Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q
(Mark one) 
   
 x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended December 31, 2017June 30, 2019
 o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
Commission File Number:001-35475

REXNORD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 20-5197013
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
   
247511 W. Freshwater Way Suite 300, Milwaukee, WI 53204
Milwaukee,Wisconsin(Zip Code)
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (414) (414) 643-3739

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock $.01 par valueRXNThe New York Stock Exchange
Depository Shares, each representing a 1/20th interest in a share of 5.75% Series A Mandatory Convertible Preferred Stock, $.01 par valueRXN.PRAThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yesx☒    No   o☐

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx☒ No o

☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filerx☒Accelerated filero☐
    
Non-accelerated filero☐Smaller reporting companyo☐
    
  Emerging growth companyo☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  o☐   No   x

☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 
Class Outstanding at JanuaryJuly 26, 20182019
Rexnord Corporation Common Stock, $0.01 par value per share 103,978,699105,864,497 shares

TABLE OF CONTENTS
 
   
  
Part I FINANCIAL INFORMATION
 
   
Item 1.
Financial Statements
4
   
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
3937
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
4745
   
Item 4.
Controls and Procedures
4746
  
Part II OTHER INFORMATION
 
   
Item 1.
Legal Proceedings
4847
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
4847
   
Item 6.
Exhibits
4847
  
Signatures
4948
 



Private Securities Litigation Reform Act Safe Harbor Statement
 
Our disclosure and analysis in this report concerning our operations, cash flows and financial position, including, in particular, the likelihood of our success in developing and expanding our business and the realization of sales from our backlog, include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar expressions are forward-looking statements. Although these statements are based upon reasonable assumptions, including projections of orders, sales, operating margins, earnings, cash flows, research and development costs, working capital and capital expenditures, they are subject to risks and uncertainties that are described more fully herein and in our Annual Report on Form 10-K for the year ended March 31, 2017,2019 in Part I, Item 1A, “Risk Factors” and in Part I under the heading "Cautionary Notice Regarding Forward-Looking Statements." Accordingly, we can give no assurance that we will achieve the results anticipated or implied by our forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.


General


Our fiscal year is the year ending March 31 of the corresponding calendar year. For example, our fiscal year 2018,2020, or fiscal 2018,2020, means the period from April 1, 20172019 to March 31, 2018,2020, and the thirdfirst quarter of fiscal 20182020 and 20172019 means the fiscal quarters ended December 31, 2017June 30, 2019 and December 31, 2016,June 30, 2018, respectively.



PART I - FINANCIAL INFORMATION


ITEM  1.FINANCIAL STATEMENTS


Rexnord Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in Millions, except share amounts)
(Unaudited)
 December 31, 2017 March 31, 2017 June 30, 2019 March 31, 2019
Assets        
Current assets:        
Cash and cash equivalents $234.8
 $490.1
 $271.8
 $292.5
Receivables, net 313.1
 322.9
 307.4
 334.3
Inventories 349.9
 314.9
 351.3
 316.5
Other current assets 57.1
 50.2
 38.9
 39.6
Total current assets 954.9
 1,178.1
 969.4
 982.9
Property, plant and equipment, net 389.3
 400.9
 382.6
 383.0
Intangible assets, net 567.9
 558.6
 510.3
 511.5
Goodwill 1,353.8
 1,318.2
 1,311.9
 1,299.7
Other assets 84.1
 83.5
 126.8
 82.6
Total assets $3,350.0
 $3,539.3
 $3,301.0
 $3,259.7
Liabilities and stockholders' equity        
Current liabilities:        
Current maturities of debt $0.2
 $16.5
 $1.4
 $1.2
Trade payables 199.6
 197.8
 179.9
 191.7
Compensation and benefits 52.4
 54.3
 40.3
 63.7
Current portion of pension and postretirement benefit obligations 4.4
 4.3
 3.3
 3.3
Other current liabilities 126.7
 127.4
 129.4
 137.1
Total current liabilities 383.3
 400.3
 354.3
 397.0

        
Long-term debt 1,322.9
 1,606.2
 1,263.5
 1,236.8
Pension and postretirement benefit obligations 170.9
 174.4
 153.7
 158.0
Deferred income taxes 146.2
 208.8
 129.6
 125.9
Other liabilities 72.6
 79.0
 122.0
 111.0
Total liabilities 2,095.9
 2,468.7
 2,023.1
 2,028.7

        
Stockholders' equity:        
Preferred stock, $0.01 par value; 10,000,000 shares authorized; shares of 5.75% Series A Mandatory Convertible Preferred Stock issued and outstanding: 402,500 at December 31, 2017 and March 31, 2017 —
 —
Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued and outstanding: 103,934,204 at December 31, 2017 and 103,600,540 at March 31, 2017 1.0
 1.0
Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued and outstanding: 105,813,457 at June 30, 2019 and 104,842,299 at March 31, 2019 1.0
 1.0
Preferred stock, $0.01 par value; 10,000,000 shares authorized; shares of 5.75% Series A Mandatory Convertible Preferred Stock issued and outstanding: 402,500 at June 30, 2019 and March 31, 2019 0.0
 0.0
Additional paid-in capital 1,270.1
 1,262.1
 1,299.5
 1,293.5
Retained earnings (deficit) 75.8
 (55.5)
Retained earnings 71.4
 30.7
Accumulated other comprehensive loss (92.8) (137.0) (96.6) (96.6)
Total Rexnord stockholders' equity 1,275.3
 1,228.6
Non-controlling interest 2.6
 2.4
Total stockholders' equity 1,254.1
 1,070.6
 1,277.9
 1,231.0
Total liabilities and stockholders' equity $3,350.0
 $3,539.3
 $3,301.0
 $3,259.7
See notes to the condensed consolidated financial statements.

Rexnord Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(in Millions, except share and per share amounts)
(Unaudited)
 Third Quarter Ended Nine Months Ended First Quarter Ended
 December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 June 30, 2019 June 30, 2018
Net sales $492.3
 $451.8
 $1,490.8
 $1,414.6
 $508.3
 $503.6
Cost of sales 309.4
 298.8
 943.6
 922.2
 306.7
 308.1
Gross profit 182.9
 153.0
 547.2
 492.4
 201.6
 195.5
Selling, general and administrative expenses 107.3
 99.9
 326.6
 313.1
 109.5
 111.8
Restructuring and other similar charges 3.8
 11.7
 11.6
 21.7
 3.2
 3.1
Amortization of intangible assets 8.6
 8.6
 24.8
 33.7
 8.7
 8.5
Income from operations 63.2
 32.8
 184.2
 123.9
 80.2
 72.1
Non-operating expense:            
Interest expense, net (18.7) (22.9) (58.9) (69.4) (15.5) (18.6)
Loss on the extinguishment of debt (11.9) (7.8) (11.9) (7.8)
Other expense, net (1.0) (0.7) (2.5) (3.3)
Other (expense) income, net (1.5) 1.7
Income before income taxes 31.6
 1.4
 110.9
 43.4
 63.2
 55.2
Benefit for income taxes (50.0) (1.8) (27.0) (3.3)
Net income 81.6
 3.2
 137.9
 46.7
Provision for income taxes (14.8) (14.5)
Equity method investment income 0.1
 1.5
Net income from continuing operations 48.5
 42.2
Loss from discontinued operations, net of tax (1.8) (42.8)
Net income (loss) 46.7
 (0.6)
Non-controlling interest income 0.2
 0.1
Net income (loss) attributable to Rexnord 46.5
 (0.7)
Dividends on preferred stock (5.8) (1.5) (17.4) (1.5) (5.8) (5.8)
Net income attributable to Rexnord common stockholders $75.8
 $1.7
 $120.5
 $45.2
Net income (loss) attributable to Rexnord common stockholders $40.7
 $(6.5)
            
Net income per share attributable to Rexnord common stockholders:      
Basic $0.73
 $0.02
 $1.16
 $0.44
Diluted $0.67
 $0.02
 $1.13
 $0.43
Basic net income (loss) per share attributable to Rexnord common stockholders:    
Continuing operations $0.40
 $0.35
Discontinued operations $(0.02) $(0.41)
Net income (loss) $0.39
 $(0.06)
Diluted net income (loss) per share attributable to Rexnord common stockholders:    
Continuing operations $0.39
 $0.34
Discontinued operations $(0.01) $(0.40)
Net income (loss) $0.38
 $(0.06)
Weighted-average number of shares outstanding (in thousands):Weighted-average number of shares outstanding (in thousands):      Weighted-average number of shares outstanding (in thousands):  
Basic 103,964
 103,113
 103,824
 102,514
 105,262
 104,338
Effect of dilutive equity securities 18,402
 2,804
Diluted 122,017
 104,558
 122,363
 104,481
 123,664
 107,142

See notes to the condensed consolidated financial statements.


Rexnord Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in Millions)
(Unaudited)
  Third Quarter Ended Nine Months Ended
  December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Net income $81.6
 $3.2
 $137.9
 $46.7
Other comprehensive income:        
Foreign currency translation adjustments 7.5
 (33.5) 41.6
 (33.4)
Change in unrealized losses on interest rate derivatives, net of tax 0.7
 3.3
 3.6
 5.6
Change in pension and postretirement defined benefit plans, net of tax (0.4) (0.3) (1.0) (0.9)
Other comprehensive income (loss), net of tax 7.8
 (30.5) 44.2
 (28.7)
Total comprehensive income (loss) $89.4
 $(27.3) $182.1
 $18.0
  First Quarter Ended
  June 30, 2019 June 30, 2018
Net income (loss) attributable to Rexnord $46.5
 $(0.7)
Other comprehensive loss:    
Foreign currency translation adjustments (0.5) (35.7)
Net change in unrealized losses on interest rate derivatives, net of tax —
 2.0
Change in pension and postretirement defined benefit plans, net of tax 0.5
 (0.2)
Other comprehensive loss, net of tax —
 (33.9)
Non-controlling interest income 0.2
 0.1
Total comprehensive income (loss) $46.7
 $(34.5)


See notes to the condensed consolidated financial statements.

Rexnord Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in Millions)
(Unaudited)
 Nine Months Ended Three Months Ended
 December 31, 2017 December 31, 2016 June 30, 2019 June 30, 2018
Operating activities        
Net income $137.9
 $46.7
Net income (loss) $46.7
 $(0.6)
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation 40.5
 45.4
 12.3
 15.8
Amortization of intangible assets 24.8
 33.7
 8.7
 8.8
Amortization of deferred financing costs 1.4
 1.9
Loss on the extinguishment of debt 11.9
 7.8
Non-cash asset impairment —
 1.6
 —
 44.0
Loss on dispositions of long-lived assets 0.4
 0.2
Deferred income taxes (76.2) (15.9) 3.6
 (8.2)
Other non-cash charges 3.0
 (3.3) 0.8
 3.6
Stock-based compensation expense 15.9
 9.8
 6.9
 6.0
Changes in operating assets and liabilities: 
 
 
 
Receivables 11.3
 33.1
 12.5
 3.2
Inventories (26.0) (5.1) (33.5) (40.7)
Other assets (6.3) (7.2) (0.2) 0.4
Accounts payable (5.8) (21.4) (12.1) (2.1)
Accruals and other (10.9) (5.2) (26.7) (14.0)
Cash provided by operating activities 121.9
 122.1
 19.0
 16.2
        
Investing activities        
Expenditures for property, plant and equipment (25.1) (44.0) (5.9) (11.1)
Acquisitions, net of cash acquired (50.0) (213.7) (24.8) —
Proceeds from dispositions of long-lived assets 5.5
 1.9
 1.3
��3.5
Cash used for investing activities (69.6) (255.8) (29.4) (7.6)
        
Financing activities        
Proceeds from borrowings of long-term debt 1,325.0
 1,590.3
Repayments of long-term debt (1,603.2) (1,881.8)
Proceeds from borrowings of short-term debt —
 16.1
Repayments of short-term debt (24.3) (19.5)
Payment of debt issuance costs (9.0) (10.6)
Proceeds from borrowings of debt —
 110.7
Repayments of debt (3.9) (127.1)
Proceeds from exercise of stock options 2.9
 9.6
 4.8
 2.9
Proceeds from financing lease obligations 5.8
 —
Deferred acquisition payment —
 (5.7)
Proceeds from issuance of preferred stock, net of direct offering costs —
 390.2
Payments of dividend on preferred stock (17.4) —
Cash (used for) provided by financing activities (320.2) 88.6
Taxes withheld and paid on employees' share-based payment awards (5.7) (0.4)
Payments of preferred stock dividends (5.8) (5.8)
Cash used for financing activities (10.6) (19.7)
Effect of exchange rate changes on cash and cash equivalents 12.6
 (10.2) 0.3
 (9.2)
Decrease in cash and cash equivalents (255.3) (55.3) (20.7) (20.3)
Cash and cash equivalents at beginning of period 490.1
 484.6
Cash and cash equivalents at end of period $234.8
 $429.3
Cash, cash equivalents and restricted cash at beginning of period 292.5
 217.6
Cash, cash equivalents and restricted cash at end of period $271.8
 $197.3


See notes to the condensed consolidated financial statements.

Rexnord Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 2017June 30, 2019
(Unaudited)


1. Basis of Presentation and Significant Accounting Policies


The unaudited condensed consolidated financial statements included herein have been prepared by Rexnord Corporation ("Rexnord"(“Rexnord” or the "Company"“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. Results for the interim periods are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2018.2020. 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 fiscal 20172019 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 ourthe 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 and flow control products for water and wastewater treatment infrastructure markets.buildings.
Recent Accounting Pronouncements
In August 2017,2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 the Company in fiscal 2021 on a retroactive basis. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements upon adoption.    
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), which modifies the disclosure requirements in ASC 820, Fair Value Measurement ("ASC 820"). The Company adopted this ASU on April 1, 2019. There was no impact to the Company's condensed consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU was issued following the enactment of the U.S. Tax Cuts and Jobs Act of 2017 ("Tax Act") and permits entities to elect a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The Company adopted the standard effective April 1, 2019, and did not reclassify tax effects stranded in accumulated other comprehensive loss. As such, there is no impact on the Company’s condensed consolidated financial position, results of operations, and cash flows as a result of the adoption of the ASU.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"), which expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ASU 2017-12 is effective for the beginning of the Company's fiscal 2020, with early adoption permitted, and must be applied prospectively. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements upon adoption.    
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). The amendments in ASU 2017-04 allow companies to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for the beginning of the Company's fiscal 2021, with early adoption permitted, and must be applied prospectively. The Company is currently evaluating the timing of adoption; however, it does not believe the adoption of ASU 2017-04 will have a material impact on the Company's consolidated financial statements.
In February 2015, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02''), which requires lessees to recognize lease assets and lease liabilities for all leases on the balance sheets. ASU 2016-02 is effective beginning for the Company's fiscal 2020 and interim periods included therein on a modified retrospective basis. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements upon adoption.    

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"). ASU 2015-11 requires inventory to be measured at the lower of cost and net realizable value, which is defined as the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. Under existing guidance, net realizable value is one of several calculations needed to measure inventory at lower of cost or market and as such, the new guidance reduces the complexity in measurement.statements. The Company adopted this ASU No. 2015-11 prospectively effectiveon April 1, 2017 and there2019. There was no impact to the Company's condensed consolidated financial statements.
In March 2017,February 2016, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits2016-02, Leases (Topic 715)842). In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU 2018-11, Leases (Topic 842): ImprovingTargeted Improvements, which addressed implementation issues related to the Presentationnew lease standard. These and certain other lease-related ASUs have generally been codified in Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”). ASC 842 supersedes the lease accounting requirements in ASC 840, Leases (“ASC 840”). ASC 842 establishes a right-of-use model that requires a lessee to record a right-of-use (“ROU”) asset and a lease liability on the balance sheet for all leases. Under ASC 842, leases are classified as either finance or operating, with classification affecting the pattern of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,which changes how employers that sponsor defined benefit pension or other postretirement benefit plans present the net periodic benefit costexpense recognition in the income statement. The new guidancestandard also requires disclosures around the service cost componentamount, timing and uncertainty of net periodic benefit costcash flows arising from leases. The Company adopted ASC 842 effective April 1, 2019, using a modified retrospective approach. Prior period financial statements continue to be presented under ASC 840 based on the accounting standards originally in effect for such periods.
The Company elected certain practical expedients permitted under the transition guidance within ASC 842 to leases that commenced before April 1, 2019, including the package of practical expedients that resulted in the same income statement line item(s) as other employee compensationCompany not reassessing its prior conclusions under ASC 840 related to lease identification, lease terms, lease classification and initial direct costs arising from services rendered duringfor expired and existing leases prior to April 1, 2019, and therefore there was no adjustment to the period with only the service cost component eligible for capitalization in assets. Other componentsopening balance of the net periodic benefit cost are to be stated separately from the line item(s) that includes the service cost and outside of operating income. The standard is required to be adopted for annual periods beginning after December 15, 2017, including interim periods within that annual period, which is the Company's fiscal year 2019. The amendment is to be applied retrospectively.retained earnings. The Company is currently evaluatingalso elected the impact this guidance will have on its consolidated financial statements upon adoption.practical expedient to combine lease and non-lease components for all asset classes, and has made a policy election not to capitalize leases with an initial term of 12 months or less.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), now referred to as Accounting Standards Codification ("ASC") Topic 606 ("ASC 606"), in order to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The guidance specifies revenue should be recognized in an amount that reflects the consideration the company expects to be entitled to in exchange for the transfer of promised goods or services to customers. The guidance provides a five-step process that entities should follow in order to achieve that core principal. ASC 606 will be effective forUpon adoption, the Company onrecognized ROU assets and lease liabilities of approximately $70.8 million and $73.0 million, respectively, as of April 1, 2018. Companies can use either a full retrospective or modified retrospective method to adopt the standard. Under the full retrospective method, the requirements2019. Adoption of the new standard are applieddid not have a significant impact on the Company’s consolidated results of operations or cash flows. See Note 18, Leases for additional information.
Reclassifications
Certain prior year amounts have been reclassified to contracts for each prior reporting period presented and the cumulative effect of applying the standard is recognized in the earliest period presented. Under the modified retrospective method, prior periods are not updated to be presented on an accounting basis that is consistent with information for fiscal 2019. Rather, a cumulative adjustment for the effects of applying the new standard to periods prior to fiscal 2019 is recorded to retained earnings as of April 1, 2018. The Company expects to adopt the new standard using the modified retrospective approach.
The Company is assessing the impact of the new revenue standard on its consolidated financial statements by reviewing its current accounting policies and practices, including detailed reviews of customer contracts, to identify potential differences that would result from applying the requirements of the new standard to its revenue contracts. In addition, ASC 606 will require more comprehensive disclosures about revenue streams and contracts with customers. The Company is currently evaluating potential changes to its processes, information systems and internal controls relatedconform to the preparation of disclosures required under ASC 606. The Company will provide additional disclosure as its ongoing assessment progresses.fiscal 2020 presentation.


2. Acquisitions
Fiscal Year 2018 Acquisitions2020
On October 4, 2017,May 10, 2019, the Company acquired World Dryersubstantially all of the assets of East Creek Corporation (“World Dryer”)(d/b/a StainlessDrains.com), a manufacturer of stainless steel drains, grates and accessories for aindustrial and commercial end markets. The preliminary cash purchase price of $50.0$24.8 million, excluding transaction costs and net of cash acquired, is subject to customary post-closing adjustments for variances between estimated working capital targets and actual working capital acquired. World Dryer is a leading global manufacturer of commercial electric hand dryers. This acquisition broadened theStainlessDrains.com, headquartered in Greenville, Texas, added complementary product portfolio oflines to the Company's existing Water Management platform and is expected to bring even greater value to commercial building owners in the form of lower operating costs.platform.
The Company's results of operations include the acquired operations subsequent to October 4, 2017.the aforementioned acquisition date. Pro-forma results of operations and certain other U.S. GAAP disclosures related to the World Dryerthis acquisition have not been presented because they are not materialsignificant to the Company's condensed consolidated statements of operations and condensed consolidated balance sheets.
or financial position. The acquisition of World Dryer wasStainlessDrains.com has been accounted for as a business combination and was recorded by allocating the purchase price to the fair value of 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 preliminary purchase price allocation associated with this acquisition resulted in tax deductible goodwill of $13.9 million, other intangible assets of $6.8 million (including tradenames of $0.7 million and $6.1 million of customer relationships), $1.9 million of trade working capital and other net assets of $2.2 million. The Company is continuing to evaluate the initial purchase price allocation for StainlessDrains.com related to the fair values assigned to tangible and intangible assets and net working capital acquired, which will be completed within the one year period following its acquisition date.

Fiscal Year 2019
On January 23, 2019, the Company acquired an additional 47.5% interest in Centa MP (Hong Kong) Co., Limited ("Centa China"), a joint venture in which the Company previously maintained a 47.5% non-controlling interest, for $21.4 million, net of cash held by the former joint venture. Centa China, a manufacturer and distributor of premium flexible couplings and drive shafts for industrial, marine, rail and power generation applications within the Company's Process & Motion Control platform, provides the Company with the opportunity to expand its product offerings within its Asia Pacific end markets. Prior to this transaction, the Company accounted for its non-controlling interest in Centa China as an equity method investment. The acquisition of the additional 47.5% interest was considered to be an acquisition achieved in stages, whereby the Company remeasured the previously held equity method investment to fair value. The Company considered multiple factors in determining the fair value of the previously held equity method investment, including (i) the price negotiated with the selling shareholder for the 47.5% equity interest in Centa China, (ii) an income valuation model (discounted cash flow), and (iii) current trading multiples for comparable companies. Based on this analysis, during the fourth quarter of fiscal 2019, the Company recognized a $0.2 million gain on the remeasurement of the previously held equity method investment and a $1.8 million loss associated with the historical foreign currency translation adjustments associated with the equity method investment. The preliminary purchase price for this business combination is estimated as follows (in millions):
Fair value of consideration transferred: 
Cash paid, net of cash acquired$21.4
Other items to be allocated to identifiable assets acquired and liabilities assumed 
Book value of investment in Centa China at the acquisition date21.8
Gain recognized from step acquisition0.2
Fair value of remaining non-controlling interest2.3
Total$45.7

The Company allocated the preliminary purchase price to the fair value of assets acquired and liabilities assumed at the acquisition date. The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The preliminary purchase price allocation was adjusted during the first quarter of fiscal 2020, resulting in a reduction to goodwill of $0.8 million, primarily related to the refinement of the estimated fair value of intangible assets acquired. As of June 30, 2019, the preliminary purchase price allocation associated with this acquisition resulted in non-tax deductible goodwill of $25.8$19.3 million, other intangible assets of $28.1$20.1 million (includes(including tradenames of $7.0$1.3 million and $21.1$18.8 million of customer relationships), $8.7 million of trade working capital and other net liabilities of $3.9$2.4 million. The Company is continuing to evaluate the initial purchase price allocation is preliminary and subjectallocations primarily related to fair value adjustments thatthe finalization of the amount of net working capital acquired as well as the related income tax analysis for this acquisition, which will be completed within the one year period following the acquisition date.
During the third quarter of fiscal

On September 24, 2018, the Company entered into a definitive agreement to acquire Centa Power Transmission (Centa Antriebe Kirschey GmbH) ("Centa")acquired certain assets associated with the design and distribution of various roof drains, spouts and flow sensors for an estimated purchase price of approximately €118institutional, commercial and industrial buildings for $2.0 million. Centa, headquartered in Haan, Germany, is a leading manufacturer of premium flexible couplings and drive shafts for industrial, marine, rail and power generation applications. The acquisition of Centa will addthese assets added complementary product lines to the Company's existing Process & Motion Control platform. TheWater Management platform and was accounted for as a business combination. This acquisition of Centa is subject to customary closing conditions and is expected to close during the fourth quarter of fiscal 2018. The Company's results of operation willdid not include Centa until the transaction is finalized.
Fiscal Year 2017 Acquisitions
On June 1, 2016, the Company acquired Cambridge International Holdings Corp. ("Cambridge") for a cash purchase price of $213.4 million. The purchase price consisted of an enterprise value of $210.0 million, excluding transaction costs and net of cash acquired, plus additional consideration of $3.4 million related to the acquisition of certain tax benefits and real property classified as held for sale at the acquisition date. Cambridge, with operations in Cambridge, Maryland and Matamoros, Mexico, is one of the world's largest suppliers of metal conveying and engineered woven metal solutions, primarily used in food processing end markets, as well as in architectural, packaging and filtration applications. The acquisition of Cambridge expandedmaterially affect the Company's presence in consumer-driven end markets in the Process & Motion Control platform.condensed consolidated statements of operations or financial position.
The Company's results of operations include the acquired operations subsequent to June 1, 2016.the respective acquisition dates. Pro-forma results of operations and certain other U.S. GAAP disclosures related to the Cambridge acquisitionfiscal 2019 acquisitions have not been presented because they are not material to the Company's condensed consolidated statements of operations and condensed consolidated balance sheets.
The acquisition of Cambridge was accounted for as a business combination and recorded by allocating the purchase price to the fair value of assets acquired and liabilities assumed at the acquisition date. The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The purchase price allocation resulted in non-tax deductible goodwill of $129.4 million, other intangible assets of $80.6 million (includes tradenames of $16.8 million, customer relationships of $58.3 million and patents of $5.5 million) and other net assets of $3.4 million.
In fiscal 2017, the Company acquired the remaining non-controlling interest in a Water Management joint venture for a cash purchase price of approximately$0.3 million, net of cash acquired and excluding transaction costs. The acquisition of the remaining minority interest was not materialsignificant to the Company's condensed consolidated statements of operations or financial position.

3. Restructuring and Other Similar Charges
During fiscal 2018,2020, the Company has 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 well as select product-line rationalizations.footprint. As such, the Company expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs, and other facility rationalization costs. The Company's restructuring plans are preliminary and related expenses are not yet estimable.
The following table summarizes the Company's restructuring and other similar charges during the three and nine months ended December 31, 2017June 30, 2019 and December 31, 2016June 30, 2018 by classification of operating segment (in millions):
  
Restructuring and Other Similar Charges
Three Months Ended June 30, 2019
  Process & Motion Control Water Management Corporate Consolidated
Employee termination benefits $2.6
 $0.3
 $—
 $2.9
Contract termination and other associated costs 0.3
 —
 —
 0.3
Total restructuring and other similar costs $2.9
 $0.3
 $—
 $3.2
  
Restructuring and Other Similar Charges
Three Months Ended December 31, 2017
  Process & Motion Control Water Management Consolidated
Employee termination benefits $0.6
 $0.6
 $1.2
Contract termination and other associated costs 2.4
 0.2
 2.6
Total restructuring and other similar charges $3.0
 $0.8
 $3.8

  
Restructuring and Other Similar Charges
Three Months Ended June 30, 2018
  Process & Motion Control Water Management Corporate Consolidated
Employee termination benefits $1.8
 $0.3
 $0.6
 $2.7
Contract termination and other associated costs 0.2
 0.1
 0.1
 0.4
Total restructuring and other similar costs $2.0
 $0.4
 $0.7
 $3.1
  
Restructuring and Other Similar Charges
Nine Months Ended December 31, 2017
  Process & Motion Control Water Management Consolidated
Employee termination benefits $2.5
 $3.3
 $5.8
Contract termination and other associated costs 5.2
 0.6
 5.8
Total restructuring and other similar charges $7.7
 $3.9
 $11.6
  
Restructuring and Other Similar Charges
Three Months Ended December 31, 2016
  Process & Motion Control Water Management Consolidated
Employee termination benefits $5.1
 $1.7
 $6.8
Asset impairment charges (1) 1.6
 —
 1.6
Contract termination and other associated costs 1.9
 1.4
 3.3
Total restructuring and other similar charges $8.6
 $3.1
 $11.7
  
Restructuring and Other Similar Charges
Nine Months Ended December 31, 2016
  Process & Motion Control Water Management Consolidated
Employee termination benefits $9.6
 $5.4
 $15.0
Asset impairment charges (1) 1.6
 —
 1.6
Contract termination and other associated costs 3.4
 1.7
 5.1
Total restructuring and other similar charges $14.6
 $7.1
 $21.7
____________________
(1)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. The Company recognized impairment charges associated with these assets during the three and nine months ended of fiscal 2017, in the amount of $1.6 million. The impairment was determined utilizing independent appraisals of the assets, classified as Level 3 inputs within the Fair Value hierarchy. Refer to Note 13, Fair Value Measurements for additional information.


The following table summarizes the activity in the Company's restructuring accrual for the ninethree months ended December 31, 2017June 30, 2019 (in millions):

  Employee termination benefits Contract termination and other associated costs Total
Restructuring accrual, March 31, 2019 (1) $2.4
 $1.9
 $4.3
Charges 2.9
 0.3
 3.2
Cash payments (1.5) (0.4) (1.9)
Restructuring accrual, June 30, 2019 (1) $3.8
 $1.8
 $5.6
____________________
(1)The restructuring accrual is included in other current liabilities in the condensed consolidated balance sheets.
  Employee termination benefits Contract termination and other associated costs Total
Restructuring accrual, March 31, 2017 (1) $11.0
 $1.0
 $12.0
Charges 5.8
 5.8
 11.6
Cash payments (13.3) (6.6) (19.9)
Restructuring accrual, December 31, 2017 (1) $3.5
 $0.2
 $3.7
____________________
(1)     The restructuring accrual is included in Other current liabilities in the condensed consolidated balance sheets.


In additionconnection 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 impairment charges recognized above,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 zero$0.6 million and $1.0$1.3 million during the three and nine months ended December 31, 2017, respectively. The Company recognized accelerated depreciation of $3.8 millionJune 30, 2019 and $5.2 million during the three and nine months ended December 31, 2016,June 30, 2018, respectively. Accelerated depreciation is recorded within Cost of sales in the condensed consolidated statements of operations.



4. Discontinued Operations

During fiscal 2016, the Company decided to exit the non-strategic product lines sold under the Rodney Hunt Fontaine ("RHF") tradename and2019, the Company completed the exitsale of the RHF product lineVAG business, which was previously included within the Water Management platform. The operating results of the VAG business are reported as discontinued operations in fiscal 2017.the condensed consolidated statements of operations for all periods presented, as the sale of VAG represented a strategic shift that had a major impact on operations and financial results. The Company evaluated the requirementssale agreement provides for the presentationCompany to potentially receive contingent consideration of up to an additional $20.0 million based on, and subject to, the VAG business attainment of Earn-out EBITDA, as defined in the sale agreement, in the Company's fiscal years ended March 31, 2019, and ending March 31, 2020 and 2021. The VAG business did not attain the Earn-out EBITDA metrics defined in the sale agreement for the fiscal year ended March 31, 2019. The sale price was subject to customary working capital and cash balance adjustments, which were finalized during the first quarter of 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 first quarter of fiscal 2020.

The major components of Loss from discontinued operations, net of tax presented in connection with the decisioncondensed consolidated statements of operations consisted of the following (in millions):
 Three months ended
 June 30, 2019
June 30, 2018
Net sales$—
 $48.0
Cost of sales—
 36.9
Selling, general and administrative expenses—
 13.1
Amortization of intangible assets—
 0.3
Non-cash asset impairment (1)—
 44.0
Loss on sale of discontinued operations1.8
 —
Other non-operating expenses, net—
 1.7
Loss from discontinued operations before income tax(1.8) (48.0)
Income tax benefit—
 5.2
Loss from discontinued operations, net of tax$(1.8) $(42.8)
____________________
(1)    During the first quarter of fiscal 2019, the Company recorded a non-cash impairment of $44.0 million to exit its flow-control gate product line and determinedreflect the product line didCompany's estimated fair value less costs to sell the VAG business based on the value of preliminary bids received at that time. 
The condensed consolidated statements of cash flows for the prior period presented has not meet the definition provided within the authoritative literature asbeen adjusted to separately disclose cash flows related to discontinued operations. Pre-tax loss from operationsHowever, the capital expenditures, depreciation, amortization and other significant non-cash amounts associated with the RHF product line was $2.2 million and $6.7 million in the three and nine months ended December 31, 2016, respectively. Pre-tax loss included restructuring and other similar charges of $0.3 million and $1.9 million in the three and nine months ended December 31, 2016, respectively.discontinued operations were as follows (in millions):
 Three Months Ended
 June 30, 2018
Depreciation$2.1
Amortization of intangible assets0.3
Non-cash asset impairment44.0
Stock-based compensation0.1
Capital expenditures0.9


4. Income Taxes5. Revenue Recognition
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“U.S. Tax Reform”). U.S. Tax Reform incorporates significant changesA performance obligation is a promise in a contract to U.S. corporate income tax laws including, among other things,transfer a reduction in the statutory federal corporate income tax rate from 35% to 21%, an exemption for dividends received from certain foreign subsidiaries, a one-time repatriation tax on deemed repatriated earnings from foreign subsidiaries, immediate expensing of certain depreciable tangible assets, limitations on the deduction for net interest expense and certain executive compensation and the repeal of the Domestic Production Activities Deduction ("DPAD"). The majority of these changes will be effective for the Company’s fiscal year beginning April 1, 2018. However, the corporate income tax rate reduction is effective January 1, 2018. As such, the Company’s effective statutory federal corporate income tax rate for the tax year ending March 31, 2018 will be 31.55%. In addition, the one-time repatriation tax will be recognized by the Company for the tax year ending March 31, 2018.
Under ASC Topic 740, Income Taxes ("ASC 740"), a company is generally required to recognize the effect of changes in tax laws in its financial statements in the period in which the legislation is enacted. U.S. income tax laws are deemed to be effective on the date the president signs tax legislation. The president signed the U.S. Tax Reform legislation on December 22, 2017. As such, the Company is required to recognize the related impactsdistinct good or service to the financial statementscustomer, 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 quarter ended December 31, 2017. In acknowledgmentterms of the substantial changes incorporated in the U.S. Tax Reform, in conjunctiona contract with the timing of the enactment being just weeks beforecustomer are satisfied. For the majority of the provisions became effective, the SEC staff issued Staff Accounting Bulletin ("SAB") 118 to provide certain guidance in determining the accounting for income tax effectsCompany's product sales, revenue is recognized at a point-in-time when control of the legislationproduct 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 accountingconsolidated 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 consolidated statements of operations.
Revenue by Category
The Company has two business segments, Process & Motion Control and Water Management. The following table presents our revenue disaggregated by customer type and geography (in millions):
  Three Months Ended
  June 30, 2019 June 30, 2018
Original equipment manufacturers/end users $186.2
 $182.4
Maintenance, repair, and operations 143.9
 150.0
    Total Process & Motion Control $330.1
 $332.4
     
Water safety, quality, flow control and conservation $165.0
 $158.8
Water infrastructure 13.2
 12.4
    Total Water Management $178.2
 $171.2
     
Three Months Ended June 30, 2019 Process & Motion Control Water Management
United States and Canada $214.4
 $174.8
Europe 72.4
 —
Rest of world 43.3
 3.4
    Total $330.1
 $178.2
     
Three Months Ended June 30, 2018 Process & Motion Control Water Management
United States and Canada $213.9
 $167.6
Europe 82.2
 —
Rest of world 36.3
 3.6
    Total $332.4
 $171.2

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, 2019 (in millions):
  Balance Sheet Classification March 31, 2019 Additions Deductions (1) June 30, 2019
Contract assets Receivables, net $2.6
 $0.6
 $(1.8) $1.4
Contract liabilities (1) Other current liabilities $5.1
 $4.5
 $(3.7) $5.9

____________________
(1)Contract liabilities are reduced when revenue is recognized.
Backlog
The Company has backlog of $390.4 million as of June 30, 2019, 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 90% of the unsatisfied performance obligations as revenue in fiscal 2020 and the remaining 10% in fiscal 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 enactmentthese costs is expected to be greater than one year, the costs would be subject to capitalization. As of June 30, 2019, the contract assets capitalized, as well as provide a measurement period (similar to that used when accounting for business combinations) within which to finalize and reflect such final effects associated with U.S. Tax Reform. Further, SAB 118 summarizes a three-step approach to be applied each reporting period within the overall measurement period: (1) amounts should be reflectedamortization recognized in the period including the date of enactment for those items which are deemed to be complete (i.e. all information is available and appropriately analyzed to determine the applicable financial statement impact), (2) to the extent the effects of certain changes due to U.S. Tax Reform for which the accounting is not deemed complete but for which a reasonable estimate can be determined, such provisional amount(s) should be reflected in the period so determined and adjusted in subsequent periods as such effects are finalized and (3) to the extent a reasonable estimate cannot be determined for a specific effect of the tax law change associated with U.S. Tax Reform, no provisional amount should be recorded but rather, continue to apply ASC 740 based upon the tax law in effect prior to the enactment of U.S. Tax Reform. Such measurement period is deemed to end when all necessary information has been obtained, prepared and analyzed such that a final accounting determination can be concluded, but in no event should the period extend beyond one year.
In consideration of this guidance, the Company has obtained, prepared and analyzed various information associated with the enactment of U.S. Tax Reform. Based upon this review, the Company has recognized a discrete estimated net income tax benefit with respect to U.S Tax Reform for the third quarter of fiscal 2018 of $54.8 million. This net income tax benefit reflects a $62.2 million net estimated income tax benefit associated with the remeasurement of the Company’s net U.S. deferred tax liability (including consideration of executive compensation limitations under U.S. Tax Reform), partiality offset with a $7.4 million estimated income tax expense associated with the impact of the deemed repatriated earnings from the Company’s foreign subsidiaries, including the one-time repatriation tax of $3.0 million. Due to the Company’s fiscal year-end of March 31, 2018 and the timing of the various technical provisions provided for under U.S. Tax Reform, the financial statement impacts recorded in the third quarter of fiscal 2018 relating to U.S. Tax Reform2020, are not deemed to be complete but rather are deemed to be reasonable, provisional estimates based upon the current available information. For example, the remeasurement of the net U.S. deferred tax liability cannot be complete until the underlying timing differences are known,significant and such timing differences cannot be known until March 31, 2018. Similarly, the Company was required to use certain estimated annual amounts in conjunction with determining the impact of the one-time repatriation tax. Although the Company believes the net income tax benefit recognized in the third quarter of fiscal 2018 as outlined above is a reasonable estimate based upon the available information and analysis completed, these related amounts will change based upon actual results occurring in the quarter and fiscal year ending March 31, 2018. As such, the Company will update and finalize the accounting for the tax effect of the enactment of U.S. Tax Reform in future quarters in accordance with the guidance as outlined in SAB 118, as deemed necessary.there have been no impairment losses recognized.


6. Income Taxes
The provision for income taxes for all periods presented is based on an estimated effective income tax rate for the respective full fiscal years. As a result of enacted U.S. Tax Reform, the Company's estimated effective income tax rate incorporated the reduced federal statutory income tax rate of 31.55%, resulting in an income tax benefit of approximately $2.1 million for the third quarter (as well as the first nine months) of fiscal 2018. This benefit is in addition to the $54.8 million discrete estimated income tax benefit recorded in association with U.S. Tax Reform, as discussed above. 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 provisionexpense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are generally lowerhigher 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 establishes 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 allowancesallowance against theU.S. federal and state capital loss carryforwards and a partial valuation allowance against certain foreign NOL carryforwards and other related foreign deferred tax assets, relating toas well as certain foreign andU.S. state net operating lossNOL 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 benefitprovision was $50.0 million in the third quarter of fiscal 2018 compared to an income tax benefit of $1.8 million in the third quarter of fiscal 2017. The effective income tax rate for the third quarter of fiscal 2018 was (158.2)% versus (128.6)% in the third quarter of fiscal 2017. The income tax benefit recorded on income before income taxes for the third quarter of fiscal 2018 was primarily due to the recognition of net income tax benefits associated with the enactment of U.S. Tax Reform, the recognition of net tax benefits associated with the reduction in the tax liability originally recorded on the expatriation of certain foreign branch assets, and the net tax benefits associated with U.S. research and development credits and the DPAD. The income tax benefit recorded on income before income taxes for the third quarter of fiscal 2017 was primarily due to excess tax benefits associated with share-based payments, the recognition of net tax benefits associated with U.S. research and development credits and the DPAD, partially offset with the recognition of income tax expense relating to various foreign income tax audits.
The income tax benefit recorded in the first nine months of fiscal 2018 was $27.0 million compared to an income tax benefit of $3.3$14.8 million in the first nine monthsquarter of fiscal 2017.2020 compared to $14.5 million in the first quarter of fiscal 2019. The effective income tax rate for the first nine monthsquarter of fiscal 20182020 was (24.3)%23.4% versus (7.6)%26.3% in the first nine monthsquarter of fiscal 2017.2019. The effective income tax benefit recorded on income before income taxesrate for the first nine monthsquarter of fiscal 20182020 was above the U.S. federal statutory rate of 21% primarily due to the recognitionaccrual of netforeign income tax benefitstaxes 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 the enactmentaccrual of U.S. Tax Reform,various state income taxes, partially offset by the recognition of net tax benefits associated with the reduction in the tax liability originally recorded on the expatriation of certain foreign branch assets, and the net tax benefits associated with U.S. research and development credits and the DPAD. The income tax benefit recorded on income before income taxes for the first nine months of fiscal 2017 was primarily due to excess tax benefits associated with share-based payments and foreign-derived intangible income ("FDII"). The effective income tax rate for the first quarter of fiscal 2019 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes at higher statutory rates, the accrual of additional taxes associated with GILTI and the accrual of various state income taxes, partially offset by the recognition of netan income tax benefitsbenefit associated with U.S. research and development credits, the recognition of a worthless stock and bad debt deduction for U.S. income tax purposes relating to an insolvent foreign subsidiary and the recognition of excess U.S. foreign tax credits, partially offset with the recognition of income tax expense relating to various foreign income tax audits.country-enacted rate reduction.
At December 31, 2017, the Company had a $19.0 million liability for unrecognized net income tax benefits. At March 31, 2017, theThe Company’s total liability for unrecognized net incomeunrecognized tax benefits as of June 30, 2019 and March 31, 2019 was $18.1 million.$22.1 million and $21.8 million, respectively. The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in income tax expense. As of December 31, 2017June 30, 2019 and March 31, 2017,2019, the total amount of gross, unrecognized income tax benefits included $5.5$4.4 million and $4.7$4.3 million of accrued interest and penalties, respectively. The Company recognized $0.3$0.1 million of net interest and penalties as income tax expense during both the ninethree months ended December 31, 2017June 30, 2019 and December 31, 2016.June 30, 2018.
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 (including a review of a few specific items on certain corporatejurisdictions. The Company is currently undergoing an income tax returns of the Company’s Netherlands subsidiaries for the tax years ended March 31, 2011 through 2015). In addition,examination by the U.S. Internal Revenue Service is currently examining("IRS") of the Company’s U.S. consolidated federal income tax return and related amended return for the tax year ended March 31, 2015. During the third quarter of fiscal 2017, the Company completed an examination of certain of its Italian subsidiaries’ corporate income tax returns for the tax years ended March 31, 2014 through 2016 and paid approximately $0.7 million upon2017. During the conclusion of such examination. In addition, during the fourthsecond quarter of fiscal 2017,2019, the CompanyIRS completed an income tax examination of certain of its German subsidiaries’ corporatethe Company’s amended U.S. consolidated federal income and trade tax returnsreturn for the tax yearsyear ended March 31, 2011 through 20142015 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, 2015,2016, state and local income tax examinations for years ending prior to fiscal 20142015 or significant foreign income tax examinations for years ending prior to fiscal 2013. With respect to the Company's U.S. federal NOL carryforward (which was fully utilized for the tax year ended March 31, 2015), the short tax period from July 21, 2006 to March 31, 2007 (due to a prior change in control of the Company) and the tax years ended March 31, 2008 through March 31, 2013 are open under statutes of limitations; whereby, the Internal Revenue Service may not adjust the income tax liability for these years, but may reduce the NOL carryforward and any other tax attribute carryforwards to currently open tax years.2014.

5.7. Earnings per Share

The following table presents the basis for the basic and diluted income per share computations (in millions, except share amounts):
  Three Months Ended
  June 30, 2019 June 30, 2018
Basic net income (loss) per share attributable to Rexnord common stockholders    
Numerator:    
Net income from continuing operations $48.5
 $42.2
Less: Non-controlling interest income 0.2
 0.1
Less: Dividends on preferred stock 5.8
 5.8
Net income from continuing operations attributable to Rexnord common stockholders $42.5
 $36.3
     
Loss from discontinued operations, net of tax $(1.8) $(42.8)
     
Net income (loss) attributable to Rexnord common stockholders $40.7
 $(6.5)
     
Denominator:    
Weighted-average common shares outstanding, basic 105,262
 104,338
     
Diluted net income (loss) per share attributable to Rexnord common stockholders    
Numerator:    
Net income from continuing operations $48.5
 $42.2
Less: Non-controlling interest income 0.2
 0.1
Less: Dividends on preferred stock (1) —
 5.8
Net income from continuing operations attributable to Rexnord common stockholders $48.3
 $36.3
     
Loss from discontinued operations, net of tax $(1.8) $(42.8)
     
Net income (loss) attributable to Rexnord common stockholders $40.7
 $(6.5)
Plus: Dividends on preferred stock (1) 5.8
 —
Net income (loss) attributable to Rexnord common stockholders $46.5
 $(6.5)
     
Denominator:    
Weighted-average common shares outstanding, basic 105,262
 104,338
Effect of dilutive equity securities 2,423
 2,804
Preferred stock under the "if-converted" method 15,979
 —
Weighted-average common shares outstanding, diluted 123,664
 107,142
  Three Months Ended Nine Months Ended
  December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Basic net income per share:        
Numerator:        
Net income $81.6
 $3.2
 $137.9
 $46.7
Less: Dividends on preferred stock (5.8) (1.5) (17.4) (1.5)
Net income attributable to Rexnord common stockholders $75.8
 $1.7
 $120.5
 $45.2
Denominator:        
Weighted-average common shares outstanding, basic 103,964
 103,113
 103,824
 102,514
         
Net income per share attributable to Rexnord common stockholders - basic $0.73
 $0.02
 $1.16
 $0.44
         
Diluted net income per share:        
Numerator:        
Net income $81.6
 $3.2
 $137.9
 $46.7
Less: Dividends on preferred stock —
 (1.5) —
 (1.5)
Net income attributable to Rexnord common stockholders (1) $81.6
 $1.7
 $137.9
 $45.2
Denominator:        
Weighted-average common shares outstanding, basic 103,964
 103,113
 103,824
 102,514
Effect of dilutive equity awards 1,966
 1,445
 1,845
 1,967
Preferred stock under the "if-converted" method (1) 16,087
 —
 16,694
 —
Weighted-average common shares outstanding, diluted 122,017
 104,558
 122,363
 104,481
         
Net income per share attributable to Rexnord common stockholders - dilutive $0.67
 $0.02
 $1.13
 $0.43
____________________
(1)Following the issuance of the 5.75% Series A Mandatory Convertible Preferred Stock ("Series A Preferred Stock") in the third quarter of fiscal 2017, the Company’s diluted net income per share is computed using the “if-converted” method. The "if-converted" method is utilized only when such calculation iswas dilutive to earnings per share usingfor the treasury stock method. Under the “if-converted” method, diluted net income per share is calculated under the assumption that the shares of Series A Preferred Stock have been converted into shares of the Company’s common stock as of the beginning of the respective period and therefore no dividends are provided to holders of the Series A Preferred Stock. During the three and nine monthsquarter ended December 31, 2017, the computation of diluted net income per share was calculated utilizing the "if-converted" method. During the three and nine months ended December 31, 2016, the computation of diluted net income per share does not include shares of preferred stock that are convertible into a weighted average of 5.1 million million and 1.7 million shares of common stock, respectively, due to their anti-dilutive effects.  June 30, 2019.

The computation of diluted net income (loss) per share for the three and nine months ended December 31, 2017June 30, 2019 and June 30, 2018 excludes 2.81.2 million and 2.71.5 million shares, respectively, related to equity awards due to their anti-dilutive effects. The computation offor diluted net incomeloss per share for the three and nine months ended December 31, 2016 excludes 5.5June 30, 2018 also does not include shares of preferred stock that are convertible into a weighted average 16.0 million and 5.3 millioncommon shares, respectively, relatedbecause to equity awards due to their anti-dilutive effects.do so would have been anti-dilutive.

6.8. Stockholders' Equity


Stockholders' equity consists of the following (in millions):
 Preferred Stock 
Common
Stock
 
Additional
Paid-In
Capital
 Retained (Deficit) Earnings 
Accumulated
Other
Comprehensive
(Loss) Income
 
Total
Stockholders’
Equity
Balance at March 31, 2017$0.0
 $1.0
 $1,262.1
 $(55.5) $(137.0) $1,070.6
Total comprehensive income—
 —
 —
 137.9
 44.2
 182.1
Stock-based compensation expense—
 —
 15.9
 —
 —
 15.9
Exercise of stock options—
 —
 2.9
 —
 —
 2.9
Preferred stock dividends—
 —
 (10.8) (6.6) —
 (17.4)
Balance at December 31, 2017$0.0
 $1.0
 $1,270.1
 $75.8
 $(92.8) $1,254.1
 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, 2018$1.0
 $—
 $1,277.8
 $8.0
 $(74.1) $0.1
 $1,212.8
Total comprehensive (loss) income—
 —
 —
 (0.7) (33.9) 0.1
 (34.5)
Stock-based compensation expense—
 —
 6.0
 —
 —
 —
 6.0
Proceeds from exercise of stock options—
 —
 2.9
 —
 —
 —
 2.9
Taxes withheld and paid on employees' share-based payment awards—
 —
 (0.4) —
 —
 —
 (0.4)
Preferred stock dividends ($14.375 per share)—
 —
 —
 (5.8) —
 —
 (5.8)
Balance at June 30, 2018$1.0
 $—
 $1,286.3
 $1.5
 $(108.0) $0.2
 $1,181.0

 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, 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
____________________
(1)For the three months ended June 30, 2019, the Company issued 971,158 shares of common stock upon exercise of stock options and vesting of restricted stock units and performance stock units.
(2)During fiscal 2018, represents a 30% non-controlling interest in two Process & Motion Control controlled subsidiaries. During fiscal 2019, represents a 30% non-controlling interest in two Process & Motion Control controlled subsidiaries and a 5% non-controlling interest in another Process & Motion Control joint venture relationship.
Preferred Stock
During the third quarterAs of fiscal 2017, the Company issued 8,050,000 depositary shares, each of which represents a 1/20th interest in a share of Series A Preferred Stock, for an offering price of $50 per depository share. The Company issued an aggregate ofJune 30, 2019, there are 402,500 shares of 5.75% Series A Mandatory Convertible Preferred Stock in connection therewith.(the "Series A Preferred Stock") outstanding. Unless converted earlier, each share of Series A Preferred Stock will convert automatically on the mandatory conversion date, which is November 15, 2019, into between 39.70239.7020 and 47.64247.6420 shares of the Company’s common stock, subject to customary anti-dilution adjustments. The number of shares of common stock issuable upon conversion will be determined based on a defined average volume weighted average price per share of the Company’s common stock preceding November 15, 2019. Holders of the Series A Preferred Stock may elect on a voluntary basis to convert their shares into common stock at the minimum exchange ratio at any time prior to the mandatory conversion date.
Dividends accumulate from the issuance date. Rexnord may pay such dividends in cash or, subject to certain limitations, by delivery of shares of the Company's common stock or through any combination of cash and shares of the Company's common stock as determined by the Company in its sole discretion. Any unpaid dividends will continue to accumulate. Dividends are payable quarterly, ending on November 15, 2019. The shares of Series A Preferred Stock have a liquidation preference of $1,000 per share, plus accrued but unpaid dividends. With respect to dividend and liquidation rights, the Series A Preferred Stock ranks senior to the Company's common stock and junior to all existing and future indebtedness.
The net proceeds from the offering during the nine months ended December 31, 2016 were approximately $390.2 million. The Company used $195.0 million of the proceeds to prepay a portion of the then-outstanding term loan indebtedness under its credit agreement, with the remainder retained for general corporate purposes. During the three and nine months ended December 31, 2017,June 30, 2019, the Company paid $5.8 million and $17.4 million of dividends respectively.on the Series A Preferred Stock. As of December 31, 2017,June 30, 2019, there were no dividends in arrears on the Series A Preferred Stock.
See Note 19, Public Offering and Common Stock Repurchase Program
In fiscal 2015,Repurchases, to the Company's Board of Directors approved a stock repurchase program (the "Repurchase Program") authorizing the repurchase of up to $200.0 millionaudited consolidated financial statements of the Company's common stock from time to timefiscal 2019 Annual Report on the open market or in privately negotiated transactions. 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; however, the program will continue until the maximum amount of dollars authorized have been expended or until it is modified or terminated by the Board. No shares were repurchased during the nine months ended December 31, 2017 or December 31, 2016. A total of approximately $160.0 million remained of the existing repurchase authority at December 31, 2017.Form 10-K for further information regarding stockholders' equity.

7.9. Accumulated Other Comprehensive Loss


The changes in accumulated other comprehensive loss, net of tax, for the ninethree months endedDecember 31, 2017 June 30, 2019 are as follows (in millions):
  Interest Rate Derivatives Foreign Currency Translation Pension and Postretirement Plans Total
Balance at March 31, 2019 $0.8
 $(60.1) $(37.3) $(96.6)
Other comprehensive loss before reclassifications —
 (0.5) —
 (0.5)
Amounts reclassified from accumulated other comprehensive loss —
 —
 0.5
 0.5
Net current period other comprehensive (loss) income —
 (0.5) 0.5
 —
Balance at June 30, 2019 $0.8
 $(60.6) $(36.8) $(96.6)

  Interest Rate Derivatives Foreign Currency Translation Pension and Postretirement Plans Total
Balance at March 31, 2017 $(9.5) $(99.3) $(28.2) $(137.0)
Other comprehensive income before reclassifications —
 41.6
 —
 41.6
Amounts reclassified from accumulated other comprehensive loss 3.6
 —
 (1.0) 2.6
Net current period other comprehensive income (loss) 3.6
 41.6
 (1.0) 44.2
Balance at December 31, 2017 $(5.9) $(57.7) $(29.2) $(92.8)


The following table summarizes the amounts reclassified from accumulated other comprehensive loss to net income during the three and nine months ended December 31, 2017June 30, 2019 and December 31, 2016June 30, 2018 (in millions):
  Three Months Ended  
  June 30, 2019 June 30, 2018 Income Statement Line
Pension and other postretirement plans      
Amortization of prior service credit $(0.1) $(0.3) Other (expense) income, net
Settlement 0.8
 —
 Other (expense) income, net
(Benefit) provision for income taxes (0.2) 0.1
  
Total net of tax $0.5
 $(0.2)  
       
Interest rate derivatives      
Net realized losses on interest rate hedges $—
 $2.6
 Interest expense, net
Benefit for income taxes —
 (0.6)  
Total net of tax $—
 $2.0
  
  Three Months Ended Nine Months Ended  
  December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Income Statement Line
Pension and other postretirement plans          
Amortization of prior service credit $(0.5) $(0.5) $(1.5) $(1.4) Selling, general and administrative expenses
Provision for income taxes 0.1
 0.2
 0.5
 0.5
  
Total net of tax $(0.4) $(0.3) $(1.0) $(0.9)  
           
Interest rate derivatives          
Net realized losses on interest rate hedges $1.8
 $2.7
 $7.2
 $7.9
 Interest expense, net
Benefit for income taxes (1.5) (1.0) (3.6) (3.0)  
Total net of tax $0.3
 $1.7
 $3.6
 $4.9
  


8.10. Inventories


The major classes of inventories are summarized as follows (in millions):
 June 30, 2019 March 31, 2019
Finished goods$167.5
 $147.3
Work in progress45.3
 39.8
Purchased components78.5
 76.7
Raw materials60.9
 53.9
Inventories at First-in, First-Out ("FIFO") cost352.2
 317.7
Adjustment to state inventories at Last-in, First-Out ("LIFO") cost(0.9) (1.2)
 $351.3
 $316.5

 December 31, 2017 March 31, 2017
Finished goods$153.7
 $139.9
Work in progress47.4
 44.4
Purchased components81.4
 74.0
Raw materials59.2
 47.7
Inventories at First-in, First-Out ("FIFO") cost341.7
 306.0
Adjustment to state inventories at Last-in, First-Out ("LIFO") cost8.2
 8.9
 $349.9
 $314.9



9.11. Goodwill and Intangible Assets


The changes in the net carrying value of goodwill for the ninethree months endedDecember 31, 2017June 30, 2019 by operating segment are presented below (in millions):

   Process & Motion Control  Water Management  Consolidated
 Net carrying amount as of March 31, 2019 $1,125.2
 $174.5
 $1,299.7
 Currency translation adjustment and other (1.0) 0.1
 (0.9)
 Acquisition (1)
 —
 13.9
 13.9
 Purchase accounting adjustments (0.8) —
 (0.8)
 Net carrying amount as of June 30, 2019 $1,123.4
 $188.5
 $1,311.9
   Process & Motion Control  Water Management  Consolidated
 Net carrying amount as of March 31, 2017 $1,068.8
 $249.4
 $1,318.2
Acquisitions (1) —
 25.8
 25.8
 Currency translation adjustment and other 3.0
 6.8
 9.8
 Net carrying amount as of December 31, 2017 $1,071.8
 $282.0
 $1,353.8

(1)    Refer to footnoteNote 2, Acquisitions for additional information regarding acquisitions.

The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of December 31, 2017June 30, 2019 and March 31, 20172019 are as follows (in millions):
   June 30, 2019
 Weighted Average Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Intangible assets subject to amortization:       
Patents10 years $50.9
 $(40.2) $10.7
Customer relationships (including distribution network)13 years 720.2
 (530.6) 189.6
Tradenames13 years 41.2
 (12.1) 29.1
Intangible assets not subject to amortization - tradenames  280.9
 —
 280.9
Total intangible assets, net13 years $1,093.2
 $(582.9) $510.3
        
   March 31, 2019
 Weighted Average Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Intangible assets subject to amortization:       
Patents10 years $50.9
 $(39.8) $11.1
Customer relationships (including distribution network)13 years 713.5
 (523.1) 190.4
Tradenames13 years 40.4
 (11.3) 29.1
Intangible assets not subject to amortization - tradenames  280.9
 —
 280.9
Total intangible assets, net13 years $1,085.7
 $(574.2) $511.5

   December 31, 2017
 Weighted Average Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Intangible assets subject to amortization:       
Patents10 years $47.5
 $(38.9) $8.6
Customer relationships (including distribution network)13 years 710.6
 (498.3) 212.3
Tradenames12 years 37.1
 (7.7) 29.4
Intangible assets not subject to amortization - tradenames  317.6
 —
 317.6
Total intangible assets, net13 years $1,112.8
 $(544.9) $567.9
        
   March 31, 2017
 Weighted Average Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Intangible assets subject to amortization:       
Patents10 years $47.0
 $(37.7) $9.3
Customer relationships (including distribution network) (1)13 years 685.8
 (475.2) 210.6
Tradenames (1)12 years 29.5
 (5.3) 24.2
Intangible assets not subject to amortization - tradenames  314.5
 —
 314.5
Total intangible assets, net13 years $1,076.8
 $(518.2) $558.6
____________________
(1) Tradenames and customer relationships acquired during fiscal 2018 were both assigned a useful life of 14 years.

Intangible asset amortization expense totaled $8.6 million and $24.8$8.7 million for the three and nine months ended December 31, 2017, respectively.June 30, 2019. Intangible asset amortization expense totaled $8.6 million and $33.7$8.5 million for the three and nine months ended December 31, 2016,June 30, 2018. Tradenames and customer relationship intangible assets acquired during fiscal 2020 were assigned a weighted average useful life of 15 years and 14 years, respectively.
    
The Company expects to recognize amortization expense on the intangible assets subject to amortization of $33.4$35.1 million in fiscal year 20182020 (inclusive of $24.8$8.7 million of amortization expense recognized in the ninethree months endedDecember 31, 2017) June 30, 2019), $34.3$34.1 million in fiscal year 2019, $34.1 million in fiscal year 2020, $32.6 million in fiscal year 2021, and $28.3$29.7 million in fiscal year 2022.2022, $15.5 million in fiscal year 2023 and $14.7 million in fiscal year 2024.

During the third quarter ended December 31, 2017, the Company completed its annual evaluation of indefinite lived intangible assets (tradenames) and goodwill for impairment in accordance with ASC 350, Intangibles - Goodwill and Other. The fair value of the Company's indefinite lived intangible assets and reporting units were primarily estimated using an income valuation model (discounted cash flow) and market approach (guideline public company comparables), which indicated that the fair value of the Company's indefinite lived intangible assets and reporting units exceeded their carrying value; therefore, no impairment was present.


10.12. Other Current Liabilities


Other current liabilities are summarized as follows (in millions):
  June 30, 2019 March 31, 2019
Contract liabilities $5.9
 $5.1
Sales rebates 26.4
 35.3
Commissions 6.8
 6.8
Restructuring and other similar charges (1) 5.6
 4.3
Product warranty (2) 7.4
 7.2
Risk management (3) 10.8
 10.5
Legal and environmental 1.6
 2.6
Taxes, other than income taxes 7.4
 7.8
Income tax payable 25.8
 20.3
Interest payable 1.6
 7.7
Current portion of operating lease liability (4) 11.2
 —
Other 18.9
 29.5
  $129.4
 $137.1
  December 31, 2017 March 31, 2017
Customer advances $10.5
 $10.9
Sales rebates 30.2
 25.5
Commissions 6.3
 6.3
Restructuring and other similar charges (1) 3.7
 12.0
Product warranty (2) 7.5
 7.5
Risk management (3) 9.6
 8.9
Legal and environmental 4.5
 4.4
Taxes, other than income taxes 7.1
 10.5
Income tax payable 19.2
 17.8
Interest payable 2.3
 5.7
Other 25.8
 17.9
  $126.7
 $127.4
____________________
(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 14,16, 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.
11.13. Long-Term Debt
Long-term debt is summarized as follows (in millions):
 December 31, 2017 March 31, 2017 June 30, 2019 March 31, 2019
Term loan (1) $791.2
 $1,584.5
 $718.7
 $718.4
4.875% Senior notes due 2025 (2) 494.1
 —
Other subsidiary debt (3) 37.8
 38.2
4.875% Senior Notes due 2025 (2) 495.2
 495.0
Finance leases and other subsidiary debt (3) 51.0
 24.6
Total 1,323.1
 1,622.7
 1,264.9
 1,238.0
Less current maturities 0.2
 16.5
 1.4
 1.2
Long-term debt $1,322.9
 $1,606.2
 $1,263.5
 $1,236.8
____________________
(1)Includes an unamortized original issue discount and debt issuance costs of $8.8$6.3 million and $17.9$6.6 million at December 31, 2017June 30, 2019 and March 31, 2017,2019, respectively.
(2)Includes an unamortized debt issuance costs of $5.9$4.8 million and $5.0 million at DecemberJune 30, 2019 and March 31, 2017.2019, respectively.
(3)Other subsidiary debt consists primarily of a $36.9 million loan payable associated with the New Market Tax Credit incentive program as of December 31, 2017 and March 31, 2017. The Company also invested an aggregate of $27.6 million in the form of a loan receivable. The aggregate loan receivable is presentedSee more information related to finance leases within Other assets on the condensed consolidated balance sheets as of both December 31, 2017 and March 31, 2017. Also includes unamortized debt issuance costs of $0.5 million as of both December 31, 2017 and March 31, 2017.Note 18, Leases.
Senior Secured Credit Facility
TheAt June 30, 2019, 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) aan $800.0 million term loan facility 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. On January 9, 2019, the Company made a voluntary prepayment on its Term Loan of $75.0 million. During August 2018, the Company met the required rating of the Credit Agreement allowing the applicable margin under the Term Loan to be reduced from 2.25% to 2.00%. At June 30, 2019, the borrowings under the Term Loan had a weighted-average effective interest rate of 4.40%, determined as the London Interbank Offered Rate (“LIBOR”) (subject to a 0% floor) plus an applicable margin of 2.00%. The weighted-average interest rate for the three months ended June 30, 2019, was 4.47% determined as LIBOR (subject to a 0.0% floor) plus an applicable margin of 2.00%. No amounts were borrowed under the revolving credit facility at June 30, 2019 or March 31, 2019; however, $5.5 million and $5.6 million of the revolving credit facility were considered utilized in connection with outstanding letters of credit at June 30, 2019 and March 31, 2019, respectively.
As of December 31, 2017,June 30, 2019, 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 3.02.3 to 1.0 as of December 31, 2017.
Term Debt
On December 7, 2017, the Company entered into an Incremental Assumption Agreement (the “Amendment”) with Credit Suisse AG, Cayman Islands Branch, as administrative agent and the refinancing term lender, and the lenders party thereto, relatingJune 30, 2019.

to the Credit Agreement. Prior to the Amendment, the Credit Agreement included a $1,606.4 million term loan facility (the “Prior Term Loan”).
The Amendment provided for a new term loan in the aggregate principal amount of $800.0 million (the “Term Refinancing Loan”). The proceeds of the Term Refinancing Loan were used, along with cash on hand and the net $500.0 million of proceeds from the Company’s issuance of the Notes (as defined below), to reduce the aggregate principal amount of the Prior Term Loan outstanding under the Credit Agreement to $800.0 million.
The Term Refinancing Loan has a maturity date of August 21, 2024 (extended from August 21, 2023 under the Prior Term Loan). The borrowings under the Term Refinancing Loan bear interest at either (i) London Interbank Offered Rate (“LIBOR”) (subject to a 0% floor) plus an applicable margin of 2.25% (which was reduced from 2.75%) or at an alternative base rate plus an applicable margin of 1.25% (which was reduced from 1.75%), or (ii.) if the borrowers have received a corporate rating equal to or higher than Ba3 (with at least a stable outlook) by Moody’s and BB- (with at least a stable outlook) by S&P, LIBOR (subject to a 0% floor) plus an applicable margin of 2.00% or an alternate base rate plus an applicable margin of 1.00%. At December 31, 2017, the borrowings under the Term Refinancing Loan had a weighted-average effective interest rate of 3.80%.
In accordance with ASC 470-50, Debt Modifications and Extinguishments (“ASC 470-50”), the Company recognized a $11.9 million loss on the debt extinguishment associated with the above transaction, which was comprised of $3.9 million of refinancing related costs, as well as a non-cash write-off of unamortized original issue discount and debt issuance costs associated with previously outstanding debt of $8.0 million. Additionally, the Company capitalized $0.8 million and $6.0 million of direct costs associated with the Term Refinancing Loan and Notes, respectively, which will be amortized over the life of the loans as interest expense using the effective interest method.
Revolving Debt Facility

The Credit Facility also includes a revolving credit facility, as noted above. Through the Amendment, the aggregate amount of the revolving credit facility commitments was reduced to $264.0 million (from $265.0 million) and the maturity date of the revolving facility under the Credit Agreement was extended from March 15, 2019, to March 15, 2023. The Company capitalized approximately $0.2 million of direct costs incurred in connection with the Amendment, which will be amortized over the remaining life of the revolving credit facility. The interest rate under the revolving credit facility remained unchanged. No amounts were borrowed under the revolving credit facility at December 31, 2017, or March 31, 2017; however $8.9 million and $14.6 million of the revolving credit facility was considered utilized in connection with outstanding letters of credit at December 31, 2017 and March 31, 2017, respectively.
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 (collectively,(Company subsidiaries; collectively, the “Issuers”) and guaranteed by the Company and its domestic subsidiaries (subject to certain exceptions). The Notes were issued pursuant to an Indenture, dated as of December 7, 2017 (the “Indenture”), by and among the Issuers, the subsidiarydomestic 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, the Subsidiary Guarantors and the Company. The CompanyIssuers. 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, accruing upon issuance, at a rate of 4.875% per year with the first payment due on June 15, 2018.15. The Notes were not and will not be registered under the Securities Act of 1933 or any state securities laws.
The Issuers may redeem some or all of the Notes at any time or from time to time prior to December 15, 2020 at certain “make-whole” redemption prices (as set forth in the Indenture) and after December 15, 2020 at specified redemption prices (as set forth in the Indenture). Additionally, the Issuers may redeem up to 40% of the aggregate principal amount of the Notes at any time or from time to time prior to December 15, 2020 with the net proceeds of specified equity offerings at specified redemption prices (as set forth in the Indenture). Upon a change of control (as defined in the Indenture), the Issuers will be required to make an offer to purchase the Notes at a price equal to 101% of the principal amount of the Notes on the date of purchase plus accrued interest.
The Indenture contains customary covenants, such as restrictions on the Issuers and its restricted subsidiaries (but not on Rexnord Corporation) incurring or guaranteeing additional indebtedness or issuing certain preferred shares, paying dividends and making other restricted payments and creating or incurring certain liens. The Notes and Indenture do not contain any financial covenants. The Notes and Indenture contain customary events of default, including the failure to pay principal or interest when due, breach of covenants, cross-acceleration to other debt of the Issuers or restricted subsidiaries in excess of $50 million and bankruptcy events, all subject to terms, including notice and cure periods, as set forth in the Indenture.

Accounts Receivable Securitization Program
The Company maintainshas an amended accounts receivable securitization facility (the “Securitization”"Securitization") with Wells Fargo Bank, N.A.& 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 the lender under the SecuritizationWells 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 will beare 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"Permitted Receivables Financing”Financing" under Article 1 and Article 6 of the Credit Agreement.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.

As of both December 31, 2017At June 30, 2019 and March 31, 2017,2019, the Company's available borrowing capacity under the Securitization was $100.0 million, based on the then-currentcurrent accounts receivables.receivables balance. No amounts wereamount was borrowed under the Securitization at December 31, 2017as of June 30, 2019 or March 31, 2017; however, $7.02019. In addition, $7.1 million and $4.6$7.1 million of available borrowing capacity under the Securitization was considered utilized in connection with outstanding letters of credit at December 31, 2017June 30, 2019 and March 31, 2017,2019, respectively. As of December 31, 2017,June 30, 2019, the Company was in compliance with all applicable covenants and performance ratios contained in the Securitization.

See Note 11, Long-Term Debt to the audited consolidated financial statements of the Company's fiscal 20172019 Annual Report on Form 10-K for further information regarding long-term debt.



12.14. Derivative Financial Instruments


The Company is exposed to certain financial risks relating to fluctuations in foreign currency exchange rates and interest rates. The Company currently selectively uses foreign currency forward exchange contracts to manage its foreign currency risk and interest rate swaps and interest rate caps to manage its interest rate 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 are set forth withinfor the tables below.

Interest Rate Derivatives

The Company utilizes three interest rate swaps to hedge the variability in future cash flows associated with the Company's variable-rate term loans. The interest rate swaps, which originally became effective in fiscal 2016, convert $650.0 million of the Company’s variable-rate term loans to a weighted average fixed interest rate of 2.55% plus the applicable marginmonths ended June 30, 2019 and will mature on September 27, 2018. In addition, the Company utilizes two interest rate caps to further mitigate the Company's exposure to increasing interest rates on its variable-rate interest loans. Those interest rate caps2018 were effective beginning in fiscal 2015, with a maturity of October 24, 2018, and they cap the interest on $750.0 million of the Company's variable-rate interest loans at 3%, plus the applicable margin. In executing the interest rate caps, the Company paid a premium of $5.8 million. At inception, the interest rate swaps and interest rate caps were designated as cash flow hedges in accordance with ASC 815.

In connection with the Amendment to the Credit Agreement described in Note 11, the critical terms of the interest rate derivatives no longer matched the outstanding debt and no longer qualify as effective hedges. Upon discontinuation of hedge accounting, the unrealized losses associated with the interest rate derivatives remaining in accumulated other comprehensive loss is reclassified into interest expense on a straight-line basis over the remaining term of the interest rate derivatives. The fair values of the Company's interest rate derivatives are recorded on the condensed consolidated balance sheets; however, changes in fair values subsequent to the Amendment are recognized within the condensed consolidated statements of operations. See the amounts recorded on the condensed consolidated balance sheets related to the Company's interest rate derivatives within the tables below.
The Company's derivatives are measured at fair value in accordance with ASC 820, Fair Value Measurements and Disclosure (“ASC 820”). See Note 13 for more information as it relates to the fair value measurement of the Company's derivative financial instruments. The following tables indicate the location and the fair value of the Company's non-qualifying, non-designated derivative instruments within the condensed consolidated balance sheets (in millions):

  December 31, 2017 March 31, 2017 Balance Sheet Classification
  Asset Derivatives
Interest rate caps $—
 $0.0
  Other assets
  Liability Derivatives
Interest rate swaps $3.6
 $—
 Other current liabilities
Interest rate swaps $—
 $10.3
 Other liabilities
Foreign currency forward contracts $0.0
 $0.1
 Other current liabilities
The following table segregates the location and the amount of gains or losses associated with the changes in the fair value of the Company's derivative instruments, net of tax, within the condensed consolidated balance sheets (for instruments no longer qualifying for hedge accounting under ASC 815) and recognized within the condensed consolidated statements of operations (for non-qualifying, non-designated derivative instruments):

  Amount of loss recognized in accumulated other comprehensive loss
Derivative instruments no longer qualifying for hedge accounting under ASC 815
(in millions)
 
 December 31, 2017 March 31, 2017
Interest rate swaps $3.3
 $6.4
Interest rate caps $1.8
 $3.1

    Amount recognized as (income) expense
Non-qualifying, non-designated derivative instruments
(in millions)
 Condensed Consolidated Statements of Operations Classification Three Months Ended Nine Months Ended
  December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Foreign currency forward contracts Other expense, net $(0.5) $—
 $—
 $0.5
Interest rate swaps Interest expense, net $(2.2) $—
 $(2.2) $—

The Company expects to reclassify approximately $8.2 million of losses related to its interest rate derivatives recorded within accumulated other comprehensive loss into earnings as interest expense during the next twelve months.not material.
 
13.15. 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 1-1 - Quoted prices for identical instruments in active markets.
Level 2-2 - 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 3-3 - 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-basedmarket 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 DerivativeFinancial Instruments
The Company transacts in foreign currency forward contracts, interest rate swaps,There were no transfers of assets between levels at June 30, 2019 and interest rate caps. TheMarch 31, 2019, respectively.
As of June 30, 2019 and March 31, 2019, the fair value of foreign currency forward contracts is based on a pricing model that utilizes the differential between the contract price and the market-based forward rate as applied to fixed future deliveries of currency at pre-designated settlement dates. The fair value of interest rate swaps and interest rate caps is based on pricing models. These models use discounted cash flows that utilize the appropriate market-based forward swap curves and interest rates.assets classified within Level 2 was immaterial.

The Company endeavorshas 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 utilizeparticipants of the best available informationplan. The Company has elected to use the fair value option for the mutual funds, which are measured using quoted prices of identical instruments in measuringactive 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. As requiredvalue based on quoted prices of identical instruments to the investment vehicles selected by ASC 820, financial assets andthe participants categorized as Level 1. Deferred compensation liabilities are classified in their entirety basedwithin other liabilities on the lowest level of input that is significant to the fair value measurement. Foreign currency forward contracts and interest rate derivatives reside within Level 2 of the fair value hierarchy. There were no transfers of assets or liabilities between levels for the periods presented. 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 December 31, 2017June 30, 2019 and March 31, 20172019 (in millions):

  Fair Value as of December 31, 2017
  Level 1 Level 2 Level 3 Total
Liabilities:        
Interest rate derivatives $—
 $3.6
 $—
 $3.6
Foreign currency forward contracts —
 0.0
 —
 —
Total liabilities at fair value $—
 $3.6
 $—
 $3.6
  Fair Value as of June 30, 2019
  Level 1 Level 2 Level 3 Total
Deferred compensation assets $3.4
 $3.8
 $—
 $7.2
Deferred compensation liabilities 7.3
 —
 —
 7.3
  Fair Value as of March 31, 2019
  Level 1 Level 2 Level 3 Total
Deferred compensation assets $2.3
 $3.7
 $—
 $6.0
Deferred compensation liabilities 6.1
 —
 —
 6.1

  Fair Value as of March 31, 2017
  Level 1 Level 2 Level 3 Total
Assets:        
Interest rate caps $—
 $0.0
 $—
 $—
Total assets at fair value $—
 $—
 $—
 $—
         
Liabilities:        
Interest rate swaps $—
 $10.3
 $—
 $10.3
Foreign currency forward contracts —
 0.1
 —
 0.1
Total liabilities at fair value $—
 $10.4
 $—
 $10.4


Fair Value of Non-Derivative Financial Instruments
The carrying amounts of cash, receivables, payables and accrued liabilities approximated fair value at December 31, 2017June 30, 2019 and March 31, 20172019 due to the short-term nature of those instruments. The fair value of long-term debt as of December 31, 2017June 30, 2019 and March 31, 20172019 was approximately $1,345.2$1,280.2 million and $1,644.6$1,238.1 million, respectively. The fair value is based on quoted market prices for the same issues.
Long-lived Assets and Intangible Assets
Long-lived assets (which includes property, plant and equipment and real estate) may be measured at fair value if such assets are held-for-sale or when there is a determination that the asset is impaired. Intangible assets (which include patents, tradenames, customer relationships, and non-compete agreements) also may be measured at fair value when there is a determination that the asset is impaired. The determination of fair value for these assets is based on the best information available that resides within Level 3 of the fair value hierarchy, including internal cash flow estimates discounted at an appropriate interest rate, quoted market prices when available, market prices for similar assets and independent appraisals, as appropriate. For real estate, cash flow estimates are based on current market estimates that reflect current and projected lease profiles and available industry information about expected trends in rental, occupancy and capitalization rates.
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. During fiscal 2017 and 2018, the Company recognized both impairment charges and accelerated depreciation of certain assets to place the assets at net realizable value.  Net realizable value of these assets was determined using independent appraisals, classified as Level 3 inputs within the fair value hierarchy.  As of December 31, 2017 and March 31, 2017, these assets were recorded at net realizable value on the condensed consolidated balance sheets within property, plant and equipment in the amount of $6.3 million and $7.0 million, respectively.instruments.


14.16. 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, 2019 June 30, 2018
Balance at beginning of period $7.2
 $7.7
Charged to operations 0.7
 0.7
Claims settled (0.5) (0.8)
Balance at end of period $7.4
 $7.6
  Nine Months Ended
  December 31, 2017 December 31, 2016
Balance at beginning of period $7.5
 $6.8
Acquired obligations 0.2
 0.4
Charged to operations 3.2
 2.9
Claims settled (3.4) (2.9)
Balance at end of period $7.5
 $7.2

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, of the Company, 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”Industries") was named as a potentially responsible party (“PRP”("PRP"), together with at least ten other companies, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the “Site”"Site"), by the United States Environmental Protection Agency (“USEPA”("USEPA"), and the Illinois Environmental Protection Agency (“IEPA”("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. 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 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 a defendant in two multi-defendant lawsuits relating to allegedthe subject of claims by multiple claimants alleging personal injuries due to the alleged presence of asbestos in a product allegedly manufactured by Prager. Additionally, there are numerous individuals who have filed asbestos related claims against Prager. TheseHowever, all these claims are currently on the Texas Multi-DistrictMulti-district Litigation inactive docket. The ultimate outcome of these asbestos matters cannot presently be determined.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”("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 December 31, 2017,June 30, 2019, Zurn and numerous other unrelated companies were defendants in approximately 6,000 asbestos related lawsuits representing approximately 16,00012,000 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 December 31, 2017,June 30, 2019, 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 $37.0$40.0 million, of which Zurn expects its insurance carriers to pay approximately $28.0$30.0 million in the next ten years on such claims, with the balance of the estimated liability being paid in subsequent years. The $37.0$40.0 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 December 31, 2017,June 30, 2019, is approximately $241.0 million,in excess of the ten year estimated exposure, and accordingly, believes that all current claims are covered by insurance. However, principally as a result of the past insolvency of certain of the Company's insurance carriers, certain coverage gaps will exist if and after the Company's other carriers have paid the first $165.0 million of aggregate liabilities.
As of December 31, 2017,June 30, 2019, the Company had a recorded receivable from its insurance carriers of $37.0$40.0 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 that $241.0 million ofthe Company's current insurance coverage will ultimately be available or that this asbestos liability will not ultimately exceed $241.0 million.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 is 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.fittings.  The settlement utilizes a seven year claims fund, which is capped at $20.0 million, and is funded in installments over the seven year period based on claim activity and minimum funding criteria.  The settlement also covers class action plaintiffs' attorneys' fees and expenses. Historically, the Company's insurance carrier had funded the Company's defense in the above referenced proceedings. The Company, however, reached a settlement agreement with its insurer, whereby the insurer paid the Company a lump sum in exchange for a release of future exposure related to this liability. The Company has recorded an accrual related to this brass fittings liability, which takes into account, in pertinent part, the insurance carrier contribution, as well as exposure from the claims fund opt-outs and the waiver of future insurance coverage.


17. Retirement Benefits

The components of net periodic benefit cost are as follows (in millions):
  Three Months Ended
  June 30, 2019 June 30, 2018
Pension Benefits:    
Service cost $0.1
 $0.1
Interest cost 5.6
 5.8
Expected return on plan assets (5.7) (6.6)
Settlement 0.8
 —
Net periodic benefit cost (credit) $0.8
 $(0.7)
Other Postretirement Benefits:    
Interest cost $0.2
 $0.2
Amortization:    
Prior service credit (0.1) (0.3)
Net periodic benefit cost (credit) $0.1
 $(0.1)


The service cost component of net periodic benefit cost 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 first three months of fiscal 2020 and 2019, the Company made contributions of $0.1 million and $0.1 million, respectively, to its U.S. qualified pension plan trusts.

During fiscal 2019, the Company offered participants in the defined benefit plan of Cambridge International Holdings Corp., which was acquired by the Company in fiscal 2017, 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 has 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 first quarter of fiscal 2020.

See Note 16, Retirement Benefits, to the audited consolidated financial statements of the Company's fiscal 2019 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 which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of 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 sheet and are instead recognized on a straight-line basis over the lease term.

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 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, 2019
Assets:    
Operating ROU assets Other assets $43.3
Finance ROU assets Property, plant and equipment, net (1) 27.1
Total ROU assets   $70.4
     
Liabilities:    
Current    
Operating Other current liabilities $11.2
Finance Current maturities of debt 0.2
Non-current    
Operating Other liabilities 34.3
Finance Long-term debt 26.9
Total lease liabilities   $72.6
____________________
(1)Finance lease assets are recorded net of accumulated amortization of $0.2 million as of June 30, 2019.
The components of lease expense reported in the condensed consolidated statements of operations are as follows (in millions):
  Three Months Ended
  June 30, 2019
Operating lease expenses:  
Fixed lease expense (1) $3.6
Variable and short-term lease expense (1) 1.2
Total operating lease expense $4.8
   
Finance lease expenses:  
Depreciation of finance ROU assets (1) $0.2
Interest on lease liabilities (2) 0.3
Total finance lease expense $0.5
____________________
(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, 2019 are as follows (in millions):
Years ending March 31, 
Operating Leases (1)
 
Finance Leases (1)
2020 $9.9
 $1.4
2021 10.5
 1.9
2022 8.3
 1.9
2023 7.2
 1.9
2024 4.7
 1.9
Thereafter 10.2
 46.0
Total future minimum lease payments 50.8
 55.0
Less: Imputed interest (5.3) (27.9)
Total lease liabilities $45.5
 $27.1

(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:

Lease Term and Discount RateJune 30, 2019
Weighted-average remaining lease terms (years):
Operating leases5.2
Finance leases29.2
Weighted-average discount rate:
Operating leases3.9%
Finance leases5.7%

Cash paid for amounts included in the measurement of lease liabilities are as follows (in millions):
  Three Months Ended
  June 30, 2019
Operating cash flows from operating leases $3.6
Operating cash flows from finance leases 0.3
Financing cash flows from finance leases 0.2


Sale-Leaseback Transaction:

During the third quarter of fiscal 2018, the Company entered into a sale-leaseback arrangement for an owned facility in Downer'sDowners Grove, Illinois and received net proceeds from the transaction of $5.8 million. Due to the Company's continuing involvementIllinois. In accordance with the constructionsale-leaseback guidance of a new facility at the same location,ASC 840, the property did not qualify for sale accounting under the sale-leaseback accounting guidance during the construction period and as a result it has beenwas accounted for as a financing transaction, with the $5.8 million of proceeds being classified in the condensed consolidated balance sheets in "Other current liabilities". The Company will depreciate the carrying value of the building over the expected remaining useful life.transaction. No gain or loss was recognized from thein connection with this transaction.
As a result of Upon the Company's anticipated involvement duringadoption of ASC 842 on April 1, 2019, this financing transaction did not qualify for sale-leaseback accounting under the construction periodrequirements of ASC 842 and, accordingly, continued to be accounted for as a financing obligation. The financing obligation and related asset of $4.6 million and $3.0 million, respectively, are recorded in Property, plant and equipment, net and Other liabilities in the new manufacturing facilitycondensed consolidated balance sheet as of June 30, 2019.
Prior to the adoption of ASC 842, the Company iswas considered, for accounting purposes only, the owner of the new facility due to the Company's continuing involvement with the new manufacturing facility during the construction period and accordingly recorded the construction asset under build-to-suit lease accounting.and financing obligation within its consolidated balance sheets. Upon completionthe adoption of construction,ASC 842 on April 1, 2019, the Company will evaluate the de-recognitionderecognized approximately $23.0 million of the construction asset and liability under sale-leaseback accounting guidance.financing obligation recorded as of March 31, 2019, and has accounted for the new facility as a finance lease in accordance with ASC 842.


15. Retirement Benefits

The components of net periodic benefit cost are as follows (in millions):
  Three Months Ended Nine Months Ended
  December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Pension Benefits:        
Service cost $0.2
 $0.5
 $0.6
 $1.4
Interest cost 6.1
 6.4
 18.3
 19.0
Expected return on plan assets (6.6) (6.8) (19.8) (20.0)
Amortization:        
Prior service cost —
 —
 —
 0.1
Net periodic benefit (credit) cost $(0.3) $0.1
 $(0.9) $0.5
Other Postretirement Benefits:        
Interest cost $0.2
 $0.3
 $0.3
 $0.9
Amortization:        
Prior service credit (0.5) (0.5) (1.5) (1.5)
Net periodic benefit credit $(0.3) $(0.2) $(1.2) $(0.6)

During the first nine months of fiscal 2018 and 2017, the Company made contributions of $2.9 million and $4.6 million, respectively, to its U.S. qualified pension plan trusts.

In accordance with the Company's accounting policy for defined benefit pension and other postretirement benefit plans, actuarial gains and losses above the corridor are immediately recognized in the Company's operating results. The corridor is 10% of the higher of the pension benefit obligation or the fair value of the plan assets. This adjustment is typically recorded annually in the fourth quarter in connection with the Company's required year-end re-measurement of plan assets and benefit obligations, or upon any off-cycle re-measurement event.

As of December 31, 2017, the Company merged three of its U.S. qualified defined benefit pension plans into a single plan, thereby also merging all of the pension plans’ assets. The merger of the three plans was a non-substantive change with no changes to the benefit formulas, vesting provisions, or to the employees covered by the plans.  Accordingly, the Company deemed an off-cycle remeasurement of the plan assets and benefit obligations was not required. 

See Note 16 to the audited consolidated financial statements of the Company's fiscal 2017 Annual Report on Form 10-K for further information regarding retirement benefits.

16.19. 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. ASC 718, Compensation-Stock Compensation (“ASC 718”), requires compensation costs related to share-

based payment transactions to be recognized in the financial statements. Generally, compensation cost is measured based on the estimated grant-date fair value of the equity instruments issued. Compensation cost is recognized over the requisite service period, generally as the awards vest.
For the three and nine months ended December 31, 2017,June 30, 2019 and June 30, 2018, the Company recognized $5.1$6.9 million and $15.9$6.0 million of stock-based compensation expense, respectively. For the three and nine months ended December 31, 2016, the Company recognized $3.8 million and $9.8 million of stock-based compensation expense, respectively. As of December 31, 2017, there was $29.4 million of total unrecognized compensation cost related to non-vested equity awards that is expected to be recognized over a weighted-average period of 1.8 years.

Stock Options
During the ninethree months ended December 31, 2017 and December 31, 2016,June 30, 2019, the Company granted the following stock options, restricted stock units, and performance stock units to directors, executive officers, and certain other employees, which vest over a weighted-average term of three years. The fair value of each option granted under the Plan during the nine months ended December 31, 2017 was estimated on the grant date using the Black-Scholes valuation model utilizing the following weighted-average assumptions:employees:
Award Type Number of Awards Weighted Average Grant-Date Fair Value
Stock options 154,934
 $9.50
Restricted stock units 410,065
 $27.49
Performance stock units 314,835
 $27.50

Nine Months Ended December 31, 2017
Expected option term (in years)6.5
Expected volatility factor31%
Weighted-average risk-free interest rate1.99%
Expected dividend rate0.0%
The Company estimates the expected term of stock options granted based on the midpoint between when the options vest and when they expire. The Company uses the simplified method to determine the expected term, as management does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term dueSee Note 15, Stock-Based Compensation, to the limited periodaudited consolidated financial statements of time its common stock shares has been publicly traded. The Company’s expected volatility assumption is based on its historical volatility. The weighted-average risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Management assumes expected dividends of zero. The weighted-average grant date fair value of options granted under the Plan during the nine months ended December 31, 2017 was $8.11.
A summary of stock option activity during the first nine months of fiscal 2018 and 2017 is as follows:
 Nine Months Ended
 December 31, 2017 December 31, 2016
 Shares Weighted Avg. Exercise Price Shares Weighted Avg. Exercise Price
Number of common shares under option:       
Outstanding at beginning of period7,770,670
 $18.73
 7,854,685
 $15.10
Granted1,175,702
 23.17
 2,599,538
 19.72
Exercised(246,372) 13.44
 (1,937,487) 5.00
Canceled/Forfeited(162,663) 22.57
 (451,536) 23.52
Outstanding at end of period (1)8,537,337
 $19.42
 8,065,200
 $18.53
Exercisable at end of period (2)5,081,221
 $17.79
 3,370,968
 $14.74
______________________
(1)The weighted average remaining contractual life of options outstanding at December 31, 2017 is 6.3 years.
(2)
The weighted average remaining contractual life of options exercisable at December 31, 2017 is 5.0 years.

Restricted Stock Units
During the nine months ended December 31, 2017 and 2016, the Company granted restricted stock units ("RSUs") to its non-employee directors and certain employees. RSUs granted during the nine months ended December 31, 2017 and 2016 generally vest ratably over three years. The fair value of each award is determined based on the Company's closing stock pricefiscal 2019 Annual Report on the date of grant. A summary of RSU activity during the nine months ended December 31, 2017 and 2016 is as follows:Form 10-K for further information regarding stock-based compensation.

 Nine Months Ended
 December 31, 2017 December 31, 2016
 Shares Weighted Avg. Grant Date Fair Value Shares Weighted Avg. Grant Date Fair Value
Nonvested RSUs at beginning of period322,142
 $20.59
 125,307
 $24.67
Granted248,199
 23.16
 276,943
 19.51
Vested(101,103) 21.25
 (42,144) 24.63
Canceled/Forfeited(30,729) 22.48
 (29,036) 21.99
Nonvested RSUs at end of period438,509
 $21.76
 331,070
 $20.59

Performance Stock Units
The Company grants performance stock units (“PSUs”) to its executive officers and certain other employees. PSUs have a three-year performance period and are earned and vest, subject to continued employment, based in part on performance relative to metrics determined by the Compensation Committee. The number of PSUs earned, which can range between 0% and 200% of the target awards granted depending on the Company's actual performance during the three-year performance period, will be satisfied with Rexnord common stock. A summary of PSU activity during the nine months ended December 31, 2017 and 2016 is as follows:    
 Nine Months Ended
 December 31, 2017 December 31, 2016
 Shares Weighted Avg. Grant Date Fair Value Shares Weighted Avg. Grant Date Fair Value
Nonvested PSUs at beginning of period259,930
 $24.74
 49,136
 $28.57
Granted193,071
 26.58
 219,266
 23.95
Vested—
 —
 —
 —
Canceled/Forfeited—
 —
 (4,200) 28.57
Nonvested PSUs at end of period453,001
 $25.53
 264,202
 $24.74

The fair value of the portion of PSUs with vesting based on free cash flow conversion is determined based on the Company's closing common stock price on the date of grant. The fair value of the portion of PSUs with vesting based on relative total shareholder return is determined utilizing the Monte Carlo simulation model and the weighted-average fair value of awards granted during the nine months ended December 31, 2017 was $31.25. Assumptions used to determine the fair value of each PSU were based on historical data and standard industry valuation practices and methodology. The following weighted-average assumptions were used for the PSUs granted during the nine months ended December 31, 2017:
Nine Months Ended December 31, 2017
Expected volatility factor31%
Weighted-average risk-free interest rate1.45%
Expected dividend rate0.0%

17.20. 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, FlatTop, Falk, Link-BeltRexnord®, Rex®, Addax®, Euroflex®, Falk®, FlatTop®, Cambridge®, Link-Belt®, Omega®, PSI®, Shafer®, Stearns®, Highfield®, Thomas®, Centa®, and Cambridge.Tollok®. 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 and flow control products for water and wastewater treatment infrastructure markets.buildings. Products are marketed and sold under widely recognized brand names, including Zurn, Wilkins,Zurn®, Wilkins®, Green Turtle®, and VAG.World Dryer®. 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 (seeorganization. See Note 1).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 in all periods presented. See Note 4, Discontinued Operations, for further information.

Business Segment Information (in millions):Information:
(in Millions)
  Three Months Ended
  June 30, 2019
June 30, 2018
Net sales    
Process & Motion Control $330.1
 $332.4
Water Management (1) 178.2
 171.2
  Consolidated net sales 508.3
 503.6
Income from operations    
Process & Motion Control 55.1
 49.9
Water Management (1) 40.0
 36.5
Corporate (14.9) (14.3)
  Consolidated income from operations 80.2
 72.1
Non-operating expense:    
Interest expense, net (15.5) (18.6)
Other (expense) income, net (1.5) 1.7
Income before income taxes 63.2
 55.2
Provision for income taxes (14.8) (14.5)
Equity method investment income 0.1
 1.5
Net income from continuing operations 48.5
 42.2
Loss from discontinued operations, net of tax (1.8) (42.8)
Net income (loss) 46.7
 (0.6)
Non-controlling interest income 0.2
 0.1
Net income (loss) attributable to Rexnord 46.5
 (0.7)
Dividends on preferred stock (5.8) (5.8)
Net income (loss) attributable to Rexnord common stockholders $40.7
 $(6.5)
     
Depreciation and amortization    
Process & Motion Control $14.6
 $16.0
Water Management (1) 6.3
 6.2
Corporate 0.1
 —
  Consolidated $21.0
 $22.2
Capital expenditures    
Process & Motion Control $4.6
 $8.9
Water Management (1) 1.3
 1.3
  Consolidated $5.9
 $10.2

  Three Months Ended Nine Months Ended
  December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Net sales        
Process & Motion Control $292.5
 $270.3
 $880.6
 $820.9
Water Management 199.8
 181.5
 610.2
 593.7
  Consolidated net sales $492.3
 $451.8
 $1,490.8
 $1,414.6
Income (loss) from operations        
Process & Motion Control $48.5
 $28.6
 $132.9
 $91.3
Water Management 25.8
 14.4
 85.9
 63.1
Corporate (11.1) (10.2) (34.6) (30.5)
  Consolidated income from operations $63.2
 $32.8
 $184.2
 $123.9
Non-operating expense:        
Interest expense, net $(18.7) $(22.9) $(58.9) $(69.4)
Loss on the extinguishment of debt (11.9) (7.8) (11.9) (7.8)
Other expense, net (1.0) (0.7) (2.5) (3.3)
Income before income taxes 31.6
 1.4
 110.9
 43.4
Benefit for income taxes (50.0) (1.8) (27.0) (3.3)
Net income 81.6
 3.2
 137.9
 46.7
Dividends on preferred stock (5.8) (1.5) (17.4) (1.5)
Net income attributable to Rexnord common stockholders $75.8
 $1.7
 $120.5
 $45.2
Depreciation and amortization        
Process & Motion Control $13.0
 $17.0
 $40.4
 $51.8
Water Management 8.7
 8.8
 24.9
 27.3
  Consolidated $21.7
 $25.8
 $65.3
 $79.1
Capital expenditures        
Process & Motion Control $7.6
 $12.0
 $20.8
 $32.9
Water Management 1.6
 3.1
 4.3
 11.1
  Consolidated $9.2
 $15.1
 $25.1
 $44.0
____________________
(1)Amounts reflect Water Management continuing operations.


18.21. Guarantor Subsidiaries

The following schedules present condensed consolidating financial information of the Company as of DecemberJune 30, 2019 and March 31, 2017 and 20162019, and for the three and nine month periods ended December 31, 2017June 30, 2019 and 20162018 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
December 31, 2017June 30, 2019
(in millions)
Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets                       
Current assets:                       
Cash and cash equivalents$—
 $0.4
 $41.3
 $193.1
 $—
 $234.8
 $0.6
 $0.8
 $67.4
 $203.0
 $—
 $271.8
Receivables, net—
 —
 176.7
 136.4
 —
 313.1
 —
 —
 203.0
 104.4
 —
 307.4
Inventories, net—
 —
 227.6
 122.3
 —
 349.9
Inventories —
 —
 240.8
 110.5
 —
 351.3
Other current assets4.4
 —
 17.2
 35.5
 —
 57.1
 —
 —
 13.9
 25.0
 —
 38.9
Total current assets4.4
 0.4
 462.8
 487.3
 —
 954.9
 0.6
 0.8
 525.1
 442.9
 —
 969.4
Property, plant and equipment, net—
 —
 239.7
 149.6
 —
 389.3
 —
 —
 253.9
 128.7
 —
 382.6
Intangible assets, net—
 —
 450.1
 117.8
 —
 567.9
 —
 —
 411.6
 98.7
 —
 510.3
Goodwill—
 —
 1,022.8
 331.0
 —
 1,353.8
 —
 —
 1,031.0
 280.9
 —
 1,311.9
Investment in:          
 
 
 
 
 
 
Issuer subsidiaries1,215.9
 —
 —
 —
 (1,215.9) —
 1,265.2
 —
 —
 —
 (1,265.2) —
Guarantor subsidiaries—
 3,098.4
 —
 —
 (3,098.4) —
 —
 3,204.3
 —
 —
 (3,204.3) —
Non-guarantor subsidiaries—
 —
 688.7
 —
 (688.7) —
 —
 —
 553.2
 —
 (553.2) —
Other assets22.6
 1.4
 47.9
 12.2
 —
 84.1
 —
 1.0
 79.0
 46.8
 —
 126.8
Total assets$1,242.9
 $3,100.2
 $2,912.0
 $1,097.9
 $(5,003.0) $3,350.0
 $1,265.8
 $3,206.1
 $2,853.8
 $998.0
 $(5,022.7) $3,301.0
Liabilities and stockholders' equity                       
Current liabilities:                       
Current portion of long-term debt$—
 $—
 $0.2
 $—
 $—
 $0.2
Current maturities of debt $—
 $—
 $0.3
 $1.1
 $—
 $1.4
Trade payables—
 0.7
 120.1
 78.8
 —
 199.6
 —
 —
 119.8
 60.1
 —
 179.9
Compensation and benefits—
 —
 30.1
 22.3
 —
 52.4
 —
 —
 21.7
 18.6
 —
 40.3
Current portion of pension and postretirement benefit obligations—
 —
 2.5
 1.9
 —
 4.4
 —
 —
 1.9
 1.4
 —
 3.3
Other current liabilities—
 5.8
 74.8
 46.1
 —
 126.7
 3.0
 1.4
 84.9
 40.1
 —
 129.4
Total current liabilities—
 6.5
 227.7
 149.1
 —
 383.3
 3.0
 1.4
 228.6
 121.3
 —
 354.3
            
Long-term debt—
 1,285.3
 37.4
 0.2
 —
 1,322.9
 —
 1,213.9
 40.8
 8.8
 —
 1,263.5
Note (receivable from) payable to affiliates, net(11.5) 588.3
 (741.0) 164.2
 —
 —
Pension and postretirement benefit obligations—
 —
 118.5
 52.4
 —
 170.9
 —
 —
 108.4
 45.3
 —
 153.7
Deferred income taxes—
 4.1
 108.4
 33.7
 —
 146.2
 —
 —
 102.7
 26.9
 —
 129.6
Other liabilities0.3
 0.1
 62.6
 9.6
 —
 72.6
 0.3
 —
 74.4
 47.3
 —
 122.0
Total liabilities(11.2) 1,884.3
 (186.4) 409.2
 —
 2,095.9
 3.3
 1,215.3
 554.9
 249.6
 —
 2,023.1
Note (receivable from) payable to affiliates, net (15.4) 725.6
 (905.4) 195.2
 —
 —
Total stockholders' equity1,254.1
 1,215.9
 3,098.4
 688.7
 (5,003.0) 1,254.1
 1,277.9
 1,265.2
 3,204.3
 553.2
 (5,022.7) 1,277.9
Total liabilities and stockholders' equity$1,242.9
 $3,100.2
 $2,912.0
 $1,097.9
 $(5,003.0) $3,350.0
 $1,265.8
 $3,206.1
 $2,853.8
 $998.0
 $(5,022.7) $3,301.0



Condensed Consolidating Balance Sheets
March 31, 20172019
(in millions)

  Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets            
Current assets:            
Cash and cash equivalents $1.4
 $0.2
 $107.7
 $183.2
 $—
 $292.5
Receivables, net —
 —
 219.6
 114.7
 —
 334.3
Inventories —
 —
 214.3
 102.2
 —
 316.5
Other current assets —
 —
 13.0
 26.6
 —
 39.6
Total current assets 1.4
 0.2
 554.6
 426.7
 —
 982.9
Property, plant and equipment, net —
 —
 251.2
 131.8
 —
 383.0
Intangible assets, net —
 —
 411.6
 99.9
 —
 511.5
Goodwill —
 —
 1,017.1
 282.6
 —
 1,299.7
Investment in: 
 
 
 
 
 
Issuer subsidiaries 1,212.1
 —
 —
 —
 (1,212.1) —
Guarantor subsidiaries —
 3,146.0
 —
 —
 (3,146.0) —
Non-guarantor subsidiaries —
 —
 547.4
 —
 (547.4) —
Other assets —
 1.1
 63.1
 18.4
 —
 82.6
Total assets $1,213.5
 $3,147.3
 $2,845.0
 $959.4
 $(4,905.5) $3,259.7
Liabilities and stockholders' equity            
Current liabilities:            
Current maturities of debt $—
 $—
 $0.1
 $1.1
 $—
 $1.2
Trade payables —
 —
 129.7
 62.0
 —
 191.7
Compensation and benefits —
 —
 42.4
 21.3
 —
 63.7
Current portion of pension and postretirement benefit obligations —
 —
 1.9
 1.4
 —
 3.3
Other current liabilities 3.0
 7.5
 90.3
 36.3
 —
 137.1
Total current liabilities 3.0
 7.5
 264.4
 122.1
 —
 397.0
             
Long-term debt —
 1,213.4
 14.4
 9.0
 —
 1,236.8
Pension and postretirement benefit obligations —
 —
 112.9
 45.1
 —
 158.0
Deferred income taxes —
 —
 98.8
 27.1
 —
 125.9
Other liabilities 0.2
 —
 87.4
 23.4
 —
 111.0
Total liabilities 3.2
 1,220.9
 577.9
 226.7
 —
 2,028.7
Note (receivable from) payable to affiliates, net (20.7) 714.3
 (879.0) 185.4
 —
 —
Total stockholders' equity 1,231.0
 1,212.1
 3,146.1
 547.3
 (4,905.5) 1,231.0
Total liabilities and stockholders' equity $1,213.5
 $3,147.3
 $2,845.0
 $959.4
 $(4,905.5) $3,259.7
 Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets           
Current assets:           
Cash and cash equivalents$4.9
 $0.1
 $253.3
 $231.8
 $—
 $490.1
Receivables, net—
 —
 191.3
 131.6
 —
 322.9
Inventories, net—
 —
 223.8
 91.1
 —
 314.9
Other current assets4.4
 —
 11.0
 34.8
 —
 50.2
Total current assets9.3
 0.1
 679.4
 489.3
 —
 1,178.1
Property, plant and equipment, net—
 —
 255.3
 145.6
 —
 400.9
Intangible assets, net—
 —
 441.9
 116.7
 —
 558.6
Goodwill—
 —
 996.8
 321.4
 —
 1,318.2
Investment in:           
Issuer subsidiaries1,020.1
 —
 —
 —
 (1,020.1) —
Guarantor subsidiaries—
 2,835.2
 —
 —
 (2,835.2) —
Non-guarantor subsidiaries—
 —
 602.2
 —
 (602.2) —
Other assets22.6
 1.8
 46.8
 12.3
 —
 83.5
Total assets$1,052.0
 $2,837.1
 $3,022.4
 $1,085.3
 $(4,457.5) $3,539.3
Liabilities and stockholders' equity           
Current liabilities:           
Current portion of long-term debt$—
 $16.1
 $0.4
 $—
 $—
 $16.5
Trade payables—
 —
 120.3
 77.5
 —
 197.8
Compensation and benefits—
 —
 32.4
 21.9
 —
 54.3
Current portion of pension and postretirement benefit obligations—
 —
 2.4
 1.9
 —
 4.3
Other current liabilities—
 5.7
 76.4
 45.3
 —
 127.4
Total current liabilities—
 21.8
 231.9
 146.6
 —
 400.3
Long-term debt—
 1,568.4
 37.7
 0.1
 —
 1,606.2
Note (receivable from) payable to affiliates, net(18.7) 215.5
 (442.2) 245.4
 —
 —
Pension and postretirement benefit obligations—
 —
 124.6
 49.8
 —
 174.4
Deferred income taxes—
 1.0
 175.7
 32.1
 —
 208.8
Other liabilities0.1
 10.3
 59.5
 9.1
 —
 79.0
Total liabilities(18.6) 1,817.0
 187.2
 483.1
 —
 2,468.7
Total stockholders' equity1,070.6
 1,020.1
 2,835.2
 602.2
 (4,457.5) 1,070.6
Total liabilities and stockholders' equity$1,052.0
 $2,837.1
 $3,022.4
 $1,085.3
 $(4,457.5) $3,539.3


Condensed Consolidating Statements of Operations
For the Three Months Ended December 31, 2017June 30, 2019
(in millions)



Parent
Issuers
Guarantor Subsidiaries
Non-Guarantor Subsidiaries
Eliminations
Consolidated
Net sales$—
 $—
 $358.7
 $210.9
 $(77.3) $492.3
Cost of sales—
 —
 226.3
 160.4
 (77.3) 309.4
Gross profit—
 —
 132.4
 50.5
 —
 182.9
Selling, general and administrative expenses—
 —
 76.1
 31.2
 —
 107.3
Restructuring and other similar charges—
 —
 3.2
 0.6
 —
 3.8
Amortization of intangible assets—
 —
 7.0
 1.6
 —
 8.6
Income from operations—
 —
 46.1
 17.1
 —
 63.2
Non-operating (expense) income:           
     Interest income (expense), net:           
          To third parties—
 (18.7) 0.1
 (0.1) —
 (18.7)
          To affiliates0.7
 6.7
 (6.1) (1.3) —
 —
Loss on extinguishment of debt—
 (11.9) —
 —
 —
 (11.9)
Other income (expense), net—
 (0.1) (2.5) 1.6
 —
 (1.0)
Income (loss) before income taxes from operations0.7
 (24.0) 37.6
 17.3
 —
 31.6
(Benefit) provision for income taxes—
 —
 (55.4) 5.4
 —
 (50.0)
Income (loss) before equity in income of subsidiaries0.7
 (24.0) 93.0
 11.9
 —
 81.6
Equity in earnings of subsidiaries80.9
 104.9
 11.9
 —
 (197.7) —
Net income81.6
 80.9
 104.9
 11.9
 (197.7) 81.6
Dividends on preferred stock5.8
 —
 —
 —
 —
 5.8
Net income attributable to Rexnord$75.8
 $80.9
 $104.9
 $11.9
 $(197.7) $75.8
Comprehensive income$81.6
 $83.3
 $104.8
 $17.4
 $(197.7) $89.4

Condensed Consolidating Statements of Operations
For the Nine Months Ended December 31, 2017
(in millions)

Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations ConsolidatedParent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $—
 $1,092.4
 $619.4
 $(221.0) $1,490.8
$—
 $—
 $391.7
 $161.3
 $(44.7) $508.3
Cost of sales—
 —
 684.8
 479.8
 (221.0) 943.6
—
 —
 238.0
 113.4
 (44.7) 306.7
Gross profit—
 —
 407.6
 139.6
 —
 547.2
—
 —
 153.7
 47.9
 —
 201.6
Selling, general and administrative expenses—
 —
 231.1
 95.5
 —
 326.6
—
 —
 82.6
 26.9
 —
 109.5
Restructuring and other similar charges—
 —
 8.3
 3.3
 —
 11.6
—
 —
 2.5
 0.7
 —
 3.2
Amortization of intangible assets—
 —
 20.0
 4.8
 —
 24.8
—
 —
 6.9
 1.8
 —
 8.7
Income from operations—
 —
 148.2
 36.0
 —
 184.2
—
 —
 61.7
 18.5
 —
 80.2
Non-operating (expense) income:           
 
 
 
 
 
Interest income (expense), net:           
 
 
 
 
 
To third parties—
 (59.3) 0.4
 —
 —
 (58.9)—
 (15.3) (0.5) 0.3
 —
 (15.5)
To affiliates2.4
 19.8
 (18.2) (4.0) —
 —
0.3
 8.7
 (7.0) (2.0) —
 —
Loss on extinguishment of debt—
 (11.9) —
 —
 —
 (11.9)
Other expense, net—
 —
 (4.7) 2.2
 —
 (2.5)—
 (0.1) (0.7) (0.7) —
 (1.5)
Income (loss) before income taxes from operations2.4
 (51.4) 125.7
 34.2
 —
 110.9
(Benefit) provision for income taxes—
 —
 (41.6) 14.6
 —
 (27.0)
Income (loss) before equity in income of subsidiaries2.4
 (51.4) 167.3
 19.6
 —
 137.9
Equity in earnings of subsidiaries135.5
 186.9
 19.6
 —
 (342.0) —
Income (loss) before income taxes0.3
 (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 subsidiaries0.3
 (6.7) 44.0
 10.9
 —
 48.5
Equity in income of subsidiaries46.5
 53.2
 9.2
 —
 (108.9) —
Net income from continuing operations46.8
 46.5
 53.2
 10.9
 (108.9) 48.5
Loss from discontinued operations, net of tax—
 —
 —
 (1.8) —
 (1.8)
Net income137.9
 135.5
 186.9
 19.6
 (342.0) 137.9
46.8
 46.5
 53.2
 9.1
 (108.9) 46.7
Non-controlling interest income—
 —
 —
 0.2
 —
 0.2
Net income attributable to Rexnord46.8
 46.5
 53.2
 8.9
 (108.9) 46.5
Dividends on preferred stock17.4
 —
 —
 —
 —
 17.4
(5.8) —
 —
 —
 —
 (5.8)
Net income attributable to Rexnord$120.5
 $135.5
 $186.9
 $19.6
 $(342.0) $120.5
Net income attributable to Rexnord common stockholders$41.0
 $46.5
 $53.2
 $8.9
 $(108.9) $40.7
Comprehensive income$137.9
 $147.1
 $189.4
 $49.7
 $(342.0) $182.1
$46.8
 $47.8
 $54.0
 $7.0
 $(108.9) $46.7

Condensed Consolidating Statements of Operations
For the Three Months Ended December 31, 2016June 30, 2018
(in millions)


 Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $—
 $385.4
 $169.5
 $(51.3) $503.6
Cost of sales—
 —
 235.9
 123.5
 (51.3) 308.1
Gross profit—
 —
 149.5
 46.0
 —
 195.5
Selling, general and administrative expenses—
 —
 85.1
 26.7
 —
 111.8
Restructuring and other similar charges—
 —
 2.1
 1.0
 —
 3.1
Amortization of intangible assets—
 —
 6.8
 1.7
 —
 8.5
Income from operations—
 —
 55.5
 16.6
 —
 72.1
Non-operating (expense) income:
 
 
 
 
 
     Interest income (expense), net:
 
 
 
 
 
          To third parties—
 (18.1) (0.5) —
 —
 (18.6)
          To affiliates0.6
 10.7
 (7.2) (4.1) —
 —
Other income, net—
 0.2
 1.0
 0.5
 —
 1.7
Income (loss) before income taxes0.6
 (7.2) 48.8
 13.0
 —
 55.2
Provision for income taxes—
 —
 (11.6) (2.9) —
 (14.5)
Equity method investment income—
 —
 —
 1.5
 —
 1.5
Income (loss) before equity in earnings of subsidiaries0.6
 (7.2) 37.2
 11.6
 —
 42.2
Equity in (loss) income of subsidiaries(1.2) 6.0
 (29.4) —
 24.6
 —
Net (loss) income from continuing operations(0.6) (1.2) 7.8
 11.6
 24.6
 42.2
Loss from discontinued operations, net of tax—
 —
 (1.8) (41.0) —
 (42.8)
Net (loss) income(0.6) (1.2) 6.0
 (29.4) 24.6
 (0.6)
Non-controlling interest income—
 —
 —
 0.1
 —
 0.1
Net (loss) income attributable to Rexnord(0.6) (1.2) 6.0
 (29.5) 24.6
 (0.7)
Dividends on preferred stock(5.8) —
 —
 —
 —
 (5.8)
Net (loss) income attributable to Rexnord common stockholders$(6.4) $(1.2) $6.0
 $(29.5) $24.6
 $(6.5)
Comprehensive (loss) income$(0.6) $(10.5) $7.5
 $(55.5) $24.6
 $(34.5)


Parent
Issuers
Guarantor Subsidiaries
Non-Guarantor Subsidiaries
Eliminations
Consolidated
Net sales$—
 $—
 $331.4
 $176.4
 $(56.0) $451.8
Cost of sales—
 —
 217.9
 136.9
 (56.0) 298.8
Gross profit—
 —
 113.5
 39.5
 —
 153.0
Selling, general and administrative expenses—
 —
 70.5
 29.4
 —
 99.9
Restructuring and other similar charges—
 —
 10.9
 0.8
 —
 11.7
Amortization of intangible assets—
 —
 7.0
 1.6
 —
 8.6
Income from operations—
 —
 25.1
 7.7
 —
 32.8
Non-operating (expense) income:           
     Interest income (expense), net:           
          To third parties—
 (22.8) (0.1) —
 —
 (22.9)
          To affiliates0.2
 16.4
 (13.7) (2.9) —
 —
Loss on extinguishment of debt—
 (7.8) —
 —
 —
 (7.8)
Other expense, net—
 —
 (0.3) (0.4) —
 (0.7)
Income (loss) before income taxes from operations0.2
 (14.2) 11.0
 4.4
 —
 1.4
(Benefit) provision for income taxes—
 —
 (6.5) 4.7
 —
 (1.8)
Net income (loss) before equity in loss of subsidiaries0.2
 (14.2) 17.5
 (0.3) —
 3.2
Equity in earnings (loss) of subsidiaries3.0
 17.2
 (0.3) —
 (19.9) —
Net income3.2
 3.0
 17.2
 (0.3) (19.9) 3.2
Dividends on preferred stock1.5
 —
 —
 —
 —
 1.5
Net income attributable to Rexnord$1.7
 $3.0
 $17.2
 $(0.3) $(19.9) $1.7
Comprehensive income (loss)$3.2
 $0.3
 $5.5
 $(16.4) $(19.9) $(27.3)

Condensed Consolidating Statements of Operations
For the Nine Months Ended December 31, 2016
(in millions)
 Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $—
 $1,043.6
 $545.5
 $(174.5) $1,414.6
Cost of sales—
 —
 682.5
 414.2
 (174.5) 922.2
Gross profit—
 —
 361.1
 131.3
 —
 492.4
Selling, general and administrative expenses—
 —
 224.0
 89.1
 —
 313.1
Restructuring and other similar charges—
 —
 18.5
 3.2
 —
 21.7
Amortization of intangible assets—
 —
 28.7
 5.0
 —
 33.7
Income from operations—
 —
 89.9
 34.0
 —
 123.9
Non-operating (expense) income:           
     Interest income (expense), net:           
          To third parties—
 (68.8) (0.5) (0.1) —
 (69.4)
          To affiliates0.2
 58.4
 (40.1) (18.5) —
 —
Loss on extinguishment of debt—
 (7.8) —
 —
 —
 (7.8)
Other (expense) income, net—
 (0.5) (1.9) (0.9) —
 (3.3)
Income (loss) before income taxes from operations0.2
 (18.7) 47.4
 14.5
 —
 43.4
Provision (benefit) for income taxes—
 0.1
 (14.2) 10.8
 —
 (3.3)
Income (loss) before equity in income of subsidiaries0.2
 (18.8) 61.6
 3.7
 —
 46.7
Equity in earnings of subsidiaries46.5
 65.3
 3.7
 —
 (115.5) —
Net income46.7
 46.5
 65.3
 3.7
 (115.5) 46.7
Dividends on preferred stock1.5
 —
 —
 —
 —
 1.5
Net income attributable to Rexnord$45.2
 $46.5
 $65.3
 $3.7
 $(115.5) $45.2
Comprehensive income (loss)$46.7
 $46.4
 $47.7
 $(7.3) $(115.5) $18.0


Condensed Consolidating Statements of Cash Flows
For the NineThree Months Ended December 31, 2017June 30, 2019
(in millions)



 Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Operating activities 
 
 
 
 
 
Cash provided by (used for) operating activities $9.6
 $311.8
 $(154.8) $(44.7) $—
 $121.9
Investing activities 
 
 
 
 
 
Expenditures for property, plant and equipment —
 —
 (18.2) (6.9) —
 (25.1)
Acquisitions, net of cash —
 —
 (50.0) —
 —
 (50.0)
Proceeds from dispositions of property, plant and equipment —
 —
 5.2
 0.3
 —
 5.5
Cash used for investing activities —
 —
 (63.0) (6.6) —
 (69.6)
Financing activities 
 
 
 
 
 
Proceeds from borrowings of long-term debt —
 1,325.0
 —
 —
 —
 1,325.0
Repayments of long-term debt —
 (1,603.2) —
 —
 —
 (1,603.2)
Repayments of short-term debt —
 (24.3) —
 —
 —
 (24.3)
Payment of debt issuance costs —
 (9.0) —
 —
 —
 (9.0)
Proceeds from exercise of stock options 2.9
 —
 —
 —
 —
 2.9
Proceeds from financing lease obligation —
 —
 5.8
 —
 —
 5.8
Payments of dividend on preferred stock (17.4) —
 —
 —
 —
 (17.4)
Cash (used for) provided by financing activities (14.5) (311.5) 5.8
 —
 —
 (320.2)
Effect of exchange rate changes on cash and cash equivalents —
 —
 —
 12.6
 —
 12.6
(Decrease) increase in cash and cash equivalents (4.9) 0.3
 (212.0) (38.7) —
 (255.3)
Cash and cash equivalents at beginning of period 4.9
 0.1
 253.3
 231.8
 —
 490.1
Cash and cash equivalents at end of period $—
 $0.4
 $41.3
 $193.1
 $—
 $234.8
  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 dividends on preferred stock (5.8) —
 —
 —
 —
 (5.8)
Cash used for 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



Condensed Consolidating Statements of Cash Flows
For the NineThree Months Ended December 31, 2016June 30, 2018
(in millions)


  Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Operating activities            
Cash provided by (used for) operating activities $4.2
 $0.1
 $18.2
 $(6.3) $—
 $16.2
Investing activities 
 
 
 
 
 
Expenditures for property, plant and equipment —
 —
 (7.9) (3.2) 

 (11.1)
Proceeds from dispositions of long-lived assets 

 

 3.5
 —
 

 3.5
Cash used for investing activities —
 —
 (4.4) (3.2) —
 (7.6)
Financing activities 
 
 
 
 
 
Proceeds from borrowings of debt —
 —
 108.0
 2.7
 —
 110.7
Repayments of debt —
 —
 (126.8) (0.3) —
 (127.1)
Proceeds from exercise of stock options 2.9
 —
 —
 —
 —
 2.9
Taxes withheld and paid on employees' share-based payment awards (0.4) —
 —
 —
 —
 (0.4)
Payments of preferred stock dividends (5.8) —
 —
 —
 —
 (5.8)
Cash (used for) provided by financing activities (3.3) —
 (18.8) 2.4
 —
 (19.7)
Effect of exchange rate changes on cash and cash equivalents —
 —
 —
 (9.2) —
 (9.2)
Increase (decrease) in cash and cash equivalents 0.9
 0.1
 (5.0) (16.3) —
 (20.3)
Cash, cash equivalents and restricted cash at beginning of period —
 —
 40.9
 176.7
 —
 217.6
Cash, cash equivalents and restricted cash at end of period $0.9
 $0.1
 $35.9
 $160.4
 $—
 $197.3

  Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Operating activities 
 
 
 
 
 
Net cash (used for) provided by operating activities $(404.9) $304.7
 $161.2
 $61.1
 $—
 $122.1
Investing activities 
 
 
 
 
 
Expenditures for property, plant and equipment —
 —
 (35.1) (8.9) —
 (44.0)
Acquisitions, net of cash —
 —
 (213.4) (0.3) —
 (213.7)
Proceeds from dispositions of property, plant and equipment —
 —
 1.9
 —
 —
 1.9
Cash used for investing activities —
 —
 (246.6) (9.2) —
 (255.8)
Financing activities 
 
 
 
 
 
Proceeds from borrowings of long-term debt —
 1,590.3
 —
 —
 —
 1,590.3
Repayments of long-term debt —
 (1,881.8) —
 —
 —
 (1,881.8)
Proceeds from borrowings of short-term debt —
 16.1
 —
 —
 —
 16.1
Repayments of short-term debt —
 (19.5) —
 —
 —
 (19.5)
Payment of debt issuance costs —
 (10.6) —
 —
 —
 (10.6)
Proceeds from issuance of preferred stock, net of direct offering costs 390.2
 —
 —
 —
 —
 390.2
Proceeds from exercise of stock options 9.6
 —
 —
 —
 —
 9.6
Deferred acquisition payment —
 —
 —
 (5.7) —
 (5.7)
Cash provided by (used for) financing activities 399.8
 (305.5) —
 (5.7) —
 88.6
Effect of exchange rate changes on cash and cash equivalents —
 —
 —
 (10.2) —
 (10.2)
(Decrease) increase in cash and cash equivalents (5.1) (0.8) (85.4) 36.0
 —
 (55.3)
Cash and cash equivalents at beginning of period 6.1
 2.0
 290.1
 186.4
 —
 484.6
Cash and cash equivalents at end of period $1.0
 $1.2
 $204.7
 $222.4
 $—
 $429.3



ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


General
Rexnord is a growth-oriented, multi-platform industrial company with what we believe are leading market shares and highly-trusted brands that serve a diverse array of global end markets. Our heritage of innovation and specification have allowed us to provide highly-engineered, mission-critical solutions to customers for decades and affords us the privilege of having long-term, valued relationships with market leaders. We operate our Company in a disciplined way and the Rexnord Business System (“RBS”) is our 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 our business.
RBS initiatives employ a framework and various processes across multiple operations and geographies, and are intended to drive customer satisfaction, performance and operating results. Savings from our RBS initiatives reflect benefits from a wide variety of ongoing efficiency, productivity and process improvements. Unless individually significant, it is not practicable to disclose each RBS activity or change that generated savings.
The following information should be read in conjunction with the audited consolidated financial statements and notes thereto, along with Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017.2019.
Fiscal Year
Our fiscal year ends on March 31. Throughout this MD&A, we refer to the quarter ended December 31, 2017period from April 1, 2019 through June 30, 2019 as the “third“first quarter of fiscal 2018”2020” or the “third“first quarter ended December 31, 2017.June 30, 2019.” Similarly, we refer to the quarter ended December 31, 2016period from April 1, 2018 through June 30, 2018 as the “third“first quarter of fiscal 2017”2019” or the “third“first quarter ended December 31, 2016.June 30, 2018.”
Critical Accounting Policies and Estimates
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Refer to Item 7, MD&A of our Annual Report on Form 10-K for the fiscal year ended March 31, 20172019, for information with respect to our critical accounting policies, which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management. Except for the items reported below, management believes that as of December 31, 2017June 30, 2019 and during the period from April 1, 20172019 through December 31, 2017,June 30, 2019, there has been no material change to this information, other than the items below.information.
Recent Accounting Pronouncements
See Item 1, Note 1, Basis of Presentation and Significant Accounting Policies regarding recent accounting pronouncements.
Acquisitions
On June 1, 2016,May 10, 2019, we acquired Cambridge International Holdings Corp. ("Cambridge") for a cash purchase price of $213.4 million. Cambridge, with operations in Cambridge, Maryland and Matamoros, Mexico, is onesubstantially all of the world's largest suppliersassets of metal conveyingEast Creek Corporation (d/b/a StainlessDrains.com), a manufacturer of stainless steel drains, grates and engineered woven metal solutions, primarily used in food processingaccessories for industrial and commercial end markets, as well as in architectural, packaging and filtration applications.markets. The acquisition of Cambridge expanded our presence in consumer-driven end markets in the Process & Motion Control platform. Our results of operations include the acquired operations subsequent to June 1, 2016.
On October 4, 2017, we acquired World Dryer Corporation (“World Dryer”) for a preliminary cash purchase price of approximately $50.0$24.8 million, excluding transaction costs and net of cash acquired, is subject to customary post-closing adjustments for variances between estimated working capital targets and actual working capital acquired. World Dryer is a leading global manufacturer of commercial electric hand dryers. This acquisition broadened theStainlessDrains.com, headquartered in Greenville, Texas, added complementary product portfolio of the Company'slines to our existing Water Management platformplatform.

On January 23, 2019, we acquired an additional 47.5% interest in Centa MP (Hong Kong) Co., Limited ("Centa China"), a joint venture in which we previously maintained a 47.5% non-controlling interest, for $21.4 million, net of cash held by the former joint venture. The acquisition of the additional interest in Centa China, a manufacturer and is expected to bring even greater value to commercial building owners in the form of lower operating costs. Our results of operations include the acquired operations as part of our Water Management platform subsequent to October 4, 2017.
During the third quarter of fiscal 2018, we entered into a definitive agreement to acquire Centa Power Transmission (Centa Antriebe Kirschey GmbH) ("Centa"), for an estimated purchase price of approximately €118 million. Centa, headquartered in Haan, Germany, is a leading manufacturerdistributor of premium flexible couplings and drive shafts for industrial, marine, rail and power generation applications. The acquisition of Centa will add complementary product lines toapplications within our existing Process & Motion Control platform, provides us with the opportunity to expand our product offerings within our Asia Pacific end markets.

Discontinued Operations
During fiscal 2019, we completed the sale of our VAG business, which was previously included within our Water Management platform. As a result, the operating results of the VAG business are reported as discontinued operations in the consolidated statements of operations for all periods presented, as the sale of VAG represented a strategic shift that had a major impact on our operations and financial results. The acquisitionsale agreement provided us the potential to receive contingent consideration of Centa isup to an additional $20.0 million based on, and subject to, the VAG business attainment of Earn-out EBITDA, as defined in the sale agreement, in our fiscal years ended March 31, 2019, and ending March 31, 2020 and 2021. The VAG business did not attain the Earn-out EBITDA metrics defined in the sale agreement for the fiscal year ended March 31, 2019. The sale price was subject to customary closing conditions; subject to those conditions, the transaction is expected to closeworking capital and cash balance adjustments, which were finalized during the fourthfirst quarter of fiscal 2018.2020.


As a result of these adjustments and other related costs, we recognized an additional $1.8 million loss on the sale of discontinued operations during the first quarter of fiscal 2020.
During the first quarter of fiscal 2019, the we recorded a non-cash impairment of $44.0 million to reflect the estimated fair value less costs to sell the VAG business based on the value of preliminary bids received at that time. For other elements of the loss from discontinued operations during the first quarter of fiscal 2019, refer to Item 1, Note 4, Discontinued Operations for further information. The analysis of our results of operations below focuses on our results from continuing operations.
Restructuring
During fiscal 2018,2020, we continued to execute various restructuring initiatives focused on driving efficiencies, reducing operating costs by modifying our footprint to reflect changes in the markets we serve and the impact of acquisitions on our overall manufacturing capacity, and refining our overall product portfolio. We expect these initiatives to continue, which may result in further workforce reductions, lease termination costs, and other facility rationalization costs, including the impairment or accelerated depreciation of assets. At this time, our full repositioning plan is preliminary and related expenses are not yet estimable.
For the three and nine months ended December 31, 2017,June 30, 2019 and June 30, 2018, restructuring and other similar charges totaled $3.8$3.2 million and $11.6 million, respectively. For the three and nine months ended December 31, 2016, restructuring and other similar charges totaled $11.7 million and $21.7$3.1 million, respectively. Refer to Item 1, Note 3, Restructuring and Other Similar Charges for further information.
Product Line Divestiture
During fiscal 2016, we decided to exit the non-strategic Rodney Hunt Fontaine (“RHF”) flow control gate product line. We completed the exit of the RHF product line in fiscal 2017. For purposes of comparison in the following discussion of results of operations, the RHF net sales for the three and nine months ended December 31, 2016 was $2.4 million and $14.4 million, respectively. Loss from operations for the three and nine months ended December 31, 2016 was$6.1 million and $13.2 million, respectively. The RHF product line exit did not impact results for the three and nine months ended December 31, 2017.


Results of Operations
ThirdFirst Quarter Ended December 31, 2017June 30, 2019 compared with the ThirdFirst Quarter Ended December 31, 2016:June 30, 2018:
Net sales
(Dollars in Millions)
Quarter Ended    Quarter Ended    
December 31, 2017 December 31, 2016 Change % ChangeJune 30, 2019 June 30, 2018 Change % Change
Process & Motion Control$292.5
 $270.3
 $22.2
 8.2%$330.1
 $332.4
 $(2.3) (0.7)%
Water Management199.8
 181.5
 18.3
 10.1%178.2
 171.2
 7.0
 4.1 %
Consolidated$492.3
 $451.8
 $40.5
 9.0%$508.3
 $503.6
 $4.7
 0.9 %
Process & Motion Control
Process & Motion Control net sales increased 8%decreased 0.7% year over year to $292.5$330.1 million in the thirdfirst quarter of fiscal 2018 as core2020. Core sales increased 6% year over year1% and the acquisition of Centa China added 1% to sales growth, which was more than offset by foreign currency translation added 2%. The increasethat had an unfavorable impact of 3% year over year. Core sales growth in core sales is the result of favorableour North American end markets was partially offset by weaker demand trends across the majority ofin our servedEuropean and Asian end markets.markets as well as our ongoing product line simplification initiatives.
Water Management
Water Management net sales were $199.8$178.2 million in the thirdfirst quarter of fiscal 2018,2020, an increase of 10%4.1% year over year. Core sales increased 7% year over year, excluding a 1% adverse impact associated with last year’s exit of the RHF product line, a 2% favorable impact from foreign currency translation, and a 2% increase from the World Dryer acquisition. The year-over-year4% increase in core sales reflects favorablegrowth is the result of increased demand trends inacross our nonresidentialNorth American building construction and water and wastewater infrastructure markets.end markets, partially offset by a modest impact of our ongoing product line simplification initiatives.



Income from operations
(Dollars in Millions)
Quarter Ended    Quarter Ended    
December 31, 2017 December 31, 2016 Change % ChangeJune 30, 2019 June 30, 2018 Change % Change
Process & Motion Control$48.5
 $28.6
 $19.9
 69.6 %$55.1
 $49.9
 $5.2
 10.4 %
% of net sales16.6% 10.6% 6.0% 
16.7% 15.0% 1.7% 
Water Management25.8
 14.4
 11.4
 79.2 %40.0
 36.5
 3.5
 9.6 %
% of net sales12.9% 7.9% 5.0% 
22.4% 21.3% 1.1% 
Corporate(11.1) (10.2) (0.9) (8.8)%(14.9) (14.3) (0.6) (4.2)%
Consolidated$63.2
 $32.8
 $30.4
 92.7 %$80.2
 $72.1
 $8.1
 11.2 %
% of net sales12.8% 7.3% 5.5%  15.8% 14.3% 1.5%  

Process & Motion Control
Process & Motion Control income from operations for the thirdfirst quarter of fiscal 20182020 was $48.5$55.1 million, or 16.6%16.7% of net sales. Income from operations as a percentage of net sales increased by 600170 basis points year over year primarily due to the core sales increase, RBS-led productivity gains, and benefits from our footprint repositioning actions and lower restructuring related expenses year over year, partially offset by higher incentive compensation accruals and incremental investments in our innovation and market expansion.year-over-year acquisition-related fair value adjustments.
Water Management
Water Management income from operations was $25.8$40.0 million for the thirdfirst quarter of fiscal 2018,2020, or 12.9%22.4% of net sales. Income from operations as a percentage of net sales increased by 500110 basis points year over year asprimarily due to the increase in sales and benefits from core sales volume growth,associated with ongoing cost reduction and productivity initiatives and lower restructuring expense year over year more than offset incremental investments in our innovation and market expansion initiatives.
Corporate
Corporate expenses were $11.1$14.9 million in the thirdfirst quarter of fiscal 20182020 and $10.2$14.3 million in the thirdfirst quarter of fiscal 2017.2019. The increase in corporate expenses is primarily associated with higher year-over-year stock-based compensation-related costs (primarily stock-based compensation) relative to the thirdfirst quarter of fiscal 2017.2019.
Interest expense, net
Interest expense, net was $18.7$15.5 million in the thirdfirst quarter of fiscal 20182020 compared to $22.9$18.6 million in the thirdfirst quarter of fiscal 2017.2019. The decrease in interest expense as compared to the prior year's period is primarily a result of the impact of lower outstanding borrowings in the thirdfirst quarter of fiscal 20182020 following a $195.0$75.0 million voluntary prepayment made on our term loan induring fiscal 2019. In addition, the thirdfirst quarter of fiscal 2017, as well as2019 included the impactamortization of unrealized losses associated with the reduction in overall term loan outstandinginterest rate derivatives that occurred in the third quartermatured during fiscal 2018. See Item 1, Note 11 Long-Term Debt for more information.2019.
Other expense,(expense) income, net
Other expense, net for the thirdfirst quarter of fiscal 2018 consisted2020 was $1.5 million compared to other income, net of $1.7 million for the first quarter of fiscal 2019. Other (expense) income, net consists primarily of foreign currency transaction lossesgains and the non-service cost components of $0.5 million and other miscellaneous expense of $0.5 million. Other expense, net for the third quarter of fiscal 2017 consisted ofperiodic benefit credits associated with our defined benefit plans. The year-over-year change is primarily driven by foreign currency transaction losses and the recognition of $0.2 million and other miscellaneous expensesactuarial losses in connection with the termination of $0.5 million.the Cambridge defined benefit plan.

BenefitProvision for income taxes
The income tax benefitprovision was $50.0$14.8 million in the thirdfirst quarter of fiscal 20182020 compared to an income tax benefit of $1.8$14.5 million in the thirdfirst quarter of fiscal 2017.2019. The effective income tax rate for the thirdfirst quarter of fiscal 20182020 was (158.2)%23.4% versus (128.6)%26.3% in the thirdfirst quarter of fiscal 2017.2019. The effective income tax benefit recorded on income before income taxesrate for the thirdfirst quarter of fiscal 20182020 was above the U.S. federal statutory rate of 21% primarily due to the recognitionaccrual of netforeign income tax benefitstaxes 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 the enactmentaccrual of U.S. Tax Cuts and Jobs Act ("U.S. Tax Reform") (see Item 1, Note 4 Income Taxes for additional information and explanation),various state income taxes, partially offset by the recognition of net tax benefits associated with the reduction in the tax liability originally recorded on the expatriation of certain foreign branch assets, and the net tax benefits associated with U.S. research and development credits and the Domestic Production Activities Deduction ("DPAD"). The income tax benefit recorded on income before income taxes for the third quarter of fiscal 2017 was primarily due to excess tax benefits associated with share-based payments and foreign-derived intangible income (“FDII”). The effective income tax rate for the first quarter of fiscal 2019 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes at higher statutory rates, the accrual of additional taxes associated with GILTI and the accrual of various state income taxes, partially offset by the recognition of netan income tax benefitsbenefit associated with U.S. research and development credits and the DPAD, partially offset with the recognition of income tax expense relating to variousa foreign income tax audits.country enacted rate reduction.
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 foreign tax creditU.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.


Net income attributable to Rexnord common stockholdersfrom continuing operations
Net income attributable to Rexnord common stockholdersfrom continuing operations for the thirdfirst quarter of fiscal 20182020 was $75.8$48.5 million, compared to net income from continuing operations of $1.7$42.2 million in the thirdfirst quarter of fiscal 2017,2019, as a result of the factors described above. Diluted net income per share attributable to Rexnord common stockholders was $0.67 in the third quarter of fiscal 2018, as compared to $0.02 in the third quarter of fiscal 2017. Net income available to Rexnord common stockholders in the third quarter of fiscal 2018 reflects the effect of $5.8 million of dividends on shares of cumulative preferred stock compared to $1.5 million of dividends on shares of cumulative preferred stock in the third quarter of fiscal 2017.


Nine Months Ended December 31, 2017 Compared with the Nine Months Ended December 31, 2016:

Net sales
(Dollars in Millions)
 Nine Months Ended    
 December 31, 2017 December 31, 2016 Change % Change
Process & Motion Control$880.6
 $820.9
 $59.7
 7.3%
Water Management610.2
 593.7
 16.5
 2.8%
  Consolidated$1,490.8
 $1,414.6
 $76.2
 5.4%
Process & Motion Control
Process & Motion Control net sales were $880.6 million in the first nine months of fiscal 2018, up 7% year over year. Excluding a 1% increase from the acquisition of Cambridge and a 1% favorable impact from foreign currency translation, core net sales increased 5% year over year. The increase in core sales is the result of favorable demand trends across the majority of our served end markets.
Water Management
Water Management net sales were $610.2 million in the first nine months of fiscal 2018 compared to $593.7 million in the first nine months of fiscal 2017. Core net sales, which excludes a 3% adverse impact associated with the exit of the RHF product line, a 1% favorable impact from foreign currency translation, and a 1% benefit from the acquisition of World Dryer, increased 4% during the first nine months of fiscal 2018. The year-over-year increase in core sales reflects favorable demand trends in our nonresidential construction and water and wastewater infrastructure markets.

Income (loss) from operations
(Dollars in Millions)
 Nine Months Ended    
 December 31, 2017 December 31, 2016 Change % Change
Process & Motion Control$132.9
 $91.3
 $41.6
 45.6 %
    % of net sales15.1% 11.1% 4.0%  
Water Management85.9
 63.1
 22.8
 36.1 %
    % of net sales14.1% 10.6% 3.5%  
Corporate(34.6) (30.5) (4.1) (13.4)%
    Consolidated$184.2
 $123.9
 $60.3
 48.7 %
        % of net sales12.4% 8.8% 3.6%  
Process & Motion Control
Process & Motion Control income from operations for the first nine months of fiscal 2018 was $132.9 million, or 15.1% of net sales. Income from operations as a percentage of net sales increased by 400 basis points year over year in the first nine months of fiscal 2018 primarily due to the core sales increase, RBS-led productivity gains and benefits from footprint repositioning actions, lower year-over-year restructuring related expenses and a reduction of amortization expense, partially offset by higher incentive compensation accruals and incremental investments in our innovation and market expansion.
Water Management
Water Management income fromcontinuing operations was $85.9 million for the first nine months of fiscal 2018, or 14.1% of net sales. Income from operations as a percentage of net sales increased 350 basis points year over year, as benefits from core sales volume growth, ongoing cost reduction and productivity initiatives, and lower restructuring expense year-over-year, more than offset incremental investments$0.39 in our innovation and market expansion initiatives.
Corporate
Corporate expenses were $34.6 million in the first nine months of fiscal 2018 and $30.5 million in the first nine months of fiscal 2017. The increase in corporate expenses is primarily associated with higher year-over-year compensation-related costs (primarily stock-based compensation) relative to the first nine months of fiscal 2017.


Interest expense, net
Interest expense, net was $58.9 million in the first nine months of fiscal 2018 compared to $69.4 million in the first nine months of fiscal 2016. The year-over-year decrease in interest expense is primarily a result of lower outstanding borrowings in the first nine months of fiscal 2018 following the $95.0 million voluntary prepayment made on our term loan during the first quarter of fiscal 2017, the $195.0 million prepayment made on our term loan in connection with the term loan refinancing completed2020, as compared to diluted net income per share of $0.34 in the thirdfirst quarter of fiscal 2017, and the $302 million of payments made on our term loan during the first nine months of fiscal 2018. See Item 1, Note 11 Long-Term Debt for more information.2019.
Other expense, net
Other expense, net for the first nine months of fiscal 2018, consisted of foreign currency transaction losses of $2.1 million and other miscellaneous expense of $0.4 million. Other expense, net for the first nine months of fiscal 2017, consisted of foreign currency transaction losses of $1.9 million, a $0.2 million loss on the sale of long-lived assets and other miscellaneous expense of $1.2 million.
Benefit for income taxes
The income tax benefit recorded in the first nine months of fiscal 2018 was $27.0 million compared to an income tax benefit of $3.3 million in the first nine months of fiscal 2017. The effective income tax rate for the first nine months of fiscal 2018 was (24.3)% versus (7.6)% in the first nine months of fiscal 2017. The income tax benefit recorded on income before income taxes for the first nine months of fiscal 2018 was primarily due to the recognition of net income tax benefits associated with the enactment of U.S. Tax Reform (see Item 1, Note 4 Income Taxes for additional information and explanation), the recognition of net tax benefits associated with the reduction in the tax liability originally recorded on the expatriation of certain foreign branch assets, and the net tax benefits associated with U.S. research and development credits and the DPAD. The income tax benefit recorded on income before income taxes for the first nine months of fiscal 2017 was primarily due to excess tax benefits associated with share-based payments, the recognition of net tax benefits associated with U.S. research and development credits, the recognition of a worthless stock and bad debt deduction for U.S. income tax purposes relating to an insolvent foreign subsidiary and the recognition of excess U.S. foreign tax credits, partially offset with the recognition of income tax expense relating to various foreign income tax audits.


Net income (loss) attributable to Rexnord common stockholders
Net income attributable to Rexnord common stockholders for the first nine monthsquarter of fiscal 20182020 was $120.5$40.7 million, compared to $45.2a net loss attributable to Rexnord common stockholders of $6.5 million forin the first nine monthsquarter of fiscal 2017, as2019.  The quarter-over-

quarter change is primarily a result of the $42.8 million, or $0.40 per diluted share, loss from discontinued operations, net of tax, in the quarter ended June 30, 2018, and the other factors described above. Diluted net income (loss) per share attributable to Rexnord common stockholders for the three months ended June 30, 2019 and June 30, 2018 was $1.13$0.38 and $0.43 in the first nine months of fiscal 2018 and fiscal 2017,$(0.06), respectively. Net income attributable to Rexnord common stockholders in the first nine months of fiscal 2018 reflects the effect of $17.4 million of dividends on shares of cumulative preferred stock compared to $1.5 million of dividends on shares of cumulative preferred stock in the first nine months of fiscal 2017.

Non-GAAP Financial Measures
Non-GAAP financial measures are intended to supplement and not replace financial measures prepared in accordance with GAAP.
Core sales
Core sales excludes the impact of acquisitions (such as the CambridgeCenta China and World DryerStainlessDrains.com acquisitions), divestitures (such as the RHF product line exit)VAG business) and foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparisons of our net sales performance with prior and future periods and to our peers. We exclude the effect of acquisitions and divestitures because the nature, size and number of acquisitions and divestitures can vary dramatically from period to period and between us and our peers, and can also obscure underlying business trends and make comparisons of long-term performance difficult. We exclude the effect of foreign currency translation from this measure because the volatility of currency translation is not under management's control.
EBITDA
EBITDA represents earnings before interest, taxes, depreciation and amortization. EBITDA is presented because it is an important supplemental measure of performance and it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is also presented and compared by analysts and investors in evaluating our ability to meet debt service obligations. Other companies in our industry may calculate EBITDA differently. EBITDA is not a measurement of financial performance under U.S. GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with U.S. GAAP. Because EBITDA is calculated before recurring cash charges, including

interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business.
Adjusted EBITDA
Adjusted EBITDA (as described below in “Covenant Compliance”) is an important measure because, under our credit agreement, our ability to incur certain types of acquisition debt and certain types of subordinated debt, make certain types of acquisitions or asset exchanges, operate our business and make dividends or other distributions, all of which will impact our financial performance, is impacted by our Adjusted EBITDA, as our lenders measure our performance with a net first lien leverage ratio by comparing our senior secured bank indebtedness to our Adjusted EBITDA (see “Covenant���Covenant Compliance” for additional discussion of this ratio, including a reconciliation to our net income). We reported net income availableattributable to Rexnord common stockholders in the ninethree months ended December 31, 2017June 30, 2019 of $120.5$40.7 million and Adjusted EBITDA for the same period of $279.0$111.0 million. See “Covenant Compliance” for a reconciliation of Adjusted EBITDA to GAAP net (loss) income.
Covenant Compliance
Our credit agreement, which governs our senior secured credit facilities, contains, among other provisions, restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and the maintenance of certain financial ratios. Payment of borrowings under the credit agreement may be accelerated if there is an event of default. Events of default include the failure to pay principal and interest when due, a material breach of a representation or warranty, certain non-payments or defaults under other indebtedness, covenant defaults, events of bankruptcy and a change of control. With respect to our revolving facility, covenants require us to remain at or below a maximum total net leverage ratio of 6.75 to 1.0 as of the end of each fiscal quarter (it was 3.0 to 1.0 at December 31, 2017). Certain covenants contained in the credit agreement restrict our ability to take certain actions, such as incurring additional debt or making acquisitions, including if we are unable to meet thea maximum total net leverage ratio.ratio of 6.75 to 1.0 as of the end of each fiscal quarter (it was 2.3 to 1.0 at June 30, 2019). Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions.

“Adjusted EBITDA” is the term we use to describe EBITDA as defined and adjusted in our credit agreement, which is net income, adjusted for the items summarized in the table below. Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, non-cash or non-recurring losses or gains. In view of our debt level, it is also provided to aid investors in understanding our compliance with our debt covenants. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA varies from others in our industry. This measure should not be considered as an alternative to net income, income from operations or any other performance measures derived in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider itbe considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; or (f) the impact of earnings or charges resulting from matters that we and the lenders under our credit agreement may not consider indicative of our ongoing operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results.
In addition, certain of these expenses can represent the reduction of cash that could be used for other corporate purposes. Further, although not included in the calculation of Adjusted EBITDA below, the measure may at times allow us to add estimated cost savings and operating synergies related to operational changes ranging from acquisitions or dispositions to restructurings,restructuring, and/or exclude one-time transition expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred.
The calculation of Adjusted EBITDA under our credit agreement as of December 31, 2017June 30, 2019, is presented in the table below. However, the results of such calculation could differ in the future based on the different types of adjustments that may be included in such respective calculations at the time.

Set forth below is a reconciliation of net income attributable to Rexnord common stockholders to Adjusted EBITDA for the periods indicated below.
(in millions)Nine months ended December 31, 2016 Year ended
March 31, 2017		 Nine months ended December 31, 2017 Twelve months ended December 31, 2017Three months ended June 30, 2018 Year ended
March 31, 2019		 Three months ended June 30, 2019 Twelve months ended June 30, 2019
Net income attributable to Rexnord common stockholders$45.2
 $66.8
 $120.5
 $142.1
Net (loss) income attributable to Rexnord common stockholders$(6.5) $11.1
 $40.7
 $58.3
Interest expense, net69.4
 88.7
 58.9
 78.2
18.6
 69.9
 15.5
 66.8
Non-controlling interest income0.1
 —
 0.2
 0.1
Equity method investment income(1.5) (3.6) (0.1) (2.2)
Dividends on preferred stock1.5
 7.3
 17.4
 23.2
5.8
 23.2
 5.8
 23.2
Income tax (benefit) provision(3.3) 7.9
 (27.0) (15.8)
Income tax provision14.5
 53.4
 14.8
 53.7
Depreciation and amortization79.1
 105.4
 65.3
 91.6
22.2
 87.9
 21.0
 86.7
EBITDA$191.9
 $276.1
 $235.1
 $319.3
$53.2
 $241.9
 $97.9
 $286.6
Adjustments to EBITDA:              
Restructuring and other similar charges (1)21.7
 31.6
 11.6
 21.5
Loss from discontinued operations, net of tax (1)42.8
 154.7
 1.8
 113.7
Restructuring and other similar charges (2)3.1
 12.1
 3.2
 12.2
Stock-based compensation expense9.8
 13.4
 15.9
 19.5
5.9
 22.6
 6.9
 23.6
LIFO (income) expense (2)(0.2) (2.3) 0.7
 (1.4)
Last-in first-out inventory adjustments (3)0.2
 6.7
 (0.3) 6.2
Acquisition-related fair value adjustment4.3
 4.3
 0.9
 0.9
1.6
 3.6
 0.5
 2.5
Loss on the extinguishment of debt7.8
 7.8
 11.9
 11.9
Actuarial gain on pension and postretirement benefit obligations—
 (2.6) —
 (2.6)
Loss on RHF product line exit (3) (excluding restructuring and related charges)9.5
 12.2
 —
 2.7
Gain on the extinguishment of debt—
 (4.3) —
 (4.3)
Other, net (4)3.7
 6.0
 2.9
 5.2
(1.8) 5.5
 1.0
 8.3
Subtotal of adjustments to EBITDA$56.6
 $70.4
 $43.9
 $57.7
$51.8
 $200.9
 $13.1
 $162.2
Adjusted EBITDA$248.5
 $346.5
 $279.0
 $377.0
$105.0
 $442.8
 $111.0
 $448.8
Pro forma adjustment for acquisitions (6)      $3.6
Pro forma adjustment for acquisitions (5)      $8.3
Pro forma Adjusted EBITDA      $380.6
      $457.1
Consolidated indebtedness (5)      $1,126.8
Total net leverage ratio (6)      3.0
Consolidated indebtedness (6)      $1,052.4
Total net leverage ratio (7)      2.3

(1)Represents restructuringLoss from discontinued operations, net of tax is not included in Adjusted EBITDA in accordance with the terms of our credit agreement.
(2)Restructuring and other similar charges is comprised of costs comprised ofassociated with workforce reductions, impairment of related manufacturing facilities, equipment and intangible assets, lease termination costs, and other facility rationalization costs.  See Item 1, Note 3, Restructuring and Other Similar Charges for more information.
(2)(3)Last-in first-out (LIFO) inventory adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement.
(3)The operating loss (excluding restructuring and related charges included in their respective adjusting lines above) related to the RHF product line exit is not included in Adjusted EBITDA in accordance with our credit agreement. The exit of the RHF product line was completed in fiscal 2017.
(4)Other, net for the periods indicated, consists of:primarily of gains and losses from foreign currency transactions, the non-service cost components of net periodic benefit costs associated with our defined benefit plans, actuarial gains and losses and gains and losses on the disposition of long-lived assets.
(in millions)Nine months ended December 31, 2016 Year ended
March 31, 2017		 Nine months ended December 31, 2017 Twelve months ended December 31, 2017
Other expense (income)       
Loss (gain) on sale of long-lived assets$0.2
 $—
 $—
 $(0.2)
Loss on foreign currency transactions1.9
 3.7
 2.1
 3.9
Other miscellaneous expenses1.2
 1.5
 0.4
 0.7
Total other expense$3.3
 $5.2
 $2.5
 $4.4
        
Other non-cash adjustments       
Other non-cash charges0.4
 0.8
 0.4
 0.8
        
Total other, net$3.7
 $6.0
 $2.9
 $5.2
(5)Represents a pro forma adjustment to include Adjusted EBITDA related to the acquisitions of Centa China and StainlessDrains.com, as permitted by our credit agreement. The pro forma adjustment includes the period from July 1, 2018 through the dates of the Centa China and StainlessDrains.com acquisitions. See Item 1, Note 2, Acquisitions for more information.
(6)Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $195.7$212.6 million (as defined by the credit agreement) at December 31, 2017.June 30, 2019.
(6)(7)Our credit agreement defines the total net leverage ratio as the ratio of consolidated indebtedness (as described above) to Adjusted EBITDA for the trailing four fiscal quarters.

Liquidity and Capital Resources
Our primary sources of liquidity are available cash and cash equivalents, cash flow from operations, borrowing availability of up to $264.0 million under our revolving credit facility, and availability of up to $100.0 million under our accounts receivable securitization program.     We expect to utilize these sources of liquidity to fund the pending acquisition of Centa that is expected to close during our fourth quarter of fiscal 2018.
As of December 31, 2017,June 30, 2019, we had $234.8$271.8 million of cash and cash equivalents and $348.1$351.4 million of additional borrowing capacity ($255.1258.5 million of available borrowings under our revolving credit facility and $93.0$92.9 million available under our accounts receivable securitization program). As of December 31, 2017,June 30, 2019, the available borrowings under our credit facility and accounts receivable securitization were reduced by $15.9$12.6 million due to outstanding letters of credit. As of March 31, 2017,2019, we had $490.1$292.5 million of cash and cash equivalents and approximately $345.8$351.3 million of additional borrowing capacity ($250.4258.4 million of available borrowings under our revolving credit facility and $95.4$92.9 million available under our accounts receivable securitization program). As of March 31, 2017, the available borrowings under our credit facility and accounts receivable securitization were reduced by $19.2 million due to outstanding letters of credit. Both our revolving credit facility and accounts receivable securitization program are available to fund our working capital requirements, acquisitions, capital expenditures and for other general corporate purposes.
Cash Flows
Net cash provided by operating activities was $121.9$19.0 million and $122.1$16.2 million in the first ninethree months of fiscal 20182020 and 2017,2019, respectively. Incremental profit generated from higher sales in the first ninethree months of fiscal 20182020 was partially offset by higher year over yearincremental trade working capital.capital and the timing of payments on accrued expenses.
Cash used for investing activities was $69.6$29.4 million in the first ninethree months of fiscal 20182020 compared to $255.8$7.6 million in the first ninethree months of fiscal 2017.2019. Investing activities in the first ninethree months of fiscal 20182020 included $25.1$5.9 million of capital expenditures, and $50.0$24.8 million associatedin connection with theour acquisition of World Dryer,StainlessDrains.com, partially offset by the receipt of $5.5$1.3 million in cash forconnection with the disposalsale of certain long-lived assets. Investing activities during the first ninethree months of fiscal 20172019 included $213.7 million of net cash associated with the acquisition of Cambridge and $44.0$11.1 million of capital expenditures, partially offset by the receipt of $1.9$3.5 million in cash forconnection with the disposalsale of certain long-lived assets.
Cash used for financing activities was $320.2$10.6 million in the first ninethree months of fiscal 20182020 compared to cash provided byused for financing activities of $88.6$19.7 million in the first ninethree months of fiscal 2017.2019. During the first ninethree months of fiscal 2018,2020, we utilized a net $311.5$3.9 million of cash and net proceedsfor the payment of our issuance of the Notes, net of financing related costs, in connection with the refinancing of the outstanding debt under our Credit Agreement (see Item 1 Note 11 Long-Term Debt for additional details). In addition we utilized $17.4and $5.8 million for the payment of preferred stock dividends. These additional usesThe first three months of fiscal 2020 also includes $4.8 million of cash were partiallyproceeds associated with stock option exercises, offset by $5.7 million of cash used for the receiptpayment of withholding taxes on employees' share-based payment awards. During the first three months of fiscal 2019, we utilized a net $16.4 million of cash for the payment of outstanding debt and $5.8 million in connection withfor the sale-leaseback transaction (see Item 1 Note 14 for further information) andpayment of preferred stock dividends. The first three months of fiscal 2019 also includes $2.9 million of cash proceeds associated with stock option exercises. During the first nine months of fiscal 2017, we received $390.2 million of proceeds from the closing of our preferred stock issuance on December 7, 2016, net of underwriting discounts, commissions and other direct costs of the offering (see Item 1 Note 6 Stockholders' Equity for additional details). The proceeds wereexercises, partially offset by $305.5 million of net debt payments, primarily for voluntary prepayments on our Term Loan of $195.0 million in connection with the preferred stock issuance, as well as our first quarter voluntary prepayment on our then existing Term Loan of $95.0 million in the first quarter (see Item 1 Note 11 Long-Term Debt for additional details). The above two debt repayment transactions exclude $10.6 million of related debt issue costs. The first nine months of fiscal 2017 also includes $9.6$0.4 million of cash proceeds associated with stock option exercises. Duringused for the first nine monthspayment of fiscal 2017, we also settled the deferred acquisitionwithholding taxes on employees' share-based payment associated with the fiscal 2015 acquisition of Tollok S.p.A. awards.
Indebtedness
As of December 31, 2017June 30, 2019, we had $1,323.1$1,264.9 million of total indebtedness outstanding as follows (in millions):
 Total Debt at December 31, 2017 Short-term Debt and Current Maturities of Long-Term Debt 
Long-term
Portion
 Total Debt at June 30, 2019 Current Maturities of Debt 
Long-term
Portion
Term loan (1) $791.2
 $—
 $791.2
 $718.7
 $—
 $718.7
4.875% Senior notes due 2025 (2) 494.1
 —
 494.1
Other subsidiary debt (3) 37.8
 0.2
 37.6
4.875% Senior Notes due 2025 (2) 495.2
 —
 495.2
Finance leases and other subsidiary debt 51.0
 1.4
 49.6
Total $1,323.1
 $0.2
 $1,322.9
 $1,264.9
 $1.4
 $1,263.5

(1)Includes an unamortized original issue discount and debt issuance costs of $8.8$6.3 million at December 31, 2017.June 30, 2019.
(2)Includes an unamortized original issue discount and debt issuance costs of $5.9 million at December 31, 2017.
(3)Includes unamortized debt issuance costs of $0.5$4.8 million at December 31, 2017.June 30, 2019.



ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk during the normal course of business from changes in foreign currency exchange rates and interest rates. The exposure to these risks is managed through a combination of normal operating and financing activities and derivative financial instruments in the form of foreign currency forward contracts, interest rate swaps and interest rate caps to cover certain known foreign currency transactional risks, as well as identified risks due to interest rate fluctuations. There have been no material changes in market risk from the information provided in "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our Form 10-K.

ITEM 4.CONTROLS AND PROCEDURES
We maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.


We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Based on that evaluation as of December 31, 2017,June 30, 2019, the Chief Executive Officer and Chief Financial Officer concluded that, as of such date, the Company's disclosure controls and procedures are adequate and effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, in a manner allowing timely decisions regarding required disclosure. As such, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the period covered by this report.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



PART II - OTHER INFORMATION


ITEM  1.LEGAL PROCEEDINGS
See the information under the heading "Commitments and Contingencies" in Note 1416 to the condensed consolidated financial statements contained in Part I, Item 1 of this report, which is incorporated in this Part II, Item 1 by reference.


ITEM  2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In fiscal 2015, the Company's Board of Directors approved a 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. 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; however, the program will continue until the maximum amount of dollars authorized have been expended or until it is modified or terminated by the Board. No shares were repurchased during the thirdfirst quarter of fiscal 2018.2020. A total of approximately $160.0 million remained of the existing repurchase authority at December 31, 2017.June 30, 2019.



ITEM  6.EXHIBITS

Exhibit
No.
Description 
Filed
Herewith
    
4.1
Indenture, dated as of December 7, 2017, by and among RBS Global, Inc., Rexnord LLC, the guarantors named therein and Wells Fargo Bank, National Association, as trustee*

 
10.1 
4.2
FormRexnord Corporation Performance Incentive Plan, as amended and restated as of RBS Global, Inc. and Rexnord LLC 4.875% Senior Notes due 2025 (included in Exhibit 4.1)*July 25, 2019*
  
    
4.3
Parent Guarantee, dated as of December 7, 2017, by and between Rexnord Corporation and Wells Fargo Bank, National Association, as trustee*
10.1
Incremental Assumption Agreement, dated as of December 7, 2017, among Chase Acquisition I, Inc., RBS Global, Inc., Rexnord LLC, certain domestic subsidiaries of Rexnord Corporation, Credit Suisse AG, Cayman Islands Branch, as administrative agent, Credit Suisse AG, Cayman Islands Branch, as refinancing term lender, and the other lenders party thereto*
10.2
Purchase Agreement, dated November 30, 2017, among RBS Global, Inc., Rexnord LLC, the Guarantors named therein, Rexnord Corporation and Credit Suisse Securities (USA) LLC, as representative of the Purchasers named therein**
10.3
Form of Indemnification Agreement (reflects non-material changes from the prior form of agreement)
X
 
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
 X
    
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
 X
    
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
 X
    
101.INSXBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.) X
    
101.SCHXBRL Taxonomy Extension Schema Document X
    
101.CALXBRL Taxonomy Extension Calculation Linkbase Document X
    
101.DEFXBRL Taxonomy Extension Definition Linkbase Document X
    
101.LABXBRL Taxonomy Extension Label Linkbase Document X
    
101.PREXBRL Taxonomy Extension Presentation Linkbase Document X
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*104Incorporated by reference to the same exhibit number in the Company’s Form 8-K, dated December 7, 2017.Cover Page iXBRL dataX
**Incorporated by reference to Exhibit 1.1 to the Company’s Form 8-K, dated November 30, 2017.

* Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A, filed on June 7, 2019.


SIGNATURESSIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Rexnord Corporation has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
     
   REXNORD CORPORATION
     
Date:January 31, 2018July 30, 2019 By:
/S/     MARK W. PETERSON
   Name:Mark W. Peterson
   Title:Senior Vice President and Chief Financial Officer





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