professional grade water safety and control products, flow systems products, hygienic and environmental products, and filtered drinking water products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time. Zurn Elkay's heritage of innovation and specification has allowed us to provide highly-engineered, mission-critical solutions to customers for decades and affords us the privilege of having long-term, valued relationships with market leaders. We operate in a disciplined way and the Zurn Elkay Business System (“ZEBS”) is our operating philosophy. Grounded in the spirit of continuous improvement, ZEBS creates a scalable, process-based framework that focuses on driving superior customer satisfaction and financial results by targeting world-class operating performance throughout all aspects of our business.
Refer to Item 1, Business for additional information.
Financial Statement Presentation
The following paragraphs provide a brief description of certain items and accounting policies that appear in our financial statements and general factors that impact these items.
Net sales. Net sales represent gross sales less deductions taken for sales returns and allowances and incentive rebate programs.
Cost of sales. Cost of sales includes all costs of manufacturing required to bring a product to a ready for sale condition. Such costs include direct and indirect materials, direct and indirect labor costs, including fringe benefits, supplies, utilities, depreciation, freight and shipping, insurance, pension and other postretirement benefits, information technology costs and other manufacturing related costs.
The largest component of our cost of sales is cost of materials, which represented approximately 30% of net sales in the year ended December 31, 2025. We purchase a broad range of materials and components throughout the world in connection with our manufacturing activities. Major raw materials and components include bronze, iron, brass, stainless steel, carbon steel, zinc, and engineered plastics. We have a strategic sourcing program that is designed to significantly reduce the number of direct and indirect suppliers we use and to lower the cost of purchased materials.
Selling, general and administrative expenses. Selling, general and administrative expenses primarily include sales and marketing, finance and administration, engineering and technical services and warehousing. Our major cost elements include salary and wages, fringe benefits, insurance, depreciation, advertising, travel and information technology costs.
Critical Accounting Estimates
The methods, estimates and judgments we use in applying our critical accounting policies have a significant impact on the results we report in our consolidated financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and different assumptions or estimates about the future could change our reported results. Within the context of these critical accounting policies, we are not currently aware of any reasonably likely event that would result in materially different amounts being reported.
We believe the following accounting policies are the most critical to us in that they are important to our financial statements and they require difficult, subjective and/or complex judgments in the preparation of our consolidated financial statements. For additional information, see Item 8, Note 2, Significant Accounting Policies, to our consolidated financial statements.
Purchase accounting and business combinations. Assets acquired and the liabilities assumed as part of a business combination are recognized separately from goodwill at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. We review and consider input from outside specialists, if and when appropriate to develop discount rates, and use estimates and assumptions about the future performance of the business to accurately value assets acquired and liabilities assumed at the acquisition date. We may refine these estimates during the measurement period, which may be up to one year from the acquisition date. As a result, during the measurement period, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset recorded to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in our consolidated statements of operations.
26
Impairment of intangible assets and tangible fixed assets. The carrying value of long-lived assets, including amortizable intangible assets and tangible fixed assets, are evaluated for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment of amortizable intangible assets and tangible fixed assets is generally determined by comparing projected undiscounted cash flows to be generated by the asset, or group of assets, to its carrying value. If impairment is identified, a loss is recorded equal to the excess of the asset's net book value over its fair value, and the cost basis is adjusted. Determination of the fair value requires various estimates including internal cash flow estimates generated from the asset, quoted market prices and appraisals as appropriate to determine fair value. Actual results could vary from these estimates. During the years ended December 31, 2025, 2024, and 2023, the Company recognized $2.0 million, $7.4 million, and $2.5 million of fixed asset impairment charges, respectively.
Goodwill, trademarks and certain tradenames have indefinite lives and are not amortized. However, the goodwill and intangible assets are tested annually for impairment, and may be tested more frequently if any triggering events occur that would reduce the recoverability of the asset. In conducting the annual impairment test for goodwill, we have the option to first assess qualitative factors to determine whether it is more likely than not (greater than 50% likelihood) the fair value of any reporting unit is less than its carrying amount. If a qualitative assessment determines an impairment is more likely than not, we are required to perform a quantitative impairment test. Otherwise, no further analysis is required. Alternatively, we may elect to proceed directly to the quantitative impairment test. In conducting a quantitative assessment, we use a discounted cash flow methodology based on future business projections and a market value approach (guideline public company comparables). We perform our goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the fair value of the reporting unit, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value up to the amount of the recorded goodwill.
During the fourth quarter of the year ended December 31, 2025, we completed our annual goodwill and intangible asset impairment tests and elected to perform a qualitative assessment. No goodwill impairment charges were recorded during the years ended December 31, 2025, 2024, or 2023. During the year ended December 31, 2024, we recorded a $0.6 million impairment charge related to an indefinite-lived tradename no longer used. No intangible asset impairment charges were recorded during the years ended December 31, 2025 or 2023.
Retirement benefits. We have pension and post-retirement benefit income and expense and assets/liabilities that are developed from actuarial valuations. These valuations include key assumptions regarding discount rates, expected return on plan assets, mortality rates, compensation increases, and the current health care cost trend rate. We consider current market conditions in selecting these assumptions. Changes in the related pension and post-retirement benefit income/costs or assets/liabilities may occur in the future due to changes in the assumptions and changes in asset values. As described in Note 14 to the consolidated financial statements, the Company’s Board of Directors approved a resolution to terminate the Company’s U.S. defined benefit pension plan (the “Pension Plan”) with the full freeze of benefit accruals under the Pension Plan effective March 31, 2025 and the termination of the Pension Plan effective April 1, 2025.
The Company remeasures the pension assets and obligations at the end of each year or more frequently upon any required remeasurement event. The amounts are measured using actuarial valuations, which are dependent, in part, on the selection of certain actuarial assumptions. Measuring the pension obligations was complex and required the involvement of specialists as a result of the complex nature of the actuarial assumptions, such as discount rates and mortality rates used in the Company’s accounting of the U.S. defined benefit pension plan termination and the related remeasurement process. These assumptions had a significant effect on the projected benefit obligation used to calculate to pension settlement gain.
We recognize the net actuarial gains or losses in excess of unrecognized gain or loss exceeding 10 percent of the greater of the market-related value of plan assets or the plan's projected benefit obligation at re-measurement (the "corridor") in our consolidated statements of operations during the fourth quarter of each fiscal year (or upon any re-measurement date). During the years ended December 31, 2025, 2024, and 2023, we recognized a non-cash actuarial gain from continuing operations of $0.5 million, $1.4 million, and $2.0 million, respectively, in connection with re-measurements of our plans. Net periodic benefit costs recorded on a quarterly basis are primarily comprised of service and interest cost and the expected return on plan assets. See Item 8, Note 14, Retirement Benefits for additional information.
The obligation for other postretirement benefits other than pension also is actuarially determined and is affected by assumptions including the discount rate and expected future increase in per capita costs of covered other postretirement health care benefits. Changes in the discount rate and differences between actual and assumed per capita health care costs may affect the recorded amount of the expense in future periods.
Income taxes. We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and recording the related deferred tax assets and liabilities. In October 2021, the Organization for Economic Co-operation and Development (“OECD”) issued rules for a new global minimum tax (“Pillar 2”) which included the introduction of a 15% global minimum tax (“Top-Up Tax”) that applies to tax years beginning in 2024. Based upon the current OECD rules and administrative guidance, as well as the related legislation
27
of those countries in which we do business, the Company does not anticipate being subject to material Top-Up Taxes. The Company is continuing to monitor the potential impact of the Pillar 2 proposals and development on our consolidated financial statements and related disclosures, including eligibility for any transitional safe harbor rules. On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act (“OBBBA”). OBBBA incorporates changes that extend several provisions of the Tax Cuts and Jobs Act (“TCJA”) of 2017 that were set to expire on December 31, 2025, including immediate expensing of domestic research and development expenses, 100% bonus depreciation, 100% depreciation of qualified production property, and reinstatement of utilizing EBITDA for the interest deduction limitation. These changes are effective for the Company’s fiscal year ending December 31, 2025. The Company is continuing to monitor these business tax provisions for further guidance from the U.S. Treasury and the Internal Revenue Service.
We assess our income tax positions and record tax liabilities for all years subject to examination based upon management’s evaluation of the facts and circumstances and information available at the reporting dates. For those income tax positions where it is more-likely-than-not, based on technical merits, that a tax benefit will be sustained upon the conclusion of an examination, we have recorded the largest amount of tax benefit having a cumulatively greater than 50% likelihood of being realized upon ultimate settlement with the applicable taxing authority, assuming that it has full knowledge of all relevant information. For those tax positions which do not meet the more-likely-than-not threshold regarding the ultimate realization of the related tax benefit, no tax benefit has been recorded in the financial statements. In addition, we provide for interest and penalties, as applicable, and record such amounts as a component of the overall income tax provision. As of December 31, 2025 and 2024, our liability for unrecognized tax benefits was $0.6 million and $1.8 million, respectively.
We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, net operating losses (“NOLs”), tax credit and other carryforwards. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As a result of this review, we established a full valuation allowance against U.S. federal and state capital loss carryforwards, as well as certain foreign NOL carryforwards and related deferred tax assets, and continue to maintain a partial valuation allowance against certain U.S. state NOL and tax credit carryforwards. As of December 31, 2025 and 2024, valuation allowances of $4.8 million and $9.0 million, respectively, were recorded against our deferred tax assets. See Item 8, Note 15, Income Taxes for additional information.
Commitments and Contingencies. We are subject to proceedings, lawsuits and other claims related to environmental, labor, product and other matters. We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. We determine the amount of accruals needed, if any, for each individual issue based on our professional knowledge and experience and discussions with legal counsel. The required accruals may change in the future due to new developments in each matter, the ultimate resolution of each matter or changes in approach, such as change in strategy. See Item 8, Note 16, Commitments and Contingencies for additional information.
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Recent Accounting Pronouncements
See Item 8, Note 2, Significant Accounting Policies regarding recent accounting pronouncements.
Overview of Recent Developments
U.S. Pension Plan Termination & Settlement
On January 30, 2025, the Company's Board of Directors approved a resolution to terminate the Company's U.S. defined benefit pension plan (the "Pension Plan") with the full freeze of benefit accruals under the Pension Plan effective March 31, 2025 and the termination of the Pension Plan effective April 1, 2025. The Pension Plan freeze resulted in a curtailment gain of $0.7 million in the first quarter of 2025. Pension Plan participants were provided the opportunity to receive their full accrued benefits from the Pension Plan assets by either electing immediate lump sum distributions or annuity contracts with a qualifying third-party annuity provider. During the quarter ended September 30, 2025, the Company entered into an agreement to purchase annuities from a third-party annuity provider and contributed $4.3 million to fund the liquidation of the Pension Plan. As a result, Pension Plan liabilities were settled and the Pension Plan was exited during the quarter ended September 30, 2025, resulting in a pre-tax settlement gain of $10.0 million from accumulated other comprehensive loss to other income (expense), net in the consolidated statements of operations.
Divestiture of Asbestos Liabilities and Certain Assets
On December 15, 2023, Zurn Holdings, Inc. (“Holdings”) sold all of the equity interests of its direct subsidiary Zurn Industries, LLC (“Zurn Industries”), together with Zurn Industries’ direct and indirect subsidiaries that primarily held asbestos liabilities, certain assets and cash, in a stock sale transaction to an unaffiliated buyer (“Sale Transaction”). As a result of the Sale Transaction, all asbestos obligations and liabilities, related insurance assets and associated deferred taxes, and other assets sold to the buyer, have been removed from the Company’s consolidated balance sheet effective December 15, 2023 and the Company no longer has any obligation with respect to pending and future asbestos claims related to the divested entities. A loss on the divestiture of asbestos liabilities and certain assets of $11.4 million was recognized in the consolidated statements of operations for the twelve months ended December 31, 2023.
Discontinued Operations
During the year ended December 31, 2021, we completed the spin-off of our PMC platform. The operating results of PMC are reported as discontinued operations in our consolidated statements of operations for all periods presented, as the Spin-Off Transaction represented a strategic shift that had a major impact on our operations and financial results. The consolidated statements of cash flows for the years ended December 31, 2025, 2024, and 2023 have not been adjusted to separately disclose cash flows related to the discontinued operations.
The major components of the Income from discontinued operations, net of tax presented in the consolidated statements of operations during the years ended December 31, 2025, 2024, and 2023 are included in the table below (in millions):
Year Ended
December 31, 2025
December 31, 2024
December 31, 2023
Selling, general and administrative income (1)
(4.7)
(0.7)
(8.4)
Income from discontinued operations before income tax
4.7
0.7
8.4
Income tax benefit
0.9
0.6
0.1
Income from discontinued operations, net of tax
$
5.6
$
1.3
$
8.5
_________________
(1)Selling, general and administrative income for the years ended December 31, 2025, 2024, and 2023 includes the release of certain accruals as a result of costs the Company will no longer incur related to the Spin-Off Transaction.
See Item 8, Note 3, Discontinued Operations for more information.
Restructuring and Other Similar Charges
During the year ended December 31, 2025, we continued to execute various restructuring actions. These initiatives were intended to drive efficiencies and reduce operating costs while also modifying our footprint to reflect changes in the markets we serve, the impact of acquisitions on our overall manufacturing capacity and the refinement of our overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs, and other facility rationalization costs. We expect to continue executing similar initiatives to optimize our operating margin and manufacturing footprint. As such, we expect further expenses related to workforce reductions, potential impairment of assets, lease termination costs, and other facility rationalization costs.
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We recorded restructuring charges of $9.6 million, $13.5 million and $15.3 million for the years ended December 31, 2025, 2024, and 2023, respectively. See Item 8, Note 4, Restructuring and Other Similar Charges for more information.
Results of Operations
Year Ended December 31, 2025 Compared with the Year Ended December 31, 2024
Net sales
(Dollars in Millions)
Year Ended
December 31,
2025
December 31,
2024
Change
% Change
Net sales
$
1,695.9
$
1,566.5
$
129.4
8.3
%
Net sales were $1,695.9 million for the year ended December 31, 2025, a 8.3% increase year over year. Core sales grew of 8% year over year, including growth in all product categories.
Income from operations
(Dollars in Millions)
Year Ended
December 31,
2025
December 31,
2024
Change
% Change
Income from operations
$
278.9
$
244.6
$
34.3
14.0
%
% of net sales
16.4
%
15.6
%
0.8
%
Income from operations was $278.9 million for the year ended December 31, 2025, or 16.4% of net sales, compared to income from operations of $244.6 million, or 15.6% of net sales, for the year ended December 31, 2024. Income from operations as a percentage of net sales increased by 80 basis points year over year as a result of the favorable impact of year-over-year sales growth (inclusive of price realization) and productivity savings being offset primarily by the adjustment to state inventories at Last-In, First-Out ("LIFO") cost.
Interest expense, net
Interest expense, net was $28.6 million for the year ended December 31, 2025 compared to $33.1 million for the year ended December 31, 2024. The decrease in interest expense, net as compared to the prior year period is primarily due to lower interest rates.
Actuarial gain on pension and other postretirement benefit obligations
Actuarial gain on pension and other postretirement benefit obligations for the year ended December 31, 2025, was $0.5 million compared to a gain of $1.4 million for the year ended December 31, 2024. The non-cash actuarial gain recognized for the year ended December 31, 2025 was primarily due to demographic and claims gains experienced during 2025 that were reflected in certain other post-retirement benefit plans. The non-cash actuarial gain recognized for the year ended December 31, 2024, was primarily due to a combination of discount rate increases coupled with demographic and claims gains experienced during 2024 that were reflected in the other post-retirement benefit plans. These gains were partially offset by an increase in the medical cost growth assumption from the prior measurement. See Item 8, Note 14, Retirement Benefits for more information.
Other income (expense), net
Other income (expense), net for the year ended December 31, 2025, was $5.5 million compared to other income (expense), net of $(5.9) million for the year ended December 31, 2024. Other income (expense), net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit plans and other non-operational gains and losses. The year-over-year change is primarily driven by the gain resulting from the settlement and termination of our U.S. defined benefit pension plan in the current year.
Provision for income taxes
The income tax provision for the year ended December 31, 2025 was $63.9 million, or an effective tax rate of 24.9%. The effective income tax rate for the year ended December 31, 2025 was above the U.S. federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally
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above the U.S. federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments and the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations. The income tax provision for the year ended December 31, 2024 was $48.1 million, or an effective tax rate of 23.2%. The effective income tax rate for the year ended December 31, 2024 was above the U.S. federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments and the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations.
Net income from continuing operations
Our net income from continuing operations for the year ended December 31, 2025, was $192.4 million, compared to net income from continuing operations of $158.9 million for the year ended December 31, 2024, as a result of the factors described above. Diluted net income per share from continuing operations was $1.12 per share for the year ended December 31, 2025, as compared to $0.91 per share for the year ended December 31, 2024.
Net income
Net income for the year ended December 31, 2025, was $198.0 million compared to $160.2 million for the year ended December 31, 2024. Diluted net income per share was $1.15 per share for the year ended December 31, 2025, compared to $0.92 per share for the year ended December 31, 2024. Income from discontinued operations, net of tax, was $5.6 million for the year ended December 31, 2025 compared to $1.3 million for the year ended December 31, 2024. The year-over-year change in net income is primarily the result of the factors described above.
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Non-GAAP Financial Measures
Non-GAAP financial measures are intended to supplement and not replace financial measures prepared in accordance with GAAP. The following non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis. We believe that these financial measures are appropriate to enhance an overall understanding of our underlying operating performance trends compared to historical and prospective periods and our peers. Management also believes that these measures are useful to investors in their analysis of our results of operations and provide improved comparability between fiscal periods as well as insight into the compliance with our debt covenants. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures.
Core sales
Core sales excludes the impact of mergers and acquisitions, divestitures and foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparisons of our net sales performance with prior and future periods and to our peers. We exclude the effect of mergers and acquisitions and divestitures because the nature, size and number of mergers and acquisitions and divestitures can vary dramatically from period to period and between us and our peers, and can also obscure underlying business trends and make comparisons of long-term performance difficult. We exclude the effect of foreign currency translation from this measure because the volatility of currency translation is not under management's control.
EBITDA
EBITDA represents earnings before interest and other debt related activities, taxes, depreciation and amortization. EBITDA is presented because it is an important supplemental measure of performance and it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is also presented and compared by analysts and investors in evaluating our ability to meet debt service obligations. Other companies in our industry may calculate EBITDA differently. EBITDA is not a measurement of financial performance under U.S. GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with U.S. GAAP. Because EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business.
Adjusted EBITDA
Adjusted EBITDA is an important measure because, under our credit agreement, our ability to incur certain types of acquisition debt and certain types of subordinated debt, make certain types of acquisitions or asset exchanges, operate our business and make dividends or other distributions, all of which will impact our financial performance, is impacted by our Adjusted EBITDA, as our lenders measure our performance with a Net First Lien Leverage Ratio by comparing our senior secured bank indebtedness to our Adjusted EBITDA (see "Covenant Compliance" for additional discussion of this ratio, including a reconciliation to our net income). "Adjusted EBITDA" is the term we use to describe EBITDA as defined and adjusted in our credit agreement, which is net income, adjusted for the items summarized in the table in the Covenant Compliance section. Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, non-cash or non-recurring losses or gains. It is also provided to aid investors in understanding our compliance with our debt covenants. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA varies from others in our industry. This measure should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; or (f) the impact of earnings or charges resulting from matters that we and the lenders under our credit agreement may not consider indicative of our ongoing operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results.
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In addition, certain of these expenses added back in calculating Adjusted EBITDA can represent the reduction of cash that could be used for other corporate purposes. Further, although not included in the calculation of Adjusted EBITDA in the Covenant Compliance section below, the measure may at times allow us to add estimated cost savings and operating synergies related to operational changes ranging from acquisitions or dispositions to restructuring, and/or exclude one-time transition expenditures that we anticipate incurring to realize cost savings before such savings have occurred.
The calculation of Adjusted EBITDA under our credit agreement as of December 31, 2025, is presented in the table in the Covenant Compliance section below. However, the results of such calculation could differ in the future based on the different types of adjustments that may be included in such respective calculations at the time. We reported net income in the year ended December 31, 2025, of $198.0 million and Adjusted EBITDA for the same period of $442.2 million. See "Covenant Compliance" for a reconciliation of Adjusted EBITDA to GAAP net income.
Covenant Compliance
Our credit agreement, which governs our senior secured credit facilities, contains, among other provisions, restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and the maintenance of certain financial ratios. Payment of borrowings under the credit agreement may be accelerated if there is an event of default. Events of default include the failure to pay principal and interest when due, a material breach of a representation or warranty, certain non-payments or defaults under other indebtedness, covenant defaults, events of bankruptcy and a change of control. Certain covenants contained in the credit agreement restrict our ability to take certain actions, such as incurring additional debt or making acquisitions, if we are unable to meet a maximum Net First Lien Leverage Ratio (consolidated indebtedness to Adjusted EBITDA) of 5.0 to 1.0 as of the end of each fiscal quarter. As of December 31, 2025, our Net First Lien Leverage Ratio was 0.53 to 1.0. Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions.
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Set forth below is a reconciliation of net income to Adjusted EBITDA for the year ended December 31, 2025.
(in millions)
Year Ended December 31, 2025
Net income
$
198.0
Income from discontinued operations, net of tax (1)
(5.6)
Provision for income taxes
63.9
Actuarial gain on pension and other postretirement benefit obligations
(0.5)
Other (income) expense, net (2)
(5.5)
Interest expense, net
28.6
Depreciation and amortization
88.7
EBITDA
367.6
Adjustments to EBITDA
Restructuring and other similar charges (3)
9.6
Stock-based compensation expense
40.6
Last-In, First-Out ("LIFO") adjustments (4)
20.4
Other, net (5)
4.0
Subtotal of adjustments to EBITDA
74.6
Adjusted EBITDA
442.2
Consolidated indebtedness (6)
$
236.1
Net First Lien Leverage Ratio (7)
0.53
____________________
(1)Income from discontinued operations, net of tax is not included in Adjusted EBITDA in accordance with the terms of our credit agreement.
(2)Other (income) expense, net consists primarily of gains and losses from foreign currency transactions, the non-service cost components of net periodic benefit costs associated with our defined benefit plans and other non-operational gains and losses as defined in our credit agreement.
(3)In accordance with the terms in our credit agreement, restructuring and other similar charges is comprised of costs associated with workforce reductions, lease termination costs, and other facility rationalization costs. See Item 8, Note 4, Restructuring and Other Similar Charges for more information.
(4)Last-In, First-Out ("LIFO") adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement.
(5)Other, net consists of gains and losses on the disposition of long-lived assets in accordance with the terms of our credit agreement.
(6)Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $260.4 million (as defined by the credit agreement) at December 31, 2025.
(7)Our credit agreement defines the Net First Lien Leverage Ratio as the ratio of consolidated indebtedness (as described above) to Adjusted EBITDA for the trailing four fiscal quarters.
Liquidity and Capital Resources
Our primary sources of liquidity are available cash and cash equivalents, cash flow from operations, and borrowing availability under our $200.0 million revolving credit facility.
As of December 31, 2025, we had $300.5 million of cash and cash equivalents and $189.9 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2025, the available borrowings under our credit facility were reduced by $10.1 million due to outstanding letters of credit. As of December 31, 2024, we had $198.0 million of cash and cash equivalents and $188.7 million of additional borrowing capacity under our revolving credit facility. As of December 31, 2024, the available borrowings under our credit facility were reduced by $11.3 million, due to outstanding letters of credit.
Our revolving credit facility is available to fund our working capital requirements, capital expenditures and other general corporate purposes. We believe this resource is adequate for expected short-term and long-term needs.
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Cash Flows
The consolidated statements of cash flows for the years ended December 31, 2025, 2024, and 2023 have not been adjusted to separately disclose cash flows related to the discontinued operations. Refer to Item 8, Note 3, Discontinued Operations for further information.
Year Ended December 31, 2025 Compared with the Year Ended December 31, 2024
Net cash provided by operating activities in the year ended December 31, 2025, was $346.5 million compared to $293.5 million in the year ended December 31, 2024 due to higher net income and lower use of cash for accruals, partially offset by cash used for trade working capital.
Cash used for investing activities was $29.9 million in the year ended December 31, 2025 compared to $20.2 million in the year ended December 31, 2024. Investing activities in the year ended December 31, 2025, included $29.9 million of capital expenditures. Investing activities for the year ended December 31, 2024, included $21.8 million of capital expenditures, which were partially offset by the receipt of $1.6 million from the sale of certain long-lived assets.
Cash used for financing activities was $217.3 million in the year ended December 31, 2025 compared to $207.5 million in the year ended December 31, 2024. Financing activities in the year ended December 31, 2025 included $63.9 million of cash for the payment of dividends on our common stock, $159.9 million of cash for repurchases of our common stock, $0.8 million of net cash payments on outstanding debt, and $0.6 million of cash used for the payment of withholding taxes on employees' share-based payment awards, which were offset by $7.9 million of net cash proceeds associated with stock option exercises and Employee Stock Purchase Plan ("ESPP") contributions. Financing activities in the year ended December 31, 2024 included $56.6 million of cash for the payment of dividends on our common stock, $150.2 million of cash for repurchases of our common stock, $0.8 million of net cash payments on outstanding debt, and $8.6 million of cash used for the payment of withholding taxes on employees' share-based payment awards, which were offset by $8.7 million of net cash proceeds associated with stock option exercises and ESPP contributions.
Indebtedness
As of December 31, 2025 we had $496.5 million of total indebtedness outstanding as follows (in millions):
Total Debt at December 31, 2025
Current Maturities of Long-Term Debt
Long-term
Portion
Term loan (1)
$
476.4
$
—
$
476.4
Finance leases
20.1
0.9
19.2
Total
$
496.5
$
0.9
$
495.6
____________________
(1)Includes unamortized original issue discount and debt issuance costs of $4.0 million at December 31, 2025.
See Item 8, Note 10, Long-Term Debt for a description of our outstanding indebtedness.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet or non-consolidated special-purpose entities.
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Contractual Obligations
Our primary material cash requirements include the payment of interest and principal on our outstanding term loans and finance lease obligations, purchase commitments, operating lease obligations, and pension and other post-retirement plans.
The timing of principal payments associated with our term loan and finance lease obligations are disclosed in Item 8, Note 10, Long-Term Debt. We pay interest monthly based on prevailing interest rates at the time and the balance outstanding on our term loans and finance lease obligations.
Our operating lease obligations are primarily for real estate leases and automobile leases. See Item 8, Note 12, Leases for future minimum lease payments associated with our lease portfolio.
We have long-term obligations related to our deferred compensation, pension and other post-retirement plans that are summarized in Item 8, Note 14, Retirement Benefits.
As part of our global sourcing strategy, we have entered into agreements with key suppliers that require the supplier to maintain minimum levels of inventory to support certain products for which we require a short lead time to fulfill customer demand. We have the ability to notify the supplier that they no longer need to maintain the minimum level of inventory should we discontinue manufacturing a product during the contract period; however, we must purchase the remaining minimum inventory levels the supplier was required to maintain within a defined period of time.
We believe our cash flows from operations and existing borrowing capacity should be sufficient to satisfy our material cash requirements over the short-term and the long-term.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk during the normal course of business from changes in foreign currency exchange rates and interest rates. The exposure to these risks is managed through a combination of normal operating and financing activities and at times derivative financial instruments in the form of foreign currency forward contracts to cover certain known foreign currency transactional risks. We also have historically entered into interest rate derivatives to manage interest rate fluctuations.
Foreign Currency Exchange Rate Risk
Our exposure to foreign currency exchange rates relates primarily to our operations in Canada. For our operations in Canada, exchange rates impact the U.S. Dollar ("USD") value of our reported earnings, our investments in the subsidiaries and the intercompany transactions with the subsidiaries.
Approximately 10% of our sales originated outside of the United States in the year ended December 31, 2025. Revenues and expenses denominated in foreign currencies are translated into USD at the end of the fiscal period using the average exchange rates in effect during the period. Fluctuations in currency exchange rates also impact the USD amount of our stockholders' equity. The assets and liabilities of our non-U.S. subsidiaries are translated into USD at the exchange rates in effect at the end of the fiscal periods. As of December 31, 2025, stockholders' equity increased by $4.9 million from December 31, 2024 as a result of foreign currency translation adjustments. If the USD strengthened by 10% as of December 31, 2025, the result would have decreased stockholders' equity by approximately $13.1 million.
As of December 31, 2025, we had not entered into foreign currency forward contracts.
Interest Rate Risk
Our indebtedness under the senior secured credit facilities bears interest at rates that fluctuate with changes in certain short-term prevailing interest rates. As of December 31, 2025, our outstanding borrowings under the term loan facility were $476.4 million (net of $4.0 million unamortized debt issuance costs) and bore a weighted-average effective interest rate of 5.80%, determined as Term SOFR (subject to a 0.5% floor), plus a Term SOFR adjustment of 0.115%, plus an applicable margin of 2.00%. During the year ended December 31, 2025, the weighted-average interest rate was 6.36%.
Our net income is affected by changes in market interest rates on our variable-rate obligations. As discussed above, our term loan facilities bear interest at Term SOFR (subject to a 0.5% floor), plus a Term SOFR adjustment plus an applicable margin. Therefore, a 100 basis point increase in Term SOFR above where it closed as of December 31, 2025 would increase the annual interest expense under our term loan facility by approximately $4.9 million.