| 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 presentation used for the Transition Period. Revenue Recognition See Note 6, Revenue Recognition for the Company's policy for recognizing revenue under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606") as well as the various other disclosures required by ASC 606. Leases The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and determines whether it is an operating or financing lease. Operating and financing leases result in the Company recording a right-of-use ("ROU") asset, current lease liability, and long term lease liability on its balance sheet. 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 consolidated balance sheet and are instead recognized on a straight-line basis over the lease term. See Note 14, Leases, for additional discussion about the Company policy for the Company's policy for accounting leases and other required disclosures. Stock-Based Compensation The Company accounts for stock based compensation in accordance with 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, Stock-Based Compensation. 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 $3.4 million at December 31, 2020, and $3.4 million at March 31, 2020. 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. 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. Significant Customers The Company’s largest customer accounted for less than 10% of consolidated net sales for the nine months ended December 31, 2020 and years ended March 31, 2020 and 2019, 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. The Company’s total inventories valued using the "last-in, first-out" (LIFO) method was 59% and 61% at December 31, 2020 and March 31, 2020, respectively. 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, adjustments to established inventory reserves may be required. The total write-down of inventories charged to expense was $5.9 million, $4.6 million and $3.1 million, during the nine months ended December 31, 2020 and years ended March 31, 2020 and 2019, respectively. Property, Plant and Equipment Property, plant and equipment are initially 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. Where appropriate, the depreciable lives of certain assets may be adjusted to reflect a change in the use of those assets, or depreciation may be accelerated in the case of an eventual asset disposal. The Company recognized accelerated depreciation of $0.8 million, $2.5 million, and $3.9 million during the nine months ended December 31, 2020, and years ended March 31, 2020 and 2019, respectively. Accelerated depreciation is recorded within Cost of sales in the consolidated statements of operations. 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 7 to 20 years, 3 to 14 years and 4 to 15 years, respectively. Where appropriate, the lives of certain intangible assets may be adjusted to reflect a change in the use of those assets, or amortization may be accelerated in the case of a known intangible asset discontinuation. Goodwill, trademarks and certain tradenames have indefinite lives and are not amortized. However, the goodwill and intangible assets are tested annually for impairment, and may be tested more frequently if any triggering events occur that would reduce the recoverability of the asset. The Company performs its impairment test by comparing the fair value of a reporting unit, utilizing both an income valuation model (discounted cash flow) and market approach (guideline public company comparables), with its carrying amount. If the carrying amount exceeds the fair value of the reporting unit, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. 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 accordingly. The Company recognized impairment charges of tangible fixed assets of $1.9 million, $0.0 million and $0.3 million during the during the nine months ended December 31, 2020 and the years ended March 31, 2020 and March 31, 2019, respectively. The impairments were determined utilizing Level 3 inputs within the Fair Value hierarchy, and the Company reviewed and considered input from outside specialists, when appropriate. Actual results could vary from these estimates. Refer to Note 13, Fair Value Measurements for additional information. 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): Nine Months Ended December 31, 2020 Year Ended March 31, 2020 Year Ended March 31, 2019 Balance at beginning of period $ 6.7 $ 7.2 $ 7.7 Charged to operations 3.6 1.7 1.9 Claims settled (1.4) (2.2) (2.4) Balance at end of period $ 8.9 $ 6.7 $ 7.2 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, Income Taxes for additional information. Per Share Data Basic net income per share from continuing and discontinued operations attributable to Rexnord common stockholders is computed by dividing net income from continuing operations and loss from discontinued operations attributable to Rexnord common stockholders, 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 attributable to Rexnord common stockholders is computed based on the weighted average number of common shares outstanding, increased by the number of incremental shares that would have been outstanding if the potential dilutive shares were issued through the exercise of outstanding stock options to purchase common shares, except when the effect would be anti-dilutive. Additionally, following the issuance of the Series A Preferred Stock during the year ended March 31, 2017, the Company’s diluted net income per share was computed using the "if-converted" method. During the year ended March 31, 2020, the Company issued 16.0 million shares of common stock upon the mandatory conversion of the Series A Preferred Stock. The "if-converted" method is utilized only when such calculation is dilutive to earnings per share using the treasury stock method. Under the "if-converted" method, diluted net income per share is calculated under the assumption that the shares of Series A Preferred Stock were converted into shares of the Company’s common stock as of the beginning of the respective period, and therefore no dividends were provided to holders of the Series A Preferred Stock. The computation for diluted net income per share for the nine months ended December 31, 2020, and years ended March 31, 2020 and 2019 excludes 0.5 million, 0.9 million and 1.0 million common shares due to their anti-dilutive effects, respectively. The following table presents the basis for income per share computations (in millions, except share amounts, which are in thousands): Nine Months Ended Years Ended December 31, 2020 March 31, 2020 March 31, 2019 Basic net income per share attributable to Rexnord common stockholders Numerator: Net income from continuing operations $ 118.6 $ 182.2 $ 189.0 Less: Non-controlling interest income 0.4 0.3 — Less: Dividends on preferred stock — 14.4 23.2 Net income from continuing operations attributable to Rexnord common stockholders $ 118.2 $ 167.5 $ 165.8 Loss from discontinued operations, net of tax $ — $ (1.8) $ (154.7) Net income attributable to Rexnord common stockholders $ 118.2 $ 165.7 $ 11.1 Denominator: Weighted-average common shares outstanding, basic 120,428 111,689 104,640 Diluted net income per share attributable to Rexnord common stockholders Numerator: Net income from continuing operations $ 118.6 $ 182.2 $ 189.0 Less: Non-controlling interest income 0.4 0.3 — Less: Dividends on preferred stock (1) — — — Net income from continuing operations attributable to Rexnord common stockholders $ 118.2 $ 181.9 $ 189.0 Loss from discontinued operations, net of tax $ — $ (1.8) $ (154.7) Net income attributable to Rexnord common stockholders 118.2 165.7 11.1 Plus: Dividends on preferred stock (1) — 14.4 23.2 Net income attributable to Rexnord common stockholders $ 118.2 $ 180.1 $ 34.3 Denominator: Weighted-average common shares outstanding, basic 120,428 111,689 104,640 Effect of dilutive equity awards 2,771 2,576 2,710 Preferred stock under the "if-converted" method (2) — 9,998 15,979 Weighted-average common shares outstanding, diluted 123,199 124,263 123,329 ____________________ (1) The "if-converted" method was dilutive for the years ended March 31, 2020 and 2019. (2) During the year ended March 31, 2020, the Company issued 16.0 million shares of common stock upon the mandatory conversion of Series A Preferred Stock; see Note 19, Common Stock Purchases and Public Offerings for additional information. Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive loss, net of tax, for the nine months ending December 31, 2020 and years ending March 31, 2020 and 2019 are as follows (in millions): Foreign Currency Translation and Other Pension and Postretirement Plans Total Balance at March 31, 2018 $ (45.9) $ (28.2) $ (74.1) Other comprehensive loss before reclassifications (39.4) (8.5) (47.9) Amounts reclassified from accumulated other comprehensive income (loss) 26.0 (0.6) 25.4 Net current period other comprehensive loss (13.4) (9.1) (22.5) Balance at March 31, 2019 (59.3) (37.3) (96.6) Other comprehensive loss before reclassifications (24.5) (3.6) (28.1) Amounts reclassified from accumulated other comprehensive loss — 0.3 0.3 Net current period other comprehensive loss (24.5) (3.3) (27.8) Balance at March 31, 2020 (83.8) (40.6) (124.4) Other comprehensive income before reclassifications 37.8 13.0 50.8 Amounts reclassified from accumulated other comprehensive loss — (0.2) (0.2) Net current period other comprehensive income 37.8 12.8 50.6 Balance at December 31, 2020 $ (46.0) $ (27.8) $ (73.8) The following table summarizes the amounts reclassified from accumulated other comprehensive loss to net income during the nine months ending December 31, 2020 and years ending March 31, 2020 and 2019 (in millions): Pension and postretirement plans Nine Months Ended December 31, 2020 Year Ended March 31, 2020 Year Ended March 31, 2019 Income Statement Line Item Amortization of prior service credit $ (0.2) $ (0.3) $ (1.5) Other income (expense), net Lump sum settlement — 0.8 0.6 Actuarial (loss) gain on pension and postretirement benefit obligations Provision for income taxes — (0.2) 0.3 Total, net of income taxes $ (0.2) $ 0.3 $ (0.6) Foreign Currency Translation and Other Reclassification on sale of business $ — $ — $ 19.7 Loss from discontinued operations, net of tax Net realized losses on interest rate derivatives — — 5.7 Interest expense, net Reclassification on acquisition of equity method investment — — 1.8 Other (expense) income, net Benefit for income taxes — — (1.2) Total $ — $ — $ 26.0 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. The Company periodically enters into foreign currency forward contracts to mitigate foreign currency volatility on certain intercompany and external cash flows expected to occur. Currency transaction (gains) losses are included in other expense (income), net in the consolidated statements of operations and totaled $(5.3) million, $3.9 million and $1.9 million for the nine months ended December 31, 2020, and years ended March 31, 2020 and 2019, respectively. Advertising Costs Advertising costs are charged to selling, general and administrative expenses on the consolidated statements of operations as incurred and amounted to $8.0 million, $13.3 million and $11.9 million for the nine months ended December 31, 2020, and years ended March 31, 2020 and 2019, respectively. Research, Development and Engineering Costs Research, development and engineering costs are charged to selling, general and administrative expenses on the consolidated statements of operations as incurred and amounted to $27.5 million, $40.5 million and $41.7 million for the nine months ended December 31, 2020 and years ended March 31, 2020 and 2019, respectively. 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 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). The amendments in this 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 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 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 nine months ended December 31, 2020. The Company will continue to evaluate the impact this guidance will have on its consolidated financial statements for all future transactions affected by reference rate reform during the time permitted. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ( "ASU 2019-12" ) . The FASB issued this update as part of its initiative to reduce complexity in accounting standards. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also improve consistent application of other areas by clarifying and amending existing guidance. The Company will adopt this ASU on January 1, 2021 using a retrospective, modified retrospective or prospective basis for certain amendments, and does not expect there to be a material impact to the consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which establishes ASC 326, Financial Instruments - Credit Losses . The ASU revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. The ASU affects trade receivables, debt securities, net investment in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses . This ASU clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief , which amends ASC 326. This ASU provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. The Company adopted this ASU on April 1, 2020 using a modified-retrospective approach. There was no impact to the Company's consolidated financial statements. In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans |
