Company: MWA
Filing Date: 2025-11-19
Form Type: 10-K
Source: 0001350593-25-000066
Chunk: 22

Company: Mueller Water Products, Inc.
Filing Date: 2025-11-19
Form: 10-K
Item: Item 8
Chunk 22
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 to 100% recapture if we do not comply with various regulations and contractual provisions surrounding the foundry project.  We have indemnified Wells Fargo for any loss or recapture of tax credits related to the transaction until the seven-year period elapses.  We do not anticipate any credit recaptures will be required in connection with this arrangement.The investment fund contributed $16.5 million cash for a 99.99% stake in a joint venture (“Sub-CDE”) with a CDE.  The Sub-CDE then loaned $16.2 million to us, with the use of the loan proceeds restricted to foundry project expenditures.  This transaction also includes a put/call provision under which we may be obligated or entitled to repurchase Wells Fargo’s interest in the investment fund.  We believe that Wells Fargo will exercise its put option in December 2027 for nominal consideration, resulting in our becoming the sole owner of the investment fund, cancelling the related loans, and recognizing an estimated gain of $3.9 million.We determined that the investment fund and the Sub-CDE are variable interest entities (“VIEs”) and that we are the primary beneficiary of the VIEs.  The ongoing activities of the VIEs, namely collecting and remitting interest and fees and administering NMTC compliance, were contemplated in the initial design of the transaction and are not expected to significantly affect economic performance throughout the life of the VIEs.  Additionally, we are obligated to deliver tax benefits and provide various other guarantees to Wells Fargo and to absorb the losses of the VIEs. Wells Fargo does not have a material interest in the underlying economics of the project.  Consequently, we have included the financial statements of the VIEs in our consolidated financial statements.Intercompany transactions between us and the VIEs have been eliminated in consolidation.  Wells Fargo’s contribution to the investment fund is consolidated in our financial statements within Other noncurrent liabilities as a result of its redemption features.Direct costs associated with Wells Fargo’s capital contribution were netted against the recorded proceeds, resulting in a net cash contribution of $3.9 million.  Other direct costs associated with the transaction were capitalized and are being recognized as interest expense over the seven-year tax credit period.  Incremental costs to maintain the structure during the compliance period are expensed as incurred and were immaterial to the consolidated financial statements.

F- 10

Table of ContentsIndex to Financial Statements

Note 2.    Summary of Significant Accounting Policies 

Cash