Company: MWA
Filing Date: 2025-11-19
Form Type: 10-K
Source: 0001350593-25-000066
Chunk: 354

Company: Mueller Water Products, Inc.
Filing Date: 2025-11-19
Form: 10-K
Item: Item 7
Chunk 354
---
 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 and Cash Equivalents.  All highly liquid investments with maturities of 90 days or less when purchased are classified as cash equivalents.  Where there is no right of offset against cash balances, outstanding checks are included in Accounts payable.Receivables, net.  Receivables are amounts due from customers.  To reduce credit risk, credit investigations are generally performed prior to accepting orders from new customers and, when necessary, we require letters of credit, bonds or other instruments to ensure payment.We present trade receivables net of expected customer discounts and an allowance for credit losses.  Our consolidated statements of operations include the expected credit losses either arising or changing during the period for our receivables.  In the period in