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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q
(Mark one)
(Mark one)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended DecemberMarch 31, 2017
2022
oTRANSITION 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

ZURN WATER SOLUTIONS CORPORATION
REXNORD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware20-5197013
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
247511 W. Freshwater Way Suite 300, Milwaukee, WI53204
Milwaukee,Wisconsin(Zip Code)
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (414) 643-3739(855) 480-5050

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 valueZWSThe 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.    Yes  x    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). Yes x 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 filerAccelerated filer
Large accelerated filerxAccelerated filero
Non-accelerated fileroSmaller 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.
ClassOutstanding at January 26, 2018April 22, 2022
RexnordZurn Water Solutions Corporation Common Stock, $0.01 par value per share103,978,699125,967,533 shares




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TABLE OF CONTENTS
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.
 



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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 MarchDecember 31, 2017,2021, in Part I, Item 1A, “Risk Factors” and in Part I under the heading "Cautionary Notice Regarding Forward-Looking Statements." Statements", as well as in our other filings with the Securities and Exchange Commission. In addition, our previously announced transaction with Elkay Manufacturing Company is subject to various risks, uncertainties and factors including, among others: the inability to complete the transaction; the inability to recognize the anticipated benefits of the proposed transaction, including due to the failure to receive required security holder approvals, or the failure of other closing conditions; and costs related to the proposed transaction. See also Part II, Item 1A, "Risk Factors" herein. 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
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Our fiscal year is the year ending March 31
Table of the corresponding calendar year. For example, our fiscal year 2018, or fiscal 2018, means the period from April 1, 2017 to March 31, 2018, and the third quarter of fiscal 2018 and 2017 means the fiscal quarters ended December 31, 2017 and December 31, 2016, respectively.Contents


PART I - FINANCIAL INFORMATION


ITEM  1.FINANCIAL STATEMENTS

ITEM  1.FINANCIAL STATEMENTS

Rexnord
Zurn Water Solutions Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in Millions, except share amounts)
(Unaudited)
(Unaudited)
 December 31, 2017 March 31, 2017March 31, 2022December 31, 2021
Assets    Assets
Current assets:    Current assets:
Cash and cash equivalents $234.8
 $490.1
Cash and cash equivalents$73.2 $96.6 
Receivables, net 313.1
 322.9
Receivables, net172.1 144.1 
Inventories 349.9
 314.9
Inventories224.3 184.5 
Income taxes receivableIncome taxes receivable27.4 33.1 
Other current assets 57.1
 50.2
Other current assets23.1 16.5 
Total current assets 954.9
 1,178.1
Total current assets520.1 474.8 
Property, plant and equipment, net 389.3
 400.9
Property, plant and equipment, net63.1 64.4 
Intangible assets, net 567.9
 558.6
Intangible assets, net176.9 179.1 
Goodwill 1,353.8
 1,318.2
Goodwill255.0 254.1 
Insurance for asbestos claimsInsurance for asbestos claims66.0 66.0 
Other assets 84.1
 83.5
Other assets37.5 39.3 
Total assets $3,350.0
 $3,539.3
Total assets$1,118.6 $1,077.7 
Liabilities and stockholders' equity    Liabilities and stockholders' equity
Current liabilities:    Current liabilities:
Current maturities of debt $0.2
 $16.5
Current maturities of debt$5.6 $5.6 
Trade payables 199.6
 197.8
Trade payables113.7 105.1 
Compensation and benefits 52.4
 54.3
Compensation and benefits6.6 22.0 
Current portion of pension and postretirement benefit obligations 4.4
 4.3
Current portion of pension and postretirement benefit obligations1.3 1.3 
Other current liabilities 126.7
 127.4
Other current liabilities87.3 106.4 
Total current liabilities 383.3
 400.3
Total current liabilities214.5 240.4 

    
Long-term debt 1,322.9
 1,606.2
Long-term debt532.9 533.9 
Pension and postretirement benefit obligations 170.9
 174.4
Pension and postretirement benefit obligations56.7 57.3 
Deferred income taxes 146.2
 208.8
Deferred income taxes7.7 3.1 
Operating lease liabilityOperating lease liability7.4 8.9 
Reserve for asbestos claimsReserve for asbestos claims66.0 66.0 
Other liabilities 72.6
 79.0
Other liabilities39.7 41.7 
Total liabilities 2,095.9
 2,468.7
Total liabilities924.9 951.3 

    
Stockholders' equity:    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: 125,847,069 at March 31, 2022 and 125,720,068 at December 31, 2021Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued and outstanding: 125,847,069 at March 31, 2022 and 125,720,068 at December 31, 20211.3 1.3 
Additional paid-in capital 1,270.1
 1,262.1
Additional paid-in capital1,440.8 1,436.9 
Retained earnings (deficit) 75.8
 (55.5)
Retained deficitRetained deficit(1,175.5)(1,236.9)
Accumulated other comprehensive loss (92.8) (137.0)Accumulated other comprehensive loss(72.9)(74.9)
Total stockholders' equity 1,254.1
 1,070.6
Total stockholders' equity193.7 126.4 
Total liabilities and stockholders' equity $3,350.0
 $3,539.3
Total liabilities and stockholders' equity$1,118.6 $1,077.7 
See notes to the condensed consolidated financial statements.

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Zurn Water Solutions Corporation and Subsidiaries
Condensed Consolidated Statements of OperationsOperations
(in Millions, except share and per share amounts)
(Unaudited)
Three Months Ended
March 31, 2022March 31, 2021
Net sales$239.6 $205.2 
Cost of sales137.7116.8
Gross profit101.988.4
Selling, general and administrative expenses53.957.7
Restructuring and other similar charges1.10.6
Amortization of intangible assets3.06.1
Income from operations43.924.0
Non-operating expense:
Interest expense, net(4.8)(9.6)
Other income, net0.30.3
Income before income taxes39.414.7
Provision for income taxes(10.0)(4.7)
Net income from continuing operations29.410.0
Income from discontinued operations, net of tax0.840.0
Net income attributable to Zurn common stockholders$30.2 $50.0 
Basic net income per share:
Continuing operations$0.23 $0.08 
Discontinued operations$0.01 $0.33 
Net income$0.24 $0.42 
Diluted net income per share:
Continuing operations$0.23 $0.08 
Discontinued operations$0.01 $0.32 
Net income$0.24 $0.40 
Weighted-average number of shares outstanding (in thousands):
Basic126,281119,808
Effect of dilutive equity awards2,1603,829
Diluted128,441123,637

See notes to the condensed consolidated financial statements.

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  Third Quarter Ended Nine Months Ended
  December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Net sales $492.3
 $451.8
 $1,490.8
 $1,414.6
Cost of sales 309.4
 298.8
 943.6
 922.2
Gross profit 182.9
 153.0
 547.2
 492.4
Selling, general and administrative expenses 107.3
 99.9
 326.6
 313.1
Restructuring and other similar charges 3.8
 11.7
 11.6
 21.7
Amortization of intangible assets 8.6
 8.6
 24.8
 33.7
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
         
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
Weighted-average number of shares outstanding (in thousands):      
Basic 103,964
 103,113
 103,824
 102,514
Diluted 122,017
 104,558
 122,363
 104,481

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RexnordZurn Water Solutions Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in Millions)
(Unaudited)
Three Months Ended
March 31, 2022March 31, 2021
Net income$30.2 $50.0 
Other comprehensive income (loss):
Foreign currency translation adjustments2.0 (1.7)
Change in pension and postretirement defined benefit plans, net of tax— (0.1)
Total comprehensive income$32.2 $48.3 
  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


See notes to the condensed consolidated financial statements.

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Zurn Water Solutions Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in Millions)
(Unaudited)
Three Months Ended
March 31, 2022March 31, 2021
Operating activities
Net income$30.2 $50.0 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation2.3 14.1 
Amortization of intangible assets3.0 9.4 
Deferred income taxes4.6 (1.3)
Other non-cash expenses0.5 0.7 
Stock-based compensation expense3.9 14.8 
Changes in operating assets and liabilities:
Receivables(27.7)(36.9)
Inventories(39.6)(19.9)
Other assets(1.1)3.1 
Accounts payable8.4 50.7 
Accruals and other(38.4)(13.4)
Cash (used for) provided by operating activities(53.9)71.3 
Investing activities
Expenditures for property, plant and equipment(0.8)(9.2)
Acquisitions, net of cash acquired— 0.4 
Proceeds from dispositions of long-lived assets1.3 0.7 
Proceeds associated with divestiture of discontinued operations35.0 — 
Cash provided by (used for) investing activities35.5 (8.1)
Financing activities
Proceeds from borrowings of debt10.0 — 
Repayments of debt(11.4)(0.5)
Proceeds from exercise of stock options0.5 2.8 
Taxes withheld and paid on employees' share-based payment awards(0.5)— 
Repurchase of common stock— (0.9)
Payment of common stock dividends(3.8)(10.8)
Cash used for financing activities(5.2)(9.4)
Effect of exchange rate changes on cash, cash equivalents and restricted cash0.2 (2.1)
(Decrease) increase in cash, cash equivalents and restricted cash(23.4)51.7 
Cash, cash equivalents and restricted cash at beginning of period96.6 255.6 
Cash, cash equivalents and restricted cash at end of period$73.2 $307.3 
  Nine Months Ended
  December 31, 2017 December 31, 2016
Operating activities    
Net income $137.9
 $46.7
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation 40.5
 45.4
Amortization of intangible assets 24.8
 33.7
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
Loss on dispositions of long-lived assets 0.4
 0.2
Deferred income taxes (76.2) (15.9)
Other non-cash charges 3.0
 (3.3)
Stock-based compensation expense 15.9
 9.8
Changes in operating assets and liabilities: 
 
Receivables 11.3
 33.1
Inventories (26.0) (5.1)
Other assets (6.3) (7.2)
Accounts payable (5.8) (21.4)
Accruals and other (10.9) (5.2)
Cash provided by operating activities 121.9
 122.1
     
Investing activities    
Expenditures for property, plant and equipment (25.1) (44.0)
Acquisitions, net of cash acquired (50.0) (213.7)
Proceeds from dispositions of long-lived assets 5.5
 1.9
Cash used for investing activities (69.6) (255.8)
     
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 exercise of stock options 2.9
 9.6
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
Effect of exchange rate changes on cash and cash equivalents 12.6
 (10.2)
Decrease in cash and cash equivalents (255.3) (55.3)
Cash and cash equivalents at beginning of period 490.1
 484.6
Cash and cash equivalents at end of period $234.8
 $429.3


See notes to the condensed consolidated financial statements.

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Zurn Water Solutions Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
DecemberMarch 31, 20172022
(Unaudited)


1.1. Basis of Presentation and Significant Accounting Policies

The unaudited condensed consolidated financial statements included herein have been prepared by RexnordZurn Water Solutions Corporation ("Rexnord"(“Zurn” 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 MarchDecember 31, 2018.2022. 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 2017 Annual Report on Form 10-K.10-K for the year ended December 31, 2021.
Spin-Off of Process & Motion Control Segment
On October 4, 2021, the Company completed a Reverse Morris Trust tax-free spin-off transaction (the “Spin-off Transaction”) in which (i) substantially all the assets and liabilities of the Company's PMC business were transferred to a newly created subsidiary, Land Newco, Inc. (“Land”), (ii) the shares of Land were distributed to the Company's stockholders pro rata, and (iii) Land was merged with a subsidiary of Regal Rexnord Corporation (formerly known as Regal Beloit Corporation), in which the stock of Land was converted into a specified number of shares of Regal Rexnord Corporation in accordance with the exchange ratio. Following completion of the Spin-Off Transaction, the Company's name was changed to “Zurn Water Solutions Corporation” and the ticker symbol for its shares of common stock trading on the New York Stock Exchange was changed to “ZWS”.
As a result of the Spin-Off Transaction, in accordance with the authoritative guidance, the operating results of PMC are reported as discontinued operations in the condensed consolidated statements of operations for all prior periods presented. The condensed consolidated statements of cash flows has not been adjusted to separately disclose cash flows related to the discontinued operations. See Note 4, Discontinued Operations for additional information.
The Company
Rexnord    Zurn Water Solutions Corporation is a growth-oriented, multi-platform industrial company withpure-play water management business that designs, procures, manufactures, and markets what itthe Company believes to be leading market sharesthe broadest sustainable product portfolio of specification-driven water management solutions to improve health, human safety and highly-trusted brandsthe environment. The Company's product portfolio includes professional grade water safety and control, flow systems and hygienic and environmental products for public and private spaces that serve a diverse array of global end markets.deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time. The Company's heritage of innovation and specification havehas allowed itZurn to provide highly-engineered, mission-critical solutions to customers for decades and affords itZurn the privilege of having long-term, valued relationships with market leaders. The Company operates in a disciplined way and the RexnordZurn Business System (“RBS”ZBS”), described below, is its operating philosophy. Grounded in the spirit of continuous improvement, RBSZBS 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 itsthe Company's 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 our 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.
Recent Accounting Pronouncements
In August 2017,March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 presentationNo. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the effectsEffects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate that is expected to be discontinued because of reference rate reform. The amendments in this update provide optional expedients and exceptions for applying GAAP to instruments affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging instrument and the hedged itemrelationship. The amendments in the financial statements.this ASU 2017-12 isare effective for the beginningall entities as of the Company's fiscalMarch 12, 2020, with early adoption permitted, and must be applied prospectively.through December 31, 2022. The Company is currently evaluatingdid not modify any material contracts due to reference rate reform during the three
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months ended March 31, 2022. The Company will continue to evaluate the impact this guidance will have on its consolidated financial statements upon adoption.    for all future transactions affected by reference rate reform during the time period referenced above.
In January 2017,
2. Acquisitions
Three Months Ended March 31, 2022
On February 12, 2022, the FASB issued ASU 2017-04, Intangibles - GoodwillCompany entered into a definitive agreement to combine with Elkay Manufacturing Company (“Elkay”), pursuant to an Agreement and Other (Topic 350): SimplifyingPlan of Merger (the “Merger Agreement”) by and among the Test for Goodwill Impairment ("ASU 2017-04"Company, Elkay, Zebra Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”)., and Elkay Interior Systems International, Inc., as representative of the stockholders of Elkay. The amendments in ASU 2017-04 allow companies to apply a one-step quantitative testMerger Agreement provides that among other matters, 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 allocatedsubject to the reporting unit. ASU 2017-04 issatisfaction or waiver of the conditions set forth in the Merger Agreement, Elkay would merge with Merger Sub, with Elkay surviving as a wholly-owned subsidiary of the Company (the “Merger”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), the Company will exchange, for 100% of the beginningoutstanding equity of Elkay, up to 52.5 million newly issued shares of the Company's fiscalcommon stock, which on a pro forma basis, assuming closing of the Merger on December 31, 2021 with early adoption permitted, and must be applied prospectively. The Company is currently evaluating(and assuming no adjustments pursuant to the timingMerger Agreement), would have represented approximately 29% of adoption; however, it does not believe the adoptionoutstanding shares 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 thereincommon stock 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. The Company adopted ASU No. 2015-11 prospectively effective April 1, 2017 and there was no impact to the Company's condensed consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation 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 cost in the income statement. The new guidance requires the service cost component of net periodic benefit cost to be presented in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period with only the service cost component eligible for capitalization in assets. Other components 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. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements upon adoption.
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 for the Company on April 1, 2018. Companies can use either a full retrospective or modified retrospective method to adopt the standard. Under the full retrospective method, the requirements of the new standard are applied 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 accountingfully diluted 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.such date (the “Merger Consideration”).
The Company is assessinganticipates the impactMerger will close will close early in the third quarter of 2022. The closing of the new revenue standard on its consolidated financial statementsMerger is subject to customary conditions, including, among others, the absence of laws or orders by reviewing its current accounting policies and practices, including detailed reviews of customer contracts, to identify potential differences that would result from applyinga governmental authority enjoining or prohibiting the requirementsconsummation of the new standardtransactions contemplated by the Merger Agreement; the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”) (which waiting period expired on March 30, 2022); the required approvals by the respective stockholders of the Company and Elkay; a registration statement having become effective in accordance with the provisions of the Securities Act of 1933, as amended, and not being subject to its revenue contracts. In addition, ASC 606 will require more comprehensive disclosures about revenue streamsany stop order suspending the registration statement (registration statement became effective on April 26, 2022); the shares of the Company's common stock to be issued in the Merger being approved for listing on the New York Stock Exchange as of the closing; the accuracy of the parties’ representations and contractswarranties contained in the Merger Agreement (subject to certain materiality qualifications); the parties’ compliance with customers. Thethe covenants and agreements in the Merger Agreement in all material respects; and the absence of any material adverse effect on the Company is currently evaluating potential changes to its processes, information systems and internal controls related to the preparation of disclosures required under ASC 606. The Company will provide additional disclosure as its ongoing assessment progresses.

2. Acquisitionsor Elkay.
Fiscal Year 2018 Acquisitions2021
On October 4, 2017,November 17, 2021, the Company acquired World Dryer Corporation (“World Dryer”completed the acquisition of the Wade Drains business ("Wade Drains") from McWane, Inc. for a preliminary cash purchase price of $50.0$13.7 million, excluding transaction costs and net of cash acquired. World DryerThe preliminary purchase price is subject to customary post-closing adjustments. Wade Drains manufactures a leading global manufacturerwide range of specified commercial electric hand dryers. This acquisition broadened the product portfolio ofplumbing products for customers across North America and complements the Company's existing Water Management platformflow systems product portfolio.
On April 16, 2021, the Company acquired substantially all of the assets of Advance Technology Solutions, LLC (d/b/a ATS GREASEwatch) ("ATS GREASEwatch") for a cash purchase price of $4.5 million, excluding transaction costs and is expected to bring even greater value to commercial building owners in the formnet of lower operating costs.
cash acquired. The Company's results of operations include the acquired operations subsequent to October 4, 2017. Pro-forma results of operations and certain other U.S. GAAP disclosures relatedCompany paid $3.8 million to the World Dryer acquisition have not been presented because they are not materialsellers at closing, with the remaining $0.7 million payable to the Company's condensed consolidated statementssellers upon settlement of operationscertain indemnities within two years of closing, ATS GREASEwatch develops, manufactures and condensed consolidated balance sheets.markets remote tank monitoring devices, alarms, software and services for various applications and provides technology to enhance and expand our current product offerings.
The acquisition of World Dryer wasacquisitions have been accounted for as a business combinationcombinations and were recorded by allocating the purchase priceprices to the fair value of assets acquired and liabilities assumed at the acquisition date.dates. 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 allocationallocations associated with these acquisitions resulted in non-taxtax deductible goodwill of $25.8$8.8 million, other intangiblecustomer relationship intangibles assets of $28.1$1.6 million, (includes tradenamestrade working capital of $7.0$9.0 million and $21.1$(1.1) million of customer relationships) and other net liabilities of $3.9 million.liabilities. The preliminary purchase price allocation is preliminary and subject to fair value adjustments thatallocations will be completed within the one yearone-year period following the acquisition date.
During the third quarter of fiscal 2018, the Company 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 manufacturer of premium flexible couplings and drive shafts for industrial, marine, rail and power generation applications. The acquisition of Centa will add complementary product lines to the Company's existing Process & Motion Control platform. The 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 will 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 expanded the Company's presence in consumer-driven end markets in the Process & Motion Control platform.dates.
The Company's results of operations include the acquired operations subsequent to June 1, 2016.the acquisition dates. Pro-forma results of operations and certain other U.S. GAAP disclosures related to the Cambridge acquisitionthese acquisitions have not been presented because they arethe acquisitions did 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 material tosignificantly impact the Company's condensed consolidated statements of operations or financial position.

3. Restructuring and Other Similar Charges
During fiscal 2018,the three months ended March 31, 2022, 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
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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'sSince the Company’s evaluation of other potential restructuring plansactions are preliminary andin process, related restructuring expenses, if any, are not yet estimable.
The following table summarizes the Company's restructuring and other similar charges during the three and nine months ended DecemberMarch 31, 20172022 and DecemberMarch 31, 2016 by operating segment2021, (in millions):
  
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
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.

Three Months Ended
March 31, 2022March 31, 2021
Employee termination benefits$1.1 $0.6 
Contract termination and other associated costs— — 
Total restructuring and other similar costs$1.1 $0.6 
The following table summarizes the activity in the Company's restructuring accrual for the ninethree months ended DecemberMarch 31, 20172022 (in millions):

Employee termination benefitsContract termination and other associated costsTotal
Accrued Restructuring Costs, December 31, 2021 (1)$2.4 $— $2.4 
Charges1.1 — $1.1 
Cash payments(2.2)— $(2.2)
Accrued Restructuring Costs, March 31, 2022 (1)$1.3 $— $1.3 
____________________
  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 Otherother current liabilities in the condensed consolidated balance sheets.


In addition to
4. Discontinued Operations

During the impairment charges recognized above, the Company recognized accelerated depreciation of zero and $1.0 million during the three and nine monthsyear ended December 31, 2017, respectively.2021, the Company completed the Spin-Off Transaction of PMC. The Company recognized accelerated depreciationoperating results of $3.8 millionPMC are reported as discontinued operations in the consolidated statements of operations for all prior periods presented, as the Spin-Off Transaction of PMC represented a strategic shift that had a major impact on operations and $5.2 million duringfinancial results. The condensed consolidated statements of cash flows for the three and nine months ended DecemberMarch 31, 2016, respectively. Accelerated depreciation is recorded2021 has not been adjusted to separately disclose cash flows related to the discontinued operations. During the three months ended March 31, 2022, the Company received $35.0 million from Regal Rexnord Corporation as a result of the final working capital and cash balances at closing exceeded the targets stipulated within Costthe Spin-Off Transaction agreement.
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The major components of the Income from discontinued operations, net of tax presented in the condensed consolidated statements of operations.

During fiscal 2016, the Company decided to exit the non-strategic product lines sold under the Rodney Hunt Fontaine ("RHF") tradename and the Company completed the exit of the RHF product line in fiscal 2017. The Company evaluated the requirementsoperations for the presentationthree months ended March 31, 2022 and March 31, 2021, are as follows (in millions):
Three Months Ended
March 31, 2022March 31, 2021
Net sales$— $320.9 
Cost of sales— (201.4)
Selling, general and administrative expenses— (61.6)
Amortization of intangible assets— (3.3)
Interest expense, net— (1.4)
Other expense, net— (0.7)
Income from discontinued operations before income tax— 52.5 
Income tax benefit (provision)0.8 (12.5)
Equity method investment income— 0.1 
Non-controlling interest income— 0.1 
Income from discontinued operations, net of tax$0.8 $40.0 
The condensed consolidated statements of discontinued operations in connection withcash flows for the decisionthree months ended March 31, 2022 and March 31, 2021 have not been adjusted to exit its flow-control gate product line and determined the product line did not meet the definition provided within the authoritative literature asseparately disclose cash flows related to discontinued operations. Pre-tax loss from operationsHowever, the significant investing and financing cash flows and other significant non-cash operating items associated with the RHF product line was $2.2 million and $6.7 milliondiscontinued operations were as follows (in millions):
Three Months Ended
March 31, 2022March 31, 2021
Depreciation$— $11.9 
Amortization of intangible assets— 3.3 
Loss on disposition of assets— 0.2 
Deferred income taxes— 0.1 
Other non-cash charges— 0.3 
Stock-based compensation— 5.7 
Expenditures for property, plant and equipment— (8.2)
Proceeds from dispositions of long-lived assets— 0.7 
Proceeds associated with divestiture of discontinued operations35.0 — 
Repayments of debt— (0.5)
Proceeds from exercise of stock options— 2.4 

5. Revenue Recognition
    A performance obligation is a promise 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.

4. Income Taxes
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 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 Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. 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
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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 following tables present the Company's revenue disaggregated by customer type and customer geography (in millions):
Three Months Ended
Customer TypeMarch 31, 2022March 31, 2021
Institutional$87.6 $76.4 
Commercial75.5 64.8 
All other76.5 64.0 
    Total$239.6 $205.2 
Three Months Ended
GeographyMarch 31, 2022March 31, 2021
United States$219.6 $185.7 
Canada15.1 14.5 
Rest of world4.9 5.0 
    Total$239.6 $205.2 
Contract Balances
For substantially all of the Company's 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.
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 as of March 31, 2022 and March 31, 2021 were not material.
Backlog
    The Company had backlog of $100.8 million as of March 31, 2022, 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 99% of the backlog in the remaining nine months of the year ending December 31, 2022, and the remaining approximately 1% in 2023 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
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capitalization. As of March 31, 2022 and March 31, 2021, 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 reflected 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 Reform 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, 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 benefitamortization recognized in the third quarterthree months ended March 31, 2022 and March 31, 2021, are not significant and no impairment losses were recognized.
Allowance for Doubtful Accounts
The Company assesses the collectability of fiscal 2018customer receivables based on the credit worthiness of a customer as outlined above is a reasonable estimate based upon the available informationdetermined by credit checks and analysis, completed, these related amounts will change based upon actual results occurring inas well as the quarter and fiscal year ending March 31, 2018. As such,customer’s payment history. In determining the allowance for doubtful accounts, the Company will updatealso considers various factors including the aging of customer accounts and finalizehistorical write-offs. In addition, the accountingCompany monitors other risk factors, including forward-looking information when establishing adequate allowances for doubtful accounts, which reflects the tax effectcurrent estimate of credit losses expected to be incurred over the life of the enactment of U.S. Tax Reform in future quarters in accordance with the guidance as outlined in SAB 118, as deemed necessary.receivables.
6. Income Taxes
The provision for income taxes for all periods presented is based on an estimated effective income tax rate for the respective 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$10.0 million infor the third quarter of fiscal 2018three months ended March 31, 2022, compared to an income tax benefit of $1.8$4.7 million infor the third quarter of fiscal 2017.three months ended March 31, 2021. The effective income tax rate for the third quarter of fiscal 2018three months ended March 31, 2022, was (158.2)%25.4% versus (128.6)% in the third quarter of fiscal 2017. The income tax benefit recorded on income before income taxes32.0% 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 ninethree 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.ended March 31, 2021. The effective income tax rate for the first ninethree months ended March 31, 2022 was above the U.S. federal statutory rate 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 was21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code and the accrual of various state income taxes, partially offset by the recognition of netcertain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and 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.share-based payments. The effective income tax benefit recorded on income before income taxesrate for the first ninethree months ended March 31, 2021 was above the U.S. federal statutory rate of fiscal 2017 was21% primarily due to excess tax benefitsthe accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with share-based payments,compensation deduction limitations under Section 162(m) of 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 subsidiaryInternal Revenue Code, and the recognitionaccrual of excess U.S. foreign tax credits,various state income taxes, partially offset withby the recognition of income tax expense relating to various foreignbenefits associated with foreign-derived intangible income tax audits.(“FDII”).
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 March 31, 2022 and December 31, 2021 was $18.1 million.$4.9 million and $5.9 million, respectively. The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in income tax expense. As of March 31, 2022 and December 31, 2017 and March 31, 2017,2021, the total amount of gross, unrecognized income tax benefits included $5.5 million and $4.7 million of accrued interest and penalties of $0.3 million and $0.5 million, respectively. The Company recognized $0.3$(0.1) million and $0.0 million of net interest and penalties as income tax expense (benefit) during both the ninethree months ended DecemberMarch 31, 20172022 and DecemberMarch 31, 2016.2021, respectively.
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 corporate income tax returns ofjurisdictions. During the Company’s Netherlands subsidiaries fornine month Transition Period ended December 31, 2020, the tax years ended March 31, 2011 through 2015). In addition, the U.S. Internal Revenue Service is currently examining(the “IRS”) completed an income tax examination 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 2017. The Company paid approximately $0.7$1.5 million upon the conclusion of such examination.examination, all of which was previously accrued in the Company’s financial statements. In addition, duringaccordance with the fourth quarterterms of fiscal 2017,the VAG sale agreement, the Company completedis required to indemnify the purchaser for any future income tax liabilities associated with all open tax years ending prior to, and including, the short period ended on the date of the Company's sale of VAG. VAG was notified by the German tax authorities of its intention to conduct an income tax examination of certain of itsthe VAG German subsidiaries’entities’ corporate income and trade tax returns for the tax years ended March 31, 20112014 through 20142019. Similarly, in accordance with the Spin-Off Transaction, the Company is required to indemnify Regal Rexnord
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Corporation for any future income tax liabilities associated with PMC entities relating to all open tax years ending prior to, and paid approximately $0.4 million upon conclusionincluding, the short period ended on the date of such examination.the Spin-Off. During the fiscal year ended March 31, 2020, the Italian tax authorities began conducting an income tax examination of the income tax return of one of PMC’s Italian subsidiaries for the tax year ended March 31, 2018. In addition, certain of the PMC German subsidiaries are currently undergoing a corporate income and trade tax examination by the German tax authorities for the tax years or periods ended March 31, 2015 through March 31, 2018. It appears reasonably possible that the amounts of unrecognized income tax benefits and indemnification liabilities 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, 2015,2019, state and local income tax examinations for years ending prior to fiscal 2014March 31, 2018 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.2017.

5.7. Earnings per Share

The following table presents the basis for the basic and diluted    Basic net income per share computations (in millions,from continuing and discontinued operations attributable to Zurn common stockholders is computed by dividing net income from continuing operations and income from discontinued operations attributable to Zurn common stockholders, respectively, by the corresponding weighted average number of common shares outstanding for the period. Diluted net income per share from continuing and discontinued operations attributable to Zurn common stockholders is computed based on the weighted average number of common shares outstanding, increased by the number of incremental shares that would have been outstanding if the potential dilutive shares were issued through the exercise of outstanding stock options to purchase common shares, except share amounts):
  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 is dilutive to earnings per share using 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 months 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.  

when the effect would be anti-dilutive.
The computation offor diluted net income per share for the three and nine months ended DecemberMarch 31, 20172022 and March 31, 2021, excludes 2.80.2 million and 2.70.2 million common shares respectively, related to equity awards due to their anti-dilutive effects. The computationeffects, respectively.
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Table of diluted net income per share for the three and nine months ended December 31, 2016 excludes 5.5 million and 5.3 million shares, respectively, related to equity awards due to their anti-dilutive effects.Contents

6.8. Stockholders' Equity

Stockholders' equity consists of the following (in millions):
Common stock (1)Additional paid-in capitalRetained earningsAccumulated other comprehensive lossNon-controlling interest (2)Total stockholders’ equity
Balance at December 31, 2020$1.2 $1,392.9 $116.0 $(73.8)$3.0 $1,439.3 
Total comprehensive income (loss)— — 50.0 (1.8)0.1 48.3 
Stock-based compensation expense— 14.2 — — — 14.2 
Proceeds from exercise of stock options— 2.8 — — — 2.8 
Repurchase of common stock— — (0.9)— — (0.9)
Common stock dividends ($0.09 per share)— — (10.8)— — (10.8)
Balance at March 31, 2021$1.2 $1,409.9 $154.3 $(75.6)$3.1 $1,492.9 
Common stock (1)Additional
paid-in
capital
Retained
deficit
Accumulated
other
comprehensive
loss
Non-controlling interestTotal
stockholders’
equity
Balance at December 31, 2021$1.3 $1,436.9 $(1,236.9)$(74.9)$— $126.4 
Total comprehensive income— — 30.2 2.0 — 32.2 
Stock-based compensation expense— 3.9 — — — 3.9 
Proceeds from exercise of stock options— 0.5 — — — 0.5 
Taxes withheld and paid on employees' share-based payment awards— (0.5)— — — (0.5)
Proceeds associated with divestiture of discontinued operations— — 35.0 — — 35.0 
Common stock dividends ($0.03 per share)— — (3.8)— — (3.8)
Balance at March 31, 2022$1.3 $1,440.8 $(1,175.5)$(72.9)$— $193.7 
____________________
 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

Preferred Stock
(1)During the third quarter of fiscal 2017,three months ended March 31, 2022 and March 31, 2021, 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 of 402,500 shares of Series A Preferred Stock in connection therewith. 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 39.702127,001 and 47.642 shares of the Company’s common stock, subject to customary anti-dilution adjustments. The number of189,629 shares of common stock issuable upon conversion will be determined based on a defined average volume weighted average price per sharethe exercise of the Company’sstock options, vesting of restricted stock units, and for other common stock preceding November 15, 2019. Holders ofawards, respectively.
(2)Non-controlling interest through the Series A Preferred Stock may elect onSpin-Off Transaction represents a voluntary basis to convert their shares into common stock at the minimum exchange ratio at any time prior5% non-controlling interest in a PMC joint venture relationship. The Company has no remaining non-controlling interest subsequent to the mandatory conversion date.Spin-Off Transaction.
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 seniorPrior year amounts disclosed within this note include amounts attributable to the Company's common stock and juniordiscontinued operations, unless otherwise noted. Refer to all existing and future indebtedness.Note 4 Discontinued Operations for further detail.
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, the Company paid $5.8 million and $17.4 million of dividends, respectively. As of December 31, 2017, there were no dividends in arrears on the Series A Preferred Stock.
Common StockShare Repurchase Program
In    During fiscal 2015, the Company's Board of Directors approved a common stock repurchase program (the "Repurchase Program") authorizing the repurchase of up to $200.0 million of the Company's common stock from time to time on the open market or in privately negotiated transactions. On January 27, 2020, the Company's Board of Directors approved increasing the remaining share repurchase authority under the Repurchase Program to $300.0 million. The Repurchase Program does not require the Company to acquire any particular amount of common stock and does not specify the timing of purchases or the prices to be paid; 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. NoThe Company did not repurchase any shares during the three months ended March 31, 2022. During the three months ended March 31, 2021, the Company repurchased 22,300 shares of common stock at a total cost of $0.9 million at a weighted average price of $39.27 per share. The repurchased shares were repurchased duringcanceled by the nine months ended December 31, 2017 or December 31, 2016.Company upon receipt. A total of approximately $160.0$162.8 million remained of the existing repurchase authority remained under the Repurchase Program at DecemberMarch 31, 2017.2022.

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9. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss, net of tax, for the ninethree months endedDecember March 31, 20172022, are as follows (in millions):
Foreign Currency Translation and OtherPension and Postretirement PlansTotal
Balance at December 31, 2021$(70.9)$(4.0)$(74.9)
Other comprehensive loss before reclassifications2.0 — 2.0 
Amounts reclassified from accumulated other comprehensive loss— — — 
Net current period other comprehensive income2.0 — 2.0 
Balance at March 31, 2022$(68.9)$(4.0)$(72.9)
  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 DecemberMarch 31, 20172022 and DecemberMarch 31, 20162021 (in millions):
Three Months Ended
March 31, 2022March 31, 2021Income Statement Line
Pension and other postretirement plans
Amortization of prior service credit$— $(0.1)Other income, net
Provision for income taxes— — 
Total net of tax$— $(0.1)
  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):
March 31, 2022December 31, 2021
Finished goods$200.8 $169.1 
Work in progress4.4 5.1 
Raw materials20.6 14.6 
Inventories at First-in, First-Out ("FIFO") cost225.8 188.8 
Adjustment to state inventories at Last-in, First-Out ("LIFO") cost(1.5)(4.3)
$224.3 $184.5 
 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 March 31, 2017 by operating segment2022, are presented below (in millions):
Net carrying amount as of December 31, 2021$254.1 
  Currency translation adjustments0.9 
Net carrying amount as of March 31, 2022$255.0 
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   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 footnote 2 for additional information regarding acquisitions.
The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of March 31, 2022 and December 31, 2017 and March 31, 20172021 are as follows (in millions):
   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.
March 31, 2022
Weighted Average Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Intangible assets subject to amortization:
Patents9 years$25.1 $(22.4)$2.7 
Customer relationships (including distribution network)15 years351.7 (271.8)79.9 
Tradenames12 years11.5 (4.3)7.2 
Intangible assets not subject to amortization - trademarks and tradenames87.1 — 87.1 
Total intangible assets, net15 years$475.4 $(298.5)$176.9 
December 31, 2021
Weighted Average Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Intangible assets subject to amortization:
Patents9 years$24.9 $(22.4)$2.5 
Customer relationships (including distribution network)15 years351.1 (269.1)82.0 
Tradenames13 years11.5 (4.0)7.5 
Intangible assets not subject to amortization - trademarks and tradenames87.1 — 87.1 
Total intangible assets, net15 years$474.6 $(295.5)$179.1 
    
Intangible asset amortization expense totaled $8.6$3.0 million and $24.8$6.1 million for the three months ended March 31, 2022 and nine monthsMarch 31, 2021, respectively. Customer relationships acquired during the year ended December 31, 2017, respectively. Intangible asset amortization expense totaled $8.6 million and $33.7 million for2021 were assigned a weighted-average useful life of 10 years. There were no intangible assets acquired during the three and nine months ended DecemberMarch 31, 2016, respectively.2022.
    
The Company expects to recognize amortization expense on the intangible assets subject to amortization of $33.4$7.9 million in fiscalthe year 2018ending December 31, 2022 (inclusive of $24.8the $3.0 million of amortization expense recognized in the ninethree months endedDecember March 31, 2017)2022), $34.3$6.5 million in fiscal year 2019, $34.12023, $6.5 million in fiscal year 2020, $32.62024, $6.5 million in fiscal year 20212025, $6.3 million in 2026 and $28.3$6.3 million in fiscal year 2022.2027.


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):
  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
March 31, 2022December 31, 2021
Commissions$8.5 $8.1 
Current portion of operating lease liability6.2 6.1 
Income taxes payable1.9 2.1 
Legal and environmental3.0 3.0 
Product warranty (1)1.3 1.3 
Restructuring and other similar charges (2)1.3 2.4 
Risk management (3)11.0 11.3 
Sales rebates23.5 38.6 
Taxes payable on behalf of PMC21.9 21.9 
Taxes, other than income taxes1.6 1.8 
Other7.1 9.8 
$87.3 $106.4 
____________________
(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, Commitments and Contingencies.
(3)Includes projected liabilities related to losses arising from automobile, general and product liability claims.

(1)See more information related to the product warranty obligations within Note 15, Commitments and Contingencies.
(2)See more information related to the restructuring obligations within Note 3, Restructuring and Other Similar Charges.
11.(3)     Includes projected liabilities related to losses arising from automobile, general and product liability claims.
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13. Long-Term Debt
Long-term debt is summarized as follows (in millions):
March 31, 2022December 31, 2021
Term loan (1)$538.2 $539.2 
Finance leases and other subsidiary debt (2)0.3 0.3 
Total538.5 539.5 
Less current maturities5.6 5.6 
Long-term debt$532.9 533.9 
____________________
  December 31, 2017 March 31, 2017
Term loan (1) $791.2
 $1,584.5
4.875% Senior notes due 2025 (2) 494.1
 
Other subsidiary debt (3) 37.8
 38.2
Total 1,323.1
 1,622.7
Less current maturities 0.2
 16.5
Long-term debt $1,322.9
 $1,606.2
(1)Includes unamortized debt issuance costs of $10.4 million and $10.8 million at March 31, 2022 and December 31, 2021, respectively.
____________________
(2)Refer to Note 14, Leases, to the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for further information regarding leases.
(1)Includes an unamortized original issue discount and debt issuance costs of $8.8 million and $17.9 million at December 31, 2017 and March 31, 2017, respectively.
(2)Includes an unamortized debt issuance costs of $5.9 million at December 31, 2017.
(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 presented 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.
Senior Secured Credit Facility
The Company’s Third    On October 4, 2021, ZBS Global, Inc. (“Holdings”), Zurn Holdings, Inc., Zurn LLC (together, the “Borrowers”), the lenders from time to time party thereto, and Credit Suisse AG, Cayman Islands Branch, as administrative agent for the lenders (in such capacity, the “Administrative Agent”) entered into a Fourth Amended and Restated First Lien Credit Agreement (the “Credit Agreement”). The Credit Agreement is funded by a syndicate of banks and other financial institutions and provides for (i) a $800.0$550.0 million term loan facility (the “Term Loan”) and (ii) a $264.0$200.0 million revolving credit facility.facility (the “Revolving Credit Facility”).
The obligations under the Credit Agreement and related documents are secured by liens on substantially all of the assets of Holdings, the Borrowers, and certain subsidiaries of the Borrowers pursuant to a Third Amended and Restated Guarantee and Collateral Agreement, dated as of October 4, 2021, among Holdings, the Borrowers, the subsidiaries of the Borrowers party thereto, and the Administrative Agent, and certain other collateral documents.
The Credit Agreement contains representations, warranties, covenants and events of default, including, without limitation, a financial covenant under which the Borrowers are, if certain conditions are met, obligated to maintain on a consolidated basis, as of the end of each fiscal quarter, a certain maximum Net First Lien Leverage Ratio (as defined in the Credit Agreement). As of DecemberMarch 31, 2017,2022, the Company wasBorrowers were 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 3.0 to 1.0 as of December 31, 2017.Agreement.
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, relating

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 underOctober 4, 2028. Commencing on March 31, 2022, the PriorBorrowers are required to make quarterly payments of principal in an amount equal to $1.4 million on each quarter until the maturity date.
The Term Loan). The borrowings under the Term Refinancing Loan bearbears interest at either (i) London Interbank Offered Rate (“LIBOR”) (subjectthe Borrowers’ option, by reference to a 0% floor)base rate or a rate based on LIBOR, in either case, plus an applicable margin determined quarterly based on the Borrowers’ Net First Lien Leverage Ratio as of 2.25% (which was reduced from 2.75%) or at an alternativethe last day of each fiscal quarter. If the Net First Lien Leverage Ratio is greater than 1.80 to 1.00, the applicable margin shall equal 1.25% in the case of base rate plus anborrowings and 2.25% in the case of LIBOR borrowings. In the event the Borrowers’ Net First Lien Leverage Ratio is less than or equal to 1.80 to 1.0, the applicable margin on both base rate and LIBOR borrowings would decrease by 0.25%. The Borrowers’ Net First Lien Leverage Ratio was 2.36 to 1.0 as of 1.25% (which was reduced from 1.75%),March 31, 2022. Certain prepayments of the Term Loan occurring on or (ii.) if the borrowers have received a corporate rating equalprior 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 (subjectApril 4, 2022 are subject to a 0% floor) plus an applicable margin of 2.00% or an alternate base rate plus an applicable margin of 1.00%. prepayment penalty.
At DecemberMarch 31, 2017,2022 and for the three months ended, the borrowings under the Term Refinancing Loan had a weighted-average effective interest raterates of 3.80%.
In accordance with ASC 470-50, Debt Modifications2.75% and Extinguishments (“ASC 470-50”)2.75%, 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.respectively.
Revolving DebtCredit Facility

The Credit Facility alsoAgreement includes a $200.0 million 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 thethat has a maturity date of the revolving facilityOctober 2, 2026. Borrowings under the Revolving Credit AgreementFacility bear interest at the Borrowers’ option, by reference to a base rate or a rate based on LIBOR, in either case, plus an applicable margin determined quarterly based on the Borrowers’ Net First Lien Leverage Ratio as of the last day of each fiscal quarter. If the Net First Lien Leverage Ratio is greater than 2.00 to 1.00, the applicable margin shall equal 1.00% in the case of base rate borrowings and 2.00% in the case of LIBOR borrowings. In the event the Borrowers' Net First Lien Leverage Ratio is less than or equal to 2.00 to 1.00, the applicable margin on both base rate and LIBOR borrowings would decrease by 0.25%. The Borrowers’ Net First Lien Leverage Ratio was extended from2.36 to 1.0 as of March 15, 2019,31, 2022. The Borrowers are also required to March 15, 2023. The Company capitalized approximately $0.2 millionpay a quarterly commitment fee on the average daily unused portion of direct costs incurredthe
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Revolving Credit Facility for each fiscal quarter and fees in connection with the Amendment, which will be amortized overissuance of letters of credit. If the remaining life ofNet First Lien Leverage Ratio is greater than 2.00 to 1.00, the revolving credit facility. The interest rate undercommitment fee shall equal 0.50%, and if the revolving credit facility remained unchanged. NoCompany's Net First Lien Leverage Ratio is less than or equal to 2.00 to 1.00, the commitment fee shall equal 0.375%.
At March 31, 2022 and December 31, 2021, there were no amounts were borrowed under the revolving credit facility atRevolving Credit Facility. As of March 31, 2022 and December 31, 2017, or March 31, 2017; however $8.92021, $6.1 million and $14.6$6.1 million of the revolving credit facility wasRevolving Credit Facility were considered utilized in connection with outstanding letters of credit, atrespectively.
Finance leases and other subsidiary debt
At March 31, 2022 and 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, the “Issuers”) and guaranteed by the Company and its domestic2021, various wholly owned 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 subsidiary 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 Company 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. 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 guaranteeinghad 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$0.3 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 maintains an accounts receivable securitization facility (the “Securitization”) with Wells Fargo Bank, N.A. Pursuant to the Securitization, Rexnord Funding (a wholly owned bankruptcy-remote special purpose subsidiary) has granted the lender under the Securitization a security interest in all$0.3 million, respectively, comprised primarily 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 be used by Rexnord Funding to finance purchases of accounts receivable. The Securitization constitutes a “Permitted Receivables Financing” under Article 1 and Article 6 of the Credit Agreement. Any borrowings under the Securitization are accounted for as secured borrowings on the Company's condensed consolidated balance sheets.

As of both December 31, 2017 and March 31, 2017, the Company's available borrowing capacity under the Securitization was $100.0 million, based on the then-current accounts receivables. No amounts were borrowed under the Securitization at December 31, 2017 or March 31, 2017; however, $7.0 million and $4.6 million was considered utilized in connection with outstanding letters of credit at December 31, 2017 and March 31, 2017, respectively. As of December 31, 2017, the Company was in compliance with all applicable covenants and performance ratios contained in the Securitization.

lease obligations. See Note 11 to14, Leases in the audited consolidated financial statements of the Company's fiscal 2017 Annual Report on Form 10-K for the year ended December 31, 2021 for further information regarding long-term debt.leases.


12. 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 within 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 margin 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 caps 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.
13.14. 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 transactshas a nonqualified deferred compensation plan where assets are invested in foreign currency forwardmutual funds and corporate-owned life insurance contracts interest rate swaps, and interest rate caps.held in a rabbi trust, which is restricted for payments to participants of the plan. The Company has elected to use the fair value option for the mutual funds, which are measured using quoted prices of foreign currency forwardidentical instruments in active markets categorized as Level 1. Corporate-owned life insurance contracts are recorded at cash surrender value, which is provided by a third party and reflects the net asset value of the underlying publicly traded mutual funds categorized as Level 2. The deferred compensation plan assets are classified within other assets on the condensed consolidated balance sheets. Deferred compensation plan liabilities are measured at fair value based on a pricing model that utilizesquoted prices of identical instruments to the differential betweeninvestment vehicles selected by the contract price and the market-based forward rateparticipants categorized 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.
The Company endeavors to utilize the best available information in measuring fair value. As required by ASC 820, financial assets andLevel 1. Deferred compensation plan 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 March 31, 2022 and December 31, 2017 and March 31, 20172021 (in millions):

Fair Value as of March 31, 2022
Level 1Level 2Level 3Total
Deferred compensation plan assets$1.8 $13.2 $— $15.0 
Deferred compensation plan liabilities15.9 — — 15.9 
Fair Value as of December 31, 2021
Level 1Level 2Level 3Total
Deferred compensation plan assets$0.9 $14.4 $— $15.3 
Deferred compensation plan liabilities16.3 — — 16.3 
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  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 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

There were no transfers of assets between levels at March 31, 2022 and December 31, 2021, respectively.
Fair Value of Non-Derivative Financial Instruments
The carrying amounts of cash, receivables, payables and accrued liabilities approximated fair value at March 31, 2022 and December 31, 2017 and March 31, 20172021, due to the short-term nature of those instruments. The fair value of long-term debt as of March 31, 2022 and December 31, 2017 and March 31, 20172021, was approximately $1,345.2$545.5 million and $1,644.6$552.4 million, respectively. The fair value is based on quoted market prices for the same issues.instruments.
Long-lived Assets and Intangible Assets
Long-lived assets (which includesinclude 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.


14.15. Commitments and Contingencies
Warranties:
The Company offers warranties on the sales of certain of its products and records an accrual for estimated future claims. Such accruals are based upon historical experience and management'smanagement’s estimate of the level of future claims. The following table presents changes in the Company'sCompany’s product warranty liability (in millions):
 Nine Months EndedThree Months Ended
 December 31, 2017 December 31, 2016March 31, 2022March 31, 2021
Balance at beginning of period $7.5
 $6.8
Balance at beginning of period$1.3 $1.2 
Acquired obligations 0.2
 0.4
Charged to operations 3.2
 2.9
Charged to operations0.2 0.6 
Claims settled (3.4) (2.9)Claims settled(0.2)(0.3)
Balance at end of period $7.5
 $7.2
Balance at end of period$1.3 $1.5 
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”) was named as a potentially responsible party (“PRP”), together with at least ten other companies, at the Ellsworth Industrial Park Site, Downers Grove, DuPage County, Illinois (the “Site”), by the United States Environmental Protection Agency (“USEPA”), and the Illinois Environmental Protection Agency (“IEPA”). Rexnord Industries' Downers Grove property is situated within the Ellsworth Industrial Complex. The USEPA and IEPA allege there have been one or more releases or threatened releases of chlorinated solvents and other hazardous substances, pollutants or contaminants, allegedly including but not limited to a release or threatened release on or from the Company's property, at the Site. The relief sought by the USEPA and IEPA includes further investigation and potential remediation of the Site and reimbursement of USEPA's past costs. 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 alleged 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. These claims are currently on the Texas Multi-District Litigation inactive docket. The ultimate outcome of these asbestos matters cannot presently be determined. To date, the Company's insurance providers have paid 100% of the costs related to the Prager asbestos matters. The Company believes that the combination of its insurance coverage and the Invensys indemnity obligations will cover any future costs of these matters.
    


In connection with the Company's acquisition of The Falk Corporation (“Falk”), Hamilton Sundstrand provided theCertain 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 DecemberMarch 31, 2017,2022, Zurn and numerous other unrelated companies were defendants in approximately 6,000 asbestos related lawsuits representing approximately 16,0007,000 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 DecemberMarch 31, 2017,2022, 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$66.0 million, of which Zurn expects its insurance carriers to pay approximately $28.0$49.0 million in the next ten years on such claims, with the balance of the estimated liability being paid in subsequent years. The $37.0$66.0 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 liabilitiesreserve for asbestos claims within the condensed consolidated balance sheets.
Management estimates that its available insurance to cover this potential asbestos liability as of DecemberMarch 31, 2017,2022 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
20

Table 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.Contents
As of DecemberMarch 31, 2017,2022, the Company had a recorded receivable from its insurance carriers of $37.0$66.0 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 one1 or more of the Company's carriers. The receivable for probable asbestos-related recoveries is recorded in Other assetsinsurance for asbestos claims 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.  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.







Sale-Leaseback Transaction:

During the third quarter of fiscal 2018, the Company entered into a sale-leaseback arrangement for an owned facility in Downer's Grove, Illinois and received net proceeds from the transaction of $5.8 million. Due to the Company's continuing involvement with the construction of a new facility at the same location, the property did not qualify for sale accounting under the sale-leaseback accounting guidance during the construction period and as a result it has been 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. No gain or loss was recognized from the transaction.
As a result of the Company's anticipated involvement during the construction period of the new manufacturing facility the Company is considered, for accounting purposes only, the owner of the construction asset under build-to-suit lease accounting. Upon completion of construction, the Company will evaluate the de-recognition of the asset and liability under sale-leaseback accounting guidance.


15.16. Retirement Benefits

The components of net periodic benefit cost are as follows (in millions):
Three Months Ended
March 31, 2022March 31, 2021
Pension Benefits:
Service cost$— $0.1 
Interest cost2.1 3.7 
Expected return on plan assets(2.4)(4.9)
Net periodic benefit cost$(0.3)$(1.1)
Other Postretirement Benefits:
Interest cost$0.1 $0.1 
Amortization:
Prior service credit— (0.1)
Net periodic benefit cost$0.1 $— 
    The service cost component of net periodic benefits is presented within Cost of sales and Selling, general and administrative expenses in the condensed consolidated statements of operations, while the other components of net periodic benefit cost are presented within Other income, net. The Company recognizes the net actuarial gains or losses in excess of the corridor in operating results during the final quarter of each fiscal year (or upon any required re-measurement event).
  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 ninethree months of fiscal 2018ended March 31, 2022 and 2017,March 31, 2021, the Company made contributions of $2.9$0.2 million and $4.6$0.1 million, respectively, to its U.S. qualified pension plan trusts.

In accordance with    Prior year amounts disclosed within this note include amounts attributable to the Company's accounting policydiscontinued operations, unless otherwise noted. Refer to Note 4 Discontinued Operations 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. 

further detail.
See Note 16, Retirement Benefits, to the audited consolidated financial statements ofincluded in the Company's fiscal 2017 Annual Report on Form 10-K for the year ended December 31, 2021 for further information regarding retirement benefits.

16.17. Stock-Based Compensation
The RexnordZurn Water Solutions 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'sZurn's performance and create value for Rexnord'sZurn'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 DecemberMarch 31, 2017,2022 and March 31, 2021, the Company recognized $5.1$3.9 million and $15.9$9.1 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 DecemberMarch 31, 2017 and December 31, 2016,2022, the Company granted the following restricted stock optionsunits, performance stock units and common stock 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 underemployees:
Award TypeNumber of AwardsWeighted Average Grant-Date Fair Value
Restricted stock units7,406 $33.17 
Performance stock units5,244 $33.37 
Common stock13,796 $35.50 
    See Note 15, Stock-Based Compensation, to the Plan duringaudited consolidated financial statements included in the nine monthsCompany's Annual Report on Form 10-K for the year ended December 31, 2017 was estimated on the grant date using the Black-Scholes valuation model utilizing the following weighted-average assumptions:2021, for further information regarding stock-based compensation.
21
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
Table 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 due to the limited period 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 price on the date of grant. A summary of RSU 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 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. 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-Beltand Cambridge. 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. Products are marketed and sold under widely recognized brand names, including Zurn, Wilkins, and VAG. The financial information of the Company's segments is regularly evaluated by the chief operating decision maker in determining resource allocation and assessing performance. Management evaluates the performance of each business segment based on its operating results. The same accounting policies are used throughout the organization (see Note 1).

Business Segment Information (in millions):
  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

18. Guarantor Subsidiaries

The following schedules present condensed consolidating financial information of the Company as of December 31, 2017 and 2016 and for the three and nine month periods ended December 31, 2017 and 2016 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, 2017
(in millions)
 Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets           
Current assets:           
Cash and cash equivalents$
 $0.4
 $41.3
 $193.1
 $
 $234.8
Receivables, net
 
 176.7
 136.4
 
 313.1
Inventories, net
 
 227.6
 122.3
 
 349.9
Other current assets4.4
 
 17.2
 35.5
 
 57.1
Total current assets4.4
 0.4
 462.8
 487.3
 
 954.9
Property, plant and equipment, net
 
 239.7
 149.6
 
 389.3
Intangible assets, net
 
 450.1
 117.8
 
 567.9
Goodwill
 
 1,022.8
 331.0
 
 1,353.8
Investment in:          
Issuer subsidiaries1,215.9
 
 
 
 (1,215.9) 
Guarantor subsidiaries
 3,098.4
 
 
 (3,098.4) 
Non-guarantor subsidiaries
 
 688.7
 
 (688.7) 
Other assets22.6
 1.4
 47.9
 12.2
 
 84.1
Total assets$1,242.9
 $3,100.2
 $2,912.0
 $1,097.9
 $(5,003.0) $3,350.0
Liabilities and stockholders' equity           
Current liabilities:           
Current portion of long-term debt$
 $
 $0.2
 $
 $
 $0.2
Trade payables
 0.7
 120.1
 78.8
 
 199.6
Compensation and benefits
 
 30.1
 22.3
 
 52.4
Current portion of pension and postretirement benefit obligations
 
 2.5
 1.9
 
 4.4
Other current liabilities
 5.8
 74.8
 46.1
 
 126.7
Total current liabilities
 6.5
 227.7
 149.1
 
 383.3
Long-term debt
 1,285.3
 37.4
 0.2
 
 1,322.9
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
Deferred income taxes
 4.1
 108.4
 33.7
 
 146.2
Other liabilities0.3
 0.1
 62.6
 9.6
 
 72.6
Total liabilities(11.2) 1,884.3
 (186.4) 409.2
 
 2,095.9
Total stockholders' equity1,254.1
 1,215.9
 3,098.4
 688.7
 (5,003.0) 1,254.1
Total liabilities and stockholders' equity$1,242.9
 $3,100.2
 $2,912.0
 $1,097.9
 $(5,003.0) $3,350.0


Condensed Consolidating Balance Sheets
March 31, 2017
(in millions)

 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, 2017
(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 Consolidated
Net sales$
 $
 $1,092.4
 $619.4
 $(221.0) $1,490.8
Cost of sales
 
 684.8
 479.8
 (221.0) 943.6
Gross profit
 
 407.6
 139.6
 
 547.2
Selling, general and administrative expenses
 
 231.1
 95.5
 
 326.6
Restructuring and other similar charges
 
 8.3
 3.3
 
 11.6
Amortization of intangible assets
 
 20.0
 4.8
 
 24.8
Income from operations
 
 148.2
 36.0
 
 184.2
Non-operating (expense) income:           
     Interest income (expense), net:           
          To third parties
 (59.3) 0.4
 
 
 (58.9)
          To affiliates2.4
 19.8
 (18.2) (4.0) 
 
Loss on extinguishment of debt
 (11.9) 
 
 
 (11.9)
Other expense, net
 
 (4.7) 2.2
 
 (2.5)
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) 
Net income137.9
 135.5
 186.9
 19.6
 (342.0) 137.9
Dividends on preferred stock17.4
 
 
 
 
 17.4
Net income attributable to Rexnord$120.5
 $135.5
 $186.9
 $19.6
 $(342.0) $120.5
Comprehensive income$137.9
 $147.1
 $189.4
 $49.7
 $(342.0) $182.1


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


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 Nine Months Ended December 31, 2017
(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


Condensed Consolidating Statements of Cash Flows
For the Nine Months Ended December 31, 2016
(in millions)

  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

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

General
Rexnord    Zurn is a growth-oriented, multi-platform industrial company withpure-play water business that designs, procures, manufactures, and markets what we believe are leading market sharesis the broadest sustainable product portfolio of water management solutions to improve health, human safety and highly-trusted brands that serve a diverse array of global end markets.the environment. Our product portfolio includes professional grade water control and safety, water distribution and drainage, finish plumbing, hygienic and environmental and site works products for public and private spaces. Our heritage of innovation and specification havehas 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 RexnordZurn Business System (“RBS”ZBS”) is our operating philosophy. Grounded in the spirit of continuous improvement, RBSZBS 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.
Fiscal Year
Our fiscal year ends on March 31. Throughout this MD&A, we refer to the quarter ended December 31, 2017 as the “third quarter of fiscal 2018” or the “third quarter ended December 31, 2017.” Similarly, we refer to the quarter ended December 31, 2016 as the “third quarter of fiscal 2017” or the “third quarter ended December 31, 2016.”2021.
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 MarchDecember 31, 20172021 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 DecemberMarch 31, 20172022, and during the period from AprilJanuary 1, 20172022 through DecemberMarch 31, 2017,2022, 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.
AcquisitionsElkay Merger
On June 1, 2016,February 12, 2022, we acquired Cambridgeentered into a definitive agreement to combine with Elkay Manufacturing Company (“Elkay”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among Zurn, Elkay, Zebra Merger Sub, Inc., a wholly-owned subsidiary of Zurn (“Merger Sub”), and Elkay Interior Systems International, Holdings Corp. ("Cambridge") for a cash purchase price of $213.4 million. Cambridge, with operations in Cambridge, Maryland and Matamoros, Mexico, is oneInc., as representative of the world's largest suppliersstockholders of metal conveyingElkay. The Merger Agreement provides that among other matters, and engineered woven metal solutions, primarily usedsubject to the satisfaction or waiver of the conditions set forth in food processing end markets,the Merger Agreement, Elkay would merge with Merger Sub, with Elkay surviving as wella wholly-owned subsidiary of Zurn (the “Merger”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), we will exchange, for 100% of the outstanding equity of Elkay, up to 52.5 million newly issued shares of our common stock, which on a pro forma basis, assuming closing of the Merger on December 31, 2021 (and assuming no adjustments pursuant to the Merger Agreement), would have represented approximately 29% of the outstanding shares of the Company's common stock on a fully diluted basis as of such date (the “Merger Consideration”).
We anticipate the Merger will close early in architectural, packagingthe third quarter of 2022. The closing of the Merger is subject to customary conditions, including, among others, the absence of laws or orders by a governmental authority enjoining or prohibiting the consummation of the transactions contemplated by the Merger Agreement; the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”) (which waiting period expired on March 30, 2022); the required approvals by the respective stockholders of Zurn and filtration applications. TheElkay; a registration statement having become effective in accordance with the provisions of the Securities Act of 1933, as amended, and not being subject to any stop order suspending the registration statement (registration statement became effective on April 26, 2022); the shares of our common stock to be issued in the Merger being approved for listing on the New York Stock Exchange as of the closing; the accuracy of the parties’ representations and warranties contained in the Merger Agreement (subject to certain materiality qualifications); the parties’ compliance with the covenants and agreements in the Merger Agreement in all material respects; and the absence of any material adverse effect on Zurn or Elkay.
22

Acquisitions
On November 17, 2021, we completed 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”Wade Drains business ("Wade Drains") from McWane, Inc. for a preliminary cash purchase price of approximately $50.0$13.7 million, excluding transaction costs and net of cash acquired. World DryerThe preliminary purchase price is subject to customary post-closing adjustments. Wade Drains manufactures a leading global manufacturerwide range of specified commercial electric hand dryers. This acquisition broadened the product portfolio ofplumbing products for customers across North America and complements the Company's existing Water Management platform and is expected to bring even greater value to commercial building owners inflow systems product portfolio.
On April 16, 2021, we acquired substantially all of the formassets 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 Advance Technology Solutions, LLC (d/b/a definitive agreement to acquire Centa Power Transmission (Centa Antriebe Kirschey GmbH)ATS GREASEwatch) ("Centa"ATS GREASEwatch"), for an estimateda total cash purchase price of approximately €118$4.5 million. Centa,ATS GREASEwatch, headquartered in Haan, Germany, is a leading manufacturer of premium flexible couplingsSaginaw, Michigan, develops, manufactures and drive shaftsmarkets remote tank monitoring devices, alarms, software and services for industrial, marine, railvarious applications and power generation applications. The acquisition of Centa will add complementaryprovides technology to enhance and expand our current product lines toofferings within our existing Water Management platform.
Spin-Off of Process & Motion Control platform. Segment
On October 4, 2021, we completed a Reverse Morris Trust tax-free spin-off transaction (the “Spin-off Transaction”) in which (i) substantially all the assets and liabilities of our Process & Motion Control ("PMC") business were transferred to a newly created subsidiary, Land Newco, Inc. (“Land”), (ii) the shares of Land were distributed to our stockholders pro rata, and (iii) Land was merged with a subsidiary of Regal Rexnord Corporation (formerly known as Regal Beloit Corporation), in which the stock of Land was converted into a specified number of shares of Regal Rexnord Corporation in accordance with the exchange ratio. Following completion of the Spin-Off Transaction, our name was changed to “Zurn Water Solutions Corporation” and the ticker symbol for our shares of common stock trading on the New York Stock Exchange was changed to “ZWS”. During the three months ended March 31, 2022, we received $35.0 million from Regal Rexnord Corporation as a result of the final working capital and cash balances at closing exceeded the targets stipulated within the Spin-Off Transaction agreement.
The acquisitionoperating results of Centa is subjectPMC are reported as discontinued operations in our condensed consolidated statements of operations for all periods presented. The condensed consolidated statements of cash flows for the period ended March 31, 2021 have not been adjusted to customary closing conditions; subjectseparately disclose cash flows related to those conditions, the transaction is expected to close duringdiscontinued operations. See Item 1, Note 4, Discontinued Operations for additional information on cash flows associated with the fourth quarterdiscontinued operations.
The major components of fiscal 2018.


Restructuring
During fiscal 2018, we continued to execute various restructuring initiatives focused on driving efficiencies, reducing operating costs by modifying our footprint to reflect changesthe Income from discontinued operations, net of tax presented in the markets we serve, the impactcondensed consolidated statements 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, restructuring and other similar charges totaled $3.8 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 million, respectively. Refer to 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 DecemberMarch 31, 2016 was$6.1 million2022 and $13.2 million, respectively. The RHF product line exit did not impact results for the three and nine months ended DecemberMarch 31, 2017.2021, are as follows (in millions):

Three Months Ended
March 31, 2022March 31, 2021
Net sales$— $320.9 
Cost of sales— (201.4)
Selling, general and administrative expenses— (61.6)
Amortization of intangible assets— (3.3)
Interest expense, net— (1.4)
Actuarial loss on pension and postretirement benefit obligations— — 
Other expense, net— (0.7)
Income from discontinued operations before income tax— 52.5 
Income tax benefit (provision)0.8 (12.5)
Equity method investment income— 0.1 
Non-controlling interest income— 0.1 
Income from discontinued operations, net of tax$0.8 $40.0 

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Table of Contents
Results of Operations
Third QuarterThree Months Ended DecemberMarch 31, 20172022 compared with the Third QuarterThree Months Ended DecemberMarch 31, 2016:2021:
Net sales
(Dollars in Millions)
Three Months Ended
March 31, 2022March 31, 2021Change% Change
Net Sales$239.6 $205.2 $34.4 16.8 %
 Quarter Ended    
 December 31, 2017 December 31, 2016 Change % Change
Process & Motion Control$292.5
 $270.3
 $22.2
 8.2%
Water Management199.8
 181.5
 18.3
 10.1%
  Consolidated$492.3
 $451.8
 $40.5
 9.0%
Process & Motion Control
Process & Motion ControlNet sales were $239.6 million during the three months ended March 31, 2022, an increase of 17% year over year. Excluding a 2% increase to net sales resulting from our prior-year acquisition, core sales increased 8%15% year over year to $292.5 million in the third quarter of fiscal 2018 as core sales increased 6% year over year and foreign currency translation added 2%. The increase in core sales is the result of favorable demand trends across the majorityall of our served end markets.
Water Management
Water Management netproduct categories contributed to the sales were $199.8 million in the third quarter of fiscal 2018, an increase of 10% 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-year increase in core sales reflects favorable demand trends in our nonresidential construction and water and wastewater infrastructure markets.

growth.
Income from operations
(Dollars in Millions)
Three Months Ended
March 31, 2022March 31, 2021Change% Change
Income from operations$43.9 $24.0 $19.9 82.9 %
    % of net sales18.3 %11.7 %6.6 %
 Quarter Ended    
 December 31, 2017 December 31, 2016 Change % Change
Process & Motion Control$48.5
 $28.6
 $19.9
 69.6 %
    % of net sales16.6% 10.6% 6.0% 
Water Management25.8
 14.4
 11.4
 79.2 %
    % of net sales12.9% 7.9% 5.0% 
Corporate(11.1) (10.2) (0.9) (8.8)%
    Consolidated$63.2
 $32.8
 $30.4
 92.7 %
        % of net sales12.8% 7.3% 5.5%  

Process & Motion Control
Process & Motion Control incomeIncome from operations forwas $43.9 million during the third quarter of fiscal 2018 was $48.5 million,three months ended March 31, 2022, or 16.6%18.3% of net sales. Income from operations as a percentage of net sales increased by 600660 basis points year over year, primarily dueas a result of the favorable impact of year-over-year sales growth (inclusive of price realization), productivity savings, lower non-cash stock-based compensation expense, lower intangible asset amortization and the year-over-year change in the adjustment to the core sales increase, RBS-led productivity gains and benefits from footprint repositioning actions and lower restructuring related expenses year over year,state inventories at last-in-first-out cost, all of which was partially offset by higher incentive compensation accrualsthe year-over-year increases in material and transportation costs, as well as incremental investments in our innovation and market expansion.
Water Management
Water Management income from operations was $25.8 million for the third quarter of fiscal 2018, or 12.9% of net sales. Income from operations as a percentage of net sales increased by 500 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 in our innovation and market expansion initiatives.
Corporate
Corporate expenses were $11.1 million in the third quarter of fiscal 2018 and $10.2 million in the third quarter 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 third quarter of fiscal 2017.investments.
Interest expense, net
Interest expense, net was $18.7$4.8 million induring the third quarter of fiscal 2018three months ended March 31, 2022, compared to $22.9$9.6 million induring the third quarter of fiscal 2017.three months ended March 31, 2021. The decrease in interest expense as compared to the prior year's period is primarily a result of the impact of lower outstanding borrowings infollowing the third quarter of fiscal 2018 following a $195.0 million prepayment made on our term loan in the third quarter of fiscal 2017, as well as the impact of the reduction in overall term loan outstanding that occurred in the third quarter fiscal 2018.Spin-Off Transaction refinancing. See Item 1, Note 1113 Long-Term Debt for more information.
Other expense,income, net
Other expense,income, net forduring the third quarter of fiscal 2018 consistedthree months ended March 31, 2022 and 2021, was $0.3 million and $0.3 million, respectively. Other income, net consists primarily of foreign currency transaction gains and losses of $0.5 million and other miscellaneous expense of $0.5 million. Other expense, net for the third quarter of fiscal 2017 consisted of foreign currency transaction losses of $0.2 million and other miscellaneous expenses of $0.5 million.non-service cost components associated with our defined benefit plans.

BenefitProvision for income taxes
The income tax benefitprovision was $50.0$10.0 million infor the third quarter of fiscal 2018three months ended March 31, 2022, compared to an income tax benefit of $1.8$4.7 million infor the third quarter of fiscal 2017.three months ended March 31, 2021. The effective income tax rate for the third quarter of fiscal 2018three months ended March 31, 2022 was (158.2)%25.4% versus (128.6)% in32.0% for the third quarter of fiscal 2017.three months ended March 31, 2021. The effective income tax benefit recorded on income before income taxesrate for the third quarterthree months ended March 31, 2022 was above the U.S. federal statutory rate of fiscal 2018 was21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code and the accrual of various state income taxes, partially offset by the recognition of netcertain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and income tax benefits associated with the enactment of U.S. Tax Cuts and Jobs Act ("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 Domestic Production Activities Deduction ("DPAD").share-based payments. The effective income tax benefit recorded on income before income taxesrate for the third quarterthree months ended March 31, 2021 was above the U.S. federal statutory rate of fiscal 2017 was21% primarily due to excess tax benefitsthe accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with share-based payments,compensation deduction limitations under Section 162(m) of the recognition of net tax benefits associated with U.S. research and development creditsInternal Revenue Code, and the DPAD,accrual of various state income taxes, partially offset withby the recognition of income tax expense relating to various foreignbenefits associated with foreign-derived intangible income tax audits.(“FDII”).
On a quarterly basis, we review and analyze our valuation allowances associated with deferred tax assets relating to certain foreign and state net operating loss carryforwards as well as 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.


24

Table of Contents
Net income attributable to RexnordZurn common stockholders
Net income attributable to RexnordZurn common stockholders during the three months ended March 31, 2022, was $30.2 million compared to $50.0 million during the three months ended March 31, 2021. Diluted net income per share attributable to Zurn common stockholders for the third quarter of fiscal 2018three months ended March 31, 2022 and March 31, 2021, was $75.8 million, compared to net income of $1.7 million in the third quarter of fiscal 2017,$0.24 and $0.40, respectively, as a result of the factors described above. Net income from discontinued operations, net of tax, was $0.8 million for the three months ended March 31, 2022 compared to $40.0 million for the three months ended March 31, 2021. 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 fromdiscontinued operations for the first ninethree months of fiscal 2018ended March 31, 2022 and March 31, 2021, 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$0.01 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.$0.32, respectively.
Water Management
Water Management income from 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 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 completed in the third 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.
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 attributable to Rexnord common stockholders
Net income attributable to Rexnord common stockholders for the first nine months of fiscal 2018 was $120.5 million, compared to $45.2 million for the first nine months of fiscal 2017, as a result of the factors described above. Diluted income per share attributable to Rexnord common stockholders was $1.13 and $0.43 in the first nine months of fiscal 2018 and fiscal 2017, 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. The following non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis. We believe that these financial measures are appropriate to enhance an overall understanding of our underlying operating performance trends compared to historical and prospective periods and our peers. Management also believes that these measures are useful to investors in their analysis of our results of operations and provide improved comparability between fiscal periods as well as insight into the compliance with our debt covenants. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures.
Core sales
Core sales excludes the impact of acquisitions (such as the Cambridge and World Dryer acquisitions)Wade Drains acquisition), divestitures (such as the RHF product line exit) 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 and other debt related activities, 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 Compliance” for additional discussion of this ratio, including a reconciliation to our net income). We reported net income availableattributable to RexnordZurn common stockholders in the ninethree months ended DecemberMarch 31, 20172022, of $120.5$30.2 million and Adjusted EBITDA for the same period of $279.0$52.0 million. See “Covenant Compliance” for a reconciliation of Adjusted EBITDA to GAAP net 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
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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 5.00 to 1.0 as of the end of each fiscal quarter. At March 31, 2022, our net leverage ratio was 2.36 to 1.0. 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    “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 DecemberMarch 31, 20172022, 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.

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Set forth below is a reconciliation of net income attributable to Zurn common stockholders to Adjusted EBITDA for the periods indicated below.
(in millions)Three months ended
March 31, 2021
Twelve months ended
December 31, 2021
Three months ended
March 31, 2022
Twelve months ended
March 31, 2022
Net income attributable to Zurn common stockholders$50.0 $120.9 $30.2 $101.1 
Income from discontinued operations, net of tax (1)$(40.0)(71.2)(0.8)(32.0)
Provision for income taxes4.7 2.7 10.0 8.0 
Actuarial gain on pension and postretirement benefit obligations— (1.2)— (1.2)
Other (income) expense, net (2)(0.3)0.7 (0.3)0.7 
Loss on the extinguishment of debt— 20.4 — 20.4 
Interest expense9.6 34.7 4.829.9 
Depreciation and amortization8.3 32.7 5.3 29.7 
EBITDA32.3 139.7 49.2 156.6 
Adjustments to EBITDA
Restructuring and other similar charges (3)0.6 3.7 1.1 4.2 
Stock-based compensation expense9.1 37.5 3.9 32.3 
LIFO expense (income) (4)1.7 14.1 (2.8)9.6 
Acquisition-related fair value adjustment0.6 0.8 0.3 0.5 
Other, net (5)— — 0.3 0.3 
Subtotal of adjustments to EBITDA12.0 56.1 2.8 46.9 
Adjusted EBITDA$44.3 $195.8 $52.0 $203.5 
Pro forma adjustment for acquisitions (6)0.8 
Pro forma Adjusted EBITDA204.3 
Consolidated indebtedness (7)   $481.2 
Total net leverage ratio (8)   2.36 

(1)Income from discontinued operations, net of tax is not included in Adjusted EBITDA in accordance with the terms of our credit agreement.
(2)Other (income) expense, net for the periods indicated, consists primarily of gains and losses from foreign currency transactions and the non-service cost components of net periodic benefit costs associated with our defined benefit plans.
(3)Restructuring and other similar charges is comprised of costs associated with workforce reductions, lease termination costs, and other facility rationalization costs.  See Item 1, Note 3, Restructuring and Other Similar Charges for more information.
(4)Last-in first-out (LIFO) inventory adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement.
(5)Other, net consists of gains and losses on the disposition of long-lived assets.
(6)Represents a pro forma adjustment to include Adjusted EBITDA related to the acquisition of Wade Drains, which was permitted by our credit agreement. The pro forma adjustment includes the period from April 1, 2021, through the date of the Wade Drains acquisition. See Item 1, Note 2, Acquisitions for more information.
(7)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 $57.3 million (as defined by the credit agreement) at March 31, 2022.
(8)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.
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(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
Net income attributable to Rexnord common stockholders$45.2
 $66.8
 $120.5
 $142.1
Interest expense, net69.4
 88.7
 58.9
 78.2
Dividends on preferred stock1.5
 7.3
 17.4
 23.2
Income tax (benefit) provision(3.3) 7.9
 (27.0) (15.8)
Depreciation and amortization79.1
 105.4
 65.3
 91.6
EBITDA$191.9
 $276.1
 $235.1
 $319.3
Adjustments to EBITDA:       
Restructuring and other similar charges (1)21.7
 31.6
 11.6
 21.5
Stock-based compensation expense9.8
 13.4
 15.9
 19.5
LIFO (income) expense (2)(0.2) (2.3) 0.7
 (1.4)
Acquisition-related fair value adjustment4.3
 4.3
 0.9
 0.9
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
Other, net (4)3.7
 6.0
 2.9
 5.2
Subtotal of adjustments to EBITDA$56.6
 $70.4
 $43.9
 $57.7
Adjusted EBITDA$248.5
 $346.5
 $279.0
 $377.0
Pro forma adjustment for acquisitions (6)      $3.6
Pro forma Adjusted EBITDA      $380.6
Consolidated indebtedness (5)      $1,126.8
Total net leverage ratio (6)      3.0

(1)Represents restructuring costs comprised of 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)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:

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(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)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 million (as defined by the credit agreement) at December 31, 2017.
(6)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, and borrowing availability of up to $264.0$200.0 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.facility.
As of DecemberMarch 31, 2017,2022, we had $234.8$73.2 million of cash and cash equivalents and $348.1$193.9 million of additional borrowing capacity ($255.1 million of available borrowings under our revolving credit facility and $93.0 million available under our accounts receivable securitization program).capacity. As of DecemberMarch 31, 2017,2022, the available borrowings under our credit facility and accounts receivable securitization were reduced by $15.9$6.1 million due to outstanding letters of credit. As of MarchDecember 31, 2017,2021, we had $490.1$96.6 million of cash and cash equivalents and approximately $345.8$193.9 million of additional borrowing capacity ($250.4 million of available borrowings under our revolving credit facility and $95.4 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 ourfacility.
Our revolving credit facility and accounts receivable securitization program areis available to fund our working capital requirements, acquisitions, capital expenditures and for other general corporate purposes. We believe this resource is adequate for expected needs.

Cash Flows
Net    Cash flows for the period ended March 31, 2021 include our continuing operations and discontinued operations for the entire period, while the period ended March 31, 2022 only include the cash flows associated with continuing operations. Refer to Item 1, Note 4, Discontinued Operations for further information.
Cash (used for) provided by operating activities was $121.9$(53.9) million and $122.1$71.3 million induring the first ninethree months of fiscal 2018ended March 31, 2022 and 2017,2021, respectively. Incremental profit generated from higher salesThe change in the first nine months of fiscal 2018 was offset by higher year over year operating cash flows was primarily the result of higher trade working capital.capital and the impact of timing of payments on accounts payable and accrued expenses during the three months ended March 31, 2022.
Cash provided by investing activities was $35.5 million during the three months ended March 31, 2022 compared cash used for investing activities was $69.6of $8.1 million induring the first ninethree months of fiscal 2018 compared to $255.8 million in the first nine months of fiscal 2017.ended March 31, 2021. Investing activities induring the first ninethree months of fiscal 2018ended March 31, 2022, included $25.1$0.8 million of capital expenditures and $50.0 million associated with the acquisition of World Dryer, partiallywhich was offset by the receipt of $5.5$35.0 million from Regal Rexnord Corporation in connection with the final net assets transferred in the PMC Spin-Off Translation and the receipt of $1.3 million in cash forconnection with the disposalsale of certain long-lived assets. Investing activities during the first ninethree months of fiscal 2017ended March 31, 2021, primarily included $213.7 million of net cash associated with the acquisition of Cambridge and $44.0$9.2 million of capital expenditures, partially offset by the receipt of $1.9$0.7 million in cash forconnection with the disposalsale of certain long-lived assets.assets and the receipt of $0.4 million in connection with finalizing the acquisition date trade working capital associated with our 2020 acquisition of Hadrian.
Cash used for financing activities was $320.2$5.2 million induring the first ninethree months of fiscal 2018ended March 31, 2022, compared to cash provided by financing activities of $88.6$9.4 million induring the first ninethree months of fiscal 2017.ended March 31, 2021. During the first ninethree months of fiscal 2018,ended March 31, 2022, we utilized a net $311.5$1.4 million of cash and net proceeds of our issuance of the Notes, net of financing related costs, in connection with the refinancing of thefor payments on outstanding debt, under our Credit Agreement (see Item 1 Note 11 Long-Term Debt for additional details). In addition we utilized $17.4$3.8 million for the payment of preferredcommon stock dividends. These additional usesdividends and $0.5 million for the payment of cash were partially offset by the receipt of $5.8 million in connection with the sale-leaseback transaction (see Item 1 Note 14 for further information) and $2.9withholding taxes on employees' share-based awards. The three months ended March 31, 2022, also includes $0.5 million of cash proceeds associated with stock option exercises. During the first ninethree months of fiscal 2017,ended March 31, 2021, we received $390.2utilized $0.5 million of proceeds fromcash for payments on outstanding debt, $10.8 million for the closingpayment of our preferredcommon stock issuance on December 7, 2016, net of underwriting discounts, commissionsdividends and other direct costs of the offering (see Item 1 Note 6 Stockholders' Equity for additional details).$0.9 million to repurchase common stock. The proceeds were 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 ninethree months of fiscal 2017ended March 31, 2021, also includes $9.6$2.8 million of cash proceeds associated with stock option exercises. During the first nine months of fiscal 2017, we also settled the deferred acquisition payment associated with the fiscal 2015 acquisition of Tollok S.p.A. 
Indebtedness
As of DecemberMarch 31, 20172022, we had $1,323.1$538.5 million of total indebtedness outstanding as follows (in millions):
Total Debt at
March 31, 2022
Current Maturities of DebtLong-term
Portion
Term loan (1)$538.2 $5.5 $532.7 
Finance leases and other subsidiary debt0.3 0.1 0.2 
Total$538.5 $5.6 $532.9 

(1)Includes unamortized debt issuance costs of $10.4 million at March 31, 2022.
See Item 1, Note 13, Long-Term Debt for a description of our outstanding indebtedness.
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  Total Debt at December 31, 2017 Short-term Debt and Current Maturities of Long-Term Debt 
Long-term
Portion
Term loan (1) $791.2
 $
 $791.2
4.875% Senior notes due 2025 (2) 494.1
 
 494.1
Other subsidiary debt (3) 37.8
 0.2
 37.6
Total $1,323.1
 $0.2
 $1,322.9

(1)Includes an unamortized original issue discount and debt issuance costs of $8.8 million at December 31, 2017.
(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 million at December 31, 2017.


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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 at times 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 torisks. We also have historically entered into interest rate derivatives to manage 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.

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ITEM 4.CONTROLS AND PROCEDURES
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 DecemberMarch 31, 2017,2022, 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.



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PART II - OTHER INFORMATION


ITEM  1.LEGAL PROCEEDINGS
ITEM  1.LEGAL PROCEEDINGS
See the information under the heading "Commitments and Contingencies" in Note 1415 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 1A. RISK FACTORS
In addition to the risks and uncertainties discussed in this quarterly report on Form 10-Q, particularly those disclosed in the MD&A, see Part I, Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the Risk Factors except as set forth below:

Risks Related to the Merger with Elkay

There can be no assurances when or if the Merger will be completed.
Although Zurn and Elkay expect to complete the Merger in early the third quarter of 2022, there can be no assurances as to the exact timing of completion of the Merger or that the Merger will be completed at all. The completion of the Merger is subject to numerous conditions, including, among others:
• the absence of any law, order or injunction prohibiting the Merger;
• the accuracy of each party’s representations and warranties;
• each party’s compliance with its covenants and agreements contained in the Merger Agreement; and
• approval of the Merger share issuance proposal (the "Merger Share Issuance Proposal") by the stockholders of Zurn and the Elkay Merger proposal (the "Elkay Merger Proposal") by the stockholders of Elkay.
    There can be no assurance that the conditions required to complete the Merger, some of which are beyond the control of Zurn and Elkay, will be satisfied or waived on the anticipated schedule, or at all.
Additionally, the Merger Agreement also provides for certain termination rights for both Zurn and Elkay, including if the Merger is not consummated on or before November 14, 2022, with an extension of three months if the parties are awaiting approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”) with such waiting period having expired on March 30, 2022, and if stockholders of Zurn fail to approve the Merger Share Issuance Proposal or by either party if the other party breaches the Merger Agreement, subject to the cure rights set forth in the Merger Agreement.
Obtaining required approvals and satisfying closing conditions may prevent or delay completion of the Merger.
The Merger is subject to a number of conditions to closing as specified in the Merger Agreement. These closing conditions include, among others, obtaining Zurn stockholder approval of the Merger Share Issuance Proposal, obtaining Elkay stockholder approval of the Merger Agreement and Merger, the listing on the NYSE of the Zurn Common Stock issuable in accordance with the Merger Agreement, and the absence of governmental restraints or prohibitions preventing the consummation of the Merger. The obligation of each of Zurn and Elkay to consummate the Merger is also conditioned on, among other things, the accuracy of the representations and warranties as set forth by the other party in the Merger Agreement (subject to certain materiality qualifications) and the performance by the other party, in all material respects, of its obligations under the Merger Agreement required to be performed at or prior to the Effective Time. The required stockholder consents and approvals may not be obtained and the required conditions to closing may not be satisfied, and, if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the Merger could cause Zurn and Elkay not to realize, or to be delayed in realizing, some or all of the benefits that Zurn and Elkay expect to achieve if the Merger is successfully completed within its expected time frame.
The market price for Zurn Common Stock following the completion of the Merger may be affected by factors different from, or in addition to, those that historically have affected or currently affect the market prices of Zurn Common Stock.
Zurn’s businesses differ in some regards from those of Elkay and, accordingly, the results of operations of Zurn following completion of the Merger will be affected by some factors that are different from those currently or historically affecting the results of operations of Zurn. In addition, following the closing of the Merger, Zurn may seek to raise additional equity financing through one or more underwritten offerings and/or private placements and/or rights offerings, or issue stock in connection with acquisitions, which may result in downward pressure on the share price of the Zurn Common Stock.
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The opinions of Zurn’s financial advisor will not reflect changes in circumstances between the signing of the Merger Agreement and the completion of the Merger.
Zurn has received an opinion from its financial advisor in connection with the signing of the Merger Agreement, but will not obtain an updated opinion prior to the closing of the Merger. Changes in the operations and prospects of Zurn or Elkay, general market and economic conditions and other factors that may be beyond the control of Zurn, and on which Zurn’s financial advisor's opinions was based, may significantly alter the value of Zurn or Elkay or the price of the shares of Zurn Common Stock by the time the Merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion.
Zurn and Elkay may be adversely affected by negative publicity related to the proposed Merger and in connection with other matters.
From time to time, political and public sentiment in connection with the proposed Merger and in connection with other matters could result in a significant amount of adverse press coverage and other adverse public statements affecting Zurn and/or Elkay. Adverse press coverage and other adverse statements, whether or not driven by political or public sentiment, may also result in investigations by regulators, legislators and law enforcement officials or in legal claims. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceeding, can divert the time and effort of senior management from the management of Zurn’s and Elkay’s respective businesses. Addressing any adverse publicity, governmental scrutiny or enforcement or other legal proceedings is time consuming and expensive and, regardless of the factual basis for the assertions being made, can have a negative impact on the reputation of Zurn and Elkay, on the morale and performance of their employees and on their relationships with their respective regulators. It may also have a negative impact on their ability to take timely advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on Zurn’s and Elkay’s respective businesses, financial condition, results of operations and cash flows.
Failure to complete the Merger could have material and adverse effects on Zurn.
If the Merger is not completed, due to the inability to satisfy any of the closing conditions or for any other reason, Zurn’s ongoing business may be adversely affected and, without realizing any of the benefits of having completed the Merger, Zurn will be subject to a number of risks, including the following:
• Zurn will be required to pay its costs relating to the Merger, such as legal and accounting, whether or not the Merger is completed;
• time and resources committed by Zurn’s management and employees to matters relating to the Merger could otherwise have been devoted to pursuing other beneficial opportunities; and
• the market price of the Zurn Common Stock could decline to the extent that the current market price reflects a market assumption that the Merger will be completed.
    In addition to the above risks, if the Merger Agreement is terminated under certain circumstances and the Zurn Board of Directors seeks another acquisition, Zurn may be required to pay Elkay a termination fee of $50.0 million.
Zurn may waive one or more of the closing conditions without re-soliciting stockholder approval.
Zurn may determine to waive, in whole or part, one or more of the conditions to closing the Merger prior to Zurn being obligated to consummate the Merger. Zurn currently expects to evaluate the materiality of any waiver and its effect on stockholders in light of the facts and circumstances at the time, to determine whether any re-solicitation of proxies is required in light of such waiver. Any determination whether to waive any condition to the Merger or to re-solicit stockholder approval will be made by Zurn at the time of such waiver based on the facts and circumstances as they exist at that time.
Zurn and Elkay will be subject to business uncertainties while the Merger is pending, which could adversely affect their respective businesses.
In connection with the pendency of the Merger, it is possible that certain persons with whom Zurn or Elkay have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with Zurn or Elkay, as the case may be, as a result of the Merger, which could negatively affect Zurn’s or Elkay’s revenues, earnings and cash flows as well as the market price of the Zurn Common Stock, regardless of whether the Merger is completed. Also, Zurn’s and Elkay’s ability to attract, retain and motivate employees may be impaired until the Merger is completed, and Zurn’s ability to do so may be impaired for a period of time thereafter, as current and prospective employees may experience uncertainty about their roles within Zurn following the Merger.
Under the terms of the Merger Agreement, Zurn and Elkay are subject to certain restrictions on the conduct of business prior to the consummation of the Merger, which may adversely affect Zurn’s and Elkay’s ability to execute certain of Zurn’s and Elkay’s business strategies, including the ability in certain cases to modify or enter into certain contracts, acquire or dispose
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of certain assets, incur or prepay certain indebtedness, incur encumbrances, make capital expenditures or settle claims. Such limitations could negatively affect Zurn’s and Elkay’s businesses and operations prior to the completion of the Merger.
Zurn and Elkay will incur significant transaction costs in connection with the Merger.
Zurn and Elkay have incurred and are expected to continue to incur a number of non-recurring costs associated with the Merger, combining the operations of Elkay with Zurn’s and achieving desired synergies. These costs have been, and will continue to be, substantial and, in many cases, each of Zurn and Elkay would bear its own transaction costs whether or not the Merger is completed. A substantial majority of non-recurring expenses will consist of transaction costs and include, among others, fees paid to financial, legal, accounting and other advisors and employee retention, severance, and benefit costs. Zurn will also incur costs related to formulating and implementing integration plans. Although Zurn expects that the elimination of duplicative costs, as well as the realization of synergies and efficiencies related to the integration of the assets and operations of Elkay, should allow Zurn to offset these transaction costs over time, this net benefit may not be achieved in the near term or at all. Moreover, if the Merger is not completed, Zurn will have incurred substantial expenses for which no ultimate benefit will have been received. Zurn and Elkay have incurred out-of-pocket expenses in connection with the Merger for investment banking, legal and accounting fees and financial printing and other costs and expenses, much of which will be incurred even if the Merger is not completed.
Until the completion of the Merger or the termination of the Merger Agreement in accordance with its terms, Zurn and Elkay are each prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to Zurn or Elkay and their respective stockholders.
From and after the date of the Merger Agreement and prior to completion of the Merger, the Merger Agreement restricts Zurn and Elkay from taking specified actions without the consent of the other party and generally requires that the business of each company and its respective subsidiaries be conducted in all material respects in the ordinary course of business consistent with past practice. These restrictions may prevent Zurn or Elkay from making appropriate changes to their respective businesses or organizational structures or from pursuing attractive business opportunities that may arise prior to the completion of the Merger and could have the effect of delaying or preventing other strategic transactions. Adverse effects arising from the pendency of the Merger could be exacerbated by any delays in consummation of the Merger or termination of the Merger Agreement.
Securities class action and derivative lawsuits may be brought against Zurn and/or Elkay in connection with the Merger, which could result in substantial costs and may delay or prevent the Merger from being completed.
Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into acquisition, merger or other business combination agreements that could prevent or delay the completion of the Merger and result in significant costs to Zurn and/or Elkay, including any costs associated with the indemnification of directors and officers. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Zurn’s and/or Elkay’s liquidity and financial condition.
Lawsuits that may be brought against Zurn, Elkay or Zurn’s or Elkay’s directors could also seek, among other things, injunctive relief or other equitable relief, including a request to enjoin Zurn from consummating the Merger. One of the conditions to the closing of the Merger is that no injunction by any court or other tribunal of competent jurisdiction has been entered and continues to be in effect and no law has been adopted or is effective, in either case that prohibits or makes illegal the closing of the Merger. Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, that injunction may delay or prevent the Merger from being completed within the expected timeframe or at all, which may adversely affect Zurn’s business, financial position and results of operation.
Zurn may record goodwill and other intangible assets that could become impaired and result in material non-cash charges to the results of operations of the combined company in the future.
Zurn will account for the Merger as an acquisition of a business in accordance with GAAP. Under the acquisition method of accounting, the assets and liabilities of Elkay and its subsidiaries will be recorded, as of the completion of the Merger, at their respective fair values and added to Zurn’s. Zurn’s reported financial condition and results of operations for periods after completion of the Merger will reflect Elkay’s balances and results after completion of the Merger but will not be restated retroactively to reflect the historical financial position or results of operations of Elkay and its subsidiaries for periods prior to the Merger.
Under the acquisition method of accounting, the total purchase price will be allocated to Elkay’s tangible assets and liabilities and identifiable intangible assets based on their fair values as of the date of completion of the Merger. The excess of the purchase price over those fair values, if any, will be recorded as goodwill. To the extent the value of goodwill or intangibles, if any, becomes impaired in the future, Zurn may be required to incur material non-cash charges relating to such impairment.
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Zurn’s operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.
If the Merger is consummated, Zurn may be unable to successfully integrate Elkay’s business into its business or achieve the anticipated benefits of the Merger.
The success of the Merger will depend, in part, on Zurn’s ability to realize the anticipated benefits and cost savings from combining Zurn’s and Elkay’s businesses, and there can be no assurance that Zurn will be able to successfully integrate or otherwise realize the anticipated benefits of the Merger. Difficulties in integrating Zurn and Elkay may result in Zurn performing differently than expected, in operational challenges, or in the failure to realize anticipated expense-related efficiencies or other synergies. Potential difficulties that may be encountered in the integration process include, among others:
• the inability to successfully integrate Elkay in a manner that permits the achievement of full revenue, expected cash flows and cost savings anticipated from the Merger;
• not realizing anticipated synergies;
• integrating personnel from Elkay and the loss of key employees;
• potential unknown liabilities and unforeseen expenses or delays associated with and following the completion of the Merger;
• integrating relationships with customers, vendors and business partners;
• performance shortfalls as a result of the diversion of management’s attention caused by completing the Merger and integrating Elkay’s operations; and
• the disruption of, or the loss of momentum in, Zurn’s ongoing business or inconsistencies in standards, controls, procedures and policies.
    Zurn may not be able to accomplish this integration process successfully.
Our results may suffer if we do not effectively manage our expanded operations following the Merger.
Following completion of the Merger, the size of Zurn’s business will increase significantly beyond its current size. Zurn’s future success will depend, in part, on Zurn’s ability to manage this expanded business, which poses numerous risks and uncertainties, including the need to integrate the operations and business of Elkay into Zurn’s existing business in an efficient and timely manner, to combine systems and management controls and to integrate relationships with customers, vendors and business partners.
Zurn’s current stockholders will have a reduced ownership and voting interest after the Merger compared to their current ownership and will exercise less influence over management.
Immediately after the Merger is completed, it is expected that Zurn’s current stockholders will collectively own approximately 71% and the Elkay stockholders are expected to receive up to 52.5 million newly issued shares of Zurn Common Stock, which on a pro forma basis assuming closing of the Merger on December 31, 2021 (and assuming no adjustments pursuant to the Merger Agreement), would have represented approximately 29% of the outstanding shares of Zurn Common Stock on a fully diluted basis as of such date. As a result of the Merger, Zurn’s current stockholders will own a smaller percentage of Zurn than they currently own, and as a result will have less influence on Zurn’s management and policies.
Sales of substantial amounts of the Zurn Common Stock in the open market by the Elkay Stockholders could depress Zurn’s stock price.
The former Elkay stockholders may wish to dispose of some or all of the Zurn Common Stock that they receive in the Merger, and as a result may seek to sell their Zurn Common Stock. These sales (or the perception that these sales may occur), coupled with the increase in the outstanding number of shares of Zurn Common Stock, may affect the market for, and the market price of, the Zurn Common Stock in an adverse manner.
If the Merger is completed and Zurn’s stockholders, including the former Elkay stockholders, sell substantial amounts of Zurn Common Stock in the public market following the closing of the Merger, the market price of the Zurn Common Stock may decrease. These sales might also make it more difficult for Zurn to raise capital by selling equity or equity-related securities at a time and price that it otherwise would deem appropriate.
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Certain stockholders of Elkay will have registration rights, the exercise of which could adversely affect the trading price of Zurn Common Stock.
Concurrently with the closing of the Merger, Zurn and certain stockholders of Elkay will enter into a Registration Rights Agreement, pursuant to which Zurn will grant such stockholders a right to demand registration of one public offering within the first three years after the closing of the Merger, subject to certain minimum and maximum thresholds and other customary conditions. Zurn will pay certain expenses of the parties incurred in connection with the exercise of their rights under the Registration Rights Agreement and indemnify them for certain securities law matters in connection with any registration statement. The existence and potential or actual exercise of such rights, and the perception that a large number of shares will be publicly sold in the market, could adversely impact the trading price of Zurn Common Stock.

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ITEM  2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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. On January 27, 2020, the Company's Board of Directors increased the remaining share repurchase authority under the Repurchase Program to $300.0 million. The Repurchase Program does not require the Company to acquire any particular amount of common stock and does not specify the timing of purchases or the prices to be paid; 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. NoThe Company did not repurchase any shares were repurchased during the third quarter of fiscal 2018.three months ended March 31, 2022. A total of approximately $160.0$162.8 million remained of the existing repurchase authority remained under the Repurchase Program at DecemberMarch 31, 2017.2022.


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ITEM  6.EXHIBITS
ITEM  6.Exhibit
No.
EXHIBITS
DescriptionFiled
Herewith
Exhibit
No.
Description
Filed
Herewith
4.1
2.1

10.1
4.2
4.3
10.1
10.2
10.3
10.2
10.3X
31.1
31.1X
31.2X
32.1X
101.INSInline XBRL 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.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
________________________

*Incorporated by reference to the same exhibit number in the Company’s Form 8-K, dated December 7, 2017.
**104Incorporated by reference toCover Page Inline XBRL data (contained in Exhibit 1.1 to the Company’s Form 8-K, dated November 30, 2017.101)X


*Incorporated by reference to the same exhibit number in the Company's Current Report on Form 8-K, dated February 12, 2022.
SIGNATURES



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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, RexnordZurn Water Solutions Corporation has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ZURN WATER SOLUTIONS CORPORATION
REXNORD CORPORATION
Date:April 27, 2022
Date:January 31, 2018By:
/S/     MARK W. PETERSON
Name:Mark W. Peterson
Title:Senior Vice President and Chief Financial Officer




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