Notes to Condensed Consolidated Financial Statements
June 30, 2020
(Unaudited)
1. Basis of Presentation and Significant Accounting Policies
The unaudited condensed consolidated financial statements included herein have been prepared by Rexnord Corporation (“Rexnord” or the “Company”) in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
In the opinion of management, the condensed consolidated financial statements include all adjustments necessary for a fair presentation of the results of operations for the interim periods. Following the end of the Company's fiscal year ended March 31, 2020, the Company transitioned to a December 31 fiscal year-end date. The nine-month period from April 1, 2020, to December 31, 2020, is serving as a transition period, and the Company will provide one-time, nine-month transitional financial statements for the transition period in a transition report on Form 10-K to be filed in 2021. Results for the interim periods are not necessarily indicative of results that may be expected for the nine-month transition period ending December 31, 2020. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's March 31, 2020 Annual Report on Form 10-K.
The Company
Rexnord is a growth-oriented, multi-platform industrial company with what it believes to be leading market shares and highly-trusted brands that serve a diverse array of global end markets. The Company's heritage of innovation and specification have allowed it to provide highly-engineered, mission-critical solutions to customers for decades and affords it the privilege of having long-term, valued relationships with market leaders. The Company operates in a disciplined way and the Rexnord Business System (“RBS”) is its operating philosophy. Grounded in the spirit of continuous improvement, RBS creates a scalable, process-based framework that focuses on driving superior customer satisfaction and financial results by targeting world-class operating performance throughout all aspects of its business.
The Process & Motion Control platform designs, manufactures, markets and services a comprehensive range of specified, highly-engineered mechanical components used within complex systems where the Company's customers' reliability requirements and costs of failure or downtime are high. The Process & Motion Control portfolio includes motion control products, shaft management products, aerospace components, and related value-added services.
The Water Management platform designs, procures, manufactures, and markets products that provide and enhance water quality, safety, flow control and conservation. The Water Management product portfolio includes professional grade water control and safety, water distribution and drainage, finish plumbing and site works products for primarily nonresidential buildings.
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate that is expected to be discontinued because of reference rate reform. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this ASU are effective for all entities as of March 12, 2020, through December 31, 2022. The Company did not modify any material contracts due to reference rate reform during the three months ended June 30, 2020. The Company will continue to evaluate the impact this guidance will have on its consolidated financial statements for all future transactions affected by reference rate reform during the time permitted.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The FASB issued this update as part of its initiative to reduce complexity in accounting standards. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general
principles in Topic 740 and also improve consistent application of other areas by clarifying and amending existing guidance. ASU 2019-12 is effective for public business entities with fiscal years beginning after December 15, 2020, and early adoption is permitted. Certain amendments of this ASU may be adopted on a retrospective basis, modified retrospective basis or prospective basis. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ASC 326, Financial Instruments - Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. The Company adopted ASU No. 2016-13, as amended, on April 1, 2020, using a modified-retrospective approach. There was no impact to the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14"), which updates the standard to remove disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. ASU 2018-14 is effective for public business entities with fiscal years beginning after December 15, 2020, on a retroactive basis. This guidance will have no impact on the Company's consolidated financial statements upon adoption other than with respect to the updated disclosure requirements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the presentation used for the three months ended June 30, 2020.
2. Acquisitions
Fiscal Year 2020
On January 28, 2020, the Company acquired substantially all of the assets of Just Manufacturing Company ("Just Manufacturing") for a cash purchase price of $59.4 million, excluding transaction costs and net of cash acquired. Just Manufacturing, based in Franklin Park, Illinois, manufactures stainless steel sinks and plumbing fixtures primarily used in institutional and commercial end markets and complements the Company's existing Water Management platform.
On May 10, 2019, the Company acquired substantially all of the assets of East Creek Corporation (d/b/a StainlessDrains.com), a manufacturer of stainless steel drains, grates and accessories for industrial and commercial end markets, for a cash purchase price of $24.8 million, excluding transaction costs and net of cash acquired. StainlessDrains.com, headquartered in Greenville, Texas, added complementary product lines to the Company's existing Water Management platform.
The fiscal 2020 acquisitions have been accounted for as business combinations and were recorded by allocating the purchase price to the fair value of the assets acquired and liabilities assumed at the acquisition date. The excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The purchase price allocations associated with these acquisitions resulted in tax deductible goodwill of $27.2 million, other intangible assets of $40.9 million (including tradenames of $2.2 million and $38.7 million of customer relationships), $8.4 million of fixed assets, $9.1 million of trade working capital and other net liabilities of $1.4 million.
The preliminary purchase price allocations for Just Manufacturing were adjusted during the three months ended June 30, 2020, resulting in a $0.7 million increase in goodwill related to the refinement of the estimated fair value of the liabilities assumed as of the acquisition date. The Company is continuing to evaluate the preliminary purchase price allocations for Just Manufacturing related to the fair value assigned to intangible assets and net working capital acquired, which will be completed within the one year period following its acquisition date. The purchase price allocations for StainlessDrains.com were finalized during fiscal 2020.
During fiscal 2020, the Company acquired the remaining non-controlling interest in a Process and Motion Control joint venture for a cash purchase price of $0.3 million. The acquisition of the remaining minority interest was not material to the Company's condensed consolidated statements of operations or financial position.
The Company's results of operations include the acquired operations subsequent to the respective acquisition dates. Pro-forma results of operations and certain other U.S. GAAP disclosures related to the fiscal 2020 acquisitions have not been presented because they are not significant to the Company's condensed consolidated statements of operations or financial position.
3. Restructuring and Other Similar Charges
During the three months ended June 30, 2020, the Company continued to execute various restructuring actions. These initiatives were implemented to drive efficiencies and reduce operating costs while also modifying the Company's footprint to reflect changes in the markets it serves, the impact of acquisitions on the Company's overall manufacturing capacity and the refinement of its overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs, and other facility rationalization costs. Management expects to continue executing initiatives and select product-line rationalizations to optimize its operating margin and manufacturing footprint. As the Company continues to evaluate the impact of COVID-19 and the resulting effects on the global economy, the Company may also execute additional restructuring actions. As such, the Company expects further expenses related to workforce reductions, lease termination costs, and other facility rationalization costs. As the Company’s evaluation of the impacts of COVID-19 and other potential restructuring actions are in process, related restructuring expenses, if any, are not yet estimable.
The following table summarizes the Company's restructuring and other similar charges during the three months ended June 30, 2020 and June 30, 2019, by classification of operating segment (in millions):
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Restructuring and Other Similar Charges
Three Months Ended June 30, 2020
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Process & Motion Control
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Water Management
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Corporate
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Consolidated
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Employee termination benefits
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$
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0.2
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$
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0.9
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$
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0.1
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$
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1.2
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Contract termination and other associated costs
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0.5
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—
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—
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0.5
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Total restructuring and other similar costs
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$
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0.7
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$
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0.9
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$
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0.1
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$
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1.7
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Restructuring and Other Similar Charges
Three Months Ended June 30, 2019
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Process & Motion Control
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Water Management
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Corporate
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Consolidated
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Employee termination benefits
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$
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2.6
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$
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0.3
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$
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—
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$
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2.9
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Contract termination and other associated costs
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0.3
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—
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—
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0.3
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Total restructuring and other similar costs
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$
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2.9
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$
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0.3
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$
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—
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$
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3.2
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The following table summarizes the activity in the Company's restructuring accrual for the three months ended June 30, 2020 (in millions):
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Employee termination benefits
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Contract termination and other associated costs
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Total
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Restructuring accrual, March 31, 2020 (1)
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$
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8.3
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$
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1.5
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$
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9.8
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Charges
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1.2
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0.5
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1.7
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Cash payments
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(3.4)
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(0.6)
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(4.0)
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Restructuring accrual, June 30, 2020 (1)
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$
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6.1
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$
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1.4
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$
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7.5
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____________________
(1)The restructuring accrual is included in other current liabilities in the condensed consolidated balance sheets.
In connection with the ongoing supply chain optimization and footprint repositioning initiatives, the Company has taken several actions to consolidate existing manufacturing facilities and rationalize its product offerings. These actions require the Company to assess whether the carrying amount of impacted long-lived assets will be recoverable as well as whether the remaining useful lives require adjustment. As a result, the Company recognized accelerated depreciation of $0.4 million and $0.6 million during the three months ended June 30, 2020 and June 30, 2019, respectively. Accelerated depreciation is recorded within Cost of sales in the condensed consolidated statements of operations.
4. Discontinued Operations
During fiscal 2019, the Company completed the sale of the VAG business, which was previously included within the Water Management platform. The operating results of the VAG business are reported as discontinued operations in the condensed consolidated statements of operations, as the sale of VAG represented a strategic shift that had a major impact on operations and financial results. The sale price was subject to customary working capital and cash balance adjustments, which were finalized in fiscal 2020. As a result of these adjustments and other related costs, the Company recognized an additional $1.8 million loss on the sale of discontinued operations during the three months ended June 30, 2019.
5. Revenue Recognition
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606, Revenue from Contracts with Customers ("ASC 606"). A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when obligations under the terms of a contract with the customer are satisfied. For the majority of the Company's product sales, revenue is recognized at a point-in-time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company's manufacturing facility to the customer.
When contracts include multiple products to be delivered to the customer, generally each product is separately priced and is determined to be distinct within the context of the contract. Other than a standard assurance-type warranty that the product will conform to agreed-upon specifications, there are generally no other significant post-shipment obligations. The expected costs associated with standard warranties continues to be recognized as an expense when the products are sold. When the contract provides the customer the right to return eligible products or when the customer is part of a sales rebate program,
the Company reduces revenue at the point of sale using current facts and historical experience by using an estimate for expected product returns and rebates associated with the transaction. The Company adjusts these estimates at the earlier of when the most likely amount of consideration that is expected to be received changes or when the consideration becomes fixed. Accordingly, an increase or decrease to revenue is recognized at that time.
Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue. The Company has elected to recognize the cost for freight and shipping when control of products has transferred to the customer as a component of cost of sales in the condensed consolidated statements of operations. The Company classifies shipping and handling fees billed to customers as net sales and the corresponding costs are classified as Cost of sales in the condensed consolidated statements of operations.
Revenue by Category
The Company has two business segments, Process & Motion Control and Water Management. The following tables present our revenue disaggregated by customer type and geography (in millions):
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Three Months Ended
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June 30, 2020
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June 30, 2019
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Original equipment manufacturers/end users
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$
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158.4
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|
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$
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186.2
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Maintenance, repair, and operations
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116.0
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143.9
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Total Process & Motion Control
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$
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274.4
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$
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330.1
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Water safety, quality, flow control and conservation
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$
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163.2
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$
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165.0
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Water infrastructure
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11.5
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13.2
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Total Water Management
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$
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174.7
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$
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178.2
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Three Months Ended
June 30, 2020
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Process & Motion Control
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Water Management
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United States and Canada
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$
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169.1
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$
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171.9
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Europe
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65.6
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—
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Rest of world
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39.7
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2.8
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Total
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$
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274.4
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$
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174.7
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Three Months Ended
June 30, 2019
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Process & Motion Control
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Water Management
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United States and Canada
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$
|
214.4
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|
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$
|
174.8
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Europe
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|
72.4
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|
|
—
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|
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Rest of world
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43.3
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3.4
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Total
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$
|
330.1
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$
|
178.2
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Contract Balances
For substantially all of the Company's Process & Motion Control and Water Management product sales, the customer is billed 100% of the contract value when the product ships and payment is generally due 30 days from shipment. Certain contracts include longer payment periods; however, the Company has elected to utilize the practical expedient in which the Company will only recognize a financing component to the sale if payment is due more than one year from the date of shipment.
The Company receives payment from customers based on the contractual billing schedule and specific performance requirements established in the contract. Billings are recorded as accounts receivable when an unconditional right to the contractual consideration exists. Contract assets arise when the Company performs by transferring goods or services to a customer before the customer pays consideration, or before the customer’s payment is due. A contract liability exists when the
Company has received consideration or the amount is due from the customer in advance of revenue recognition. Contract liabilities and contract assets are recognized in Other current liabilities and Receivables, net, respectively, in the Company's condensed consolidated balance sheets.
The following table presents changes in the Company’s contract assets and liabilities during the three months ended June 30, 2020 (in millions):
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Balance Sheet Classification
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March 31, 2020
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Additions
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Deductions
|
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June 30, 2020
|
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Contract assets
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Receivables, net
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$
|
0.5
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
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$
|
0.6
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|
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Contract liabilities (1)
|
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Other current liabilities
|
|
$
|
7.3
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|
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$
|
3.1
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|
|
$
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(4.4)
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$
|
6.0
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____________________
(1)Contract liabilities are reduced when revenue is recognized.
Backlog
The Company has a backlog of $370.8 million as of June 30, 2020, which represents the most likely amount of consideration expected to be received in satisfying the remaining backlog under open contracts. The Company has elected to use the optional exemption provided by ASC 606-10-50-14A for variable consideration, and has not included estimated rebates in the amount of unsatisfied performance obligations. The Company expects to recognize approximately 78% of the unsatisfied performance obligations as revenue in the remaining six months in the transition period ending December 31, 2020, and the remaining approximately 22% in 2021 and beyond.
Timing of Performance Obligations Satisfied at a Point in Time
The Company determined that the customer is able to control the product when it is delivered to them; thus, depending on the shipping terms, control will transfer at different points between the Company's manufacturing facility or warehouse and the customer’s location. The Company considers control to have transferred upon shipment or delivery because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.
Variable Consideration
The Company provides volume-based rebates and the right to return product to certain customers, which are accrued for based on current facts and historical experience. Rebates are paid either on an annual or quarterly basis. There are no other significant variable consideration elements included in the Company's contracts with customers.
Contract Costs
The Company has elected to expense contract costs as incurred if the amortization period is expected to be one year or less. If the amortization period of these costs is expected to be greater than one year, the costs would be subject to capitalization. As of June 30, 2020, the contract assets capitalized, as well as amortization recognized in the three months ended June 30, 2020, are not significant and there have been no impairment losses recognized.
Allowance for Doubtful Accounts
The Company assesses the collectability of customer receivables based on the creditworthiness of a customer as determined by credit checks and analysis, as well as the customer’s payment history. In determining the allowance for doubtful accounts, the Company also considers various factors including the aging of customer accounts and historical write-offs. In addition, the Company monitors other risk factors including forward-looking information when establishing adequate allowances for doubtful accounts, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables.
6. Income Taxes
The provision for income taxes for all periods presented is based on an estimated effective income tax rate for the respective fiscal years. The estimated annual effective income tax rate is determined excluding the effect of significant discrete items or items that are reported net of their related tax effects. The tax effect of significant discrete items is reflected in the period in which they occur. The Company's income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are generally higher than the U.S. federal statutory rate, state tax rates in the jurisdictions where the Company does business and the Company's ability to utilize various tax credits, capital loss and net operating loss (“NOL”) carryforwards.
The Company regularly reviews its deferred tax assets for recoverability and valuation allowances are established based on historical losses, projected future taxable income and the expected timing of the reversals of existing temporary
differences, as deemed appropriate. In addition, all other available positive and negative evidence is taken into consideration for purposes of determining the proper balances of such valuation allowances. As a result of this review, the Company continues to maintain a full valuation allowance against U.S. federal and state capital loss carryforwards and a partial valuation allowance against certain foreign NOL carryforwards and other related foreign deferred tax assets, as well as certain U.S. state NOL carryforwards. Future changes to the balances of these valuation allowances, as a result of this continued review and analysis by the Company, could result in a material impact to the financial statements for such period of change.
The income tax provision was $17.2 million in the three months ended June 30, 2020, compared to $14.8 million in the three months ended June 30, 2019. The effective income tax rate for the three months ended June 30, 2020 was 32.5% versus 23.4% in the three months ended June 30, 2019. The effective income tax rate for the three months ended June 30, 2020 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with global intangible low-taxed income (“GILTI”) and compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of withholding taxes associated with foreign dividends, and the accrual of various state income taxes, partially offset by the recognition of income tax benefits associated with share-based payments and foreign-derived intangible income (“FDII”). The effective income tax rate for the three months ended June 30, 2019 was above the U.S. federal statutory rate of 21% primarily due to the recognition of certain previously unrecognized tax benefits due to the lapse of applicable statutes of limitations, partially offset by the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with GILTI and the accrual of various state income taxes, partially offset by the recognition of income tax benefits associated with share-based payments and FDII.
On a quarterly basis, we review and analyze our valuation allowances associated with deferred tax assets relating to certain foreign and state net operating loss carryforwards as well as U.S. federal and state capital loss carryforwards. In conjunction with this analysis, we weigh both positive and negative evidence for purposes of determining the proper balances of such valuation allowances. Future changes to the balances of these valuation allowances, as a result of our continued review and analysis, could result in a material impact to the financial statements for such period of change.
The Company’s total liability for net unrecognized tax benefits as of June 30, 2020 and March 31, 2020, was $15.1 million and $14.8 million, respectively. The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in income tax expense. As of June 30, 2020 and March 31, 2020, the total amount of gross, unrecognized income tax benefits included $1.6 million and $1.5 million of accrued interest and penalties, respectively. The Company recognized $0.1 million of net interest and penalties as income tax benefit during both the three months ended June 30, 2020 and June 30, 2019.
The Company conducts business in multiple locations within and outside the U.S. Consequently, the Company is subject to periodic income tax examinations by domestic and foreign income tax authorities. Currently, the Company is undergoing routine, periodic income tax examinations in both domestic and foreign jurisdictions. The Company is currently undergoing an income tax examination by the Internal Revenue Service (the "IRS") of the Company’s U.S. consolidated federal income tax returns for the tax years ended March 31, 2016 and 2017. During the fourth quarter of fiscal 2020, the German tax authorities concluded an examination of the corporate income and trade tax returns for the Company’s CENTA German subsidiary for the tax years ended December 31, 2014 through December 31, 2017. The conclusion of the tax examination resulted in additional tax liabilities of approximately $1.7 million, all of which is subject to indemnification under the terms of the applicable purchase agreement or otherwise appropriately accrued in the Company's financial statements. During the three months ended March 31, 2020, the Italian tax authorities began conducting an income tax examination of the income tax returns of one of the Company’s Italian subsidiaries for the tax year ended March 31, 2018. In addition, certain of the Company’s German subsidiaries were notified by the German tax authorities of their intention to conduct an income tax examination of such subsidiaries’ German corporate income and trade tax returns for the tax years or period ended March 31, 2015 through March 31, 2018. The Company anticipates the related fieldwork on such matters will begin during the three months ending September 30, 2020. In addition, in accordance with the terms of the VAG sale agreement, the Company is required to indemnify the purchaser for any future income tax liabilities associated with all open tax years ending prior to, and including, the short period ended on the date of the Company's sale of VAG. VAG was notified by the German tax authorities of its intention to conduct an income tax examination of the VAG German entities’ corporate income and trade tax returns for the tax years ended March 31, 2014 through 2019. The Company anticipates the related fieldwork on this matter will begin during the three months ending December 31, 2020. During the three months ended September 30, 2018, the IRS completed an income tax examination of the Company’s amended U.S. consolidated federal income tax return for the tax year ended March 31, 2015, and the Company paid approximately $0.4 million upon conclusion of such examination. It appears reasonably possible that the amounts of unrecognized income tax benefits could change in the next twelve months upon conclusion of the Company’s current ongoing examinations; however, any potential payments of income tax, interest and penalties are not expected to be significant to the Company's consolidated financial statements. With certain exceptions, the Company is no longer subject to U.S. federal income tax examinations for tax years ending prior to March 31, 2016, state and local income tax examinations for years ending prior to fiscal 2016 or significant foreign income tax examinations for years ending prior to fiscal 2015.
7. Earnings per Share
The following table presents the basis for income per share computations (in millions, except share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
|
|
|
|
Basic net income per share attributable to Rexnord common stockholders
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
35.8
|
|
|
$
|
48.5
|
|
|
|
|
|
|
Less: Non-controlling interest income
|
|
0.2
|
|
|
0.2
|
|
|
|
|
|
|
Less: Dividends on preferred stock
|
|
—
|
|
|
5.8
|
|
|
|
|
|
|
Net income from continuing operations attributable to Rexnord common stockholders
|
|
$
|
35.6
|
|
|
$
|
42.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
$
|
—
|
|
|
$
|
(1.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Rexnord common stockholders
|
|
$
|
35.6
|
|
|
$
|
40.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic
|
|
120,246
|
|
|
105,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share attributable to Rexnord common stockholders
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
35.8
|
|
|
$
|
48.5
|
|
|
|
|
|
|
Less: Non-controlling interest income
|
|
0.2
|
|
|
0.2
|
|
|
|
|
|
|
Less: Dividends on preferred stock
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Net income from continuing operations attributable to Rexnord common stockholders
|
|
$
|
35.6
|
|
|
$
|
48.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
$
|
—
|
|
|
$
|
(1.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Rexnord common stockholders
|
|
$
|
35.6
|
|
|
$
|
40.7
|
|
|
|
|
|
|
Plus: Dividends on preferred stock
|
|
—
|
|
|
5.8
|
|
|
|
|
|
|
Net income attributable to Rexnord common stockholders
|
|
$
|
35.6
|
|
|
$
|
46.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic
|
|
120,246
|
|
|
105,262
|
|
|
|
|
|
|
Effect of dilutive equity securities
|
|
1,802
|
|
|
2,423
|
|
|
|
|
|
|
Preferred stock under the "if-converted" method (1)
|
|
—
|
|
|
15,979
|
|
|
|
|
|
|
Weighted-average common shares outstanding, diluted
|
|
122,048
|
|
|
123,664
|
|
|
|
|
|
____________________
(1)On November 15, 2019, the Company issued 15,980,050 shares of common stock upon the mandatory conversion of Series A Preferred Stock; see Note 8, Stockholders' Equity for additional information.
The computation of diluted net income per share for the three months ended June 30, 2020 and June 30, 2019, excludes 1.2 million and 1.2 million shares, respectively, related to equity awards due to their anti-dilutive effects.
8. Stockholders' Equity
Stockholders' equity consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
Preferred stock
|
|
Additional paid-in capital
|
|
Retained earnings
|
|
Accumulated other comprehensive loss
|
|
|
|
Non-controlling interest (2)
|
|
Total stockholders’ equity
|
|
Balance at March 31, 2019
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
1,293.5
|
|
|
$
|
30.7
|
|
|
$
|
(96.6)
|
|
|
|
|
$
|
2.4
|
|
|
$
|
1,231.0
|
|
|
Total comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
46.5
|
|
|
—
|
|
|
|
|
0.2
|
|
|
46.7
|
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
6.9
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
6.9
|
|
|
Proceeds from exercise of stock options
|
—
|
|
|
—
|
|
|
4.8
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
4.8
|
|
|
Taxes withheld and paid on employees' share-based payment awards
|
—
|
|
|
—
|
|
|
(5.7)
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(5.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends ($14.375 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.8)
|
|
|
—
|
|
|
|
|
—
|
|
|
(5.8)
|
|
|
Balance at June 30, 2019
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
1,299.5
|
|
|
$
|
71.4
|
|
|
$
|
(96.6)
|
|
|
|
|
$
|
2.6
|
|
|
$
|
1,277.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock (1)
|
|
Preferred stock
|
|
Additional
paid-in
capital
|
|
Retained
earnings
|
|
Accumulated
other
comprehensive
loss
|
|
|
|
Non-controlling interest (2)
|
|
Total
stockholders’
equity
|
|
Balance at March 31, 2020
|
$
|
1.2
|
|
|
$
|
—
|
|
|
$
|
1,348.3
|
|
|
$
|
85.9
|
|
|
$
|
(124.4)
|
|
|
|
|
$
|
2.7
|
|
|
$
|
1,313.7
|
|
|
Total comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
35.6
|
|
|
6.3
|
|
|
|
|
0.2
|
|
|
42.1
|
|
|
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
10.6
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
10.6
|
|
|
Proceeds from exercise of stock options
|
—
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
6.3
|
|
|
Taxes withheld and paid on employees' share-based payment awards
|
—
|
|
|
—
|
|
|
(9.4)
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(9.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends ($0.08 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.6)
|
|
|
—
|
|
|
|
|
—
|
|
|
(9.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020
|
$
|
1.2
|
|
|
$
|
—
|
|
|
$
|
1,355.8
|
|
|
$
|
111.9
|
|
|
$
|
(118.1)
|
|
|
|
|
$
|
2.9
|
|
|
$
|
1,353.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)For the three months ended June 30, 2020, the Company issued 936,552 shares of common stock upon the exercise of stock options, vesting of restricted stock units and performance stock units, and for other common stock awards.
(2)During the first quarter of fiscal 2020, represents a 30% non-controlling interest in two Process & Motion Control controlled subsidiaries. During the second quarter of fiscal 2020, the Company acquired the remaining 30% non-controlling interest associated with one of the aforementioned Process & Motion Control joint ventures for a cash purchase price of $0.3 million. Following this transaction, represents a 30% non-controlling interest in the remaining Process & Motion Control controlled subsidiary and a 5% non-controlling interest in another Process & Motion Control controlled subsidiary.
Preferred Stock
On November 15, 2019, 402,500 shares of 5.75% Series A Mandatory Convertible Preferred Stock (the "Series A Preferred Stock") automatically converted into 15,980,050 shares of the Company's common stock. The number of shares of common stock issued upon conversion was determined based on a defined average volume weighted average price per share of the Company’s common stock. Upon conversion, there were no shares of Series A Preferred Stock outstanding. The final dividend payment was made on November 15, 2019.
Share Repurchase Program
During fiscal 2015, the Company's Board of Directors approved a common stock repurchase program (the "Repurchase Program") authorizing the repurchase of up to $200.0 million of the Company's common stock from time to time on the open market or in privately negotiated transactions. On January 27, 2020, the Company's Board of Directors approved increasing the remaining share repurchase authority under the Repurchase Program to $300.0 million. The Repurchase Program does not require the Company to acquire any particular amount of common stock and does not specify the timing of purchases or the prices to be paid. On April 8, 2020, the Company announced the temporary suspension of share repurchases as a result of the uncertainty caused by the COVID-19 pandemic. Therefore, during the three months ended June 30, 2020, the Company did not repurchase any shares of its common stock. A total of approximately $223.0 million of the existing authority remained under the Repurchase Program at June 30, 2020.
9. Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, for the three months ended June 30, 2020, are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation
|
|
Pension and Postretirement Plans
|
|
Total
|
|
Balance at March 31, 2020
|
|
|
|
$
|
(83.8)
|
|
|
$
|
(40.6)
|
|
|
$
|
(124.4)
|
|
|
Other comprehensive income before reclassifications
|
|
|
|
6.4
|
|
|
—
|
|
|
6.4
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
|
|
—
|
|
|
(0.1)
|
|
|
(0.1)
|
|
|
Net current period other comprehensive income (loss)
|
|
|
|
6.4
|
|
|
(0.1)
|
|
|
6.3
|
|
|
Balance at June 30, 2020
|
|
|
|
$
|
(77.4)
|
|
|
$
|
(40.7)
|
|
|
$
|
(118.1)
|
|
The following table summarizes the amounts reclassified from accumulated other comprehensive loss to net income during the three months ended June 30, 2020 and June 30, 2019 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
|
|
|
|
Income Statement Line
|
|
Pension and other postretirement plans
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
|
$
|
(0.1)
|
|
|
$
|
(0.1)
|
|
|
|
|
|
|
Other income (expense), net
|
|
Settlement
|
|
—
|
|
|
0.8
|
|
|
|
|
|
|
Other income (expense), net
|
|
Benefit for income taxes
|
|
—
|
|
|
(0.2)
|
|
|
|
|
|
|
|
|
Total net of tax
|
|
$
|
(0.1)
|
|
|
$
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Inventories
The major classes of inventories are summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
March 31, 2020
|
|
Finished goods
|
$
|
168.9
|
|
|
$
|
145.6
|
|
|
Work in progress
|
41.8
|
|
|
43.7
|
|
|
Purchased components
|
76.3
|
|
|
70.4
|
|
|
Raw materials
|
58.9
|
|
|
54.9
|
|
|
Inventories at First-in, First-Out ("FIFO") cost
|
345.9
|
|
|
314.6
|
|
|
Adjustment to state inventories at Last-in, First-Out ("LIFO") cost
|
2.9
|
|
|
2.9
|
|
|
|
$
|
348.8
|
|
|
$
|
317.5
|
|
11. Goodwill and Intangible Assets
The changes in the net carrying value of goodwill for the three months ended June 30, 2020, by operating segment are presented below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Process & Motion Control
|
|
Water Management
|
|
Consolidated
|
|
Net carrying amount as of March 31, 2020
|
|
$
|
1,121.4
|
|
|
$
|
200.5
|
|
|
$
|
1,321.9
|
|
|
Currency translation adjustments
|
|
0.6
|
|
|
0.3
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments (1)
|
|
—
|
|
|
0.7
|
|
|
0.7
|
|
|
Net carrying amount as of June 30, 2020
|
|
$
|
1,122.0
|
|
|
$
|
201.5
|
|
|
$
|
1,323.5
|
|
____________________
(1) Refer to Note 2, Acquisitions for additional information regarding acquisitions.
The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of June 30, 2020 and March 31, 2020 are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
|
Weighted Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
Patents
|
10 years
|
|
$
|
51.2
|
|
|
$
|
(41.5)
|
|
|
$
|
9.7
|
|
|
Customer relationships (including distribution network)
|
13 years
|
|
748.5
|
|
|
(560.6)
|
|
|
187.9
|
|
|
Tradenames
|
13 years
|
|
42.2
|
|
|
(15.0)
|
|
|
27.2
|
|
|
Intangible assets not subject to amortization - tradenames
|
|
|
280.9
|
|
|
—
|
|
|
280.9
|
|
|
Total intangible assets, net
|
13 years
|
|
$
|
1,122.8
|
|
|
$
|
(617.1)
|
|
|
$
|
505.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
|
|
Weighted Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
Patents
|
10 years
|
|
$
|
51.1
|
|
|
$
|
(41.2)
|
|
|
$
|
9.9
|
|
|
Customer relationships (including distribution network)
|
13 years
|
|
748.0
|
|
|
(552.5)
|
|
|
195.5
|
|
|
Tradenames
|
13 years
|
|
42.1
|
|
|
(14.2)
|
|
|
27.9
|
|
|
Intangible assets not subject to amortization - tradenames
|
|
|
280.9
|
|
|
—
|
|
|
280.9
|
|
|
Total intangible assets, net
|
13 years
|
|
$
|
1,122.1
|
|
|
$
|
(607.9)
|
|
|
$
|
514.2
|
|
Intangible asset amortization expense totaled $9.0 million for the three months ended June 30, 2020. Intangible asset amortization expense totaled $8.7 million for the three months ended June 30, 2019. No intangible assets were acquired during the three months ended June 30, 2020.
The Company expects to recognize amortization expense on the intangible assets subject to amortization of $26.9 million in the nine months ended December 31, 2020 (inclusive of $9.0 million of amortization expense recognized in the three months ended June 30, 2020), $34.4 million in 2021, $18.7 million in 2022, $16.2 million in 2023, $16.1 million in 2024 and $15.1 million in 2025.
12. Other Current Liabilities
Other current liabilities are summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
March 31, 2020
|
|
Contract liabilities
|
|
$
|
6.0
|
|
|
$
|
7.3
|
|
|
Sales rebates
|
|
25.2
|
|
|
35.5
|
|
|
Commissions
|
|
6.9
|
|
|
7.0
|
|
|
Restructuring and other similar charges (1)
|
|
7.5
|
|
|
9.8
|
|
|
Product warranty (2)
|
|
8.0
|
|
|
6.7
|
|
|
Risk management (3)
|
|
10.8
|
|
|
10.4
|
|
|
Legal and environmental
|
|
1.6
|
|
|
1.5
|
|
|
Taxes, other than income taxes
|
|
7.5
|
|
|
8.3
|
|
|
Income tax payable
|
|
17.1
|
|
|
9.9
|
|
|
Interest payable
|
|
1.7
|
|
|
8.3
|
|
|
Current portion of operating lease liability (4)
|
|
12.6
|
|
|
12.8
|
|
|
Other
|
|
13.6
|
|
|
11.0
|
|
|
|
|
$
|
118.5
|
|
|
$
|
128.5
|
|
____________________
(1)See more information related to the restructuring obligations within Note 3, Restructuring and Other Similar Charges.
(2)See more information related to the product warranty obligations within Note 16, Commitments and Contingencies.
(3)Includes projected liabilities related to losses arising from automobile, general and product liability claims.
(4)See more information related to leases within Note 18, Leases.
13. Long-Term Debt
Long-term debt is summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
March 31, 2020
|
|
Term loan (1)
|
|
$
|
621.1
|
|
|
$
|
620.8
|
|
|
4.875% Senior Notes due 2025 (2)
|
|
495.9
|
|
|
495.7
|
|
|
Revolving credit facility (3)
|
|
—
|
|
|
249.2
|
|
|
Securitization facility borrowings (4)
|
|
74.9
|
|
|
74.9
|
|
|
Finance leases and other subsidiary debt (5)
|
|
32.5
|
|
|
32.8
|
|
|
Total
|
|
1,224.4
|
|
|
1,473.4
|
|
|
Less current maturities
|
|
76.4
|
|
|
76.4
|
|
|
Long-term debt
|
|
$
|
1,148.0
|
|
|
$
|
1,397.0
|
|
____________________
(1)Includes unamortized debt issuance costs of $3.9 million and $4.2 million at June 30, 2020 and March 31, 2020, respectively.
(2)Includes unamortized debt issuance costs of $4.1 million and $4.3 million at June 30, 2020 and March 31, 2020, respectively.
(3)Includes unamortized debt issuance costs of $0.0 million and $0.8 million at June 30, 2020 and March 31, 2020, respectively.
(4)Includes unamortized debt issuance costs of $0.1 million and $0.1 million at June 30, 2020 and March 31, 2020, respectively.
(5)See more information related to finance leases within Note 18, Leases.
Senior Secured Credit Facility
At June 30, 2020, the Company’s Third Amended and Restated First Lien Credit Agreement, as amended (the “Credit Agreement”), is funded by a syndicate of banks and other financial institutions and provides for (i) a $725.0 million term loan facility, which was reduced to $625.0 million as a result of a December 2019 voluntary prepayment, and (ii) a $264.0 million revolving credit facility. The term loan facility has a maturity date of August 21, 2024, and there are no required principal payments due or scheduled under the term debt until the maturity date. At June 30, 2020, the borrowings under the Term Loan had a weighted-average effective interest rate of 1.91%. The weighted-average interest rate for borrowings under the Term Loan for the three months ended June 30, 2020, was 2.26%. At June 30, 2020, no amounts were borrowed under the revolving credit facility. As of March 31, 2020, $250.0 million was borrowed under the revolving credit facility. As of and during the three months ended June 30, 2020, borrowings under the revolving credit facility had weighted-average effective interest rates of 4.00%. As of June 30, 2020 and March 31, 2020, $2.7 million and $4.7 million of the revolving credit facility were considered utilized in connection with outstanding letters of credit, respectively.
As of June 30, 2020, the Company was in compliance with all applicable covenants under the Credit Agreement, including compliance with a maximum permitted total net leverage ratio (the Company's sole financial maintenance covenant under the revolving credit facility discussed below) of 6.75 to 1.0. The Company's total net leverage ratio was 2.1 to 1.0 as of June 30, 2020.
4.875% Senior Notes due 2025
On December 7, 2017, the Company issued $500.0 million aggregate principal amount of 4.875% senior notes due 2025 (the “Notes”). The Notes were issued by RBS Global, Inc. and Rexnord LLC (Company subsidiaries; collectively, the “Issuers”) pursuant to an Indenture, dated as of December 7, 2017 (the “Indenture”), by and among the Issuers, the domestic subsidiaries of the Company (with certain exceptions) as guarantors named therein (the “Subsidiary Guarantors”) and Wells Fargo Bank, National Association (the “Trustee”). The Notes are general senior unsecured obligations of the Issuers. Rexnord Corporation separately entered into a Parent Guarantee with the Trustee whereby it guaranteed certain obligations of the Issuers under the Indenture. The Notes pay interest semi-annually on June 15 and December 15.
Accounts Receivable Securitization Program
The Company has an amended accounts receivable securitization facility (the "Securitization") with Wells Fargo & Company ("Wells Fargo"). Pursuant to the agreements evidencing the Securitization, Rexnord Funding LLC ("Rexnord Funding") (a wholly owned bankruptcy-remote special purpose subsidiary) has granted Wells Fargo a security interest in all of its current and future receivables and related assets in exchange for a credit facility permitting borrowings of up to a maximum aggregate amount of $100.0 million outstanding from time to time. Such borrowings are used by Rexnord Funding to finance purchases of accounts receivable. The amount of advances available will be determined based on advance rates relating to the eligibility of the receivables held by Rexnord Funding at that time. Advances bear interest based on LIBOR plus 1.20%. The
last date on which advances may be made is December 30, 2020, unless the maturity of the Securitization is otherwise accelerated. In addition to other customary fees associated with financings of this type, Rexnord Funding pays an unused line fee to Wells Fargo based on any unused portion of the Securitization facility. If the average daily outstanding principal amount during a calendar month is less than 50% of the average daily aggregate commitment in effect during such month, the unused line fee is 0.50% per annum; otherwise, it is 0.375% per annum.
The Securitization constitutes a "Permitted Receivables Financing" under the Credit Agreement and does not qualify for sale accounting under ASC 860, Transfers and Servicing. Any borrowings under the Securitization are accounted for as secured borrowings on the Company's condensed consolidated balance sheets. Financing costs associated with the Securitization are recorded within "Interest expense, net" in the condensed consolidated statements of operations if revolving loans or letters of credit are obtained under the facility.
At June 30, 2020 and March 31, 2020, the Company's total borrowing capacity under the Securitization was $100.0 million, respectively, based on the current accounts receivables balance. As of both June 30, 2020 and March 31, 2020, $75.0 million was borrowed under the Securitization. In addition, $7.7 million and $5.7 million of available borrowing capacity under the Securitization was considered utilized in connection with outstanding letters of credit at June 30, 2020 and March 31, 2020, respectively. As of and during the three months ended June 30, 2020, borrowings under the Securitization had weighted-average effective interest rates of 1.58% and 1.36%, respectively. As of June 30, 2020, the Company was in compliance with all applicable covenants and performance ratios contained in the Securitization. On July 10, 2020, the Company repaid all remaining borrowings under the Securitization.
See Note 11, Long-Term Debt to the audited consolidated financial statements of the Company's March 31, 2020 Annual Report on Form 10-K for further information regarding long-term debt.
14. Derivative Financial Instruments
The Company is exposed to certain financial risks relating to fluctuations in foreign currency exchange rates. The Company currently selectively uses foreign currency forward exchange contracts to manage its foreign currency risk. All hedging transactions are authorized and executed pursuant to defined policies and procedures that prohibit the use of financial instruments for speculative purposes.
Foreign Exchange Contracts
The Company periodically enters into foreign currency forward contracts to mitigate the foreign currency volatility relative to certain intercompany and external cash flows expected to occur. These foreign currency forward contracts were not accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging (“ASC 815”), and as such were marked to market through earnings. The amounts recorded on the condensed consolidated balance sheets and recognized within the condensed consolidated statements of operations related to the Company's foreign currency forward contracts for the three months ended June 30, 2020 and 2019, were not material.
15. Fair Value Measurements
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed assumptions about the assumptions a market participant would use.
In accordance with ASC 820, fair value measurements are classified under the following hierarchy:
•Level 1 - Quoted prices for identical instruments in active markets.
•Level 2 - Quoted prices for similar instruments; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable.
•Level 3 - Model-derived valuations in which one or more inputs or value-drivers are both significant to the fair value measurement and unobservable.
If applicable, the Company uses quoted market prices in active markets to determine fair value, and therefore classifies such measurements within Level 1. In some cases where market prices are not available, the Company makes use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters. These measurements are classified within Level 3 if they use significant unobservable inputs.
Fair Value of Financial Instruments
There were no transfers of assets between levels at June 30, 2020 and March 31, 2020, respectively.
The Company has a nonqualified deferred compensation plan where assets are invested in mutual funds and corporate-owned life insurance contracts held in a rabbi trust, which is restricted for payments to participants of the plan. The Company has elected to use the fair value option for the mutual funds, which are measured using quoted prices of identical instruments in active markets categorized as Level 1. Corporate-owned life insurance contracts are recorded at cash surrender value, which is provided by a third party and reflects the net asset value of the underlying publicly traded mutual funds categorized as Level 2. The deferred compensation assets are classified within other assets on the condensed consolidated balance sheets. Deferred compensation liabilities are measured at fair value based on quoted prices of identical instruments to the investment vehicles selected by the participants categorized as Level 1. Deferred compensation liabilities are classified within other liabilities on the condensed consolidated balance sheets.
The following table provides a summary of the Company's assets and liabilities that were recognized at fair value on a recurring basis as of June 30, 2020 and March 31, 2020 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of June 30, 2020
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Deferred compensation assets
|
|
$
|
2.9
|
|
|
$
|
6.6
|
|
|
$
|
—
|
|
|
$
|
9.5
|
|
|
Deferred compensation liabilities
|
|
9.7
|
|
|
—
|
|
|
—
|
|
|
9.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of March 31, 2020
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Deferred compensation assets
|
|
$
|
1.7
|
|
|
$
|
5.5
|
|
|
$
|
—
|
|
|
$
|
7.2
|
|
|
Deferred compensation liabilities
|
|
7.4
|
|
|
—
|
|
|
—
|
|
|
7.4
|
|
Fair Value of Non-Derivative Financial Instruments
The carrying amounts of cash, receivables, payables and accrued liabilities approximated fair value at June 30, 2020 and March 31, 2020 due to the short-term nature of those instruments. The fair value of long-term debt as of June 30, 2020 and March 31, 2020 was approximately $1,224.1 million and $1,398.1 million, respectively. The fair value is based on quoted market prices for the same instruments.
16. Commitments and Contingencies
Warranties:
The Company offers warranties on the sales of certain products and records an accrual for estimated future claims. Such accruals are based upon historical experience and management's estimate of the level of future claims. The following table presents changes in the Company's product warranty liability (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
Balance at beginning of period
|
|
$
|
6.7
|
|
|
$
|
7.2
|
|
|
|
|
|
|
|
|
Charged to operations
|
|
1.8
|
|
|
0.7
|
|
|
Claims settled
|
|
(0.5)
|
|
|
(0.5)
|
|
|
Balance at end of period
|
|
$
|
8.0
|
|
|
$
|
7.4
|
|
Contingencies:
The Company's subsidiaries are involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business involving, among other things, product liability, commercial, employment, workers' compensation, intellectual property claims and environmental matters. The Company establishes accruals in a manner that is consistent with accounting principles generally accepted in the United States for costs associated with such matters when liability is probable and those costs are capable of being reasonably estimated. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, based upon current information, management believes the eventual outcome of these unresolved legal actions, either individually or in the aggregate, will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.
In connection with its sale, Invensys plc ("Invensys") provided the Company with indemnification against certain contingent liabilities, including certain pre-closing environmental liabilities. The Company believes that, pursuant to such indemnity obligations, Invensys is obligated to defend and indemnify the Company with respect to the matters described below relating to the Ellsworth Industrial Park Site and to various asbestos claims. The indemnity obligations relating to the matters described below are subject, together with indemnity obligations relating to other matters, to an overall dollar cap equal to the purchase price, which is an amount in excess of $900 million. The following paragraphs summarize the most significant actions and proceedings:
•In 2002, Rexnord Industries, LLC ("Rexnord Industries") was named as a potentially responsible party ("PRP"), together with at least ten other companies, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the "Site"), by the United States Environmental Protection Agency ("USEPA"), and the Illinois Environmental Protection Agency ("IEPA"). Rexnord Industries' Downers Grove property is situated within the Ellsworth Industrial Complex. The USEPA and IEPA allege there have been one or more releases or threatened releases of chlorinated solvents and other hazardous substances, pollutants or contaminants, allegedly including but not limited to a release or threatened release on or from the Company's property, at the Site. The relief sought by the USEPA and IEPA includes further investigation and potential remediation of the Site and reimbursement of USEPA's past costs. In early 2020, Rexnord Industries entered into an administrative order with the USEPA to do remediation work on its Downers Grove property. Rexnord Industries' allocated share of past and future costs related to the Site, including for investigation and/or remediation, could be significant. All previously pending property damage and personal injury lawsuits against the Company related to the Site have been settled or dismissed. Pursuant to its indemnity obligation, Invensys continues to defend the Company in known matters related to the Site, including the costs of the remediation work pursuant to the 2020 administrative order, and has paid 100% of the costs to date.
•Multiple lawsuits (with approximately 300 claimants) are pending in state or federal court in numerous jurisdictions relating to alleged personal injuries due to the alleged presence of asbestos in certain brakes and clutches previously manufactured by the Company's Stearns division and/or its predecessor owners. Invensys and FMC, prior owners of the Stearns business, have paid 100% of the costs to date related to the Stearns lawsuits. Similarly, the Company's Prager subsidiary is the subject of claims by multiple claimants alleging personal injuries due to the alleged presence of asbestos in a product allegedly manufactured by Prager. However, all these claims are currently on the Texas Multi-district Litigation inactive docket, and the Company does not believe that they will become active in the future. To date, the Company's insurance providers have paid 100% of the costs related to the Prager asbestos matters. The Company believes that the combination of its insurance coverage and the Invensys indemnity obligations will cover any future costs of these matters.
In connection with the Company's acquisition of The Falk Corporation ("Falk"), Hamilton Sundstrand provided the Company with indemnification against certain products-related asbestos exposure liabilities. The Company believes that, pursuant to such indemnity obligations, Hamilton Sundstrand is obligated to defend and indemnify the Company with respect to the asbestos claims described below, and that, with respect to these claims, such indemnity obligations are not subject to any time or dollar limitations.
The following paragraph summarizes the most significant actions and proceedings for which Hamilton Sundstrand has accepted responsibility:
•Falk, through its successor entity, is a defendant in multiple lawsuits pending in state or federal court in numerous jurisdictions relating to alleged personal injuries due to the alleged presence of asbestos in certain clutches and drives previously manufactured by Falk. There are approximately 100 claimants in these suits. The ultimate outcome of these lawsuits cannot presently be determined. Hamilton Sundstrand is defending the Company in these lawsuits pursuant to its indemnity obligations and has paid 100% of the costs to date.
Certain Water Management subsidiaries are also subject to asbestos litigation. As of June 30, 2020, Zurn and numerous other unrelated companies were defendants in approximately 6,000 asbestos related lawsuits representing approximately 7,000 claims. Plaintiffs' claims allege personal injuries caused by exposure to asbestos used primarily in industrial boilers formerly manufactured by a segment of Zurn. Zurn did not manufacture asbestos or asbestos components. Instead, Zurn purchased them from suppliers. These claims are being handled pursuant to a defense strategy funded by insurers.
As of June 30, 2020, the Company estimates the potential liability for the asbestos-related claims described above as well as the claims expected to be filed in the next ten years to be approximately $50.0 million, of which Zurn expects its insurance carriers to pay approximately $38.0 million in the next ten years on such claims, with the balance of the estimated liability being paid in subsequent years. The $50.0 million was developed based on actuarial studies and represents the projected indemnity payout for current and future claims. There are inherent uncertainties involved in estimating the number of future asbestos claims, future settlement costs, and the effectiveness of defense strategies and settlement initiatives. As a result, actual liability could differ from the estimate described herein and could be substantial. The liability for the asbestos-related claims is recorded in Other liabilities within the condensed consolidated balance sheets.
Management estimates that its available insurance to cover this potential asbestos liability as of June 30, 2020, is in excess of the 10 year estimated exposure, and accordingly, believes that all current claims are covered by insurance.
As of June 30, 2020, the Company had a recorded receivable from its insurance carriers of $50.0 million, which corresponds to the amount of this potential asbestos liability that is covered by available insurance and is currently determined to be probable of recovery. However, there is no assurance the Company's current insurance coverage will ultimately be available or that this asbestos liability will not ultimately exceed the Company's coverage limits. Factors that could cause a decrease in the amount of available coverage or create gaps in coverage include: changes in law governing the policies, potential disputes and settlements with the carriers regarding the scope of coverage, and insolvencies of one or more of the Company's carriers. The receivable for probable asbestos-related recoveries is recorded in Other assets within the condensed consolidated balance sheets.
Certain Company subsidiaries were named as defendants in a number of individual and class action lawsuits in various United States courts claiming damages due to the alleged failure or anticipated failure of Zurn brass fittings on the PEX plumbing systems in homes and other structures. In fiscal 2013, the Company reached a court-approved agreement to settle the liability underlying this litigation. The settlement was designed to resolve, on a national basis, the Company's overall exposure for both known and unknown claims related to the alleged failure or anticipated failure of such fittings, subject to the right of eligible class members to opt-out of the settlement and pursue their claims independently. The settlement utilized a seven year claims fund, which was capped at $20.0 million, and was funded in installments over the seven year period based on claim activity and minimum funding criteria. The seven year filing period expired on April 1, 2020. Any claims after April 1, 2020 are time barred. The Company expects to make payment on any remaining timely filed claims and close out the settlement fund.
17. Retirement Benefits
The components of net periodic benefit cost are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
|
|
|
|
Pension Benefits:
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
|
|
|
|
Interest cost
|
|
4.6
|
|
|
5.6
|
|
|
|
|
|
|
Expected return on plan assets
|
|
(4.6)
|
|
|
(5.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement
|
|
—
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
0.1
|
|
|
$
|
0.8
|
|
|
|
|
|
|
Other Postretirement Benefits:
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
|
|
|
|
Amortization:
|
|
|
|
|
|
|
|
|
|
Prior service credit
|
|
(0.1)
|
|
|
(0.1)
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
|
|
|
The service cost component of net periodic benefits is presented within Cost of sales and Selling, general and administrative expenses in the condensed consolidated statements of operations, while the other components of net periodic benefit cost are presented within Other (expense) income, net.
During the three months ended June 30, 2020 and June 30, 2019, the Company made contributions of $1.0 million and $0.1 million, respectively, to its U.S. qualified pension plan trusts.
During fiscal 2019, the Company offered participants in a domestic defined benefit plan the opportunity to receive a lump sum settlement as part of the termination process for that plan. During the first quarter of fiscal 2020, the obligations associated with the individuals that did not accept the lump sum settlement offer were transferred to an insurance company through the purchase of an annuity. The Company's cash contribution to purchase the annuity contract was $3.9 million.
Following the purchase of the annuity contract, the Company had no remaining obligations to participants of this plan. The termination of this plan resulted in the recognition of $0.8 million non-cash pre-tax losses during the three months ended June 30, 2019.
See Note 16, Retirement Benefits, to the audited consolidated financial statements of the Company's March 31, 2020 Annual Report on Form 10-K for further information regarding retirement benefits.
18. Leases
The Company determines if a contract is (or contains) a lease at inception by evaluating whether the contract conveys the right to control the use of an identified asset. The Company has operating and finance leases primarily associated with real estate, automobiles and manufacturing and office equipment.
The Company has lease agreements that include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of the underlying assets. The term of the Company’s leases generally reflects the non-cancellable period of the lease. Some of the Company’s lease agreements include options to extend or terminate the lease, which are excluded from the minimum lease terms unless the Company is reasonably certain the option will be exercised. Lease expense for operating leases and amortization expense for finance leases is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets and are instead recognized on a straight-line basis over the lease term
Right-of-use (“ROU”) assets and liabilities are recognized in the condensed consolidated balance sheets based on the present value of remaining lease payments over the lease term. Additionally, ROU assets include any lease payments made at or before the lease commencement date, any initial direct costs incurred, and are reduced by lease incentives received. As most of the Company’s leases do not provide an implicit rate, the present value of lease payments is determined using the Company’s incremental borrowing rate at the commencement date of the lease. Lease payments included in the measurement of the lease liabilities are comprised of fixed payments, variable payments that depend on an index or rate, and amounts probable to be paid if an option is reasonably certain to be exercised. Variable lease payments, typically based on usage of the asset or changes in an index or rate, are excluded from the lease liabilities and are recognized in the period in which the obligation for those payments is incurred.
ROU assets and lease liability balances recorded on the condensed consolidated balance sheets are summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases
|
|
Classification
|
|
June 30, 2020
|
|
March 31, 2020
|
|
Assets:
|
|
|
|
|
|
|
|
Operating ROU assets
|
|
Other assets
|
|
$
|
68.8
|
|
|
$
|
71.1
|
|
|
Finance ROU assets
|
|
Property, plant and equipment, net (1)
|
|
27.1
|
|
|
27.3
|
|
|
Total ROU assets
|
|
|
|
$
|
95.9
|
|
|
$
|
98.4
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Operating
|
|
Other current liabilities
|
|
$
|
12.6
|
|
|
$
|
12.8
|
|
|
Finance
|
|
Current maturities of debt
|
|
0.5
|
|
|
0.5
|
|
|
Non-current
|
|
|
|
|
|
|
|
Operating
|
|
Other liabilities
|
|
60.8
|
|
|
63.1
|
|
|
Finance
|
|
Long-term debt
|
|
27.3
|
|
|
27.4
|
|
|
Total lease liabilities
|
|
|
|
$
|
101.2
|
|
|
$
|
103.8
|
|
|
|
|
|
|
|
|
|
____________________
(1)Finance lease assets are recorded net of accumulated amortization of $1.3 million and $1.0 million as of June 30, 2020 and March 31, 2020, respectively.
The components of lease expense reported in the condensed consolidated statements of operations are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
Operating lease expenses (1)
|
|
$
|
4.5
|
|
|
$
|
3.6
|
|
|
Finance lease expenses:
|
|
|
|
|
|
Depreciation of finance ROU assets (1)
|
|
0.3
|
|
|
0.2
|
|
|
Interest on lease liabilities (2)
|
|
0.4
|
|
|
0.3
|
|
|
Total finance lease expense
|
|
0.7
|
|
|
0.5
|
|
|
Variable and short-term lease expense (1)
|
|
1.1
|
|
|
1.2
|
|
|
Total lease expense
|
|
$
|
6.3
|
|
|
$
|
5.3
|
|
____________________
(1)Included in cost of sales and selling, general and administrative expenses.
(2)Included in interest expense, net.
Future minimum lease payments under operating and finance leases as of June 30, 2020 are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ending December 31,
|
|
Operating Leases (1)
|
|
Finance Leases (1)
|
|
2020 (through December 31, 2020)
|
|
$
|
7.4
|
|
|
$
|
1.1
|
|
|
2021
|
|
14.4
|
|
|
2.1
|
|
|
2022
|
|
14.8
|
|
|
2.0
|
|
|
2023
|
|
12.1
|
|
|
2.0
|
|
|
2024
|
|
10.0
|
|
|
2.0
|
|
|
Thereafter
|
|
30.3
|
|
|
45.1
|
|
|
Total future minimum lease payments
|
|
89.0
|
|
|
54.3
|
|
|
Less: Imputed interest
|
|
(15.6)
|
|
|
(26.5)
|
|
|
Total lease liabilities
|
|
$
|
73.4
|
|
|
$
|
27.8
|
|
____________________
(1)Excludes legally binding minimum lease payments for leases signed but not yet commenced.
The weighted-average remaining lease terms and discount rates for leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Lease Term and Discount Rate
|
|
June 30, 2020
|
|
June 30, 2019
|
|
Weighted-average remaining lease terms (years):
|
|
|
|
|
|
Operating leases
|
|
6.6
|
|
5.2
|
|
Finance leases
|
|
27.6
|
|
29.2
|
|
Weighted-average discount rate:
|
|
|
|
|
|
Operating leases
|
|
4.8
|
%
|
|
3.9
|
%
|
|
Finance leases
|
|
5.7
|
%
|
|
5.7
|
%
|
Cash paid for amounts included in the measurement of lease liabilities are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
Operating cash flows from operating leases
|
|
$
|
3.8
|
|
|
$
|
3.6
|
|
|
Operating cash flows from finance leases
|
|
0.4
|
|
|
0.3
|
|
|
Financing cash flows from finance leases
|
|
0.1
|
|
|
0.2
|
|
ROU assets obtained in exchange for lease liabilities are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
Operating leases
|
|
$
|
—
|
|
|
$
|
1.2
|
|
19. Stock-Based Compensation
The Rexnord Corporation Performance Incentive Plan (the "Plan") is utilized to provide performance incentives to the Company's officers, employees, directors and certain others by permitting grants of equity awards (for common stock), as well as performance-based cash awards, to such persons to encourage them to maximize Rexnord's performance and create value for Rexnord's stockholders. For the three months ended June 30, 2020 and June 30, 2019, the Company recognized $13.3 million and $6.9 million, of stock-based compensation expense, respectively.
During the three months ended June 30, 2020, the Company granted the following stock options, restricted stock units, performance stock units and common stock to directors, executive officers, and certain other employees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award Type
|
|
Number of Awards
|
|
Weighted Average Grant-Date Fair Value
|
|
Stock options
|
|
196,902
|
|
|
$
|
7.68
|
|
|
Restricted stock units
|
|
426,921
|
|
|
$
|
25.52
|
|
|
Performance stock units
|
|
547,374
|
|
|
$
|
25.52
|
|
|
Common stock
|
|
66,557
|
|
|
$
|
27.68
|
|
See Note 15, Stock-Based Compensation, to the audited consolidated financial statements of the Company's March 31, 2020 Annual Report on Form 10-K for further information regarding stock-based compensation.
20. Business Segment Information
The Company's results of operations are reported in two business segments, consisting of the Process & Motion Control platform and the Water Management platform. The Process & Motion Control platform designs, manufactures, markets and services a comprehensive range of specified, highly-engineered mechanical components used within complex systems where customers' reliability requirements and costs of failure or downtime are high. The Process & Motion Control portfolio includes motion control products, shaft management products, aerospace components, and related value-added services. Products and services are marketed and sold globally under widely recognized brand names, including Rexnord®, Rex®, Addax®, Euroflex®, Falk®, FlatTop®, Cambridge®, Link-Belt®, Omega®, PSI®, Shafer®, Stearns®, Highfield®, Thomas®, Centa®, and TollokTM. Process & Motion Control products and services are sold into a diverse group of attractive end markets, including food and beverage, aerospace, mining, petrochemical, energy and power generation, cement and aggregates, forest and wood products, agriculture, and general industrial and automation applications. The Water Management platform designs,
procures, manufactures, and markets products that provide and enhance water quality, safety, flow control and conservation. The Water Management product portfolio includes professional grade water control and safety, water distribution and drainage, finish plumbing, and site works products for primarily nonresidential buildings. Products are marketed and sold under widely recognized brand names, including Zurn®, Wilkins®, Green Turtle®, World Dryer®, StainlessDrains.comTM and JUST®. The financial information of the Company's segments is regularly evaluated by the chief operating decision maker in determining resource allocation and assessing performance. Management evaluates the performance of each business segment based on its operating results. The same accounting policies are used throughout the organization. See Note 1, Basis of Presentation and Significant Accounting Policies for further information.
During fiscal 2019, the Company sold its VAG business included within the Water Management platform and in accordance with the authoritative guidance, the operating results of the VAG business are reported as discontinued operations. See Note 4, Discontinued Operations, for further information.
Business Segment Information:
(in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
Process & Motion Control
|
|
$
|
274.4
|
|
|
$
|
330.1
|
|
|
|
|
|
|
Water Management
|
|
174.7
|
|
|
178.2
|
|
|
|
|
|
|
Consolidated net sales
|
|
449.1
|
|
|
508.3
|
|
|
|
|
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
Process & Motion Control
|
|
39.6
|
|
|
55.1
|
|
|
|
|
|
|
Water Management
|
|
40.1
|
|
|
40.0
|
|
|
|
|
|
|
Corporate
|
|
(13.7)
|
|
|
(14.9)
|
|
|
|
|
|
|
Consolidated income from operations
|
|
66.0
|
|
|
80.2
|
|
|
|
|
|
|
Non-operating expense:
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(13.4)
|
|
|
(15.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
0.4
|
|
|
(1.5)
|
|
|
|
|
|
|
Income before income taxes
|
|
53.0
|
|
|
63.2
|
|
|
|
|
|
|
Provision for income taxes
|
|
(17.2)
|
|
|
(14.8)
|
|
|
|
|
|
|
Equity method investment income
|
|
—
|
|
|
0.1
|
|
|
|
|
|
|
Net income from continuing operations
|
|
35.8
|
|
|
48.5
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
—
|
|
|
(1.8)
|
|
|
|
|
|
|
Net income
|
|
35.8
|
|
|
46.7
|
|
|
|
|
|
|
Non-controlling interest income
|
|
0.2
|
|
|
0.2
|
|
|
|
|
|
|
Net income attributable to Rexnord
|
|
35.6
|
|
|
46.5
|
|
|
|
|
|
|
Dividends on preferred stock
|
|
—
|
|
|
(5.8)
|
|
|
|
|
|
|
Net income attributable to Rexnord common stockholders
|
|
$
|
35.6
|
|
|
$
|
40.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
Process & Motion Control
|
|
$
|
14.3
|
|
|
$
|
14.6
|
|
|
|
|
|
|
Water Management
|
|
7.3
|
|
|
6.3
|
|
|
|
|
|
|
Corporate
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
Consolidated
|
|
$
|
21.7
|
|
|
$
|
21.0
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
|
Process & Motion Control
|
|
$
|
7.2
|
|
|
$
|
4.6
|
|
|
|
|
|
|
Water Management
|
|
1.3
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
8.5
|
|
|
$
|
5.9
|
|
|
|
|
|
21. Guarantor Subsidiaries
The following schedules present condensed consolidating financial information as of June 30, 2020 and March 31, 2020, and for the three month periods ended June 30, 2020 and 2019 for (a) Rexnord Corporation, the parent company (the "Parent"); (b) RBS Global, Inc. and its wholly-owned subsidiary Rexnord LLC, which together are co-issuers (the “Issuers”) of the outstanding Notes; (c) on a combined basis, the domestic subsidiaries of the Company, all of which are wholly-owned by the Issuers (collectively, the “Guarantor Subsidiaries”) and guarantors of those Notes; and (d) on a combined basis, the foreign subsidiaries of the Company (collectively, the “Non-Guarantor Subsidiaries”). Separate financial statements of the Guarantor Subsidiaries are not presented because their guarantees of the senior notes and senior subordinated notes are full, unconditional and joint and several, and the Company believes separate financial statements and other disclosures regarding the Guarantor Subsidiaries are not material to investors.
Condensed Consolidating Balance Sheets
June 30, 2020
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
$
|
160.4
|
|
|
$
|
192.7
|
|
|
$
|
—
|
|
|
$
|
353.4
|
|
|
Receivables, net
|
|
—
|
|
|
—
|
|
|
174.8
|
|
|
97.3
|
|
|
—
|
|
|
272.1
|
|
|
Inventories
|
|
—
|
|
|
—
|
|
|
244.6
|
|
|
104.2
|
|
|
—
|
|
|
348.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
—
|
|
|
0.1
|
|
|
17.0
|
|
|
23.9
|
|
|
—
|
|
|
41.0
|
|
|
Total current assets
|
|
—
|
|
|
0.4
|
|
|
596.8
|
|
|
418.1
|
|
|
—
|
|
|
1,015.3
|
|
|
Property, plant and equipment, net
|
|
—
|
|
|
—
|
|
|
253.9
|
|
|
121.7
|
|
|
—
|
|
|
375.6
|
|
|
Intangible assets, net
|
|
—
|
|
|
—
|
|
|
417.5
|
|
|
88.2
|
|
|
—
|
|
|
505.7
|
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
1,044.2
|
|
|
279.3
|
|
|
—
|
|
|
1,323.5
|
|
|
Investment in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer subsidiaries
|
|
1,424.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,424.2)
|
|
|
—
|
|
|
Guarantor subsidiaries
|
|
—
|
|
|
3,449.0
|
|
|
—
|
|
|
—
|
|
|
(3,449.0)
|
|
|
—
|
|
|
Non-guarantor subsidiaries
|
|
—
|
|
|
—
|
|
|
636.1
|
|
|
—
|
|
|
(636.1)
|
|
|
—
|
|
|
Other assets
|
|
—
|
|
|
0.8
|
|
|
87.4
|
|
|
58.9
|
|
|
—
|
|
|
147.1
|
|
|
Total assets
|
|
$
|
1,424.2
|
|
|
$
|
3,450.2
|
|
|
$
|
3,035.9
|
|
|
$
|
966.2
|
|
|
$
|
(5,509.3)
|
|
|
$
|
3,367.2
|
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75.5
|
|
|
$
|
0.9
|
|
|
$
|
—
|
|
|
$
|
76.4
|
|
|
Trade payables
|
|
—
|
|
|
—
|
|
|
100.9
|
|
|
59.2
|
|
|
—
|
|
|
160.1
|
|
|
Compensation and benefits
|
|
—
|
|
|
—
|
|
|
28.3
|
|
|
16.5
|
|
|
—
|
|
|
44.8
|
|
|
Current portion of pension and postretirement benefit obligations
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
1.4
|
|
|
—
|
|
|
3.2
|
|
|
Other current liabilities
|
|
—
|
|
|
1.4
|
|
|
75.1
|
|
|
42.0
|
|
|
—
|
|
|
118.5
|
|
|
Total current liabilities
|
|
—
|
|
|
1.4
|
|
|
281.6
|
|
|
120.0
|
|
|
—
|
|
|
403.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
—
|
|
|
1,117.0
|
|
|
26.9
|
|
|
4.1
|
|
|
—
|
|
|
1,148.0
|
|
|
Note payable to (receivable from) affiliates, net
|
|
69.9
|
|
|
907.6
|
|
|
(1,054.8)
|
|
|
77.3
|
|
|
—
|
|
|
—
|
|
|
Pension and postretirement benefit obligations
|
|
—
|
|
|
—
|
|
|
142.4
|
|
|
47.4
|
|
|
—
|
|
|
189.8
|
|
|
Deferred income taxes
|
|
—
|
|
|
—
|
|
|
100.7
|
|
|
22.7
|
|
|
—
|
|
|
123.4
|
|
|
Other liabilities
|
|
0.6
|
|
|
—
|
|
|
90.1
|
|
|
58.6
|
|
|
—
|
|
|
149.3
|
|
|
Total liabilities
|
|
70.5
|
|
|
2,026.0
|
|
|
(413.1)
|
|
|
330.1
|
|
|
—
|
|
|
2,013.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
1,353.7
|
|
|
1,424.2
|
|
|
3,449.0
|
|
|
636.1
|
|
|
(5,509.3)
|
|
|
1,353.7
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
1,424.2
|
|
|
$
|
3,450.2
|
|
|
$
|
3,035.9
|
|
|
$
|
966.2
|
|
|
$
|
(5,509.3)
|
|
|
$
|
3,367.2
|
|
Condensed Consolidating Balance Sheets
March 31, 2020
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11.0
|
|
|
$
|
0.4
|
|
|
$
|
383.9
|
|
|
$
|
178.1
|
|
|
$
|
—
|
|
|
$
|
573.4
|
|
|
Receivables, net
|
|
—
|
|
|
—
|
|
|
223.5
|
|
|
111.2
|
|
|
—
|
|
|
334.7
|
|
|
Inventories
|
|
—
|
|
|
—
|
|
|
224.8
|
|
|
92.7
|
|
|
—
|
|
|
317.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
—
|
|
|
—
|
|
|
20.5
|
|
|
18.2
|
|
|
—
|
|
|
38.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
11.0
|
|
|
0.4
|
|
|
852.7
|
|
|
400.2
|
|
|
—
|
|
|
1,264.3
|
|
|
Property, plant and equipment, net
|
|
—
|
|
|
—
|
|
|
256.1
|
|
|
122.7
|
|
|
—
|
|
|
378.8
|
|
|
Intangible assets, net
|
|
—
|
|
|
—
|
|
|
424.8
|
|
|
89.4
|
|
|
—
|
|
|
514.2
|
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
1,043.6
|
|
|
278.3
|
|
|
—
|
|
|
1,321.9
|
|
|
Investment in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer subsidiaries
|
|
1,381.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,381.1)
|
|
|
—
|
|
|
Guarantor subsidiaries
|
|
—
|
|
|
3,324.9
|
|
|
—
|
|
|
—
|
|
|
(3,324.9)
|
|
|
—
|
|
|
Non-guarantor subsidiaries
|
|
—
|
|
|
—
|
|
|
621.1
|
|
|
—
|
|
|
(621.1)
|
|
|
—
|
|
|
Other assets
|
|
—
|
|
|
—
|
|
|
88.7
|
|
|
59.2
|
|
|
—
|
|
|
147.9
|
|
|
Total assets
|
|
$
|
1,392.1
|
|
|
$
|
3,325.3
|
|
|
$
|
3,287.0
|
|
|
$
|
949.8
|
|
|
$
|
(5,327.1)
|
|
|
$
|
3,627.1
|
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75.4
|
|
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
76.4
|
|
|
Trade payables
|
|
—
|
|
|
—
|
|
|
123.9
|
|
|
61.7
|
|
|
—
|
|
|
185.6
|
|
|
Compensation and benefits
|
|
—
|
|
|
—
|
|
|
42.4
|
|
|
19.4
|
|
|
—
|
|
|
61.8
|
|
|
Current portion of pension and postretirement benefit obligations
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
1.4
|
|
|
—
|
|
|
3.2
|
|
|
Other current liabilities
|
|
—
|
|
|
7.9
|
|
|
79.9
|
|
|
40.7
|
|
|
—
|
|
|
128.5
|
|
|
Total current liabilities
|
|
—
|
|
|
7.9
|
|
|
323.4
|
|
|
124.2
|
|
|
—
|
|
|
455.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
—
|
|
|
1,290.9
|
|
|
101.8
|
|
|
4.3
|
|
|
—
|
|
|
1,397.0
|
|
|
Note payable to (receivable from), net
|
|
77.9
|
|
|
645.4
|
|
|
(795.9)
|
|
|
72.6
|
|
|
—
|
|
|
—
|
|
|
Pension and postretirement benefit obligations
|
|
—
|
|
|
—
|
|
|
142.8
|
|
|
46.8
|
|
|
—
|
|
|
189.6
|
|
|
Deferred income taxes
|
|
—
|
|
|
—
|
|
|
98.6
|
|
|
22.4
|
|
|
—
|
|
|
121.0
|
|
|
Other liabilities
|
|
0.5
|
|
|
—
|
|
|
91.4
|
|
|
58.4
|
|
|
—
|
|
|
150.3
|
|
|
Total liabilities
|
|
78.4
|
|
|
1,944.2
|
|
|
(37.9)
|
|
|
328.7
|
|
|
—
|
|
|
2,313.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
1,313.7
|
|
|
1,381.1
|
|
|
3,324.9
|
|
|
621.1
|
|
|
(5,327.1)
|
|
|
1,313.7
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
1,392.1
|
|
|
$
|
3,325.3
|
|
|
$
|
3,287.0
|
|
|
$
|
949.8
|
|
|
$
|
(5,327.1)
|
|
|
$
|
3,627.1
|
|
Condensed Consolidating Statements of Operations
For the Three Months Ended June 30, 2020
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
341.6
|
|
|
$
|
141.9
|
|
|
$
|
(34.4)
|
|
|
$
|
449.1
|
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
204.6
|
|
|
102.0
|
|
|
(34.4)
|
|
|
272.2
|
|
|
Gross profit
|
—
|
|
|
—
|
|
|
137.0
|
|
|
39.9
|
|
|
—
|
|
|
176.9
|
|
|
Selling, general and administrative expenses
|
—
|
|
|
—
|
|
|
77.9
|
|
|
22.3
|
|
|
—
|
|
|
100.2
|
|
|
Restructuring and other similar charges
|
—
|
|
|
—
|
|
|
2.3
|
|
|
(0.6)
|
|
|
—
|
|
|
1.7
|
|
|
Amortization of intangible assets
|
—
|
|
|
—
|
|
|
7.4
|
|
|
1.6
|
|
|
—
|
|
|
9.0
|
|
|
Income from operations
|
—
|
|
|
—
|
|
|
49.4
|
|
|
16.6
|
|
|
—
|
|
|
66.0
|
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
To third parties
|
—
|
|
|
(12.8)
|
|
|
(0.7)
|
|
|
0.1
|
|
|
—
|
|
|
(13.4)
|
|
|
To affiliates
|
9.6
|
|
|
5.8
|
|
|
(14.9)
|
|
|
(0.5)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
—
|
|
|
(0.1)
|
|
|
0.2
|
|
|
0.3
|
|
|
—
|
|
|
0.4
|
|
|
Income (loss) before income taxes
|
9.6
|
|
|
(7.1)
|
|
|
34.0
|
|
|
16.5
|
|
|
—
|
|
|
53.0
|
|
|
Provision for income taxes
|
—
|
|
|
—
|
|
|
(10.4)
|
|
|
(6.8)
|
|
|
—
|
|
|
(17.2)
|
|
|
Equity method investment income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Income (loss) before equity in earnings of subsidiaries
|
9.6
|
|
|
(7.1)
|
|
|
23.6
|
|
|
9.7
|
|
|
—
|
|
|
35.8
|
|
|
Equity in income of subsidiaries
|
26.2
|
|
|
33.3
|
|
|
9.7
|
|
|
—
|
|
|
(69.2)
|
|
|
—
|
|
|
Net income from continuing operations
|
35.8
|
|
|
26.2
|
|
|
33.3
|
|
|
9.7
|
|
|
(69.2)
|
|
|
35.8
|
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net income
|
35.8
|
|
|
26.2
|
|
|
33.3
|
|
|
9.7
|
|
|
(69.2)
|
|
|
35.8
|
|
|
Non-controlling interest income
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
Net income attributable to Rexnord
|
35.8
|
|
|
26.2
|
|
|
33.3
|
|
|
9.5
|
|
|
(69.2)
|
|
|
35.6
|
|
|
Dividends on preferred stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net income attributable to Rexnord common stockholders
|
$
|
35.8
|
|
|
$
|
26.2
|
|
|
$
|
33.3
|
|
|
$
|
9.5
|
|
|
$
|
(69.2)
|
|
|
$
|
35.6
|
|
|
Comprehensive income
|
$
|
35.8
|
|
|
$
|
27.2
|
|
|
$
|
33.4
|
|
|
$
|
14.9
|
|
|
$
|
(69.2)
|
|
|
$
|
42.1
|
|
Condensed Consolidating Statements of Operations
For the Three Months Ended June 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
391.7
|
|
|
$
|
161.3
|
|
|
$
|
(44.7)
|
|
|
$
|
508.3
|
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
238.0
|
|
|
113.4
|
|
|
(44.7)
|
|
|
306.7
|
|
|
Gross profit
|
—
|
|
|
—
|
|
|
153.7
|
|
|
47.9
|
|
|
—
|
|
|
201.6
|
|
|
Selling, general and administrative expenses
|
—
|
|
|
—
|
|
|
82.6
|
|
|
26.9
|
|
|
—
|
|
|
109.5
|
|
|
Restructuring and other similar charges
|
—
|
|
|
—
|
|
|
2.5
|
|
|
0.7
|
|
|
—
|
|
|
3.2
|
|
|
Amortization of intangible assets
|
—
|
|
|
—
|
|
|
6.9
|
|
|
1.8
|
|
|
—
|
|
|
8.7
|
|
|
Income from operations
|
—
|
|
|
—
|
|
|
61.7
|
|
|
18.5
|
|
|
—
|
|
|
80.2
|
|
|
Non-operating (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
To third parties
|
—
|
|
|
(15.3)
|
|
|
(0.5)
|
|
|
0.3
|
|
|
—
|
|
|
(15.5)
|
|
|
To affiliates
|
0.3
|
|
|
8.7
|
|
|
(7.0)
|
|
|
(2.0)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
—
|
|
|
(0.1)
|
|
|
(0.7)
|
|
|
(0.7)
|
|
|
—
|
|
|
(1.5)
|
|
|
Income (loss) before income taxes
|
0.3
|
|
|
(6.7)
|
|
|
53.5
|
|
|
16.1
|
|
|
—
|
|
|
63.2
|
|
|
Provision for income taxes
|
—
|
|
|
—
|
|
|
(9.5)
|
|
|
(5.3)
|
|
|
—
|
|
|
(14.8)
|
|
|
Equity method investment income
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
Income (loss) before equity in earnings of subsidiaries
|
0.3
|
|
|
(6.7)
|
|
|
44.0
|
|
|
10.9
|
|
|
—
|
|
|
48.5
|
|
|
Equity in income of subsidiaries
|
46.5
|
|
|
53.2
|
|
|
9.2
|
|
|
—
|
|
|
(108.9)
|
|
|
—
|
|
|
Net income from continuing operations
|
46.8
|
|
|
46.5
|
|
|
53.2
|
|
|
10.9
|
|
|
(108.9)
|
|
|
48.5
|
|
|
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.8)
|
|
|
—
|
|
|
(1.8)
|
|
|
Net income
|
46.8
|
|
|
46.5
|
|
|
53.2
|
|
|
9.1
|
|
|
(108.9)
|
|
|
46.7
|
|
|
Non-controlling interest income
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
Net income attributable to Rexnord
|
46.8
|
|
|
46.5
|
|
|
53.2
|
|
|
8.9
|
|
|
(108.9)
|
|
|
46.5
|
|
|
Dividends on preferred stock
|
(5.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.8)
|
|
|
Net income attributable to Rexnord common stockholders
|
$
|
41.0
|
|
|
$
|
46.5
|
|
|
$
|
53.2
|
|
|
$
|
8.9
|
|
|
$
|
(108.9)
|
|
|
$
|
40.7
|
|
|
Comprehensive income
|
$
|
46.8
|
|
|
$
|
47.8
|
|
|
$
|
54.0
|
|
|
$
|
7.0
|
|
|
$
|
(108.9)
|
|
|
$
|
46.7
|
|
Condensed Consolidating Statements of Cash Flows
For the Three Months Ended June 30, 2020
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used for) operating activities
|
|
$
|
1.7
|
|
|
$
|
250.0
|
|
|
$
|
(217.5)
|
|
|
$
|
13.4
|
|
|
$
|
—
|
|
|
$
|
47.6
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
—
|
|
|
—
|
|
|
(6.0)
|
|
|
(2.5)
|
|
|
—
|
|
|
(8.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from dispositions of long-lived assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used for investing activities
|
|
—
|
|
|
—
|
|
|
(6.0)
|
|
|
(1.6)
|
|
|
—
|
|
|
(7.6)
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt
|
|
—
|
|
|
(250.0)
|
|
|
(0.1)
|
|
|
(0.2)
|
|
|
—
|
|
|
(250.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
6.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.3
|
|
|
Taxes withheld and paid on employees' share-based payment awards
|
|
(9.4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of common stock dividend
|
|
(9.6)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used for financing activities
|
|
(12.7)
|
|
|
(250.0)
|
|
|
(0.1)
|
|
|
(0.2)
|
|
|
—
|
|
|
(263.0)
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.0
|
|
|
—
|
|
|
3.0
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
(11.0)
|
|
|
—
|
|
|
(223.6)
|
|
|
14.6
|
|
|
—
|
|
|
(220.0)
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
11.0
|
|
|
0.3
|
|
|
384.0
|
|
|
178.1
|
|
|
—
|
|
|
573.4
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
$
|
160.4
|
|
|
$
|
192.7
|
|
|
$
|
—
|
|
|
$
|
353.4
|
|
Condensed Consolidating Statements of Cash Flows
For the Three Months Ended June 30, 2019
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used for) operating activities
|
|
$
|
5.9
|
|
|
$
|
0.6
|
|
|
$
|
(10.7)
|
|
|
$
|
23.2
|
|
|
$
|
—
|
|
|
$
|
19.0
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
—
|
|
|
—
|
|
|
(4.8)
|
|
|
(1.1)
|
|
|
—
|
|
|
(5.9)
|
|
|
Acquisitions, net of cash acquired
|
|
—
|
|
|
—
|
|
|
(24.8)
|
|
|
—
|
|
|
—
|
|
|
(24.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from dispositions of long-lived assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used for) provided by investing activities
|
|
—
|
|
|
—
|
|
|
(29.6)
|
|
|
0.2
|
|
|
—
|
|
|
(29.4)
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.9)
|
|
|
—
|
|
|
(3.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
4.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.8
|
|
|
Taxes withheld and paid on employees' share-based payment awards
|
|
(5.7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.7)
|
|
|
Payments of preferred stock dividends
|
|
(5.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.8)
|
|
|
Cash used for by financing activities
|
|
(6.7)
|
|
|
—
|
|
|
—
|
|
|
(3.9)
|
|
|
—
|
|
|
(10.6)
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
(0.8)
|
|
|
0.6
|
|
|
(40.3)
|
|
|
19.8
|
|
|
—
|
|
|
(20.7)
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
1.4
|
|
|
0.2
|
|
|
107.7
|
|
|
183.2
|
|
|
—
|
|
|
292.5
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
0.6
|
|
|
$
|
0.8
|
|
|
$
|
67.4
|
|
|
$
|
203.0
|
|
|
$
|
—
|
|
|
$
|
271.8
|
|
22. Subsequent Events
On July 23, 2020, the Company's Board of Directors declared a quarterly cash dividend on the Company's common stock of $0.08 per-share to be paid on September 8, 2020, to stockholders of record as of August 20, 2020.
