Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q
(Mark one)
(Mark one)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended September 30, 2019
2020
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
Commission File Number:001-35475

REXNORD CORPORATION
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.)
511 W. Freshwater Way53204
Milwaukee,Wisconsin(Zip Code)
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (414) (414) 643-3739
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $.01 par valueRXNThe New York Stock Exchange
Depository Shares, each representing a 1/20th interest in a share of 5.75% Series A Mandatory Convertible Preferred Stock, $.01 par valueRXN.PRAThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No   ☐
Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
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 filer☒Accelerated filer☐
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
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.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  ☐    No   ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 
ClassOutstanding at October 25, 201923, 2020
Rexnord Corporation Common Stock, $0.01 par value per share105,956,411120,279,849 shares



Table of Contents
TABLE OF CONTENTS
 
Item 1.
4
Item 2.
4438
Item 3.
5248
Item 4.
5349
Item 1.
5450
Item 2.
5450
Item 6.
5451
5552
 


2
Table of Contents
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 fiscal year ended March 31, 20192020, in Part I, Item 1A, “Risk Factors” and in Part I under the heading "Cautionary Notice Regarding Forward-Looking Statements." Accordingly, we can give no assurance that we will achieve the results anticipated or implied by our forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

 In addition, the effects of the ongoing COVID-19 pandemic on our employees, customers and supply chain, including those related to governmental actions, all of which are uncertain at this time, may, among other impacts, heighten the effects on our business, results of operations and financial condition of the risk factors identified in our Form 10-K.
General

Our    Following the end of our fiscal year ended March 31, 2020, we transitioned to a December 31 fiscal year-end date. The nine-month period from April 1, 2020, to December 31, 2020, is serving as a transition period, and we will provide one-time, nine-month transitional financial statements for the transition period in a transition report on Form 10-K to be filed in 2021. Prior to the transition period, our fiscal year was the year ending on March 31 of the corresponding calendar year. For example, our fiscal year 2020, or fiscal 2020, meanswas the period from April 1, 2019, to March 31, 2020, and the second quarter2020. Our fiscal year 2021 will commence on January 1, 2021.

3
Table of fiscal 2020 and 2019 means the fiscal quarters ended September 30, 2019 and September 30, 2018, respectively.Contents


PART I - FINANCIAL INFORMATION

ITEM  1.FINANCIAL STATEMENTS

ITEM  1.FINANCIAL STATEMENTS

Rexnord Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in Millions, except share amounts)
(Unaudited) 
 September 30, 2019 March 31, 2019September 30, 2020March 31, 2020
Assets    Assets
Current assets:    Current assets:
Cash and cash equivalents $319.8
 $292.5
Cash and cash equivalents$326.6 $573.4 
Receivables, net 301.0
 334.3
Receivables, net290.3 334.7 
Inventories 344.6
 316.5
Inventories355.7 317.5 
Other current assets 48.1
 39.6
Other current assets42.9 38.7 
Total current assets 1,013.5
 982.9
Total current assets1,015.5 1,264.3 
Property, plant and equipment, net 373.1
 383.0
Property, plant and equipment, net418.1 378.8 
Intangible assets, net 499.2
 511.5
Intangible assets, net499.1 514.2 
Goodwill 1,310.5
 1,299.7
Goodwill1,326.2 1,321.9 
Other assets 114.7
 82.6
Other assets146.5 147.9 
Total assets $3,311.0
 $3,259.7
Total assets$3,405.4 $3,627.1 
Liabilities and stockholders' equity    Liabilities and stockholders' equity
Current liabilities:    Current liabilities:
Current maturities of debt $1.5
 $1.2
Current maturities of debt$3.2 $76.4 
Trade payables 158.7
 191.7
Trade payables157.0 185.6 
Compensation and benefits 53.4
 63.7
Compensation and benefits49.7 61.8 
Current portion of pension and postretirement benefit obligations 3.3
 3.3
Current portion of pension and postretirement benefit obligations3.2 3.2 
Other current liabilities 127.9
 137.1
Other current liabilities146.9 128.5 
Total current liabilities 344.8
 397.0
Total current liabilities360.0 455.5 

    
Long-term debt 1,249.3
 1,236.8
Long-term debt1,192.6 1,397.0 
Pension and postretirement benefit obligations 150.8
 158.0
Pension and postretirement benefit obligations185.0 189.6 
Deferred income taxes 127.7
 125.9
Deferred income taxes120.1 121.0 
Other liabilities 117.0
 111.0
Other liabilities149.3 150.3 
Total liabilities 1,989.6
 2,028.7
Total liabilities2,007.0 2,313.4 
    
Stockholders' equity:    Stockholders' equity:
Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued and outstanding: 105,951,498 at September 30, 2019 and 104,842,299 at March 31, 2019 1.0
 1.0
Preferred stock, $0.01 par value; 10,000,000 shares authorized; shares of 5.75% Series A Mandatory Convertible Preferred Stock issued and outstanding: 402,500 at September 30, 2019 and March 31, 2019 0.0
 0.0
Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued and outstanding: 120,247,595 at September 30, 2020 and 119,718,631 at March 31, 2020Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued and outstanding: 120,247,595 at September 30, 2020 and 119,718,631 at March 31, 20201.2 1.2 
Additional paid-in capital 1,307.2
 1,293.5
Additional paid-in capital1,366.8 1,348.3 
Retained earnings 122.2
 30.7
Retained earnings132.7 85.9 
Accumulated other comprehensive loss (111.7) (96.6)Accumulated other comprehensive loss(105.2)(124.4)
Total Rexnord stockholders' equity 1,318.7
 1,228.6
Total Rexnord stockholders' equity1,395.5 1,311.0 
Non-controlling interest 2.7
 2.4
Non-controlling interest2.9 2.7 
Total stockholders' equity 1,321.4
 1,231.0
Total stockholders' equity1,398.4 1,313.7 
Total liabilities and stockholders' equity $3,311.0
 $3,259.7
Total liabilities and stockholders' equity$3,405.4 $3,627.1 
See notes to the condensed consolidated financial statements.

4
Table of Contents
Rexnord Corporation and Subsidiaries
Condensed Consolidated Statements of OperationsOperations
(in Millions, except share and per share amounts)
(Unaudited)
Three Months EndedSix Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net sales$493.6 $521.3 $942.7 $1,029.6 
Cost of sales300.5 313.1 572.7 619.8 
Gross profit193.1 208.2 370.0 409.8 
Selling, general and administrative expenses105.1 108.8 205.3 218.3 
Restructuring and other similar charges6.6 2.1 8.3 5.3 
Amortization of intangible assets9.0 8.8 18.0 17.5 
Income from operations72.4 88.5 138.4 168.7 
Non-operating expense:
Interest expense, net(11.5)(15.3)(24.9)(30.8)
Gain on the extinguishment of debt0 3.2 0 3.2 
Other income (expense), net0.6 (0.3)1.0 (1.8)
Income before income taxes61.5 76.1 114.5 139.3 
Provision for income taxes(16.1)(19.5)(33.3)(34.3)
Equity method investment income0 0.1 0 0.2 
Net income from continuing operations45.4 56.7 81.2 105.2 
Loss from discontinued operations, net of tax0 0 0 (1.8)
Net income45.4 56.7 81.2 103.4 
Non-controlling interest income0 0.1 0.2 0.3 
Net income attributable to Rexnord45.4 56.6 81.0 103.1 
Dividends on preferred stock0 (5.8)0 (11.6)
Net income attributable to Rexnord common stockholders$45.4 $50.8 $81.0 $91.5 
Basic net income (loss) per share attributable to Rexnord common stockholders:
Continuing operations$0.38 $0.48 $0.67 $0.88 
Discontinued operations$0 $0 $0 $(0.02)
Net income$0.38 $0.48 $0.67 $0.87 
Diluted net income (loss) per share attributable to Rexnord common stockholders:
Continuing operations$0.37 $0.46 $0.66 $0.85 
Discontinued operations$0 $0 $0 $(0.01)
Net income$0.37 $0.46 $0.66 $0.83 
Weighted-average number of shares outstanding (in thousands):
Basic120,704 106,007 120,476 105,637 
Effect of dilutive equity securities1,803 17,913 2,034 18,004 
Diluted122,507 123,920 122,510 123,641 
  Second Quarter Ended Six Months Ended
  September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Net sales $521.3
 $524.8
 $1,029.6
 $1,028.4
Cost of sales 313.1
 321.6
 619.8
 629.7
Gross profit 208.2
 203.2
 409.8
 398.7
Selling, general and administrative expenses 108.8
 109.6
 218.3
 221.4
Restructuring and other similar charges 2.1
 3.7
 5.3
 6.8
Amortization of intangible assets 8.8
 8.5
 17.5
 17.0
Income from operations 88.5
 81.4
 168.7
 153.5
Non-operating expense:        
Interest expense, net (15.3) (18.7) (30.8) (37.3)
Gain on the extinguishment of debt 3.2
 —
 3.2
 —
Other (expense) income, net (0.3) —
 (1.8) 1.7
Income before income taxes 76.1
 62.7
 139.3
 117.9
Provision for income taxes (19.5) (17.2) (34.3) (31.7)
Equity method investment income 0.1
 0.7
 0.2
 2.2
Net income from continuing operations 56.7
 46.2
 105.2
 88.4
Loss from discontinued operations, net of tax —
 (83.7) (1.8) (126.5)
Net income (loss) 56.7
 (37.5) 103.4
 (38.1)
Non-controlling interest income 0.1
 0.1
 0.3
 0.2
Net income (loss) attributable to Rexnord 56.6
 (37.6) 103.1
 (38.3)
Dividends on preferred stock (5.8) (5.8) (11.6) (11.6)
Net income (loss) attributable to Rexnord common stockholders $50.8
 $(43.4) $91.5
 $(49.9)
         
Basic net income (loss) per share attributable to Rexnord common stockholders:        
Continuing operations $0.48
 $0.39
 $0.88
 $0.73
Discontinued operations $—
 $(0.80) $(0.02) $(1.21)
Net income (loss) $0.48
 $(0.42) $0.87
 $(0.48)
Diluted net income (loss) per share attributable to Rexnord common stockholders:        
Continuing operations $0.46
 $0.37
 $0.85
 $0.71
Discontinued operations $—
 $(0.68) $(0.01) $(1.18)
Net income (loss) $0.46
 $(0.30) $0.83
 $(0.46)
Weighted-average number of shares outstanding (in thousands):      
Basic 106,007
 104,570
 105,637
 104,455
Effect of dilutive equity securities 17,913
 18,806
 18,004
 2,921
Diluted 123,920
 123,376
 123,641
 107,376

See notes to the condensed consolidated financial statements.


5
Table of Contents
Rexnord Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in Millions)
(Unaudited)
Three Months EndedSix Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net income attributable to Rexnord$45.4 $56.6 $81.0 $103.1 
Other comprehensive income:
Foreign currency translation adjustments13.0 (15.0)19.4 (15.5)
Change in pension and postretirement defined benefit plans, net of tax(0.1)(0.1)(0.2)0.4 
Other comprehensive income, net of tax12.9 (15.1)19.2 (15.1)
Non-controlling interest income0 0.1 0.2 0.3 
Total comprehensive income$58.3 $41.6 $100.4 $88.3 
  Second Quarter Ended Six Months Ended
  September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Net income (loss) attributable to Rexnord $56.6
 $(37.6) $103.1
 $(38.3)
Other comprehensive (loss) income:        
Foreign currency translation adjustments (15.0) (0.9) (15.5) (36.6)
Net change in unrealized losses on interest rate derivatives, net of tax —
 2.0
 —
 4.0
Change in pension and postretirement defined benefit plans, net of tax (0.1) 0.4
 0.4
 0.2
Other comprehensive (loss) income, net of tax (15.1) 1.5
 (15.1) (32.4)
Non-controlling interest income 0.1
 0.1
 0.3
 0.2
Total comprehensive income (loss) $41.6
 $(36.0) $88.3
 $(70.5)

See notes to the condensed consolidated financial statements.

6
Table of Contents
Rexnord Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in Millions)
(Unaudited)
Six Months Ended
September 30, 2020September 30, 2019
Operating activities
Net income$81.2 $103.4 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation26.0 25.2 
Amortization of intangible assets18.0 17.5 
Deferred income taxes(1.5)2.2 
Other non-cash (income) expense(0.7)2.4 
Gain on the extinguishment of debt0 (3.2)
Stock-based compensation expense20.7 12.8 
Changes in operating assets and liabilities:
Receivables38.0 15.4 
Inventories(34.0)(30.0)
Other assets0.7 (12.9)
Accounts payable(31.4)(31.4)
Accruals and other(3.2)(15.1)
Cash provided by operating activities113.8 86.3 
Investing activities
Expenditures for property, plant and equipment(15.3)(13.2)
Acquisitions, net of cash acquired0 (25.1)
Proceeds from dispositions of long-lived assets7.8 2.0 
Payment associated with divestiture of discontinued operations0 (1.3)
Cash used for investing activities(7.5)(37.6)
Financing activities
Proceeds from borrowings of debt6.0 0 
Repayments of debt(331.8)(5.4)
Proceeds from exercise of stock options7.2 6.9 
Taxes withheld and paid on employees' share-based payment awards(9.4)(5.7)
Repurchase of common stock(15.0)0 
Payment of common stock dividends(19.2)0 
Payment of preferred stock dividends0 (11.6)
Cash used for financing activities(362.2)(15.8)
Effect of exchange rate changes on cash and cash equivalents9.1 (5.6)
(Decrease) increase in cash and cash equivalents(246.8)27.3 
Cash, cash equivalents and restricted cash at beginning of period573.4 292.5 
Cash, cash equivalents and restricted cash at end of period$326.6 $319.8 
  Six Months Ended
  September 30, 2019 September 30, 2018
Operating activities    
Net income (loss) $103.4
 $(38.1)
Adjustments to reconcile net income (loss) to cash provided by operating activities:    
Depreciation 25.2
 31.2
Amortization of intangible assets 17.5
 17.3
Non-cash asset impairment —
 126.0
Deferred income taxes 2.2
 (16.6)
Other non-cash charges 2.4
 6.2
Gain on the extinguishment of debt (3.2) —
Stock-based compensation expense 12.8
 11.8
Changes in operating assets and liabilities:    
Receivables 15.4
 (14.5)
Inventories (30.0) (39.7)
Other assets (12.9) (1.8)
Accounts payable (31.4) (16.1)
Accruals and other (15.1) 9.4
Cash provided by operating activities 86.3
 75.1
     
Investing activities    
Expenditures for property, plant and equipment (13.2) (17.6)
Acquisitions, net of cash acquired (25.1) (2.0)
Proceeds from dispositions of long-lived assets 2.0
 3.5
Net payments associated with divestiture of discontinued operations (1.3) —
Cash used for investing activities (37.6) (16.1)
     
Financing activities    
Proceeds from borrowings of debt —
 209.7
Repayments of debt (5.4) (227.6)
Proceeds from exercise of stock options 6.9
 5.0
Taxes withheld and paid on employees' share-based payment awards (5.7) (3.2)
Payments of preferred stock dividends (11.6) (11.6)
Cash used for financing activities (15.8) (27.7)
Effect of exchange rate changes on cash and cash equivalents (5.6) (10.2)
Increase in cash and cash equivalents 27.3
 21.1
Cash, cash equivalents and restricted cash at beginning of period 292.5
 217.6
Cash, cash equivalents and restricted cash at end of period $319.8
 $238.7

See notes to the condensed consolidated financial statements.

7
Table of Contents
Rexnord Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 20192020
(Unaudited)

1.1. Basis of Presentation and Significant Accounting Policies

The unaudited condensed consolidated financial statements included herein have been prepared by Rexnord Corporation (“Rexnord” or the “Company”) in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
In the opinion of management, the condensed consolidated financial statements include all adjustments necessary for a fair presentation of the results of operations for the interim periods. Following the end of the Company's fiscal year ended March 31, 2020, the Company transitioned to a December 31 fiscal year-end date. The nine-month period from April 1, 2020, to December 31, 2020, is serving as a transition period, and the Company will provide one-time, nine-month transitional financial statements for the transition period in a transition report on Form 10-K to be filed in 2021. Results for the interim periods are not necessarily indicative of results that may be expected for the fiscal yearnine-month transition period ending MarchDecember 31, 2020. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's fiscal 2019March 31, 2020 Annual Report on Form 10-K.
The Company
Rexnord is a growth-oriented, multi-platform industrial company with what it believes to be leading market shares and highly-trusted brands that serve a diverse array of global end markets. The Company's heritage of innovation and specification have allowed it to provide highly-engineered, mission-critical solutions to customers for decades and affords it the privilege of having long-term, valued relationships with market leaders. The Company operates in a disciplined way and the Rexnord Business System (“RBS”) is its operating philosophy. Grounded in the spirit of continuous improvement, RBS creates a scalable, process-based framework that focuses on driving superior customer satisfaction and financial results by targeting world-class operating performance throughout all aspects of its business.
The Process & Motion Control platform designs, manufactures, markets and services a comprehensive range of specified, highly-engineered mechanical components used within complex systems where the Company's customers' reliability requirements and costs of failure or downtime are high. The Process & Motion Control portfolio includes motion control products, shaft management products, aerospace components, and related value-added services.
The Water Management platform designs, procures, manufactures, and markets products that provide and enhance water quality, safety, flow control and conservation. The Water Management product portfolio includes professional grade water control and safety, water distribution and drainage, finish plumbing and site works products for primarily nonresidential buildings.
Recent Accounting Pronouncements
In June 2016,March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate that is expected to be discontinued because of reference rate reform. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this ASU are effective for all entities as of March 12, 2020, through December 31, 2022. The Company did not modify any material contracts due to reference rate reform during the three and six months ended September 30, 2020. The Company will continue to evaluate the impact this guidance will have on its consolidated financial statements for all future transactions affected by reference rate reform during the time period referenced above.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The FASB issued this update as part of its initiative to reduce complexity in accounting standards. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general
8
Table of Contents
principles in Topic 740 and also improve consistent application of other areas by clarifying and amending existing guidance. ASU 2019-12 is effective for public business entities with fiscal years beginning after December 15, 2020, and early adoption is permitted. Certain amendments of this ASU may be adopted on a retrospective basis, modified retrospective basis or prospective basis. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.     
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ASC 326, Financial Instruments - Credit Losses. The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses.Losses. This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. ASU 2016-13 is effective for the Company in the first quarter of fiscal year 2021. The Company expects that it will adopt theadopted ASU No. 2016-13, as amended, on April 1, 2020, using a modified-retrospective approach. The Company is currently evaluatingThere was no impact to the impact this guidance will have on its consolidated financial statements and does not anticipate that the guidance will materially impact itsCompany's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14"), which updates the standard to remove disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. ASU 2018-14 is effective for the Company inpublic business entities with fiscal 2021years beginning after December 15, 2020, on a retroactive basis. The Company is currently evaluating the impact thisThis guidance will have no impact on itsthe Company's consolidated financial statements upon adoption.    

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changesadoption other than with respect to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"), which modifies theupdated disclosure requirements in ASC 820, Fair Value Measurement ("ASC 820"). The Company adopted this ASU on April 1, 2019. There was no impact to the Company's condensed consolidated financial statements.requirements.    
In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU was issued following the enactment of the U.S. Tax Cuts and Jobs Act of 2017 ("Tax Act") and permits entities to elect a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The Company adopted the standard effective April 1, 2019, and did not reclassify tax effects stranded in accumulated other comprehensive loss. As such, there was no impact on the Company’s condensed consolidated financial position, results of operations, and cash flows as a result of the adoption of the ASU.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"), which expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The Company adopted this ASU on April 1, 2019. There was no impact to the Company's condensed consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU 2018-11, Leases (Topic 842): Targeted Improvements, which addressed implementation issues related to the new lease standard. These and certain other lease-related ASUs have generally been codified in Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”). ASC 842 supersedes the lease accounting requirements in ASC 840, Leases (“ASC 840”). ASC 842 establishes a right-of-use model that requires a lessee to record a right-of-use (“ROU”) asset and a lease liability on the balance sheet for all leases. Under ASC 842, leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The standard also requires disclosures around the amount, timing and uncertainty of cash flows arising from leases. The Company adopted ASC 842 effective April 1, 2019, using a modified retrospective approach. Prior period financial statements continue to be presented under ASC 840 based on the accounting standards originally in effect for such periods.
The Company elected certain practical expedients permitted under the transition guidance within ASC 842 to leases that commenced before April 1, 2019, including the package of practical expedients that resulted in the Company not reassessing its prior conclusions under ASC 840 related to lease identification, lease terms, lease classification and initial direct costs for expired and existing leases prior to April 1, 2019, and therefore there was no adjustment to the opening balance of retained earnings. The Company also elected the practical expedient to combine lease and non-lease components for all asset classes, and has made a policy election not to capitalize leases with an initial term of 12 months or less.
Upon adoption, the Company recognized ROU assets and lease liabilities of approximately $70.8 million and $73.0 million, respectively, as of April 1, 2019. Adoption of the new standard did not have a significant impact on the Company’s consolidated results of operations or cash flows. See Note 18, Leases for additional information.
Reclassifications
Certain prior year amounts have been reclassified to conform to the fiscal 2020 presentation.presentation used for the three and six months ended September 30, 2020.


9
Table of Contents
2. Acquisitions and Divestiture
Fiscal Year 2020
    On January 28, 2020, the Company acquired substantially all of the assets of Just Manufacturing Company ("Just Manufacturing") for a cash purchase price of $59.4 million, excluding transaction costs and net of cash acquired. Just Manufacturing, based in Franklin Park, Illinois, manufactures stainless steel sinks and plumbing fixtures primarily used in institutional and commercial end markets and complements the Company's existing Water Management platform.
On May 10, 2019, the Company acquired substantially all of the assets of East Creek Corporation (d/b/a StainlessDrains.com), a manufacturer of stainless steel drains, grates and accessories for industrial and commercial end markets, for a cash purchase price of $24.8 million, excluding transaction costs and net of cash acquired. StainlessDrains.com, headquartered in Greenville, Texas, added complementary product lines to the Company's existing Water Management platform.
The Company's results of operations include the acquired operations subsequent to the aforementioned acquisition date. Pro-forma results of operations and certain other U.S. GAAP disclosures related to this acquisitionfiscal 2020 acquisitions have not been presented because they are not significant to the Company's condensed consolidated statements of operations or financial position. The acquisition of StainlessDrains.com has been accounted for as a business combinationcombinations and waswere recorded by allocating the purchase price to the fair value of the assets acquired and liabilities assumed at the acquisition date. The excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The preliminary purchase price allocationallocations associated with this acquisitionthese acquisitions resulted in tax deductible goodwill of $13.9$27.2 million, other intangible assets of $6.8$40.9 million (including tradenames of $0.7$2.2 million and $6.1$38.7 million of customer relationships), $1.9$8.4 million of fixed assets, $9.1 million of trade working capital and other net assetsliabilities of $2.2$1.4 million.
The preliminary purchase price allocations for Just Manufacturing were adjusted during the six months ended September 30, 2020, resulting in a $0.7 million increase in goodwill related to the refinement of the estimated fair value of the liabilities assumed as of the acquisition date. The Company is continuing to evaluate the initialpreliminary purchase price allocationallocations for StainlessDrains.comJust Manufacturing related to the fair valuesvalue assigned to tangible and intangible assets and net working capital acquired, which will be completed within the one year period following its acquisition date. The purchase price allocations for StainlessDrains.com were finalized during fiscal 2020.    

During the second quarter of fiscal 2020, the Company acquired the remaining non-controlling interest in a Process and Motion Control joint venture for a cash purchase price of $0.3 million. The acquisition of the remaining minority interest was not material to the Company's condensed consolidated statements of operations or financial position.

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

The Company allocated the preliminary purchase price to the fair value of assets acquired and liabilities assumed at the acquisition date. The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The preliminary purchase price allocation was adjusted during the first and second quarters of fiscal 2020, resulting in a reduction to goodwill of $0.3 million, primarily related to the refinement of the estimated fair value of intangible assets and other working capital acquired. As of September 30, 2019, the preliminary purchase price allocation associated with this acquisition resulted in non-tax deductible goodwill of $19.8 million, other intangible assets of $20.1 million (including tradenames of $1.3 million and $18.8 million of customer relationships), $8.0 million of trade working capital and other net liabilities of $2.2 million. The Company is continuing to evaluate the initial purchase price allocations primarily

related to the finalization of the amount of net working capital acquired as well as the related income tax analysis for this acquisition, which will be completed within the one year period following the acquisition date.
On September 24, 2018, the Company acquired certain assets associated with the design and distribution of various roof drains, spouts and flow sensors for institutional, commercial and industrial buildings for $2.0 million. The acquisition of these assets added complementary product lines to the Company's existing Water Management platform and was accounted for as a business combination. This acquisition did not materially affect the Company's condensed consolidated statements of operations or financial position.
The Company's results of operations include the acquired operations subsequent to the respective acquisition dates. Pro-forma results of operations and certain other U.S. GAAP disclosures related to the fiscal 2020 and 2019 acquisitions have not been presented because they are not significant to the Company's condensed consolidated statements of operations or financial position.

Divestiture
On October 1, 2020, the Company completed the sale of the China gearbox product line within its Process & Motion Control platform. Cash proceeds from the sale were $5.8 million and were received by the Company on September 30, 2020 in advance of the transaction closing. Accordingly, the Company recorded the cash proceeds within other current liabilities on its condensed consolidated balance sheets as of September 30, 2020. As the carrying value of the assets as of September 30, 2020 included in the transaction approximate the cash proceeds received, the final gain or loss on sale to be recognized during the three months ending December 31, 2020 is expected to be immaterial. The China gearbox product line was not material to the Company's condensed consolidated statements of operations or financial position.
3. Restructuring and Other Similar Charges
During fiscalthe three months and six months ended September 30, 2020, the Company continued to execute various restructuring actions. These initiatives were implemented to drive efficiencies and reduce operating costs while also modifying the Company's footprint to reflect changes in the markets it serves, the impact of acquisitions on the Company's overall manufacturing capacity and the refinement of its overall product portfolio. These restructuring actions primarily resulted in workforce reductions, lease termination costs, and other facility rationalization costs. Management expects to continue executing initiatives and select product-line rationalizations to optimize its operating margin and manufacturing footprint. As the Company continues to evaluate the impact of the ongoing COVID-19 pandemic and the resulting effects on the global economy, the Company may also execute additional restructuring actions. As such, the Company expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs, and other facility rationalization costs. The Company'sSince the Company’s evaluation of the impacts of COVID-19 and other potential restructuring plansactions are preliminary andin process, related restructuring expenses, if any, are not yet estimable.
10
Table of Contents
The following table summarizes the Company's restructuring and other similar charges during the three and six months ended September 30, 20192020 and September 30, 20182019, by classification of operating segment (in millions):
Restructuring and Other Similar Charges
Three Months Ended September 30, 2020
Process & Motion ControlWater ManagementCorporateConsolidated
Employee termination benefits$5.6 $0.1 $0 $5.7 
Contract termination and other associated costs1.1 0 (0.2)0.9 
Total restructuring and other similar costs$6.7 $0.1 $(0.2)$6.6 
  Restructuring and Other Similar Charges
Three Months Ended September 30, 2019
  Process & Motion Control Water Management Corporate Consolidated
Employee termination benefits $1.8
 $0.1
 $—
 $1.9
Contract termination and other associated costs 0.2
 —
 —
 0.2
Total restructuring and other similar costs $2.0
 $0.1
 $—
 $2.1
  Restructuring and Other Similar Charges
Six Months Ended September 30, 2019
  Process & Motion Control Water Management Corporate Consolidated
Employee termination benefits $4.4
 $0.4
 $—
 $4.8
Contract termination and other associated costs 0.5
 —
 —
 0.5
Total restructuring and other similar costs $4.9
 $0.4
 $—
 $5.3
  
Restructuring and Other Similar Charges
Three Months Ended September 30, 2018
  Process & Motion Control Water Management Corporate Consolidated
Employee termination benefits $1.9
 $—
 $—
 $1.9
Contract termination and other associated costs 0.8
 —
 1.0
 1.8
Total restructuring and other similar costs $2.7
 $—
 $1.0
 $3.7

Restructuring and Other Similar Charges
Six Months Ended September 30, 2020
Process & Motion ControlWater ManagementCorporateConsolidated
Employee termination benefits$5.8 $1.0 $0.1 $6.9 
Contract termination and other associated costs1.6 0 (0.2)1.4 
Total restructuring and other similar costs$7.4 $1.0 $(0.1)$8.3 
  
Restructuring and Other Similar Charges
Six Months Ended September 30, 2018
  Process & Motion Control Water Management Corporate Consolidated
Employee termination benefits $3.7
 $0.3
 $0.6
 $4.6
Contract termination and other associated costs 1.0
 0.1
 1.1
 2.2
Total restructuring and other similar costs $4.7
 $0.4
 $1.7
 $6.8

Restructuring and Other Similar Charges
Three Months Ended September 30, 2019
Process & Motion ControlWater ManagementCorporateConsolidated
Employee termination benefits$1.8 $0.1 $0 $1.9 
Contract termination and other associated costs0.2 0 0 0.2 
Total restructuring and other similar costs$2.0 $0.1 $0 $2.1 

Restructuring and Other Similar Charges
Six Months Ended September 30, 2019
Process & Motion ControlWater ManagementCorporateConsolidated
Employee termination benefits$4.4 $0.4 $0 $4.8 
Contract termination and other associated costs0.5 0 0 0.5 
Total restructuring and other similar costs$4.9 $0.4 $0 $5.3 
The following table summarizes the activity in the Company's restructuring accrual for the six months ended September 30, 20192020 (in millions):
Employee termination benefitsContract termination and other associated costsTotal
Restructuring accrual, March 31, 2020 (1)$8.3 $1.5 $9.8 
Charges6.9 1.4 8.3 
Cash payments(6.5)(1.9)(8.4)
Restructuring accrual, September 30, 2020 (1)$8.7 $1.0 $9.7 
  Employee termination benefits Contract termination and other associated costs Total
Restructuring accrual, March 31, 2019 (1) $2.4
 $1.9
 $4.3
Charges 4.8
 0.5
 5.3
Cash payments (3.2) (1.2) (4.4)
Restructuring accrual, September 30, 2019 (1) $4.0
 $1.2
 $5.2
____________________
____________________(1)The restructuring accrual is included in other current liabilities in the condensed consolidated balance sheets.
(1)The restructuring accrual is included in other current liabilities in the condensed consolidated balance sheets.


In connection with the ongoing supply chain optimization and footprint repositioning initiatives, the Company has taken several actions to consolidate existing manufacturing facilities and rationalize its product offerings. These actions require the Company to assess whether the carrying amount of impacted long-lived assets will be recoverable as well as whether the remaining useful lives require adjustment. As a result, the Company recognized accelerated depreciation of $0.2 million and $0.6 million during the three and six months ended September 30, 2020, and $0.7 million and $1.3 million during the three and six months ended September 30, 2019, and $1.2 million and $2.5 million during the three and six months ended September 30, 2018.respectively. Accelerated depreciation is recorded within Cost of sales in the condensed consolidated statements of operations.

11
Table of Contents




4. Discontinued Operations

During fiscal 2019, the Company completed the sale of the VAG business, which was previously included within the Water Management platform. The operating results of the VAG business are reported as discontinued operations in the condensed consolidated statements of operations, for all periods presented, as the sale of VAG represented a strategic shift that had a major impact on operations and financial results. The sale price was subject to customary working capital and cash balance adjustments, which waswere finalized in fiscal 2020. As a result of these adjustments and other related costs, the Company recognized an additional $1.8 million loss on the sale of discontinued operations during the six months ended September 30, 2019.

The major components of Loss from discontinued operations, net of tax presented in the condensed consolidated statements of operations consisted of the following (in millions):
 Three months ended Six months ended
 September 30, 2019
September 30, 2018 September 30, 2019 September 30, 2018
Net sales$—
 $49.0
 $—
 $97.0
Cost of sales—
 37.8
 —
 74.7
Selling, general and administrative expenses—
 11.8
 —
 24.9
Amortization of intangible assets—
 —
 —
 0.3
Non-cash asset impairment (1)—
 82.0
 —
 126.0
Loss on sale of discontinued operations—
 —
 1.8
 —
Other non-operating expenses, net—
 0.6
 —
 2.3
Loss from discontinued operations before income tax—
 (83.2) (1.8) (131.2)
Income tax (expense) benefit—
 (0.5) —
 4.7
Loss from discontinued operations, net of tax$—
 $(83.7) $(1.8) $(126.5)
____________________
(1)    The Company recorded non-cash impairments of $82.0 million and $126.0 million during the three and six months ended September 30, 2018, respectively, toreflect the Company's estimated fair value less costs to sell the VAG business based on the value of preliminary bids received at that time. 
The condensed consolidated statements of cash flows for the prior period presented has not been adjusted to separately disclose cash flows related to discontinued operations. However, the capital expenditures, depreciation, amortization and other significant non-cash amounts associated with the discontinued operations were as follows (in millions):
  Six Months Ended
  September 30, 2018
Depreciation $4.1
Amortization of intangible assets 0.3
Non-cash asset impairment 126.0
Stock-based compensation 0.2
Capital expenditures 1.5



5. Revenue Recognition
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606, Revenue from Contracts with Customers ("ASC 606"). A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when obligations under the terms of a contract with the customer are satisfied. For the majority of the Company's product sales, revenue is recognized at a point-in-time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company's manufacturing facility to the customer.
When contracts include multiple products to be delivered to the customer, generally each product is separately priced and is determined to be distinct within the context of the contract. Other than a standard assurance-type warranty that the product will conform to agreed-upon specifications, there are generally no other significant post-shipment obligations. The expected costs associated with standard warranties continues to be recognized as an expense when the products are sold. When the contract provides the customer the right to return eligible products or when the customer is part of a sales rebate program, the Company reduces revenue at the point of sale using current facts and historical experience by using an estimate for expected product returns and rebates associated with the transaction. The Company adjusts these estimates at the earlier of when the most likely amount of consideration that is expected to be received changes or when the consideration becomes fixed. Accordingly, an increase or decrease to revenue is recognized at that time.
Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue. The Company has elected to recognize the cost for freight and shipping when control of products has transferred to the customer as a component of cost of sales in the condensed consolidated statements of operations. The Company classifies shipping and handling fees billed to customers as net sales and the corresponding costs are classified as Cost of sales in the condensed consolidated statements of operations.
Revenue by Category
The Company has 2 business segments, Process & Motion Control and Water Management. The following table presentstables present our revenue disaggregated by customer type and originating geography (in millions):
Three Months EndedSix Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Original equipment manufacturers/end users$177.6 $204.9 $336.0 $406.4 
Maintenance, repair, and operations116.3 132.1 232.3 260.7 
    Total Process & Motion Control$293.9 $337.0 $568.3 $667.1 
Water safety, quality, flow control and conservation$187.2 $171.7 $350.4 $336.7 
Water infrastructure12.5 12.6 24.0 25.8 
    Total Water Management$199.7 $184.3 $374.4 $362.5 
  Three Months Ended Six Months Ended
  September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Original equipment manufacturers/end users $193.4
 $198.5
 $379.6
 $384.2
Maintenance, repair, and operations 143.6
 150.2
 287.5
 296.9
    Total Process & Motion Control $337.0
 $348.7
 $667.1
 $681.1
         
Water safety, quality, flow control and conservation $171.7
 $164.1
 $336.7
 $322.9
Water infrastructure 12.6
 12.0
 25.8
 24.4
    Total Water Management $184.3
 $176.1
 $362.5
 $347.3
12
Table of Contents


Three Months Ended
September 30, 2020		Six Months Ended
September 30, 2020
Process & Motion ControlWater ManagementProcess & Motion ControlWater Management
United States and Canada$168.6 $194.7 $337.7 $366.6 
Europe75.7 0 141.4 0 
Rest of world49.6 5.0 89.2 7.8 
    Total$293.9 $199.7 $568.3 $374.4 
  Three Months Ended September 30, 2019 
Six Months Ended
September 30, 2019
  Process & Motion Control Water Management Process & Motion Control Water Management
United States and Canada $216.6
 $180.4
 $431.0
 $355.2
Europe 73.3
 —
 145.7
 —
Rest of world 47.1
 3.9
 90.4
 7.3
    Total $337.0
 $184.3
 $667.1
 $362.5
  Three Months Ended September 30, 2018 
Six Months Ended
September 30, 2018
  Process & Motion Control Water Management Process & Motion Control Water Management
United States and Canada $226.9
 $172.2
 $440.8
 $339.7
Europe 84.7
 —
 166.9
 —
Rest of world 37.1
 3.9
 73.4
 7.6
    Total $348.7
 $176.1
 $681.1
 $347.3

Three Months Ended
September 30, 2019		Six Months Ended
September 30, 2019
Process & Motion ControlWater ManagementProcess & Motion ControlWater Management
United States and Canada$216.6 $180.4 $431.0 $355.2 
Europe73.3 0 145.7 0 
Rest of world47.1 3.9 90.4 7.3 
    Total$337.0 $184.3 $667.1 $362.5 
Contract Balances
For substantially all of the Company's Process & Motion Control and Water Management product sales, the customer is billed 100% of the contract value when the product ships and payment is generally due 30 days from shipment. Certain contracts include longer payment periods; however, the Company has elected to utilize the practical expedient in which the Company will only recognize a financing component to the sale if payment is due more than one year from the date of shipment.
The Company receives payment from customers based on the contractual billing schedule and specific performance requirements established in the contract. Billings are recorded as accounts receivable when an unconditional right to the contractual consideration exists. Contract assets arise when the Company performs by transferring goods or services to a customer before the customer pays consideration, or before the customer’s payment is due. A contract liability exists when the Company has received consideration or the amount is due from the customer in advance of revenue recognition. Contract liabilities and contract assets are recognized in Other current liabilities and Receivables, net, respectively, in the Company's condensed consolidated balance sheets.
The following table presents changes in the Company’s contract assets and liabilities during the six months ended September 30, 20192020 (in millions):
  Balance Sheet Classification March 31, 2019 Additions Deductions September 30, 2019
Contract assets Receivables, net $2.6
 $1.0
 $(2.2) $1.4
Contract liabilities (1) Other current liabilities $5.1
 $10.8
 $(10.1) $5.8

Balance Sheet ClassificationMarch 31, 2020AdditionsDeductionsSeptember 30, 2020
Contract assetsReceivables, net$0.5 $0.1 $(0.5)$0.1 
Contract liabilities (1)Other current liabilities$7.3 $4.6 $(5.0)$6.9 
____________________
(1)Contract liabilities are reduced when revenue is recognized.
(1)Contract liabilities are reduced when revenue is recognized.
Backlog
The Company has a backlog of $392.1$353.3 million as of September 30, 2019,2020, which represents the most likely amount of consideration expected to be received in satisfying the remaining backlog under open contracts. The Company has elected to use the optional exemption provided by ASC 606-10-50-14A for variable consideration, and has not included estimated rebates in the amount of unsatisfied performance obligations. The Company expects to recognize approximately 80%62% of the unsatisfied performance obligations as revenue in fiscalthe remaining three months in the transition period ending December 31, 2020, and the remaining 20%approximately 38% in fiscal 2021 and beyond.
13
Table of Contents
Timing of Performance Obligations Satisfied at a Point in Time
The Company determined that the customer is able to control the product when it is delivered to them; thus, depending on the shipping terms, control will transfer at different points between the Company's manufacturing facility or warehouse and the customer’s location. The Company considers control to have transferred upon shipment or delivery because the Company has a present right to payment at that time, the customer has legal title to the asset, the Company has transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.

Variable Consideration
The Company provides volume-based rebates and the right to return product to certain customers, which are accrued for based on current facts and historical experience. Rebates are paid either on an annual or quarterly basis. There are no other significant variable consideration elements included in the Company's contracts with customers.
Contract Costs
The Company has elected to expense contract costs as incurred if the amortization period is expected to be one year or less. If the amortization period of these costs is expected to be greater than one year, the costs would be subject to capitalization. As of September 30, 2019,2020, the contract assets capitalized, as well as amortization recognized in fiscalboth the three and six months ended September 30, 2020, are not significant and there have been 0 impairment losses recognized.

Allowance for Doubtful Accounts


The Company assesses the collectability of customer receivables based on the credit worthiness of a customer as determined by credit checks and analysis, as well as the customer’s payment history. In determining the allowance for doubtful accounts, the Company also considers various factors including the aging of customer accounts and historical write-offs. In addition, the Company monitors other risk factors, including forward-looking information when establishing adequate allowances for doubtful accounts, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables.
6. Income Taxes
The provision for income taxes for all periods presented is based on an estimated effective income tax rate for the respective full fiscal years. The estimated annual effective income tax rate is determined excluding the effect of significant discrete items or items that are reported net of their related tax effects. The tax effect of significant discrete items is reflected in the period in which they occur. The Company's income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are generally higher than the U.S. federal statutory rate, state tax rates in the jurisdictions where the Company does business and the Company's ability to utilize various tax credits, capital loss and net operating loss (“NOL”) carryforwards.

The Company regularly reviews its deferred tax assets for recoverability and valuation allowances are established based on historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences, as deemed appropriate.In addition, all other available positive and negative evidence is taken into consideration for purposes of determining the proper balances of such valuation allowances. As a result of this review, the Company continues to maintain a full valuation allowance against U.S. federal and state capital loss carryforwards and a partial valuation allowance against certain foreign NOL carryforwards and other related foreign deferred tax assets, as well as certain U.S. state NOL carryforwards. Future changes to the balances of these valuation allowances, as a result of this continued review and analysis by the Company, could result in a material impact to the financial statements for such period of change.

The income tax provision was $16.1 million in the three months ended September 30, 2020, compared to $19.5 million in the second quarter of fiscal 2020 compared to $17.2 million in the second quarter of fiscalthree months ended September 30, 2019. The effective income tax rate for the second quarter of fiscalthree months ended September 30, 2020 was 25.6%26.2% versus 27.4%25.6% in the second quarter of fiscalthree months ended September 30, 2019. The effective income tax rate for the second quarter of fiscalthree months ended September 30, 2020 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with global intangible low-taxed income (“GILTI”) and compensation deduction limitations under Section 162(m) of the Internal Revenue Code, and the accrual of various state income taxes, partially offset by the recognition of income tax benefits associated with foreign-derived intangible income (“FDII”). The effective income tax rate for the three months ended September 30, 2019 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with GILTI and the accrual of various state income taxes, partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and the recognition of income tax benefits associated with foreign-derived intangibleFDII.

14
Table of Contents
The income (“FDII”).tax provision was $33.3 million in the six months ended September 30, 2020, compared to $34.3 million in the six months ended September 30, 2019. The effective income tax rate for the second quartersix months ended September 30, 2020 was 29.1% versus 24.6% in the six months ended September 30, 2019. The effective income tax rate for the six months ended September 30, 2020 was above the U.S. federal statutory rate of fiscal21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with GILTI and compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of withholding taxes associated with foreign dividends, and the accrual of various state income taxes, partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and the recognition of income tax benefits associated with share-based payments and FDII. The effective income tax rate for the six months ended September 30, 2019 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, at higher statutory rates, the accrual of additional taxes associated with GILTI and the accrual of various state income taxes, partially offset by the recognition of excess tax benefits associated with share-based payments.
The income tax provision recorded in the first six months of fiscal 2020 was $34.3 million compared to $31.7 million recorded in the first six months of fiscal 2019. The effective income tax rate for the first six months of fiscal 2020 was 24.6% versus 26.9% in the first six months of fiscal 2019. The effective income tax rate for the first six months of fiscal 2020 waswhich are generally above the U.S. federal statutory rate, of 21% primarily due to the accrual of foreign income taxes at higher statutory rates, the accrual of additional income taxes associated with GILTI and the accrual of various state income taxes, partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and the recognition of income tax benefits associated with share-based payments and FDII. The effective income tax rate for the first six months of fiscal 2019 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes at higher statutory rates, the accrual of additional taxes associated with GILTI and the accrual of various state income taxes partially offset by the recognition of income tax benefits associated with share-based payments and the recognition of a tax benefit associated with a foreign country-enacted rate reduction.

The Company’s total liability for net unrecognized tax benefits as of September 30, 20192020 and March 31, 20192020, was $20.7$15.7 million and $21.8$14.8 million, respectively. The Company recognizes accrued interest and penalties related to unrecognized income tax benefits in income tax expense. As of both September 30, 20192020 and March 31, 2019,2020, the total amount of gross, unrecognized income tax benefits included $4.3$1.7 million and $1.5 million of accrued interest and penalties.penalties, respectively. The Company recognized $0.1 million of net interest and penalties as income tax expense during both the six months ended September 30, 20192020 as well as for the six months ended September 30, 2018.2019.
The Company conducts business in multiple locations within and outside the U.S. Consequently, the Company is subject to periodic income tax examinations by domestic and foreign income tax authorities. Currently, the Company is undergoing routine, periodic income tax examinations in both domestic and foreign jurisdictions. The Company is currently undergoing an income tax examination by the U.S. Internal Revenue Service (IRS)(the “IRS”) of the Company’s U.S. consolidated federal income tax returns for the tax years ended March 31, 2016 and 2017. During the fourth quarter of fiscal 2020, the German tax authorities concluded an examination of the corporate income and trade tax returns for the Company’s CENTA German subsidiary for the tax years ended December 31, 2014 through December 31, 2017. The conclusion of the tax examination resulted in additional tax liabilities of approximately $1.7 million, all of which is subject to indemnification under the terms of the applicable purchase agreement or otherwise appropriately accrued in the Company’s financial statements. During the three months ended March 31, 2020, the Italian tax authorities began conducting an income tax examination of the income tax returns of one of the Company’s Italian subsidiaries for the tax year ended March 31, 2018. In addition, certain of the Company’s German subsidiaries were notified by the German tax authorities of their intention to conduct an income tax examination of such subsidiaries’ German corporate income and trade tax returns for the tax years or period ended March 31, 2015 through March 31, 2018. The Company anticipates the related fieldwork will begin during the three months ending December 31, 2020. In addition, in accordance with the terms of the VAG sale agreement, the Company is required to indemnify the purchaser for any future income tax liabilities associated with all open tax years ending prior to, and including, the short period ended on the date of the Company's sale of VAG. During the first six months of fiscal 2020, VAG was notified by the German tax authorities of its intention to conduct an income tax examination of the VAG German entities'entities’ corporate income and trade tax returns for the tax years ended March 31, 2014 through 2017.2019. The Company anticipates the related fieldwork will begin during the third quarter of fiscalthree months ending December 31, 2020. During the second quarter of fiscal 2019,three months ended September 30, 2018, the IRS completed an income tax examination of the Company’s amended U.S. consolidated federal income tax return for the tax year ended March 31, 2015, and the Company paid

approximately $0.4 million upon conclusion of such examination. It appears reasonably possible that the amounts of unrecognized income tax benefits could change in the next twelve months upon conclusion of the Company’s current ongoing examinations; however, any potential payments of income tax, interest and penalties are not expected to be significant to the Company's consolidated financial statements. With certain exceptions, the Company is no longer subject to U.S. federal income tax examinations for tax years ending prior to March 31, 2016, state and local income tax examinations for years ending prior to fiscal 20152016 or significant foreign income tax examinations for years ending prior to fiscal 2014.2015.

15
Table of Contents
7. Earnings per Share
The following table presents the basis for income per share computations (in millions, except share amounts):
Three Months EndedSix Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Basic net income per share attributable to Rexnord common stockholders
Numerator:
Net income from continuing operations$45.4 $56.7 $81.2 $105.2 
Less: Non-controlling interest income0 0.1 0.2 0.3 
Less: Dividends on preferred stock0 5.8 0 11.6 
Net income from continuing operations attributable to Rexnord common stockholders$45.4 $50.8 $81.0 $93.3 
Loss from discontinued operations, net of tax$0 $0 $0 $(1.8)
Net income attributable to Rexnord common stockholders$45.4 $50.8 $81.0 $91.5 
Denominator:
Weighted-average common shares outstanding, basic120,704 106,007 120,476 105,637 
Diluted net income per share attributable to Rexnord common stockholders
Numerator:
Net income from continuing operations$45.4 $56.7 $81.2 $105.2 
Less: Non-controlling interest income0 0.1 0.2 0.3 
Less: Dividends on preferred stock— — — — 
Net income from continuing operations attributable to Rexnord common stockholders$45.4 $56.6 $81.0 $104.9 
Loss from discontinued operations, net of tax$0 $0 $0 $(1.8)
Net income attributable to Rexnord common stockholders$45.4 $50.8 $81.0 $91.5 
Plus: Dividends on preferred stock0 5.8 0 11.6 
Net income attributable to Rexnord common stockholders$45.4 $56.6 $81.0 $103.1 
Denominator:
Weighted-average common shares outstanding, basic120,704 106,007 120,476 105,637 
Effect of dilutive equity securities1,803 1,934 2,034 2,025 
Preferred stock under the "if-converted" method (1)0 15,979 0 15,979 
Weighted-average common shares outstanding, diluted122,507 123,920 122,510 123,641 
  Three Months Ended Six Months Ended
  September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Basic net income (loss) per share attributable to Rexnord common stockholders        
Numerator:        
Net income from continuing operations $56.7
 $46.2
 $105.2
 $88.4
Less: Non-controlling interest income 0.1
 0.1
 0.3
 0.2
Less: Dividends on preferred stock 5.8
 5.8
 11.6
 11.6
Net income from continuing operations attributable to Rexnord common stockholders $50.8
 $40.3
 $93.3
 $76.6
         
Loss from discontinued operations, net of tax —
 (83.7) (1.8) (126.5)
         
Net income (loss) attributable to Rexnord common stockholders $50.8
 $(43.4) $91.5
 $(49.9)
         
Denominator:        
Weighted-average common shares outstanding, basic 106,007
 104,570
 105,637
 104,455
         
Diluted net income (loss) per share attributable to Rexnord common stockholders        
Numerator:        
Net income from continuing operations $56.7
 $46.2
 $105.2
 $88.4
Less: Non-controlling interest income 0.1
 0.1
 0.3
 0.2
Less: Dividends on preferred stock (1) —
 —
 —
 11.6
Net income from continuing operations attributable to Rexnord common stockholders $56.6
 $46.1
 $104.9
 $76.6
         
Loss from discontinued operations, net of tax $—
 $(83.7) $(1.8) $(126.5)
         
Net income (loss) attributable to Rexnord common stockholders $50.8
 $(43.4) $91.5
 $(49.9)
Plus: Dividends on preferred stock (1) 5.8
 5.8
 11.6
 —
Net income (loss) attributable to Rexnord common stockholders $56.6
 $(37.6) $103.1
 $(49.9)
         
Denominator:        
Weighted-average common shares outstanding, basic 106,007
 104,570
 105,637
 104,455
Effect of dilutive equity securities 1,934
 2,826
 2,025
 2,921
Preferred stock under the "if-converted" method 15,979
 15,980
 15,979
 —
Weighted-average common shares outstanding, diluted 123,920
 123,376
 123,641
 107,376
____________________
____________________(1)On November 15, 2019, the Company issued 15,980,050 shares of common stock upon the mandatory conversion of Series A Preferred Stock; see Note 8, Stockholders' Equity for additional information.
(1)The "if-converted" method was dilutive for the six months ended September 30, 2019, and quarters ended September 30, 2019 and September 30, 2018, respectively.
The computationcomputations of diluted net income (loss) per share for the three and six months ended September 30, 2020, exclude 0.8 million and 1.2 million shares, respectively, related to equity awards due to their anti-dilutive effects. The computations of diluted net income per share for the three and six months ended September 30, 2019 excludes 1.2 million and 1.8 million shares, respectively, related to equity awards due to their anti-dilutive effects. The computation
16
Table of diluted net income (loss) per share for the three months and six months ended September 30, 2018 excludes 0.5 million and 0.9 million shares, respectively, related to equity awards due to their anti-dilutive effects.Contents
The computation for diluted net loss per share for the six months ended September 30, 2018 also does not include shares of preferred stock that are convertible into a weighted average 16.0 million common shares, because to do so would have been anti-dilutive.

8. Stockholders' Equity

Stockholders' equity consists of the following (in millions):

Common stockPreferred stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive lossNon-controlling interest (2)Total stockholders’ equity
Balance at March 31, 2019Balance at March 31, 2019$1.0 $0 $1,293.5 $30.7 $(96.6)$2.4 $1,231.0 
Total comprehensive incomeTotal comprehensive income— — — 46.5 — 0.2 46.7 
Stock-based compensation expenseStock-based compensation expense— — 6.9 — — — 6.9 
Proceeds from exercise of stock optionsProceeds from exercise of stock options— — 4.8 — — — 4.8 
Taxes withheld and paid on employees' share-based payment awardsTaxes withheld and paid on employees' share-based payment awards— — (5.7)— — — (5.7)
Preferred stock dividends ($14.375 per share)Preferred stock dividends ($14.375 per share)— — — (5.8)— — (5.8)
Balance at June 30, 2019Balance at June 30, 20191.0 0 1,299.5 71.4 (96.6)2.6 1,277.9 
Total comprehensive income (loss)Total comprehensive income (loss)— — — 56.6 (15.1)0.1 41.6 
Stock-based compensation expenseStock-based compensation expense— — 5.9 — — — 5.9 
Proceeds from exercise of stock optionsProceeds from exercise of stock options— — 2.1 — — — 2.1 
Acquisition of non-controlling interestAcquisition of non-controlling interest— — (0.3)— — — (0.3)
Preferred stock dividends ($14.375 per share)Preferred stock dividends ($14.375 per share)— — — (5.8)— — (5.8)
Balance at September 30, 2019Balance at September 30, 2019$1.0 $0 $1,307.2 $122.2 $(111.7)$2.7 $1,321.4 
Common stock Preferred stock Additional
paid-in
capital		 Retained
earnings		 Accumulated
other
comprehensive
(loss) income		 Non-controlling interest (2) Total
stockholders’
equity
Balance at March 31, 2018$1.0
 $—
 $1,277.8
 $8.0
 $(74.1) $0.1
 $1,212.8
Total comprehensive (loss) income—
 —
 —
 (0.7) (33.9) 0.1
 (34.5)
Stock-based compensation expense—
 —
 6.0
 —
 —
 —
 6.0
Proceeds from exercise of stock options—
 —
 2.9
 —
 —
 —
 2.9
Taxes withheld and paid on employees' share-based payment awards—
 —
 (0.4) —
 —
 —
 (0.4)
Preferred stock dividends ($14.375 per share)—
 —
 —
 (5.8) —
 —
 (5.8)
Balance at June 30, 2018$1.0
 $—
 $1,286.3
 $1.5
 $(108.0) $0.2
 $1,181.0
Total comprehensive (loss) income0.0
 —
 —
 (37.6) 1.5
 0.1
 (36.0)
Stock-based compensation expense—
 —
 5.8
 —
 —
 —
 5.8
Proceeds from exercise of stock options—
 —
 (1.1) —
 —
 —
 (1.1)
Taxes withheld and paid on employees' share-based payment awards—
 —
 0.4
 —
 —
 —
 0.4
Preferred stock dividends ($14.375 per share)—
 —
 (5.8) —
 —
 —
 (5.8)
Balance at September 30, 2018$1.0
 $—
 $1,285.6
 $(36.1) $(106.5) $0.3
 $1,144.3
Common stock (1)Preferred stockAdditional
paid-in
capital		Retained
earnings		Accumulated
other
comprehensive
loss		Non-controlling interest (2)Total
stockholders’
equity
Balance at March 31, 2020$1.2 $0 $1,348.3 $85.9 $(124.4)$2.7 $1,313.7 
Total comprehensive income— — — 35.6 6.3 0.2 42.1 
Stock-based compensation expense— — 10.6 — — — 10.6 
Proceeds from exercise of stock options— — 6.3 — — — 6.3 
Taxes withheld and paid on employees' share-based payment awards— — (9.4)— — — (9.4)
Common stock dividends ($0.08 per share)— — — (9.6)— — (9.6)
Balance at June 30, 20201.2 0 1,355.8 111.9 (118.1)2.9 1,353.7 
Total comprehensive income— — — 45.4 12.9 0 58.3 
Stock-based compensation expense— — 10.1 — — — 10.1 
Proceeds from exercise of stock options— — 0.9 — — — 0.9 
Repurchase of common stock (3)— — — (15.0)— — (15.0)
Common stock dividends ($0.08 per share)— — — (9.6)— — (9.6)
Balance at September 30, 2020$1.2 $0 $1,366.8 $132.7 $(105.2)$2.9 $1,398.4 
 Common stock (1) Preferred stock 
Additional
paid-in
capital
 
Retained
earnings
 
Accumulated
other
comprehensive
loss
 Non-controlling interest (2) 
Total
stockholders’
equity
Balance at March 31, 2019$1.0
 $—
 $1,293.5
 $30.7
 $(96.6) $2.4
 $1,231.0
Total comprehensive income—
 —
 —
 46.5
 —
 0.2
 46.7
Stock-based compensation expense—
 —
 6.9
 —
 —
 —
 6.9
Proceeds from exercise of stock options—
 —
 4.8
 —
 —
 —
 4.8
Taxes withheld and paid on employees' share-based payment awards—
 —
 (5.7) —
 —
 —
 (5.7)
Preferred stock dividends ($14.375 per share)—
 —
 —
 (5.8) —
 —
 (5.8)
Balance at June 30, 2019$1.0
 $—
 $1,299.5
 $71.4
 $(96.6) $2.6
 $1,277.9
Total comprehensive income (loss)—
 —
 —
 56.6
 (15.1) 0.1
 41.6
Stock-based compensation expense—
 —
 5.9
 —
 —
 —
 5.9
Proceeds from exercise of stock options—
 —
 2.1
 —
 —
 —
 2.1
Taxes withheld and paid on employees' share-based payment awards—
 —
 —
 —
 —
 —
 —
Acquisition of non-controlling interest—
 —
 (0.3) —
 —
 —
 (0.3)
Preferred stock dividends ($14.375 per share)—
 —
 —
 (5.8) —
 —
 (5.8)
Balance at September 30, 2019$1.0
 $—
 $1,307.2
 $122.2
 $(111.7) $2.7
 $1,321.4
____________________
____________________(1)For the three and six months ended September 30, 2020, the Company issued 92,462 and 1,029,014 shares of common stock upon the exercise of stock options, vesting of restricted stock units and performance stock units, and for other common stock awards.
(1)For the three and six months ended September 30, 2019, the Company issued 138,041 and 1,109,199 shares of common stock, respectively, upon exercise of stock options and vesting of restricted stock units and performance stock units.
(2)During fiscal 2019, represents a 30% non-controlling interest in two Process & Motion Control controlled subsidiaries. During the second quarter of fiscal 2020, the Company acquired the remaining 30% non-controlling interest associated with one of the aforementioned Process & Motion Control joint ventures for a cash purchase price of $0.3 million. During the second quarter of fiscal 2020, represents a 30% non-controlling interest in the remaining Process & Motion Control controlled subsidiary and a 5% non-controlling interest in another Process & Motion Control joint venture relationship.
(2)During the first quarter of fiscal 2020, represents a 30% non-controlling interest in 2 Process & Motion Control controlled subsidiaries. During the second quarter of fiscal 2020, the Company acquired the remaining 30% non-controlling interest associated with one of the aforementioned Process & Motion Control joint ventures for a cash purchase price of $0.3 million. Following this transaction, represents a 30% non-controlling interest in the remaining Process & Motion Control controlled subsidiary and a 5% non-controlling interest in another Process & Motion Control controlled subsidiary.
(3)During the three and six months ended September 30, 2020, the Company repurchased and canceled 500,050 shares of common stock at a total cost of $15.0 million at a weighted average price of $30.02 per share. See "Share Repurchase Program" below.
Preferred Stock
As of September 30,On November 15, 2019, there are 402,500 shares of 5.75% Series A Mandatory Convertible Preferred Stock (the "Series A Preferred Stock") outstanding. Unlessautomatically converted earlier, each share of Series A Preferred Stock will convert automatically on the mandatory conversion date, which is November 15, 2019, into between 39.7020 and 47.642015,980,050 shares of the Company’sCompany's common

stock, subject to customary anti-dilution adjustments. stock. The number of shares of common stock issuableissued upon conversion will bewas determined based on a defined average volume weighted average price per share of
17
Table of Contents
the Company’s common stock to be determined on November 12, 2019. Holdersstock. Upon conversion, there were 0 shares of the Series A Preferred Stock may electoutstanding. The final dividend payment was made on November 15, 2019.
Share Repurchase Program
    During fiscal 2015, the Company's Board of Directors approved a voluntary basis to convert their shares into common stock atrepurchase program (the "Repurchase Program") authorizing the minimum exchange ratio at any time priorrepurchase of up to the mandatory conversion date.
Dividends accumulate from the issuance date. Rexnord may pay such dividends in cash or, subject to certain limitations, by delivery of shares$200.0 million of the Company's common stock from time to time on the open market 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; subsequent to the end of the second quarter of fiscalprivately negotiated transactions. On January 27, 2020, the Company's Board of Directors declaredapproved increasing the final quarterly dividend onremaining share repurchase authority under the Series A Preferred StockRepurchase Program to stockholders$300.0 million. The Repurchase Program does not require the Company to acquire any particular amount of record as of November 1, 2019. The shares of Series A Preferred Stock have a liquidation preference of $1,000 per share, plus accrued but unpaid dividends. With respect to dividend and liquidation rights, the Series A Preferred Stock ranks senior to the Company's common stock and juniordoes not specify the timing of purchases or the prices to all existing and future indebtedness.
be paid. During the three and six months ended September 30, 2019,2020, the Company paid $5.8repurchased 500,050 shares of common stock for a total cost of $15.0 million and $11.6at a weighted average price of $30.02 per share, with all of the shares repurchased during the three months ended September 30, 2020. The repurchased shares were canceled by the Company upon receipt. A total of approximately $208.0 million of dividends on the Series A Preferred Stock, respectively. As ofexisting authority remained under the Repurchase Program at September 30, 2019, there were 0 dividends in arrears on the Series A Preferred Stock. See Note 19, Public Offering and Common Stock Repurchases, to the audited consolidated financial statements of the Company's fiscal 2019 Annual Report on Form 10-K for further information regarding stockholders' equity.2020.

9. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss, net of tax, for the six months ended September 30, 20192020, are as follows (in millions):
Foreign Currency TranslationPension and Postretirement PlansTotal
Balance at March 31, 2020$(83.8)$(40.6)$(124.4)
Other comprehensive income before reclassifications19.4 0 19.4 
Amounts reclassified from accumulated other comprehensive loss0 (0.2)(0.2)
Net current period other comprehensive income (loss)19.4 (0.2)19.2 
Balance at September 30, 2020$(64.4)$(40.8)$(105.2)
  Interest Rate Derivatives Foreign Currency Translation Pension and Postretirement Plans Total
Balance at March 31, 2019 $0.8
 $(60.1) $(37.3) $(96.6)
Other comprehensive loss before reclassifications —
 (15.5) —
 (15.5)
Amounts reclassified from accumulated other comprehensive loss —
 —
 0.4
 0.4
Net current period other comprehensive (loss) income —
 (15.5) 0.4
 (15.1)
Balance at September 30, 2019 $0.8
 $(75.6) $(36.9) $(111.7)


The following table summarizes the amounts reclassified from accumulated other comprehensive loss to net income during the three and six months ended September 30, 20192020 and September 30, 20182019 (in millions):
Three Months EndedSix Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019Income Statement Line
Pension and other postretirement plans
Amortization of prior service credit$(0.1)$(0.1)$(0.2)$(0.2)Other income (expense), net
Settlement— — 0 0.8 Other income (expense), net
Benefit for income taxes— — — (0.2)
Total net of tax$(0.1)$(0.1)$(0.2)$0.4 
  Three Months Ended Six Months Ended  
  September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 Income Statement Line
Pension and other postretirement plans          
Amortization of prior service credit $(0.1) $(0.3) $(0.2) $(0.6) Other (expense) income, net
Settlement —
 —
 0.8
 —
 Other (expense) income, net
Provision (benefit) for income taxes —
 0.1
 (0.2) 0.2
  
Total net of tax $(0.1) $(0.2) $0.4
 $(0.4)  
           
Interest rate derivatives          
Net realized losses on interest rate hedges $—
 $2.7
 $—
 $5.3
 Interest expense, net
Benefit for income taxes —
 (0.7) —
 (1.3)  
Total net of tax $—
 $2.0
 $—
 $4.0
  


10. Inventories

The major classes of inventories are summarized as follows (in millions):
September 30, 2019 March 31, 2019September 30, 2020March 31, 2020
Finished goods$158.8
 $147.3
Finished goods$173.1 $145.6 
Work in progress46.1
 39.8
Work in progress46.9 43.7 
Purchased components79.1
 76.7
Purchased components73.8 70.4 
Raw materials61.2
 53.9
Raw materials58.5 54.9 
Inventories at First-in, First-Out ("FIFO") cost345.2
 317.7
Inventories at First-in, First-Out ("FIFO") cost352.3 314.6 
Adjustment to state inventories at Last-in, First-Out ("LIFO") cost(0.6) (1.2)Adjustment to state inventories at Last-in, First-Out ("LIFO") cost3.4 2.9 
$344.6
 $316.5
$355.7 $317.5 


11. Goodwill and Intangible Assets

18
Table of Contents
The changes in the net carrying value of goodwill for the six months endedSeptember 30, 20192020, by operating segment are presented below (in millions):
 Process & Motion Control Water Management Consolidated
 Net carrying amount as of March 31, 2020$1,121.4 $200.5 $1,321.9 
 Currency translation adjustments3.1 0.5 3.6 
 Purchase accounting adjustments (1)0 0.7 0.7 
 Net carrying amount as of September 30, 2020$1,124.5 $201.7 $1,326.2 
   Process & Motion Control  Water Management  Consolidated
 Net carrying amount as of March 31, 2019 $1,125.2
 $174.5
 $1,299.7
 Currency translation adjustments (2.8) —
 (2.8)
 Acquisition (1)
 —
 13.9
 13.9
 Purchase accounting adjustments (0.3) —
 (0.3)
 Net carrying amount as of September 30, 2019 $1,122.1
 $188.4
 $1,310.5
____________________
(1)    Refer to Note 2, Acquisitions and Divestiture for additional information regarding acquisitions.
The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of September 30, 20192020 and March 31, 20192020 are as follows (in millions):  
September 30, 2020
Weighted Average Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Intangible assets subject to amortization:
Patents10 years$51.4 $(41.8)$9.6 
Customer relationships (including distribution network)13 years751.2 (569.2)182.0 
Tradenames13 years42.7 (16.1)26.6 
Intangible assets not subject to amortization - tradenames280.9 — 280.9 
Total intangible assets, net13 years$1,126.2 $(627.1)$499.1 
March 31, 2020
Weighted Average Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Intangible assets subject to amortization:
Patents10 years$51.1 $(41.2)$9.9 
Customer relationships (including distribution network)13 years748.0 (552.5)195.5 
Tradenames13 years42.1 (14.2)27.9 
Intangible assets not subject to amortization - tradenames280.9 — 280.9 
Total intangible assets, net13 years$1,122.1 $(607.9)$514.2 
   September 30, 2019
 Weighted Average Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Intangible assets subject to amortization:       
Patents10 years $50.9
 $(40.5) $10.4
Customer relationships (including distribution network)13 years 717.4
 (537.6) 179.8
Tradenames13 years 40.8
 (12.7) 28.1
Intangible assets not subject to amortization - tradenames  280.9
 —
 280.9
Total intangible assets, net13 years $1,090.0
 $(590.8) $499.2
        
   March 31, 2019
 Weighted Average Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Intangible assets subject to amortization:       
Patents10 years $50.9
 $(39.8) $11.1
Customer relationships (including distribution network)13 years 713.5
 (523.1) 190.4
Tradenames13 years 40.4
 (11.3) 29.1
Intangible assets not subject to amortization - tradenames  280.9
 —
 280.9
Total intangible assets, net13 years $1,085.7
 $(574.2) $511.5


    Intangible asset amortization expense totaled $9.0 million and $18.0 million for the three and six months ended September 30, 2020. Intangible asset amortization expense totaled $8.8 million and $17.5 million for the three and six months ended September 30, 2019. Intangible asset amortization expense totaled $8.5 million and $17.0 million forNaN intangible assets were acquired during the three months and six months

ended September 30, 2018. Tradenames and customer relationship intangible assets acquired during fiscal 2020 were assigned a weighted average useful life of 15 years and 14 years, respectively.2020.
    
The Company expects to recognize amortization expense on the intangible assets subject to amortization of $34.9$26.9 million in fiscal yearthe nine months ending December 31, 2020 (inclusive of $17.5$18.0 million of amortization expense recognized in the six months ended September 30, 2019)2020), $33.9$34.6 million in fiscal year 2021, $29.6$18.8 million in fiscal year 2022, $15.3$16.3 million in fiscal year 2023, $14.5$16.3 million in fiscal year 2024 and $14.1$15.2 million in fiscal year 2025.

19
Table of Contents
12. Other Current Liabilities

Other current liabilities are summarized as follows (in millions):
September 30, 2020March 31, 2020
Contract liabilities$6.9 $7.3 
Sales rebates34.0 35.5 
Commissions6.9 7.0 
Restructuring and other similar charges (1)9.7 9.8 
Product warranty (2)8.3 6.7 
Risk management (3)10.8 10.4 
Legal and environmental2.0 1.5 
Taxes, other than income taxes8.2 8.3 
Income tax payable17.8 9.9 
Interest payable7.6 8.3 
Current portion of operating lease liability (4)12.1 12.8 
Other22.6 11.0 
$146.9 $128.5 
  September 30, 2019 March 31, 2019
Contract liabilities $5.8
 $5.1
Sales rebates 33.1
 35.3
Commissions 6.5
 6.8
Restructuring and other similar charges (1) 5.2
 4.3
Product warranty (2) 7.1
 7.2
Risk management (3) 10.7
 10.5
Legal and environmental 1.9
 2.6
Taxes, other than income taxes 14.0
 7.8
Income tax payable 10.6
 20.3
Interest payable 7.7
 7.7
Current portion of operating lease liability (4) 10.5
 —
Other 14.8
 29.5
  $127.9
 $137.1
____________________
____________________(1)See more information related to the restructuring obligations within Note 3, Restructuring and Other Similar Charges.
(1)See more information related to the restructuring obligations within Note 3, Restructuring and Other Similar Charges.
(2)See more information related to the product warranty obligations within Note 16, Commitments and Contingencies.
(3)Includes projected liabilities related to losses arising from automobile, general and product liability claims.
(4)See more information related to leases within Note 18, Leases.
(2)See more information related to the product warranty obligations within Note 16, Commitments and Contingencies.
(3)Includes projected liabilities related to losses arising from automobile, general and product liability claims.
(4)See more information related to leases within Note 18, Leases.
13. Long-Term Debt
Long-term debt is summarized as follows (in millions):
September 30, 2020March 31, 2020
Term loan (1)$621.3 $620.8 
4.875% Senior Notes due 2025 (2)496.1 495.7 
Revolving credit facility (3)0 249.2 
Securitization facility borrowings (4)0 74.9 
Finance leases and other subsidiary debt (5)78.4 32.8 
Total1,195.8 1,473.4 
Less current maturities3.2 76.4 
Long-term debt$1,192.6 $1,397.0 
  September 30, 2019 March 31, 2019
Term loan (1) $719.0
 $718.4
4.875% Senior Notes due 2025 (2) 495.4
 495.0
Finance leases and other subsidiary debt (3) 36.4
 24.6
Total 1,250.8
 1,238.0
Less current maturities 1.5
 1.2
Long-term debt $1,249.3
 $1,236.8
____________________
____________________(1)Includes unamortized debt issuance costs of $3.7 million and $4.2 million at September 30, 2020 and March 31, 2020, respectively.
(1)Includes unamortized debt issuance costs of $6.0 million and $6.6 million at September 30, 2019 and March 31, 2019, respectively.
(2)Includes unamortized debt issuance costs of $4.6 million and $5.0 million at September 30, 2019 and March 31, 2019, respectively.
(3)See more information related to finance leases within Note 18, Leases.
(2)Includes unamortized debt issuance costs of $3.9 million and $4.3 million at September 30, 2020 and March 31, 2020, respectively.
(3)Includes unamortized debt issuance costs of $0.8 million at March 31, 2020.
(4)Includes unamortized debt issuance costs of $0.1 million at March 31, 2020.
(5)See more information related to finance leases within Note 18, Leases.
Senior Secured Credit Facility
At September 30, 2019,2020, the Company’s Third Amended and Restated First Lien Credit Agreement, as amended (the “Credit Agreement”), is funded by a syndicate of banks and other financial institutions and provides for (i) an $800.0a $725.0 million term loan facility, which was reduced to $625.0 million as a result of a December 2019 voluntary prepayment, and (ii) a $264.0 million revolving credit facility. The term loan facility has a maturity date of August 21, 2024, and there are no required principal payments due or scheduled under the term debt until the maturity date. On January 9, 2019, the Company made a voluntary prepayment on its Term Loan of $75.0 million. During August 2018, the Company met the required rating of the Credit Agreement allowing the applicable margin under the Term Loan to be reduced from 2.25% to 2.00%. At September 30, 2019,2020, the borrowings under the Term Loan had a weighted-average effective interest rate of 4.02%, determined

as the London Interbank Offered Rate (“LIBOR”) (subject to a 0% floor) plus an applicable margin of 2.00%1.90%. The weighted-average interest rate for borrowings under the Term Loan for the six months ended September 30, 2019,2020, was 4.36% determined as LIBOR (subject to a 0.0% floor) plus an applicable margin of 2.00%2.09%. NaNAt September 30, 2020, 0 amounts were borrowed under the revolving credit facility at facility. As of March 31, 2020, $250.0 million was borrowed under the
20
Table of Contents
revolving credit facility. As of and during the six months ended September 30, 2019 or2020, borrowings under the revolving credit facility had weighted-average effective interest rates of 4.00%. As of September 30, 2020 and March 31, 2019; however, $5.42020, $2.8 million and $5.6$4.7 million of the revolving credit facility were considered utilized in connection with outstanding letters of credit, at respectively.
As of September 30, 2019 and March 31, 2019, respectively.
As of September 30, 2019,2020, the Company was in compliance with all applicable covenants under the Credit Agreement, including compliance with a maximum permitted total net leverage ratio (the Company's sole financial maintenance covenant under the revolving credit facility discussed below) of 6.75 to 1.0. The Company's total net leverage ratio was 2.2 to 1.0 as of September 30, 2019.2020.
4.875% Senior Notes due 2025
On December 7, 2017, the Company issued $500.0 million aggregate principal amount of 4.875% senior notes due 2025 (the “Notes”). The Notes were issued by RBS Global, Inc. and Rexnord LLC (Company subsidiaries; collectively, the “Issuers”) pursuant to an Indenture, dated as of December 7, 2017 (the “Indenture”), by and among the Issuers, the domestic subsidiaries of the Company (with certain exceptions) as guarantors named therein (the “Subsidiary Guarantors”) and Wells Fargo Bank, National Association (the “Trustee”). The Notes are general senior unsecured obligations of the Issuers. Rexnord Corporation separately entered into a Parent Guarantee with the Trustee whereby it guaranteed certain obligations of the Issuers under the Indenture. The Notes pay interest semi-annually on June 15 and December 15. The Notes were not and will not be registered under the Securities Act of 1933 or any state securities laws.
Accounts Receivable Securitization Program
The    On September 25, 2020, certain subsidiaries of the Company hasentered into an amended accounts receivable securitization facility (the "Securitization"“New Securitization”) with Mizuho Bank, Ltd. (“Mizuho”) to replace the Company’s previous $100.0 million accounts receivable securitization facility with Wells Fargo & Company ("Wells Fargo"(the “Previous Securitization” and, collectively with the New Securitization, referred to as the “Securitization”)., which was scheduled to expire in December 2020.1
    As part of the New Securitization, Rexnord Industries, LLC, Zurn Industries, LLC, Zurn PEX, Inc., Precision Gear LLC, Centa Corporation and Cambridge International, Inc. (collectively, the “Originators”) agreed, pursuant to an Amended and Restated Receivables Sale and Servicing Agreement, dated as of September 25, 2020 (the “Sale Agreement”), to sell all of their existing and future accounts receivable and related assets to Rexnord Funding LLC (“Rexnord Funding”), a bankruptcy-remote special purpose entity, in exchange for cash, subordinated notes and letters of credit. The Originators and Rexnord Funding intend for the transactions contemplated by the Sale Agreement to constitute true sales to Rexnord Funding by the respective Originators. In addition to being an Originator, Rexnord Industries, LLC is also the current servicer under the Sale Agreement.
Concurrently with the execution of the Sale Agreement, Rexnord Funding entered into a Receivables Funding and Administration Agreement (the “Funding Agreement”) with Mizuho, as a lender and administrative agent. Pursuant to the agreements evidencing the Securitization,Funding Agreement, Rexnord Funding LLC ("Rexnord Funding") (a wholly owned bankruptcy-remote special purpose subsidiary) has granted Wells FargoMizuho a security interest in all of its current and future receivables and related assets in exchange for a credit facility permitting borrowings of up to a maximum aggregate amount of $100.0 million outstanding from time to time. Such borrowings arewill be used by Rexnord Funding to finance purchases of accounts receivable.receivable from the Originators pursuant to the Sale Agreement. The amount of advances available will beis determined based on advance rates relating to the eligibility of the receivables held by Rexnord Funding at that time. Advances bear interest based on LIBOR plus 1.20%.1.30% per annum. The last date on which advances may be made is December 30, 2020,September 24, 2021, with a six-month extension option, unless the maturity of the New Securitization is otherwise accelerated. In addition to other customary fees associated with financings of this type, Rexnord Funding pays an unused line fee of 0.40% per annum to Wells FargoMizuho based on any unused portion of the Securitization facility. If the average daily outstanding principal amount during a calendar month is less than 50% of the average daily aggregate commitment in effect during such month, the unused line fee is 0.50% per annum; otherwise, it is 0.375% per annum.New Securitization.
The New Securitization constitutes a "Permitted“Permitted Receivables Financing"Financing” under the Credit AgreementCompany’s existing credit agreement and a “Qualified Receivables Financing” under the indenture governing the Company’s outstanding senior notes. The New Securitization does not qualify for sale accounting under ASCAccounting Standards Codification Topic 860, Transfers and Servicing. Any borrowings under the New Securitization arewill be accounted for as secured borrowings on the Company's condensedCompany’s consolidated balance sheets. Financing costs associated with the New Securitization arewill be recorded within "Interest“Interest expense, net"net” in the condensed consolidated statements of operations if revolving loans or letters of credit are obtained under the facility.New Securitization.
At both September 30, 20192020 and March 31, 2019,2020, the Company's total borrowing capacity under the Securitization was $100.0 million based on the currentthen-current accounts receivables balance. NaN amount wasbalances. As of September 30, 2020 and March 31, 2020, $0.0 million and $75.0 million were borrowed under the Securitization as of September 30, 2019 or March 31, 2019.Securitization. In addition, $6.9$6.1 million and $7.1$5.7 million of available borrowing capacity under the Securitization was considered utilized in connection with outstanding letters of credit at September 30, 20192020 and March 31, 2019,2020, respectively. As of and during the six months ended September 30, 2020, borrowings under the Securitization had weighted-average and effective interest rates of 1.37% and 1.56%, respectively. As of
21
Table of Contents
September 30, 2019,2020, the Company was in compliance with all applicable covenants and performance ratios contained in the Securitization.
Other Subsidiary Debt
Prior to 2016, the Company received an aggregate of $9.8 million in net proceeds from financing agreements related to facility modernization projects at 2 North American manufacturing facilities. These financing agreements were structured with unrelated third party financial institutions (the "Investors") and their wholly-owned community development entities in connection with the Company's participation in transactions qualified under the federal New Market Tax Credit program pursuant to Section 45D of the Internal Revenue Code of 1986, as amended. Upon closing of these transactions, the Company provided an aggregate of $27.6 million to the Investor, in the form of loans receivable, with a term of 30 years, bearing an interest rate of approximately 2.0% per annum. Under the terms of the financing agreements and upon meeting certain conditions, both the Investors and the Company have the ability to trigger forgiveness of the net debt. During the third quarter of fiscal year 2019, $23.4 million of the associated loans and $17.9 million of the related loans receivable were forgiven by both the Investors and the Company resulting in a non-cash gain on debt extinguishment of $5.0 million , net of the write-off of $0.5 million of unamortized debt issuance costs associated with the forgiven debt. During the second quarter of fiscal year 2020, the remaining $14.0 million of aggregate loans and $9.7 million of loans receivable remaining were also jointly forgiven by the Company and the Investors. Accordingly, the

Company recognized a non-cash gain on debt extinguishment of $3.2 million during the three and six months ended September 30, 2019. As of September 30, 2019 there are no outstanding balances related to the New Market Tax Credit related debt.
See Note 11, Long-Term Debt to the audited consolidated financial statements of the Company's fiscal 2019March 31, 2020 Annual Report on Form 10-K for further information regarding long-term debt.

14. Derivative Financial Instruments


The Company is exposed to certain financial risks relating to fluctuations in foreign currency exchange rates. The Company currently selectively uses foreign currency forward exchange contracts to manage its foreign currency risk. All hedging transactions are authorized and executed pursuant to defined policies and procedures that prohibit the use of financial instruments for speculative purposes.

Foreign Exchange Contracts
The Company periodically enters into foreign currency forward contracts to mitigate the foreign currency volatility relative to certain intercompany and external cash flows expected to occur. These foreign currency forward contracts were not accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging (“ASC 815”), and as such were marked to market through earnings. The amounts recorded on the condensed consolidated balance sheets and recognized within the condensed consolidated statements of operations related to the Company's foreign currency forward contracts for the three and six months ended September 30, 20192020 and 20182019, were not material.
15. Fair Value Measurements

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed assumptions about the assumptions a market participant would use.
In accordance with ASC 820, fair value measurements are classified under the following hierarchy:
•Level 1 - Quoted prices for identical instruments in active markets.
•Level 2 - Quoted prices for similar instruments; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable.
•Level 3 - Model-derived valuations in which one or more inputs or value-drivers are both significant to the fair value measurement and unobservable.
If applicable, the Company uses quoted market prices in active markets to determine fair value, and therefore classifies such measurements within Level 1. In some cases where market prices are not available, the Company makes use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters. These measurements are classified within Level 3 if they use significant unobservable inputs.
Fair Value of Financial Instruments
There were no transfers of assets between levels at September 30, 2019 and March 31, 2019, respectively.
As of September 30, 2019 and March 31, 2019, the fair value of foreign currency forward contract assets classified within Level 2 was immaterial.

The Company has a nonqualified deferred compensation plan where assets are invested in mutual funds and corporate-owned life insurance contracts held in a rabbi trust, which is restricted for payments to participants of the plan. The Company has elected to use the fair value option for the mutual funds, which are measured using quoted prices of identical instruments in active markets categorized as Level 1. Corporate-owned life insurance contracts are recorded at cash surrender value, which is provided by a third party and reflects the net asset value of the underlying publicly traded mutual funds categorized as Level 2. The deferred compensation assets are classified within other assets on the condensed consolidated balance sheets. Deferred compensation liabilities are measured at fair value based on quoted prices of identical instruments to the investment vehicles selected by the participants categorized as Level 1. Deferred compensation liabilities are classified within other liabilities on the condensed consolidated balance sheets.

The following table provides a summary of the Company's assets and liabilities that were recognized at fair value on a recurring basis as of September 30, 20192020 and March 31, 20192020 (in millions):
22
Table of Contents
 Fair Value as of September 30, 2019Fair Value as of September 30, 2020
 Level 1 Level 2 Level 3 TotalLevel 1Level 2Level 3Total
Deferred compensation assets $3.6
 $3.8
 $—
 $7.4
Deferred compensation assets$3.1 $6.8 $0 $9.9 
Deferred compensation liabilities 7.6
 —
 —
 7.6
Deferred compensation liabilities10.3 0 0 10.3 

  Fair Value as of March 31, 2019
  Level 1 Level 2 Level 3 Total
Deferred compensation assets $2.3
 $3.7
 $—
 $6.0
Deferred compensation liabilities 6.1
 —
 —
 6.1

Fair Value as of March 31, 2020
Level 1Level 2Level 3Total
Deferred compensation assets$1.7 $5.5 $0 $7.2 
Deferred compensation liabilities7.4 0 0 7.4 

There were no transfers of assets between levels at September 30, 2020 and March 31, 2020, respectively.
Fair Value of Non-Derivative Financial Instruments
The carrying amounts of cash, receivables, payables and accrued liabilities approximated fair value at September 30, 20192020 and March 31, 20192020 due to the short-term nature of those instruments. The fair value of long-term debt as of September 30, 20192020 and March 31, 20192020, was approximately $1,280.0$1,207.4 million and $1,238.1$1,398.1 million, respectively. The fair value is based on quoted market prices for the same instruments.
16. Commitments and Contingencies
Warranties:
The Company offers warranties on the sales of certain products and records an accrual for estimated future claims. Such accruals are based upon historical experience and management's estimate of the level of future claims. The following table presents changes in the Company's product warranty liability (in millions):
  Six Months Ended
  September 30, 2019 September 30, 2018
Balance at beginning of period $7.2
 $7.7
Charged to operations 0.9
 1.5
Claims settled (1.0) (1.2)
Balance at end of period $7.1
 $8.0

Six Months Ended
September 30, 2020September 30, 2019
Balance at beginning of period$6.7 $7.2 
Charged to operations2.6 0.9 
Claims settled(1.0)(1.0)
Balance at end of period$8.3 $7.1 
Contingencies:
The Company's subsidiaries are involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business involving, among other things, product liability, commercial, employment, workers' compensation, intellectual property claims and environmental matters. The Company establishes accruals in a manner that is consistent with accounting principles generally accepted in the United States for costs associated with such matters when liability is probable and those costs are capable of being reasonably estimated. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, based upon current information, management believes the eventual outcome of these unresolved legal actions, either individually or in the aggregate, will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.
In connection with its sale, Invensys plc ("Invensys") provided the Company with indemnification against certain contingent liabilities, including certain pre-closing environmental liabilities. The Company believes that, pursuant to such indemnity obligations, Invensys is obligated to defend and indemnify the Company with respect to the matters described below relating to the Ellsworth Industrial Park Site and to various asbestos claims. The indemnity obligations relating to the matters described below are subject, together with indemnity obligations relating to other matters, to an overall dollar cap equal to the purchase price, which is an amount in excess of $900 million. The following paragraphs summarize the most significant actions and proceedings:
•In 2002, Rexnord Industries, LLC ("Rexnord Industries") was named as a potentially responsible party ("PRP"), together with at least 10 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 1 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
23
Table of Contents
further investigation and potential remediation of the Site and reimbursement of USEPA's past costs. In early 2020, Rexnord Industries entered into an administrative order with the USEPA to do remediation work on its Downers Grove property. Rexnord Industries' allocated share of past and future costs related to the Site, including for investigation and/or remediation, could be significant. All previously pending property damage and personal injury lawsuits against the Company related to the Site have been settled or dismissed. Pursuant to its indemnity obligation, Invensys continues to defend the Company in known matters related to the Site, including the costs of the remediation work pursuant to the 2020 administrative order, and has paid 100% of the costs to date.
•Multiple lawsuits (with approximately 300��300 claimants) are pending in state or federal court in numerous jurisdictions relating to alleged personal injuries due to the alleged presence of asbestos in certain brakes and clutches previously manufactured by the Company's Stearns division and/or its predecessor owners. Invensys and FMC, prior owners of the

Stearns business, have paid 100% of the costs to date related to the Stearns lawsuits. Similarly, the Company's Prager subsidiary is the subject of claims by multiple claimants alleging personal injuries due to the alleged presence of asbestos in a product allegedly manufactured by Prager. However, all these claims are currently on the Texas Multi-district Litigation inactive docket, and the Company does not believe that they will become active in the future. To date, the Company's insurance providers have paid 100% of the costs related to the Prager asbestos matters. The Company believes that the combination of its insurance coverage and the Invensys indemnity obligations will cover any future costs of these matters.
In connection with the Company's acquisition of The Falk Corporation ("Falk"), Hamilton Sundstrand provided the Company with indemnification against certain products-related asbestos exposure liabilities. The Company believes that, pursuant to such indemnity obligations, Hamilton Sundstrand is obligated to defend and indemnify the Company with respect to the asbestos claims described below, and that, with respect to these claims, such indemnity obligations are not subject to any time or dollar limitations.
The following paragraph summarizes the most significant actions and proceedings for which Hamilton Sundstrand has accepted responsibility:
•Falk, through its successor entity, is a defendant in multiple lawsuits pending in state or federal court in numerous jurisdictions relating to alleged personal injuries due to the alleged presence of asbestos in certain clutches and drives previously manufactured by Falk. There are approximately 100 claimants in these suits. The ultimate outcome of these lawsuits cannot presently be determined. Hamilton Sundstrand is defending the Company in these lawsuits pursuant to its indemnity obligations and has paid 100% of the costs to date.
Certain Water Management subsidiaries are also subject to asbestos litigation. As of September 30, 2019,2020, Zurn and numerous other unrelated companies were defendants in approximately 5,0006,000 asbestos related lawsuits representing approximately 7,000 claims. Plaintiffs' claims allege personal injuries caused by exposure to asbestos used primarily in industrial boilers formerly manufactured by a segment of Zurn. Zurn did not manufacture asbestos or asbestos components. Instead, Zurn purchased them from suppliers. These claims are being handled pursuant to a defense strategy funded by insurers.
As of September 30, 2019,2020, the Company estimates the potential liability for the asbestos-related claims described above as well as the claims expected to be filed in the next ten years to be approximately $40.0$50.0 million, of which Zurn expects its insurance carriers to pay approximately $30.0$38.0 million in the next ten years on such claims, with the balance of the estimated liability being paid in subsequent years. The $40.0$50.0 million was developed based on actuarial studies and represents the projected indemnity payout for current and future claims. There are inherent uncertainties involved in estimating the number of future asbestos claims, future settlement costs, and the effectiveness of defense strategies and settlement initiatives. As a result, actual liability could differ from the estimate described herein and could be substantial. The liability for the asbestos-related claims is recorded in Other liabilities within the condensed consolidated balance sheets.
Management estimates that its available insurance to cover this potential asbestos liability as of September 30, 2019,2020, is in excess of the 10 year estimated exposure, and accordingly, believes that all current claims are covered by insurance.
As of September 30, 2019,2020, the Company had a recorded receivable from its insurance carriers of $40.0$50.0 million, which corresponds to the amount of this potential asbestos liability that is covered by available insurance and is currently determined to be probable of recovery. However, there is no assurance the Company's current insurance coverage will ultimately be available or that this asbestos liability will not ultimately exceed the Company's coverage limits. Factors that could cause a decrease in the amount of available coverage or create gaps in coverage include: changes in law governing the policies, potential disputes and settlements with the carriers regarding the scope of coverage, and insolvencies of 1one or more of the Company's carriers. The receivable for probable asbestos-related recoveries is recorded in Other assets within the condensed consolidated balance sheets.
Certain Company subsidiaries were named as defendants in a number of individual and class action lawsuits in various United States courts claiming damages due to the alleged failure or anticipated failure of Zurn brass fittings on the PEX
24
Table of Contents
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 iswas 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.  The settlement utilizesutilized a seven year claims fund, which iswas capped at $20.0 million, and iswas 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.seven year filing period expired on April 1, 2020. Any claims after April 1, 2020 are time barred. The Company however, reached aexpects to make payment on any remaining timely filed claims and close out the 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.fund. The Company has recorded an accrual related tofor the balance of this brass fittings liability, which takes into account, in pertinent part, the insurance carrier contribution, as well as exposure from the claims fund and the waiver of future insurance coverage.liability.

17. Retirement Benefits

The components of net periodic benefit cost are as follows (in millions):
Three Months EndedSix Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Pension Benefits:
Service cost$0.2 $0.1 $0.3 $0.2 
Interest cost4.7 5.4 9.3 11.0 
Expected return on plan assets(4.7)(5.6)(9.3)(11.3)
Settlement0 0 0 0.8 
Net periodic benefit cost$0.2 $(0.1)$0.3 $0.7 
Other Postretirement Benefits:
Interest cost$0.2 $0.1 $0.3 $0.3 
Amortization:
Prior service credit(0.1)(0.1)(0.2)(0.2)
Net periodic benefit cost$0.1 $0 $0.1 $0.1 
  Three Months Ended Six Months Ended
  September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Pension Benefits:        
Service cost $0.1
 $0.1
 $0.2
 $0.2
Interest cost 5.4
 5.8
 11.0
 11.6
Expected return on plan assets (5.6) (6.6) (11.3) (13.2)
Settlement —
 —
 0.8
 —
Net periodic (credit) benefit cost $(0.1) $(0.7) $0.7
 $(1.4)
Other Postretirement Benefits:        
Interest cost $0.1
 $0.2
 $0.3
 $0.4
Amortization:        
Prior service credit (0.1) (0.3) (0.2) (0.6)
Net periodic (credit) benefit cost $—
 $(0.1) $0.1
 $(0.2)


The service cost component of net periodic benefit costbenefits is presented within Cost of sales and Selling, general and administrative expenses in the condensed consolidated statements of operations, while the other components of net periodic benefit cost are presented within Other (expense) income, net.

During the first six months of fiscalended September 30, 2020 and September 30, 2019, the Company made contributions of $0.2$6.0 million and $1.1$0.2 million, respectively, to its U.S. qualified pension plan trusts.

During fiscal 2019, the Company offered participants in thea domestic defined benefit plan of Cambridge International Holdings Corp., which was acquired by the Company in fiscal 2017, the opportunity to receive a lump sum settlement as part of the termination process for that plan. During the first quarter of fiscal 2020, the obligations associated with the individuals that did not accept the lump sum settlement offer were transferred to an insurance company through the purchase of an annuity. The Company's cash contribution to purchase the annuity contract was $3.9 million. Following the purchase of the annuity contract, the Company hashad no remaining obligations to participants of this plan. The termination of this plan resulted in the recognition of $0.0 million and $0.8 million non-cash pre-tax losses during the first quarter of fiscal 2020.three and six months ended September 30, 2019.

See Note 16, Retirement Benefits, to the audited consolidated financial statements of the Company's fiscal 2019March 31, 2020 Annual Report on Form 10-K for further information regarding retirement benefits.


18. Leases
The Company determines if a contract is (or contains) a lease at inception by evaluating whether the contract conveys the right to control the use of an identified asset. The Company has operating and finance leases primarily associated with real estate, automobiles and manufacturing and office equipment.

The Company has lease agreements that include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of the underlying assets. The term of the Company’s leases generally reflects the non-cancellable period of the lease. Some of the Company’s lease agreements include options to extend or terminate the lease, which are excluded from the minimum lease terms unless the Company is reasonably certain the option will be exercised. Lease expense for operating leases and amortization expense for finance leases is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets and are instead recognized on a straight-line basis over the lease term.

term
Right-of-use (“ROU”) assets and liabilities are recognized in the condensed consolidated balance sheets based on the present value of remaining lease payments over the lease term. Additionally, ROU assets include any lease payments made at or
25
Table of Contents
before the lease commencement date, any initial direct costs incurred, and are reduced by lease incentives received. As most of the Company’s leases do not provide an implicit rate, the present value of lease payments is determined using the Company’s incremental borrowing rate at the commencement date of the lease. Lease payments included in the measurement of the lease liabilities are comprised of fixed payments, variable payments that depend on an index or rate, and amounts probable to be paid if an option is reasonably certain to be exercised. Variable lease payments, typically based on usage of the asset or changes in an index or rate, are excluded from the lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

26
Table of Contents
ROU assets and lease liability balances recorded on the condensed consolidated balance sheets are summarized as follows (in millions):
LeasesClassificationSeptember 30, 2020March 31, 2020
Assets:    
Operating ROU assetsOther assets$65.6 $71.1 
Finance ROU assets Property, plant and equipment, net (1) 72.5 27.3 
Total ROU assets$138.1 $98.4 
     
Liabilities:
Current    
OperatingOther current liabilities$12.1 $12.8 
Finance Current maturities of debt 2.1 0.5 
Non-current
Operating Other liabilities 58.3 63.1 
FinanceLong-term debt71.8 27.4 
Total lease liabilities   $144.3 $103.8 
____________________
(1)
Leases Classification September 30, 2019
Assets:    
Operating ROU assets Other assets $40.9
Finance ROU assets Property, plant and equipment, net (1) 27.0
Total ROU assets   $67.9
     
Liabilities:    
Current    
Operating Other current liabilities $10.5
Finance Current maturities of debt 0.3
Non-current    
Operating Other liabilities 32.9
Finance Long-term debt 26.9
Total lease liabilities   $70.6
____________________Finance lease assets are recorded net of accumulated amortization of $2.4 million and $1.0 million as of September 30, 2020 and March 31, 2020, respectively.
(1)Finance lease assets are recorded net of accumulated amortization of $0.5 million as of September 30, 2019.
The components of lease expense reported in the condensed consolidated statements of operations are as follows (in millions):
Three Months EndedSix Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Operating lease expenses (1)$4.4 $3.7 $8.9 $7.3 
Finance lease expenses:
Depreciation of finance ROU assets (1) 1.1 0.3 1.4 0.5 
Interest on lease liabilities (2)1.0 0.4 1.4 0.7 
Total finance lease expense2.1 0.7 2.8 1.2 
Variable and short-term lease expense (1)1.6 1.1 2.7 2.3 
Total lease expense$8.1 $5.5 $14.4 $10.8 
  Three Months Ended Six Months Ended
  September 30, 2019
Operating lease expenses (1) $3.7
 $7.3
Finance lease expenses:    
Depreciation of finance ROU assets (1) 0.3
 0.5
Interest on lease liabilities (2) 0.4
 0.7
Total finance lease expense 0.7
 1.2
Variable and short-term lease expense (1) 1.1
 2.3
Total lease expense $5.5
 $10.8
____________________
(1)Included in cost of sales and selling, general and administrative expenses.
(2)Included in interest expense, net.
(1)Included in cost of sales and selling, general and administrative expenses.
(2)Included in interest expense, net.
Future minimum lease payments under operating and finance leases as of September 30, 20192020 are as follows (in millions):
Years ending December 31,
Operating Leases (1)
Finance Leases (1)
2020 (through December 31, 2020)$2.4 $1.0 
202114.5 6.1 
202214.8 6.2 
202312.1 6.2 
202410.1 6.3 
Thereafter31.6 95.3 
Total future minimum lease payments85.5  121.1 
Less: Imputed interest(15.1)(47.2)
Total lease liabilities$70.4  $73.9 
Years ending March 31, 
Operating Leases (1)
 
Finance Leases (1)
2020 (excluding the six months ended September 30, 2019) $6.4
 $1.0
2021 10.8
 1.9
2022 8.6
 1.9
2023 7.5
 1.9
2024 5.0
 1.9
Thereafter 10.2
 46.1
Total future minimum lease payments 48.5
 54.7
Less: Imputed interest (5.1) (27.5)
Total lease liabilities $43.4
 $27.2
____________________
____________________(1)
(1)Excludes legally binding minimum lease payments for leases signed but not yet commenced.

Future minimum rental payments for leases with initial terms in excesssigned but not yet commenced.
27
Table of one year as of March 31, 2019 are as follows (in millions):Contents
Years ending March 31: 
2020$14.6
202111.8
20229.6
20238.7
20246.4
Thereafter56.3
Total future minimum lease payments$107.4

The weighted-average remaining lease terms and discount rates for leases are as follows:
Lease Term and Discount RateSeptember 30, 2019
Weighted-average remaining lease terms (years):
Operating leases5.1
Finance leases28.8
Weighted-average discount rate:
Operating leases4.0%
Finance leases5.7%

Six Months Ended
Lease Term and Discount RateSeptember 30, 2020September 30, 2019
Weighted-average remaining lease terms (years):  
Operating leases6.55.1
Finance leases 19.428.8
Weighted-average discount rate:
Operating leases 4.9 %4.0 %
Finance leases5.4 %5.7 %
Cash paid for amounts included in the measurement of lease liabilities are as follows (in millions):
Six Months Ended
September 30, 2020September 30, 2019
Operating cash flows from operating leases$7.4 $7.1 
Operating cash flows from finance leases 1.4 0.8 
Financing cash flows from finance leases0.5 0.2 
  Six Months Ended
  September 30, 2019
Operating cash flows from operating leases $7.1
Operating cash flows from finance leases 0.8
Financing cash flows from finance leases 0.2


ROU assets obtained in exchange for lease liabilities are as follows (in millions):
  Six Months Ended
  September 30, 2019
Operating leases $2.8


Sale-Leaseback Transaction:
During fiscal 2018, the Company entered into a sale-leaseback arrangement for an owned facility in Downers Grove, Illinois. In accordance with the sale-leaseback guidance of ASC 840, the property did not qualify for sale accounting and as a result was accounted for as a financing transaction. No gain or loss was recognized in connection with this transaction. Upon the Company's adoption of ASC 842 on April 1, 2019, this financing transaction did not qualify for sale-leaseback accounting under the requirements of ASC 842 and, accordingly, continued to be accounted for as a financing obligation. The financing obligation and related asset of $4.6 million and $3.0 million, respectively, are recorded in Property, plant and equipment, net and Other liabilities in the condensed consolidated balance sheet as of September 30, 2019.
Prior to the adoption of ASC 842, the Company was considered, for accounting purposes only, the owner of the new facility due to the Company's continuing involvement with the new manufacturing facility during the construction period and accordingly recorded the construction asset and financing obligation within its consolidated balance sheets. Upon the adoption of ASC 842 on April 1, 2019, the Company derecognized approximately $23.0 million of the construction asset and financing obligation recorded as of March 31, 2019, and has accounted for the new facility as a finance lease in accordance with ASC 842.
Six Months Ended
September 30, 2020September 30, 2019
Operating leases $0.4 $2.8 
Finance leases$46.5 $0 
    

19. Stock-Based Compensation
The Rexnord Corporation Performance Incentive Plan (the "Plan") is utilized to provide performance incentives to the Company's officers, employees, directors and certain others by permitting grants of equity awards (for common stock), as well as performance-based cash awards, to such persons to encourage them to maximize Rexnord's performance and create value for Rexnord's stockholders. For the three and six months ended September 30, 2019,2020, the Company recognized $5.9$7.4 million and $12.8$20.7 million of stock-based compensation expense, respectively. For the three and six months ended September 30, 2018,2019, the Company recognized $5.7$5.9 million and $11.6$12.8 million respectively, of stock-based compensation expense.expense, respectively.
During the six months ended September 30, 2019,2020, the Company granted the following stock options, restricted stock units, and performance stock units and common stock to directors, executive officers, and certain other employees:
Award Type Number of Awards Weighted Average Grant-Date Fair Value
Stock options 154,934
 $9.50
Restricted stock units 415,666
 $27.51
Performance stock units 316,835
 $27.52

Award TypeNumber of AwardsWeighted Average Grant-Date Fair Value
Stock options197,565 $7.69 
Restricted stock units429,153 $25.54 
Performance stock units547,374 $25.52 
Common stock120,418 $28.03 
See Note 15, Stock-Based Compensation, to the audited consolidated financial statements of the Company's fiscal 2019March 31, 2020 Annual Report on Form 10-K for further information regarding stock-based compensation.
20. Business Segment Information
The Company's results of operations are reported in 2 business segments, consisting of the Process & Motion Control platform and the Water Management platform. The Process & Motion Control platform designs, manufactures, markets and services a comprehensive range of specified, highly-engineered mechanical components used within complex systems where customers' reliability requirements and costs of failure or downtime are high. The Process & Motion Control portfolio includes motion control products, shaft management products, aerospace components, and related value-added services. Products and services are marketed and sold globally under widely recognized brand names, including Rexnord®, Rex®, Addax®, Euroflex®, Falk®, FlatTop®, Cambridge®, Link-Belt®, Omega®, PSI®, Shafer®, Stearns®, Highfield®, Thomas®, Centa®, and Tollok®TollokTM. Process & Motion Control products and services are sold into a diverse group of attractive end markets,
28
Table of Contents
including food and beverage, aerospace, mining, petrochemical, energy and power generation, cement and aggregates, forest and wood products, agriculture, and general industrial and automation applications. The Water Management platform designs, procures, manufactures, and markets products that provide and enhance water quality, safety, flow control and conservation. The Water Management product portfolio includes professional grade water control and safety, water distribution and drainage, finish plumbing, and site works products for primarily nonresidential buildings. Products are marketed and sold under widely recognized brand names, including Zurn®, Wilkins®, Green Turtle®, and World Dryer®, StainlessDrains.comTM and JUST®. The financial information of the Company's segments is regularly evaluated by the chief operating decision maker in determining resource allocation and assessing performance. Management evaluates the performance of each business segment based on its operating results. The same accounting policies are used throughout the organization. See Note 1, Basis of Presentation and Significant Accounting Policies for further information.
During fiscal 2019, the Company sold its VAG business included within the Water Management platform and in accordance with the authoritative guidance, the operating results of the VAG business are reported as discontinued operations in all periods presented.operations. See Note 4, Discontinued Operations, for further information.

Business Segment Information:
(in Millions)
Three Months EndedSix Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net sales
Process & Motion Control$293.9 $337.0 $568.3 $667.1 
Water Management199.7 184.3 374.4 362.5 
  Consolidated net sales493.6 521.3 942.7 1,029.6 
Income from operations
Process & Motion Control35.8 58.3 75.4 113.4 
Water Management48.7 43.7 88.8 83.7 
Corporate(12.1)(13.5)(25.8)(28.4)
  Consolidated income from operations72.4 88.5 138.4 168.7 
Non-operating expense:
Interest expense, net(11.5)(15.3)(24.9)(30.8)
Gain on the extinguishment of debt0 3.2 0 3.2 
Other income (expense), net0.6 (0.3)1.0 (1.8)
Income before income taxes61.5 76.1 114.5 139.3 
Provision for income taxes(16.1)(19.5)(33.3)(34.3)
Equity method investment income0 0.1 0 0.2 
Net income from continuing operations45.4 56.7 81.2 105.2 
Loss from discontinued operations, net of tax0 0 0 (1.8)
Net income45.4 56.7 81.2 103.4 
Non-controlling interest income0 0.1 0.2 0.3 
Net income attributable to Rexnord45.4 56.6 81.0 103.1 
Dividends on preferred stock0 (5.8)0 (11.6)
Net income attributable to Rexnord common stockholders$45.4 $50.8 $81.0 $91.5 
Depreciation and amortization
Process & Motion Control$14.8 $15.0 $29.1 $29.6 
Water Management7.4 6.6 14.7 12.9 
Corporate0.1 0.1 0.2 0.2 
  Consolidated$22.3 $21.7 $44.0 $42.7 
Capital expenditures
Process & Motion Control$5.2 $5.9 $12.5 $10.4 
Water Management1.6 1.5 2.8 2.8 
  Consolidated$6.8 $7.4 $15.3 $13.2 
  Three Months Ended Six Months Ended
  September 30, 2019
September 30, 2018 September 30, 2019 September 30, 2018
Net sales        
Process & Motion Control $337.0
 $348.7
 $667.1
 $681.1
Water Management (1) 184.3
 176.1
 362.5
 347.3
  Consolidated net sales 521.3
 524.8
 1,029.6
 1,028.4
Income from operations        
Process & Motion Control 58.3
 56.4
 113.4
 106.3
Water Management (1) 43.7
 41.3
 83.7
 77.8
Corporate (13.5) (16.3) (28.4) (30.6)
  Consolidated income from operations 88.5
 81.4
 168.7
 153.5
Non-operating expense:        
Interest expense, net (15.3) (18.7) (30.8) (37.3)
Gain on the extinguishment of debt 3.2
 —
 3.2
 —
Other (expense) income, net (0.3) —
 (1.8) 1.7
Income before income taxes 76.1
 62.7
 139.3
 117.9
Provision for income taxes (19.5) (17.2) (34.3) (31.7)
Equity method investment income 0.1
 0.7
 0.2
 2.2
Net income from continuing operations 56.7
 46.2
 105.2
 88.4
Loss from discontinued operations, net of tax —
 (83.7) (1.8) (126.5)
Net income (loss) 56.7
 (37.5) 103.4
 (38.1)
Non-controlling interest income 0.1
 0.1
 0.3
 0.2
Net income (loss) attributable to Rexnord 56.6
 (37.6) 103.1
 (38.3)
Dividends on preferred stock (5.8) (5.8) (11.6) (11.6)
Net income (loss) attributable to Rexnord common stockholders $50.8
 $(43.4) $91.5
 $(49.9)
         
Depreciation and amortization        
Process & Motion Control $15.0
 $15.7
 $29.6
 $31.7
Water Management (1) 6.6
 6.2
 12.9
 12.4
Corporate 0.1
 —
 0.2
 —
  Consolidated $21.7
 $21.9
 $42.7
 $44.1
Capital expenditures        
Process & Motion Control $5.9
 $4.4
 $10.4
 $13.3
Water Management (1) 1.5
 1.5
 2.8
 2.8
  Consolidated $7.4
 $5.9
 $13.2
 $16.1

____________________
(1)Amounts reflect Water Management continuing operations.



29
Table of Contents
21. Guarantor Subsidiaries
The following schedules present condensed consolidating financial information of the Company as of September 30, 20192020 and March 31, 2019,2020, and for the three and six month periods ended September 30, 20192020 and 20182019 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
September 30, 20192020
(in millions)
ParentIssuersGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Assets
Current assets:
Cash and cash equivalents$0 $0.2 $105.1 $221.3 $0 $326.6 
Receivables, net0 0 182.5 107.8 0 290.3 
Inventories0 0 246.5 109.2 0 355.7 
Other current assets0 0 18.7 24.2 0 42.9 
Total current assets0 0.2 552.8 462.5 0 1,015.5 
Property, plant and equipment, net0 0 292.9 125.2 0 418.1 
Intangible assets, net0 0 410.2 88.9 0 499.1 
Goodwill0 0 1,044.2 282.0 0 1,326.2 
Investment in:
Issuer subsidiaries1,479.6 — — — (1,479.6)— 
Guarantor subsidiaries— 3,507.3 — — (3,507.3)— 
Non-guarantor subsidiaries— — 662.9 — (662.9)— 
Other assets0 0.7 88.2 57.6 — 146.5 
Total assets$1,479.6 $3,508.2 $3,051.2 $1,016.2 $(5,649.8)$3,405.4 
Liabilities and stockholders' equity
Current liabilities:
Current maturities of debt$0 $0 $2.2 $1.0 $0 $3.2 
Trade payables0 0 97.9 59.1 0 157.0 
Compensation and benefits0 0 31.8 17.9 0 49.7 
Current portion of pension and postretirement benefit obligations0 0 1.8 1.4 0 3.2 
Other current liabilities0 7.3 81.8 57.8 0 146.9 
Total current liabilities0 7.3 215.5 137.2 0 360.0 
Long-term debt0 1,117.4 71.3 3.9 0 1,192.6 
Note payable to (receivable from) affiliates, net80.6 903.9 (1,067.1)82.6 0 0 
Pension and postretirement benefit obligations0 0 136.2 48.8 0 185.0 
Deferred income taxes0 0 97.2 22.9 0 120.1 
Other liabilities0.6 0 90.8 57.9 0 149.3 
Total liabilities81.2 2,028.6 (456.1)353.3 0 2,007.0 
Total stockholders' equity1,398.4 1,479.6 3,507.3 662.9 (5,649.8)1,398.4 
Total liabilities and stockholders' equity$1,479.6 $3,508.2 $3,051.2 $1,016.2 $(5,649.8)$3,405.4 

30
  Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets            
Current assets:            
Cash and cash equivalents $1.3
 $1.1
 $115.2
 $202.2
 $—
 $319.8
Receivables, net —
 —
 198.1
 102.9
 —
 301.0
Inventories —
 —
 235.5
 109.1
 —
 344.6
Other current assets —
 —
 19.8
 28.3
 —
 48.1
Total current assets 1.3
 1.1
 568.6
 442.5
 —
 1,013.5
Property, plant and equipment, net —
 —
 249.3
 123.8
 —
 373.1
Intangible assets, net —
 —
 404.7
 94.5
 —
 499.2
Goodwill —
 —
 1,031.0
 279.5
 —
 1,310.5
Investment in:            
Issuer subsidiaries 1,312.2
 —
 —
 —
 (1,312.2) —
Guarantor subsidiaries —
 3,262.8
 —
 —
 (3,262.8) —
Non-guarantor subsidiaries —
 —
 556.7
 —
 (556.7) —
Other assets 0.2
 0.9
 67.9
 45.7
 —
 114.7
Total assets $1,313.7
 $3,264.8
 $2,878.2
 $986.0
 $(5,131.7) $3,311.0
Liabilities and stockholders' equity            
Current liabilities:            
Current maturities of debt $—
 $—
 $0.4
 $1.1
 $—
 $1.5
Trade payables —
 —
 103.3
 55.4
 —
 158.7
Compensation and benefits —
 —
 34.9
 18.5
 —
 53.4
Current portion of pension and postretirement benefit obligations —
 —
 1.9
 1.4
 —
 3.3
Other current liabilities 3.0
 7.3
 73.9
 43.7
 —
 127.9
Total current liabilities 3.0
 7.3
 214.4
 120.1
 —
 344.8
             
Long-term debt —
 1,214.4
 26.9
 8.0
 —
 1,249.3
Pension and postretirement benefit obligations —
 —
 107.4
 43.4
 —
 150.8
Deferred income taxes —
 —
 102.1
 25.6
 —
 127.7
Other liabilities 0.4
 —
 72.8
 43.8
 —
 117.0
Total liabilities 3.4
 1,221.7
 523.6
 240.9
 —
 1,989.6
Note (receivable from) payable to affiliates, net (11.1) 730.9
 (908.2) 188.4
 —
 —
Total stockholders' equity 1,321.4
 1,312.2
 3,262.8
 556.7
 (5,131.7) 1,321.4
Total liabilities and stockholders' equity $1,313.7
 $3,264.8
 $2,878.2
 $986.0
 $(5,131.7) $3,311.0
Table of Contents


Condensed Consolidating Balance Sheets
March 31, 20192020
(in millions)
ParentIssuersGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Assets
Current assets:
Cash and cash equivalents$11.0 $0.4 $383.9 $178.1 $0 $573.4 
Receivables, net0 0 223.5 111.2 0 334.7 
Inventories0 0 224.8 92.7 0 317.5 
Other current assets0 0 20.5 18.2 0 38.7 
Total current assets11.0 0.4 852.7 400.2 0 1,264.3 
Property, plant and equipment, net0 0 256.1 122.7 0 378.8 
Intangible assets, net0 0 424.8 89.4 0 514.2 
Goodwill0 0 1,043.6 278.3 0 1,321.9 
Investment in:
Issuer subsidiaries1,381.1 — — — (1,381.1)— 
Guarantor subsidiaries— 3,324.9 — — (3,324.9)— 
Non-guarantor subsidiaries— — 621.1 — (621.1)— 
Other assets0 0 88.7 59.2 — 147.9 
Total assets$1,392.1 $3,325.3 $3,287.0 $949.8 $(5,327.1)$3,627.1 
Liabilities and stockholders' equity
Current liabilities:
Current maturities of debt$0 $0 $75.4 $1.0 $0 $76.4 
Trade payables0 0 123.9 61.7 0 185.6 
Compensation and benefits0 0 42.4 19.4 0 61.8 
Current portion of pension and postretirement benefit obligations0 0 1.8 1.4 0 3.2 
Other current liabilities0 7.9 79.9 40.7 0 128.5 
Total current liabilities0 7.9 323.4 124.2 0 455.5 
Long-term debt0 1,290.9 101.8 4.3 0 1,397.0 
Note payable to (receivable from), net77.9 645.4 (795.9)72.6 0 0 
Pension and postretirement benefit obligations0 0 142.8 46.8 0 189.6 
Deferred income taxes0 0 98.6 22.4 0 121.0 
Other liabilities0.5 0 91.4 58.4 0 150.3 
Total liabilities78.4 1,944.2 (37.9)328.7 0 2,313.4 
Total stockholders' equity1,313.7 1,381.1 3,324.9 621.1 (5,327.1)1,313.7 
Total liabilities and stockholders' equity$1,392.1 $3,325.3 $3,287.0 $949.8 $(5,327.1)$3,627.1 
  Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Assets            
Current assets:            
Cash and cash equivalents $1.4
 $0.2
 $107.7
 $183.2
 $—
 $292.5
Receivables, net —
 —
 219.6
 114.7
 —
 334.3
Inventories —
 —
 214.3
 102.2
 —
 316.5
Other current assets —
 —
 13.0
 26.6
 —
 39.6
Total current assets 1.4
 0.2
 554.6
 426.7
 —
 982.9
Property, plant and equipment, net —
 —
 251.2
 131.8
 —
 383.0
Intangible assets, net —
 —
 411.6
 99.9
 —
 511.5
Goodwill —
 —
 1,017.1
 282.6
 —
 1,299.7
Investment in:            
Issuer subsidiaries 1,212.1
 —
 —
 —
 (1,212.1) —
Guarantor subsidiaries —
 3,146.0
 —
 —
 (3,146.0) —
Non-guarantor subsidiaries —
 —
 547.4
 —
 (547.4) —
Other assets —
 1.1
 63.1
 18.4
 —
 82.6
Total assets $1,213.5
 $3,147.3
 $2,845.0
 $959.4
 $(4,905.5) $3,259.7
Liabilities and stockholders' equity            
Current liabilities:            
Current maturities of debt $—
 $—
 $0.1
 $1.1
 $—
 $1.2
Trade payables —
 —
 129.7
 62.0
 —
 191.7
Compensation and benefits —
 —
 42.4
 21.3
 —
 63.7
Current portion of pension and postretirement benefit obligations —
 —
 1.9
 1.4
 —
 3.3
Other current liabilities 3.0
 7.5
 90.3
 36.3
 —
 137.1
Total current liabilities 3.0
 7.5
 264.4
 122.1
 —
 397.0
             
Long-term debt —
 1,213.4
 14.4
 9.0
 —
 1,236.8
Pension and postretirement benefit obligations —
 —
 112.9
 45.1
 —
 158.0
Deferred income taxes —
 —
 98.8
 27.1
 —
 125.9
Other liabilities 0.2
 —
 87.4
 23.4
 —
 111.0
Total liabilities 3.2
 1,220.9
 577.9
 226.7
 —
 2,028.7
Note (receivable from) payable to affiliates, net (20.7) 714.3
 (879.0) 185.4
 —
 —
Total stockholders' equity 1,231.0
 1,212.1
 3,146.1
 547.3
 (4,905.5) 1,231.0
Total liabilities and stockholders' equity $1,213.5
 $3,147.3
 $2,845.0
 $959.4
 $(4,905.5) $3,259.7


31
Table of Contents
Condensed Consolidating Statements of Operations
For the Six Months Ended September 30, 2020
(in millions)
ParentIssuersGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net sales$0 $0 $707.3 $314.2 $(78.8)$942.7 
Cost of sales0 0 429.1 222.4 (78.8)572.7 
Gross profit0 0 278.2 91.8 0 370.0 
Selling, general and administrative expenses0 0 158.8 46.5 0 205.3 
Restructuring and other similar charges0 0 4.5 3.8 0 8.3 
Amortization of intangible assets0 0 14.8 3.2 0 18.0 
Income from operations0 0 100.1 38.3 0 138.4 
Non-operating income (expense):
     Interest income (expense), net:
          To third parties0 (22.8)(2.3)0.2 0 (24.9)
          To affiliates19.2 11.2 (29.5)(0.9)0 0 
Other (expense) income, net0 (0.2)0 1.2 0 1.0 
Income (loss) before income taxes19.2 (11.8)68.3 38.8 0 114.5 
Provision for income taxes0 0 (20.1)(13.2)0 (33.3)
Equity method investment income0 0 0 0 0 0 
Income (loss) before equity in earnings of subsidiaries19.2 (11.8)48.2 25.6 0 81.2 
Equity in income of subsidiaries62.0 73.8 25.6 0 (161.4)0 
Net income from continuing operations81.2 62.0 73.8 25.6 (161.4)81.2 
Loss from discontinued operations, net of tax0 0 0 0 0 0 
Net income81.2 62.0 73.8 25.6 (161.4)81.2 
Non-controlling interest income0 0 0 0.2 0 0.2 
Net income attributable to Rexnord81.2 62.0 73.8 25.4 (161.4)81.0 
Dividends on preferred stock0 0 0 0 0 0 
Net income attributable to Rexnord common stockholders$81.2 $62.0 $73.8 $25.4 $(161.4)$81.0 
Comprehensive income$81.2 $65.1 $74.0 $41.5 $(161.4)$100.4 


32
Table of Contents
Condensed Consolidating Statements of Operations
For the Three Months Ended September 30, 2020
(in millions)
ParentIssuersGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net sales$0 $0 $365.7 $172.3 $(44.4)$493.6 
Cost of sales0 0 224.5 120.4 (44.4)300.5 
Gross profit0 0 141.2 51.9 0 193.1 
Selling, general and administrative expenses0 0 80.9 24.2 0 105.1 
Restructuring and other similar charges0 0 2.2 4.4 0 6.6 
Amortization of intangible assets0 0 7.4 1.6 0 9.0 
Income from operations0 0 50.7 21.7 0 72.4 
Non-operating income (expense):
     Interest income (expense), net:
          To third parties0 (10.0)(1.6)0.1 0 (11.5)
          To affiliates9.6 5.4 (14.6)(0.4)0 0 
Other (expense) income, net0 (0.1)(0.2)0.9 0 0.6 
Income (loss) before income taxes9.6 (4.7)34.3 22.3 0 61.5 
Provision for income taxes0 0 (9.7)(6.4)0 (16.1)
Equity method investment income0 0 0 0 0 0 
Income (loss) before equity in earnings of subsidiaries9.6 (4.7)24.6 15.9 0 45.4 
Equity in income of subsidiaries35.8 40.5 15.9 0 (92.2)0 
Net income from continuing operations45.4 35.8 40.5 15.9 (92.2)45.4 
Loss from discontinued operations, net of tax0 0 0 0 0 0 
Net income45.4 35.8 40.5 15.9 (92.2)45.4 
Non-controlling interest income0 0 0 0 0 0 
Net income attributable to Rexnord45.4 35.8 40.5 15.9 (92.2)45.4 
Dividends on preferred stock0 0 0 0 0 0 
Net income attributable to Rexnord common stockholders$45.4 $35.8 $40.5 $15.9 $(92.2)$45.4 
Comprehensive income$45.4 $37.9 $40.6 $26.6 $(92.2)$58.3 

33
Table of Contents
Condensed Consolidating Statements of Operations
For the Six Months Ended September 30, 2019
(in millions)
ParentIssuersGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net sales$0 $0 $787.9 $327.9 $(86.2)$1,029.6 
Cost of sales0 0 476.3 229.7 (86.2)619.8 
Gross profit0 0 311.6 98.2 0 409.8 
Selling, general and administrative expenses0 0 166.1 52.2 0 218.3 
Restructuring and other similar charges0 0 2.7 2.6 0 5.3 
Amortization of intangible assets0 0 13.8 3.7 0 17.5 
Income from operations0 0 129.0 39.7 0 168.7 
Non-operating (expense) income:
     Interest (expense) income, net:
          To third parties0 (30.2)(1.3)0.7 0 (30.8)
          To affiliates0.4 17.1 (13.7)(3.8)0 0 
Gain on the extinguishment of debt0 0 3.2 0 0 3.2 
Other income (expense), net0 0.1 (1.2)(0.7)0 (1.8)
Income (loss) before income taxes0.4 (13.0)116.0 35.9 0 139.3 
Provision for income taxes0 0 (23.1)(11.2)0 (34.3)
Equity method investment income0 0 0 0.2 0 0.2 
Income (loss) before equity in earnings of subsidiaries0.4 (13.0)92.9 24.9 0 105.2 
Equity in income of subsidiaries103.0 116.0 23.1 0 (242.1)0 
Net income from continuing operations103.4 103.0 116.0 24.9 (242.1)105.2 
Loss from discontinued operations, net of tax0 0 0 (1.8)0 (1.8)
Net income103.4 103.0 116.0 23.1 (242.1)103.4 
Non-controlling interest income0 0 0 0.3 0 0.3 
Net income attributable to Rexnord103.4 103.0 116.0 22.8 (242.1)103.1 
Dividends on preferred stock(11.6)0 0 0 0 (11.6)
Net income attributable to Rexnord common stockholders$91.8 $103.0 $116.0 $22.8 $(242.1)$91.5 
Comprehensive income$103.4 $99.3 $116.1 $11.6 $(242.1)$88.3 

34
 Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $—
 $787.9
 $327.9
 $(86.2) $1,029.6
Cost of sales—
 —
 476.3
 229.7
 (86.2) 619.8
Gross profit—
 —
 311.6
 98.2
 —
 409.8
Selling, general and administrative expenses—
 —
 166.1
 52.2
 —
 218.3
Restructuring and other similar charges—
 —
 2.7
 2.6
 —
 5.3
Amortization of intangible assets—
 —
 13.8
 3.7
 —
 17.5
Income from operations—
 —
 129.0
 39.7
 —
 168.7
Non-operating (expense) income:           
     Interest (expense) income, net:           
          To third parties—
 (30.2) (1.3) 0.7
 —
 (30.8)
          To affiliates0.4
 17.1
 (13.7) (3.8) —
 —
Gain on the extinguishment of debt—
 —
 3.2
 —
 —
 3.2
Other income (expense), net—
 0.1
 (1.2) (0.7) —
 (1.8)
Income (loss) before income taxes0.4
 (13.0) 116.0
 35.9
 —
 139.3
Provision for income taxes—
 —
 (23.1) (11.2) —
 (34.3)
Equity method investment income—
 —
 —
 0.2
 —
 0.2
Income (loss) before equity in earnings of subsidiaries0.4
 (13.0) 92.9
 24.9
 —
 105.2
Equity in income of subsidiaries103.0
 116.0
 23.1
 —
 (242.1) —
Net income from continuing operations103.4
 103.0
 116.0
 24.9
 (242.1) 105.2
Loss from discontinued operations, net of tax—
 —
 —
 (1.8) —
 (1.8)
Net income103.4
 103.0
 116.0
 23.1
 (242.1) 103.4
Non-controlling interest income—
 —
 —
 0.3
 —
 0.3
Net income attributable to Rexnord103.4
 103.0
 116.0
 22.8
 (242.1) 103.1
Dividends on preferred stock(11.6) —
 —
 —
 —
 (11.6)
Net income attributable to Rexnord common stockholders$91.8
 $103.0
 $116.0
 $22.8
 $(242.1) $91.5
Comprehensive income$103.4
 $99.3
 $116.1
 $11.6
 $(242.1) $88.3
Table of Contents

Condensed Consolidating Statements of Operations
For the Three Months Ended September 30, 2019
(in millions)
ParentIssuersGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net sales$0 $0 $396.2 $166.6 $(41.5)$521.3 
Cost of sales0 0 238.3 116.3 (41.5)313.1 
Gross profit0 0 157.9 50.3 0 208.2 
Selling, general and administrative expenses0 0 83.5 25.3 0 108.8 
Restructuring and other similar charges0 0 0.2 1.9 0 2.1 
Amortization of intangible assets0 0 6.9 1.9 0 8.8 
Income from operations0 0 67.3 21.2 0 88.5 
Non-operating (expense) income:
     Interest income (expense), net:
          To third parties0 (14.9)(0.8)0.4 0 (15.3)
          To affiliates0.2 8.4 (6.7)(1.9)0 0 
Gain on the extinguishment of debt0 0 3.2 0 0 3.2 
Other expense (income), net0 0.2 (0.5)0 0 (0.3)
Income (loss) before income taxes0.2 (6.3)62.5 19.7 0 76.1 
Provision for income taxes0 0 (13.6)(5.9)0 (19.5)
Equity method investment income0 0 0 0.1 0 0.1 
Income (loss) before equity in earnings of subsidiaries0.2 (6.3)48.9 13.9 0 56.7 
Equity in income of subsidiaries56.5 62.8 13.9 0 (133.2)0 
Net income56.7 56.5 62.8 13.9 (133.2)56.7 
Non-controlling interest income0 0 0 0.1 0 0.1 
Net income attributable to Rexnord56.7 56.5 62.8 13.8 (133.2)56.6 
Dividends on preferred stock(5.8)0 0 0 0 (5.8)
Net income attributable to Rexnord common stockholders$50.9 $56.5 $62.8 $13.8 $(133.2)$50.8 
Comprehensive income$56.6 $51.5 $62.1 $4.6 $(133.2)$41.6 

35
 Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $—
 $396.2
 $166.6
 $(41.5) $521.3
Cost of sales—
 —
 238.3
 116.3
 (41.5) 313.1
Gross profit—
 —
 157.9
 50.3
 —
 208.2
Selling, general and administrative expenses—
 —
 83.5
 25.3
 —
 108.8
Restructuring and other similar charges—
 —
 0.2
 1.9
 —
 2.1
Amortization of intangible assets—
 —
 6.9
 1.9
 —
 8.8
Income from operations—
 —
 67.3
 21.2
 —
 88.5
Non-operating (expense) income:           
     Interest income (expense), net:           
          To third parties—
 (14.9) (0.8) 0.4
 —
 (15.3)
          To affiliates0.2
 8.4
 (6.7) (1.9) —
 —
Gain on the extinguishment of debt—
 —
 3.2
 —
 —
 3.2
Other expense (income), net—
 0.2
 (0.5) —
 —
 (0.3)
Income (loss) before income taxes0.2
 (6.3) 62.5
 19.7
 —
 76.1
Provision for income taxes—
 —
 (13.6) (5.9) —
 (19.5)
Equity method investment income—
 —
 —
 0.1
 —
 0.1
Income (loss) before equity in earnings of subsidiaries0.2
 (6.3) 48.9
 13.9
 —
 56.7
Equity in income of subsidiaries56.5
 62.8
 13.9
 —
 (133.2) —
Net income56.7
 56.5
 62.8
 13.9
 (133.2) 56.7
Non-controlling interest income—
 —
 —
 0.1
 —
 0.1
Net income attributable to Rexnord56.7
 56.5
 62.8
 13.8
 (133.2) 56.6
Dividends on preferred stock(5.8) —
 —
 —
 —
 (5.8)
Net income attributable to Rexnord common stockholders$50.9
 $56.5
 $62.8
 $13.8
 $(133.2) $50.8
Comprehensive income$56.6
 $51.5
 $62.1
 $4.6
 $(133.2) $41.6
Table of Contents


Condensed Consolidating Statements of OperationsCash Flows
For the Six Months Ended September 30, 20182020
(in millions)

ParentIssuerGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Operating activities
Cash provided by (used for) operating activities$25.4 $249.8 $(194.9)$33.5 $0 $113.8 
Investing activities
Expenditures for property, plant and equipment0 0 (9.1)(6.2)0 (15.3)
Proceeds from dispositions of long-lived assets0 0 0.6 7.2 0 7.8 
Cash (used for) provided by investing activities0 0 (8.5)1.0 0 (7.5)
Financing activities
Proceeds from borrowings of debt0 0 6.0 0 0 6.0 
Repayments of debt0 (250.0)(81.4)(0.4)0 (331.8)
Proceeds from exercise of stock options7.2 0 0 0 0 7.2 
Taxes withheld and paid on employees' share-based payment awards(9.4)0 0 0 0 (9.4)
Repurchase of common stock(15.0)0 0 0 0 (15.0)
Payment of common stock dividend(19.2)0 0 0 0 (19.2)
Cash used for financing activities(36.4)(250.0)(75.4)(0.4)0 (362.2)
Effect of exchange rate changes on cash and cash equivalents0 0 0 9.1 0 9.1 
(Decrease) increase in cash and cash equivalents(11.0)(0.2)(278.8)43.2 0 (246.8)
Cash, cash equivalents and restricted cash at beginning of period11.0 0.4 383.9 178.1 0 573.4 
Cash, cash equivalents and restricted cash at end of period$0 $0.2 $105.1 $221.3 $0 $326.6 
 Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $—
 $786.0
 $340.8
 $(98.4) $1,028.4
Cost of sales—
 —
 479.8
 248.3
 (98.4) 629.7
Gross profit—
 —
 306.2
 92.5
 —
 398.7
Selling, general and administrative expenses—
 —
 168.1
 53.3
 —
 221.4
Restructuring and other similar charges—
 —
 4.2
 2.6
 —
 6.8
Amortization of intangible assets—
 —
 13.8
 3.2
 —
 17.0
Income from continuing operations—
 —
 120.1
 33.4
 —
 153.5
Non-operating (expense) income:           
     Interest income (expense), net:           
          To third parties—
 (36.6) (0.8) 0.1
 —
 (37.3)
          To affiliates1.2
 19.6
 (14.3) (6.5) —
 —
Other income (expense), net—
 0.1
 2.5
 (0.9) —
 1.7
Income (loss) before income taxes from continuing operations1.2
 (16.9) 107.5
 26.1
 —
 117.9
Provision for income taxes—
 —
 (26.0) (5.7) —
 (31.7)
Equity method investment income—
 —
 —
 2.2
 —
 2.2
Income (loss) before equity in earnings of subsidiaries1.2
 (16.9) 81.5
 22.6
 —
 88.4
Equity in loss of subsidiaries(39.3) (22.4) (100.2) —
 161.9
 —
Net (loss) income from continuing operations(38.1) (39.3) (18.7) 22.6
 161.9
 88.4
Loss from discontinued operations, net of tax—
 —
 (3.7) (122.8) —
 (126.5)
Net loss(38.1) (39.3) (22.4) (100.2) 161.9
 (38.1)
Non-controlling interest income—
 —
 —
 0.2
 —
 0.2
Net loss attributable to Rexnord(38.1) (39.3) (22.4) (100.4) 161.9
 (38.3)
Dividends on preferred stock(11.6) —
 —
 —
 —
 (11.6)
Net loss attributable to Rexnord common stockholders$(49.7) $(39.3) $(22.4) $(100.4) $161.9
 $(49.9)
Comprehensive loss$(38.1) $(43.1) $(20.5) $(130.7) $161.9
 $(70.5)


36
Condensed Consolidating Statements
Table of Operations
For the Three Months Ended September 30, 2018
(in millions)

 Parent Issuers Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Net sales$—
 $—
 $400.6
 $171.3
 $(47.1) $524.8
Cost of sales—
 —
 243.9
 124.8
 (47.1) 321.6
Gross profit—
 —
 156.7
 46.5
 —
 203.2
Selling, general and administrative expenses—
 —
 83.0
 26.6
 —
 109.6
Restructuring and other similar charges—
 —
 2.1
 1.6
 —
 3.7
Amortization of intangible assets—
 —
 7.0
 1.5
 —
 8.5
Income from continuing operations—
 —
 64.6
 16.8
 —
 81.4
Non-operating (expense) income:           
     Interest income (expense), net:           
          To third parties—
 (18.5) (0.3) 0.1
 —
 (18.7)
          To affiliates0.6
 8.9
 (7.1) (2.4) —
 —
Other (expense) income, net—
 (0.1) 1.5
 (1.4) —
 —
Income (loss) before income taxes from continuing operations0.6
 (9.7) 58.7
 13.1
 —
 62.7
Provision for income taxes—
 —
 (14.4) (2.8) —
 (17.2)
Equity method investment income—
 —
 —
 0.7
 —
 0.7
Income (loss) before equity in earnings of subsidiaries0.6
 (9.7) 44.3
 11.0
 —
 46.2
Equity in loss of subsidiaries(38.1) (28.4) (70.8) —
 137.3
 —
Net (loss) income from continuing operations(37.5) (38.1) (26.5) 11.0
 137.3
 46.2
Loss from discontinued operations, net of tax—
 —
 (1.9) (81.8) —
 (83.7)
Net loss(37.5) (38.1) (28.4) (70.8) 137.3
 (37.5)
Non-controlling interest income—
 —
 —
 0.1
 —
 0.1
Net loss attributable to Rexnord(37.5) (38.1) (28.4) (70.9) 137.3
 (37.6)
Dividends on preferred stock(5.8) —
 —
 —
 —
 (5.8)
Net loss attributable to Rexnord common stockholders$(43.3) $(38.1) $(28.4) $(70.9) $137.3
 $(43.4)
Comprehensive loss$(37.5) $(32.6) $(28.0) $(75.2) $137.3
 $(36.0)

Contents



Condensed Consolidating Statements of Cash Flows
For the Six Months Ended September 30, 2019
(in millions)

ParentIssuerGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Operating activities
Cash provided by operating activities$10.3 $0.9 $42.2 $32.9 $0 $86.3 
Investing activities
Expenditures for property, plant and equipment0 0 (9.5)(3.7)0 (13.2)
Acquisitions, net of cash acquired0 0 (24.8)(0.3)0 (25.1)
Proceeds from dispositions of long-lived assets0 0 0.7 1.3 0 2.0 
Payments associated with divestiture of discontinued operations0 0 0 (1.3)0 (1.3)
Cash used for investing activities0 0 (33.6)(4.0)0 (37.6)
Financing activities
Repayments of debt0 0 (1.1)(4.3)0 (5.4)
Proceeds from exercise of stock options6.9 0 0 0 0 6.9 
Taxes withheld and paid on employees' share-based payment awards(5.7)0 0 0 0 (5.7)
Payments of preferred stock dividends(11.6)0 0 0 0 (11.6)
Cash used for by financing activities(10.4)0 (1.1)(4.3)0 (15.8)
Effect of exchange rate changes on cash and cash equivalents0 0 0 (5.6)0 (5.6)
(Decrease) increase in cash and cash equivalents(0.1)0.9 7.5 19.0 0 27.3 
Cash, cash equivalents and restricted cash at beginning of period1.4 0.2 107.7 183.2 0 292.5 
Cash, cash equivalents and restricted cash at end of period$1.3 $1.1 $115.2 $202.2 $0 $319.8 
  Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Operating activities            
Cash provided by operating activities $10.3
 $0.9
 $42.2
 $32.9
 $—
 $86.3
Investing activities           
Expenditures for property, plant and equipment —
 —
 (9.5) (3.7) —
 (13.2)
Acquisitions, net of cash acquired —
 —
 (24.8) (0.3) —
 (25.1)
Proceeds from dispositions of long-lived assets —
 —
 0.7
 1.3
 —
 2.0
Net payments associated with divestiture of discontinued operations —
 —
 —
 (1.3) —
 (1.3)
Cash used for investing activities —
 —
 (33.6) (4.0) —
 (37.6)
Financing activities            
Repayments of debt —
 —
 (1.1) (4.3) —
 (5.4)
Proceeds from exercise of stock options 6.9
 —
 —
 —
 —
 6.9
Taxes withheld and paid on employees' share-based payment awards (5.7) —
 —
 —
 —
 (5.7)
Payments of preferred stock dividends (11.6) —
 —
 —
 —
 (11.6)
Cash used for financing activities (10.4) —
 (1.1) (4.3) —
 (15.8)
Effect of exchange rate changes on cash and cash equivalents —
 —
 —
 (5.6) —
 (5.6)
(Decrease) increase in cash and cash equivalents (0.1) 0.9
 7.5
 19.0
 —
 27.3
Cash, cash equivalents and restricted cash at beginning of period 1.4
 0.2
 107.7
 183.2
 —
 292.5
Cash, cash equivalents and restricted cash at end of period $1.3
 $1.1
 $115.2
 $202.2
 $—
 $319.8


Condensed Consolidating Statements of Cash Flows
For the Six Months Ended September 30, 2018
(in millions)

  Parent Issuer Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Consolidated
Operating activities            
Cash provided by operating activities $10.1
 $18.3
 $32.8
 $13.9
 $—
 $75.1
Investing activities            
Expenditures for property, plant and equipment —
 —
 (12.8) (4.8) —
 (17.6)
Acquisitions, net of cash acquired —
 —
 (2.0) —
 —
 (2.0)
Proceeds from dispositions of long-lived assets     3.5
 —
   3.5
Cash used for investing activities —
 —
 (11.3) (4.8) —
 (16.1)
Financing activities            
Proceeds from borrowings of long-term debt —
 209.7
 —
 —
 —
 209.7
Repayments of debt —
 (227.6) —
 —
 —
 (227.6)
Proceeds from exercise of stock options 5.0
 —
 —
 —
 —
 5.0
Taxes withheld and paid on employees' share-based payment awards (3.2) —
 —
 —
 —
 (3.2)
Payments of preferred stock dividends (11.6) —
 —
 —
 —
 (11.6)
Cash used for by financing activities (9.8) (17.9) —
 —
 —
 (27.7)
Effect of exchange rate changes on cash and cash equivalents —
 —
 —
 (10.2) —
 (10.2)
Increase (decrease) in cash and cash equivalents 0.3
 0.4
 21.5
 (1.1) —
 21.1
Cash, cash equivalents and restricted cash at beginning of period —
 —
 40.9
 176.7
 —
 217.6
Cash, cash equivalents and restricted cash at end of period $0.3
 $0.4
 $62.4
 $175.6
 $—
 $238.7



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

22. Subsequent Events
On October 1, 2020, the Company completed the sale of the China gearbox product line. See Note 2, Acquisitions and Divestiture for additional information
On October 22, 2020, the Company's Board of Directors declared a quarterly cash dividend on the Company's common stock of $0.08 per-share to be paid on December 7, 2020, to stockholders of record as of November 20, 2020.

37
Table of Contents
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General
Rexnord is a growth-oriented, multi-platform industrial company with what we believe are leading market shares and highly-trusted brands that serve a diverse array of global end markets. Our heritage of innovation and specification have allowed us to provide highly-engineered, mission-critical solutions to customers for decades and affords us the privilege of having long-term, valued relationships with market leaders. We operate our Company in a disciplined way and the Rexnord Business System (“RBS”) is our operating philosophy. Grounded in the spirit of continuous improvement, RBS creates a scalable, process-based framework that focuses on driving superior customer satisfaction and financial results by targeting world-class operating performance throughout all aspects of our business.
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, 2019.2020.
Fiscal Year
Our    Following the end of our fiscal 2020, we transitioned to a December 31 fiscal year-end date. The nine-month period from April 1, 2020, to December 31, 2020, is serving as a transition period, and we will provide one-time, nine-month transitional financial statements for the transition period in a transition report on Form 10-K to be filed in calendar year 2021. Prior to the transition period, our fiscal year ends onwas the year ending March 31.31 of the corresponding calendar year. Throughout this MD&A, we refer to the period from July 1, 2020 through September 30, 2020, as the "three months ended September 30, 2020" or the “quarter ended September 30, 2020.” We refer to the period from July 1, 2019 through September 30, 2019, as the “second quarter of fiscal 2020” or the “second quarter“three months ended September 30, 2019.” Similarly, we refer to the period from July 1, 2018 through September 30, 2018 as the “second quarter of fiscal 2019” or the “second quarter“quarter ended September 30, 2018.2019.”
Critical Accounting Policies and Estimates
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Refer to Item 7, MD&A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2019,2020, 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 September 30, 20192020, and during the period from April 1, 20192020 through September 30, 2019,2020, there has been no material change to this information.
Recent Accounting Pronouncements
See Item 1, Note 1, Basis of Presentation and Significant Accounting Policies regarding recent accounting pronouncements.
COVID-19 Pandemic
The ongoing coronavirus ("COVID-19") pandemic and the actions taken by various governments and third parties to combat the spread of COVID-19 (including, in some cases, mandatory quarantines and other suspensions of non-essential business operations) have led to disruptions in our manufacturing and distribution operations and supply chains, including temporary reductions or suspensions of operations at some of our manufacturing and distribution locations around the world. In addition, our suppliers, business partners and customers have also experienced similar negative impacts from the COVID-19 pandemic. As of September 30, 2020, essentially all of our global facilities are operating with only intermittent interruptions and we are not currently experiencing any significant issues with respect to our distribution operations and supply chains. We remain focused on the health and well-being of our associates and have undertaken numerous actions within our offices and manufacturing sites that are intended to minimize the spread of COVID-19, including implementing work from home policies, establishing social distancing protocols for associates while at work and providing associates with access to numerous collaboration and productivity tools to facilitate communication in lieu of travel and face-to-face meetings.

During the three and six months ended September 30, 2020, we experienced a reduction in market demand in our Process & Motion Control platform and several businesses within our Water Management platform as customers reacted to the COVID-19 pandemic.However, we did experience increased demand for our touchless and hygienic solutions products in our Water Management platform.

In order to reduce our cash outflows during this period of uncertainty and economic volatility, we have implemented and actioned furloughs of certain personnel, workforce reductions and reductions of non-essential spending. Our objective with
38
Table of Contents
respect to these actions is to attempt to control the downside risk to our financial results, while ensuring that we maintain the capacity and flexibility to fully participate in the expected eventual recovery. While it is not possible at this time to estimate the scope and severity of the impact that COVID-19 could have on our operations, the continued spread of COVID-19, the measures taken, and those that may be taken in the future, by the governments of countries affected, actions taken to protect employees, actions taken to shutdown or temporarily discontinue operations in certain locations, changes in customer buying patterns and the impact of the pandemic on various business activities in affected countries and the economy generally, it could continue to adversely affect our financial condition, results of operations and cash flows.
Acquisitions
On January 28, 2020, we acquired substantially all of the assets of Just Manufacturing Company ("Just Manufacturing") for a cash purchase price of $59.4 million, excluding transaction costs and net of cash acquired. Just Manufacturing, based in Franklin Park, Illinois, manufactures stainless steel sinks and plumbing fixtures primarily used in institutional and commercial end markets and complements our existing Water Management platform.
On May 10, 2019, we acquired substantially all of the assets of East Creek Corporation (d/b/a StainlessDrains.com), a manufacturer of stainless steel drains, grates and accessories for industrial and commercial end markets, for a cash purchase price of $24.8 million, excluding transaction costs and net of cash acquired. StainlessDrains.com, headquartered in Greenville, Texas, added complementary product lines to our existing Water Management platform.

On January 23, 2019, we acquired an additional 47.5% interest in Centa MP (Hong Kong) Co., Limited ("Centa China"), a joint venture in which we previously maintained a 47.5% non-controlling interest, for $21.4 million, net of cash held by the former joint venture. The acquisition of the additional interest in Centa China, a manufacturer and distributor of premium flexible couplings and drive shafts for industrial, marine, rail and power generation applications within our existing Process & Motion Control platform, provides us with the opportunity to expand our product offerings within our Asia Pacific end markets.

Discontinued Operations
During the fiscal year ended March 31, 2019, we completed the sale of our VAG business, which was previously included within our Water Management platform. As a result, the operating results of the VAG business are reported as discontinued operations in the consolidated statements of operations, for all periods presented, as the sale of VAG represented a strategic shift that had a major impact on our operations and financial results. The sale price was subject to customary working capital and cash balance adjustments, which were finalized during the first quarter of fiscal 2020.three months ended June 30, 2019. As a result of these adjustments and other related costs, we recognized an additional $1.8 million loss on the sale of discontinued operations during the first quarter of fiscal 2020.six months ended September 30, 2019.
Restructuring
During the three and six months ended September 30, 2018, we recorded non-cash impairment charges of $82.0 million and $126.0 million, respectively, to reflect the estimated fair value less costs to sell the VAG business based on the value of preliminary bids received at that time. For other elements of the loss from discontinued operations during the three and six months

ended September 30, 2019, refer to Item 1, Note 4, Discontinued Operations for further information. The analysis of our results of operations below focuses on our results from continuing operations.
Restructuring
During fiscal 2020, we continued to execute various restructuring initiatives focused on driving efficiencies, reducing operating costs by modifying our footprint to reflect changes in the markets we serve and the impact of acquisitions on our overall manufacturing capacity and refiningthe refinement of our overall product portfolio. These restructuring actions primarily resulted in workforce reductions, impairment of related manufacturing facilities, equipment and intangible assets, lease termination costs, and other facility rationalization costs. We expect theseto continue executing similar initiatives to optimize our operating margin and manufacturing footprint. As we continue whichto evaluate the impact of the ongoing COVID-19 pandemic and the resulting effects on the global economy, we may result inalso execute additional restructuring actions. As such, we expect further expenses related to workforce reductions, lease termination costs, and other facility rationalization costs includingon our overall manufacturing capacity, and refining our overall product portfolio. For the impairment or accelerated depreciation of assets. At this time, our full repositioning plan is preliminarythree and related expenses are not yet estimable.six months ended September 30, 2020, restructuring charges totaled $6.6 million and $8.3 million, respectively. For the three and six months ended September 30, 2019, restructuring charges totaled $2.1 million and $5.3 million, respectively. For the three and six months ended September 30, 2018, restructuring charges totaled $3.7 million and $6.8 million, respectively. Refer to Item 1, Note 3, Restructuring and Other Similar Charges for further information.

Results of Operations
Second QuarterThree Months Ended September 30, 20192020 compared with the Second QuarterThree Months Ended September 30, 2018:2019:
Net sales
(Dollars in Millions)
Quarter Ended    Three Months Ended
September 30, 2019 September 30, 2018 Change % ChangeSeptember 30, 2020September 30, 2019Change% Change
Process & Motion Control$337.0
 $348.7
 $(11.7) (3.4)%Process & Motion Control$293.9 $337.0 $(43.1)(12.8)%
Water Management184.3
 176.1
 8.2
 4.7 %Water Management199.7 184.3 15.4 8.4 %
Consolidated$521.3
 $524.8
 $(3.5) (0.7)% Consolidated$493.6 $521.3 $(27.7)(5.3)%
Process & Motion Control
Process & Motion Control net sales were $293.9 million and $337.0 million during the three months ended September 30, 2020 and 2019, respectively. Net sales and core sales decreased 3%13% year over year to $337.0 millionas a result of a reduction in market
39
Table of Contents
demand across the second quartermajority of fiscal 2020. Core sales decreased 2%, the acquisition of Centa China added 1% to sales growth and foreign currency translation had an unfavorable impact of 2% year over year. Core sales growth in our aerospace end markets was more than offset by softer demand across several of our industrial process end markets, coupled withand geographies as customers reacted to and changed buying patterns given the impact of our ongoing product line simplification initiatives.current COVID-19 pandemic.
Water Management
Water Management net sales were $184.3$199.7 million induring the second quarter of fiscalthree months ended September 30, 2020, an increase of 5%8% year over year. Excluding a 1% year over year3% year-over-year increase in net sales resulting from our acquisition of Stainlessdrains.com,Just Manufacturing, core sales increased 4% in5% during the second quarter of fiscalthree months ended September 30, 2020 as a result ofprimarily driven by increased demand acrossfor our North American building construction end markets, partially offset by a modest impact of our ongoing product line simplification initiatives.


touchless and hygienic solutions in response to the COVID-19 pandemic.
Income from operations
(Dollars in Millions)
Quarter Ended    Three Months Ended
September 30, 2019 September 30, 2018 Change % ChangeSeptember 30, 2020September 30, 2019Change% Change
Process & Motion Control$58.3
 $56.4
 $1.9
 3.4%Process & Motion Control$35.8 $58.3 $(22.5)(38.6)%
% of net sales17.3% 16.2% 1.1% 
 % of net sales12.2 %17.3 %(5.1)%
Water Management43.7
 41.3
 2.4
 5.8%Water Management48.7 43.7 5.0 11.4 %
% of net sales23.7% 23.5% 0.2% 
 % of net sales24.4 %23.7 %0.7 %
Corporate(13.5) (16.3) 2.8
 17.2%Corporate(12.1)(13.5)1.4 10.4 %
Consolidated$88.5
 $81.4
 $7.1
 8.7% Consolidated$72.4 $88.5 $(16.1)(18.2)%
% of net sales17.0% 15.5% 1.5%   % of net sales14.7 %17.0 %(2.3)%
Process & Motion Control
Process & Motion Control income from operations forduring the second quarter of fiscalthree months ended September 30, 2020 was $58.3$35.8 million, or 17.3%12.2% of net sales. Income from operations as a percentage of net sales decreased by 510 basis points year over year primarily as a result of the lower sales volume, higher restructuring and non-cash stock compensation expense, partially offset by benefits obtained from cost reduction and productivity initiatives.
Water Management
    Water Management income from operations was $48.7 million during the three months ended September 30, 2020, or 24.4% of net sales. Income from operations as a percentage of net sales increased by 11070 basis points year over year primarily due to RBS-led productivity gains and benefits from our footprint repositioning actions, and loweras a result of the incremental profit generated on higher sales year over year acquisition related adjustments.

Water Management
Water Management incomeand the benefits obtained from operations was $43.7 million for the second quarter of fiscal 2020, or 23.7% of net sales. Income from operations as a percentage of net sales increased by 20 basis points year over year primarily due to the increase in sales and benefits associated with ongoingour cost reduction and productivity initiatives.
Corporate
Corporate expenses were $12.1 million and $13.5 million induring the second quarter of fiscalthree months ended September 30, 2020 and $16.3 million in the second quarter of fiscal 2019.2019, respectively. The decrease in corporate expenses during the three months ended September 30, 2020, is primarily associated with the recognitionresult of lease facility termination costs during the second quarter of fiscal 2019 in connection with our ongoing footprint optimization actions.savings from cost reduction initiatives, including those related to COVID-19, as discussed above.
Interest expense, net
Interest expense, net was $15.3$11.5 million induring the second quarter of fiscalthree months ended September 30, 2020, compared to $18.7$15.3 million induring the second quarter of fiscalthree months ended September 30, 2019. The decrease in interest expense as compared to the prior year's period is primarily a result of the impact of lower outstanding borrowings inand lower average interest rates following the second quarter of fiscal 2020 following a $75.0$100.0 million voluntary prepayment onand refinancing of our term loan during fiscalthe three months ended December 31, 2019. In addition, the second quarter of fiscal 2019 included the amortization of unrealized losses associated with the interest rate derivatives that matured during fiscal 2019.See Item 1, Note 13 Long-Term Debt for more information.
Gain on extinguishment of debtOther income (expense), net
During the second quarter of fiscal 2020, we recognized a $3.2 million gain on the extinguishment of debt of in connection with the forgiveness of the    Other income (expense), net debt associated with the New Market Tax Credit program. No debt was extinguished during the second quarter of fiscal 2019.
three months ended September 30, 2020 and 2019 was $0.6 million and $(0.3) million, respectively. Other expense, net
Other expense, net for the second quarter of fiscal 2020 was $0.3 million compared to zero for the second quarter of fiscal 2019. Other expense,income (expense), net consists primarily of foreign currency transaction gains and losses and the non-service cost components associated with our defined benefit plans. The year-over-year change is primarily driven by changes in foreign currency rates.
Provision for income taxes
The income tax provision was $16.1 million during the three months ended September 30, 2020, compared to $19.5 million in the second quarter of fiscal 2020 compared to $17.2 million in the second quarter of fiscalthree months ended September 30, 2019. The effective income tax rate for the second quarter of fiscalthree months ended September 30, 2020 was 25.6%26.2% versus 27.4%25.6% in the second quarter of fiscalthree months ended September 30, 2019. The effective income tax rate for the second quarter of fiscalthree months ended September 30, 2020 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with global intangible low-taxed income (“GILTI”) and compensation deduction limitations under Section 162(m) of the Internal
40
Table of Contents
Revenue Code, and the accrual of various state income taxes, partially offset by the recognition of income tax benefits associated with foreign-derived intangible income (“FDII”). The effective income tax rate for the three months ended September 30, 2019 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally above the U.S. federal statutory rate, the accrual of additional income taxes associated with GILTI and the accrual of various state income taxes, partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and the recognition of income tax benefits associated with foreign-derived intangible income (“FDII”). The effective income tax rate for the second quarter of fiscal 2019 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes at higher statutory rates, the accrual of additional taxes associated with GILTI and the accrual of various state income taxes, partially offset by the recognition of excess tax benefits associated with share-based payments.FDII.

On a quarterly basis, we review and analyze our valuation allowances associated with deferred tax assets relating to certain foreign and state net operating loss carryforwards as well as U.S. federal and state capital loss carryforwards.In conjunction with this analysis, we weigh both positive and negative evidence for purposes of determining the proper balances of such valuation allowances. Future changes to the balances of these valuation allowances, as a result of our continued review and analysis, could result in a material impact to the financial statements for such period of change.

Net income from continuing operations
Net income from continuing operations forduring the second quarter of fiscalthree months ended September 30, 2020 and 2019, was $45.4 million and $56.7 million, compared to net income from continuing operations of $46.2 million in the second quarter of fiscal 2019,respectively, as a result of the factors described above. Diluted net income per share from continuing operations was $0.46 in$0.37 during the second quarter of fiscalthree months ended September 30, 2020, as compared to diluted net income per share from continuing operations of $0.37 in$0.46 during the second quarter of fiscalthree months ended September 30, 2019.

Net income (loss) attributable to Rexnord common stockholders
Net income attributable to Rexnord common stockholders forduring the second quarter of fiscalthree months ended September 30, 2020, was $50.8$45.4 million compared to a net loss attributable to Rexnord common stockholders of $43.4$50.8 million induring the second quarter of fiscalthree months ended September 30, 2019. Diluted net income (loss) per share attributable to Rexnord common stockholders for the three months ended September 30, 20192020 and September 30, 20182019, was $0.37 and $0.46, and $(0.30), respectively. The quarter-over-quarter change is primarilyrespectively, as a result of the $83.7 million,

or $0.68 per diluted share, loss from discontinued operations, net of tax, infactors described above. Net income attributable to Rexnord common stockholders for the quarterthree months ended September 30, 2018,2019, reflects the effects of the payment of $5.8 million of dividends on shares of cumulative preferred stock (the preferred stock was converted into common stock on November 15, 2019, and the other factors described above.  is no longer outstanding).  


Six Months Ended September 30, 2019 Compared2020 compared with the Six Months Ended September 30, 2018:2019:
Net sales
(Dollars in Millions)
Six Months Ended
September 30, 2020September 30, 2019Change% Change
Process & Motion Control$568.3 $667.1 $(98.8)(14.8)%
Water Management374.4 362.5 11.9 3.3 %
  Consolidated$942.7 $1,029.6 $(86.9)(8.4)%
 Six Months Ended    
 September 30, 2019 September 30, 2018 Change % Change
Process & Motion Control$667.1
 $681.1
 $(14.0) (2.1)%
Water Management362.5
 347.3
 15.2
 4.4 %
  Consolidated$1,029.6
 $1,028.4
 $1.2
 0.1 %

Process & Motion Control
Process & Motion Control net sales decreased 2% year over year towere $568.3 million and $667.1 million induring the first six months of fiscal 2020.ended September 30, 2020 and 2019, respectively. Excluding a 1% increase from the acquisition of Centa China and a 2% unfavorable impact from foreign currency translation, core net sales declined 1%. Core sales growthdecreased 14% year over year as a result of a reduction in our Aerospace end-markets was partially offset bymarket demand across the impactmajority of our ongoing product line simplification initiativesend markets and geographies as well as softer demand across several of our industrial process end markets.customers reacted to and changed buying patterns given the current COVID-19 pandemic.
Water Management
Water Management net sales were $362.5$374.4 million induring the first six months ended September 30, 2020, an increase of fiscal 2020, a 4% increase3% year over year. Water Management core net sales, which excludesExcluding a 1%3% year-over-year increase in net sales associated withresulting from our acquisitionacquisitions of Stainlessdrains.com and a 1% adverse impact associated with foreign currency translation, increased 4%Just Manufacturing, core sales were flat during the first six months of fiscal 2020. The increase in core net sales is primarilyended September 30, 2020 compared to the result ofsix months ended September 30, 2019 as increased demand acrossfor our North American building construction end markets, partiallytouchless and hygienic solutions was offset by a modest impactreduced overall market demand resulting from the current COVID-19 pandemic.

41
Table of our ongoing product line simplification initiatives.Contents
Income (loss) from operations
(Dollars in Millions)

Six Months Ended    Six Months Ended
September 30, 2019 September 30, 2018 Change % ChangeSeptember 30, 2020September 30, 2019Change% Change
Process & Motion Control$113.4
 $106.3
 $7.1
 6.7%Process & Motion Control$75.4 $113.4 $(38.0)(33.5)%
% of net sales17.0% 15.6% 1.4%   % of net sales13.3 %17.0 %(3.7)%
Water Management83.7
 77.8
 5.9
 7.6%Water Management88.8 83.7 5.1 6.1 %
% of net sales23.1% 22.4% 0.7%   % of net sales23.7 %23.1 %0.6 %
Corporate(28.4) (30.6) 2.2
 7.2%Corporate(25.8)(28.4)2.6 9.2 %
Consolidated$168.7
 $153.5
 $15.2
 9.9% Consolidated$138.4 $168.7 $(30.3)(18.0)%
% of net sales16.4% 14.9% 1.5%   % of net sales14.7 %16.4 %(1.7)%

Process & Motion Control
Process & Motion Control income from operations forduring the first six months of fiscalended September 30, 2020 was $113.4$75.4 million, or 17.0%13.3% of net sales. Income from operations as a percentage of net sales decreased by 370 basis points year over year primarily as a result of the lower sales volume and higher year-over-year restructuring and non-cash stock option expense, partially offset by our cost reduction and productivity initiatives, including those related to COVID-19 as discussed above.
Water Management
    Water Management income from operations was $88.8 million during the six months ended September 30, 2020, or 23.7% of net sales. Income from operations as a percentage of net sales increased by 14060 basis points year over year in the first six months of fiscal 2020 primarily due to RBS-led productivity gains, benefits from our footprint repositioning actions and lower year-over-year acquisition-related fair value adjustments.
Water Management
Water Management income from operations was $83.7 million for the first six months of fiscal 2020, or 23.1% of net sales. Income from operations as a percentageresult of netthe incremental profit generated on higher sales increased 70 basis points in the first six months of fiscal 2020 compared to the first six months of fiscal 2019 primarily due to the increase in salesyear over year and benefits associated with ongoingobtained from our cost reduction and productivity initiatives.initiatives, partially offset by higher year-over-year depreciation, amortization, restructuring expenses and stock option expense.

Corporate
Corporate expenses were $25.8 million and $28.4 million induring the first six months of fiscalended September 30, 2020 compared to $30.6 million in the first six months of fiscal 2019.and 2019, respectively. The decrease in corporate expenses during the six months ended September 30, 2020, is primarily the result of the prior year recognition of lease facility termination costs incurred in connection with our ongoing footprint optimization actions.savings from cost reduction initiatives, including those related to COVID-19, as discussed above.
Interest expense, net
Interest expense, net was $30.8$24.9 million induring the first six months of fiscalended September 30, 2020, compared to $37.3$30.8 million induring the first six months of fiscalended September 30, 2019. The decrease in interest expense as compared to the prior year's period is primarily a result of the impact of lower outstanding borrowings inand lower average interest rates following the first six months of fiscal 2020 following a $75.0$100.0 million voluntary prepayment onand refinancing of our term loan during fiscalthe three months ended December 31, 2019. In addition,See Item 1, Note 13 Long-Term Debt for more information.
Other income (expense), net
    Other income (expense), net during the first six months of fiscalended September 30, 2020 and 2019 included the amortization of unrealized losses associated with the interest rate derivatives that matured during fiscal 2019.
Gain on extinguishment of debt
During the first six months of fiscal 2020, we recognized a $3.2was $1.0 million gain on the extinguishment of debt in connection with the forgiveness of the net debt associated with the New Market Tax Credit program. No debt was extinguished during the first six months of fiscal 2019.
and $(1.8) million, respectively. Other expense (income), net
Other expense, net for the first six months of fiscal 2020 was $1.8 million compared to other income net of $1.7 million for the first six months of fiscal 2019. Other (expense) income,, net consists primarily of foreign currency transaction gains and losses and the non-service cost components of net periodic benefit credits associated with our defined benefit plans. The year-over-year change is primarily driven by foreign currency transaction losses and the recognition of actuarial losses in connection with the termination of a domestic defined benefit plan during the first six months of fiscal 2020.ended September 30, 2019 and changes in foreign currency exchange rates.
Provision for income taxes
The income tax provision recordedwas $33.3 million during the six months ended September 30, 2020, compared to $34.3 million in the first six months of fiscal 2020 was $34.3 million compared to $31.7 million recorded in the first six months of fiscalended September 30, 2019. The effective income tax rate for the first six months of fiscalended September 30, 2020 was 24.6%29.1% versus 26.9%24.6% in the first six months of fiscalended September 30, 2019. The effective income tax rate for the first six months of fiscalended September 30, 2020 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, at higherwhich are generally above the U.S. federal statutory rates,rate, the accrual of additional income taxes associated with GILTI and compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of withholding taxes associated with foreign dividends, and the accrual of various state income taxes, partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and the recognition of income tax benefits associated with share-based payments and FDII. The effective income tax rate for the six months ended September 30, 2019 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally
42
Table of Contents
above the U.S. federal statutory rate, the accrual of additional income taxes associated with GILTI and the accrual of various state income taxes partially offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and the recognition of income tax benefits associated with share-based payments and FDII. The effective income tax rate for the first six months of fiscal 2019 was above the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes at higher statutory rates, the accrual of additional taxes associated with GILTI and the accrual of various state income taxes partially offset by the recognition of income tax benefits associated with share-based payments and the recognition of a tax benefit associated with a foreign country-enacted rate reduction.

Net income from continuing operations
Net income from continuing operations forduring the first six months of fiscalended September 30, 2020 and 2019, was $81.2 million and $105.2 million, compared to net income from continuing operations of $88.4 million in the first six months of fiscal 2019,respectively, as a result of the factors described above. Diluted net income per share from continuing operations was $0.85 in$0.66 during the first six months of fiscalended September 30, 2020, as compared to diluted net income per share from continuing operations of $0.71 in$0.85 during the first six months of fiscalended September 30, 2019.
Net income (loss) attributable to Rexnord common stockholders
Our netNet income attributable to Rexnord common stockholders forduring the first six months of fiscalended September 30, 2020, was $91.5$81.0 million compared to a net loss attributable to Rexnord common stockholders of $49.9$91.5 million forduring the first six months of fiscalended September 30, 2019. Diluted net income per share attributable to Rexnord common stockholders was $0.83 infor the first six months ended September 30, 2020 and September 30, 2019, was $0.66 and $0.83, respectively, as a result of fiscal 2020, as compared to a diluted net loss per sharethe factors described above. Net income attributable to Rexnord common stockholders of $0.46 per share infor the first six months of fiscal 2019. The year-over-year change is primarily a resultended September 30, 2019, reflects the effects of the $126.5payment of $11.6 million or $1.18 per diluted share, loss from discontinued operations, net of tax, in the first six monthsdividends on shares of fiscalcumulative preferred stock (the preferred stock was converted into common stock on November 15, 2019, and the other factors described above.is no longer outstanding).
43
Table of Contents
Non-GAAP Financial Measures
Non-GAAP financial measures are intended to supplement and not replace financial measures prepared in accordance with GAAP.
Core sales
Core sales excludes the impact of acquisitions (such as the Centa ChinaStainlessDrains.com and StainlessDrains.comJust Manufacturing acquisitions), divestitures (such as the VAG business) and foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparisons of our net sales performance with prior and future periods and to our peers. We exclude the effect of acquisitions and divestitures because the nature, size and number of acquisitions and divestitures can vary dramatically from period to period and between us and our peers, and can also obscure underlying business trends and make comparisons of long-term performance difficult. We exclude the effect of foreign currency translation from this measure because the volatility of currency translation is not under management's control.
EBITDA
EBITDA represents earnings from continuing operations 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 attributable to Rexnord common stockholders in the six months ended September 30, 20192020, of $91.5$81.0 million and Adjusted EBITDA for the same period of $229.2$211.6 million. See “Covenant Compliance” for a reconciliation of Adjusted EBITDA to GAAP net income.income attributable to Rexnord common stockholders.
Covenant Compliance
Our credit agreement, which governs our senior secured credit facilities, contains, among other provisions, restrictive covenants regarding indebtedness, payments and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and the maintenance of certain financial ratios. Payment of borrowings under the credit agreement may be accelerated if there is an event of default. Events of default include the failure to pay principal and interest when due, a material breach of a representation or warranty, certain non-payments or defaults under other indebtedness, covenant defaults, events of bankruptcy and a change of control. Certain covenants contained in the credit agreement restrict our ability to take certain actions, such as incurring additional debt or making acquisitions, if we are unable to meet a maximum total net leverage ratio of 6.75 to 1.0 as of the end of each fiscal quarter (itquarter. At September 30, 2020, our net leverage ratio was 2.2 to 1.0 at September 30, 2019).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.

44
Table of Contents
“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 should not be 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 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 September 30, 2019,2020, 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.

45
Table of Contents
Set forth below is a reconciliation of net income attributable to Rexnord common stockholders to Adjusted EBITDA for the periods indicated below.
(in millions)Six months ended September 30, 2019Fiscal year ended
March 31, 2020		Six months ended September 30, 2020Twelve months ended September 30, 2020
Net income attributable to Rexnord common stockholders$91.5 $165.7 $81.0 $155.2 
Dividends on preferred stock11.6 14.4 — 2.8 
Non-controlling interest income0.3 0.3 0.2 0.2 
Loss from discontinued operations, net of tax (1)1.8 1.8 — — 
Equity method investment income(0.2)— — 0.2 
Income tax provision34.3 54.1 33.3 53.1 
Actuarial loss on pension and postretirement benefit obligations0.8 36.6 — 35.8 
Other expense (income), net (2)1.0 3.8 (1.0)1.8 
Gain on the extinguishment of debt(3.2)(1.0)— 2.2 
Interest expense, net30.8 58.6 24.9 52.7 
Depreciation and amortization42.7 86.6 44.0 87.9 
EBITDA$211.4 $420.9 $182.4 $391.9 
Adjustments to EBITDA:  
Restructuring and other similar charges (3)5.3 15.5 8.3 18.5 
Stock-based compensation expense12.8 26.9 20.7 34.8 
Last-in first-out inventory adjustments (4)(0.7)(4.1)(0.5)(3.9)
Acquisition-related fair value adjustment0.7 1.7 0.9 1.9 
Other, net (5)(0.3)(0.7)(0.2)(0.6)
Subtotal of adjustments to EBITDA$17.8 $39.3 $29.2 $50.7 
Adjusted EBITDA$229.2 $460.2 $211.6 $442.6 
Pro forma adjustment for acquisitions (6)$1.5 
Pro forma Adjusted EBITDA$444.1 
Consolidated indebtedness (7)   $956.9 
Total net leverage ratio (8)   2.2 

(1)Loss from discontinued operations, net of tax is not included in Adjusted EBITDA in accordance with the terms of our credit agreement.
(2)Other expense (income), 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 for the periods indicated, consists primarily 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 Just Manufacturing, which was permitted by our credit agreement. The pro forma adjustment includes the period from October 1, 2019, through the date of the Just Manufacturing acquisition. See Item 1, Note 2, Acquisitions and Divestiture 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 $238.8 million (as defined by the credit agreement) at September 30, 2020.
(8)Our credit agreement defines the total net leverage ratio as the ratio of consolidated indebtedness (as described above) to Adjusted EBITDA for the trailing four fiscal quarters.
46
(in millions)Six months ended September 30, 2018 Year ended
March 31, 2019		 Six months ended September 30, 2019 Twelve months ended September 30, 2019
Net (loss) income attributable to Rexnord common stockholders$(49.9) $11.1
 $91.5
 $152.5
Interest expense, net37.3
 69.9
 30.8
 63.4
Non-controlling interest income0.2
 —
 0.3
 0.1
Equity method investment income(2.2) (3.6) (0.2) (1.6)
Dividends on preferred stock11.6
 23.2
 11.6
 23.2
Income tax provision31.7
 53.4
 34.3
 56.0
Depreciation and amortization44.1
 87.9
 42.7
 86.5
EBITDA$72.8
 $241.9
 $211.0
 $380.1
Adjustments to EBITDA:       
Loss from discontinued operations, net of tax (1)126.5
 154.7
 1.8
 30.0
Restructuring and other similar charges (2)6.8
 12.1
 5.3
 10.6
Stock-based compensation expense11.6
 22.6
 12.8
 23.8
Last-in first-out inventory adjustments (3)0.5
 6.7
 (0.7) 5.5
Acquisition-related fair value adjustment3.2
 3.6
 0.7
 1.1
Gain on the extinguishment of debt—
 (4.3) (3.2) (7.5)
Other, net (4)(1.6) 5.5
 1.5
 8.6
Subtotal of adjustments to EBITDA$147.0
 $200.9
 $18.2
 $72.1
Adjusted EBITDA$219.8
 $442.8
 $229.2
 $452.2
Pro forma adjustment for acquisitions (5)      $5.2
Pro forma Adjusted EBITDA      $457.4
Consolidated indebtedness (6)      $987.4
Total net leverage ratio (7)      2.2

(1)Loss from discontinued operations, net of tax is not included in Adjusted EBITDA in accordance with the terms of our credit agreement.
(2)Restructuring and other similar charges is comprised of costs associated with workforce reductions, impairment of related manufacturing facilities, equipment and intangible assets, lease termination costs, and other facility rationalization costs.  See Item 1, Note 3, Restructuring and Other Similar Charges for more information.
(3)Last-in first-out (LIFO) inventory adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement.
(4)Other, net for the periods indicated, consists primarily of gains and losses from foreign currency transactions, the non-service cost components of net periodic benefit costs associated with our defined benefit plans, actuarial gains and losses and gains and losses on the disposition of long-lived assets.
(5)Represents a pro forma adjustment to include Adjusted EBITDA related to the acquisitions of Centa China and StainlessDrains.com, as permitted by our credit agreement. The pro forma adjustment includes the period from October 1, 2018 through the dates of the Centa China and StainlessDrains.com acquisitions. See Item 1, Note 2, Acquisitions for more information.
(6)Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $263.3 million (as defined by the credit agreement) at September 30, 2019.
(7)Our credit agreement defines the total net leverage ratio as the ratio of consolidated indebtedness (as described above) to Adjusted EBITDA for the trailing four fiscal quarters.

Table of Contents
Liquidity and Capital Resources    
Our primary sources of liquidity are available cash and cash equivalents, cash flow from operations, borrowing availability of up to $264.0 million under our revolving credit facility and availability of up to $100.0 million under our accounts receivable securitization program.     
As of September 30, 2019,2020, we had $319.8$326.6 million of cash and cash equivalents and $351.7$355.1 million of additional borrowing capacity ($258.6261.2 million of available borrowings under our revolving credit facility and $93.1$93.9 million available under our accounts receivable securitization program). As of September 30, 2019,2020, the available borrowings under our credit facility and accounts receivable securitization were reduced by $12.3$8.9 million due to outstanding letters of credit. As of March 31, 2019,2020, we had $292.5$573.4 million of cash and cash equivalents and approximately $351.3$28.6 million of additional borrowing capacity ($258.49.3 million of available borrowings under our revolving credit facility and $92.9$19.3 million available under our accounts receivable securitization program).
Both our revolving credit facility and accounts receivable securitization program are available to fund our working capital requirements, capital expenditures and for other general corporate purposes.
Cash Flows
Net cash    Cash provided by operating activities was $113.8 million and $86.3 million and $75.1 million induring the first six months of fiscalended September 30, 2020 and 2019, respectively. Incremental profit generated in the first six months of fiscal 2020 was partially offset by incrementalLower trade working capital and the timing of payments on accrued expenses.expenses were partially offset by lower net income generated during the six months ended September 30, 2020.
Cash used for investing activities was $37.6$7.5 million induring the first six months of fiscalended September 30, 2020 compared to $16.1$37.6 million induring the first six months of fiscalended September 30, 2019. Investing activities induring the first six months of fiscalended September 30, 2020, primarily included $15.3 million of capital expenditures, partially offset by the receipt of $7.8 million in connection with the sale of certain long-lived assets. Investing activities during the six months ended September 30, 2019, included $13.2 million of capital expenditures and $25.1 million in connection with our acquisitions,for the acquisition of substantially all the assets of StainlessDrains.com, partially offset by the receipt of $2.0 million in connection with the sale of certain long-lived assets. Investing activities during the first six months of fiscal 2019 included $17.6 million of capital expenditures and $2.0 million for an acquisition of assets, partially offset by the receipt of $3.5 million in connection with the sale of certain long-lived assets.
Cash used for financing activities was $15.8$362.2 million induring the first six months of fiscalended September 30, 2020, compared to $15.8 million during the six months ended September 30, 2019. During the six months ended September 30, 2020, we utilized a net $325.8 million of cash for payments on outstanding debt, $19.2 million for the payment of common stock dividends and $15.0 million to repurchase shares of common stock. The six months ended September 30, 2020, also includes $7.2 million of cash proceeds associated with stock option exercises, partially offset by $9.4 million of cash used for financing activitiesthe payment of $27.7 million inwithholding taxes on employees' share-based awards. During the first six months of fiscal 2019. During the first six months of fiscal 2020,ended September 30, 2019, we utilized a net $5.4 million of cash for the payment of outstanding debt and $11.6 million for the payment of preferred stock dividends. The first six months of fiscal 2020ended September 30, 2019, also includes $6.9 million of cash proceeds associated with stock option exercises, partially offset by $5.7 million of cash used for the payment of withholding taxes on employees' share-based payment awards. During the first six months of fiscal 2019, we utilized a net $17.9 million of cash for the payment of outstanding debt and $11.6 million for the payment of preferred stock dividends. The first six months of fiscal 2019 also includes $5.0 million of cash proceeds associated with stock option exercises, partially offset by $3.2 million of cash used for the payment of withholding taxes on employees' share-based payment awards.
Indebtedness
As of September 30, 2019,2020, we had $1,250.8$1,195.8 million of total indebtedness outstanding as follows (in millions):
Total Debt at September 30, 2020Current Maturities of DebtLong-term
Portion
Term loan (1)$621.3 $— $621.3 
4.875% Senior Notes due 2025 (2)496.1 — 496.1 
Finance leases and other subsidiary debt78.4 3.2 75.2 
Total$1,195.8 $3.2 $1,192.6 

(1)Includes unamortized debt issuance costs of $3.7 million at September 30, 2020.
(2)Includes unamortized debt issuance costs of $3.9 million at September 30, 2020.



47
Table of Contents
  Total Debt at September 30, 2019 Current Maturities of Debt 
Long-term
Portion
Term loan (1) $719.0
 $—
 $719.0
4.875% Senior Notes due 2025 (2) 495.4
 —
 495.4
Finance leases and other subsidiary debt 36.4
 1.5
 34.9
Total $1,250.8
 $1.5
 $1,249.3

(1)Includes unamortized debt issuance costs of $6.0 million at September 30, 2019.
(2)Includes unamortized debt issuance costs of $4.6 million at September 30, 2019.



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 derivative financial instruments in the form of foreign currency forward contracts, interest rate swaps and interest rate caps to cover certain known foreign currency transactional risks, as well as identified risks due to interest rate fluctuations. There have been no material changes in market risk from the information provided in "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our Form 10-K.


ITEM 4.CONTROLS AND PROCEDURES
48
Table of Contents

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 September 30, 2019,2020, 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.


49
Table of Contents
PART II - OTHER INFORMATION

ITEM  1.LEGAL PROCEEDINGS
ITEM  1.LEGAL PROCEEDINGS
See the information under the heading "Commitments and Contingencies" in Note 16 to the condensed consolidated financial statements contained in Part I, Item 1 of this report, which is incorporated in this Part II, Item 1 by reference.

ITEM  2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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, our 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. NoDuring the three months ended September 30, 2020, the Company repurchased 500,050 shares of common stock for a total cost of $15.0 million at a weighted average price of $30.02 per share. The repurchased shares were repurchased duringcanceled by the second quarter of fiscal 2020.Company upon receipt. A total of approximately $160.0$208.0 million remained of the existing repurchase authority remained under the Repurchase Program at September 30, 2019.2020.

ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)Maximum Approximate Dollar Value that may yet be Purchased Under the Plans or Programs (1)
Period
July 1 - July 31, 2020— $— — $223,045,614 
August 1 - August 31, 2020343,850 $30.06 343,850 $212,708,092 
September 1 - September 30, 2020156,200 $29.93 156,200 $208,032,360 
  Total/Average500,050 $30.02 500,050 N/A

(1) See explanation of the Repurchase Program above.
50
Table of Contents
ITEM  6.EXHIBITS
ITEM  6.Exhibit
No.		EXHIBITSDescriptionFiled
Herewith

10.1
Amended and Restated Receivables Sale and Servicing Agreement, entered into as of September 25, 2020, by and among each of the originators signatory thereto from time to time, Rexnord Industries, LLC in its capacity as servicer thereunder and Rexnord Funding LLC, as buyer.*

10.2
No.
Description
Filed
Herewith
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
104Cover Page Inline XBRL data (contained in Exhibit 101)X


*Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, dated September 25, 2020.

** Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, dated September 25, 2020.



51
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Rexnord Corporation has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
REXNORD CORPORATION
REXNORD CORPORATION
Date:October 27, 2020
Date:October 29, 2019By:
/S/     MARK W. PETERSON
Name:Mark W. Peterson
Title:Senior Vice President and Chief Financial Officer



55
52