Key Highlights

  • Zurn Elkay Water Solutions reported third quarter net sales of USD 495.1 million for the period.
  • Net income was USD 76.3 million, with diluted earnings per share of USD 0.45 on a GAAP basis.
  • Nine month net income reached USD 248.5 million, with nine month adjusted EBITDA of USD 392.1 million.
  • The company's Total Net Leverage Ratio stood at 0.47 to 1.00, well within its covenant limit of 4.00 to 1.00.

Net Sales and Earnings for the Quarter

Zurn Elkay Water Solutions Corporation (NYSE:ZWS) reported third quarter net sales of USD 495.1 million. Net income from continuing operations was USD 76.1 million, with total net income of USD 76.3 million. Diluted earnings per share were USD 0.45, with basic earnings per share at USD 0.46.

For the nine months ended September 30, 2026, the company reported net income of USD 248.5 million and Adjusted EBITDA, a non-GAAP measure defined under its credit agreement, of USD 392.1 million for the same period.

Balance Sheet Strength Supports Financial Flexibility

The company's Total Net Leverage Ratio, which compares consolidated indebtedness to Adjusted EBITDA under its credit agreement, was 0.47 to 1.00 as of September 30, 2026, well within the maximum permitted ratio of 4.00 to 1.00. This low leverage position provides the company with substantial flexibility under its credit agreement's restrictive covenants governing indebtedness, acquisitions, and capital expenditures.

Adjusted EBITDA is used by the company's lenders to measure performance and compliance with debt covenants, and the significant cushion relative to the maximum permitted leverage ratio indicates the company retains considerable capacity to pursue acquisitions or other strategic actions without triggering covenant constraints.

Credit Agreement Covenant Compliance

The company's credit agreement contains restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures, and the maintenance of certain financial ratios. Events of default under the agreement include failure to pay principal and interest when due, material breaches of representations or warranties, and events of bankruptcy, among others.

The company's low leverage ratio relative to its covenant ceiling suggests continued capacity for debt-funded growth initiatives, if management chooses to pursue such opportunities, without approaching the restrictions embedded in its credit agreement.

Balance Sheet and Leverage Metrics to Track

The Total Net Leverage Ratio relative to the 0.47 to 1.00 reported this quarter, continued Adjusted EBITDA generation relative to the USD 392.1 million reported for the nine month period, and any potential capital allocation decisions that could utilize the company's available leverage capacity are among the items that may shape the company's financial position in coming quarters. With leverage sitting so far below the 4.00 to 1.00 covenant ceiling, the company's capacity for acquisitions, dividends or share repurchases without covenant pressure remains a notable feature of its current balance sheet position.