Background and Basis of Presentation

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Background and Basis of Presentation

Background and Basis of Presentation

Milacron Holdings Corp. ("Company" or "Milacron") is a global leader in the manufacture, distribution, and service of highly engineered and customized systems used in the plastic technology and processing industry. The Company has a full-line product portfolio that includes hot runner systems, injection molding and extrusion equipment and produces process control systems, mold bases and components and maintenance, repair and operating ("MRO") supplies for plastic processing equipment and fluid technology. The Company operates throughout the world and is headquartered in Cincinnati, Ohio.

The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles ("U.S. GAAP") for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are necessary for a fair presentation of the Condensed Consolidated Financial Statements for the interim periods presented. The interim period results are not necessarily indicative of the results to be expected for the full year. These interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes for the fiscal year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2019.

Hillenbrand Merger

On July 12, 2019, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Hillenbrand, Inc. ("Hillenbrand") and Bengal Delaware Holding Corporation, a wholly-owned subsidiary of Hillenbrand, under which Hillenbrand will acquire the Company in a cash and stock transaction (the "Merger").

Under the terms of the Merger Agreement, at the time the Merger becomes effective (the "Effective Time") each Company common share issued and outstanding immediately prior to the Effective Time will automatically be converted into the right to receive (1) $11.80 in cash, without interest, and (2) 0.1612 shares of Hillenbrand common stock.

The closing of the Merger is subject to the adoption of the Merger Agreement by the Company’s shareholders and other customary closing conditions.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 also requires significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The Company adopted ASU 2016-02 on January 1, 2019 using a modified retrospective method. There was no material impact to the Company's consolidated net earnings, shareholders' equity or cash flows. Under the modified retrospective approach, the Company did not adjust its comparative period financial information or make new lease disclosures for periods before the effective date. As permitted under ASU 2016-02, the Company also elected the package of practical expedients and will carry forward the assessment of whether contracts contain or are leases and the classification of leases.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) (ASU 2018-02). ASU 2018-02 allows for an entity to elect to reclassify from accumulated other comprehensive income (loss) to retained earnings the income tax effects on items resulting from what is commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017 (the "Tax Act"). ASU 2018-02 is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within those years. The Company has elected to not reclassify the stranded income tax effects of the Tax Act from accumulated other comprehensive loss to retained earnings.

Lease Accounting Policy

The Company determines if an arrangement contains a lease at inception and recognizes ROU assets and liabilities associated with leases based on the present value of the future minimum lease payments over the lease term at the later of the commencement date of the lease or January 1, 2019 (the implementation date of ASU 2016-02). The Company uses its incremental borrowing rate at the commencement date in determining the present value of future payments for leases where the implicit rate cannot be readily determined. Lease terms reflect options to extend or terminate the lease when it is reasonably certain that the option will be exercised. For leases that include residual value guarantees or payments for terminating the lease, the Company includes these costs in the lease liability when it is probable that we will incur them. ROU assets and liabilities for short-term leases (leases with an initial term of 12 months or less) are not recognized in the Company's Condensed Consolidated Balance Sheets. Lease expense for short-term leases is recognized on a straight-line basis over the lease term.

Results for reporting periods beginning after January 1, 2019 are presented under Accounting Standards Codification ("ASC") 842, Leases ("ASC 842"), while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting treatment under ASC Topic 840, Leases.

Reclassifications

Certain amounts in the prior period Condensed Consolidated Financial Statements have been reclassified to conform to the current period's presentation specifically as it relates to assets and liabilities held for sale and disaggregated revenue.