Notes to Consolidated Financial Statements
December 31, 2021
1. Basis of Presentation and Description of Business
The consolidated financial statements included herein have been prepared by Zurn Water Solutions Corporation ("Zurn" or the "Company"), in accordance with accounting principles generally accepted in the United States ("GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the consolidated financial statements include all adjustments necessary for a fair presentation of the financial position and the results of operations for the periods presented.
Following the end of the Company's fiscal year ended March 31, 2020, the Company transitioned to a December 31 fiscal year-end date. As a result, this Form 10-K includes financial information for the nine-month period from April 1, 2020 to December 31, 2020 (the "Transition Period"). Prior to the Transition Period, the Company’s fiscal year ended on March 31 of each year. For example, fiscal 2020 represents the period from April 1, 2019, to March 31, 2020. See Note 12, Comparative Twelve and Nine Month Financial Information for additional information.
Spin-Off of Process & Motion Control Segment
As previously disclosed, on October 4, 2021, the Company completed a Reverse Morris Trust tax-free spin-off transaction (the “Spin-off Transaction”) in which (i) substantially all the assets and liabilities of the Company's PMC business were transferred to a newly created subsidiary, Land Newco, Inc. (“Land”), (ii) the shares of Land were distributed to the Company's stockholders pro rata, and (iii) Land was merged with a subsidiary of Regal Rexnord Corporation (formerly known as Regal Beloit Corporation), in which the stock of Land was converted into a specified number of shares of Regal Rexnord Corporation in accordance with the exchange ratio. Following completion of the Spin-Off Transaction, the Company's name was changed to “Zurn Water Solutions Corporation” and the ticker symbol for its shares of common stock trading on the New York Stock Exchange was changed to “ZWS”.
As a result of the Spin-Off Transaction, in accordance with the authoritative guidance, the operating results of PMC are reported as discontinued operations in the consolidated statements of operations for all periods presented. The consolidated statements of cash flows for the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 have not been adjusted to separately disclose cash flows related to the discontinued operations. See Note 4, Discontinued Operations for additional information.
In connection with the Spin-Off Transaction, the Company separated certain defined benefit pension and other post-employment benefit plans, and adjusted its employee share-based compensation awards. See Note 15 Stock-Based Compensation and Note 16 Retirement Benefits, respectively, for additional information.
The Company
Zurn Water Solutions Corporation is a growth-oriented, pure-play water management business that designs, procures, manufactures, and markets what the Company believes to be the broadest sustainable product portfolio of specification-driven water management solutions to improve health, human safety and the environment. The Company's product portfolio includes professional grade water safety and control, flow systems and hygienic and environmental products for public and private spaces that deliver superior value to building owners, positively impact the environment and human hygiene and reduce product installation time. The Company's heritage of innovation and specification have allowed Zurn to provide highly-engineered, mission-critical solutions to customers for decades and affords Zurn the privilege of having long-term, valued relationships with market leaders. The Company operates in a disciplined way and the Zurn Business System (“ZBS”), described below, is its operating philosophy. Grounded in the spirit of continuous improvement, ZBS 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 the Company's business.
2. 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
As of result of the Spin-Off Transaction certain prior year amounts primarily related to discontinued operations have been reclassified to conform to presentation used for the year ending December 31, 2021.
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's policy for accounting for 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 $1.2 million at December 31, 2021, and $0.8 million at December 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 23%, 24% and 23% of consolidated net sales for the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, respectively. No other customers account for more than 10% of consolidated net sales for the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 or the fiscal year ended March 31, 2020.
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 84% and 75% at December 31, 2021 and 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 $0.9 million, $1.5 million and $2.2 million, during the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, 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.
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 10 years and 5 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. In conducting the annual impairment test for goodwill, the Company has the option to first assess qualitative factors to determine whether it is more likely than not (> 50% likelihood) the fair value of any reporting unit is less than its carrying amount. If a qualitative assessment determines an impairment is more likely than not, the Company is required to perform a quantitative impairment test. Otherwise, no further analysis is required. Alternatively, the Company may elect to proceed directly to the quantitative impairment test. In conducting a qualitative assessment, the Company utilizes a discounted cash flow methodology based on future business projections and a market value approach (guideline public company comparables). The Company performs the goodwill impairment test by comparing the fair value of a reporting unit 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 up to the amount of the recorded goodwill.
During the fourth quarter of the year ended December 31, 2021, the Company completed its annual goodwill impairment tests and elected to perform a qualitative assessment. No goodwill impairment charges were recorded during the year ended December 31, 2021, the nine month transition period ended December 31, 2020 and the fiscal year ended March 31, 2020.
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 no impairment charges of tangible fixed assets during the during the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, respectively. Impairments are determined utilizing Level 3 inputs within the Fair Value hierarchy, and the Company reviews and considers 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):
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Year Ended December 31, 2021
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Nine Month Transition Period Ended December 31, 2020
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Year Ended March 31, 2020
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Balance at beginning of period
|
$
|
1.2
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|
|
$
|
1.4
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|
$
|
1.4
|
|
Acquired obligations
|
0.3
|
|
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—
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|
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—
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|
Charged to operations
|
1.1
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|
|
0.7
|
|
|
1.2
|
|
Claims settled
|
(1.3)
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|
|
(0.9)
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|
|
(1.2)
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|
Balance at end of period
|
$
|
1.3
|
|
|
$
|
1.2
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|
|
$
|
1.4
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Income Taxes
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 Zurn common stockholders is computed by dividing net income from continuing operations and income from discontinued operations attributable to Zurn common stockholders, respectively, by the corresponding weighted average number of common shares outstanding for the period. Diluted net income per share from continuing and discontinued operations attributable to Zurn common stockholders is computed based on the weighted average number of common shares outstanding, increased by the number of incremental shares that would have been outstanding if the potential dilutive shares were issued through the exercise of outstanding stock options to purchase common shares, except when the effect would be anti-dilutive.
Additionally, following the issuance of the Series A Preferred Stock during the fiscal year ended March 31, 2017, the Company’s diluted net income per share was computed using the "if-converted" method. During the fiscal 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 year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 excludes 0.7 million, 0.5 million and 0.9 million common shares due to their anti-dilutive effects, respectively. In addition, during the fiscal year ended March 31, 2020, the computation of diluted net income per share does not include shares of preferred stock that are convertible into a weighted average of 10.0 million shares of common stock due to their anti-dilutive effects.
The following table presents the basis for income per share computations (in millions, except share amounts, which are in thousands):
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Year Ended
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Nine Month Transition Period Ended
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Year Ended
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December 31, 2021
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December 31, 2020
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March 31, 2020
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Basic net income per share attributable to Zurn common stockholders
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Numerator:
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|
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Net income from continuing operations
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|
$
|
49.7
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|
|
$
|
35.0
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|
|
$
|
19.0
|
|
|
|
|
|
|
|
|
Less: Dividends on preferred stock
|
|
—
|
|
|
—
|
|
|
14.4
|
|
Net income from continuing operations attributable to Zurn common stockholders
|
|
49.7
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|
|
35.0
|
|
|
4.6
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
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|
71.2
|
|
|
83.2
|
|
|
161.1
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|
|
|
|
|
|
|
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Net income attributable to Zurn common stockholders
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|
$
|
120.9
|
|
|
$
|
118.2
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|
|
$
|
165.7
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|
|
|
|
|
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|
|
Denominator:
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|
|
|
|
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Weighted-average common shares outstanding, basic
|
|
121,493
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|
|
120,428
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|
|
111,689
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|
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|
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Diluted net income per share attributable to Zurn common stockholders
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|
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Numerator:
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|
|
|
|
|
Net income from continuing operations
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|
$
|
49.7
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|
|
$
|
35.0
|
|
|
$
|
19.0
|
|
|
|
|
|
|
|
|
Less: Dividends on preferred stock (1)
|
|
—
|
|
|
—
|
|
|
14.4
|
|
Net income from continuing operations attributable to Zurn common stockholders
|
|
49.7
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|
|
35.0
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|
|
4.6
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
|
|
71.2
|
|
|
83.2
|
|
|
161.1
|
|
|
|
|
|
|
|
|
Net income attributable to Zurn common stockholders
|
|
120.9
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|
|
118.2
|
|
|
165.7
|
|
Plus: Dividends on preferred stock (1)
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|
—
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|
|
—
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|
|
—
|
|
Net income attributable to Zurn common stockholders
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|
$
|
120.9
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|
|
$
|
118.2
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|
|
$
|
165.7
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|
|
|
|
|
|
|
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Denominator:
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|
|
|
|
|
|
Weighted-average common shares outstanding, basic
|
|
121,493
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|
|
120,428
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|
|
111,689
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|
Effect of dilutive equity awards
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|
3,621
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|
|
2,771
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|
|
2,576
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|
|
|
|
|
|
|
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Weighted-average common shares outstanding, diluted
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|
125,114
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|
|
123,199
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|
|
114,265
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____________________
(1) The "if-converted" method was anti-dilutive for the fiscal year ended March 31, 2020.
(2) See Note 19, Public Offering and Common Stock Repurchases and Public Offerings for additional information related to the mandatory conversion of Series A Preferred Stock.
Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of tax, for the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 are as follows (in millions):
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Foreign Currency Translation and Other
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|
Pension and Postretirement Plans
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Total
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Balance at March 31, 2019
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$
|
(59.3)
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|
|
$
|
(37.3)
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|
|
$
|
(96.6)
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Other comprehensive loss before reclassifications
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|
|
(24.5)
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|
|
(3.6)
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|
|
(28.1)
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|
Amounts reclassified from accumulated other comprehensive loss
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|
|
—
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|
|
0.3
|
|
|
0.3
|
|
|
|
|
|
|
|
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Balance at March 31, 2020
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|
|
$
|
(83.8)
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|
|
$
|
(40.6)
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|
|
$
|
(124.4)
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Other comprehensive income before reclassifications
|
|
|
37.8
|
|
|
13.0
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|
|
50.8
|
|
Amounts reclassified from accumulated other comprehensive loss
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|
|
—
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|
|
(0.2)
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|
|
(0.2)
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|
|
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|
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|
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|
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Balance at December 31, 2020
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|
|
$
|
(46.0)
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|
|
$
|
(27.8)
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|
|
$
|
(73.8)
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Other comprehensive (loss) income before reclassifications
|
|
|
(4.2)
|
|
|
14.9
|
|
|
10.7
|
|
Amounts reclassified from accumulated other comprehensive loss
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|
|
—
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|
|
3.5
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|
|
3.5
|
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PMC Spin-Off Transaction
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|
|
(20.7)
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5.4
|
|
|
(15.3)
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Balance at December 31, 2021
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|
|
$
|
(70.9)
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|
|
$
|
(4.0)
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|
|
$
|
(74.9)
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|
|
|
|
|
|
|
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|
The following table summarizes the amounts reclassified from accumulated other comprehensive loss to net income during the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the year ended March 31, 2020 (in millions):
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Pension and postretirement plans
|
Year Ended December 31, 2021
|
|
Nine Month Transition Period Ended December 31, 2020
|
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Year Ended March 31, 2020
|
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Income Statement Line Item
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Amortization of prior service credit
|
$
|
(0.2)
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|
|
$
|
(0.2)
|
|
|
$
|
(0.3)
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|
|
Other income (expense), net
|
Lump sum settlement
|
—
|
|
|
—
|
|
|
0.8
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|
|
Discontinued operations, net of tax
|
PMC Spin-Off Transaction settlement
|
4.8
|
|
|
—
|
|
|
—
|
|
|
Discontinued operations, net of tax
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Provision for income taxes
|
(1.1)
|
|
|
—
|
|
|
(0.2)
|
|
|
|
Total, net of income taxes
|
$
|
3.5
|
|
|
$
|
(0.2)
|
|
|
$
|
0.3
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|
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 (gains) losses are included in other expense, net in the consolidated statements of operations and totaled $0.4 million, $(0.4) million and $0.4 million for the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, respectively.
Advertising Costs
Advertising costs are charged to selling, general and administrative expenses on the consolidated statements of operations as incurred and amounted to $8.2 million, $5.5 million and $9.2 million for the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, 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 $14.0 million, $9.6 million and $13.2 million for the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, respectively.
Business Segment and Geographic Areas
The Company is a pure-play water management business that designs, procures, manufactures, and markets specification-driven water management solutions to improve health, human safety and the environment, which comprises one reportable segment. The Company manages and evaluates its operations as one segment primarily due to similarities in the nature of its products, production process, customers and methods of distribution.
Net sales to third parties and long-lived assets by geographic region are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
Long-lived Assets
|
|
Year Ended December 31, 2021
|
|
Nine Month Transition Period Ended December 31, 2020
|
|
Year Ended March 31, 2020
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
United States
|
792.8
|
|
|
517.3
|
|
|
651.5
|
|
|
$
|
51.6
|
|
|
$
|
56.3
|
|
|
$
|
46.7
|
|
Canada
|
113.3
|
|
|
32.9
|
|
|
42.6
|
|
|
12.7
|
|
|
13.3
|
|
|
1.4
|
|
Rest of World
|
4.8
|
|
|
12.5
|
|
|
16.0
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
$
|
910.9
|
|
|
$
|
562.7
|
|
|
$
|
710.1
|
|
|
$
|
64.4
|
|
|
$
|
69.6
|
|
|
$
|
48.1
|
|
Net sales to third parties are attributed to the geographic regions based on the country in which the shipment originates. Amounts attributed to the geographic regions for long-lived assets are based on the location of the entity that holds such assets. In accordance with ASC 280, Segment Reporting, long-lived assets includes movable assets and excludes net intangible assets and goodwill.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and temporary investments 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 year ended December 31, 2021. 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 adopted this ASU on January 1, 2021, using a retrospective, modified retrospective or prospective basis for certain amendments. There was no impact to the consolidated financial statements.
3. Acquisitions
Year Ended December 31, 2021
On November 17, 2021, the Company completed the acquisition of the Wade Drains business ("Wade Drains") from McWane, Inc. for a preliminary cash purchase price of $13.7 million, excluding transaction costs and net of cash acquired. The preliminary purchase price is subject to customary post-closing adjustments. Wade Drains manufactures a wide range of specified commercial plumbing products for customers across North America and complements the Company's existing flow systems product portfolio.
On April 16, 2021, the Company acquired substantially all of the assets of Advance Technology Solutions, LLC (d/b/a ATS GREASEwatch) ("ATS GREASEwatch") for a cash purchase price of $4.5 million, excluding transaction costs and net of cash acquired. The Company paid $3.8 million to the sellers at closing, with the remaining $0.7 million payable to the sellers upon settlement of certain indemnities within two years of closing, ATS GREASEwatch develops, manufactures and markets remote tank monitoring devices, alarms, software and services for various applications and provides technology to enhance and expand our current product offerings.
The acquisitions have been accounted for as business combinations and were recorded by allocating the purchase prices to the fair value of assets acquired and liabilities assumed at the acquisition dates. 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 allocations associated with these acquisitions resulted in tax deductible goodwill of $8.8 million, customer relationship intangibles assets of $1.6 million, trade working capital of $9.0 million and $(1.1) million of other net liabilities. The preliminary purchase price allocations will be completed within the one-year period following the acquisition dates.
The Company's results of operations include the acquired operations subsequent to the acquisition dates. Pro-forma results of operations and certain other U.S. GAAP disclosures related to these acquisitions have not been presented because the acquisitions did not significantly impact the Company's consolidated statements of operations or financial position.
Nine Month Transition Period Ended December 31, 2020
On December 11, 2020, the Company acquired substantially all of the assets of Hadrian Manufacturing Inc. and 100% of the stock of Hadrian Inc. (collectively "Hadrian") for a cash purchase price of $101.3 million, excluding transaction costs and net of cash acquired. During the year ended December 31, 2021, the Company received a $0.4 million cash payment from the sellers in connection with finalizing the acquisition date trade working capital, which is included in the total cash purchase price above. Hadrian, based in Burlington, Ontario, Canada, manufactures washroom partitions and lockers primarily used in institutional and commercial end markets and complements the Company's existing product portfolio.
The acquisition has been accounted for as a business combination and was recorded by allocating the preliminary purchase price to the fair value of assets acquired and liabilities assumed at the acquisition date. The excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The purchase price allocations associated with the acquisition resulted in goodwill of $43.0 million ($36.9 million tax deductible), other intangible assets of $32.4 million (including tradenames of $0.8 million and $31.6 million of customer relationships), $17.1 million of fixed assets, $9.7 million of trade working capital and other net liabilities of $0.9 million. The purchase price allocations for Hadrian were adjusted during the year ended December 31, 2021, resulting in $0.3 million increase in goodwill related to final working capital adjustments and the refinement of the estimated fair value of the liabilities assumed.
The Company's results of operations include the acquired operations subsequent to the acquisition date. Pro-forma results of operations and certain other U.S. GAAP disclosures related to the acquisition have not been presented because they are not significant to the Company's consolidated statements of operations or financial position.
Year Ended March 31, 2020
On January 28, 2020, the Company acquired substantially all of the assets of Just Manufacturing Company ("Just Manufacturing") for a total 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 complemented the Company's existing product portfolio.
On May 10, 2019, the Company acquired substantially all of the assets of 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 product portfolio.
The Company's results of operations include the acquired operations subsequent to the aforementioned acquisitions dates. Pro-forma results of operations and certain other U.S. GAAP disclosures related to these acquisitions have not been presented because they are not significant to the Company's consolidated statements of operations or financial position.
These acquisitions have been accounted for as business combinations and were recorded by allocating the purchase price to the fair value of assets acquired and liabilities assumed at the acquisition date. The excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill. The purchase price allocations associated with these acquisitions resulted in tax deductible goodwill of $27.3 million, other intangible assets of $40.9 million (including tradenames of $2.2 million and $38.7 million of customer relationships), $8.4 million of fixed assets, $9.1 million of trade working capital and other net liabilities of $1.5 million.
The purchase price allocations for StainlessDrains.com, which were finalized and adjusted during the year ended March 31, 2020, resulted in a reduction of goodwill of $1.2 million, related to the refinement of the estimated fair value of intangible assets acquired. The purchase price allocations for Just Manufacturing were adjusted and finalized during the nine month Transition Period ended December 31, 2020, resulting in $0.8 million increase in goodwill related to the refinement of the estimated fair value of the liabilities assumed as of the acquisition date.
4. Discontinued Operations
During the year ended December 31, 2021, the Company completed the Spin-Off Transaction of PMC. The operating results of PMC are reported as discontinued operations in the consolidated statements of operations for all periods presented, as the Spin-Off Transaction of PMC represented a strategic shift that had a major impact on operations and financial results. The consolidated statements of cash flows for the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 have not been adjusted to separately disclose cash flows related to the discontinued operations. The terms of the Spin-Off Transaction agreement included targeted working capital and cash balances at closing of the Spin-Off Transaction, which are subject to adjustment after determining final working capital and cash balances held by PMC at the Spin-Off Transaction date. As of the date of this filing, no such adjustments have been made or asserted.
In connection with the Spin-Off Transaction, the Company incurred approximately $60 million in separation costs during the year ended December 31, 2021, which are included within earnings from discontinued operations, net of income taxes in the accompanying consolidated statements of operations. These costs primarily related to professional fees associated with planning the Spin-Off Transaction, as well as Spin-Off Transaction activities within finance, tax, legal and information system functions and certain investment banking fees incurred upon completion of the Spin-Off Transaction.
The major components of the Income from discontinued operations, net of tax presented in the consolidated statements of operations during the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 are included in the table below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
December 31, 2021 (1)
|
|
December 31, 2020
|
|
March 31, 2020
|
Net sales
|
$
|
973.0
|
|
|
$
|
870.4
|
|
|
$
|
1,358.2
|
|
Cost of sales
|
598.6
|
|
|
572.0
|
|
|
862.8
|
|
Selling, general and administrative expenses
|
260.2
|
|
|
168.0
|
|
|
236.4
|
|
Restructuring and other similar charges
|
1.9
|
|
|
12.9
|
|
|
14.3
|
|
Amortization of intangible assets
|
9.9
|
|
|
10.1
|
|
|
14.5
|
|
Interest expense, net
|
4.1
|
|
|
3.3
|
|
|
2.0
|
|
|
|
|
|
|
|
Gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
(3.0)
|
|
Actuarial loss on pension and postretirement benefit obligations
|
4.8
|
|
|
1.3
|
|
|
15.7
|
|
|
|
|
|
|
|
Other non-operating (income) expenses, net
|
(5.6)
|
|
|
(6.4)
|
|
|
4.4
|
|
Income from discontinued operations before income tax
|
99.1
|
|
|
109.2
|
|
|
211.1
|
|
|
|
|
|
|
|
Income tax provision
|
(28.0)
|
|
|
(25.8)
|
|
|
(49.7)
|
|
Equity method investment income
|
0.3
|
|
|
0.2
|
|
|
—
|
|
Non-controlling interest income
|
(0.2)
|
|
|
(0.4)
|
|
|
(0.3)
|
|
Income from discontinued operations, net of tax
|
$
|
71.2
|
|
|
$
|
83.2
|
|
|
$
|
161.1
|
|
____________________
(1)Results of operations during the year ended December 31, 2021 reflect the period from January 1, 2021 through October 4, 2021, the date on which the Spin-Off Transaction of PMC was completed.
The carrying amounts of major classes of assets and liabilities associated with PMC included as part of discontinued operations presented in the consolidated balance sheets as of December 31, 2020 are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
Assets
|
|
|
|
|
Cash and cash equivalents
|
$
|
193.3
|
|
|
|
|
Receivables, net
|
171.2
|
|
|
|
|
Inventories
|
194.0
|
|
|
|
|
Other current assets
|
27.4
|
|
|
|
|
Total non-current assets of discontinued operation
|
$
|
585.9
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
$
|
365.2
|
|
|
|
|
Intangible assets, net
|
324.3
|
|
|
|
|
Goodwill
|
1,125.3
|
|
|
|
|
Other assets
|
67.3
|
|
|
|
|
Total non-current assets of discontinued operation
|
$
|
1,882.1
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current maturities of debt
|
$
|
2.1
|
|
|
|
|
Trade payables
|
88.1
|
|
|
|
|
Compensation and benefits
|
43.9
|
|
|
|
|
Current portion of pension and postretirement benefit obligations
|
1.7
|
|
|
|
|
Other current liabilities
|
65.1
|
|
|
|
|
Total current liabilities of discontinued operation
|
$
|
200.9
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
$
|
71.2
|
|
|
|
|
Pension and postretirement benefit obligations
|
91.0
|
|
|
|
|
Deferred income taxes
|
111.4
|
|
|
|
|
Other liabilities
|
73.2
|
|
|
|
|
Total non-current liabilities of discontinued operation
|
$
|
346.8
|
|
|
|
|
|
|
|
|
|
The consolidated statements of cash flows for the prior periods presented have not been adjusted to separately disclose cash flows related to discontinued operations. However, the significant investing and financing cash flows and other significant non-cash operating items associated with the discontinued operations were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
|
December 31, 2021 (1)
|
|
December 31, 2020
|
|
March 31, 2020
|
Depreciation
|
|
$
|
34.9
|
|
|
$
|
33.7
|
|
|
$
|
44.3
|
|
Amortization of intangible assets
|
|
9.9
|
|
|
10.1
|
|
|
14.4
|
|
Gain on disposition of assets
|
|
(10.1)
|
|
|
(1.3)
|
|
|
(0.3)
|
|
Deferred income taxes
|
|
0.5
|
|
|
(3.8)
|
|
|
0.7
|
|
Actuarial loss on pension and postretirement benefit obligations
|
|
4.8
|
|
|
1.3
|
|
|
1.5
|
|
Other non-cash charges
|
|
(0.3)
|
|
|
1.4
|
|
|
1.7
|
|
Gain on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
(3.0)
|
|
Stock-based compensation
|
|
13.9
|
|
|
13.7
|
|
|
7.4
|
|
Expenditures for property, plant and equipment
|
|
(17.5)
|
|
|
(23.5)
|
|
|
(33.7)
|
|
Acquisitions, net of cash acquired
|
|
—
|
|
|
(0.3)
|
|
|
(0.3)
|
|
Proceeds from dispositions of long-lived assets
|
|
14.3
|
|
|
7.2
|
|
|
2.9
|
|
Repayments of debt
|
|
(1.6)
|
|
|
(5.4)
|
|
|
(9.9)
|
|
Proceeds from exercise of stock options
|
|
12.8
|
|
|
9.5
|
|
|
13.0
|
|
Taxes withheld and paid on employees' shared-based payment awards
|
|
(0.5)
|
|
|
(0.4)
|
|
|
—
|
|
Net payments from divestiture of discontinued operations
|
|
4.2
|
|
|
—
|
|
|
(1.3)
|
|
___________________
(1)Results of operations during the year ended December 31, 2021 reflect the period from January 1, 2021 through October 4, 2021, the date on which the Spin-Off Transaction of PMC was completed.
During the year ended March 31, 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 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 were finalized in the year ended March 31, 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 for the year ended March 31, 2020.
The terms of the sale agreement provided the Company to receive contingent consideration, based on, and subject to, the VAG business attainment of Earn-out EBITDA, as defined in the sale agreement. During the year ended December 31, 2021, the Company received a $4.2 million cash payment as a result of the VAG businesses performance in its fiscal year ending March 31, 2021, which represented the final period of the earn-out, and was recorded within income from discontinued operations, net of tax in its consolidated statements of operations.
5. Restructuring and Other Similar Charges
During the year ended December 31, 2021, 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 similar initiatives to optimize its operating margin and manufacturing footprint. As such, the Company expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs and other facility rationalization costs. The Company's restructuring plans are preliminary and the full extent of related expenses are not yet estimable.
The following table summarizes the Company's restructuring and other similar costs incurred during the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021
|
|
Nine Month Transition Period Ended December 31, 2020
|
|
Year Ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
Employee termination benefits
|
|
|
|
$
|
3.7
|
|
|
$
|
1.8
|
|
|
$
|
0.6
|
|
|
|
|
|
|
|
|
|
|
Contract termination and other associated costs
|
|
|
|
—
|
|
|
(0.1)
|
|
|
0.6
|
|
Total restructuring and other similar costs
|
|
|
|
$
|
3.7
|
|
|
$
|
1.7
|
|
|
$
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Costs To-date (Period from April 1, 2011 to December 31, 2021)
|
|
Restructuring Costs To-date (Period from April 1, 2011 to December 31, 2021)
|
|
|
|
|
|
|
|
|
|
Employee termination benefits
|
|
$
|
16.8
|
|
|
|
|
Contract termination and other associated costs
|
|
7.3
|
|
Total restructuring and other similar costs
|
|
$
|
24.1
|
|
The following table summarizes the activity in the Company's accrual for restructuring and other similar costs for the year ended December 31, 2021, and the nine month Transition Period ended December 31, 2020 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination benefits
|
|
|
|
Contract termination and other associated costs
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Restructuring Costs, March 31, 2020 (1)
|
|
$
|
0.1
|
|
|
|
|
$
|
1.1
|
|
|
$
|
1.2
|
|
Charges
|
|
1.8
|
|
|
|
|
(0.1)
|
|
|
1.7
|
|
Cash payments
|
|
(1.4)
|
|
|
|
|
(1.0)
|
|
|
(2.4)
|
|
|
|
|
|
|
|
|
|
|
Accrued Restructuring Costs, December 31, 2020 (1)
|
|
$
|
0.5
|
|
|
|
|
$
|
—
|
|
|
$
|
0.5
|
|
Charges
|
|
3.7
|
|
|
|
|
—
|
|
|
3.7
|
|
Cash payments
|
|
(1.8)
|
|
|
|
|
—
|
|
|
(1.8)
|
|
|
|
|
|
|
|
|
|
|
Accrued Restructuring Costs, December 31, 2021 (1)
|
|
$
|
2.4
|
|
|
|
|
$
|
—
|
|
|
$
|
2.4
|
|
|
|
|
|
|
|
|
|
|
____________________
(1) The restructuring accrual is included in Other current liabilities on the consolidated balance sheets.
6. 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. 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 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 consolidated statements of operations.
Revenue by Category
The following tables present our revenue disaggregated by customer type and customer geography (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
Customer Type
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional
|
|
$
|
334.8
|
|
|
$
|
221.6
|
|
|
$
|
269.8
|
|
Commercial
|
|
286.7
|
|
|
170.7
|
|
|
215.2
|
|
All other
|
|
289.4
|
|
|
170.4
|
|
|
225.1
|
|
Total
|
|
$
|
910.9
|
|
|
$
|
562.7
|
|
|
$
|
710.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Nine Month Transition Period Ended
|
|
|
|
Year Ended
|
Geography
|
|
|
|
December 31, 2021
|
|
|
|
December 31, 2020
|
|
|
|
March 31, 2020
|
United States
|
|
|
|
$
|
819.9
|
|
|
|
|
$
|
512.6
|
|
|
|
|
$
|
639.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
|
67.4
|
|
|
|
|
31.0
|
|
|
|
|
41.7
|
|
Rest of world
|
|
|
|
23.6
|
|
|
|
|
19.1
|
|
|
|
|
28.8
|
|
Total
|
|
|
|
$
|
910.9
|
|
|
|
|
$
|
562.7
|
|
|
|
|
$
|
710.1
|
|
Contract Balances
For substantially all of the Company's product sales, the customer is billed 100% of the contract value when the product ships and payment is generally due 30 days from shipment. Certain contracts include longer payment periods; however, the Company has elected to utilize the practical expedient in which the Company will only recognize a financing component to the sale if payment is due more than one year from the date of shipment.
Billings are recorded as accounts receivable when an unconditional right to the contractual consideration exists. Contract assets arise when the Company performs by transferring goods or services to a customer before the customer pays consideration, or before the customer’s payment is due. A contract liability exists when the Company has received consideration or the amount is due from the customer in advance of revenue recognition. Contract liabilities and contract assets as of December 31, 2021 and December 31, 2020 were not material.
Backlog
The Company had backlog of $69.9 million and $36.3 million as of December 31, 2021, and December 31, 2020, respectively, 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 100% of the backlog as revenue in the year ending December 31, 2022.
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 December 31, 2021 and December 31, 2020, the contract assets capitalized are not significant. During the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020, and the fiscal year ended March 31, 2020, contract asset amortization was not significant and no impairment losses were recognized.
7. Inventories
The major classes of inventories are summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
2021
|
|
2020
|
Finished goods
|
$
|
169.1
|
|
|
$
|
111.9
|
|
Work in progress
|
5.1
|
|
|
2.5
|
|
|
|
|
|
Raw materials
|
14.6
|
|
|
11.8
|
|
Inventories at First-in, First-Out ("FIFO") cost
|
188.8
|
|
|
126.2
|
|
Adjustment to state inventories at Last-in, First-Out ("LIFO") cost
|
(4.3)
|
|
|
9.9
|
|
|
$
|
184.5
|
|
|
$
|
136.1
|
|
8. Property, Plant and Equipment
Property, plant and equipment, net is summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
2021
|
|
2020
|
Land
|
$
|
7.4
|
|
|
$
|
7.3
|
|
Buildings and improvements
|
47.6
|
|
|
48.6
|
|
Machinery and equipment
|
45.2
|
|
|
44.2
|
|
Hardware and software
|
17.9
|
|
|
19.7
|
|
Construction in-progress
|
5.8
|
|
|
5.4
|
|
|
123.9
|
|
|
125.2
|
|
Less accumulated depreciation
|
(59.5)
|
|
|
(55.6)
|
|
|
$
|
64.4
|
|
|
$
|
69.6
|
|
9. Goodwill and Intangible Assets
The changes in the net carrying value of goodwill for the year ended December 31, 2021, and nine month Transition Period ended December 31, 2020, consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount as of March 31, 2020
|
|
|
|
|
|
$
|
200.5
|
|
Acquisitions (1)
|
|
|
|
|
|
42.8
|
|
Purchase accounting adjustments (1)
|
|
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
|
|
|
|
|
0.7
|
|
Net carrying amount as of December 31, 2020
|
|
|
|
|
|
$
|
244.8
|
|
Acquisitions (1)
|
|
|
|
|
|
8.8
|
|
Purchase accounting adjustments (1)
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
Currency translation and other adjustments
|
|
|
|
|
|
0.2
|
|
Net carrying amount as of December 31, 2021
|
|
|
|
|
|
$
|
254.1
|
|
______________________
(1)Refer to Note 3, Acquisitions for additional information regarding acquisitions.
Total cumulative goodwill impairment charges as of December 31, 2021 and 2020 was $337.1 million and $337.1 million, respectively.
The gross carrying amount and accumulated amortization for each major class of identifiable intangible assets as of December 31, 2021 and December 31, 2020 consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
Weighted Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
Patents
|
9 years
|
|
$
|
24.9
|
|
|
$
|
(22.4)
|
|
|
$
|
2.5
|
|
Customer relationships (including distribution network)
|
15 years
|
|
351.1
|
|
|
(269.1)
|
|
|
82.0
|
|
Tradenames
|
13 years
|
|
11.5
|
|
|
(4.0)
|
|
|
7.5
|
|
Intangible assets not subject to amortization - trademarks and tradenames
|
|
|
87.1
|
|
|
—
|
|
|
87.1
|
|
Total intangible assets, net
|
15 years
|
|
$
|
474.6
|
|
|
$
|
(295.5)
|
|
|
$
|
179.1
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Weighted Average Useful Life
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
Patents
|
9 years
|
|
$
|
24.4
|
|
|
$
|
(22.1)
|
|
|
$
|
2.3
|
|
Customer relationships (including distribution network)
|
15 years
|
|
349.5
|
|
|
(246.9)
|
|
|
102.6
|
|
Tradenames
|
13 years
|
|
11.5
|
|
|
(3.2)
|
|
|
8.3
|
|
Intangible assets not subject to amortization - trademarks and tradenames
|
|
|
87.1
|
|
|
—
|
|
|
87.1
|
|
Total intangible assets, net
|
15 years
|
|
$
|
472.5
|
|
|
$
|
(272.2)
|
|
|
$
|
200.3
|
|
Intangible asset amortization expense totaled $23.5 million, $16.9 million and $20.9 million for the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, respectively. Customer relationships acquired during the year ended December 31, 2021 were assigned a weighted-average useful life of 10 years. Tradenames, and customer relationships acquired during the nine month Transition Period ended December 31, 2020 were assigned a weighted-average useful life of 5 years and 18 years, respectively.
The Company expects to recognize amortization expense on the intangible assets subject to amortization of $7.9 million in 2022, $6.5 million in 2023, $6.5 million in 2024, $6.4 million in 2025, and $6.3 million in 2026.
10. Other Current Liabilities
Other current liabilities are summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
|
|
|
Sales rebates
|
$
|
38.6
|
|
|
$
|
28.0
|
|
Commissions
|
8.1
|
|
|
5.3
|
|
Restructuring and other similar charges (1)
|
2.4
|
|
|
0.5
|
|
Product warranty (2)
|
1.3
|
|
|
1.2
|
|
Risk management (3)
|
11.3
|
|
|
9.1
|
|
Legal and environmental
|
3.0
|
|
|
1.1
|
|
Taxes, other than income taxes
|
1.8
|
|
|
0.6
|
|
Taxes payable on behalf of PMC
|
21.9
|
|
|
—
|
|
Income taxes payable
|
2.1
|
|
|
2.4
|
|
Interest payable
|
—
|
|
|
1.3
|
|
Current portion of operating lease liability (4)
|
6.1
|
|
|
5.7
|
|
Other
|
9.8
|
|
|
5.3
|
|
|
$
|
106.4
|
|
|
$
|
60.5
|
|
___________________
(1)See more information related to the restructuring obligations balance within Note 5, Restructuring and Other Similar Charges.
(2)See more information related to the product warranty obligations balance within Note 2, Significant Accounting Policies.
(3)Includes projected liabilities related to losses arising from automobile, general and product liability claims.
(4)See more information related to leases within Note 14, Leases.
11. Long-Term Debt
Long-term debt is summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
Term loan (1)
|
|
$
|
539.2
|
|
|
$
|
621.5
|
|
4.875% Senior Notes due 2025 (2)
|
|
—
|
|
|
496.3
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases and other subsidiary debt (3)
|
|
0.3
|
|
|
0.5
|
|
Total
|
|
539.5
|
|
|
1,118.3
|
|
Less current maturities
|
|
5.6
|
|
|
0.3
|
|
Long-term debt
|
|
$
|
533.9
|
|
|
$
|
1,118.0
|
|
____________________
(1)Includes unamortized debt issuance costs of $10.8 million and $3.5 million at December 31, 2021 and December 31, 2020, respectively.
(2)Includes unamortized debt issuance costs of $0.0 million and $3.7 million at December 31, 2021 and December 31, 2020, respectively.
(3)See more information related to finance leases within Note 14, Leases.
Senior Secured Credit Facility
On October 4, 2021, ZBS Global, Inc. (“Holdings”), Zurn Holdings, Inc., Zurn LLC (together, the “Borrowers”), the lenders from time to time party thereto, and Credit Suisse AG, Cayman Islands Branch, as administrative agent for the lenders (in such capacity, the “Administrative Agent”) entered into a Fourth Amended and Restated First Lien Credit Agreement (the “Credit Agreement”). The Credit Agreement is funded by a syndicate of banks and other financial institutions and provides for (i) a $550.0 million term loan facility (the “Term Loan”) and (ii) a $200.0 million revolving credit facility (the “Revolving Credit Facility”).
The obligations under the Credit Agreement and related documents are secured by liens on substantially all of the assets of Holdings, the Borrowers, and certain subsidiaries of the Borrowers pursuant to a Third Amended and Restated Guarantee and Collateral Agreement, dated as of October 4, 2021, among Holdings, the Borrowers, the subsidiaries of the Borrowers party thereto, and the Administrative Agent, and certain other collateral documents.
The Credit Agreement contains representations, warranties, covenants and events of default, including, without limitation, a financial covenant under which the Borrowers are, if certain conditions are met, obligated to maintain on a consolidated basis, as of the end of each fiscal quarter, a certain maximum Net First Lien Leverage Ratio (as defined in the Credit Agreement). As of December 31, 2021, the Borrowers were in compliance with all applicable covenants under the Credit Agreement.
The Credit Agreement amended and restated in its entirety the Company’s Third Amended and Restated First Lien Credit Agreement, as amended (the “Prior Credit Agreement”). At December 31, 2020, the Prior Credit Agreement was funded by a syndicate of banks and other financial institutions and provided for (i) a $625.0 million term loan facility (the “Prior Term Loan”) and (ii) a $264.0 million revolving credit facility (the “Prior Revolving Credit Facility”).
In connection with the amendment of the Credit Agreement, the Company recognized a $20.4 million loss on the extinguishment of debt, comprised of refinancing-related costs incurred and a non-cash write-off of debt issuance costs associated with the previous debt outstanding.
Term Debt
The Credit Agreement provided for the issuance of a term loan facility in an aggregate principal amount of $550.0 million. The proceeds of the Term Loan were, together with the Land Newco Dividend and cash on hand, used to (i) repay in full the aggregate principal amount outstanding of the Prior Term Loan, together with accrued interest thereon, (ii) redeem the $500 million of outstanding principal amount of the Notes, as described below, and (iii) pay related fees and expenses.
The Term Loan has a maturity date of October 4, 2028. Commencing on March 31, 2022, the Borrowers are required to make quarterly payments of principal in an amount equal to $1.4 million on each quarter until the maturity date.
The Term Loan bears interest at the Borrowers’ option, by reference to a base rate or a rate based on LIBOR, in either case, plus an applicable margin determined quarterly based on the Borrowers’ Net First Lien Leverage Ratio as of the last day of each fiscal quarter. If the Net First Lien Leverage Ratio is greater than 1.80 to 1.00, the applicable margin shall equal 1.25%
in the case of base rate borrowings and 2.25% in the case of LIBOR borrowings. In the event the Borrowers’ Net First Lien Leverage Ratio is less than or equal to 1.80 to 1.0, the applicable margin on both base rate and LIBOR borrowings would decrease by 0.25%. The Borrowers’ Net First Lien Leverage Ratio was 2.35 to 1.0 as of December 31, 2021. Certain prepayments of the Term Loan occurring on or prior to April 4, 2022 are subject to a 1.00% prepayment penalty.
At December 31, 2021 and December 31, 2020, the borrowings under the Term Loan and Prior Term Loan had weighted-average effective interest rates of 2.75% and 1.89%, respectively. During the year ended December 31, 2021 and the nine months ended December 31, 2020, the borrowings under the Term Loan and Prior Term Loan had weighted-average effective interest rates of 2.07% and 2.02%, respectively.
Revolving Credit Facility
The Credit Agreement includes a $200.0 million revolving credit facility that has a maturity date of October 2, 2026. Borrowings under the Revolving Credit Facility bear interest at the Borrowers’ option, by reference to a base rate or a rate based on LIBOR, in either case, plus an applicable margin determined quarterly based on the Borrowers’ Net First Lien Leverage Ratio as of the last day of each fiscal quarter. If the Net First Lien Leverage Ratio is greater than 2.00 to 1.00, the applicable margin shall equal 1.00% in the case of base rate borrowings and 2.00% in the case of LIBOR borrowings. In the event the Borrowers' Net First Lien Leverage Ratio is less than or equal to 2.00 to 1.00, the applicable margin on both base rate and LIBOR borrowings would decrease by 0.25%. The Borrowers’ Net First Lien Leverage Ratio was 2.35 to 1.0 as of December 31, 2021. The Borrowers are also required to pay a quarterly commitment fee on the average daily unused portion of the Revolving Credit Facility for each fiscal quarter and fees in connection with the issuance of letters of credit. If the Net First Lien Leverage Ratio is greater than 2.00 to 1.00, the commitment fee shall equal 0.50%, and if the Company's Net First Lien Leverage Ratio is less than or equal to 2.00 to 1.00, the commitment fee shall equal 0.375%
At December 31, 2021 and December 31, 2020, the amounts borrowed under the Revolving Credit Facility and Prior Revolving Credit Facility were zero, respectively. As of December 31, 2021 and December 31, 2020, $6.1 million and $3.0 million of the Revolving Credit Facility and Prior Revolving Credit Facility, as applicable, were considered utilized in connection with outstanding letters of credit, respectively.
4.875% Senior Notes due 2025
On December 7, 2017, the Company issued $500.0 million aggregate principal amount of 4.875% senior notes due December 15, 2025 (the “Notes”). The Notes were issued by ZBS Global, Inc. (f/k/a RBS Global, Inc.) and Zurn LLC (f/k/a 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 were general senior unsecured obligations of the Issuers. The Company separately entered into a Parent Guarantee with the Trustee whereby it guaranteed certain obligations of the Issuers under the Indenture. The Notes paid interest semi-annually on June 15 and December 15. The Notes were not registered under the Securities Act of 1933 or any state securities laws. Debt issuance costs associated with the Notes were being amortized over the life of the Notes as interest expense using the effective interest method.
The Issuers redeemed the Notes on October 4, 2021, at a redemption price equal to 102.438% of the principal amount thereof plus accrued and unpaid interest.
Accounts Receivable Securitization Program
On September 25, 2020, certain subsidiaries of the Company entered into a $100 million accounts receivable securitization facility (the “Securitization”) with Mizuho Bank, Ltd. (“Mizuho”) to replace the Company’s previous $100.0 million accounts receivable securitization facility with Wells Fargo & Company, which was scheduled to expire in December 2020. On May 17, 2021, the Company terminated the Securitization.
Other Subsidiary Debt
At December 31, 2021 and 2020, various wholly owned subsidiaries had additional debt of $0.3 million and $0.5 million, respectively, comprised primarily of finance lease obligations. For more information related to finance leases, see Note 14, Leases.
Future Debt Maturities
Future maturities of debt and financing lease obligations as of December 31, 2021, excluding the unamortized debt issuance costs of $10.8 million, were as follows (in millions):
|
|
|
|
|
|
Years ending December 31:
|
|
2022
|
$
|
5.6
|
|
2023
|
5.6
|
|
2024
|
5.6
|
|
2025
|
5.5
|
|
2026
|
5.5
|
|
Thereafter
|
522.5
|
|
|
$
|
550.3
|
|
Cash interest paid for the year ended December 31, 2021, the nine months ended December 31, 2020 and the fiscal year ended March 31, 2020 was $34.7 million, $39.8 million and $54.9 million, respectively.
12. Comparative Twelve and Nine Month Financial Information
As discussed in Note 1, Basis of Presentation and Description of Business, this Form 10-K includes financial information for the Transition Period. Consolidated Statements of Operations and Cash Flows for the twelve months ended December 31, 2021 and 2020 and nine months ended December 31, 2020 and 2019 are summarized below. All data for the twelve months ended December 31, 2020 and nine months ended December 31, 2019, are derived from the Company's unaudited condensed consolidated financial statements.
Consolidated Statements of Operations
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Months Ended
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
910.9
|
|
|
$
|
746.1
|
|
|
$
|
562.7
|
|
|
526.7
|
|
Cost of sales
|
|
537.7
|
|
|
407.9
|
|
|
309.4
|
|
|
289.0
|
|
Gross profit
|
|
373.2
|
|
|
338.2
|
|
|
253.3
|
|
|
237.7
|
|
Selling, general and administrative expenses
|
|
239.0
|
|
|
206.1
|
|
|
153.7
|
|
|
144.0
|
|
Restructuring and other similar charges
|
|
3.7
|
|
|
2.0
|
|
|
1.7
|
|
|
0.9
|
|
Amortization of intangible assets
|
|
23.5
|
|
|
22.4
|
|
|
16.9
|
|
|
15.4
|
|
Income from operations
|
|
107.0
|
|
|
107.7
|
|
|
81.0
|
|
|
77.4
|
|
Non-operating (expense) income:
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(34.7)
|
|
|
(45.9)
|
|
|
(33.3)
|
|
|
(44.0)
|
|
Loss on the extinguishment of debt
|
|
(20.4)
|
|
|
—
|
|
|
—
|
|
|
(2.0)
|
|
Actuarial gain (loss) on pension and postretirement benefit obligations
|
|
1.2
|
|
|
(21.2)
|
|
|
(0.3)
|
|
|
—
|
|
Other expense, net
|
|
(0.7)
|
|
|
(2.5)
|
|
|
(1.9)
|
|
|
(0.6)
|
|
Income from continuing operations before income taxes
|
|
52.4
|
|
|
38.1
|
|
|
45.5
|
|
|
30.8
|
|
Provision for income taxes
|
|
(2.7)
|
|
|
(9.5)
|
|
|
(10.5)
|
|
|
(5.4)
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
49.7
|
|
|
28.6
|
|
|
35.0
|
|
|
25.4
|
|
Income from discontinued operations, net of tax
|
|
71.2
|
|
|
118.1
|
|
|
83.2
|
|
|
126.2
|
|
Net income
|
|
120.9
|
|
|
146.7
|
|
|
118.2
|
|
|
151.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on preferred stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.4)
|
|
Net income attributable to Zurn common stockholders
|
|
$
|
120.9
|
|
|
$
|
146.7
|
|
|
$
|
118.2
|
|
|
$
|
137.2
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share attributable to Zurn common stockholders:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.41
|
|
|
$
|
0.24
|
|
|
$
|
0.29
|
|
|
$
|
0.10
|
|
Discontinued operations
|
|
$
|
0.59
|
|
|
$
|
0.98
|
|
|
$
|
0.69
|
|
|
$
|
1.17
|
|
Net income
|
|
$
|
1.00
|
|
|
$
|
1.21
|
|
|
$
|
0.98
|
|
|
$
|
1.27
|
|
Diluted net income per share attributable to Zurn common stockholders:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.40
|
|
|
$
|
0.23
|
|
|
$
|
0.28
|
|
|
$
|
0.10
|
|
Discontinued operations
|
|
$
|
0.57
|
|
|
$
|
0.96
|
|
|
$
|
0.68
|
|
|
$
|
1.14
|
|
Net income
|
|
$
|
0.97
|
|
|
$
|
1.19
|
|
|
$
|
0.96
|
|
|
$
|
1.24
|
|
Weighted-average number of common shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
Basic
|
|
121,493
|
|
|
120,764
|
|
|
120,428
|
|
|
108,250
|
|
Effect of dilutive equity awards
|
|
3,621
|
|
|
2,688
|
|
|
2,771
|
|
|
2,253
|
|
Diluted
|
|
125,114
|
|
|
123,452
|
|
|
123,199
|
|
|
110,503
|
|
Consolidated Statements of Cash Flows
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Months Ended
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
Operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
120.9
|
|
|
$
|
146.7
|
|
|
$
|
118.2
|
|
|
$
|
151.6
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
44.1
|
|
|
53.2
|
|
|
40.0
|
|
|
38.0
|
|
Amortization of intangible assets
|
|
33.4
|
|
|
36.1
|
|
|
27.0
|
|
|
26.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on dispositions of property, plant and equipment
|
|
(10.1)
|
|
|
(1.8)
|
|
|
(1.1)
|
|
|
—
|
|
Deferred income taxes
|
|
(12.1)
|
|
|
(14.7)
|
|
|
(7.0)
|
|
|
4.9
|
|
Actuarial loss on pension and postretirement benefit obligations
|
|
3.6
|
|
|
37.4
|
|
|
1.6
|
|
|
0.8
|
|
Other non-cash charges
|
|
(3.6)
|
|
|
3.5
|
|
|
0.2
|
|
|
0.7
|
|
Gain on extinguishment of debt
|
|
20.4
|
|
|
—
|
|
|
—
|
|
|
(1.0)
|
|
Stock-based compensation expense
|
|
51.4
|
|
|
44.8
|
|
|
36.6
|
|
|
18.7
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
(66.6)
|
|
|
10.8
|
|
|
65.1
|
|
|
34.4
|
|
Inventories
|
|
(79.5)
|
|
|
35.0
|
|
|
0.5
|
|
|
(34.4)
|
|
Other assets
|
|
(7.7)
|
|
|
23.8
|
|
|
2.4
|
|
|
(18.2)
|
|
Accounts payable
|
|
99.1
|
|
|
(56.4)
|
|
|
(65.1)
|
|
|
(12.4)
|
|
Accruals and other
|
|
30.3
|
|
|
1.8
|
|
|
(22.1)
|
|
|
(34.7)
|
|
Cash provided by operating activities
|
|
223.6
|
|
|
320.2
|
|
|
196.3
|
|
|
174.7
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Expenditures for property, plant and equipment
|
|
(23.3)
|
|
|
(44.2)
|
|
|
(28.3)
|
|
|
(25.5)
|
|
Acquisitions, net of cash acquired
|
|
(17.1)
|
|
|
(161.4)
|
|
|
(102.0)
|
|
|
(25.1)
|
|
Proceeds from dispositions of long-lived assets
|
|
14.3
|
|
|
9.0
|
|
|
7.8
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
Net proceeds (payment) from divestiture of discontinued operations - VAG
|
|
4.2
|
|
|
—
|
|
|
—
|
|
|
(1.3)
|
|
Cash used for investing activities
|
|
(21.9)
|
|
|
(196.6)
|
|
|
(122.5)
|
|
|
(49.0)
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Proceeds from borrowings of debt
|
|
550.0
|
|
|
331.0
|
|
|
6.0
|
|
|
725.0
|
|
Repayments of debt
|
|
(1,126.7)
|
|
|
(336.7)
|
|
|
(336.4)
|
|
|
(835.3)
|
|
Dividend received from Spin-Off Transaction of PMC
|
|
486.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash transferred to PMC related to Spin-Off Transaction
|
|
(192.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Payment of debt issuance costs
|
|
(28.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Repurchase of common stock
|
|
(0.9)
|
|
|
(140.0)
|
|
|
(59.3)
|
|
|
(20.0)
|
|
Payment of common stock dividends
|
|
(36.4)
|
|
|
(38.6)
|
|
|
(28.8)
|
|
|
—
|
|
Payment of preferred stock dividends
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17.4)
|
|
Proceeds from exercise of stock options
|
|
24.9
|
|
|
37.5
|
|
|
18.3
|
|
|
16.8
|
|
Taxes withheld and paid on employees' share-based payment awards
|
|
(32.3)
|
|
|
(9.4)
|
|
|
(9.4)
|
|
|
(7.6)
|
|
|
|
|
|
|
|
|
|
|
Cash used for financing activities
|
|
(356.2)
|
|
|
(156.2)
|
|
|
(409.6)
|
|
|
(138.5)
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
|
(4.5)
|
|
|
11.2
|
|
|
18.0
|
|
|
(2.7)
|
|
Decrease in cash, cash equivalents and restricted cash
|
|
(159.0)
|
|
|
(21.4)
|
|
|
(317.8)
|
|
|
(15.5)
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
255.6
|
|
|
277.0
|
|
|
573.4
|
|
|
292.5
|
|
Cash, cash equivalents and restricted cash at end of period (1)
|
|
$
|
96.6
|
|
|
$
|
255.6
|
|
|
$
|
255.6
|
|
|
$
|
277.0
|
|
____________________
(1) The Company has combined cash flows from discontinued operations with cash flows from continuing operations within operating, investing and financing categories. As such cash and cash equivalents and restricted cash include $193.3 million and $136.4 million of cash and cash equivalents from the discontinued operation as of December 31, 2020 and December 31, 2019, respectively.
13. 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 Non-Derivative Financial Instruments
The carrying amounts of cash, receivables, payables and accrued liabilities approximated fair value at December 31, 2021 and December 31, 2020 due to the short-term nature of those instruments. The fair value of long-term debt recorded on the consolidated balance sheets as of December 31, 2021 and December 31, 2020 was approximately $552.4 million and $1,209.3 million, respectively. The fair value is based on quoted market prices for the same issues.
Long-lived Assets and Intangible Assets
Long-lived assets (which include property, plant and equipment and real estate) may be measured at fair value if such assets are held-for-sale or when there is a determination that the asset is impaired. Intangible assets (which include patents, tradenames, customer relationships, and non-compete agreements) also may be measured at fair value when there is a determination that the asset is impaired. The determination of fair value for these assets is based on the best information available that resides within Level 3 of the fair value hierarchy, including internal cash flow estimates discounted at an appropriate interest rate, quoted market prices when available, market prices for similar assets and independent appraisals, as appropriate. For real estate, cash flow estimates are based on current market estimates that reflect current and projected lease profiles and available industry information about expected trends in rental, occupancy and capitalization rates.
14. 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 consolidated balance sheets and are instead recognized on a straight-line basis over the lease term.
Right-of-use (“ROU”) assets and liabilities are recognized in the consolidated balance sheets based on the present value of remaining lease payments over the lease term. Additionally, ROU assets include any lease payments made at or before the 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.
ROU assets and lease liability balances recorded on the consolidated balance sheets are summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases
|
|
Classification
|
|
December 31, 2021
|
|
December 31, 2020
|
Assets:
|
|
|
|
|
|
|
Operating ROU assets
|
|
Other assets
|
|
$
|
14.1
|
|
|
$
|
18.1
|
|
Finance ROU assets
|
|
Property, plant and equipment, net (1)
|
|
0.5
|
|
|
0.4
|
|
Total ROU assets
|
|
|
|
$
|
14.6
|
|
|
$
|
18.5
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Operating
|
|
Other current liabilities
|
|
$
|
6.1
|
|
|
$
|
5.7
|
|
Finance
|
|
Current maturities of debt
|
|
0.1
|
|
|
0.1
|
|
Non-current
|
|
|
|
|
|
|
Operating
|
|
Operating lease liability
|
|
8.9
|
|
|
13.4
|
|
Finance
|
|
Long-term debt
|
|
0.2
|
|
|
0.1
|
|
Total lease liabilities
|
|
|
|
$
|
15.3
|
|
|
$
|
19.3
|
|
|
|
|
|
|
|
|
____________________
(1)Finance lease assets are recorded net of accumulated amortization of $0.2 million and $0.1 million as of December 31, 2021 and December 31, 2020, respectively.
The components of lease expense reported in the consolidated statements of operations are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
|
Operating lease expenses (1)
|
|
$
|
6.1
|
|
|
$
|
4.2
|
|
|
$
|
5.0
|
|
|
|
Finance lease expenses:
|
|
|
|
|
|
|
|
|
Depreciation of finance ROU assets (1)
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
|
Interest on lease liabilities (2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Total finance lease expense
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
|
Variable and short-term lease expense (1)
|
|
3.5
|
|
|
2.4
|
|
|
2.7
|
|
|
|
Total lease expense
|
|
$
|
9.7
|
|
|
$
|
6.6
|
|
|
$
|
7.7
|
|
|
|
____________________
(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 December 31, 2021 are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ending December 31,
|
|
Operating Leases (1)
|
|
Finance Leases (1)
|
2022
|
|
$
|
6.5
|
|
|
$
|
0.1
|
|
2023
|
|
5.0
|
|
|
0.1
|
|
2024
|
|
3.0
|
|
|
0.1
|
|
2025
|
|
0.8
|
|
|
—
|
|
2026
|
|
0.4
|
|
|
—
|
|
Thereafter
|
|
—
|
|
|
—
|
|
Total future minimum lease payments
|
|
15.7
|
|
|
0.3
|
|
Less: Imputed interest
|
|
(0.7)
|
|
|
—
|
|
Total lease liabilities
|
|
$
|
15.0
|
|
|
$
|
0.3
|
|
____________________
(1)Excludes legally binding minimum lease payments for leases signed but not yet commenced.
The weighted-average remaining lease terms and discount rates for leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
Lease Term and Discount Rate
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
Weighted-average remaining lease terms (years):
|
|
|
|
|
|
|
Operating leases
|
|
2.8
|
|
3.5
|
|
4.1
|
Finance leases
|
|
3.3
|
|
3.1
|
|
2.7
|
Weighted-average discount rate:
|
|
|
|
|
|
|
Operating leases
|
|
3.3
|
%
|
|
3.5
|
%
|
|
3.5
|
%
|
Finance leases
|
|
3.4
|
%
|
|
3.5
|
%
|
|
3.4
|
%
|
Cash paid for amounts included in the measurement of lease liabilities are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
Operating cash flows from operating leases
|
|
$
|
6.4
|
|
|
$
|
4.2
|
|
|
$
|
4.6
|
|
Operating cash flows from finance leases
|
|
—
|
|
|
—
|
|
|
—
|
|
Financing cash flows from finance leases
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
ROU assets obtained in exchange for lease liabilities are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
Operating leases
|
|
$
|
1.9
|
|
|
$
|
2.8
|
|
|
$
|
12.0
|
|
Finance leases
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
15. Stock-Based Compensation
Generally, compensation cost associated with share-based payment transactions 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.
The Zurn Water Solutions Corporation Performance Incentive Plan, which was last approved by stockholders in fiscal 2020 (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 Zurn's performance and create value for Zurn's stockholders. To date, equity awards consisting of stock options, Restricted Stock Units ("RSUs") and Performance Stock Units ("PSUs") have been issued under the Plan.
The options granted under the Plan have a maximum term of 10 years after the grant date. Options and RSUs granted since fiscal 2016 generally vest ratably over 3 years. Options and RSUs granted during the Transition Period vested in two equal installments, with the first installment vesting on the first anniversary of the grant date and the second installment vesting on December 31, 2021. During the year ended December 31, 2021, RSUs were granted to certain employees that vest ratably over 2 years. RSUs granted to nonemployee directors vest immediately, but shares are not issued until six months after the director's cessation of service. Other than the PSUs granted during the Transition Period, PSUs generally cliff vest after 3 years. PSUs granted during the Transition Period cliff vested based on performance in the period from April 1, 2020, through December 31, 2021. The vesting of the PSUs granted during the Transition Period was accelerated in connection with the Spin-Off Transaction based on performance achieved through, and as of the Spin-Off Transaction date.
The Plan permits the grant of awards that may deliver up to an aggregate of 19,665,489 shares of common stock. The Plan is administered by the Compensation Committee.
In connection with the Spin-Off Transaction, the Company made adjustments to the number of unvested stock options, RSUs and PSUs with the intention of preserving the intrinsic value of the recipient's awards prior to the Spin-Off. Accordingly, the number of stock options, RSUs and PSUs outstanding as of the date of the Spin-Off Transaction was multiplied by a factor of 2.03446, and the related grant date fair value was divided by a factor of 2.03446, which resulted in no increase in the intrinsic value of awards outstanding. Stock options and RSU's continue to vest in accordance with their original vesting period. The vesting of PSU's granted prior to the beginning of 2021 was accelerated and all outstanding awards became fully vested and were released at the time of the Spin-Off Transaction based on performance achieved through, and as of the Spin-Off
Transaction date. PSUs granted during 2021 continue to vest in accordance with their original vesting period. These adjustments to the Company’s share-based compensation awards were deemed to be a modification of the awards and resulted in approximately $4.9 million expense, of which $4.5 million was recognized during the year ended December 31, 2021. The remaining $0.4 million will be recognized over the 24 months following the completion of the Spin-Off Transaction.
Stock options and RSUs outstanding that were held by employees who transferred to Regal Rexnord Corporation in connection with the Spin-Off Transaction were canceled and replaced by awards issued by Regal Rexnord Corporation. Employees remaining with the Company did not receive share-based compensation awards of Regal Rexnord Corporation as a result of the Spin-Off Transaction. Except for the conversion of awards, the material terms of the awards held by employees who transferred to Regal Rexnord Corporation remained unchanged.
During the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, the Company recorded $37.5 million, $22.9 million and $19.5 million of stock-based compensation expense from continuing operations, respectively (the related tax benefit on these amounts was $9.2 million for the year ended December 31, 2021, $5.3 million for the nine month Transition Period ended December 31, 2020 and $4.8 million for the fiscal year ended March 31, 2020). During the year ended December 31, 2021, nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, the Company also recorded $18.6 million, $0.4 million and $5.1 million, respectively, of an excess tax benefit related to stock options exercised during each period. As of December 31, 2021, there was $29.0 million of total unrecognized compensation cost related to non-vested stock options, RSUs and PSUs granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2.3 years.
Stock Options
The fair value of each option granted under the Plan was estimated on the date of grant using the Black-Scholes valuation model that uses the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
Expected option term (in years)
|
6.5
|
|
6.5
|
|
6.5
|
Expected volatility factor
|
34
|
%
|
|
35
|
%
|
|
29
|
%
|
Weighted-average risk free interest rate
|
1.02
|
%
|
|
0.48
|
%
|
|
2.27
|
%
|
Expected dividend rate
|
0.5
|
%
|
|
1.3
|
%
|
|
0.0
|
%
|
Management’s estimate of the option term for options granted under the Plan is based on the midpoint between when the options vest and when they expire. The Company uses the simplified method to determine the expected term, as management does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The Company’s expected volatility assumption for all options granted prior to the Spin-Off Transaction is based on the historical volatility of the Company's common stock price. The expected volatility assumption for all options granted after the Spin-Off Transaction is based on the historical volatility of the common stock prices of a peer group. The weighted average risk free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. The weighted-average grant date fair value of options granted under the Plan during the year ended December 31, 2021, nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 was $13.54, $7.69 and $9.50, respectively. The total fair value of options vested during the year ended December 31, 2021, nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 was $3.6 million, $4.6 million and $10.2 million, respectively.
A summary of stock option activity during the year ended December 31, 2021, nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
Shares
|
|
Weighted Avg. Exercise Price
|
|
Shares
|
|
Weighted Avg. Exercise Price
|
|
Shares
|
|
Weighted Avg. Exercise Price
|
Number of shares under options:
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of period
|
3,862,822
|
|
|
$
|
22.99
|
|
|
5,513,156
|
|
|
$
|
22.28
|
|
|
7,843,911
|
|
|
$
|
20.49
|
|
Granted
|
432,478
|
|
|
39.79
|
|
|
197,565
|
|
|
25.54
|
|
|
154,934
|
|
|
27.50
|
|
Exercised (1)
|
(3,260,839)
|
|
|
14.24
|
|
|
(1,780,068)
|
|
|
20.92
|
|
|
(2,398,363)
|
|
|
16.65
|
|
Spin-off Transaction conversion
|
2,413,727
|
|
|
10.98
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Canceled/Forfeited
|
(604,126)
|
|
|
32.04
|
|
|
(67,831)
|
|
|
26.90
|
|
|
(87,326)
|
|
|
25.69
|
|
Outstanding at end of period (2)
|
2,844,062
|
|
|
$
|
13.44
|
|
|
3,862,822
|
|
|
$
|
22.99
|
|
|
5,513,156
|
|
|
$
|
22.28
|
|
Exercisable at end of period (3)
|
2,566,451
|
|
|
$
|
11.75
|
|
|
3,450,079
|
|
|
$
|
22.50
|
|
|
4,739,921
|
|
|
$
|
21.61
|
|
______________________
(1)The total intrinsic value of options exercised during the year ended December 31, 2021, nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 was $90.4 million, $19.9 million and $35.1 million, respectively.
(2)The weighted average remaining contractual life of options outstanding was 5.1 years at December 31, 2021, 5.6 years at December 31, 2020 and 5.4 years at March 31, 2020. The aggregate intrinsic value of options outstanding at December 31, 2021 was $65.3 million.
(3)The weighted average remaining contractual life of options exercisable was 4.6 years at December 31, 2021, 5.3 years at December 31, 2020 and 4.9 years at March 31, 2020. The aggregate intrinsic value of options exercisable at December 31, 2021 was $63.3 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Avg. Exercise Price
|
Nonvested options at beginning of period
|
412,743
|
|
|
$
|
27.13
|
|
Granted
|
432,478
|
|
|
39.79
|
|
Spin-off Transaction conversion
|
72,976
|
|
|
17.70
|
|
Vested
|
(322,037)
|
|
|
25.31
|
|
Canceled/Forfeited
|
(318,549)
|
|
|
38.34
|
|
Nonvested options at end of period
|
277,611
|
|
|
$
|
29.06
|
|
Restricted Stock Units
During the year ended December 31, 2021, nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 the Company granted RSUs to certain of its officers, directors, and employees. The fair value of each award is determined based on the Company's closing stock price on the date of grant. A summary of RSU activity during the year ended December 31, 2021, nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
Units
|
|
Weighted Avg. Grant Date Fair Value
|
|
Units
|
|
Weighted Avg. Grant Date Fair Value
|
|
Units
|
|
Weighted Avg. Grant Date Fair Value
|
Nonvested RSUs at beginning of period
|
647,668
|
|
|
$
|
26.54
|
|
|
545,275
|
|
|
$
|
27.54
|
|
|
417,347
|
|
|
$
|
25.94
|
|
Granted
|
483,067
|
|
|
38.56
|
|
|
430,646
|
|
|
25.56
|
|
|
422,707
|
|
|
27.52
|
|
Spin-off conversion Transaction
|
227,058
|
|
|
16.54
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Vested
|
(501,902)
|
|
|
22.49
|
|
|
(287,696)
|
|
|
26.90
|
|
|
(253,831)
|
|
|
24.90
|
|
Canceled/Forfeited
|
(354,560)
|
|
|
32.70
|
|
|
(40,557)
|
|
|
27.04
|
|
|
(40,948)
|
|
|
27.29
|
|
Nonvested RSUs at end of period
|
501,331
|
|
|
$
|
25.98
|
|
|
647,668
|
|
|
$
|
26.54
|
|
|
545,275
|
|
|
$
|
27.54
|
|
Performance Stock Units
During the year ended December 31, 2021, nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, the Company granted PSU's to certain of its officers and employees. The PSUs granted during the nine month Transition Period ended December 31, 2020, had a 21 month performance period (April 1, 2020, to December 31, 2021) while the PSUs granted during the years ended December 31, 2021 and March 31, 2020 have a three-year performance period, and are earned and vest, subject to continued employment, based on performance relative to metrics determined by the Compensation Committee. The number of performance share awards earned, which can range between 0% and 200% of the target awards granted depending on the Company's actual performance during the respective performance period, will be satisfied with Zurn common stock. A summary of PSU activity during the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
Units
|
|
Weighted Avg. Grant Date Fair Value
|
|
Units
|
|
Weighted Avg. Grant Date Fair Value
|
|
Units
|
|
Weighted Avg. Grant Date Fair Value
|
Nonvested PSUs at beginning of period
|
1,022,985
|
|
|
$
|
26.68
|
|
|
480,186
|
|
|
$
|
28.01
|
|
|
351,104
|
|
|
$
|
27.76
|
|
Granted
|
1,559,795
|
|
|
30.93
|
|
|
547,374
|
|
|
25.52
|
|
|
324,619
|
|
|
27.50
|
|
Spin-Off conversion Transaction
|
1,986,910
|
|
|
14.12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Vested
|
(3,739,235)
|
|
|
14.39
|
|
|
—
|
|
|
—
|
|
|
(169,748)
|
|
|
23.13
|
|
Canceled/Forfeited
|
(53,081)
|
|
|
24.72
|
|
|
(4,575)
|
|
|
26.23
|
|
|
(25,789)
|
|
|
26.99
|
|
Nonvested PSUs at end of period
|
777,374
|
|
|
$
|
26.27
|
|
|
1,022,985
|
|
|
$
|
26.68
|
|
|
480,186
|
|
|
$
|
28.01
|
|
During the nine month Transition Period ended December 31, 2020, PSUs were granted with vesting based on goals related to free cash flow conversion. During the year ended December 31, 2021 and the fiscal year ended March 31, 2020, PSUs were granted with vesting based on goals related to free cash flow conversion and return on invested capital. The fair value of the portion of PSUs with vesting based on free cash flow conversion and return on invested capital is determined based on the Company's closing stock price on the date of grant.
16. Retirement Benefits
The Company sponsors pension and other postretirement benefit plans for certain employees. Most of the Company’s employees are accumulating retirement income benefits through defined contribution plans. However, the Company sponsors frozen pension plans for certain salaried participants and ongoing pension benefits for certain employees represented by collective bargaining. These plans provide for monthly pension payments to eligible employees upon retirement. Pension benefits for salaried employees generally are based on years of frozen credited service and average earnings. Pension benefits for hourly employees generally are based on specified benefit amounts and years of service. The Company’s policy is to fund its pension obligations in conformity with the funding requirements under applicable laws and governmental regulations. Other postretirement benefits consist of retiree medical plans that cover a portion of employees in the United States that meet certain age and service requirements.
Net periodic benefit costs recorded on a quarterly basis are primarily comprised of service and interest cost, amortization of unrecognized prior service cost and the expected return on plan assets. The service cost component of net periodic benefit cost is presented within Cost of sales and Selling, general and administrative expenses in the statements of operations while the other components of net periodic benefit cost are presented within Other expense (income), net.
Amounts disclosed within this note include amounts attributable to the Company's discontinued operations, unless otherwise noted. Refer to Note 4 Discontinued Operations for further detail.
The Company recognizes the net actuarial gains or losses in excess of the corridor in operating results during the final quarter of each fiscal year (or upon any required re-measurement event). The corridor is 10% of the greater of the projected benefit obligation or the fair value of the plan assets. In connection with this accounting policy, the Company recognized non-cash actuarial gain (loss) of $1.2 million, $(0.3) million, and $(20.9) million within the consolidated statements of operations from continuing operations, during the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, respectively. These amounts are recorded within Actuarial (loss) gain on pension and postretirement benefit obligations in the consolidated statements of operations. In addition, the Company recognized non-cash actuarial losses associated PMC plans of $4.8 million, $1.3 million and $15.7 million during the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, respectively, which is recorded in income from discontinued operations, net of tax in the consolidated statements of operations.
On October 4, 2021, the Company completed the Spin-Off Transaction of the PMC business. In accordance with the terms of the Spin-Off Transaction agreements, the net assets associated with the PMC business included in the Spin-Off Transaction included unfunded pension and post retirement benefit obligations of $80.4 million. The transfer of these obligations affiliated with certain defined benefit plans was accounted for as a settlement in accordance with the authoritative guidance, which required the Company to perform an interim remeasurement of certain plans. In connection with the remeasurement, the Company recognized pre-tax non-cash actuarial losses of $4.8 million, which is recognized within income from discontinued operations, net of tax.
During the fiscal year ended March 31, 2019, the Company offered participants in a PMC defined benefit plan the opportunity to receive a lump sum settlement as part of the termination process for that plan. During the fiscal year ended March 31, 2020, the obligations associated with the individuals that did not accept the lump sum settlement offer were transferred to an insurance company through the purchase of an annuity. The Company's cash contribution to purchase the annuity contract was $3.9 million. Following the purchase of the annuity contract, the Company has no remaining obligations to participants of this plan. The termination of this plan resulted in the recognition of $0.8 million non-cash pre-tax losses within discontinued operations during the fiscal year ended March 31, 2020.
The components of net periodic benefit cost reported in the consolidated statements of operations are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Nine Month Transition Period Ended
|
|
Year Ended
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
Pension Benefits:
|
|
|
|
|
|
Service cost
|
$
|
0.4
|
|
|
$
|
0.4
|
|
|
$
|
0.5
|
|
Interest cost
|
13.3
|
|
|
13.9
|
|
|
21.9
|
|
Expected return on plan assets
|
(17.3)
|
|
|
(13.9)
|
|
|
(22.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit cost associated with special events:
|
|
|
|
|
|
Settlement
|
—
|
|
|
—
|
|
|
0.8
|
|
|
|
|
|
|
|
PMC Spin-Off
|
5.7
|
|
|
—
|
|
|
—
|
|
Recognition of actuarial losses
|
—
|
|
|
1.6
|
|
|
35.9
|
|
Net periodic benefit (income) expense
|
$
|
2.1
|
|
|
$
|
2.0
|
|
|
$
|
36.6
|
|
Other Postretirement Benefits:
|
|
|
|
|
|
Service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
0.3
|
|
|
0.4
|
|
|
0.7
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
(0.2)
|
|
|
(0.2)
|
|
|
(0.3)
|
|
Benefit cost associated with special events:
|
|
|
|
|
|
PMC Spin-Off
|
(0.9)
|
|
|
—
|
|
|
—
|
|
Recognition of actuarial gains
|
(1.2)
|
|
|
—
|
|
|
(0.1)
|
|
Net periodic benefit expense
|
$
|
(2.0)
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
During the year ended December 31, 2021, the recognition of $3.6 million of net non-cash actuarial losses was primarily due to an increase in the discount rates utilized within remeasurement of the Company's defined benefit plans. During the nine month Transition Period ended December 31, 2020, the recognition of $1.6 million of non-cash actuarial loss was due to favorable asset performance and contributions made to the plan partially offset by decreases in the discount rate utilized within the annual remeasurement of the Company's defined benefit plans. During the fiscal year ended March 31, 2020, the recognition of $36.6 million of non-cash actuarial loss was due to the termination of a PMC defined benefit plan described above and decreases in discount rates coupled with lower than expected asset return, partially offset by decreases in life expectancy assumptions utilized within the annual remeasurement of the Company's defined benefit plans.
The Company made contributions to its U.S. qualified pension plan trusts of $2.0 million, $6.0 million, and $0.3 million during the year ended December 31, 2021, nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020, respectively.
The status of the plans is summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
Year Ended December 31, 2021
|
|
Nine Month Transition Period Ended December 31, 2020
|
|
Year Ended December 31, 2021
|
|
Nine Month Transition Period Ended December 31, 2020
|
Benefit obligation at beginning of period
|
$
|
(662.1)
|
|
|
$
|
(623.2)
|
|
|
$
|
(15.4)
|
|
|
$
|
(16.1)
|
|
Service cost
|
(0.4)
|
|
|
(0.4)
|
|
|
—
|
|
|
—
|
|
Interest cost
|
(13.3)
|
|
|
(13.9)
|
|
|
(0.3)
|
|
|
(0.4)
|
|
Actuarial (losses) gains
|
25.7
|
|
|
(44.2)
|
|
|
1.3
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
33.3
|
|
|
29.0
|
|
|
1.4
|
|
|
1.2
|
|
Plan participant contributions
|
—
|
|
|
—
|
|
|
(0.3)
|
|
|
(0.3)
|
|
Spin-Off Transaction
|
318.8
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Settlements
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Translation and other adjustments
|
—
|
|
|
(9.4)
|
|
|
—
|
|
|
—
|
|
Benefit obligation at end of period
|
$
|
(297.9)
|
|
|
$
|
(662.1)
|
|
|
$
|
(10.6)
|
|
|
$
|
(15.4)
|
|
Plan assets at the beginning of the period
|
$
|
503.5
|
|
|
$
|
446.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
15.4
|
|
|
73.3
|
|
|
—
|
|
|
—
|
|
Contributions
|
2.0
|
|
|
7.9
|
|
|
1.4
|
|
|
1.3
|
|
Benefits paid
|
(32.6)
|
|
|
(29.0)
|
|
|
(1.4)
|
|
|
(1.3)
|
|
Spin-Off Transaction
|
(238.4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Translation adjustment
|
—
|
|
|
4.4
|
|
|
—
|
|
|
—
|
|
Plan assets at end of period
|
$
|
249.9
|
|
|
$
|
503.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Funded status of plans
|
$
|
(48.0)
|
|
|
$
|
(158.6)
|
|
|
$
|
(10.6)
|
|
|
$
|
(15.4)
|
|
Net amount on Consolidated Balance Sheets consists of:
|
|
|
|
|
|
|
|
Non-current assets
|
$
|
—
|
|
|
$
|
0.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Current liabilities
|
(0.3)
|
|
|
(1.7)
|
|
|
(1.0)
|
|
|
(1.4)
|
|
Long-term liabilities
|
(47.7)
|
|
|
(157.4)
|
|
|
(9.6)
|
|
|
(14.0)
|
|
Total net funded status
|
$
|
(48.0)
|
|
|
$
|
(158.6)
|
|
|
$
|
(10.6)
|
|
|
$
|
(15.4)
|
|
As of December 31, 2021, the Company had pension plans with a combined projected benefit obligation of $297.9 million compared to plan assets of $249.9 million, resulting in an under-funded status of $48.0 million compared to an under-funded status of $158.6 million at December 31, 2020. The Company’s funded status improved during the year ended December 31, 2021 primarily due to the Spin-Off Transaction, increases in the discount rate assumption and census data gains. Any further changes in the assumptions underlying the Company’s pension values, including those that arise as a result of declines in equity markets and changes in interest rates, could result in increased pension obligation and pension cost which could negatively affect the Company’s consolidated financial position and results of operations in future periods.
Amounts included in accumulated other comprehensive loss (income), net of tax, related to defined benefit plans at December 31, 2021 and December 31, 2020 consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021
|
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
Total
|
Unrecognized prior service credit
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Unrecognized actuarial loss (gain)
|
7.3
|
|
|
(1.1)
|
|
|
6.2
|
|
Accumulated other comprehensive loss (income), gross
|
7.3
|
|
|
(1.1)
|
|
|
6.2
|
|
Deferred income tax (benefit) provision
|
(2.4)
|
|
|
0.2
|
|
|
(2.2)
|
|
Accumulated other comprehensive loss (income), net
|
$
|
4.9
|
|
|
$
|
(0.9)
|
|
|
$
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
Total
|
Unrecognized prior service credit
|
$
|
(0.1)
|
|
|
$
|
(0.9)
|
|
|
$
|
(1.0)
|
|
Unrecognized actuarial loss (gain)
|
40.0
|
|
|
(1.2)
|
|
|
38.8
|
|
Accumulated other comprehensive loss (income), gross
|
39.9
|
|
|
(2.1)
|
|
|
37.8
|
|
Deferred income tax (benefit) provision
|
(10.5)
|
|
|
0.5
|
|
|
(10.0)
|
|
Accumulated other comprehensive loss (income), net
|
$
|
29.4
|
|
|
$
|
(1.6)
|
|
|
$
|
27.8
|
|
The following table presents significant assumptions used to determine benefit obligations and net periodic benefit cost (income) in weighted-average percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
December 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
Benefit Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
3.0
|
%
|
|
2.3
|
%
|
|
3.1
|
%
|
|
2.9
|
%
|
|
2.4
|
%
|
|
3.3
|
%
|
Rate of compensation increase
|
3.0
|
%
|
|
3.0
|
%
|
|
3.0
|
%
|
|
n/a
|
|
n/a
|
|
n/a
|
Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
2.7
|
%
|
|
3.1
|
%
|
|
3.7
|
%
|
|
2.4
|
%
|
|
3.3
|
%
|
|
3.9
|
%
|
Rate of compensation increase
|
3.0
|
%
|
|
3.0
|
%
|
|
2.9
|
%
|
|
n/a
|
|
n/a
|
|
n/a
|
Expected return on plan assets
|
4.3
|
%
|
|
4.3
|
%
|
|
4.9
|
%
|
|
n/a
|
|
n/a
|
|
n/a
|
In evaluating the expected return on plan assets, consideration was given to historical long-term rates of return on plan assets and input from the Company’s pension fund consultant on asset class return expectations, long-term inflation and current market conditions. The following table presents the Company’s target investment allocations for the year ended December 31, 2021 and actual investment allocations at December 31, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets
|
|
December 31, 2021
|
|
December 31, 2020
|
|
Investment
Policy (1)
|
|
Target
Allocation (2)
|
|
Actual
Allocation
|
|
Actual
Allocation
|
Equity securities
|
20%
|
-
|
30%
|
|
30%
|
|
29%
|
|
27%
|
Debt securities (including cash and cash equivalents)
|
55%
|
-
|
80%
|
|
70%
|
|
70%
|
|
63%
|
Other
|
0%
|
-
|
10%
|
|
—%
|
|
1%
|
|
10%
|
______________________
(1)The investment policy allocation represents the guidelines of the Company's pension plans based on the changes in the plans funded status.
(2)The target allocations represent the weighted average target allocations for the Company's pension plans.
The Company's defined benefit pension utilizes a dynamic liability driven investment ("LDI") strategy. The objective is to more closely align the pension plan assets with its liabilities in terms of how both respond to interest rate changes. The plan assets are allocated into two investment categories: (i) LDI, comprised of high quality, investment grade fixed income securities and (ii) return seeking, comprised of traditional securities and alternative asset classes. All assets are managed externally according to guidelines established individually with investment managers and the Company's investment consultant. The Company periodically undertakes asset and liability modeling studies to determine the appropriateness of the investments. The Company intends to continuously reduce the assets allocated to the return seeking category, thereby increasing the assets allocated to the LDI category based on the overall improvement in the plan funded status. No equity securities of the Company are held in the portfolio.
The fair values of the Company’s pension plan assets for both the U.S and non-U.S. plans at December 31, 2021 and December 31, 2020, by asset category are included in the table below (in millions). For additional information on the fair value hierarchy and the inputs used to measure fair value, see Note 13, Fair Value Measurements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021
|
|
Quoted Prices in
Active Market
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Assets measured at net asset value
(1)
|
|
Total
|
Cash and cash equivalents
|
$
|
5.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.4
|
|
Investment funds
|
|
|
|
|
|
|
|
|
|
Fixed income funds (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
169.4
|
|
|
169.4
|
|
U.S. equity funds (3)
|
20.9
|
|
|
—
|
|
|
—
|
|
|
31.5
|
|
|
52.4
|
|
International equity funds (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
19.1
|
|
|
19.1
|
|
Balanced funds (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
2.5
|
|
|
2.5
|
|
Alternative investment funds (4)
|
—
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
26.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
223.6
|
|
|
$
|
249.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
Quoted Prices in
Active Market
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Assets measured at net asset value
(1)
|
|
Total
|
Cash and cash equivalents
|
$
|
9.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9.6
|
|
Investment funds
|
|
|
|
|
|
|
|
|
|
Fixed income funds (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
313.8
|
|
|
313.8
|
|
U.S. equity funds (3)
|
12.9
|
|
|
—
|
|
|
—
|
|
|
61.2
|
|
|
74.1
|
|
International equity funds (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
37.2
|
|
|
37.2
|
|
Balanced funds (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
6.8
|
|
|
6.8
|
|
Alternative investment funds (4)
|
—
|
|
|
—
|
|
|
—
|
|
|
22.1
|
|
|
22.1
|
|
Insurance contracts
|
—
|
|
|
—
|
|
|
39.9
|
|
|
—
|
|
|
39.9
|
|
Total
|
$
|
22.5
|
|
|
$
|
—
|
|
|
$
|
39.9
|
|
|
$
|
441.1
|
|
|
$
|
503.5
|
|
______________________
(1)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.
(2)The Company's fixed income mutual and commingled funds primarily include investments in U.S. government securities and corporate bonds. The commingled funds also include an insignificant portion of investments in asset-backed securities or partnerships. The mutual and commingled funds are primarily valued using the net asset value, which reflects the plan's share of the fair value of the investments.
(3)The Company's equity mutual and commingled funds primarily include investments in U.S. and international common stock. The balanced mutual and commingled funds invest in a combination of fixed income and equity securities. The mutual and commingled funds are primarily valued using the net asset value, which reflects the plan's share of the fair value of the investments.
(4)The Company's alternative investments include venture capital and partnership investments. Alternative investments are valued using the net asset value, which reflects the plan's share of the fair value of the investments. The Company is generally able to redeem investments at periodic times during the year with notice provided to the general partner.
The table below sets forth a summary of changes in the fair value of the Level 3 investments for the year ended December 31, 2021 and the nine month Transition Period ended December 31, 2020 (in millions):
|
|
|
|
|
|
|
Insurance
Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2020
|
$
|
32.6
|
|
Actual return on assets:
|
|
Related to assets held at reporting date
|
7.3
|
|
Related to assets sold during the period
|
—
|
|
Purchases, sales, issuances and settlements
|
—
|
|
|
|
Ending balance, December 31, 2020
|
39.9
|
|
Actual return on assets:
|
|
Related to assets held at reporting date
|
—
|
|
Related to assets sold during the period
|
—
|
|
Purchases, sales, issuances and settlements (1)
|
(39.9)
|
|
|
|
Ending balance, December 31, 2021
|
$
|
—
|
|
(1) Insurance contracts were distributed in connection with the Spin-Off Transaction.
Expected benefit payments to be paid in each of the next five years and in the aggregate for the five years thereafter are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending December 31:
|
|
Pension
Benefits
|
|
Other
Postretirement
Benefits
|
2022
|
|
$
|
20.3
|
|
|
$
|
1.0
|
|
2023
|
|
20.1
|
|
|
0.9
|
|
2024
|
|
19.9
|
|
|
0.9
|
|
2025
|
|
19.7
|
|
|
0.9
|
|
2026
|
|
19.4
|
|
|
0.8
|
|
2027 - 2031
|
|
90.8
|
|
|
3.4
|
|
Pension Plans That Are Not Fully Funded
At December 31, 2021, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of the fair value of plan assets were $297.9 million, $296.0 million and $249.9 million, respectively.
At December 31, 2020, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of the fair value of plan assets were $622.0 million, $617.6 million and $462.9 million, respectively.
Other Postretirement Benefits
The other postretirement benefit obligation was determined using an assumed health care cost trend rate of 6.0% in 2022 grading down to 5.0% in 2026 and thereafter. The discount rate, compensation rate increase and health care cost trend rate assumptions are determined as of the measurement date.
Defined Contribution Savings Plans
The Company sponsors certain defined-contribution savings plans for eligible employees. Expense recognized related to these plans was $5.5 million, $5.7 million and $7.7 million during the year ended December 31, 2021, nine months ended December 31, 2020 and for the year ended March 31, 2020, respectively. and During the year ended December 31, 2021, the Company utilized 107,113 shares of its common stock with a weighted average fair value of $51.67 per share in funding the cost. During the nine month Transition Period ended December 31, 2020, the Company utilized 156,316 shares of its common stock with a weighted average fair value of $30.38 per share in funding the cost.
Deferred Compensation Plan
The Company has a nonqualified deferred compensation plan for certain executives and other highly compensated employees. Assets are invested primarily in mutual funds and corporate-owned life insurance contracts held in a Rabbi trust and restricted for payments to participants of the plan. The assets and liabilities are classified in Other assets and Other liabilities,
respectively, on the consolidated balance sheets. Changes in the values of the assets held by the rabbi trust and changes in the value of the deferred compensation liability are recorded in Other expense, net in the consolidated statements of operations.
The fair values of the Company’s deferred compensation plan assets and liability are included in the table below (in millions). For additional information on the fair value hierarchy and the inputs used to measure fair value, see Note 13, Fair Value Measurements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of December 31, 2021
|
|
Quoted Prices in
Active Market
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Total
|
Deferred compensation plan assets:
|
|
|
|
|
|
|
|
Mutual funds (1)
|
$
|
0.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.9
|
|
Corporate-owned life insurance policies (2)
|
—
|
|
|
14.4
|
|
|
—
|
|
|
14.4
|
|
Total assets at fair value
|
$
|
0.9
|
|
|
$
|
14.4
|
|
|
$
|
—
|
|
|
$
|
15.3
|
|
|
|
|
|
|
|
|
|
Deferred compensation liability at fair value (3):
|
$
|
16.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of December 31, 2020
|
|
Quoted Prices in
Active Market
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Total
|
Deferred compensation plan assets:
|
|
|
|
|
|
|
|
Mutual funds (1)
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.0
|
|
Corporate-owned life insurance policies (2)
|
—
|
|
|
10.7
|
|
|
—
|
|
|
10.7
|
|
Total assets at fair value
|
$
|
1.0
|
|
|
$
|
10.7
|
|
|
$
|
—
|
|
|
$
|
11.7
|
|
|
|
|
|
|
|
|
|
Deferred compensation liability at fair value (3):
|
$
|
11.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11.9
|
|
______________________
(1)The Company has elected to use the fair value option for the mutual funds to better align the measurement of the assets with the measurement of the liability, which are measured using quoted prices of identical instruments in active markets and are categorized as Level 1.
(2)The 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, and are categorized as Level 2.
(3)The deferred compensation liability is measured at fair value based on the quoted prices of identical instruments to the investment vehicles selected by the participants.
17. Income Taxes
The provision for income taxes consists of amounts for taxes currently payable, amounts for tax items deferred to future periods; as well as, adjustments relating to the Company’s determination of uncertain tax positions, including interest and penalties. The Company recognizes deferred tax assets and liabilities based on the future tax consequences attributable to tax net operating loss (“NOL”) carryforwards, capital loss carryforwards, tax credit carryforwards and differences between the financial statement carrying amounts and the tax bases of applicable assets and liabilities. Deferred tax assets are regularly reviewed 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 a result of this review, the Company established a full valuation allowance against U.S. federal and state capital loss carryforwards, as well as certain state tax credit carryforwards, and continues to maintain 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.
Income Tax Provision
The components of the provision for income taxes are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Nine Month Transition Period Ended December 31,
|
|
Year Ended March 31,
|
|
2021
|
|
2020
|
|
2020
|
Current:
|
|
|
|
|
|
United States
|
$
|
7.2
|
|
|
$
|
12.3
|
|
|
$
|
0.1
|
|
Non-United States
|
1.0
|
|
|
0.7
|
|
|
1.4
|
|
State and local
|
2.7
|
|
|
2.6
|
|
|
—
|
|
Total current
|
10.9
|
|
|
15.6
|
|
|
1.5
|
|
Deferred:
|
|
|
|
|
|
United States
|
(8.8)
|
|
|
(2.5)
|
|
|
1.4
|
|
Non-United States
|
(0.1)
|
|
|
(0.4)
|
|
|
(0.3)
|
|
State and local
|
0.7
|
|
|
(2.2)
|
|
|
1.8
|
|
Total deferred
|
(8.2)
|
|
|
(5.1)
|
|
|
2.9
|
|
Provision for income taxes
|
$
|
2.7
|
|
|
$
|
10.5
|
|
|
$
|
4.4
|
|
The provision for income taxes differs from the United States statutory income tax rate due to the following items (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Nine Month Transition Period Ended December 31,
|
|
Year Ended March 31,
|
|
2021
|
|
2020
|
|
2020
|
Provision for income taxes at U.S. federal statutory income tax rate
|
$
|
11.0
|
|
|
$
|
9.6
|
|
|
$
|
4.9
|
|
State and local income taxes, net of federal benefit
|
1.4
|
|
|
1.7
|
|
|
1.2
|
|
Net effects of foreign rate differential
|
(0.2)
|
|
|
(0.1)
|
|
|
0.1
|
|
Net effects of foreign operations
|
0.8
|
|
|
0.3
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effects of GILTI inclusion
|
—
|
|
|
(0.2)
|
|
|
0.3
|
|
Foreign derived intangible income deduction
|
(0.2)
|
|
|
—
|
|
|
—
|
|
Unrecognized tax benefits, net of federal benefit
|
1.0
|
|
|
2.0
|
|
|
(1.2)
|
|
|
|
|
|
|
|
Research and development credit
|
(0.2)
|
|
|
(0.2)
|
|
|
(0.4)
|
|
Excess tax benefits related to equity compensation
|
(17.7)
|
|
|
(2.6)
|
|
|
(4.1)
|
|
§162(m) compensation limitation
|
5.1
|
|
|
2.0
|
|
|
2.8
|
|
Net changes in valuation allowance
|
1.6
|
|
|
(1.6)
|
|
|
0.5
|
|
Other
|
0.1
|
|
|
(0.4)
|
|
|
(0.2)
|
|
Provision for income taxes
|
$
|
2.7
|
|
|
$
|
10.5
|
|
|
$
|
4.4
|
|
The provision for income taxes was calculated based upon the following components of income from continuing operations before income taxes (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Nine Month Transition Period Ended December 31,
|
|
Year Ended March 31,
|
|
2021
|
|
2020
|
|
2020
|
United States
|
$
|
49.5
|
|
|
$
|
44.6
|
|
|
$
|
18.8
|
|
Non-United States
|
2.9
|
|
|
0.9
|
|
|
4.6
|
|
Income before income taxes
|
$
|
52.4
|
|
|
$
|
45.5
|
|
|
$
|
23.4
|
|
Deferred Income Tax Assets and Liabilities
Deferred income taxes consist of the tax effects of the following temporary differences (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
December 31, 2020
|
Deferred tax assets:
|
|
|
|
Compensation and retirement benefits
|
$
|
22.7
|
|
|
$
|
29.5
|
|
General accruals and reserves
|
12.5
|
|
|
7.1
|
|
Lease liabilities
|
3.8
|
|
|
4.7
|
|
State tax net operating loss and credit carryforwards
|
19.0
|
|
|
22.3
|
|
Federal and state capital loss carryforwards
|
17.7
|
|
|
18.2
|
|
Foreign net operating loss carryforwards
|
2.7
|
|
|
1.5
|
|
Other
|
1.9
|
|
|
—
|
|
Total deferred tax assets before valuation allowance
|
80.3
|
|
|
83.3
|
|
Valuation allowance
|
(35.1)
|
|
|
(36.8)
|
|
Total deferred tax assets
|
45.2
|
|
|
46.5
|
|
Deferred tax liabilities:
|
|
|
|
Property, plant and equipment
|
5.8
|
|
|
5.5
|
|
Lease ROU assets
|
3.6
|
|
|
4.5
|
|
Inventories
|
8.0
|
|
|
8.4
|
|
Intangible assets and goodwill
|
26.5
|
|
|
30.0
|
|
Other
|
—
|
|
|
0.3
|
|
|
|
|
|
Total deferred tax liabilities
|
43.9
|
|
|
48.7
|
|
Net deferred tax assets (liabilities)
|
$
|
1.3
|
|
|
$
|
(2.2)
|
|
|
|
|
|
Net amount on Consolidated Balance Sheets consists of:
|
|
|
|
Other assets
|
$
|
4.4
|
|
|
$
|
5.8
|
|
Deferred income taxes
|
(3.1)
|
|
|
(8.0)
|
|
Net long-term deferred tax assets (liabilities)
|
$
|
1.3
|
|
|
$
|
(2.2)
|
|
Management has reviewed the deferred tax assets and has analyzed the uncertainty with respect to ultimately realizing the related tax benefits associated with such assets. Based upon this analysis, management has determined that a valuation allowance should be established for the federal and state capital loss carryforwards, state credit carryforwards, certain foreign NOL carryforwards and related deferred tax assets, as well as certain state NOL carryforwards as of December 31, 2021. Significant factors considered by management in this determination included the historical operating results of the Company, as well as anticipated reversals of future taxable temporary differences. Capital losses may generally only be used to offset available capital gains. Federal capital losses are allowed to be carried back three years and carried forward for five. The Company does not have any capital gains in the carryback period with which to offset any portion of the capital loss. States generally follow federal law with respect to capital losses; however, for those that do have a modification, such modification (in most cases) is to deny any carryback period. The carryforward periods for the state NOLs range from five to twenty years. The state credit carryforwards expire over a period of 15 years. The foreign NOL carryforwards are subject to a twenty-year expiration period.
At December 31, 2021, the Company had approximately $377.4 million of state NOL carryforwards, expiring over various years ending through December 31, 2033. The Company has a tax effected valuation allowance of $14.5 million recorded against the related deferred tax asset. In addition, at December 31, 2021, the Company had approximately $10.6 million of foreign NOL carryforwards, of which there is a recorded tax effected valuation allowance of $1.0 million.
No provision has been made for U.S. federal income taxes related to approximately $13.9 million of undistributed earnings of foreign subsidiaries considered to be permanently reinvested. The additional income tax liability that would result if such earnings were repatriated to the U.S., other than potential out-of-pocket withholding taxes of approximately $0.6 million, would not be expected to be significant to the Company’s consolidated financial statements.
The Company’s total receivable for net accrued income taxes as of December 31, 2021 and 2020 was $31.0 million and $6.1 million, respectively. This net amount is presented in the consolidated balance sheets as income taxes payable (separately disclosed in other current liabilities) of $2.1 million and $2.4 million as of December 31, 2021 and 2020, respectively; and as income taxes receivable in the consolidated balance sheets of $33.1 million and $8.5 million as of December 31, 2021 and 2020, respectively. Net cash paid for income taxes to governmental tax authorities for the year ended
December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31,2020 was $57.8 million, $44.9 million and $72.5 million, respectively.
Liability for Unrecognized Tax Benefits
The Company's total liability for net unrecognized tax benefits as of December 31, 2021 and 2020 was $5.9 million and $4.7 million, respectively.
The following table represents a reconciliation of the beginning and ending amount of the gross unrecognized tax benefits, excluding interest and penalties, for the year ended December 31, 2021 and the nine month Transition Period ended December 31, 2020 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Nine Month Transition Period Ended December 31,
|
|
2021
|
|
2020
|
Balance at beginning of period
|
$
|
4.7
|
|
|
$
|
2.4
|
|
Additions based on tax positions related to the current year
|
1.2
|
|
|
1.3
|
|
Additions for tax positions of prior years
|
—
|
|
|
1.7
|
|
Reductions for tax positions of prior years
|
—
|
|
|
—
|
|
Settlements
|
—
|
|
|
—
|
|
Reductions due to lapse of applicable statute of limitations
|
—
|
|
|
(0.7)
|
|
Cumulative translation adjustment
|
—
|
|
|
—
|
|
Balance at end of period
|
$
|
5.9
|
|
|
$
|
4.7
|
|
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2021 and 2020, the total amount of unrecognized tax benefits includes $0.5 million and $0.2 million of gross accrued interest and penalties, respectively. The amount of interest and penalties recorded as income tax expense (benefit) during the year ended December 31, 2021, the nine month Transition Period ended December 31, 2020 and the fiscal year ended March 31, 2020 was $0.2 million, $0.0 million, and $(0.6) million, respectively.
The Company conducts business in multiple locations within and outside the U.S. Consequently, the Company is subject to periodic income tax examinations by domestic and foreign income tax authorities. Currently, the Company is undergoing routine, periodic income tax examinations in foreign jurisdictions. During the nine month Transition Period ended December 31, 2020, the Internal Revenue Service (the “IRS”) completed an income tax examination of the Company’s U.S. consolidated federal income tax returns for the tax years ended March 31, 2016 and 2017. The Company paid approximately $1.5 million upon the conclusion of such examination, all of which was previously accrued in the Company's financial statements. During the fiscal year ended March 31, 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 was subject to indemnification under the terms of the applicable purchase agreement or otherwise appropriately accrued in the Company’s financial statements. 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. VAG was notified by the German tax authorities of its intention to conduct an income tax examination of the VAG German entities’ corporate income and trade tax returns for the tax years ended March 31, 2014 through 2019. Similarly, in accordance with the Spin-Off Transaction of PMC, the Company is required to indemnify Regal for any future income tax liabilities associated with PMC entities relating to all open tax years ending prior to, and including, the short period ended on the date of the Spin-Off Transaction. During the fiscal year ended March 31, 2020, the Italian tax authorities began conducting an income tax examination of the income tax return of one of PMC’s Italian subsidiaries for the tax year ended March 31, 2018. In addition, certain of the PMC German subsidiaries are currently undergoing a corporate income and trade tax examination by the German tax authorities for the tax years or period ended March 31, 2015 through March 31, 2018. It appears reasonably possible that the amounts of unrecognized income tax benefits and indemnification liabilities could change in the next twelve months upon conclusion of the 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, 2019, state and local income tax examinations for years ending prior to March 31, 2018 or significant foreign income tax examinations for years ending prior to March 31, 2017.
18. Commitments and Contingencies
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.
Certain Company subsidiaries are subject to asbestos litigation. As of December 31, 2021, Zurn and numerous other unrelated companies were defendants in approximately 6,000 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 December 31, 2021, 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 $66.0 million, of which Zurn expects its insurance carriers to pay approximately $49.0 million in the next ten years on such claims, with the balance of the estimated liability being paid in subsequent years. The $66.0 million was developed based on actuarial studies and represents the projected indemnity payout for current and future claims. There are inherent uncertainties involved in estimating the number of future asbestos claims, future settlement costs, and the effectiveness of defense strategies and settlement initiatives. As a result, actual liability could differ from the estimate described herein and could be substantial. The liability for the asbestos-related claims is recorded in reserve for asbestos claims within the consolidated balance sheets.
Management estimates that its available insurance to cover this potential asbestos liability as of December 31, 2021, is in excess of the ten year estimated exposure, and accordingly, believes that all current claims are covered by insurance.
As of December 31, 2021, the Company had a recorded receivable from its insurance carriers of $66.0 million, which corresponds to the amount of this potential asbestos liability that is covered by available insurance and is currently determined to be probable of recovery. However, there is no assurance 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 one or more of the Company's carriers. The receivable for probable asbestos-related recoveries is recorded in insurance for asbestos claims within the consolidated balance sheets.
Certain Company subsidiaries were named as defendants in a number of individual and class action lawsuits in various United States courts claiming damages due to the alleged failure or anticipated failure of Zurn brass fittings on the PEX plumbing systems in homes and other structures. In fiscal 2013, the Company reached a court-approved agreement to settle the liability underlying this litigation. The settlement was designed to resolve, on a national basis, the Company's overall exposure for both known and unknown claims related to the alleged failure or anticipated failure of such fittings, subject to the right of eligible class members to opt-out of the settlement and pursue their claims independently. The settlement utilized a seven year claims fund, which was capped at $20.0 million, and was funded in installments over the seven year period based on claim activity and minimum funding criteria. The seven year filing period expired on April 1, 2020. Any claims after April 1, 2020 are time barred. As of December 31, 2021, the Company had made payment on all remaining timely filed claims and closed the settlement fund.
19. Public Offering and Common Stock Repurchases
Preferred Stock
On December 7, 2016, the Company issued 8.1 million depositary shares, each of which represents a 1/20th interest in a share of Series A Preferred Stock, for an offering price of $50 per depositary share. The Company issued an aggregate of 402,500 shares of Series A Preferred Stock in connection therewith. During the year ended March 31, 2020, 402,500 shares of Series A Preferred Stock automatically converted into 16.0 million shares of the Company's common stock. The number of
shares of common stock issued upon conversion was determined based on a defined average volume weighted average price per share of the Company’s common stock. Upon conversion, there were no shares of Series A Preferred Stock outstanding.
Dividends were paid on the Series A Preferred Stock quarterly. The final dividend payment was made on November 15, 2019. During the fiscal year ended March 31, 2020, the Company accrued $14.4 million of dividends and paid $17.4 million of dividends on the Series A Preferred Stock, respectively.
Issuer Repurchases of Equity Securities
During fiscal 2015, the Company's Board of Directors approved a common stock repurchase program (the "Repurchase Program") authorizing the repurchase of up to $200.0 million of the Company's common stock from time to time on the open market or in privately negotiated transactions. On January 27, 2020, the Company's Board of Directors approved to increase 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. During the year ended December 31, 2021, the Company repurchased 22,300 shares of common stock at a total cost of $0.9 million at a weighted average price of $39.27 per share. During the nine month Transition Period ended December 31, 2020, the Company repurchased 1.7 million shares of common stock at a total cost of $59.3 million at a weighted average price of $34.97 per share. During the fiscal year ended March 31, 2020, the Company repurchased 3.6 million shares of common stock at a total cost of $100.7 million at a weighted average price of $27.94 per share. The repurchased shares were canceled by the Company upon receipt.
At December 31, 2021, a total of approximately $162.8 million of repurchase authority remained under the Repurchase Program.
20. Quarterly Results of Operations (unaudited)
(in millions, except per share amounts)
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Year Ended December 31, 2021
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First Quarter
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Second Quarter
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Third Quarter
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Fourth Quarter
(1)
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Total
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Net sales
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$
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205.2
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$
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243.7
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$
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229.7
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$
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232.3
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$
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910.9
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Gross profit
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88.4
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103.8
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95.8
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85.2
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373.2
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Net income from continuing operations
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10.0
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20.5
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16.3
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2.9
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49.7
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Income (loss) from discontinued operations, net of tax
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40.0
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52.6
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47.9
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(69.3)
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71.2
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Net income (loss)
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50.0
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73.1
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64.2
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(66.4)
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120.9
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Net income (loss) attributable to Zurn common stockholders
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$
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50.0
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$
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73.1
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$
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64.2
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$
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(66.4)
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$
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120.9
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Basic net income (loss) per share attributable to Zurn common stockholders
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Continuing operations
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$
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0.08
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$
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0.17
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$
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0.13
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$
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0.02
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$
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0.41
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Discontinued operations
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$
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0.33
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$
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0.44
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$
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0.39
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$
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(0.56)
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|
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$
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0.59
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Net income (loss)
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$
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0.42
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$
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0.61
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$
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0.53
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$
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(0.53)
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$
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1.00
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Diluted net income (loss) per share attributable to Zurn common stockholders
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Continuing operations
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$
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0.08
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$
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0.16
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$
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0.13
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$
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0.02
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$
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0.40
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Discontinued operations
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$
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0.32
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$
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0.42
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|
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$
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0.38
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$
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(0.54)
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|
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$
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0.57
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Net income (loss)
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$
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0.40
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|
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$
|
0.59
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|
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$
|
0.51
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|
|
$
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(0.52)
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|
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$
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0.97
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______________________
(1) The fourth quarter of the year ended December 31, 2021 includes the recognition of a $20.4 million loss on extinguishment of debt following the refinancing of the Company's debt in connection with the Spin-Off Transaction. Refer to Note 11, Long-Term Debt for additional information. In addition, the Company recognized approximately $60.0 million of separation costs in connection with the Spin-Off Transaction that was recorded within the loss from discontinued operations, net of tax. Refer to Note 4, Discontinued Operations for additional information.
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Nine Month Transition Period Ended December 31, 2020
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Three Months Ended June 30, 2020
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Three Months Ended September 30, 2020
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Three Months Ended December 31, 2020
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Total
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Net sales
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$
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174.7
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$
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199.7
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$
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188.3
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$
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562.7
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Gross profit
|
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79.9
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92.5
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|
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80.9
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253.3
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Net income from continuing operations
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10.6
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18.8
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5.6
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35.0
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Income from discontinued operations, net of tax
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25.0
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26.6
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31.6
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83.2
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Net income attributable to Zurn common stockholders
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$
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35.6
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$
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45.4
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$
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37.2
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$
|
118.2
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|
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|
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Basic net income per share attributable to Zurn common stockholders
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Continuing operations
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$
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0.09
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$
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0.16
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$
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0.05
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$
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0.29
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Discontinued operations
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$
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0.21
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$
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0.22
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|
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$
|
0.26
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|
|
|
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$
|
0.69
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Net income
|
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$
|
0.30
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|
|
$
|
0.38
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|
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$
|
0.31
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|
|
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$
|
0.98
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|
|
|
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Diluted net income per share attributable to Zurn common stockholders
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Continuing operations
|
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$
|
0.09
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|
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$
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0.15
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$
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0.05
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|
|
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$
|
0.28
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Discontinued operations
|
|
$
|
0.21
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|
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$
|
0.22
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|
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$
|
0.26
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|
|
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$
|
0.68
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Net income
|
|
$
|
0.29
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|
|
$
|
0.37
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|
|
$
|
0.30
|
|
|
|
|
$
|
0.96
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21. Subsequent Event
On February 3, 2022, the Company's Board of Directors declared a quarterly cash dividend on the Company's common stock of $0.03 per-share to be paid on March 7, 2022, to stockholders of record as of February 18, 2022.