Company: MWA
Filing Date: 2025-11-19
Form Type: 10-K
Source: 0001350593-25-000066
Chunk: 318

Company: Mueller Water Products, Inc.
Filing Date: 2025-11-19
Form: 10-K
Item: Item 7
Chunk 318
---
 activity, which is seasonal in many areas as a result of the impact of cold weather conditions on construction.  Net sales and operating income have historically been lowest in the first and second quarters ending December 31 and March 31, respectively, when the northern United States and most of Canada generally face weather conditions that restrict significant construction activity.  See “Item 1A. RISK FACTORS - Seasonal demand for certain of our products and services may adversely affect our financial results.”  

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, expenses and related disclosure of contingent assets and liabilities.  These estimates are based upon experience and on various other assumptions we believe to be reasonable under the circumstances.  Actual results may differ from these estimates.  We consider an accounting estimate to be critical if changes in the estimate that are reasonably likely to occur over time or the use of reasonably different estimates could have a material impact on our financial condition or results of operations.  Our critical accounting estimates include the below items.

Inventories, net

We record inventories at standard cost or estimated net realizable value.  Standard cost reasonably approximates cost determined on the first-in, first-out basis.  Inventory cost includes an overhead component that can be affected by levels of production and actual costs incurred.  We evaluate the need to record adjustments for impairment of inventory at least quarterly.  This evaluation includes such factors as anticipated usage, inventory levels and ultimate product sales value.  If in our judgment persuasive evidence exists that the net realizable value of inventory is lower than its cost, the inventory value is written down to its estimated net realizable value.  Significant judgments regarding future events and market conditions are made when estimating net realizable value.

Accounting for the Impairment of Goodwill and Indefinite-lived Intangible Assets

We test goodwill and indefinite-lived intangible assets for impairment annually or more frequently if events or circumstances indicate possible impairment.  We perform this annual impairment testing on September 1, using standard valuation methodologies and rates that we consider to be reasonable and appropriate.

We evaluate goodwill for impairment using a quantitative analysis.  The carrying value of the reporting unit, including goodwill, is compared with the estimated fair value of the reporting unit utilizing a combination of the income and market approach as applicable.  The income approach is based on projected debt-free cash flow which is discounted to the present value