Significant Accounting Policies | 12 Months Ended |
Mar. 31, 2015 |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies |
Use of Estimates |
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. |
Reclassifications |
Certain prior year amounts have been reclassified to conform to the fiscal 2015 presentation. |
Revenue Recognition |
Net sales are recorded upon transfer of title and risk of product loss to the customer. Net sales relating to any particular shipment are based upon the amount invoiced for the delivered goods less estimated future rebate payments and sales returns which are based upon the Company’s historical experience. Revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. The value of returned goods during the years ended March 31, 2015, 2014 and 2013 was approximately 1.0% or less of net sales. Other than a standard product warranty, there are no post-shipment obligations. |
The Company classifies shipping and handling fees billed to customers as net sales and the corresponding costs are classified as cost of sales in the consolidated statements of operations. |
Stock Based Compensation |
The Company accounts for stock based compensation in accordance with Accounting Standards Codification ("ASC") 718, Accounting for Stock Compensation ("ASC 718"). ASC 718 requires compensation costs related to stock-based payment transactions to be recognized in the financial statements. Generally, compensation cost is measured based on the grant-date fair value of the equity instruments issued. Compensation cost is recognized over the requisite service period, generally as the awards vest. See further discussion of the Company’s equity plans in Note 15. |
Per Share Data |
Basic net income (loss) per share from continuing and discontinued operations is computed by dividing net income from continuing operations and (loss) income from discontinued operations, respectively, by the corresponding weighted average number of common shares outstanding for the period. Diluted net income (loss) per share from continuing and discontinued operations is computed based on the weighted average number of common shares outstanding increased by the number of incremental shares that would have been outstanding if the potential dilutive shares were issued through the exercise of outstanding stock options to purchase common shares, except when the effect would be anti-dilutive. The computation for diluted net income (loss) per share for the fiscal year ended March 31, 2015, 2014 and 2013 excludes 1,268,623, 1,278,316 and 2,924,547 shares due to their anti-dilutive effects, respectively. |
Cash and Cash Equivalents |
The Company considers all highly liquid investments with a maturity of three months or less to be cash and cash equivalents. |
Receivables |
Receivables are stated net of allowances for doubtful accounts of $16.8 million at March 31, 2015 and $6.4 million at March 31, 2014. The Company evaluates the collectability of its receivables and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and historical write-off experience. Credit is extended to customers based upon an evaluation of their financial position. Generally, advance payment is not required. Allowances for doubtful accounts established are recorded within Selling, general and administrative expenses within the Consolidated Statements of Operations. |
Since the Company's fiscal 2012 acquisition of VAG Holdings, GmbH "("VAG"), the Company has delivered multiple water infrastructure projects to a long-standing state-owned water utility customer located in Venezuela (transactions were denominated in Euros). While the Company continued to receive payments from the customer during fiscal 2015, the Company experienced a general slowdown in cash collections which can primarily be attributed to constrained sovereign liquidity and foreign currency controls resulting from the increased political, civil and economic instability in Venezuela. During the fourth quarter of fiscal 2015, the Company established a reserve of approximately $9.1 million for all outstanding receivables related to this long-standing customer as of March 31, 2015. |
Significant Customers |
The Company’s largest customer accounted for 8.9%, 7.8% and 7.4% of consolidated net sales for the years ended March 31, 2015, 2014 and 2013, respectively. Receivables related to this Process & Motion Control industrial distributor at March 31, 2015 and 2014 were $10.2 million and $9.8 million, respectively. |
Inventories |
Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at the lower of cost or market. Market is determined based on estimated net realizable values. Approximately 61% of the Company’s total inventories as of both March 31, 2015 and 2014 were valued using the “last-in, first-out” (LIFO) method. All remaining inventories are valued using the “first-in, first-out” (FIFO) method. |
In some cases, the Company has determined a certain portion of inventories are excess or obsolete. In those cases, the Company writes down the value of those inventories to their net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. The total write-down of inventories charged to expense was $5.2 million, $3.8 million and $4.9 million, during fiscal 2015, 2014 and 2013, respectively. |
Property, Plant and Equipment |
Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over 10 to 30 years for buildings and improvements, 5 to 10 years for machinery and equipment and 3 to 5 years for computer hardware and software. Maintenance and repair costs are expensed as incurred. |
Goodwill and Intangible Assets |
Intangible assets consist of acquired trademarks and tradenames, customer relationships (including distribution network) and patents. The customer relationships, patents, and certain tradenames are being amortized using the straight-line method over their estimated useful lives of 1 to 20 years, 2 to 15 years, and 5 to 10 years, respectively. Goodwill, trademarks and certain tradenames have indefinite lives and are not amortized but are tested annually for impairment using a discounted cash flow and market value approach analysis. |
Impairment of Long-Lived Assets |
The carrying value of long-lived assets, including amortizable intangible assets and tangible fixed assets, are evaluated for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment of amortizable intangible assets and tangible fixed assets is generally determined by comparing projected undiscounted cash flows to be generated by the asset, or group of assets, to its carrying value. If impairment is identified, a loss is recorded equal to the excess of the asset's net book value over its fair value, and the cost basis is adjusted. Determination of the fair value requires various estimates including internal cash flow estimates generated from the asset, quoted market prices and appraisals as appropriate to determine fair value. Actual results could vary from these estimates. |
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Deferred Financing Costs |
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Other assets at March 31, 2015 and 2014, include deferred financing costs of $9.9 million and $12.1 million, respectively, net of accumulated amortization of $6.8 million and $4.7 million, respectively. These costs were incurred to obtain long-term financing and are being amortized using the effective interest method over the term of the related debt. See Note 11 for further information on the Company's long-term financing. |
Product Warranty |
The Company offers warranties on the sales of certain of its products and records an accrual for estimated future claims. Such accruals are based upon historical experience and management’s estimate of the level of future claims. The following table presents changes in the Company’s product warranty liability during each of the periods presented (in millions): |
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| Year Ended March 31, 2015 | | Year Ended March 31, 2014 | | Year Ended March 31, 2013 | | | | |
Balance at beginning of period | $ | 8 | | | $ | 7.7 | | | $ | 7.7 | | | | | |
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Acquired obligations | — | | | 0.2 | | | — | | | | | |
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Charged to operations | 1.8 | | | 3.9 | | | 3.6 | | | | | |
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Claims settled | (3.0 | ) | | (3.8 | ) | | (3.6 | ) | | | | |
Balance at end of period | $ | 6.8 | | | $ | 8 | | | $ | 7.7 | | | | | |
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Income Taxes |
The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes (“ASC 740”). Deferred income taxes are provided for future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating losses, tax credits and other applicable carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be actually paid or recovered. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of continuing operations in the period that includes the date of enactment. |
The Company regularly reviews its deferred tax assets for recoverability and provides a valuation allowance against its deferred tax assets if, based upon consideration of all positive and negative evidence, the Company determines that it is more-likely-than-not that a portion or all of the deferred tax assets will ultimately not be realized in future tax periods. Such positive and negative evidence would include review of historical earnings and losses, anticipated future earnings, the time period over which the temporary differences and carryforwards are anticipated to reverse and implementation of feasible, prudent tax planning strategies. |
The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining the Company's worldwide provision for income taxes and recording the related deferred tax assets and liabilities. In the ordinary course of the Company's business, there is inherent uncertainty in quantifying the ultimate tax outcome of all of the numerous transactions and required calculations relating to the Company's tax positions. Accruals for unrecognized tax benefits are provided for in accordance with the requirements of ASC 740. An unrecognized tax benefit represents the difference between the recognition of benefits related to uncertain tax positions for income tax reporting purposes and financial reporting purposes. The Company has established a reserve for interest and penalties, as applicable, for uncertain tax positions and it is recorded as a component of the overall income tax provision. |
The Company is subject to periodic income tax examinations by domestic and foreign income tax authorities. Although the outcome of income tax examinations is always uncertain, the Company believes that it has appropriate support for the positions taken on its income tax returns and has adequately provided for potential income tax assessments. Nonetheless, the amounts ultimately settled relating to issues raised by the taxing authorities may differ materially from the amounts accrued for each year. |
See Note 17 for more information on income taxes. |
Accumulated Other Comprehensive Loss |
At March 31, 2015, accumulated other comprehensive loss consisted of $76.5 million of foreign currency translation losses, $12.6 million, net of tax, of unrealized losses on interest rate derivatives, and $41.1 million, net of tax, of unrecognized actuarial losses and unrecognized prior services costs. At March 31, 2014, accumulated other comprehensive loss consisted of $7.8 million of foreign currency translation gains, $1.7 million, net of tax, of unrealized losses on interest rate derivatives, and $29.9 million, net of tax, of unrecognized actuarial losses and unrecognized prior services costs. |
The changes in accumulated other comprehensive loss, net of tax, for the fiscal years ending March 31, 2015, 2014 and 2013 are as follows (in millions): |
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| Interest Rate Derivatives | | Foreign Currency Translation | | Pension and Postretirement Plans | | Total |
Balance April 1, 2012 | $ | — | | | $ | 15 | | | $ | (26.3 | ) | | $ | (11.3 | ) |
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Other comprehensive loss before reclassifications | — | | | (14.3 | ) | | (12.2 | ) | | (26.5 | ) |
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Amounts reclassified from accumulated other comprehensive loss | — | | | — | | | (0.9 | ) | | (0.9 | ) |
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Net current period other comprehensive loss | — | | | (14.3 | ) | | (13.1 | ) | | (27.4 | ) |
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Balance at March 31, 2013 | — | | | 0.7 | | | (39.4 | ) | | (38.7 | ) |
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Balance April 1, 2013 | — | | | 0.7 | | | (39.4 | ) | | (38.7 | ) |
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Other comprehensive (loss) income before reclassifications | (1.7 | ) | | 7.1 | | | 10.5 | | | 15.9 | |
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Amounts reclassified from accumulated other comprehensive loss | — | | | — | | | (1.0 | ) | | (1.0 | ) |
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Net current period other comprehensive (loss) income | (1.7 | ) | | 7.1 | | | 9.5 | | | 14.9 | |
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Balance at March 31, 2014 | (1.7 | ) | | 7.8 | | | (29.9 | ) | | (23.8 | ) |
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Balance April 1, 2014 | (1.7 | ) | | 7.8 | | | (29.9 | ) | | (23.8 | ) |
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Other comprehensive loss before reclassifications | (10.9 | ) | | (84.3 | ) | | (14.1 | ) | | (109.3 | ) |
Amounts reclassified from accumulated other comprehensive loss | — | | | — | | | 2.9 | | | 2.9 | |
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Net current period other comprehensive loss | (10.9 | ) | | (84.3 | ) | | (11.2 | ) | | (106.4 | ) |
Balance at March 31, 2015 | $ | (12.6 | ) | | $ | (76.5 | ) | | $ | (41.1 | ) | | $ | (130.2 | ) |
The following table summarizes the amounts reclassified from accumulated other comprehensive loss to net income during the fiscal years ending March 31, 2015, 2014 and 2013 (in millions): |
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Pension and postretirement plans | Year Ending March 31, 2015 | | Year Ending March 31, 2014 | | Year Ending March 31, 2013 | | Income Statement Line Item | | |
Amortization of prior service credit | $ | (1.7 | ) | | $ | (1.7 | ) | | $ | (1.4 | ) | | Selling, general and administrative expenses | | |
Lump Sum Settlement | 6.5 | | | — | | | — | | | Actuarial loss on pension and postretirement benefit obligations | | |
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(Benefit) provision for income taxes | (1.9 | ) | | 0.7 | | | 0.5 | | | | | |
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Total, net of income taxes | $ | 2.9 | | | $ | (1.0 | ) | | $ | (0.9 | ) | | | | |
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Derivative Financial Instruments |
The Company is exposed to certain financial risks relating to fluctuations in foreign currency exchange rates and interest rates. The Company selectively uses foreign currency forward contracts and interest rate derivatives to manage its foreign currency and interest rate risks. All hedging transactions are authorized and executed pursuant to defined policies and procedures which prohibit the use of financial instruments for speculative purposes. |
The Company accounts for derivative instruments in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”). ASC 815 requires companies to recognize all of its derivative instruments as either assets or liabilities in the balance sheet at fair value. Fair value is defined under ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), 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. See more information as it relates to applying fair value to derivative instruments at Note 13. The accounting for changes in the fair value of a derivative instrument depends on whether the derivative instrument has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. As of March 31, 2015, the Company had forward-starting interest rate swaps and interest rate caps on its variable rate term debt that are designated and qualify as hedging instruments. For the derivative instruments designated and qualifying as effective hedging instruments under ASC 815, the changes in the fair value of the effective portion of the instrument are recognized in accumulated other comprehensive loss whereas any changes in the fair value of a derivative instrument that is not designated or does not qualify as an effective hedge are recorded in other non-operating expense. See Note 12 for further information regarding the classification and accounting for the Company’s derivative financial instruments. |
Financial Instrument Counterparties |
The Company is exposed to credit losses in the event of non-performance by counterparties to its financial instruments. The Company anticipates, however, that counterparties will be able to fully satisfy their obligations under these instruments. The Company places cash and temporary investments and foreign currency and interest rate swap and cap contracts with various high-quality financial institutions. Although the Company does not obtain collateral or other security to support these financial instruments, it does periodically evaluate the credit-worthiness of each of its counterparties. |
Foreign Currency Translation |
Assets and liabilities of subsidiaries operating outside of the United States with a functional currency other than the U.S. dollar are translated into U.S. dollars using exchange rates at the end of the respective period. Revenues and expenses of such entities are translated at average exchange rates in effect during the respective period. Foreign currency translation adjustments are included as a component of accumulated other comprehensive loss. Currency transaction losses are included in other expense, net in the consolidated statements of operations and totaled $1.5 million, $3.9 million and $6.8 million for the years ended March 31, 2015, 2014 and 2013, respectively. |
Advertising Costs |
Advertising costs are charged to selling, general and administrative expenses as incurred and amounted to $10.4 million, $9.6 million, and $10.0 million for the years ended March 31, 2015, 2014 and 2013, respectively. |
Research, Development and Engineering Costs |
Research, development and engineering costs are charged to selling, general and administrative expenses as incurred and for the years ended March 31, 2015, 2014 and 2013 amounted to the following (in millions): |
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| Year Ended March 31, 2015 | | Year Ended March 31, 2014 | | Year Ended March 31, 2013 | | | | |
Research and development costs | $ | 12.8 | | | $ | 13 | | | $ | 13.7 | | | | | |
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Engineering costs | 26 | | | 28.4 | | | 24.3 | | | | | |
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Total | $ | 38.8 | | | $ | 41.4 | | | $ | 38 | | | | | |
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Concentrations of Credit Risk |
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and temporary investments, forward currency contracts and trade accounts receivable. |
Recent Accounting Pronouncements |
In March 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation of Financial Statements and Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08"), which changes the criteria for reporting discontinued operations. ASU 2014-08 allows only disposals representing a strategic shift in operations to be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. In addition, the new guidance requires expanded disclosures about discontinued operations, as well as pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. ASU 2014-08 will be effective for the Company in the first quarter of fiscal 2016. As this guidance is a prospective change, adoption of this standard is not expected to have a material impact on the Company's results of operations, financial position or cash flows. |
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In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers in order to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The guidance specifies revenue should be recognized in the amount that reflects the consideration the company expects to be entitled to in exchange for the transfer of promised goods or services to customers. ASU 2014-09 will be effective for the Company in the first quarter of fiscal 2017 and allows for full retrospective adoption applied to all periods presented or retrospective adoption with the cumulative effect of initially applying this update recognized at the date of initial application. The Company is currently evaluating the method of adoption and the potential impact adoption will have on its consolidated financial statements. |
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In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. ASU 2015-03 will be effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the impact adoption of this standard will have on its consolidated financial statements. |