Company: MWA
Filing Date: 2025-02-05
Form Type: 10-Q
Source: 0001350593-25-000012
Chunk: 50

Company: Mueller Water Products, Inc.
Filing Date: 2025-02-05
Form: 10-Q
Item: Part I, Item 8
Chunk 50
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 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.

10

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 are immaterial to the consolidated financial statements.

Note 2.    Revenue from Contracts with Customers

We recognize revenue when control of promised products or services is transferred to our customers, in amounts that reflect the consideration to which we expect to be entitled in exchange for those products or services.  We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, the payment terms are identified, the contract has commercial substance and collectability of consideration is probable.  We determine the appropriate revenue recognition for our contracts with customers by analyzing the type, terms and conditions of each customer contract or arrangement.Disaggregation of RevenueRefer to Note 8. for disaggregation of our revenues from contracts with customers by reportable segment and by geographical region, which we believe best depicts how the nature, amount, timing and certainty of our revenue and cash flows are affected by economic factors.  Geographical region represents the location of the customer.Contract Asset and Liability BalancesDifferences in the timing of