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HELD FOR SALE, DIVESTITURES AND ACQUISITIONS
 9 Months Ended
Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
HELD FOR SALE, DIVESTITURES AND ACQUISITIONS HELD FOR SALE, DIVESTITURES AND ACQUISITIONS
Assets Held for Sale

The balances that were classified as Assets Held for Sale as of September 30, 2022 and January 1, 2022 were $10.8 million and $12.5 million, respectively.

2021 Acquisitions

Rexnord Transaction
On October 4, 2021, in accordance with the terms and conditions of the Agreement and Plan of Merger, dated as of February 15, 2021 (the “Rexnord Merger Agreement”), the Company completed its combination with the Rexnord Process & Motion Control business (the “Rexnord PMC business”) of Zurn Elkay Water Solutions Corporation (formerly known as Rexnord Corporation) (“Zurn”) in a Reverse Morris Trust transaction (the “Rexnord Transaction”). Pursuant to the Rexnord Transaction, (i) Zurn transferred to its then-subsidiary Land Newco, Inc. (“Land”) substantially all of the assets, and Land assumed substantially all of the liabilities, of the Rexnord PMC business (the “Reorganization”), (ii) after which all of the issued and outstanding shares of common stock, $0.01 par value per share, of Land (“Land common stock”) held by a subsidiary of Zurn were distributed in a series of distributions to Zurn’s stockholders (the “Distributions”, and the final distribution of Land common stock from Zurn to Zurn’s stockholders, which was made pro rata for no consideration, the “Spin-Off”) and (iii) immediately after the Spin-Off, a subsidiary of the Company (“Rexnord Merger Sub”) merged with and into Land (the “Rexnord Merger”) and all shares of Land common stock (other than those held by Zurn, Land, the Company, Rexnord Merger Sub or their respective subsidiaries) were converted as of the effective time of the Rexnord Merger (the “Effective Time”) into the right to receive 0.22296103 shares of common stock, $0.01 par value per share, of the Company (“Company common stock”), as calculated in the Rexnord Merger Agreement.

As of the Effective Time, Land, which held the Rexnord PMC business, became a wholly owned subsidiary of the Company.

Pursuant to the Rexnord Merger, the Company issued approximately 27,055,945 shares of Company common stock to holders of Land common stock, which represents approximately 39.9% of the approximately 67,756,732 outstanding shares of Company common stock immediately following the Effective Time. In addition, holders of record of Company common stock as of October 1, 2021 received $6.99 per share of Company common stock pursuant to a previously announced special dividend in connection with the Transactions (the “Special Dividend”).

In connection with the Rexnord Transaction, two directors designated by Zurn were appointed to the Company's Board of Directors. The current chief executive officer of the Company continued as the chief executive officer of the combined company after the Rexnord Transaction and a majority of the senior management of the Company immediately prior the consummation of the Rexnord Transaction remained executive officers of the Company immediately after the Rexnord Transaction. The Company's management determined that the Company is the accounting acquirer in the Rexnord Transaction based on the facts and circumstances noted within this section and other relevant factors. As such, the Company applied the acquisition method of accounting to the identifiable assets and liabilities of the Rexnord PMC business, which have been measured at estimated fair value as of the date of the business combination.

In connection with the Rexnord Transaction, the Company entered into certain financing arrangements, which are described in Note 7.

The tax matters agreement the Company entered into in connection with the Rexnord Transaction imposes certain restrictions on the Company, Land and Zurn during the two-year period following the Spin-Off, subject to certain exceptions, with respect to actions that could cause the Reorganization and the Distributions to fail to qualify for the intended tax treatment. As a result of these restrictions, the Company's and Land’s ability to engage in certain transactions, such as the issuance or purchase of stock or certain business combinations, may be limited.

The total consideration transferred for the acquisition of Land was approximately $4.0 billion. The total assets and liabilities assumed were based on the final balances per the terms included within the Separation and Distribution Agreement.

The final purchase price of the Rexnord PMC business consisted of the following (in millions):
As Reported as of January 1, 2022Measurement period adjustmentsAs Reported as of September 30, 2022
Fair value of Company common stock issued to Zurn (a)$3,896.3 $— $3,896.3 
Stock based compensation (b)47.1 — 47.1 
Adjustment amount (c)30.9 4.1 35.0 
Land Financing Fees paid by the Company (d)3.9 — 3.9 
Preexisting Relationships (e)(0.8)— (0.8)
Purchase price$3,977.4 $4.1 $3,981.5 

(a) Represents approximately 27 million new shares of Company common stock issued to Zurn stockholders in the exchange offer, based on the Company's October 4, 2021, closing share price of $151.00, less the Special Dividend amount of $6.99, which the Zurn stockholders were not entitled to receive.

(b) Represents fair value of replacement equity-based awards and Company common stock issued in settlement of other Zurn share based awards. The portion of the fair value attributable to pre-Rexnord Merger service was recorded as part of the consideration transferred in the Rexnord Merger - see Note 10.

(c) Represents working capital adjustment pursuant to the terms of the purchase agreement. The entire amount was settled and paid in cash by the Company as of March 31, 2022.

(d) Represents financing fees paid by the Company for the bridge facility that was negotiated in connection with the Rexnord Transaction and Land Term Facility (as defined in Note 7) that were determined to be costs of Zurn.

(e) Represents effective settlement of outstanding payables and receivables between the Company and the Rexnord PMC business. No gain or loss was recognized on this settlement.

Purchase Price Allocation

The Rexnord PMC business’s assets and liabilities were measured at estimated fair values at October 4, 2021, primarily using Level 3 inputs. Estimates of fair value represent management’s best estimate of assumptions about future events and uncertainties, including significant judgments related to future cash flows, discount rates, competitive trends, margin and revenue growth assumptions including royalty rates and customer attrition rates and others. Inputs used were generally obtained from historical data supplemented by current and anticipated market conditions and growth rates expected as of the acquisition date.

As of September 30, 2022, the valuation process to determine the fair values of the net assets acquired during the measurement period was complete. The Company estimated the fair value of net assets acquired based on information available during the measurement period.
The final fair value of the assets acquired and liabilities and noncontrolling interests assumed were as follows (in millions):
As Reported as of January 1, 2022Measurement period adjustmentsAs Reported as of September 30, 2022
Cash and Cash Equivalents$192.8 $— $192.8 
Trade Receivables186.9 (4.4)182.5 
Inventories262.5 (10.8)251.7 
Prepaid Expenses and Other Current Assets21.0 — 21.0 
Assets Held for Sale1.4 — 1.4 
Deferred Income Tax Benefits8.8 (7.7)1.1 
Property, Plant and Equipment412.3 (38.4)373.9 
Operating Lease Assets46.4 — 46.4 
Intangible Assets1,831.0 23.0 1,854.0 
Other Noncurrent Assets12.3 12.3 24.6 
Accounts Payable(121.1)— (121.1)
Accrued Compensation and Benefits(44.0)2.6 (41.4)
Other Accrued Expenses(55.7)(4.0)(59.7)
Current Operating Lease Liabilities(8.1)— (8.1)
Current Maturities of Long-Term Debt(2.5)— (2.5)
Long-Term Debt(558.2)— (558.2)
Deferred Income Taxes(508.2)13.2 (495.0)
Pension and Other Post Retirement Benefits(75.1)— (75.1)
Noncurrent Operating Lease Liabilities(38.0)— (38.0)
Other Noncurrent Liabilities(17.0)(8.6)(25.6)
Total Identifiable Net Assets1,547.5 (22.8)1,524.7 
Goodwill2,433.2 26.9 2,460.1 
Noncontrolling Interests(3.3)— (3.3)
Purchase price$3,977.4 $4.1 $3,981.5 

During the nine months ended September 30, 2022, the Company made a cash payment of $35.0 million to Zurn in connection with finalizing the acquisition date trade working capital. The preliminary purchase price allocations were also adjusted by the refinement of the estimated fair value of the assets received and liabilities assumed. The cumulative impact of the adjustments during the nine months ended September 30, 2022 resulted in $26.9 million of additional goodwill.

Results of the Rexnord PMC business Subsequent to the Acquisition

The financial results of the Rexnord PMC business have been included in the Company's Motion Control Solutions segment from the date of acquisition.

Arrowhead Transaction
On November 23, 2021, the Company acquired all of the outstanding equity interests of Arrowhead Systems, LLC ("Arrowhead") (the "Arrowhead Transaction"), for $315.6 million in cash, net of $1.1 million of cash acquired. Arrowhead is a global leader in providing industrial process automation solutions including conveyors and (de)palletizers to the food & beverage, aluminum can, and consumer staples end markets, among others. Arrowhead is now known as the Automation Solutions business unit, which is a part of the Conveying division of the Company's Motion Control Solutions segment.

The Consolidated Statements of Income include the results of operations of Arrowhead since the date of acquisition, and such results are reflected in the Motion Control Solutions segment.
Purchase Price Allocation

Arrowhead's assets and liabilities were measured at estimated fair values at November 23, 2021. Estimates of fair value represent management’s best estimate of assumptions about future events and uncertainties, including significant judgments related to future cash flows, discount rates, competitive trends, margin and revenue growth assumptions including royalty rates and customer attrition rates and others. Inputs used were generally obtained from historical data supplemented by current and anticipated market conditions and growth rates expected as of the acquisition date.
As of September 30, 2022, the valuation process to determine the fair values of the net assets acquired during the measurement period was complete. The Company estimated the fair value of net assets acquired based on information available during the measurement period.
The final fair value of the assets acquired and liabilities assumed were as follows (in millions):

As Reported as of January 1, 2022Measurement period adjustmentsAs Reported as of September 30, 2022
Cash and Cash Equivalents$1.1 $— $1.1 
Trade Receivables19.1 (0.3)18.8 
Inventories12.8 — 12.8 
Prepaid Expenses and Other Current Assets7.6 — 7.6 
Property, Plant and Equipment3.7 — 3.7 
Intangible Assets(1)
160.0 — 160.0 
Accounts Payable(4.7)— (4.7)
Accrued Compensation and Benefits(2.6)— (2.6)
Other Accrued Expenses(25.0)— (25.0)
Total Identifiable Net Assets172.0 (0.3)171.7 
Goodwill143.6 0.3 143.9 
Purchase price$315.6 $— $315.6 
(1) Includes $124.0 million related to Customer Relationships, $18.0 million related to Trademarks and $18.0 million related to Technology.

The cumulative impact of the adjustments during the nine months ended September 30, 2022 resulted in $0.3 million of additional goodwill.