News Release

Rexnord Reports Q3 FY2017 Financial Results and Affirms FY2017 Operating Outlook

February 1, 2017 at 4:24 PM EST

Call scheduled for Thursday, February 2, 2017 at 8:00 a.m. Eastern Time

MILWAUKEE--(BUSINESS WIRE)--Feb. 1, 2017-- Rexnord Corporation (NYSE:RXN)

Third Quarter Highlights

  • Net sales were $452 million and down 2% year over year. Core sales(1) declined 5%, excluding a 1% impact from the RHF product line exit. Acquisitions contributed 5% to net sales; currency translation deducted 1%.
  • GAAP diluted EPS was $0.02, compared with $0.24 in the prior year.
  • GAAP net income was $2 million.
  • Adjusted EPS(1) was $0.25, compared with $0.42 in the prior year.
  • Adjusted EBITDA(1) was $79 million, or 18% of net sales.
  • Net debt to adjusted EBITDA ratio reduced to 3.3x.

Todd Adams, President and Chief Executive Officer, commented, “Our third-quarter earnings were in line with our guidance, with solid operating execution offsetting a modestly greater-than-expected revenue impact from currency translation. On our bottom line, the one-penny impact on earnings per share from the accrual of the preferred dividend in the quarter was offset by a penny benefit on the tax line. We made good progress with our strategic initiatives during the quarter, and we are nearing completion of our Supply Chain Optimization and Footprint Repositioning program that remains on track to deliver $30 million of annual savings. Leveraging RBS continues to be at the core of what is driving the transition of our business toward our goals of better organic growth and improved profitability and cash flow.”

“Our balance sheet was strengthened by the December convertible preferred offering and term loan refinancing out to 2023, and our net debt leverage ratio was down to 3.3x at the end of the quarter.”

“Sales in our Process & Motion Control (“PMC”) platform grew 2% as the benefits of our diversification into consumer-facing end markets, led by our Cambridge acquisition, more than offset the headwinds in our industrial process end markets. We continue to see stable sell-through in our industrial distribution channels, and are encouraged by the traction we’re seeing on first-fit wins and our other organic growth initiatives.”

“Water Management (“WM”) platform results were in line with our expectations for the current quarter. The improvement in US nonresidential construction starts growth that we’ve seen in the second half of 2016 appears to bode well for the upcoming 2017 construction season, when we look to an accelerated impact from our market expansion initiatives and new product introductions to contribute to above-market growth.”

(1) Refer to "Non-GAAP Measures" for a definition of this non-GAAP metric, as well as the accompanying reconciliations to GAAP.

Fiscal 2017 Outlook and Guidance

Adams continued, “Our guidance for our fiscal year 2017 earnings per share remains essentially unchanged from an operating viewpoint. After accounting for our December offering of mandatorily convertible preferred stock and our debt refinancing, we now project our fiscal year 2017 GAAP earnings per share to be in a range of $0.60 - $0.66(2). Our guidance for fiscal year 2017 adjusted earnings per share moves to approximately $1.30(2), after incorporating a five-cent net impact from our third-quarter capital market transactions into our prior guidance of $1.32 - $1.38.”

Third Quarter Fiscal 2017 Segment Highlights

Process & Motion Control

Process & Motion Control net sales were $270 million in the third quarter of fiscal 2017, up 2% year over year. The Cambridge acquisition contributed 8%, and more than offset the 6% year-over-year decrease in core sales. Sales to OEM and end-user customers across several of our industrial process industry end markets were lower than the prior year, which offset growth in our consumer-facing end markets. Core growth in our US industrial distribution channels moderated against a more difficult year over year comparison.

Process & Motion Control income from operations for the third quarter of fiscal 2017 was $29 million, or 10.6% of net sales. Income from operations as a percentage of net sales decreased by 280 basis points year over year primarily due to the impact of lower core sales year over year and the accelerated depreciation related to our Supply Chain Optimization and Footprint Repositioning program as the impact of incremental investments in our innovation, market expansion, and cost reduction initiatives was offset by our RBS-led productivity gains.

Adjusted EBITDA(1) in the third quarter was $56 million. Adjusted EBITDA as a percentage of net sales decreased by 70 basis points year over year to 20.6%.

Water Management

Water Management net sales were $182 million in the third quarter of fiscal 2017, a decline of 7% year over year. Core sales decreased 4% year over year, which excludes a 2% adverse impact associated with the exit of the Rodney Hunt® Fontaine® (“RHF”) product line and a 1% unfavorable impact from foreign currency translation. Project shipments to our global water and wastewater infrastructure end markets were lower than in the year-earlier quarter and more than offset stable demand in our nonresidential construction end markets.

Water Management income from operations was $14 million for the third quarter of fiscal 2017. Operating margin was 7.9% of net sales, a decrease of 350 basis points year over year. The contraction reflects the reduced level of sales and less favorable project mix, plus certain expense timing and the increased investment in our innovation and market expansion initiatives.

Adjusted EBITDA(1) in the first quarter was $32 million or 17.6% of sales (adjusted for the RHF product line exit). Comparable margin declined by 550 basis points year over year.

(1) Refer to "Non-GAAP Measures" for a definition of this non-GAAP metric, as well as the accompanying reconciliations to GAAP.

(2) Our guidance for GAAP earnings per share is based upon the extent of information available as of the date of this filing regarding events and conditions that will impact our future operating results for the periods noted above. Our actual net income per diluted share may be materially impacted by events for which information is not available, such as asset impairments, purchase accounting effects related to future acquisitions, future restructuring actions, gains (losses) recognized on the disposal of tangible and intangible assets, gains (losses) on debt extinguishment, actuarial gains (losses) on our defined benefit plans, and other gains (losses) related to events or conditions not yet known. Consequently, we have not included incremental gains or (losses) for these items in our forward-looking guidance since that information is not reasonably available.

Non-GAAP Financial Measures

The following non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis. We believe that these financial measures are appropriate to enhance an overall understanding of our underlying operating performance trends compared to historical and prospective periods and our peers. Management also believes that these measures are useful to investors in their analysis of our results of operations and provide improved comparability between fiscal periods as well as insight into the compliance with our debt covenants. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of non-GAAP financial measures presented above to our GAAP results has been provided in the financial tables included in this press release.

Core Sales

Core sales excludes the impact of acquisitions (such as the Cambridge acquisition), divestitures (such as the RHF product line exit) and foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparison of our net sales performance with prior and future periods and to our peers. We exclude the effect of acquisitions and divestitures because the nature, size and number of acquisitions and divestitures can vary dramatically from period to period and between us and our peers, and can also obscure underlying business trends and make comparisons of long-term performance difficult. We exclude the effect of foreign currency translation from this measure because the volatility of currency translation is not under management's control.

Adjusted Net Income and Adjusted Earnings Per Share

Adjusted net income and adjusted earnings per share (calculated on a diluted basis) exclude actuarial gains and losses on pension and postretirement benefit obligations, restructuring and other similar charges, gains or losses on divestitures, gains or losses on extinguishment of debt, the impact of acquisition-related fair value adjustments in connection with purchase accounting, amortization of intangible assets, and other non-operational, non-cash or non-recurring losses, net of their income tax impact. The tax rates used to calculate adjusted net income and adjusted earnings per share are based on a transaction specific basis. We believe that adjusted net income and adjusted earnings per share are useful in assessing our financial performance by excluding items that are not indicative of our core operating performance or that may obscure trends useful in evaluating our continuing results of operations.

EBITDA

EBITDA represents earnings before interest, taxes, depreciation and amortization. EBITDA is presented because it is an important supplemental measure of performance and it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is also presented and compared by analysts and investors in evaluating our ability to meet debt service obligations. Other companies in our industry may calculate EBITDA differently. EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with GAAP. Because EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business.

Adjusted EBITDA

“Adjusted EBITDA” is the term we use to describe EBITDA as defined and adjusted in our credit agreement, which is net income, adjusted for the items summarized in the table below. Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, non-cash or non-recurring losses or gains. In view of our debt level, it is also provided to aid investors in understanding our compliance with our debt covenants. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA varies from others in our industry. This measure should not be considered as an alternative to net income, income from operations (as it relates to our two reportable segments, we adjust from income from operations because “non-operating” expenses such as interest and income taxes are not allocated to our segments and therefore net income is not presented at the segment level) or any other performance measures derived in accordance with GAAP. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for, analysis of our results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses, or the cash requirements necessary to service interest or principal payments, on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; or (f) the impact of earnings or charges resulting from matters that we and the lenders under our credit agreement may not consider indicative of our ongoing operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results.

In addition, certain of these expenses can represent the reduction of cash that could be used for other corporate purposes. Further, although not included in the calculation of Adjusted EBITDA below, the measure may at times allow us to add estimated cost savings and operating synergies related to operational changes ranging from acquisitions to dispositions to restructurings and/or exclude one-time transition expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred. Further, management and various investors use the ratio of total debt less cash to Adjusted EBITDA (which includes a full pro-forma last-twelve-month impact of acquisitions), or "net debt leverage", as a measure of our financial strength and ability to incur incremental indebtedness when making key investment decisions and evaluating us against peers.

Free Cash Flow

We define Free Cash Flow as cash flow from operations less capital expenditures, and we use this metric in analyzing our ability to service and repay our debt and to forecast future periods. However, this measure does not represent funds available for investment or other discretionary uses since it does not deduct cash used to service our debt.

About Rexnord

Headquartered in Milwaukee, Wisconsin, Rexnord is comprised of two strategic platforms, Process & Motion Control and Water Management, with approximately 8,000 employees worldwide. The Process & Motion Control platform designs, manufactures, markets and services specified, highly-engineered mechanical components used within complex systems. The Water Management platform designs, procures, manufactures and markets products that provide and enhance water quality, safety, flow control and conservation. Additional information about the Company can be found at www.rexnord.com.

Conference Call Details

Rexnord will hold a conference call on Thursday, February 2, 2017 at 8:00 a.m. Eastern Time to discuss its fiscal 2017 third quarter results and provide a general business update. Rexnord President and CEO, Todd Adams, and Senior Vice President and CFO, Mark Peterson, will co-host the call. The conference call can be accessed via telephone as follows:

Domestic toll-free #: 888-771-4371
International toll #: 847-585-4405
Access Code: 4405 0136

A live webcast of the call will also be available on the Company's investor relations website. Please go to the website (investors.rexnord.com) at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software.

If you are unable to participate during the live teleconference, a replay of the conference call will be available from 10:30 a.m. Eastern Time, February 2, 2017 until 11:59 p.m. Eastern Time, February 9, 2017. To access the replay, please dial 888-843-7419 (domestic) or 630-652-3042 (international) with access code 4405 0136 #.

Cautionary Statement on Forward-Looking Statements

Information in this release may involve outlook, expectations, beliefs, plans, intentions, strategies or other statements regarding the future, which are forward-looking statements. These forward-looking statements involve risks and uncertainties. All forward-looking statements included in this release are based upon information available to Rexnord Corporation as of the date of the release, and Rexnord Corporation assumes no obligation to update any such forward-looking statements. The statements in this release are not guarantees of future performance, and actual results could differ materially from current expectations. Numerous factors could cause or contribute to such differences. Please refer to "Risk Factors" and "Cautionary Notice Regarding Forward-Looking Statements" in the Company's Form 10-K for the fiscal year ended March 31, 2016 as well as the Company's annual, quarterly and current reports filed on Forms 10-K, 10-Q and 8-K from time to time with the Securities and Exchange Commission for a further discussion of the factors and risks associated with the business.

 
Rexnord Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(in Millions, except share and per share amounts)
(Unaudited)
 
  Third Quarter Ended   Nine Months Ended
December 31, 2016   December 31, 2015 December 31, 2016   December 31, 2015
Net sales $ 451.8 $ 460.2 $ 1,414.6 $ 1,431.2
Cost of sales 298.8   301.9   922.2   933.8  
Gross profit 153.0 158.3 492.4 497.4
Selling, general and administrative expenses 99.9 89.1 313.1 286.4
Restructuring and other similar charges 11.7 6.1 21.7 10.7
Amortization of intangible assets 8.6   14.6   33.7   43.1  
Income from operations 32.8 48.5 123.9 157.2
Non-operating expense:
Interest expense, net (22.9 ) (24.5 ) (69.4 ) (68.0 )
Loss on the extinguishment of debt (7.8 ) (7.8 )
Other expense, net (0.7 ) (1.1 ) (3.3 ) (2.5 )
Income before income taxes 1.4 22.9 43.4 86.7
(Benefit) provision for income taxes (1.8 ) (1.4 ) (3.3 ) 18.6  
Net income 3.2 24.3 46.7 68.1
Non-controlling interest loss   (0.1 )   (0.2 )
Net income attributable to Rexnord $ 3.2 $ 24.4 $ 46.7 $ 68.3
Dividends on preferred stock (1.5 )   (1.5 )  
Net income attributable to Rexnord common shareholders $ 1.7   $ 24.4   $ 45.2   $ 68.3  
 
Net income per share attributable to Rexnord common shareholders:
Basic $ 0.02 $ 0.24 $ 0.44 $ 0.68
Diluted $ 0.02 $ 0.24 $ 0.43 $ 0.66
Weighted-average number of shares outstanding (in thousands):
Basic 103,113 100,366 102,514 100,707
Effect of dilutive equity awards 1,445   2,410   1,967   2,644  
Diluted 104,558   102,776   104,481   103,351  
 
Rexnord Corporation and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
Third quarter ended December 31, 2016
(in Millions, except share and per share amounts) (Unaudited)
 
  Third Quarter Ended   Nine Months Ended
Adjusted EBITDA December 31, 2016   December 31, 2015 December 31, 2016   December 31, 2015
Net income attributable to Rexnord common shareholders $ 1.7 $ 24.4 $ 45.2 $ 68.3
Dividends on preferred stock 1.5 1.5
Non-controlling interest loss (0.1 ) (0.2 )
Income tax (benefit) provision (1.8 ) (1.4 ) (3.3 ) 18.6
Other expense, net 0.7 1.1 3.3 2.5
Loss on the extinguishment of debt 7.8 7.8
Interest expense, net 22.9   24.5   69.4   68.0  
Income from operations 32.8   48.5   123.9   157.2  
 
Adjustments
Depreciation and amortization 25.8 29.5 79.1 86.1
Restructuring and other similar charges 11.7 6.1 21.7 10.7
Acquisition-related fair value adjustment 4.3
Stock-based compensation expense 3.8 2.0 9.8 5.8
Impact of RHF product line exit (1) 4.8 5.4 9.5 11.1
Last-in first-out inventory adjustments (0.1 ) 0.6 (0.2 ) 1.4
Other, net 0.4     0.4    
Subtotal of adjustments 46.4   43.6   124.6   115.1  
Adjusted EBITDA $ 79.2   $ 92.1   $ 248.5   $ 272.3  
   
Third Quarter Ended Nine Months Ended
Adjusted Net Income and Earnings Per Share December 31, 2016   December 31, 2015 December 31, 2016   December 31, 2015
Net income attributable to Rexnord common shareholders $ 1.7 $ 24.4 $ 45.2 $ 68.3
Supply chain optimization and footprint repositioning initiatives (2) 3.8 1.1 5.2 1.5
Impact of RHF product line exit (1) 4.8 5.9 10.0 12.6
Loss on the extinguishment of debt 7.8 7.8
Restructuring and other similar charges 11.7 6.1 21.7 10.7
Acquisition-related fair value adjustment 4.3
Amortization of intangible assets 8.6 14.6 33.7 43.1
Other, net (3) 1.1 1.0 3.7 2.3
Tax effect on above items (13.6 ) (10.1 ) (30.0 ) (24.7 )
Adjusted net income $ 25.9   $ 43.0   $ 101.6   $ 113.8  
 
Weighted-average number of shares outstanding (in thousands)
Basic 103,113 100,366 102,514 100,707
Effect of dilutive equity awards 1,445   2,410   1,967   2,644  
Diluted 104,558   102,776   104,481   103,351  
 
GAAP net income per share attributable to Rexnord common shareholders $ 0.02 $ 0.24 $ 0.43 $ 0.66
Adjusted earnings per share - diluted $ 0.25 $ 0.42 $ 0.97 $ 1.10
 
(1) During fiscal 2016, the Company announced its decision to exit the RHF flow control gate product line within its Water Management platform. The operating loss (excluding restructuring and other similar charges) is not included in Adjusted EBITDA in accordance with our credit agreement. Further, to enhance comparability between historical periods, the pre-tax loss of the RHF product line exit has also been excluded from our Adjusted earnings per share.
 
(2) Represents accelerated depreciation and other non-cash expenses associated with our strategic supply chain optimization and footprint repositioning initiatives.
 
(3) Other, net includes the impact of foreign currency transactions, sale of long-lived assets, other miscellaneous expenses and a non-controlling interest loss. See "Management Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-Q for the quarter ended December 31, 2016 for further information.
 
Third Quarter Ended
December 31, 2016   December 31, 2015
Adjusted EBITDA by Segment Process & Motion Control   Water Management   Corporate Process & Motion Control   Water Management   Corporate
Income from operations $ 28.6 $ 14.4 $ (10.2 ) $ 35.6 $ 22.1 $ (9.2 )
Operating margin 10.6 % 7.9 % 13.4 % 11.4 %
 
Depreciation and amortization 17.0 8.8 19.6 9.9
Restructuring and other similar charges 8.6 3.1 1.3 4.5 0.3
Stock-based compensation expense 1.0 0.6 2.2 0.5 0.5 1.0
Impact of RHF product line exit (1) 4.8 5.4
Last-in first-out inventory adjustments 0.1 (0.2 ) (0.4 ) 1.0
Other, net 0.4                
Adjusted EBITDA $ 55.7   $ 31.5   $ (8.0 ) $ 56.6   $ 43.4     $ (7.9 )
Adjusted EBITDA margin (2) 20.6 % 17.6 % 21.3 % 23.1 %
 
Nine Months Ended
December 31, 2016   December 31, 2015
Adjusted EBITDA by Segment Process & Motion Control   Water Management   Corporate Process & Motion Control   Water Management   Corporate
Income from operations $ 91.3 $ 63.1 $ (30.5 ) $ 105.1 $ 78.1 $ (26.0 )
Operating margin 11.1 % 10.6 % 13.0 % 12.5 %
 
Depreciation and amortization 51.8 27.3 57.8 28.3
Restructuring and other similar charges 14.6 7.1 4.5 5.9 0.3
Acquisition-related fair value adjustment 4.3
Stock-based compensation expense 2.5 1.4 5.9 1.6 1.3 2.9
Impact of RHF product line exit (1) 9.5 11.1
Last-in first-out inventory adjustments 0.5 (0.7 ) 0.3 1.1
Other, net 0.4                
Adjusted EBITDA $ 165.4   $ 107.7   $ (24.6 ) $ 169.3   $ 125.8     $ (22.8 )
Adjusted EBITDA margin (2) 20.1 % 18.6 % 21.0 % 21.2 %
(1)   During fiscal 2016, the Company announced its decision to exit the RHF flow control gate product line within its Water Management platform and its intention to exclude related RHF results from its forward-looking guidance. The operating loss (excluding restructuring and other similar charges) is not included in Adjusted EBITDA in accordance with our credit agreement.
 
(2) Calculation of Adjusted EBITDA margin for our Water Management platform excludes sales associated with the RHF product line. See reconciliation included within the supplemental data for additional details.
 
Nine Months Ended
December 31, 2016   December 31, 2015
Cash provided by operating activities $ 122.1 $ 150.2
Expenditures for property, plant and equipment (44.0 ) (26.4 )
Excess tax benefit on exercise of stock options   0.9  
Free cash flow $ 78.1   $ 124.7  
 
Fiscal 2017 Earnings Guidance Reconciliation Earnings Guidance for
the Twelve Months Ending
Adjusted net income per diluted share March 31, 2017
Net income per diluted share (1) $0.60 to $0.66
Footprint repositioning and supply chain optimization 0.09
Restructuring and other similar charges 0.31
Acquisition-related fair value adjustment 0.04
Loss on the extinguishment of debt 0.07
Impact of RHF product line exit 0.10
Amortization of intangible assets 0.40
Other, net 0.04
Tax impact on adjustments (0.38)
Adjusted net income per diluted share $1.27 to $1.33
 
(1) Our guidance for net income per diluted share is based upon the extent of information available as of the date of this filing regarding events and conditions that will impact our future operating results for the periods noted above. Our actual net income per diluted share may be materially impacted by events for which information is not available, such as asset impairments, purchase accounting effects related to future acquisitions, future restructuring actions, gains (losses) recognized on the disposal of tangible and intangible assets, gains (losses) on debt extinguishment, actuarial gains (losses) on our defined benefit plans, and other gains (losses) related to events or conditions not yet known. Consequently, we have not included incremental gains or (losses) for these items in our forward-looking guidance since that information is not reasonably available.
 
Rexnord Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in Millions)
(Unaudited)
 
  Third Quarter Ended   Nine Months Ended
December 31, 2016   December 31, 2015 December 31, 2016   December 31, 2015
Net income attributable to Rexnord $ 3.2 $ 24.4 $ 46.7 $ 68.3
Other comprehensive loss:
Foreign currency translation adjustments (33.5 ) (6.5 ) (33.4 ) (18.3 )
Unrealized income (loss) on interest rate derivatives, net of tax 3.3 2.2 5.6 (2.0 )
Change in pension and other postretirement defined benefit plans, net of tax (0.3 ) (0.3 ) (0.9 ) (0.9 )
Other comprehensive loss, net of tax (30.5 ) (4.6 ) (28.7 ) (21.2 )
Non-controlling interest loss   (0.1 )   (0.2 )
Total comprehensive (loss) income $ (27.3 ) $ 19.7   $ 18.0   $ 46.9  
 
Rexnord Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in Millions, except share amounts)
(Unaudited)
 
  December 31, 2016   March 31, 2016
Assets
Current assets:
Cash and cash equivalents $ 429.3 $ 484.6
Receivables, net 279.9 317.6
Inventories, net 339.1 327.2
Income tax receivable 19.8 1.8
Other current assets 37.4   44.9  
Total current assets 1,105.5 1,176.1
Property, plant and equipment, net 408.1 397.2
Intangible assets, net 562.9 520.9
Goodwill 1,313.0 1,193.8
Insurance for asbestos claims 32.0 32.0
Other assets 39.5   34.8  
Total assets $ 3,461.0   $ 3,354.8  
Liabilities and stockholders' equity
Current liabilities:
Current maturities of debt $ 16.8 $ 20.2
Trade payables 180.3 200.8
Compensation and benefits 45.9 54.0
Current portion of pension and postretirement benefit obligations 4.9 5.0
Other current liabilities 118.8   124.4  
Total current liabilities 366.7 404.4
 
Long-term debt 1,610.1 1,899.9
Pension and postretirement benefit obligations 190.3 195.5
Deferred income taxes 203.3 186.0
Reserve for asbestos claims 32.0 32.0
Other liabilities 45.3   49.0  
Total liabilities 2,447.7 2,766.8
 
Stockholders' equity:
Common stock, $0.01 par value; 200,000,000 shares authorized; shares issued and outstanding: 103,415,393 at December 31, 2016 and 101,435,762 at March 31, 2016 1.0 1.0
Preferred stock, $0.01 par value; 10,000,000 shares authorized; shares of 5.75% Series A Mandatory Convertible Preferred Stock issued and outstanding: 402,500 at December 31, 2016 and 0 at March 31, 2016 0.0
Additional paid-in capital 1,262.9 856.2
Retained deficit (82.9 ) (129.6 )
Accumulated other comprehensive loss (167.7 ) (139.0 )
Total Rexnord stockholders' equity 1,013.3 588.6
Non-controlling interest   (0.6 )
Total stockholders' equity 1,013.3   588.0  
Total liabilities and stockholders' equity $ 3,461.0   $ 3,354.8  
 
Rexnord Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in Millions)
(Unaudited)

 

  Nine Months Ended
December 31, 2016   December 31, 2015
Operating activities
Net income $ 46.7 $ 68.1
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation 45.4 43.0
Amortization of intangible assets 33.7 43.1
Amortization of deferred financing costs 1.9 1.6
Loss on the extinguishment of debt 7.8
Non-cash asset impairment 1.6 2.9
Loss (gain) on dispositions of long-lived assets 0.2 (0.2 )
Deferred income taxes (15.9 ) 7.1
Other non-cash charges (3.3 ) 5.2
Stock-based compensation expense 9.8 5.8
Changes in operating assets and liabilities:
Receivables 33.1 38.9
Inventories (5.1 ) 5.2
Other assets (7.2 ) 1.3
Accounts payable (21.4 ) (46.9 )
Accruals and other (5.2 ) (24.9 )
Cash provided by operating activities 122.1 150.2
 
Investing activities
Expenditures for property, plant and equipment (44.0 ) (26.4 )
Acquisitions, net of cash acquired (213.7 ) 1.1
Proceeds from dispositions of long-lived assets 1.9   4.8  
Cash used for investing activities (255.8 ) (20.5 )
 
Financing activities
Proceeds from borrowings of long-term debt 1,590.3
Repayments of long-term debt (1,881.8 ) (14.7 )
Proceeds from borrowings of short-term debt 16.1 0.9
Repayments of short-term debt (19.5 ) (4.6 )
Payment of debt issuance costs (10.6 ) (0.9 )
Proceeds from exercise of stock options 9.6
Deferred acquisition payment (5.7 )
Proceeds from issuance of preferred stock, net of direct offering costs 390.2
Repurchase of Company common stock (40.0 )
Excess tax benefit on exercise of stock options   0.9  
Cash provided by (used for) financing activities 88.6 (58.4 )
Effect of exchange rate changes on cash and cash equivalents (10.2 ) (5.2 )
(Decrease) increase in cash and cash equivalents (55.3 ) 66.1
Cash and cash equivalents at beginning of period 484.6   370.3  
Cash and cash equivalents at end of period $ 429.3   $ 436.4  
       
Rexnord Corporation and Subsidiaries
Supplemental Data
(in Millions)
(Unaudited)
 
  Fiscal 2017
Q1 Q2 Q3 Q4 Fiscal Year-to-Date Total
Net sales
Process & Motion Control $ 263.7 $ 286.9 $ 270.3 $ 820.9
Water Management, as adjusted (1) 201.6 198.6 179.1   579.3  
Total, as adjusted (1) $ 465.3 $ 485.5 $ 449.4   $ 1,400.2  
 
Sales growth
Core growth (1)% (2)% (5)% (3)%
Currency translation (1)% —% (1)% —%
Acquisition/divestiture (1)% 3% 4%   2%  
Reported growth (3)% 1% (2)%   (1)%  
 
Adjusted EBITDA
Process & Motion Control $ 49.0 $ 60.7 $ 55.7 $ 165.4
Water Management 38.3 37.9 31.5 107.7
Corporate (8.3 ) (8.3 ) (8.0 )   (24.6 )
Total $ 79.0 $ 90.3 $ 79.2   $ 248.5  
 
Adjusted EBITDA %
Process & Motion Control 18.6 % 21.2 % 20.6 % 20.1 %
Water Management 19.0 % 19.1 % 17.6 % 18.6 %
Total (including Corporate) 17.0 % 18.6 % 17.6 % 17.7 %
 
Fiscal 2016
Q1 Q2 Q3 Q4 Fiscal Year Total
Net sales
Process & Motion Control $ 271.6 $ 268.8 $ 265.8 $ 294.1 $ 1,100.3
Water Management, as adjusted (1) 196.6 208.5 188.2 191.2 784.5  
Total, as adjusted (1) $ 468.2 $ 477.3 $ 454.0 $ 485.3 $ 1,884.8  
 
Sales growth
Core growth (2)% (5)% (4)% (3)% (3)%
Currency translation (5)% (5)% (4)% (2)% (4)%
Acquisition/divestiture 2% 2% 1% —% 1%  
Reported growth (5)% (8)% (7)% (5)% (6)%  
 
Adjusted EBITDA
Process & Motion Control $ 57.0 $ 55.7 $ 56.6 $ 65.0 $ 234.3
Water Management 38.9 43.5 43.4 33.6 159.4
Corporate (8.8 ) (6.1 ) (7.9 ) (5.4 ) (28.2 )
Total $ 87.1 $ 93.1 $ 92.1 $ 93.2 $ 365.5  
 
Adjusted EBITDA %
Process & Motion Control 21.0 % 20.7 % 21.3 % 22.1 % 21.3 %
Water Management 19.8 % 20.9 % 23.1 % 17.6 % 20.3 %
Total (including Corporate) 18.6 % 19.5 % 20.3 % 19.2 % 19.4 %
 
(1) During fiscal 2016, the Company announced its decision to exit the RHF flow control gate product line within its Water Management platform and its intention to exclude related RHF results from its forward-looking guidance. To improve the comparability of historical and prospective financial information, this supplementary schedule presents pro forma Water Management and consolidated financial information that has been adjusted to exclude the RHF product line. Refer to the "Reconciliation of GAAP to Non-GAAP Financial Measures" schedules below.
 
Rexnord Corporation and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
Fiscal 2017 and Fiscal 2016 Quarterly Results
(in Millions) (Unaudited)
 
Reconciliation of Water Management Net Sales to Water Management Net Sales Excluding RHF:
 
  Fiscal 2017
Q1   Q2   Q3   Q4   Total
Water Management net sales, as reported $ 208.1 $ 204.1 $ 181.5 $ 593.7
Less RHF net sales (1) (6.5 ) (5.5 ) (2.4 )   (14.4 )
Water Management net sales, as adjusted (1) $ 201.6   $ 198.6   $ 179.1     $ 579.3  
 
Fiscal 2016
Q1 Q2 Q3 Q4 Total
Water Management net sales, as reported $ 213.5 $ 217.1 $ 194.4 $ 198.5 $ 823.5
Less RHF net sales (1) (16.9 ) (8.6 ) (6.2 ) (7.3 ) (39.0 )
Water Management net sales, as adjusted (1) $ 196.6   $ 208.5   $ 188.2   $ 191.2   $ 784.5  
 
(1) During fiscal 2016, the Company announced its decision to exit the RHF flow control gate product line within its Water Management platform and its intention to exclude related RHF results from its forward-looking guidance. To improve the comparability of historical and prospective financial information, this supplementary schedule presents pro forma Water Management net sales that has been adjusted to exclude the RHF product line.
 

Source: Rexnord Corporation

Rexnord Corporation
Rob McCarthy
Vice President - Investor Relations
414.223.1615