Financial Analysis

Commitments and Contingencies Warranties: The Company offers warranties on the sales of certain of its products and records an accrual for estimated future claims. Such accruals are based upon historical experience and managements estimate of the level of future claims. The following table presents changes in the Companys product warranty liability (in millions): Six Months Ended June 30, 2026 June 30, 2025 Balance at beginning of period $ 6.6 $ 4.9 Charged to operations 4.0 2.0 Claims settled (1.2) (1.3) Total $ 9.4 $ 5.6 Less current reserve $ 4.9 $ 5.6 Long-term reserve $ 4.5 $ Contingencies: The Company's subsidiaries are involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business involving, among other things, product liability, commercial, employment, workers' compensation, intellectual property claims and environmental matters. The Company establishes accruals in a manner that is consistent with accounting principles generally accepted in the United States for costs associated with such matters when a liability is probable and those costs are capable of being reasonably estimated. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, based upon current information, management believes the eventual outcome of these unresolved legal actions, either individually or in the aggregate, will not have a material adverse effect on t …

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The following tables present revenue disaggregated by customer type and the geographic region of the end customer (in millions): Three Months Ended Six Months Ended Customer Type June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Institutional $ 245.1 $ 217.8 $ 459.3 $ 409.2 Commercial 142.6 125.6 269.2 234.5 All other 103.3 101.1 195.5 189.6 Total $ 491.0 $ 444.5 $ 924.0 $ 833.3 Three Months Ended Six Months Ended Geography June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 United States $ 452.1 $ 410.4 $ 850.7 $ 767.9 Canada 26.9 25.3 50.1 45.4 Rest of world 12.0 8.8 23.2 20.0 Total $ 491.0 $ 444.5 $ 924.0 $ 833.3

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"Stock-Based Compensation The Zurn Elkay Water Solutions Corporation Performance Incentive Plan (the ""Plan"") is utilized to provide performance incentives to the Company's officers, employees, directors and certain others by permitting grants of equity awards (for common stock), as well as performance-based cash awards, to such persons to encourage them to maximize the Company's performance and create value for the Company's stockholders. For the three months ended June 30, 2026 and June 30, 2025, the Company recognized $9.2 million and $9.0 million of stock-based compensation expense, respectively. For the six months ended June 30, 2026 and June 30, 2025, the Company recognized $20.9 million and $19.5 million of stock-based compensation expense, respectively. During the six months ended June 30, 2026, the Company granted the following stock options, restricted stock units, performance stock units, and common stock to directors, executive officers, and certain other employees: Award Type Number of Awards Weighted Average Grant-Date Fair Value Stock options 53,514 $ 19.02 Restricted stock units 163,219 $ 50.25 Performance stock units 334,435 $ 51.11 Common stock 100,801 $ 46.25 Employee Stock Purchase Plan In May 2024, the Companys stockholders approved the adoption of the Zurn Elkay Water Solutions Corporation Employee Stock Purchase Plan (the ESPP""). The number of shares of Company common stock available for purchase under the ESPP is 2,000,000 shares, subject to adjustme …

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Fair Value Measurements ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed assumptions about the assumptions a market participant would use. In accordance with ASC 820, fair value measurements are classified under the following hierarchy: Level 1 - Quoted prices for identical instruments in active markets. Level 2 - Quoted prices for similar instruments; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable. Level 3 - Model-derived valuations in which one or more inputs or value-drivers are both significant to the fair value measurement and unobservable. If applicable, the Company uses quoted market prices in active markets to determine fair value, and therefore classifies such measurements within Level 1. In some cases where market prices are not available, the Company makes use of observable market-based inputs to calculate fair value, in which case the measurements ar …

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Goodwill and Intangible Assets The changes in the net carrying value of goodwill for the six months ended June 30, 2026, are presented below (in millions): Net carrying amount as of December 31, 2025 $ 795.0 Currency translation adjustments (1.8) Net carrying amount as of June 30, 2026 $ 793.2 The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of June 30, 2026 and December 31, 2025 are as follows (in millions): June 30, 2026 Weighted Average Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Intangible assets subject to amortization: Patents 10 years $ 28.9 $ (23.4) $ 5.5 Customer relationships (including distribution network) 16 years 1,067.4 (473.6) 593.8 Tradenames 19 years 156.7 (36.8) 119.9 Intangible assets not subject to amortization - trademarks and tradenames 86.3 86.3 Total intangible assets, net 16 years $ 1,339.3 $ (533.8) $ 805.5 December 31, 2025 Weighted Average Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Intangible assets subject to amortization: Patents 10 years $ 28.4 $ (23.3) $ 5.1 Customer relationships (including distribution network) 16 years 1,068.6 (448.9) 619.7 Tradenames 19 years 156.7 (32.8) 123.9 Intangible assets not subject to amortization - trademarks and tradenames 86.3 86.3 Total intangible assets, net 16 years $ 1,340.0 $ (505.0) $ 835.0 Intangible asset amortization expense totaled $14.7 million and $14.6 million for t …

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Income Taxes The provision for income taxes for all periods presented is based on an estimated effective income tax rate for the respective fiscal years. The estimated annual effective income tax rate is determined excluding the effect of significant discrete items or items that are reported net of their related tax effects. The tax effect of significant discrete items is reflected in the period in which they occur. The Company's income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are generally higher than the U.S. federal statutory rate, state tax rates in the jurisdictions where the Company does business and the Company's ability to utilize various tax credits, capital loss and net operating loss (NOL) carryforwards. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted. 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. OBBBA incorporates additional changes to the U.S tax code that are effective after January 1, 2026, including charitable contribution limitations, deductible meal limitations, and changes to the U.S. system for taxing internat …

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"Long-Term Debt Long-term debt is summarized as follows (in millions): June 30, 2026 December 31, 2025 Term loan (1) $ 477.1 $ 476.4 Finance leases 22.0 20.1 Total 499.1 496.5 Less current maturities 1.4 0.9 Long-term debt $ 497.7 $ 495.6 (1) Includes unamortized debt issuance costs of $3.3 million and $4.0 million at June 30, 2026 and December 31, 2025, respectively. Senior Secured Credit Facility On October 4, 2021, ZBS Global, Inc. (Holdings), Zurn Holdings, Inc., Zurn LLC (together, the Original Borrowers), the lenders from time to time party thereto, and Credit Suisse AG, Cayman Islands Branch, as administrative agent for the lenders entered into a Fourth Amended and Restated First Lien Credit Agreement as amended by that certain Amendment No. 1 to Fourth Amended and Restated First Lien Credit Agreement dated as of July 1, 2022 (""Amendment No. 1"") (as so amended and as further amended to date, including Amendment No. 3 referenced below, the Credit Agreement). Pursuant to Amendment No. 1, Elkay joined the Credit Agreement as a borrower (Elkay and the Original Borrowers, collectively, the ""Borrowers""). The Credit Agreement is funded by a syndicate of banks and other financial institutions and provides for (i) a $550.0 million term loan facility (the Term Loan) and (ii) a revolving credit facility (the Revolving Credit Facility). On February 19, 2026, the Borrowers entered into Amendment No. 3 to the Credit Agreement (""Amendment No. 3""), appointing JPMorgan Chase Bank …

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Recent Accounting Pronouncements In November 2024, the FASB issued Accounting Standards Update 2024-03 Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses (ASU 2024-03), which is intended to improve disclosures about a public business entity's expenses, primarily through additional disaggregation of income statement expenses. The ASUs amendments are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. The Company is evaluating the impact of the adoption of ASU 2024-03 on the consolidated financial statements. …

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"Retirement Benefits 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 (expense), net in the condensed consolidated statements of operations. The components of net periodic benefit cost are as follows (in millions): Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Pension Benefits: Service cost $ 0.1 $ $ 0.1 $ Interest cost 0.1 2.9 0.2 5.7 Expected return on plan assets (0.1) (2.3) (0.1) (4.6) Curtailment (0.7) Net periodic benefit cost $ 0.1 $ 0.6 $ 0.2 $ 0.4 Other Postretirement Benefits: Interest cost $ 0.1 $ 0.1 $ 0.2 $ 0.2 Net periodic benefit cost $ 0.1 $ 0.1 $ 0.2 $ 0.2 The service cost component of net periodic benefit cost is present …

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Restructuring and Other Similar Charges During the three and six months ended June 30, 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. The Company's restructuring plans are preliminary and the full extent of related expenses are not yet estimable. The Company accounts for restructuring costs in the period in which the liability is incurred. The following table summarizes the Company's restructuring and other similar charges during the three and six months ended June 30, 2026 and June 30, 2025, (in millions): Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Employee termination benefits $ 1.2 $ 0.8 $ 1.3 $ 1.3 Contract termination and oth …

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"Revenue Recognition A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in Accounting Standards Codification (""ASC"") 606, Revenue from Contracts with Customers . A contracts transaction price is allocated to each distinct performance obligation and revenue is recognized when obligations under the terms of a contract with the customer are satisfied. For the majority of the Company's product sales, revenue is recognized at a point-in-time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company's manufacturing facility to the customer. When contracts include multiple products to be delivered to the customer, generally each product is separately priced and is determined to be distinct within the context of the contract. Other than a standard assurance-type warranty that the product will conform to agreed-upon specifications, there are generally no other significant post-shipment obligations. The expected costs associated with standard warranties continue to be recognized as an expense when the products are sold. When the contract provides the customer the right to return eligible products or when the customer is part of a sales rebate program, the Company reduces revenue at the point of sale using current facts and historical experience to estimate for expected product returns and rebates associated with the transaction. The …

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Business Segment Information The Company is a pure-play water management business that designs, procures, manufactures and markets what the Company believes to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, hydration, human safety and the environment. The Companys product portfolio includes professional grade water safety and control products, flow systems products, hygienic and environmental products and filtered drinking water products. Revenue is primarily generated in the United States and the Company manages and evaluates its operations on a consolidated basis as one reportable operating segment due to similarities of its products, processes, customer base and methods of distribution. See Note 2, Significant Accounting Policies, to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, for further information regarding the Company's accounting policies. The Companys Chief Operating Decision Maker (CODM) is the Chief Executive Officer. The CODM assesses the Companys performance and makes capital allocation decisions based on net income from continuing operations as reported in the consolidated statement of operations. This metric is used to monitor forecasted to actual and budgeted results and benchmarking to our peers. The following table includes segment revenue, significant expense items and segment profit as viewed by t …

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"Stockholders' Equity Stockholders' equity consists of the following (in millions): Common stock (1) Additional paid-in capital Retained deficit Accumulated other comprehensive loss Total stockholders equity Balance at December 31, 2024 $ 1.7 $ 2,828.2 $ (1,168.7) $ (74.4) $ 1,586.8 Total comprehensive income 43.6 (0.2) 43.4 Stock-based compensation expense 10.5 10.5 Proceeds from exercise of stock options and ESPP contributions 1.1 1.1 Taxes withheld and paid on employees' share-based payment awards (0.5) (0.5) Repurchase of common stock (78.0) (78.0) Common stock dividends ($0.09 per share) (15.3) (15.3) Balance at March 31, 2025 $ 1.7 $ 2,824.0 $ (1,203.1) $ (74.6) $ 1,548.0 Total comprehensive income 50.5 4.9 55.4 Stock-based compensation expense 9.0 9.0 Proceeds from exercise of stock options and ESPP contributions 1.3 1.3 Repurchase of common stock (32.9) (32.9) Common stock dividends ($0.09 per share) (16.4) (16.4) Balance at June 30, 2025 $ 1.7 $ 2,817.9 $ (1,185.5) $ (69.7) $ 1,564.4 Common stock (1) Additional paid-in capital Retained deficit Accumulated other comprehensive loss Total stockholders equity Balance at December 31, 2025 $ 1.7 $ 2,810.0 $ (1,131.7) $ (76.7) $ 1,603.3 Total comprehensive income 58.9 (1.6) 57.3 Stock-based compensation expense 11.7 11.7 Proceeds from exercise of stock options and ESPP contributions 2.5 2.5 Repurchase of common stock (50.0) (50.0) Common stock dividends ($0.11 per share) (18.0) (18.0) Balance at March 31, 2026 $ 1.7 $ 2,806 …

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"Subsequent Events Acquisition of Intellihot On July 21, 2026, the Company acquired 100% of the stock of Intellihot, Inc. (""Intellihot"") for a total preliminary cash purchase price of approximately $108.5 million, excluding transaction costs and net of cash acquired. The preliminary purchase price is subject to customary post-closing adjustments. Intellihot, based in Vernon Hills, Illinois, is a leader in tankless water heater solutions serving the healthcare, education, hospitality and commercial end markets. The Company's financial position and results from operations will include Intellihot subsequent to July 20, 2026. As of the date of this filing, the Company has not completed the preliminary allocation of the purchase price to the assets acquired and liabilities assumed. This acquisition is not expected to have a material impact on the Company's consolidated financial statements. Dividends On July 23, 2026, the Company's Board of Directors declared a quarterly cash dividend on the Company's common stock of $0.11 per-share to be paid on September 4, 2026, to stockholders of record as of August 20, 2026."

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