Zurn Elkay Water Solutions Corporation

Company Overview

Business Model: Zurn Elkay Water Solutions Corporation is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets a broad portfolio of specification-driven water management solutions. These solutions are aimed at improving health, hydration, human safety, and the environment. The 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. The company generates revenue by delivering highly-engineered, mission-critical solutions that provide superior value to building owners, positively impact the environment and human hygiene, and reduce product installation time. The Zurn Elkay Business System ("ZEBS") serves as its operating philosophy, emphasizing continuous improvement, superior customer satisfaction, and world-class operating performance.

Market Position: Zurn Elkay Water Solutions Corporation is a leading provider of specification-driven water management solutions primarily to the multi-billion dollar institutional and commercial building construction market, and to a lesser extent, the waterworks and residential construction markets. The company believes it has achieved market leadership by developing innovative products that meet stringent third-party regulatory, building, and plumbing code requirements, and by successfully achieving specification of its products into projects. Its products are project-critical, highly-engineered, high value-add, and typically represent a low percentage of overall project cost, which fosters high end-user loyalty and contributes to leading market shares in the majority of its product lines. The company generally avoids commoditized market segments.

Recent Strategic Developments:

• U.S. Pension Plan Termination & Settlement (2025): The Board of Directors approved the termination of the U.S. defined benefit pension plan, effective April 1, 2025. This action resulted in a curtailment gain of $0.7 million and a pre-tax settlement gain of $10.0 million.
• Divestiture of Asbestos Liabilities and Certain Assets (2023): Zurn Holdings, Inc. completed the sale of Zurn Industries, LLC and its subsidiaries primarily holding asbestos liabilities, certain assets, and cash to an unaffiliated buyer. This transaction removed all asbestos obligations and related insurance assets from Zurn Elkay Water Solutions Corporation's consolidated balance sheet, resulting in an $11.4 million loss on divestiture in 2023.
• Merger with Elkay Manufacturing Company (2022): Zurn Water Solutions Corporation combined with Elkay Manufacturing Company on July 1, 2022, subsequently changing its name to Zurn Elkay Water Solutions Corporation.
• Spin-Off Transaction (2021): The former Process & Motion Control business was divested to Regal Rexnord Corporation, establishing Zurn Elkay Water Solutions Corporation as a pure-play water management business.

Geographic Footprint: Zurn Elkay Water Solutions Corporation's physical footprint includes 21 principal manufacturing and warehouse facilities, predominantly located in North America.

• North America: Operates 17 facilities across Arizona, California, Georgia, Illinois, North Carolina, Pennsylvania, and Texas in the United States, and 4 facilities in Canada, and 1 in Mexico.
• Primary Markets (by end customer revenue, 2025):
  • United States: 91.5% of total revenue
  • Canada: 5.8% of total revenue
  • Rest of world: 2.8% of total revenue

Financial Performance

Revenue Analysis

Profitability Metrics (2025):

• Gross Margin: 45.1%
• Operating Margin: 16.4%
• Net Margin (based on total net income): 11.7%

Investment in Growth (2025):

• R&D Expenditure: $25.0 million (1.5% of revenue)
• Capital Expenditures: $29.9 million
• Strategic Investments: Zurn Elkay Water Solutions Corporation continues to evaluate opportunities for strategic acquisitions to broaden product lines, enter adjacent markets, and expand its geographic presence. No specific major investment initiatives with disclosed amounts were reported for 2025 beyond R&D and capital expenditures.

Business Segment Analysis

Zurn Elkay Water Solutions Corporation manages and evaluates its operations on a consolidated basis as one operating and reporting segment due to the similarities across its products, processes, customer base, and distribution methods. The Chief Operating Decision Maker ("CODM") assesses the company’s performance and makes capital allocation decisions based on Net income from continuing operations.

Product Portfolio Overview

Zurn Elkay Water Solutions Corporation designs, procures, manufactures, and markets a comprehensive portfolio of water management solutions under widely recognized brand names, including Zurn®, Elkay®, Wilkins®, Green Turtle®, World Dryer®, StainlessDrains.com™, JUST®, Hadrian®, Wade®, and Halsey Taylor®.

Drinking Water Products: Product Portfolio: This line includes an extensive collection of filtered drinking water delivery products, such as filtered bottle filling stations, water fountains, water dispensers, and filtered faucets. These products are sold under the Elkay® and Halsey Taylor® brand names. New Product Launches or Major Updates: In 2025, Elkay® launched Pro Filtration™ for its ezH2O® Bottle Filling Station line, which offers up to 10,000-gallon filtration capacity and a new top-mounted filter housing for filter replacement in under 30 seconds. These units can be equipped with filters certified to NSF/ANSI 42, 53, and 401 requirements to reduce contaminants like PFAS, lead, microplastics, and asbestos. Market Dynamics: Products are typically plumbed directly into building water systems and must comply with strict applicable codes and standards. Solutions are designed for various facilities, including education, healthcare, hospitality, multifamily, municipal, office, retail, commercial, and residential applications.

Water Safety and Control Products: Product Portfolio: This category encompasses a wide range of valve and water distribution control products, including backflow preventers, fire system valves, pressure reducing valves, and thermostatic mixing valves. These are sold under the Zurn® and Wilkins® brand names. Key Growth Drivers: These are highly specified and engineered flow control devices that protect and control potable and emergency water supplies within buildings or sites. They are designed to meet stringent requirements from independent test labs such as IAPMO, NSF, UL, FM, and USC. Products are sold into institutional, commercial, and residential new construction and retrofit applications, as well as the fire protection, municipal water and wastewater, and irrigation end markets.

Flow Systems Products: Product Portfolio: These products are commonly installed within buildings or on sites for storm water and wastewater management. They include specification drainage products (e.g., roof drains, floor drains, hydrants, fixture carrier systems, chemical drainage systems), linear drainage systems, and wastewater pre-treatment products (e.g., oil and grease interceptors, separators, acid neutralization systems, remote monitoring systems). These are marketed under the Zurn®, Green Turtle®, and Wade® brands. Key Growth Drivers: Proprietary designs, primarily fabricated from fiberglass reinforced polyester, are gaining market share over traditional concrete products due to their reliability, service life, ease of service, and lowest cost of ownership. Applications span restaurants, institutional foodservice, office buildings, hotels, entertainment venues, schools, grocery and convenience stores, airports, vehicle service garages, fleet operations, and laboratories.

Hygienic and Environmental Products: Product Portfolio: This segment includes sensor-operated flush valves (Aquaflush®, AquaSense®, AquaVantage®), heavy-duty commercial faucets (AquaSpec®), flush valves and faucets (Hydro X Power®), water conserving fixtures (EcoVantage®, Zurn One®), stainless steel, quartz, fireclay-ceramic, and cast iron sinks (Elkay®), stainless steel sinks and plumbing fixtures (JUST®), and restroom partition systems and lockers (Hadrian®). Key Growth Drivers: These products are typically required in the latter stages of construction or retrofit projects. Zurn One Systems® integrate valve and/or faucet products with fixtures into complete plumbing systems, offering time and cost savings. EcoVantage® fixture systems promote water-efficiency, health, and hygiene, aiding in compliance with water conservation requirements. The combined portfolio delivers comprehensive hygienic and environmental content to new and existing buildings.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Zurn Elkay Water Solutions Corporation repurchased 4.4 million shares of common stock at a total cost of $159.9 million, with an average price of $36.74 per share, during the year ended December 31, 2025.
• Dividend Payments: The company paid $63.9 million in common stock dividends during the year ended December 31, 2025.
• Future Capital Return Commitments: On October 28, 2025, the Board of Directors approved increasing the remaining share repurchase authority under the Repurchase Program to $500.0 million. As of December 31, 2025, approximately $482.1 million of repurchase authority remained. A quarterly cash dividend of $0.11 per share was declared on January 29, 2026, to be paid on March 6, 2026.

Balance Sheet Position (as of December 31, 2025):

• Cash and Equivalents: $300.5 million
• Total Debt: $496.5 million, consisting of a $476.4 million Term Loan and $20.1 million in Finance Leases.
• Net Cash Position: -$196.0 million (Net Debt)
• Credit Rating: Not disclosed in the filing.
• Debt Maturity Profile: The Term Loan matures on October 4, 2028. The Revolving Credit Facility matures on October 2, 2026. Future maturities of debt and finance lease obligations (excluding unamortized debt issuance costs) are $1.0 million in 2027, $481.5 million in 2028, $1.3 million in 2029, $1.4 million in 2030, and $14.4 million thereafter.

Cash Flow Generation (Year Ended December 31, 2025):

• Operating Cash Flow: $346.5 million
• Free Cash Flow: $316.6 million (Operating Cash Flow less Capital Expenditures of $29.9 million).
• Cash Conversion Metrics: Operating cash flow increased from $293.5 million in 2024, driven by higher net income and lower use of cash for accruals, partially offset by cash used for trade working capital.

Operational Excellence

Production & Service Model: Zurn Elkay Water Solutions Corporation designs, procures, manufactures, and markets its products. The company's operational philosophy is guided by the Zurn Elkay Business System ("ZEBS"), which is grounded in continuous improvement and aims to achieve world-class operating performance and superior customer satisfaction. The distribution model prioritizes high product availability near customers, leveraging a network of regional distribution centers and third-party warehouses to provide same-day service and quick response times, which the company considers a competitive advantage.

Supply Chain Architecture: Key Suppliers & Partners:

• Raw Materials: Principal materials include bronze, iron, brass, stainless steel, carbon steel, zinc, and engineered plastics. Zurn Elkay Water Solutions Corporation employs a global sourcing strategy to maintain alternate sources of supply for important materials and components, and is not dependent on a single source for any significant raw material or component.
• Manufacturing Partners: The company utilizes a global network of independent sources that manufacture high-quality, lower-cost component parts to its specifications and proprietary designs. This approach allows Zurn Elkay Water Solutions Corporation to concentrate on product engineering, assembly, testing, and quality control.
• Technology Partners: Not explicitly detailed beyond general reliance on third-party vendors for cybersecurity and IT infrastructure.

Facility Network:

• Manufacturing & Warehouse: Zurn Elkay Water Solutions Corporation operates 21 principal manufacturing and warehouse facilities. These include 17 facilities in the United States (Arizona, California, Georgia, Illinois, North Carolina, Pennsylvania, Texas), 4 in Canada, and 1 in Mexico. These facilities are deemed suitable and provide sufficient capacity for current and anticipated needs.
• Research & Development: The company maintains a team of approximately 180 engineers and technical employees, organized by product line, responsible for product development and application support.
• Distribution: The distribution infrastructure includes a network of regional distribution centers and approximately 65 third-party warehouses in North America.

Operational Metrics:

• Total Recordable Incident Rate (TRIR): Reduced by 43% compared to calendar year 2022, achieving a rate of 0.69 per 100 associates.
• Lost Time Incident Rate (LTIR): Reduced by 43% over the same period, reaching a rate of 0.21 per 100 associates. These rates are reported as better than best-in-class benchmarks.
• Efficiency Measures: The application of ZEBS has led to improvements in growth, productivity, cost reduction, and asset efficiency, with ongoing opportunities for further performance enhancement.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Zurn Elkay Water Solutions Corporation utilizes approximately 1,000 independent sales representatives across 120 sales agencies in North America. These representatives engage with building owners, engineers, architects, operators, contractors, and builders to specify products, and work with wholesalers to meet the needs of building contractors.
• Channel Partners: Products are distributed through plumbing wholesalers and industry-specific distributors serving the waterworks, foodservice, industrial, janitorial, sanitation, and siteworks industries.
• Digital Platforms: The company operates plumbSMART™, a secure online portal that provides real-time insights from its Connected Products. This includes wireless monitoring of usage trends, filter status, water consumption, potential issues, and alerts. This platform supports customers' operations and maintenance staff in minimizing unplanned system downtime and improving productivity and safety.

Customer Portfolio: Enterprise Customers:

• Customer Concentration: The largest customer accounted for 18% of consolidated net sales for the year ended December 31, 2025. The top five customers collectively accounted for approximately 38% of consolidated net sales for the same period. No other customers individually accounted for more than 10% of consolidated net sales.
• Customer Loyalty: Strong brand recognition (Zurn®, Elkay®, JUST®, Hadrian®, Wilkins®) is reinforced by a high propensity for "like-for-like" product replacement. Satisfactory results from specified products often lead to continued use in future projects.

Geographic Revenue Distribution (Year Ended December 31, 2025, by end customer):

• United States: $1,551.1 million, representing 91.5% of total revenue.
• Canada: $97.8 million, representing 5.8% of total revenue.
• Rest of world: $47.0 million, representing 2.8% of total revenue.
• Growth Markets: Zurn Elkay Water Solutions Corporation strategically focuses its efforts and resources on end markets exhibiting above-average growth characteristics.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: Zurn Elkay Water Solutions Corporation operates within the multi-billion dollar construction market, primarily serving institutional and commercial buildings, and to a lesser extent, waterworks and residential construction. Demand for its products is driven by new institutional and commercial building construction, the retrofit of existing structures (to enhance energy and water efficiency), and new infrastructure and residential construction. The markets in which the company participates are relatively fragmented. Zurn Elkay Water Solutions Corporation generally avoids segments that are commoditized or applications that do not require differentiation based on product quality, reliability, and innovation. Key Trends: The company believes that growing demand for water safety, conservation, hygienic solutions, availability of clean drinking water, and the elimination of plastic water bottles can support market growth above that of overall United States industrial production. Historically, the institutional, commercial, and waterworks construction sectors have demonstrated greater stability and less vulnerability to down-cycles compared to the residential construction industry. Specification-Driven Markets: These markets necessitate close collaboration with building owners, local engineers, architects, contractors, and builders to design specific applications that meet local performance requirements and building owners' needs. The ability to build and maintain strong relationships with these specifiers, coupled with flexibility in design and product innovation, is critical for effective competition.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: The markets in which Zurn Elkay Water Solutions Corporation operates are fragmented, with competitors spanning a broad range of industries, sectors, and product lines. No single competitor directly competes with the company across the entire breadth of its product lines. Specific competitor names are not disclosed in the filing.

Emerging Competitive Threats: Risks include competitors successfully leveraging artificial intelligence, including generative artificial intelligence and machine learning, more quickly or effectively than Zurn Elkay Water Solutions Corporation, which could impact its competitive position, profitability, and results of operations. New entrants, disruptive technologies, or alternative solutions also pose potential threats.

Competitive Response Strategy: Zurn Elkay Water Solutions Corporation's strategy is to build its platform around end markets with sustainable growth characteristics where it is, or can become, an industry leader, aiming to grow at rates above the overall market and competition. The company emphasizes continuous product evolution and the introduction of new products to meet changing customer needs and regulatory demands, supported by its manufacturing and engineering expertise. It also expects to continue pursuing strategic acquisitions to broaden product lines, move into adjacent markets, and expand its geographic presence.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Economic and Financial Market Weakness: Zurn Elkay Water Solutions Corporation's business operations are susceptible to volatility and weaknesses in the overall economy and financial markets. Weak or volatile economic conditions in its end markets (institutional, commercial, residential construction, waterworks) typically reduce demand, sales volume, and can lead to downward pressure on product pricing and profit margins. Key drivers include consumer confidence, employment rates, weather conditions, interest rates, credit standards, and income levels.
• Increased Competition: The company operates in highly competitive markets. Some competitors are larger and possess greater financial and other resources, potentially adopting more aggressive sales policies or dedicating more resources to product development and promotion, which could result in customer loss.
• Climate Change Impact on Demand: The long-term effects of climate change, such as unpredictable changes in rainfall and water availability, may alter how building owners and municipalities manage water, potentially leading to new or modified regulations. These changes could decrease demand for certain products or shift the product sales mix in ways that reduce margins.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Manufacturing processes rely on third parties for raw materials, including bronze, iron, brass, stainless steel, carbon steel, zinc, and engineered plastics. Risks include price fluctuations (potentially from tariffs or trade protection measures), inefficiencies if suppliers need to be changed, and delays or unavailability of raw materials. The company does not typically use hedging transactions for commodity supplies.
• Transportation: Reliance on third-party shippers for product transportation throughout the supply chain, with risks of reduced availability and increased costs.
• Geographic Concentration: Not explicitly detailed as a specific risk beyond general supply chain vulnerabilities.
• Capacity Constraints: Not explicitly detailed.

Technology & Innovation:

• Managing Changing Technology: Failure to continuously evolve existing products, introduce new products, or effectively adopt technological advances, including artificial intelligence, could result in a competitive disadvantage.
• Artificial Intelligence Risks: The use of artificial intelligence, coupled with an uncertain regulatory environment, poses risks of reputational harm, liability, security risks to confidential or proprietary information and personal data, and potential misuse by personnel. Competitors leveraging AI more effectively could impact Zurn Elkay Water Solutions Corporation's competitive position.
• Business Continuity: Risk of unexpected loss at a material facility or operation, with no assurance of adequate insurance protection against such a loss.

Human Capital:

• Loss of Key Personnel: The company's ongoing success depends on its ability to recruit, retain, and develop highly skilled management and key personnel in a competitive industry. Failure to do so or to effectively manage succession planning could materially harm the business.

Financial & Regulatory Risks

Market & Financial Risks:

• Indebtedness: The ability to generate sufficient cash flow from operations to meet debt service obligations depends on various economic, competitive, and business factors. Inability to refinance debt, sell assets, or raise equity on commercially reasonable terms could lead to default and impair liquidity.
• Goodwill and Intangible Assets Impairment: As of December 31, 2025, goodwill and intangible assets totaled $795.0 million and $835.0 million, respectively, representing a substantial portion of total assets. These assets are subject to annual impairment tests, and significant negative industry or economic trends, business disruptions, or integration failures could lead to material impairment charges.
• Pension Funding Requirements: Required cash contributions or plan settlement expenses related to defined benefit pension plans may increase due to factors such as asset returns, market interest rates, legislative changes, or modifications to actuarial assumptions.
• Foreign Exchange: Exposure to foreign currency exchange rates primarily relates to operations in Canada, impacting reported earnings, investments in subsidiaries, and intercompany transactions. A 10% strengthening of the USD as of December 31, 2025, would have decreased stockholders' equity by approximately $13.1 million.
• Credit & Liquidity: The credit agreement contains restrictive covenants (e.g., maximum Net First Lien Leverage Ratio of 5.0 to 1.0) that limit the ability to incur additional debt, make acquisitions, or pay dividends. Failure to comply could result in default and acceleration of debt repayment.

Regulatory & Compliance Risks:

• Government Regulations and Third-Party Certifications: Failure to comply with extensive laws and regulations (e.g., pollution, environmental protection, health and safety, trade taxes, government contracts), third-party certification requirements (e.g., IAPMO, NSF, ANSI, UL, FM, PDI, ASTM, AWWA), or customer/constituency-driven policies (e.g., social responsibility, climate-related) could adversely affect reputation, business, and results of operations.
• Climate Change Regulations: Legislative and regulatory developments related to climate change and the transition to a low-carbon economy could impose significant costs on Zurn Elkay Water Solutions Corporation and its suppliers (e.g., increased energy requirements, capital equipment, environmental monitoring and reporting).
• Tax Law Changes: Subject to U.S. federal and state, and foreign income and other taxes. Changes in tax rates, enactment of new tax laws (e.g., One Big Beautiful Bill Act ("OBBBA") extending TCJA provisions, OECD Pillar 2 global minimum tax), or revisions of tax regulations could result in substantially higher taxes.
• Environmental Liabilities: Operations are subject to extensive environmental laws. Non-compliance could result in civil or criminal fines, penalties, enforcement actions, third-party claims, cleanup requirements, or operational curtailment. Liability can be imposed without regard to fault and may be joint and several.
• Product Liability Claims: Subject to product liability and other claims if product use or exposure to raw materials is alleged to cause injury. While product liability insurance is maintained, future availability on commercially reasonable terms or adequate coverage is not assured.
• Data Privacy: Subject to an increasing number of evolving data privacy and security laws and regulations. Failure to comply could result in fines, penalties, and other costs.

Geopolitical & External Risks

Geopolitical Exposure:

• Terrorism, Conflicts, Wars: Events outside of the company's control, such as terrorism, conflicts, and wars, could adversely affect its business.
• Infectious Disease Outbreaks: Future outbreaks of infectious diseases could result in widespread or localized health crises, adversely affecting general commercial activity, economies, and financial markets. This could prevent or impair Zurn Elkay Water Solutions Corporation or its employees, contractors, suppliers, and customers from conducting ordinary business activities, disrupt global supply chains, and potentially increase compensation expenses. Trade Relations:
• Trade Tensions: Changes in tariffs, import duties, or other trade protection measures instituted by the U.S. or other countries could impact the cost or availability of goods or materials, both imported and domestic, or adversely affect demand for products.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: Zurn Elkay Water Solutions Corporation's research and development efforts are primarily focused on introducing products that provide incremental value to its end customers and support their sustainability goals. This includes innovation in products designed to save water, use less energy, provide clean drinking water, reduce installation time, and lower maintenance costs.

• Investment Level: Research, development, and engineering costs amounted to $25.0 million in 2025.
• Strategic Importance: Product innovation is crucial in the institutional and commercial plumbing products markets to continually meet evolving specifications, regulatory demands, and customer needs.
• Competitive Position: Zurn Elkay Water Solutions Corporation's products are recognized in the industry for their innovation, which is largely driven by an extensive "Voice of the Customer" operating philosophy.

Innovation Pipeline:

• Digital Strategy: The company's digital strategy centers on its plumbSMART™ secure online portal, which integrates technology with its product portfolio. This platform provides real-time insights from Connected Products, including wireless monitoring of usage trends, filter status, water consumption, and alerts. This information assists customers' operations and maintenance staff in minimizing unplanned system downtime and improving productivity and safety. Connected Products can also be retrofitted to the installed base.
• New Technology Development: In 2025, Elkay® launched Pro Filtration™ for its ezH2O® Bottle Filling Station line, which advances water quality and sustainability through increased filtration capacity and a new top-mounted filter housing designed for quick filter replacement.

Intellectual Property Portfolio:

• Patent Strategy: As of December 31, 2025, Zurn Elkay Water Solutions Corporation held approximately 240 active patents in the United States and approximately 90 foreign active patents. The company aims to protect its intellectual property through a combination of patent, trademark, copyright, and trade secret protection, as well as third-party nondisclosure and assignment agreements.
• Competitive Moats: The company's proprietary designs and extensive IP portfolio enable it to focus on product engineering, assembly, testing, and quality control, while leveraging a global network of independent sources for component manufacturing.
• IP Litigation: In the ordinary course of operations, the company periodically seeks to enforce its intellectual property rights through litigation or is subject to third-party claims of infringement.

Technology Partnerships: Not explicitly detailed beyond general reliance on third-party vendors for cybersecurity and IT infrastructure.

Leadership & Governance

Executive Leadership Team (as of February 4, 2026)

Leadership Continuity: Not explicitly detailed beyond the executive team's tenure.

Board Composition: The Audit Committee, on behalf of the Board, oversees the company’s material financial and other risk exposures, including risks related to cybersecurity and artificial intelligence. The Board possesses extensive cybersecurity experience, with two members of the Audit Committee holding a certificate in cybersecurity oversight from the Carnegie Mellon University Software Engineering Institute, and one member holding a certificate in Effective AI Oversight from the Heinz College of Information Systems and Public Policy of Carnegie Mellon University.

Human Capital Strategy

Workforce Composition (as of December 31, 2025):

• Total Employees: Approximately 2,600 employees.
• Geographic Distribution: Approximately 2,000 employees are located in the United States.
• Skill Mix: Not explicitly detailed beyond general statements about talent.
• Union Representation: Approximately 160 United States employees are represented by labor unions. Zurn Elkay Water Solutions Corporation is party to four collective bargaining agreements in the United States, with expiration dates in November 2026, October 2027, and January 2028. The company believes it maintains a strong relationship with its employees, including those represented by labor unions.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Human Resources programs are designed to attract, retain, and develop talent for critical roles and leadership positions.
• Retention Metrics: The company has reduced its Total Recordable Incident Rate ("TRIR") by 43% and its Lost Time Incident Rate ("LTIR") by 43% compared to the combined Zurn Elkay rate for calendar year 2022, achieving rates of 0.69 TRIR and 0.21 LTIR per 100 associates, respectively. These rates are reported as better than best-in-class benchmarks.
• Employee Value Proposition: The company strives to provide competitive compensation and benefits for its associates and is committed to fostering a culture of inclusion and belonging.

Diversity & Development:

• Diversity Metrics: Zurn Elkay Water Solutions Corporation is committed to fostering, cultivating, and preserving a culture of inclusion and belonging, recognizing and valuing associates for their unique perspectives, including different ages, ethnic and cultural backgrounds, sexual orientation, gender identity and expression, veteran status, and abilities. Specific representation data across key demographics is not disclosed.
• Development Programs: The company has a robust program of employee engagement and invests in the personal and professional development of its employees. All employees receive annual training on various policies, procedures, and matters specific to their roles.
• Culture & Engagement: The company monitors metrics to ensure the health of its company culture and alignment with its values and strategic business priorities, and conducts annual employee surveys to understand what matters most to its employees.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Not explicitly detailed beyond general statements about products helping customers achieve sustainability goals by saving water and using less energy. Supply Chain Sustainability: Not explicitly detailed.

Social Impact Initiatives:

• Community Investment: Not explicitly detailed.
• Product Impact: Zurn Elkay Water Solutions Corporation's product portfolio is designed to improve health, hydration, human safety, and the environment, delivering superior value to building owners and positively impacting human health and hygiene. Innovation is focused on products that save water, use less energy, provide clean drinking water, reduce installation time, and lower maintenance costs.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Demand for Zurn Elkay Water Solutions Corporation's products is primarily driven by institutional and commercial building activity, remodeling and retrofit opportunities, and to a lesser extent, new home starts and waterworks expansion. Weather significantly impacts construction activity, leading to generally decreased sales in the first and fourth quarters compared to the second and third quarters of the calendar year, as spring and summer months in the United States and Canada represent the main construction season.
• Economic Sensitivity: Operating results are dependent on general economic conditions and other market factors beyond the company's control. Serving customers in cyclical industries, the company's operating results have been, and are likely to be, negatively affected during economic downturns.
• Industry Cycles: Historically, the institutional, commercial, and waterworks construction sectors have been more stable and less vulnerable to down-cycles than the residential construction industry.

Planning & Forecasting: Not explicitly detailed beyond general statements about managing demand patterns.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: Zurn Elkay Water Solutions Corporation's operations and facilities are subject to extensive laws and regulations related to pollution, environmental protection, health and safety, trade taxes, and government contracts. Its products must meet stringent county-specific regulatory, building, and plumbing code requirements from various bodies, including the Foundation for Cross-Connection Control and Hydraulic Research at the University of Southern California ("USC"), the International Association of Plumbing and Mechanical Officials ("IAPMO"), the National Sanitation Foundation ("NSF"), the American National Standards Institute ("ANSI"), ASTM International ("ASTM"), the Plumbing and Drainage Institute ("PDI"), Underwriters Laboratories ("UL"), Factory Mutual ("FM"), and the American Waterworks Association ("AWWA").

• International Compliance: The company is subject to laws and rules issued by different agencies concerning safeguarding and maintaining the confidentiality of sensitive information.

Trade & Export Controls:

• Export Restrictions: Not explicitly detailed.
• Sanctions Compliance: Not explicitly detailed.

Legal Proceedings: Zurn Elkay Water Solutions Corporation's subsidiaries are involved in various unresolved legal actions, administrative proceedings, and claims in the ordinary course of business. These include product liability, commercial, employment, workers' compensation, intellectual property claims, and environmental matters. Management believes that the eventual outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the company's financial position, results of operations, or cash flows.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: The effective tax rate for the year ended December 31, 2025, was 24.9% (compared to 23.2% in 2024 and 29.0% in 2023). This rate 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). These increases were 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 applicable statutes of limitations.
• Geographic Tax Planning: No provision has been made for U.S. federal income taxes related to approximately $52.5 million of undistributed earnings of foreign subsidiaries, which are considered permanently reinvested. If these earnings were repatriated to the U.S., potential out-of-pocket withholding taxes of approximately $2.8 million would be expected.
• Tax Reform Impact:
  • One Big Beautiful Bill Act ("OBBBA") (2025): Enacted on July 4, 2025, OBBBA extended several provisions of the Tax Cuts and Jobs Act ("TCJA") of 2017 that were set to expire on December 31, 2025. These extensions, effective for the company’s fiscal year ending December 31, 2025, include 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 also incorporates additional changes to the U.S. tax code effective after January 1, 2026, such as charitable contribution limitations, deductible meal limitations, and changes to the U.S. system for taxing international corporate income.
  • OECD Pillar 2 (2021): The Organization for Economic Co-operation and Development ("OECD") issued rules for a new global minimum tax ("Pillar 2"), including a 15% global minimum tax ("Top-Up Tax") applicable to tax years beginning in 2024. Based on current OECD rules and related legislation in countries where it operates, Zurn Elkay Water Solutions Corporation does not anticipate being subject to material Top-Up Taxes.

Insurance & Risk Transfer

Risk Management Framework: Zurn Elkay Water Solutions Corporation is exposed to market risk from changes in foreign currency exchange rates and interest rates during its normal course of business. These exposures are managed through a combination of normal operating and financing activities, and at times, through derivative financial instruments such as foreign currency forward contracts to cover known foreign currency transactional risks. The company has also historically used interest rate derivatives to manage interest rate fluctuations.

• Insurance Coverage: The company annually purchases a cybersecurity insurance policy. It also maintains product liability insurance coverage, but cannot assure that such insurance will be obtainable on commercially reasonable terms in the future, if at all, or that any such insurance will provide adequate coverage against claims.
• Risk Transfer Mechanisms: Not explicitly detailed beyond general risk management.